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Application of Equal Credit Opportunity Act’s Notice Provisions to Delinquent Borrowers

A California court recently found that delinquent borrowers may bring a claim under the Equal Credit Opportunity Act (“ECOA”) when a lender does not respond to an application for a loan modification within thirty days. MacDonald v. Wells Fargo Bank, N.A., No. 14-cv-04970 (N.D. Cal. Apr. 24, 2015).

ECOA requires that within thirty days “after receipt of a completed action for credit, a creditor shall notify the applicant of its action on the application.” In MacDonald v. Wells Fargo Bank N.A., the borrowers submitted an application for a loan modification and received confirmation that their application was complete, but never received a response about whether the lender approved or denied the application. The borrowers brought suit against the lender, alleging, among other things, that the lender had violated ECOA. The lender argued that the thirty day deadline under did not apply because the borrowers were delinquent. The court disagreed, finding that “a plain reading of the statute confirms that creditors are required to make a determination on a completed application within thirty days regardless of the status of the applicant, but need not send applicants in default a statement of reasons when their application is rejected.”

If you have questions about whether the Equal Credit Opportunity Act is applicable to a specific situation, please contact one of the attorneys in our Financial Services Group.