The Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) protect consumers by prohibiting unfair and discriminatory practices. Read OCC’s Answers about Consumer Loans and Answers about Consumer Mortgages for more information.
The FHA prohibits discrimination in residential real estate–related transactions based on…
- Race or color
- National origin
- Familial status
The ECOA prohibits discrimination in credit transactions based on
- Race or color
- National origin
- Marital status
- Applicant’s receipt of income from a pubic assistance program
- Applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act
*Age is a prohibited factor provided the applicant has the capacity to enter into a contract.
A lender’s policies, even when applied equally to all its credit applicants, may have a negative effect on certain applicants. For example, a lender may have a policy of not making single family home loans for less than $60,000. This policy might exclude a high number of applicants who have lower income levels or lower home values than the rest of the applicant pool. That uneven effect of the policy is called disparate impact.
Illegal disparate treatment occurs when a lender bases its lending decision on one or more of the prohibited discriminatory factors covered by the fair lending laws. For example, if lender offers a credit card with a limit of $750 for applicants age 21 through 30 and $1,500 for applicants over age 30. This policy violates the ECOA’s prohibition on discrimination based on age.
Fair lending laws also contain provisions to address predatory lending practices. Some examples follow:
- Collateral or equity “stripping”: The practice of making loans that rely on the liquidation value of the borrower’s home or other collateral rather than the borrower’s ability to repay.
- Inadequate disclosure: The practice of failing to fully disclose or explain the true costs and risks of loan transactions.
- Risky loan terms and structures: The practice of making loans with terms or structures that make it more difficult or impossible for borrowers to reduce their indebtedness.
- Padding or packing: The practice of charging customers unearned, concealed, or unwarranted fees.
- Flipping: The practice of encouraging customers to frequently refinance mortgage loans solely for the purpose of earning loan-related fees.
- Single-premium credit insurance: The requirement to obtain life, disability, or unemployment insurance for which the consumer does not receive a net tangible financial benefit.
Unfair and Deceptive Practices
The OCC took the lead among the federal bank regulatory agencies in developing an approach to address unfair and deceptive marketing practices. These practices are often an element in predatory lending. The OCC has taken a number of enforcement actions against banks that were found to have engaged in abusive practices and, in one landmark case, required a bank to pay over $300 million in restitution to its customers. The following are a number of OCC actions and issuances related to unfair and deceptive practices.
|12/04/2008||OCC Revises the Settlement Agreement Dated April 24, 2008, with Wachovia and Directs the Bank to Reimburse Consumers directly.
News Release 2008-143 | Amended Agreement
|04/24/2008||OCC Directs Wachovia to Make Restitution to Consumers Harmed by the Bank’s Relationship with Telemarketers and Third Party Processors.
News Release 2008-48 | Formal Agreement
|11/04/2005||OCC Takes Action Against Bank and Subsidiary for Lending Practices
News Release 2005-110 | Action
|02/28/2005||OCC Issues a Cease and Desist Order and $5 Million Civil Money Penalty for Mortgage Fraud Against Chicago Title Insurance Company
News Release 2005-21 | Consent Order
|11/13/2003||OCC Takes Action Against Texas Bank Engaged in Abusive Lending
News Release 2003-88 | Consent Order
|08/01/2003||OCC Requires First Consumers National Bank to Refund Customer Fees
News Release 2003-60 | Formal Agreement
|01/21/2003||OCC Concludes Case Against First National Bank in Brookings Involving Payday Lending, Unsafe Merchant Processing, and Deceptive Marketing of Credit Cards
News Release 2003-03 | Consent Order
|06/28/2000||Providian to Cease Unfair Practices, Pay Consumers Minimum of $300 Million Under Settlement with OCC and San Francisco District Attorney
News Release 2000-49 | Statement | Consent Order | Stipulation | Fact Sheet
|07/12/2012||NR 2012-107,||Comptroller Statement Regarding Wells Fargo Fair Lending Settlement|
|09/07/2011||OCC 2011-36,||Truth in Lending Act: Annual Dollar Trigger for Certain Home Mortgage Loans|
|02/18/2010||OCC 2010-7,||Tax Refund Anticipation Loans: Guidance on Consumer Protection and Safety and Soundness|