Is Free Checking for 50 & Older an ECOA Violation? Andy Zavoina, BOL Guru Guru BIOS
Question: We are in the process of implementing an automated overdraft protection service. As a courtesy, the Fair Lending folks at the FDIC spoke with us regarding "guidance" on this service. Specifically, they told us that if we have any checking products that are age-based (such as 50 years plus checking) that has a waived service charge that we are discriminating against all other accounts holders that have an account that is not aged base and has a service charge or a minimum balance requirement. The violation would fall under ECOA. We were told the only way that we would be in "guidance" would be if the aged based account was 62 years plus. We asked them to site specifically "where" in the Reg B or in the joint guidance that this is stated. Apparently this is very broad guidance. Has anyone else come up against this situation or been written-up in an exam for this? Any advise as to our next move?
Answer: §202.6 and the OSC at 6(b)(2)1 tells us that "Any system of evaluating creditworthiness may favor a credit applicant who is age 62 or older. A credit program that offers more favorable credit terms to applicants age 62 or older is also permissible; a program that offers more favorable credit terms to applicants at an age lower than 62 is permissible only if it meets the special-purpose credit requirements of §202.8."
Because the deposit product is tied to what Reg. B considers a credit, these provisions apply. Better pricing on the senior account, where the age restriction is less than 62 years, is indirectly better pricing for the credit product.
Worse yet, as a lending discrimination issue, this type of violation would earn you a Department of Justice Referral.
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