Fair Lending - CRCM Study Guide
Terms in this set (13)
The term Fair Lending primarily refers to what two laws?
Fair Housing Act and Equal Credit Opportunity Act (ECOA)
What are three other regulations that also factor into Fair Lending?
CRA, HMDA, and ADA.
Name three areas beyond mere loan applications and denials that are looked at for compliance with Fair Lending?
Setting of terms and conditions for approved loans (collateral, length of term, etc.)
Pricing (interest rates, fees, down payments, etc.)
Override and exceptions, both of loan decisions and loan pricing
Name the three types of discrimination associated with Fair Lending.
Define Overt Discrimination.
Occurs when a lender blatantly discriminates against an individual or class of persons. The lender does not have to act on the discriminatory expression for it to be present.
Define Disparate Treatment.
Different treatment based on a prohibited basis. Does not require actual intent to discriminate.
Define Disparate Impact.
Occurs when a policy or practice is applied equally to all applicants but has a disproportionate, adverse impact on a protected class. Does not require intent to discriminate illegally.
A policy or practice that adversely affects a protected group may not be illegal if...
It is justified by a business necessity and a less discriminatory alternative is not available.
What are the two basic parts to a Fair Lending examination?
Scope and intensity.
The CFPB's indirect auto lending guidance applies to whom?
Indirect auto lenders who allow dealers to increase rates and retain a portion of the increased rate as compensation. This applies to bank and non-bank lenders governed by the CFPB.
When are auto lenders liable for disparate impact or disparate treatment?
When the lender's markup and compensation policies result in discrimination.
Name the three scenarios that act as the basis for auto lender liability for Fair Lending?
Lender's own policies may be source of discrimination.
Lender knows or has reason to know of a dealer's discriminatory behavior.
Disparities could arise within a particular dealer's transactions or across different dealers within a lender's portfolio.
Name three things lender's can do to limit Fair Lending risk in indirect auto lending?
Impose controls on dealer markup and compensation policies.
Eliminate dealer discretion to mark up rates
Develop a robust fair lending compliance management program.