03/01/2023, 267 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. Finally, the Bureau is amending Regulation B and the associated commentary to allow creditors to collect ethnicity, race, and sex from mortgage applicants in certain cases where the creditor is not required to report under HMDA and Regulation C. These circumstances include when: (1) A creditor that is a financial institution under revised Regulation C 1003.2(g), originates 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; (2) a creditor that submitted HMDA data in any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e), if not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (3) a creditor that exceeded an applicable loan volume threshold in the first year of the two-year threshold period provided in Regulation C 1003.2(g), 1003.3(c)(11), or 1003.3(c)(12), collects, in the second year, demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 12 CFR 1003.2(e), if the loan were not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (4) a creditor that is a financial institution under Regulation C 1003.2(g), or that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e) if the loan were not excluded by Regulation C 1003.3(c)(10); and (5) a creditor that collects demographic information of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a second or additional co-applicant for a loan described in amended 1002.5(a)(4)(i) through (v). The Bureau of Consumer Financial Protection (Bureau) is issuing a final rule that amends Regulation B to permit creditors additional flexibility in complying with Regulation B in order to facilitate compliance with Regulation C, adds certain model forms and removes others from Regulation B, and makes various other amendments to Regulation B and its commentary to facilitate the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants. Sec. Two of these circumstances are a requirement for creditors to collect and retain certain information about applicants for certain dwelling-secured loans under Regulation B 1002.13 and the similar applicant information that financial institutions are required to collect and report under Regulation C, 12 CFR part 1003, which implements the Home Mortgage Disclosure Act (HMDA). 2. electronic version on GPOs govinfo.gov. Potential Benefits and Costs to Consumers and Covered Persons, Providing an Option To Collect Disaggregated Race and Ethnicity for Regulation B, Model Forms for Collecting Race and Ethnicity Data, Allowing Voluntary Collection of Applicant Information, C. Impact on Depository Institutions and Credit Unions With $10 Billion or Less in Assets, as Described in Dodd-Frank Section 1026, VIII. Section 1002.13(b) discusses how creditors may obtain applicant information required under 1002.13(a). The Bureau believes that these provisions further the purposes of ECOA by easing overall burden on creditors and improving the quality of the data that is used to promote the availability of credit to all creditworthy applicants. Removing the Regulation B requirement altogether would make detection of any discrimination by these entities more difficult, with potentially large costs to consumers where such discrimination exists. The Bureau requested comment regarding the costs and benefits associated with this provision. documents in the last year, by the Food and Drug Administration procedures. 210.4 Sending items to Reserve Banks. 5. [FR Doc. Both ECOA and title X of the Dodd-Frank Act are consumer financial laws. Accordingly, 1002.5(a)(4)(vi) permits a creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant to collect information regarding the ethnicity, race, and sex of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a loan described in paragraphs (a)(4)(i) through (v). The final rule may have benefits to consumers, to the extent that lending entities voluntarily choose to collect disaggregated race and ethnicity information. 2. 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. 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 Bureau requested comment on the analysis under the RFA and any relevant data. regulation prescribes rules for taking, evaluating, and acting on applications aswell rules for furnishing and maintaining credit information. The CFPB protects the following credit applications and transactions for consumers: Consumer. documents in the last year, by the Rural Utilities Service Appendix B to part 1002, at paragraphs 1, 3. The other alternative would permit collection of applicant demographic information for any covered loan under Regulation C with no timeframe restriction, even if the creditor was not a financial institution under Regulation C. The Bureau is not adopting these proposed alternatives. In addition, comment appendix B-2 provides that the home-improvement and energy loan application form prepared by the Enterprises, dated October 1986, complies with the requirements of Regulation B for some creditors but not others, depending on whether the creditor is governed by 1002.13(a) or subject to a substitute monitoring program under 1002.13(d). All methods of compliance under current law will remain available to covered persons, including small entities, when these provisions become effective. 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. 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. Regulation C implements HMDA and sets out specific requirements for the collection, recording, reporting, and disclosure of mortgage lending information, including a requirement to collect and report applicant demographic information. 1. in Accordingly, the undersigned certifies that this final rule will not have a significant economic impact on a substantial number of small entities. These included, for example, a comment supporting the collection of loan officers' demographic information, a request to collect information on whether the applicant is divorced, a request for guidance on when previously gathered applicant demographic information can be used for new applications, and a request that the Bureau provide a safe harbor for information collected in 2017. By providing flexibility and reducing burden, the Bureau believes this modification will further the purposes of ECOA by facilitating practices that promote the availability of credit to all creditworthy applicants. Under Regulation B, a creditor may request any information. 36. 2. It is still the case that due to the low volume of mortgages by many affected entities and the lack of reporting, disaggregated race and ethnicity data may have limited benefits. I'd first recommend that you go review this section and the applicable Official Staff Commentary. !qZ{r![6|(:9'nG%8}tB\iJ9 DIbsH NB8- The Bureau did not propose these changes in the 2017 ECOA Proposal. [33] Effective January 1, 2018, amend Appendix B to Part 1002 by revising paragraph 1 and adding a Data Collection Model Form to the end of the Appendix to read as follows: 1. 5512(b)(1)). 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. The Bureau proposed that the 2004 URLA be removed on the cutover date the Enterprises designate for use of the 2016 URLA or January 1, 2022, whichever comes first. 2443 0 obj <>/Filter/FlateDecode/ID[<30EF4E5AA22E03459A9EF6E0C2536565><7935FD3A29EF9D43BC143B64EE87FEEF>]/Index[2430 29]/Info 2429 0 R/Length 72/Prev 288071/Root 2431 0 R/Size 2459/Type/XRef/W[1 2 1]>>stream Interagency guidance was issued in 2005. at 66314 (amendments to appendix B to Regulation C, effective January 1, 2018). The prudential regulators confirm that data collected and retained by entities subject to Regulation B but not Regulation C may be used for fair lending supervision and enforcement. 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. 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]. 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. Requiring disaggregated collection, even after a multi-year phase in period, would add complexity and burden to an already complex timeline that includes implementation of the 2015 HMDA Final Rule and transition to the 2016 URLA. 1375, 1980 (2010) (codified at 12 U.S.C. If it appears that action is warranted, the Bureau will engage in further rulemaking as appropriate. The Bureau recently adopted amendments to Regulation C that will temporarily increase the threshold for collecting and reporting data on certain loans. (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. No commenters provided such data. [2] Congress enacted the ECOA to ensure that financial institutions and firms dealing with credit make it equally available to all creditworthy customers. [15] 44. Application-by-application basis. The Bureau continues to believe that the benefits of this alternative are very low. A general description of the regulation, by section, follows. 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. An applicant's age can be requested if it appears that they cannot legally sign a contract. Regulation B applies toall persons who, in the ordinary course of business, regularly participate in the credit decision of an applicant or borrower, including setting the terms of the credit. Prior to Reg B, discriminatory lending practices such as redlining for mortgages was prevalent in the U.S. Regulation B makes such practices illegal. 33. 3. This prototype edition of the The notice provides that, although the use of the 2016 URLA by creditors is not required under Regulation B, a creditor that uses the 2016 URLA without any modification that would violate 1002.5(b) through (d) acts in compliance with 1002.5(b) through (d). 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. Under this section, procedural requirements of the regulation do not apply to certain types of credit. In addition to the amendment to Regulation B in the proposal, the Bureau Start Printed Page 45692considered two alternatives to address the differing race and ethnicity requirements of Regulation B and revised Regulation C. The Bureau considered requiring all creditors subject to the collection and retention requirement of Regulation B to permit applicants to self-identify using disaggregated race and ethnicity categories. 28. documents in the last year, by the Food Safety and Inspection Service and the Food and Drug Administration The Bureau acknowledges that the requirement to collect or provide applicant demographic information from co-applicants differs between 1002.13 and revised Regulation C. The Bureau concludes that these differences may create additional burden and complexity for creditors, who may need to modify their practices concerning co-applicant collection depending on whether collection is required under both Regulation B and revised Regulation C or only under revised Regulation C. The Bureau is therefore revising 1002.13(b) to clarify that a creditor is permitted, but is not required, to collect the information set forth in 1002.13(a) from a second or additional co-applicant. These costs include greater operational costs and one-time database upgrades. Financial institutions that report under Regulation C, have reported in the prior five years, or may report in the near future may also be affected by this rule. The Bureau solicited comment on its proposal to allow creditors to collect applicant race and ethnicity information using, at the creditor's option, either aggregate or disaggregated categories. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. 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. documents in the last year, 36 This table of contents is a navigational tool, processed from the Unlike prior versions of the URLA, the 2016 URLA permits an applicant to select disaggregated ethnicity and race categories, as required under revised Regulation C. Given the issuance of the Bureau Approval Notice and the modifications to 1002.13, the Bureau proposed several revisions to the Regulation B appendix as discussed below. While every effort has been made to ensure that on NARA's archives.gov. The Bureau solicited comment on permitting the collection of applicant demographic information in the circumstances described in proposed 1002.5(a)(4), and, in particular, regarding the proposed five-year time frame, and whether there are other specific, narrowly tailored circumstances not described in 1002.5(a)(2) or proposed 1002.5(a)(4) under which a creditor would benefit from being able to collect applicant demographic information for mortgage loan applicants. [40] The appendix provides that the use of its model forms is optional under Regulation B but that, if a creditor uses an appropriate appendix B model form, or modifies a form in accordance with instructions provided in appendix B, that creditor shall be deemed to be acting in compliance with 1002.5(b) through (d). The Bureau received no comments specifically addressing the revisions to proposed comment 13(b)-1, and so is finalizing it as proposed. 4, 2017). The regulation requires written applications for the types of credit covered by 1002.13. The Bureau does not believe that these comments are relevant to the 2017 ECOA Proposal and do not provide a basis to change the approach proposed by the Bureau in the 2017 ECOA Proposal. Thus, even if the Bureau were reconsidering its approach to visual observation or surname collection, which it is not, the Bureau does not believe the evidence submitted by the commenters demonstrate that collection based on visual observation or surname do not serve the purposes of ECOA. 03/01/2023, 43 The creditor need not orally request the monitoring information if it is requested in writing. Id. 1376, 2083-84 (2010). Having considered the comments received and for the reasons discussed above, the Bureau is finalizing 1002.13(a)(1)(i) as proposed. 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 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. 0 Rules for Taking Applications Section 202.5 Regulation B prohibits creditors from requesting and collecting specific personal information about an applicant that has no bearing on the applicant's It also provides that the information must be retained pursuant to the requirements of 1002.12. The Bureau acknowledges that the preamble to the proposed rule stated that 1002.12(b)(1) required retention of certain records for 25 months and did not acknowledge the different 12 month period for business credit provided for in 1002.12(b)(1). The Bureau received no comments on the proposal to remove the 2004 URLA or the timing of the removal and so is finalizing removal of the 2004 URLA as proposed. The issues raised by these comments were considered as part of the rulemaking to revise Regulation C and addressed in the 2015 HMDA Final Rule, and the Bureau has not reassessed those issues as part of this rulemaking, which concerns only issues relating to the alignment of collection of certain information about applicants under Regulation B and Regulation C and the status and use of the URLA. Among other instructions, current 1002.13(b) provides that, if an applicant chooses not to provide some or all of the requested applicant demographic information, the creditor must, in certain circumstances, collect Start Printed Page 45688the information on the basis of visual observation or surname. On the other hand, the Bureau believes that requiring disaggregated collection for Regulation B-only creditors would impose additional burden on creditors without significant benefits. The Bureau does not believe that these comments are relevant to the 2017 ECOA Proposal and do not provide a basis to change the approach proposed by the Bureau in the 2017 ECOA Proposal, which, as related to 1002.13, is limited to modifications that harmonize the collection requirements of Regulation B and Regulation C. For the reasons discussed above, the Bureau is adopting 1002.13(a)(1)(i) and comments 13(a)-7 and 13(a)-8 as proposed. 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. 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. collection, as the CFPB defines by rule, and their service providers . For instance, the 2015 NCUA Call Report and the 2015 Nationwide Mortgage Licensing System & Registry (NMLS) Mortgage Call Report data include 489 credit unions and 161 non-depository institutions that originated at least 25 closed-end mortgages that are not found in the 2015 HMDA data. 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). In the 2017 ECOA Proposal, the Bureau also considered but did not propose the alternative of including the 2016 URLA as a model form in the Regulation B appendix. Fair Credit Reporting Act (Reg V) FCRA is intended to ensure consumer reports are accurate and used for permissible purposes. Those rules include: They must identify themselves as a debt collection agency and give their name and the address for the collection agency. 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.
Ana Gasteyer Commercial,
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