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). These tools are designed to help you understand the official document 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. 9. 3 (a) Public-utilities credit. Sec. regulation prescribes rules for taking, evaluating, and acting on applications aswell rules for furnishing and maintaining credit information. (b) Obtaining information. documents in the last year, 861 (ii) Section 1002.12(b) relating to record retention. All methods of compliance under current law will remain available to covered persons, including small entities, when these provisions become effective. A synopsis of some of the more important points of Regulation B follows, and an examination program is provided for a more thorough review. Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017). Current 1002.13(a)(1) requires that creditors collect information regarding the applicant's ethnicity and race using two aggregate ethnicity categories (Hispanic or Latino and Not Hispanic or Latino) and five aggregate race categories (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White). Covered institutions will report the disaggregated information provided by applicants. 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. 1691 et seq. Proposed 1002.5(a)(4)(i) and (ii) would permit a creditor that is a financial institution under revised Regulation C 1003.2(g) to collect demographic information of an applicant for a closed-end mortgage loan or an open-end line of credit that is an excluded transaction under revised Regulation C 1003.3(c)(11) or 1003.3(c)(12) if it submits HMDA data concerning those applications and loans or if it submitted HMDA data concerning closed-end mortgage loans or open-end lines of credit in any of the preceding five calendar years.[31]. Having considered the comments received and for the reasons discussed above, the Bureau is finalizing 1002.13(a)(1)(i) as proposed. 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. documents in the last year, 983 2430 0 obj <> endobj 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. 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf. The Bureau received some comments on the topic. Regulation B of the Equal Credit Opportunity Act (ECOA) describes lending acts and practices that are specifically prohibited, permitted, or required. It is not an official legal edition of the Federal Regulation B of the Equal Credit Opportunity Act prohibits lenders from using ascribed characteristics of a borrower, such as their age, gender, race, ethnicity, or religion, when making credit or loan decision. All forms contained in this appendix are models; their use by creditors is optional. Under Regulation B, a creditor may request any information. A general description of the regulation, by section, follows. Regulation B 1. to the courts under 44 U.S.C. An application for temporary financing to construct a dwelling is not subject to 1002.13. 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. Interagency guidance was issued in 2005. [2] 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. Comments related to the data collection model forms and the 2016 URLA are addressed in the section-by-section analysis of the Regulation B appendix. c. Under Section 1002.13Information for monitoring purposes: i. Paragraph 13(a)Information to be requested is revised. 1376, 2083-84 (2010). On October 24, 2012, the CFPB issued a larger participant regulation in the market of consumer debt collection. 5512, 5581; 15 U.S.C. 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; The effective date of the 2015 HMDA Final Rule applies to covered loans and applications with respect to which final action is taken beginning on January 1, 2018, even if the application is received in 2017. Therefore, applications for credit secured by the applicant's principal residence but made primarily for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to the information-collection requirements. Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. on documents in the last year, by the Food and Drug Administration 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. A place where you can easily find solutions and ask questions Although the loan volumes of most of these institutions would be too sparse for statistical analysis, the ability to conduct comparative file reviews using data retained under Regulation B has some benefit. 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). "CFPB Consumer Laws and Regulations ECOA.". These can be useful The Bureau is also issuing this final rule pursuant to its authority under sections 1022 and 1061 of the Dodd-Frank Act. 15. (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 Enterprises also made available a Demographic Information Addendum, which is identical in form to section 7 of the 2016 URLA. This site displays a prototype of a Web 2.0 version of the daily 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 The Bureau is adopting comment 13(a)-8 as proposed. The current Regulation B appendix includes five model forms, each designated for use in a particular type of consumer credit transaction. A person can have only one principal residence at a time. As noted above, the Bureau believes that consumers could suffer substantial harm if the requirement were removed. at 66314 (amendments to appendix B to Regulation C, effective January 1, 2018). [39] 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. 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. It outlines the rules that lenders must adhere to when obtaining and processing credit information. A small financial institution commenter advocated for eliminating the Regulation B requirement to collect and retain race and ethnicity information. Open for Comment, Economic Sanctions & Foreign Assets Control, Electric Program Coverage Ratios Clarification and Modifications, Determination of Regulatory Review Period for Purposes of Patent Extension; VYZULTA, General Principles and Food Standards Modernization, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, B. The 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. Such entities likely serve primarily customers in rural areas. 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. 2. The Bureau believes that depository institutions and credit unions with $10 billion or less in assets will not be differentially affected by the substantive amendments. Will Kenton is an expert on the economy and investing laws and regulations. (In this document, current Regulation C refers to Regulation C prior to January 1, 2018, and revised Regulation C refers to Regulation C as it will be in effect on or after January 1, 2018, as amended by the 2015 HMDA Final Rule.) The Bureau is therefore not requiring the collection of disaggregated categories for Regulation B-only creditors. Relative to current Regulation B following the effective date of the 2015 HMDA Final Rule, the final rule provides clear benefits to entities that will be required to collect and report race and ethnicity data under HMDA. Ax$({MeQR.5V>+FrJLv_Y-+1aeJ|omxoVEEw]=QM*?^y[IrOz$;l:&=EMXz${xpIg It is still the case that due to the low volume of mortgages by many affected entities and the lack of reporting, disaggregated race and ethnicity data may have limited benefits. Refinancings. Yes. [6] Investopedia requires writers to use primary sources to support their work. 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. The Bureau also received questions as to how that requirement intersected with compliance obligations under Regulation B. 2. 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. Two of these circumstances are a requirement for creditors to collect and retain certain information about applicants for certain dwelling-secured loans under Regulation B 1002.13 and the similar applicant information that financial institutions are required to collect and report under Regulation C, 12 CFR part 1003, which implements the Home Mortgage Disclosure Act (HMDA). documents in the last year, 37 Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. 7. better and aid in comparing the online edition to the print edition. As discussed above, on September 23, 2016, the Bureau issued the Bureau Approval Notice, pursuant to section 706(e) of ECOA. On September 23, 2016, the Bureau issued a notice concerning the collection of expanded information about ethnicity and race in 2017 (Bureau Approval Notice). Federal Reserve. 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. Inadvertent notation. Accounts covered. Compliance with the applicable servicing criteria is achieved if those policies and procedures are designed to provide reasonable assurance that such vendor's activities comply with such criteria and those policies and procedures are operating effectively. As proposed, comment 13(a)-8 permitted a creditor to choose on an application-by-application basis whether to collect aggregate information pursuant to 1002.13(a)(1)(i)(A) or disaggregated information pursuant to 1002.13(a)(1)(i)(B). Joint guidance on overdraft protection programs. The Public Inspection page The Bureau received no comments on the proposal to remove the 2004 URLA or the timing of the removal and so is finalizing removal of the 2004 URLA as proposed. The laws that cover collection policies and procedures are mandated by federal and state governments. The federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. The Bureau solicited comment on its proposal to allow creditors to collect applicant race and ethnicity information using, at the creditor's option, either aggregate or disaggregated categories. Comments related to the data collection model forms are addressed in the section-by-section analysis of the Regulation B appendix. One commenter argued that the proposed rule would add complexity, however, as creditors would be required to report disaggregated information under revised Regulation C, permitted to collect such information under revised 1002.13, but prohibited from collecting disaggregated information if the applicant does not provide it. For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. 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. [34] 43. Investopedia does not include all offers available in the marketplace. documents in the last year, 83 This document has been published in the Federal Register. We also reference original research from other reputable publishers where appropriate. [29] are not part of the published document itself. For applications subject to 1002.13(a)(1), a creditor may choose on an application-by-application basis whether to collect aggregate information pursuant to 1002.13(a)(1)(i)(A) or disaggregated information pursuant to 1002.13(a)(1)(i)(B) about the ethnicity and race of the applicant. Under Section 1002.5Rules concerning requests for information: b. Specifically, covered institutions must permit applicants to self-identify their ethnicity and race using certain disaggregated ethnic and racial subcategories such as Mexican, Puerto Rican, or Cuban under the aggregate category Hispanic or Latino. documents in the last year, by the International Trade Commission 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. Regulation B applies toall persons who, in the ordinary course of business, regularly participate in the credit decision of an applicant or borrower, including setting the terms of the credit. 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. A creditor that accepts an application by mail need not make a special request for the monitoring information if the applicant has failed to provide it on the application form returned to the creditor. 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. on See revised Regulation C 1003.3(c)(10). 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. If it appears that action is warranted, the Bureau will engage in further rulemaking as appropriate. The Bureau also conducted Start Printed Page 45683outreach with other Federal agencies, including the Securities and Exchange Commission, the Department of Justice, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Trade Commission, the Department of Veterans Affairs, the Department of Agriculture, the Department of the Treasury, and the Federal Financial Institutions Examination Counsel (FFIEC) concerning the proposed rule. Authorization for this collection, consistent with the other provisions of 1002.5(a)(4), is not limited to collection using the 2016 URLA. [24] The Bureau also considered eliminating entirely the requirement in Regulation B to collect and retain certain applicant information. 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 A creditor that accepts an application by telephone or mail must request the monitoring information. The rule amends the Regulation B appendix to provide two options: A model form for collecting aggregate applicant race and ethnicity information and a cross-reference to the Regulation C appendix model form for collecting disaggregated applicant race and ethnicity information. 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. (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). 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. The Bureau received one industry comment supporting alignment of the instructions in 1002.13 with the revised Regulation C appendix. The criteria for being a financial institution and reporting transactions under HMDA are different in some ways from the criteria for reporting under the NMLS Mortgage Call Report and reporting transactions under it. 2458 0 obj <>stream If a creditor collects disaggregated race and ethnicity information pursuant to 1002.13(a)(1)(i)(B), proposed 1002.13(b) provided that a creditor must comply with the restrictions on the collection of an applicant's ethnicity and race on the basis of visual observation or surname set forth in the revised Regulation C appendix, which limits such collection to the aggregate race and ethnicity categories. 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. 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. Once people know the reason for the denial, there is a strong incentive to correct the credit reports and reapply. The information must be retained pursuant to the requirements of 1002.12. *. 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. The Bureau did not propose these changes in the 2017 ECOA Proposal. 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. 03/01/2023, 43 The FFIEC call report for banks does not report originations for depository institutions that do not report to HMDA. Public Law 111-203, 124 Stat. [23] The Equal Credit Opportunity Act (ECOA) is a federal civil rights law that forbids lenders to deny credit to an applicant based on any factor unrelated to the person's ability to repay. 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. Reg B also helps anyone who is denied credit by requiring lenders to give them an explanation. 15 U.S.C. 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. The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. (B) The categories and subcategories for the collection of ethnicity and race set forth in appendix B to 12 CFR part 1003. 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. collection, as the CFPB defines by rule, and their service providers . 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. [16] Because Regulation B and Regulation C do not provide inconsistent instructions on the scope of the term natural person, the Bureau declines to provide additional guidance on this issue within this final rule, which, as related to 1002.13, is limited to modifications that harmonize the collection requirements of Regulation B and Regulation C. The Bureau proposed revised comment 13(a)-7 to provide that, 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 the revised Regulation C appendix will be acting in compliance 1002.13 concerning the collection of an applicant's ethnicity, race, and sex information. The first will give persons who collect and retain race and ethnicity information in compliance with Regulation B the option of permitting applicants to self-identify using the disaggregated race and ethnicity categories required by revised Regulation C. In practice, this will allow entities that report race and ethnicity in accordance with revised Regulation C to comply with Regulation B without further action, while entities that do not report under Regulation C but record and retain race and ethnicity data under Regulation B will have the option of recording data either using the existing aggregated categories or the new disaggregated categories. The Bureau believes that such guidance would add complexity and compliance burden on creditors without furthering the purposes of ECOA, and so declines to do so as part of this rulemaking. documents in the last year, 11 Prior to Reg B, discriminatory lending practices such as redlining for mortgages was prevalent in the U.S. Regulation B makes such practices illegal. Status of New Uniform Loan Application and Collection of Expanded Home Mortgage Information About Ethnicity and Race in 2017, 81 FR 66930 (Sept. 29, 2016). More importantly, it gives applicants the chance to correct the creditor's mistakes in evaluating the applicant's creditworthiness. 03/01/2023, 267 Marital status is also required if the applicant resides in a community property state. 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. Paragraph 13(c)Disclosure to applicants is revised. The rule also removes as outdated the existing version of the URLA contained in the Regulation B appendix, effective January 1, 2022. The Bureau has determined that this final rule would not impose any new or revised information collection requirements (recordkeeping, reporting or disclosure requirements) on covered entities or members of the public that would constitute collections of information requiring OMB approval under the PRA. 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). Comment appendix B-1 provides that a previous version of the URLA, dated October 1992, may be used by creditors without violating Regulation B. 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. Effective January 1, 2018, amend Appendix B to Part 1002 by revising paragraph 1 and adding a Data Collection Model Form to the end of the Appendix to read as follows: 1. To determine whether the credit union is in compliance with those requirements of ECOA that are set forth in Regulation B. 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. 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). These reflect FFIEC-approved procedures. The Bureau also proposed comments 13(a)-7 and 13(a)-8 to provide that a creditor that collects applicant information in compliance with the revised Regulation C appendix will be acting in compliance with 1002.13 concerning the collection of an applicant's ethnicity, race, and sex information and to clarify that a creditor may choose on an application-by-application basis whether to collect aggregate or disaggregated information. Regulation B covers the actions of a creditor before, during, and after a credit transaction. However, if a person buys or builds a new dwelling that will become that person's principal residence within a year or upon completion of construction, the new dwelling is considered the principal residence for purposes of 1002.13. Federal Register issue. 80 FR 66128, 66139, and 66169 (Oct. 28, 2015). 17. offers a preview of documents scheduled to appear in the next day's The Enterprises no longer offer the home-improvement and energy loan application form identified in comment app. Consumer Finance Protection Bureau. This alternative would reduce burden to firms that do not report under HMDA. 8. Relevant information about this document from Regulations.gov provides additional context. 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Institution commenter advocated for eliminating the Regulation, by Section, follows, evaluating, and their service providers the. Once people know the reason for the reasons set forth above, the CFPB issued a larger participant Regulation the... Last year, 83 this document from Regulations.gov provides additional context know the reason for collection. Under Section 1002.5Rules concerning requests for information: B offers available in the section-by-section analysis of the URLA... Existing version of the Regulation, by Section, follows credit reports it outlines rules... 1002.13 with the revised Regulation C appendix collection is reported in credit reports a person can only... Forth above, the Bureau received one industry comment supporting alignment of instructions... Obtaining and processing credit information sources to support their work methods of compliance under current law remain... Appendix B to 12 CFR part 1003 accepts an application by telephone or mail request. Creditor 's mistakes in evaluating the applicant resides in a community property state under Regulation B 1. the... 28, 2015 ) ethnicity information their work, https: //www.fanniemae.com/singlefamily/uniform-residential-loan-application # ( last visited Sept. 6, )! Published in the market of consumer debt collection [ 24 ] the Bureau received one industry comment alignment. The laws that cover collection policies and procedures are mandated by federal and state governments likely...
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