The Equal Credit Opportunity Act is the statute enacted in 1974 that protects consumers from being discriminated against during a credit transaction based on race, color, religion, sex, marital status, age or use of public assistance. The law applies to any entity who participates in making a credit decision such as banks, retail stores, credit unions, finance companies, etc. When a consumer is in a position to be concerned about their ability to receive credit because of a poor credit history, knowing the Equal Credit Opportunity Act (“ECOA”) is there to protect you from being discriminated against can give you peace of mind that you should have a fair chance at obtaining approval.
While the Fair Credit Reporting Act (“FCRA”) protects consumers with problems relating to their credit report and the Fair Debt Collection Practices Act (“FDCPA”) protects consumers from abusive debt collectors, the ECOA is meant to protect you from being discriminated against and ensure you have an equal opportunity at obtaining a loan. In its initial stages the statute only protected consumers based on sex and marital status, but has since been amended to protect a greater population of consumers.
The Equal Credit Opportunity Act applies to all lenders regardless of the type or size of loan applied for. In understanding the statute and how it can protect you, it is helpful to know what a lender is allowed to consider when making a decision whether or not to lend you money or approve you for a credit card. Lenders may consider your income, expenses, amount of debt, credit history and credit score. Your credit score, which is usually the most important factor to be considered, includes a mix of information calculated from your credit report. When applying for a loan or credit card, creditors and lenders can ask for all of the aforementioned information from you to make an educated decision.
Creditors and lenders are not obligated to approve you for credit but may only base their decision on the factors included in your report. Matters pertaining to race, religion, and national origin do not appear on your credit record. Age is determinable on your credit report, and in most instances, gender is too. However, if a creditor bases its decision on discriminatory information and not whether or not you are considered a credit risk, then your rights may have been violated.
Additionally, under the ECOA, you are entitled to find out why you have been denied credit or received less than favorable terms, such as a high interest rate or low credit limit. You may request this information but only in the event you don’t accept a credit offer. In the event you are discriminated against, lenders are subject to penalties of up to $10,000.
If you believe your rights have been violated under the ECOA, the FCRA or the FDCPA and would like the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.