Equal Credit Opportunity Act Summary

The Equal Credit Opportunity Act - (15 U.S.C. §§ 1691-1691f, as amended)

What is required?

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public benefits (such as Social Security), or because a person exercises his or her rights under a consumer protection statute. ECOA applies to both the original extension of credit and to actions taken after the credit is extended, such as the termination of an account.  

Who is regulated?

ECOA applies to any entity which regularly extends credit, such as a bank, mortgage lender, or finance company.  It also applies to an individual or entity which regularly arranges for the extension of credit, such as a mortgage broker or car dealership.

When does the law apply?

ECOA applies when a lender or broker takes an application for credit and makes a decision as to whether or not to extend credit to the applicant.   

For example:

• If a consumer applies for credit and that credit is denied, the creditor must provide the applicant with a notice giving the reason for the credit denial.

• In certain circumstances, if a credit card company cancels a credit card account, it must send the cardholder a notice giving the reason for terminating the card.

•  If a consumer requests an increase in a credit limit on a credit card or other type of loan and is denied, the lender must send a notice giving the reason for denying the request.

• If a consumer applies for credit, a creditor cannot ask for more information from the consumer than it would ask from any other consumer solely because this consumer is, for example, African-American or elderly.

• A creditor cannot request the race, color, religion or national origin of the applicant, except for monitoring purposes for home loan applications. 

• If an applicant applies for individual, unsecured credit, a creditor may not ask about the applicant’s marital status unless:

1. The applicant resides in a community property state;
2. The credit involves a regulated utility company, such as an electric or gas company;
3. The information is sought solely to determine eligibility and premium rates for insurance, or;
4. The creditor is asking solely to determine the applicant’s eligibility for a special credit program.

• A creditor cannot require a spouse to be a co-signer on an application for credit.

• If an applicant applies for credit to purchase a house or to refinance a house, the creditor must provide the applicant with a notice of the applicant’s right to receive an appraisal report on the house that is being purchased or refinanced. 

Is there a solution?

If a creditor violates ECOA, a consumer may be entitled to actual damages and punitive damages up to $10,000.  In addition, ECOA contains a “fee-shifting” provision which may require the defendant to pay the plaintiff’s attorney fees and court costs.

Last Modified: Thursday, May 9, 2013