CFPB Advisory Opinion Clarifies Applicability of Equal Credit Opportunity Act


The Consumer Financial Protection Bureau (CFPB) on May 9, 2022 published an advisory opinion that affirms the Equal Credit Opportunity Act (ECOA) applies to lenders from the application process and extends through the life of the loan.

CFPB Director Rohit Chopra stated, “Today’s advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”

In its 50-year history, ECOA has protected consumers and businesses against discrimination when seeking, applying for, and using credit. ECOA bans credit discrimination based on race,  religion, national origin, sex, marital status, and age. It also protects those who are receiving money from any public assistance program or exercising their rights under certain consumer protection laws.

While the advisory opinion does not specifically include an example regarding collection of defaulted loans, it can be easily argued that the advisory opinion makes ECOA applicable to all segments of loan servicing, including debt collection.

The Advisory Opinion’s examples are based on actual situations in which the CFPB has acted in the past. The industry is closely monitoring future CFPB ECOA guidance, enforcement actions, and interpretations to better understand how they intend to apply the Act.

The advisory opinion states that ECOA:

  • Continues to protect borrowers after they have applied for and received credit: Lenders are prohibited from discriminating against borrowers with existing credit. For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race.
  • Requires lenders to provide “adverse action notices” to borrowers with existing credit: Adverse action notices explain why an unfavorable decision was made against a borrower. Credit applicants and borrowers receive these notices for reasons including that credit was denied, an existing account was terminated, or an account’s terms were unfavorably changed. “Adverse action notices” discourage discrimination, and they help applicants and borrowers learn the reasons for creditors’ decisions.