[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Proposed Rules]
[Pages 16307-16321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06195]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 82, No. 63 / Tuesday, April 4, 2017 /
Proposed Rules
[[Page 16307]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1002
[Docket No. CFPB-2017-0009]
RIN 3170-AA65
Amendments to Equal Credit Opportunity Act (Regulation B)
Ethnicity and Race Information Collection
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule with request for public comment.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) proposes
amendments to Regulation B to permit creditors additional flexibility
in complying with Regulation B in order to facilitate compliance with
Regulation C, to add certain model forms and remove others from
Regulation B, and to make 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.
DATES: Comments must be received on or before May 4, 2017.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2017-
0009 or RIN 3170-AA65, by any of the following methods:
Email: [email protected]. Include Docket
No. CFPB-2017-0009 or RIN 3170-AA65 in the subject line of the email.
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552. Include CFPB-2017-0009 or RIN 3170-AA65 in a reference line at
the top of the submission.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1275 First
Street NE., Washington, DC 20002. Include CFPB-2017-0009 or RIN 3170-
AA65 in a reference line at the top of the submission.
Instructions: All submissions should include the agency name and
docket number or Regulatory Information Number (RIN) for this
rulemaking. Because paper mail in the Washington, DC area and at the
Bureau is subject to delay, commenters are encouraged to submit
comments electronically. In general, all comments received will be
posted without change to http://www.regulations.gov. In addition,
comments will be available for public inspection and copying at 1275
First Street NE., Washington, DC 20002, on official business days
between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an
appointment to inspect the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or Social
Security numbers, should not be included. Comments will not be edited
to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Kathryn Lazarev or James Wylie,
Counsels, Office of Regulations, at 202-435-7700.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
Regulation B implements the Equal Credit Opportunity Act (ECOA)
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.\1\ One of those circumstances is a
requirement for creditors to collect and retain certain information
about applicants for certain dwelling-secured loans under Regulation B
Sec. 1002.13. Another circumstance is the applicant information
required to be collected and reported under Regulation C by financial
institutions. Regulation C, 12 CFR part 1003, implements the Home
Mortgage Disclosure Act (HMDA), as amended by the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act).\2\
Regulation B also includes certain optional model forms for use in
complying with certain Regulation B requirements. One of those forms is
a 2004 version of the Uniform Residential Loan Application (URLA)
issued by the Federal National Mortgage Association (Fannie Mae) and
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively,
the Enterprises).
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\1\ 15 U.S.C. 1691, 12 CFR part 1002.
\2\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010).
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The Bureau issued a final rule in October of 2015 amending
Regulation C (2015 HMDA final rule), which included changes to the
collection of applicants' ethnicity and race information.\3\ The
Enterprises recently issued a new version of the URLA (2016 URLA).\4\
The Bureau proposes to amend various sections of Regulation B to
further the purposes of ECOA including to promote the availability of
credit to all creditworthy applicants without regard to race, color,
religion, national origin, sex, marital status, or age (provided the
applicant has the capacity to contract) and other protected
characteristics. The proposed amendments to Sec. 1002.13 would permit
a creditor additional flexibility in how it collects applicant
ethnicity and race information in order to better align with Regulation
C, as amended in the 2015 HMDA final rule. The proposed amendments to
Appendix B would remove the URLA dated January 2004 (2004 URLA) from
Regulation B and add additional sample forms to Regulation B to
facilitate compliance. The proposed amendments to Sec. 1002.5 would
permit creditors to collect applicant information in certain
circumstances when they would not otherwise be required to do so. The
proposed amendments to Sec. 1002.12 would address retention of
information about certain applicants.
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\3\ Home Mortgage Disclosure (Regulation C); 80 FR 66128 (Oct.
28, 2015).
\4\ See Fannie Mae, Guide Forms (2016), available at, https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms
(listing all selling and servicing guide forms); see also Freddie
Mac, Forms and Documents (2016) http://www.freddiemac.com/singlefamily/guide/ (same).
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[[Page 16308]]
II. Background
A. Regulation B and Ethnicity and Race Information Collection
With some exceptions, Regulation B Sec. 1002.5(b) prohibits a
creditor from inquiring about the race, color, religion, national
origin, or sex of an applicant or any other person (protected
applicant-characteristic information) in connection with a credit
transaction. Section 1002.5(a)(2) provides an exception to that
prohibition for information that creditors are required to request for
certain dwelling-secured loans under Sec. 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 the scope, required information, and
manner for collecting information about an applicant's ethnicity, race,
sex, marital status, and age under Regulation B (In this notice,
``applicant demographic information'' refers to information about an
applicant's ethnicity, race, or sex information collected under Sec.
1002.13 or, as discussed below, Regulation C, while ``certain protected
applicant-characteristic information'' refers to all information
collected under Sec. 1002.13, including age and marital status.) Under
Sec. 1002.13(a)(1), creditors that receive an application for credit
primarily for the purchase or refinancing of a dwelling occupied (or to
be occupied) by the applicant as a principal residence, where the
extension of credit will be secured by the dwelling, must collect
certain protected applicant-characteristic information, including
specified race and ethnicity categories. These race and ethnicity
categories correspond to the OMB standards for the classification of
Federal data on ethnicity and race minimum standards.\5\ Certain of
these categories include several more specific race, heritage,
nationality, or country of origin groups. For example, Hispanic or
Latino as defined by OMB for the 2010 Census refers to a person of
Cuban, Mexican, Puerto Rican, South or Central American, or other
Spanish culture or origin.\6\ Section 1002.13(b) through (c) provides
instructions on the manner of collection. Unlike financial institutions
covered by Regulation C, creditors subject to Sec. 1002.13 but not to
Regulation C are required only to collect and retain, but not to
report, the required protected applicant-characteristic information.
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\5\ Office of Mgmt. and Budget, Revisions to the Standards for
the Classification of Federal Data on Race and Ethnicity, 62 FR
58782-90 (Oct. 30, 1997).
\6\ See U.S. Census Bureau, C2010BR-02, Overview of Race and
Hispanic Origin: 2010, at 2 (2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf.
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B. 2015 HMDA Final Rule
The Dodd-Frank Act transferred rulemaking authority for HMDA to the
Bureau, effective July 2011.\7\ It also amended HMDA to add new data
points and authorized the Bureau to require additional information from
covered institutions. 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 information about an applicant's ethnicity, race,
and sex (applicant demographic information).
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\7\ Public Law 111-203, 124 Stat. 1376.
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In July 2014, the Bureau proposed amendments to Regulation C to
implement the Dodd-Frank Act changes to require collection, recording,
and reporting of additional information to further HMDA's purposes, and
to modernize the manner in which covered institutions report HMDA
data.\8\ The Bureau published a final rule on October 28, 2015,
amending Regulation C, with many of the amendments taking effect
January 1, 2018.\9\ (In this notice, ``current Regulation C'' refers to
Regulation C prior to January 1, 2018, and ``revised Regulation C''
refers to Regulation C as it will be in effect on or after January 1,
2018, as amended by the 2015 HMDA final rule.) For data collected in or
after 2018, the 2015 HMDA final rule amends the requirement for
collection and reporting of applicant demographic information.
Specifically, covered institutions must permit applicants to self-
identify their ethnicity and race using certain disaggregated ethnic
and racial subcategories. Covered institutions will report the
disaggregated information provided by applicants. However, revised
Regulation C will not require or permit covered institutions to use the
disaggregated subcategories when collecting and reporting the
applicant's ethnicity and race based on visual observation or
surname.\10\
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\8\ Home Mortgage Disclosure (Regulation C), 79 FR 51731 (Aug.
29, 2014).
\9\ 80 FR 66128 (Oct. 28, 2015).
\10\ Id. at 66314 (amendments to appendix B to Regulation C,
effective January 1, 2018).
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Revised Regulation C Sec. 1003.2(g)(1)(v) and 1003.2(g)(2)(ii)
also introduces an exemption to the requirement to report information
for financial institutions that originated fewer than 25 closed-end
mortgage loans or fewer than 100 open-end lines of credit in either of
the two prior years. As a result, when revised Regulation C takes
effect, an institution's obligation to collect and report information
under Regulation C may change over time based on its prior loan volume.
C. Uniform Residential Loan Application
The Enterprises, currently under the conservatorship of the Federal
Housing Finance Agency (FHFA), prepare and periodically revise a
Uniform Residential Loan Application (URLA) used by many lenders for
certain dwelling-related loans. A mortgage loan application must be
documented using the URLA in the mortgage loan file for the loan to be
eligible for sale to the Enterprises.\11\ A version of the URLA dated
January 2004 (2004 URLA) is included in appendix B to Regulation B as a
model form for use in complying with Sec. 1002.13. Appendix B 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 Sec.
1002.5(b) through (d).\12\
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\11\ Fannie Mae, Selling Guide: Single Family Seller Servicer
(Dec. 16, 2016), Sec. B1-1-01, available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html; Freddie Mac,
Single-Family Seller/Servicer Guide (Sep. 21, 2016), Sec. 3401.7,
available at http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html.
\12\ Comment app. B-1 provides that a previous version of the
URLA, dated October 1992, may be used by creditors without violating
Regulation B. In addition, comment app. 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 Sec. 1002.13(a) or subject to a
substitute monitoring program under Sec. 1002.13(d). The
Enterprises no longer offer the home-improvement and energy loan
application form identified in comment app. B-2 See Fannie Mae,
Guide Forms (2016), available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (listing all current
selling and servicing guide forms); see also Freddie Mac, Forms and
Documents (2016) available at http://www.freddiemac.com/singlefamily/guide/ (same).
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The Enterprises, under the conservatorship of the FHFA, issued a
revised and redesigned URLA on August 23, 2016 (2016 URLA).\13\ This
issuance was part of the effort of these
[[Page 16309]]
entities to update the Uniform Loan Application Dataset (ULAD). 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.
The Enterprises also made available a Demographic Information Addendum,
which is identical in form to section 7 of the 2016 URLA.\14\ The
Enterprises have advised that the Demographic Information Addendum may
be used by lenders at any time on or after January 1, 2017, as a
replacement for section X (Information for Government Monitoring
Purposes) in the current URLA, dated 7/05 (revised 6/09).\15\ The
Enterprises have not yet provided a date when lenders may begin using
the 2016 URLA (the effective date) or the date lenders are required to
use the 2016 URLA (the cutover date), but have stated their intention
to collaborate with industry stakeholders to help shape the
implementation timeline for the 2016 URLA, with a goal to provide
lenders with more precise information in 2017 regarding the cutover
date.\16\
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\13\ Fannie Mae, Uniform Residential Loan Application (Aug.
2016), https://www.fanniemae.com/content/guide_form/urla-borrower-information.pdf; 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.
\14\ Fannie Mae, Demographic Information Addendum (Aug. 2016),
available at https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf.
\15\ Press Release, Uniform Mortgage Data Program, Fannie Mae
and Freddie Mac at the direction of the FHFA, URLA Implementation
Guidance and Update (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf;
Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the
direction of the FHFA, Uniform Residential loan Application (URLA)/
Uniform Loan Application Dataset (ULAD) FAQs, ] 6 (Nov. 1, 2016),
available at https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf.
\16\ Press Release, Uniform Mortgage Data Program, Fannie Mae
and Freddie Mac at the direction of the FHFA, URLA Implementation
Guidance and Update (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf.
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D. Bureau Approval Notice
On September 23, 2016, the Bureau issued a notice concerning the
collection of expanded information about ethnicity and race in 2017
(Bureau Approval Notice).\17\ Under current Regulation C Sec.
1003.4(a)(10), covered financial institutions are required to collect,
record, and report applicant demographic information. Revised
Regulation C will require financial institutions to permit applicants
to self-identify using disaggregated ethnic and racial categories
beginning January 1, 2018.\18\ However, before that date, such
inquiries are not required by current Regulation C and would not have
been allowed under Regulation B Sec. 1002.5(a)(2), and therefore
creditors would have been prohibited by Regulation B Sec. 1002.5(b)
from requesting applicants to self-identify using disaggregated ethnic
and racial categories before January 1, 2018.
The Bureau Approval Notice provided that, anytime from January 1,
2017, through December 31, 2017, a creditor may, at its option, permit
applicants to self-identify using disaggregated ethnic and racial
categories as instructed in appendix B to revised Regulation C. During
this period, a creditor adopting the practice of permitting applicants
to self-identify using disaggregated ethnic and racial categories as
instructed in appendix B to revised Regulation C shall be deemed to be
in compliance with Regulation B Sec. 1002.13(a)(i).
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 Sec. 1002.5(b) through (d), regarding
requests for protected applicant-characteristic information and certain
other information. 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
Sec. 1002.5(b) through (d) acts in compliance with Sec. 1002.5(b)
through (d).
III. Outreach
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 has received
questions about the requirement to permit applicants to self-identify
using disaggregated ethnicity and race categories and how that
requirement intersects with compliance obligations under Regulation B.
The Bureau also received questions related to the Bureau Approval
Notice about whether the approval for collecting disaggregated
ethnicity and race categories under Regulation B in 2017 would be
extended to 2018. 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 (FRB), and the National Credit Union
Administration (NCUA), the Bureau conducted outreach to these agencies.
The Bureau specifically sought input from these prudential regulators
concerning their use of applicant ethnicity and race information
collected under Sec. 1002.13 but not reported or anticipated to be
reported under current or revised Regulation C and their views on
appropriate standards for collection and retention of this information.
The Bureau also conducted outreach with other Federal agencies,
including 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 U.S.
Department of Veterans Affairs, the U.S. Department of Agriculture, and
the Department of the Treasury, concerning this proposed rule.
IV. Legal Authority
The Bureau is issuing this proposed rule pursuant to its authority
under section 703 of ECOA, as amended by section 1085 of the Dodd-Frank
Act.\19\ ECOA authorizes the Bureau to issue regulations to carry out
the purposes of ECOA.\20\ These regulations may contain but are not
limited to such classifications, differentiations, or other provisions,
and may provide for such adjustments and exceptions for any class of
transactions, as in the judgment of the Bureau are necessary or proper
to effectuate the purposes of ECOA, to prevent circumvention or evasion
of ECOA, or to facilitate or substantiate compliance with ECOA.\21\ A
purpose of ECOA is to promote the availability of credit to all
creditworthy applicants without regard to race, color, religion,
national origin, sex, marital status, or age (provided the applicant
has the capacity to contract) and other protected characteristics.\22\
ECOA section 703 serves as a source of authority to establish rules
concerning the taking and evaluation of credit applications, collection
and retention of applicant demographic information concerning the
applicant or co-applicant, use of designated model forms, and
substantive requirements to carry out the purposes of ECOA.
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\19\ 15 U.S.C. 1691b; Public Law 111-203, 124 Stat. 1376, 2083-
84 (2010).
\20\ 15 U.S.C. 1691b(a).
\21\ Id.
\22\ 12 CFR 1002.1(b).
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The Bureau is also issuing this proposed rule pursuant to its
authority under sections 1022 and 1061 of the
[[Page 16310]]
Dodd-Frank Act. 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.\23\ Section 1061 of the Dodd-Frank Act transferred to
the Bureau consumer financial protection functions previously vested in
certain other Federal agencies, including the authority to prescribe
rules or issue orders or guidelines pursuant to any Federal consumer
financial law and perform appropriate functions to promulgate and
review such rules, orders, and guidelines.\24\ Both ECOA and title X of
the Dodd-Frank Act are consumer financial laws.\25\ Accordingly, the
Bureau has authority to issue regulations to administer ECOA.
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\23\ Public Law 111-203, 124 Stat. 1375, 1980 (2010) (codified
at 12 U.S.C. 5512(b)(1)).
\24\ Public Law 111-203, 124 Stat. 1375, 2035-39 (2010)
(codified at 12 U.S.C. 5581).
\25\ 12 U.S.C. 5481(12), (14).
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V. Proposed Implementation Period
Except as set forth below, the Bureau proposes an effective date of
January 1, 2018, for any final rule based on this proposal to align
with the effective dates of the relevant provisions of the 2015 HMDA
final rule. As an effective date for any final rule removing the 2004
URLA from appendix B of Regulation B, the Bureau proposes the cutover
date designated by the Enterprises for the mandatory use of the 2016
URLA or January 1, 2022, whichever occurs first.
VI. Section-by-Section Analysis
Section 1002.5 Rules Concerning Requests for Information
Section 1002.5 provides rules concerning requests for information.
In general, Sec. 1002.5(b) prohibits a creditor from inquiring about
protected applicant-characteristic information in connection with a
credit transaction, except under certain circumstances. The Bureau is
proposing to add proposed Sec. 1002.5(a)(4), to authorize creditors to
collect such information under certain additional circumstances. The
Bureau is proposing to make conforming changes to comment 5(a)(2)-2 to
reference the types of loans covered by revised Regulation C and
provide a citation to Regulation C. The Bureau is also proposing to add
proposed comment 5(a)(4)-1 to provide guidance on proposed Sec.
1002.5(a)(4).
5(a) General Rules
5(a)(4) Other Permissible Collection of Information
Section 1002.5(a)(2) provides that, notwithstanding the limitations
in Sec. 1002.5(b) through (d) on collecting protected applicant-
characteristic information and other applicant information, a creditor
shall request information for monitoring purposes as required by Sec.
1002.13. Section 1002.5(a)(2) further provides that a creditor may
obtain information required by a regulation, order, or agreement issued
by, or entered with, a court or an enforcement agency to monitor or
enforce compliance with ECOA, Regulation B, or other Federal or State
statutes and regulations. However, Sec. 1002.5(a)(2) does not
authorize collection of information beyond what is required by law. The
Bureau is proposing to add Sec. 1002.5(a)(4) to authorize a creditor
to obtain information in certain additional specified circumstances
other than information required as described in Sec. 1002.5(a)(2).
Proposed Sec. 1002.5(a)(4) would provide that, notwithstanding Sec.
1002.5(b), a creditor may collect information under the circumstances
included under that section, provided that the creditor collects the
information in compliance with appendix B to revised Regulation C.
The Bureau understands that certain creditors who will be excluded
from reporting under revised Regulation C in a given reporting year may
want to continue to collect or report applicant demographic information
during that time to maintain consistent compliance standards from year-
to-year. The Bureau also understands that certain creditors who are not
subject to revised Regulation C in a given calendar year but may become
subject to reporting in the next calendar year may want to collect
applicant demographic information for applications that may become
revised Regulation C covered loans if the creditor becomes subject to
reporting and final action is taken on the application in the next
calendar year. Therefore, the Bureau believes that it is appropriate to
permit creditors to collect such information in the specifically
permitted circumstances explained below. The Bureau believes that
permitting creditors to collect information without interruption or
break from year-to-year would further the purposes of ECOA by easing
overall burden on creditors and improving the quality and reliability
of the data that are used to promote the availability of credit to all
creditworthy applicants. 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 Sec. 1002.5(b) through (d) that preserves the
protection and respects the purposes of those prohibitions.
Under proposed Sec. 1002.5(a)(4)(i) a creditor that is a financial
institution under revised Regulation C Sec. 1003.2(g) may collect
information regarding the applicant demographic information of an
applicant for a closed-end mortgage loan that is an excluded
transaction under revised Regulation C Sec. 1003.3(c)(11) if it
submits HMDA data concerning those applications and loans or if it
submitted HMDA data concerning closed-end mortgage loans in any of the
preceding five calendar years. The proposal would permit a financial
institution that voluntarily reports HMDA data concerning closed-end
mortgage loans to collect applicant demographic information for such
reporting in compliance with Regulation B. The proposal would also
permit a financial institution to collect applicant demographic
information for closed-end mortgage loans for up to five years after it
fell below the loan volume threshold for closed-end mortgage loans in
revised Regulation C Sec. 1003.3(c)(11). The Bureau believes that
creditors in this latter situation may not want to incur the burden of
altering their compliance process, particularly when they may become
subject to reporting again in the near future. The Bureau believes that
permitting such collection for five years provides an appropriate time
frame under which a financial institution should be permitted to
continue collecting the information without having to change its
compliance processes; the Bureau believes the period is long enough
that it would provide a creditor a strong indication that its present
business trend is unlikely to subject it to reporting in the near
future, but the period would not be so long as to permit a creditor to
collect protected applicant-characteristic information for a period of
time that is too attenuated from the previous Regulation C legal
requirement and associated compliance process. The Bureau invites
comment on this proposal to permit collection of applicant demographic
information in these circumstances and the proposed five-year time
frame.
Under proposed Sec. 1002.5(a)(4)(ii), a creditor that is a
financial institution under Regulation C Sec. 1003.2(g) may collect
information regarding the applicant demographic information of an
applicant for an open-end line of credit that is an excluded
transaction
[[Page 16311]]
under revised Regulation C Sec. 1003.3(c)(12) if it submits HMDA data
concerning those applications and open-end lines of credit or if it
submitted HMDA data concerning open-end lines of credit in any of the
preceding five calendar years. Similar to proposed Sec.
1002.5(a)(4)(i), the proposal would permit a financial institution that
voluntarily reports HMDA data concerning open-end lines of credit to
collect applicant demographic information for such reporting in
compliance with Regulation B. The proposal would also permit a
financial institution to collect applicant demographic information for
open-end lines of credit for up to five years after it fell below the
loan volume threshold for open-end lines of credit in revised
Regulation C Sec. 1003.3(c)(12). The Bureau believes that the proposal
is justified for similar reasons and provides similar benefits to
proposed Sec. 1002.5(a)(4)(i) discussed above. The Bureau invites
comment on this proposal to permit collection of applicant demographic
information in these circumstances and the proposed five-year time
frame.
Under proposed Sec. 1002.5(a)(4)(iii), a creditor that submitted
HMDA data for any of the preceding five calendar years but is not
currently a financial institution under revised Regulation C Sec.
1003.2(g) may collect information regarding the applicant demographic
information of an applicant for a loan that would otherwise be a
covered loan under revised Regulation C Sec. 1003.2(e) if not excluded
by Regulation C Sec. Sec. 1003.3(c)(11) or (12). This proposal would
permit a creditor that falls below the loan-volume threshold \26\ and
is therefore no longer required to collect and report information under
revised Regulation C to continue to collect applicant demographic
information. The Bureau believes that the proposal is justified for
similar reasons and provides similar benefits to proposed Sec.
1002.5(a)(4)(i) discussed above. The Bureau invites comment on this
proposal to permit collection of applicant demographic information in
these circumstances and the proposed five-year time frame.
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\26\ The loan-volume thresholds in revised Regulation C are 25
or more closed-end mortgage loans originated in each of the two
proceeding calendar years and 100 open-end lines of credit in each
of the two proceeding calendar years. Revised Regulation C Sec.
1003.2(g)(1)(v), (g)(2)(ii).
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Under proposed Sec. 1002.5(a)(4)(iv), a creditor that exceeded a
loan volume threshold in the first year of a two-year threshold period
provided in revised Regulation C Sec. Sec. 1003.2(g), 1003.3(c)(11),
or 1003.3(c)(12) may, in the subsequent year, collect the applicant
demographic information of an applicant for a loan that would otherwise
be a covered loan under Regulation C Sec. 1003.2(e) if not excluded by
revised Regulation C Sec. 1003.3(c)(11) or (12). The proposal would
benefit creditors in certain situations in which the creditor is
uncertain whether it will be required to report information under
revised Regulation C in a future calendar year. For example, where a
creditor meets the closed-end mortgage loan coverage threshold or open-
end line of credit coverage threshold in revised Regulation C Sec.
1003.2(g)(1)(v) and (g)(2)(ii) for the first time in a given calendar
year, it may wish to begin collecting certain protected applicant-
characteristic information for applications received in the next
calendar year (second calendar year) so as to be prepared to report
that information if final action is taken in the following calendar
year (third calendar year), when the creditor would be required to
report the information under revised Regulation C if it exceeded the
applicable two-year threshold at the end the second calendar year. The
Bureau believes that a creditor would benefit from being able to
collect applicant demographic information concerning such applications
with assurance of compliance with Sec. 1002.5 regardless of whether or
not it becomes subject to HMDA reporting at the end of the two-year
threshold period. The Bureau invites comment on this proposal to permit
collection of applicant demographic information in these circumstances.
The Bureau is also proposing to add new comment 5(a)(4)-1 which
provides that applicant demographic information that is not required to
be collected pursuant to Regulation C may nevertheless be collected
under the circumstances set forth in Sec. 1002.5(a)(4) without
violating Sec. 1002.5(b) and highlights that, as discussed below, such
information should be retained pursuant to Sec. 1002.12. The Bureau
also invites comment on whether there are other specific, narrowly
tailored circumstances not described in Sec. 1002.5(a)(2) or proposed
Sec. 1002.5(a)(4) under which a creditor would benefit from being able
to collect applicant demographic information for mortgage loan
applicants.
Section 1002.12 Record Retention
Section 1002.12 provides rules concerning permissible and required
record retention. In light of proposed Sec. 1002.5(a)(4), the Bureau
is also proposing to amend Sec. 1002.12(b)(1)(i) to require retention
of certain protected applicant-characteristic information obtained
pursuant to proposed Sec. 1002.5(a)(4).
12(a) Retention of Prohibited Information
12(b) Preservation of Records
12(b)(1) Applications
12(b)(1)(i)
Section 1002.12(b)(1) provides that a creditor must retain certain
records for 25 months. Under Sec. 1002.12(b)(1)(i), these records
include any information required to be obtained concerning
characteristics of the applicant to monitor compliance with ECOA and
Regulation B or other similar law. The Bureau is proposing to amend
Sec. 1002.12(b)(1)(i) to include within its preservation requirements
any information obtained pursuant to proposed Sec. 1002.5(a)(4). The
Bureau believes that, if a creditor voluntarily collects applicant
demographic information pursuant to proposed Sec. 1002.5(a)(4), the
creditor should be required to maintain those records in the same
manner as protected applicant-characteristic information it is required
to collect. This would allow the information to be available for its
primary purpose of monitoring and enforcing compliance with ECOA,
Regulation B, and other Federal or State statutes or regulations.
Without a corresponding record retention requirement, a creditor could
collect but not retain the information, thus preventing the use of the
information for these purposes. The Bureau is also proposing to amend
comment 12(b)-2 to require retention of applicant demographic
information obtained pursuant to proposed Sec. 1002.5(a)(4). The
Bureau invites comment on the proposed amendment.
Section 1002.13 Information for Monitoring Purposes
Section 1002.13 sets forth the scope, required information, and
manner for the mandatory collection of certain protected applicant-
characteristic information under Regulation B. Section 1002.13(a)(1)
requires creditors to collect information about the applicant,
including ethnicity and race information, for certain dwelling-related
loans. Among other revisions to Sec. 1002.13 and its commentary, the
Bureau proposes to amend Sec. 1002.13(a)(1)(i) to provide that, for
applications subject to Sec. 1002.13(a)(1), a creditor must collect
the applicant's information using either aggregate ethnicity and race
categories or the ethnicity and race categories and subcategories set
forth in appendix B to
[[Page 16312]]
revised Regulation C, which provide disaggregated ethnicity and race
categories.
13(a) Information To Be Requested
13(a)(1)
13(a)(1)(i)
Under Sec. 1002.13(a)(1), creditors that receive an application
for credit primarily for the purchase or refinancing of a dwelling
occupied or to be occupied by the applicant as a principal residence,
where the extension of credit will be secured by the dwelling, must
collect certain information about the applicant, including ethnicity
and race information. Specifically, under current Sec.
1002.13(a)(1)(i) creditors must collect information regarding the
applicant's ethnicity using the categories Hispanic or Latino and not
Hispanic or Latino, and the applicant's race using the categories
American Indian or Alaska Native, Asian, Black or African American,
Native Hawaiian or Other Pacific Islander, and White. Under Regulation
B, creditors are required to collect and retain such data, but have no
obligation to report the data to a regulator.\27\
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\27\ 12 CFR 1002.12 and 1002.13.
---------------------------------------------------------------------------
As set forth above, in 2015 the Bureau issued the 2015 HMDA final
rule, which adopted certain revisions to Regulation C.\28\ Under
current Regulation C, financial institutions are required to collect
and report an applicant's or borrower's information using aggregate
ethnicity and race categories that are identical to the ethnicity and
race categories set forth under current Sec. 1002.13(a)(1)(i). In
contrast, under revised Regulation C, financial institutions are
required to permit applicants or borrowers to self-identify using
disaggregated ethnicity and race categories.\29\ Once revised
Regulation C goes into effect on January 1, 2018, the race and
ethnicity categories financial institutions use to collect information
under revised Regulation C will no longer correspond with the race and
ethnicity categories a creditor uses to collect information under
current Sec. 1002.13(a)(1)(i). Many creditors are subject to both
Sec. 1002.13 and revised Regulation C. The Bureau believes that such
creditors should not be subject to differing collection requirements,
and that aligning the two requirements furthers the purposes of ECOA by
facilitating practices that promote the availability of credit to all
creditworthy applicants.\30\
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\28\ 80 FR 66127 (Oct. 28, 2015).
\29\ See also revised Regulation C Sec. 1003.4(a)(10)(i) and
comment 4(a)(10)(i)-1 (requiring financial institution to report
information about the applicant's or borrower's ethnicity and race
using the instructions in appendix B to Regulation C).
\30\ Because of the differences between revised Regulation C and
current Sec. 1002.13, some creditors may be uncertain whether
compliance with revised Regulation C also satisfies compliance with
current Sec. 1002.13 or whether additional collection to satisfy
current Sec. 1002.13 would also be required. The Bureau believes
that resolving this issue through rulemaking will provide certainty
to such creditors.
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Accordingly, the Bureau proposes to revise Sec. 1002.13(a)(1)(i)
to provide that, for applications subject to Sec. 1002.13(a)(1), a
creditor must collect an applicant's information using either the
aggregate or disaggregated ethnicity and race categories (creditors
subject to revised Regulation C will be required to use the
disaggregated race and ethnicity categories for applications subject to
revised Regulation C). Specifically, the Bureau proposes to amend Sec.
1002.13(a)(1)(i) to allow a creditor to comply with either Sec.
1002.13(a)(1)(i)(A) or Sec. 1002.13(a)(1)(i)(B). Under proposed Sec.
1002.13(a)(1)(i)(A), a creditor may collect information regarding the
applicant using the aggregate ethnicity and race categories set forth
in current Sec. 1002.13(a)(1)(i). Under proposed Sec.
1002.13(a)(1)(i)(B), a creditor may collect an applicant's ethnicity
and race information using the categories and subcategories set forth
in appendix B to revised Regulation C, which provides disaggregated
ethnicity and race categories. Thus, under the proposal, a creditor
subject to collection requirements under both Sec. 1002.13(a)(1) and
revised Regulation C that collects information pursuant to the
requirements of appendix B to revised Regulation C would also satisfy
Sec. 1002.13(a)(1)(i).
For applications subject to Sec. 1002.13(a)(1), the Bureau
believes there are compelling reasons for permitting a creditor to
collect an applicant's information using disaggregated ethnicity and
race categories, even if the creditor is not required to submit HMDA
data concerning the application under revised Regulation C (Regulation
B-only creditors or transactions). As discussed in the preamble to the
2015 HMDA final rule, among other reasons, the Bureau revised
Regulation C to require financial institutions to allow applicants to
self-identify using the disaggregated ethnicity and race categories
based on the conclusion that it would further HMDA's purpose to
identify possible discriminatory lending patterns, encourage self-
reporting by applicants and borrowers, and more accurately reflect the
nation's ethnic and racial diversity.\31\ The Bureau believes these
same benefits will also further the purpose of ECOA, which, similar to
HMDA, seeks to promote the availability of credit to all creditworthy
applicants without regard to protected characteristics, such as
national origin and race.
---------------------------------------------------------------------------
\31\ 80 FR 66127, 66190 (Oct. 28, 2015).
---------------------------------------------------------------------------
The Bureau believes that optional collection of disaggregated
ethnicity and race information under proposed Sec. 1002.13(a)(1)(i)(B)
is also appropriate given that the 2016 URLA provides for the
collection of disaggregated ethnicity and race categories. As noted
above, the Enterprises have indicated their intent to mandate use of
the 2016 URLA at some point in the future for all loans eligible for
purchase by the Enterprises. Given the widespread use of the current
URLA among lenders, the Bureau expects that on or prior to the cutover
date, many creditors will want to adopt the 2016 URLA irrespective of
whether the creditor or transaction is subject to the collection and
reporting requirements in revised Regulation C. Accordingly, the Bureau
believes that the proposed revisions will facilitate the transition to
the 2016 URLA for all creditors seeking to use the updated form.
The Bureau also considered the alternative, for all applications
subject to Sec. 1002.13(a)(1), of requiring creditors to use the
disaggregated ethnicity and race categories. The Bureau is not
proposing this approach for several reasons. First, the Bureau believes
that the creditors that would be most affected by such a change would
primarily be small creditors that will not meet the loan-volume
thresholds, asset-size thresholds, or location test under revised
Regulation C.\32\ Creditors within the scope of revised Regulation C
would be minimally affected as they will already be required to use the
disaggregated ethnicity and race categories under revised Regulation C.
Regulation B-only creditors, however, would incur various costs and
heightened compliance burdens as a result of adopting this alternative
option, including updating application forms, revising policies and
procedures, and providing additional training. Second, these small
creditors would potentially have a short timeframe to come into
compliance with any requirement to use the disaggregated ethnicity and
race categories. To resolve the differences between Regulation B and
revised Regulation C in a timely manner, the proposed revisions to
[[Page 16313]]
Sec. 1002.13(a)(1) would ideally take effect on or prior to January 1,
2018. While the Bureau could impose a staggered effective date for
Regulation B-only creditors, the Bureau believes such an approach would
create additional complexity that the Bureau would like to avoid. Thus,
the burden of this alternative option on affected creditors would
likely be compounded by the short implementation timeline available.
Third, the Bureau believes the benefits of requiring (rather than
permitting) creditors to use the disaggregated ethnicity and race
categories would be limited, as most creditors will likely adopt the
disaggregated ethnicity and race categories under the proposed optional
approach, eventually if not immediately. Many will be required to use
the disaggregated information under revised Regulation C, and many that
are not subject to revised Regulation C are nevertheless likely to
adopt the 2016 URLA at some point because of business considerations
unrelated to Regulations B and C.
---------------------------------------------------------------------------
\32\ Revised Regulation C Sec. 1003.2(g)(i), (ii), and (v); see
also id. Sec. 1003.3(c)(11) and (12).
---------------------------------------------------------------------------
On the other hand, the Bureau acknowledges that requiring creditors
to use the disaggregated ethnicity and race categories under Sec.
1002.13(a)(1)(i) may maximize the benefits of disaggregation by
affecting all applications subject to Sec. 1002.13(a)(1). The Bureau
also acknowledges that under this alternative option, Regulation B-only
creditors would incur the costs of collecting disaggregated ethnicity
and race information, and would not incur the more costly burdens of
also reporting such data.
Despite these considerations, the Bureau believes the potential
incremental benefits of requiring creditors to use disaggregated
ethnicity and race categories for applications subject to Sec.
1002.13(a)(1) do not outweigh the burdens of such a proposal on
Regulation B-only creditors.
In addition to the alternative approach discussed above, the Bureau
also considered eliminating altogether the requirement in Sec.
1002.13(a)(1)(i) that creditors collect information on an applicant's
ethnicity and race. While there is significant overlap between Sec.
1002.13 and revised Regulation C, the transactions covered under the
two regulations are not identical and, as discussed above, many
creditors are not subject to Regulation C. Based on outreach to other
regulators, including the FDIC, OCC, FRB, and NCUA, the Bureau
understands that a substantial percentage of supervised entities are
expected to be Regulation B-only creditors and that the protected-
applicant characteristic information collected under Sec. 1002.13 is
frequently relied upon by such regulators to monitor compliance with
fair lending laws. Accordingly, the Bureau believes that the collection
of applicant race and ethnicity information under Sec. 1002.13 serves
the important function of monitoring and enforcing compliance with ECOA
and other antidiscrimination laws and therefore continues to serve the
purposes of ECOA.
For the reasons discussed above, the Bureau proposes to revise
Sec. 1002.13(a)(1)(i), including adding Sec. 1002.13(a)(1)(i)(A) and
Sec. 1002.13(a)(1)(i)(B) to set forth the two options available to
creditors. Under the proposal, for any applications subject to Sec.
1002.13(a)(1), a creditor must seek to collect information concerning
the applicant using, at its option, either aggregate race and ethnicity
categories (proposed Sec. 1002.13(a)(1)(i)(A)) or disaggregated race
and ethnicity categories (proposed Sec. 1002.13(a)(1)(i)(B)).
Proposed Sec. 1002.13(a)(1)(i)(A) is intended to mirror the
ethnicity and race categories set forth in existing Sec.
1002.13(a)(1)(i). The addition of the word ``aggregate'' in proposed
Sec. 1002.13(a)(1)(i)(A) is not a substantive revision but, rather, is
included to clarify that the enumerated categories in proposed Sec.
1002.13(a)(1)(i)(A) differ from the disaggregated ethnicity and race
categories under proposed Sec. 1002.13(a)(1)(i)(B).
Proposed Sec. 1002.13(a)(1)(i)(B) provides that a creditor may
alternatively collect information regarding the applicant using the
categories and subcategories for the collection of race and ethnicity
set forth in appendix B to revised Regulation C. Proposed Sec.
1002.13(a)(1)(i)(B) cross-references the ethnicity and race categories
and subcategories set forth in appendix B to revised Regulation C; the
proposed provision does not recite those categories and subcategories.
Thus, a creditor would comply with proposed Sec. 1002.13(a)(1)(i)(B)
so long as it collects information concerning an applicant's ethnicity
and race using all of the same categories and subcategories as then in
effect under appendix B to revised Regulation C. For example, if
appendix B to revised Regulation C is amended at a later date to
require a financial institution to collect, for example, additional or
different ethnicity and race categories or subcategories, then a
creditor seeking to comply with proposed Sec. 1002.13(a)(1)(i)(B) must
also allow an applicant to select such amended categories or
subcategories. The Bureau solicits comment on this proposal.
The Bureau also proposes to add comment 13(a)-8 to clarify that a
creditor may choose, on an application-by-application basis, whether to
collect aggregate information pursuant to proposed Sec.
1002.13(a)(1)(i)(A) or disaggregated information pursuant to proposed
Sec. 1002.13(a)(1)(i)(B). The Bureau solicits comment on proposed
comment 13(a)-8.
In addition, the Bureau proposes to revise comment 13(a)-7 to
provide, for applications subject to Sec. 1002.13(a)(1), that a
creditor that collects information about the ethnicity, race, and sex
of an applicant in compliance with the requirements of appendix B to
revised Regulation C will be acting in compliance with Sec. 1002.13
concerning the collection of an applicant's ethnicity, race, and sex
information. Section 1002.13(b) through (c) provides instructions on
how to collect an applicant's ethnicity, race, and sex information,
including directions on how to obtain the required information,
required disclosures concerning the collection, and instructions on
when to collect the information on the basis of visual observation or
surname. As discussed above, many applications subject to Sec.
1002.13(a)(1) will also be subject to collection and reporting under
revised Regulation C. While the instructions for the collection of
applicant demographic information in appendix B to revised Regulation C
impose similar requirements as those set forth in Sec. 1002.13(b)
through (c), the Bureau acknowledges that the two sets of instructions
are not identical and that revised Regulation C sometimes provides
additional instructions absent from Sec. 1002.13. For example,
paragraph 12 of appendix B to revised Regulation C provides that, if an
applicant begins an application by mail, Internet, or telephone and
does not provide the requested applicant information but does not check
or select the ``I do not wish to provide this information'' box on the
application, and the applicant then meets in person with the financial
institution and the financial institution requests the information but
the applicant does not provide the information during the in-person
meeting, the financial institution must collect the information on the
basis of visual observation or surname. Current Sec. 1002.13, on the
other hand, is silent on whether a creditor is required to collect
applicant demographic information if the application is initiated by
mail, internet, and telephone, and the applicant subsequently meets in-
person with the creditor.
[[Page 16314]]
While the Bureau believes that the instructions in Sec. 1002.13
for the collection of applicant demographic information are not
inconsistent with revised Regulation C, to eliminate any uncertainty,
the Bureau proposes to revise comment 13(a)-7 to provide that for
applications subject to Sec. 1002.13(a)(1), a creditor that collects
an applicant's ethnicity, race, and sex information in compliance with
the instructions set forth in appendix B to revised Regulation C is
acting in compliance with Sec. 1002.13 concerning the collection of an
applicant's ethnicity, race, and sex information. The Bureau believes
this clarification will also reduce the compliance burden on creditors
subject to both Sec. 1002.13(a)(1) and revised Regulation C by
allowing such creditors to follow a single set of instructions.
The Bureau solicits comment on proposed comment 13(a)-7.
13(b) Obtaining Information
Section 1002.13(b) provides rules and instructions for obtaining
applicant information required under Sec. 1002.13(a). The Bureau is
proposing to amend Sec. 1002.13(b) to provide that, when a creditor
collects ethnicity and race information pursuant to proposed Sec.
1002.13(a)(1)(i)(B), the creditor must comply with any restrictions on
the collection of an applicant's ethnicity or race on the basis of
visual observation or surname set forth in appendix B to revised
Regulation C.
Among other instructions, current Sec. 1002.13(b) provides that,
if an applicant chooses not to provide some or all of the requested
applicant demographic information, the creditor shall, to the extent
possible, note on the form the ethnicity, race, and sex of the
applicant on the basis of visual observation or surname. Instruction 10
in appendix B to revised Regulation C provides, however, that when a
financial institution collects an applicant's ethnicity, race, and sex
on the basis of visual observation or surname, the financial
institution must select from the aggregate ethnicity and race
categories.
In light of the revisions to proposed Sec. 1002.13(a)(1)(i), the
Bureau proposes to amend Sec. 1002.13(b) to restrict the collection of
applicant demographic information where collected on the basis of
visual observation or surname. The Bureau believes that a creditor that
wishes to collect an applicant's ethnicity and race information under
proposed Sec. 1002.13(a)(1)(i)(B) should be subject to the same
restrictions as set forth in appendix B to revised Regulation C. The
Bureau further believes that keeping the requirements aligned is
appropriate given the similar requirements and to promote regulatory
consistency. The Bureau invites comment on this amendment.
Comment 13(b)-1 provides guidance on the forms a creditor may use
to collect applicant information under Sec. 1002.13(a). The Bureau is
proposing to amend the comment to reference the data collection model
forms the Bureau proposes to provide in appendix B of Regulation B, as
further discussed below. The Bureau is also proposing to amend comment
13(b)-1. First proposed comment 13(b)-1 would reiterate the current
interpretation that when a creditor collects only aggregate ethnicity
and race information pursuant to proposed Sec. 1002.13(a)(1)(i)(A)
(current Sec. 1002.13(a)(1)(i)), the applicant must be offered the
option to select more than one racial designation. Proposed comment
13(b)-1 would also provide that when a creditor collects applicant
information pursuant to Sec. 1002.13(a)(1)(i)(B), the applicant must
be offered the option to select more than one ethnicity and more than
one racial designation. The Bureau invites comment on these proposed
amendments.
13(c) Disclosure to Applicant(s)
Section 1002.13(c) sets forth the required disclosures a creditor
must provide to applicants when collecting the required protected
applicant-characteristic information. Current comment 13(c)-1 provides,
among other things, that appendix B contains a sample disclosure and
that a creditor may devise its own disclosure so long as it is
substantially similar. In light of the proposed amendments to appendix
B described below, the Bureau is proposing to amend comment 13(c)-1 to
reference the two data collection model forms provided for in proposed
appendix B. While the Bureau acknowledges that the disclosures in the
two data collection model forms are slightly different from each other,
the Bureau concludes that use of either form complies with Sec.
1002.13(c) and that the two forms are substantially similar. The Bureau
invites comment on this proposed amendment.
Appendix B to Part 1002--Model Application Forms
Regulations B and C both contain an appendix B that provides model
forms for use when collecting applicant demographic information
required under the regulations. Current appendix B to Regulation B
(Regulation B appendix) includes the 2004 URLA, which provides for the
same ethnicity and race categories as required under current Sec.
1002.13. Appendix B to current and revised Regulation C (current
Regulation C appendix or revised Regulation C appendix, as applicable)
includes instructions and a data collection model form for collecting
applicant demographic information. In light of the proposed revisions
to Sec. 1002.13(a)(1)(i), the Bureau also proposes to amend the
Regulation B appendix.
The current Regulation B appendix includes five model forms, each
designated for use in a particular type of consumer credit transaction.
The fifth model form, the 2004 URLA, is described in the Regulation B
appendix as appropriate for residential mortgage transactions and
contains a model disclosure for use in complying with current Sec.
1002.13. While use of the model forms is optional, if a creditor uses
the appropriate model form, or modifies a form in accordance with the
instructions provided in the Regulation B appendix, that creditor is
deemed to be acting in compliance with Sec. 1002.5(b) through (d).\33\
The section in the 2004 URLA used to collect an applicant's ethnicity
and race information (section X) conforms with the aggregate ethnicity
and race categories set forth in current Sec. 1002.13(a)(1)(i). The
most current version of the URLA (prior to the 2016 URLA) used by the
Enterprises is dated July 2005 and was revised in June 2009.
---------------------------------------------------------------------------
\33\ Appendix B to part 1002 ]] 1, 3.
---------------------------------------------------------------------------
On September 23, 2016, the Bureau issued the Bureau Approval
Notice, which approved, pursuant to section 706(e) of ECOA, use of the
2016 URLA.\34\ In the Bureau Approval Notice, the Bureau determined
that, while a creditor is not required to use the 2016 URLA, a creditor
that uses the form without any modification that would violate Sec.
1002.5(b) through (d) would act in compliance with Sec. 1002.5(b)
through (d).\35\ Unlike prior versions of the URLA, the 2016 URLA
permits the applicant to select disaggregated ethnicity and race
categories, as required under revised Regulation C.
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\34\ Status of New Uniform Residential Loan Application and
Collection of Expanded Home Mortgage Disclosure Act Information
About Ethnicity and Race in 2017, 81 FR 66930 (Sep. 23, 2016).
\35\ Id.
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As explained above, the Bureau proposes to revise Sec.
1002.13(a)(1)(i) to provide that, for applications subject to Sec.
1002.13(a)(1), a creditor must collect information concerning the
applicant using, at its option, either aggregate or disaggregated
ethnicity and race categories. In light of this revision, the Bureau
proposes to revise the
[[Page 16315]]
Regulation B appendix to reflect these alternative approaches in
proposed Sec. 1002.13(a)(1)(i). Given the release of the 2016 URLA and
the Bureau's approval of that form in the Bureau Approval Notice, the
Bureau also proposes to remove the 2004 URLA from the Regulation B
appendix, effective upon the Enterprises' cutover date for the 2016
URLA or January 1, 2022, whichever comes first. Each of these proposed
revisions is discussed in depth below.
Model Forms for Complying With Proposed Sec. 1002.13(a)(1)(i)
Under proposed Sec. 1002.13(a)(1)(i)(B) a creditor may request
information concerning the applicant using disaggregated ethnicity and
race categories. In light of this revision, the Bureau believes it is
appropriate to provide creditors a model form to use when complying
with proposed Sec. 1002.13(a)(1)(i)(B). Specifically, the Bureau
proposes to cross-reference the data collection model form included in
the revised Regulation C appendix and thereby establish it as a model
form for complying with proposed Sec. 1002.13(a)(1)(i)(B). The Bureau
proposes to cross-reference this form, rather than create a new model
form, based on the belief that doing so will ease the compliance burden
on creditors by providing them a single form that may be used with both
revised Regulation C and proposed Sec. 1002.13(a)(1)(i)(B). The Bureau
believes cross-referencing the data collection model form in revised
Regulation C is also appropriate because it will avoid the possibility
of inconsistent forms.
The Bureau considered the alternative approach of including the
2016 URLA as a model form for use in complying with proposed Sec.
1002.13(a)(1)(i)(B). The Bureau is not proposing this alternative for
several reasons. As discussed above, the Bureau approved use of the
2016 URLA under section 706(e) of ECOA through the Bureau Approval
Notice and believes that including the 2016 URLA as a model form is
unnecessary given the approvals already provided to the 2016 URLA in
that notice. The Bureau also believes that a model form designated for
use in complying with Sec. 1002.13(a)(1)(i)(B) is properly limited to
include only information relevant to the collection applicant
demographic information and that inclusion of unrelated sections of the
2016 URLA is not necessary to further the purposes of ECOA or provide
relevant guidance to creditors. Moreover, the Bureau anticipates that
the Enterprises may update the 2016 URLA in the future. By maintaining
approval of the 2016 URLA in a freestanding notice, the Bureau avoids
the risk that the model form will become outdated or that the Bureau
will need to make ongoing revisions and updates within Regulation B.
Although the Bureau does not propose to include the 2016 URLA in
Regulation B as a model form, the Bureau notes that the substance and
form of section 7 of the 2016 URLA is substantially similar to the data
collection model form the Bureau proposes to designate for use in
complying with revised Sec. 1002.13(a)(1)(i)(B). The Bureau does not
intend to convey disapproval of the 2016 URLA and has no plans at this
time to revise or withdraw the Bureau Approval Notice currently in
effect.
The Bureau also proposes to add a model form to the Regulation B
appendix to be used for the collection of an applicant's ethnicity and
race information in compliance with proposed Sec. 1002.13(a)(1)(i)(A).
The text of the proposed model form substantially mirrors both section
X in the 2004 URLA and the data collection model form contained in the
current Regulation C appendix. Given these similarities, the Bureau
believes that a creditor can comply with revised Sec.
1002.13(a)(1)(i)(A) without modifying its existing forms for the
collection of an applicant's ethnicity and race information. Like the
proposed model form that may be used in compliance with Sec.
1002.13(a)(1)(i)(B), the Bureau's proposed model form for Sec.
1002.13(a)(1)(i)(A) is one-page in length and limited to information
concerning the applicant's ethnicity, race, and sex.
The Bureau solicits comment on this proposal to provide alternative
model forms for compliance with revised Sec. 1002.13(a)(1)(i).
Removal of the 2004 URLA as a Model Form
As discussed above, the current Regulation B appendix includes the
2004 URLA as a model form for use in complying with Sec. 1002.13. In
light of the proposed revisions to Sec. 1002.13(a)(1)(i) and the
proposal to provide two additional model forms for use in complying
with revised Sec. 1002.13(a)(1)(i), the Bureau proposes to remove the
2004 URLA as a model form in Regulation B. The Bureau proposes 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.
As noted above, the Bureau expects the Enterprises will designate
in 2017 a cutover date for mandatory use of the 2016 URLA. The Bureau
expects that the vast majority of creditors that use the URLA either
currently do not use the already outdated 2004 URLA or will cease using
the 2004 URLA on or prior to the 2016 URLA cutover date. Accordingly,
the Bureau believes that removal of the 2004 URLA from appendix B upon
the cutover date designated by the Enterprises will successfully
eliminate an outdated form without imposing an appreciable burden on
creditors. Alternatively, if the cutover date is after January 1, 2022,
the Bureau proposes an effective date of January 1, 2022; the Bureau
believes that five years provides creditors ample time to update their
forms if they wish to.
The Bureau further believes that removal of the 2004 URLA is
appropriate because it would be duplicative of the form the Bureau
proposes to provide for use in complying with proposed Sec.
1002.13(a)(1)(i)(A). As discussed above, the proposed one-page data
collection model form is substantially similar to section X of the 2004
URLA. The Bureau believes that retention of the 2004 URLA in Regulation
B is therefore unnecessary and could create uncertainty as to the
purpose of the two forms.
Finally, the Bureau believes that removal of the 2004 URLA from
Regulation B is appropriate in light of the proposal not to include the
2016 URLA as a model form. The Bureau is concerned that maintaining the
2004 URLA as a model form in Regulation B, while not including the 2016
URLA, may discourage some creditors from using the 2016 URLA or the
disaggregated ethnicity and race categories. The Bureau further
believes that removal of the 2004 URLA from Regulation B is appropriate
for many of the same reasons the Bureau identified above for not
proposing to include the 2016 URLA, including that the 2004 URLA
contains numerous sections that are irrelevant to compliance with Sec.
1002.13. In proposing to remove the 2004 URLA, however, the Bureau does
not intend to suggest that the content and wording of the form no
longer complies with Sec. 1002.5(b) through (d) or Sec.
1002.13(a)(1)(i).
In light of these considerations, the Bureau proposes to remove the
2004 URLA as a model form in the Regulation B appendix, effective upon
the cutover date designated by the Enterprises for use of the 2016 URLA
or January 1, 2022, whichever comes first. The Bureau solicits comment
on this proposal.
[[Page 16316]]
Removal of the Official Commentary to Appendix B
As discussed above, commentary to appendix B includes a discussion
of two forms created by the Enterprises that are no longer in use: A
1992 version of the URLA and a 1986 home-improvement and energy loan
application form. Given that neither form discussed in the commentary
to the Regulation B appendix is currently used by the Enterprises, the
Bureau believes that few, if any, creditors continue to use the
referenced forms. Accordingly, the Bureau proposes to remove in its
entirety the commentary to the Regulation B appendix based on the
belief that it no longer provides useful guidance to creditors. While
the Bureau acknowledges that the commentary in the Regulation B
appendix instructs creditors to delete, strike, or modify the data-
collection section on the referenced forms when using the forms for
transaction not covered by Sec. 1002.13(a), the Bureau believes that
this language is unnecessary and duplicative of appendix B itself,
which provides that a creditor may alter the model forms by deleting
any information request. The Bureau solicits comment on this proposal,
including specifically whether any portion of the current commentary to
appendix B should be retained.
VII. Dodd-Frank Act Section 1022(b) Analysis
A. Overview
In developing the proposed rule, the Bureau has considered the
potential benefits, costs, and impacts.\36\ The Bureau requests comment
on the preliminary analysis presented below as well as submissions of
additional data that could inform the Bureau's analysis of the
benefits, costs, and impacts. 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
U.S. Department of Veterans Affairs, the U.S. Department of
Agriculture, and the Department of the Treasury, including regarding
consistency with any prudential, market or systematic objectives
administered by such agencies.
---------------------------------------------------------------------------
\36\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act
calls for the Bureau to consider the potential costs of a regulation
to consumers and covered persons, including the potential reduction
of access by consumers to consumer financial products or services;
the impact on depository institutions and credit unions with $10
billion or less in total assets as described in section 1026 of the
Dodd-Frank Act; and the impact on consumers in rural areas.
---------------------------------------------------------------------------
The purpose of ECOA, as implemented by Regulation B, is to promote
access to credit by all creditworthy applicants without regard to
protected characteristics. The proposal would make three substantive
changes to Regulation B, along with other clarifications, minor
changes, and technical corrections to align the language of Regulation
B with Regulation C as amended by the 2015 HMDA Final Rule. The first
would give persons who collect and retain race and ethnicity
information in compliance with ECOA as implemented in Regulation B the
option of permitting applicants to self-identify using the
disaggregated race and ethnicity categories required by the 2015 HMDA
Final Rule. In practice, this would allow entities that report race and
ethnicity in accordance with the 2015 HMDA Final Rule and Regulation C
to comply with Regulation B without further action, while entities that
do not report under HMDA but record and retain race and ethnicity data
under Regulation B would have the option of recording data either using
the existing aggregated categories or the new disaggregated categories.
The Bureau believes that, absent this change, entities which
currently report race and ethnicity data under the HMDA could conclude
that they have different obligations under Regulation B and Regulation
C once the 2015 HMDA Final Rule goes into effect on January 1, 2018.
This would lead to unnecessary burden from collecting both aggregated
and disaggregated data. By making disaggregated collection an option
under Regulation B, entities who will report race and ethnicity
information under the HMDA final rule will also be in compliance with
Regulation B with certainty. The Bureau believes that making collection
of disaggregated race and ethnicity an option for all entities covered
by Regulation B will pose little or no additional burden on those
entities who are not HMDA reporters. The proposed amendment may have
some benefits to non-HMDA reporting entities, as the current language
of Regulation B would not allow these entities to use the 2016 version
of the Enterprises' Uniform Residential Loan Application (URLA) for the
purpose of collecting race and ethnicity data, as the 2016 URLA uses
the disaggregated race and ethnicity categories matching the 2015 HMDA
Final Rule and not the specific categories required by current
Regulation B. Thus, the proposed amendment has the added benefit that
it will allow non-HMDA reporting entities to use the 2016 URLA as an
instrument to collect race and ethnicity information.
The second substantive change would remove the outdated 2004 URLA
as a model form, concurrent with the date that the Enterprises have
announced they will cease accepting that form or on January 1, 2022,
whichever occurs first. The Bureau issued an Approval Notice under its
authority in section 706(e) of ECOA on September 23, 2016, that a
creditor that uses the 2016 URLA without any modification that would
violate Sec. 1002.5(b) through (d) would act in compliance with Sec.
1002.5(b) through (d). The Bureau is not proposing to add the 2016 URLA
as a model form in place of the 2004 version. Instead, the Bureau is
proposing to provide for two alternative data collection model forms
for the purpose of collecting ethnicity and race information. 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 avoid the risk that the model form included in Regulation B will
become outdated in the future.
Finally, the Bureau proposes 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 cases include
creditors that submit HMDA data even though not required to do so, and
creditors that submitted HMDA data in any of the preceding five
calendar years. This change would 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. The Bureau
believes that allowing voluntary collection will reduce the burden of
compliance with Regulation C on some entities and provide certainty
regarding Regulation B compliance over time.
B. Potential Benefits and Costs to Consumers and Covered Persons
Providing an Option To Collect Disaggregated Race and Ethnicity for
Regulation B
Relative to the state of Regulation B and Regulation C following
the effective date of the 2015 HMDA Final Rule, the proposed amendment
provides clear
[[Page 16317]]
benefits to entities that will be required to collect and report race
and ethnicity data under HMDA. Currently the disaggregated race and
ethnicity categories required by the amendments to Regulation C in the
2015 HMDA Final Rule, effective January 1, 2018, do not match the
categories specified in current Regulation B. Because of the
differences between the categories, some creditors required to collect
and report race and ethnicity using the disaggregated categories set
forth in Regulation C may be uncertain whether additional collection
using aggregated categories would also be required to satisfy current
Regulation B. Complying with both Regulations would require burdensome
and duplicative collection of race and ethnicity data at both the
aggregated and disaggregated level. In practice, the proposal simply
makes clear that the existing collection that will be required for
Regulation C is sufficient for compliance with Regulation B.
The proposal may have small benefits to consumers, to the extent
that lending entities voluntarily choose to collect disaggregated race
and ethnicity information. As discussed in the section 1022 analysis
for the 2015 HMDA Final Rule, collection of disaggregated race and
ethnicity data can enhance the ability of regulators to conduct fair
lending analysis. These benefits are limited for three reasons,
however. First, non-HMDA reporters will not be required to permit
applicants to self-identify using disaggregated ethnicity and race
categories. Second, many Regulation B-only creditors will be exempt
from reporting under Regulation C because they originate fewer than 25
closed-end mortgage loans in each of the two preceding calendar years,
which means both that few consumers would be affected and that the
resulting data would likely be too sparse for statistical analysis even
of the aggregated race and ethnicity data. Finally, demographic data
retained by Regulation B-only creditors is not reported under
Regulation C. Consequently, most oversight and analysis of demographic
data retained by Regulation B-only creditors will be done only by
regulators, whereas researchers and community groups also conduct
analysis of HMDA data reported under Regulation C. The Bureau believes
the proposal will not impose any costs on consumers.
The proposal may have benefits to some Regulation B-only creditors.
Although these entities need not make any changes to their race and
ethnicity collection procedures, they may desire to do so in the future
by adopting the 2016 URLA for non-HMDA reportable loan applications.
The Enterprises have announced that they will cease accepting older
versions of the URLA at a date to be determined and require firms that
sell to the Enterprises to use the 2016 URLA form. Some Regulation B-
only creditors sell mortgages to the Enterprises, and would benefit
from being able to use the 2016 URLA. Because the policy change on the
part of the Enterprises is not a part of the rule, the Bureau believes
any operational costs from adopting the 2016 URLA are part of the
normal course of business and are not a cost of the proposed rule
change.
In addition to the proposed change, the Bureau considered two
alternatives to address the differing race and ethnicity requirements
of Regulation B and Regulation C. The Bureau considered requiring all
persons subject to the collection and retention requirement of
Regulation B to permit applicants to self-identify using disaggregated
race and ethnicity categories. To the extent that consumers would
benefit from disaggregated race and ethnicity collection, this
alternative would provide greater benefits than the Bureau's proposal.
However, of the three limitations to consumer benefits listed above,
only the first (that disaggregated categories would be optional) is
alleviated by requiring the use of disaggregated race and ethnicity
categories under Regulation B. 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. 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.
At the same time, mandatory use of disaggregated collection of race
and ethnicity categories would impose greater costs on firms than the
Bureau's proposal, particularly on smaller entities. These costs
include greater operational costs and one-time database upgrades.
Unlike adoption of the 2016 URLA, these costs would not be incurred in
the normal course of business. The Bureau does not have data available
to estimate these costs, but given the small marginal benefits of
mandatory use of disaggregated race and ethnicity categories, the
Bureau is not proposing making disaggregated race and ethnicity
categories mandatory for compliance with Regulation B. The Bureau
requests comments on both the costs and benefits associated with this
alternative approach.
The Bureau also considered eliminating entirely the collection and
retention requirement of Regulation B. Although this alternative would
reduce burden to firms who do not report under HMDA, the Bureau
believes it may impose costs on consumers. 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. Institutions subject to Regulation B but
not Regulation C include, for example, institutions that do not have a
branch or home office in a Metropolitan Statistical Area, do not meet
an applicable asset threshold, or do not meet an applicable loan volume
threshold.
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.\37\ In addition, many community banks in rural areas
are already exempt from HMDA reporting because they do not have a
branch or home office in a Metropolitan Statistical Area (MSA).\38\
Demographic information collected under Regulation B by those
institutions with larger loan volumes may be used in statistical
analysis that supports fair lending supervision and enforcement.
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.
Even for institutions with very small volumes of originations that may
not be subject to HMDA reporting because they do not meet an applicable
loan volume threshold, the retained information may be useful for
comparative file reviews. In 2015 there were 1,178 institutions that
reported HMDA data but had fewer than 25 originations and therefore
would likely be exempt under the 2015 HMDA Final Rule if they continue
to originate loans at a similar volume. Although the loan
[[Page 16318]]
volumes of most of these institutions would be too sparse for
statistical analysis, the ability to conduct comparative file reviews
using data retained under Regulation B has some benefit. Accordingly,
the Bureau does not propose removing the Regulation B requirement to
collect and retain race and ethnicity information.
---------------------------------------------------------------------------
\37\ The criteria for being a financial institution and
reporting transactions under HMDA are different in some ways from
the criteria for reporting under the NMLS Mortgage Call Report and
reporting transactions under it. It is possible that the NMLS omits
some non-depository institutions that originated at least 25 closed-
end mortgages, did not report HMDA data, and are subject to
Regulation B. Some or all of these institutions may also not have
been required to report HMDA data.
\38\ The Bureau does not have an estimate of the number of rural
community banks that are currently exempt from HMDA reporting and
originate at least 25 loans per year. The FFIEC call report for
banks does not report originations for depository institutions that
do not report to HMDA.
---------------------------------------------------------------------------
Model Forms for Collecting Race and Ethnicity Data
The Bureau believes that the proposal to change the model forms for
collecting race and ethnicity data will have modest benefits to firms
collecting these data, by providing updated model forms, and reducing
confusion regarding the outdated 2004 URLA. The proposal does not
impose any new costs on firms, nor does the Bureau believe that
consumers will experience any cost or benefit from the proposal. The
Bureau requests comment regarding the costs and benefits associated
with this proposal.
Allowing Voluntary Collection of Applicant Information
Regarding the proposal to allow certain creditors to voluntarily
collect demographic information, the Bureau believes the financial
institutions that will most likely exercise such options would be low-
volume, low-complexity institutions that have made a one-time
investment in HMDA collection and reporting and would like to utilize
that collection process already in place. The Bureau believes the
proposed provision will provide modest benefits to such institutions,
by saving on one-time adjustment costs required to shift in and out of
collection. The Bureau expects that institutions will only exercise
this option if voluntary collection provides a net benefit. The Bureau
does not believe that consumers will experience any cost or benefit
from the proposal. The Bureau requests comment regarding the costs and
benefits associated with this proposal, particularly data on the number
of firms that might be interested in voluntary collection under this
provision.
C. Impact on Depository Institutions and Credit Unions With $10 Billion
or Less in Assets, As Described in Dodd-Frank Section 1026
The Bureau believes that depository institutions and credit unions
with $10 billion or less in assets will not be differentially affected
by the substantive proposed amendments. The primary benefit to lenders
from the proposed 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.
Both certain depository institutions and credit unions with less than
$10 billion in assets and covered persons with more than $10 billion in
assets currently report data under HMDA and thus will receive these
benefits. The benefits may be somewhat larger for depository
institutions and credit unions with less than $10 billion in assets
because the relative costs of duplicative collection would be greater
for these entities.
D. Impact on Access to Credit
The Bureau does not believe that there will be an adverse impact on
access to credit resulting from any of the proposed provisions.
E. Impact on Consumers in Rural Areas
The Bureau believes that rural areas might benefit from the
provision to allow collection of disaggregated race and ethnicity
information more than urban areas. One of the exceptions to the
reporting requirements under HMDA is for entities which do not have a
branch or home office located in an MSA. Such entities likely serve
primarily customers in rural areas. To the extent that the proposed
provision benefits firms and consumers, consumers in rural areas will
see the largest benefits.
VIII. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires each
agency to consider the potential impact of its regulations on small
entities, including small business, small governmental units, and small
nonprofit organizations. 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.
The RFA generally requires an agency to conduct an initial
regulatory flexibility analysis (IRFA) and a final regulatory
flexibility analysis (FRFA) of any rule subject to notice-and-comment
rulemaking requirements, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. 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.
An IRFA is not required for this proposal because the proposal, if
adopted, would not have a significant economic impact on any small
entities. The Bureau does not expect the proposal to impose costs on
covered persons. All methods of compliance under current law will
remain available to small entities if the proposal is adopted. Thus, a
small entity that is in compliance with current law need not take any
additional action if the proposal is adopted, save those already
required by the 2015 HMDA Final Rule.
Accordingly, the undersigned certifies that this proposal, if
adopted, would not have a significant economic impact on a substantial
number of small entities.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), Federal agencies are generally required to seek the Office of
Management and Budget (OMB)'s approval for information collection
requirements prior to implementation. 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). Under the PRA, the Bureau
may not conduct or sponsor and, notwithstanding any other provision of
law, a person is not required to respond to an information collection
unless the information collection displays a valid control number
assigned by OMB.
The Bureau has determined that this Proposed Rule would not impose
any new or revised information collection requirements (recordkeeping,
reporting or disclosure requirements) on covered entities or members of
the public that would constitute collections of information requiring
OMB approval under the PRA. Although some entities subject to
Regulation B but not Regulation C may choose to voluntarily begin
collecting disaggregated race and ethnicity information, the Bureau
believes the most likely reason for this to occur is through adoption
of the 2016 URLA, which is not part of the proposed rule.
The Bureau welcomes comments on this determination, which may
submitted to the Bureau at the Consumer Financial Protection Bureau
(Attention: PRA Office), 1700 G Street NW., Washington, DC 20552, or by
email to [email protected]. All Comments are matters of Public Record.
List of Subjects in 12 CFR Part 1002
Aged, Banks, Banking, Civil rights, Consumer protection, Credit,
Credit unions, Discrimination, Fair lending, Marital status
discrimination, National banks, National origin discrimination,
Penalties, Race discrimination, Religious discrimination, Reporting and
[[Page 16319]]
recordkeeping requirements, Savings associations, Sex discrimination.
Authority and Issuance
For the reasons set forth above, the Bureau proposes to amend
Regulation B, 12 CFR part 1002, as set forth below:
PART 1002--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)
0
1. The authority citation for part 1002 continues to read as follows:
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.
0
2. Section 1002.5 is amended by adding paragraph (a)(4) to read as
follows:
Sec. 1002.5 Rules concerning requests for information.
(a) * * *
(4) Other permissible collection of information. Notwithstanding
paragraph (b) of this section, a creditor may collect information under
the following circumstances provided that the creditor collects the
information in compliance with appendix B to Regulation C, 12 CFR part
1003:
(i) A creditor that is a financial institution under 12 CFR
1003.2(g) may collect information regarding the ethnicity, race, and
sex of an applicant for a closed-end mortgage loan that is an excluded
transaction under 12 CFR 1003.3(c)(11) if it submits HMDA data
concerning such closed-end mortgage loans and applications or if it
submitted HMDA data concerning closed-end mortgage loans for any of the
preceding five calendar years;
(ii) A creditor that is a financial institution under 12 CFR
1003.2(g) may collect information regarding the ethnicity, race, and
sex of an applicant for an open-end line of credit that is an excluded
transaction under 12 CFR 1003.3(c)(12) if it submits HMDA data
concerning such open-end lines of credit and applications or if it
submitted HMDA data concerning open-end lines of credit for any of the
preceding five calendar years;
(iii) A creditor that submitted HMDA data for any of the preceding
five calendar years but is not currently a financial institution under
12 CFR 1003.2(g) may collect information regarding the ethnicity, race,
and sex of an applicant for a loan that would otherwise be a covered
loan under 12 CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or
(12); and
(iv) A creditor that exceeded an applicable loan volume threshold
in the first year of the two-year threshold period provided in 12 CFR
1003.2(g), 1003.3(c)(11), or 1003.3(c)(12) may, in the subsequent year,
collect information regarding the ethnicity, race, and sex of an
applicant for a loan that would otherwise be a covered loan under 12
CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or (12).
* * * * *
0
3. Section 1002.12 is amended by revising paragraph (b)(1)(i) to read
as follows:
Sec. 1002.12 Record retention.
* * * * *
(b) * * *
(1) * * *
(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 Sec. 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.
0
4. Section 1002.13 is amended by revising paragraphs (a)(1)(i) and (b)
to read as follows:
Sec. 1002.13 Information for monitoring purposes.
(a) * * *
(1) * * *
(i) Ethnicity and race using either:
(A) For ethnicity, the aggregate categories Hispanic or Latino and
not Hispanic or Latino; and, for race, the aggregate categories
American Indian or Alaska Native, Asian, Black or African American,
Native Hawaiian or Other Pacific Islander, and White; or
(B) The categories and subcategories for the collection of
ethnicity and race set forth in appendix B to Regulation C, 12 CFR part
1003.
* * * * *
(b) Obtaining information. 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 applicant(s) shall be asked but not required to supply
the requested information. If the applicant(s) chooses not to provide
the information or any part of it, that fact shall be noted on the
form. 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. When a creditor collects ethnicity
and race information pursuant to paragraph (a)(1)(i)(B), the creditor
must comply with any restrictions on the collection of an applicant's
ethnicity or race on the basis of visual observation or surname set
forth in appendix B to Regulation C, 12 CFR part 1003.
* * * * *
0
5. Appendix B to Part 1002--Model Application Forms is amended by
revising paragraph (1) and adding a Data Collection Model Form to read
as follows:
Appendix B to Part 1002--Model Application Forms
1. This appendix contains five model credit application forms,
each designated for use in a particular type of consumer credit
transaction as indicated by the bracketed caption on each form. 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 Sec. 1002.13 for certain dwelling-related loans. This appendix
also contains a data collection model form for collecting
information concerning an applicant's ethnicity, race, and sex that
complies with the requirements of Sec. 1002.13(a)(1)(i)(A) and
(ii). Appendix B to Regulation C, 12 CFR part 1003, provides a data
collection model form for collecting information concerning an
applicant's ethnicity, race and sex that complies with the
requirements of Sec. 1002.13(a)(1)(i)(B) and (ii). All forms
contained in this appendix are models; their use by creditors is
optional.
* * * * *
BILLING CODE 4810-AM-P
[[Page 16320]]
[GRAPHIC] [TIFF OMITTED] TP04AP17.000
BILLING CODE 4810-AM-C
* * * * *
0
6. Appendix B to Part 1002--Model Application Forms is amended by
revising paragraph 1 and under paragraph 3 removing the form ``Uniform
Residential Loan Application''.
The revision reads as follows:
Appendix B to Part 1002--Model Application Forms
1. This appendix contains four model credit application forms,
each designated for use in a particular type of consumer credit
transaction as indicated by the bracketed caption on each form. 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. This appendix also contains a data
collection model form for collecting information concerning an
applicant's ethnicity, race, and sex that complies with the
requirements of Sec. 1002.13(a)(1)(i)(A) and (ii). Appendix B to
Regulation C, 12 CFR part 1003, provides a data collection model
form for collecting information concerning an applicant's ethnicity,
race and sex that complies with the requirements of Sec.
1002.13(a)(1)(i)(B) and (ii). All forms contained in this appendix
are models; their use by creditors is optional.
* * * * *
0
7. Supplement I to Part 1002--Official Interpretations:
0
a. Under Section 1002.5--Rules concerning requests for information:
0
i. Under Paragraph 5(a)(2), paragraph 2 is revised.
0
ii. New heading Paragraph 5(a)(4) is added, and under Paragraph 5(a)(4)
new paragraph 1 is added.
0
b. Under Section 1002.12--Record retention:
0
i. Under Paragraph 12(b), paragraph 2 is revised.
0
c. Under Section 1002.13--Information for monitoring purposes:
0
i. Under Paragraph 13(a) --Information to be requested, paragraph 7 is
revised and paragraph 8 is added.
0
ii. Under Paragraph 13(b)--Obtaining of information, paragraph 1 is
revised.
0
iii. Under Paragraph 13(c)--Disclosure to applicants, paragraph 1 is
revised.
0
d. The heading Appendix B--Model Application Forms and paragraphs 1 and
2 thereunder are removed.
The revisions and additions read as follows:
Supplement I to Part 1002--Official Interpretations
* * * * *
Section 1002.5--Rules Concerning Requests for Information
5(a) General Rules
* * * * *
Paragraph 5(a)(2)
* * * * *
2. Information required by Regulation C. Regulation C, 12 CFR
part 1003, generally requires creditors covered by the Home Mortgage
Disclosure Act (HMDA) to collect and report information about the
race, ethnicity, and sex of applicants for certain dwelling-secured
loans, including some types of loans not covered by Sec. 1002.13.
* * * * *
Paragraph 5(a)(4).1. Other permissible collection of
information. 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 Sec.
1002.5(a)(4) without violating Sec. 1002.5(b). The information must
be retained pursuant to the requirements of Sec. 1002.12.
* * * * *
Section 1002.12--Record Retention
* * * * *
12(b) Preservation of Records
* * * * *
2. Computerized decisions. A creditor that enters information
items from a written application into a computerized or mechanized
system and makes the credit decision mechanically, based only on the
items of information entered into the system, may comply with Sec.
1002.12(b) by retaining the information actually entered. It is not
required to store the complete written application, nor is it
required to enter the remaining items of information into the
system. If the transaction is subject to Sec. 1002.13 or the
creditor is collecting information pursuant to Sec. 1002.5(a)(4),
however, the creditor is required to enter and retain the data on
personal characteristics in order to comply with the requirements of
that section.
* * * * *
Section 1002.13--Information for Monitoring Purposes
13(a) Information To Be Requested
* * * * *
7. Data collection under Regulation C. For applications subject
to Sec. 1002.13(a)(1), a creditor that collects information about
the ethnicity, race, and sex of an applicant in compliance with the
requirements of appendix B to Regulation C, 12 CFR part
[[Page 16321]]
1003, is acting in compliance with Sec. 1002.13 concerning the
collection of an applicant's ethnicity, race, and sex information.
See also comment 5(a)(2)-2.8. Application-by-application basis. For
applications subject to Sec. 1002.13(a)(1), a creditor may choose
on an application-by-application basis whether to collect aggregate
information pursuant to Sec. 1002.13(a)(1)(i)(A) or disaggregated
information pursuant to Sec. 1002.13(a)(1)(i)(B) about the
ethnicity and race of the applicant.
13(b) Obtaining of information. 1. Forms for collecting data. A
creditor may collect the information specified in Sec. 1002.13(a)
either on an application form or on a separate form referring to the
application. Appendix B to this part provides for two alternative
data collection model forms for use in complying with the
requirements of Sec. 1002.13(a)(1)(i) and (ii) to collect
information concerning an applicant's ethnicity, race, and sex. When
a creditor collects ethnicity and race information pursuant to Sec.
1002.13(a)(1)(i)(A), the applicant must be offered the option to
select more than one racial designation. When a creditor collects
ethnicity and race information pursuant to Sec.
1002.13(a)(1)(i)(B), the applicant must be offered the option to
select more than one ethnicity designation and more than one racial
designation.
* * * * *
13(c) Disclosure to applicants. 1. Procedures for providing
disclosures. The disclosure to an applicant regarding the monitoring
information may be provided in writing. Appendix B provides data
collection model forms for use in complying with Sec. 1002.13 and
that comply with Sec. 1002.13(c). A creditor may devise its own
disclosure so long as it is substantially similar. The creditor need
not orally request the monitoring information if it is requested in
writing.
* * * * *
Dated: March 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-06195 Filed 4-3-17; 8:45 am]
BILLING CODE 4810-AM-P