A woman trying to borrow money for her personal needs has better legal protection against sex discrimination than a woman seeking funds for a business she owns. A push is now under way in Congress to change that anomaly.

The distinction stems from the rules issued by the Federal Reserve Board to implement the 11-year-old Equal Credit Opportunity Act, a law that is supposed to ban bias from the credit markets. Although the statute applies to both personal and commercial credit, Federal Reserve regulations state that in the case of business borrowing, a bank:

Can ask if the applicant is married or single.

Need not give unsuccessful applicants a written explanation of why they were turned down for a loan.

Does not have to keep records on how it evaluated applications.

"Exempting business credit transactions from the requirements of the act hampers the ability of enforcement agencies and women entrepreneurs to detect illegal discrimination, eliminates incentives for financial institutions to monitor their own practices, and makes it impossible for public-policy makers to know whether they need to address discriminatory practices or other types of barriers to full access to credit," complains lawyer Hope Eastman of the National Association of Women Business Owners.

And Jeanne Atkins, staff lawyer for the Women's Equity Action League, agrees. "There is no basis for retaining this distinction, which condones a disparate treatment having a particular impact on women seeking to establish small businesses," she told the Fed. The law still bans bias in the processing of loan applications. But with the disparate treatment allowed in handling business borrowers, it is easier for subtle prejudice to creep in when there are fewer limits to what the loan officer can ask -- and fewer records to double-check how applications were handled.

At one time, it looked as though the Fed would put the credit opportunity regulations for personal and business borrowing on an equal footing. In 1978, the agency proposed a rule change that would have dropped the distinctions, but it later reversed itself and voted to keep things as they were. A rewrite of the entire ECOA regulation is now out for public comment, but the three points that rankle women activists have not been changed. Fed staffers say that banks objected so strongly to the recommended changes -- saying the proposals would increase lending costs by requiring more record keeping and changes in application forms -- that it just was not considered worth the fight to push the amendments through.

That battle now will be fought in Congress. Reps. Parren Mitchell (D-Md.) and Lindy Boggs (D-La.) have introduced a bill that goads the Fed into changing its regulations. They promise, in a letter to fellow House members soliciting cosponsors, that the measure "will bring fairness and equity to the current discriminatory climate, which entraps and strangles the prospects of women and minorities in the business world."

The loopholes for commercial credit can continue, their proposal says, but only under conditions that the Fed is not likely to be able to meet. The Fed would have to hold formal hearings and find that closing the loopholes would not help promote equal credit opportunities.

The Small Business Administration notes that even under the Fed regulations, a lender may not discriminate against women because of their sex or marital status. The problem is that the loopholes make it hard to enforce that protection. On the one hand, without a written notice of why she was turned down, a woman can't go to court to protest the denial of credit. On the other hand, the SBA pointed out to the Fed, requiring a written notice "forces creditors to concentrate on sound business reasons for not extending credit" -- in other words, to clean up their own act, to ferret out bias that may be at work in subjective decision-making.

Women's rights activists are convinced that such bias is a major impediment to women business owners' finding startup and expansion money. And they say that allowing lenders to ask about their marital status -- a provision the SBA finds harmless -- gives them additional reasons to reject loan applications from female borrowers.

Both married and single women say their marital status has caused them trouble in borrowing.

"Whichever you are, it's usually used against you," says Susan Hager, owner of a public relations firm. "I think it's an excuse in many situations. They just don't think of the woman as an individual business owner." Women who are single face skepticism that they will stick with a business if they get married. But women who are married are routinely asked to bring in their husbands to sign the loan agreement -- even when the husbands have no role at all in the businesses.