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. 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). New principal residence. alteration, or termination of credit; collection procedures. Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. [41] One commenter requested clarification that the voluntary collection under proposed 1002.5(a)(4) was truly voluntary and not a new compliance requirement. 3 (a) Public-utilities credit. Through this proposed change, creditors taking applications for loans subject to 1002.13(a)(1) but not required to submit HMDA data under Regulation C would have the option of either maintaining their current collection practices or transitioning to the revised Regulation C collection practices and the 2016 URLA. d. Appendix BModel Application Forms is removed. The federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. The Bureau did not intend to extend the record retention period under Regulation B for business credit transactions through the proposal and this final rule does not do so. Joint guidance on overdraft protection programs. to the courts under 44 U.S.C. at 43132, 43145 (1003.2(g)(1)(v)(B), (g)(2)(ii)(B), and 1003.3(c)(12)). The changes to Regulation B in this rule are summarized briefly in this section and discussed in detail below. 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 regulation only addresses the procedures for state application for exemption from the provisions of the Act. The Bureau does not have an estimate of the number of rural community banks that are currently exempt from HMDA reporting and originate at least 25 loans per year. 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. 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. I'd first recommend that you go review this section and the applicable Official Staff Commentary. fbS`}R7E_ |.rgxp,gh bWFdd~N2 ]_r'xj`-]JRZPT/]kM;U::. The Bureau believes that, absent this change, entities that currently report race and ethnicity data under Regulation C could conclude that they have different obligations under Regulation B and Regulation C once the 2015 HMDA Final Rule goes into effect on January 1, 2018. Accordingly, the Bureau is finalizing the Regulation B appendix as proposed, without including the 2016 URLA. 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. 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. 10. 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. 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. Section IV. 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). Copies. 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. better and aid in comparing the online edition to the print edition. 12 U.S.C. are not part of the published document itself. The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires each agency to consider the potential impact of its regulations on small entities, including small business, small governmental units, and small nonprofit organizations. Register (ACFR) issues a regulation granting it official legal status. 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. Principal residence. 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. 8. 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. Definition, Legality, and Effects, Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B). 4, 2017). 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. 3. A creditor that uses a computerized or mechanized system Start Printed Page 45696need not keep a paper copy of a document (for example, of an adverse action notice) if it can regenerate all pertinent information in a timely manner for examination or other purposes. Transactions not covered. The Enterprises have announced that they will cease accepting older versions of the URLA at a date to be determined and require firms that sell to the Enterprises to use the 2016 URLA form. 15 U.S.C. Section 1002.13(b) through (c) provides instructions on the manner of collection. 3. The Bureau requested comment regarding the costs and benefits associated with this provision. ii. The rule is effective on January 1, 2018, except that the amendment to Appendix B to Part 1002 revising paragraph 1 and removing the existing Uniform Residential Loan Application form in amendatory instruction 6 is effective January 1, 2022. %%EOF Sc~|~??lW@l 80 FR 66128, 66187-88 (Oct. 28, 2015). 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 *. One of the exceptions to the reporting requirements under HMDA is for entities that do not have a branch or home office located in an MSA. The benefits may be somewhat larger for depository institutions and credit unions with less than $10 billion in assets because the relative costs of duplicative collection will be greater for these entities. The Bureau received several comments on the proposal concerning the 2015 HMDA Final Rule. 44. 33. The Bureau received no comments on its proposal and so is removing the commentary to the Regulation B appendix in this final rule. 5. The Bureau is adopting comment 13(a)-8 as proposed. Applications through loan-shopping services. With some exceptions, Regulation B 1002.5(b) prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person (protected applicant-characteristic information) in connection with a credit transaction. 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). Amend 1002.13 by revising paragraph (a)(1)(i) and paragraph (b) to read as follows: (A) For ethnicity, the aggregate categories Hispanic or Latino and not Hispanic or Latino; and, for race, the aggregate categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White; or. The applicant(s) shall be asked but not required to supply the requested information. Public Law 111-203, 124 Stat. 31. the official SGML-based PDF version on govinfo.gov, those relying on it for 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 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. Complying with both Regulations B and C would require burdensome and duplicative collection of race and ethnicity data at both the aggregated and disaggregated level. In this Issue, Documents Section 1002.5(a)(2) provides several exceptions to that prohibition for information that creditors are required to request for certain dwelling-secured loans under 1002.13, and for information required by a regulation, order, or agreement issued by or entered into with a court or an enforcement agency to monitor or enforce compliance with ECOA, Regulation B or other Federal or State statutes or regulations, including Regulation C. Section 1002.13 sets forth rules for collecting information about an applicant's ethnicity, race, sex, marital status, and age under Regulation B. The consumer advocacy groups stated that mandatory disaggregated collection would ensure uniform data collection practices and facilitate fair lending analysis, including identifying potential discrimination against racial and ethnic subgroups. Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017). 17. 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 This site displays a prototype of a Web 2.0 version of the daily 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. Unlike the costs associated with the adoption of the 2016 URLA, these costs would not otherwise be incurred in the normal course of business. 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]. The Bureau also believes that permitting creditors to collect certain protected applicant-characteristic information in these circumstances provides a narrow exception to the general limitations in 1002.5(b) through (d) respects the purposes of those prohibitions. For class actions, the creditor could face a penalty of $500,000 or 1% of the creditors net worth, whichever is lower. 2. "Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)," Page 3. 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. An application for temporary financing to construct a dwelling is not subject to 1002.13. 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]. . [30] Sections with amendments are marked with an asterisk (*). Section 1002.5(a)(2) further provides that a creditor may obtain information required by a regulation, order, or agreement issued by, or entered into with, a court or an enforcement agency to monitor or enforce compliance with ECOA, Regulation B, or other Federal or State statutes and regulations. on FederalRegister.gov 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). 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. 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). Persons such as loan brokers and correspondents do not violate the ECOA or Regulation B if they collect information that they are otherwise prohibited from collecting, where the purpose of collecting the information is to provide it to a creditor that is subject to the Home Mortgage Disclosure Act or another Federal or state statute or regulation requiring data collection. See Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017); see also Press Release, Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the direction of the FHFA, The Redesigned URLA and ULAD Mapping Document Are Here!, (Aug. 23, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf. New Documents on To determine whether the credit union is in compliance with those requirements of ECOA that are set forth in Regulation B. In addition, there are state laws that provide protections. 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; and the fourth in transactions involving community property or occurring in community property States. 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