Regulation B (Reg B) in the Equal Credit Opportunity Act (ECOA)

Regulation B implements the Equal Credit Opportunity Act (ECOA) to prohibit discrimination in credit transactions. It requires creditors to base credit decisions on creditworthiness, not on personal characteristics, and it sets rules for information requests, adverse-action notices, and enforcement.

Key takeaways

• Reg B prohibits discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, or age, and on income from public assistance or exercise of consumer protection rights.
• Creditors must provide an adverse-action notice explaining the reasons for denial (or how to request the reasons) within 30 days of receiving a completed application.
• Certain applicant information may not be requested unless directly relevant or under specific exceptions.
• Violations can lead to statutory damages: up to $10,000 per individual and, for class actions, up to $500,000 or 1% of the creditor’s net worth (whichever is less).

What Reg B covers

Regulation B applies to all persons who regularly participate in credit decisions or set credit terms in the ordinary course of business. It governs creditor conduct before, during, and after credit transactions, including:
* Consumer and business credit
* Mortgage and open-end credit
* Refinancing
* Application procedures, information requirements, investigation standards, and termination of credit

Prohibited bases of discrimination

Creditors may not discriminate on the basis of:
* Race, color, religion, national origin
* Sex (including gender)
* Marital status
* Age (unless the applicant is too young to enter a contract)
* Income derived from public assistance programs
* Exercise in good faith of rights under the Consumer Credit Protection Act or related state law

Adverse-action notices

When a completed application is denied or an adverse action is taken, creditors must:
* Provide written or oral notice within 30 days of receiving the completed application.
* Explain the reasons for the action or provide instructions on how the applicant can request the reasons.
* Extend the same information rights to the spouse of a rejected married applicant when applicable.

These notices help applicants identify errors in credit reports and correct inaccuracies.

Requests for information and permissible exceptions

Generally, creditors may not request information about sex, national origin, color, or other non-creditworthiness attributes. Exceptions and permissible inquiries include:
* Age—when there is doubt about the applicant’s ability to enter into a contract.
* Marital status—when required (for example, in community property states) or when the spouse will use the account or be contractually liable.
* Spouse information—only when:
– the spouse will be permitted to use the account, or
– the spouse will be contractually liable, or
– the applicant relies on the spouse’s income to obtain credit, or
– the applicant resides in or relies on property in a community property state, or
– the applicant relies on alimony, child support, or separate maintenance as repayment.
* Additional collateral-related information when the applicant pledges property as security.

Creditors must limit information requests to what is directly relevant to credit decisions.

Benefits and policy goals

Regulation B promotes fair lending by:
* Preventing discriminatory practices (including redlining) and discouraging advertising that would deter protected groups from applying.
* Requiring meaningful explanations for denials so applicants can remedy errors and pursue creditworthiness.
* Increasing transparency and accountability in lending decisions.

Enforcement and remedies

Reg B is enforced by federal agencies such as the Consumer Financial Protection Bureau (CFPB) and through private actions. Remedies include actual and statutory damages, with statutory limits as noted above, and potential injunctive relief.

Bottom line

Regulation B is a central fair-lending rule that requires creditors to evaluate and communicate credit decisions based on objective credit factors, not personal or ascribed characteristics. It strengthens consumer protections, increases transparency, and helps prevent discriminatory lending practices.

Sources

• Federal Reserve — Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)
• Consumer Financial Protection Bureau — ECOA/Regulation B materials