The Equal Credit Opportunity Act and Regulation B Flashcards
The courts have recognized three methods to prove lending discrimination under the fair lending laws. List them and give a brief description of each.
The courts have recognized three methods to prove lending discrimination under the fair lending laws:
1) Overt evidence of discrimination — a lender blatantly discriminates on a prohibited basis.
2) Evidence of disparate treatment — a lender treats applicants differently based on one of the prohibited factors.
3) Evidence of disparate impact — a lender applies a practice uniformly to all applicants, but the practice has a discriminatory effect on a prohibited basis and is not justified by business necessity.
What are the nine “protected classes” or “prohibited basis” as defined by Regulation B?
The protected classes defined by Regulation B are: sex; marital status; race; color; religion; national origin; age; the receipt of protected income (such as welfare benefits); and the exercise of legal rights under the consumer credit laws.
There are three steps in the “effects test” used to determine if there is a case of disparate treatment or disparate impact. The first is to prove that a loan criteria or practice has a disproportionate adverse impact. What are the other two?
The two other steps are: (1) the credit union must prove that the criteria or practice served a business necessity; and (2) the claimant must be able to prove that there are other criteria or practices that would have achieved that business necessity equally as well if used instead.
There are four circumstances where it is appropriate to gather information on a spouse or a former spouse. List two of them.
A credit union can gather information on a spouse or former spouse only when one of the following applies:
1) the spouse will be contractually liable for, or a user of, the account;
2) the member is relying on the spouse’s income to repay the debt;
3) the member is relying on alimony or child support payments from the spouse or former spouse to repay the debt;
4) the member resides in a community property state or is relying on property located in such a state for repayment. As with marital status, spousal information may always be requested from community property state applicants.
What must an applicant be told before making inquiries about the receipt of alimony, child support, or separate maintenance payments?
Before making inquiries about income from these three sources, a lender must advise the applicant that this information need not be revealed if the applicant does not wish to rely on it as a basis for repayment.
Under Reg B, credit unions are restricted in the types of information that can be requested in regard to childbearing intentions or capabilities. What types of information are you allowed to gather?
Credit unions can make inquiries regarding the loan applicant’s ability to repay the debt, such as the probability of continuing employment as long as the same request is made of all similarly situated applicants. You cannot ask about birth control practices, childbearing intentions or capability, or maternity leave.
When inquiring about a loan applicant’s nationality, what types of inquiries are you allowed to make under Reg B?
You may inquire about the applicant’s permanent residence and immigration status.
When considering income that is “protected income” and has been disclosed by the loan applicant for consideration in evaluating the loan application, what are two of the five factors credit unions can look at?
Can consider: (1) if the payments are received pursuant to a written agreement or court order; (2) the length of time the payments have been received; (3) if the payments are received regularly; (4) if the courts are available to compel payment; and (5) the creditworthiness of the party making the payments.
When is a credit union required to send an adverse action notice to the member?
An adverse action notice must be sent to a member whenever: (1) adverse action is taken on an initial loan application or (2) adverse action is taken on an existing credit account.
If an application for a loan is denied, the adverse action notice must be sent to the applicant within 30 days of receipt of a complete application. What are three of the five required items for this notice?
The adverse action notice must contain: (1) a statement of the action taken;(2) name and address of the credit union; (3) the required ECOA nondiscrimination statement; (4) the NCUA address; and (5) either a statement of the specific reasons for the action or a disclosure of the applicant’s right to a statement of those reasons.
