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Compliance Corner: Second Quarter 2006

Compliance Alert: Regulation B and Special Benefits For Senior Citizens

Regulation B is the Federal Reserve System’s implementing regulation for the Equal Credit Opportunity Act (ECOA). Both the ECOA and Regulation B prohibit discrimination in the extension of credit based on race, color, religion, national origin, sex, marital status, age, the fact that the applicant receives public assistance, or the fact that the applicant has exercised any right under the Consumer Credit Protection Act. Regulation B contains an exception that allows creditors to discriminate in favor of elderly people, who are defined as age 62 or older, in extending credit.1 

In offering special benefits to senior citizens, some banks fail to recognize that Regulation B’s age discrimination exception only applies to persons 62 or older. That is, some banks offer more favorable credit terms to persons who are over a certain age, for example, 52, without realizing Regulation B only allows them to offer better credit terms to customers age 62 or older. This typically happens when banks include a loan discount for senior citizens who are younger than the defined age for the discrimination exception of 62 or older.

The federal banking agencies are authorized to use the full range of their enforcement authority to address discriminatory practices. This includes placing enforcement actions that may require prospective and retrospective relief and, depending on the nature of the violation and the degree of culpability, civil money penalties. As a result, a violation of Regulation B’s discrimination provisions can be very costly. Thus, banks should regularly review their loan products to ensure that they are not offering more favorable credit terms to customers who are not considered to be elderly, as defined by Regulation B and the ECOA.

If you have any questions related to ECOA and Regulation B, please contact Supervising Examiner John D. Fields through the Regulations Assistance Line at (215) 574-6568.

  • 1 See 12 C.F.R. 202.2(o). Creditors can discriminate in favor of elderly people (i.e., treat them more favorably in offering them credit than their non-elderly customers), but creditors cannot discriminate against them based solely on their age.

The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.

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