What is the Equal Credit Opportunity Act?

The Equal Credit Opportunity Act (ECOA) is federal law that prohibits creditors from certain forms of discrimination. Age (as long as you are old enough to enter into a legally binding contract), race, color, national origin, gender, marital status, religion, or receipt of public aid may not be used to:

  • Discourage or prevent you from applying for credit,
  • Refuse you credit which you otherwise qualify for,
  • Give you less credit, or credit on terms different from those who have similar credit risks (permissible risk factors include ability to pay, credit record, stability and assets owned)
  • Deny you credit because you exercised your rights under federal laws such as the Consumer Credit Protection Act, the Fair Credit Billing Act, or the Fair Credit Reporting Act.

A lender is allowed to use a statistically sound scoring system that is derived from empirical data as long as being 62 years or older is not assigned a negative value in the scoring system.

Under ECOA, a creditor is required to notify you within 30 days after you have completed your credit application whether your application has been approved or denied. If credit is denied, the reasons for the declination must be provided or you must be told how to obtain such information.

Violation of ECOA may be redressed by filing a federal lawsuit for the actual damages you have suffered plus punitive damages of up to $10,000.