Welcome to Part 2 of our blog mini-series on navigating the regulatory fair lending shifts in 2025! In this series, we offer detailed explanations, real-world examples, and actionable advice for lenders, compliance professionals, and industry observers.
In part 1, we covered the defining differences between disparate treatment and disparate impact. In part 2, we'll cover the importance - and some misconceptions - about statistical evidence.
We are focused on understanding some of the differences between disparate impact and disparate treatment, which are the subject of revisions the OCC and the FDIC have formally made to their fair lending examination approaches.
A common myth in fair lending is that reliance on statistical disparities or patterns as evidence of discrimination is disparate impact. But as the FDIC's August 2025 manual update clarifies, statistics often support disparate treatment claims instead. Let's unpack why.
First, in an examination, agencies are looking for patterns or practices of discrimination, not one-off events. This is what truly defines a fair lending violation. Stats like denial rates from HMDA data can reveal disparate treatment if they show unexplained differences—e.g., minorities denied more often despite similar qualifications. This isn't disparate impact (neutral policy effects) but disparate treatment (inconsistent treatment). The manual's scoping procedures use stats to identify focal points for comparative reviews, not standalone disparate impact.
In fact, statistical data is almost always necessary to both establish patterns, and more importantly, quantify the impact of these patterns.
The shift stems from Executive Order 14281 (April 2025), ending disparate impact scrutiny. The OCC acted on this in July, removing references to disparate impact from exams and the FDIC followed suit in August. This does not mean there will be no more analysis of data, as there can be no way to identify a “pattern or practice” of discrimination without it. Instead, the disparate impact piece (neutral policy effects) will not be the focal point, which has NOT been the case historically anyway.
Practical advice: DATA AND ANALYSIS REMAINS CRITICAL. Use stats in self-evaluations to spot disparate treatment risks for all fair lending pressure points. This series will explore more nuances next.
Resources:
FDIC changes to compliance manual: https://www.fdic.gov/news/financial-institution-letters/2025/update-fdics-consumer-compliance-examination-manual?source=govdelivery&utm_medium=email&utm_source=govdelivery.
OCC changes: https://occ.gov/news-issuances/bulletins/2025/bulletin-2025-16.html.
Understanding (3) forms of lending discrimination: https://www.premierinsights.com/blog/blog/understanding-the-3-types-of-fair-lending-discrimination.
Executive Order 14821 April 23, 2025: https://www.federalregister.gov/documents/2025/04/28/2025-07378/restoring-equality-of-opportunity-and-meritocracy.
