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Financial Services Law Insights and Observations

Court finds no ECOA violation with credit union’s dispute-free credit report requirement

Courts ECOA FCRA FDCPA Regulation B Consumer Finance

Courts

On August 28, the U.S. District Court for the Eastern District of Wisconsin dismissed an action against a credit union, holding that the credit union’s decision to consider only dispute-free credit reports of all applicants does not amount to a “prohibited basis” under the Equal Credit Opportunity Act (ECOA). According to the opinion, the credit union required the consumer to remove his disputed debts from his credit report in order for his application for a home equity loan to move forward. After the disputes were removed, the consumer’s credit score dropped below the minimum required by the credit union, and his application was denied. In December 2017, the consumer brought an action against the credit union, alleging that he was discriminated against in violation of ECOA for exercising his dispute rights under the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA). The court rejected the consumer’s arguments, concluding that the FDCPA and the FCRA do not give a consumer a right to dispute debts, but rather a right to ensure that disputed debts are accurately reported as such. The court also rejected the consumer’s theory of recovery under ECOA, finding that his arguments were inconsistent with ECOA’s implementing regulation, Regulation B. The court determined that Regulation B allows a creditor to restrict the types of credit history that it will consider if the restrictions are applied to all applicants without regard to a prohibited basis. Because the dispute-free restriction was applied to all applicants of the credit union equally, the consumer’s claim failed.