Equal Credit Opportunity Act


The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq., was enacted in 1974.  The Act makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract) because the applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.  The law applies to any person who, in the ordinary course of business, regularly participates in a credit decision, including banks, retailers, bankcard companies, finance companies, and credit unions.

Failure to comply with the Equal Credit Opportunity Act’s Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions.  For punitive damages, liability can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions.

In cases where the Department of Justice finds a pattern or practice of discrimination, it may file a lawsuit under ECOA.  In cases involving discrimination in home mortgage loans or home improvement loans, the Department may file suit under both the Fair Housing Act and ECOA.  Individuals aggrieved by an unfair credit transaction involving residential property may file a complaint with the Department of Housing and Urban Development [HUD] or may file their own lawsuit.

Other federal agencies have general regulatory authority over certain types of lenders and monitor creditors for their compliance with ECOA.  When there is reason to believe that a creditor is engaged in a pattern or practice of discrimination which violates ECOA, the ECOA requires the agencies to refer matters to the Justice Department.  Each year, the Department files a report with Congress on its activities under the statute.  The Board of Governors of the Federal Reserve System has issued regulations under ECOA. These regulations, known as Regulation B, provide the substantive and procedural framework for fair lending.

The ECOA is monitored by The Federal Trade Commission and it ensures that all consumers are given an equal chance to obtain credit.  This does not mean that all consumers who apply for credit get it.  Factors such as income, expenses, debt, and credit history are also considerations for creditworthiness.  The ECOA prohibits discrimination based upon the following:

1. Race

2. Color

3. Religion

4. National Origin

5. Sex

6. Marital Status

7. Age (provided that the applicant has the capacity to enter into a binding contract)

8. Receipt of income from any public assistance program

9. Good faith exercise of any rights under the Consumer Protection Act