Which act requires lenders to judge loan applicants on the basis of credit?

• A. Truth in Lending Act
• B. Real Estate Settlement Procedures Act
• C. Equal Credit Opportunity Act
• D. Fair Housing Act

Answer: (C)

This question tests the principle that lenders must judge loan applicants based on creditworthiness rather than personal characteristics. The Equal Credit Opportunity Act prohibits discrimination in lending on protected traits such as race, color, religion, national origin, sex, marital status, age, or reliance on public assistance. It requires lenders to evaluate applicants using objective credit factors—like credit history, income, debts, and other financial information—so decisions are based on the ability to repay, not on non-financial characteristics.

Disclosures and settlement processes are the focus of the Truth in Lending Act and the Real Estate Settlement Procedures Act, which deal with providing clear information about loan terms and closing costs, not with how decisions are made. The Fair Housing Act bans discrimination in housing-related activities more broadly, but ECOA is the specific rule that governs how lenders evaluate credit applications.