The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit. Not everyone who applies for credit gets it or gets the same terms: Factors like income, expenses, debts, and credit history are among the considerations lenders use to determine your creditworthiness.
Section 1002.4—General Rules
Paragraph 4(a).
- Scope of rule. The general rule stated in § 1002.4(a) covers all dealings, without exception, between an applicant and a creditor, whether or not addressed by other provisions of the regulation. Other provisions of the regulation identify specific practices that the Bureau has decided are impermissible because they could result in credit discrimination on a basis prohibited by the Act. The general rule covers, for example, application procedures, criteria used to evaluate creditworthiness, administration of accounts, and treatment of delinquent or slow accounts. Thus, whether or not specifically prohibited elsewhere in the regulation, a credit practice that treats applicants differently on a prohibited basis violates the law because it violates the general rule. Disparate treatment on a prohibited basis is illegal whether or not it results from a conscious intent to discriminate.
The aim of this topic is to discuss the "new" rules set forth by JPMorgan's Chase commercial credit cards in regards to discriminatory credit furnisher practices.
For those of you unaware - the rule says that those with five new credit cards within the past 24-months will not be approved for a new credit card application. Under the law "treating applicants differently on a prohibited basis is unlawful if the creditor lacks a legitimate nondiscriminatory reason for its action, or if the asserted reason is found to be a pretext for discrimination."
Chase will soon apply their famed 5/24 rule to co-branded credit cards as well, starting in early April. We can expect a timeline which will look something like this:
- Currently, once past 5/24, you can not get Freedom, Sapphire, or Slate. You can get all other cards.
- At some point in March, the INK cards will be restricted as well. We can still get personal and business co-branded cards.
- At some point in April, all Chase credit cards will be included in the rule, and those past 5/24 won’t be approved for anything.
Quite recently as a result of the various credit furnisher marketing promotions happening like 25,000 miles upon sign-up, double cashback etc., or 0% balance transfers etc., credit cards are a convenient way for the average consumer to save drastically on everyday, general purchases, of course, taking into account the ability to repay at least 70 per cent or more of his balance. Taking credit can significantly contribute to one's wellbeing, as well as to credit furnishers as per the interests they get. I would rather pay interest on equal or less than 30 per cent of the credit card balance than directly buying the product. This will also contribute to better managing monthly money fluctuations and most importantly, it WOULD NOT prohibit the consumer from buying the product and/or service. Not to mention that the consumer will demonstrate a pattern of responsible behavior to other credit furnishers.
Many stores now offer 'store credit cards' with 0 % financing for 12/24 months as a way to alleviate consumers from cash fluctuations.
Considering the above, it is quite normal for a consumer to have more than 5 credit cards in two years period. If a credit furnisher or a store offers me a good deal and/or promotion while of course having the ability to repay, keep 30 per cent or less utilization (as reflected on one's credit report) why shouldn't I apply for a new credit card? Having more than 5 recent credit cards doesn't necessary mean a pattern of abuse i.e. so called 'churning' or irresponsible behavior.
But then of course comes Chase with unfair consumer practices quite discriminatory, in nature. Think about it for a second.
Here's my case:
720 FICO
No public record
No negative history
No negative items or DEROG
No payments missed
No loans
13 per cent utilization rating
12 credit card accounts opened last 9 months
Total credit line: $5,400
Time since oldest account: 9 months
Average length of accounts: 5 months
EDIT:
What is credit discrimination?
ON THE BASIS OF:
- Race or color
- Religion
- National origin
- Sex or Marital status
- Age (as long as you are old enough to enter into a contract)
- Receipt of income from any public assistance program
- Exercising in good faith your rights under the Consumer Credit Protection Act.https://www.fdic.gov/regulations/laws/rules/6500-200.html
Credit discrimination is illegal. Under the Equal Credit Opportunity Act, a creditor can't discriminate in any credit transaction, including mortgages, against any applicant because of these factors:
- Race
- Color
- Religion
- National origin
- Sex (gender)
- Marital status
- Age, unless the applicant is not legally able to enter into a contract
- Receipt of income from any public assistance program
- Exercising in good faith a right under the Consumer Credit Protection Act (such as disputing information in your credit report)
This means that a creditor may not use any of the above grounds as a reason to:
I am trying to reason that 5/24 policy is unfair simply because the applicant is not aware of the 'probable outcome' e.g. the denial. Wouldn't you be mad if you waste an inquiry on your credit report because of that or simple because of circumstances out of your control? A lot of myFico forum members are currently unhappy, as well as individuals from other third party commercial websites.
Yes you are right: people are getting rejected for credit everyday for various of reasons rational in nature such as 'length of time accounts have been established', not for 'you have x credit cards for (n) period'.
You keep posting about race, age, religion etc all of which has no bearing on the 5/24 rule. Yes, I do. Race, age, religion.. etc., are one of factors e.g. the protected classes of the ECON. The other factor is the exercise of your rights under the Consumer Credit Protection Act (which contains federal consumer credit laws like the Fair Credit Reporting Act) which is applicable for any person.
There is a point on the Consumer Credit Protection Act which stating that 'the Dodd-Frank Act prohibits conduct that constitutes an unfair act or practice. An act or practice is unfair when (2) The injury is not reasonably avoidable by consumers. Therefore making it applicable - now how the language is interpreted is, of course disputed - as of many legal documents..
ECON states that if this is true therefore it is considered discriminatory in nature. While stating that it is discriminatory in nature, it also states that the credit furnisher may had had this policy as to avoid other negative outcomes e.g. NOT TO achieve the seen 'discriminatory' effect. I don't think that Chase discriminates based on protected classes - it would be really irrational to think so. What I am trying to establish is in conjunction to exercise your rights under the Consumer Credit Protection Act under unfair acts or practices. The law says it this way - now it is up to you and possibly the court to determine the proper interpretation of this.
And yet you say: This was created for another purpose so forth and you are constantly arguing that this is not regarded as such. I respect your opinion but you did see that this is getting out of control with the so called 'contributers' that are trolling me. Instead of paying the three credit bureau's seperate subscriptions I was considering getting my reports through here. Now I don't see a value of doing that any more.
Quicksilver $10,000 | Better Balance Rewards $2000 | Sallie Mae $3500 | Freedom $3500