This week, the Consumer Financial Protection Bureau partnered with the Department of Justice, the Federal Reserve Board, and the Federal Trade Commission to oppose a dangerous threat to our nation’s civil rights laws. The CFPB filed a friend-of-the-court (“amicus”) brief in Fralish v. Bank of America, a case in which an individual consumer sued his bank for closing his credit card account without providing an explanation mandated by the Equal Credit Opportunity Act (ECOA). Bank of America’s response to the lawsuit argues that it can disregard ECOA when it comes to the bank’s existing customers – an argument that has been made by other banks and that would undermine the anti-discrimination protections enjoyed by millions of Americans if accepted by the court.
For almost 50 years, ECOA has protected individuals and businesses against discrimination when seeking, applying for, and using credit. Crucially, and as the joint amicus brief explains, ECOA’s protections continue to apply after an applicant receives credit. Lenders may not discriminate against existing borrowers by, for example, lowering the credit limit on a borrower’s account or subjecting certain borrowers to more aggressive collections practices on a prohibited basis.
ECOA also gives consumers the right to an explanation when their application for credit is denied, or when an existing account is terminated or its terms are unfavorably changed. These “adverse action notices” discourage discrimination and help educate consumers about the reasons for a creditor’s decision. Like ECOA’s core ban on discrimination, this requirement applies to current borrowers as well as those seeking credit.
Bank of America is essentially arguing that ECOA only applies when people are applying for credit. Taken to its logical conclusion, this position would mean that the bank is free to discriminate once somebody becomes their customer. That is dubious from a business perspective and wrong from a legal one.
Banks should compete to obtain and keep customers by building strong and positive relationships that serve individual needs. People deserve banks that deliver high-quality customer service and fair treatment to all their customers, not just the prospective customers they are trying to reel in.
And that is why the CFPB – as the agency tasked with administering ECOA – joined with its law enforcement and regulatory partners to file this amicus brief in court. Our jointly filed brief explains that Bank of America’s argument is contradicted by the language and history of the law. ECOA’s crucial protections against credit discrimination do not disappear the moment that credit is extended. Instead, ECOA shields existing borrowers from discrimination in all aspects of a credit arrangement. For the 46 years that ECOA has been in effect, its implementing regulation has explicitly stated that the law protects those who have applied for credit, as well as those who have received it.
Just as the CFPB protects consumers from bad actors, we also stand up to protect the law from companies that might prefer a marketplace without rules. Banks and other lenders should invest in following the law and promoting equal opportunity for all instead of trying to create loopholes.
The case is Fralish v. Bank of America, N.A., No. 21-2846 (7th Cir.).