This content was published prior to the combination of Dentons Sirote. Learn more about Dentons Sirote. 

The Equal Credit Opportunity Act (ECOA) is the foremost body of federal law protecting fair access to credit.  This law governs the kinds of questions and information that creditors may pose and take into consideration in evaluating a consumer’s creditworthiness.  The purpose of the law is to promote the availability of credit to all creditworthy applicants without regard to impermissible characteristics—race, color, religion, national origin, sex, marital status, or age (provided the applicant has the legal capacity to contract), to the fact that all or part of the applicant’s income derives from a public assistance program, or to the fact that an applicant has in good faith exercised any right under the Consumer Credit Protection Act.  

Does this mean, though, that a creditor cannot turn a credit applicant down because of the fact that the applicant’s public assistance income is too low?  Most assuredly, the answer is no!  

While the fact of public assistance income by itself cannot be a negative determiner of creditworthiness, the paucity of the amount of such income may be considered in the creditworthiness evaluation.  

Regulation B to the ECOA includes a sample notice of action taken and statement of reasons for that action. Among the principal reasons for credit denial, termination or other adverse action is “income insufficient for amount of credit requested.”  And, source of income is not a moderating factor.

So, when evaluating the creditworthiness of applicants, the source of an applicant’s income is irrelevant.  However, the amount and temporary or irregular nature of that income may be considered.  

This point comes to mind during these uncertain times when the continuation of COVID pandemic unemployment benefits remains in question.