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The Equal Credit Opportunity Act (ECOA) is a federal law that prohibits creditors from discrimination against an applicant for credit on the basis of age, marital status, sex, race, religion, color, national origin, or receipt of public assistance. The ECOA also prohibits discrimination against an applicant for credit if the applicant has in a good faith exercised any rights under the federal laws for consumer credit protection. The act ensures that credit opportunity is equally available to all creditworthy applicants from the credit extending institutions.

Areas covered in ECOA

The major areas ECOA deals with are:
  • General rules prohibiting discrimination
  • Rules concerning taking of applications
  • Rules on providing property appraisal reports
  • Rules concerning evaluation of applications
  • Rules concerning extensions of credit
  • Rules concerning special purpose credit programs
  • Rules on furnishing of credit information
  • Rules concerning information for monitoring purposes, and
  • Enforcement, penalties and liabilities for not complying the law
Thus, the ECOA covers all institutions that regularly extend credit including credit card companies, credit unions, banks, small loan and finance companies, and retail and department stores. Wherever the decisions to grant credit are involved the ECOA is applicable.

Consumer's rights under the ECOA

The major consumer's rights under the ECOA are:
  • Right to obtain, use, and maintain credit by requiring all credit extending institutions to give you a fair and equal credit opportunity. The credit extending institutions are free to have their own procedures for credit decision but ECOA ensures that these procedures are consistently applied for all credit applicants.
  • Right to non-discrimination based on age, marital status, sex, race, religion, color, national origin, or receipt of public assistance.
    • Credit extending institutions may ask you to voluntarily disclose this information (except religion) for certain purposes, but cannot use it to decide on your credit application.
    • The creditors may use age if (a) you are underage to sign a credit contract (generally less than 18 years of age); (b) You are 62 years or older and your age is used to favor you by the creditor
  • Right not to disclose information about your spouse unless you are applying for joint credit or using your spouse's income to obtain credit. The act also prohibit creditor to inquire about your plans for having or raising children.
  • Right to get notified in writing if the creditor has denied your application for credit.
  • Right to know the reason for denial of credit by the creditor, if requested within 60 days.
  • Right to know why you have been offered less favorable terms than you applied for.

  • Right to get a copy of the property appraisal report used for the decision on credit application.
  • The ECOA also requires creditors to consider additional information you might supply about your credit history.
If you feel that your application for credit has been discriminated based on any of the factors prohibited by ECOA, you can file a complaint and the creditor not complying with ECOA will have to face the penalties and liabilities under ECOA.

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