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Credit Discrimination: 12.1 Introduction

Several federal and state agencies are responsible for ensuring compliance with the various laws prohibiting credit discrimination. This chapter identifies those agencies and their respective enforcement roles and responsibilities under each of the applicable statutes. These agencies have brought some important cases that have explored significant discrimination claims. The substance of these cases is discussed in various other chapters, according to the underlying subject matter of the claims and the federal statute sought to be enforced.

Credit Discrimination: 12.2.1 U.S. Attorney General

The U.S. Attorney General, as head of the Department of Justice, may bring a civil action against a creditor for violations of the Equal Credit Opportunity Act (ECOA) when a federal agency with ECOA enforcement authority refers a case to the Attorney General for prosecution or the Attorney General has reason to believe that a creditor is engaging in a pattern or practice of ECOA violations.1 Relief available in such actions includes actual and punitive damages and injunctive relief.2

Credit Discrimination: 12.2.2 Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”),7 has been given rule-writing authority for all the major consumer financial protection statutes—called the “enumerated statutes”—including the ECOA.8 The CFPB has rule-writing authority over virtually every type of entity in the financial services area, including banks, credit unions, mortgage lenders, credit bureaus, automobile finance companies, debt col

Credit Discrimination: 12.2.3 Federal Trade Commission

As a result of the Dodd-Frank Act,13 the FTC’s primary jurisdiction for enforcing the ECOA, among many other consumer statutes, was transferred to the CFPB. Most dealers of automobiles, motorcycles, boats, recreational vehicles, and motor homes are exempt and stay under FTC authority.14 While the FTC no longer has ECOA authority over many lenders, it retains authority to enforce the FTC Act against those entities.

Credit Discrimination: 12.2.4 Federal Reserve Board

Until the passage of the Dodd-Frank Act,15 the Federal Reserve Board (FRB) played the most important role in setting ECOA standards by promulgating regulations and staff interpretations of the rule. The CFPB now also has that role, although the FRB retains jurisdiction over smaller banks previously under its jurisdiction, and the FRB version of Regulation B is still in place.16

Credit Discrimination: 12.2.5 Other Federal Agencies

The ECOA delegates specific enforcement authority to nine different federal agencies, each having jurisdiction over a particular type of credit institution.17

Below is a list of banking regulators other than the CFPB and their areas of responsibility (subject to the foregoing discussion on the transfer of authority to the CFPB):

Credit Discrimination: 12.4.1.1 Introduction

The Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) do not explicitly authorize investigations or enforcement by state or local agencies (although the FHA allows for certain administrative enforcement by certified state or local agencies).

Credit Discrimination: 12.4.1.2 Dodd-Frank Act May Authorize State ECOA Enforcement

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”)55 provides for state attorney general enforcement of “provisions of this title [Dodd-Frank Title X] or regulations issued under this title,”56 effective July 21, 2011.57 Under 12 U.S.C. § 5536(a)(1)(A), a violation of a federal consumer financial law is also a Title X violation.

Credit Discrimination: 12.4.1.4 Parens Patriae

Under a parens patriae theory, a state or local agency acts on behalf of a class of residents of that state or locality to seek relief otherwise available to individuals under state or federal law. In effect, the state is bringing the individuals’ action for them. There is authority allowing state officials to enforce the FHA under the parens patriae doctrine.68

Credit Discrimination: 12.4.2.1 Introduction

State credit discrimination statutes often explicitly authorize state attorney general or other state agency enforcement.119 Such state enforcement is generally not preempted by the federal discrimination laws unless there is a direct conflict between the federal and state discrimination laws.120 For example, in actions by private parties challenging lenders’ reverse redlining practices, the courts have often allowed the cases to proceed under state anti-discrimination laws in conjunction wi

Credit Discrimination: 12.4.2.3.1 Introduction

Assuming that the National Bank Act does not preempt the application of state credit discrimination statutes to national banks or federal thrifts, the question still remains whether only the OCC can investigate compliance with and enforce those state laws or whether state or local agencies can do so as well. The question is whether state investigation or enforcement constitutes an exercise of “visitorial powers” and thus interferes with the exclusive examination and supervision powers of the OCC.

Credit Discrimination: 12.4.2.3.2 Supreme Court’s Clearing House decision

In its decision in Cuomo v. Clearing House Association, L.L.C.,133 the Supreme Court considered the extent to which states can investigate and enforce state anti-discrimination laws against national banks. The case involved actions by the state of New York to enforce its non-preempted fair lending laws against several national banks.

Credit Discrimination: 12.4.2.3.3 Dodd-Frank Act codifies Clearing House and extends it to savings and loan associations

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) codifies the Supreme Court’s decision in Clearing House139 by expressly amending the National Bank Act (NBA) to provide that the limitation on the states’ exercise of “visitorial powers” over national banks must not be construed to limit the authority of states to bring actions to enforce non-preempted state laws.140 State attorneys general and regulators can enforce non-preempted state laws through jud

Credit Discrimination: 12.4.2.3.5 Implications of Clearing House and Dodd-Frank Act codification

Clearing House and the Dodd-Frank Act’s codification of that ruling now mean that a state cannot launch an investigation of discriminatory lending practices by issuing an administrative subpoena to a national bank or federal savings association, nor can it go to court to enforce the administrative subpoena.149 However, after initiating a formal lawsuit against a national bank or federal savings association, the state can seek the same information with the aid of discovery tools, including subpoenas.

Credit Discrimination: 12.4.2.3.7 State investigatory authority upon referral from HUD

Another way in which state agencies can investigate discriminatory practices of any lender under their state laws is through a referral from the Department of Housing and Urban Development (HUD). Under certain circumstances, the FHA requires that HUD initially refer discrimination complaints to state agencies for investigation and enforcement.

Credit Discrimination: 12.4.3 Examples of State and Local Enforcement

In the years leading up to and during the financial crisis that began in 2007, offices of state attorneys general were among the few governmental entities that attempted to take effective action against the discriminatory lending practices of the nation’s largest financial institutions.166 In Illinois v.

Access to Utility Service: 7.2.5.2.3 The basic electric utility hardship customer arrearage forgiveness plan

In 2003, Connecticut amended its statutory basis for an arrearage forgiveness program to provide for the participation of electric companies in offering such programs.402 The statutory amendment provided that a residential customer using electricity for heat403 may be eligible to have monies due and owing deducted from the customer’s delinquent account, provided the customer meets prescribed criteria.