Comment Letter on the Equal Credit Opportunity Act

The Manhattan Institute joined the American Civil Rights Project to file a comment with the Consumer Financial Protection Bureau (CFPB) in support of a proposed rule taking essential steps toward realizing the Constitution’s promise of equality. The Equal Credit Opportunity Act (ECOA) makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract).”  The CFPB’s current ECOA regulations go beyond that language, imposing disparate-impact liability onto lenders for facially neutral, evenhandedly applied practices that differently impact different demographic groups. Those regulations also set criteria for approved Special Purpose Credit Programs to extend credit to borrowers, because of their covered demography, on more favorable terms than their lenders afford others.

The CFPB’s proposed rule would fix both issues, no longer asserting that the agency can impose liability for actions Congress has not, and reframing the requirements for SPCPs to assure that any approved will meet the strict-scrutiny the Constitution requires for race-conscious governmental decisions. In our comment, we applaud particular measures in the proposed rule and offer suggestions for its further improvement.

Dan Morenoff is the executive director and secretary of the American Civil Rights Project. Ilya Shapiro is a senior fellow and director of constitutional studies at the Manhattan Institute.

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