NCUA Q&As – What are examples of age discrimination?

Compliance > Lending > Fair Lending
Q:   What are examples of age discrimination?
 
A:  On the issue of age discrimination, the largest risk factor is creating a product which favors “senior citizens” without complying with the Equal Credit Opportunity Act (ECOA) and Regulation B rules on treatment of age.  Regulation B permits favoring elderly applicants, defined as age 62 or older.  For example, if a credit union provided a different age cut-off, such as 50 or 55 to qualify for favorable terms, or assigned lower credit limits to applicants under the age of 25, such practices could be construed as age discrimination.  This is a violation of ECOA to take age directly into account to set credit terms.  It is permissible to take age into account to evaluate pertinent elements of creditworthiness, such as the length of time an applicant will continue to receive benefits based on age. 
 
Regulation B permits consideration of age in credit scoring under two conditions:   
 
•  The system must be empirically derived and demonstrably and statistically sound.  This means it must be based on the creditor's data or an acceptable substitute, developed using recognized statistical methods, and periodically validated. 
 
•  Elderly applicants must be treated at least as favorably as any other age group.  This means that applicants age 62 and older must receive a score for age that is as high as or higher than the highest score for any other age group in the system.   
 
Un-validated credit scoring systems based on age have the potential for age discrimination.
 
 
ADDITIONAL INFORMATION:
This Q&A was obtained from NCUA’s website, in a document entitled “NCUA Fair Lending Examination and Compliance Program for Federal Credit Unions,” which may be found here: 
 

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