The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating on the basis of certain factors unrelated to creditworthiness.
Published February 01, 2002
Do you need a loan to help develop or expand your business? Perhaps you'd like to start your own business and you need a loan to help with start-up costs. If so, you should know about a law that protects you against illegal discrimination in business credit. The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating on the basis of certain factors unrelated to creditworthiness. The Better Business Bureau, along with the Federal Trade Commission, offers the following summary of what the law provides:
Credit cannot be denied on the basis of sex, marital status, race, age, national origin, or religion. This applies to you and to the people you deal with.
If your application for business credit is rejected, you can find out why by sending a written request to the lender within 30 days after you have been denied credit. The lender must give you the specific reasons in writing within 30 days after you ask. If you disagree with the reasons, discuss your concerns with the lender. Complaints can usually be resolved at this level.
If your business is small (less than $1 million in gross revenues), the lender must keep records of your credit application for at least a year after telling you of the credit decision. If your business is larger, the lender is required to keep your credit application for only 60 days after a credit denial. If you do not request reasons for denial within 60 days, the lender may destroy your records. However, if you request that records be kept longer, or ask for a written statement of the reasons for denial, the lender will maintain records relating to your application for one year. These records are important for any future legal action you may consider against a lender.
If you believe your rights have been violated, you may wish to seek legal advice. You have the right to sue a lender who violates the ECOA. If your complaint is about a governmental lender, public utility company, small loan and finance company, travel and expense credit card company, or other non-bank lender, you may wish to also contact the Federal Trade Commission, Correspondence Branch, Washington, DC 20580. Although the FTC cannot help you resolve your individual dispute, it may be able to provide you with some useful information and take enforcement action against the company if it is warranted.
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