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What Is the Equal Credit Opportunity Act?

Consumers apply for credit every day in the United States, from paying for education, purchasing a car, to purchasing a house. The Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. 1691 et seq., protects consumers from unlawful credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because a consumer receives public assistance. While creditors may be able to use some of this information in certain limited circumstances, creditors may not use it when determining whether to give a consumer credit or setting the terms of credit. The ECOA provides protections when consumers deal with any organizations or individuals that regularly extend credit, including banks, retail and department stores, credit card companies, finance companies, and credit unions.

When Consumers Apply For Credit, Creditors are Prohibited From the Following Practices:

  • Discourage consumers from applying or reject an application based upon race, color, religion, national origin, sex, marital status, age, or because a consumer receives public assistance.

  • Consider a consumer’s race, sex, or national origin. A creditor may consider a consumer’s immigration status and whether the consumer has the right to stay in the country long enough to repay the debt.

  • Impose different terms or conditions, such as a higher interest on a loan based upon a consumer’s race, color, religion, national origin, sex, marital status, age, or because a consumer receives public assistance.

  • Ask a consumer whether they are widowed or divorced. A creditor may use only the terms: married, unmarried, or separated.

  • Ask for information about a consumer’s spouse, except:

    • if a consumer’s spouse is applying with a consumer;
    • if the consumer’s spouse will be allowed to use the account;
    • if the consumer is relying on their spouse’s income or on alimony or child support income from a former spouse.
  • Ask about a consumer’s plans for having or raising children, but the creditor can ask questions about expenses related to a consumer’s dependents.

  • Ask if a consumer receives alimony, child support, or separate maintenance payments, unless the creditor informs the consumer that they do not have to provide this information if the consumer is not relying on these payments to obtain credit. A creditor may ask a consumer whether they have to pay alimony, child support, or separate maintenance payments.

Notice of Credit Decision and Statement of Reasons: The 30/60/30 Day Rules

The ECOA requires that a creditor provide notice to the consumer of action taken with the request for credit within thirty (30) days after a completed credit application is received by the creditor. The possible actions under ECOA are: an Adverse Action; a counteroffer; or granting the credit requested. Adverse Action is defined as: when a creditor refuses to grant credit in substantially the amount or terms of credit requested, unless the credit grantor makes a counteroffer; terminates an account or implements an unfavorable change in the credit terms; or a refusal to increase the amount of credit available.

If Adverse Action is taken, notice must be provided by the creditor to the consumer that the consumer has the right to request reasons for the Adverse Action in writing within sixty (60) days of such action. The consumer has sixty (60) days from receipt of the creditor’s Adverse Action letter to request an explanation of the Adverse Action. If a consumer requests an explanation of Adverse Action within the sixty (60) day period, the creditor must provide a statement of reasons within thirty (30) days.

Penalties for ECOA Violations

Enforcement and penalties for those who violate the ECOA are set forth in 15 U.S.C. § 1691e(b) and 12 C.F.R. § 1002.16. The penalties for a creditor who violates provisions of the ECOA include:

  • Civil liability for actual damages.
  • Civil liability for punitive damages.
  • Punitive damages are limited to non-governmental entities.
    • Punitive damages are capped as follows:
      • The lesser of $500,000 or 1% of a creditor’s net worth in a class action lawsuit.
      • $10,000 on an individual claim.
    • Costs and attorney’s fees awarded to an aggrieved applicant in a successful private action.
    • Equitable and declaratory relief.

Brendan A. Sweeney, Esq., The Florida Debt Warrior, of Sweeney Law, P.A., fights for consumer justice, one case at a time. If you think that your rights under the Equal Credit Opportunity Act have been violated, then please contact Sweeney Law, P.A. to immediately to protect your rights.

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