One of our key focuses at the CFPB is our workhelping you “know before you owe,” whether that’s with your mortgage, your carloan, or the loans you’ll take out to cover college. As part of our work toempower consumers’ financial decision-making, we also want you to know aboutimportant consumer rights that protect you. One of these is the law thatprotects consumers from being discriminated against in the financialmarketplace: the Equal Credit Opportunity Act (ECOA).
In October, we mark the anniversary of thisimportant civil rights law. To celebratethe anniversary, we will publish two blogs to help educate you about ECOA.
Whatis ECOA?
ECOA is afederal civil rights law that protects you from being discriminated against bylenders, based on any of the following reasons:
- Race
- Color
- Religion
- Nationalorigin – The country you or your ancestors were born in
- Sex(including gender)
- Maritalstatus
- Age(as long as the applicant is old enough to enter into a contract)
- Receivingmoney from any public assistance program, such as Social Security DisabilityInsurance (SSDI) or the Supplemental Nutrition Assistance Program (SNAP)
- Exercising your rights under certain consumerprotection laws
For example, alender generally can’t deny loan applications or charge higher costs, like ahigher interest rate or higher fees, for any of the reasons on the above list. ECOAapplies to various types of loans including car loans, credit cards, home loans,student loans, and small business loans.
Whyit became the law
ECOA was passed at a time when discriminationagainst women applying for credit was common. For example, mortgage lendersoften discounted a married woman’s income, especially if she was ofchildbearing age. Things weren’t much better for single women, either. Organizations that lobbied for the passage ofECOA also claimed that mortgage lenders were more likely to deny credit tosingle women relative to other applicants.
Congress originally passed ECOA in October of1974. When it was enacted, ECOAprohibited lending discrimination based on sex or marital status.
Not long after the original law was passed, inMarch of 1976 Congress amended the law to further prohibit lendingdiscrimination based on race, color, religion, national origin, age, thereceipt of public assistance income, or exercising one’s rights under certainconsumer protection laws.
So,let’s talk about what this means for you
Here’san instance of possible credit discrimination: You apply for a loan and receiveSocial Security Disability Insurance (SSDI)—which is a form of publicassistance income—and the lender refuses to lend to you if you do not provide anote from a doctor about the likely duration of your disability—that may beillegal.
Who makes sure that lenders obey thislaw?
Before the CFPB opened its doors in 2011, the FederalReserve Board had the job of writing rules to implement ECOA. These rules arewritten to make sure that consumers are protected and that lenders know how toavoid discrimination in lending. Whenthe CFPB was created, the job of writing most of those rules was transferred tous.
Besides writing rules to implement ECOA, at the CFPB we supervise institutions like banksand lending companies to ensure they are following thelaw. We also promote the development ofmarkets for consumer financial products and services that are fair andnondiscriminatory.
When we supervise aninstitution to make sure it is not discriminating, we often visit theinstitution itself and review its records, conduct analyses of lendingoutcomes, review consumer complaints, and interview the lender’s employees andofficers. The CFPB shares the job of supervising for compliance with ECOA withother federal agencies, including the Office of the Comptroller of the Currency ,Federal Reserve Board , Federal Deposit Insurance Corporation , and National Credit Union Administration .
When appropriate, the Bureau also takes publicenforcement action under ECOA to hold financial institutions accountable fortheir actions that violate ECOA. The CFPB shares the job of enforcing ECOA withother federal agencies, including those listed above, as well as the Department of Justice and the Federal Trade Commission . We all work together to ensurethat institutions are following the law.
Finally,the voices of consumers remain foundational to the Bureau’s work. If you are having a problem or issue with afinancial service or product you can submit a complaint online or by callingus toll-free at (855) 411-2372,where we provide services in more than 180 languages. If you don’t want to submit a complaint,you can also share your story,good or bad, about your experience with a financial product or service.
Our next blog in this series will dive deeperinto examples of lender practices that might violate the Equal Credit Opportunity Act. Check back soon tolearn more about what you can do and what we are doing to protect you fromdiscrimination in the financial marketplace.
