Facts for Business from the Federal Trade Commission

Getting Business Credit -- October 1993

As a business owner, or a person planning to start a business, 
you may need to borrow money to get started or to help your 
business develop or expand.  If so, you should know about a law 
that protects you against illegal discrimination in business 
credit.

The Equal Credit Opportunity Act (ECOA) prohibits creditors from 
discriminating on the basis of certain factors unrelated to 
creditworthiness.  This law also permits you to find out why your 
application was denied and to sue creditors who discriminate 
illegally.  Here is a summary of what the law provides:

l  Credit cannot be denied on the basis of sex, marital status, 
race, age, national origin, or religion.  This applies to you and 
to the people you deal with.  For example, if you request a loan 
for a store in an ethnic or minority neighborhood, creditors 
cannot deny your application based on your race or the race of 
your customers.

l  If your application for business credit is rejected, you can 
find out why by making a written request for the reasons within 
30 days after you are denied credit.  The creditor must give you 
the specific reasons in writing within 30 days after you ask.  If 
you do not agree with the reasons, discuss your concerns with the 
lender.  Complaints frequently can be resolved at this level.

l  If your business is small (less than $1 million in gross  
revenues), the lender must keep records of your credit 
application for a year after telling you of the credit decision. 

 If your business is larger, the lender must keep your records 
for only 60 days after a credit denial, and if you do not request 
reasons within 60 days, the creditor may destroy your records.  
However, if you request that records be kept longer, or ask for a 
written statement of the reasons for denial, the lender will 
maintain records relating to your application for one year.  
These records are important for any future legal action you may 
consider against a lender.

If you believe your rights have been violated, you may wish to 
seek legal advice.  You have the right to sue a creditor who 
violates the ECOA.  If your complaint is about a governmental 
lender, public utility company, small loan and finance company, 
travel and expense credit card company, or other non-bank 
creditor, you may also wish to contact the Federal Trade 
Commission.  Although the FTC cannot help you resolve your 
individual dispute, it may be able to provide you with some 
useful information and to take enforcement action against the 
company if it is warranted.  Write to: Correspondence Branch, 
Federal Trade Commission, Washington, DC 20580. 

To obtain a free copy of our Best Sellers _ a complete listing of 
all consumer and business publications from the FTC _ contact: 
Public Reference, Federal Trade Commission, Washington, D.C. 
20580; (202) 326-2222.
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