3 (a) Public-utilities credit. Until the ACFR grants it official status, the XML Regulation B of the Equal Credit Opportunity Act prohibits lenders from using ascribed characteristics of a borrower, such as their age, gender, race, ethnicity, or religion, when making credit or loan decision. Redlining is an unethical and illegal practice that denies loans or services to people living in majority-minority communities. 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. As proposed, comment 13(a)-8 permitted a creditor to choose on an application-by-application basis whether to collect aggregate information pursuant to 1002.13(a)(1)(i)(A) or disaggregated information pursuant to 1002.13(a)(1)(i)(B). 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. 1. in On October 24, 2012, the CFPB issued a larger participant regulation in the market of consumer debt collection. This information is not part of the official Federal Register document. The Bureau also proposed comments 13(a)-7 and 13(a)-8 to provide that a creditor that collects applicant information in compliance with the revised Regulation C appendix will be acting in compliance with 1002.13 concerning the collection of an applicant's ethnicity, race, and sex information and to clarify that a creditor may choose on an application-by-application basis whether to collect aggregate or disaggregated information. 82 FR 43088, 43100-43102 (Sept. 13, 2017); see also id. [18] The current Regulation B appendix includes the 2004 URLA as a model form. 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. Fannie Mae, Form 1003 and Freddie Mac Form 65, Demographic Information Addendum, (Aug. 2016), available at https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf. Commenters expressed concern that the data points added to Regulation C in the 2015 HMDA Final Rule burdened financial institutions and, because of this burden, the commenters encouraged the Bureau to reduce the HMDA data fields to only statutorily required fields. The Bureau believes that, if a creditor voluntarily collects applicant demographic information pursuant to 1002.5(a)(4), the creditor should be required to maintain those records in the same manner as it does for protected applicant-characteristic information it is required to collect. Regulation B covers the actions of a creditor before, during, and after a credit transaction. Sections with amendments are marked with an asterisk (*). Two industry commenters, while supportive of the flexibility provided in the 2017 ECOA Proposal, sought clarification on how aggregate and disaggregated data will be evaluated against one another, including how aggregate information collected under Regulation B would be compared to disaggregated information collected under revised Regulation C. The commenters expressed concern that the optionality could result in dissimilar demographic reporting and potentially greater compliance burden for creditors who choose to continue to collect aggregate information. *. 03/01/2023, 267 As discussed above, on September 23, 2016, the Bureau issued the Bureau Approval Notice, pursuant to section 706(e) of ECOA. In addition, many community banks in rural areas are already exempt from HMDA reporting because they do not have a branch or home office in an MSA. %PDF-1.6
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The commenter noted that differing instructions may lead to uncertainty and that Regulation B-only creditors would benefit from the additional instructions provided in revised Regulation C. No commenters opposed the proposed comment, and so the Bureau is finalizing comment 13(a)-7 as proposed. These include white papers, government data, original reporting, and interviews with industry experts. 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. Second, for creditors collecting aggregate applicant demographic information pursuant to 1002.13(a)(1)(i)(A) and (ii), the Bureau proposed to amend the Regulation B appendix to add a model form. As part of the Bureau's outreach to financial institutions, vendors, and other mortgage industry participants to prepare for the implementation of the 2015 HMDA Final Rule, the Bureau received questions about the requirement to permit applicants to self-identify using disaggregated ethnicity and race categories. 09/29/2017 at 8:45 am. Fannie Mae, Selling Guide: Single Family Seller Servicer, at B1-1-01 (Dec. 16, 2014), available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html;; Freddie Mac, Single-Family Seller/Servicer Guide (Sep. 21, 2016), 3401.7, available at http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html. 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. Under this section, procedural requirements of the regulation do not apply to certain types of credit. 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. For Regulation B creditors making mortgage loans subject to 1002.13, the rule will allow creditors to collect the applicant's information using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories, as set forth in appendix B to Regulation C (the Regulation C appendix) as amended by the 2015 HMDA Final Rule. "Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)," Page 2. endstream
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The laws that cover collection policies and procedures are mandated by federal and state governments. All forms contained in this appendix are models; their use by creditors is optional. The rule does not add the 2016 URLA to the Regulation B appendix; that form is subject to a separate Federal Register notice issued by the Bureau acknowledging its compliance with certain provisions of Regulation B.[8]. The Public Inspection page may also New principal residence. 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. documents in the last year, 522 Regulation B of the Equal Credit Opportunity Act (ECOA) describes lending acts and practices that are specifically prohibited, permitted, or required. 4. This final rule adopts the proposed rule without making changes that would affect the Bureau's conclusion that the rule will not have a significant economic impact on any small entities. Although the loan volumes of most of these institutions would be too sparse for statistical analysis, the ability to conduct comparative file reviews using data retained under Regulation B has some benefit. 6. One industry commenter also noted that the 2016 URLA includes a form for the collection of applicant demographic information for additional borrowers and does not necessarily limit the collection to the applicant and the first co-applicant, even though Regulation C requires financial institutions to provide the ethnicity, race and sex information only for the applicant and first co-applicant. documents in the last year, 822 You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. Two commenters supported the proposal regarding record retention, noting that it would facilitate Start Printed Page 45686monitoring of fair lending laws and serve ECOA's purposes and that it seemed appropriate given the proposed amendments to 1002.5(a)(4). The Bureau believes that such guidance would add complexity and compliance burden on creditors without furthering the purposes of ECOA, and so declines to do so as part of this rulemaking. The Bureau is also issuing this final rule pursuant to its authority under sections 1022 and 1061 of the Dodd-Frank Act. Proposed 1002.5(a)(4)(i) and (ii) would permit a creditor that is a financial institution under revised Regulation C 1003.2(g) to collect demographic information of an applicant for a closed-end mortgage loan or an open-end line of credit that is an excluded transaction under revised Regulation C 1003.3(c)(11) or 1003.3(c)(12) if it submits HMDA data concerning those applications and loans or if it submitted HMDA data concerning closed-end mortgage loans or open-end lines of credit in any of the preceding five calendar years.[31]. It is not required to store the complete written application, nor is it required to enter the remaining items of information into the system. FDIC Consumer Compliance Examination Manual provides information and examination procedures to assist institutions with understanding and complying with fair lending-related requirements. Under Section 1002.5Rules concerning requests for information: b. This temporary increase in the open-end threshold will provide time for the Bureau to consider whether to initiate another rulemaking to address the appropriate level for the open-end threshold for data collected beginning January 1, 2020. These changes will primarily benefit institutions that may be near the loan volume reporting threshold, such that they may be required to report under HMDA and Regulation C in some years and not others, or may be uncertain about their reporting status. Authorization for this collection, consistent with the other provisions of 1002.5(a)(4), is not limited to collection using the 2016 URLA. 38. During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in the revised Regulation C appendix shall be deemed to be in compliance with Regulation B 1002.13(a)(i). The regulation only addresses the procedures for state application for exemption from the provisions of the Act. informational resource until the Administrative Committee of the Federal 4. Paragraph 13(c)Disclosure to applicants is revised. Two industry groups suggested that the Bureau remove 1002.13 altogether. Revision of the Standards for the Classification of Federal Data on Race and Ethnicity, 62 FR 58782, 5878-90 (Oct. 30, 1997). The Bureau proposed to amend comment 13(c)-1 to reference two data collection model forms the Bureau proposed to provide in the Regulation B appendix. A credit application related to a vacation home or a rental unit is not covered. One of the exceptions to the reporting requirements under HMDA is for entities that do not have a branch or home office located in an MSA. Will Kenton is an expert on the economy and investing laws and regulations. Proposed 1002.5(a)(4)(iv) would permit a creditor that exceeds a revised Regulation C loan-volume threshold in the first year of a two-year threshold period to collect, in the second year, applicant demographic information for a loan that would otherwise be a covered loan under Regulation C. For the reasons provided below, the Bureau is adopting 1002.5(a)(4)(i) through (iv) as proposed. Unlike the costs associated with the adoption of the 2016 URLA, these costs would not otherwise be incurred in the normal course of business. The creditor must note the monitoring information on the basis of visual observation or surname, if the applicant chooses not to provide the information. endstream
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Investopedia does not include all offers available in the marketplace. The Bureau also is subject to certain additional procedures under RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required. The incremental benefits of this alternative are also likely to be low because many creditors will collect disaggregated categories under Regulation B in any case, either because they are required to do so under revised Regulation C or as part of the transition to the 2016 URLA. Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. documents in the last year, 121 The rule also removes as outdated the existing version of the URLA contained in the Regulation B appendix, effective January 1, 2022. The Bureau further received questions related to the Bureau Approval Notice about whether the approval for collecting disaggregated ethnicity and race categories under Regulation B in 2017 would be extended to 2018. The Bureau also believes that permitting creditors to collect certain protected applicant-characteristic information in these circumstances provides a narrow exception to the general limitations in 1002.5(b) through (d) respects the purposes of those prohibitions. Investopedia requires writers to use primary sources to support their work. All lenders are required to comply with Regulation B, which protects applicants from discrimination. The Bureau does not have an estimate of the number of rural community banks that are currently exempt from HMDA reporting and originate at least 25 loans per year. An applicant's age can be requested if it appears that they cannot legally sign a contract. The Bureau declines to consider the proposals to eliminate altogether the requirement to collect applicant demographic information on the basis of visual observation or surname in 1002.13 or to provide further instructions on how to collect such information as both proposals go beyond the issues on which the Bureau solicited comment. Accordingly, the Bureau has authority to issue regulations to administer ECOA. Section 1002.12(b)(1) provides that a creditor must retain certain records for 25 months, or 12 months for business credit. The regulation covers topics such as: Prohibition on kickbacks and unearned fees Mortgage origination and servicing disclosures Affiliated business arrangements Title insurance Escrow accounts List of homeownership counseling organizations Mortgage loan servicing requirements Force-placed insurance The disclosure to an applicant regarding the monitoring information may be provided in writing. Local laws. 8. Use the PDF linked in the document sidebar for the official electronic format. of the issuing agency. The Bureau may reevaluate the need for mandatory disaggregated collection under 1002.13 after implementation of the 2015 HMDA Final Rule and transition to the 2016 URLA, when more information is available on creditor collection practices. A consumer advocacy group commenter argued that the Bureau should adopt the alternative of requiring all persons subject to the collection and retention requirement of Regulation B to permit applicants to self-identify using disaggregated race and ethnicity categories. to the courts under 44 U.S.C. However, the Bureau believes it may impose costs on consumers. With some exceptions, Regulation B 1002.5(b) prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person (protected applicant-characteristic information) in connection with a credit transaction. The current Regulation B appendix includes the 2004 URLA as a model form for use in complying with 1002.13. Commenters noted that the five-year timeframe for 1002.5(a)(4)(i), (ii), and (iii) was realistic and would provide enough time to allow institutions to keep their systems updated, but not so long that it would be unlikely the institution would become a HMDA reporter again. Regulation B also includes certain optional model forms for use in complying with certain Regulation B requirements, including a model form for complying with 1002.13 that is a 2004 version of the Uniform Residential Loan Application (URLA) issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). 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