Credit Denial? Know Your Rights

Consumer Bureau issues guidance to creditors

Andy Spears


Photo by Clément Hélardot on Unsplash

Finding out you’ve been denied credit can be frustrating. Often, the explanation you receive from a potential creditor is vague, relying on highly technical language. This is due in part to the complex mathematical formulas used to determine credit eligibility. These algorithms take into account a range of factors from available data in order to arrive at a credit granting decision.

However, the Consumer Financial Protection Bureau (CFPB) has recently issued a notice that says creditors must provide a detailed explanation when issuing a denial of credit.

The ruling is due to a new interpretation of the Equal Credit Opportunity Act (ECOA). This law says that if credit is denied, a consumer must be given an explanation. In part, this is designed to protect consumers in the case of inaccurate or incomplete information on a credit report.

The consumer protection attorneys at Finn Law Group offer further explanation relative to the benefits of this new CFPB guidance.

Creditors Must Explain Denials (

The ECOA also requires lenders to keep you informed of their decisions and to be specific about their reasons for turning down a loan application or charging you a higher interest rate than the best one available at the time your application is accepted. The CFPB believes that black-box algorithms may make it more difficult for consumers to understand why they were denied. The federal agency is also concerned that black-box algorithms could disproportionately impact certain groups of people, such as minorities and women.

Ed Mierzwinski, Senior Director of the Federal Consumer Program at the U.S. Public Interest Research Group (PIRG) expressed his opinion with Finn Law Group and said,

“An explanation that simply lists “secret artificial intelligence algorithm” as a main reason you were denied won’t be good enough. Companies that tell the CFPB — “I can



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .