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Financial Services Law Insights and Observations

CFPB, FTC argue ECOA “applicant” includes those with existing credit

Courts Amicus Brief Second Circuit Appellate ECOA Regulation B

Courts

On October 7, the CFPB and the FTC (collectively, “agencies”) filed an amici curiae brief with the U.S. Court of Appeals for the Second Circuit in an action addressing “whether a person ceases to be an ‘applicant’ under ECOA and its implementing regulation after receiving (or being denied) an extension of credit.” According to the brief, a consumer filed suit against a national bank for allegedly violating ECOA and Regulation B’s adverse-action notice requirement when it closed his line of credit and sent an email acknowledging the closure without including (i) “‘the address of the creditor,’” and (ii) “either a ‘statement of specific reasons for the action taken’ or a disclosure of his ‘right to a statement of specific reasons.’” The district court dismissed the action after adopting the magistrate judge’s Report and Recommendation recommending that the bank’s motion be granted without prejudice to plaintiff, who had leave to brief the court on whether an amended complaint should be permitted.

The agencies disagreed with the district court and filed the amici brief on behalf of the applicant. Specifically, the agencies argue that ECOA’s protections apply to any aspect of a credit transaction, including those who have an existing arrangement with a creditor, noting there is “‘no temporal qualifier in the statute.’” According to the agencies, ECOA has provisions that cover the revocation of credit or the change in credit terms, and therefore, those provisions “would make little sense if ‘applicants’ instead included only those with pending requests for credit.” Moreover, the agencies argue that the district court’s interpretation of “applicant” would “curtail the reach of the statute,” and introduce a large loophole. Lastly, the agencies assert that the legislative history of ECOA supports their interpretation, such as the addition of amendments covering the revocation of credit, and most notably, Regulation B’s definition of “applicant,” which includes those who have received an extension of credit.

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