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40 years later: Equal Credit Opportunity Act

Landmark banking legislation gave equal access to women

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When attorney Lynn Schenk married in late 1972, she went to a San Diego branch of the now-defunct Security Pacific Bank with what today would be a simple request: to add her new husband’s name to her long-held checking account.

The bank teller rebuffed Schenk’s request.

The couple didn’t share the same last name, so it couldn’t be legally done, the teller said. Except Schenk — a women’s rights activist who famously helped overturn the men-only policy at downtown San Diego’s Grant Grill — knew the snub was about discrimination and not legalities.

“I said, ‘I’m a lawyer, I know this area of law, and it’s not the law,’” Schenk recalled. “She said, ‘If it’s not the law, then it’s certainly the policy of this bank.”

While women in the late 1960s and early 1970s were increasingly entering professional fields dominated by men, earning their own income and making their own financial decisions, they could still be denied equal access to banking services and credit in their own name.

Schenk knew women who wanted a line of credit to open their own law firms but were unable to get one without a male co-signer.

So Schenk and several colleagues formed their own Women’s Bank in Mission Valley, the first of its kind to be chartered in California and among the first in the nation.

The Women’s Bank specialized in small-business loans, which were granted based on good business plans, regardless of whether the applicant was male or female, Schenk said.

While Schenk and her peers were working locally for greater equality in banking, federal lawmakers were at the same time considering legislation that would change the way issuers made credit-granting decisions.

Credit cards were typically issued only to married women, and then only with a husband's signature.

The Equal Credit Opportunity Act was enacted in 1974, just 40 years ago. The federal law makes it illegal for a creditor to discriminate against an applicant on the basis of sex, marital status, age, race, color, national origin, religion or public assistance benefits.

Creditors bound by the anti-discrimination law include banks, credit unions, retailers, and bank card, loan and finance companies.

The Federal Trade Commission enforces the law.

Creditors can still ask for details about an applicant’s personal background, but they can’t use that information to decide whether to grant credit or when setting the credit terms. Income, expenses, debts and credit history can be used to determine creditworthiness.

Schenk said the big banks soon noticed the value in women’s banks and women’s banking divisions, and the implementation of the Equal Credit Opportunity Act furthered the cause.

“There are two ways to make changes — change the law and the custom will follow, or change the custom and have the law follow,” Schenk said. “In this case, both happened.”

Women’s Bank and others like it were eventually acquired by big banks.

The legacy of those specialized banks continues today with women’s banking divisions, such as the March 2011-created Women’s Banking Group at Torrey Pines Bank. The Women’s Banking Group is led by Teofla Rich, a senior vice president and head of Torrey Pines Bank’s private banking office.

“Research is clear and impressive on the economic influence that women have in both the decisions they make for their family and in the business environment. I’ve been in banking for over 40 years and have seen the increasingly significant role women have played,” Rich said.

The Equal Credit Opportunity Act gave women greater access to credit, more independence and more control of their finances, Rich said.

“The ECOA was a necessary landmark ruling that helped advance the civil rights of all people, including those of women. If all people were treated equitably, laws like ECOA would not be necessary,” Rich said. “As a woman, a consumer and a banker, I am grateful.”

While women are increasingly financially literate, the FTC warns that women are still particularly susceptible to credit-history problems.

Women who change their legal names or whose accounts were reported in their husband’s name only can find themselves with little or no credit history.

Candace Bahr, co-founder and managing partner of Carlsbad-based Bahr Investment Group and co-founder of the San Diego-based nonprofit Women’s Institute for Financial Education, said women are often compelled to become financially literate during a life transition, such as divorce or the death of a spouse.

“It’s a tough time to be learning about money,” Bahr said.

“Women have incredible skills for managing money, but too often they relinquish that role to their husbands,” she said.

The Women’s Institute for Financial Education, or wife.org, has been providing financial education to women for 25 years, including online budgeting tools and weekend workshops at Mira Costa College.

The nonprofit institute even offers free bumper stickers that say simply, “A man is not a financial plan.”

“So many women were not socialized to be involved in their finances,” Bahr said.

Anti-discrimination laws such as the Equal Credit Opportunity Act and evolving social norms have made banking and business more equitable.

“We’ve seen huge changes,” Schenk said. “Sex is no longer a legitimate criterion. Women are in greater numbers in the workforce, we see more women-owned businesses.

“Overt discrimination is a thing of the past.”

— McEntee is a San Diego-based freelance writer.

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