The Bureau requested comment regarding the costs and benefits associated with this provision. Accordingly, the Bureau is finalizing the Regulation B appendix as proposed, without including the 2016 URLA. 3. 80 FR 66128, 66139, and 66169 (Oct. 28, 2015). 12 U.S.C. [34] 20. Public Law 111-203, 124 Stat. Joint guidance on overdraft protection programs. FDIC Consumer Compliance Examination Manual provides information and examination procedures to assist institutions with understanding and complying with fair lending-related requirements. These comments were primarily from small financial institutions. !qZ{r![6|(:9'nG%8}tB\iJ9 DIbsH NB8- The FFIEC call report for banks does not report originations for depository institutions that do not report to HMDA. 29. Redlining is the discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity. Section 1002.13(b) discusses how creditors may obtain applicant information required under 1002.13(a). reg b covers collection procedures More information and documentation can be found in our As noted above, the Bureau believes that consumers could suffer substantial harm if the requirement were removed. Revision of the Standards for the Classification of Federal Data on Race and Ethnicity, 62 FR 58782, 5878-90 (Oct. 30, 1997). The Bureau received one industry comment supporting alignment of the instructions in 1002.13 with the revised Regulation C appendix. Register documents. documents in the last year. ECOA authorizes the Bureau to issue regulations to carry out the purposes of ECOA. 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. If the applicant(s) chooses not to provide the information or any part of it, that fact shall be noted on the form. The RFA defines a small business as a business that meets the size standard developed by the Small Business Administration pursuant to the Small Business Act. documents in the last year, 474 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. Under 1002.13(a)(1), creditors that receive an application for credit primarily for the purchase or refinancing of a dwelling occupied (or to be occupied) by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, must collect certain protected applicant-characteristic information, including specified race and ethnicity categories. 4. Hubungi Kami. The Bureau continues to believe that the benefits of this alternative are very low. In addition to the amendment to Regulation B in the proposal, the Bureau Start Printed Page 45692considered two alternatives to address the differing race and ethnicity requirements of Regulation B and revised Regulation C. The Bureau considered requiring all creditors subject to the collection and retention requirement of Regulation B to permit applicants to self-identify using disaggregated race and ethnicity categories. The rule change therefore will not require Regulation B creditors that are not HMDA reporters (Regulation B-only creditors) to change their 1002.13 compliance practices, but would allow them to adopt voluntarily new practices for collecting applicant information, including practices that would permit such creditors to transition to the 2016 URLA. 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). 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. The commenter argued that the availability of the 2016 URLA would reduce the cost of collecting disaggregated race and ethnicity information, and advocated for a two-year implementation period for mandatory disaggregated collection to further reduce the costs. If you are using public inspection listings for legal research, you Changes to Applicant Information Collection for Regulation B Creditors, C. Changes to Applicant Information Collection for HMDA Reporters, A. The commenters also argued that such collection is often inaccurate, cannot be relied upon for fair lending analysis, and is contrary to the purposes of ECOA. on The consumer advocacy groups stated that mandatory disaggregated collection would ensure uniform data collection practices and facilitate fair lending analysis, including identifying potential discrimination against racial and ethnic subgroups. 1. endstream endobj 2434 0 obj <>stream 03/01/2023, 43 The notice provides that, although the use of the 2016 URLA by creditors is not required under Regulation B, a creditor that uses the 2016 URLA without any modification that would violate 1002.5(b) through (d) acts in compliance with 1002.5(b) through (d). 8. [5] documents in the last year, 24 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 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). Section 1002.5 provides rules concerning requests for information. [35] 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. An application for temporary financing to construct a dwelling is not subject to 1002.13. See Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017); see also Press Release, Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the direction of the FHFA, The Redesigned URLA and ULAD Mapping Document Are Here!, (Aug. 23, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf. Reg. In the case of a conflict between state and federal law, federal law prevails. Similarly, an industry commenter stated that the collection methods used in Regulation B and Regulation C should match. 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. include documents scheduled for later issues, at the request This Regulation has amendments effective January 1, 2019. Regulation B creditors will also be able to collect voluntarily certain information about applicants for certain mortgage loan scenarios as provided for in 1002.5(a)(4). These tools are designed to help you understand the official document [6] Regulation B applies toall persons who, in the ordinary course of business, regularly participate in the credit decision of an applicant or borrower, including setting the terms of the credit. 16. at 43132 (1003.3(c)(11) and (12)). 37. 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. [32] On September 23, 2016, the Bureau issued a notice concerning the collection of expanded information about ethnicity and race in 2017 (Bureau Approval Notice). 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. Reg B also helps anyone who is denied credit by requiring lenders to give them an explanation. It is not an official legal edition of the Federal The regulation requires written applications for the types of credit covered by 1002.13. 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. 7. Commenters expressed concern that the data points added to Regulation C in the 2015 HMDA Final Rule burdened financial institutions and, because of this burden, the commenters encouraged the Bureau to reduce the HMDA data fields to only statutorily required fields. Adverse action is also a negative action that impacts employment. Regulation B covers the actions of a creditor before, during, and after a credit transaction. 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. No commenters provided such data. The Bureau issued the Bureau Approval Notice under its authority in section 706(e) of ECOA on September 23, 2016, which provides that a creditor that uses the 2016 URLA without any modification that would violate 1002.5(b) through (d) would act in compliance with 1002.5(b) through (d). The Bureau is therefore not requiring the collection of disaggregated categories for Regulation B-only creditors. By providing flexibility and reducing burden, the Bureau believes this modification will further the purposes of ECOA by facilitating practices that promote the availability of credit to all creditworthy applicants. Two industry groups suggested that the Bureau remove 1002.13 altogether. If a creditor collects applicant information pursuant to 1002.13(a)(1)(i)(B), the applicant must be offered the option to select more than one ethnicity and more than one racial designation. The current Regulation B appendix includes the 2004 URLA as a model form for use in complying with 1002.13. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU. Regulation B of the Equal Credit Opportunity Act prohibits lenders from using ascribed characteristics of a borrower, such as their age, gender, race, ethnicity, or religion, when making credit or loan decision. Two commenters supported the proposal regarding record retention, noting that it would facilitate Start Printed Page 45686monitoring of fair lending laws and serve ECOA's purposes and that it seemed appropriate given the proposed amendments to 1002.5(a)(4). A creditor that receives an application to refinance an existing extension of credit made by that creditor for the purchase of the applicant's dwelling may request the monitoring information again but is not required to do so if it was obtained in the earlier transaction. If a creditor collects disaggregated race and ethnicity information pursuant to 1002.13(a)(1)(i)(B), proposed 1002.13(b) provided that a creditor must comply with the restrictions on the collection of an applicant's ethnicity and race on the basis of visual observation or surname set forth in the revised Regulation C appendix, which limits such collection to the aggregate race and ethnicity categories. Shaakira Gold-Ramirez, Paralegal Specialist, Kathryn Lazarev, Counsel, or James Wylie, Senior Counsel, Office of Regulations, at 202-435-7700 or https://www.consumerfinance.gov/policy-compliance/guidance/. First, for creditors collecting disaggregated applicant demographic information pursuant to 1002.13(a)(1)(i)(B) and (ii), the Bureau proposed to amend the Regulation B appendix to cross-reference the data collection model form included in the revised Regulation C appendix. 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. 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). [10] (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.) Although the information collected under 1002.13 and Regulation C overlap, in part, as discussed in the 2017 ECOA Proposal, regulators will rely on applicant demographic information collected under 1002.13 to supervise and enforce fair lending laws, including for a substantial number of creditors that will not be required to report under revised Regulation C.36 *. Under 1002.12(b)(1)(i), these records include any information required to be obtained concerning characteristics of credit applicants to monitor compliance with ECOA and Regulation B or other similar law. documents in the last year, 861 The Bureau received several additional comments about topics other than those raised by the Bureau in the 2017 ECOA Proposal. When a creditor receives an application through an unaffiliated loan-shopping service, it does not have to request the monitoring information for purposes of the ECOA or Regulation B. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower. For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. 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. In light of proposed 1002.5(a)(4), the Bureau also proposed to amend 1002.12(b)(1)(i) to require retention of certain protected applicant-characteristic information obtained pursuant to proposed 1002.5(a)(4). Although these entities need not make any changes to their race and ethnicity collection procedures, they may desire to do so in the future by adopting the 2016 URLA. The spouses of rejected married applicants also have the right to this information. To the extent that consumers would benefit from disaggregated race and ethnicity collection, this alternative would provide greater benefits than the Bureau's proposal. Federal Register issue. 03/01/2023, 828 Federal Reserve. 210.2 Definitions.*. Regulation B's prohibition of advertising that would discourage potential applicants from applying for loans is a crucial part of redlining cases. [23] Similarly, because the substance and form of section 7 of the 2016 URLA is substantially similar to the form the Bureau provides as a model form in Regulation C, the 2016 URLA may be used in complying with 1002.13. Other circumstances permitting voluntary collection of applicant demographic information finalized in this rule do not correspond to provisions in Regulation C addressing optional reporting. In contrast, dwelling-secured loans that are not made primarily for a business or commercial purpose are generally required to be reported even if they do not meet the definition of a home purchase, refinancing, or home improvement loan. Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017). 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. If the debt collector does not provide . 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. 210.4 Sending items to Reserve Banks. [16] fbS`}R7E_ |.rgxp,gh bWFdd~N2 ]_r'xj`-]JRZPT/]kM;U::. Some or all of these institutions may also not have been required to report HMDA data. One industry commenter also noted that the 2016 URLA includes a form for the collection of applicant demographic information for additional borrowers and does not necessarily limit the collection to the applicant and the first co-applicant, even though Regulation C requires financial institutions to provide the ethnicity, race and sex information only for the applicant and first co-applicant. More importantly, it gives applicants the chance to correct the creditor's mistakes in evaluating the applicant's creditworthiness. 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]. Until the ACFR grants it official status, the XML The final rule may have some benefits to Regulation B-only creditors, as the current language of Regulation B would not allow these entities to use the 2016 Start Printed Page 45691URLA for the purpose of collecting race and ethnicity data, as the 2016 URLA uses the disaggregated race and ethnicity categories set forth in revised Regulation C and not the specific categories required by current Regulation B. Subpart A--Collection of Checks and Other Items By Federal Reserve Banks. 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. Current 1002.13(a)(1) requires that creditors collect information regarding the applicant's ethnicity and race using two aggregate ethnicity categories (Hispanic or Latino and Not Hispanic or Latino) and five aggregate race categories (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White). You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. The Bureau believes that making collection of disaggregated race and ethnicity an option for all entities covered by Regulation B will pose little or no additional burden on those entities who are not HMDA reporters. 35. 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. Questions regarding ethnicity, race, sex, marital status, and age may be listed, at the creditor's option, on the application form or on a separate form that refers to the application. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. 15 U.S.C. Video and other electronic-application processes. It also provides that the information must be retained pursuant to the requirements of 1002.12. regulatory information on FederalRegister.gov with the objective of Proposed 1002.5(a)(4) provides authorization to collect applicant demographic information, but does not require collection in the circumstances described. If a creditor takes an application through an electronic medium that allows the creditor to see the applicant, the creditor must treat the application as taken in person. 2458 0 obj <>stream [27] The applicant(s) shall be asked but not required to supply the requested information. On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its Web site. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Two industry commenters proposed two alternative voluntary collection authorizations that would replace proposed 1002.5(a)(4). In practice, the final rule simply makes clear that the existing collection required under revised Regulation C is sufficient for compliance with Regulation B. 43. The Bureau believes that these provisions further the purposes of ECOA by easing overall burden on creditors and improving the quality of the data that is used to promote the availability of credit to all creditworthy applicants. [3] 6. However, the Bureau believes it may impose costs on consumers. Section 1061 of the Dodd-Frank Act transferred to the Bureau consumer financial protection functions previously vested in certain other Federal agencies, including the authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law and perform appropriate functions to promulgate and review such rules, Start Printed Page 45684orders, and guidelines. The Bureau believes that, if a creditor voluntarily collects applicant demographic information pursuant to 1002.5(a)(4), the creditor should be required to maintain those records in the same manner as it does for protected applicant-characteristic information it is required to collect. The disclosure to an applicant regarding the monitoring information may be provided in writing. New principal residence. 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf. Before the January 1, 2018, effective date of most provisions of the 2015 HMDA Final Rule, inquiries to collect applicant demographic information using disaggregated ethnic and racial categories are not required by current Regulation C and would not have been allowed under Regulation B 1002.5(a)(2), and therefore creditors would have been prohibited by Regulation B 1002.5(b) from requesting applicants to self-identify using disaggregated ethnic and racial categories before January 1, 2018. edition of the Federal Register. Temporary financing. . For applications subject to 1002.13(a)(1), a creditor may 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) about the ethnicity and race of the applicant. The Bureau received some comments on the topic. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. Yes. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A. The Bureau is finalizing this comment as proposed. 1. Credit denial is the rejection of a credit application by a prospective lender, usually due to its assessment that the applicant is not creditworthy. This appendix contains four model credit application forms, each designated for use in a particular type of consumer credit transaction as indicated by the bracketed caption on each form. Therefore, applications for credit secured by the applicant's principal residence but made primarily for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to the information-collection requirements. Because the Bureau Approval Notice remains in effect for all of 2017, the amendments in this rule are not necessary to permit Regulation B-only creditors or HMDA reporters to collect disaggregated applicant demographic information for applications taken in 2017; they are already permitted to do so by the Bureau Approval Notice for any application for a covered loan under revised Regulation C 1003.2(g) or any application subject to 1002.13 for all of 2017. Proposed 1002.5(a)(4)(i) and (ii) would permit a creditor that is a financial institution under revised Regulation C 1003.2(g) to collect demographic information of an applicant for 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.[31]. Various consumer advocacy groups also opposed proposed comment 13(a)-8, arguing that the instruction could encourage creditors to develop and maintain haphazard, inaccurate, and inconsistent data collection methods. Many of these commenters stated that the proposal would simplify the collection process and reduce regulatory burden by ensuring that creditors are not subject to differing collection requirements under Regulation B and Regulation C. Commenters also expressed the view that the proposal would ease compliance burden because it would provide creditors the flexibility to use the method most suitable for them. See Fannie Mae, Guide Forms, available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (last visited Sept. 6, 2017) (listing all current selling and servicing guide forms); see also Freddie Mac, Forms and Documents, available at http://www.freddiemac.com/singlefamily/guide/ (last visited Sept. 6, 2017) (same). 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. Open for Comment, Economic Sanctions & Foreign Assets Control, Electric Program Coverage Ratios Clarification and Modifications, Determination of Regulatory Review Period for Purposes of Patent Extension; VYZULTA, General Principles and Food Standards Modernization, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, B. The Bureau did not receive any comments on the analysis or data. 2430 0 obj <> endobj This information is discussed below in the section-by-section analysis and subsequent parts of the notice, as applicable. Regulation B implements the Equal Credit Opportunity Act (ECOA)[1] One commenter indicated that the Bureau's proposed effective date for this rule creates concerns that it does not indicate that the collection of disaggregated applicant demographic information is permitted for applications received in 2017 for which final action is taken in 2018. "CFPB Consumer Laws and Regulations ECOA.". Purpose, What Is the Consumer Credit Protection Act (CCPA)? 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. at 43132, 43145 (1003.2(g)(1)(v)(B), (g)(2)(ii)(B), and 1003.3(c)(12)). Reg. Because the Enterprises have not announced a cutover date for the mandatory use of the 2016 URLA, the Bureau is finalizing January 1, 2022, as the effective date for the removal of the 2004 URLA from the Regulation B appendix. The creditor shall then also note on the form, to the extent possible, the ethnicity, race, and sex of the applicant(s) on the basis of visual observation or surname. with the applicable provisions of Regulation B described below. The Enterprises, not the Bureau, mandate the adoption of the 2016 URLA. A large number of industry commenters supported the proposed amendments to 1002.13(a)(1)(i). Redlining has often been used to discriminate against Black Americans. 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. [19] collection, as the CFPB defines by rule, and their service providers . Section 1002.12 provides rules concerning permissible and required record retention. The does reg b cover collection procedures credit Protection Act ( CCPA ) above, the Bureau requested regarding! 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