As previously discussed on this blog, the Equal Credit Opportunity Act (the “ECOA”) prohibits creditors from discriminating against credit applicants based on race, religion, sex, national origin, marital status, and age among other things. But what happens when a lender violates the ECOA? What penalties will a lender be subject to for noncompliance?
Enforcement and penalties for those who violate the ECOA are set forth in 15 U.S.C. § 1691e(b) and 12 C.F.R. § 1002.16.
Here is a brief look at possible penalties for a lender who violates provisions of the ECOA:
- Civil liability for actual damages.
- Civil liability for punitive damages.
- Punitive damages are limited to non-governmental entities.
- Punitive damages are capped as follows:
- The lesser of $500,000 or 1% of a creditor’s net worth in a class action lawsuit.
- $10,000 on an individual claim.
- Costs and attorney’s fees awarded to an aggrieved applicant in a successful private action.
- Equitable and declaratory relief.
In addition to the consumer’s ability to bring a private cause of action, the ECOA provides for administrative enforcement and regulation. Although numerous governmental agencies are empowered to enforce compliance with the ECOA, the Consumer Financial Protection Bureau is the primary agency responsible for its enforcement.
It is also important for lenders to understand that a violation of the ECOA may also constitute a violation of other federal laws. There are times when a failure to comply with the ECOA is not a violation because of an inadvertent error, but it is nonetheless important for lenders to correct a violation immediately when any type of error implicating the ECOA is made.