The final rule may have benefits to consumers, to the extent that lending entities voluntarily choose to collect disaggregated race and ethnicity information. The Regulation B creditors affected by this rule are primarily those creditors making mortgage loans subject to 1002.13, which applies to purchase and refinance transactions involving an applicant's primary residence. HUMo8W,"Z[$hAX][RmyZ#=({x~6VX,k:JT%CXI qhTpz 1. 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 1002.13. A creditor may collect the information specified in 1002.13(a) either on an application form or on a separate form referring to the application. the Federal Register. The second substantive change will remove the outdated 2004 URLA as a model form. To determine whether the credit union discriminated against members of one or more protected classes in any aspect of its credit operations. Natural person. 2. Answer by David Dickinson: The definition of applicant in Reg B Section 202.2: (e) Applicant means any person who requests or who has received an extension of credit from a creditor, and includes any person who is or may become contractually liable regarding an extension of credit.For purposes of Section 202.7(d), the term includes guarantors, sureties, endorsers, and similar parties. The Consumer Credit Protection Act of 1968 (CCPA) is federal legislation outlining disclosure requirements for consumer lenders. The Bureau believes that permitting collection of applicant demographic information in this narrowly tailored circumstance may be beneficial for some financial institutions because it would allow them to collect applicant demographic information early in the collection process, when they have determined that the loan would be dwelling secured and primarily for a business or commercial purpose but may not yet have determined whether it meets the definition of a home purchase loan, refinancing, or home improvement loan under revised Regulation C. Collection of applicant demographic information at that point in the application process may allow for more consistent collection and may be easier to integrate into the application process when compared with collection after HMDA coverage has been determined. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. 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. c. Under Section 1002.13Information for monitoring purposes: i. Paragraph 13(a)Information to be requested is revised. For class actions, the creditor could face a penalty of $500,000 or 1% of the creditors net worth, whichever is lower. Second, many Regulation B-only creditors will be exempt from reporting under revised Regulation C because they originate fewer than 25 closed-end mortgage loans in each of the two preceding calendar years, which means both that few consumers would be affected and any disaggregated data would likely be too sparse for statistical analysis. In the Bureau Approval Notice, the Bureau determined that, while a creditor is not required to use the 2016 URLA, a creditor that uses the form without any modification that would violate 1002.5(b) through (d) would act in compliance with 1002.5(b) through (d). [5] First, Regulation B-only creditors will not be required to permit applicants to self-identify using disaggregated ethnicity and race categories, likely resulting in few creditors adopting disaggregated ethnicity and race categories. As the Bureau noted in the 2017 ECOA Proposal, without a time limit such voluntary collection would permit a creditor to collect protected applicant-characteristic information for a period of time that is too attenuated from any past Regulation C legal requirement and associated compliance process. Aspects of overdraft program implementation or management that is outsourced to third parties, including debt collection practices, must be actively overseen by the bank to ensure compliance. The consumer debt collection larger participant rule, which appears in 12 CFR Part 1090, was effective January 2, 2013 . Examination Procedures Because the Bureau Approval Notice remains in effect for all of 2017, the amendments in this rule are not necessary to permit Regulation B-only creditors or HMDA reporters to collect disaggregated applicant demographic information for applications taken in 2017; they are already permitted to do so by the Bureau Approval Notice for any application for a covered loan under revised Regulation C 1003.2(g) or any application subject to 1002.13 for all of 2017. The Bureau of Consumer Financial Protection (Bureau) is issuing a final rule that amends Regulation B to permit creditors additional flexibility in complying with Regulation B in order to facilitate compliance with Regulation C, adds certain model forms and removes others from Regulation B, and makes various other amendments to Regulation B and its commentary to facilitate the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants. It is not an official legal edition of the Federal The federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. Register documents. 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. . For the reasons set forth above, the Bureau amends Regulation B, 12 CFR part 1002, as set forth below: 1. 18. [6] Effective January 1, 2018, amend Appendix B to Part 1002 by revising paragraph 1 and adding a Data Collection Model Form to the end of the Appendix to read as follows: 1. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. The creditor must note the monitoring information on the basis of visual observation or surname, if the applicant chooses not to provide the information. Two industry groups suggested that the Bureau remove 1002.13 altogether. Although the information collected under 1002.13 and Regulation C overlap, in part, as discussed in the 2017 ECOA Proposal, regulators will rely on applicant demographic information collected under 1002.13 to supervise and enforce fair lending laws, including for a substantial number of creditors that will not be required to report under revised Regulation C.36 15 U.S.C. The notice must explain why the applicant was rejected or give instructions for how the applicant can request this information. However, of the three limitations to consumer benefits listed above, only the first (that disaggregated categories would be optional) is alleviated by requiring the use of disaggregated race and ethnicity categories under Regulation B. Reg. The Bureau may reevaluate the need for mandatory disaggregated collection under 1002.13 after implementation of the 2015 HMDA Final Rule and transition to the 2016 URLA, when more information is available on creditor collection practices. More importantly, it gives applicants the chance to correct the creditor's mistakes in evaluating the applicant's creditworthiness. The Public Inspection page may also Is There a Gender Gap in Home Equity Loans? As discussed above, on September 23, 2016, the Bureau issued the Bureau Approval Notice, pursuant to section 706(e) of ECOA. Interagency guidance was issued in 2005. documents in the last year, 20 These costs include greater operational costs and one-time database upgrades. In 2015, there were 1,178 institutions that reported HMDA data but had fewer than 25 originations and therefore would likely be exempt under the 2015 HMDA Final Rule if they continue to originate loans at a similar volume. [27] on 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. These tools are designed to help you understand the official document Regulation B and Ethnicity and Race Information Collection, Comments Related to Other Changes to Regulation B, Section 1002.5Rules Concerning Requests for Information, 5(a)(4) Other Permissible Collection of Information, Section 1002.13Information for Monitoring Purposes, Appendix B to Part 1002Model Application Forms, Model Forms for Complying With Section 1002.13(a)(1)(i), Removal of the Official Commentary to Appendix B, VII. If a creditor collects applicant information pursuant to 1002.13(a)(1)(i)(B), the applicant must be offered the option to select more than one ethnicity and more than one racial designation. [43] Potential Benefits and Costs to Consumers and Covered Persons, Providing an Option To Collect Disaggregated Race and Ethnicity for Regulation B, Model Forms for Collecting Race and Ethnicity Data, Allowing Voluntary Collection of Applicant Information, C. Impact on Depository Institutions and Credit Unions With $10 Billion or Less in Assets, as Described in Dodd-Frank Section 1026, VIII. On the other hand, consumer advocacy groups and an industry service provider suggested that creditors be required to collect disaggregated ethnicity and race information after a multi-year phase in period. Unlike financial institutions covered by Regulation C, creditors subject to 1002.13 but not to Regulation C are required only to collect and retain, but not to report, the required protected applicant-characteristic information. There are three reasons, however, that this rule will likely have a limited effect on fair lending analysis. documents in the last year, 287 Use the PDF linked in the document sidebar for the official electronic format. 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 1002.13 for certain dwelling-related loans. a. Thus, the final rule has the added benefit that it will allow Regulation B-only creditors to use the 2016 URLA as an instrument to collect race and ethnicity information. Section 1061 of the Dodd-Frank Act transferred to the Bureau consumer financial protection functions previously vested in certain other Federal agencies, including the authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law and perform appropriate functions to promulgate and review such rules, Start Printed Page 45684orders, and guidelines. The Bureau believes that these provisions further the purposes of ECOA by easing overall burden on creditors and improving the quality of the data that is used to promote the availability of credit to all creditworthy applicants. The Bureau requested comment regarding the costs and benefits associated with this provision. The criteria for being a financial institution and reporting transactions under HMDA are different in some ways from the criteria for reporting under the NMLS Mortgage Call Report and reporting transactions under it. 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does reg b cover collection procedures