Section 1002.13 applies only to applications from natural persons. 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/. Collecting information on behalf of creditors. Among other instructions, current 1002.13(b) provides that, if an applicant chooses not to provide some or all of the requested applicant demographic information, the creditor must, in certain circumstances, collect Start Printed Page 45688the information on the basis of visual observation or surname. 1. This appendix also contains 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)(A) and (ii). 11. These proposed changes included establishing applicant demographic information collection, reporting, and public disclosure requirements for automobile creditors similar to HMDA, requiring adverse action notices in certain situations involving counteroffers, and adding record-keeping and applicant demographic information collection requirements for brokers and arrangers of credit. This compensation may impact how and where listings appear. The first sample form is intended for use in open-end, unsecured transactions; the second for closed-end, secured transactions; the third for closed-end transactions, whether unsecured or secured; the fourth in transactions involving community property or occurring in community property States; and the fifth in residential mortgage transactions which contains a model disclosure for use in complying with 1002.13 for certain dwelling-related loans. Regulation CC contains four subparts. An industry service provider asked the Bureau to provide guidance regarding whether the term natural person as used in Regulation B and Regulation C includes living trusts or sole proprietorships. [23] the official SGML-based PDF version on govinfo.gov, those relying on it for Each document posted on the site includes a link to the 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. [39] electronic version on GPOs govinfo.gov. (i) A refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer (to grant credit in a different amount or on other terms) and the applicant uses or expressly accepts the credit offered; Official interpretation of Paragraph 2 (c) (1) (i). For example, an applicant who puts down his home as collateral will have additional information collected for monitoring compliance. The requirements of 1002.13 apply only if an application relates to a dwelling that is or will be occupied by the applicant as the principal residence. Two commenters opposed the collection of applicant demographic information on the basis of visual observation or surname under any circumstances. Some commenters proposed other changes to Regulation B unrelated to alignment with Regulation C or applicant demographic information collection for mortgage applicants. This table of contents is a navigational tool, processed from the 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). Rules for Taking Applications Section 202.5 Regulation B prohibits creditors from requesting and collecting specific personal information about an applicant that has no bearing on the applicant's 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. Local laws. 33. 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). Comments on the benefits and costs of the rule are also discussed above in the section-by-section analysis of the preamble. Creditors that fail to comply with Reg B will be held liable for punitive damages up to $10,000 in individual actions. The prudential regulators confirm that data collected and retained by entities subject to Regulation B but not Regulation C may be used for fair lending supervision and enforcement. Regulation B covers the actions of a creditor before, during, and after a credit transaction. rendition of the daily Federal Register on FederalRegister.gov does not !qZ{r![6|(:9'nG%8}tB\iJ9 DIbsH NB8- Section 1002.13(b) through (c) provides instructions on the manner of collection. 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). Potential Benefits and Costs to Consumers and Covered Persons, Providing an Option To Collect Disaggregated Race and Ethnicity for Regulation B, Model Forms for Collecting Race and Ethnicity Data, Allowing Voluntary Collection of Applicant Information, C. Impact on Depository Institutions and Credit Unions With $10 Billion or Less in Assets, as Described in Dodd-Frank Section 1026, VIII. Regarding the provision to allow certain creditors to voluntarily collect demographic information, the Bureau believes the financial institutions that will most likely exercise such options will be low-volume, low-complexity institutions that have made a one-time investment in HMDA collection and reporting and would like to utilize that collection process already in place. The Bureau may reevaluate the need for mandatory disaggregated collection under 1002.13 after implementation of the 2015 HMDA Final Rule and transition to the 2016 URLA, when more information is available on creditor collection practices. [11] documents in the last year, 861 6. If the debt collector does not provide . Register documents. Video and other electronic-application processes. Your institution is required to establish procedures to ensure that it complies with the requirements of Regulation CC and to provide a copy of these procedures to all employees who perform duties affected by the regulation. To further align the collection requirements of Regulation B and Regulation C, the Bureau is further 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. Subpart A--Collection of Checks and Other Items By Federal Reserve Banks. [5] Unlike financial institutions covered by Regulation C, creditors subject to 1002.13 but not to Regulation C are required only to collect and retain, but not to report, the required protected applicant-characteristic information. 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. Currently the disaggregated race and ethnicity categories required by the amendments to Regulation C in the 2015 HMDA Final Rule, effective January 1, 2018, do not match the categories specified in current Regulation B. 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf. Creditors can ask about the number of children, their ages, and the borrower's financial obligations relating to the children. 4. aJKvqC[+>G5Ci"95,Tk#qCsdtx\/TXCjJ5 &t\A%+gkp# The notice must explain why the applicant was rejected or give instructions for how the applicant can request this information. Two industry commenters proposed two alternative voluntary collection authorizations that would replace proposed 1002.5(a)(4). 3. The Bureau considered these comments but does not believe that the comments are relevant to the 2017 ECOA Proposal and do not provide a basis to change the approach proposed by the Bureau in the 2017 ECOA Proposal. 5581). (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 requested comments on both the costs and benefits associated with this alternative approach. An adverse action is a notice a lender gives when denying a credit application. It is possible that the NMLS omits some non-depository institutions that originated at least 25 closed-end mortgages, did not report HMDA data, and are subject to Regulation B. Financial institutions that report under Regulation C, have reported in the prior five years, or may report in the near future may also be affected by this rule. This repetition of headings to form internal navigation links On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its Web site. This document has been published in the Federal Register. Sec. Moreover, because both methods use the same aggregate categories, a creditor can compare information collected under either method by rolling up the disaggregated subcategories into their corresponding aggregate categories. hbbd``b`>$[A#` , b)@,k $301rY~0 # 34. Reg B mandates that lenders provide explanations to rejected applicants within 30 days of receiving their completed applications. Appendix B to part 1002, at paragraphs 1, 3. A Rule by the Consumer Financial Protection Bureau on 10/02/2017. In developing the final rule, the Bureau has considered the potential benefits, costs, and impacts. As such, lenders cannot discriminate based on any of the above factors. 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. The Bureau does not believe that these comments are relevant to the 2017 ECOA Proposal and do not provide a basis to change the approach proposed by the Bureau in the 2017 ECOA Proposal, which, as related to 1002.13, is limited to modifications that harmonize the collection requirements of Regulation B and Regulation C. For the reasons discussed above, the Bureau is adopting 1002.13(a)(1)(i) and comments 13(a)-7 and 13(a)-8 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. Inadvertent notation. Fair Credit Reporting Act (Reg V) FCRA is intended to ensure consumer reports are accurate and used for permissible purposes. During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in the Regulation C appendix is also deemed to be in compliance with Regulation B 1002.13(a)(1)(i) even though applicants are asked to self-identify using categories other than those explicitly provided in that section. Redlining is the discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity. The Bureau believes the final rule will provide modest benefits to such institutions, by saving on one-time adjustment costs required to shift in and out of collection. 210.4 Sending items to Reserve Banks. Id. In keeping with the broad reach of the statute's prohibition, the regulation covers creditor activities before, during, and after the extension of credit. On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its Web site. The commenter noted that differing instructions may lead to uncertainty and that Regulation B-only creditors would benefit from the additional instructions provided in revised Regulation C. No commenters opposed the proposed comment, and so the Bureau is finalizing comment 13(a)-7 as proposed. The Bureau received no comments on proposed comment 13(c)-1, and so is finalizing comment 13(c)-1 as proposed. [45] 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. 28. at 43132 (1003.3(c)(11) and (12)). The second substantive change will remove the outdated 2004 URLA as a model form. The regulation also requires creditors to notify applicants of action taken on their applications; to report credit history in the names of both spouses on an account; to retain records of credit applications; to collect information about the applicant's race and other personal characteristics in applications for certain dwelling-related loans; New Documents 82 FR 43088, 43100-43102 (Sept. 13, 2017); see also id. The Bureau believes that the interim final rule will benefit consumers and covered persons by updating and recodifying Regulation B to reflect the transfer of authority to the Bureau and certain other changes mandated by the Dodd-Frank Act. 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). A creditor may only request information from a loan applicants spouse if: The most important benefit of Regulation B is that it helps to prevent discrimination against women and minorities. 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. 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. Paragraph 13(c)Disclosure to applicants is revised. 13. A creditor that accepts an application by telephone or mail must request the monitoring information. The Bureau specifically sought input from these agencies concerning their use of applicant ethnicity and race information collected under 1002.13 but not reported or anticipated to be reported under Regulation C and their views on appropriate standards for collection and retention of this information. The Bureau also requested data on the number of firms that might be interested in voluntary collection under this provision. One industry commenter requested clarification that use of the 2016 URLA complies with Regulation B. If there is more than one co-applicant, a creditor is permitted, but is not required, to collect the information set forth in paragraph (a) of this section from a second or additional co-applicant. Appendix B provides data collection model forms for use in complying with 1002.13 and that comply with 1002.13(c). 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