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  1. #1
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Post ECOA and Regulation B

    There's a new article up by law firm Hudson Cook LLP that claims if you offer business loans, you have to comply with the Equal Credit Opportunity Act and Regulation B.

    http://dailyfunder.com/magazine/addi...egal-concerns/

    Commercial transactions are included.

  2. #2
    Veteran Reputation points: 134971 Chambo's Avatar
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    "The primary purpose of the ECOA is to prohibit a lender from discriminating on a prohibited basis, including: race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a legally binding contract); because part or all of an applicant’s income derives from a public assistance program; or because the applicant previously exercised in good faith any right under the Consumer Credit Protection Act, which includes the ECOA."

    So this would apply to funders out there who refuse a certain ethnic group, I get it....but could this be stretched into SIC code scrutiny?

  3. #3
    Senior Member Reputation points: 148 Capital Stack's Avatar
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    Quote Originally Posted by Chambo View Post
    "The primary purpose of the ECOA is to prohibit a lender from discriminating on a prohibited basis, including: race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a legally binding contract); because part or all of an applicant’s income derives from a public assistance program; or because the applicant previously exercised in good faith any right under the Consumer Credit Protection Act, which includes the ECOA."

    So this would apply to funders out there who refuse a certain ethnic group, I get it....but could this be stretched into SIC code scrutiny?
    Doubt SIC code applies, a funder or lender can use their own risk guidelines in measuring their own risk tolerance. Declining for credit is a different issue.

  4. #4
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by Chambo View Post
    "The primary purpose of the ECOA is to prohibit a lender from discriminating on a prohibited basis, including: race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into a legally binding contract); because part or all of an applicant’s income derives from a public assistance program; or because the applicant previously exercised in good faith any right under the Consumer Credit Protection Act, which includes the ECOA."

    So this would apply to funders out there who refuse a certain ethnic group, I get it....but could this be stretched into SIC code scrutiny?
    I doubt it too. I think more than anything this article is explaining that if you decline someone, even a business, you have to send them a letter explaining why.

  5. #5
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    ECOA and Regulation B

    on deck does this on thier declines

  6. #6
    A forum user Reputation points: 2147483647 Sean Cash's Avatar
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    Quote Originally Posted by AMERICApital1 View Post
    on deck does this on thier declines
    that's really interesting to know. I guess the tricky part is when an ISO sends the deal to multiple lenders (actual lenders not MCA) and each one that declines it having to send that decline notice to the merchant directly.

  7. #7
    There is a lot more to this, but a few quick points.

    Obviously this is about discrimination.
    There are three test that are run for proof of lending discrimination.

    - Overt evidence of discrimination
    - evidence of disparate treatment
    - evidence of disparate impact

    Lenders need an adverse action policy - among other policies and they need to keep adverse action notices for 25 months

    * I am not a lawyer and this is not legal advice, just an opinion *
    Nathan Warshaw
    President
    Warshaw Consulting
    770-672-7177
    770-500-2437
    nwarshaw@2warshaws.com

  8. #8

    ECOA and Regulation B

    Quote Originally Posted by AMERICApital1 View Post
    on deck does this on thier declines
    Does OnDeck send adverse action notice if they approve loan but at a lesser amount than merchant requests?

  9. #9
    Do lenders need to send notice if they approve the loan but fund less than requested amount? Anyone know what the major players do?

  10. #10
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    In the pass few months a lot of businesses are looking for funding but did not have a real business just a corp. If you are a real business and need funding we can help must have four trade lines on your business credit report, and each trade line must be a high credit limit of $10K plus.

  11. #11
    Veteran Reputation points: 134971 Chambo's Avatar
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    Quote Originally Posted by AMERICApital1 View Post
    on deck does this on thier declines
    Rapid does too

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