On May 9, 2022, the CFPB issued an Advisory Opinion outlining its position that the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, extend beyond applicants seeking credit to include those who have received credit. The 16-page Advisory Opinion lays out the Bureau’s position that the statutory text, legislative purpose and judicial precedent support this conclusion. The Advisory Opinion points out that this has been the “longstanding position” of the Bureau and echoes arguments made last year in an interagency amicus brief filed with the Court of Appeals for the Seventh Circuit. As an interpretive rule, the Advisory Opinion is exempt from the notice-and-comment rulemaking procedures under the Administrative Procedure Act.
ECOA defines an “applicant” as 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). Regulation B defines “applicant” more broadly as “any person who requests or who has received an extension of credit from a creditor.” The Bureau cites to ECOA’s definition of “adverse action” to support its position that the legislative intent was to cover consumers who applied for and received credit and are now existing borrowers. Specifically, ECOA defines “adverse action” as “a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested.” The Advisory Opinion also points to ECOA’s broad anti-discrimination provision, which prohibits creditors from discriminating against applicants in connection with any aspect of a credit transaction.
Although the Advisory Opinion acknowledges that several district courts have interpreted “applicant” to include only consumers actively seeking credit, the Bureau states that this interpretation is “not persuasive.” Citing to courts that have read the statute more broadly to protect existing borrowers—including the only circuit court to have addressed the issue—the Bureau pointed to language in ECOA protecting people from discrimination in the “denial or termination of credit.” In the Advisory Opinion, the CFPB seemingly criticizes creditors that “fail to acknowledge” ECOA and Regulation B apply to borrowers even after origination, including the provision of adverse action notices in connection with a revocation of credit or an unfavorable change in the terms of credit.
In issuing the Advisory Opinion, Director Chopra stated that the CFPB is “ramping up its efforts to issue guidance and advisory opinions” and suggests that this opinion is intended to make clear that anti-discrimination protections do not vanish once a customer obtains a loan.