Until 50 Years Ago, Women Couldn't Get Credit Without A Man’s Signature

The Equal Credit Opportunity Act (ECOA) is a law established in the United States in the year 1974, the law was signed by then-President Gerald Ford and is implemented by the Board's Regulation B. The act prohibits discrimination against consumers or any applicants in aspects of credit. Until the introduction of ECOA, women were not allowed to take credit for themselves. They needed a male companion who would sign on their behalf to get the loans approved. 

The law makes it unlawful or illegal for any creditor to discriminate against any applicant, or consumer based on race, religion, colour, national origin, sex, marital status, or age.

How does ECOA work?

While the Equal Pay Act was cleared in 1963, which demanded both men and women get paid equally for the same work they were doing, it was only in 1974 when the ECOA was passed that women got their credit cards with their names on them. The ECOA was originally introduced in 1973 by Representative Bella Abzug (D-NY) and was signed into law by President Gerald Ford on October 28, 1974. The Equal Credit Opportunity Act protects consumers against getting discriminated against during credit transactions. The aspect of discrimination on the above-stated grounds was common and was explicitly practised, putting the law in place to prohibit such nasty practices.

ECOA applies to any institution that offers credit, such as banks, finance companies, retail stores, credit card companies, and unions. Creditors cannot ask about marital status or impose various conditions based on the consumers' individual personality or choice.

Loans such as Home Loan, Car Loan, Student Loan, and Small Business Loan, among many others, are all covered under ECOA.

Exceptions To ECOA

The lender may ask about certain personal facts which are prohibited by ECOA when the borrower applies for credit. While it is not possible to use these questions for lending decisions, and answering them is voluntary, this information helps the Federal Agencies in their enforcement of legislation against discrimination.

One more facet of the Equal Credit Opportunity Act is that it allows the disclosure of information such as permanent residence or immigration of the consumers as it helps to decide the creditworthiness.

Penalties And Liabilities For Violating ECOA

In case, an institution, an organization, or an individual, who is the lending party is found guilty of violating the law, they can be sued in court for punitive damages of up to $10,000 for individual lawsuits and $500,000 or 1% of the creditors' new worth for class-action lawsuits, along with the actual damages caused.

A Philadelphia-based finance company, Franklin Acceptance Corporation (Franklin), dealing majorly in the business of purchasing instalment sales contracts from automobile dealers, was charged by the Federal Tarde Commission of the US with violating several provisions of the ECOA.