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Understanding the Equal Credit Opportunity Act

On Behalf of | Jan 1, 2013 | Consumer Protection

The Equal Credit Opportunity Act (“ECOA”) 15 U.S.C. § 1691 et seq. is a United States law enacted in 1974, that makes it illegal for a creditor to discriminate against a credit applicant on the basis of race, color, religion, national origin, sex, marital status, age or because you receive public assistance.  The ECOA applies to any person who, in the ordinary course of business, regularly participates in a credit decision, including banks, retailers, credit card companies, finance companies and credit unions.  Failure to comply with the rules and regulations of the ECOA may subject a creditor to actual and punitive damages as high as $10,000 in an individual suit and up to $500,000 in a class action.

When applying for credit it is important to understand your rights and what a creditor may and/or may not ask of you during the application process.  First, a creditor may likely ask you for personal information such as race, religion, sex, martial status, etc. but may not use this information in basing its decision on whether or not to extend you credit.  A creditor may not impose alternate terms or conditions on your loan if approved simply because of this information, such as a higher interest rate or fees.  Factors such as income, expenses, debt and credit history however may legally be evaluated in determining whether to extend you credit.

Furthermore, a creditor may not ask if you are widowed or divorced, but may inquire about your marital status if you are applying for a joint account.  Similarly, a creditor may not ask for information about your spouse unless you are applying for a joint account or plan to make your spouse an authorized user on the account.  However, if you reside in a community property state, the creditor grantor may inquire about your spouse without violating the spirit of the ECOA.   Lastly, a creditor may not ask about your plans to have or to raise children but may ask about living children and whether or not you are financially responsible for their care as this may impact your ability to make payment on a debt.

If a creditor has discriminated against you, you are entitled to sue the creditor in federal court under the ECOA.  If successful, you are entitled to recovery as described above including your attorneys’ fees and court costs.  If you feel your rights have been violated under the ECOA, contactSmithMarco P.C. for a free case review.