The district court had ruled that the Equal Credit Opportunity Act (ECOA) was only applicable to applicants
Townstone Mortgage recently filed a brief on the appeal by the Consumer Financial Protection Bureau (CFPB) to the US Court of Appeals for the Seventh Circuit, as reported in an article by Ballard Spahr LLP.
The brief regards the decision made by the district court on the enforcement action the CFPB made against Townstone. The court had ruled that a redlining claim may not be brought under the Equal Credit Opportunity Act (ECOA) as this can only be applied to applicants.
ECOA’s Section 1691(a) says that it is unlawful for a creditor to discriminate “against any applicant, with respect to any aspect of a credit transaction” on a basis that is prohibited. Its Regulation B provides that a “creditor shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage, on a prohibited basis, a reasonable person from making or pursuing an application.”
The CFPB’s complaint against Townstone included alleged violations of the ECOA, as well as the Consumer Financial Protection Act (CFPA). However, the US District Court for the Northern District of Illinois granted the company’s motion to dismiss the complaint against them because of how ECOA only applied to applicants and not to those that were only prospective applicants. This also led to the dismissal of the CFPA claim because this depended on the ECOA claim.
A brief by the CFPB had argued that the Seventh Circuit should reverse the decision made by the district court because with the application of the Chevron framework, the court should defer its interpretation of the ECOA in Regulation B.
In Townstone’s brief, the Regulation B provision was referred to as prohibiting discouragement of “prospective applicants”, on a prohibited basis, as the “anti-discouragement rule.” Townstone also included arguments in its brief that supported the decision made by the district court which mostly revolved around the Chevron framework.
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