A (mostly) prohibited basis: Unemployment income and the ECOA

The COVID-19 pandemic has upended many aspects of American life over the past few months, especially in terms of the U.S. workforce. Applications for unemployment compensation have soared during the pandemic, and the U.S. unemployment rate has reached levels not seen since the Great Depression. You can read more in NAFCU’s newsroom. Given the rise in the number of Americans receiving unemployment compensation, it might be helpful to review some potential fair lending implications credit unions serving members who receive this type of income may face.

Does Regulation B Address Unemployment Compensation?

The Equal Credit Opportunity Act (ECOA) and Regulation B prohibit discrimination based upon a “prohibited basis.” Section 1002.2 of Regulation B defines the term “prohibited basis”:

“Prohibited basis means race, color, religion, national origin, sex, marital status, or age (provided that the applicant has the capacity to enter into a binding contract); the fact that all or part of the applicant’s income derives from any public assistance program; or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act or any state law upon which an exemption has been granted by the Bureau.

 

continue reading »