Consumer Bureau Expands Reach of Equal Credit Law

CFPB issues advisory opinion extending protections to borrowers

The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion extending protections found in the Equal Credit Opportunity Act (ECOA) beyond the issuing of a loan. That is, the protections provided by the ECOA extend even after the loan is awarded and borrowers should be treated equally in the loan repayment process as well.

The CFPB noted that the advisory opinion was issued to clarify the responsibilities of loan-granting entities.

“The CFPB is ramping up its efforts to issue guidance and advisory opinions to assist entities with understanding their obligations under the law,” said CFPB Director Rohit Chopra. “Today’s advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”

ECOA has helped people obtain credit on fair terms since 1974. Throughout its almost 50-year history, ECOA has protected people and businesses against discrimination when seeking, applying for, and using credit. ECOA bans credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. It also protects those who are receiving money from any public assistance program or exercising their rights under certain consumer protection laws.

The advisory opinion notes that the ECOA:

• Continues to protect borrowers after they have applied for and received credit: Lenders are prohibited from discriminating against borrowers with existing credit. For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race.
• Requires lenders to provide “adverse action notices” to borrowers with existing credit: Adverse action notices explain why an unfavorable decision was made against a borrower. Credit applicants and borrowers receive these notices for reasons including that credit was denied, an existing account was terminated, or an account’s terms were unfavorably changed. “Adverse action notices” discourage discrimination, and they help applicants and borrowers learn the reasons for creditors’ decisions.

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