Overt Discrimination Overt discrimination exists when a lender openly treats an applicant differently on a prohibited basis. For example, a woman on maternity leave sued a credit union for discrimination based on sex and familial status for rejecting her home renovation loan because they would not consider her income until she returned to work.
What are the forms of overt discrimination at a financial institution?
Overt discrimination may take place at a financial institution in one of the following forms: 1 Denying an eligible loan applicant based on the applicant’s race 2 Offering higher interest rates due to the applicant’s gender or sexual orientation 3 Refusing to provide a limited-time promotion to an applicant because of their religion More ...
What is overt evidence of discrimination?
• "Overt evidence of discrimination," when a lender blatantly discriminates on a prohibited basis; • Evidence of "disparate impact," when a lender applies a practice uniformly to all applicants but the practice has a discriminatory effect on a prohibited basis and is not justified by business necessity.
How common is overt discrimination in the workplace?
Various laws prohibit certain types of overt discrimination, and its prevalence has dropped considerably over the years. Subtle discrimination, however, is still common. Refusing to hire or provide services to someone based on gender, race, religion or age is a common form of overt discrimination,...
What is overt discrimination and disparate treatment?
Overt discrimination may be blatant or obvious, but lenders should understand it can occur inadvertently. Disparate treatment is a risk where there are inconsistencies in a lender’s lending practices.
What are 3 examples of overt discrimination?
Overt Discrimination OverviewRefusing to hire someone based on his or her age or race.Vandalizing the personal property of someone who is gay or from another country.Wording a job posting in such a way that it eliminates female applicants.Denying a promotion or raise to someone with a mental health disorder.
What does disparate treatment mean in banking?
Disparate treatment occurs when a lender treats a credit applicant differently based on one of the prohibited bases. Disparate treatment ranges from overt discrimination to more subtle disparities in treatment.
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.
Which of the following is overt discrimination?
Overt discrimination is the blatant act of mistreating one person or a group of people based on a prohibited basis. A prohibited basis would be race, religion, national origin, gender, marital status, age, or mental capability.
Can banks discriminate?
The Equal Credit Opportunity Act makes it illegal for a creditor to discriminate in any aspect of credit transaction based on certain characteristics. In addition, the Fair Housing Act makes many discrimination practices in home financing illegal.
How do you prove disparate impact discrimination?
To establish an adverse disparate impact, the investigating agency must (1) identify the specific policy or practice at issue; (2) establish adversity/harm; (3) establish significant disparity; [9] and (4) establish causation.
What is overt evidence of disparate treatment?
Overt Evidence of Disparate Treatment. There is overt evidence of discrimination when a lender openly discriminates on a prohibited basis. Example: A lender offered a credit card with a limit of up to $750 for applicants aged 21- 30 and $1500 for applicants over 30.
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 the meaning of disparate treatment?
intentional employment discriminationDisparate treatment is intentional employment discrimination. For example, testing a particular skill of only certain minority applicants is disparate treatment.
What is comparative disparate treatment in lending?
Comparative evidence of disparate treatment occurs when a protected class applicant is treated less favorably than other applicants and is typically discovered through a comparative analysis during a fair lending examination.
What is disparate treatment and why should it be avoided?
As an employer, it's your obligation to prevent and address discrimination against employees. The definition of disparate treatment encompasses many discriminatory practices and is one major possible cause of negative employee interactions with each other and the work environment as a whole.
What are some examples of disparate impact?
A common and simple example of “disparate impact” discrimination is when an employer has a policy that it will only hire individuals who are a certain minimum height or who can lift a certain minimum weight. Courts have found height restrictions disproportionately impact women and certain races.
What are other types of discrimination?
Overt discrimination is the most obvious form of discrimination, which makes it easy to catch and punish. However, other, more subtle forms of discrimination have just as big of a negative impact.
What to do if you believe your employer discriminated against you?
If you believe an employer has discriminated against you, you can file a Charge of Discrimination with the EEOC. This is a signed statement that explains the employer, union, or labor organization engaged in employment discrimination. Alternatively, you can file a discrimination lawsuit against the employer or lender.
What is the EEOC?
As far as the workplace, the U.S. Equal Employment Opportunity Commission (EEOC) enforces prohibitions against employment and promotion discrimination. The EEOC enforces multiple Civil Rights, Equal Pay, Discrimination, and Rehabilitation Acts to prevent mistreatment in the workplace.
How to report a lender discrimination?
If you believe a lender has discriminated against you, you can submit a complaint with the Consumer Financial Protection Bureau. You can submit a complaint online or give them a call at (855) 411-2372.
Why is it important to self reflect?
Routinely self-reflect to ensure that you aren’t indirectly being unfair to a particular group of people. Your actions will be observed by customers and employees alike, so it is crucial to lead by example. It is also good to use fair and non-accusatory language when dealing with discrimination complaints.
What is a prohibited basis?
A prohibited basis would be race, religion, national origin, gender, marital status, age, or mental capability. Overt discrimination can be found when borrowing a loan, applying for a job, or purchasing items at a store.
How to prevent discrimination in the workplace?
1. Training. If you are a business owner, you want to treat your customers with the utmost respect and have your employees feeling comfortable in their job.
What is disparate treatment?
Disparate treatment is differences or inconsistencies in treatment based on prohibited factors that are not fully explained by relevant, non-discriminatory factors. Disparate treatment applies ...
What is fair lending?
Fair lending laws and regulations are broad and cover every phase of the lending transaction. This includes the initial inquiry and loan application process through the servicing and ultimate settlement of the debt. Accordingly, there are nearly an infinite range of possible pressure points that a lender may need to evaluate in order to assess fair lending risk.
What is overt discrimination?
Overt Discrimination. Overt discrimination is the easiest to understand and is what most people think about when they hear the word “discrimination. ”. Simply, it is obviously or blatantly providing or offering more favorable terms to one group versus another based solely on a prohibited factor, such as gender.
What are some examples of business necessity?
A simple example may be having a minimum credit score or loan amount requirement. A lender may be completely consistent and never deviate from the policy, but if it adversely impacts a protected class, the institution should be able to demonstrate “business necessity.”
When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but?
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, the policy or practice is described as having a “disparate impact.”
Is disparate impact a discrimination?
We should point out here that disparate impact is controversial and has been the subject of much debate. The good news is that it is seldom the type of discrimination that is the target of most fair lending reviews and inquiries.
Is overt discrimination intentional?
However, overt does not necessarily mean deliberate as overt discrimination can be unintentional. For example, an institution may offer some type of loan product that has an age requirement that is inconsistent with the actual legal requirements resulting in discrimination based on age.
What is overt discrimination?
Overt discrimination is discrimination that is clear and often public. Various laws prohibit certain types of overt discrimination, and its prevalence has dropped considerably over the years. Subtle discrimination, however, is still common.
Is subtle discrimination more damaging than overt discrimination?
Some studies suggest that subtle discrimination can be more damaging than overt discrimination. ADVERTISEMENT.
Is same sex marriage a form of discrimination?
Some argue that forbidding same-sex marriage is a form of overt discrimination. There are also forms of subtle discrimination, and people who discriminate can often do so by maintaining plausible deniability. Subtle discrimination can be difficult to spot; it may even be done subconsciously.
Why did JPMorgan Chase fail to catch a disparate impact affecting a group of their customers?
Based on the information provided, the DOJ alleged that JPMorgan Chase failed to catch a disparate impact affecting a group of their customers due to a lack of monitoring and loan file reviews.
What is redlining in mortgage?
Redlining is a type of disparate treatment where a lender provides unequal access to or terms of credit because of the prohibited characteristics of the residents of an area in which an individual lives or in which a residential property to be mortgaged is located.
Why is Wells Fargo suing Philadephia?
The city of Philadephia announced in mid-May that they were suing Wells Fargo for predatory lending, which violates the federal Fair Housing Act.
Why is it important to analyze data for disparities that may indicate discrimination?
Analyzing your data for disparities that may indicate discrimination will help improve your fair lending compliance risk management.
What are the different types of discrimination in lending?
There are 3 types of discrimination in fair lending : Overt Discrimination. Overt discrimination is the act of openly and/or intentionally discriminating on a prohibited basis, i.e. "we don't lend to single women.". Disparate Treatment.
What is disparate treatment?
Disparate treatment occurs when members of a prohibited basis group are treated differently than others, even if it's not overt. Disparate treatment can be unintentional. For example, if you have pricing discretion that results in white applicants receiving better pricing than Asian applicants, that might be considered comparative evidence of disparate treatment.
What are the risks of fair lending?
These risks can exist in any stage of the lending process, such as marketing, steering, pricing, or servicing. There are 3 types of discrimination in fair lending : Overt Discrimination.
What is the purpose of the ECOA policy statement?
It is intended to be consistent with those statutes and their implementing regulations and to provide guidance to lenders seeking to comply with them. It does not create or confer any substantive or procedural rights on third parties which could be enforceable in any administrative or civil proceeding.
Why use HMDA data?
Therefore, regulatory and enforcement agencies may use HMDA data, along with other factors, to identify institutions whose lending practices warrant more scrutiny. Furthermore, HMDA data can be relevant, in conjunction with other data and information, to the determination whether a lender has discriminated.
Why is HMDA important?
HMDA data are useful, though, for identifying lenders whose practices may warrant investigation for compliance with fair lending laws. HMDA data may also be relevant, in conjunction with other evidence, to the determination whether a lender has discriminated. Evidence of Disparate Impact.
What is the reason to believe an ECOA violation has occurred?
A: A federal financial institutions regulatory agency has reason to believe that an ECOA violation has occurred when a reasonable person would conclude from an examination of all credible information available that discrimination has occurred. This determination requires weighing the available evidence and applicable law and determining whether an apparent violation has occurred. Information supporting a reason to believe finding may include loan files and other documents, credible observations by persons with direct knowledge, statistical analysis, and the financial institution's response to the preliminary examination findings.
Why is the lending policy statement issued?
The policy statement is being issued for several reasons, including: • To provide guidance about what the agencies consider in determining if lending discrimination exists; and. • To provide a foundation for future intepretations and rulemakings by the Agencies. A number of federal statutes seek to promote fair lending.
What are some examples of fair lending laws?
A number of federal statutes seek to promote fair lending. For example, the Home Mortgage Disclosure Act ("HMDA"), 12 U.S.C. 2801 et seq., seeks to prevent lending discrimination and redlining by requiring public disclosure of certain information about mortgage loan applications. The Community Reinvestment Act ("CRA"), 12 U.S.C. 2901 et seq., seeks affirmatively to encourage institutions to help to meet the credit needs of the entire community served by each institution covered by the statute, and CRA ratings take into account lending discrimination by those institutions. The Americans with Disabilities Act, 42 U.S.C. 1210 et seq., prohibits discrimination against persons with disabilities in the provision of goods and services, including credit services. This policy statement, however, is based upon and addresses only the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. 1691 et seq., and the Fair Housing Act ("FH Act"), 42 U.S.C. 3601 et seq., the two statutes that specifically prohibit discrimination in lending.
What is the CRA?
The Community Reinvestment Act ("CRA"), 12 U.S.C. 2901 et seq., seeks affirmatively to encourage institutions to help to meet the credit needs of the entire community served by each institution covered by the statute, and CRA ratings take into account lending discrimination by those institutions.
Overt Discrimination
Disparate Treatment
- Of the three types of discrimination, this is the most common and the most likely to be targeted in a fair lending review. Disparate treatment is differences or inconsistencies in treatment based on prohibited factors that are not fully explained by relevant, non-discriminatory factors. Disparate treatment applies to a wide range of issues such as pricing, underwriting, or steering. Disparate t…
Disparate Impact
- Disparate impact can be understood by thinking of it as somewhat of the mirror image of disparate treatment. Whereas disparate treatment is the result of inconsistencies, disparate impact involves, instead, consistency. Disparate impact is where consistent application of a policy results in an adverse impact on a protected class. The Interagency Fair Lending Examination Procedures pro…
Conclusion
- It is important to understand the types of discriminations that can occur in order to fully evaluate fair lending risk. Overt discrimination may be blatant or obvious, but lenders should understand it can occur inadvertently. 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 adv…