Credit is an important financial tool used by consumers to achieve goals like going to college, buying a house, obtaining a personal loan, and more.
In the modern age, consumer credit is indispensable as a means of creating a better life through leveraging debt in a way that serves specific goals. And, credit should be extended to people based on a set of defined criteria that have to do with creditworthiness and credit history, not other identifying factors that some financial institutions might (wrongfully) use as a reason not to extend credit to someone.
In this article, the consumer advocates at Matthew R. Osborne, PC are bringing you some fundamental information to keep in mind as it pertains to Credit Discrimination: a term used to describe what happens when a creditor unlawfully denies credit or makes some other credit determination on the basis of a particular demographic like gender, race, or national origin.
After reading this, you’ll have a better understanding of what is and isn’t Credit Discrimination, what you can do to protect yourself against it, and what to do if you find that you’ve been discriminated against in this way.
The Three Types of Credit Discrimination
The Equal Credit Opportunity Act became law in October of 1974, and it set forth a series of rules that must be followed by those issuing lines of credit to consumers in the United States.
According to the Equal Credit Opportunity Act, there are three main categories of credit discrimination. They are:
- Overt discrimination. This type of credit discrimination is rare, but it does happen. Overt discrimination is when a creditor openly denies credit or significantly modifies credit terms based on a prohibited criteria like marital status, age, or income type.
- Disparate treatment. This is an often subtler form of discrimination, and it can be harder to detect. Disparate treatment is when a consumer is treated differently during the credit evaluation process based on prohibited criteria. An example would be requiring more proof of income from a disabled person just because they’re disabled.
- Disparate impact. Disparate impact credit discrimination is the most difficult to detect, as it is often related to lending policies that are neutrally applied to all borrowers, but have disparate impacts on a specific demographic (for example, hispanic or African American borrowers paying higher finance rates when buying a car).
Proving credit discrimination used to be quite difficult because lenders haven’t always been scrutinized for how they deal with credit applicants. Now, however, everything is tracked and recorded, and in fact, stipulations of the Equal Credit Opportunity Act require that lenders inform applicants about the specific reason(s) why they were denied credit or why they were granted credit in a way that is different from the terms under which they originally applied.
Protecting Yourself against Credit Discrimination
Knowledge is the single most powerful weapon you can use in the fight against credit discrimination. Knowing why you can and cannot be denied credit is the first step in protecting yourself against this type of treatment.
Watch for some of the most common warning signs of credit discrimination, including:
- Being treated differently over phone compared to in-person
- You feel pressured against applying for credit
- You are denied credit even though you clearly qualify for it
- You are not given a reason why you were denied credit
Any time you are involved in the credit evaluation process, it’s critical that you ask as many questions as you can. Don’t keep the focus solely on your monthly payment or some other individual feature of the borrowing agreement. You have a right to know what you’re signing up for, and if the creditor isn’t being forthright with their answers, it’s probably best to look elsewhere for the credit you need.
What to Do If You Are Discriminated Against
You deserve to be treated fairly by lenders.
It can feel terrible knowing you were denied credit because of your race, age, gender, marital status, or disability status. The good news is that you have rights that can be upheld in a court of law, and the legal team at Matthew R. Osborne, PC is here to assist you.
If you feel you have been discriminated against in a case involving a credit decision, gather all of your documentation together and give us a call. We’ll schedule a consultation to review your case and, if we think we can help you, we will let you know what your options are.