NCUA Outlines ECOA Nondiscrimination Requirements

The National Credit Union Administration recently issued Letter to Credit Unions 22-CU-04 which provides a summary of the Equal Credit Opportunity Act’s (ECOA) nondiscrimination requirements. The letter to credit unions also provides insight into fair lending risk areas that credit unions should be aware of.

The ECOA promotes the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant’s income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. ECOA prohibits creditor practices that discriminate based on any of these factors.

The Areas of Potential Fair Lending Risk Include the Following:

Applicant Marital Status
Except as otherwise permitted or required by law, a creditor must evaluate married and unmarried applicants using the same standards. In evaluating joint applicants, a creditor cannot treat applicants differently based on the existence, absence, or likelihood of a marital relationship between the parties. A common marital status discrimination violation involves risk-based pricing practices. When two applicants or signers are involved in a lending transaction, a lending policy cannot provide for different pricing guidelines based solely on applicants’ or signers’ marital status, in violation of ECOA. For example, when two applicants are involved, a credit union cannot price loans based on the higher of the two applicants’ credit scores when they are married but based on the primary applicant’s credit score when the applicants are unmarried.

Applicant Age
Except as permitted, a creditor cannot take into account an applicant’s age, provided the applicant has the capacity to enter into a binding contract. Age discrimination violations in credit unions typically involve automatic loan approval systems and guidelines. A credit union cannot disqualify a loan applicant for automatic loan approval based on the applicant’s age, provided the applicant is of legal age to enter into a binding contract, even if the credit union subsequently approves the application following a manual review of the application file. Credit unions using automated underwriting systems should ensure the system’s settings comply with ECOA’s requirements and do not result in age discrimination.

Income Consideration
Creditors may not discount or exclude from consideration the income of an applicant or the spouse of an applicant because of a prohibited basis or because the income is derived from part-time employment or is an annuity, pension, or other retirement benefit.6 For example, creditors are not permitted to treat women on maternity leave as though they are unemployed for underwriting purposes. Similarly, creditors must consider public assistance and retirement income fully in the underwriting process. However, a creditor may consider the amount and probable continuance of any income in evaluating an applicant’s creditworthiness.

“Redlining,” as defined by DOJ, is an illegal practice in which lenders avoid providing services to individuals living in communities of color because of the race or national origin of the people who live in those communities. Credit unions, especially those with fields of membership defined by, or partially defined by, geography, such as community charters and underserved areas, must ensure they provide equal access to credit in the areas defined by their fields of membership. Reviews to determine if a credit union is providing equal access to credit can include statistical analyses of the credit union’s lending within its service area(s), analyses of service locations and placement of mortgage loan officers, and analyses of marketing and advertising.

Indirect Lending
Credit unions with indirect lending programs use various methods to compensate automobile dealers for loan transactions. Discretionary markups allow a dealer to affect the cost of financing on an individual and discretionary basis. For this reason, the use of discretionary markups presents fair lending risks not usually associated with a flat fee or flat percentage compensation structure. Credit unions that permit discretionary markups should ensure their fair lending compliance management systems are sufficiently robust to enable the credit union to measure and address prohibited basis pricing disparities.

Question of the Week

Q. Can I charge any fees due to dormancy or inactivity, or stop paying interest on a dormant account?

A. Generally, the credit union cannot impose any charges due to dormancy or inactivity or stop the payment of interest. However, the credit union can impose charges or stop paying interest if it meets three requirements. First, there is a written contract between the credit union and property owner stating that the credit union can impose a charge or stop the payment of interest.  Second, the property is over ten dollars, and the credit union, no more than 3 months before imposing the charges or stopping interest, provides written notice to the owner as to the amount of charges at the last known address and states that charges will be imposed, or payment of interest will stop.  Third, the credit union imposes such charges or stops the payment of interest and does not regularly reverse or cancel them or retroactively credit interest with respect to the property.

Related Links

RCW 63.29.060
ORS 98.311
IDS 14-506

Compliance Alerts

National Credit Union Administration

Special Purpose Credit Programs: The NCUA issued Letter to Credit Unions 22-CU-03 about an interagency statement to remind creditors of the ability under the Equal Credit Opportunity Act to establish special purpose credit programs (SPCPs) to meet the credit needs of specific classes of persons. SPCPs are credit assistance programs for economically or socially disadvantaged consumers and commercial enterprises.

ECOA Nondiscrimination Requirements: The NCUA issued Letter to Credit Unions 22-CU-04 which provides an overview of the Equal Credit Opportunity Act (ECOA) Nondiscrimination Requirements. The letter also provides insight into fair lending risk areas that credit unions should be aware of.

NCUA CAMELS Webinar – March 10: The NCUA has opened registration for the March 10, webinar which will provide information on the changes to the NCUA’s CAMELS rating system.

Second Call Report Changes Webinar – March 8: The NCUA has opened registration for the March 8 webinar which will cover changes to the Call Reports for Natural Person Credit Unions.

Current Geopolitical Events Increase Likelihood of Imminent Cyberattacks on Financial Institutions: The NCUA has updated its cybersecurity resources to include information released from the Cybersecurity and Infrastructure Security Agency (CISA) and the alerts that the agency issued addressing risks from Russian State-Sponsored cyber threats.

Consumer Financial Protection Bureau

CFPB Outlines Options to Prevent Algorithmic Bias in Home Valuations: The CFPB outlined options to ensure that computer models used to help determine home valuations are accurate and fair. The options are now being reviewed to determine their potential impact on small businesses.

CFPB Issues Factsheet on Prepaid Interest and the General QM APR Special Rule for ARMs: The CFPB issued a factsheet on the interest rate that is used for calculating prepaid interest under the price-based General QM APR calculation rule for certain ARMs and step-rate loans.

CFPB Bulletin 2022-4: Mitigating Harm from Repossession of Automobiles: The CFPB issued a compliance bulletin that provides insight into conduct observed during CFPB examinations and enforcement actions, including illegal seizure of cars, sloppy record-keeping, unreliable balance statements, and ransom for personal property.

Office of Foreign Assets Control

OFAC has updated the SDN list as of Feb. 28. The last update prior to this was Feb. 17.

Questions? Contact the Compliance Hotline: 1.800.546.4465;

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