What must lenders do under ECOA if they decline a loan application?

Under the Equal Credit Opportunity Act (ECOA), lenders are required to notify applicants of the denial of their loan application within a specified timeframe. When a loan application is declined, ECOA mandates that lenders inform the applicants of the adverse action, typically within 30 days after the decision is made. This requirement aims to promote transparency in the lending process and ensure that applicants are aware of the status of their application, as well as their rights to seek clarification on the decision.

The requirement is an important component of ECOA, which is designed to protect consumers from discrimination and to uphold fair lending practices. By notifying applicants of the denial, lenders allow individuals to understand their creditworthiness, and they can also take the necessary steps to improve their financial standing or challenge any inaccuracies that may have led to the denial.