As a business owner, or a person planning to start a business, you
may need to borrow money to get started or to help your business
develop or expand. If so, you should know about a law that protects
you against illegal discrimination in business credit.
The Equal Credit Opportunity Act (ECOA) prohibits creditors from
discriminating on the basis of certain factors unrelated to
creditworthiness. This law also permits you to find out why your
application was denied and to sue creditors who discriminate
illegally. Here is a summary of what the law provides:
* Credit cannot be denied on the basis of sex, marital status, race,
age, national origin, or religion. This applies to you and to the
people you deal with. For example, if you request a loan for a store
in an ethnic or minority neighborhood, creditors cannot deny your
application based on your race or the race of your customers.
* If your application for business credit is rejected, you can find
out why by making a written request for the reasons within 30 days
after you are denied credit. The creditor must give you the specific
reasons in writing within 30 days after you ask. If you do not agree
with the reasons, discuss your concerns with the lender. Complaints
frequently can be resolved at this level.
* If your business is small (less than $1 million in gross
revenues), the lender must keep records of your credit application
for a year after telling you of the credit decision. If your business
is larger, the lender must keep your records for only 60 days after a
credit denial, and if you do not request reasons within 60 days, the
creditor may destroy your records. However, if you request that
records be kept longer, or ask for a written statement of the reasons
for denial, the lender will maintain records relating to your
application for one year. These records are important for any future
legal action you may consider against a lender.
If you believe your rights have been violated, you may wish to seek
legal advice. You have the right to sue a creditor who violates the
ECOA. If your complaint is about a governmental lender, public
utility company, small loan and finance company, travel and expense
credit card company, or other non-bank creditor, you may also wish to
contact the Federal Trade Commission. Although the FTC cannot help
you resolve your individual dispute, it may be able to provide you
with some useful information and to take enforcement action against
the company if it is warranted. Write to: Correspondence Branch,
Federal Trade Commission, Washington, DC 20580.
To obtain a free copy of our Best Sellers -- a complete listing of
all consumer and business publications from the FTC -- contact:
Public Reference, Federal Trade Commission, Washington, D.C. 20580;
from the Federal Trade Commission, 10/93
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