Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Which act is designed to ensure fairness in lending practices?

1. Home Mortgage Disclosure Act (HMDA)

2. Equal Credit Opportunity Act (ECOA)

3. Fair Credit Reporting Act (FCRA)

4. Fair Housing Act

The correct answer is: Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) is specifically designed to ensure fairness in lending practices by prohibiting discrimination in any aspect of a credit transaction. This legislation aims to ensure that all consumers are treated equally and have equal access to credit regardless of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance. In doing so, ECOA promotes a level playing field in lending, which is essential for fostering economic equality and opportunity among different segments of the population. The act requires lenders to notify applicants of the action taken on their credit applications and to provide reasons for any adverse actions taken, helping to maintain transparency and accountability in lending practices. While other acts mentioned, such as the Fair Housing Act, focus on preventing discrimination in housing and the Home Mortgage Disclosure Act pertains to data collection on mortgage lending patterns, it is ECOA that directly addresses fairness in the credit acquisition process itself. This is why it is the correct answer in the context of ensuring fairness in lending practices.