ECOA proposal provides clarity while upholding law’s intent
Fair lending and eliminating credit discrimination are vitally important to credit unions. The CFPB’s proposal on the Equal Credit Opportunity Act (ECOA) is re-opened for comment with updates, and America’s Credit Unions outlined the need to provide clarifications while preserving consumer protections.
The CFPB initially issued its proposal to amend provisions related to disparate impact, discouragement of applicants or prospective applicants, and special purpose credit programs under Regulation B (which implements ECOA).
Updates to the proposal “strike an appropriate balance by upholding the law’s intent while providing greater clarity for lenders and consumers,” the letter reads. It outlines the several elements America’s Credit Unions supports, including:
- Removing disparate-impact (effects-test) language from Regulation B, as this will reduce uncertainty and avoid chilling innovative, inclusive credit programs.
- Narrowing the discouragement provision to “oral or written statements;”
- Clarifying that discouragement covers only statements directed at applicants or prospective applicants;
- The notion that encouraging one group does not, by itself, constitute discouragement of non-recipients; and
- Revising the discouragement knowledge standard so that a violation occurs only when a creditor knows a statement would communicate discriminatory outcomes.
The letter cautions against relying on a short list of “permissible” commentary examples, and instead suggests emphasizing that the examples are illustrative only and that institutions must assess statements under the rule text and all applicable anti-discrimination laws.
The proposal response also requests explicit confirmation that “targeted outreach to traditionally disadvantaged groups” remains permissible and encouraged when done on a non-discriminatory basis.