Your ATM May Someday Be Your Loan Agent Too

You step up to an ATM machine in a grocery store or at the mall, punch in your name and Social Security number, and apply for a loan. The computer runs a credit check, approves the loan, and the machine prints out a cashier’s check for the amount you borrowed.

This could be the loan of the future--electronic credit approved without visiting an office or having a face-to-face interview with a loan officer.

The nation’s regulator of savings and loan associations announced Monday that it is inviting the industry and bank customers to discuss the growing revolution in banking, which could include remote lending from ATM machines.

The Office of Thrift Supervision, which approved the first Internet bank two years ago, is hoping to push even further into electronic finances, OTS Director Nicolas P. Retsinas said at a news conference.

“We are looking forward even if we don’t know where forward is,” Retsinas said.

“Washington doesn’t always know better,” he said, explaining why the agency is asking for general comments and discussion rather than issuing a proposed rule to handle the electronic explosion in banking and finance. The rule will come only after the OTS hears from the financial industry and its customers, he said.

Loan applications through ATMs became available in the last year at machines in the offices of some financial institutions. But the OTS envisions ATM machines in locations far from a bank or thrift office that can handle lending. All of the loan paperwork would be processed through the ATM, and the money delivered as a cashier’s check.

In addition to remote lending at ATM machines, the OTS wants a discussion of “smart cards,” which have a specific value of money stored in a magnetic strip or computer chip. The cards are in limited circulation but their use is expanding rapidly.

The card is used like cash when a person pays for goods--the cost is deducted from the prepaid amount stored on the card. The OTS would like to take up the issue of how or if the distribution of smart cards should be regulated by federal authorities.

The nation’s financial regulators are determined to “avoid being an impediment to electronic banking,” said Paul D. Glenn, the OTS special counsel.

“We are doing what we can to stay out of the way of the implementation of technology,” he said. The goal is to assure that electronic banking is “safe, secure, reliable and private,” Glenn noted.

Retsinas also said the OTS is concerned that computerization has the potential for hurting some consumers, particularly the less affluent, who may not meet the standard criteria for loan approval.

Although artificial intelligence programs designed to evaluate credit risk were developed after lenders reviewed vast amounts of information on lending patterns and default rates, the programs cannot account for all relevant factors. In some cases, intervention by people would be needed to assure fairness, Retsinas said.

The OTS will be working closely with other federal regulatory agencies to assure a common approach to the fast pace of change in electronic banking, according to Retsinas and other officials.