VIDEO: What is a Protected Class
In this Compliance Clip (video), Adam discusses what a protected class is under fair lending. In particular, Adam talks about the protected classes under the two fair lending laws: Fair Housing Act and ECOA, and how they differ as well as how they overlap.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to answer the question “what is a protected class?”
When we’re talking about protected classes, we, of course, are talking about fair lending. In order to understand what a protected class is, we need to understand the laws that apply to fair lending. And in banking, there's two main laws that apply to fair lending. These are the Fair Housing Act, or FHA, and the Equal Credit Opportunity Act, or ECOA. Each of these laws actually defines a protected class a little bit differently. So, let's take a look at each of these.
First of all, the Fair Housing Act dates back to the late 1960s and covers fair housing. So, loans related to a dwelling and housing for individuals. Under the Fair Housing Act, they defined a protected class as a number of things and this includes race or color, national origin, religion, sex, familial status, which includes children under 18 living at home, and handicap. Under the Fair Housing Act, these are the protected classes that we are concerned about from a fair lending perspective.
Now, I will tell you, when we get to the ECOA slide, in the Equal Credit Opportunity Act, which relates to Regulation B, in just a minute, some of these are redundant. We'll take a look at those in just a second, but first, let's talk about ECOA. ECOA was passed in the early 1970s, and this prohibits discrimination on all aspects of a credit transaction, and includes all types of credit, not just home loans like the Fair Housing Act, but also commercial and business purpose loans. And of course, ECOA is implemented by Subpart A of Regulation B. So Regulation B drives a lot of this and includes a list of protected classes.
Now, the protected classes under ECOA are a little bit different, but there is some overlap. A protected class under ECOA includes race or color, religion, national origin, and sex. So those are the same things that we started out the Fair Housing Act list with, but ECOA has a couple of different ones. In fact, they do not include handicap just like the Fair Housing Act did. The additional Items under ECOA include marital status, age - at least the capacity to contract, and then receipt of income from any public assistance program, and a good faith exercise of rights under the Consumer Credit Protection Act. So all of these are protected classes under ECOA, and you can see the bold items are those that are separate under ECOA, where the Fair Housing Act had a couple of different ones that do not apply to ECOA.
So that answers our question of what is a protected class, because we have a different protected class list for the Fair Housing Act as we do for ECOA.
That's all I have for this Compliance Clip.