[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2017 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 12

Banks and Banking


________________________

Parts 900 to 1025

                         Revised as of January 1, 2017

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2017
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter IX--Federal Housing Finance Board                  3
          Chapter X--Bureau of Consumer Financial Protection        29
  Finding Aids:
      Table of CFR Titles and Chapters........................     721
      Alphabetical List of Agencies Appearing in the CFR......     741
      List of CFR Sections Affected...........................     751

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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 900.1 refers 
                       to title 12, part 900, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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[[Page vii]]

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    Oliver A. Potts,
    Director,
    Office of the Federal Register.
    January 1, 2017.

                                
                                      
                            

  

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                               THIS TITLE

    Title 12--Banks and Banking is composed of ten volumes. The parts in 
these volumes are arranged in the following order: Parts 1-199, 200-219, 
220-229, 230-299, 300-499, 500-599, 600-899, 900-1025, 1026-1099, and 
1100-end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of January 1, 2017.

    For this volume, Ann Worley was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                 (This book contains parts 900 to 1025)

  --------------------------------------------------------------------
                                                                    Part

chapter ix--Federal Housing Finance Board...................         900

chapter x-- Bureau of Consumer Financial Protection.........        1001

[[Page 3]]



                CHAPTER IX--FEDERAL HOUSING FINANCE BOARD




  --------------------------------------------------------------------

                    SUBCHAPTER A--GENERAL DEFINITIONS
Part                                                                Page
900             General definitions applying to all Finance 
                    Board regulations.......................           5
 SUBCHAPTER B--FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS
906             Operations..................................           8
                       SUBCHAPTERS C-D [RESERVED]
    SUBCHAPTER E--FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS
930             Definitions applying to risk management and 
                    capital regulations.....................           9
932             Federal Home Loan Bank capital requirements.          10
                         SUBCHAPTER F [RESERVED]
 SUBCHAPTER G--FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS
955             Acquired member assets......................          24
                       SUBCHAPTERS H-M [RESERVED]
956-999

[Reserved]

[[Page 5]]



                    SUBCHAPTER A_GENERAL DEFINITIONS





PART 900_GENERAL DEFINITIONS APPLYING TO ALL FINANCE BOARD REGULATIONS
--Table of Contents



Sec.
900.1  Basic terms relating to the Finance Board, the Bank System and 
          related entities.
900.2  Terms relating to Bank operations, mission and supervision.
900.3  Terms relating to other entities and concepts used throughout 12 
          CFR chapter IX.

    Authority: 12 U.S.C. 1422b(a).

    Source: 67 FR 12842, Mar. 20, 2002, unless otherwise noted.



Sec. 900.1  Basic terms relating to the Finance Board, the Bank System
and related entities.

    As used throughout this chapter, the following basic terms relating 
to the Finance Board, the Bank System and related entities have the 
meanings set forth below, unless otherwise indicated in a particular 
subchapter, part, section, or paragraph:
    Act means the Federal Home Loan Bank Act, as amended (12 U.S.C. 1421 
through 1449).
    Bank, written in title case, means a Federal Home Loan Bank 
established under section 12 of the Act (12 U.S.C. 1432).
    Bank System means the Federal Home Loan Bank System, consisting of 
the 12 Banks and the Office of Finance.
    Board of Directors, written in title case, means the Board of 
Directors of the Federal Housing Finance Board; the term board of 
directors, written in lower case, has the meaning indicated in context.
    Chairperson means the Chairperson of the Board of Directors of the 
Finance Board.
    Executive Secretary means an employee within the Office of 
Management of the Finance Board who is responsible for records 
management.
    Finance Board means the Federal Housing Finance Board established by 
section 2A of the Act (12 U.S.C. 1422a).
    Financing Corporation or FICO means the Financing Corporation 
established and supervised by the Finance Board under section 21 of the 
Act (12 U.S.C. 1441) and part 995 of this chapter.
    Housing associate means an entity that has been approved as a 
housing associate pursuant to part 926 of this chapter.
    Member means an institution that has been approved for membership in 
a Bank and has purchased capital stock in the Bank in accordance with 
Secs. 925.20 or 925.24(b) of this chapter.
    Office of Finance or OF means the Office of Finance, a joint office 
of the Banks referred to in section 2B of the Act (12 U.S.C. 1422b) and 
established under part 985 of this chapter.
    Resolution Funding Corporation or REFCORP means the Resolution 
Funding Corporation established by section 21B of the Act (12 U.S.C. 
1441b) and addressed in parts 996 and 997 of this chapter.
    Secretary to the Board means employees within the Office of General 
Counsel of the Finance Board who are responsible for issues concerning 
meetings of the Board of Directors.

[67 FR 12842, Mar. 20, 2002, as amended at 68 FR 38169, June 27, 2003]



Sec. 900.2  Terms relating to Bank operations, mission and supervision.

    As used throughout this chapter, the following terms relating to 
Bank operations, mission and supervision have the meanings set forth 
below, unless otherwise indicated in a particular subchapter, part, 
section or paragraph:
    Acquired member assets or AMA means those assets that may be 
acquired by a Bank under part 955 of this chapter.
    Advance means a loan from a Bank that is:
    (1) Provided pursuant to a written agreement;
    (2) Supported by a note or other written evidence of the borrower's 
obligation; and
    (3) Fully secured by collateral in accordance with the Act and part 
950 of this chapter.
    Affordable Housing Program or AHP means the Affordable Housing 
Program, the CICA program that each Bank is required to establish 
pursuant

[[Page 6]]

to section 10(j) of the Act (12 U.S.C. 1430(j)) and part 951 of this 
chapter.
    Capital plan means the capital structure plan required for each Bank 
by section 6(b) of the Act, as amended (12 U.S.C. 1426(b)), and part 933 
of this chapter, as approved by the Finance Board, unless the context of 
the regulation refers to the capital plan prior to its approval by the 
Finance Board.
    CIP means the Community Investment Program, an advance program under 
CICA required to be offered pursuant to section 10(i) of the Act (12 
U.S.C. 1430(i)).
    Community Investment Cash Advance or CICA means any advance made 
through a program offered by a Bank under section 10 of the Act (12 
U.S.C. 1430) and parts 951 and 952 of this chapter to provide funding 
for targeted community lending and affordable housing, including 
advances made under a Bank's Rural Development Funding (RDF) program, 
offered under section 10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a 
Bank's Urban Development Funding (UDF) program, offered under section 
10(j)(10) of the Act (12 U.S.C. 1430(j)(10)); a Bank's Affordable 
Housing Program (AHP), offered under section 10(j) of the Act (12 U.S.C. 
1430(j)); a Bank's Community Investment Program (CIP), offered under 
section 10(i) of the Act (12 U.S.C. 1430(i)); or any other program 
offered by a Bank that meets the requirements of part 952 of this 
chapter.
    Community lending means providing financing for economic development 
projects for targeted beneficiaries, and, for community financial 
institutions (as defined in Sec. 925.1 of this chapter), purchasing or 
funding small business loans, small farm loans or small agri-business 
loans (as defined in Sec. 950.1 of this chapter).
    Consolidated obligation or CO means any bond, debenture, or note 
authorized under part 966 of this chapter to be issued jointly by the 
Banks pursuant to section 11(a) of the Act, as amended (12 U.S.C. 
1431(a)), or any bond or note issued by the Finance Board on behalf of 
all Banks pursuant to section 11(c) of the Act (12 U.S.C. 1431(c)), on 
which the Banks are jointly and severally liable.
    Data Reporting Manual or DRM means a manual issued by the Finance 
Board and amended from time to time containing reporting requirements 
for the Banks.
    Excess stock means that amount of a Bank's capital stock owned by a 
member or other institution in excess of that member's or other 
institution's minimum investment in capital stock required under the 
Bank's capital plan, the Act, or the Finance Board's regulations, as 
applicable.
    Financial Management Policy or FMP means the Financial Management 
Policy For The Federal Home Loan Bank System approved by the Finance 
Board pursuant to Finance Board Resolution No. 96-45 (July 3, 1996), as 
amended by Finance Board Resolution No. 96-90 (Dec. 6, 1996), Finance 
Board Resolution No. 97-05 (Jan. 14, 1997), and Finance Board Resolution 
No. 97-86 (Dec. 17, 1997).

[67 FR 12842, Mar. 20, 2002, as amended at 71 FR 35499, June 21, 2006; 
71 FR 78050, Dec. 28, 2006]



Sec. 900.3  Terms relating to other entities and concepts used throughout
12 CFR chapter IX.

    As used throughout this chapter, the following terms relating to 
other entities and concepts used throughout 12 CFR chapter IX have the 
meanings set forth below, unless otherwise indicated in a particular 
subchapter, part, section or paragraph:
    Appropriate Federal banking agency has the meaning set forth in 
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)) 
and, for federally-insured credit unions, means the NCUA.
    Appropriate state regulator means any state officer, agency, 
supervisor or other entity that has regulatory authority over, or is 
empowered to institute enforcement action against, a particular 
institution.
    Fannie Mae means the Federal National Mortgage Association 
established under authority of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1716, et seq.).
    FDIC means the Federal Deposit Insurance Corporation.
    FRB means the Board of Governors of the Federal Reserve System.

[[Page 7]]

    Freddie Mac means the Federal Home Loan Mortgage Corporation 
established under authority of the Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1451, et seq.).
    Generally Accepted Accounting Principles or GAAP means accounting 
principles generally accepted in the United States.
    Ginnie Mae means the Government National Mortgage Association 
established under authority of the Federal National Mortgage Association 
Charter Act (12 U.S.C. 1716, et seq.).
    GLB Act means the Gramm-Leach-Bliley Act (Pub. L. 106-102 (1999)).
    HUD means the United States Department of Housing and Urban 
Development.
    NCUA means the National Credit Union Administration.
    NRSRO means a credit rating organization regarded as a Nationally 
Recognized Statistical Rating Organization by the Securities and 
Exchange Commission.
    OCC means the Office of the Comptroller of the Currency.
    OTS means the Office of Thrift Supervision.
    SBIC means a small business investment company formed pursuant to 
section 301 of the Small Business Investment Act (15 U.S.C. 681).
    SEC means the United States Securities and Exchange Commission.
    State means a state of the United States, American Samoa, the 
Commonwealth of the Northern Mariana Islands, the District of Columbia, 
Guam, Puerto Rico, or the United States Virgin Islands.
    1934 Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.).

[67 FR 12842, Mar. 20, 2002, as amended at 69 FR 38811, June 29, 2004]

[[Page 8]]



 SUBCHAPTER B_FEDERAL HOUSING FINANCE BOARD ORGANIZATION AND OPERATIONS





PART 906_OPERATIONS--Table of Contents



Subpart A [Reserved]

              Subpart B_Monthly Interest Rate Survey (MIRS)

Sec.
906.5  Monthly interest rate survey.

Subpart C [Reserved]

    Authority: 12 U.S.C. 4516.

    Source: 70 FR 9509, Feb. 28, 2005, unless otherwise noted.

Subpart A [Reserved]



              Subpart B_Monthly Interest Rate Survey (MIRS)



Sec. 906.5  Monthly interest rate survey.

    The Finance Board conducts its Monthly Survey of Rates and Terms on 
Conventional One-Family Non-farm Mortgage Loans in the following manner:
    (a) Initial survey. Each month, the Finance Board samples savings 
institutions, commercial banks, and mortgage loan companies, and asks 
them to report the terms and conditions on all conventional mortgages 
(i.e., those not federally insured or guaranteed) used to purchase 
single-family homes that each such lender closes during the last five 
working days of the month. In most cases, the information is reported 
electronically in a format similar to Finance Board Form FHFB 10-91. The 
initial weights are based on lender type and lender size. The data also 
is weighted so that the pattern of weighted responses matches the actual 
pattern of mortgage originations by lender type and by region. The 
Finance Board tabulates the data and publishes standard data tables late 
in the following month.
    (b) Adjustable-rate mortgage index. The weighted data, tabulated and 
published pursuant to paragraph (a) of this section, is used to compile 
the Finance Board's adjustable-rate mortgage index, entitled the 
``National Average Contract Mortgage Rate for the Purchase of Previously 
Occupied Homes by Combined Lenders.'' This index is the successor to the 
index maintained by the former Federal Home Loan Bank Board and is used 
for determining the movement of the interest rate on renegotiable-rate 
mortgages and on some other adjustable-rate mortgages.

Subpart C [Reserved]

[[Page 9]]



                       SUBCHAPTERS C	D [RESERVED]





    SUBCHAPTER E_FEDERAL HOME LOAN BANK RISK MANAGEMENT AND CAPITAL 
                                STANDARDS





PART 930_DEFINITIONS APPLYING TO RISK MANAGEMENT AND CAPITAL 
REGULATIONS--Table of Contents



    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1426, 1436(a), 1440, 
1443, and 1446.



Sec. 930.1  Definitions.

    As used in this subchapter:
    Affiliated counterparty means a counterparty of a Bank that 
controls, is controlled by or is under common control with another 
counterparty of the Bank. For the purposes of this definition only, 
direct or indirect ownership (including beneficial ownership) of more 
than 50 percent of the voting securities or voting interests of an 
entity constitutes control.
    Certain drawdown means a legally binding agreement that commits the 
Bank to make an advance or acquire a loan, at or by a specified future 
date.
    Charges against the capital of the Bank means an other than 
temporary decline in the Bank's total equity that causes the value of 
total equity to fall below the Bank's aggregate capital stock amount.
    Class A stock means capital stock issued by a Bank, including 
subclasses, that has the characteristics specified by Sec. 931.1(a) of 
this subchapter.
    Class B stock means capital stock issued by a Bank, including 
subclasses, that has the characteristics specified by Sec. 931.1(b) of 
this subchapter.
    Contingency liquidity means the sources of cash a Bank may use to 
meet its operational requirements when its access to the capital markets 
is impeded, and includes:
    (1) Marketable assets with a maturity of one year or less;
    (2) Self-liquidating assets with a maturity of seven days or less;
    (3) Assets that are generally accepted as collateral in the 
repurchase agreement market; and
    (4) Irrevocable lines of credit from financial institutions rated 
not lower than the second highest credit rating category by an NRSRO.
    Credit derivative contract means a derivative contract that 
transfers credit risk.
    Credit risk means the risk that the market value, or estimated fair 
value if market value is not available, of an obligation will decline as 
a result of deterioration in creditworthiness.
    Derivative contract means generally a financial contract the value 
of which is derived from the values of one or more underlying assets, 
reference rates, or indices of asset values, or credit-related events. 
Derivative contracts include interest rate, foreign exchange rate, 
equity, precious metals, commodity, and credit contracts, and any other 
instruments that pose similar risks.
    Exchange rate contracts include cross-currency interest-rate swaps, 
forward foreign exchange rate contracts, currency options purchased, and 
any similar instruments that give rise to similar risks.
    General allowance for losses means an allowance established by a 
Bank in accordance with GAAP for losses, but which does not include any 
amounts held against specific assets of the Bank.
    Government Sponsored Enterprise, or GSE, means a United States 
Government-sponsored agency or instrumentality originally established or 
chartered to serve public purposes specified by the United States 
Congress, but whose obligations are not obligations of the United States 
and are not guaranteed by the United States.
    Interest rate contracts include, single currency interest-rate 
swaps, basis swaps, forward rate agreements, interest-rate options, and 
any similar instrument that gives rise to similar risks, including when-
issued securities.
    Investment grade means:
    (1) A credit quality rating in one of the four highest credit rating 
categories by an NRSRO and not below

[[Page 10]]

the fourth highest rating category by any NRSRO; or
    (2) If there is no credit quality rating by an NRSRO, a 
determination by a Bank that the issuer, asset or instrument is the 
credit equivalent of investment grade using credit rating standards 
available from an NRSRO or other similar standards.
    Market risk means the risk that the market value, or estimated fair 
value if market value is not available, of a Bank's portfolio will 
decline as a result of changes in interest rates, foreign exchange 
rates, equity and commodity prices.
    Marketable means, with respect to an asset, that the asset can be 
sold with reasonable promptness at a price that corresponds reasonably 
to its fair value.
    Market value at risk is the loss in the market value of a Bank's 
portfolio measured from a base line case, where the loss is estimated in 
accordance with Sec. 932.5 of this chapter.
    Minimum investment means the minimum amount of Class A and/or Class 
B stock that a member is required to own in order to be a member of a 
Bank and in order to obtain advances and to engage in other business 
activities with the Bank in accordance with Sec. 931.3 of this chapter.
    Operations risk means the risk of an unexpected loss to a Bank 
resulting from human error, fraud, unenforceability of legal contracts, 
or deficiencies in internal controls or information systems.
    Permanent capital means the retained earnings of a Bank, determined 
in accordance with GAAP, plus the amount paid-in for the Bank's Class B 
stock.
    Redeem or Redemption means the acquisition by a Bank of its 
outstanding Class A or Class B stock at par value following the 
expiration of the six-month or five-year statutory redemption period, 
respectively, for the stock.
    Regulatory risk-based capital requirement means the amount of 
permanent capital that a Bank is required to maintain in accordance with 
Sec. 932.3 of this chapter.
    Regulatory total capital requirement means the amount of total 
capital that a Bank is required to maintain in accordance with 
Sec. 932.2 of this chapter.
    Repurchase means the acquisition by a Bank of excess stock prior to 
the expiration of the six-month or five-year statutory redemption period 
for the stock.
    Repurchase agreement means an agreement between a seller and a buyer 
whereby the seller agrees to repurchase a security or similar securities 
at an agreed upon price, with or without a stated time for repurchase.
    Sales of federal funds subject to a continuing contract means an 
overnight federal funds loan that is automatically renewed each day 
unless terminated by either the lender or the borrower.
    Total assets means the total assets of a Bank, as determined in 
accordance with GAAP.
    Total capital of a Bank means the sum of permanent capital, the 
amounts paid-in for Class A stock, the amount of any general allowance 
for losses, and the amount of other instruments identified in a Bank's 
capital plan that the Finance Board has determined to be available to 
absorb losses incurred by such Bank.
    Walkaway clause means a provision in a bilateral netting contract 
that permits a nondefaulting counterparty to make a lower payment than 
it would make otherwise under the bilateral netting contract, or no 
payment at all, to a defaulter or the estate of a defaulter, even if the 
defaulter or the estate of the defaulter is a net creditor under the 
bilateral netting contract.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54107, Oct. 26, 2001; 66 
FR 66728, Dec. 27, 2001; 67 FR 12849, Mar. 20, 2002; 71 FR 78051, Dec. 
28, 2006]



PART 932_FEDERAL HOME LOAN BANK CAPITAL REQUIREMENTS--Table of Contents



Sec.
932.1  Risk management.
932.2  Total capital requirement.
932.3  Risk-based capital requirement.
932.4  Credit risk capital requirement.
932.5  Market risk capital requirement.
932.6  Operations risk capital requirement.
932.7  Reporting requirements.
932.8  Minimum liquidity requirements.
932.9  Limits on unsecured extensions of credit to one counterparty or 
          affiliated counterparties; reporting requirements for total 
          extensions of credit to one

[[Page 11]]

          counterparty or affiliated counterparties.

    Authority: 12 U.S.C. 1426, 1440, 1443, 1446, 4513, 4526.

    Source: 66 FR 8310, Jan. 30, 2001, unless otherwise noted.



Sec. 932.1  Risk management.

    Before its new capital plan may take effect, each Bank shall obtain 
the approval of the Finance Board for the internal market risk model or 
the internal cash flow model used to calculate the market risk component 
of its risk-based capital requirement, and for the risk assessment 
procedures and controls (whether established as part of its risk 
management policy or otherwise) to be used to manage its credit, market, 
and operations risks.



Sec. 932.2  Total capital requirement.

    Each Bank shall maintain at all times:
    (a) Total capital in an amount at least equal to 4.0 percent of the 
Bank's total assets; and
    (b) A leverage ratio of total capital to total assets of at least 
5.0 percent of the Bank's total assets. For purposes of determining the 
leverage ratio, total capital shall be computed by multiplying the 
Bank's permanent capital by 1.5 and adding to this product all other 
components of total capital.

[76 FR 11674, Mar. 3, 2011]



Sec. 932.3  Risk-based capital requirement.

    Each Bank shall maintain at all times permanent capital in an amount 
at least equal to the sum of its credit risk capital requirement, its 
market risk capital requirement, and its operations risk capital 
requirement, calculated in accordance with Secs. 932.4, 932.5 and 932.6, 
respectively.

[76 FR 11674, Mar. 3, 2011]



Sec. 932.4  Credit risk capital requirement.

    (a) General requirement. Each Bank's credit risk capital requirement 
shall be equal to the sum of the Bank's credit risk capital charges for 
all assets, off-balance sheet items and derivative contracts.
    (b) Credit risk capital charge for assets. Except as provided in 
paragraph (i) of this section, each Bank's credit risk capital charge 
for an asset shall be equal to the book value of the asset multiplied by 
the credit risk percentage requirement assigned to that asset pursuant 
to paragraph (e)(2) of this section.
    (c) Credit risk capital charge for off-balance sheet items. Each 
Bank's credit risk capital charge for an off-balance sheet item shall be 
equal to the credit equivalent amount of such item, as determined 
pursuant to paragraph (f) of this section multiplied by the credit risk 
percentage requirement assigned to that item pursuant to paragraph 
(e)(2) of this section, except that the credit risk percentage 
requirement applied to the credit equivalent amount for a stand-by 
letter of credit shall be that for an advance with the same remaining 
maturity as that stand-by letter of credit.
    (d) Credit risk capital charge for derivative contracts--(1) 
Derivative contracts with non-member counterparties. Except as provided 
in paragraph (j) of this section, each Bank's credit risk capital charge 
for a specific derivative contract entered into between a Bank and a 
non-member institution shall equal the sum of :
    (i) The current credit exposure for the derivative contract, 
calculated in accordance with paragraph (g) or (h) of this section, as 
applicable, multiplied by the credit risk percentage requirement 
assigned to that derivative contract pursuant to paragraph (e)(2) of 
this section, provided that:
    (A) The remaining maturity of the derivative contract shall be 
deemed to be less than one year for the purpose of applying Table 1.1 or 
1.3 of this part; and
    (B) Any collateral held against an exposure from the derivative 
contract shall be applied to reduce the portion of the credit risk 
capital charge corresponding to the current credit exposure in 
accordance with the requirements of paragraph (e)(2)(ii)(B) of this 
section; plus
    (ii) The potential future credit exposure for the derivative 
contract calculated in accordance with paragraph (g) or (h) of this 
section, as applicable,

[[Page 12]]

multiplied by the credit risk percentage requirement assigned to that 
derivative contract pursuant to paragraph (e)(2) of this section, where 
the actual remaining maturity of the derivative contract is used to 
apply Table 1.1 or Table 1.3 of this part.
    (2) Derivative contracts with a member. Except as provided in 
paragraph (j) of this section, the credit risk capital charge for any 
derivative contract entered into between a Bank and one of its member 
institutions shall be calculated in accordance with paragraph (d)(1) of 
this section. However, the credit risk percentage requirements used in 
the calculations shall be found in Table 1.1 of this part, which sets 
forth the credit risk percentage requirements for advances.
    (e) Determination of credit risk percentage requirements--(1) 
Finance Board determination of credit risk percentage requirements. The 
Finance Board shall determine, and update periodically, the credit risk 
percentage requirements set forth in Tables 1.1 through 1.4 of this part 
applicable to a Bank's assets, off-balance sheet items, and derivative 
contracts.
    (2) Bank determination of credit risk percentage requirements. (i) 
Each Bank shall determine the credit risk percentage requirement 
applicable to each asset, each off-balance sheet item and each 
derivative contract by identifying the category set forth in Table 1.1, 
Table 1.2, Table 1.3 or Table 1.4 of this part to which the asset, item 
or derivative belongs, given, if applicable, its demonstrated credit 
rating and remaining maturity (as determined in accordance with 
paragraphs (e)(2)(ii) and (e)(2)(iii) of this section). The applicable 
credit risk percentage requirement for an asset, off-balance sheet item 
or derivative contract shall be used to calculate the credit risk 
capital charge for such asset, item, or derivative contract in 
accordance with paragraphs (b), (c) or (d) of this section respectively. 
The relevant categories and credit risk percentage requirements are 
provided in the following Tables 1.1 through 1.4 of this part:

                   Table 1.1--Requirement for Advances
------------------------------------------------------------------------
                                                              Percentage
                      Type of advances                        applicable
                                                             to advances
------------------------------------------------------------------------
Advances with:
  Remaining maturity 4 years...............................         0.07
  Remaining maturity >4 years to 7 years...................         0.20
  Remaining maturity >7 years to 10 years..................         0.30
  Remaining maturity >10 years.............................         0.35
------------------------------------------------------------------------


      Table 1.2--Requirement for Rated Residential Mortgage Assets
------------------------------------------------------------------------
                                                              Percentage
                                                              applicable
                                                                  to
             Type of residential mortgage asset              residential
                                                               mortgage
                                                                assets
------------------------------------------------------------------------
Highest Investment Grade...................................         0.37
Second Highest Investment Grade............................         0.60
Third Highest Investment Grade.............................         0.86
Fourth Highest Investment Grade............................         1.20
If Downgraded to Below Investment Grade After Acquisition
 By Bank:
  Highest Below Investment Grade...........................         2.40
  Second Highest Below Investment Grade....................         4.80
  All Other Below Investment Grade.........................        34.00
Subordinated Classes of Mortgage Assets:
  Highest Investment Grade.................................         0.37
  Second Highest Investment Grade..........................         0.60
  Third Highest Investment Grade...........................         1.60
  Fourth Highest Investment Grade..........................         4.45
If Downgraded to Below Investment Grade After Acquisition
 By Bank:
  Highest Below Investment Grade...........................        13.00
  Second Highest Below Investment Grade....................        34.00
  All Other Below Investment Grade.........................       100.00
------------------------------------------------------------------------


    Table 1.3--Requirement for rated Assets or Rated Items Other Than Advances or Residential Mortgage Assets
                                          [Based on remaining maturity]
----------------------------------------------------------------------------------------------------------------
                                                                      Applicable percentage
                                                ----------------------------------------------------------------
                                                               >1 yr to 3   >3 yrs to    >7 yrs to
                                                    1 year        yrs          7yrs        10 yrs      >10 yrs
----------------------------------------------------------------------------------------------------------------
U.S. Government Securities.....................         0.00         0.00         0.00         0.00         0.00
Highest Investment Grade.......................         0.15         0.40         0.90         1.40         2.20
Second Highest Investment Grade................         0.20         0.45         1.00         1.45         2.30
Third Highest Investment Grade.................         0.70         1.10         1.60         2.05         2.95
Fourth Highest Investment Grade................         2.50         3.70         4.45         5.50         7.05
If Downgraded Below Investment Grade After
 Acquisition by Bank:
    Highest Below Investment Grade.............        10.00        13.00        13.00        13.00        13.00
    Second Highest Below Investment Grade......        26.00        34.00        34.00        34.00        34.00

[[Page 13]]

 
    All Other..................................       100.00       100.00       100.00       100.00       100.00
----------------------------------------------------------------------------------------------------------------


                Table 1.4--Requirement for Unrated Assets
------------------------------------------------------------------------
                                                              Applicable
                   Type of unrated asset                      percentage
------------------------------------------------------------------------
Cash.......................................................         0.00
Premises, Plant, and Equipment.............................         8.00
Investments Under Sec.  940.3(e) & (f).....................         8.00
------------------------------------------------------------------------

    (ii) When determining the applicable credit risk percentage 
requirement from Tables 1.2 or 1.3 of this part, each Bank shall apply 
the following criteria:
    (A) For assets or items that are rated directly by an NRSRO, the 
credit rating shall be the NRSRO's credit rating for the asset or item 
as determined in accordance with paragraph (e)(2)(iii) of this section.
    (B) When using Table 1.3 of this part, for an asset, off-balance 
sheet item, or derivative contract that is not rated directly by an 
NRSRO, but for which an NRSRO rating has been assigned to any 
corresponding obligor counterparty, third party guarantor, or collateral 
backing the asset, item, or derivative, the credit rating that shall 
apply to the asset, item, or derivative, or portion of the asset, item, 
or derivative so guaranteed or collateralized, shall be the credit 
rating corresponding to such obligor counterparty, third party 
guarantor, or underlying collateral, as determined in accordance with 
paragraph (e)(2)(iii) of this section. If there are multiple obligor 
counterparties, third party guarantors, or collateral instruments 
backing an asset, item, or derivative not rated directly by an NRSRO, or 
any specific portion thereof, then the credit rating that shall apply to 
that asset, item, or derivative or specific portion thereof, shall be 
the highest credit rating among such obligor counterparties, third party 
guarantors, or collateral instruments, as determined in accordance with 
paragraph (e)(2)(iii) of this section. Assets, items or derivatives 
shall be deemed to be backed by collateral for purposes of this 
paragraph if the collateral is:
    (1) Actually held by the Bank or an independent, third-party 
custodian, or, if permitted under the Bank's collateral agreement with 
such party, by the Bank's member or an affiliate of that member where 
the term ``affiliate'' has the same meaning as in Sec. 950.1 of this 
chapter;
    (2) Legally available to absorb losses;
    (3) Of a readily determinable value at which it can be liquidated by 
the Bank;
    (4) Held in accordance with the provisions of the Bank's member 
products policy established pursuant to Sec. 917.4 of this chapter; and
    (5) Subject to an appropriate discount to protect against price 
decline during the holding period, as well as the costs likely to be 
incurred in the liquidation of the collateral.
    (C) When using Table 1.3 of this part, for an asset with a short-
term credit rating from a given NRSRO, the credit risk percentage 
requirement shall be based on the remaining maturity of the asset and 
the long-term credit rating provided for the issuer of the asset by the 
same NRSRO. Should the issuer of the short-term asset not have a long-
term credit rating, the long-term equivalent rating shall be determined 
as follows:
    (1) The highest short-term credit rating shall be equivalent to the 
third highest long-term rating;
    (2) The second highest short-term rating shall be equivalent to the 
fourth highest long-term rating;
    (3) The third highest short-term rating shall be equivalent to the 
fourth highest long-term rating; and
    (4) If the short-term rating is downgraded to below investment grade 
after acquisition by the Bank, the short-term rating shall be equivalent 
to the second highest below investment grade long-term rating.

[[Page 14]]

    (D) For residential mortgage assets and other assets or items, or 
relevant portion of an asset or item, that do not meet the requirements 
of paragraphs (e)(2)(ii)(A), (e)(2)(ii)(B) or (e)(2)(ii)(C) of this 
section, and are not identified in Tables 1.1 or Table 1.4 of this part, 
each Bank shall determine its own credit rating for such assets or 
items, or relevant portion thereof, using credit rating standards 
available from an NRSRO or other similar standards. This credit rating, 
as determined by the Bank, shall be used to identify the applicable 
credit risk percentage requirement under Table 1.2 of this part for 
residential mortgage assets, or under Table 1.3 of this part for all 
other assets or items.
    (E) The credit risk percentage requirement for mortgage assets that 
are acquired member assets described in Sec. 955.2 of this chapter shall 
be assigned from Table 1.2 of this part based on the rating of those 
assets after taking into account any credit enhancement required by 
Sec. 955.3 of this chapter. Should a Bank further enhance a pool of 
loans through the purchase of insurance or by some other means, the 
credit risk percentage requirement shall be based on the rating of such 
pool after the supplemental credit enhancement, except that the Finance 
Board retains the right to adjust the credit capital charge to account 
for any deficiencies with the supplemental enhancement on a case-by-case 
basis.
    (iii) In determining the credit ratings under paragraph 
(e)(2)(ii)(A), (e)(2)(ii)(B) and (e)(2)(ii)(C) of this section, each 
Bank shall apply the following criteria:
    (A) The most recent credit rating from a given NRSRO shall be 
considered. If only one NRSRO has rated an asset or item, that NRSRO's 
rating shall be used. If an asset or item has received credit ratings 
from more than one NRSRO, the lowest credit rating from among those 
NRSROs shall be used.
    (B) Where a credit rating has a modifier (e.g., A-1 + for short-term 
ratings and A + or A- for long-term ratings) the credit rating is deemed 
to be the credit rating without the modifier (e.g., A-1 + = A-1 and A + 
or A-= A);
    (f) Calculation of credit equivalent amount for off-balance sheet 
items--(1) General requirement. The credit equivalent amount for an off-
balance sheet item shall be determined by a Finance Board approved model 
or shall be equal to the face amount of the instrument multiplied by the 
credit conversion factor assigned to such risk category of instruments, 
subject to the exceptions in paragraph (f)(2) of this section, provided 
in the following Table 2 of this part:

     Table 2--Credit Conversion Factors for Off-Balance Sheet Items
------------------------------------------------------------------------
                                                              Credit
                                                            conversion
                       Instrument                           factor (In
                                                             percent)
------------------------------------------------------------------------
Asset sales with recourse where the credit risk remains              100
 with the Bank..........................................
Commitments to make advances subject to certain drawdown
Commitments to acquire loans subject to certain drawdown
Standby letters of credit...............................              50
Other commitments with original maturity of over one
 year...................................................
Other commitments with original maturity of one year or               20
 less...................................................
------------------------------------------------------------------------

    (2) Exceptions. The credit conversion factor shall be zero for Other 
Commitments With Original Maturity of Over One Year and Other 
Commitments With Original Maturity of One Year or Less, for which credit 
conversion factors of 50 percent or 20 percent would otherwise apply, 
that are unconditionally cancelable, or that effectively provide for 
automatic cancellation, due to the deterioration in a borrower's 
creditworthiness, at any time by the Bank without prior notice.
    (g) Calculation of current and potential future credit exposures for 
single derivative contracts--(1) Current credit exposure. The current 
credit exposure for a derivative contract that is not subject to a 
qualifying bilateral netting contract described in paragraph (h)(3) of 
this section shall be:
    (i) If the mark-to-market value of the contract is positive, the 
mark-to-market value of the contract; or
    (ii) If the mark-to-market value of the contract is zero or 
negative, zero.
    (2) Potential future credit exposure. (i) The potential future 
credit exposure

[[Page 15]]

for a single derivative contract, including a derivative contract with a 
negative mark-to-market value, shall be calculated using an internal 
model approved by the Finance Board or, in the alternative, by 
multiplying the effective notional amount of the derivative contract by 
one of the assigned credit conversion factors, modified as may be 
required by paragraph (g)(2)(ii) of this section, for the appropriate 
category as provided in the following Table 3 of this part:

          Table 3--Credit Conversion Factors for Potential Future Credit Exposure Derivative Contracts
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                Foreign                   Precious
              Residual maturity                  Interest    exchange and     Equity       metals       Other
                                                   rate          gold                   except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less.............................           0             1              6            7           10
Over 1 year to five years....................            .5           5              8            7           12
Over five years..............................           1.5           7.5           10            8           15
----------------------------------------------------------------------------------------------------------------

    (ii) In applying the credit conversion factors in Table 3 of this 
part the following modifications shall be made:
    (A) For derivative contracts with multiple exchanges of principal, 
the conversion factors are multiplied by the number of remaining 
payments in the derivative contract; and
    (B) For derivative contracts that automatically reset to zero value 
following a payment, the residual maturity equals the time until the 
next payment; however, interest rate contracts with remaining maturities 
of greater than one year shall be subject to a minimum conversion factor 
of 0.5 percent.
    (iii) If a Bank uses an internal model to determine the potential 
future credit exposure for a particular type of derivative contract, the 
Bank shall use the same model for all other similar types of contracts. 
However, the Bank may use an internal model for one type of derivative 
contract and Table 3 of this part for another type of derivative 
contract.
    (iv) Forwards, swaps, purchased options and similar derivative 
contracts not included in the Interest Rate, Foreign Exchange and Gold, 
Equity, or Precious Metals Except Gold categories shall be treated as 
other commodities contracts when determining potential future credit 
exposures using Table 3 of this part.
    (v) If a Bank uses Table 3 of this part to determine the potential 
future credit exposures for credit derivative contracts, the credit 
conversion factors provided in Table 3 for equity contracts shall also 
apply to the credit derivative contracts entered into with investment 
grade counterparties. If the counterparty is downgraded to below 
investment grade, the credit conversion factor provided in Table 3 of 
this part for other commodity contracts shall apply.
    (h) Calculation of current and potential future credit exposures for 
multiple derivative contracts subject to a qualifying bilateral netting 
contract--(1) Current credit exposure. The current credit exposure for 
multiple derivative contracts executed with a single counterparty and 
subject to a qualifying bilateral netting contract described in 
paragraph (h)(3) of this section, shall be calculated on a net basis and 
shall equal:
    (i) The net sum of all positive and negative mark-to-market values 
of the individual derivative contracts subject to a qualifying bilateral 
netting contract, if the net sum of the mark-to-market values is 
positive; or
    (ii) Zero, if the net sum of the mark-to-market values is zero or 
negative.
    (2) Potential future credit exposure. The potential future credit 
exposure for each individual derivative contract from among a group of 
derivative contracts that are executed with a single counterparty and 
subject to a qualifying bilateral netting contract described in 
paragraph (h)(3) of this section shall be calculated as follows:

Anet = 0.4  x  Agross + (0.6  x  NGR  x  
Agross),


where:

[[Page 16]]

    (i) Anet is the potential future credit exposure for an 
individual derivative contract subject to the qualifying bilateral 
netting contract;
    (ii) Agross is the gross potential future credit 
exposure, i.e., the potential future credit exposure for the individual 
derivative contract, calculated in accordance with paragraph (g)(2) of 
this section but without regard to the fact that the contract is subject 
to the qualifying bilateral netting contract;
    (iii) NGR is the net to gross ratio, i.e., the ratio of the net 
current credit exposure of all the derivative contracts subject to the 
qualifying bilateral netting contract, calculated in accordance with 
paragraph (h)(1) of this section, to the gross current credit exposure; 
and
    (iv) The gross current credit exposure is the sum of the positive 
current credit exposures of all the individual derivative contracts 
subject to the qualifying bilateral netting contract, calculated in 
accordance with paragraph (g)(1) of this section but without regard to 
the fact that the contract is subject to the qualifying bilateral 
netting contract.
    (3) Qualifying bilateral netting contract. A bilateral netting 
contract shall be considered a qualifying bilateral netting contract if 
the following conditions are met:
    (i) The netting contract is in writing;
    (ii) The netting contract is not subject to a walkaway clause;
    (iii) The netting contract provides that the Bank would have a 
single legal claim or obligation either to receive or to pay only the 
net amount of the sum of the positive and negative mark-to-market values 
on the individual derivative contracts covered by the netting contract 
in the event that a counterparty, or a counterparty to whom the netting 
contract has been assigned, fails to perform due to default, insolvency, 
bankruptcy, or other similar circumstance;
    (iv) The Bank obtains a written and reasoned legal opinion that 
represents, with a high degree of certainty, that in the event of a 
legal challenge, including one resulting from default, insolvency, 
bankruptcy, or similar circumstances, the relevant court and 
administrative authorities would find the Bank's exposure to be the net 
amount under:
    (A) The law of the jurisdiction by which the counterparty is 
chartered or the equivalent location in the case of non-corporate 
entities, and if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    (B) The law of the jurisdiction that governs the individual 
derivative contracts covered by the netting contract; and
    (C) The law of the jurisdiction that governs the netting contract;
    (v) The Bank establishes and maintains procedures to monitor 
possible changes in relevant law and to ensure that the netting contract 
continues to satisfy the requirements of this section; and
    (vi) The Bank maintains in its files documentation adequate to 
support the netting of a derivative contract.
    (i) Credit risk capital charge for assets hedged with credit 
derivatives--(1) Credit derivatives with a remaining maturity of one 
year or more. The credit risk capital charge for an asset that is hedged 
with a credit derivative that has a remaining maturity of one year or 
more may be reduced only in accordance with paragraph (i)(3) or (i)(4) 
of this section and only if the credit derivative provides substantial 
protection against credit losses.
    (2) Credit derivatives with a remaining maturity of less than one 
year. The credit risk capital charge for an asset that is hedged with a 
credit derivative that has a remaining maturity of less than one year 
may be reduced only in accordance with paragraph (i)(3) of this section 
and only if the remaining maturity on the credit derivative is identical 
to or exceeds the remaining maturity of the hedged asset and the credit 
derivative provides substantial protection against credit losses.
    (3) Capital charge reduced to zero. The credit risk capital charge 
for an asset shall be zero if a credit derivative is used to hedge the 
credit risk on that asset in accordance with paragraph (i)(1) or (i)(2) 
of this section, provided that:
    (i) The remaining maturity for the credit derivative used for the 
hedge is identical to or exceeds the remaining

[[Page 17]]

maturity for the hedged asset, and either:
    (A) The asset referenced in the credit derivative is identical to 
the hedged asset; or
    (B) The asset referenced in the credit derivative is different from 
the hedged asset, but only if the asset referenced in the credit 
derivative and the hedged asset have been issued by the same obligor, 
the asset referenced in the credit derivative ranks pari passu to or 
more junior than the hedged asset and has the same maturity as the 
hedged asset, and cross-default clauses apply; and
    (ii) The credit risk capital charge for the credit derivative 
contract calculated pursuant to paragraph (d) of this section is still 
applied.
    (4) Capital charge reduction in certain other cases. The credit risk 
capital charge for an asset hedged with a credit derivative in 
accordance with paragraph (i)(1) of this section shall equal the sum of 
the credit risk capital charges for the hedged and unhedged portion of 
the asset provided that:
    (i) The remaining maturity for the credit derivative is less than 
the remaining maturity for the hedged asset and either:
    (A) The asset referenced in the credit derivative is identical to 
the hedged asset; or
    (B) The asset referenced in the credit derivative is different from 
the hedged asset, but only if the asset referenced in the credit 
derivative and the hedged asset have been issued by the same obligor, 
the asset referenced in the credit derivative ranks pari passu to or 
more junior than the hedged asset and has the same maturity as the 
hedged asset, and cross-default clauses apply; and
    (ii) The credit risk capital charge for the unhedged portion of the 
asset equals:
    (A) The credit risk capital charge for the hedged asset, calculated 
as the book value of the hedged asset multiplied by the hedged asset's 
credit risk percentage requirement assigned pursuant to paragraph (e)(2) 
of this section where the appropriate credit rating is that for the 
hedged asset and the appropriate maturity is the remaining maturity of 
the hedged asset; minus
    (B) The credit risk capital charge for the hedged asset, calculated 
as the book value of the hedged asset multiplied by the hedged asset's 
credit risk percentage requirement assigned pursuant to paragraph (e)(2) 
of this section where the appropriate credit rating is that for the 
hedged asset but the appropriate maturity is deemed to be the remaining 
maturity of the credit derivative; and
    (iii) The credit risk capital charge for the hedged portion of the 
asset is equal to the credit risk capital charge for the credit 
derivative, calculated in accordance with paragraph (d) of this section.
    (j) Zero Credit risk capital charge for certain derivative 
contracts. The credit risk capital charge for the following derivative 
contracts shall be zero:
    (1) A foreign exchange rate contract with an original maturity of 14 
calendar days or less (gold contracts do not qualify for this 
exception); and
    (2) A derivative contract that is traded on an organized exchange 
requiring the daily payment of any variations in the market value of the 
contract.
    (k) Date of calculations. Unless otherwise directed by the Finance 
Board, each Bank shall perform all calculations required by this section 
using the assets, off-balance sheet items, and derivative contracts held 
by the Bank, and, if applicable, the values or credit ratings of such 
assets, items, or derivatives as of the close of business of the last 
business day of the month for which the credit risk capital charge is 
being calculated.

[66 FR 8310, Jan. 30, 2001, as amended at 66 FR 54108, Oct. 26, 2001]



Sec. 932.5  Market risk capital requirement.

    (a) General requirement. (1) Each Bank's market risk capital 
requirement shall equal the sum of:
    (i) The market value of the Bank's portfolio at risk from movements 
in interest rates, foreign exchange rates, commodity prices, and equity 
prices that could occur during periods of market stress, where the 
market value of the Bank's portfolio at risk is determined using an 
internal market risk model that fulfills the requirements of paragraph 
(b) of this section and that has been approved by the Finance Board; and

[[Page 18]]

    (ii) The amount, if any, by which the Bank's current market value of 
total capital is less than 85 percent of the Bank's book value of total 
capital, where:
    (A) The current market value of the total capital is calculated by 
the Bank using the internal market risk model approved by the Finance 
Board under paragraph (d) of this section; and
    (B) The book value of total capital is the same as the amount of 
total capital reported by the Bank to the Finance Board under Sec. 932.7 
of this part.
    (2) A Bank may substitute an internal cash flow model to derive a 
market risk capital requirement in place of that calculated using an 
internal market risk model under paragraph (a)(1) of this section, 
provided that:
    (i) The Bank obtains Finance Board approval of the internal cash 
flow model and of the assumptions to be applied to the model; and
    (ii) The Bank demonstrates to the Finance Board that the internal 
cash flow model subjects the Bank's assets and liabilities, off-balance 
sheet items and derivative contracts, including related options, to a 
comparable degree of stress for such factors as will be required for an 
internal market risk model.
    (b) Measurement of market value at risk under a Bank's internal 
market risk model. (1) Except as provided under paragraph (a)(2) of this 
section, each Bank shall use an internal market risk model that 
estimates the market value of the Bank's assets and liabilities, off-
balance sheet items, and derivative contracts, including any related 
options, and measures the market value of the Bank's portfolio at risk 
of its assets and liabilities, off-balance sheet items, and derivative 
contracts, including related options, from all sources of the Bank's 
market risks, except that the Bank's model need only incorporate those 
risks that are material.
    (2) The Bank's internal market risk model may use any generally 
accepted measurement technique, such as variance-covariance models, 
historical simulations, or Monte Carlo simulations, for estimating the 
market value of the Bank's portfolio at risk, provided that any 
measurement technique used must cover the Bank's material risks.
    (3) The measures of the market value of the Bank's portfolio at risk 
shall include the risks arising from the non-linear price 
characteristics of options and the sensitivity of the market value of 
options to changes in the volatility of the options' underlying rates or 
prices.
    (4) The Bank's internal market risk model shall use interest rate 
and market price scenarios for estimating the market value of the Bank's 
portfolio at risk, but at a minimum:
    (i) The Bank's internal market risk model shall provide an estimate 
of the market value of the Bank's portfolio at risk such that the 
probability of a loss greater than that estimated shall be no more than 
one percent;
    (ii) The Bank's internal market risk model shall incorporate 
scenarios that reflect changes in interest rates, interest rate 
volatility, and shape of the yield curve, and changes in market prices, 
equivalent to those that have been observed over 120-business day 
periods of market stress. For interest rates, the relevant historical 
observations should be drawn from the period that starts at the end of 
the previous month and goes back to the beginning of 1978;
    (iii) The total number of, and specific historical observations 
identified by the Bank as, stress scenarios shall be:
    (A) Satisfactory to the Finance Board;
    (B) Representative of the periods of the greatest potential market 
stress given the Bank's portfolio, and
    (C) Comprehensive given the modeling capabilities available to the 
Bank; and
    (iv) The measure of the market value of the Bank's portfolio at risk 
may incorporate empirical correlations among interest rates.
    (5) For any consolidated obligations denominated in a currency other 
than U.S. Dollars or linked to equity or commodity prices, each Bank 
shall, in addition to fulfilling the criteria of paragraph (b)(4) of 
this section, calculate an estimate of the market value of its portfolio 
at risk due to the material foreign exchange, equity price or commodity 
price risk, such that, at a minimum:

[[Page 19]]

    (i) The probability of a loss greater than that estimated shall not 
exceed one percent;
    (ii) The scenarios reflect changes in foreign exchange, equity, or 
commodity market prices that have been observed over 120-business day 
periods of market stress, as determined using historical data that is 
from an appropriate period; and
    (iii) The total number of, and specific historical observations 
identified by the Bank as, stress scenarios shall be:
    (A) Satisfactory to the Finance Board;
    (B) Representative of the periods of greatest potential stress given 
the Bank's portfolio; and
    (C) Comprehensive given the modeling capabilities available to the 
Bank; and
    (iv) The measure of the market value of the Bank's portfolio at risk 
may incorporate empirical correlations within or among foreign exchange 
rates, equity prices, or commodity prices.
    (c) Independent validation of Bank internal market risk model or 
internal cash flow model. (1) Each Bank shall conduct an independent 
validation of its internal market risk model or internal cash flow model 
within the Bank that is carried out by personnel not reporting to the 
business line responsible for conducting business transactions for the 
Bank. Alternatively, the Bank may obtain independent validation by an 
outside party qualified to make such determinations. Validations shall 
be done on an annual basis, or more frequently as required by the 
Finance Board.
    (2) The results of such independent validations shall be reviewed by 
the Bank's board of directors and provided promptly to the Finance 
Board.
    (d) Finance Board approval of Bank internal market risk model or 
internal cash flow model. Each Bank shall obtain Finance Board approval 
of an internal market risk model or an internal cash flow model, 
including subsequent material adjustments to the model made by the Bank, 
prior to the use of any model. Each Bank shall make such adjustments to 
its model as may be directed by the Finance Board.
    (e) Date of calculations. Unless otherwise directed by the Finance 
Board, each Bank shall perform any calculations or estimates required 
under this section using the assets and liabilities, off-balance sheet 
items, and derivative contracts held by the Bank, and if applicable, the 
values of any such holdings, as of the close of business of the last 
business day of the month for which the market risk capital requirement 
is being calculated.



Sec. 932.6  Operations risk capital requirement.

    (a) General requirement. Except as authorized under paragraph (b) of 
this section, each Bank's operations risk capital requirement shall at 
all times equal 30 percent of the sum of the Bank's credit risk capital 
requirement and market risk capital requirement.
    (b) Alternative requirements. With the approval of the Finance 
Board, each Bank may have an operations risk capital requirement equal 
to less than 30 percent but no less than 10 percent of the sum of the 
Bank's credit risk capital requirement and market risk capital 
requirement if:
    (1) The Bank provides an alternative methodology for assessing and 
quantifying an operations risk capital requirement; or
    (2) The Bank obtains insurance to cover operations risk from an 
insurer rated at least the second highest investment grade credit rating 
by an NRSRO.



Sec. 932.7  Reporting requirements.

    Each Bank shall report to the Finance Board by the 15th business day 
of each month its risk-based capital requirement by component amounts, 
and its actual total capital amount and permanent capital amount, 
calculated as of the close of business of the last business day of the 
preceding month, or more frequently, as may be required by the Finance 
Board.



Sec. 932.8  Minimum liquidity requirements.

    In addition to meeting the deposit liquidity requirements contained 
in Sec. 965.3 of this chapter, each Bank shall hold contingency 
liquidity in an amount sufficient to enable the Bank to meet its 
liquidity needs, which

[[Page 20]]

shall, at a minimum, cover five business days of inability to access the 
consolidated obligation debt markets. An asset that has been pledged 
under a repurchase agreement cannot be used to satisfy minimum liquidity 
requirements.



Sec. 932.9  Limits on unsecured extensions of credit to one counterparty 
or affiliated counterparties; reporting requirements for total extensions 
of credit to one counterparty or affiliated counterparties.

    (a) Unsecured extensions of credit to a single counterparty. A Bank 
shall not extend unsecured credit to any single counterparty (other than 
a GSE) in an amount that would exceed the limits of this paragraph. A 
Bank shall not extend unsecured credit to a GSE in an amount that would 
exceed the limits set forth in paragraph (c) of this section. If a 
third-party provides an irrevocable, unconditional guarantee of 
repayment of a credit (or any part thereof), the third-party guarantor 
shall be considered the counterparty for purposes of calculating and 
applying the unsecured credit limits of this section with respect the to 
guaranteed portion of the transaction.
    (1) Term limits. All unsecured extensions of credit by a Bank to a 
single counterparty that arise from the Bank's on- and off-balance sheet 
and derivative transactions (but excluding the amount of sales of 
federal funds with a maturity of one day or less and sales of federal 
funds subject to a continuing contract) shall not exceed the product of 
the maximum capital exposure limit applicable to such counterparty, as 
determined in accordance with paragraph (a)(4) of this section and Table 
4 of this part, multiplied by the lesser of:
    (i) The Bank's total capital; or
    (ii) The counterparty's Tier 1 capital, or if Tier 1 capital is not 
available, total capital (as defined by the counterparty's principal 
regulator) or some similar comparable measure identified by the Bank.
    (2) Overall limits including sales of overnight federal funds. All 
unsecured extensions of credit by a Bank to a single counterparty that 
arise from the Bank's on- and off-balance sheet and derivative 
transactions, including the amounts of sales of federal funds with a 
maturity of one day or less and sales of federal funds subject to a 
continuing contract, shall not exceed twice the limit calculated 
pursuant to paragraph (a)(1) of this section.
    (3) Limits for certain obligations issued by state, local or tribal 
governmental agencies. The term limit set forth in paragraph (a)(1) of 
this section when applied to the marketable direct obligations of state, 
local or tribal government unit or agencies that are acquired member 
assets identified in Sec. 955.2(a)(3) of this chapter or are otherwise 
excluded from the prohibition against investments in whole mortgages or 
whole loan or interests in such mortgages or loans by 
Sec. 956.3(a)(4)(iii) of this chapter shall be calculated based on the 
Bank's total capital and the credit rating assigned to the particular 
obligation as determined in accordance with paragraph (a)(5) of this 
section. If a Bank owns series or classes of obligations issued by a 
particular state, local or tribal government unit or agency or has 
extended other forms of unsecured credit to such entity falling into 
different rating categories, the total amount of unsecured credit 
extended by the Bank to that government unit or agency shall not exceed 
the term limit associated with the highest-rated obligation issued by 
the entity and actually purchased by the Bank.
    (4) Bank determination of applicable maximum capital exposure 
limits. (i) Except as set forth in paragraph (a)(4)(ii) or (a)(4)(iii) 
of this section, the applicable maximum capital exposure limits are 
assigned to each counterparty based upon the long-term credit rating of 
the counterparty, as determined in accordance with paragraph (a)(5) of 
this section, and are provided in the following Table 4 of this part:

  Table 4--Maximum Limits on Unsecured Extensions of Credit to a Single
      Counterparty by Counterparty Long-Term Credit Rating Category
------------------------------------------------------------------------
                                                              Maximum
                                                              capital
    Long-term credit rating of counterparty category      exposure limit
                                                           (in percent)
------------------------------------------------------------------------
Highest Investment Grade................................              15
Second Highest Investment Grade.........................              14
Third Highest Investment Grade..........................               9

[[Page 21]]

 
Fourth Highest Investment Grade.........................               3
Below Investment Grade or Other.........................               1
------------------------------------------------------------------------

    (ii) If a counterparty does not have a long-term credit rating but 
has received a short-term credit rating from an NRSRO, the maximum 
capital exposure limit applicable to that counterparty shall be based 
upon the short-term credit rating, as determined in accordance with 
paragraph (a)(5) of this section, as follows:
    (A) The highest short-term investment grade credit rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the third highest long-term investment grade rating;
    (B) The second highest short-term investment grade rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the fourth highest long-term investment grade rating; and
    (C) The third highest short-term investment grade rating shall 
correspond to the maximum capital exposure limit provided in Table 4 of 
this part for the fourth highest long-term investment grade rating.
    (iii) If a specific debt obligation issued by a counterparty 
receives a credit rating from an NRSRO that is lower than the 
counterparty's long-term credit rating, the total amount of the lower-
rated obligation held by the Bank may not exceed a sub-limit calculated 
in accordance with paragraph (a)(1) of this section, except that the 
Bank shall use the credit rating associated with the specific obligation 
to determine the applicable maximum capital exposure limit. For purposes 
of this paragraph, the credit rating of the debt obligation shall be 
determined in accordance with paragraph (a)(5) of this section.
    (5) Bank determination of applicable credit ratings. The following 
criteria shall be applied to determine a counterparty's credit rating:
    (i) The counterparty's most recent credit rating from a given NRSRO 
shall be considered;
    (ii) If only one NRSRO has rated the counterparty, that NRSRO's 
rating shall be used. If a counterparty has received credit ratings from 
more than one NRSRO, the lowest credit rating from among those NRSROs 
shall be used;
    (iii) Where a credit rating has a modifier, the credit rating is 
deemed to be the credit rating without the modifier;
    (iv) If a counterparty is placed on a credit watch for a potential 
downgrade by an NRSRO, the credit rating from that NRSRO at the next 
lower grade shall be used; and
    (v) If a counterparty is not rated by an NRSRO, the Bank shall 
determine the applicable credit rating by using credit rating standards 
available from an NRSRO or other similar standards.
    (b) Unsecured extensions of credit to affiliated counterparties--(1) 
In general. The total amount of unsecured extensions of credit by a Bank 
to a group of affiliated counterparties that arise from the Bank's on- 
and off-balance sheet and derivative transactions, including sales of 
federal funds with a maturity of one day or less and sales of federal 
funds subject to a continuing contract, shall not exceed thirty percent 
of the Bank's total capital.
    (2) Relation to individual limits. The aggregate limits calculated 
under this paragraph shall apply in addition to the limits on extensions 
of unsecured credit to a single counterparty imposed by paragraph (a) of 
this section.
    (c) Special limits for GSEs--(1) In general. Unsecured extensions of 
credit by a Bank to a GSE that arise from the Bank's on- and off-balance 
sheet and derivative transactions, including from the purchase of any 
subordinated debt subject to the sub-limit set forth in paragraph (c)(2) 
of this section, from any sales of federal funds with a maturity of one 
day or less and from sales of federal funds subject to a continuing 
contract, shall not exceed the lesser of:
    (i) The Bank's total capital; or
    (ii) The GSE's total capital (as defined by the GSE's principal 
regulator) or some similar comparable measure identified by the Bank.

[[Page 22]]

    (2) Sub-limit for subordinated debt. The maximum amount of 
subordinated debt issued by a GSE and held by a Bank shall not exceed 
the term limit calculated under paragraph (a)(1) of this section, except 
that a Bank shall use the credit rating of the GSE's subordinated debt 
to determine the applicable maximum capital exposure limit. The credit 
rating of the subordinated debt shall be determined in accordance with 
paragraph (a)(5) of this section.
    (3) Limits applying to a GSE after a downgrade. If any NRSRO assigns 
a credit rating to any senior debt obligation issued (or to be issued) 
by a GSE that is below the highest investment grade or downgrades, or 
places on a credit watch for a potential downgrade of the credit rating 
on any senior unsecured obligation issued by a GSE to below the highest 
investment grade, the special limits on unsecured extensions of credit 
under paragraph (c)(1) of this section shall cease to apply, and 
instead, the Bank shall calculate the maximum amount of its unsecured 
extensions of credit to that GSE in accordance with paragraphs (a)(1) 
and (a)(2) of this section.
    (4) Extensions of unsecured credit to other Banks. The limits of 
this section do not apply to unsecured credit extended by one Bank to 
another Bank.
    (d) Extensions of unsecured credit after downgrade or placement on 
credit watch. If an NRSRO downgrades the credit rating applicable to any 
counterparty or places any counterparty on a credit watch for a 
potential downgrade, a Bank need not unwind or liquidate any existing 
transaction or position with that counterparty that complied with the 
limits of this section at the time it was entered. In such a case, 
however, a Bank may extend any additional unsecured credit to such a 
counterparty only in compliance with the limitations that are calculated 
using the lower maximum exposure limits. For the purposes of this 
section, the renewal of an existing unsecured extension of credit, 
including any decision not to terminate any sales of federal funds 
subject to a continuing contract, shall be considered an additional 
extension of unsecured credit that can be undertaken only in accordance 
with the lower limit.
    (e) Reporting requirements--(1) Total unsecured extensions of 
credit. Each Bank shall report monthly to the Finance Board the amount 
of the Bank's total unsecured extensions of credit arising from on- and 
off-balance sheet and derivative transactions to any single counterparty 
or group of affiliated counterparties that exceeds 5 percent of:
    (i) The Bank's total capital; or
    (ii) The counterparty's, or affiliated counterparties' combined, 
Tier 1 capital, or if Tier 1 capital is not available, total capital (as 
defined by each counterparty's principal regulator) or some similar 
comparable measure identified by the Bank.
    (2) Total secured and unsecured extensions of credit. Each Bank 
shall report monthly to the Finance Board the amount of the Bank's total 
secured and unsecured extensions of credit arising from on- and off-
balance sheet and derivative transactions to any single counterparty or 
group of affiliated counterparties that exceeds 5 percent of the Bank's 
total assets.
    (3) Extensions of credit in excess of limits. A Bank shall report 
promptly to the Finance Board any extensions of unsecured credit that 
exceeds any limit set forth in paragraphs (a), (b) or (c) of this 
section. In making this report, a Bank shall provide the name of the 
counterparty or group of affiliated counterparties to which the excess 
unsecured credit has been extended, the dollar amount of the applicable 
limit which has been exceeded, the dollar amount by which the Bank's 
extension of unsecured credit exceeds such limit, the dates for which 
the Bank was not in compliance with the limit, and, if applicable, a 
brief explanation of any extenuating circumstances which caused the 
limit to be exceeded.
    (f) Measurement of unsecured extensions of credit--(1) In general. 
For purposes of this section, unsecured extensions of credit will be 
measured as follows:
    (i) For on-balance sheet transactions, an amount equal to the sum of 
the book value of the item plus net payments due the Bank;
    (ii) For off-balance sheet transactions, an amount equal to the 
credit

[[Page 23]]

equivalent amount of such item, calculated in accordance with 
Sec. 932.4(f) of this part; and
    (iii) For derivative transactions, an amount equal to the sum of the 
current and potential future credit exposures for the derivative 
contract, where those values are calculated in accordance with 
Secs. 932.4(g) or 932.4(h) of this part, as applicable, less the amount 
of any collateral that is held in accordance with the requirements of 
Sec. 932.4(e)(2)(ii)(B) of this part against the credit exposure from 
the derivative contract.
    (2) Status of debt obligations purchased by the Bank. Any debt 
obligation or debt security (other than mortgage-backed securities or 
acquired member assets that are identified in Secs. 955.2(a)(1) and (2) 
of this chapter) purchased by a Bank shall be considered an unsecured 
extension of credit for the purposes of this section, except:
    (i) Any amount owed the Bank against which the Bank holds collateral 
in accordance with Sec. 932.4(e)(2)(ii)(B) of this part; or
    (ii) Any amount which the Finance Board has determined on a case-by-
case basis shall not be considered an unsecured extension of credit.
    (g) Obligations of the United States. Obligations of, or guaranteed 
by, the United States are not subject to the requirements of this 
section.

[66728, Dec. 27, 2002]



                         SUBCHAPTER F [RESERVED]



[[Page 24]]



 SUBCHAPTER G_FEDERAL HOME LOAN BANK ASSETS AND OFF-BALANCE SHEET ITEMS





PART 955_ACQUIRED MEMBER ASSETS--Table of Contents



Sec.
955.1  Definitions.
955.2  Authorization to hold acquired member assets.
955.3  Required credit-risk sharing structure.
955.4  Reporting requirements for acquired member assets.
955.5  Administrative and investment transactions between Banks.
955.6  Risk-based capital requirement for acquired member assets.

    Authority: 12 U.S.C. 1422a(a)(3), 1422b(a), 1430, 1430b, 1431.

    Source: 65 FR 43981, July 17, 2000, unless otherwise noted.

    Effective Date Note: At 81 FR 91688, Dec. 19, 2016, subchapter G, 
consisting of part 955, was removed and reserved, effective Jan. 18, 
2017.



Sec. 955.1  Definitions.

    As used in this part:
    Affiliate means any business entity that controls, is controlled by, 
or is under common control with, a member.
    Expected losses means the base loss scenario in the methodology of 
an NRSRO applicable to that type of AMA asset.
    Residential real property has the meaning set forth in Sec. 950.1 of 
this chapter.

[67 FR 12852, Mar. 20, 2002]



Sec. 955.2  Authorization to hold acquired member assets.

    Subject to the requirements of part 980 of this chapter, each Bank 
may hold assets acquired from or through Bank System members or housing 
associates by means of either a purchase or a funding transaction (AMA), 
subject to each of the following requirements:
    (a) Loan type requirement. The assets are either:
    (1) Whole loans that are eligible to secure advances under 
Secs. 950.7(a)(1)(i), (a)(2)(ii), (a)(4), or (b)(1) of this chapter, 
excluding:
    (i) Single-family mortgages where the loan amount exceeds the limits 
established pursuant to 12 U.S.C. 1717(b)(2); and
    (ii) Loans made to an entity, or secured by property, not located in 
a state;
    (2) Whole loans secured by manufactured housing, regardless of 
whether such housing qualifies as residential real property; or
    (3) State and local housing finance agency bonds;
    (b) Member or housing associate nexus requirement. The assets are:
    (1) Either:
    (i) Originated or issued by, through, or on behalf of a Bank System 
member or housing associate, or an affiliate thereof; or
    (ii) Held for a valid business purpose by a Bank System member or 
housing associate, or an affiliate thereof, prior to acquisition by a 
Bank; and
    (2) Acquired either:
    (i) From a member or housing associate of the acquiring Bank;
    (ii) From a member or housing associate of another Bank, pursuant to 
an arrangement with that Bank, which, in the case of state and local 
finance agency bonds only, may be reached in accordance with the 
following process:
    (A) The housing finance agency shall first offer the Bank in whose 
district the agency is located (local Bank) a right of first refusal to 
purchase, or negotiate the terms of, its proposed bond offering;
    (B) If the local Bank indicates, within a three day period, that it 
will negotiate in good faith to purchase the bonds, the agency may not 
offer to sell or negotiate the terms of a purchase with another Bank; 
and
    (C) If the local Bank declines the offer, or has failed to respond 
within the three day period, the acquiring Bank will be considered to 
have an arrangement with the local Bank for purposes of this section and 
may offer to buy or negotiate the terms of a bond sale with the agency;
    (iii) From another Bank; and

[[Page 25]]

    (c) Credit risk-sharing requirement. The transactions through which 
the Bank acquires the assets either:
    (1) Meet the credit risk-sharing requirements of Sec. 955.3 of this 
part; or
    (2) Were authorized by the Finance Board under section II.B.12 of 
the FMP and are within any total dollar cap established by the Finance 
Board at the time of such authorization.



Sec. 955.3  Required credit risk-sharing structure.

    (a) Determination of necessary credit enhancement. At the earlier of 
270 days from the date of the Bank's acquisition of the first loan in a 
pool, or the date at which the amount of a pool's assets reaches $100 
million, a Bank shall determine the total credit enhancement necessary 
to enhance the asset or pool of assets to a credit quality that is 
equivalent to that of an instrument having at least the fourth highest 
credit rating from an NRSRO, or such higher credit rating as the Bank 
may require. The Bank shall make this determination for each AMA product 
using a methodology that is confirmed in writing by an NRSRO to be 
comparable to a methodology that the NRSRO would use in determining 
credit enhancement levels when conducting a rating review of the asset 
or pool of assets in a securitization transaction.
    (b) Credit risk-sharing structure. A Bank acquiring AMA shall 
implement, and have in place at all times, a credit risk-sharing 
structure for each AMA product under which a member or housing associate 
of the Bank or, with the approval of both Banks, a member or housing 
associate of another Bank, provides a sufficient credit enhancement from 
the first dollar of credit loss for each asset or pool of assets such 
that the acquiring Bank's exposure to credit risk for the life of the 
asset or pool of assets is no greater than that of an asset rated in the 
fourth highest credit rating category, as determined pursuant to 
paragraph (a) of this section, or such higher rating as the acquiring 
Bank may require. This credit enhancement structure shall meet the 
following requirements:
    (1) A portion of the credit enhancement may be provided by:
    (i) Contracting with an insurance affiliate of that member or 
housing associate to provide an enhancement or undertaking against 
losses to the Bank, but only where such insurance is positioned in the 
credit enhancement structure so as to cover only losses remaining after 
the member or housing associate has borne losses as required under 
paragraph (b)(2) of this section;
    (ii) Purchasing loan-level insurance, which may include United 
States government insurance or guarantee, but only where:
    (A) The member or housing associate is legally obligated at all 
times to maintain such insurance with an insurer rated not lower than 
the second highest credit rating category; and
    (B) Such insurance is positioned in the credit enhancement structure 
so as to cover only losses remaining after the member or housing 
associate has borne losses as required under paragraph (b)(2) of this 
section;
    (iii) Purchasing pool-level insurance, but only where such 
insurance:
    (A) Insures that portion of the required credit enhancement 
attributable to the geographic concentration and size of the pool; and
    (B) Is positioned last in the credit enhancement structure so as to 
cover only those losses remaining after all other elements of the credit 
enhancement structure have been exhausted; or
    (iv) Contracting with another member or housing associate in the 
Bank's district or in another Bank's district, pursuant to an 
arrangement with that Bank, to provide an enhancement or undertaking 
against losses to the Bank in return for some compensation;
    (2) The member or housing associate that is providing the credit 
enhancement required under paragraph (b)(1) of this section shall in all 
cases bear the direct economic consequences of actual credit losses on 
the asset or pool of assets:
    (i) From the first dollar of loss up to the amount of expected 
losses; or
    (ii) Immediately following expected losses, but in an amount equal 
to or exceeding the amount of expected losses;
    (3) The portion of the credit enhancement that is an obligation of a 
Bank System member or housing associate shall be fully secured; and

[[Page 26]]

    (4) The Bank shall obtain written verification from an NRSRO that 
concludes to the satisfaction of the Finance Board, based on the 
underlying economic terms of the credit enhancement structure as 
represented by the Bank for each AMA product, that either:
    (i) The level of credit enhancement provided by the member or 
housing associate is generally sufficient to enhance the asset or pool 
of assets to a credit quality that is equivalent to that of an 
instrument having the fourth highest credit rating from an NRSRO, or 
such higher rating as the Bank may require; or
    (ii) The methodology used by the Bank for estimating the level of 
credit enhancement provided by the member or housing associate is in 
accordance with the practices established by the NRSRO.
    (c) Timing of NRSRO opinions. For AMA programs already in operation 
at the time of the effective date of this rule, a Bank shall have 90 
days from the effective date of this rule to obtain the NRSRO 
verifications required under paragraphs (a) and (b)(4) of this section.

[65 FR 43981, July 17, 2000, as amended at 67 FR 12852, Mar. 20, 2002]



Sec. 955.4  Reporting requirement for acquired member assets.

    Each Bank shall report information related to AMA in accordance with 
the instructions provided in the Data Reporting Manual issued by the 
Finance Board, as amended from time to time.

[71 FR 35500, June 21, 2006]



Sec. 955.5  Administrative and investment transactions between Banks.

    (a) Delegation of administrative duties. A Bank may delegate the 
administration of an AMA program to another Bank whose administrative 
office has been examined and approved by the Finance Board to process 
AMA transactions. The existence of such a delegation, or the possibility 
that such a delegation may be made, must be disclosed to any potential 
participating member or housing associate as part of any AMA-related 
agreements are signed with that member or housing associate.
    (b) Terminability of Agreements. Any agreement made between two or 
more Banks in connection with any AMA program shall be made terminable 
by either party after a reasonable notice period.
    (c) Delegation of Pricing Authority. A Bank that has delegated its 
AMA pricing function to another Bank shall retain a right to refuse to 
acquire AMA at prices it does not consider appropriate.



Sec. 955.6  Risk-based capital requirement for acquired member assets.

    (a) General. Each Bank shall hold retained earnings plus general 
allowance for losses as support for the credit risk of all AMA estimated 
by the Bank to represent a credit risk that is greater than that of 
comparable instruments that have received the second highest credit 
rating from an NRSRO in an amount equal to or greater than the 
outstanding balance of the assets or pools of assets times a factor 
associated with the putative credit rating of the assets or pools of 
assets as determined by the Finance Board on a case-by-case basis. For 
single-family mortgage assets, the factors are as set forth in Table 1 
of this part.

                                 Table 1
------------------------------------------------------------------------
                                                           Percentage
                                                        applicable to on-
   Putative rating of single-family mortgage assets       balance sheet
                                                        equivalent value
                                                             of AMA
------------------------------------------------------------------------
Third Highest Investment Grade........................              0.90
Fourth Highest Investment Grade.......................              1.50
If Downgraded to Below Investment Grade After
 Acquisition By Bank:
    Highest Below Investment Grade....................              2.25
    Second Highest Below Investment Grade.............              2.60
    All Other Below Investment Grade..................            100.00
------------------------------------------------------------------------


[[Page 27]]

    (b) Recalculation of credit enhancement. For risk-based capital 
purposes, each Bank shall recalculate the estimated credit rating of a 
pool of AMA if there is evidence that a decline in the credit quality of 
that pool may have occurred.



                       SUBCHAPTERS H	M [RESERVED]



                        PARTS 956	999 [RESERVED]

[[Page 29]]



           CHAPTER X--BUREAU OF CONSUMER FINANCIAL PROTECTION




  --------------------------------------------------------------------
Part                                                                Page
1000

[Reserved]

1001            Financial products or services..............          31
1002            Equal Credit Opportunity Act (Regulation B).          31
1003            Home mortgage disclosure (Regulation C).....          89
1004            Alternative mortgage transaction parity 
                    (Regulation D)..........................         162
1005            Electronic fund transfers (Regulation E)....         166
1006            Fair Debt Collection Practices Act 
                    (Regulation F)..........................         345
1007            S.A.F.E. Mortgage Licensing Act--Federal 
                    registration of residential mortgage 
                    loan originators (Regulation G).........         348
1008            S.A.F.E. Mortgage Licensing Act--State 
                    compliance and bureau registration 
                    system (Regulation H)...................         356
1009            Disclosure requirements for depository 
                    institutions lacking Federal deposit 
                    insurance (Regulation I)................         370
1010            Land registration (Regulation J)............         372
1011            Purchasers' revocation rights, sales 
                    practices and standards (Regulation K)..         430
1012            Special rules of practice (Regulation L)....         434
1013            Consumer leasing (Regulation M).............         438
1014            Mortgage acts and practices--Advertising 
                    (Regulation N)..........................         464
1015            Mortgage assistance relief services 
                    (Regulation O)..........................         467
1016            Privacy of consumer financial information 
                    (Regulation P)..........................         474
1022            Fair credit reporting (Regulation V)........         508
1024            Real Estate Settlement Procedures Act 
                    (Regulation X)..........................         600
1025

[Reserved]

[[Page 31]]

                          PART 1000 [RESERVED]



PART 1001_FINANCIAL PRODUCTS OR SERVICES--Table of Contents



Sec.
1001.1  Authority and purpose.
1001.2  Definitions.

    Authority: 12 U.S.C. 5481(15)(A)(xi); and 12 U.S.C. 5512(b)(1).

    Source: 80 FR 37526, June 30, 2015, unless otherwise noted.



Sec. 1001.1  Authority and purpose.

    Under 12 U.S.C. 5481(15)(A)(xi), the Bureau is authorized to define 
certain financial products or services for purposes of title X of the 
Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376 (2010) (Title X) in 
addition to those defined in 12 U.S.C. 5481(15)(A)(i)-(x). The purpose 
of this part is to implement that authority.



Sec. 1001.2  Definitions.

    Except as otherwise provided in Title X, in addition to the 
definitions set forth in 12 U.S.C. 5481(15)(A)(i)-(x), the term 
``financial product or service'' means, for purposes of Title X:
    (a) Extending or brokering leases of an automobile, as automobile is 
defined by 12 CFR 1090.108(a), where the lease:
    (1) Qualifies as a full-payout lease and a net lease, as provided by 
12 CFR 23.3(a), and has an initial term of not less than 90 days, as 
provided by 12 CFR 23.11; and
    (2) Is not a financial product or service under 12 U.S.C. 
5481(15)(A)(ii).
    (b) [Reserved]
      



PART 1002_EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)--Table of Contents



Sec.
1002.1  Authority, scope and purpose.
1002.2  Definitions.
1002.3  Limited exceptions for certain classes of transactions.
1002.4  General rules.
1002.5  Rules concerning requests for information.
1002.6  Rules concerning evaluation of applications.
1002.7  Rules concerning extensions of credit.
1002.8  Special purpose credit programs.
1002.9  Notifications.
1002.10  Furnishing of credit information.
1002.11  Relation to state law.
1002.12  Record retention.
1002.13  Information for monitoring purposes.
1002.14  Rules on providing appraisal reports.
1002.15  Incentives for self-testing and self-correction.
1002.16  Enforcement, penalties and liabilities.

Appendix A to Part 1002--Federal Agencies to be Listed in Adverse Action 
          Notices
Appendix B to Part 1002--Model Application Forms
Appendix C to Part 1002--Sample Notification Forms
Appendix D to Part 1002--Issuance of Official Interpretations
Supplement I to Part 1002--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.

    Source: 76 FR 79445, Dec. 21, 2011, unless otherwise noted.



Sec. 1002.1  Authority, scope and purpose.

    (a) Authority and scope. This part, known as Regulation B, is issued 
by the Bureau of Consumer Financial Protection (Bureau) pursuant to 
title VII (Equal Credit Opportunity Act) of the Consumer Credit 
Protection Act, as amended (15 U.S.C. 1601 et seq.). Except as otherwise 
provided herein, this part applies to all persons who are creditors, as 
defined in Sec. 1002.2(l), other than a person excluded from coverage of 
this part by section 1029 of the Consumer Financial Protection Act of 
2010, title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 1376. Information 
collection requirements contained in this part have been approved by the 
Office of Management and Budget under the provisions of 44 U.S.C. 3501 
et seq. and have been assigned OMB No. 3170-0013.
    (b) Purpose. The purpose of this part 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); to the fact that all or part of 
the applicant's income derives from a public assistance program; or to 
the fact that the applicant has in good faith exercised any right under 
the

[[Page 32]]

Consumer Credit Protection Act. The regulation prohibits creditor 
practices that discriminate on the basis of any of these factors. The 
regulation also requires creditors to notify applicants of action taken 
on their applications; to report credit history in the names of both 
spouses on an account; to retain records of credit applications; to 
collect information about the applicant's race and other personal 
characteristics in applications for certain dwelling-related loans; and 
to provide applicants with copies of appraisal reports used in 
connection with credit transactions.



Sec. 1002.2  Definitions.

    For the purposes of this part, unless the context indicates 
otherwise, the following definitions apply.
    (a) Account means an extension of credit. When employed in relation 
to an account, the word use refers only to open-end credit.
    (b) Act means the Equal Credit Opportunity Act (Title VII of the 
Consumer Credit Protection Act).
    (c) Adverse action. (1) The term means:
    (i) A refusal to grant credit in substantially the amount or on 
substantially the terms requested in an application unless the creditor 
makes a counteroffer (to grant credit in a different amount or on other 
terms) and the applicant uses or expressly accepts the credit offered;
    (ii) A termination of an account or an unfavorable change in the 
terms of an account that does not affect all or substantially all of a 
class of the creditor's accounts; or
    (iii) A refusal to increase the amount of credit available to an 
applicant who has made an application for an increase.
    (2) The term does not include:
    (i) A change in the terms of an account expressly agreed to by an 
applicant;
    (ii) Any action or forbearance relating to an account taken in 
connection with inactivity, default, or delinquency as to that account;
    (iii) A refusal or failure to authorize an account transaction at 
point of sale or loan, except when the refusal is a termination or an 
unfavorable change in the terms of an account that does not affect all 
or substantially all of a class of the creditor's accounts, or when the 
refusal is a denial of an application for an increase in the amount of 
credit available under the account;
    (iv) A refusal to extend credit because applicable law prohibits the 
creditor from extending the credit requested; or
    (v) A refusal to extend credit because the creditor does not offer 
the type of credit or credit plan requested.
    (3) An action that falls within the definition of both paragraphs 
(c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of 
this section.
    (d) Age refers only to the age of natural persons and means the 
number of fully elapsed years from the date of an applicant's birth.
    (e) Applicant means any person who requests or who has received an 
extension of credit from a creditor, and includes any person who is or 
may become contractually liable regarding an extension of credit. For 
purposes of Sec. 1002.7(d), the term includes guarantors, sureties, 
endorsers, and similar parties.
    (f) Application means an oral or written request for an extension of 
credit that is made in accordance with procedures used by a creditor for 
the type of credit requested. The term application does not include the 
use of an account or line of credit to obtain an amount of credit that 
is within a previously established credit limit. A completed application 
means an application in connection with which a creditor has received 
all the information that the creditor regularly obtains and considers in 
evaluating applications for the amount and type of credit requested 
(including, but not limited to, credit reports, any additional 
information requested from the applicant, and any approvals or reports 
by governmental agencies or other persons that are necessary to 
guarantee, insure, or provide security for the credit or collateral). 
The creditor shall exercise reasonable diligence in obtaining such 
information.

[[Page 33]]

    (g) Business credit refers to extensions of credit primarily for 
business or commercial (including agricultural) purposes, but excluding 
extensions of credit of the types described in Secs. 1002.3(a)-(d).
    (h) Consumer credit means credit extended to a natural person 
primarily for personal, family, or household purposes.
    (i) Contractually liable means expressly obligated to repay all 
debts arising on an account by reason of an agreement to that effect.
    (j) Credit means the right granted by a creditor to an applicant to 
defer payment of a debt, incur debt and defer its payment, or purchase 
property or services and defer payment therefor.
    (k) Credit card means any card, plate, coupon book, or other single 
credit device that may be used from time to time to obtain money, 
property, or services on credit.
    (l) Creditor means a person who, in the ordinary course of business, 
regularly participates in a credit decision, including setting the terms 
of the credit. The term creditor includes a creditor's assignee, 
transferee, or subrogee who so participates. For purposes of 
Secs. 1002.4(a) and (b), the term creditor also includes a person who, 
in the ordinary course of business, regularly refers applicants or 
prospective applicants to creditors, or selects or offers to select 
creditors to whom requests for credit may be made. A person is not a 
creditor regarding any violation of the Act or this part committed by 
another creditor unless the person knew or had reasonable notice of the 
act, policy, or practice that constituted the violation before becoming 
involved in the credit transaction. The term does not include a person 
whose only participation in a credit transaction involves honoring a 
credit card.
    (m) Credit transaction means every aspect of an applicant's dealings 
with a creditor regarding an application for credit or an existing 
extension of credit (including, but not limited to, information 
requirements; investigation procedures; standards of creditworthiness; 
terms of credit; furnishing of credit information; revocation, 
alteration, or termination of credit; and collection procedures).
    (n) Discriminate against an applicant means to treat an applicant 
less favorably than other applicants.
    (o) Elderly means age 62 or older.
    (p) Empirically derived and other credit scoring systems--(1) A 
credit scoring system is a system that evaluates an applicant's 
creditworthiness mechanically, based on key attributes of the applicant 
and aspects of the transaction, and that determines, alone or in 
conjunction with an evaluation of additional information about the 
applicant, whether an applicant is deemed creditworthy. To qualify as an 
empirically derived, demonstrably and statistically sound, credit 
scoring system, the system must be:
    (i) Based on data that are derived from an empirical comparison of 
sample groups or the population of creditworthy and non-creditworthy 
applicants who applied for credit within a reasonable preceding period 
of time;
    (ii) Developed for the purpose of evaluating the creditworthiness of 
applicants with respect to the legitimate business interests of the 
creditor utilizing the system (including, but not limited to, minimizing 
bad debt losses and operating expenses in accordance with the creditor's 
business judgment);
    (iii) Developed and validated using accepted statistical principles 
and methodology; and
    (iv) Periodically revalidated by the use of appropriate statistical 
principles and methodology and adjusted as necessary to maintain 
predictive ability.
    (2) A creditor may use an empirically derived, demonstrably and 
statistically sound, credit scoring system obtained from another person 
or may obtain credit experience from which to develop such a system. Any 
such system must satisfy the criteria set forth in paragraph (p)(1)(i) 
through (iv) of this section; if the creditor is unable during the 
development process to validate the system based on its own credit 
experience in accordance with paragraph (p)(1) of this section, the 
system must be validated when sufficient credit experience becomes 
available. A system that fails this validity test is no longer an 
empirically derived, demonstrably and statistically sound, credit 
scoring system for that creditor.

[[Page 34]]

    (q) Extend credit and extension of credit mean the granting of 
credit in any form (including, but not limited to, credit granted in 
addition to any existing credit or credit limit; credit granted pursuant 
to an open-end credit plan; the refinancing or other renewal of credit, 
including the issuance of a new credit card in place of an expiring 
credit card or in substitution for an existing credit card; the 
consolidation of two or more obligations; or the continuance of existing 
credit without any special effort to collect at or after maturity).
    (r) Good faith means honesty in fact in the conduct or transaction.
    (s) Inadvertent error means a mechanical, electronic, or clerical 
error that a creditor demonstrates was not intentional and occurred 
notwithstanding the maintenance of procedures reasonably adapted to 
avoid such errors.
    (t) Judgmental system of evaluating applicants means any system for 
evaluating the creditworthiness of an applicant other than an 
empirically derived, demonstrably and statistically sound, credit 
scoring system.
    (u) Marital status means the state of being unmarried, married, or 
separated, as defined by applicable state law. The term ``unmarried'' 
includes persons who are single, divorced, or widowed.
    (v) Negative factor or value, in relation to the age of elderly 
applicants, means utilizing a factor, value, or weight that is less 
favorable regarding elderly applicants than the creditor's experience 
warrants or is less favorable than the factor, value, or weight assigned 
to the class of applicants that are not classified as elderly and are 
most favored by a creditor on the basis of age.
    (w) Open-end credit means credit extended under a plan in which a 
creditor may permit an applicant to make purchases or obtain loans from 
time to time directly from the creditor or indirectly by use of a credit 
card, check, or other device.
    (x) Person means a natural person, corporation, government or 
governmental subdivision or agency, trust, estate, partnership, 
cooperative, or association.
    (y) Pertinent element of creditworthiness, in relation to a 
judgmental system of evaluating applicants, means any information about 
applicants that a creditor obtains and considers and that has a 
demonstrable relationship to a determination of creditworthiness.
    (z) Prohibited basis means race, color, religion, national origin, 
sex, marital status, or age (provided that the applicant has the 
capacity to enter into a binding contract); the fact that all or part of 
the applicant's income derives from any public assistance program; or 
the fact that the applicant has in good faith exercised any right under 
the Consumer Credit Protection Act or any state law upon which an 
exemption has been granted by the Bureau.
    (aa) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, or any territory or possession of the 
United States.



Sec. 1002.3  Limited exceptions for certain classes of transactions.

    (a) Public utilities credit--(1) Definition. Public utilities credit 
refers to extensions of credit that involve public utility services 
provided through pipe, wire, or other connected facilities, or radio or 
similar transmission (including extensions of such facilities), if the 
charges for service, delayed payment, and any discount for prompt 
payment are filed with or regulated by a government unit.
    (2) Exceptions. The following provisions of this part do not apply 
to public utilities credit:
    (i) Section 1002.5(d)(1) concerning information about marital 
status; and
    (ii) Section 1002.12(b) relating to record retention.
    (b) Securities credit--(1) Definition. Securities credit refers to 
extensions of credit subject to regulation under section 7 of the 
Securities Exchange Act of 1934 or extensions of credit by a broker or 
dealer subject to regulation as a broker or dealer under the Securities 
Exchange Act of 1934.
    (2) Exceptions. The following provisions of this part do not apply 
to securities credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;

[[Page 35]]

    (iii) Section 1002.5(d)(1) concerning information about marital 
status;
    (iv) Section 1002.7(b) relating to designation of name to the extent 
necessary to comply with rules regarding an account in which a broker or 
dealer has an interest, or rules regarding the aggregation of accounts 
of spouses to determine controlling interests, beneficial interests, 
beneficial ownership, or purchase limitations and restrictions;
    (v) Section 1002.7(c) relating to action concerning open-end 
accounts, to the extent the action taken is on the basis of a change of 
name or marital status;
    (vi) Section 1002.7(d) relating to the signature of a spouse or 
other person;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (c) Incidental credit--(1) Definition. Incidental credit refers to 
extensions of consumer credit other than the types described in 
paragraphs (a) and (b) of this section:
    (i) That are not made pursuant to the terms of a credit card 
account;
    (ii) That are not subject to a finance charge (as defined in 
Regulation Z, 12 CFR 1026.4); and
    (iii) That are not payable by agreement in more than four 
installments.
    (2) Exceptions. The following provisions of this part do not apply 
to incidental credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant, but only to the extent necessary for medical records or 
similar purposes;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;
    (iii) Section 1002.5(d)(1) concerning information about marital 
status;
    (iv) Section 1002.5(d)(2) concerning information about income 
derived from alimony, child support, or separate maintenance payments;
    (v) Section 1002.7(d) relating to the signature of a spouse or other 
person;
    (vi) Section 1002.9 relating to notifications;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (d) Government credit--(1) Definition. Government credit refers to 
extensions of credit made to governments or governmental subdivisions, 
agencies, or instrumentalities.
    (2) Applicability of regulation. Except for Sec. 1002.4(a), the 
general rule against discrimination on a prohibited basis, the 
requirements of this part do not apply to government credit.



Sec. 1002.4  General rules.

    (a) Discrimination. A creditor shall not discriminate against an 
applicant on a prohibited basis regarding any aspect of a credit 
transaction.
    (b) Discouragement. A creditor shall not make any oral or written 
statement, in advertising or otherwise, to applicants or prospective 
applicants that would discourage on a prohibited basis a reasonable 
person from making or pursuing an application.
    (c) Written applications. A creditor shall take written applications 
for the dwelling-related types of credit covered by Sec. 1002.13(a).
    (d) Form of disclosures--(1) General rule. A creditor that provides 
in writing any disclosures or information required by this part must 
provide the disclosures in a clear and conspicuous manner and, except 
for the disclosures required by Secs. 1002.5 and 1002.13, in a form the 
applicant may retain.
    (2) Disclosures in electronic form. The disclosures required by this 
part that are required to be given in writing may be provided to the 
applicant in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
Where the disclosures under Secs. 1002.5(b)(1), 1002.5(b)(2), 
1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) accompany an 
application accessed by the applicant in electronic form, these 
disclosures may be provided to the applicant in electronic form on or 
with the application form, without regard to the consumer consent or 
other provisions of the E-Sign Act.
    (e) Foreign-language disclosures. Disclosures may be made in 
languages

[[Page 36]]

other than English, provided they are available in English upon request.

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



Sec. 1002.5  Rules concerning requests for information.

    (a) General rules--(1) Requests for information. Except as provided 
in paragraphs (b) through (d) of this section, a creditor may request 
any information in connection with a credit transaction. This paragraph 
does not limit or abrogate any Federal or state law regarding privacy, 
privileged information, credit reporting limitations, or similar 
restrictions on obtainable information.
    (2) Required collection of information. Notwithstanding paragraphs 
(b) through (d) of this section, a creditor shall request information 
for monitoring purposes as required by Sec. 1002.13 for credit secured 
by the applicant's dwelling. In addition, a creditor may obtain 
information required by a regulation, order, or agreement issued by, or 
entered into with, a court or an enforcement agency (including the 
Attorney General of the United States or a similar state official) to 
monitor or enforce compliance with the Act, this part, or other Federal 
or state statutes or regulations.
    (3) Special-purpose credit. A creditor may obtain information that 
is otherwise restricted to determine eligibility for a special purpose 
credit program, as provided in Secs. 1002.8(b), (c), and (d).
    (b) Limitation on information about race, color, religion, national 
origin, or sex. A creditor shall not inquire about the race, color, 
religion, national origin, or sex of an applicant or any other person in 
connection with a credit transaction, except as provided in paragraphs 
(b)(1) and (b)(2) of this section.
    (1) Self-test. A creditor may inquire about the race, color, 
religion, national origin, or sex of an applicant or any other person in 
connection with a credit transaction for the purpose of conducting a 
self-test that meets the requirements of Sec. 1002.15. A creditor that 
makes such an inquiry shall disclose orally or in writing, at the time 
the information is requested, that:
    (i) The applicant will not be required to provide the information;
    (ii) The creditor is requesting the information to monitor its 
compliance with the Federal Equal Credit Opportunity Act;
    (iii) Federal law prohibits the creditor from discriminating on the 
basis of this information, or on the basis of an applicant's decision 
not to furnish the information; and
    (iv) If applicable, certain information will be collected based on 
visual observation or surname if not provided by the applicant or other 
person.
    (2) Sex. An applicant may be requested to designate a title on an 
application form (such as Ms., Miss, Mr., or Mrs.) if the form discloses 
that the designation of a title is optional. An application form shall 
otherwise use only terms that are neutral as to sex.
    (c) Information about a spouse or former spouse--(1) General rule. 
Except as permitted in this paragraph, a creditor may not request any 
information concerning the spouse or former spouse of an applicant.
    (2) Permissible inquiries. A creditor may request any information 
concerning an applicant's spouse (or former spouse under paragraph 
(c)(2)(v) of this section) that may be requested about the applicant if:
    (i) The spouse will be permitted to use the account;
    (ii) The spouse will be contractually liable on the account;
    (iii) The applicant is relying on the spouse's income as a basis for 
repayment of the credit requested;
    (iv) The applicant resides in a community property state or is 
relying on property located in such a state as a basis for repayment of 
the credit requested; or
    (v) The applicant is relying on alimony, child support, or separate 
maintenance payments from a spouse or former spouse as a basis for 
repayment of the credit requested.
    (3) Other accounts of the applicant. A creditor may request that an 
applicant list any account on which the applicant is contractually 
liable and to provide the name and address of the person in whose name 
the account is held. A creditor may also ask an applicant to list the 
names in which the applicant has previously received credit.

[[Page 37]]

    (d) Other limitations on information requests--(1) Marital status. 
If an applicant applies for individual unsecured credit, a creditor 
shall not inquire about the applicant's marital status unless the 
applicant resides in a community property state or is relying on 
property located in such a state as a basis for repayment of the credit 
requested. If an application is for other than individual unsecured 
credit, a creditor may inquire about the applicant's marital status, but 
shall use only the terms married, unmarried, and separated. A creditor 
may explain that the category unmarried includes single, divorced, and 
widowed persons.
    (2) Disclosure about income from alimony, child support, or separate 
maintenance. A creditor shall not inquire whether income stated in an 
application is derived from alimony, child support, or separate 
maintenance payments unless the creditor discloses to the applicant that 
such income need not be revealed if the applicant does not want the 
creditor to consider it in determining the applicant's creditworthiness.
    (3) Childbearing, childrearing. A creditor shall not inquire about 
birth control practices, intentions concerning the bearing or rearing of 
children, or capability to bear children. A creditor may inquire about 
the number and ages of an applicant's dependents or about dependent-
related financial obligations or expenditures, provided such information 
is requested without regard to sex, marital status, or any other 
prohibited basis.
    (e) Permanent residency and immigration status. A creditor may 
inquire about the permanent residency and immigration status of an 
applicant or any other person in connection with a credit transaction.



Sec. 1002.6  Rules concerning evaluation of applications.

    (a) General rule concerning use of information. Except as otherwise 
provided in the Act and this part, a creditor may consider any 
information obtained, so long as the information is not used to 
discriminate against an applicant on a prohibited basis. The legislative 
history of the Act indicates that the Congress intended an ``effects 
test'' concept, as outlined in the employment field by the Supreme Court 
in the cases of Griggs v. Duke Power Co., 401 U.S. 424 (1971), and 
Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975), to be applicable to a 
creditor's determination of creditworthiness.
    (b) Specific rules concerning use of information. (1) Except as 
provided in the Act and this part, a creditor shall not take a 
prohibited basis into account in any system of evaluating the 
creditworthiness of applicants.
    (2) Age, receipt of public assistance. (i) Except as permitted in 
this paragraph, a creditor shall not take into account an applicant's 
age (provided that the applicant has the capacity to enter into a 
binding contract) or whether an applicant's income derives from any 
public assistance program.
    (ii) In an empirically derived, demonstrably and statistically 
sound, credit scoring system, a creditor may use an applicant's age as a 
predictive variable, provided that the age of an elderly applicant is 
not assigned a negative factor or value.
    (iii) In a judgmental system of evaluating creditworthiness, a 
creditor may consider an applicant's age or whether an applicant's 
income derives from any public assistance program only for the purpose 
of determining a pertinent element of creditworthiness.
    (iv) In any system of evaluating creditworthiness, a creditor may 
consider the age of an elderly applicant when such age is used to favor 
the elderly applicant in extending credit.
    (3) Childbearing, childrearing. In evaluating creditworthiness, a 
creditor shall not make assumptions or use aggregate statistics relating 
to the likelihood that any category of persons will bear or rear 
children or will, for that reason, receive diminished or interrupted 
income in the future.
    (4) Telephone listing. A creditor shall not take into account 
whether there is a telephone listing in the name of an applicant for 
consumer credit but may take into account whether there is a telephone 
in the applicant's residence.
    (5) Income. A creditor shall not discount or exclude from 
consideration the income of an applicant or the spouse of an applicant 
because of a prohibited basis or because the income is

[[Page 38]]

derived from part-time employment or is an annuity, pension, or other 
retirement benefit; a creditor may consider the amount and probable 
continuance of any income in evaluating an applicant's creditworthiness. 
When an applicant relies on alimony, child support, or separate 
maintenance payments in applying for credit, the creditor shall consider 
such payments as income to the extent that they are likely to be 
consistently made.
    (6) Credit history. To the extent that a creditor considers credit 
history in evaluating the creditworthiness of similarly qualified 
applicants for a similar type and amount of credit, in evaluating an 
applicant's creditworthiness a creditor shall consider:
    (i) The credit history, when available, of accounts designated as 
accounts that the applicant and the applicant's spouse are permitted to 
use or for which both are contractually liable;
    (ii) On the applicant's request, any information the applicant may 
present that tends to indicate the credit history being considered by 
the creditor does not accurately reflect the applicant's 
creditworthiness; and
    (iii) On the applicant's request, the credit history, when 
available, of any account reported in the name of the applicant's spouse 
or former spouse that the applicant can demonstrate accurately reflects 
the applicant's creditworthiness.
    (7) Immigration status. A creditor may consider the applicant's 
immigration status or status as a permanent resident of the United 
States, and any additional information that may be necessary to 
ascertain the creditor's rights and remedies regarding repayment.
    (8) Marital status. Except as otherwise permitted or required by 
law, a creditor shall evaluate married and unmarried applicants by the 
same standards; and in evaluating joint applicants, a creditor shall not 
treat applicants differently based on the existence, absence, or 
likelihood of a marital relationship between the parties.
    (9) Race, color, religion, national origin, sex. Except as otherwise 
permitted or required by law, a creditor shall not consider race, color, 
religion, national origin, or sex (or an applicant's or other person's 
decision not to provide the information) in any aspect of a credit 
transaction.
    (c) State property laws. A creditor's consideration or application 
of state property laws directly or indirectly affecting creditworthiness 
does not constitute unlawful discrimination for the purposes of the Act 
or this part.



Sec. 1002.7  Rules concerning extensions of credit.

    (a) Individual accounts. A creditor shall not refuse to grant an 
individual account to a creditworthy applicant on the basis of sex, 
marital status, or any other prohibited basis.
    (b) Designation of name. A creditor shall not refuse to allow an 
applicant to open or maintain an account in a birth-given first name and 
a surname that is the applicant's birth-given surname, the spouse's 
surname, or a combined surname.
    (c) Action concerning existing open-end accounts--(1) Limitations. 
In the absence of evidence of the applicant's inability or unwillingness 
to repay, a creditor shall not take any of the following actions 
regarding an applicant who is contractually liable on an existing open-
end account on the basis of the applicant's reaching a certain age or 
retiring or on the basis of a change in the applicant's name or marital 
status:
    (i) Require a reapplication, except as provided in paragraph (c)(2) 
of this section;
    (ii) Change the terms of the account; or
    (iii) Terminate the account.
    (2) Requiring reapplication. A creditor may require a reapplication 
for an open-end account on the basis of a change in the marital status 
of an applicant who is contractually liable if the credit granted was 
based in whole or in part on income of the applicant's spouse and if 
information available to the creditor indicates that the applicant's 
income may not support the amount of credit currently available.
    (d) Signature of spouse or other person--(1) Rule for qualified 
applicant. Except as provided in this paragraph, a creditor shall not 
require the signature of an applicant's spouse or other person, other 
than a joint applicant, on any credit instrument if the applicant

[[Page 39]]

qualifies under the creditor's standards of creditworthiness for the 
amount and terms of the credit requested. A creditor shall not deem the 
submission of a joint financial statement or other evidence of jointly 
held assets as an application for joint credit.
    (2) Unsecured credit. If an applicant requests unsecured credit and 
relies in part upon property that the applicant owns jointly with 
another person to satisfy the creditor's standards of creditworthiness, 
the creditor may require the signature of the other person only on the 
instrument(s) necessary, or reasonably believed by the creditor to be 
necessary, under the law of the state in which the property is located, 
to enable the creditor to reach the property being relied upon in the 
event of the death or default of the applicant.
    (3) Unsecured credit--community property states. If a married 
applicant requests unsecured credit and resides in a community property 
state, or if the applicant is relying on property located in such a 
state, a creditor may require the signature of the spouse on any 
instrument necessary, or reasonably believed by the creditor to be 
necessary, under applicable state law to make the community property 
available to satisfy the debt in the event of default if:
    (i) Applicable state law denies the applicant power to manage or 
control sufficient community property to qualify for the credit 
requested under the creditor's standards of creditworthiness; and
    (ii) The applicant does not have sufficient separate property to 
qualify for the credit requested without regard to community property.
    (4) Secured credit. If an applicant requests secured credit, a 
creditor may require the signature of the applicant's spouse or other 
person on any instrument necessary, or reasonably believed by the 
creditor to be necessary, under applicable state law to make the 
property being offered as security available to satisfy the debt in the 
event of default, for example, an instrument to create a valid lien, 
pass clear title, waive inchoate rights, or assign earnings.
    (5) Additional parties. If, under a creditor's standards of 
creditworthiness, the personal liability of an additional party is 
necessary to support the credit requested, a creditor may request a 
cosigner, guarantor, endorser, or similar party. The applicant's spouse 
may serve as an additional party, but the creditor shall not require 
that the spouse be the additional party.
    (6) Rights of additional parties. A creditor shall not impose 
requirements upon an additional party that the creditor is prohibited 
from imposing upon an applicant under this section.
    (e) Insurance. A creditor shall not refuse to extend credit and 
shall not terminate an account because credit life, health, accident, 
disability, or other credit-related insurance is not available on the 
basis of the applicant's age.



Sec. 1002.8  Special purpose credit programs.

    (a) Standards for programs. Subject to the provisions of paragraph 
(b) of this section, the Act and this part permit a creditor to extend 
special purpose credit to applicants who meet eligibility requirements 
under the following types of credit programs:
    (1) Any credit assistance program expressly authorized by Federal or 
state law for the benefit of an economically disadvantaged class of 
persons;
    (2) Any credit assistance program offered by a not-for-profit 
organization, as defined under section 501(c) of the Internal Revenue 
Code of 1954, as amended, for the benefit of its members or for the 
benefit of an economically disadvantaged class of persons; or
    (3) Any special purpose credit program offered by a for-profit 
organization, or in which such an organization participates to meet 
special social needs, if:
    (i) The program is established and administered pursuant to a 
written plan that identifies the class of persons that the program is 
designed to benefit and sets forth the procedures and standards for 
extending credit pursuant to the program; and
    (ii) The program is established and administered to extend credit to 
a class of persons who, under the organization's customary standards of 
creditworthiness, probably would not receive such credit or would 
receive it on less

[[Page 40]]

favorable terms than are ordinarily available to other applicants 
applying to the organization for a similar type and amount of credit.
    (b) Rules in other sections--(1) General applicability. All the 
provisions of this part apply to each of the special purpose credit 
programs described in paragraph (a) of this section except as modified 
by this section.
    (2) Common characteristics. A program described in paragraph (a)(2) 
or (a)(3) of this section qualifies as a special purpose credit program 
only if it was established and is administered so as not to discriminate 
against an applicant on any prohibited basis; however, all program 
participants may be required to share one or more common characteristics 
(for example, race, national origin, or sex) so long as the program was 
not established and is not administered with the purpose of evading the 
requirements of the Act or this part.
    (c) Special rule concerning requests and use of information. If 
participants in a special purpose credit program described in paragraph 
(a) of this section are required to possess one or more common 
characteristics (for example, race, national origin, or sex) and if the 
program otherwise satisfies the requirements of paragraph (a) of this 
section, a creditor may request and consider information regarding the 
common characteristic(s) in determining the applicant's eligibility for 
the program.
    (d) Special rule in the case of financial need. If financial need is 
one of the criteria under a special purpose credit program described in 
paragraph (a) of this section, the creditor may request and consider, in 
determining an applicant's eligibility for the program, information 
regarding the applicant's marital status; alimony, child support, and 
separate maintenance income; and the spouse's financial resources. In 
addition, a creditor may obtain the signature of an applicant's spouse 
or other person on an application or credit instrument relating to a 
special purpose credit program if the signature is required by Federal 
or state law.



Sec. 1002.9  Notifications.

    (a) Notification of action taken, ECOA notice, and statement of 
specific reasons--(1) When notification is required. A creditor shall 
notify an applicant of action taken within:
    (i) 30 days after receiving a completed application concerning the 
creditor's approval of, counteroffer to, or adverse action on the 
application;
    (ii) 30 days after taking adverse action on an incomplete 
application, unless notice is provided in accordance with paragraph (c) 
of this section;
    (iii) 30 days after taking adverse action on an existing account; or
    (iv) 90 days after notifying the applicant of a counteroffer if the 
applicant does not expressly accept or use the credit offered.
    (2) Content of notification when adverse action is taken. A 
notification given to an applicant when adverse action is taken shall be 
in writing and shall contain a statement of the action taken; the name 
and address of the creditor; a statement of the provisions of section 
701(a) of the Act; the name and address of the Federal agency that 
administers compliance with respect to the creditor; and either:
    (i) A statement of specific reasons for the action taken; or
    (ii) A disclosure of the applicant's right to a statement of 
specific reasons within 30 days, if the statement is requested within 60 
days of the creditor's notification. The disclosure shall include the 
name, address, and telephone number of the person or office from which 
the statement of reasons can be obtained. If the creditor chooses to 
provide the reasons orally, the creditor shall also disclose the 
applicant's right to have them confirmed in writing within 30 days of 
receiving the applicant's written request for confirmation.
    (3) Notification to business credit applicants. For business credit, 
a creditor shall comply with the notification requirements of this 
section in the following manner:
    (i) With regard to a business that had gross revenues of $1 million 
or less in its preceding fiscal year (other than an extension of trade 
credit, credit incident to a factoring agreement, or other similar types 
of business credit), a creditor shall comply with paragraphs (a)(1) and 
(2) of this section, except that:

[[Page 41]]

    (A) The statement of the action taken may be given orally or in 
writing, when adverse action is taken;
    (B) Disclosure of an applicant's right to a statement of reasons may 
be given at the time of application, instead of when adverse action is 
taken, provided the disclosure contains the information required by 
paragraph (a)(2)(ii) of this section and the ECOA notice specified in 
paragraph (b)(1) of this section;
    (C) For an application made entirely by telephone, a creditor 
satisfies the requirements of paragraph (a)(3)(i) of this section by an 
oral statement of the action taken and of the applicant's right to a 
statement of reasons for adverse action.
    (ii) With regard to a business that had gross revenues in excess of 
$1 million in its preceding fiscal year or an extension of trade credit, 
credit incident to a factoring agreement, or other similar types of 
business credit, a creditor shall:
    (A) Notify the applicant, within a reasonable time, orally or in 
writing, of the action taken; and
    (B) Provide a written statement of the reasons for adverse action 
and the ECOA notice specified in paragraph (b)(1) of this section if the 
applicant makes a written request for the reasons within 60 days of the 
creditor's notification.
    (b) Form of ECOA notice and statement of specific reasons--(1) ECOA 
notice. To satisfy the disclosure requirements of paragraph (a)(2) of 
this section regarding section 701(a) of the Act, the creditor shall 
provide a notice that is substantially similar to the following: The 
Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is [name 
and address as specified by the appropriate agency or agencies listed in 
appendix A of this part]. Until January 1, 2013, a creditor may comply 
with this paragraph (b)(1) and paragraph (a)(2) of this section by 
including in the notice the name and address as specified by the 
appropriate agency in appendix A to 12 CFR part 202, as in effect on 
October 1, 2011.
    (2) Statement of specific reasons. The statement of reasons for 
adverse action required by paragraph (a)(2)(i) of this section must be 
specific and indicate the principal reason(s) for the adverse action. 
Statements that the adverse action was based on the creditor's internal 
standards or policies or that the applicant, joint applicant, or similar 
party failed to achieve a qualifying score on the creditor's credit 
scoring system are insufficient.
    (c) Incomplete applications--(1) Notice alternatives. Within 30 days 
after receiving an application that is incomplete regarding matters that 
an applicant can complete, the creditor shall notify the applicant 
either:
    (i) Of action taken, in accordance with paragraph (a) of this 
section; or
    (ii) Of the incompleteness, in accordance with paragraph (c)(2) of 
this section.
    (2) Notice of incompleteness. If additional information is needed 
from an applicant, the creditor shall send a written notice to the 
applicant specifying the information needed, designating a reasonable 
period of time for the applicant to provide the information, and 
informing the applicant that failure to provide the information 
requested will result in no further consideration being given to the 
application. The creditor shall have no further obligation under this 
section if the applicant fails to respond within the designated time 
period. If the applicant supplies the requested information within the 
designated time period, the creditor shall take action on the 
application and notify the applicant in accordance with paragraph (a) of 
this section.
    (3) Oral request for information. At its option, a creditor may 
inform the applicant orally of the need for additional information. If 
the application remains incomplete the creditor shall send a notice in 
accordance with paragraph (c)(1) of this section.

[[Page 42]]

    (d) Oral notifications by small-volume creditors. In the case of a 
creditor that did not receive more than 150 applications during the 
preceding calendar year, the requirements of this section (including 
statements of specific reasons) are satisfied by oral notifications.
    (e) Withdrawal of approved application. When an applicant submits an 
application and the parties contemplate that the applicant will inquire 
about its status, if the creditor approves the application and the 
applicant has not inquired within 30 days after applying, the creditor 
may treat the application as withdrawn and need not comply with 
paragraph (a)(1) of this section.
    (f) Multiple applicants. When an application involves more than one 
applicant, notification need only be given to one of them but must be 
given to the primary applicant where one is readily apparent.
    (g) Applications submitted through a third party. When an 
application is made on behalf of an applicant to more than one creditor 
and the applicant expressly accepts or uses credit offered by one of the 
creditors, notification of action taken by any of the other creditors is 
not required. If no credit is offered or if the applicant does not 
expressly accept or use the credit offered, each creditor taking adverse 
action must comply with this section, directly or through a third party. 
A notice given by a third party shall disclose the identity of each 
creditor on whose behalf the notice is given.



Sec. 1002.10  Furnishing of credit information.

    (a) Designation of accounts. A creditor that furnishes credit 
information shall designate:
    (1) Any new account to reflect the participation of both spouses if 
the applicant's spouse is permitted to use or is contractually liable on 
the account (other than as a guarantor, surety, endorser, or similar 
party); and
    (2) Any existing account to reflect such participation, within 90 
days after receiving a written request to do so from one of the spouses.
    (b) Routine reports to consumer reporting agency. If a creditor 
furnishes credit information to a consumer reporting agency concerning 
an account designated to reflect the participation of both spouses, the 
creditor shall furnish the information in a manner that will enable the 
agency to provide access to the information in the name of each spouse.
    (c) Reporting in response to inquiry. If a creditor furnishes credit 
information in response to an inquiry, concerning an account designated 
to reflect the participation of both spouses, the creditor shall furnish 
the information in the name of the spouse about whom the information is 
requested.



Sec. 1002.11  Relation to state law.

    (a) Inconsistent state laws. Except as otherwise provided in this 
section, this part alters, affects, or preempts only those state laws 
that are inconsistent with the Act and this part and then only to the 
extent of the inconsistency. A state law is not inconsistent if it is 
more protective of an applicant.
    (b) Preempted provisions of state law. (1) A state law is deemed to 
be inconsistent with the requirements of the Act and this part and less 
protective of an applicant within the meaning of section 705(f) of the 
Act to the extent that the law:
    (i) Requires or permits a practice or act prohibited by the Act or 
this part;
    (ii) Prohibits the individual extension of consumer credit to both 
parties to a marriage if each spouse individually and voluntarily 
applies for such credit;
    (iii) Prohibits inquiries or collection of data required to comply 
with the Act or this part;
    (iv) Prohibits asking about or considering age in an empirically 
derived, demonstrably and statistically sound, credit scoring system to 
determine a pertinent element of creditworthiness, or to favor an 
elderly applicant; or
    (v) Prohibits inquiries necessary to establish or administer a 
special purpose credit program as defined by Sec. 1002.8.
    (2) A creditor, state, or other interested party may request that 
the Bureau determine whether a state law is inconsistent with the 
requirements of the Act and this part.
    (c) Laws on finance charges, loan ceilings. If married applicants 
voluntarily

[[Page 43]]

apply for and obtain individual accounts with the same creditor, the 
accounts shall not be aggregated or otherwise combined for purposes of 
determining permissible finance charges or loan ceilings under any 
Federal or state law. Permissible loan ceiling laws shall be construed 
to permit each spouse to become individually liable up to the amount of 
the loan ceilings, less the amount for which the applicant is jointly 
liable.
    (d) State and Federal laws not affected. This section does not alter 
or annul any provision of state property laws, laws relating to the 
disposition of decedents' estates, or Federal or state banking 
regulations directed only toward insuring the solvency of financial 
institutions.
    (e) Exemption for state-regulated transactions--(1) Applications. A 
state may apply to the Bureau for an exemption from the requirements of 
the Act and this part for any class of credit transactions within the 
state. The Bureau will grant such an exemption if the Bureau determines 
that:
    (i) The class of credit transactions is subject to state law 
requirements substantially similar to those of the Act and this part or 
that applicants are afforded greater protection under state law; and
    (ii) There is adequate provision for state enforcement.
    (2) Liability and enforcement. (i) No exemption will extend to the 
civil liability provisions of section 706 of the Act or the 
administrative enforcement provisions of section 704 of the Act.
    (ii) After an exemption has been granted, the requirements of the 
applicable state law (except for additional requirements not imposed by 
Federal law) will constitute the requirements of the Act and this part.



Sec. 1002.12  Record retention.

    (a) Retention of prohibited information. A creditor may retain in 
its files information that is prohibited by the Act or this part for use 
in evaluating applications, without violating the Act or this part, if 
the information was obtained:
    (1) From any source prior to March 23, 1977;
    (2) From consumer reporting agencies, an applicant, or others 
without the specific request of the creditor; or
    (3) As required to monitor compliance with the Act and this part or 
other Federal or state statutes or regulations.
    (b) Preservation of records--(1) Applications. For 25 months (12 
months for business credit, except as provided in paragraph (b)(5) of 
this section) after the date that a creditor notifies an applicant of 
action taken on an application or of incompleteness, the creditor shall 
retain in original form or a copy thereof:
    (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, and any 
other written or recorded information used in evaluating the application 
and not returned to the applicant at the applicant's request;
    (ii) A copy of the following documents if furnished to the applicant 
in written form (or, if furnished orally, any notation or memorandum 
made by the creditor):
    (A) The notification of action taken; and
    (B) The statement of specific reasons for adverse action; and
    (iii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (2) Existing accounts. For 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section) after the date 
that a creditor notifies an applicant of adverse action regarding an 
existing account, the creditor shall retain as to that account, in 
original form or a copy thereof:
    (i) Any written or recorded information concerning the adverse 
action; and
    (ii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (3) Other applications. For 25 months (12 months for business 
credit, except as provided in paragraph (b)(5) of this section) after 
the date that a creditor receives an application for which the creditor 
is not required to comply with the notification requirements of

[[Page 44]]

Sec. 1002.9, the creditor shall retain all written or recorded 
information in its possession concerning the applicant, including any 
notation of action taken.
    (4) Enforcement proceedings and investigations. A creditor shall 
retain the information beyond 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section) if the creditor 
has actual notice that it is under investigation or is subject to an 
enforcement proceeding for an alleged violation of the Act or this part, 
by the Attorney General of the United States or by an enforcement agency 
charged with monitoring that creditor's compliance with the Act and this 
part, or if it has been served with notice of an action filed pursuant 
to section 706 of the Act and Sec. 1002.16 of this part. The creditor 
shall retain the information until final disposition of the matter, 
unless an earlier time is allowed by order of the agency or court.
    (5) Special rule for certain business credit applications. With 
regard to a business that had gross revenues in excess of $1 million in 
its preceding fiscal year, or an extension of trade credit, credit 
incident to a factoring agreement, or other similar types of business 
credit, the creditor shall retain records for at least 60 days after 
notifying the applicant of the action taken. If within that time period 
the applicant requests in writing the reasons for adverse action or that 
records be retained, the creditor shall retain records for 12 months.
    (6) Self-tests. For 25 months after a self-test (as defined in 
Sec. 1002.15) has been completed, the creditor shall retain all written 
or recorded information about the self-test. A creditor shall retain 
information beyond 25 months if it has actual notice that it is under 
investigation or is subject to an enforcement proceeding for an alleged 
violation, or if it has been served with notice of a civil action. In 
such cases, the creditor shall retain the information until final 
disposition of the matter, unless an earlier time is allowed by the 
appropriate agency or court order.
    (7) Prescreened solicitations. For 25 months after the date on which 
an offer of credit is made to potential customers (12 months for 
business credit, except as provided in paragraph (b)(5) of this 
section), the creditor shall retain in original form or a copy thereof:
    (i) The text of any prescreened solicitation;
    (ii) The list of criteria the creditor used to select potential 
recipients of the solicitation; and
    (iii) Any correspondence related to complaints (formal or informal) 
about the solicitation.



Sec. 1002.13  Information for monitoring purposes.

    (a) Information to be requested. (1) A creditor that receives 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, shall request as part of the application the following 
information regarding the applicant(s):
    (i) Ethnicity, using the categories Hispanic or Latino, and not 
Hispanic or Latino; and race, using the categories American Indian or 
Alaska Native, Asian, Black or African American, Native Hawaiian or 
Other Pacific Islander, and White;
    (ii) Sex;
    (iii) Marital status, using the categories married, unmarried, and 
separated; and
    (iv) Age.
    (2) Dwelling means a residential structure that contains one to four 
units, whether or not that structure is attached to real property. The 
term includes, but is not limited to, an individual condominium or 
cooperative unit and a mobile or other manufactured home.
    (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.

[[Page 45]]

    (c) Disclosure to applicant(s). The creditor shall inform the 
applicant(s) that the information regarding ethnicity, race, sex, 
marital status, and age is being requested by the Federal Government for 
the purpose of monitoring compliance with Federal statutes that prohibit 
creditors from discriminating against applicants on those bases. The 
creditor shall also inform the applicant(s) that if the applicant(s) 
chooses not to provide the information, the creditor is required to note 
the ethnicity, race and sex on the basis of visual observation or 
surname.
    (d) Substitute monitoring program. A monitoring program required by 
an agency charged with administrative enforcement under section 704 of 
the Act may be substituted for the requirements contained in paragraphs 
(a), (b), and (c) of this section.



Sec. 1002.14  Rules on providing appraisals and other valuations.

    (a) Providing appraisals and other valuations--(1) In general. A 
creditor shall provide an applicant a copy of all appraisals and other 
written valuations developed in connection with an application for 
credit that is to be secured by a first lien on a dwelling. A creditor 
shall provide a copy of each such appraisal or other written valuation 
promptly upon completion, or three business days prior to consummation 
of the transaction (for closed-end credit) or account opening (for open-
end credit), whichever is earlier. An applicant may waive the timing 
requirement in this paragraph (a)(1) and agree to receive any copy at or 
before consummation or account opening, except where otherwise 
prohibited by law. Any such waiver must be obtained at least three 
business days prior to consummation or account opening, unless the 
waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical changes 
from a previous version of the appraisal or other written valuation 
provided to the applicant three or more business days prior to 
consummation or account opening. If the applicant provides a waiver and 
the transaction is not consummated or the account is not opened, the 
creditor must provide these copies no later than 30 days after the 
creditor determines consummation will not occur or the account will not 
be opened.
    (2) Disclosure. For applications subject to paragraph (a)(1) of this 
section, a creditor shall mail or deliver to an applicant, not later 
than the third business day after the creditor receives an application 
for credit that is to be secured by a first lien on a dwelling, a notice 
in writing of the applicant's right to receive a copy of all written 
appraisals developed in connection with the application. In the case of 
an application for credit that is not to be secured by a first lien on a 
dwelling at the time of application, if the creditor later determines 
the credit will be secured by a first lien on a dwelling, the creditor 
shall mail or deliver the same notice in writing not later than the 
third business day after the creditor determines that the loan is to be 
secured by a first lien on a dwelling.
    (3) Reimbursement. A creditor shall not charge an applicant for 
providing a copy of appraisals and other written valuations as required 
under this section, but may require applicants to pay a reasonable fee 
to reimburse the creditor for the cost of the appraisal or other written 
valuation unless otherwise provided by law.
    (4) Withdrawn, denied, or incomplete applications. The requirements 
set forth in paragraph (a)(1) of this section apply whether credit is 
extended or denied or if the application is incomplete or withdrawn.
    (5) Copies in electronic form. The copies required by 
Sec. 1002.14(a)(1) may be provided to the applicant in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the Electronic Signatures in Global and National Commerce 
Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (b) Definitions. For purposes of paragraph (a) of this section:
    (1) Consummation. The term ``consummation'' means the time that a 
consumer becomes contractually obligated on a closed-end credit 
transaction.
    (2) Dwelling. The term ``dwelling'' means a residential structure 
that contains one to four units whether or not

[[Page 46]]

that structure is attached to real property. The term includes, but is 
not limited to, an individual condominium or cooperative unit, and a 
mobile or other manufactured home.
    (3) Valuation. The term ``valuation'' means any estimate of the 
value of a dwelling developed in connection with an application for 
credit.

[78 FR 7248, Jan. 31, 2013]



Sec. 1002.15  Incentives for self-testing and self-correction.

    (a) General rules--(1) Voluntary self-testing and correction. The 
report or results of a self-test that a creditor voluntarily conducts 
(or authorizes) are privileged as provided in this section. Data 
collection required by law or by any governmental authority is not a 
voluntary self-test.
    (2) Corrective action required. The privilege in this section 
applies only if the creditor has taken or is taking appropriate 
corrective action.
    (3) Other privileges. The privilege created by this section does not 
preclude the assertion of any other privilege that may also apply.
    (b) Self-test defined--(1) Definition. A self-test is any program, 
practice, or study that:
    (i) Is designed and used specifically to determine the extent or 
effectiveness of a creditor's compliance with the Act or this part; and
    (ii) Creates data or factual information that is not available and 
cannot be derived from loan or application files or other records 
related to credit transactions.
    (2) Types of information privileged. The privilege under this 
section applies to the report or results of the self-test, data or 
factual information created by the self-test, and any analysis, 
opinions, and conclusions pertaining to the self-test report or results. 
The privilege covers workpapers or draft documents as well as final 
documents.
    (3) Types of information not privileged. The privilege under this 
section does not apply to:
    (i) Information about whether a creditor conducted a self-test, the 
methodology used or the scope of the self-test, the time period covered 
by the self-test, or the dates it was conducted; or
    (ii) Loan and application files or other business records related to 
credit transactions, and information derived from such files and 
records, even if the information has been aggregated, summarized, or 
reorganized to facilitate analysis.
    (c) Appropriate corrective action--(1) General requirement. For the 
privilege in this section to apply, appropriate corrective action is 
required when the self-test shows that it is more likely than not that a 
violation occurred, even though no violation has been formally 
adjudicated.
    (2) Determining the scope of appropriate corrective action. A 
creditor must take corrective action that is reasonably likely to remedy 
the cause and effect of a likely violation by:
    (i) Identifying the policies or practices that are the likely cause 
of the violation; and
    (ii) Assessing the extent and scope of any violation.
    (3) Types of relief. Appropriate corrective action may include both 
prospective and remedial relief, except that to establish a privilege 
under this section:
    (i) A creditor is not required to provide remedial relief to a 
tester used in a self-test;
    (ii) A creditor is only required to provide remedial relief to an 
applicant identified by the self-test as one whose rights were more 
likely than not violated; and
    (iii) A creditor is not required to provide remedial relief to a 
particular applicant if the statute of limitations applicable to the 
violation expired before the creditor obtained the results of the self-
test or the applicant is otherwise ineligible for such relief.
    (4) No admission of violation. Taking corrective action is not an 
admission that a violation occurred.
    (d) Scope of privilege--(1) General rule. The report or results of a 
privileged self-test may not be obtained or used:
    (i) By a government agency in any examination or investigation 
relating to compliance with the Act or this part; or
    (ii) By a government agency or an applicant (including a prospective 
applicant who alleges a violation of Sec. 1002.4(b)) in any proceeding 
or civil

[[Page 47]]

action in which a violation of the Act or this part is alleged.
    (2) Loss of privilege. The report or results of a self-test are not 
privileged under paragraph (d)(1) of this section if the creditor or a 
person with lawful access to the report or results:
    (i) Voluntarily discloses any part of the report or results, or any 
other information privileged under this section, to an applicant or 
government agency or to the public;
    (ii) Discloses any part of the report or results, or any other 
information privileged under this section, as a defense to charges that 
the creditor has violated the Act or regulation; or
    (iii) Fails or is unable to produce written or recorded information 
about the self-test that is required to be retained under 
Sec. 1002.12(b)(6) when the information is needed to determine whether 
the privilege applies. This paragraph does not limit any other penalty 
or remedy that may be available for a violation of Sec. 1002.12.
    (3) Limited use of privileged information. Notwithstanding paragraph 
(d)(1) of this section, the self-test report or results and any other 
information privileged under this section may be obtained and used by an 
applicant or government agency solely to determine a penalty or remedy 
after a violation of the Act or this part has been adjudicated or 
admitted. Disclosures for this limited purpose may be used only for the 
particular proceeding in which the adjudication or admission was made. 
Information disclosed under this paragraph (d)(3) remains privileged 
under paragraph (d)(1) of this section.



Sec. 1002.16  Enforcement, penalties and liabilities.

    (a) Administrative enforcement. (1) As set forth more fully in 
section 704 of the Act, administrative enforcement of the Act and this 
part regarding certain creditors is assigned to the Comptroller of the 
Currency, Board of Governors of the Federal Reserve System, Board of 
Directors of the Federal Deposit Insurance Corporation, National Credit 
Union Administration, Surface Transportation Board, Civil Aeronautics 
Board, Secretary of Agriculture, Farm Credit Administration, Securities 
and Exchange Commission, Small Business Administration, Secretary of 
Transportation, and Bureau of Consumer Financial Protection.
    (2) Except to the extent that administrative enforcement is 
specifically assigned to some government agency other than the Bureau, 
and subject to subtitle B of the Consumer Financial Protection Act of 
2010, the Federal Trade Commission is authorized to enforce the 
requirements imposed under the Act and this part.
    (b) Penalties and liabilities. (1) Sections 702(g) and 706(a) and 
(b) of the Act provide that any creditor that fails to comply with a 
requirement imposed by the Act or this part is subject to civil 
liability for actual and punitive damages in individual or class 
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the 
Act, violations of the Act or this part also constitute violations of 
other Federal laws. Liability for punitive damages can apply only to 
nongovernmental entities and is limited to $10,000 in individual actions 
and the lesser of $500,000 or 1 percent of the creditor's net worth in 
class actions. Section 706(c) provides for equitable and declaratory 
relief and section 706(d) authorizes the awarding of costs and 
reasonable attorney's fees to an aggrieved applicant in a successful 
action.
    (2) As provided in section 706(f) of the Act, a civil action under 
the Act or this part may be brought in the appropriate United States 
district court without regard to the amount in controversy or in any 
other court of competent jurisdiction within five years after the date 
of the occurrence of the violation, or within one year after the 
commencement of an administrative enforcement proceeding or of a civil 
action brought by the Attorney General of the United States within five 
years after the alleged violation.
    (3) If an agency responsible for administrative enforcement is 
unable to obtain compliance with the Act or this part, it may refer the 
matter to the Attorney General of the United States. If the Bureau, the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Board of Governors of the Federal Reserve System, or the National 
Credit Union Administration has reason to believe that one

[[Page 48]]

or more creditors have engaged in a pattern or practice of discouraging 
or denying applications in violation of the Act or this part, the agency 
shall refer the matter to the Attorney General. If the agency has reason 
to believe that one or more creditors violated section 701(a) of the 
Act, the agency may refer a matter to the Attorney General.
    (4) On referral, or whenever the Attorney General has reason to 
believe that one or more creditors have engaged in a pattern or practice 
in violation of the Act or this part, the Attorney General may bring a 
civil action for such relief as may be appropriate, including actual and 
punitive damages and injunctive relief.
    (5) If the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Board of Governors of the Federal Reserve 
System, or the National Credit Union Administration has reason to 
believe (as a result of a consumer complaint, a consumer compliance 
examination, or some other basis) that a violation of the Act or this 
part has occurred which is also a violation of the Fair Housing Act, and 
the matter is not referred to the Attorney General, the agency shall:
    (i) Notify the Secretary of Housing and Urban Development; and
    (ii) Inform the applicant that the Secretary of Housing and Urban 
Development has been notified and that remedies may be available under 
the Fair Housing Act.
    (c) Failure of compliance. A creditor's failure to comply with 
Sec. 1002.6(b)(6), Sec. 1002.9, Sec. 1002.10, Sec. 1002.12 or 
Sec. 1002.13 is not a violation if it results from an inadvertent error. 
On discovering an error under Secs. 1002.9 and 1002.10, the creditor 
shall correct it as soon as possible. If a creditor inadvertently 
obtains the monitoring information regarding the ethnicity, race, and 
sex of the applicant in a dwelling-related transaction not covered by 
Sec. 1002.13, the creditor may retain information and act on the 
application without violating the regulation.



 Sec. Appendix A to Part 1002--Federal Agencies to be Listed in Adverse 
                             Action Notices

    The following list indicates the Federal agency or agencies that 
should be listed in notices provided by creditors pursuant to 
Sec. 1002.9(b)(1). Any questions concerning a particular creditor may be 
directed to such agencies. This list is not intended to describe 
agencies' enforcement authority for ECOA and Regulation B. Terms that 
are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) 
shall have the meaning given to them in the International Banking Act of 
1978 (12 U.S.C. 3101).
    1. Banks, savings associations, and credit unions with total assets 
of over $10 billion and their affiliates: Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington DC 20006. Such affiliates that 
are not banks, savings associations, or credit unions also should list, 
in addition to the Bureau: FTC Regional Office for region in which the 
creditor operates or Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    2. To the extent not included in item 1 above:
    a. National banks, Federal savings associations, and Federal 
branches and Federal agencies of foreign banks: Office of the 
Comptroller of the Currency, Customer Assistance Group, 1301 McKinney 
Street, Suite 3450, Houston, TX 77010-9050
    b. State member banks, branches and agencies of foreign banks (other 
than Federal branches, Federal agencies, and insured state branches of 
foreign banks), commercial lending companies owned or controlled by 
foreign banks, and organizations operating under section 25 or 25A of 
the Federal Reserve Act: Federal Reserve Consumer Help Center, P.O. Box 
1200, Minneapolis, MN 55480.
    c. Nonmember Insured Banks, Insured State Branches of Foreign Banks, 
and Insured State Savings Associations: FDIC Consumer Response Center, 
1100 Walnut Street, Box 11, Kansas City, MO 64106.
    d. Federal Credit Unions: National Credit Union Administration, 
Office of Consumer Protection, 1775 Duke Street, Alexandria, VA 22314.
    3. Air carriers: Assistant General Counsel for Aviation Enforcement 
and Proceedings, Department of Transportation, 400 Seventh Street SW., 
Washington, DC 20590.
    4. Creditors Subject to Surface Transportation Board: Office of 
Proceedings, Surface Transportation Board, Department of Transportation, 
1925 K Street NW., Washington, DC 20423.
    5. Creditors Subject to Packers and Stockyards Act: Nearest Packers 
and Stockyards Administration area supervisor.
    6. Small Business Investment Companies: Associate Deputy 
Administrator for Capital Access, United States Small Business 
Administration, 409 Third Street SW., 8th Floor, Washington, DC 20416.
    7. Brokers and Dealers: Securities and Exchange Commission, 
Washington, DC 20549.

[[Page 49]]

    8. Federal Land Banks, Federal Land Bank Associations, Federal 
Intermediate Credit Banks, and Production Credit Associations: Farm 
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    9. Retailers, Finance Companies, and All Other Creditors Not Listed 
Above: FTC Regional Office for region in which the creditor operates or 
Federal Trade Commission, Equal Credit Opportunity, Washington, DC 
20580.



          Sec. 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. All forms contained in this appendix are models; 
their use by creditors is optional.
    2. The use or modification of these forms is governed by the 
following instructions. A creditor may change the forms: by asking for 
additional information not prohibited by Sec. 1002.5; by deleting any 
information request; or by rearranging the format without modifying the 
substance of the inquiries. In any of these three instances, however, 
the appropriate notices regarding the optional nature of courtesy 
titles, the option to disclose alimony, child support, or separate 
maintenance, and the limitation concerning marital status inquiries must 
be included in the appropriate places if the items to which they relate 
appear on the creditor's form.
    3. If a creditor uses an appropriate appendix B model form, or 
modifies a form in accordance with the above instructions, that creditor 
shall be deemed to be acting in compliance with the provisions of 
paragraphs (b), (c) and (d) of Sec. 1002.5 of this part.

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         Sec. Appendix C to Part 1002--Sample Notification Forms

    1. This Appendix contains ten sample notification forms. Forms C-1 
through C-4 are intended for use in notifying an applicant that adverse 
action has been taken on an application or account under 
Secs. 1002.9(a)(1) and (2)(i) of this part. Form C-5 is a notice of 
disclosure of the right to request specific reasons for adverse action 
under Secs. 1002.9(a)(1) and (2)(ii). Form C-6 is designed for use in 
notifying an applicant, under Sec. 1002.9(c)(2), that an application is 
incomplete. Forms C-7 and C-8 are intended for use in connection with 
applications for business credit under Sec. 1002.9(a)(3). Form C-9 is 
designed for use in notifying an applicant of the right to receive a 
copy of appraisals under Sec. 1002.14. Form C-10 is designed for use in 
notifying an applicant for nonmortgage credit that the creditor is 
requesting applicant characteristic information.
    2. Form C-1 contains the Fair Credit Reporting Act disclosure as 
required by sections 615(a) and (b) of that act. Forms C-2 through C-5 
contain only the section 615(a) disclosure (that a creditor obtained 
information from a consumer reporting agency that was considered in the 
credit decision). A creditor must provide the section 615(a) disclosure 
when adverse action is taken against a consumer based on information 
from a consumer reporting agency. A creditor must provide the section 
615(b) disclosure when adverse action is taken based on information from 
an outside source other than a consumer reporting agency. In addition, a 
creditor must provide the section 615(b) disclosure if the creditor 
obtained information from an affiliate other than information in a 
consumer report or other than information concerning the affiliate's own 
transactions or experiences with the consumer. Creditors may comply with 
the disclosure requirements for adverse action based on information in a 
consumer report obtained from an affiliate by providing either the 
section 615(a) or section 615(b) disclosure. Optional language in Forms 
C-1 through C-5 may be used to direct the consumer to the entity that 
provided the credit score for any questions about the credit score, 
along with the entity's contact information. Creditors may use or not 
use this additional language without losing the safe harbor, since the 
language is optional.
    3. The sample forms are illustrative and may not be appropriate for 
all creditors. They were designed to include some of the factors that 
creditors most commonly consider. If a creditor chooses to use the 
checklist of reasons provided in one of the sample forms in this 
appendix and if reasons commonly used by the creditor are not provided 
on the form, the creditor should modify the checklist by substituting or 
adding other reasons. For example, if ``inadequate down payment'' or 
``no deposit relationship with us'' are common reasons for taking 
adverse action on an application, the creditor ought to add or 
substitute such reasons for those presently contained on the sample 
forms.
    4. If the reasons listed on the forms are not the factors actually 
used, a creditor will not satisfy the notice requirement by simply 
checking the closest identifiable factor listed. For example, some 
creditors consider only references from banks or other depository 
institutions and disregard finance company references altogether; their 
statement of reasons should disclose ``insufficient bank references,'' 
not ``insufficient credit references.'' Similarly, a creditor that 
considers bank references and other credit references as distinct 
factors should treat the two factors separately and disclose them as 
appropriate. The creditor should either add such other factors to the 
form or check ``other'' and include the appropriate explanation. The 
creditor need not, however, describe how or why a factor adversely 
affected the application. For example, the notice may say ``length of 
residence'' rather than ``too short a period of residence.''
    5. A creditor may design its own notification forms or use all or a 
portion of the forms contained in this Appendix. Proper use of Forms C-1 
through C-4 will satisfy the requirement of Sec. 1002.9(a)(2)(i). Proper 
use of Forms C-5 and C-6 constitutes full compliance with 
Secs. 1002.9(a)(2)(ii) and 1002.9(c)(2), respectively. Proper use of 
Forms C-7 and C-8 will satisfy the requirements of Secs. 1002.9(a)(2)(i) 
and (ii), respectively, for applications for business credit. Proper use 
of Form C-9 will satisfy the requirements of Sec. 1002.14 of this part. 
Proper use of Form C-10 will satisfy the requirements of 
Sec. 1002.5(b)(1).

    Form C-1--Sample Notice of Action Taken and Statement of Reasons

Statement of Credit Denial, Termination or Change

 Date:__________________________________________________________________
 Applicant's Name:______________________________________________________
 Applicant's Address:___________________________________________________
 Description of Account, Transaction, or Requested Credit:______________
 Description of Action Taken:___________________________________________

  Part I--Principal Reason(s) for Credit Denial, Termination, or Other 
                     Action Taken Concerning Credit

    This section must be completed in all instances.

__Credit application incomplete
__Insufficient number of credit references provided
__Unacceptable type of credit references provided
__Unable to verify credit references
__Temporary or irregular employment

[[Page 63]]

__Unable to verify employment
__Length of employment
__Income insufficient for amount of credit requested
__Excessive obligations in relation to income
__Unable to verify income
__Length of residence
__Temporary residence
__Unable to verify residence
__No credit file
__Limited credit experience
__Poor credit performance with us
__Delinquent past or present credit obligations with others
__Collection action or judgment
__Garnishment or attachment
__Foreclosure or repossession
__Bankruptcy
__Number of recent inquiries on credit bureau report
__Value or type of collateral not sufficient
__Other, specify: ___

   Part II--Disclosure of Use of Information Obtained From an Outside 
                                 Source

    This section should be completed if the credit decision was based in 
whole or in part on information that has been obtained from an outside 
source.
__Our credit decision was based in whole or in part on information 
obtained in a report from the consumer reporting agency listed below. 
You have a right under the Fair Credit Reporting Act to know the 
information contained in your credit file at the consumer reporting 
agency. The reporting agency played no part in our decision and is 
unable to supply specific reasons why we have denied credit to you. You 
also have a right to a free copy of your report from the reporting 
agency, if you request it no later than 60 days after you receive this 
notice. In addition, if you find that any information contained in the 
report you receive is inaccurate or incomplete, you have the right to 
dispute the matter with the reporting agency.
 Name:__________________________________________________________________
 Address:_______________________________________________________________
 [Toll-free] Telephone number:__________________________________________
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.

 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of ____ to a high of ____.
    Key factors that adversely affected your credit score:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________

[[Toll-free] Telephone number: ____]

__Our credit decision was based in whole or in part on information 
obtained from an affiliate or from an outside source other than a 
consumer reporting agency. Under the Fair Credit Reporting Act, you have 
the right to make a written request, no later than 60 days after you 
receive this notice, for disclosure of the nature of this information.

    If you have any questions regarding this notice, you should contact:

 Creditor's name:_______________________________________________________
 Creditor's address:____________________________________________________
 Creditor's telephone number:___________________________________________

    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

    Form C-2--Sample Notice of Action Taken and Statement of Reasons

Date

    Dear Applicant: Thank you for your recent application. Your request 
for [a loan/a credit card/an increase in your credit limit] was 
carefully considered, and we regret that we are unable to approve your 
application at this time, for the following reason(s):
    Your Income:

__is below our minimum requirement.
__is insufficient to sustain payments on the amount of credit requested.
__could not be verified.

    Your Employment:

__is not of sufficient length to qualify.
__could not be verified.

    Your Credit History:

__of making payments on time was not satisfactory.
__could not be verified.

    Your Application:

__lacks a sufficient number of credit references.
__lacks acceptable types of credit references.

[[Page 64]]

__reveals that current obligations are excessive in relation to income.
 Other:_________________________________________________________________

    The consumer reporting agency contacted that provided information 
that influenced our decision in whole or in part was [name, address and 
[toll-free] telephone number of the reporting agency]. The reporting 
agency played no part in our decision and is unable to supply specific 
reasons why we have denied credit to you. You have a right under the 
Fair Credit Reporting Act to know the information contained in your 
credit file at the consumer reporting agency. You also have a right to a 
free copy of your report from the reporting agency, if you request it no 
later than 60 days after you receive this notice. In addition, if you 
find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to dispute the matter with 
the reporting agency. Any questions regarding such information should be 
directed to [consumer reporting agency]. If you have any questions 
regarding this letter, you should contact us at [creditor's name, 
address and telephone number].

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

 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of ____ to a high of ____.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________

[[Toll-free] Telephone number: ____]
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

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

Date

    Dear Applicant: Thank you for your recent application for _____. We 
regret that we are unable to approve your request.
    [Reasons for Denial of Credit]
    Your application was processed by a [credit scoring] system that 
assigns a numerical value to the various items of information we 
consider in evaluating an application. These numerical values are based 
upon the results of analyses of repayment histories of large numbers of 
customers.
    The information you provided in your application did not score a 
sufficient number of points for approval of the application. The reasons 
you did not score well compared with other applicants were:

  Insufficient bank references
  Type of occupation
  Insufficient credit experience
  Number of recent inquiries on credit bureau report

    [Your Right to Get Your Consumer Report]
    In evaluating your application the consumer reporting agency listed 
below provided us with information that in whole or in part influenced 
our decision. The consumer reporting agency played no part in our 
decision and is unable to supply specific reasons why we have denied 
credit to you. You have a right under the Fair Credit Reporting Act to 
know the information contained in your credit file at the consumer 
reporting agency. It can be obtained by contacting: [Name, address, and 
[toll-free] telephone number of the consumer reporting agency]. You also 
have a right to a free copy of your report from the reporting agency, if 
you request it no later than 60 days after you receive this notice. In 
addition, if you find that any information contained in the report you 
receive is inaccurate or incomplete, you have the right to dispute the 
matter with the reporting agency.
    [Information about Your Credit Score]
    [Information about Your Credit Score]
    We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
 Your credit score:_____________________________________________________
 Date:__________________________________________________________________

    Scores range from a low of ____ to a high of ____.
    Key factors that adversely affected your credit score:
________________________________________________________________________

[[Page 65]]

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:
 Address:_______________________________________________________________

[Toll-free] Telephone number: ____]
    If you have any questions regarding this letter, you should contact 
us at
 Creditor's Name:_______________________________________________________
 Address:_______________________________________________________________
 Telephone:_____________________________________________________________
        Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (with certain 
limited exceptions); because all or part of the applicant's income 
derives from any public assistance program; or because the applicant has 
in good faith exercised any right under the Consumer Credit Protection 
Act. The Federal agency that administers compliance with this law 
concerning this creditor is (name and address as specified by the 
appropriate agency listed in appendix A).

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

Date

    Dear Applicant: Thank you for your application for _____. We are 
unable to offer you credit on the terms that you requested for the 
following reason(s):_____
    We can, however, offer you credit on the following terms: _____
    If this offer is acceptable to you, please notify us within [amount 
of time] at the following address: _____.
    Our credit decision on your application was based in whole or in 
part on information obtained in a report from [name, address and [toll-
free] telephone number of the consumer reporting agency]. You have a 
right under the Fair Credit Reporting Act to know the information 
contained in your credit file at the consumer reporting agency. The 
reporting agency played no part in our decision and is unable to supply 
specific reasons why we have denied credit to you. You also have a right 
to a free copy of your report from the reporting agency, if you request 
it no later than 60 days after you receive this notice. In addition, if 
you find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to dispute the matter with 
the reporting agency.
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
 Your credit score:_____________________________________________________
 Date:__________________________________________________________________
    Scores range from a low of ____ to a high of ____.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________
    [Toll-free] Telephone number:____]
    You should know that the Federal Equal Credit Opportunity Act 
prohibits creditors, such as ourselves, from discriminating against 
credit applicants on the basis of their race, color, religion, national 
origin, sex, marital status, age (provided the applicant has the 
capacity to enter into a binding contract), because they receive income 
from a public assistance program, or because they may have exercised 
their rights under the Consumer Credit Protection Act. If you believe 
there has been discrimination in handling your application you should 
contact the [name and address of the appropriate Federal enforcement 
agency listed in appendix A].
        Sincerely,

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

Date
    Dear Applicant: Thank you for applying to us for _____.
    After carefully reviewing your application, we are sorry to advise 
you that we cannot [open an account for you/grant a loan to you/increase 
your credit limit] at this time. If you would like a statement of 
specific reasons why your application was denied, please contact [our 
credit service manager] shown below within 60 days of the date of this 
letter. We will provide you with the statement of reasons within 30 days 
after receiving your request.

Creditor's name
Address
Telephone number

    If we obtained information from a consumer reporting agency as part 
of our consideration of your application, its name, address, and [toll-
free] telephone number is shown below. The reporting agency played

[[Page 66]]

no part in our decision and is unable to supply specific reasons why we 
have denied credit to you. [You have a right under the Fair Credit 
Reporting Act to know the information contained in your credit file at 
the consumer reporting agency.] You have a right to a free copy of your 
report from the reporting agency, if you request it no later than 60 
days after you receive this notice. In addition, if you find that any 
information contained in the report you received is inaccurate or 
incomplete, you have the right to dispute the matter with the reporting 
agency. You can find out about the information contained in your file 
(if one was used) by contacting:

Consumer reporting agency's name
Address
[Toll-free] Telephone number

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

    Scores range from a low of ____ to a high of ____.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

 Address:_______________________________________________________________
[Toll-free] Telephone number: ____]
        Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is (name 
and address as specified by the appropriate agency listed in appendix 
A).

   Form C-6--Sample Notice of Incomplete Application and Request for 
                         Additional Information

Creditor's name
Address
Telephone number
Date

    Dear Applicant: Thank you for your application for credit. The 
following information is needed to make a decision on your application: 
_____
    We need to receive this information by _____ (date). If we do not 
receive it by that date, we will regrettably be unable to give further 
consideration to your credit request.
        Sincerely,

    Form C-7--Sample Notice of Action Taken and Statement of Reasons 
                            (Business Credit)

Creditor's name
Creditor's address
Date

    Dear Applicant: Thank you for applying to us for credit. We have 
given your request careful consideration, and regret that we are unable 
to extend credit to you at this time for the following reasons:
    (Insert appropriate reason, such as: Value or type of collateral not 
sufficient; Lack of established earnings record; Slow or past due in 
trade or loan payments)
        Sincerely,
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex, marital status, age (provided the 
applicant has the capacity to enter into a binding contract); because 
all or part of the applicant's income derives from any public assistance 
program; or because the applicant has in good faith exercised any right 
under the Consumer Credit Protection Act. The Federal agency that 
administers compliance with this law concerning this creditor is [name 
and address as specified by the appropriate agency listed in appendix 
A].

  Form C-8--Sample Disclosure of Right To Request Specific Reasons for 
      Credit Denial Given at Time of Application (Business Credit)

Creditor's name
Creditor's address

    If your application for business credit is denied, you have the 
right to a written statement of the specific reasons for the denial. To 
obtain the statement, please contact [name, address and telephone number 
of the person or office from which the statement of reasons can be 
obtained] within 60 days from the date you are notified of our decision. 
We will send you a written statement of reasons for the denial within 30 
days of receiving your request for the statement.
    Notice: The Federal Equal Credit Opportunity Act prohibits creditors 
from discriminating against credit applicants on the basis of race, 
color, religion, national origin, sex,

[[Page 67]]

marital status, age (provided the applicant has the capacity to enter 
into a binding contract); because all or part of the applicant's income 
derives from any public assistance program; or because the applicant has 
in good faith exercised any right under the Consumer Credit Protection 
Act. The Federal agency that administers compliance with this law 
concerning this creditor is [name and address as specified by the 
appropriate agency listed in appendix A].

  Form C-9--Sample Disclosure of Right To Receive a Copy of Appraisals

    We may order an appraisal to determine the property's value and 
charge you for this appraisal. We will promptly give you a copy of any 
appraisal, even if your loan does not close.
    You can pay for an additional appraisal for your own use at your own 
cost.
    [In your letter, give us the following information:]

       Form C-10--Sample Disclosure About Voluntary Data Notation

    We are requesting the following information to monitor our 
compliance with the Federal Equal Credit Opportunity Act, which 
prohibits unlawful discrimination. You are not required to provide this 
information. We will not take this information (or your decision not to 
provide this information) into account in connection with your 
application or credit transaction. The law provides that a creditor may 
not discriminate based on this information, or based on whether or not 
you choose to provide it. [If you choose not to provide the information, 
we will note it by visual observation or surname].

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



   Sec. Appendix D to Part 1002--Issuance of Official Interpretations

    1.Official Interpretations. Interpretations of this part issued by 
officials of the Bureau provide the protection afforded under section 
706(e) of the Act. Except in unusual circumstances, such interpretations 
will not be issued separately but will be incorporated in an official 
commentary to the regulation, which will be amended periodically.
    2. Requests for Issuance of Official Interpretations. A request for 
an official interpretation should be in writing and addressed to the 
Assistant Director, Office of Regulations, Division of Research, 
Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 
G Street, NW., Washington, DC 20006. The request should contain a 
complete statement of all relevant facts concerning the issue, including 
copies of all pertinent documents.
    3. Scope of Interpretations. No interpretations will be issued 
approving creditors' forms or statements. This restriction does not 
apply to forms or statements whose use is required or sanctioned by a 
government agency.



        Sec. Supplement I to Part 1002--Official Interpretations

    Following is an official interpretation of Regulation B (12 CFR part 
1002) issued by the Bureau of Consumer Financial Protection. References 
are to sections of the regulation or the Equal Credit Opportunity Act 
(15 U.S.C. 1601 et seq.).

                              Introduction

    1.Official status. Section 706(e) of the Equal Credit Opportunity 
Act protects a creditor from civil liability for any act done or omitted 
in good faith in conformity with an interpretation issued by a duly 
authorized official of the Bureau. This commentary is the means by which 
the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation B. Good-faith compliance with this 
commentary affords a creditor protection under section 706(e) of the 
Act.
    2. Issuance of interpretations. Under appendix D to the regulation, 
any person may request an official interpretation. Interpretations will 
be issued at the discretion of designated officials and incorporated in 
this commentary following publication for comment in the Federal 
Register. Except in unusual circumstances, official interpretations will 
be issued only by means of this commentary.
    3. Comment designations. The comments are designated with as much 
specificity as possible according to the particular regulatory provision 
addressed. Each comment in the commentary is identified by a number and 
the regulatory section or paragraph that it interprets. For example, 
comments to Sec. 1002.2(c) are further divided by subparagraph, such as 
comment 2(c)(1)(ii)-1 and comment 2(c)(2)(ii-1.

              Section 1002.1--Authority, Scope, and Purpose

    1(a) Authority and scope.
    1. Scope. The Equal Credit Opportunity Act and Regulation B apply to 
all credit--commercial as well as personal--without regard to the nature 
or type of the credit or the creditor, except for an entity excluded 
from coverage of this part (but not the Act) by section 1029 of the 
Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a 
transaction provides for the deferral of the payment of a debt, it is 
credit covered by Regulation B even though it may not be a credit 
transaction covered by Regulation Z (Truth in Lending) (12 CFR part 
1026). Further, the definition of creditor is not restricted to the

[[Page 68]]

party or person to whom the obligation is initially payable, as is the 
case under Regulation Z. Moreover, the Act and regulation apply to all 
methods of credit evaluation, whether performed judgmentally or by use 
of a credit scoring system.
    2. Foreign applicability. Regulation B generally does not apply to 
lending activities that occur outside the United States. The regulation 
does apply to lending activities that take place within the United 
States (as well as the Commonwealth of Puerto Rico and any territory or 
possession of the United States), whether or not the applicant is a 
citizen.
    3. Bureau. The term Bureau, as used in this part, means the Bureau 
of Consumer Financial Protection.

                       Section 1002.2--Definitions

    2(c) Adverse action.
    Paragraph 2(c)(1)(i).
    1. Application for credit. If the applicant applied in accordance 
with the creditor's procedures, a refusal to refinance or extend the 
term of a business or other loan is adverse action.
    Paragraph 2(c)(1)(ii).
    1. Move from service area. If a credit card issuer terminates the 
open-end account of a customer because the customer has moved out of the 
card issuer's service area, the termination is adverse action unless 
termination on this ground was explicitly provided for in the credit 
agreement between the parties. In cases where termination is adverse 
action, notification is required under Sec. 1002.9.
    2. Termination based on credit limit. If a creditor terminates 
credit accounts that have low credit limits (for example, under $400) 
but keeps open accounts with higher credit limits, the termination is 
adverse action and notification is required under Sec. 1002.9.
    Paragraph 2(c)(2)(ii).
    1. Default--exercise of due-on-sale clause. If a mortgagor sells or 
transfers mortgaged property without the consent of the mortgagee, and 
the mortgagee exercises its contractual right to accelerate the mortgage 
loan, the mortgagee may treat the mortgagor as being in default. An 
adverse action notice need not be given to the mortgagor or the 
transferee. (See comment 2(e)-1 for treatment of a purchaser who 
requests to assume the loan.)
    2. Current delinquency or default. The term adverse action does not 
include a creditor's termination of an account when the accountholder is 
currently in default or delinquent on that account. Notification in 
accordance with Sec. 1002.9 of the regulation generally is required, 
however, if the creditor's action is based on a past delinquency or 
default on the account.
    Paragraph 2(c)(2)(iii).
    1. Point-of-sale transactions. Denial of credit at point of sale is 
not adverse action except under those circumstances specified in the 
regulation. For example, denial at point of sale is not adverse action 
in the following situations:
    i. A credit cardholder presents an expired card or a card that has 
been reported to the card issuer as lost or stolen.
    ii. The amount of a transaction exceeds a cash advance or credit 
limit.
    iii. The circumstances (such as excessive use of a credit card in a 
short period of time) suggest that fraud is involved.
    iv. The authorization facilities are not functioning.
    v. Billing statements have been returned to the creditor for lack of 
a forwarding address.
    2. Application for increase in available credit. A refusal or 
failure to authorize an account transaction at the point of sale or loan 
is not adverse action except when the refusal is a denial of an 
application, submitted in accordance with the creditor's procedures, for 
an increase in the amount of credit.
    Paragraph 2(c)(2)(v).
    1. Terms of credit versus type of credit offered. When an applicant 
applies for credit and the creditor does not offer the credit terms 
requested by the applicant (for example, the interest rate, length of 
maturity, collateral, or amount of downpayment), a denial of the 
application for that reason is adverse action (unless the creditor makes 
a counteroffer that is accepted by the applicant) and the applicant is 
entitled to notification under Sec. 1002.9.
    2(e) Applicant.
    1. Request to assume loan. If a mortgagor sells or transfers the 
mortgaged property and the buyer makes an application to the creditor to 
assume the mortgage loan, the mortgagee must treat the buyer as an 
applicant unless its policy is not to permit assumptions.
    2(f) Application.
    1. General. A creditor has the latitude under the regulation to 
establish its own application process and to decide the type and amount 
of information it will require from credit applicants.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a creditor for making credit decisions as well as 
its stated application procedures. For example, if a creditor's stated 
policy is to require all applications to be in writing on the creditor's 
application form, but the creditor also makes credit decisions based on 
oral requests, the creditor's procedures are to accept both oral and 
written applications.
    3. When an inquiry or prequalification request becomes an 
application. A creditor is encouraged to provide consumers with 
information about loan terms. However, if in giving information to the 
consumer the creditor also evaluates information about the consumer,

[[Page 69]]

decides to decline the request, and communicates this to the consumer, 
the creditor has treated the inquiry or prequalification request as an 
application and must then comply with the notification requirements 
under Sec. 1002.9. Whether the inquiry or prequalification request 
becomes an application depends on how the creditor responds to the 
consumer, not on what the consumer says or asks. (See comment 9-5 for 
further discussion of prequalification requests; see comment 2(f)-5 for 
a discussion of preapproval requests.)
    4. Examples of inquiries that are not applications. The following 
examples illustrate situations in which only an inquiry has taken place:
    i. A consumer calls to ask about loan terms and an employee explains 
the creditor's basic loan terms, such as interest rates, loan-to-value 
ratio, and debt-to-income ratio.
    ii. A consumer calls to ask about interest rates for car loans, and, 
in order to quote the appropriate rate, the loan officer asks for the 
make and sales price of the car and the amount of the downpayment, then 
gives the consumer the rate.
    iii. A consumer asks about terms for a loan to purchase a home and 
tells the loan officer her income and intended downpayment, but the loan 
officer only explains the creditor's loan-to-value ratio policy and 
other basic lending policies, without telling the consumer whether she 
qualifies for the loan.
    iv. A consumer calls to ask about terms for a loan to purchase 
vacant land and states his income and the sales price of the property to 
be financed, and asks whether he qualifies for a loan; the employee 
responds by describing the general lending policies, explaining that he 
would need to look at all of the consumer's qualifications before making 
a decision, and offering to send an application form to the consumer.
    5. Examples of an application. An application for credit includes 
the following situations:
    i. A person asks a financial institution to ``preapprove'' her for a 
loan (for example, to finance a house or a vehicle she plans to buy) and 
the institution reviews the request under a program in which the 
institution, after a comprehensive analysis of her creditworthiness, 
issues a written commitment valid for a designated period of time to 
extend a loan up to a specified amount. The written commitment may not 
be subject to conditions other than conditions that require the 
identification of adequate collateral, conditions that require no 
material change in the applicant's financial condition or 
creditworthiness prior to funding the loan, and limited conditions that 
are not related to the financial condition or creditworthiness of the 
applicant that the lender ordinarily attaches to a traditional 
application (such as certification of a clear termite inspection for a 
home purchase loan, or a maximum mileage requirement for a used car 
loan). But if the creditor's program does not provide for giving written 
commitments, requests for preapprovals are treated as prequalification 
requests for purposes of the regulation.
    ii. Under the same facts as above, the financial institution 
evaluates the person's creditworthiness and determines that she does not 
qualify for a preapproval.
    6. Completed application--diligence requirement. The regulation 
defines a completed application in terms that give a creditor the 
latitude to establish its own information requirements. Nevertheless, 
the creditor must act with reasonable diligence to collect information 
needed to complete the application. For example, the creditor should 
request information from third parties, such as a credit report, 
promptly after receiving the application. If additional information is 
needed from the applicant, such as an address or a telephone number to 
verify employment, the creditor should contact the applicant promptly. 
(But see comment 9(a)(1)-3, which discusses the creditor's option to 
deny an application on the basis of incompleteness.)2(g) Business 
credit.
    1. Definition. The test for deciding whether a transaction qualifies 
as business credit is one of primary purpose. For example, an open-end 
credit account used for both personal and business purposes is not 
business credit unless the primary purpose of the account is business-
related. A creditor may rely on an applicant's statement of the purpose 
for the credit requested.
    2(j) Credit.
    1. General. Regulation B covers a wider range of credit transactions 
than Regulation Z (Truth in Lending). Under Regulation B, a transaction 
is credit if there is a right to defer payment of a debt--regardless of 
whether the credit is for personal or commercial purposes, the number of 
installments required for repayment, or whether the transaction is 
subject to a finance charge.
    2(l) Creditor.
    1. Assignees. The term creditor includes all persons participating 
in the credit decision. This may include an assignee or a potential 
purchaser of the obligation who influences the credit decision by 
indicating whether or not it will purchase the obligation if the 
transaction is consummated.
    2. Referrals to creditors. For certain purposes, the term creditor 
includes persons such as real estate brokers, automobile dealers, home 
builders, and home-improvement contractors who do not participate in 
credit decisions but who only accept applications and refer applicants 
to creditors, or select or offer to select creditors to whom credit 
requests can be made. These persons must

[[Page 70]]

comply with Sec. 1002.4(a), the general rule prohibiting discrimination, 
and with Sec. 1002.4(b), the general rule against discouraging 
applications.
    2(p) Empirically derived and other credit scoring systems.
    1. Purpose of definition. The definition under Secs. 1002.2(p)(1)(i) 
through (iv) sets the criteria that a credit system must meet in order 
to use age as a predictive factor. Credit systems that do not meet these 
criteria are judgmental systems and may consider age only for the 
purpose of determining a ``pertinent element of creditworthiness.'' 
(Both types of systems may favor an elderly applicant. See 
Sec. 1002.6(b)(2).)
    2. Periodic revalidation. The regulation does not specify how often 
credit scoring systems must be revalidated. The credit scoring system 
must be revalidated frequently enough to ensure that it continues to 
meet recognized professional statistical standards for statistical 
soundness. To ensure that predictive ability is being maintained, the 
creditor must periodically review the performance of the system. This 
could be done, for example, by analyzing the loan portfolio to determine 
the delinquency rate for each score interval, or by analyzing population 
stability over time to detect deviations of recent applications from the 
applicant population used to validate the system. If this analysis 
indicates that the system no longer predicts risk with statistical 
soundness, the system must be adjusted as necessary to reestablish its 
predictive ability. A creditor is responsible for ensuring its system is 
validated and revalidated based on the creditor's own data.
    3. Pooled data scoring systems. A scoring system or the data from 
which to develop such a system may be obtained from either a single 
credit grantor or multiple credit grantors. The resulting system will 
qualify as an empirically derived, demonstrably and statistically sound, 
credit scoring system provided the criteria set forth in paragraph 
(p)(1)(i) through (iv) of this section are met. A creditor is 
responsible for ensuring its system is validated and revalidated based 
on the creditor's own data when it becomes available.
    4. Effects test and disparate treatment. An empirically derived, 
demonstrably and statistically sound, credit scoring system may include 
age as a predictive factor (provided that the age of an elderly 
applicant is not assigned a negative factor or value). Besides age, no 
other prohibited basis may be used as a variable. Generally, credit 
scoring systems treat all applicants objectively and thus avoid problems 
of disparate treatment. In cases where a credit scoring system is used 
in conjunction with individual discretion, disparate treatment could 
conceivably occur in the evaluation process. In addition, neutral 
factors used in credit scoring systems could nonetheless be subject to 
challenge under the effects test. (See comment 6(a)-2 for a discussion 
of the effects test).
    2(w) Open-end credit.
    1. Open-end real estate mortgages. The term ``open-end credit'' does 
not include negotiated advances under an open-end real estate mortgage 
or a letter of credit.
    2(z) Prohibited basis.
    1. Persons associated with applicant. As used in this part, 
prohibited basis refers not only to characteristics--the race, color, 
religion, national origin, sex, marital status, or age--of an applicant 
(or officers of an applicant in the case of a corporation) but also to 
the characteristics of individuals with whom an applicant is affiliated 
or with whom the applicant associates. This means, for example, that 
under the general rule stated in Sec. 1002.4(a), a creditor may not 
discriminate against an applicant because of that person's personal or 
business dealings with members of a certain religion, because of the 
national origin of any persons associated with the extension of credit 
(such as the tenants in the apartment complex being financed), or 
because of the race of other residents in the neighborhood where the 
property offered as collateral is located.
    2. National origin. A creditor may not refuse to grant credit 
because an applicant comes from a particular country but may take the 
applicant's immigration status into account. A creditor may also take 
into account any applicable law, regulation, or executive order 
restricting dealings with citizens (or the government) of a particular 
country or imposing limitations regarding credit extended for their use.
    3. Public assistance program. Any Federal, state, or local 
governmental assistance program that provides a continuing, periodic 
income supplement, whether premised on entitlement or need, is ``public 
assistance'' for purposes of the regulation. The term includes (but is 
not limited to) Temporary Aid to Needy Families, food stamps, rent and 
mortgage supplement or assistance programs, social security and 
supplemental security income, and unemployment compensation. Only 
physicians, hospitals, and others to whom the benefits are payable need 
consider Medicare and Medicaid as public assistance.

 Section 1002.3--Limited Exceptions for Certain Classes of Transactions

    1. Scope. Under this section, procedural requirements of the 
regulation do not apply to certain types of credit. All classes of 
transactions remain subject to Sec. 1002.4(a), the general rule barring 
discrimination on a prohibited basis, and to any other provision not 
specifically excepted.
    3(a) Public-utilities credit.
    1. Definition. This definition applies only to credit for the 
purchase of a utility service,

[[Page 71]]

such as electricity, gas, or telephone service. Credit provided or 
offered by a public utility for some other purpose--such as for 
financing the purchase of a gas dryer, telephone equipment, or other 
durable goods, or for insulation or other home improvements--is not 
excepted.
    2. Security deposits. A utility company is a creditor when it 
supplies utility service and bills the user after the service has been 
provided. Thus, any credit term (such as a requirement for a security 
deposit) is subject to the regulation's bar against discrimination on a 
prohibited basis.
    3. Telephone companies. A telephone company's credit transactions 
qualify for the exceptions provided in Sec. 1002.3(a)(2) only if the 
company is regulated by a government unit or files the charges for 
service, delayed payment, or any discount for prompt payment with a 
government unit.
    3(c) Incidental credit.
    1. Examples. If a service provider (such as a hospital, doctor, 
lawyer, or merchant) allows the client or customer to defer the payment 
of a bill, this deferral of debt is credit for purposes of the 
regulation, even though there is no finance charge and no agreement for 
payment in installments. Because of the exceptions provided by this 
section, however, these particular credit extensions are excepted from 
compliance with certain procedural requirements as specified in 
Sec. 1002.3(c).
    3(d) Government credit.
    1. Credit to governments. The exception relates to credit extended 
to (not by) governmental entities. For example, credit extended to a 
local government is covered by this exception, but credit extended to 
consumers by a Federal or state housing agency does not qualify for 
special treatment under this category.

                      Section 1002.4--General Rules

    Paragraph 4(a).
    1. Scope of rule. The general rule stated in Sec. 1002.4(a) covers 
all dealings, without exception, between an applicant and a creditor, 
whether or not addressed by other provisions of the regulation. Other 
provisions of the regulation identify specific practices that the Bureau 
has decided are impermissible because they could result in credit 
discrimination on a basis prohibited by the Act. The general rule 
covers, for example, application procedures, criteria used to evaluate 
creditworthiness, administration of accounts, and treatment of 
delinquent or slow accounts. Thus, whether or not specifically 
prohibited elsewhere in the regulation, a credit practice that treats 
applicants differently on a prohibited basis violates the law because it 
violates the general rule. Disparate treatment on a prohibited basis is 
illegal whether or not it results from a conscious intent to 
discriminate.
    2. Examples.
    i. Disparate treatment would exist, for example, in the following 
situations:
    A. A creditor provides information only on ``subprime'' and similar 
products to minority applicants who request information about the 
creditor's mortgage products, but provides information on a wider 
variety of mortgage products to similarly situated nonminority 
applicants.
    B. A creditor provides more comprehensive information to men than to 
similarly situated women.
    C. A creditor requires a minority applicant to provide greater 
documentation to obtain a loan than a similarly situated nonminority 
applicant.
    D. A creditor waives or relaxes credit standards for a nonminority 
applicant but not for a similarly situated minority applicant.
    ii. Treating applicants differently on a prohibited basis is 
unlawful if the creditor lacks a legitimate nondiscriminatory reason for 
its action, or if the asserted reason is found to be a pretext for 
discrimination.
    Paragraph 4(b).
    1. Prospective applicants. Generally, the regulation's protections 
apply only to persons who have requested or received an extension of 
credit. In keeping with the purpose of the Act--to promote the 
availability of credit on a nondiscriminatory basis--Sec. 1002.4(b) 
covers acts or practices directed at prospective applicants that could 
discourage a reasonable person, on a prohibited basis, from applying for 
credit. Practices prohibited by this section include:
    i. A statement that the applicant should not bother to apply, after 
the applicant states that he is retired.
    ii. The use of words, symbols, models or other forms of 
communication in advertising that express, imply, or suggest a 
discriminatory preference or a policy of exclusion in violation of the 
Act.
    iii. The use of interview scripts that discourage applications on a 
prohibited basis.
    2. Affirmative advertising. A creditor may affirmatively solicit or 
encourage members of traditionally disadvantaged groups to apply for 
credit, especially groups that might not normally seek credit from that 
creditor.
    Paragraph 4(c).
    1. Requirement for written applications. Model application forms are 
provided in appendix B to the regulation, although use of a printed form 
is not required. A creditor will satisfy the requirement by writing down 
the information that it normally considers in making a credit decision. 
The creditor may complete an application on behalf of an applicant and 
need not require the applicant to sign the application.
    2. Telephone applications. A creditor that accepts applications by 
telephone for dwelling-related credit covered by Sec. 1002.13 can

[[Page 72]]

meet the requirement for written applications by writing down pertinent 
information that is provided by the applicant.
    3. Computerized entry. Information entered directly into and 
retained by a computerized system qualifies as a written application 
under this paragraph. (See the commentary to Sec. 1002.13(b), 
Applications through electronic media and Applications through video.)
    Paragraph 4(d).
    1. Clear and conspicuous. This standard requires that disclosures be 
presented in a reasonably understandable format in a way that does not 
obscure the required information. No minimum type size is mandated, but 
the disclosures must be legible, whether typewritten, handwritten, or 
printed by computer.
    2. Form of disclosures. Whether the disclosures required to be on or 
with an application must be in electronic form depends upon the 
following:
    i. If an applicant accesses a credit application electronically 
(other than as described under ii below), such as online at a home 
computer, the creditor must provide the disclosures in electronic form 
(such as with the application form on its Web site) in order to meet the 
requirement to provide disclosures in a timely manner on or with the 
application. If the creditor instead mailed paper disclosures to the 
applicant, this requirement would not be met.
    ii. In contrast, if an applicant is physically present in the 
creditor's office, and accesses a credit application electronically, 
such as via a terminal or kiosk (or if the applicant uses a terminal or 
kiosk located on the premises of an affiliate or third party that has 
arranged with the creditor to provide applications to consumers), the 
creditor may provide disclosures in either electronic or paper form, 
provided the creditor complies with the timing, delivery, and 
retainability requirements of the regulation.

        Section 1002.5--Rules Concerning Requests for Information

    5(a) General rules.
    Paragraph 5(a)(1).
    1. Requests for information. This section governs the types of 
information that a creditor may gather. Section1002.6 governs how 
information may be used.
    Paragraph 5(a)(2).
    1. Local laws. Information that a creditor is allowed to collect 
pursuant to a ``state'' statute or regulation includes information 
required by a local statute, regulation, or ordinance.
    2. Information required by Regulation C. Regulation C 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 home-improvement loans and home-purchase loans, including 
some types of loans not covered by Sec. 1002.13.
    3. Collecting information on behalf of creditors. Persons such as 
loan brokers and correspondents do not violate the ECOA or Regulation B 
if they collect information that they are otherwise prohibited from 
collecting, where the purpose of collecting the information is to 
provide it to a creditor that is subject to the Home Mortgage Disclosure 
Act or another Federal or state statute or regulation requiring data 
collection.
    5(d) Other limitations on information requests.
    Paragraph 5(d)(1).
    1. Indirect disclosure of prohibited information. The fact that 
certain credit-related information may indirectly disclose marital 
status does not bar a creditor from seeking such information. For 
example, the creditor may ask about:
    i. The applicant's obligation to pay alimony, child support, or 
separate maintenance income.
    ii. The source of income to be used as the basis for repaying the 
credit requested, which could disclose that it is the income of a 
spouse.
    iii. Whether any obligation disclosed by the applicant has a co-
obligor, which could disclose that the co-obligor is a spouse or former 
spouse.
    iv. The ownership of assets, which could disclose the interest of a 
spouse.
    Paragraph 5(d)(2).
    1. Disclosure about income. The sample application forms in appendix 
B to the regulation illustrate how a creditor may inform an applicant of 
the right not to disclose alimony, child support, or separate 
maintenance income.
    2. General inquiry about source of income. Since a general inquiry 
about the source of income may lead an applicant to disclose alimony, 
child support, or separate maintenance income, a creditor making such an 
inquiry on an application form should preface the request with the 
disclosure required by this paragraph.
    3. Specific inquiry about sources of income. A creditor need not 
give the disclosure if the inquiry about income is specific and worded 
in a way that is unlikely to lead the applicant to disclose the fact 
that income is derived from alimony, child support, or separate 
maintenance payments. For example, an application form that asks about 
specific types of income such as salary, wages, or investment income 
need not include the disclosure.

       Section 1002.6--Rules Concerning Evaluation of Applications

    6(a) General rule concerning use of information.
    1. General. When evaluating an application for credit, a creditor 
generally may consider

[[Page 73]]

any information obtained. However, a creditor may not consider in its 
evaluation of creditworthiness any information that it is barred by 
Sec. 1002.5 from obtaining or from using for any purpose other than to 
conduct a self-test under Sec. 1002.15.
    2. Effects test. The effects test is a judicial doctrine that was 
developed in a series of employment cases decided by the U.S. Supreme 
Court under title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e 
et seq.,) and the burdens of proof for such employment cases were 
codified by Congress in the Civil Rights Act of 1991 (42 U.S.C. 2000e-
2). Congressional intent that this doctrine apply to the credit area is 
documented in the Senate Report that accompanied H.R. 6516, No. 94-589, 
pp. 4-5; and in the House Report that accompanied H.R. 6516, No. 94-210, 
p.5. The Act and regulation may prohibit a creditor practice that is 
discriminatory in effect because it has a disproportionately negative 
impact on a prohibited basis, even though the creditor has no intent to 
discriminate and the practice appears neutral on its face, unless the 
creditor practice meets a legitimate business need that cannot 
reasonably be achieved as well by means that are less disparate in their 
impact. For example, requiring that applicants have income in excess of 
a certain amount to qualify for an overdraft line of credit could mean 
that women and minority applicants will be rejected at a higher rate 
than men and nonminority applicants. If there is a demonstrable 
relationship between the income requirement and creditworthiness for the 
level of credit involved, however, use of the income standard would 
likely be permissible.
    6(b) Specific rules concerning use of information.
    Paragraph 6(b)(1).
    1. Prohibited basis--special purpose credit. In a special purpose 
credit program, a creditor may consider a prohibited basis to determine 
whether the applicant possesses a characteristic needed for eligibility. 
(See Sec. 1002.8.)
    Paragraph 6(b)(2).
    1. Favoring the elderly. Any system of evaluating creditworthiness 
may favor a credit applicant who is age 62 or older. A credit program 
that offers more favorable credit terms to applicants age 62 or older is 
also permissible; a program that offers more favorable credit terms to 
applicants at an age lower than 62 is permissible only if it meets the 
special-purpose credit requirements of Sec. 1002.8.
    2. Consideration of age in a credit scoring system. Age may be taken 
directly into account in a credit scoring system that is ``demonstrably 
and statistically sound,'' as defined in Sec. 1002.2(p), with one 
limitation: Applicants age 62 years or older must be treated at least as 
favorably as applicants who are under age 62. If age is scored by 
assigning points to an applicant's age category, elderly applicants must 
receive the same or a greater number of points as the most favored class 
of nonelderly applicants.
    i. Age-split scorecards. Some credit systems segment the population 
and use different scorecards based on the age of an applicant. In such a 
system, one card may cover a narrow age range (for example, applicants 
in their twenties or younger) who are evaluated under attributes 
predictive for that age group. A second card may cover all other 
applicants, who are evaluated under the attributes predictive for that 
broader class. When a system uses a card covering a wide age range that 
encompasses elderly applicants, the credit scoring system is not deemed 
to score age. Thus, the system does not raise the issue of assigning a 
negative factor or value to the age of elderly applicants. But if a 
system segments the population by age into multiple scorecards, and 
includes elderly applicants in a narrower age range, the credit scoring 
system does score age. To comply with the Act and regulation in such a 
case, the creditor must ensure that the system does not assign a 
negative factor or value to the age of elderly applicants as a class.
    3. Consideration of age in a judgmental system. In a judgmental 
system, defined in Sec. 1002.2(t), a creditor may not decide whether to 
extend credit or set the terms and conditions of credit based on age or 
information related exclusively to age. Age or age-related information 
may be considered only in evaluating other ``pertinent elements of 
creditworthiness'' that are drawn from the particular facts and 
circumstances concerning the applicant. For example, a creditor may not 
reject an application or terminate an account because the applicant is 
60 years old. But a creditor that uses a judgmental system may relate 
the applicant's age to other information about the applicant that the 
creditor considers in evaluating creditworthiness. As the following 
examples illustrate, the evaluation must be made in an individualized, 
case-by-case manner:
    i. A creditor may consider the applicant's occupation and length of 
time to retirement to ascertain whether the applicant's income 
(including retirement income) will support the extension of credit to 
its maturity.
    ii. A creditor may consider the adequacy of any security offered 
when the term of the credit extension exceeds the life expectancy of the 
applicant and the cost of realizing on the collateral could exceed the 
applicant's equity. An elderly applicant might not qualify for a 5 
percent down, 30-year mortgage loan but might qualify with a larger 
downpayment or a shorter loan maturity.
    iii. A creditor may consider the applicant's age to assess the 
significance of length of employment (a young applicant may have just 
entered the job market) or length of time at an address (an elderly 
applicant may

[[Page 74]]

recently have retired and moved from a long-term residence).
    4. Consideration of age in a reverse mortgage. A reverse mortgage is 
a home-secured loan in which the borrower receives payments from the 
creditor, and does not become obligated to repay these amounts (other 
than in the case of default) until the borrower dies, moves permanently 
from the home, or transfers title to the home, or upon a specified 
maturity date. Disbursements to the borrower under a reverse mortgage 
typically are determined by considering the value of the borrower's 
home, the current interest rate, and the borrower's life expectancy. A 
reverse mortgage program that requires borrowers to be age 62 or older 
is permissible under Sec. 1002.6(b)(2)(iv). In addition, under 
Sec. 1002.6(b)(2)(iii), a creditor may consider a borrower's age to 
evaluate a pertinent element of creditworthiness, such as the amount of 
the credit or monthly payments that the borrower will receive, or the 
estimated repayment date.
    5. Consideration of age in a combined system. A creditor using a 
credit scoring system that qualifies as ``empirically derived'' under 
Sec. 1002.2(p) may consider other factors (such as a credit report or 
the applicant's cash flow) on a judgmental basis. Doing so will not 
negate the classification of the credit scoring component of the 
combined system as ``demonstrably and statistically sound.'' While age 
could be used in the credit scoring portion, however, in the judgmental 
portion age may not be considered directly. It may be used only for the 
purpose of determining a ``pertinent element of creditworthiness.'' (See 
comment 6(b)(2)-3.)
    6. Consideration of public assistance. When considering income 
derived from a public assistance program, a creditor may take into 
account, for example:
    i. The length of time an applicant will likely remain eligible to 
receive such income.
    ii. Whether the applicant will continue to qualify for benefits 
based on the status of the applicant's dependents (as in the case of 
Temporary Aid to Needy Families, or social security payments to a 
minor).
    iii. Whether the creditor can attach or garnish the income to assure 
payment of the debt in the event of default.
    Paragraph 6(b)(5).
    1. Consideration of an individual applicant. A creditor must 
evaluate income derived from part-time employment, alimony, child 
support, separate maintenance payments, retirement benefits, or public 
assistance on an individual basis, not on the basis of aggregate 
statistics; and must assess its reliability or unreliability by 
analyzing the applicant's actual circumstances, not by analyzing 
statistical measures derived from a group.
    2. Payments consistently made. In determining the likelihood of 
consistent payments of alimony, child support, or separate maintenance, 
a creditor may consider factors such as whether payments are received 
pursuant to a written agreement or court decree; the length of time that 
the payments have been received; whether the payments are regularly 
received by the applicant; the availability of court or other procedures 
to compel payment; and the creditworthiness of the payor, including the 
credit history of the payor when it is available to the creditor.
    3. Consideration of income.
    i. A creditor need not consider income at all in evaluating 
creditworthiness. If a creditor does consider income, there are several 
acceptable methods, whether in a credit scoring or a judgmental system:
    A. A creditor may score or take into account the total sum of all 
income stated by the applicant without taking steps to evaluate the 
income for reliability.
    B. A creditor may evaluate each component of the applicant's income, 
and then score or take into account income determined to be reliable 
separately from other income; or the creditor may disregard that portion 
of income that is not reliable when it aggregates reliable income.
    C. A creditor that does not evaluate all income components for 
reliability must treat as reliable any component of protected income 
that is not evaluated.
    ii. In considering the separate components of an applicant's income, 
the creditor may not automatically discount or exclude from 
consideration any protected income. Any discounting or exclusion must be 
based on the applicant's actual circumstances.
    4. Part-time employment, sources of income. A creditor may score or 
take into account the fact that an applicant has more than one source of 
earned income--a full-time and a part-time job or two part-time jobs. A 
creditor may also score or treat earned income from a secondary source 
differently than earned income from a primary source. The creditor may 
not, however, score or otherwise take into account the number of sources 
for income such as retirement income, social security, supplemental 
security income, and alimony. Nor may the creditor treat negatively the 
fact that an applicant's only earned income is derived from, for 
example, a part-time job.
    Paragraph 6(b)(6).
    1. Types of credit references. A creditor may restrict the types of 
credit history and credit references that it will consider, provided 
that the restrictions are applied to all credit applicants without 
regard to sex, marital status, or any other prohibited basis. On the 
applicant's request, however, a creditor must consider credit 
information not reported

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through a credit bureau when the information relates to the same types 
of credit references and history that the creditor would consider if 
reported through a credit bureau.
    Paragraph 6(b)(7).
    1. National origin--immigration status. The applicant's immigration 
status and ties to the community (such as employment and continued 
residence in the area) could have a bearing on a creditor's ability to 
obtain repayment. Accordingly, the creditor may consider immigration 
status and differentiate, for example, between a noncitizen who is a 
long-time resident with permanent resident status and a noncitizen who 
is temporarily in this country on a student visa.
    2. National origin--citizenship. A denial of credit on the ground 
that an applicant is not a United States citizen is not per se 
discrimination based on national origin.
    Paragraph 6(b)(8).
    1. Prohibited basis--marital status. A creditor may consider the 
marital status of an applicant or joint applicant for the purpose of 
ascertaining the creditor's rights and remedies applicable to the 
particular extension of credit. For example, in a secured transaction 
involving real property, a creditor could take into account whether 
state law gives the applicant's spouse an interest in the property being 
offered as collateral.

          Section 1002.7--Rules Concerning Extensions of Credit

    7(a) Individual accounts.
    1. Open-end credit--authorized user. A creditor may not require a 
creditworthy applicant seeking an individual credit account to provide 
additional signatures. But the creditor may condition the designation of 
an authorized user by the account holder on the authorized user's 
becoming contractually liable for the account, as long as the creditor 
does not differentiate on any prohibited basis in imposing this 
requirement.
    2. Open-end credit--choice of authorized user. A creditor that 
permits an account holder to designate an authorized user may not 
restrict this designation on a prohibited basis. For example, if the 
creditor allows the designation of spouses as authorized users, the 
creditor may not refuse to accept a non-spouse as an authorized user.
    3. Overdraft authority on transaction accounts. If a transaction 
account (such as a checking account or NOW account) includes an 
overdraft line of credit, the creditor may require that all persons 
authorized to draw on the transaction account assume liability for any 
overdraft.
    7(b) Designation of name.
    1. Single name on account. A creditor may require that joint 
applicants on an account designate a single name for purposes of 
administering the account and that a single name be embossed on any 
credit cards issued on the account. But the creditor may not require 
that the name be the husband's name. (See Sec. 1002.10 for rules 
governing the furnishing of credit history on accounts held by spouses.)
    7(c) Action concerning existing open-end accounts.
    Paragraph 7(c)(1).
    1. Termination coincidental with marital status change. When an 
account holder's marital status changes, a creditor generally may not 
terminate the account unless it has evidence that the account holder is 
now unable or unwilling to repay. But the creditor may terminate an 
account on which both spouses are jointly liable, even if the action 
coincides with a change in marital status, when one or both spouses:
    i. Repudiate responsibility for future charges on the joint account.
    ii. Request separate accounts in their own names.
    iii. Request that the joint account be closed.
    2. Updating information. A creditor may periodically request updated 
information from applicants but may not use events related to a 
prohibited basis--such as an applicant's retirement or reaching a 
particular age, or a change in name or marital status--to trigger such a 
request.
    Paragraph 7(c)(2).
    1. Procedure pending reapplication. A creditor may require a 
reapplication from an account holder, even when there is no evidence of 
unwillingness or inability to repay, if (1) the credit was based on the 
qualifications of a person who is no longer available to support the 
credit and (2) the creditor has information indicating that the account 
holder's income may be insufficient to support the credit. While a 
reapplication is pending, the creditor must allow the account holder 
full access to the account under the existing contract terms. The 
creditor may specify a reasonable time period within which the account 
holder must submit the required information.
    7(d) Signature of spouse or other person.
    1. Qualified applicant. The signature rules ensure that qualified 
applicants are able to obtain credit in their own names. Thus, when an 
applicant requests individual credit, a creditor generally may not 
require the signature of another person unless the creditor has first 
determined that the applicant alone does not qualify for the credit 
requested.
    2. Unqualified applicant. When an applicant requests individual 
credit but does not meet a creditor's standards, the creditor may 
require a cosigner, guarantor, endorser, or similar party--but cannot 
require that it be the spouse. (See commentary to Secs. 1002.7(d)(5) and 
(6).)
    Paragraph 7(d)(1).

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    1. Signature of another person. It is impermissible for a creditor 
to require an applicant who is individually creditworthy to provide a 
cosigner--even if the creditor applies the requirement without regard to 
sex, marital status, or any other prohibited basis. (But see comment 
7(d)(6)-1 concerning guarantors of closely held corporations.)
    2. Joint applicant. The term ``joint applicant'' refers to someone 
who applies contemporaneously with the applicant for shared or joint 
credit. It does not refer to someone whose signature is required by the 
creditor as a condition for granting the credit requested.
    3. Evidence of joint application. A person's intent to be a joint 
applicant must be evidenced at the time of application. Signatures on a 
promissory note may not be used to show intent to apply for joint 
credit. On the other hand, signatures or initials on a credit 
application affirming applicants' intent to apply for joint credit may 
be used to establish intent to apply for joint credit. (See appendix B.) 
The method used to establish intent must be distinct from the means used 
by individuals to affirm the accuracy of information. For example, 
signatures on a joint financial statement affirming the veracity of 
information are not sufficient to establish intent to apply for joint 
credit.
    Paragraph 7(d)(2).
    1. Jointly owned property. If an applicant requests unsecured 
credit, does not own sufficient separate property, and relies on joint 
property to establish creditworthiness, the creditor must value the 
applicant's interest in the jointly owned property. A creditor may not 
request that a nonapplicant joint owner sign any instrument as a 
condition of the credit extension unless the applicant's interest does 
not support the amount and terms of the credit sought.
    i. Valuation of applicant's interest. In determining the value of an 
applicant's interest in jointly owned property, a creditor may consider 
factors such as the form of ownership and the property's susceptibility 
to attachment, execution, severance, or partition; the value of the 
applicant's interest after such action; and the cost associated with the 
action. This determination must be based on the existing form of 
ownership, and not on the possibility of a subsequent change. For 
example, in determining whether a married applicant's interest in 
jointly owned property is sufficient to satisfy the creditor's standards 
of creditworthiness for individual credit, a creditor may not consider 
that the applicant's separate property could be transferred into tenancy 
by the entirety after consummation. Similarly, a creditor may not 
consider the possibility that the couple may divorce. Accordingly, a 
creditor may not require the signature of the non-applicant spouse in 
these or similar circumstances.
    ii. Other options to support credit. If the applicant's interest in 
jointly owned property does not support the amount and terms of credit 
sought, the creditor may offer the applicant other options to qualify 
for the extension of credit. For example:
    A. Providing a co-signer or other party (Sec. 1002.7(d)(5));
    B. Requesting that the credit be granted on a secured basis 
(Sec. 1002.7(d)(4)); or
    C. Providing the signature of the joint owner on an instrument that 
ensures access to the property in the event of the applicant's death or 
default, but does not impose personal liability unless necessary under 
state law (such as a limited guarantee). A creditor may not routinely 
require, however, that a joint owner sign an instrument (such as a 
quitclaim deed) that would result in the forfeiture of the joint owner's 
interest in the property.
    2. Need for signature--reasonable belief. A creditor's reasonable 
belief as to what instruments need to be signed by a person other than 
the applicant should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    Paragraph 7(d)(3).
    1. Residency. In assessing the creditworthiness of a person who 
applies for credit in a community property state, a creditor may assume 
that the applicant is a resident of the state unless the applicant 
indicates otherwise.
    Paragraph 7(d)(4).
    1. Creation of enforceable lien. Some state laws require that both 
spouses join in executing any instrument by which real property is 
encumbered. If an applicant offers such property as security for credit, 
a creditor may require the applicant's spouse to sign the instruments 
necessary to create a valid security interest in the property. The 
creditor may not require the spouse to sign the note evidencing the 
credit obligation if signing only the mortgage or other security 
agreement is sufficient to make the property available to satisfy the 
debt in the event of default. However, if under state law both spouses 
must sign the note to create an enforceable lien, the creditor may 
require the signatures.
    2. Need for signature--reasonable belief. Generally, a signature to 
make the secured property available will only be needed on a security 
agreement. A creditor's reasonable belief that, to ensure access to the 
property, the spouse's signature is needed on an instrument that imposes 
personal liability should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    3. Integrated instruments. When a creditor uses an integrated 
instrument that combines the note and the security agreement, the

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spouse cannot be asked to sign the integrated instrument if the 
signature is only needed to grant a security interest. But the spouse 
could be asked to sign an integrated instrument that makes clear--for 
example, by a legend placed next to the spouse's signature--that the 
spouse's signature is only to grant a security interest and that signing 
the instrument does not impose personal liability.
    Paragraph 7(d)(5).
    1. Qualifications of additional parties. In establishing guidelines 
for eligibility of guarantors, cosigners, or similar additional parties, 
a creditor may restrict the applicant's choice of additional parties but 
may not discriminate on the basis of sex, marital status, or any other 
prohibited basis. For example, the creditor could require that the 
additional party live in the creditor's market area.
    2. Reliance on income of another person--individual credit. An 
applicant who requests individual credit relying on the income of 
another person (including a spouse in a non-community property state) 
may be required to provide the signature of the other person to make the 
income available to pay the debt. In community property states, the 
signature of a spouse may be required if the applicant relies on the 
spouse's separate income. If the applicant relies on the spouse's future 
earnings that as a matter of state law cannot be characterized as 
community property until earned, the creditor may require the spouse's 
signature, but need not do so--even if it is the creditor's practice to 
require the signature when an applicant relies on the future earnings of 
a person other than a spouse. (See Sec. 1002.6(c) on consideration of 
state property laws.)
    3. Renewals. If the borrower's creditworthiness is reevaluated when 
a credit obligation is renewed, the creditor must determine whether an 
additional party is still warranted and, if not warranted, release the 
additional party.
    Paragraph 7(d)(6).
    1. Guarantees. A guarantee on an extension of credit is part of a 
credit transaction and therefore subject to the regulation. A creditor 
may require the personal guarantee of the partners, directors, or 
officers of a business, and the shareholders of a closely held 
corporation, even if the business or corporation is creditworthy. The 
requirement must be based on the guarantor's relationship with the 
business or corporation, however, and not on a prohibited basis. For 
example, a creditor may not require guarantees only for women-owned or 
minority-owned businesses. Similarly, a creditor may not require 
guarantees only of the married officers of a business or the married 
shareholders of a closely held corporation.
    2. Spousal guarantees. The rules in Sec. 1002.7(d) bar a creditor 
from requiring the signature of a guarantor's spouse just as they bar 
the creditor from requiring the signature of an applicant's spouse. For 
example, although a creditor may require all officers of a closely held 
corporation to personally guarantee a corporate loan, the creditor may 
not automatically require that spouses of married officers also sign the 
guarantee. If an evaluation of the financial circumstances of an officer 
indicates that an additional signature is necessary, however, the 
creditor may require the signature of another person in appropriate 
circumstances in accordance with Sec. 1002.7(d)(2).
    7(e) Insurance.
    1. Differences in terms. Differences in the availability, rates, and 
other terms on which credit-related casualty insurance or credit life, 
health, accident, or disability insurance is offered or provided to an 
applicant does not violate Regulation B.
    2. Insurance information. A creditor may obtain information about an 
applicant's age, sex, or marital status for insurance purposes. The 
information may only be used for determining eligibility and premium 
rates for insurance, however, and not in making the credit decision.

             Section 1002.8--Special Purpose Credit Programs

    8(a) Standards for programs.
    1. Determining qualified programs. The Bureau does not determine 
whether individual programs qualify for special purpose credit status, 
or whether a particular program benefits an ``economically disadvantaged 
class of persons.'' The agency or creditor administering or offering the 
loan program must make these decisions regarding the status of its 
program.
    2. Compliance with a program authorized by Federal or state law. A 
creditor does not violate Regulation B when it complies in good faith 
with a regulation promulgated by a government agency implementing a 
special purpose credit program under Sec. 1002.8(a)(1). It is the 
agency's responsibility to promulgate a regulation that is consistent 
with Federal and state law.
    3. Expressly authorized. Credit programs authorized by Federal or 
state law include programs offered pursuant to Federal, state, or local 
statute, regulation or ordinance, or pursuant to judicial or 
administrative order.
    4. Creditor liability. A refusal to grant credit to an applicant is 
not a violation of the Act or regulation if the applicant does not meet 
the eligibility requirements under a special purpose credit program.
    5. Determining need. In designing a special purpose credit program 
under Sec. 1002.8(a), a for-profit organization must determine that the 
program will benefit a class of people who would otherwise be denied 
credit or would receive it on less favorable terms. This determination 
can be based on a broad analysis using the organization's own research 
or

[[Page 78]]

data from outside sources, including governmental reports and studies. 
For example, a creditor might design new products to reach consumers who 
would not meet, or have not met, its traditional standards of 
creditworthiness due to such factors as credit inexperience or the use 
of credit sources that may not report to consumer reporting agencies. 
Or, a bank could review Home Mortgage Disclosure Act data along with 
demographic data for its assessment area and conclude that there is a 
need for a special purpose credit program for low-income minority 
borrowers.
    6. Elements of the program. The written plan must contain 
information that supports the need for the particular program. The plan 
also must either state a specific period of time for which the program 
will last, or contain a statement regarding when the program will be 
reevaluated to determine if there is a continuing need for it.
    8(b) Rules in other sections.
    1. Applicability of rules. A creditor that rejects an application 
because the applicant does not meet the eligibility requirements (common 
characteristic or financial need, for example) must nevertheless notify 
the applicant of action taken as required by Sec. 1002.9.
    8(c) Special rule concerning requests and use of information.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Secs. 1002.5 and 1002.6 to determine an 
applicant's eligibility for a particular program.
    2. Examples. Examples of programs under which the creditor can ask 
for and consider information about a prohibited basis are:
    i. Energy conservation programs to assist the elderly, for which the 
creditor must consider the applicant's age.
    ii. Programs under a Minority Enterprise Small Business Investment 
Corporation, for which a creditor must consider the applicant's minority 
status.
    8(d) Special rule in the case of financial need.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Secs. 1002.5 and 1002.6, and to require 
signatures that would otherwise be prohibited by Sec. 1002.7(d).
    2. Examples. Examples of programs in which financial need is a 
criterion are:
    i. Subsidized housing programs for low-to moderate-income 
households, for which a creditor may have to consider the applicant's 
receipt of alimony or child support, the spouse's or parents' income, 
etc.
    ii. Student loan programs based on the family's financial need, for 
which a creditor may have to consider the spouse's or parents' financial 
resources.
    3. Student loans. In a guaranteed student loan program, a creditor 
may obtain the signature of a parent as a guarantor when required by 
Federal or state law or agency regulation, or when the student does not 
meet the creditor's standards of creditworthiness. (See 
Secs. 1002.7(d)(1) and (5).) The creditor may not require an additional 
signature when a student has a work or credit history that satisfies the 
creditor's standards.

                      Section 1002.9--Notifications

    1. Use of the term adverse action. The regulation does not require 
that a creditor use the term adverse action in communicating to an 
applicant that a request for an extension of credit has not been 
approved. In notifying an applicant of adverse action as defined by 
Sec. 1002.2(c)(1), a creditor may use any words or phrases that describe 
the action taken on the application.
    2. Expressly withdrawn applications. When an applicant expressly 
withdraws a credit application, the creditor is not required to comply 
with the notification requirements under Sec. 1002.9. (The creditor must 
comply, however, with the record retention requirements of the 
regulation. See Sec. 1002.12(b)(3).)
    3. When notification occurs. Notification occurs when a creditor 
delivers or mails a notice to the applicant's last known address or, in 
the case of an oral notification, when the creditor communicates the 
credit decision to the applicant.
    4. Location of notice. The notifications required under Sec. 1002.9 
may appear on either or both sides of a form or letter.
    5. Prequalification requests. Whether a creditor must provide a 
notice of action taken for a prequalification request depends on the 
creditor's response to the request, as discussed in comment 2(f)-3. For 
instance, a creditor may treat the request as an inquiry if the creditor 
evaluates specific information about the consumer and tells the consumer 
the loan amount, rate, and other terms of credit the consumer could 
qualify for under various loan programs, explaining the process the 
consumer must follow to submit a mortgage application and the 
information the creditor will analyze in reaching a credit decision. On 
the other hand, a creditor has treated a request as an application, and 
is subject to the adverse action notice requirements of Sec. 1002.9 if, 
after evaluating information, the creditor decides that it will not 
approve the request and communicates that decision to the consumer. For 
example, if the creditor tells the consumer that it would not approve an 
application for a mortgage because of a bankruptcy in the consumer's 
record, the creditor has denied an application for credit.
    9(a) Notification of action taken, ECOA notice, and statement of 
specific reasons.
    Paragraph 9(a)(1).

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    1. Timing of notice--when an application is complete. Once a 
creditor has obtained all the information it normally considers in 
making a credit decision, the application is complete and the creditor 
has 30 days in which to notify the applicant of the credit decision. 
(See also comment 2(f)-6.)
    2. Notification of approval. Notification of approval may be express 
or by implication. For example, the creditor will satisfy the 
notification requirement when it gives the applicant the credit card, 
money, property, or services requested.
    3. Incomplete application--denial for incompleteness. When an 
application is incomplete regarding information that the applicant can 
provide and the creditor lacks sufficient data for a credit decision, 
the creditor may deny the application giving as the reason for denial 
that the application is incomplete. The creditor has the option, 
alternatively, of providing a notice of incompleteness under 
Sec. 1002.9(c).
    4. Incomplete application--denial for reasons other than 
incompleteness. When an application is missing information but provides 
sufficient data for a credit decision, the creditor may evaluate the 
application, make its credit decision, and notify the applicant 
accordingly. If credit is denied, the applicant must be given the 
specific reasons for the credit denial (or notice of the right to 
receive the reasons); in this instance missing information or 
``incomplete application'' cannot be given as the reason for the denial.
    5. Length of counteroffer. Section 1002.9(a)(1)(iv) does not require 
a creditor to hold a counteroffer open for 90 days or any other 
particular length of time.
    6. Counteroffer combined with adverse action notice. A creditor that 
gives the applicant a combined counteroffer and adverse action notice 
that complies with Sec. 1002.9(a)(2) need not send a second adverse 
action notice if the applicant does not accept the counteroffer. A 
sample of a combined notice is contained in form C-4 of appendix C to 
the regulation.
    7. Denial of a telephone application. When an application is made by 
telephone and adverse action is taken, the creditor must request the 
applicant's name and address in order to provide written notification 
under this section. If the applicant declines to provide that 
information, then the creditor has no further notification 
responsibility.
    Paragraph 9(a)(3).
    1. Coverage. In determining which rules in this paragraph apply to a 
given business credit application, a creditor may rely on the 
applicant's assertion about the revenue size of the business. 
(Applications to start a business are governed by the rules in 
Sec. 1002.9(a)(3)(i).) If an applicant applies for credit as a sole 
proprietor, the revenues of the sole proprietorship will determine which 
rules govern the application. However, if an applicant applies for 
business credit as an individual, the rules in Sec. 1002.9(a)(3)(i) 
apply unless the application is for trade or similar credit.
    2. Trade credit. The term trade credit generally is limited to a 
financing arrangement that involves a buyer and a seller--such as a 
supplier who finances the sale of equipment, supplies, or inventory; it 
does not apply to an extension of credit by a bank or other financial 
institution for the financing of such items.
    3. Factoring. Factoring refers to a purchase of accounts receivable, 
and thus is not subject to the Act or regulation. If there is a credit 
extension incident to the factoring arrangement, the notification rules 
in Sec. 1002.9(a)(3)(ii) apply, as do other relevant sections of the Act 
and regulation.
    4. Manner of compliance. In complying with the notice provisions of 
the Act and regulation, creditors offering business credit may follow 
the rules governing consumer credit. Similarly, creditors may elect to 
treat all business credit the same (irrespective of revenue size) by 
providing notice in accordance with Sec. 1002.9(a)(3)(i).
    5. Timing of notification. A creditor subject to 
Sec. 1002.9(a)(3)(ii)(A) is required to notify a business credit 
applicant, orally or in writing, of action taken on an application 
within a reasonable time of receiving a completed application. Notice 
provided in accordance with the timing requirements of Sec. 1002.9(a)(1) 
is deemed reasonable in all instances.
    9(b) Form of ECOA notice and statement of specific reasons.
    Paragraph 9(b)(1).
    1. Substantially similar notice. The ECOA notice sent with a 
notification of a credit denial or other adverse action will comply with 
the regulation if it is ``substantially similar'' to the notice 
contained in Sec. 1002.9(b)(1). For example, a creditor may add a 
reference to the fact that the ECOA permits age to be considered in 
certain credit scoring systems, or add a reference to a similar state 
statute or regulation and to a state enforcement agency.
    Paragraph 9(b)(2).
    1. Number of specific reasons. A creditor must disclose the 
principal reasons for denying an application or taking other adverse 
action. The regulation does not mandate that a specific number of 
reasons be disclosed, but disclosure of more than four reasons is not 
likely to be helpful to the applicant.
    2. Source of specific reasons. The specific reasons disclosed under 
Secs. 1002.9(a)(2) and (b)(2) must relate to and accurately describe the 
factors actually considered or scored by a creditor.
    3. Description of reasons. A creditor need not describe how or why a 
factor adversely

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affected an applicant. For example, the notice may say ``length of 
residence'' rather than ``too short a period of residence.''
    4. Credit scoring system. If a creditor bases the denial or other 
adverse action on a credit scoring system, the reasons disclosed must 
relate only to those factors actually scored in the system. Moreover, no 
factor that was a principal reason for adverse action may be excluded 
from disclosure. The creditor must disclose the actual reasons for 
denial (for example, ``age of automobile'') even if the relationship of 
that factor to predicting creditworthiness may not be clear to the 
applicant.
    5. Credit scoring--method for selecting reasons. The regulation does 
not require that any one method be used for selecting reasons for a 
credit denial or other adverse action that is based on a credit scoring 
system. Various methods will meet the requirements of the regulation. 
One method is to identify the factors for which the applicant's score 
fell furthest below the average score for each of those factors achieved 
by applicants whose total score was at or slightly above the minimum 
passing score. Another method is to identify the factors for which the 
applicant's score fell furthest below the average score for each of 
those factors achieved by all applicants. These average scores could be 
calculated during the development or use of the system. Any other method 
that produces results substantially similar to either of these methods 
is also acceptable under the regulation.
    6. Judgmental system. If a creditor uses a judgmental system, the 
reasons for the denial or other adverse action must relate to those 
factors in the applicant's record actually reviewed by the person making 
the decision.
    7. Combined credit scoring and judgmental system. If a creditor 
denies an application based on a credit evaluation system that employs 
both credit scoring and judgmental components, the reasons for the 
denial must come from the component of the system that the applicant 
failed. For example, if a creditor initially credit scores an 
application and denies the credit request as a result of that scoring, 
the reasons disclosed to the applicant must relate to the factors scored 
in the system. If the application passes the credit scoring stage but 
the creditor then denies the credit request based on a judgmental 
assessment of the applicant's record, the reasons disclosed must relate 
to the factors reviewed judgmentally, even if the factors were also 
considered in the credit scoring component. If the application is not 
approved or denied as a result of the credit scoring, but falls into a 
gray band, and the creditor performs a judgmental assessment and denies 
the credit after that assessment, the reasons disclosed must come from 
both components of the system. The same result applies where a 
judgmental assessment is the first component of the combined system. As 
provided in comment 9(b)(2)-1, disclosure of more than a combined total 
of four reasons is not likely to be helpful to the applicant.
    8. Automatic denial. Some credit decision methods contain features 
that call for automatic denial because of one or more negative factors 
in the applicant's record (such as the applicant's previous bad credit 
history with that creditor, the applicant's declaration of bankruptcy, 
or the fact that the applicant is a minor). When a creditor denies the 
credit request because of an automatic-denial factor, the creditor must 
disclose that specific factor.
    9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of 
the principal reasons for denying or taking other adverse action on an 
application for an extension of credit. The Fair Credit Reporting Act 
(FCRA) requires a creditor to disclose when it has based its decision in 
whole or in part on information from a source other than the applicant 
or its own files. Disclosing that a credit report was obtained and used 
in the denial of the application, as the FCRA requires, does not satisfy 
the ECOA requirement to disclose specific reasons. For example, if the 
applicant's credit history reveals delinquent credit obligations and the 
application is denied for that reason, to satisfy Sec. 1002.9(b)(2) the 
creditor must disclose that the application was denied because of the 
applicant's delinquent credit obligations. The FCRA also requires a 
creditor to disclose, as applicable, a credit score it used in taking 
adverse action along with related information, including up to four key 
factors that adversely affected the consumer's credit score (or up to 
five factors if the number of inquiries made with respect to that 
consumer report is a key factor). Disclosing the key factors that 
adversely affected the consumer's credit score does not satisfy the ECOA 
requirement to disclose specific reasons for denying or taking other 
adverse action on an application or extension of credit. Sample forms C-
1 through C-5 of appendix C of the regulation provide for both the ECOA 
and FCRA disclosures. See also comment 9(b)(2)-1.
    9(c) Incomplete applications.
    Paragraph 9(c)(1).
    1. Exception for preapprovals. The requirement to provide a notice 
of incompleteness does not apply to preapprovals that constitute 
applications under Sec. 1002.2(f).
    Paragraph 9(c)(2).
    1. Reapplication. If information requested by a creditor is 
submitted by an applicant after the expiration of the time period 
designated by the creditor, the creditor may require the applicant to 
make a new application.
    Paragraph 9(c)(3).

[[Page 81]]

    1. Oral inquiries for additional information. If an applicant fails 
to provide the information in response to an oral request, a creditor 
must send a written notice to the applicant within the 30-day period 
specified in Secs. 1002.9(c)(1) and (2). If the applicant provides the 
information, the creditor must take action on the application and notify 
the applicant in accordance with Sec. 1002.9(a).
    9(g) Applications submitted through a third party.
    1. Third parties. The notification of adverse action may be given by 
one of the creditors to whom an application was submitted, or by a 
noncreditor third party. If one notification is provided on behalf of 
multiple creditors, the notice must contain the name and address of each 
creditor. The notice must either disclose the applicant's right to a 
statement of specific reasons within 30 days, or give the primary 
reasons each creditor relied upon in taking the adverse action--clearly 
indicating which reasons relate to which creditor.
    2. Third party notice--enforcement agency. If a single adverse 
action notice is being provided to an applicant on behalf of several 
creditors and they are under the jurisdiction of different Federal 
enforcement agencies, the notice need not name each agency; disclosure 
of any one of them will suffice.
    3. Third-party notice--liability. When a notice is to be provided 
through a third party, a creditor is not liable for an act or omission 
of the third party that constitutes a violation of the regulation if the 
creditor accurately and in a timely manner provided the third party with 
the information necessary for the notification and maintains reasonable 
procedures adapted to prevent such violations.

            Section 1002.10--Furnishing of Credit Information

    1. Scope. The requirements of Sec. 1002.10 for designating and 
reporting credit information apply only to consumer credit transactions. 
Moreover, they apply only to creditors that opt to furnish credit 
information to credit bureaus or to other creditors; there is no 
requirement that a creditor furnish credit information on its accounts.
    2. Reporting on all accounts. The requirements of Sec. 1002.10 apply 
only to accounts held or used by spouses. However, a creditor has the 
option to designate all joint accounts (or all accounts with an 
authorized user) to reflect the participation of both parties, whether 
or not the accounts are held by persons married to each other.
    3. Designating accounts. In designating accounts and reporting 
credit information, a creditor need not distinguish between accounts on 
which the spouse is an authorized user and accounts on which the spouse 
is a contractually liable party.
    4. File and index systems. The regulation does not require the 
creation or maintenance of separate files in the name of each 
participant on a joint or user account, or require any other particular 
system of recordkeeping or indexing. It requires only that a creditor be 
able to report information in the name of each spouse on accounts 
covered by Sec. 1002.10. Thus, if a creditor receives a credit inquiry 
about the wife, it should be able to locate her credit file without 
asking the husband's name.
    10(a) Designation of accounts.
    1. New parties. When new parties who are spouses undertake a legal 
obligation on an account, as in the case of a mortgage loan assumption, 
the creditor must change the designation on the account to reflect the 
new parties and must furnish subsequent credit information on the 
account in the new names.
    2. Request to change designation of account. A request to change the 
manner in which information concerning an account is furnished does not 
alter the legal liability of either spouse on the account and does not 
require a creditor to change the name in which the account is 
maintained.

                 Section 1002.11--Relation to State Law

    11(a) Inconsistent state laws.
    1. Preemption determination--New York. The Bureau recognizes state 
law preemption determinations made by the Board of Governors of the 
Federal Reserve System prior to July 21, 2011, until and unless the 
Bureau makes and publishes any contrary determination. The Board of 
Governors determined that the following provisions in the state law of 
New York are preempted by the Federal law, effective November 11, 1988:
    i. Article 15, section 296a(1)(b). Unlawful discriminatory practices 
in relation to credit on the basis of race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars taking a prohibited basis into 
account when establishing eligibility for certain special-purpose credit 
programs.
    ii. Article 15, section 296a(1)(c). Unlawful discriminatory practice 
to make any record or inquiry based on race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars a creditor from requesting and 
considering information regarding the particular characteristics (for 
example, race, national origin, or sex) required for eligibility for 
special-purpose credit programs.
    2. Preemption determination--Ohio. The Bureau recognizes state law 
preemption determinations made by the Board of Governors of the Federal 
Reserve System prior to July 21, 2011, until and unless the Bureau makes 
and publishes any contrary determination. The Board of Governors 
determined that the following provision in the state law of Ohio

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is preempted by the Federal law, effective July 23, 1990:
    i. Section 4112.021(B)(1)--Unlawful discriminatory practices in 
credit transactions. This provision is preempted to the extent that it 
bars asking or favorably considering the age of an elderly applicant; 
prohibits the consideration of age in a credit scoring system; permits 
without limitation the consideration of age in real estate transactions; 
and limits the consideration of age in special-purpose credit programs 
to certain government-sponsored programs identified in the state law.

                    Section 1002.12--Record Retention

    12(a) Retention of prohibited information.
    1. Receipt of prohibited information. Unless the creditor 
specifically requested such information, a creditor does not violate 
this section when it receives prohibited information from a consumer 
reporting agency.
    2. Use of retained information. Although a creditor may keep in its 
files prohibited information as provided in Sec. 1002.12(a), the 
creditor may use the information in evaluating credit applications only 
if permitted to do so by Sec. 1002.6.
    12(b) Preservation of records.
    1. Copies. Copies of the original record include carbon copies, 
photocopies, microfilm or microfiche copies, or copies produced by any 
other accurate retrieval system, such as documents stored and reproduced 
by computer. A creditor that uses a computerized or mechanized system 
need not keep a paper copy of a document (for example, of an adverse 
action notice) if it can regenerate all pertinent information in a 
timely manner for examination or other purposes.
    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, however, the creditor is required to enter and 
retain the data on personal characteristics in order to comply with the 
requirements of that section.
    Paragraph 12(b)(3).
    1. Withdrawn and brokered applications. In most cases, the 25-month 
retention period for applications runs from the date a notification is 
sent to the applicant granting or denying the credit requested. In 
certain transactions, a creditor is not obligated to provide a notice of 
the action taken. (See, for example, comment 9-2.) In such cases, the 
25-month requirement runs from the date of application, as when:
    i. An application is withdrawn by the applicant.
    ii. An application is submitted to more than one creditor on behalf 
of the applicant, and the application is approved by one of the other 
creditors.
    12(b)(6) Self-tests.
    1. The rule requires all written or recorded information about a 
self-test to be retained for 25 months after a self-test has been 
completed. For this purpose, a self-test is completed after the creditor 
has obtained the results and made a determination about what corrective 
action, if any, is appropriate. Creditors are required to retain 
information about the scope of the self-test, the methodology used and 
time period covered by the self-test, the report or results of the self-
test including any analysis or conclusions, and any corrective action 
taken in response to the self-test.
    12(b)(7) Preapplication marketing information.
    1. Prescreened credit solicitations. The rule requires creditors to 
retain copies of prescreened credit solicitations. For purposes of this 
part, a prescreened solicitation is an ``offer of credit'' as described 
in 15 U.S.C. 1681a(1) of the Fair Credit Reporting Act. A creditor 
complies with this rule if it retains a copy of each solicitation 
mailing that contains different terms, such as the amount of credit 
offered, annual percentage rate, or annual fee.
    2. List of criteria. A creditor must retain the list of criteria 
used to select potential recipients. This includes the criteria used by 
the creditor both to determine the potential recipients of the 
particular solicitation and to determine who will actually be offered 
credit.
    3. Correspondence. A creditor may retain correspondence relating to 
consumers' complaints about prescreened solicitations in any manner that 
is reasonably accessible and is understandable to examiners. There is no 
requirement to establish a separate database or set of files for such 
correspondence, or to match consumer complaints with specific 
solicitation programs.

          Section 1002.13--Information for Monitoring Purposes

    13(a) Information to be requested.
    1. Natural person. Section1002.13 applies only to applications from 
natural persons.
    2. Principal residence. The requirements of Sec. 1002.13 apply only 
if an application relates to a dwelling that is or will be occupied by 
the applicant as the principal residence. A credit application related 
to a vacation home or a rental unit is not covered. In the case of a 
two-to four-unit dwelling, the application is covered if the applicant 
intends to occupy one of the units as a principal residence.

[[Page 83]]

    3. Temporary financing. An application for temporary financing to 
construct a dwelling is not subject to Sec. 1002.13. But an application 
for both a temporary loan to finance construction of a dwelling and a 
permanent mortgage loan to take effect upon the completion of 
construction is subject to Sec. 1002.13.
    4. New principal residence. A person can have only one principal 
residence at a time. However, if a person buys or builds a new dwelling 
that will become that person's principal residence within a year or upon 
completion of construction, the new dwelling is considered the principal 
residence for purposes of Sec. 1002.13.
    5. Transactions not covered. The information-collection requirements 
of this section apply to applications for credit primarily for the 
purchase or refinancing of a dwelling that is or will become the 
applicant's principal residence. Therefore, applications for credit 
secured by the applicant's principal residence but made primarily for a 
purpose other than the purchase or refinancing of the principal 
residence (such as loans for home improvement and debt consolidation) 
are not subject to the information-collection requirements. An 
application for an open-end home equity line of credit is not subject to 
this section unless it is readily apparent to the creditor when the 
application is taken that the primary purpose of the line is for the 
purchase or refinancing of a principal dwelling.
    6. Refinancings. A refinancing occurs when an existing obligation is 
satisfied and replaced by a new obligation undertaken by the same 
borrower. A creditor that receives an application to refinance an 
existing extension of credit made by that creditor for the purchase of 
the applicant's dwelling may request the monitoring information again 
but is not required to do so if it was obtained in the earlier 
transaction.
    7. Data collection under Regulation C. See comment 5(a)(2)-2.
    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. The applicant must be 
offered the option to select more than one racial designation.
    2. Written applications. The regulation requires written 
applications for the types of credit covered by Sec. 1002.13. A creditor 
can satisfy this requirement by recording on paper or by means of 
computer the information that the applicant provides orally and that the 
creditor normally considers in a credit decision.
    3. Telephone, mail applications.
    i. A creditor that accepts an application by telephone or mail must 
request the monitoring information.
    ii. A creditor that accepts an application by mail need not make a 
special request for the monitoring information if the applicant has 
failed to provide it on the application form returned to the creditor.
    iii. If it is not evident on the face of an application that it was 
received by mail, telephone, or via an electronic medium, the creditor 
should indicate on the form or other application record how the 
application was received.
    4. Video and other electronic-application processes.
    i. If a creditor takes an application through an electronic medium 
that allows the creditor to see the applicant, the creditor must treat 
the application as taken in person. The creditor must note the 
monitoring information on the basis of visual observation or surname, if 
the applicant chooses not to provide the information.
    ii. If an applicant applies through an electronic medium without 
video capability, the creditor treats the application as if it were 
received by mail.
    5. Applications through loan-shopping services. When a creditor 
receives an application through an unaffiliated loan-shopping service, 
it does not have to request the monitoring information for purposes of 
the ECOA or Regulation B. Creditors subject to the Home Mortgage 
Disclosure Act should be aware, however, that data collection may be 
called for under Regulation C (12 CFR part 1003), which generally 
requires creditors to report, among other things, the sex and race of an 
applicant on brokered applications or applications received through a 
correspondent.
    6. Inadvertent notation. If a creditor inadvertently obtains the 
monitoring information in a dwelling-related transaction not covered by 
Sec. 1002.13, the creditor may process and retain the application 
without violating the regulation.
    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 contains a sample disclosure. 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.
    13(d) Substitute monitoring program.
    1. Substitute program. An enforcement agency may adopt, under its 
established rulemaking or enforcement procedures, a program requiring 
creditors under its jurisdiction to collect information in addition to 
information required by this section.

      Section 1002.14--Rules on Providing Appraisals and Valuations

    14(a) Providing appraisals and other valuations.

[[Page 84]]

    1. Multiple applicants. If there is more than one applicant, the 
written disclosure about written appraisals, and the copies of 
appraisals and other written valuations, need only be given to one 
applicant. However, these materials must be given to the primary 
applicant where one is readily apparent. Similarly, if there is more 
than one applicant for credit in the transaction, one applicant may 
provide a waiver under Sec. 1002.14(a)(1), but it must be the primary 
applicant where one is readily apparent.
    14(a)(1) In general.
    1. Coverage. Section 1002.14 covers applications for credit to be 
secured by a first lien on a dwelling, as that term is defined in 
Sec. 1002.14(b)(2), whether the credit is for a business purpose (for 
example, a loan to start a business) or a consumer purpose (for example, 
a loan to purchase a home).
    2. Renewals. Section 1002.14(a)(1) applies when an applicant 
requests the renewal of an existing extension of credit and the creditor 
develops a new appraisal or other written valuation. Section 
1002.14(a)(1) does not apply to the extent a creditor uses the 
appraisals and other written valuations that were previously developed 
in connection with the prior extension of credit to evaluate the renewal 
request.
    3. Written. For purposes of Sec. 1002.14, an ``appraisal or other 
written valuation'' includes, without limitation, an appraisal or other 
valuation received or developed by the creditor in paper form (hard 
copy); electronically, such as CD or email; or by any other similar 
media. See Sec. 1002.14(a)(5) regarding the provision of copies of 
appraisals and other written valuations to applicants via electronic 
means.
    4. Timing. Section 1002.14(a)(1) requires that the creditor 
``provide'' copies of appraisals and other written valuations to the 
applicant ``promptly upon completion,'' or no later than three business 
days before consummation (for closed-end credit) or account opening (for 
open-end credit), whichever is earlier.
    i. For purposes of this timing requirement, ``provide'' means 
``deliver.'' Delivery occurs three business days after mailing or 
delivering the copies to the last-known address of the applicant, or 
when evidence indicates actual receipt by the applicant, whichever is 
earlier. Delivery to or actual receipt by the applicant by electronic 
means must comply with the E-Sign Act, as provided for in 
Sec. 1002.14(a)(5).
    ii. The application and meaning of the ``promptly upon completion'' 
standard depends upon the facts and circumstances, including but not 
limited to when the creditor receives the appraisal or other written 
valuation, and the extent of any review or revision after the creditor 
receives it.
    iii. ``Completion'' occurs when the last version is received by the 
creditor, or when the creditor has reviewed and accepted the appraisal 
or other written valuation to include any changes or corrections 
required, whichever is later. See also comment 14(a)(1)-7.
    iv. In a transaction that is being consummated (for closed-end 
credit) or in which the account is being opened (for open-end credit), 
if an appraisal or other written valuation has been developed but is not 
yet complete, the deadline for providing a copy of three business days 
before consummation or account opening still applies, unless the 
applicant waived that deadline as provided under Sec. 1002.14(a)(1), in 
which case the copy must be provided at or before consummation or 
account opening.
    v. Even if the transaction will not be consummated (for closed-end 
credit) or the account will not be opened (for open-end credit), the 
copy must be provided ``promptly upon completion'' as provided for in 
Sec. 1002.14(a)(1), unless the applicant has waived that deadline as 
provided under Sec. 1002.14(a)(1), in which case as provided for in 
Sec. 1002.14(a)(1) the copy must be provided to the applicant no later 
than 30 days after the creditor determines the transaction will not be 
consummated or the account will not be opened.
    5. Promptly upon completion-examples. Examples in which the 
``promptly upon completion'' standard would be satisfied include, but 
are not limited to, those in subparagraphs i, ii, and iii below. 
Examples in which the ``promptly upon completion'' standard would not be 
satisfied include, but are not limited to, those in subparagraphs iv and 
v below.
    i. Sending a copy of an appraisal within a week of completion with 
sufficient time before consummation (or account opening for open-end 
credit). On day 15 after receipt of the application, the creditor's 
underwriting department reviews an appraisal and determines it is 
acceptable. One week later, the creditor sends a copy of the appraisal 
to the applicant. The applicant actually receives the copy more than 
three business days before the date of consummation (or account 
opening). The creditor has provided the copy of the appraisal promptly 
upon completion.
    ii. Sending a copy of a revised appraisal within a week after 
completion and with sufficient time before consummation (or account 
opening for open-end credit). An appraisal is being revised, and the 
creditor does not receive the revised appraisal until day 45 after the 
application, when the creditor immediately determines the revised 
appraisal is acceptable. A week later, the creditor sends a copy of the 
revised appraisal to the applicant, and does not send a copy of the 
initial appraisal to the applicant. The applicant actually receives the 
copy of the revised appraisal three business days before the date of 
consummation

[[Page 85]]

(or account opening). The creditor has provided the appraisal copy 
promptly upon completion.
    iii. Sending a copy of an AVM report within a week after its receipt 
and with sufficient time before consummation (or account opening for 
open-end credit). The creditor receives an automated valuation model 
(AVM) report on day 5 after receipt of the application and treats the 
AVM report as complete when it is received. On day 12 after receipt of 
the application, the creditor sends the applicant a copy of the 
valuation. The applicant actually receives the valuation more than three 
business days before the date of consummation (or account opening). The 
creditor has provided the copy of the AVM report promptly upon 
completion.
    iv. Delay in sending an appraisal. On day 12 after receipt of the 
application, the creditor's underwriting department reviews an appraisal 
and determines it is acceptable. Although the creditor has determined 
the appraisal is complete, the creditor waits to provide a copy to the 
applicant until day 42, when the creditor schedules the consummation (or 
account opening) to occur on day 50. The creditor has not provided the 
copy of the appraisal promptly upon completion.
    v. Delay in sending an AVM report while waiting for completion of a 
second valuation. The creditor receives an AVM report on day 5 after 
application and completes its review of the AVM report the day it is 
received. The creditor also has ordered an appraisal, but the initial 
version of the appraisal received by the creditor is found to be 
deficient and is sent for review. The creditor waits 30 days to provide 
a copy of the completed AVM report, until the appraisal is completed on 
day 35. The creditor then provides the applicant with copies of the AVM 
report and the revised appraisal. While the appraisal report was 
provided promptly upon completion, the AVM report was not.
    6. Waiver. Section 1002.14(a)(1) permits the applicant to waive the 
timing requirement if the creditor provides the copies at or before 
consummation or account opening, except where otherwise prohibited by 
law. Except where otherwise prohibited by law, an applicant's waiver is 
effective under Sec. 1002.14(a)(1) in either of the following two 
situations:
    i. If, no later than three business days prior to consummation or 
account opening, the applicant provides the creditor an affirmative oral 
or written statement waiving the timing requirement under this rule; or
    ii. If, within three business days of consummation or account 
opening, the applicant provides the creditor an affirmative oral or 
written statement waiving the timing requirement under this rule and the 
waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical changes 
from a previous version of the appraisal or other written valuation 
provided to the applicant three or more business days prior to 
consummation or account opening. For purpose of this second type of 
waiver, revisions will only be considered to be clerical in nature if 
they have no impact on the estimated value, and have no impact on the 
calculation or methodology used to derive the estimate. In addition, 
under Sec. 1002.14(a)(1) the applicant still must receive the copy of 
the revision at or prior to consummation or account opening.
    7. Multiple versions of appraisals or valuations. For purposes of 
Sec. 1002.14(a)(1), the reference to ``all'' appraisals and other 
written valuations does not refer to all versions of the same appraisal 
or other valuation. If a creditor has received multiple versions of an 
appraisal or other written valuation, the creditor is required to 
provide only a copy of the latest version received. If, however, a 
creditor already has provided a copy of one version of an appraisal or 
other written valuation to an applicant, and the creditor later receives 
a revision of that appraisal or other written valuation, then the 
creditor also must provide the applicant with a copy of the revision to 
comply with Sec. 1002.14(a)(1). If a creditor receives only one version 
of an appraisal or other valuation that is developed in connection with 
the applicant's application, then that version must be provided to the 
applicant to comply with Sec. 1002.14(a)(1). See also comment 14(a)(1)-4 
above.
    14(a)(2) Disclosure.
    1. Appraisal independence requirements not affected. Nothing in the 
text of the disclosure required by Sec. 1002.14(a)(2) should be 
construed to affect, modify, limit, or supersede the operation of any 
legal, regulatory, or other requirements or standards relating to 
independence in the conduct of appraisers or the use of applicant-
ordered appraisals by creditors.
    14(a)(3) Reimbursement.
    1. Photocopy, postage, or other costs. Creditors may not charge for 
photocopy, postage, or other costs incurred in providing a copy of an 
appraisal or other written valuation in accordance with section 
14(a)(1).
    2. Reasonable fee for reimbursement. Section 1002.14(a)(3) does not 
prohibit a creditor from imposing a reasonable fee to reimburse the 
creditor's costs of the appraisal or other written valuation, so long as 
the fee is not increased to cover the costs of providing copies of such 
appraisals or other written valuations under Sec. 1002.14(a)(1). A 
creditor's cost may include an administration fee charged to the 
creditor by an appraisal management company as defined in 12 U.S.C. 
3350(11). Section 1002.14(a)(3) does not, however, legally obligate the 
applicant to pay such fees. Further, creditors may not impose fees for 
reimbursement of the costs of an appraisal or other valuation where 
otherwise prohibited by law. For instance, a creditor may not

[[Page 86]]

charge a consumer a fee for the performance of a second appraisal if the 
second appraisal is required under 15 U.S.C. 1639h(b)(2) and 12 CFR 
1026.35(c).
    14(b) Definitions.
    14(b)(1) Consummation.
    1. State law governs. When a contractual obligation on the 
consumer's part is created is a matter to be determined under applicable 
law; Sec. 1002.14 does not make this determination. A contractual 
commitment agreement, for example, that under applicable law binds the 
consumer to the credit terms would be consummation. Consummation, 
however, does not occur merely because the consumer has made some 
financial investment in the transaction (for example, by paying a 
nonrefundable fee) unless, of course, applicable law holds otherwise.
    2. Credit vs. sale. Consummation does not occur when the consumer 
becomes contractually committed to a sale transaction, unless the 
consumer also becomes legally obligated to accept a particular credit 
arrangement.
    14(b)(2) Dwelling.
    1. ``Motor vehicles'' not covered. The requirements of Sec. 1002.14 
do not apply to ``motor vehicles'' as defined by 12 U.S.C. 5519(f)(1).
    14(b)(3) Valuation.
    1. Valuations--examples. Examples of valuations include but are not 
limited to:
    i. A report prepared by an appraiser (whether or not licensed or 
certified) including the appraiser's estimate of the property's value or 
opinion of value.
    ii. A document prepared by the creditor's staff that assigns value 
to the property.
    iii. A report approved by a government-sponsored enterprise for 
describing to the applicant the estimate of the property's value 
developed pursuant to the proprietary methodology or mechanism of the 
government-sponsored enterprise.
    iv. A report generated by use of an automated valuation model to 
estimate the property's value.
    v. A broker price opinion prepared by a real estate broker, agent, 
or sales person to estimate the property's value.
    2. Attachments and exhibits. The term ``valuation'' includes any 
attachments and exhibits that are an integrated part of the valuation.
    3. Other documentation. Not all documents that discuss or restate a 
valuation of an applicant's property constitute a ``valuation'' for 
purposes of Sec. 1002.14(b)(3). Examples of documents that discuss the 
valuation of the applicant's property or may reflect its value but 
nonetheless are not ``valuations'' include but are not limited to:
    i. Internal documents that merely restate the estimated value of the 
dwelling contained in an appraisal or written valuation being provided 
to the applicant.
    ii. Governmental agency statements of appraised value that are 
publically available.
    iii. Publicly-available lists of valuations (such as published sales 
prices or mortgage amounts, tax assessments, and retail price ranges).
    iv. Manufacturers' invoices for manufactured homes.
    v. Reports reflecting property inspections that do not provide an 
estimate of the value of the property and are not used to develop an 
estimate of the value of the property.
    vi. Appraisal reviews that do not include the appraiser's estimate 
of the property's value or opinion of value.

    Section 1002.15--Incentives for Self-Testing and Self-Correction

    15(a) General rules.
    15(a)(1) Voluntary self-testing and correction.
    1. Activities required by any governmental authority are not 
voluntary self-tests. A governmental authority includes both 
administrative and judicial authorities for Federal, State, and local 
governments.
    15(a)(2) Corrective action required.
    1. To qualify for the privilege, appropriate corrective action is 
required when the results of a self-test show that it is more likely 
than not that there has been a violation of the ECOA or this part. A 
self-test is also privileged when it identifies no violations.
    2. In some cases, the issue of whether certain information is 
privileged may arise before the self-test is complete or corrective 
actions are fully under way. This would not necessarily prevent a 
creditor from asserting the privilege. In situations where the self-test 
is not complete, for the privilege to apply the lender must satisfy the 
regulation's requirements within a reasonable period of time. To assert 
the privilege where the self-test shows a likely violation, the rule 
requires, at a minimum, that the creditor establish a plan for 
corrective action and a method to demonstrate progress in implementing 
the plan. Creditors must take appropriate corrective action on a timely 
basis after the results of the self-test are known.
    3. A creditor's determination about the type of corrective action 
needed, or a finding that no corrective action is required, is not 
conclusive in determining whether the requirements of this paragraph 
have been satisfied. If a creditor's claim of privilege is challenged, 
an assessment of the need for corrective action or the type of 
corrective action that is appropriate must be based on a review of the 
self-testing results, which may require an in camera inspection of the 
privileged documents.
    15(a)(3) Other privileges.
    1. A creditor may assert the privilege established under this 
section in addition to asserting any other privilege that may apply, 
such as the attorney-client privilege or the work-product privilege. 
Self-testing

[[Page 87]]

data may be privileged under this section whether or not the creditor's 
assertion of another privilege is upheld.
    15(b) Self-test defined.
    15(b)(1) Definition.
    Paragraph 15(b)(1)(i).
    1. To qualify for the privilege, a self-test must be sufficient to 
constitute a determination of the extent or effectiveness of the 
creditor's compliance with the Act and Regulation B. Accordingly, a 
self-test is only privileged if it was designed and used for that 
purpose. A self-test that is designed or used to determine compliance 
with other laws or regulations or for other purposes is not privileged 
under this rule. For example, a self-test designed to evaluate employee 
efficiency or customers' satisfaction with the level of service provided 
by the creditor is not privileged even if evidence of discrimination is 
uncovered incidentally. If a self-test is designed for multiple 
purposes, only the portion designed to determine compliance with the 
ECOA is eligible for the privilege.
    Paragraph 15(b)(1)(ii).
    1. The principal attribute of self-testing is that it constitutes a 
voluntary undertaking by the creditor to produce new data or factual 
information that otherwise would not be available and could not be 
derived from loan or application files or other records related to 
credit transactions. Self-testing includes, but is not limited to, the 
practice of using fictitious applicants for credit (testers), either 
with or without the use of matched pairs. A creditor may elect to test a 
defined segment of its business, for example, loan applications 
processed by a specific branch or loan officer, or applications made for 
a particular type of credit or loan program. A creditor also may use 
other methods of generating information that is not available in loan 
and application files, such as surveying mortgage loan applicants. To 
the extent permitted by law, creditors might also develop new methods 
that go beyond traditional pre-application testing, such as hiring 
testers to submit fictitious loan applications for processing.
    2. The privilege does not protect a creditor's analysis performed as 
part of processing or underwriting a credit application. A creditor's 
evaluation or analysis of its loan files, Home Mortgage Disclosure Act 
data, or similar types of records (such as broker or loan officer 
compensation records) does not produce new information about a 
creditor's compliance and is not a self-test for purposes of this 
section. Similarly, a statistical analysis of data derived from existing 
loan files is not privileged.
    15(b)(3) Types of information not privileged.
    Paragraph 15(b)(3)(i).
    1. The information listed in this paragraph is not privileged and 
may be used to determine whether the prerequisites for the privilege 
have been satisfied. Accordingly, a creditor might be asked to identify 
the self-testing method, for example, whether preapplication testers 
were used or data were compiled by surveying loan applicants. 
Information about the scope of the self-test (such as the types of 
credit transactions examined, or the geographic area covered by the 
test) also is not privileged.
    Paragraph 15(b)(3)(ii).
    1. Property appraisal reports, minutes of loan committee meetings or 
other documents reflecting the basis for a decision to approve or deny 
an application, loan policies or procedures, underwriting standards, and 
broker compensation records are examples of the types of records that 
are not privileged. If a creditor arranges for testers to submit loan 
applications for processing, the records are not related to actual 
credit transactions for purposes of this paragraph and may be privileged 
self-testing records.
    15(c) Appropriate corrective action.
    1. The rule only addresses the corrective actions required for a 
creditor to take advantage of the privilege in this section. A creditor 
may be required to take other actions or provide additional relief if a 
formal finding of discrimination is made.
    15(c)(1) General requirement.
    1. Appropriate corrective action is required even though no 
violation has been formally adjudicated or admitted by the creditor. In 
determining whether it is more likely than not that a violation 
occurred, a creditor must treat testers as if they are actual applicants 
for credit. A creditor may not refuse to take appropriate corrective 
action under this section because the self-test used fictitious loan 
applicants. The fact that a tester's agreement with the creditor waives 
the tester's legal right to assert a violation does not eliminate the 
requirement for the creditor to take corrective action, although no 
remedial relief for the tester is required under paragraph 15(c)(3).
    15(c)(2) Determining the scope of appropriate corrective action.
    1. Whether a creditor has taken or is taking corrective action that 
is appropriate will be determined on a case-by-case basis. Generally, 
the scope of the corrective action that is needed to preserve the 
privilege is governed by the scope of the self-test. For example, a 
creditor that self-tests mortgage loans and discovers evidence of 
discrimination may focus its corrective actions on mortgage loans, and 
is not required to expand its testing to other types of loans.
    2. In identifying the policies or practices that are a likely cause 
of the violation, a creditor might identify inadequate or improper 
lending policies, failure to implement established policies, employee 
conduct, or other causes. The extent and scope of a likely violation may 
be assessed by determining

[[Page 88]]

which areas of operations are likely to be affected by those policies 
and practices, for example, by determining the types of loans and stages 
of the application process involved and the branches or offices where 
the violations may have occurred.
    3. Depending on the method and scope of the self-test and the 
results of the test, appropriate corrective action may include one or 
more of the following:
    i. If the self-test identifies individuals whose applications were 
inappropriately processed, offering to extend credit if the application 
was improperly denied and compensating such persons for out-of-pocket 
costs and other compensatory damages;
    ii. Correcting institutional policies or procedures that may have 
contributed to the likely violation, and adopting new policies as 
appropriate;
    iii. Identifying and then training and/or disciplining the employees 
involved;
    iv. Developing outreach programs, marketing strategies, or loan 
products to serve more effectively segments of the lender's markets that 
may have been affected by the likely discrimination; and
    v. Improving audit and oversight systems to avoid a recurrence of 
the likely violations.
    15(c)(3) Types of relief.
    Paragraph 15(c)(3)(ii).
    1. The use of pre-application testers to identify policies and 
practices that illegally discriminate does not require creditors to 
review existing loan files for the purpose of identifying and 
compensating applicants who might have been adversely affected.
    2. If a self-test identifies a specific applicant who was 
discriminated against on a prohibited basis, to qualify for the 
privilege in this section the creditor must provide appropriate remedial 
relief to that applicant; the creditor is not required to identify other 
applicants who might also have been adversely affected.
    Paragraph 15(c)(3)(iii).
    1. A creditor is not required to provide remedial relief to an 
applicant that would not be available by law. An applicant might also be 
ineligible for certain types of relief due to changed circumstances. For 
example, a creditor is not required to offer credit to a denied 
applicant if the applicant no longer qualifies for the credit due to a 
change in financial circumstances, although some other type of relief 
might be appropriate.
    15(d)(1) Scope of privilege.
    1. The privilege applies with respect to any examination, 
investigation or proceeding by Federal, State, or local government 
agencies relating to compliance with the Act or this part. Accordingly, 
in a case brought under the ECOA, the privilege established under this 
section preempts any inconsistent laws or court rules to the extent they 
might require disclosure of privileged self-testing data. The privilege 
does not apply in other cases (such as in litigation filed solely under 
a State's fair lending statute). In such cases, if a court orders a 
creditor to disclose self-test results, the disclosure is not a 
voluntary disclosure or waiver of the privilege for purposes of 
paragraph 15(d)(2); a creditor may protect the information by seeking a 
protective order to limit availability and use of the self-testing data 
and prevent dissemination beyond what is necessary in that case. 
Paragraph 15(d)(1) precludes a party who has obtained privileged 
information from using it in a case brought under the ECOA, provided the 
creditor has not lost the privilege through voluntary disclosure under 
paragraph 15(d)(2).
    15(d)(2) Loss of privilege.
    Paragraph 15(d)(2)(i).
    1. A creditor's corrective action, by itself, is not considered a 
voluntary disclosure of the self-test report or results. For example, a 
creditor does not disclose the results of a self-test merely by offering 
to extend credit to a denied applicant or by inviting the applicant to 
reapply for credit. Voluntary disclosure could occur under this 
paragraph, however, if the creditor disclosed the self-test results in 
connection with a new offer of credit.
    2. The disclosure of self-testing results to an independent 
contractor acting as an auditor or consultant for the creditor on 
compliance matters does not result in loss of the privilege.
    Paragraph 15(d)(2)(ii).
    1. The privilege is lost if the creditor discloses privileged 
information, such as the results of the self-test. The privilege is not 
lost if the creditor merely reveals or refers to the existence of the 
self-test.
    Paragraph 15(d)(2)(iii).
    1. A creditor's claim of privilege may be challenged in a court or 
administrative law proceeding with appropriate jurisdiction. In 
resolving the issue, the presiding officer may require the creditor to 
produce privileged information about the self-test.
    Paragraph 15(d)(3) Limited use of privileged information.
    1. A creditor may be required to produce privileged documents for 
the purpose of determining a penalty or remedy after a violation of the 
ECOA or Regulation B has been formally adjudicated or admitted. A 
creditor's compliance with such a requirement does not evidence the 
creditor's intent to forfeit the privilege.

        Section 1002.16--Enforcement, Penalties, and Liabilities

    16(c) Failure of compliance.
    1. Inadvertent errors. Inadvertent errors include, but are not 
limited to, clerical mistake, calculation error, computer malfunction, 
and printing error. An error of legal

[[Page 89]]

judgment is not an inadvertent error under the regulation.
    2. Correction of error. For inadvertent errors that occur under 
Secs. 1002.12 and 1002.13, this section requires that they be corrected 
prospectively.

                   Appendix B--Model Application Forms

    1. Freddie Mac/Fannie Mae form--residential loan application. The 
uniform residential loan application form (Freddie Mac 65/Fannie Mae 
1003), including supplemental form (Freddie Mac 65A/Fannie Mae 1003A), 
prepared by the Federal Home Loan Mortgage Corporation and the Federal 
National Mortgage Association and dated October 1992 may be used by 
creditors without violating this part. Creditors that are governed by 
the monitoring requirements of this part (which limits collection to 
applications primarily for the purchase or refinancing of the 
applicant's principal residence) should delete, strike, or modify the 
data-collection section on the form when using it for transactions not 
covered by Sec. 1002.13(a) to ensure that they do not collect the 
information. Creditors that are subject to more extensive collection 
requirements by a substitute monitoring program under Sec. 1002.13(d) or 
by the Home Mortgage Disclosure Act (HMDA) may use the form as issued, 
in compliance with the substitute program or HMDA.
    2. FHLMC/FNMA form--home improvement loan application. The home-
improvement and energy loan application form (FHLMC 703/FNMA 1012), 
prepared by the Federal Home Loan Mortgage Corporation and the Federal 
National Mortgage Association and dated October 1986, complies with the 
requirements of the regulation for some creditors but not others because 
of the form's section ``Information for Government Monitoring 
Purposes.'' Creditors that are governed by Sec. 1002.13(a) of the 
regulation (which limits collection to applications primarily for the 
purchase or refinancing of the applicant's principal residence) should 
delete, strike, or modify the data-collection section on the form when 
using it for transactions not covered by Sec. 1002.13(a) to ensure that 
they do not collect the information. Creditors that are subject to more 
extensive collection requirements by a substitute monitoring program 
under Sec. 1002.13(d) may use the form as issued, in compliance with 
that substitute program.

                  Appendix C--Sample Notification Forms

    1. Form C-9. If not otherwise provided under other applicable 
disclosure requirements, creditors may design their own form, add to, or 
modify the model form to reflect their individual policies and 
procedures. For example, a creditor may want to add:
    i. A telephone number that applicants may call to leave their name 
and the address to which a copy of the appraisal or other written 
valuation should be sent.
    ii. A notice of the cost the applicant will be required to pay the 
creditor for the appraisal or other valuation

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]
      



PART 1003_HOME MORTGAGE DISCLOSURE (REGULATION C)--Table of Contents



Sec.
1003.1  Authority, purpose, and scope.
1003.2  Definitions.
1003.3  Exempt institutions.
1003.4  Compilation of loan data.
1003.5  Disclosure and reporting.
1003.6  Enforcement.

Appendix A to Part 1003--Form and Instructions for Completion of HMDA 
          Loan/Application Register
Appendix B to Part 1003--Form and Instructions for Data Collection on 
          Ethnicity, Race, and Sex
Appendix C to Part 1003--Procedures for Generating a Check Digit and 
          Validating a ULI
Supplement I to Part 1003--Staff Commentary

    Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.

    Source: 76 FR 78468, Dec. 19, 2011, unless otherwise noted.



Sec. 1003.1  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation C, is issued by the 
Bureau of Consumer Financial Protection (Bureau) pursuant to the Home 
Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et seq.,) as amended. The 
information-collection requirements have been approved by the U.S. 
Office of Management and Budget (OMB) under 44 U.S.C. 3501 et seq. and 
have been assigned OMB numbers for institutions reporting data to the 
Office of the Comptroller of the Currency (1557-0159), the Federal 
Deposit Insurance Corporation (3064-0046), the Federal Reserve System 
(7100-0247), the Department of Housing and Urban Development (HUD) 
(2502-0529), the National Credit Union Administration (3133-0166), and 
the Bureau of Consumer Financial Protection (3170-0008).
    (b) Purpose. (1) This part implements the Home Mortgage Disclosure 
Act, which is intended to provide the public with loan data that can be 
used:

[[Page 90]]

    (i) To help determine whether financial institutions are serving the 
housing needs of their communities;
    (ii) To assist public officials in distributing public-sector 
investment so as to attract private investment to areas where it is 
needed; and
    (iii) To assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes.
    (2) Neither the act nor this part is intended to encourage unsound 
lending practices or the allocation of credit.
    (c) Scope. This part applies to certain financial institutions, 
including banks, savings associations, credit unions, and other mortgage 
lending institutions, as defined in Sec. 1003.2. The regulation requires 
an institution to report data to the appropriate Federal agency about 
home purchase loans, home improvement loans, and refinancings that it 
originates or purchases, or for which it receives applications; and to 
disclose certain data to the public.

    Effective Date Note: At 80 FR 66308, Oct. 28, 2015, Sec. 1003.1 was 
amended by revising paragraph (c), effective Jan. 1, 2018. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 1003.1  Authority, purpose, and scope.

                                * * * * *

    (c) Scope. This part applies to financial institutions as defined in 
Sec. 1003.2(g). This part requires a financial institution to submit 
data to the appropriate Federal agency for the financial institution as 
defined in Sec. 1003.5(a)(4), and to disclose certain data to the 
public, about covered loans for which the financial institution receives 
applications, or that it originates or purchases, and that are secured 
by a dwelling located in a State of the United States of America, the 
District of Columbia, or the Commonwealth of Puerto Rico.



Sec. 1003.2  Definitions.

    In this part:
    Act means the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et 
seq.,) as amended.
    Application--(1) In general. Application means an oral or written 
request for a home purchase loan, a home improvement loan, or a 
refinancing that is made in accordance with procedures used by a 
financial institution for the type of credit requested.
    (2) Preapproval programs. A request for preapproval for a home 
purchase loan is an application under this section if the request is 
reviewed under a program in which the financial institution, after a 
comprehensive analysis of the creditworthiness of the applicant, issues 
a written commitment to the applicant valid for a designated period of 
time to extend a home purchase loan up to a specified amount. The 
written commitment may not be subject to conditions other than:
    (i) Conditions that require the identification of a suitable 
property;
    (ii) Conditions that require that no material change has occurred in 
the applicant's financial condition or creditworthiness prior to 
closing; and
    (iii) Limited conditions that are not related to the financial 
condition or creditworthiness of the applicant that the lender 
ordinarily attaches to a traditional home mortgage application (such as 
certification of a clear termite inspection).
    Branch office means:
    (1) Any office of a bank, savings association, or credit union that 
is approved as a branch by a Federal or state supervisory agency, but 
excludes free-standing electronic terminals such as automated teller 
machines; and
    (2) Any office of a for-profit mortgage-lending institution (other 
than a bank, savings association, or credit union) that takes 
applications from the public for home purchase loans, home improvement 
loans, or refinancings. A for-profit mortgage-lending institution is 
also deemed to have a branch office in an MSA or in a Metropolitan 
Division, if, in the preceding calendar year, it received applications 
for, originated, or purchased five or more home purchase loans, home 
improvement loans, or refinancings related to property located in that 
MSA or Metropolitan Division, respectively.
    Dwelling means a residential structure (whether or not attached to 
real property) located in a state of the United States of America, the 
District of Columbia, or the Commonwealth of Puerto Rico. The term 
includes an individual condominium unit, cooperative unit, or mobile or 
manufactured home.
    Financial institution means:

[[Page 91]]

    (1) A bank, savings association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Bureau for coverage 
by the act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in an 
MSA;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan (excluding temporary financing such as a construction 
loan) or refinancing of a home purchase loan, secured by a first lien on 
a one- to four-family dwelling;
    (iv) Meets one or more of the following three criteria:
    (A) The institution is Federally insured or regulated;
    (B) The mortgage loan referred to in paragraph (1)(iii) of this 
definition was insured, guaranteed, or supplemented by a Federal agency; 
or
    (C) The mortgage loan referred to in paragraph (1)(iii) of this 
definition was intended by the institution for sale to Fannie Mae or 
Freddie Mac; and
    (v) In each of the two preceding calendar years, originated at least 
25 home purchase loans, including refinancings of home purchase loans, 
that are not excluded from this part pursuant to Sec. 1003.4(d); and
    (2) A for-profit mortgage-lending institution (other than a bank, 
savings association, or credit union) that:
    (i) In the preceding calendar year, either:
    (A) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least 10 percent of its loan-origination 
volume, measured in dollars; or
    (B) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least $25 million; and
    (ii) On the preceding December 31, had a home or branch office in an 
MSA; and
    (iii) Either:
    (A) On the preceding December 31, had total assets of more than $10 
million, counting the assets of any parent corporation; or
    (B) In the preceding calendar year, originated at least 100 home 
purchase loans, including refinancings of home purchase loans.
    Home-equity line of credit means an open-end credit plan secured by 
a dwelling as defined in Regulation Z (Truth in Lending), 12 CFR part 
1026.
    Home improvement loan means:
    (1) A loan secured by a lien on a dwelling that is for the purpose, 
in whole or in part, of repairing, rehabilitating, remodeling, or 
improving a dwelling or the real property on which it is located; and
    (2) A non-dwelling secured loan that is for the purpose, in whole or 
in part, of repairing, rehabilitating, remodeling, or improving a 
dwelling or the real property on which it is located, and that is 
classified by the financial institution as a home improvement loan.
    Home purchase loan means a loan secured by and made for the purpose 
of purchasing a dwelling.
    Manufactured home means any residential structure as defined under 
regulations of the Department of Housing and Urban Development 
establishing manufactured home construction and safety standards (24 CFR 
3280.2).
    Metropolitan Statistical Area or MSA and Metropolitan Division or 
MD--(1) Metropolitan Statistical Area or MSA means a metropolitan 
statistical area as defined by the U.S. Office of Management and Budget.
    (2) Metropolitan Division or MD means a metropolitan division of an 
MSA, as defined by the U.S. Office of Management and Budget.
    Refinancing means a new obligation that satisfies and replaces an 
existing obligation by the same borrower, in which:
    (1) For coverage purposes, the existing obligation is a home 
purchase loan (as determined by the lender, for example, by reference to 
available documents; or as stated by the applicant), and both the 
existing obligation and the new obligation are secured by first liens on 
dwellings; and

[[Page 92]]

    (2) For reporting purposes, both the existing obligation and the new 
obligation are secured by liens on dwellings.

[76 FR 78468, Dec. 19, 2011, as amended at 80 FR 66308, Oct. 28, 2015]

    Effective Date Note: At 80 FR 66308, Oct. 28, 2015, Sec. 1003.2 was 
revised, effective Jan. 1, 2018. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1003.2  Definitions.

    In this part:
    (a) Act means the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 
2801 et seq.), as amended.
    (b) Application--(1) In general. Application means an oral or 
written request for a covered loan that is made in accordance with 
procedures used by a financial institution for the type of credit 
requested.
    (2) Preapproval programs. A request for preapproval for a home 
purchase loan, other than a home purchase loan that will be an open-end 
line of credit, a reverse mortgage, or secured by a multifamily 
dwelling, is an application under this section if the request is 
reviewed under a program in which the financial institution, after a 
comprehensive analysis of the creditworthiness of the applicant, issues 
a written commitment to the applicant valid for a designated period of 
time to extend a home purchase loan up to a specified amount. The 
written commitment may not be subject to conditions other than:
    (i) Conditions that require the identification of a suitable 
property;
    (ii) Conditions that require that no material change has occurred in 
the applicant's financial condition or creditworthiness prior to 
closing; and
    (iii) Limited conditions that are not related to the financial 
condition or creditworthiness of the applicant that the financial 
institution ordinarily attaches to a traditional home mortgage 
application.
    (c) Branch office means:
    (1) Any office of a bank, savings association, or credit union that 
is considered a branch by the Federal or State supervisory agency 
applicable to that institution, excluding automated teller machines and 
other free-standing electronic terminals; and
    (2) Any office of a for-profit mortgage-lending institution (other 
than a bank, savings association, or credit union) that takes 
applications from the public for covered loans. A for-profit mortgage-
lending institution (other than a bank, savings association, or credit 
union) is also deemed to have a branch office in an MSA or in an MD, if, 
in the preceding calendar year, it received applications for, 
originated, or purchased five or more covered loans related to property 
located in that MSA or MD, respectively.
    (d) Closed-end mortgage loan means an extension of credit that is 
secured by a lien on a dwelling and that is not an open-end line of 
credit under paragraph (o) of this section.
    (e) Covered loan means a closed-end mortgage loan or an open-end 
line of credit that is not an excluded transaction under Sec. 1003.3(c).
    (f) Dwelling means a residential structure, whether or not attached 
to real property. The term includes but is not limited to a detached 
home, an individual condominium or cooperative unit, a manufactured home 
or other factory-built home, or a multifamily residential structure or 
community.
    (g) Financial institution means a depository financial institution 
or a nondepository financial institution, where:
    (1) Depository financial institution means a bank, savings 
association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Bureau for coverage 
by the Act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in an 
MSA;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan or refinancing of a home purchase loan, secured by a first 
lien on a one- to four-unit dwelling;
    (iv) Meets one or more of the following two criteria:
    (A) The institution is federally insured or regulated; or
    (B) Any loan referred to in paragraph (g)(1)(iii) of this section 
was insured, guaranteed, or supplemented by a Federal agency, or was 
intended by the institution for sale to the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation; and
    (v) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at least 
25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec. 1003.3(c)(1) through (10); or
    (B) In each of the two preceding calendar years, originated at least 
100 open-end lines of credit that are not excluded from this part 
pursuant to Sec. 1003.3(c)(1) through (10); and
    (2) Nondepository financial institution means a for-profit mortgage-
lending institution (other than a bank, savings association, or credit 
union) that:
    (i) On the preceding December 31, had a home or branch office in an 
MSA; and
    (ii) Meets at least one of the following criteria:

[[Page 93]]

    (A) In each of the two preceding calendar years, originated at least 
25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec. 1003.3(c)(1) through (10); or
    (B) In each of the two preceding calendar years, originated at least 
100 open-end lines of credit that are not excluded from this part 
pursuant to Sec. 1003.3(c)(1) through (10).
    (h) [Reserved]
    (i) Home improvement loan means a closed-end mortgage loan or an 
open-end line of credit that is for the purpose, in whole or in part, of 
repairing, rehabilitating, remodeling, or improving a dwelling or the 
real property on which the dwelling is located.
    (j) Home purchase loan means a closed-end mortgage loan or an open-
end line of credit that is for the purpose, in whole or in part, of 
purchasing a dwelling.
    (k) Loan/Application Register means both the record of information 
required to be collected pursuant to Sec. 1003.4 and the record 
submitted annually or quarterly, as applicable, pursuant to 
Sec. 1003.5(a).
    (l) Manufactured home means any residential structure as defined 
under regulations of the U.S. Department of Housing and Urban 
Development establishing manufactured home construction and safety 
standards (24 CFR 3280.2). For purposes of Sec. 1003.4(a)(5), the term 
also includes a multifamily dwelling that is a manufactured home 
community.
    (m) Metropolitan Statistical Area (MSA) and Metropolitan Division 
(MD). (1) Metropolitan Statistical Area or MSA means a Metropolitan 
Statistical Area as defined by the U.S. Office of Management and Budget.
    (2) Metropolitan Division (MD) means a Metropolitan Division of an 
MSA, as defined by the U.S. Office of Management and Budget.
    (n) Multifamily dwelling means a dwelling, regardless of 
construction method, that contains five or more individual dwelling 
units.
    (o) Open-end line of credit means an extension of credit that:
    (1) Is secured by a lien on a dwelling; and
    (2) Is an open-end credit plan as defined in Regulation Z, 12 CFR 
1026.2(a)(20), but without regard to whether the credit is consumer 
credit, as defined in Sec. 1026.2(a)(12), is extended by a creditor, as 
defined in Sec. 1026.2(a)(17), or is extended to a consumer, as defined 
in Sec. 1026.2(a)(11).
    (p) Refinancing means a closed-end mortgage loan or an open-end line 
of credit in which a new, dwelling-secured debt obligation satisfies and 
replaces an existing, dwelling-secured debt obligation by the same 
borrower.
    (q) Reverse mortgage means a closed-end mortgage loan or an open-end 
line of credit that is a reverse mortgage transaction as defined in 
Regulation Z, 12 CFR 1026.33(a), but without regard to whether the 
security interest is created in a principal dwelling.



Sec. 1003.3  Exempt institutions.

    (a) Exemption based on state law. (1) A state-chartered or state-
licensed financial institution is exempt from the requirements of this 
part if the Bureau determines that the institution is subject to a state 
disclosure law that contains requirements substantially similar to those 
imposed by this part and that contains adequate provisions for 
enforcement.
    (2) Any state, state-chartered or state-licensed financial 
institution, or association of such institutions, may apply to the 
Bureau for an exemption under paragraph (a) of this section.
    (3) An institution that is exempt under paragraph (a) of this 
section shall use the disclosure form required by its state law and 
shall submit the data required by that law to its state supervisory 
agency for purposes of aggregation.
    (b) Loss of exemption. An institution losing a state-law exemption 
under paragraph (a) of this section shall comply with this part 
beginning with the calendar year following the year for which it last 
reported loan data under the state disclosure law.

    Effective Date Note: At 80 FR 66309, Oct. 28, 2015, Sec. 1003.3 was 
amended by revising the section heading and adding paragraph (c), 
effective Jan. 1, 2018. For the convenience of the user, the added and 
revised text is set forth as follows:



Sec. 1003.3  Exempt institutions and excluded transactions.

                                * * * * *

    (c) Excluded transactions. The requirements of this part do not 
apply to:
    (1) A closed-end mortgage loan or open-end line of credit originated 
or purchased by a financial institution acting in a fiduciary capacity;
    (2) A closed-end mortgage loan or open-end line of credit secured by 
a lien on unimproved land;
    (3) Temporary financing;
    (4) The purchase of an interest in a pool of closed-end mortgage 
loans or open-end lines of credit;
    (5) The purchase solely of the right to service closed-end mortgage 
loans or open-end lines of credit;
    (6) The purchase of closed-end mortgage loans or open-end lines of 
credit as part of a

[[Page 94]]

merger or acquisition, or as part of the acquisition of all of the 
assets and liabilities of a branch office as defined in Sec. 1003.2(c);
    (7) A closed-end mortgage loan or open-end line of credit, or an 
application for a closed-end mortgage loan or open-end line of credit, 
for which the total dollar amount is less than $500;
    (8) The purchase of a partial interest in a closed-end mortgage loan 
or open-end line of credit;
    (9) A closed-end mortgage loan or open-end line of credit used 
primarily for agricultural purposes;
    (10) A closed-end mortgage loan or open-end line of credit that is 
or will be made primarily for a business or commercial purpose, unless 
the closed-end mortgage loan or open-end line of credit is a home 
improvement loan under Sec. 1003.2(i), a home purchase loan under 
Sec. 1003.2(j), or a refinancing under Sec. 1003.2(p);
    (11) A closed-end mortgage loan, if the financial institution 
originated fewer than 25 closed-end mortgage loans in each of the two 
preceding calendar years; or
    (12) An open-end line of credit, if the financial institution 
originated fewer than 100 open-end lines of credit in each of the two 
preceding calendar years.



Sec. 1003.4  Compilation of loan data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for, and originations and purchases 
of, home purchase loans, home improvement loans, and refinancings for 
each calendar year. An institution is required to collect data regarding 
requests under a preapproval program (as defined in Sec. 1003.2) only if 
the preapproval request is denied or results in the origination of a 
home purchase loan. All reportable transactions shall be recorded, 
within thirty calendar days after the end of the calendar quarter in 
which final action is taken (such as origination or purchase of a loan, 
or denial or withdrawal of an application), on a register in the format 
prescribed in appendix A of this part. The data recorded shall include 
the following items:
    (1) An identifying number for the loan or loan application, and the 
date the application was received.
    (2) The type of loan or application.
    (3) The purpose of the loan or application.
    (4) Whether the application is a request for preapproval and whether 
it resulted in a denial or in an origination.
    (5) The property type to which the loan or application relates.
    (6) The owner-occupancy status of the property to which the loan or 
application relates.
    (7) The amount of the loan or the amount applied for.
    (8) The type of action taken, and the date.
    (9) The location of the property to which the loan or application 
relates, by MSA or by Metropolitan Division, by state, by county, and by 
census tract, if the institution has a home or branch office in that MSA 
or Metropolitan Division.
    (10) The ethnicity, race, and sex of the applicant or borrower, and 
the gross annual income relied on in processing the application.
    (11) The type of entity purchasing a loan that the institution 
originates or purchases and then sells within the same calendar year 
(this information need not be included in quarterly updates).
    (12)(i) For originated loans subject to Regulation Z, 12 CFR part 
1026, the difference between the loan's annual percentage rate (APR) and 
the average prime offer rate for a comparable transaction as of the date 
the interest rate is set, if that difference is equal to or greater than 
1.5 percentage points for loans secured by a first lien on a dwelling, 
or equal to or greater than 3.5 percentage points for loans secured by a 
subordinate lien on a dwelling.
    (ii) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates, points, and other loan 
pricing terms currently offered to consumers by a representative sample 
of creditors for mortgage loans that have low-risk pricing 
characteristics. The Bureau publishes average prime offer rates for a 
broad range of types of transactions in tables updated at least weekly, 
as well as the methodology the Bureau uses to derive these rates.
    (13) Whether the loan is subject to the Home Ownership and Equity 
Protection Act of 1994, as implemented in Regulation Z (12 CFR 1026.32).
    (14) The lien status of the loan or application (first lien, 
subordinate lien, or not secured by a lien on a dwelling).

[[Page 95]]

    (b) Collection of data on ethnicity, race, sex, and income. (1) A 
financial institution shall collect data about the ethnicity, race, and 
sex of the applicant or borrower as prescribed in appendix B of this 
part.
    (2) Ethnicity, race, sex, and income data may but need not be 
collected for loans purchased by the financial institution.
    (c) Optional data. A financial institution may report:
    (1) The reasons it denied a loan application;
    (2) Requests for preapproval that are approved by the institution 
but not accepted by the applicant; and
    (3) Home-equity lines of credit made in whole or in part for the 
purpose of home improvement or home purchase.
    (d) Excluded data. A financial institution shall not report:
    (1) Loans originated or purchased by the financial institution 
acting in a fiduciary capacity (such as trustee);
    (2) Loans on unimproved land;
    (3) Temporary financing (such as bridge or construction loans);
    (4) The purchase of an interest in a pool of loans (such as 
mortgage-participation certificates, mortgage-backed securities, or real 
estate mortgage investment conduits);
    (5) The purchase solely of the right to service loans; or
    (6) Loans acquired as part of a merger or acquisition, or as part of 
the acquisition of all of the assets and liabilities of a branch office 
as defined in Sec. 1003.2.
    (e) Data reporting for banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under CRA. Banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under regulations that implement the Community 
Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) shall also collect the 
location of property located outside MSAs and Metropolitan Divisions in 
which the institution has a home or branch office, or outside any MSA.

    Effective Date Note: At 80 FR 66310, Oct. 28, 2015, Sec. 1003.4 was 
revised, effective Jan. 1, 2018. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1003.4  Compilation of reportable data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for covered loans that it receives, 
covered loans that it originates, and covered loans that it purchases 
for each calendar year. A financial institution shall collect data 
regarding requests under a preapproval program, as defined in 
Sec. 1003.2(b)(2), only if the preapproval request is denied, is 
approved by the financial institution but not accepted by the applicant, 
or results in the origination of a home purchase loan. The data 
collected shall include the following items:
    (1)(i) A universal loan identifier (ULI) for the covered loan or 
application that can be used to identify and retrieve the covered loan 
or application file. Except for a purchased covered loan or application 
described in paragraphs (a)(1)(i)(D) and (E) of this section, the 
financial institution shall assign and report a ULI that:
    (A) Begins with the financial institution's Legal Entity Identifier 
(LEI) that is issued by:
    (1) A utility endorsed by the LEI Regulatory Oversight Committee; or
    (2) A utility endorsed or otherwise governed by the Global LEI 
Foundation (GLEIF) (or any successor of the GLEIF) after the GLEIF 
assumes operational governance of the global LEI system.
    (B) Follows the LEI with up to 23 additional characters to identify 
the covered loan or application, which:
    (1) May be letters, numerals, or a combination of letters and 
numerals;
    (2) Must be unique within the financial institution; and
    (3) Must not include any information that could be used to directly 
identify the applicant or borrower; and
    (C) Ends with a two-character check digit, as prescribed in appendix 
C to this part.
    (D) For a purchased covered loan that any financial institution has 
previously assigned or reported with a ULI under this part, the 
financial institution that purchases the covered loan must use the ULI 
that was assigned or previously reported for the covered loan.
    (E) For an application that was previously reported with a ULI under 
this part and that results in an origination during the same calendar 
year that is reported in a subsequent reporting period pursuant to 
Sec. 1003.5(a)(1)(ii), the financial institution may report the same ULI 
for the origination that was previously reported for the application.
    (ii) Except for purchased covered loans, the date the application 
was received or the date shown on the application form.

[[Page 96]]

    (2) Whether the covered loan is, or in the case of an application 
would have been, insured by the Federal Housing Administration, 
guaranteed by the Veterans Administration, or guaranteed by the Rural 
Housing Service or the Farm Service Agency.
    (3) Whether the covered loan is, or the application is for, a home 
purchase loan, a home improvement loan, a refinancing, a cash-out 
refinancing, or for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing.
    (4) Whether the application or covered loan involved a request for a 
preapproval of a home purchase loan under a preapproval program.
    (5) Whether the construction method for the dwelling related to the 
property identified in paragraph (a)(9) of this section is site-built or 
a manufactured home.
    (6) Whether the property identified in paragraph (a)(9) of this 
section is or will be used by the applicant or borrower as a principal 
residence, as a second residence, or as an investment property.
    (7) The amount of the covered loan or the amount applied for, as 
applicable.
    (i) For a closed-end mortgage loan, other than a purchased loan, an 
assumption, or a reverse mortgage, the amount to be repaid as disclosed 
on the legal obligation. For a purchased closed-end mortgage loan or an 
assumption of a closed-end mortgage loan, the unpaid principal balance 
at the time of purchase or assumption.
    (ii) For an open-end line of credit, other than a reverse mortgage 
open-end line of credit, the amount of credit available to the borrower 
under the terms of the plan.
    (iii) For a reverse mortgage, the initial principal limit, as 
determined pursuant to section 255 of the National Housing Act (12 
U.S.C. 1715z-20) and implementing regulations and mortgagee letters 
issued by the U.S. Department of Housing and Urban Development.
    (8) The following information about the financial institution's 
action:
    (i) The action taken by the financial institution, recorded as one 
of the following:
    (A) Whether a covered loan was originated or purchased;
    (B) Whether an application for a covered loan that did not result in 
the origination of a covered loan was approved but not accepted, denied, 
withdrawn by the applicant, or closed for incompleteness; and
    (C) Whether a preapproval request that did not result in the 
origination of a home purchase loan was denied or approved but not 
accepted.
    (ii) The date of the action taken by the financial institution.
    (9) The following information about the location of the property 
securing the covered loan or, in the case of an application, proposed to 
secure the covered loan:
    (i) The property address; and
    (ii) If the property is located in an MSA or MD in which the 
financial institution has a home or branch office, or if the institution 
is subject to paragraph (e) of this section, the location of the 
property by:
    (A) State;
    (B) County; and
    (C) Census tract if the property is located in a county with a 
population of more than 30,000 according to the most recent decennial 
census conducted by the U.S. Census Bureau.
    (10) The following information about the applicant or borrower:
    (i) Ethnicity, race, and sex, and whether this information was 
collected on the basis of visual observation or surname;
    (ii) Age; and
    (iii) Except for covered loans or applications for which the credit 
decision did not consider or would not have considered income, the gross 
annual income relied on in making the credit decision or, if a credit 
decision was not made, the gross annual income relied on in processing 
the application.
    (11) The type of entity purchasing a covered loan that the financial 
institution originates or purchases and then sells within the same 
calendar year.
    (12)(i) For covered loans subject to Regulation Z, 12 CFR part 1026, 
other than assumptions, purchased covered loans, and reverse mortgages, 
the difference between the covered loan's annual percentage rate and the 
average prime offer rate for a comparable transaction as of the date the 
interest rate is set.
    (ii) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates, points, and other loan 
pricing terms currently offered to consumers by a representative sample 
of creditors for mortgage loans that have low-risk pricing 
characteristics. The Bureau publishes average prime offer rates for a 
broad range of types of transactions in tables updated at least weekly, 
as well as the methodology the Bureau uses to derive these rates.
    (13) For covered loans subject to the Home Ownership and Equity 
Protection Act of 1994, as implemented in Regulation Z, 12 CFR 1026.32, 
whether the covered loan is a high-cost mortgage under Regulation Z, 12 
CFR 1026.32(a).
    (14) The lien status (first or subordinate lien) of the property 
identified under paragraph (a)(9) of this section.
    (15)(i) Except for purchased covered loans, the credit score or 
scores relied on in making the credit decision and the name and version 
of the scoring model used to generate each credit score.
    (ii) For purposes of this paragraph (a)(15), ``credit score'' has 
the meaning set forth in 15 U.S.C. 1681g(f)(2)(A).

[[Page 97]]

    (16) The principal reason or reasons the financial institution 
denied the application, if applicable.
    (17) For covered loans subject to Regulation Z, 12 CFR 1026.43(c), 
the following information:
    (i) If a disclosure is provided for the covered loan pursuant to 
Regulation Z, 12 CFR 1026.19(f), the amount of total loan costs, as 
disclosed pursuant to Regulation Z, 12 CFR 1026.38(f)(4); or
    (ii) If the covered loan is not subject to the disclosure 
requirements in Regulation Z, 12 CFR 1026.19(f), and is not a purchased 
covered loan, the total points and fees charged in connection with the 
covered loan, expressed in dollars and calculated pursuant to Regulation 
Z, 12 CFR 1026.32(b)(1).
    (18) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the total of all itemized amounts that 
are designated borrower-paid at or before closing, as disclosed pursuant 
to Regulation Z, 12 CFR 1026.38(f)(1).
    (19) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the points paid to the creditor to 
reduce the interest rate, expressed in dollars, as described in 
Regulation Z, 12 CFR 1026.37(f)(1)(i), and disclosed pursuant to 
Regulation Z, 12 CFR 1026.38(f)(1).
    (20) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the amount of lender credits, as 
disclosed pursuant to Regulation Z, 12 CFR 1026.38(h)(3).
    (21) The interest rate applicable to the approved application, or to 
the covered loan at closing or account opening.
    (22) For covered loans or applications subject to Regulation Z, 12 
CFR part 1026, other than reverse mortgages or purchased covered loans, 
the term in months of any prepayment penalty, as defined in Regulation 
Z, 12 CFR 1026.32(b)(6)(i) or (ii), as applicable.
    (23) Except for purchased covered loans, the ratio of the 
applicant's or borrower's total monthly debt to the total monthly income 
relied on in making the credit decision.
    (24) Except for purchased covered loans, the ratio of the total 
amount of debt secured by the property to the value of the property 
relied on in making the credit decision.
    (25) The scheduled number of months after which the legal obligation 
will mature or terminate or would have matured or terminated.
    (26) The number of months, or proposed number of months in the case 
of an application, until the first date the interest rate may change 
after closing or account opening.
    (27) Whether the contractual terms include or would have included 
any of the following:
    (i) A balloon payment as defined in Regulation Z, 12 CFR 
1026.18(s)(5)(i);
    (ii) Interest-only payments as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(iv);
    (iii) A contractual term that would cause the covered loan to be a 
negative amortization loan as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(v); or
    (iv) Any other contractual term that would allow for payments other 
than fully amortizing payments, as defined in Regulation Z, 12 CFR 
1026.43(b)(2), during the loan term, other than the contractual terms 
described in this paragraph (a)(27)(i), (ii), and (iii).
    (28) The value of the property securing the covered loan or, in the 
case of an application, proposed to secure the covered loan relied on in 
making the credit decision.
    (29) If the dwelling related to the property identified in paragraph 
(a)(9) of this section is a manufactured home and not a multifamily 
dwelling, whether the covered loan is, or in the case of an application 
would have been, secured by a manufactured home and land, or by a 
manufactured home and not land.
    (30) If the dwelling related to the property identified in paragraph 
(a)(9) of this section is a manufactured home and not a multifamily 
dwelling, whether the applicant or borrower:
    (i) Owns the land on which it is or will be located or, in the case 
of an application, did or would have owned the land on which it would 
have been located, through a direct or indirect ownership interest; or
    (ii) Leases or, in the case of an application, leases or would have 
leased the land through a paid or unpaid leasehold.
    (31) The number of individual dwelling units related to the property 
securing the covered loan or, in the case of an application, proposed to 
secure the covered loan.
    (32) If the property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan includes a multifamily 
dwelling, the number of individual dwelling units related to the 
property that are income-restricted pursuant to Federal, State, or local 
affordable housing programs.
    (33) Except for purchased covered loans, the following information 
about the application channel of the covered loan or application:
    (i) Whether the applicant or borrower submitted the application for 
the covered loan directly to the financial institution; and
    (ii) Whether the obligation arising from the covered loan was, or in 
the case of an application, would have been initially payable to the 
financial institution.
    (34) For a covered loan or application, the unique identifier 
assigned by the Nationwide Mortgage Licensing System and Registry for 
the mortgage loan originator, as defined in Regulation G, 12 CFR 
1007.102, or Regulation H, 12 CFR 1008.23, as applicable.

[[Page 98]]

    (35)(i) Except for purchased covered loans, the name of the 
automated underwriting system used by the financial institution to 
evaluate the application and the result generated by that automated 
underwriting system.
    (ii) For purposes of this paragraph (a)(35), an ``automated 
underwriting system'' means an electronic tool developed by a 
securitizer, Federal government insurer, or Federal government guarantor 
that provides a result regarding the credit risk of the applicant and 
whether the covered loan is eligible to be originated, purchased, 
insured, or guaranteed by that securitizer, Federal government insurer, 
or Federal government guarantor.
    (36) Whether the covered loan is, or the application is for, a 
reverse mortgage.
    (37) Whether the covered loan is, or the application is for, an 
open-end line of credit.
    (38) Whether the covered loan is, or the application is for a 
covered loan that will be, made primarily for a business or commercial 
purpose.
    (b) Collection of data on ethnicity, race, sex, age, and income. (1) 
A financial institution shall collect data about the ethnicity, race, 
and sex of the applicant or borrower as prescribed in appendix B to this 
part.
    (2) Ethnicity, race, sex, age, and income data may but need not be 
collected for covered loans purchased by a financial institution.
    (c)-(d) [Reserved]
    (e) Data reporting for banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under CRA. Banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under regulations that implement the Community 
Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) shall also collect the 
information required by paragraph 4(a)(9) of this section for property 
located outside MSAs and MDs in which the institution has a home or 
branch office, or outside any MSA.
    (f) Quarterly recording of data. A financial institution shall 
record the data collected pursuant to this section on a loan/application 
register within 30 calendar days after the end of the calendar quarter 
in which final action is taken (such as origination or purchase of a 
covered loan, sale of a covered loan in the same calendar year it is 
originated or purchased, or denial or withdrawal of an application).



Sec. 1003.5  Disclosure and reporting.

    (a) Reporting to agency. (1) By March 1 following the calendar year 
for which the loan data are compiled, a financial institution shall send 
its complete loan/application register to the agency office specified in 
appendix A of this part. The institution shall retain a copy for its 
records for at least three years.
    (2) A subsidiary of a bank or savings association shall complete a 
separate loan/application register. The subsidiary shall submit the 
register, directly or through its parent, to the same agency as its 
parent.
    (b) Public disclosure of statement. (1) The Federal Financial 
Institutions Examination Council (FFIEC) will prepare a disclosure 
statement from the data each financial institution submits.
    (2) An institution shall make its disclosure statement (prepared by 
the FFIEC) available to the public at the institution's home office no 
later than three business days after receiving the disclosure statement 
from the FFIEC.
    (3) In addition, an institution shall either:
    (i) Make its disclosure statement available to the public, within 
ten business days of receiving it, in at least one branch office in each 
other MSA and each other Metropolitan Division where the institution has 
offices (the disclosure statement need only contain data relating to the 
MSA or Metropolitan Division where the branch is located); or
    (ii) Post the address for sending written requests in the lobby of 
each branch office in other MSAs and Metropolitan Divisions where the 
institution has offices; and mail or deliver a copy of the disclosure 
statement within fifteen calendar days of receiving a written request 
(the disclosure statement need only contain data relating to the MSA or 
Metropolitan Division for which the request is made). Including the 
address in the general notice required under paragraph (e) of this 
section satisfies this requirement.
    (c) Public disclosure of modified loan/application register. A 
financial institution shall make its loan/application register available 
to the public after removing the following information regarding each 
entry: The application or loan number, the date that the application was 
received, and the date action was taken. An institution shall make its 
modified register available following the calendar year for which the

[[Page 99]]

data are compiled, by March 31 for a request received on or before March 
1, and within thirty calendar days for a request received after March 1. 
The modified register need only contain data relating to the MSA or 
Metropolitan Division for which the request is made.
    (d) Availability of data. A financial institution shall make its 
modified register available to the public for a period of three years 
and its disclosure statement available for a period of five years. An 
institution shall make the data available for inspection and copying 
during the hours the office is normally open to the public for business. 
It may impose a reasonable fee for any cost incurred in providing or 
reproducing the data.
    (e) Notice of availability. A financial institution shall post a 
general notice about the availability of its HMDA data in the lobby of 
its home office and of each branch office located in an MSA and 
Metropolitan Division. An institution shall provide promptly upon 
request the location of the institution's offices where the statement is 
available for inspection and copying, or it may include the location in 
the lobby notice.
    (f) Loan aggregation and central data depositories. Using the loan 
data submitted by financial institutions, the FFIEC will produce reports 
for individual institutions and reports of aggregate data for each MSA 
and Metropolitan Division, showing lending patterns by property 
location, age of housing stock, and income level, sex, ethnicity, and 
race. These reports will be available to the public at central data 
depositories located in each MSA and Metropolitan Division. A listing of 
central data depositories can be obtained from the Federal Financial 
Institutions Examination Council, Washington, DC 20006.

    Effective Date Note 1: At 80 FR 66312, Oct. 28, 2015, Sec. 1003.5 
was amended by revising paragraphs (b) through (f), effective Jan. 1, 
2018. For the convenience of the user, the revised text is set forth as 
follows:



Sec. 1003.5  Disclosure and reporting.

                                * * * * *

    (b) Disclosure statement--(1) The Federal Financial Institutions 
Examination Council (FFIEC) will make available a disclosure statement 
based on the data each financial institution submits for the preceding 
calendar year pursuant to paragraph (a) of this section.
    (2) No later than three business days after receiving notice from 
the FFIEC that a financial institution's disclosure statement is 
available, the financial institution shall make available to the public 
upon request at its home office, and each branch office physically 
located in each MSA and each MD, a written notice that clearly conveys 
that the institution's disclosure statement may be obtained on the 
Bureau's Web site at www.consumerfinance.gov/hmda.
    (c) Modified loan/application register. (1) A financial institution 
shall make available to the public upon request at its home office, and 
each branch office physically located in each MSA and each MD, a written 
notice that clearly conveys that the institution's loan/application 
register, as modified by the Bureau to protect applicant and borrower 
privacy, may be obtained on the Bureau's Web site at 
www.consumerfinance.gov/hmda.
    (2) A financial institution shall make available the notice required 
by paragraph (c)(1) of this section following the calendar year for 
which the data are collected.
    (d) Availability of written notices. (1) A financial institution 
shall make the notice required by paragraph (c) of this section 
available to the public for a period of three years and the notice 
required by paragraph (b)(2) of this section available to the public for 
a period of five years. An institution shall make these notices 
available during the hours the office is normally open to the public for 
business.
    (2) A financial institution may make available to the public, at its 
discretion and in addition to the written notices required by paragraphs 
(b)(2) or (c)(1) of this section, as applicable, its disclosure 
statement or its loan/application register, as modified by the Bureau to 
protect applicant and borrower privacy. A financial institution may 
impose a reasonable fee for any cost incurred in providing or 
reproducing these data.
    (e) Posted notice of availability of data. A financial institution 
shall post a general notice about the availability of its HMDA data in 
the lobby of its home office and of each branch office physically 
located in each MSA and each MD. This notice must clearly convey that 
the institution's HMDA data is available on the Bureau's Web site at 
www.consumerfinance.gov/hmda.
    (f) Aggregated data. Using data submitted by financial institutions 
pursuant to paragraph (a) of this section, the FFIEC will make available 
aggregate data for each MSA

[[Page 100]]

and MD, showing lending patterns by property location, age of housing 
stock, and income level, sex, ethnicity, and race.

    Effective Date Note 2: At 80 FR 66312, Oct. 28, 2015, Sec. 1003.5 
was revised, effective Jan. 1, 2019. For the convenience of the user, 
the revised text is set forth as follows:



Sec. 1003.5  Disclosure and reporting.

    (a) Reporting to agency. (1)(i) Annual reporting. By March 1 
following the calendar year for which data are collected and recorded as 
required by Sec. 1003.4, a financial institution shall submit its annual 
loan/application register in electronic format to the appropriate 
Federal agency at the address identified by such agency. An authorized 
representative of the financial institution with knowledge of the data 
submitted shall certify to the accuracy and completeness of data 
submitted pursuant to this paragraph (a)(1)(i). The financial 
institution shall retain a copy of its annual loan/application register 
submitted pursuant to this paragraph (a)(1)(i) for its records for at 
least three years.
    (ii) [Reserved]
    (iii) When the last day for submission of data prescribed under this 
paragraph (a)(1) falls on a Saturday or Sunday, a submission shall be 
considered timely if it is submitted on the next succeeding Monday.
    (2) A financial institution that is a subsidiary of a bank or 
savings association shall complete a separate loan/application register. 
The subsidiary shall submit the loan/application register, directly or 
through its parent, to the appropriate Federal agency for the 
subsidiary's parent at the address identified by the agency.
    (3) A financial institution shall provide with its submission:
    (i) Its name;
    (ii) The calendar year the data submission covers pursuant to 
paragraph (a)(1)(i) of this section or calendar quarter and year the 
data submission covers pursuant to paragraph (a)(1)(ii) of this section;
    (iii) The name and contact information of a person who may be 
contacted with questions about the institution's submission;
    (iv) Its appropriate Federal agency;
    (v) The total number of entries contained in the submission;
    (vi) Its Federal Taxpayer Identification number; and
    (vii) Its Legal Entity Identifier (LEI) as described in 
Sec. 1003.4(a)(1)(i)(A).
    (4) For purposes of paragraph (a) of this section, ``appropriate 
Federal agency'' means the appropriate agency for the financial 
institution as determined pursuant to section 304(h)(2) of the Home 
Mortgage Disclosure Act (12 U.S.C. 2803(h)(2)) or, with respect to a 
financial institution subject to the Bureau's supervisory authority 
under section 1025(a) of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5515(a)), the Bureau.
    (5) Procedures for the submission of data pursuant to paragraph (a) 
of this section are available at www.consumerfinance.gov/hmda.
    (b) Disclosure statement. (1) The Federal Financial Institutions 
Examination Council (FFIEC) will make available a disclosure statement 
based on the data each financial institution submits for the preceding 
calendar year pursuant to paragraph (a)(1)(i) of this section.
    (2) No later than three business days after receiving notice from 
the FFIEC that a financial institution's disclosure statement is 
available, the financial institution shall make available to the public 
upon request at its home office, and each branch office physically 
located in each MSA and each MD, a written notice that clearly conveys 
that the institution's disclosure statement may be obtained on the 
Bureau's Web site at www.consumerfinance.gov/hmda.
    (c) Modified loan/application register. (1) A financial institution 
shall make available to the public upon request at its home office, and 
each branch office physically located in each MSA and each MD, a written 
notice that clearly conveys that the institution's loan/application 
register, as modified by the Bureau to protect applicant and borrower 
privacy, may be obtained on the Bureau's Web site at 
www.consumerfinance.gov/hmda.
    (2) A financial institution shall make available the notice required 
by paragraph (c)(1) of this section following the calendar year for 
which the data are collected.
    (d) Availability of written notices. (1) A financial institution 
shall make the notice required by paragraph (c) of this section 
available to the public for a period of three years and the notice 
required by paragraph (b)(2) of this section available to the public for 
a period of five years. An institution shall make these notices 
available during the hours the office is normally open to the public for 
business.
    (2) A financial institution may make available to the public, at its 
discretion and in addition to the written notices required by paragraphs 
(b)(2) or (c)(1) of this section, as applicable, its disclosure 
statement or its loan/application register, as modified by the Bureau to 
protect applicant and borrower privacy. A financial institution may 
impose a reasonable fee for any cost incurred in providing or 
reproducing these data.
    (e) Posted notice of availability of data. A financial institution 
shall post a general notice about the availability of its HMDA data in 
the lobby of its home office and of each branch office physically 
located in each MSA and each MD. This notice must clearly convey that 
the institution's HMDA data is available on the Bureau's Web site at 
www.consumerfinance.gov/hmda.

[[Page 101]]

    (f) Aggregated data. Using data submitted by financial institutions 
pursuant to paragraph (a)(1)(i) of this section, the FFIEC will make 
available aggregate data for each MSA and MD, showing lending patterns 
by property location, age of housing stock, and income level, sex, 
ethnicity, and race.

    Effective Date Note 3: At 80 FR 66313, Oct. 28, 2015, Sec. 1003.5 
was amended by adding paragraph (a)(1)(ii), effective Jan. 1, 2020. For 
the convenience of the user, the added text is set forth as follows:



Sec. 1003.5  Disclosure and reporting.

    (a) * * *
    (1) * * *
    (ii) Quarterly reporting. Within 60 calendar days after the end of 
each calendar quarter except the fourth quarter, a financial institution 
that reported for the preceding calendar year at least 60,000 covered 
loans and applications, combined, excluding purchased covered loans, 
shall submit to the appropriate Federal agency its loan/application 
register containing all data required to be recorded for that quarter 
pursuant to Sec. 1003.4(f). The financial institution shall submit its 
quarterly loan/application register pursuant to this paragraph 
(a)(1)(ii) in electronic format at the address identified by the 
appropriate Federal agency for the institution.

                                * * * * *



Sec. 1003.6  Enforcement.

    (a) Administrative enforcement. A violation of the Act or this part 
is subject to administrative sanctions as provided in section 305 of the 
Act, including the imposition of civil money penalties, where 
applicable. Compliance is enforced by the agencies listed in section 305 
of the Act (12 U.S.C. 2804).
    (b) Bona fide errors. (1) An error in compiling or recording loan 
data is not a violation of the act or this part if the error was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such errors.
    (2) An incorrect entry for a census tract number is deemed a bona 
fide error, and is not a violation of the act or this part, provided 
that the institution maintains procedures reasonably adapted to avoid 
such errors.
    (3) If an institution makes a good-faith effort to record all data 
concerning covered transactions fully and accurately within thirty 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the error or omission is not a 
violation of the act or this part provided that the institution corrects 
or completes the information prior to submitting the loan/application 
register to its regulatory agency.

    Effective Date Note: At 80 FR 66313, Oct. 28, 2015, Sec. 1003.6 was 
revised, effective Jan. 1, 2019. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1003.6  Enforcement.

    (a) Administrative enforcement. A violation of the Act or this part 
is subject to administrative sanctions as provided in section 305 of the 
Act (12 U.S.C. 2804), including the imposition of civil money penalties, 
where applicable. Compliance is enforced by the agencies listed in 
section 305 of the Act.
    (b) Bona fide errors. (1) An error in compiling or recording data 
for a covered loan or application is not a violation of the Act or this 
part if the error was unintentional and occurred despite the maintenance 
of procedures reasonably adapted to avoid such an error.
    (2) An incorrect entry for a census tract number is deemed a bona 
fide error, and is not a violation of the Act or this part, provided 
that the financial institution maintains procedures reasonably adapted 
to avoid such an error.
    (c) Quarterly recording and reporting. (1) If a financial 
institution makes a good-faith effort to record all data required to be 
recorded pursuant to Sec. 1003.4(f) fully and accurately within 30 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the inaccuracy or omission is not 
a violation of the Act or this part provided that the institution 
corrects or completes the data prior to submitting its annual loan/
application register pursuant to Sec. 1003.5(a)(1)(i).
    (2) If a financial institution required to comply with 
Sec. 1003.5(a)(1)(ii) makes a good-faith effort to report all data 
required to be reported pursuant to Sec. 1003.5(a)(1)(ii) fully and 
accurately within 60 calendar days after the end of each calendar 
quarter, and some data are nevertheless inaccurate or incomplete, the 
inaccuracy or omission is not a violation of the Act or this part 
provided that the institution corrects or completes the data prior to 
submitting its annual loan/application register pursuant to 
Sec. 1003.5(a)(1)(i).

[[Page 102]]



 Sec. Appendix A to Part 1003--Form and Instructions for Completion of 
                     HMDA Loan/Application Register

                     Paperwork Reduction Act Notice

    This report is required by law (12 U.S.C. 2801-2810 and 12 CFR 
1003). An agency may not conduct or sponsor, and an organization is not 
required to respond to, a collection of information unless it displays a 
valid Office of Management and Budget (OMB) Control Number. See 12 CFR 
1003.1(a) for the valid OMB Control Numbers applicable to this 
information collection. Send comments regarding this burden estimate or 
any other aspect of this collection of information, including 
suggestions for reducing the burden, to the respective agencies and to 
OMB, Office of Information and Regulatory Affairs, Paperwork Reduction 
Project, Washington, DC 20503. Be sure to reference the applicable 
agency and the OMB Control Number, as found in 12 CFR 1003.1(a), when 
submitting comments to OMB.

       I. Instructions for Completion of Loan/Application Register

                   A. Application or Loan Information

    1. Application or Loan Number. Enter an identifying loan number that 
can be used later to retrieve the loan or application file. It can be 
any number of your institution's choosing (not exceeding 25 characters). 
You may use letters, numerals, or a combination of both.
    2. Date Application Received. Enter the date the loan application 
was received by your institution by month, day, and year. If your 
institution normally records the date shown on the application form you 
may use that date instead. Enter ``NA'' for loans purchased by your 
institution. For paper submissions only, use numerals in the form MM/DD/
YYYY (for example, 01/15/2003). For submissions in electronic form, the 
proper format is YYYYMMDD.
    3. Type of Loan or Application. Indicate the type of loan or 
application by entering the applicable Code from the following:

Code 1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
Code 2--FHA-insured (Federal Housing Administration)
Code 3--VA-guaranteed (Veterans Administration)
Code 4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing 
Service)

    4. Property Type. Indicate the property type by entering the 
applicable Code from the following:

Code 1--One-to four-family dwelling (other than manufactured housing)
Code 2--Manufactured housing
Code 3--Multifamily dwelling

    a. Use Code 1, not Code 3, for loans on individual condominium or 
cooperative units.
    b. If you cannot determine (despite reasonable efforts to find out) 
whether the loan or application relates to a manufactured home, use Code 
1.
    5. Purpose of Loan or Application. Indicate the purpose of the loan 
or application by entering the applicable Code from the following:

Code 1--Home purchase
Code 2--Home improvement
Code 3--Refinancing

    a. Do not report a refinancing if, under the loan agreement, you 
were unconditionally obligated to refinance the obligation, or you were 
obligated to refinance the obligation subject to conditions within the 
borrower's control.
    6. Owner Occupancy. Indicate whether the property to which the loan 
or loan application relates is to be owner-occupied as a principal 
residence by entering the applicable Code from the following:

Code 1--Owner-occupied as a principal dwelling
Code 2--Not owner-occupied as a principal dwelling
Code 3--Not applicable

    a. For purchased loans, use Code 1 unless the loan documents or 
application indicate that the property will not be owner-occupied as a 
principal residence.
    b. Use Code 2 for second homes or vacation homes, as well as for 
rental properties.
    c. Use Code 3 if the property to which the loan relates is a 
multifamily dwelling; is not located in an MSA; or is located in an MSA 
or an MD in which your institution has neither a home nor a branch 
office. Alternatively, at your institution's option, you may report the 
actual occupancy status, using Code 1 or 2 as applicable.
    7. Loan Amount. Enter the amount of the loan or application. Do not 
report loans below $500. Show the amount in thousands, rounding to the 
nearest thousand (round $500 up to the next $1,000). For example, a loan 
for $167,300 should be entered as 167 and one for $15,500 as 16.
    a. For a home purchase loan that you originated, enter the principal 
amount of the loan.
    b. For a home purchase loan that you purchased, enter the unpaid 
principal balance of the loan at the time of purchase.
    c. For a home improvement loan, enter the entire amount of the 
loan--including unpaid finance charges if that is how such loans are 
recorded on your books--even if only a part of the proceeds is intended 
for home improvement.

[[Page 103]]

    d. If you opt to report home-equity lines of credit, report only the 
portion of the line intended for home improvement or home purchase.
    e. For a refinancing, indicate the total amount of the refinancing, 
including both the amount outstanding on the original loan and any 
amount of ``new money.''
    f. For a loan application that was denied or withdrawn, enter the 
amount for which the applicant applied.
    8. Request for Preapproval of a Home Purchase Loan. Indicate whether 
the application or loan involved a request for preapproval of a home 
purchase loan by entering the applicable Code from the following:

Code 1--Preapproval requested
Code 2--Preapproval not requested
Code 3--Not applicable

    a. Enter Code 2 if your institution has a covered preapproval 
program but the applicant does not request a preapproval.
    b. Enter Code 3 if your institution does not have a preapproval 
program as defined in Sec. 1003.2.
    c. Enter Code 3 for applications or loans for home improvement or 
refinancing, and for purchased loans.

                             B. Action Taken

    1. Type of Action. Indicate the type of action taken on the 
application or loan by using one of the following Codes.

Code 1--Loan originated
Code 2--Application approved but not accepted
Code 3--Application denied
Code 4--Application withdrawn
Code 5--File closed for incompleteness
Code 6--Loan purchased by your institution
Code 7--Preapproval request denied
Code 8--Preapproval request approved but not accepted (optional 
reporting)

    a. Use Code 1 for a loan that is originated, including one resulting 
from a request for preapproval.
    b. For a counteroffer (your offer to the applicant to make the loan 
on different terms or in a different amount from the terms or amount 
applied for), use Code 1 if the applicant accepts. Use Code 3 if the 
applicant turns down the counteroffer or does not respond.
    c. Use Code 2 when the application is approved but the applicant (or 
the loan broker or correspondent) fails to respond to your notification 
of approval or your commitment letter within the specified time. Do not 
use this Code for a preapproval request.
    d. Use Code 4 only when the application is expressly withdrawn by 
the applicant before a credit decision is made. Do not use Code 4 if a 
request for preapproval is withdrawn; preapproval requests that are 
withdrawn are not reported under HMDA.
    e. Use Code 5 if you sent a written notice of incompleteness under 
Sec. 1002.9(c)(2) of Regulation B (Equal Credit Opportunity) and the 
applicant did not respond to your request for additional information 
within the period of time specified in your notice. Do not use this Code 
for requests for preapproval that are incomplete; these preapproval 
requests are not reported under HMDA.
    2. Date of Action. For paper submissions only, enter the date by 
month, day, and year, using numerals in the form MM/DD/YYYY (for 
example, 02/22/2003). For submissions in electronic form, the proper 
format is YYYYMMDD.
    a. For loans originated, enter the settlement or closing date.
    b. For loans purchased, enter the date of purchase by your 
institution.
    c. For applications and preapprovals denied, applications and 
preapprovals approved but not accepted by the applicant, and files 
closed for incompleteness, enter the date that the action was taken by 
your institution or the date the notice was sent to the applicant.
    d. For applications withdrawn, enter the date you received the 
applicant's express withdrawal, or enter the date shown on the 
notification from the applicant, in the case of a written withdrawal.
    e. For preapprovals that lead to a loan origination, enter the date 
of the origination.

                          C. Property Location

    Except as otherwise provided, enter in these columns the applicable 
Codes for the MSA, or the MD if the MSA is divided into MDs, state, 
county, and census tract to indicate the location of the property to 
which a loan relates.
    1. MSA or Metropolitan Division.--For each loan or loan application, 
enter the MSA, or the MD number if the MSA is divided into MDs. MSA and 
MD boundaries are defined by OMB; use the boundaries that were in effect 
on January 1 of the calendar year for which you are reporting. A listing 
of MSAs and MDs is available from the appropriate Federal agency to 
which you report data or the FFIEC.
    2. State and County. Use the Federal Information Processing Standard 
(FIPS) two-digit numerical code for the state and the three-digit 
numerical code for the county. These codes are available from the 
appropriate Federal agency to which you report data or the FFIEC.
    3. Census Tract.--Indicate the census tract where the property is 
located. Notwithstanding paragraph 6, if the property is located in a 
county with a population of 30,000 or less in the 2000 Census, enter 
``NA'' (even if the population has increased above 30,000 since 2000), 
or enter the census tract number.

[[Page 104]]

County population data can be obtained from the U.S. Census Bureau.
    4. Census Tract Number.--For the census tract number, consult the 
resources provided by the U.S. Census Bureau or the FFIEC.
    5. Property Located Outside MSAs or Metropolitan Divisions.--For 
loans on property located outside the MSAs and MDs in which an 
institution has a home or branch office, or for property located outside 
of any MSA or MD, the institution may choose one of the following two 
options. Under option one, the institution may enter the MSA or MD, 
state and county codes and the census tract number; and if the property 
is not located in any MSA or MD, the institution may enter ``NA'' in the 
MSA or MD column. (Codes exist for all states and counties and numbers 
exist for all census tracts.) Under this first option, the codes and 
census tract number must accurately identify the property location. 
Under the second option, which is not available if paragraph 6 applies, 
an institution may enter ``NA'' in all four columns, whether or not the 
codes or numbers exist for the property location.
    6. Data Reporting for Banks and Savings Associations Required To 
Report Data on Small Business, Small Farm, and Community Development 
Lending Under the CRA Regulations.--If your institution is a bank or 
savings association that is required to report data under the 
regulations that implement the CRA, you must enter the property location 
on your HMDA/LAR even if the property is outside the MSAs or MDs in 
which you have a home or branch office, or is not located in any MSA.
    7. Requests for Preapproval. Notwithstanding paragraphs 1 through 6, 
if the application is a request for preapproval that is denied or that 
is approved but not accepted by the applicant, you may enter ``NA'' in 
all four columns.

       D. Applicant Information--Ethnicity, Race, Sex, and Income

    Appendix B contains instructions for the collection of data on 
ethnicity, race, and sex, and also contains a sample form for data 
collection.
    1. Applicability. Report this information for loans that you 
originate as well as for applications that do not result in an 
origination.
    a. You need not collect or report this information for loans 
purchased. If you choose not to report this information, use the Codes 
for ``not applicable.''
    b. If the borrower or applicant is not a natural person (a 
corporation or partnership, for example), use the Codes for ``not 
applicable.''
    2. Mail, Internet, or Telephone Applications.--All loan 
applications, including applications taken by mail, internet, or 
telephone must use a collection form similar to that shown in appendix B 
regarding ethnicity, race, and sex. For applications taken by telephone, 
the information in the collection form must be stated orally by the 
lender, except for information that pertains uniquely to applications 
taken in writing. If the applicant does not provide these data in an 
application taken by mail or telephone or on the internet, enter the 
Code for ``information not provided by applicant in mail, internet, or 
telephone application'' specified in paragraphs I.D.3., 4., and 5. of 
this appendix. (See appendix B for complete information on the 
collection of these data in mail, Internet, or telephone applications.)
    3. Ethnicity of Borrower or Applicant. Use the following Codes to 
indicate the ethnicity of the applicant or borrower under column ``A'' 
and of any co-applicant or co-borrower under column ``CA.''

Code 1--Hispanic or Latino
Code 2--Not Hispanic or Latino
Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant

    4. Race of Borrower or Applicant. Use the following Codes to 
indicate the race of the applicant or borrower under column ``A'' and of 
any co-applicant or co-borrower under column ``CA.''

Code 1--American Indian or Alaska Native
Code 2--Asian
Code 3--Black or African American
Code 4--Native Hawaiian or Other Pacific Islander
Code 5--White
Code 6--Information not provided by applicant in mail, internet, or 
telephone application
Code 7--Not applicable
Code 8--No co-applicant

    a. If an applicant selects more than one racial designation, enter 
all Codes corresponding to the applicant's selections.
    b. Use Code 4 (for ethnicity) and Code 7 (for race) for ``not 
applicable'' only when the applicant or co-applicant is not a natural 
person or when applicant or co-applicant information is unavailable 
because the loan has been purchased by your institution.
    c. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the application 
form. If there are no co-applicants or co-borrowers, use Code 5 (for 
ethnicity) and Code 8 (for race) for ``no co-applicant'' in the co-
applicant column.
    5. Sex of Borrower or Applicant. Use the following Codes to indicate 
the sex of the applicant or borrower under column ``A'' and of any co-
applicant or co-borrower under column ``CA.''

Code 1--Male
Code 2--Female

[[Page 105]]

Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant or co-borrower

    a. Use Code 4 for ``not applicable'' only when the applicant or co-
applicant is not a natural person or when applicant or co-applicant 
information is unavailable because the loan has been purchased by your 
institution.
    b. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the application 
form. If there are no co-applicants or co-borrowers, use Code 5 for ``no 
co-applicant'' in the co-applicant column.
    6. Income. Enter the gross annual income that your institution 
relied on in making the credit decision.
    a. Round all dollar amounts to the nearest thousand (round $500 up 
to the next $1,000), and show in thousands. For example, report $35,500 
as 36.
    b. For loans on multifamily dwellings, enter ``NA.''
    c. If no income information is asked for or relied on in the credit 
decision, enter ``NA.''
    d. If the applicant or co-applicant is not a natural person or the 
applicant or co-applicant information is unavailable because the loan 
has been purchased by your institution, enter ``NA.''

                          E. Type of Purchaser

    Enter the applicable Code to indicate whether a loan that your 
institution originated or purchased was then sold to a secondary market 
entity within the same calendar year:

Code 0--Loan was not originated or was not sold in calendar year covered 
by register
Code 1--Fannie Mae
Code 2--Ginnie Mae
Code 3--Freddie Mac
Code 4--Farmer Mac
Code 5--Private securitization
Code 6--Commercial bank, savings bank, or savings association
Code 7--Life insurance company, credit union, mortgage bank, or finance 
company
Code 8--Affiliate institution
Code 9--Other type of purchaser

    a. Use Code 0 for applications that were denied, withdrawn, or 
approved but not accepted by the applicant; and for files closed for 
incompleteness.
    b. Use Code 0 if you originated or purchased a loan and did not sell 
it during that same calendar year. If you sell the loan in a succeeding 
year, you need not report the sale.
    c. Use Code 2 if you conditionally assign a loan to Ginnie Mae in 
connection with a mortgage-backed security transaction.
    d. Use Code 8 for loans sold to an institution affiliated with you, 
such as your subsidiary or a subsidiary of your parent corporation.

                          F. Reasons for Denial

    1. You may report the reason for denial, and you may indicate up to 
three reasons, using the following Codes. Leave this column blank if the 
``action taken'' on the application is not a denial. For example, do not 
complete this column if the application was withdrawn or the file was 
closed for incompleteness.

Code 1--Debt-to-income ratio
Code 2--Employment history
Code 3--Credit history
Code 4--Collateral
Code 5--Insufficient cash (downpayment, closing costs)
Code 6--Unverifiable information
Code 7--Credit application incomplete
Code 8--Mortgage insurance denied
Code 9--Other

    2. If your institution uses the model form for adverse action 
contained in appendix C to Regulation B (Form C-1, Sample Notification 
Form), use the foregoing Codes as follows:
    a. Code 1 for: Income insufficient for amount of credit requested, 
and Excessive obligations in relation to income.
    b. Code 2 for: Temporary or irregular employment, and Length of 
employment.
    c. Code 3 for: Insufficient number of credit references provided; 
Unacceptable type of credit references provided; No credit file; Limited 
credit experience; Poor credit performance with us; Delinquent past or 
present credit obligations with others; Garnishment, attachment, 
foreclosure, repossession, collection action, or judgment; and 
Bankruptcy.
    d. Code 4 for: Value or type of collateral not sufficient.
    e. Code 6 for: Unable to verify credit references; Unable to verify 
employment; Unable to verify income; and Unable to verify residence.
    f. Code 7 for: Credit application incomplete.
    g. Code 9 for: Length of residence; Temporary residence; and Other 
reasons specified on notice.

                         G. Pricing-Related Data

    1. Rate Spread. a. For a home-purchase loan, a refinancing, or a 
dwelling-secured home improvement loan that you originated, report the 
spread between the annual percentage rate (APR) and the average prime 
offer rate for a comparable transaction if the spread is equal to or 
greater than 1.5 percentage points for first-lien loans or 3.5 
percentage points for subordinate-lien loans. To determine whether the 
rate spread meets this threshold, use the average prime offer rate in 
effect for the type of transaction as

[[Page 106]]

of the date the interest rate was set, and use the APR for the loan, as 
calculated and disclosed to the consumer under Secs. 1026.6 or 1026.18, 
as applicable, of Regulation Z (12 CFR part 1026). Current and historic 
average prime offer rates are set forth in the tables published on the 
FFIEC's Web site (http://www.ffiec.gov/hmda) entitled ``Average Prime 
Offer Rates-Fixed'' and ``Average Prime Offer Rates-Adjustable.'' Use 
the most recently available average prime offer rate. ``Most recently 
available'' means the average prime offer rate set forth in the 
applicable table with the most recent effective date as of the date the 
interest rate was set. Do not use an average prime offer rate before its 
effective date.
    b. If the loan is not subject to Regulation Z, or is a home 
improvement loan that is not dwelling-secured, or is a loan that you 
purchased, enter ``NA.''
    c. Enter ``NA'' in the case of an application that does not result 
in a loan origination.
    d. Enter the rate spread to two decimal places, and use a leading 
zero. For example, enter 03.29. If the difference between the APR and 
the average prime offer rate is a figure with more than two decimal 
places, round the figure or truncate the digits beyond two decimal 
places.
    e. If the difference between the APR and the average prime offer 
rate is less than 1.5 percentage points for a first-lien loan and less 
than 3.5 percentage points for a subordinate-lien loan, enter ``NA.''
    2. Date the interest rate was set. The relevant date to use to 
determine the average prime offer rate for a comparable transaction is 
the date on which the loan's interest rate was set by the financial 
institution for the final time before closing. If an interest rate is 
set pursuant to a ``lock-in'' agreement between the lender and the 
borrower, then the date on which the agreement fixes the interest rate 
is the date the rate was set. If a rate is re-set after a lock-in 
agreement is executed (for example, because the borrower exercises a 
float-down option or the agreement expires), then the relevant date is 
the date the rate is re-set for the final time before closing. If no 
lock-in agreement is executed, then the relevant date is the date on 
which the institution sets the rate for the final time before closing.
    3. HOEPA Status. a. For a loan that you originated or purchased that 
is subject to the Home Ownership and Equity Protection Act of 1994 
(HOEPA), as implemented in Regulation Z (12 CFR 1026.32), because the 
APR or the points and fees on the loan exceed the HOEPA triggers, enter 
Code 1.
    b. Enter Code 2 in all other cases. For example, enter Code 2 for a 
loan that you originated or purchased that is not subject to the 
requirements of HOEPA for any reason; also enter Code 2 in the case of 
an application that does not result in a loan origination.

                             H. Lien Status

    Use the following Codes for loans that you originate and for 
applications that do not result in an origination:

Code 1--Secured by a first lien.
Code 2--Secured by a subordinate lien.
Code 3--Not secured by a lien.
Code 4--Not applicable (purchased loan).

    a. Use Codes 1 through 3 for loans that you originate, as well as 
for applications that do not result in an origination (applications that 
are approved but not accepted, denied, withdrawn, or closed for 
incompleteness).
    b. Use Code 4 for loans that you purchase.

           II. Appropriate Federal Agencies for HMDA Reporting

    A. You are strongly encouraged to submit your loan/application 
register via email. If you elect to use this method of transmission and 
the appropriate Federal agency for your institution is the Bureau of 
Consumer Financial Protection, the Office of the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, or the National 
Credit Union Administration, then you should submit your institution's 
files to the email address dedicated to that purpose by the Bureau, 
which can be found on the Web site of the FFIEC. If one of the foregoing 
agencies is the appropriate Federal agency for your institution and you 
elect to submit your data by regular mail, then use the following 
address: HMDA, Federal Reserve Board, Attention: HMDA Processing, 
(insert name of the appropriate Federal agency for your institution), 
20th & Constitution Ave NW., MS N502, Washington, DC 20551-0001.
    B. If the Federal Reserve System (but not the Bureau of Consumer 
Financial Protection) is the appropriate Federal agency for your 
institution, you should use the email or regular mail address of your 
district bank indicated on the Web site of the FFIEC. If the Department 
of Housing and Urban Development is the appropriate Federal agency for 
your institution, then you should use the email or regular mail address 
indicated on the Web site of the FFIEC.

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[[Page 108]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.017


[[Page 109]]


[GRAPHIC] [TIFF OMITTED] TR19DE11.018


    Effective Date Note 1: At 80 FR 66313, Oct. 28, 2015, appendix A to 
part 1003 was amended by adding a new subheading and paragraph 1 under 
that subheading, revising paragraphs II.A and B, and adding paragraph 
II.C , effective Jan. 1, 2018. For the convenience of the user, the 
added and revised text is set forth as follows:

[[Page 110]]



 Sec. Appendix A to Part 1003--Form and Instructions for Completion of 
                     HMDA Loan/Application Register

                     Paperwork Reduction Act Notice

                                * * * * *

Transition Requirements for Data Collected in 2017 and Submitted in 2018

    1. The instructions for completion of the loan/application register 
in part I of this appendix applies to data collected during the 2017 
calendar year and reported in 2018. Part I of this appendix does not 
apply to data collected pursuant to the amendments to Regulation C 
effective January 1, 2018.

                                * * * * *

           II. Appropriate Federal Agencies for HMDA Reporting

    A. A financial institution shall submit its loan/application 
register in electronic format to the appropriate Federal agency at the 
address identified by such agency. The appropriate Federal agency for a 
financial institution is determined pursuant to section 304(h)(2) of the 
Home Mortgage Disclosure Act (12 U.S.C. 2803(h)(2)) or, with respect to 
a financial institution subject to the Bureau's supervisory authority 
under section 1025(a) of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5515(a)), is the Bureau.
    B. Procedures for the submission of the loan/application register 
are available at www.consumerfinance.gov/hmda.
    C. An authorized representative of the financial institution with 
knowledge of the data submitted shall certify to the accuracy and 
completeness of the data submitted.

                                * * * * *

    Effective Date Note 2: At 80 FR 66314, Oct. 28, 2015, appendix A to 
part 1003 was removed and reserved, effective Jan. 1, 2019.



Sec. Appendix B to Part 1003--Form and Instructions for Data Collection 
                       on Ethnicity, Race, and Sex

    I. Instructions on Collection of Data on Ethnicity, Race, and Sex

    You may list questions regarding the ethnicity, race, and sex of the 
applicant on your loan application form, or on a separate form that 
refers to the application. (See the sample form below for model 
language.)

                             II. Procedures

    A. You must ask the applicant for this information (but you cannot 
require the applicant to provide it) whether the application is taken in 
person, by mail or telephone, or on the internet. For applications taken 
by telephone, the information in the collection form must be stated 
orally by the lender, except for that information which pertains 
uniquely to applications taken in writing.
    B. Inform the applicant that the Federal government requests this 
information in order to monitor compliance with Federal statutes that 
prohibit lenders from discriminating against applicants on these bases. 
Inform the applicant that if the information is not provided where the 
application is taken in person, you are required to note the data on the 
basis of visual observation or surname.
    C. You must offer the applicant the option of selecting one or more 
racial designations.
    D. If the applicant chooses not to provide the information for an 
application taken in person, note this fact on the form and then note 
the applicant's ethnicity, race, and sex on the basis of visual 
observation and surname, to the extent possible.
    E. If the applicant declines to answer these questions or fails to 
provide the information on an application taken by mail or telephone or 
on the internet, the data need not be provided. In such a case, indicate 
that the application was received by mail, telephone, or Internet, if it 
is not otherwise evident on the face of the application.

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[GRAPHIC] [TIFF OMITTED] TR19DE11.019


[76 FR 78468, Dec. 19, 2011, as amended at 77 FR 8722, Feb. 15, 2012]

    Effective Date Note: At 80 FR 66314, Oct. 28, 2015, appendix B to 
part 1003 was revised, effective Jan. 1, 2018. For the convenience of 
the user, the revised text is set forth as follows:



Sec. Appendix B to Part 1003--Form and Instructions for Data Collection 
                       on Ethnicity, Race, and Sex

    You may list questions regarding the ethnicity, race, and sex of the 
applicant on your loan application form, or on a separate form that 
refers to the application. (See the sample data collection form below 
for model language.)

[[Page 112]]

    1. You must ask the applicant for this information (but you cannot 
require the applicant to provide it) whether the application is taken in 
person, by mail or telephone, or on the internet. For applications taken 
by telephone, you must state the information in the collection form 
orally, except for that information which pertains uniquely to 
applications taken in writing, for example, the italicized language in 
the sample data collection form.
    2. Inform the applicant that Federal law requires this information 
to be collected in order to protect consumers and to monitor compliance 
with Federal statutes that prohibit discrimination against applicants on 
these bases. Inform the applicant that if the information is not 
provided where the application is taken in person, you are required to 
note the information on the basis of visual observation or surname.
    3. If you accept an application through electronic media with a 
video component, you must treat the application as taken in person. If 
you accept an application through electronic media without a video 
component (for example, facsimile), you must treat the application as 
accepted by mail.
    4. For purposes of Sec. 1003.4(a)(10)(i), if a covered loan or 
application includes a guarantor, you do not report the guarantor's 
ethnicity, race, and sex.
    5. If there are no co-applicants, you must report that there is no 
co-applicant. If there is more than one co-applicant, you must provide 
the ethnicity, race, and sex only for the first co-applicant listed on 
the collection form. A co-applicant may provide an absent co-applicant's 
ethnicity, race, and sex on behalf of the absent co-applicant. If the 
information is not provided for an absent co-applicant, you must report 
``information not provided by applicant in mail, internet, or telephone 
application'' for the absent co-applicant.
    6. When you purchase a covered loan and you choose not to report the 
applicant's or co-applicant's ethnicity, race, and sex, you must report 
that the requirement is not applicable.
    7. You must report that the requirement to report the applicant's or 
co-applicant's ethnicity, race, and sex is not applicable when the 
applicant or co-applicant is not a natural person (for example, a 
corporation, partnership, or trust). For example, for a transaction 
involving a trust, you must report that the requirement to report the 
applicant's ethnicity, race, and sex is not applicable if the trust is 
the applicant. On the other hand, if the applicant is a natural person, 
and is the beneficiary of a trust, you must report the applicant's 
ethnicity, race, and sex.
    8. You must report the ethnicity, race, and sex of an applicant as 
provided by the applicant. For example, if an applicant selects the 
``Mexican'' box the institution reports ``Mexican'' for the ethnicity of 
the applicant. If an applicant selects the ``Asian'' box the institution 
reports ``Asian'' for the race of the applicant. Only an applicant may 
self-identify as being of a particular Hispanic or Latino subcategory 
(Mexican, Puerto Rican, Cuban, Other Hispanic or Latino) or of a 
particular Asian subcategory (Asian Indian, Chinese, Filipino, Japanese, 
Korean, Vietnamese, Other Asian) or of a particular Native Hawaiian or 
Other Pacific Islander subcategory (Native Hawaiian, Guamanian or 
Chamorro, Samoan, Other Pacific Islander) or of a particular American 
Indian or Alaska Native enrolled or principal tribe.
    9. You must offer the applicant the option of selecting more than 
one ethnicity or race. If an applicant selects more than one ethnicity 
or race, you must report each selected designation, subject to the 
limits described below.
    i. Ethnicity--Aggregate categories and subcategories. There are two 
aggregate ethnicity categories: Hispanic or Latino; and Not Hispanic or 
Latino. If an applicant selects Hispanic or Latino, the applicant may 
also select up to four ethnicity subcategories: Mexican; Puerto Rican; 
Cuban; and Other Hispanic or Latino. You must report each aggregate 
ethnicity category and each ethnicity subcategory selected by the 
applicant.
    ii. Ethnicity--Other subcategories. If an applicant selects the 
Other Hispanic or Latino ethnicity subcategory, the applicant may also 
provide a particular Hispanic or Latino ethnicity not listed in the 
standard subcategories. In such a case, you must report both the 
selection of Other Hispanic or Latino and the additional information 
provided by the applicant.
    iii. Race--Aggregate categories and subcategories. There are five 
aggregate race categories: American Indian or Alaska Native; Asian; 
Black or African American; Native Hawaiian or Other Pacific Islander; 
and White. The Asian and the Native Hawaiian or Other Pacific Islander 
aggregate categories have seven and four subcategories, respectively. 
The Asian race subcategories are: Asian Indian; Chinese, Filipino; 
Japanese; Korean; Vietnamese; and Other Asian. The Native Hawaiian or 
Other Pacific Islander race subcategories are: Native Hawaiian; 
Guamanian or Chamorro; Samoan; and Other Pacific Islander. You must 
report every aggregate race category selected by the applicant. If the 
applicant also selects one or more race subcategories, you must report 
each race subcategory selected by the applicant, except that you must 
not report more than a total of five aggregate race categories and race 
subcategories combined. For example, if the applicant selects all five 
aggregate race categories and also selects some race subcategories, you 
report only the five aggregate race categories. On the other

[[Page 113]]

hand, if the applicant selects the White, Asian, and Native Hawaiian or 
Other Pacific Islander aggregate race categories, and the applicant also 
selects the Korean, Vietnamese, and Samoan race subcategories, you must 
report White, Asian, Native Hawaiian or Other Pacific Islander, and any 
two, at your option, of the three race subcategories selected by the 
applicant. In this example, you must report White, Asian, and Native 
Hawaiian or Other Pacific Islander, and in addition you must report (at 
your option) either Korean and Vietnamese, Korean and Samoan, or 
Vietnamese and Samoan. To determine how to report an Other race 
subcategory for purposes of the five-race maximum, see paragraph 9.iv 
below.
    iv. Race--Other subcategories. If an applicant selects the Other 
Asian race subcategory or the Other Pacific Islander race subcategory, 
the applicant may also provide a particular Other Asian or Other Pacific 
Islander race not listed in the standard subcategories. In either such 
case, you must report both the selection of Other Asian or Other Pacific 
Islander, as applicable, and the additional information provided by the 
applicant, subject to the five-race maximum. In all such cases where the 
applicant has selected an Other race subcategory and also provided 
additional information, for purposes of the maximum of five reportable 
race categories and race subcategories combined set forth above, the 
Other race subcategory and additional information provided by the 
applicant together constitute only one selection. Thus, using the same 
facts in the example offered in paragraph 9.iii above, if the applicant 
also selected Other Asian and entered ``Thai'' in the space provided, 
Other Asian and Thai are considered one selection. You must report any 
two (at your option) of the four race subcategories selected by the 
applicant, Korean, Vietnamese, Other Asian-Thai, and Samoan, in addition 
to the three aggregate race categories selected by the applicant.
    10. If the applicant chooses not to provide the information for an 
application taken in person, note this fact on the collection form and 
then collect the applicant's ethnicity, race, and sex on the basis of 
visual observation or surname. You must report whether the applicant's 
ethnicity, race, and sex was collected on the basis of visual 
observation or surname. When you collect an applicant's ethnicity, race, 
and sex on the basis of visual observation or surname, you must select 
from the following aggregate categories: Ethnicity (Hispanic or Latino; 
not Hispanic or Latino); race (American Indian or Alaska Native; Asian; 
Black or African American; Native Hawaiian or Other Pacific Islander; 
White); sex (male; female).
    11. If the applicant declines to answer these questions by checking 
the ``I do not wish to provide this information'' box on an application 
that is taken by mail or on the internet, or declines to provide this 
information by stating orally that he or she does not wish to provide 
this information on an application that is taken by telephone, you must 
report ``information not provided by applicant in mail, internet, or 
telephone application.''
    12. If the applicant begins an application by mail, internet, or 
telephone, and does not provide the requested information on the 
application but does not check or select the ``I do not wish to provide 
this information'' box on the application, and the applicant meets in 
person with you to complete the application, you must request the 
applicant's ethnicity, race, and sex. If the applicant does not provide 
the requested information during the in-person meeting, you must collect 
the information on the basis of visual observation or surname. If the 
meeting occurs after the application process is complete, for example, 
at closing or account opening, you are not required to obtain the 
applicant's ethnicity, race, and sex.
    13. When an applicant provides the requested information for some 
but not all fields, you report the information that was provided by the 
applicant, whether partial or complete. If an applicant provides partial 
or complete information on ethnicity, race, and sex and also checks the 
``I do not wish to provide this information'' box on an application that 
is taken by mail or on the internet, or makes that selection when 
applying by telephone, you must report the information on ethnicity, 
race, and sex that was provided by the applicant.

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[GRAPHIC] [TIFF OMITTED] TR28OC15.011


[[Page 115]]





 Sec. Appendix C to Part 1003--Procedures for Generating a Check Digit 
                          and Validating a ULI

    The check digit for the Universal Loan Identifier (ULI) pursuant to 
Sec. 1003.4(a)(1)(i)(C) is calculated using the ISO/IEC 7064, MOD 97-10 
as it appears on the International Standard ISO/IEC 7064:2003, which is 
published by the International Organization for Standardization (ISO).
    (copyright)ISO. This material is reproduced from ISO/IEC 7064:2003 
with permission of the American National Standards Institute (ANSI) on 
behalf of ISO. All rights reserved.

                        Generating A Check Digit

    Step 1: Starting with the leftmost character in the string that 
consists of the combination of the Legal Entity Identifier (LEI) 
pursuant to Sec. 1003.4(a)(1)(i)(A) and the additional characters 
identifying the covered loan or application pursuant to 
Sec. 1003.4(a)(1)(i)(B), replace each alphabetic character with numbers 
in accordance with Table I below to obtain all numeric values in the 
string.

             Table I--Alphabetic To Numeric Conversion Table

    The alphabetic characters are not case-sensitive and each letter, 
whether it is capitalized or in lower-case, is equal to the same value 
as each letter illustrates in the conversion table. For example, A and a 
are each equal to 10.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
      A = 10             H = 17            O = 24            V = 31
      B = 11             I = 18            P = 25            W = 32
            C = 12       J = 19            Q = 26            X = 33
      D = 13             K = 20            R = 27            Y = 34
      E = 14             L = 21            S = 28            Z = 35
      F = 15             M = 22            T = 29
      G = 16             N = 23            U = 30
------------------------------------------------------------------------

    Step 2: After converting the combined string of characters to all 
numeric values, append two zeros to the rightmost positions.
    Step 3: Apply the mathematical function mod=(n,97) where n= the 
number obtained in step 2 above and 97 is the divisor.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. Truncate the remainder to 
three digits and multiply it by .97. Round the result to the nearest 
whole number.
    Step 4: Subtract the result in step 3 from 98. If the result is one 
digit, add a leading 0 to make it two digits.
    Step 5: The two digits in the result from step 4 is the check digit. 
Append the resulting check digit to the rightmost position in the 
combined string of characters described in step 1 above to generate the 
ULI.

                                 Example

    For example, assume the LEI for a financial institution is 
10Bx939c5543TqA1144M and the financial institution assigned the 
following string of characters to identify the covered loan: 999143X. 
The combined string of characters is 10Bx939c5543TqA1144M999143X.
    Step 1: Starting with the leftmost character in the combined string 
of characters, replace each alphabetic character with numbers in 
accordance with Table I above to obtain all numeric values in the 
string. The result is 1011339391 25543292610114 42299914333.
    Step 2: Append two zeros to the rightmost positions in the combined 
string. The result is 10113393912 55432926101144 229991433300.
    Step 3: Apply the mathematical function mod=(n,97) where n= the 
number obtained in step 2 above and 97 is the divisor. The result is 60.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. The result is 1042617929 
129312294946 332267952920.618556 701030928. Truncate the remainder to 
three digits, which is .618, and multiply it by .97. The result is 
59.946. Round this result to the nearest whole number, which is 60.
    Step 4: Subtract the result in step 3 from 98. The result is 38.
    Step 5: The two digits in the result from step 4 is the check digit. 
Append the check digit to the rightmost positions in the combined string 
of characters that consists of the LEI and the string of characters 
assigned by the financial institution to identify the covered loan to 
obtain the ULI. In this example, the ULI would be 10Bx939c5543T 
qA1144M999143X38.

                            Validating A ULI

    To determine whether the ULI contains a transcription error using 
the check digit calculation, the procedures are described below.
    Step 1: Starting with the leftmost character in the ULI, replace 
each alphabetic character with numbers in accordance with Table I above 
to obtain all numeric values in the string.
    Step 2: Apply the mathematical function mod=(n,97) where n=the 
number obtained in step 1 above and 97 is the divisor.
    Step 3: If the result is 1, the ULI does not contain transcription 
errors.

                                 Example

    For example, the ULI assigned to a covered loan is 10Bx939c5543T 
qA1144M999143X38.
    Step 1: Starting with the leftmost character in the ULI, replace 
each alphabetic character with numbers in accordance with Table I above 
to obtain all numeric values in the string. The result is 10113393 
912554329 26101144 229991433338.

[[Page 116]]

    Step 2: Apply the mathematical function mod=(n,97) where n is the 
number obtained in step 1 above and 97 is the divisor.
    Step 3: The result is 1. The ULI does not contain transcription 
errors.

    Effective Date Note: At 80 FR 66316, Oct. 28, 2015, appendix C to 
part 1003 was added, effective Jan. 1, 2018.



            Sec. Supplement I to Part 1003--Staff Commentary

                              Introduction

    1. Status. The commentary in this supplement is the vehicle by which 
the Bureau of Consumer Financial Protection issues formal staff 
interpretations of Regulation C (12 CFR part 1003).

              Section 1003.1--Authority, Purpose, and Scope

    1(c) Scope.
    1. General. The comments in this section address issues affecting 
coverage of institutions and exemptions from coverage.
    2. The broker rule and the meaning of ``broker'' and ``investor.'' 
For the purposes of the guidance given in this commentary, an 
institution that takes and processes a loan application and arranges for 
another institution to acquire the loan at or after closing is acting as 
a ``broker,'' and an institution that acquires a loan from a broker at 
or after closing is acting as an ``investor.'' (The terms used in this 
commentary may have different meanings in certain parts of the mortgage 
lending industry, and other terms may be used in place of these terms, 
for example in the Federal Housing Administration mortgage insurance 
programs.) Depending on the facts, a broker may or may not make a credit 
decision on an application (and thus it may or may not have reporting 
responsibilities). If the broker makes a credit decision, it reports 
that decision; if it does not make a credit decision, it does not 
report. If an investor reviews an application and makes a credit 
decision prior to closing, the investor reports that decision. If the 
investor does not review the application prior to closing, it reports 
only the loans that it purchases; it does not report the loans it does 
not purchase. An institution that makes a credit decision on an 
application prior to closing reports that decision regardless of whose 
name the loan closes in.
    3. Illustrations of the broker rule. Assume that, prior to closing, 
four investors receive the same application from a broker; two deny it, 
one approves it, and one approves it and acquires the loan. In these 
circumstances, the first two report denials, the third reports the 
transaction as approved but not accepted, and the fourth reports an 
origination (whether the loan closes in the name of the broker or the 
investor). Alternatively, assume that the broker denies a loan before 
sending it to an investor; in this situation, the broker reports a 
denial.
    4. Broker's use of investor's underwriting criteria. If a broker 
makes a credit decision based on underwriting criteria set by an 
investor, but without the investor's review prior to closing, the broker 
has made the credit decision. The broker reports as an origination a 
loan that it approves and closes, and reports as a denial an application 
that it turns down (either because the application does not meet the 
investor's underwriting guidelines or for some other reason). The 
investor reports as purchases only those loans it purchases.
    5. Insurance and other criteria. If an institution evaluates an 
application based on the criteria or actions of a third party other than 
an investor (such as a government or private insurer or guarantor), the 
institution must report the action taken on the application (loan 
originated, approved but not accepted, or denied, for example).
    6. Credit decision of agent is decision of principal. If an 
institution approves loans through the actions of an agent, the 
institution must report the action taken on the application (loan 
originated, approved but not accepted, or denied, for example). State 
law determines whether one party is the agent of another.
    7. Affiliate bank underwriting (250.250 review). If an institution 
makes an independent evaluation of the creditworthiness of an applicant 
(for example, as part of a preclosing review by an affiliate bank under 
12 CFR 250.250, a regulation of the Board of Governors of the Federal 
Reserve System that interprets section 23A of the Federal Reserve Act), 
the institution is making a credit decision. If the institution then 
acquires the loan, it reports the loan as an origination whether the 
loan closes in the name of the institution or its affiliate. An 
institution that does not acquire the loan but takes some other action 
reports that action.
    8. Participation loan. An institution that originates a loan and 
then sells partial interests to other institutions reports the loan as 
an origination. An institution that acquires only a partial interest in 
such a loan does not report the transaction even if it has participated 
in the underwriting and origination of the loan.
    9. Assumptions. An assumption occurs when an institution enters into 
a written agreement accepting a new borrower as the obligor on an 
existing obligation. An institution reports an assumption (or an 
application for an assumption) as a home purchase loan in the amount of 
the outstanding principal. If a transaction does not involve a written 
agreement between a new borrower and the institution, it is not an 
assumption for HMDA purposes and is not reported.

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                       Section 1003.2--Definitions

    Application.
    1. Consistency With Regulation B. Bureau interpretations that appear 
in the official staff commentary to Regulation B (Equal Credit 
Opportunity, 12 CFR part 1002, Supplement I) are generally applicable to 
the definition of an application under Regulation C. However, under 
Regulation C the definition of an application does not include 
prequalification requests.
    2. Prequalification. A prequalification request is a request by a 
prospective loan applicant (other than a request for preapproval) for a 
preliminary determination on whether the prospective applicant would 
likely qualify for credit under an institution's standards, or for a 
determination on the amount of credit for which the prospective 
applicant would likely qualify. Some institutions evaluate 
prequalification requests through a procedure that is separate from the 
institution's normal loan application process; others use the same 
process. In either case, Regulation C does not require an institution to 
report prequalification requests on the HMDA/LAR, even though these 
requests may constitute applications under Regulation B for purposes of 
adverse action notices.
    3. Requests for preapproval. To be a covered preapproval program, 
the written commitment issued under the program must result from a full 
review of the creditworthiness of the applicant, including such 
verification of income, resources and other matters as is typically done 
by the institution as part of its normal credit evaluation program. In 
addition to conditions involving the identification of a suitable 
property and verification that no material change has occurred in the 
applicant's financial condition or creditworthiness, the written 
commitment may be subject only to other conditions (unrelated to the 
financial condition or creditworthiness of the applicant) that the 
lender ordinarily attaches to a traditional home mortgage application 
approval. These conditions are limited to conditions such as requiring 
an acceptable title insurance binder or a certificate indicating clear 
termite inspection, and, in the case where the applicant plans to use 
the proceeds from the sale of the applicant's present home to purchase a 
new home, a settlement statement showing adequate proceeds from the sale 
of the present home.
    Branch office.
    1. Credit union. For purposes of Regulation C, a ``branch'' of a 
credit union is any office where member accounts are established or 
loans are made, whether or not the office has been approved as a branch 
by a Federal or state agency. (See 12 U.S.C. 1752.)
    2. Depository institution. A branch of a depository institution does 
not include a loan-production office, the office of an affiliate, or the 
office of a third party such as a loan broker. (But see appendix A, 
paragraph I.C.6, which requires certain depository institutions to 
report property location even for properties located outside those MSAs 
or Metropolitan Divisions in which the institution has a home or branch 
office.)
    3. Nondepository institution. For a nondepository institution, 
``branch office'' does not include the office of an affiliate or other 
third party such as a loan broker. (But note that certain nondepository 
institutions must report property location even in MSAs or Metropolitan 
Divisions where they do not have a physical location.)
    Dwelling.
    1. Coverage. The definition of ``dwelling'' is not limited to the 
principal or other residence of the applicant or borrower, and thus 
includes vacation or second homes and rental properties. A dwelling also 
includes a multifamily structure such as an apartment building.
    2. Exclusions. Recreational vehicles such as boats or campers are 
not dwellings for purposes of HMDA. Also excluded are transitory 
residences such as hotels, hospitals, and college dormitories, whose 
occupants have principal residences elsewhere.
    Financial institution.
    1. General. An institution that met the test for coverage under HMDA 
in year 1, and then ceases to meet the test (for example, because its 
assets fall below the threshold on December 31 of year 2) stops 
collecting HMDA data beginning with year 3. Similarly, an institution 
that did not meet the coverage test for a given year, and then meets the 
test in the succeeding year, begins collecting HMDA data in the calendar 
year following the year in which it meets the test for coverage. For 
example, a for-profit mortgage lending institution (other than a bank, 
savings association, or credit union) that, in year 1, falls below the 
thresholds specified in the definition of Financial institution in 
Sec. 1003.2, but meets one of them in year 2, need not collect data in 
year 2, but begins collecting data in year 3.
    2. Adjustment of exemption threshold for banks, savings 
associations, and credit unions. For data collection in 2017, the asset-
size exemption threshold is $44 million. Banks, savings associations, 
and credit unions with assets at or below $44 million as of December 31, 
2016, are exempt from collecting data for 2017.
    3. Coverage after a merger. Several scenarios of data-collection 
responsibilities for the calendar year of a merger are described below. 
Under all the scenarios, if the merger results in a covered institution, 
that institution must begin data collection January 1 of the following 
calendar year.
    i. Two institutions are not covered by Regulation C because of asset 
size. The institutions merge. No data collection is required

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for the year of the merger (even if the merger results in a covered 
institution).
    ii. A covered institution and an exempt institution merge. The 
covered institution is the surviving institution. For the year of the 
merger, data collection is required for the covered institution's 
transactions. Data collection is optional for transactions handled in 
offices of the previously exempt institution.
    iii. A covered institution and an exempt institution merge. The 
exempt institution is the surviving institution, or a new institution is 
formed. Data collection is required for transactions of the covered 
institution that take place prior to the merger. Data collection is 
optional for transactions taking place after the merger date.
    iv. Two covered institutions merge. Data collection is required for 
the entire year. The surviving or resulting institution files either a 
consolidated submission or separate submissions for that year.
    4. Originations. HMDA coverage depends in part on whether an 
institution has originated home purchase loans. To determine whether 
activities with respect to a particular loan constitute an origination, 
institutions should consult, among other parts of the staff commentary, 
the discussion of the broker rule under Secs. 1003.1(c) and 1003.4(a).
    5. Branches of foreign banks--treated as banks. A Federal branch or 
a state-licensed insured branch of a foreign bank is a ``bank'' under 
section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(a)), and is covered by HMDA if it meets the tests for a depository 
institution found in Sec. 1003.2 of Regulation C.
    6. Branches and offices of foreign banks--treated as for-profit 
mortgage lending institutions. Federal agencies, state-licensed 
agencies, state-licensed uninsured branches of foreign banks, commercial 
lending companies owned or controlled by foreign banks, and entities 
operating under section 25 or 25A of the Federal Reserve Act, 12 U.S.C. 
601 and 611 (Edge Act and agreement corporations) are not ``banks'' 
under the Federal Deposit Insurance Act. These entities are nonetheless 
covered by HMDA if they meet the tests for a for-profit nondepository 
mortgage lending institution found in Sec. 1003.2 of Regulation C.
    Home improvement loan.
    1. Classification requirement for loans not secured by a lien on a 
dwelling. An institution has ``classified'' a loan that is not secured 
by a lien on a dwelling as a home improvement loan if it has entered the 
loan on its books as a home improvement loan, or has otherwise coded or 
identified the loan as a home improvement loan. For example, an 
institution that has booked a loan or reported it on a ``call report'' 
as a home improvement loan has classified it as a home improvement loan. 
An institution may also classify loans as home improvement loans in 
other ways (for example, by color-coding loan files).
    2. Improvements to real property. Home improvements include 
improvements both to a dwelling and to the real property on which the 
dwelling is located (for example, installation of a swimming pool, 
construction of a garage, or landscaping).
    3. Commercial and other loans. A home improvement loan may include a 
loan originated outside an institution's residential mortgage lending 
division (such as a loan to improve an apartment building made through 
the commercial loan department).
    4. Mixed-use property. A loan to improve property used for 
residential and commercial purposes (for example, a building containing 
apartment units and retail space) is a home improvement loan if the loan 
proceeds are used primarily to improve the residential portion of the 
property. If the loan proceeds are used to improve the entire property 
(for example, to replace the heating system), the loan is a home 
improvement loan if the property itself is primarily residential. An 
institution may use any reasonable standard to determine the primary use 
of the property, such as by square footage or by the income generated. 
An institution may select the standard to apply on a case-by-case basis. 
If the loan is unsecured, to report the loan as a home improvement loan 
the institution must also have classified it as such.
    5. Multiple-category loans. If a loan is a home improvement loan as 
well as a refinancing, an institution reports the loan as a home 
improvement loan.
    Home purchase loan.
    1. Multiple properties. A home purchase loan includes a loan secured 
by one dwelling and used to purchase another dwelling.
    2. Mixed-use property. A dwelling-secured loan to purchase property 
used primarily for residential purposes (for example, an apartment 
building containing a convenience store) is a home purchase loan. An 
institution may use any reasonable standard to determine the primary use 
of the property, such as by square footage or by the income generated. 
An institution may select the standard to apply on a case-by-case basis.
    3. Farm loan. A loan to purchase property used primarily for 
agricultural purposes is not a home purchase loan even if the property 
includes a dwelling. An institution may use any reasonable standard to 
determine the primary use of the property, such as by reference to the 
exemption from Regulation X (Real Estate Settlement Procedures, 12 CFR 
1024.5(b)(1)) for a loan on property of 25 acres or more. An institution 
may select the standard to apply on a case-by-case basis.
    4. Commercial and other loans. A home purchase loan may include a 
loan originated outside an institution's residential mortgage

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lending division (such as a loan for the purchase of an apartment 
building made through the commercial loan department).
    5. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan and the permanent 
financing that replaces a construction-only loan. It does not include a 
construction-only loan, which is considered ``temporary financing'' 
under Regulation C and is not reported.
    6. Second mortgages that finance the downpayments on first 
mortgages. If an institution making a first mortgage loan to a home 
purchaser also makes a second mortgage loan to the same purchaser to 
finance part or all of the home purchaser's downpayment, the institution 
reports each loan separately as a home purchase loan.
    7. Multiple-category loans. If a loan is a home purchase loan as 
well as a home improvement loan, or a refinancing, an institution 
reports the loan as a home purchase loan.
    Manufactured home.
    1. Definition of a manufactured home. The definition in Sec. 1003.2 
refers to the Federal building code for factory-built housing 
established by the Department of Housing and Urban Development (HUD). 
The HUD code requires generally that housing be essentially ready for 
occupancy upon leaving the factory and being transported to a building 
site. Modular homes that meet all of the HUD code standards are included 
in the definition because they are ready for occupancy upon leaving the 
factory. Other factory-built homes, such as panelized and pre-cut homes, 
generally do not meet the HUD code because they require a significant 
amount of construction on site before they are ready for occupancy. 
Loans and applications relating to manufactured homes that do not meet 
the HUD code should not be identified as manufactured housing under 
HMDA.
    Metropolitan Statistical Areas and Metropolitan Divisions.
    1. Use of terms ``Metropolitan Statistical Area'' and ``Metropolitan 
Division.'' The U.S. Office of Management and Budget defines 
Metropolitan Statistical Areas and Metropolitan Divisions to provide 
nationally consistent definitions for collecting, tabulating, and 
publishing Federal statistics for a set of geographic areas. OMB divides 
every Metropolitan Statistical Area (MSA) with a population of 2.5 
million or more into Metropolitan Divisions (MDs); MSAs with populations 
under 2.5 million population are not so divided. 67 FR 82228 (December 
27, 2000). For all purposes under Regulation C, if an MSA is divided by 
OMB into MDs, the appropriate geographic unit to be used is the MD; if 
an MSA is not so divided by OMB into MDs, the appropriate geographic 
unit to be used is the MSA.

                Section 1003.4--Compilation of Loan Data

    4(a) Data format and itemization.
    1. Reporting requirements. i. An institution reports data on loans 
that it originated and loans that it purchased during the calendar year 
described in the report. An institution reports these data even if the 
loans were subsequently sold by the institution.
    ii. An institution reports the data for loan applications that did 
not result in originations--for example, applications that the 
institution denied or that the applicant withdrew during the calendar 
year covered by the report.
    iii. In the case of brokered loan applications or applications 
forwarded through a correspondent, the institution reports as 
originations the loans that it approved and subsequently acquired per a 
pre-closing arrangement (whether or not they closed in the institution's 
name). Additionally, the institution reports the data for all 
applications that did not result in originations--for example, 
applications that the institution denied or that the applicant withdrew 
during the calendar year covered by the report (whether or not they 
would have closed in the institution's name). For all of these loans and 
applications, the institution reports the required data regarding the 
borrower's or applicant's ethnicity, race, sex, and income.
    iv. Loan originations are to be reported only once. If the 
institution is the loan broker or correspondent, it does not report as 
originations the loans that it forwarded to another lender for approval 
prior to closing, and that were approved and subsequently acquired by 
that lender (whether or not they closed in the institution's name).
    v. An institution reports applications that were received in the 
previous calendar year but were acted upon during the calendar year 
covered by the current register.
    vi. A financial institution submits all required data to the 
appropriate Federal agency in one package, with the prescribed 
transmittal sheet. An officer of the institution certifies to the 
accuracy of the data.
    vii. The transmittal sheet states the total number of line entries 
contained in the accompanying data transmission.
    2. Updating--agency requirements. Certain state or Federal 
regulations, such as the Federal Deposit Insurance Corporation's 
regulations, may require an institution to update its data more 
frequently than is required under Regulation C.
    3. Form of quarterly updating. An institution may maintain the 
quarterly updates of the HMDA/LAR in electronic or any other format, 
provided the institution can make the information available to its 
regulatory agency in a timely manner upon request.
    Paragraph 4(a)(1).

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    1. Application date--consistency. In reporting the date of 
application, an institution reports the date the application was 
received or the date shown on the application. Although an institution 
need not choose the same approach for its entire HMDA submission, it 
should be generally consistent (such as by routinely using one approach 
within a particular division of the institution or for a category of 
loans).
    2. Application date--application forwarded by a broker. For an 
application forwarded by a broker, an institution reports the date the 
application was received by the broker, the date the application was 
received by the institution, or the date shown on the application. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks an institution to reinstate a 
counteroffer that the applicant previously did not accept (or asks the 
institution to reconsider an application that was denied, withdrawn, or 
closed for incompleteness), the institution may treat that request as 
the continuation of the earlier transaction or as a new transaction. If 
the institution treats the request for reinstatement or reconsideration 
as a new transaction, it reports the date of the request as the 
application date.
    4. Application or loan number. An institution must ensure that each 
identifying number is unique within the institution. If an institution's 
register contains data for branch offices, for example, the institution 
could use a letter or a numerical code to identify the loans or 
applications of different branches, or could assign a certain series of 
numbers to particular branches to avoid duplicate numbers. Institutions 
are strongly encouraged not to use the applicant's or borrower's name or 
social security number, for privacy reasons.
    5. Application--year action taken. An institution must report an 
application in the calendar year in which the institution takes final 
action on the application.
    Paragraph 4(a)(3).
    1. Purpose--statement of applicant. An institution may rely on the 
oral or written statement of an applicant regarding the proposed use of 
loan proceeds. For example, a lender could use a check-box, or a purpose 
line, on a loan application to determine whether or not the applicant 
intends to use loan proceeds for home improvement purposes.
    2. Purpose--multiple-purpose loan. If a loan is a home purchase loan 
as well as a home improvement loan, or a refinancing, an institution 
reports the loan as a home purchase loan. If a loan is a home 
improvement loan as well as a refinancing, an institution reports the 
loan as a home improvement loan.
    Paragraph 4(a)(6).
    1. Occupancy--multiple properties. If a loan relates to multiple 
properties, the institution reports the owner occupancy status of the 
property for which property location is being reported. (See the 
comments to paragraph 4(a)(9)).
    Paragraph 4(a)(7).
    1. Loan amount--counteroffer. If an applicant accepts a counteroffer 
for an amount different from the amount initially requested, the 
institution reports the loan amount granted. If an applicant does not 
accept a counteroffer or fails to respond, the institution reports the 
loan amount initially requested.
    2. Loan amount--multiple-purpose loan. Except in the case of a home-
equity line of credit, an institution reports the entire amount of the 
loan, even if only a part of the proceeds is intended for home purchase 
or home improvement.
    3. Loan amount--home-equity line. An institution that has chosen to 
report home-equity lines of credit reports only the part that is 
intended for home-improvement or home-purchase purposes.
    4. Loan amount--assumption. An institution that enters into a 
written agreement accepting a new party as the obligor on a loan reports 
the amount of the outstanding principal on the assumption as the loan 
amount.
    Paragraph 4(a)(8).
    1. Action taken--counteroffers. If an institution makes a 
counteroffer to lend on terms different from the applicant's initial 
request (for example, for a shorter loan maturity or in a different 
amount) and the applicant does not accept the counteroffer or fails to 
respond, the institution reports the action taken as a denial on the 
original terms requested by the applicant.
    2. Action taken--rescinded transactions. If a borrower rescinds a 
transaction after closing, the institution may report the transaction 
either as an origination or as an application that was approved but not 
accepted.
    3. Action taken--purchased loans. An institution reports the loans 
that it purchased during the calendar year, and does not report the 
loans that it declined to purchase.
    4. Action taken--conditional approvals. If an institution issues a 
loan approval subject to the applicant's meeting underwriting conditions 
(other than customary loan commitment or loan-closing conditions, such 
as a clear-title requirement or an acceptable property survey) and the 
applicant does not meet them, the institution reports the action taken 
as a denial.
    5. Action taken date--approved but not accepted. For a loan approved 
by an institution but not accepted by the applicant, the institution 
reports any reasonable date, such as

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the approval date, the deadline for accepting the offer, or the date the 
file was closed. Although an institution need not choose the same 
approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of loans).
    6. Action taken date--originations. For loan originations, an 
institution generally reports the settlement or closing date. For loan 
originations that an institution acquires through a broker, the 
institution reports either the settlement or closing date, or the date 
the institution acquired the loan from the broker. If the disbursement 
of funds takes place on a date later than the settlement or closing 
date, the institution may use the date of disbursement. For a 
construction/permanent loan, the institution reports either the 
settlement or closing date, or the date the loan converts to the 
permanent financing. Although an institution need not choose the same 
approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of loans). Notwithstanding 
this flexibility regarding the use of the closing date in connection 
with reporting the date action was taken, the year in which an 
origination goes to closing is the year in which the institution must 
report the origination.
    7. Action taken--pending applications. An institution does not 
report any loan application still pending at the end of the calendar 
year; it reports that application on its register for the year in which 
final action is taken.
    Paragraph 4(a)(9).
    1. Property location--multiple properties (home improvement/
refinance of home improvement). For a home improvement loan, an 
institution reports the property being improved. If more than one 
property is being improved, the institution reports the location of one 
of the properties or reports the loan using multiple entries on its 
HMDA/LAR (with unique identifiers) and allocating the loan amount among 
the properties.
    2. Property location--multiple properties (home purchase/refinance 
of home purchase). For a home purchase loan, an institution reports the 
property taken as security. If an institution takes more than one 
property as security, the institution reports the location of the 
property being purchased if there is just one. If the loan is to 
purchase multiple properties and is secured by multiple properties, the 
institution reports the location of one of the properties or reports the 
loan using multiple entries on its HMDA/LAR (with unique identifiers) 
and allocating the loan amount among the properties.
    3. Property location--loans purchased from another institution. The 
requirement to report the property location by census tract in an MSA or 
Metropolitan Division where the institution has a home or branch office 
applies not only to loan applications and originations but also to loans 
purchased from another institution. This includes loans purchased from 
an institution that did not have a home or branch office in that MSA or 
Metropolitan Division and did not collect the property-location 
information.
    4. Property location--mobile or manufactured home. If information 
about the potential site of a mobile or manufactured home is not 
available, an institution reports using the Code for ``not applicable.''
    Paragraph 4(a)(10).
    1. Applicant data--completion by applicant. An institution reports 
the monitoring information as provided by the applicant. For example, if 
an applicant checks the ``Asian'' box the institution reports using the 
``Asian'' Code.
    2. Applicant data--completion by lender. If an applicant fails to 
provide the requested information for an application taken in person, 
the institution reports the data on the basis of visual observation or 
surname.
    3. Applicant data--application completed in person. When an 
applicant meets in person with a lender to complete an application that 
was begun by mail, internet, or telephone, the institution must request 
the monitoring information. If the meeting occurs after the application 
process is complete, for example, at closing, the institution is not 
required to obtain monitoring information.
    4. Applicant data--joint applicant. A joint applicant may enter the 
government monitoring information on behalf of an absent joint 
applicant. If the information is not provided, the institution reports 
using the Code for ``information not provided by applicant in mail, 
internet, or telephone application.''
    5. Applicant data--video and other electronic-application processes. 
An institution that accepts applications through electronic media with a 
video component treats the applications as taken in person and collects 
the information about the ethnicity, race, and sex of applicants. An 
institution that accepts applications through electronic media without a 
video component (for example, the internet or facsimile) treats the 
applications as accepted by mail.
    6. Income data--income relied on. An institution reports the gross 
annual income relied on in evaluating the creditworthiness of 
applicants. For example, if an institution relies on an applicant's 
salary to compute a debt-to-income ratio but also relies on the 
applicant's annual bonus to evaluate creditworthiness, the institution 
reports the salary and the bonus to the extent relied upon. Similarly, 
if an institution relies on the income of a cosigner to evaluate 
creditworthiness, the institution includes this income to the extent 
relied upon. But an institution

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does not include the income of a guarantor who is only secondarily 
liable.
    7. Income data--co-applicant. If two persons jointly apply for a 
loan and both list income on the application, but the institution relies 
only on the income of one applicant in computing ratios and in 
evaluating creditworthiness, the institution reports only the income 
relied on.
    8. Income data--loan to employee. An institution may report ``NA'' 
in the income field for loans to its employees to protect their privacy, 
even though the institution relied on their income in making its credit 
decisions.
    Paragraph 4(a)(11).
    1. Type of purchaser--loan-participation interests sold to more than 
one entity. An institution that originates a loan, and then sells it to 
more than one entity, reports the ``type of purchaser'' based on the 
entity purchasing the greatest interest, if any. If an institution 
retains a majority interest, it does not report the sale.
    2. Type of purchaser--swapped loans. Loans ``swapped'' for mortgage-
backed securities are to be treated as sales; the purchaser is the type 
of entity receiving the loans that are swapped.
    Paragraph 4(a)(12)(ii).
    1. Average prime offer rate. Average prime offer rates are annual 
percentage rates derived from average interest rates, points, and other 
loan pricing terms offered to borrowers by a representative sample of 
lenders for mortgage loans that have low-risk pricing characteristics. 
Other pricing terms include commonly used indices, margins, and initial 
fixed-rate periods for variable-rate transactions. Relevant pricing 
characteristics include a consumer's credit history and transaction 
characteristics such as the loan-to-value ratio, owner-occupant status, 
and purpose of the transaction. To obtain average prime offer rates, the 
Bureau uses a survey of lenders that both meets the criteria of 
Sec. 1003.4(a)(12)(ii) and provides pricing terms for at least two types 
of variable-rate transactions and at least two types of non-variable-
rate transactions. An example of such a survey is the Freddie Mac 
Primary Mortgage Market Survey[supreg].
    2. Comparable transaction. The rate spread reporting requirement 
applies to a reportable loan with an annual percentage rate that exceeds 
by the specified margin (or more) the average prime offer rate for a 
comparable transaction as of the date the interest rate is set. The 
tables of average prime offer rates published by the Bureau (see comment 
4(a)(12)(ii)-3) indicate how to identify the comparable transaction.
    3. Bureau tables. The Bureau publishes on the FFIEC's Web site 
(http://www.ffiec.gov/hmda), in table form, average prime offer rates 
for a wide variety of transaction types. The Bureau calculates an annual 
percentage rate, consistent with Regulation Z (see 12 CFR 1026.22 and 
part 1026, appendix J), for each transaction type for which pricing 
terms are available from the survey described in comment 4(a)(12)(ii)-1. 
The Bureau estimates annual percentage rates for other types of 
transactions for which direct survey data are not available based on the 
loan pricing terms available in the survey and other information. The 
Bureau publishes on the FFIEC's Web site the methodology it uses to 
arrive at these estimates.
    Paragraph 4(a)(14).
    1. Determining lien status for applications and loans originated. i. 
Lenders are required to report lien status for loans they originate and 
applications that do not result in originations. Lien status is 
determined by reference to the best information readily available to the 
lender at the time final action is taken and to the lender's own 
procedures. Thus, lenders may rely on the title search they routinely 
perform as part of their underwriting procedures--for example, for home 
purchase loans. Regulation C does not require lenders to perform title 
searches solely to comply with HMDA reporting requirements. Lenders may 
rely on other information that is readily available to them at the time 
final action is taken and that they reasonably believe is accurate, such 
as the applicant's statement on the application or the applicant's 
credit report. For example, where the applicant indicates on the 
application that there is a mortgage on the property or where the 
applicant's credit report shows that the applicant has a mortgage--and 
that mortgage is not going to be paid off as part of the transaction--
the lender may assume that the loan it originates is secured by a 
subordinate lien. If the same application did not result in an 
origination--for example, because the application is denied or 
withdrawn--the lender would report the application as an application for 
a subordinate-lien loan.
    ii. Lenders may also consider their established procedures when 
determining lien status for applications that do not result in 
originations. For example, a consumer applies to a lender to refinance a 
$100,000 first mortgage; the consumer also has a home equity line of 
credit for $20,000. If the lender's practice in such a case is to ensure 
that it will have first-lien position--through a subordination agreement 
with the holder of the mortgage on the home equity line--then the lender 
should report the application as an application for a first-lien loan.
    Paragraph 4(c)(3).
    1. An institution that opts to report home-equity lines reports the 
disposition of all applications, not just originations.
    4(d) Excluded data.
    1. Mergers, purchases in bulk, and branch acquisitions. If a covered 
institution acquires loans in bulk from another institution (for

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example, from the receiver for a failed institution) but no merger or 
acquisition of the institution, or acquisition of a branch, is involved, 
the institution reports the loans as purchased loans.

               Section 1003.5(a)--Disclosure and Reporting

    5(a) Reporting to agency.
    1. Submission of data. Institutions submit data to the appropriate 
Federal agencies in an automated, machine-readable form. The format must 
conform to that of the HMDA/LAR. An institution should contact the 
appropriate Federal agency for information regarding procedures and 
technical specifications for automated data submission; in some cases, 
agencies also make software available for automated data submission. The 
data are edited before submission, using the edits included in the 
agency-supplied software or equivalent edits in software available from 
vendors or developed in-house.
    2. Submission in paper form. Institutions that report twenty-five or 
fewer entries on their HMDA/LAR may collect and report the data in paper 
form. An institution that submits its register in non-automated form 
sends two copies that are typed or computer printed and must use the 
format of the HMDA/LAR (but need not use the form itself). Each page 
must be numbered along with the total number of pages (for example, 
``Page 1 of 3'').
    3. Procedures for entering data. The required data are entered in 
the register for each loan origination, each application acted on, and 
each loan purchased during the calendar year. The institution should 
decide on the procedure it wants to follow--for example, whether to 
begin entering the required data, when an application is received, or to 
wait until final action is taken (such as when a loan goes to closing or 
an application is denied).
    4. Options for collection. An institution may collect data on 
separate registers at different branches, or on separate registers for 
different loan types (such as for home purchase or home improvement 
loans, or for loans on multifamily dwellings). Entries need not be 
grouped on the register by MSA or Metropolitan Division, or 
chronologically, or by census tract numbers, or in any other particular 
order.
    5. Change in appropriate Federal agency. If the appropriate Federal 
agency for a covered institution changes (as a consequence of a merger 
or a change in the institution's charter, for example), the institution 
must report data to the new appropriate Federal agency beginning with 
the year of the change.
    6. Subsidiaries. An institution is a subsidiary of a bank or savings 
association (for purposes of reporting HMDA data to the same agency as 
the parent) if the bank or savings association holds or controls an 
ownership interest that is greater than 50 percent of the institution.
    7. Transmittal sheet--additional data submissions. If an additional 
data submission becomes necessary (for example, because the institution 
discovers that data were omitted from the initial submission, or because 
revisions are called for), that submission must be accompanied by a 
transmittal sheet.
    8. Transmittal sheet--revisions or deletions. If a data submission 
involves revisions or deletions of previously submitted data, it must 
state the total of all line entries contained in that submission, 
including both those representing revisions or deletions of previously 
submitted entries, and those that are being resubmitted unchanged or are 
being submitted for the first time. Depository institutions must provide 
a list of the MSAs or Metropolitan Divisions in which they have home or 
branch offices.
    5(b) Public disclosure of statement.
    1. Business day. For purposes of Sec. 1003.5, a business day is any 
calendar day other than a Saturday, Sunday, or legal public holiday.
    2. Format. An institution may make the disclosure statement 
available in paper form or, if the person requesting the data agrees, in 
electronic form.
    5(c) Public disclosure of modified loan/application register.
    1. Format. An institution may make the modified register available 
in paper or electronic form. Although institutions are not required to 
make the modified register available in census tract order, they are 
strongly encouraged to do so in order to enhance its utility to users.
    5(e) Notice of availability.
    1. Poster--suggested text. An institution may use any text that 
meets the requirements of the regulation. Some of the Federal agencies 
that receive HMDA data provide HMDA posters that an institution can use 
to inform the public of the availability of its HMDA data, or the 
institution may create its own posters. If an institution prints its 
own, the following language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, and income of applicants and 
borrowers; and information about loan approvals and denials. Inquire at 
this office regarding the locations where HMDA data may be inspected.
    2. Additional language for institutions making the disclosure 
statement available on request. An institution that posts a notice 
informing the public of the address to which a request should be sent 
could include the following sentence, for example, in its general 
notice: ``To receive a copy of these data send a written request to 
[address].''

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                       Section 1003.6--Enforcement

    6(b) Bona fide errors.
    1. Bona fide error--information from third parties. An institution 
that obtains the property-location information for applications and 
loans from third parties (such as appraisers or vendors of ``geocoding'' 
services) is responsible for ensuring that the information reported on 
its HMDA/LAR is correct.

[76 FR 78468, Dec. 19, 2011, as amended at 78 FR 79286, Dec. 30, 2013; 
79 FR 77855, Dec. 29, 2014; 80 FR 79674, Dec. 23, 2015; 81 FR 93581, 
Dec. 21, 2016]

    Effective Date Note 1: At 80 FR 66317, Oct. 28, 2015, supplement I 
to part 1003 was revised, effective Jan. 1, 2018. For the convenience of 
the user, the revised text is set forth as follows:



        Sec. Supplement I to Part 1003--Official Interpretations

                              Introduction

    1. Status. The commentary in this supplement is the vehicle by which 
the Bureau of Consumer Financial Protection issues formal 
interpretations of Regulation C (12 CFR part 1003).

                       Section 1003.2--Definitions

                            2(b) Application

    1. Consistency with Regulation B. Bureau interpretations that appear 
in the official commentary to Regulation B (Equal Credit Opportunity 
Act, 12 CFR part 1002, Supplement I) are generally applicable to the 
definition of application under Regulation C. However, under Regulation 
C the definition of an application does not include prequalification 
requests.
    2. Prequalification. A prequalification request is a request by a 
prospective loan applicant (other than a request for preapproval) for a 
preliminary determination on whether the prospective loan applicant 
would likely qualify for credit under an institution's standards, or for 
a determination on the amount of credit for which the prospective 
applicant would likely qualify. Some institutions evaluate 
prequalification requests through a procedure that is separate from the 
institution's normal loan application process; others use the same 
process. In either case, Regulation C does not require an institution to 
report prequalification requests on the loan/application register, even 
though these requests may constitute applications under Regulation B for 
purposes of adverse action notices.
    3. Requests for preapproval. To be a preapproval program as defined 
in Sec. 1003.2(b)(2), the written commitment issued under the program 
must result from a comprehensive review of the creditworthiness of the 
applicant, including such verification of income, resources, and other 
matters as is typically done by the institution as part of its normal 
credit evaluation program. In addition to conditions involving the 
identification of a suitable property and verification that no material 
change has occurred in the applicant's financial condition or 
creditworthiness, the written commitment may be subject only to other 
conditions (unrelated to the financial condition or creditworthiness of 
the applicant) that the lender ordinarily attaches to a traditional home 
mortgage application approval. These conditions are limited to 
conditions such as requiring an acceptable title insurance binder or a 
certificate indicating clear termite inspection, and, in the case where 
the applicant plans to use the proceeds from the sale of the applicant's 
present home to purchase a new home, a settlement statement showing 
adequate proceeds from the sale of the present home. Regardless of its 
name, a program that satisfies the definition of a preapproval program 
in Sec. 1003.2(b)(2) is a preapproval program for purposes of Regulation 
C. Conversely, a program that a financial institution describes as a 
``preapproval program'' that does not satisfy the requirements of 
Sec. 1003.2(b)(2) is not a preapproval program for purposes of 
Regulation C. If a financial institution does not regularly use the 
procedures specified in Sec. 1003.2(b)(2), but instead considers 
requests for preapprovals on an ad hoc basis, the financial institution 
need not treat ad hoc requests as part of a preapproval program for 
purposes of Regulation C. A financial institution should, however, be 
generally consistent in following uniform procedures for considering 
such ad hoc requests.

                           2(c) Branch Office

                            Paragraph 2(c)(1)

    1. Credit unions. For purposes of Regulation C, a ``branch'' of a 
credit union is any office where member accounts are established or 
loans are made, whether or not the office has been approved as a branch 
by a Federal or State agency. (See 12 U.S.C. 1752.)
    2. Bank, savings association, or credit unions. A branch office of a 
bank, savings association, or credit union does not include a loan-
production office if the loan-production office is not considered a 
branch by the Federal or State supervisory authority applicable to that 
institution. A branch office also does not include the office of an 
affiliate or of a third party, such as a third-party broker.

                            Paragraph 2(c)(2)

    1. General. A branch office of a for-profit mortgage lending 
institution, other than a bank savings association or credit union, does 
not include the office of an affiliate or

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of a third party, such as a third-party broker.

                      2(d) Closed-end Mortgage Loan

    1. Dwelling-secured. Section 1003.2(d) defines a closed-end mortgage 
loan as an extension of credit that is secured by a lien on a dwelling 
and that is not an open-end line of credit under Sec. 1003.2(o). Thus, 
for example, a loan to purchase a dwelling and secured only by a 
personal guarantee is not a closed-end mortgage loan because it is not 
dwelling-secured.
    2. Extension of credit. Under Sec. 1003.2(d), a dwelling-secured 
loan is not a closed-end mortgage loan unless it involves an extension 
of credit. Thus, some transactions completed pursuant to installment 
sales contracts, such as some land contracts, are not closed-end 
mortgage loans because no credit is extended. For example, if a land 
contract provides that, upon default, the contract terminates, all 
previous payments will be treated as rent, and the borrower is under no 
obligation to make further payments, the transaction is not a closed-end 
mortgage loan. In general, extension of credit under Sec. 1003.2(d) 
refers to the granting of credit only pursuant to a new debt obligation. 
Thus, except as described in comments 2(d)-2.i and .ii, if a transaction 
modifies, renews, extends, or amends the terms of an existing debt 
obligation, but the existing debt obligation is not satisfied and 
replaced, the transaction is not a closed-end mortgage loan under 
Sec. 1003.2(d) because there has been no new extension of credit. The 
phrase extension of credit thus is defined differently under Regulation 
C than under Regulation B, 12 CFR part 1002.
    i. Assumptions. For purposes of Regulation C, an assumption is a 
transaction in which an institution enters into a written agreement 
accepting a new borrower in place of an existing borrower as the obligor 
on an existing debt obligation. For purposes of Regulation C, 
assumptions include successor-in-interest transactions, in which an 
individual succeeds the prior owner as the property owner and then 
assumes the existing debt secured by the property. Under Sec. 1003.2(d), 
assumptions are extensions of credit even if the new borrower merely 
assumes the existing debt obligation and no new debt obligation is 
created. See also comment 2(j)-5.
    ii. New York State consolidation, extension, and modification 
agreements. A transaction completed pursuant to a New York State 
consolidation, extension, and modification agreement and classified as a 
supplemental mortgage under New York Tax Law section 255, such that the 
borrower owes reduced or no mortgage recording taxes, is an extension of 
credit under Sec. 1003.2(d). Comments 2(i)-1, 2(j)-5, and 2(p)-2 clarify 
whether such transactions are home improvement loans, home purchase 
loans, or refinancings, respectively.

                              2(f) Dwelling

    1. General. The definition of a dwelling is not limited to the 
principal or other residence of the applicant or borrower, and thus 
includes vacation or second homes and investment properties.
    2. Multifamily residential structures and communities. A dwelling 
also includes a multifamily residential structure or community such as 
an apartment, condominium, cooperative building or complex, or a 
manufactured home community. A loan related to a manufactured home 
community is secured by a dwelling for purposes of Sec. 1003.2(f) even 
if it is not secured by any individual manufactured homes, but only by 
the land that constitutes the manufactured home community including 
sites for manufactured homes. However, a loan related to a multifamily 
residential structure or community that is not a manufactured home 
community is not secured by a dwelling for purposes of Sec. 1003.2(f) if 
it is not secured by any individual dwelling units and is, for example, 
instead secured only by property that only includes common areas, or is 
secured only by an assignment of rents or dues.
    3. Exclusions. Recreational vehicles, including boats, campers, 
travel trailers, and park model recreational vehicles, are not 
considered dwellings for purposes of Sec. 1003.2(f), regardless of 
whether they are used as residences. Houseboats, floating homes, and 
mobile homes constructed before June 15, 1976, are also excluded, 
regardless of whether they are used as residences. Also excluded are 
transitory residences such as hotels, hospitals, college dormitories, 
and recreational vehicle parks, and structures originally designed as 
dwellings but used exclusively for commercial purposes, such as homes 
converted to daycare facilities or professional offices.
    4. Mixed-use properties. A property used for both residential and 
commercial purposes, such as a building containing apartment units and 
retail space, is a dwelling if the property's primary use is 
residential. An institution may use any reasonable standard to determine 
the primary use of the property, such as by square footage or by the 
income generated. An institution may select the standard to apply on a 
case-by-case basis.
    5. Properties with service and medical components. For purposes of 
Sec. 1003.2(f), a property used for both long-term housing and to 
provide related services, such as assisted living for senior citizens or 
supportive housing for persons with disabilities, is a dwelling and does 
not have a non-residential purpose merely because the property is used 
for both housing and to provide services. However, transitory residences 
that are used to provide such services are not dwellings. See comment 
2(f)-3. Properties that are used to

[[Page 126]]

provide medical care, such as skilled nursing, rehabilitation, or long-
term medical care, also are not dwellings. See comment 2(f)-3. If a 
property that is used for both long-term housing and to provide related 
services also is used to provide medical care, the property is a 
dwelling if its primary use is residential. An institution may use any 
reasonable standard to determine the property's primary use, such as by 
square footage, income generated, or number of beds or units allocated 
for each use. An institution may select the standard to apply on a case-
by-case basis.

                       2(g) Financial Institution

    1. Preceding calendar year and preceding December 31. The definition 
of financial institution refers both to the preceding calendar year and 
the preceding December 31. These terms refer to the calendar year and 
the December 31 preceding the current calendar year. For example, in 
2019, the preceding calendar year is 2018 and the preceding December 31 
is December 31, 2018. Accordingly, in 2019, Financial Institution A 
satisfies the asset-size threshold described in Sec. 1003.2(g)(1)(i) if 
its assets exceeded the threshold specified in comment 2(g)-2 on 
December 31, 2018. Likewise, in 2020, Financial Institution A does not 
meet the loan-volume test described in Sec. 1003.2(g)(1)(v)(A) if it 
originated fewer than 25 closed-end mortgage loans during either 2018 or 
2019.
    2. [Reserved]
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec. 1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec. 1003.2(g). For example, A and B merge. The surviving or newly 
formed institution meets the loan threshold described in 
Sec. 1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, 
and B originated a combined total of at least 100 open-end lines of 
credit in each of the two preceding calendar years. Likewise, the 
surviving or newly formed institution meets the asset-size threshold in 
Sec. 1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec. 1003.2(g)(1)(i). Comment 2(g)-4 discusses a financial 
institution's responsibilities during the calendar year of a merger.
    4. Merger or acquisition--coverage for calendar year of merger or 
acquisition. The scenarios described below illustrate a financial 
institution's responsibilities for the calendar year of a merger or 
acquisition. For purposes of these illustrations, a ``covered 
institution'' means a financial institution, as defined in 
Sec. 1003.2(g), that is not exempt from reporting under Sec. 1003.3(a), 
and ``an institution that is not covered'' means either an institution 
that is not a financial institution, as defined in Sec. 1003.2(g), or an 
institution that is exempt from reporting under Sec. 1003.3(a).
    i. Two institutions that are not covered merge. The surviving or 
newly formed institution meets all of the requirements necessary to be a 
covered institution. No data collection is required for the calendar 
year of the merger (even though the merger creates an institution that 
meets all of the requirements necessary to be a covered institution). 
When a branch office of an institution that is not covered is acquired 
by another institution that is not covered, and the acquisition results 
in a covered institution, no data collection is required for the 
calendar year of the acquisition.
    ii. A covered institution and an institution that is not covered 
merge. The covered institution is the surviving institution, or a new 
covered institution is formed. For the calendar year of the merger, data 
collection is required for covered loans and applications handled in the 
offices of the merged institution that was previously covered and is 
optional for covered loans and applications handled in offices of the 
merged institution that was previously not covered. When a covered 
institution acquires a branch office of an institution that is not 
covered, data collection is optional for covered loans and applications 
handled by the acquired branch office for the calendar year of the 
acquisition.
    iii. A covered institution and an institution that is not covered 
merge. The institution that is not covered is the surviving institution, 
or a new institution that is not covered is formed. For the calendar 
year of the merger, data collection is required for covered loans and 
applications handled in offices of the previously covered institution 
that took place prior to the merger. After the merger date, data 
collection is optional for covered loans and applications handled in the 
offices of the institution that was previously covered. When an 
institution remains not covered after acquiring a branch office of a 
covered institution, data collection is required for transactions of the 
acquired branch office that take place prior to the acquisition. Data 
collection by the acquired branch office is optional for transactions 
taking place in the remainder of the calendar year after the 
acquisition.
    iv. Two covered institutions merge. The surviving or newly formed 
institution is a covered institution. Data collection is required for 
the entire calendar year of the merger. The surviving or newly formed 
institution files either a consolidated submission or separate 
submissions for that calendar year. When a covered institution acquires 
a branch office of a covered institution, data collection is required 
for the entire calendar

[[Page 127]]

year of the merger. Data for the acquired branch office may be submitted 
by either institution.
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years or 
at least 100 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec. 1003.2(g).
    6. Branches of foreign banks--treated as banks. A Federal branch or 
a State-licensed or insured branch of a foreign bank that meets the 
definition of a ``bank'' under section 3(a)(1) of the Federal Deposit 
Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes of 
Sec. 1003.2(g).
    7. Branches and offices of foreign banks and other entities--treated 
as nondepository financial institutions. A Federal agency, State-
licensed agency, State-licensed uninsured branch of a foreign bank, 
commercial lending company owned or controlled by a foreign bank, or 
entity operating under section 25 or 25A of the Federal Reserve Act, 12 
U.S.C. 601 and 611 (Edge Act and agreement corporations) may not meet 
the definition of ``bank'' under the Federal Deposit Insurance Act and 
may thereby fail to satisfy the definition of a depository financial 
institution under Sec. 1003.2(g)(1). An entity is nonetheless a 
financial institution if it meets the definition of nondepository 
financial institution under Sec. 1003.2(g)(2).

                       2(i) Home Improvement Loan

    1. General. Section 1003.2(i) defines a home improvement loan as a 
closed-end mortgage loan or an open-end line of credit that is for the 
purpose, in whole or in part, of repairing, rehabilitating, remodeling, 
or improving a dwelling or the real property on which the dwelling is 
located. For example, a closed-end mortgage loan obtained to repair a 
dwelling by replacing a roof is a home improvement loan under 
Sec. 1003.2(i). A loan or line of credit is a home improvement loan even 
if only a part of the purpose is for repairing, rehabilitating, 
remodeling, or improving a dwelling. For example, an open-end line of 
credit obtained in part to remodel a kitchen and in part to pay college 
tuition is a home improvement loan under Sec. 1003.2(i). Similarly, for 
example, a loan that is completed pursuant to a New York State 
consolidation, extension, and modification agreement and that is 
classified as a supplemental mortgage under New York Tax Law section 
255, such that the borrower owes reduced or no mortgage recording taxes, 
is a home improvement loan if any of the loan's funds are for home 
improvement purposes. See also comment 2(d)-2.ii.
    2. Improvements to real property. Home improvements include 
improvements both to a dwelling and to the real property on which the 
dwelling is located (for example, installation of a swimming pool, 
construction of a garage, or landscaping).
    3. Commercial and other loans. A home improvement loan may include a 
closed-end mortgage loan or an open-end line of credit originated 
outside an institution's residential mortgage lending division, such as 
a loan or line of credit to improve an apartment building originated in 
the commercial loan department.
    4. Mixed-use property. A closed-end mortgage loan or an open-end 
line of credit to improve a dwelling used for residential and commercial 
purposes (for example, a building containing apartment units and retail 
space), or the real property on which such a dwelling is located, is a 
home improvement loan if the loan's proceeds are used either to improve 
the entire property (for example, to replace the heating system), or if 
the proceeds are used primarily to improve the residential portion of 
the property. An institution may use any reasonable standard to 
determine the primary use of the loan proceeds. An institution may 
select the standard to apply on a case-by-case basis.
    5. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a home improvement loan under Sec. 1003.2(i) 
may also be a refinancing under Sec. 1003.2(p) if the transaction is a 
cash-out refinancing and the funds will be used to improve a home. Such 
a transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.
    6. Statement of borrower. In determining whether a closed-end 
mortgage loan or an open-end line of credit, or an application for a 
closed-end mortgage loan or an open-end line of credit, is for home 
improvement purposes, an institution may rely on the applicant's or 
borrower's stated purpose(s) for the loan or line of credit at the time 
the application is received or the credit decision is made. An 
institution need not confirm that the borrower actually uses any of the 
funds for the stated purpose(s).

                         2(j) Home Purchase Loan

    1. Multiple properties. A home purchase loan includes a closed-end 
mortgage loan or an open-end line of credit secured by one dwelling and 
used to purchase another dwelling. For example, if a person obtains a 
home-equity loan or a reverse mortgage secured by dwelling A to purchase 
dwelling B, the home-equity loan or the reverse mortgage is a home 
purchase loan under Sec. 1003.2(j).

[[Page 128]]

    2. Commercial and other loans. A home purchase loan may include a 
closed-end mortgage loan or an open-end line of credit originated 
outside an institution's residential mortgage lending division, such as 
a loan or line of credit to purchase an apartment building originated in 
the commercial loan department.
    3. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan and the permanent 
financing that replaces a construction-only loan. A home purchase loan 
does not include a construction-only loan that is designed to be 
replaced by permanent financing at a later time, which is excluded from 
Regulation C as temporary financing under Sec. 1003.3(c)(3). Comment 
3(c)(3)-1 provides additional details about transactions that are 
excluded as temporary financing.
    4. Second mortgages that finance the downpayments on first 
mortgages. If an institution making a first mortgage loan to a home 
purchaser also makes a second mortgage loan or line of credit to the 
same purchaser to finance part or all of the home purchaser's 
downpayment, both the first mortgage loan and the second mortgage loan 
or line of credit are home purchase loans.
    5. Assumptions. Under Sec. 1003.2(j), an assumption is a home 
purchase loan when an institution enters into a written agreement 
accepting a new borrower as the obligor on an existing obligation to 
finance the new borrower's purchase of the dwelling securing the 
existing obligation, if the resulting obligation is a closed-end 
mortgage loan or an open-end line of credit. A transaction in which 
borrower B finances the purchase of borrower A's dwelling by assuming 
borrower A's existing debt obligation and that is completed pursuant to 
a New York State consolidation, extension, and modification agreement 
and is classified as a supplemental mortgage under New York Tax Law 
section 255, such that the borrower owes reduced or no mortgage 
recording taxes, is an assumption and a home purchase loan. See comment 
2(d)-2.ii. On the other hand, a transaction in which borrower B, a 
successor-in-interest, assumes borrower A's existing debt obligation 
only after acquiring title to borrower A's dwelling is not a home 
purchase loan because borrower B did not assume the debt obligation for 
the purpose of purchasing a dwelling. See Sec. 1003.4(a)(3) and comment 
4(a)(3)-4 for guidance about how to report covered loans that are not 
home improvement loans, home purchase loans, or refinancings.
    6. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a home purchase loan under Sec. 1003.2(j) may 
also be a home improvement loan under Sec. 1003.2(i) and a refinancing 
under Sec. 1003.2(p) if the transaction is a cash-out refinancing and 
the funds will be used to purchase and improve a dwelling. Such a 
transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.

                         2(l) Manufactured Home

    1. Definition of a manufactured home. The definition in 
Sec. 1003.2(l) refers to the Federal building code for manufactured 
housing established by the U.S. Department of Housing and Urban 
Development (HUD) (24 CFR part 3280.2). Modular or other factory-built 
homes that do not meet the HUD code standards are not manufactured homes 
for purposes of Sec. 1003.2(l). Recreational vehicles are excluded from 
the HUD code standards pursuant to 24 CFR 3282.8(g) and are also 
excluded from the definition of dwelling for purposes of Sec. 1003.2(f). 
See comment 2(f)-3.
    2. Identification. A manufactured home will generally bear a data 
plate affixed in a permanent manner near the main electrical panel or 
other readily accessible and visible location noting its compliance with 
the Federal Manufactured Home Construction and Safety Standards in force 
at the time of manufacture and providing other information about its 
manufacture pursuant to 24 CFR 3280.5. A manufactured home will 
generally also bear a HUD Certification Label pursuant to 24 CFR 
3280.11.

 2(m) Metropolitan Statistical Area (MD) or Metropolitan Division (MD).

    1. Use of terms ``Metropolitan Statistical Area (MSA)'' and 
``Metropolitan Division (MD).'' The U.S. Office of Management and Budget 
(OMB) defines Metropolitan Statistical Areas (MSAs) and Metropolitan 
Divisions (MDs) to provide nationally consistent definitions for 
collecting, tabulating, and publishing Federal statistics for a set of 
geographic areas. For all purposes under Regulation C, if an MSA is 
divided by OMB into MDs, the appropriate geographic unit to be used is 
the MD; if an MSA is not so divided by OMB into MDs, the appropriate 
geographic unit to be used is the MSA.

                        2(n) Multifamily Dwelling

    1. Multifamily residential structures. The definition of dwelling in 
Sec. 1003.2(f) includes multifamily residential structures and the 
corresponding commentary provides guidance on when such residential 
structures are included in that definition. See comments 2(f)-2 through 
-5.
    2. Special reporting requirements for multifamily dwellings. The 
definition of multifamily dwelling in Sec. 1003.2(n) includes a 
dwelling, regardless of construction method,

[[Page 129]]

that contains five or more individual dwelling units. Covered loans 
secured by a multifamily dwelling are subject to additional reporting 
requirements under Sec. 1003.4(a)(32), but are not subject to reporting 
requirements under Sec. 1003.4(a)(4), (10)(iii), (23), (29), or (30).

                      2(o) Open-End Line of Credit

    1. General. Section 1003.2(o) defines an open-end line of credit as 
an extension of credit that is secured by a lien on a dwelling and that 
is an open-end credit plan as defined in Regulation Z, 12 CFR 
1026.2(a)(20), but without regard to whether the credit is consumer 
credit, as defined in Sec. 1026.2(a)(12), is extended by a creditor, as 
defined in Sec. 1026.2(a)(17), or is extended to a consumer, as defined 
in Sec. 1026.2(a)(11). Aside from these distinctions, institutions may 
rely on 12 CFR 1026.2(a)(20) and its related commentary in determining 
whether a transaction is an open-end line of credit under 
Sec. 1003.2(o). For example, assume a business-purpose transaction that 
is exempt from Regulation Z pursuant to Sec. 1026.3(a)(1) but that 
otherwise is open-end credit under Regulation Z Sec. 1026.2(a)(20). The 
business-purpose transaction is an open-end line of credit under 
Regulation C, provided the other requirements of Sec. 1003.2(o) are met. 
Similarly, assume a transaction in which the person extending open-end 
credit is a financial institution under Sec. 1003.2(g) but is not a 
creditor under Regulation Z, Sec. 1026.2(a)(17). In this example, the 
transaction is an open-end line of credit under Regulation C, provided 
the other requirements of Sec. 1003.2(o) are met.
    2. Extension of credit. Extension of credit has the same meaning 
under Sec. 1003.2(o) as under Sec. 1003.2(d) and comment 2(d)-2. Thus, 
for example, a renewal of an open-end line of credit is not an extension 
of credit under Sec. 1003.2(o) and is not covered by Regulation C unless 
the existing debt obligation is satisfied and replaced. Likewise, under 
Sec. 1003.2(o), each draw on an open-end line of credit is not an 
extension of credit.

                            2(p) Refinancing

    1. General. Section 1003.2(p) defines a refinancing as a closed-end 
mortgage loan or an open-end line of credit in which a new, dwelling-
secured debt obligation satisfies and replaces an existing, dwelling-
secured debt obligation by the same borrower. Except as described in 
comment 2(p)-2, whether a refinancing has occurred is determined by 
reference to whether, based on the parties' contract and applicable law, 
the original debt obligation has been satisfied or replaced by a new 
debt obligation. Whether the original lien is satisfied is irrelevant. 
For example:
    i. A new closed-end mortgage loan that satisfies and replaces one or 
more existing closed-end mortgage loans is a refinancing under 
Sec. 1003.2(p).
    ii. A new open-end line of credit that satisfies and replaces an 
existing closed-end mortgage loan is a refinancing under Sec. 1003.2(p).
    iii. Except as described in comment 2(p)-2, a new debt obligation 
that renews or modifies the terms of, but that does not satisfy and 
replace, an existing debt obligation, is not a refinancing under 
Sec. 1003.2(p).
    2. New York State consolidation, extension, and modification 
agreements. Where a transaction is completed pursuant to a New York 
State consolidation, extension, and modification agreement and is 
classified as a supplemental mortgage under New York Tax Law 
sectionSec. 255, such that the borrower owes reduced or no mortgage 
recording taxes, and where, but for the agreement, the transaction would 
have met the definition of a refinancing under Sec. 1003.2(p), the 
transaction is considered a refinancing under Sec. 1003.2(p). See also 
comment 2(d)-2.ii.
    3. Existing debt obligation. A closed-end mortgage loan or an open-
end line of credit that satisfies and replaces one or more existing debt 
obligations is not a refinancing under Sec. 1003.2(p) unless the 
existing debt obligation (or obligations) also was secured by a 
dwelling. For example, assume that a borrower has an existing $30,000 
closed-end mortgage loan and obtains a new $50,000 closed-end mortgage 
loan that satisfies and replaces the existing $30,000 loan. The new 
$50,000 loan is a refinancing under Sec. 1003.2(p). However, if the 
borrower obtains a new $50,000 closed-end mortgage loan that satisfies 
and replaces an existing $30,000 loan secured only by a personal 
guarantee, the new $50,000 loan is not a refinancing under 
Sec. 1003.2(p). See Sec. 1003.4(a)(3) and related commentary for 
guidance about how to report the loan purpose of such transactions, if 
they are not otherwise excluded under Sec. 1003.3(c).
    4. Same borrower. Section 1003.2(p) provides that, even if all of 
the other requirements of Sec. 1003.2(p) are met, a closed-end mortgage 
loan or an open-end line of credit is not a refinancing unless the same 
borrower undertakes both the existing and the new obligation(s). Under 
Sec. 1003.2(p), the ``same borrower'' undertakes both the existing and 
the new obligation(s) even if only one borrower is the same on both 
obligations. For example, assume that an existing closed-end mortgage 
loan (obligation X) is satisfied and replaced by a new closed-end 
mortgage loan (obligation Y). If borrowers A and B both are obligated on 
obligation X, and only borrower B is obligated on obligation Y, then 
obligation Y is a refinancing under Sec. 1003.2(p), assuming the other 
requirements of Sec. 1003.2(p) are met, because borrower B is obligated 
on both transactions. On the other hand, if only borrower A is obligated 
on obligation X, and only borrower B is obligated on obligation Y,

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then obligation Y is not a refinancing under Sec. 1003.2(p). For 
example, assume that two spouses are divorcing. If both spouses are 
obligated on obligation X, but only one spouse is obligated on 
obligation Y, then obligation Y is a refinancing under Sec. 1003.2(p), 
assuming the other requirements of Sec. 1003.2(p) are met. On the other 
hand, if only spouse A is obligated on obligation X, and only spouse B 
is obligated on obligation Y, then obligation Y is not a refinancing 
under Sec. 1003.2(p). See Sec. 1003.4(a)(3) and related commentary for 
guidance about how to report the loan purpose of such transactions, if 
they are not otherwise excluded under Sec. 1003.3(c).
    5. Two or more debt obligations. Section 1003.2(p) provides that, to 
be a refinancing, a new debt obligation must satisfy and replace an 
existing debt obligation. Where two or more new obligations replace an 
existing obligation, each new obligation is a refinancing if, taken 
together, the new obligations satisfy the existing obligation. 
Similarly, where one new obligation replaces two or more existing 
obligations, the new obligation is a refinancing if it satisfies each of 
the existing obligations.
    6. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a refinancing under Sec. 1003.2(p) may also be 
a home improvement loan under Sec. 1003.2(i) and be used for other 
purposes if the refinancing is a cash-out refinancing and the funds will 
be used both for home improvement and to pay college tuition. Such a 
transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.

      Section 1003.3--Exempt Institutions and Excluded Transactions

                       3(c) Excluded Transactions

                            Paragraph 3(c)(1)

    1. Financial institution acting in a fiduciary capacity. Section 
1003.3(c)(1) provides that a closed-end mortgage loan or an open-end 
line of credit originated or purchased by a financial institution acting 
in a fiduciary capacity is an excluded transaction. A financial 
institution acts in a fiduciary capacity if, for example, the financial 
institution acts as a trustee.

                            Paragraph 3(c)(2)

    1. Loan or line of credit secured by a lien on unimproved land. 
Section 1003.3(c)(2) provides that a closed-end mortgage loan or an 
open-end line of credit secured by a lien on unimproved land is an 
excluded transaction. A loan or line of credit is secured by a lien on 
unimproved land if the loan or line of credit is secured by vacant or 
unimproved property, unless the institution knows, based on information 
that it receives from the applicant or borrower at the time the 
application is received or the credit decision is made, that the 
proceeds of that loan or credit line will be used within two years after 
closing or account opening to construct a dwelling on, or to purchase a 
dwelling to be placed on, the land. A loan or line of credit that is not 
excludable under Sec. 1003.3(c)(2) nevertheless may be excluded, for 
example, as temporary financing under Sec. 1003.3(c)(3).

                            Paragraph 3(c)(3)

    1. Temporary financing. Section 1003.3(c)(3) provides that closed-
end mortgage loans or open-end lines of credit obtained for temporary 
financing are excluded transactions. A loan or line of credit is 
considered temporary financing and excluded under Sec. 1003.3(c)(3) if 
the loan or line of credit is designed to be replaced by permanent 
financing at a later time. For example:
    i. Lender A extends credit in the form of a bridge or swing loan to 
finance a borrower's down payment on a home purchase. The borrower pays 
off the bridge or swing loan with funds from the sale of his or her 
existing home and obtains permanent financing for his or her new home 
from Lender A. The bridge or swing loan is excluded as temporary 
financing under Sec. 1003.3(c)(3).
    ii. Lender A extends credit to finance construction of a dwelling. A 
new extension of credit for permanent financing for the dwelling will be 
obtained, either from Lender A or from another lender, and either 
through a refinancing of the initial construction loan or a separate 
loan. The initial construction loan is excluded as temporary financing 
under Sec. 1003.3(c)(3).
    iii. Assume the same scenario as in comment 3(c)(3)-1.ii, except 
that the initial construction loan is, or may be, renewed one or more 
times before the permanent financing is made. The initial construction 
loan, including any renewal thereof, is excluded as temporary financing 
under Sec. 1003.3(c)(3).
    iv. Lender A extends credit to finance construction of a dwelling. 
The loan automatically will convert to permanent financing with Lender A 
once the construction phase is complete. Under Sec. 1003.3(c)(3), the 
loan is not designed to be replaced by permanent financing and therefore 
the temporary financing exclusion does not apply. See also comment 2(j)-
3.
    v. Lender A originates a loan with a nine-month term to enable an 
investor to purchase a home, renovate it, and re-sell it before the term 
expires. Under Sec. 1003.3(c)(3), the loan is not designed to be 
replaced by permanent financing and therefore the temporary financing 
exclusion does not apply. Such a transaction is not temporary financing 
under Sec. 1003.3(c)(3) merely because its term is short.

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                            Paragraph 3(c)(4)

    1. Purchase of an interest in a pool of loans. Section 1003.3(c)(4) 
provides that the purchase of an interest in a pool of closed-end 
mortgage loans or open-end lines of credit is an excluded transaction. 
The purchase of an interest in a pool of loans or lines of credit 
includes, for example, mortgage-participation certificates, mortgage-
backed securities, or real estate mortgage investment conduits.

                            Paragraph 3(c)(6)

    1. Mergers and acquisitions. Section 1003.3(c)(6) provides that the 
purchase of closed-end mortgage loans or open-end lines of credit as 
part of a merger or acquisition, or as part of the acquisition of all of 
the assets and liabilities of a branch office, are excluded 
transactions. If a financial institution acquires loans or lines of 
credit in bulk from another institution (for example, from the receiver 
for a failed institution), but no merger or acquisition of an 
institution, or acquisition of a branch office, is involved and no other 
exclusion applies, the acquired loans or lines of credit are covered 
loans and are reported as described in comment 4(a)-1.iii.

                            Paragraph 3(c)(8)

    1. Partial interest. Section 1003.3(c)(8) provides that the purchase 
of a partial interest in a closed-end mortgage loan or an open-end line 
of credit is an excluded transaction. If an institution acquires only a 
partial interest in a loan or line of credit, the institution does not 
report the transaction even if the institution participated in the 
underwriting and origination of the loan or line of credit. If an 
institution acquires a 100 percent interest in a loan or line of credit, 
the transaction is not excluded under Sec. 1003.3(c)(8).

                            Paragraph 3(c)(9)

    1. Loan or line of credit used primarily for agricultural purposes. 
Section 1003.3(c)(9) provides that an institution does not report a 
closed-end mortgage loan or an open-end line of credit used primarily 
for agricultural purposes. A loan or line of credit is used primarily 
for agricultural purposes if its funds will be used primarily for 
agricultural purposes, or if the loan or line of credit is secured by a 
dwelling that is located on real property that is used primarily for 
agricultural purposes (e.g., a farm). An institution may refer to 
comment 3(a)-8 in the official interpretations of Regulation Z, 12 CFR 
part 1026, supplement I, for guidance on what is an agricultural 
purpose. An institution may use any reasonable standard to determine the 
primary use of the property. An institution may select the standard to 
apply on a case-by-case basis.

                           Paragraph 3(c)(10)

    1. General. Section 1003.3(c)(10) provides a special rule for 
reporting a closed-end mortgage loan or an open-end line of credit that 
is or will be made primarily for a business or commercial purpose. If an 
institution determines that a closed-end mortgage loan or an open-end 
line of credit primarily is for a business or commercial purpose, then 
the loan or line of credit is a covered loan only if it is a home 
improvement loan under Sec. 1003.2(i), a home purchase loan under 
Sec. 1003.2(j), or a refinancing under Sec. 1003.2(p) and no other 
exclusion applies. Section 1003.3(c)(10) does not categorically exclude 
all business- or commercial-purpose loans and lines of credit from 
coverage.
    2. Primary purpose. An institution must determine in each case if a 
closed-end mortgage loan or an open-end line of credit primarily is for 
a business or commercial purpose. If a closed-end mortgage loan or an 
open-end line of credit is deemed to be primarily for a business, 
commercial, or organizational purpose under Regulation Z, 12 CFR 
1026.3(a) and its related commentary, then the loan or line of credit 
also is deemed to be primarily for a business or commercial purpose 
under Sec. 1003.3(c)(10).
    3. Examples--covered business- or commercial-purpose transactions. 
The following are examples of closed-end mortgage loans and open-end 
lines of credit that are not excluded from reporting under 
Sec. 1003.3(c)(10), because they primarily are for a business or 
commercial purpose, but they also meet the definition of a home 
improvement loan under Sec. 1003.2(i), a home purchase loan under 
Sec. 1003.2(j), or a refinancing under Sec. 1003.2(p):
    i. A closed-end mortgage loan or an open-end line of credit to 
purchase or to improve a multifamily dwelling or a single-family 
investment property, or a refinancing of a closed-end mortgage loan or 
an open-end line of credit secured by a multifamily dwelling or a 
single-family investment property;
    ii. A closed-end mortgage loan or an open-end line of credit to 
improve an office, for example a doctor's office, that is located in a 
dwelling; and
    iii. A closed-end mortgage loan or an open-end line of credit to a 
corporation, if the funds from the loan or line of credit will be used 
to purchase or to improve a dwelling, or if the transaction is a 
refinancing.
    4. Examples--excluded business- or commercial-purpose transactions. 
The following are examples of closed-end mortgage loans and open-end 
lines of credit that are not covered loans because they primarily are 
for a business or commercial purpose, but they do not meet the 
definition of a home improvement loan under Sec. 1003.2(i), a home 
purchase loan under Sec. 1003.2(j), or a refinancing under 
Sec. 1003.2(p):

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    i. A closed-end mortgage loan or an open-end line of credit whose 
funds will be used primarily to improve or expand a business, for 
example to renovate a family restaurant that is not located in a 
dwelling, or to purchase a warehouse, business equipment, or inventory;
    ii. A closed-end mortgage loan or an open-end line of credit to a 
corporation whose funds will be used primarily for business purposes, 
such as to purchase inventory; and
    iii. A closed-end mortgage loan or an open-end line of credit whose 
funds will be used primarily for business or commercial purposes other 
than home purchase, home improvement, or refinancing, even if the loan 
or line of credit is cross-collateralized by a covered loan.

                           Paragraph 3(c)(11)

    1. General. Section 1003.3(c)(11) provides that a closed-end 
mortgage loan is an excluded transaction if a financial institution 
originated fewer than 25 closed-end mortgage loans in each of the two 
preceding calendar years. For example, assume that a bank is a financial 
institution in 2022 under Sec. 1003.2(g) because it originated 200 open-
end lines of credit in 2020, 250 open-end lines of credit in 2021, and 
met all of the other requirements under Sec. 1003.2(g)(1). Also assume 
that the bank originated 10 and 20 closed-end mortgage loans in 2020 and 
2021, respectively. The open-end lines of credit that the bank 
originated, or for which it received applications, during 2022 are 
covered loans and must be reported, unless they otherwise are excluded 
transactions under Sec. 1003.3(c). However, the closed-end mortgage 
loans that the bank originated, or for which it received applications, 
during 2022 are excluded transactions under Sec. 1003.3(c)(11) and need 
not be reported. See comments 4(a)-2 through -4 for guidance about the 
activities that constitute an origination.

                           Paragraph 3(c)(12)

    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 100 open-end lines of credit in each of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2022 under Sec. 1003.2(g) because it originated 50 
closed-end mortgage loans in 2020, 75 closed-end mortgage loans in 2021, 
and met all of the other requirements under Sec. 1003.2(g)(1). Also 
assume that the bank originated 75 and 85 open-end lines of credit in 
2020 and 2021, respectively. The closed-end mortgage loans that the bank 
originated, or for which it received applications, during 2022 are 
covered loans and must be reported, unless they otherwise are excluded 
transactions under Sec. 1003.3(c). However, the open-end lines of credit 
that the bank originated, or for which it received applications, during 
2022 are excluded transactions under Sec. 1003.3(c)(12) and need not be 
reported. See comments 4(a)-2 through -4 for guidance about the 
activities that constitute an origination.

             Section 1003.4--Compilation of Reportable Data

                    4(a) Data Format and Itemization

    1. General. Section 1003.4(a) describes a financial institution's 
obligation to collect data on applications it received, on covered loans 
that it originated, and on covered loans that it purchased during the 
calendar year covered by the loan/application register.
    i. A financial institution reports these data even if the covered 
loans were subsequently sold by the institution.
    ii. A financial institution reports data for applications that did 
not result in an origination but on which actions were taken-for 
example, an application that the institution denied, that it approved 
but that was not accepted, that it closed for incompleteness, or that 
the applicant withdrew during the calendar year covered by the loan/
application register. A financial institution is required to report data 
regarding requests under a preapproval program (as defined in 
Sec. 1003.2(b)(2)) only if the preapproval request is denied, results in 
the origination of a home purchase loan, or was approved but not 
accepted.
    iii. If a financial institution acquires covered loans in bulk from 
another institution (for example, from the receiver for a failed 
institution), but no merger or acquisition of an institution, or 
acquisition of a branch office, is involved, the acquiring financial 
institution reports the covered loans as purchased loans.
    iv. A financial institution reports the data for an application on 
the loan/application register for the calendar year during which the 
application was acted upon even if the institution received the 
application in a previous calendar year.
    2. Originations and applications involving more than one 
institution. Section 1003.4(a) requires a financial institution to 
collect certain information regarding applications for covered loans 
that it receives and regarding covered loans that it originates. The 
following provides guidance on how to report originations and 
applications involving more than one institution. The discussion below 
assumes that all of the parties are financial institutions as defined by 
Sec. 1003.2(g). The same principles apply if any of the parties is not a 
financial institution. Comment 4(a)-3 provides examples of transactions 
involving more than one institution, and comment 4(a)-4 discusses how to 
report actions taken by agents.

[[Page 133]]

    i. Only one financial institution reports each originated covered 
loan as an origination. If more than one institution was involved in the 
origination of a covered loan, the financial institution that made the 
credit decision approving the application before closing or account 
opening reports the loan as an origination. It is not relevant whether 
the loan closed or, in the case of an application, would have closed in 
the institution's name. If more than one institution approved an 
application prior to closing or account opening and one of those 
institutions purchased the loan after closing, the institution that 
purchased the loan after closing reports the loan as an origination. If 
a financial institution reports a transaction as an origination, it 
reports all of the information required for originations, even if the 
covered loan was not initially payable to the financial institution that 
is reporting the covered loan as an origination.
    ii. In the case of an application for a covered loan that did not 
result in an origination, a financial institution reports the action it 
took on that application if it made a credit decision on the application 
or was reviewing the application when the application was withdrawn or 
closed for incompleteness. It is not relevant whether the financial 
institution received the application from the applicant or from another 
institution, such as a broker, or whether another financial institution 
also reviewed and reported an action taken on the same application.
    3. Examples--originations and applications involving more than one 
institution. The following scenarios illustrate how an institution 
reports a particular application or covered loan. The illustrations 
assume that all of the parties are financial institutions as defined by 
Sec. 1003.2(g). However, the same principles apply if any of the parties 
is not a financial institution.
    i. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application and 
approved the loan prior to closing. The loan closed in Financial 
Institution A's name. Financial Institution B purchased the loan from 
Financial Institution A after closing. Financial Institution B was not 
acting as Financial Institution A's agent. Since Financial Institution B 
made the credit decision prior to closing, Financial Institution B 
reports the transaction as an origination, not as a purchase. Financial 
Institution A does not report the transaction.
    ii. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application before 
the loan would have closed, but the application did not result in an 
origination because Financial Institution B denied the application. 
Financial Institution B was not acting as Financial Institution A's 
agent. Since Financial Institution B made the credit decision, Financial 
Institution B reports the application as a denial. Financial Institution 
A does not report the application. If, under the same facts, the 
application was withdrawn before Financial Institution B made a credit 
decision, Financial Institution B would report the application as 
withdrawn and Financial Institution A would not report the application.
    iii. Financial Institution A received an application for a covered 
loan from an applicant and approved the application before closing the 
loan in its name. Financial Institution A was not acting as Financial 
Institution B's agent. Financial Institution B purchased the covered 
loan from Financial Institution A. Financial Institution B did not 
review the application before closing. Financial Institution A reports 
the loan as an origination. Financial Institution B reports the loan as 
a purchase.
    iv. Financial Institution A received an application for a covered 
loan from an applicant. If approved, the loan would have closed in 
Financial Institution B's name. Financial Institution A denied the 
application without sending it to Financial Institution B for approval. 
Financial Institution A was not acting as Financial Institution B's 
agent. Since Financial Institution A made the credit decision before the 
loan would have closed, Financial Institution A reports the application. 
Financial Institution B does not report the application.
    v. Financial Institution A reviewed an application and made the 
credit decision to approve a covered loan using the underwriting 
criteria provided by a third party (e.g., another financial institution, 
Fannie Mae, or Freddie Mac). The third party did not review the 
application and did not make a credit decision prior to closing. 
Financial Institution A was not acting as the third party's agent. 
Financial Institution A reports the application or origination. If the 
third party purchased the loan and is subject to Regulation C, the third 
party reports the loan as a purchase whether or not the third party 
reviewed the loan after closing. Assume the same facts, except that 
Financial Institution A approved the application, and the applicant 
chose not to accept the loan from Financial Institution A. Financial 
Institution A reports the application as approved but not accepted and 
the third party, assuming the third party is subject to Regulation C, 
does not report the application.
    vi. Financial Institution A reviewed and made the credit decision on 
an application based on the criteria of a third-party insurer or 
guarantor (for example, a government or

[[Page 134]]

private insurer or guarantor). Financial Institution A reports the 
action taken on the application.
    vii. Financial Institution A received an application for a covered 
loan and forwarded it to Financial Institutions B and C. Financial 
Institution A made a credit decision, acting as Financial Institution 
D's agent, and approved the application. The applicant did not accept 
the loan from Financial Institution D. Financial Institution D reports 
the application as approved but not accepted. Financial Institution A 
does not report the application. Financial Institution B made a credit 
decision, approving the application, the applicant accepted the offer of 
credit from Financial Institution B, and credit was extended. Financial 
Institution B reports the origination. Financial Institution C made a 
credit decision and denied the application. Financial Institution C 
reports the application as denied.
    4. Agents. If a financial institution made the credit decision on a 
covered loan or application through the actions of an agent, the 
institution reports the application or origination. State law determines 
whether one party is the agent of another. For example, acting as 
Financial Institution A's agent, Financial Institution B approved an 
application prior to closing and a covered loan was originated. 
Financial Institution A reports the loan as an origination.
    5. Purchased loans. i. A financial institution is required to 
collect data regarding covered loans it purchases. For purposes of 
Sec. 1003.4(a), a purchase includes a repurchase of a covered loan, 
regardless of whether the institution chose to repurchase the covered 
loan or was required to repurchase the covered loan because of a 
contractual obligation and regardless of whether the repurchase occurs 
within the same calendar year that the covered loan was originated or in 
a different calendar year. For example, assume that Financial 
Institution A originates or purchases a covered loan and then sells it 
to Financial Institution B, who later requires Financial Institution A 
to repurchase the covered loan pursuant to the relevant contractual 
obligations. Financial Institution B reports the purchase from Financial 
Institution A, assuming it is a financial institution as defined under 
Sec. 1003.2(g). Financial Institution A reports the repurchase from 
Financial Institution B as a purchase.
    ii. In contrast, for purposes of Sec. 1003.4(a), a purchase does not 
include a temporary transfer of a covered loan to an interim funder or 
warehouse creditor as part of an interim funding agreement under which 
the originating financial institution is obligated to repurchase the 
covered loan for sale to a subsequent investor. Such agreements, often 
referred to as ``repurchase agreements,'' are sometimes employed as 
functional equivalents of warehouse lines of credit. Under these 
agreements, the interim funder or warehouse creditor acquires legal 
title to the covered loan, subject to an obligation of the originating 
institution to repurchase at a future date, rather than taking a 
security interest in the covered loan as under the terms of a more 
conventional warehouse line of credit. To illustrate, assume Financial 
Institution A has an interim funding agreement with Financial 
Institution B to enable Financial Institution B to originate loans. 
Assume further that Financial Institution B originates a covered loan 
and that, pursuant to this agreement, Financial Institution A takes a 
temporary transfer of the covered loan until Financial Institution B 
arranges for the sale of the covered loan to a subsequent investor and 
that Financial Institution B repurchases the covered loan to enable it 
to complete the sale to the subsequent investor (alternatively, 
Financial Institution A may transfer the covered loan directly to the 
subsequent investor at Financial Institution B's direction, pursuant to 
the interim funding agreement). The subsequent investor could be, for 
example, a financial institution or other entity that intends to hold 
the loan in portfolio, a GSE or other securitizer, or a financial 
institution or other entity that intends to package and sell multiple 
loans to a GSE or other securitizer. In this example, the temporary 
transfer of the covered loan from Financial Institution B to Financial 
Institution A is not a purchase, and any subsequent transfer back to 
Financial Institution B for delivery to the subsequent investor is not a 
purchase, for purposes of Sec. 1003.4(a). Financial Institution B 
reports the origination of the covered loan as well as its sale to the 
subsequent investor. If the subsequent investor is a financial 
institution under Sec. 1003.2(g), it reports a purchase of the covered 
loan pursuant to Sec. 1003.4(a), regardless of whether it acquired the 
covered loan from Financial Institution B or directly from Financial 
Institution A.

                          Paragraph 4(a)(1)(i)

    1. ULI--uniqueness. Section 1003.4(a)(1)(i)(B)(2) requires a 
financial institution that assigns a universal loan identifier (ULI) to 
each covered loan or application (except as provided in 
Sec. 1003.4(a)(1)(i)(D) and (E)) to ensure that the character sequence 
it assigns is unique within the institution and used only for the 
covered loan or application. A financial institution should assign only 
one ULI to any particular covered loan or application, and each ULI 
should correspond to a single application and ensuing loan in the case 
that the application is approved and a loan is originated. A financial 
institution may use a ULI that was reported previously to refer only to 
the same loan or application for which the ULI was used previously or a 
loan that ensues from an application for

[[Page 135]]

which the ULI was used previously. A financial institution may not 
report an application for a covered loan in 2030 using the same ULI that 
was reported for a covered loan that was originated in 2020. Similarly, 
refinancings or applications for refinancing should be assigned a 
different ULI than the loan that is being refinanced. A financial 
institution with multiple branches must ensure that its branches do not 
use the same ULI to refer to multiple covered loans or applications.
    2. ULI--privacy. Section 1003.4(a)(1)(i)(B)(3) prohibits a financial 
institution from including information that could be used to directly 
identify the applicant or borrower in the identifier that it assigns for 
the application or covered loan of the applicant or borrower. 
Information that could be used to directly identify the applicant or 
borrower includes, but is not limited to, the applicant's or borrower's 
name, date of birth, Social Security number, official government-issued 
driver's license or identification number, alien registration number, 
government passport number, or employer or taxpayer identification 
number.
    3. ULI--purchased covered loan. If a financial institution has 
previously reported a covered loan with a ULI under this part, a 
financial institution that purchases that covered loan must use the ULI 
that was previously reported under this part. For example, if a loan 
origination was previously reported under this part with a ULI, the 
financial institution that purchases the covered loan would report the 
purchase of the covered loan using the same ULI. A financial institution 
that purchases a covered loan must use the ULI that was assigned by the 
financial institution that originated the covered loan. For example, if 
a financial institution that submits an annual loan/application register 
pursuant to Sec. 1003.5(a)(1)(i) originates a covered loan that is 
purchased by a financial institution that submits a quarterly loan/
application register pursuant to Sec. 1003.5(a)(1)(ii), the financial 
institution that purchased the covered loan must use the ULI that was 
assigned by the financial institution that originated the covered loan. 
A financial institution that purchases a covered loan assigns a ULI and 
records and submits it in its loan/application register pursuant to 
Sec. 1003.5(a)(1)(i) or (ii), whichever is applicable, if the covered 
loan was not assigned a ULI by the financial institution that originated 
the loan because, for example, the loan was originated prior to January 
1, 2018.
    4. ULI--reinstated or reconsidered application. A financial 
institution may, at its option, use a ULI previously reported under this 
part if, during the same calendar year, an applicant asks the 
institution to reinstate a counteroffer that the applicant previously 
did not accept or asks the financial institution to reconsider an 
application that was previously denied, withdrawn, or closed for 
incompleteness. For example, if a financial institution reports a denied 
application in its second-quarter 2020 data submission, pursuant to 
Sec. 1003.5(a)(1)(ii), but then reconsiders the application, which 
results in an origination in the third quarter of 2020, the financial 
institution may report the origination in its third-quarter 2020 data 
submission using the same ULI that was reported for the denied 
application in its second-quarter 2020 data submission, so long as the 
financial institution treats the transaction as a continuation of the 
application. However, a financial institution may not use a ULI 
previously reported if it reinstates or reconsiders an application that 
occurred and was reported in a prior calendar year. For example, if a 
financial institution reports a denied application in its fourth-quarter 
2020 data submission, pursuant to Sec. 1003.5(a)(1)(ii), but then 
reconsiders the application resulting in an origination in the first 
quarter of 2021, the financial institution reports a denied application 
under the original ULI in its fourth-quarter 2020 data submission and an 
approved application with a different ULI in its first-quarter 2021 data 
submission, pursuant to Sec. 1003.5(a)(1)(ii).
    5. ULI--check digit. Section 1003.(4)(a)(1)(i)(C) requires that the 
two right-most characters in the ULI represent the check digit. Appendix 
C prescribes the requirements for generating a check digit and 
validating a ULI.

                          Paragraph 4(a)(1)(ii)

    1. Application date--consistency. Section 1003.4(a)(1)(ii) requires 
that, in reporting the date of application, a financial institution 
report the date it received the application, as defined under 
Sec. 1003.2(b), or the date shown on the application form. Although a 
financial institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans). If the financial institution chooses to report 
the date shown on the application form and the institution retains 
multiple versions of the application form, the institution reports the 
date shown on the first application form satisfying the application 
definition provided under Sec. 1003.2(b).
    2. Application date--indirect application. For an application that 
was not submitted directly to the financial institution, the institution 
may report the date the application was received by the party that 
initially received the application, the date the application was 
received by the institution, or the date shown on the application form. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such

[[Page 136]]

as by routinely using one approach within a particular division of the 
institution or for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks a financial institution to reinstate a 
counteroffer that the applicant previously did not accept (or asks the 
institution to reconsider an application that was denied, withdrawn, or 
closed for incompleteness), the institution may treat that request as 
the continuation of the earlier transaction using the same ULI or as a 
new transaction with a new ULI. If the institution treats the request 
for reinstatement or reconsideration as a new transaction, it reports 
the date of the request as the application date. If the institution does 
not treat the request for reinstatement or reconsideration as a new 
transaction, it reports the original application date.

                            Paragraph 4(a)(2)

    1. Loan type--general. If a covered loan is not, or in the case of 
an application would not have been, insured by the Federal Housing 
Administration, guaranteed by the Veterans Administration, or guaranteed 
by the Rural Housing Service or the Farm Service Agency, an institution 
complies with Sec. 1003.4(a)(2) by reporting the covered loan as not 
insured or guaranteed by the Federal Housing Administration, Veterans 
Administration, Rural Housing Service, or Farm Service Agency.

                            Paragraph 4(a)(3)

    1. Purpose--statement of applicant. A financial institution may rely 
on the oral or written statement of an applicant regarding the proposed 
use of covered loan proceeds. For example, a lender could use a check-
box or a purpose line on a loan application to determine whether the 
applicant intends to use covered loan proceeds for home improvement 
purposes. If an applicant provides no statement as to the proposed use 
of covered loan proceeds and the covered loan is not a home purchase 
loan, cash-out refinancing, or refinancing, a financial institution 
reports the covered loan as for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing for purposes of 
Sec. 1003.4(a)(3).
    2. Purpose--refinancing and cash-out refinancing. Section 
1003.4(a)(3) requires a financial institution to report whether a 
covered loan is, or an application is for, a refinancing or a cash-out 
refinancing. A financial institution reports a covered loan or an 
application as a cash-out refinancing if it is a refinancing as defined 
by Sec. 1003.2(p) and the institution considered it to be a cash-out 
refinancing in processing the application or setting the terms (such as 
the interest rate or origination charges) under its guidelines or an 
investor's guidelines. For example:
    i. Assume a financial institution considers an application for a 
loan product to be a cash-out refinancing under an investor's guidelines 
because of the amount of cash received by the borrower at closing or 
account opening. Assume also that under the investor's guidelines, the 
applicant qualifies for the loan product and the financial institution 
approves the application, originates the covered loan, and sets the 
terms of the covered loan consistent with the loan product. In this 
example, the financial institution would report the covered loan as a 
cash-out refinancing for purposes of Sec. 1003.4(a)(3).
    ii. Assume a financial institution does not consider an application 
for a covered loan to be a cash-out refinancing under its own guidelines 
because the amount of cash received by the borrower does not exceed a 
certain threshold. Assume also that the institution approves the 
application, originates the covered loan, and sets the terms of the 
covered loan consistent with its own guidelines applicable to 
refinancings other than cash-out refinancings. In this example, the 
financial institution would report the covered loan as a refinancing for 
purposes of Sec. 1003.4(a)(3).
    iii. Assume a financial institution does not distinguish between a 
cash-out refinancing and a refinancing under its own guidelines, and 
sets the terms of all refinancings without regard to the amount of cash 
received by the borrower at closing or account opening, and does not 
offer loan products under investor guidelines. In this example, the 
financial institution reports all covered loans and applications for 
covered loans that are defined by Sec. 1003.2(p) as refinancings for 
purposes of Sec. 1003.4(a)(3).
    3. Purpose--multiple-purpose loan. Section 1003.4(a)(3) requires a 
financial institution to report the purpose of a covered loan or 
application. If a covered loan is a home purchase loan as well as a home 
improvement loan, a refinancing, or a cash-out refinancing, an 
institution complies with Sec. 1003.4(a)(3) by reporting the loan as a 
home purchase loan. If a covered loan is a home improvement loan as well 
as a refinancing or cash-out refinancing, but the covered loan is not a 
home purchase loan, an institution complies with Sec. 1003.4(a)(3) by 
reporting the covered loan as a refinancing or a cash-out refinancing, 
as appropriate. If a covered loan is a refinancing or cash-out 
refinancing as well as for another purpose, such as for the purpose of 
paying educational expenses, but the covered loan is not a home purchase 
loan, an institution complies with Sec. 1003.4(a)(3) by reporting the 
covered loan as a refinancing or a cash-out refinancing, as appropriate. 
See comment 4(a)(3)-2. If a covered loan is a home improvement loan as 
well as for another purpose, but the covered loan is not a

[[Page 137]]

home purchase loan, a refinancing, or cash-out refinancing, an 
institution complies with Sec. 1003.4(a)(3) by reporting the covered 
loan as a home improvement loan. See comment 2(i)-1.
    4. Purpose--other. If a covered loan is not, or an application is 
not for, a home purchase loan, a home improvement loan, a refinancing, 
or a cash-out refinancing, a financial institution complies with 
Sec. 1003.4(a)(3) by reporting the covered loan or application as for a 
purpose other than home purchase, home improvement, refinancing, or 
cash-out refinancing. For example, if a covered loan is for the purpose 
of paying educational expenses, the financial institution complies with 
Sec. 1003.4(a)(3) by reporting the covered loan as for a purpose other 
than home purchase, home improvement, refinancing, or cash-out 
refinancing. Section 1003.4(a)(3) also requires an institution to report 
a covered loan or application as for a purpose other than home purchase, 
home improvement, refinancing, or cash-out refinancing if it is a 
refinancing but, under the terms of the agreement, the financial 
institution was unconditionally obligated to refinance the obligation 
subject to conditions within the borrower's control.
    5. Purpose--business or commercial purpose loans. If a covered loan 
primarily is for a business or commercial purpose as described in 
Sec. 1003.3(c)(10) and comment 3(c)(10)-2 and is a home purchase loan, 
home improvement loan, or a refinancing, Sec. 1003.4(a)(3) requires the 
financial institution to report the applicable loan purpose. If a loan 
primarily is for a business or commercial purpose but is not a home 
purchase loan, home improvement loan, or a refinancing, the loan is an 
excluded transaction under Sec. 1003.3(c)(10).

                            Paragraph 4(a)(4)

    1. Request under a preapproval program. Section 1003.4(a)(4) 
requires a financial institution to report whether an application or 
covered loan involved a request for a preapproval of a home purchase 
loan under a preapproval program as defined by Sec. 1003.2(b)(2). If an 
application or covered loan did not involve a request for a preapproval 
of a home purchase loan under a preapproval program as defined by 
Sec. 1003.2(b)(2), a financial institution complies with 
Sec. 1003.4(a)(4) by reporting that the application or covered loan did 
not involve such a request, regardless of whether the institution has 
such a program and the applicant did not apply through that program or 
the institution does not have a preapproval program as defined by 
Sec. 1003.2(b)(2).
    2. Scope of requirement. A financial institution reports that the 
application or covered loan did not involve a preapproval request for a 
purchased covered loan; an application or covered loan for any purpose 
other than a home purchase loan; an application for a home purchase loan 
or a covered loan that is a home purchase loan secured by a multifamily 
dwelling; an application or covered loan that is an open-end line of 
credit or a reverse mortgage; or an application that is denied, 
withdrawn by the applicant, or closed for incompleteness.

                            Paragraph 4(a)(5)

    1. Modular homes and prefabricated components. Covered loans or 
applications related to modular homes should be reported with a 
construction method of site-built, regardless of whether they are on-
frame or off-frame modular homes. Modular homes comply with local or 
other recognized buildings codes rather than standards established by 
the National Manufactured Housing Construction and Safety Standards Act, 
42 U.S.C. 5401 et seq. Modular homes are not required to have HUD 
Certification Labels under 24 CFR 3280.11 or data plates under 24 CFR 
3280.5. Modular homes may have a certification from a State licensing 
agency that documents compliance with State or other applicable building 
codes. On-frame modular homes are constructed on permanent metal chassis 
similar to those used in manufactured homes. The chassis are not removed 
on site and are secured to the foundation. Off-frame modular homes 
typically have floor construction similar to the construction of other 
site-built homes, and the construction typically includes wooden floor 
joists and does not include permanent metal chassis. Dwellings built 
using prefabricated components assembled at the dwelling's permanent 
site should also be reported with a construction method of site-built.
    2. Multifamily dwelling. For a covered loan or an application for a 
covered loan related to a multifamily dwelling, the financial 
institution should report the construction method as site-built unless 
the multifamily dwelling is a manufactured home community, in which case 
the financial institution should report the construction method as 
manufactured home.
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.

                            Paragraph 4(a)(6)

    1. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    2. Principal residence. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the covered loan 
or application relates is or will be used as a residence that the 
applicant or borrower physically occupies and uses, or will occupy and 
use, as his or her principal residence. For purposes of 
Sec. 1003.4(a)(6), an applicant or

[[Page 138]]

borrower can have only one principal residence at a time. Thus, a 
vacation or other second home would not be a principal residence. 
However, if an applicant or borrower buys or builds a new dwelling that 
will become the applicant's or borrower's principal residence within a 
year or upon the completion of construction, the new dwelling is 
considered the principal residence for purposes of applying this 
definition to a particular transaction.
    3. Second residences. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the loan or 
application relates is or will be used as a second residence. For 
purposes of Sec. 1003.4(a)(6), a property is a second residence of an 
applicant or borrower if the property is or will be occupied by the 
applicant or borrower for a portion of the year and is not the 
applicant's or borrower's principal residence. For example, if a person 
purchases a property, occupies the property for a portion of the year, 
and rents the property for the remainder of the year, the property is a 
second residence for purposes of Sec. 1003.4(a)(6). Similarly, if a 
couple occupies a property near their place of employment on weekdays, 
but the couple returns to their principal residence on weekends, the 
property near the couple's place of employment is a second residence for 
purposes of Sec. 1003.4(a)(6).
    4. Investment properties. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the covered loan 
or application relates is or will be used as an investment property. For 
purposes of Sec. 1003.4(a)(6), a property is an investment property if 
the borrower does not, or the applicant will not, occupy the property. 
For example, if a person purchases a property, does not occupy the 
property, and generates income by renting the property, the property is 
an investment property for purposes of Sec. 1003.4(a)(6). Similarly, if 
a person purchases a property, does not occupy the property, and does 
not generate income by renting the property, but intends to generate 
income by selling the property, the property is an investment property 
for purposes of Sec. 1003.4(a)(6). Section 1003.4(a)(6) requires a 
financial institution to identify a property as an investment property 
if the borrower or applicant does not or will not occupy the property, 
even if the borrower or applicant does not consider the property as 
owned for investment purposes. For example, if a corporation purchases a 
property that is a dwelling under Sec. 1003.2(f), that it does not 
occupy, but that is for the long-term residential use of its employees, 
the property is an investment property for purposes of 
Sec. 1003.4(a)(6), even if the corporation considers the property as 
owned for business purposes rather than investment purposes, does not 
generate income by renting the property, and does not intend to generate 
income by selling the property at some point in time. If the property is 
for transitory use by employees, the property would not be considered a 
dwelling under Sec. 1003.2(f). See comment 2(f)-3.
    5. Purchased covered loans. For purchased covered loans, a financial 
institution may report principal residence unless the loan documents or 
application indicate that the property will not be occupied as a 
principal residence.

                            Paragraph 4(a)(7)

    1. Covered loan amount--counteroffer. If an applicant accepts a 
counteroffer for an amount different from the amount for which the 
applicant applied, the financial institution reports the covered loan 
amount granted. If an applicant does not accept a counteroffer or fails 
to respond, the institution reports the amount initially requested.
    2. Covered loan amount--application approved but not accepted or 
preapproval request approved but not accepted. A financial institution 
reports the covered loan amount that was approved.
    3. Covered loan amount--preapproval request denied, application 
denied, closed for incompleteness or withdrawn. For a preapproval 
request that was denied, and for an application that was denied, closed 
for incompleteness, or withdrawn, a financial institution reports the 
amount for which the applicant applied.
    4. Covered loan amount--multiple-purpose loan. A financial 
institution reports the entire amount of the covered loan, even if only 
a part of the proceeds is intended for home purchase, home improvement, 
or refinancing.
    5. Covered loan amount--closed-end mortgage loan. For a closed-end 
mortgage loan, other than a purchased loan, an assumption, or a reverse 
mortgage, a financial institution reports the amount to be repaid as 
disclosed on the legal obligation. For a purchased closed-end mortgage 
loan or an assumption of a closed-end mortgage loan, a financial 
institution reports the unpaid principal balance at the time of purchase 
or assumption.
    6. Covered loan amount--open-end line of credit. For an open-end 
line of credit, a financial institution reports the entire amount of 
credit available to the borrower under the terms of the open-end plan, 
including a purchased open-end line of credit and an assumption of an 
open-end line of credit, but not for a reverse mortgage open-end line of 
credit.
    7. Covered loan amount--refinancing. For a refinancing, a financial 
institution reports the amount of credit extended under the terms of the 
new debt obligation.
    8. Covered loan amount--home improvement loan. A financial 
institution reports the entire amount of a home improvement loan, even 
if only a part of the proceeds is intended for home improvement.

[[Page 139]]

    9. Covered loan amount--non-federally insured reverse mortgage. A 
financial institution reports the initial principal limit of a non-
federally insured reverse mortgage as set forth in 
Sec. 1003.4(a)(7)(iii).

                          Paragraph 4(a)(8)(i)

    1. Action taken--covered loan originated. A financial institution 
reports that the covered loan was originated if the financial 
institution made a credit decision approving the application before 
closing or account opening and that credit decision results in an 
extension of credit. The same is true for an application that began as a 
request for a preapproval that subsequently results in a covered loan 
being originated. See comments 4(a)-2 through -4 for guidance on 
transactions in which more than one institution is involved.
    2. Action taken--covered loan purchased. A financial institution 
reports that the covered loan was purchased if the covered loan was 
purchased by the financial institution after closing or account opening 
and the financial institution did not make a credit decision on the 
application prior to closing or account opening, or if the financial 
institution did make a credit decision on the application prior to 
closing or account opening, but is repurchasing the loan from another 
entity that the loan was sold to. See comment 4(a)-5. See comments 4(a)-
2 through -4 for guidance on transactions in which more than one 
financial institution is involved.
    3. Action taken--application approved but not accepted. A financial 
institution reports application approved but not accepted if the 
financial institution made a credit decision approving the application 
before closing or account opening, subject solely to outstanding 
conditions that are customary commitment or closing conditions, but the 
applicant or the party that initially received the application fails to 
respond to the financial institution's approval within the specified 
time, or the closed-end mortgage loan was not otherwise consummated or 
the account was not otherwise opened. See comment 4(a)(8)(i)-13.
    4. Action taken--application denied. A financial institution reports 
that the application was denied if it made a credit decision denying the 
application before an applicant withdraws the application or the file is 
closed for incompleteness. See comments 4(a)-2 through -4 for guidance 
on transactions in which more than one institution is involved.
    5. Action taken--application withdrawn. A financial institution 
reports that the application was withdrawn when the application is 
expressly withdrawn by the applicant before the financial institution 
makes a credit decision denying the application, before the financial 
institution makes a credit decision approving the application, or before 
the file is closed for incompleteness. A financial institution also 
reports application withdrawn if the financial institution provides a 
conditional approval specifying underwriting or creditworthiness 
conditions, pursuant to comment 4(a)(8)(i)-13, and the application is 
expressly withdrawn by the applicant before the applicant satisfies all 
specified underwriting or creditworthiness conditions. A preapproval 
request that is withdrawn is not reportable under HMDA. See 
Sec. 1003.4(a).
    6. Action taken--file closed for incompleteness. A financial 
institution reports that the file was closed for incompleteness if the 
financial institution sent a written notice of incompleteness under 
Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond to 
the request for additional information within the period of time 
specified in the notice before the applicant satisfies all underwriting 
or creditworthiness conditions. See comment 4(a)(8)(i)-13. If a 
financial institution then provides a notification of adverse action on 
the basis of incompleteness under Regulation B, 12 CFR 1002.9(c)(i), the 
financial institution may report the action taken as either file closed 
for incompleteness or application denied. A preapproval request that is 
closed for incompleteness is not reportable under HMDA. See 
Sec. 1003.4(a).
    7. Action taken--preapproval request denied. A financial institution 
reports that the preapproval request was denied if the application was a 
request for a preapproval under a preapproval program as defined in 
Sec. 1003.2(b)(2) and the institution made a credit decision denying the 
preapproval request.
    8. Action taken--preapproval request approved but not accepted. A 
financial institution reports that the preapproval request was approved 
but not accepted if the application was a request for a preapproval 
under a preapproval program as defined in Sec. 1003.2(b)(2) and the 
institution made a credit decision approving the preapproval request but 
the application did not result in a covered loan originated by the 
financial institution.
    9. Action taken--counteroffers. If a financial institution makes a 
counteroffer to lend on terms different from the applicant's initial 
request (for example, for a shorter loan maturity, with a different 
interest rate, or in a different amount) and the applicant does not 
accept the counteroffer or fails to respond, the institution reports the 
action taken as a denial on the original terms requested by the 
applicant. If the applicant accepts, the financial institution reports 
the action taken as covered loan originated.
    10. Action taken--rescinded transactions. If a borrower rescinds a 
transaction after closing and before a financial institution is required 
to submit its loan/application register containing the information for 
the transaction under Sec. 1003.5(a), the institution reports the 
transaction as an application that was approved but not accepted.

[[Page 140]]

    11. Action taken--purchased covered loans. An institution reports 
the covered loans that it purchased during the calendar year. An 
institution does not report the covered loans that it declined to 
purchase, unless, as discussed in comments 4(a)-2 through -4, the 
institution reviewed the application prior to closing, in which case it 
reports the application or covered loan according to comments 4(a)-2 
through -4.
    12. Action taken--repurchased covered loans. See comment 4(a)-5 
regarding reporting requirements when a covered loan is repurchased by 
the originating financial institution.
    13. Action taken--conditional approvals. If an institution issues an 
approval other than a commitment pursuant to a preapproval program as 
defined under Sec. 1003.2(b)(2), and that approval is subject to the 
applicant meeting certain conditions, the institution reports the action 
taken as provided below dependent on whether the conditions are solely 
customary commitment or closing conditions or if the conditions include 
any underwriting or creditworthiness conditions.
    i. Action taken examples. If the approval is conditioned on 
satisfying underwriting or creditworthiness conditions and they are not 
met, the institution reports the action taken as a denial. If, however, 
the conditions involve submitting additional information about 
underwriting or creditworthiness that the institution needs to make the 
credit decision, and the institution has sent a written notice of 
incompleteness under Regulation B, 12 CFR 1002.9(c)(2), and the 
applicant did not respond within the period of time specified in the 
notice, the institution reports the action taken as file closed for 
incompleteness. See comment 4(a)(8)(i)-6. If the conditions are solely 
customary commitment or closing conditions and the conditions are not 
met, the institution reports the action taken as approved but not 
accepted. If all the conditions (underwriting, creditworthiness, or 
customary commitment or closing conditions) are satisfied and the 
institution agrees to extend credit but the covered loan is not 
originated, the institution reports the action taken as application 
approved but not accepted. If the applicant expressly withdraws before 
satisfying all underwriting or creditworthiness conditions and before 
the institution denies the application or closes the file for 
incompleteness, the institution reports the action taken as application 
withdrawn. If all underwriting and creditworthiness conditions have been 
met, and the outstanding conditions are solely customary commitment or 
closing conditions and the applicant expressly withdraws before the 
covered loan is originated, the institution reports the action taken as 
application approved but not accepted.
    ii. Customary commitment or closing conditions. Customary commitment 
or closing conditions include, for example: a clear-title requirement, 
an acceptable property survey, acceptable title insurance binder, clear 
termite inspection, a subordination agreement from another lienholder, 
and, where the applicant plans to use the proceeds from the sale of one 
home to purchase another, a settlement statement showing adequate 
proceeds from the sale.
    iii. Underwriting or creditworthiness conditions. Underwriting or 
creditworthiness conditions include, for example: conditions that 
constitute a counter-offer, such as a demand for a higher down-payment; 
satisfactory debt-to-income or loan-to-value ratios, a determination of 
need for private mortgage insurance, or a satisfactory appraisal 
requirement; or verification or confirmation, in whatever form the 
institution requires, that the applicant meets underwriting conditions 
concerning applicant creditworthiness, including documentation or 
verification of income or assets.
    14. Action taken--pending applications. An institution does not 
report any covered loan application still pending at the end of the 
calendar year; it reports that application on its loan/application 
register for the year in which final action is taken.

                          Paragraph 4(a)(8)(ii)

    1. Action taken date--general. A financial institution reports the 
date of the action taken.
    2. Action taken date--applications denied and files closed for 
incompleteness. For applications, including requests for a preapproval, 
that are denied or for files closed for incompleteness, the financial 
institution reports either the date the action was taken or the date the 
notice was sent to the applicant.
    3. Action taken date--application withdrawn. For applications 
withdrawn, the financial institution may report the date the express 
withdrawal was received or the date shown on the notification form in 
the case of a written withdrawal.
    4. Action taken date--approved but not accepted. For a covered loan 
approved by an institution but not accepted by the applicant, the 
institution reports any reasonable date, such as the approval date, the 
deadline for accepting the offer, or the date the file was closed. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of covered loans).
    5. Action taken date--originations. For covered loan originations, 
including a preapproval request that leads to an origination by the 
financial institution, an institution generally reports the closing or 
account opening date. For covered loan originations that an institution 
acquires from a party

[[Page 141]]

that initially received the application, the institution reports either 
the closing or account opening date, or the date the institution 
acquired the covered loan from the party that initially received the 
application. If the disbursement of funds takes place on a date later 
than the closing or account opening date, the institution may use the 
date of initial disbursement. For a construction/permanent covered loan, 
the institution reports either the closing or account opening date, or 
the date the covered loan converts to the permanent financing. Although 
an institution need not choose the same approach for its entire HMDA 
submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of covered loans). Notwithstanding this flexibility 
regarding the use of the closing or account opening date in connection 
with reporting the date action was taken, the institution must report 
the origination as occurring in the year in which the origination goes 
to closing or the account is opened.
    6. Action taken date--loan purchased. For covered loans purchased, a 
financial institution reports the date of purchase.

                            Paragraph 4(a)(9)

    1. Multiple properties with one property taken as security. If a 
covered loan is related to more than one property, but only one property 
is taken as security (or, in the case of an application, proposed to be 
taken as security), a financial institution reports the information 
required by Sec. 1003.4(a)(9) for the property taken as or proposed to 
be taken as security. A financial institution does not report the 
information required by Sec. 1003.4(a)(9) for the property or properties 
related to the loan that are not taken as or proposed to be taken as 
security. For example, if a covered loan is secured by property A, and 
the proceeds are used to purchase or rehabilitate (or to refinance home 
purchase or home improvement loans related to) property B, the 
institution reports the information required by Sec. 1003.4(a)(9) for 
property A and does not report the information required by 
Sec. 1003.4(a)(9) for property B.
    2. Multiple properties with more than one property taken as 
security. If more than one property is taken or, in the case of an 
application, proposed to be taken as security for a single covered loan, 
a financial institution reports the covered loan or application in a 
single entry on its loan/application register and provides the 
information required by Sec. 1003.4(a)(9) for one of the properties 
taken as security that contains a dwelling. A financial institution does 
not report information about the other properties taken as security. If 
an institution is required to report specific information about the 
property identified in Sec. 1003.4(a)(9), the institution reports the 
information that relates to the property identified in 
Sec. 1003.4(a)(9). For example, Financial Institution A originated a 
covered loan that is secured by both property A and property B, each of 
which contains a dwelling. Financial Institution A reports the loan as 
one entry on its loan/application register, reporting the information 
required by Sec. 1003.4(a)(9) for either property A or property B. If 
Financial Institution A elects to report the information required by 
Sec. 1003.4(a)(9) about property A, Financial Institution A also reports 
the information required by Sec. 1003.4(a)(5), (6), (14), (29), and (30) 
related to property A. For aspects of the entries that do not refer to 
the property identified in Sec. 1003.4(a)(9) (i.e., Sec. 1003.4(a)(1) 
through (4), (7), (8), (10) through (13), (15) through (28), (31) 
through (38)), Financial Institution A reports the information 
applicable to the covered loan or application and not information that 
relates only to the property identified in Sec. 1003.4(a)(9).
    3. Multifamily dwellings. A single multifamily dwelling may have 
more than one postal address. For example, three apartment buildings, 
each with a different street address, comprise a single multifamily 
dwelling that secures a covered loan. For the purposes of 
Sec. 1003.4(a)(9), a financial institution reports the information 
required by Sec. 1003.4(a)(9) in the same manner described in comment 
4(a)(9)-2.
    4. Loans purchased from another institution. The requirement to 
report the property location information required by Sec. 1003.4(a)(9) 
applies not only to applications and originations but also to purchased 
covered loans.
    5. Manufactured home. If the site of a manufactured home has not 
been identified, a financial institution complies by reporting that the 
information required by Sec. 1003.4(a)(9) is not applicable.

                          Paragraph 4(a)(9)(i)

    1. General. Section 1003.4(a)(9)(i) requires a financial institution 
to report the property address of the location of the property securing 
a covered loan or, in the case of an application, proposed to secure a 
covered loan. The address should correspond to the property identified 
on the legal obligation related to the covered loan. For applications 
that did not result in an origination, the address should correspond to 
the location of the property proposed to secure the loan as identified 
by the applicant. For example, assume a loan is secured by a property 
located at 123 Main Street, and the applicant's or borrower's mailing 
address is a post office box. The financial institution should not 
report the post office box, and should report 123 Main Street.
    2. Property address--format. A financial institution complies with 
the requirements in Sec. 1003.4(a)(9)(i) by reporting the following 
information about the physical location of the property securing the 
loan.

[[Page 142]]

    i. Street address. When reporting the street address of the 
property, a financial institution complies by including, as applicable, 
the primary address number, the predirectional, the street name, street 
prefixes and/or suffixes, the postdirectional, the secondary address 
identifier, and the secondary address, as applicable. For example, 100 N 
Main ST Apt 1.
    ii. City name. A financial institution complies by reporting the 
name of the city in which the property is located.
    iii. State name. A financial institution complies by reporting the 
two letter State code for the State in which the property is located, 
using the U.S. Postal Service official State abbreviations.
    iv. Zip Code. A financial institution complies by reporting the five 
or nine digit Zip Code in which the property is located.
    3. Property address--not applicable. A financial institution 
complies with Sec. 1003.4(a)(9)(i) by indicating that the requirement is 
not applicable if the property address of the property securing the 
covered loan is not known. For example, if the property did not have a 
property address at closing or if the applicant did not provide the 
property address of the property to the financial institution before the 
application was denied, withdrawn, or closed for incompleteness, the 
financial institution complies with Sec. 1003.4(a)(9)(i) by indicating 
that the requirement is not applicable.

                        Paragraph 4(a)(9)(ii)(B)

    1. General. A financial institution complies by reporting the five-
digit Federal Information Processing Standards (FIPS) numerical county 
code.

                        Paragraph 4(a)(9)(ii)(C)

    1. General. Census tract numbers are defined by the U.S. Census 
Bureau. A financial institution complies with Sec. 1003.4(a)(9)(ii)(C) 
if it uses the boundaries and codes in effect on January 1 of the 
calendar year covered by the loan/application register that it is 
reporting.

                          Paragraph 4(a)(10)(i)

    1. Applicant data--general. Refer to appendix B to this part for 
instructions on collection of an applicant's ethnicity, race, and sex.
    2. Transition rule for applicant data collected prior to January 1, 
2018. If a financial institution receives an application prior to 
January 1, 2018, but final action is taken on or after January 1, 2018, 
the financial institution complies with Sec. 1003.4(a)(10)(i) and (b) if 
it collects the information in accordance with the requirements in 
effect at the time the information was collected. For example, if a 
financial institution receives an application on November 15, 2017, 
collects the applicant's ethnicity, race, and sex in accordance with the 
instructions in effect on that date, and takes final action on the 
application on January 5, 2018, the financial institution has complied 
with the requirements of Sec. 1003.4(a)(10)(i) and (b), even though 
those instructions changed after the information was collected but 
before the date of final action. However, if, in this example, the 
financial institution collected the applicant's ethnicity, race, and sex 
on or after January 1, 2018, Sec. 1003.4(a)(10)(i) and (b) requires the 
financial institution to collect the information in accordance with the 
amended instructions.

                         Paragraph 4(a)(10)(ii)

    1. Applicant data--completion by financial institution. A financial 
institution complies with Sec. 1003.4(a)(10)(ii) by reporting the 
applicant's age, as of the application date under Sec. 1003.4(a)(1)(ii), 
as the number of whole years derived from the date of birth as shown on 
the application form. For example, if an applicant provides a date of 
birth of 01/15/1970 on the application form that the financial 
institution receives on 01/14/2015, the institution reports 44 as the 
applicant's age.
    2. Applicant data--co-applicant. If there are no co-applicants, the 
financial institution reports that there is no co-applicant. If there is 
more than one co-applicant, the financial institution reports the age 
only for the first co-applicant listed on the application form. A co-
applicant may provide an absent co-applicant's age on behalf of the 
absent co-applicant.
    3. Applicant data--purchased loan. A financial institution complies 
with Sec. 1003.4(a)(10)(ii) by reporting that the requirement is not 
applicable when reporting a purchased loan for which the institution 
chooses not to report the income.
    4. Applicant data--non-natural person. A financial institution 
complies with Sec. 1003.4(a)(10)(ii) by reporting that the requirement 
is not applicable if the applicant or co-applicant is not a natural 
person (for example, a corporation, partnership, or trust). For example, 
for a transaction involving a trust, a financial institution reports 
that the requirement to report the applicant's age is not applicable if 
the trust is the applicant. On the other hand, if the applicant is a 
natural person, and is the beneficiary of a trust, a financial 
institution reports the applicant's age.
    5. Applicant data--guarantor. For purposes of 
Sec. 1003.4(a)(10)(ii), if a covered loan or application includes a 
guarantor, a financial institution does not report the guarantor's age.

                         Paragraph 4(a)(10)(iii)

    1. Income data--income relied on. When a financial institution 
evaluates income as part

[[Page 143]]

of a credit decision, it reports the gross annual income relied on in 
making the credit decision. For example, if an institution relies on an 
applicant's salary to compute a debt-to-income ratio but also relies on 
the applicant's annual bonus to evaluate creditworthiness, the 
institution reports the salary and the bonus to the extent relied upon. 
If an institution relies on only a portion of an applicant's income in 
its determination, it does not report that portion of income not relied 
on. For example, if an institution, pursuant to lender and investor 
guidelines, does not rely on an applicant's commission income because it 
has been earned for less than 12 months, the institution does not 
include the applicant's commission income in the income reported. 
Likewise, if an institution relies on the verified gross income of the 
applicant in making the credit decision, then the institution reports 
the verified gross income. Similarly, if an institution relies on the 
income of a cosigner to evaluate creditworthiness, the institution 
includes the cosigner's income to the extent relied upon. An 
institution, however, does not include the income of a guarantor who is 
only secondarily liable.
    2. Income data--co-applicant. If two persons jointly apply for a 
covered loan and both list income on the application, but the financial 
institution relies on the income of only one applicant in evaluating 
creditworthiness, the institution reports only the income relied on.
    3. Income data--loan to employee. A financial institution complies 
with Sec. 1003.4(a)(10)(iii) by reporting that the requirement is not 
applicable for a covered loan to, or an application from, its employee 
to protect the employee's privacy, even though the institution relied on 
the employee's income in making the credit decision.
    4. Income data--assets. A financial institution does not include as 
income amounts considered in making a credit decision based on factors 
that an institution relies on in addition to income, such as amounts 
derived from annuitization or depletion of an applicant's remaining 
assets.
    5. Income data--credit decision not made. Section 1003.4(a)(10)(iii) 
requires a financial institution to report the gross annual income 
relied on in processing the application if a credit decision was not 
made. For example, assume an institution received an application that 
included an applicant's self-reported income, but the application was 
withdrawn before a credit decision that would have considered income was 
made. The financial institution reports the income information relied on 
in processing the application at the time that the application was 
withdrawn or the file was closed for incompleteness.
    6. Income data--credit decision not requiring consideration of 
income. A financial institution complies with Sec. 1003.4(a)(10)(iii) by 
reporting that the requirement is not applicable if the application did 
not or would not have required a credit decision that considered income 
under the financial institution's policies and procedures. For example, 
if the financial institution's policies and procedures do not consider 
income for a streamlined refinance program, the institution reports that 
the requirement is not applicable, even if the institution received 
income information from the applicant.
    7. Income data--non-natural person. A financial institution reports 
that the requirement is not applicable when the applicant or co-
applicant is not a natural person (e.g., a corporation, partnership, or 
trust). For example, for a transaction involving a trust, a financial 
institution reports that the requirement to report income data is not 
applicable if the trust is the applicant. On the other hand, if the 
applicant is a natural person, and is the beneficiary of a trust, a 
financial institution is required to report the information described in 
Sec. 1003.4(a)(10)(iii).
    8. Income data--multifamily properties. A financial institution 
complies with Sec. 1003.4(a)(10)(iii) by reporting that the requirement 
is not applicable when the covered loan is secured by, or application is 
proposed to be secured by, a multifamily dwelling.
    9. Income data--purchased loans. A financial institution complies 
with Sec. 1003.4(a)(10)(iii) by reporting that the requirement is not 
applicable when reporting a purchased covered loan for which the 
institution chooses not to report the income.
    10. Income data--rounding. A financial institution complies by 
reporting the dollar amount of the income in thousands, rounded to the 
nearest thousand ($500 rounds up to the next $1,000). For example, 
$35,500 is reported as 36.

                           Paragraph 4(a)(11)

    1. Type of purchaser--loan-participation interests sold to more than 
one entity. A financial institution that originates a covered loan, and 
then sells it to more than one entity, reports the ``type of purchaser'' 
based on the entity purchasing the greatest interest, if any. For 
purposes of Sec. 1003.4(a)(11), if a financial institution sells some 
interest or interests in a covered loan but retains a majority interest 
in that loan, it does not report the sale.
    2. Type of purchaser--swapped covered loans. Covered loans 
``swapped'' for mortgage-backed securities are to be treated as sales; 
the purchaser is the entity receiving the covered loans that are 
swapped.
    3. Type of purchaser--affiliate institution. For purposes of 
complying with Sec. 1003.4(a)(11), the term ``affiliate'' means any 
company that controls, is controlled by, or is

[[Page 144]]

under common control with, another company, as set forth in the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).
    4. Type of purchaser--private securitizations. A financial 
institution that knows or reasonably believes that the covered loan it 
is selling will be securitized by the entity purchasing the covered 
loan, other than by one of the government-sponsored enterprises, reports 
the purchasing entity type as a private securitizer regardless of the 
type or affiliation of the purchasing entity. Knowledge or reasonable 
belief could, for example, be based on the purchase agreement or other 
related documents, the financial institution's previous transactions 
with the purchaser, or the purchaser's role as a securitizer (such as an 
investment bank). If a financial institution selling a covered loan does 
not know or reasonably believe that the purchaser will securitize the 
loan, and the seller knows that the purchaser frequently holds or 
disposes of loans by means other than securitization, then the financial 
institution should report the covered loan as purchased by, as 
appropriate, a commercial bank, savings bank, savings association, life 
insurance company, credit union, mortgage company, finance company, 
affiliate institution, or other type of purchaser.
    5. Type of purchaser--mortgage company. For purposes of complying 
with Sec. 1003.4(a)(11), a mortgage company means a nondepository 
institution that purchases covered loans and typically originates such 
loans. A mortgage company might be an affiliate or a subsidiary of a 
bank holding company or thrift holding company, or it might be an 
independent mortgage company. Regardless, a financial institution 
reports the purchasing entity type as a mortgage company, unless the 
mortgage company is an affiliate of the seller institution, in which 
case the seller institution should report the loan as purchased by an 
affiliate institution.
    6. Purchases by subsidiaries. A financial institution that sells a 
covered loan to its subsidiary that is a commercial bank, savings bank, 
or savings association, should report the covered loan as purchased by a 
commercial bank, savings bank, or savings association. A financial 
institution that sells a covered loan to its subsidiary that is a life 
insurance company, should report the covered loan as purchased by a life 
insurance company. A financial institution that sells a covered loan to 
its subsidiary that is a credit union, mortgage company, or finance 
company, should report the covered loan as purchased by a credit union, 
mortgage company, or finance company. If the subsidiary that purchases 
the covered loan is not a commercial bank, savings bank, savings 
association, life insurance company, credit union, mortgage company, or 
finance company, the seller institution should report the loan as 
purchased by other type of purchaser. The financial institution should 
report the covered loan as purchased by an affiliate institution when 
the subsidiary is an affiliate of the seller institution.
    7. Type of purchaser--bank holding company or thrift holding 
company. When a financial institution sells a covered loan to a bank 
holding company or thrift holding company (rather than to one of its 
subsidiaries), it should report the loan as purchased by other type of 
purchaser, unless the bank holding company or thrift holding company is 
an affiliate of the seller institution, in which case the seller 
institution should report the loan as purchased by an affiliate 
institution.
    8. Repurchased covered loans. See comment 4(a)-5 regarding reporting 
requirements when a covered loan is repurchased by the originating 
financial institution.
    9. Type of purchaser--quarterly recording. For purposes of recording 
the type of purchaser within 30 calendar days after the end of the 
calendar quarter pursuant to Sec. 1003.4(f), a financial institution 
records that the requirement is not applicable if the institution 
originated or purchased a covered loan and did not sell it during the 
calendar quarter for which the institution is recording the data. If the 
financial institution sells the covered loan in a subsequent quarter of 
the same calendar year, the financial institution records the type of 
purchaser on its loan/application register for the quarter in which the 
covered loan was sold. If a financial institution sells the covered loan 
in a succeeding year, the financial institution should not record the 
sale.
    10. Type of purchaser--not applicable. A financial institution 
reports that the requirement is not applicable for applications that 
were denied, withdrawn, closed for incompleteness or approved but not 
accepted by the applicant; and for preapproval requests that were denied 
or approved but not accepted by the applicant. A financial institution 
also reports that the requirement is not applicable if the institution 
originated or purchased a covered loan and did not sell it during that 
same calendar year.

                           Paragraph 4(a)(12)

    1. Average prime offer rate. Average prime offer rates are annual 
percentage rates derived from average interest rates, points, and other 
loan pricing terms offered to borrowers by a representative sample of 
lenders for mortgage loans that have low-risk pricing characteristics. 
Other pricing terms include commonly used indices, margins, and initial 
fixed-rate periods for variable-rate transactions. Relevant pricing 
characteristics include a consumer's credit history and transaction 
characteristics such as the loan-to-value ratio, owner-occupant status, 
and purpose of the transaction. To obtain average prime offer rates, the 
Bureau uses a survey of lenders that both meets the criteria of

[[Page 145]]

Sec. 1003.4(a)(12)(ii) and provides pricing terms for at least two types 
of variable-rate transactions and at least two types of non-variable-
rate transactions. An example of such a survey is the Freddie Mac 
Primary Mortgage Market Survey[supreg].
    2. Bureau tables. The Bureau publishes on the FFIEC's Web site 
(http://www.ffiec.gov/hmda), in tables entitled ``Average Prime Offer 
Rates-Fixed'' and ``Average Prime Offer Rates-Adjustable,'' current and 
historic average prime offer rates for a wide variety of closed-end 
transaction types. The Bureau calculates an annual percentage rate, 
consistent with Regulation Z (see 12 CFR 1026.22 and part 1026, appendix 
J), for each transaction type for which pricing terms are available from 
the survey described in comment 4(a)(12)-1. The Bureau uses loan pricing 
terms available in the survey and other information to estimate annual 
percentage rates for other types of transactions for which direct survey 
data are not available. The Bureau publishes on the FFIEC's Web site the 
methodology it uses to arrive at these estimates. A financial 
institution may either use the average prime offer rates published by 
the Bureau or may determine average prime offer rates itself by 
employing the methodology published on the FFIEC Web site. A financial 
institution that determines average prime offer rates itself, however, 
is responsible for correctly determining the rates in accordance with 
the published methodology.
    3. Rate spread calculation--annual percentage rate. The requirements 
of Sec. 1003.4(a)(12)(i) refer to the covered loan's annual percentage 
rate. A financial institution complies with Sec. 1003.4(a)(12)(i) by 
relying on the annual percentage rate for the covered loan, as 
calculated and disclosed pursuant to Regulation Z, 12 CFR 1026.18 or 
1026.38 (for closed-end mortgage loans) or 1026.40 (for open-end credit 
lines of credit), as applicable.
    4. Rate spread calculation--comparable transaction. The rate spread 
calculation in Sec. 1003.4(a)(12)(i) is defined by reference to a 
comparable transaction, which is determined according to the covered 
loan's amortization type (i.e., fixed- or variable-rate) and loan term. 
For covered loans that are open-end lines of credit, 
Sec. 1003.4(a)(12)(i) requires a financial institution to identify the 
most closely comparable closed-end transaction. The tables of average 
prime offer rates published by the Bureau (see comment 4(a)(12)-2) 
provide additional detail about how to identify the comparable 
transaction.
    i. Fixed-rate transactions. For fixed-rate covered loans, the term 
for identifying the comparable transaction is the transaction's maturity 
(i.e., the period until the last payment will be due under the closed-
end mortgage loan contract or open-end line of credit agreement). If an 
open-end credit plan has a fixed rate but no definite plan length, a 
financial institution complies with Sec. 1003.4(a)(12)(i) by using a 30-
year fixed-rate loan as the most closely comparable closed-end 
transaction. Financial institutions may refer to the table on the FFIEC 
Web site entitled ``Average Prime Offer Rates-Fixed'' when identifying a 
comparable fixed-rate transaction.
    ii. Variable-rate transactions. For variable-rate covered loans, the 
term for identifying the comparable transaction is the initial, fixed-
rate period (i.e., the period until the first scheduled rate 
adjustment). For example, five years is the relevant term for a 
variable-rate transaction with a five-year, fixed-rate introductory 
period that is amortized over thirty years. Financial institutions may 
refer to the table on the FFIEC Web site entitled ``Average Prime Offer 
Rates-Variable'' when identifying a comparable variable-rate 
transaction. If an open-end line of credit has a variable rate and an 
optional, fixed-rate feature, a financial institution uses the rate 
table for variable-rate transactions.
    iii. Term not in whole years. When a covered loan's term to maturity 
(or, for a variable-rate transaction, the initial fixed-rate period) is 
not in whole years, the financial institution uses the number of whole 
years closest to the actual loan term or, if the actual loan term is 
exactly halfway between two whole years, by using the shorter loan term. 
For example, for a loan term of ten years and three months, the relevant 
term is ten years; for a loan term of ten years and nine months, the 
relevant term is 11 years; for a loan term of ten years and six months, 
the relevant term is ten years. If a loan term includes an odd number of 
days, in addition to an odd number of months, the financial institution 
rounds to the nearest whole month, or rounds down if the number of odd 
days is exactly halfway between two months. The financial institution 
rounds to one year any covered loan with a term shorter than six months, 
including variable-rate covered loans with no initial, fixed-rate 
periods. For example, if an open-end covered loan has a rate that varies 
according to an index plus a margin, with no introductory, fixed-rate 
period, the transaction term is one year.
    iv. Amortization period longer than loan term. If the amortization 
period of a covered loan is longer than the term of the transaction to 
maturity, Sec. 1003.4(a)(12)(i) requires a financial institution to use 
the loan term to determine the applicable average prime offer rate. For 
example, assume a financial institution originates a closed-end, fixed-
rate loan that has a term to maturity of five years and a thirty-year 
amortization period that results in a balloon payment. The financial 
institution complies with Sec. 1003.4(a)(12)(i) by using the five-year 
loan term.
    5. Rate-set date. The relevant date to use to determine the average 
prime offer rate for a

[[Page 146]]

comparable transaction is the date on which the covered loan's interest 
rate was set by the financial institution for the final time before 
closing or account opening.
    i. Rate-lock agreement. If an interest rate is set pursuant to a 
``lock-in'' agreement between the financial institution and the 
borrower, then the date on which the agreement fixes the interest rate 
is the date the rate was set. Except as provided in comment 4(a)(12)-
5.ii, if a rate is reset after a lock-in agreement is executed (for 
example, because the borrower exercises a float-down option or the 
agreement expires), then the relevant date is the date the financial 
institution exercises discretion in setting the rate for the final time 
before closing or account opening. The same rule applies when a rate-
lock agreement is extended and the rate is reset at the same rate, 
regardless of whether market rates have increased, decreased, or 
remained the same since the initial rate was set. If no lock-in 
agreement is executed, then the relevant date is the date on which the 
institution sets the rate for the final time before closing or account 
opening.
    ii. Change in loan program. If a financial institution issues a 
rate-lock commitment under one loan program, the borrower subsequently 
changes to another program that is subject to different pricing terms, 
and the financial institution changes the rate promised to the borrower 
under the rate-lock commitment accordingly, the rate-set date is the 
date of the program change. However, if the financial institution 
changes the promised rate to the rate that would have been available to 
the borrower under the new program on the date of the original rate-lock 
commitment, then that is the date the rate is set, provided the 
financial institution consistently follows that practice in all such 
cases or the original rate-lock agreement so provided. For example, 
assume that a borrower locks a rate of 2.5 percent on June 1 for a 30-
year, variable-rate loan with a 5-year, fixed-rate introductory period. 
On June 15, the borrower decides to switch to a 30-year, fixed-rate 
loan, and the rate available to the borrower for that product on June 15 
is 4.0 percent. On June 1, the 30-year, fixed-rate loan would have been 
available to the borrower at a rate of 3.5 percent. If the financial 
institution offers the borrower the 3.5 percent rate (i.e., the rate 
that would have been available to the borrower for the fixed-rate 
product on June 1, the date of the original rate-lock) because the 
original agreement so provided or because the financial institution 
consistently follows that practice for borrowers who change loan 
programs, then the financial institution should use June 1 as the rate-
set date. In all other cases, the financial institution should use June 
15 as the rate-set date.
    iii. Brokered loans. When a financial institution has reporting 
responsibility for an application for a covered loan that it received 
from a broker, as discussed in comment 4(a)-4 (e.g., because the 
financial institution makes a credit decision prior to closing or 
account opening), the rate-set date is the last date the financial 
institution set the rate with the broker, not the date the broker set 
the borrower's rate.
    6. Compare the annual percentage rate to the average prime offer 
rate. Section 1003.4(a)(12)(i) requires a financial institution to 
compare the covered loan's annual percentage rate to the most recently 
available average prime offer rate that was in effect for the comparable 
transaction as of the rate-set date. For purposes of 
Sec. 1003.4(a)(12)(i), the most recently available rate means the 
average prime offer rate set forth in the applicable table with the most 
recent effective date as of the date the interest rate was set. However, 
Sec. 1003.4(a)(12)(i) does not permit a financial institution to use an 
average prime offer rate before its effective date.
    7. Rate spread--not applicable. If the covered loan is an 
assumption, reverse mortgage, a purchased loan, or is not subject to 
Regulation Z, 12 CFR part 1026, a financial institution complies with 
Sec. 1003.4(a)(12) by reporting that the requirement is not applicable. 
If the application did not result in an origination for a reason other 
than the application was approved but not accepted by the applicant, a 
financial institution complies with Sec. 1003.4(a)(12) by reporting that 
the requirement is not applicable.
    8. Application approved but not accepted or preapproval request 
approved but not accepted. In the case of an application approved but 
not accepted or a preapproval request that was approved but not 
accepted, Sec. 1003.4(a)(12) requires a financial institution to report 
the applicable rate spread.

                           Paragraph 4(a)(13)

    1. HOEPA status--not applicable. If the covered loan is not subject 
to the Home Ownership and Equity Protection Act of 1994, as implemented 
in Regulation Z, 12 CFR 1026.32, a financial institution complies with 
Sec. 1003.4(a)(13) by reporting that the requirement is not applicable. 
If an application did not result in an origination, a financial 
institution complies with Sec. 1003.4(a)(13) by reporting that the 
requirement is not applicable.

                           Paragraph 4(a)(14)

    1. Determining lien status for applications and covered loans 
originated and purchased. i. Financial institutions are required to 
report lien status for covered loans they originate and purchase and 
applications that do not result in originations (preapproval requests 
that are approved but not accepted,

[[Page 147]]

preapproval requests that are denied, applications that are approved but 
not accepted, denied, withdrawn, or closed for incompleteness). For 
covered loans purchased by a financial institution, lien status is 
determined by reference to the best information readily available to the 
financial institution at the time of purchase. For covered loans that a 
financial institution originates and applications that do not result in 
originations, lien status is determined by reference to the best 
information readily available to the financial institution at the time 
final action is taken and to the financial institution's own procedures. 
Thus, financial institutions may rely on the title search they routinely 
perform as part of their underwriting procedures--for example, for home 
purchase loans. Regulation C does not require financial institutions to 
perform title searches solely to comply with HMDA reporting 
requirements. Financial institutions may rely on other information that 
is readily available to them at the time final action is taken and that 
they reasonably believe is accurate, such as the applicant's statement 
on the application or the applicant's credit report. For example, where 
the applicant indicates on the application that there is a mortgage on 
the property or where the applicant's credit report shows that the 
applicant has a mortgage--and that mortgage will not be paid off as part 
of the transaction--the financial institution may assume that the loan 
it originates is secured by a subordinate lien. If the same application 
did not result in an origination--for example, because the application 
was denied or withdrawn--the financial institution would report the 
application as an application for a subordinate-lien loan.
    ii. Financial institutions may also consider their established 
procedures when determining lien status for applications that do not 
result in originations. For example, assume an applicant applies to a 
financial institution to refinance a $100,000 first mortgage; the 
applicant also has an open-end line of credit for $20,000. If the 
financial institution's practice in such a case is to ensure that it 
will have first-lien position--through a subordination agreement with 
the holder of the lien securing the open-end line of credit--then the 
financial institution should report the application as an application 
for a first-lien covered loan.
    2. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.

                           Paragraph 4(a)(15)

    1. Credit score--relied on. Except for purchased covered loans, 
Sec. 1003.4(a)(15) requires a financial institution to report the credit 
score or scores relied on in making the credit decision and information 
about the scoring model used to generate each score. A financial 
institution relies on a credit score in making the credit decision if 
the credit score was a factor in the credit decision even if it was not 
a dispositive factor. For example, if a credit score is one of multiple 
factors in a financial institution's credit decision, the financial 
institution has relied on the credit score even if the financial 
institution denies the application because one or more underwriting 
requirements other than the credit score are not satisfied.
    2. Credit score--multiple credit scores. When a financial 
institution obtains or creates two or more credit scores for a single 
applicant or borrower but relies on only one score in making the credit 
decision (for example, by relying on the lowest, highest, most recent, 
or average of all of the scores), the financial institution complies 
with Sec. 1003.4(a)(15) by reporting that credit score and information 
about the scoring model used. When a financial institution obtains or 
creates two or more credit scores for an applicant or borrower and 
relies on multiple scores for the applicant or borrower in making the 
credit decision (for example, by relying on a scoring grid that 
considers each of the scores obtained or created for the applicant or 
borrower without combining the scores into a composite score), 
Sec. 1003.4(a)(15) requires the financial institution to report one of 
the credit scores for the applicant or borrower that was relied on in 
making the credit decision. In choosing which credit score to report in 
this circumstance, a financial institution need not use the same 
approach for its entire HMDA submission, but it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans). In 
instances such as these, the financial institution should report the 
name and version of the credit scoring model for the score reported.
    3. Credit score--multiple applicants or borrowers. In a transaction 
involving two or more applicants or borrowers for which the financial 
institution obtains or creates a single credit score, and relies on that 
credit score in making the credit decision for the transaction, the 
institution complies with Sec. 1003.4(a)(15) by reporting that credit 
score for either the applicant or first co-applicant. Otherwise, a 
financial institution complies with Sec. 1003.4(a)(15) by reporting a 
credit score for the applicant that it relied on in making the credit 
decision, if any, and a credit score for the first co-applicant that it 
relied on in making the credit decision, if any. To illustrate, assume a 
transaction involves one applicant and one co-applicant and that the 
financial institution obtains or creates two credit scores for the 
applicant and two credit scores for the co-applicant. Assume further 
that the financial institution relies on the lowest, highest, most 
recent, or average of

[[Page 148]]

all of the credit scores obtained or created to make the credit decision 
for the transaction. The financial institution complies with 
Sec. 1003.4(a)(15) by reporting that credit score and information about 
the scoring model used. Alternatively, assume a transaction involves one 
applicant and one co-applicant and that the financial institution 
obtains or creates three credit scores for the applicant and three 
credit scores for the co-applicant. Assume further that the financial 
institution relies on the middle credit score for the applicant and the 
middle credit score for the co-applicant to make the credit decision for 
the transaction. The financial institution complies with 
Sec. 1003.4(a)(15) by reporting both the middle score for the applicant 
and the middle score for the co-applicant.
    4. Transactions for which no credit decision was made. If a file was 
closed for incompleteness or the application was withdrawn before a 
credit decision was made, the financial institution complies with 
Sec. 1003.4(a)(15) by reporting that the requirement is not applicable, 
even if the financial institution had obtained or created a credit score 
for the applicant or co-applicant. For example, if a file is closed for 
incompleteness and is so reported in accordance with Sec. 1003.4(a)(8), 
the financial institution complies with Sec. 1003.4(a)(15) by reporting 
that the requirement is not applicable, even if the financial 
institution had obtained or created a credit score for the applicant or 
co-applicant. Similarly, if an application was withdrawn by the 
applicant before a credit decision was made and is so reported in 
accordance with Sec. 1003.4(a)(8), the financial institution complies 
with Sec. 1003.4(a)(15) by reporting that the requirement is not 
applicable, even if the financial institution had obtained or created a 
credit score for the applicant or co-applicant.
    5. Transactions for which no credit score was relied on. If a 
financial institution makes a credit decision without relying on a 
credit score for the applicant or borrower, the financial institution 
complies with Sec. 1003.4(a)(15) by reporting that the requirement is 
not applicable.
    6. Purchased covered loan. A financial institution complies with 
Sec. 1003.4(a)(15) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.
    7. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution complies 
with Sec. 1003.4(a)(15) by reporting that the requirement is not 
applicable.

                           Paragraph 4(a)(16)

    1. Reason for denial--general. A financial institution complies with 
Sec. 1003.4(a)(16) by reporting the principal reason or reasons it 
denied the application, indicating up to four reasons. The financial 
institution should report only the principal reason or reasons it denied 
the application, even if there are fewer than four reasons. For example, 
if a financial institution denies the application because of the 
applicant's credit history and debt-to-income ratio, the financial 
institution need only report these two principal reasons. The reasons 
reported must be specific and accurately describe the principal reason 
or reasons the financial institution denied the application.
    2. Reason for denial--preapproval request denied. Section 
1003.4(a)(16) requires a financial institution to report the principal 
reason or reasons it denied the application. A request for a preapproval 
under a preapproval program as defined by Sec. 1003.2(b)(2) is an 
application. If a financial institution denies a preapproval request, 
the financial institution complies with Sec. 1003.4(a)(16) by reporting 
the reason or reasons it denied the preapproval request.
    3. Reason for denial--adverse action model form or similar form. If 
a financial institution chooses to provide the applicant the reason or 
reasons it denied the application using the model form contained in 
appendix C to Regulation B (Form C-1, Sample Notice of Action Taken and 
Statement of Reasons) or a similar form, Sec. 1003.4(a)(16) requires the 
financial institution to report the reason or reasons that were 
specified on the form by the financial institution, which includes 
reporting the ``Other'' reason or reasons that were specified on the 
form by the financial institution, if applicable. If a financial 
institution chooses to provide a disclosure of the applicant's right to 
a statement of specific reasons using the model form contained in 
appendix C to Regulation B (Form C-5, Sample Disclosure of Right to 
Request Specific Reasons for Credit Denial) or a similar form, or 
chooses to provide the denial reason or reasons orally under Regulation 
B, 12 CFR 1002.9(a)(2)(ii), the financial institution complies with 
Sec. 1003.4(a)(16) by entering the principal reason or reasons it denied 
the application.
    4. Reason for denial--not applicable. A financial institution 
complies with Sec. 1003.4(a)(16) by reporting that the requirement is 
not applicable if the action taken on the application, pursuant to 
Sec. 1003.4(a)(8), is not a denial. For example, a financial institution 
complies with Sec. 1003.4(a)(16) by reporting that the requirement is 
not applicable if the loan is originated or purchased by the financial 
institution, or the application or preapproval request was approved but 
not accepted, or the application was withdrawn before a credit decision 
was made, or the file was closed for incompleteness.

                          Paragraph 4(a)(17)(i)

    1. Total loan costs--not applicable. Section 1003.4(a)(17)(i) does 
not require financial institutions to report the total loan costs for 
applications, or for transactions not subject to Regulation Z, 12 CFR 
1026.43(c), and 12

[[Page 149]]

CFR 1026.19(f), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for business or commercial 
purposes. In these cases, a financial institution complies with 
Sec. 1003.4(a)(17)(i) by reporting that the requirement is not 
applicable to the transaction.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec. 1003.4(a)(17)(i) 
by reporting that the requirement is not applicable to the transaction.
    3. Revised disclosures. If the amount of total loan costs changes 
because a financial institution provides a revised version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2), the financial institution complies 
with Sec. 1003.4(a)(17)(i) by reporting the revised amount, provided 
that the revised disclosure was provided to the borrower during the same 
reporting period in which closing occurred. For example, in the case of 
a financial institution's quarterly submission made pursuant to 
Sec. 1003.5(a)(1)(ii), if the financial institution provides a corrected 
disclosure to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected amount 
of total loan costs only if the corrected disclosure was provided prior 
to the end of the quarter in which closing occurred. The financial 
institution does not report the corrected amount of total loan costs in 
its quarterly submission if the corrected disclosure was provided after 
the end of the quarter, even if the corrected disclosure was provided 
prior to the deadline for timely submission of the financial 
institution's quarterly data. However, the financial institution reports 
the corrected amount of total loan costs on its annual loan/application 
register.

                         Paragraph 4(a)(17)(ii)

    1. Total points and fees--not applicable. Section 1003.4(a)(17)(ii) 
does not require financial institutions to report the total points and 
fees for transactions not subject to Regulation Z, 12 CFR 1026.43(c), 
such as open-end lines of credit, reverse mortgages, or loans or lines 
of credit made primarily for business or commercial purposes, or for 
applications or purchased covered loans. In these cases, a financial 
institution complies with Sec. 1003.4(a)(17)(ii) by reporting that the 
requirement is not applicable to the transaction.
    2. Total points and fees cure mechanism. For covered loans subject 
to this reporting requirement, if a financial institution determines 
that the transaction's total points and fees exceeded the applicable 
limit and cures the overage pursuant to Regulation Z, 12 CFR 
1026.43(e)(3)(iii) and (iv), a financial institution complies with 
Sec. 1003.4(a)(17)(ii) by reporting the correct amount of total points 
and fees, provided that the cure was effected during the same reporting 
period in which closing occurred. For example, in the case of a 
financial institution's quarterly submission, the financial institution 
reports the revised amount of total points and fees only if it cured the 
overage prior to the end of the quarter in which closing occurred. The 
financial institution does not report the revised amount of total points 
and fees in its quarterly submission if it cured the overage after the 
end of the quarter, even if the cure was effected prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the revised amount of total 
points and fees on its annual loan/application register.

                           Paragraph 4(a)(18)

    1. Origination charges--not applicable. Section 1003.4(a)(18) does 
not require financial institutions to report the total borrower-paid 
origination charges for applications, or for transactions not subject to 
Regulation Z, 12 CFR 1026.19(f), such as open-end lines of credit, 
reverse mortgages, or loans or lines of credit made primarily for 
business or commercial purposes. In these cases, a financial institution 
complies with Sec. 1003.4(a)(18) by reporting that the requirement is 
not applicable to the transaction.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec. 1003.4(a)(18) by 
reporting that the requirement is not applicable to the transaction.
    3. Revised disclosures. If the total amount of borrower-paid 
origination charges changes because a financial institution provides a 
revised version of the disclosures required under Regulation Z, 12 CFR 
1026.19(f), pursuant to Regulation Z, 12 CFR 1026.19(f)(2), the 
financial institution complies with Sec. 1003.4(a)(18) by reporting the 
revised amount, provided that the revised disclosure was provided to the 
borrower during the same reporting period in which closing occurred. For 
example, in the case of a financial institution's quarterly submission 
made pursuant to Sec. 1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to reflect a refund made pursuant to 
Regulation

[[Page 150]]

Z, 12 CFR 1026.19(f)(2)(v), the financial institution reports the 
corrected amount of origination charges only if the corrected disclosure 
was provided prior to the end of the quarter in which closing occurred. 
The financial institution does not report the corrected amount of 
origination charges in its quarterly submission if the corrected 
disclosure was provided after the end of the quarter, even if the 
corrected disclosure was provided prior to the deadline for timely 
submission of the financial institution's quarterly data. However, the 
financial institution reports the corrected amount of origination 
charges on its annual loan/application register.

                           Paragraph 4(a)(19)

    1. Discount points--not applicable. Section 1003.4(a)(19) does not 
require financial institutions to report the discount points for 
applications, or for transactions not subject to Regulation Z, 12 CFR 
1026.19(f), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for business or commercial 
purposes. In these cases, a financial institution complies with 
Sec. 1003.4(a)(19) by reporting that the requirement is not applicable 
to the transaction.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec. 1003.4(a)(19) by 
reporting that the requirement is not applicable to the transaction.
    3. Revised disclosures. If the amount of discount points changes 
because a financial institution provides a revised version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2), the financial institution complies 
with Sec. 1003.4(a)(19) by reporting the revised amount, provided that 
the revised disclosure was provided to the borrower during the same 
reporting period in which closing occurred. For example, in the case of 
a financial institution's quarterly submission made pursuant to 
Sec. 1003.5(a)(ii), if the financial institution provides a corrected 
disclosure to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected amount 
of discount points only if the corrected disclosure was provided prior 
to the end of the quarter in which closing occurred. The financial 
institution does not report the corrected amount of discount points in 
its quarterly submission if the corrected disclosure was provided after 
the end of the quarter, even if the corrected disclosure was provided 
prior to the deadline for timely submission of the financial 
institution's quarterly data. However, the financial institution reports 
the corrected amount of discount points on its annual loan/application 
register.

                           Paragraph 4(a)(20)

    1. Lender credits--not applicable. Section 1003.4(a)(20) does not 
require financial institutions to report lender credits for 
applications, or for transactions not subject to Regulation Z, 12 CFR 
1026.19(f), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for business or commercial 
purposes. In these cases, a financial institution complies with 
Sec. 1003.4(a)(20) by reporting that the requirement is not applicable 
to the transaction.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec. 1003.4(a)(20) by 
reporting that the requirement is not applicable to the transaction.
    3. Revised disclosures. If the amount of lender credits changes 
because a financial institution provides a revised version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2), the financial institution complies 
with Sec. 1003.4(a)(20) by reporting the revised amount, provided that 
the revised disclosure was provided to the borrower during the same 
reporting period in which closing occurred. For example, in the case of 
a financial institution's quarterly submission made pursuant to 
Sec. 1003.5(a)(1)(ii), if the financial institution provides a corrected 
disclosure to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected amount 
of lender credits only if the corrected disclosure was provided prior to 
the end of the quarter in which closing occurred. The financial 
institution does not report the corrected amount of lender credits in 
its quarterly submission if the corrected disclosure was provided after 
the end of the quarter, even if the corrected disclosure was provided 
prior to the deadline for timely submission of the financial 
institution's quarterly data. However, the financial institution reports 
the corrected amount of lender credits on its annual loan/application 
register.

                           Paragraph 4(a)(21)

    1. Interest rate--disclosures. Section 1003.4(a)(21) requires a 
financial institution to identify the interest rate applicable to the 
approved application, or to the covered loan at closing or account 
opening. For covered loans or applications subject to the disclosure 
requirements of Regulation Z, 12 CFR

[[Page 151]]

1026.19(e) or (f), a financial institution complies with 
Sec. 1003.4(a)(21) by reporting the interest rate disclosed on the 
applicable disclosure. For covered loans for which disclosures were 
provided pursuant to both 12 CFR 1026.19(e) and 12 CFR 1026.19(f), a 
financial institution reports the interest rate disclosed pursuant to 12 
CFR 1026.19(f). A financial institution may rely on the definitions and 
commentary to the sections of Regulation Z relevant to the disclosure of 
the interest rate pursuant to 12 CFR 1026.19(e) or 12 CFR 1026.19(f).
    2. Applications. In the case of an application, Sec. 1003.4(a)(21) 
requires a financial institution to report the applicable interest rate 
only if the application has been approved by the financial institution 
but not accepted by the borrower. In such cases, a financial institution 
reports the interest rate applicable at the time that the application 
was approved by the financial institution. A financial institution may 
report the interest rate appearing on the disclosure provided pursuant 
to 12 CFR 1026.19(e) or (f) if such disclosure accurately reflects the 
interest rate at the time the application was approved. For applications 
that have been denied or withdrawn, or files closed for incompleteness, 
a financial institution reports that no interest rate was applicable to 
the application.
    3. Adjustable rate--interest rate unknown. Except as provided in 
comment 4(a)(21)-1, for adjustable-rate covered loans or applications, 
if the interest rate is unknown at the time that the application was 
approved, or at closing or account opening, a financial institution 
reports the fully-indexed rate based on the index applicable to the 
covered loan or application. For purposes of Sec. 1003.4(a)(21), the 
fully-indexed rate is the index value and margin at the time that the 
application was approved, or, for covered loans, at closing or account 
opening.

                           Paragraph 4(a)(22)

    1. Prepayment penalty term--not applicable. Section 1003.4(a)(22) 
does not require financial institutions to report the term of any 
prepayment penalty for transactions not subject to Regulation Z, 12 CFR 
part 1026, such as loans or lines of credit made primarily for business 
or commercial purposes, or for reverse mortgages or purchased covered 
loans. In these cases, a financial institution complies with 
Sec. 1003.4(a)(22) by reporting that the requirement is not applicable 
to the transaction.
    2. Transactions for which no prepayment penalty exists. For covered 
loans or applications that have no prepayment penalty, a financial 
institution complies with Sec. 1003.4(a)(22) by reporting that the 
requirement is not applicable to the transaction. A financial 
institution may rely on the definitions and commentary to Regulation Z, 
12 CFR 1026.32(b)(6)(i) or (ii) in determining whether the terms of a 
transaction contain a prepayment penalty.

                           Paragraph 4(a)(23)

    1. General. For covered loans that are not purchased covered loans, 
Sec. 1003.4(a)(23) requires a financial institution to report the ratio 
of the applicant's or borrower's total monthly debt to total monthly 
income (debt-to-income ratio) relied on in making the credit decision. 
For example, if a financial institution calculated the applicant's or 
borrower's debt-to-income ratio twice--once according to the financial 
institution's own requirements and once according to the requirements of 
a secondary market investor--and the financial institution relied on the 
debt-to-income ratio calculated according to the secondary market 
investor's requirements in making the credit decision, 
Sec. 1003.4(a)(23) requires the financial institution to report the 
debt-to-income ratio calculated according to the requirements of the 
secondary market investor.
    2. Transactions for which a debt-to-income ratio was one of multiple 
factors. A financial institution relies on the ratio of the applicant's 
or borrower's total monthly debt to total monthly income (debt-to-income 
ratio) in making the credit decision if the debt-to-income ratio was a 
factor in the credit decision even if it was not a dispositive factor. 
For example, if the debt-to-income ratio was one of multiple factors in 
a financial institution's credit decision, the financial institution has 
relied on the debt-to-income ratio and complies with Sec. 1003.4(a)(23) 
by reporting the debt-to-income ratio, even if the financial institution 
denied the application because one or more underwriting requirements 
other than the debt-to-income ratio were not satisfied.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness, or if an application was withdrawn before a 
credit decision was made, a financial institution complies with 
Sec. 1003.4(a)(23) by reporting that the requirement is not applicable, 
even if the financial institution had calculated the ratio of the 
applicant's total monthly debt to total monthly income (debt-to-income 
ratio). For example, if a file was closed for incompleteness and was so 
reported in accordance with Sec. 1003.4(a)(8), the financial institution 
complies with Sec. 1003.4(a)(23) by reporting that the requirement is 
not applicable, even if the financial institution had calculated the 
applicant's debt-to-income ratio. Similarly, if an application was 
withdrawn by the applicant before a credit decision was made, the 
financial institution complies with Sec. 1003.4(a)(23) by reporting that 
the requirement is not applicable, even if the financial institution had 
calculated the applicant's debt-to-income ratio.
    4. Transactions for which no debt-to-income ratio was relied on. 
Section 1003.4(a)(23) does

[[Page 152]]

not require a financial institution to calculate the ratio of an 
applicant's or borrower's total monthly debt to total monthly income 
(debt-to-income ratio), nor does it require a financial institution to 
rely on an applicant's or borrower's debt-to-income ratio in making a 
credit decision. If a financial institution made a credit decision 
without relying on the applicant's or borrower's debt-to-income ratio, 
the financial institution complies with Sec. 1003.4(a)(23) by reporting 
that the requirement is not applicable since no debt-to-income ratio was 
relied on in connection with the credit decision.
    5. Non-natural person. A financial institution complies with 
Sec. 1003.4(a)(23) by reporting that the requirement is not applicable 
when the applicant and co-applicant, if applicable, are not natural 
persons.
    6. Multifamily dwellings. A financial institution complies with 
Sec. 1003.4(a)(23) by reporting that the requirement is not applicable 
for a covered loan secured by, or an application proposed to be secured 
by, a multifamily dwelling.
    7. Purchased covered loans. A financial institution complies with 
Sec. 1003.4(a)(23) by reporting that the requirement is not applicable 
when reporting a purchased covered loan.

                           Paragraph 4(a)(24)

    1. General. Section 1003.4(a)(24) requires a financial institution 
to report, except for purchased covered loans, the ratio of the total 
amount of debt secured by the property to the value of the property 
(combined loan-to-value ratio) relied on in making the credit decision. 
For example, if a financial institution calculated a combined loan-to-
value ratio twice--once according to the financial institution's own 
requirements and once according to the requirements of a secondary 
market investor--and the financial institution relied on the combined 
loan-to-value ratio calculated according to the secondary market 
investor's requirements in making the credit decision, 
Sec. 1003.4(a)(24) requires the financial institution to report the 
combined loan-to-value ratio calculated according to the requirements of 
the secondary market investor.
    2. Transactions for which a combined loan-to-value ratio was one of 
multiple factors. A financial institution relies on the total amount of 
debt secured by the property to the value of the property (combined 
loan-to-value ratio) in making the credit decision if the combined loan-
to-value ratio was a factor in the credit decision even if it was not a 
dispositive factor. For example, if the combined loan-to-value ratio is 
one of multiple factors in a financial institution's credit decision, 
the financial institution has relied on the combined loan-to-value ratio 
and complies with Sec. 1003.4(a)(24) by reporting the combined loan-to-
value ratio, even if the financial institution denies the application 
because one or more underwriting requirements other than the combined 
loan-to-value ratio are not satisfied.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness, or if an application was withdrawn before a 
credit decision was made, a financial institution complies with 
Sec. 1003.4(a)(24) by reporting that the requirement is not applicable, 
even if the financial institution had calculated the ratio of the total 
amount of debt secured by the property to the value of the property 
(combined loan-to-value ratio). For example, if a file is closed for 
incompleteness and is so reported in accordance with Sec. 1003.4(a)(8), 
the financial institution complies with Sec. 1003.4(a)(24) by reporting 
that the requirement is not applicable, even if the financial 
institution had calculated a combined loan-to-value ratio. Similarly, if 
an application was withdrawn by the applicant before a credit decision 
was made and is so reported in accordance with Sec. 1003.4(a)(8), the 
financial institution complies with Sec. 1003.4(a)(24) by reporting that 
the requirement is not applicable, even if the financial institution had 
calculated a combined loan-to-value ratio.
    4. Transactions for which no combined loan-to-value ratio was relied 
on. Section 1003.4(a)(24) does not require a financial institution to 
calculate the ratio of the total amount of debt secured by the property 
to the value of the property (combined loan-to-value ratio), nor does it 
require a financial institution to rely on a combined loan-to-value 
ratio in making a credit decision. If a financial institution makes a 
credit decision without relying on a combined loan-to-value ratio, the 
financial institution complies with Sec. 1003.4(a)(24) by reporting that 
the requirement is not applicable since no combined loan-to-value ratio 
was relied on in making the credit decision.
    5. Purchased covered loan. A financial institution complies with 
Sec. 1003.4(a)(24) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.

                           Paragraph 4(a)(25)

    1. Amortization and maturity. For a fully amortizing covered loan, 
the number of months after which the legal obligation matures is the 
number of months in the amortization schedule, ending with the final 
payment. Some covered loans do not fully amortize during the maturity 
term, such as covered loans with a balloon payment; such loans should 
still be reported using the maturity term rather than the amortization 
term, even in the case of covered loans that mature before fully 
amortizing but have reset options. For example, a 30-year fully 
amortizing covered loan would be reported

[[Page 153]]

with a term of ``360,'' while a five year balloon covered loan would be 
reported with a loan term of ``60.''
    2. Non-monthly repayment periods. If a covered loan or application 
includes a schedule with repayment periods measured in a unit of time 
other than months, the financial institution should report the covered 
loan or application term using an equivalent number of whole months 
without regard for any remainder.
    3. Purchased loans. For a covered loan that was purchased, a 
financial institution reports the number of months after which the legal 
obligation matures as measured from the covered loan's origination.
    4. Open-end line of credit. For an open-end line of credit with a 
definite term, a financial institution reports the number of months from 
origination until the account termination date, including both the draw 
and repayment period.
    5. Loan or application without a definite term. For a covered loan 
or application without a definite term, such as a reverse mortgage, a 
financial institution complies with Sec. 1003.4(a)(25) by reporting that 
the requirement is not applicable.

                           Paragraph 4(a)(26)

    1. Types of introductory rates. Section 1003.4(a)(26) requires a 
financial institution to report the number of months, or proposed number 
of months in the case of an application, from closing or account opening 
until the first date the interest rate may change. For example, assume 
an open-end line of credit contains an introductory or ``teaser'' 
interest rate for two months after the date of account opening, after 
which the interest rate may adjust. In this example, the financial 
institution complies with Sec. 1003.4(a)(26) by reporting the number of 
months as ``2.'' Section 1003.4(a)(26) requires a financial institution 
to report the number of months based on when the first interest rate 
adjustment may occur, even if an interest rate adjustment is not 
required to occur at that time and even if the rates that will apply, or 
the periods for which they will apply, are not known at closing or 
account opening. For example, if a closed-end mortgage loan with a 30-
year term has an adjustable-rate product with an introductory interest 
rate for the first 60 months, after which the interest rate is 
permitted, but not required to vary, according to the terms of an index 
rate, the financial institution complies with Sec. 1003.4(a)(26) by 
reporting the number of months as ``60.'' Similarly, if a closed-end 
mortgage loan with a 30-year term is a step-rate product with an 
introductory interest rate for the first 24 months, after which the 
interest rate will increase to a different known interest rate for the 
next 36 months, the financial institution complies with 
Sec. 1003.4(a)(26) by reporting the number of months as ``24.''
    2. Preferred rates. Section 1003.4(a)(26) does not require reporting 
of introductory interest rate periods based on preferred rates unless 
the terms of the legal obligation provide that the preferred rate will 
expire at a certain defined date. Preferred rates include terms of the 
legal obligation that provide that the initial underlying rate is fixed 
but that it may increase or decrease upon the occurrence of some future 
event, such as an employee leaving the employ of the financial 
institution, the borrower closing an existing deposit account with the 
financial institution, or the borrower revoking an election to make 
automated payments. In these cases, because it is not known at the time 
of closing or account opening whether the future event will occur, and 
if so, when it will occur, Sec. 1003.4(a)(26) does not require reporting 
of an introductory interest rate period.
    3. Loan or application with a fixed rate. A financial institution 
complies with Sec. 1003.4(a)(26) by reporting that the requirement is 
not applicable for a covered loan with a fixed rate or an application 
for a covered loan with a fixed rate.
    4. Purchased loan. A financial institution complies with 
Sec. 1003.4(a)(26) by reporting that requirement is not applicable when 
the covered loan is a purchased covered loan with a fixed rate.

                           Paragraph 4(a)(27)

    1. General. Section 1003.4(a)(27) requires reporting of contractual 
features that would allow payments other than fully amortizing payments. 
Section 1003.4(a)(27) defines the contractual features by reference to 
Regulation Z, 12 CFR part 1026, but without regard to whether the 
covered loan is consumer credit, as defined in Sec. 1026.2(a)(12), is 
extended by a creditor, as defined in Sec. 1026.2(a)(17), or is extended 
to a consumer, as defined in Sec. 1026.2(a)(11), and without regard to 
whether the property is a dwelling as defined in Sec. 1026.2(a)(19). For 
example, assume that a financial institution originates a business-
purpose transaction that is exempt from Regulation Z pursuant to 12 CFR 
1026.3(a)(1), to finance the purchase of a multifamily dwelling, and 
that there is a balloon payment, as defined by Regulation Z, 12 CFR 
1026.18(s)(5)(i), at the end of the loan term. The multifamily dwelling 
is a dwelling under Sec. 1003.2(f), but not under Regulation Z, 12 CFR 
1026.2(a)(19). In this example, the financial institution should report 
the business-purpose transaction as having a balloon payment under 
Sec. 1003.4(a)(27)(i), assuming the other requirements of this part are 
met. Aside from these distinctions, financial institutions may rely on 
the definitions and related commentary provided in the appropriate 
sections of Regulation Z referenced in Sec. 1003.4(a)(27) of this part 
in determining

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whether the contractual feature should be reported.

                           Paragraph 4(a)(28).

    1. General. A financial institution reports the property value 
relied on in making the credit decision. For example, if the institution 
relies on an appraisal or other valuation for the property in 
calculating the loan-to-value ratio, it reports that value; if the 
institution relies on the purchase price of the property in calculating 
the loan-to-value ratio, it reports that value.
    2. Multiple property values. When a financial institution obtains 
two or more valuations of the property securing or proposed to secure 
the covered loan, the financial institution complies with 
Sec. 1003.4(a)(28) by reporting the value relied on in making the credit 
decision. For example, when a financial institution obtains an 
appraisal, an automated valuation model report, and a broker price 
opinion with different values for the property, it reports the value 
relied on in making the credit decision. Section Sec. 1003.4(a)(28) does 
not require a financial institution to use a particular property 
valuation method, but instead requires a financial institution to report 
the valuation relied on in making the credit decision.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness or the application was withdrawn before a 
credit decision was made, the financial institution complies with 
Sec. 1003.4(a)(28) by reporting that the requirement is not applicable, 
even if the financial institution had obtained a property value. For 
example, if a file is closed for incompleteness and is so reported in 
accordance with Sec. 1003.4(a)(8), the financial institution complies 
with Sec. 1003.4(a)(28) by reporting that the requirement is not 
applicable, even if the financial institution had obtained a property 
value. Similarly, if an application was withdrawn by the applicant 
before a credit decision was made and is so reported in accordance with 
Sec. 1003.4(a)(8), the financial institution complies with 
Sec. 1003.4(a)(28) by reporting that the requirement is not applicable, 
even if the financial institution had obtained a property value.
    4. Transactions for which no property value was relied on. Section 
1003.4(a)(28) does not require a financial institution to obtain a 
property valuation, nor does it require a financial institution to rely 
on a property value in making a credit decision. If a financial 
institution makes a credit decision without relying on a property value, 
the financial institution complies with Sec. 1003.4(a)(28) by reporting 
that the requirement is not applicable since no property value was 
relied on in making the credit decision.

                           Paragraph 4(a)(29)

    1. Classification under State law. A financial institution should 
report a covered loan that is or would have been secured only by a 
manufactured home but not the land on which it is sited as secured by a 
manufactured home and not land, even if the manufactured home is 
considered real property under applicable State law.
    2. Manufactured home community. A manufactured home community that 
is a multifamily dwelling is not considered a manufactured home for 
purposes of Sec. 1003.4(a)(29).
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    4. Scope of requirement. A financial institution reports that the 
requirement is not applicable for a covered loan where the dwelling 
related to the property identified in Sec. 1003.4(a)(9) is not a 
manufactured home.

                           Paragraph 4(a)(30)

    1. Indirect land ownership. Indirect land ownership can occur when 
the applicant or borrower is or will be a member of a resident-owned 
community structured as a housing cooperative in which the occupants own 
an entity that holds the underlying land of the manufactured home 
community. In such communities, the applicant or borrower may still have 
a lease and pay rent for the lot on which his or her manufactured home 
is or will be located, but the property interest type for such an 
arrangement should be reported as indirect ownership if the applicant is 
or will be a member of the cooperative that owns the underlying land of 
the manufactured home community. If an applicant resides or will reside 
in such a community but is not a member, the property interest type 
should be reported as a paid leasehold.
    2. Leasehold interest. A leasehold interest could be formalized in a 
lease with a defined term and specified rent payments, or could arise as 
a tenancy at will through permission of a land owner without any 
written, formal arrangement. For example, assume a borrower will locate 
the manufactured home in a manufactured home community, has a written 
lease for a lot in that park, and the lease specifies rent payments. In 
this example, a financial institution complies with Sec. 1003.4(a)(30) 
by reporting a paid leasehold. However, if instead the borrower will 
locate the manufactured home on land owned by a family member without a 
written lease and with no agreement as to rent payments, a financial 
institution complies with Sec. 1003.4(a)(30) by reporting an unpaid 
leasehold.
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.

[[Page 155]]

    4. Manufactured home community. A manufactured home community that 
is a multifamily dwelling is not considered a manufactured home for 
purposes of Sec. 1003.4(a)(30).
    5. Direct ownership. An applicant or borrower has a direct ownership 
interest in the land on which the dwelling is or is to be located when 
it has a more than possessory real property ownership interest in the 
land such as fee simple ownership.
    6. Scope of requirement. A financial institution reports that the 
requirement is not applicable for a covered loan where the dwelling 
related to the property identified in Sec. 1003.4(a)(9) is not a 
manufactured home.

                           Paragraph 4(a)(31)

    1. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    2. Manufactured home community. For an application or covered loan 
secured by a manufactured home community, the financial institution 
should include in the number of individual dwelling units the total 
number of manufactured home sites that secure the loan and are available 
for occupancy, regardless of whether the sites are currently occupied or 
have manufactured homes currently attached. A financial institution may 
include in the number of individual dwelling units other units such as 
recreational vehicle pads, manager apartments, rental apartments, site-
built homes or other rentable space that are ancillary to the operation 
of the secured property if it considers such units under its 
underwriting guidelines or the guidelines of an investor, or if it 
tracks the number of such units for its own internal purposes. For a 
loan secured by a single manufactured home that is or will be located in 
a manufactured home community, the financial institution should report 
one individual dwelling unit.
    3. Condominium and cooperative projects. For a covered loan secured 
by a condominium or cooperative property, the financial institution 
reports the total number of individual dwelling units securing the 
covered loan or proposed to secure the covered loan in the case of an 
application. For example:
    i. Assume that a loan is secured by the entirety of a cooperative 
property. The financial institution would report the number of 
individual dwelling units in the cooperative property.
    ii. Assume that a covered loan is secured by 30 individual dwelling 
units in a condominium property that contains 100 individual dwelling 
units and that the loan is not exempt from Regulation C under 
Sec. 1003.3(c)(3). The financial institution reports 30 individual 
dwelling units.
    4. Best information available. A financial institution may rely on 
the best information readily available to the financial institution at 
the time final action is taken and on the financial institution's own 
procedures in reporting the information required by Sec. 1003.4(a)(31). 
Information readily available could include, for example, information 
provided by an applicant that the financial institution reasonably 
believes, information contained in a property valuation or inspection, 
or information obtained from public records.

                           Paragraph 4(a)(32)

    1. Affordable housing income restrictions. For purposes of 
Sec. 1003.4(a)(32), affordable housing income-restricted units are 
individual dwelling units that have restrictions based on the income 
level of occupants pursuant to restrictive covenants encumbering the 
property. Such income levels are frequently expressed as a percentage of 
area median income by household size as established by the U.S. 
Department of Housing and Urban Development or another agency 
responsible for implementing the applicable affordable housing program. 
Such restrictions are frequently part of compliance with programs that 
provide public funds, special tax treatment, or density bonuses to 
encourage development or preservation of affordable housing. Such 
restrictions are frequently evidenced by a use agreement, regulatory 
agreement, land use restriction agreement, housing assistance payments 
contract, or similar agreement. Rent control or rent stabilization laws, 
and the acceptance by the owner or manager of a multifamily dwelling of 
Housing Choice Vouchers (24 CFR part 982) or other similar forms of 
portable housing assistance that are tied to an occupant and not an 
individual dwelling unit, are not affordable housing income-restricted 
dwelling units for purposes of Sec. 1003.4(a)(32).
    2. Federal affordable housing sources. Examples of Federal programs 
and funding sources that may result in individual dwelling units that 
are reportable under Sec. 1003.4(a)(32) include, but are not limited to:
    i. Affordable housing programs pursuant to Section 8 of the United 
States Housing Act of 1937 (42 U.S.C. 1437f);
    ii. Public housing (42 U.S.C. 1437a(b)(6));
    iii. The HOME Investment Partnerships program (24 CFR part 92);
    iv. The Community Development Block Grant program (24 CFR part 570);
    v. Multifamily tax subsidy project funding through tax-exempt bonds 
or tax credits (26 U.S.C. 42; 26 U.S.C. 142(d));
    vi. Project-based vouchers (24 CFR part 983);
    vii. Federal Home Loan Bank affordable housing program funding (12 
CFR part 1291); and
    viii. Rural Housing Service multifamily housing loans and grants (7 
CFR part 3560).
    3. State and local government affordable housing sources. Examples 
of State and local

[[Page 156]]

sources that may result in individual dwelling units that are reportable 
under Sec. 1003.4(a)(32) include, but are not limited to: State or local 
administration of Federal funds or programs; State or local funding 
programs for affordable housing or rental assistance, including programs 
operated by independent public authorities; inclusionary zoning laws; 
and tax abatement or tax increment financing contingent on affordable 
housing requirements.
    4. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    5. Best information available. A financial institution may rely on 
the best information readily available to the financial institution at 
the time final action is taken and on the financial institution's own 
procedures in reporting the information required by Sec. 1003.4(a)(32). 
Information readily available could include, for example, information 
provided by an applicant that the financial institution reasonably 
believes, information contained in a property valuation or inspection, 
or information obtained from public records.
    6. Scope of requirement. A financial institution reports that the 
requirement is not applicable if the property securing the covered loan 
or, in the case of an application, proposed to secure the covered loan 
is not a multifamily dwelling.

                           Paragraph 4(a)(33)

    1. Agents. If a financial institution is reporting actions taken by 
its agent consistent with comment 4(a)-4, the agent is not considered 
the financial institution for the purposes of Sec. 1003.4(a)(33). For 
example, assume that an applicant submitted an application to Financial 
Institution A, and Financial Institution A made the credit decision 
acting as Financial Institution B's agent under State law. A covered 
loan was originated and the obligation arising from a covered loan was 
initially payable to Financial Institution A. Financial Institution B 
purchased the loan. Financial Institution B reports the origination and 
not the purchase, and indicates that the application was not submitted 
directly to the financial institution and that the transaction was not 
initially payable to the financial institution.

                          Paragraph 4(a)(33)(i)

    1. General. Section 4(a)(33)(i) requires a financial institution to 
indicate whether the applicant or borrower submitted the application 
directly to the financial institution that is reporting the covered loan 
or application. The following scenarios demonstrate whether an 
application was submitted directly to the financial institution that is 
reporting the covered loan or application.
    i. The application was submitted directly to the financial 
institution if the mortgage loan originator identified pursuant to 
Sec. 1003.4(a)(34) was an employee of the reporting financial 
institution when the originator performed the origination activities for 
the covered loan or application that is being reported.
    ii. The application was also submitted directly to the financial 
institution reporting the covered loan or application if the reporting 
financial institution directed the applicant to a third-party agent 
(e.g., a credit union service organization) that performed loan 
origination activities on behalf of the financial institution and did 
not assist the applicant with applying for covered loans with other 
institutions.
    iii. If an applicant contacted and completed an application with a 
broker or correspondent that forwarded the application to a financial 
institution for approval, an application was not submitted to the 
financial institution.

                         Paragraph 4(a)(33)(ii)

    1. General. Section 1003.4(a)(33)(ii) requires financial 
institutions to report whether the obligation arising from a covered 
loan was or, in the case of an application, would have been initially 
payable to the institution. An obligation is initially payable to the 
institution if the obligation is initially payable either on the face of 
the note or contract to the financial institution that is reporting the 
covered loan or application. For example, if a financial institution 
reported an origination of a covered loan that it approved prior to 
closing, that closed in the name of a third-party, such as a 
correspondent lender, and that the financial institution purchased after 
closing, the covered loan was not initially payable to the financial 
institution.
    2. Applications. A financial institution complies with 
Sec. 1003.4(a)(33)(ii) by reporting that the requirement is not 
applicable if the institution had not determined whether the covered 
loan would have been initially payable to the institution reporting the 
application when the application was withdrawn, denied, or closed for 
incompleteness.

                           Paragraph 4(a)(34)

    1. NMLSR ID. Section 1003.4(a)(34) requires a financial institution 
to report the Nationwide Mortgage Licensing System and Registry unique 
identifier (NMLSR ID) for the mortgage loan originator, as defined in 
Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, as 
applicable. The NMLSR ID is a unique number or other identifier 
generally assigned to individuals registered or licensed through NMLSR 
to provide loan originating services. For more information, see the 
Secure and Fair Enforcement for

[[Page 157]]

Mortgage Licensing Act of 2008, title V of the Housing and Economic 
Recovery Act of 2008 (S.A.F.E. Act), 12 U.S.C. 5101 et seq., and its 
implementing regulations (12 CFR part 1007 and 12 CFR part 1008).
    2. Mortgage loan originator without NMLSR ID. An NMLSR ID for the 
mortgage loan originator is not required by Sec. 1003.4(a)(34) to be 
reported by a financial institution if the mortgage loan originator is 
not required to obtain and has not been assigned an NMLSR ID. For 
example, certain individual mortgage loan originators may not be 
required to obtain an NMLSR ID for the particular transaction being 
reported by the financial institution, such as a commercial loan. 
However, some mortgage loan originators may have obtained an NMLSR ID 
even if they are not required to obtain one for that particular 
transaction. If a mortgage loan originator has been assigned an NMLSR 
ID, a financial institution complies with Sec. 1003.4(a)(34) by 
reporting the mortgage loan originator's NMLSR ID regardless of whether 
the mortgage loan originator is required to obtain an NMLSR ID for the 
particular transaction being reported by the financial institution. In 
the event that the mortgage loan originator is not required to obtain 
and has not been assigned an NMLSR ID, a financial institution complies 
with Sec. 1003.4(a)(34) by reporting that the requirement is not 
applicable.
    3. Multiple mortgage loan originators. If more than one individual 
associated with a covered loan or application meets the definition of a 
mortgage loan originator, as defined in Regulation G, 12 CFR 1007.102, 
or Regulation H, 12 CFR 1008.23, a financial institution complies with 
Sec. 1003.4(a)(34) by reporting the NMLSR ID of the individual mortgage 
loan originator with primary responsibility for the transaction as of 
the date of action taken pursuant to Sec. 1003.4(a)(8)(ii). A financial 
institution that establishes and follows a reasonable, written policy 
for determining which individual mortgage loan originator has primary 
responsibility for the reported transaction as of the date of action 
taken complies with Sec. 1003.4(a)(34).

                           Paragraph 4(a)(35)

    1. Automated underwriting system data--general. A financial 
institution complies with Sec. 1003.4(a)(35) by reporting, except for 
purchased covered loans, the name of the automated underwriting system 
(AUS) used by the financial institution to evaluate the application and 
the result generated by that AUS. The following scenarios illustrate 
when a financial institution reports the name of the AUS used by the 
financial institution to evaluate the application and the result 
generated by that AUS.
    i. A financial institution that uses an AUS, as defined in 
Sec. 1003.4(a)(35)(ii), to evaluate an application, must report the name 
of the AUS used by the financial institution to evaluate the application 
and the result generated by that system, regardless of whether the AUS 
was used in its underwriting process. For example, if a financial 
institution uses an AUS to evaluate an application prior to submitting 
the application through its underwriting process, the financial 
institution complies with Sec. 1003.4(a)(35) by reporting the name of 
the AUS it used to evaluate the application and the result generated by 
that system.
    ii. A financial institution that uses an AUS, as defined in 
Sec. 1003.4(a)(35)(ii), to evaluate an application, must report the name 
of the AUS it used to evaluate the application and the result generated 
by that system, regardless of whether the financial institution intends 
to hold the covered loan in its portfolio or sell the covered loan. For 
example, if a financial institution uses an AUS developed by a 
securitizer to evaluate an application and intends to sell the covered 
loan to that securitizer but ultimately does not sell the covered loan 
and instead holds the covered loan in its portfolio, the financial 
institution complies with Sec. 1003.4(a)(35) by reporting the name of 
the securitizer's AUS that the institution used to evaluate the 
application and the result generated by that system. Similarly, if a 
financial institution uses an AUS developed by a securitizer to evaluate 
an application to determine whether to originate the covered loan but 
does not intend to sell the covered loan to that securitizer and instead 
holds the covered loan in its portfolio, the financial institution 
complies with Sec. 1003.4(a)(35) by reporting the name of the 
securitizer's AUS that the institution used to evaluate the application 
and the result generated by that system.
    iii. A financial institution that uses an AUS, as defined in 
Sec. 1003.4(a)(35)(ii), that is developed by a securitizer to evaluate 
an application, must report the name of the AUS it used to evaluate the 
application and the result generated by that system, regardless of 
whether the securitizer intends to hold the covered loan it purchased 
from the financial institution in its portfolio or securitize the 
covered loan. For example, if a financial institution uses an AUS 
developed by a securitizer to evaluate an application and the financial 
institution sells the covered loan to that securitizer but the 
securitizer holds the covered loan it purchased in its portfolio, the 
financial institution complies with Sec. 1003.4(a)(35) by reporting the 
name of the securitizer's AUS that the institution used to evaluate the 
application and the result generated by that system.
    iv. A financial institution, which is also a securitizer, that uses 
its own AUS, as defined in Sec. 1003.4(a)(35)(ii), to evaluate an 
application, must report the name of the AUS it used to evaluate the 
application and the result generated by that system, regardless of

[[Page 158]]

whether the financial institution intends to hold the covered loan it 
originates in its portfolio, purchase the covered loan, or securitize 
the covered loan. For example, if a financial institution, which is also 
a securitizer, has developed its own AUS and uses that AUS to evaluate 
an application that it intends to originate and hold in its portfolio 
and not purchase or securitize the covered loan, the financial 
institution complies with Sec. 1003.4(a)(35) by reporting the name of 
its AUS that it used to evaluate the application and the result 
generated by that system.
    2. Definition of automated underwriting system. A financial 
institution must report the information required by 
Sec. 1003.4(a)(35)(i) if the financial institution uses an automated 
underwriting system (AUS), as defined in Sec. 1003.4(a)(35)(ii), to 
evaluate an application. In order for an AUS to be covered by the 
definition in Sec. 1003.4(a)(35)(ii), the system must be an electronic 
tool that has been developed by a securitizer, Federal government 
insurer, or a Federal government guarantor. For example, if a financial 
institution has developed its own proprietary system that it uses to 
evaluate an application and the financial institution is also a 
securitizer, then the financial institution complies with 
Sec. 1003.4(a)(35) by reporting the name of that system and the result 
generated by that system. On the other hand, if a financial institution 
has developed its own proprietary system that it uses to evaluate an 
application but the financial institution is not a securitizer, then the 
financial institution is not required by Sec. 1003.4(a)(35) to report 
the use of that system and the result generated by that system. In 
addition, in order for an AUS to be covered by the definition in 
Sec. 1003.4(a)(35)(ii), the system must provide a result regarding both 
the credit risk of the applicant and the eligibility of the covered loan 
to be originated, purchased, insured, or guaranteed by the securitizer, 
Federal government insurer, or Federal government guarantor that 
developed the system being used to evaluate the application. For 
example, if a system is an electronic tool that provides a determination 
of the eligibility of the covered loan to be originated, purchased, 
insured, or guaranteed by the securitizer, Federal government insurer, 
or Federal government guarantor that developed the system being used by 
a financial institution to evaluate the application, but the system does 
not also provide an assessment of the creditworthiness of the 
applicant--such as, an evaluation of the applicant's income, debt, and 
credit history--then that system does not qualify as an AUS, as defined 
in Sec. 1003.4(a)(35)(ii). A financial institution that uses a system 
that is not an AUS, as defined in Sec. 1003.4(a)(35)(ii), to evaluate an 
application does not report the information required by 
Sec. 1003.4(a)(35)(i).
    3. Reporting automated underwriting system data--multiple results. 
When a financial institution uses one or more automated underwriting 
systems (AUS) to evaluate the application and the system or systems 
generate two or more results, the financial institution complies with 
Sec. 1003.4(a)(35) by reporting, except for purchased covered loans, the 
name of the AUS used by the financial institution to evaluate the 
application and the result generated by that AUS as determined by the 
following principles. To determine what AUS (or AUSs) and result (or 
results) to report under Sec. 1003.4(a)(35), a financial institution 
follows each of the principles that is applicable to the application in 
question, in the order in which they are set forth below.
    i. If a financial institution obtains two or more AUS results and 
the AUS generating one of those results corresponds to the loan type 
reported pursuant to Sec. 1003.4(a)(2), the financial institution 
complies with Sec. 1003.4(a)(35) by reporting that AUS name and result. 
For example, if a financial institution evaluates an application using 
the Federal Housing Administration's (FHA) Technology Open to Approved 
Lenders (TOTAL) Scorecard and subsequently evaluates the application 
with an AUS used to determine eligibility for a non-FHA loan, but 
ultimately originates an FHA loan, the financial institution complies 
with Sec. 1003.4(a)(35) by reporting TOTAL Scorecard and the result 
generated by that system. If a financial institution obtains two or more 
AUS results and more than one of those AUS results is generated by a 
system that corresponds to the loan type reported pursuant to 
Sec. 1003.4(a)(2), the financial institution identifies which AUS result 
should be reported by following the principle set forth below in comment 
4(a)(35)-3.ii.
    ii. If a financial institution obtains two or more AUS results and 
the AUS generating one of those results corresponds to the purchaser, 
insurer, or guarantor, if any, the financial institution complies with 
Sec. 1003.4(a)(35) by reporting that AUS name and result. For example, 
if a financial institution evaluates an application with the AUS of 
Securitizer A and subsequently evaluates the application with the AUS of 
Securitizer B, but the financial institution ultimately originates a 
covered loan that it sells within the same calendar year to Securitizer 
A, the financial institution complies with Sec. 1003.4(a)(35) by 
reporting the name of Securitizer A's AUS and the result generated by 
that system. If a financial institution obtains two or more AUS results 
and more than one of those AUS results is generated by a system that 
corresponds to the purchaser, insurer, or guarantor, if any, the 
financial institution identifies which AUS result should be reported by 
following the principle set forth below in comment 4(a)(35)-3.iii.

[[Page 159]]

    iii. If a financial institution obtains two or more AUS results and 
none of the systems generating those results correspond to the 
purchaser, insurer, or guarantor, if any, or the financial institution 
is following this principle because more than one AUS result is 
generated by a system that corresponds to either the loan type or the 
purchaser, insurer, or guarantor, the financial institution complies 
with Sec. 1003.4(a)(35) by reporting the AUS result generated closest in 
time to the credit decision and the name of the AUS that generated that 
result. For example, if a financial institution evaluates an application 
with the AUS of Securitizer A, subsequently again evaluates the 
application with Securitizer A's AUS, the financial institution complies 
with Sec. 1003.4(a)(35) by reporting the name of Securitizer A's AUS and 
the second AUS result. Similarly, if a financial institution obtains a 
result from an AUS that requires the financial institution to underwrite 
the loan manually, but the financial institution subsequently processes 
the application through a different AUS that also generates a result, 
the financial institution complies with Sec. 1003.4(a)(35) by reporting 
the name of the second AUS that it used to evaluate the application and 
the AUS result generated by that system.
    iv. If a financial institution obtains two or more AUS results at 
the same time and the principles in comment 4(a)(35)-3.i through .iii do 
not apply, the financial institution complies with Sec. 1003.4(a)(35) by 
reporting the name of all of the AUSs used by the financial institution 
to evaluate the application and the results generated by each of those 
systems. For example, if a financial institution simultaneously 
evaluates an application with the AUS of Securitizer A and the AUS of 
Securitizer B, the financial institution complies with 
Sec. 1003.4(a)(35) by reporting the name of both Securitizer A's AUS and 
Securitizer B's AUS and the results generated by each of those systems. 
In any event, however, the financial institution does not report more 
than five AUSs and five results. If more than five AUSs and five results 
meet the criteria in this principle, the financial institution complies 
with Sec. 1003.4(a)(35) by choosing any five among them to report.
    4. Transactions for which an automated underwriting system was not 
used to evaluate the application. Section 1003.4(a)(35) does not require 
a financial institution to evaluate an application using an automated 
underwriting system (AUS), as defined in Sec. 1003.4(a)(35)(ii). For 
example, if a financial institution only manually underwrites an 
application and does not use an AUS to evaluate the application, the 
financial institution complies with Sec. 1003.4(a)(35) by reporting that 
the requirement is not applicable since an AUS was not used to evaluate 
the application.
    5. Purchased covered loan. A financial institution complies with 
Sec. 1003.4(a)(35) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.
    6. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution complies 
with Sec. 1003.4(a)(35) by reporting that the requirement is not 
applicable.

                           Paragraph 4(a)(37)

    1. Open-end line of credit. Section 1003.4(a)(37) requires a 
financial institution to identify whether the covered loan or the 
application is for an open-end line of credit. See comments 2(o)-1 and -
2 for a discussion of open-end line of credit and extension of credit.

                           Paragraph 4(a)(38)

    1. Primary purpose. Section 1003.4(a)(38) requires a financial 
institution to identify whether the covered loan is, or the application 
is for a covered loan that will be, made primarily for a business or 
commercial purpose. See comment 3(c)(10)-2 for a discussion of how to 
determine the primary purpose of the transaction and the standard 
applicable to financial institution's determination of the primary 
purpose of the transaction. See comments 3(c)(10)-3 and -4 for examples 
of excluded and reportable business- or commercial-purpose transactions.

                    4(f) Quarterly Recording of Data

    1. General. Section 1003.4(f) requires a financial institution to 
record the data collected pursuant to Sec. 1003.4 on a loan/application 
register within 30 calendar days after the end of the calendar quarter 
in which final action is taken. Section 1003.4(f) does not require a 
financial institution to record data on a single loan/application 
register on a quarterly basis. Rather, for purposes of Sec. 1003.4(f), a 
financial institution may record data on a single loan/application 
register or separately for different branches or different loan types 
(such as home purchase or home improvement loans, or loans on 
multifamily dwellings).
    2. Agency requirements. Certain State or Federal regulations may 
require a financial institution to record its data more frequently than 
is required under Regulation C.
    3. Form of quarterly records. A financial institution may maintain 
the records required by Sec. 1003.4(f) in electronic or any other 
format, provided the institution can make the information available to 
its regulatory agency in a timely manner upon request.

                Section 1003.5--Disclosure and Reporting

                        5(a) Reporting to Agency

    1. [Reserved]

[[Page 160]]

    2. [Reserved]
    3. [Reserved]
    4. [Reserved]
    5. Change in appropriate Federal agency. If the appropriate Federal 
agency for a covered institution changes (as a consequence of a merger 
or a change in the institution's charter, for example), the institution 
must report data to the new appropriate Federal agency beginning with 
the year of the change.
    6. Subsidiaries. An institution is a subsidiary of a bank or savings 
association (for purposes of reporting HMDA data to the same agency as 
the parent) if the bank or savings association holds or controls an 
ownership interest that is greater than 50 percent of the institution.
    7. Transmittal sheet--additional data submissions. If an additional 
data submission becomes necessary (for example, because the institution 
discovers that data were omitted from the initial submission, or because 
revisions are called for), that submission must be accompanied by a 
transmittal sheet.
    8. Transmittal sheet--revisions or deletions. If a data submission 
involves revisions or deletions of previously submitted data, it must 
state the total of all line entries contained in that submission, 
including both those representing revisions or deletions of previously 
submitted entries, and those that are being resubmitted unchanged or are 
being submitted for the first time. Depository institutions must provide 
a list of the MSAs or Metropolitan Divisions in which they have home or 
branch offices.

                        5(b) Disclosure Statement

    1. Business day. For purposes of Sec. 1003.5(b), a business day is 
any calendar day other than a Saturday, Sunday, or legal public holiday.
    2. Format of notice. A financial institution may make the written 
notice required under Sec. 1003.5(b)(2) available in paper or electronic 
form.
    3. Notice--suggested text. A financial institution may use any text 
that meets the requirements of Sec. 1003.5(b)(2). The following language 
is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. These data 
are available online at the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda). HMDA data for many other financial 
institutions are also available at this Web site.
    4. Combined notice. A financial institution may use the same notice 
to satisfy the requirements of both Sec. 1003.5(b)(2) and 
Sec. 1003.5(c).

                 5(c) Modified loan/application Register

    1. Format of notice. A financial institution may make the written 
notice required under Sec. 1003.5(c)(1) available in paper or electronic 
form.
    2. Notice--suggested text. A financial institution may use any text 
that meets the requirements of Sec. 1003.5(c)(1). The following language 
is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. These data 
are available online at the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda). HMDA data for many other financial 
institutions are also available at this Web site.
    3. Combined notice. A financial institution may use the same notice 
to satisfy the requirements of both Sec. 1003.5(c) and 
Sec. 1003.5(b)(2).

               5(e) Posted Notice of Availability of Data

    1. Posted notice--suggested text. A financial institution may post 
any text that meets the requirements of Sec. 1003.5(e). The Bureau or 
other appropriate Federal agency for a financial institution may provide 
a notice that the institution can post to inform the public of the 
availability of its HMDA data, or an institution may create its own 
notice. The following language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. HMDA data 
for many other financial institutions are also available online. For 
more information, visit the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda).

                       Section 1003.6--Enforcement

                          6(b) Bona Fide Errors

    1. Bona fide error--information from third parties. An institution 
that obtains the property-location information for applications and 
loans from third parties (such as appraisers or vendors of ``geocoding'' 
services) is responsible for ensuring that the information reported on 
its HMDA/LAR is correct.

    Effective Date Note 2: At 80 FR 66339, Oct. 28, 2015, supplement I 
to part 1003 was amended: a. under the heading ``Section

[[Page 161]]

1003.5`` by adding paragraphs 1 through 4, revising paragraph 5, and 
removing paragraphs 6 through 8, and b. under the heading ``Section 
1003.6'', under the subheading ``6(b) Bona Fide Errors'' by revising 
paragraph 1, effective Jan. 1, 2019. For the convenience of the user, 
the added and revised text is set forth as follows:



        Sec. Supplement I to Part 1003--Official Interpretations

                                * * * * *

                Section 1003.5--Disclosure and Reporting

                        5(a) Reporting to Agency

    1. Quarterly reporting--coverage. i. Section 1003.5(a)(1)(ii) 
requires that, within 60 calendar days after the end of each calendar 
quarter except the fourth quarter, a financial institution that reported 
for the preceding calendar year at least 60,000 covered loans and 
applications, combined, excluding purchased covered loans, must submit 
its loan/application register containing all data required to be 
recorded for that quarter pursuant to Sec. 1003.4(f). For example, if 
for calendar year 2019 Financial Institution A reports 60,000 covered 
loans, excluding purchased covered loans, it must comply with 
Sec. 1003.5(a)(1)(ii) in calendar year 2020. Similarly, if for calendar 
year 2019 Financial Institution A reports 20,000 applications and 40,000 
covered loans, combined, excluding purchased covered loans, it must 
comply with Sec. 1003.5(a)(1)(ii) in calendar year 2020. If for calendar 
year 2020 Financial Institution A reports fewer than 60,000 covered 
loans and applications, combined, excluding purchased covered loans, it 
is not required to comply with Sec. 1003.5(a)(1)(ii) in calendar year 
2021.
    ii. In the calendar year of a merger or acquisition, the surviving 
or newly formed financial institution is required to comply with 
Sec. 1003.5(a)(1)(ii), effective the date of the merger or acquisition, 
if a combined total of at least 60,000 covered loans and applications, 
combined, excluding purchased covered loans, is reported for the 
preceding calendar year by or for the surviving or newly formed 
financial institution and each financial institution or branch office 
merged or acquired. For example, Financial Institution A and Financial 
Institution B merge to form Financial Institution C in 2020. Financial 
Institution A reports 40,000 covered loans and applications, combined, 
excluding purchased covered loans, for 2019. Financial Institution B 
reports 21,000 covered loans and applications, combined, excluding 
purchased covered loans, for 2019. Financial Institution C is required 
to comply with Sec. 1003.5(a)(1)(ii) effective the date of the merger. 
Similarly, for example, Financial Institution A acquires a branch office 
of Financial Institution B in 2020. Financial Institution A reports 
58,000 covered loans and applications, combined, excluding purchased 
covered loans, for 2019. Financial Institution B reports 3,000 covered 
loans and applications, combined, excluding purchased covered loans, for 
2019 for the branch office acquired by Financial Institution A. 
Financial Institution A is required to comply with Sec. 1003.5(a)(1)(ii) 
in 2020 effective the date of the branch acquisition.
    iii. In the calendar year following a merger or acquisition, the 
surviving or newly formed financial institution is required to comply 
with Sec. 1003.5(a)(1)(ii) if a combined total of at least 60,000 
covered loans and applications, combined, excluding purchased covered 
loans, is reported for the preceding calendar year by or for the 
surviving or newly formed financial institution and each financial 
institution or branch office merged or acquired. For example, Financial 
Institution A and Financial Institution B merge to form Financial 
Institution C in 2019. Financial Institution C reports 21,000 covered 
loans and applications, combined, excluding purchased covered loans, 
each for Financial Institution A, B, and C for 2019, for a combined 
total of 63,000 covered loans and applications reported, excluding 
purchased covered loans. Financial Institution C is required to comply 
with Sec. 1003.5(a)(1)(ii) in 2020. Similarly, for example, Financial 
Institution A acquires a branch office of Financial Institution B in 
2019. Financial Institution A reports 58,000 covered loans and 
applications, combined, excluding purchased covered loans, for 2019. 
Financial Institution A or B reports 3,000 covered loans and 
applications, combined, excluding purchased covered loans, for 2019 for 
the branch office acquired by Financial Institution A. Financial 
Institution A is required to comply with Sec. 1003.5(a)(1)(ii) in 2020.
    2. Change in appropriate Federal agency. If the appropriate Federal 
agency for a financial institution changes (as a consequence of a merger 
or a change in the institution's charter, for example), the institution 
must identify its new appropriate Federal agency in its annual 
submission of data pursuant to Sec. 1003.5(a)(1)(i) for the year of the 
change. For example, if an institution's appropriate Federal agency 
changes in February 2018, it must identify its new appropriate Federal 
agency beginning with the annual submission of its 2018 data by March 1, 
2019 pursuant to Sec. 1003.5(a)(1)(i). For an institution required to 
comply with Sec. 1003.5(a)(1)(ii), the institution also must identify 
its new appropriate Federal agency in its quarterly submission of data 
pursuant to Sec. 1003.5(a)(1)(ii) beginning with its submission for the 
quarter of the change, unless the change occurs during the fourth 
quarter. For example, if the appropriate Federal agency for an 
institution required to comply with Sec. 1003.5(a)(1)(ii) changes during 
February 2020,

[[Page 162]]

the institution must identify its new appropriate Federal agency 
beginning with its quarterly submission pursuant to 
Sec. 1003.5(a)(1)(ii) for the first quarter of 2020. If the appropriate 
Federal agency for an institution required to comply with 
Sec. 1003.5(a)(1)(ii) changes during December 2020, the institution must 
identify its new appropriate Federal agency beginning with the annual 
submission of its 2020 data by March 1, 2021 pursuant to 
Sec. 1003.5(a)(1)(i).
    3. Subsidiaries. A financial institution is a subsidiary of a bank 
or savings association (for purposes of reporting HMDA data to the same 
agency as the parent) if the bank or savings association holds or 
controls an ownership interest in the institution that is greater than 
50 percent.
    4. Retention. A financial institution may satisfy the requirement 
under Sec. 1003.5(a)(1)(i) that it retain a copy of its submitted annual 
loan/application register for three years by retaining a copy of the 
annual loan/application register in either electronic or paper form.
    5. Federal Taxpayer Identification Number. Section 1003.5(a)(3) 
requires a financial institution to provide its Federal Taxpayer 
Identification Number with its data submission. If a financial 
institution obtains a new Federal Taxpayer Identification Number, it 
should provide the new number in its subsequent data submission. For 
example, if two financial institutions that previously reported HMDA 
data under this part merge and the surviving institution retained its 
Legal Entity Identifier but obtained a new Federal Taxpayer 
Identification Number, then the surviving institution should report the 
new Federal Taxpayer Identification Number with its HMDA data 
submission.

                                * * * * *

                       Section 1003.6--Enforcement

                          6(b) Bona Fide Errors

    1. Information from third parties. Section 1003.6(b) provides that 
an error in compiling or recording data for a covered loan or 
application is not a violation of the Act or this part if the error was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such an error. A financial institution that 
obtains the required data, such as property-location information, from 
third parties is responsible for ensuring that the information reported 
pursuant to Sec. 1003.5 is correct.
      



PART 1004_ALTERNATIVE MORTGAGE TRANSACTION PARITY (REGULATION D)
--Table of Contents



Sec.
1004.1  Authority, purpose, and scope.
1004.2  Definitions.
1004.3  Preemption of State law.
1004.4  Requirements for alternative mortgage transactions.

Appendix A to Part 1004--Official Commentary on Regulation D

    Authority: 12 U.S.C. 3802, 3803; 15 U.S.C. 1604, 1639b; Pub. L. No. 
111-203, 124 Stat. 1376.

    Source: 76 FR 44242, July 22, 2011, unless otherwise noted.



Sec. 1004.1  Authority, purpose, and scope.

    (a) Authority. This regulation, known as Regulation D, is issued by 
the Bureau of Consumer Financial Protection to implement the Alternative 
Mortgage Transaction Parity Act, 12 U.S.C. 3801 et seq., as amended by 
title X, Section 1083 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203, 124 Stat. 1376). Section 1004.4 is 
issued pursuant to the Alternative Mortgage Transaction Parity Act (as 
amended) and the Truth in Lending Act, 15 U.S.C. 1601 et seq.
    (b) Purpose. Consistent with the Alternative Mortgage Transaction 
Parity Act, the Truth in Lending Act, and the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, the purpose of this regulation is to 
balance access to responsible credit and enhanced parity between State 
and federal housing creditors regarding the making, purchase, and 
enforcement of alternative mortgage transactions with consumer 
protection and the interests of the States in regulating mortgage 
transactions generally.
    (c) Scope. This regulation applies to an alternative mortgage 
transaction if the creditor received an application for that transaction 
on or after July 22, 2011. This regulation does not apply to a 
transaction if the creditor received the application for that 
transaction before July 22, 2011.



Sec. 1004.2  Definitions.

    For purposes of this part:
    Alternative mortgage transaction means a loan, credit sale, or 
account:

[[Page 163]]

    (1) That is secured by an interest in a residential structure that 
contains one to four units, whether or not that structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence;
    (2) That is made primarily for personal, family, or household 
purposes; and
    (3) In which the interest rate or finance charge may be adjusted or 
renegotiated.
    Creditor shall have the same meaning as in 12 CFR 226.2.
    Housing creditor means:
    (1) A depository institution, as defined in section 501(a)(2) of the 
Depository Institutions Deregulation and Monetary Control Act of 1980;
    (2) A lender approved by the Secretary of Housing and Urban 
Development for participation in any mortgage insurance program under 
the National Housing Act;
    (3) Any person who regularly makes loans, credit sales, or advances 
on an account secured by an interest in a residential structure that 
contains one to four units, whether or not the structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence; and
    (4) Any transferee of a party listed in paragraph (c)(1), (2), or 
(3) of this section.
    State means any State of the United States of America, the District 
of Columbia, Puerto Rico, the Virgin Islands, the Northern Mariana 
Islands, American Samoa, Guam, and any other territory or possession of 
the United States.
    State law means a State constitution, statute, or regulation or any 
provision thereof.



Sec. 1004.3  Preemption of State law.

    Pursuant to 12 U.S.C. 3803, a State-chartered or -licensed housing 
creditor may make, purchase, and enforce alternative mortgage 
transactions in accordance with Sec. 1004.4(a) through (c) of this part 
(as applicable), notwithstanding any provision of State law that 
restricts the ability of the housing creditor to adjust or renegotiate 
an interest rate or finance charge with respect to the transaction or to 
change the amount of interest or finance charges included in a regular 
periodic payment as a result of such an adjustment or renegotiation.



Sec. 1004.4  Requirements for alternative mortgage transactions.

    (a) Mortgages with adjustable rates or finance charges and home 
equity lines of credit. A creditor that makes an alternative mortgage 
transaction with an adjustable rate or finance charge may only increase 
the interest rate or finance charge as follows:
    (1) If the transaction is subject to 12 CFR 226.5b, the creditor 
must comply with 12 CFR 226.5b(f)(1).
    (2) For all other transactions, the creditor must use either:
    (i) An index to which changes in the interest rate are tied that is 
readily available to and verifiable by the borrower and beyond the 
control of the creditor; or
    (ii) A formula or schedule identifying the amount that the interest 
rate or finance charge may increase and the times at which, or 
circumstances under which, a change may be made.
    (b) Renegotiable rates for renewable balloon-payment mortgages. A 
creditor that makes an alternative mortgage transaction with payments 
based on an amortization period and a large final payment due after a 
shorter term may negotiate an increase or decrease in the interest rate 
when the transaction is renewed only if the creditor makes a written 
commitment to renew the transaction at specified intervals throughout 
the amortization period. However, the creditor is not required to renew 
the transaction if:
    (1) Any action or inaction by the consumer materially and adversely 
affects the creditor's security for the transaction or any right of the 
creditor in such security;
    (2) There is a material failure by the consumer to meet the 
repayment terms of the transaction;
    (3) There is fraud or a willful or knowing material 
misrepresentation by the consumer in connection with the transaction; or
    (4) Federal law dealing with credit extended by a depository 
institution to

[[Page 164]]

its executive officers specifically requires that as a condition of the 
extension the credit shall become due and payable on demand, provided 
that the creditor includes such a provision in the initial agreement.
    (c) Requirements for high-cost and higher-priced mortgage loans. (1) 
If an alternative mortgage transaction is subject to 12 CFR 226.32, the 
creditor must comply with 12 CFR 226.32 and 12 CFR 226.34.
    (2) If an alternative mortgage transaction is subject to 12 CFR 
226.35, the creditor must comply with 12 CFR 226.35.
    (d) Other applicable law. Notwithstanding paragraphs (a) through (c) 
of this section, a housing creditor that is not making an alternative 
mortgage transaction pursuant to Sec. 1004.3 of this part may make that 
transaction consistent with applicable State or Federal law other than 
this section.
    (e) Reductions in interest rate or finance charge. Nothing in this 
section prohibits a creditor from decreasing the interest rate or 
finance charge on an alternative mortgage transaction.



    Sec. Appendix A to Part 1004--Official Commentary on Regulation D

               Sec. 1004.1  Authority, Purpose, and Scope

                              1(c)  Scope.

    1. Application received before July 22, 2011. This part does not 
apply to a transaction if the creditor received the application for that 
transaction before July 22, 2011, even if the transaction was 
consummated or completed on or after July 22, 2011. Whether 12 U.S.C. 
3803(c) preempts State law with respect to such a transaction depends on 
whether: (1) The transaction was an alternative mortgage transaction as 
defined by the version of 12 U.S.C. 3802(1) in effect at the time of 
application; and (2) the State housing creditor complied with applicable 
federal regulations issued by the Office of the Comptroller of the 
Currency, the National Credit Union Administration, the Office of Thrift 
Supervision, or the Federal Home Loan Bank Board in effect at the time 
of application.
    2. Subsequent modifications and other actions. If applicable 
regulations under 12 U.S.C. 3803(c) (including this Part) preempted 
State law with respect to an alternative mortgage transaction at the 
time the application was received, the following actions with respect to 
that transaction are entitled to the same degree of preemption under 
such regulations:
    i. The subsequent consummation, completion, purchase, or enforcement 
of the transaction by a housing creditor.
    ii. The subsequent modification, renewal, or extension of the 
transaction. However, if such a transaction is satisfied and replaced by 
another transaction, the second transaction must independently meet the 
requirements for preemption in effect at the time the application for 
the second transaction was received.

                        Sec. 1004.2  Definitions

                 2(a)  Alternative Mortgage Transaction

    1. Alternative mortgage transaction. For purposes of this Part, an 
alternative mortgage transaction that meets the definition in 
Sec. 1004.2(a) includes any consumer credit transaction that is secured 
by a mortgage, deed of trust, or other equivalent consensual security 
interest in a dwelling or in residential real property that includes a 
dwelling. The dwelling need not be the primary dwelling of the consumer. 
Home equity lines of credit and subordinate lien mortgages are 
alternative mortgage transactions for purposes of this part to the 
extent they meet the definition in Sec. 1004.2(a).
    2. Examples of alternative mortgage transactions. Examples of 
alternative mortgage transactions include:
    i. Transactions in which the interest rate changes in accordance 
with fluctuations in an index.
    ii. Transactions in which the interest rate or finance charge may be 
increased or decreased after a specified period of time or under 
specified circumstances.
    iii. Balloon transactions in which payments are based on an 
amortization schedule and a large final payment is due after a shorter 
term, where the creditor makes a commitment to renew the transaction at 
specified intervals throughout the amortization period, but the interest 
rate may be renegotiated at renewal. For example, a fixed-rate mortgage 
loan with a 30-year amortization period but a balloon payment due five 
years after consummation is an alternative mortgage transaction under 
Sec. 1004.2(a) if the creditor commits to renew the mortgage at five-
year intervals for the entire 30-year amortization period.
    iv. Transactions in which the creditor and the consumer agree to 
share some or all of the appreciation in the value of the property 
(shared equity/shared appreciation).
    However, this part preempts State law only to the extent provided in 
Sec. 1004.3 and only to the extent that the requirements of 
Sec. 1004.4(a) through (c) (as applicable) are met.
    3. Examples of transactions that are not alternative mortgage 
transactions. The following are examples of transactions that are not 
alternative mortgage transactions:

[[Page 165]]

    i. Transactions with a fixed interest rate where one or more of the 
regular periodic payments may be applied solely to accrued interest and 
not to loan principal (an interest-only feature).
    ii. Balloon transactions with a fixed interest rate where payments 
are based on an amortization schedule and a large final payment is due 
after a shorter term, where the creditor does not make a commitment to 
renew the transaction at specified intervals throughout the amortization 
period.
    iii. Transactions with a fixed interest rate where one or more of 
the regular periodic payments may result in an increase in the principal 
balance (a negative amortization feature).

                             2(b)  Creditor

    1. Creditor. As defined in 12 CFR 226.2, ``creditor'' includes 
federally and State-chartered banks, thrifts, and credit unions, as well 
as non-depository institutions, such as State-licensed lenders. The 
Official Staff Commentary to 12 CFR 226.2 contains additional guidance 
on the definition of the term ``creditor.'' See 12 CFR 226.2, Supp. I.

                  Sec. 1004.3  Preemption of State Law

    1. Scope of State laws. Regardless of whether a State law applies 
solely to alternative mortgage transactions or applies to both 
alternative mortgage transactions and other mortgage or consumer credit 
transactions, that law is preempted by Sec. 1004.3 only to the extent 
that it restricts the ability of a State-chartered or -licensed housing 
creditor to adjust or renegotiate an interest rate or finance charge 
with respect to an alternative mortgage transaction or to change the 
amount of interest or finance charges included in a regular periodic 
payment as a result of such an adjustment or renegotiation.
    2. Examples of State laws that are preempted. The following are 
examples of State laws that are preempted by Sec. 1004.3:
    i. Restrictions on the adjustment or renegotiation of an interest 
rate or finance charge, including restrictions on the circumstances 
under which a rate or charge may be adjusted, the method by which a rate 
or charge may be adjusted, and the amount of the adjustment to the rate 
or charge. For example, if a provision of State law prohibits creditors 
from increasing an adjustable rate more than two percentage points or 
from increasing an adjustable rate more than once during a year, that 
provision is preempted by Sec. 1004.3 with respect to alternative 
mortgage transactions that comply with Sec. 1004.4(a) through (c), as 
applicable. Similarly, if a provision of State law prohibits housing 
creditors from renewing balloon transactions that meet the definition of 
an alternative mortgage transaction in Sec. 1004.2(a) on different 
terms, that provision is preempted by Sec. 1004.3 only to the extent 
that it restricts a state housing creditor's ability to adjust or 
renegotiate the interest rate or finance charge at renewal. See also 
comment 1004.3-3.i.
    ii. Restrictions on the ability of a housing creditor to change the 
amount of interest or finance charges included in regular periodic 
payments as a result of the adjustment or renegotiation of an interest 
rate or finance charge. For example, if a provision of State law 
prohibits housing creditors from increasing payments or limits the 
amount of such increases with respect to both alternative mortgage 
transactions and other mortgage or consumer credit transactions, that 
provision is preempted by Sec. 1004.3 to the extent that it restricts a 
housing creditor's ability to adjust payments as a result of the 
adjustment or renegotiation of an interest rate on an alternative 
mortgage transaction. Other restrictions on changes to payments are not 
preempted, including restrictions on transactions in which one or more 
of the regular periodic payments may result in an increase in the 
principal balance (a negative amortization feature) or may be applied 
solely to accrued interest and not to loan principal (an interest-only 
feature).
    iii. Restrictions on the creditor and the consumer sharing some or 
all of the appreciation in the value of the property (shared equity/
shared appreciation).
    iv. Underwriting requirements that address the adjustment or 
renegotiation of interest rates or finance charges. For example, if a 
provision of State law requires housing creditors to underwrite based on 
the maximum contractual rate, that provision is preempted by Sec. 1004.3 
with respect to alternative mortgage transactions, regardless of whether 
the provision applies solely to alternative mortgage transactions or to 
both alternative mortgage transactions and other mortgage or consumer 
credit transactions.
    3. Examples of State laws that are not preempted. The following are 
examples of State laws that are not preempted by Sec. 1004.3 regardless 
of whether the provision applies solely to alternative mortgage 
transactions or to both alternative mortgage transactions and other 
mortgage or consumer credit transactions:
    i. Restrictions on prepayment penalties or late charges (including 
an increase in an interest rate or finance charge as a result of a late 
payment).
    ii. Restrictions on transactions in which one or more of the regular 
periodic payments may result in an increase in the principal balance (a 
negative amortization feature) or may be applied solely to accrued 
interest and not to loan principal (an interest-only feature).
    iii. Requirements that disclosures be provided.

[[Page 166]]

     Sec. 1004.4  Requirements for Alternative Mortgage Transactions

4(a)  Mortgages With Adjustable or Renegotiable Rates or Finance Charges 
                     and Home Equity Lines of Credit

    1. Index values. A creditor may use any measure of index values that 
meets the requirements in Sec. 1004.4(a)(2)(i). For example, the index 
may be either single values as of a specific date or an average of 
values calculated over a specified period.
    2. Index beyond creditor's control. A creditor may increase an 
adjustable interest rate pursuant to Sec. 1004.4(a)(2)(i) only if the 
increase is based on an index that is beyond the creditor's control. For 
purposes of Sec. 1004.4(a)(2)(i), an index is not beyond the creditor's 
control if the index is the creditor's own prime rate or cost of funds. 
A creditor is permitted, however, to use a published prime rate, such as 
the prime rate published in the Wall Street Journal, even if the 
creditor's own prime rate is one of several rates used to establish the 
published rate.
    3. Publicly available. For purposes of Sec. 1004.4(a)(2)(i), the 
index must be available to the public. A publicly available index need 
not be published in a newspaper, but it must be one the consumer can 
independently obtain (by telephone, for example) and use to verify the 
annual percentage rate applied to the alternative mortgage transaction.

    4(c)  Requirements for High-Cost and Higher-Priced Mortgage Loans

    1. Prepayment penalties. If applicable, creditors must comply with 
12 CFR 226.32, including 12 CFR 226.32(d)(6) and (d)(7) which provide 
limitations on prepayment penalties. Similarly, if applicable, creditors 
must comply with 12 CFR 226.35, including 12 CFR 226.35(b)(2), which 
also provides limitations on prepayment penalties. However, under 
Sec. 1004.3, State laws regarding prepayment penalties are not 
preempted. See comment 1004.3-3.i. Accordingly, creditors must also 
comply with any State laws regarding prepayment penalties unless an 
independent basis for preemption exists, such as because the State law 
is inconsistent with the requirements of Regulation Z, 12 CFR part 226. 
See 12 CFR 226.28.

                       4(d)  Other Applicable Law

    1. Other applicable law. Section 1004.4(d) permits state housing 
creditors that do not seek preemption under Sec. 1004.3 and federal 
housing creditors to make alternative mortgage transactions consistent 
with applicable State or federal law other than Sec. 1004.4(a) through 
(c). However, Sec. 1004.4(d) does not exempt those housing creditors 
from complying with the provisions of federal law that are incorporated 
by reference in Sec. 1004.4 and are otherwise applicable to the 
creditor. Specifically, nothing in Sec. 1004.4(d) exempts a housing 
creditor from complying with 12 CFR 226.5b, 226.32, 226.34, or 226.35.



PART 1005_ELECTRONIC FUND TRANSFERS (REGULATION E)--Table of Contents



                            Subpart A_General

Sec.
1005.1  Authority and purpose.
1005.2  Definitions.
1005.3  Coverage.
1005.4  General disclosure requirements; jointly offered services.
1005.5  Issuance of access devices.
1005.6  Liability of consumer for unauthorized transfers.
1005.7  Initial disclosures.
1005.8  Change in terms notice; error resolution notice.
1005.9  Receipts at electronic terminals; periodic statements.
1005.10  Preauthorized transfers.
1005.11  Procedures for resolving errors.
1005.12  Relation to other laws.
1005.13  Administrative enforcement; record retention.
1005.14  Electronic fund transfer service provider not holding 
          consumer's account.
1005.15  Electronic fund transfer of government benefits.
1005.16  Disclosures at automated teller machines.
1005.17  Requirements for overdraft services.
1005.18  Requirements for financial institutions offering payroll card 
          accounts.
1005.19  Internet posting of prepaid account agreements.
1005.20  Requirements for gift cards and gift certificates.

             Subpart B_Requirements for Remittance Transfers

1005.30   Remittance transfer definitions.
1005.31   Disclosures.
1005.32   Estimates.
1005.33   Procedures for resolving errors.
1005.34   Procedures for cancellation and refund of remittance 
          transfers.
1005.35   Acts of agents.
1005.36   Transfers scheduled before the date of transfer.

Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005 [Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is also 
issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o-1.

[[Page 167]]


    Source: 76 FR 81023, Dec. 27, 2011, unless otherwise noted.



                            Subpart A_General



Sec. 1005.1  Authority and purpose.

    (a) Authority. The regulation in this part, known as Regulation E, 
is issued by the Bureau of Consumer Financial Protection (Bureau) 
pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.). 
The information-collection requirements have been approved by the Office 
of Management and Budget under 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 3170-0014.
    (b) Purpose. This part carries out the purposes of the Electronic 
Fund Transfer Act, which establishes the basic rights, liabilities, and 
responsibilities of consumers who use electronic fund transfer and 
remittance transfer services and of financial institutions or other 
persons that offer these services. The primary objective of the act and 
this part is the protection of individual consumers engaging in 
electronic fund transfers and remittance transfers.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec. 1005.2  Definitions.

    Except as otherwise provided in subpart B, for purposes of this 
part, the following definitions apply:
    (a)(1) ``Access device'' means a card, code, or other means of 
access to a consumer's account, or any combination thereof, that may be 
used by the consumer to initiate electronic fund transfers.
    (2) An access device becomes an ``accepted access device'' when the 
consumer:
    (i) Requests and receives, or signs, or uses (or authorizes another 
to use) the access device to transfer money between accounts or to 
obtain money, property, or services;
    (ii) Requests validation of an access device issued on an 
unsolicited basis; or
    (iii) Receives an access device in renewal of, or in substitution 
for, an accepted access device from either the financial institution 
that initially issued the device or a successor.
    (b)(1) ``Account'' means a demand deposit (checking), savings, or 
other consumer asset account (other than an occasional or incidental 
credit balance in a credit plan) held directly or indirectly by a 
financial institution and established primarily for personal, family, or 
household purposes.
    (2) The term includes a ``payroll card account'' which is an account 
that is directly or indirectly established through an employer and to 
which electronic fund transfers of the consumer's wages, salary, or 
other employee compensation (such as commissions), are made on a 
recurring basis, whether the account is operated or managed by the 
employer, a third-party payroll processor, a depository institution or 
any other person. For rules governing payroll card accounts, see 
Sec. 1005.18.
    (3) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (c) ``Act'' means the Electronic Fund Transfer Act (Title IX of the 
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
    (d) ``Business day'' means any day on which the offices of the 
consumer's financial institution are open to the public for carrying on 
substantially all business functions.
    (e) ``Consumer'' means a natural person.
    (f) ``Credit'' means the right granted by a financial institution to 
a consumer to defer payment of debt, incur debt and defer its payment, 
or purchase property or services and defer payment therefor.
    (g) ``Electronic fund transfer'' is defined in Sec. 1005.3.
    (h) ``Electronic terminal'' means an electronic device, other than a 
telephone operated by a consumer, through which a consumer may initiate 
an electronic fund transfer. The term includes, but is not limited to, 
point-of-sale terminals, automated teller machines (ATMs), and cash 
dispensing machines.
    (i) ``Financial institution'' means a bank, savings association, 
credit union, or any other person that directly or indirectly holds an 
account belonging to a consumer, or that issues an access device and 
agrees with a consumer to

[[Page 168]]

provide electronic fund transfer services, other than a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376.
    (j) ``Person'' means a natural person or an organization, including 
a corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (k) ``Preauthorized electronic fund transfer'' means an electronic 
fund transfer authorized in advance to recur at substantially regular 
intervals.
    (l) ``State'' means any state, territory, or possession of the 
United States; the District of Columbia; the Commonwealth of Puerto 
Rico; or any political subdivision of the thereof in this paragraph (l).
    (m) ``Unauthorized electronic fund transfer'' means an electronic 
fund transfer from a consumer's account initiated by a person other than 
the consumer without actual authority to initiate the transfer and from 
which the consumer receives no benefit. The term does not include an 
electronic fund transfer initiated:
    (1) By a person who was furnished the access device to the 
consumer's account by the consumer, unless the consumer has notified the 
financial institution that transfers by that person are no longer 
authorized;
    (2) With fraudulent intent by the consumer or any person acting in 
concert with the consumer; or
    (3) By the financial institution or its employee.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]

    Effective Date Note: At 81 FR 84325, Nov. 22, 2016, Sec. 1005.2 was 
amended by revising paragraphs (b)(2) and (3), effective Oct. 1, 2017. 
For the convenience of the user, the revised text is set forth as 
follows:



Sec. 1005.2  Definitions.

                                * * * * *

    (b) * * *
    (2) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (3) The term includes a prepaid account.
    (i) ``Prepaid account'' means:
    (A) A ``payroll card account,'' which is an account that is directly 
or indirectly established through an employer and to which electronic 
fund transfers of the consumer's wages, salary, or other employee 
compensation (such as commissions) are made on a recurring basis, 
whether the account is operated or managed by the employer, a third-
party payroll processor, a depository institution, or any other person; 
or
    (B) A ``government benefit account,'' as defined in 
Sec. 1005.15(a)(2); or
    (C) An account that is marketed or labeled as ``prepaid'' and that 
is redeemable upon presentation at multiple, unaffiliated merchants for 
goods or services or usable at automated teller machines; or
    (D) An account:
    (1) That is issued on a prepaid basis in a specified amount or not 
issued on a prepaid basis but capable of being loaded with funds 
thereafter,
    (2) Whose primary function is to conduct transactions with multiple, 
unaffiliated merchants for goods or services, or at automated teller 
machines, or to conduct person-to-person transfers, and
    (3) That is not a checking account, share draft account, or 
negotiable order of withdrawal account.
    (ii) For purposes of paragraphs (b)(3)(i)(C) and (D) of this 
section, the term ``prepaid account'' does not include:
    (A) An account that is loaded only with funds from a health savings 
account, flexible spending arrangement, medical savings account, health 
reimbursement arrangement, dependent care assistance program, or transit 
or parking reimbursement arrangement;
    (B) An account that is directly or indirectly established through a 
third party and loaded only with qualified disaster relief payments;
    (C) The person-to-person functionality of an account established by 
or through the United States government whose primary function is to 
conduct closed-loop transactions on U.S. military installations or 
vessels, or similar government facilities;
    (D)(1) A gift certificate as defined in Sec. 1005.20(a)(1) and (b);
    (2) A store gift card as defined in Sec. 1005.20(a)(2) and (b);
    (3) A loyalty, award, or promotional gift card as defined in 
Sec. 1005.20(a)(4) and (b); or
    (4) A general-use prepaid card as defined in Sec. 1005.20(a)(3) and 
(b) that is both marketed and labeled as a gift card or gift 
certificate; or
    (E) An account established for distributing needs-tested benefits in 
a program established under state or local law or administered by a 
state or local agency, as set forth in Sec. 1005.15(a)(2).

                                * * * * *

[[Page 169]]



Sec. 1005.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, this part applies to financial institutions. For 
purposes of Secs. 1005.3(b)(2) and (3), 1005.10(b), (d), and (e), 
1005.13, and 1005.20, this part applies to any person, other than a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376. The requirements of subpart B apply to remittance transfer 
providers.
    (b) Electronic fund transfer--(1) Definition. The term ``electronic 
fund transfer'' means any transfer of funds that is initiated through an 
electronic terminal, telephone, computer, or magnetic tape for the 
purpose of ordering, instructing, or authorizing a financial institution 
to debit or credit a consumer's account. The term includes, but is not 
limited to:
    (i) Point-of-sale transfers;
    (ii) Automated teller machine transfers;
    (iii) Direct deposits or withdrawals of funds;
    (iv) Transfers initiated by telephone; and
    (v) Transfers resulting from debit card transactions, whether or not 
initiated through an electronic terminal.
    (2) Electronic fund transfer using information from a check. (i) 
This part applies where a check, draft, or similar paper instrument is 
used as a source of information to initiate a one-time electronic fund 
transfer from a consumer's account. The consumer must authorize the 
transfer.
    (ii) The person initiating an electronic fund transfer using the 
consumer's check as a source of information for the transfer must 
provide a notice that the transaction will or may be processed as an 
electronic fund transfer, and obtain a consumer's authorization for each 
transfer. A consumer authorizes a one-time electronic fund transfer (in 
providing a check to a merchant or other payee for the MICR encoding, 
that is, the routing number of the financial institution, the consumer's 
account number and the serial number) when the consumer receives notice 
and goes forward with the underlying transaction. For point-of-sale 
transfers, the notice must be posted in a prominent and conspicuous 
location, and a copy thereof, or a substantially similar notice, must be 
provided to the consumer at the time of the transaction.
    (iii) A person may provide notices that are substantially similar to 
those set forth in appendix A-6 to comply with the requirements of this 
paragraph (b)(2).
    (3) Collection of returned item fees via electronic fund transfer--
(i) General. The person initiating an electronic fund transfer to 
collect a fee for the return of an electronic fund transfer or a check 
that is unpaid, including due to insufficient or uncollected funds in 
the consumer's account, must obtain the consumer's authorization for 
each transfer. A consumer authorizes a one-time electronic fund transfer 
from his or her account to pay the fee for the returned item or transfer 
if the person collecting the fee provides notice to the consumer stating 
that the person may electronically collect the fee, and the consumer 
goes forward with the underlying transaction. The notice must state that 
the fee will be collected by means of an electronic fund transfer from 
the consumer's account if the payment is returned unpaid and must 
disclose the dollar amount of the fee. If the fee may vary due to the 
amount of the transaction or due to other factors, then, except as 
otherwise provided in paragraph (b)(3)(ii) of this section, the person 
collecting the fee may disclose, in place of the dollar amount of the 
fee, an explanation of how the fee will be determined.
    (ii) Point-of-sale transactions. If a fee for an electronic fund 
transfer or check returned unpaid may be collected electronically in 
connection with a point-of-sale transaction, the person initiating an 
electronic fund transfer to collect the fee must post the notice 
described in paragraph (b)(3)(i) of this section in a prominent and 
conspicuous location. The person also must either provide the consumer 
with a copy of the posted notice (or a substantially similar notice) at 
the time of the

[[Page 170]]

transaction, or mail the copy (or a substantially similar notice) to the 
consumer's address as soon as reasonably practicable after the person 
initiates the electronic fund transfer to collect the fee. If the amount 
of the fee may vary due to the amount of the transaction or due to other 
factors, the posted notice may explain how the fee will be determined, 
but the notice provided to the consumer must state the dollar amount of 
the fee if the amount can be calculated at the time the notice is 
provided or mailed to the consumer.
    (c) Exclusions from coverage. The term ``electronic fund transfer'' 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization. Any transfer of funds that 
guarantees payment or authorizes acceptance of a check, draft, or 
similar paper instrument but that does not directly result in a debit or 
credit to a consumer's account.
    (3) Wire or other similar transfers. Any transfer of funds through 
Fedwire or through a similar wire transfer system that is used primarily 
for transfers between financial institutions or between businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or Federal 
agency.
    (5) Automatic transfers by account-holding institution. Any transfer 
of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate individual 
transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to 
Sec. 1005.10(e) regarding compulsory use and sections 916 and 917 of the 
Act regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone communication between a consumer and 
a financial institution making the transfer; and
    (ii) Does not take place under a telephone bill-payment or other 
written plan in which periodic or recurring transfers are contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution were 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph (c)(7) 
remain subject to Sec. 1005.10(e) regarding compulsory use and sections 
916 and 917 of the Act regarding civil and criminal liability.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec. 1005.4  General disclosure requirements; jointly offered services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form the 
consumer may keep, except as otherwise provided in this part. The 
disclosures required by this part may be provided to the consumer in 
electronic form, subject to compliance with the consumer-consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15

[[Page 171]]

U.S.C. 7001 et seq.). A financial institution may use commonly accepted 
or readily understandable abbreviations in complying with the disclosure 
requirements of this part.
    (2) Foreign language disclosures. Disclosures required under this 
part may be made in a language other than English, provided that the 
disclosures are made available in English upon the consumer's request.
    (b) Additional information; disclosures required by other laws. A 
financial institution may include additional information and may combine 
disclosures required by other laws (such as the Truth in Lending Act (15 
U.S.C. 1601 et seq.) or the Truth in Savings Act (12 U.S.C. 4301 et 
seq.) with the disclosures required by this part.
    (c) Multiple accounts and account holders--(1) Multiple accounts. A 
financial institution may combine the required disclosures into a single 
statement for a consumer who holds more than one account at the 
institution.
    (2) Multiple account holders. For joint accounts held by two or more 
consumers, a financial institution need provide only one set of the 
required disclosures and may provide them to any of the account holders.
    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this part imposes on any or all of 
them. An institution need make only the disclosures required by 
Secs. 1005.7 and 1005.8 that are within its knowledge and within the 
purview of its relationship with the consumer for whom it holds an 
account.



Sec. 1005.5  Issuance of access devices.

    (a) Solicited issuance. Except as provided in paragraph (b) of this 
section, a financial institution may issue an access device to a 
consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access device 
is:
    (1) Not validated, meaning that the institution has not yet 
performed all the procedures that would enable a consumer to initiate an 
electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is not 
validated and how the consumer may dispose of it if validation is not 
desired;
    (3) Accompanied by the disclosures required by Sec. 1005.7, of the 
consumer's rights and liabilities that will apply if the access device 
is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution has verified the 
consumer's identity by a reasonable means.



Sec. 1005.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec. 1005.7(b)(1), (2), and (3). If the unauthorized transfer 
involved an access device, it must be an accepted access device and the 
financial institution must have provided a means to identify the 
consumer to whom it was issued.
    (b) Limitations on amount of liability. A consumer's liability for 
an unauthorized electronic fund transfer or a series of related 
unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or theft 
of the access device, the consumer's liability shall not exceed the 
lesser of $50 or the amount of unauthorized transfers that occur before 
notice to the financial institution.
    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:

[[Page 172]]

    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the close 
of two business days and before notice to the institution, provided the 
institution establishes that these transfers would not have occurred had 
the consumer notified the institution within that two-day period.
    (3) Periodic statement; timely notice not given. A consumer must 
report an unauthorized electronic fund transfer that appears on a 
periodic statement within 60 days of the financial institution's 
transmittal of the statement to avoid liability for subsequent 
transfers. If the consumer fails to do so, the consumer's liability 
shall not exceed the amount of the unauthorized transfers that occur 
after the close of the 60 days and before notice to the institution, and 
that the institution establishes would not have occurred had the 
consumer notified the institution within the 60-day period. When an 
access device is involved in the unauthorized transfer, the consumer may 
be liable for other amounts set forth in paragraphs (b)(1) or (b)(2) of 
this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial institution was due to extenuating circumstances, the 
institution shall extend the times specified above to a reasonable 
period.
    (5) Notice to financial institution. (i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary to 
provide the institution with the pertinent information, whether or not a 
particular employee or agent of the institution actually receives the 
information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission to the institution by 
any other usual means. Notice may be considered constructively given 
when the institution becomes aware of circumstances leading to the 
reasonable belief that an unauthorized transfer to or from the 
consumer's account has been or may be made.
    (6) Liability under state law or agreement. If state law or an 
agreement between the consumer and the financial institution imposes 
less liability than is provided by this section, the consumer's 
liability shall not exceed the amount imposed under the state law or 
agreement.



Sec. 1005.7  Initial disclosures.

    (a) Timing of disclosures. A financial institution shall make the 
disclosures required by this section at the time a consumer contracts 
for an electronic fund transfer service or before the first electronic 
fund transfer is made involving the consumer's account.
    (b) Content of disclosures. A financial institution shall provide 
the following disclosures, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec. 1005.6 or under state or other applicable law or agreement, 
for unauthorized electronic fund transfers.
    (2) Telephone number and address. The telephone number and address 
of the person or office to be notified when the consumer believes that 
an unauthorized electronic fund transfer has been or may be made.
    (3) Business days. The financial institution's business days.
    (4) Types of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. Details of the limitations 
need not be disclosed if confidentiality is essential to maintain the 
security of the electronic fund transfer system.
    (5) Fees. Any fees imposed by the financial institution for 
electronic fund transfers or for the right to make transfers.
    (6) Documentation. A summary of the consumer's right to receipts and 
periodic statements, as provided in Sec. 1005.9 of this part, and 
notices regarding preauthorized transfers as provided in Sec. 1005.10(a) 
and (d).
    (7) Stop payment. A summary of the consumer's right to stop payment 
of a preauthorized electronic fund transfer and the procedure for 
placing a stop-

[[Page 173]]

payment order, as provided in Sec. 1005.10(c).
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the Act for 
failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in the ordinary 
course of business, the financial institution may provide information 
concerning the consumer's account to third parties.
    (10) Error resolution. A notice that is substantially similar to 
Model Form A-3 as set out in appendix A of this part concerning error 
resolution.
    (11) ATM fees. A notice that a fee may be imposed by an automated 
teller machine operator as defined in Sec. 1005.16(a), when the consumer 
initiates an electronic fund transfer or makes a balance inquiry, and by 
any network used to complete the transaction.
    (c) Addition of electronic fund transfer services. If an electronic 
fund transfer service is added to a consumer's account and is subject to 
terms and conditions different from those described in the initial 
disclosures, disclosures for the new service are required.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 70320, Oct. 12, 2016]



Sec. 1005.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice--(1) Prior notice required. A financial 
institution shall mail or deliver a written notice to the consumer, at 
least 21 days before the effective date, of any change in a term or 
condition required to be disclosed under Sec. 1005.7(b) of this part if 
the change would result in:
    (i) Increased fees for the consumer;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an account or an electronic fund 
transfer system. If the institution makes such a change permanent and 
disclosure would not jeopardize the security of the account or system, 
the institution shall notify the consumer in writing on or with the next 
regularly scheduled periodic statement or within 30 days of making the 
change permanent.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, an 
error resolution notice substantially similar to the model form set 
forth in appendix A of this part (Model Form A-3). Alternatively, an 
institution may include an abbreviated notice substantially similar to 
the model form error resolution notice set forth in appendix A of this 
part (Model Form A-3), on or with each periodic statement required by 
Sec. 1005.9(b).



Sec. 1005.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals--General. Except as provided in 
paragraph (e) of this section, a financial institution shall make a 
receipt available to a consumer at the time the consumer initiates an 
electronic fund transfer at an electronic terminal. The receipt shall 
set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account(s) to or from which funds are transferred. The type of account 
may be omitted if the access device used is able to access only one 
account at that terminal.
    (4) Identification. A number or code that identifies the consumer's 
account or accounts, or the access device used to initiate the transfer. 
The number or code need not exceed four digits or letters to comply with 
the requirements of this paragraph (a)(4).
    (5) Terminal location. The location of the terminal where the 
transfer is initiated, or an identification such as a code or terminal 
number. Except in limited circumstances where all terminals are located 
in the same city or state, if the location is disclosed, it

[[Page 174]]

shall include the city and state or foreign country and one of the 
following:
    (i) The street address; or
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For an account to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth the 
following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the consumer's 
account;
    (iii) The type of transfer and type of account to or from which 
funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location described in paragraph (a)(5) 
of this section; and
    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account.
    (3) Fees. The amount of any fees assessed against the account during 
the statement period for electronic fund transfers, the right to make 
transfers, or account maintenance.
    (4) Account balances. The balance in the account at the beginning 
and at the close of the statement period.
    (5) Address and telephone number for inquiries. The address and 
telephone number to be used for inquiries or notice of errors, preceded 
by ``Direct inquiries to'' or similar language. The address and 
telephone number provided on an error resolution notice under 
Sec. 1005.8(b) given on or with the statement satisfies this 
requirement.
    (6) Telephone number for preauthorized transfers. A telephone number 
the consumer may call to ascertain whether preauthorized transfers to 
the consumer's account have occurred, if the financial institution uses 
the telephone-notice option under Sec. 1005.10(a)(1)(iii).
    (c) Exceptions to the periodic statement requirement for certain 
accounts--(1) Preauthorized transfers to accounts. For accounts that may 
be accessed only by preauthorized transfers to the account the following 
rules apply:
    (i) Passbook accounts. For passbook accounts, the financial 
institution need not provide a periodic statement if the institution 
updates the passbook upon presentation or enters on a separate document 
the amount and date of each electronic fund transfer since the passbook 
was last presented.
    (ii) Other accounts. For accounts other than passbook accounts, the 
financial institution must send a periodic statement at least quarterly.
    (2) Intra-institutional transfers. For an electronic fund transfer 
initiated by the consumer between two accounts of the consumer in the 
same institution, documenting the transfer on a periodic statement for 
one of the two accounts satisfies the periodic statement requirement.
    (3) Relationship between paragraphs (c)(1) and (2) of this section. 
An account that is accessed by preauthorized transfers to the account 
described in paragraph (c)(1) of this section and by intra-institutional 
transfers described in paragraph (c)(2) of this section, but by no other 
type of electronic fund transfers, qualifies for the exceptions provided 
by paragraph (c)(1) of this section.
    (d) Documentation for foreign-initiated transfers. The failure by a 
financial institution to provide a terminal receipt for an electronic 
fund transfer or to document the transfer on a periodic statement does 
not violate this part if:
    (1) The transfer is not initiated within a state; and
    (2) The financial institution treats an inquiry for clarification or 
documentation as a notice of error in accordance with Sec. 1005.11.
    (e) Exception for receipts in small-value transfers. A financial 
institution is not

[[Page 175]]

subject to the requirement to make available a receipt under paragraph 
(a) of this section if the amount of the transfer is $15 or less.



Sec. 1005.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account--(1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Readily-available telephone line. Providing a readily 
available telephone line that the consumer may call to determine whether 
the transfer occurred and disclosing the telephone number on the initial 
disclosure of account terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide notice 
of a transfer if the payor gives the consumer positive notice that the 
transfer has been initiated.
    (3) Crediting. A financial institution that receives a preauthorized 
transfer of the type described in paragraph (a)(1) of this section shall 
credit the amount of the transfer as of the date the funds for the 
transfer are received.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment--(1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding after 
14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount--(1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send the consumer written notice of the amount and 
date of the transfer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic fund transfers with a particular institution as a 
condition of employment or receipt of a government benefit.

    Effective Date Note: At 81 FR 84326, Nov. 22, 2016, Sec. 1005.10 was 
amended by revising paragraph (e)(1), effective Oct. 1, 2017. For the 
convenience of the user, the revised text is set forth as follows:

[[Page 176]]



Sec. 1005.10  Preauthorized transfers.

                                * * * * *

    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account. This 
exception does not apply to a covered separate credit feature accessible 
by a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 
1026.61.

                                * * * * *



Sec. 1005.11  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. The term ``error'' means:
    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the consumer's 
account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec. 1005.9 or Sec. 1005.10(a); or
    (vii) The consumer's request for documentation required by 
Sec. 1005.9 or Sec. 1005.10(a) or for additional information or 
clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1)(i) through (vi) of this section.
    (2) Types of inquiries not covered. The term ``error'' does not 
include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer--(1) Timing; contents. A financial 
institution shall comply with the requirements of this section with 
respect to any oral or written notice of error from the consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation, required by Sec. 1005.9, on which the alleged error is 
first reflected;
    (ii) Enables the institution to identify the consumer's name and 
account number; and
    (iii) Indicates why the consumer believes an error exists and 
includes to the extent possible the type, date, and amount of the error, 
except for requests described in paragraph (a)(1)(vii) of this section.
    (2) Written confirmation. A financial institution may require the 
consumer to give written confirmation of an error within 10 business 
days of an oral notice. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification.
    (3) Request for documentation or clarifications. When a notice of 
error is based on documentation or clarification that the consumer 
requested under paragraph (a)(1)(vii) of this section, the consumer's 
notice of error is timely if received by the financial institution no 
later than 60 days after the institution sends the information 
requested.
    (c) Time limits and extent of investigation--(1) Ten-day period. A 
financial institution shall investigate promptly and, except as 
otherwise provided in this paragraph (c), shall determine whether an 
error occurred within 10 business days of receiving a notice of error. 
The institution shall report the results to the consumer within three 
business days after completing its investigation. The institution shall 
correct the error within one business day after determining that an 
error occurred.
    (2) Forty-five day period. If the financial institution is unable to 
complete its investigation within 10 business days, the institution may 
take up to 45 days from receipt of a notice of error to investigate and 
determine whether an

[[Page 177]]

error occurred, provided the institution does the following:
    (i) Provisionally credits the consumer's account in the amount of 
the alleged error (including interest where applicable) within 10 
business days of receiving the error notice. If the financial 
institution has a reasonable basis for believing that an unauthorized 
electronic fund transfer has occurred and the institution has satisfied 
the requirements of Sec. 1005.6(a), the institution may withhold a 
maximum of $50 from the amount credited. An institution need not 
provisionally credit the consumer's account if:
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220);
    (ii) Informs the consumer, within two business days after the 
provisional crediting, of the amount and date of the provisional 
crediting and gives the consumer full use of the funds during the 
investigation;
    (iii) Corrects the error, if any, within one business day after 
determining that an error occurred; and
    (iv) Reports the results to the consumer within three business days 
after completing its investigation (including, if applicable, notice 
that a provisional credit has been made final).
    (3) Extension of time periods. The time periods in paragraphs (c)(1) 
and (c)(2) of this section are extended as follows:
    (i) The applicable time is 20 business days in place of 10 business 
days under paragraphs (c)(1) and (2) of this section if the notice of 
error involves an electronic fund transfer to or from the account within 
30 days after the first deposit to the account was made.
    (ii) The applicable time is 90 days in place of 45 days under 
paragraph (c)(2) of this section, for completing an investigation, if a 
notice of error involves an electronic fund transfer that:
    (A) Was not initiated within a state;
    (B) Resulted from a point-of-sale debit card transaction; or
    (C) Occurred within 30 days after the first deposit to the account 
was made.
    (4) Investigation. With the exception of transfers covered by 
Sec. 1005.14 of this part, a financial institution's review of its own 
records regarding an alleged error satisfies the requirements of this 
section if:
    (i) The alleged error concerns a transfer to or from a third party; 
and
    (ii) There is no agreement between the institution and the third 
party for the type of electronic fund transfer involved.
    (d) Procedures if financial institution determines no error or 
different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the financial institution 
shall follow the procedures set forth in this paragraph (d) if it 
determines that no error occurred or that an error occurred in a manner 
or amount different from that described by the consumer:
    (1) Written explanation. The institution's report of the results of 
its investigation shall include a written explanation of the 
institution's findings and shall note the consumer's right to request 
the documents that the institution relied on in making its 
determination. Upon request, the institution shall promptly provide 
copies of the documents.
    (2) Debiting provisional credit. Upon debiting a provisionally 
credited amount, the financial institution shall:
    (i) Notify the consumer of the date and amount of the debiting;
    (ii) Notify the consumer that the institution will honor checks, 
drafts, or similar instruments payable to third parties and 
preauthorized transfers from the consumer's account (without charge to 
the consumer as a result of an overdraft) for five business days after 
the notification. The institution shall honor items as specified in the 
notice, but need honor only items that it would have paid if the 
provisionally credited funds had not been debited.
    (e) Reassertion of error. A financial institution that has fully 
complied with the error resolution requirements has no further 
responsibilities under this section should the consumer later reassert 
the same error, except in the case of an error asserted by the consumer 
following receipt of information

[[Page 178]]

provided under paragraph (a)(1)(vii) of this section.

    Effective Date Note: At 81 FR 84326, Nov. 22, 2016, Sec. 1005.11 was 
amended by revising paragraphs (c)(2)(i)(A) and (B) and adding paragraph 
(c)(2)(i)(C), effective Oct. 1, 2017. For the convenience of the user, 
the added and revised text is set forth as follows:



Sec. 1005.11  Procedures for resolving errors.

                                * * * * *

    (c) * * *
    (2) * * *
    (i) * * *
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error;
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220); or
    (C) The alleged error involves a prepaid account, other than a 
payroll card account or government benefit account, for which the 
financial institution has not completed its consumer identification and 
verification process, as set forth in Sec. 1005.18(e)(3)(ii).

                                * * * * *



Sec. 1005.12  Relation to other laws.

    (a) Relation to Truth in Lending. (1) The Electronic Fund Transfer 
Act and this part govern:
    (i) The addition to an accepted credit card, as defined in 
Regulation Z (12 CFR 1026.12, comment 12-2), of the capability to 
initiate electronic fund transfers;
    (ii) The issuance of an access device that permits credit extensions 
(under a preexisting agreement between a consumer and a financial 
institution) only when the consumer's account is overdrawn or to 
maintain a specified minimum balance in the consumer's account, or under 
an overdraft service, as defined in Sec. 1005.17(a) of this part;
    (iii) The addition of an overdraft service, as defined in 
Sec. 1005.17(a), to an accepted access device; and
    (iv) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of errors involving an extension of 
credit that occurs under an agreement between the consumer and a 
financial institution to extend credit when the consumer's account is 
overdrawn or to maintain a specified minimum balance in the consumer's 
account, or under an overdraft service, as defined in Sec. 1005.17(a).
    (2) The Truth in Lending Act and Regulation Z (12 CFR part 1026), 
which prohibit the unsolicited issuance of credit cards, govern:
    (i) The addition of a credit feature to an accepted access device; 
and
    (ii) Except as provided in paragraph (a)(1)(ii) of this section, the 
issuance of a credit card that is also an access device.
    (b) Preemption of inconsistent state laws--(1) Inconsistent 
requirements. The Bureau shall determine, upon its own motion or upon 
the request of a state, financial institution, or other interested 
party, whether the Act and this part preempt state law relating to 
electronic fund transfers, or dormancy, inactivity, or service fees, or 
expiration dates in the case of gift certificates, store gift cards, or 
general-use prepaid cards.
    (2) Standards for determination. State law is inconsistent with the 
requirements of the Act and this part if state law:
    (i) Requires or permits a practice or act prohibited by the Federal 
law;
    (ii) Provides for consumer liability for unauthorized electronic 
fund transfers that exceeds the limits imposed by the Federal law;
    (iii) Allows longer time periods than the Federal law for 
investigating and correcting alleged errors, or does not require the 
financial institution to credit the consumer's account during an error 
investigation in accordance with Sec. 1005.11(c)(2)(i) of this part; or
    (iv) Requires initial disclosures, periodic statements, or receipts 
that are different in content from those required by the Federal law 
except to the extent that the disclosures relate to consumer rights 
granted by the state law and not by the Federal law.
    (c) State exemptions--(1) General rule. Any state may apply for an 
exemption from the requirements of the Act or this part for any class of 
electronic fund transfers within the state. The Bureau shall grant an 
exemption if it determines that:

[[Page 179]]

    (i) Under state law the class of electronic fund transfers is 
subject to requirements substantially similar to those imposed by the 
Federal law; and
    (ii) There is adequate provision for state enforcement.
    (2) Exception. To assure that the Federal and state courts continue 
to have concurrent jurisdiction, and to aid in implementing the Act:
    (i) No exemption shall extend to the civil liability provisions of 
section 916 of the Act; and
    (ii) When the Bureau grants an exemption, the state law requirements 
shall constitute the requirements of the Federal law for purposes of 
section 916 of the Act, except for state law requirements not imposed by 
the Federal law.

    Effective Date Note: At 81 FR 84326, Nov. 22, 2016, Sec. 1005.12 was 
amended by revising paragraphs (a)(1)(ii), (a)(1)(iv), and (a)(2)(i) and 
(ii) and adding paragraph (a)(2)(iii), effective Oct. 1, 2017. For the 
convenience of the user, the added and revised text is set forth as 
follows:



Sec. 1005.12  Relation to other laws.

    (a) * * *
    (1) * * *
    (ii) The issuance of an access device (other than an access device 
for a prepaid account) that permits credit extensions (under a 
preexisting agreement between a consumer and a financial institution) 
only when the consumer's account is overdrawn or to maintain a specified 
minimum balance in the consumer's account, or under an overdraft 
service, as defined in Sec. 1005.17(a) of this part;

                                * * * * *

    (iv) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of errors involving:
    (A) Except with respect to a prepaid account, an extension of credit 
that is incident to an electronic fund transfer that occurs under an 
agreement between the consumer and a financial institution to extend 
credit when the consumer's account is overdrawn or to maintain a 
specified minimum balance in the consumer's account, or under an 
overdraft service, as defined in Sec. 1005.17(a);
    (B) With respect to transactions that involve a covered separate 
credit feature and an asset feature on a prepaid account that are both 
accessible by a hybrid prepaid-credit card as those terms are defined in 
Regulation Z, 12 CFR 1026.61, an extension of credit that is incident to 
an electronic fund transfer that occurs when the hybrid prepaid-credit 
card accesses both funds in the asset feature of the prepaid account and 
a credit extension from the credit feature with respect to a particular 
transaction;
    (C) Transactions that involves credit extended through a negative 
balance to the asset feature of a prepaid account that meets the 
conditions set forth in Regulation Z, 12 CFR 1026.61(a)(4); and
    (D) With respect to transactions involving a prepaid account and a 
non-covered separate credit feature as defined in Regulation Z, 12 CFR 
1026.61, transactions that access the prepaid account, as applicable.
    (2) * * *
    (i) The addition of a credit feature or plan to an accepted access 
device, including an access device for a prepaid account, that would 
make the access device into a credit card under Regulation Z (12 CFR 
part 1026);
    (ii) Except as provided in paragraph (a)(1)(ii) of this section, the 
issuance of a credit card that is also an access device; and
    (iii) With respect to transactions involving a prepaid account and a 
non-covered separate credit feature as defined in Regulation Z, 12 CFR 
1026.61, a consumer's liability for unauthorized use and the 
investigation of errors involving transactions that access the non-
covered separate credit feature, as applicable.

                                * * * * *



Sec. 1005.13  Administrative enforcement; record retention.

    (a) Enforcement by Federal agencies. Compliance with this part is 
enforced in accordance with section 918 of the Act.
    (b) Record retention. (1) Any person subject to the Act and this 
part shall retain evidence of compliance with the requirements imposed 
by the Act and this part for a period of not less than two years from 
the date disclosures are required to be made or action is required to be 
taken.
    (2) Any person subject to the Act and this part having actual notice 
that it is the subject of an investigation or an enforcement proceeding 
by its enforcement agency, or having been served with notice of an 
action filed under sections 910, 916, or 917(a) of the Act, shall retain 
the records that pertain to the investigation, action, or proceeding 
until final disposition of the matter unless an earlier time is allowed 
by court or agency order.

[[Page 180]]



Sec. 1005.14  Electronic fund transfer service provider not holding
consumer's account.

    (a) Provider of electronic fund transfer service. A person that 
provides an electronic fund transfer service to a consumer but that does 
not hold the consumer's account is subject to all requirements of this 
part if the person:
    (1) Issues a debit card (or other access device) that the consumer 
can use to access the consumer's account held by a financial 
institution; and
    (2) Has no agreement with the account-holding institution regarding 
such access.
    (b) Compliance by service provider. In addition to the requirements 
generally applicable under this part, the service provider shall comply 
with the following special rules:
    (1) Disclosures and documentation. The service provider shall give 
the disclosures and documentation required by Secs. 1005.7, 1005.8, and 
1005.9 of this part that are within the purview of its relationship with 
the consumer. The service provider need not furnish the periodic 
statement required by Sec. 1005.9(b) if the following conditions are 
met:
    (i) The debit card (or other access device) issued to the consumer 
bears the service provider's name and an address or telephone number for 
making inquiries or giving notice of error;
    (ii) The consumer receives a notice concerning use of the debit card 
that is substantially similar to the notice contained in appendix A of 
this part;
    (iii) The consumer receives, on or with the receipts required by 
Sec. 1005.9(a), the address and telephone number to be used for an 
inquiry, to give notice of an error, or to report the loss or theft of 
the debit card;
    (iv) The service provider transmits to the account-holding 
institution the information specified in Sec. 1005.9(b)(1), in the 
format prescribed by the automated clearinghouse (ACH) system used to 
clear the fund transfers;
    (v) The service provider extends the time period for notice of loss 
or theft of a debit card, set forth in Sec. 1005.6(b)(1) and (2), from 
two business days to four business days after the consumer learns of the 
loss or theft; and extends the time periods for reporting unauthorized 
transfers or errors, set forth in Secs. 1005.6(b)(3) and 
1005.11(b)(1)(i), from 60 days to 90 days following the transmittal of a 
periodic statement by the account-holding institution.
    (2) Error resolution. (i) The service provider shall extend by a 
reasonable time the period in which notice of an error must be received, 
specified in Sec. 1005.11(b)(1)(i), if a delay resulted from an initial 
attempt by the consumer to notify the account-holding institution.
    (ii) The service provider shall disclose to the consumer the date on 
which it initiates a transfer to effect a provisional credit in 
accordance with Sec. 1005.11(c)(2)(ii).
    (iii) If the service provider determines an error occurred, it shall 
transfer funds to or from the consumer's account, in the appropriate 
amount and within the applicable time period, in accordance with 
Sec. 1005.11(c)(2)(i).
    (iv) If funds were provisionally credited and the service provider 
determines no error occurred, it may reverse the credit. The service 
provider shall notify the account-holding institution of the period 
during which the account-holding institution must honor debits to the 
account in accordance with Sec. 1005.11(d)(2)(ii). If an overdraft 
results, the service provider shall promptly reimburse the account-
holding institution in the amount of the overdraft.
    (c) Compliance by account-holding institution. The account-holding 
institution need not comply with the requirements of the Act and this 
part with respect to electronic fund transfers initiated through the 
service provider except as follows:
    (1) Documentation. The account-holding institution shall provide a 
periodic statement that describes each electronic fund transfer 
initiated by the consumer with the access device issued by the service 
provider. The account-holding institution has no liability for the 
failure to comply with this requirement if the service provider did not 
provide the necessary information; and
    (2) Error resolution. Upon request, the account-holding institution 
shall provide information or copies of documents needed by the service 
provider to investigate errors or to furnish copies of documents to the 
consumer. The account-holding institution shall also

[[Page 181]]

honor debits to the account in accordance with Sec. 1005.11(d)(2)(ii).



Sec. 1005.15  Electronic fund transfer of government benefits.

    (a) Government agency subject to regulation. (1) A government agency 
is deemed to be a financial institution for purposes of the Act and this 
part if directly or indirectly it issues an access device to a consumer 
for use in initiating an electronic fund transfer of government benefits 
from an account, other than needs-tested benefits in a program 
established under state or local law or administered by a state or local 
agency. The agency shall comply with all applicable requirements of the 
Act and this part, except as provided in this section.
    (2) For purposes of this section, the term ``account'' means an 
account established by a government agency for distributing government 
benefits to a consumer electronically, such as through automated teller 
machines or point-of-sale terminals, but does not include an account for 
distributing needs-tested benefits in a program established under state 
or local law or administered by a state or local agency.
    (b) Issuance of access devices. For purposes of this section, a 
consumer is deemed to request an access device when the consumer applies 
for government benefits that the agency disburses or will disburse by 
means of an electronic fund transfer. The agency shall verify the 
identity of the consumer receiving the device by reasonable means before 
the device is activated.
    (c) Alternative to periodic statement. A government agency need not 
furnish the periodic statement required by Sec. 1005.9(b) if the agency 
makes available to the consumer:
    (1) The consumer's account balance, through a readily available 
telephone line and at a terminal (such as by providing balance 
information at a balance-inquiry terminal or providing it, routinely or 
upon request, on a terminal receipt at the time of an electronic fund 
transfer); and
    (2) A written history of the consumer's account transactions that is 
provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date of a request by the consumer.
    (d) Modified requirements. A government agency that does not furnish 
periodic statements, in accordance with paragraph (c) of this section, 
shall comply with the following special rules:
    (1) Initial disclosures. The agency shall modify the disclosures 
under Sec. 1005.7(b) by disclosing:
    (i) Account balance. The means by which the consumer may obtain 
information concerning the account balance, including a telephone 
number. The agency provides a notice substantially similar to the notice 
contained in paragraph A-5 in appendix A of this part.
    (ii) Written account history. A summary of the consumer's right to 
receive a written account history upon request, in place of the periodic 
statement required by Sec. 1005.7(b)(6), and the telephone number to 
call to request an account history. This disclosure may be made by 
providing a notice substantially similar to the notice contained in 
paragraph A-5 in appendix A of this part.
    (iii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-5 in 
appendix A of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The agency shall provide an 
annual notice concerning error resolution that is substantially similar 
to the notice contained in paragraph A-5 in appendix A, in place of the 
notice required by Sec. 1005.8(b).
    (3) Limitations on liability. For purposes of Sec. 1005.6(b)(3), 
regarding a 60-day period for reporting any unauthorized transfer that 
appears on a periodic statement, the 60-day period shall begin with 
transmittal of a written account history or other account information 
provided to the consumer under paragraph (c) of this section.
    (4) Error resolution. The agency shall comply with the requirements 
of Sec. 1005.11 of this part in response to an oral or written notice of 
an error from the consumer that is received no later

[[Page 182]]

than 60 days after the consumer obtains the written account history or 
other account information, under paragraph (c) of this section, in which 
the error is first reflected.

    Effective Date Note: At 81 FR 84326, Nov. 22, 2016, Sec. 1005.15 was 
revised, effective Oct. 1, 2017. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1005.15  Electronic fund transfer of government benefits.

    (a) Government agency subject to regulation. (1) A government agency 
is deemed to be a financial institution for purposes of the Act and this 
part if directly or indirectly it issues an access device to a consumer 
for use in initiating an electronic fund transfer of government benefits 
from an account, other than needs-tested benefits in a program 
established under state or local law or administered by a state or local 
agency. The agency shall comply with all applicable requirements of the 
Act and this part except as modified by this section.
    (2) For purposes of this section, the term ``account'' or 
``government benefit account'' means an account established by a 
government agency for distributing government benefits to a consumer 
electronically, such as through automated teller machines or point-of-
sale terminals, but does not include an account for distributing needs-
tested benefits in a program established under state or local law or 
administered by a state or local agency.
    (b) Issuance of access devices. For purposes of this section, a 
consumer is deemed to request an access device when the consumer applies 
for government benefits that the agency disburses or will disburse by 
means of an electronic fund transfer. The agency shall verify the 
identity of the consumer receiving the device by reasonable means before 
the device is activated.
    (c) Pre-acquisition disclosure requirements. (1) Before a consumer 
acquires a government benefit account, a government agency shall comply 
with the pre-acquisition disclosure requirements applicable to prepaid 
accounts as set forth in Sec. 1005.18(b).
    (2) Additional content for government benefit accounts--(i) 
Statement regarding consumer's payment options. As part of its short 
form pre-acquisition disclosures, the agency must provide a statement 
that the consumer does not have to accept the government benefit account 
and directing the consumer to ask about other ways to receive their 
benefit payments from the agency instead of receiving them via the 
account, using the following clause or a substantially similar clause: 
``You do not have to accept this benefits card. Ask about other ways to 
receive your benefits.'' Alternatively, an agency may provide a 
statement that the consumer has several options to receive benefit 
payments, followed by a list of the options available to the consumer, 
and directing the consumer to indicate which option the consumer chooses 
using the following clause or a substantially similar clause: ``You have 
several options to receive your payments: [list of options available to 
the consumer]; or this benefits card. Tell the benefits office which 
option you choose.'' This statement must be located above the 
information required by Sec. 1005.18(b)(2)(i) through (iv). This 
statement must appear in a minimum type size of eight points (or 11 
pixels) and appear in no larger a type size than what is used for the 
fee headings required by Sec. 1005.18(b)(2)(i) through (iv).
    (ii) Statement regarding state-required information or other fee 
discounts and waivers. An agency may, but is not required to, include a 
statement in one additional line of text in the short form disclosure 
directing the consumer to a particular location outside the short form 
disclosure for information on ways the consumer may access government 
benefit account funds and balance information for free or for a reduced 
fee. This statement must be located directly below any statements 
disclosed pursuant to Sec. 1005.18(b)(3)(i) and (ii), or, if no such 
statements are disclosed, above the statement required by 
Sec. 1005.18(b)(2)(x). This statement must appear in the same type size 
used to disclose variable fee information pursuant to 
Sec. 1005.18(b)(3)(i) and (ii), or, if none, the same type size used for 
the information required by Sec. 1005.18(b)(2)(x) through (xiii).
    (3) Form of disclosures. When a short form disclosure required by 
paragraph (c) of this section is provided in writing or electronically, 
the information required by Sec. 1005.18(b)(2)(i) through (ix) shall be 
provided in the form of a table. Except as provided in 
Sec. 1005.18(b)(6)(iii)(B), the short form disclosure required by 
Sec. 1005.18(b)(2) shall be provided in a form substantially similar to 
Model Form A-10(a) of appendix A of this part. Sample Form A-10(f) in 
appendix A of this part provides an example of the long form disclosure 
required by Sec. 1005.18(b)(4) when the agency does not offer multiple 
service plans.
    (d) Access to account information--(1) Periodic statement 
alternative. A government agency need not furnish periodic statements 
required by Sec. 1005.9(b) if the agency makes available to the 
consumer:
    (i) The consumer's account balance, through a readily available 
telephone line and at a terminal (such as by providing balance 
information at a balance-inquiry terminal or providing it, routinely or 
upon request, on a terminal receipt at the time of an electronic fund 
transfer);
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 12 months preceding

[[Page 183]]

the date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 24 months preceding the date the agency receives the 
consumer's request.
    (2) Additional access to account information requirements. For 
government benefit accounts, a government agency shall comply with the 
account information requirements applicable to prepaid accounts as set 
forth in Sec. 1005.18(c)(3) through (5).
    (e) Modified disclosure, limitations on liability, and error 
resolution requirements. A government agency that provides information 
under paragraph (d)(1) of this section shall comply with the following:
    (1) Initial disclosures. The agency shall modify the disclosures 
under Sec. 1005.7(b) by disclosing:
    (i) Access to account information. A telephone number that the 
consumer may call to obtain the account balance, the means by which the 
consumer can obtain an electronic account history, such as the address 
of a Web site, and a summary of the consumer's right to receive a 
written account history upon request (in place of the summary of the 
right to receive a periodic statement required by Sec. 1005.7(b)(6)), 
including a telephone number to call to request a history. The 
disclosure required by this paragraph (e)(1)(i) may be made by providing 
a notice substantially similar to the notice contained in paragraph (a) 
of appendix A-5 of this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-5 of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The agency shall provide an 
annual notice concerning error resolution that is substantially similar 
to the notice contained in paragraph (b) of appendix A-5 of this part, 
in place of the notice required by Sec. 1005.8(b). Alternatively, the 
agency may include on or with each electronic or written history 
provided in accordance with paragraph (d)(1) of this section, a notice 
substantially similar to the abbreviated notice for periodic statements 
contained in paragraph (b) in appendix A-3 of this part, modified as 
necessary to reflect the error resolution provisions set forth in this 
section.
    (3) Modified limitations on liability requirements. (i) For purposes 
of Sec. 1005.6(b)(3), the 60-day period for reporting any unauthorized 
transfer shall begin on the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (d)(1)(ii) of this section, provided that the 
electronic history made available to the consumer reflects the 
unauthorized transfer; or
    (B) The date the agency sends a written history of the consumer's 
account transactions requested by the consumer under paragraph 
(d)(1)(iii) of this section in which the unauthorized transfer is first 
reflected.
    (ii) An agency may comply with paragraph (e)(3)(i) of this section 
by limiting the consumer's liability for an unauthorized transfer as 
provided under Sec. 1005.6(b)(3) for any transfer reported by the 
consumer within 120 days after the transfer was credited or debited to 
the consumer's account.
    (4) Modified error resolution requirements. (i) The agency shall 
comply with the requirements of Sec. 1005.11 in response to an oral or 
written notice of an error from the consumer that is received by the 
earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (d)(1)(ii) of this section, 
provided that the electronic history made available to the consumer 
reflects the alleged error; or
    (B) Sixty days after the date the agency sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (d)(1)(iii) of this section in which the alleged error is 
first reflected.
    (ii) In lieu of following the procedures in paragraph (e)(4)(i) of 
this section, an agency complies with the requirements for resolving 
errors in Sec. 1005.11 if it investigates any oral or written notice of 
an error from the consumer that is received by the agency within 120 
days after the transfer allegedly in error was credited or debited to 
the consumer's account.
    (f) Disclosure of fees and other information. For government benefit 
accounts, a government agency shall comply with the disclosure and 
change-in-terms requirements applicable to prepaid accounts as set forth 
in Sec. 1005.18(f).
    (g) Government benefit accounts accessible by hybrid prepaid-credit 
cards. For government benefit accounts accessible by hybrid prepaid-
credit cards as defined in Regulation Z, 12 CFR 1026.61, a government 
agency shall comply with prohibitions and requirements applicable to 
prepaid accounts as set forth in Sec. 1005.18(g).



Sec. 1005.16  Disclosures at automated teller machines.

    (a) Definition. ``Automated teller machine operator'' means any 
person that operates an automated teller machine at which a consumer 
initiates an electronic fund transfer or a balance inquiry and that does 
not hold the account to or from which the transfer is made, or about 
which an inquiry is made.

[[Page 184]]

    (b) General. An automated teller machine operator that imposes a fee 
on a consumer for initiating an electronic fund transfer or a balance 
inquiry must provide a notice that a fee will be imposed for providing 
electronic fund transfer services or a balance inquiry that discloses 
the amount of the fee.
    (c) Notice requirement. An automated teller machine operator must 
provide the notice required by paragraph (b) of this section either by 
showing it on the screen of the automated teller machine or by providing 
it on paper, before the consumer is committed to paying a fee.
    (d) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer or 
a balance inquiry only if:
    (1) The consumer is provided the notice required under paragraph (c) 
of this section, and
    (2) The consumer elects to continue the transaction or inquiry after 
receiving such notice.

[76 FR 81023, Dec. 27, 2011, as amended at 78 FR 18224, Mar. 26, 2013]



Sec. 1005.17  Requirements for overdraft services.

    (a) Definition. For purposes of this section, the term ``overdraft 
service'' means a service under which a financial institution assesses a 
fee or charge on a consumer's account held by the institution for paying 
a transaction (including a check or other item) when the consumer has 
insufficient or unavailable funds in the account. The term ``overdraft 
service'' does not include any payment of overdrafts pursuant to:
    (1) A line of credit subject to Regulation Z (12 CFR part 1026), 
including transfers from a credit card account, home equity line of 
credit, or overdraft line of credit;
    (2) A service that transfers funds from another account held 
individually or jointly by a consumer, such as a savings account; or
    (3) A line of credit or other transaction exempt from Regulation Z 
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d).
    (b) Opt-in requirement--(1) General. Except as provided under 
paragraph (c) of this section, a financial institution holding a 
consumer's account shall not assess a fee or charge on a consumer's 
account for paying an ATM or one-time debit card transaction pursuant to 
the institution's overdraft service, unless the institution:
    (i) Provides the consumer with a notice in writing, or if the 
consumer agrees, electronically, segregated from all other information, 
describing the institution's overdraft service;
    (ii) Provides a reasonable opportunity for the consumer to 
affirmatively consent, or opt in, to the service for ATM and one-time 
debit card transactions;
    (iii) Obtains the consumer's affirmative consent, or opt-in, to the 
institution's payment of ATM or one-time debit card transactions; and
    (iv) Provides the consumer with confirmation of the consumer's 
consent in writing, or if the consumer agrees, electronically, which 
includes a statement informing the consumer of the right to revoke such 
consent.
    (2) Conditioning payment of other overdrafts on consumer's 
affirmative consent. A financial institution shall not:
    (i) Condition the payment of any overdrafts for checks, ACH 
transactions, and other types of transactions on the consumer 
affirmatively consenting to the institution's payment of ATM and one-
time debit card transactions pursuant to the institution's overdraft 
service; or
    (ii) Decline to pay checks, ACH transactions, and other types of 
transactions that overdraw the consumer's account because the consumer 
has not affirmatively consented to the institution's overdraft service 
for ATM and one-time debit card transactions.
    (3) Same account terms, conditions, and features. A financial 
institution shall provide to consumers who do not affirmatively consent 
to the institution's overdraft service for ATM and one-time debit card 
transactions the same account terms, conditions, and features that it 
provides to consumers who affirmatively consent, except for the 
overdraft service for ATM and one-time debit card transactions.
    (c) Timing--(1) Existing account holders. For accounts opened prior 
to July 1, 2010, the financial institution must

[[Page 185]]

not assess any fees or charges on a consumer's account on or after 
August 15, 2010, for paying an ATM or one-time debit card transaction 
pursuant to the overdraft service, unless the institution has complied 
with Sec. 1005.17(b)(1) and obtained the consumer's affirmative consent.
    (2) New account holders. For accounts opened on or after July 1, 
2010, the financial institution must comply with Sec. 1005.17(b)(1) and 
obtain the consumer's affirmative consent before the institution 
assesses any fee or charge on the consumer's account for paying an ATM 
or one-time debit card transaction pursuant to the institution's 
overdraft service.
    (d) Content and format. The notice required by paragraph (b)(1)(i) 
of this section shall be substantially similar to Model Form A-9 set 
forth in appendix A of this part, include all applicable items in this 
paragraph, and may not contain any information not specified in or 
otherwise permitted by this paragraph.
    (1) Overdraft service. A brief description of the financial 
institution's overdraft service and the types of transactions for which 
a fee or charge for paying an overdraft may be imposed, including ATM 
and one-time debit card transactions.
    (2) Fees imposed. The dollar amount of any fees or charges assessed 
by the financial institution for paying an ATM or one-time debit card 
transaction pursuant to the institution's overdraft service, including 
any daily or other overdraft fees. If the amount of the fee is 
determined on the basis of the number of times the consumer has 
overdrawn the account, the amount of the overdraft, or other factors, 
the institution must disclose the maximum fee that may be imposed.
    (3) Limits on fees charged. The maximum number of overdraft fees or 
charges that may be assessed per day, or, if applicable, that there is 
no limit.
    (4) Disclosure of opt-in right. An explanation of the consumer's 
right to affirmatively consent to the financial institution's payment of 
overdrafts for ATM and one-time debit card transactions pursuant to the 
institution's overdraft service, including the methods by which the 
consumer may consent to the service; and
    (5) Alternative plans for covering overdrafts. If the institution 
offers a line of credit subject to Regulation Z (12 CFR part 1026) or a 
service that transfers funds from another account of the consumer held 
at the institution to cover overdrafts, the institution must state that 
fact. An institution may, but is not required to, list additional 
alternatives for the payment of overdrafts.
    (6) Permitted modifications and additional content. If applicable, 
the institution may modify the content required by Sec. 1005.17(d) to 
indicate that the consumer has the right to opt into, or opt out of, the 
payment of overdrafts under the institution's overdraft service for 
other types of transactions, such as checks, ACH transactions, or 
automatic bill payments; to provide a means for the consumer to exercise 
this choice; and to disclose the associated returned item fee and that 
additional merchant fees may apply. The institution may also disclose 
the consumer's right to revoke consent. For notices provided to 
consumers who have opened accounts prior to July 1, 2010, the financial 
institution may describe the institution's overdraft service with 
respect to ATM and one-time debit card transactions with a statement 
such as ``After August 15, 2010, we will not authorize and pay 
overdrafts for the following types of transactions unless you ask us to 
(see below).''
    (e) Joint relationships. If two or more consumers jointly hold an 
account, the financial institution shall treat the affirmative consent 
of any of the joint consumers as affirmative consent for that account. 
Similarly, the financial institution shall treat a revocation of 
affirmative consent by any of the joint consumers as revocation of 
consent for that account.
    (f) Continuing right to opt in or to revoke the opt-in. A consumer 
may affirmatively consent to the financial institution's overdraft 
service at any time in the manner described in the notice required by 
paragraph (b)(1)(i) of this section. A consumer may also revoke consent 
at any time in the manner made available to the consumer for

[[Page 186]]

providing consent. A financial institution must implement a consumer's 
revocation of consent as soon as reasonably practicable.
    (g) Duration and revocation of opt-in. A consumer's affirmative 
consent to the institution's overdraft service is effective until 
revoked by the consumer, or unless the financial institution terminates 
the service.

    Effective Date Note: At 81 FR 84328, Nov. 22, 2016, Sec. 1005.17 was 
amended by revising paragraphs (a)(2) and (3) and adding paragraph 
(a)(4), effective Oct. 1, 2017. For the convenience of the user, the 
added and revised text is set forth as follows:



Sec. 1005.17  Requirements for overdraft services.

    (a) * * *
    (2) A service that transfers funds from another account held 
individually or jointly by a consumer, such as a savings account;
    (3) A line of credit or other transaction exempt from Regulation Z 
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d); or
    (4) A covered separate credit feature accessible by a hybrid 
prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61; or 
credit extended through a negative balance on the asset feature of the 
prepaid account that meets the conditions of 12 CFR 1026.61(a)(4).

                                * * * * *



Sec. 1005.18  Requirements for financial institutions offering payroll
card accounts.

    (a) Coverage. A financial institution shall comply with all 
applicable requirements of the Act and this part with respect to payroll 
card accounts except as provided in this section.
    (b) Alternative to periodic statements. (1) A financial institution 
need not furnish periodic statements required by Sec. 1005.9(b) if the 
institution makes available to the consumer:
    (i) The consumer's account balance, through a readily available 
telephone line;
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 60 days preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 60 days preceding the date the financial institution 
receives the consumer's request.
    (2) The history of account transactions provided under paragraphs 
(b)(1)(ii) and (iii) of this section must include the information set 
forth in Sec. 1005.9(b).
    (c) Modified requirements. A financial institution that provides 
information under paragraph (b) of this section, shall comply with the 
following:
    (1) Initial disclosures. The financial institution shall modify the 
disclosures under Sec. 1005.7(b) by disclosing:
    (i) Account information. A telephone number that the consumer may 
call to obtain the account balance, the means by which the consumer can 
obtain an electronic account history, such as the address of a Web site, 
and a summary of the consumer's right to receive a written account 
history upon request (in place of the summary of the right to receive a 
periodic statement required by Sec. 1005.7(b)(6)), including a telephone 
number to call to request a history. The disclosure required by this 
paragraph (c)(1)(i) may be made by providing a notice substantially 
similar to the notice contained in paragraph A-7(a) in appendix A of 
this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The financial institution shall 
provide an annual notice concerning error resolution that is 
substantially similar to the notice contained in paragraph A-7(b) in 
appendix A of this part, in place of the notice required by 
Sec. 1005.8(b). Alternatively, a financial institution may include on or 
with each electronic and written history provided in accordance with 
Sec. 1005.18(b)(1), a notice substantially similar to the abbreviated 
notice for periodic statements contained in paragraph A-3(b) in appendix 
A of this part, modified as necessary to reflect the error resolution 
provisions set forth in this section.
    (3) Limitations on liability. (i) For purposes of Sec. 1005.6(b)(3), 
the 60-day period for reporting any unauthorized transfer shall begin on 
the earlier of:

[[Page 187]]

    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (b)(1)(ii) of this section, provided that the 
electronic history made available to the consumer reflects the transfer; 
or
    (B) The date the financial institution sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (b)(1)(iii) of this section in which the unauthorized transfer 
is first reflected.
    (ii) A financial institution may comply with paragraph (c)(3)(i) of 
this section by limiting the consumer's liability for an unauthorized 
transfer as provided under Sec. 1005.6(b)(3) for any transfer reported 
by the consumer within 120 days after the transfer was credited or 
debited to the consumer's account.
    (4) Error resolution. (i) The financial institution shall comply 
with the requirements of Sec. 1005.11 in response to an oral or written 
notice of an error from the consumer that is received by the earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (b)(1)(ii) of this section, 
provided that the electronic history made available to the consumer 
reflects the alleged error; or
    (B) Sixty days after the date the financial institution sends a 
written history of the consumer's account transactions requested by the 
consumer under paragraph (b)(1)(iii) of this section in which the 
alleged error is first reflected.
    (ii) In lieu of following the procedures in paragraph (c)(4)(i) of 
this section, a financial institution complies with the requirements for 
resolving errors in Sec. 1005.11 if it investigates any oral or written 
notice of an error from the consumer that is received by the institution 
within 120 days after the transfer allegedly in error was credited or 
debited to the consumer's account.

    Effective Date Note: At 81 FR 84328, Nov. 22, 2016, Sec. 1005.18 was 
revised, effective Oct. 1, 2017. For the convenience of the user, the 
revised text is set forth as follows:



Sec. 1005.18  Requirements for financial institutions offering prepaid 
          accounts.

    (a) Coverage. A financial institution shall comply with all 
applicable requirements of the Act and this part with respect to prepaid 
accounts except as modified by this section. For rules governing 
government benefit accounts, see Sec. 1005.15.
    (b) Pre-acquisition disclosure requirements--(1) Timing of 
disclosures--(i) General. Except as provided in paragraphs (b)(1)(ii) or 
(iii) of this section, a financial institution shall provide the 
disclosures required by paragraph (b) of this section before a consumer 
acquires a prepaid account.
    (ii) Disclosures for prepaid accounts acquired in retail locations. 
A financial institution is not required to provide the long form 
disclosures required by paragraph (b)(4) of this section before a 
consumer acquires a prepaid account in person at a retail location if 
the following conditions are met:
    (A) The prepaid account access device is contained inside the 
packaging material.
    (B) The disclosures required by paragraph (b)(2) of this section are 
provided on or are visible through an outward-facing, external surface 
of a prepaid account access device's packaging material.
    (C) The disclosures required by paragraph (b)(2) of this section 
include the information set forth in paragraph (b)(2)(xiii) of this 
section that allows a consumer to access the information required to be 
disclosed by paragraph (b)(4) of this section by telephone and via a Web 
site.
    (D) The long form disclosures required by paragraph (b)(4) of this 
section are provided after the consumer acquires the prepaid account.
    (iii) Disclosures for prepaid accounts acquired orally by telephone. 
A financial institution is not required to provide the long form 
disclosures required by paragraph (b)(4) of this section before a 
consumer acquires a prepaid account orally by telephone if the following 
conditions are met:
    (A) The financial institution communicates to the consumer orally, 
before the consumer acquires the prepaid account, that the information 
required to be disclosed by paragraph (b)(4) of this section is 
available both by telephone and on a Web site.
    (B) The financial institution makes the information required to be 
disclosed by paragraph (b)(4) of this section available both by 
telephone and on a Web site.
    (C) The long form disclosures required by paragraph (b)(4) of this 
section are provided after the consumer acquires the prepaid account.
    (2) Short form disclosure content. In accordance with paragraph 
(b)(1) of this section, a financial institution shall provide a 
disclosure setting forth the following fees and information for a 
prepaid account, as applicable:
    (i) Periodic fee. The periodic fee charged for holding the prepaid 
account, assessed on a monthly or other periodic basis, using the term 
``Monthly fee,'' ``Annual fee,'' or a substantially similar term.

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    (ii) Per purchase fee. The fee for making a purchase using the 
prepaid account, using the term ``Per purchase'' or a substantially 
similar term.
    (iii) ATM withdrawal fees. Two fees for using an automated teller 
machine to initiate a withdrawal of cash in the United States from the 
prepaid account, both within and outside of the financial institution's 
network or a network affiliated with the financial institution, using 
the term ``ATM withdrawal'' or a substantially similar term, and ``in-
network'' or ``out-of-network,'' respectively, or substantially similar 
terms.
    (iv) Cash reload fee. The fee for reloading cash into the prepaid 
account using the term ``Cash reload'' or a substantially similar term. 
The fee disclosed must be the total of all charges from the financial 
institution and any third parties for a cash reload.
    (v) ATM balance inquiry fees. Two fees for using an automated teller 
machine to check the balance of the prepaid account in the United 
States, both within and outside of the financial institution's network 
or a network affiliated with the financial institution, using the term 
``ATM balance inquiry'' or a substantially similar term, and ``in-
network'' or ``out-of-network,'' respectively, or substantially similar 
terms.
    (vi) Customer service fees. Two fees for calling the financial 
institution about the prepaid account, both for calling an interactive 
voice response system and a live customer service agent, using the term 
``Customer service'' or a substantially similar term, and ``automated'' 
or ``live agent,'' or substantially similar terms, respectively, and 
``per call'' or a substantially similar term. When providing a short 
form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, disclose only the fee for calling the 
live agent customer service about the prepaid account, using the term 
``Live customer service'' or a substantially similar term and ``per 
call'' or a substantially similar term.
    (vii) Inactivity fee. The fee for non-use, dormancy, or inactivity 
of the prepaid account, using the term ``Inactivity'' or a substantially 
similar term, as well as the conditions that trigger the financial 
institution to impose that fee.
    (viii) Statements regarding additional fee types--(A) Statement 
regarding number of additional fee types charged. A statement disclosing 
the number of additional fee types the financial institution may charge 
consumers with respect to the prepaid account, using the following 
clause or a substantially similar clause: ``We charge [x] other types of 
fees.'' The number of additional fee types disclosed must reflect the 
total number of fee types under which the financial institution may 
charge fees, excluding:
    (1) Fees required to be disclosed pursuant to paragraphs (b)(2)(i) 
through (vii) and (b)(5) of this section; and
    (2) Any finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in 12 CFR 
1026.61.
    (B) Statement directing consumers to disclosure of additional fee 
types. If a financial institution makes a disclosure pursuant to 
paragraph (b)(2)(ix) of this section, a statement directing consumers to 
that disclosure, located after but on the same line of text as the 
statement regarding the number of additional fee types required by 
paragraph (b)(2)(viii)(A) of this section, using the following clause or 
a substantially similar clause: ``Here are some of them:''.
    (ix) Disclosure of additional fee types--(A) Determination of which 
additional fee types to disclose. The two fee types that generate the 
highest revenue from consumers for the prepaid account program or across 
prepaid account programs that share the same fee schedule during the 
time period provided in paragraphs (b)(2)(ix)(D) and (E) of this 
section, excluding:
    (1) Fees required to be disclosed pursuant to paragraphs (b)(2)(i) 
through (vii) and (b)(5) of this section;
    (2) Any fee types that generated less than 5 percent of the total 
revenue from consumers for the prepaid account program or across prepaid 
account programs that share the same fee schedule during the time period 
provided in paragraphs (b)(2)(ix)(D) and (E) of this section; and
    (3) Any finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in 12 CFR 
1026.61.
    (B) Disclosure of fewer than two additional fee types. A financial 
institution that has only one additional fee type that satisfies the 
criteria in paragraph (b)(2)(ix)(A) of this section must disclose that 
one additional fee type; it may, but is not required to, also disclose 
another additional fee type of its choice. A financial institution that 
has no additional fee types that satisfy the criteria in paragraph 
(b)(2)(ix)(A) of this section is not required to make a disclosure under 
this paragraph (b)(2)(ix); it may, but is not required to, disclose one 
or two fee types of its choice.
    (C) Fee variations in additional fee types. If an additional fee 
type required to be disclosed pursuant to paragraph (b)(2)(ix)(A) of 
this section has more than two fee variations, or when providing a short 
form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, the financial institution must 
disclose the name of the additional fee type and the highest fee amount 
in accordance with paragraph

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(b)(3)(i) of this section. Except when providing a short form disclosure 
for multiple service plans pursuant to paragraph (b)(6)(iii)(B)(2) of 
this section, if an additional fee type has two fee variations, the 
financial institution must disclose the name of the additional fee type 
together with the names of the two fee variations and the fee amounts in 
a format substantially similar to that used to disclose the two-tier 
fees required by paragraphs (b)(2)(v) and (vi) of this section and in 
accordance with paragraph (b)(7)(ii)(B)(1) of this section. If a 
financial institution only charges one fee under a particular fee type, 
the financial institution must disclose the name of the additional fee 
type and the fee amount; it may, but is not required to, disclose also 
the name of the one fee variation for which the fee amount is charged, 
in a format substantially similar to that used to disclose the two-tier 
fees required by paragraphs (b)(2)(v) and (vi) of this section, except 
that the financial institution would disclose only the one fee variation 
name and fee amount instead of two.
    (D) Timing of initial assessment of additional fee type disclosure--
(1) Existing prepaid account programs as of October 1, 2017. For a 
prepaid account program in effect as of October 1, 2017, the financial 
institution must disclose the additional fee types based on revenue for 
a 24-month period that begins no earlier than October 1, 2014.
    (2) Existing prepaid account programs as of October 1, 2017 with 
unavailable data. If a financial institution does not have 24 months of 
fee revenue data for a particular prepaid account program from which to 
calculate the additional fee types disclosure in advance of October 1, 
2017, the financial institution must disclose the additional fee types 
based on revenue it reasonably anticipates the prepaid account program 
will generate over the 24-month period that begins on October 1, 2017.
    (3) New prepaid account programs created on or after October 1, 
2017. For a prepaid account program created on or after October 1, 2017, 
the financial institution must disclose the additional fee types based 
on revenue it reasonably anticipates the prepaid account program will 
generate over the first 24 months of the program.
    (E) Timing of periodic reassessment and update of additional fee 
types disclosure--(1) General. A financial institution must reassess its 
additional fee types disclosure periodically as described in paragraph 
(b)(2)(ix)(E)(2) of this section and upon a fee schedule change as 
described in paragraph (b)(2)(ix)(E)(3) of this section. The financial 
institution must update its additional fee types disclosure if the 
previous disclosure no longer complies with the requirements of this 
paragraph (b)(2)(ix).
    (2) Periodic reassessment. A financial institution must reassess 
whether its previously disclosed additional fee types continue to comply 
with the requirements of this paragraph (b)(2)(ix) every 24 months based 
on revenue for the previous 24-month period. The financial institution 
must complete this reassessment and update its disclosures, if 
applicable, within three months of the end of the 24-month period, 
except as provided in the update printing exception in paragraph 
(b)(2)(ix)(E)(4) of this section. A financial institution may, but is 
not required to, carry out this reassessment and update, if applicable, 
more frequently than every 24 months, at which time a new 24-month 
period commences.
    (3) Fee schedule change. If a financial institution revises the fee 
schedule for a prepaid account program, it must determine whether it 
reasonably anticipates that the previously disclosed additional fee 
types will continue to comply with the requirements of this paragraph 
(b)(2)(ix) for the 24 months following implementation of the fee 
schedule change. If the financial institution reasonably anticipates 
that the previously disclosed additional fee types will not comply with 
the requirements of this paragraph (b)(2)(ix), it must update the 
disclosure based on its reasonable anticipation of what those additional 
fee types will be at the time the fee schedule change goes into effect, 
except as provided in the update printing exception in paragraph 
(b)(2)(ix)(E)(4) of this section. If an immediate change in terms and 
conditions is necessary to maintain or restore the security of an 
account or an electronic fund transfer system as described in 
Sec. 1005.8(a)(2) and that change affects the prepaid account program's 
fee schedule, the financial institution must complete its reassessment 
and update its disclosures, if applicable, within three months of the 
date it makes the change permanent, except as provided in the update 
printing exception in paragraph (b)(2)(ix)(E)(4) of this section.
    (4) Update printing exception. Notwithstanding the requirements to 
update additional fee types disclosures in paragraph (b)(2)(ix)(E) of 
this section, a financial institution is not required to update the 
listing of additional fee types that are provided on, in, or with 
prepaid account packaging materials that were manufactured, printed, or 
otherwise produced prior to a periodic reassessment and update pursuant 
to paragraph (b)(2)(ix)(E)(2) of this section or prior to a fee schedule 
change pursuant to paragraph (b)(2)(ix)(E)(3) of this section.
    (x) Statement regarding overdraft credit features. If a covered 
separate credit feature accessible by a hybrid prepaid-credit card as 
defined in Regulation Z, 12 CFR 1026.61, may be offered at any point to 
a consumer in connection with the prepaid account, a statement that 
overdraft/credit may be offered, the time period after which it may be 
offered, and that fees would apply, using the

[[Page 190]]

following clause or a substantially similar clause: ``You may be offered 
overdraft/credit after [x] days. Fees would apply.'' If no such credit 
feature will be offered at any point to a consumer in connection with 
the prepaid account, a statement that no overdraft credit feature is 
offered, using the following clause or a substantially similar clause: 
``No overdraft/credit feature.''
    (xi) Statement regarding registration and FDIC or NCUA insurance. A 
statement regarding the prepaid account program's eligibility for FDIC 
deposit insurance or NCUA share insurance, as appropriate, and directing 
the consumer to register the prepaid account for insurance and other 
account protections, where applicable, as follows:
    (A) Account is insurance eligible and does not have pre-acquisition 
customer identification/verification. If a prepaid account program is 
set up to be eligible for FDIC deposit or NCUA share insurance, and 
customer identification and verification does not occur before the 
account is opened, using the following clause or a substantially similar 
clause: ``Register your card for [FDIC insurance eligibility] [NCUA 
insurance, if eligible,] and other protections.''
    (B) Account is not insurance eligible and does not have pre-
acquisition customer identification/verification. If a prepaid account 
program is not set up to be eligible for FDIC deposit or NCUA share 
insurance, and customer identification and verification does not occur 
before the account is opened, using the following clause or a 
substantially similar clause: ``Not [FDIC] [NCUA] insured. Register your 
card for other protections.''
    (C) Account is insurance eligible and has pre-acquisition customer 
identification/verification. If a prepaid account program is set up to 
be eligible for FDIC deposit or NCUA share insurance, and customer 
identification and verification occurs for all prepaid accounts within 
the prepaid program before the account is opened, using the following 
clause or a substantially similar clause: ``Your funds are [eligible for 
FDIC insurance] [NCUA insured, if eligible].''
    (D) Account is not insurance eligible and has pre-acquisition 
customer identification/verification. If a prepaid account program is 
not set up to be eligible for FDIC deposit or NCUA share insurance, and 
customer identification and verification occurs for all prepaid accounts 
within the prepaid account program before the account is opened, using 
the following clause or a substantially similar clause: ``Your funds are 
not [FDIC] [NCUA] insured.''
    (E) No customer identification/verification. If a prepaid account 
program is set up such that there is no customer identification and 
verification process for any prepaid accounts within the prepaid account 
program, using the following clause or a substantially similar clause: 
``Treat this card like cash. Not [FDIC] [NCUA] insured.''
    (xii) Statement regarding CFPB Web site. A statement directing the 
consumer to a Web site URL of the Consumer Financial Protection Bureau 
(cfpb.gov/prepaid) for general information about prepaid accounts, using 
the following clause or a substantially similar clause: ``For general 
information about prepaid accounts, visit cfpb.gov/prepaid.''
    (xiii) Statement regarding information on all fees and services. A 
statement directing the consumer to the location of the long form 
disclosure required by paragraph (b)(4) of this section to find details 
and conditions for all fees and services. For a financial institution 
offering prepaid accounts at a retail location pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section, this 
statement must also include a telephone number and a Web site URL that a 
consumer may use to directly access, respectively, an oral and an 
electronic version of the long form disclosure required under paragraph 
(b)(4) of this section. The disclosure required by this paragraph must 
be made using the following clause or a substantially similar clause: 
``Find details and conditions for all fees and services in [location]'' 
or, for prepaid accounts offered at retail locations pursuant to 
paragraph (b)(1)(ii) of this section, made using the following clause or 
a substantially similar clause: ``Find details and conditions for all 
fees and services inside the package, or call [telephone number] or 
visit [Web site].'' The Web site URL may not exceed 22 characters and 
must be meaningfully named. A financial institution may, but is not 
required to, disclose an SMS code at the end of the statement disclosing 
the telephone number and Web site URL, if the SMS code can be 
accommodated on the same line of text as the statement required by this 
paragraph.
    (xiv) Additional content for payroll card accounts--(A) Statement 
regarding wage or salary payment options. For payroll card accounts, a 
statement that the consumer does not have to accept the payroll card 
account and directing the consumer to ask about other ways to receive 
wages or salary from the employer instead of receiving them via the 
payroll card account using the following clause or a substantially 
similar clause: ``You do not have to accept this payroll card. Ask your 
employer about other ways to receive your wages.'' Alternatively, a 
financial institution may provide a statement that the consumer has 
several options to receive wages or salary, followed by a list of the 
options available to the consumer, and directing the consumer to tell 
the employer which option the consumer chooses using the following 
clause or a substantially similar clause: ``You have several options to 
receive your wages: [list of options available to the consumer]; or this 
payroll card. Tell your

[[Page 191]]

employer which option you choose.'' This statement must be located above 
the information required by paragraphs (b)(2)(i) through (iv).
    (B) Statement regarding state-required information or other fee 
discounts and waivers. For payroll card accounts, a financial 
institution may, but is not required to, include a statement in one 
additional line of text directing the consumer to a particular location 
outside the short form disclosure for information on ways the consumer 
may access payroll card account funds and balance information for free 
or for a reduced fee. This statement must be located directly below any 
statements disclosed pursuant to paragraphs (b)(3)(i) and (ii) of this 
section, or, if no such statements are disclosed, above the statement 
required by paragraph (b)(2)(x) of this section.
    (3) Short form disclosure of variable fees and third-party fees and 
prohibition on disclosure of finance charges--(i) General disclosure of 
variable fees. If the amount of any fee that is required to be disclosed 
in the short form disclosure pursuant to paragraphs (b)(2)(i) through 
(vii) and (ix) of this section could vary, a financial institution shall 
disclose the highest amount it may impose for that fee, followed by a 
symbol, such as an asterisk, linked to a statement explaining that the 
fee could be lower depending on how and where the prepaid account is 
used, using the following clause or a substantially similar clause: 
``This fee can be lower depending on how and where this card is used.'' 
Except as provided in paragraph (b)(3)(ii) of this section, a financial 
institution must use the same symbol and statement for all fees that 
could vary. The linked statement must be located above the statement 
required by paragraph (b)(2)(x) of this section.
    (ii) Disclosure of variable periodic fee. If the amount of the 
periodic fee disclosed in the short form disclosure pursuant to 
paragraph (b)(2)(i) of this section could vary, as an alternative to the 
disclosure required by paragraph (b)(3)(i) of this section, the 
financial institution may disclose the highest amount it may impose for 
the periodic fee, followed by a symbol, such as a dagger, that is 
different from the symbol the financial institution uses pursuant to 
paragraph (b)(3)(i) of this section, to indicate that a waiver of the 
fee or a lower fee might apply, linked to a statement in one additional 
line of text disclosing the waiver or reduced fee amount and explaining 
the circumstances under which the fee waiver or reduction may occur. The 
linked statement must be located directly above or in place of the 
linked statement required by paragraph (b)(3)(i) of this section, as 
applicable.
    (iii) Single disclosure for like fees. As an alternative to the two-
tier fee disclosure required by paragraphs (b)(2)(iii), (v), and (vi) of 
this section and any two-tier fee required by paragraph (b)(2)(ix) of 
this section, a financial institution may disclose a single fee amount 
when the amount is the same for both fees.
    (iv) Third-party fees in general. Except as provided in paragraph 
(b)(3)(v) of this section, a financial institution may not include any 
third-party fees in a disclosure made pursuant to paragraph (b)(2) of 
this section.
    (v) Third-party cash reload fees. Any third-party fee included in 
the cash reload fee disclosed in the short form pursuant to paragraph 
(b)(2)(iv) of this section must be the highest fee known by the 
financial institution at the time it prints, or otherwise prepares, the 
short form disclosure required by paragraph (b)(2) of this section. A 
financial institution is not required to revise its short form 
disclosure to reflect a cash reload fee change by a third party until 
such time that the financial institution manufactures, prints, or 
otherwise produces new prepaid account packaging materials or otherwise 
updates the short form disclosure.
    (vi) Prohibition on disclosure of finance charges. A financial 
institution may not include in a disclosure made pursuant to paragraphs 
(b)(2)(i) through (ix) of this section any finance charges as described 
in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection with a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined in 12 CFR 1026.61.
    (4) Long form disclosure content. In accordance with paragraph 
(b)(1) of this section, a financial institution shall provide a 
disclosure setting forth the following fees and information for a 
prepaid account, as applicable:
    (i) Title for long form disclosure. A heading stating the name of 
the prepaid account program and that the long form disclosure contains a 
list of all fees for that particular prepaid account program.
    (ii) Fees. All fees that may be imposed in connection with a prepaid 
account. For each fee, the financial institution must disclose the 
amount of the fee and the conditions, if any, under which the fee may be 
imposed, waived, or reduced. A financial institution may not use any 
symbols, such as an asterisk, to explain conditions under which any fee 
may be imposed. A financial institution may, but is not required to, 
include in the long form disclosure any service or feature it provides 
or offers at no charge to the consumer. The financial institution must 
also disclose any third-party fee amounts known to the financial 
institution that may apply. For any such third-party fee disclosed, the 
financial institution may, but is not required to, include either or 
both a statement that the fee is accurate as of or through a specific 
date or that the third-party fee is subject to change. If a third-party 
fee may apply but the amount of that fee is not known by the

[[Page 192]]

financial institution, it must include a statement indicating that the 
third-party fee may apply without specifying the fee amount. A financial 
institution is not required to revise the long form disclosure required 
by paragraph (b)(4) of this section to reflect a fee change by a third 
party until such time that the financial institution manufactures, 
prints, or otherwise produces new prepaid account packaging materials or 
otherwise updates the long form disclosure.
    (iii) Statement regarding registration and FDIC or NCUA insurance. 
The statement required by paragraph (b)(2)(xi) of this section, together 
with an explanation of FDIC or NCUA insurance coverage and the benefit 
of such coverage or the consequence of the lack of such coverage, as 
applicable.
    (iv) Statement regarding overdraft credit features. The statement 
required by paragraph (b)(2)(x) of this section.
    (v) Statement regarding financial institution contact information. A 
statement directing the consumer to a telephone number, mailing address, 
and Web site URL of the person or office that a consumer may contact to 
learn about the terms and conditions of the prepaid account, to obtain 
prepaid account balance information, to request a copy of transaction 
history pursuant to paragraph (c)(1)(iii) of this section if the 
financial institution does not provide periodic statements pursuant to 
Sec. 1005.9(b), or to notify the financial institution when the consumer 
believes that an unauthorized electronic fund transfer occurred as 
required by Sec. 1005.7(b)(2) and paragraph (d)(1)(ii) of this section.
    (vi) Statement regarding CFPB Web site and telephone number. A 
statement directing the consumer to a Web site URL of the Consumer 
Financial Protection Bureau (cfpb.gov/prepaid) for general information 
about prepaid accounts, and a statement directing the consumer to a 
Consumer Financial Protection Bureau telephone number (1-855-411-2372) 
and Web site URL (cfpb.gov/complaint) to submit a complaint about a 
prepaid account, using the following clause or a substantially similar 
clause: ``For general information about prepaid accounts, visit 
cfpb.gov/prepaid. If you have a complaint about a prepaid account, call 
the Consumer Financial Protection Bureau at 1-855-411-2372 or visit 
cfpb.gov/complaint.''
    (vii) Regulation Z disclosures for overdraft credit features. The 
disclosures described in Regulation Z, 12 CFR 1026.60(e)(1), in 
accordance with the requirements for such disclosures in 12 CFR 1026.60, 
if, at any point, a covered separate credit feature accessible by a 
hybrid prepaid-credit card as defined in 12 CFR 1026.61, may be offered 
in connection with the prepaid account. A financial institution may, but 
is not required to, include above the Regulation Z disclosures required 
by this paragraph a heading and other explanatory information 
introducing the overdraft credit feature. A financial institution is not 
required to revise the disclosure required by this paragraph to reflect 
a change in the fees or other terms disclosed therein until such time as 
the financial institution manufactures, prints, or otherwise produces 
new prepaid account packaging materials or otherwise updates the long 
form disclosure.
    (5) Disclosure requirements outside the short form disclosure. At 
the time a financial institution provides the short form disclosure, it 
must also disclose the following information: the name of the financial 
institution; the name of the prepaid account program; the purchase price 
for the prepaid account, if any; and the fee for activating the prepaid 
account, if any. In a setting other than in a retail location, this 
information must be disclosed in close proximity to the short form. In a 
retail location, this information, other than the purchase price, must 
be disclosed on the exterior of the access device's packaging material. 
In a retail location, the purchase price must be disclosed either on the 
exterior of or in close proximity to the prepaid account access device's 
packaging material.
    (6) Form of pre-acquisition disclosures--(i) General--(A) Written 
disclosures. Except as provided in paragraphs (b)(6)(i)(B) and (C) of 
this section, disclosures required by paragraph (b) of this section must 
be in writing.
    (B) Electronic disclosures. The disclosures required by paragraph 
(b) of this section must be provided in electronic form when a consumer 
acquires a prepaid account through electronic means, including via a Web 
site or mobile application, and must be viewable across all screen 
sizes. The long form disclosure must be provided electronically through 
a Web site when a financial institution is offering prepaid accounts at 
a retail location pursuant to the retail location exception in paragraph 
(b)(1)(ii) of this section. Electronic disclosures must be provided in a 
manner which is reasonably expected to be accessible in light of how a 
consumer is acquiring the prepaid account, in a responsive form, and 
using machine-readable text that is accessible via Web browsers or 
mobile applications, as applicable, and via screen readers. Electronic 
disclosures provided pursuant to paragraph (b) of this section need not 
meet the consumer consent and other applicable provisions of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.).
    (C) Oral disclosures. Disclosures required by paragraphs (b)(2) and 
(5) of this section must be provided orally when a consumer acquires a 
prepaid account orally by telephone as described in paragraph 
(b)(1)(iii) of this section. For prepaid accounts acquired in retail 
locations or orally by telephone, disclosures required by paragraph 
(b)(4) of this section provided by telephone pursuant to paragraph

[[Page 193]]

(b)(1)(ii)(B) or (b)(1)(iii)(B) of this section also must be made 
orally.
    (ii) Retainable form. Pursuant to Sec. 1005.4(a)(1), disclosures 
required by paragraph (b) of this section must be made in a form that a 
consumer may keep, except for disclosures provided orally pursuant to 
paragraphs (b)(1)(ii) or (iii) of this section, long form disclosures 
provided via SMS as permitted by paragraph (b)(2)(xiii) of this section 
for a prepaid account sold at retail locations pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section, and the 
disclosure of a purchase price pursuant to paragraph (b)(5) of this 
section that is not disclosed on the exterior of the packaging material 
for a prepaid account sold at a retail location pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section.
    (iii) Tabular format--(A) General. When a short form disclosure is 
provided in writing or electronically, the information required by 
paragraphs (b)(2)(i) through (ix) of this section shall be provided in 
the form of a table. Except as provided in paragraph (b)(6)(iii)(B) of 
this section, the short form disclosures required by paragraph (b)(2) of 
this section shall be provided in a form substantially similar to Model 
Forms A-10(a) through (d) in appendix A of this part, as applicable. 
When a long form disclosure is provided in writing or electronically, 
the information required by paragraph (b)(4)(ii) of this section shall 
be provided in the form of a table. Sample Form A-10(f) in appendix A of 
this part provides an example of the long form disclosure required by 
paragraph (b)(4) of this section when the financial institution does not 
offer multiple service plans.
    (B) Multiple service plans--(1) Short form disclosure for default 
service plan. When a financial institution offers multiple service plans 
within a particular prepaid account program and each plan has a 
different fee schedule, the information required by paragraphs (b)(2)(i) 
through (ix) of this section may be provided in the tabular format 
described in paragraph (b)(6)(iii)(A) of this section for the service 
plan in which a consumer is initially enrolled by default upon acquiring 
the prepaid account.
    (2) Short form disclosure for multiple service plans. As an 
alternative to disclosing the default service plan pursuant to paragraph 
(b)(6)(iii)(B)(1) of this section, when a financial institution offers 
multiple service plans within a particular prepaid account program and 
each plan has a different fee schedule, fee disclosures required by 
paragraphs (b)(2)(i) through (vii) and (ix) of this section may be 
provided in the form of a table with separate columns for each service 
plan, in a form substantially similar to Model Form A-10(e) in appendix 
A of this part. Column headings must describe each service plan included 
in the table, using the terms ``Pay-as-you-go plan,'' ``Monthly plan,'' 
``Annual plan,'' or substantially similar terms; or, for multiple 
service plans offering preferred rates or fees for the prepaid accounts 
of consumers who also use another non-prepaid service, column headings 
must describe each service plan included in the table for the preferred- 
and non-preferred service plans, as applicable.
    (3) Long form disclosure. The information in the long form 
disclosure required by paragraph (b)(4)(ii) of this section must be 
presented in the form of a table for all service plans.
    (7) Specific formatting requirements for pre-acquisition 
disclosures--(i) Grouping--(A) Short form disclosure. The information 
required in the short form disclosure by paragraphs (b)(2)(i) through 
(iv) of this section must be grouped together and provided in that 
order. The information required by paragraphs (b)(2)(v) through (ix) of 
this section must be generally grouped together and provided in that 
order. The information required by paragraphs (b)(3)(i) and (ii) of this 
section, as applicable, must be generally grouped together and in the 
location described by paragraphs (b)(3)(i) and (ii) of this section. The 
information required by paragraphs (b)(2)(x) through (xiii) of this 
section must be generally grouped together and provided in that order. 
The statement regarding wage or salary payment options for payroll card 
accounts required by paragraph (b)(2)(xiv)(A) of this section must be 
located above the information required by paragraphs (b)(2)(i) through 
(iv) of this section, as described in paragraph (b)(2)(xiv)(A) of this 
section. The statement regarding state-required information or other fee 
discounts or waivers permitted by paragraph (b)(2)(xiv)(B) of this 
section, when applicable, must appear in the location described by 
paragraph (b)(2)(xiv)(B) of this section.
    (B) Long form disclosure. The information required by paragraph 
(b)(4)(i) of this section must be located in the first line of the long 
form disclosure. The information required by paragraph (b)(4)(ii) of 
this section must be generally grouped together and organized under 
subheadings by the categories of function for which a financial 
institution may impose the fee. Text describing the conditions under 
which a fee may be imposed must appear in the table required by 
paragraph (b)(6)(iii)(A) of this section in close proximity to the fee 
amount. The information in the long form disclosure required by 
paragraphs (b)(4)(iii) through (vi) of this section must be generally 
grouped together, provided in that order, and appear below the 
information required by paragraph (b)(4)(ii) of this section. If, 
pursuant to Sec. 1005.18(b)(4)(vii), the financial institution includes 
the disclosures described in Regulation Z, 12 CFR 1026.60(e)(1), such 
disclosures

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must appear below the disclosures required by paragraph (b)(4)(vi) of 
this section.
    (C) Multiple service plan disclosure. When providing a short form 
disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, in lieu of the requirements in 
paragraph (b)(7)(i)(A) of this section for grouping of the disclosures 
required by paragraphs (b)(2)(i) through (iv) and (v) through (ix) of 
this section, the information required by paragraphs (b)(2)(i) through 
(ix) of this section must be grouped together and provided in that 
order.
    (ii) Prominence and size--(A) General. All text used to disclose 
information in the short form or in the long form disclosure pursuant to 
paragraphs (b)(2), (b)(3)(i) and (ii), and (b)(4) of this section must 
be in a single, easy-to-read type that is all black or one color and 
printed on a background that provides a clear contrast.
    (B) Short form disclosure--(1) Fees and other information. The 
information required in the short form disclosure by paragraphs 
(b)(2)(i) through (iv) of this section must appear as follows: Fee 
amounts in bold-faced type; single fee amounts in a minimum type size of 
15 points (or 21 pixels); two-tier fee amounts for ATM withdrawal in a 
minimum type size of 11 points (or 16 pixels) and in no larger a type 
size than what is used for the single fee amounts; and fee headings in a 
minimum type size of eight points (or 11 pixels) and in no larger a type 
size than what is used for the single fee amounts. The information 
required by paragraphs (b)(2)(v) through (ix) of this section must 
appear in a minimum type size of eight points (or 11 pixels) and appear 
in the same or a smaller type size than what is used for the fee 
headings required by paragraphs (b)(2)(i) through (iv) of this section. 
The information required by paragraphs (b)(2)(x) through (xiii) of this 
section must appear in a minimum type size of seven points (or nine 
pixels) and appear in no larger a type size than what is used for the 
information required to be disclosed by paragraphs (b)(2)(v) through 
(ix) of this section. Additionally, the statements disclosed pursuant to 
paragraphs (b)(2)(viii)(A) and (b)(2)(x) of this section and the 
telephone number and URL disclosed pursuant to paragraph (b)(2)(xiii) of 
this section, where applicable, must appear in bold-faced type. The 
following information must appear in a minimum type size of six points 
(or eight pixels) and appear in no larger a type size that what is used 
for the information required by paragraphs (b)(2)(x) through (xiii) of 
this section: text used to distinguish each of the two-tier fees 
pursuant to paragraphs (b)(2)(iii), (v), (vi), and (ix) of this section; 
text used to explain that the fee required by paragraph (b)(2)(vi) of 
this section applies ``per call,'' where applicable; and text used to 
explain the conditions that trigger an inactivity fee and that the fee 
applies monthly or for the applicable time period, pursuant to paragraph 
(b)(2)(vii) of this section.
    (2) Variable fees. The symbols and corresponding statements 
regarding variable fees disclosed in the short form pursuant to 
paragraphs (b)(3)(i) and (ii) of this section, when applicable, must 
appear in a minimum type size of seven points (or nine pixels) and 
appear in no larger a type size than what is used for the information 
required by paragraphs (b)(2)(x) through (xiii) of this section. A 
symbol required next to the fee amount pursuant to paragraphs (b)(3)(i) 
and (ii) of this section must appear in the same type size or pixel size 
as what is used for the corresponding fee amount.
    (3) Payroll card account additional content. The statement regarding 
wage or salary payment options for payroll card accounts required by 
paragraph (b)(2)(xiv)(A) of this section, when applicable, must appear 
in a minimum type size of eight points (or 11 pixels) and appear in no 
larger a type size than what is used for the fee headings required by 
paragraphs (b)(2)(i) through (iv) of this section. The statement 
regarding state-required information and other fee discounts or waivers 
permitted by paragraph (b)(2)(xiv)(B) of this section must appear in the 
same type size used to disclose variable fee information pursuant to 
paragraph (b)(3)(i) and (ii) of this section, or, if none, the same type 
size used for the information required by paragraphs (b)(2)(x) through 
(xiii) of this section.
    (C) Long form disclosure. Long form disclosures required by 
paragraph (b)(4) of this section must appear in a minimum type size of 
eight points (or 11 pixels).
    (D) Multiple service plan short form disclosure. When providing a 
short form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, the fee headings required by 
paragraphs (b)(2)(i) through (iv) of this section must appear in bold-
faced type. The information required by paragraphs (b)(2)(i) through 
(xiii) of this section must appear in a minimum type size of seven 
points (or nine pixels), except the following must appear in a minimum 
type size of six points (or eight pixels) and appear in no larger a type 
size than what is used for the information required by paragraphs 
(b)(2)(i) through (xiii) of this section: Text used to distinguish each 
of the two-tier fees required by paragraphs (b)(2)(iii) and (v) of this 
section; text used to explain that the fee required by paragraph 
(b)(2)(vi) of this section applies ``per call,'' where applicable; text 
used to explain the conditions that trigger an inactivity fee pursuant 
to paragraph (b)(2)(vii) of this section; and text used to distinguish 
that fees required by paragraphs (b)(2)(i) and (vii) of this section 
apply monthly or for the applicable time period.
    (iii) Segregation. Short form and long form disclosures required by 
paragraphs (b)(2) and (4) of this section must be segregated from

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other information and must contain only information that is required or 
permitted for those disclosures by paragraph (b) of this section.
    (8) Terminology of pre-acquisition disclosures. Fee names and other 
terms must be used consistently within and across the disclosures 
required by paragraph (b) of this section.
    (9) Prepaid accounts acquired in foreign languages--(i) General. A 
financial institution must provide the pre-acquisition disclosures 
required by paragraph (b) of this section in a foreign language, if the 
financial institution uses that same foreign language in connection with 
the acquisition of a prepaid account in the following circumstances:
    (A) The financial institution principally uses a foreign language on 
the prepaid account packaging material;
    (B) The financial institution principally uses a foreign language to 
advertise, solicit, or market a prepaid account and provides a means in 
the advertisement, solicitation, or marketing material that the consumer 
uses to acquire the prepaid account by telephone or electronically; or
    (C) The financial institution provides a means for the consumer to 
acquire a prepaid account by telephone or electronically principally in 
a foreign language.
    (ii) Long form disclosures in English upon request. A financial 
institution required to provide pre-acquisition disclosures in a foreign 
language pursuant to paragraph (b)(9)(i) of this section must also 
provide the information required to be disclosed in its pre-acquisition 
long form disclosure pursuant to paragraph (b)(4) of this section in 
English upon a consumer's request and on any part of the Web site where 
it discloses this information in a foreign language.
    (c) Access to prepaid account information--(1) Periodic statement 
alternative. A financial institution need not furnish periodic 
statements required by Sec. 1005.9(b) if the financial institution makes 
available to the consumer:
    (i) The consumer's account balance, through a readily available 
telephone line;
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 12 months preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 24 months preceding the date the financial institution 
receives the consumer's request.
    (2) Periodic statement alternative for unverified prepaid accounts. 
For prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to provide a 
written history of the consumer's account transactions pursuant to 
paragraph (c)(1)(iii) of this section for any prepaid account for which 
the financial institution has not completed its consumer identification 
and verification process as described in paragraph (e)(3)(i)(A) through 
(C) of this section.
    (3) Information included on electronic or written histories. The 
history of account transactions provided under paragraphs (c)(1)(ii) and 
(iii) of this section must include the information set forth in 
Sec. 1005.9(b).
    (4) Inclusion of all fees charged. A financial institution must 
disclose the amount of any fees assessed against the account, whether 
for electronic fund transfers or otherwise, on any periodic statement 
provided pursuant to Sec. 1005.9(b) and on any history of account 
transactions provided or made available by the financial institution.
    (5) Summary totals of fees. A financial institution must display a 
summary total of the amount of all fees assessed by the financial 
institution against the consumer's prepaid account for the prior 
calendar month and for the calendar year to date on any periodic 
statement provided pursuant to Sec. 1005.9(b) and on any history of 
account transactions provided or made available by the financial 
institution.
    (d) Modified disclosure requirements. A financial institution that 
provides information under paragraph (c)(1) of this section shall comply 
with the following:
    (1) Initial disclosures. The financial institution shall modify the 
disclosures under Sec. 1005.7(b) by disclosing:
    (i) Access to account information. A telephone number that the 
consumer may call to obtain the account balance, the means by which the 
consumer can obtain an electronic account transaction history, such as 
the address of a Web site, and a summary of the consumer's right to 
receive a written account transaction history upon request (in place of 
the summary of the right to receive a periodic statement required by 
Sec. 1005.7(b)(6)), including a telephone number to call to request a 
history. The disclosure required by this paragraph may be made by 
providing a notice substantially similar to the notice contained in 
paragraph (a) of appendix A-7 of this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-7 of this part, in place of the notice required by 
Sec. 1005.7(b)(10).
    (2) Annual error resolution notice. The financial institution shall 
provide an annual notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-7 of this part, in place of the notice required by 
Sec. 1005.8(b). Alternatively, a financial institution may include on or 
with each electronic and written account transaction history provided in 
accordance with paragraph (c)(1) of this section, a notice substantially 
similar to the

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abbreviated notice for periodic statements contained in paragraph (b) of 
appendix A-3 of this part, modified as necessary to reflect the error 
resolution provisions set forth in paragraph (e) of this section.
    (e) Modified limitations on liability and error resolution 
requirements--(1) Modified limitations on liability requirements. A 
financial institution that provides information under paragraph (c)(1) 
of this section shall comply with the following:
    (i) For purposes of Sec. 1005.6(b)(3), the 60-day period for 
reporting any unauthorized transfer shall begin on the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (c)(1)(ii) of this section, provided that the 
electronic account transaction history made available to the consumer 
reflects the unauthorized transfer; or
    (B) The date the financial institution sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (c)(1)(iii) of this section in which the unauthorized transfer 
is first reflected.
    (ii) A financial institution may comply with paragraph (e)(1)(i) of 
this section by limiting the consumer's liability for an unauthorized 
transfer as provided under Sec. 1005.6(b)(3) for any transfer reported 
by the consumer within 120 days after the transfer was credited or 
debited to the consumer's account.
    (2) Modified error resolution requirements. A financial institution 
that provides information under paragraph (c)(1) of this section shall 
comply with the following:
    (i) The financial institution shall comply with the requirements of 
Sec. 1005.11 in response to an oral or written notice of an error from 
the consumer that is received by the earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (c)(1)(ii) of this section, 
provided that the electronic account transaction history made available 
to the consumer reflects the alleged error; or
    (B) Sixty days after the date the financial institution sends a 
written history of the consumer's account transactions requested by the 
consumer under paragraph (c)(1)(iii) of this section in which the 
alleged error is first reflected.
    (ii) In lieu of following the procedures in paragraph (e)(2)(i) of 
this section, a financial institution complies with the requirements for 
resolving errors in Sec. 1005.11 if it investigates any oral or written 
notice of an error from the consumer that is received by the institution 
within 120 days after the transfer allegedly in error was credited or 
debited to the consumer's account.
    (3) Error resolution for unverified accounts--(i) Provisional credit 
for errors on accounts that have not been verified. As set forth in 
Sec. 1005.11(c)(2)(i)(C), for prepaid accounts that are not payroll card 
accounts or government benefit accounts, a financial institution may 
take up to the maximum length of time permitted under 
Sec. 1005.11(c)(2)(i) or (c)(3)(ii), as applicable, to investigate and 
determine whether an error occurred without provisionally crediting a 
consumer's account if the financial institution has not completed its 
consumer identification and verification process with respect to that 
prepaid account.
    (ii) For purposes of paragraph (e)(3)(i) of this section, a 
financial institution has not completed its consumer identification and 
verification process where:
    (A) It has not concluded its consumer identification and 
verification process, provided the financial institution has disclosed 
to the consumer the risks of not registering the account using a notice 
that is substantially similar to the model notice contained in paragraph 
(c) of appendix A-7 of this part.
    (B) It has concluded its consumer identification and verification 
process, but could not verify the identity of the consumer, provided the 
financial institution has disclosed to the consumer the risks of not 
registering the account using a notice that is substantially similar to 
the model notice contained in paragraph (c) of appendix A-7 of this 
part; or
    (C) It does not have a consumer identification and verification 
process by which the consumer can register the prepaid account.
    (iii) Resolution of pre-verification errors. If a consumer's account 
has been verified, the financial institution must comply with the 
provisions set forth in Sec. 1005.11(c) in full with respect to any 
errors that satisfy the timing requirements of Sec. 1005.11, or the 
modified timing requirements in this paragraph (e), as applicable, 
including with respect to errors that occurred prior to verification.
    (A) Notwithstanding paragraph (e)(3)(iii) of this section, if, at 
the time the financial institution was required to provisionally credit 
the account (pursuant to Sec. 1005.11(c)(2)(i) or (c)(3)(ii), as 
applicable), the financial institution has not yet completed its 
identification and verification process with respect to that account, 
the financial institution may take up to the maximum length of time 
permitted under Sec. 1005.11(c)(2)(i) or (c)(3)(ii), as applicable, to 
investigate and determine whether an error occurred without 
provisionally crediting the account.
    (f) Disclosure of fees and other information--(1) Initial disclosure 
of fees and other information. A financial institution must include, as 
part of the initial disclosures given pursuant to Sec. 1005.7, all of 
the information required to be disclosed in its pre-acquisition long 
form disclosure pursuant to paragraph (b)(4) of this section.
    (2) Change-in-terms notice. The change-in-terms notice provisions in 
Sec. 1005.8(a) apply to

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any change in a term or condition that is required to be disclosed under 
Sec. 1005.7 or paragraph (f)(1) of this section. If a financial 
institution discloses the amount of a third-party fee in its pre-
acquisition long form disclosure pursuant to paragraph (b)(4)(ii) of 
this section and initial disclosures pursuant to paragraph (f)(1) of 
this section, the financial institution is not required to provide a 
change-in-terms notice solely to reflect a change in that fee amount 
imposed by the third party. If a financial institution provides pursuant 
to paragraph (f)(1) of this section the Regulation Z disclosures 
required by paragraph (b)(4)(vii) of this section for an overdraft 
credit feature, the financial institution is not required to provide a 
change-in-terms notice solely to reflect a change in the fees or other 
terms disclosed therein.
    (3) Disclosures on prepaid account access devices. The name of the 
financial institution and the Web site URL and a telephone number a 
consumer can use to contact the financial institution about the prepaid 
account must be disclosed on the prepaid account access device. If a 
financial institution does not provide a physical access device in 
connection with a prepaid account, the disclosure must appear on the Web 
site, mobile application, or other entry point a consumer must visit to 
access the prepaid account electronically.
    (g) Prepaid accounts accessible by hybrid prepaid-credit cards--(1) 
In general. Except as provided in paragraph (g)(2) of this section, with 
respect to a prepaid account program where consumers may be offered a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined by Regulation Z, 12 CFR 1026.61, a financial institution 
must provide to any prepaid account without a covered separate credit 
feature the same account terms, conditions, and features that it 
provides on prepaid accounts in the same prepaid account program that 
have such a credit feature.
    (2) Exception for higher fees or charges. A financial institution is 
not prohibited under paragraph (g)(1) of this section from imposing a 
higher fee or charge on the asset feature of a prepaid account with a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card than the amount of a comparable fee or charge that it imposes on 
any prepaid account in the same prepaid account program that does not 
have such a credit feature.
    (h) Effective date and special transition rules for disclosure 
provisions--(1) Effective date generally. Except as provided in 
paragraphs (h)(2) and (3) of this section, the requirements of this 
subpart, as modified by this section, apply to prepaid accounts as 
defined in Sec. 1005.2(b)(3), including government benefit accounts 
subject to Sec. 1005.15, beginning October 1, 2017.
    (2) Early disclosures--(i) Exception for disclosures on existing 
prepaid account access devices and prepaid account packaging materials. 
The disclosure requirements of this subpart, as modified by this 
section, shall not apply to any disclosures that are provided, or that 
would otherwise be required to be provided, on prepaid account access 
devices, or on, in, or with prepaid account packaging materials that 
were manufactured, printed, or otherwise produced in the normal course 
of business prior to October 1, 2017.
    (ii) Disclosures for prepaid accounts acquired on or after October 
1, 2017. This paragraph applies to prepaid accounts acquired by 
consumers on or after October 1, 2017 via packaging materials that were 
manufactured, printed, or otherwise produced prior to October 1, 2017.
    (A) Notices of certain changes. If a financial institution has 
changed a prepaid account's terms and conditions as a result of 
paragraph (h)(1) of this section taking effect such that a change-in-
terms notice would have been required under Sec. 1005.8(a) or paragraph 
(f)(2) of this section for existing customers, the financial institution 
must provide to the consumer a notice of the change within 30 days of 
obtaining the consumer's contact information.
    (B) Initial disclosures. The financial institution must mail or 
deliver to the consumer initial disclosures pursuant to Sec. 1005.7 and 
paragraph (f)(1) of this section that have been updated as a result of 
paragraph (h)(1) of this section taking effect, within 30 days of 
obtaining the consumer's contact information.
    (iii) Disclosures for prepaid accounts acquired before October 1, 
2017. This paragraph applies to prepaid accounts acquired by consumers 
before October 1, 2017. If a financial institution has changed a prepaid 
account's terms and conditions as a result of paragraph (h)(1) of this 
section taking effect such that a change-in-terms notice would have been 
required under Sec. 1005.8(a) or paragraph (f)(2) of this section for 
existing customers, the financial institution must provide to the 
consumer a notice of the change at least 21 days in advance of the 
change becoming effective, provided the financial institution has the 
consumer's contact information. If the financial institution obtains the 
consumer's contact information less than 30 days in advance of the 
change becoming effective or after it has become effective, the 
financial institution is permitted instead to notify the consumer of the 
change in accordance with the timing requirements set forth in paragraph 
(h)(2)(ii)(A) of this section.
    (iv) Method of providing notice to consumers. With respect to 
prepaid accounts governed by paragraph (h)(2)(ii) or (iii) of this 
section, if a financial institution has not obtained a consumer's 
consent to provide disclosures in electronic form pursuant to the 
Electronic

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Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.), or is not otherwise already mailing or delivering to the 
consumer written account-related communications within the respective 
time periods specified in paragraphs (h)(2)(ii) or (iii) of this 
section, the financial institution may provide to the consumer a notice 
of a change in terms and conditions pursuant to paragraph (h)(2)(ii) or 
(iii) of this section or required or voluntary updated initial 
disclosures as a result of paragraph (h)(1) of this section taking 
effect in electronic form without regard to the consumer notice and 
consent requirements of section 101(c) of the E-Sign Act.
    (3) Account information not available on October 1, 2017--(i) 
Electronic and written account transaction history. If, on October 1, 
2017, a financial institution does not have readily accessible the data 
necessary to make available 12 months of electronic account transaction 
history pursuant to paragraph (c)(1)(ii) of this section or to provide 
24 months of written account transaction history upon request pursuant 
to paragraph (c)(1)(iii) of this section, the financial institution may 
make available or provide such histories using the data for the time 
period it has until the financial institution has accumulated the data 
necessary to comply in full with the requirements set forth in 
paragraphs (c)(1)(ii) and (iii) of this section.
    (ii) Summary totals of fees. If, on October 1, 2017, the financial 
institution does not have readily accessible the data necessary to 
calculate the summary totals of the amount of all fees assessed by the 
financial institution on the consumer's prepaid account for the prior 
calendar month and for the calendar year to date pursuant to paragraph 
(c)(5) of this section, the financial institution may display the 
summary totals using the data it has until the financial institution has 
accumulated the data necessary to display the summary totals as required 
by paragraph (c)(5) of this section.



Sec. 1005.19  Internet posting of prepaid account agreements.

    (a) Definitions--(1) Agreement. For purposes of this section, 
``agreement'' or ``prepaid account agreement'' means the written 
document or documents evidencing the terms of the legal obligation, or 
the prospective legal obligation, between a prepaid account issuer and a 
consumer for a prepaid account. ``Agreement'' or ``prepaid account 
agreement'' also includes fee information, as defined in paragraph 
(a)(3) of this section.
    (2) Amends. For purposes of this section, an issuer ``amends'' an 
agreement if it makes a substantive change (an ``amendment'') to the 
agreement. A change is substantive if it alters the rights or 
obligations of the issuer or the consumer under the agreement. Any 
change in the fee information, as defined in paragraph (a)(3) of this 
section, is deemed to be substantive.
    (3) Fee information. For purposes of this section, ``fee 
information'' means the short form disclosure for the prepaid account 
pursuant to Sec. 1005.18(b)(2) and the fee information and statements 
required to be disclosed in the pre-acquisition long form disclosure for 
the prepaid account pursuant to Sec. 1005.18(b)(4).
    (4) Issuer. For purposes of this section, ``issuer'' or ``prepaid 
account issuer'' means the entity to which a consumer is legally 
obligated, or would be legally obligated, under the terms of a prepaid 
account agreement.
    (5) Offers. For purposes of this section, an issuer ``offers'' an 
agreement if the issuer markets, solicits applications for, or otherwise 
makes available a prepaid account that would be subject to that 
agreement, regardless of whether the issuer offers the prepaid account 
to the general public.
    (6) Offers to the general public. For purposes of this section, an 
issuer ``offers to the general public'' an agreement if the issuer 
markets, solicits applications for, or otherwise makes available to the 
general public a prepaid account that would be subject to that 
agreement.
    (7) Open account. For purposes of this section, a prepaid account is 
an ``open account'' or ``open prepaid account'' if: There is an 
outstanding balance in the account; the consumer can load funds to the 
account even if the account does not currently hold a balance; or the 
consumer can access credit from a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in Regulation Z, 
12 CFR 1026.61, in connection with the account. A prepaid account that 
has been suspended temporarily (for example, due to a report by the 
consumer of unauthorized use of the card) is considered an ``open 
account'' or ``open prepaid account.''
    (8) Prepaid account. For purposes of this section, ``prepaid 
account'' means

[[Page 199]]

a prepaid account as defined in Sec. 1005.2(b)(3).
    (b) Submission of agreements to the Bureau--(1) Submissions on a 
rolling basis. An issuer must make submissions of prepaid account 
agreements to the Bureau on a rolling basis, in the form and manner 
specified by the Bureau. Rolling submissions must be sent to the Bureau 
no later than 30 days after an issuer offers, amends, or ceases to offer 
any prepaid account agreement as described in paragraphs (b)(1)(ii) 
through (iv) of this section. Each submission must contain:
    (i) Identifying information about the issuer and the agreements 
submitted, including the issuer's name, address, and identifying number 
(such as an RSSD ID number or tax identification number), the effective 
date of the prepaid account agreement, the name of the program manager, 
if any, and the names of other relevant parties, if applicable (such as 
the employer for a payroll card program or the agency for a government 
benefit program);
    (ii) Any prepaid account agreement offered by the issuer that has 
not been previously submitted to the Bureau;
    (iii) Any prepaid account agreement previously submitted to the 
Bureau that has been amended, as described in paragraph (b)(2) of this 
section; and
    (iv) Notification regarding any prepaid account agreement previously 
submitted to the Bureau that the issuer is withdrawing, as described in 
paragraphs (b)(3), (b)(4)(ii), and (b)(5)(ii) of this section.
    (2) Amended agreements. If a prepaid account agreement previously 
submitted to the Bureau is amended, the issuer must submit the entire 
amended agreement to the Bureau, in the form and manner specified by the 
Bureau, no later than 30 days after the change comes effective.
    (3) Withdrawal of agreements no longer offered. If an issuer no 
longer offers a prepaid account agreement that was previously submitted 
to the Bureau, the issuer must notify the Bureau, in the form and manner 
specified by the Bureau, no later than 30 days after the issuer ceases 
to offer the agreement, that it is withdrawing the agreement.
    (4) De minimis exception. (i) An issuer is not required to submit 
any prepaid account agreements to the Bureau if the issuer has fewer 
than 3,000 open prepaid accounts. If the issuer has 3,000 or more open 
prepaid accounts as of the last day of the calendar quarter, the issuer 
must submit to the Bureau its prepaid account agreements no later than 
30 days after the last day of that calendar quarter.
    (ii) If an issuer that did not previously qualify for the de minimis 
exception newly qualifies for the de minimis exception, the issuer must 
continue to make submissions to the Bureau on a rolling basis until the 
issuer notifies the Bureau that the issuer is withdrawing all agreements 
it previously submitted to the Bureau.
    (5) Product testing exception. (i) An issuer is not required to 
submit a prepaid account agreement to the Bureau if the agreement meets 
the criteria set forth in paragraphs (b)(5)(i)(A) through (C) of this 
section. If the agreement fails to meet the criteria set forth in 
paragraphs (b)(5)(i)(A) through (C) of this section as of the last day 
of the calendar quarter, the issuer must submit to the Bureau that 
prepaid account agreement no later than 30 days after the last day of 
that calendar quarter. An agreement qualifies for the product testing 
exception if the agreement:
    (A) Is offered as part of a product test offered to only a limited 
group of consumers for a limited period of time;
    (B) Is used for fewer than 3,000 open prepaid accounts; and
    (C) Is not offered other than in connection with such a product 
test.
    (ii) If an agreement that did not previously qualify for the product 
testing exception newly qualifies for the exception, the issuer must 
continue to make submissions to the Bureau on a rolling basis with 
respect to that agreement until the issuer notifies the Bureau that the 
issuer is withdrawing the agreement.
    (6) Form and content of agreements submitted to the Bureau--(i) Form 
and content generally. (A) Each agreement must contain the provisions of 
the agreement and the fee information currently in effect.
    (B) Agreements must not include any personally identifiable 
information relating to any consumer, such as name,

[[Page 200]]

address, telephone number, or account number.
    (C) The following are not deemed to be part of the agreement for 
purposes of this section, and therefore are not required to be included 
in submissions to the Bureau:
    (1) Ancillary disclosures required by state or Federal law, such as 
affiliate marketing notices, privacy policies, or disclosures under the 
E-Sign Act;
    (2) Solicitation or marketing materials;
    (3) Periodic statements; and
    (4) Documents that may be sent to the consumer along with the 
prepaid account or prepaid account agreement such as a cover letter, a 
validation sticker on the card, or other information about card 
security.
    (D) Agreements must be presented in a clear and legible font.
    (ii) Fee information. Fee information must be set forth either in 
the prepaid account agreement or in a single addendum to that agreement. 
The agreement or addendum thereto must contain all of the fee 
information, as defined by paragraph (a)(3) of this section.
    (iii) Integrated agreement. An issuer may not provide provisions of 
the agreement or fee information to the Bureau in the form of change-in-
terms notices or riders (other than the optional fee information 
addendum). Changes in provisions or fee information must be integrated 
into the text of the agreement, or the optional fee information 
addendum, as appropriate.
    (c) Posting of agreements offered to the general public. (1) An 
issuer must post and maintain on its publicly available Web site any 
prepaid account agreements offered to the general public that the issuer 
is required to submit to the Bureau under paragraph (b) of this section.
    (2) Agreements posted pursuant to this paragraph (c) must conform to 
the form and content requirements for agreements submitted to the Bureau 
set forth in paragraph (b)(6) of this section.
    (3) The issuer must post and update the agreements posted on its Web 
site pursuant to this paragraph (c) as frequently as the issuer is 
required to submit new or amended agreements to the Bureau pursuant to 
paragraph (b)(2) of this section.
    (4) Agreements posted pursuant to this paragraph (c) may be posted 
in any electronic format that is readily usable by the general public. 
Agreements must be placed in a location that is prominent and readily 
accessible to the public and must be accessible without submission of 
personally identifiable information.
    (d) Agreements for all open accounts--(1) Availability of an 
individual consumer's prepaid account agreement. With respect to any 
open prepaid account, an issuer must either:
    (i) Post and maintain the consumer's agreement on its Web site; or
    (ii) Promptly provide a copy of the consumer's agreement to the 
consumer upon the consumer's request. If the issuer makes an agreement 
available upon request, the issuer must provide the consumer with the 
ability to request a copy of the agreement by telephone. The issuer must 
send to the consumer a copy of the consumer's prepaid account agreement 
no later than five business days after the issuer receives the 
consumer's request.
    (2) Form and content of agreements. (i) Except as provided in this 
paragraph (d), agreements posted on the issuer's Web site pursuant to 
paragraph (d)(1)(i) of this section or sent to the consumer upon the 
consumer's request pursuant to paragraph (d)(1)(ii) of this section must 
conform to the form and content requirements for agreements submitted to 
the Bureau as set forth in paragraph (b)(6) of this section.
    (ii) If the issuer posts an agreement on its Web site under 
paragraph (d)(1)(i) of this section, the agreement may be posted in any 
electronic format that is readily usable by the general public and must 
be placed in a location that is prominent and readily accessible to the 
consumer.
    (iii) Agreements posted or otherwise provided pursuant to this 
paragraph (d) may contain personally identifiable information relating 
to the consumer, such as name, address, telephone number, or account 
number, provided that the issuer takes appropriate measures to make the 
agreement accessible only to the consumer or other authorized persons.

[[Page 201]]

    (iv) Agreements posted or otherwise provided pursuant to this 
paragraph (d) must set forth the specific provisions and fee information 
applicable to the particular consumer.
    (v) Agreements posted pursuant to paragraph (d)(1)(i) of this 
section must be updated as frequently as the issuer is required to 
submit amended agreements to the Bureau pursuant to paragraph (b)(2) of 
this section. Agreements provided upon consumer request pursuant to 
paragraph (d)(1)(ii) of this section must be accurate as of the date the 
agreement is sent to the consumer.
    (vi) Agreements provided upon consumer request pursuant to paragraph 
(d)(1)(ii) of this section must be provided by the issuer in paper form, 
unless the consumer agrees to receive the agreement electronically.
    (e) E-Sign Act requirements. Except as otherwise provided in this 
section, issuers may provide prepaid account agreements in electronic 
form under paragraphs (c) and (d) of this section without regard to the 
consumer notice and consent requirements of section 101(c) of the 
Electronic Signatures in Global and National Commerce Act(E-Sign Act) 
(15 U.S.C. 7001 et seq.).
    (f) Effective date--(1) Effective date generally. Except as provided 
in paragraph (f)(2) of this section, the requirements of this section 
apply to prepaid accounts beginning on October 1, 2017.
    (2) Delayed effective date for the agreement submission requirement. 
The requirement to submit prepaid account agreements to the Bureau on a 
rolling basis pursuant to paragraph (b) of this section is delayed until 
October 1, 2018. An issuer must submit to the Bureau no later than 
October 31, 2018 all prepaid account agreements it offers as of October 
1, 2018.
    (3) Requirements to post and provide consumers agreements. Nothing 
in paragraph (f)(2) of this section shall affect the requirements to 
post prepaid account agreements on an issuer's Web site pursuant to 
paragraphs (c) and (d) of this section or the requirement to provide a 
copy of the consumer's agreement to the consumer upon request pursuant 
to paragraph (d) of this section.

    Effective Date Note: At 81 FR 84336, Nov. 22, 2016, Sec. 1005.19 was 
added, effective Oct. 1, 2017, which the exception of paragraph (b) 
which will not be effective until Oct. 1, 2018.



Sec. 1005.20  Requirements for gift cards and gift certificates.

    (a) Definitions. For purposes of this section, except as excluded 
under paragraph (b), the following definitions apply:
    (1) ``Gift certificate'' means a card, code, or other device that 
is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount that may not be 
increased or reloaded in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (2) ``Store gift card'' means a card, code, or other device that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (3) ``General-use prepaid card'' means a card, code, or other device 
that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, or usable at automated teller machines.
    (4) ``Loyalty, award, or promotional gift card'' means a card, code, 
or other device that:
    (i) Is issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in connection with a loyalty, award, or 
promotional program;
    (ii) Is redeemable upon presentation at one or more merchants for 
goods or services, or usable at automated teller machines; and
    (iii) Sets forth the following disclosures, as applicable:
    (A) A statement indicating that the card, code, or other device is 
issued for

[[Page 202]]

loyalty, award, or promotional purposes, which must be included on the 
front of the card, code, or other device;
    (B) The expiration date for the underlying funds, which must be 
included on the front of the card, code, or other device;
    (C) The amount of any fees that may be imposed in connection with 
the card, code, or other device, and the conditions under which they may 
be imposed, which must be provided on or with the card, code, or other 
device; and
    (D) A toll-free telephone number and, if one is maintained, a Web 
site, that a consumer may use to obtain fee information, which must be 
included on the card, code, or other device.
    (5) Dormancy or inactivity fee. The terms ``dormancy fee'' and 
``inactivity fee'' mean a fee for non-use of or inactivity on a gift 
certificate, store gift card, or general-use prepaid card.
    (6) Service fee. The term ``service fee'' means a periodic fee for 
holding or use of a gift certificate, store gift card, or general-use 
prepaid card. A periodic fee includes any fee that may be imposed on a 
gift certificate, store gift card, or general-use prepaid card from time 
to time for holding or using the certificate or card.
    (7) Activity. The term ``activity'' means any action that results in 
an increase or decrease of the funds underlying a certificate or card, 
other than the imposition of a fee, or an adjustment due to an error or 
a reversal of a prior transaction.
    (b) Exclusions. The terms ``gift certificate,'' ``store gift card,'' 
and ``general-use prepaid card'', as defined in paragraph (a) of this 
section, do not include any card, code, or other device that is:
    (1) Useable solely for telephone services;
    (2) Reloadable and not marketed or labeled as a gift card or gift 
certificate. For purposes of this paragraph (b)(2), the term 
``reloadable'' includes a temporary non-reloadable card issued solely in 
connection with a reloadable card, code, or other device;
    (3) A loyalty, award, or promotional gift card;
    (4) Not marketed to the general public;
    (5) Issued in paper form only; or
    (6) Redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain goods 
or services in conjunction with admission to such events or venues, 
either at the event or venue or at specific locations affiliated with 
and in geographic proximity to the event or venue.
    (c) Form of disclosures--(1) Clear and conspicuous. Disclosures made 
under this section must be clear and conspicuous. The disclosures may 
contain commonly accepted or readily understandable abbreviations or 
symbols.
    (2) Format. Disclosures made under this section generally must be 
provided to the consumer in written or electronic form. Except for the 
disclosures in paragraphs (c)(3) and (h)(2) of this section, written and 
electronic disclosures made under this section must be in a retainable 
form. Only disclosures provided under paragraphs (c)(3) and (h)(2) may 
be given orally.
    (3) Disclosures prior to purchase. Before a gift certificate, store 
gift card, or general-use prepaid card is purchased, a person that 
issues or sells such certificate or card must disclose to the consumer 
the information required by paragraphs (d)(2), (e)(3), and (f)(1) of 
this section. The fees and terms and conditions of expiration that are 
required to be disclosed prior to purchase may not be changed after 
purchase.
    (4) Disclosures on the certificate or card. Disclosures required by 
paragraphs (a)(4)(iii), (d)(2), (e)(3), and (f)(2) of this section must 
be made on the certificate or card, or in the case of a loyalty, award, 
or promotional gift card, on the card, code, or other device. A 
disclosure made in an accompanying terms and conditions document, on 
packaging surrounding a certificate or card, or on a sticker or other 
label affixed to the certificate or card does not constitute a 
disclosure on the certificate or card. For an electronic certificate or 
card, disclosures must be provided electronically on the certificate or 
card provided to the consumer. An issuer that provides a code or 
confirmation to a consumer orally must provide to the consumer a written 
or

[[Page 203]]

electronic copy of the code or confirmation promptly, and the applicable 
disclosures must be provided on the written copy of the code or 
confirmation.
    (d) Prohibition on imposition of fees or charges. No person may 
impose a dormancy, inactivity, or service fee with respect to a gift 
certificate, store gift card, or general-use prepaid card, unless:
    (1) There has been no activity with respect to the certificate or 
card, in the one-year period ending on the date on which the fee is 
imposed;
    (2) The following are stated, as applicable, clearly and 
conspicuously on the gift certificate, store gift card, or general-use 
prepaid card:
    (i) The amount of any dormancy, inactivity, or service fee that may 
be charged;
    (ii) How often such fee may be assessed; and
    (iii) That such fee may be assessed for inactivity; and
    (3) Not more than one dormancy, inactivity, or service fee is 
imposed in any given calendar month.
    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The person has established policies and procedures to provide 
consumers with a reasonable opportunity to purchase a certificate or 
card with at least five years remaining until the certificate or card 
expiration date;
    (2) The expiration date for the underlying funds is at least the 
later of:
    (i) Five years after the date the gift certificate was initially 
issued, or the date on which funds were last loaded to a store gift card 
or general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a consumer may use to obtain a replacement certificate or card 
after the certificate or card expires if the underlying funds may be 
available; and
    (iii) Except where a non-reloadable certificate or card bears an 
expiration date that is at least seven years from the date of 
manufacture, a statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that:
    (A) The certificate or card expires, but the underlying funds either 
do not expire or expire later than the certificate or card, and;
    (B) The consumer may contact the issuer for a replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card or for 
providing the certificate or card holder with the remaining balance in 
some other manner prior to the funds expiration date, unless such 
certificate or card has been lost or stolen.
    (f) Additional disclosure requirements for gift certificates or 
cards. The following disclosures must be provided in connection with a 
gift certificate, store gift card, or general-use prepaid card, as 
applicable:
    (1) Fee disclosures. For each type of fee that may be imposed in 
connection with the certificate or card (other than a dormancy, 
inactivity, or service fee subject to the disclosure requirements under 
paragraph (d)(2) of this section), the following information must be 
provided on or with the certificate or card:
    (i) The type of fee;
    (ii) The amount of the fee (or an explanation of how the fee will be 
determined); and
    (iii) The conditions under which the fee may be imposed.
    (2) Telephone number for fee information. A toll-free telephone 
number and, if one is maintained, a Web site, that a consumer may use to 
obtain information about fees described in paragraphs (d)(2) and (f)(1) 
of this section must be disclosed on the certificate or card.
    (g) Compliance dates--(1) Effective date for gift certificates, 
store gift cards, and general-use prepaid cards. Except as provided in 
paragraph (h) of this section, the requirements of this section apply to 
any gift certificate, store gift card, or general-use prepaid card sold 
to a

[[Page 204]]

consumer on or after August 22, 2010, or provided to a consumer as a 
replacement for such certificate or card.
    (2) Effective date for loyalty, award, or promotional gift cards. 
The requirements in paragraph (a)(4)(iii) of this section apply to any 
card, code, or other device provided to a consumer in connection with a 
loyalty, award, or promotional program if the period of eligibility for 
such program began on or after August 22, 2010.
    (h) Temporary exemption--(1) Delayed mandatory compliance date. For 
any gift certificate, store gift card, or general-use prepaid card 
produced prior to April 1, 2010, the mandatory compliance date of the 
requirements of paragraphs (c)(3), (d)(2), (e)(1), (e)(3), and (f) of 
this section is January 31, 2011, provided that an issuer of such 
certificate or card:
    (i) Complies with all other provisions of this section;
    (ii) Does not impose an expiration date with respect to the funds 
underlying such certificate or card;
    (iii) At the consumer's request, replaces such certificate or card 
if it has funds remaining at no cost to the consumer; and
    (iv) Satisfies the requirements of paragraph (h)(2) of this section.
    (2) Additional disclosures. Issuers relying on the delayed effective 
date in Sec. 1005.20(h)(1) must disclose through in-store signage, 
messages during customer service calls, Web sites, and general 
advertising, that:
    (i) The underlying funds of such certificate or card do not expire;
    (ii) Consumers holding such certificate or card have a right to a 
free replacement certificate or card, which must be accompanied by the 
packaging and materials typically associated with such certificate or 
card; and
    (iii) Any dormancy, inactivity, or service fee for such certificate 
or card that might otherwise be charged will not be charged if such fees 
do not comply with section 916 of the Act.
    (3) Expiration of additional disclosure requirements. The 
disclosures in paragraph (h)(2) of this section:
    (i) Are not required to be provided on or after January 31, 2011, 
with respect to in-store signage and general advertising.
    (ii) Are not required to be provided on or after January 31, 2013, 
with respect to messages during customer service calls and Web sites.



             Subpart B_Requirements for Remittance Transfers

    Source: 77 FR 6285, Feb. 7, 2012, unless otherwise noted.



Sec. 1005.30  Remittance transfer definitions.

    Except as otherwise provided, for purposes of this subpart, the 
following definitions apply:
    (a) ``Agent'' means an agent, authorized delegate, or person 
affiliated with a remittance transfer provider, as defined under State 
or other applicable law, when such agent, authorized delegate, or 
affiliate acts for that remittance transfer provider.
    (b) ``Business day'' means any day on which the offices of a 
remittance transfer provider are open to the public for carrying on 
substantially all business functions.
    (c) ``Designated recipient'' means any person specified by the 
sender as the authorized recipient of a remittance transfer to be 
received at a location in a foreign country.
    (d) ``Preauthorized remittance transfer'' means a remittance 
transfer authorized in advance to recur at substantially regular 
intervals.
    (e) Remittance transfer--(1) General definition. A ``remittance 
transfer'' means the electronic transfer of funds requested by a sender 
to a designated recipient that is sent by a remittance transfer 
provider. The term applies regardless of whether the sender holds an 
account with the remittance transfer provider, and regardless of whether 
the transaction is also an electronic fund transfer, as defined in 
Sec. 1005.3(b).
    (2) Exclusions from coverage. The term ``remittance transfer'' does 
not include:
    (i) Small value transactions. Transfer amounts, as described in 
Sec. 1005.31(b)(1)(i), of $15 or less.
    (ii) Securities and commodities transfers. Any transfer that is 
excluded from the definition of electronic fund transfer under 
Sec. 1005.3(c)(4).

[[Page 205]]

    (f) Remittance transfer provider--(1) General definition. 
``Remittance transfer provider'' or ``provider'' means any person that 
provides remittance transfers for a consumer in the normal course of its 
business, regardless of whether the consumer holds an account with such 
person.
    (2) Normal course of business--(i) Safe harbor. For purposes of 
paragraph (f)(1) of this section, a person is deemed not to be providing 
remittance transfers for a consumer in the normal course of its business 
if the person:
    (A) Provided 100 or fewer remittance transfers in the previous 
calendar year; and
    (B) Provides 100 or fewer remittance transfers in the current 
calendar year.
    (ii) Transition period. If a person that provided 100 or fewer 
remittance transfers in the previous calendar year provides more than 
100 remittance transfers in the current calendar year, and if that 
person is then providing remittance transfers for a consumer in the 
normal course of its business pursuant to paragraph (f)(1) of this 
section, the person has a reasonable period of time, not to exceed six 
months, to begin complying with this subpart. Compliance with this 
subpart will not be required for any remittance transfers for which 
payment is made during that reasonable period of time.
    (g) ``Sender'' means a consumer in a State who primarily for 
personal, family, or household purposes requests a remittance transfer 
provider to send a remittance transfer to a designated recipient.
    (h) Third-party fees. (1) ``Covered third-party fees.'' The term 
``covered third-party fees'' means any fees imposed on the remittance 
transfer by a person other than the remittance transfer provider except 
for fees described in paragraph (h)(2) of this section.
    (2) ``Non-covered third-party fees.'' The term ``non-covered third-
party fees'' means any fees imposed by the designated recipient's 
institution for receiving a remittance transfer into an account except 
if the institution acts as an agent of the remittance transfer provider.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 78 
FR 30703, May 22, 2013]



Sec. 1005.31  Disclosures.

    (a) General form of disclosures--(1) Clear and conspicuous. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section or Sec. 1005.33(h)(3) must be clear and 
conspicuous. Disclosures required by this subpart or permitted by 
paragraph (b)(1)(viii) of this section or Sec. 1005.33(h)(3) may contain 
commonly accepted or readily understandable abbreviations or symbols.
    (2) Written and electronic disclosures. Disclosures required by this 
subpart generally must be provided to the sender in writing. Disclosures 
required by paragraph (b)(1) of this section may be provided 
electronically, if the sender electronically requests the remittance 
transfer provider to send the remittance transfer. Written and 
electronic disclosures required by this subpart generally must be made 
in a retainable form. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, need not be retainable.
    (3) Disclosures for oral telephone transactions. The information 
required by paragraph (b)(1) of this section may be disclosed orally if:
    (i) The transaction is conducted orally and entirely by telephone;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally a statement about the rights of 
the sender regarding cancellation required by paragraph (b)(2)(iv) of 
this section pursuant to the timing requirements in paragraph (e)(1) of 
this section; and
    (iv) The provider discloses orally, as each is applicable, the 
information required by paragraph (b)(2)(vii) of this section and the 
information required by Sec. 1005.36(d)(1)(i)(A), with respect to 
transfers subject to Sec. 1005.36(d)(2)(ii), pursuant to the timing 
requirements in paragraph (e)(1) of this section.
    (4) Oral disclosures for certain error resolution notices. The 
information required by Sec. 1005.33(c)(1) may be disclosed orally if:
    (i) The remittance transfer provider determines that an error 
occurred as described by the sender; and

[[Page 206]]

    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section.
    (5) Disclosures for mobile application or text message transactions. 
The information required by paragraph (b)(1) of this section may be 
disclosed orally or via mobile application or text message if:
    (i) The transaction is conducted entirely by telephone via mobile 
application or text message;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally or via mobile application or 
text message a statement about the rights of the sender regarding 
cancellation required by paragraph (b)(2)(iv) of this section pursuant 
to the timing requirements in paragraph (e)(1) of this section; and
    (iv) The provider discloses orally or via mobile application or text 
message, as each is applicable, the information required by paragraph 
(b)(2)(vii) of this section and the information required by 
Sec. 1005.36(d)(1)(i)(A), with respect to transfers subject to 
Sec. 1005.36(d)(2)(ii), pursuant to the timing requirements in paragraph 
(e)(1) of this section.
    (b) Disclosure requirements--(1) Pre-payment disclosure. A 
remittance transfer provider must disclose to a sender, as applicable:
    (i) The amount that will be transferred to the designated recipient, 
in the currency in which the remittance transfer is funded, using the 
term ``Transfer Amount'' or a substantially similar term;
    (ii) Any fees imposed and any taxes collected on the remittance 
transfer by the provider, in the currency in which the remittance 
transfer is funded, using the terms ``Transfer Fees'' for fees and 
``Transfer Taxes'' for taxes, or substantially similar terms;
    (iii) The total amount of the transaction, which is the sum of 
paragraphs (b)(1)(i) and (ii) of this section, in the currency in which 
the remittance transfer is funded, using the term ``Total'' or a 
substantially similar term;
    (iv) The exchange rate used by the provider for the remittance 
transfer, rounded consistently for each currency to no fewer than two 
decimal places and no more than four decimal places, using the term 
``Exchange Rate'' or a substantially similar term;
    (v) The amount in paragraph (b)(1)(i) of this section, in the 
currency in which the funds will be received by the designated 
recipient, but only if covered third-party fees are imposed under 
paragraph (b)(1)(vi) of this section, using the term ``Transfer Amount'' 
or a substantially similar term. The exchange rate used to calculate 
this amount is the exchange rate in paragraph (b)(1)(iv) of this 
section, including an estimated exchange rate to the extent permitted by 
Sec. 1005.32, prior to any rounding of the exchange rate;
    (vi) Any covered third-party fees, in the currency in which the 
funds will be received by the designated recipient, using the term 
``Other Fees,'' or a substantially similar term. The exchange rate used 
to calculate any covered third-party fees is the exchange rate in 
paragraph (b)(1)(iv) of this section, including an estimated exchange 
rate to the extent permitted by Sec. 1005.32, prior to any rounding of 
the exchange rate;
    (vii) The amount that will be received by the designated recipient, 
in the currency in which the funds will be received, using the term 
``Total to Recipient'' or a substantially similar term except that this 
amount shall not include non-covered third party fees or taxes collected 
on the remittance transfer by a person other than the provider 
regardless of whether such fees or taxes are disclosed pursuant to 
paragraph (b)(1)(viii) of this section. The exchange rate used to 
calculate this amount is the exchange rate in paragraph (b)(1)(iv) of 
this section, including an estimated exchange rate to the extent 
permitted by Sec. 1005.32, prior to any rounding of the exchange rate.
    (viii) A statement indicating that non-covered third-party fees or 
taxes collected on the remittance transfer by a person other than the 
provider may apply to the remittance transfer and result in the 
designated recipient receiving less than the amount disclosed pursuant 
to paragraph (b)(1)(vii) of this section. A provider may only include 
this statement to the extent that such fees or taxes do or may apply to 
the transfer, using the language set forth in Model Forms A-30(a) 
through (c) of appendix A to this part, as appropriate,

[[Page 207]]

or substantially similar language. In this statement, a provider also 
may, but is not required, to disclose any applicable non-covered third-
party fees or taxes collected by a person other than the provider. Any 
such figure must be disclosed in the currency in which the funds will be 
received, using the language set forth in Model Forms A-30(b) through 
(d) of appendix A to this part, as appropriate, or substantially similar 
language. The exchange rate used to calculate any disclosed non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider is the exchange rate in paragraph 
(b)(1)(iv) of this section, including an estimated exchange rate to the 
extent permitted by Sec. 1005.32, prior to any rounding of the exchange 
rate;
    (2) Receipt. A remittance transfer provider must disclose to a 
sender, as applicable:
    (i) The disclosures described in paragraphs (b)(1)(i) through (viii) 
of this section;
    (ii) The date in the foreign country on which funds will be 
available to the designated recipient, using the term ``Date Available'' 
or a substantially similar term. A provider may provide a statement that 
funds may be available to the designated recipient earlier than the date 
disclosed, using the term ``may be available sooner'' or a substantially 
similar term;
    (iii) The name and, if provided by the sender, the telephone number 
and/or address of the designated recipient, using the term ``Recipient'' 
or a substantially similar term;
    (iv) A statement about the rights of the sender regarding the 
resolution of errors and cancellation, using language set forth in Model 
Form A-37 of Appendix A to this part or substantially similar language. 
For any remittance transfer scheduled by the sender at least three 
business days before the date of the transfer, the statement about the 
rights of the sender regarding cancellation must instead reflect the 
requirements of Sec. 1005.36(c);
    (v) The name, telephone number(s), and Web site of the remittance 
transfer provider;
    (vi) A statement that the sender can contact the State agency that 
licenses or charters the remittance transfer provider with respect to 
the remittance transfer and the Consumer Financial Protection Bureau for 
questions or complaints about the remittance transfer provider, using 
language set forth in Model Form A-37 of Appendix A to this part or 
substantially similar language. The disclosure must provide the name, 
telephone number(s), and Web site of the State agency that licenses or 
charters the remittance transfer provider with respect to the remittance 
transfer and the name, toll-free telephone number(s), and Web site of 
the Consumer Financial Protection Bureau; and
    (vii) For any remittance transfer scheduled by the sender at least 
three business days before the date of the transfer, or the first 
transfer in a series of preauthorized remittance transfers, the date the 
remittance transfer provider will make or made the remittance transfer, 
using the term ``Transfer Date,'' or a substantially similar term.
    (3) Combined disclosure--(i) In general. As an alternative to 
providing the disclosures described in paragraph (b)(1) and (2) of this 
section, a remittance transfer provider may provide the disclosures 
described in paragraph (b)(2) of this section, as applicable, in a 
single disclosure pursuant to the timing requirements in paragraph 
(e)(1) of this section. Except as provided in paragraph (b)(3)(ii) of 
this section, if the remittance transfer provider provides the combined 
disclosure and the sender completes the transfer, the remittance 
transfer provider must provide the sender with proof of payment when 
payment is made for the remittance transfer. The proof of payment must 
be clear and conspicuous, provided in writing or electronically, and 
provided in a retainable form.
    (ii) Transfers scheduled before the date of transfer. If the 
disclosure described in paragraph (b)(3)(i) of this section is provided 
in accordance with Sec. 1005.36(a)(1)(i) and payment is not processed by 
the remittance transfer provider at the time the remittance transfer is 
scheduled, a remittance transfer provider may provide confirmation that 
the transaction has been scheduled in lieu of the proof of

[[Page 208]]

payment otherwise required by paragraph (b)(3)(i) of this section. The 
confirmation of scheduling must be clear and conspicuous, provided in 
writing or electronically, and provided in a retainable form.
    (4) Long form error resolution and cancellation notice. Upon the 
sender's request, a remittance transfer provider must promptly provide 
to the sender a notice describing the sender's error resolution and 
cancellation rights, using language set forth in Model Form A-36 of 
Appendix A to this part or substantially similar language. For any 
remittance transfer scheduled by the sender at least three business days 
before the date of the transfer, the description of the rights of the 
sender regarding cancellation must instead reflect the requirements of 
Sec. 1005.36(c).
    (c) Specific format requirements--(1) Grouping. The information 
required by paragraphs (b)(1)(i), (ii), and (iii) of this section 
generally must be grouped together. The information required by 
paragraphs (b)(1)(v), (vi), (vii), and (viii) of this section generally 
must be grouped together. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, generally need not comply with the grouping requirements of 
this paragraph, however information required or permitted by paragraph 
(b)(1)(viii) of this section must be grouped with information required 
by paragraph (b)(1)(vii) of this section.
    (2) Proximity. The information required by paragraph (b)(1)(iv) of 
this section generally must be disclosed in close proximity to the other 
information required by paragraph (b)(1) of this section. The 
information required by paragraph (b)(2)(iv) of this section generally 
must be disclosed in close proximity to the other information required 
by paragraph (b)(2) of this section. The information required or 
permitted by paragraph (b)(1)(viii) must be in close proximity to the 
information required by paragraph (b)(1)(vii) of this section. 
Disclosures provided via mobile application or text message, to the 
extent permitted by paragraph (a)(5) of this section, generally need not 
comply with the proximity requirements of this paragraph, however 
information required or permitted by paragraph (b)(1)(viii) of this 
section must follow the information required by paragraph (b)(1)(vii) of 
this section.
    (3) Prominence and size. Written disclosures required by this 
subpart or permitted by paragraph (b)(1)(viii) of this section must be 
provided on the front of the page on which the disclosure is printed. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in a minimum eight-point font, except for 
disclosures provided via mobile application or text message, to the 
extent permitted by paragraph (a)(5) of this section. Disclosures 
required by paragraph (b) of this section or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in equal prominence to each other.
    (4) Segregation. Except for disclosures provided via mobile 
application or text message, to the extent permitted by paragraph (a)(5) 
of this section, disclosures required by this subpart that are provided 
in writing or electronically must be segregated from everything else and 
must contain only information that is directly related to the 
disclosures required under this subpart.
    (d) Estimates. Estimated disclosures may be provided to the extent 
permitted by Sec. 1005.32. Estimated disclosures must be described using 
the term ``Estimated'' or a substantially similar term in close 
proximity to the estimated term or terms.
    (e) Timing. (1) Except as provided in Sec. 1005.36(a), a pre-payment 
disclosure required by paragraph (b)(1) of this section or a combined 
disclosure required by paragraph (b)(3) of this section must be provided 
to the sender when the sender requests the remittance transfer, but 
prior to payment for the transfer.
    (2) Except as provided in Sec. 1005.36(a), a receipt required by 
paragraph (b)(2) of this section generally must be provided to the 
sender when payment is made for the remittance transfer. If a 
transaction is conducted entirely by telephone, a receipt required by 
paragraph (b)(2) of this section may be mailed or delivered to the 
sender no later than one business day after the date on

[[Page 209]]

which payment is made for the remittance transfer. If a transaction is 
conducted entirely by telephone and involves the transfer of funds from 
the sender's account held by the provider, the receipt required by 
paragraph (b)(2) of this section may be provided on or with the next 
regularly scheduled periodic statement for that account or within 30 
days after payment is made for the remittance transfer if a periodic 
statement is not provided. The statement about the rights of the sender 
regarding cancellation required by paragraph (b)(2)(iv) of this section 
may, but need not, be disclosed pursuant to the timing requirements of 
this paragraph if a provider discloses this information pursuant to 
paragraphs (a)(3)(iii) or (a)(5)(iii) of this section.
    (f) Accurate when payment is made. Except as provided in 
Sec. 1005.36(b), disclosures required by this section or permitted by 
paragraph (b)(1)(viii) of this section must be accurate when a sender 
makes payment for the remittance transfer, except to the extent 
estimates are permitted by Sec. 1005.32.
    (g) Foreign language disclosures--(1) General. Except as provided in 
paragraph (g)(2) of this section, disclosures required by this subpart 
or permitted by paragraph (b)(1)(viii) of this section or 
Sec. 1005.33(h)(3) must be made in English and, if applicable, either 
in:
    (i) Each of the foreign languages principally used by the remittance 
transfer provider to advertise, solicit, or market remittance transfer 
services, either orally, in writing, or electronically, at the office in 
which a sender conducts a transaction or asserts an error; or
    (ii) The foreign language primarily used by the sender with the 
remittance transfer provider to conduct the transaction (or for written 
or electronic disclosures made pursuant to Sec. 1005.33, in the foreign 
language primarily used by the sender with the remittance transfer 
provider to assert the error), provided that such foreign language is 
principally used by the remittance transfer provider to advertise, 
solicit, or market remittance transfer services, either orally, in 
writing, or electronically, at the office in which a sender conducts a 
transaction or asserts an error, respectively.
    (2) Oral, mobile application, or text message disclosures. 
Disclosures provided orally for transactions conducted orally and 
entirely by telephone under paragraph (a)(3) of this section or orally 
or via mobile application or text message for transactions conducted via 
mobile application or text message under paragraph (a)(5) of this 
section shall be made in the language primarily used by the sender with 
the remittance transfer provider to conduct the transaction. Disclosures 
provided orally under paragraph (a)(4) of this section for error 
resolution purposes shall be made in the language primarily used by the 
sender with the remittance transfer provider to assert the error.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 77 
FR 30703, May 22, 2013]



Sec. 1005.32  Estimates.

    (a) Temporary exception for insured institutions--(1) General. For 
disclosures described in Secs. 1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided in accordance with 
paragraph (c) of this section for the amounts required to be disclosed 
under Sec. 1005.31(b)(1)(iv) through (vii), if:
    (i) A remittance transfer provider cannot determine the exact 
amounts for reasons beyond its control;
    (ii) A remittance transfer provider is an insured institution; and
    (iii) The remittance transfer is sent from the sender's account with 
the institution.
    (2) Sunset date. Paragraph (a)(1) of this section expires on July 
21, 2020.
    (3) Insured institution. For purposes of this section, the term 
``insured institution'' means insured depository institutions (which 
includes uninsured U.S. branches and agencies of foreign depository 
institutions) as defined in section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813), and insured credit unions as defined in section 
101 of the Federal Credit Union Act (12 U.S.C. 1752).
    (b) Permanent exceptions--(1) Permanent exception for transfers to 
certain countries--(i) General. For disclosures described in 
Secs. 1005.31(b)(1) through (b)(3) and 1005.36(a)(1) and (a)(2), 
estimates may be provided for transfers to certain countries in 
accordance with

[[Page 210]]

paragraph (c) of this section for the amounts required to be disclosed 
under Sec. 1005.31(b)(1)(iv) through (b)(1)(vii), if a remittance 
transfer provider cannot determine the exact amounts when the disclosure 
is required because:
    (A) The laws of the recipient country do not permit such a 
determination, or
    (B) The method by which transactions are made in the recipient 
country does not permit such determination.
    (ii) Safe harbor. A remittance transfer provider may rely on the 
list of countries published by the Bureau to determine whether estimates 
may be provided under paragraph (b)(1) of this section, unless the 
provider has information that a country's laws or the method by which 
transactions are conducted in that country permits a determination of 
the exact disclosure amount.
    (2) Permanent exception for transfers scheduled before the date of 
transfer. (i) Except as provided in paragraph (b)(2)(ii) of this 
section, for disclosures described in Secs. 1005.36(a)(1)(i) and 
(a)(2)(i), estimates may be provided in accordance with paragraph (d) of 
this section for the amounts to be disclosed under 
Secs. 1005.31(b)(1)(iv) through (vii) if the remittance transfer is 
scheduled by a sender five or more business days before the date of the 
transfer. In addition, if, at the time the sender schedules such a 
transfer, the provider agrees to a sender's request to fix the amount to 
be transferred in the currency in which the remittance transfer will be 
received and not the currency in which it is funded, estimates may also 
be provided for the amounts to be disclosed under Secs. 1005.31(b)(1)(i) 
through (iii), except as provided in paragraph (b)(2)(iii) of this 
section.
    (ii) Covered third-party fees described in Sec. 1005.31(b)(1)(vi) 
may be estimated under paragraph (b)(2)(i) of this section only if the 
exchange rate is also estimated under paragraph (b)(2)(i) of this 
section and the estimated exchange rate affects the amount of such fees.
    (iii) Fees and taxes described in Sec. 1005.31(b)(1)(ii) may be 
estimated under paragraph (b)(2)(i) of this section only if the amount 
that will be transferred in the currency in which it is funded is also 
estimated under paragraph (b)(2)(i) of this section, and the estimated 
amount affects the amount of such fees and taxes.
    (3) Permanent exception for optional disclosure of non-covered 
third-party fees and taxes collected by a person other than the 
provider. For disclosures described in Secs. 1005.31(b)(1) through (3) 
and 1005.36(a)(1) and (2), estimates may be provided for applicable non-
covered third-party fees and taxes collected on the remittance transfer 
by a person other than the provider, which are permitted to be disclosed 
under Sec. 1005.31(b)(1)(viii), provided such estimates are based on 
reasonable sources of information.
    (c) Bases for estimates generally. Estimates provided pursuant to 
the exceptions in paragraph (a) or (b)(1) of this section must be based 
on the below-listed approach or approaches, except as otherwise 
permitted by this paragraph. If a remittance transfer provider bases an 
estimate on an approach that is not listed in this paragraph, the 
provider is deemed to be in compliance with this paragraph so long as 
the designated recipient receives the same, or greater, amount of funds 
than the remittance transfer provider disclosed under 
Sec. 1005.31(b)(1)(vii).
    (1) Exchange rate. In disclosing the exchange rate as required under 
Sec. 1005.31(b)(1)(iv), an estimate must be based on one of the 
following:
    (i) For remittance transfers sent via international ACH that qualify 
for the exception in paragraph (b)(1)(ii) of this section, the most 
recent exchange rate set by the recipient country's central bank or 
other governmental authority and reported by a Federal Reserve Bank;
    (ii) The most recent publicly available wholesale exchange rate and, 
if applicable, any spread that the remittance transfer provider or its 
correspondent typically applies to such a wholesale rate for remittance 
transfers for that currency; or
    (iii) The most recent exchange rate offered or used by the person 
making funds available directly to the designated recipient or by the 
person setting the exchange rate.
    (2) Transfer amount in the currency in which the funds will be 
received by the designated recipient. In disclosing the

[[Page 211]]

transfer amount in the currency in which the funds will be received by 
the designated recipient, as required under Sec. 1005.31(b)(1)(v), an 
estimate must be based on the estimated exchange rate provided in 
accordance with paragraph (c)(1) of this section, prior to any rounding 
of the estimated exchange rate.
    (3) Covered third-party fees--(i) Imposed as percentage of amount 
transferred. In disclosing covered third-party fees, as described under 
Sec. 1005.31(b)(1)(vi), that are a percentage of the amount transferred 
to the designated recipient, an estimated exchange rate must be based on 
the estimated exchange rate provided in accordance with paragraph (c)(1) 
of this section, prior to any rounding of the estimated exchange rate.
    (ii) Imposed by the intermediary or final institution. In disclosing 
covered third-party fees pursuant to Sec. 1005.31(b)(1)(vi), an estimate 
must be based on one of the following:
    (A) The remittance transfer provider's most recent remittance 
transfer to the designated recipient's institution, or
    (B) A representative transmittal route identified by the remittance 
transfer provider.
    (4) Amount of currency that will be received by the designated 
recipient. In disclosing the amount of currency that will be received by 
the designated recipient as required under Sec. 1005.31(b)(1)(vii), an 
estimate must be based on the information provided in accordance with 
paragraphs (c)(1) through (3) of this section, as applicable.
    (d) Bases for estimates for transfers scheduled before the date of 
transfer. Estimates provided pursuant to paragraph (b)(2) of this 
section must be based on the exchange rate or, where applicable, the 
estimated exchange rate based on an estimation methodology permitted 
under paragraph (c) of this section that the provider would have used or 
did use that day in providing disclosures to a sender requesting such a 
remittance transfer to be made on the same day. If, in accordance with 
this paragraph, a remittance transfer provider uses a basis described in 
paragraph (c) of this section but not listed in paragraph (c)(1) of this 
section, the provider is deemed to be in compliance with this paragraph 
regardless of the amount received by the designated recipient, so long 
as the estimation methodology is the same that the provider would have 
used or did use in providing disclosures to a sender requesting such a 
remittance transfer to be made on the same day.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50283, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 79 FR 55991, Sept. 18, 2014]

    Effective Date Note: At 81 FR 84338, Nov. 22, 2016, Sec. 1005.32 was 
amended by revising paragraph (a)(1)(iii), effective Oct. 1, 2017. For 
the convenience of the user, the revised text is set forth as follows:



Sec. 1005.32  Estimates.

    (a) * * *
    (1) * * *
    (iii) The remittance transfer is sent from the sender's account with 
the institution; provided however, for the purposes of this paragraph, a 
sender's account does not include a prepaid account, unless the prepaid 
account is a payroll card account or a government benefit account.

                                * * * * *



Sec. 1005.33  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. For purposes of this section, the term error means:
    (i) An incorrect amount paid by a sender in connection with a 
remittance transfer unless the disclosure stated an estimate of the 
amount paid by a sender in accordance with Sec. 1005.32(b)(2) and the 
difference results from application of the actual exchange rate, fees, 
and taxes, rather than any estimated amount;
    (ii) A computational or bookkeeping error made by the remittance 
transfer provider relating to a remittance transfer;
    (iii) The failure to make available to a designated recipient the 
amount of currency disclosed pursuant to Sec. 1005.31(b)(1)(vii) and 
stated in the disclosure provided to the sender under Sec. 1005.31(b)(2) 
or (3) for the remittance transfer, unless:

[[Page 212]]

    (A) The disclosure stated an estimate of the amount to be received 
in accordance with Sec. 1005.32(a), (b)(1) or (b)(2) and the difference 
results from application of the actual exchange rate, fees, and taxes, 
rather than any estimated amounts; or
    (B) The failure resulted from extraordinary circumstances outside 
the remittance transfer provider's control that could not have been 
reasonably anticipated; or
    (C) The difference results from the application of non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider and the provider provided the disclosure 
required by Sec. 1005.31(b)(1)(viii).
    (iv) The failure to make funds available to a designated recipient 
by the date of availability stated in the disclosure provided to the 
sender under Sec. 1005.31(b)(2) or (3) for the remittance transfer, 
unless the failure to make the funds available resulted from:
    (A) Extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated;
    (B) Delays related to a necessary investigation or other special 
action by the remittance transfer provider or a third party as required 
by the provider's fraud screening procedures or in accordance with the 
Bank Secrecy Act, 31 U.S.C. 5311 et seq., Office of Foreign Assets 
Control requirements, or similar laws or requirements;
    (C) The remittance transfer being made with fraudulent intent by the 
sender or any person acting in concert with the sender; or
    (D) The sender having provided the remittance transfer provider an 
incorrect account number or recipient institution identifier for the 
designated recipient's account or institution, provided that the 
remittance transfer provider meets the conditions set forth in paragraph 
(h) of this section;
    (v) The sender's request for documentation required by Sec. 1005.31 
or for additional information or clarification concerning a remittance 
transfer, including a request a sender makes to determine whether an 
error exists under paragraphs (a)(1)(i) through (iv) of this section.
    (2) Types of transfers or inquiries not covered. The term error does 
not include:
    (i) An inquiry about the status of a remittance transfer, except 
where the funds from the transfer were not made available to a 
designated recipient by the disclosed date of availability as described 
in paragraph (a)(1)(iv) of this section;
    (ii) A request for information for tax or other recordkeeping 
purposes;
    (iii) A change requested by the designated recipient; or
    (iv) A change in the amount or type of currency received by the 
designated recipient from the amount or type of currency stated in the 
disclosure provided to the sender under Sec. 1005.31(b)(2) or (3) if the 
remittance transfer provider relied on information provided by the 
sender as permitted under Sec. 1005.31 in making such disclosure.
    (b) Notice of error from sender--(1) Timing; contents. A remittance 
transfer provider shall comply with the requirements of this section 
with respect to any oral or written notice of error from a sender that:
    (i) Is received by the remittance transfer provider no later than 
180 days after the disclosed date of availability of the remittance 
transfer;
    (ii) Enables the provider to identify:
    (A) The sender's name and telephone number or address;
    (B) The recipient's name, and if known, the telephone number or 
address of the recipient; and
    (C) The remittance transfer to which the notice of error applies; 
and
    (iii) Indicates why the sender believes an error exists and includes 
to the extent possible the type, date, and amount of the error, except 
for requests for documentation, additional information, or clarification 
described in paragraph (a)(1)(v) of this section.
    (2) Request for documentation or clarification. When a notice of 
error is based on documentation, additional information, or 
clarification that the sender previously requested under paragraph 
(a)(1)(v) of this section, the sender's notice of error is timely if 
received by the remittance transfer provider the later of 180 days after 
the disclosed date of availability of the remittance transfer or 60 days 
after the provider sent the

[[Page 213]]

documentation, information, or clarification that had been requested.
    (c) Time limits and extent of investigation--(1) Time limits for 
investigation and report to consumer of error. A remittance transfer 
provider shall investigate promptly and determine whether an error 
occurred within 90 days of receiving a notice of error. The remittance 
transfer provider shall report the results to the sender, including 
notice of any remedies available for correcting any error that the 
provider determines has occurred, within three business days after 
completing its investigation.
    (2) Remedies. Except as provided in paragraph (c)(2)(iii) of this 
section, if, following an assertion of an error by a sender, the 
remittance transfer provider determines an error occurred, the provider 
shall, within one business day of, or as soon as reasonably practicable 
after, receiving the sender's instructions regarding the appropriate 
remedy, correct the error as designated by the sender by:
    (i) In the case of any error under paragraphs (a)(1)(i) through 
(iii) of this section, as applicable, either:
    (A) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (B) Making available to the designated recipient, without additional 
cost to the sender or to the designated recipient, the amount 
appropriate to resolve the error;
    (ii) Except as provided in paragraph (c)(2)(iii) of this section, in 
the case of an error under paragraph (a)(1)(iv) of this section
    (A) As applicable, either:
    (1) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (2) Making available to the designated recipient the amount 
appropriate to resolve the error. Such amount must be made available to 
the designated recipient without additional cost to the sender or to the 
designated recipient; and
    (B) Refunding to the sender any fees imposed and, to the extent not 
prohibited by law, taxes collected on the remittance transfer;
    (iii) In the case of an error under paragraph (a)(1)(iv) of this 
section that occurred because the sender provided incorrect or 
insufficient information in connection with the remittance transfer, the 
remittance transfer provider shall provide the remedies required by 
paragraphs (c)(2)(ii)(A)(1) and (c)(2)(ii)(B) of this section within 
three business days of providing the report required by paragraph (c)(1) 
or (d)(1) of this section except that the provider may agree to the 
sender's request, upon receiving the results of the error investigation, 
that the funds be applied towards a new remittance transfer, rather than 
be refunded, if the provider has not yet processed a refund. The 
provider may deduct from the amount refunded or applied towards a new 
transfer any fees actually imposed on or, to the extent not prohibited 
by law, taxes actually collected on the remittance transfer as part of 
the first unsuccessful remittance transfer attempt except that the 
provider shall not deduct its own fee.
    (iv) In the case of a request under paragraph (a)(1)(v) of this 
section, providing the requested documentation, information, or 
clarification.
    (d) Procedures if remittance transfer provider determines no error 
or different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the remittance transfer 
provider shall follow the procedures set forth in this paragraph (d) if 
it determines that no error occurred or that an error occurred in a 
manner or amount different from that described by the sender.
    (1) Explanation of results of investigation. The remittance transfer 
provider's report of the results of the investigation shall include a 
written explanation of the provider's findings and shall note the 
sender's right to request the documents on which the provider relied in 
making its determination. The explanation shall also address the 
specific complaint of the sender.
    (2) Copies of documentation. Upon the sender's request, the 
remittance transfer provider shall promptly provide

[[Page 214]]

copies of the documents on which the provider relied in making its error 
determination.
    (e) Reassertion of error. A remittance transfer provider that has 
fully complied with the error resolution requirements of this section 
has no further responsibilities under this section should the sender 
later reassert the same error, except in the case of an error asserted 
by the sender following receipt of information provided under paragraph 
(a)(1)(v) of this section.
    (f) Relation to other laws--(1) Relation to Regulation E 
Sec. 1005.11 for incorrect EFTs from a sender's account. If an alleged 
error involves an incorrect electronic fund transfer from a sender's 
account in connection with a remittance transfer, and the sender 
provides a notice of error to the account-holding institution, the 
account-holding institution shall comply with the requirements of 
Sec. 1005.11 governing error resolution rather than the requirements of 
this section, provided that the account-holding institution is not also 
the remittance transfer provider. If the remittance transfer provider is 
also the financial institution that holds the consumer's account, then 
the error-resolution provisions of this section apply when the sender 
provides such notice of error.
    (2) Relation to Truth in Lending Act and Regulation Z. If an alleged 
error involves an incorrect extension of credit in connection with a 
remittance transfer, an incorrect amount received by the designated 
recipient under paragraph (a)(1)(iii) of this section that is an 
extension of credit for property or services not delivered as agreed, or 
the failure to make funds available by the disclosed date of 
availability under paragraph (a)(1)(iv) of this section that is an 
extension of credit for property or services not delivered as agreed, 
and the sender provides a notice of error to the creditor extending the 
credit, the provisions of Regulation Z, 12 CFR 1026.13, governing error 
resolution apply to the creditor, rather than the requirements of this 
section, even if the creditor is the remittance transfer provider. 
However, if the creditor is the remittance transfer provider, paragraph 
(b) of this section will apply instead of 12 CFR 1026.13(b). If the 
sender instead provides a notice of error to the remittance transfer 
provider that is not also the creditor, then the error-resolution 
provisions of this section apply to the remittance transfer provider.
    (3) Unauthorized remittance transfers. If an alleged error involves 
an unauthorized electronic fund transfer for payment in connection with 
a remittance transfer, Secs. 1005.6 and 1005.11 apply with respect to 
the account-holding institution. If an alleged error involves an 
unauthorized use of a credit account for payment in connection with a 
remittance transfer, the provisions of Regulation Z, 12 CFR 1026.12(b), 
if applicable, and Sec. 1026.13, apply with respect to the creditor.
    (g) Error resolution standards and recordkeeping requirements--(1) 
Compliance program. A remittance transfer provider shall develop and 
maintain written policies and procedures that are designed to ensure 
compliance with the error resolution requirements applicable to 
remittance transfers under this section.
    (2) Retention of error-related documentation. The remittance 
transfer provider's policies and procedures required under paragraph 
(g)(1) of this section shall include policies and procedures regarding 
the retention of documentation related to error investigations. Such 
policies and procedures must ensure, at a minimum, the retention of any 
notices of error submitted by a sender, documentation provided by the 
sender to the provider with respect to the alleged error, and the 
findings of the remittance transfer provider regarding the investigation 
of the alleged error. Remittance transfer providers are subject to the 
record retention requirements under Sec. 1005.13.
    (h) Incorrect account number or recipient institution identifier 
provided by the sender. The exception in paragraph (a)(1)(iv)(D) of this 
section applies if:
    (1) The remittance transfer provider can demonstrate that the sender 
provided an incorrect account number or recipient institution identifier 
to the provider in connection with the remittance transfer;
    (2) For any instance in which the sender provided the incorrect 
recipient institution identifier, prior to or when

[[Page 215]]

sending the transfer, the provider used reasonably available means to 
verify that the recipient institution identifier provided by the sender 
corresponded to the recipient institution name provided by the sender;
    (3) The provider provided notice to the sender before the sender 
made payment for the remittance transfer that, in the event the sender 
provided an incorrect account number or recipient institution 
identifier, the sender could lose the transfer amount. For purposes of 
providing this disclosure, Sec. 1005.31(a)(2) applies to this notice 
unless the notice is given at the same time as other disclosures 
required by this subpart for which information is permitted to be 
disclosed orally or via mobile application or text message, in which 
case this disclosure may be given in the same medium as those other 
disclosures;
    (4) The incorrect account number or recipient institution identifier 
resulted in the deposit of the remittance transfer into a customer's 
account that is not the designated recipient's account; and
    (5) The provider promptly used reasonable efforts to recover the 
amount that was to be received by the designated recipient.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50284, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 78 FR 49366, Aug. 14, 2013; 79 FR 55991, Sept. 
18, 2014]



Sec. 1005.34  Procedures for cancellation and refund of remittance transfers.

    (a) Sender right of cancellation and refund. Except as provided in 
Sec. 1005.36(c), a remittance transfer provider shall comply with the 
requirements of this section with respect to any oral or written request 
to cancel a remittance transfer from the sender that is received by the 
provider no later than 30 minutes after the sender makes payment in 
connection with the remittance transfer if:
    (1) The request to cancel enables the provider to identify the 
sender's name and address or telephone number and the particular 
transfer to be cancelled; and
    (2) The transferred funds have not been picked up by the designated 
recipient or deposited into an account of the designated recipient.
    (b) Time limits and refund requirements. A remittance transfer 
provider shall refund, at no additional cost to the sender, the total 
amount of funds provided by the sender in connection with a remittance 
transfer, including any fees and, to the extent not prohibited by law, 
taxes imposed in connection with the remittance transfer, within three 
business days of receiving a sender's request to cancel the remittance 
transfer.



Sec. 1005.35  Acts of agents.

    A remittance transfer provider is liable for any violation of this 
subpart by an agent when such agent acts for the provider.



Sec. 1005.36  Transfers scheduled before the date of transfer.

    (a) Timing. (1) For a one-time transfer scheduled five or more 
business days before the date of transfer or for the first in a series 
of preauthorized remittance transfers, the remittance transfer provider 
must:
    (i) Provide either the pre-payment disclosure described in 
Sec. 1005.31(b)(1) and the receipt described in Sec. 1005.31(b)(2) or 
the combined disclosure described in Sec. 1005.31(b)(3), in accordance 
with the timing requirements set forth in Sec. 1005.31(e); and
    (ii) If any of the disclosures provided pursuant to paragraph 
(a)(1)(i) of this section contain estimates as permitted by 
Sec. 1005.32(b)(2), mail or deliver to the sender an additional receipt 
meeting the requirements described in Sec. 1005.31(b)(2) no later than 
one business day after the date of the transfer. If the transfer 
involves the transfer of funds from the sender's account held by the 
provider, the receipt required by this paragraph may be provided on or 
with the next periodic statement for that account, or within 30 days 
after the date of the transfer if a periodic statement is not provided.
    (2) For each subsequent preauthorized remittance transfer:
    (i) If any of the information on the most recent receipt provided 
pursuant to paragraph (a)(1)(i) of this section, or by this paragraph 
(a)(2)(i), other than the temporal disclosures required by

[[Page 216]]

Sec. 1005.31(b)(2)(ii) and (b)(2)(vii), is no longer accurate with 
respect to a subsequent preauthorized remittance transfer for reasons 
other than as permitted by Sec. 1005.32, then the remittance transfer 
provider must provide an updated receipt meeting the requirements 
described in Sec. 1005.31(b)(2) to the sender. The provider must mail or 
deliver this receipt to the sender within a reasonable time prior to the 
scheduled date of the next subsequent preauthorized remittance transfer. 
Such receipt must clearly and conspicuously indicate that it contains 
updated disclosures.
    (ii) Unless a receipt was provided in accordance with paragraph 
(a)(2)(i) of this section that contained no estimates pursuant to 
Sec. 1005.32, the remittance transfer provider must mail or deliver to 
the sender a receipt meeting the requirements described in 
Sec. 1005.31(b)(2) no later than one business day after the date of the 
transfer. If the remittance transfer involves the transfer of funds from 
the sender's account held by the provider, the receipt required by this 
paragraph may be provided on or with the next periodic statement for 
that account, or within 30 days after the date of the transfer if a 
periodic statement is not provided.
    (iii) A remittance transfer provider must provide the disclosures 
required by paragraph (d) of this section in accordance with the timing 
requirements of that section.
    (b) Accuracy. (1) For a one-time transfer scheduled five or more 
business days in advance or for the first in a series of preauthorized 
remittance transfers, disclosures provided pursuant to paragraph 
(a)(1)(i) of this section must comply with Sec. 1005.31(f) by being 
accurate when a sender makes payment except to the extent estimates are 
permitted by Sec. 1005.32.
    (2) For each subsequent preauthorized remittance transfer, the most 
recent receipt provided pursuant to paragraph (a)(1)(i) or (a)(2)(i) of 
this section must be accurate as of when such transfer is made, except:
    (i) The temporal elements required by Sec. 1005.31(b)(2)(ii) and 
(b)(2)(vii) must be accurate only if the transfer is the first transfer 
to occur after the disclosure was provided; and
    (ii) To the extent estimates are permitted by Sec. 1005.32.
    (3) Disclosures provided pursuant to paragraph (a)(1)(ii) or 
(a)(2)(ii) of this section must be accurate as of when the remittance 
transfer to which it pertains is made, except to the extent estimates 
are permitted by Sec. 1005.32(a) or (b)(1).
    (c) Cancellation. For any remittance transfer scheduled by the 
sender at least three business days before the date of the transfer, a 
remittance transfer provider shall comply with any oral or written 
request to cancel the remittance transfer from the sender if the request 
to cancel:
    (1) Enables the provider to identify the sender's name and address 
or telephone number and the particular transfer to be cancelled; and
    (2) Is received by the provider at least three business days before 
the scheduled date of the remittance transfer.
    (d) Additional requirements for subsequent preauthorized remittance 
transfers--(1) Disclosure requirement. (i) For any subsequent transfer 
in a series of preauthorized remittance transfers, the remittance 
transfer provider must disclose to the sender:
    (A) The date the provider will make the subsequent transfer, using 
the term ``Future Transfer Date,'' or a substantially similar term;
    (B) A statement about the rights of the sender regarding 
cancellation as described in Sec. 1005.31(b)(2)(iv); and
    (C) The name, telephone number(s), and Web site of the remittance 
transfer provider.
    (ii) If the future date or dates of transfer are described as 
occurring in regular periodic intervals, e.g., the 15th of every month, 
rather than as a specific calendar date or dates, the remittance 
transfer provider must disclose any future date or dates of transfer 
that do not conform to the described interval.
    (2) Notice requirements. (i) Except as described in paragraph 
(d)(2)(ii) of this section, the disclosures required by paragraph (d)(1) 
of this section must be received by the sender no more than 12 months, 
and no less than five business days prior to the date of any subsequent 
transfer to which it pertains.

[[Page 217]]

The disclosures required by paragraph (d)(1) of this section may be 
provided in a separate disclosure or may be provided on one or more 
disclosures required by this subpart related to the same series of 
preauthorized transfers, so long as the consumer receives the required 
information for each subsequent preauthorized remittance transfer in 
accordance with the timing requirements of this paragraph (d)(2)(i).
    (ii) For any subsequent preauthorized remittance transfer for which 
the date of transfer is four or fewer business days after the date 
payment is made for that transfer, the information required by paragraph 
(d)(1) of this section must be provided on or with the receipt described 
in Sec. 1005.31(b)(2), or disclosed as permitted by Sec. 1005.31(a)(3) 
or (a)(5), for the initial transfer in that series in accordance with 
paragraph (a)(1)(i) of this section.
    (3) Specific format requirement. The information required by 
paragraph (d)(1)(i)(A) of this section generally must be disclosed in 
close proximity to the other information required by paragraph 
(d)(1)(i)(B) of this section.
    (4) Accuracy. Any disclosure required by paragraph (d)(1) of this 
section must be accurate as of the date the preauthorized remittance 
transfer to which it pertains is made.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 50284, Aug. 20, 2012]



    Sec. Appendix A to Part 1005--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))
A-3--Model Forms for Error Resolution Notice (Secs. 1005.7(b)(10) and 
          1005.8(b))
A-4--Model Form for Service-Providing Institutions 
          (Sec. 1005.14(b)(1)(ii))
A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and (2))
A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
          Using Information From a Check (Sec. 1005.3(b)(2))
A-7--Model Clauses for Financial Institutions Offering Payroll Card 
          Accounts (Sec. 1005.18(c))
A-8--Model Clause for Electronic Collection of Returned Item Fees 
          (Sec. 1005.3(b)(3))
A-9--Model Consent Form for Overdraft Services (Sec. 1005.17)
A-10 through A-30 [Reserved]
A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency including a disclaimer where non-covered 
third-party fees and foreign taxes may apply (Sec. 1005.31(b)(1))
A-30(b) --Model Form for Pre-Payment Disclosures for Remittance 
Transfers Exchanged into Local Currency including a disclaimer with 
estimate for non-covered third-party fees (Sec. 1005.31(b)(1) and 
Sec. 1005.32(b)(3))
A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency including a disclaimer with estimate for 
foreign taxes (Sec. 1005.31(b)(1) and Sec. 1005.32(b)(3))
A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency, including a disclaimer with estimates for 
non-covered third-party fees and foreign taxes (Sec. 1005.31(b)(1) and 
Sec. 1005.32(b)(3))
A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency (Sec. 1005.31(b)(2))
A-32--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(3))
A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
(Sec. 1005.31(b)(2))
A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(3))
A-36--Model Form for Error Resolution and Cancellation Disclosures 
(Long) (Sec. 1005.31(b)(4))
A-37--Model Form for Error Resolution and Cancellation Disclosures 
(Short) (Sec. 1005.31(b)(2)(iv) and (b)(2)(vi))
A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency--Spanish (Sec. 1005.31(b)(2))
A-40--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(3))
A-41--Model Form for Error Resolution and Cancellation Disclosures 
(Long)--Spanish (Sec. 1005.31(b)(4))

     A-1--Model Clauses for Unsolicited Issuance (Sec. 1005.5(b)(2))

    (a) Accounts using cards. You cannot use the enclosed card to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the card, please (destroy it at once by 
cutting it in half).
    [Financial institution may add validation instructions here.]
    (b) Accounts using codes. You cannot use the enclosed code to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the code, please (destroy this notice at 
once).
    [Financial institution may add validation instructions here.]

[[Page 218]]

       A-2--Model Clauses for Initial Disclosures (Sec. 1005.7(b))

    (a) Consumer Liability (Sec. 1005.7(b)(1)).
    (Tell us AT ONCE if you believe your [card] [code] has been lost or 
stolen, or if you believe that an electronic fund transfer has been made 
without your permission using information from your check. Telephoning 
is the best way of keeping your possible losses down. You could lose all 
the money in your account (plus your maximum overdraft line of credit). 
If you tell us within 2 business days after you learn of the loss or 
theft of your [card] [code], you can lose no more than $50 if someone 
used your [card][code] without your permission.)
    If you do NOT tell us within 2 business days after you learn of the 
loss or theft of your [card] [code], and we can prove we could have 
stopped someone from using your [card] [code] without your permission if 
you had told us, you could lose as much as $500.
    Also, if your statement shows transfers that you did not make, 
including those made by card, code or other means, tell us at once. If 
you do not tell us within 60 days after the statement was mailed to you, 
you may not get back any money you lost after the 60 days if we can 
prove that we could have stopped someone from taking the money if you 
had told us in time. If a good reason (such as a long trip or a hospital 
stay) kept you from telling us, we will extend the time periods.
    (b) Contact in event of unauthorized transfer (Sec. 1005.7(b)(2)). 
If you believe your [card] [code] has been lost or stolen, call: 
[Telephone number] or write: [Name of person or office to be notified] 
[Address].
    You should also call the number or write to the address listed above 
if you believe a transfer has been made using the information from your 
check without your permission.
    (c) Business days (Sec. 1005.7(b)(3)). For purposes of these 
disclosures, our business days are (Monday through Friday) (Monday 
through Saturday) (any day including Saturdays and Sundays). Holidays 
are (not) included.
    (d) Transfer types and limitations (Sec. 1005.7(b)(4)) (1) Account 
access. You may use your [card][code] to:
    (i) Withdraw cash from your [checking] [or] [savings] account.
    (ii) Make deposits to your [checking] [or] [savings] account.
    (iii) Transfer funds between your checking and savings accounts 
whenever you request.
    (iv) Pay for purchases at places that have agreed to accept the 
[card] [code].
    (v) Pay bills directly [by telephone] from your [checking] [or] 
[savings] account in the amounts and on the days you request.
    Some of these services may not be available at all terminals.
    (2) Electronic check conversion. You may authorize a merchant or 
other payee to make a one-time electronic payment from your checking 
account using information from your check to:
    (i) Pay for purchases.
    (ii) Pay bills.
    (3) Limitations on frequency of transfers. (i) You may make only 
[insert number, e.g., 3] cash withdrawals from our terminals each 
[insert time period, e.g., week].
    (ii) You can use your telephone bill-payment service to pay [insert 
number] bills each [insert time period] [telephone call].
    (iii) You can use our point-of-sale transfer service for [insert 
number] transactions each [insert time period].
    (iv) For security reasons, there are limits on the number of 
transfers you can make using our [terminals] [telephone bill-payment 
service] [point-of-sale transfer service].
    (4) Limitations on dollar amounts of transfers (i) You may withdraw 
up to [insert dollar amount] from our terminals each [insert time 
period] time you use the [card] [code].
    (ii) You may buy up to [insert dollar amount] worth of goods or 
services each [insert time period] time you use the [card] [code] in our 
point-of-sale transfer service.
    (e) Fees (Sec. 1005.7(b)(5)) (1) Per transfer charge. We will charge 
you [insert dollar amount] for each transfer you make using our 
[automated teller machines] [telephone bill-payment service] [point-of-
sale transfer service].
    (2) Fixed charge. We will charge you [insert dollar amount] each 
[insert time period] for our [automated teller machine service] 
[telephone bill-payment service] [point-of-sale transfer service].
    (3) Average or minimum balance charge. We will only charge you for 
using our [automated teller machines] [telephone bill-payment service] 
[point-of-sale transfer service] if the [average] [minimum] balance in 
your [checking account] [savings account] [accounts] falls below [insert 
dollar amount]. If it does, we will charge you [insert dollar amount] 
each [transfer] [insert time period].
    (f) Confidentiality (Sec. 1005.7(b)(9)). We will disclose 
information to third parties about your account or the transfers you 
make:
    (i) Where it is necessary for completing transfers, or
    (ii) In order to verify the existence and condition of your account 
for a third party, such as a credit bureau or merchant, or
    (iii) In order to comply with government agency or court orders, or
    (iv) If you give us your written permission.
    (g) Documentation (Sec. 1005.7(b)(6)) (1) Terminal transfers. You 
can get a receipt at the time you make any transfer to or from your 
account using one of our [automated teller machines] [or] [point-of-sale 
terminals].
    (2) Preauthorized credits. If you have arranged to have direct 
deposits made to your account at least once every 60 days from the

[[Page 219]]

same person or company, (we will let you know if the deposit is [not] 
made.) [the person or company making the deposit will tell you every 
time they send us the money] [you can call us at (insert telephone 
number) to find out whether or not the deposit has been made].
    (3) Periodic statements. You will get a [monthly] [quarterly] 
account statement (unless there are no transfers in a particular month. 
In any case you will get the statement at least quarterly).
    (4) Passbook account where the only possible electronic fund 
transfers are preauthorized credits. If you bring your passbook to us, 
we will record any electronic deposits that were made to your account 
since the last time you brought in your passbook.
    (h) Preauthorized payments (Sec. 1005.7(b) (6), (7) and (8); 
Sec. 1005.10(d)) (1) Right to stop payment and procedure for doing so. 
If you have told us in advance to make regular payments out of your 
account, you can stop any of these payments. Here's how:
    Call us at [insert telephone number], or write us at [insert 
address], in time for us to receive your request 3 business days or more 
before the payment is scheduled to be made. If you call, we may also 
require you to put your request in writing and get it to us within 14 
days after you call. (We will charge you [insert amount] for each stop-
payment order you give.)
    (2) Notice of varying amounts. If these regular payments may vary in 
amount, [we] [the person you are going to pay] will tell you, 10 days 
before each payment, when it will be made and how much it will be. (You 
may choose instead to get this notice only when the payment would differ 
by more than a certain amount from the previous payment, or when the 
amount would fall outside certain limits that you set.)
    (3) Liability for failure to stop payment of preauthorized transfer. 
If you order us to stop one of these payments 3 business days or more 
before the transfer is scheduled, and we do not do so, we will be liable 
for your losses or damages.
    (i) Financial institution's liability (Sec. 1005.7(b)(8)). If we do 
not complete a transfer to or from your account on time or in the 
correct amount according to our agreement with you, we will be liable 
for your losses or damages. However, there are some exceptions. We will 
not be liable, for instance:
    (1) If, through no fault of ours, you do not have enough money in 
your account to make the transfer.
    (2) If the transfer would go over the credit limit on your overdraft 
line.
    (3) If the automated teller machine where you are making the 
transfer does not have enough cash.
    (4) If the [terminal] [system] was not working properly and you knew 
about the breakdown when you started the transfer.
    (5) If circumstances beyond our control (such as fire or flood) 
prevent the transfer, despite reasonable precautions that we have taken.
    (6) There may be other exceptions stated in our agreement with you.
    (j) ATM fees (Sec. 1005.7(b)(11)). When you use an ATM not owned by 
us, you may be charged a fee by the ATM operator [or any network used] 
(and you may be charged a fee for a balance inquiry even if you do not 
complete a fund transfer).

 A-3--Model Forms for Error Resolution Notice (Secs. 1005.7(b)(10) and 
                               1005.8(b))

    (a) Initial and annual error resolution notice (Secs. 1005.7(b)(10) 
and 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] Write us at [insert address] 
[or email us at [insert email address]] as soon as you can, if you think 
your statement or receipt is wrong or if you need more information about 
a transfer listed on the statement or receipt. We must hear from you no 
later than 60 days after we sent the FIRST statement on which the 
problem or error appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation. You may ask for copies of the 
documents that we used in our investigation.

[[Page 220]]

    (b) Error resolution notice on periodic statements (Sec. 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt is 
wrong or if you need more information about a transfer on the statement 
or receipt. We must hear from you no later than 60 days after we sent 
you the FIRST statement on which the error or problem appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    We will investigate your complaint and will correct any error 
promptly. If we take more than 10 business days to do this, we will 
credit your account for the amount you think is in error, so that you 
will have the use of the money during the time it takes us to complete 
our investigation.

           A-4--Model Form for Service-Providing Institutions 
                        (Sec. 1005.14(b)(1)(ii))

    ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD) CARD 
MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO THE BANK 
OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. We are 
responsible for the [name of service] service and for resolving any 
errors in transactions made with your [name of card] card.
    We will not send you a periodic statement listing transactions that 
you make using your [name of card] card. The transactions will appear 
only on the statement issued by your bank or other financial 
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME OF 
CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU RECEIVE 
FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have any questions 
about one of these transactions, call or write us at [telephone number 
and address] [the telephone number and address indicated below].
    IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE by 
calling or writing to us at [telephone number and address].

  A-5--Model Forms for Government Agencies (Sec. 1005.15(d)(1) and (2))

    (a) Disclosure by government agencies of information about obtaining 
account balances and account histories (Sec. 1005.15(d)(1)(i) and (ii)).
    You may obtain information about the amount of benefits you have 
remaining by calling [telephone number]. That information is also 
available [on the receipt you get when you make a transfer with your 
card at (an ATM)(a POS terminal)][when you make a balance inquiry at an 
ATM][when you make a balance inquiry at specified locations].
    You also have the right to receive a written summary of transactions 
for the 60 days preceding your request by calling [telephone number]. 
[Optional: Or you may request the summary by contacting your 
caseworker.]
    (b) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements 
(Sec. 1005.15(d)(1)(iii) and (d)(2)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [telephone number] Write us at [insert address] [or 
email us at [insert email address]] as soon as you can, if you think an 
error has occurred in your [EBT][agency's name for program] account. We 
must hear from you no later than 60 days after you learn of the error. 
You will need to tell us:
      Your name and [case] [file] number.
      Why you believe there is an error, and the dollar amount 
involved.
      Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation. You may ask for copies of the 
documents that we used in our investigation.
    If you need more information about our error resolution procedures, 
call us at [telephone number][the telephone number shown above].

[[Page 221]]

 A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
           Using Information From a Check (Sec. 1005.3(b)(2))

    (a) Notice About Electronic Check Conversion.
    When you provide a check as payment, you authorize us either to use 
information from your check to make a one-time electronic fund transfer 
from your account or to process the payment as a check transaction.
    (b) Alternative Notice About Electronic Check Conversion (Optional).
    When you provide a check as payment, you authorize us to use 
information from your check to make a one-time electronic fund transfer 
from your account. In certain circumstances, such as for technical or 
processing reasons, we may process your payment as a check transaction.
    [Specify other circumstances (at payee's option).]
    (c) Notice For Providing Additional Information About Electronic 
Check Conversion.
    When we use information from your check to make an electronic fund 
transfer, funds may be withdrawn from your account as soon as the same 
day [you make] [we receive] your payment[, and you will not receive your 
check back from your financial institution].

  A-7--Model Clauses for Financial Institutions Offering Payroll Card 
                       Accounts (Sec. 1005.18(c))

    (a) Disclosure by financial institutions of information about 
obtaining account information for payroll card accounts. 
Sec. 1005.18(c)(1).
    You may obtain information about the amount of money you have 
remaining in your payroll card account by calling [telephone number]. 
This information, along with a 60-day history of account transactions, 
is also available online at [internet address].
    You also have the right to obtain a 60-day written history of 
account transactions by calling [telephone number], or by writing us at 
[address].
    (b) Disclosure of error-resolution procedures for financial 
institutions that provide alternative means of obtaining payroll card 
account information (Sec. 1005.18(c)(1)(ii) and (c)(2)).
    In Case of Errors or Questions About Your Payroll Card Account 
Telephone us at [telephone number] or Write us at [address] [or email us 
at [email address]] as soon as you can, if you think an error has 
occurred in your payroll card account. We must allow you to report an 
error until 60 days after the earlier of the date you electronically 
access your account, if the error could be viewed in your electronic 
history, or the date we sent the FIRST written history on which the 
error appeared. You may request a written history of your transactions 
at any time by calling us at [telephone number] or writing us at 
[address]. You will need to tell us:
    Your name and [payroll card account] number.
    Why you believe there is an error, and the dollar amount involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the money during the time it takes us to complete our 
investigation. If we ask you to put your complaint or question in 
writing and we do not receive it within 10 business days, we may not 
credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution procedures, 
call us at [telephone number] [the telephone number shown above] [or 
visit [internet address]].

   A-8--Model Clause for Electronic Collection of Returned Item Fees 
                           (Sec. 1005.3(b)(3))

    If your payment is returned unpaid, you authorize [us/name of person 
collecting the fee electronically] to make a one-time electronic fund 
transfer from your account to collect a fee of [$____]. [If your payment 
is returned unpaid, you authorize [us/name of person collecting the fee 
electronically] to make a one-time electronic fund transfer from your 
account to collect a fee. The fee will be determined [by]/[as follows]:

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                      A-10 through A-29 [Reserved]

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A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
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A-30(b)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
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A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
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A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(1))
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A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency (Sec. 1005.31(b)(2))
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A-32--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec. 1005.31(b)(3))
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A-33--Model Form for Pre-Payment Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(1))
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A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
(Sec. 1005.31(b)(2))
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A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec. 1005.31(b)(3))
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A-36--Model Form for Error Resolution and Cancellation Disclosures 
(Long) (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.252

A-37--Model Form for Error Resolution and Cancellation Disclosures 
(Short)
(Sec. 1005.31(b)(2)(iv) and (b)(2)(vi))

    You have a right to dispute errors in your transaction. If you think 
there is an error, contact us within 180 days at [insert telephone 
number] or [insert website]. You can also contact us for a written 
explanation of your rights.
    You can cancel for a full refund within 30 minutes of payment, 
unless the funds have been picked up or deposited.
    For questions or complaints about [insert name of remittance 
transfer provider], contact:

State Regulatory Agency, 800-111-2222, www.stateregulatory agency.gov
Consumer Financial Protection Bureau, 855-411-2372, 855-729-2372 (TTY/
TDD), www.consumerfinance.gov

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A-38--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(1))
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A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency--Spanish (Sec. 1005.31(b)(2))
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A-40--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(3))
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A-41--Model Form for Error Resolution and Cancellation Disclosures 
(Long)--Spanish (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.258


[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6290, Feb. 7, 2012; 77 
FR 40459, July 10, 2012; 78 FR 30705, May 22, 2013; 79 FR 55991, Sept. 
18, 2014; 81 FR 70320, Oct. 12, 2016]

    Effective Date Note: At 81 FR 84338, Nov. 22, 2016, appendix A to 
part 1005 was amended by:
    a. In the table of contents:
    i. The entries for A-5 and A-7 were revised.
    ii. Entries for A-10(a) through A-10(f) were added.
    iii. The entry for reserved A-10 through A-30 was revised to A-11 
through A-29.
    b. Model Clauses A-5 and A-7 were revised.
    c. Model Forms A-10(a) through (f) were added.
    d. Model Forms A-11 through A-29 were reserved, effective Oct. 1, 
2017.

[[Page 236]]

    For the convenience of the user, the added and revised text is set 
forth as follows:



    Sec. Appendix A to Part 1005--Model Disclosure Clauses and Forms

                            Table of Contents

                                * * * * *

A-5--Model Clauses for Government Agencies (Sec. 1005.15(e)(1) and (2))

                                * * * * *

A-7--Model Clauses for Financial Institutions Offering Prepaid Accounts 
(Sec. 1005.18(d) and (e)(3))

                                * * * * *

A-10(a)--Model Form for Short Form Disclosures for Government Benefit 
Accounts (Secs. 1005.15(c) and 1005.18(b)(2), (3), (6), and (7))
A-10(b)--Model Form for Short Form Disclosures for Payroll Card Accounts 
(Sec. 1005.18(b)(2), (3), (6), and (7))
A-10(c)--Model Form for Short Form Disclosures for Prepaid Accounts, 
Example 1 (Sec. 1005.18(b)(2), (3), (6), and (7))
A-10(d)--Model Form for Short Form Disclosures for Prepaid Accounts, 
Example 2 (Sec. 1005.18(b)(2), (3), (6), and (7))
A-10(e)--Model Form for Short Form Disclosures for Prepaid Accounts with 
Multiple Service Plans (Sec. 1005.18(b)(2), (3), (6), and (7))
A-10(f)--Sample Form for Long Form Disclosures for Prepaid Accounts 
(Sec. 1005.18(b)(4), (6), and (7))
A-11 through A-29 [Reserved]

                                * * * * *

 A-5--Model Clauses for Government Agencies (Sec. 1005.15(e)(1) and (2))

    (a) Disclosure by government agencies of information about obtaining 
account information for government benefit accounts 
(Sec. 1005.15(e)(1)(i)).
    You may obtain information about the amount of benefits you have 
remaining by calling [telephone number]. That information is also 
available [on the receipt you get when you make a transfer with your 
card at (an ATM) (a POS terminal)] [when you make a balance inquiry at 
an ATM] [when you make a balance inquiry at specified locations]. This 
information, along with a 12-month history of account transactions, is 
also available online at [Internet address].
    You also have the right to obtain at least 24 months of written 
history of account transactions by calling [telephone number], or by 
writing to us at [address]. You will not be charged a fee for this 
information unless you request it more than once per month. [Optional: 
Or you may request a written history of account transactions by 
contacting your caseworker.]
    (b) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements (Sec. 1005.15(e)(1)(ii) 
and (e)(2)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [telephone number] Write us at [address] [or email us at 
[email address]] as soon as you can, if you think an error has occurred 
in your [agency's name for program] account. We must allow you to report 
an error until 60 days after the earlier of the date you electronically 
access your account, if the error could be viewed in your electronic 
history, or the date we sent the FIRST written history on which the 
error appeared. You may request a written history of your transactions 
at any time by calling us at [telephone number] or writing us at 
[address] [optional: or by contacting your caseworker]. You will need to 
tell us:
      Your name and [case] [file] number.
      Why you believe there is an error, and the dollar amount 
involved.
      Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.

[[Page 237]]

    If you need more information about our error resolution procedures, 
call us at [telephone number][the telephone number shown above].

                                * * * * *

A-7--Model Clauses for Financial Institutions Offering Prepaid Accounts 
                      (Sec. 1005.18(d) and (e)(3))

    (a) Disclosure by financial institutions of information about 
obtaining account information for prepaid accounts 
(Sec. 1005.18(d)(1)(i)).
    You may obtain information about the amount of money you have 
remaining in your prepaid account by calling [telephone number]. This 
information, along with a 12-month history of account transactions, is 
also available online at [Internet address].
    [For accounts that are or can be registered:] [If your account is 
registered with us,] You also have the right to obtain at least 24 
months of written history of account transactions by calling [telephone 
number], or by writing us at [address]. You will not be charged a fee 
for this information unless you request it more than once per month.
    (b) Disclosure of error-resolution procedures for financial 
institutions that do not provide periodic statements 
(Sec. 1005.18(d)(1)(ii) and (d)(2)).
    In Case of Errors or Questions About Your Prepaid Account Telephone 
us at [telephone number] or Write us at [address] [or email us at [email 
address]] as soon as you can, if you think an error has occurred in your 
prepaid account. We must allow you to report an error until 60 days 
after the earlier of the date you electronically access your account, if 
the error could be viewed in your electronic history, or the date we 
sent the FIRST written history on which the error appeared. You may 
request a written history of your transactions at any time by calling us 
at [telephone number] or writing us at [address]. You will need to tell 
us:
    Your name and [prepaid account] number.
    Why you believe there is an error, and the dollar amount involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, [and your account is 
registered with us,] we will credit your account within 10 business days 
for the amount you think is in error, so that you will have the money 
during the time it takes us to complete our investigation. If we ask you 
to put your complaint or question in writing and we do not receive it 
within 10 business days, we may not credit your account. [Keep reading 
to learn more about how to register your card.]
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution procedures, 
call us at [telephone number] [the telephone number shown above] [or 
visit [Internet address]].
    (c) Warning regarding unregistered prepaid accounts 
(Sec. 1005.18(e)(3)).
    It is important to register your prepaid account as soon as 
possible. Unless you register your account, we may not credit your 
account in the amount you think is in error until we complete our 
investigation. To register your account, go to [Internet address] or 
call us at [telephone number]. We will ask you for identifying 
information about yourself (including your full name, address, date of 
birth, and [Social Security Number] [government-issued identification 
number]), so that we can verify your identity.

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    A-11 through A-29 [Reserved]

                                * * * * *



                 Sec. Appendix B to Part 1005 [Reserved]



   Sec. Appendix C to Part 1005--Issuance of Official Interpretations

                        Official Interpretations

    Pursuant to section 916(d) of the Act, the Bureau has designated the 
Associate Director and other officials of the Division of Research, 
Markets, and Regulations as officials ``duly authorized'' to issue, at 
their discretion, official interpretations of this part. Except in 
unusual circumstances, such interpretations will not be issued 
separately but will be incorporated in an official commentary to this 
part, which will be amended periodically.

            Requests for Issuance of Official Interpretations

    A request for an official interpretation shall be in writing and 
addressed to the Bureau of Consumer Financial Protection, 1700 G Street 
NW., Washington, DC 20006. The request shall contain a complete 
statement of all relevant facts concerning the issue, including copies 
of all pertinent documents.

                        Scope of Interpretations

    No interpretations will be issued approving financial institutions' 
forms or statements. This restriction does not apply to forms or 
statements whose use is required or sanctioned by a government agency.



        Sec. Supplement I to Part 1005--Official Interpretations

                       Section 1005.2  Definitions

                           2(a) Access Device

    1. Examples. The term ``access device'' includes debit cards, 
personal identification numbers (PINs), telephone transfer and telephone 
bill payment codes, and other means that may be used by a consumer to 
initiate an electronic fund transfer (EFT) to or from a consumer 
account. The term does not include magnetic tape or other devices used 
internally by a financial institution to initiate electronic transfers.
    2. Checks used to capture information. The term ``access device'' 
does not include a check or draft used to capture the Magnetic Ink 
Character Recognition (MICR) encoding to initiate a one-time automated 
clearinghouse (ACH) debit. For example, if a consumer authorizes a one-
time ACH debit from the consumer's account using a blank, partially 
completed, or fully completed and signed check for the merchant to 
capture the routing, account, and serial numbers to initiate the debit, 
the check is not an access device. (Although the check is not an access 
device under Regulation E, the transaction is nonetheless covered by the 
regulation. See comment 3(b)(1)-1.v.)

                              2(b) Account

    1. Consumer asset account. The term ``consumer asset account'' 
includes:
    i. Club accounts, such as vacation clubs. In many cases, however, 
these accounts are exempt from the regulation under Sec. 1005.3(c)(5) 
because all electronic transfers to or from the account have been 
preauthorized by the consumer and involve another account of the 
consumer at the same institution.
    ii. A retail repurchase agreement (repo), which is a loan made to a 
financial institution by a consumer that is collateralized by government 
or government-insured securities.
    2. Certain employment-related cards not covered. The term ``payroll 
card account'' does not include a card used solely to disburse 
incentive-based payments (other than commissions which can represent the 
primary means through which a consumer is paid), such as bonuses, which 
are unlikely to be a consumer's primary source of salary or other 
compensation. The term also does not include a card used solely to make 
disbursements unrelated to compensation, such as petty cash 
reimbursements or travel per diem payments. Similarly, a payroll card 
account does not include a card that is used in isolated instances to 
which an employer typically does not make recurring payments, such as 
when providing final payments or in emergency situations when other 
payment methods are unavailable. However, all transactions involving the 
transfer of funds to or from a payroll card account are covered by the 
regulation, even if a particular transaction involves payment of a 
bonus, other incentive-based payment, or reimbursement, or the 
transaction does not represent a transfer of wages, salary, or other 
employee compensation.
    3. Examples of accounts not covered by Regulation E (12 CFR part 
1005) include:
    i. Profit-sharing and pension accounts established under a trust 
agreement, which are exempt under Sec. 1005.2(b)(2).
    ii. Escrow accounts, such as those established to ensure payment of 
items such as real estate taxes, insurance premiums, or completion of 
repairs or improvements.
    iii. Accounts for accumulating funds to purchase U.S. savings bonds.

                            Paragraph 2(b)(2)

    1. Bona fide trust agreements. The term ``bona fide trust 
agreement'' is not defined by the Act or regulation; therefore, 
financial

[[Page 244]]

institutions must look to state or other applicable law for 
interpretation.
    2. Custodial agreements. An account held under a custodial agreement 
that qualifies as a trust under the Internal Revenue Code, such as an 
individual retirement account, is considered to be held under a trust 
agreement for purposes of Regulation E.

                            2(d) Business Day

    1. Duration. A business day includes the entire 24-hour period 
ending at midnight, and a notice required by the regulation is effective 
even if given outside normal business hours. The regulation does not 
require, however, that a financial institution make telephone lines 
available on a 24-hour basis.
    2. Substantially all business functions. Substantially all business 
functions include both the public and the back-office operations of the 
institution. For example, if the offices of an institution are open on 
Saturdays for handling some consumer transactions (such as deposits, 
withdrawals, and other teller transactions), but not for performing 
internal functions (such as investigating account errors), then Saturday 
is not a business day for that institution. In this case, Saturday does 
not count toward the business-day standard set by the regulation for 
reporting lost or stolen access devices, resolving errors, etc.
    3. Short hours. A financial institution may determine, at its 
election, whether an abbreviated day is a business day. For example, if 
an institution engages in substantially all business functions until 
noon on Saturdays instead of its usual 3 p.m. closing, it may consider 
Saturday a business day.
    4. Telephone line. If a financial institution makes a telephone line 
available on Sundays for reporting the loss or theft of an access 
device, but performs no other business functions, Sunday is not a 
business day under the substantially all business functions standard.

                        2(h) Electronic Terminal

    1. Point-of-sale (POS) payments initiated by telephone. Because the 
term ``electronic terminal'' excludes a telephone operated by a 
consumer, a financial institution need not provide a terminal receipt 
when:
    i. A consumer uses a debit card at a public telephone to pay for the 
call.
    ii. A consumer initiates a transfer by a means analogous in function 
to a telephone, such as by home banking equipment or a facsimile 
machine.
    2. POS terminals. A POS terminal that captures data electronically, 
for debiting or crediting to a consumer's asset account, is an 
electronic terminal for purposes of Regulation E even if no access 
device is used to initiate the transaction. See Sec. 1005.9 for receipt 
requirements.
    3. Teller-operated terminals. A terminal or other computer equipment 
operated by an employee of a financial institution is not an electronic 
terminal for purposes of the regulation. However, transfers initiated at 
such terminals by means of a consumer's access device (using the 
consumer's PIN, for example) are EFTs and are subject to other 
requirements of the regulation. If an access device is used only for 
identification purposes or for determining the account balance, the 
transfers are not EFTs for purposes of the regulation.

               2(k) Preauthorized Electronic Fund Transfer

    1. Advance authorization. A preauthorized electronic fund transfer 
under Regulation E is one authorized by the consumer in advance of a 
transfer that will take place on a recurring basis, at substantially 
regular intervals, and will require no further action by the consumer to 
initiate the transfer. In a bill-payment system, for example, if the 
consumer authorizes a financial institution to make monthly payments to 
a payee by means of EFTs, and the payments take place without further 
action by the consumer, the payments are preauthorized EFTs. In 
contrast, if the consumer must take action each month to initiate a 
payment (such as by entering instructions on a touch-tone telephone or 
home computer), the payments are not preauthorized EFTs.

               2(m) Unauthorized Electronic Fund Transfer

    1. Transfer by institution's employee. A consumer has no liability 
for erroneous or fraudulent transfers initiated by an employee of a 
financial institution.
    2. Authority. If a consumer furnishes an access device and grants 
authority to make transfers to a person (such as a family member or co-
worker) who exceeds the authority given, the consumer is fully liable 
for the transfers unless the consumer has notified the financial 
institution that transfers by that person are no longer authorized.
    3. Access device obtained through robbery or fraud. An unauthorized 
EFT includes a transfer initiated by a person who obtained the access 
device from the consumer through fraud or robbery.
    4. Forced initiation. An EFT at an ATM is an unauthorized transfer 
if the consumer has been induced by force to initiate the transfer.
    5. Reversal of direct deposits. The reversal of a direct deposit 
made in error is not an unauthorized EFT when it involves:
    i. A credit made to the wrong consumer's account;
    ii. A duplicate credit made to a consumer's account; or

[[Page 245]]

    iii. A credit in the wrong amount (for example, when the amount 
credited to the consumer's account differs from the amount in the 
transmittal instructions).

                        Section 1005.3  Coverage

                              3(a) General

    1. Accounts covered. The requirements of the regulation apply only 
to an account for which an agreement for EFT services to or from the 
account has been entered into between:
    i. The consumer and the financial institution (including an account 
for which an access device has been issued to the consumer, for 
example);
    ii. The consumer and a third party (for preauthorized debits or 
credits, for example), when the account-holding institution has received 
notice of the agreement and the fund transfers have begun.
    2. Automated clearing house (ACH) membership. The fact that 
membership in an ACH requires a financial institution to accept EFTs to 
accounts at the institution does not make every account of that 
institution subject to the regulation.
    3. Foreign applicability. Regulation E applies to all persons 
(including branches and other offices of foreign banks located in the 
United States) that offer EFT services to residents of any state, 
including resident aliens. It covers any account located in the United 
States through which EFTs are offered to a resident of a state. This is 
the case whether or not a particular transfer takes place in the United 
States and whether or not the financial institution is chartered in the 
United States or a foreign country. The regulation does not apply to a 
foreign branch of a U.S. bank unless the EFT services are offered in 
connection with an account in a state as defined in Sec. 1005.2(l).

                      3(b) Electronic Fund Transfer

                           3(b)(1) Definition

    1. Fund transfers covered. The term ``electronic fund transfer'' 
includes:
    i. A deposit made at an ATM or other electronic terminal (including 
a deposit in cash or by check) provided a specific agreement exists 
between the financial institution and the consumer for EFTs to or from 
the account to which the deposit is made.
    ii. A transfer sent via ACH. For example, social security benefits 
under the U.S. Treasury's direct-deposit program are covered, even if 
the listing of payees and payment amounts reaches the account-holding 
institution by means of a computer printout from a correspondent bank.
    iii. A preauthorized transfer credited or debited to an account in 
accordance with instructions contained on magnetic tape, even if the 
financial institution holding the account sends or receives a composite 
check.
    iv. A transfer from the consumer's account resulting from a debit-
card transaction at a merchant location, even if no electronic terminal 
is involved at the time of the transaction, if the consumer's asset 
account is subsequently debited for the amount of the transfer.
    v. A transfer via ACH where a consumer has provided a check to 
enable the merchant or other payee to capture the routing, account, and 
serial numbers to initiate the transfer, whether the check is blank, 
partially completed, or fully completed and signed; whether the check is 
presented at POS or is mailed to a merchant or other payee or lockbox 
and later converted to an EFT; or whether the check is retained by the 
consumer, the merchant or other payee, or the payee's financial 
institution.
    vi. A payment made by a bill payer under a bill-payment service 
available to a consumer via computer or other electronic means, unless 
the terms of the bill-payment service explicitly state that all 
payments, or all payments to a particular payee or payees, will be 
solely by check, draft, or similar paper instrument drawn on the 
consumer's account, and the payee or payees that will be paid in this 
manner are identified to the consumer.
    2. Fund transfers not covered. The term ``electronic fund transfer'' 
does not include:
    i. A payment that does not debit or credit a consumer asset account, 
such as a payroll allotment to a creditor to repay a credit extension 
(which is deducted from salary).
    ii. A payment made in currency by a consumer to another person at an 
electronic terminal.
    iii. A preauthorized check drawn by the financial institution on the 
consumer's account (such as an interest or other recurring payment to 
the consumer or another party), even if the check is computer-generated.
    iv. Transactions arising from the electronic collection, 
presentment, or return of checks through the check collection system, 
such as through transmission of electronic check images.

     3(b)(2) Electronic Fund Transfer Using Information From a Check

    1. Notice at POS not furnished due to inadvertent error. If the copy 
of the notice under section 1005.3(b)(2)(ii) for electronic check 
conversion (ECK) transactions is not provided to the consumer at POS 
because of a bona fide unintentional error, such as when a terminal 
printing mechanism jams, no violation results if the payee maintains 
procedures reasonably adapted to avoid such occurrences.
    2. Authorization to process a transaction as an EFT or as a check. 
In order to process a transaction as an EFT, or alternatively as a

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check, the payee must obtain the consumer's authorization to do so. A 
payee may, at its option, specify the circumstances under which a check 
may not be converted to an EFT. See model clauses in appendix A-6.
    3. Notice for each transfer. Generally, a notice to authorize an 
electronic check conversion transaction must be provided for each 
transaction. For example, a consumer must receive a notice that the 
transaction will be processed as an EFT for each transaction at POS or 
each time a consumer mails a check in an accounts receivable (ARC) 
transaction to pay a bill, such as a utility bill, if the payee intends 
to convert a check received as payment. Similarly, the consumer must 
receive notice if the payee intends to collect a service fee for 
insufficient or uncollected funds via an EFT for each transaction 
whether at POS or if the consumer mails a check to pay a bill. The 
notice about when funds may be debited from a consumer's account and the 
non-return of consumer checks by the consumer's financial institution 
must also be provided for each transaction. However, if in an ARC 
transaction, a payee provides a coupon book to a consumer, for example, 
for mortgage loan payments, and the payment dates and amounts are set 
out in the coupon book, the payee may provide a single notice on the 
coupon book stating all of the required disclosures under paragraph 
(b)(2) of this section in order to obtain authorization for each 
conversion of a check and any debits via EFT to the consumer's account 
to collect any service fees imposed by the payee for insufficient or 
uncollected funds in the consumer's account. The notice must be placed 
on a conspicuous location of the coupon book that a consumer can 
retain--for example, on the first page, or inside the front cover.
    4. Multiple payments/multiple consumers. If a merchant or other 
payee will use information from a consumer's check to initiate an EFT 
from the consumer's account, notice to a consumer listed on the billing 
account that a check provided as payment during a single billing cycle 
or after receiving an invoice or statement will be processed as a one-
time EFT or as a check transaction constitutes notice for all checks 
provided in payment for the billing cycle or the invoice for which 
notice has been provided, whether the check(s) is submitted by the 
consumer or someone else. The notice applies to all checks provided in 
payment for the billing cycle or invoice until the provision of notice 
on or with the next invoice or statement. Thus, if a merchant or other 
payee receives a check as payment for the consumer listed on the billing 
account after providing notice that the check will be processed as a 
one-time EFT, the authorization from that consumer constitutes 
authorization to convert any other checks provided for that invoice or 
statement. Other notices required under this paragraph (b)(2) (for 
example, to collect a service fee for insufficient or uncollected funds 
via an EFT) provided to the consumer listed on the billing account also 
constitutes notice to any other consumer who may provide a check for the 
billing cycle or invoice.
    5. Additional disclosures about ECK transactions at POS. When a 
payee initiates an EFT at POS using information from the consumer's 
check, and returns the check to the consumer at POS, the payee need not 
provide a notice to the consumer that the check will not be returned by 
the consumer's financial institution.

  3(b)(3) Collection of Returned Item Fees via Electronic Fund Transfer

    1. Fees imposed by account-holding institution. The requirement to 
obtain a consumer's authorization to collect a fee via EFT for the 
return of an EFT or check unpaid applies only to the person that intends 
to initiate an EFT to collect the returned item fee from the consumer's 
account. The authorization requirement does not apply to any fees 
assessed by the consumer's account-holding financial institution when it 
returns the unpaid underlying EFT or check or pays the amount of an 
overdraft.
    2. Accounts receivable transactions. In an ARC transaction where a 
consumer sends in a payment for amounts owed (or makes an in-person 
payment at a biller's physical location, such as when a consumer makes a 
loan payment at a bank branch or places a payment in a drop box), a 
person seeking to electronically collect a fee for items returned unpaid 
must obtain the consumer's authorization to collect the fee in this 
manner. A consumer authorizes a person to electronically collect a 
returned item fee when the consumer receives notice, typically on an 
invoice or statement, that the person may collect the fee through an EFT 
to the consumer's account, and the consumer goes forward with the 
underlying transaction by providing payment. The notice must also state 
the dollar amount of the fee. However, an explanation of how that fee 
will be determined may be provided in place of the dollar amount of the 
fee if the fee may vary due to the amount of the transaction or due to 
other factors, such as the number of days the underlying transaction is 
left outstanding. For example, if a state law permits a maximum fee of 
$30 or 10% of the underlying transaction, whichever is greater, the 
person collecting the fee may explain how the fee is determined, rather 
than state a specific dollar amount for the fee.
    3. Disclosure of dollar amount of fee for POS transactions. The 
notice provided to the consumer in connection with a POS transaction 
under Sec. 1005.3(b)(3)(ii) must state the amount of the fee for a 
returned item if the dollar amount of the fee can be calculated at the 
time the notice is provided or mailed. For

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example, if notice is provided to the consumer at the time of the 
transaction, if the applicable state law sets a maximum fee that may be 
collected for a returned item based on the amount of the underlying 
transaction (such as where the amount of the fee is expressed as a 
percentage of the underlying transaction), the person collecting the fee 
must state the actual dollar amount of the fee on the notice provided to 
the consumer. Alternatively, if the amount of the fee to be collected 
cannot be calculated at the time of the transaction (for example, where 
the amount of the fee will depend on the number of days a debt continues 
to be owed), the person collecting the fee may provide a description of 
how the fee will be determined on both the posted notice as well as on 
the notice provided at the time of the transaction. However, if the 
person collecting the fee elects to send the consumer notice after the 
person has initiated an EFT to collect the fee, that notice must state 
the amount of the fee to be collected.
    4. Third party providing notice. The person initiating an EFT to a 
consumer's account to electronically collect a fee for an item returned 
unpaid may obtain the authorization and provide the notices required 
under Sec. 1005.3(b)(3) through third parties, such as merchants.

                      3(c) Exclusions From Coverage

                             3(c)(1) Checks

    1. Re-presented checks. The electronic re-presentment of a returned 
check is not covered by Regulation E because the transaction originated 
by check. Regulation E does apply, however, to any fee debited via an 
EFT from a consumer's account by the payee because the check was 
returned for insufficient or uncollected funds. The person debiting the 
fee electronically must obtain the consumer's authorization.
    2. Check used to capture information for a one-time EFT. See comment 
3(b)(1)-1.v.

                3(c)(2) Check Guarantee or Authorization

    1. Memo posting. Under a check guarantee or check authorization 
service, debiting of the consumer's account occurs when the check or 
draft is presented for payment. These services are exempt from coverage, 
even when a temporary hold on the account is memo-posted electronically 
at the time of authorization.

                 3(c)(3) Wire or Other Similar Transfers

    1. Fedwire and ACH. If a financial institution makes a fund transfer 
to a consumer's account after receiving funds through Fedwire or a 
similar network, the transfer by ACH is covered by the regulation even 
though the Fedwire or network transfer is exempt.
    2. Article 4A. Financial institutions that offer telephone-initiated 
Fedwire payments are subject to the requirements of UCC section 4A-202, 
which encourages verification of Fedwire payment orders pursuant to a 
security procedure established by agreement between the consumer and the 
receiving bank. These transfers are not subject to Regulation E and the 
agreement is not considered a telephone plan if the service is offered 
separately from a telephone bill-payment or other prearranged plan 
subject to Regulation E. Regulation J of the Board of Governors of the 
Federal Reserve System (12 CFR part 210) specifies the rules applicable 
to funds handled by Federal Reserve Banks. To ensure that the rules for 
all fund transfers through Fedwire are consistent, the Board of 
Governors used its preemptive authority under UCC section 4A-107 to 
determine that subpart B of the Board's Regulation J, including the 
provisions of Article 4A, applies to all fund transfers through Fedwire, 
even if a portion of the fund transfer is governed by the EFTA. The 
portion of the fund transfer that is governed by the EFTA is not 
governed by subpart B of the Board's Regulation J.
    3. Similar fund transfer systems. Fund transfer systems that are 
similar to Fedwire include the Clearing House Interbank Payments System 
(CHIPS), Society for Worldwide Interbank Financial Telecommunication 
(SWIFT), Telex, and transfers made on the books of correspondent banks.

              3(c)(4) Securities and Commodities Transfers

    1. Coverage. The securities exemption applies to securities and 
commodities that may be sold by a registered broker-dealer or futures 
commission merchant, even when the security or commodity itself is not 
regulated by the Securities and Exchange Commission or the Commodity 
Futures Trading Commission.
    2. Example of exempt transfer. The exemption applies to a transfer 
involving a transfer initiated by a telephone order to a stockbroker to 
buy or sell securities or to exercise a margin call.
    3. Examples of nonexempt transfers. The exemption does not apply to 
a transfer involving:
    i. A debit card or other access device that accesses a securities or 
commodities account such as a money market mutual fund and that the 
consumer uses for purchasing goods or services or for obtaining cash.
    ii. A payment of interest or dividends into the consumer's account 
(for example, from a brokerage firm or from a Federal Reserve Bank for 
government securities).

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       3(c)(5) Automatic Transfers by Account-Holding Institution

    1. Automatic transfers exempted. The exemption applies to:
    i. Electronic debits or credits to consumer accounts for check 
charges, stop-payment charges, non-sufficient funds (NSF) charges, 
overdraft charges, provisional credits, error adjustments, and similar 
items that are initiated automatically on the occurrence of certain 
events.
    ii. Debits to consumer accounts for group insurance available only 
through the financial institution and payable only by means of an 
aggregate payment from the institution to the insurer.
    iii. EFTs between a thrift institution and its paired commercial 
bank in the state of Rhode Island, which are deemed under state law to 
be intra-institutional.
    iv. Automatic transfers between a consumer's accounts within the 
same financial institution, even if the account holders on the two 
accounts are not identical.
    2. Automatic transfers not exempted. Transfers between accounts of 
the consumer at affiliated institutions (such as between a bank and its 
subsidiary or within a holding company) are not intra-institutional 
transfers, and thus do not qualify for the exemption.

                  3(c)(6) Telephone-Initiated Transfers

    1. Written plan or agreement. A transfer that the consumer initiates 
by telephone is covered by Regulation E if the transfer is made under a 
written plan or agreement between the consumer and the financial 
institution making the transfer. A written statement available to the 
public or to account holders that describes a service allowing a 
consumer to initiate transfers by telephone constitutes a plan; for 
example, a brochure, or material included with periodic statements. The 
following, however, do not by themselves constitute a written plan or 
agreement:
    i. A hold-harmless agreement on a signature card that protects the 
institution if the consumer requests a transfer.
    ii. A legend on a signature card, periodic statement, or passbook 
that limits the number of telephone-initiated transfers the consumer can 
make from a savings account because of reserve requirements under 
Regulation D of the Board of Governors of the Federal Reserve System (12 
CFR part 204).
    iii. An agreement permitting the consumer to approve by telephone 
the rollover of funds at the maturity of an instrument.
    2. Examples of covered transfers. When a written plan or agreement 
has been entered into, a transfer initiated by a telephone call from a 
consumer is covered even though:
    i. An employee of the financial institution completes the transfer 
manually (for example, by means of a debit memo or deposit slip).
    ii. The consumer is required to make a separate request for each 
transfer.
    iii. The consumer uses the plan infrequently.
    iv. The consumer initiates the transfer via a facsimile machine.
    v. The consumer initiates the transfer using a financial 
institution's audio-response or voice-response telephone system.

                       3(c)(7) Small Institutions

    1. Coverage. This exemption is limited to preauthorized transfers; 
institutions that offer other EFTs must comply with the applicable 
sections of the regulation as to such services. The preauthorized 
transfers remain subject to sections 913, 916, and 917 of the Act and 
Sec. 1005.10(e), and are therefore exempt from UCC Article 4A.

    Section 1005.4  General Disclosure Requirements; Jointly Offered 
                                Services

                        4(a) Form of Disclosures

    1. General. Although no particular rules govern type size, number of 
pages, or the relative conspicuousness of various terms, the disclosures 
must be in a clear and readily understandable written form that the 
consumer may retain. Numbers or codes are considered readily 
understandable if explained elsewhere on the disclosure form.
    2. Foreign language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

               Section 1005.5  Issuance of Access Devices

    1. Coverage. The provisions of this section limit the circumstances 
under which a financial institution may issue an access device to a 
consumer. Making an additional account accessible through an existing 
access device is equivalent to issuing an access device and is subject 
to the limitations of this section.

                         5(a) Solicited Issuance

                            Paragraph 5(a)(1)

    1. Joint account. For a joint account, a financial institution may 
issue an access device to each account holder if the requesting holder 
specifically authorizes the issuance.
    2. Permissible forms of request. The request for an access device 
may be written or oral (for example, in response to a telephone 
solicitation by a card issuer).

                            Paragraph 5(a)(2)

    1. One-for-one rule. In issuing a renewal or substitute access 
device, only one renewal or substitute device may replace a previously 
issued device. For example, only one new card and PIN may replace a card 
and PIN previously issued. A financial institution may provide 
additional devices at the time it

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issues the renewal or substitute access device, however, provided the 
institution complies with Sec. 1005.5(b). See comment 5(b)-5. If the 
replacement device or the additional device permits either fewer or 
additional types of electronic fund transfer services, a change-in-terms 
notice or new disclosures are required.
    2. Renewal or substitution by a successor institution. A successor 
institution is an entity that replaces the original financial 
institution (for example, following a corporate merger or acquisition) 
or that acquires accounts or assumes the operation of an EFT system.

                        5(b) Unsolicited Issuance

    1. Compliance. A financial institution may issue an unsolicited 
access device (such as the combination of a debit card and PIN) if the 
institution's ATM system has been programmed not to accept the access 
device until after the consumer requests and the institution validates 
the device. Merely instructing a consumer not to use an unsolicited 
debit card and PIN until after the institution verifies the consumer's 
identity does not comply with the regulation.
    2. PINs. A financial institution may impose no liability on a 
consumer for unauthorized transfers involving an unsolicited access 
device until the device becomes an ``accepted access device'' under the 
regulation. A card and PIN combination may be treated as an accepted 
access device once the consumer has used it to make a transfer.
    3. Functions of PIN. If an institution issues a PIN at the 
consumer's request, the issuance may constitute both a way of validating 
the debit card and the means to identify the consumer (required as a 
condition of imposing liability for unauthorized transfers).
    4. Verification of identity. To verify the consumer's identity, a 
financial institution may use any reasonable means, such as a 
photograph, fingerprint, personal visit, signature comparison, or 
personal information about the consumer. However, even if reasonable 
means were used, if an institution fails to verify correctly the 
consumer's identity and an imposter succeeds in having the device 
validated, the consumer is not liable for any unauthorized transfers 
from the account.
    5. Additional access devices in a renewal or substitution. A 
financial institution may issue more than one access device in 
connection with the renewal or substitution of a previously issued 
accepted access device, provided that any additional access device 
(beyond the device replacing the accepted access device) is not 
validated at the time it is issued, and the institution complies with 
the other requirements of Sec. 1005.5(b). The institution may, if it 
chooses, set up the validation procedure such that both the device 
replacing the previously issued device and the additional device are not 
validated at the time they are issued, and validation will apply to both 
devices. If the institution sets up the validation procedure in this 
way, the institution should provide a clear and readily understandable 
disclosure to the consumer that both devices are unvalidated and that 
validation will apply to both devices.

    Section 1005.6  Liability of Consumer for Unauthorized Transfers

                      6(a) Conditions for Liability

    1. Means of identification. A financial institution may use various 
means for identifying the consumer to whom the access device is issued, 
including but not limited to:
    i. Electronic or mechanical confirmation (such as a PIN).
    ii. Comparison of the consumer's signature, fingerprint, or 
photograph.
    2. Multiple users. When more than one access device is issued for an 
account, the financial institution may, but need not, provide a separate 
means to identify each user of the account.

                 6(b) Limitations on Amount of Liability

    1. Application of liability provisions. There are three possible 
tiers of consumer liability for unauthorized EFTs depending on the 
situation. A consumer may be liable for: (1) up to $50; (2) up to $500; 
or (3) an unlimited amount depending on when the unauthorized EFT 
occurs. More than one tier may apply to a given situation because each 
corresponds to a different (sometimes overlapping) time period or set of 
conditions.
    2. Consumer negligence. Negligence by the consumer cannot be used as 
the basis for imposing greater liability than is permissible under 
Regulation E. Thus, consumer behavior that may constitute negligence 
under state law, such as writing the PIN on a debit card or on a piece 
of paper kept with the card, does not affect the consumer's liability 
for unauthorized transfers. (However, refer to comment 2(m)-2 regarding 
termination of the authority of given by the consumer to another 
person.)
    3. Limits on liability. The extent of the consumer's liability is 
determined solely by the consumer's promptness in reporting the loss or 
theft of an access device. Similarly, no agreement between the consumer 
and an institution may impose greater liability on the consumer for an 
unauthorized transfer than the limits provided in Regulation E.

                       6(b)(1) Timely Notice Given

    1. $50 limit applies. The basic liability limit is $50. For example, 
the consumer's card is lost or stolen on Monday and the consumer learns 
of the loss or theft on Wednesday. If the consumer notifies the 
financial institution within two business days of learning of

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the loss or theft (by midnight Friday), the consumer's liability is 
limited to $50 or the amount of the unauthorized transfers that occurred 
before notification, whichever is less.
    2. Knowledge of loss or theft of access device. The fact that a 
consumer has received a periodic statement that reflects unauthorized 
transfers may be a factor in determining whether the consumer had 
knowledge of the loss or theft, but cannot be deemed to represent 
conclusive evidence that the consumer had such knowledge.
    3. Two business day rule. The two business day period does not 
include the day the consumer learns of the loss or theft or any day that 
is not a business day. The rule is calculated based on two 24-hour 
periods, without regard to the financial institution's business hours or 
the time of day that the consumer learns of the loss or theft. For 
example, a consumer learns of the loss or theft at 6 p.m. on Friday. 
Assuming that Saturday is a business day and Sunday is not, the two 
business day period begins on Saturday and expires at 11:59 p.m. on 
Monday, not at the end of the financial institution's business day on 
Monday.

                     6(b)(2) Timely Notice Not Given

    1. $500 limit applies. The second tier of liability is $500. For 
example, the consumer's card is stolen on Monday and the consumer learns 
of the theft that same day. The consumer reports the theft on Friday. 
The $500 limit applies because the consumer failed to notify the 
financial institution within two business days of learning of the theft 
(which would have been by midnight Wednesday). How much the consumer is 
actually liable for, however, depends on when the unauthorized transfers 
take place. In this example, assume a $100 unauthorized transfer was 
made on Tuesday and a $600 unauthorized transfer on Thursday. Because 
the consumer is liable for the amount of the loss that occurs within the 
first two business days (but no more than $50), plus the amount of the 
unauthorized transfers that occurs after the first two business days and 
before the consumer gives notice, the consumer's total liability is $500 
($50 of the $100 transfer plus $450 of the $600 transfer, in this 
example). But if $600 was taken on Tuesday and $100 on Thursday, the 
consumer's maximum liability would be $150 ($50 of the $600 plus $100).

           6(b)(3) Periodic Statement; Timely Notice Not Given

    1. Unlimited liability applies. The standard of unlimited liability 
applies if unauthorized transfers appear on a periodic statement, and 
may apply in conjunction with the first two tiers of liability. If a 
periodic statement shows an unauthorized transfer made with a lost or 
stolen debit card, the consumer must notify the financial institution 
within 60 calendar days after the periodic statement was sent; 
otherwise, the consumer faces unlimited liability for all unauthorized 
transfers made after the 60-day period. The consumer's liability for 
unauthorized transfers before the statement is sent, and up to 60 days 
following, is determined based on the first two tiers of liability: up 
to $50 if the consumer notifies the financial institution within two 
business days of learning of the loss or theft of the card and up to 
$500 if the consumer notifies the institution after two business days of 
learning of the loss or theft.
    2. Transfers not involving access device. The first two tiers of 
liability do not apply to unauthorized transfers from a consumer's 
account made without an access device. If, however, the consumer fails 
to report such unauthorized transfers within 60 calendar days of the 
financial institution's transmittal of the periodic statement, the 
consumer may be liable for any transfers occurring after the close of 
the 60 days and before notice is given to the institution. For example, 
a consumer's account is electronically debited for $200 without the 
consumer's authorization and by means other than the consumer's access 
device. If the consumer notifies the institution within 60 days of the 
transmittal of the periodic statement that shows the unauthorized 
transfer, the consumer has no liability. However, if in addition to the 
$200, the consumer's account is debited for a $400 unauthorized transfer 
on the 61st day and the consumer fails to notify the institution of the 
first unauthorized transfer until the 62nd day, the consumer may be 
liable for the full $400.

                    6(b)(4) Extension of Time Limits

    1. Extenuating circumstances. Examples of circumstances that require 
extension of the notification periods under this section include the 
consumer's extended travel or hospitalization.

                 6(b)(5) Notice to Financial Institution

    1. Receipt of notice. A financial institution is considered to have 
received notice for purposes of limiting the consumer's liability if 
notice is given in a reasonable manner, even if the consumer notifies 
the institution but uses an address or telephone number other than the 
one specified by the institution.
    2. Notice by third party. Notice to a financial institution by a 
person acting on the consumer's behalf is considered valid under this 
section. For example, if a consumer is hospitalized and unable to report 
the loss or theft of an access device, notice is considered given when 
someone acting on the consumer's behalf notifies the bank of the loss or 
theft. A financial institution may require appropriate documentation 
from the person representing the consumer to establish that

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the person is acting on the consumer's behalf.
    3. Content of notice. Notice to a financial institution is 
considered given when a consumer takes reasonable steps to provide the 
institution with the pertinent account information. Even when the 
consumer is unable to provide the account number or the card number in 
reporting a lost or stolen access device or an unauthorized transfer, 
the notice effectively limits the consumer's liability if the consumer 
otherwise identifies sufficiently the account in question. For example, 
the consumer may identify the account by the name on the account and the 
type of account in question.

                   Section 1005.7  Initial Disclosures

                       7(a) Timing of Disclosures

    1. Early disclosures. Disclosures given by a financial institution 
earlier than the regulation requires (for example, when the consumer 
opens a checking account) need not be repeated when the consumer later 
enters into an agreement with a third party to initiate preauthorized 
transfers to or from the consumer's account, unless the terms and 
conditions differ from those that the institution previously disclosed. 
This interpretation also applies to any notice provided about one-time 
EFTs from a consumer's account initiated using information from the 
consumer's check. On the other hand, if an agreement for EFT services to 
be provided by an account-holding institution is directly between the 
consumer and the account-holding institution, disclosures must be given 
in close proximity to the event requiring disclosure, for example, when 
the consumer contracts for a new service.
    2. Lack of advance notice of a transfer. Where a consumer authorizes 
a third party to debit or credit the consumer's account, an account-
holding institution that has not received advance notice of the transfer 
or transfers must provide the required disclosures as soon as reasonably 
possible after the first debit or credit is made, unless the institution 
has previously given the disclosures.
    3. Addition of new accounts. If a consumer opens a new account 
permitting EFTs at a financial institution, and the consumer already has 
received Regulation E disclosures for another account at that 
institution, the institution need only disclose terms and conditions 
that differ from those previously given.
    4. Addition of service in interchange systems. If a financial 
institution joins an interchange or shared network system (which 
provides access to terminals operated by other institutions), 
disclosures are required for additional EFT services not previously 
available to consumers if the terms and conditions differ from those 
previously disclosed.
    5. Disclosures covering all EFT services offered. An institution may 
provide disclosures covering all EFT services that it offers, even if 
some consumers have not arranged to use all services.

                       7(b) Content of Disclosures

                      7(b)(1) Liability of Consumer

    1. No liability imposed by financial institution. If a financial 
institution chooses to impose zero liability for unauthorized EFTs, it 
need not provide the liability disclosures. If the institution later 
decides to impose liability, however, it must first provide the 
disclosures.
    2. Preauthorized transfers. If the only EFTs from an account are 
preauthorized transfers, liability could arise if the consumer fails to 
report unauthorized transfers reflected on a periodic statement. To 
impose such liability on the consumer, the institution must have 
disclosed the potential liability and the telephone number and address 
for reporting unauthorized transfers.
    3. Additional information. At the institution's option, the summary 
of the consumer's liability may include advice on promptly reporting 
unauthorized transfers or the loss or theft of the access device.

                  7(b)(2) Telephone Number and Address

    1. Disclosure of telephone numbers. An institution may use the same 
or different telephone numbers in the disclosures for the purpose of:
    i. Reporting the loss or theft of an access device or possible 
unauthorized transfers;
    ii. Inquiring about the receipt of a preauthorized credit;
    iii. Stopping payment of a preauthorized debit;
    iv. Giving notice of an error.
    2. Location of telephone number. The telephone number need not be 
incorporated into the text of the disclosure; for example, the 
institution may instead insert a reference to a telephone number that is 
readily available to the consumer, such as ``Call your branch office. 
The number is shown on your periodic statement.'' However, an 
institution must provide a specific telephone number and address, on or 
with the disclosure statement, for reporting a lost or stolen access 
device or a possible unauthorized transfer.

                 7(b)(4) Types of Transfers; Limitations

    1. Security limitations. Information about limitations on the 
frequency and dollar amount of transfers generally must be disclosed in 
detail, even if related to security aspects of the system. If the 
confidentiality of certain details is essential to the security of an 
account or system, these details may be withheld (but the fact that 
limitations exist must still be disclosed). For example,

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an institution limits cash ATM withdrawals to $100 per day. The 
institution may disclose that daily withdrawal limitations apply and 
need not disclose that the limitations may not always be in force (such 
as during periods when its ATMs are off-line).
    2. Restrictions on certain deposit accounts. A limitation on account 
activity that restricts the consumer's ability to make EFTs must be 
disclosed even if the restriction also applies to transfers made by non-
electronic means. For example, Regulation D of the Board of Governors of 
the Federal Reserve System (12 CFR part 204) restricts the number of 
payments to