The CFPB, FTC, DOJ, and Federal Reserve Board have filed a joint amicus brief in the U.S. Court of Appeals for the Seventh Circuit urging the court to reverse a district court ruling that an individual who had already received credit from the defendant and who was not currently applying to the defendant for credit was not an “applicant” for purposes of the ECOA’s adverse action notice requirement.

The ECOA defines an “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.” 15 U.S.C. 1691a(b).  As defined by Regulation  B, an “applicant” includes “any person who requests or who has received an extension of credit from a creditor.”  Both the ECOA and Regulation B require a creditor to provide a statement of the reasons for adverse action to an “applicant.”

In Fralish v. Bank of America One, N.A., the plaintiff had a credit card issued by the defendant bank.  The plaintiff filed a lawsuit against the bank alleging that the notice sent to him by the bank that it was closing his card account did not comply with the adverse action notice requirement in ECOA and Regulation B because it did not include a statement of the reasons for the closure or a notice of his right to receive a statement of the reasons.  The bank moved for judgment on the pleadings, arguing that plaintiff was not an “applicant” entitled to notice of adverse action under the ECOA because he did not allege that he was actively applying for credit when the bank closed his card account.  The district court agreed with the bank’s reading of the ECOA and, construing the bank’s motion as a motion to dismiss, granted the motion and dismissed the complaint.

In their amicus brief, the agencies argue that, despite the wording of the ECOA’s definition of the term “applicant,” the “best reading” of the ECOA is to interpret the statutory language to include “both those currently seeking credit and those who have previously sought and have since received credit.”  According to the agencies, the ECOA’s text, history, and purpose make clear that the ECOA’s protections extend to existing borrowers.

The agencies also argue that Regulation B’s definition of “applicant,” which expressly includes an individual “who has received an extension of credit from the creditor” is entitled to substantial deference under Chevron.

In October 2020, the CFPB and FTC filed a joint amicus brief with the Second Circuit in Tewinkle v. Capital One, N.A., in which they made similar arguments on behalf of a plaintiff who had alleged that a notice sent to him by the defendant bank that it was terminating his checking account and overdraft line did not comply with the ECOA/Regulation B adverse action notice requirement.  In that case, the district court agreed with the bank that the plaintiff was not an “applicant” for purposes of the adverse action notice requirement.  The Second Circuit did not issue a ruling because there was settlement in the case.