| HOW TO APPLY FOR CREDIT
Equal Credit Opportunity Act
Q. When I apply for credit, are there factors that credit grantors must
consider in a fair manner?
A. The federal Equal Credit Opportunity Act (ECOA) says that
credit grantors may not use
certain factors to discriminate against you in a credit deal. A credit
grantor may not use age
(providing that you are old enough to enter into a legally binding contract),
race, color, national
origin, sex, marital status, religion, receipt of public aid or the exercise
of rights under the
Consumer Credit Protection Act, TILA, and related federal law to:
• discourage or prevent you from applying for credit;
• refuse you credit if you otherwise qualify;
• extend you credit on terms different from those granted someone
with similar risk (as
determined by such factors as ability to repay, credit history, stability
and assets); or
• give you less credit than you asked for, if someone with similar
risk would have received that
amount or more.
The Equal Credit Opportunity Act does not, however, guarantee that you
will receive credit.
You still must meet the credit grantor's standards of whether you are
worthy of receiving credit.
Protecting Your Right to Credit
The Equal Credit Opportunity Act offers equal opportunity to obtain
credit, but does not assure you of credit--only the opportunity to
obtain it. Essentially, the law requires that credit grantors may
not treat an applicant less favorably than other equally creditworthy
applicants on the basis of age (as long as you're old enough to make
a legally binding contract), race, sex, color, national origin, marital
status, religion, receipt of income from a public assistance program
or exercise of rights under federal consumer protection laws. Some
state laws may be even more protective; for example, they may preclude
discrimination because a couple has children. |
Age Discrimination
Q. When I apply for credit, may a credit grantor ask my age?
A. Yes, but if you are old enough to sign and be liable for a
contract (usually 18 to 21, depending
on state law), a credit grantor may not:
• refuse to give you credit or decrease the amount of credit just
because of your age;
• refuse to consider your retirement income in rating your credit
application if the creditor
considers income in evaluating creditworthiness;
• cancel your credit account or require you to reapply for credit
just because you are a certain
age or have retired;
• refuse you credit or cancel your account because you cannot get
credit life (or related)
insurance due to your age.
The law does allow a credit grantor to consider certain age-related facts.
These include how long
your income will continue or how long it will be until you reach retirement
age. Consider, for
example, a loan that will take a long time to pay back. If an older applicant
does not provide
adequate security, he or she may not be a good credit risk.
Public Assistance
Q. May a credit grantor deny credit if I receive public assistance?
A. Not if you receive Social Security or public assistance payments
such as Aid to Families with Dependent Children. Then a credit grantor
may not deny you credit for that reason alone.
However, credit grantors may ask the age of your dependents, since you
may lose federal
benefits when they reach a certain age. A credit grantor also may consider
whether you will
continue to meet residency requirements for receiving benefits and whether
the creditor can
reach the benefits by legal process if you do not pay.
Discrimination Against Women
Q. Does my gender or marital status affect whether I am worthy of credit?
A. No, the law protects both men and women from discrimination
based on gender and marital
status. In general, a credit grantor may not deny you credit or take any
adverse action, such as
lowering your credit limits or raising your APR, just because of your
gender or because you are
married, single, widowed, divorced, or separated. Specific prohibitions
include:
• a credit grantor usually may not ask your gender when you apply
for credit; (one exception
would be a loan to buy or build a home, or to repair, rehabilitate, or
remodel a home, when
asking your gender helps the federal government look for housing discrimination
by
determining whether equally qualified females and males are able to obtain
residential
mortgage loans; however, you may refuse to answer this question);
• you normally do not have to use a gender title (Mr., Miss, Mrs.,
or Ms.) when applying for
credit; sometimes credit grantors may ask whether you are married, unmarried,
or separated
if your marital status relates to their right to obtain repayment; such
a request would most
likely be made in a state with community property laws or if the credit
will be secured;
• a credit grantor may not ask women if they use birth control or
whether they plan to have
children; and
• you do not have to reveal child support or alimony payments to
a credit grantor unless you
wish the credit grantor to consider it as income.
Marital Status and Separate Credit Accounts
Q. May married people open credit accounts that are not also in their
spouses' names?
A. Yes, you may open credit accounts or take out loans in your
own name and do not have to
open joint accounts or take out loans with your spouse. Moreover, if you
have a joint account
with your spouse, when a creditor sends a credit bureau information about
your account, it must report the information in both your names. The credit
bureau will also maintain a separate file on you and may rely only on
your credit history when making a credit decision.
A credit grantor may not:
• refuse to open a separate credit account just because of your
gender or marital status;
• require your spouse to cosign your account, unless you live in
a community property state
where spouses are liable for each other's debts; or
• ask about your spouse or ex-spouse when you apply for credit based
on your own income.
However, a credit grantor may seek this information if a community property
state is
involved or if you are relying in part on your income from alimony, child
support, or
maintenance payments from your ex-spouse for the purpose of obtaining
credit.
Change in Marital Status
Q. If my marital status changes, may a credit grantor force me to reapply
for credit?
A. No, a credit grantor may not require you to reapply for credit
just because you marry or
divorce, or your spouse has died.
A credit grantor also may not close your account or change its terms for
these reasons
alone. There must be a change in how worthy of credit you are, such as
a decrease in your
income. For example, if your spouse dies or you get a divorce, and you
had used your spouse's
income to get credit, a credit grantor may have you reapply. The credit
grantor must allow you to use the account while considering your new application.
Denial of a Credit Application
Q. What happens if a credit grantor denies credit to me?
A. Under the Equal Credit Opportunity Act, a credit grantor must
notify you whether it has
approved or denied your credit application within thirty days after you
have completed your
credit application. If the credit grantor denies credit to you, the notice
must be written and list the reasons for denying credit or tell you how
to request an explanation. Another law, the Fair Credit Reporting Act,
affects credit denials, as well. It requires that the notice tell you
if the credit grantor used a credit report to deny you credit and, if
so, the name and address of the credit bureau that provided the report.
These rights also apply if a credit grantor takes any adverse action,
such as closing an existing credit account or reducing an open line of
credit.
Q. What may I do if a credit grantor will not say why it has
taken an adverse action against me?
A. First, ask the credit grantor to supply a written explanation
as required by law. If you think the credit grantor has discriminated
against you, tell the credit grantor why you think this, then try to resolve
the issue through negotiation. If the credit grantor continues the adverse
action and has not given a satisfactory explanation, you may sue (see
below) or complain to the appropriate federal enforcement agency (see
the end of this section).
Q. Can I sue if a credit grantor has discriminated against me?
A. Under the Equal Credit Opportunity Act, you may sue for actual
damages (the actual losses
you suffered), plus punitive damages of up to $10,000. The amount of punitive
damages awarded depends on whether the credit grantor should have known
it was violating the law and other factors like the number of violations.
Punitive damages penalize the credit grantor because it has violated the
law.
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