Moreover, the cited studies conclude only that some applicants may self-identify as different races over time and that visual observation of race is not always accurate. The requirements of the regulation apply only to an account for which an agreement for EFT services to or from the account has been entered into between: i. Aspects of overdraft program implementation or management that is outsourced to third parties, including debt collection practices, must be actively overseen by the bank to ensure compliance. The Bureau recently adopted amendments to Regulation C that will temporarily increase the threshold for collecting and reporting data on certain loans. 15 U.S.C. Regulation B of the Equal Credit Opportunity Act (ECOA) describes lending acts and practices that are specifically prohibited, permitted, or required. 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 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). The information provided to applicants about the rejection helps them take constructive steps to build their credit. 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rather than a revision to Regulation B will reduce the risk that the model form included in Regulation B will become outdated in the future. However, of the three limitations to consumer benefits listed above, only the first (that disaggregated categories would be optional) is alleviated by requiring the use of disaggregated race and ethnicity categories under Regulation B. Section 1002.13(c) sets forth disclosures a creditor must provide to an applicant when collecting the information set forth in 1002.13(a). Comment 5(a)(4)-1 provides that information regarding ethnicity, race, and sex that is not required to be collected pursuant to Regulation C may nevertheless be collected under the circumstances set forth in 1002.5(a)(4) without violating 1002.5(b). 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf. Both certain depository institutions and credit unions with less than $10 billion in assets and covered persons with more than $10 billion in assets currently report data under HMDA and thus will receive these benefits. 03/01/2023, 239 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. 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. A Rule by the Consumer Financial Protection Bureau on 10/02/2017. 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. 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. should verify the contents of the documents against a final, official The Bureau considered the comments, and adopts a modified final rule as described below in the section-by-section analysis. 5512(b)(1)). [14] Under Section 1002.12Record retention, Paragraph 12(b) is revised. 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. The rule does not add the 2016 URLA to the Regulation B appendix; that form is subject to a separate Federal Register notice issued by the Bureau acknowledging its compliance with certain provisions of Regulation B.[8]. 28. 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. @*EtJ '_whyb.v'Yc:E| t%]C@bkBZSAqqu`2B6G\#; 35. [45] The Bureau proposed to amend 1002.5(a)(4) to authorize creditors to collect such information under certain additional circumstances. documents in the last year, 121 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. (ii) Section 1002.12(b) relating to record retention. Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017). Reg. These include white papers, government data, original reporting, and interviews with industry experts. Errors in credit reports are fairly common, and many people only find out about them after being denied credit. "Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)," Page 3. Removing the Regulation B requirement altogether would make detection of any discrimination by these entities more difficult, with potentially large costs to consumers where such discrimination exists. headings within the legal text of Federal Register documents. with the applicable provisions of Regulation B described below. 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. 3501 et seq. 15 U.S.C. Section 1002.5(a)(4)(v) permits a creditor that is a financial institution under revised 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 revised Regulation C 1003.2(g) to collect information regarding the ethnicity, race, and sex of an applicant for a loan that would otherwise be a covered loan under revised Regulation C 1003.2(e) if not excluded by revised Regulation C 1003.3(c)(10). The Bureau concluded that the proposal, if adopted, would not have a significant economic impact on any small entities and that an IRFA was therefore not required. Appendix B to part 1002, at paragraphs 1, 3. Industry commenters supported the change, with several confirming the potential benefits noted above. 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. Investopedia requires writers to use primary sources to support their work. 80 FR 66128, 66187-88 (Oct. 28, 2015). The permitted collection may also alleviate concerns about violating 1002.5(b) if a financial institution collects applicant demographic information for a particular dwelling-secured loan made primarily for a business or commercial purpose, based on the financial institution's belief that it is a home purchase loan, a refinancing, or a home improvement loan, but the financial institution later discovers that this belief was mistaken, and therefore collection of applicant demographic information was not required under Regulation C. The Bureau is adopting 1002.5(a)(4)(v) to address the commenter's suggestion. 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. the current document as it appeared on Public Inspection on For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. Press Release, Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the direction of the FHFA, URLA Implementation Guidance and Update, (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf;; Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the direction of the FHFA, Uniform Residential Loan Application (URLA)/Uniform Loan Application Dataset (ULAD) FAQs, at 6 (Nov. 1, 2016), available at https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf. Certain of these categories include several more specific race, heritage, nationality, or country of origin groups. Given that neither of these forms is currently used by the Enterprises, the Bureau proposed to remove in its entirety the commentary to the Regulation B appendix. The regulation requires written applications for the types of credit covered by 1002.13. Regulation B 1002.5(a)(4)(i) and (ii) as finalized in this rule correspond to those provisions in revised Regulation C and permit the collection of applicant demographic information necessary to facilitate that optional reporting. In addition, the Bureau is adopting new 1002.5(a)(4)(v) and (vi) in response to comments, as discussed below. The authority citation for part 1002 continues to read as follows: Authority: "Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)," Page 1. Paragraph 13(c)Disclosure to applicants is revised. Under this section, procedural requirements of the regulation do not apply to certain types of credit. 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. The Bureau requested comment on the analysis under the RFA and any relevant data. a. arisglobal llc subsidiaries black and white dance floor rental near netherlands underwater lidar scanner reg b covers collection procedures Posted: multifunctional headwear face mask by: 1 Industry commenters proposed two additional, narrowly tailored exceptions that the Bureau is substantially adopting. Fannie Mae, Selling Guide: Single Family Seller Servicer, at B1-1-01 (Dec. 16, 2014), available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html;; Freddie Mac, Single-Family Seller/Servicer Guide (Sep. 21, 2016), 3401.7, available at http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html. An adverse action is a notice a lender gives when denying a credit application. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. developer tools pages. 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/. 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. 3 (a) Public-utilities credit. Comments on the benefits and costs of the rule are also discussed above in the section-by-section analysis of the preamble. Sec. Creditors can ask about the number of children, their ages, and the borrower's financial obligations relating to the children. Note that the language that follows is taken directly from the regulation, which appears in the References portion of this section. The Bureau proposed to amend 1002.12(b)(1)(i) to include within its preservation requirements any information obtained pursuant to 1002.5(a)(4). The Bureau is therefore not requiring the collection of disaggregated categories for Regulation B-only creditors. 3. In keeping with the broad reach of the statute's prohibition, the regulation covers creditor activities before, during, and after the extension of credit. In the 2017 ECOA Proposal, the Bureau also considered but did not propose the alternative of including the 2016 URLA as a model form in the Regulation B appendix. Fair Credit Reporting Act (Reg V) FCRA is intended to ensure consumer reports are accurate and used for permissible purposes. 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. 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. Transactions not covered. , which is implemented by Regulation B (12 CFR Part 1002 ), applies to all creditors, including credit unions. 1691 et seq., 12 CFR part 1002. The Bureau expects that institutions will only exercise this option if voluntary collection provides a net benefit. If it is not evident on the face of an application that it was received by mail, telephone, or via an electronic medium, the creditor should indicate on the form or other application record how the application was received. The current Regulation B appendix includes the 2004 URLA as a model form for use in complying with 1002.13. 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. The rule also removes as outdated the existing version of the URLA contained in the Regulation B appendix, effective January 1, 2022. %PDF-1.6 % On September 23, 2016, the Bureau issued a notice concerning the collection of expanded information about ethnicity and race in 2017 (Bureau Approval Notice). Having considered the comments received and for the reasons discussed above, the Bureau is finalizing 1002.5(a)(4)(i) through (iv) generally as proposed with minor wording changes for clarity, finalizing new 1002.5(a)(4)(v) and (vi), and finalizing the conforming amendments to comment 5(a)(2)-2 and new comment 5(a)(4)-1 as proposed. The final rule amends parts of Regulation B, its commentary, and its appendices, and affects when and how a creditor may collect information regarding the applicant's ethnicity, race, and sex. The consumer advocacy groups further expressed the view that mandatory disaggregated collection would prepare lenders to submit HMDA data in the future should they cross a reporting threshold and that the burden of mandatory disaggregated collection would not be significant because the 2016 URLA makes it easy to record these categories. 10. The other commenter asserted that collection of applicant demographic information requires significant time and resources for Regulation B-only creditors and that the information is virtually never used. The regulation only addresses the procedures for state application for exemption from the provisions of the Act. 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. While final 1002.5(a)(4) provides a narrow exception to the general limitations in 1002.5(b) through (d), these alternative proposals would create a much broader exception to the general limitations on collecting such information in Regulation B. Under Regulation B, a creditor may request any information. the material on FederalRegister.gov is accurately displayed, consistent with 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. Because of the differences between the categories, some creditors required to collect and report race and ethnicity using the disaggregated categories set forth in revised Regulation C may be uncertain whether additional collection using aggregated categories would also be required to satisfy current Regulation B. Another industry commenter was concerned about how a creditor would decide which collection method to use and whether the instruction could have a discriminatory impact. [16] Computerized decisions. B prohibited practices (12 C.F.R. Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 2430 0 obj <> endobj It is not an official legal edition of the Federal 1. in 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. 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. [43] aJKvqC[+>G5Ci"95,Tk#qCsdtx\/TXCjJ5 &t\A%+gkp# 2. The Bureau solicited comment on permitting the collection of applicant demographic information in the circumstances described in proposed 1002.5(a)(4), and, in particular, regarding the proposed five-year time frame, and whether there are other specific, narrowly tailored circumstances not described in 1002.5(a)(2) or proposed 1002.5(a)(4) under which a creditor would benefit from being able to collect applicant demographic information for mortgage loan applicants. 3. 210.1 Authority, purpose, and scope. Examination Procedures These costs include greater operational costs and one-time database upgrades. [6] The creditor need not orally request the monitoring information if it is requested in writing. fbS`}R7E_ |.rgxp,gh bWFdd~N2 ]_r'xj`-]JRZPT/]kM;U::. 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. The commenter suggested that the Bureau revise 1002.5(b) to permit collection of demographic information for any additional co-applicants using the 2016 URLA. documents in the last year, 87 Answer by David Dickinson: The definition of applicant in Reg B Section 202.2: (e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit.For purposes of Section 202.7(d), the term includes guarantors, sureties, endorsers, and similar parties. 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). In the 2017 ECOA Proposal, the Bureau proposed to amend comment 13(b)-1 to reference the data collection model forms the Bureau proposed to provide in the Regulation B appendix. documents in the last year, 1479 The Bureau is issuing this final rule pursuant to its authority under section 703 of ECOA, as amended by section 1085 of the Dodd-Frank Act. Definition, What Is Redlining? =+f=?z)0p0+~#zSsTib5MuC={0z7&8J8],?8A eMa`?P2EDJaq{%c 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). 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. Regulation B is intended to prevent applicants from discrimination in any aspect of a credit transaction. Id. Regulation B implements the Equal Credit Opportunity Act (ECOA)[1] Financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years will not be required to begin collecting such data until January 1, 2020. Even for institutions with very small volumes of originations that may not be subject to HMDA reporting because they do not meet an applicable loan volume threshold, the retained information may be useful for comparative file reviews. 31. (In this document, applicant demographic information refers to information about an applicant's ethnicity, race, or sex information, while certain protected applicant-characteristic information refers to all information collected under 1002.13, including age and marital status.) 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. 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. Other circumstances permitting voluntary collection of applicant demographic information finalized in this rule do not correspond to provisions in Regulation C addressing optional reporting. Credit denial is the rejection of a credit application by a prospective lender, usually due to its assessment that the applicant is not creditworthy. I'd first recommend that you go review this section and the applicable Official Staff Commentary. the official SGML-based PDF version on govinfo.gov, those relying on it for Investopedia does not include all offers available in the marketplace. 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 consumer debt collection larger participant rule, which appears in 12 CFR Part 1090, was effective January 2, 2013 . Among other changes, the 2016 URLA includes a Demographic Information section (section 7) that addresses the requirements in revised Regulation C for collecting applicant demographic information, including the requirement that financial institutions permit applicants to self-identify using disaggregated ethnicity and race categories beginning January 1, 2018. 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. Two commenters opposed the collection of applicant demographic information on the basis of visual observation or surname under any circumstances. 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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