The Equal Credit Opportunity Act (ECOA) is a federal law that was enacted in 1974, and it is one of a group sometimes called the ‘fair lending laws.’ It is codified as part of the federal code of regulations, and, is commonly referred to as Regulation B. The ECOA and Regulation B prohibit discrimination against any applicant in any aspect of a credit transaction on any of nine prohibited bases: race, color, religion, national origin, sex, marital status, age, whether the applicant derives income from a public assistance program, or whether the applicant has exercised in good faith any right under the Consumer Credit Protection Act. The creditor may consider the applicant’s age to determine if the applicant may enter into a legal contract. Although Regulation B and the Equal Credit Opportunity Act are sometimes called ‘consumer’ protection rules, the non-discrimination requirements apply to all applicants for credit regardless of whether the purpose of the credit is for personal, family or household purposes (consumer credit) or for business purposes (business or commercial credit).
The Regulation B and ECOA guidance and requirements include, but are not limited to:
- Requesting for information from applicants and evaluating applications;
- Extending credit (individual or joint) and administering special purpose credit programs;
- Notifying applicants (Notices of Action Taken);
- Furnishing credit information on credit accounts;
- Collecting government monitoring information (race, ethnicity, and sex) for institutions not subject to Home Mortgage Disclosure Act data collection and reporting requirements; and,
- Providing appraisal reports.
The Equal Credit Opportunity Act and Regulation B have been amended numerous times since 1974; however, most recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Rules) amended Regulation B regarding requirements for appraisals and other property valuations. The Dodd-Frank Rules require creditors to provide applicants with free copies of all appraisals and other written valuations developed in connection with an applicant for a loan to be secured by a first lien on a dwelling (note that it does not have to be the principal dwelling), and the rules require creditors to notify applicants in writing that copies of the appraisals will be provided to them promptly. The appraisal requirements under the Dodd-Frank Rules were issued in final form January 2013 and became effective January 18, 2014, and include the following:
- Requires creditors to notify applicants within three business days of receiving an application of their right to receive a copy of appraisals developed.
- Requires creditors to provide applicants a copy of each appraisal or other written valuation promptly upon its completion or three business days before consummation (for closed-end credit) or before account opening (for open-end credit), whichever is earlier.
- Permits applicants to waive the timing requirement for providing these copies. However, applicants who waive the timing requirement must be given a copy of all appraisals and other written valuations at or prior to loan closing or account opening, or, if the transaction is not consummated or the account is not opened, no later than 30 days after the creditor determines the transaction will not be consummated or the account will not be opened.
- Prohibits creditors from charging for the copy of appraisals or other written valuations, but permits creditors to charge applicants reasonable fees for the cost of the appraisals or other written valuations unless applicable law provides otherwise.