VIDEO: What is Overt Evidence of Disparate Treatment?
In this Compliance Clip (video), Adam explains how a lender could end up with overt evidence of disparate treatment. This video takes just 7 minutes to view and can be shared with your lending team or others in your organization who need to understand fair lending rules and regulations.
Video Transcript
The following is a transcript of this video:
This Compliance Clip is going to answer the question of what is overt evidence of disparate treatment. Of course, this is a fair lending topic we're going to discuss today. In order to answer the question of what is overt evidence of disparate treatment, I want to briefly explain where this terminology comes from. In fact, this is one of three things that is a type of discrimination that is recognized by the court. First type is overt evidence of disparate treatment. The second type is what we call comparative evidence of disparate treatment. And the third type is evidence of disparate impact. These are topics we will discuss in other videos.
So what is overt evidence of disparate treatment? Well, I like to refer to this as open discrimination. When you are blatant about your discrimination against a protected class and you're being obvious that you are discriminating against somebody. This could be through advertising or it could be through comments that you or your lenders or somebody in your organization makes. I like to refer to it as “stupid statements”, things you should not say.
There are many examples of overt evidence of disparate treatment that I could come up with hypothetically. But in reality, we rarely see overt evidence in financial institutions. The reason being is our lenders should, in today's day and age, understand that they cannot make certain comments. That said, just a few days ago, one of my wife's friends was applying for a mortgage loan and her lender told her, and I kid you not, her lender said, “Go get a man, get married, come back and we will do a loan for you.” I kid you not. That's what this person said. How would that be discrimination? Well, that would be discrimination based on marital status. That is a problem. This lender said, “Go get a man or get married, and then we'll do the loan for you.” That is a problem. I advised that person to seek counsel, to complain and to try somebody else to get the loan, because that is not an acceptable denial reason by any means.
In fact, that was something I heard just a few days ago, but I rarely hear this brought up, but there are some examples we could see. For example, if your lender said something like this, “Well, we really don't like to lend to native Americans. I know you're native American. We really don't like to lend to your people, but the law says we have to. So if you'd like to apply, you absolutely can if you want to.” So that would be a problem because even if you made a statement like that, that appeared to discriminate but you ended up closing the loan and your lenders did something like that. They closed the loan. And even if that applicant, who was a native American, ended up not getting treated differently at all. It would be considered discrimination because to be discrimination, the creditor doesn't have to act on the statement, just saying it becomes discrimination. That in and of itself is considered overt evidence of disparate treatment.
The only example that I've actually seen in an organization was I was going around to different financials or different branches of a financial institution. Working as a consultant, I've traveled to many, but I was going into a financial institution, being introduced to the branch managers of different branches. As I went into one particular branch, I was greeted by the Assistant Branch Manager, not the Branch Manager. I asked the Assistant Branch Manager, I saw an empty office, I said, “Oh, is that where the branch manager is located?” And she turned to me and said, “Oh, Tom,” I forgot his name, I’m calling him Tom. “Tom, he's a character. You know, he doesn't like to lend to women because he doesn't think that women can run businesses.” The look of horror was probably on my face because she responded by saying, “Oh, oh, it's okay. Everybody realizes that so we just send all women applicants over to our next branch which actually happens to be over a 30 minute drive away.” That is an another example of overt evidence of disparate treatment because he made a comment, a blatant statement of discrimination, discriminating based on gender. The ironic thing was this office was actually located within about 10 miles of the world headquarters for Vera Bradley and Vera Bradley is kind of a success story in the Fort Wayne area. It is a success story in the Fort Wayne area because it was founded by two women who have successfully run this gigantic corporation of Vera Bradley that creates handbags and other items that I, as a man, would never purchase, except that I would purchase them for my wife and daughters.
Overt evidence of disparate treatment is stupid statements by your lenders. You can not make these kinds of statements or you can end up in major trouble with your regulators. You can end up with substantial fines and penalties, or you could end up with a referral and settlement with the department of justice.
So overt evidence to disparate treatment is a type of discrimination that you don't want to have. In order to prevent this in your organization, the best thing you can do is to train, train, train, train on what your lender should not say. New lenders need to be very careful on what they say to applicants, because even a statement of discrimination is a problem even if the end result is that applicants still got alone. So training is the best thing you can do to prevent over evidence of disparate treatment in your organization.
That's all I have for you in this Compliance Clip.