The Equal Credit Opportunity Act

Jeremy Pruett applied for a revolving credit card, without as much as giving it a second thought that the credit card company would deny his application. After all, at the age of 22 and fresh out of college, Jeremy thought obtaining a credit card was just another of the many rites of passages into adulthood.

“All of my friends were approved for credit cards,” said Jeremy. “I had no idea what the process was all about. When I received the rejection letter from the credit card company, I thought I was discriminated against because of my ethnic background. I contacted a lawyer because I had read something about fair credit access in the Equal Credit Opportunity Act. My attorney explained to me that the law applies to equal access to credit, but not the guarantee of getting it.”

Jeremy’s case illustrates the confusion that surrounds the landmark consumer protection statute called the Equal Credit Opportunity Act (ECOA).

Overview of the ECOA

Most American consumers use credit to finance purchases of high-priced items such as homes, vehicles, businesses, and educations. The Equal Credit Opportunity Act makes sure every consumer receives the opportunity to apply for credit. The key word here is “apply,” not “receive.” Not every consumer who applies for credit has the legal right to receive it. Credit decision factors that include income, debt load, and credit history determine the likelihood of you obtaining credit. The ECOAQ ensures banks, finance companies, retail and department stores, and credit card companies accept and review your credit application in an unbiased manner.

What the ECOA Prohibits Creditors from Doing

The OCOA represents a sweeping piece of federal legislation that prevents creditors from denying you the legal right to apply for credit. Sections of the groundbreaking consumer protection law address what creditors cannot do when it comes to your credit application and credit status, as well as the income you earn.

Credit Application

Under the terms of the ECOA, a creditor cannot try to stop you from applying for credit because of your age, gender, ethnicity, and/or marital status. Moreover, a creditor is not allowed to discourage you from submitting a credit application because you receive some form of financial public assistance. In fact, creditors cannot require you to divulge any demographic information. However, creditors are allowed to ask about the immigration status of credit applicants. In community property states, creditors have the legal right to inquire about your marital status to establish whether the credit account is for a single applicant or joint applicants. Unless you apply for a joint account with a spouse, a creditor cannot ask for information about your spouse on a credit application.

Legal Guidelines for the Credit Decision

Creditors cannot use gender, religion, ethnicity, marital status, and/or national origin to determine whether to extend credit to an applicant. You do not have to demonstrate that you have a telephone listing in your name. The ECOA prohibits the practice of redlining, which involves creditors considering the demographics of the residents of the neighborhood where you live to determine whether to approve your credit application. Creditors can only factor in age to determine credit decisions when an applicant is below the 18 years of age threshold for submitting a credit application

Income and the OCOA

The ECOA prohibits lenders from refusing to consider financial public assistance as part of a credit applicant’s income. Lenders must treat financial public assistance the same way the institutions treat every other type of income source. Creditors cannot apply income percentages based on gender, such as discounting a woman’s income contribution under the premise she will have to stop working to give birth to and raise children. Annuities, retirement benefits, and part time income all comprise income sources creditors must consider under the provisions of the ECOA. Creditors must also consider regular alimony payments, as well as child support and several types of divorce maintenance payments.

If you believe a creditor has violated one or more provisions of the ECOA, you should contact a licensed and experienced California consumer law attorney to schedule an initial consultation. Most California consumer law attorneys offer free initial consultations to determine how to proceed with your ECOA case.