Column One:
Eye on Unmarried America

January 29,  2007  



Justice Department protects unmarried borrowers

By Thomas F. Coleman

The United States Department of Justice has reached a settlement with Compass Bank in a lawsuit alleging that the bank illegally discriminated against unmarried car-loan applicants.

In a complaint filed in federal court, the Justice Department alleged the Birmingham-based bank had violated the Equal Credit Opportunity Act (ECOA) by charging car loan co-applicants who were not married to one another higher rates than married couples.

"Under the law, marital status should have no effect on an individual's access to credit," said Wan J. Kim, assistant attorney general for the Justice Department's Civil Rights Division, in a news release. "We will continue to vigorously enforce the federal laws that prevent discrimination in credit and lending services." 

The settlement, which must be approved by a federal judge, requires the lender to pay up to $1.75 million to non-married car loan customers who were charged higher interest rates than married couples.  Compass also will promise not to discriminate on the basis of marital status in any aspect of its automobile lending.

Compass Bank is owned by Compass Bancshares, Inc. -- a $33.6 billion Southwestern financial holding company which operates 409 full-service banking offices in Alabama, Arizona, Colorado, Florida, New Mexico and Texas. Compass is among the top 30 U.S. bank holding companies by asset size.

The ECOA is the only area of federal law which prohibits marital status discrimination by private businesses.  Federal employment laws and fair housing laws do not include the term "marital status" among the forms of discrimination which are illegal.

Congress added "marital status" to the equal credit law in the 1970s in response to pressure from women's rights organizations complaining that unmarried women, especially those who were divorced, were being denied credit because they were not married.  In the 1980s, a federal appeals court clarified that the term "marital status" was not limited to individuals but also protected unmarried couples from being treated differently than married couples.

While most states do not prohibit marital status discrimination in employment and housing, a majority -- some 27 in all -- do outlaw such discrimination by lenders.  In these states, single people have the option to sue violators in state court rather than having to file a complaint with a federal agency, thus giving them added legal protection.

The Justice Department launched its investigation into Compass' auto lending practices after the Federal Reserve Board found "reason to believe that Compass Bank's loan pricing procedures and directives constituted a pattern or practice of discrimination." 

The Federal Reserve Board regulates banks which may violate ECOA while the Federal Trade Commission (FTC) has jurisdiction over other lending institutions which may violate this law. 

It is surprising that a financial institution as large as Compass Bank would engage in such discrimination, considering the fact that the FTC flexed its muscle a few years ago and made two national lenders pay hefty damages because of discriminatory practices against unmarried consumers.

Ford Credit, the financing subsidiary of Ford Motor Co., agreed to pay $650,000 in 1999 to settle allegations it treated unmarried joint applicants for auto loans differently from married couples. 

The FTC said Ford Credit had violated a U.S. fair lending law during the period between May 1994 and August 1995 by failing to combine the incomes of unmarried joint auto loan applicants, as it did with married applicants.  As a result, many unmarried joint applicants were offered credit on less favorable terms than their married counterparts.

Franklin Acceptance Corporation, a Philadelphia-based finance company, paid a $800,000 civil penalty in 1999 for similar alleged violations against unmarried couples.

Those settlements were then among the largest ever obtained by the FTC under the Equal Credit Opportunity Act, which bars discrimination against credit applicants on the basis of race, color, religion, national origin, sex, or marital status.

It is commendable that federal law protects unmarried consumers who experience marital status discrimination at the hands of corporate lenders.  Too bad that workers and tenants who experience such discrimination have no federal agency to help them.  It is disappointing that federal law does not include "marital status" in fair housing and fair employment statutes.

Recent Census data show that a majority of the nation's households are now headed by unmarried adults. 

Perhaps it is time for contenders in the 2008 presidential race to indicate whether they believe federal law should protect Americans from marital status discrimination.  Better yet, maybe the time has come for unmarried voters to demand that candidates take a position on the issue.

To read other editions of Column One, click here.

Unmarried America 2006

Thomas F. Coleman, Executive Director of Unmarried America, is an attorney with 33 years of experience in singles' rights, family diversity, domestic partner benefits, and marital status discrimination.  Each week he adds a new commentary to Column One: Eye on Unmarried America. E-mail: Unmarried America is a nonprofit information service for unmarried employees, consumers, taxpayers, and voters.