This article provides useful information relating to the Truth in
Lending Act (TILA) credit card rules affecting young consum-
ers, as well as the anti-discrimination provisions of the Equal
Credit Opportunity Act (ECOA).
The Credit Card Act Changes the Truth in Lending Re-
quirements
The Credit Card Accountability Responsibility and Disclosure
Act (Credit CARD Act) is a federal statute passed in 2009 that
changed certain TILA requirements. Previously, the credit
card provisions in TILA mostly involved disclosure require-
ments, but the Credit CARD Act introduced new requirements
that changed how lenders consider credit card applicants. For
example, Regulation Z, which implements TILA, now includes
rules for making credit card loans to consumers less than 21
years of age (or “young consumers”). In general, a card issuer
cannot issue a card to a young consumer unless the consumer
has submitted information showing an independent ability to
make the minimum payments.
How Age-Based Truth in Lending Requirements Intersect
with Fair Lending Compliance
Some questions have arisen about how TILA rules involving
young consumers interact with the fair lending requirements of
ECOA. While financial institutions should implement under-
writing policies that consider the TILA provisions relating to
applicants that are less than 21 years of age, these policies
should not provide age-based restrictions that violate fair lend-
ing rules under ECOA. Specifically, ECOA prohibits a creditor
from discriminating against an applicant in any aspect of a
credit transaction on the basis of age.
The commentary to Regulation Z notes that when considering
a credit card application from a consumer who is less than 21
years old, creditors must also comply with the applicable rules
in Regulation B, which implements ECOA. Under Regulation
B, if an applicant qualifies under the creditor’s standards of
creditworthiness, a lender cannot require the signature of an
additional person who is not a joint applicant, except under
specified circumstances. Commentary on Regulation B clari-
fies that if an applicant does not qualify independently, a credi-
FDIC Newsletter: ECOA - Understanding Age-Based
Discrimination in Credit Card Lending
Federal Deposit Insurance Corporation
Division of Depositor and Consumer Protection
tor’s guidelines for eligibility of guarantors or cosigners may
restrict the applicant’s choice of additional parties but may not
discriminate on a prohibited basis. Regulation B does not pro-
vide grounds for requiring that applicants below a certain age
have a parent or a guardian serve as a guarantor or cosigner.
While the commentary on Regulation Z states that a card issu-
er would not violate Regulation B if complying with age-related
TILA requirements, lenders should consider whether any age-
based restrictions truly are required by TILA. For example,
TILA does not prohibit consumers between the ages of 18 and
21 from applying for credit card loans. That is, the TILA re-
quirements relating to young consumers do not provide a basis
for refusing credit to a qualified applicant solely on the basis of
age (assuming the applicant is of legal age to contract).
How to Reduce Fair Lending Risk Related to Credit Cards.
A strong compliance management system (CMS) can help
ensure compliance with all aspects of credit card requirements,
including those related to TILA and ECOA. Banks seeking to
strengthen their CMS may want to consider the following ques-
tions:
Do the bank’s written policies and procedures clearly out-
line the difference between the TILA requirements and
those relating to fair lending?
Does the bank’s training address both TILA requirements
and fair lending laws and regulations, including a review of
any applicable state laws relating to age requirements?
Do the bank’s credit card-related loan policies and proce-
dures address TILA and fair lending requirements?
Do the bank’s policies and procedures ensure co-signers
are only required if the individual applicant cannot prove
their individual ability to repay and not unnecessarily re-
strict which parties can serve as cosigners when required?
Do the bank’s monitoring and audit procedures ensure
credit card marketing and underwriting practices align with
regulatory requirements and the bank’s loan policy?
Monitoring and audit controls can help determine whether cred-
it card practices are consistent with the bank’s written policies
and statutory and regulatory requirements, as well as identify
areas where the bank’s CMS could be strengthened.
