The Equal Credit Opportunity Act

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

There are several consumer credit protection laws in America, including the Fair Credit Reporting Act (FCRA), the Credit Repair Organizations Act (CROA), and the Fair Credit Billing Act (FCBA). The Equal Credit Opportunity Act (ECOA) is another one of these laws. As the name implies, the ECOA ensures that creditors can’t discriminate against borrowers. Individuals should be aware of the ECOA so they know their rights when dealing with creditors. 

What is the Equal Credit Opportunity Act?

The Equal Credit Opportunity Act was enacted by the U.S. Government in 1974. The law states that individuals applying for credit and loans can only be evaluated by their creditworthiness. This means creditors and lenders can’t discriminate against applicants based on their race, sex, ethnicity, national origin, religion or age (as long as they meet minimum age requirements), their receipt of public assistance or their good-faith exercise of any right under the Consumer Credit Protection Act (CCPA).

None of these factors should play a role in any part of the loan approval process, including approving or denying loans, discouraging an applicant from applying, setting loan terms such as interest rates, or setting loan fees. 

When members of Congress were first drafting the bill, “sex” and “marital status” were not included. Congresswoman and women’s rights advocate Lindy Boggs added a provision to the act to add these two categories without telling her colleagues. When it came time to address her changes, Boggs stated, “Knowing the members composing this committee as well as I do, I’m sure it was just an oversight that we didn’t have ‘sex’ or ‘marital status’ included. I’ve taken care of that, and I trust it meets with the committee’s approval.” Luckily, no one argued with Boggs’ additions to the legislation. 

EOCA covers many institutions and positions. The following people and organizations must adhere to the ECOA:

• Banks
• Small loan and finance companies
• Retail and department stores
• Credit card companies
• Credit unions
• Real estate brokers who arrange financing

Your rights under the ECOA

It’s important to note that creditors often collect personal information about applicants that may include details such as their age, sex, marital status, race, religion, and more. However, the ECOA clearly prohibits this information from being taken into account when making lending approvals or denials. Borrowers can only consider factors associated with a person’s creditworthiness, such as their income, debt, credit score, credit report and so on. 

Under the ECOA, your rights are:

• Only creditworthiness factors can be considered in your credit or loan application.
• You have the right to take out credit in your birth name.
• If you meet all the requirements, you have the right to apply for an account without a cosigner.
• You can apply for an account with a cosigner who isn’t your spouse.
• You can keep any accounts after you change your marital status or name, if you reach a certain age or if you retire. The exception to this right is if the lender has proof that you can’t pay or are unwilling to pay, in which case they can terminate your account.
• Creditors have to tell applicants if they’ve been approved or denied within 30 days of receiving an application.
• If you ask within 60 days of finding out you’ve been denied, you have the right to be told the specific reason(s) for your rejection. Acceptable reasons can be along the lines of “your debt-to-income ratio is too high” or “your credit score is too low.” Vague answers, such as “”you didn’t meet our qualifications,” are not an acceptable response.
• Creditors must view public assistance as the same as any other type of income.
• Creditors and lenders can’t ignore income earned through part-time employment, pensions, annuities or Social Security.
• When applying for a separate, unsecured account, lenders and creditors can’t inquire about your marital status.
• Creditors or lenders aren’t allowed to ask if you’re divorced or widowed.
• Creditors or lenders can’t ask if you receive alimony, child support or separate maintenance payments. Some will ask this question after clarifying that you’re not obligated to answer it.
• Creditors or lenders can’t ask about your plans for raising children. However, they can ask questions about expenses for dependents.
• Creditors or lenders can’t ask questions about your spouse unless:
  • They’re applying with you
  • They’ll be on the account with you
  • You’re relying on their income, alimony or child support
  • You live in a community property state

Look out for credit discrimination

Unfortunately, credit discrimination still happens today. When it does happen, it’s essential to be aware of it so you can stand up for your rights. 

When looking out for credit discrimination, take note of things like lenders:

• Making negative comments about race or sex
• Treating you differently in person vs. online or over the phone
• Refusing you credit and not telling you why
• Telling you you’ve been denied when you know you met all their qualifications
• Offering you a higher rate or different loan terms, even though you know you qualify for better terms
• Discouraging you from applying for credit at all

What to do if you think your ECOA rights have been violated

If you believe your ECOA rights have been violated, you can take steps to challenge the situation. 

Speak to the creditor and consider suing them

Creditors are legally obliged to adhere to ECOA. The first step is to speak to the creditor. There’s a possibility you dealt with a prejudiced employee and the actions are not reflective of the creditor as a whole. 

If they’re unwilling to reconsider your application or rectify the situation, you can consider suing them. You likely have a strong case and you’ll bring forward justice against someone who may be breaking the law. Many lawyers and attorneys offer a free initial consultation to determine if someone has a viable case. 

Contact your state Attorney General’s office

You can contact your local state Attorney General’s office to see if the creditor has a history of EOCA complaints. If they do, you may have a stronger case for repeat behavior in a lawsuit. If there are no other complaints, it can still be helpful to file one. The Attorney General may choose to investigate. 

Complain to the CFPB

Consider complaining to the Consumer Financial Protection Bureau (CFPB). The CFPB will reach out to the creditor to get answers on your behalf. 

Report it to the appropriate government agency

Whenever you’re denied credit, the required notification of denial includes contact information for the relevant government agency associated with your type of loan or credit. If you believe your denial was against the ECOA, contact this government agency and let them know. 

If you’re being denied credit due to “creditworthiness” factors, it might be time to consider whether your credit score is too low. Lexington Law Firm offers credit repair services to evaluate your credit and help you dispute any inaccurate negative items. If you can improve your score, it may open the door to new financial opportunities, including any loans you may need in the future. 

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