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The Premier Insights Blog

By Premier Insights

In Fair Lending, Discrimination

Posted May 23, 2017

Agencies' Use of Testers in Assessing Discriminatory Lending Practices

Agencies Use of “Shopping” or “Testers” in Assessing Discriminatory Lending Practices

The CFPB recently released its report on fair lending for 2016. The report covered a number of topics related to fair lending, including a summary of their supervisory and enforcement activities. One area addressed was the use of “testers” which involves sending persons of protected and non-protected class status into branch locations to inquire about services. 

The goal is to evaluate the level of service each person received and compare the treatment received from each group to see if it differed. The Bureau pointed to its use of such “testers” in a 2016 enforcement action and maintained its reliance on such evaluations to establish evidence of discriminatory lending practices. 

The following is from the report:

Testing is a tool the Bureau employs in its enforcement investigative activity. Other government agencies, including the DOJ and HUD, as well as private fair housing organizations and state and local agencies, have used testers for decades as a method of identifying discrimination. Courts have long recognized testing as a reliable investigative tool.

The complete report can be found by clicking here.

Whether the use of testers to detect discrimination in the manner as described by the Bureau is a valid approach is somewhat of an open question. This can only be answered by knowing the overall approach employed, including the design and execution and specifics such as the numbers of testers used, points of inquiry, and so forth. There are a lot of variables that would have to be evaluated to know what the right answer to the question truly is.  

Premier has conducted such “mystery shopping” or “testing” projects for over 15 years. To get an accurate reading and, therefore, have reliable information from these projects is a painstaking task that requires a great deal of planning and effort. This includes things such as selecting appropriate personnel, the proper points of inquiry, designing an appropriate survey instrument and near flawless execution.

Since much of the feedback received post-shop is qualitative and therefore subjective, it is necessary to be able to winnow through the subjective aspect (which is often tainted by individual biases) and be able to actually obtain a valid measurement. As is human nature, often different individuals can visit a location and have completely different perceptions that have no relation to protected-class status. 

Whether the CFPB’s use of shoppers was appropriate, therefore, remains debatable without more information.  What is not debatable, however, is that most lending institutions are not prepared for this type of scrutiny. Most have probably not even contemplated this as a possible risk. In our previous articles Improve Customer Service To Lower Fair Lending Risk and Manage Customer Service Perceptions To Lower Fair Lending Risk, we've addressed some steps to take to help you get prepared.


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Premier Insights is an analytical and consulting firm specializing in econometric and statistical analysis for the banking industry, Fair Lending and CRA consulting, and other research and analytical services.

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