Unlawful discrimination may occur in connection with credit you already have or new or additional credit you request. The Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) each require certain notices in connection with a creditor’s decision to change, grant, or deny credit. The required notices are intended to expose and prevent discrimination and to provide you with more information so you can determine why a particular decision was made, whether it was a legitimate decision, and check the accuracy of any credit report or other information that the creditor used in making the credit decision.
(To learn more about what types of credit discrimination are not allowed, see Laws That Prohibit Credit Discrimination.)
The ECOA requires that most creditors give notice of credit decisions as follows.
Appraisals. If you apply for credit on a residence, and the creditor does not give you a copy of any appraisal done, you can get a copy of the appraisal by sending a written request to the creditor.
Other credit decisions. The ECOA requires a creditor to tell you its decision within 30 days of receiving your credit application or taking an “adverse action” on your existing credit account. An adverse action is when a creditor:
If the creditor takes an adverse action, it must give you a written notice that tells you
You are not entitled to this notice if you are denied additional credit under an existing credit agreement when you are already delinquent or otherwise in default, or if the additional credit requested would put you above your credit limit. But it doesn’t hurt to ask for the information anyway.
The FCRA requires that creditors give notice of credit decisions as follows.
The FCRA requires creditors taking adverse action (see above for the definition) to give you a notice with this information:
If the creditor also used a credit score in making its decision, it must tell you
If the creditor relied on information from some other source when making its decision, it must tell you that you have the right to request, within 60 days, the reasons for the adverse action. If you do make such a request, it must tell you upon what information it relied.
Generally, a creditor will combine the ECOA and the FCRA notices into one.
As of August 15, 2011, if a creditor charges you a higher annual percentage rate (APR) than it charges others, it has to comply with certain notice obligations. These FCRA notice requirements kick in if a creditor uses a consumer report in connection with deciding what regular APR to charge for new or existing credit, and offers you a rate less favorable than the rate it offers approximately 40% of other consumers to whom it offered a similar type of credit. The rule doesn’t require lenders to tell you that it offered a different type of loan to people with better credit. For example, if the creditor offers you a variable rate home loan, but offers fixed-rate home loans to a substantial number of its customers with better credit histories, it does not have to give you a notice telling you that. It only has to notify you if it offers a substantial number of customers a better rate on a variable rate loan.
The notice requirement has many other exceptions and limitations.
Barring one of the above exceptions or limitations, if the creditor does offer you an APR less favorable than what it offers to about 40% of other consumers it has to tell you this and provide you with the following information:
Required information for risk-based notice.
Required information for credit score notice. If the creditor used a credit score, it must also provide you with the following information:
The creditor can avoid giving you the actual credit score it relied on if instead it discloses to each consumer who requests credit either that person’s current credit score or the most recent credit score calculated by a credit reporting agency for the purpose of extending credit.
If the credit you are requesting does not have an APR, the same rules apply to the most important credit term in the contract is different for you than for others. For example, it might have to tell you that the utility service deposit it charges you is higher than what it charges others.
This is an excerpt from Nolo's Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Margaret Reiter and Robin Leonard.