What does the Equal Credit Opportunity Act (ECOA) protect against?

The Equal Credit Opportunity Act (ECOA) is designed to prevent discrimination in credit transactions. It specifically ensures that all individuals have equal access to credit regardless of certain protected characteristics, which include race, color, religion, national origin, sex, marital status, or age. By protecting against discrimination based on these factors, the ECOA seeks to promote fairness and prevent bias in lending practices.

This emphasis on prohibiting discrimination means that lenders cannot refuse credit or offer less favorable terms based solely on a borrower's characteristics tied to these protected categories. Consequently, this allows for a more equitable lending process, promoting diversity and inclusion in access to credit.

In contrast, the other options do not align with the core purpose of the ECOA. Denying credit based on reasonable business reasons, loan approvals solely based on income, and promoting higher interest rates for certain demographics could potentially be seen as justifiable credit policies or practices that do not necessarily involve discrimination against the protected classes outlined in the ECOA. Therefore, the correct answer encapsulates the act’s fundamental goal of fostering equality in credit access.