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Credit Discrimination: 5.4.3 Providing Disparate Levels of Assistance in the Application Process

Discrimination in the application process may involve allegations that a lender requested more—or different—types of information from or about protected class applicants, or provided disparate levels of assistance. The challenged conduct must be shown to be the result of disparate treatment or disparate impact.117 Most credit discrimination appears to occur in the context of applicants who are marginally qualified.

Credit Discrimination: 5.5.1.1 Introduction

There are a number of special Equal Credit Opportunity Act (ECOA) requirements and prohibitions concerning requests for information, especially information relevant to the prohibited bases. These requirements specify that various types of information may not be requested or may be requested only in certain situations.

Credit Discrimination: 5.5.1.2 ECOA Restricts Creditor from “Requesting” Information About an “Applicant”

An important aspect of the general rule regarding prohibited requests for information is the definition of the term “applicant” because the prohibitions cover only those information requests made about “applicants.”139 Regulation B defines an applicant as including “any person who requests or who has received an extension of credit” and “any person who is or may become contractually liable regarding an extension of credit.”140 Regulation B defines “contractually liable” as being expressly ob

Credit Discrimination: 5.5.1.4 Should Regulation B Permit or Require Creditors to Request Information About Prohibited Bases?

In 1999, the Federal Reserve Board (FRB) proposed removing the prohibition on seeking information about an applicant’s race, color, religion, national origin, and sex for non-mortgage credit products.159 This change was made in response to comments from the Department of Justice (DOJ) and other federal financial enforcement agencies that the enhanced ability to obtain data on race and ethnicity would aid fair lending enforcement, particularly with respect to small business lending.160

Credit Discrimination: 5.5.2.2.2 Courtesy titles

The applicant may be asked, but not required, to designate a courtesy title for the account (Ms., Miss, Mrs., or Mr.),187 and the application form must “appropriately” indicate that selection of such a designation is optional.188 All other terms used on the application must be gender-neutral.189

Credit Discrimination: 5.5.2.2.3 Birth control, childbearing, or childrearing

A creditor may not request any information about the applicant’s birth control practices, intention or capacity to bear children, or intention to rear children.190 A creditor, however, may request information about the applicant’s present dependents (such as the number of dependents and their ages) and related financial obligations for these present dependents, as long as this information is not solely requested from a group protected by the statute.191 For example, a creditor would violate

Credit Discrimination: 5.5.2.3.2 Types of marital status information which may be requested

In situations in which creditors may request an applicant’s marital status, creditors may categorize the applicant only as unmarried (which includes single, divorced, and widowed persons), married, or separated.206 These terms are to be defined by applicable state law.207 The creditor may explain that the category “unmarried” includes single, divorced, and widowed persons but is not required to do so.208

Credit Discrimination: 5.5.2.5 Public Assistance Status

With the exceptions of home mortgages and special purpose credit programs,226 a creditor is likely to be limited in the information it may seek about an applicant’s public assistance status. Whether a creditor may ask about the applicant’s public assistance status depends on what kind of credit evaluation system it uses. If the creditor utilizes a credit scoring system, it may not consider—and therefore presumably may not ask about—public assistance status.227

Credit Discrimination: 5.5.3.1 The Home Mortgage Monitoring Requirements

The major exception to the Equal Credit Opportunity Act’s (ECOA) prohibitions on prohibited inquiries is in the area of home mortgages. Both Regulation B and the Home Mortgage Disclosure Act (HMDA)231 require lenders to collect certain information regarding the residential real estate-related loans that they make.

Credit Discrimination: 5.5.3.4 Special Purpose Credit Programs

Regulation B creates special rules for special purpose credit programs, which are programs that address the credit needs of economically disadvantaged groups.265 If participants in such a program are required to possess one or more common characteristics (such as race, national origin, or sex), a creditor may request information regarding those common characteristics.266 For example, if an energy conservation program is created to assist older consumers, the creditor may ask the applicant’s

Credit Discrimination: 5.5.3.5 Self-Test Exception

As part of the revisions to Regulation B in March 2003, a new exception was created permitting a creditor to request information about an applicant’s race, color, religion, national origin, and sex for the purpose of conducting a self-test under section 1002.15.270

Credit Discrimination: 5.6.1 General

The general rule against discrimination prevents a creditor from seeking a spouse or other person to co-sign or guarantee a loan on a prohibited basis.283 Thus, creditors may not ask husbands to co-sign loans while not requiring wives to do so or require only applicants on public assistance to provide co-signers.

Credit Discrimination: 5.6.2 Individual Credit When No Joint Property Is Involved

A creditor may not require the signature of a spouse or any other additional person on a credit instrument if the applicant has requested an individual account, no jointly held or community property is involved, and the applicant individually meets the creditor’s standards for creditworthiness for the amount and terms of credit requested.295 For example, a creditor may not automatically require that applications by married women for individual credit be signed by their husbands or that unmarried women applicants obtain co-signers for loans,

Credit Discrimination: 5.6.3 Reliance on Jointly Owned Property to Establish Creditworthiness

If an applicant requests individual unsecured credit and relies on jointly owned property to establish creditworthiness, the creditor may require the signature of a spouse or other person on an instrument necessary to make the property available to the creditor in case of death or default.309 For example, if a house is held in tenancy by the entirety under state law and cannot be transferred by only one spouse, the creditor may request the wife’s signature if the husband applies for credit and relies on the house to establish creditworthine

Credit Discrimination: 5.6.4 Reliance on Community Property to Establish Creditworthiness

If a married applicant requests individual unsecured credit in a community property state or relies on property located in such a state, the creditor may request the spouse’s signature on instruments necessary to make community property available in case of death or default.319 Similarly, in a community property state, if an applicant for individual credit relies on the future earnings or income of another person, the creditor may require the signature of that individual320 (the official int