Equal Credit Opportunity Act (ECOA) - Reg B
The primary purpose of Reg B is to require banks and other institutions that grant credit to make such credit equally available to all qualified applications.
Key Restrictions
ECOA made it unlawful to discriminate in any aspect of a credit transaction on the basis of:
- Sex
- Marital status
- Race
- Color
- Religion
- National origin
- Age
- Receipt of public assistance
- Exercise of rights under the Consumer Credit Protection Act
Requirements
To comply with Reg B, creditors are required to to the following:
- Notify applicants of decision made regarding their applications.
- Report credit history in the names of both spouses on an account, if the credit liability is in both names and if the bank is reporting credit information.
- Retain records of credit applications.
- Collect information about applicant's race and other personal characteristics in applications for certain dwelling-related loans.
- Provide applications with copies of appraisal reports used in connection with credit transactions.
What is covered by ECOA?
- All types of credit, including consumer and business credit, such as loans used to purchase a car or start a small business.
- Banks' procedures for all aspects of the credit transaction process. Note: There are special rules and exemptions from the regulation for credit transactions involving public utilities, securities, incidental, and government credit programs.
Credit Application Process
If you deal with potential credit applicants you need to be aware of the point at which an inquiry turns into an application, because applications are subject to all the notification and record keeping requirements of Reg B.
DeleteTruth in Lending Act (TILA) - Reg Z
The goal of the Truth in Lending Act, Reg Z, is to require creditors to disclose the total cost of credit in meaningful terms, enabling a consumer who is shopping for a loan to compare the terms offered by various creditors.
Requirements
Reg Z requires that creditors must provide consumers with specific numbers when providing loan costs, including:- Fees for the loan
- Rate of interest charged annually
- Total amount the consumer will have to pay by the end of the loan
The total cost of borrowing expressed yearly is called the Annual Percentage Rate or APR.
DeleteDisclosures
Under Reg Z, disclosure requirements are separated into 2 primary loan categories:
- Closed-end credit
- Open-end credit
- Variable rate
- Fixed rate
- Adjustable rate mortgages (ARM)
Reg Z requires specific disclosures for each particular loan category.
The table below provides a matrix of applicable loans, forms of credit and disclosures for each loan category.
| Loan Category | Loans | Forms of Credit | Disclosure |
|---|---|---|---|
| Closed-end Credit |
|
|
Closed rate initial disclosure statement |
| Open-end Credit |
|
|
|
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