The Equal Credit Opportunity Act (ECOA) regulates what factors creditors may consider in determining your creditworthiness. Generally, creditors cannot deny you credit solely
- Because of your color, race, national origin, religion, gender, marital status, or age
- Because your income is a form of public assistance
- Because you’ve exercised your rights under any federal consumer credit protection laws
The ECOA also specifies what creditors must do in responding to your application for credit, particularly if they’ve denied you the credit you seek.
◙ Special circumstances that may affect creditor determinations
While creditors may not deny your application for credit solely on the basis of your marital status, age, or source of income, information about these factors may sometimes affect creditor decisions, and you may be turned down for credit without the denial constituting discrimination.
◙ Marital status considerations
Creditors may never ask you if you’re widowed or divorced. When they are allowed to ask about your marital status, they may only ask if you’re unmarried (which includes single, divorced, and widowed), married, or separated. Creditors are allowed to ask you about your marital status if
- You live in a community property state
- You’re applying for an account jointly with another person
- You’re applying for credit that will be secured by property owned jointly with another person
A creditor evaluates an applicant’s individual capacity to repay the debts for which he or she is responsible. A married couple may be jointly liable on several credit accounts, and one spouse’s income might not be sufficient to support additional credit in his or her own name. As a result, a creditor might deny an application for credit made by one partner in a marriage not because the applicant is married, but because he or she alone would have insufficient resources to repay both the current joint debt and any additional individual debt. This would not be considered a discriminatory decision.
If your marital status changes, a creditor generally cannot close an open account or require you to reapply for it unless given reason to believe you may not be able to continue paying the account in a timely fashion. If you first acquired revolving credit on the strength of a spouse’s income and you are no longer married, a creditor may ask you to reapply for the credit. Whether or not you are then granted the same credit terms will depend on the creditor’s determination about your ability to pay the debt on your own.
You have the right to have a credit record in your own last name, your spouse’s last name, or a hyphenated version of the two. A woman may lose a credit history she established in her own name if she later marries and then uses her husband’s last name, or if the creditor reports joint credit in the husband’s name only. To safeguard against these possibilities, a woman should ask the credit reporting agencies to keep relevant information in a file under her own name.
◙ Age considerations
A creditor is allowed to determine that you’re old enough to enter a binding contract. Beyond that consideration, a lender cannot refuse you credit solely because of your age. If you’re age 62 or older and a creditor uses a credit scoring system to evaluate your application for credit, that system cannot value your age differently than it does the age of an applicant under age 62 (unless it’s to favor you). You also can’t be held to income standards more stringent than those applied to a younger person in a similar financial situation.
Unless you’ve demonstrated an inability to make timely payments on an existing credit account, a creditor cannot close an open account or require you to reapply for it simply because you’ve retired or reached a certain age. If you apply for new credit, however, a creditor may consider your age in relation to other factors important to your creditworthiness, such as when you’re likely to retire and whether your income will subsequently change. These considerations could affect a lender’s perception of your ability to repay the credit you’re applying for (e.g., a 30-year mortgage when you’re age 64) and could result in a denial of your application which would not be considered discriminatory in nature.
◙ Income considerations
Creditors must consider all income you choose to report, regardless of its source. You may not be denied credit simply because you receive income from a pension, annuity, or retirement benefit program, or because you receive income in the form of public assistance, child support, or alimony.
Creditors must inform you that you don’t have to report income from child support or alimony payments if you won’t rely on these forms of income to repay the debt. If you do report this income in an effort to obtain credit, however, creditors may then ask you to substantiate that you receive these payments consistently, and they have the right to request information about your former spouse.
If you are receiving child support or public assistance, a creditor may consider factors that could affect your source of income, since a change in your income status would affect your overall creditworthiness. A creditor may then consider such factors as the age of your dependents (you may lose child support or public assistance when they reach a certain age) or the probability you will continue to meet residency requirements for the benefits that you receive.
Your rights if you’re denied credit
A creditor must respond to your application for credit in writing within 30 days of receiving your application and other relevant material (such as your credit report). If the creditor offers you terms less favorable than those you sought (e.g., a lower credit limit or a higher interest rate), you have a right to know why, but you must ask before accepting the terms offered.
If your application for credit is denied, the written response must:
- Give you specific reasons why your application was denied, or give you information (usually a toll-free telephone number or a mailing address) about how to contact the issuer within 60 days to learn those reasons
- Inform you of what constitutes discrimination under the ECOA
- Provide the name and address of the federal agency that has the authority to enforce antidiscrimination regulations relevant to this decision
If your credit report was used in connection with a decision to reject your application, the creditor must provide you with the name and address of the credit bureau that furnished the report. If you make a request within 60 days of being denied credit, the ECOA entitles you to a free copy of your credit report from that credit bureau. You should obtain your report and review it carefully. To get any errors corrected, dispute the erroneous information with the credit bureau.
If you feel you were unfairly denied credit, you can contact the creditor (it’s best to do so by letter) to plead your case. Address the specific reasons you were denied credit. If your credit report has been corrected, inform the creditor of this change. If you have a reasonable chance to reverse the creditor’s decision and you persist, you may be successful. Read more about your credit rights.
What recourse do you have if you feel you’ve suffered from credit discrimination?
If you believe you have been turned down for credit for a discriminatory reason, you have several avenues of recourse open to you. You may:
- Inform the creditor you believe you’ve been discriminated against. The creditor may review the decision and reverse it.
- Consider contacting an attorney and suing the creditor. If you do so and win, you may be awarded damages, punitive damages, court costs, and compensation for your attorney’s fees. (But if you lose, you must pay the attorney fees and costs.)
- Consider contacting an attorney to determine if others allegedly have been similarly discriminated against and are willing to join you in filing a class action suit. If successful, you may recover damages and punitive damages for the group, as well as compensation for the group’s attorney fees and court costs.
- Contact your state’s Attorney General. If the creditor has engaged in a pattern of decision-making behavior that appears to violate state equal credit opportunity laws, the Attorney General’s office may decide to prosecute the creditor.
- Report violations to the appropriate government agency (as specified in the creditor’s denial letter).
Contacts: If you’ve been denied credit:
- Nationally-chartered bank … Contact: Comptroller of the Currency
- State-chartered bank that is a member of the Federal Reserve System … Contact: Federal Reserve Board
- State-chartered bank insured by the Federal Deposit Insurance Corporation (FDIC) but not a member of the Federal Reserve System … Contact: Federal Deposit Insurance Corporation
- Federal Savings and Loan Association, Federal Savings Bank, Federally Insured Savings Association, or State-Chartered Federally Insured Savings Institution … Contact: Office of Thrift Supervision
- Federally-chartered credit union … Contact: National Credit Union Administration
- State-chartered bank or savings institution without federal deposit insurance, retail or department store, finance company, mortgage company, oil company, public utility, state-chartered credit union, government lending program, or travel and expense credit card company … Contact: Federal Trade Commission
Tip: If you feel that you have been denied credit for any discriminatory reason, you can also file a complaint with the Consumer Financial Protection Bureau at www.consumerfinance.gov.