On May 9, 2022, the Consumer Financial Protection Bureau issued an advisory opinion declaring that the Equal Credit Opportunity Act’s prohibitions against discrimination protect borrowers in all aspects of a credit transaction, including in connection with account servicing.

Echoing positions taken in previous amicus briefs, the CFPB’s opinion highlights that the ECOA defines an “applicant” to mean “any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit” (15 US Code 1691a(b)). As defined by Regulation B, an “applicant” includes “any person who requests or who has received an extension of credit from a creditor.” According to the CFPB, the “best interpretation” is therefore that an “applicant” subject to the protections in the ECOA and Regulation B includes an existing borrower.

By clarifying the scope of the ECOA and Regulation B, the CFPB is enhancing its legal basis for applying the ECOA’s anti-discrimination provisions to post-origination interactions with borrowers. In a key footnote, the CFPB states that it “interprets aspects of the credit transactions enumerated in Regulation B as including and encompassing the servicing of that credit, debt collection, loss mitigation, payment plans, settlements, co-signer release, and certain other services provided to existing accountholders.” The opinion also highlights prior CFPB enforcement actions, such as its action against a large bank that allegedly discriminated against certain borrowers by engaging in aggressive collections practices.

The announcement is part of a broader CFPB initiative to expand the boundaries of anti-discrimination protections, such as in its March 16 announcement that it would leverage its unfair, deceptive, and abusive acts or practices (UDAAP) authority to prohibit discrimination in noncredit financial products and services.

What does this mean for you?

In light of the CFPB’s announcement, financial services providers may want to consider taking action to enhance their fair servicing practices, including by:

• Expanding fair lending training to employees engaged in account servicing, debt collection and loss mitigation.
• Expanding fair lending policies to clearly incorporate fair servicing principles in all aspects of account servicing.
• Revisiting servicing practices to assess whether borrowers with existing credit are receiving adverse action notices, as appropriate.
• Adopting a testing program to assess whether servicing practices risk noncompliance with the ECOA’s anti-discrimination protections.