ECOA Flashcards
- ECOA stands for the
Equal Credit Opportunity Act (ECOA)
- The Consumer Financial Protection Bureau (CFPB) enforces ECOA.
- ECOA is regulation “B” and it requires that creditors do not discriminate when granting credit – they must “Be Equal”.
- ECOA primarily deals with
“credit applications”.
- The Equal Credit Opportunity Act (ECOA) prohibits discrimination by lenders in any part of a credit transaction based on
race, color, religion, national origin, sex, marital status, age (provided the applicant has attained the minimum legal age in the state), the receipt of income from a public assistance program, or having exercised any rights under the Consumer Credit Protection Act.
- ECOA (Regulation B) also specifies that the borrower is entitled to a copy of the residential property appraisal report at least 3 business days before closing (loan consummation).
- Copies of Appraisals - upon receipt of an application, lenders have three days to notify a borrower of their right to receive a copy of any appraisal or valuation
- ECOA Requires credit bureaus to maintain separate credit files for married spouses, if requested.
- ECOA Allows credit applicants to file discrimination complaints or bring a civil lawsuit for alleged discrimination.
- ECOA prohibits a creditor from inquiring about a consumer’s
marital status or
intentions related to having or raising children
- ECOA also prohibits creditors from making any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would –
discourage them from making or pursuing an application on a prohibited basis, such as membership in a protected class.
- ECOA has eight (8) Protected classes:
sex, race, religion, color, national origin, age ,marital status & public assistance.
( The first five (5) are also protected by the Fair Housing Act. The last three (3) – 𝗮𝗴𝗲, 𝗺𝗮𝗿𝗶𝘁𝗮𝗹 𝘀𝘁𝗮𝘁𝘂𝘀 & 𝗽𝘂𝗯𝗹𝗶𝗰 𝗮𝘀𝘀𝗶𝘀𝘁𝗮𝗻𝗰𝗲 – 𝗮𝗿𝗲 𝗢𝗡𝗟𝗬 𝗽𝗿𝗼𝘁𝗲𝗰𝘁𝗲𝗱 𝗯𝘆 𝗘𝗖𝗢𝗔.)
- ECOA prohibits creditors from refusing to consider or discounting income from alimony, child support, maintenance if borrower chooses to disclose it.
- It is because of ECOA that lenders cannot ask if a borrower is single, widowed or divorced. They can only ask if
the person is married, unmarried or separated and these are the only choices on the loan application.
- It is permissible to ask a client about marital status, since this likely impacts the loan and/or documents needed at closing; however, if an applicant is NOT legally married, it is NOT permissible if he/she is divorced, widowed, etc
- A loan originator should not ask an applicant how many children they have (or plan to have) – the proper way to obtain this information is —
"”How many dependents do you have?”
Instead of How many mouths you feed?
- According to ECOA, a creditor also may not ask an applicant if any income stated on the application is derived from alimony or child support, unless the applicant wishes that income to be considered in determining eligibility for the loan.
- ECOA dictates the collection of demographic information to monitor the lenders’ compliance with the law. Specifically, on the bottom of the 8th page of the 1003 loan application, the interviewer MUST specify the applicant’s race, ethnicity, and sex when the loan application is taken face-to-face.
- ECOA requires credit bureaus to keep separate files on married spouses, if requested
- ECOA notification of adverse action (denial letter) must be in _______.
writing; a telephone call is not sufficient
- ECOA states that a creditor must provide an ______ on a credit application 30 days after receipt of an application. The answer could result in approval, adverse actions(denial) or request for additional information
answer
- ECOA states that a creditor must notify the application of action taken on an application within 90 days after notifying the application of a counteroffer if the application does not expressly accept the offer.
- The notice of adverse action must contain
a statement of the action taken, contact information for the lender, the name and address of the federal agency with jurisdiction, and the reasons for the decision or a statement advising the borrower of their right to receive the reasons
- An applicant can request a statement of reasons within 60 days of receiving the original adverse action notice. When adverse action is taken - an application has been denied, the applicant was offered less favorable terms than those applied for, or there was a change in terms of an existing credit agreement - the creditor must either provide notice of the specific reasons for the decision or inform the applicant of his right to request specific reasons for the decision within 60 days