What does the Equal Credit Opportunity Act (ECOA) prohibit?

The Equal Credit Opportunity Act (ECOA) is designed to ensure that all individuals are treated fairly and equally in credit transactions. The primary purpose of ECOA is to prohibit discrimination against credit applicants based on specific protected characteristics, such as race, color, religion, national origin, sex, marital status, age, or because they receive public assistance. Therefore, the correct answer is that ECOA explicitly prohibits discrimination in credit transactions.

This means that lenders cannot treat applicants differently based on these characteristics when it comes to granting credit, setting terms, or determining qualifications for loans, including mortgages. This protection is crucial in promoting equal access to credit and preventing unfair practices that could disproportionately impact certain groups.

In contrast, while issues such as predatory lending practices relate to unfair lending tactics and discrimination based on credit score or loan application fees may emerge from inequitable practices, these do not directly capture the core focus of ECOA, which specifically aims to combat discrimination in the credit application process itself. Thus, the emphasis of ECOA on protecting applicants from discrimination in credit transactions is why that option is the correct answer.