How to document fair lending business necessity

Exactly how are banks expected to document business necessity to justify disparate impact on loan rates? Are there any examples or samples in any regs or guidance anyone knows of?

Well we need to know a little bit more than you offered. What loan rates? If you want a margin of 3% and your cost of funds, associated operating costs and loan losses equal 3%, then you price your loan at 6%. Disparate impact would happen when you charge protected class more than non-protected classes. So there have to be other factors that we need to know about.

I'm just asking if there are general templates. So, we have different rates based on a few different factors/logic: age of vehicle (higher maintenance cost on collateral), amount of loan (man hours needed to book/service loan), credit score (higher risk of default).

Are other banks including the business necessity justification on their rate sheet? loan policy? a separate doc entirely? Is there a standard form or would just having spreadsheets with my calculations documented *somewhere* suffice?

You can get a lot of information from your risk department. The credit bureaus have documentation to support a higher delinquency/default rate based on credit scores. You should be able to identify (and document) higher repair costs (Look at age and mileage both). Depending on the size of the bank, risk appetite and complexity, it could be something simple. Answer and document the question, WHY am I charging a higher rate?

If there is an application fee, consistent with all loans, it will affect the APR, but not the rate, Same with a shorter term loan, since the fee is spread over a shorter timeframe. Those are easy to defend.