Fair lending: creating a complete picture
by: Ken Agle
When it comes to fair lending, many institutions leave the picture of their performance incomplete—they know their own numbers, but they fail to give these numbers context based on a comparison to such factors as population, income, age, gender, etc. It’s similar to those word puzzles we’ve all seen:
Fi@r L3nidng A@nyls1s
Although these words are scrambled and mixed with numbers, chances are you can still accurately read them. This example showcases one of the miraculous traits of our brains: given just enough content, our minds fill in the gaps with their own context. Just as a jumble of words becomes a logical phrase, context is critical for evaluating your institution’s fair lending performance.
Analyzing your fair lending data in the right conditions can allow you to make accurate assumptions and derive important conclusions. The reverse is also true: an absence of context can lead to miscalculations and misjudgments. Take, for example, the following data for a financial institution:
