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

Which act makes it illegal to discriminate against borrowers in lending?

1. Home Mortgage Disclosure Act

2. Equal Credit Opportunity Act

3. Fair Housing Act

4. Fair Credit Reporting Act

The correct answer is: Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) is the legislation that makes it illegal for lenders to discriminate against borrowers on the basis of race, color, religion, national origin, sex, marital status, age, or because you receive public assistance. This act was enacted to ensure that all individuals have equal access to credit without being subjected to discrimination, thereby promoting fairness in lending practices. By setting rigid guidelines for lenders, the ECOA helps create a more equitable environment for obtaining credit. It is essential in fostering a diverse lending market, protecting consumers from potential biases that could influence a lender’s decision. The other options are related to credit and housing but serve different purposes. The Home Mortgage Disclosure Act focuses on public monitoring of lending practices to assess whether lenders are serving the housing needs of the community. The Fair Housing Act prohibits discrimination in housing-related activities, but it does not specifically address lending. Lastly, the Fair Credit Reporting Act regulates the collection and use of consumer credit information, ensuring accuracy and privacy rather than addressing discrimination in lending directly.