Lenders are barred from discriminating against customers after they have received a loan, not just during the application process, according to an advisory opinion issued Monday by the federal consumer financial protection agency.
The Equal Credit Opportunity Act (ECOA), the Consumer Financial Protection Bureau (CFPB) said in the advisory opinion, protects people from discrimination in all aspects of a credit arrangement. Among the points that the advisory makes about protections of the ECOA:
- Lenders are prohibited from discriminating against borrowers with existing credit. “For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race,” the agency said.
- Lenders are required to provide “adverse action notices” of unfavorable decisions to borrowers who have existing credit. Those notices, the agency said, explain why an unfavorable decision was made against a borrower. “Credit applicants and borrowers receive these notices for reasons including that credit was denied, an existing account was terminated, or an account’s terms were unfavorably changed,” CFPB said. “‘Adverse action notices’ discourage discrimination, and they help applicants and borrowers learn the reasons for creditors’ decisions.”
The advisory opinion becomes applicable once it is published in the Federal Register.