Equal Credit Opportunity Act (ECOA)

Last updated: June 30, 2021

What Does Equal Credit Opportunity Act (ECOA) Mean?

The Equal Credit Opportunity Act, or ECOA, is a federal law mandate upheld and enforced by the Federal Trade Commission (FTC) in order to enforce fair credit appraisals and extensions to people without discrimination due to race, color, nationality, religion, creed, age, marital status, or any other prejudicial factor considered to be illegitimate grounds for obtaining credit when applying for loans. There is a formal criteria requiring all applicants to provide specific documentation when applying for loans that that helps to determine acceptance or rejection under regulated terms set forth by the ECOA.


WorkplaceTesting Explains Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act, or ECOA, is intended to standardize credit lending practices and eliminate prejudicial decisions surrounding credit. This is hoped to provide a more level playing field to individuals and business owners of historically marginalized classes. An unintended benefit of this act is that the better access to credit helps to ensure that running a credit report on a potential employee is not predjudical as it might have been in the past when women, minorities, or other now-protected classes might have looked to be risky on paper due to predjudice in the lending industry rather than any real failings on the part of the individual.

The Equal Credit Opportunity Act also helps to diversify the ownership of businesses in America by ensuring fair access to credit by minorities to start or expand a business.


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