On November 13, the CFPB published a proposed rule in the Federal Register to amend Regulation B, which implements the ECOA. If adopted, the proposal would make three principal changes to Regulation B: (i) eliminating regulatory provisions that have lent support to the position that ECOA authorizes disparate-impact liability (and thus limiting liability to intentional discrimination); (ii) narrowing the regulation’s description of what would constitute “discouragement” for purposes of ECOA; and (iii) changing the requirements applicable to for-profit entities that wish to offer “special purpose credit programs” (SPCPs).

The CFPB cited its authority under the ECOA and the Dodd-Frank Act, as well as Executive Order 14281, in reaching its preliminary determination that disparate-impact claims are not available under ECOA. The rule would remove language indicating that facially neutral policies resulting in disproportionate effects could trigger liability, focusing instead on intentional discrimination.

Regarding discouragement, the proposed rule would further define and narrow its scope, specifying that creditors must not make any statements they know or should know would cause a reasonable person to believe the creditor would deny, or would grant on less favorable terms, a credit application because of a prohibited basis characteristic.

The Bureau also proposed new prohibitions and restrictions for SPCPs offered by for-profit entities, including barring for-profit SPCPs from using race, color, national origin, or sex as eligibility criteria, and imposing new evidentiary requirements for SPCPs using other prohibited bases.

The proposal maintained that, except as otherwise provided, creditors may consider any information obtained so long as it is not used to discriminate on a prohibited basis. Credit scoring systems may include age as a predictive factor, with restrictions for elderly applicants, but no other prohibited basis may be used as a variable.

The CFPB requested public comment on all aspects of the proposal, with comments due 30 days after publication in the Federal Register.