The Act gives every consumer an equal chance to obtain credit. You should remember that this does not mean everyone is entitled to credit, but it does mean that every consumer’s application for credit will be treated equally and that a creditor cannot unfairly discriminate against a consumer.

What Are Creditors Prohibited from Doing when I Apply for Credit?

Creditors are generally prohibited from asking consumers personal questions pertaining to the consumer’s race, gender, or religion, as well as questions regarding the consumer’s marital status or child custody status that have no bearing on their credit application.

A creditor may not require you to disclose:

  • Race
  • Sex
  • National origin
  • Religion

Creditors can ask you for this information voluntarily, but it shouldn’t affect your credit application.

Pertaining to Marital Status, a Creditor May Not Ask:

  • Questions about your marital status if you are applying for a separate account unless you live in a state that recognizes community property (i.e., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin)
  • If you’ve been widowed or divorced. Creditors will only ask if you are married, divorced, or separated
  • Regarding your spouse, unless your spouse plans to use the account or you are reliant on child support or alimony from a former spouse or live in a community property state

Pertaining to Your Children, a Creditor May Not Ask:

  • What your plans are for having children or raising them
  • If you receive child support or alimony, you are not required to provide the creditor with information unless you rely on these payments to qualify for credit. If you have been told ahead of time, you may provide that information voluntarily.

What Is a Creditor Prohibited from Considering when Deciding to Give Me Credit?

When a creditor is deciding whether to grant you credit, the creditor cannot consider:

  • Your sex, religion, national origin, marital status, or race (or the race of the people in your neighborhood)
  • Whether you are listed in the phone book
  • Your age, unless it is used to evaluate other factors important to creditworthiness (such as whether the consumer is old enough to legally sign contracts)

What Am I Entitled to Know Once I Have Finished Applying for Credit?

Upon completing the application process, the creditor must notify you within 30 days whether your application has been approved or denied. Upon being denied, you may ask for specific reasons why, and the creditor must give you those reasons within 60 days. This is required by law. The creditor must explain why you were approved for credit on less favorable terms.

Special Considerations

Lenders may ask about some of the personal facts that ECOA prohibits when a borrower applies for credit. Although these questions cannot be used to make lending decisions and answering them is optional, the information helps federal agencies enforce anti-discrimination laws. The ECOA also permits each spouse in a marriage to have a credit history. Still, if a borrower and their spouse have joint accounts, both credit reports will show the accounts. The financial behavior of a spouse can have a positive or negative effect on the credit score of an individual borrower.

Whenever you are rejected for a loan or a credit line, the lender must tell you in an Adverse Action Notice the reasons your application was denied or that you have the right to request the reasons for denial within 60 days of receiving the notice.

ECOA prohibits lenders from determining credit eligibility based on marital status. However, some loans, such as mortgages, may require borrowers to disclose alimony or child support income as a basis for credit qualification. Divorce does not automatically disqualify a borrower from getting a loan. However, divorced borrowers cannot be denied a loan.

Examples of Equal Credit Opportunity Act (ECOA) Enforcement

ECOA violations include charging higher rates or fees to Black, Indigenous, and People of Color (BIPOC) applicants. Both of these cases involved this.

Wells Fargo Bank was recently fined more than $175 million by the Department of Justice (DOJ) for discriminatory lending practices. Black and Hispanic borrowers qualified for loans but were charged higher fees or rates or were wrongfully placed into subprime loans, which are more expensive.

In January 2017, JP Morgan Chase settled a discrimination lawsuit for $53 million. In the events leading up to and during the 2008 financial crisis, the bank’s brokers charged BIPOC borrowers higher interest rates than White borrowers.

Who Oversees the Equal Credit Opportunity Act (ECOA)?

The Consumer Financial Protection Bureau (CFPB) is responsible for enforcing the ECOA and for supervising financial institutions (such as banks and lending companies). Compliance is also overseen by several other federal agencies, including:

  • Federal Deposit Insurance Corporation (FDIC)
  • National Credit Union Administration (NCUA)
  • Federal Reserve Board (FRB)
  • Office of the Comptroller of the Currency (OCC)

The CFPB enforces ECOA in conjunction with the agencies mentioned above, the Department of Justice, and the Federal Trade Commission.

Does ECOA Apply to All Creditors?

Yes. All creditors are covered by the Equal Credit Opportunity Act. In the course of extending credit, financial institutions and other companies cannot discriminate against applicants on a prohibited basis. Furthermore, lending officers and employees can’t do anything that discourages a reasonable person from applying for a loan on a prohibited basis.

What Is the Penalty for Violating the Equal Credit Opportunity Act (ECOA)?

Lenders who violate ECOA may face class-action lawsuits from the Department of Justice (DOJ) if the DOJ or any affiliated agencies identify a pattern of discrimination.

Together with other federal agencies, the Consumer Financial Protection Bureau enforces ECOA. Punitive damages can be significant, and the offending organization could be forced to cover the costs incurred by the wronged party if found guilty.

Your Equal Credit Opportunity Rights

ECOA gives you the following rights when you apply for a loan or line of credit:

  • Creditors can only consider relevant financial factors when determining the terms of your loan, including your credit score, income, and credit history.
  • A person may receive credit for their birth name, first name and spouse’s last name, first name, and combined last name.
  • If your name or marital status changes, you reach a certain age, or you retire, you are entitled to keep your accounts unless the creditor can prove that you are unable or unwilling to pay.
  • After submitting a complete application, the creditor must notify you if your application was accepted or rejected within 30 days.
  • Creditors must provide a specific reason for rejecting your application or mention that you may learn the reason if you ask within 60 days

Identifying the Signs of Credit Discrimination

Because credit discrimination is not always obvious, it is hard to detect. To spot ECOA violations, consumers should look for these warning signs:

  • On the phone or online, you are treated differently than in person.
  • Credit applications are discouraged.
  • You hear the lender make negative comments about race, national origin, or sex during your loan process.
  • Even though you meet the advertised requirements, you are refused credit.
  • Even though you qualify for a lower rate, you are offered a higher rate than what you applied for.
  • If you are denied credit, you are not told why or how to find out why.
  • You feel pushed or pressured to sign.

What Should I Do if I Feel My Consumer Rights Under this Act Have Been Violated?

Contact the creditor. This violation should also be reported to your state attorney general and to the appropriate federal agency (in most cases, the Federal Trade Commission (FTC). You may also want to consult a business attorney who specializes in civil suits concerning consumer credit since you could be entitled to money damages in a lawsuit or may be able to join an already existing class-action suit against the creditor.