5 Questions Your Banker Can't Ask
By Jill Terry
In these days of online banking and faceless interactions,
divulging only what's absolutely necessary to your banker
should be expected. But what is absolutely necessary?
In other words, what are bankers, by law, forbidden to ask
credit applicants?
The federal government enacted Regulation B, better known
as the "Equal Credit Opportunity Act," to combat unfair treatment
reported by credit applicants when they applied for credit.
The law prohibits a creditor from asking certain questions
about you--questions that ultimately have nothing to do with
your ability to repay a loan. Credit application forms usually
comply with this law, but any time you have a conversation
with a banker, make sure that he or she doesn't ask about
and you do not volunteer the following types of information.
Age
This is a tricky one. The bank can't ask you how old you are,
but the law permits a creditor to ask for your date of birth.
What a banker must not do is make assumptions about how your
age will affect your credit-worthiness. However, being old
enough to execute a contract or a 75-year-old applying for
a 20-year mortgage are legitimate considerations under the
law.
Receipt of Public Assistance
You are required to disclose if you have received any
public assistance monies only if you want that income considered
as part of your application. And a bank cannot arbitrarily
exclude these payments from your debt-to-income calculation
unless it's clear that these payments will not be consistently
made or are scheduled to end soon.
Marital Status
There are only two situations in which marital status
is a valid consideration in extending credit:
- You apply for individual, unsecured credit (which you
can do, even if you're married) and you live in a community
property state or are relying on property located in a community
property state in order to pay off the loan.
- You apply jointly with your spouse for any other kind
of credit.
The credit application can inquire about your marital status,
using only the terms "unmarried," "married," and "separated."
Banks are prohibited from using your marital status as a reason
to approve or deny credit, but they may consider it in determining
how you hold property and determining your debt.
Race, Color, Religion, National Origin
It is now common knowledge that these are criteria by
which nobody should be judged, and the credit application
process is certainly no exception. Beware of bankers who innocently
ask your nationality, perhaps as part of a casual conversation.
Don't answer the question and report the banker's action to
his supervisor. If you're applying for a mortgage, however,
the bank is required to collect this information under another
federal regulation in order for the bank to report whether
or not it gave you credit and why.
Sex
Usually, your first name will reveal your gender, but
not always. In any event, an applicant's sex is irrelevant
and should have no bearing on the bank's decision whether
to extend credit.
The Bottom Line
A bank should have a set of standards by which it measures
the credit-worthiness of an applicant and none of the above
should be included in the decision making process. If you
suspect these prohibited subjects formed part of your bank's
decision to decline your loan application, you should contact
the federal regulatory agency that regulates your bank.
For more information about Regulation B, visit the Federal
Reserve Bank's Web site. For a list of available consumer
protection publications, visit the Federal Reserve's consumer
information area.
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