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Financial Services Law Insights and Observations

14 state Attorneys General urge CFPB not to change ECOA disparate impact liability

Federal Issues State Attorney General CFPB Disparate Impact Fair Lending ECOA

Federal Issues

On September 5, a coalition of 14 state Attorneys General sent a comment letter to the CFPB raising concerns about statements made by acting Director Mick Mulvaney in May suggesting that the Bureau may reexamine its requirements and enforcement of the Equal Credit Opportunity Act (ECOA). The letter notes that Mulvaney’s comments followed the Bureau’s repeal of the agency’s 2013 guidance on indirect auto lending and compliance with ECOA last May. (See previous InfoBytes coverage on resolution S.J. Res. 57 disapproving the guidance here.) The Attorneys General point out that the resolution did not eliminate regulations promulgated in 1977 and adopted by the Bureau in 2011 that interpret “ECOA to provide for disparate impact liability without limitation to the type of lending.” The Attorneys General express concern over the Bureau’s possible break with “the federal government’s longstanding interpretation that ECOA provides for disparate impact liability” both because states share ECOA enforcement authority with the Bureau and because many states model their antidiscrimination statutes on ECOA.

The comment letter asserts that dropping disparate impact from ECOA reviews would be inconsistent with the 2015 U.S. Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (as covered by a Buckley Sandler Special Alert). The Attorneys General cite to the Supreme Court’s holding that disparate impact liability was provided for under a provision of the Federal Housing Act, and assert that the holding “dictates that the text of ECOA unambiguously provides for disparate impact liability.” Because, they claim, the “CFPB has no authority to overrule the Supreme Court's interpretation of unambiguous text, any action to reinterpret ECOA not to provide for disparate impact liability could be set aside by a court as arbitrary, capricious, and otherwise not in accordance with law.”

As previously covered in InfoBytes, last month 17 state Attorneys General sent a comment letter to HUD urging the agency to not make any changes to its 2013 Disparate Impact Regulation, which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance.

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