What Is the Equal Credit Opportunity Act?

Most people rely on creditors and lenders to make large purchases or get credit for daily living. This includes car loans, real estate mortgages, and credit cards. As a borrower, you should get equal and fair treatment. Unfortunately, some lenders discriminate against borrowers based on their race or gender.

The Equal Credit Opportunity Act prohibits discrimination in lending. The ECOA empowers borrowers to enforce their legal rights. For more information about how the Equal Credit Opportunity Act protects you, talk to a consumer protection lawyer.

How Does the Equal Credit Opportunity Act Work?

The Equal Credit Opportunity Act (ECOA) is a federal law prohibiting credit discrimination. Creditors can’t discriminate against consumers and borrowers based on their protected status. Protected classes under the ECOA include:

• Race
• Color
• Religion
• National origin
• Sex
• Marital status
• Age
• Borrowers on public assistance programs

Creditors can’t discriminate against anyone who exercises their Consumer Credit Protection Act rights. For example, you have the right to dispute errors on your credit report. Creditors must correct any mistakes. A creditor also can’t deny a loan because you exercised your legal rights.

What Are My Rights if a Lender Denies My Application?

If the lender denies your application, the creditor must give you the reason in an adverse action notice. Creditors must provide notice within 30 days of receiving a completed application. They must tell you why your application was denied or how you can find that information.

What Are Examples of Credit Discrimination?

Consider this example of possible credit discrimination, which can help you understand fair lending laws.

A mortgage lender gets a credit application from a woman to purchase a home. The lender assumes she will stop working to raise children and no longer have the same income. The lender denies the loan even though she has enough income and a high credit score. Even if the lender doesn’t say why they rejected the mortgage, this could be an example of credit discrimination.

Do All Creditors Have To Follow the ECOA?

Under federal civil rights laws, the ECOA applies to all creditors. This includes:

• Credit unions
• Banks and financial institutions
• Credit card companies
• Mortgage companies
• Finance companies
• Retailers with store credit cards

What Are Signs of Credit Discrimination?

Spotting credit discrimination is often difficult. The lender may not say anything about your ethnicity or that you get money from Social Security. They may just give you a higher interest rate without any comments that they did so based on race. Credit applications already include personal information, including your income, employment, and credit history.

According to the Consumer Financial Protection Bureau (CFPB), credit discrimination is hard to spot. Signs of possible credit discrimination include:

• The manager making jokes or negative comments about people of a certain race or sexual orientation
• The lender suggests applying from a different financial institution
• You qualified for a rate online or over the phone but not when you met with them in person

Not all questions about marital status, sex, or age are evidence of discrimination. For example, a lender can ask about your spouse if you live in a community property state or rely on alimony or child support. Lenders can also ask for voluntary information about your race or sex for federal government reporting and monitoring purposes.

How Can I Report Creditor Violations Under the ECOA?

You can report credit discrimination if you suspect the lender is treating you differently because of your status. You can report your concerns to federal agencies, including the CFPB, or at HelpWithMyBank.gov. You can also report discrimination to the relevant agencies, such as the Federal Trade Commission, FDIC, or Federal Reserve Board.

You can also contact your state attorney general’s office for equal credit opportunity state law violations.

If a creditor discriminates against your application on a prohibited basis, you can file a lawsuit in federal court. If the lender has discriminated against multiple borrowers, you can join a class action lawsuit against them.

The ECOA provides for actual and punitive damages in an ECOA lawsuit. Actual damages include your financial losses. Punitive damages punish the wrongdoer and deter similar violations in the future. Punitive damages can go up to $10,000 for individual violations.

If there’s a pattern of discrimination, the Department of Justice can also file a lawsuit against the lender under the ECOA or Fair Housing Act.

How Can a Lawyer Help With Equal Credit Opportunity Violations?

Many borrowers never find out they were victims of credit discrimination. If you suspect possible discrimination, it’s essential to report it. Reporting ECOA violations can help protect others from similar discrimination. It may also allow you to punish the lender with financial penalties. A consumer protection lawyer can review your case and explain your legal options. Your lawyer can file a lawsuit to help you recover compensation. For more information about protecting your rights, contact a consumer protection attorney.