Overt Evidence Of Disparate Treatment
Adam discusses the first type of discrimination recognized by the courts: overt evidence of disparate treatment. There are a few good examples and a few good laughs in this video. A complementary article for this video can be found at https://www.compliancecohort.com/blog/fair-lending-risk-overt-evidence-of-disparate-treatment
Video Transcript
The following is a transcript of this video.
Today's topic is overt evidence of disparate treatment. We're currently going through a series on fair lending, and we're looking at the three types of discrimination recognized by the courts. The first type of discrimination recognized by the courts is overt evidence of disparate treatment. The second type is comparative evidence of disparate treatment, and the third type is disparate impact. And of course, today's topic of this video is overt evidence of disparate treatment.
When we have any of these types of discrimination, these types of discrimination would be against a protected class. So let's review what a protected class is under Regulation B. It includes a number of things. It includes race, color, religion, national origin, gender, marital status, age, receipt of income from public assistance, and even if a consumer is to exercise their rights in good faith under the Consumer Credit Protection Act. These are all considered protected classes under Regulation B. We cannot discriminate against them.
Under the Fair Housing Act, the protected classes are very similar, but we have two different ones. The first one being familial status that's defined as having the number of children living in a house, they're under 18 years of age, as well as the second type being handicap. So, these are the protected classes under the Fair Housing Act. All of these classes we cannot discriminate against.
Let's look at what overt evidence of disparate treatment is.
Well, overt evidence of disparate treatment occurs when a lender openly discriminates. So, they openly discriminate. And this could be through verbal statements, or through something else that we'll talk about in just a second. But verbal statements, it could be something like “you are too old.” That is overt evidence of disparate treatment. Now, not only verbal statements, but it could come through advertisements or other printed documents.
The reality is in today's society, we know that we cannot discriminate and for the most part, banks don't do this, especially not through advertising, but usually when we do see it, which is pretty rare, it's a rare form of discrimination, we do see it through verbal statements. So let's give some examples of overt evidence of disparate treatment.
First would be any lender’s statement against a protected class. Something like, “we won't lend against blank.” You fill in the blank, put the protected class in the blank. For example, we won't lend against this religion. That is problematic. My favorite example in all the years I've been doing compliance, I really only have a couple of examples, but my favorite example was when I heard about a lender, and they were telling me about this lender, and they said that this lender's quirky, and it's okay. He's just a little strange, and everybody knew that he was strange, and one weird thing about him was he did not think that women could run businesses. So, he would not lend to women. Well my eyes were- woah! You know, I went through the wall when I heard this, and the person telling me this said “No, no, no. It's okay, everybody knows this”, and I'm thinking if everybody knows this, where are the examiners? Why isn't this guy kicked out of banking? But she said, “No it's okay, everybody knows this so the women will just go to the next closest branch,” which happened to be over a half hour away, which is absolutely crazy.
The interesting thing about overt evidence of disparate treatment is discrimination can occur even if a lender does not act on a statement. All they have to do is say it. Even if the loan closes, the overt evidence has still occurred. So, for example, if you have a lender that says something that he showed it. For example he says, “You know, we really don't like to land in Native Americans but the loss is we have to soooooo.” Right? And then if he proceeds on with the loan and closes it, overt evidence of disparate treatment has already occurred. It's already occurred. So, it's the statement in and of itself that is problematic. Right? The statement causes the overt evidence even if the end result is the protected class got the loan. That's where the problem is.
Now, the best way to identify overt evidence in your organization - maybe you're an auditor just trying to assess your risk of fair lending - the best way to identify it is there's a couple of things you can do. First is to review training. If your lenders have not had training, there's a good chance they may be making stupid comments. If there's good training they should understand this rule and this could easily be avoided. The second thing you can do is to conduct surveys of both your lenders and your customers and to look at complaints that may have come in. And that's how you could identify overt evidence of disparate treatment.
Thanks for joining me for this video today.
