Lending discrimination: your rights and how to complain

Applying for a loan is stressful, and more so if you feel you are being treated differently because of your accent, your last name or your family. This guide is for anyone who is applying, or already applied, for a loan or mortgage and wants to know what the law bans, what lenders may ask (including about immigration status), what to do if they are turned down and where to complain. It explains what the laws and agencies say; it does not evaluate your case.

For the lender to tell you its decision, from your completed application

30 days⁶

To ask in writing for the reasons for a denial, if you were not given them

60 days⁶

To report discrimination in a home loan to HUD

1 year¹⁰

To sue under the Equal Credit Opportunity Act (ECOA)

5 years²

Which laws protect you

Two federal laws cover discrimination when you apply for credit for your home. The first is the Equal Credit Opportunity Act (ECOA). It bans a creditor from discriminating against you in any part of a credit transaction because of your race, color, religion, national originnational originNational origin is one of the characteristics the Fair Housing Act protects. According to the Department of Justice, national origin discrimination can be based on the country where you were born or where your ancestors came from. The law prohibits refusing to sell or rent you a home, setting different terms or publishing ads that state a preference based on your national origin. According to the CFPB, the Equal Credit Opportunity Act also prohibits lenders from discriminating against you because of your national origin when you apply for credit, such as a mortgage.See the full definitionClose, sex, marital status or age; because all or part of your income comes from a public assistance program; or because you exercised in good faith a right under that law.¹ According to the CFPB, it applies to almost every kind of loan: mortgages, auto loans, credit cards and student loans.¹⁶

The second is the Fair Housing ActFair Housing ActThe Fair Housing Act is the federal law that makes it illegal to refuse to sell or rent a dwelling, or to discriminate in its terms, because of race, color, religion, sex, familial status (having children), national origin or disability. It applies to landlords, real estate agents and managers, and also to banks and lenders when their practices make housing or credit unavailable for those reasons. National origin covers your language and the country you come from, regardless of immigration status. If you believe you were discriminated against, you can file a complaint with HUD at no cost; many states add protections.See the full definitionClose. For residential real estate transactions, such as loans to buy, build, repair or maintain a home, or appraising it, it bans discrimination because of race, color, religion, sex, disability, familial statusfamilial statusFamilial status is one of the characteristics the Fair Housing Act protects. The law defines it as having one or more children under 18 living with a parent, with another person who has legal custody of them or with someone that person designates in writing. It also protects anyone who is pregnant or is in the process of getting custody of a child. So, with some exceptions, such as certain housing for older persons, no one may refuse to rent or sell you a home, or impose special conditions, because you live with children.See the full definitionClose or national origin.⁹ Your state or city laws may protect you on additional grounds.¹⁶

The two laws, side by side

Almost any kind of credit

Equal Credit Opportunity Act (ECOA)

• Race, color, religion, national origin, sex, marital status and age.¹
• Public assistance income, such as Social Security, SSI, unemployment, TANF or SNAP.¹⁶
• Having exercised your credit rights in good faith.¹
• Deadline to sue: 5 years from the violation.²

Home loans and housing services

Fair Housing Act

• Race, color, religion, sex, disability, familial status and national origin.⁹
• Covers home lending, brokering and appraisals.⁹
• Report to HUD within one year.¹⁰
• Deadline to sue: 2 years.¹¹

If the loan is for your home, both may apply: in that case you can go to the CFPB and to HUD.¹⁵

What a lender cannot do

Under Regulation B, which implements ECOA, a creditor may not discriminate against you on a prohibited basis at any step of the credit process. Nor may it discourage you: it cannot say, in an ad or in person, something that would make a reasonable person believe it would deny credit, or grant it on worse terms, for that reason.³ Except as the law allows, it may not consider your race, color, religion, national origin or sex.⁵

The Fair Housing Act and its regulation give concrete examples for home loans. It is illegal, because of a protected basis, to:

• Refuse to give you information about available loans, requirements or the process, or give you wrong information or information different from what others get.¹²
• Discourage you from applying for a loan in a way that discriminates.¹²
• Use different rules to decide whether you deserve credit, or set a different amount, rate, cost or term for you.¹³
• Service your loan in a discriminatory way after you get it.¹³

Regulation B also sets limits on how your income is treated. A lender may not discount or leave out your income, or your spouse’s, because it comes from part-time work or a pension, though it can look at how much it is and whether it will continue. And if you rely on alimony or child support, it must count it as income to the extent it is likely to be paid consistently.⁵

What does discrimination look like? The CFPB lists these red flags: you are treated differently in person than on the phone; you are discouraged from applying; you are offered a higher rate even though you qualify for a lower one; you are denied without being told why or how to find out; or you feel pushed or pressured to sign.¹⁶

What lenders are allowed to ask

Knowing which questions are legal helps you avoid needless worry, and spot when something is wrong.

Your immigration status. Regulation B lets a lender ask about your permanent residency and immigration status, and consider it in its decision.⁴⁵ The CFPB draws the line: a creditor may not discriminate against you based on national origin, and may not use your immigration status to justify discriminating against you based on national origin, race or another protected characteristic.¹⁶ The guide to ITIN mortgages explains which loans exist for people with an ITIN.

Your race, ethnicity and sex, only to monitor the law. In general, a lender may not ask your race, color, religion, national origin or sex.⁴ The most common exception: if you apply for a loan to buy or refinance the home you live in, the lender must ask your ethnicity (for example, “Hispanic or Latino”), race, sex, marital status and age so the federal government can check that no one discriminates. You must be asked, but you are not required to answer; if you do not, the lender records it based on visual observation or surname.⁷

Your public assistance income. You cannot be discriminated against because you receive public assistance; as with any income, the lender can consider whether it will continue.¹⁶ If you worry about how using assistance affects your immigration situation, the guide to rental help and public charge explains what official sources say.

If you are denied: your adverse action notice

When a lender turns you down or offers you less than you asked for, that is called adverse action, and you must be told in writing. That document, the adverse action noticeadverse action noticeAn adverse action notice is the notice you get when a company denies you credit or takes another action against you on your application or account. Under federal law, the lender must give you the main reasons or tell you how to ask for them. If the decision was based on a credit report or another consumer report, the company must also give you the score that was used, the name and contact information of the company that supplied the report, and explain your right to a free copy of that report and to dispute errors. The reporting company did not make the decision and cannot tell you why it was made.See the full definitionClose, is your best tool.

From denial to complaint, step by step

1. 1. You receive the decision

   Within 30 days of your completed application

   A denial must be in writing and name the federal agency that supervises that lender.⁶

2. 2. Check the reasons

   When you get the notice

   They must be specific: “internal policies” or “did not reach the score” are not sufficient reasons.⁶

3. 3. If no reasons were given, ask for them

   Within 60 days of the notice

   The lender must give you the reasons within 30 days of your request.⁶

4. 4. Ask for a copy of the appraisal

   If it was a mortgage

   You must get copies of appraisals with no charge for the copies, even if you were denied.⁸

5. 5. If you think it was discrimination, complain

   As soon as possible

   To the CFPB, to HUD if it was a home loan, or to your state attorney general.¹⁶

Example with real numbers

A denial letter, line by line

An example of phrases you might see and what the rules say about each one.

“You do not meet our internal policies”

Not a sufficient reason: you must get specific reasons.⁶

No reason at all

It must tell you that you can ask within 60 days, and whom to ask.⁶

“Because of your immigration status”

They may consider it, but not as an excuse to discriminate based on national origin.¹⁶

“Your SSI income doesn't count”

They cannot dismiss it for being public assistance; they may check whether it will continue.¹⁶

What to do

Keep the letter and, if you think you were discriminated against, file a complaint.¹⁸

This is a practice example; your real letter may say other things. If the denial was because of your credit report, review that report too.

Run it with your numbersCompare loans

If the denial was because of your credit report, the guide to disputing credit report errors helps you correct it. And comparing offers from several lenders, as explained in how to choose a mortgage lender, helps you see whether you were offered something very different from others.

Language and documents

If Spanish is your language, it helps to know what the rule says so you do not expect something that is not guaranteed. Regulation B allows a lender to give you disclosures in another language, as long as they are available in English on request; it does not require Spanish.³

FHFA, together with Fannie Mae and Freddie Mac, runs a Mortgage Translations clearinghouse with translated documents, education materials and a standardized glossary of mortgage terms in Spanish and other languages. FHFA notes that the material is for information only.¹⁹ Our glossary also explains the terms in plain language.

Most important: the CFPB warns never to sign anything you do not understand.²⁰ Being pressured to sign without an explanation is one of the CFPB’s red flags.¹⁶ A HUD-approved housing counselorHUD-approved housing counselorA HUD-approved housing counselor works at an agency HUD has approved to provide housing counseling: independent, expert advice customized to your situation about buying a home, renting, a missed mortgage payment, a foreclosure or credit problems. The agencies usually charge little or nothing; many serve in Spanish and offer the homebuyer education course several assistance programs require. They are not lenders or real estate agents and sell you nothing. Your county page lists the official agencies with phone numbers.See the full definitionClose can go over the papers with you, often at little or no cost.²¹

How and where to complain

You have several doors, and you can use more than one:

If the problem was…	Where to complain
With any loan or card	The CFPB, online or at 1-855-411-CFPB (2372); also the FTC
With a home loan	HUD (FHEO office), online or at 1-800-669-9777
In your state	Your state attorney general or consumer protection office

The CFPB lists those channels,¹⁶ and HUD lists its own.¹⁴ The Justice Department explains that people who believe they were victims in a loan involving residential property may report to HUD or file their own lawsuit, and that the Department itself may sue when there is a pattern of discrimination.¹⁵

Deadlines. A HUD complaint must be filed no later than one year after what happened, and HUD asks you to report as soon as possible.¹⁰¹⁴ To sue, the Fair Housing Act allows 2 years¹¹ and ECOA, 5 years.² A free legal aid office can tell you whether a lawsuit makes sense in your case; going to court is not required to complain.

What to include. The CFPB asks for the key facts in your own words and supporting documents, such as account statements and communications with the company. You generally cannot submit a second complaint about the same problem, so include everything from the start. Companies generally respond in 15 days.¹⁸ HUD also asks for as much information as possible.¹⁴

Your information. The CFPB keeps complaint information, including your personal information, for 25 years, and shares it with certain state and federal agencies as the law allows.¹⁸ If that worries you because of your situation, you can talk it over first with a legal aid office.

Retaliation. HUD says it is illegal to retaliate against anyone for filing an allegation,¹⁴ and ECOA bars a creditor from discriminating against you because you exercised in good faith a right under that law.¹ For complaints about renting a home, the guide on housing discrimination explains the full process.

Recent rule changes

In practice, documenting what happened to you (dates, names, what was said, the letters) is what makes a clear complaint possible.¹⁸

If this is you

If this is you

You are applying with an ITIN or without permanent residency

You may be asked about your immigration status, but it cannot be used as an excuse to discriminate against you based on national origin.¹⁶

You receive government assistance

You cannot be discriminated against because your income comes from public assistance, such as SSI, unemployment or SNAP.¹⁶

You have children

The Fair Housing Act protects familial status in home lending.⁹

You prefer documents in Spanish

They may be given to you in Spanish if they are also available in English, but it is not required; do not sign what you do not understand.³²⁰

Mistakes that weaken your complaint

• Mistake: Throwing away the denial letter or not asking for the reasons.

  Instead: Keep it and, if it gives no reasons, request them in writing within 60 days.⁶

• Mistake: Waiting months to report to HUD.

  Instead: The deadline to report to HUD is one year, and HUD asks you to report as soon as possible.¹⁰¹⁴

• Mistake: Filing a short complaint and planning to add more later.

  Instead: Include all facts and documents from the start: there is generally no second complaint.¹⁸

• Mistake: Assuming any lender can ask your sex or religion.

  Instead: In general they cannot ask, except for the information used to monitor the law.⁴

• Mistake: Signing documents you do not understand because you are being rushed.

  Instead: The CFPB warns never to sign what you do not understand, and pressure is a red flag.²⁰¹⁶

What to do this week

1. Gather your application, the lender’s letters and notes on every call, with dates and names.¹⁸
2. If you were denied and not given specific reasons, request them in writing.⁶
3. If it was a mortgage, ask for the copy of the appraisal.⁸
4. If you think you were discriminated against, file a complaint with the CFPB and, for a home loan, with HUD before a year passes.¹⁶¹⁰
5. Ask other lenders for written offers to compare.¹³
6. If you want help, talk with a HUD-approved housing counselor or a free legal aid office.²¹