Proposal clarifies Equal Credit Opportunity Act obligations

The CFPB is proposing to amend Regulation B (which implements the Equal Credit Opportunity Act) provisions related to disparate impact to clarify compliance obligations. 

Disparate impact is a legal concept describing a policy or practice that unintentionally has a negative and unequal effect on a protected group. 

The proposed rule:

• States that ECOA does not allow disparate impact liability, only intentional discrimination is actionable.
• Clarifies that words or images, including ads, above would not constitute prohibited discouragement even if they had an effect that some consumers could arguably find discouraging. Instead, the discouragement provision would cover only actual oral or written statements by creditors to applicants or prospective applicants; and
• Bans special purpose credit programs (SPCPs) run by for-profit organizations from using race, color, national origin, or sex as eligibility criteria and adds new guardrails. 

Comments are due to the CFPB by Dec. 13. 

The proposal follows executive orders directing agencies to limit disparate-impact enforcement. NCUA announced in April—in response to the same executive orders—that it would remove all references to disparate impact liability from its Fair Lending Guide and other materials.