Credit Scoring and Fair Lending

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Question:

Are there potential fair lending issues if we use credit scoring for dealer paper credit decisions and pricing, when all of our other traditional loan products use other criteria?

Answer:

You may process some products using a scoring system and others using a judgmental system. A number of lenders use scoring for secondary market mortgage loans and a judgemental system for everything else.

There is always potential liability. If examiners find a denied dealer car loan app that is comparable to an approved direct car loan app and the borrowers differ on sex, race or other factors, you may have a violation.

First published on BankersOnline.com 2/16/04