Other commenters did not directly address this alternative, but several industry commenters supported the flexibility of the proposal with respect to collection of disaggregated race and ethnicity information, implicitly opposing making this collection mandatory. the current document as it appeared on Public Inspection on 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. 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. Federal Register provide legal notice to the public and judicial notice 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. 6. The current Regulation B appendix includes five model forms, each designated for use in a particular type of consumer credit transaction. 1375, 2035-39 (2010) (codified at 12 U.S.C. B prohibited practices (12 C.F.R. In the same notice, the Bureau also determined that the relevant language in the 2016 URLA is in compliance with the regulatory provisions of Regulation B 1002.5(b) through (d), regarding requests for protected applicant-characteristic information and certain other information. 1691b; Public Law 111-203, 124 Stat. As the Bureau noted in the 2017 ECOA Proposal, without a time limit such voluntary collection would permit a creditor to collect protected applicant-characteristic information for a period of time that is too attenuated from any past Regulation C legal requirement and associated compliance process. The RFA defines a small business as a business that meets the size standard developed by the Small Business Administration pursuant to the Small Business Act. An industry service provider asked the Bureau to provide guidance regarding whether the term natural person as used in Regulation B and Regulation C includes living trusts or sole proprietorships. 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. Regulation B 1002.5(a)(4)(i) and (ii) as finalized in this rule correspond to those provisions in revised Regulation C and permit the collection of applicant demographic information necessary to facilitate that optional reporting. The amendment to 1002.13(b) in the 2017 ECOA Proposal would not impose any new obligation on creditors to collect an applicant's ethnicity and race on the basis of visual observation or surname but, rather, would limit such collection to the aggregate ethnicity and race categories, even if the creditor permits an applicant to self-identify using the disaggregated categories. On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its Web site. fbS`}R7E_ |.rgxp,gh bWFdd~N2 ]_r'xj`-]JRZPT/]kM;U::. 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. 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. Specifically, covered institutions must permit applicants to self-identify their ethnicity and race using certain disaggregated ethnic and racial subcategories such as Mexican, Puerto Rican, or Cuban under the aggregate category Hispanic or Latino. Federal Register. 1. Prohibited basis under Regulation B refers to a borrower's race, color, religion, national origin, sex, marital status, or age. The Consumer Credit Protection Act of 1968 (CCPA) is federal legislation outlining disclosure requirements for consumer lenders. First, for creditors collecting disaggregated applicant demographic information pursuant to 1002.13(a)(1)(i)(B) and (ii), the Bureau proposed to amend the Regulation B appendix to cross-reference the data collection model form included in the revised Regulation C appendix. Two industry groups suggested that the Bureau remove 1002.13 altogether. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. The Bureau also received questions as to how that requirement intersected with compliance obligations under Regulation B. The creditor need not orally request the monitoring information if it is requested in writing. The proposal was published in the Federal Register on April 4, 2017.[22]. ii. 2017-20417 Filed 9-29-17; 8:45 am], updated on 11:15 AM on Wednesday, March 1, 2023, updated on 8:45 AM on Wednesday, March 1, 2023. To further align the collection requirements of Regulation B and Regulation C, the Bureau is further amending 1002.13(b) to permit, but not require, creditors to collect the information set forth in 1002.13(a) from a second or additional co-applicant. The Bureau believes that rural areas might benefit from the provision to allow collection of disaggregated race and ethnicity information more than urban areas. [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 practice, the final rule simply makes clear that the existing collection required under revised Regulation C is sufficient for compliance with Regulation B. When it comes to credit transactions, a creditor cannot discriminate: Regulation B also mandates that lenders provide oral or written notice of rejection to failed applicants within 30 days of receiving their completed applications. Section IV. 5581). Sec. All methods of compliance under current law will remain available to covered persons, including small entities, when these provisions become effective. The Bureau is adopting 1002.5(a)(4)(vi) to address the commenter's suggestion by clarifying that the collection of applicant demographic information for additional borrowers is permitted. See Fannie Mae, Uniform Residential Loan Application, https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017); see also Press Release, Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the direction of the FHFA, The Redesigned URLA and ULAD Mapping Document Are Here!, (Aug. 23, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf. reg b covers collection procedures (In this document, applicant demographic information refers to information about an applicant's ethnicity, race, or sex information, while certain protected applicant-characteristic information refers to all information collected under 1002.13, including age and marital status.) The Bureau proposed to amend 1002.13(a)(1)(i) to provide a creditor flexibility to collect applicant ethnicity and race information using either aggregate or disaggregated categories, thereby furthering the purposes of ECOA, reducing compliance burden, and facilitating use of the 2016 URLA. The Equal Credit Opportunity Act (ECOA) is a federal civil rights law that forbids lenders to deny credit to an applicant based on any factor unrelated to the person's ability to repay. [16] The proposed model form substantially mirrors section X in the 2004 URLA and the data collection model form contained in the current Regulation C appendix. Status of New Uniform Loan Application and Collection of Expanded Home Mortgage Information About Ethnicity and Race in 2017, 81 FR 66930 (Sept. 29, 2016). documents in the last year, 287 In this Issue, Documents A small financial institution commenter advocated for eliminating the Regulation B requirement to collect and retain race and ethnicity information. Another industry commenter was concerned about how a creditor would decide which collection method to use and whether the instruction could have a discriminatory impact. 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. New Documents The rule amends the Regulation B appendix to provide two options: A model form for collecting aggregate applicant race and ethnicity information and a cross-reference to the Regulation C appendix model form for collecting disaggregated applicant race and ethnicity information. 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 industry commenter generally supported the proposal, noting the flexibility would reduce compliance burden. To address these issues, the Bureau issued a proposal on March 24, 2017, which was published in the Federal Register on April 4, 2017 (the 2017 ECOA Proposal).[7]. 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. Because Regulation B and Regulation C do not provide inconsistent instructions on the scope of the term natural person, the Bureau declines to provide additional guidance on this issue within this final rule, which, as related to 1002.13, is limited to modifications that harmonize the collection requirements of Regulation B and Regulation C. The Bureau proposed revised comment 13(a)-7 to provide that, 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 the revised Regulation C appendix will be acting in compliance 1002.13 concerning the collection of an applicant's ethnicity, race, and sex information. See revised Regulation C 1003.3(c)(10). 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. The Bureau believes this clarification will simplify collection practices and reduce compliance burden by aligning Regulation B and Regulation C. The clarification will also allow Regulation B-only creditors to maintain their existing practices under 1002.13 if so desired. 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]. 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). Creditors that utilize model forms from appendix B to Regulation B (the Regulation B appendix) for mortgage loans are also affected by the rule. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A. to the courts under 44 U.S.C. The Bureau believes that the interim final rule will benefit consumers and covered persons by updating and recodifying Regulation B to reflect the transfer of authority to the Bureau and certain other changes mandated by the Dodd-Frank Act. The Bureau did not propose these changes in the 2017 ECOA Proposal. The Bureau is not adding the 2016 URLA as a model form in place of the 2004 version. "Federal Fair Lending Regulations and Statutes: Equal Credit Opportunity (Regulation B)," Page 1. 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. A purpose of ECOA, as implemented by Regulation B, is to promote the availability of credit to all creditworthy applicants without regard to protected characteristics. As discussed above in Part V, the Bureau disagrees with the consumer advocacy group commenter that there would be little burden to Regulation B-only creditors from making the collection of disaggregated race and ethnicity categories mandatory. 6. should verify the contents of the documents against a final, official Definition. 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. 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 requirements of the regulation apply only to an account for which an agreement for EFT services to or from the account has been entered into between: i. The Bureau is now publishing final amendments to Regulation B. All forms contained in this appendix are models; their use by creditors is optional. In light of these inquiries, the Bureau determined that it would be beneficial to establish through rulemaking appropriate standards in Regulation B concerning the collection of an applicant's ethnicity and race information similar to those in revised Regulation C. Because many of the financial institutions most affected by this proposed rule are supervised by the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (Board), and the National Credit Union Administration (NCUA), the Bureau conducted outreach to these agencies. If a creditor collects disaggregated race and ethnicity information pursuant to 1002.13(a)(1)(i)(B), proposed 1002.13(b) provided that a creditor must comply with the restrictions on the collection of an applicant's ethnicity and race on the basis of visual observation or surname set forth in the revised Regulation C appendix, which limits such collection to the aggregate race and ethnicity categories. 2458 0 obj <>stream on New principal residence. The Bureau is finalizing the amendments to 1002.12(b)(1)(i) and comment 12(b)-2 as proposed. on FederalRegister.gov With the introduction of the 2016 URLA the Bureau believes that permitting collection of applicant demographic information in this narrowly tailored circumstance may be beneficial for some financial institutions because it would allow them to use more easily standard forms for collection of applicant demographic information without identifying at the time of collection which applicants are the primary and first co-applicant. Accounts covered. 210.4 Sending items to Reserve Banks. Because the Bureau Approval Notice remains in effect for all of 2017, the amendments in this rule are not necessary to permit Regulation B-only creditors or HMDA reporters to collect disaggregated applicant demographic information for applications taken in 2017; they are already permitted to do so by the Bureau Approval Notice for any application for a covered loan under revised Regulation C 1003.2(g) or any application subject to 1002.13 for all of 2017. Regulation B 1. 2. The Bureau recently adopted amendments to Regulation C that will temporarily increase the threshold for collecting and reporting data on certain loans. The primary benefit to lenders from the final rule is the reduced uncertainty and compliance burden from allowing the disaggregated race and ethnicity information collected under Regulation C to be used to comply with Regulation B. 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