CFPB / FTC / DOJ / Federal Reserve Board File Joint Amicus Brief Arguing Consumers Not Applying For Credit Are “Applicants” Under ECOA | Ballard Spahr srl

The CFPB, the FTC, the DOJ and the Federal Reserve have submitted a joint amicus brief in the United States Court of Appeals for the Seventh Circuit, urging the court to overturn a district court ruling that a person who had previously received credit from the defendant and was not currently asking the defendant for a Credit was not a “plaintiff” for the purposes of the ECOA’s adverse action notice requirement.

The ECOA defines an “applicant” as meaning “any person who directly asks a creditor for an extension, renewal or continuation of credit, or applies to a creditor indirectly using an existing credit plan for an amount in excess of one. previously established credit. limit. “15 USC 1691a (b). As defined by Rule B, an” applicant “includes” any person who applies for or has received an extension of credit from a creditor. “ECOA and Rule B require both that a creditor provides a statement of the reasons for the adverse action to a “plaintiff”.

In Fralish v. Bank of America One, NA, the plaintiff had a credit card issued by the defendant bank. The plaintiff brought legal action against the bank, alleging that the notice sent to them by the bank that it was closing their card account did not meet the adverse action notice requirement provided for by ECOA and Regulation B because it did not include a statement of reasons for closure or a notice of its right to receive a statement of reasons. The bank sought a judgment on the pleadings, arguing that the plaintiff was not a “plaintiff” entitled to an adverse notice of action under the ECOA because he did not allege that he was actively applying for credit when the bank closed its card account. The district court approved the bank’s reading of the ECOA and, interpreting the bank’s petition as a motion to dismiss, allowed the petition and dismissed the complaint.

In their amicus brief, the agencies contend that, despite the wording of the ECOA’s definition of “applicant”, the “best reading” of the ECOA is to interpret the wording of the statute to include ” both those who are currently seeking credit and those who have previously sought and have since received credit. According to the agencies, the text, history and purpose of the ECOA make it clear that the protections of the ECOA extend to existing borrowers.

The agencies also argue that the definition of “plaintiff” in Regulation B, which expressly includes a person “who has received an extension of credit from the creditor” is entitled to substantial deference under Chevron.

In October 2020, the CFPB and the FTC filed a joint amicus brief with the Second Circuit in Tewinkle v. Capital One, NA, in which they presented similar arguments on behalf of a plaintiff who alleged that a notice sent to him by the defendant bank that he was terminating his checking account and his overdraft line was not Complies with ECOA / Settlement B adverse action notice requirement. In this case, the district court agreed with the bank that the plaintiff was not a “plaintiff” for the purposes of the notice requirement adverse action. The Second Circuit did not render a decision because there had been a settlement in the matter.

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