[Federal Register Volume 87, Number 96 (Wednesday, May 18, 2022)]
[Rules and Regulations]
[Pages 30097-30101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10453]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 87, No. 96 / Wednesday, May 18, 2022 / Rules 
and Regulations

[[Page 30097]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002


Equal Credit Opportunity (Regulation B); Revocations or 
Unfavorable Changes to the Terms of Existing Credit Arrangements

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advisory opinion.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing 
this advisory opinion to affirm that the Equal Credit Opportunity Act 
and Regulation B protect not only those actively seeking credit but 
also those who sought and have received credit.

DATES: This advisory opinion is applicable on May 18, 2022.

FOR FURTHER INFORMATION CONTACT: Christopher Davis, Attorney-Advisor; 
Office of Fair Lending and Equal Opportunity, at 
<a href="/cdn-cgi/l/email-protection#77343127352831161e053b1219131e1910371411071559101801"><span class="__cf_email__" data-cfemail="63202533213c25020a112f060d070a0d0423000513014d040c15">[email protected]</span></a> or 202-435-7000. If you require this document 
in an alternative electronic format, please contact 
<a href="/cdn-cgi/l/email-protection#03404553415c4260606670706a616a6f6a777a43606573612d646c75"><span class="__cf_email__" data-cfemail="9ddedbcddfc2dcfefef8eeeef4fff4f1f4e9e4ddfefbedffb3faf2eb">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: The CFPB is issuing this advisory opinion 
through the procedures for its Advisory Opinions Policy.\1\ Refer to 
those procedures for more information.
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    \1\ 85 FR 77987 (Dec. 3, 2020).
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I. Advisory Opinion

A. Background

    The Bureau is issuing this advisory opinion to affirm that the 
Equal Credit Opportunity Act (ECOA) \2\ and Regulation B \3\ protect 
both those actively seeking credit and those who sought and have 
received credit. ECOA is a landmark civil rights law that protects 
individuals and businesses against discrimination in accessing and 
using credit--``a virtual necessity of life'' for most people.\4\ 
Congress enacted ECOA in 1974, initially to address ``widespread 
discrimination . . . in the granting of credit to women.'' \5\ 
Accordingly, ECOA made it unlawful for ``any creditor to discriminate 
against any applicant on the basis of sex or marital status with 
respect to any aspect of a credit transaction.'' \6\ From the 
beginning, this prohibition has protected both those actively seeking 
credit and those who sought and have received credit.
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    \2\ 15 U.S.C. 1691 et seq.
    \3\ 12 CFR part 1002.
    \4\ S. Rep. 94-589, 94th Cong., 2nd Sess., at 4, reprinted in 
1976 U.S.C.C.A.N. 403, 406.
    \5\ S. Rep. 93-278, 93rd Cong., 1st Sess., at 16 (1973).
    \6\ Public Law 93-495, sec. 503, 88 Stat. 1521, 1521 (1974).
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    Then as now, ECOA defined ``applicant'' to mean ``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.'' \7\ The drafters of these provisions 
emphasized that ECOA's prohibition on discrimination ``applies to all 
credit transactions including the approval, denial, renewal, 
continuation, or revocation of any open-end consumer credit account.'' 
\8\ Among other examples of the sort of discrimination against 
``applicants'' that ECOA would bar, its drafters cited a scenario in 
which a lender required a ``newly married woman whose creditworthiness 
has otherwise remained the same'' to reapply for her existing credit 
arrangement as a new applicant.\9\ The Act also created a private right 
of action under which aggrieved ``applicant[s]'' can hold liable a 
creditor that fails to comply with ``any requirement imposed under 
[ECOA].'' \10\ And it provided that this private right of action 
extends to violations of any requirement imposed under ECOA's 
implementing regulations.\11\
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    \7\ Public Law 93-495, sec. 503, 88 Stat. at 1522 (codified at 
15 U.S.C. 1691a(b)).
    \8\ S. Rep. 93-278, at 27 (emphasis added).
    \9\ S. Rep. 93-278, at 17.
    \10\ 15 U.S.C. 1691e(a).
    \11\ 15 U.S.C. 1691a(g) (``Any reference to any requirement 
imposed under this subchapter . . . includes reference to the 
regulations of the Bureau under this subchapter . . . .'').
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    Congress originally tasked the Board of Governors of the Federal 
Reserve System (Board) with prescribing those regulations.\12\ The 
Board issued those rules, known as Regulation B, the year after ECOA 
was enacted and several days before the Act took effect.\13\ From the 
beginning, Regulation B made clear that the new law's protections 
against credit discrimination cover both those currently applying to 
receive credit and those who have already received it. It did so by 
defining ``applicant'' to expressly include not only ``any person who 
applies to a creditor directly for an extension, renewal or 
continuation of credit'' but also, ``[w]ith respect to any creditor[,] 
. . . any person to whom credit is or has been extended by that 
creditor.'' \14\ In explaining this provision, the Board noted that 
ECOA's express terms and its legislative history ``demonstrate that 
Congress intended to reach discrimination . . . `in any aspect of a 
credit transaction.' '' \15\
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    \12\ Public Law 93-495, sec. 503, 88 Stat. at 1522.
    \13\ See 40 FR 49298 (Oct. 22, 1975) (promulgating 12 CFR part 
202); 40 FR 42030 (Sept. 10, 1975); 40 FR 18183 (Apr. 25, 1975).
    \14\ 12 CFR 202.3(c) (1976); see also 40 FR 49306.
    \15\ 40 FR 49298 (quoting 15 U.S.C. 1691(a)).
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    Two years after enacting ECOA, Congress significantly broadened the 
Act to prohibit discrimination on bases in addition to sex and marital 
status.\16\ These bases now generally include ``race, color, religion, 
national origin, sex or marital status, or age'' as well as the receipt 
of public-assistance income.\17\ In what the Senate drafters called 
``one of [the amendments'] most important provisions,'' \18\ the 
amendments also provided that ``[e]ach applicant against whom adverse 
action is taken shall be entitled to a statement of reasons for such 
action from the creditor.'' \19\ The amendments defined

[[Page 30098]]

``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.'' \20\ Thus, since 1976, ECOA has provided that 
``applicants'' are entitled to an explanation when the terms of an 
existing credit arrangement are altered or the credit cancelled 
outright, among other circumstances.
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    \16\ See ECOA Amendments of 1976, Public Law 94-239, 90 Stat. 
251.
    \17\ ECOA Amendments of 1976, Public Law 94-239, sec. 2, 90 
Stat. 251 (codified at 15 U.S.C. 1691(a)). In 2021, the CFPB issued 
an interpretive rule to clarify that, with respect to any aspect of 
a credit transaction, the prohibition against sex discrimination in 
ECOA and Regulation B encompasses sexual orientation discrimination 
and gender identity discrimination, including discrimination based 
on actual or perceived nonconformity with sex-based or gender-based 
stereotypes and discrimination based on an applicant's associations. 
86 FR 14363 (Mar. 16, 2021).
    \18\ S. Rep. 94-589, 94th Cong., 2nd Sess., at 2, reprinted in 
1976 U.S.C.C.A.N. 403, 404.
    \19\ 15 U.S.C. 1691(d)(2); see also 15 U.S.C. 1691(d)(3) (``A 
statement of reasons meets the requirements of this section only if 
it contains the specific reasons for the adverse action taken.''). 
In lieu of providing this statement of specific reasons, a creditor 
may instead disclose the applicant's right to receive such a 
statement. 15 U.S.C. 1691(d)(2)(B); see also 12 CFR 
1002.9(a)(2)(ii).
    \20\ 15 U.S.C. 1691(d)(6).
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    ECOA's notice requirements ``were designed to fulfill the twin 
goals of consumer protection and education.'' \21\ In terms of consumer 
protection, ``the notice requirement is intended to prevent 
discrimination ex ante because `if creditors know they must explain 
their decisions . . . they [will] effectively be discouraged' from 
discriminatory practices.'' \22\ The notice requirement ``fulfills a 
broader need'' as well by educating consumers about the reasons for the 
creditor's action.\23\ As a result of being informed of the specific 
reasons for the adverse action, consumers can take steps to try to 
improve their credit status or, in cases ``where the creditor may have 
acted on misinformation or inadequate information[,] . . . to rectify 
the mistake.'' \24\
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    \21\ Fischl v. Gen. Motors Acceptance Corp., 708 F.2d 143, 146 
(5th Cir. 1983); see also id. (calling these provisions ``[p]erhaps 
the most significant of the 1976 amendments to the ECOA'').
    \22\ Treadway v. Gateway Chevrolet Oldsmobile Inc., 362 F.3d 
971, 977-78 (7th Cir. 2004) (quoting Fischl, 708 F.2d at 146); see 
also S. Rep. 94-589, at 4 (calling the notice requirement ``a strong 
and necessary adjunct to the antidiscrimination purpose of the 
legislation'').
    \23\ S. Rep. 94-589, at 4.
    \24\ Id.
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    Following the ECOA Amendments of 1976, the Board amended Regulation 
B, including by adding new provisions to implement ECOA's notice 
requirement.\25\ The amended rule defined ``adverse action'' to include 
``[a] termination of an account or an unfavorable change in the terms 
of an account that does not affect all or substantially all of a class 
of the creditor's accounts.'' \26\ And it required that adverse action 
notices give a ``statement of reasons'' for the action that is 
``specific'' and ``indicate[s] the principal reason(s) for the adverse 
action.'' \27\
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    \25\ 42 FR 1242 (Jan. 6, 1977); 41 FR 49123 (Nov. 8, 1976); 41 
FR 29870 (July 20, 1976).
    \26\ 12 CFR 1002.2(c)(1)(ii).
    \27\ 12 CFR 1002.9(b)(2).
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    Finally, the Board made a ``minor editorial change'' to Regulation 
B's definition of ``applicant'' in order to ``express more succinctly 
the fact that the term includes both a person who requests credit and a 
debtor,'' a debtor being one who has already requested and received 
credit.\28\ Whereas Regulation B originally defined ``applicant'' to 
include one who ``applies to a creditor directly for an extension, 
renewal or continuation of credit'' as well as, ``[w]ith respect to any 
creditor[,] . . . any person to whom credit is or has been extended by 
that creditor,'' \29\ the revised definition simply stated that 
``applicant'' includes ``any person who requests or who has received an 
extension of credit from a creditor.'' \30\ Although the Board revised 
other parts of the definition over the years, it never departed from 
the bedrock understanding of the term ``applicant'' as including any 
person ``who has received'' an extension of credit.\31\
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    \28\ 41 FR 29870, 29871 (July 20, 1976) (proposed rule).
    \29\ 12 CFR 202.3(c) (1976).
    \30\ 12 CFR 202.2(e) (1978) (emphasis added); see also 42 FR 
1242, 1252 (Jan. 6, 1977) (final rule).
    \31\ See 12 CFR 1002.2(e).
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    The Dodd-Frank Wall Street Reform and Consumer Protection Act, 
enacted in 2010, revoked primary rulemaking responsibility under ECOA 
from the Board and transferred it to the newly created Bureau.\32\
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    \32\ Public Law 111-203, sec. 1085, 124 Stat. 1376, 2083-84.
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    Shortly thereafter, the Bureau republished the Board's ECOA 
regulations, including the definition of ``applicant,'' without 
material change.\33\ In addition, the Bureau's Supervision and 
Examination Manual makes clear that creditors subject to the Bureau's 
supervisory jurisdiction must comply with ECOA and Regulation B's 
requirements with respect to existing accounts. For instance, the 
Examination Manual explains that ``[n]otification of adverse action 
taken on an existing account must also be made within 30 days.'' \34\
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    \33\ See 76 FR 79442 (Dec. 21, 2011) (promulgating 12 CFR part 
1002 & supplement I).
    \34\ CFPB Supervision and Examination Manual, at ECOA 7, https://files.consumerfinance.gov/f/documents/201510_cfpb_ecoa-narrative-and-procedures.pdf (emphasis added); see also id. at ECOA 10 (``[a] 
creditor must preserve any written or recorded information 
concerning adverse action on an existing account as well as any 
written statement submitted by the applicant alleging a violation of 
the ECOA or Regulation B.'').
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B. Coverage

    This advisory opinion applies to all ``creditors'' as defined in 
section 702 of ECOA.\35\ As used in this advisory opinion, ``existing 
account holder'' refers to an applicant who has applied for and 
received an extension of credit. ``Existing account'' or ``existing 
credit arrangement'' refers to an extension of credit previously made 
by a creditor other than an extension of credit that is closed or 
inactive. This advisory opinion has no application to any other 
circumstance and does not offer a legal interpretation of any other 
provisions of law.
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    \35\ See 15 U.S.C. 1691a(e).
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C. Legal Analysis

    ECOA and Regulation B plainly protect applicants who have received 
credit and are existing account holders, not just those in the process 
of applying for credit. This has been the longstanding position of the 
Bureau, and the view of Federal agencies prior to the Bureau's 
creation. Despite this well-established interpretation,\36\ the Bureau 
is aware that some creditors fail to acknowledge that ECOA and 
Regulation B plainly apply to circumstances that take place after an 
extension of credit has been granted, including a revocation of credit 
or an unfavorable change in the terms of a credit arrangement.\37\ In 
addition, the Bureau is aware that some creditors fail to provide 
applicants with required notifications that include a statement of the 
specific reasons for the adverse action taken or disclose an 
applicant's right to such a statement.\38\ But ECOA's

[[Page 30099]]

text, history, purpose, and judicial interpretation all point the same 
way: As used in ECOA, the term ``applicant'' includes persons who 
applied for and have received credit. Any uncertainty about ECOA's 
protections for existing borrowers is dispelled by Regulation B.
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    \36\ See 12 CFR 202.3(c) (1976) (expressly defining the term 
``applicant'' to include ``any person to whom credit is or has been 
extended'').
    \37\ See Brief of Amici Curiae Consumer Fin. Prot. Bureau, Dep't 
of Justice, Bd. of Governors of the Fed. Reserve Sys., and Fed. 
Trade Comm'n in Support of Appellant and Reversal, Fralish v. Bank 
of Am., No. 21-2846 (7th Cir. filed Dec. 16, 2021), https://files.consumerfinance.gov/f/documents/cfpb_fralish-v-bank-of-america_amicus-brief_2021-12.pdf; Brief of Amici Curiae Consumer 
Fin. Prot. Bureau and Fed. Trade Comm'n, TeWinkle v. Capital One, 
N.A., No. 20-2049 (2d Cir. filed Oct. 7, 2020), https://files.consumerfinance.gov/f/documents/cfpb_amicus-brief_tewinkle-v-capital-one-na_2020-10.pdf.
    \38\ Credit cards are one of the most commonly held and widely 
used financial products in America--over 175 million Americans hold 
at least one credit card. During the COVID-19 pandemic, credit cards 
played a vital role as both a source of credit in emergencies and a 
payment method as more transactions occurred online. According to 
the CFPB's 2021 Credit Card Report, about 2%, or over 10 million 
credit card accounts, were closed in 2020 and consumers with low 
credit scores are two to three times more likely to have their 
accounts closed than those with a higher credit score. See Bureau of 
Consumer Fin. Prot., The Consumer Credit Card Market (Sept. 2021), 
https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf. Additionally, the same report shows 
that over 10 million accounts experienced a credit line decrease in 
2020. See id.; see also 5 Reasons Credit Card Companies Close 
Accounts Without Notice--And How to Fix Them, USA TODAY (July 13, 
2021), https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2021/07/13/5-reasons-a-credit-card-company-can-close-your-account-with-no-notice/47470647/; `My Credit Card Just Got 
Canceled and I Don't Know Why,' THE CUT (Sept. 11, 2020), https://www.thecut.com/article/can-my-credit-card-company-cancel-my-card.html.
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a. Statutory Text
    ``It is a fundamental canon of statutory construction that the 
words of a statute must be read in their context and with a view to 
their place in the overall statutory scheme.'' \39\ Reading together 
the relevant provisions of ECOA makes clear that the term ``applicant'' 
is not limited to those who are in the process of applying for credit. 
The Supreme Court's analysis in Robinson v. Shell Oil Co.\40\ is 
instructive. In that case, the Court held that the term ``employees'' 
in Section 704(a) of Title VII includes those who were former employees 
when the discrimination occurred. Writing for a unanimous Court, 
Justice Thomas explained that although ``[a]t first blush, the term 
`employees' . . . would seem to refer to those having an existing 
employment relationship with the employer in question,'' that ``initial 
impression . . . does not withstand scrutiny in the context of Sec.  
704(a).'' \41\
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    \39\ Nat'l Ass'n of Home Builders v. Defs. of Wildlife, 551 U.S. 
644, 666 (2007) (quotation marks omitted).
    \40\ 519 U.S. 337 (1997).
    \41\ Id. at 341.
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    For one thing, the Court observed, there is ``no temporal qualifier 
in the statute such as would make plain that Sec.  704(a) protects only 
persons still employed at the time of the retaliation.'' \42\ The same 
reasoning applies to the term ``applicant'' in ECOA, which is not 
expressly limited to those currently in the process of seeking credit. 
The Court further noted that ``a number of other provisions in Title 
VII use the term `employees' to mean something more inclusive or 
different than `current employees.' '' \43\ The same reasoning applies 
to the term ``applicant'' used in ECOA.
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    \42\ Id.
    \43\ Id. at 342.
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    Reading ECOA's definition of ``applicant'' alongside the Act's 
other provisions makes clear that the term includes applicants who have 
received credit and become existing borrowers. For example, ECOA's core 
anti-discrimination provision protects ``applicant[s]'' from 
discrimination ``with respect to any aspect of a credit transaction''--
not just during the application process itself.\44\ The phrase ``any 
aspect of a credit transaction'' is most naturally read to include both 
the initial formation of a credit agreement as well as the performance 
of that agreement.\45\ Consistent with this ordinary meaning, 
Regulation B has always defined the term ``credit transaction'' to 
encompass ``every aspect of an applicant's dealings with a creditor,'' 
including elements of the transaction that take place after credit has 
been extended.\46\ The expansive language of this provision shows an 
intent to sweep broadly, beyond just the initial process of requesting 
credit, to bar discrimination in all parts of a credit arrangement. 
Indeed, the main Senate report accompanying ECOA specifically noted 
that ``[t]he prohibition applies to all credit transactions including . 
. . revocation of any open-end consumer credit account.'' \47\
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    \44\ 15 U.S.C. 1691(a) (emphasis added); see also Ali v. Fed. 
Bureau of Prisons, 552 U.S. 214, 218 (2008) (``[T]he word `any' has 
an expansive meaning . . . .'') (quoting United States v. Gonzales, 
520 U.S. 1, 5 (1997)).
    \45\ See, e.g., Black's Law Dictionary 1668 (rev. 4th ed. 1968) 
(defining ``transaction'' to include the ``[a]ct of transacting or 
conducting any business'' and defining ``transact'' as ``equivalent 
to `carry on,' when used with reference to business'').
    \46\ 12 CFR 1002.2(m) (defining ``credit transaction'' to 
include, among other things, the ``revocation, alteration, or 
termination of credit'' and ``collection procedures''); 12 CFR 
202.3(k) (1976) (defining ``credit transaction'' to include the 
``furnishing of credit information and collection procedures''). 
Accordingly, the Bureau interprets aspects of the credit 
transactions enumerated in Regulation B as including and 
encompassing the servicing of that credit, debt collection, loss 
mitigation, payment plans, settlements, co-signer release, and 
certain other services provided to existing accountholders.
    \47\ S. Rep. 93-278, 93rd Cong., 1st Sess., at 27 (1973).
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    Similarly, ECOA's disclosure provision requires that creditors give 
a statement of reasons to ``[e]ach applicant'' against whom they take 
``adverse action.'' \48\ ECOA defines ``adverse action'' to include a 
``revocation of credit'' as well as a ``change in the terms of an 
existing credit arrangement.'' \49\ These are actions that can be taken 
only with respect to persons who have already received credit.
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    \48\ 15 U.S.C. 1691(d)(2).
    \49\ 15 U.S.C. 1691(d)(6).
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    ECOA's private right of action points in the same direction. It 
allows an aggrieved ``applicant'' to bring suit against creditors who 
fail to comply with ECOA or Regulation B.\50\ These references to 
``applicant[s]'' cannot be understood to refer only to those with 
pending credit applications. Otherwise, a person whose application was 
denied on a prohibited basis would have no recourse under ECOA's 
private right of action, which Congress intended would be the Act's 
``chief enforcement tool.'' \51\ Instead, these references further 
confirm that the term ``applicant'' is not limited to those currently 
applying for credit.\52\
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    \50\ 15 U.S.C. 1691e(a); see also id. 1691e(b) (a ``creditor, 
other than a government or governmental subdivision or agency,'' 
shall be liable to the aggrieved ``applicant'' for punitive 
damages); id. 1691e(c) (aggrieved ``applicant'' may seek relief in 
district court).
    \51\ S. Rep. 94-589, at 13.
    \52\ Cf. Robinson, 519 U.S. at 343 (similarly concluding that 
the reference to aggrieved ``employees'' in Title VII's private 
right of action shows that that term is not limited to current 
employees).
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b. Legislative History
    Congress's history of amending the statute strongly supports 
reading the statute to include existing borrowers. As noted, the Board 
issued Regulation B in 1975, through notice-and-comment rulemaking, 
shortly before ECOA took effect. The rule defined ``applicant'' to 
include ``any person to whom credit is or has been extended.'' \53\ If 
Congress thought this definition an unreasonable departure from the 
statute it had just passed, it would surely have given some sign of 
that when it amended and expanded ECOA the following year. Nor is there 
any doubt that the drafters of those statutory amendments were 
generally aware of the new Regulation B, as they cited parts of it in 
explaining their bill.\54\
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    \53\ 12 CFR 202.3(c) (1976).
    \54\ See S. Rep. 94-589, at 2 (citing the Board's rules and 
noting that the amendments expanded the Board's rulemaking 
authority).
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    But the 1976 amendments did not limit the reasonable definition of 
``applicant'' that the Board had promulgated just months before. To the 
contrary, the 1976 amendments added new provisions--such as the ones 
entitling ``applicants'' to a statement of reasons when their credit is 
revoked or modified--that make sense only if ``applicant'' is 
understood to include existing borrowers, as stated in Regulation B. 
Nor has Congress ever amended the statutory definition of ``applicant'' 
or otherwise expressed disapproval of the understanding of that term in 
Regulation B, despite revising the statute multiple times since 
1976.\55\
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    \55\ See FDIC Improvement Act of 1991, Public Law 102-242, sec. 
223, 105 Stat. 2306-07; Dodd-Frank Act, Public Law 111-203, secs. 
1071, 1474, 124 Stat. 2056-57, 2199-2200.
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    ``[W]hen,'' as here, ``Congress revisits a statute giving rise to a 
longstanding administrative interpretation without pertinent change, 
the `congressional failure to revise or repeal the agency's 
interpretation is persuasive evidence that the interpretation is the 
one

[[Page 30100]]

intended by Congress.' '' \56\ That maxim applies with particular force 
here: The first time Congress revisited the statute after the Board 
defined ``applicant'' to include existing borrowers, Congress enacted 
new provisions that implicitly approved the Board's interpretation by 
requiring that creditors provide an explanation for adverse actions 
that can be taken only with respect to existing borrowers.
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    \56\ CFTC v. Schor, 478 U.S. 833, 846 (1986) (quoting NLRB v. 
Bell Aerospace Co., 416 U.S. 267, 274-75 (1974)).
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c. Statutory Purpose
    Reading ``applicant'' to protect individuals and businesses from 
discrimination both during the process of requesting credit and once 
credit has been extended furthers ECOA's purpose. It prevents a 
creditor from canceling an existing account because of a borrower's 
race. It bars a creditor from unfavorably modifying the terms of an 
existing account--perhaps by lowering the amount available on a line of 
credit--because of a borrower's national origin. It stops a creditor 
from requiring women with existing accounts to reapply for their credit 
upon getting married.\57\ And it ensures that a creditor would be 
required to provide a statement of reasons to the applicant in any of 
these situations. This is the most plausible interpretation of ECOA.
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    \57\ Cf. S. Rep. 93-278, at 17 (citing this very scenario as an 
example of the discrimination against ``applicants'' that ECOA 
prohibits).
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    Finally, reading ``applicant'' in this way--i.e., ECOA protects 
applicants from discrimination both during the process of requesting 
credit and once credit has been extended--precludes obvious paths to 
evasion. A creditor that wished to deny credit applications on a 
prohibited basis, or to offer credit on inferior terms for the same 
prohibited reason, cannot do so by simply extending credit on the terms 
requested and later revoking or amending the terms of the credit 
arrangement. Nor can a creditor use similar means to avoid ever having 
to explain to an applicant the reasons for an adverse action. This 
interpretation of ECOA, therefore, forecloses a potential loophole that 
could effectively swallow much of the Act. Such a loophole would be 
plainly inconsistent with ECOA.
d. Judicial Precedent
    Those courts that have properly read the term ``applicant'' in its 
statutory context, including the only court of appeals to have 
addressed the issue, have agreed that the statute protects existing 
borrowers. In Kinnell v. Convenient Loan Co.,\58\ the Tenth Circuit 
considered a claim that a creditor discriminated in violation of ECOA 
when it refused to accept a late payment on an existing loan and 
instead accelerated the remaining balance due. The court rejected the 
argument that the plaintiff was not an ``applicant'' under ECOA because 
he was no longer actively seeking credit.\59\ ECOA, the court 
explained, prohibits discrimination ``with respect to any aspect of a 
credit transaction,'' \60\ and was meant ``to protect people from the 
`denial or termination of credit' '' on a prohibited basis.\61\ The 
lender's reading of ``applicant'' would mean that ``any sua sponte 
action on the part of the creditor . . . would not be actionable. Such 
an interpretation improperly narrows the scope of the ECOA.'' \62\ The 
court noted that its reading of ``applicant'' was directly supported by 
Regulation B.\63\
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    \58\ 77 F.3d 492 (10th Cir. 1996) (unpublished table decision).
    \59\ Id. at *2.
    \60\ Id. (quoting 15 U.S.C. 1691(a)).
    \61\ Id. (emphasis added) (quoting Miller v. American Express 
Co., 688 F.2d 1235, 1239 (9th Cir. 1982)).
    \62\ Id.
    \63\ Id.
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    At least one district court has reached the same conclusion. In 
Powell v. Pentagon Fed. Credit Union,\64\ the court held that the 
plaintiff, who alleged that his existing credit plan was terminated on 
a prohibited basis, was an ``applicant'' under ECOA. The court relied 
on ECOA's requirement that ``applicants'' receive notice when their 
credit is revoked and on the longstanding definition in Regulation 
B.\65\ The court observed that the contrary interpretation would be 
wholly at odds with ECOA's purposes because it ``would preclude a 
plaintiff with an existing account from bringing a claim for the 
discriminatory revocation of that account.'' \66\ The court found 
nothing to ``suggest[ ] that Congress' intent to discourage 
discrimination against applicants somehow ceases when the alleged 
discrimination is against existing credit customers.'' \67\
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    \64\ No. 10-cv-785, 2010 WL 3732195 (N.D. Ill. Sept. 17, 2010).
    \65\ Id. at *4-5.
    \66\ Id. at *4.
    \67\ Id. at *4 n.2.
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    The Bureau acknowledges that a few other district court decisions 
have interpreted ``applicant'' to include only persons actively seeking 
credit, but the Bureau does not believe this interpretation is 
persuasive.\68\ No court of appeals has endorsed these district courts' 
narrow reading. These district court decisions read ``applicant'' in 
isolation instead of reading this statutory term in context, as 
required by the Supreme Court. For example, these decisions did not 
attempt to square their interpretation with ECOA's requirement that 
``applicants'' receive an explanation when their existing credit is 
terminated or modified. Nor did they grapple with the clear loophole 
their interpretation would create or the degree to which it would 
frustrate the Act's remedial purposes.
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    \68\ See, e.g., TeWinkle v. Capital One, N.A., No. 1:19-cv-
01002, 2019 WL 8918731, at *4-5 (W.D.N.Y. Dec. 11, 2019); Kalisz v. 
Bank of America, N.A., No. 1:18-cv-00516, 2018 WL 4356768, at *2-3 
(E.D. Va. Sept. 11, 2018).
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e. Regulation B
    Regulation B has always defined the term ``applicant'' to include 
those who applied for and have received credit.\69\ Other provisions 
reflect the same interpretation.\70\ Neither the Board nor the Bureau 
has ever amended the rule to reflect a contrary understanding of the 
term.
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    \69\ See 12 CFR 1002.2(e) (including in the definition ``any 
person . . . who has received an extension of credit from a 
creditor''); see also 12 CFR 202.3(c) (1976) (including in the 
definition ``any person to whom credit is or has been extended by 
[a] creditor'').
    \70\ See, e.g., 12 CFR 1002.2(m) (defining ``credit 
transaction'' to mean ``every aspect of an applicant's dealings with 
a creditor regarding an application for credit or an existing 
extension of credit'') (emphasis added).
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    As described above, the best interpretation of ECOA is that the 
term ``applicant'' includes existing borrowers. It was thus reasonable 
for the Board and then the Bureau to adopt that interpretation in 
Regulation B. Adopting the contrary reading would have led to the 
serious textual inconsistencies described above and run directly 
contrary to the statute's purposes. Regulation B's definition avoids 
those difficulties and, in the process, serves to ``carry out'' and 
``effectuate'' the purposes of ECOA.\71\ And because the contrary 
interpretation would open a glaring loophole in ECOA, Regulation B's 
definition is ``necessary or proper . . . to prevent circumvention or 
evasion'' of the Act.\72\
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    \71\ 15 U.S.C. 1691b(a).
    \72\ Id.
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    Notably, Regulation B has expressly included existing borrowers as 
applicants since the rule was first promulgated through notice-and-
comment rulemaking in 1975. Indeed, the interpretation of ``applicant'' 
discussed here has been confirmed by numerous Federal agencies for 
decades. For example, nine separate agencies or offices, including the 
Department of Justice, Federal Trade Commission, and

[[Page 30101]]

the Board, previously published a statement confirming their view that 
ECOA prohibits discrimination in the treatment of existing borrowers, 
such as by ``[t]reat[ing] a borrower differently in servicing a loan or 
invoking default remedies'' or ``[using] different standards for 
pooling or packaging a loan in the secondary market.'' \73\ The same 
view is reflected in the manual used by the Federal Deposit Insurance 
Corporation, Office of the Comptroller of the Currency, and other 
financial regulators to conduct examinations of financial institutions 
for compliance with fair lending laws.\74\ The Bureau has consistently 
taken the same view of ``applicant,'' including by reissuing the 
Board's original definition; issuing guidance that Regulation B 
``covers creditor activities before, during, and after the extension of 
credit''; \75\ and taking enforcement action to address violations of 
ECOA against existing borrowers.\76\ In short, the Bureau's 
interpretation is longstanding and well established.
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    \73\ Policy Statement on Discrimination in Lending, 59 FR 18266, 
18268 (Apr. 15, 1994).
    \74\ See Interagency Fair Lending Examination Procedures, at ii 
(Aug. 2009), available at https://go.usa.gov/xeY37.
    \75\ Bureau of Consumer Fin. Prot., Equal Credit Opportunity Act 
Examination Procedures, at 1 (Oct. 2015), available at https://go.usa.gov/xekcN.
    \76\ See, e.g., In re American Express Centurion Bank and 
American Express Bank, FSB, No. 2017-CFPB-0016, 2017 WL 7520638 
(Aug. 23, 2017) (consent order resolving claims that creditors 
discriminated against existing borrowers on the basis of race and 
national origin by, for example, subjecting certain borrowers to 
more aggressive collection practices).
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II. Regulatory Matters

    This advisory opinion is an interpretive rule issued under the 
Bureau's authority to interpret ECOA and Regulation B, including under 
section 1022(b)(1) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, which authorized guidance as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of Federal consumer financial laws.\77\
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    \77\ 12 U.S.C. 5512(b)(1). The relevant provisions of ECOA and 
Regulation B form part of Federal consumer financial law. 12 U.S.C. 
5481(12)(D), (14).
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    By operation of ECOA section 706(e), no provision of ECOA imposing 
any liability applies to any act done or omitted in good faith in 
conformity with this interpretive rule, notwithstanding that after such 
act or omission has occurred, the interpretive rule is amended, 
rescinded, or determined by judicial or other authority to be invalid 
for any reason.\78\
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    \78\ 15 U.S.C. 1691e(e).
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    As an interpretive rule, this rule is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\79\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\80\ The Bureau also has determined 
that this interpretive rule does not impose any new or revise any 
existing recordkeeping, reporting, or disclosure requirements on 
covered entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.\81\
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    \79\ 5 U.S.C. 553(b).
    \80\ 5 U.S.C. 603(a), 604(a).
    \81\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\82\ the Bureau will 
submit a report containing this interpretive rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule's 
published effective date. The Office of Information and Regulatory 
Affairs has designated this interpretive rule as not a ``major rule'' 
as defined by 5 U.S.C. 804(2).
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    \82\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-10453 Filed 5-17-22; 8:45 am]
BILLING CODE 4810-AM-P


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