Equal Credit Opportunity Act
15 U.S.C. §§ 1691–1691fThe Equal Credit Opportunity Act prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, or the good-faith exercise of rights under the Consumer Credit Protection Act. It also requires creditors to give applicants a specific, written explanation whenever they take adverse action.
What It Covers
The ECOA governs any extension of credit to a consumer, including credit cards, mortgages, auto loans, personal loans, and small business credit. Its prohibition on discrimination covers not just outright denial but every aspect of a credit transaction: the terms offered, the evaluation criteria applied, and the treatment of applicants during the application process. A creditor may not refuse to consider income from part-time work, alimony, child support, or public assistance solely because of its source, though the creditor may evaluate the reliability of that income.
One of the ECOA's most practical consumer protections is the adverse action notice requirement. If a creditor denies an application, offers credit on terms less favorable than those applied for, or takes other specified adverse actions, it must provide a written notice explaining why. The notice must include the specific reasons for the adverse action or a disclosure of the applicant's right to request those reasons. This requirement often overlaps with the separate FCRA adverse action notice, but the two notices are not identical and a creditor generally must satisfy both where both apply.
Regulation B at 12 C.F.R. Part 1002 is the implementing rule. It defines adverse action, prescribes the content and timing of adverse action notices, sets rules on information that may be requested on applications, and governs data collection for monitoring purposes. Consumers have a private right of action and may recover actual damages, punitive damages capped at $10,000 in individual actions (higher in class actions), and attorney's fees and costs.
Key Provisions
- § 1691(a) Prohibited bases of discrimination: race, color, religion, national origin, sex, marital status, age, income from public assistance, and exercise of Consumer Credit Protection Act rights.
- § 1691(d) Requirement to provide reasons for adverse action, generally within 30 days after the application is completed.
- § 1691(d)(6) Definition of "adverse action," including denial, revocation, unfavorable change of terms, and refusal to grant credit in substantially the amount requested.
- § 1691e Civil liability: actual damages, up to $10,000 in punitive damages for individual actions, and attorney's fees and costs.
- 12 C.F.R. § 1002.9 Regulation B: content, form, and timing of adverse action notifications.
- 12 C.F.R. § 1002.13 Regulation B: data collection requirements for monitoring purposes in certain transactions.