U.S. Senator Kirsten Gillibrand (D-NY), a Democratic candidate for president, and Congressman Jesús García (D-IL), on May 6, announced a new bill, the Protections in Consumer Lending Act.
It is intended to protect against discrimination when consumers apply for different types of credit.
“Although it is illegal for credit lenders to discriminate against credit applicants due to their race, religion, sex, marital status, or age, it is still a widely recognized problem and there is currently no method of tracking if discrimination has taken place,” the legislators wrote.
The Protections in Consumer Lending Act would require credit lenders to collect information on which applicants have been approved or denied from the following credit transactions: automobile loans, credit card applications, cash checking, small-dollar loans, payday lending, and loans with annual percentage rates above 36 percent. This would allow the Consumer Financial Protection Bureau to analyze credit-lending patterns, identify if discriminatory practices have occurred, and enforce anti-discrimination laws.
“We know that discrimination in credit lending is a problem, but we need more data to understand the scope of it. People depend on credit to be able to buy a car, start a business, and get personal loans. Access to fair credit is essential to establishing financial well-being, but if someone is discriminated against and can only get expensive terms for their loans, it becomes harder for them to get ahead in life,” Gillibrand said. “My bill would help create transparency in the credit-lending process and help identify when discrimination is taking place. We need to do everything we can to make sure that there is fairness in the financial system, and I urge all of my colleagues to fight with me to pass this bill.”
“Unfortunately, under the Trump administration, we have seen the CFPB withdraw from efforts to crack down on abusive payday lending and less collaboration between the Bureau and other agencies collecting data that shows a pattern of discriminatory and predatory consumer lending,” García added.
Under the Equal Credit Opportunity Act (ECOA), it is unlawful for any creditor to discriminate against an applicant on the basis of race, religion, national origin, sex, marital status, or age. There is, however, no comprehensive database that tracks applicant information, the loan terms offered to the applicant, and whether the application is approved or denied.
In greater detail, the Protections in Consumer Lending Act would require credit lenders to collect demographic information for individuals applying for the following credit transactions if the transaction is less than $15,000 or on a repayment period less than three years. The demographic information collected would include age, race, sexual orientation, gender identity, sex, and marital status.
The data would be collected by the CFPB, which would analyze the information to identify if a discriminatory pattern emerges. Creditors who partake in discriminatory practices would be punished with civil penalties or have their cases referred to the Attorney General of the United States.
The Protections in Consumer Lending Act is supported by the Human Rights Campaign, NAACP, UnidosUS, National Urban League, Americans for Financial Reform, and the National Consumer Law Center.
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