The Equal Credit Opportunity Act aims to enforce equal financial opportunities for all Americans through regulation of lenders by conducting regulatory checks and investigating consumer complaints.

However, recent violations of the act reveal persistent instances of financial discrimination against marginalized groups by financial institutions.

Historically, lending credit allowed early merchants to actualize costly business ideas and expand, ultimately allowing for the economic growth central to the formation of the United States economy, according to the Oxford Research Encyclopedia. As the credit system evolved, lenders developed ways to control access to borrowed money such as identifying borrowers’ employment status or history of paying back credit. These new methods consequently resulted in discrimination, according to the book “The Development of Consumer Credit in Global Perspective: Business, Regulation, and Culture.”

According to the Consumer Financial Protection Bureau, a government agency overseeing financial protection for consumers in the U.S., the ECOA was enacted in 1974 to regulate financial institutions when discrimination against women who were applying for credit was commonplace. Over time, amendments increased in scope to also include protections against discrimination based on race, religion, national origin, age and receipt of public financial assistance, according to the CFPB.

Christy Mallory, legal director at UCLA’s legal research center Williams Institute, said the ECOA has only recently begun to address discrimination against additional marginalized groups.

“The Equal Credit Opportunity Act does prohibit discrimination, … for a long time that was thought to mean discrimination against men and women,” Mallory said. “But the legal landscape on that changed significantly in 2020 when the Supreme Court held that discrimination against people because of their sexual orientation or gender identity is discrimination based on sex.”

According to Vox, in June 2020, the Supreme Court’s decision on Bostock v. Clayton County established that “sex” in Title VII in the Civil Rights Act included LGBTQ+ people, therefore federally prohibiting discrimination against LGBTQ+ people. The decision denoted that anti-discrimination laws including the ECOA now include protection against discrimination based on sexual orientation.

However, despite the enactment and amendments to anti-discrimination legislation in the U.S., the law has seen violations by major financial institutions.

On Nov. 8, the CFPB released a statement detailing Citigroup’s violation of the ECOA. CFPB’s investigations revealed that the leading global bank had been training employees to identify and reject credit card applicants with surnames of Armenian origin ending in “-ian” and “-yan,” as well as applicants from Glendale, California, where approximately 15% of the U.S.’ Armenian American population resides.

According to AP News, Citi initially employed these tactics as a preventative measure in response to organized crime syndicates involving Armenian Americans in Southern California. These measures then evolved into violations eligible for federal punishment.

Lucy Varpetian, attorney for the City of Glendale and past chairperson of the Armenian Bar Association, said she was startled by the volume of responses when the ABA reached out to the Armenian community via social media and community circles to provide legal assistance for those affected.

“The expectation was that there would be a handful of people who would reach out to us as part of the Citigroup issue, … but from what we’re hearing, it was broader than that one institution,” Varpetian said. “We’re very concerned about this type of systematic discrimination on the part of a financial institution, which of course spills into the economic well-being of a marginalized immigrant community.”

Diana Gazaryan, a J.D. candidate at the UCLA School of Law and chair of the National Armenian Law Students Association, said Citi’s prominence as a leading financial institution indicates the scope of the issue.

“You would think that a financial institution like Citibank that is huge and has all the resources in the world could have better mechanisms for detecting fraud that don’t include systematic discrimination,” Gazaryan said.

According to the CFPB, Citi is the third-largest bank by asset size in the U.S. with $1.7 trillion in total assets as of June. It has approximately 200 million customer accounts and operates in nearly 160 countries and jurisdictions, according to its 2022 Annual Report.

While Citi’s discrimination was federally punished, Gazaryan said this case necessitates a broader conversation about financial institutions’ continual discrimination against marginalized communities.

“Citibank was the place that the CFPB was able to direct this investigation and actually inflict penalties, because there was maybe more evidence than there was in some (other) cases,” Gazaryan said. “But I don’t think that this is the only instance of this type of discrimination, and I also don’t think that it’s necessarily only Armenians who are being targeted.”

According to USA Today, Wells Fargo Bank, the largest residential home mortgage originator in the U.S., faced class action lawsuits in both 2012 and 2022 against its alleged discriminatory policies against Black and Hispanic borrowers. Despite the existence of anti-discrimination and fair lending laws, inferior access to financial services persists among people of color, according to the Federal Reserve Bank of San Francisco.

Additionally, services provided by financial institutions – from transactions like lending money for mortgages to subtle details such as interest rates, bank branch density and the financial mobility of small businesses – are markedly different in majority-Black neighborhoods, according to a study conducted by the Brookings Institute.

Despite the launch of Combating Redline Initiative in October 2021 to increase mortgage approvals for Black and Hispanic residents, City National Bank paid $31 million in fines in January for denying mortgage requests from Black and Hispanic residents and requests coming from areas with a high Black and Hispanic population, which violated the Fair Housing Act and Equal Credit Opportunity Act, according to Forbes.

According to the Department of Justice, the Combating Redline Initiative represented the federal government’s most aggressive effort to address real estate-based financial discrimination as part of an overall effort to strengthen ECOA enforcement in collaboration with the Office of the Comptroller of the Currency and CFPB.

In addition to efforts such as fining violators and implementing formalized initiatives, the CFPB continues to strengthen the ECOA through contributions from UCLA lawyers and scholars.

In 2022, the CFPB requested a comment from UCLA’s Williams Institute on how to better implement data collection measures to strengthen the enforcement of the ECOA across marginalized groups such as the LGBTQ+ community.

According to the Williams Institute, multiple studies show LGBT adults in the U.S. have been experiencing disproportionately negative economic effects across employment, homeownership and overall financial security. Therefore, the Williams Institute’s submitted comment to the CFPB argues for the implementation of reliable and rigorous data collection methods under the ECOA which can prevent the perpetuation of systematic discrimination.

As a key contributor to the comment, Mallory said her goal is to ensure laws and policies are backed by strong data to combat misinformation.

“As a lawyer, I just am very motivated to make sure that all laws and policies – whether they affect LGBTQ people, other marginalized communities, anyone – are really based on facts,” Mallory said. “That’s particularly important right now as we see kind of rampant misinformation and disinformation out there that’s being used to further marginalize vulnerable groups.”

Meanwhile, Varpetian said her community’s outreach initiative and legal work provide opportunities to realize the changes needed to aid marginalized communities.

“Sometimes it takes one representative community to bring forth a lawsuit and to effectuate a change in behavior in the industry,” Varpetian said.

While the CFPB makes continuous improvements to better enforce the ECOA, and professionals contribute to the initiative with their expertise, Varpetian said UCLA students can play a crucial role by developing an awareness of how discrimination manifests across various groups and settings and collectively form solutions.

“We really have to pay attention to what’s happening in other communities, find the similarities and help each other and similarly educate those other communities of what’s happening to us,” Varpetian said.