Reg B '09 SS fin_mtd

Supporting Statement for Information Collection
Provisions of Regulation B
(Equal Credit Opportunity Act)
12 CFR 202
(OMB Control Number: 3084-0087)
1.

Necessity for Collecting and Retaining the Information

The Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. 1691 et seq., was enacted to
ensure that credit is made available to all creditworthy applicants without discrimination on the
basis of sex, marital status, race, color, religion, national origin, or age. The ECOA also
prohibits discrimination because an applicant's income is derived from a public assistance
program, or because the applicant has in good faith exercised any right under the Consumer
Credit Protection Act.
The Federal Reserve Board (“FRB”) promulgated Regulation B to implement the ECOA,
as required by the statute. The ECOA applies to anyone who regularly extends or arranges for
the extension of credit and to an assignee who participates in the decision to extend credit.1 The
Federal Trade Commission (“FTC” or “Commission”) enforces the ECOA as to all creditors
except those (such as federally chartered or insured depository institutions) that are subject to the
regulatory authority of another federal agency. The ECOA also contains a private right of action
with a two-year statute of limitations for aggrieved applicants.
Recordkeeping
Section 202.12(b) of Regulation B requires creditors to retain records relating to
consumer credit applications for 25 months from the date that the applicant is notified of the
action taken on the application or, where notice is not required, for 25 months from the date of
the application. When a creditor takes adverse action on an existing account, the creditor must
retain records for 25 months after the applicant is notified of the action taken. Records of
business credit applications must be retained for comparable 12 month periods, with certain
exceptions. Regulation B also requires creditors who have been informed that they are the
subject of an investigation by the FTC (or another agency) regarding their compliance with the
ECOA to retain such records until the agency or a court informs the creditor that retention is no
longer necessary. Moreover, Regulation B requires creditors to retain all written or recorded
information about a self-test (including corrective action), as defined in Section 202.15 of
Regulation B, for 25 months after a self-test has been completed (and longer under some
circumstances). Regulation B also requires creditors to retain certain prescreened solicitation
materials for 25 months after the date on which an offer of credit is made to potential customers

1

The law applies to a person who, in the ordinary course of business, regularly participates in a credit
decision, including setting the terms of credit. See Section 202.2(l) of Regulation B. It includes assignees and
others, but not potential assignees who establish underwriting guidelines for their purchases yet do not
influence individual credit decisions. See 68 FR 13,144 (2003).

(12 months for business credit, with certain exceptions).2 The recordkeeping requirement
ensures that records that might contain evidence of violations of the ECOA remain available to
the FTC, other agencies, and private litigants.
Disclosure3
Section 202.9 of Regulation B requires creditors to provide notice (within specified time
periods) to applicants for credit against whom adverse action is taken.4 Generally, the required
notice must be in writing and contain: a statement of the action taken; the name and address of
the creditor; a statement describing the anti-discrimination provisions of the ECOA; the name
and address of the federal agency that administers compliance as to the creditor; and either a
statement of specific reasons for the action taken or a notice of the applicant's right to obtain
such a statement.
Section 202.10 of Regulation B requires creditors that furnish credit information to
consumer reporting agencies to designate accounts to reflect the participation of both spouses, if
the applicant’s spouse is permitted to use or is contractually liable on the account.
Section 202.13 of Regulation B requires that creditors who receive applications for
certain mortgage credit requests, as part of the application process, obtain information about the
applicant’s race/national origin, sex, marital status, and age. The information may be requested
on the application form or on a separate form that refers to the application. The applicant is
asked but not required to supply the information. If the applicant chooses not to provide the
information or any part of it, the creditor must note that fact on the form and must note, to the
extent possible, the race/national origin and sex of the applicant on the basis of visual
observation or surname. The creditor is required to inform the applicant that the information is
sought by the federal government to help monitor compliance with federal statutes that prohibit
creditors from discriminating against applicants based on the above-noted factors. An agency
charged with the administrative enforcement of the ECOA, including the FTC, may substitute its
own monitoring program for that described in § 202.13 of Regulation B.
Section 202.14 of Regulation B requires that creditors notify mortgage credit applicants
of their right to receive a copy of the appraisal report prepared in connection with the
application. The requirement that the creditor provide a copy of the appraisal report upon the
applicant's request is statutorily mandated by Section 1691(e) of the ECOA. The requirement
that applicants be notified of this right is not specifically mandated by the ECOA. Regulation B

2

The records are generally already retained by creditors in connection with their business operations in part
due to the credit extension that will be made to responding applicants.
3

Regulation B permits many disclosures to be made orally. Any required written disclosures must be made
clearly and conspicuously and in a form the applicant can retain.
4

For incomplete applications, creditors may initially provide the adverse action notice or a notice of
incompleteness.

2

allows creditors to avoid the notice requirement by providing the appraisal report itself to all
applicants for whom an appraisal is performed in the first instance. Creditors may also avoid the
burden of sending a separate notice by including the notice of the right to an appraisal in an
adverse action notice or by placing the notice on the application form or other documents
provided to the applicant.
Under Sections 202.5(b) and 202.15 of Regulation B, creditors that collect applicant
characteristics for purposes of conducting a self-test under Regulation B must disclose, orally or
in writing, that providing the information is optional, that the creditor will not take into account
the information in any aspect of the credit transactions, and, if applicable, that the information
will be noted by visual observation or surname, if the applicant chooses not to provide it.
The requirement that spousal credit history information on shared accounts be reported
under both spouses’ names (if it is reported at all) is intended to ensure that each spouse has the
benefit of that shared credit history from which to seek and obtain further credit. The
requirement that a notice of adverse action be provided assists applicants in detecting unlawful
discrimination, correcting errors that may have occurred in the evaluation of their applications,
and learning how to become more creditworthy. The requirement that information about the
race/national origin, sex, marital status, and age of applicants be collected helps the FTC, other
enforcement agencies, and private litigants to determine whether creditors discriminated against
applicants on those bases. The collateral requirement that applicants be notified of the purpose
for collecting this information helps to ensure that the information is provided. The applicants'
right to a copy of the appraisal allows applicants to determine the role that the appraisal played
in the credit decision; the collateral requirement that applicants be informed of their right to
obtain a copy of the appraisal helps applicants take advantage of this right. The self-testing
disclosure helps applicants understand the nature of the information collection process.
The FRB has issued model forms that may be used to comply with the notice
requirements of the ECOA and Regulation B. See Appendices B and C to Regulation B. Correct
use of these model forms insulates creditors from liability for the respective requirements under
the ECOA and Regulation B. Id.
2.

Use of the Information

The FTC, other agencies, and private litigants use recordkeeping information to compare
accepted and rejected applicants in order to determine whether applicants are treated less
favorably on the basis of race, sex, age, or other prohibited bases under the ECOA. Information
derived from these records has been the primary evidence of law violations in most of the ECOA
enforcement actions brought by the FTC. Self-testing records (including for corrective action)
are used by creditors to identify potential violations and reflect their efforts to correct the
problem. Absent the Regulation B requirement that creditors retain monitoring information, the
FTC's ability to detect unlawful discrimination and enforce the ECOA would be significantly
impaired.
The FTC, other agencies, and private litigants use adverse action notices, appraisal
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reports, and other information in the application file to compare accepted and rejected applicants
in order to determine whether any applicants are discriminated against on the basis of
race/national origin, sex, marital status, age, or other prohibited bases under the ECOA.
Information derived from these records has been the primary evidence of law violations in most
of the ECOA enforcement actions brought by the FTC. The adverse action notice requirement
apprises applicants of their rights under the ECOA and of the basis for a creditor's decision.
Applicants use their copy of the appraisal to review (and possibly challenge) the accuracy and/or
fairness of the information contained within, and to determine the role that the appraisal played
in the credit decision. Applicants use the self-testing disclosure to facilitate understanding of
creditors’ information collection, including its optionality.
3.

Consideration of the Use of Improved Information Technology

The FRB has issued final rules to establish uniform standards for using electronic
communication to deliver disclosures required under Regulation B, within the context of the
Electronic Signatures in Global and National Commerce Act (“ESIGN”), 15 U.S.C. 7001 et seq.
72 FR 63,445 (Nov. 9, 2007). These rules enable businesses to utilize electronic disclosures and
compliance, consistent with the requirements of ESIGN, which became effective on Oct. 1,
2000. Use of such electronic communications is also consistent with the Government Paperwork
Elimination Act (“GPEA”), Title XVII of Pub. L. 105-277, codified at 44 U.S.C. 3504, note.
ESIGN and GPEA serve to reduce businesses’ compliance burden related to federal
requirements, including Regulation B, by enabling creditors to utilize more efficient electronic
media for disclosures and compliance.
Regulation B also permits a creditor to retain records as “carbon copies, photocopies,
microfilm or microfiche copies, or copies produced by any other accurate retrieval system, such
as documents stored and reproduced by computer.” Section 202.12(b)-1 of the FRB Official
Staff Commentary on Regulation B (“Commentary”). In addition, Regulation B permits a
creditor to record the information required for monitoring purposes “by recording on paper or by
means of computer . . . .” Section 202.13(b)-2 of the Commentary.
4.

Efforts to Identify Duplication/Availability of Similar Information

The recordkeeping requirement of Regulation B preserves the information considered by
the creditor in deciding whether to extend credit or terminate an existing credit account. The
creditor is the only source of this information, and no other federal law mandates its retention.
State laws do not duplicate these requirements.5 Similarly, the creditor is the only source of the
5

Regarding prescreened solicitations, Section 615(d) of the Fair Credit Reporting Act (“FCRA”) requires
retention of some, but not identical, information required by the ECOA. Among other things, the FCRA
requires persons who use information in consumer reports to select consumers to receive certain offers of
credit to maintain the criteria used to select the consumer, for three years from the date the credit offer is
made. The ECOA focuses on creditors, includes certain business applicants, and also addresses the
solicitation including the text and any related complaints. The FRB enacted these rules to ensure that creditors
would retain all necessary information for enforcement and avoidance of circumvention of the ECOA.

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information provided by appraisal reports, adverse action notices, and self-testing information,
and no other federal law mandates their disclosure nor is staff aware of any state law mandating
their disclosure.
Regulation C under the Home Mortgage Disclosure Act (“HMDA”) requires mortgage
lenders subject to that Act to collect and report information about the race or national origin and
sex of applicants. The data collection requirements of HMDA are similar, but not identical to,
those of the ECOA. However, the FTC has no enforcement authority for HMDA, and ordinarily
has no right to obtain this information except to the extent that it becomes publicly available.
Moreover, the HMDA information released publicly does not include identifying information
about individual applicants. Thus, the ECOA monitoring information is less useful to FTC staff
in its enforcement efforts than is the ECOA monitoring information. The creditor is also the
only source of the credit history reporting information regarding the applicant’s spouse.
5.

Efforts to Minimize Burdens on Small Businesses

The ECOA and Regulation B accord special treatment to creditors that receive fewer than
150 applications each year. Section 202.9(d) of the Regulation states that such creditors may
provide required notices to rejected applicants orally rather than in writing. Where fewer written
records are required to be created, the recordkeeping burden is correspondingly reduced. In
addition, Section 202.3(c) of the Regulation exempts providers of incidental credit, such as a
doctor or lawyer who allows a patient or client to defer payment of a bill, from many
requirements including notifications under Section 202.9 of the Regulation and recordkeeping.
The requirements to collect monitoring information and to provide a copy of the appraisal report
apply to all creditors who extend applicable mortgage credit. There is no exception based on
creditor size.
Most creditors today utilize some degree of computerization in their business, which
further assists in facilitating compliance with the Regulation. Additionally, as noted above,
Regulation B provides model forms that may be used in compliance with its requirements.
Correct use of these forms insulates creditors from liability from the respective requirements.
6.

Consequences of Conducting Collection Less Frequently

The current record retention period of 25 months supports the two-year statute of
limitations for private actions, and the FTC’s (and other administrative agencies’) need for
sufficient time to bring enforcement actions regarding ECOA issues. If the retention period were
shortened, applicants who sue under the ECOA, and administrative agencies that enforce the
ECOA, might find that the records needed to prove ECOA violations no longer exist.
Were the requirement that creditors provide notice of adverse action eliminated,
applicants could be deprived of the right to receive timely notice of the creditor's decision, the
reasons for any adverse action by the creditor, and the applicants' rights under the ECOA.
Eliminating the requirement that creditors provide a copy of the appraisal report or notice of its
availability would greatly impair applicants’ ability to assess the report’s impact on the
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creditor’s decision and to challenge it in timely fashion. Were the requirement that creditors
collect information about an applicant's race or national origin eliminated or changed, the
creditor would still have access to this information when obtained through a face-to-face
interview with the applicant and could use the information to discriminate. However, the FTC
and others seeking to enforce compliance with the ECOA would not have that information and
would thereby be disadvantaged. Eliminating the self-test disclosure (which can be made orally
or in writing) could disadvantage consumers who may then not understand the purpose of the
information being collected, or their option not to provide it. Finally, eliminating the credit
history reporting requirement regarding spouses with shared accounts would undermine the goal
of affording both spouses the benefit of that shared credit history in seeking further credit.
7.

Circumstances Requiring Collection Inconsistent with Guidelines

Regulation B's recordkeeping and disclosure requirements are consistent with the
guidelines contained in 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

Both the recordkeeping and the notice requirements of Regulation B were promulgated
by the FRB. Before the regulation was initially adopted and prior to each amendment, the FRB
published the regulation for public comment in the Federal Register.
More recently, the Commission sought public comment in connection with its latest PRA
clearance request for these regulations, in accordance with 5 CFR 1320.8(d). See 73 FR 70,347
(Nov. 20, 2008). No comments were received. Consistent with 5 CFR 1320.12(c), the FTC is
again seeking public comment contemporaneously with this submission.
9.

Payments or Gifts to Respondents
Not applicable.

10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

The required recordkeeping and written disclosures contain private financial information
about applicants for consumer credit. Such information is protected by the Right to Financial
Privacy Act, 12 U.S.C. 3401 et seq. Such records may also constitute confidential customer
lists. Any of these records provided to the FTC would be covered by the protections of Sections
6(f) and 21 of the FTC Act, 15 U.S.C. 46(f) and 57b-2, by Section 4.10 of the Commission's
Rules of Practice, 16 CFR 4.10, and by the exemptions of the Freedom of Information Act,
5 U.S.C. 552(b), as applicable.

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12.

Estimated Hours Burden: 3,129,437 (1,153,500 recordkeeping hours + 1,975,937
disclosure hours).
Recordkeeping

FTC staff estimates that Regulation B’s general recordkeeping requirements affect
1,000,000 credit firms subject to the Commission’s jurisdiction, at an average annual burden of 1
hour per firm, for a total of 1,000,000 hours. Staff also estimates that the requirement that
mortgage creditors monitor information about race/national origin, sex, age, and marital status
imposes a maximum burden of one minute each for approximately 9 million credit applications
(based on industry data regarding the approximate number of mortgage purchase and refinance
originations), for a total of 150,000 hours.6 Staff also estimates that recordkeeping of self-testing
subject to the regulation would affect 2,500 firms, with an average annual burden of one hour per
firm, for a total of 2,500 hours, and that recordkeeping of any corrective action for self-testing
would affect 250 firms in a given year, with an average annual burden of four hours per firm, for
a total of 1,000 hours.7 The total estimated recordkeeping burden is 1,153,500 hours.
Disclosure
Regulation B requires that creditors (i.e., entities that regularly participate in the decision
whether to extend credit under Regulation B) provide notices whenever they take adverse action.
It requires entities that extend various types of mortgage credit to provide a copy of the appraisal
report to applicants or to notify them of their right to a copy of the report (and thereafter provide
a copy of the report, upon the applicant’s request). Finally, Regulation B also requires that for
accounts which spouses may use or for which they are contractually liable, creditors who report
credit history must do so in a manner reflecting both spouses’ participation. Further, it requires
creditors that collect applicant characteristics for purposes of conducting a self-test to disclose to
those applicants that providing the information is optional, that the creditor will not take the
information into account in any aspect of the credit transactions, and, if applicable, that the
information will be noted by visual observation or surname if the applicant chooses not to
provide it.8
Regulation B applies to retailers, mortgage lenders, mortgage brokers, finance
companies, and others. Below is staff’s best estimate of burden applicable to this very broad
spectrum of covered entities.

6

Regulation B contains model forms that creditors may use to gather and retain the required information.

7

In contrast to banks, for example, entities under FTC jurisdiction are not subject to regular audits for
financial regulatory compliance with Regulation B; rather they may be subject to investigations and
enforcement actions. This may impact the level of self-testing (as specifically defined by Regulation B) in a
given year, and staff has sought to address such factors in its burden estimates.

8

The disclosure may be provided orally or in writing. Regulation B provides a model form to assist creditors
in providing the written disclosure.

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Regulation B: Disclosures – Burden Hours

Disclosures

Credit history reporting
Adverse action notices
Appraisal notices
Appraisal reports
Self-test disclosures

--------------- Setup/Monitoring1 --------------Average
Total Setup/
Burden per
Monitoring
Respondents Respondent
Burden
(hours)
(hours)
250,000
1,000,000
20,000
20,000
2,500

.25
.5
.5
.5
.5

62,500
500,000
10,000
10,000
1,250

--------- Transaction-related2----------Average
Total
Number of Burden per Transaction
Transactions Transaction
Burden
(minutes)
(hours)
125,000,000
200,000,000
4,500,000
4,500,000
125,000

Total

.25
.25
.25
.25
.25

520,833
833,333
18,750
18,750
521

Total
Burden
(hours)
583,333
1,333,333
28,750
28,750
1,771
1,975,937

1

With respect to appraisal notices and appraisal reports, the above figures reflect a decrease in applicable mortgage entities. The figures assume
that approximately half of those entities (.5 x 40,000, or 20,000 businesses) would not otherwise provide this information and thus would be
affected. The figures also assume that all applicable entities would provide notices first and thereafter provide the reports upon request.
2
The above figures reflect a decrease in mortgage transactions compared to prior FTC estimates. They assume that half of applicable mortgage
transactions (.5 x 9,000,000, or 4,500,000) would not otherwise provide the appraisal notices and reports and thus would be affected.

Associated labor cost: $ 83,456,633
Staff calculated labor costs by applying appropriate hourly cost figures to the burden
hours described above. The hourly rates used below ($41 for managerial or professional time,
$30 for skilled technical time, and $16 for clerical time) are averages.
Recordkeeping
Staff estimates that the general recordkeeping responsibility of one hour per creditor
would involve approximately 90 percent clerical time and 10 percent skilled technical time.
Keeping records of race/national origin, sex, age, and marital status requires an estimated one
minute of skilled technical time. Keeping records of the self-test responsibility and of any
corrective actions requires an estimated one hour and four hours, respectively, of skilled
technical time. As shown below, the total recordkeeping cost is $22,005,000.
Disclosure
For each notice or information item listed, staff estimates that the burden hours consist of
10 percent managerial or professional time and 90 percent skilled technical time. As shown
below, the total disclosure cost is $61,451,633.

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Regulation B: Recordkeeping and Disclosures – Cost

Required Task

------Managerial-----Time
Cost
(hours)
($41/hr.)

General recordkeeping
Other recordkeeping
Recordkeeping of test
Recordkeeping of corrective action

0
0
0
0

$0
$0
$0
$0

-----Skilled Technical----Time
Cost
(hours)
($30/hr.)
100,000
150,000
2,500
1,000

$3,000,000
$4,500,000
$75,000
$30,000

--------Clerical-------Time
Cost
(hours)
($16/hr.)
900,000 $14,400,000
0
$0
0
$0
0
$0

Total Recordkeeping
Credit history reporting
Adverse action notices
Appraisal notices
Appraisal reports
Self-test disclosure

Total
Cost
($)
$17,400,000
$4,500,000
$75,000
$30,000
$22,005,000

58,333
133,333
2,875
2,875
177

$2,391,653
$5,466,653
$117,875
$117,875
$7,257

525,000 $15,750,000
1,200,000 $36,000,000
25,875
$776,250
25,875
$776,250
1,594
$47,820

0
0
0
0
0

$0
$0
$0
$0
$0

$18,141,653
$41,466,653
$894,125
$894,125
$55,077

Total Disclosures

$61,451,633

Total Recordkeeping and Disclosures

$83,456,633

13.

Estimated Capital and Other Non-Labor Costs

The applicable requirements impose minimal start-up costs, as lenders generally have or
obtain necessary equipment for other business purposes. For the same reason, staff believes that
the cost of printing and copying needed to comply with Regulation B is minimal. Staff
anticipates that the above requirements necessitate ongoing, regular training so that lenders stay
current and have a clear understanding of federal mandates. This training, however, would be a
small portion of and subsumed within the ordinary training that employees receive apart from
that associated with collecting information to comply with Regulation B.
14.

Estimated Cost to the Federal Government

The FRB promulgated the recordkeeping requirement of Regulation B, so there is no cost
to the FTC for that purpose. Enforcement of the recordkeeping requirements of Regulation B is
incidental to overall enforcement of the ECOA. In the course of compliance investigations, staff
routinely requests records of credit applications. If the records requested are not available, it
indicates that records are not being retained as required. Staff estimates that enforcing this
requirement will cost the FTC Bureau of Consumer Protection no more than $78,593, which is a
representative years’ cost of enforcing Regulation B’s requirements during the three-year
clearance period sought. This estimate is based on the assumption that one-half of one attorney
work year will be expended. Clerical and other support services are included in this estimate.
The FRB promulgated the Regulation B disclosure requirements, so there is no cost to
the FTC for that purpose. Regarding enforcement, staff estimates that the cost to the FTC
Bureau of Consumer Protection for this requirement will approximate $628,736. This estimate
is based on the assumption that three attorney work years and one other professional work year
will be expended to enforce various aspects of these rules. Clerical and other support services
are also included in this estimate.

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15.

Program Changes or Adjustments

Staff has decreased the prior annual burden estimate by 559,563 hours (from 3,689,000 to
3,129,437). This is attributable to a decrease in the number of mortgage entities and mortgage
transactions, relative to prior FTC estimates.
16.

Publishing Results of the Collection of Information
Not applicable.

17.

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certification for PRA Submissions
Not applicable.

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