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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

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.