Consumer Protection

Equal Credit Opportunity 

The Equal Credit Opportunity Act (ECOA) is found at 15 U.S.C. §§1691-1691f. Regulation B, promulgated by the Federal Reserve Board, is codified at 12 CFR Part 202. 

The ECOA prohibits discrimination in any credit transaction (not limited to consumer transactions) on the basis of sex, marital status, race, color, religion, national origin, age, receipt of income from public assistance, and good faith exercise of rights under the Consumer Credit Protection Act. An applicant who has been discriminated against on a prohibited basis has a cause of action against the creditor under the ECOA and Regulation B. 15 U.S.C. §1691e; 12 CFR §202.4. 

The statute and regulations are fairly complex and contain numerous exceptions. Generally, it applies to all stages of a credit transaction, including the initial application (and possibly even an oral request -- 12 CFR §202.5(a)), terms, termination, collection, and reporting on the account to third parties. A guarantor can be an "applicant”, and thus be protected by the Act. Companies that process applications but do not themselves extend credit and businesses that accept credit cards are excluded from the definition of "creditor". 12 CFR §202.2(e). Generally, the rules for consideration of applications for credit can be found at 12 CFR §202.6. If the credit is to be secured by a lien on a dwelling, the applicant can receive, either routinely or by request, a copy of the appraisal report, the documents used for consideration of the credit application. 12 CFR §202.5a. 

The available remedies for discrimination are actual and punitive damages, costs and attorneys’ fees, as well as equitable and declaratory relief. 15 U.S.C. §1691e. 

While receiving an award of actual damages is not a prerequisite to receiving punitive damages, as a practical matter, courts are often reluctant to award punitive damages in the absence of any showing of harm from the defendant's conduct. 

There is a statutory limit on the amount of punitive damages that may be awarded. The maximum in an individual action is $10,000. In a class action, the court can award up to $500,000, or 1% of the creditor's net worth, whichever is less. The amount of punitive damages is to be determined by weighing a list of relevant factors, which includes, but is not limited to, the amount of actual damages, the frequency of the defendant's noncompliance, its resources, the number of persons affected, and the extent to which the creditor's noncompliance was intentional. 15 U.S.C. §1691e(b). 

When the defendant is a governmental entity, no money damages are available; the remedies are limited to equitable and declaratory relief. 

The statute of limitations for an ECOA violation is two years from the occurrence. If, however, a government agency has started its own ECOA proceedings or the Attorney General has filed an action against the same creditor, based on the same violation, within two years of that violation, then the individual plaintiff has one year from the beginning of those proceedings in which to bring his or her own action. 15 U.S.C. §1691e(f). 
In addition, the Commonwealth of Virginia has enacted a state ECOA, at Va. Code §§59.1-21.19 to 21.28. It generally mirrors the federal Act, and provides that the State Corporation Commission (SCC) has authority to enforce the act through mediation. Va Code §59.1-21.26. The Act makes clear that in the case of husband or wife only seeking credit for a home mortgage, the creditor may ask for information of the other spouse for the sake of preparing the proper mortgage, but may not ask other credit questions of the other spouse otherwise. (Thus the creditor can legally force the other spouse to execute the mortgage, but not the loan, where the credit is applied for and granted in the name of only one spouse.) Va Code §59.1-21.22. In addition, under the state Act, punitive damages of $10,000 or less are permitted to be awarded where there are also actual damages. Va. Code §59.1-21.23(b). 

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