An AI auditor is designing a testing protocol for a loan underwriting model. Which approach BEST demonstrates that the model does not violate fair lending laws by using protected characteristics as proxies?
Select an answer to reveal the explanation.
Short Explanation and Infographic
Here's the deal — b is correct because disparate impact testing with the 4/5ths (80%) rule is the established regulatory method for detecting indirect discrimination in credit decisions, required under the Equal Credit Opportunity Act and aligned with CFPB guidance. Removing feature names (A) does not address proxy variables that correlate with protected classes.
Full explanation below image
Full Explanation
B is correct because disparate impact testing with the 4/5ths (80%) rule is the established regulatory method for detecting indirect discrimination in credit decisions, required under the Equal Credit Opportunity Act and aligned with CFPB guidance. Removing feature names (A) does not address proxy variables that correlate with protected classes. A business justification review (C) is a legal defense, not a bias test. A fairness attestation (D) is an administrative control, not a technical bias assessment.