Homeownership is the dream of millions of Americans, and should never be denied because of an applicant’s race, color, national origin, sex, religion, marital status or age.
In 1974, Congress sought to remove such discriminatory obstacles from the approval process. The Equal Credit Opportunity Act was created to weed out discriminatory practices in lending.
It’s not about who you are. The ECOA made it illegal for creditors to discriminate in any aspect of the lending process against an applicant based on what they look like, what religion they practice, or their sex, national origin, marital status or age. It is also illegal to deny credit to applicants who receive assistance from the government, such as welfare.
If an applicant is asking for separate, unsecured credit, the creditor cannot ask about marital status unless the loan is in a community property state. The creditor cannot ask if the applicant plans to have children, but can ask about existing children, the age of any children, and any financial responsibilities related to those children.
A creditor is defined as any person who makes credit-approval decisions for any lending institution, such as a bank, credit union or bank card company. Violators face punitive civil damages.
Clear communication. Creditors must provide applicants with clear reasons why they have been granted or denied credit within 30 days of the submission of completed applications. If an applicant has been granted credit, but under different terms, that must be explained to the applicant. These same rules apply if the creditor refuses to increase a line of credit, or makes a negative change to the terms.
These rules apply to the lending process during application, the evaluation and after the extension of credit.
Generally, the Equal Credit Opportunity Act is meant to limit the criteria for extending credit to a person’s financial history and ability to pay and protect them from discrimination for reasons having to do with who they are.
Until 2011, the ECOA was under the authority of the Federal Reserve Board, but in that year it was consolidated along with other financial enforcement under the newly created Consumer Financial Protection Bureau. Information can be found at www.consumerfinance.gov.