Arthur Baines and Marsha Courchane have published an article entitled “Compliance in the Indirect Automotive Market: Key Issues in Fair Lending Analysis,” which appeared in the September/October issue of ABA Bank Compliance. The authors identify some of the key fair lending compliance issues associated with indirect automotive finance and methodologies that may assist with the identification of any disparities resulting from underwriting or pricing of automotive finance contracts.
What is disparate impact testing?
Disparate impact testing requires quantitatively testing models for fairness with respect to classes of borrowers protected under the Equal Credit Opportunity...