united-states civil-law finance equal-protection
Are marketplace lenders subject to fair lending laws?
<p>Are 'marketplace' lenders, such as those using Lending Club or Funding Circle, <em>etc.</em>, subject to fair lending provisions, such as the Equal Credit Opportunity Act or the Fair Lending provisions of the Fair Housing Act? (Though I realized there are probably few mortgages through these sites.) If so, what are the obligations of lenders under the law, and what is the enforcement mechanism for violations?</p>

<p>In the case of the <a href="http://nline.citi.com/US/login.do?locale=en_US" rel="nofollow noreferrer">ECOA</a>, yes.</p>

<blockquote>
  <p>The law applies to <strong>any person who, in the ordinary course of
  business, regularly participates in a credit decision,</strong> including
  banks, retailers, bankcard companies, finance companies, and credit
  unions.</p>
</blockquote>

<p>For example, a 2017 <a href="https://www.aba.com/Tools/Offers/Documents/The%20Regulation%20of%20Marketplace%20Lending%20A%20Summary%20of%20the%20Principal%20Issues.pdf" rel="nofollow noreferrer">American Bankers Association report</a> at pages 91-92 (internal pages numbers, add 7 for pdf page number) which states:</p>

<blockquote>
  <p>Since marketplace lenders are very much involved in many aspects of
  the credit transaction, they must structure and operate their lending
  platforms in compliance with the ECOA and applicable state law
  counterparts. In addition, the criteria used to determine
  creditworthiness must not have a disparate impact on the basis of any
  Prohibited Basis. Notably, the ECOA applies to commercial as well as
  consumer lending.</p>
</blockquote>

<p>The <a href="https://en.wikipedia.org/wiki/Fair_Housing_Act" rel="nofollow noreferrer">Fair Housing Act</a> also applies in mortgage lending with regard to owner occupied residential housing (see also <a href="https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_lending" rel="nofollow noreferrer">here</a>). The <a href="https://www.dummies.com/test-prep/real-estate-license/1968-federal-fair-housing-act-exceptions-on-the-real-estate-license-exam/" rel="nofollow noreferrer">only meaningful exemption</a> would be for mortgage lending provided by religious organizations to its members only, which does not apply to the situations in the question. <em>But see</em>, <em><a href="https://scholar.google.com/scholar_case?case=492359625235343103&amp;hl=en&amp;as_sdt=6&amp;as_vis=1&amp;oi=scholarr" rel="nofollow noreferrer">Alexander v. AmeriPro Funding, Inc.</a></em>, No. 15-20710 (5th Cir. 2017), cert. denied, U.S. No. 16-cv-01395 (11/6/2017) (holding that the FHA does not apply to secondary market purchases of mortgage loans which are subject at the underlying loan level to the act). This case is discussed starting at page 18 of the American Bankers Association report linked above (internal page numbering, not pdf page number).</p>

<p>For what it is worth, I do not believe that <em>Alexander</em> will be followed by other federal circuits or will remain good law, because it is contrary to a plain reading of the statute and HUD and Consumer Financial Protection Bureau ("CFPB") policy (at least prior to the current administration), and because it requires primary lenders to make prohibited distinctions to cull packages of loans for sale to secondary market purchasers.</p>
