CFPB issues advisory opinion on ECOA and Reg B

Two weeks ago, the Consumer Financial Protection Bureau (CFPB or bureau) issued an advisory opinion to clarify the Equal Credit Opportunity Act (ECOA) and its implementing regulation (Regulation B) prohibit discrimination against members during the life of a loan, not just during the application process. In the press release, the bureau explained that it will continue to use advisory opinions to provide guidance and clarity for its regulations. The purpose of advisory opinions is to ensure financial institutions, including credit unions, understand the obligations and requirements of CFPB regulations when they are unclear.

This opinion regarding the scope of ECOA and Reg B does not present a huge change in the industry’s understanding of these fair lending laws. In fact, the NAFCU compliance team often reminds credit unions that the prohibition on discrimination applies through the life of a loan, not just origination. This means that lenders may not discriminate while servicing loans, offering modifications, or collecting on delinquent loans.

In the advisory opinion, the bureau discusses a few definitions found in Reg B that can help to clarify its scope:

Applicant. In Reg B, this term includes any person “who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit.” The bureau explains this addition to the definition of “applicant” makes clear the intent to extend protections to those who have received credit, not just those currently applying for credit. This definition of applicant also supports the prohibition against discrimination “regarding any aspect of a credit transaction” as stated in section 1002.4. In short, because Reg B applies to “any aspect” of the transaction, it would also apply to any member who has a credit account or transaction at the credit union.

 

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