Credit Discrimination

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Credit discrimination occurs when a money lender, in relation to any lending transaction, considers sex, marital status, age, race, national origin, public assistance moneys, neighborhood of residence, or religion of the applicant.  When the financial institution uses these factors to predict how likely a person is to pay back the loan, even if statistically true, it constitutes illegal credit discrimination. 

The United States is a credit-based society, meaning credit defines what a person can and cannot do, and also reflects a person’s social position.  Basing credit on characteristics that a person has no control over would forever trap that person within the confines of a statistical, prejudiced group.  This is unfair because a person may or may not have the attributes of that group. 

The Equal Credit Opportunity Act (ECOA) has been around for a surprisingly long time – since 1974 – to deal with lenders who discriminate.  Specific acts of discrimination may consist of discouraging a person from applying for credit, pretending to allow a person to apply then denying the credit application, or lowering the amount of the loan.  This can be particularly insidious when a person applies for a home loan. 

Credit discrimination prosecutors look for a “pattern” of discrimination among a particular group.  For example, prosecutors will try to find evidence that the percentage of X applicants being denied credit is greater than the percentage Y applicants, all other factors being equal such as financial qualifications. 

The reasons for credit denial need to be specific.  Acceptable reasons for denying a credit application include low income, low salary, short employment history, and poor credit history.  However, vague or indefinite reasons such as not “meeting our minimum standards” are illegal.  

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Last Modified: 06-07-2012 04:04 PM PDT

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