CFPB: ECOA Bars Discrimination in All Aspects of Credit Arrangement

Lenders are barred from discriminating against customers after they have received a loan, not just during the application process, according to an advisory opinion issued Monday by the CFPB.

The CFPB states in the advisory opinion that The Equal Credit Opportunity Act (ECOA) protects people from discrimination in all aspects of a credit arrangement. Among the points that the advisory makes about protections of 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.

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.