Fair Lending (2024)

Discrimination

The FHA prohibits discrimination in residential real estate–related transactions based on

• race or color.
• national origin.
• religion.
• sex.
• familial status.
• handicap.

The ECOA prohibits discrimination in credit transactions based on

• race or color.
• national origin.
• religion.
• sex.
• marital status.
• age.*
• applicant's receipt of income from a public assistance program.
• applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act.

*Age is a prohibited factor provided the applicant has the capacity to enter into a contract.

Disparate Impact

When a bank applies a facially neutral policy or practice to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis under FHA and/or ECOA, the policy or practice is described as having a disparate impact or discriminatory effect. A policy that results in a disparate impact on a prohibited basis and is not legally justified violates fair lending laws and regulations. Evidence of discriminatory intent is not necessary to establish that a bank’s adoption or implementation of a policy or practice that has a disparate impact violates ECOA or the FH Act.

Disparate Treatment

Disparate treatment occurs when a lender treats a credit applicant differently based on one of the prohibited bases under FHA and/or ECOA. It does not require any showing that the treatment was motivated by prejudice or a conscious intention to discriminate against a person beyond the difference in treatment itself. It is considered by courts to be intentional discrimination because no credible, nondiscriminatory reason explains the difference in treatment on a prohibited basis.