under the Consumer Credit Protection Act.” The ECOA has two principal theories of liability: disparate treatment and disparate impact. Disparate treatment occurs when a creditor treats an applicant differently based on a prohibited basis such as race or national origin. 2 Disparate
What is disparate treatment and disparate impact in ECOA?
The ECOA has two principal theories of liability: disparate treatment and disparate impact. Disparate treatment occurs when a creditor treats an applicant differently based on a prohibited basis such as race or national origin. 2
What does disparate treatment mean in law?
Disparate Treatment. With respect to disparate treatment, the Policy Statement provides that disparate treatment ranges from overt discrimination to more subtle disparities in treatment and, importantly, does not require any showing that treatment was motivated by prejudice or a conscious intention to discriminate against a person beyond...
What is overt disparate treatment?
What is overt disparate treatment? Overt disparate treatment occurs when someone obviously and clearly judges or punishes an employee based on their gender, race, religion or another personal characteristic.
What is disparate treatment under Title VII?
Disparate treatment. A disparate treatment violation is made out when an individual of a protected group is shown to have been singled out and treated less favorably than others similarly situated on the basis of an impermissible criterion under Title VII. The issue is whether the employer's actions were motivated by discriminatory intent.
What is disparate treatment in fair lending?
Disparate treatment occurs when a lender treats a. credit applicant differently on the basis of one of the. prohibited factors.
What is an example of disparate treatment in lending?
Illegal disparate treatment occurs when a lender bases its lending decision on one or more of the prohibited discriminatory factors covered by the fair lending laws, for example, if a lender offers a credit card with a limit of $750 for applicants age 21 through 30 and $1,500 for applicants over age 30.
What are prohibited factors under ECOA?
The Federal Trade Commission (FTC), the nation's consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.
What is the difference between overt discrimination and disparate treatment?
Overt Discrimination, which occurs when a consumer is openly and/or actively discriminated against on a prohibited basis factor. Disparate Treatment, which occurs when members of a prohibited basis group are treated differently than others.
What is comparative disparate treatment in lending?
Comparative evidence of disparate treatment occurs when a protected class applicant is treated less favorably than other applicants and is typically discovered through a comparative analysis during a fair lending examination.
What are the 3 types of lending discrimination?
There are 3 types of discrimination in fair lending:Overt Discrimination. Overt discrimination is the act of openly and/or intentionally discriminating on a prohibited basis, i.e. "we don't lend to single women."Disparate Treatment. ... Disparate Impact.
How do regulatory agencies most often establish proof of disparate impact through?
The existence of a disparate impact must be established by facts. Frequently this is done through a quantitative or statistical analysis.
What are prohibited factors?
Answer: There are nine prohibited factors under the ECOA. Most people are familiar with seven of them: gender, race, color, religion, national origin, marital status and age.
What disclosures are required by ECOA?
The ECOA requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit....§ 1002.9 Notifications.Use of the term adverse action. ... Expressly withdrawn applications. ... When notification occurs. ... Location of notice. ... Prequalification requests.
How do you prove disparate treatment?
Disparate treatment occurs when an employer treats some individuals less favorably than other similarly situated individuals because of their race, color, religion, sex, or national origin. To prove disparate treatment, the charging party must establish that respondent's actions were based on a discriminatory motive.
What is disparate impact discrimination and how is it proved?
Disparate impact lawsuits claim that an employer's facially neutral practice had a discriminatory effect. By Lisa Guerin, J.D. Disparate impact is a way to prove employment discrimination based on the effect of an employment policy or practice rather than the intent behind it.
What is an example of a disparate impact?
A common and simple example of “disparate impact” discrimination is when an employer has a policy that it will only hire individuals who are a certain minimum height or who can lift a certain minimum weight. Courts have found height restrictions disproportionately impact women and certain races.
What is the ECOA?
What Is the Equal Credit Opportunity Act (ECOA)? The Equal Credit Opportunity Act (ECOA) is a law created by the U.S. government with the aim of giving all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders.
Who is responsible for enforcing the ECOA?
In July 2020, the Consumer Financial Protection Bureau (CFPB), which takes the lead in supervising compliance and enforcing the ECOA, issued a Request for Information 2 soliciting public comments to identify opportunities for improving what ECOA does to ensure nondiscriminatory access to credit.
What is an ECOA loan?
It also applies to anyone involved in the decision to grant credit or set its terms—for example, real estate brokers who arrange financing. The ECOA covers various types of credit, including personal loans, credit cards, home loans, student loans, car loans, small business loans and loan modifications.
What is the purpose of the Equal Credit Opportunity Act?
Code, is intended to prohibit discrimination by lenders in any aspect of granting credit to an individual. The act's purpose is to prevent lenders from using race , color, sex, religion, or other non-creditworthiness factors when evaluating a loan application, ...
When was the Equal Credit Opportunity Act enacted?
Understanding the Equal Credit Opportunity Act (ECOA) The Equal Credit Opportunity Act was enacted in 1974 and is detailed in Title 15 of the United States Code. 1 The act, as implemented by Regulation B, states that individuals applying for loans and other credit can only be evaluated using factors that are directly related to their ...
Can a lender be sued for ECOA?
Lenders found in violation of the ECOA can potentially face class-action lawsuits by the Department of Justice (DOJ) if the DOJ or any affiliate agencies recognize a pattern of discrimination.
What is disparate treatment?
Disparate treatment is a claim of discrimination in which an individual complains to have been treated differently than other people in a similar situation, but who don’t share the individual’s protected class. Disparate treatment is a common element of proving employment discrimination, but it occurs in other areas of life as well, ...
What is disparate discrimination?
The EEO defines this type of discrimination as: “Inconsistent application of rules and policies to one group of people over another.” In 1977, the U.S. Supreme Court defined disparate treatment as discriminatory acts in which “ [t]he employer simply treats some people less favorably than others because of their race, color, religion, sex, or national origin.” Proving disparate treatment often involves proving that the employer’s decision was motivated by the employee’s protected trait.
What is after acquired evidence?
After-acquired evidence is evidence of an employee’s wrongdoing or misconduct, gathered by the employer only after the employee’s discharge and claim of discrimination. Over the years, there has been some debate as to whether after-acquired evidence could prevent a plaintiff from winning his discrimination, or disparate treatment, lawsuit. In general, the courts have held that after-acquired evidence of misconduct unrelated to the grounds for termination can only prevent a plaintiff from being awarded reinstatement, injunctive relief, and front pay, if accepted at all.
How can a person be treated differently?
There are two ways in which a person may be treated differently, or “disparately,” for purposes of discrimination actions: (1) disparate treatment, and (2) disparate impact. The difference between the two has to do with intent and effect.
Why was EEO enacted?
Equal Employment Opportunity (“EEO”) laws were enacted to correct a pattern of unequal treatment of women and minorities. As the definition of protected class has expanded, it has become clear that everyone belongs to some protected class, and may be protected from discrimination by federal law.
What does "discriminatory treatment" mean?
Noun. Treatment of an individual that is less favorable than treatment of others, for a discriminatory purpose. Discriminatory treatment of an employee for reasons of his inclusion in a protected class.
Why are anti-discrimination laws unlawful?
Federal anti-discrimination laws make it unlawful to discriminate against anyone on the basis of certain characteristics. Because these characteristics are protected by law, people having these traits or qualities are considered to be in a protected class.
When the scoping process or any other source identifies overt evidence of disparate treatment, should the examiner
Where the scoping process or any other source identifies overt evidence of disparate treatment, the examiner should assess the nature of the policy or statement and the extent of its impact on affected applicants by conducting the following analysis
What is the ECOA Act?
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction. It applies to any extension of credit, including extensions of credit to small businesses, corporations, partnerships, and trusts.
What is the Equal Credit Opportunity Act?
The Equal Credit Opportunity Act (ECOA), which is implemented by Regulation B , applies to all creditors. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) transferred this authority to the Consumer Financial Protection Bureau (“CFPB” or “Bureau”). The Dodd-Frank Act granted rule-making authority under ECOA to the CFPB and, with respect to entities within its jurisdiction, granted authority to the CFPB to supervise for and enforce compliance with ECOA and its implementing regulations.1In December 2011, the CFPB restated the Federal Reserve’s implementing regulation at 12 CFR Part 1002 (76 Fed. Reg. 79442)(December 21, 2011).
Why do we need pre-examination scoping?
The purpose of pre-examination scoping is to help examiners target areas with the highest fair lending risk.
What is the E-Sign Act?
Disclosures required to be given in writing may be provided to the applicant in electronic form,generally subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
What is fair lending procedure?
These procedures are intended to be a basic and flexible framework to be used in the majority of fair lending examinations conducted by the FFIEC agencies. They are also intended to guide examiner judgment, not to supplant it. The procedures can be augmented by each agency as necessary to ensure their effective implementation.
When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but
When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a “disparate impact.”
What is disparate treatment?
They start with the same word, but have decidedly different meanings. Disparate treatment occurs when a lender treats applicants differently. This may occur based on our unconscious biases about people or situations, or done as a pattern of practice.
What does "disparate" mean in a case?
Disparate Treatment Vs. Disparate Impact. “Disparate” means that you are treating one person differently than another. Now many of you will jump to the defense and swear that you don’t treat any client differently than the other. For some of you that may be true, but based on mystery shopping results the examiners don’t see it that way.
Can random treatment be done on a prohibited basis?
Random treatment like this can only be helped with consistent training. However, Disparate Treatment that is done on a prohibited basis is another story and may occur in patterns of treatment to certain types of customers.
Why is it important to recognize disparate treatment?
Disparate treatment has a direct impact on your employees and the work environment as a whole, so it’s important to know how to recognize it and prevent issues within your organization.
How does disparate treatment affect a business?
Employers who enable or allow disparate treatment and other discriminatory practices at their company can face legal, financial and cultural consequences. Employees can take action when a company violates their rights, resulting in possible fines and legal repercussions.
What is the term for an employer who treats an employee unfairly compared to other employees based on their personal characteristics
Disparate treatment , also known as adverse treatment , occurs when an employer treats an employee unfairly compared to other employees based on their personal characteristics, especially in regard to protected classes.
Why are employees treated differently than others?
Employees being treated differently than others in the workplace because of their differences are victims of disparate treatment in their employment conditions. For example, a female employee being passed over for a promotion several times in favor of male employees with less experience is disparate treatment.
What is disparate impact?
Disparate impact is similar to disparate treatment but specifically addresses situations where someone feels that they have been unintentionally discriminated against. If a company has a policy that makes it harder for certain groups to succeed, this can cause disparate impact.
What is the purpose of clear policies in the employee handbook?
Having clear policies in place allows you to have a benchmark that you can use for comparing staff behaviors.
What is disparate treatment?
Disparate treatment. Disparate treatment is one kind of unlawful discrimination in US labor law. In the United States, it means unequal behavior toward someone because of a protected characteristic (e.g. race or gender) under Title VII of the United States Civil Rights Act. This contrasts with disparate impact, ...
What is a disparate impact violation?
A disparate impact violation is when an employer is shown to have used a specific employment practice, neutral on its face but that caused a substantial adverse impact to a protected group, and cannot be justified as serving a legitimate business goal for the employer. No proof of intentional discrimination is necessary.
How can an employer rebut a prima facie case?
The employer can rebut the prima facie case by introducing alternative statistics or by demonstrating that plaintiff's proof is either inaccurate or insignificant. The plaintiff then bears the burden of proving that the employer's information is biased, inaccurate, or otherwise unworthy of credence.
What happens if an employer takes an adverse employment action against an employee?
If an employer takes an adverse employment action against an employee for a discriminatory reason and later discovers a legitimate reason that it can prove would have led it to take the same action, the employer is still liable for the discrimination , but the relief that the employee can recover may be limited. McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995). In general, the employee is not entitled to reinstatement or front pay, and the back pay liability period is limited to the time between the occurrence of the discriminatory act and the date the misconduct justifying the job action is discovered. McKennon, 513 U.S. at 361-62.
What is direct evidence?
Direct evidence: Although direct evidence of discrimination can be very powerful, courts often give little weight to discriminatory remarks made by persons other than decision makers, "stray" remarks not pertaining directly to the plaintiffs, or remarks that are distant in time to the disputed employment decision.
Is race a bona fide occupational qualification?
Race or color may never be a bona fide occupational qualification. "suspicious timing, ambiguous statements oral or written, behavior toward or comments directed at other employees in the protected group, and other bits and pieces from which an inference of discriminatory intent might be drawn.".
Definition of Disparate Treatment
What Is Disparate Treatment
- Disparate treatment is a claim of discrimination in which an individual complains to have been treated differently than other people in a similar situation, but who don’t share the individual’s protected class. Disparate treatment is a common element of proving employment discrimination, but it occurs in other areas of life as well, such as loan ap...
Disparate Treatment vs. Disparate Impact
- There are two ways in which a person may be treated differently, or “disparately,” for purposes of discrimination actions: (1) disparate treatment, and (2) disparate impact. The difference between the two has to do with intent and effect.
Proving A Disparate Treatment Complaint
- Proving a claim of disparate treatment does not require proof beyond doubt. Rather, it requires the individual complaining of discrimination (the “plaintiff”) to make a prima facie case, which means he has to provide sufficient evidence to the court that there is at least the appearanceof discrimination. The employer must then defend its actions, providing evidence of a reasonable, …
Disparate Treatment Example in Firefighter Promotions
- In 2003, the New Haven Connecticut Fire Department needed to fill 15 management positions, having 7 openings for Captain, and 8 openings for Lieutenant. Like most civil service organizations, hiring is done by a “Rule of Three,” in which a civil service examination is given, after which the department chooses from the three highest-scoring applicants on the list. The Ci…
Related Legal Terms and Issues
- Civil Lawsuit– A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
- Defendant– A party against whom a lawsuit has been filed in civil court, or who has been accused of, or charged with, a crime or offense.
- Discrimination– The practice of unfairly treating different categories of people, especially on …
- Civil Lawsuit– A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
- Defendant– A party against whom a lawsuit has been filed in civil court, or who has been accused of, or charged with, a crime or offense.
- Discrimination– The practice of unfairly treating different categories of people, especially on the grounds of ethnicity, national origin, gender, race, religion, and sexual orientation.
- Front Pay– Employment compensation for the period between judgement ordering reinstatement, and actual reinstatement. Front pay is, like back pay, an award of lost earnings.
