Which of the following applicant characteristics is legally permitted to be considered in evaluating credit risk?

Which of the following applicant characteristics is legally permitted to be considered in evaluating credit risk?
A . Whether the applicant seems likely to have children
B . Whether the applicant has a phone number listing in their name
C . Whether the applicant’s age makes them ineligible for credit-related insurance
D . Whether the alimony payments the applicant relies on for income are likely to continue and to be consistently made

View Answer

Answer: D

Explanation:

When evaluating credit risk, lenders are legally permitted to consider whether alimony payments that the applicant relies on for income are likely to continue and be consistently made. Lenders need to assess the reliability of income sources, and documented alimony that is expected to continue is a valid consideration under ECOA (Equal Credit Opportunity Act) guidelines.

Factors like the applicant’s likelihood of having children (A), phone listing (B), and age (C) are not permissible criteria for evaluating creditworthiness under ECOA, as these would constitute discrimination.

References:

Equal Credit Opportunity Act (ECOA), 15 U.S.C. §1691

CFPB ECOA Guidelines