Understanding the Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) was enacted by Congress to eliminate discrimination against women seeking to obtain credit. It was expanded to include the prohibition of denying credit based on a person’s race, color, place of national origin, religion, sex, age, or marital status. Further, a woman who exercises her rights under the act cannot be “blacklisted” from obtaining credit.

One of the main problems with the ECOA is that it is difficult to prove discrimination since other reasons can be given for denial of credit. Another problem is that the people the law was designed to protect seldom exercise their rights, usually because of one of the following reasons:

Because credit rejection may be masqueraded by another reason, the applicant may not even realize she has been a victim of discrimination.

Most people don’t know their rights under the law and are unaware of the ease of filing a complaint.

The applicant may not want to get involved with “fighting the system.

The general rule of thumb to determine whether you have been a victim of discrimination is to ask yourself if you would have been granted the loan if you were a non-minority with the same economic status. The following is a summary of your rights under the ECOA:

If you have a sufficient debt-to-income ratio, the lender cannot require a cosigner or co-applicant.

If you are a woman, you may use your maiden or married name (whichever you choose). You may even use a combination of both.

The creditor may inquire as to how many dependents you have to determine your spendable income. However, he cannot ask about your birth-control practices or plans for parenthood.

The creditor must consider all income derived from alimony, child support, public assistance, and part-time work. (A woman may choose not to reveal alimony and child support. If she chooses not to, these amounts will not be taken into consideration when computing her debt-to-income ratio.)

A woman cannot be denied credit automatically for listing her occupation as a housewife.

If there is a change in a woman’s marital status (divorced, widowed, separated) or she chooses to change her name legally, the creditor cannot automatically require her to reapply for an existing loan. The only exception is if there appears to be a problem with a loan in which a former husband’s income had been considered at the time the loan was approved.

A woman’s marital status cannot be inquired into if she is trying to obtain separate unsecured credit. The only exception is if the applicant lives in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, or Washington).