Skip to content

Mystery Shopping Revisited

Ever wanted to be on Candid Camera? If you work at a thrift, you could get the next best thing. The Office of Thrift Supervision has decided to conduct some limited scope mystery shopping at selected thrifts.

OTS now joins testing veterans such as OCC and HUD. These agencies have used testing in the past to measure the extent of fair lending problems.

What it is
Mystery shopping involves using matched pairs of applicants, one representing a targeted minority and the other member of the pair representing a control or discrimination-neutral identity. Each applies for credit within a short period of time. The testers report their experiences to an analyst. The analyst then compares the reports to determine whether the treatment of minorities and controls was similar or different in any significant way.

When well done, mystery shopping can give the institution a picture of what really happens in the loan application process and how the customer perceives it. The tester's interview is a snapshot of how the loan officer treated the tester as an applicant.

When poorly done, the results won't tell the lender much at all. Without careful quality controls, the test can easily become biased or incomplete.

Mystery shopping is expensive. It involves the development of the testers' profiles (who they are as applicants), training the testers, selecting the "targets," conducting the test, debriefing the testers, and evaluating the results. For such a significant commitment of resources, the project should be carefully designed to give clear and reliable results.

What it is not
Many critics of mystery shopping charge that it is merely a process of entrapment. Some critics believe that the testers are "out to get" the lender and make leading statements and misrepresentations to induce the lender to say or do something that could be construed as discriminatory.

While this may happen in some situations, a well-designed test should not do this. The result of a test that involved entrapment would be useless.

In a well-designed test, the testers themselves may not know the purpose of their mystery shopping. In a well-designed test, mystery shoppers do not compare notes with each other - especially during the actual testing phase.

For the investment, most testers want reliable results. So they are careful to design a fair and objective test. Each tester should look like any ordinary applicant. The only question for analysis is to compare how each applicant is treated.

The OTS Project
OTS will be using this mystery shopping procedure in institutions that it selects for testing. The selections will be based on some reason to be concerned about lending patterns within the targeted institutions. Institutions will be selected after a review of HMDA data and loan files raises the concern that prescreening may exist.

Testing will be aimed at the pre-application and information- seeking process. This is the stage at which the applicant is the most vulnerable, the loan officer has the most ability to discourage or influence the applicant, and documentation usually doesn't exist.

OTS has done some research before announcing their intent to test. Mystery shopping is an expensive process. OTS has met with a variety of groups, including other agencies, before making the decision to mystery shop.

OTS will measure the results of this project not by the number of cases of discrimination the tests support (or fail to support) but by the effectiveness of mystery shopping in identifying lending practices that may put the institution at risk.

To determine whether your institution is a possible target for mystery shopping, review your HMDA data to see whether your applicants are representative of the demographics of your market. If minority groups are not appropriately represented in your applicant group, you need to find out why - fast!


  • Review your HMDA data and CRA data and compare it to the demographics in your market and the lending record of your peer institutions. If your data shows fewer applications from minorities, and from low-income areas, you may be ripe for testing.
  • Consider the likelihood that you may be tested. Base this on your location (higher likelihood for urban than rural areas) and ethnic composition of your market.
  • If you are a possible target for testing, schedule some quality service training for all staff that has contact with potential loan applicants.
  • Use the possibility of testing as a disciplinary tool - remind your lenders and front line staff that testing could happen to them.

Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 10, 9/00

First published on 09/01/2000

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics