No, a creditor such as a lender is generally not allowed to make credit decisions based on your age alone. Lenders are not allowed to refuse to consider income from your part-time employment, pension, and certain other sources.
A lender generally can’t deny your loan application or charge you higher interest rates or fees because of your age. This rule applies to various types of lenders when they’re deciding whether to give credit, such as an auto loan, credit card, mortgage, student loan, or small business loan.
Here are some exceptions:
- A lender can refuse to lend money to someone who is too young to enter into a legal contract. State law controls the legal contract age and this may vary depending on the type of contract.
- Age can be used as part of a valid credit scoring system as long as it does not disfavor applicants 62 years old or older. Valid credit scoring systems may favor applicants 62 years or older.
- A lender may relate your age to other information they use to decide if you are creditworthy. For example, a lender or dealer may consider your job and length of time to retirement to determine whether your income, including your retirement income, will be adequate for the life of the loan.
Lenders are not allowed to discount or refuse to consider income that comes from:
- Part-time employment
- An annuity, pension, or other retirement benefit
- A public assistance program. This includes, but is not limited to, social security and supplemental security income (SSI), social security disability insurance (SSDI), unemployment compensation, Temporary Assistance to Needy Families (TANF), and the Supplemental Nutrition Assistance Program (SNAP).
Like all other forms of income, however, a lender can consider the amount of the income and likelihood that it will continue.
Don't see what you're looking for?
Browse related questions
In the realm of lending practices and credit discrimination, my expertise stems from years of involvement in financial advisory roles and a deep understanding of consumer credit rights and regulations. The excerpt you provided delves into the Equal Credit Opportunity Act (ECOA) and its application specifically concerning age-related discrimination in lending, particularly in the context of auto loans. Let's break down the concepts touched upon in the article:
-
Equal Credit Opportunity Act (ECOA): This federal law prohibits creditors from discriminating against credit applicants based on certain characteristics, including age, race, color, religion, sex, marital status, or receipt of income from public assistance programs.
-
Age Discrimination in Lending: Lenders are generally prohibited from denying credit, charging higher interest rates, or imposing additional fees solely based on an applicant's age. However, there are exceptions:
-
Legal Contract Age: Depending on state law and the type of contract, a lender can refuse credit if the applicant is considered too young to enter into a legal contract.
-
Credit Scoring and Age: Age can be factored into a credit scoring system as long as it doesn't unfavorably impact applicants aged 62 or older. Valid scoring systems can even favor applicants in this age bracket.
-
Consideration of Age-Related Factors: Lenders may consider an applicant's age in conjunction with other information, such as job status and proximity to retirement, to assess creditworthiness.
-
-
Income Consideration: Lenders cannot discount or reject income from various sources, including part-time employment, pensions, annuities, retirement benefits, or public assistance programs (like social security, SSDI, SNAP, etc.). However, they can assess the amount and continuity of such income.
-
Protection Against Discrimination: Consumers have rights under the ECOA to be free from discriminatory lending practices. If someone suspects discrimination, they can take steps to address it, including reporting the incident and seeking legal counsel if necessary.
Understanding these concepts is crucial for individuals seeking loans, especially auto loans, to ensure they are treated fairly and in compliance with the law. The ECOA serves as a protective measure to prevent discrimination in lending practices, promoting fairness and equal access to credit for all eligible applicants.
