The millennial blues: Rent padding and fair lending

first_imgI read earlier this year that between the ages of 22 and 30, millennials paid an estimated 45% of their income towards rent. Compare that to 41% of income paid toward rent for Generation X and 36% paid by Baby Boomers. Housing simply costs proportionally more than it used to. Add to that an average balance of $40,000 in student debt, and many millennials are delaying homeownership or foregoing living alone entirely. Approximately 22.5% of millennials between the ages of 24 and 36 opt to live with their parents, especially in metropolitan areas where the housing cost is most expensive.However, when someone walks into a credit union to apply for a car loan or signature loan, and indicates that their housing cost is “$0,” it’s natural to raise an eyebrow. Most people pay a rent or a mortgage. The need to pay to put a roof over your head is a constant existential threat of adult life; they made a whole musical about it. Sometimes financial institutions want to add a housing cost where the borrower has asserted none as a matter of policy. This is sometimes referred to as “rent padding.” However, it’s a practice that can have significant fair lending implications.A Potential Disparate Impact on Young ApplicantsRegulation B prohibits discrimination against an applicant for credit on a prohibited basis, including their age. 12 CFR §§ 1002.2(z); 1002.4(a). Having a blanket policy to pad housing costs when none are listed is not discriminatory on its face. But because those living at home and paying no rent costs are usually younger, having a blanket policy may disproportionately affect applicants on the basis of their age. Comment 2 to paragraph 6(a) of Regulation B explains how this can also be discrimination: continue reading » 7SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img

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