Credit discrimination is illegal
Under federal law, lenders are not allowed to discriminate against you. When you apply for credit or borrow money, it is against the law to discriminate because of:
- Race
- Color
- Religion
- National origin
- Sex (including sexual orientation and gender identity)
- Marital status
- Age
- Receiving money from public assistance
The list above shows protected characteristics under the Equal Credit Opportunity Act (ECOA). Lenders are sometimes allowed to ask you about the items on the list, mainly because it helps the lender show they are following the law. But lenders can’t steer you away from applying for credit, or reject your application, based on how you might be described using that list (for example, your sex or religion). Lenders are not allowed to charge higher costs, like a higher interest rate or higher fees, because of the factors on the list. And, they can’t reject your application because you exercised your rights under certain consumer protection laws.
Within limits, lenders are allowed to consider other factors, such as your income, debt, and credit history, when they decide whether to offer you credit and what terms to offer you.
The ECOA applies to loans and credit including:
You are protected under the Equal Credit Opportunity Act (ECOA)
ECOA is a federal law, enacted in 1974. It makes credit discrimination illegal and holds lenders responsible if they break the law. Many parts of the U.S. government enforce the law—including the CFPB.
Warning signs of discrimination
You can more easily spot credit discrimination if you are prepared and aware of warning signs. Credit discrimination doesn’t only happen in a face-to-face situation, which means it can be hard to spot. Pay attention to whether you are:
- 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 make 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 interest rate than you applied for, even though you qualify for a lower rate based on advertised requirements
Get legal help if you believe you have been discriminated against
- For legal resources listed state by state, visit: lawhelp.org
Ways to prepare before taking out a loan
If you are struggling financially, disaster relief and other government programs may help you avoid taking out high-cost loans or falling victim to a scam.
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.
Steps for resolving a dispute
Problems with financial products and services sometimes happen, and often they can be fixed if you work directly with the company. Even if you later submit a complaint to the CFPB or hire a lawyer, it can help to take the first steps yourself. Most companies can be reached by telephone, e-mail, online chat, mail, or social media.
Tips that can help:
- Never post your personal data on social media or review sites
- Avoid angry, sarcastic, or threatening language
- Keep notes as you go—who you spoke with, when, and what they said
Before you contact the company, be prepared and have information on hand:
- Your name, address, phone number, and account number or transaction number
- What happened—as clear and to-the-point as you can
- What you want to fix the problem
- Documents or screen shots that show what happened
Page last modified Jun. 4, 2025 @ 11:24 AM EDT
15 U.S.C. 1691: Key Protections Under the Equal Credit Opportunity Act
Learn how the Equal Credit Opportunity Act ensures fair lending practices, outlining key protections, creditor responsibilities, and enforcement mechanisms.
Published Mar 28, 2025
The Equal Credit Opportunity Act (ECOA), codified at 15 U.S.C. 1691, is a federal law designed to prevent discrimination in credit transactions. It ensures that individuals and businesses have equal access to credit without being unfairly denied based on certain characteristics. This law applies to various types of credit, including personal loans, mortgages, and business financing, making it a crucial safeguard for consumers and entrepreneurs.
Understanding ECOA’s protections is essential for both borrowers and lenders. The law outlines specific obligations for creditors, establishes notification requirements, and provides enforcement mechanisms to hold violators accountable.
Protected Categories
ECOA explicitly prohibits creditors from discriminating against applicants based on race, color, religion, national origin, sex, marital status, age (provided the applicant is of legal age to contract), or income derived from public assistance programs. These protections ensure financial institutions evaluate applicants based on creditworthiness rather than personal attributes unrelated to repayment ability.
The inclusion of public assistance as a protected category prevents lenders from denying credit to individuals who rely on government benefits such as Social Security, Supplemental Security Income (SSI), or Temporary Assistance for Needy Families (TANF). Similarly, protection against age discrimination ensures older applicants are not unfairly denied credit or subjected to unfavorable terms unless age is a legitimate factor, such as in reverse mortgage eligibility.
Sex and marital status protections address past lending practices that disadvantaged women, particularly married women once required to have a husband co-sign for credit. Lenders cannot assume a married applicant’s creditworthiness depends on their spouse or require spousal signatures unless the spouse is a joint applicant. Additionally, creditors cannot inquire about an applicant’s plans to have children, a practice previously used to deny credit based on assumptions about future income loss due to pregnancy or childcare responsibilities.
Creditors’ Obligations
Lenders must evaluate credit applicants based on legitimate financial criteria rather than prohibited factors. Creditworthiness should be assessed using objective standards such as income, credit history, debt-to-income ratio, and repayment ability. Any deviation from these measures can expose a creditor to liability.
Under 12 C.F.R. 1002.12, lenders must retain applications and related documents for at least 25 months for consumer credit and 12 months for business credit. These records include application forms, credit reports, and correspondence. Failure to maintain proper records can hinder investigations into discriminatory practices and itself constitute a violation.
Creditors must also ensure their underwriting models and decision-making algorithms do not result in disparate impact discrimination. Even if a lending policy appears neutral, it can violate ECOA if it disproportionately affects a protected group without a legitimate business justification. The Consumer Financial Protection Bureau (CFPB) has taken enforcement actions against lenders whose automated systems produced discriminatory outcomes. Financial institutions utilizing artificial intelligence or algorithmic credit scoring must rigorously test their models to prevent discriminatory lending patterns.
Requirements for Notifications
Creditors must notify applicants of their decision within 30 days of receiving a completed application, as outlined in 15 U.S.C. 1691(d) and Regulation B (12 C.F.R. 1002.9). If credit is denied or offered on different terms, the applicant must receive a clear explanation. This requirement prevents arbitrary rejections and allows individuals to address issues affecting their application.
The notice must include the creditor’s name, the action taken, and a statement of the applicant’s rights under ECOA. If credit is denied or altered unfavorably, the creditor must provide either the specific reasons for the decision or inform the applicant of their right to request this information within 60 days. If requested, the creditor must respond within 30 days.
If a credit denial is based on information from a third party, such as a credit reporting agency, the notification must include a statement advising the applicant of their right to obtain a free copy of their credit report. This aligns with the Fair Credit Reporting Act (FCRA), allowing consumers to dispute inaccurate or outdated information that may have led to an adverse credit decision.
Enforcement and Liabilities
The CFPB, along with agencies such as the Federal Trade Commission (FTC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve, oversees ECOA compliance. These agencies investigate violations, issue fines, and mandate corrective actions. Regulatory enforcement often results in consent orders requiring lenders to reform their policies and compensate affected consumers.
Private individuals who experience credit discrimination may file lawsuits under 15 U.S.C. 1691e. ECOA allows consumers to seek actual damages, punitive damages up to $10,000 for individual cases ($500,000 or 1% of a creditor’s net worth in class actions), and attorneys’ fees. Courts have interpreted actual damages broadly, covering financial losses, emotional distress, and reputational harm.
Exceptions
ECOA includes exceptions where creditors can legally consider factors that might otherwise seem discriminatory. These exceptions balance consumer protections with legitimate business considerations.
Special-purpose credit programs (SPCPs), permitted under 12 C.F.R. 1002.8, allow creditors to extend credit to economically disadvantaged groups. For example, a nonprofit may offer loans exclusively for minority-owned small businesses or low-income homebuyers without violating ECOA, provided the program meets a demonstrated need. Properly structured SPCPs aim to expand, rather than restrict, credit access.
Age-based lending decisions are also allowed when age is a legitimate factor in determining creditworthiness. Lenders may consider an applicant’s age for financial products such as retirement-based loans or mortgages with term limits extending beyond the applicant’s life expectancy. They may also evaluate whether an applicant’s income is likely to decrease due to impending retirement, but such assessments must be based on objective financial information rather than assumptions.
Filing Complaints
Individuals who believe they have been subjected to credit discrimination can file complaints with the CFPB, which investigates violations and can impose penalties. Complaints can be submitted online, and the agency typically forwards them to the creditor for a response. If a pattern of discrimination is identified, the CFPB may initiate enforcement proceedings, resulting in fines, corrective measures, and restitution. Complaints involving banks or credit unions may also be directed to their primary regulator, such as the OCC or the Federal Reserve.
ECOA allows aggrieved applicants to file a lawsuit in federal or state court within five years of the alleged violation. Successful plaintiffs may recover actual damages, punitive damages, and attorneys’ fees. The Department of Justice (DOJ) may intervene in cases involving a pattern or practice of discrimination, leading to broader enforcement actions. These legal pathways ensure individuals can challenge unfair treatment and hold financial institutions accountable.
https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/credit-discrimination-is-illegal/https://legalclarity.org/15-u-s-c-1691-key-protections-under-the-equal-credit-opportunity-act/
