LUDR | Lawyers United for Debt Relief

IF YOU HAVE BEEN DENIED CREDIT BECAUSE OF A BAD CREDIT REPORT, YOU MAY HAVE BEEN DISCRIMINATED AGAINST

Equal Credit Opportunity Act on a Bad Credit Report.

In 1974, Congress passed the Equal Credit Opportunity Act (ECOA). The purpose of this law was to halt creditors' blatant discrimination against women and minorities. The ECOA prevents creditors' from discriminating against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because you are receiving public assistance.

Before the ECOA had come into play, creditors often asked women to find a husband or male family member to cosign for a loan. Sometimes women were asked details about their child bearing plans. Some creditors went so far as to cancel a woman's credit once she became married.

Most allegations against creditors involved women who were denied a line of credit or loan based on their sex or marital status. Today, the ECOA prohibits creditors from doing this. If a creditor denies you credit, you are entitled to a written explanation along with information regarding which credit bureau(s) provided the information. Some creditors provide this statement automatically but most don't. If you request the denial in writing, the creditor has 30 days to respond.

There are four main topics of discrimination under the ECOA that are going to be discussed. They are: Race Discrimination, Sex Discrimination, Marital Status Discrimination, and Bankruptcy & Government Discrimination.

Race Discrimination: Lending institutions are prohibited from asking you your race. However, a mortgage lender must request a person's race for the sole purpose of monitoring home mortgage applications.

There are other acts that the federal government has issued to prevent discrimination. The Home Mortgage Disclosure Act says that mortgage lenders must maintain and disclose their lending practices for certain areas (this is done to prevent "redlining" certain neighborhoods). The Community Reinvestment Act states that bank mortgage lenders must demonstrate that they serve the needs of the communities in which they are chartered to serve. If the banks fail to do so, bank regulators can deny the bank the right to establish branches or other activity requiring regulatory approval. There are also the Fair Credit Housing Act and the Federal Civil Rights Act.

Sex Discrimination: When filling out a credit application, a creditor must let you know that using Ms., Miss, Mrs., or Mr. is optional. A creditor may only ask you sex when you apply for a real estate loan. The reason why they ask for your sex when applying for a real estate loan is because the Federal Government requires the information for statistical purposes.

The terms of a loan for a woman must be the same for a man with similar qualifications. For example:

A creditor cannot rate a female job (waitress) lower than a similar male job (waiter) when applying for credit.
A person cannot be discriminated against based on income from part-time jobs, alimony, or child support.
A creditor cannot ask a married woman information about her husband unless the same is typically done with men.
A creditor cannot deny credit to pregnant women anticipating going on maternity leave.

Marital Status Discrimination: Married persons must be allowed to apply for credit in their own name. A creditor cannot require an applicant's spouse to cosign an application. A creditor may not ask your marital status but may ask questions that would disclose your marital status such as:

Do you pay alimony or child support?
Do you receive alimony or child support as part of your income?
Are any of your debts that you listed on the credit application jointly liable with someone else?

The ECOA also protects consumers against being judged solely on their past credit history. More specifically the ECOA Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, states that a creditor cannot discriminate against a consumer by virtue of information contained in a credit report. The regulation reads in pertinent part:

Credit History. To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness a creditor shall consider:

On the applicant'. request, any information the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant's creditworthiness...

What this means for consumers is that if the information in a consumer's credit report does not accurately reflect their creditworthiness, it cannot be used against them in the evaluation of their credit application. Essentially, if the credit bureaus did not update a consumer's credit report so that the information was completely accurate, the consumer could approach the creditor with the complete information. By doing this, the creditor would be forced to review the credit report as if the data in question were nonexistent. If the creditor denies the application, you may have the right of a claim against the creditor!

Attached are some same letters which can be sent to creditors who have denied you credit. They include reasons for bad credit reports. If you are denied credit from a creditor you should fill out this letter and provide the reasons why your credit suffered in the past. Extenuating circumstances such as a job loss, divorce, a death in the family, etc. are all reasonable explanations under the ECOA. Any accounts on your credit report that were due to the extenuating circumstance may not be used against you in the credit evaluation process!!! So, if you went through some problems in the past, but you are now paying all your bills on time and up to date, you shouldn't be judged on your past credit history. Although each time a creditor looks at your credit report it will show your past credit history, with the ECOA they may be forced to ignore the negative information being reported. It's as if it was never there to begin with!!! If you believe you have been discriminated against, send the appropriate letter to creditor. If the creditor continues to deny you credit, give us a call at (312) 939-2221.

STANDARD LETTER

THIS IS A SAMPLE LETTER WHICH CONSUMERS CAN COPY AND CUSTOMIZE TO MEET THEIR REQUIREMENTS WHEN THEY'RE READY TO APPLY FOR CREDIT OR TO RE-APPLY FOR A DENIED CREDIT APPLICATION.

Dear (Creditor/Landlord etc.):
Date: (Insert)

I am writing to promote the acceptance of my pending (or previously submitted or denied) (credit card, automobile, mortgage, etc.) loan application, for credit with your company.

I am aware that your company is using a credit report in the process of evaluating my creditworthiness. As you may not know, my creditworthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my rights, under The Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR CH. 11 (1-1-92 Edition) Part 202, which reads, in pertinent part, as follows:

Credit History: To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants, for a similar type and amount of credit, in evaluating an applicant's creditworthiness, a creditor shall consider:

Upon the applicant's request, any information that the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant's true creditworthiness ...

Please let it be known that it is my position that the information in my credit report fails to accurately reflect my true creditworthiness because:

[Here's where you should insert the reason for your past credit problem(s) such as: extenuating circumstances, a death in the family, a Ł-fled business, hospitalization, a major automobile accident, a billing dispute, loss oŁ job, etc.]

Due to these circumstances, my present credit report fails to accurately reflect my current creditworthiness. It is incomplete, by failing to note (...the insurance company should have paid this due to my spouse's illness ... I was an authorized user on my ax-spouse's account ... the Judgment/Lien indicated on my report has since been satisfied ... my credit report is not being updated properly, etc.). This was due to extenuating circumstances beyond my control.

The account data is misleading and biased, by indicating inaccurate and incomplete information. Consistent with The Equal Credit Opportunity Act -- Regulation B at 12 CFR Part 202, the (list consumer's derogatory accounts here) may not be used in evaluating my creditworthiness in the process of approving my credit application with your company. Thank you for your consideration of this information in the evaluation of my credit application. If you require any additional information or further clarification of this matter, please contact me at the address below. Thank you.

Sincerely,
(signature)
Your Name Address Social Security Number

This educational material is not intended to mislead, deceive or willfully provide any fraudulent statements to any creditor and/or credit reporting agency/bureau. If consumers still get denied after using the ECOA letter, consumers then have a right of claim against the creditor for discrimination under Reg. 8 at 12 CFR Ch. 11 (1-1-92 Edition) Part 202.

SAMPLE 1: LACK OF INCOME, JOB LOSS

(DATE)
(COMPANY NAME)
(COMPANY ADDRESS)
To Whom It May Concern:

I am writing to promote the acceptance of my previously submitted application for an auto loan with your company. I am aware that your company has used a credit report in the process of evaluating my creditworthiness. As you may not know, my credit worthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my right under the Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, which reads in pertinent part:

On the applicant's request, any information the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant's true creditworthiness ...

It is my position that the information supplied on my credit report fails to accurately reflect my true creditworthiness. I am requesting that your company not judge my application based solely on my credit report. Please take into consideration the following:

Any accounts listed on my credit report with negative information were incurred over 4 years ago when I was a full time college student. During that time, I was not employed on a full time basis and my income was limited.

My intentions were to pay off all accounts in full as soon as I graduated and became employed on a full time basis. Unfortunately, due to the recession and many corporations downsizing, I was unable to find employment for almost six months after I graduated. As soon as I began working, all creditors were paid in full.

Since that time, I have re-established my credit, as evidenced by several other accounts appearing on my report. I have been employed with my present company for several years and my probability of continued employment is excellent. I earn a sufficient amount of income to maintain the monthly payments to the account for which I applied.

Please do not judge my credit based on how it appeared over 4 years ago. This unfortunate incident was due to circumstances being my control and does not reflect my true creditworthiness. My credit report should also be reflecting several other accounts, which were opened over the last four years, and have always been paid as agreed. I can also supply your company with proof of timely rental, phone, and utility payments for the past 12 months which certainly reflect my true creditworthiness as it stands today.

The account data appearing on my credit report is misleading and biased by indicating inaccurate, incomplete and outdated information. Consistent with The Equal Credit Opportunity Act -Regulation B at 12 CFR Part 202, this information should not be used in evaluating my creditworthiness.

I understand the importance of maintaining a very good credit standing and I assure you, if given the opportunity to obtain this auto loan, I will prove to be a very trustworthy and creditworthy customer.

Thank you for your reconsideration in the evaluation of my credit application. If you require any additional information or further clarification of this matter, please contact me at the address listed below. Thank you.

Sincerely,
John Doe
(Address)
(Phone Number)

SAMPLE 2: ILLNESS, INJURY

(DATE)
(COMPANY NAME)
(COMPANY ADDRESS)

To Whom It May Concern:

I am writing to promote the acceptance of my previously submitted application for a mortgage with your company. I am aware that your company has used a credit report in the process of evaluating my creditworthiness. As you may not know, my credit worthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my right under the Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, which reads in pertinent part:

It is my position that the information supplied on my credit report fails to accurately reflect my true creditworthiness. I am requesting that your company please reconsider my application based on the following information:

Several years ago, I was involved in a life-threatening automobile accident. I was seriously injured and out of work for several months. My income decreased drastically and unfortunately, I was unable to maintain the monthly payments for all of my creditors. After six months of physical therapy, I was able to return to work and begin to pay all of my accounts in a timely manner again.

Since that time, I have re-established my credit (as evidenced by several other accounts appearing on my report). I have been employed with my present company for several years and my probability of continued employment is excellent. I earn a sufficient amount of income to maintain the monthly payments for the account to which I applied. I can also supply your company with proof of timely rental, phone, and utility payments which reflect my true creditworthiness as it stands today.

Please do not judge my credit based on this unfortunate incident which was caused by extenuating circumstances beyond my control.

The account data appearing on my credit report is misleading and biased by indicating inaccurate, incomplete and outdated information. Consistent with the Equal Credit Opportunity Act -Regulation B at 12 CFR Part 202, this information should not be used in evaluating my creditworthiness.

I understand the importance of maintaining a very good credit standing and I assure you, if given the opportunity to obtain this mortgage, I will prove to be a very trustworthy and creditworthy customer.

Sincerely,
Jane Doe
(Address)
(Phone Number)

SAMPLE 3: LACK OF CREDIT
(DATE)
(COMPANY NAME)
(COMPANY ADDRESS)

To Whom It May Concern:

I am writing to promote the acceptance of my previously submitted application for a credit card with your company. I am aware that your company has used a credit report in the process of evaluating my creditworthiness. AS you may not know, my credit worthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my right under the Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, which reads in pertinent part:

It is my position that the lack of information supplied on my credit report fails to accurately reflect my true creditworthiness. I am requesting that your company not judge my application based solely on my credit report. Please take into consideration the following:

I have been with my present company for several years and my probability of continued employment is excellent. I earn a sufficient amount of income to maintain the monthly payments for the account to which I applied.

I have been residing at my present address for several years and can provide evidence of timely rental payments for the last 12 months. I believe this will certainly reflect my true creditworthiness as it stands today.

The lack of account data appearing on my credit report is misleading and biased by indicating incomplete information. Consistent with The Equal Credit Opportunity Act -- Regulation B at 12 CFR Part 202, this information should not be used in evaluating my creditworthiness.

I understand the importance of maintaining a very good credit standing and I assure you, if given the opportunity to obtain this credit card, I will prove to be a very trustworthy and creditworthy customer.

Sincerely,
John Doe
(Address)
(Phone Number)

SAMPLE 4:SEPARATION, DIVORCE

(DATE)
(COMPANY NAME)
(COMPANY ADDRESS)

To Whom It May Concern:

I am writing to promote the acceptance of my previously submitted application for a credit card with your company. I am aware that your company has used a credit report in the process of evaluating my creditworthiness. As you may not know, my credit worthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my right under the Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, which reads in pertinent part:

Any accounts listed on my credit report with negative information were due to my divorce, which occurred several years ago. At that time, I was advised by my attorney that my ex-husband was responsible for repayment of the accounts we shared until our divorce was finalized. When the divorce was finalized, it was determined that I was not legally responsible for the repayment of most of these debts.

I began to make payments for any accounts I was responsible for. Any late payments reflected on these accounts were due to the fact that I no longer received income from my ax-husband and had to adjust to a monthly decrease of income by over 50%. All of these accounts have been paid in full for several years and any negative reports relating to them do not reflect my true creditworthiness as it stands today.

Please do not judge my credit based this unfortunate incident which occurred several years ago. I can also supply your company with proof of timely rental, phone, and utility payments for the previous 24 months which certainly reflect my true creditworthiness as it stands today.

Sincerely,
Jenny Smith
(Address)
(Phone Number)

SAMPLE 5: BILLING DISPUTE

(DATE)
(COMPANY NAME)
(COMPANY ADDRESS)

To Whom It May Concern:

I am writing to promote the acceptance of my previously submitted application for a credit card with your company. I am aware that your company has used a credit report in the process of evaluating my creditworthiness. As you may not know, my credit worthiness is not properly reflected by my credit report and must not be considered in a form which is adverse to my application for credit.

I bring to your attention my right under the Equal Credit Opportunity Act (ECOA) - Regulation B at 12 CFR Ch. 11 (1-1-92 Edition) Part 202, which reads in pertinent part:

The account appearing on my credit report with IC Systems does not belong to me. I am in the process of disputing this account directly with IC Systems and the credit bureaus. I am sure that this error will be corrected, but unfortunately this is quite time consuming.

Please do not judge my credit based on this one inaccurate account. My credit report reflects several other accounts which have been always been paid as agreed and reflect my true creditworthiness.

I have been employed as a police officer for over 5 years and my probability of continued employment is excellent. I earn a sufficient amount of income to maintain the monthly payments for the account to which I applied.

Sincerely,
Mike Jones
(Address)
(Phone Number)