Texas Crammer Practice Exam

Refusing credit for which of the following reasons would violate the Federal Equal Credit Opportunity Act?

1. Income level

2. Credit history

3. Marital status

4. Employment status

The correct answer is: Marital status

The Federal Equal Credit Opportunity Act (ECOA) was established to prevent discrimination in credit decision-making. One of the critical aspects of this act is that it prohibits lenders from considering certain personal characteristics when evaluating a credit application. Marital status is one of these characteristics. Refusing credit based on marital status could lead to discriminatory practices that unfairly disadvantage certain groups, such as single individuals or those who are divorced or widowed. The ECOA aims to ensure that credit is accessible to all individuals regardless of their personal situations, promoting equality in lending practices. While factors like income level, credit history, and employment status are indeed relevant to assessing creditworthiness, they do not fall under the protective provisions established by the ECOA. Thus, refusing credit based on marital status specifically violates the act, making it critical for lenders to evaluate applicants based on objective financial criteria rather than personal characteristics that do not reflect their ability to repay a loan.