I am conducting a Fair Lending comparative file review and I'm applying the regulators' "sample size tables" to determine the number of files to review. If the sample size of your prohibited basis group of denied loans is low, for example 5 loans, is it fair to assume you would compare multiple control group loans to these 5 loans in that the sample size table suggests that you should review 20 control group loans? Ex: 5 control group loans to each of the prohibited group loans.

Regulators usually do only one or two tests at a time.

Luz, before you start, IMHO, be sure that the bank has an action plan in the event that there is something found. This review should be done only after all aspects have been discussed and approved by a minimum of senior management and preferably the board, after consultation with legal counsel. If there is discrimination found, the regulator will report it up the line.

The following is from the OCC's Fair Lending handbook, Appendix M:

Q5: Should a lender engage in self-testing?

A: Principles of sound lending dictate that adequate policies and procedures be in place to ensure safe and sound lending practices and compliance with applicable laws and regulations, and that a lender adopt appropriate audit and control systems to determine whether the institution's policies and procedures are functioning adequately. This is as true in the area of fair lending as in other operations. Lenders should employ reliable measures for auditing fair lending compliance. A well-designed and implemented program of self-testing could be a valuable part of this process. Lenders should be aware, however, that data documenting lending discrimination discovered in a self-test generally will not be shielded from disclosure.

Corrective actions should always be taken by any lender that discovers discrimination. Self-testing and corrective actions do not expunge or extinguish legal liability for the violations of law, insulate a lender from private suits, or eliminate the primary regulatory agency's obligation to make the referrals required by law. However, they will be considered as a substantial mitigating factor by the primary regulatory agencies when contemplating possible enforcement actions. In addition, HUD and DOJ will consider as a substantial mitigating factor an institution's self-identification and self-correction when determining whether they will seek additional penalties or other relief under the FH Act and the ECOA. The Agencies strongly encourage self-testing and will consider further steps that might be taken to provide greater incentives for institutions to undertake self-assessment and self-correction.