CFPB Issues Advisory Opinion on ECOA’s Applicability to Existing Borrowers
The CFPB recently issued an advisory opinion explaining the agency’s stance that the protections against discrimination under the Equal Credit Opportunity Act (ECOA), and its implementing Regulation B, continue after the application stage and apply to all aspects of a credit arrangement, including for borrowers who have received an extension of credit.
ECOA prohibits any creditor from discriminating against any applicant, with respect to any aspect of a credit transaction, on a prohibited basis (race, color, religion, national origin, sex or marital status, age, or because the applicant’s income derives from a public assistance program).
The CFPB argues that interpreting “applicant” to include individuals and businesses during the application progress, as well as once credit has been extended, is consistent with ECOA’s purpose, its legislative history, and its statutory text taken together. The advisory opinion notes that, “[t]his has been the longstanding position of the Bureau, and the view of federal agencies prior to the Bureau’s creation.”
In interpreting the term “applicant” broadly, the opinion explains that ECOA would prohibit a lender from, for instance, lowering the credit limit of certain borrowers’ accounts or using more aggressive collection practices with certain borrowers based on an ECOA prohibited basis. In addition, the opinion notes that ECOA would require a lender to provide an adverse action notice to an existing borrower if, for instance, an existing account is terminated or an account’s terms are unfavorably changed. The CFPB has taken this position previously in litigation, including in an amicus brief filed in the 7th Circuit in December 2021.
In a statement regarding the advisory opinion, CFPB Director Rohit Chopra said, “Today’s advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”
