What is the Equal Credit Opportunity Act?

The Equal Credit Opportunity Act, often referred to as ECOA,  prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.  The creditors can ask for this information but can’t use it in making the decision to give you credit or setting the credit terms.

Creditors make decisions using credit reports, credit scores, income data, asset data, and debt data. The type of loan or credit offer determines what data they’ll likely use.  The Equal Credit Opportunity Act is enforced by the Federal Trade Commission (FTC).  This Act applies to any company or person that extends credit, such as banks, finance companies, retailers, credit card companies, credit unions, and real estate brokers.

What creditors cannot do when you apply for credit

  • Reject your application because of your race, color, religion, national origin, sex, marital status, or because you receive public assistance.
  • Consider your race, sex or national origin, but you may be asked to disclose this information.
  • Give you different terms or conditions, such as higher interest rate, because of your race, religion, national origin, sex, marital status, age, or because you receive public assistance.
  • Ask if you are widowed or divorced; can only use the terms: married, unmarried or separated.
  • Ask your marital status if applying for an individual, unsecured account such as a credit card. This exception; “community property” states.
  • Ask for information about your spouse except in the following:  applying jointly, will be using the account, rely on income from spouse or receive child support or alimony from a former spouse, or live in a common law state.
  • Ask about your plans to have or raise children, but can ask about expenses related to dependents.

What creditors can’t do when deciding to grant credit or set the terms

  • Consider your race, color, religion, national origin, sex, marital status or whether you get public assistance.
  • Consider your age unless: under age 18; 62 years or over (you get special treatment); and  if age might impact creditworthiness, such as getting ready to retire.
  • Consider whether have phone account in your name, but they can ask if have a phone.
  • Consider the racial make-up of the neighborhood where you are buying or remodeling.

It is important to be aware of your rights.  If you feel your rights have been violated contact the FTC or other regulatory agencies that govern the financial institution.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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