Equal Credit Opportunity Act – Overview and Summary of Requirements
The Equal Credit Opportunity Act was passed and enacted in 1974 to protect applicants for loans from banks and financial institutions from discrimination for factors that didn’t relate to their creditworthiness.
The US Congress found that there was a need to ensure that financial institutions and other firms engage in lending credit exercised their responsibility to make credit available with fairness, impartiality and without discrimination on the basis of color, gender or marital status.
The Act requires all financial institutions to make credit equally available to all creditworthy customers without regard to race, color, religion, national origin, sex or marital status.
Summary of requirements
The Equal Credit Opportunity Act makes it illegal for credit lending institutions to discriminate against creditworthy individuals:
- On the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract)
- Because all or part of the applicant's income derives from any public assistance program
- Because the applicant has in good faith exercised any right under the Consumer Credit Protection Act
Creditors cannot impose a higher rate of credit on an applicant based on race, color, religion, national origin, sex, marital status, age, or because the applicant receives public assistance.
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What creditors cannot ask applicants
Creditors also cannot ask an applicant:
- If he or she is widowed or divorced. A creditor may use only the terms: married, unmarried, or separated.
- About his or her marital status if the applicant is applying for a separate, unsecured account. A creditor may ask the applicant to provide this information if he or she lives in “community property” states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A creditor in any state may ask for this information if the applicant applies for a joint account or one secured by property.
- For information about his or her spouse, except:
- if the spouse is applying with the original applicant;
- if the spouse will be allowed to use the account;
- if the applicant is relying on his or her spouse’s income or on alimony or child support income from a former spouse;
- if the applicant lives in a community property state.
- About an applicant’s plans for having or raising children, but they can ask questions about expenses related to the applicant’s dependents.
- If an applicant gets alimony, child support, or separate maintenance payments, unless they first tell the applicant that he or she doesn’t have to provide this information if he or she isn’t relying on these payments to get credit. A creditor may ask an applicant if he or she has to pay alimony, child support, or separate maintenance payments.
Evaluating income
When evaluating an applicant’s income, creditors may not:
- Refuse to consider reliable public assistance income the same way as other income.
- Discount income because of an applicant’s sex or marital status. For example, a creditor cannot count a man’s salary at 100 percent and a woman’s at 75 percent. A creditor may not assume a woman of childbearing age will stop working to raise children.
- Discount or refuse to consider income because it comes from part-time employment, Social Security, pensions, or annuities.
- Refuse to consider reliable alimony, child support, or separate maintenance payments. A creditor may ask an applicant for proof that he or she receives this income consistently.
Legal action
An applicant who feels discriminated against can, under the Act, instigate the following actions against the offending creditor:
- Complain to the creditor.
- Check with the state Attorney General’s office to see if the creditor violated state equal credit opportunity laws.
- Consider suing the creditor in federal district court.
- Report violations to the appropriate government agency.
Penalties for violation
- Violators of the Act can face class-action suits.
- If found guilty, the offending institution could have to pay out punitive damages totaling up the lesser of $500,000 or 1% of the its net worth.
Additional resources
Compliance Trainings
Pregnancy in the Workplace: Strategies to Protect Your Organization from Pregnancy Discrimination Claims
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How to Vet an IRB: Expose and Fix Problems Before They Threaten Your Trial
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Compliance Standards
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