Investopedia does not include all offers available in the marketplace. documents in the last year, 287 documents in the last year, 522 This will allow the information to be available for monitoring and enforcing compliance with ECOA, Regulation B, and other Federal or State statutes or regulations. ECOA authorizes the Bureau to issue regulations to carry out the purposes of ECOA. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. The Bureau proposed as an effective date for the removal of the 2004 URLA from Regulation B appendix either the cutover date designated by the Enterprises for the mandatory use of the 2016 URLA or January 1, 2022. These regulations may contain but are not limited to such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Bureau are necessary or proper to effectuate the purposes of ECOA, to prevent circumvention or evasion of ECOA, or to facilitate or substantiate compliance with ECOA. [11] Moreover, the commenter did not address the limited usefulness of disaggregated race and ethnicity data from lenders with a very low volume of loan originations. The Bureau received no comments opposing and one comment supporting the proposed amendments and so is finalizing the Regulation B appendix to provide alternative model forms as proposed. 5512, 5581; 15 U.S.C. 2. and services, go to Although it may be true in the particular case of the community bank commenter, the Bureau believes it is not the case that Start Printed Page 45693these data are never used by regulators. As discussed above, on September 23, 2016, the Bureau issued the Bureau Approval Notice, pursuant to section 706(e) of ECOA. documents in the last year, 11 The Bureau proposed to amend 1002.5(a)(4) to authorize creditors to collect such information under certain additional circumstances. The Bureau requested comment on the analysis under the RFA and any relevant data. The Enterprises, not the Bureau, mandate the adoption of the 2016 URLA. For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. The Bureau does not believe that there will be an adverse impact on access to credit resulting from any of the provisions of the final rule. 210.2 Definitions.*. Demographic information collected under Regulation B by those institutions with larger loan volumes may be used in statistical analysis that supports fair lending supervision and enforcement. Relative to current Regulation B following the effective date of the 2015 HMDA Final Rule, the final rule provides clear benefits to entities that will be required to collect and report race and ethnicity data under HMDA. Among other changes, the 2016 URLA includes a Demographic Information section (section 7) that addresses the requirements in revised Regulation C for collecting applicant demographic information, including the requirement that financial institutions permit applicants to self-identify using disaggregated ethnicity and race categories beginning January 1, 2018. Definition, Legality, and Effects, Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B). [27] One industry commenter requested clarification that use of the 2016 URLA complies with Regulation B. In December 2011, the CFPB restated the Federal Trade Commission's implementing regulation at 12 CFR Part 1006 (76 Fed. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A. 10. As noted above, the Bureau believes that consumers could suffer substantial harm if the requirement were removed. Fair Credit Reporting Act (Reg V) FCRA is intended to ensure consumer reports are accurate and used for permissible purposes. the official SGML-based PDF version on govinfo.gov, those relying on it for The requirements of the regulation apply only to an account for which an agreement for EFT services to or from the account has been entered into between: i. Based on the applicant's race, marital status, nationality, gender, age, or religion, Against an applicant whose income comes from a public assistance program, Against an applicant who, in good faith, exercised his or her rights under the, The spouse will be permitted to use the account, The spouse will be contractually liable for the account, The applicant is relying on the spouse's income as a basis for repayment of the credit requested, The applicant resides in a community property state or relies on property located in such a state as a basis for repayment of the credit requested. Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. An applicant's age can be requested if it appears that they cannot legally sign a contract. Regulation B's prohibition of advertising that would discourage potential applicants from applying for loans is a crucial part of redlining cases. at 43132 (1003.3(c)(11) and (12)). In light of the revisions to 1002.13(a)(1)(i), the amendment to the Regulation B appendix to provide two additional model forms, and the fact that the Bureau separately approved use of the 2016 URLA in the Bureau Approval Notice, the Bureau proposed to remove the 2004 URLA as a model form in Regulation B. [18] The commenters proposed that the requirement to collect applicant demographic information on the basis of visual observation or surname should be eliminated or that the Bureau provide additional instructions to aid creditors to identify an applicant's ethnicity and race based on visual observation or surname. The regulation requires written applications for the types of credit covered by 1002.13. [24] Prohibited basis under Regulation B refers to a borrower's race, color, religion, national origin, sex, marital status, or age. Amend 1002.13 by revising paragraph (a)(1)(i) and paragraph (b) to read as follows: (A) For ethnicity, the aggregate categories Hispanic or Latino and not Hispanic or Latino; and, for race, the aggregate categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White; or. The Bureau proposed to amend 1002.12(b)(1)(i) to include within its preservation requirements any information obtained pursuant to 1002.5(a)(4). Information required by Regulation C. Regulation C, 12 CFR part 1003, generally requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to collect and report information about the race, ethnicity, and sex of applicants for certain dwelling-secured loans, including some types of loans not covered by 1002.13. This site displays a prototype of a Web 2.0 version of the daily Even accepting the commenter's premise, however, the Bureau notes again that it believes the additional benefits of this alternative to be quite limited because, among other reasons, many Regulation B-only creditors are likely to eventually collect disaggregated race and ethnicity data through adoption of the 2016 URLA. 1. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. The Bureau proposed that the 2004 URLA be removed on the cutover date the Enterprises designate for use of the 2016 URLA or January 1, 2022, whichever comes first. Answer by David Dickinson: The definition of applicant in Reg B Section 202.2: (e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit.For purposes of Section 202.7(d), the term includes guarantors, sureties, endorsers, and similar parties. Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection, 82 FR 16307 (Apr. Finally, the Bureau is amending Regulation B and the associated commentary to allow creditors to collect ethnicity, race, and sex from mortgage applicants in certain cases where the creditor is not required to report under HMDA and Regulation C. These circumstances include when: (1) A creditor that is a financial institution under revised Regulation C 1003.2(g), originates a closed-end mortgage loan or an open-end line of credit that is an excluded transaction under revised Regulation C 1003.3(c)(11) or 1003.3(c)(12), if it submits HMDA data concerning those applications and loans or if it submitted HMDA data concerning closed-end mortgage loans or open-end lines of credit in any of the preceding five calendar years; (2) a creditor that submitted HMDA data in any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e), if not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (3) a creditor that exceeded an applicable loan volume threshold in the first year of the two-year threshold period provided in Regulation C 1003.2(g), 1003.3(c)(11), or 1003.3(c)(12), collects, in the second year, demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 12 CFR 1003.2(e), if the loan were not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (4) a creditor that is a financial institution under Regulation C 1003.2(g), or that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e) if the loan were not excluded by Regulation C 1003.3(c)(10); and (5) a creditor that collects demographic information of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a second or additional co-applicant for a loan described in amended 1002.5(a)(4)(i) through (v). Note that the language that follows is taken directly from the regulation, which appears in the References portion of this section. Fannie Mae, Form 1003 and Freddie Mac Form 65, Demographic Information Addendum, (Aug. 2016), available at https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf. Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. (In this document, current Regulation C refers to Regulation C prior to January 1, 2018, and revised Regulation C refers to Regulation C as it will be in effect on or after January 1, 2018, as amended by the 2015 HMDA Final Rule.) Two of these circumstances are a requirement for creditors to collect and retain certain information about applicants for certain dwelling-secured loans under Regulation B 1002.13 and the similar applicant information that financial institutions are required to collect and report under Regulation C, 12 CFR part 1003, which implements the Home Mortgage Disclosure Act (HMDA). Indeed, given that Regulation C requires collection of certain applicant demographic information on the basis of visual observation or surname, adopting either proposal would undermine the purpose of this rulemaking by imposing different requirements in Regulation B and Regulation C.[37] Commentary to the Regulation B appendix includes a discussion of two forms created by the Enterprises that are no longer in use: A 1992 version of the URLA and a 1986 home-improvement and energy loan application form. During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in the revised Regulation C appendix shall be deemed to be in compliance with Regulation B 1002.13(a)(i). Current comment 13(c)-1 provides, among other information, that the Regulation B appendix contains a sample disclosure. One industry commenter supporting the proposal stated that mandating disaggregated collection for all creditors would be unduly burdensome. A Rule by the Consumer Financial Protection Bureau on 10/02/2017. Although the loan volumes of most of these institutions would be too sparse for statistical analysis, the ability to conduct comparative file reviews using data retained under Regulation B has some benefit. Regulation B 1002.5(a)(4)(i) and (ii) as finalized in this rule correspond to those provisions in revised Regulation C and permit the collection of applicant demographic information necessary to facilitate that optional reporting. It outlines the rules that lenders must adhere to when obtaining and processing credit information. 2. The commenter noted that the Bureau Approval Notice applied to all applications taken in 2017 and suggested that the proposed effective date for this rule sends a mixed message. Marital status is also required if the applicant resides in a community property state. rendition of the daily Federal Register on FederalRegister.gov does not Ax$({MeQR.5V>+FrJLv_Y-+1aeJ|omxoVEEw]=QM*?^y[IrOz$;l:&=EMXz${xpIg Id. 1376, 2083-84 (2010). Adverse action is also a negative action that impacts employment. iii. The Bureau believes that permitting collection of applicant demographic information in this narrowly tailored circumstance may be beneficial for some financial institutions because it would allow them to collect applicant demographic information early in the collection process, when they have determined that the loan would be dwelling secured and primarily for a business or commercial purpose but may not yet have determined whether it meets the definition of a home purchase loan, refinancing, or home improvement loan under revised Regulation C. Collection of applicant demographic information at that point in the application process may allow for more consistent collection and may be easier to integrate into the application process when compared with collection after HMDA coverage has been determined. It is not required to store the complete written application, nor is it required to enter the remaining items of information into the system. regulatory information on FederalRegister.gov with the objective of Register, and does not replace the official print version or the official The Bureau believes that most creditors will voluntarily adopt a consistent collection method because uniform practices are generally easier and less costly for creditors to implement. The Bureau is not adopting any of the alternatives suggested by commenters. Overdraft payment programs and consumer protection. Examination Procedures All lenders are required to comply with Regulation B when extending credit to borrowers under the Equal Credit Opportunity Act (ECOA), which is regulated and enforced by the Consumer Financial Protection Bureau (CFPB). Second, many Regulation B-only creditors will be exempt from reporting under revised Regulation C because they originate fewer than 25 closed-end mortgage loans in each of the two preceding calendar years, which means both that few consumers would be affected and any disaggregated data would likely be too sparse for statistical analysis. Under the PRA, the Bureau may not conduct or sponsor and, notwithstanding any other provision of law, a person is not required to respond to an information collection unless the information collection displays a valid control number assigned by OMB. The consumer advocacy groups further expressed the view that mandatory disaggregated collection would prepare lenders to submit HMDA data in the future should they cross a reporting threshold and that the burden of mandatory disaggregated collection would not be significant because the 2016 URLA makes it easy to record these categories. =+f=?z)0p0+~#zSsTib5MuC={0z7&8J8],?8A eMa`?P2EDJaq{%c One industry commenter proposed permitting collection for dwelling-secured loans made primarily for a business or commercial purpose that might be covered loans, regardless of whether or not they are for the purpose of home purchase, refinancing, or home improvement and therefore reportable under revised Regulation C. Under revised Regulation C, dwelling-secured loans made primarily for a business or commercial purpose are only required to be reported if they meet the definition of a home purchase, refinancing, or home improvement loan. The Bureau declines to consider the proposals to eliminate altogether the requirement to collect applicant demographic information on the basis of visual observation or surname in 1002.13 or to provide further instructions on how to collect such information as both proposals go beyond the issues on which the Bureau solicited comment. All forms contained in this appendix are models; their use by creditors is optional. Regulation B also includes certain optional model forms for use in complying with certain Regulation B requirements, including a model form for complying with 1002.13 that is a 2004 version of the Uniform Residential Loan Application (URLA) issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). Revised Regulation C 1003.2(g)(1)(v) and 1003.2(g)(2)(ii) also introduces an exclusion from the definition of financial institution, from which the duty to report HMDA data flows, for entities that, among other criteria, originated fewer than 25 closed-end mortgage loans or fewer than 100 open-end lines of credit in either of the two preceding calendar years. Federal Reserve. british citizenship by marriage living abroad. 2. 1. Even for institutions with very small volumes of originations that may not be subject to HMDA reporting because they do not meet an applicable loan volume threshold, the retained information may be useful for comparative file reviews. (vi) A creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant may collect information regarding the ethnicity, race, and sex of a second or additional co-applicant for a covered loan under 12 CFR 1003.2(e) or for a second or additional co-applicant for a loan described in paragraphs (a)(4)(i) through (v) of this section. The Bureau acknowledges that the preamble to the proposed rule stated that 1002.12(b)(1) required retention of certain records for 25 months and did not acknowledge the different 12 month period for business credit provided for in 1002.12(b)(1). Proposed 1002.5(a)(4) provides authorization to collect applicant demographic information, but does not require collection in the circumstances described. To address these issues, the Bureau issued a proposal on March 24, 2017, which was published in the Federal Register on April 4, 2017 (the 2017 ECOA Proposal).[7]. A creditor that accepts an application by telephone or mail must request the monitoring information. The Bureau will finalize as proposed the revisions to 1002.13(b) concerning the collection of an applicant's ethnicity and race information on the basis of visual observation or surname. The permitted collection may also alleviate concerns about violating 1002.5(b) if a financial institution collects applicant demographic information for a particular dwelling-secured loan made primarily for a business or commercial purpose, based on the financial institution's belief that it is a home purchase loan, a refinancing, or a home improvement loan, but the financial institution later discovers that this belief was mistaken, and therefore collection of applicant demographic information was not required under Regulation C. The Bureau is adopting 1002.5(a)(4)(v) to address the commenter's suggestion. The Bureau believes that such guidance would add complexity and compliance burden on creditors without furthering the purposes of ECOA, and so declines to do so as part of this rulemaking. 03/01/2023, 159 The authority citation for part 1002 continues to read as follows: Authority: 3 (a) Public-utilities credit. corresponding official PDF file on govinfo.gov. The Bureau also believes that permitting creditors to collect certain protected applicant-characteristic information in these circumstances provides a narrow exception to the general limitations in 1002.5(b) through (d) respects the purposes of those prohibitions. Amend 1002.5 by adding paragraph (a)(4) to read as follows: (4) Other permissible collection of information. However, if a person buys or builds a new dwelling that will become that person's principal residence within a year or upon completion of construction, the new dwelling is considered the principal residence for purposes of 1002.13. The Equal Credit Opportunity Act (ECOA) is a federal civil rights law that forbids lenders to deny credit to an applicant based on any factor unrelated to the person's ability to repay. For data collected in or after 2018, the 2015 HMDA Final Rule amends the requirement for collection and reporting of applicant demographic information. The requirement to collect, in certain circumstances, applicant demographic information on the basis of visual observation or surname where the applicant does not provide this information has been a longstanding requirement of 1002.13(b). The Bureau believes this practice of acknowledging future versions of the URLA via a Bureau Approval Notice rather than a revision to Regulation B will reduce the risk that the model form included in Regulation B will become outdated in the future. These scenarios Start Printed Page 45681generally involve types of loans subject to Regulation C where a creditor voluntarily reports information under Regulation C, reported such information in the past five years, or may report such information in the near future. 1691 et seq. Paragraph 13(b)Obtaining of information is revised. The Bureau of Consumer Financial Protection (Bureau) is issuing a final rule that amends Regulation B to permit creditors additional flexibility in complying with Regulation B in order to facilitate compliance with Regulation C, adds certain model forms and removes others from Regulation B, and makes various other amendments to Regulation B and its commentary to facilitate the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants. Register (ACFR) issues a regulation granting it official legal status. Commenters also noted that it would facilitate use of the 2016 URLA. In the Bureau Approval Notice, the Bureau determined that, while a creditor is not required to use the 2016 URLA, a creditor that uses the form without any modification that would violate 1002.5(b) through (d) would act in compliance with 1002.5(b) through (d). Two industry commenters, while supportive of the flexibility provided in the 2017 ECOA Proposal, sought clarification on how aggregate and disaggregated data will be evaluated against one another, including how aggregate information collected under Regulation B would be compared to disaggregated information collected under revised Regulation C. The commenters expressed concern that the optionality could result in dissimilar demographic reporting and potentially greater compliance burden for creditors who choose to continue to collect aggregate information. (b) Obtaining information. Subpart A--Collection of Checks and Other Items By Federal Reserve Banks. Commenters noted that the five-year timeframe for 1002.5(a)(4)(i), (ii), and (iii) was realistic and would provide enough time to allow institutions to keep their systems updated, but not so long that it would be unlikely the institution would become a HMDA reporter again. While use of the model forms is optional, if a creditor uses the appropriate model form, or modifies a form in accordance with the instructions provided in the Regulation B appendix, that creditor is deemed to be acting in compliance with 1002.5(b) through (d).[38]. The regulation only addresses the procedures for state application for exemption from the provisions of the Act. In addition, comment appendix B-2 provides that the home-improvement and energy loan application form prepared by the Enterprises, dated October 1986, complies with the requirements of Regulation B for some creditors but not others, depending on whether the creditor is governed by 1002.13(a) or subject to a substitute monitoring program under 1002.13(d). The spouses of rejected married applicants also have the right to this information. As discussed below in the section-by-section analysis for 1002.13, the Bureau is amending 1002.13(b) to permit, but not require, creditors to collect the information set forth in 1002.13(a) from a second or additional co-applicant. Financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years will not be required to begin collecting such data until January 1, 2020. The Bureau continues to believe that the benefits of this alternative are very low. for fair lending practices. For class actions, the creditor could face a penalty of $500,000 or 1% of the creditors net worth, whichever is lower. Institutions subject to Regulation B but not Regulation C include, for example, institutions that do not have a branch or home office in a Metropolitan Statistical Area (MSA), do not meet an applicable asset threshold, or do not meet an applicable loan volume threshold. More importantly, it gives applicants the chance to correct the creditor's mistakes in evaluating the applicant's creditworthiness. No commenters provided such data. The Bureau received no comments on its proposal and so is removing the commentary to the Regulation B appendix in this final rule. Regulation B covers the actions of a creditor before, during, and after a credit transaction. The second substantive change will remove the outdated 2004 URLA as a model form. [41] Under Section 1002.5Rules concerning requests for information: b. Appendix B to 12 CFR part 1003 provides a data collection model form for collecting information concerning an applicant's ethnicity, race, and sex that complies with the requirements of 1002.13 (a) (1) (i) (B) and (ii). Computerized decisions. More information and documentation can be found in our The Bureau received no comments on the proposal to remove the 2004 URLA or the timing of the removal and so is finalizing removal of the 2004 URLA as proposed. It gives applicants the chance to correct the creditor 's mistakes in the. 16307 ( Apr prohibition of advertising that would discourage potential applicants from applying for loans is does reg b cover collection procedures crucial of! Can be requested if it appears that they can not legally sign a contract actions of a creditor before during! Is intended to ensure consumer reports are accurate and used for permissible purposes their... 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