In fair lending, a prohibited basis is a personal characteristic that a lender is not allowed to consider when deciding whether to approve your application, what interest rate to offer, or what other terms to set. Two federal statutes supply the list. The Equal Credit Opportunity Act (ECOA) bars discrimination based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, and the good-faith exercise of rights under consumer credit laws. The Fair Housing Act (FHA) covers race, color, religion, sex, national origin, familial status, and disability in residential real estate transactions. If a lender factors any of these into a credit decision, the decision violates federal law whether or not the lender meant to discriminate.
Which Law Protects You Depends on the Loan
ECOA, codified at 15 U.S.C. § 1691, applies to every type of credit transaction: credit cards, auto loans, student loans, business lines of credit, and mortgages. Its implementing rules sit in Regulation B.1Consumer Financial Protection Bureau. 12 CFR 1002.1 – Authority, Scope and Purpose
The Fair Housing Act, at 42 U.S.C. § 3601 et seq., is narrower. It reaches residential real estate transactions, which includes mortgage loans, home equity lines of credit, home improvement financing, and the appraisal of residential property.2Office of the Law Revision Counsel. 42 USC 3605 – Discrimination in Residential Real Estate-Related Transactions So a credit card application is governed by ECOA alone. A mortgage application is governed by both laws at once, which gives mortgage applicants the broadest set of protections of any credit product.
The Prohibited Bases Under ECOA
ECOA makes it unlawful for any creditor to discriminate against an applicant in any aspect of a credit transaction based on:
- Race
- Color
- Religion
- National origin
- Sex
- Marital status
- Age (provided the applicant is old enough to legally enter a contract)
- Receipt of public assistance income
ECOA also prohibits a creditor from retaliating against anyone who has exercised a right under the Consumer Credit Protection Act, such as disputing a billing error or asking why credit was denied.3Office of the Law Revision Counsel. 15 USC 1691 – Scope of Prohibition
In 2021, the Consumer Financial Protection Bureau clarified that ECOA’s prohibition on sex discrimination also covers discrimination based on sexual orientation and gender identity.4Consumer Financial Protection Bureau. CFPB Clarifies That Discrimination by Lenders on the Basis of Sexual Orientation and Gender Identity Is Illegal
The Prohibited Bases Under the Fair Housing Act
For residential real estate transactions, the FHA bars discrimination because of:
- Race
- Color
- Religion
- Sex
- National origin
- Familial status
- Disability (the statute uses the word “handicap”)
Familial status covers households where one or more children under 18 live with a parent, legal guardian, or designated caretaker. It also protects anyone who is pregnant or in the process of securing legal custody of a child under 18.6Office of the Law Revision Counsel. 42 USC 3602 – Definitions A mortgage lender who offers worse terms to a family with young children violates the FHA, even if the terms look defensible on paper.
Disability protections run broad. A lender cannot refuse a mortgage or charge a higher rate because of a physical or mental disability, and the FHA requires lenders to make reasonable accommodations in their policies when necessary for a person with a disability to have equal access to housing credit.5Office of the Law Revision Counsel. 42 USC 3604 – Discrimination in the Sale or Rental of Housing
HUD has likewise interpreted the FHA’s bar on sex discrimination to reach sexual orientation and gender identity.7U.S. Department of Housing and Urban Development. HUD to Enforce Fair Housing Act to Prohibit Discrimination on the Basis of Sexual Orientation and Gender Identity
Where the Two Laws Diverge
Marital status, age, public assistance income, and retaliation for exercising consumer credit rights are ECOA-only. Familial status and disability are FHA-only. Everything else overlaps. For a mortgage, both lists apply at the same time.
How Discrimination Actually Shows Up
A lender does not need to say anything about a protected characteristic for the decision to be unlawful. Federal regulators recognize several forms, and some of them are invisible to the person being discriminated against.
Disparate Treatment
This is the most direct form. A lender treats one applicant differently from another because of a prohibited basis: a higher interest rate, a larger required down payment, stricter documentation. The lender does not need to feel prejudice. If two similarly qualified applicants received different treatment that tracked a prohibited characteristic, that is enough.8Office of the Comptroller of the Currency. Fair Lending
Disparate Impact
A policy that looks neutral on its face can still violate fair lending laws if it disproportionately burdens a protected group and the lender cannot show both a legitimate business necessity and the absence of a less discriminatory alternative.8Office of the Comptroller of the Currency. Fair Lending The Supreme Court confirmed in 2015 that disparate impact claims are available under the Fair Housing Act.
Redlining and Steering
Redlining is a refusal to offer loans or services to residents of specific neighborhoods, typically communities with large minority populations, with geography standing in for race or ethnicity. Steering is the opposite move: approving applicants but routing them toward less favorable products or less desirable neighborhoods based on a prohibited characteristic. A loan officer who consistently directs minority applicants to higher-cost loans while offering comparable white applicants better terms is steering, even if everyone gets approved.
Discouragement
Sometimes discrimination happens before an application exists. Staff may give certain inquirers discouraging or misleading information so they never apply. No application means no paper trail, which is what makes this form hard to prove and important to recognize.9National Credit Union Administration. Fair Housing Act (FHA)
Your Right to Know Why You Were Denied
If a creditor denies your application, offers worse terms than you asked for, or takes other unfavorable action, ECOA requires a written adverse action notice within 30 days. The notice must either state the specific reasons for the decision or tell you that you have 60 days to request those reasons.10Consumer Financial Protection Bureau. Regulation B – 1002.9 Notifications
The notice must also identify the federal agency that supervises the creditor’s compliance, which gives you a direct route for a complaint if the stated reasons look pretextual. If the creditor gives reasons orally, you can request written confirmation and the creditor has 30 days to provide it. Vague or shifting explanations in that notice are often the first concrete evidence of a discrimination claim.
Narrow Exceptions
Two situations let a lender or housing provider consider a characteristic that would otherwise be off-limits.
ECOA permits special purpose credit programs that target economically disadvantaged groups. A program authorized by federal or state law, offered by a qualifying nonprofit, or set up by a for-profit organization under a documented written plan can extend credit to groups that would otherwise be denied or receive worse terms.11Consumer Financial Protection Bureau. Regulation B – 1002.8 Special Purpose Credit Programs The program has to expand access, not restrict it.
The FHA’s familial status rule has a carve-out for housing designed for older residents: a community where at least 80 percent of occupied units have at least one resident aged 55 or older can exclude families with children. That exception runs to the housing itself, not to the mortgage. A lender financing a home in such a community still cannot deny the loan because of familial status.
How to File a Complaint or Sue
The CFPB supervises ECOA compliance across most consumer lending and accepts complaints about credit discrimination involving any loan or credit product.12Consumer Financial Protection Bureau. Providing Equal Credit Opportunities (ECOA) HUD handles FHA complaints involving mortgage lending, appraisals, and other residential transactions, and a HUD complaint must be filed within one year of the alleged discriminatory act.13U.S. Department of Housing and Urban Development. Report Housing Discrimination The Department of Justice brings its own cases when it identifies a pattern or practice of lending discrimination under either statute.14Department of Justice. The Equal Credit Opportunity Act
You can also sue on your own. Under ECOA, a court can award actual damages, punitive damages up to $10,000 in an individual case, and attorney’s fees.15Office of the Law Revision Counsel. 15 USC 1691e – Civil Liability That $10,000 cap is a fixed statutory figure and has not been adjusted for inflation; the cap rises in class actions. In most individual ECOA cases, actual damages and attorney’s fees do more of the financial work than punitive damages.
FHA suits carry more weight. You have two years from the discriminatory act to file, and the clock pauses while a HUD administrative proceeding is pending. A court can order actual damages, punitive damages with no statutory cap, injunctive relief requiring the lender to change its practices, and attorney’s fees.16Office of the Law Revision Counsel. 42 USC 3613 – Enforcement by Private Persons Because punitive damages are uncapped, FHA cases often produce larger recoveries. If your situation involves a mortgage or other residential loan, filing under the FHA, or under both laws together, is usually the stronger approach.