Equal Credit Opportunity Act Quiz

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Questions and Answers

Which of the following is NOT a protected characteristic under the Equal Credit Opportunity Act (ECOA)?

  • Race
  • Socioeconomic Status (correct)
  • Age (if the applicant is at least 18 years old)
  • Religion

According to the Equal Credit Opportunity Act (ECOA), which action is a lender prohibited from taking?

  • Verifying an applicant's employment history
  • Requiring collateral for a loan
  • Setting different terms for credit based on national origin (correct)
  • Offering different interest rates based on credit scores

What is a responsibility of a creditor under the Equal Credit Opportunity Act (ECOA)?

  • To provide a clear and concise notice of the applicant's right to complain (correct)
  • To establish higher interest rates for single applicants
  • To deny credit applications from individuals over 65
  • To base credit decisions on stereotypes

Which of the following penalties can be imposed on a creditor for violating the Equal Credit Opportunity Act (ECOA)?

<p>Statutory damages and attorney fees (B)</p> Signup and view all the answers

Which of the following entities is responsible for enforcing the Equal Credit Opportunity Act (ECOA)?

<p>The Consumer Financial Protection Bureau (CFPB) (D)</p> Signup and view all the answers

The Equal Credit Opportunity Act (ECOA) applies to which of the following?

<p>A wide range of credit transactions including loans and credit cards (A)</p> Signup and view all the answers

Under the Equal Credit Opportunity Act (ECOA), what are credit reporting agencies NOT allowed to do?

<p>Discriminate based on race when compiling credit reports (D)</p> Signup and view all the answers

What is the primary goal of the Equal Credit Opportunity Act (ECOA)?

<p>To ensure a fair and equitable marketplace (B)</p> Signup and view all the answers

Flashcards

Equal Credit Opportunity Act (ECOA)

A US federal law that prohibits credit discrimination based on protected characteristics.

Protected Characteristics

Traits protected under ECOA include race, religion, sex, and age.

Prohibited Actions by Creditors

Creditors cannot refuse credit, set different terms, or discriminate based on protected characteristics.

Lender Responsibilities

Creditors must inform applicants of their rights and make unbiased credit decisions.

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ECOA Civil Penalties

Violating ECOA can result in damages, attorney fees, and equitable relief.

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Credit Reporting Agencies

They must compile credit reports without discrimination against protected characteristics.

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Enforcement Agencies

The FTC and CFPB enforce the ECOA and handle discrimination complaints.

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Importance of Compliance

Staying compliant with ECOA is vital for a fair marketplace.

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Study Notes

Equal Credit Opportunity Act (ECOA)

  • ECOA is a US federal law.
  • It prohibits discrimination in credit extension based on protected characteristics.
  • It covers various credit transactions like loans, mortgages, credit cards, and more.

Protected Characteristics under ECOA

  • ECOA prohibits discrimination based on:
    • Race
    • Color
    • Religion
    • National origin
    • Sex
    • Marital status
    • Age (18+)
    • Receiving public assistance
    • Exercising rights under the Consumer Credit Protection Act

Prohibited Actions

  • Creditors cannot:
    • Deny credit based on protected characteristics
    • Offer different credit terms due to protected characteristics
    • Discriminate in any credit transaction aspect (application, terms, collections).
  • Creditors cannot ask about, or use protected characteristics to assess creditworthiness.

Lender Responsibilities

  • Creditors must inform applicants about complaint rights.
  • Accurate transaction records are required and available upon request.
  • Credit decisions must be impartial and free of stereotypes.
  • All applicants must be treated fairly and consistently.
    • Interest rates and terms cannot vary based on protected characteristics.

Penalties for Violation

  • ECOA violations lead to civil penalties.
  • Penalties can include:
    • Statutory damages
    • Attorney fees
    • Equitable relief
    • Monetary damages

Credit Reporting Agencies

  • ECOA applies to credit reporting agencies.
  • Agencies cannot discriminate against individuals based on protected characteristics when making or sharing credit reports.

Enforcement

  • The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) enforce ECOA.
  • Individuals can file complaints if they believe they were discriminated against.

Importance of Compliance

  • ECOA compliance creates a fair marketplace.
  • It ensures equal credit access for all.
  • It fosters consumer trust and strengthens the financial system.

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