Collections: Equal Opportunity Act

     In a previous blog, we began a review of The Equal Opportunity Credit Act ("the ECOA" or "the Act").
     There are many potential issues that have been raised under the Act -- in the previous blog I listed the first six; listed below are five more which have been cited most frequently.
     7. Requiring certain types of life insurance before issuing a loan.
     8. Basing a credit decision on the area in which the applicant lives, such as the fact that a white applicant lived in a largely black area.
     9. Changing the terms of a credit account without notifying the borrower within 30 days and including a boiler plate notice concerning the borrower's rights under the ECOA.
     10. Asking about an applicant's intentions to have children.
     11. Asking for the applicant's title (Mr., Mrs., Ms., etc.) without stating that providing this information is optional.
     There are also many potential defenses that have been raised by lenders; listed below are those which have been cited most frequently.
     1. Voluntary signatures are okay. Although a spouse cannot be required to co-sign a note, voluntary signatures are okay. Thus, the lender can win if it can show that the spouse's signature was voluntary.
     2. One spouse was not enough. A lender can argue that the applicant's spouse did not satisfy it's credit criteria all alone, and the other spouse's assets figured into his loan decision, which is why the other spouse's signature was required.
     3. Both spouses are principals. If both spouses are principals in a business, the lender can argue that it required both of their signatures because of their business relationship rather than their marital status.
     4. Pre-1986 guarantors. ECOA regulations were expanded to include guarantors as of October 1, 1986. Courts have been split as to whether they apply to guarantors if a bank violated the Act before that date but renewed the note after it.
     5. Good Faith. A lender is not liable if it acted in good faith compliance with the Federal Reserve Board's "official staff interpretation" of the ECOA, which can be found at 12 C.F.R. §202.
     We will continue our review of the Act in a future blog.