We believe that advertising and offering a money market account only to certain consumers, and not the general public, could present a risk of being considered a discriminatory unfair, deceptive, or abusive act or practice (UDAAP).

While the Equal Credit Opportunity Act’s discrimination protections would not apply to money market accounts without credit features, the CFPB’s Supervision and Examination Manual suggests that fair lending standards could be applied to deposit accounts. The manual states that “[a] discriminatory act or practice is not shielded from the possibility of being unfair, deceptive or abusive even when fair lending laws do not apply to the conduct.” Further, the manual instructs examiners to consider whether an entity’s “policies, procedures and practices . . . target or exclude consumers from products and services, or offer different terms and conditions, in a discriminatory manner” and whether an entity’s “[m]arketing or advertising . . . improperly target or exclude consumers on a discriminatory basis.” Accordingly, it is possible that advertising and offering a money market account only to certain consumers could be found to be a discriminatory UDAAP if customers are excluded based on a protected characteristic, such as race or national origin.

Given the CFPB’s focus on fair lending principles with respect to deposit products, we also recommend considering the disparate impact risks when excluding the general public from a particular product. A policy or practice is said to have a disparate impact when it “disproportionately excludes or burdens certain persons on a prohibited basis” even if the policy or practice is neutral on its face and applied equally to all applicants. Consequently, even if your selection of customers eligible for the money market account is not intentionally discriminatory, this practice may raise UDAAP risks if it has a disparate impact on protected classes without establishing and documenting a valid business necessity for the product’s exclusive structure.

For resources related to our guidance, please see:

• Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)

• Equal Credit Opportunity Act, 15 USC 1691(a) (“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under this chapter.”)

• Equal Credit Opportunity Act, 15 USC 1691a(d) (“The term ‘credit’ means the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.”)

• CFPB Supervision and Examination Manual: UDAAPs, page 10 (March 2022) (“A discriminatory act or practice is not shielded from the possibility of being unfair, deceptive or abusive even when fair lending laws do not apply to the conduct. For example, not allowing African-American consumers to open deposit accounts, or subjecting African-American consumers to different requirements to open deposit accounts, may be an unfair practice even in those instances when ECOA does not apply to this type of transaction.”)

• CFPB Supervision and Examination Manual: UDAAPs, pages 13–14 (March 2022) (“Through discussions with management and a review of available information, determine whether the entity’s internal controls are adequate to prevent unfair, deceptive or abusive acts or practices. Consider whether: . . . (l) The entity’s policies, procedures and practices do not target or exclude consumers from products and services, or offer different terms and conditions, in a discriminatory manner.”)

• CFPB Supervision and Examination Manual: UDAAPs, pages 15–16 (March 2022) (“Through a review of marketing materials, customer agreements, and other disclosures, determine whether, before the consumer chooses to obtain the product or service: . . . Marketing or advertising do not improperly target or exclude consumers on a discriminatory basis, including through digital advertising.”)

• FFIEC Interagency Fair Lending Procedures, page iv (August 2009) (“When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a ‘disparate impact.’ . . . The fact that a policy or practice creates a disparity on a prohibited basis is not alone proof of a violation. When an Agency finds that a lender’s policy or practice has a disparate impact, the next step is to seek to determine whether the policy or practice is justified by ‘business necessity.’ The justification must be manifest and may not be hypothetical or speculative. Factors that may be relevant to the justification could include cost and profitability. Even if a policy or practice that has a disparate impact on a prohibited basis can be justified by business necessity, it still may be found to be in violation if an alternative policy or practice could serve the same purpose with less discriminatory effect.”)