CFPB: ECOA Protects Borrowers After Applying for, Receiving Credit

The Consumer Financial Protection Bureau on Monday published an advisory opinion affirming the Equal Credit Opportunity Act—a federal civil rights law protecting individuals and businesses against discrimination in accessing and using credit—bars lenders from discriminating against customers after they have received a loan, not just during the application process.

“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.”

The advisory opinion is consistent with the Bureau’s Advisory Opnion Policy, issued in 2020. The Bureau said advisory opinions are one of many types of guidance documents that the agency issues to provide market participants with information about the application of federal consumer financial laws.

ECOA was established in 1974 and is designed to protect 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 clarifies that ECOA protects people from discrimination in all aspects of a credit arrangement. The advisory opinion is consistent with a recent legal brief filed by the CFPB, the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice. Among other things, the advisory opinion states that 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.