WASHINGTON, DC – The Center for Responsible Lending has urged the acting director of the Consumer Financial Protection Bureau (CFPB), Russell Vought, to withdraw a proposed rule that would weaken the Equal Credit Opportunity Act (ECOA), a 51-year-old civil rights law that prohibits lending discrimination based on personal characteristics, including sex, race, age and national origin.
“If it goes into effect, this proposed rule would mean more people being unjustly denied credit or charged more for a loan. This would be a massive step backwards for our country’s pursuit of fair access to credit,” said Anneliese Lederer, senior policy counsel at the Center for Responsible Lending (CRL). “This proposal requires people claiming illegal discrimination to prove the lender intentionally discriminated, which can make it extremely difficult to hold them accountable, especially since algorithms now make many credit decisions.”
The CFPB’s proposed rule – if finalized as currently written and upheld by the courts – would: 1) take away a legal tool, known as the disparate impact standard, used to identify unlawful discrimination; 2) weaken the prohibition on marketing and other business actions that, based on protected characteristics, discourage people from applying for a loan – thereby facilitating practices like redlining; 3) prevent lenders from operating Special Purpose Credit Programs that enables financial institutions to better meet the needs of borrowers from underserved communities.
While signing on to separate public comment letters rebutting point-by-point proposed changes to the regulation that implements ECOA, CRL’s comment letter focuses on the CFPB’s failure to uphold its legal obligations to adequately consider the costs of its proposed rule. The CRL letter shows how the proposal does not meet legal requirements for rulemaking procedure under the Regulatory Flexibility Act, an executive order issued by President Trump, and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Among its arguments, the letter points out that the CFPB did not adequately consider how the proposal would impact minority-owned or women-owned small businesses in need of credit nor did the CFPB conduct meaningful analysis of the proposal’s effect on discrimination in its different forms and in different credit markets. Full text of the comment letter is linked here.
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Press Contact: Matthew Kravitz matthew.kravitz@responsiblelending.org