The Equal Credit Opportunity Act (ECOA), enforced by the Federal Trade Commission (FTC), prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age or because a person receives public assistance.
Creditors may ask for most of this information when necessary but they may not use it when setting the terms of credit decisions. Other factors, including income, expenses, debts and credit history are considered by lenders to determine creditworthiness. The ECOA provide protections when dealing with people and organizations like banks, financial companies, retail and department stores, credit card companies and credit unions who regularly extend credit to the public. Everyone involved in making decisions to give credit or in setting the terms of credit MUST comply with the ECOA.
Some basic provisions of The ECOA:
When applying for credit, Creditors may not…
- Discourage you from applying or reject your application because of your race, color, religion, national origin, marital status, age or because you receive public assistance.
- Consider your race, sex or national origin even when you’re asked to disclose that information on an application. Information requested on race, sex or national origin helps federal agencies enforce anti-discrimination laws. However, a creditor may consider your immigration status and whether you have the right to stay in the USA long enough to repay the debt
- Impose different terms or conditions like higher interest rates or fees based on race, sex, color……or because a person receives public assistance.
- Ask whether a person is widowed or divorced. Creditors can only use the terms: married, unmarried or separated.
- Ask for information about your spouse, except:
- If your spouse is applying for credit with you;
- If your spouse will be using the account;
- If you are relying on the income of your spouse or on alimony or child support to repay;
- If you live in a community state (Arizona, California, Texas, Washington, Wisconsin etc.)
- Ask about your plans for having or raising children but can ask questions about expenses related to your dependents.
- Ask if you get alimony, child support or separate maintenance payments, unless they tell you first that you don’t have to provide this information if you are not relying on these payments to qualify for credit. But they may ask if you are mandated to pay alimony, child support or separate maintenance payments when calculating your current and future expenses.
When deciding to grant you credit or when setting the terms of credit, Creditors may not...
- Consider your race, color, religion, national origin, sex, marital status or whether you get public assistance.
- Consider your age, unless:
- You’re too young to sign contracts, generally that’s under 18;
- You’re age 62 and that age is a qualifying factor for the product (e.g) Reverse mortgage;
- It’s used in a valid credit scoring system that favors applicants age 62 and older (e.g)
- Your length of employment might be scored differently depending on your age;
- It’s used to determine the meaning of other factors important to creditworthiness (e.g. a decrease in income due to impending retirement);
- Consider whether you have a telephone account in your name.
- Consider the racial composition of the neighborhood where you want to buy, refinance or improve a house with the money you are borrowing.
When evaluating your income, Creditors may not...
- Refuse to consider reliable public assistance income the same way as other income
- Discount income because of your sex or marital status. For example, a creditor cannot evaluate a man’s salary at 100 percent and a woman’s at 75 percent. A creditor may not assume a woman of childbearing age will stop working to raise children.
- Discount or refuse to consider income because it comes from part-time employment, Social Security, pensions or annuities.
- Refuse to consider reliable alimony, child support or separate maintenance payments, however, the creditor can ask for proof that you receive this income consistently.
You also have the right to…
- Have credit in your birth name, your first and your spouse’s last name or your first name and a combined last name (e.g) Denise Williams Garrett.
- Get credit without a co-signer, if you meet the creditor’s standards.
- Have a co-signer other than your spouse, if one is necessary.
- Keep your own accounts after you change your name, marital status, reach a certain age or retire, unless the creditor has evidence that you’re not willing or able to pay.
- Know whether your application was rejected or accepted within 30 days of filing a complete application.
- Know why your application was rejected. The creditor must tell you the specific reason for the rejection and that you are entitled to learn the reason if you ask within 60 days.
- Learn the specific reason you were offered less favorable terms than you applied for. For example, if the lender offers you a smaller loan or a higher interest rate, and you don’t accept the offer, you have the right to know why those terms were offered.
- Find out why your account was closed or why the terms of the account were made less favorable, unless the account was inactive or you failed to make payments as agreed.
A Special Note to Women…
A good credit history is often necessary to get credit. This can hurt many married, separated, divorced or widowed women. There are two common reasons women do not have credit histories in their own names: either they lost their credit histories when they married and change their names, or creditors reported accounts shared by married couples in the husband’s name only.
If married, separated, divorced or widowed, contact the credit reporting agencies to verify that all relevant information in in a file under your own name. Credit reporting companies sell the information in your credit report to creditors, insurers, employers and other businesses who use it to evaluate your applications for credit, insurance, employment or renting a home.
**The Fair Credit Reporting Act (FCRA) requires each of the three credit reporting companies, TransUnion, Experian and Equifax to give you a free copy of your credit report, at your request once every 12 months online via annualcreditreport.com or by phone at 877-322-8228.
If you suspect a Creditor has discriminated against you…
- Complain to the creditor. You may be able to persuade the lender to reconsider your application.
- Check with your state Attorney General’s office at to verify whether the lender violated state equal credit opportunity laws.
- Consider suing the creditor in federal district court. You can recover damages and possibly awarded punitive damages if the court finds that the creditor’s conduct was willful. You may also be able to recover some attorney’s fees and court costs.
- Report violations to the appropriate government agency. If you’ve been denied credit, the creditor must give you the name and address of the government agency to contact.