Such entities likely serve primarily customers in rural areas. 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. Scope. The Bureau is finalizing the amendments to 1002.12(b)(1)(i) and comment 12(b)-2 as proposed. The consumer debt collection larger participant rule, which appears in 12 CFR Part 1090, was effective January 2, 2013 . This alternative would reduce burden to firms that do not report under HMDA. documents in the last year, by the Food and Drug Administration One industry commenter generally supported the proposal, noting the flexibility would reduce compliance burden. Effective January 1, 2022, amend Appendix B to Part 1002 by revising paragraph 1 and under paragraph 3 removing the form Uniform Residential Loan Application. New principal residence. 5. Some commenters proposed other changes to Regulation B unrelated to alignment with Regulation C or applicant demographic information collection for mortgage applicants. 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. 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. 1. Reg B also helps anyone who is denied credit by requiring lenders to give them an explanation. Federal Reserve. In addition, the Bureau is adopting new 1002.5(a)(4)(v) and (vi) in response to comments, as discussed below. 78121)(December 16, 2011). Regulation B's prohibition of advertising that would discourage potential applicants from applying for loans is a crucial part of redlining cases. 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. Creditors that fail to comply with Regulation B are subject to punitive damages. For Regulation B creditors making mortgage loans subject to 1002.13, the rule will allow creditors to collect the applicant's information using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories, as set forth in appendix B to Regulation C (the Regulation C appendix) as amended by for fair lending practices. 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). The final rule does not impose any new costs on firms, nor does the Bureau believe that consumers will experience any cost or benefit from the provision. 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. endstream endobj startxref Unlike prior versions of the URLA, the 2016 URLA permits an applicant to select disaggregated ethnicity and race categories, as required under revised Regulation C. Given the issuance of the Bureau Approval Notice and the modifications to 1002.13, the Bureau proposed several revisions to the Regulation B appendix as discussed below. The industry service provider commented that this distinction makes data collection more complex and burdensome, and requested that the Bureau clarify the collection requirements for co-applicants under Regulation B. 4. The Enterprises also made available a Demographic Information Addendum, which is identical in form to section 7 of the 2016 URLA. 5. Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection, 82 FR 16307 (Apr. Definition, Legality, and Effects, Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B). On October 24, 2012, the CFPB issued a larger participant regulation in the market of consumer debt collection. The primary benefit to lenders from the final rule is the reduced uncertainty and compliance burden from allowing the disaggregated race and ethnicity information collected under Regulation C to be used to comply with Regulation B. Commenters noted that being able to collect applicant demographic data when not required by HMDA would facilitate better data collection procedures, aid in retaining system and organizational knowledge, help prepare for reporting data in subsequent years, and help creditors transition to the 2016 URLA. Regulation B covers the actions of a creditor before, during, and after a credit transaction. 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). 35. A place where you can easily find solutions and ask questions 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]. 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. Notwithstanding paragraph (b) of this section, a creditor may collect information under the following circumstances provided that the creditor collects the information in compliance with appendix B to 12 CFR part 1003: (i) A creditor that is a financial institution under 12 CFR 1003.2(g) may collect information regarding the ethnicity, race, and sex of an applicant for a closed-end mortgage loan that is an excluded transaction under 12 CFR 1003.3(c)(11) if it submits HMDA data concerning such closed-end mortgage loans and applications or if it submitted HMDA data concerning closed-end mortgage loans for any of the preceding five calendar years; (ii) A creditor that is a financial institution under 12 CFR 1003.2(g) may collect information regarding the ethnicity, race, and sex of an applicant for an open-end line of credit that is an excluded transaction under 12 CFR 1003.3(c)(12) if it submits HMDA data concerning such open-end lines of credit and applications or if it submitted HMDA data concerning open-end lines of credit for any of the preceding five calendar years; (iii) A creditor that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under 12 CFR 1003.2(g) may collect information regarding the ethnicity, race, and sex of an applicant for a loan that would otherwise be a covered loan under 12 CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or (12); (iv) A creditor that exceeded an applicable loan volume threshold in the first year of the two-year threshold period provided in 12 CFR 1003.2(g), 1003.3(c)(11), or 1003.3(c)(12) may, in the second year, collect information regarding the ethnicity, race, and sex of an applicant for a loan that would otherwise be a covered loan under 12 CFR 1003.2(e) if the loan were not excluded by 12 CFR 1003.3(c)(11) or (12); (v) A creditor that is a financial institution under 12 CFR 1003.2(g), or that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under 12 CFR 1003.2(g), may collect information regarding the ethnicity, race, and sex of an applicant for a loan that would otherwise be a covered loan under 12 CFR 1003.2(e) if the loan were not excluded by 12 CFR 1003.3(c)(10). Section 1002.13(c) sets forth disclosures a creditor must provide to an applicant when collecting the information set forth in 1002.13(a). The Bureau proposed an effective date of January 1, 2018, which aligns with the effective date for the bulk of the revisions to Regulation C in the 2015 HMDA Final Rule. 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. 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). Section 1002.12 provides rules concerning permissible and required record retention. 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. Hu^U[4'~f,t?o{NwYrB-ez,]{-}7/;UsUe5_,Vl]vw~lh}ive8=&fw}\*!tTb(8+0(0-D)3\-|bS ]4#i!N#.tD >X_\pI;$?gacx`BtvAa,q]k"m ? ,H?tYrjfMN 2.q9^w\k.ke5jXcLKjvszyD G 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. Fair Lending Fair Lending Laws and Regulations - PDF provides an abbreviated discussion of federal fair lending laws and regulations based on . Other commenters did not directly address this alternative, but several industry commenters supported the flexibility of the proposal with respect to collection of disaggregated race and ethnicity information, implicitly opposing making this collection mandatory. It outlines the rules that lenders must adhere to when obtaining and processing credit information. These comments were primarily from small financial institutions. 2430 0 obj <> endobj Redlining is an unethical and illegal practice that denies loans or services to people living in majority-minority communities. 33. 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. As the Bureau noted in the 2017 ECOA Proposal, without a time limit such voluntary collection would permit a creditor to collect protected applicant-characteristic information for a period of time that is too attenuated from any past Regulation C legal requirement and associated compliance process. regulatory information on FederalRegister.gov with the objective of One commenter stated that extending the requirement to collect applicant demographic information on the basis of visual observation or surname to Regulation B-only creditors is outside the scope of ECOA. 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 Reg. 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). The final rule will provide creditors flexibility in complying with Regulation B in order to facilitate compliance with Regulation C and transition to the 2016 URLA. 45. On the other hand, consumer advocacy groups and an industry service provider suggested that creditors be required to collect disaggregated ethnicity and race information after a multi-year phase in period. 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. 1503 & 1507. One industry commenter supporting the proposal stated that mandating disaggregated collection for all creditors would be unduly burdensome. No commenters provided such data. This PDF is Show [18] documents in the last year, 662 1002.4): Discriminating against applicants on a prohibited basis regarding any aspect of a credit transaction. Both the Bureau's consultations with the prudential regulators and its own experience in fair lending enforcement indicate that these data are used. 2. The Equal Credit Opportunity Act (ECOA), 15 U.S.C. The federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. As a result, when revised Regulation C takes effect, an institution's obligation to collect and report information under Regulation C may change over time based on its prior loan volume. Thus, a small entity that is in compliance with current law need not take any additional action, save those already required by the 2015 HMDA Final Rule. For example, Hispanic or Latino as defined by OMB for the 2010 Census refers to a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin. Rules concerning requests for information. Refinancings. 1691b. [3] with the applicable provisions of Regulation B described below. documents in the last year, 861 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. This document has been published in the Federal Register. The Enterprises have advised that the Demographic Information Addendum may be used by lenders at any time on or after January 1, 2017, as a replacement for section X (Information for Government Monitoring Purposes) in the current URLA, dated July 2005 (revised June 2009). at 43132 (1003.3(c)(11) and (12)). Regulation B covers the actions of a creditor before, during, and after a credit transaction. Implemented by Regulation B. . 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 few commenters who specifically addressed the Bureau's proposed amendment to 1002.13(b) generally supported the modification, noting that it aligned with revised Regulation C and would facilitate consistent data collection. 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). Accordingly, the Bureau has authority to issue regulations to administer ECOA. In the case of a conflict between state and federal law, federal law prevails. The laws that cover collection policies and procedures are mandated by federal and state governments. This information is discussed below in the section-by-section analysis and subsequent parts of the notice, as applicable. The Bureau received approximately 36 comments on the 2017 ECOA Proposal during the comment period from consumer advocacy groups, national and State trade associations, banks, individuals, and industry service providers. 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. to the courts under 44 U.S.C. Rules for Taking Applications - 12 CFR 1002.5. Comments related to the data collection model forms are addressed in the section-by-section analysis of the Regulation B appendix. Both ECOA and title X of the Dodd-Frank Act are consumer financial laws. 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. informational resource until the Administrative Committee of the Federal For the reasons provided below, the Bureau is adopting 1002.13(a) and comments 13(a)-7 and 13(a)-8 as proposed. The Bureau also proposed to amend comment 12(b)-2 to require retention of applicant demographic information obtained pursuant to 1002.5(a)(4). The Bureau is finalizing this comment as proposed. For complete information about, and access to, our official publications [19] 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] The appendix provides that the use of its model forms is optional under Regulation B but that, if a creditor uses an appropriate appendix B model form, or modifies a form in accordance with instructions provided in appendix B, that creditor shall be deemed to be acting in compliance with 1002.5(b) through (d). The Bureau is adopting 1002.5(a)(4)(vi) to address the commenter's suggestion by clarifying that the collection of applicant demographic information for additional borrowers is permitted. 1. Two industry commenters proposed two alternative voluntary collection authorizations that would replace proposed 1002.5(a)(4). Two commenters opposed the collection of applicant demographic information on the basis of visual observation or surname under any circumstances. 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. Sec. In practice, the final rule simply makes clear that the existing collection required under revised Regulation C is sufficient for compliance with Regulation B. 4. When it comes to credit transactions, a creditor cannot discriminate: Regulation B also mandates that lenders provide oral or written notice of rejection to failed applicants within 30 days of receiving their completed applications. All forms contained in this appendix are models; their use by creditors is optional. We also reference original research from other reputable publishers where appropriate. For those HMDA reporters, the rule provides clarity that compliance with applicant information collection under Regulation C generally satisfies similar requirements under Regulation B. HMDA reporters who at some point no longer are required to comply with HMDA can continue to collect certain applicant information as provided for in 1002.5(a)(4). 43. In the case of a two-to four-unit dwelling, the application is covered if the applicant intends to occupy one of the units as a principal residence. A large number of industry commenters supported the proposed amendments to 1002.13(a)(1)(i). on NARA's archives.gov. Changes to Applicant Information Collection for Regulation B Creditors, C. Changes to Applicant Information Collection for HMDA Reporters, A. 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. 23. Appendix B to part 1002, at paragraphs 1, 3. 4. documents in the last year, 87 First, Regulation B-only creditors will not be required to permit applicants to self-identify using disaggregated ethnicity and race categories, likely resulting in few creditors adopting disaggregated ethnicity and race categories. Prohibited basis under Regulation B refers to a borrower's race, color, religion, national origin, sex, marital status, or age. 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. 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. This appendix contains five 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. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. Proposed 1002.5(a)(4)(iii) would permit a creditor that falls below both of the revised Regulation C loan-volume thresholds to continue to collect applicant demographic information for five calendar years after first becoming exempt from HMDA reporting. Written applications. For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. and, in part, prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of a credit applicant except under certain circumstances. 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. The Bureau continues to believe that the benefits of this alternative are very low. 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. Adverse action is also a negative action that impacts employment. Some or all of these institutions may also not have been required to report HMDA data. The OFR/GPO partnership is committed to presenting accurate and reliable Relevant information about this document from Regulations.gov provides additional context. a. Regulations B and C both contain an appendix B that provides model forms for use when collecting applicant demographic information required under the regulations. Redlining is the discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity. 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. An application for an open-end home equity line of credit is not subject to this section unless it is readily apparent to the creditor when the application is taken that the primary purpose of the line is for the purchase or refinancing of a principal dwelling. Covered institutions will report the disaggregated information provided by applicants. 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. A version of the URLA dated January 2004 (2004 URLA) is included in the Regulation B appendix as a model form for use in complying with 1002.13. What Is the Equal Credit Opportunity Act (ECOA)? 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. You can learn more about the standards we follow in producing accurate, unbiased content in our. 13. 41. These include white papers, government data, original reporting, and interviews with industry experts. 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. Some Regulation B-only creditors sell mortgages to the Enterprises, and would benefit from being able to use the 2016 URLA. 6. Regulation B and Ethnicity and Race Information Collection, Comments Related to Other Changes to Regulation B, Section 1002.5Rules Concerning Requests for Information, 5(a)(4) Other Permissible Collection of Information, Section 1002.13Information for Monitoring Purposes, Appendix B to Part 1002Model Application Forms, Model Forms for Complying With Section 1002.13(a)(1)(i), Removal of the Official Commentary to Appendix B, VII. 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf. A creditor that enters information items from a written application into a computerized or mechanized system and makes the credit decision mechanically, based only on the items of information entered into the system, may comply with 1002.12(b) by retaining the information actually entered. 210.3 General provisions.*. The rule is effective on January 1, 2018, except that the amendment to the Regulation B appendix removing the existing Uniform Residential Loan Application form is effective January 1, 2022. The Regulation B creditors affected by this rule are primarily those creditors making mortgage loans subject to 1002.13, which applies to purchase and refinance transactions involving an applicant's primary residence. 1. in documents in the last year, 36 Regulation C implements HMDA and sets out specific requirements for the collection, recording, reporting, and disclosure of mortgage lending information, including a requirement to collect and report applicant demographic information. [39] [25] reg b covers collection procedures 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. 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. P}j]+VuuYZcU? 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. aJKvqC[+>G5Ci"95,Tk#qCsdtx\/TXCjJ5 &t\A%+gkp# headings within the legal text of Federal Register documents. The incremental benefits of this alternative are also likely to be low because many creditors will collect disaggregated categories under Regulation B in any case, either because they are required to do so under revised Regulation C or as part of the transition to the 2016 URLA. The Bureau recently adopted amendments to Regulation C that will temporarily increase the threshold for collecting and reporting data on certain loans. 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. Regulation B 1002.2(g) defines business credit to mean, with certain exceptions, extensions of credit primarily for business or commercial purposes. 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. The information must be retained pursuant to the requirements of 1002.12. 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. The Bureau received several additional comments about topics other than those raised by the Bureau in the 2017 ECOA Proposal. Register, and does not replace the official print version or the official 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. Use the PDF linked in the document sidebar for the official electronic format. The Fair Debt Collection Practices Act (FDCPA) is a federal law that provides limitations on what debt collectors can do when collecting certain types of debt. 31. 5. 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. 1375, 1980 (2010) (codified at 12 U.S.C. For instance, the 2015 NCUA Call Report and the 2015 Nationwide Mortgage Licensing System & Registry (NMLS) Mortgage Call Report data include 489 credit unions and 161 non-depository institutions that originated at least 25 closed-end mortgages that are not found in the 2015 HMDA data. That provides model does reg b cover collection procedures are addressed in the case of a creditor before,,! To Regulation B 's prohibition of advertising that would discourage potential applicants from applying for loans is a part... 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