Equal Credit Opportunity Act Overview

Equal Credit Opportunity Act (ECOA)/Regulation B

• Purpose: Protects consumers from credit discrimination.
• Enforcing Agency: Consumer Financial Protection Bureau (CFPB).
• Timely Notifications: Creditors must notify applicants about actions on their applications.
• Credit History Reporting: Credit history is reported in both spouses' names for accounts.
• Record Retention: Creditors must keep application records.
• Specific Loan Information: Information about race and similar characteristics may be collected for certain dwelling-related loans.
• Appraisal Copies: Applicants must receive copies of appraisal reports.

Protected Classes/Prohibited Factors

• Discrimination is illegal: Based on protected characteristics.
• Protected Characteristics: Race, color, religion, national origin, sex, marital status, age (if of contracting age), and public assistance income.
• Consumer Credit General Rules: Covers all applicant-creditor dealings.
• Examples of Impermissible Practices: Certain application procedures, underwriting standards, servicing/admin, and collections (delay or refuse credit).
• Discriminatory Actions: Overt discrimination (obvious/intentional) vs. disparate treatment (unintentional differences).
• Disparate Impact: Policies applied equally but harm a protected group.
• Credit Denial Due to Protected Class Affiliation: Refusal to lend due to the applicant or business associations with a protected class is illegal.

Application Considerations

• Marital Status: Permitted inquiry related to property rights, but restricted in other contexts.
• Age Consideration: Equal consideration for applicants 62 and older.
• Co-Borrowers/Co-Signers: Not required for creditworthy applicants.
• Individual Credit Applications: Applicants to be allowed individual applications regardless of marital status.
• Income Sources: Alimony, child support, separate maintenance income is permissible to consider.
• Income Evaluations: Part-time, retirement, annuities, public assistance income are considered valid income; consistency of payment is evaluated.
• Borrower's Obligation: Lender allowed to ask about alimony, child support, and separate maintenance to evaluate payment obligation.
• Joint Accounts: Must consider joint accounts if requested by the applicant.

Mortgage Lender Obligations (Home Mortgage Disclosure Act)

• Information Collection: Lenders must collect data about race, ethnicity, age, marital status, and sex.
• Use Restrictions on Information: Information collected cannot be used for discriminatory practices.
• Applicant Refusal: Applicant may refuse to provide data, though lender must inform applicant of legal obligation to collect this information.

Creditworthiness Decisions

• General Information Use: Lenders may use all applicant-supplied data to evaluate creditworthiness, except for factors prohibited by ECOA.
• Prohibited Considerations: Age, potential childbearing/childrearing status, telephone listing, income source, and protected characteristics or refusal to disclose.
• Permitted Considerations: Credit history (joint accounts considered), explanation for contradictory credit history, immigration status, state laws, appraisals.

Application Processing

• Application Completion: Lenders will provide notice of application incompleteness and a timeframe to provide requested information.
• Adverse Action: Loan denial/unfavorable change in account terms; written notification with specific reasons or right to request them. Applicant can request a statement of reasons for the denial within 60 days.
• Timeframes for Notification: Lenders must notify applicants of decisions (approval, denial, counteroffers) within 30 days of receiving a complete application.
• Incomplete Applications: If application is incomplete, notice within 30 days; applicants get a period to complete missing information; failure to provide results in no further consideration.
• Appraisal Requirements: Must provide appraisal copies at least 3 days prior to closing; can be waived in which case must provide in 30 days after closing.