Which act requires lenders to provide reasons for rejecting loan applications?

The correct answer is the Equal Credit Opportunity Act of 1974. This act specifically mandates that lenders provide borrowers with a written explanation when a loan application is denied. The purpose of this requirement is to ensure transparency in the lending process and to protect consumers from discrimination based on race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

By requiring lenders to disclose the reasons for rejecting a loan application, the Equal Credit Opportunity Act helps to promote fair lending practices. This means that if an individual applies for credit and is turned down, they have the right to understand why this decision was made. This approach not only empowers borrowers but also helps to discourage discriminatory practices in lending.

The other acts mentioned have different focuses: the Truth in Lending Act aims to ensure that all costs associated with borrowing are communicated clearly to borrowers, the Fair Housing Act prohibits discrimination in housing and related transactions, and the Home Mortgage Disclosure Act requires lenders to report data about mortgage applications to ensure compliance with anti-discrimination laws. While all these acts serve to promote fair practices in their respective areas, it is the Equal Credit Opportunity Act of 1974 that addresses the need for transparency specifically in loan denial situations.