Examples of Lending Discrimination
Providing a different customer service experience to mortgage applicants depending on their race, color, religion, sex (including gender identity and sexual orientation), familial status, national origin or disability.
6.1 Direct, indirect, subtle and adverse effect discrimination.
Students classify those characteristics based on the three C's of credit (capacity, character, and collateral), assess the riskiness of lending to that individual based on these characteristics, and then decide whether or not to approve or deny the loan request.
Sex (including gender identity and sexual orientation) Familial Status. Disability.
These three pillars are the keys to effective credit analysis and can also be referred to as the 3 P's: Policies, Process and People. Policies (or procedures) refer to the overall strategy or framework that guides specific actions. Loan policies provide the framework for an institution's lending activities.
A loan is a sum of money that an individual or company borrows from a lender. It can be classified into three main categories, namely, unsecured and secured, conventional, and open-end and closed-end loans.
These three essential factors — Credit, Capacity, and Collateral — play a pivotal role in determining your eligibility and terms for a mortgage.
First-degree is when a seller charges all buyers the highest price and allows for reductions. Second-degree is when a seller changes price depending on the quantity purchased. Third-degree is when a seller charges different prices for different consumer groups based on a specific attribute.
Today, three federal laws offer protection against such discrimination: The Fair Housing Act (FHA)1. The Equal Credit Opportunity Act (ECOA)2. The Community Reinvestment Act (CRA)3.
Sexual orientation. Gender identity, gender expression. Medical condition.
The courts have recognized three methods of proof of lending discrimination under the ECOA and the FHAct: Overt evidence of disparate treatment; • Comparative evidence of disparate treatment; and • Evidence of disparate impact.
Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.
The lenders ask for a collateral before lending because: It is an asset that the borrower owns and uses this as a guarantee to the lender – until the loan is repaid. Collateral with the lender acts as a proof that the borrower will return the money.
A fair lending risk assessment works by evaluating the different types of risks in your institution. In the most general sense, there are three important elements that a fair lending risk assessment will consider: inherent risk, controls, and residual risk.
The 5 Cs are Character, Capacity, Capital, Collateral, and Conditions. The 5 Cs are factored into most lenders' risk rating and pricing models to support effective loan structures and mitigate credit risk.
When it comes to fair lending compliance, three key regulations hold the utmost importance: Regulation B, Regulation C, and the Community Reinvestment Act (CRA). All three regulations are designed to promote fair access to credit and prevent discrimination in lending.
The first is overt discrimination, where a lender/LO can blatantly offer favorable terms to a customer due to their gender, race, etc., or withhold said terms from another customer for the same reason. This is the most obvious form of discrimination and, as such, typically the form that is employed the least.