No commenters opposed the decision not to include the 2016 URLA as a model form in the Regulation B appendix, and several commenters noted that the proposed rule would encourage use and transition to the 2016 URLA. 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. Amend 1002.12 by revising paragraph (b)(1)(i) to read as follows: (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. Finally, the Bureau believes many entities will adopt the 2016 URLA as part of the course of business and thus permit applicants to self-identify using disaggregated race and ethnicity categories. Answer by David Dickinson: The definition of applicant in Reg B Section 202.2: (e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit.For purposes of Section 202.7(d), the term includes guarantors, sureties, endorsers, and similar parties. documents in the last year, 11 with the applicable provisions of Regulation B described below. This compensation may impact how and where listings appear. Applications through loan-shopping services. 43. Instead, the Bureau is providing for two alternative data collection model forms for the purpose of collecting ethnicity and race information. corresponding official PDF file on govinfo.gov. Comments are publicly available at http://www.regulations.gov. 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. The Bureau proposed an effective date of January 1, 2018, which aligns with the effective date for the bulk of the revisions to Regulation C in the 2015 HMDA Final Rule. documents in the last year, 83 @*EtJ '_whyb.v'Yc:E| t%]C@bkBZSAqqu`2B6G\#; !qZ{r![6|(:9'nG%8}tB\iJ9 DIbsH NB8- A small financial institution commenter advocated for eliminating the Regulation B requirement to collect and retain race and ethnicity information. The Bureau also believes that permitting creditors to collect certain protected applicant-characteristic information in these circumstances provides a narrow exception to the general limitations in 1002.5(b) through (d) respects the purposes of those prohibitions. For the reasons provided below, the Bureau is adopting the revisions to 1002.13(b) concerning the collection of ethnicity and race information on the basis of visual observation or surname as proposed. [28] To determine whether the credit union discriminated against members of one or more protected classes in any aspect of its credit operations. 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 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. The Bureau believes this practice of acknowledging future versions of the URLA via a Bureau Approval Notice rather than a revision to Regulation B will reduce the risk that the model form included in Regulation B will become outdated in the future. More information and documentation can be found in our First, Regulation B-only creditors will not be required to permit applicants to self-identify using disaggregated ethnicity and race categories, likely resulting in few creditors adopting disaggregated ethnicity and race categories. The effective date of the 2015 HMDA Final Rule applies to covered loans and applications with respect to which final action is taken beginning on January 1, 2018, even if the application is received in 2017. For complete information about, and access to, our official publications B-2. 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). 28. All lenders are required to comply with Regulation B, which protects applicants from discrimination. legal research should verify their results against an official edition of Learn more here. The second substantive change will remove the outdated 2004 URLA as a model form. The final rule may have some benefits to Regulation B-only creditors, as the current language of Regulation B would not allow these entities to use the 2016 Start Printed Page 45691URLA for the purpose of collecting race and ethnicity data, as the 2016 URLA uses the disaggregated race and ethnicity categories set forth in revised Regulation C and not the specific categories required by current Regulation B. Rules for Taking Applications - 12 CFR 1002.5. The collections of information related to Regulation B and Regulation C have been previously reviewed and approved by OMB and assigned OMB Control Number 3170-0013 (Regulation B) and 3170-0008 (Regulation C). In this Issue, Documents Joint guidance on overdraft protection programs. [5] Under Dodd-Frank Act section 1022(b)(1), the Bureau has authority to prescribe rules as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws and to prevent evasions thereof. Current comment 13(c)-1 provides, among other information, that the Regulation B appendix contains a sample disclosure. 29. It is not required to store the complete written application, nor is it required to enter the remaining items of information into the system. The regulation requires written applications for the types of credit covered by 1002.13. Accounts covered. Inadvertent notation. [23] ii. 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. Transactions not covered. Proposed 1002.5(a)(4) provides authorization to collect applicant demographic information, but does not require collection in the circumstances described. Credit denial is the rejection of a credit application by a prospective lender, usually due to its assessment that the applicant is not creditworthy. Paragraph 13(c)Disclosure to applicants is revised. The final rule amends parts of Regulation B, its commentary, and its appendices, and affects when and how a creditor may collect information regarding the applicant's ethnicity, race, and sex. 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. 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. If you are using public inspection listings for legal research, you In light of the revisions to 1002.13(a)(1)(i), the amendment to the Regulation B appendix to provide two additional model forms, and the fact that the Bureau separately approved use of the 2016 URLA in the Bureau Approval Notice, the Bureau proposed to remove the 2004 URLA as a model form in Regulation B. 9. Specifically, the Bureau proposed an amendment to 1002.13 to permit a creditor additional flexibility in how it collects applicant ethnicity and race information by allowing use of either aggregate or disaggregate ethnicity and race categories on an application-by-application basis. Under Regulation B, a creditor may request any information. 3 (a) Public-utilities credit. For those HMDA reporters, the rule provides clarity that compliance with applicant information collection under Regulation C generally satisfies similar requirements under Regulation B. HMDA reporters who at some point no longer are required to comply with HMDA can continue to collect certain applicant information as provided for in 1002.5(a)(4). Relative to current Regulation B following the effective date of the 2015 HMDA Final Rule, the final rule provides clear benefits to entities that will be required to collect and report race and ethnicity data under HMDA. Comments on the benefits and costs of the rule are also discussed above in the section-by-section analysis of the preamble. 210.4 Sending items to Reserve Banks. and, in part, prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of a credit applicant except under certain circumstances. 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. A large number of industry commenters supported proposed 1002.5(a)(4) and the five-year timeframe for 1002.5(a)(4)(i), (ii), and (iii). Other circumstances permitting voluntary collection of applicant demographic information finalized in this rule do not correspond to provisions in Regulation C addressing optional reporting. The Bureau is issuing this final rule pursuant to its authority under section 703 of ECOA, as amended by section 1085 of the Dodd-Frank Act. Without Regulation B's explanation requirement, many potential borrowers with errors in their credit reports would become discouraged and give up. 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. It creates consumer protections and rights and imposes responsibilities on banks as users of consumer reports and entities furnishing information to the consumer reporting agencies. One commenter requested clarification that the voluntary collection under proposed 1002.5(a)(4) was truly voluntary and not a new compliance requirement. The Bureau did not receive any comments on the analysis or data. Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017). Revision of the Standards for the Classification of Federal Data on Race and Ethnicity, 62 FR 58782, 5878-90 (Oct. 30, 1997). %%EOF For the reasons discussed above, the Bureau is finalizing as proposed the revisions to 1002.13(b) concerning the collection of ethnicity and race information on the basis of visual observation or surname. The Bureau has consulted, or offered to consult with, the prudential regulators (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency), the Securities and Exchange Commission, the Department of Justice, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Trade Commission, the Department of Veterans Affairs, the Department of Agriculture, and the Department of the Treasury, including regarding consistency with any prudential, market or systematic objectives administered by such agencies. The Bureau did not propose these changes to Regulation B. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU. These scenarios Start Printed Page 45681generally involve types of loans subject to Regulation C where a creditor voluntarily reports information under Regulation C, reported such information in the past five years, or may report such information in the near future. By making disaggregated collection an option under Regulation B, entities who will report race and ethnicity information under revised Regulation C will also be in compliance with Regulation B with certainty. documents in the last year, 1479 Federal Reserve. [16] 2. Comments related to the data collection model forms and the 2016 URLA are addressed in the section-by-section analysis of the Regulation B appendix. 8. Comment 5(a)(4)-1 provides that information regarding ethnicity, race, and sex that is not required to be collected pursuant to Regulation C may nevertheless be collected under the circumstances set forth in 1002.5(a)(4) without violating 1002.5(b). are not part of the published document itself. One industry commenter proposed permitting collection for dwelling-secured loans made primarily for a business or commercial purpose that might be covered loans, regardless of whether or not they are for the purpose of home purchase, refinancing, or home improvement and therefore reportable under revised Regulation C. Under revised Regulation C, dwelling-secured loans made primarily for a business or commercial purpose are only required to be reported if they meet the definition of a home purchase, refinancing, or home improvement loan. Thus, the final rule has the added benefit that it will allow Regulation B-only creditors to use the 2016 URLA as an instrument to collect race and ethnicity information. daily Federal Register on FederalRegister.gov will remain an unofficial Consumer Finance Protection Bureau. See revised Regulation C 1003.2(e). Similarly, an industry commenter stated that the collection methods used in Regulation B and Regulation C should match. Sec. The other commenter asserted that collection of applicant demographic information requires significant time and resources for Regulation B-only creditors and that the information is virtually never used. On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its Web site. An industry service provider suggested the Bureau standardize the treatment of co-applicants between 1002.13 and Regulation C. The commenter noted that the two rules imposed different requirements where there are multiple applicants, stating that while 1002.13 requires a financial institution to collect information from any applicant who is a natural person, the revised Regulation C appendix instructs a financial institution to provide applicant demographic information for only the applicant and the first co-applicant listed on the collection form. The notice must explain why the applicant was rejected or give instructions for how the applicant can request this information. A version of the URLA dated January 2004 (2004 URLA) is included in the Regulation B appendix as a model form for use in complying with 1002.13. 03/01/2023, 828 documents in the last year, 20 Among other changes, the 2016 URLA includes a Demographic Information section (section 7) that addresses the requirements in revised Regulation C for collecting applicant demographic information, including the requirement that financial institutions permit applicants to self-identify using disaggregated ethnicity and race categories beginning January 1, 2018. 6. Section 1002.5(a)(2) provides several exceptions to that prohibition for information that creditors are required to request for certain dwelling-secured loans under 1002.13, and for information required by a regulation, order, or agreement issued by or entered into with a court or an enforcement agency to monitor or enforce compliance with ECOA, Regulation B or other Federal or State statutes or regulations, including Regulation C. Section 1002.13 sets forth rules for collecting information about an applicant's ethnicity, race, sex, marital status, and age under Regulation B. The Bureau is not adding the 2016 URLA as a model form in place of the 2004 version. It outlines the rules that lenders must adhere to when obtaining and processing credit information. Complying with both Regulations B and C would require burdensome and duplicative collection of race and ethnicity data at both the aggregated and disaggregated level. In 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. [14] Z The proposal was published in the Federal Register on April 4, 2017.[22]. The Bureau believes that depository institutions and credit unions with $10 billion or less in assets will not be differentially affected by the substantive amendments. The disclosure to an applicant regarding the monitoring information may be provided in writing. [33] has no substantive legal effect. (B) The categories and subcategories for the collection of ethnicity and race set forth in appendix B to 12 CFR part 1003. on As further discussed in the Section 1022(b) analysis below, the Bureau believes that the additional burden would have few benefits. These race and ethnicity categories correspond to the Office of Management and Budget (OMB) minimum standards for the classification of Federal data on ethnicity and race. the material on FederalRegister.gov is accurately displayed, consistent with There are three reasons, however, that this rule will likely have a limited effect on fair lending analysis. 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