QandAs: Loans

What is the Equal Credit Opportunity Act?

Answer:
The Equal Credit Opportunity act is intended

to protect loan applicants. When applying for a mortgage loan, auto loan, or credit card, your credit report plays a huge role. This determines loan approval and interest rate.

Unfortunately, applicants have been denied credit as a result of other factors. To ensure that each person is given a fair opportunity to obtain credit, the Equal Credit Opportunity Acts forbids a creditor or lender from using a person’s background (sex, race, national origin, etc.) as basis for loan approval.

Creditors are allowed to inquire about income and debts. However, they cannot make a credit decision based on discriminatory factors. According to the Equal Credit Opportunity Act, a lender may not discourage a person from applying for a loan due to their sex or marital status.

Loan applications normally ask inquiring questions. However, detail explanations aren’t required. For example, if asked about marital status, an applicant can simply provide “married or unmarried.” The lender is not privy to specific details such as divorced or widowed.

Additionally, lenders cannot force an applicant to reveal their race or national origin. Applicants may voluntary disclose this information on the loan application. Furthermore, the Equal Credit Opportunity Act prohibits a lender denying a loan request because the applicant receives public assistance, child support, or alimony payments.