Attorney General Bonta Issues Consumer Alert: Credit Discrimination Remains Illegal Under California and Federal Law

OAKLAND — California Attorney General Rob Bonta today issued a consumer alert reminding consumers and lenders that credit discrimination remains illegal, under both California law and federal law. In October, as part of the Trump Administration’s continued gutting of the Consumer Financial Protection Bureau (CFPB), the CFPB prematurely terminated the consent order that documented its settlement with Citibank for allegedly discriminating against Armenian-American credit card applicants in Southern California, sending a strong message of the Trump Administration’s abandonment of these critical protections for consumers. 

“Credit discrimination remains illegal in California and throughout the United States. The Trump Administration’s premature termination of the settlement with Citibank for discriminating against Armenian-American applicants in California is alarming and no doubt another sign of the Bureau abandoning its obligation to protect the American people from unfair treatment by big corporations,” said Attorney General Bonta. “This, however, is not a sign that no one is looking. Let me be very clear: I will use the force of my office against financial institutions that deny brighter financial futures to Californians on the basis of their sex, race, religion or any protected characteristics.”

What is Credit Discrimination?

Credit discrimination is when a lender makes a decision about offering or denying credit based on a person's race, color, religion, national origin, sex, marital status, age, military or veteran status, because they receive public assistance, or based on another impermissible basis. Credit discrimination can manifest in various ways, such as consumers being discouraged from applying for credit, being offered less favorable terms such as higher interest rates or higher fees, or being refused credit despite meeting requirements, because of the factors listed above. 

People use credit to take out student loans, open businesses, and buy cars and homes. Building credit helps consumers to build a better future for themselves and future generations. Credit discrimination prevents people from having access to these opportunities and can make credit more expensive.

The Legal Bits: Federal and State Laws Banning Credit Discrimination

Federal and state laws prohibit discrimination by banks, lenders, credit card companies, and other lenders and financial institutions. 

The federal Equal Credit Opportunity Act (ECOA) prohibits financial institutions from discriminating against individuals on the basis of race, color, religion, national origin, sex, gender, marital status, age, receipt of public assistance, and other protected characteristics in all aspects of credit transactions, including applications, approvals, and terms and conditions. (15 U.S.C. section 1691 et seq.)

Similarly, the California Unruh Civil Rights Act (Unruh Act) prohibits discrimination on the basis of race, color, religion, ancestry, national origin, disability, medical condition, age, marital status, sexual orientation, sex, gender, or gender identity, as well as other protected characteristics by any business providing services in the state. (See Cal. Civ. Code section 51 et seq.) In addition to prohibiting discrimination in credit transactions, the Unruh Act prohibits banks, lenders, credit card companies, financial institutions, and other businesses from discrimination in any and all services that the business may provide.

California law also offers specific protections against discrimination in lending for housing finance. Under the Fair Employment and Housing Act, any financial institution that provides financial assistance for the purchase, organization, or construction of any housing accommodation is prohibited from discriminating in the terms or conditions of financing on the basis of protected characteristics, including but not limited to race, color, religion, sex, gender identity or expression, sexual orientation, marital status, national origin, ancestry, familial status, disability, source of income, veteran or military status, and genetic information. (See Cal. Gov’t Code section 12955, subd. (e).) Likewise, California’s Holden Act provides similar protections against discriminatory practices in housing finance. (See Bus. & Prof. Code section 35800 et seq.). And California's Military and Veterans Code prohibits discriminatory practices targeting members of the armed forces. (See Cal. Mil. & Vet. Code section 394).

Report It!

People who believe that they have been denied services or discriminated against because of a protected characteristic, and whistleblowers with information regarding potential violations of state or federal fair lending laws, can file a complaint with:

• The California Attorney General’s Office: oag.ca.gov/report
• The California Civil Rights Department: calcivilrights.ca.gov
• The California Department of Financial Protection and Innovation:  dfpi.ca.gov/submit-a-complaint/