Federal Reserve Update -- Equal Credit Opportunity Act
by David Sands, Partner
Troop Mesinger Steuber & Pasich, LLP
The Federal Reserve Board recently issued proposed commentary under Regulation B (Equal Credit Opportunity) that would clarify several issues which have arisen as a result of the use of credit scoring systems, spousal signature rules and the gathering of information for monitoring purposes. Among the more significant issues addressed by the proposed commentary are the following:
- Credit Scoring:
- The use of credit scoring system which any way assigns a negative value to age is impermissible under ECOA. However, the use of age in a reverse mortgage transaction in order to determine life expectancy will not be considered a violation of ECOA.
- Credit History:
- If the creditor considers credit history in the evaluation of a loan application, the creditor must consider all information presented by the applicant that is not included on the credit report, if the information presented by the applicant is the type of information the creditor normally considers on a credit report.
- Quit Claims:
- A creditor may not require a non-applicant spouse to quitclaim his or her interest in jointly owned property relied upon to establish credit worthiness if the applicant-spouse's interest in the property, and other resources, are sufficient to support the credit request. If adopted as proposed, this comment will cause difficulty for creditors making loans in California that are applied for by one but not both spouses where the property used as collateral is separately owned (non-community) property.
- Internet Loans:
- Information collected through electronic media (such as the Internet) that does not permit the creditor to view the applicant should be treated as an application received by the mail or telephone.
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