The Equal Credit Opportunity Act (ECOA) was signed into law in 1974. For decades prior to ECOA, more and more consumers relied on credit to make large purchases. However, access to credit was hindered because the metrics for judging creditworthiness included many that relied on subjective assessments, such as a person’s reputation. As Dubravka Ritter explains in a 2012 paper for the Federal Reserve Bank of Philadelphia, “…the process was susceptible to direct and indirect considerations of personal characteristics in making lending decisions.”
The ECOA of 1974 prohibited lending discrimination based on sex or marital status. However, Members of Congress, although aware of racial discrimination in lending, were not convinced a bill protecting minorities from discrimination could pass. ECOA was amended in 1976 to prohibit lending discrimination based on race, ethnicity, age, and other protected classes. The Board of Governors of the Federal Reserve System issued Regulation B to provide the substantive and procedural framework for implementing ECOA’s fair lending requirements.
ECOA works alongside the Fair Housing Act to ensure that people are not denied mortgages for discriminatory reasons. In cases involving discrimination in home mortgage loans, the Department of Justice may file suit under the Fair Housing Act and ECOA.
Dubravka Ritter’s 2012 paper for the Federal Reserve Bank of Philadelphia, Do We Still Need the Equal Credit Opportunity Act?, is available at: http://bit.ly/1lNyddI
More information about ECOA is at: http://1.usa.gov/1r2Twgw
NLIHC is recognizing its 40th anniversary throughout 2014, culminating in a commemorative event on Monday, November 17 in Washington, DC. Please save the date.