Incorporate Massachusetts fair lending rules into ECOA disclosures?

Article by: Ben Giumarra, Spillane Consulting Associates

Addressing some nuances in fair lending/ECOA rules.

So I received this question from a friend the other day:

  • I wanted to reach out to with a question regarding genetic information as a protected class in Massachusetts regarding ECOA purposes. Reading the law it appears “genetic information” should be noted as a protected class on our ECOA disclosures. Can you confirm whether or not we should have “genetic information” included on our disclosures?

Alright, let’s dig in.

Here my friend is talking about ECOA’s adverse action rules that require notification to borrowers in certain circumstances. Note: Some lenders also have a separate “ECOA” or “Fair Lending” disclosure that’s provided to every borrower – which, as far as I can tell, there’s really no reason for.

Massachusetts does indeed protect more classes of people than ECOA. But whether that has to be incorporated into adverse action disclosures is another question.

Massachusetts Discrimination Language

My friend was referencing the Massachusetts law Chapter 151B Section 4 (read here), which goes further than Federal regulations in preventing discrimination than ECOA. But these aren’t the only two regulations at play — There are a number of different regulations/laws that prevent us from discriminating.

Let’s compare the prohibited factors under the three most important fair lending laws:

Mass. 151B ECOA FHA
Race or color Race or color Race or color
National Origin National Origin National Origin
Religion Religion Religion
Sex Sex Sex
—- Marital Status —-
Age Age —-
—- Receipt of income from public assistance —-
—- Applicant’s exercise of rights under Consumer Credit Protection Act —-
Handicap —- Handicap
—- —- Familial Status
Genetic Information —- —-
Ancestry —- —-
Gender Identity —- —-
Sexual Orientation —- —-

So this chart highlights how there are plenty of other differences between ECOA’s fair lending limitations and other laws that are in place.  Genetic Information is just one difference. 

Adverse Action (ECOA) Notices

Now that we’ve set the stage, let’s determine the answer to the question presented.

Rule on Contents (Section 1002.9(b)(1). 

Adverse action disclosure must include notice that is “substantially similar to the following: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, …” (continues to list all of the ECOA factors but none from FHA, Massachusetts, or other fair lending rule)

So that basically gives us the technical answer –> No. The ECOA notices only require us to list ECOA’s prohibited factors, not factors that might be prohibited by the FHA or other fair lending law.

(And this kind of makes sense right?)

Now we also have official Comment 1026.9(b) – 1, which adds that we have the right to add certain things to this disclosure and still pass the “substantially similar” test:

“The ECOA notice sent with a notification of a credit denial or other adverse action will comply with the regulation if it is “substantially similar” …. For example, a creditor may add a reference to the fact that the ECOA permits age to be considered in certain credit scoring systems, or add a reference to a similar state statute or regulation and to a state enforcement agency.”

Hits the nail right on the head!  But that leads to the WHY … why would we add a reference if we don’t have to? Should we? Should we not?

That will depend on what approach you take.

Approach #1: “All Business”

ECOA is clear that only ECOA requirements need to be in the notice. You’re safe doing this. It avoids confusion, especially if you lend across multiple states — you wouldn’t necessarily want to have to use different adverse action notices depending on which state you’re in. You should feel comfortable that this is safe. And why are you worried about going out of your way to inform the borrower about a couple extra things they could complain about?

Approach #2: “Over-Achiever” 

Adding the specific language (from FHA and Mass. Ch. 151B) to the ECOA notices isn’t a crazy idea either — it is specifically permitted by the Comment. Maybe it’s a good reminder to your staff — maybe it counts as a stronger compliance control. Maybe it just looks better when the regulator looks through the files. Maybe you just think it makes more sense to more accurately state the fair lending requirements that are in place — on that point, the ECOA notice is a little misleading- it basically implies only those factors listed are off limits.

In Other News

On My Mind …

How do you teach yourself enjoy the moment? I hear John and Steve talk about “the good old days” … reminiscing about when they met, things they’ve done. If I’m being self-aware, I’m probably experiencing those days right now … that highlight reel I’ll playback wistfully will have something from today. Traveling around New England with colleagues like Paul, Greg, and others — forging new procedures with Donna and Justin — laughing/crying through drastic ups and downs with Cheryl — learning more from John than probably I can even really appreciate yet.

You know, I drop our 2-year-old off at daycare and they have to peel her off my leg. “Don’t worry sir- this phase won’t last long” they tell me. But that’s the problem…

“You can wipe out your opponents. But if you do it unjustly you become eligible for being wiped out yourself.”

– Ernest Hemingway


Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.  


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