Regulation B is the part of the Act that officially details the authority and scope of the law in relation to the lenders or banks, further defining their liability (as a lender) if they fail to follow the rule of law. Again, the aftermath of old policies has created a cycle of poverty and instability for current generations.ĭespite these setbacks, the ECOA still sets an important standard for lenders and banks, and offers vital protections for those that need it. They may not outright admit their prejudice, as they don’t want to be found guilty of violating the ECOA, but they may find other reasons to reject loan applicants that are less likely to raise suspicion, such as zip code location or lack of credit history (despite a good credit score).Īdditionally, the effects of past policies, such as redlining, have made it difficult for current generations to build up the strong financial foundation needed to purchase a home today. A woman on the committee, Lindy Boggs, ensured that the ECOA included “marital status” and “sex/gender” to ensure that women also were protected by this law.Īlthough an extremely important law, the ECOA has not stopped discriminatory practices altogether, and, unfortunately, some banks and lenders will still regularly deny loans to consumers with a protected minority status. But as banks continued to engage in unfair practices, a House committee took action and created the Equal Credit Opportunity Act, and it was unanimously voted into law in 1974. Already, the Civil Rights Act of 1968 had included a “Fair Housing Act” (Title VIII) that prevented discrimination on the part of homeowners who refused to sell or rent out homes to people of a protected class. However, due to the Civil Rights Movement of the late 1960’s, lawmakers took note of some of the ways in which minority groups were being disenfranchised by banking institutions from participating in American traditions such as homeownership. Single women were often denied loans outright. Without access to owning property or financing businesses, generations of people in minority groups have lost out on the “American dream.”Īdditionally, many women were denied credit, with some banks stating that women needed the approval of their husband before they could grant credit. Historical discrimination, as well as its current iteration, has created a ripple effect that has furthered the modern day racial wealth gap. During the 1960’s, the credit market was growing rapidly - but only for a select few.Īfrican Americans, Hispanics, and other minority groups were regularly denied loans for homes (sometimes entire neighborhoods were singled out via a process known as “ redlining”), and many still experience discrimination today in the form of higher interest rates or denied loan applications. To fully understand the importance of the ECOA, you may need to understand the historical context of this Congressional Act and why it was created in the first place. What Is the Purpose of the Equal Credit Opportunity Act? You can read more about the specific protections on the FTC’s website. Any decisions made that also consider your race, gender, or other protected status are considered illegal practices by the FTC, as outlined in the ECOA. Lenders and banks are only allowed to decide on your credit worthiness by looking over your income, credit score, credit history, and monthly expenses (including current debts). This act is one of many consumer protections that the FTC enforces on banks and lending institutions to prevent discrimination, scams, or predatory practices. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit.” “The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance. ![]() According to the Federal Trade Commission (FTC): ![]() The Equal Credit Opportunity Act is a consumer protection aimed at preventing discrimination in lending practices. ![]() What Is the Equal Credit Opportunity Act of 1974? Credit Score and Credit Report Resources.How to Get a Free Equifax Credit Report.How to Get a Free Transunion Credit Report.How to Get a Free Experian Credit Report.How to Remove Something From Credit Report.What’s This Charge On My Credit Card Statement?.
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