CRA Insights

What is disparate impact testing?

January 27, 2023

Disparate impact testing requires quantitatively testing models for fairness with respect to classes of borrowers protected under the Equal Credit Opportunity Act (ECOA) or Fair Housing Act (FHA). It is fundamentally different from traditional fair lending analyses that look to uncover differences in outcomes across groups due to differential treatment or in the application of discretion.

This Insights describes some approaches and measures commonly used for fair lending testing of credit and/or risk model scores. While no single method is used to assess models, most reviews include testing of the model’s output.

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