And if youre denied credit, ask the lender why a lender is legally obligated to provide an answer if you ask. The Equal Credit Opportunity Act [ECOA], 15 U.S.C. In many cases, an elderly individual does not maintain a primary income from employment, and instead they rely on pension plans and retirement funds to supply necessary resources. And its a good idea to get that offer in writing so that you can read through it and compare it to others. The fair credit reporting act, which is title VI of the consumer credit protection act (15 U.S.C.A. Understanding the 3 Types of Fair Lending Discrimination Senior citizens: Over 52 million Americans are senior citizens and may face unique challenges when applying for credit; for example, no lender is allowed to discriminate against seniors who use Social Security as part of all of their income. Accordingly, there are nearly an infinite range of possible pressure points that a lender may need to evaluate in order to assess fair lending risk. Redlining generally refers to a policy where lenders isolate neighborhoods based on group makeup and then refuse to extend credit access to those communities on the same terms as to others living elsewhere even when their credit profiles or situations are similar. Find legal resources and guidance to understand your business responsibilities and comply with the law. You are entitled to one free copy of your credit report every year from each of the three national credit-reporting agencies. For example, a creditor could use your age to determine if your income might drop because youre about to retire. Shopping around for the best offer available to you is always a good idea. As a result, it is more difficult to prove patterns of discrimination. While race, sex, age, and religion are the most common characteristics to be at the center of discrimination, they are not the only traits about which individuals maintain prejudices. Overt discrimination is the easiest to understand and is what most people think about when they hear the word discrimination. Simply, it is obviously or blatantly providing or offering more favorable terms to one group versus another based solely on a prohibited factor, such as gender. To make it more challenging, creditors often must ask about (and consider) information that is deeply personal like your income, expenses, debts, and credit history. Creditors often cite the tendency of minority communities to maintain low incomes as a primary reason they do not extend loans to individuals of a minority race. Credit Discrimination - Consumer Sourcebook | Consumer Protection The MoneyGeek editorial team has decades of combined experience in writing and publishing information about how people should manage money and credit. How to protect your personal information and privacy, stay safe online, and help your kids do the same. When you apply for credit or borrow money, it is against the law to discriminate because of: Race Color Religion National origin Sex (including sexual orientation and gender identity) Marital status Age Receiving money from public assistance The list above shows protected characteristics under the Equal Credit Opportunity Act (ECOA). The offers for financial products you see on our platform come from companies who pay us. Have you been harmed by a lender, debt collector, insurance company, or by identity theft, etc? Most vulnerabilities institutions face with regard to fair lending will fall under the category of disparate treatment as it is driven by inconsistencies. Thats why its important to know your rights as a borrower. Always review your reports carefully andcorrect any mistakes. Types of Consumer Credit | FreeAdvice Compensation may factor into how and where products appear on our platform (and in what order). What Is the Relationship Between a Firm's Credit Policy & Its Accounts Receivable. Explain consumer credit discrimination and three types of The credit does not extend beyond the sales price of the car. The Interagency Fair Lending Examination Procedures probably define it best and is as follows: When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a disparate impact., A simple example may be having a minimum credit score or loan amount requirement. Three types of credit agreements are distinguished in the Act: a credit facility, for example a credit card, line of credit, overdraft protection; system, defined in 1002.2(t), a creditor may not decide whether to extend credit or set the terms and conditions of credit based on age or information related exclusively to age. If youre only given a vague reason or if you suspect discrimination its time to dig deeper. Required fields are marked *. If you are facing discrimination in housing, go to the HUD website and look up your state to find a fair housing program near you. An individual who believes that they have been the victim of credit discrimination may want to speak with an attorney about a possible course of action as well. 1691 et seq. The FHAct prohibits discrimination based on Consumer Compliance Handbook Fair Lending: Overview 1 (1/06) Race or color Religion National origin . Our mission is protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity. Its a good idea to monitor your credit often if youre working on building it, but even if your scores are high, keep an eye on your reports periodically to make sure theyre accurate. Box 105281, Atlanta, GA 30348-5281. For example, the Home Mortgage Disclosure Act requires lenders to report mortgage data. Many architects are working toward a future in which "universal design" is incorporated into all new housing and makes it safe and accessible to all, regardless of their age, physical ability or stature. What Is Lending Discrimination? | U.S. News But they are not allowed to ask you about your race, religion or other personal characteristics that have no bearing on your ability to pay back a loan. One type of installment closed-end credit is a car loan. Today . Ask for information about your spouse, unless your spouse is applying with you, will be allowed to use the account, provides part of your income, or if you live in a community property state. Looking for alternatives for your holiday shopping? The ECOA, along with the federal Fair Housing Act and other legislation, outlines what is considered discrimination when it comes to credit and lending. A creditor cannot assume a younger woman will stop working to raise children. Weve given you a general rundown of your rights as a potential borrower. Your race, sex, disability or other protected trait is brought into the conversation. How can consumers protect themselves from discrimination? Questions about your personal characteristics that do not impact your ability to pay, such as religion and country of origin, are off-limits. Some unfair practices in lending are obvious being denied a loan outright solely because youre a person of color, for example. Your credit report includes information on where you live, how you pay your bills, and whether youve filed for bankruptcy. In most cases, a lender cant use that information to decide whether to offer you credit or at what terms. If you feel these red flags apply to you, it may be time to file a complaint: If you feel you have been discriminated against in your search for fair housing, there are steps you can take: If you feel you have been discriminated against in accessing credit for any sort of purchase: Consider retaining an attorney. Discriminatory practices in the granting of credit led to the enactment of legislation to ensure that all qualified applicants have the same opportunity to receive credit. For a list of such agencies, visit HUD's website, U.S. Centers for Disease Control and Prevention. However, the complaints that are filed may be included in a communal case against a questionable corporation. Find the resources you need to understand how consumer protection law impacts your business. They are: Overt Discrimination Disparate Treatment Disparate Impact Overt Discrimination Overt discrimination exists when a lender openly treats an applicant differently on a prohibited basis. Both statutes explicitly prohibit discrimination on the basis of race, color, or national origin. Your email address will not be published. Of the three types of discrimination, this is the most common and the most likely to be targeted in a fair lending review. Veterans and active-duty service members: American veterans number 19 million and active-duty service members 1.4 million: one would imagine that our men and women in arms are among the most protected groups by law, but not so in the case of credit discrimination. In a Nutshell It's illegal for a lender to discriminate against you based on certain protected traits like race, gender, religion or marital status. This is when applicants are treated differently because of their race, gender, age or other category that is protected by law. Discrimination can happen to any individual for any number of reasons. Thats in addition to the one free Equifax report (plus your Experian and TransUnion reports) you can get atAnnualCreditReport.com. Dont keep the focus solely on your monthly payment or some other individual feature of the borrowing agreement. They have not been granted the same rights, privileges, and responsibilities with which men have been entrusted. But the mortgage discrimination practices of the early 20th century left a legacy of racial inequality that continues to affect communities of color today. Your age is used to determine the meaning of other factors important to creditworthiness. This includes the initial inquiry and loan application process through the servicing and ultimate settlement of the debt. Violations of the Fair Housing Act could involve a landlord refusing to rent to you, giving you different terms than someone else or falsely telling you that a place is not available. Copyright Premier Insights, Inc. All Right Reserved. In one version of the scam, you get a call and a recorded message that says its Amazon. The Equal Credit Opportunity Act became law in October of 1974, and it set forth a series of rules that must be followed by those issuing lines of credit to consumers in the United States. prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. For mortgage or rental discrimination, you can. When you build a credit record under one name, but then legally change your name, it may appear that you dont have a credit history in your own name. Nevertheless, discrimination against women continues to be a troubling reality throughout the nation. Cash Bazar: Understanding Closed-End Credit, How to Enter Refund Credits in QuickBooks, How to Make Internatonal Calls Using Gmail. Lenders have the right to deny an applicant credit for a variety of different reasons. Other laws like the Home Mortgage Disclosure Act, the Truth in Lending Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Electronic Fund Transfer Act also do their part to enforce fair lending practices. A creditor cannot count a mans salary at 100 percent and a womans at 75 percent. If the impact of the blanket policy negatively affects a certain group, that can count as discrimination. Discrimination occurs on all levels in various realms, and it may be based on numerous personal characteristics. The Consumer Financial Protection Bureau (CFPB) issued regulations under the ECOA that became known as "Regulation B." The purpose of Regulation B is to promote the availability of credit to all creditworthy applicants. While women are a protected group under federal discrimination laws, there is a reason they are protected: until the mid-20th century, women were unable to apply for credit independent of a man. PDF and Overview Within limits, lenders can consider relevant information like your credit history, debt and income all of which may help them determine how likely you are to pay back any money they lend you.