During the early and mid-20th century, lending products like credit cards and mortgages became increasingly popular. But despite their widespread availability, certain groups of people weren’t able to access these financial products due to discriminatory lending practices.
For instance, married women were forced to use their husbands as co-signers before the bank would sign off on a loan. And unmarried women were often denied loans outright.
And the problem was even worse for minority groups. For a period of time, the FHA used to refuse to insure mortgages in neighborhoods that were primarily black. These actions made anti-discrimination legislation necessary and led to the eventual signing of the Equal Credit Opportunity Act (ECOA ).
Get matched with a lender that will work for your financial situation.
The Equal Credit Opportunity Act (ECOA) is a law that prevents credit bureaus from discriminating against individuals, businesses and other entities in credit transactions. The ECOA prohibits discrimination based on race, sex, nationality, religion and other factors. All creditors must follow the ECOA’s guidelines, including mortgage lenders.
The ECOA is a federal law that prevents financial institutions from discriminating against credit applications based on factors that aren’t relevant to a borrower’s ability to repay the loan. The ECOA ensures that all borrowers have fair and equal access to credit.
The ECOA originally passed in 1974 and was written to prevent discrimination based on sex or marital status. The law greatly benefited women but left out other marginalized groups who experienced discrimination in the financial sector.
To remedy this, the law was amended in 1976 to widen the scope of groups protected under the ECOA. Today, it’s illegal for any lender to discriminate against borrowers based on any of the following:
Lenders may still ask you questions related to some of these things, but only if they’re relevant to the loan. For example, if you’re divorced and plan on using alimony to qualify for a mortgage, your lender may ask you to provide documentation showing proof of the alimony agreement.
And you may still be asked to report basic information, including your race, ethnicity, gender or age, when applying for certain types of credit, like a mortgage. Mortgage lenders are required to report basic data about the borrowers they serve so that government regulators can ensure that the lender isn’t engaging in discriminatory practices.
The ECOA also requires that creditors provide denied applicants with the reasoning behind their decision within 60 days. If you believe you’ve been discriminated against, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
Regulation B implements ECOA and provides the framework for how it should be followed and enforced. Basically, it’s the part of the law that puts the regulations into practice.
Regulation B also lays out penalties for creditors who violate the ECOA. If lenders are found liable, they could pay up to $10,000 in individual lawsuits and the lesser of $500,000 or 1% of the creditor’s net worth in class action lawsuits.
Borrowers are entitled to certain protections anytime they’re dealing with a financial institution. Here is a list of rights guaranteed by the ECOA:
Here are some of the ways the ECOA restricts creditors:
The ECOA also allows married couples to have a credit history in their own names. So if you have any joint accounts with your spouse, they’ll show up on both individuals’ credit reports.
Get matched with a lender that will work for your financial situation.
Lenders are allowed to consider factors that could affect a borrower’s ability to repay the loan. This includes things like:
And depending on the type of credit you’re applying for, lenders can consider other factors as long as they’re pertinent to the loan. For example, if you’re near retirement age, a lender may consider how a reduction in income due to retirement would affect your ability to repay a loan. Or a lender may consider your age if you are 62 years old or older and your age can be used in your favor.
Here are some signs that could indicate you’re being discriminated against and your ECOA rights are being violated:
If you believe you’ve been discriminated against by a lender, the first step is to file a complaint with that lender. You may be able to convince them to revisit your loan application.
But if that doesn’t work, you can file a complaint with the CFPB. The CFPB uses these complaints to establish patterns of behavior among various financial institutions.
It’s also a good idea to contact an attorney who can advise you on your rights and what your next steps are. You may be able to take that lender to court and if you win, you could receive punitive damages.
The ECOA protects lenders from discrimination on the basis of race, gender, religion, national origin, marital status and any other factor unrelated to the loan itself. Lenders are only allowed to consider factors that will affect a borrower’s ability to repay the loan.
When the law was originally enacted, the Federal Trade Commission (FTC) was responsible for implementing the regulation. But when the Dodd-Frank Act was passed in 2010, it transferred this authority to the CFPB. The CFPB currently enforces the ECOA for banks, credit unions and savings associations holding more than $10 billion in assets.
If a lender is found guilty of violating the ECOA, they can be taken to court and sued for damages. If they’re found liable, they could pay up to $10,000 in individual lawsuits and the lesser of $500,000 or 1% of the creditor’s net worth in class action lawsuits.
The ECOA is legislation passed by Congress to prevent discrimination in credit and financial transactions. Regulation B is the rule the FTC created to enforce the ECOA. The CFPB is now responsible for enforcing Regulation B.
In the past, lack of access to credit prevented certain groups from accumulating wealth through homeownership. The ECOA Act prevents lenders from discriminating against borrowers based on factors unrelated to their ability to repay the loan.
As a borrower, it’s important to know your rights. If you’ve been denied credit, you have a right to know why. And if you believe you’ve been discriminated against, file a complaint with the CFPB and speak with an attorney to explore any legal remedies available to you.
Get matched with a lender that will work for your financial situation.
LMB Mortgage Services, Inc., (dba Quicken Loans), is not acting as a lender or broker. The information provided by you to Quicken Loans is not an application for a mortgage loan, nor is it used to pre-qualify you with any lender. If you are contacted by a lender or broker advertising within our network, your quoted rate may be higher depending on your property location, credit score, loan-to-value ratio, debt-to-income ratio, and/or other factors. Quicken Loans does not offer its matching services in all states. This loan may not be available for all credit types, and not all service providers in the Quicken Loans network offer this or other products with interest-only options. The information that we provide is from companies which Quicken Loans and its partners may receive compensation. This compensation may influence the selection, appearance, and order of appearance on this site. The information provided by Quicken Loans does not include all financial services companies or all of their available product and service offerings. Article content appears via license from original author or content owner, including Rocket Mortgage.
Note: Actions on this website are recorded for quality assurance or training purposes. Input of data constitutes consent.
Quicken Loans is a registered trademark of Rocket Mortgage, LLC, used under license by LMB Mortgage Services, Inc.
LMB Mortgage Services, Inc. | NMLS #167283
4859 W Slauson Ave #405 Los Angeles, CA 90056
