What is considered a conflict of interest in lending?

A conflict of interest in lending arises when a lender's decisions or actions are influenced by personal interests that could potentially harm a borrower or lead to unfair practices. Steering borrowers toward certain products for personal gain exemplifies this situation clearly. In such a case, the lender prioritizes their own financial benefit, possibly leading to a mismatch between the borrower's needs and the products being presented. This not only compromises the integrity of the lending process but can also result in borrowers receiving loans that may not be in their best interest, violating ethical lending standards.

In contrast, while providing a loan to a family member could raise concerns about favoritism, it does not inherently constitute a conflict of interest without additional context indicating undue influence. Offering lower interest rates could be beneficial to borrowers and does not represent a conflict of interest unless linked to unethical practices. Delegating tasks to assist on loan applications is typically a standard practice in lending and does not suggest any self-serving motivations that could bias the outcomes for borrowers.