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pdf1002.10 Furnishing of credit information.
1002.11 Relation to state law.
1002.12 Record retention.
1002.13 Information for monitoring purposes.
1002.14 Rules on providing appraisal reports.
1002.15 Incentives for self-testing and selfcorrection.
1002.16 Enforcement, penalties and liabilities.
APPENDIX A TO PART 1002—FEDERAL AGENCIES TO BE LISTED IN ADVERSE ACTION NO-
PART 1000 [RESERVED]
PART 1001—FINANCIAL PRODUCTS
OR SERVICES
Sec.
1001.1
1001.2
Authority and purpose.
Definitions.
AUTHORITY: 12 U.S.C. 5481(15)(A)(xi); and 12
U.S.C. 5512(b)(1).
TICES
SOURCE: 80 FR 37526, June 30, 2015, unless
otherwise noted.
APPENDIX B TO PART 1002—MODEL APPLICATION FORMS
APPENDIX C TO PART 1002—SAMPLE NOTIFICATION FORMS
APPENDIX D TO PART 1002—ISSUANCE OF OFFICIAL INTERPRETATIONS
SUPPLEMENT I TO PART 1002—OFFICIAL INTER-
§ 1001.1 Authority and purpose.
Under 12 U.S.C. 5481(15)(A)(xi), the
Bureau is authorized to define certain
financial products or services for purposes of title X of the Dodd-Frank Act,
Public Law 111–203, 124 Stat. 1376 (2010)
(Title X) in addition to those defined in
12 U.S.C. 5481(15)(A)(i)–(x). The purpose
of this part is to implement that authority.
PRETATIONS
AUTHORITY: 12 U.S.C. 5512, 5581; 15 U.S.C.
1691b.
SOURCE: 76 FR 79445, Dec. 21, 2011, unless
otherwise noted.
§ 1002.1 Authority, scope and purpose.
(a) Authority and scope. This part,
known as Regulation B, is issued by
the Bureau of Consumer Financial Protection (Bureau) pursuant to title VII
(Equal Credit Opportunity Act) of the
Consumer Credit Protection Act, as
amended (15 U.S.C. 1601 et seq.). Except
as otherwise provided herein, this part
applies to all persons who are creditors, as defined in § 1002.2(l), other than
a person excluded from coverage of this
part by section 1029 of the Consumer
Financial Protection Act of 2010, title
X of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111–203, 124 Stat. 1376. Information collection requirements contained in this part have been approved
by the Office of Management and Budget under the provisions of 44 U.S.C. 3501
et seq. and have been assigned OMB No.
3170–0013.
(b) Purpose. The purpose of this part
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); to the fact that all or part of
the applicant’s income derives from a
public assistance program; or to the
fact that the applicant has in good
faith exercised any right under the
Consumer Credit Protection Act. The
§ 1001.2 Definitions.
Except as otherwise provided in Title
X, in addition to the definitions set
forth in 12 U.S.C. 5481(15)(A)(i)–(x), the
term ‘‘financial product or service’’
means, for purposes of Title X:
(a) Extending or brokering leases of
an automobile, as automobile is defined by 12 CFR 1090.108(a), where the
lease:
(1) Qualifies as a full-payout lease
and a net lease, as provided by 12 CFR
23.3(a), and has an initial term of not
less than 90 days, as provided by 12
CFR 23.11; and
(2) Is not a financial product or service under 12 U.S.C. 5481(15)(A)(ii).
(b) [Reserved]
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PART 1002—EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)
Sec.
1002.1 Authority, scope and purpose.
1002.2 Definitions.
1002.3 Limited exceptions for certain classes
of transactions.
1002.4 General rules.
1002.5 Rules concerning requests for information.
1002.6 Rules concerning evaluation of applications.
1002.7 Rules concerning extensions of credit.
1002.8 Special purpose credit programs.
1002.9 Notifications.
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§ 1002.2
12 CFR Ch. X (1–1–21 Edition)
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regulation prohibits creditor practices
that discriminate on the basis of any of
these factors. 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; and to provide applicants
with copies of appraisal reports used in
connection with credit transactions.
class of the creditor’s accounts, or
when the refusal is a denial of an application for an increase in the amount of
credit available under the account;
(iv) A refusal to extend credit because applicable law prohibits the creditor from extending the credit requested; or
(v) A refusal to extend credit because
the creditor does not offer the type of
credit or credit plan requested.
(3) An action that falls within the
definition of both paragraphs (c)(1) and
(c)(2) of this section is governed by
paragraph (c)(2) of this section.
(d) Age refers only to the age of natural persons and means the number of
fully elapsed years from the date of an
applicant’s birth.
(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
§ 1002.7(d), the term includes guarantors, sureties, endorsers, and similar
parties.
(f) Application means an oral or written request for an extension of credit
that is made in accordance with procedures used by a creditor for the type of
credit requested. The term application
does not include the use of an account
or line of credit to obtain an amount of
credit that is within a previously established credit limit. A completed application means an application in connection with which a creditor has received all the information that the
creditor regularly obtains and considers in evaluating applications for
the amount and type of credit requested (including, but not limited to,
credit reports, any additional information requested from the applicant, and
any approvals or reports by governmental agencies or other persons that
are necessary to guarantee, insure, or
provide security for the credit or collateral). The creditor shall exercise
reasonable diligence in obtaining such
information.
(g) Business credit refers to extensions
of credit primarily for business or commercial (including agricultural) purposes, but excluding extensions of credit of the types described in § 1002.3(a)–
(d).
§ 1002.2 Definitions.
For the purposes of this part, unless
the context indicates otherwise, the
following definitions apply.
(a) Account means an extension of
credit. When employed in relation to
an account, the word use refers only to
open-end credit.
(b) Act means the Equal Credit Opportunity Act (Title VII of the Consumer Credit Protection Act).
(c) Adverse action. (1) The term
means:
(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;
(ii) A termination of an account or
an unfavorable change in the terms of
an account that does not affect all or
substantially all of a class of the creditor’s accounts; or
(iii) A refusal to increase the amount
of credit available to an applicant who
has made an application for an increase.
(2) The term does not include:
(i) A change in the terms of an account expressly agreed to by an applicant;
(ii) Any action or forbearance relating to an account taken in connection
with inactivity, default, or delinquency
as to that account;
(iii) A refusal or failure to authorize
an account transaction at point of sale
or loan, except when the refusal is a
termination or an unfavorable change
in the terms of an account that does
not affect all or substantially all of a
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Bur. of Consumer Financial Protection
§ 1002.2
(h) Consumer credit means credit extended to a natural person primarily
for personal, family, or household purposes.
(i) Contractually liable means expressly obligated to repay all debts
arising on an account by reason of an
agreement to that effect.
(j) Credit means the right granted by
a creditor to an applicant to defer payment of a debt, incur debt and defer its
payment, or purchase property or services and defer payment therefor.
(k) Credit card means any card, plate,
coupon book, or other single credit device that may be used from time to
time to obtain money, property, or
services on credit.
(l) Creditor means a person who, in
the ordinary course of business, regularly participates in a credit decision,
including setting the terms of the credit. The term creditor includes a creditor’s assignee, transferee, or subrogee
who so participates. For purposes of
§§ 1002.4(a) and (b), the term creditor
also includes a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers
to select creditors to whom requests
for credit may be made. A person is not
a creditor regarding any violation of
the Act or this part committed by another creditor unless the person knew
or had reasonable notice of the act,
policy, or practice that constituted the
violation before becoming involved in
the credit transaction. The term does
not include a person whose only participation in a credit transaction involves honoring a credit card.
(m) Credit transaction means every aspect of an applicant’s dealings with a
creditor regarding an application for
credit or an existing extension of credit
(including, but not limited to, information requirements; investigation procedures; standards of creditworthiness;
terms of credit; furnishing of credit information; revocation, alteration, or
termination of credit; and collection
procedures).
(n) Discriminate against an applicant
means to treat an applicant less favorably than other applicants.
(o) Elderly means age 62 or older.
(p) Empirically derived and other credit
scoring systems—(1) A credit scoring sys-
tem is a system that evaluates an applicant’s creditworthiness mechanically,
based on key attributes of the applicant and aspects of the transaction,
and that determines, alone or in conjunction with an evaluation of additional information about the applicant,
whether an applicant is deemed creditworthy. To qualify as an empirically derived, demonstrably and statistically
sound, credit scoring system, the system
must be:
(i) Based on data that are derived
from an empirical comparison of sample groups or the population of creditworthy and non-creditworthy applicants who applied for credit within a
reasonable preceding period of time;
(ii) Developed for the purpose of evaluating the creditworthiness of applicants with respect to the legitimate
business interests of the creditor utilizing the system (including, but not
limited to, minimizing bad debt losses
and operating expenses in accordance
with the creditor’s business judgment);
(iii) Developed and validated using
accepted statistical principles and
methodology; and
(iv) Periodically revalidated by the
use of appropriate statistical principles
and methodology and adjusted as necessary to maintain predictive ability.
(2) A creditor may use an empirically
derived, demonstrably and statistically
sound, credit scoring system obtained
from another person or may obtain
credit experience from which to develop such a system. Any such system
must satisfy the criteria set forth in
paragraph (p)(1)(i) through (iv) of this
section; if the creditor is unable during
the development process to validate
the system based on its own credit experience in accordance with paragraph
(p)(1) of this section, the system must
be validated when sufficient credit experience becomes available. A system
that fails this validity test is no longer
an empirically derived, demonstrably
and statistically sound, credit scoring
system for that creditor.
(q) Extend credit and extension of credit
mean the granting of credit in any
form (including, but not limited to,
credit granted in addition to any existing credit or credit limit; credit granted pursuant to an open-end credit plan;
the refinancing or other renewal of
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§ 1002.3
12 CFR Ch. X (1–1–21 Edition)
credit, including the issuance of a new
credit card in place of an expiring credit card or in substitution for an existing credit card; the consolidation of
two or more obligations; or the continuance of existing credit without any
special effort to collect at or after maturity).
(r) Good faith means honesty in fact
in the conduct or transaction.
(s) Inadvertent error means a mechanical, electronic, or clerical error that a
creditor demonstrates was not intentional and occurred notwithstanding
the maintenance of procedures reasonably adapted to avoid such errors.
(t) Judgmental system of evaluating applicants means any system for evaluating the creditworthiness of an applicant other than an empirically derived,
demonstrably and statistically sound,
credit scoring system.
(u) Marital status means the state of
being unmarried, married, or separated, as defined by applicable state
law. The term ‘‘unmarried’’ includes
persons who are single, divorced, or
widowed.
(v) Negative factor or value, in relation
to the age of elderly applicants, means
utilizing a factor, value, or weight that
is less favorable regarding elderly applicants than the creditor’s experience
warrants or is less favorable than the
factor, value, or weight assigned to the
class of applicants that are not classified as elderly and are most favored by
a creditor on the basis of age.
(w) Open-end credit means credit extended under a plan in which a creditor
may permit an applicant to make purchases or obtain loans from time to
time directly from the creditor or indirectly by use of a credit card, check, or
other device.
(x) Person means a natural person,
corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.
(y) Pertinent element of creditworthiness, in relation to a judgmental system of evaluating applicants, means
any information about applicants that
a creditor obtains and considers and
that has a demonstrable relationship
to a determination of creditworthiness.
(z) Prohibited basis means race, color,
religion, national origin, sex, marital
status, or age (provided that the applicant has the capacity to enter into a
binding contract); the fact that all or
part of the applicant’s income derives
from any public assistance program; or
the fact that the applicant has in good
faith exercised any right under the
Consumer Credit Protection Act or any
state law upon which an exemption has
been granted by the Bureau.
(aa) State means any state, the District of Columbia, the Commonwealth
of Puerto Rico, or any territory or possession of the United States.
§ 1002.3 Limited exceptions for certain
classes of transactions.
(a) Public utilities credit—(1) Definition. Public utilities credit refers to extensions of credit that involve public
utility services provided through pipe,
wire, or other connected facilities, or
radio or similar transmission (including extensions of such facilities), if the
charges for service, delayed payment,
and any discount for prompt payment
are filed with or regulated by a government unit.
(2) Exceptions. The following provisions of this part do not apply to public
utilities credit:
(i) Section 1002.5(d)(1) concerning information about marital status; and
(ii) Section 1002.12(b) relating to
record retention.
(b) Securities credit (1) Definition. Securities credit refers to extensions of
credit subject to regulation under section 7 of the Securities Exchange Act
of 1934 or extensions of credit by a
broker or dealer subject to regulation
as a broker or dealer under the Securities Exchange Act of 1934.
(2) Exceptions. The following provisions of this part do not apply to securities credit:
(i) Section 1002.5(b) concerning information about the sex of an applicant;
(ii) Section 1002.5(c) concerning information about a spouse or former
spouse;
(iii) Section 1002.5(d)(1) concerning
information about marital status;
(iv) Section 1002.7(b) relating to designation of name to the extent necessary to comply with rules regarding
an account in which a broker or dealer
has an interest, or rules regarding the
aggregation of accounts of spouses to
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Bur. of Consumer Financial Protection
§ 1002.5
the requirements of this part do not
apply to government credit.
determine controlling interests, beneficial interests, beneficial ownership,
or purchase limitations and restrictions;
(v) Section 1002.7(c) relating to action
concerning open-end accounts, to the
extent the action taken is on the basis
of a change of name or marital status;
(vi) Section 1002.7(d) relating to the
signature of a spouse or other person;
(vii) Section 1002.10 relating to furnishing of credit information; and
(viii) Section 1002.12(b) relating to
record retention.
(c) Incidental credit (1) Definition. Incidental credit refers to extensions of
consumer credit other than the types
described in paragraphs (a) and (b) of
this section:
(i) That are not made pursuant to the
terms of a credit card account;
(ii) That are not subject to a finance
charge (as defined in Regulation Z, 12
CFR 1026.4); and
(iii) That are not payable by agreement in more than four installments.
(2) Exceptions. The following provisions of this part do not apply to incidental credit:
(i) Section 1002.5(b) concerning information about the sex of an applicant,
but only to the extent necessary for
medical records or similar purposes;
(ii) Section 1002.5(c) concerning information about a spouse or former
spouse;
(iii) Section 1002.5(d)(1) concerning
information about marital status;
(iv) Section 1002.5(d)(2) concerning information about income derived from
alimony, child support, or separate
maintenance payments;
(v) Section 1002.7(d) relating to the
signature of a spouse or other person;
(vi) Section 1002.9 relating to notifications;
(vii) Section 1002.10 relating to furnishing of credit information; and
(viii) Section 1002.12(b) relating to
record retention.
(d) Government credit—(1) Definition.
Government credit refers to extensions
of credit made to governments or governmental subdivisions, agencies, or
instrumentalities.
(2) Applicability of regulation. Except
for § 1002.4(a), the general rule against
discrimination on a prohibited basis,
§ 1002.4 General rules.
(a) Discrimination. A creditor shall
not discriminate against an applicant
on a prohibited basis regarding any aspect of a credit transaction.
(b) Discouragement. A creditor shall
not make any oral or written statement, in advertising or otherwise, to
applicants or prospective applicants
that would discourage on a prohibited
basis a reasonable person from making
or pursuing an application.
(c) Written applications. A creditor
shall take written applications for the
dwelling-related types of credit covered
by § 1002.13(a).
(d) Form of disclosures—(1) General
rule. A creditor that provides in writing any disclosures or information required by this part must provide the
disclosures in a clear and conspicuous
manner and, except for the disclosures
required by §§ 1002.5 and 1002.13, in a
form the applicant may retain.
(2) Disclosures in electronic form. The
disclosures required by this part that
are required to be given in writing may
be provided to the applicant in electronic form, subject to compliance
with the consumer consent and other
applicable provisions of the Electronic
Signatures in Global and National
Commerce Act (E-Sign Act) (15 U.S.C.
7001 et seq.). Where the disclosures
under
§§ 1002.5(b)(1),
1002.5(b)(2),
1002.5(d)(1), 1002.5(d)(2), 1002.13, and
1002.14(a)(2) accompany an application
accessed by the applicant in electronic
form, these disclosures may be provided to the applicant in electronic
form on or with the application form,
without regard to the consumer consent or other provisions of the E-Sign
Act.
(e) Foreign-language disclosures. Disclosures may be made in languages
other than English, provided they are
available in English upon request.
[76 FR 79445, Dec. 21, 2011, as amended at 78
FR 7248, Jan. 31, 2013]
§ 1002.5 Rules concerning requests for
information.
(a) General rules—(1) Requests for information. Except as provided in paragraphs (b) through (d) of this section, a
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§ 1002.5
12 CFR Ch. X (1–1–21 Edition)
creditor may request any information
in connection with a credit transaction. This paragraph does not limit
or abrogate any Federal or state law
regarding privacy, privileged information, credit reporting limitations, or
similar restrictions on obtainable information.
(2) Required collection of information.
Notwithstanding
paragraphs
(b)
through (d) of this section, a creditor
shall request information for monitoring purposes as required by § 1002.13
for credit secured by the applicant’s
dwelling. In addition, a creditor may
obtain information required by a regulation, order, or agreement issued by,
or entered into with, a court or an enforcement agency (including the Attorney General of the United States or a
similar state official) to monitor or enforce compliance with the Act, this
part, or other Federal or state statutes
or regulations.
(3) Special-purpose credit. A creditor
may obtain information that is otherwise restricted to determine eligibility
for a special purpose credit program, as
provided in § 1002.8(b), (c), and (d).
(4) Other permissible collection of information. Notwithstanding paragraph (b)
of this section, a creditor may collect
information under the following circumstances provided that the creditor
collects the information in compliance
with appendix B to 12 CFR part 1003:
(i) A creditor that is a financial institution under 12 CFR 1003.2(g) may collect information regarding the ethnicity, race, and sex of an applicant for
a closed-end mortgage loan that is an
excluded transaction under 12 CFR
1003.3(c)(11) if it submits HMDA data
concerning such closed-end mortgage
loans and applications or if it submitted HMDA data concerning closedend mortgage loans for any of the preceding five calendar years;
(ii) A creditor that is a financial institution under 12 CFR 1003.2(g) may
collect information regarding the ethnicity, race, and sex of an applicant for
an open-end line of credit that is an excluded transaction under 12 CFR
1003.3(c)(12) if it submits HMDA data
concerning such open-end lines of credit and applications or if it submitted
HMDA data concerning open-end lines
of credit for any of the preceding five
calendar years;
(iii) A creditor that submitted HMDA
data for any of the preceding five calendar years but is not currently a financial institution under 12 CFR
1003.2(g) may collect information regarding the ethnicity, race, and sex of
an applicant for a loan that would otherwise be a covered loan under 12 CFR
1003.2(e) if not excluded by 12 CFR
1003.3(c)(11) or (12);
(iv) A creditor that exceeded an applicable loan volume threshold in the
first year of the two-year threshold period provided in 12 CFR 1003.2(g),
1003.3(c)(11), or 1003.3(c)(12) may, in the
second year, collect information regarding the ethnicity, race, and sex of
an applicant for a loan that would otherwise be a covered loan under 12 CFR
1003.2(e) if the loan were not excluded
by 12 CFR 1003.3(c)(11) or (12);
(v) A creditor that is a financial institution under 12 CFR 1003.2(g), or
that submitted HMDA data for any of
the preceding five calendar years but is
not currently a financial institution
under 12 CFR 1003.2(g), may collect information regarding the ethnicity,
race, and sex of an applicant for a loan
that would otherwise be a covered loan
under 12 CFR 1003.2(e) if the loan were
not excluded by 12 CFR 1003.3(c)(10).
(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.
(b) Limitation on information about
race, color, religion, national origin, or
sex. A creditor shall not inquire about
the race, color, religion, national origin, or sex of an applicant or any other
person in connection with a credit
transaction, except as provided in paragraphs (b)(1) and (b)(2) of this section.
(1) Self-test. A creditor may inquire
about the race, color, religion, national
origin, or sex of an applicant or any
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Bur. of Consumer Financial Protection
§ 1002.5
(3) Other accounts of the applicant. A
creditor may request that an applicant
list any account on which the applicant is contractually liable and to provide the name and address of the person in whose name the account is held.
A creditor may also ask an applicant
to list the names in which the applicant has previously received credit.
(d) Other limitations on information requests—(1) Marital status. If an applicant applies for individual unsecured
credit, a creditor shall not inquire
about the applicant’s marital status
unless the applicant resides in a community property state or is relying on
property located in such a state as a
basis for repayment of the credit requested. If an application is for other
than individual unsecured credit, a
creditor may inquire about the applicant’s marital status, but shall use
only the terms married, unmarried, and
separated. A creditor may explain that
the category unmarried includes single, divorced, and widowed persons.
(2) Disclosure about income from alimony, child support, or separate maintenance. A creditor shall not inquire
whether income stated in an application is derived from alimony, child support, or separate maintenance payments unless the creditor discloses to
the applicant that such income need
not be revealed if the applicant does
not want the creditor to consider it in
determining the applicant’s creditworthiness.
(3) Childbearing, childrearing. A creditor shall not inquire about birth control practices, intentions concerning
the bearing or rearing of children, or
capability to bear children. A creditor
may inquire about the number and
ages of an applicant’s dependents or
about dependent-related financial obligations or expenditures, provided such
information is requested without regard to sex, marital status, or any
other prohibited basis.
(e) Permanent residency and immigration status. A creditor may inquire
about the permanent residency and immigration status of an applicant or any
other person in connection with a credit transaction.
other person in connection with a credit transaction for the purpose of conducting a self-test that meets the requirements of § 1002.15. A creditor that
makes such an inquiry shall disclose
orally or in writing, at the time the information is requested, that:
(i) The applicant will not be required
to provide the information;
(ii) The creditor is requesting the information to monitor its compliance
with the Federal Equal Credit Opportunity Act;
(iii) Federal law prohibits the creditor from discriminating on the basis of
this information, or on the basis of an
applicant’s decision not to furnish the
information; and
(iv) If applicable, certain information
will be collected based on visual observation or surname if not provided by
the applicant or other person.
(2) Sex. An applicant may be requested to designate a title on an application form (such as Ms., Miss, Mr.,
or Mrs.) if the form discloses that the
designation of a title is optional. An
application form shall otherwise use
only terms that are neutral as to sex.
(c) Information about a spouse or
former spouse—(1) General rule. Except
as permitted in this paragraph, a creditor may not request any information
concerning the spouse or former spouse
of an applicant.
(2) Permissible inquiries. A creditor
may request any information concerning an applicant’s spouse (or
former spouse under paragraph (c)(2)(v)
of this section) that may be requested
about the applicant if:
(i) The spouse will be permitted to
use the account;
(ii) The spouse will be contractually
liable on the account;
(iii) The applicant is relying on the
spouse’s income as a basis for repayment of the credit requested;
(iv) The applicant resides in a community property state or is relying on
property located in such a state as a
basis for repayment of the credit requested; or
(v) The applicant is relying on alimony, child support, or separate maintenance payments from a spouse or
former spouse as a basis for repayment
of the credit requested.
[76 FR 79445, Dec. 21, 2011, as amended at 82
FR 45694, Oct. 2, 2017]
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§ 1002.6
12 CFR Ch. X (1–1–21 Edition)
(4) Telephone listing. A creditor shall
not take into account whether there is
a telephone listing in the name of an
applicant for consumer credit but may
take into account whether there is a
telephone in the applicant’s residence.
(5) Income. A creditor shall not discount or exclude from consideration
the income of an applicant or the
spouse of an applicant because of a prohibited basis or because the income is
derived from part-time employment or
is an annuity, pension, or other retirement benefit; a creditor may consider
the amount and probable continuance
of any income in evaluating an applicant’s creditworthiness. When an applicant relies on alimony, child support,
or separate maintenance payments in
applying for credit, the creditor shall
consider such payments as income to
the extent that they are likely to be
consistently made.
(6) Credit history. To the extent that a
creditor considers credit history in
evaluating the creditworthiness of
similarly qualified applicants for a
similar type and amount of credit, in
evaluating an applicant’s creditworthiness a creditor shall consider:
(i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant’s spouse are permitted to use or
for which both are contractually liable;
(ii) On the applicant’s request, any
information the applicant may present
that tends to indicate the credit history being considered by the creditor
does not accurately reflect the applicant’s creditworthiness; and
(iii) On the applicant’s request, the
credit history, when available, of any
account reported in the name of the applicant’s spouse or former spouse that
the applicant can demonstrate accurately reflects the applicant’s creditworthiness.
(7) Immigration status. A creditor may
consider the applicant’s immigration
status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s
rights and remedies regarding repayment.
§ 1002.6 Rules concerning evaluation
of applications.
(a) General rule concerning use of information. Except as otherwise provided in
the Act and this part, a creditor may
consider any information obtained, so
long as the information is not used to
discriminate against an applicant on a
prohibited basis. The legislative history of the Act indicates that the Congress intended an ‘‘effects test’’ concept, as outlined in the employment
field by the Supreme Court in the cases
of Griggs v. Duke Power Co., 401 U.S. 424
(1971), and Albemarle Paper Co. v.
Moody, 422 U.S. 405 (1975), to be applicable to a creditor’s determination of
creditworthiness.
(b) Specific rules concerning use of information. (1) Except as provided in the
Act and this part, a creditor shall not
take a prohibited basis into account in
any system of evaluating the creditworthiness of applicants.
(2) Age, receipt of public assistance. (i)
Except as permitted in this paragraph,
a creditor shall not take into account
an applicant’s age (provided that the
applicant has the capacity to enter
into a binding contract) or whether an
applicant’s income derives from any
public assistance program.
(ii) In an empirically derived, demonstrably and statistically sound, credit
scoring system, a creditor may use an
applicant’s age as a predictive variable,
provided that the age of an elderly applicant is not assigned a negative factor or value.
(iii) In a judgmental system of evaluating creditworthiness, a creditor may
consider an applicant’s age or whether
an applicant’s income derives from any
public assistance program only for the
purpose of determining a pertinent element of creditworthiness.
(iv) In any system of evaluating creditworthiness, a creditor may consider
the age of an elderly applicant when
such age is used to favor the elderly applicant in extending credit.
(3) Childbearing, childrearing. In evaluating creditworthiness, a creditor
shall not make assumptions or use aggregate statistics relating to the likelihood that any category of persons will
bear or rear children or will, for that
reason, receive diminished or interrupted income in the future.
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§ 1002.7
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(8) Marital status. Except as otherwise
permitted or required by law, a creditor shall evaluate married and unmarried applicants by the same standards;
and in evaluating joint applicants, a
creditor shall not treat applicants differently based on the existence, absence, or likelihood of a marital relationship between the parties.
(9) Race, color, religion, national origin,
sex. Except as otherwise permitted or
required by law, a creditor shall not
consider race, color, religion, national
origin, or sex (or an applicant’s or
other person’s decision not to provide
the information) in any aspect of a
credit transaction.
(c) State property laws. A creditor’s
consideration or application of state
property laws directly or indirectly affecting creditworthiness does not constitute unlawful discrimination for the
purposes of the Act or this part.
plicant who is contractually liable if
the credit granted was based in whole
or in part on income of the applicant’s
spouse and if information available to
the creditor indicates that the applicant’s income may not support the
amount of credit currently available.
(d) Signature of spouse or other person—(1) Rule for qualified applicant. Except as provided in this paragraph, a
creditor shall not require the signature
of an applicant’s spouse or other person, other than a joint applicant, on
any credit instrument if the applicant
qualifies under the creditor’s standards
of creditworthiness for the amount and
terms of the credit requested. A creditor shall not deem the submission of a
joint financial statement or other evidence of jointly held assets as an application for joint credit.
(2) Unsecured credit. If an applicant
requests unsecured credit and relies in
part upon property that the applicant
owns jointly with another person to
satisfy the creditor’s standards of creditworthiness, the creditor may require
the signature of the other person only
on the instrument(s) necessary, or reasonably believed by the creditor to be
necessary, under the law of the state in
which the property is located, to enable the creditor to reach the property
being relied upon in the event of the
death or default of the applicant.
(3) Unsecured credit—community property states. If a married applicant requests unsecured credit and resides in a
community property state, or if the applicant is relying on property located
in such a state, a creditor may require
the signature of the spouse on any instrument necessary, or reasonably believed by the creditor to be necessary,
under applicable state law to make the
community property available to satisfy the debt in the event of default if:
(i) Applicable state law denies the applicant power to manage or control sufficient community property to qualify
for the credit requested under the
creditor’s standards of creditworthiness; and
(ii) The applicant does not have sufficient separate property to qualify for
the credit requested without regard to
community property.
(4) Secured credit. If an applicant requests secured credit, a creditor may
§ 1002.7 Rules concerning extensions
of credit.
(a) Individual accounts. A creditor
shall not refuse to grant an individual
account to a creditworthy applicant on
the basis of sex, marital status, or any
other prohibited basis.
(b) Designation of name. A creditor
shall not refuse to allow an applicant
to open or maintain an account in a
birth-given first name and a surname
that is the applicant’s birth-given surname, the spouse’s surname, or a combined surname.
(c) Action concerning existing open-end
accounts—(1) Limitations. In the absence
of evidence of the applicant’s inability
or unwillingness to repay, a creditor
shall not take any of the following actions regarding an applicant who is
contractually liable on an existing
open-end account on the basis of the
applicant’s reaching a certain age or
retiring or on the basis of a change in
the applicant’s name or marital status:
(i) Require a reapplication, except as
provided in paragraph (c)(2) of this section;
(ii) Change the terms of the account;
or
(iii) Terminate the account.
(2) Requiring reapplication. A creditor
may require a reapplication for an
open-end account on the basis of a
change in the marital status of an ap-
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§ 1002.8
12 CFR Ch. X (1–1–21 Edition)
require the signature of the applicant’s
spouse or other person on any instrument necessary, or reasonably believed
by the creditor to be necessary, under
applicable state law to make the property being offered as security available
to satisfy the debt in the event of default, for example, an instrument to
create a valid lien, pass clear title,
waive inchoate rights, or assign earnings.
(5) Additional parties. If, under a
creditor’s standards of creditworthiness, the personal liability of an additional party is necessary to support the
credit requested, a creditor may request a cosigner, guarantor, endorser,
or similar party. The applicant’s
spouse may serve as an additional
party, but the creditor shall not require that the spouse be the additional
party.
(6) Rights of additional parties. A creditor shall not impose requirements
upon an additional party that the creditor is prohibited from imposing upon
an applicant under this section.
(e) Insurance. A creditor shall not
refuse to extend credit and shall not
terminate an account because credit
life, health, accident, disability, or
other credit-related insurance is not
available on the basis of the applicant’s
age.
participates to meet special social
needs, if:
(i) The program is established and administered pursuant to a written plan
that identifies the class of persons that
the program is designed to benefit and
sets forth the procedures and standards
for extending credit pursuant to the
program; and
(ii) The program is established and
administered to extend credit to a class
of persons who, under the organization’s customary standards of creditworthiness, probably would not receive
such credit or would receive it on less
favorable terms than are ordinarily
available to other applicants applying
to the organization for a similar type
and amount of credit.
(b) Rules in other sections—(1) General
applicability. All the provisions of this
part apply to each of the special purpose credit programs described in paragraph (a) of this section except as
modified by this section.
(2) Common characteristics. A program
described in paragraph (a)(2) or (a)(3) of
this section qualifies as a special purpose credit program only if it was established and is administered so as not
to discriminate against an applicant on
any prohibited basis; however, all program participants may be required to
share one or more common characteristics (for example, race, national origin,
or sex) so long as the program was not
established and is not administered
with the purpose of evading the requirements of the Act or this part.
(c) Special rule concerning requests and
use of information. If participants in a
special purpose credit program described in paragraph (a) of this section
are required to possess one or more
common characteristics (for example,
race, national origin, or sex) and if the
program otherwise satisfies the requirements of paragraph (a) of this section, a creditor may request and consider information regarding the common characteristic(s) in determining
the applicant’s eligibility for the program.
(d) Special rule in the case of financial
need. If financial need is one of the criteria under a special purpose credit
program described in paragraph (a) of
this section, the creditor may request
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§ 1002.8 Special purpose credit programs.
(a) Standards for programs. Subject to
the provisions of paragraph (b) of this
section, the Act and this part permit a
creditor to extend special purpose credit to applicants who meet eligibility
requirements under the following types
of credit programs:
(1) Any credit assistance program expressly authorized by Federal or state
law for the benefit of an economically
disadvantaged class of persons;
(2) Any credit assistance program offered by a not-for-profit organization,
as defined under section 501(c) of the
Internal Revenue Code of 1954, as
amended, for the benefit of its members or for the benefit of an economically disadvantaged class of persons; or
(3) Any special purpose credit program offered by a for-profit organization, or in which such an organization
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Bur. of Consumer Financial Protection
§ 1002.9
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and consider, in determining an applicant’s eligibility for the program, information regarding the applicant’s
marital status; alimony, child support,
and separate maintenance income; and
the spouse’s financial resources. In addition, a creditor may obtain the signature of an applicant’s spouse or other
person on an application or credit instrument relating to a special purpose
credit program if the signature is required by Federal or state law.
cant’s written request for confirmation.
(3) Notification to business credit applicants. For business credit, a creditor
shall comply with the notification requirements of this section in the following manner:
(i) With regard to a business that had
gross revenues of $1 million or less in
its preceding fiscal year (other than an
extension of trade credit, credit incident to a factoring agreement, or other
similar types of business credit), a
creditor shall comply with paragraphs
(a)(1) and (2) of this section, except
that:
(A) The statement of the action
taken may be given orally or in writing, when adverse action is taken;
(B) Disclosure of an applicant’s right
to a statement of reasons may be given
at the time of application, instead of
when adverse action is taken, provided
the disclosure contains the information
required by paragraph (a)(2)(ii) of this
section and the ECOA notice specified
in paragraph (b)(1) of this section;
(C) For an application made entirely
by telephone, a creditor satisfies the
requirements of paragraph (a)(3)(i) of
this section by an oral statement of
the action taken and of the applicant’s
right to a statement of reasons for adverse action.
(ii) With regard to a business that
had gross revenues in excess of $1 million in its preceding fiscal year or an
extension of trade credit, credit incident to a factoring agreement, or other
similar types of business credit, a creditor shall:
(A) Notify the applicant, within a
reasonable time, orally or in writing,
of the action taken; and
(B) Provide a written statement of
the reasons for adverse action and the
ECOA notice specified in paragraph
(b)(1) of this section if the applicant
makes a written request for the reasons within 60 days of the creditor’s notification.
(b) Form of ECOA notice and statement
of specific reasons—(1) ECOA notice. To
satisfy the disclosure requirements of
paragraph (a)(2) of this section regarding section 701(a) of the Act, the creditor shall provide a notice that is substantially similar to the following: The
Federal Equal Credit Opportunity Act
§ 1002.9 Notifications.
(a) Notification of action taken, ECOA
notice, and statement of specific reasons—
(1) When notification is required. A creditor shall notify an applicant of action
taken within:
(i) 30 days after receiving a completed application concerning the
creditor’s approval of, counteroffer to,
or adverse action on the application;
(ii) 30 days after taking adverse action on an incomplete application, unless notice is provided in accordance
with paragraph (c) of this section;
(iii) 30 days after taking adverse action on an existing account; or
(iv) 90 days after notifying the applicant of a counteroffer if the applicant
does not expressly accept or use the
credit offered.
(2) Content of notification when adverse
action is taken. A notification given to
an applicant when adverse action is
taken shall be in writing and shall contain a statement of the action taken;
the name and address of the creditor; a
statement of the provisions of section
701(a) of the Act; the name and address
of the Federal agency that administers
compliance with respect to the creditor; and either:
(i) A statement of specific reasons for
the action taken; or
(ii) A disclosure of the applicant’s
right to a statement of specific reasons
within 30 days, if the statement is requested within 60 days of the creditor’s
notification. The disclosure shall include the name, address, and telephone
number of the person or office from
which the statement of reasons can be
obtained. If the creditor chooses to provide the reasons orally, the creditor
shall also disclose the applicant’s right
to have them confirmed in writing
within 30 days of receiving the appli-
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§ 1002.9
12 CFR Ch. X (1–1–21 Edition)
prohibits creditors from discriminating
against credit applicants on the basis
of race, color, religion, national origin,
sex, marital status, age (provided the
applicant has the capacity to enter
into a binding contract); because all or
part of the applicant’s income derives
from any public assistance program; or
because the applicant has in good faith
exercised any right under the Consumer Credit Protection Act. The Federal agency that administers compliance with this law concerning this
creditor is [name and address as specified by the appropriate agency or agencies listed in appendix A of this part].
Until January 1, 2013, a creditor may
comply with this paragraph (b)(1) and
paragraph (a)(2) of this section by including in the notice the name and address as specified by the appropriate
agency in appendix A to 12 CFR part
202, as in effect on October 1, 2011.
(2) Statement of specific reasons. The
statement of reasons for adverse action
required by paragraph (a)(2)(i) of this
section must be specific and indicate
the principal reason(s) for the adverse
action. Statements that the adverse
action was based on the creditor’s internal standards or policies or that the
applicant, joint applicant, or similar
party failed to achieve a qualifying
score on the creditor’s credit scoring
system are insufficient.
(c) Incomplete applications—(1) Notice
alternatives. Within 30 days after receiving an application that is incomplete
regarding matters that an applicant
can complete, the creditor shall notify
the applicant either:
(i) Of action taken, in accordance
with paragraph (a) of this section; or
(ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section.
(2) Notice of incompleteness. If additional information is needed from an
applicant, the creditor shall send a
written notice to the applicant specifying the information needed, designating a reasonable period of time for
the applicant to provide the information, and informing the applicant that
failure to provide the information requested will result in no further consideration being given to the application. The creditor shall have no further
obligation under this section if the ap-
plicant fails to respond within the designated time period. If the applicant
supplies the requested information
within the designated time period, the
creditor shall take action on the application and notify the applicant in accordance with paragraph (a) of this section.
(3) Oral request for information. At its
option, a creditor may inform the applicant orally of the need for additional information. If the application
remains incomplete the creditor shall
send a notice in accordance with paragraph (c)(1) of this section.
(d) Oral notifications by small-volume
creditors. In the case of a creditor that
did not receive more than 150 applications during the preceding calendar
year, the requirements of this section
(including statements of specific reasons) are satisfied by oral notifications.
(e) Withdrawal of approved application.
When an applicant submits an application and the parties contemplate that
the applicant will inquire about its status, if the creditor approves the application and the applicant has not inquired within 30 days after applying,
the creditor may treat the application
as withdrawn and need not comply
with paragraph (a)(1) of this section.
(f) Multiple applicants. When an application involves more than one applicant, notification need only be given to
one of them but must be given to the
primary applicant where one is readily
apparent.
(g) Applications submitted through a
third party. When an application is
made on behalf of an applicant to more
than one creditor and the applicant expressly accepts or uses credit offered
by one of the creditors, notification of
action taken by any of the other creditors is not required. If no credit is offered or if the applicant does not expressly accept or use the credit offered,
each creditor taking adverse action
must comply with this section, directly
or through a third party. A notice
given by a third party shall disclose
the identity of each creditor on whose
behalf the notice is given.
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Bur. of Consumer Financial Protection
§ 1002.10
tion.
§ 1002.11
(iii) Prohibits inquiries or collection
of data required to comply with the
Act or this part;
(iv) Prohibits asking about or considering age in an empirically derived, demonstrably and statistically sound,
credit scoring system to determine a
pertinent element of creditworthiness,
or to favor an elderly applicant; or
(v) Prohibits inquiries necessary to
establish or administer a special purpose credit program as defined by
§ 1002.8.
(2) A creditor, state, or other interested party may request that the Bureau determine whether a state law is
inconsistent with the requirements of
the Act and this part.
(c) Laws on finance charges, loan ceilings. If married applicants voluntarily
apply for and obtain individual accounts with the same creditor, the accounts shall not be aggregated or otherwise combined for purposes of determining permissible finance charges or
loan ceilings under any Federal or
state law. Permissible loan ceiling laws
shall be construed to permit each
spouse to become individually liable up
to the amount of the loan ceilings, less
the amount for which the applicant is
jointly liable.
(d) State and Federal laws not affected.
This section does not alter or annul
any provision of state property laws,
laws relating to the disposition of decedents’ estates, or Federal or state
banking regulations directed only toward insuring the solvency of financial
institutions.
(e) Exemption for state-regulated transactions—(1) Applications. A state may
apply to the Bureau for an exemption
from the requirements of the Act and
this part for any class of credit transactions within the state. The Bureau
will grant such an exemption if the Bureau determines that:
(i) The class of credit transactions is
subject to state law requirements substantially similar to those of the Act
and this part or that applicants are afforded greater protection under state
law; and
(ii) There is adequate provision for
state enforcement.
(2) Liability and enforcement. (i) No exemption will extend to the civil liability provisions of section 706 of the Act
Furnishing of credit informa-
(a) Designation of accounts. A creditor
that furnishes credit information shall
designate:
(1) Any new account to reflect the
participation of both spouses if the applicant’s spouse is permitted to use or
is contractually liable on the account
(other than as a guarantor, surety, endorser, or similar party); and
(2) Any existing account to reflect
such participation, within 90 days after
receiving a written request to do so
from one of the spouses.
(b) Routine reports to consumer reporting agency. If a creditor furnishes credit information to a consumer reporting
agency concerning an account designated to reflect the participation of
both spouses, the creditor shall furnish
the information in a manner that will
enable the agency to provide access to
the information in the name of each
spouse.
(c) Reporting in response to inquiry. If
a creditor furnishes credit information
in response to an inquiry, concerning
an account designated to reflect the
participation of both spouses, the creditor shall furnish the information in
the name of the spouse about whom the
information is requested.
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§ 1002.11
Relation to state law.
(a) Inconsistent state laws. Except as
otherwise provided in this section, this
part alters, affects, or preempts only
those state laws that are inconsistent
with the Act and this part and then
only to the extent of the inconsistency.
A state law is not inconsistent if it is
more protective of an applicant.
(b) Preempted provisions of state law.
(1) A state law is deemed to be inconsistent with the requirements of the
Act and this part and less protective of
an applicant within the meaning of section 705(f) of the Act to the extent that
the law:
(i) Requires or permits a practice or
act prohibited by the Act or this part;
(ii) Prohibits the individual extension of consumer credit to both parties
to a marriage if each spouse individually and voluntarily applies for such
credit;
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§ 1002.12
12 CFR Ch. X (1–1–21 Edition)
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or the administrative enforcement provisions of section 704 of the Act.
(ii) After an exemption has been
granted, the requirements of the applicable state law (except for additional
requirements not imposed by Federal
law) will constitute the requirements
of the Act and this part.
as provided in paragraph (b)(5) of this
section) after the date that a creditor
notifies an applicant of adverse action
regarding an existing account, the
creditor shall retain as to that account, in original form or a copy thereof:
(i) Any written or recorded information concerning the adverse action; and
(ii) Any written statement submitted
by the applicant alleging a violation of
the Act or this part.
(3) Other applications. For 25 months
(12 months for business credit, except
as provided in paragraph (b)(5) of this
section) after the date that a creditor
receives an application for which the
creditor is not required to comply with
the
notification
requirements
of
§ 1002.9, the creditor shall retain all
written or recorded information in its
possession concerning the applicant,
including any notation of action taken.
(4) Enforcement proceedings and investigations. A creditor shall retain the information beyond 25 months (12
months for business credit, except as
provided in paragraph (b)(5) of this section) if the creditor has actual notice
that it is under investigation or is subject to an enforcement proceeding for
an alleged violation of the Act or this
part, by the Attorney General of the
United States or by an enforcement
agency charged with monitoring that
creditor’s compliance with the Act and
this part, or if it has been served with
notice of an action filed pursuant to
section 706 of the Act and § 1002.16 of
this part. The creditor shall retain the
information until final disposition of
the matter, unless an earlier time is allowed by order of the agency or court.
(5) Special rule for certain business
credit applications. With regard to a
business that had gross revenues in excess of $1 million in its preceding fiscal
year, or an extension of trade credit,
credit incident to a factoring agreement, or other similar types of business credit, the creditor shall retain
records for at least 60 days after notifying the applicant of the action taken.
If within that time period the applicant requests in writing the reasons for
adverse action or that records be retained, the creditor shall retain records
for 12 months.
§ 1002.12 Record retention.
(a) Retention of prohibited information.
A creditor may retain in its files information that is prohibited by the Act or
this part for use in evaluating applications, without violating the Act or this
part, if the information was obtained:
(1) From any source prior to March
23, 1977;
(2) From consumer reporting agencies, an applicant, or others without
the specific request of the creditor; or
(3) As required to monitor compliance with the Act and this part or
other Federal or state statutes or regulations.
(b) Preservation of records—(1) Applications. For 25 months (12 months for
business credit, except as provided in
paragraph (b)(5) of this section) after
the date that a creditor notifies an applicant of action taken on an application or of incompleteness, the creditor
shall retain in original form or a copy
thereof:
(i) Any application that it receives,
any information required to be obtained concerning characteristics of
the applicant to monitor compliance
with the Act and this part or other
similar law, any information obtained
pursuant to § 1002.5(a)(4), and any other
written or recorded information used
in evaluating the application and not
returned to the applicant at the applicant’s request.
(ii) A copy of the following documents if furnished to the applicant in
written form (or, if furnished orally,
any notation or memorandum made by
the creditor):
(A) The notification of action taken;
and
(B) The statement of specific reasons
for adverse action; and
(iii) Any written statement submitted by the applicant alleging a violation of the Act or this part.
(2) Existing accounts. For 25 months
(12 months for business credit, except
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Bur. of Consumer Financial Protection
§ 1002.13
(6) Self-tests. For 25 months after a
self-test (as defined in § 1002.15) has
been completed, the creditor shall retain all written or recorded information about the self-test. A creditor
shall retain information beyond 25
months if it has actual notice that it is
under investigation or is subject to an
enforcement proceeding for an alleged
violation, or if it has been served with
notice of a civil action. In such cases,
the creditor shall retain the information until final disposition of the matter, unless an earlier time is allowed by
the appropriate agency or court order.
(7) Prescreened solicitations. For 25
months after the date on which an
offer of credit is made to potential customers (12 months for business credit,
except as provided in paragraph (b)(5)
of this section), the creditor shall retain in original form or a copy thereof:
(i) The text of any prescreened solicitation;
(ii) The list of criteria the creditor
used to select potential recipients of
the solicitation; and
(iii) Any correspondence related to
complaints (formal or informal) about
the solicitation.
(iii) Marital status, using the categories married, unmarried, and separated; and
(iv) Age.
(2) Dwelling means a residential
structure that contains one to four
units, whether or not that structure is
attached to real property. The term includes, but is not limited to, an individual condominium or cooperative
unit and a mobile or other manufactured home.
(b) Obtaining information. Questions
regarding ethnicity, race, sex, marital
status, and age may be listed, at the
creditor’s option, on the application
form or on a separate form that refers
to the application. The applicant(s)
shall be asked but not required to supply the requested information. If the
applicant(s) chooses not to provide the
information or any part of it, that fact
shall be noted on the form. The creditor shall then also note on the form,
to the extent possible, the ethnicity,
race, and sex of the applicant(s) on the
basis of visual observation or surname.
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. 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.
(c) Disclosure to applicant(s). The creditor shall inform the applicant(s) that
the information regarding ethnicity,
race, sex, marital status, and age is
being requested by the Federal Government for the purpose of monitoring
compliance with Federal statutes that
prohibit creditors from discriminating
against applicants on those bases. The
creditor shall also inform the applicant(s) that if the applicant(s) chooses
not to provide the information, the
creditor is required to note the ethnicity, race and sex on the basis of visual observation or surname.
(d) Substitute monitoring program. A
monitoring program required by an
agency charged with administrative
enforcement under section 704 of the
[76 FR 79445, Dec. 21, 2011, as amended at 82
FR 45694, Oct. 2, 2017]
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§ 1002.13 Information for monitoring
purposes.
(a) Information to be requested. (1) A
creditor that receives an application
for credit primarily for the purchase or
refinancing of a dwelling occupied or to
be occupied by the applicant as a principal residence, where the extension of
credit will be secured by the dwelling,
shall request as part of the application
the following information regarding
the applicant(s):
(i) Ethnicity and race using either:
(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
(B) The categories and subcategories
for the collection of ethnicity and race
set forth in appendix B to 12 CFR part
1003.
(ii) Sex;
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§ 1002.14
12 CFR Ch. X (1–1–21 Edition)
Act may be substituted for the requirements contained in paragraphs (a), (b),
and (c) of this section.
the time of application, if the creditor
later determines the credit will be secured by a first lien on a dwelling, the
creditor shall mail or deliver the same
notice in writing not later than the
third business day after the creditor
determines that the loan is to be secured by a first lien on a dwelling.
(3) Reimbursement. A creditor shall
not charge an applicant for providing a
copy of appraisals and other written
valuations as required under this section, but may require applicants to pay
a reasonable fee to reimburse the creditor for the cost of the appraisal or
other written valuation unless otherwise provided by law.
(4) Withdrawn, denied, or incomplete
applications. The requirements set forth
in paragraph (a)(1) of this section apply
whether credit is extended or denied or
if the application is incomplete or
withdrawn.
(5) Copies in electronic form. The copies required by § 1002.14(a)(1) may be
provided to the applicant in electronic
form, subject to compliance with the
consumer consent and other applicable
provisions of the Electronic Signatures
in Global and National Commerce Act
(E-Sign Act) (15 U.S.C. 7001 et seq.).
(b) Definitions. For purposes of paragraph (a) of this section:
(1) Consummation. The term ‘‘consummation’’ means the time that a
consumer becomes contractually obligated on a closed-end credit transaction.
(2) Dwelling. The term ‘‘dwelling’’
means a residential structure that contains one to four units whether or not
that structure is attached to real property. The term includes, but is not limited to, an individual condominium or
cooperative unit, and a mobile or other
manufactured home.
(3) Valuation. The term ‘‘valuation’’
means any estimate of the value of a
dwelling developed in connection with
an application for credit.
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[76 FR 79445, Dec. 21, 2011, as amended at 82
FR 45694, Oct. 2, 2017]
§ 1002.14 Rules on providing appraisals and other valuations.
(a) Providing appraisals and other valuations—(1) In general. A creditor shall
provide an applicant a copy of all appraisals and other written valuations
developed in connection with an application for credit that is to be secured
by a first lien on a dwelling. A creditor
shall provide a copy of each such appraisal or other written valuation
promptly upon completion, or three
business days prior to consummation
of the transaction (for closed-end credit) or account opening (for open-end
credit), whichever is earlier. An applicant may waive the timing requirement in this paragraph (a)(1) and agree
to receive any copy at or before consummation or account opening, except
where otherwise prohibited by law.
Any such waiver must be obtained at
least three business days prior to consummation or account opening, unless
the waiver pertains solely to the applicant’s receipt of a copy of an appraisal
or other written valuation that contains only clerical changes from a previous version of the appraisal or other
written valuation provided to the applicant three or more business days
prior to consummation or account
opening. If the applicant provides a
waiver and the transaction is not consummated or the account is not
opened, the creditor must provide these
copies no later than 30 days after the
creditor determines consummation will
not occur or the account will not be
opened.
(2) Disclosure. For applications subject to paragraph (a)(1) of this section,
a creditor shall mail or deliver to an
applicant, not later than the third
business day after the creditor receives
an application for credit that is to be
secured by a first lien on a dwelling, a
notice in writing of the applicant’s
right to receive a copy of all written
appraisals developed in connection
with the application. In the case of an
application for credit that is not to be
secured by a first lien on a dwelling at
[78 FR 7248, Jan. 31, 2013]
§ 1002.15 Incentives for self-testing
and self-correction.
(a) General rules—(1) Voluntary selftesting and correction. The report or results of a self-test that a creditor voluntarily conducts (or authorizes) are
privileged as provided in this section.
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Bur. of Consumer Financial Protection
§ 1002.15
Data collection required by law or by
any governmental authority is not a
voluntary self-test.
(2) Corrective action required. The
privilege in this section applies only if
the creditor has taken or is taking appropriate corrective action.
(3) Other privileges. The privilege created by this section does not preclude
the assertion of any other privilege
that may also apply.
(b) Self-test defined—(1) Definition. A
self-test is any program, practice, or
study that:
(i) Is designed and used specifically
to determine the extent or effectiveness of a creditor’s compliance with
the Act or this part; and
(ii) Creates data or factual information that is not available and cannot be
derived from loan or application files
or other records related to credit transactions.
(2) Types of information privileged. The
privilege under this section applies to
the report or results of the self-test,
data or factual information created by
the self-test, and any analysis, opinions, and conclusions pertaining to the
self-test report or results. The privilege
covers workpapers or draft documents
as well as final documents.
(3) Types of information not privileged.
The privilege under this section does
not apply to:
(i) Information about whether a creditor conducted a self-test, the methodology used or the scope of the self-test,
the time period covered by the selftest, or the dates it was conducted; or
(ii) Loan and application files or
other business records related to credit
transactions, and information derived
from such files and records, even if the
information has been aggregated, summarized, or reorganized to facilitate
analysis.
(c) Appropriate corrective action—(1)
General requirement. For the privilege
in this section to apply, appropriate
corrective action is required when the
self-test shows that it is more likely
than not that a violation occurred,
even though no violation has been formally adjudicated.
(2) Determining the scope of appropriate
corrective action. A creditor must take
corrective action that is reasonably
likely to remedy the cause and effect
of a likely violation by:
(i) Identifying the policies or practices that are the likely cause of the
violation; and
(ii) Assessing the extent and scope of
any violation.
(3) Types of relief. Appropriate corrective action may include both prospective and remedial relief, except that to
establish a privilege under this section:
(i) A creditor is not required to provide remedial relief to a tester used in
a self-test;
(ii) A creditor is only required to provide remedial relief to an applicant
identified by the self-test as one whose
rights were more likely than not violated; and
(iii) A creditor is not required to provide remedial relief to a particular applicant if the statute of limitations applicable to the violation expired before
the creditor obtained the results of the
self-test or the applicant is otherwise
ineligible for such relief.
(4) No admission of violation. Taking
corrective action is not an admission
that a violation occurred.
(d) Scope of privilege—(1) General rule.
The report or results of a privileged
self-test may not be obtained or used:
(i) By a government agency in any
examination or investigation relating
to compliance with the Act or this
part; or
(ii) By a government agency or an applicant (including a prospective applicant who alleges a violation of
§ 1002.4(b)) in any proceeding or civil
action in which a violation of the Act
or this part is alleged.
(2) Loss of privilege. The report or results of a self-test are not privileged
under paragraph (d)(1) of this section if
the creditor or a person with lawful access to the report or results:
(i) Voluntarily discloses any part of
the report or results, or any other information privileged under this section, to an applicant or government
agency or to the public;
(ii) Discloses any part of the report
or results, or any other information
privileged under this section, as a defense to charges that the creditor has
violated the Act or regulation; or
(iii) Fails or is unable to produce
written or recorded information about
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§ 1002.16
12 CFR Ch. X (1–1–21 Edition)
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the self-test that is required to be retained under § 1002.12(b)(6) when the information is needed to determine
whether the privilege applies. This
paragraph does not limit any other
penalty or remedy that may be available for a violation of § 1002.12.
(3) Limited use of privileged information. Notwithstanding paragraph (d)(1)
of this section, the self-test report or
results and any other information privileged under this section may be obtained and used by an applicant or government agency solely to determine a
penalty or remedy after a violation of
the Act or this part has been adjudicated or admitted. Disclosures for
this limited purpose may be used only
for the particular proceeding in which
the adjudication or admission was
made. Information disclosed under this
paragraph (d)(3) remains privileged
under paragraph (d)(1) of this section.
suant to sections 702(g) and 704(b), (c),
and (d) of the Act, violations of the Act
or this part also constitute violations
of other Federal laws. Liability for punitive damages can apply only to nongovernmental entities and is limited to
$10,000 in individual actions and the
lesser of $500,000 or 1 percent of the
creditor’s net worth in class actions.
Section 706(c) provides for equitable
and declaratory relief and section
706(d) authorizes the awarding of costs
and reasonable attorney’s fees to an
aggrieved applicant in a successful action.
(2) As provided in section 706(f) of the
Act, a civil action under the Act or
this part may be brought in the appropriate United States district court
without regard to the amount in controversy or in any other court of competent jurisdiction within five years
after the date of the occurrence of the
violation, or within one year after the
commencement of an administrative
enforcement proceeding or of a civil action brought by the Attorney General
of the United States within five years
after the alleged violation.
(3) If an agency responsible for administrative enforcement is unable to
obtain compliance with the Act or this
part, it may refer the matter to the Attorney General of the United States. If
the Bureau, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System,
or the National Credit Union Administration has reason to believe that one
or more creditors have engaged in a
pattern or practice of discouraging or
denying applications in violation of the
Act or this part, the agency shall refer
the matter to the Attorney General. If
the agency has reason to believe that
one or more creditors violated section
701(a) of the Act, the agency may refer
a matter to the Attorney General.
(4) On referral, or whenever the Attorney General has reason to believe
that one or more creditors have engaged in a pattern or practice in violation of the Act or this part, the Attorney General may bring a civil action
for such relief as may be appropriate,
including actual and punitive damages
and injunctive relief.
§ 1002.16 Enforcement, penalties and
liabilities.
(a) Administrative enforcement. (1) As
set forth more fully in section 704 of
the Act, administrative enforcement of
the Act and this part regarding certain
creditors is assigned to the Comptroller of the Currency, Board of Governors of the Federal Reserve System,
Board of Directors of the Federal Deposit Insurance Corporation, National
Credit Union Administration, Surface
Transportation Board, Civil Aeronautics Board, Secretary of Agriculture, Farm Credit Administration,
Securities and Exchange Commission,
Small Business Administration, Secretary of Transportation, and Bureau
of Consumer Financial Protection.
(2) Except to the extent that administrative enforcement is specifically assigned to some government agency
other than the Bureau, and subject to
subtitle B of the Consumer Financial
Protection Act of 2010, the Federal
Trade Commission is authorized to enforce the requirements imposed under
the Act and this part.
(b) Penalties and liabilities. (1) Sections 702(g) and 706(a) and (b) of the Act
provide that any creditor that fails to
comply with a requirement imposed by
the Act or this part is subject to civil
liability for actual and punitive damages in individual or class actions. Pur-
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Bur. of Consumer Financial Protection
Pt. 1002, App. B
itor operates or Federal Trade Commission,
Equal Credit Opportunity, Washington, DC
20580.
2. To the extent not included in item 1
above:
a. National banks, Federal savings associations, and Federal branches and Federal agencies of foreign banks: Office of the Comptroller of the Currency, Customer Assistance
Group, 1301 McKinney Street, Suite 3450,
Houston, TX 77010–9050
b. State member banks, branches and agencies
of foreign banks (other than Federal branches,
Federal agencies, and insured state branches of
foreign banks), commercial lending companies
owned or controlled by foreign banks, and organizations operating under section 25 or 25A of
the Federal Reserve Act: Federal Reserve Consumer Help Center, P.O. Box 1200, Minneapolis, MN 55480.
c. Nonmember Insured Banks, Insured State
Branches of Foreign Banks, and Insured State
Savings Associations: FDIC Consumer Response Center, 1100 Walnut Street, Box #11,
Kansas City, MO 64106.
d. Federal Credit Unions: National Credit
Union Administration, Office of Consumer
Protection, 1775 Duke Street, Alexandria, VA
22314.
3. Air carriers: Assistant General Counsel
for Aviation Enforcement and Proceedings,
Department of Transportation, 400 Seventh
Street SW., Washington, DC 20590.
4. Creditors Subject to Surface Transportation
Board: Office of Proceedings, Surface Transportation Board, Department of Transportation, 1925 K Street NW., Washington, DC
20423.
5. Creditors Subject to Packers and Stockyards
Act: Nearest Packers and Stockyards Administration area supervisor.
6. Small Business Investment Companies: Associate Deputy Administrator for Capital
Access, United States Small Business Administration, 409 Third Street SW., 8th
Floor, Washington, DC 20416.
7. Brokers and Dealers: Securities and Exchange Commission, Washington, DC 20549.
8. Federal Land Banks, Federal Land Bank
Associations,
Federal
Intermediate
Credit
Banks, and Production Credit Associations:
Farm Credit Administration, 1501 Farm
Credit Drive, McLean, VA 22102–5090.
9. Retailers, Finance Companies, and All
Other Creditors Not Listed Above: FTC Regional Office for region in which the creditor
operates or Federal Trade Commission,
Equal Credit Opportunity, Washington, DC
20580.
(5) If the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Board of Governors of
the Federal Reserve System, or the National Credit Union Administration has
reason to believe (as a result of a consumer complaint, a consumer compliance examination, or some other basis)
that a violation of the Act or this part
has occurred which is also a violation
of the Fair Housing Act, and the matter is not referred to the Attorney General, the agency shall:
(i) Notify the Secretary of Housing
and Urban Development; and
(ii) Inform the applicant that the
Secretary of Housing and Urban Development has been notified and that remedies may be available under the Fair
Housing Act.
(c) Failure of compliance. A creditor’s
failure to comply with § 1002.6(b)(6),
§ 1002.9, § 1002.10, § 1002.12 or § 1002.13 is
not a violation if it results from an inadvertent error. On discovering an
error under §§ 1002.9 and 1002.10, the
creditor shall correct it as soon as possible. If a creditor inadvertently obtains the monitoring information regarding the ethnicity, race, and sex of
the applicant in a dwelling-related
transaction not covered by § 1002.13, the
creditor may retain information and
act on the application without violating the regulation.
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APPENDIX A TO PART 1002—FEDERAL
AGENCIES TO BE LISTED IN ADVERSE
ACTION NOTICES
The following list indicates the Federal
agency or agencies that should be listed in
notices provided by creditors pursuant to
§ 1002.9(b)(1). Any questions concerning a particular creditor may be directed to such
agencies. This list is not intended to describe
agencies’ enforcement authority for ECOA
and Regulation B. Terms that are not defined in the Federal Deposit Insurance Act
(12 U.S.C. 1813(s)) shall have the meaning
given to them in the International Banking
Act of 1978 (12 U.S.C. 3101).
1. Banks, savings associations, and credit
unions with total assets of over $10 billion and
their affiliates: Bureau of Consumer Financial
Protection, 1700 G Street NW., Washington
DC 20006. Such affiliates that are not banks,
savings associations, or credit unions also
should list, in addition to the Bureau: FTC
Regional Office for region in which the cred-
APPENDIX B TO PART 1002—MODEL
APPLICATION FORMS
1. 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
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Pt. 1002, App. B
12 CFR Ch. X (1–1–21 Edition)
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on each form. 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.
This appendix also contains 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)(A) and (ii). 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). All forms contained in this appendix are models; their use
by creditors is optional.
2. The use or modification of these forms is
governed by the following instructions. A
creditor may change the forms: by asking for
additional information not prohibited by
§ 1002.5; by deleting any information request;
or by rearranging the format without modifying the substance of the inquiries. In any
of these three instances, however, the appropriate notices regarding the optional nature
of courtesy titles, the option to disclose alimony, child support, or separate maintenance, and the limitation concerning marital status inquiries must be included in the
appropriate places if the items to which they
relate appear on the creditor’s form.
3. If a creditor uses an appropriate appendix B model form, or modifies a form in accordance with the above instructions, that
creditor shall be deemed to be acting in compliance with the provisions of paragraphs (b),
(c) and (d) of § 1002.5 of this part.
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Pt. 1002, App. B
Bur. of Consumer Financial Protection
Pt. 1002, App. C
[76 FR 79445, Dec. 21, 2011, as amended at 82
FR 45694, Oct. 2, 2017]
requirements of § 1002.13(a)(1)(i)(B) and (ii).
All forms contained in this appendix are
models; their use by creditors is optional.
EFFECTIVE DATE NOTE: At 82 FR 45695, Oct.
2, 2017, appendix B to part 1002 was amended
by revising paragraph 1 and under paragraph
3 removing the form ‘‘Uniform Residential
Loan Application’’, effective Jan. 1, 2022. For
the convenience of the user, the revised text
is set forth as follows:
*
*
*
*
APPENDIX C TO PART 1002—SAMPLE
NOTIFICATION FORMS
1. This Appendix contains ten sample notification forms. Forms C–1 through C–4 are
intended for use in notifying an applicant
that adverse action has been taken on an application or account under §§ 1002.9(a)(1) and
(2)(i) of this part. Form C–5 is a notice of disclosure of the right to request specific reasons for adverse action under §§ 1002.9(a)(1)
and (2)(ii). Form C–6 is designed for use in
notifying an applicant, under § 1002.9(c)(2),
that an application is incomplete. Forms C–
7 and C–8 are intended for use in connection
with applications for business credit under
§ 1002.9(a)(3). Form C–9 is designed for use in
notifying an applicant of the right to receive
a copy of appraisals under § 1002.14. Form C–
10 is designed for use in notifying an applicant for nonmortgage credit that the creditor is requesting applicant characteristic
information.
2. Form C–1 contains the Fair Credit Reporting Act disclosure as required by sections 615(a) and (b) of that act. Forms C–2
through C–5 contain only the section 615(a)
APPENDIX B TO PART 1002—MODEL
APPLICATION FORMS
1. This appendix contains four 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. 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. This appendix also contains
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)(A) and (ii).
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
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*
kpayne on VMOFRWIN702 with $$_JOB
Pt. 1002, App. C
12 CFR Ch. X (1–1–21 Edition)
disclosure (that a creditor obtained information from a consumer reporting agency that
was considered in the credit decision). A
creditor must provide the section 615(a) disclosure when adverse action is taken against
a consumer based on information from a consumer reporting agency. A creditor must
provide the section 615(b) disclosure when adverse action is taken based on information
from an outside source other than a consumer reporting agency. In addition, a creditor must provide the section 615(b) disclosure if the creditor obtained information
from an affiliate other than information in a
consumer report or other than information
concerning the affiliate’s own transactions
or experiences with the consumer. Creditors
may comply with the disclosure requirements for adverse action based on information in a consumer report obtained from an
affiliate by providing either the section
615(a) or section 615(b) disclosure. Optional
language in Forms C–1 through C–5 may be
used to direct the consumer to the entity
that provided the credit score for any questions about the credit score, along with the
entity’s contact information. Creditors may
use or not use this additional language without losing the safe harbor, since the language is optional.
3. The sample forms are illustrative and
may not be appropriate for all creditors.
They were designed to include some of the
factors that creditors most commonly consider. If a creditor chooses to use the checklist of reasons provided in one of the sample
forms in this appendix and if reasons commonly used by the creditor are not provided
on the form, the creditor should modify the
checklist by substituting or adding other
reasons. For example, if ‘‘inadequate down
payment’’ or ‘‘no deposit relationship with
us’’ are common reasons for taking adverse
action on an application, the creditor ought
to add or substitute such reasons for those
presently contained on the sample forms.
4. If the reasons listed on the forms are not
the factors actually used, a creditor will not
satisfy the notice requirement by simply
checking the closest identifiable factor listed. For example, some creditors consider
only references from banks or other depository institutions and disregard finance company references altogether; their statement
of reasons should disclose ‘‘insufficient bank
references,’’ not ‘‘insufficient credit references.’’ Similarly, a creditor that considers bank references and other credit references as distinct factors should treat the
two factors separately and disclose them as
appropriate. The creditor should either add
such other factors to the form or check
‘‘other’’ and include the appropriate explanation. The creditor need not, however, describe how or why a factor adversely affected
the application. For example, the notice may
say ‘‘length of residence’’ rather than ‘‘too
short a period of residence.’’
5. A creditor may design its own notification forms or use all or a portion of the
forms contained in this Appendix. Proper use
of Forms C–1 through C–4 will satisfy the requirement of § 1002.9(a)(2)(i). Proper use of
Forms C–5 and C–6 constitutes full compliance with §§ 1002.9(a)(2)(ii) and 1002.9(c)(2), respectively. Proper use of Forms C–7 and C–8
will
satisfy
the
requirements
of
§§ 1002.9(a)(2)(i) and (ii), respectively, for applications for business credit. Proper use of
Form C–9 will satisfy the requirements of
§ 1002.14 of this part. Proper use of Form C–10
will satisfy the requirements of § 1002.5(b)(1).
FORM C–1—SAMPLE NOTICE OF ACTION TAKEN
AND STATEMENT OF REASONS
Statement of Credit Denial, Termination or
Change
Date: llllllllllllllllllll
Applicant’s Name:
lllllllllllll
Applicant’s Address:
llllllllllll
Description of Account, Transaction, or Requested Credit: llllllllllllll
Description of Action Taken: llllllll
PART I—PRINCIPAL REASON(S) FOR CREDIT DENIAL, TERMINATION, OR OTHER ACTION
TAKEN CONCERNING CREDIT
This section must be completed in all instances.
llCredit application incomplete
llInsufficient number of credit references
provided
llUnacceptable type of credit references
provided
llUnable to verify credit references
llTemporary or irregular employment
llUnable to verify employment
llLength of employment
llIncome insufficient for amount of credit
requested
llExcessive obligations in relation to income
llUnable to verify income
llLength of residence
llTemporary residence
llUnable to verify residence
llNo credit file
llLimited credit experience
llPoor credit performance with us
llDelinquent past or present credit obligations with others
llCollection action or judgment
llGarnishment or attachment
llForeclosure or repossession
llBankruptcy
llNumber of recent inquiries on credit bureau report
llValue or type of collateral not sufficient
llOther, specify: lll
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Bur. of Consumer Financial Protection
Pt. 1002, App. C
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
marital status, age (provided the applicant
has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance
program; or because the applicant has in
good faith exercised any right under the Consumer Credit Protection Act. The Federal
agency that administers compliance with
this law concerning this creditor is (name
and address as specified by the appropriate
agency listed in appendix A).
kpayne on VMOFRWIN702 with $$_JOB
PART II—DISCLOSURE OF USE OF INFORMATION
OBTAINED FROM AN OUTSIDE SOURCE
This section should be completed if the credit
decision was based in whole or in part on information that has been obtained from an outside
source.
llOur credit decision was based in whole or
in part on information obtained in a report
from the consumer reporting agency listed
below. You have a right under the Fair Credit Reporting Act to know the information
contained in your credit file at the consumer
reporting agency. The reporting agency
played no part in our decision and is unable
to supply specific reasons why we have denied credit to you. You also have a right to
a free copy of your report from the reporting
agency, if you request it no later than 60
days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate
or incomplete, you have the right to dispute
the matter with the reporting agency.
Name: llllllllllllllllllll
Address: lllllllllllllllllll
[Toll-free] Telephone number: lllllll
[We also obtained your credit score from
the consumer reporting agency and used it in
making our credit decision. Your credit
score is a number that reflects the information in your consumer report. Your credit
score can change, depending on how the information in your consumer report changes.
Your credit score: llllllllllllll
Date: llllllllllllllllllll
Scores range from a low of llll to a
high of llll.
Key factors that adversely affected your
credit score:
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your
credit score, you should contact [entity that
provided the credit score] at:
Address: lllllllllllllllllll
[[Toll-free] Telephone number: llll]
llOur credit decision was based in whole or
in part on information obtained from an affiliate or from an outside source other than
a consumer reporting agency. Under the Fair
Credit Reporting Act, you have the right to
make a written request, no later than 60
days after you receive this notice, for disclosure of the nature of this information.
If you have any questions regarding this notice, you should contact:
Creditor’s name:
llllllllllllll
Creditor’s address:
lllllllllllll
Creditor’s telephone number: llllllll
FORM C–2—SAMPLE NOTICE OF ACTION TAKEN
AND STATEMENT OF REASONS
Date
Dear Applicant: Thank you for your recent
application. Your request for [a loan/a credit
card/an increase in your credit limit] was
carefully considered, and we regret that we
are unable to approve your application at
this time, for the following reason(s):
Your Income:
llis below our minimum requirement.
llis insufficient to sustain payments on
the amount of credit requested.
llcould not be verified.
Your Employment:
llis not of sufficient length to qualify.
llcould not be verified.
Your Credit History:
llof making payments on time was not satisfactory.
llcould not be verified.
Your Application:
lllacks a sufficient number of credit references.
lllacks acceptable types of credit references.
llreveals that current obligations are excessive in relation to income.
Other: llllllllllllllllllll
The consumer reporting agency contacted
that provided information that influenced
our decision in whole or in part was [name,
address and [toll-free] telephone number of
the reporting agency]. The reporting agency
played no part in our decision and is unable
to supply specific reasons why we have denied credit to you. You have a right under
the Fair Credit Reporting Act to know the
information contained in your credit file at
the consumer reporting agency. You also
have a right to a free copy of your report
from the reporting agency, if you request it
no later than 60 days after you receive this
notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have
the right to dispute the matter with the reporting agency. Any questions regarding
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Pt. 1002, App. C
12 CFR Ch. X (1–1–21 Edition)
•
•
•
•
such information should be directed to [consumer reporting agency]. If you have any
questions regarding this letter, you should
contact us at [creditor’s name, address and
telephone number].
[We also obtained your credit score from
the consumer reporting agency and used it in
making our credit decision. Your credit
score is a number that reflects the information in your consumer report. Your credit
score can change, depending on how the information in your consumer report changes.
Your credit score: llllllllllllll
Date: llllllllllllllllllll
Scores range from a low of llll to a
high of llll.
Key factors that adversely affected your
credit score:
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your
credit score, you should contact [entity that
provided the credit score] at:
Address: lllllllllllllllllll
[[Toll-free] Telephone number: llll]
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
marital status, age (provided the applicant
has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance
program; or because the applicant has in
good faith exercised any right under the Consumer Credit Protection Act. The Federal
agency that administers compliance with
this law concerning this creditor is (name
and address as specified by the appropriate
agency listed in appendix A).
[Your Right to Get Your Consumer Report]
In evaluating your application the consumer reporting agency listed below provided us with information that in whole or in
part influenced our decision. The consumer
reporting agency played no part in our decision and is unable to supply specific reasons
why we have denied credit to you. You have
a right under the Fair Credit Reporting Act
to know the information contained in your
credit file at the consumer reporting agency.
It can be obtained by contacting: [Name, address, and [toll-free] telephone number of the
consumer reporting agency]. You also have a
right to a free copy of your report from the
reporting agency, if you request it no later
than 60 days after you receive this notice. In
addition, if you find that any information
contained in the report you receive is inaccurate or incomplete, you have the right to
dispute the matter with the reporting agency.
[Information about Your Credit Score]
[Information about Your Credit Score]
We also obtained your credit score from
the consumer reporting agency and used it in
making our credit decision. Your credit
score is a number that reflects the information in your consumer report. Your credit
score can change, depending on how the information in your consumer report changes.
Your credit score: llllllllllllll
Date: llllllllllllllllllll
Scores range from a low of llll to a
high of llll.
Key factors that adversely affected your
credit score:
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
FORM C–3—SAMPLE NOTICE OF ACTION TAKEN
AND STATEMENT OF REASONS (CREDIT SCORING)
kpayne on VMOFRWIN702 with $$_JOB
Insufficient bank references
Type of occupation
Insufficient credit experience
Number of recent inquiries on credit bureau report
[Number of recent inquiries on consumer report, as a key factor]
Date
Dear Applicant: Thank you for your recent
application for lllll. We regret that we
are unable to approve your request.
[Reasons for Denial of Credit]
Your application was processed by a [credit
scoring] system that assigns a numerical
value to the various items of information we
consider in evaluating an application. These
numerical values are based upon the results
of analyses of repayment histories of large
numbers of customers.
The information you provided in your application did not score a sufficient number of
points for approval of the application. The
reasons you did not score well compared
with other applicants were:
[If you have any questions regarding your
credit score, you should contact [entity that
provided the credit score] at:
Address: lllllllllllllllllll
[Toll-free] Telephone number: llll]
If you have any questions regarding this
letter, you should contact us at
Creditor’s Name: llllllllllllll
Address: lllllllllllllllllll
Telephone:
lllllllllllllllll
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
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Bur. of Consumer Financial Protection
Pt. 1002, App. C
marital status, age (with certain limited exceptions); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has
in good faith exercised any right under the
Consumer Credit Protection Act. The Federal agency that administers compliance
with this law concerning this creditor is
(name and address as specified by the appropriate agency listed in appendix A).
You should know that the Federal Equal
Credit Opportunity Act prohibits creditors,
such as ourselves, from discriminating
against credit applicants on the basis of
their race, color, religion, national origin,
sex, marital status, age (provided the applicant has the capacity to enter into a binding
contract), because they receive income from
a public assistance program, or because they
may have exercised their rights under the
Consumer Credit Protection Act. If you believe there has been discrimination in handling your application you should contact
the [name and address of the appropriate
Federal enforcement agency listed in appendix A].
Sincerely,
kpayne on VMOFRWIN702 with $$_JOB
FORM C–4—SAMPLE NOTICE OF ACTION TAKEN,
STATEMENT OF REASONS AND COUNTEROFFER
Date
Dear Applicant: Thank you for your application for lllll. We are unable to offer
you credit on the terms that you requested
for the following reason(s):lllll
We can, however, offer you credit on the
following terms: lllll
If this offer is acceptable to you, please notify us within [amount of time] at the following address: lllll.
Our credit decision on your application
was based in whole or in part on information
obtained in a report from [name, address and
[toll-free] telephone number of the consumer
reporting agency]. You have a right under
the Fair Credit Reporting Act to know the
information contained in your credit file at
the consumer reporting agency. The reporting agency played no part in our decision
and is unable to supply specific reasons why
we have denied credit to you. You also have
a right to a free copy of your report from the
reporting agency, if you request it no later
than 60 days after you receive this notice. In
addition, if you find that any information
contained in the report you receive is inaccurate or incomplete, you have the right to
dispute the matter with the reporting agency.
[We also obtained your credit score from
the consumer reporting agency and used it in
making our credit decision. Your credit
score is a number that reflects the information in your consumer report. Your credit
score can change, depending on how the information in your consumer report changes.
Your credit score: llllllllllllll
Date: llllllllllllllllllll
Scores range from a low of llll to a
high of llll.
Key factors that adversely affected your
credit score:
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your
credit score, you should contact [entity that
provided the credit score] at:
Address: lllllllllllllllllll
[Toll-free] Telephone number:llll]
FORM C–5—SAMPLE DISCLOSURE OF RIGHT TO
REQUEST SPECIFIC REASONS FOR CREDIT DENIAL
Date
Dear Applicant: Thank you for applying to
us for lllll.
After carefully reviewing your application,
we are sorry to advise you that we cannot
[open an account for you/grant a loan to you/
increase your credit limit] at this time. If
you would like a statement of specific reasons why your application was denied, please
contact [our credit service manager] shown
below within 60 days of the date of this letter. We will provide you with the statement
of reasons within 30 days after receiving
your request.
Creditor’s name
Address
Telephone number
If we obtained information from a consumer reporting agency as part of our consideration of your application, its name, address, and [toll-free] telephone number is
shown below. The reporting agency played
no part in our decision and is unable to supply specific reasons why we have denied credit to you. [You have a right under the Fair
Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency.] You have a right to
a free copy of your report from the reporting
agency, if you request it no later than 60
days after you receive this notice. In addition, if you find that any information contained in the report you received is inaccurate or incomplete, you have the right to
dispute the matter with the reporting agency. You can find out about the information
contained in your file (if one was used) by
contacting:
Consumer reporting agency’s name
Address
[Toll-free] Telephone number
[We also obtained your credit score from
the consumer reporting agency and used it in
making our credit decision. Your credit
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Pt. 1002, App. C
12 CFR Ch. X (1–1–21 Edition)
score is a number that reflects the information in your consumer report. Your credit
score can change, depending on how the information in your consumer report changes.
Your credit score: llllllllllllll
Date: llllllllllllllllllll
Scores range from a low of llll to a
high of llll.
Key factors that adversely affected your
credit score:
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
llllllllllllllllllllllll
[Number of recent inquiries on consumer report, as a key factor]
[If you have any questions regarding your
credit score, you should contact [entity that
provided the credit score] at:
Address: lllllllllllllllllll
[Toll-free] Telephone number: llll]
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
marital status, age (provided the applicant
has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance
program; or because the applicant has in
good faith exercised any right under the Consumer Credit Protection Act. The Federal
agency that administers compliance with
this law concerning this creditor is (name
and address as specified by the appropriate
agency listed in appendix A).
unable to extend credit to you at this time
for the following reasons:
(Insert appropriate reason, such as: Value
or type of collateral not sufficient; Lack of
established earnings record; Slow or past due
in trade or loan payments)
Sincerely,
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
marital status, age (provided the applicant
has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance
program; or because the applicant has in
good faith exercised any right under the Consumer Credit Protection Act. The Federal
agency that administers compliance with
this law concerning this creditor is [name
and address as specified by the appropriate
agency listed in appendix A].
FORM C–8—SAMPLE DISCLOSURE OF RIGHT TO
REQUEST SPECIFIC REASONS FOR CREDIT DENIAL GIVEN AT TIME OF APPLICATION (BUSINESS CREDIT)
Creditor’s name
Creditor’s address
If your application for business credit is
denied, you have the right to a written statement of the specific reasons for the denial.
To obtain the statement, please contact
[name, address and telephone number of the
person or office from which the statement of
reasons can be obtained] within 60 days from
the date you are notified of our decision. We
will send you a written statement of reasons
for the denial within 30 days of receiving
your request for the statement.
Notice: The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis
of race, color, religion, national origin, sex,
marital status, age (provided the applicant
has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance
program; or because the applicant has in
good faith exercised any right under the Consumer Credit Protection Act. The Federal
agency that administers compliance with
this law concerning this creditor is [name
and address as specified by the appropriate
agency listed in appendix A].
FORM C–6—SAMPLE NOTICE OF INCOMPLETE
APPLICATION AND REQUEST FOR ADDITIONAL
INFORMATION
Creditor’s name
Address
Telephone number
Date
Dear Applicant: Thank you for your application for credit. The following information
is needed to make a decision on your application: lllll
We need to receive this information by
lllll (date). If we do not receive it by
that date, we will regrettably be unable to
give further consideration to your credit request.
Sincerely,
kpayne on VMOFRWIN702 with $$_JOB
FORM C–7—SAMPLE NOTICE OF ACTION TAKEN
AND STATEMENT OF REASONS (BUSINESS
CREDIT)
FORM C–9—SAMPLE DISCLOSURE OF RIGHT TO
RECEIVE A COPY OF APPRAISALS
We may order an appraisal to determine
the property’s value and charge you for this
appraisal. We will promptly give you a copy
of any appraisal, even if your loan does not
close.
You can pay for an additional appraisal for
your own use at your own cost.
Creditor’s name
Creditor’s address
Date
Dear Applicant: Thank you for applying to
us for credit. We have given your request
careful consideration, and regret that we are
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Bur. of Consumer Financial Protection
Pt. 1002, Supp. I
[In your letter, give us the following information:]
terpretation issued by a duly authorized official of the Bureau. This commentary is the
means by which the Bureau of Consumer Financial Protection issues official interpretations of Regulation B. Good-faith compliance
with this commentary affords a creditor protection under section 706(e) of the Act.
2. Issuance of interpretations. Under appendix D to the regulation, any person may request an official interpretation. Interpretations will be issued at the discretion of designated officials and incorporated in this
commentary following publication for comment in the FEDERAL REGISTER. Except in
unusual circumstances, official interpretations will be issued only by means of this
commentary.
3. Comment designations. The comments are
designated with as much specificity as possible according to the particular regulatory
provision addressed. Each comment in the
commentary is identified by a number and
the regulatory section or paragraph that it
interprets. For example, comments to
§ 1002.2(c) are further divided by subparagraph, such as comment 2(c)(1)(ii)–1 and comment 2(c)(2)(ii–1.
FORM C–10—SAMPLE DISCLOSURE ABOUT
VOLUNTARY DATA NOTATION
We are requesting the following information to monitor our compliance with the
Federal Equal Credit Opportunity Act, which
prohibits unlawful discrimination. You are
not required to provide this information. We
will not take this information (or your decision not to provide this information) into account in connection with your application or
credit transaction. The law provides that a
creditor may not discriminate based on this
information, or based on whether or not you
choose to provide it. [If you choose not to
provide the information, we will note it by
visual observation or surname].
[76 FR 79445, Dec. 21, 2011, as amended at 78
FR 7248, Jan. 31, 2013]
APPENDIX D TO PART 1002—ISSUANCE OF
OFFICIAL INTERPRETATIONS
1.Official Interpretations. Interpretations of
this part issued by officials of the Bureau
provide the protection afforded under section
706(e) of the Act. Except in unusual circumstances, such interpretations will not be
issued separately but will be incorporated in
an official commentary to the regulation,
which will be amended periodically.
2. Requests for Issuance of Official Interpretations. A request for an official interpretation
should be in writing and addressed to the Assistant Director, Office of Regulations, Division of Research, Markets, and Regulations,
Bureau of Consumer Financial Protection,
1700 G Street, NW., Washington, DC 20006.
The request should contain a complete statement of all relevant facts concerning the
issue, including copies of all pertinent documents.
3. Scope of Interpretations. No interpretations will be issued approving creditors’
forms or statements. This restriction does
not apply to forms or statements whose use
is required or sanctioned by a government
agency.
Section 1002.1—Authority, Scope, and Purpose
1(a) Authority and scope.
1. Scope. The Equal Credit Opportunity Act
and Regulation B apply to all credit—commercial as well as personal—without regard
to the nature or type of the credit or the
creditor, except for an entity excluded from
coverage of this part (but not the Act) by
section 1029 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a transaction provides for the deferral of the payment of a debt, it is credit covered by Regulation B even though it may not be a credit
transaction covered by Regulation Z (Truth
in Lending) (12 CFR part 1026). Further, the
definition of creditor is not restricted to the
party or person to whom the obligation is
initially payable, as is the case under Regulation Z. Moreover, the Act and regulation
apply to all methods of credit evaluation,
whether performed judgmentally or by use of
a credit scoring system.
2. Foreign applicability. Regulation B generally does not apply to lending activities
that occur outside the United States. The
regulation does apply to lending activities
that take place within the United States (as
well as the Commonwealth of Puerto Rico
and any territory or possession of the United
States), whether or not the applicant is a
citizen.
3. Bureau. The term Bureau, as used in this
part, means the Bureau of Consumer Financial Protection.
SUPPLEMENT I TO PART 1002—OFFICIAL
INTERPRETATIONS
Following is an official interpretation of
Regulation B (12 CFR part 1002) issued by the
Bureau of Consumer Financial Protection.
References are to sections of the regulation
or the Equal Credit Opportunity Act (15
U.S.C. 1601 et seq.).
kpayne on VMOFRWIN702 with $$_JOB
INTRODUCTION
1.Official status. Section 706(e) of the Equal
Credit Opportunity Act protects a creditor
from civil liability for any act done or omitted in good faith in conformity with an in-
Section 1002.2—Definitions
2(c) Adverse action.
Paragraph 2(c)(1)(i).
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Pt. 1002, Supp. I
12 CFR Ch. X (1–1–21 Edition)
1. Application for credit. If the applicant applied in accordance with the creditor’s procedures, a refusal to refinance or extend the
term of a business or other loan is adverse
action.
Paragraph 2(c)(1)(ii).
1. Move from service area. If a credit card
issuer terminates the open-end account of a
customer because the customer has moved
out of the card issuer’s service area, the termination is adverse action unless termination on this ground was explicitly provided for in the credit agreement between
the parties. In cases where termination is adverse action, notification is required under
§ 1002.9.
2. Termination based on credit limit. If a creditor terminates credit accounts that have
low credit limits (for example, under $400)
but keeps open accounts with higher credit
limits, the termination is adverse action and
notification is required under § 1002.9.
Paragraph 2(c)(2)(ii).
1. Default—exercise of due-on-sale clause. If a
mortgagor sells or transfers mortgaged property without the consent of the mortgagee,
and the mortgagee exercises its contractual
right to accelerate the mortgage loan, the
mortgagee may treat the mortgagor as being
in default. An adverse action notice need not
be given to the mortgagor or the transferee.
(See comment 2(e)–1 for treatment of a purchaser who requests to assume the loan.)
2. Current delinquency or default. The term
adverse action does not include a creditor’s
termination of an account when the
accountholder is currently in default or delinquent on that account. Notification in accordance with § 1002.9 of the regulation generally is required, however, if the creditor’s
action is based on a past delinquency or default on the account.
Paragraph 2(c)(2)(iii).
1. Point-of-sale transactions. Denial of credit
at point of sale is not adverse action except
under those circumstances specified in the
regulation. For example, denial at point of
sale is not adverse action in the following
situations:
i. A credit cardholder presents an expired
card or a card that has been reported to the
card issuer as lost or stolen.
ii. The amount of a transaction exceeds a
cash advance or credit limit.
iii. The circumstances (such as excessive
use of a credit card in a short period of time)
suggest that fraud is involved.
iv. The authorization facilities are not
functioning.
v. Billing statements have been returned
to the creditor for lack of a forwarding address.
2. Application for increase in available credit.
A refusal or failure to authorize an account
transaction at the point of sale or loan is not
adverse action except when the refusal is a
denial of an application, submitted in ac-
cordance with the creditor’s procedures, for
an increase in the amount of credit.
Paragraph 2(c)(2)(v).
1. Terms of credit versus type of credit offered.
When an applicant applies for credit and the
creditor does not offer the credit terms requested by the applicant (for example, the
interest rate, length of maturity, collateral,
or amount of downpayment), a denial of the
application for that reason is adverse action
(unless the creditor makes a counteroffer
that is accepted by the applicant) and the
applicant is entitled to notification under
§ 1002.9.
2(e) Applicant.
1. Request to assume loan. If a mortgagor
sells or transfers the mortgaged property
and the buyer makes an application to the
creditor to assume the mortgage loan, the
mortgagee must treat the buyer as an applicant unless its policy is not to permit assumptions.
2(f) Application.
1. General. A creditor has the latitude
under the regulation to establish its own application process and to decide the type and
amount of information it will require from
credit applicants.
2. Procedures used. The term ‘‘procedures’’
refers to the actual practices followed by a
creditor for making credit decisions as well
as its stated application procedures. For example, if a creditor’s stated policy is to require all applications to be in writing on the
creditor’s application form, but the creditor
also makes credit decisions based on oral requests, the creditor’s procedures are to accept both oral and written applications.
3. When an inquiry or prequalification request
becomes an application. A creditor is encouraged to provide consumers with information
about loan terms. However, if in giving information to the consumer the creditor also
evaluates information about the consumer,
decides to decline the request, and communicates this to the consumer, the creditor
has treated the inquiry or prequalification
request as an application and must then
comply with the notification requirements
under § 1002.9. Whether the inquiry or
prequalification request becomes an application depends on how the creditor responds to
the consumer, not on what the consumer
says or asks. (See comment 9–5 for further
discussion of prequalification requests; see
comment
2(f)–5
for
a
discussion
of
preapproval requests.)
4. Examples of inquiries that are not applications. The following examples illustrate situations in which only an inquiry has taken
place:
i. A consumer calls to ask about loan
terms and an employee explains the creditor’s basic loan terms, such as interest rates,
loan-to-value ratio, and debt-to-income
ratio.
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ii. A consumer calls to ask about interest
rates for car loans, and, in order to quote the
appropriate rate, the loan officer asks for the
make and sales price of the car and the
amount of the downpayment, then gives the
consumer the rate.
iii. A consumer asks about terms for a loan
to purchase a home and tells the loan officer
her income and intended downpayment, but
the loan officer only explains the creditor’s
loan-to-value ratio policy and other basic
lending policies, without telling the consumer whether she qualifies for the loan.
iv. A consumer calls to ask about terms for
a loan to purchase vacant land and states his
income and the sales price of the property to
be financed, and asks whether he qualifies
for a loan; the employee responds by describing the general lending policies, explaining
that he would need to look at all of the consumer’s qualifications before making a decision, and offering to send an application
form to the consumer.
5. Examples of an application. An application for credit includes the following situations:
i. A person asks a financial institution to
‘‘preapprove’’ her for a loan (for example, to
finance a house or a vehicle she plans to buy)
and the institution reviews the request
under a program in which the institution,
after a comprehensive analysis of her creditworthiness, issues a written commitment
valid for a designated period of time to extend a loan up to a specified amount. The
written commitment may not be subject to
conditions other than conditions that require the identification of adequate collateral, conditions that require no material
change in the applicant’s financial condition
or creditworthiness prior to funding the
loan, and limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender
ordinarily attaches to a traditional application (such as certification of a clear termite
inspection for a home purchase loan, or a
maximum mileage requirement for a used
car loan). But if the creditor’s program does
not provide for giving written commitments,
requests for preapprovals are treated as
prequalification requests for purposes of the
regulation.
ii. Under the same facts as above, the financial institution evaluates the person’s
creditworthiness and determines that she
does not qualify for a preapproval.
6. Completed application—diligence requirement. The regulation defines a completed application in terms that give a creditor the
latitude to establish its own information requirements. Nevertheless, the creditor must
act with reasonable diligence to collect information needed to complete the application. For example, the creditor should request information from third parties, such as
a credit report, promptly after receiving the
application. If additional information is
needed from the applicant, such as an address or a telephone number to verify employment, the creditor should contact the
applicant promptly. (But see comment
9(a)(1)–3, which discusses the creditor’s option to deny an application on the basis of
incompleteness.)2(g) Business credit.
1. Definition. The test for deciding whether
a transaction qualifies as business credit is
one of primary purpose. For example, an
open-end credit account used for both personal and business purposes is not business
credit unless the primary purpose of the account is business-related. A creditor may
rely on an applicant’s statement of the purpose for the credit requested.
2(j) Credit.
1. General. Regulation B covers a wider
range of credit transactions than Regulation
Z (Truth in Lending). Under Regulation B, a
transaction is credit if there is a right to
defer payment of a debt—regardless of
whether the credit is for personal or commercial purposes, the number of installments required for repayment, or whether
the transaction is subject to a finance
charge.
2(l) Creditor.
1. Assignees. The term creditor includes all
persons participating in the credit decision.
This may include an assignee or a potential
purchaser of the obligation who influences
the credit decision by indicating whether or
not it will purchase the obligation if the
transaction is consummated.
2. Referrals to creditors. For certain purposes, the term creditor includes persons
such as real estate brokers, automobile dealers, home builders, and home-improvement
contractors who do not participate in credit
decisions but who only accept applications
and refer applicants to creditors, or select or
offer to select creditors to whom credit requests can be made. These persons must
comply with § 1002.4(a), the general rule prohibiting discrimination, and with § 1002.4(b),
the general rule against discouraging applications.
2(p) Empirically derived and other credit scoring systems.
1. Purpose of definition. The definition
under §§ 1002.2(p)(1)(i) through (iv) sets the
criteria that a credit system must meet in
order to use age as a predictive factor. Credit
systems that do not meet these criteria are
judgmental systems and may consider age
only for the purpose of determining a ‘‘pertinent element of creditworthiness.’’ (Both
types of systems may favor an elderly applicant. See § 1002.6(b)(2).)
2. Periodic revalidation. The regulation does
not specify how often credit scoring systems
must be revalidated. The credit scoring system must be revalidated frequently enough
to ensure that it continues to meet recognized professional statistical standards for
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statistical soundness. To ensure that predictive ability is being maintained, the creditor must periodically review the performance of the system. This could be done, for
example, by analyzing the loan portfolio to
determine the delinquency rate for each
score interval, or by analyzing population
stability over time to detect deviations of
recent applications from the applicant population used to validate the system. If this
analysis indicates that the system no longer
predicts risk with statistical soundness, the
system must be adjusted as necessary to reestablish its predictive ability. A creditor is
responsible for ensuring its system is validated and revalidated based on the creditor’s
own data.
3. Pooled data scoring systems. A scoring system or the data from which to develop such
a system may be obtained from either a single credit grantor or multiple credit
grantors. The resulting system will qualify
as an empirically derived, demonstrably and
statistically sound, credit scoring system
provided the criteria set forth in paragraph
(p)(1)(i) through (iv) of this section are met.
A creditor is responsible for ensuring its system is validated and revalidated based on the
creditor’s own data when it becomes available.
4. Effects test and disparate treatment. An
empirically derived, demonstrably and statistically sound, credit scoring system may
include age as a predictive factor (provided
that the age of an elderly applicant is not assigned a negative factor or value). Besides
age, no other prohibited basis may be used as
a variable. Generally, credit scoring systems
treat all applicants objectively and thus
avoid problems of disparate treatment. In
cases where a credit scoring system is used
in conjunction with individual discretion,
disparate treatment could conceivably occur
in the evaluation process. In addition, neutral factors used in credit scoring systems
could nonetheless be subject to challenge
under the effects test. (See comment 6(a)–2
for a discussion of the effects test).
2(w) Open-end credit.
1. Open-end real estate mortgages. The term
‘‘open-end credit’’ does not include negotiated advances under an open-end real estate mortgage or a letter of credit.
2(z) Prohibited basis.
1. Persons associated with applicant. As used
in this part, prohibited basis refers not only
to characteristics—the race, color, religion,
national origin, sex, marital status, or age—
of an applicant (or officers of an applicant in
the case of a corporation) but also to the
characteristics of individuals with whom an
applicant is affiliated or with whom the applicant associates. This means, for example,
that under the general rule stated in
§ 1002.4(a), a creditor may not discriminate
against an applicant because of that person’s
personal or business dealings with members
of a certain religion, because of the national
origin of any persons associated with the extension of credit (such as the tenants in the
apartment complex being financed), or because of the race of other residents in the
neighborhood where the property offered as
collateral is located.
2. National origin. A creditor may not
refuse to grant credit because an applicant
comes from a particular country but may
take the applicant’s immigration status into
account. A creditor may also take into account any applicable law, regulation, or executive order restricting dealings with citizens (or the government) of a particular
country or imposing limitations regarding
credit extended for their use.
3. Public assistance program. Any Federal,
state, or local governmental assistance program that provides a continuing, periodic income supplement, whether premised on entitlement or need, is ‘‘public assistance’’ for
purposes of the regulation. The term includes (but is not limited to) Temporary Aid
to Needy Families, food stamps, rent and
mortgage supplement or assistance programs, social security and supplemental security income, and unemployment compensation. Only physicians, hospitals, and
others to whom the benefits are payable need
consider Medicare and Medicaid as public assistance.
Section 1002.3—Limited Exceptions for Certain
Classes of Transactions
1. Scope. Under this section, procedural requirements of the regulation do not apply to
certain types of credit. All classes of transactions remain subject to § 1002.4(a), the general rule barring discrimination on a prohibited basis, and to any other provision not
specifically excepted.
3(a) Public-utilities credit.
1. Definition. This definition applies only to
credit for the purchase of a utility service,
such as electricity, gas, or telephone service.
Credit provided or offered by a public utility
for some other purpose—such as for financing the purchase of a gas dryer, telephone
equipment, or other durable goods, or for insulation or other home improvements—is
not excepted.
2. Security deposits. A utility company is a
creditor when it supplies utility service and
bills the user after the service has been provided. Thus, any credit term (such as a requirement for a security deposit) is subject
to the regulation’s bar against discrimination on a prohibited basis.
3. Telephone companies. A telephone company’s credit transactions qualify for the exceptions provided in § 1002.3(a)(2) only if the
company is regulated by a government unit
or files the charges for service, delayed payment, or any discount for prompt payment
with a government unit.
3(c) Incidental credit.
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1. Examples. If a service provider (such as a
hospital, doctor, lawyer, or merchant) allows
the client or customer to defer the payment
of a bill, this deferral of debt is credit for
purposes of the regulation, even though
there is no finance charge and no agreement
for payment in installments. Because of the
exceptions provided by this section, however,
these particular credit extensions are excepted from compliance with certain procedural requirements as specified in § 1002.3(c).
3(d) Government credit.
1. Credit to governments. The exception relates to credit extended to (not by) governmental entities. For example, credit extended to a local government is covered by
this exception, but credit extended to consumers by a Federal or state housing agency
does not qualify for special treatment under
this category.
a legitimate nondiscriminatory reason for
its action, or if the asserted reason is found
to be a pretext for discrimination.
Paragraph 4(b).
1. Prospective applicants. Generally, the regulation’s protections apply only to persons
who have requested or received an extension
of credit. In keeping with the purpose of the
Act—to promote the availability of credit on
a nondiscriminatory basis—§ 1002.4(b) covers
acts or practices directed at prospective applicants that could discourage a reasonable
person, on a prohibited basis, from applying
for credit. Practices prohibited by this section include:
i. A statement that the applicant should
not bother to apply, after the applicant
states that he is retired.
ii. The use of words, symbols, models or
other forms of communication in advertising
that express, imply, or suggest a discriminatory preference or a policy of exclusion in
violation of the Act.
iii. The use of interview scripts that discourage applications on a prohibited basis.
2. Affirmative advertising. A creditor may affirmatively solicit or encourage members of
traditionally disadvantaged groups to apply
for credit, especially groups that might not
normally seek credit from that creditor.
Paragraph 4(c).
1. Requirement for written applications.
Model application forms are provided in appendix B to the regulation, although use of a
printed form is not required. A creditor will
satisfy the requirement by writing down the
information that it normally considers in
making a credit decision. The creditor may
complete an application on behalf of an applicant and need not require the applicant to
sign the application.
2. Telephone applications. A creditor that
accepts applications by telephone for dwelling-related credit covered by § 1002.13 can
meet the requirement for written applications by writing down pertinent information
that is provided by the applicant.
3. Computerized entry. Information entered
directly into and retained by a computerized
system qualifies as a written application
under this paragraph. (See the commentary
to § 1002.13(b), Applications through electronic
media and Applications through video.)
Paragraph 4(d).
1. Clear and conspicuous. This standard requires that disclosures be presented in a reasonably understandable format in a way that
does not obscure the required information.
No minimum type size is mandated, but the
disclosures must be legible, whether typewritten, handwritten, or printed by computer.
2. Form of disclosures. Whether the disclosures required to be on or with an application must be in electronic form depends upon
the following:
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Section 1002.4—General Rules
Paragraph 4(a).
1. Scope of rule. The general rule stated in
§ 1002.4(a) covers all dealings, without exception, between an applicant and a creditor,
whether or not addressed by other provisions
of the regulation. Other provisions of the
regulation identify specific practices that
the Bureau has decided are impermissible because they could result in credit discrimination on a basis prohibited by the Act. The
general rule covers, for example, application
procedures, criteria used to evaluate creditworthiness, administration of accounts, and
treatment of delinquent or slow accounts.
Thus, whether or not specifically prohibited
elsewhere in the regulation, a credit practice
that treats applicants differently on a prohibited basis violates the law because it violates the general rule. Disparate treatment
on a prohibited basis is illegal whether or
not it results from a conscious intent to discriminate.
2. Examples.
i. Disparate treatment would exist, for example, in the following situations:
A. A creditor provides information only on
‘‘subprime’’ and similar products to minority
applicants who request information about
the creditor’s mortgage products, but provides information on a wider variety of
mortgage products to similarly situated nonminority applicants.
B. A creditor provides more comprehensive
information to men than to similarly situated women.
C. A creditor requires a minority applicant
to provide greater documentation to obtain a
loan than a similarly situated nonminority
applicant.
D. A creditor waives or relaxes credit
standards for a nonminority applicant but
not for a similarly situated minority applicant.
ii. Treating applicants differently on a prohibited basis is unlawful if the creditor lacks
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i. If an applicant accesses a credit application electronically (other than as described
under ii below), such as online at a home
computer, the creditor must provide the disclosures in electronic form (such as with the
application form on its Web site) in order to
meet the requirement to provide disclosures
in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the applicant, this requirement
would not be met.
ii. In contrast, if an applicant is physically
present in the creditor’s office, and accesses
a credit application electronically, such as
via a terminal or kiosk (or if the applicant
uses a terminal or kiosk located on the
premises of an affiliate or third party that
has arranged with the creditor to provide applications to consumers), the creditor may
provide disclosures in either electronic or
paper form, provided the creditor complies
with the timing, delivery, and retainability
requirements of the regulation.
Paragraph 5(d)(1).
1. Indirect disclosure of prohibited information. The fact that certain credit-related information may indirectly disclose marital
status does not bar a creditor from seeking
such information. For example, the creditor
may ask about:
i. The applicant’s obligation to pay alimony, child support, or separate maintenance income.
ii. The source of income to be used as the
basis for repaying the credit requested,
which could disclose that it is the income of
a spouse.
iii. Whether any obligation disclosed by
the applicant has a co-obligor, which could
disclose that the co-obligor is a spouse or
former spouse.
iv. The ownership of assets, which could
disclose the interest of a spouse.
Paragraph 5(d)(2).
1. Disclosure about income. The sample application forms in appendix B to the regulation illustrate how a creditor may inform an
applicant of the right not to disclose alimony, child support, or separate maintenance income.
2. General inquiry about source of income.
Since a general inquiry about the source of
income may lead an applicant to disclose alimony, child support, or separate maintenance income, a creditor making such an inquiry on an application form should preface
the request with the disclosure required by
this paragraph.
3. Specific inquiry about sources of income. A
creditor need not give the disclosure if the
inquiry about income is specific and worded
in a way that is unlikely to lead the applicant to disclose the fact that income is derived from alimony, child support, or separate maintenance payments. For example, an
application form that asks about specific
types of income such as salary, wages, or investment income need not include the disclosure.
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Section 1002.5—Rules Concerning Requests for
Information
5(a) General rules.
Paragraph 5(a)(1).
1. Requests for information. This section
governs the types of information that a creditor may gather. Section1002.6 governs how
information may be used.
Paragraph 5(a)(2).
1. Local laws. Information that a creditor is
allowed to collect pursuant to a ‘‘state’’
statute or regulation includes information
required by a local statute, regulation, or ordinance.
2. Information required by Regulation C. Regulation C, 12 CFR part 1003, generally requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to collect and
report information about the race, ethnicity,
and sex of applicants for certain dwelling-secured loans, including some types of loans
not covered by § 1002.13.
3. Collecting information on behalf of creditors. 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.
Paragraph 5(a)(4).
1. Other permissible collection of information.
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). The information must be
retained pursuant to the requirements of
§ 1002.12.
5(d) Other limitations on information requests.
Section 1002.6—Rules Concerning Evaluation of
Applications
6(a) General rule concerning use of information.
1. General. When evaluating an application
for credit, a creditor generally may consider
any information obtained. However, a creditor may not consider in its evaluation of
creditworthiness any information that it is
barred by § 1002.5 from obtaining or from
using for any purpose other than to conduct
a self-test under § 1002.15.
2. Effects test. The effects test is a judicial
doctrine that was developed in a series of
employment cases decided by the U.S. Supreme Court under title VII of the Civil
Rights Act of 1964 (42 U.S.C. 2000e et seq.,) and
the burdens of proof for such employment
cases were codified by Congress in the Civil
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Rights Act of 1991 (42 U.S.C. 2000e–2). Congressional intent that this doctrine apply to
the credit area is documented in the Senate
Report that accompanied H.R. 6516, No. 94–
589, pp. 4–5; and in the House Report that accompanied H.R. 6516, No. 94–210, p.5. The Act
and regulation may prohibit a creditor practice that is discriminatory in effect because
it has a disproportionately negative impact
on a prohibited basis, even though the creditor has no intent to discriminate and the
practice appears neutral on its face, unless
the creditor practice meets a legitimate
business need that cannot reasonably be
achieved as well by means that are less disparate in their impact. For example, requiring that applicants have income in excess of
a certain amount to qualify for an overdraft
line of credit could mean that women and
minority applicants will be rejected at a
higher rate than men and nonminority applicants. If there is a demonstrable relationship
between the income requirement and creditworthiness for the level of credit involved,
however, use of the income standard would
likely be permissible.
6(b) Specific rules concerning use of information.
Paragraph 6(b)(1).
1. Prohibited basis—special purpose credit.
In a special purpose credit program, a creditor may consider a prohibited basis to determine whether the applicant possesses a characteristic needed for eligibility. (See § 1002.8.)
Paragraph 6(b)(2).
1. Favoring the elderly. Any system of evaluating creditworthiness may favor a credit
applicant who is age 62 or older. A credit program that offers more favorable credit terms
to applicants age 62 or older is also permissible; a program that offers more favorable
credit terms to applicants at an age lower
than 62 is permissible only if it meets the
special-purpose
credit
requirements
of
§ 1002.8.
2. Consideration of age in a credit scoring system. Age may be taken directly into account
in a credit scoring system that is ‘‘demonstrably and statistically sound,’’ as defined
in § 1002.2(p), with one limitation: Applicants
age 62 years or older must be treated at least
as favorably as applicants who are under age
62. If age is scored by assigning points to an
applicant’s age category, elderly applicants
must receive the same or a greater number
of points as the most favored class of nonelderly applicants.
i. Age-split scorecards. Some credit systems
segment the population and use different
scorecards based on the age of an applicant.
In such a system, one card may cover a narrow age range (for example, applicants in
their twenties or younger) who are evaluated
under attributes predictive for that age
group. A second card may cover all other applicants, who are evaluated under the attributes predictive for that broader class.
When a system uses a card covering a wide
age range that encompasses elderly applicants, the credit scoring system is not
deemed to score age. Thus, the system does
not raise the issue of assigning a negative
factor or value to the age of elderly applicants. But if a system segments the population by age into multiple scorecards, and
includes elderly applicants in a narrower age
range, the credit scoring system does score
age. To comply with the Act and regulation
in such a case, the creditor must ensure that
the system does not assign a negative factor
or value to the age of elderly applicants as a
class.
3. Consideration of age in a judgmental system. In a judgmental system, defined in
§ 1002.2(t), a creditor may not decide whether
to extend credit or set the terms and conditions of credit based on age or information
related exclusively to age. Age or age-related
information may be considered only in evaluating other ‘‘pertinent elements of creditworthiness’’ that are drawn from the particular facts and circumstances concerning
the applicant. For example, a creditor may
not reject an application or terminate an account because the applicant is 60 years old.
But a creditor that uses a judgmental system may relate the applicant’s age to other
information about the applicant that the
creditor considers in evaluating creditworthiness. As the following examples illustrate, the evaluation must be made in an individualized, case-by-case manner:
i. A creditor may consider the applicant’s
occupation and length of time to retirement
to ascertain whether the applicant’s income
(including retirement income) will support
the extension of credit to its maturity.
ii. A creditor may consider the adequacy of
any security offered when the term of the
credit extension exceeds the life expectancy
of the applicant and the cost of realizing on
the collateral could exceed the applicant’s
equity. An elderly applicant might not qualify for a 5 percent down, 30-year mortgage
loan but might qualify with a larger downpayment or a shorter loan maturity.
iii. A creditor may consider the applicant’s
age to assess the significance of length of
employment (a young applicant may have
just entered the job market) or length of
time at an address (an elderly applicant may
recently have retired and moved from a longterm residence).
4. Consideration of age in a reverse mortgage.
A reverse mortgage is a home-secured loan
in which the borrower receives payments
from the creditor, and does not become obligated to repay these amounts (other than in
the case of default) until the borrower dies,
moves permanently from the home, or transfers title to the home, or upon a specified
maturity date. Disbursements to the borrower under a reverse mortgage typically are
determined by considering the value of the
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borrower’s home, the current interest rate,
and the borrower’s life expectancy. A reverse
mortgage program that requires borrowers
to be age 62 or older is permissible under
§ 1002.6(b)(2)(iv).
In
addition,
under
§ 1002.6(b)(2)(iii), a creditor may consider a
borrower’s age to evaluate a pertinent element of creditworthiness, such as the
amount of the credit or monthly payments
that the borrower will receive, or the estimated repayment date.
5. Consideration of age in a combined system.
A creditor using a credit scoring system that
qualifies as ‘‘empirically derived’’ under
§ 1002.2(p) may consider other factors (such as
a credit report or the applicant’s cash flow)
on a judgmental basis. Doing so will not negate the classification of the credit scoring
component of the combined system as ‘‘demonstrably and statistically sound.’’ While
age could be used in the credit scoring portion, however, in the judgmental portion age
may not be considered directly. It may be
used only for the purpose of determining a
‘‘pertinent element of creditworthiness.’’
(See comment 6(b)(2)–3.)
6. Consideration of public assistance. When
considering income derived from a public assistance program, a creditor may take into
account, for example:
i. The length of time an applicant will
likely remain eligible to receive such income.
ii. Whether the applicant will continue to
qualify for benefits based on the status of
the applicant’s dependents (as in the case of
Temporary Aid to Needy Families, or social
security payments to a minor).
iii. Whether the creditor can attach or garnish the income to assure payment of the
debt in the event of default.
Paragraph 6(b)(5).
1. Consideration of an individual applicant. A
creditor must evaluate income derived from
part-time employment, alimony, child support, separate maintenance payments, retirement benefits, or public assistance on an
individual basis, not on the basis of aggregate statistics; and must assess its reliability or unreliability by analyzing the applicant’s actual circumstances, not by analyzing statistical measures derived from a
group.
2. Payments consistently made. In determining the likelihood of consistent payments of alimony, child support, or separate
maintenance, a creditor may consider factors such as whether payments are received
pursuant to a written agreement or court decree; the length of time that the payments
have been received; whether the payments
are regularly received by the applicant; the
availability of court or other procedures to
compel payment; and the creditworthiness of
the payor, including the credit history of the
payor when it is available to the creditor.
3. Consideration of income.
i. A creditor need not consider income at
all in evaluating creditworthiness. If a creditor does consider income, there are several
acceptable methods, whether in a credit
scoring or a judgmental system:
A. A creditor may score or take into account the total sum of all income stated by
the applicant without taking steps to evaluate the income for reliability.
B. A creditor may evaluate each component of the applicant’s income, and then
score or take into account income determined to be reliable separately from other
income; or the creditor may disregard that
portion of income that is not reliable when it
aggregates reliable income.
C. A creditor that does not evaluate all income components for reliability must treat
as reliable any component of protected income that is not evaluated.
ii. In considering the separate components
of an applicant’s income, the creditor may
not automatically discount or exclude from
consideration any protected income. Any
discounting or exclusion must be based on
the applicant’s actual circumstances.
4. Part-time employment, sources of income. A
creditor may score or take into account the
fact that an applicant has more than one
source of earned income—a full-time and a
part-time job or two part-time jobs. A creditor may also score or treat earned income
from a secondary source differently than
earned income from a primary source. The
creditor may not, however, score or otherwise take into account the number of
sources for income such as retirement income, social security, supplemental security
income, and alimony. Nor may the creditor
treat negatively the fact that an applicant’s
only earned income is derived from, for example, a part-time job.
Paragraph 6(b)(6).
1. Types of credit references. A creditor may
restrict the types of credit history and credit
references that it will consider, provided
that the restrictions are applied to all credit
applicants without regard to sex, marital
status, or any other prohibited basis. On the
applicant’s request, however, a creditor must
consider credit information not reported
through a credit bureau when the information relates to the same types of credit references and history that the creditor would
consider if reported through a credit bureau.
Paragraph 6(b)(7).
1. National origin—immigration status. The
applicant’s immigration status and ties to
the community (such as employment and
continued residence in the area) could have a
bearing on a creditor’s ability to obtain repayment. Accordingly, the creditor may consider immigration status and differentiate,
for example, between a noncitizen who is a
long-time resident with permanent resident
status and a noncitizen who is temporarily
in this country on a student visa.
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2. National origin—citizenship. A denial of
credit on the ground that an applicant is not
a United States citizen is not per se discrimination based on national origin.
Paragraph 6(b)(8).
1. Prohibited basis—marital status. A creditor
may consider the marital status of an applicant or joint applicant for the purpose of
ascertaining the creditor’s rights and remedies applicable to the particular extension
of credit. For example, in a secured transaction involving real property, a creditor
could take into account whether state law
gives the applicant’s spouse an interest in
the property being offered as collateral.
with a change in marital status, when one or
both spouses:
i. Repudiate responsibility for future
charges on the joint account.
ii. Request separate accounts in their own
names.
iii. Request that the joint account be
closed.
2. Updating information. A creditor may periodically request updated information from
applicants but may not use events related to
a prohibited basis—such as an applicant’s retirement or reaching a particular age, or a
change in name or marital status—to trigger
such a request.
Paragraph 7(c)(2).
1. Procedure pending reapplication. A creditor may require a reapplication from an account holder, even when there is no evidence
of unwillingness or inability to repay, if (1)
the credit was based on the qualifications of
a person who is no longer available to support the credit and (2) the creditor has information indicating that the account holder’s
income may be insufficient to support the
credit. While a reapplication is pending, the
creditor must allow the account holder full
access to the account under the existing contract terms. The creditor may specify a reasonable time period within which the account holder must submit the required information.
7(d) Signature of spouse or other person.
1. Qualified applicant. The signature rules
ensure that qualified applicants are able to
obtain credit in their own names. Thus,
when an applicant requests individual credit,
a creditor generally may not require the signature of another person unless the creditor
has first determined that the applicant alone
does not qualify for the credit requested.
2. Unqualified applicant. When an applicant
requests individual credit but does not meet
a creditor’s standards, the creditor may require a cosigner, guarantor, endorser, or
similar party—but cannot require that it be
the spouse. (See commentary to §§ 1002.7(d)(5)
and (6).)
Paragraph 7(d)(1).
1. Signature of another person. It is impermissible for a creditor to require an applicant who is individually creditworthy to provide a cosigner—even if the creditor applies
the requirement without regard to sex, marital status, or any other prohibited basis.
(But see comment 7(d)(6)–1 concerning guarantors of closely held corporations.)
2. Joint applicant. The term ‘‘joint applicant’’ refers to someone who applies contemporaneously with the applicant for shared or
joint credit. It does not refer to someone
whose signature is required by the creditor
as a condition for granting the credit requested.
3. Evidence of joint application. A person’s
intent to be a joint applicant must be evidenced at the time of application. Signatures
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Section 1002.7—Rules Concerning Extensions of
Credit
7(a) Individual accounts.
1. Open-end credit—authorized user. A creditor may not require a creditworthy applicant seeking an individual credit account to
provide additional signatures. But the creditor may condition the designation of an authorized user by the account holder on the
authorized user’s becoming contractually
liable for the account, as long as the creditor
does not differentiate on any prohibited
basis in imposing this requirement.
2. Open-end credit—choice of authorized user.
A creditor that permits an account holder to
designate an authorized user may not restrict this designation on a prohibited basis.
For example, if the creditor allows the designation of spouses as authorized users, the
creditor may not refuse to accept a nonspouse as an authorized user.
3. Overdraft authority on transaction accounts. If a transaction account (such as a
checking account or NOW account) includes
an overdraft line of credit, the creditor may
require that all persons authorized to draw
on the transaction account assume liability
for any overdraft.
7(b) Designation of name.
1. Single name on account. A creditor may
require that joint applicants on an account
designate a single name for purposes of administering the account and that a single
name be embossed on any credit cards issued
on the account. But the creditor may not require that the name be the husband’s name.
(See § 1002.10 for rules governing the furnishing of credit history on accounts held by
spouses.)
7(c) Action concerning existing open-end accounts.
Paragraph 7(c)(1).
1. Termination coincidental with marital status change. When an account holder’s marital
status changes, a creditor generally may not
terminate the account unless it has evidence
that the account holder is now unable or unwilling to repay. But the creditor may terminate an account on which both spouses are
jointly liable, even if the action coincides
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on a promissory note may not be used to
show intent to apply for joint credit. On the
other hand, signatures or initials on a credit
application affirming applicants’ intent to
apply for joint credit may be used to establish intent to apply for joint credit. (See appendix B.) The method used to establish intent must be distinct from the means used
by individuals to affirm the accuracy of information. For example, signatures on a
joint financial statement affirming the veracity of information are not sufficient to establish intent to apply for joint credit.
Paragraph 7(d)(2).
1. Jointly owned property. If an applicant requests unsecured credit, does not own sufficient separate property, and relies on joint
property to establish creditworthiness, the
creditor must value the applicant’s interest
in the jointly owned property. A creditor
may not request that a nonapplicant joint
owner sign any instrument as a condition of
the credit extension unless the applicant’s
interest does not support the amount and
terms of the credit sought.
i. Valuation of applicant’s interest. In determining the value of an applicant’s interest in
jointly owned property, a creditor may consider factors such as the form of ownership
and the property’s susceptibility to attachment, execution, severance, or partition; the
value of the applicant’s interest after such
action; and the cost associated with the action. This determination must be based on
the existing form of ownership, and not on
the possibility of a subsequent change. For
example, in determining whether a married
applicant’s interest in jointly owned property is sufficient to satisfy the creditor’s
standards of creditworthiness for individual
credit, a creditor may not consider that the
applicant’s separate property could be transferred into tenancy by the entirety after
consummation. Similarly, a creditor may
not consider the possibility that the couple
may divorce. Accordingly, a creditor may
not require the signature of the non-applicant spouse in these or similar circumstances.
ii. Other options to support credit. If the applicant’s interest in jointly owned property
does not support the amount and terms of
credit sought, the creditor may offer the applicant other options to qualify for the extension of credit. For example:
A. Providing a co-signer or other party
(§ 1002.7(d)(5));
B. Requesting that the credit be granted
on a secured basis (§ 1002.7(d)(4)); or
C. Providing the signature of the joint
owner on an instrument that ensures access
to the property in the event of the applicant’s death or default, but does not impose
personal liability unless necessary under
state law (such as a limited guarantee). A
creditor may not routinely require, however,
that a joint owner sign an instrument (such
as a quitclaim deed) that would result in the
forfeiture of the joint owner’s interest in the
property.
2. Need for signature—reasonable belief. A
creditor’s reasonable belief as to what instruments need to be signed by a person
other than the applicant should be supported
by a thorough review of pertinent statutory
and decisional law or an opinion of the state
attorney general.
Paragraph 7(d)(3).
1. Residency. In assessing the creditworthiness of a person who applies for credit in a
community property state, a creditor may
assume that the applicant is a resident of
the state unless the applicant indicates otherwise.
Paragraph 7(d)(4).
1. Creation of enforceable lien. Some state
laws require that both spouses join in executing any instrument by which real property is encumbered. If an applicant offers
such property as security for credit, a creditor may require the applicant’s spouse to
sign the instruments necessary to create a
valid security interest in the property. The
creditor may not require the spouse to sign
the note evidencing the credit obligation if
signing only the mortgage or other security
agreement is sufficient to make the property
available to satisfy the debt in the event of
default. However, if under state law both
spouses must sign the note to create an enforceable lien, the creditor may require the
signatures.
2. Need for signature—reasonable belief. Generally, a signature to make the secured property available will only be needed on a security agreement. A creditor’s reasonable belief that, to ensure access to the property,
the spouse’s signature is needed on an instrument that imposes personal liability
should be supported by a thorough review of
pertinent statutory and decisional law or an
opinion of the state attorney general.
3. Integrated instruments. When a creditor
uses an integrated instrument that combines
the note and the security agreement, the
spouse cannot be asked to sign the integrated instrument if the signature is only
needed to grant a security interest. But the
spouse could be asked to sign an integrated
instrument that makes clear—for example,
by a legend placed next to the spouse’s signature—that the spouse’s signature is only to
grant a security interest and that signing
the instrument does not impose personal liability.
Paragraph 7(d)(5).
1. Qualifications of additional parties. In establishing guidelines for eligibility of guarantors, cosigners, or similar additional parties, a creditor may restrict the applicant’s
choice of additional parties but may not discriminate on the basis of sex, marital status,
or any other prohibited basis. For example,
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the creditor could require that the additional party live in the creditor’s market
area.
2. Reliance on income of another person—individual credit. An applicant who requests individual credit relying on the income of another person (including a spouse in a noncommunity property state) may be required
to provide the signature of the other person
to make the income available to pay the
debt. In community property states, the signature of a spouse may be required if the applicant relies on the spouse’s separate income. If the applicant relies on the spouse’s
future earnings that as a matter of state law
cannot be characterized as community property until earned, the creditor may require
the spouse’s signature, but need not do so—
even if it is the creditor’s practice to require
the signature when an applicant relies on the
future earnings of a person other than a
spouse. (See § 1002.6(c) on consideration of
state property laws.)
3. Renewals. If the borrower’s creditworthiness is reevaluated when a credit obligation
is renewed, the creditor must determine
whether an additional party is still warranted and, if not warranted, release the additional party.
Paragraph 7(d)(6).
1. Guarantees. A guarantee on an extension
of credit is part of a credit transaction and
therefore subject to the regulation. A creditor may require the personal guarantee of
the partners, directors, or officers of a business, and the shareholders of a closely held
corporation, even if the business or corporation is creditworthy. The requirement must
be based on the guarantor’s relationship
with the business or corporation, however,
and not on a prohibited basis. For example,
a creditor may not require guarantees only
for women-owned or minority-owned businesses. Similarly, a creditor may not require
guarantees only of the married officers of a
business or the married shareholders of a
closely held corporation.
2. Spousal guarantees. The rules in § 1002.7(d)
bar a creditor from requiring the signature
of a guarantor’s spouse just as they bar the
creditor from requiring the signature of an
applicant’s spouse. For example, although a
creditor may require all officers of a closely
held corporation to personally guarantee a
corporate loan, the creditor may not automatically require that spouses of married officers also sign the guarantee. If an evaluation of the financial circumstances of an officer indicates that an additional signature
is necessary, however, the creditor may require the signature of another person in appropriate circumstances in accordance with
§ 1002.7(d)(2).
7(e) Insurance.
1. Differences in terms. Differences in the
availability, rates, and other terms on which
credit-related casualty insurance or credit
life, health, accident, or disability insurance
is offered or provided to an applicant does
not violate Regulation B.
2. Insurance information. A creditor may obtain information about an applicant’s age,
sex, or marital status for insurance purposes.
The information may only be used for determining eligibility and premium rates for insurance, however, and not in making the
credit decision.
Section 1002.8—Special Purpose Credit Programs
8(a) Standards for programs.
1. Determining qualified programs. The Bureau does not determine whether individual
programs qualify for special purpose credit
status, or whether a particular program benefits an ‘‘economically disadvantaged class
of persons.’’ The agency or creditor administering or offering the loan program must
make these decisions regarding the status of
its program.
2. Compliance with a program authorized by
Federal or state law. A creditor does not violate Regulation B when it complies in good
faith with a regulation promulgated by a
government agency implementing a special
purpose credit program under § 1002.8(a)(1). It
is the agency’s responsibility to promulgate
a regulation that is consistent with Federal
and state law.
3. Expressly authorized. Credit programs authorized by Federal or state law include programs offered pursuant to Federal, state, or
local statute, regulation or ordinance, or
pursuant to judicial or administrative order.
4. Creditor liability. A refusal to grant credit
to an applicant is not a violation of the Act
or regulation if the applicant does not meet
the eligibility requirements under a special
purpose credit program.
5. Determining need. In designing a special
purpose credit program under § 1002.8(a), a
for-profit organization must determine that
the program will benefit a class of people
who would otherwise be denied credit or
would receive it on less favorable terms. This
determination can be based on a broad analysis using the organization’s own research or
data from outside sources, including governmental reports and studies. For example, a
creditor might design new products to reach
consumers who would not meet, or have not
met, its traditional standards of creditworthiness due to such factors as credit inexperience or the use of credit sources that
may not report to consumer reporting agencies. Or, a bank could review Home Mortgage
Disclosure Act data along with demographic
data for its assessment area and conclude
that there is a need for a special purpose
credit program for low-income minority borrowers.
6. Elements of the program. The written plan
must contain information that supports the
need for the particular program. The plan
also must either state a specific period of
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time for which the program will last, or contain a statement regarding when the program will be reevaluated to determine if
there is a continuing need for it.
8(b) Rules in other sections.
1. Applicability of rules. A creditor that rejects an application because the applicant
does not meet the eligibility requirements
(common characteristic or financial need,
for example) must nevertheless notify the
applicant of action taken as required by
§ 1002.9.
8(c) Special rule concerning requests and use
of information.
1. Request of prohibited basis information.
This section permits a creditor to request
and consider certain information that would
otherwise be prohibited by §§ 1002.5 and 1002.6
to determine an applicant’s eligibility for a
particular program.
2. Examples. Examples of programs under
which the creditor can ask for and consider
information about a prohibited basis are:
i. Energy conservation programs to assist
the elderly, for which the creditor must consider the applicant’s age.
ii. Programs under a Minority Enterprise
Small Business Investment Corporation, for
which a creditor must consider the applicant’s minority status.
8(d) Special rule in the case of financial need.
1. Request of prohibited basis information.
This section permits a creditor to request
and consider certain information that would
otherwise be prohibited by §§ 1002.5 and 1002.6,
and to require signatures that would otherwise be prohibited by § 1002.7(d).
2. Examples. Examples of programs in
which financial need is a criterion are:
i. Subsidized housing programs for low-to
moderate-income households, for which a
creditor may have to consider the applicant’s receipt of alimony or child support,
the spouse’s or parents’ income, etc.
ii. Student loan programs based on the
family’s financial need, for which a creditor
may have to consider the spouse’s or parents’ financial resources.
3. Student loans. In a guaranteed student
loan program, a creditor may obtain the signature of a parent as a guarantor when required by Federal or state law or agency regulation, or when the student does not meet
the creditor’s standards of creditworthiness.
(See §§ 1002.7(d)(1) and (5).) The creditor may
not require an additional signature when a
student has a work or credit history that
satisfies the creditor’s standards.
phrases that describe the action taken on
the application.
2. Expressly withdrawn applications. When
an applicant expressly withdraws a credit application, the creditor is not required to
comply with the notification requirements
under § 1002.9. (The creditor must comply,
however, with the record retention requirements of the regulation. See § 1002.12(b)(3).)
3. When notification occurs. Notification occurs when a creditor delivers or mails a notice to the applicant’s last known address or,
in the case of an oral notification, when the
creditor communicates the credit decision to
the applicant.
4. Location of notice. The notifications required under § 1002.9 may appear on either or
both sides of a form or letter.
5. Prequalification requests. Whether a creditor must provide a notice of action taken
for a prequalification request depends on the
creditor’s response to the request, as discussed in comment 2(f)-3. For instance, a
creditor may treat the request as an inquiry
if the creditor evaluates specific information
about the consumer and tells the consumer
the loan amount, rate, and other terms of
credit the consumer could qualify for under
various loan programs, explaining the process the consumer must follow to submit a
mortgage application and the information
the creditor will analyze in reaching a credit
decision. On the other hand, a creditor has
treated a request as an application, and is
subject to the adverse action notice requirements of § 1002.9 if, after evaluating information, the creditor decides that it will not approve the request and communicates that decision to the consumer. For example, if the
creditor tells the consumer that it would not
approve an application for a mortgage because of a bankruptcy in the consumer’s
record, the creditor has denied an application for credit.
9(a) Notification of action taken, ECOA notice, and statement of specific reasons.
Paragraph 9(a)(1).
1. Timing of notice—when an application is
complete. Once a creditor has obtained all the
information it normally considers in making
a credit decision, the application is complete
and the creditor has 30 days in which to notify the applicant of the credit decision. (See
also comment 2(f)-6.)
2. Notification of approval. Notification of
approval may be express or by implication.
For example, the creditor will satisfy the notification requirement when it gives the applicant the credit card, money, property, or
services requested.
3. Incomplete application—denial for incompleteness. When an application is incomplete
regarding information that the applicant can
provide and the creditor lacks sufficient data
for a credit decision, the creditor may deny
the application giving as the reason for denial that the application is incomplete. The
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Section 1002.9—Notifications
1. Use of the term adverse action. The regulation does not require that a creditor use the
term adverse action in communicating to an
applicant that a request for an extension of
credit has not been approved. In notifying an
applicant of adverse action as defined by
§ 1002.2(c)(1), a creditor may use any words or
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creditor has the option, alternatively, of providing a notice of incompleteness under
§ 1002.9(c).
4. Incomplete application—denial for reasons
other than incompleteness. When an application is missing information but provides sufficient data for a credit decision, the creditor may evaluate the application, make its
credit decision, and notify the applicant accordingly. If credit is denied, the applicant
must be given the specific reasons for the
credit denial (or notice of the right to receive the reasons); in this instance missing
information or ‘‘incomplete application’’
cannot be given as the reason for the denial.
5.
Length
of
counteroffer.
Section
1002.9(a)(1)(iv) does not require a creditor to
hold a counteroffer open for 90 days or any
other particular length of time.
6. Counteroffer combined with adverse action
notice. A creditor that gives the applicant a
combined counteroffer and adverse action
notice that complies with § 1002.9(a)(2) need
not send a second adverse action notice if
the
applicant
does
not
accept
the
counteroffer. A sample of a combined notice
is contained in form C–4 of appendix C to the
regulation.
7. Denial of a telephone application. When an
application is made by telephone and adverse
action is taken, the creditor must request
the applicant’s name and address in order to
provide written notification under this section. If the applicant declines to provide that
information, then the creditor has no further
notification responsibility.
Paragraph 9(a)(3).
1. Coverage. In determining which rules in
this paragraph apply to a given business
credit application, a creditor may rely on
the applicant’s assertion about the revenue
size of the business. (Applications to start a
business are governed by the rules in
§ 1002.9(a)(3)(i).) If an applicant applies for
credit as a sole proprietor, the revenues of
the sole proprietorship will determine which
rules govern the application. However, if an
applicant applies for business credit as an individual, the rules in § 1002.9(a)(3)(i) apply
unless the application is for trade or similar
credit.
2. Trade credit. The term trade credit generally is limited to a financing arrangement
that involves a buyer and a seller—such as a
supplier who finances the sale of equipment,
supplies, or inventory; it does not apply to
an extension of credit by a bank or other financial institution for the financing of such
items.
3. Factoring. Factoring refers to a purchase
of accounts receivable, and thus is not subject to the Act or regulation. If there is a
credit extension incident to the factoring arrangement,
the
notification
rules
in
§ 1002.9(a)(3)(ii) apply, as do other relevant
sections of the Act and regulation.
4. Manner of compliance. In complying with
the notice provisions of the Act and regulation, creditors offering business credit may
follow the rules governing consumer credit.
Similarly, creditors may elect to treat all
business credit the same (irrespective of revenue size) by providing notice in accordance
with § 1002.9(a)(3)(i).
5. Timing of notification. A creditor subject
to § 1002.9(a)(3)(ii)(A) is required to notify a
business credit applicant, orally or in writing, of action taken on an application within
a reasonable time of receiving a completed
application. Notice provided in accordance
with the timing requirements of § 1002.9(a)(1)
is deemed reasonable in all instances.
9(b) Form of ECOA notice and statement of
specific reasons.
Paragraph 9(b)(1).
1. Substantially similar notice. The ECOA notice sent with a notification of a credit denial or other adverse action will comply with
the regulation if it is ‘‘substantially similar’’
to the notice contained in § 1002.9(b)(1). For
example, a creditor may add a reference to
the fact that the ECOA permits age to be
considered in certain credit scoring systems,
or add a reference to a similar state statute
or regulation and to a state enforcement
agency.
Paragraph 9(b)(2).
1. Number of specific reasons. A creditor
must disclose the principal reasons for denying an application or taking other adverse
action. The regulation does not mandate
that a specific number of reasons be disclosed, but disclosure of more than four reasons is not likely to be helpful to the applicant.
2. Source of specific reasons. The specific
reasons disclosed under §§ 1002.9(a)(2) and
(b)(2) must relate to and accurately describe
the factors actually considered or scored by
a creditor.
3. Description of reasons. A creditor need
not describe how or why a factor adversely
affected an applicant. For example, the notice may say ‘‘length of residence’’ rather
than ‘‘too short a period of residence.’’
4. Credit scoring system. If a creditor bases
the denial or other adverse action on a credit
scoring system, the reasons disclosed must
relate only to those factors actually scored
in the system. Moreover, no factor that was
a principal reason for adverse action may be
excluded from disclosure. The creditor must
disclose the actual reasons for denial (for example, ‘‘age of automobile’’) even if the relationship of that factor to predicting creditworthiness may not be clear to the applicant.
5. Credit scoring—method for selecting reasons. The regulation does not require that
any one method be used for selecting reasons
for a credit denial or other adverse action
that is based on a credit scoring system.
Various methods will meet the requirements
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of the regulation. One method is to identify
the factors for which the applicant’s score
fell furthest below the average score for each
of those factors achieved by applicants
whose total score was at or slightly above
the minimum passing score. Another method
is to identify the factors for which the applicant’s score fell furthest below the average
score for each of those factors achieved by
all applicants. These average scores could be
calculated during the development or use of
the system. Any other method that produces
results substantially similar to either of
these methods is also acceptable under the
regulation.
6. Judgmental system. If a creditor uses a
judgmental system, the reasons for the denial or other adverse action must relate to
those factors in the applicant’s record actually reviewed by the person making the decision.
7. Combined credit scoring and judgmental
system. If a creditor denies an application
based on a credit evaluation system that employs both credit scoring and judgmental
components, the reasons for the denial must
come from the component of the system that
the applicant failed. For example, if a creditor initially credit scores an application and
denies the credit request as a result of that
scoring, the reasons disclosed to the applicant must relate to the factors scored in the
system. If the application passes the credit
scoring stage but the creditor then denies
the credit request based on a judgmental assessment of the applicant’s record, the reasons disclosed must relate to the factors reviewed judgmentally, even if the factors
were also considered in the credit scoring
component. If the application is not approved or denied as a result of the credit
scoring, but falls into a gray band, and the
creditor performs a judgmental assessment
and denies the credit after that assessment,
the reasons disclosed must come from both
components of the system. The same result
applies where a judgmental assessment is the
first component of the combined system. As
provided in comment 9(b)(2)–1, disclosure of
more than a combined total of four reasons
is not likely to be helpful to the applicant.
8. Automatic denial. Some credit decision
methods contain features that call for automatic denial because of one or more negative
factors in the applicant’s record (such as the
applicant’s previous bad credit history with
that creditor, the applicant’s declaration of
bankruptcy, or the fact that the applicant is
a minor). When a creditor denies the credit
request because of an automatic-denial factor, the creditor must disclose that specific
factor.
9. Combined ECOA–FCRA disclosures. The
ECOA requires disclosure of the principal
reasons for denying or taking other adverse
action on an application for an extension of
credit. The Fair Credit Reporting Act
(FCRA) requires a creditor to disclose when
it has based its decision in whole or in part
on information from a source other than the
applicant or its own files. Disclosing that a
credit report was obtained and used in the
denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant’s credit history reveals
delinquent credit obligations and the application is denied for that reason, to satisfy
§ 1002.9(b)(2) the creditor must disclose that
the application was denied because of the applicant’s delinquent credit obligations. The
FCRA also requires a creditor to disclose, as
applicable, a credit score it used in taking
adverse action along with related information, including up to four key factors that
adversely affected the consumer’s credit
score (or up to five factors if the number of
inquiries made with respect to that consumer report is a key factor). Disclosing the
key factors that adversely affected the consumer’s credit score does not satisfy the
ECOA requirement to disclose specific reasons for denying or taking other adverse action on an application or extension of credit.
Sample forms C–1 through C–5 of appendix C
of the regulation provide for both the ECOA
and FCRA disclosures. See also comment
9(b)(2)–1.
9(c) Incomplete applications.
Paragraph 9(c)(1).
1. Exception for preapprovals. The requirement to provide a notice of incompleteness
does not apply to preapprovals that constitute applications under § 1002.2(f).
Paragraph 9(c)(2).
1. Reapplication. If information requested
by a creditor is submitted by an applicant
after the expiration of the time period designated by the creditor, the creditor may require the applicant to make a new application.
Paragraph 9(c)(3).
1. Oral inquiries for additional information. If
an applicant fails to provide the information
in response to an oral request, a creditor
must send a written notice to the applicant
within the 30-day period specified in
§§ 1002.9(c)(1) and (2). If the applicant provides
the information, the creditor must take action on the application and notify the applicant in accordance with § 1002.9(a).
9(g) Applications submitted through a third
party.
1. Third parties. The notification of adverse
action may be given by one of the creditors
to whom an application was submitted, or by
a noncreditor third party. If one notification
is provided on behalf of multiple creditors,
the notice must contain the name and address of each creditor. The notice must either disclose the applicant’s right to a statement of specific reasons within 30 days, or
give the primary reasons each creditor relied
upon in taking the adverse action—clearly
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indicating which reasons relate to which
creditor.
2. Third party notice—enforcement agency. If
a single adverse action notice is being provided to an applicant on behalf of several
creditors and they are under the jurisdiction
of different Federal enforcement agencies,
the notice need not name each agency; disclosure of any one of them will suffice.
3. Third-party notice—liability. When a notice is to be provided through a third party,
a creditor is not liable for an act or omission
of the third party that constitutes a violation of the regulation if the creditor accurately and in a timely manner provided the
third party with the information necessary
for the notification and maintains reasonable procedures adapted to prevent such violations.
formation concerning an account is furnished does not alter the legal liability of either spouse on the account and does not require a creditor to change the name in which
the account is maintained.
Section 1002.11—Relation to State Law
11(a) Inconsistent state laws.
1. Preemption determination—New York. The
Bureau recognizes state law preemption determinations made by the Board of Governors of the Federal Reserve System prior
to July 21, 2011, until and unless the Bureau
makes and publishes any contrary determination. The Board of Governors determined that the following provisions in the
state law of New York are preempted by the
Federal law, effective November 11, 1988:
i. Article 15, section 296a(1)(b). Unlawful
discriminatory practices in relation to credit
on the basis of race, creed, color, national origin, age, sex, marital status, or disability.
This provision is preempted to the extent
that it bars taking a prohibited basis into
account when establishing eligibility for certain special-purpose credit programs.
ii. Article 15, section 296a(1)(c). Unlawful
discriminatory practice to make any record
or inquiry based on race, creed, color, national origin, age, sex, marital status, or disability. This provision is preempted to the
extent that it bars a creditor from requesting and considering information regarding
the particular characteristics (for example,
race, national origin, or sex) required for eligibility for special-purpose credit programs.
2. Preemption determination—Ohio. The Bureau recognizes state law preemption determinations made by the Board of Governors
of the Federal Reserve System prior to July
21, 2011, until and unless the Bureau makes
and publishes any contrary determination.
The Board of Governors determined that the
following provision in the state law of Ohio
is preempted by the Federal law, effective
July 23, 1990:
i. Section 4112.021(B)(1)—Unlawful discriminatory practices in credit transactions.
This provision is preempted to the extent
that it bars asking or favorably considering
the age of an elderly applicant; prohibits the
consideration of age in a credit scoring system; permits without limitation the consideration of age in real estate transactions;
and limits the consideration of age in special-purpose credit programs to certain government-sponsored programs identified in
the state law.
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Section 1002.10—Furnishing of Credit
Information
1. Scope. The requirements of § 1002.10 for
designating and reporting credit information
apply only to consumer credit transactions.
Moreover, they apply only to creditors that
opt to furnish credit information to credit
bureaus or to other creditors; there is no requirement that a creditor furnish credit information on its accounts.
2. Reporting on all accounts. The requirements of § 1002.10 apply only to accounts held
or used by spouses. However, a creditor has
the option to designate all joint accounts (or
all accounts with an authorized user) to reflect the participation of both parties,
whether or not the accounts are held by persons married to each other.
3. Designating accounts. In designating accounts and reporting credit information, a
creditor need not distinguish between accounts on which the spouse is an authorized
user and accounts on which the spouse is a
contractually liable party.
4. File and index systems. The regulation
does not require the creation or maintenance
of separate files in the name of each participant on a joint or user account, or require
any other particular system of recordkeeping or indexing. It requires only that a
creditor be able to report information in the
name of each spouse on accounts covered by
§ 1002.10. Thus, if a creditor receives a credit
inquiry about the wife, it should be able to
locate her credit file without asking the husband’s name.
10(a) Designation of accounts.
1. New parties. When new parties who are
spouses undertake a legal obligation on an
account, as in the case of a mortgage loan
assumption, the creditor must change the
designation on the account to reflect the
new parties and must furnish subsequent
credit information on the account in the new
names.
2. Request to change designation of account.
A request to change the manner in which in-
Section 1002.12—Record Retention
12(a) Retention of prohibited information.
1. Receipt of prohibited information. Unless
the creditor specifically requested such information, a creditor does not violate this
section when it receives prohibited information from a consumer reporting agency.
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2. Use of retained information. Although a
creditor may keep in its files prohibited information as provided in § 1002.12(a), the
creditor may use the information in evaluating credit applications only if permitted to
do so by § 1002.6.
12(b) Preservation of records.
1. Copies. Copies of the original record include carbon copies, photocopies, microfilm
or microfiche copies, or copies produced by
any other accurate retrieval system, such as
documents stored and reproduced by computer. A creditor that uses a computerized or
mechanized system need 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.
2. Computerized decisions. A creditor that
enters information items from a written application into a computerized or mechanized
system and makes the credit decision mechanically, based only on the items of information entered into the system, may comply
with § 1002.12(b) by retaining the information
actually entered. It is not required to store
the complete written application, nor is it
required to enter the remaining items of information into the system. If the transaction
is subject to § 1002.13 or the creditor is collecting information pursuant to § 1002.5(a)(4),
however, the creditor is required to enter
and retain the data on personal characteristics in order to comply with the requirements of that section.
Paragraph 12(b)(3).
1. Withdrawn and brokered applications. In
most cases, the 25-month retention period
for applications runs from the date a notification is sent to the applicant granting or
denying the credit requested. In certain
transactions, a creditor is not obligated to
provide a notice of the action taken. (See,
for example, comment 9–2.) In such cases, the
25-month requirement runs from the date of
application, as when:
i. An application is withdrawn by the applicant.
ii. An application is submitted to more
than one creditor on behalf of the applicant,
and the application is approved by one of the
other creditors.
12(b)(6) Self-tests.
1. The rule requires all written or recorded
information about a self-test to be retained
for 25 months after a self-test has been completed. For this purpose, a self-test is completed after the creditor has obtained the results and made a determination about what
corrective action, if any, is appropriate.
Creditors are required to retain information
about the scope of the self-test, the methodology used and time period covered by the
self-test, the report or results of the self-test
including any analysis or conclusions, and
any corrective action taken in response to
the self-test.
12(b)(7) Preapplication marketing information.
1. Prescreened credit solicitations. The rule
requires creditors to retain copies of
prescreened credit solicitations. For purposes of this part, a prescreened solicitation
is an ‘‘offer of credit’’ as described in 15
U.S.C. 1681a(1) of the Fair Credit Reporting
Act. A creditor complies with this rule if it
retains a copy of each solicitation mailing
that contains different terms, such as the
amount of credit offered, annual percentage
rate, or annual fee.
2. List of criteria. A creditor must retain the
list of criteria used to select potential recipients. This includes the criteria used by the
creditor both to determine the potential recipients of the particular solicitation and to
determine who will actually be offered credit.
3. Correspondence. A creditor may retain
correspondence relating to consumers’ complaints about prescreened solicitations in
any manner that is reasonably accessible
and is understandable to examiners. There is
no requirement to establish a separate database or set of files for such correspondence,
or to match consumer complaints with specific solicitation programs.
Section 1002.13—Information for Monitoring
Purposes
13(a) Information to be requested.
1. Natural person. Section 1002.13 applies
only to applications from natural persons.
2. Principal residence. The requirements of
§ 1002.13 apply only if an application relates
to a dwelling that is or will be occupied by
the applicant as the principal residence. A
credit application related to a vacation
home or a rental unit is not covered. 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.
3. Temporary financing. An application for
temporary financing to construct a dwelling
is not subject to § 1002.13. But an application
for both a temporary loan to finance construction of a dwelling and a permanent
mortgage loan to take effect upon the completion of construction is subject to § 1002.13.
4. New principal residence. A person can
have only one principal residence at a time.
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.
5. Transactions not covered. The information-collection requirements of this section
apply to applications for credit primarily for
the purchase or refinancing of a dwelling
that is or will become the applicant’s principal residence. Therefore, applications for
credit secured by the applicant’s principal
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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. An application for an open-end
home equity line of credit is not subject to
this section unless it is readily apparent to
the creditor when the application is taken
that the primary purpose of the line is for
the purchase or refinancing of a principal
dwelling.
6. Refinancings. A refinancing occurs when
an existing obligation is satisfied and replaced by a new obligation undertaken by
the same borrower. A creditor that receives
an application to refinance an existing extension of credit made by that creditor for
the purchase of the applicant’s dwelling may
request the monitoring information again
but is not required to do so if it was obtained
in the earlier transaction.
7. 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. See also comment 5(a)(2)–2.
8. Application-by-application basis. 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.
13(b) Obtaining of information.
1. Forms for collecting data. A creditor may
collect
the
information
specified
in
§ 1002.13(a) either on an application form or
on a separate form referring to the application. Appendix B to this part provides for
two alternative data collection model forms
for use in complying with the requirements
of § 1002.13(a)(1)(i) and (ii) to collect information concerning an applicant’s ethnicity,
race, and sex. When a creditor collects ethnicity and race information pursuant to
§ 1002.13(a)(1)(i)(A), the applicant must be offered the option to select more than one racial designation. When a creditor collects
ethnicity and race information pursuant to
§ 1002.13(a)(1)(i)(B), the applicant must be offered the option to select more than one ethnicity designation and more than one racial
designation.
2. Written applications. The regulation requires written applications for the types of
credit covered by § 1002.13. A creditor can satisfy this requirement by recording on paper
or by means of computer the information
that the applicant provides orally and that
the creditor normally considers in a credit
decision.
3. Telephone, mail applications.
i. A creditor that accepts an application by
telephone or mail must request the monitoring information.
ii. 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.
iii. 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.
4. Video and other electronic-application processes.
i. If a creditor takes an application
through an electronic medium that allows
the creditor to see the applicant, the creditor must treat the application as taken in
person. The creditor must note the monitoring information on the basis of visual observation or surname, if the applicant chooses not to provide the information.
ii. If an applicant applies through an electronic medium without video capability, the
creditor treats the application as if it were
received by mail.
5. Applications through loan-shopping services. When a creditor receives an application
through an unaffiliated loan-shopping service, it does not have to request the monitoring information for purposes of the ECOA
or Regulation B. Creditors subject to the
Home Mortgage Disclosure Act should be
aware, however, that data collection may be
called for under Regulation C (12 CFR part
1003), which generally requires creditors to
report, among other things, the sex and race
of an applicant on brokered applications or
applications
received
through
a
correspondent.
6. Inadvertent notation. If a creditor inadvertently obtains the monitoring information in a dwelling-related transaction not
covered by § 1002.13, the creditor may process
and retain the application without violating
the regulation.
13(c) Disclosure to applicants.
1. Procedures for providing disclosures. The
disclosure to an applicant regarding the
monitoring information may be provided in
writing. Appendix B provides data collection
model forms for use in complying with
§ 1002.13 and that comply with § 1002.13(c). A
creditor may devise its own disclosure so
long as it is substantially similar. The creditor need not orally request the monitoring
information if it is requested in writing.
13(d) Substitute monitoring program.
1. Substitute program. An enforcement agency may adopt, under its established rulemaking or enforcement procedures, a program requiring creditors under its jurisdiction to collect information in addition to information required by this section.
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Section 1002.14—Rules on Providing Appraisals
and Valuations
receives the appraisal or other written valuation, and the extent of any review or revision after the creditor receives it.
iii. ‘‘Completion’’ occurs when the last
version is received by the creditor, or when
the creditor has reviewed and accepted the
appraisal or other written valuation to include any changes or corrections required,
whichever is later. See also comment 14(a)(1)–
7.
iv. In a transaction that is being consummated (for closed-end credit) or in which
the account is being opened (for open-end
credit), if an appraisal or other written valuation has been developed but is not yet complete, the deadline for providing a copy of
three business days before consummation or
account opening still applies, unless the applicant waived that deadline as provided
under § 1002.14(a)(1), in which case the copy
must be provided at or before consummation
or account opening.
v. Even if the transaction will not be consummated (for closed-end credit) or the account will not be opened (for open-end credit), the copy must be provided ‘‘promptly
upon completion’’ as provided for in
§ 1002.14(a)(1), unless the applicant has
waived that deadline as provided under
§ 1002.14(a)(1), in which case as provided for in
§ 1002.14(a)(1) the copy must be provided to
the applicant no later than 30 days after the
creditor determines the transaction will not
be consummated or the account will not be
opened.
5. Promptly upon completion–examples. Examples in which the ‘‘promptly upon completion’’ standard would be satisfied include,
but are not limited to, those in subparagraphs i, ii, and iii below. Examples in which
the ‘‘promptly upon completion’’ standard
would not be satisfied include, but are not
limited to, those in subparagraphs iv and v
below.
i. Sending a copy of an appraisal within a
week of completion with sufficient time before
consummation (or account opening for open-end
credit). On day 15 after receipt of the application, the creditor’s underwriting department
reviews an appraisal and determines it is acceptable. One week later, the creditor sends
a copy of the appraisal to the applicant. The
applicant actually receives the copy more
than three business days before the date of
consummation (or account opening). The
creditor has provided the copy of the appraisal promptly upon completion.
ii. Sending a copy of a revised appraisal within a week after completion and with sufficient
time before consummation (or account opening
for open-end credit). An appraisal is being revised, and the creditor does not receive the
revised appraisal until day 45 after the application, when the creditor immediately determines the revised appraisal is acceptable. A
week later, the creditor sends a copy of the
revised appraisal to the applicant, and does
14(a) Providing appraisals and other valuations.
1. Multiple applicants. If there is more than
one applicant, the written disclosure about
written appraisals, and the copies of appraisals and other written valuations, need only
be given to one applicant. However, these
materials must be given to the primary applicant where one is readily apparent. Similarly, if there is more than one applicant for
credit in the transaction, one applicant may
provide a waiver under § 1002.14(a)(1), but it
must be the primary applicant where one is
readily apparent.
14(a)(1) In general.
1. Coverage. Section 1002.14 covers applications for credit to be secured by a first lien
on a dwelling, as that term is defined in
§ 1002.14(b)(2), whether the credit is for a
business purpose (for example, a loan to
start a business) or a consumer purpose (for
example, a loan to purchase a home).
2. Renewals. Section 1002.14(a)(1) applies
when an applicant requests the renewal of an
existing extension of credit and the creditor
develops a new appraisal or other written
valuation. Section 1002.14(a)(1) does not
apply to the extent a creditor uses the appraisals and other written valuations that
were previously developed in connection
with the prior extension of credit to evaluate
the renewal request.
3. Written. For purposes of § 1002.14, an ‘‘appraisal or other written valuation’’ includes,
without limitation, an appraisal or other
valuation received or developed by the creditor in paper form (hard copy); electronically, such as CD or email; or by any other
similar media. See § 1002.14(a)(5) regarding
the provision of copies of appraisals and
other written valuations to applicants via
electronic means.
4. Timing. Section 1002.14(a)(1) requires that
the creditor ‘‘provide’’ copies of appraisals
and other written valuations to the applicant ‘‘promptly upon completion,’’ or no
later than three business days before consummation (for closed-end credit) or account
opening (for open-end credit), whichever is
earlier.
i. For purposes of this timing requirement,
‘‘provide’’ means ‘‘deliver.’’ Delivery occurs
three business days after mailing or delivering the copies to the last-known address of
the applicant, or when evidence indicates actual receipt by the applicant, whichever is
earlier. Delivery to or actual receipt by the
applicant by electronic means must comply
with the E-Sign Act, as provided for in
§ 1002.14(a)(5).
ii. The application and meaning of the
‘‘promptly upon completion’’ standard depends upon the facts and circumstances, including but not limited to when the creditor
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not send a copy of the initial appraisal to the
applicant. The applicant actually receives
the copy of the revised appraisal three business days before the date of consummation
(or account opening). The creditor has provided the appraisal copy promptly upon completion.
iii. Sending a copy of an AVM report within
a week after its receipt and with sufficient time
before consummation (or account opening for
open-end credit). The creditor receives an
automated valuation model (AVM) report on
day 5 after receipt of the application and
treats the AVM report as complete when it is
received. On day 12 after receipt of the application, the creditor sends the applicant a
copy of the valuation. The applicant actually
receives the valuation more than three business days before the date of consummation
(or account opening). The creditor has provided the copy of the AVM report promptly
upon completion.
iv. Delay in sending an appraisal. On day 12
after receipt of the application, the creditor’s underwriting department reviews an
appraisal and determines it is acceptable. Although the creditor has determined the appraisal is complete, the creditor waits to
provide a copy to the applicant until day 42,
when the creditor schedules the consummation (or account opening) to occur on day 50.
The creditor has not provided the copy of the
appraisal promptly upon completion.
v. Delay in sending an AVM report while
waiting for completion of a second valuation.
The creditor receives an AVM report on day
5 after application and completes its review
of the AVM report the day it is received. The
creditor also has ordered an appraisal, but
the initial version of the appraisal received
by the creditor is found to be deficient and is
sent for review. The creditor waits 30 days to
provide a copy of the completed AVM report,
until the appraisal is completed on day 35.
The creditor then provides the applicant
with copies of the AVM report and the revised appraisal. While the appraisal report
was provided promptly upon completion, the
AVM report was not.
6. Waiver. Section 1002.14(a)(1) permits the
applicant to waive the timing requirement if
the creditor provides the copies at or before
consummation or account opening, except
where otherwise prohibited by law. Except
where otherwise prohibited by law, an applicant’s waiver is effective under § 1002.14(a)(1)
in either of the following two situations:
i. If, no later than three business days
prior to consummation or account opening,
the applicant provides the creditor an affirmative oral or written statement waiving
the timing requirement under this rule; or
ii. If, within three business days of consummation or account opening, the applicant provides the creditor an affirmative
oral or written statement waiving the timing requirement under this rule and the
waiver pertains solely to the applicant’s receipt of a copy of an appraisal or other written valuation that contains only clerical
changes from a previous version of the appraisal or other written valuation provided
to the applicant three or more business days
prior to consummation or account opening.
For purpose of this second type of waiver, revisions will only be considered to be clerical
in nature if they have no impact on the estimated value, and have no impact on the calculation or methodology used to derive the
estimate. In addition, under § 1002.14(a)(1) the
applicant still must receive the copy of the
revision at or prior to consummation or account opening.
7. Multiple versions of appraisals or valuations. For purposes of § 1002.14(a)(1), the reference to ‘‘all’’ appraisals and other written
valuations does not refer to all versions of
the same appraisal or other valuation. If a
creditor has received multiple versions of an
appraisal or other written valuation, the
creditor is required to provide only a copy of
the latest version received. If, however, a
creditor already has provided a copy of one
version of an appraisal or other written valuation to an applicant, and the creditor later
receives a revision of that appraisal or other
written valuation, then the creditor also
must provide the applicant with a copy of
the revision to comply with § 1002.14(a)(1). If
a creditor receives only one version of an appraisal or other valuation that is developed
in connection with the applicant’s application, then that version must be provided to
the applicant to comply with § 1002.14(a)(1).
See also comment 14(a)(1)–4 above.
14(a)(2) Disclosure.
1. Appraisal independence requirements not
affected. Nothing in the text of the disclosure
required by § 1002.14(a)(2) should be construed
to affect, modify, limit, or supersede the operation of any legal, regulatory, or other requirements or standards relating to independence in the conduct of appraisers or the
use of applicant-ordered appraisals by creditors.
14(a)(3) Reimbursement.
1. Photocopy, postage, or other costs. Creditors may not charge for photocopy, postage,
or other costs incurred in providing a copy of
an appraisal or other written valuation in
accordance with section 14(a)(1).
2. Reasonable fee for reimbursement. Section
1002.14(a)(3) does not prohibit a creditor from
imposing a reasonable fee to reimburse the
creditor’s costs of the appraisal or other
written valuation, so long as the fee is not
increased to cover the costs of providing copies of such appraisals or other written valuations under § 1002.14(a)(1). A creditor’s cost
may include an administration fee charged
to the creditor by an appraisal management
company as defined in 12 U.S.C. 3350(11). Section 1002.14(a)(3) does not, however, legally
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obligate the applicant to pay such fees. Further, creditors may not impose fees for reimbursement of the costs of an appraisal or
other valuation where otherwise prohibited
by law. For instance, a creditor may not
charge a consumer a fee for the performance
of a second appraisal if the second appraisal
is required under 15 U.S.C. 1639h(b)(2) and 12
CFR 1026.35(c).
14(b) Definitions.
14(b)(1) Consummation.
1. State law governs. When a contractual obligation on the consumer’s part is created is
a matter to be determined under applicable
law; § 1002.14 does not make this determination. A contractual commitment agreement,
for example, that under applicable law binds
the consumer to the credit terms would be
consummation. Consummation, however,
does not occur merely because the consumer
has made some financial investment in the
transaction (for example, by paying a nonrefundable fee) unless, of course, applicable
law holds otherwise.
2. Credit vs. sale. Consummation does not
occur when the consumer becomes contractually committed to a sale transaction, unless the consumer also becomes legally obligated to accept a particular credit arrangement.
14(b)(2) Dwelling.
1. ‘‘Motor vehicles’’ not covered. The requirements of § 1002.14 do not apply to ‘‘motor vehicles’’ as defined by 12 U.S.C. 5519(f)(1).
14(b)(3) Valuation.
1. Valuations—examples. Examples of valuations include but are not limited to:
i. A report prepared by an appraiser
(whether or not licensed or certified) including the appraiser’s estimate of the property’s
value or opinion of value.
ii. A document prepared by the creditor’s
staff that assigns value to the property.
iii. A report approved by a governmentsponsored enterprise for describing to the applicant the estimate of the property’s value
developed pursuant to the proprietary methodology or mechanism of the governmentsponsored enterprise.
iv. A report generated by use of an automated valuation model to estimate the property’s value.
v. A broker price opinion prepared by a
real estate broker, agent, or sales person to
estimate the property’s value.
2. Attachments and exhibits. The term
‘‘valuation’’ includes any attachments and
exhibits that are an integrated part of the
valuation.
3. Other documentation. Not all documents
that discuss or restate a valuation of an applicant’s property constitute a ‘‘valuation’’
for purposes of § 1002.14(b)(3). Examples of
documents that discuss the valuation of the
applicant’s property or may reflect its value
but nonetheless are not ‘‘valuations’’ include
but are not limited to:
i. Internal documents that merely restate
the estimated value of the dwelling contained in an appraisal or written valuation
being provided to the applicant.
ii. Governmental agency statements of appraised value that are publically available.
iii. Publicly-available lists of valuations
(such as published sales prices or mortgage
amounts, tax assessments, and retail price
ranges).
iv. Manufacturers’ invoices for manufactured homes.
v. Reports reflecting property inspections
that do not provide an estimate of the value
of the property and are not used to develop
an estimate of the value of the property.
vi. Appraisal reviews that do not include
the appraiser’s estimate of the property’s
value or opinion of value.
Section 1002.15—Incentives for Self-Testing and
Self-Correction
15(a) General rules.
15(a)(1) Voluntary self-testing and correction.
1. Activities required by any governmental
authority are not voluntary self-tests. A
governmental authority includes both administrative and judicial authorities for
Federal, State, and local governments.
15(a)(2) Corrective action required.
1. To qualify for the privilege, appropriate
corrective action is required when the results of a self-test show that it is more likely
than not that there has been a violation of
the ECOA or this part. A self-test is also
privileged when it identifies no violations.
2. In some cases, the issue of whether certain information is privileged may arise before the self-test is complete or corrective
actions are fully under way. This would not
necessarily prevent a creditor from asserting
the privilege. In situations where the selftest is not complete, for the privilege to
apply the lender must satisfy the regulation’s requirements within a reasonable period of time. To assert the privilege where
the self-test shows a likely violation, the
rule requires, at a minimum, that the creditor establish a plan for corrective action
and a method to demonstrate progress in implementing the plan. Creditors must take appropriate corrective action on a timely basis
after the results of the self-test are known.
3. A creditor’s determination about the
type of corrective action needed, or a finding
that no corrective action is required, is not
conclusive in determining whether the requirements of this paragraph have been satisfied. If a creditor’s claim of privilege is
challenged, an assessment of the need for
corrective action or the type of corrective
action that is appropriate must be based on
a review of the self-testing results, which
may require an in camera inspection of the
privileged documents.
15(a)(3) Other privileges.
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1. A creditor may assert the privilege established under this section in addition to
asserting any other privilege that may
apply, such as the attorney-client privilege
or the work-product privilege. Self-testing
data may be privileged under this section
whether or not the creditor’s assertion of another privilege is upheld.
15(b) Self-test defined.
15(b)(1) Definition.
Paragraph 15(b)(1)(i).
1. To qualify for the privilege, a self-test
must be sufficient to constitute a determination of the extent or effectiveness of the
creditor’s compliance with the Act and Regulation B. Accordingly, a self-test is only
privileged if it was designed and used for
that purpose. A self-test that is designed or
used to determine compliance with other
laws or regulations or for other purposes is
not privileged under this rule. For example,
a self-test designed to evaluate employee efficiency or customers’ satisfaction with the
level of service provided by the creditor is
not privileged even if evidence of discrimination is uncovered incidentally. If a self-test
is designed for multiple purposes, only the
portion designed to determine compliance
with the ECOA is eligible for the privilege.
Paragraph 15(b)(1)(ii).
1. The principal attribute of self-testing is
that it constitutes a voluntary undertaking
by the creditor to produce new data or factual information that otherwise would not
be available and could not be derived from
loan or application files or other records related to credit transactions. Self-testing includes, but is not limited to, the practice of
using fictitious applicants for credit (testers), either with or without the use of
matched pairs. A creditor may elect to test
a defined segment of its business, for example, loan applications processed by a specific
branch or loan officer, or applications made
for a particular type of credit or loan program. A creditor also may use other methods
of generating information that is not available in loan and application files, such as
surveying mortgage loan applicants. To the
extent permitted by law, creditors might
also develop new methods that go beyond
traditional pre-application testing, such as
hiring testers to submit fictitious loan applications for processing.
2. The privilege does not protect a creditor’s analysis performed as part of processing or underwriting a credit application.
A creditor’s evaluation or analysis of its
loan files, Home Mortgage Disclosure Act
data, or similar types of records (such as
broker or loan officer compensation records)
does not produce new information about a
creditor’s compliance and is not a self-test
for purposes of this section. Similarly, a statistical analysis of data derived from existing loan files is not privileged.
15(b)(3) Types of information not privileged.
Paragraph 15(b)(3)(i).
1. The information listed in this paragraph
is not privileged and may be used to determine whether the prerequisites for the privilege have been satisfied. Accordingly, a creditor might be asked to identify the self-testing
method,
for
example,
whether
preapplication testers were used or data were
compiled by surveying loan applicants. Information about the scope of the self-test
(such as the types of credit transactions examined, or the geographic area covered by
the test) also is not privileged.
Paragraph 15(b)(3)(ii).
1. Property appraisal reports, minutes of
loan committee meetings or other documents reflecting the basis for a decision to
approve or deny an application, loan policies
or procedures, underwriting standards, and
broker compensation records are examples of
the types of records that are not privileged.
If a creditor arranges for testers to submit
loan applications for processing, the records
are not related to actual credit transactions
for purposes of this paragraph and may be
privileged self-testing records.
15(c) Appropriate corrective action.
1. The rule only addresses the corrective
actions required for a creditor to take advantage of the privilege in this section. A creditor may be required to take other actions or
provide additional relief if a formal finding
of discrimination is made.
15(c)(1) General requirement.
1. Appropriate corrective action is required
even though no violation has been formally
adjudicated or admitted by the creditor. In
determining whether it is more likely than
not that a violation occurred, a creditor
must treat testers as if they are actual applicants for credit. A creditor may not refuse to
take appropriate corrective action under
this section because the self-test used fictitious loan applicants. The fact that a tester’s agreement with the creditor waives the
tester’s legal right to assert a violation does
not eliminate the requirement for the creditor to take corrective action, although no
remedial relief for the tester is required
under paragraph 15(c)(3).
15(c)(2) Determining the scope of appropriate
corrective action.
1. Whether a creditor has taken or is taking corrective action that is appropriate will
be determined on a case-by-case basis. Generally, the scope of the corrective action
that is needed to preserve the privilege is
governed by the scope of the self-test. For
example, a creditor that self-tests mortgage
loans and discovers evidence of discrimination may focus its corrective actions on
mortgage loans, and is not required to expand its testing to other types of loans.
2. In identifying the policies or practices
that are a likely cause of the violation, a
creditor might identify inadequate or improper lending policies, failure to implement
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established policies, employee conduct, or
other causes. The extent and scope of a likely violation may be assessed by determining
which areas of operations are likely to be affected by those policies and practices, for example, by determining the types of loans and
stages of the application process involved
and the branches or offices where the violations may have occurred.
3. Depending on the method and scope of
the self-test and the results of the test, appropriate corrective action may include one
or more of the following:
i. If the self-test identifies individuals
whose applications were inappropriately
processed, offering to extend credit if the application was improperly denied and compensating such persons for out-of-pocket costs
and other compensatory damages;
ii. Correcting institutional policies or procedures that may have contributed to the
likely violation, and adopting new policies
as appropriate;
iii. Identifying and then training and/or
disciplining the employees involved;
iv. Developing outreach programs, marketing strategies, or loan products to serve
more effectively segments of the lender’s
markets that may have been affected by the
likely discrimination; and
v. Improving audit and oversight systems
to avoid a recurrence of the likely violations.
15(c)(3) Types of relief.
Paragraph 15(c)(3)(ii).
1. The use of pre-application testers to
identify policies and practices that illegally
discriminate does not require creditors to review existing loan files for the purpose of
identifying and compensating applicants
who might have been adversely affected.
2. If a self-test identifies a specific applicant who was discriminated against on a prohibited basis, to qualify for the privilege in
this section the creditor must provide appropriate remedial relief to that applicant; the
creditor is not required to identify other applicants who might also have been adversely
affected.
Paragraph 15(c)(3)(iii).
1. A creditor is not required to provide remedial relief to an applicant that would not
be available by law. An applicant might also
be ineligible for certain types of relief due to
changed circumstances. For example, a creditor is not required to offer credit to a denied
applicant if the applicant no longer qualifies
for the credit due to a change in financial
circumstances, although some other type of
relief might be appropriate.
15(d)(1) Scope of privilege.
1. The privilege applies with respect to any
examination, investigation or proceeding by
Federal, State, or local government agencies
relating to compliance with the Act or this
part. Accordingly, in a case brought under
the ECOA, the privilege established under
this section preempts any inconsistent laws
or court rules to the extent they might require disclosure of privileged self-testing
data. The privilege does not apply in other
cases (such as in litigation filed solely under
a State’s fair lending statute). In such cases,
if a court orders a creditor to disclose selftest results, the disclosure is not a voluntary
disclosure or waiver of the privilege for purposes of paragraph 15(d)(2); a creditor may
protect the information by seeking a protective order to limit availability and use of the
self-testing data and prevent dissemination
beyond what is necessary in that case. Paragraph 15(d)(1) precludes a party who has obtained privileged information from using it
in a case brought under the ECOA, provided
the creditor has not lost the privilege
through voluntary disclosure under paragraph 15(d)(2).
15(d)(2) Loss of privilege.
Paragraph 15(d)(2)(i).
1. A creditor’s corrective action, by itself,
is not considered a voluntary disclosure of
the self-test report or results. For example, a
creditor does not disclose the results of a
self-test merely by offering to extend credit
to a denied applicant or by inviting the applicant to reapply for credit. Voluntary disclosure could occur under this paragraph,
however, if the creditor disclosed the selftest results in connection with a new offer of
credit.
2. The disclosure of self-testing results to
an independent contractor acting as an auditor or consultant for the creditor on compliance matters does not result in loss of the
privilege.
Paragraph 15(d)(2)(ii).
1. The privilege is lost if the creditor discloses privileged information, such as the results of the self-test. The privilege is not lost
if the creditor merely reveals or refers to the
existence of the self-test.
Paragraph 15(d)(2)(iii).
1. A creditor’s claim of privilege may be
challenged in a court or administrative law
proceeding with appropriate jurisdiction. In
resolving the issue, the presiding officer may
require the creditor to produce privileged information about the self-test.
Paragraph 15(d)(3) Limited use of privileged
information.
1. A creditor may be required to produce
privileged documents for the purpose of determining a penalty or remedy after a violation of the ECOA or Regulation B has been
formally adjudicated or admitted. A creditor’s compliance with such a requirement
does not evidence the creditor’s intent to
forfeit the privilege.
Section 1002.16—Enforcement, Penalties, and
Liabilities
16(c) Failure of compliance.
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Bur. of Consumer Financial Protection
§ 1003.2
1. Inadvertent errors. Inadvertent errors include, but are not limited to, clerical mistake, calculation error, computer malfunction, and printing error. An error of legal
judgment is not an inadvertent error under
the regulation.
2. Correction of error. For inadvertent errors
that occur under §§ 1002.12 and 1002.13, this
section requires that they be corrected prospectively.
ment and Budget (OMB) under 44
U.S.C. 3501 et seq. and have been assigned OMB numbers for institutions
reporting data to the Office of the
Comptroller of the Currency (1557–0159),
the Federal Deposit Insurance Corporation (3064–0046), the Federal Reserve
System (7100–0247), the Department of
Housing and Urban Development (HUD)
(2502–0529), the National Credit Union
Administration (3133–0166), and the Bureau of Consumer Financial Protection
(3170–0008).
(b) Purpose. (1) This part implements
the Home Mortgage Disclosure Act,
which is intended to provide the public
with loan data that can be used:
(i) To help determine whether financial institutions are serving the housing needs of their communities;
(ii) To assist public officials in distributing public-sector investment so
as to attract private investment to
areas where it is needed; and
(iii) To assist in identifying possible
discriminatory lending patterns and
enforcing antidiscrimination statutes.
(2) Neither the act nor this part is intended to encourage unsound lending
practices or the allocation of credit.
(c) Scope. This part applies to financial
institutions
as
defined
in
§ 1003.2(g). This part requires a financial institution to submit data to the
appropriate Federal agency for the financial institution as defined in
§ 1003.5(a)(4), and to disclose certain
data to the public, about covered loans
for which the financial institution receives applications, or that it originates or purchases, and that are secured by a dwelling located in a State
of the United States of America, the
District of Columbia, or the Commonwealth of Puerto Rico.
APPENDIX C—SAMPLE NOTIFICATION FORMS
1. Form C–9. If not otherwise provided
under other applicable disclosure requirements, creditors may design their own form,
add to, or modify the model form to reflect
their individual policies and procedures. For
example, a creditor may want to add:
i. A telephone number that applicants may
call to leave their name and the address to
which a copy of the appraisal or other written valuation should be sent.
ii. A notice of the cost the applicant will
be required to pay the creditor for the appraisal or other valuation
[76 FR 79445, Dec. 21, 2011, as amended at 78
FR 7248, Jan. 31, 2013; 82 FR 45695, Oct. 2,
2017]
PART 1003—HOME MORTGAGE
DISCLOSURE (REGULATION C)
Sec.
1003.1 Authority, purpose, and scope.
1003.2 Definitions.
1003.3 Exempt institutions and excluded and
partially exempt transactions.
1003.4 Compilation of reportable data.
1003.5 Disclosure and reporting.
1003.6 Enforcement.
APPENDIX A TO PART 1003 [RESERVED]
APPENDIX B TO PART 1003—FORM AND INSTRUCTIONS FOR DATA COLLECTION ON
ETHNICITY, RACE, AND SEX
APPENDIX C TO PART 1003—PROCEDURES FOR
GENERATING A CHECK DIGIT AND VALIDATING A ULI
SUPPLEMENT I TO PART 1003—OFFICIAL INTERPRETATIONS
AUTHORITY: 12 U.S.C. 2803, 2804, 2805, 5512,
5581.
[76 FR 78468, Dec. 19, 2011, as amended at 80
FR 66308, Oct. 28, 2015]
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SOURCE: 76 FR 78468, Dec. 19, 2011, unless
otherwise noted.
§ 1003.2 Definitions.
In this part:
(a) Act means the Home Mortgage
Disclosure Act (HMDA) (12 U.S.C. 2801
et seq.), as amended.
(b) Application—(1) In general. Application means an oral or written request for a covered loan that is made in
accordance with procedures used by a
financial institution for the type of
credit requested.
§ 1003.1 Authority, purpose, and scope.
(a) Authority. This part, known as
Regulation C, is issued by the Bureau
of Consumer Financial Protection (Bureau) pursuant to the Home Mortgage
Disclosure Act (HMDA) (12 U.S.C. 2801
et seq.,) as amended. The informationcollection requirements have been approved by the U.S. Office of Manage-
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| File Type | application/pdf |
| File Modified | 2021-08-26 |
| File Created | 2021-08-26 |