Final answer:
Under the Equal Credit Opportunity Act, lenders may not consider the age of a borrower when making a lending decision. Instead, they can consider creditworthiness, the ability to make payments, and the amount of income, which directly relate to the borrower's financial situation and ability to repay the loan.
Step-by-step explanation:
Under the Equal Credit Opportunity Act (ECOA), lenders are prohibited from using certain personal characteristics when deciding whether to grant credit to a borrower. This includes factors such as gender, race, ethnicity, and in some circumstances, age. When evaluating a loan application, a lender may not consider the age of the borrower (C), as it is against the law to discriminate based on age in these circumstances.
Lenders are, however, allowed to consider factors that directly relate to a borrower's finances and ability to repay a loan. This includes the borrower's creditworthiness (A), which involves assessing past credit behavior through credit history and scores. Additionally, lenders evaluate the borrower's ability to make the payments (B), usually through determining the debt-to-income ratio, and the amount of the borrower's income (D), as this indicates whether the borrower has the financial means to meet the monthly loan obligations.
The ECOA's goal is to ensure that all consumers have a fair opportunity to obtain credit without discrimination on prohibited bases. It ensures lenders make their decisions based on factual financial data, and not on discriminatory factors.