Skip to main content

Search

Credit Discrimination: 3.4.4.4 “Applicant” Must Exercise the Rights

The applicant must have exercised the Consumer Credit Protection Act (CCPA) rights. “Applicant” is a defined term under Regulation B and includes a credit applicant, one who has been extended credit, and a co-signer or other party who is contractually obligated on the loan.136 If any of these individuals had previously exercised CCPA rights, the creditor may not use that as a basis for discrimination.

Credit Discrimination: 3.5.1 Familial Status

The federal Fair Housing Act (FHA) lists familial status as a prohibited basis for credit discrimination,137 as do most state credit discrimination and housing financing statutes.138 Generally, this prohibition forbids creditors from discriminating on the basis that applicants have children (or do not have children), are pregnant, or are legal custodians of children.

Credit Discrimination: 3.5.2.1 General

The Fair Housing Act (FHA) and many state credit discrimination statutes147 directly prohibit credit discrimination based on an applicant’s status as disabled.148 The Americans with Disabilities Act (ADA)149 also prohibits discrimination by creditors on the basis of disability. However, the Equal Credit Opportunity Act (ECOA) does not provide for an individual’s disability as a protected basis.

Credit Discrimination: 3.5.2.2 Definition of Disability

Disability is defined in the FHA and in the ADA as a physical or mental impairment which substantially limits one or more major life activity, having a record of such impairment, or being considered as having such an impairment.150 It is not enough to have an impairment. The disability also must substantially limit one or more major life activity, such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.151

Credit Discrimination: 3.5.2.3 Application of the Americans with Disabilities Act to Credit Transactions

The ADA can combat credit discrimination involving applicants with disabilities, especially for non-housing financing cases.155 Title III of the ADA prohibits discrimination by places of public accommodation on the basis of disability.156 Public accommodation is defined to include banks, retailers, and other service establishments.157 Thus, many creditors should be covered by the ADA because they constitute places of public accommodation.

Credit Discrimination: 3.6.1 Race and Ethnicity

Race is the sole prohibited basis under the federal Civil Rights Acts.188 One important issue in the definition of race under the federal Civil Rights Acts is whether racial discrimination includes discrimination against certain ethnic groups, such as Arabs, Jews, and Latinxs.

Credit Discrimination: 3.6.2 Citizenship Status

Only citizens are given the right to utilize section 1982, since the statutes state explicitly that “all citizens of the United States shall have the same right.” On the other hand, section 1981 states that “all persons within the jurisdiction of the United States shall have the same right to make and enforce contracts . . . as is enjoyed by white citizens.”196 Thus, a non-citizen can bring actions under that statute when that non-citizen does not have the same rights as White citizens.197

Credit Discrimination: 3.7.1 General

If discrimination does not involve one of these listed prohibited bases under the Equal Credit Opportunity Act (ECOA), the federal Fair Housing Act (FHA), the federal Civil Rights Acts, or a state’s general anti-discrimination statute, the consumer has three strategies to show such discrimination to be actionable. First, does the basis for credit discrimination have a disparate impact on a protected class?

Credit Discrimination: 3.7.2 Discrimination and the Digital Divide

A growing practice that is likely to have a disparate impact on protected classes is the offering of preferential or exclusive credit terms to consumers who apply online.221 Studies indicate lower access and use of the internet by various protected groups, such as African Americans, Hispanics, older citizens, people with disabilities, and those on public assistance.222 Therefore, a creditor who offers “internet-only” deals, or special discounts for applying online, is likely going to disproporti

Credit Discrimination: 3.8.1 General

The Equal Credit Opportunity Act (ECOA) and Regulation B set out a clearly delineated and limited exception to the general rule prohibiting discrimination on a prohibited basis, called special purpose credit programs.234 These programs may require that program participants share a common characteristic, such as race, national origin, or sex.235 For example, a special purpose credit program may be set up to assist individuals of color, women, or young applicants.

Credit Discrimination: 3.9.1 The General Rule Under the ECOA

Prohibited credit discrimination under the Equal Credit Opportunity Act (ECOA) may be based not only on the characteristics of the applicant but on the characteristics of the applicant’s business partners, its officers (in the case of a corporate applicant), and the individuals with whom the applicant affiliates or associates.262 Thus, the ECOA prevents discrimination in the offering of credit based on the race, religion, sex, or other characteristics of those with whom the applicant deals or of those who will benefit if the applicant obtains

Credit Discrimination: 3.9.2 Application of ECOA Rule to Public Assistance and to the Exercise of CCPA Rights

The general ECOA rule that a creditor may not discriminate against an applicant because of individuals the applicant associates with is at least true when the discrimination is based on the race, color, religion, national origin, sex, marital status, or age of those with whom the applicant deals.267 This “associational” protection should also extend to the remaining two protected ECOA categories—receipt of public assistance and good faith exercise of rights under the Consumer Credit Protection Act.

Credit Discrimination: 6.6.4 Marital Status

A creditor may not consider an applicant’s marital status to determine the applicant’s creditworthiness, except as otherwise permitted or required by law.308 In evaluating joint applications, a creditor cannot treat applicants differently based on the existence, absence, or likelihood of a marital relationship between the parties.309

Credit Discrimination: BOOKS

Chloe Thurston, At the Boundaries of Homeownership: Credit, Discrimination, and the American State (2018).

Dan Immergluck, Credit to the Community: Community Reinvestment and Fair Lending Policy in the United States (2004).

Discrimination in Financial Services: A Special Issue of the Journal of Financial Services Research (George J. Benston et al. eds., 1997).

Edward M. Gramlich, Subprime Mortgages: America’s Latest Boom and Bust (2007).

Gregory D. Squires & Charis E. Kubrin, Privileged Places: Race, Residence, and the Structure of Opportunity (2006).

Credit Discrimination: Introduction to State Credit Discrimination Laws

The following is a summary of state statutes prohibiting discrimination in credit. Some statutes are similar to the federal Equal Credit Opportunity Act. Some are part of a state civil rights or human rights act and are at least somewhat general in their application to consumer credit. As part of a general state civil rights code, there may be remedies or administrative procedures available modeled to varying degrees after those provided for in federal civil rights laws.

Credit Discrimination: ALABAMA

Fair Housing: Ala. Code §§ 24-8-1 to 24-8-15

Protected Classes: Race, color, religion, sex, familial status, national origin, handicap.

Prohibited Practices: Discriminating in providing financial assistance for the purchase, construction, repair, and maintenance of a dwelling.

Scope of Coverage: Businesses involved in realty-related transactions.

Exclusions: Too numerous to list, see § 24-8-7.

Credit Discrimination: ALASKA

Civil Rights: Alaska Stat. § 18.80.250 (credit transactions)

Protected Classes: Sex, physical or mental disability, marital status, changes in marital status, pregnancy, parenthood, race, religion, color, or national origin.

Prohibited Practices: Discriminating in transactions involving secured or unsecured credit, housing-related credit, credit for acquisition of unimproved property, credit to a married person or disabled person, credit card in the name of the married person requesting it.

Credit Discrimination: ARIZONA

Fair Housing: Ariz. Rev. Stat. Ann. §§ 41-1491 to 41-1491.37

Protected Classes: Race, color, religion, sex, familial status, disability, or national origin.

Prohibited Practices: Discriminating in providing financial assistance for the purchase, construction, repair, and maintenance of a dwelling. § 41-1491.20.

Scope of Coverage: Businesses involved in realty-related transactions.

Credit Discrimination: ARKANSAS

Civil Rights: Ark. Code Ann. §§ 16-123-101 to 16-123-108 (credit transactions)

Protected Classes: Race, religion, national origin, gender, or any sensory, mental, or physical disability.

Prohibited Practices: Interference with the right to engage in credit and other contractual transactions without discrimination. § 16-123-107(a)(4).

Private Remedies: Civil action for injunction, compensatory, and punitive damages; costs and attorney fees permitted. § 16-123-107(b).