In a series of posts dating back to March, our blog has been discussing just how disappointing it can be for those pursuing an education, new home, business opportunity or other venture to see a financial institution deny their application for much-needed funds, effectively putting their dreams on hold.
We also discussed how those in this situation should take comfort in the fact that lenders make these decisions all the time, meaning they aren't alone. Furthermore, we've been discussing how the Equal Credit Opportunity Act helps ensure that these rejections aren't predicated on discrimination and, if they were, that the lenders can be held legally accountable. We'll conclude this important discussion in today's post.
What rights do applicants have concerning rejections of loan applications?
Under the ECOA, those who have submitted a complete application for credit must be provided with an answer as to whether it was accepted or rejected within 30 days of filing.
If the application was rejected, the applicant has the right to know why. Specifically, the lender must inform the applicant of the exact reason for the rejection, or of their ability to learn the exact reason if they submit an inquiry within 60 days.
As for the reason provided, it would be insufficient for a lender to indicate that the rejection was because the applicant "didn't meet minimum standards." Rather, it needs to state something more concrete, such as "income levels were not high enough" or "employment history is too short."
What about less favorable terms?
The ability of an applicant to learn exact information extends to those scenarios in which they are offered a loan at less favorable terms than they originally sought (i.e., lower amount, higher interest rate, etc.). However, this right only exists where the applicant rejects the less favorable terms.
What can an applicant do if they suspect that they have been discriminated against?
There is no definitive answer to this question, as every scenario is different and every person can elect to take a different course of action. However, some options available to affected individuals include:
- Reporting the matter to the state Attorney General's Office, which can help determine whether any state discrimination laws were violated
- Reporting a potential violation of the ECOA to federal agencies like the Federal Trade Commission or the Consumer Financial Protection Bureau
- Considering filing a federal lawsuit against the creditor alleging a violation of the ECOA, or locating similarly aggrieved parties and filing a class action suit
Here's hoping the foregoing discussion has proven enlightening. As always, consider speaking with a skilled consumer protection attorney to learn more about your rights and your options if you believe that you have been victimized by credit discrimination or other fraudulent business practices.