The Equal Credit Opportunity Act
The goal of the Equal Credit Opportunity Act (ECOA) is to ensure
that all individuals are given a fair and equal opportunity to
secure credit. All banks, finance companies, retail stores, credit
unions, credit card companies and loan companies must adhere to the
rules outlined in the Act. The Act also protects those entities that
are involved in granting credit. This Act applies to individuals and
businesses.
Sec. 1691. - Scope of prohibition
(a) Activities constituting discrimination
It shall be unlawful for any creditor to discriminate against any
applicant, with respect to any aspect of a credit transaction -
(1) on the basis of race, color, religion, national origin, sex or
marital status, or age (provided the applicant has the capacity to
contract);
(2) because all or part of the applicant's income derives from any
public assistance program; or
(3) because the applicant has in good faith exercised any right
under this chapter.
(b) Activities not constituting discrimination
It shall not constitute discrimination for purposes of this
subchapter for a creditor -
(1) to make an inquiry of marital status if such
inquiry is for the purpose of ascertaining the creditor's rights and
remedies applicable to the particular extension of credit and not to
discriminate in a determination of credit-worthiness; (FOOTNOTE 1)
(2) to make an inquiry of the applicant's age or of whether the
applicant's income derives from any public assistance program if
such inquiry is for the purpose of determining the amount and
probable continuance of income levels, credit history, or other
pertinent element of credit-worthiness [1] as provided in
regulations of the Board;
(3) to use any empirically derived credit system which considers age
if such system is demonstrably and statistically sound in accordance
with regulations of the Board, except that in the operation of such
system the age of an elderly applicant may not be assigned a
negative factor or value; or
(4) to make an inquiry or to consider the age of an elderly
applicant when the age of such applicant is to be used by the
creditor in the extension of credit in favor of such applicant.
(c) Additional activities not constituting discrimination
It is not a violation of this section for a creditor to refuse to
extend credit offered pursuant to -
(1) any credit assistance program expressly authorized by law for an
economically disadvantaged class of persons;
(2) any credit assistance program administered by a nonprofit
organization for its members or an economically disadvantaged class
of persons; or
(3) any special purpose credit program offered by a profit-making
organization to meet special social needs which meets standards
prescribed in regulations by the Board;
if such refusal is required by or made pursuant to such program.
(d) Reason for adverse action; procedure applicable; ''adverse
action'' defined
(1) Within thirty days (or such longer reasonable time as specified
in regulations of the Board for any class of credit transaction)
after receipt of a completed application for credit, a creditor
shall notify the applicant of its action on the application.
(2) Each applicant against whom adverse action is taken shall be
entitled to a statement of reasons for such action from the
creditor. A creditor satisfies this obligation by -
(A) providing statements of reasons in writing as a matter of course
to applicants against whom adverse action is taken; or
(B) giving written notification of adverse action which discloses
(i) the applicant's right to a statement of reasons within thirty
days after receipt by the creditor of a request made within sixty
days after such notification, and
(ii) the identity of the person or office from which such statement
may be obtained. Such statement may be given orally if the written
notification advises the applicant of his right to have the
statement of reasons confirmed in writing on written request.
(3) A statement of reasons meets the requirements of this section
only if it contains the specific reasons for the adverse action
taken.
(4) Where a creditor has been requested by a third party to make a
specific extension of credit directly or indirectly to an applicant,
the notification and statement of reasons required by this
subsection may be made directly by such creditor, or indirectly
through the third party, provided in either case that the identity
of the creditor is disclosed.
(5) The requirements of paragraph (2), (3), or (4) may be satisfied
by verbal statements or notifications in the case of any creditor
who did not act on more than one hundred and fifty applications
during the calendar year preceding the calendar year in which the
adverse action is taken, as determined under regulations of the
Board.
(6) For purposes of this subsection, the term ''adverse action''
means a denial or revocation of credit, a change in the terms of an
existing credit arrangement, or a refusal to grant credit in
substantially the amount or on substantially the terms requested.
Such term does not include a refusal to extend additional credit
under an existing credit arrangement where the applicant is
delinquent or otherwise in default, or where such additional credit
would exceed a previously established credit limit.
(e) Appraisals; copies of reports to applicants; costs
Each creditor shall promptly furnish an applicant, upon written
request by the applicant made within a reasonable period of time of
the application, a copy of the appraisal report used in connection
with the applicant's application for a loan that is or would have
been secured by a lien on residential real property. The creditor
may require the applicant to reimburse the creditor for the cost of
the appraisal
Sec. 1691a. - Definitions; rules of construction
(a) The definitions and rules of construction set forth in this
section are applicable for the purposes of this subchapter.
(b) The term ''applicant'' means any person who applies to a
creditor directly for an extension, renewal, or continuation of
credit, or applies to a creditor indirectly by use of an existing
credit plan for an amount exceeding a previously established credit
limit.
(c) The term ''Board'' refers to the Board of Governors of the
Federal Reserve System.
(d) The term ''credit'' means the right granted by a creditor to a
debtor to defer payment of debt or to incur debts and defer its
payment or to purchase property or services and defer payment
therefor.
(e) The term ''creditor'' means any person who regularly extends,
renews, or continues credit; any person who regularly arranges for
the extension, renewal, or continuation of credit; or any assignee
of an original creditor who participates in the decision to extend,
renew, or continue credit.
(f) The term ''person'' means a natural person, a corporation,
government or governmental subdivision or agency, trust, estate,
partnership, cooperative, or association.
(g) Any reference to any requirement imposed under this subchapter
or any provision thereof includes reference to the regulations of
the Board under this subchapter or the provision thereof in question
Sec. 1691b. - Promulgation of regulations by Board; establishment of
Consumer Advisory Council by Board; duties, membership, etc., of
Council
(a) Regulations
(1) The Board shall prescribe regulations to carry out the purposes
of this subchapter. These regulations may contain but are not
limited to such classifications, differentiation, or other
provision, and may provide for such adjustments and exceptions for
any class of transactions, as in the judgment of the Board are
necessary or proper to effectuate the purposes of this subchapter,
to prevent circumvention or evasion thereof, or to facilitate or
substantiate compliance therewith.
(2) Such regulations may exempt from the provisions of this
subchapter any class of transactions that are not primarily for
personal, family, or household purposes, or business or commercial
loans made available by a financial institution, except that a
particular type within a class of such transactions may be exempted
if the Board determines, after making an express finding that the
application of this subchapter or of any provision of this
subchapter of such transaction would not contribute substantially to
effecting the purposes of this subchapter.
(3) An exemption granted pursuant to paragraph (2) shall be for no
longer than five years and shall be extended only if the Board makes
a subsequent determination, in the manner described by such
paragraph, that such exemption remains appropriate.
(4) Pursuant to Board regulations, entities making business or
commercial loans shall maintain such records or other data relating
to such loans as may be necessary to evidence compliance with this
subsection or enforce any action pursuant to the authority of this
chapter. In no event shall such records or data be maintained for a
period of less than one year. The Board shall promulgate regulations
to implement this paragraph in the manner prescribed by chapter 5 of
title 5.
(5) The Board shall provide in regulations that an applicant for a
business or commercial loan shall be provided a written notice of
such applicant's right to receive a written statement of the reasons
for the denial of such loan.
(b) Consumer Advisory Council
The Board shall establish a Consumer Advisory Council to advise and
consult with it in the exercise of its functions under this chapter
and to advise and consult with it concerning other consumer related
matters it may place before the Council. In appointing the members
of the Council, the Board shall seek to achieve a fair
representation of the interests of creditors and consumers. The
Council shall meet from time to time at the call of the Board.
Members of the Council who are not regular full-time employees of
the United States shall, while attending meetings of such Council,
be entitled to receive compensation at a rate fixed by the Board,
but not exceeding $100 per day, including travel time. Such members
may be allowed travel expenses, including transportation and
subsistence, while away from their homes or regular place of
business
Sec. 1691c. - Administrative enforcement
(a) Enforcing agencies
Compliance with the requirements imposed under this subchapter shall
be enforced under:
(1) section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
in the case of -
(A) national banks, and Federal branches and Federal agencies of
foreign banks, by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national
banks), branches and agencies of foreign banks (other than Federal
branches, Federal agencies, and insured State branches of foreign
banks), commercial lending companies owned or controlled by foreign
banks, and organizations operating under section 25 or 25(a) [1] of
the Federal Reserve Act (12 U.S.C. 601 et seq., 611 et seq.), by the
Board; and
(C) banks insured by the Federal Deposit Insurance Corporation
(other than members of the Federal Reserve System) and insured State
branches of foreign banks, by the Board of Directors of the Federal
Deposit Insurance Corporation;
(2) Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
by the Director of the Office of Thrift Supervision, in the case of
a savings association the deposits of which are insured by the
Federal Deposit Insurance Corporation.
(3) The Federal Credit Union Act (12 U.S.C. 1751 et seq.), by the
Administrator of the National Credit Union Administration with
respect to any Federal Credit Union.
(4) Subtitle IV of title 49, by the Secretary of Transportation,
with respect to all carriers subject to the jurisdiction of the
Surface Transportation Board.
(5) Part A of subtitle VII of title 49, by the Secretary of
Transportation with respect to any air carrier or foreign air
carrier subject to that part.
(6) The Packers and Stockyards Act, 1921 (7 U.S.C. 181 et seq.)
(except as provided in section 406 of that Act (7 U.S.C. 226, 227)),
by the Secretary of Agriculture with respect to any activities
subject to that Act.
(7) The Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), by the
Farm Credit Administration with respect to any Federal land bank,
Federal land bank association, Federal intermediate credit bank, and
production credit association;
(8) The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), by
the Securities and Exchange Commission with respect to brokers and
dealers; and
(9) The Small Business Investment Act of 1958 (15 U.S.C. 661 et
seq.), by the Small Business Administration, with respect to small
business investment companies.
The terms used in paragraph (1) that are not defined in this
subchapter or otherwise defined in section 3(s) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning
given to them in section 1(b) of the International Banking Act of
1978 (12 U.S.C. 3101).
(b) Violations of subchapter deemed violations of preexisting
statutory requirements; additional agency powers
For the purpose of the exercise by any agency referred to in
subsection (a) of this section of its powers under any Act referred
to in that subsection, a violation of any requirement imposed under
this subchapter shall be deemed to be a violation of a requirement
imposed under that Act. In addition to its powers under any
provision of law specifically referred to in subsection (a) of this
section, each of the agencies referred to in that subsection may
exercise for the purpose of enforcing compliance with any
requirement imposed under this subchapter, any other authority
conferred on it by law. The exercise of the authorities of any of
the agencies referred to in subsection (a) of this section for the
purpose of enforcing compliance with any requirement imposed under
this subchapter shall in no way preclude the exercise of such
authorities for the purpose of enforcing compliance with any other
provision of law not relating to the prohibition of discrimination
on the basis of sex or marital status with respect to any aspect of
a credit transaction.
(c) Overall enforcement authority of Federal Trade Commission
Except to the extent that enforcement of the requirements imposed
under this subchapter is specifically committed to some other
Government agency under subsection (a) of this section, the Federal
Trade Commission shall enforce such requirements. For the purpose of
the exercise by the Federal Trade Commission of its functions and
powers under the Federal Trade Commission Act (15 U.S.C. 41 et
seq.), a violation of any requirement imposed under this subchapter
shall be deemed a violation of a requirement imposed under that Act.
All of the functions and powers of the Federal Trade Commission
under the Federal Trade Commission Act are available to the
Commission to enforce compliance by any person with the requirements
imposed under this subchapter, irrespective of whether that person
is engaged in commerce or meets any other jurisdictional tests in
the Federal Trade Commission Act, including the power to enforce any
Federal Reserve Board regulation promulgated under this subchapter
in the same manner as if the violation had been a violation of a
Federal Trade Commission trade regulation rule.
(d) Rules and regulations by enforcing agencies
The authority of the Board to issue regulations under this
subchapter does not impair the authority of any other agency
designated in this section to make rules respecting its own
procedures in enforcing compliance with requirements imposed under
this subchapter
Sec. 1691c-1. - Incentives for self-testing and self-correction
(a) Privileged information
(1) Conditions for privilege
A report or result of a self-test (as that term is defined by
regulations of the Board) shall be considered to be privileged under
paragraph (2) if a creditor -
(A) conducts, or authorizes an independent third party to conduct, a
self-test of any aspect of a credit transaction by a creditor, in
order to determine the level or effectiveness of compliance with
this subchapter by the creditor; and
(B) has identified any possible violation of this subchapter by the
creditor and has taken, or is taking, appropriate corrective action
to address any such possible violation.
(2) Privileged self-test
If a creditor meets the conditions specified in subparagraphs (A)
and (B) of paragraph (1) with respect to a self-test described in
that paragraph, any report or results of that self-test -
(A) shall be privileged; and
(B) may not be obtained or used by any applicant, department, or
agency in any
(i) proceeding or civil action in which one or more violations of
this subchapter are alleged; or
(ii) examination or investigation relating to compliance with this
subchapter.
(b) Results of self-testing
(1) In general
No provision of this section may be construed to prevent an
applicant, department, or agency from obtaining or using a report or
results of any self-test in any proceeding or civil action in which
a violation of this subchapter is alleged, or in any examination or
investigation of compliance with this subchapter if -
(A) the creditor or any person with lawful access to the report or
results -
(i) voluntarily releases or discloses all, or any part of, the
report or results to the applicant, department, or agency, or to the
general public; or
(ii) refers to or describes the report or results as a defense to
charges of violations of this subchapter against the creditor to
whom the self-test relates; or
(B) the report or results are sought in conjunction with an
adjudication or admission of a violation of this subchapter for the
sole purpose of determining an appropriate penalty or remedy.
(2) Disclosure for determination of penalty or remedy
Any report or results of a self-test that are disclosed for the
purpose specified in paragraph (1)(B) -
(A) shall be used only for the particular proceeding in which the
adjudication or admission referred to in paragraph (1)(B) is made;
and
(B) may not be used in any other action or proceeding.
(c) Adjudication
An applicant, department, or agency that challenges a privilege
asserted under this section may seek a determination of the
existence and application of that privilege in -
(1) a court of competent jurisdiction; or
(2) an administrative law proceeding with appropriate jurisdiction
Sec. 1691d. - Applicability of other laws
(a) Requests for signature of husband and wife for creation of valid
lien, etc.
A request for the signature of both parties to a marriage for the
purpose of creating a valid lien, passing clear title, waiving
inchoate rights to property, or assigning earnings, shall not
constitute discrimination under this subchapter: Provided, however,
That this provision shall not be construed to permit a creditor to
take sex or marital status into account in connection with the
evaluation of creditworthiness of any applicant.
(b) State property laws affecting creditworthiness
Consideration or application of State property laws directly or
indirectly affecting creditworthiness shall not constitute
discrimination for purposes of this subchapter.
(c) State laws prohibiting separate extension of consumer credit to
husband and wife
Any provision of State law which prohibits the separate extension of
consumer credit to each party to a marriage shall not apply in any
case where each party to a marriage voluntarily applies for separate
credit from the same creditor: Provided, That in any case where such
a State law is so preempted, each party to the marriage shall be
solely responsible for the debt so contracted.
(d) Combining credit accounts of husband and wife with same creditor
to determine permissible finance charges or loan ceilings under
Federal or State laws
When each party to a marriage separately and voluntarily applies for
and obtains separate credit accounts with the same creditor, those
accounts shall not be aggregated or otherwise combined for purposes
of determining permissible finance charges or permissible loan
ceilings under the laws of any State or of the United States.
(e) Election of remedies under subchapter or State law; nature of
relief determining applicability
Where the same act or omission constitutes a violation of this
subchapter and of applicable State law, a person aggrieved by such
conduct may bring a legal action to recover monetary damages either
under this subchapter or under such State law, but not both. This
election of remedies shall not apply to court actions in which the
relief sought does not include monetary damages or to administrative
actions.
(f) Compliance with inconsistent State laws; determination of
inconsistency
This subchapter does not annul, alter, or affect, or exempt any
person subject to the provisions of this subchapter from complying
with, the laws of any State with respect to credit discrimination,
except to the extent that those laws are inconsistent with any
provision of this subchapter, and then only to the extent of the
inconsistency. The Board is authorized to determine whether such
inconsistencies exist. The Board may not determine that any State
law is inconsistent with any provision of this subchapter if the
Board determines that such law gives greater protection to the
applicant.
(g) Exemption by regulation of credit transactions covered by State
law; failure to comply with State law
The Board shall by regulation exempt from the requirements of
sections 1691 and 1691a of this title any class of credit
transactions within any State if it determines that under the law of
that State that class of transactions is subject to requirements
substantially similar to those imposed under this subchapter or that
such law gives greater protection to the applicant, and that there
is adequate provision for enforcement. Failure to comply with any
requirement of such State law in any transaction so exempted shall
constitute a violation of this subchapter for the purposes of
section 1691e of this title
Sec. 1691e. - Civil liability
(a) Individual or class action for actual damages
Any creditor who fails to comply with any requirement imposed under
this subchapter shall be liable to the aggrieved applicant for any
actual damages sustained by such applicant acting either in an
individual capacity or as a member of a class.
(b) Recovery of punitive damages in individual and class action for
actual damages; exemptions; maximum amount of punitive damages in
individual actions; limitation on total recovery in class actions;
factors determining amount of award
Any creditor, other than a government or governmental subdivision or
agency, who fails to comply with any requirement imposed under this
subchapter shall be liable to the aggrieved applicant for punitive
damages in an amount not greater than $10,000, in addition to any
actual damages provided in subsection (a) of this section, except
that in the case of a class action the total recovery under this
subsection shall not exceed the lesser of $500,000 or 1 per centum
of the net worth of the creditor. In determining the amount of such
damages in any action, the court shall consider, among other
relevant factors, the amount of any actual damages awarded, the
frequency and persistence of failures of compliance by the creditor,
the resources of the creditor, the number of persons adversely
affected, and the extent to which the creditor's failure of
compliance was intentional.
(c) Action for equitable and declaratory relief
Upon application by an aggrieved applicant, the appropriate United
States district court or any other court of competent jurisdiction
may grant such equitable and declaratory relief as is necessary to
enforce the requirements imposed under this subchapter.
(d) Recovery of costs and attorney fees
In the case of any successful action under subsection (a), (b), or
(c) of this section, the costs of the action, together with a
reasonable attorney's fee as determined by the court, shall be added
to any damages awarded by the court under such subsection.
(e) Good faith compliance with rule, regulation, or interpretation
of Board or interpretation or approval by an official or employee of
Federal Reserve System duly authorized by Board
No provision of this subchapter imposing liability shall apply to
any act done or omitted in good faith in conformity with any
official rule, regulation, or interpretation thereof by the Board or
in conformity with any interpretation or approval by an official or
employee of the Federal Reserve System duly authorized by the Board
to issue such interpretations or approvals under such procedures as
the Board may prescribe therefor, notwithstanding that after such
act or omission has occurred, such rule, regulation, interpretation,
or approval is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.
(f) Jurisdiction of courts; time for maintenance of action;
exceptions
Any action under this section may be brought in the appropriate
United States district court without regard to the amount in
controversy, or in any other court of competent jurisdiction. No
such action shall be brought later than two years from the date of
the occurrence of the violation, except that -
(1) whenever any agency having responsibility for administrative
enforcement under section 1691c of this title commences an
enforcement proceeding within two years from the date of the
occurrence of the violation,
(2) whenever the Attorney General commences a civil action under
this section within two years from the date of the occurrence of the
violation,
then any applicant who has been a victim of the discrimination which
is the subject of such proceeding or civil action may bring an
action under this section not later than one year after the
commencement of that proceeding or action.
(g) Request by responsible enforcement agency to Attorney General
for civil action
The agencies having responsibility for administrative enforcement
under section 1691c of this title, if unable to obtain compliance
with section 1691 of this title, are authorized to refer the matter
to the Attorney General with a recommendation that an appropriate
civil action be instituted. Each agency referred to in paragraphs
(1), (2), and (3) of section 1691c(a) of this title shall refer the
matter to the Attorney General whenever the agency has reason to
believe that 1 or more creditors has engaged in a pattern or
practice of discouraging or denying applications for credit in
violation of section 1691(a) of this title. Each such agency may
refer the matter to the Attorney General whenever the agency has
reason to believe that 1 or more creditors has violated section
1691(a) of this title.
(h) Authority for Attorney General to bring civil action;
jurisdiction
When a matter is referred to the Attorney General pursuant to
subsection (g) of this section, or whenever he has reason to believe
that one or more creditors are engaged in a pattern or practice in
violation of this subchapter, the Attorney General may bring a civil
action in any appropriate United States district court for such
relief as may be appropriate, including actual and punitive damages
and injunctive relief.
(i) Recovery under both subchapter and fair housing enforcement
provisions prohibited for violation based on same transaction
No person aggrieved by a violation of this subchapter and by a
violation of section 3605 of title 42 shall recover under this
subchapter and section 3612 [1] of title 42, if such violation is
based on the same transaction.
(j) Discovery of creditor's granting standards
Nothing in this subchapter shall be construed to prohibit the
discovery of a creditor's credit granting standards under
appropriate discovery procedures in the court or agency in which an
action or proceeding is brought.
(k) Notice to HUD of violations
Whenever an agency referred to in paragraph (1), (2), or (3) of
section 1691c(a) of this title -
(1) has reason to believe, as a result of receiving a consumer
complaint, conducting a consumer compliance examination, or
otherwise, that a violation of this subchapter has occurred;
(2) has reason to believe that the alleged violation would be a
violation of the Fair Housing Act (42 U.S.C. 3601 et seq.); and
(3) does not refer the matter to the Attorney General pursuant to
subsection (g) of this section,
the agency shall notify the Secretary of Housing and Urban
Development of the violation, and shall notify the applicant that
the Secretary of Housing and Urban Development has been notified of
the alleged violation and that remedies for the violation may be
available under the Fair Housing Act
Sec. 1691f. - Annual reports to Congress; contents
Each year, the Board and the Attorney General shall, respectively,
make reports to the Congress concerning the administration of their
functions under this subchapter, including such recommendations as
the Board and the Attorney General, respectively, deem necessary or
appropriate. In addition, each report of the Board shall include its
assessment of the extent to which compliance with the requirements
of this subchapter is being achieved, and a summary of the
enforcement actions taken by each of the agencies assigned
administrative enforcement responsibilities under section 1691c of
this title
The Equal Credit Opportunity Act (ECOA) is one part of consumer credit law
enacted
to protect consumer's fair access to credit. An understanding of
this law can help you ensure that you're not being treated unfairly
by potential creditors.
Professional credit repair services begin with
a FREE, online
credit repair
consult.
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Credit Repair Organizations Act
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