A lender implements a policy requiring all applicants to have bank accounts at their institution for six months before applying for a mortgage. Statistical analysis reveals this requirement disproportionately excludes Native American applicants from a nearby reservation who traditionally use different financial institutions. To defend this policy, the lender must show:
Correct Answer
C) The policy serves a legitimate business purpose and no less discriminatory alternative exists
In a disparate impact case, the lender must prove that the challenged practice serves a substantial, legitimate, nondiscriminatory business interest and that no less discriminatory alternative exists that would serve the same business purpose. Simply showing equal application or lack of intent is insufficient to defend against disparate impact claims.
Why This Is the Correct Answer
In a disparate impact case, the lender must prove that the challenged practice serves a substantial, legitimate, nondiscriminatory business interest and that no less discriminatory alternative exists that would serve the same business purpose. Simply showing equal application or lack of intent is insufficient to defend against disparate impact claims.
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Previous Question
An MLO discovers that their company's loan processing system automatically generates higher rate quotes for borrowers in certain ZIP codes, even when those borrowers have identical credit profiles to borrowers in other areas. The MLO is concerned about fair lending implications but is told by management that the system uses 'proprietary risk algorithms.' What is the MLO's best course of action under UDAAP principles?
Next Question
A bank's policy requires a minimum credit score of 720 for all mortgage applicants. Statistical analysis shows this policy disproportionately affects Hispanic applicants, even though the policy is applied equally to all applicants. This scenario represents: