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Credit Discrimination: 5.6.6 When Do Applicants Voluntarily Enter into a Joint Account?

When a joint, rather than an individual, application for credit is made, the creditor clearly has the right to ask for the signature of both persons involved.330 However, in order for an account to be truly joint and thus avoid ECOA co-signer limitations, the co-signer must have voluntarily entered into the loan. The official interpretations state that a joint applicant “refers to someone who applies contemporaneously with the applicant for shared or joint credit.

Credit Discrimination: 5.6.7 Authorized Users

Credit card and other credit accounts often provide the individual borrower the opportunity to designate another individual as an authorized user. The latter may use the account but is not liable for payment of debts accrued to the account.

Credit Discrimination: 5.6.8 Signature of Guarantor’s Spouse

The rules limiting a creditor’s ability to require the signature of an applicant’s spouse apply as well to a creditor’s attempt to obtain the signature not only of a guarantor but also a guarantor’s spouse.348 For example, if a creditor requires one parent’s signature on a credit application in addition to the applicant’s, it may not require that the father sign in addition to the mother.

Credit Discrimination: 5.8.1 Discriminatory Practices

In addition to the Equal Credit Opportunity Act’s (ECOA) co-signature rules, a creditor may not discriminate on a prohibited basis as to the type of protection it demands on a loan, including collateral or security. For example, a creditor cannot require that married women alone put up a home as collateral on a small loan when other applicants need not do so.

Credit Discrimination: 5.8.2 Injury Caused by Such Discrimination

Merely requiring extra security may not seem injurious to a consumer, but such discrimination can often cause the consumer financial damage even if the loan never goes into default, and these damages should be recoverable under the ECOA. If a consumer must put up personal property as collateral, the creditor may require the consumer to purchase property insurance on that collateral. Using a home as security may require various closing costs.

Credit Discrimination: 3.1 Introduction

Federal and state credit discrimination laws do not prohibit all forms of discrimination. They do not prevent creditors from making reasonable distinctions between applicants, denying credit, or offering less advantageous terms to higher-risk borrowers. The credit discrimination laws generally do not even require that creditors act reasonably in making a determination as to which applicants are high risk.

Credit Discrimination: 3.2 When Is Discrimination Made on a Prohibited Basis?

Creditors are in the business of distinguishing between good and bad credit risks and creditors discriminate against bad risks all the time. Credit discrimination laws do not generally prevent creditors from denying credit or providing less favorable terms to bad credit risks. In fact, such laws do not generally prevent creditors from making bad judgments and denying credit to good credit risks. What credit discrimination laws do is outlaw the practice of treating individuals differently because of their race, religion, national origin, sex, or some other prohibited basis.

Credit Discrimination: 3.3.1 Race and Color

Race and color are prohibited bases under both the Equal Credit Opportunity Act (ECOA)5 and the Fair Housing Act (FHA).6 They are also prohibited bases under the federal Civil Rights Acts7 and virtually all state credit discrimination legislation.8 American Indians are a protected race.9 For example, one settled lawsuit alleged that a lender violated the

Credit Discrimination: 3.3.2 Religion, Creed, and Political Affiliation

Religion is a prohibited basis for discrimination under the ECOA,13 the federal FHA,14 and most state credit discrimination statutes.15 The only exception under the ECOA is that creditors may favor applicants of a particular religion when offering a special-purpose credit program meeting the standards set out in Regulation B.16

Credit Discrimination: 3.3.3.2 Ancestry or Country of Birth

National origin is not defined in U.S. Department of Housing and Urban Development (HUD) regulations but has been the subject of some interpretation under the ECOA. It seems clear that national origin is included as a prohibited basis to prevent discrimination based on an individual’s ancestry.

Credit Discrimination: 3.3.3.4.1 Discrimination against immigrants

Credit discrimination against immigrants occurs frequently and often overtly, especially in mortgage lending.35 Non-citizens who are not lawful permanent residents generally may be subject to heightened requirements to obtain mortgage loans, such as higher down payments and additional documentation requirements.36 They may be unable to obtain loans that conform to secondary market requirements and may be required to pay higher interest rates.37

Credit Discrimination: 3.3.3.4.3 The Fair Housing Act standard

The Fair Housing Act (FHA) is not clear as to whether its prohibition on discrimination based on national origin would apply to discrimination based on immigration status.45 Unlike the ECOA, there is no explicit exception allowing distinctions based on immigration status. Therefore, a discrimination action based on immigration status could conceivably be available under the Act.

Credit Discrimination: 3.3.4.1 General

An applicant’s sex is a prohibited basis for credit discrimination under the ECOA,47 the federal FHA,48 and many state credit discrimination statutes.49 Sex discrimination is often related to discrimination based on marital status, discussed infra.50 It is therefore important to consider both bases in any case involving one or the other.

Credit Discrimination: 3.3.4.2 Special ECOA Protections

The ECOA provides women with specific protections against creditor inquiries or credit decisions based on a woman’s childbearing or childrearing intentions, including plans for maternity leave.51 For example, a civil penalty was assessed against a credit union that denied loans to women members who anticipated taking maternity leave.52 Similarly, the FHA prohibits discrimination on the basis of familial status, which includes discrimination against women who are pregnant.

Credit Discrimination: 3.3.4.3 Sexual Orientation

In light of the Supreme Court’s landmark decision in Obergefell v. Hodges,58 which granted same-sex couples the fundamental right to marry, questions of discrimination on the basis of sexual orientation take on two forms. The first concerns discrimination based on an individual’s sexual orientation, and the second involves treating same-sex married couples differently than opposite-sex married couples.

Credit Discrimination: 3.4.1 Marital Status

Marital status is a prohibited basis under the Equal Credit Opportunity Act (ECOA)65 and many state credit discrimination and fair housing statutes.66 Generally, marital status as a prohibited basis includes any discrimination against an individual because that individual is single, divorced, separated, married, or widowed.

Credit Discrimination: 3.4.2 Age

The ECOA81 and a number of state credit discrimination laws82 list age as a prohibited basis. In practice, however, the ECOA mainly prohibits discrimination against older consumers.

Credit Discrimination: 3.4.3 Public Assistance Status

The ECOA lists as a prohibited basis for discrimination that “all or part of the applicant’s income derives from any public assistance program.”93 This is an important category of prohibited discrimination for low-income consumers. It is not found in the federal Fair Housing Act (FHA). It is sometimes found in state fair housing laws and infrequently found as a prohibited basis in state credit discrimination laws.94

Credit Discrimination: 3.4.4.1 General

A prohibited basis unique to the Equal Credit Opportunity Act (ECOA) is the applicant’s good faith exercise of federal Consumer Credit Protection Act (CCPA) rights.106 Only a few states have an analogous provision listing exercise of rights under state credit legislation as a prohibited basis.107 Also, the Fair Housing Act (FHA) prohibits retaliating against any person because that person has made a complaint, testified, assisted, or participated in any manner in a proceeding under the FHA.

Credit Discrimination: 3.4.4.3 “Good Faith” Exercise of Rights

The applicant is protected only when an exercise of rights under the Consumer Credit Protection Act (CCPA) was done in “good faith.”130 As the legislative history of the 1976 ECOA amendments explains, “[t]he ‘good faith’ qualification recognizes that some applicants may engage in frivolous or nuisance disputes which do reflect on their willingness to honor their obligations.”131