Which federal law prohibits creditors from discriminating against credit applicants on the basis of protected characteristics?

• A. ECOA
• B. Fair Housing Act
• C. Truth in Lending Act
• D. CRA

Answer: (A)

The law that directly prohibits discrimination in credit transactions is Equal Credit Opportunity Act. It ensures that lenders evaluate credit applicants based on creditworthiness, not on protected characteristics such as race, color, religion, national origin, sex, marital status, age, or whether the applicant receives public assistance. It applies to all creditors and covers all stages of the credit decision, including underwriting and terms offered, and it also requires proper notice of action on applications.

Other laws address related but different issues: the Fair Housing Act focuses on housing discrimination, not general lending; the Truth in Lending Act centers on clear disclosure of loan terms; and the Community Reinvestment Act concentrates on encouraging lenders to serve the credit needs of their communities. Since the question asks which law prohibits discriminating in credit decisions based on protected characteristics, the correct answer is Equal Credit Opportunity Act.