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On March 9, 2021, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued an interpretive rule clarifying that the Equal Opportunity Credit Act (“ECOA”) and its implementing regulation, Regulation B, prohibit discrimination based on sexual orientation and gender identity.  The CFPB made clear that this prohibition also extends to “actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other association.”  Specifically, the Bureau found that, under ECOA and Regulation B:

On October 29, 2019, the House Committee on Financial Services held a hearing entitled “Financial Services and the LGBTQ+ Community: A Review of Discrimination in Lending and Housing.”  Witnesses at the hearing included Harper Jean Tobin, the Director of Policy at the National Center for Transgender Equality, Michael Adams, CEO of SAGE (Services and Advocacy for GLBT Elders), and Alphonso David, President of the Human Rights Campaign.
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Continue Reading House Committee Holds Hearing on Financial Services and the LGBTQ+ Community

On September 20, 2017, the Consumer Financial Protection Agency (“CFPB”) announced final amendments to Regulation B, which implements the Equal Credit Opportunity Act (“ECOA”), to provide flexibility and clarity to mortgage lenders regarding the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants.  The CFPB also issued proposed policy guidance, with a request for public comment, regarding the loan-level Home Mortgage Disclosure Act (“HMDA”) data reported by financial institutions that the CFPB plans to disclose to the public beginning in 2019.

Regulation B Amendments

ECOA prohibits a creditor from discriminating against an applicant with respect to any aspect of a credit transaction on a prohibited basis, which includes, among other things, race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).  To implement ECOA’s antidiscrimination principles, Regulation B generally prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person (“applicant demographic information”) in connection with a credit transaction.

The amendments announced by the CFPB are designed to align Regulation B’s rules regarding the collection and reporting of applicant demographic information by mortgage lenders with the CFPB’s 2015 revisions to Regulation C, which implements HMDA and governs the collection, reporting, and disclosure of mortgage lending information, including HMDA’s separate requirement to collect and report applicant demographic information.  The revisions to Regulation C go into effect on January 1, 2018.

The amendments make three substantive changes to Regulation B:

  • Permitting additional flexibility in the collection of demographic information: Regulation B provides exceptions to the prohibition of creditor inquiries into applicant demographic information.  One such exception is that creditors that receive an application for certain dwelling-secured loans are required to collect and retain protected information, including race and ethnicity information.  This information is collected in terms of specified racial and ethnic categories that are broad and aggregated (e.g., Asian, Hispanic).   However, this aggregated racial and ethnic categorization is somewhat inconsistent with the revisions to Regulation C, pursuant to which creditors must permit applicants to self-identify their race and ethnicity using certain disaggregated racial and ethnic subcategories (e.g., Mexican, Puerto Rican, or Cuban under the aggregate category of Hispanic).  To remedy this inconsistency, the Regulation B amendments allow creditors to collect the applicant’s information using either the aggregate ethnicity and race categories or the disaggregated ethnicity and race categories and subcategories required by revised Regulation C.  In addition, to standardize the treatment of co-applicants under Regulation B and Regulation C, the amendments clarify that a creditor is permitted, but not required, to collect applicant demographic information from a second or additional co-applicant.

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Continue Reading The CFPB Finalizes Amendments to ECOA Regulations and Seeks Public Comment on HMDA Policy Guidance

On September 14, 2017, the Consumer Financial Protection Bureau (the “CFPB” or the “Bureau”) issued a no-action letter for the first time, after having finalized its no-action letter policy in February 2016.  The Bureau’s letter grants a request by Upstart Network, Inc. (“Upstart”), an online lender that uses both traditional and non-traditional credit scoring data, regarding the application of the Equal Credit Opportunity Act and Regulation B to Upstart’s automated model for underwriting applicants for unsecured non-revolving credit.  In its press release accompanying the letter, the Bureau explicitly referenced its ongoing interest in learning more about the benefits and risks of using alternative data in credit scoring, an issue the Bureau raised in February 2017.
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Continue Reading CFPB Issues its First No-Action Letter