What protections do I have against credit discrimination?
People use credit to go to college, open businesses, and buy homes. They have the opportunity to use credit to build a better future for themselves and their loved ones. Credit discrimination prevents people from having access to these opportunities, and can make credit more expensive.
What is credit discrimination?
The Equal Credit Opportunity Act makes it illegal for a creditor to discriminate in any aspect of credit transaction based on certain characteristics.
It is illegal to:
- Refuse you credit if you qualify for it
- Discourage you from applying for credit
- Offer you credit on terms that are less favorable, like a higher interest rate, than terms offered to someone with similar qualifications
- Close your account
On the basis of:
- Race
- Color
- Religion
- National origin
- Sex (including sexual orientation and gender identity)
- Marital status
- Age
- Receiving money from public assistance
- Exercising in good faith your rights under the Consumer Credit Protection Act.
How can I protect myself from credit discrimination?
Watch for warning signs
Credit discrimination is often hidden or even unintentional, which makes it hard to spot. Look for red flags, such as:
- Treated differently in person than on the phone or online
- Discouraged from applying for credit
- Encouraged or told to apply for a type of loan that has less favorable terms (for example, a higher interest rate)
- Hearing the lender making negative comments about race, national origin, age, sex (including sexual orientation or gender identity), or other protected statuses
- Refused credit even though you qualify for it based on advertised requirements
- Offered credit with a higher rate than you applied for, even though you qualify for a lower rate based on advertised requirements
Ways to prepare before taking out a loan
- Do your research. Shop around. Learn about the benefits and risks of the loan or credit card you want. Research current interest rates. Compare offers from several lenders.
- Know your credit history. Be sure there are no mistakes or missing items in your credit reports. You have the right to request one free copy of your credit reports each year, from each of the three biggest consumer credit reporting companies, by visiting AnnualCreditReport.com. When you visit the site, you may see steps to view more frequently updated reports online. This gives you a greater ability to monitor changes in your credit. If needed, you can ask whether your credit report is available in your preferred language.
- Ask questions about total costs. Look beyond the monthly payment. Be sure you understand your interest rates and the total amount of interest and fees paid over the long run. Ask about which fees and charges may be negotiable.
- Stay in control. Lenders shouldn’t make you feel rushed or unnecessarily delay action on your application. You have a right to receive information in writing — and in most cases, that means you get timely information on the decision a lender has made about your application for credit.
- Be sure before signing. You shouldn’t ever feel pressured to sign. You should take the time to make sure the credit product and terms work for you. If needed, ask the lender whether help is available in your preferred language.
Get legal help if you believe you have been discriminated against
For legal resources listed state by state, visit lawhelp.org
To find out about eligibility for assistance from a Legal Services program funded by the Legal Services Corporation, visit lsc.gov/what-legal-aid/find-legal-aid
To locate your state attorney general’s office, see naag.org/find-my-ag/
Learn more about your fair lending rights
For more information on credit discrimination, see our brochures for consumers (English | Español | 中文
) and for those who work with consumers ( English
CFPB Issues Advisory Opinion on Coverage of Fair Lending Laws
Washington, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) published an advisory opinion to affirm that the Equal Credit Opportunity Act (ECOA)—a landmark federal civil rights law protecting individuals and businesses against discrimination in accessing and using credit—bars lenders from discriminating against customers after they have received a loan, not just during the application process.
“The CFPB is ramping up its efforts to issue guidance and advisory opinions to assist entities with understanding their obligations under the law,” said CFPB Director Rohit Chopra. “Today’s advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”
In 2020, the CFPB issued
an Advisory Opinion policy. Advisory opinions are one of many types of guidance documents that the agency issues to provide market participants with information about the application of federal consumer financial laws.
ECOA has helped people obtain credit on fair terms since 1974. Throughout its almost 50-year history, ECOA has protected people and businesses against discrimination when seeking, applying for, and using credit. ECOA bans credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. It also protects those who are receiving money from any public assistance program or exercising their rights under certain consumer protection laws.
The CFPB issued today’s advisory opinion and accompanying analysis to clarify that ECOA protects people from discrimination in all aspects of a credit arrangement. The advisory opinion is consistent with a recent legal brief filed by the CFPB, the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice. Among other things, the advisory opinion states that ECOA:
- Continues to protect borrowers after they have applied for and received credit: Lenders are prohibited from discriminating against borrowers with existing credit. For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race.
- Requires lenders to provide “adverse action notices” to borrowers with existing credit: Adverse action notices explain why an unfavorable decision was made against a borrower. Credit applicants and borrowers receive these notices for reasons including that credit was denied, an existing account was terminated, or an account’s terms were unfavorably changed. “Adverse action notices” discourage discrimination, and they help applicants and borrowers learn the reasons for creditors’ decisions.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.
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Page last modified May 9, 2022 @ 11:49 AM EDT
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