ECOA's Regulation B protects Existing Customers

Jonathan Foxx, Ph.D., MBA Chairman & Managing Director

May 12, 2022 Question We originate mortgages in 35 states, and all loan originations are retail. I am the company’s Chief Risk Officer. For years, we took the position that ECOA only applies to people who are applying for loans. We checked around and found that many banks had the same policy. Then, in 2020, we learned about a lawsuit against Bank of America, which changed our policy.   Apparently, Bank of America argued that it could disregard ECOA when it comes to existing customers. The dispute was over them not having to issue an adverse action notice. This did not go over well with the CFPB, which contended that ignoring the ECOA for existing customers would undermine anti-discrimination protections.  I’ve been told that the CFPB is now doing examination and enforcement audits to see if companies provide ECOA rules to applicants and existing customers.  Can you provide some insight into Regulation B’s protection of existing customers? Answer The case you referenced concerns the CFPB’s involvement in 2021. Bank of America contended that it did not have to send an adverse action notice to an existing customer. The CFPB filed an amicus curiae (legalese for a brief filed as “friend of the court”), arguing that Bank of America’s position was contradicted by the language and history of the law.   According to the CFPB, the Equal Credit Opportunity Act (ECOA) protections against credit discrimination do not disappear when credit is extended; instead, ECOA shields existing borrowers from discrimination in all aspects of a credit arrangement.  You mentioned in your inquiry that my firm conducted an ECOA Tune-up® for you in 2020, and you now plan to do another one this year. We consider ECOA to be one of the primary regulations in mortgage banking. If others want information about the ECOA Tune-up®, please contact us HERE.  Briefly put, the CFPB contended that ECOA and its implementing rule, Regulation B, include those currently seeking credit and those who sought and have now received credit. The Bureau determined that this interpretation is the best reading of the statute itself. Any doubt whether the term “applicant” includes current borrowers is put to rest by Regulation B, which has expressly defined the term to include current borrowers for decades.

Jonathan Foxx, Ph.D., MBA Chairman & Managing Director Visit our Website Pioneering Mini-Audits Compliance Solutions Speak to an Expert Contact Us Send an Email Ask a Question Careers

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