Equal Credit Opportunity Act
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| Financial regulation in the United States | |
| Dodd-Frank Act | |
| Federal Reserve | |
| Financial regulation by state | |
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| Key terms | |
| Commercial bank • Credit union • Depository institution • Financial system • Investment banking • Securities | |
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The Equal Credit Opportunity Act is a federal financial regulation law enacted in 1974. The act prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, or age in credit transactions. The act also requires creditors to inform an applicant of his or her approval or denial of credit within 30 days of receiving his or her application. The law also requires creditors to provide a reason if credit is denied.
Legislative history
The Equal Credit Opportunity Act (ECOA) is part of an amendment to the Federal Deposit Insurance Act, originally enacted in 1950. The act was introduced to the United States House of Representatives on October 31, 1973. The measure passed on February 5, 1974 in a vote of 282-94. The measure was then referred to the United States Senate, which passed an amended version on June 13 in a vote of 89-0. The amended version went to a conference committee. The committee returned an amended bill to both chambers. The House approved the amended version in a vote of 355-1 on October 9, and Senate approved the bill in a voice vote on October 10. The act was signed into law by President Gerald Ford on October 28. Enforcement of the act was originally the responsibility of the Federal Reserve Board, but the passage of the Dodd-Frank Act in 2010 transferred this authority to the Consumer Financial Protection Bureau.[1]
Components
The ECOA prohibits creditors from discriminating against any applicants on any of three bases:[2]
- The applicant's race, color, religion, national origin, sex, marital status, or age (provided the applicant is old enough to legally enter a contract)
- Any portion of the applicant's income comes from any public assistance program
- The applicant has exercised his or her rights under the Consumer Credit Protection Act
In addition to prohibiting discrimination on the basis of marital status, the act prohibits creditors from asking the marital status of an applicant (unless the application is for joint credit) or whether the applicant plans to have children. Creditors may, however, ask about the ages and financial obligations of the applicant's existing children.[2]
The ECOA requires that creditors inform an applicant within 30 days whether his or her credit application has been accepted or denied. If the application is denied, the creditor must inform the applicant of the reason for the denial. Creditors must also provide an account holder with a reason for closing an account, refusing to extend credit, or making changes in the terms of credit.[2]
The ECOA established penalties for failure to comply with the regulations. The act provides for up to $10,000 in punitive damages for individual lawsuits and the lesser of $500,000 or 1 percent of the credit's net worth for class action suits.[2]
See also
External links
Consumer Financial Protection Bureau
Footnotes
- ↑ United States Congress, "H.R.11221 - An Act to increase deposit insurance from $20,000 to $40,000, to provide full insurance for public unit deposits of $100,000 per account, to establish a National Commission on Electronic Fund Transfers, and for other purposes," accessed February 23, 2017
- ↑ 2.0 2.1 2.2 2.3 Consumer Financial Protection Bureau, "Equal Credit Opportunity Act (ECOA)," accessed February 23, 2017
