FTC Files Amicus Brief in CFPB Action Opposing Efforts to Weaken Equal Credit Opportunity Act

The Federal Trade Commission filed a friend-of-the-court (amicus) brief in the U.S. Court of Appeals for the Seventh Circuit challenging a district court ruling that invalidated a key anti-discrimination rule in the Equal Credit Opportunity Act (ECOA).

The case, CFPB v. Townstone Financial and Barry Sturner, relates to a Chicago-based mortgage lender and its owner, which the CFPB alleged violated Regulation B, the rule that implements ECOA. The CFPB alleged that the defendants took steps to discourage Black consumers from applying for loans, violating Regulation B’s anti-discouragement rule. The district court ruled that the anti-discouragement provision was invalid and that ECOA protects only those consumers who have already applied for credit.

In its brief, the FTC argues that the district court’s ruling was incorrect. The Commission’s brief notes that the anti-discouragement rule—which has stood for nearly 50 years—is authorized by the plain language of ECOA, which mandates that regulators further ECOA’s “purpose” and prevent its “evasion.”

The FTC also argues that the district court’s ruling would have “profoundly negative consequences” for consumers, emboldening discriminatory lenders to openly discourage consumers from applying for loans. For example, the brief points to the possibility that a lender could display a “Whites Only” sign or turn away Black consumers as they walk in the door. The brief notes that the FTC receives thousands of complaints from consumers each year related to discriminatory lending practices.

The Commission vote approving the filing of the amicus brief was 3-0.