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Credit Discrimination: 2.3.2.3.1 General

Residential real estate-related transactions include transactions involving lenders and those providing other financial assistance related to the making of the loans.239 Thus, the Fair Housing Act (FHA) applies to loan brokers, financial consultants, or anyone else providing financial assistance related to a loan covered by the Act.

Credit Discrimination: 2.3.2.3.2 “Makers” of loans

Section 3605 applies to a wide range of actors involved in making loans or providing other financial assistance for a dwelling or financial assistance secured by a dwelling. The regulations implementing the Act identify some of the prohibited practices in this category.244

Credit Discrimination: 2.3.2.3.3 Purchasers of loans

The FHA also applies to the activities of one who purchases loans247—that is, to the activities of those who buy mortgages and other loan paper from the originating lender—as long as the loans themselves are covered by the Act.

Credit Discrimination: 2.3.2.3.4 Sellers, brokers, and appraisers

The FHA applies to persons or businesses engaging in the selling, brokering, or appraising of residential real property.255 The Act’s regulations define broker or agent to include any person authorized to act on behalf of another person regarding any matter related to the sale or rental of a dwelling.256 Brokers should also be covered under the provisions prohibiting discrimination in the terms and conditions for making loans or other financial assistance available.

Credit Discrimination: 2.3.3.1.1 General

Section 3604 is titled “Discrimination in the Sale or Rental of Housing and Other Prohibited Practices.” Of most relevance to consumer credit, the first two subsections make it unlawful:

(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

Credit Discrimination: 2.3.4 Interference, Coercion, Intimidation, or Threats: Scope of Section 3617

Section 3617 of the Fair Housing Act (FHA) makes it unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or their having exercised or enjoyed, or their having aided or encouraged any other person in the exercise or enjoyment of, the rights granted or protected by sections 3603, 3604, 3605, or 3606 of the Act.295 Thus, if defendants have violated one of the four enumerated sections, they have also violated section 3617.296 It is also possible to

Credit Discrimination: 2.3.5 Aggrieved Persons May Bring Actions

The Fair Housing Act (FHA) prohibits certain types of discrimination and specifies that these prohibitions protect “any person.”305 The only limit as to who can bring a case under the Act is that the individual be “aggrieved.”306 “Aggrieved person” is defined in the regulations implementing the Act as any person who claims to be injured by a discriminatory housing practice or believes they will be injured by a discriminatory housing practice that is about to occur.

Credit Discrimination: 6.1 Introduction

This chapter focuses on discrimination in the credit evaluation process. It discusses examples of credit evaluation practices that violate the general rule against discrimination as well as the special Equal Credit Opportunity Act (ECOA) requirements with respect to credit evaluation.

Credit Discrimination: 6.2.2.2 Using Different Investigation Procedures on a Prohibited Basis

The general rule against discrimination prohibits creditors from implementing different investigatory procedures on a prohibited basis. Regulation B specifically states that creditors may not discriminate on a prohibited basis as to “investigation procedures.”14 Thus, creditors may not order credit reports on the spouses of married women who apply for individual accounts but not on the spouses of married men who apply for individual accounts.15

Credit Discrimination: 6.5.2.3 Individual Evaluation of Protected Income

If the creditor is using the second approach and evaluating every component of the applicant’s income for reliability, the creditor may not discount or exclude from consideration the income of an applicant or the spouse of an applicant because of a prohibited basis.223 In addition, the creditor may not automatically discount or exclude from consideration any protected income. The discount or exclusion must be based on the applicant’s actual circumstances.224

Credit Discrimination: 6.5.2.4 Income from Multiple Sources

The previous subsection discussed whether a creditor could treat certain types of protected income as unreliable and thus discount or ignore that income. A separate but related issue is whether creditors may score or treat income differently if it comes from multiple sources rather than from a single source. This issue is particularly important because women and older applicants are more likely to have multiple sources of income.

Credit Discrimination: 6.5.2.5 Income Sources Associated with Older Applicants

A creditor may not automatically exclude from consideration income of an applicant or applicant’s spouse derived from part-time employment, annuities, pensions, or other retirement benefits, or consider only a portion of such income.234 Evaluation of protected income from sources such as Social Security or retirement benefits must be made on an individual basis and not be based on aggregate statistical relationships such as those underlying credit scoring models.

Credit Discrimination: 6.5.2.6 Income Sources Historically Associated with Women Applicants

Regulation B prohibits creditors from automatically discounting income from certain sources historically associated with women, such as part-time employment.238 Other sources of income traditionally available primarily to women, such as alimony, child support, and separate maintenance payments, also may not be discounted automatically when an applicant is relying on such income to support the application.239 A person receiving such income may choose not to include it when submitting a credit app

Credit Discrimination: 6.5.2.7 Income Sources Associated with Public Assistance Recipients

Public assistance status as a prohibited basis and treatment of public assistance income as protected income are so closely related that a discussion of one effectively merges into the other. Therefore, discussion of income sources associated with public assistance is detailed in conjunction with the discussion later in this chapter of the ECOA rules concerning public assistance generally.245

Credit Discrimination: 6.5.3.1 Background

Regulation B attempts to assist two groups of women that historically have had problems with credit histories.246 First, the Equal Credit Opportunity Act (ECOA) gives special rights to applicants (primarily women—whether married, divorced, or widowed) who have not been able to reap the benefits of their good credit histories because their accounts were recorded in their spouses’ (husbands’) names.

Credit Discrimination: 6.5.3.2 Supplementing a Minimal Credit History

Regulation B requires creditors who consider the credit history of applicants to consider the credit history, when “available,” of accounts designated as accounts that both the applicant and applicant’s spouse are permitted to use or for which both are contractually liable.248 What information is considered available is not defined in Regulation B, but the Federal Reserve Board stated in a letter that creditors are not required to conduct any investigation of whether a spousal account exists given the prohibition against asking about marital