The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) are the primary federal laws that prohibit credit discrimination. The ECOA prohibits creditors from discriminating against individuals in credit transactions because of the person's race, color, national origin, sex, marital status, religion, age, or public assistance status. Another federal law, the FHA, prohibits discrimination in the residential real estate and mortgage context. Unfortunately, some people are still denied credit for reasons entirely unrelated to their ability to pay, like their race, sex, marital status, or age.
Below you can learn more about the ECOA and FHA, as well as find out what to do if a creditor illegally discriminates against you.
The ECOA (15 U.S.C. §§ 1691 and following) and Regulation B (12 C.F.R. §§ 1002 and following), which implements the ECOA, prohibit discrimination in any part of most credit transactions, including:
The ECOA makes it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction because of:
In general, under ECOA, lenders can’t deny loan applications or charge higher costs, like a higher interest rate or higher fees, for any of the reasons listed above. The ECOA also requires creditors to give you certain notices if you are granted or denied credit, or granted credit on different terms from what you requested. These notices might be combined with required notices under the FCRA.
The FHA (42 U.S.C. §§ 3601 and following) prohibits discrimination in residential real estate transactions. It covers loans to purchase, improve, or maintain your home, or loans for which your home is used as security.
Like the ECOA, the FHA prohibits discrimination based on race, color, religion, national origin, and sex. In addition, the FHA prohibits discrimination based on:
It doesn’t, however, prohibit discrimination based on age or public assistance status.
Other federal laws, like the Community Reinvestment Act (12 U.S.C §§ 2901 and following), and some state laws can be used to fight against discrimination by banks and lenders. (To find out if your state has a law barring credit discrimination, check with a local consumer protection attorney.)
Credit discrimination isn’t always obvious. Some subtle signs that you might be experiencing discrimination are:
If a creditor denies you credit, reduces or cancels your credit, or offers you terms worse than what you requested, you should always ask the creditor on what it based its decision, the reasons for its decision, and how the terms it offered you compare with the terms it gave to other consumers. Sometimes the creditor will include this information in a notice it gives you with its credit decision. Review any notice carefully to see if information about the credit decision is missing.
If you are harmed by the creditor’s violation of the ECOA, you may sue the creditor. If you are successful, the court may award regular damages, up to $10,000 in punitive damages, and attorneys’ fees. If the credit discrimination relates to housing, you can bring a lawsuit based on violations of the FHA, which also provides for damages and attorneys’ fees if you win. Because the defendant has to pay your attorneys’ fees if you win, attorneys specializing in credit discrimination lawsuits are sometimes willing to take your case without charging you fees up front if they think you have a good chance of winning. So, if you believe your rights have been violated under the ECOA or FHA, consider talking to a consumer protection attorney.
You may also complain to the creditor, your state attorney general, the Consumer Financial Protection Bureau (for financial institutions) or the Federal Trade Commission (for creditors that are not financial institutions, like car dealers). If the discrimination is related to housing, contact the Department of Housing and Urban Development at 800-669-9777 or file a complaint at HUD.gov.