Credit Discrimination: REPORTS
Adam Rust, Cmty. Reinvestment Ass’n of N.C., The New Hurdle to Homeownership: How Loan Level Pricing Changes the Cost of and the Access to Mortgage Credit (Aug. 2011), available at https://reinvestmentpartners.org.
Adam Rust, Cmty. Reinvestment Ass’n of N.C., The New Hurdle to Homeownership: How Loan Level Pricing Changes the Cost of and the Access to Mortgage Credit (Aug. 2011), available at https://reinvestmentpartners.org.
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.
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.
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.
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.
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).
Civil Rights: Cal. Civ. Code §§ 51 to 52.2 (West)
Protected Classes: Sex, race, age, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, or immigration status.
Prohibited Practices: Discrimination in accommodations, advantages, facilities, privileges, or services of business establishments.
Scope of Coverage: All business establishments.
Consumer Credit: Colo. Rev. Stat. § 5-3-210
Protected Classes: Race, creed, religion, color, sex, sexual orientation, gender identity, gender expression, marital status, national origin, or ancestry.
Prohibited Practices: Denial of credit or making terms or conditions of credit more stringent on basis of membership in a protected class.
Scope of Coverage: Consumer credit sales, consumer leases, consumer loans regulated under Title V of Colorado Consumer Credit Code (C-CCC).
Civil Rights: Conn. Gen. Stat. §§ 46a-65, 46a-66, 46a-81f, 46a-98 (credit transactions)
Protected Classes: Sex, gender identity or expression, age, race, color, religious creed, national origin, ancestry, marital status, intellectual disability, learning disability, veteran status, blindness, physical disability, or sexual orientation (if eighteen years or older). § 46a-66. Provision prohibiting credit discrimination on basis of sexual orientation includes protection for “civil union status.” § 46a-81f.
Fair Housing: Del. Code Ann. tit. 6, §§ 4600 to 4620
Protected Classes: Race, color, national origin, religion, creed, sex, marital status, familial status, age (if eighteen or older), disability, source of income, sexual orientation, or gender identity. §§ 4603(b), 4604.
Civil Rights: D.C. Code §§ 2-1401.01 to 2-1403.17
Protected Classes: Actual or perceived race, color, religion, national origin, sex, age, marital status, personal appearance, sexual orientation, gender identity or expression, familial status, family responsibilities, disability, matriculation, political affiliation, source of income, genetic information, status as victim of an intrafamily offense, or place of residence or business. § 2-1402.21.
Consumer Credit: Fla. Stat. § 725.07
Protected Classes: Sex, marital status, or race.
Prohibited Practices: No person can discriminate on basis of membership in protected class.
Scope of Coverage: Covers areas of loaning money, granting credit, and providing equal pay for equal services performed.
Exclusions: None specified.
Private Remedies: Compensatory and punitive damages and attorney fees.
Administrative Remedies: None specified.
Consumer Credit: Ga. Code Ann. §§ 7-6-1 to 7-6-2
Protected Classes: Sex, race, religion, national origin, or marital status.
Prohibited Practices: Discriminating or providing requirements which discriminate in the extending of credit or the making of loans.
Scope of Coverage: Banks, lending companies, financial institutions, retail installment seller, or person extending credit.
Private Remedies: Action for damages in court of competent jurisdiction.
Fair Housing: 9 Guam Code Ann. §§ 70.210 to 70.470
Protected Classes: Race, color, religion, sex, or national origin of applicant or of any person associated with applicant. § 70.230.
Consumer Credit: Haw. Rev. Stat. §§ 477E-1 to 477E-6
Protected Classes: Marital status. § 477E-3.
Prohibited Practices: Discrimination against any applicant with respect to any aspect of a credit transaction; aggregation of loans to determine finance charges or loan ceilings.
Scope of Coverage: Credit transactions by financial institutions, pawnbrokers, debt adjusters, extenders, or arrangers of credit, assignee who participates in credit decision.
Civil Rights: Idaho Code §§ 67-5901 to 67-5912 (housing transactions)
Protected Classes: Race, color, religion, sex, national origin, or disability.
Prohibited Practices: Discriminating or using a form that directly or indirectly indicates an intent to make a limitation, specification or discrimination regarding real estate transaction. § 67-5909.
Civil Rights: 775 Ill. Comp. Stat. §§ 5/1-101 to 5/10-104; 775 Ill. Comp. Stat. §§ 5/4-101 to 5/4-104 (credit transactions)
Protected Classes: Race, color, religion, sex, national origin, ancestry, age, sexual orientation, marital status, order of protection status, pregnancy, physical or mental disability, military status, or unfavorable discharge from military service. §§ 5/1-102(A), 5/1-103. Familial status, for real estate transactions. § 5/1-102(D).
The potential for discrimination in the supposedly objective process of generating credit scores also arises when loan officers engage in selective “coaching” of applicants.173 If a loan officer provides more information and assistance to White applicants in filling out their applications, those applications may be more likely to generate higher credit application scores and to qualify under automated underwriting systems.174
Most lenders now use credit scores to determine not only whether a consumer will be approved for credit but at what price the credit will be provided—so-called “risk-based pricing.” Essentially, the higher the credit score, the lower the price for credit. In addition to questions as to the justifiability of risk-based pricing,175 many loan brokers and loan officers have “marked up” the price of credit by selling the borrower a higher rate than what the borrower’s credit score qualifies them for.
The use of a scoring model in one context but not in another could lead to a disparate impact on protected classes.
Auto loan borrowers have also alleged that companies may manipulate a supposedly “color blind” credit scoring system by setting systems up differently for different dealerships. In one case, plaintiffs alleged that dealerships in communities of color may even be required to submit all credit applications to creditors for manual review.
The use of credit scores for non-credit related purposes has grown dramatically.
A particularly controversial issue is the use of credit scores by automobile and home insurers to determine whether to insure a consumer and at what price. The credit scores used by insurers, or “insurance scores,” are specially developed for insurers and not the same as generic credit scores.
In the 2000s, a number of state insurance commissions conducted studies on the relationship between insurance scores and certain demographic characteristics, including race, gender, age, and income. A study commissioned by the Washington State Insurance Commissioner showed a correlation between insurance scores and income; however, its findings regarding the racial impact of insurance scoring were inconclusive, primarily because of the small number of people of color sampled from Washington State’s relatively homogeneous population.206
The following section discusses the special Equal Credit Opportunity Act (ECOA) prohibitions on certain types of credit discrimination that are indirectly linked to a prohibited basis. Examples are credit decisions based on the applicant’s likelihood of childbearing, type of income, telephone listing, and certain aspects of credit history. These special ECOA rules provide protection for women and, to a lesser extent, for applicants aged 62 or over.