documents in the last year, by the Food Safety and Inspection Service and the Food and Drug Administration 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. Regulation B 1. In 2016, the Enterprises issued a new version of the URLA that complies with the 2015 HMDA Final Rule (2016 URLA). The Bureau Approval Notice provides that, at any time 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 revised Regulation C. 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 not deemed to violate Regulation B 1002.5(b). should verify the contents of the documents against a final, official 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. 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 The Enterprises also made available a Demographic Information Addendum, which is identical in form to section 7 of the 2016 URLA. 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). 1. Accordingly, 1002.5(a)(4)(vi) permits a creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant to collect information regarding the ethnicity, race, and sex of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a loan described in paragraphs (a)(4)(i) through (v). The documents posted on this site are XML renditions of published Federal 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. With respect to the open-end line of credit threshold for HMDA reporting, the Bureau adopted amendments to Regulation C that temporarily increases the open-end line of credit threshold to 500 until January 1, 2020. [202.9(a)(3)(i)(B)] We designed the application to include those disclosures. 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. documents in the last year, 983 Specifically, the Bureau proposed an amendment to 1002.13 to permit a creditor additional flexibility in how it collects applicant ethnicity and race information by allowing use of either aggregate or disaggregate ethnicity and race categories on an application-by-application basis. On the federal level, the Federal Trade Commission regulates what is called the Fair Debt Collection Practices Act (FDCPA). 6. Based on the applicant's race, marital status, nationality, gender, age, or religion, Against an applicant whose income comes from a public assistance program, Against an applicant who, in good faith, exercised his or her rights under the, The spouse will be permitted to use the account, The spouse will be contractually liable for the account, The applicant is relying on the spouse's income as a basis for repayment of the credit requested, The applicant resides in a community property state or relies on property located in such a state as a basis for repayment of the credit requested. Regulation B implements the Equal Credit Opportunity Act (ECOA)[1] A creditor that accepts an application by telephone or mail must request the monitoring information. at 43132, 43145 (1003.2(g)(1)(v)(B), (g)(2)(ii)(B), and 1003.3(c)(12)). 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; For complete information about, and access to, our official publications [43] For the reasons provided below, the Bureau is adopting the revisions to 1002.13(b) concerning the collection of ethnicity and race information on the basis of visual observation or surname as proposed. [45] 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]. edition of the Federal Register. with the applicable provisions of Regulation B described below. Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. 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. The Bureau believes that allowing voluntary collection will reduce the burden of compliance with Regulation C on some entities and provide certainty regarding Regulation B compliance over time. 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. In support, one of the commenters cited a report finding that 10 million Americans change their racial and ethnic identifications between U.S. Census surveys. 03/01/2023, 159 1691b. documents in the last year, 940 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. The changes to Regulation B in this rule are summarized briefly in this section and discussed in detail below. Industry commenters supported the change, with several confirming the potential benefits noted above. 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. collection, as the CFPB defines by rule, and their service providers . The Bureau received one industry comment supporting alignment of the instructions in 1002.13 with the revised Regulation C appendix. 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 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 regulation covers topics such as: Discrimination Discouragement Notification of action taken (including adverse action) Appraisal and other written valuations Special purpose credit programs Limitation on collection certain protected information Self-testing and self-correction Evaluation of applications Signature requirements A person can have only one principal residence at a time. The Bureau proposed to revise the Regulation B appendix to provide two additional model forms for use in complying with 1002.13. 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. For class actions, the creditor could face a penalty of $500,000 or 1% of the creditors net worth, whichever is lower. 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. 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. Applications through loan-shopping services. 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. It also provides that the information must be retained pursuant to the requirements of 1002.12. However, there are certain times when such information can be collected from the applicant. 8. 2. Definition, What Is Redlining? 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. 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 collections of information related to Regulation B and Regulation C have been previously reviewed and approved by OMB and assigned OMB Control Number 3170-0013 (Regulation B) and 3170-0008 (Regulation C). The Bureau received several comments on the proposal concerning the 2015 HMDA Final Rule. on 5. 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. 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). For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. 6. 5. About the Federal Register 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. !qZ{r![6|(:9'nG%8}tB\iJ9 DIbsH NB8- 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. 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. Register (ACFR) issues a regulation granting it official legal status. endstream endobj 2431 0 obj <>/Metadata 156 0 R/Outlines 270 0 R/Pages 2420 0 R/StructTreeRoot 365 0 R/Type/Catalog>> endobj 2432 0 obj <>/Font<>>>/Rotate 0/StructParents 0/Type/Page>> endobj 2433 0 obj <>stream 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. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower. Director, Bureau of Consumer Financial Protection. The Bureau also proposed comment 5(a)(4)-1 to provide guidance on proposed 1002.5(a)(4) and to highlight the voluntary nature of the rule. The Bureau believes that permitting collection of applicant demographic information in this narrowly tailored circumstance may be beneficial for some financial institutions because it would allow them to collect applicant demographic information early in the collection process, when they have determined that the loan would be dwelling secured and primarily for a business or commercial purpose but may not yet have determined whether it meets the definition of a home purchase loan, refinancing, or home improvement loan under revised Regulation C. Collection of applicant demographic information at that point in the application process may allow for more consistent collection and may be easier to integrate into the application process when compared with collection after HMDA coverage has been determined. The spouses of rejected married applicants also have the right to this information. 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. 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. A purpose of ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract) or other protected characteristics. hbbd``b`>$[A#` , b)@,k $301rY~0 # 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. 13. 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). A credit union trade association explicitly opposed the alternative, asserting that its members would be unduly burdened by mandatory collection of disaggregated race and ethnicity information. 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. Section 1002.12(b)(1) provides that creditors must retain records for 12 months for business credit, except as provided in 1002.12(b)(5). Computerized decisions. documents in the last year, 662 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. 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). 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. Information regarding ethnicity, race, and sex that is not required to be collected pursuant to Regulation C, 12 CFR part 1003, may nevertheless be collected under the circumstances set forth in 1002.5(a)(4) without violating 1002.5(b). documents in the last year, 83 by the Housing and Urban Development Department Application-by-application basis. ECOA section 703 serves as a source of authority to establish rules concerning the taking and evaluation of credit applications, collection and retention of applicant demographic information concerning the applicant or co-applicant, use of designated model forms, and substantive requirements to carry out the purposes of ECOA. 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. 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). Data collection under Regulation C. For applications subject to 1002.13(a)(1), a creditor that collects information about the ethnicity, race, and sex of an applicant in compliance with the requirements of appendix B to 12 CFR part 1003 is acting in compliance with 1002.13 concerning the collection of an applicant's ethnicity, race, and sex information. The commenters proposed that the requirement to collect applicant demographic information on the basis of visual observation or surname should be eliminated or that the Bureau provide additional instructions to aid creditors to identify an applicant's ethnicity and race based on visual observation or surname. 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. Accordingly, the Bureau is not removing the Regulation B requirement to collect and retain race and ethnicity information. Proposed 1002.13(a)(1)(i) provided that a creditor must collect the applicant's information using either the aggregate ethnicity and race categories currently required or the ethnicity and race categories and subcategories set forth in the revised Regulation C appendix, which provide disaggregated ethnicity and race categories. Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act calls for the Bureau to consider the potential costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act; and the impact on consumers in rural areas. B, 12 CFR part 1002, as the CFPB defines by Rule and. 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