how does the equal credit opportunity act protect consumers

by Dr. Harold Gerlach IV Published 3 years ago Updated 2 years ago

This Act (Title VII of the Consumer Credit Protection Act) prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act.

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Why is equal credit opportunity so important?

Why is Equal Credit Opportunity so important? The Equal Credit Opportunity Act is very important to create and maintain a level playing field for obtaining and accessing credit, whether it be for a mortgage for a home, or a credit card, or an auto loan, or any banking type loan. It protects the following classes: Race. Sex. Color. National Origin.

What does the equal credit Opportunity Act cover?

The Equal Credit Opportunity Act (ECOA) is a United States law (codified at 15 U.S.C. § 1691 et seq.), enacted 28 October 1974, that makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract ...

Why did the equal credit Opportunity Act become necessary?

The Equal Credit Opportunity Act, or ECOA, is intended to give everyone in America a fair chance at obtaining a loan. It was passed back in 1974, when credit scoring was in its early stages and lending decisions were still “arguably susceptible to a loan officer’s personal judgments and prejudices,” per a 2012 paper written by Dubravka Ritter for the Federal Reserve Bank of Philadelphia.

Who does the equal credit Opportunity Act protect?

The Equal Credit Opportunity Act [ECOA], 15 U.S.C. 1691 et seq. prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.

How does the Equal Credit Opportunity Act help consumers?

Specifically, ECOA protects consumers from lending discrimination based on race, color, religion, national origin, sex, marital status, age, public assistance, or the exercise of any rights under the Consumer Credit Protection Act.

What is the main purpose of ECOA?

ECOA is a federal civil rights law that protects you from being discriminated against by lenders, based on any of the following reasons: Race. Color. Religion.

What violates the Equal Credit Opportunity Act?

It prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age or because a person receives public assistance in whole or in part. It also makes it unlawful to discriminate against anyone who has exercised any rights under the Consumer Credit Protection Act.

What are the only three reasons a person can be denied credit according to the Equal Credit Opportunity Act?

Except as otherwise permitted or required by law, a creditor shall not consider race, color, religion, national origin, or sex (or an applicant's or other person's decision not to provide the information) in any aspect of a credit transaction.

What is the purpose of the Equal Credit Opportunity Act quizlet?

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in the granting of credit based on race, color, religion, national origin, sex, marital status, age or receipt of public assistance.

How does the Consumer Credit Protection Act protect consumers?

It requires creditors to disclose credit terms to consumers. The Consumer Credit Protection Act also protects consumers from loan sharks, restricts the garnishing of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry.

What does the Equal credit Opportunity for All Act say?

These discoveries led to the Equal Credit Opportunity Act (ECOA), which prohibits lenders from discriminating against any applicant on the basis of age, gender, ethnicity, nationality, or marital status.

What are some common ECOA issues?

The Top 5 Most Common Violations of the Equal Credit Opportunity...Race.Color.Religion.National origin.Sex / gender.Marital status.Age (unless a person is not of legal age to enter into a contract)Status as a public assistance recipient.More items...•

When was the Equal Credit Opportunity Act effective?

The Equal Credit Opportunity Act is a federal financial regulation law enacted in 1974. The act prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, or age in credit transactions.

Under what circumstances might you be protected by the Equal Credit Opportunity Act?

This Act (Title VII of the Consumer Credit Protection Act) prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act.

What is a red flag for an Equal Credit Opportunity Act violation?

ECOA violations. 1. The lender changes its story after meeting a client face-to-face after telephone conversation approval. 2. There is any indication that the loan is denied based on personal status.

Does a lender have to tell you why you were denied?

Under the Equal Credit Opportunity Act , the creditor must tell you why you were denied, though it doesn't have to tell you the factors and points used in its scoring system. Lenders are required to send you a free copy of the credit report used to arrive at the decision.

What did the Equal Credit Opportunity Act establish?

Introduced in House (05/29/1973) Equal Credit Opportunity Act - Prohibits discrimination by any creditor, card issuer or other person against any person on account of sex or marital status in connection with approval or denial of credit.

What is ECOA fair lending?

The Equal Credit Opportunity Act (ECOA), which is implemented by the Board's Regulation B (12 CFR 202), prohibits discrimination in any aspect of a credit transaction.

What disclosures are required by ECOA?

The ECOA requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit....§ 1002.9 Notifications.Use of the term adverse action. ... Expressly withdrawn applications. ... When notification occurs. ... Location of notice. ... Prequalification requests.

What are some common ECOA issues?

What is the purpose of the Equal Credit Opportunity Act?

Code, is intended to prohibit discrimination by lenders in any aspect of granting credit to an individual. The act's purpose is to prevent lenders from using race , color, sex, religion, or other non-creditworthiness factors when evaluating a loan application, ...

What Is the Equal Credit Opportunity Act (ECOA)?

The Equal Credit Opportunity Act (ECOA) is a law created by the U.S. government with the aim of giving all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders.

What is an ECOA loan?

It also applies to anyone involved in the decision to grant credit or set its terms—for example, real estate brokers who arrange financing. The ECOA covers various types of credit, including personal loans, credit cards, home loans, student loans, car loans, small business loans and loan modifications.

What is the ECOA?

What Is the Equal Credit Opportunity Act (ECOA)? The Equal Credit Opportunity Act (ECOA) is a law created by the U.S. government with the aim of giving all individuals an equal opportunity to obtain loans and other types of credit from financial institutions and other lenders.

How to complain about a creditor?

First, contact the creditor to complain. Sometimes you’ll be able to persuade them to take a second look at your application.

What are the factors that creditors can consider when applying for a loan?

Creditors are only allowed to consider relevant financial factors—your credit score , your income, and your credit history, including your existing debt load —when considering your credit application or setting terms for the loan.

Can you get credit in your birth name?

You are entitled to credit in your birth name.

What is the role of the Federal Reserve Board in implementing the ECOA?

These rules are written to make sure that consumers are protected and that lenders know how to avoid discrimination in lending.

What is the role of the CFPB in ECOA?

Besides writing rules to implement ECOA, at the CFPB we supervise institutions like banks and lending companies to ensure they are following the law. We also promote the development of markets for consumer financial products and services that are fair and nondiscriminatory.

What is ECOA?

ECOA is a federal civil rights law that protects you from being discriminated against by lenders, based on any of the following reasons:

What is the role of the CFPB in enforcing ECOA?

When appropriate, the Bureau also takes public enforcement action under ECOA to hold financial institutions accountable for their actions that violate ECOA. The CFPB shares the job of enforcing ECOA with other federal agencies, including those listed above, as well as the Department of Justice and the Federal Trade Commission . We all work together to ensure that institutions are following the law.

Why was ECOA passed?

Why it became the law. ECOA was passed at a time when discrimination against women applying for credit was common. For example, mortgage lenders often discounted a married woman’s income, especially if she was of childbearing age. Things weren’t much better for single women, either.

What are the requirements for ECOA?

ECOA is a federal civil rights law that protects you from being discriminated against by lenders, based on any of the following reasons: 1 Race 2 Color 3 Religion 4 National origin – The country you or your ancestors were born in 5 Sex (including gender) 6 Marital status 7 Age (as long as the applicant is old enough to enter into a contract) 8 Receiving money from any public assistance program, such as Social Security Disability Insurance (SSDI) or the Supplemental Nutrition Assistance Program (SNAP) 9 Exercising your rights under certain consumer protection laws

What does the CFPB do when it supervises an institution?

When we supervise an institution to make sure it is not discriminating , we often visit the institution itself and review its records, conduct analyses of lending outcomes, review consumer complaints, and interview the lender’s employees and officers. The CFPB shares the job of supervising for compliance with ECOA with other federal agencies, including the Office of the Comptroller of the Currency , Federal Reserve Board , Federal Deposit Insurance Corporation , and National Credit Union Administration .

What is the role of the ECOA?

The role of the ECOA is to give protection to consumers when they interact or conduct business with individuals or companies that are known to regularly extend credit. These entities include:

Can a consumer sue a creditor for a notice violation?

Should a consumer have their rights violated in some way by a creditor, such as by being discriminated against or receiving a notice violation, they have the right to sue the creditor. If the person decides to take legal action and is successful in their lawsuit, the court can also award punitive damages.

How Is Equal Credit Enforced?

The Consumer Financial Protection Board, banking agencies and the D.O.J. share enforcement duties of the ECOA. The CFPB is the only U.S. agency whose primary mission is to protect consumers of financial services.

When determining a consumer's creditworthiness, financial institutions must instead consider income, expenses, debts and?

When determining a consumer’s creditworthiness, financial institutions must instead consider income, expenses, debts and credit history. Creditors are permitted to ask for certain information to help in the documentation process, but even that is limited by certain rules.

When Was the ECOA Passed?

The U.S. House of Representatives passed it in 1974 by a vote of 282-94. It moved to the Senate, which passed an amended version 89-0. The House then approved the amended version 355-1 and President Gerald Ford signed the bill into law on Oct. 10, 1974.

What is the ECOA?

The ECOA requires banks, credit card companies and anyone else involved in lending to make credit equally available to all creditworthy customers. It prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age or because a person receives public assistance in whole or in part.

How does the CFPB work with the D.O.J.?

The CFPB works with the D.O.J. when it has a case of discrimination under the ECOA and the Justice Department can file a federal lawsuit if it sees a pattern of discrimination.

Why did lenders take so long to process credit applications?

Lenders also took much longer to process applications from women and minorities in order to discourage those groups from seeking credit. In short, if you weren’t a white male you were likely to be treated like a potential problem, not a potential customer.

How long does it take to receive a response from an ECOA?

The primary right consumers have under the ECOA is to receive a response on their application – favorable or unfavorable – within 30 days of receiving the application and if the application is denied, receive written notification of why it was denied.

What is ECOA in credit unions?

The Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691 et seq. (opens new window), which is implemented by Regulation B ( 12 CFR Part 1002 (opens new window) ), applies to all creditors, including credit unions. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) transferred this authority to the Consumer Financial Protection Bureau (CFPB or Bureau). The Dodd-Frank Act granted rule-making authority under ECOA to the CFPB and, with respect to entities within its jurisdiction with over $10 billion in assets, granted authority to the CFPB to supervise for and enforce compliance with ECOA and its implementing regulation. NCUA continues to have authority to enforce ECOA for federally chartered credit unions under its supervision with $10 billion or less in assets. NCUA is not the primary enforcement authority for ECOA in federally-insured, state-chartered credit unions (FISCUs). If you find ECOA violations at a FISCU and you feel the State Supervisory Authority is not properly addressing the issue, contact your supervisor.

What is the purpose of ECOA?

The purpose of ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, ...

What is required to obtain unsecured credit?

If a married applicant requests unsecured credit and resides in a community property state, or if the applicant is relying on property located in such a state, the creditor requires the signature of the spouse only on any instrument necessary, or reasonably believed by the creditor to be necessary , under applicable state law to make the community property available to satisfy the debt in the event of default and (1) applicable state law denies the applicant power to manage or control sufficient community property to qualify for the credit requested under the creditor’s standards of creditworthiness; and (2) the applicant does not have sufficient separate property to qualify for the credit requested without regard to community property. (§ 1002.7 (d) (3)) (opens new window)

What is Regulation B?

In keeping with the broad reach of the statute’s prohibition, Regulation B covers creditor activities before, during, and after the extension of credit.

What is the job of a credit reporting agency?

Obtain and review policies and procedures, training materials, and audits pertaining to the designation of accounts on furnishing them to credit reporting agencies, as well as a sample of information reported to the credit reporting agencies.

What is the purpose of reviewing the results of analysis from the fair lending software?

Review the results of analysis from the fair lending software to identify possible examination focal points.

When did the CFPB change the regulations?

In January 2013, CFPB amended Regulation B to reflect the Dodd-Frank Act amendments requiring creditors to provide applicants with free copies of all appraisals and other written valuations developed in connection with all credit applications to be secured by a first lien on a dwelling.

Your Equal Credit Opportunity Rights

The Equal Credit Opportunity Act (ECOA) makes it illegal for creditors (also known as banks, mortgage companies, small loan and finance companies, credit unions, retail and department stores, credit card companies, other online companies offering credit, and people who arrange for credit) to discriminate against you.

When Is It Credit Discrimination?

To ensure equal access to credit, creditors must not consider certain factors when making a credit determination. These factors include

You Have Other Important Rights

have credit in your birth name (Mary Smith), your first and your spouse’s last name (Mary Jones), or your first name and a combined last name (Mary Smith Jones)

Building and Protecting Your Credit History

A good credit history — a record of how you pay your bills and if you pay on time — often is necessary to get credit. This can be hard for young people to establish when they’re just starting out and don’t have a history of paying their own bills.

What Are Consumer Rights?

There are dozens of laws and acts that clearly define consumer rights, but they can be broadly explained by these four basic rights:

Why is it important to understand consumer rights?

The sheer number of laws can be overwhelming, but it is important that consumers understand their basic rights, so they can identify when those rights have been violated.

What is the Federal Reserve's credit practice rule?

The Federal Reserve Board adopted the Credit Practices Rule in 1985 to protect the rights of consumers in debt. It applies to consumer credit contracts made with creditors such as car dealers, department stores and financing companies. It doesn’t apply to real estate purchases, bank loans or contracts with loan associations, yet it covers mobile homes and houseboats.

What is a waiver of a credit obligation?

Contract provisions that force a consumer to relinquish legal protections of his home, possessions or wages against seizure to satisfy a judgment – such a waiver is permitted if the property is given as collateral in the credit obligation

What is the right to choose?

An informed consumer will be able to make safer decisions. This right requires producers to provide accurate and truthful information in advertising, especially when it comes to health and medicine. 3. Right Choose. This is the right to choose between alternatives products.

Why are lenders regulated?

Lenders are regulated to ensure they adhere to standardized practices that are fair and honest. For example, the act deals with credit reports and other aspects of debt and credit.

When did the consumer rights act start?

It started with the Consumer Credit Protection Act of 1968, when Congress moved to shield consumers and their financial records from abuse. In the years following, other laws refined consumer rights, ...