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Credit Discrimination: 1.2.3 Overview of the Chapters

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.

Credit Discrimination: 1.3.1 Overview

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:

Credit Discrimination: 1.3.2.2 1976 Amendments Broaden ECOA’s Scope

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.

Credit Discrimination: 1.3.2.3 1985 Revision of Regulation B and Issuance of FRB Commentary

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.

Credit Discrimination: 1.3.2.5 1991 Amendments

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.

Credit Discrimination: 1.3.2.6 1996 Amendments

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

Credit Discrimination: 1.3.2.8 CFPB Now Issues Regulation B and Its Official Interpretations

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.

Credit Discrimination: 1.3.3.2 Legislative History

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:

Credit Discrimination: 1.3.3.3 Other Sources of Authority

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.

Credit Discrimination: 1.3.3.4 The ECOA Should Be Liberally Construed

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.

Credit Discrimination: 1.4.1 Overview

The Fair Housing Act (FHA) contains two different provisions primarily applicable to credit discrimination—section 360566 and section 3604.67 Section 3605 of the FHA bars discrimination in residential real-estate-related transactions.

Credit Discrimination: 1.4.2 History

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

Credit Discrimination: 1.6 The Americans with Disabilities Act

Another potentially useful tool for addressing credit discrimination is the Americans with Disabilities Act (ADA). The purpose of the ADA includes the “elimination of discrimination against individuals with disabilities” and the regulation of “commerce in order to address the major areas of discrimination faced day to day by people with disabilities.”94 The ADA may be especially useful in non-housing financing cases because the ECOA does not include disability as a prohibited basis.

Credit Discrimination: 1.7 State Credit Discrimination Laws

State laws dealing with credit discrimination are of several different types. State equal credit laws are generally patterned after the ECOA. State fair housing laws are generally patterned after the FHA.102 In the wake of the 1988 amendments to the FHA, many states amended their fair housing statutes to add familial status and disability to the list of protected classes, to increase the statute of limitations from one to two years, and to eliminate the ceilings for punitive damages awards.

Credit Discrimination: 1.8 State UDAP Statutes

Every state has a general statute prohibiting deceptive and unfair marketplace conduct. This treatise adopts the typical term commonly used to refer to these statutes: UDAP (an acronym for Unfair and Deceptive Acts and Practices). UDAP statutes are treated in detail in NCLC’s Unfair and Deceptive Acts and Practices.103

Credit Discrimination: 1.9 The Community Reinvestment Act (CRA)

The Community Reinvestment Act (CRA) requires federal bank supervisors to monitor and evaluate how banks serve the credit needs of the entire communities from which they receive deposits, including both low-income and moderate-income neighborhoods.106 It is distinct from the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) in that it addresses inequalities in the distribution of credit among geographic areas rather than discrimination against particular protected groups.

Credit Discrimination: 1.10.1 Housing Law in the Non-Credit Discrimination Context

There is an extensive body of cases brought under the Fair Housing Act (FHA) in the rental, zoning, and other non-credit contexts. Much of this case law is used by courts as a source of precedent in credit discrimination cases brought under both the FHA and the ECOA, even in non-housing finance cases.118 Some of these cases are discussed in this treatise when relevant.