Fair lending refers to the unbiased treatment of all customers when making credit-related decisions. It is a set of laws and regulations that prohibit lenders from discriminating against borrowers based on certain characteristics such as race, color, national origin, religion, sex, familial status, or disability. The federal fair lending laws include the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act. These laws apply to any extension of credit, including extensions of credit to small businesses, corporations, partnerships, and trusts.
Lenders are prohibited from considering the above-mentioned characteristics when applying for residential mortgages or any other type of credit. If a lender has apparently treated similar applicants differently on the basis of a prohibited factor, it must provide an explanation for the difference in treatment. If the lender’s explanation is found to be not credible, the agency may find that the lender discriminated.
Fair lending laws ensure that financial institutions provide fair and uniform services and credit decisions. The fair treatment of current and potential customers is an integral part of the overall commitment to maintaining the highest standards of corporate responsibility. Denying any person equal access to basic economic opportunities, such as home ownership or credit, is morally repugnant, has no place in financial institutions, and will not be tolerated.
