The Equal Credit Opportunity Act prohibits lenders from discriminating based on race, religion, national origin, gender, marital status, age, or source of income. It applies to most lenders and covers all aspects of the lending process. Enforcement is carried out by federal agencies and individuals can also file lawsuits for discrimination. Personal information can still be requested but cannot be used to influence lending decisions.
The Equal Credit Opportunity Act, commonly referred to as ECOA, is an aspect of United States law that prohibits most lenders from discriminating on the basis of race, religion, national origin, gender, marital status, age, or source of income. The act was enacted in 1974 as part of the larger Consumer Credit Protection Act (CCPA). The Equal Opportunity Credit Act amends the CCPA by prohibiting discrimination at any level of the lending process. Lenders can still ask lenders to provide certain personal information, but under the deed they cannot use that information to decide whether to extend a loan or to decide what the terms of any resulting loan will be.
The Equal Credit Opportunity Act is codified in the United States Code, United States statutory law, section 15 USC 1691. The act applies to any person or entity that “regularly extends, renews, or continues credit,” as well as anyone who participates in the decision of that person or entity. Banks, mortgage lenders and all commercial lenders are covered. Personal loans between friends or one-off loans between parties who aren’t regular lenders usually aren’t.
Enforcement of the Equal Credit Opportunity Act is an important part of many aspects of US law practice. The act is important to US federal banking legislation insofar as it covers banks and commercial lenders. It also commonly occurs in property and real estate law, as its provisions pertain to housing lenders and property loans. The act also touches on consumer protection law in relation to credit card companies, personal credit extensions and interest rates.
In large part, the Equal Credit Opportunity Act was designed to ensure that all individuals applying for credit are treated on an equal footing. The act specifically prohibits discrimination based on race, religion, national origin, sex, marital status, age, or receipt of public assistance such as welfare. Discrimination is prohibited both in deciding whether to grant a loan or in any other aspect of the loan origination process, such as the setting of loan rates, interest or penalties.
Lenders may still ask for personal details such as marital status or age when deciding whether to give you a loan or extend your credit. All the Equal Credit Opportunity Act says is that the lender cannot use any of the factors mentioned to influence the decision. In some cases, borrowers may choose to report their demographic and personal information so federal agencies can better monitor whether lenders are following the rules of the law.
What type of loan is at stake affects who enforces the act. The Federal Trade Commission applies the law to most consumer lending scenarios, while the Department for Housing and Urban Development applies it to home loan transactions. The Federal Deposit Insurance Corporation enforces the act against most commercial banks. If a certain lender has established a routine pattern of discrimination, the Justice Department usually gets involved. Agencies monitor lenders’ practices, but also depend on consumer complaints to take action.
The act also provides for a private right of action, meaning that people who believe they have been discriminated against can bring a lawsuit on their own, without going through a federal agency. Discrimination claims under the Equal Opportunity Credit Act are filed in US federal district court. Federal district courts enforce federal law, but sit in each state. Individuals who believe they were not the only victims of discrimination by a particular lender may choose to file a class action lawsuit, which combines many plaintiffs with a similar complaint into a single claim. Monetary damages and compensation are usually higher in class action lawsuits.
Filing a lawsuit in federal court is a complex undertaking, both individually and on behalf of a class. Lawsuits allow injured parties to collect damages that may not be available in a federal agency enforcement action, but they also require more time, resources, and know-how than simply reporting an agency a possible abuse. It is usually best to consult a lawyer before taking any individual action.
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