Future Business Leaders of America (FBLA) Business Law Practice Exam

What does the Equal Credit Opportunity Act (ECOA) prohibit?

1. Discrimination in credit applications based on gender, race, or other factors

2. Excessive interest rates on loans

3. Unfair business practices in advertising

4. All forms of bankruptcy

The correct answer is: Discrimination in credit applications based on gender, race, or other factors

The Equal Credit Opportunity Act (ECOA) is designed specifically to address and prohibit discrimination in the lending process. This includes any bias in credit applications based on characteristics such as race, color, religion, national origin, sex, marital status, age, or because you receive public assistance. The primary purpose of the ECOA is to ensure that all individuals have an equal opportunity to obtain credit, promoting fairness and equality in the lending process. While other options touch on important aspects of business law, they do not directly relate to the primary function and intent of the ECOA. For instance, excessive interest rates on loans relate to regulations that protect consumers from predatory lending practices, but they are not the focus of the ECOA. Similarly, unfair business practices in advertising and all forms of bankruptcy address different areas of consumer protection and business regulation, but do not specifically target the issue of discrimination in credit assessments. This focus on equality and nondiscrimination, particularly regarding credit access, reinforces why the first option is the accurate portrayal of what the ECOA prohibits.