Equal Credit Opportunity Act and RESPA Pass After Industry Lobbying Weakens Enforcement

Congress passes two major housing consumer protection laws in 1974: the Equal Credit Opportunity Act (ECOA) prohibiting discrimination in lending based on sex and marital status (race added in 1976), and the Real Estate Settlement Procedures Act (RESPA) requiring disclosure of closing costs. However, banking industry lobbying successfully weakens both laws, limiting their effectiveness in combating discrimination and predatory practices.

The Equal Credit Opportunity Act responds to documented discrimination against women seeking credit. Before passage, banks routinely required husband co-signers for married women, discounted women’s income, and denied credit to divorced or widowed women. However, the law relies primarily on complaints from individual borrowers rather than systematic enforcement. The Federal Reserve, tasked with writing implementing regulations, takes a narrow interpretation of the law’s scope, and banks develop new screening methods that achieve similar discriminatory outcomes through facially neutral criteria.

RESPA addresses kickbacks and hidden fees in real estate transactions that inflate costs for homebuyers. The law requires a “Good Faith Estimate” of closing costs and prohibits referral fees between settlement service providers. However, the mortgage industry secures exemptions for “affiliated business arrangements” that allow integrated lenders to collect fees at multiple stages of transactions. Enforcement proves minimal; violations rarely result in meaningful penalties. Both laws demonstrate a pattern where consumer protection legislation passes after scandals but industry lobbying shapes implementing regulations and enforcement priorities to minimize actual impact on discriminatory or predatory business practices.