Federal Register, Volume 76 Issue 50 (Tuesday, March 15, 2011)

[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13896-13902]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5417]

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FEDERAL RESERVE SYSTEM

12 CFR Part 202

[Regulation B; Docket No. R-1408]
RIN No. 7100-AD67

Equal Credit Opportunity

AGENCY: Board of Governors of the Federal Reserve System (Board).

ACTION: Notice of proposed rulemaking.

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SUMMARY: Section 701 of the Equal Credit Opportunity Act (ECOA)
requires a creditor to notify a credit applicant when it has taken
adverse action against the applicant. The ECOA adverse action
requirements are implemented in the Board's Regulation B. Section
615(a) of the Fair Credit Reporting Act (FCRA) also requires a person
to provide a notice when the person takes an adverse action against a
consumer based in whole or in part on information in a consumer report.
Certain model notices in Regulation B include the content required by
both the ECOA and the FCRA adverse action provisions, so that creditors
can use the model notices to comply with the adverse action
requirements of both statutes. The Board proposes to amend these model
notices in Regulation B to include the disclosure of credit scores and
information relating to credit scores if a credit score is used in
taking adverse action. These proposed amendments reflect the new
content requirements in section 615(a) of the FCRA that were added by
section 1100F of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.

DATES: Comments must be received on or before April 14, 2011. Comments
on the Paperwork Reduction Act analysis set forth in Section III.A. of
this Federal Register notice must be received on or before May 16,
2011.

ADDRESSES: You may submit comments, identified by Docket No. R-1408, by
any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Board: Mandie K. Aubrey, Senior
Attorney, or Catherine Henderson, Attorney, Division of Consumer and
Community Affairs, (202) 452-3667 or (202) 452-2412, Board of Governors
of the Federal Reserve System, 20th and C Streets, NW., Washington, DC
20551. For users of a Telecommunications Device for the Deaf (TDD)
only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq.,
makes it unlawful for creditors to discriminate in any aspect of a
credit transaction on the basis of sex, race, color, religion, national
origin, marital status, or age (provided the applicant has the capacity
to contract), because all or part of an applicant's income derives from
public assistance, or because an applicant has in good faith exercised
any right under the Consumer Credit Protection Act. The Board's
Regulation B (12 CFR part 202) implements the ECOA.
Section 701(d) of the ECOA generally requires a creditor to notify
a credit applicant against whom it has taken an adverse action. Under
section 701(d)(6) of the ECOA, an adverse action generally means a
denial or revocation of credit, a change in the terms of an existing
credit arrangement, or a refusal to grant credit in substantially the
amount or on substantially the terms requested.
Section 615(a) of the FCRA also requires a person to provide an
adverse action notice when the person takes an adverse action based in
whole or in part on information in a consumer report. The definition of
adverse action in section 603(k) of the FCRA incorporates, for purposes
of credit transactions, the definition of adverse action under ECOA.
The adverse action provisions in both the ECOA and the FCRA require
certain disclosures to be given to consumers.
The ECOA adverse action provisions are implemented in Regulation B.
There are no implementing regulations for the adverse action
requirements of section 615(a) of the FCRA. However, as explained in
comment 202.9(b)(2)-9 of Regulation B, certain model notices in
Regulation B include the content required by both the ECOA and the
FCRA, so that persons can use the model notices to comply with the
adverse action requirements of both statutes.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) was signed into law. Public Law 111-
203, 124 Stat. 1376. Section 1100F of the Dodd-Frank Act amends section
615(a) of the FCRA to require creditors to disclose on FCRA adverse
action notices a credit score used in taking any adverse action and
information relating to that score. The effective date of these
amendments is July 21, 2011.\1\
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\1\ Section 1100H of the Dodd-Frank Act provides that the
amendments in Subtitle H of Title X, which includes Section 1100F,
become effective on the ``designated transfer date.'' The Secretary
of the Treasury set the designated transfer date as July 21, 2011.
75 FR 57252 (Sept. 20, 2010).
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The Board is proposing to amend those model adverse action notices
in Regulation B which incorporate the content requirements of section
615(a) of the FCRA to reflect the new content requirements added by
section 1100F of the Dodd-Frank Act. These revisions to the model
notices will help facilitate uniform compliance when section 1100F of
the Dodd-Frank Act becomes effective. Thus, pursuant to its authority

[[Page 13897]]

in section 703(a) of the ECOA, the Board is proposing to amend certain
adverse action model notices in Regulation B consistent with the
requirements of section 1100F of the Dodd-Frank Act.

II. Section-by-Section Analysis

Appendix C to Part 202--Sample Notification Forms

Under section 701(d) of the ECOA, a creditor must provide to
applicants against whom adverse action is taken either: (1) A statement
of reasons for taking the adverse action as a matter of course; or (2)
a notification of adverse action which discloses the applicant's right
to a statement of reasons within thirty days after receipt by the
creditor of a request made by the applicant within sixty days after the
written notification. Section 615(a) of the FCRA requires a person to
provide in an adverse action notice information regarding the consumer
reporting agency that furnished the consumer report used in taking the
adverse action. It also requires a person to disclose that a consumer
has a right to a free credit report and right to dispute the accuracy
or completeness of any information in a consumer report.
Section 1100F of the Dodd-Frank Act amends section 615(a) of the
FCRA to require that creditors disclose additional information on FCRA
adverse action notices. Specifically, a person must disclose on a FCRA
adverse action notice a credit score used in taking any adverse action
and information relating to that score, in addition to the information
currently required by section 615(a) of the FCRA. The statute generally
requires that the FCRA adverse action notice include: (1) A numerical
credit score used in making the credit decision; (2) the range of
possible scores under the model used; (3) the key factors that
adversely affected the credit score of the consumer in the model used;
(4) the date on which the credit score was created; and (5) the name of
the person or entity that provided the credit score.
As explained in paragraph 2 of Appendix C to part 202, model
notices C-1 through C-5 may be used to comply with the adverse action
provisions of both the ECOA and the FCRA. The Board proposes to amend
model notices C-1 through C-5 to incorporate the additional content
requirements prescribed by section 1100F of the Dodd-Frank Act.
Under the proposal, Forms C-1 through C-5 would be revised to
include, as applicable, a statement that the creditor obtained the
consumer's credit score from a consumer reporting agency named in the
notice and used the score in making the credit decision. The notice
would also state that a credit score is a number that reflects the
information in the consumer's credit report and that the consumer's
credit score can change, depending on how the information in the
consumer's credit report changes. The model notices would also provide
space for the creditor to include the content required under section
1100F of the Dodd-Frank Act that is specific to the consumer. This
content includes: the consumer's credit score, the date the credit
score was created, the range of possible credit scores under the model
used, and up to four key factors that adversely affected the consumer's
credit score (or up to five factors if the number of enquiries made
with respect to that consumer report is one of the factors).
In addition to the content added to each of Forms C-1 through C-5,
Form C-3 would be amended for clarity. Form C-3 is a model notice that
can be used by creditors in circumstances where the creditor uses a
proprietary credit scoring system to make a credit decision and where
the creditor uses information from a consumer reporting agency in this
scoring evaluation. As discussed above, section 1100F of the Dodd-Frank
Act requires information regarding a credit score that is obtained from
a consumer reporting agency to be included on an adverse action notice.
The Board believes discussing two different types of credit scoring
systems on Form C-3 could be confusing for consumers. Therefore, the
Board proposes to amend Form C-3 to clarify the differences between a
proprietary score and a credit score that is obtained from a consumer
reporting agency. The text would clarify that the consumer's
application was processed by a system that assigns a numerical value to
the various items of information the creditor considers when evaluating
the consumer's application. This numerical value is based upon analyses
of repayment histories of the creditor's customers. The proposed form
would also add topic headings to help distinguish the different types
of scores that were used in making the credit decision. It would also
remove the reference to credit scoring in the title of the form.
In some cases, a person who is required to provide an adverse
action notice under the FCRA may use a consumer report, but not a
credit score, in taking the adverse action. Under section 1100F of the
Dodd-Frank Act, a person is not required to disclose a credit score and
related information if a credit score is not used in taking the adverse
action. Therefore, the amendments to Forms C-1 through C-5 are only
applicable if a credit score is used in taking an adverse action. A
person may amend, at its option, Form C-3 to add the additional
headings and remove the reference to a credit scoring system, even if
the person does not add the heading and information about the
consumer's credit score.
The Board notes that section 1100F of the Dodd-Frank Act requires a
creditor to provide, if applicable, a consumer's credit score and
related information, regardless of whether it provides a statement of
specific reasons for taking the adverse action or a disclosure of the
applicant's right to a statement of specific reasons for an adverse
action. Therefore, a creditor would not comply with the FCRA adverse
action provisions by providing the required FCRA disclosures only if a
consumer responds to a request for a statement of specific reasons for
an adverse action. As a result, proposed Form C-5 reflects the
requirement to provide the disclosures required by section 615(a) of
the FCRA, including the consumer's credit score and the key factors
that adversely affected the credit score, at the time a creditor
provides a disclosure of the applicant's right to a statement of
specific reasons for an adverse action.
The Board requests comment on whether the proposed revisions to the
content of the adverse action model notices are appropriate. The Board
also solicits comment on whether additional or different changes to the
model notices should be adopted.
The Board also proposes to amend paragraph 2 of Appendix C, which
discusses the disclosure requirements of section 615 of the FCRA that
are contained in Forms C-1 through C-5. Paragraph 2 explains that Form
C-1 contains the disclosures required by sections 615(a) and (b) of the
FCRA, and Forms C-2 through C-5 contain only disclosures required by
section 615(a) of the FCRA. Paragraph 2 also describes the
circumstances under which a creditor must provide the section 615(a)
disclosures or the section 615(b) disclosures.
The paragraph states that the combined ECOA-FCRA disclosures in
Form C-1 through Form C-5 must state that a creditor obtained
information from a consumer reporting agency. Consistent with section
1100F of the Dodd-Frank Act, the paragraph would be revised to state
that the combined disclosure must also include, as applicable, a credit
score used in taking adverse action along with related information. The
paragraph would also be revised to clarify that information

[[Page 13898]]

from a consumer reporting agency was considered in the credit decision.

Supplement I to Part 202--Official Staff Interpretations

The Board proposes to amend comment 9(b)(2)-9 to reflect the
proposed changes to the adverse action model notices. Comment 9(b)(2)-9
addresses the combined ECOA-FCRA adverse action disclosures. The
proposed amendment would clarify that the FCRA requires a creditor to
disclose, as applicable, a credit score it used in taking adverse
action along with related information, including the key factors that
adversely affected the consumer's credit score. It would also eliminate
a statement that is redundant.
The proposed amendment to comment 9(b)(2)-9 would also clarify that
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. The Board recognizes that a key factor(s) that
adversely affected the consumer's credit score may be the same as a
specific reason(s) for denying credit or taking other adverse action.
However, some specific reasons for taking adverse action may be
unrelated to a consumer's credit score, such as reasons related to the
consumer's income, employment, or residency. Therefore, the Board
believes the disclosure of both the key factors that adversely affected
the consumer's credit score and the specific reasons for denying credit
or taking other adverse action is necessary to fulfill the separate
requirements of the ECOA and the FCRA.

III. Regulatory Analysis

A. Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (PRA) (44
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the
proposed rulemaking under the authority delegated to the Board by the
Office of Management and Budget (OMB). The collection of information
that is required by this proposed rulemaking is found in 12 CFR 202. In
addition, as permitted by the PRA, the Board also proposes to extend
for three years the current recordkeeping and disclosure requirements
in connection with Regulation B. The Board may not conduct or sponsor,
and an organization is not required to respond to, this information
collection unless it displays a currently valid OMB control number. The
OMB control number is 7100-0201.
Section 703(a)(1) of the Equal Credit Opportunity Act (15 U.S.C.
1691b(a)(1)) authorizes the Board to issue regulations to carry out the
provisions of the Act. The purpose of the Act is to ensure that credit
is made available to all creditworthy customers without discrimination
on the basis of race, color, religion, national origin, sex, marital
status, age (provided the applicant has the capacity to contract),
receipt of public assistance income, or the fact that the applicant has
in good faith exercised any right under the Consumer Credit Protection
Act (15 U.S.C. 1600 et seq.). This information collection is mandatory.
Regulation B applies to all types of creditors, not just State
member banks. However, under the Paperwork Reduction Act, the Board
accounts for the burden of the paperwork associated with the regulation
only for entities that are supervised by the Board. Appendix A of
Regulation B defines these creditors as 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. Other Federal agencies account for the paperwork burden for the
institutions they supervise. Creditors are required to retain records
for 12 to 25 months as evidence of compliance.
The current annual burden to comply with the provisions of
Regulation B is estimated to be 157,538 hours for the 1,107
institutions \2\ supervised by the Board that are deemed to be
respondents for the purposes of the PRA.
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\2\ The number of Board-supervised respondents was obtained from
numbers published in the Board of Governors of the Federal Reserve
System 96th Annual Report 2009: 845 State member banks, 204 branches
& agencies of foreign banks, three commercial lending companies, and
55 Edge Act or agreement corporations.
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As discussed above, the Board proposes to amend model notices C-1
through C-5 to incorporate the additional content requirements
prescribed by section 1100F of the Dodd-Frank Act. In addition, the
Board proposes to amend Form C-3 to clarify the differences between a
proprietary score and a credit score that is obtained from a consumer
reporting agency.
The Board estimates that the proposed rule would impose a one-time
increase in the total annual burden under Regulation B. The 1,107
respondents would take, on average, 16 hours (two business days) to
update their systems to comply with the disclosure requirements
addressed in 12 CFR part 202. This one-time revision would increase the
burden by 17,712 hours. The Board estimates that, on a continuing
basis, the revision to the rule would have a negligible effect on the
annual burden. The total annual burden for the Regulation B information
collection is estimated to increase from 157,538 to 175,250 hours.
Comments are invited on: (1) Whether the proposed collection of
information is necessary for the proper performance of the Board's
functions; including whether the information has practical utility; (2)
the accuracy of the Board's estimate of the burden of the proposed
information collection, including the cost of compliance; (3) ways to
enhance the quality, utility, and clarity of the information to be
collected; and (4) ways to minimize the burden of information
collection on respondents, including through the use of automated
collection techniques or other forms of information technology.
Comments on the collection of information should be sent to Cynthia
Ayouch, Acting Federal Reserve Clearance Officer, Division of Research
and Statistics, Mail Stop 95-A, Board of Governors of the Federal
Reserve System, Washington, DC 20551, with copies of such comments sent
to the Office of Management and Budget, Paperwork Reduction Project
(7100-0202), Washington, DC 20503.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
requires an agency either to provide an initial regulatory flexibility
analysis with a proposed rule or certify that the proposed rule will
not have a significant economic impact on a substantial number of small
entities. The proposed regulations cover certain banks, other
depository institutions, and non-bank entities that take adverse action
against consumers. The Small Business Administration (SBA) establishes
size standards that define which entities are small businesses for
purposes of the RFA.\3\ The size standard to be considered a small
business is: $175 million or less in assets for banks and other
depository institutions; and $7 million or less in annual revenues for
the majority of non-bank entities that are likely to be subject to the
proposed regulations. The Board requests public comment in the
following areas.
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\3\ U.S. Small Business Administration, Table of Small Business
Size Standards Matched to North American Industry Classification
System Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.

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[[Page 13899]]

1. Reasons for the Proposed Rule
Section 1100F of the Dodd-Frank Act amends section 615(a) of the
FCRA to require persons to disclose a credit score and information
relating to that credit score in adverse action notices when the person
uses a credit score in taking adverse action. Specifically, a person
must disclose, in addition to the information currently required by
section 615(a) of the FCRA: (1) A numerical credit score used in making
the credit decision; (2) the range of possible scores under the model
used; (3) the key factors that adversely affected the credit score of
the consumer in the model used; (4) the date on which the credit score
was created; and (5) the name of the person or entity that provided the
credit score. The effective date of these amendments is July 21, 2011.
Certain model notices in Regulation B include the content required
by both the ECOA and the FCRA adverse action provisions, so that
creditors can use the model notices to comply with the adverse action
requirements of both statutes. The Board is issuing proposed amendments
to the combined ECOA-FCRA adverse action model notices in Regulation B
pursuant to its existing authority under section 703(a) of the ECOA to
facilitate compliance with the new requirements under section 1100F of
the Dodd-Frank Act.
2. Statement of Objectives and Legal Basis
The SUPPLEMENTARY INFORMATION above contains this information. The
legal basis for the proposed regulations is section 703(a) of the ECOA.
The proposed regulations are consistent with section 1100F of the Dodd-
Frank Act.
3. Description of Small Entities to Which the Regulation Applies
The proposed regulations apply to any person that (1) is required
to provide an adverse action notice to a consumer; and (2) uses a
credit score in making the credit decision requiring an adverse action
notice. The total number of small entities likely to be affected by the
proposal is unknown because the Board does not have data on the number
of small entities that use credit scores in taking adverse action in
connection with consumer credit. The adverse action provisions of
section 1100F of the Dodd-Frank Act have broad applicability to persons
who use credit scores in taking adverse action in connection with the
provision of consumer credit.
Based on estimates compiled by the Board, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision, there are
approximately 9,585 depository institutions that could be considered
small entities and that are potentially subject to the proposed
rule.\4\ The available data are insufficient to estimate the number of
non-bank entities that would be subject to the proposed rule and that
are small as defined by the SBA. Such entities would include non-bank
mortgage lenders, auto finance companies, automobile dealers, other
non-bank finance companies, insurance companies, employers, telephone
companies, and utility companies.
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\4\ The estimate includes 1,504 institutions regulated by the
Board, 673 national banks, and 4,167 Federally-chartered credit
unions, as determined by the Board. The estimate also includes 2,872
institutions regulated by the FDIC and 369 thrifts regulated by the
OTS. See 75 FR 36016, 36020 (Jun. 24, 2010).
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It also is unknown how many of these small entities that meet the
SBA's size standards and are potentially subject to the proposed
regulations use credit scores in taking adverse action in connection
with the provision of consumer credit. The proposed regulations do not
impose any requirements on small entities that do not use credit scores
in taking adverse action in connection with consumer credit.
The Board invites comment regarding the number and type of small
entities that would be affected by the proposed rule.
4. Projected Reporting, Recordkeeping and Other Compliance Requirements
The compliance requirements of the proposed regulations are
described in detail in the SUPPLEMENTARY INFORMATION above.
The proposed regulations generally require a person that is
required to provide an adverse action notice to a consumer and uses a
credit score in making the credit decision to provide a credit score
and information relating to that credit score in the notice, in
addition to the information currently required by section 615(a) of the
FCRA. A person is currently required to determine if it takes an
adverse action, based in whole or in part on consumer reports, in
connection with the provision of consumer credit. If the person does
take adverse action based on consumer reports, the person is required
to establish procedures for identifying those consumers to whom it must
provide adverse action notices.
A person that is required to provide adverse action notices to
certain consumers would need to analyze the regulations. The person
would need to determine whether it uses credit scores in taking adverse
action against the consumers to whom it must provide adverse action
notices. Persons that use credit scores in taking adverse action would
need to provide a credit score and information relating to that credit
score to those consumers to whom it must provide an adverse action
notice, in addition to the information currently required by section
615(a) of the FCRA. Persons would need to design, generate, and provide
notices, including a credit score and information relating to that
credit score, to the consumers to whom it must provide an adverse
action notice.
The Board seeks information and comment on any costs, compliance
requirements, or changes in operating procedures arising from the
application of the proposed rule to small institutions.
5. Identification of Duplicative, Overlapping, or Conflicting Federal
Regulations
The Board has not identified any Federal statutes or regulations
that would duplicate, overlap, or conflict with the proposed
regulations. As discussed in part III above, the proposed amendments to
the adverse action rules are consistent with section 1100F of the Dodd-
Frank Act. The Board is proposing the rules pursuant to their existing
authority under section 703(a) of the ECOA. The proposed amendments to
the adverse action model notices have been designed to work in
conjunction with the requirements of section 1100F of the Dodd-Frank
Act to help facilitate uniform compliance when this section becomes
effective. The Board seeks comment regarding any statutes or
regulations, including State or local statutes or regulations, that
would duplicate, overlap, or conflict with the proposed regulations.
6. Discussion of Significant Alternatives
The Board welcomes comments on any significant alternatives
consistent with section 703(a) of the ECOA and the provisions of
section 1100F of the Dodd-Frank Act that would minimize the impact of
the proposed regulations on small entities.

Text of Proposed Revisions

Certain conventions have been used to highlight the proposed
revisions. New language is shown inside [rtrif]bold-type arrows[ltrif]
while language that would be deleted is set off with .

[[Page 13900]]

List of Subjects in 12 CFR Part 202

Aged, Banks, Banking, Civil Rights, Consumer protection, Credit,
Discrimination, Federal Reserve System, Marital Status Discrimination,
Penalties, Religious Discrimination, Reporting and recordkeeping
requirements, Sex Discrimination.

For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 202 and the Official Staff Commentary, as follows:

PART 202--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)

1. The authority citation for part 202 continues to read as
follows:

Authority: 15 U.S.C. 1693b.

2. Appendix C to Part 202 is amended by revising paragraph 2 and
Forms C-1 through C-5 to read as follows:

Appendix C to Part 202--Sample Notification Forms

* * * * *
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) disclosure (that a creditor
obtained information from a consumer reporting agency that [rtrif]was considered[ltrif] in the credit decision
[rtrif]and, as applicable, a credit score used in taking adverse
action along with related information[ltrif]). 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.
* * * * *

Form C-1--Sample Notice of Action Taken and Statement of Reasons
Statement of Credit Denial, Termination or Change

Date:------------------------------------------------------------------
Applicant's Name:------------------------------------------------------
Applicant's Address:---------------------------------------------------

Description of Account, Transaction, or Requested Credit:
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Description of Action Taken:
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Part I--Principal Reason(s) for Credit Denial, Termination, or Other
Action Taken Concerning Credit

This section must be completed in all instances.

----Credit application incomplete
----Insufficient number of credit references provided
----Unacceptable type of credit references provided
----Unable to verify credit references
----Temporary or irregular employment
----Unable to verify employment
----Length of employment
----Income insufficient for amount of credit requested
----Excessive obligations in relation to income
----Unable to verify income
----Length of residence
----Temporary residence
----Unable to verify residence
----No credit file
----Limited credit experience
----Poor credit performance with us
----Delinquent past or present credit obligations with others
----Collection action or judgment
----Garnishment or attachment
----Foreclosure or repossession
----Bankruptcy
----Number of recent inquiries on credit bureau report
---- Value or type of collateral not sufficient
----Other, specify:
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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.
----Our 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:------------------------------------------------------------------
Address:---------------------------------------------------------------
[Toll-free] Telephone number:------------------------------------------

[rtrif][We also obtained your credit score from this consumer
reporting agency and used it in making our credit decision. Your
credit score is a number that reflects the information in your
credit report. Your credit score can change, depending on how the
information in your credit report changes.

Your credit score:-----------------------------------------------------
Date:------------------------------------------------------------------
Scores range from a low of---------------------------------------------
to a high of----------------------------------------------------------

Key factors that adversely affected your credit score:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
[Number of recent inquiries on credit report]][ltrif]

----Our 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:-------------------------------------------------------
Creditor's address:----------------------------------------------------
Creditor's telephone number:-------------------------------------------

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-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:
----is below our minimum requirement.
----is insufficient to sustain payments on the amount of credit
requested.
----could not be verified.

Your Employment:
----is not of sufficient length to qualify.
----could not be verified.

Your Credit History:
---- of making payments on time was not satisfactory.
----could not be verified.
Your Application:
----lacks a sufficient number of credit references.
----lacks acceptable types of credit references.
----reveals that current obligations are excessive in relation to
income.
Other:-----------------------------------------------------------------

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

[[Page 13901]]

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 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].
[rtrif][We also obtained your credit score from this consumer
reporting agency and used it in making our credit decision. Your
credit score is a number that reflects the information in your
credit report. Your credit score can change, depending on how the
information in your credit report changes.

Form C-3--Sample Notice of Action Taken and Statement of Reasons
[rtrif][(Credit Scoring)][ltrif]

Date

Dear Applicant: Thank you for your recent application for ------
----------. We regret that we are unable to approve your request.

[rtrif][Reasons for Denial of Credit][ltrif]

Your application was processed by a [rtrif][[ltrif]credit
scoring[rtrif]][ltrif] 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:
Insufficient bank references
Type of occupation
Insufficient credit experience
Number of recent inquiries on credit bureau report

[rtrif][Your Right to Get Your Credit Report][ltrif]

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.

[rtrif][Information about Your Credit Score

We also obtained your credit score from this consumer reporting
agency and used it in making our credit decision. Your credit score
is a number that reflects the information in your credit report.
Your credit score can change, depending on how the information in
your credit report changes.

If you have any questions regarding this letter, you should
contact us at

Creditor's Name:-------------------------------------------------------
Address:---------------------------------------------------------------
-----------------------------------------------------------------------
Telephone:-------------------------------------------------------------

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
(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).

Form C-4--Sample Notice of Action Taken, Statement of Reasons and
Counteroffer

Date

Dear Applicant: Thank you for your application for ------------
----. We are unable to offer you credit on the terms that you
requested for the following reason(s):
-----------------------------------------------------------------------
We can, however, offer you credit on the following terms: ------
----------
-----------------------------------------------------------------------
If this offer is acceptable to you, please notify us within
[amount of time] at the following address: ----------------.
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.
[rtrif][We also obtained your credit score from this consumer
reporting agency and used it in making our credit decision. Your
credit score is a number that reflects the information in your
credit report. Your credit score can change, depending on how the
information in your credit report changes.

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,

Form C-5--Sample Disclosure of Right to Request Specific Reasons for
Credit Denial

Date

Dear Applicant: Thank you for applying to us for --------------
--.
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

[[Page 13902]]

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

Key factors that adversely affected your credit score:

-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
[Number of recent inquiries on credit report]][ltrif]

Sincerely,

Supplement I to Part 202--Official Staff Interpretations

* * * * *

Section 202.9--Notifications

* * * * *

Paragraph 9(b)(2)

* * * * *
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 Sec. 202.9(b)(2) the creditor must
disclose that the application was denied because of the applicant's
delinquent credit obligations. [rtrif]The FCRA also requires a
creditor to disclose, as applicable, a credit score it used in
taking adverse action along with related information, including the
key factors that adversely affected the consumer's credit score.
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.[ltrif]
Sample forms C-1 through C-5 of Appendix C of the regulation provide
for the two disclosures. See also comment 9(a)(2)-1.
* * * * *

By order of the Board of Governors of the Federal Reserve
System, March 1, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-5417 Filed 3-14-11; 8:45 am]
BILLING CODE 6210-01-P