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Equal Credit Opportunity Act

The Equal Credit Opportunity Act became mandatory for business creditors on 4/1/1990. Provided below are guideline to follow when a consumer applicant is denied credit. For other information on ECOA Click Here.

Providing Notice

Within 30 days, business creditors must provide notice to a consumer applicant who is denied credit. The notice must contain:

• A statement of the action taken.
• The specific reason for the denial of credit.
• The name and address of the creditor.
• A copy of ECOA Notice 701(a), along with the name and address of the federal agency that administers compliance.
  

Within 60 days, the applicant can request, orally or in writing, the specific reason for denial. If the creditor gives the reason(s) orally, the creditor must disclose to the applicant of their right to have the reason(s) confirmed in writing and how to proceed. The applicant has a right to receive written confirmation within 30 days of their written request.

Providing Reasons for Action

It is recommended that you draft a standard declination letter, which includes a declination statement; your name, address, phone, and fax numbers; the reason(s) for the declination (which may be checkboxes); and the ECOA Notice 701(a).

Specific reason for the denial of credit may include:

• Delinquent credit obligations
• Need for additional references
• Unfavorable trade references
• Inability to verify references
  

Do not cite the creditor's internal company standards and policies or the applicant's failure to achieve a qualifying score on the creditor's scoring system as specific reasons for the adverse action.

Records Retention

For trade creditors, ECOA requires that an applicant's records be kept for 60 days after notifying the applicant of the action taken. If the applicant requests in writing the reasons for adverse credit decision during the 60 day period, the creditor must retain the applicant's records for at least 12 months.

ECOA Notice 701(a)

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applications on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is the Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.