THE EQUAL CREDIT OPPORTUNITY ACT OF 1974: A COST/BENEFIT ANALYSIS

Abstract

THE EQUAL CREDIT OPPORTUNITY ACT of 1974 (Titles V & VII of Public Law 93-495) was signed into law by President Ford on October 28, 1974 [16]. Rulemaking authority under the Act was assigned the Board of Governors of the Federal Reserve System, and the Board was given one year complete the assignment. On October 16, 1975, the Board published the final version (two previous versions had been published for comment on April 22 and September 5) of its Regulation B, Credit [4]. The purpose of the Act is to require that financial institutions and other firms engaged in the extension of credit make that credit equally available all creditworthy customers without regard sex or marital status ([16], Section 502). Surely, this purpose represents a social equity which all persons support. The following discussion is intended analyze the benefits and costs society from the implementation of the Act. No criticism of the purpose of the Act is intended or implied. The analysis does not cover the changes the Act embodied in the Equal Credit Opportunity Act Amendments of 1976 (Public Law 94-239), since the Board published final regulations implementing that Act on December 29, 1976, and they did not become effective until March 23, 1977 [5] and [17]. The public record on the issue of the availability of credit women, which led the Act, goes back hearings held by the National Commission on Consumer Finance on May 22-23, 1972. The Commission heard a great deal of what it characterized as anecdotal evidence which its report summarized as follows: