Equal Credit Opportunity Act (ECOA) 5180

Personal Finance presentation equal credit Opportunity Act, the EC o A, prepared to get financially fit by practicing personal finance equal credit Opportunity Act, the EC o A, the Federal Trade Commission FTC, the nation’s consumer protection agency enforces the equal credit Opportunity Act, the EC o A, which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status age, or because you get public assistance.


Now note that in a perfect world of competition, if competition was working properly, and there’s going to be multiple financial institutions in place competing with each other in order to provide loans, which is the case in many areas, you would think that the financial institution would have an incentive, of course, to provide loans because that’s how they’re going to be making money and have equal standards that they’re going to be applying across the board to see whether or not people can repay the loan,



so that they can pick up loans that are likely to be repaid on and if they were to depend on factors that are outside of whether or not someone can repay the loan or not, you would think that they would lose in a competitive market, because other people would pick up those individuals and be more than happy to provide loans if they were going to be repaid in on it. And that would and that would drive the people that are not picking up the loans based on circumstances as to whether someone can repay them or not on a business setting and competition would go out of the market.



But the market is not always perfect. Because there could be areas that there isn’t perfect competition, and so on and so forth. One bank might have, you know, a larger control of a particular region, anytime there’s centralization of power, then that centralization leads to less competition, and so on and so forth. So you want to know, of course, the laws here. So equal credit Opportunity Act, the EC o A, creditors may ask for most of this information in certain situations, but they may not use it when deciding whether to give you credit, or when setting the terms of your credit.



So obviously, when you go through the application process, they may ask for some of this information, for whatever reason through the application process. But these are factors on which you wouldn’t think that the credit should be determined in it’s illegal to be determined it in and you would also think that they’re not factors that would be relevant to determine whether someone can repay the loan or not, and therefore irrelevant, just from a self interested standpoint, to assess whether someone can repay a loan or not.



So note, everyone who applies for credit gets gets it or gets the same terms, factors like income expense, debt, and credit history are among the considerations that lenders use to determine your credit worthiness. So generally, you should have equal treatment under the terms. So whatever the terms of the institution’s, you would think that they should apply those terms equally to everybody involved across basically these categories.



And again, you would think they would have a self interest in order to do that, because those are the terms that they’re looking for to see whether or not someone can repay the loan. And if someone can repay the loan, those are loans we want we want, right because it’s a business transaction. So the equal credit Opportunity Act, the law provides protections when the deal with any organizations or people who regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies,



and credit unions, everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing must comply with the e c o A, when you apply for credit, creditors may not discourage you from applying or reject your application, because of your race, color, religion, national origin, sex, marital status, age or because you receive public assistance, consider your race, sex or national origin.



Although you may be asked to disclose this information if you want to. So no, oftentimes, they may actually be quite rude be required sometimes to ask for this information where you might say, Well, why are you even asking for it at this point, because it shouldn’t have anything to do with the whether or not I can repay the loan. But obviously, they’re trying to put the statistics together to do that.



So they may have the questionnaire saying, asking these questions, which you might consider to be irrelevant so they can put their you know, grouping of people into boxes, stats together and everything together and whatnot. So it helps federal agencies enforce anti discrimination laws, a credit may consider your immigration status and whether you have the right to stay in the country long enough to repay the debt. Now, obviously, if you’re if it’s an immigration status, that’s completely different, because that does



affect whether or not you can possibly repay the loan or not. So you would think that that would be something that you know, they might want to it. wouldn’t be a factor whether or not you would say they need to have the information. If they could have the information on the banking side, you would think it would be something that they might factor into their, their questionnaire given the fact that you would think it could have an impact on whether or not someone could repay. So impose different terms or conditions, like a higher interest rate or higher fees on loan based on your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.



So again, the idea would be that it’s uniform policy over these categories, because, again, these categories you would think would not have an impact on whether you can repay the loan or not so so they shouldn’t be factors in determining, you know, what the conditions of the loan will be, should have equal treatment under the law or an under in this case, the policy. So ask if you’re if you’re widowed or divorced, a creditor may use only the terms of married, unmarried and separated. When you apply for credit may not they may not ask about your marital status, if you’re applying for a separate unsecured account.



So if it’s if it’s a separate account you’re looking for, obviously, if you were looking for a loan and you’re filing joint for it or something, then that would be a different situation. But if not, then the marital status is none of their business generally. So a creditor may ask you to provide this information. If you live in community property states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, a creditor in any state may ask for this information if you apply for a joint account, or a secured by property.



So ask for information about your spouse except except if your spouse is applying with you. So obviously, you know, if the spouse is applying with you, then their information is relevant if your spouse will be allowed to use the account, if you are relying on your spouse’s income, or alimony or child support income from a former spouse, if you live in a community property state, ask about your plan for having a or raising children. But they can ask questions about expenses related to your dependence.



So that’s a kind of sticky situation right there from a creditor standpoint, of course, because they don’t want to get too involved in in, you know, how you’re raising your children and whatnot. But obviously, children are an expense in terms of your monthly expenses. So so just from a financial standpoint, in terms of you how much you’re paying in terms of how much you can repay the loan, do you think it could be relevant but so that’s that so ask if your alimony child support or separate maintenance payments unless they tell you first that you don’t have to provide this information.



If you aren’t relying on these payments to get credit, a creditor may ask if you have to pay alimony, child support or separate maintenance payments. Okay, so when deciding to grant you credit, or when setting the terms of credit, creditors may not consider your race, color, religion, national origin, sex, marital status, or whether you get public assistance, consider your age unless now age, of course, is an it’s a factor that’s different.



I mean, age is a little bit different than these other factors, obviously, you know, if every if all else is equal in terms of your credit, in terms of your financial conditions, then race, color, religion, national origin, sex, marital status shouldn’t really matter from a loan standpoint, perspective, and you can have an equal policy when you look at age, and you could get you know, it’s a little bit you got the age discrimination, but it’s not exactly the same thing.



Because we all have a limited time here on the earth and whatnot. So it could, you know, impact the repayment, you would think it might be something that could be more more in alignment. So it’s a little bit different of a thing there, you would think, but let’s see what we have here. Consider, they cannot consider your age unless you’re too young to sign the contract.



So obviously, if you can’t sign the contract, you can’t go into a contract for a loan, you’re at least 62 and the creditor will favor you because of your age. It’s used to determine the meaning of other factors important to credit worthiness, for example, a creditor will use your age to determine if your income might drop because you’re about to retire. So obviously, if you’re close to retirement, then you know that’s kind of that could have an impact on your income. Like you know what your whole income scenario thing is gonna look like.



So it’s used to value credit scoring systems that favor applicants 62 and older. A credit scoring system assigns points to answers you give on credit applications for example, your length of employment might be scored differently depending on age. So when deciding to grant new credit or when set setting the terms of credit, creditors may not consider whether you have a telephone account in your name, a creditor may consider whether you have a phone, consider the racial composition of the neighborhood where you want to buy reference or improve a house with money.



You are You are borrowing. So when evaluating your Income creditors may not refuse to consider reliable public assistance income, the same way as other income. So, so, in other words, if you’re looking for reliable income and the income is reliable, even though it’s from public assistance, then if it’s reliable, then it would be a reliable source of income. And you would think it would be part of the same kind of calculations when they get your income versus expense and whether you can pay back type of calculations, discuss income because of your sex or marital status.



For example, a creditor cannot count a man’s salary is 100% and a woman’s at 75%. a creditor may not assume a woman of childbearing age will will stop working to raise children. Now and again, that’s that’s one that you can see the bank you know, just from a statistical standpoint, might you know it just in terms of age, you would think that at Myrtle stage that certain amount of women would have children which could have an impact on earnings, but you can’t, can’t consider that.



And so that’s interesting. So discuss or refuse to consider income because it comes from a part time employment, Social Security, pension or annuities, refuse to consider reliable alimony, child support, or separate maintenance payments, a creditor may ask you for proof that you receive this income consistently.



So you also have the right to have credit in your birth name, your first and your spouse’s last name, or your first name and combined last name, I get credit without a cosigner if you meet the creditors standards have a cosigner other than your spouse, if one is necessary, keep your own accounts after you change your name, marital status, reach a certain age or retire unless the creditor has evidence that that you’re not willing or able to pay.



No, whether your application was accepted or rejected within 30 days of filing a complete application, you also have the right to know why your application was rejected. So if they do reject your application, then of course, you want to know why and you want to be able to look at and then then you can kind of review these factors and say, Hey, is there is there something funny here going on, that they rejected it.



And like I said, if you had other financial institutions in the area, that are competing with that financial institution in a similar market, you would think you can go the other other application, you can determine quite quickly, whether or not they’re not applying the same standards possibly in try to see you know what the differences are.



But of course, if you’re in a situation where, you know, one institution pass, you know, had is dominating the whole kind of area there and you don’t have any other options, that’s when these kind of corrupt things are more likely to happen due to the fact that competition doesn’t drive people to be, you know, doing doing things in a competitive fashion anymore, and taking on the loans that people can repay back.



So in any case, the creditor must tell you the specific reasons for the rejection, or that you were entitled to learn the reasons if you ask within 60 days, and acceptable reason might be your income was too low, or you haven’t been employed long enough and unacceptable reason might be you don’t meet your minimum standards, you don’t meet our minimum standards, that information is not specific enough. So it’s just like, if someone was to tell you, it basically said, you know, why, why did you do this? And or why is this the way it is? And the other person says, because I said,



So? Well, then that’s not you know, okay, you know, that’s not very, that’s not very informative. I don’t, I can’t go based on that. That’s not an objective type of decision. If they give you something that’s objective, they say, hey, look, your incomes too low. You we got this credit problem. That’s the problem right there, I’ve compared you know, it’s I apply the same standard to everybody. And that is the thing that’s drawn me under if you’ve improved that thing, then you can come in, and we’d be more likely to do it if they just say,



Because I said so well, then, you know, that’s not a reason that I can improve or anything. So that’s so learn. The specific reason you were you were offered less favorable terms, then you apply for it, but only if you reject these terms. For example, if the lender offers you a smaller loan or a higher interest rate, and you don’t accept the offer, you have the right to know why those terms were offered. So find out why your account was closed or why the terms of the account were made less favorable unless the account was inactive or you fail to make payments as agreed

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