ECOA Flashcards
Equal Credit Opportunity Act
When did ECOA become law?
A. 1942
B. 1953
C. 2009
D. 1974
Correct answer: D
D is correct, as ECOA was signed into law on the 28th of October 1974 to prohibit creditors from discriminating against consumers based on race, color, religion, national origin, sex, marital status, and age.
What is the primary purpose of ECOA?
A. To ensure lenders are paid equally.
B. An act to standardize lender fees across the board.
C. It is unlawful for creditors to discriminate against any applicant.
D. B & C.
Correct answer: C
C is correct because the primary aim of ECOA is to make the playing field between creditors and their consumers more equal. So, creditors cannot make financial choices based on race, color, and several other things out of consumers’ control. This particularly applies to cases related to any credit extension, such as credit extensions to small businesses, corporations, partnerships, and trusts.
ECOA bands creditors taking on credit applications outside of credit
interests.
A. True
B. False
Correct answer: A
A is correct because ECOA protects the rights of consumers while also
setting standards not to let interests outside of the credit sphere persuade creditors. This includes their potential biases and other things outside of their discrimination that may lead to applications being approved.
ECOA stops discrimination against what?
A. Age and religion.
B. Wealth class and credit history
C. Gender, nationality, and race.
D. A & C.
E. All of the above.
Correct answer: E
E is correct because ECOA stops the discrimination by creditors against
consumers from certain groups, such as age, religion, wealth class, credit history, gender, nationality, and race.
Creditors in ECOA are defined as what?
A. A person or business where money is owed.
B. Banks and credit providers.
C. A third-party lender.
D. All of the above.
Correct answer: D
D is correct because creditors is an umbrella term used by ECOA to
encompass a variety of crediting professionals. These include individuals and businesses who lend out money, banks and credit providers, and third-party loaners.
How is the ECOA put into practice?
A. Creditors can’t dissuade consumers from applying for credit because they are in a group.
B. Creditors must accept credit applications from consumers even if they are in a certain group.
C. Creditor decisions must be based on credit-related matters alone, not
special treatment.
D. Creditors must treat all their consumers fairly and equally.
E. All of the above.
Correct answer: E
E is correct because ECOA has a very set list of things that creditors must follow to not discriminate against consumers applying for credit. This includes not accepting or declining a loan because the consumer is part of a certain group, and their credit decisions should only be made based on credit-related matters, and all consumers must be treated equally.
ECOA applies not just to traditional creditors but also to other types
of lenders.
A. True
B. False
Correct answer: A
A is correct because although the Fair Housing Act applies to lenders, the ECOA applies to all types of creditors and lenders. Regardless of what type of lender you are, you need to follow the rules outlined in ECOA.
Creditors can ask for consumer details related to race or gender.
A. True.
B. False.
C. So long as they don’t use this information to make credit decisions.
D. A & C.
Correct answer: D
D is correct, as although creditors can ask for extra details when dealing with a consumer related to race or gender, it should only be when setting up the application and have no weight in the decision regarding approving or declining their credit application
The consumer has the power to do what under ECOA?
A. Use their membership in a particular religion, race, or gender to get special credit.
B. Ask a creditor the reason why their credit application was declined.
C. Take legal action if the creditor went against ECOA law.
D. B & C.
Correct answer: D
D is correct because the consumer has the power under ECOA to ask for an apparent reason why their credit application was declined. They can also take legal action against the creditor if they feel that the ECOA law has not been followed in the process.
What is an example of ECOA non-compliance?
A. Lenders explaining clearly why an application was declined.
B. Lenders declining an application because an applicant has a low credit score.
C. A lender approving an application because the applicant is from the same race.
D. A lender approving an application despite the fact the applicant is from a rival religion.
Correct answer: C
C is correct, as a lender that approves an application because the applicant is from the same race show lending bias prohibited under ECOA. Like with how a lender cannot make a choice on a loan based on a client’s race or sex
because a lender may think differently of them, the same for if they also admire them. ALL mortgage judgments should be based on the credit and income of the applicant and their ability to repay a loan. A, B and D show
classic examples of ECOA compliance, where lenders must clearly explain why an application was declined, they can decline an application based on low credit scores, and a lender should approve an application if the
applicant shows clearly, they can repay the loan regardless of their religion.
What is NOT an example of ECOA non-compliance?
A. A lender that refuses an applicant because they are Asian.
B. A lender that denies the application and does not explain why.
C. A lender that keeps records of credit applicants for a certain period.
D. A lender that denies the applicant because they get public assistance.
Correct answer: C
C is correct, as the ECOA requires that lenders keep records of all their credit applications for a certain amount of time in order to have evidence to look over if they believe that there are ECOA violations related to the lender or files. A is an example of ECOA violation because it is against the law to deny credit applications based on the Applicant’s race. Decisions about mortgages should be based solely on finances. B is another violation
as lenders should always explain clearly why an application was declined so that if they did so due to unlawful reasons this can be followed up. D is yet another example of ECOA non-compliance as lenders can’t decline an
application because the applicants get public assistance.
