The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction. It applies to any extension of credit, including extensions of credit offered indirectly through auto lenders. Indirect auto lending presents its own set of challenges because loan terms and approvals can be influenced by the third-party dealers. This creates potential for unfair practices or disparate treatment, particularly if dealer markups or discretion led to different decisions or pricing outcomes for borrowers based on any prohibited bases characteristics. It is critical for financial institutions to consistently evaluate their lending practices and processes to mitigate all risks associated with fair and equitable lending.

Asurity Advisors leveraged industry expertise and the CFPB’s Auto Finance section of the
Supervision and Examination Manual to assess the bank’s compliance with fair lending laws
and regulations, including technical compliance with ECOA / Regulation B. Our team assessed
the bank’s auto lending fair lending compliance management system, including the scope and
adequacy and application of existing statistical analyses, reporting of analysis results, use of
exceptions and overrides, pricing policies, and controls related to financing add-on products
(e.g., GAP, extended warranties, etc.). Because the mock exam was focused on indirect auto
lending, Asurity Advisors also specifically assessed how the bank set buy rates and limits on
dealer markup. Upon completion of the project, Asurity provided a report of findings,
observations, and recommendations identified in the mock examination.