CFPB Strengthens Legal Basis for Oversight of Discrimination in Loan Servicing – Financial Services


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

Echoing positions taken in previous amicus briefs, the CFPB notice points out that the ECOA defines a “plaintiff” as meaning “any person who applies directly to a creditor for an extension, renewal or continuation creditor, or indirectly addresses a creditor using an existing credit plan for an amount in excess of a previously established credit limit” (15 U.S. Code 1691a(b)). As defined by Rule B, a “applicant” includes “any person who requests or 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 of the ECOA and the Regulation B includes an existing borrower.

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

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

What does this mean for you?

In light of the CFPB announcement, financial service providers may consider taking steps to improve their fair service practices, including by:

  • Expand Fair Lending training to employees responsible for account management, debt collection and loss mitigation.

  • Expand Fair Lending Policies to clearly incorporate fair service principles into all aspects of account service.

  • Review service practices to assess whether borrowers with existing credit receive adverse action notices, if any.

  • Adopt a testing program to assess whether interview practices may not comply with ECOA anti-discrimination protections.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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