Fair lending is comprised of a closely-coordinated combination of requirements and prohibitions contained in several consumer protection and civil rights laws and regulations. The Fair Lending Laws are generally considered to be: Regulation B – Equal Credit Opportunity Act (ECOA); Fair Housing Act; Regulation V – Fair Credit Reporting Act (FCRA); and Regulation C – Home Mortgage Disclosure Act (HMDA).
Regulation B and the ECOA protect applicants to and borrowers of loans from discrimination on the basis of 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 law applies in consumer-purpose and business-purpose transactions, is not collateral dependent, and includes the end-to-end credit process. It also requires non-HMDA reporting financial institutions and other mortgage lenders to collect information about a loan applicant(s)’s race, ethnicity, and sex for applications and loans to purchase or refinance a consumer’s principal dwelling (commonly referred to as ‘government monitoring information’).
The Fair Housing Act protects any person from discrimination because of race, color, religion, sex, handicap, familial status, or national origin in the sale, rental, or advertising of dwellings, in the provision of brokerage services, or in the availability of residential real estate-related transactions.
Regulation V and FCRA provides rules to credit reporting and consumer reporting agencies about collecting and disseminating information about consumers to be used in credit evaluations and for other purposes, including insurance applications and employment. It also provides rules for credit reporters and report users, like banks and other creditors, to protect consumers from inaccurate and negative reporting.
Regulation C and HMDA require certain financial institutions and other mortgage lenders to report information about applications and loans to purchase or refinance a dwelling or dwelling(s) and for certain transactions secured by a dwelling or dwelling(s). While the aggregated HMDA data, which shows lending activity by race/ethnicity/sex, geographic location, income levels, type of collateral, and economic status of census tracts or blocks, does not prove discrimination, it may reveal lending patterns that warrant further investigation by federal financial regulators.