The CFPB has issued a new advisory opinion “to affirm that the Equal Credit Opportunity Act (ECOA) and Regulation B protect those actively seeking credit and those who sought and received credit.”

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.” 

The CFPB has previously taken the position in amicus briefs that the term “applicant” includes a person who had received credit and is an existing account holder and is not limited to a person in the process of applying for credit.  The CFPB took that position most recently in an amicus brief filed in December 2021 jointly with the FTC, DOJ, and Federal Reserve Board in the Seventh Circuit in Fralish v. Bank of America One, N.A.  In the brief, the agencies urge 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.

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 a settlement in the case.

In the advisory opinion, as it did in the amicus briefs, the CFPB takes the position that, despite the wording of the ECOA’s definition of the term “applicant,” the “best interpretation” of the ECOA is that the term includes existing borrowers.  According to the CFPB, the ECOA’s text, legislative history, and statutory purpose support reading the ECOA to include existing borrowers.  For that reason, according to the CFPB, it was reasonable for the Federal Reserve Board and then the CFPB to adopt this reading of the ECOA in Regulation B. 

By issuing the advisory opinion, the CFPB may be seeking to bolster its ability to litigate the ECOA issue in other cases (as well as head off adverse decisions in other cases) should the Seventh Circuit reject its interpretation in Fralish.  An adverse result in Fralish could also lead to an attempt by the CFPB to use its UDAAP authority to challenge discrimination against existing borrowers.