Bureau blog post notes that ECOA, Reg B allow targeted focus on special needs, economically disadvantaged groups

Lenders are reminded that the Equal Credit Opportunity Act (ECOA) and Regulation B have provisions that allow lenders to implement special purpose credit programs (SPCPs) to meet special social needs and benefit economically disadvantaged groups, the Consumer Financial Protection Bureau (CFPB) said in a recent blog post.

According to that post, dated Friday and circulated Monday by email, such programs are permitted for both for-profit and not-for-profit creditors. In particular, the bureau stated that specific requirements apply to for-profit organizations seeking to offer or participate on SPCPs, as follows:

  • The program is established and administered pursuant to a written plan that identifies the class of persons that the program is designed to benefit and sets forth the procedures and standards for extending credit pursuant to the program; and
  • The program is established and administered to extend credit to a class of persons who, under the organization’s customary standards of creditworthiness, probably would not receive such credit or would receive it on less favorable terms than are ordinarily available to other applicants applying to the organization for a similar type and amount of credit.

The bureau said its Reg B commentary further clarifies that to satisfy the above, a for-profit organization “must determine that the program will benefit a class of people who would otherwise be denied credit or would receive it on less favorable terms. This determination can be based on a broad analysis using the organization’s own research or data from outside sources, including governmental reports and studies.” However, this determination is not required for special purpose credit offered under “[a]ny credit assistance program offered by a not-for-profit organization, as defined under section 501(c) of the Internal Revenue Code of 1954, as amended, for the benefit of its members or for the benefit of an economically disadvantaged class of persons,” the bureau said.

It added that Reg B also allows creditors to affirmatively solicit or encourage members of traditionally disadvantaged groups to apply for credit, especially groups that might not normally seek credit from them.

Expanding access to credit to underserved communities