2018 GNYADA Membership Directory

The Equal Credit Opportunity Act (“ECOA”) and the Federal Reserve Board’s Regulation B ECOA and its implementing regulation, Regulation B, prohibit auto dealer discrimination in granting or denying credit on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. Certain state laws include additional protected class categories. The CFPB has entered into consent orders with several finance sources over alleged violations of the ECOA’s prohibition on discriminating against protected classes. As a result, many finance sources are requiring dealers to implement a fair lending compliance program. See Chapters 2 and 13 for more information. If gross income rather than net income is used in determining a consumer’s repayment ability, ECOA will generally require that nontaxable income be“grossed up”tomake it equivalent to taxable income in order to avoid allegations of a disparate impact on applicants, such as those with disabilities and the elderly, both of whom are more likely than the general applicant pool to receive substantial nontaxable income. ECOA has other considerations relating to income, e.g., a creditor may not discount part-time income in evaluating a consumer’s creditworthiness. The Federal Reserve Board staff has long held the view that ECOA does not apply to a lease transaction because it does not qualify as “credit” under the ECOA’s definition. Some courts have taken the opposite view, and recent actions by the CFPB taking jurisdiction over auto leasing make it a best practice to treat leases as if they were subject to the ECOA’s protections. ECOA also mandates the time frames (30 days after receipt of a completed credit application for approvals and declines, and 90 after notifying the applicant of a counter offer if the applicant does not expressly accept or use the credit offered) for notifying the applicant of the credit decision (e.g., offering credit, informing the consumer that additional information is necessary to make a credit decision, making a counter-offer, or sending an adverse action notice). An ECOA adverse action notice must be in writing and either provide specific reasons why the credit application was denied or counter-offered, or tell the consumer how they may contact the dealership within 60 days to get the reasons. ECOA also requires that credit application forms (or scripts, as applicable) contain certain disclosures, such as the consumer’s right to not reveal income from alimony, child support, or separate maintenance if the consumer does not want such income to be considered as a basis for repaying the credit obligation. Certain state laws impose additional notice requirements in credit applications. Regulation B also requires that multiple consumer applicants affirmatively state on the credit application whether or not they want to apply for joint credit. Adverse Action Notice Obligations Under ECOA and FCRA Adverse action means a refusal to grant credit or a refusal to grant credit in substantially the amount or on substantially the terms requested by the consumer, unless the consumer accepts a counter-offer of credit. Adverse action also means terminating an account or changing its terms in a manner unfavorable to the consumer, except

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