CFPB Reiterates ECOA Applies After Loan Origination – Financial Services & More News Here

On May 9, 2022, the CFPB issued an Advisory Opinion outlining its place that
the Equal Credit Opportunity Act (ECOA) and its implementing
regulation, Regulation B, prolong past candidates looking for credit score
to incorporate those that have obtained credit score. The 16-web page Advisory
Opinion lays out the Bureau’s place that the statutory textual content,
legislative function and judicial precedent assist this conclusion.
The Advisory Opinion factors out that this has been the
“longstanding position” of the Bureau and echoes
arguments made final 12 months in an interagency amicus transient filed with
the Court of Appeals for the Seventh Circuit. As an interpretive
rule, the Advisory Opinion is exempt from the discover-and-remark
rulemaking procedures below the Administrative Procedure Act.

ECOA defines an “applicant” as any one that applies
to a creditor straight for an extension, renewal or continuation of
credit score (or applies to a creditor not directly by use of an present
credit score plan for an quantity exceeding a beforehand established credit score
restrict). Regulation B defines “applicant” extra broadly as
“any one that requests or who has obtained an extension
of credit score from a creditor.” The Bureau cites to ECOA’s
definition of “adverse action” to assist its place
that the legislative intent was to cowl customers who utilized for
and obtained credit score and are actually present debtors. Specifically,
ECOA defines “adverse action” as “a denial or
revocation of credit score, a change within the phrases of an present credit score
association, or a refusal to grant credit score in considerably the
quantity or on considerably the phrases requested.” The Advisory
Opinion additionally factors to ECOA’s broad anti-discrimination
provision, which prohibits collectors from discriminating towards
candidates in reference to any facet of a credit score
transaction.

Although the Advisory Opinion acknowledges that a number of district
courts have interpreted “applicant” to incorporate solely
customers actively looking for credit score, the Bureau states that this
interpretation is “not persuasive.” Citing to courts that
have learn the statute extra broadly to guard present
debtors-together with the one circuit court docket to have addressed the
subject-the Bureau pointed to language in ECOA defending individuals from
discrimination within the “denial or termination of
credit score.” In the Advisory Opinion, the CFPB seemingly
criticizes collectors that “fail to acknowledge” ECOA and
Regulation B apply to debtors even after origination, together with
the supply of hostile motion notices in reference to a
revocation of credit score or an unfavorable change within the phrases of
credit score.

In issuing the Advisory Opinion, Director Chopra acknowledged that the
CFPB is “ramping up its efforts to subject steerage and advisory
opinions” and means that this opinion is meant to make
clear that anti-discrimination protections don’t vanish as soon as a
buyer obtains a mortgage.

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