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Getting an Equal Chance with Equal Credit Opportunity Act
What is Equal Credit Opportunity Act?With the progress of civilization, facilitating has become a major industry throughout the world. And in developed countries like the United States of America, its impact is more visible.
One such facilitating process is providing credit. Credit is used by millions of customers in United States as well as the whole world for multifarious purposes. Higher education of children, construction of a residential house, setting up a business or industry are some of the common purposes for which a credit is sought after by the potential customer. The Equal credit Opportunity Act (ECOA) ensures that all consumers are provided with equal opportunities to opt for and obtain such credit.Purpose of Equal Credit Opportunity Act (ECOA) Under the provisions of the Federal Equal Credit opportunity Act, any consumer, irrespective of his status, can apply for credit. However, this does not automatically entitle a consumer to get credit. Several factors like income, financial balance sheet, and most important of all, credit report of the consumer, determine the eligibility of the consumer to get a credit. To use technical terms, creditworthiness of the consumer is the vital aspect for granting a loa n. Legal protection is provided under the ECOA to consumers such that a creditor would not discriminate you on the grounds of sex, martial status, age, race, nationality, or origin. In fact the creditor can not even ask you to reveal this information though they can ask you to voluntarily disclose this information. In fact, this Act performs the role of a complement to Federal anti-discrimination laws. How the ECOA Protects the ConsumerThe Equal Credit Opportunity Act provides real protection to consumers when they deal with such creditors who regularly provide credits. These include banks, small and large financial companies, retail and departmental stores, credit card companies, and credit unions. All these agencies, you may take note, provide some type of credit or other covering millions of customers. Bank activities are widely known to the people. Credit cards and stores are interrelated since many payments to retails and departmental stores are made today using a valid credit card. In addi tion, the agencies that deal in real estate business, are also covered under the provisions of this Act. One unique feature of this Act is that the consumer need not necessarily be an individual but may be a corporate body like a society, an organization, or a business house too. The creditor, excepting under extraordinary circumstances, cannot ask for information prohibited by the provisions of the Act. They cannot refuse credit on the basis of any such criteria like age, sex, religion, martial status, age, race, and nationality to any customer. ECOA RulesWhen a customer applies for credit, a creditor is prohibited from taking certain actions under the provisions of this Act. These provisions are popularly known as the ECOA credit code. The creditor cannot: - Refuse credit to the customer on the basis of his/her age, marital status, sex, race, nationality or origin.
- Refuse credit to the customer because he or she is presently receiving public assistance income.
- Ask the cus tomer to disclose information on sex, religion, race or national origin.
- Ask whether you are widowed or divorced. Even if the customer permits the creditor to ask questions regarding marital status, he can only use words like married, unmarried, or separated etc. But he cannot ask about the marital status when the customer is asking for a separate account. In some states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington are exceptions where a creditor can ask a few questions about your marital status before granting a credit.
- Inquire about your spouse or child support income from a former spouse.
- Inquire about your plans in raising children.
- Inquire about child support, separate maintenance payments, or alimony.
In case any creditor asks for all the above types of information before lending out a loan, which will be included in violations of the Equal Credit Opportunity Act, the consumer can always seek the protection under the Equal Credit Opportunity Act.
What Creditors are Allowed to AskThe Creditor, if he is dealing in real estate, may ask you about your marital status if you are applying for a real estate loan. In such case the creditor may also ask about your residence or immigration status. A creditor can always ask about the marital status of the client in case of application for a joint account. He can in such cases inquire about your spouse too, especially when the spouse will operate the account jointly. The creditor can ask about child support income, separate maintenance payments, or alimony to verify your status if you rely especially on these incomes to get the credit. What ECOA Prohibits CreditorsThe Act provides certain guidelines to be followed by the creditor when such creditor decides to lend some loan to a borrower. While providing a credit, a creditor may not:- Take into consideration the sex, marital status, race, religion, or national origin of the customer.
- Consider w hether the customer has a telep hone listing in his/her name.
- Consider the race of people in the neighborhood where the customer decides to buy property or improve an existing property.
- Consider the age of customer unless the customer is a minor below the age of 18 or of too advanced age, above 62. The creditor may however, consider your age to decide that your income might drop due to your retirement on superannuation. He may also take age reference if it is a valid source for determination of credit score of the customer concerned.
When a creditor fails to adhere to the above guidelines in lending out a credit, he will always be answerable under the Federal law, that is, Equal Credit Opportunity Act, a sequel to the anti-discriminatory laws prevalent in United States of America. Role of ECOAWhile determining the income of the customer in order to consider his eligibility for a credit facility to be extended to him/her, it will be natural for the creditor to try to be foolproof with all informati on. However, such creditor, under the provisions laid down in ECOA, cannot:- Refuse to consider public assistance income at par with other types of income.
- Discriminate by reduction of probable income on the basis of sex.
- Refuse to take into consideration child maintenance, alimony, or other such types of income into account provided the flow is consistent.
Refusal of credit on any of the above ground will be considered a violation of the existing law of the land.
Continue to: Consumer's Rights Under ECOA
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