By David Venables

On May 9, 2022, the Consumer Financial Protection Bureau (CFPB) published an advisory opinion affirming that the Equal Credit Opportunity Act (ECOA) not only prohibits lenders from discriminating against borrowers who are actively seeking credit, but also prohibits discrimination against borrowers with existing credit.  According to CFPB Director Rohit Chopra, this recent “advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”[1]

The CFPB is charged with interpreting and promulgating rules under ECOA and it enforces the Act’s requirements with rules known as Regulation B. See 15 USC §§ 1691b, 1691c(a)(9); 12 C.F.R. pt. 1002.  Advisory opinions, such as this one, are one of many types of guidance documents that the CFPB issues to assist entities in understanding their obligations under the law.    Not all courts have applied ECOA’s protections to cover existing credit accounts, however, and so the CFPB recently filed an amicus brief[2] in Fralish v. Bank of America, N.A., No. 21-2846 (7th Cir.).  In Fralish, the district court had concluded that ECOA did not apply to those who previously applied for and received credit.  Consistent with its rationale in this advisory opinion, the CFPB explained in its amicus that the text, history, and purpose of the Act clearly demonstrate that the protections do not disappear once credit has been extended.

Enacted in 1974, ECOA is a landmark civil rights law which aims to help protect people and businesses against discrimination when seeking, applying for, and using credit by banning credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. 15 U.S.C. 1691(a). As noted in the advisory opinion, ECOA prohibits lenders from lowering the credit limit of existing borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis.[3]  ECOA also requires lenders to provide “adverse action notices” to borrowers which explain why an unfavorable decision was made and the advisory opinion makes clear that lenders need to provide such “adverse action notices” to borrowers with existing credit. See 15 U.S.C. § 1691(d)(2)-(3).

[1]  https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-opinion-on-coverage-of-fair-lending-laws/

[2]  The CFPB amicus brief was filed in conjunction with the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice.

[3] https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-advisory-opinion-on-coverage-of-fair-lending-laws/