Responsible borrowers use credit to go to college, open businesses, and buy homes. American consumers should have the opportunity to use credit to build a better future for themselves and their loved ones. Credit discrimination prevents people from having access to these opportunities, and can make credit more expensive.
WATCH FOR WARNING SIGNS
Credit discrimination is often hidden or even unintentional, which makes it hard to spot. Look for red flags, such as:
You are treated differently in person than on the phone.
You are discouraged from applying for credit.
You hear the lender make negative comments about race, national origin, sex, or other protected groups.
You are refused credit even though you qualify for it.
You are offered credit with a higher rate than the one you applied for, even though you qualify for the lower rate.
You are denied credit, but not given a reason why or told how to find out why.
Your deal sounds too good to be true.
You feel pushed or pressured to sign.
What protections do I have from credit discrimination?
The Home Mortgage Disclosure Act (HMDA) requires that certain financial institutions collect and report information about home mortgage applications and originations, including the race, ethnicity, and gender of applicants. Some of this information is then made public, which can help identify potential discrimination and thus assist in enforcing the fair lending laws, such as ECOA.
The Equal Credit Opportunity Act makes it illegal for a creditor to discriminate in any aspect of credit transaction based on certain characteristics. The law protects consumers by prohibiting credit discrimination based on the nine characteristics below. In addition, the Fair Housing Act makes many discrimination practices in home financing illegal.
IT IS ILLEGAL TO:
Refuse you credit if you qualify for it
Discourage you from applying for credit
Offer you credit on terms that are less favorable, like a higher interest rate, than terms offered to someone with similar qualifications
Close your account
ON THE BASIS OF:
Race or color
Sex (including gender)*
Age (as long as you are old enough to enter into a contract)
Receipt of income from any public assistance program
Exercising in good faith your rights under the Consumer Credit Protection Act.
*Currently, the law supports arguments that the prohibition against sex discrimination also affords broad protection from discrimination based on a consumer’s gender identity and sexual orientation.
MORE WAYS YOU CAN PROTECT YOURSELF
Do your research. Shop around. Learn about the various features and downsides of the credit product you want. Research the current interest rates. Compare products from several lenders. Talk to your friends and family members about their credit products.
Know your credit history. Creditors will make decisions based on your credit history. Be sure there are no mistakes or missing items in your credit reports. Get a free copy of your credit report from each of the three biggest consumer reporting agencies every 12 months. Get your free copy from AnnualCreditReport.com.
Ask questions. Don’t focus only on your monthly payment. Be sure you understand the rates and fees you will pay over the long run. Ask whether the rates and fees quoted to you by your lender are set, or if there are any circumstances in which the quoted rates and fees could change. Keep asking questions until you are fully satisfied. If a creditor does not want to answer your questions, this could be a bad sign.
Stay in control. Your lender shouldn’t make you feel rushed, or unnecessarily delay action on your application. Walking away and continuing the discussion later, if you so choose, is a good way to control communications with the lender.
Don’t sign until you’re satisfied that the credit product works for you. Remember, the product that works for you today may not work for you down the road. Make sure you’ve considered both before you sign.