Equal Credit Opportunity Act Flashcards

Study Notes

Equal Credit Opportunity Act (ECOA) Overview

Enforced by the Consumer Financial Protection Bureau (CFPB) to ensure equal credit access.
Known as Regulation B, requires non-discrimination in credit granting.

Discrimination Prohibition

ECOA prohibits discrimination based on:
- Race, color, religion, national origin, sex, marital status, age (must be at least 18), public assistance income, and exercising rights under the Consumer Credit Protection Act.

Appraisal Rights

Borrowers are entitled to a copy of the appraisal report at least three business days before closing.
Lenders must notify borrowers of this right within three days of application receipt.

Prohibited Practices

Creditors cannot inquire about marital status or intentions about children.
Advertisements must not discourage applications based on a prohibited basis or protected class membership.
Lenders may ask if a borrower is married, unmarried, or separated, avoiding terms like single, divorced, or widowed.
Disclosure of child support, alimony, or public assistance income is optional for borrowers.
Income from alimony, child support, or maintenance must be considered if disclosed.
Creditors can ask about dependents but not about children specifically.
Discrimination based on the source of income is prohibited, but amount of income can be evaluated.

Protected Classes

Exclusively protected under ECOA: Age, marital status, public assistance.
Non-exclusively protected: Sex, race, religion, color, national origin.

Adverse Actions

Must be documented in writing, such as a denial letter.
Letters must include:
- Statement of action taken.
- Lender's contact information.
- Name and address of the relevant federal agency.
- Reasons for the decision or advisory on the right to request reasons.
Applicants can request reasons for denial within 60 days.
If denied based on appraisal, borrowers have 90 days to request a copy, which must be delivered within 30 days.

Types of Discrimination

Overt Discrimination: Explicit, evident discrimination practices.
Disparate Treatment: Discrimination that affects only some protected classes, e.g., showing bias against specific groups while treating others fairly.
Disparate Impact: Non-discriminatory on the surface but results in a negative effect on particular races, genders, or other protected classes.

HMDA/ECOA Connection

Applicants informed that information collected for monitoring discrimination is not used in loan eligibility decisions.

Description

Test your knowledge on the Equal Credit Opportunity Act (ECOA) with these flashcards. Learn about key terms such as Regulation B and how the act prohibits discrimination in credit transactions. Perfect for students and professionals looking to understand credit law.