prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection ...
PURPOSE. The Equal Credit Opportunity Act (ECOA) and its implementing regulations, referred to as Regulation B, ensure that creditors do not discriminate against any applicant on the basis of race, color, religion, national origin, sex, marital status, or age.
Regulation B prohibits creditors from requesting and collecting specific personal information about an applicant that has no bearing on the applicant's ability or willingness to repay the credit requested and could be used to discriminate against the applicant.
An original violation of a child labor law, rule or regulation, designated as a class "B" violation, shall subject the employer, or responsible entity, to a penalty assessment of $100.00. The second citation for a class "B" violation shall subject the employer, or responsible entity, to a penalty assessment of $200.00.
Common Violation #1: Discrimination on a prohibited basis in a credit transaction.
Violations of regulatory requirements often result in legal punishment for individuals and organizations, including fines and debarment from future government programs and contracts.
Regulation B protects consumers and prohibits lenders from discriminating based on age, gender, ethnicity, nationality, or marital status. Reg B mandates that lenders provide explanations to rejected applicants within 30 days of receiving their completed applications.
1. Timing of notice - when an application is complete. Once a creditor has obtained all the information it normally considers in making a credit decision, the application is complete and the creditor has 30 days in which to notify the applicant of the credit decision. (See also comment 2(f)-6.)
The Dodd-Frank Act granted rule-making authority under ECOA to the CFPB and, with respect to entities within its jurisdiction with over $10 billion in assets, granted authority to the CFPB to supervise for and enforce compliance with ECOA and its implementing regulation.
For example, if a lender refuses to make a mortgage loan because of your race or ethnicity, or if a lender charges excessive fees to refinance your current mortgage loan based on your race or ethnicity, the lender is in violation of the federal Fair Housing Act.
The regulation covers topics such as:
Notification of action taken (including adverse action) Appraisal and other written valuations. Special purpose credit programs. Limitation on collection of certain protected information.
Look for red flags, such as: Treated differently in person than on the phone or online. Discouraged from applying for credit. Encouraged or told to apply for a type of loan that has less favorable terms (for example, a higher interest rate)
For these reasons, the ECOA and Regulation B prohibition against discrimination on the basis of “sex” includes discrimination or discouragement based on sexual orientation and/or gender identity, including but not limited to discrimination based on actual or perceived nonconformity with sex-based or gender-based ...
Any creditor, other than a government or governmental subdivision or agency, who fails to comply with any requirement imposed under this subchapter shall be liable to the aggrieved applicant for punitive damages in an amount not greater than $10,000, in addition to any actual damages provided in subsection (a), except ...
Notice of incompleteness Sample
This letter is to inform you that we have received your application for a loan for [describe loan request]; however, we are unable to process this request until we receive [describe missing information]from you.
Three pieces of information that should not affect the loan decision include whether she receives any form of public assistance, her national origin, or her gender. It is crucial that you evaluate June's creditworthiness based on her financial capacity and credit history.
Overt discrimination: Refusing to lend or to apply normal guidelines to creditworthy borrowers, simply because they exhibit a protected characteristic. Disparate treatment: Refusing to offer the same options or treatment to borrowers because of a protected characteristic.
Imposing unfair terms or conditions on a loan (such as lower loan amount or higher interest rates) based on personal characteristics protected under the ECOA. Asking detailed personal information regarding marital status, such as whether you are widowed or divorced.
Adverse action notices under the ECOA and Regulation B are designed to help consumers and businesses by providing transparency to the credit underwriting process and protecting against potential credit discrimination by requiring creditors to explain the reasons adverse action was taken.
The ECOA requires bankers to treat all similarly situated credit applicants equally based solely on their credit qualifications and not any of the prohibited bases such as race, national origin, gender or age.
The consequences of violating a regulation that applies to your business can vary from a mild notice to comply, to fines, to the closing of the business, and even incarceration.
Three major types of workplace violations—routine, situational, & exceptional—will be covered in detail in this extensive blog. These classifications will offer a helpful framework for comprehending and dealing with the various forms of workplace misconduct.
The Consequences of Non Compliance
The consequences of regulatory non-compliance can be costly. Worker injuries and deaths, property damages, lost production, and jail time are just a few examples.