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Credit Analysis in New Environment

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By Doug Fox, CCE and Scott Blakeley, Esq.
Reprinted by permission from Trade Vendor Quarterly Blakeley & Blakeley LLP

1. Denying Credit in the New Environment

Some industries, such as certain airlines, have discussed racial profiling as necessary to ensure passenger safety. Can such profiling carry over to credit analysis of commercial credit?

The Equal Credit Opportunity Act (ECOA) was enacted by Congress in 1989, and the Federal Reserve Board issued Regulation B to implement ECOA in 1990. ECOA is a federal statute that prohibits credit grantors from discriminating in the granting of credit based on a prohibited basis, including race, color, religion, national origin, gender, marital status or age (collectively referred to under the regulations governing ECOA as the "Prohibited Basis"). ECOA is intended to promote the availability of credit without regard to characteristics that have nothing to do with creditworthiness. Creditors are required to notify applicants of action taken on their applications, and to retain records of credit applications.

There is no federal legislation or authority that allows a credit professional to ignore ECOA because of the Sept. 11 events.

2. Privacy Rights in the New Environment

With the arrival of the Internet and sharing of a customer's financial information electronically, a customer's privacy rights to financial information has been at the forefront of legislation passed by the U.S. Congress and state legislatures. The Federal Trade Commission, the federal agency that regulates federal privacy legislation, has been active in interpreting this legislation and has been concerned with the unauthorized release of private credit information to third parties, including the dramatic rise of the crime identity theft. Courts, including bankruptcy courts, have wrestled with the breadth of a customer's privacy rights and duties owed to customers.

However, since Sept. 11, the U.S. Congress and the President have focused on terrorism legislation that will significant impact consumer privacy. The FTC has suspended pending privacy legislation. Federal legislation is anticipated that will require national identity cards, imbedded with chips, that will enable tracking an individual for terrorism activity. The anti-terrorism legislation reflects a change in concern over privacy rights, wherein individuals are willing to sacrifice privacy for safety.

Douglas G Fox, GSCFM, CCE is a member of Mid-Atlantic NACM and is active in the Greater Delaware Valley Region and Philadelphia area.

Scott E. Blakeley is a principal of Blakeley & Blakeley LLP where he practices creditors' rights and bankruptcy law. He can be reached at

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