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What you should know about your rights under the ECOA

As much as we would perhaps like to think otherwise, money and, by extension, access to credit, really do make the world go round. Indeed, chances are good that anyone looking to buy a home, pursue an education, start a small business, secure an automobile or pursue any manner of dream will first need to take out a loan.

The unfortunate reality is that this is sometimes easier said than done, as a financial institution might decline to extend the necessary funds after consideration of such factors as the applicant's income, debts, expenses and credit history. While there is, of course, nothing wrong with this, it's important to understand that there are certain factors that cannot be considered by a lender, as made clear by the Equal Credit Opportunity Act.       

What is the Equal Credit Opportunity Act?

The Equal Credit Opportunity Act, or ECOA, is a federal law enforced by the Federal Trade Commission, which expressly prohibits financial institutions from engaging in credit discrimination based on age, color, marital status, national origin, race, receipt of public assistance, religion or sex.

What types of financial institutions are covered by the ECOA?

Any financial institution that participates in the decision to grant credit is covered by the ECOA, including:

  • Banks
  • Credit card companies
  • Credit unions
  • Department stores
  • Finance companies
  • Real estate brokers
  • Retail stores
  • Small loan companies

What is the extent of the protection offered by the ECOA?

The ECOA covers both income evaluations undertaken by creditors and the application process, as well as decisions to grant credit or the establishment of credit terms. It also sets forth a series of remedies that may be pursued in the event any prohibited discrimination takes place.

We'll continue this discussion in a future post, examining more about how exactly the ECOA works during the application process.

In the meantime, if you believe that you have been victimized by credit discrimination or other fraudulent business practices, consider speaking with a skilled consumer protection attorney to learn more about your rights and your options. 

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