A credit union's policy requires borrowers to have been employed at the same job for 24 months, with no exceptions. Statistical analysis shows this requirement excludes 40% of single mothers compared to 15% of married applicants. The credit union argues it reduces default risk. This scenario represents:
Correct Answer
C) Disparate impact that may violate fair lending laws unless justified by business necessity
This represents potential disparate impact discrimination under ECOA and the Fair Housing Act. While the policy appears neutral, it disproportionately affects women (particularly single mothers), who are a protected class. The lender must prove the 24-month requirement is justified by business necessity and that no less discriminatory alternative exists to achieve the same legitimate business goal.
Why This Is the Correct Answer
This represents potential disparate impact discrimination under ECOA and the Fair Housing Act. While the policy appears neutral, it disproportionately affects women (particularly single mothers), who are a protected class. The lender must prove the 24-month requirement is justified by business necessity and that no less discriminatory alternative exists to achieve the same legitimate business goal.
More Ethics & Fraud Questions
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