Fair Lending: Know Your Rights and Protections as a Consumer

What is Fair Lending?

Fair lending laws ensure that customers are treated fairly by financial institutions. Like banks, credit unions and other financial institutions get more complex, the risks of fair lending increase. As an informed consumer, you should know what fair lending is and how to ensure your rights are protected as you interact with banks. Fair lending is governed by two laws that financial institutions are required to comply with: the Equal Credit Opportunity Act and the Fair Housing Act.

The Equal Credit Opportunity Act (ECOA) requires that financial institutions and other firms engaged in the extension of credit to “make credit equally available to all creditworthy customers without regard to sex or marital status.” Moreover, the statute makes it unlawful for “any creditor to discriminate against any applicant with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.”

The Fair Housing Act (FHA) prohibits discrimination by direct providers of housing, such as landlords and real estate companies as well as other entities, such as municipalities, banks or other lending institutions and homeowners insurance companies whose discriminatory practices make housing unavailable to persons because of: race or color, religion, sex, national origin, familial status and disability.

How do Banks Violate Fair Lending?

You may be wondering what are the ways in which banks could possibly discriminate against individuals. There are quite a few ways in which they can knowingly or unknowingly discriminate based on the factors described above. Discrimination can occur at any part of the credit offering process. For example, if banks only market to certain communities, that has the potential to discriminate against customers who don’t get the same opportunity because they were not marketed to based on being a member of one of the protected categories listed above. Steering is a similar form of discrimination in which agents at institutions deliberately guide loan applicants toward or away from certain loan products or lending channels. 

Redlining is another form of illegal discrimination in which a bank provides unequal access to credit, or unequal terms of credit, on a prohibited basis based on the applicant’s residence. Pricing also provides risk in that certain applicants could get more or less beneficial pricing than other similarly situated applicants. Loan officer compensation is a particularly hot topic when it comes to pricing because some employees may try to get bonuses or additional compensation based on the type of products they sell.

Banks strive to maintain their due diligence to ensure that they are treating customers fairly. As mentioned, banks sometimes unknowingly can be guilty of violating fair lending laws. Regulators regularly inspect banks to make sure they are not violating the law. Per the Consumer Financial Protection Bureau, there are two principal theories of liability when it comes to fair lending: disparate treatment and disparate impact. Disparate treatment occurs when a creditor treats an applicant differently based on a prohibited basis such as race or national origin. Disparate impact occurs when a creditor employs facially neutral policies or practices that have an adverse effect or impact on a member of a protected class unless it meets a legitimate business need that cannot reasonably be achieved by means that are less disparate in their impact.

Case Studies

Still having trouble understanding the impact of fair lending? Violating fair lending laws has severe ramifications for financial institutions. Check out the headlines below that outline very real and very public situations in which banks were found to violate fair lending laws and had to face serious monetary consequences and reputation loss.

CFPB and American Express Reach Resolution to Address Discriminatory Card Terms in Puerto Rico and U.S. Territories

“The Consumer Financial Protection Bureau (CFPB) today took action against two American Express banking subsidiaries for discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories by providing them with credit and charge card terms that were inferior to those available in the 50 states. American Express also discriminated against certain consumers with Spanish-language preferences. Over the course of at least 10 years, more than 200,000 consumers were harmed by American Express’ discriminatory practices, which included charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness. American Express has paid approximately $95 million in consumer redress during the course of the Bureau’s review and American Express’ review, and today’s order requires it to pay at least another $1 million to fully compensate harmed consumers.”

CFPB Orders GE Capital to Pay $225 Million in Consumer Relief for Deceptive and Discriminatory Credit Card Practices

“The Consumer Financial Protection Bureau (CFPB) is ordering GE Capital Retail Bank (GE Capital), now known as Synchrony Bank, to provide an estimated $225 million in relief to consumers harmed by illegal and discriminatory credit card practices. GE Capital must refund $56 million to approximately 638,000 consumers who were subjected to deceptive marketing practices. As part of the joint enforcement action by the CFPB and Department of Justice, GE Capital must also provide an additional $169 million to about 108,000 borrowers excluded from debt relief offers because of their national origin. This order represents the federal government’s largest credit card discrimination settlement in history.”

You can read more about this here.

Consumer Financial Protection Bureau And Department Of Justice Action Requires BancorpSouth To Pay $10.6 Million To Address Discriminatory Mortgage Lending Practices

“Today, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) announced a joint action against BancorpSouth Bank for discriminatory mortgage lending practices that harmed African Americans and other minorities. The complaint filed by the CFPB and DOJ alleges that BancorpSouth engaged in numerous discriminatory practices, including illegally redlining in Memphis; denying certain African Americans mortgage loans more often than similarly situated non-Hispanic white applicants; charging African-American customers for certain mortgage loans more than non-Hispanic white borrowers with similar loan qualifications; and implementing an explicitly discriminatory loan denial policy. If the proposed consent order is approved by the court, BancorpSouth will pay $4 million in direct loan subsidies in minority neighborhoods in Memphis, at least $800,000 for community programs, advertising, outreach, and credit repair, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans, and a $3 million penalty.”

Ensure that you know your rights as a consumer. If you feel that you’ve been discriminated against by a financial institution, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). For FHA related complaints, you can also file a complaint with the Department of Housing & Urban Development (HUD) as well as the local fair housing office in your state.

Stay tuned next week for lessons you should take away from the 2008 financial crisis!


The opinions expressed by the guest writer/blogger and those providing comments are theirs alone and do not necessarily reflect the opinions of Brown Girl Magazine, Inc., or any employee thereof. Brown Girl Magazine is not responsible for the accuracy of any of the information supplied by the guest writer/bloggers. This work is the opinion of the blogger. It is not the intention of Brown Girl Magazine to malign any religion, ethnic group, club, organization, company, or individual. If you’d like to submit a guest post, please follow the guidelines we’ve set forth here
By Jamie James

Jamie is a financial services consultant based in Chicago. She has over seven years of experience in the financial industry, … Read more ›

Oak Creek: A Story of Hate, Hope and Healing

Every year on August 5th, the Sikh American community remembers one of our community’s most devastating tragedies in recent memory — the Oak Creek massacre. On this day in 2012, a white supremacist gunman entered the Sikh Temple of Wisconsin, a gurdwara (Sikh house of worship) in Oak Creek, Wisconsin where he shot and killed six worshippers and severely injured others. This violent attack was the deadliest mass shooting targeting Sikh Americans in U.S. history, and at the time, was one of the worst attacks on a U.S. house of worship in decades. Six worshippers — Paramjit Kaur Saini, Sita Singh, Ranjit Singh, Prakash Singh, Suveg Singh Khattra, and Satwant Singh Kaleka — were killed on that horrific day. An additional community member, Baba Punjab Singh, was severely paralyzed and ultimately passed away from complications related to his injuries in 2020. Others, including Bhai Santokh Singh and responding police officer and hero, Lt. Brian Murphy, were seriously wounded during the shooting. 

[Read Related: Oak Creek Gurdwara Massacre’s 4th Anniversary: Young Sikhs Express Optimism for the Continued Struggle Against Hate and Ignorance]

In 2022, the community came together to demonstrate that we are undaunted. My organization, the Sikh American Legal Defense and Education Fund (SALDEF) joined in supporting the anniversary observance at Oak Creek: a remembrance event centered around the theme of “Heal, Unite, Act.” The Oak Creek Sikh community hosted a series of in-person events, including the 10th Annual Oak Creek Sikh Memorial Anniversary Candlelight Remembrance Vigil on Friday, August 5, 2022. The program included a representative from the White House, Wisconsin Governor Tony Evers, Oak Creek Mayor Dan Bukiewicz, and representatives of the families who lost loved ones. Being there in Oak Creek 10 years after the tragedy was deeply meaningful — both to see the inspiring resilience of this community and to remember how much remains to be done.

In D.C., SALDEF continues to fight for policies that improve the lives of Sikh Americans. I had the honor of chairing the most recent iteration of the Faith-Based Security Advisory Council at the Department of Homeland Security, providing recommendations at the request of Secretary Alejandro N. Mayorkas. Consequently, the three subcommittees published a report that emphasized the importance of greater accessibility, greater equity, and greater transparency in counterterrorism efforts that for too long revolved around surveilling populations like the one that was senselessly attacked at the Oak Creek gurdwara in 2012. Leading the FBSAC as a Sikh woman, and representing a community that was highly targeted alongside Muslims by both white supremacists and in post-9/11 counterterrorism profiling, was an opportunity to push the Council to advocate more fiercely for further information-sharing between communities and law enforcement, extending grant opportunities for security for Gurdwaras and other houses of worship, and building trust between the government and Sikh communities. In addition, I advocated for accountability for the damage needlessly caused to Muslim, Arab, South Asian, and Hindu (MASSAH) communities by federal agencies historically pursuing “counterterrorism” objectives which has resulted in eroded trust rather than the development of strong partnerships. 

Although we have made great strides in this country, there is still more to do. Through our work we have partnered with many across the nation to come together and find solutions through tenets central to Sikhism and America — unity, love, and equality. SALDEF continues to strongly endorse the policy framework articulated across the Domestic Terrorism Prevention Act (H.R. 350 / S. 963); Justice for Victims of Hate Crimes Act; and the Nonprofit Security Grant Program (NSGP) Improvement Act (H.R. 6825). We believe strongly in mandating federal agencies to create dedicated offices to investigate domestic terrorism; allowing prosecutors to feasibly indict perpetrators of hate crimes; and allowing religious nonprofits to access federal funding to enhance their own security.

[Read Related: Anti-Sikh Hate is on the Rise: Here’s What we can Do]

While 11 years have passed, the effects of the Oak Creek shooting are never far from the minds of Sikh American advocates and the community we serve. SALDEF will not stop taking a stand against senseless violence and hate crimes. We continue to work in unity with our community and movement partners, and fight for better policies that will actively keep all of our communities safe. Through tragedy, we find hope. We know there can be a world where people from all backgrounds and cultures can practice their faith freely and, even though it has eluded the Sikh American community in the past, we still believe this world is possible.

Photo Courtesy of Amrita Kular


The opinions expressed by the writer of this piece, and those providing comments thereon (collectively, the “Writers”), are theirs alone and do not necessarily reflect the opinions of Brown Girl Magazine, Inc., or any of its employees, directors, officers, affiliates, or assigns (collectively, “BGM”). BGM is not responsible for the accuracy of any of the information supplied by the Writers. It is not the intention of Brown Girl Magazine to malign any religion, ethnic group, club, organization, company, or individual. If you have a complaint about this content, please email us at Staff@browngirlmagazine.com. This post is subject to our Terms of Use and Privacy Policy. If you’d like to submit a guest post, please follow the guidelines we’ve set forth here.
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By Kiran Kaur Gill

Kiran Kaur Gill is an accomplished professional with exemplary executive experience. In her role as Executive Director, she is responsible … Read more ›