Last week, the CFPB issued a compliance bulletin confirming that it would follow the disparate impact theory in advancing claims of discriminatory lending practices. The importance of the disparate impact theory is that it does not require a showing of intentional discrimination. Rather, it simply requires the government to show that a lender’s policies and/or practices resulted in a discriminatory outcome-regardless of the intent.

Disparate impact claims also confirm that the CFPB will focus on overall lending statistics for institutions. Indeed, statistically significant differences in treatment between minority/non-minority borrowers are an essential component of disparate impact analysis because without the statistically significant showing, the government cannot show a policy exists and cannot show the needed discriminatory effect.

It's important to realize that the disparate impact theory is essentially outcome determinative. In other words, you cannot be susceptible to disparate impact claims, if there is not an overall statistically significant imbalance. As such, if a lender routinely audits its lending statistics and confirms that its practices are not resulting in disparate lending, then it is clearly safe from any governmental investigation. In the alternative, if it determines that a statistical imbalance does exist after accounting for legitimate differences in loan pricing, a lender is on notice that adjustments to its policies and practices are necessary. Just as important, lenders have less to worry about in regard to one-off claims (where a single borrower points to a single instance of another borrower getting a better rate) as sufficient evidence of discrimination. Hence, while lenders cannot ignore overt indications of discrimination, they should concentrate their focus on overall lending statistics.