What is an example of disparate treatment in lending?
Illegal disparate treatment occurs when a lender bases its lending decision on one or more of the prohibited discriminatory factors covered by the fair lending laws, for example, if a lender offers a credit card with a limit of $750 for applicants age 21 through 30 and $1,500 for applicants over age 30.
What are the 3 types of lending discrimination?
Three lending discrimination types
- → Overt.
- → Disparate impact.
- → Disparate treatment.
What is comparative disparate treatment in lending?
Comparative evidence of disparate treatment occurs through an analysis of loan files where the result is that a protected class received less favorable terms than a control group.
What is disparate impact in banking?
A disparate impact occurs when a lender applies a racially (or otherwise) neutral policy or practice Page 3 Federal Fair Lending Regulations and Statutes: Overview equally to all credit applicants but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis. Example.
What’s the difference between disparate treatment and disparate impact?
Both disparate impact and disparate treatment refer to discriminatory practices. Disparate impact is often referred to as unintentional discrimination, whereas disparate treatment is intentional. The terms adverse impact and adverse treatment are sometimes used as an alternative.
What is disparate impact in lending?
Disparate impact is when a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis.
How do you prove disparate treatment?
Disparate treatment occurs when an employer treats some individuals less favorably than other similarly situated individuals because of their race, color, religion, sex, or national origin. To prove disparate treatment, the charging party must establish that respondent’s actions were based on a discriminatory motive.
What is disparate treatment in lending?
Disparate treatment is a risk where there are inconsistencies in a lender’s lending practices. Disparate impact is application of an otherwise neutral policy that may be adverse to one group, although it is applied consistently. Although the most common is disparate treatment, the other two are also legitimate risks and should not be ignored.
What are some examples of disparate treatment?
Disparate treatment examples include providing higher pay to men as opposed to women for the same job, offering overtime hours to white workers over minority workers, and accommodating religious observations of Christian employees but not Muslim or Jewish employees.
How do you support a disparate treatment claim?
To support a disparate treatment claim, you need to establish four elements: 1 The individual is a member of a protected class; 2 The employer knows of the individual’s protected class; 3 A harmful act occurred; and 4 Other similarly situated individuals were treated more favorably or not subjected to the same treatment.
What is disparate impact and how can I avoid it?
Disparate impact occurs when you apply your policy “neutrally” (everyone gets treated the same); yet by virtue of your policy you cause a Disparate impact on a prohibited basis in your market. Example: Your investors allow for a 620 credit score.