Equal Credit Opportunity Act – ECOA

 

 

The Equal Credit Opportunity Act (ECOA) specifies that creditors should take into account only the creditworthiness of consumers while taking lending decisions. Other factors like gender, age, race, marital status, etc. which do not have any bearing on an individual’s ability to repay debt should not be considered. The Equal Credit Opportunity Act (ECOA) is applicable to finance companies, bankcard companies, banks, credit unions and other lending institutions who are involved in providing credit to consumers in the United States of America.

The act has been established to ensure that consumers have equal opportunity to obtain credit and that they are not discriminated against in any way. The Equal Credit Opportunity Act (ECOA), however, does not ensure that all applicants can get credit. Consumers are entitled to get credit on the basis of their credit histories, debts and their income and expenditure patterns. Credit decisions based on race, origin, sex, marital status or age are prohibited by this act.

There are certain stipulations laid down by the Equal Credit Opportunity Act (ECOA) which specifies what a creditor cannot force upon an applicant. These are:

• A creditor cannot force an applicant to reveal his/her race, religion, national origin or sex. Moreover a creditor cannot discourage anyone from applying for credit due to these factors. In the case of a real estate loan, however, the creditor may ask the applicant to voluntarily disclose such information (with the exception of religion).
• A creditor cannot seek information as to whether someone is widowed or divorced. In cases where seeking information about marital status in permitted, a creditor may ask whether a person is married, unmarried or separated.
• In ‘community property’ states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington, information about marital status may be sought by a creditor. Information about marital status may also be sought if one applies for a joint account.
• A creditor cannot seek information about an applicant’s spouse unless the spouse is a co-applicant or the applicant is residing in a ‘community property’ state.
• Information about an applicant’s plans to have or raise children cannot be sought by a creditor.
• A creditor cannot discourage someone from applying because he/she receives public assistance income.
• Information as to whether a person receives alimony, child support, or separate maintenance payments cannot be asked for by a creditor. However a creditor may ask whether a person has to make such payments.

According to the Equal Credit Opportunity Act (ECOA), while evaluating the income of an applicant, a creditor needs to follow certain stipulations –

• Public Assistance Income has to be considered by the creditor.
• Income cannot be discounted on the basis of marital status or sex. It cannot be assumed by a creditor that women of childbearing age will stop working.
• Income from part time jobs, annuity, retirement benefits, and pensions has to be considered by the creditor.
• A creditor has to accept income from alimony, separate maintenance payments or child support. The creditor may however ask for proof o such income.

A credit applicant who feels victimized or discriminated against by a creditor may seek redress under the Equal Credit Opportunity Act (ECOA).

The consumers enjoy a range of rights and benefits under the Equal Credit Opportunity Act (FCRA). At the request of a consumer, a CRA has to provide him/her the information contained in his/her file. Furthermore the CRA must provide the list of lending organizations who have requested the credit details of the consumer.

The credit information provided by a CRA may be used to take measures against a consumer, such as rejection of credit application, employment or insurance. In such a case, the individual or organization taking such measure must provide the details of the CRA on whose reports the decision was based.

Furthermore, under the Equal Credit Opportunity Act (FCRA), a consumer has the right to dispute inaccurate information provided by a CRA. A CRA is bound to investigate information about a consumer that the consumer claims to be inaccurate. The CRA should provide an investigation report to the concerned consumer once the investigation is complete. Inaccurate or unauthenticated information must be removed from the files of the CRA.

According to the Equal Credit Opportunity Act (FCRA), the CRA should maintain confidentiality of credit information. The FCRA has laid down certain stipulations regarding the purposes or which credit information can be divulged to anyone. Access to files of consumers is limited to such purposes as laid own by the Equal Credit Opportunity Act (FCRA).