I. INTRODUCTION
There have been indications that the FDIC examiners in some states have been citing violations of the Equal Credit Opportunity Act (ECOA) involving marital status in the course of conducting compliance exams.
Although there has been no official guidance from the FDIC, there are indications that the violations may be referred to the Department of Justice for action and required to be disclosed in a bank’s CRA Exam Report (which is available to the public).
II. ECOA VIOLATIONS
The violation focuses on credit reports. Each person has his/her own credit record and credit score. When one person applies for credit, a credit report is pulled, and the customer may be charged for the report (e.g., $15). However, if two people apply together for credit, credit reports for two people can either be pulled as two single reports (i.e., 2 x $15 = $30) or as one joint report on two people (e.g., $18). The FDIC believes that charging two married joint applicants for a single joint credit report, and charging two similarly situated unmarried joint applicants for two separate single reports, constitutes a marital-status discrimination violation because FDIC has confirmed that the credit bureaus can and will provide joint credit reports on unmarried joint applicants residing at the same address for the same price as married applicants residing at the same address.
It appears that a “joint” credit report is only available for applicants who share a common residential address – whether they are married or not. However, some banks have mistakenly ordered “joint” reports for married applicants and have not sought joint reports for unmarried applicants residing at the same address. The key to treating similarly situated applicants the same is to treat applicants from the same address the same.
The violation relates to the fee that is charged to joint applicants. If unmarried joint applicants residing at the same address are charged more for credit report(s) than married joint applicants are, the FDIC suggests that should be deemed a violation of Regulation B, 12 C.F.R. 202.6(b)(8).
Arguably, joint applicants who reside at separate addresses (married, like recently newlyweds, or unmarried non-cohabitants) are not similarly situated to joint applicants who do reside at the same address. Therefore, charging joint applicants with separate addresses differently from joint applicants with the same address should not be a Regulation B violation. In such a case, passing through the credit bureau charge for a “joint” report for the applicants with the same address, but charging joint applicants with different addresses for individual credit reports is not treating similarly situated persons differently and should not be a Regulation B violation – instead, it is treating differently situated applicants differently based on residential address, not marital status.
The Consumer Data Industry Association (CDIA) has indicated that all credit bureaus offer an option for a bank to submit a joint inquiry for credit reports, which will result in the delivery of two different consumer reports via the single request. (Presentation of this information may vary across credit repositories.) This inquiry option is available for banks which are processing a joint application for credit.
There are a few important facts to consider regarding the joint inquiry option:
Some banks have mistakenly submitted joint inquiries only for married applicants and have not used the joint inquiry option for unmarried applicants. In doing so a bank may have ended up passing through a higher charge to the unmarried joint applicants than the charge for married joint applicants.
The key to treating similarly situated applicants the same is to ensure that they are not paying different amounts for the credit reports due to the method of ordering credit reports (joint v. individual inquiries). To do so a bank should treat all joint applicants (married or not) where they share the same address the same, and similarly treat all joint applicants (married or not) living at different addresses the same when it comes to ordering credit reports. In doing so the bank will then pass on to the consumers the same charges whether the joint applicants are married or not, or are living at the same address or not.
While the extent of the violations appear to be small and the discrepancy in fees is a minor amount, the FDIC is treating this as very important and threatening downgrades in CRA and Compliance ratings.
If your bank has committed this alleged violation in the past, you may want to consider conducting a review of your records, identifying any customers who have overpaid, refunding the overpayment and documenting the corrective action to demonstrate to the FDIC that you have proactively addressed the issue. A bank should ensure that going forward, for loan products where the customers are charged for credit reports, all two-person joint applications (regardless of marital status) are charged the same for credit reports. If your vendor indicates that this is not possible, the FDIC has advised that a new provider should be retained that will comply with this requirement.