ECOA (Regulation B)

A loan originator should not ask an applicant how many children do they have (or plan to have) - the proper way to obtain this information is

"How many dependents do you have?"

ECOA primarily deals with a

"credit application".

The penalty for violation ECOA is

$10,000.

A consumer can sue for a violation of ECOA for up to

24 months.

ECOA records must be kept for

25 months.

ECOA states that a creditor must provide an answer on a credit application

30 days after receipt of an application. The answer could result in approval, adverse action (denial) or request for additional information.

An applicant can request a statement of reasons within

60 days of receiving the original adverse action notice. When adverse action is taken - an application has been denied, the applicant was offered less favorable terms than those applied for, or there was a change in terms of an existing credit agreement - the creditor must either provide notice of the specific reasons for the decision or inform the applicant of his right to request specific reasons for the decision within 60 days.

ECOA states that a creditor must notify the application of acting taken on an application within

90 days after notifying the application of a counteroffer if the application does not expressly accept the offer.

ECOA prevents creditors from discrimination against a borrowers SOURCE of income; however, the creditor can discriminate against their

AMOUNT of income.

The Consumer Financial Protection Bureau (CFPB) enforces

ECOA. ECOA is regulation "B" and it requires that creditors do not discriminate when granting credit - they must "BE EQUAL".

ECOA stands for the

Equal Credit Opportunity Act (ECOA)

It is permissible to ask a client about marital status, since this likely impacts the loan and/or documents needed at closing; however, if an applicant is NOT legally married, it is

NOT permissible if he/she is divorced, widowed, etc.

In order to make sure that the Loan Originator is not violating ECOA, he/she should refrain from asking questions that may be construed as discriminatory; for example,

a loan originator should never ask a borrower whether any portion of his income is derived from alimony, child support, or public assistance.

The notice of adverse action must contain a statement of the

action taken, contact information for the lender, the name and address of the federal agency with jurisdiction, and the reasons for the decision or a statement advising the borrower of their right to receive the reasons.

If an application for credit is DENIED based on the Appraisal - under ECOA (Reg B) says

borrower has 90 days to request a copy/Lender has 30 days deliver.

HMDA/ECOA - Government Monitoring Information Section (Section X) of the 1003 requirements - HMDA requires that this section be completed in order to

comply with the government monitoring requirements. The applicant should be informed that this information is only used to assure that the lender is not discriminating against applicants and is not considered when determining whether to grant a loan. Under ECOA - if the application is taken face-to-face, this section should be completed based on "visual observation" or "surname".

ECOA prohibits creditors from refusing to

consider or discounting income from alimony, child support, maintenance if borrower chooses to disclose it.

Disparate Treatment - is discrimination that is

defined by differences in the way a member of a protected class (race, religion, sex, etc.) are served by an institution. Disparate Treatment is discrimination that is defined by differences in the way members of a protected class are served by the institution. For example, an individual may be engaging in disparate treatment by shaking the hand of members of one race or gender and not following the same procedure with members of another race or gender. Disparate treatment can also occur if members of a protected class are charged higher rates and/or fees than similarly situated members of a non-protected class.

Allows credit applicants to file

discrimination complains or bring a civil lawsuit for alleged discrimination.

Overt Discrimination - is discrimination that is

explicit or obvious. An example would be advertising that indicates members of a protected class are not welcome at the institution. Alternatively, overt discrimination might exist if there is a widespread understanding in the community that members of a protected class will not be served by an institution.

The Loan Estimates must be given to the borrower no later than

four (4) business days before consummation or placed in mail no later than three (3) business days after the creditor receives information sufficient to justify a revision. This is to ensure that seven (7) business days must pass between delivering or mailing the Loan Estimate (or revised Loan Estimate) before the loan may close. Three (3) days + Four (4) days = Seven (7) days.

Childbearing, childrearing - about plans for having children, childbearing capabilities, or birth control practices. ECOA states that lender/MLOs are not allowed to ask borrowers questions related to

how many children they are planning on having in their family. A creditor shall not inquire about birth control practices, intentions concerning the bearing or rearing of children, or the capability to bear children. A creditor may inquire about the number and ages of an applicant's dependents or about dependent-related financial obligations or expenditures, provided such information is requested without regard to sex, marital status, or any other prohibited basis.

Disparate Impact is a method of

identifying discrimination through statistical analysis. It occurs when a practice or policy that appears to be non-discriminatory on tis face has a disproportionately negative effect on members of a particular race, gender or other protected class. Unlike other forms of discrimination, discrimination identified via disparate impact is often illegal even if the discrimination is unintentional. For example, one of the largest fair-lending settlements based on disparate impact theory alleged that a creditor's minimum credit score policies rusted in a disproportionate number of minority applicants receiving FHA loans instead of less expensive conventional loans.

Requires credit bureaus to bureaus to maintain separate credit files for

married spouses, if requested.

It is because of ECOA that lenders cannot ask if a borrower is single, widowed or divorced. They can only ask if the person is

married, unmarried or separated and these are the only choices on the loan application.

ECOA prohibits a creditor from inquiring about a consumer's

martial status or intentions related to having or raising children.

ECOA dictates the collection of demographic information in order to

monitor the lenders' compliance with the law. Specifically, on the bottom of the third page of the 1003 loan application, the interviewer MUST specify the applicant's race, ethnicity and sex when the loan application is taken face-to-face.

ECOA notification of adverse action (denial letter)

must be written; a telephone call is not sufficient.

The Equal Credit Opportunity Act (ECOA) prohibits discrimination by lenders in any part of a credit transaction on the basis of:

race, color, religion, national origin, sex, marital status, age (provided the applicant has attained the minimum legal age in the state), the receipt of income from a public assistance program, or having exercised any rights under the Consumer Credit Protection Act.

ECOA prohibits a lender from discouraging individuals from applying for a mortgage or reject there application because of their

race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

ECOA requires credit bureaus to keep separate files on married spouses, if

requested.

ECOA (Regulation B) also specifies that the borrower is entitled to a copy of the

residential property appraisal report at least 3 business days before closing (loan consummation).

ECOA has eight (8) protected classes:

sex, race, religion, color, national origin, age, marital status & Publix assistance. The first five (5) are also protected by the Fair Housing Act. The last three (3) - age, marital status & public assistance - are ONLY protected by ECOA

Creditors may not issue revisions to a Loan estimate due to

technical errors, miscalculations or underestimations of charges - whether the creditor is making the disclosure, or a mortgage broker is making a disclosure on the creditor's behalf.

According to ECOA, a creditor also may not ask an applicant if any income stated on the application is derived from alimony or child support, unless

the applicant wishes that income to be considered in determining eligibility for the loan.

Copies of Appraisals - upon receipt of an application, lenders have

three (3) days to notify a borrower of their right to receive a copy of any appraisal or valuation.