However, technical violations, especially of a repetitive nature, can be indicators that possible substantive violations may also exist. Substantive violations involve actual discrimination on a prohibited basis, either disparate treatment or disparate impact. Identifying Types of Lending Discrimination When evaluating the results of the analysis, look for any evidence of overt discrimination, as well as evidence of disparate treatment and disparate impact. Evidence of overt discrimination exists when a lender openly and blatantly discriminates on a prohibited basis. Disparate treatment occurs when a lender treats an applicant differently based on one of the prohibited bases.
Disparate treatment ranges from overt discrimination to more subtle differences in treatment.
As discussed earlier, disparate treatment may more likely occur in the treatment of applicants who are neither clearly well-qualified nor clearly unqualified for a loan. Even when there is an apparently valid explanation for a particular difference in treatment, further investigation may indicate disparate treatment. Disparate impact occurs when a policy or practice applied equally to all applicants has a disproportionate adverse impact on applicants in a protected group. However, identifying the existence of a possible disparate impact is only the first step in finding lending discrimination. The justification may not be hypothetical or speculative.