The OCC issuance even says that this prohibition applies to use of standards highly correlated with a prohibited factor, such as whether the customer speaks Spanish as a primary language. This amounts to a position on the affirmative action debate as it affects credit, as it means that even a model intended to benefit a protected group would be forbidden. Avoid the disparate treatment trap. Lenders assume that the models are objective, the computers make the decisions, and, therefore, the only risks should be on disparate impact. The reality is that few scoring systems are used with no human judgment added in the implementation process.
Most institutions permit overrides, and tend to mix the score with underwriter judgment.
These human inputs can easily raise disparate treatment concerns. The OCC plans to test overrides for discriminatory patterns and will undoubtedly evaluate disparate treatment in mixed systems. Putting new developments in context Remember, the Comptroller's Office is speaking only for its constituency, so institutions that are not national banks cannot rely on its guidance. Yet it is clear that OCC's focus on credit scoring is part of a larger current of thought in fair lending. Civil rights attorneys have targeted scoring and disparate impact for class-action litigation, arguing that the Justice Department may avoid the politically tough issues involved but that courts can take them on.