Question: What is the Equal Credit Opportunity Act (ECOA), and how can the bank avoid violating this federal law?
Answer:
The Equal Credit Opportunity Act (ECOA) was designed to prevent any form of discrimination during the phases of the credit process. According to the ECOA, banks and financial institutions must be willing to extend credit to all credit-worthy applicants without any form of overt or disparate discrimination. The Federal Trade Commission (FTC) recently charged a California home mortgage lender and its owner with violating the Equal Credit Opportunity Act (ECOA) for charging Hispanic clients higher prices for mortgage loans than non-Hispanic clients.
To ensure compliance with ECOA, banks should provide their creditors with training with regard to the following:
Requirements for taking credit applications.
Guidelines for application evaluations.
Requirements for extending credit to consumers.
Information monitoring procedure.
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