Ethics · 18% of the SAFE examhard
Correct answer: Disparate impact, because a facially neutral policy produces statistically unequal outcomes
Disparate impact theory applies when a facially neutral policy or practice — uniformly applied — nonetheless produces statistically significant discriminatory outcomes against a protected class, even without proof of discriminatory intent. The lender claims race-neutral criteria, yet outcomes differ substantially between White and Black applicants with similar profiles. A regulator would analyze this through disparate impact. Disparate treatment requires proof of intentional discrimination — applying different standards to different groups — which the scenario does not establish, since the lender claims uniform criteria. Redlining involves refusing to lend in specific geographic areas based on demographics, not differential approval rates across racial groups. Reverse redlining involves targeting minority communities with predatory products, which is not described here.
CRAM ARCADE has the full NMLS question bank, timed practice exams, focus drills on your weakest category, flashcards and spaced repetition. No credit card.
Start studying free