The Bureau requested comment regarding the costs and benefits associated with this provision. Through this proposed change, creditors taking applications for loans subject to 1002.13(a)(1) but not required to submit HMDA data under Regulation C would have the option of either maintaining their current collection practices or transitioning to the revised Regulation C collection practices and the 2016 URLA. The Bureau proposed to add 1002.5(a)(4) to authorize a creditor to obtain information in certain additional specified circumstances other than as described in 1002.5(a)(2). An applicant's age can be requested if it appears that they cannot legally sign a contract. [2] on Consumer Finance Protection Bureau. A purpose of ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract) or other protected characteristics. As discussed above in Part V, the Bureau disagrees with the consumer advocacy group commenter that there would be little burden to Regulation B-only creditors from making the collection of disaggregated race and ethnicity categories mandatory. A creditor may devise its Start Printed Page 45697own disclosure so long as it is substantially similar. 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. Procedures for providing disclosures. has no substantive legal effect. The current Regulation B appendix includes the 2004 URLA as a model form for use in complying with 1002.13. 24. Public Law 111-203, 124 Stat. documents in the last year, 36 3. Finally, the Bureau believes many entities will adopt the 2016 URLA as part of the course of business and thus permit applicants to self-identify using disaggregated race and ethnicity categories. documents in the last year, 37 However, there are certain times when such information can be collected from the applicant. endstream endobj startxref Therefore, the Bureau believes any operational costs from adopting the 2016 URLA are part of the normal course of business and are not a cost of the final rule. 7. Federal Register issue. With the introduction of the 2016 URLA 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 use more easily standard forms for collection of applicant demographic information without identifying at the time of collection which applicants are the primary and first co-applicant. Scope. The Bureau also proposed to revise comment 13(b)-1 to reiterate that when a creditor collects only aggregate ethnicity and race information pursuant to 1002.13(a)(1)(i)(A), the applicant must be offered the option to select more than one racial designation. 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. For the reasons provided below, the Bureau is adopting the revisions to 1002.13(b) concerning the collection of ethnicity and race information on the basis of visual observation or surname as proposed. Section 1002.13(b) through (c) provides instructions on the manner of collection. 2017-20417 Filed 9-29-17; 8:45 am], updated on 11:15 AM on Wednesday, March 1, 2023, updated on 8:45 AM on Wednesday, March 1, 2023. Having considered the comments received and for the reasons discussed above, the Bureau is finalizing 1002.13(a)(1)(i) as proposed. The Bureau continues to believe that the benefits of this alternative are very low. ii. Reg B also helps anyone who is denied credit by requiring lenders to give them an explanation. hbbd``b`>$[A#` , b)@,k $301rY~0 # The consumer and the financial institution (including an account for which an access device has been issued to the consumer, for example); ii. Both the Bureau's consultations with the prudential regulators and its own experience in fair lending enforcement indicate that these data are used. One of these commenters stated that the collection of applicant demographic information is duplicative of Regulation C and that removing this requirement in Regulation B would reduce burden. on The proposed model form substantially mirrors section X in the 2004 URLA and the data collection model form contained in the current Regulation C appendix. *. The Bureau is finalizing this comment as proposed. A consumer advocacy group commenter argued that the Bureau should adopt the alternative of requiring all persons subject to the collection and retention requirement of Regulation B to permit applicants to self-identify using disaggregated race and ethnicity categories. The Bureau has determined that this final rule would not impose any new or revised information collection requirements (recordkeeping, reporting or disclosure requirements) on covered entities or members of the public that would constitute collections of information requiring OMB approval under the PRA. The commenter asserted the resulting data are never used by regulators, while the collection and retention imposes a substantial burden. The Bureau does not believe that consumers will experience any costs or benefits from this provision except to the extent that financial institutions achieve cost savings and pass any such cost savings on to their customers. Start Printed Page 45687Thus, the Bureau concludes that retaining 1002.13 serves the purposes of ECOA to promote the availability of credit to all creditworthy applicants without regard to protected characteristics. 3 (a) Public-utilities credit. A large number of industry commenters supported the proposed amendments to 1002.13(a)(1)(i). Although some entities subject to Regulation B but not Regulation C may choose to voluntarily Start Printed Page 45694begin collecting disaggregated race and ethnicity information, the Bureau believes the most likely reason for this to occur is through adoption of the 2016 URLA, which is not part of the final rule. (b) Securities credit (1) Definition. Yes. Such entities likely serve primarily customers in rural areas. Accordingly, 1002.5(a)(4)(vi) permits a creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant to collect information regarding the ethnicity, race, and sex of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a loan described in paragraphs (a)(4)(i) through (v). Document page views are updated periodically throughout the day and are cumulative counts for this document. It is not an official legal edition of the Federal [17] In practice, the final rule simply makes clear that the existing collection required under revised Regulation C is sufficient for compliance with Regulation B. The creditor need not orally request the monitoring information if it is requested in writing. The Bureau believes that depository institutions and credit unions with $10 billion or less in assets will not be differentially affected by the substantive amendments. Investopedia does not include all offers available in the marketplace. 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. documents in the last year, by the Food and Drug Administration [27] These comments were primarily from small financial institutions. [25] electronic version on GPOs govinfo.gov. %%EOF Federal Reserve. Accounts covered. One commenter noted that Regulation B 1002.12(b)(1) provides a 25-month record retention period for most transactions, but a 12-month period for business credit transactions, and that the Bureau's proposal would create a longer retention period for business credit for which a creditor voluntarily collected applicant demographic information under proposed 1002.5(a)(4). Regulation J. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A. They must tell you the name of the creditor (company or person you owe), the amount you owe and how you can dispute the debt or seek verification of the debt. 3 With respect to the open-end line of credit threshold for HMDA reporting, the Bureau adopted amendments to Regulation C that temporarily increases the open-end line of credit threshold to 500 until January 1, 2020. An industry service provider suggested the Bureau standardize the treatment of co-applicants between 1002.13 and Regulation C. The commenter noted that the two rules imposed different requirements where there are multiple applicants, stating that while 1002.13 requires a financial institution to collect information from any applicant who is a natural person, the revised Regulation C appendix instructs a financial institution to provide applicant demographic information for only the applicant and the first co-applicant listed on the collection form. on [34] The laws that cover collection policies and procedures are mandated by federal and state governments. As discussed below, though, a creditor must comply with the record retention requirements of 1002.12 if it chooses to take advantage of the authorization in 1002.5(a)(4). Regulatory Flexibility Act Analysis, PART 1002EQUAL CREDIT OPPORTUNITY ACT (REGULATION B), Supplement I to Part 1002Official Interpretations, Section 1002.5Rules Concerning Requests for Information, Section 1002.13Information for Monitoring Purposes, https://www.federalregister.gov/d/2017-20417, MODS: Government Publishing Office metadata, https://www.consumerfinance.gov/policy-compliance/guidance/, https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms, http://www.freddiemac.com/singlefamily/guide/, http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf, https://www.fanniemae.com/content/guide/selling/b1/1/01.html;, http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application, https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf, https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf, https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf;, https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf. As proposed, comment 13(a)-8 permitted a creditor to choose on an application-by-application basis whether to collect aggregate information pursuant to 1002.13(a)(1)(i)(A) or disaggregated information pursuant to 1002.13(a)(1)(i)(B). This temporary increase in the open-end threshold will provide time for the Bureau to consider whether to initiate another rulemaking to address the appropriate level for the open-end threshold for data collected beginning January 1, 2020. Instead, the Bureau is providing for two alternative data collection model forms for the purpose of collecting ethnicity and race information. Both ECOA and title X of the Dodd-Frank Act are consumer financial laws. This PDF is Prohibited basis under Regulation B refers to a borrower's race, color, religion, national origin, sex, marital status, or age. When a creditor collects ethnicity and race information pursuant to 1002.13(a)(1)(i)(A), the applicant must be offered the option to select more than one racial designation. The Bureau believes that, absent this change, entities that currently report race and ethnicity data under Regulation C could conclude that they have different obligations under Regulation B and Regulation C once the 2015 HMDA Final Rule goes into effect on January 1, 2018. 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. 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). The Bureau received no comments on proposed comment 13(c)-1, and so is finalizing comment 13(c)-1 as proposed. When a creditor collects ethnicity and race information pursuant to 1002.13(a)(1)(i)(B), the creditor must comply with any restrictions on the collection of an applicant's ethnicity or race on the basis of visual observation or surname set forth in appendix B to 12 CFR part 1003. 45. Credit denial is the rejection of a credit application by a prospective lender, usually due to its assessment that the applicant is not creditworthy. Finally, demographic data retained by Regulation B-only creditors is not reported under Regulation C. Consequently, most oversight and analysis of demographic data retained by Regulation B-only creditors will be done only by regulators, whereas researchers and community groups also conduct analysis of HMDA data reported under Regulation C. The Bureau believes the final rule will not impose any costs on consumers. If the transaction is subject to 1002.13 or the creditor is collecting information pursuant to 1002.5(a)(4), however, the creditor is required to enter and retain the data on personal characteristics in order to comply with the requirements of that section. Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. The Bureau received no comments on its proposal and so is removing the commentary to the Regulation B appendix in this final rule. With some exceptions, Regulation B 1002.5(b) prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person (protected applicant-characteristic information) in connection with a credit transaction. The Enterprises, not the Bureau, mandate the adoption of the 2016 URLA. Section IV. fbS`}R7E_ |.rgxp,gh bWFdd~N2 ]_r'xj`-]JRZPT/]kM;U::. edition of the Federal Register. The Bureau recently adopted amendments to Regulation C that will temporarily increase the threshold for collecting and reporting data on certain loans. Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. For the reasons discussed above, the Bureau is finalizing as proposed the revisions to 1002.13(b) concerning the collection of ethnicity and race information on the basis of visual observation or surname. 2443 0 obj <>/Filter/FlateDecode/ID[<30EF4E5AA22E03459A9EF6E0C2536565><7935FD3A29EF9D43BC143B64EE87FEEF>]/Index[2430 29]/Info 2429 0 R/Length 72/Prev 288071/Root 2431 0 R/Size 2459/Type/XRef/W[1 2 1]>>stream [16] The Bureau Approval Notice provided that, anytime from January 1, 2017 through December 31, 2017, a creditor may, at its option, permit applicants to self-identify using disaggregated ethnic and racial categories as instructed in the revised Regulation C appendix. These include white papers, government data, original reporting, and interviews with industry experts. Document Drafting Handbook The regulation allows a bank to be exempt from having to send an adverse action notice to a small business loan applicant, as defined above, IF AT THE TIME OF APPLICATION, the bank provides certain disclosures to the customer IN A FORM THAT THE CUSTOMER CAN KEEP. 9. Similarly, an industry commenter stated that the collection methods used in Regulation B and Regulation C should match. The current Regulation B appendix includes five model forms, each designated for use in a particular type of consumer credit transaction. 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. The criteria for being a financial institution and reporting transactions under HMDA are different in some ways from the criteria for reporting under the NMLS Mortgage Call Report and reporting transactions under it. These race and ethnicity categories correspond to the Office of Management and Budget (OMB) minimum standards for the classification of Federal data on ethnicity and race. Copies of the original record include carbon copies, photocopies, microfilm or microfiche copies, or copies produced by any other accurate retrieval system, such as documents stored and reproduced by computer. documents in the last year, 822 The final rule will make three substantive changes to Regulation B, along with other clarifications, minor changes, and technical corrections to align the language of Regulation B with Regulation C as amended by the 2015 HMDA Final Rule. 15 U.S.C. 29. 20. Without a corresponding record retention requirement, a creditor might collect but not retain the information, thus preventing the use of the information for these purposes. It outlines the rules that lenders must adhere to when obtaining and processing credit information. These changes will primarily benefit institutions that may be near the loan volume reporting threshold, such that they may be required to report under HMDA and Regulation C in some years and not others, or may be uncertain about their reporting status. 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. These can be useful Thus, even if the Bureau were reconsidering its approach to visual observation or surname collection, which it is not, the Bureau does not believe the evidence submitted by the commenters demonstrate that collection based on visual observation or surname do not serve the purposes of ECOA. Director, Bureau of Consumer Financial Protection. Forms for collecting data. 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