Final answer:
The Equal Credit Opportunity Act (ECOA) of 1974 prohibits lenders from discriminating against loan applicants whose income comes from public assistance. It ensures fair treatment regardless of various personal characteristics. The Federal Reserve ensures banks comply with this and other consumer protection laws.
Step-by-step explanation:
The law that prohibits a lender from discriminating against a loan applicant because his or her income is from public assistance is the Equal Credit Opportunity Act (ECOA) of 1974. This legislation was enacted to ensure that all consumers have an equal chance to obtain credit and specifically outlaws discrimination based on various factors, including income source.
The ECOA makes it illegal for creditors to discriminate against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because all or part of an applicant's income derives from any public assistance program.
Additionally, the Federal Reserve (the Fed) has a role in ensuring that banks comply with various consumer protection laws, including the ECOA, and it requires banks to disclose detailed information about the housing loans they make.
These disclosures include how loans are distributed geographically, as well as by sex and race of the loan applicants, emphasizing transparency and fair lending practices.