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Credit discrimination permeates American society. Protected class members face difficulties obtaining market-rate first and second mortgages. Many banks do not maintain branches in communities of color. The disparity in mortgage approval rates between White applicants and applicants of color, as well as disparities in the terms on which mortgage credit is offered, are evidence that discrimination in the marketplace persists.¹

A series of federal and state statutes provides significant remedies to victims of credit discrimination. Violations of the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and 42 U.S.C. §§ 1981 and 1982 (hereinafter referred to as the federal Civil Rights Acts) can result not only in recovery of out-of-pocket damages but in recovery for such intangible injuries as humiliation, deprivation of rights, and damage to credit rating. These statutes also provide for punitive damages, equitable relief, and attorney fees.

Despite the far-reaching remedies available, credit discrimination laws were not utilized significantly until the 1990s and may not yet be fully utilized. Throughout the 1980s only a small number of Equal Credit Opportunity Act (ECOA) cases were brought each year. The Fair Housing Act (FHA), the federal Civil Rights Acts, and state anti-discrimination statutes were rarely applied to credit discrimination.

Listed below are some practices that may be attacked through the use of credit discrimination statutes. These statutes may be used to attack common discriminatory practices and to challenge many different types of creditor practices. They may be used by individuals, groups, or in class actions. Some of the statutes also include procedural requirements that apply even when discrimination cannot be established.

This treatise commonly uses the following abbreviations and shorthand:

Credit Discrimination is available in both a print and digital version. Print revisions are released every few years and the digital version is updated more frequently, with all changes integrated into the text.

The first three chapters of this book cover preliminary issues in credit discrimination cases. This chapter introduces the reader to the issue of credit discrimination and to the various statutes that can be used to address it. It contains an overview and history of the ECOA and the FHA, as well as descriptions of other statutes that are useful in challenging credit discrimination.

A useful way to approach this treatise and a credit discrimination case in general is to determine if a case involves the general prohibition against discrimination or whether it involves a specific ECOA requirement. Each type of case will require practitioners to focus on different chapters of this treatise.

This treatise analyzes a number of different credit discrimination statutes. The Equal Credit Opportunity Act (ECOA) is the primary statute discussed, in part because it has the broadest application and the most detailed standards.

This treatise contains the basic source materials for a credit discrimination case. Appendix A, infra, contains the relevant federal statutes.

The Equal Credit Opportunity Act (ECOA) has two important features. First, it sets out a general rule that creditors cannot discriminate in any way against any applicant in any stage of a credit transaction on any of the following bases:

An important impetus for the ECOA’s passage were hearings held by the National Commission on Consumer Finance²³ in 1972, which documented the difficulties women face in obtaining consumer credit:

A 1975 hearing before the House Committee on Banking, Currency, and Housing gave special attention to age discrimination, finding that creditors often established arbitrary age limits (usually around sixty-five years of age), after which credit would not be granted and existing credit would be revoked. Empirical data supplied to the Committee proved that senior citizens were often better than average credit risks.³¹ In response, the Committee reported out H.R.

In 1985, the FRB issued an overall revision of Regulation B.³⁹ At the same time, the FRB issued an official staff commentary to Regulation B which supersedes all previous FRB Board and staff interpretations and letters.⁴⁰ This commentary is sometimes referred to as “Supplement 1 to Regulation B” or as “ECO-1.” The 1985 revision of Regulation B included (as appendices B and C) model application and notification forms, which replaced all previous model forms released by the FRB.⁴¹

The Women’s Business Ownership Act of 1988⁴² contained amendments to the ECOA chiefly relating to the Federal Reserve Board’s (FRB) treatment of business credit but also applying to other FRB-created exclusions from the ECOA.

In 1991, the Equal Credit Opportunity Act (ECOA) was amended as part of the Federal Deposit Insurance Corporation Improvement Act of 1991.⁴⁷ The most significant change for consumers was the amendment to section 1691, which mandated that the creditor provide, upon the applicant’s request, a copy of its appraisal report on residential real property offered as security for a loan.

In 1996, the ECOA was amended as part of the Omnibus Consolidated Appropriations Act of 1996.⁴⁸ Incentives for self-testing and self-correcting were added, providing that reports or results of self-tests are privileged information under specified conditions. The FRB (in consultation with HUD) promulgated regulations dealing with these issues effective January 1998.⁴⁹

In 1999, the FRB issued an extensive set of proposed revisions to Regulation B and the official staff commentary.⁵⁰ The FRB issued its final rule and revisions to the official staff commentary almost four years later, in March 2003.⁵¹ The changes made by the final rule were significantly more limited in scope than the proposed rule.

The Consumer Financial Protection Bureau (CFPB) now has authority to issue Regulation B.⁵² On December 21, 2011, the CFPB issued its version of Regulation B and its official interpretations.⁵³ The Federal Reserve Board (FRB) has not withdrawn its Regulation B, certain kinds of credit are not within the CFPB’s enforcement authority, and the FRB regulation may therefore remain relevant.

Any Equal Credit Opportunity Act (ECOA) analysis begins with the statute, Regulation B, and its official interpretations. The statute is found at 15 U.S.C. §§ 1691 to 1691f and is reprinted in Appendix A.1, infra.

Both the 1974 and 1976 versions of the ECOA were accompanied by extensive hearings and congressional reports. The ECOA’s legislative history is discussed in § 1.3.2, supra. In summary (and in chronological order), the legislative history is found in the following sources:

Historically, several federal agencies, including the Federal Trade Commission, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the National Credit Union Administration had enforcement power under the ECOA.⁵⁹ However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) makes the Consumer Financial Protection Bureau (CFPB) the agency currently responsible for regulation and enforcement of the ECOA.

The ECOA must be liberally construed to achieve its central goal of eradicating credit discrimination in the American marketplace.⁶⁰ The ECOA is designed to remedy what Congressional hearings revealed to be widespread credit discrimination based on gender, age, race, marital status, and other factors.

The FHA was originally passed in 1968 as Title VIII of the Civil Rights Act of 1964.⁷³ The Civil Rights Act was enacted pursuant to the Thirteenth Amendment’s grant of power to Congress to implement laws eliminating the badges and incidents of slavery⁷⁴ and declares that “it is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.”⁷⁵

This treatise also briefly treats two other federal statutes with some importance to credit discrimination. These two statutes, 42 U.S.C. §§ 1981 and 1982, are referred to throughout this treatise as the federal Civil Rights Acts. These are recodifications of statutes enacted after the Civil War.