Fair Lending Overview and Discrimination Definitions

Step Type: Text

What learners will learn: Overview of fair lending compliance.

Step Description:
Fair lending protects consumers by prohibiting unfair and discriminatory lending practices. This resource identifies fair lending risks, as well as the types of analyses institutions may perform in the assessment of each risk.

Summary of Content:
Learners will examine fair lending laws, the risks of non-compliance, and how institutions assess and mitigate those risks. The content outlines six fair lending risk areas, types of illegal discrimination, and practices like redlining and predatory lending. It highlights permissible lending factors and components of an effective fair lending program, including how to identify and address fair lending risk.

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Step Type: MultiChoice

What learners will learn: Fair lending risks, analyses and penalties.

Step Description:
There is no requirement for the types of analyses financial institutions must perform to assess fair lending risks; however, it is in the best interest of the institution to ensure all fair lending risks are identified and evaluated appropriately.

Summary of Content:
This step covers potential outcomes of non-compliance with fair lending laws, including civil money penalties, branching restrictions, and reputational harm. It highlights how various services—like underwriting and marketing—can expose institutions to risk. The step also introduces learners to typical analysis methods and key regulations that promote fair lending.

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Step Type: Text

What learners will learn: Types of fair lending discrimination.

Step Description:
It is important to understand the types of discriminations that can occur in order to fully evaluate fair lending risk. Although the most common is disparate treatment, overt discrimination and disparate impact are also legitimate risks and should not be ignored.

Summary of Content:
This step defines illegal discrimination in lending and outlines three main types: overt discrimination, disparate treatment, and disparate impact. It explains how each form occurs, their implications for fair lending, and why understanding them is essential to evaluating fair lending risk.

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Step Type: Streak

What learners will learn: What is illegal discrimination in lending.

Step Description:
For lending purposes, illegal discrimination takes place when individuals with a similar credit background are treated differently based on any of the prohibited factors described by the Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA).

Summary of Content:
This step identifies prohibited bases for discrimination under key regulations and outlines common examples. It also emphasizes that discrimination can occur even when not intentional, and that lenders must remain vigilant against inconsistent practices that lead to unequal outcomes.

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Step Type: MultiChoice

What learners will learn: How to identify overt discrimination in lending.

Step Description:
Overt discrimination is the easiest to understand and is what most people think about when they hear the word “discrimination.” Overt discrimination may be blatant or obvious, but lenders should understand it can occur inadvertently.

Summary of Content:
This step helps learners identify overt discrimination through realistic examples. It explains that overt acts may be intentional or unintentional and that offering preferential terms based on protected characteristics still violates fair lending laws. Recognizing these practices is crucial for avoiding compliance failures.

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Step Type: True or False

What learners will learn: How to identify disparate treatment in lending.

Step Description:
Of the three types of discrimination, disparate treatment is the most common and the most likely to be targeted in a fair lending review.

Summary of Content:
This step explains disparate treatment and its emphasis on inconsistently applied policies. Learners explore how these inconsistencies may arise unintentionally and how statistical or file-based reviews are used to identify risk. The step reinforces why consistent application of policy is essential for fair lending compliance.

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Step Type: Polygraph

What learners will learn: How to identify disparate impact in lending.

Step Description:
Disparate impact occurs when consistent application of a policy results in an adverse impact on a protected class, as opposed to disparate treatment, which involves the inconsistent application of a policy.

Summary of Content:
Disparate impact focuses on policies that are consistently applied but lead to unequal results for certain groups. The step introduces concepts like “business necessity” as a defense and explores examples where seemingly neutral policies can trigger fair lending violations. It also notes that disparate impact is less frequently targeted but still significant.

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Step Type: Crossword

What learners will learn: Fair Lending Overview and Discrimination Definitions course review.

Step Description:
Test your knowledge on the basics of fair lending in this mastery step!

Summary of Content:
This review step reinforces core concepts and terminology through an engaging crossword format. Learners revisit discrimination types, policy impacts, and regulatory requirements. The step is designed to reinforce understanding and retention at the end of the course.

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