Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection, 16307-16321 [2017-06195]
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16307
Proposed Rules
Federal Register
Vol. 82, No. 63
Tuesday, April 4, 2017
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1002
[Docket No. CFPB–2017–0009]
RIN 3170–AA65
Amendments to Equal Credit
Opportunity Act (Regulation B)
Ethnicity and Race Information
Collection
Bureau of Consumer Financial
Protection.
ACTION: Proposed rule with request for
public comment.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) proposes
amendments to Regulation B to permit
creditors additional flexibility in
complying with Regulation B in order to
facilitate compliance with Regulation C,
to add certain model forms and remove
others from Regulation B, and to make
various other amendments to Regulation
B and its commentary to facilitate the
collection and retention of information
about the ethnicity, sex, and race of
certain mortgage applicants.
DATES: Comments must be received on
or before May 4, 2017.
ADDRESSES: You may submit comments,
identified by Docket No. CFPB–2017–
0009 or RIN 3170–AA65, by any of the
following methods:
• Email: FederalRegisterComments@
cfpb.gov. Include Docket No. CFPB–
2017–0009 or RIN 3170–AA65 in the
subject line of the email.
• Electronic: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Monica Jackson, Office of the
Executive Secretary, Consumer
Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
Include CFPB–2017–0009 or RIN 3170–
AA65 in a reference line at the top of
the submission.
• Hand Delivery/Courier: Monica
Jackson, Office of the Executive
Secretary, Consumer Financial
Protection Bureau, 1275 First Street NE.,
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SUMMARY:
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Washington, DC 20002. Include CFPB–
2017–0009 or RIN 3170–AA65 in a
reference line at the top of the
submission.
Instructions: All submissions should
include the agency name and docket
number or Regulatory Information
Number (RIN) for this rulemaking.
Because paper mail in the Washington,
DC area and at the Bureau is subject to
delay, commenters are encouraged to
submit comments electronically. In
general, all comments received will be
posted without change to https://
www.regulations.gov. In addition,
comments will be available for public
inspection and copying at 1275 First
Street NE., Washington, DC 20002, on
official business days between the hours
of 10 a.m. and 5 p.m. Eastern Time. You
can make an appointment to inspect the
documents by telephoning (202) 435–
7275.
All comments, including attachments
and other supporting materials, will
become part of the public record and
subject to public disclosure. Sensitive
personal information, such as account
numbers or Social Security numbers,
should not be included. Comments will
not be edited to remove any identifying
or contact information.
FOR FURTHER INFORMATION CONTACT:
Kathryn Lazarev or James Wylie,
Counsels, Office of Regulations, at 202–
435–7700.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
Regulation B implements the Equal
Credit Opportunity Act (ECOA) and, in
part, prohibits a creditor from inquiring
about the race, color, religion, national
origin or sex of a credit applicant except
under certain circumstances.1 One of
those circumstances is a requirement for
creditors to collect and retain certain
information about applicants for certain
dwelling-secured loans under
Regulation B § 1002.13. Another
circumstance is the applicant
information required to be collected and
reported under Regulation C by
financial institutions. Regulation C, 12
CFR part 1003, implements the Home
Mortgage Disclosure Act (HMDA), as
amended by the Dodd-Frank Wall Street
Reform and Consumer Protection Act
1 15
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(Dodd-Frank Act).2 Regulation B also
includes certain optional model forms
for use in complying with certain
Regulation B requirements. One of those
forms is a 2004 version of the Uniform
Residential Loan Application (URLA)
issued by the Federal National Mortgage
Association (Fannie Mae) and the
Federal Home Loan Mortgage
Corporation (Freddie Mac) (collectively,
the Enterprises).
The Bureau issued a final rule in
October of 2015 amending Regulation C
(2015 HMDA final rule), which
included changes to the collection of
applicants’ ethnicity and race
information.3 The Enterprises recently
issued a new version of the URLA (2016
URLA).4 The Bureau proposes to amend
various sections of Regulation B to
further the purposes of ECOA including
to promote the availability of credit to
all creditworthy applicants without
regard to race, color, religion, national
origin, sex, marital status, or age
(provided the applicant has the capacity
to contract) and other protected
characteristics. The proposed
amendments to § 1002.13 would permit
a creditor additional flexibility in how
it collects applicant ethnicity and race
information in order to better align with
Regulation C, as amended in the 2015
HMDA final rule. The proposed
amendments to Appendix B would
remove the URLA dated January 2004
(2004 URLA) from Regulation B and add
additional sample forms to Regulation B
to facilitate compliance. The proposed
amendments to § 1002.5 would permit
creditors to collect applicant
information in certain circumstances
when they would not otherwise be
required to do so. The proposed
amendments to § 1002.12 would address
retention of information about certain
applicants.
2 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111–203, 124 Stat. 1376
(2010).
3 Home Mortgage Disclosure (Regulation C); 80 FR
66128 (Oct. 28, 2015).
4 See Fannie Mae, Guide Forms (2016), available
at, https://www.fanniemae.com/singlefamily/
selling-servicing-guide-forms (listing all selling and
servicing guide forms); see also Freddie Mac, Forms
and Documents (2016) https://www.freddiemac.com/
singlefamily/guide/ (same).
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II. Background
A. Regulation B and Ethnicity and Race
Information Collection
With some exceptions, Regulation B
§ 1002.5(b) prohibits a creditor from
inquiring about the race, color, religion,
national origin, or sex of an applicant or
any other person (protected applicantcharacteristic information) in
connection with a credit transaction.
Section 1002.5(a)(2) provides an
exception to that prohibition for
information that creditors are required
to request for certain dwelling-secured
loans under § 1002.13, and for
information required by a regulation,
order, or agreement issued by or entered
into with a court or an enforcement
agency to monitor or enforce
compliance with ECOA, Regulation B,
or other Federal or State statutes or
regulations, including Regulation C.
Section 1002.13 sets forth the scope,
required information, and manner for
collecting information about an
applicant’s ethnicity, race, sex, marital
status, and age under Regulation B (In
this notice, ‘‘applicant demographic
information’’ refers to information about
an applicant’s ethnicity, race, or sex
information collected under § 1002.13
or, as discussed below, Regulation C,
while ‘‘certain protected applicantcharacteristic information’’ refers to all
information collected under § 1002.13,
including age and marital status.) Under
§ 1002.13(a)(1), creditors that receive an
application for credit primarily for the
purchase or refinancing of a dwelling
occupied (or to be occupied) by the
applicant as a principal residence,
where the extension of credit will be
secured by the dwelling, must collect
certain protected applicantcharacteristic information, including
specified race and ethnicity categories.
These race and ethnicity categories
correspond to the OMB standards for
the classification of Federal data on
ethnicity and race minimum standards.5
Certain of these categories include
several more specific race, heritage,
nationality, or country of origin groups.
For example, Hispanic or Latino as
defined by OMB for the 2010 Census
refers to a person of Cuban, Mexican,
Puerto Rican, South or Central
American, or other Spanish culture or
origin.6 Section 1002.13(b) through (c)
provides instructions on the manner of
collection. Unlike financial institutions
5 Office of Mgmt. and Budget, Revisions to the
Standards for the Classification of Federal Data on
Race and Ethnicity, 62 FR 58782–90 (Oct. 30, 1997).
6 See U.S. Census Bureau, C2010BR–02, Overview
of Race and Hispanic Origin: 2010, at 2 (2011),
available at https://www.census.gov/prod/cen2010/
briefs/c2010br-02.pdf.
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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 applicantcharacteristic information.
B. 2015 HMDA Final Rule
The Dodd-Frank Act transferred
rulemaking authority for HMDA to the
Bureau, effective July 2011.7 It also
amended HMDA to add new data points
and authorized the Bureau to require
additional information from covered
institutions. Regulation C implements
HMDA and sets out specific
requirements for the collection,
recording, reporting, and disclosure of
mortgage lending information, including
a requirement to collect and report
information about an applicant’s
ethnicity, race, and sex (applicant
demographic information).
In July 2014, the Bureau proposed
amendments to Regulation C to
implement the Dodd-Frank Act changes
to require collection, recording, and
reporting of additional information to
further HMDA’s purposes, and to
modernize the manner in which covered
institutions report HMDA data.8 The
Bureau published a final rule on
October 28, 2015, amending Regulation
C, with many of the amendments taking
effect January 1, 2018.9 (In this notice,
‘‘current Regulation C’’ refers to
Regulation C prior to January 1, 2018,
and ‘‘revised Regulation C’’ refers to
Regulation C as it will be in effect on or
after January 1, 2018, as amended by the
2015 HMDA final rule.) For data
collected in or after 2018, the 2015
HMDA final rule amends the
requirement for collection and reporting
of applicant demographic information.
Specifically, covered institutions must
permit applicants to self-identify their
ethnicity and race using certain
disaggregated ethnic and racial
subcategories. Covered institutions will
report the disaggregated information
provided by applicants. However,
revised Regulation C will not require or
permit covered institutions to use the
disaggregated subcategories when
collecting and reporting the applicant’s
ethnicity and race based on visual
observation or surname.10
Revised Regulation C § 1003.2(g)(1)(v)
and 1003.2(g)(2)(ii) also introduces an
exemption to the requirement to report
information for financial institutions
that originated fewer than 25 closed-end
7 Public
Law 111–203, 124 Stat. 1376.
Mortgage Disclosure (Regulation C), 79 FR
51731 (Aug. 29, 2014).
9 80 FR 66128 (Oct. 28, 2015).
10 Id. at 66314 (amendments to appendix B to
Regulation C, effective January 1, 2018).
8 Home
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mortgage loans or fewer than 100 openend lines of credit in either of the two
prior years. As a result, when revised
Regulation C takes effect, an
institution’s obligation to collect and
report information under Regulation C
may change over time based on its prior
loan volume.
C. Uniform Residential Loan
Application
The Enterprises, currently under the
conservatorship of the Federal Housing
Finance Agency (FHFA), prepare and
periodically revise a Uniform
Residential Loan Application (URLA)
used by many lenders for certain
dwelling-related loans. A mortgage loan
application must be documented using
the URLA in the mortgage loan file for
the loan to be eligible for sale to the
Enterprises.11 A version of the URLA
dated January 2004 (2004 URLA) is
included in appendix B to Regulation B
as a model form for use in complying
with § 1002.13. Appendix B provides
that the use of its model forms is
optional under Regulation B but that, if
a creditor uses an appropriate appendix
B model form, or modifies a form in
accordance with instructions provided
in appendix B, that creditor shall be
deemed to be acting in compliance with
§ 1002.5(b) through (d).12
The Enterprises, under the
conservatorship of the FHFA, issued a
revised and redesigned URLA on
August 23, 2016 (2016 URLA).13 This
issuance was part of the effort of these
11 Fannie Mae, Selling Guide: Single Family Seller
Servicer (Dec. 16, 2016), § B1–1–01, available at
https://www.fanniemae.com/content/guide/selling/
b1/1/01.html; Freddie Mac, Single-Family Seller/
Servicer Guide (Sep. 21, 2016), § 3401.7, available
at https://www.freddiemac.com/singlefamily/guide/
bulletins/snapshot.html.
12 Comment app. B–1 provides that a previous
version of the URLA, dated October 1992, may be
used by creditors without violating Regulation B. In
addition, comment app. B–2 provides that the
home-improvement and energy loan application
form prepared by the Enterprises, dated October
1986, complies with the requirements of Regulation
B for some creditors but not others, depending on
whether the creditor is governed by § 1002.13(a) or
subject to a substitute monitoring program under
§ 1002.13(d). The Enterprises no longer offer the
home-improvement and energy loan application
form identified in comment app. B–2 See Fannie
Mae, Guide Forms (2016), available at https://
www.fanniemae.com/singlefamily/selling-servicingguide-forms (listing all current selling and servicing
guide forms); see also Freddie Mac, Forms and
Documents (2016) available at https://
www.freddiemac.com/singlefamily/guide/ (same).
13 Fannie Mae, Uniform Residential Loan
Application (Aug. 2016), https://
www.fanniemae.com/content/guide_form/urlaborrower-information.pdf; see also Press Release,
Uniform Mortgage Data Program, Fannie Mae and
Freddie Mac at the direction of the FHFA, The
Redesigned URLA and ULAD Mapping Document
Are Here! (Aug. 23, 2016), available at https://
www.fanniemae.com/content/news/urlaannouncement-august-2016.pdf.
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entities to update the Uniform Loan
Application Dataset (ULAD). Among
other changes, the 2016 URLA includes
a Demographic Information section
(section 7) that addresses the
requirements in revised Regulation C for
collecting applicant demographic
information, including the requirement
that financial institutions permit
applicants to self-identify using
disaggregated ethnicity and race
categories beginning January 1, 2018.
The Enterprises also made available a
Demographic Information Addendum,
which is identical in form to section 7
of the 2016 URLA.14 The Enterprises
have advised that the Demographic
Information Addendum may be used by
lenders at any time on or after January
1, 2017, as a replacement for section X
(Information for Government
Monitoring Purposes) in the current
URLA, dated 7/05 (revised 6/09).15 The
Enterprises have not yet provided a date
when lenders may begin using the 2016
URLA (the effective date) or the date
lenders are required to use the 2016
URLA (the cutover date), but have stated
their intention to collaborate with
industry stakeholders to help shape the
implementation timeline for the 2016
URLA, with a goal to provide lenders
with more precise information in 2017
regarding the cutover date.16
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D. Bureau Approval Notice
On September 23, 2016, the Bureau
issued a notice concerning the
collection of expanded information
about ethnicity and race in 2017
(Bureau Approval Notice).17 Under
current Regulation C § 1003.4(a)(10),
covered financial institutions are
required to collect, record, and report
applicant demographic information.
Revised Regulation C will require
financial institutions to permit
applicants to self-identify using
disaggregated ethnic and racial
categories beginning January 1, 2018.18
14 Fannie Mae, Demographic Information
Addendum (Aug. 2016), available at https://
www.fanniemae.com/content/guide_form/urlademographic-addendum.pdf.
15 Press Release, Uniform Mortgage Data Program,
Fannie Mae and Freddie Mac at the direction of the
FHFA, URLA Implementation Guidance and
Update (Nov. 1, 2016), available at https://
www.fanniemae.com/content/news/urlaannouncement-november-2016.pdf; Uniform
Mortgage Data Program, Fannie Mae and Freddie
Mac at the direction of the FHFA, Uniform
Residential loan Application (URLA)/Uniform Loan
Application Dataset (ULAD) FAQs, ¶ 6 (Nov. 1,
2016), available at https://www.fanniemae.com/
content/faq/urla-ulad-faqs.pdf.
16 Press Release, Uniform Mortgage Data Program,
Fannie Mae and Freddie Mac at the direction of the
FHFA, URLA Implementation Guidance and
Update (Nov. 1, 2016), available at https://
www.fanniemae.com/content/news/urlaannouncement-november-2016.pdf.
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However, before that date, such
inquiries are not required by current
Regulation C and would not have been
allowed under Regulation B
§ 1002.5(a)(2), and therefore creditors
would have been prohibited by
Regulation B § 1002.5(b) from requesting
applicants to self-identify using
disaggregated ethnic and racial
categories before January 1, 2018.
The Bureau Approval Notice provided
that, anytime from January 1, 2017,
through December 31, 2017, a creditor
may, at its option, permit applicants to
self-identify using disaggregated ethnic
and racial categories as instructed in
appendix B to revised Regulation C.
During this period, a creditor adopting
the practice of permitting applicants to
self-identify using disaggregated ethnic
and racial categories as instructed in
appendix B to revised Regulation C
shall be deemed to be in compliance
with Regulation B § 1002.13(a)(i).
In the same notice, the Bureau also
determined that the relevant language in
the 2016 URLA is in compliance with
the regulatory provisions of Regulation
B § 1002.5(b) through (d), regarding
requests for protected applicantcharacteristic information and certain
other information. The notice provides
that, although the use of the 2016 URLA
by creditors is not required under
Regulation B, a creditor that uses the
2016 URLA without any modification
that would violate § 1002.5(b) through
(d) acts in compliance with § 1002.5(b)
through (d).
III. Outreach
As part of the Bureau’s outreach to
financial institutions, vendors, and
other mortgage industry participants to
prepare for the implementation of the
2015 HMDA final rule, the Bureau has
received questions about the
requirement to permit applicants to selfidentify using disaggregated ethnicity
and race categories and how that
requirement intersects with compliance
obligations under Regulation B. The
Bureau also received questions related
to the Bureau Approval Notice about
whether the approval for collecting
disaggregated ethnicity and race
categories under Regulation B in 2017
would be extended to 2018. In light of
these inquiries, the Bureau determined
that it would be beneficial to establish
through rulemaking appropriate
standards in Regulation B concerning
the collection of an applicant’s ethnicity
and race information similar to those in
revised Regulation C. Because many of
the financial institutions most affected
by this proposed rule are supervised by
the Federal Deposit Insurance
Corporation (FDIC), the Office of the
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Comptroller of the Currency (OCC), the
Federal Reserve Board (FRB), and the
National Credit Union Administration
(NCUA), the Bureau conducted outreach
to these agencies. The Bureau
specifically sought input from these
prudential regulators concerning their
use of applicant ethnicity and race
information collected under § 1002.13
but not reported or anticipated to be
reported under current or revised
Regulation C and their views on
appropriate standards for collection and
retention of this information. The
Bureau also conducted outreach with
other Federal agencies, including
Securities and Exchange Commission,
the Department of Justice, the
Department of Housing and Urban
Development, the Federal Housing
Finance Agency, the Federal Trade
Commission, the U.S. Department of
Veterans Affairs, the U.S. Department of
Agriculture, and the Department of the
Treasury, concerning this proposed rule.
IV. Legal Authority
The Bureau is issuing this proposed
rule pursuant to its authority under
section 703 of ECOA, as amended by
section 1085 of the Dodd-Frank Act.19
ECOA authorizes the Bureau to issue
regulations to carry out the purposes of
ECOA.20 These regulations may contain
but are not limited to such
classifications, differentiations, or other
provisions, and may provide for such
adjustments and exceptions for any
class of transactions, as in the judgment
of the Bureau are necessary or proper to
effectuate the purposes of ECOA, to
prevent circumvention or evasion of
ECOA, or to facilitate or substantiate
compliance with ECOA.21 A purpose of
ECOA is to promote the availability of
credit to all creditworthy applicants
without regard to race, color, religion,
national origin, sex, marital status, or
age (provided the applicant has the
capacity to contract) and other protected
characteristics.22 ECOA section 703
serves as a source of authority to
establish rules concerning the taking
and evaluation of credit applications,
collection and retention of applicant
demographic information concerning
the applicant or co-applicant, use of
designated model forms, and
substantive requirements to carry out
the purposes of ECOA.
The Bureau is also issuing this
proposed rule pursuant to its authority
under sections 1022 and 1061 of the
19 15 U.S.C. 1691b; Public Law 111–203, 124 Stat.
1376, 2083–84 (2010).
20 15 U.S.C. 1691b(a).
21 Id.
22 12 CFR 1002.1(b).
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Dodd-Frank Act. Under Dodd-Frank Act
section 1022(b)(1), the Bureau has
authority to prescribe rules as may be
necessary or appropriate to enable the
Bureau to administer and carry out the
purposes and objectives of the Federal
consumer financial laws and to prevent
evasions thereof.23 Section 1061 of the
Dodd-Frank Act transferred to the
Bureau consumer financial protection
functions previously vested in certain
other Federal agencies, including the
authority to prescribe rules or issue
orders or guidelines pursuant to any
Federal consumer financial law and
perform appropriate functions to
promulgate and review such rules,
orders, and guidelines.24 Both ECOA
and title X of the Dodd-Frank Act are
consumer financial laws.25 Accordingly,
the Bureau has authority to issue
regulations to administer ECOA.
V. Proposed Implementation Period
Except as set forth below, the Bureau
proposes an effective date of January 1,
2018, for any final rule based on this
proposal to align with the effective dates
of the relevant provisions of the 2015
HMDA final rule. As an effective date
for any final rule removing the 2004
URLA from appendix B of Regulation B,
the Bureau proposes the cutover date
designated by the Enterprises for the
mandatory use of the 2016 URLA or
January 1, 2022, whichever occurs first.
VI. Section-by-Section Analysis
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Section 1002.5 Rules Concerning
Requests for Information
Section 1002.5 provides rules
concerning requests for information. In
general, § 1002.5(b) prohibits a creditor
from inquiring about protected
applicant-characteristic information in
connection with a credit transaction,
except under certain circumstances. The
Bureau is proposing to add proposed
§ 1002.5(a)(4), to authorize creditors to
collect such information under certain
additional circumstances. The Bureau is
proposing to make conforming changes
to comment 5(a)(2)–2 to reference the
types of loans covered by revised
Regulation C and provide a citation to
Regulation C. The Bureau is also
proposing to add proposed comment
5(a)(4)–1 to provide guidance on
proposed § 1002.5(a)(4).
23 Public Law 111–203, 124 Stat. 1375, 1980
(2010) (codified at 12 U.S.C. 5512(b)(1)).
24 Public Law 111–203, 124 Stat. 1375, 2035–39
(2010) (codified at 12 U.S.C. 5581).
25 12 U.S.C. 5481(12), (14).
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5(a) General Rules
5(a)(4) Other Permissible Collection of
Information
Section 1002.5(a)(2) provides that,
notwithstanding the limitations in
§ 1002.5(b) through (d) on collecting
protected applicant-characteristic
information and other applicant
information, a creditor shall request
information for monitoring purposes as
required by § 1002.13. Section
1002.5(a)(2) further provides that a
creditor may obtain information
required by a regulation, order, or
agreement issued by, or entered with, a
court or an enforcement agency to
monitor or enforce compliance with
ECOA, Regulation B, or other Federal or
State statutes and regulations. However,
§ 1002.5(a)(2) does not authorize
collection of information beyond what
is required by law. The Bureau is
proposing to add § 1002.5(a)(4) to
authorize a creditor to obtain
information in certain additional
specified circumstances other than
information required as described in
§ 1002.5(a)(2). Proposed § 1002.5(a)(4)
would provide that, notwithstanding
§ 1002.5(b), a creditor may collect
information under the circumstances
included under that section, provided
that the creditor collects the information
in compliance with appendix B to
revised Regulation C.
The Bureau understands that certain
creditors who will be excluded from
reporting under revised Regulation C in
a given reporting year may want to
continue to collect or report applicant
demographic information during that
time to maintain consistent compliance
standards from year-to-year. The Bureau
also understands that certain creditors
who are not subject to revised
Regulation C in a given calendar year
but may become subject to reporting in
the next calendar year may want to
collect applicant demographic
information for applications that may
become revised Regulation C covered
loans if the creditor becomes subject to
reporting and final action is taken on
the application in the next calendar
year. Therefore, the Bureau believes that
it is appropriate to permit creditors to
collect such information in the
specifically permitted circumstances
explained below. The Bureau believes
that permitting creditors to collect
information without interruption or
break from year-to-year would further
the purposes of ECOA by easing overall
burden on creditors and improving the
quality and reliability of the data that
are used to promote the availability of
credit to all creditworthy applicants.
The Bureau also believes that permitting
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creditors to collect certain protected
applicant-characteristic information in
these circumstances provides a narrow
exception to the general limitations in
§ 1002.5(b) through (d) that preserves
the protection and respects the purposes
of those prohibitions.
Under proposed § 1002.5(a)(4)(i) a
creditor that is a financial institution
under revised Regulation C § 1003.2(g)
may collect information regarding the
applicant demographic information of
an applicant for a closed-end mortgage
loan that is an excluded transaction
under revised Regulation C
§ 1003.3(c)(11) if it submits HMDA data
concerning those applications and loans
or if it submitted HMDA data
concerning closed-end mortgage loans
in any of the preceding five calendar
years. The proposal would permit a
financial institution that voluntarily
reports HMDA data concerning closedend mortgage loans to collect applicant
demographic information for such
reporting in compliance with Regulation
B. The proposal would also permit a
financial institution to collect applicant
demographic information for closed-end
mortgage loans for up to five years after
it fell below the loan volume threshold
for closed-end mortgage loans in revised
Regulation C § 1003.3(c)(11). The
Bureau believes that creditors in this
latter situation may not want to incur
the burden of altering their compliance
process, particularly when they may
become subject to reporting again in the
near future. The Bureau believes that
permitting such collection for five years
provides an appropriate time frame
under which a financial institution
should be permitted to continue
collecting the information without
having to change its compliance
processes; the Bureau believes the
period is long enough that it would
provide a creditor a strong indication
that its present business trend is
unlikely to subject it to reporting in the
near future, but the period would not be
so long as to permit a creditor to collect
protected applicant-characteristic
information for a period of time that is
too attenuated from the previous
Regulation C legal requirement and
associated compliance process. The
Bureau invites comment on this
proposal to permit collection of
applicant demographic information in
these circumstances and the proposed
five-year time frame.
Under proposed § 1002.5(a)(4)(ii), a
creditor that is a financial institution
under Regulation C § 1003.2(g) may
collect information regarding the
applicant demographic information of
an applicant for an open-end line of
credit that is an excluded transaction
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under revised Regulation C
§ 1003.3(c)(12) if it submits HMDA data
concerning those applications and openend lines of credit or if it submitted
HMDA data concerning open-end lines
of credit in any of the preceding five
calendar years. Similar to proposed
§ 1002.5(a)(4)(i), the proposal would
permit a financial institution that
voluntarily reports HMDA data
concerning open-end lines of credit to
collect applicant demographic
information for such reporting in
compliance with Regulation B. The
proposal would also permit a financial
institution to collect applicant
demographic information for open-end
lines of credit for up to five years after
it fell below the loan volume threshold
for open-end lines of credit in revised
Regulation C § 1003.3(c)(12). The
Bureau believes that the proposal is
justified for similar reasons and
provides similar benefits to proposed
§ 1002.5(a)(4)(i) discussed above. The
Bureau invites comment on this
proposal to permit collection of
applicant demographic information in
these circumstances and the proposed
five-year time frame.
Under proposed § 1002.5(a)(4)(iii), a
creditor that submitted HMDA data for
any of the preceding five calendar years
but is not currently a financial
institution under revised Regulation C
§ 1003.2(g) may collect information
regarding the applicant demographic
information of an applicant for a loan
that would otherwise be a covered loan
under revised Regulation C § 1003.2(e) if
not excluded by Regulation C
§§ 1003.3(c)(11) or (12). This proposal
would permit a creditor that falls below
the loan-volume threshold 26 and is
therefore no longer required to collect
and report information under revised
Regulation C to continue to collect
applicant demographic information. The
Bureau believes that the proposal is
justified for similar reasons and
provides similar benefits to proposed
§ 1002.5(a)(4)(i) discussed above. The
Bureau invites comment on this
proposal to permit collection of
applicant demographic information in
these circumstances and the proposed
five-year time frame.
Under proposed § 1002.5(a)(4)(iv), a
creditor that exceeded a loan volume
threshold in the first year of a two-year
threshold period provided in revised
Regulation C §§ 1003.2(g), 1003.3(c)(11),
or 1003.3(c)(12) may, in the subsequent
26 The loan-volume thresholds in revised
Regulation C are 25 or more closed-end mortgage
loans originated in each of the two proceeding
calendar years and 100 open-end lines of credit in
each of the two proceeding calendar years. Revised
Regulation C § 1003.2(g)(1)(v), (g)(2)(ii).
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year, collect the applicant demographic
information of an applicant for a loan
that would otherwise be a covered loan
under Regulation C § 1003.2(e) if not
excluded by revised Regulation C
§ 1003.3(c)(11) or (12). The proposal
would benefit creditors in certain
situations in which the creditor is
uncertain whether it will be required to
report information under revised
Regulation C in a future calendar year.
For example, where a creditor meets the
closed-end mortgage loan coverage
threshold or open-end line of credit
coverage threshold in revised
Regulation C § 1003.2(g)(1)(v) and
(g)(2)(ii) for the first time in a given
calendar year, it may wish to begin
collecting certain protected applicantcharacteristic information for
applications received in the next
calendar year (second calendar year) so
as to be prepared to report that
information if final action is taken in the
following calendar year (third calendar
year), when the creditor would be
required to report the information under
revised Regulation C if it exceeded the
applicable two-year threshold at the end
the second calendar year. The Bureau
believes that a creditor would benefit
from being able to collect applicant
demographic information concerning
such applications with assurance of
compliance with § 1002.5 regardless of
whether or not it becomes subject to
HMDA reporting at the end of the twoyear threshold period. The Bureau
invites comment on this proposal to
permit collection of applicant
demographic information in these
circumstances.
The Bureau is also proposing to add
new comment 5(a)(4)–1 which provides
that applicant demographic information
that is not required to be collected
pursuant to Regulation C may
nevertheless be collected under the
circumstances set forth in § 1002.5(a)(4)
without violating § 1002.5(b) and
highlights that, as discussed below,
such information should be retained
pursuant to § 1002.12. The Bureau also
invites comment on whether there are
other specific, narrowly tailored
circumstances not described in
§ 1002.5(a)(2) or proposed § 1002.5(a)(4)
under which a creditor would benefit
from being able to collect applicant
demographic information for mortgage
loan applicants.
Section 1002.12 Record Retention
Section 1002.12 provides rules
concerning permissible and required
record retention. In light of proposed
§ 1002.5(a)(4), the Bureau is also
proposing to amend § 1002.12(b)(1)(i) to
require retention of certain protected
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applicant-characteristic information
obtained pursuant to proposed
§ 1002.5(a)(4).
12(a) Retention of Prohibited
Information
12(b) Preservation of Records
12(b)(1) Applications
12(b)(1)(i)
Section 1002.12(b)(1) provides that a
creditor must retain certain records for
25 months. Under § 1002.12(b)(1)(i),
these records include any information
required to be obtained concerning
characteristics of the applicant to
monitor compliance with ECOA and
Regulation B or other similar law. The
Bureau is proposing to amend
§ 1002.12(b)(1)(i) to include within its
preservation requirements any
information obtained pursuant to
proposed § 1002.5(a)(4). The Bureau
believes that, if a creditor voluntarily
collects applicant demographic
information pursuant to proposed
§ 1002.5(a)(4), the creditor should be
required to maintain those records in
the same manner as protected applicantcharacteristic information it is required
to collect. This would allow the
information to be available for its
primary purpose of monitoring and
enforcing compliance with ECOA,
Regulation B, and other Federal or State
statutes or regulations. Without a
corresponding record retention
requirement, a creditor could collect but
not retain the information, thus
preventing the use of the information for
these purposes. The Bureau is also
proposing to amend comment 12(b)–2 to
require retention of applicant
demographic information obtained
pursuant to proposed § 1002.5(a)(4). The
Bureau invites comment on the
proposed amendment.
Section 1002.13 Information for
Monitoring Purposes
Section 1002.13 sets forth the scope,
required information, and manner for
the mandatory collection of certain
protected applicant-characteristic
information under Regulation B. Section
1002.13(a)(1) requires creditors to
collect information about the applicant,
including ethnicity and race
information, for certain dwelling-related
loans. Among other revisions to
§ 1002.13 and its commentary, the
Bureau proposes to amend
§ 1002.13(a)(1)(i) to provide that, for
applications subject to § 1002.13(a)(1), a
creditor must collect the applicant’s
information using either aggregate
ethnicity and race categories or the
ethnicity and race categories and
subcategories set forth in appendix B to
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disaggregated ethnicity and race
categories.
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13(a)(1)
13(a)(1)(i)
Under § 1002.13(a)(1), creditors that
receive an application for credit
primarily for the purchase or
refinancing of a dwelling occupied or to
be occupied by the applicant as a
principal residence, where the
extension of credit will be secured by
the dwelling, must collect certain
information about the applicant,
including ethnicity and race
information. Specifically, under current
§ 1002.13(a)(1)(i) creditors must collect
information regarding the applicant’s
ethnicity using the categories Hispanic
or Latino and not Hispanic or Latino,
and the applicant’s race using the
categories American Indian or Alaska
Native, Asian, Black or African
American, Native Hawaiian or Other
Pacific Islander, and White. Under
Regulation B, creditors are required to
collect and retain such data, but have no
obligation to report the data to a
regulator.27
As set forth above, in 2015 the Bureau
issued the 2015 HMDA final rule, which
adopted certain revisions to Regulation
C.28 Under current Regulation C,
financial institutions are required to
collect and report an applicant’s or
borrower’s information using aggregate
ethnicity and race categories that are
identical to the ethnicity and race
categories set forth under current
§ 1002.13(a)(1)(i). In contrast, under
revised Regulation C, financial
institutions are required to permit
applicants or borrowers to self-identify
using disaggregated ethnicity and race
categories.29 Once revised Regulation C
goes into effect on January 1, 2018, the
race and ethnicity categories financial
institutions use to collect information
under revised Regulation C will no
longer correspond with the race and
ethnicity categories a creditor uses to
collect information under current
§ 1002.13(a)(1)(i). Many creditors are
subject to both § 1002.13 and revised
Regulation C. The Bureau believes that
such creditors should not be subject to
differing collection requirements, and
that aligning the two requirements
furthers the purposes of ECOA by
27 12
CFR 1002.12 and 1002.13.
28 80 FR 66127 (Oct. 28, 2015).
29 See also revised Regulation C § 1003.4(a)(10)(i)
and comment 4(a)(10)(i)–1 (requiring financial
institution to report information about the
applicant’s or borrower’s ethnicity and race using
the instructions in appendix B to Regulation C).
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facilitating practices that promote the
availability of credit to all creditworthy
applicants.30
Accordingly, the Bureau proposes to
revise § 1002.13(a)(1)(i) to provide that,
for applications subject to
§ 1002.13(a)(1), a creditor must collect
an applicant’s information using either
the aggregate or disaggregated ethnicity
and race categories (creditors subject to
revised Regulation C will be required to
use the disaggregated race and ethnicity
categories for applications subject to
revised Regulation C). Specifically, the
Bureau proposes to amend
§ 1002.13(a)(1)(i) to allow a creditor to
comply with either § 1002.13(a)(1)(i)(A)
or § 1002.13(a)(1)(i)(B). Under proposed
§ 1002.13(a)(1)(i)(A), a creditor may
collect information regarding the
applicant using the aggregate ethnicity
and race categories set forth in current
§ 1002.13(a)(1)(i). Under proposed
§ 1002.13(a)(1)(i)(B), a creditor may
collect an applicant’s ethnicity and race
information using the categories and
subcategories set forth in appendix B to
revised Regulation C, which provides
disaggregated ethnicity and race
categories. Thus, under the proposal, a
creditor subject to collection
requirements under both § 1002.13(a)(1)
and revised Regulation C that collects
information pursuant to the
requirements of appendix B to revised
Regulation C would also satisfy
§ 1002.13(a)(1)(i).
For applications subject to
§ 1002.13(a)(1), the Bureau believes
there are compelling reasons for
permitting a creditor to collect an
applicant’s information using
disaggregated ethnicity and race
categories, even if the creditor is not
required to submit HMDA data
concerning the application under
revised Regulation C (Regulation B-only
creditors or transactions). As discussed
in the preamble to the 2015 HMDA final
rule, among other reasons, the Bureau
revised Regulation C to require financial
institutions to allow applicants to selfidentify using the disaggregated
ethnicity and race categories based on
the conclusion that it would further
HMDA’s purpose to identify possible
discriminatory lending patterns,
encourage self-reporting by applicants
and borrowers, and more accurately
reflect the nation’s ethnic and racial
30 Because of the differences between revised
Regulation C and current § 1002.13, some creditors
may be uncertain whether compliance with revised
Regulation C also satisfies compliance with current
§ 1002.13 or whether additional collection to satisfy
current § 1002.13 would also be required. The
Bureau believes that resolving this issue through
rulemaking will provide certainty to such creditors.
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diversity.31 The Bureau believes these
same benefits will also further the
purpose of ECOA, which, similar to
HMDA, seeks to promote the availability
of credit to all creditworthy applicants
without regard to protected
characteristics, such as national origin
and race.
The Bureau believes that optional
collection of disaggregated ethnicity and
race information under proposed
§ 1002.13(a)(1)(i)(B) is also appropriate
given that the 2016 URLA provides for
the collection of disaggregated ethnicity
and race categories. As noted above, the
Enterprises have indicated their intent
to mandate use of the 2016 URLA at
some point in the future for all loans
eligible for purchase by the Enterprises.
Given the widespread use of the current
URLA among lenders, the Bureau
expects that on or prior to the cutover
date, many creditors will want to adopt
the 2016 URLA irrespective of whether
the creditor or transaction is subject to
the collection and reporting
requirements in revised Regulation C.
Accordingly, the Bureau believes that
the proposed revisions will facilitate the
transition to the 2016 URLA for all
creditors seeking to use the updated
form.
The Bureau also considered the
alternative, for all applications subject
to § 1002.13(a)(1), of requiring creditors
to use the disaggregated ethnicity and
race categories. The Bureau is not
proposing this approach for several
reasons. First, the Bureau believes that
the creditors that would be most
affected by such a change would
primarily be small creditors that will
not meet the loan-volume thresholds,
asset-size thresholds, or location test
under revised Regulation C.32 Creditors
within the scope of revised Regulation
C would be minimally affected as they
will already be required to use the
disaggregated ethnicity and race
categories under revised Regulation C.
Regulation B-only creditors, however,
would incur various costs and
heightened compliance burdens as a
result of adopting this alternative
option, including updating application
forms, revising policies and procedures,
and providing additional training.
Second, these small creditors would
potentially have a short timeframe to
come into compliance with any
requirement to use the disaggregated
ethnicity and race categories. To resolve
the differences between Regulation B
and revised Regulation C in a timely
manner, the proposed revisions to
31 80
FR 66127, 66190 (Oct. 28, 2015).
Regulation C § 1003.2(g)(i), (ii), and (v);
see also id. § 1003.3(c)(11) and (12).
32 Revised
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§ 1002.13(a)(1) would ideally take effect
on or prior to January 1, 2018. While the
Bureau could impose a staggered
effective date for Regulation B-only
creditors, the Bureau believes such an
approach would create additional
complexity that the Bureau would like
to avoid. Thus, the burden of this
alternative option on affected creditors
would likely be compounded by the
short implementation timeline
available. Third, the Bureau believes the
benefits of requiring (rather than
permitting) creditors to use the
disaggregated ethnicity and race
categories would be limited, as most
creditors will likely adopt the
disaggregated ethnicity and race
categories under the proposed optional
approach, eventually if not
immediately. Many will be required to
use the disaggregated information under
revised Regulation C, and many that are
not subject to revised Regulation C are
nevertheless likely to adopt the 2016
URLA at some point because of business
considerations unrelated to Regulations
B and C.
On the other hand, the Bureau
acknowledges that requiring creditors to
use the disaggregated ethnicity and race
categories under § 1002.13(a)(1)(i) may
maximize the benefits of disaggregation
by affecting all applications subject to
§ 1002.13(a)(1). The Bureau also
acknowledges that under this alternative
option, Regulation B-only creditors
would incur the costs of collecting
disaggregated ethnicity and race
information, and would not incur the
more costly burdens of also reporting
such data.
Despite these considerations, the
Bureau believes the potential
incremental benefits of requiring
creditors to use disaggregated ethnicity
and race categories for applications
subject to § 1002.13(a)(1) do not
outweigh the burdens of such a proposal
on Regulation B-only creditors.
In addition to the alternative
approach discussed above, the Bureau
also considered eliminating altogether
the requirement in § 1002.13(a)(1)(i) that
creditors collect information on an
applicant’s ethnicity and race. While
there is significant overlap between
§ 1002.13 and revised Regulation C, the
transactions covered under the two
regulations are not identical and, as
discussed above, many creditors are not
subject to Regulation C. Based on
outreach to other regulators, including
the FDIC, OCC, FRB, and NCUA, the
Bureau understands that a substantial
percentage of supervised entities are
expected to be Regulation B-only
creditors and that the protectedapplicant characteristic information
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collected under § 1002.13 is frequently
relied upon by such regulators to
monitor compliance with fair lending
laws. Accordingly, the Bureau believes
that the collection of applicant race and
ethnicity information under § 1002.13
serves the important function of
monitoring and enforcing compliance
with ECOA and other
antidiscrimination laws and therefore
continues to serve the purposes of
ECOA.
For the reasons discussed above, the
Bureau proposes to revise
§ 1002.13(a)(1)(i), including adding
§ 1002.13(a)(1)(i)(A) and
§ 1002.13(a)(1)(i)(B) to set forth the two
options available to creditors. Under the
proposal, for any applications subject to
§ 1002.13(a)(1), a creditor must seek to
collect information concerning the
applicant using, at its option, either
aggregate race and ethnicity categories
(proposed § 1002.13(a)(1)(i)(A)) or
disaggregated race and ethnicity
categories (proposed
§ 1002.13(a)(1)(i)(B)).
Proposed § 1002.13(a)(1)(i)(A) is
intended to mirror the ethnicity and
race categories set forth in existing
§ 1002.13(a)(1)(i). The addition of the
word ‘‘aggregate’’ in proposed
§ 1002.13(a)(1)(i)(A) is not a substantive
revision but, rather, is included to
clarify that the enumerated categories in
proposed § 1002.13(a)(1)(i)(A) differ
from the disaggregated ethnicity and
race categories under proposed
§ 1002.13(a)(1)(i)(B).
Proposed § 1002.13(a)(1)(i)(B)
provides that a creditor may
alternatively collect information
regarding the applicant using the
categories and subcategories for the
collection of race and ethnicity set forth
in appendix B to revised Regulation C.
Proposed § 1002.13(a)(1)(i)(B) crossreferences the ethnicity and race
categories and subcategories set forth in
appendix B to revised Regulation C; the
proposed provision does not recite those
categories and subcategories. Thus, a
creditor would comply with proposed
§ 1002.13(a)(1)(i)(B) so long as it collects
information concerning an applicant’s
ethnicity and race using all of the same
categories and subcategories as then in
effect under appendix B to revised
Regulation C. For example, if appendix
B to revised Regulation C is amended at
a later date to require a financial
institution to collect, for example,
additional or different ethnicity and
race categories or subcategories, then a
creditor seeking to comply with
proposed § 1002.13(a)(1)(i)(B) must also
allow an applicant to select such
amended categories or subcategories.
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The Bureau solicits comment on this
proposal.
The Bureau also proposes to add
comment 13(a)–8 to clarify that a
creditor may choose, on an applicationby-application basis, whether to collect
aggregate information pursuant to
proposed § 1002.13(a)(1)(i)(A) or
disaggregated information pursuant to
proposed § 1002.13(a)(1)(i)(B). The
Bureau solicits comment on proposed
comment 13(a)–8.
In addition, the Bureau proposes to
revise comment 13(a)–7 to provide, for
applications subject to § 1002.13(a)(1),
that a creditor that collects information
about the ethnicity, race, and sex of an
applicant in compliance with the
requirements of appendix B to revised
Regulation C will be acting in
compliance with § 1002.13 concerning
the collection of an applicant’s
ethnicity, race, and sex information.
Section 1002.13(b) through (c) provides
instructions on how to collect an
applicant’s ethnicity, race, and sex
information, including directions on
how to obtain the required information,
required disclosures concerning the
collection, and instructions on when to
collect the information on the basis of
visual observation or surname. As
discussed above, many applications
subject to § 1002.13(a)(1) will also be
subject to collection and reporting
under revised Regulation C. While the
instructions for the collection of
applicant demographic information in
appendix B to revised Regulation C
impose similar requirements as those set
forth in § 1002.13(b) through (c), the
Bureau acknowledges that the two sets
of instructions are not identical and that
revised Regulation C sometimes
provides additional instructions absent
from § 1002.13. For example, paragraph
12 of appendix B to revised Regulation
C provides that, if an applicant begins
an application by mail, Internet, or
telephone and does not provide the
requested applicant information but
does not check or select the ‘‘I do not
wish to provide this information’’ box
on the application, and the applicant
then meets in person with the financial
institution and the financial institution
requests the information but the
applicant does not provide the
information during the in-person
meeting, the financial institution must
collect the information on the basis of
visual observation or surname. Current
§ 1002.13, on the other hand, is silent on
whether a creditor is required to collect
applicant demographic information if
the application is initiated by mail,
internet, and telephone, and the
applicant subsequently meets in-person
with the creditor.
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While the Bureau believes that the
instructions in § 1002.13 for the
collection of applicant demographic
information are not inconsistent with
revised Regulation C, to eliminate any
uncertainty, the Bureau proposes to
revise comment 13(a)–7 to provide that
for applications subject to
§ 1002.13(a)(1), a creditor that collects
an applicant’s ethnicity, race, and sex
information in compliance with the
instructions set forth in appendix B to
revised Regulation C is acting in
compliance with § 1002.13 concerning
the collection of an applicant’s
ethnicity, race, and sex information. The
Bureau believes this clarification will
also reduce the compliance burden on
creditors subject to both § 1002.13(a)(1)
and revised Regulation C by allowing
such creditors to follow a single set of
instructions.
The Bureau solicits comment on
proposed comment 13(a)–7.
13(b) Obtaining Information
Section 1002.13(b) provides rules and
instructions for obtaining applicant
information required under § 1002.13(a).
The Bureau is proposing to amend
§ 1002.13(b) to provide that, when a
creditor collects ethnicity and race
information pursuant to proposed
§ 1002.13(a)(1)(i)(B), the creditor must
comply with any restrictions on the
collection of an applicant’s ethnicity or
race on the basis of visual observation
or surname set forth in appendix B to
revised Regulation C.
Among other instructions, current
§ 1002.13(b) provides that, if an
applicant chooses not to provide some
or all of the requested applicant
demographic information, the creditor
shall, to the extent possible, note on the
form the ethnicity, race, and sex of the
applicant on the basis of visual
observation or surname. Instruction 10
in appendix B to revised Regulation C
provides, however, that when a
financial institution collects an
applicant’s ethnicity, race, and sex on
the basis of visual observation or
surname, the financial institution must
select from the aggregate ethnicity and
race categories.
In light of the revisions to proposed
§ 1002.13(a)(1)(i), the Bureau proposes
to amend § 1002.13(b) to restrict the
collection of applicant demographic
information where collected on the
basis of visual observation or surname.
The Bureau believes that a creditor that
wishes to collect an applicant’s
ethnicity and race information under
proposed § 1002.13(a)(1)(i)(B) should be
subject to the same restrictions as set
forth in appendix B to revised
Regulation C. The Bureau further
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believes that keeping the requirements
aligned is appropriate given the similar
requirements and to promote regulatory
consistency. The Bureau invites
comment on this amendment.
Comment 13(b)–1 provides guidance
on the forms a creditor may use to
collect applicant information under
§ 1002.13(a). The Bureau is proposing to
amend the comment to reference the
data collection model forms the Bureau
proposes to provide in appendix B of
Regulation B, as further discussed
below. The Bureau is also proposing to
amend comment 13(b)–1. First proposed
comment 13(b)–1 would reiterate the
current interpretation that when a
creditor collects only aggregate ethnicity
and race information pursuant to
proposed § 1002.13(a)(1)(i)(A) (current
§ 1002.13(a)(1)(i)), the applicant must be
offered the option to select more than
one racial designation. Proposed
comment 13(b)–1 would also provide
that when a creditor collects applicant
information pursuant to
§ 1002.13(a)(1)(i)(B), the applicant must
be offered the option to select more than
one ethnicity and more than one racial
designation. The Bureau invites
comment on these proposed
amendments.
13(c) Disclosure to Applicant(s)
Section 1002.13(c) sets forth the
required disclosures a creditor must
provide to applicants when collecting
the required protected applicantcharacteristic information. Current
comment 13(c)–1 provides, among other
things, that appendix B contains a
sample disclosure and that a creditor
may devise its own disclosure so long
as it is substantially similar. In light of
the proposed amendments to appendix
B described below, the Bureau is
proposing to amend comment 13(c)–1 to
reference the two data collection model
forms provided for in proposed
appendix B. While the Bureau
acknowledges that the disclosures in the
two data collection model forms are
slightly different from each other, the
Bureau concludes that use of either form
complies with § 1002.13(c) and that the
two forms are substantially similar. The
Bureau invites comment on this
proposed amendment.
Appendix B to Part 1002—Model
Application Forms
Regulations B and C both contain an
appendix B that provides model forms
for use when collecting applicant
demographic information required
under the regulations. Current appendix
B to Regulation B (Regulation B
appendix) includes the 2004 URLA,
which provides for the same ethnicity
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and race categories as required under
current § 1002.13. Appendix B to
current and revised Regulation C
(current Regulation C appendix or
revised Regulation C appendix, as
applicable) includes instructions and a
data collection model form for
collecting applicant demographic
information. In light of the proposed
revisions to § 1002.13(a)(1)(i), the
Bureau also proposes to amend the
Regulation B appendix.
The current Regulation B appendix
includes five model forms, each
designated for use in a particular type
of consumer credit transaction. The fifth
model form, the 2004 URLA, is
described in the Regulation B appendix
as appropriate for residential mortgage
transactions and contains a model
disclosure for use in complying with
current § 1002.13. While use of the
model forms is optional, if a creditor
uses the appropriate model form, or
modifies a form in accordance with the
instructions provided in the Regulation
B appendix, that creditor is deemed to
be acting in compliance with § 1002.5(b)
through (d).33 The section in the 2004
URLA used to collect an applicant’s
ethnicity and race information (section
X) conforms with the aggregate ethnicity
and race categories set forth in current
§ 1002.13(a)(1)(i). The most current
version of the URLA (prior to the 2016
URLA) used by the Enterprises is dated
July 2005 and was revised in June 2009.
On September 23, 2016, the Bureau
issued the Bureau Approval Notice,
which approved, pursuant to section
706(e) of ECOA, use of the 2016
URLA.34 In the Bureau Approval Notice,
the Bureau determined that, while a
creditor is not required to use the 2016
URLA, a creditor that uses the form
without any modification that would
violate § 1002.5(b) through (d) would act
in compliance with § 1002.5(b) through
(d).35 Unlike prior versions of the
URLA, the 2016 URLA permits the
applicant to select disaggregated
ethnicity and race categories, as
required under revised Regulation C.
As explained above, the Bureau
proposes to revise § 1002.13(a)(1)(i) to
provide that, for applications subject to
§ 1002.13(a)(1), a creditor must collect
information concerning the applicant
using, at its option, either aggregate or
disaggregated ethnicity and race
categories. In light of this revision, the
Bureau proposes to revise the
33 Appendix
B to part 1002 ¶¶ 1, 3.
of New Uniform Residential Loan
Application and Collection of Expanded Home
Mortgage Disclosure Act Information About
Ethnicity and Race in 2017, 81 FR 66930 (Sep. 23,
2016).
35 Id.
34 Status
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Regulation B appendix to reflect these
alternative approaches in proposed
§ 1002.13(a)(1)(i). Given the release of
the 2016 URLA and the Bureau’s
approval of that form in the Bureau
Approval Notice, the Bureau also
proposes to remove the 2004 URLA
from the Regulation B appendix,
effective upon the Enterprises’ cutover
date for the 2016 URLA or January 1,
2022, whichever comes first. Each of
these proposed revisions is discussed in
depth below.
Model Forms for Complying With
Proposed § 1002.13(a)(1)(i)
Under proposed § 1002.13(a)(1)(i)(B) a
creditor may request information
concerning the applicant using
disaggregated ethnicity and race
categories. In light of this revision, the
Bureau believes it is appropriate to
provide creditors a model form to use
when complying with proposed
§ 1002.13(a)(1)(i)(B). Specifically, the
Bureau proposes to cross-reference the
data collection model form included in
the revised Regulation C appendix and
thereby establish it as a model form for
complying with proposed
§ 1002.13(a)(1)(i)(B). The Bureau
proposes to cross-reference this form,
rather than create a new model form,
based on the belief that doing so will
ease the compliance burden on creditors
by providing them a single form that
may be used with both revised
Regulation C and proposed
§ 1002.13(a)(1)(i)(B). The Bureau
believes cross-referencing the data
collection model form in revised
Regulation C is also appropriate because
it will avoid the possibility of
inconsistent forms.
The Bureau considered the alternative
approach of including the 2016 URLA
as a model form for use in complying
with proposed § 1002.13(a)(1)(i)(B). The
Bureau is not proposing this alternative
for several reasons. As discussed above,
the Bureau approved use of the 2016
URLA under section 706(e) of ECOA
through the Bureau Approval Notice
and believes that including the 2016
URLA as a model form is unnecessary
given the approvals already provided to
the 2016 URLA in that notice. The
Bureau also believes that a model form
designated for use in complying with
§ 1002.13(a)(1)(i)(B) is properly limited
to include only information relevant to
the collection applicant demographic
information and that inclusion of
unrelated sections of the 2016 URLA is
not necessary to further the purposes of
ECOA or provide relevant guidance to
creditors. Moreover, the Bureau
anticipates that the Enterprises may
update the 2016 URLA in the future. By
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maintaining approval of the 2016 URLA
in a freestanding notice, the Bureau
avoids the risk that the model form will
become outdated or that the Bureau will
need to make ongoing revisions and
updates within Regulation B. Although
the Bureau does not propose to include
the 2016 URLA in Regulation B as a
model form, the Bureau notes that the
substance and form of section 7 of the
2016 URLA is substantially similar to
the data collection model form the
Bureau proposes to designate for use in
complying with revised
§ 1002.13(a)(1)(i)(B). The Bureau does
not intend to convey disapproval of the
2016 URLA and has no plans at this
time to revise or withdraw the Bureau
Approval Notice currently in effect.
The Bureau also proposes to add a
model form to the Regulation B
appendix to be used for the collection
of an applicant’s ethnicity and race
information in compliance with
proposed § 1002.13(a)(1)(i)(A). The text
of the proposed model form
substantially mirrors both section X in
the 2004 URLA and the data collection
model form contained in the current
Regulation C appendix. Given these
similarities, the Bureau believes that a
creditor can comply with revised
§ 1002.13(a)(1)(i)(A) without modifying
its existing forms for the collection of an
applicant’s ethnicity and race
information. Like the proposed model
form that may be used in compliance
with § 1002.13(a)(1)(i)(B), the Bureau’s
proposed model form for
§ 1002.13(a)(1)(i)(A) is one-page in
length and limited to information
concerning the applicant’s ethnicity,
race, and sex.
The Bureau solicits comment on this
proposal to provide alternative model
forms for compliance with revised
§ 1002.13(a)(1)(i).
Removal of the 2004 URLA as a Model
Form
As discussed above, the current
Regulation B appendix includes the
2004 URLA as a model form for use in
complying with § 1002.13. In light of the
proposed revisions to § 1002.13(a)(1)(i)
and the proposal to provide two
additional model forms for use in
complying with revised
§ 1002.13(a)(1)(i), the Bureau proposes
to remove the 2004 URLA as a model
form in Regulation B. The Bureau
proposes that the 2004 URLA be
removed on the cutover date the
Enterprises designate for use of the 2016
URLA or January 1, 2022, whichever
comes first.
As noted above, the Bureau expects
the Enterprises will designate in 2017 a
cutover date for mandatory use of the
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2016 URLA. The Bureau expects that
the vast majority of creditors that use
the URLA either currently do not use
the already outdated 2004 URLA or will
cease using the 2004 URLA on or prior
to the 2016 URLA cutover date.
Accordingly, the Bureau believes that
removal of the 2004 URLA from
appendix B upon the cutover date
designated by the Enterprises will
successfully eliminate an outdated form
without imposing an appreciable
burden on creditors. Alternatively, if the
cutover date is after January 1, 2022, the
Bureau proposes an effective date of
January 1, 2022; the Bureau believes
that five years provides creditors ample
time to update their forms if they wish
to.
The Bureau further believes that
removal of the 2004 URLA is
appropriate because it would be
duplicative of the form the Bureau
proposes to provide for use in
complying with proposed
§ 1002.13(a)(1)(i)(A). As discussed
above, the proposed one-page data
collection model form is substantially
similar to section X of the 2004 URLA.
The Bureau believes that retention of
the 2004 URLA in Regulation B is
therefore unnecessary and could create
uncertainty as to the purpose of the two
forms.
Finally, the Bureau believes that
removal of the 2004 URLA from
Regulation B is appropriate in light of
the proposal not to include the 2016
URLA as a model form. The Bureau is
concerned that maintaining the 2004
URLA as a model form in Regulation B,
while not including the 2016 URLA,
may discourage some creditors from
using the 2016 URLA or the
disaggregated ethnicity and race
categories. The Bureau further believes
that removal of the 2004 URLA from
Regulation B is appropriate for many of
the same reasons the Bureau identified
above for not proposing to include the
2016 URLA, including that the 2004
URLA contains numerous sections that
are irrelevant to compliance with
§ 1002.13. In proposing to remove the
2004 URLA, however, the Bureau does
not intend to suggest that the content
and wording of the form no longer
complies with § 1002.5(b) through (d) or
§ 1002.13(a)(1)(i).
In light of these considerations, the
Bureau proposes to remove the 2004
URLA as a model form in the Regulation
B appendix, effective upon the cutover
date designated by the Enterprises for
use of the 2016 URLA or January 1,
2022, whichever comes first. The
Bureau solicits comment on this
proposal.
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Removal of the Official Commentary to
Appendix B
As discussed above, commentary to
appendix B includes a discussion of two
forms created by the Enterprises that are
no longer in use: A 1992 version of the
URLA and a 1986 home-improvement
and energy loan application form. Given
that neither form discussed in the
commentary to the Regulation B
appendix is currently used by the
Enterprises, the Bureau believes that
few, if any, creditors continue to use the
referenced forms. Accordingly, the
Bureau proposes to remove in its
entirety the commentary to the
Regulation B appendix based on the
belief that it no longer provides useful
guidance to creditors. While the Bureau
acknowledges that the commentary in
the Regulation B appendix instructs
creditors to delete, strike, or modify the
data-collection section on the referenced
forms when using the forms for
transaction not covered by § 1002.13(a),
the Bureau believes that this language is
unnecessary and duplicative of
appendix B itself, which provides that
a creditor may alter the model forms by
deleting any information request. The
Bureau solicits comment on this
proposal, including specifically whether
any portion of the current commentary
to appendix B should be retained.
VII. Dodd-Frank Act Section 1022(b)
Analysis
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A. Overview
In developing the proposed rule, the
Bureau has considered the potential
benefits, costs, and impacts.36 The
Bureau requests comment on the
preliminary analysis presented below as
well as submissions of additional data
that could inform the Bureau’s analysis
of the benefits, costs, and impacts. The
Bureau has consulted, or offered to
consult with, the prudential regulators
(the Board of Governors of the Federal
Reserve System, the Federal Deposit
Insurance Corporation, the National
Credit Union Administration, and the
Office of the Comptroller of the
Currency), the Securities and Exchange
Commission, the Department of Justice,
the Department of Housing and Urban
Development, the Federal Housing
Finance Agency, the Federal Trade
Commission, the U.S. Department of
36 Specifically, section 1022(b)(2)(A) of the DoddFrank Act calls for the Bureau to consider the
potential costs of a regulation to consumers and
covered persons, including the potential reduction
of access by consumers to consumer financial
products or services; the impact on depository
institutions and credit unions with $10 billion or
less in total assets as described in section 1026 of
the Dodd-Frank Act; and the impact on consumers
in rural areas.
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Veterans Affairs, the U.S. Department of
Agriculture, and the Department of the
Treasury, including regarding
consistency with any prudential, market
or systematic objectives administered by
such agencies.
The purpose of ECOA, as
implemented by Regulation B, is to
promote access to credit by all
creditworthy applicants without regard
to protected characteristics. The
proposal would make three substantive
changes to Regulation B, along with
other clarifications, minor changes, and
technical corrections to align the
language of Regulation B with
Regulation C as amended by the 2015
HMDA Final Rule. The first would give
persons who collect and retain race and
ethnicity information in compliance
with ECOA as implemented in
Regulation B the option of permitting
applicants to self-identify using the
disaggregated race and ethnicity
categories required by the 2015 HMDA
Final Rule. In practice, this would allow
entities that report race and ethnicity in
accordance with the 2015 HMDA Final
Rule and Regulation C to comply with
Regulation B without further action,
while entities that do not report under
HMDA but record and retain race and
ethnicity data under Regulation B
would have the option of recording data
either using the existing aggregated
categories or the new disaggregated
categories.
The Bureau believes that, absent this
change, entities which currently report
race and ethnicity data under the
HMDA could conclude that they have
different obligations under Regulation B
and Regulation C once the 2015 HMDA
Final Rule goes into effect on January 1,
2018. This would lead to unnecessary
burden from collecting both aggregated
and disaggregated data. By making
disaggregated collection an option
under Regulation B, entities who will
report race and ethnicity information
under the HMDA final rule will also be
in compliance with Regulation B with
certainty. The Bureau believes that
making collection of disaggregated race
and ethnicity an option for all entities
covered by Regulation B will pose little
or no additional burden on those
entities who are not HMDA reporters.
The proposed amendment may have
some benefits to non-HMDA reporting
entities, as the current language of
Regulation B would not allow these
entities to use the 2016 version of the
Enterprises’ Uniform Residential Loan
Application (URLA) for the purpose of
collecting race and ethnicity data, as the
2016 URLA uses the disaggregated race
and ethnicity categories matching the
2015 HMDA Final Rule and not the
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specific categories required by current
Regulation B. Thus, the proposed
amendment has the added benefit that
it will allow non-HMDA reporting
entities to use the 2016 URLA as an
instrument to collect race and ethnicity
information.
The second substantive change would
remove the outdated 2004 URLA as a
model form, concurrent with the date
that the Enterprises have announced
they will cease accepting that form or on
January 1, 2022, whichever occurs first.
The Bureau issued an Approval Notice
under its authority in section 706(e) of
ECOA on September 23, 2016, that a
creditor that uses the 2016 URLA
without any modification that would
violate § 1002.5(b) through (d) would act
in compliance with § 1002.5(b) through
(d). The Bureau is not proposing to add
the 2016 URLA as a model form in place
of the 2004 version. Instead, the Bureau
is proposing to provide for two
alternative data collection model forms
for the purpose of collecting ethnicity
and race information. The Bureau
believes this practice of acknowledging
future versions of the URLA via a
Bureau Approval Notice rather than a
revision to Regulation B will avoid the
risk that the model form included in
Regulation B will become outdated in
the future.
Finally, the Bureau proposes
amending Regulation B and the
associated commentary to allow
creditors to collect ethnicity, race and
sex from mortgage applicants in certain
cases where the creditor is not required
to report under HMDA and Regulation
C. These cases include creditors that
submit HMDA data even though not
required to do so, and creditors that
submitted HMDA data in any of the
preceding five calendar years. This
change would primarily benefit
institutions that may be near the loan
volume reporting threshold, such that
they may be required to report under
HMDA and Regulation C in some years
and not others, or may be uncertain
about their reporting status. The Bureau
believes that allowing voluntary
collection will reduce the burden of
compliance with Regulation C on some
entities and provide certainty regarding
Regulation B compliance over time.
B. Potential Benefits and Costs to
Consumers and Covered Persons
Providing an Option To Collect
Disaggregated Race and Ethnicity for
Regulation B
Relative to the state of Regulation B
and Regulation C following the effective
date of the 2015 HMDA Final Rule, the
proposed amendment provides clear
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benefits to entities that will be required
to collect and report race and ethnicity
data under HMDA. Currently the
disaggregated race and ethnicity
categories required by the amendments
to Regulation C in the 2015 HMDA Final
Rule, effective January 1, 2018, do not
match the categories specified in current
Regulation B. Because of the differences
between the categories, some creditors
required to collect and report race and
ethnicity using the disaggregated
categories set forth in Regulation C may
be uncertain whether additional
collection using aggregated categories
would also be required to satisfy current
Regulation B. Complying with both
Regulations would require burdensome
and duplicative collection of race and
ethnicity data at both the aggregated and
disaggregated level. In practice, the
proposal simply makes clear that the
existing collection that will be required
for Regulation C is sufficient for
compliance with Regulation B.
The proposal may have small benefits
to consumers, to the extent that lending
entities voluntarily choose to collect
disaggregated race and ethnicity
information. As discussed in the section
1022 analysis for the 2015 HMDA Final
Rule, collection of disaggregated race
and ethnicity data can enhance the
ability of regulators to conduct fair
lending analysis. These benefits are
limited for three reasons, however. First,
non-HMDA reporters will not be
required to permit applicants to selfidentify using disaggregated ethnicity
and race categories. Second, many
Regulation B-only creditors will be
exempt from reporting under Regulation
C because they originate fewer than 25
closed-end mortgage loans in each of the
two preceding calendar years, which
means both that few consumers would
be affected and that the resulting data
would likely be too sparse for statistical
analysis even of the aggregated race and
ethnicity data. Finally, demographic
data retained by Regulation B-only
creditors is not reported under
Regulation C. Consequently, most
oversight and analysis of demographic
data retained by Regulation B-only
creditors will be done only by
regulators, whereas researchers and
community groups also conduct
analysis of HMDA data reported under
Regulation C. The Bureau believes the
proposal will not impose any costs on
consumers.
The proposal may have benefits to
some Regulation B-only creditors.
Although these entities need not make
any changes to their race and ethnicity
collection procedures, they may desire
to do so in the future by adopting the
2016 URLA for non-HMDA reportable
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loan applications. The Enterprises have
announced that they will cease
accepting older versions of the URLA at
a date to be determined and require
firms that sell to the Enterprises to use
the 2016 URLA form. Some Regulation
B-only creditors sell mortgages to the
Enterprises, and would benefit from
being able to use the 2016 URLA.
Because the policy change on the part
of the Enterprises is not a part of the
rule, the Bureau believes any
operational costs from adopting the
2016 URLA are part of the normal
course of business and are not a cost of
the proposed rule change.
In addition to the proposed change,
the Bureau considered two alternatives
to address the differing race and
ethnicity requirements of Regulation B
and Regulation C. The Bureau
considered requiring all persons subject
to the collection and retention
requirement of Regulation B to permit
applicants to self-identify using
disaggregated race and ethnicity
categories. To the extent that consumers
would benefit from disaggregated race
and ethnicity collection, this alternative
would provide greater benefits than the
Bureau’s proposal. However, of the
three limitations to consumer benefits
listed above, only the first (that
disaggregated categories would be
optional) is alleviated by requiring the
use of disaggregated race and ethnicity
categories under Regulation B. It is still
the case that due to the low volume of
mortgages by many affected entities and
the lack of reporting, disaggregated race
and ethnicity data may have limited
benefits. Finally, the Bureau believes
many entities will adopt the 2016 URLA
as part of the course of business and
thus permit applicants to self-identify
using disaggregated race and ethnicity
categories.
At the same time, mandatory use of
disaggregated collection of race and
ethnicity categories would impose
greater costs on firms than the Bureau’s
proposal, particularly on smaller
entities. These costs include greater
operational costs and one-time database
upgrades. Unlike adoption of the 2016
URLA, these costs would not be
incurred in the normal course of
business. The Bureau does not have data
available to estimate these costs, but
given the small marginal benefits of
mandatory use of disaggregated race and
ethnicity categories, the Bureau is not
proposing making disaggregated race
and ethnicity categories mandatory for
compliance with Regulation B. The
Bureau requests comments on both the
costs and benefits associated with this
alternative approach.
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The Bureau also considered
eliminating entirely the collection and
retention requirement of Regulation B.
Although this alternative would reduce
burden to firms who do not report under
HMDA, the Bureau believes it may
impose costs on consumers. The
prudential regulators confirm that data
collected and retained by entities
subject to Regulation B but not
Regulation C may be used for fair
lending supervision and enforcement.
Institutions subject to Regulation B but
not Regulation C include, for example,
institutions that do not have a branch or
home office in a Metropolitan Statistical
Area, do not meet an applicable asset
threshold, or do not meet an applicable
loan volume threshold.
For instance, the 2015 NCUA Call
Report and the 2015 Nationwide
Mortgage Licensing System & Registry
(NMLS) Mortgage Call Report data
include 489 credit unions and 161 nondepository institutions that originated at
least 25 closed-end mortgages that are
not found in the 2015 HMDA data.37 In
addition, many community banks in
rural areas are already exempt from
HMDA reporting because they do not
have a branch or home office in a
Metropolitan Statistical Area (MSA).38
Demographic information collected
under Regulation B by those institutions
with larger loan volumes may be used
in statistical analysis that supports fair
lending supervision and enforcement.
Removing the Regulation B requirement
altogether would make detection of any
discrimination by these entities more
difficult, with potentially large costs to
consumers where such discrimination
exists. Even for institutions with very
small volumes of originations that may
not be subject to HMDA reporting
because they do not meet an applicable
loan volume threshold, the retained
information may be useful for
comparative file reviews. In 2015 there
were 1,178 institutions that reported
HMDA data but had fewer than 25
originations and therefore would likely
be exempt under the 2015 HMDA Final
Rule if they continue to originate loans
at a similar volume. Although the loan
37 The criteria for being a financial institution and
reporting transactions under HMDA are different in
some ways from the criteria for reporting under the
NMLS Mortgage Call Report and reporting
transactions under it. It is possible that the NMLS
omits some non-depository institutions that
originated at least 25 closed-end mortgages, did not
report HMDA data, and are subject to Regulation B.
Some or all of these institutions may also not have
been required to report HMDA data.
38 The Bureau does not have an estimate of the
number of rural community banks that are currently
exempt from HMDA reporting and originate at least
25 loans per year. The FFIEC call report for banks
does not report originations for depository
institutions that do not report to HMDA.
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volumes of most of these institutions
would be too sparse for statistical
analysis, the ability to conduct
comparative file reviews using data
retained under Regulation B has some
benefit. Accordingly, the Bureau does
not propose removing the Regulation B
requirement to collect and retain race
and ethnicity information.
Model Forms for Collecting Race and
Ethnicity Data
The Bureau believes that the proposal
to change the model forms for collecting
race and ethnicity data will have modest
benefits to firms collecting these data,
by providing updated model forms, and
reducing confusion regarding the
outdated 2004 URLA. The proposal does
not impose any new costs on firms, nor
does the Bureau believe that consumers
will experience any cost or benefit from
the proposal. The Bureau requests
comment regarding the costs and
benefits associated with this proposal.
nlaroche on DSK30NT082PROD with PROPOSALS
Allowing Voluntary Collection of
Applicant Information
Regarding the proposal to allow
certain creditors to voluntarily collect
demographic information, the Bureau
believes the financial institutions that
will most likely exercise such options
would be low-volume, low-complexity
institutions that have made a one-time
investment in HMDA collection and
reporting and would like to utilize that
collection process already in place. The
Bureau believes the proposed provision
will provide modest benefits to such
institutions, by saving on one-time
adjustment costs required to shift in and
out of collection. The Bureau expects
that institutions will only exercise this
option if voluntary collection provides a
net benefit. The Bureau does not believe
that consumers will experience any cost
or benefit from the proposal. The
Bureau requests comment regarding the
costs and benefits associated with this
proposal, particularly data on the
number of firms that might be interested
in voluntary collection under this
provision.
C. Impact on Depository Institutions and
Credit Unions With $10 Billion or Less
in Assets, As Described in Dodd-Frank
Section 1026
The Bureau believes that depository
institutions and credit unions with $10
billion or less in assets will not be
differentially affected by the substantive
proposed amendments. The primary
benefit to lenders from the proposed
rule is the reduced uncertainty and
compliance burden from allowing the
disaggregated race and ethnicity
information collected under Regulation
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C to be used to comply with Regulation
B. Both certain depository institutions
and credit unions with less than $10
billion in assets and covered persons
with more than $10 billion in assets
currently report data under HMDA and
thus will receive these benefits. The
benefits may be somewhat larger for
depository institutions and credit
unions with less than $10 billion in
assets because the relative costs of
duplicative collection would be greater
for these entities.
D. Impact on Access to Credit
The Bureau does not believe that
there will be an adverse impact on
access to credit resulting from any of the
proposed provisions.
E. Impact on Consumers in Rural Areas
The Bureau believes that rural areas
might benefit from the provision to
allow collection of disaggregated race
and ethnicity information more than
urban areas. One of the exceptions to
the reporting requirements under
HMDA is for entities which do not have
a branch or home office located in an
MSA. Such entities likely serve
primarily customers in rural areas. To
the extent that the proposed provision
benefits firms and consumers,
consumers in rural areas will see the
largest benefits.
VIII. Regulatory Flexibility Act
Analysis
The Regulatory Flexibility Act (RFA),
as amended by the Small Business
Regulatory Enforcement Fairness Act of
1996, requires each agency to consider
the potential impact of its regulations on
small entities, including small business,
small governmental units, and small
nonprofit organizations. The RFA
defines a ‘‘small business’’ as a business
that meets the size standard developed
by the Small Business Administration
pursuant to the Small Business Act.
The RFA generally requires an agency
to conduct an initial regulatory
flexibility analysis (IRFA) and a final
regulatory flexibility analysis (FRFA) of
any rule subject to notice-and-comment
rulemaking requirements, unless the
agency certifies that the rule will not
have a significant economic impact on
a substantial number of small entities.
The Bureau also is subject to certain
additional procedures under RFA
involving the convening of a panel to
consult with small business
representatives prior to proposing a rule
for which an IRFA is required.
An IRFA is not required for this
proposal because the proposal, if
adopted, would not have a significant
economic impact on any small entities.
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The Bureau does not expect the
proposal to impose costs on covered
persons. All methods of compliance
under current law will remain available
to small entities if the proposal is
adopted. Thus, a small entity that is in
compliance with current law need not
take any additional action if the
proposal is adopted, save those already
required by the 2015 HMDA Final Rule.
Accordingly, the undersigned certifies
that this proposal, if adopted, would not
have a significant economic impact on
a substantial number of small entities.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3501 et seq.),
Federal agencies are generally required
to seek the Office of Management and
Budget (OMB)’s approval for
information collection requirements
prior to implementation. The collections
of information related to Regulation B
and Regulation C have been previously
reviewed and approved by OMB and
assigned OMB Control Number 3170–
0013 (Regulation B) and 3170–0008
(Regulation C). Under the PRA, the
Bureau may not conduct or sponsor and,
notwithstanding any other provision of
law, a person is not required to respond
to an information collection unless the
information collection displays a valid
control number assigned by OMB.
The Bureau has determined that this
Proposed Rule would not impose any
new or revised information collection
requirements (recordkeeping, reporting
or disclosure requirements) on covered
entities or members of the public that
would constitute collections of
information requiring OMB approval
under the PRA. Although some entities
subject to Regulation B but not
Regulation C may choose to voluntarily
begin collecting disaggregated race and
ethnicity information, the Bureau
believes the most likely reason for this
to occur is through adoption of the 2016
URLA, which is not part of the proposed
rule.
The Bureau welcomes comments on
this determination, which may
submitted to the Bureau at the
Consumer Financial Protection Bureau
(Attention: PRA Office), 1700 G Street
NW., Washington, DC 20552, or by
email to CFPB_PRA@cfpb.gov. All
Comments are matters of Public Record.
List of Subjects in 12 CFR Part 1002
Aged, Banks, Banking, Civil rights,
Consumer protection, Credit, Credit
unions, Discrimination, Fair lending,
Marital status discrimination, National
banks, National origin discrimination,
Penalties, Race discrimination,
Religious discrimination, Reporting and
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recordkeeping requirements, Savings
associations, Sex discrimination.
Authority and Issuance
For the reasons set forth above, the
Bureau proposes to amend Regulation B,
12 CFR part 1002, as set forth below:
PART 1002—EQUAL CREDIT
OPPORTUNITY ACT (REGULATION B)
1. The authority citation for part 1002
continues to read as follows:
■
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C.
1691b.
2. Section 1002.5 is amended by
adding paragraph (a)(4) to read as
follows:
■
nlaroche on DSK30NT082PROD with PROPOSALS
§ 1002.5 Rules concerning requests for
information.
(a) * * *
(4) Other permissible collection of
information. Notwithstanding paragraph
(b) of this section, a creditor may collect
information under the following
circumstances provided that the creditor
collects the information in compliance
with appendix B to Regulation C, 12
CFR part 1003:
(i) A creditor that is a financial
institution under 12 CFR 1003.2(g) may
collect information regarding the
ethnicity, race, and sex of an applicant
for a closed-end mortgage loan that is an
excluded transaction under 12 CFR
1003.3(c)(11) if it submits HMDA data
concerning such closed-end mortgage
loans and applications or if it submitted
HMDA data concerning closed-end
mortgage loans for any of the preceding
five calendar years;
(ii) A creditor that is a financial
institution under 12 CFR 1003.2(g) may
collect information regarding the
ethnicity, race, and sex of an applicant
for an open-end line of credit that is an
excluded transaction under 12 CFR
1003.3(c)(12) if it submits HMDA data
concerning such open-end lines of
credit and applications or if it submitted
HMDA data concerning open-end lines
of credit for any of the preceding five
calendar years;
(iii) A creditor that submitted HMDA
data for any of the preceding five
calendar years but is not currently a
financial institution under 12 CFR
1003.2(g) may collect information
regarding the ethnicity, race, and sex of
VerDate Sep<11>2014
15:42 Apr 03, 2017
Jkt 241001
an applicant for a loan that would
otherwise be a covered loan under 12
CFR 1003.2(e) if not excluded by 12 CFR
1003.3(c)(11) or (12); and
(iv) A creditor that exceeded an
applicable loan volume threshold in the
first year of the two-year threshold
period provided in 12 CFR 1003.2(g),
1003.3(c)(11), or 1003.3(c)(12) may, in
the subsequent year, collect information
regarding the ethnicity, race, and sex of
an applicant for a loan that would
otherwise be a covered loan under 12
CFR 1003.2(e) if not excluded by 12 CFR
1003.3(c)(11) or (12).
*
*
*
*
*
■ 3. Section 1002.12 is amended by
revising paragraph (b)(1)(i) to read as
follows:
§ 1002.12
Record retention.
*
*
*
*
*
(b) * * *
(1) * * *
(i) Any application that it receives,
any information required to be obtained
concerning characteristics of the
applicant to monitor compliance with
the Act and this part or other similar
law, any information obtained pursuant
to § 1002.5(a)(4), and any other written
or recorded information used in
evaluating the application and not
returned to the applicant at the
applicant’s request.
■ 4. Section 1002.13 is amended by
revising paragraphs (a)(1)(i) and (b) to
read as follows:
§ 1002.13 Information for monitoring
purposes.
(a) * * *
(1) * * *
(i) Ethnicity and race using either:
(A) For ethnicity, the aggregate
categories Hispanic or Latino and not
Hispanic or Latino; and, for race, the
aggregate categories American Indian or
Alaska Native, Asian, Black or African
American, Native Hawaiian or Other
Pacific Islander, and White; or
(B) The categories and subcategories
for the collection of ethnicity and race
set forth in appendix B to Regulation C,
12 CFR part 1003.
*
*
*
*
*
(b) Obtaining information. Questions
regarding ethnicity, race, sex, marital
status, and age may be listed, at the
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
creditor’s option, on the application
form or on a separate form that refers to
the application. The applicant(s) shall
be asked but not required to supply the
requested information. If the
applicant(s) chooses not to provide the
information or any part of it, that fact
shall be noted on the form. The creditor
shall then also note on the form, to the
extent possible, the ethnicity, race, and
sex of the applicant(s) on the basis of
visual observation or surname. When a
creditor collects ethnicity and race
information pursuant to paragraph
(a)(1)(i)(B), the creditor must comply
with any restrictions on the collection of
an applicant’s ethnicity or race on the
basis of visual observation or surname
set forth in appendix B to Regulation C,
12 CFR part 1003.
*
*
*
*
*
5. Appendix B to Part 1002—Model
Application Forms is amended by
revising paragraph (1) and adding a Data
Collection Model Form to read as
follows:
■
Appendix B to Part 1002—Model
Application Forms
1. This appendix contains five model
credit application forms, each designated for
use in a particular type of consumer credit
transaction as indicated by the bracketed
caption on each form. The first sample form
is intended for use in open-end, unsecured
transactions; the second for closed-end,
secured transactions; the third for closed-end
transactions, whether unsecured or secured;
the fourth in transactions involving
community property or occurring in
community property States; and the fifth in
residential mortgage transactions which
contains a model disclosure for use in
complying with § 1002.13 for certain
dwelling-related loans. This appendix also
contains a data collection model form for
collecting information concerning an
applicant’s ethnicity, race, and sex that
complies with the requirements of
§ 1002.13(a)(1)(i)(A) and (ii). Appendix B to
Regulation C, 12 CFR part 1003, provides a
data collection model form for collecting
information concerning an applicant’s
ethnicity, race and sex that complies with the
requirements of § 1002.13(a)(1)(i)(B) and (ii).
All forms contained in this appendix are
models; their use by creditors is optional.
*
*
*
*
BILLING CODE 4810–AM–P
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*
*
*
*
■ 6. Appendix B to Part 1002—Model
Application Forms is amended by
revising paragraph 1 and under
paragraph 3 removing the form
‘‘Uniform Residential Loan
Application’’.
The revision reads as follows:
nlaroche on DSK30NT082PROD with PROPOSALS
Appendix B to Part 1002—Model
Application Forms
1. This appendix contains four model
credit application forms, each designated for
use in a particular type of consumer credit
transaction as indicated by the bracketed
caption on each form. The first sample form
is intended for use in open-end, unsecured
transactions; the second for closed-end,
secured transactions; the third for closed-end
transactions, whether unsecured or secured;
and the fourth in transactions involving
community property or occurring in
community property States. This appendix
also contains a data collection model form for
collecting information concerning an
applicant’s ethnicity, race, and sex that
complies with the requirements of
§ 1002.13(a)(1)(i)(A) and (ii). Appendix B to
Regulation C, 12 CFR part 1003, provides a
data collection model form for collecting
information concerning an applicant’s
ethnicity, race and sex that complies with the
requirements of § 1002.13(a)(1)(i)(B) and (ii).
All forms contained in this appendix are
models; their use by creditors is optional.
*
*
*
*
*
7. Supplement I to Part 1002—Official
Interpretations:
■ a. Under Section 1002.5—Rules
concerning requests for information:
■ i. Under Paragraph 5(a)(2), paragraph
2 is revised.
■
VerDate Sep<11>2014
15:42 Apr 03, 2017
ii. New heading Paragraph 5(a)(4) is
added, and under Paragraph 5(a)(4) new
paragraph 1 is added.
■ b. Under Section 1002.12—Record
retention:
■ i. Under Paragraph 12(b), paragraph 2
is revised.
■ c. Under Section 1002.13—
Information for monitoring purposes:
■ i. Under Paragraph 13(a)
—Information to be requested,
paragraph 7 is revised and paragraph 8
is added.
■ ii. Under Paragraph 13(b)—Obtaining
of information, paragraph 1 is revised.
■ iii. Under Paragraph 13(c)—
Disclosure to applicants, paragraph 1 is
revised.
■ d. The heading Appendix B—Model
Application Forms and paragraphs 1
and 2 thereunder are removed.
The revisions and additions read as
follows:
■
*
Jkt 241001
Supplement I to Part 1002—Official
Interpretations
*
*
*
*
*
Section 1002.5—Rules Concerning Requests
for Information
5(a) General Rules
*
*
*
*
*
*
*
*
*
2. Information required by Regulation C.
Regulation C, 12 CFR part 1003, generally
requires creditors covered by the Home
Mortgage Disclosure Act (HMDA) to collect
and report information about the race,
ethnicity, and sex of applicants for certain
dwelling-secured loans, including some
types of loans not covered by § 1002.13.
*
PO 00000
*
*
Frm 00014
*
Fmt 4702
*
Sfmt 4702
*
*
*
*
*
Section 1002.12—Record Retention
*
*
*
*
*
12(b) Preservation of Records
*
*
*
*
*
2. Computerized decisions. A creditor that
enters information items from a written
application into a computerized or
mechanized system and makes the credit
decision mechanically, based only on the
items of information entered into the system,
may comply with § 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
§ 1002.13 or the creditor is collecting
information pursuant to § 1002.5(a)(4),
however, the creditor is required to enter and
retain the data on personal characteristics in
order to comply with the requirements of that
section.
*
Paragraph 5(a)(2)
*
Paragraph 5(a)(4).1. Other permissible
collection of information. Information
regarding ethnicity, race, and sex that is not
required to be collected pursuant to
Regulation C may nevertheless be collected
under the circumstances set forth in
§ 1002.5(a)(4) without violating § 1002.5(b).
The information must be retained pursuant to
the requirements of § 1002.12.
*
*
*
*
Section 1002.13—Information for Monitoring
Purposes
13(a) Information To Be Requested
*
*
*
*
*
7. Data collection under Regulation C. For
applications subject to § 1002.13(a)(1), a
creditor that collects information about the
ethnicity, race, and sex of an applicant in
compliance with the requirements of
appendix B to Regulation C, 12 CFR part
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04APP1
EP04AP17.000
BILLING CODE 4810–AM–C
Federal Register / Vol. 82, No. 63 / Tuesday, April 4, 2017 / Proposed Rules
1003, is acting in compliance with § 1002.13
concerning the collection of an applicant’s
ethnicity, race, and sex information. See also
comment 5(a)(2)–2.8. Application-byapplication basis. For applications subject to
§ 1002.13(a)(1), a creditor may choose on an
application-by-application basis whether to
collect aggregate information pursuant to
§ 1002.13(a)(1)(i)(A) or disaggregated
information pursuant to § 1002.13(a)(1)(i)(B)
about the ethnicity and race of the applicant.
13(b) Obtaining of information. 1. Forms
for collecting data. A creditor may collect the
information specified in § 1002.13(a) either
on an application form or on a separate form
referring to the application. Appendix B to
this part provides for two alternative data
collection model forms for use in complying
with the requirements of § 1002.13(a)(1)(i)
and (ii) to collect information concerning an
applicant’s ethnicity, race, and sex. When a
creditor collects ethnicity and race
information pursuant to § 1002.13(a)(1)(i)(A),
the applicant must be offered the option to
select more than one racial designation.
When a creditor collects ethnicity and race
information pursuant to § 1002.13(a)(1)(i)(B),
the applicant must be offered the option to
select more than one ethnicity designation
and more than one racial designation.
*
*
*
*
*
13(c) Disclosure to applicants. 1.
Procedures for providing disclosures. The
disclosure to an applicant regarding the
monitoring information may be provided in
writing. Appendix B provides data collection
model forms for use in complying with
§ 1002.13 and that comply with § 1002.13(c).
A creditor may devise its own disclosure so
long as it is substantially similar. The
creditor need not orally request the
monitoring information if it is requested in
writing.
*
*
*
*
*
Dated: March 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2017–06195 Filed 4–3–17; 8:45 am]
nlaroche on DSK30NT082PROD with PROPOSALS
BILLING CODE 4810–AM–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Part 73
[Docket No. FDA–2017–C–1951]
Environmental Defense Fund,
Earthjustice, Environmental Working
Group, Center for Environmental
Health, Healthy Homes Collaborative,
Health Justice Project of Loyola
University Chicago School of Law,
Breast Cancer Fund, Improving Kids’
Environment, Consumers Union,
Natural Resources Defense Council,
Consumer Federation of America,
Learning Disabilities Association,
Maricel Maffini, and Howard Mielke;
Filing of Color Additive Petition
AGENCY:
Food and Drug Administration,
HHS.
ACTION:
Notice of petition.
The Food and Drug
Administration (FDA or we) is
announcing that we have filed a
petition, submitted by the
Environmental Defense Fund,
Earthjustice, Environmental Working
Group, Center for Environmental
Health, Healthy Homes Collaborative,
Health Justice Project of Loyola
University Chicago School of Law,
Breast Cancer Fund, Improving Kids’
Environment, Consumers Union,
Natural Resources Defense Council,
Consumer Federation of America,
Learning Disabilities Association,
Maricel Maffini, and Howard Mielke,
proposing that FDA repeal the color
additive regulation providing for the use
of lead acetate in cosmetics intended for
coloring hair on the scalp.
DATES: The color additive petition was
filed on February 24, 2017. Submit
either electronic or written comments
by June 5, 2017. Late, untimely filed
comments will not be considered.
Electronic comments must be submitted
on or before June 5, 2017. The https://
www.regulations.gov electronic filing
system will accept comments until
midnight Eastern Time at the end of
June 5, 2017. Comments received by
mail/hand delivery/courier (for written/
paper submissions) will be considered
timely if they are postmarked or the
delivery service acceptance receipt is on
or before that date.
ADDRESSES: You may submit comments
as follows:
SUMMARY:
Electronic Submissions
Submit electronic comments in the
following way:
VerDate Sep<11>2014
15:42 Apr 03, 2017
Jkt 241001
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
16321
• Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
Comments submitted electronically,
including attachments, to https://
www.regulations.gov will be posted to
the docket unchanged. Because your
comment will be made public, you are
solely responsible for ensuring that your
comment does not include any
confidential information that you or a
third party may not wish to be posted,
such as medical information, your or
anyone else’s Social Security number, or
confidential business information, such
as a manufacturing process. Please note
that if you include your name, contact
information, or other information that
identifies you in the body of your
comment, that information will be
posted on https://www.regulations.gov.
• If you want to submit a comment
with confidential information that you
do not wish to be made available to the
public, submit the comment as a
written/paper submission and in the
manner detailed (see ‘‘Written/Paper
Submissions’’ and ‘‘Instructions’’).
Written/Paper Submissions
Submit written/paper submissions as
follows:
• Mail/Hand delivery/Courier (for
written/paper submissions): Division of
Dockets Management (HFA–305), Food
and Drug Administration, 5630 Fishers
Lane, Rm. 1061, Rockville, MD 20852.
• For written/paper comments
submitted to the Division of Dockets
Management, FDA will post your
comment, as well as any attachments,
except for information submitted,
marked and identified, as confidential,
if submitted as detailed in
‘‘Instructions.’’
Instructions: All submissions received
must include the Docket No. FDA–
2017–C–1951 for ‘‘Environmental
Defense Fund, Earthjustice,
Environmental Working Group, Center
for Environmental Health, Healthy
Homes Collaborative, Health Justice
Project of Loyola University Chicago
School of Law, Breast Cancer Fund,
Improving Kids’ Environment,
Consumers Union, Natural Resources
Defense Council, Consumer Federation
of America, Learning Disabilities
Association, Maricel Maffini, and
Howard Mielke; Filing of Color Additive
Petition.’’ Received comments, those
filed in a timely manner (see DATES),
will be placed in the docket and, except
for those submitted as ‘‘Confidential
Submissions,’’ publicly viewable at
https://www.regulations.gov or at the
Division of Dockets Management
between 9 a.m. and 4 p.m., Monday
through Friday.
E:\FR\FM\04APP1.SGM
04APP1
Agencies
[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Proposed Rules]
[Pages 16307-16321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06195]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 82, No. 63 / Tuesday, April 4, 2017 /
Proposed Rules
[[Page 16307]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1002
[Docket No. CFPB-2017-0009]
RIN 3170-AA65
Amendments to Equal Credit Opportunity Act (Regulation B)
Ethnicity and Race Information Collection
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule with request for public comment.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) proposes
amendments to Regulation B to permit creditors additional flexibility
in complying with Regulation B in order to facilitate compliance with
Regulation C, to add certain model forms and remove others from
Regulation B, and to make various other amendments to Regulation B and
its commentary to facilitate the collection and retention of
information about the ethnicity, sex, and race of certain mortgage
applicants.
DATES: Comments must be received on or before May 4, 2017.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2017-
0009 or RIN 3170-AA65, by any of the following methods:
Email: FederalRegisterComments@cfpb.gov. Include Docket
No. CFPB-2017-0009 or RIN 3170-AA65 in the subject line of the email.
Electronic: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552. Include CFPB-2017-0009 or RIN 3170-AA65 in a reference line at
the top of the submission.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1275 First
Street NE., Washington, DC 20002. Include CFPB-2017-0009 or RIN 3170-
AA65 in a reference line at the top of the submission.
Instructions: All submissions should include the agency name and
docket number or Regulatory Information Number (RIN) for this
rulemaking. Because paper mail in the Washington, DC area and at the
Bureau is subject to delay, commenters are encouraged to submit
comments electronically. In general, all comments received will be
posted without change to https://www.regulations.gov. In addition,
comments will be available for public inspection and copying at 1275
First Street NE., Washington, DC 20002, on official business days
between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an
appointment to inspect the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or Social
Security numbers, should not be included. Comments will not be edited
to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Kathryn Lazarev or James Wylie,
Counsels, Office of Regulations, at 202-435-7700.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
Regulation B implements the Equal Credit Opportunity Act (ECOA)
and, in part, prohibits a creditor from inquiring about the race,
color, religion, national origin or sex of a credit applicant except
under certain circumstances.\1\ One of those circumstances is a
requirement for creditors to collect and retain certain information
about applicants for certain dwelling-secured loans under Regulation B
Sec. 1002.13. Another circumstance is the applicant information
required to be collected and reported under Regulation C by financial
institutions. Regulation C, 12 CFR part 1003, implements the Home
Mortgage Disclosure Act (HMDA), as amended by the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act).\2\
Regulation B also includes certain optional model forms for use in
complying with certain Regulation B requirements. One of those forms is
a 2004 version of the Uniform Residential Loan Application (URLA)
issued by the Federal National Mortgage Association (Fannie Mae) and
the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively,
the Enterprises).
---------------------------------------------------------------------------
\1\ 15 U.S.C. 1691, 12 CFR part 1002.
\2\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------
The Bureau issued a final rule in October of 2015 amending
Regulation C (2015 HMDA final rule), which included changes to the
collection of applicants' ethnicity and race information.\3\ The
Enterprises recently issued a new version of the URLA (2016 URLA).\4\
The Bureau proposes to amend various sections of Regulation B to
further the purposes of ECOA including to promote the availability of
credit to all creditworthy applicants without regard to race, color,
religion, national origin, sex, marital status, or age (provided the
applicant has the capacity to contract) and other protected
characteristics. The proposed amendments to Sec. 1002.13 would permit
a creditor additional flexibility in how it collects applicant
ethnicity and race information in order to better align with Regulation
C, as amended in the 2015 HMDA final rule. The proposed amendments to
Appendix B would remove the URLA dated January 2004 (2004 URLA) from
Regulation B and add additional sample forms to Regulation B to
facilitate compliance. The proposed amendments to Sec. 1002.5 would
permit creditors to collect applicant information in certain
circumstances when they would not otherwise be required to do so. The
proposed amendments to Sec. 1002.12 would address retention of
information about certain applicants.
---------------------------------------------------------------------------
\3\ Home Mortgage Disclosure (Regulation C); 80 FR 66128 (Oct.
28, 2015).
\4\ See Fannie Mae, Guide Forms (2016), available at, https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms
(listing all selling and servicing guide forms); see also Freddie
Mac, Forms and Documents (2016) https://www.freddiemac.com/singlefamily/guide/ (same).
---------------------------------------------------------------------------
[[Page 16308]]
II. Background
A. Regulation B and Ethnicity and Race Information Collection
With some exceptions, Regulation B Sec. 1002.5(b) prohibits a
creditor from inquiring about the race, color, religion, national
origin, or sex of an applicant or any other person (protected
applicant-characteristic information) in connection with a credit
transaction. Section 1002.5(a)(2) provides an exception to that
prohibition for information that creditors are required to request for
certain dwelling-secured loans under Sec. 1002.13, and for information
required by a regulation, order, or agreement issued by or entered into
with a court or an enforcement agency to monitor or enforce compliance
with ECOA, Regulation B, or other Federal or State statutes or
regulations, including Regulation C.
Section 1002.13 sets forth the scope, required information, and
manner for collecting information about an applicant's ethnicity, race,
sex, marital status, and age under Regulation B (In this notice,
``applicant demographic information'' refers to information about an
applicant's ethnicity, race, or sex information collected under Sec.
1002.13 or, as discussed below, Regulation C, while ``certain protected
applicant-characteristic information'' refers to all information
collected under Sec. 1002.13, including age and marital status.) Under
Sec. 1002.13(a)(1), creditors that receive an application for credit
primarily for the purchase or refinancing of a dwelling occupied (or to
be occupied) by the applicant as a principal residence, where the
extension of credit will be secured by the dwelling, must collect
certain protected applicant-characteristic information, including
specified race and ethnicity categories. These race and ethnicity
categories correspond to the OMB standards for the classification of
Federal data on ethnicity and race minimum standards.\5\ Certain of
these categories include several more specific race, heritage,
nationality, or country of origin groups. For example, Hispanic or
Latino as defined by OMB for the 2010 Census refers to a person of
Cuban, Mexican, Puerto Rican, South or Central American, or other
Spanish culture or origin.\6\ Section 1002.13(b) through (c) provides
instructions on the manner of collection. Unlike financial institutions
covered by Regulation C, creditors subject to Sec. 1002.13 but not to
Regulation C are required only to collect and retain, but not to
report, the required protected applicant-characteristic information.
---------------------------------------------------------------------------
\5\ Office of Mgmt. and Budget, Revisions to the Standards for
the Classification of Federal Data on Race and Ethnicity, 62 FR
58782-90 (Oct. 30, 1997).
\6\ See U.S. Census Bureau, C2010BR-02, Overview of Race and
Hispanic Origin: 2010, at 2 (2011), available at https://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf.
---------------------------------------------------------------------------
B. 2015 HMDA Final Rule
The Dodd-Frank Act transferred rulemaking authority for HMDA to the
Bureau, effective July 2011.\7\ It also amended HMDA to add new data
points and authorized the Bureau to require additional information from
covered institutions. Regulation C implements HMDA and sets out
specific requirements for the collection, recording, reporting, and
disclosure of mortgage lending information, including a requirement to
collect and report information about an applicant's ethnicity, race,
and sex (applicant demographic information).
---------------------------------------------------------------------------
\7\ Public Law 111-203, 124 Stat. 1376.
---------------------------------------------------------------------------
In July 2014, the Bureau proposed amendments to Regulation C to
implement the Dodd-Frank Act changes to require collection, recording,
and reporting of additional information to further HMDA's purposes, and
to modernize the manner in which covered institutions report HMDA
data.\8\ The Bureau published a final rule on October 28, 2015,
amending Regulation C, with many of the amendments taking effect
January 1, 2018.\9\ (In this notice, ``current Regulation C'' refers to
Regulation C prior to January 1, 2018, and ``revised Regulation C''
refers to Regulation C as it will be in effect on or after January 1,
2018, as amended by the 2015 HMDA final rule.) For data collected in or
after 2018, the 2015 HMDA final rule amends the requirement for
collection and reporting of applicant demographic information.
Specifically, covered institutions must permit applicants to self-
identify their ethnicity and race using certain disaggregated ethnic
and racial subcategories. Covered institutions will report the
disaggregated information provided by applicants. However, revised
Regulation C will not require or permit covered institutions to use the
disaggregated subcategories when collecting and reporting the
applicant's ethnicity and race based on visual observation or
surname.\10\
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\8\ Home Mortgage Disclosure (Regulation C), 79 FR 51731 (Aug.
29, 2014).
\9\ 80 FR 66128 (Oct. 28, 2015).
\10\ Id. at 66314 (amendments to appendix B to Regulation C,
effective January 1, 2018).
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Revised Regulation C Sec. 1003.2(g)(1)(v) and 1003.2(g)(2)(ii)
also introduces an exemption to the requirement to report information
for financial institutions that originated fewer than 25 closed-end
mortgage loans or fewer than 100 open-end lines of credit in either of
the two prior years. As a result, when revised Regulation C takes
effect, an institution's obligation to collect and report information
under Regulation C may change over time based on its prior loan volume.
C. Uniform Residential Loan Application
The Enterprises, currently under the conservatorship of the Federal
Housing Finance Agency (FHFA), prepare and periodically revise a
Uniform Residential Loan Application (URLA) used by many lenders for
certain dwelling-related loans. A mortgage loan application must be
documented using the URLA in the mortgage loan file for the loan to be
eligible for sale to the Enterprises.\11\ A version of the URLA dated
January 2004 (2004 URLA) is included in appendix B to Regulation B as a
model form for use in complying with Sec. 1002.13. Appendix B provides
that the use of its model forms is optional under Regulation B but
that, if a creditor uses an appropriate appendix B model form, or
modifies a form in accordance with instructions provided in appendix B,
that creditor shall be deemed to be acting in compliance with Sec.
1002.5(b) through (d).\12\
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\11\ Fannie Mae, Selling Guide: Single Family Seller Servicer
(Dec. 16, 2016), Sec. B1-1-01, available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html; Freddie Mac,
Single-Family Seller/Servicer Guide (Sep. 21, 2016), Sec. 3401.7,
available at https://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html.
\12\ Comment app. B-1 provides that a previous version of the
URLA, dated October 1992, may be used by creditors without violating
Regulation B. In addition, comment app. B-2 provides that the home-
improvement and energy loan application form prepared by the
Enterprises, dated October 1986, complies with the requirements of
Regulation B for some creditors but not others, depending on whether
the creditor is governed by Sec. 1002.13(a) or subject to a
substitute monitoring program under Sec. 1002.13(d). The
Enterprises no longer offer the home-improvement and energy loan
application form identified in comment app. B-2 See Fannie Mae,
Guide Forms (2016), available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (listing all current
selling and servicing guide forms); see also Freddie Mac, Forms and
Documents (2016) available at https://www.freddiemac.com/singlefamily/guide/ (same).
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The Enterprises, under the conservatorship of the FHFA, issued a
revised and redesigned URLA on August 23, 2016 (2016 URLA).\13\ This
issuance was part of the effort of these
[[Page 16309]]
entities to update the Uniform Loan Application Dataset (ULAD). Among
other changes, the 2016 URLA includes a Demographic Information section
(section 7) that addresses the requirements in revised Regulation C for
collecting applicant demographic information, including the requirement
that financial institutions permit applicants to self-identify using
disaggregated ethnicity and race categories beginning January 1, 2018.
The Enterprises also made available a Demographic Information Addendum,
which is identical in form to section 7 of the 2016 URLA.\14\ The
Enterprises have advised that the Demographic Information Addendum may
be used by lenders at any time on or after January 1, 2017, as a
replacement for section X (Information for Government Monitoring
Purposes) in the current URLA, dated 7/05 (revised 6/09).\15\ The
Enterprises have not yet provided a date when lenders may begin using
the 2016 URLA (the effective date) or the date lenders are required to
use the 2016 URLA (the cutover date), but have stated their intention
to collaborate with industry stakeholders to help shape the
implementation timeline for the 2016 URLA, with a goal to provide
lenders with more precise information in 2017 regarding the cutover
date.\16\
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\13\ Fannie Mae, Uniform Residential Loan Application (Aug.
2016), https://www.fanniemae.com/content/guide_form/urla-borrower-information.pdf; see also Press Release, Uniform Mortgage Data
Program, Fannie Mae and Freddie Mac at the direction of the FHFA,
The Redesigned URLA and ULAD Mapping Document Are Here! (Aug. 23,
2016), available at https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf.
\14\ Fannie Mae, Demographic Information Addendum (Aug. 2016),
available at https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf.
\15\ Press Release, Uniform Mortgage Data Program, Fannie Mae
and Freddie Mac at the direction of the FHFA, URLA Implementation
Guidance and Update (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf;
Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the
direction of the FHFA, Uniform Residential loan Application (URLA)/
Uniform Loan Application Dataset (ULAD) FAQs, ] 6 (Nov. 1, 2016),
available at https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf.
\16\ Press Release, Uniform Mortgage Data Program, Fannie Mae
and Freddie Mac at the direction of the FHFA, URLA Implementation
Guidance and Update (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf.
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D. Bureau Approval Notice
On September 23, 2016, the Bureau issued a notice concerning the
collection of expanded information about ethnicity and race in 2017
(Bureau Approval Notice).\17\ Under current Regulation C Sec.
1003.4(a)(10), covered financial institutions are required to collect,
record, and report applicant demographic information. Revised
Regulation C will require financial institutions to permit applicants
to self-identify using disaggregated ethnic and racial categories
beginning January 1, 2018.\18\ However, before that date, such
inquiries are not required by current Regulation C and would not have
been allowed under Regulation B Sec. 1002.5(a)(2), and therefore
creditors would have been prohibited by Regulation B Sec. 1002.5(b)
from requesting applicants to self-identify using disaggregated ethnic
and racial categories before January 1, 2018.
The Bureau Approval Notice provided that, anytime from January 1,
2017, through December 31, 2017, a creditor may, at its option, permit
applicants to self-identify using disaggregated ethnic and racial
categories as instructed in appendix B to revised Regulation C. During
this period, a creditor adopting the practice of permitting applicants
to self-identify using disaggregated ethnic and racial categories as
instructed in appendix B to revised Regulation C shall be deemed to be
in compliance with Regulation B Sec. 1002.13(a)(i).
In the same notice, the Bureau also determined that the relevant
language in the 2016 URLA is in compliance with the regulatory
provisions of Regulation B Sec. 1002.5(b) through (d), regarding
requests for protected applicant-characteristic information and certain
other information. The notice provides that, although the use of the
2016 URLA by creditors is not required under Regulation B, a creditor
that uses the 2016 URLA without any modification that would violate
Sec. 1002.5(b) through (d) acts in compliance with Sec. 1002.5(b)
through (d).
III. Outreach
As part of the Bureau's outreach to financial institutions,
vendors, and other mortgage industry participants to prepare for the
implementation of the 2015 HMDA final rule, the Bureau has received
questions about the requirement to permit applicants to self-identify
using disaggregated ethnicity and race categories and how that
requirement intersects with compliance obligations under Regulation B.
The Bureau also received questions related to the Bureau Approval
Notice about whether the approval for collecting disaggregated
ethnicity and race categories under Regulation B in 2017 would be
extended to 2018. In light of these inquiries, the Bureau determined
that it would be beneficial to establish through rulemaking appropriate
standards in Regulation B concerning the collection of an applicant's
ethnicity and race information similar to those in revised Regulation
C. Because many of the financial institutions most affected by this
proposed rule are supervised by the Federal Deposit Insurance
Corporation (FDIC), the Office of the Comptroller of the Currency
(OCC), the Federal Reserve Board (FRB), and the National Credit Union
Administration (NCUA), the Bureau conducted outreach to these agencies.
The Bureau specifically sought input from these prudential regulators
concerning their use of applicant ethnicity and race information
collected under Sec. 1002.13 but not reported or anticipated to be
reported under current or revised Regulation C and their views on
appropriate standards for collection and retention of this information.
The Bureau also conducted outreach with other Federal agencies,
including Securities and Exchange Commission, the Department of
Justice, the Department of Housing and Urban Development, the Federal
Housing Finance Agency, the Federal Trade Commission, the U.S.
Department of Veterans Affairs, the U.S. Department of Agriculture, and
the Department of the Treasury, concerning this proposed rule.
IV. Legal Authority
The Bureau is issuing this proposed rule pursuant to its authority
under section 703 of ECOA, as amended by section 1085 of the Dodd-Frank
Act.\19\ ECOA authorizes the Bureau to issue regulations to carry out
the purposes of ECOA.\20\ These regulations may contain but are not
limited to such classifications, differentiations, or other provisions,
and may provide for such adjustments and exceptions for any class of
transactions, as in the judgment of the Bureau are necessary or proper
to effectuate the purposes of ECOA, to prevent circumvention or evasion
of ECOA, or to facilitate or substantiate compliance with ECOA.\21\ A
purpose of ECOA is to promote the availability of credit to all
creditworthy applicants without regard to race, color, religion,
national origin, sex, marital status, or age (provided the applicant
has the capacity to contract) and other protected characteristics.\22\
ECOA section 703 serves as a source of authority to establish rules
concerning the taking and evaluation of credit applications, collection
and retention of applicant demographic information concerning the
applicant or co-applicant, use of designated model forms, and
substantive requirements to carry out the purposes of ECOA.
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\19\ 15 U.S.C. 1691b; Public Law 111-203, 124 Stat. 1376, 2083-
84 (2010).
\20\ 15 U.S.C. 1691b(a).
\21\ Id.
\22\ 12 CFR 1002.1(b).
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The Bureau is also issuing this proposed rule pursuant to its
authority under sections 1022 and 1061 of the
[[Page 16310]]
Dodd-Frank Act. Under Dodd-Frank Act section 1022(b)(1), the Bureau has
authority to prescribe rules as may be necessary or appropriate to
enable the Bureau to administer and carry out the purposes and
objectives of the Federal consumer financial laws and to prevent
evasions thereof.\23\ Section 1061 of the Dodd-Frank Act transferred to
the Bureau consumer financial protection functions previously vested in
certain other Federal agencies, including the authority to prescribe
rules or issue orders or guidelines pursuant to any Federal consumer
financial law and perform appropriate functions to promulgate and
review such rules, orders, and guidelines.\24\ Both ECOA and title X of
the Dodd-Frank Act are consumer financial laws.\25\ Accordingly, the
Bureau has authority to issue regulations to administer ECOA.
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\23\ Public Law 111-203, 124 Stat. 1375, 1980 (2010) (codified
at 12 U.S.C. 5512(b)(1)).
\24\ Public Law 111-203, 124 Stat. 1375, 2035-39 (2010)
(codified at 12 U.S.C. 5581).
\25\ 12 U.S.C. 5481(12), (14).
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V. Proposed Implementation Period
Except as set forth below, the Bureau proposes an effective date of
January 1, 2018, for any final rule based on this proposal to align
with the effective dates of the relevant provisions of the 2015 HMDA
final rule. As an effective date for any final rule removing the 2004
URLA from appendix B of Regulation B, the Bureau proposes the cutover
date designated by the Enterprises for the mandatory use of the 2016
URLA or January 1, 2022, whichever occurs first.
VI. Section-by-Section Analysis
Section 1002.5 Rules Concerning Requests for Information
Section 1002.5 provides rules concerning requests for information.
In general, Sec. 1002.5(b) prohibits a creditor from inquiring about
protected applicant-characteristic information in connection with a
credit transaction, except under certain circumstances. The Bureau is
proposing to add proposed Sec. 1002.5(a)(4), to authorize creditors to
collect such information under certain additional circumstances. The
Bureau is proposing to make conforming changes to comment 5(a)(2)-2 to
reference the types of loans covered by revised Regulation C and
provide a citation to Regulation C. The Bureau is also proposing to add
proposed comment 5(a)(4)-1 to provide guidance on proposed Sec.
1002.5(a)(4).
5(a) General Rules
5(a)(4) Other Permissible Collection of Information
Section 1002.5(a)(2) provides that, notwithstanding the limitations
in Sec. 1002.5(b) through (d) on collecting protected applicant-
characteristic information and other applicant information, a creditor
shall request information for monitoring purposes as required by Sec.
1002.13. Section 1002.5(a)(2) further provides that a creditor may
obtain information required by a regulation, order, or agreement issued
by, or entered with, a court or an enforcement agency to monitor or
enforce compliance with ECOA, Regulation B, or other Federal or State
statutes and regulations. However, Sec. 1002.5(a)(2) does not
authorize collection of information beyond what is required by law. The
Bureau is proposing to add Sec. 1002.5(a)(4) to authorize a creditor
to obtain information in certain additional specified circumstances
other than information required as described in Sec. 1002.5(a)(2).
Proposed Sec. 1002.5(a)(4) would provide that, notwithstanding Sec.
1002.5(b), a creditor may collect information under the circumstances
included under that section, provided that the creditor collects the
information in compliance with appendix B to revised Regulation C.
The Bureau understands that certain creditors who will be excluded
from reporting under revised Regulation C in a given reporting year may
want to continue to collect or report applicant demographic information
during that time to maintain consistent compliance standards from year-
to-year. The Bureau also understands that certain creditors who are not
subject to revised Regulation C in a given calendar year but may become
subject to reporting in the next calendar year may want to collect
applicant demographic information for applications that may become
revised Regulation C covered loans if the creditor becomes subject to
reporting and final action is taken on the application in the next
calendar year. Therefore, the Bureau believes that it is appropriate to
permit creditors to collect such information in the specifically
permitted circumstances explained below. The Bureau believes that
permitting creditors to collect information without interruption or
break from year-to-year would further the purposes of ECOA by easing
overall burden on creditors and improving the quality and reliability
of the data that are used to promote the availability of credit to all
creditworthy applicants. The Bureau also believes that permitting
creditors to collect certain protected applicant-characteristic
information in these circumstances provides a narrow exception to the
general limitations in Sec. 1002.5(b) through (d) that preserves the
protection and respects the purposes of those prohibitions.
Under proposed Sec. 1002.5(a)(4)(i) a creditor that is a financial
institution under revised Regulation C Sec. 1003.2(g) may collect
information regarding the applicant demographic information of an
applicant for a closed-end mortgage loan that is an excluded
transaction under revised Regulation C Sec. 1003.3(c)(11) if it
submits HMDA data concerning those applications and loans or if it
submitted HMDA data concerning closed-end mortgage loans in any of the
preceding five calendar years. The proposal would permit a financial
institution that voluntarily reports HMDA data concerning closed-end
mortgage loans to collect applicant demographic information for such
reporting in compliance with Regulation B. The proposal would also
permit a financial institution to collect applicant demographic
information for closed-end mortgage loans for up to five years after it
fell below the loan volume threshold for closed-end mortgage loans in
revised Regulation C Sec. 1003.3(c)(11). The Bureau believes that
creditors in this latter situation may not want to incur the burden of
altering their compliance process, particularly when they may become
subject to reporting again in the near future. The Bureau believes that
permitting such collection for five years provides an appropriate time
frame under which a financial institution should be permitted to
continue collecting the information without having to change its
compliance processes; the Bureau believes the period is long enough
that it would provide a creditor a strong indication that its present
business trend is unlikely to subject it to reporting in the near
future, but the period would not be so long as to permit a creditor to
collect protected applicant-characteristic information for a period of
time that is too attenuated from the previous Regulation C legal
requirement and associated compliance process. The Bureau invites
comment on this proposal to permit collection of applicant demographic
information in these circumstances and the proposed five-year time
frame.
Under proposed Sec. 1002.5(a)(4)(ii), a creditor that is a
financial institution under Regulation C Sec. 1003.2(g) may collect
information regarding the applicant demographic information of an
applicant for an open-end line of credit that is an excluded
transaction
[[Page 16311]]
under revised Regulation C Sec. 1003.3(c)(12) if it submits HMDA data
concerning those applications and open-end lines of credit or if it
submitted HMDA data concerning open-end lines of credit in any of the
preceding five calendar years. Similar to proposed Sec.
1002.5(a)(4)(i), the proposal would permit a financial institution that
voluntarily reports HMDA data concerning open-end lines of credit to
collect applicant demographic information for such reporting in
compliance with Regulation B. The proposal would also permit a
financial institution to collect applicant demographic information for
open-end lines of credit for up to five years after it fell below the
loan volume threshold for open-end lines of credit in revised
Regulation C Sec. 1003.3(c)(12). The Bureau believes that the proposal
is justified for similar reasons and provides similar benefits to
proposed Sec. 1002.5(a)(4)(i) discussed above. The Bureau invites
comment on this proposal to permit collection of applicant demographic
information in these circumstances and the proposed five-year time
frame.
Under proposed Sec. 1002.5(a)(4)(iii), a creditor that submitted
HMDA data for any of the preceding five calendar years but is not
currently a financial institution under revised Regulation C Sec.
1003.2(g) may collect information regarding the applicant demographic
information of an applicant for a loan that would otherwise be a
covered loan under revised Regulation C Sec. 1003.2(e) if not excluded
by Regulation C Sec. Sec. 1003.3(c)(11) or (12). This proposal would
permit a creditor that falls below the loan-volume threshold \26\ and
is therefore no longer required to collect and report information under
revised Regulation C to continue to collect applicant demographic
information. The Bureau believes that the proposal is justified for
similar reasons and provides similar benefits to proposed Sec.
1002.5(a)(4)(i) discussed above. The Bureau invites comment on this
proposal to permit collection of applicant demographic information in
these circumstances and the proposed five-year time frame.
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\26\ The loan-volume thresholds in revised Regulation C are 25
or more closed-end mortgage loans originated in each of the two
proceeding calendar years and 100 open-end lines of credit in each
of the two proceeding calendar years. Revised Regulation C Sec.
1003.2(g)(1)(v), (g)(2)(ii).
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Under proposed Sec. 1002.5(a)(4)(iv), a creditor that exceeded a
loan volume threshold in the first year of a two-year threshold period
provided in revised Regulation C Sec. Sec. 1003.2(g), 1003.3(c)(11),
or 1003.3(c)(12) may, in the subsequent year, collect the applicant
demographic information of an applicant for a loan that would otherwise
be a covered loan under Regulation C Sec. 1003.2(e) if not excluded by
revised Regulation C Sec. 1003.3(c)(11) or (12). The proposal would
benefit creditors in certain situations in which the creditor is
uncertain whether it will be required to report information under
revised Regulation C in a future calendar year. For example, where a
creditor meets the closed-end mortgage loan coverage threshold or open-
end line of credit coverage threshold in revised Regulation C Sec.
1003.2(g)(1)(v) and (g)(2)(ii) for the first time in a given calendar
year, it may wish to begin collecting certain protected applicant-
characteristic information for applications received in the next
calendar year (second calendar year) so as to be prepared to report
that information if final action is taken in the following calendar
year (third calendar year), when the creditor would be required to
report the information under revised Regulation C if it exceeded the
applicable two-year threshold at the end the second calendar year. The
Bureau believes that a creditor would benefit from being able to
collect applicant demographic information concerning such applications
with assurance of compliance with Sec. 1002.5 regardless of whether or
not it becomes subject to HMDA reporting at the end of the two-year
threshold period. The Bureau invites comment on this proposal to permit
collection of applicant demographic information in these circumstances.
The Bureau is also proposing to add new comment 5(a)(4)-1 which
provides that applicant demographic information that is not required to
be collected pursuant to Regulation C may nevertheless be collected
under the circumstances set forth in Sec. 1002.5(a)(4) without
violating Sec. 1002.5(b) and highlights that, as discussed below, such
information should be retained pursuant to Sec. 1002.12. The Bureau
also invites comment on whether there are other specific, narrowly
tailored circumstances not described in Sec. 1002.5(a)(2) or proposed
Sec. 1002.5(a)(4) under which a creditor would benefit from being able
to collect applicant demographic information for mortgage loan
applicants.
Section 1002.12 Record Retention
Section 1002.12 provides rules concerning permissible and required
record retention. In light of proposed Sec. 1002.5(a)(4), the Bureau
is also proposing to amend Sec. 1002.12(b)(1)(i) to require retention
of certain protected applicant-characteristic information obtained
pursuant to proposed Sec. 1002.5(a)(4).
12(a) Retention of Prohibited Information
12(b) Preservation of Records
12(b)(1) Applications
12(b)(1)(i)
Section 1002.12(b)(1) provides that a creditor must retain certain
records for 25 months. Under Sec. 1002.12(b)(1)(i), these records
include any information required to be obtained concerning
characteristics of the applicant to monitor compliance with ECOA and
Regulation B or other similar law. The Bureau is proposing to amend
Sec. 1002.12(b)(1)(i) to include within its preservation requirements
any information obtained pursuant to proposed Sec. 1002.5(a)(4). The
Bureau believes that, if a creditor voluntarily collects applicant
demographic information pursuant to proposed Sec. 1002.5(a)(4), the
creditor should be required to maintain those records in the same
manner as protected applicant-characteristic information it is required
to collect. This would allow the information to be available for its
primary purpose of monitoring and enforcing compliance with ECOA,
Regulation B, and other Federal or State statutes or regulations.
Without a corresponding record retention requirement, a creditor could
collect but not retain the information, thus preventing the use of the
information for these purposes. The Bureau is also proposing to amend
comment 12(b)-2 to require retention of applicant demographic
information obtained pursuant to proposed Sec. 1002.5(a)(4). The
Bureau invites comment on the proposed amendment.
Section 1002.13 Information for Monitoring Purposes
Section 1002.13 sets forth the scope, required information, and
manner for the mandatory collection of certain protected applicant-
characteristic information under Regulation B. Section 1002.13(a)(1)
requires creditors to collect information about the applicant,
including ethnicity and race information, for certain dwelling-related
loans. Among other revisions to Sec. 1002.13 and its commentary, the
Bureau proposes to amend Sec. 1002.13(a)(1)(i) to provide that, for
applications subject to Sec. 1002.13(a)(1), a creditor must collect
the applicant's information using either aggregate ethnicity and race
categories or the ethnicity and race categories and subcategories set
forth in appendix B to
[[Page 16312]]
revised Regulation C, which provide disaggregated ethnicity and race
categories.
13(a) Information To Be Requested
13(a)(1)
13(a)(1)(i)
Under Sec. 1002.13(a)(1), creditors that receive an application
for credit primarily for the purchase or refinancing of a dwelling
occupied or to be occupied by the applicant as a principal residence,
where the extension of credit will be secured by the dwelling, must
collect certain information about the applicant, including ethnicity
and race information. Specifically, under current Sec.
1002.13(a)(1)(i) creditors must collect information regarding the
applicant's ethnicity using the categories Hispanic or Latino and not
Hispanic or Latino, and the applicant's race using the categories
American Indian or Alaska Native, Asian, Black or African American,
Native Hawaiian or Other Pacific Islander, and White. Under Regulation
B, creditors are required to collect and retain such data, but have no
obligation to report the data to a regulator.\27\
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\27\ 12 CFR 1002.12 and 1002.13.
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As set forth above, in 2015 the Bureau issued the 2015 HMDA final
rule, which adopted certain revisions to Regulation C.\28\ Under
current Regulation C, financial institutions are required to collect
and report an applicant's or borrower's information using aggregate
ethnicity and race categories that are identical to the ethnicity and
race categories set forth under current Sec. 1002.13(a)(1)(i). In
contrast, under revised Regulation C, financial institutions are
required to permit applicants or borrowers to self-identify using
disaggregated ethnicity and race categories.\29\ Once revised
Regulation C goes into effect on January 1, 2018, the race and
ethnicity categories financial institutions use to collect information
under revised Regulation C will no longer correspond with the race and
ethnicity categories a creditor uses to collect information under
current Sec. 1002.13(a)(1)(i). Many creditors are subject to both
Sec. 1002.13 and revised Regulation C. The Bureau believes that such
creditors should not be subject to differing collection requirements,
and that aligning the two requirements furthers the purposes of ECOA by
facilitating practices that promote the availability of credit to all
creditworthy applicants.\30\
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\28\ 80 FR 66127 (Oct. 28, 2015).
\29\ See also revised Regulation C Sec. 1003.4(a)(10)(i) and
comment 4(a)(10)(i)-1 (requiring financial institution to report
information about the applicant's or borrower's ethnicity and race
using the instructions in appendix B to Regulation C).
\30\ Because of the differences between revised Regulation C and
current Sec. 1002.13, some creditors may be uncertain whether
compliance with revised Regulation C also satisfies compliance with
current Sec. 1002.13 or whether additional collection to satisfy
current Sec. 1002.13 would also be required. The Bureau believes
that resolving this issue through rulemaking will provide certainty
to such creditors.
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Accordingly, the Bureau proposes to revise Sec. 1002.13(a)(1)(i)
to provide that, for applications subject to Sec. 1002.13(a)(1), a
creditor must collect an applicant's information using either the
aggregate or disaggregated ethnicity and race categories (creditors
subject to revised Regulation C will be required to use the
disaggregated race and ethnicity categories for applications subject to
revised Regulation C). Specifically, the Bureau proposes to amend Sec.
1002.13(a)(1)(i) to allow a creditor to comply with either Sec.
1002.13(a)(1)(i)(A) or Sec. 1002.13(a)(1)(i)(B). Under proposed Sec.
1002.13(a)(1)(i)(A), a creditor may collect information regarding the
applicant using the aggregate ethnicity and race categories set forth
in current Sec. 1002.13(a)(1)(i). Under proposed Sec.
1002.13(a)(1)(i)(B), a creditor may collect an applicant's ethnicity
and race information using the categories and subcategories set forth
in appendix B to revised Regulation C, which provides disaggregated
ethnicity and race categories. Thus, under the proposal, a creditor
subject to collection requirements under both Sec. 1002.13(a)(1) and
revised Regulation C that collects information pursuant to the
requirements of appendix B to revised Regulation C would also satisfy
Sec. 1002.13(a)(1)(i).
For applications subject to Sec. 1002.13(a)(1), the Bureau
believes there are compelling reasons for permitting a creditor to
collect an applicant's information using disaggregated ethnicity and
race categories, even if the creditor is not required to submit HMDA
data concerning the application under revised Regulation C (Regulation
B-only creditors or transactions). As discussed in the preamble to the
2015 HMDA final rule, among other reasons, the Bureau revised
Regulation C to require financial institutions to allow applicants to
self-identify using the disaggregated ethnicity and race categories
based on the conclusion that it would further HMDA's purpose to
identify possible discriminatory lending patterns, encourage self-
reporting by applicants and borrowers, and more accurately reflect the
nation's ethnic and racial diversity.\31\ The Bureau believes these
same benefits will also further the purpose of ECOA, which, similar to
HMDA, seeks to promote the availability of credit to all creditworthy
applicants without regard to protected characteristics, such as
national origin and race.
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\31\ 80 FR 66127, 66190 (Oct. 28, 2015).
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The Bureau believes that optional collection of disaggregated
ethnicity and race information under proposed Sec. 1002.13(a)(1)(i)(B)
is also appropriate given that the 2016 URLA provides for the
collection of disaggregated ethnicity and race categories. As noted
above, the Enterprises have indicated their intent to mandate use of
the 2016 URLA at some point in the future for all loans eligible for
purchase by the Enterprises. Given the widespread use of the current
URLA among lenders, the Bureau expects that on or prior to the cutover
date, many creditors will want to adopt the 2016 URLA irrespective of
whether the creditor or transaction is subject to the collection and
reporting requirements in revised Regulation C. Accordingly, the Bureau
believes that the proposed revisions will facilitate the transition to
the 2016 URLA for all creditors seeking to use the updated form.
The Bureau also considered the alternative, for all applications
subject to Sec. 1002.13(a)(1), of requiring creditors to use the
disaggregated ethnicity and race categories. The Bureau is not
proposing this approach for several reasons. First, the Bureau believes
that the creditors that would be most affected by such a change would
primarily be small creditors that will not meet the loan-volume
thresholds, asset-size thresholds, or location test under revised
Regulation C.\32\ Creditors within the scope of revised Regulation C
would be minimally affected as they will already be required to use the
disaggregated ethnicity and race categories under revised Regulation C.
Regulation B-only creditors, however, would incur various costs and
heightened compliance burdens as a result of adopting this alternative
option, including updating application forms, revising policies and
procedures, and providing additional training. Second, these small
creditors would potentially have a short timeframe to come into
compliance with any requirement to use the disaggregated ethnicity and
race categories. To resolve the differences between Regulation B and
revised Regulation C in a timely manner, the proposed revisions to
[[Page 16313]]
Sec. 1002.13(a)(1) would ideally take effect on or prior to January 1,
2018. While the Bureau could impose a staggered effective date for
Regulation B-only creditors, the Bureau believes such an approach would
create additional complexity that the Bureau would like to avoid. Thus,
the burden of this alternative option on affected creditors would
likely be compounded by the short implementation timeline available.
Third, the Bureau believes the benefits of requiring (rather than
permitting) creditors to use the disaggregated ethnicity and race
categories would be limited, as most creditors will likely adopt the
disaggregated ethnicity and race categories under the proposed optional
approach, eventually if not immediately. Many will be required to use
the disaggregated information under revised Regulation C, and many that
are not subject to revised Regulation C are nevertheless likely to
adopt the 2016 URLA at some point because of business considerations
unrelated to Regulations B and C.
---------------------------------------------------------------------------
\32\ Revised Regulation C Sec. 1003.2(g)(i), (ii), and (v); see
also id. Sec. 1003.3(c)(11) and (12).
---------------------------------------------------------------------------
On the other hand, the Bureau acknowledges that requiring creditors
to use the disaggregated ethnicity and race categories under Sec.
1002.13(a)(1)(i) may maximize the benefits of disaggregation by
affecting all applications subject to Sec. 1002.13(a)(1). The Bureau
also acknowledges that under this alternative option, Regulation B-only
creditors would incur the costs of collecting disaggregated ethnicity
and race information, and would not incur the more costly burdens of
also reporting such data.
Despite these considerations, the Bureau believes the potential
incremental benefits of requiring creditors to use disaggregated
ethnicity and race categories for applications subject to Sec.
1002.13(a)(1) do not outweigh the burdens of such a proposal on
Regulation B-only creditors.
In addition to the alternative approach discussed above, the Bureau
also considered eliminating altogether the requirement in Sec.
1002.13(a)(1)(i) that creditors collect information on an applicant's
ethnicity and race. While there is significant overlap between Sec.
1002.13 and revised Regulation C, the transactions covered under the
two regulations are not identical and, as discussed above, many
creditors are not subject to Regulation C. Based on outreach to other
regulators, including the FDIC, OCC, FRB, and NCUA, the Bureau
understands that a substantial percentage of supervised entities are
expected to be Regulation B-only creditors and that the protected-
applicant characteristic information collected under Sec. 1002.13 is
frequently relied upon by such regulators to monitor compliance with
fair lending laws. Accordingly, the Bureau believes that the collection
of applicant race and ethnicity information under Sec. 1002.13 serves
the important function of monitoring and enforcing compliance with ECOA
and other antidiscrimination laws and therefore continues to serve the
purposes of ECOA.
For the reasons discussed above, the Bureau proposes to revise
Sec. 1002.13(a)(1)(i), including adding Sec. 1002.13(a)(1)(i)(A) and
Sec. 1002.13(a)(1)(i)(B) to set forth the two options available to
creditors. Under the proposal, for any applications subject to Sec.
1002.13(a)(1), a creditor must seek to collect information concerning
the applicant using, at its option, either aggregate race and ethnicity
categories (proposed Sec. 1002.13(a)(1)(i)(A)) or disaggregated race
and ethnicity categories (proposed Sec. 1002.13(a)(1)(i)(B)).
Proposed Sec. 1002.13(a)(1)(i)(A) is intended to mirror the
ethnicity and race categories set forth in existing Sec.
1002.13(a)(1)(i). The addition of the word ``aggregate'' in proposed
Sec. 1002.13(a)(1)(i)(A) is not a substantive revision but, rather, is
included to clarify that the enumerated categories in proposed Sec.
1002.13(a)(1)(i)(A) differ from the disaggregated ethnicity and race
categories under proposed Sec. 1002.13(a)(1)(i)(B).
Proposed Sec. 1002.13(a)(1)(i)(B) provides that a creditor may
alternatively collect information regarding the applicant using the
categories and subcategories for the collection of race and ethnicity
set forth in appendix B to revised Regulation C. Proposed Sec.
1002.13(a)(1)(i)(B) cross-references the ethnicity and race categories
and subcategories set forth in appendix B to revised Regulation C; the
proposed provision does not recite those categories and subcategories.
Thus, a creditor would comply with proposed Sec. 1002.13(a)(1)(i)(B)
so long as it collects information concerning an applicant's ethnicity
and race using all of the same categories and subcategories as then in
effect under appendix B to revised Regulation C. For example, if
appendix B to revised Regulation C is amended at a later date to
require a financial institution to collect, for example, additional or
different ethnicity and race categories or subcategories, then a
creditor seeking to comply with proposed Sec. 1002.13(a)(1)(i)(B) must
also allow an applicant to select such amended categories or
subcategories. The Bureau solicits comment on this proposal.
The Bureau also proposes to add comment 13(a)-8 to clarify that a
creditor may choose, on an application-by-application basis, whether to
collect aggregate information pursuant to proposed Sec.
1002.13(a)(1)(i)(A) or disaggregated information pursuant to proposed
Sec. 1002.13(a)(1)(i)(B). The Bureau solicits comment on proposed
comment 13(a)-8.
In addition, the Bureau proposes to revise comment 13(a)-7 to
provide, for applications subject to Sec. 1002.13(a)(1), that a
creditor that collects information about the ethnicity, race, and sex
of an applicant in compliance with the requirements of appendix B to
revised Regulation C will be acting in compliance with Sec. 1002.13
concerning the collection of an applicant's ethnicity, race, and sex
information. Section 1002.13(b) through (c) provides instructions on
how to collect an applicant's ethnicity, race, and sex information,
including directions on how to obtain the required information,
required disclosures concerning the collection, and instructions on
when to collect the information on the basis of visual observation or
surname. As discussed above, many applications subject to Sec.
1002.13(a)(1) will also be subject to collection and reporting under
revised Regulation C. While the instructions for the collection of
applicant demographic information in appendix B to revised Regulation C
impose similar requirements as those set forth in Sec. 1002.13(b)
through (c), the Bureau acknowledges that the two sets of instructions
are not identical and that revised Regulation C sometimes provides
additional instructions absent from Sec. 1002.13. For example,
paragraph 12 of appendix B to revised Regulation C provides that, if an
applicant begins an application by mail, Internet, or telephone and
does not provide the requested applicant information but does not check
or select the ``I do not wish to provide this information'' box on the
application, and the applicant then meets in person with the financial
institution and the financial institution requests the information but
the applicant does not provide the information during the in-person
meeting, the financial institution must collect the information on the
basis of visual observation or surname. Current Sec. 1002.13, on the
other hand, is silent on whether a creditor is required to collect
applicant demographic information if the application is initiated by
mail, internet, and telephone, and the applicant subsequently meets in-
person with the creditor.
[[Page 16314]]
While the Bureau believes that the instructions in Sec. 1002.13
for the collection of applicant demographic information are not
inconsistent with revised Regulation C, to eliminate any uncertainty,
the Bureau proposes to revise comment 13(a)-7 to provide that for
applications subject to Sec. 1002.13(a)(1), a creditor that collects
an applicant's ethnicity, race, and sex information in compliance with
the instructions set forth in appendix B to revised Regulation C is
acting in compliance with Sec. 1002.13 concerning the collection of an
applicant's ethnicity, race, and sex information. The Bureau believes
this clarification will also reduce the compliance burden on creditors
subject to both Sec. 1002.13(a)(1) and revised Regulation C by
allowing such creditors to follow a single set of instructions.
The Bureau solicits comment on proposed comment 13(a)-7.
13(b) Obtaining Information
Section 1002.13(b) provides rules and instructions for obtaining
applicant information required under Sec. 1002.13(a). The Bureau is
proposing to amend Sec. 1002.13(b) to provide that, when a creditor
collects ethnicity and race information pursuant to proposed Sec.
1002.13(a)(1)(i)(B), the creditor must comply with any restrictions on
the collection of an applicant's ethnicity or race on the basis of
visual observation or surname set forth in appendix B to revised
Regulation C.
Among other instructions, current Sec. 1002.13(b) provides that,
if an applicant chooses not to provide some or all of the requested
applicant demographic information, the creditor shall, to the extent
possible, note on the form the ethnicity, race, and sex of the
applicant on the basis of visual observation or surname. Instruction 10
in appendix B to revised Regulation C provides, however, that when a
financial institution collects an applicant's ethnicity, race, and sex
on the basis of visual observation or surname, the financial
institution must select from the aggregate ethnicity and race
categories.
In light of the revisions to proposed Sec. 1002.13(a)(1)(i), the
Bureau proposes to amend Sec. 1002.13(b) to restrict the collection of
applicant demographic information where collected on the basis of
visual observation or surname. The Bureau believes that a creditor that
wishes to collect an applicant's ethnicity and race information under
proposed Sec. 1002.13(a)(1)(i)(B) should be subject to the same
restrictions as set forth in appendix B to revised Regulation C. The
Bureau further believes that keeping the requirements aligned is
appropriate given the similar requirements and to promote regulatory
consistency. The Bureau invites comment on this amendment.
Comment 13(b)-1 provides guidance on the forms a creditor may use
to collect applicant information under Sec. 1002.13(a). The Bureau is
proposing to amend the comment to reference the data collection model
forms the Bureau proposes to provide in appendix B of Regulation B, as
further discussed below. The Bureau is also proposing to amend comment
13(b)-1. First proposed comment 13(b)-1 would reiterate the current
interpretation that when a creditor collects only aggregate ethnicity
and race information pursuant to proposed Sec. 1002.13(a)(1)(i)(A)
(current Sec. 1002.13(a)(1)(i)), the applicant must be offered the
option to select more than one racial designation. Proposed comment
13(b)-1 would also provide that when a creditor collects applicant
information pursuant to Sec. 1002.13(a)(1)(i)(B), the applicant must
be offered the option to select more than one ethnicity and more than
one racial designation. The Bureau invites comment on these proposed
amendments.
13(c) Disclosure to Applicant(s)
Section 1002.13(c) sets forth the required disclosures a creditor
must provide to applicants when collecting the required protected
applicant-characteristic information. Current comment 13(c)-1 provides,
among other things, that appendix B contains a sample disclosure and
that a creditor may devise its own disclosure so long as it is
substantially similar. In light of the proposed amendments to appendix
B described below, the Bureau is proposing to amend comment 13(c)-1 to
reference the two data collection model forms provided for in proposed
appendix B. While the Bureau acknowledges that the disclosures in the
two data collection model forms are slightly different from each other,
the Bureau concludes that use of either form complies with Sec.
1002.13(c) and that the two forms are substantially similar. The Bureau
invites comment on this proposed amendment.
Appendix B to Part 1002--Model Application Forms
Regulations B and C both contain an appendix B that provides model
forms for use when collecting applicant demographic information
required under the regulations. Current appendix B to Regulation B
(Regulation B appendix) includes the 2004 URLA, which provides for the
same ethnicity and race categories as required under current Sec.
1002.13. Appendix B to current and revised Regulation C (current
Regulation C appendix or revised Regulation C appendix, as applicable)
includes instructions and a data collection model form for collecting
applicant demographic information. In light of the proposed revisions
to Sec. 1002.13(a)(1)(i), the Bureau also proposes to amend the
Regulation B appendix.
The current Regulation B appendix includes five model forms, each
designated for use in a particular type of consumer credit transaction.
The fifth model form, the 2004 URLA, is described in the Regulation B
appendix as appropriate for residential mortgage transactions and
contains a model disclosure for use in complying with current Sec.
1002.13. While use of the model forms is optional, if a creditor uses
the appropriate model form, or modifies a form in accordance with the
instructions provided in the Regulation B appendix, that creditor is
deemed to be acting in compliance with Sec. 1002.5(b) through (d).\33\
The section in the 2004 URLA used to collect an applicant's ethnicity
and race information (section X) conforms with the aggregate ethnicity
and race categories set forth in current Sec. 1002.13(a)(1)(i). The
most current version of the URLA (prior to the 2016 URLA) used by the
Enterprises is dated July 2005 and was revised in June 2009.
---------------------------------------------------------------------------
\33\ Appendix B to part 1002 ]] 1, 3.
---------------------------------------------------------------------------
On September 23, 2016, the Bureau issued the Bureau Approval
Notice, which approved, pursuant to section 706(e) of ECOA, use of the
2016 URLA.\34\ In the Bureau Approval Notice, the Bureau determined
that, while a creditor is not required to use the 2016 URLA, a creditor
that uses the form without any modification that would violate Sec.
1002.5(b) through (d) would act in compliance with Sec. 1002.5(b)
through (d).\35\ Unlike prior versions of the URLA, the 2016 URLA
permits the applicant to select disaggregated ethnicity and race
categories, as required under revised Regulation C.
---------------------------------------------------------------------------
\34\ Status of New Uniform Residential Loan Application and
Collection of Expanded Home Mortgage Disclosure Act Information
About Ethnicity and Race in 2017, 81 FR 66930 (Sep. 23, 2016).
\35\ Id.
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As explained above, the Bureau proposes to revise Sec.
1002.13(a)(1)(i) to provide that, for applications subject to Sec.
1002.13(a)(1), a creditor must collect information concerning the
applicant using, at its option, either aggregate or disaggregated
ethnicity and race categories. In light of this revision, the Bureau
proposes to revise the
[[Page 16315]]
Regulation B appendix to reflect these alternative approaches in
proposed Sec. 1002.13(a)(1)(i). Given the release of the 2016 URLA and
the Bureau's approval of that form in the Bureau Approval Notice, the
Bureau also proposes to remove the 2004 URLA from the Regulation B
appendix, effective upon the Enterprises' cutover date for the 2016
URLA or January 1, 2022, whichever comes first. Each of these proposed
revisions is discussed in depth below.
Model Forms for Complying With Proposed Sec. 1002.13(a)(1)(i)
Under proposed Sec. 1002.13(a)(1)(i)(B) a creditor may request
information concerning the applicant using disaggregated ethnicity and
race categories. In light of this revision, the Bureau believes it is
appropriate to provide creditors a model form to use when complying
with proposed Sec. 1002.13(a)(1)(i)(B). Specifically, the Bureau
proposes to cross-reference the data collection model form included in
the revised Regulation C appendix and thereby establish it as a model
form for complying with proposed Sec. 1002.13(a)(1)(i)(B). The Bureau
proposes to cross-reference this form, rather than create a new model
form, based on the belief that doing so will ease the compliance burden
on creditors by providing them a single form that may be used with both
revised Regulation C and proposed Sec. 1002.13(a)(1)(i)(B). The Bureau
believes cross-referencing the data collection model form in revised
Regulation C is also appropriate because it will avoid the possibility
of inconsistent forms.
The Bureau considered the alternative approach of including the
2016 URLA as a model form for use in complying with proposed Sec.
1002.13(a)(1)(i)(B). The Bureau is not proposing this alternative for
several reasons. As discussed above, the Bureau approved use of the
2016 URLA under section 706(e) of ECOA through the Bureau Approval
Notice and believes that including the 2016 URLA as a model form is
unnecessary given the approvals already provided to the 2016 URLA in
that notice. The Bureau also believes that a model form designated for
use in complying with Sec. 1002.13(a)(1)(i)(B) is properly limited to
include only information relevant to the collection applicant
demographic information and that inclusion of unrelated sections of the
2016 URLA is not necessary to further the purposes of ECOA or provide
relevant guidance to creditors. Moreover, the Bureau anticipates that
the Enterprises may update the 2016 URLA in the future. By maintaining
approval of the 2016 URLA in a freestanding notice, the Bureau avoids
the risk that the model form will become outdated or that the Bureau
will need to make ongoing revisions and updates within Regulation B.
Although the Bureau does not propose to include the 2016 URLA in
Regulation B as a model form, the Bureau notes that the substance and
form of section 7 of the 2016 URLA is substantially similar to the data
collection model form the Bureau proposes to designate for use in
complying with revised Sec. 1002.13(a)(1)(i)(B). The Bureau does not
intend to convey disapproval of the 2016 URLA and has no plans at this
time to revise or withdraw the Bureau Approval Notice currently in
effect.
The Bureau also proposes to add a model form to the Regulation B
appendix to be used for the collection of an applicant's ethnicity and
race information in compliance with proposed Sec. 1002.13(a)(1)(i)(A).
The text of the proposed model form substantially mirrors both section
X in the 2004 URLA and the data collection model form contained in the
current Regulation C appendix. Given these similarities, the Bureau
believes that a creditor can comply with revised Sec.
1002.13(a)(1)(i)(A) without modifying its existing forms for the
collection of an applicant's ethnicity and race information. Like the
proposed model form that may be used in compliance with Sec.
1002.13(a)(1)(i)(B), the Bureau's proposed model form for Sec.
1002.13(a)(1)(i)(A) is one-page in length and limited to information
concerning the applicant's ethnicity, race, and sex.
The Bureau solicits comment on this proposal to provide alternative
model forms for compliance with revised Sec. 1002.13(a)(1)(i).
Removal of the 2004 URLA as a Model Form
As discussed above, the current Regulation B appendix includes the
2004 URLA as a model form for use in complying with Sec. 1002.13. In
light of the proposed revisions to Sec. 1002.13(a)(1)(i) and the
proposal to provide two additional model forms for use in complying
with revised Sec. 1002.13(a)(1)(i), the Bureau proposes to remove the
2004 URLA as a model form in Regulation B. The Bureau proposes that the
2004 URLA be removed on the cutover date the Enterprises designate for
use of the 2016 URLA or January 1, 2022, whichever comes first.
As noted above, the Bureau expects the Enterprises will designate
in 2017 a cutover date for mandatory use of the 2016 URLA. The Bureau
expects that the vast majority of creditors that use the URLA either
currently do not use the already outdated 2004 URLA or will cease using
the 2004 URLA on or prior to the 2016 URLA cutover date. Accordingly,
the Bureau believes that removal of the 2004 URLA from appendix B upon
the cutover date designated by the Enterprises will successfully
eliminate an outdated form without imposing an appreciable burden on
creditors. Alternatively, if the cutover date is after January 1, 2022,
the Bureau proposes an effective date of January 1, 2022; the Bureau
believes that five years provides creditors ample time to update their
forms if they wish to.
The Bureau further believes that removal of the 2004 URLA is
appropriate because it would be duplicative of the form the Bureau
proposes to provide for use in complying with proposed Sec.
1002.13(a)(1)(i)(A). As discussed above, the proposed one-page data
collection model form is substantially similar to section X of the 2004
URLA. The Bureau believes that retention of the 2004 URLA in Regulation
B is therefore unnecessary and could create uncertainty as to the
purpose of the two forms.
Finally, the Bureau believes that removal of the 2004 URLA from
Regulation B is appropriate in light of the proposal not to include the
2016 URLA as a model form. The Bureau is concerned that maintaining the
2004 URLA as a model form in Regulation B, while not including the 2016
URLA, may discourage some creditors from using the 2016 URLA or the
disaggregated ethnicity and race categories. The Bureau further
believes that removal of the 2004 URLA from Regulation B is appropriate
for many of the same reasons the Bureau identified above for not
proposing to include the 2016 URLA, including that the 2004 URLA
contains numerous sections that are irrelevant to compliance with Sec.
1002.13. In proposing to remove the 2004 URLA, however, the Bureau does
not intend to suggest that the content and wording of the form no
longer complies with Sec. 1002.5(b) through (d) or Sec.
1002.13(a)(1)(i).
In light of these considerations, the Bureau proposes to remove the
2004 URLA as a model form in the Regulation B appendix, effective upon
the cutover date designated by the Enterprises for use of the 2016 URLA
or January 1, 2022, whichever comes first. The Bureau solicits comment
on this proposal.
[[Page 16316]]
Removal of the Official Commentary to Appendix B
As discussed above, commentary to appendix B includes a discussion
of two forms created by the Enterprises that are no longer in use: A
1992 version of the URLA and a 1986 home-improvement and energy loan
application form. Given that neither form discussed in the commentary
to the Regulation B appendix is currently used by the Enterprises, the
Bureau believes that few, if any, creditors continue to use the
referenced forms. Accordingly, the Bureau proposes to remove in its
entirety the commentary to the Regulation B appendix based on the
belief that it no longer provides useful guidance to creditors. While
the Bureau acknowledges that the commentary in the Regulation B
appendix instructs creditors to delete, strike, or modify the data-
collection section on the referenced forms when using the forms for
transaction not covered by Sec. 1002.13(a), the Bureau believes that
this language is unnecessary and duplicative of appendix B itself,
which provides that a creditor may alter the model forms by deleting
any information request. The Bureau solicits comment on this proposal,
including specifically whether any portion of the current commentary to
appendix B should be retained.
VII. Dodd-Frank Act Section 1022(b) Analysis
A. Overview
In developing the proposed rule, the Bureau has considered the
potential benefits, costs, and impacts.\36\ The Bureau requests comment
on the preliminary analysis presented below as well as submissions of
additional data that could inform the Bureau's analysis of the
benefits, costs, and impacts. The Bureau has consulted, or offered to
consult with, the prudential regulators (the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the
National Credit Union Administration, and the Office of the Comptroller
of the Currency), the Securities and Exchange Commission, the
Department of Justice, the Department of Housing and Urban Development,
the Federal Housing Finance Agency, the Federal Trade Commission, the
U.S. Department of Veterans Affairs, the U.S. Department of
Agriculture, and the Department of the Treasury, including regarding
consistency with any prudential, market or systematic objectives
administered by such agencies.
---------------------------------------------------------------------------
\36\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act
calls for the Bureau to consider the potential costs of a regulation
to consumers and covered persons, including the potential reduction
of access by consumers to consumer financial products or services;
the impact on depository institutions and credit unions with $10
billion or less in total assets as described in section 1026 of the
Dodd-Frank Act; and the impact on consumers in rural areas.
---------------------------------------------------------------------------
The purpose of ECOA, as implemented by Regulation B, is to promote
access to credit by all creditworthy applicants without regard to
protected characteristics. The proposal would make three substantive
changes to Regulation B, along with other clarifications, minor
changes, and technical corrections to align the language of Regulation
B with Regulation C as amended by the 2015 HMDA Final Rule. The first
would give persons who collect and retain race and ethnicity
information in compliance with ECOA as implemented in Regulation B the
option of permitting applicants to self-identify using the
disaggregated race and ethnicity categories required by the 2015 HMDA
Final Rule. In practice, this would allow entities that report race and
ethnicity in accordance with the 2015 HMDA Final Rule and Regulation C
to comply with Regulation B without further action, while entities that
do not report under HMDA but record and retain race and ethnicity data
under Regulation B would have the option of recording data either using
the existing aggregated categories or the new disaggregated categories.
The Bureau believes that, absent this change, entities which
currently report race and ethnicity data under the HMDA could conclude
that they have different obligations under Regulation B and Regulation
C once the 2015 HMDA Final Rule goes into effect on January 1, 2018.
This would lead to unnecessary burden from collecting both aggregated
and disaggregated data. By making disaggregated collection an option
under Regulation B, entities who will report race and ethnicity
information under the HMDA final rule will also be in compliance with
Regulation B with certainty. The Bureau believes that making collection
of disaggregated race and ethnicity an option for all entities covered
by Regulation B will pose little or no additional burden on those
entities who are not HMDA reporters. The proposed amendment may have
some benefits to non-HMDA reporting entities, as the current language
of Regulation B would not allow these entities to use the 2016 version
of the Enterprises' Uniform Residential Loan Application (URLA) for the
purpose of collecting race and ethnicity data, as the 2016 URLA uses
the disaggregated race and ethnicity categories matching the 2015 HMDA
Final Rule and not the specific categories required by current
Regulation B. Thus, the proposed amendment has the added benefit that
it will allow non-HMDA reporting entities to use the 2016 URLA as an
instrument to collect race and ethnicity information.
The second substantive change would remove the outdated 2004 URLA
as a model form, concurrent with the date that the Enterprises have
announced they will cease accepting that form or on January 1, 2022,
whichever occurs first. The Bureau issued an Approval Notice under its
authority in section 706(e) of ECOA on September 23, 2016, that a
creditor that uses the 2016 URLA without any modification that would
violate Sec. 1002.5(b) through (d) would act in compliance with Sec.
1002.5(b) through (d). The Bureau is not proposing to add the 2016 URLA
as a model form in place of the 2004 version. Instead, the Bureau is
proposing to provide for two alternative data collection model forms
for the purpose of collecting ethnicity and race information. The
Bureau believes this practice of acknowledging future versions of the
URLA via a Bureau Approval Notice rather than a revision to Regulation
B will avoid the risk that the model form included in Regulation B will
become outdated in the future.
Finally, the Bureau proposes amending Regulation B and the
associated commentary to allow creditors to collect ethnicity, race and
sex from mortgage applicants in certain cases where the creditor is not
required to report under HMDA and Regulation C. These cases include
creditors that submit HMDA data even though not required to do so, and
creditors that submitted HMDA data in any of the preceding five
calendar years. This change would primarily benefit institutions that
may be near the loan volume reporting threshold, such that they may be
required to report under HMDA and Regulation C in some years and not
others, or may be uncertain about their reporting status. The Bureau
believes that allowing voluntary collection will reduce the burden of
compliance with Regulation C on some entities and provide certainty
regarding Regulation B compliance over time.
B. Potential Benefits and Costs to Consumers and Covered Persons
Providing an Option To Collect Disaggregated Race and Ethnicity for
Regulation B
Relative to the state of Regulation B and Regulation C following
the effective date of the 2015 HMDA Final Rule, the proposed amendment
provides clear
[[Page 16317]]
benefits to entities that will be required to collect and report race
and ethnicity data under HMDA. Currently the disaggregated race and
ethnicity categories required by the amendments to Regulation C in the
2015 HMDA Final Rule, effective January 1, 2018, do not match the
categories specified in current Regulation B. Because of the
differences between the categories, some creditors required to collect
and report race and ethnicity using the disaggregated categories set
forth in Regulation C may be uncertain whether additional collection
using aggregated categories would also be required to satisfy current
Regulation B. Complying with both Regulations would require burdensome
and duplicative collection of race and ethnicity data at both the
aggregated and disaggregated level. In practice, the proposal simply
makes clear that the existing collection that will be required for
Regulation C is sufficient for compliance with Regulation B.
The proposal may have small benefits to consumers, to the extent
that lending entities voluntarily choose to collect disaggregated race
and ethnicity information. As discussed in the section 1022 analysis
for the 2015 HMDA Final Rule, collection of disaggregated race and
ethnicity data can enhance the ability of regulators to conduct fair
lending analysis. These benefits are limited for three reasons,
however. First, non-HMDA reporters will not be required to permit
applicants to self-identify using disaggregated ethnicity and race
categories. Second, many Regulation B-only creditors will be exempt
from reporting under Regulation C because they originate fewer than 25
closed-end mortgage loans in each of the two preceding calendar years,
which means both that few consumers would be affected and that the
resulting data would likely be too sparse for statistical analysis even
of the aggregated race and ethnicity data. Finally, demographic data
retained by Regulation B-only creditors is not reported under
Regulation C. Consequently, most oversight and analysis of demographic
data retained by Regulation B-only creditors will be done only by
regulators, whereas researchers and community groups also conduct
analysis of HMDA data reported under Regulation C. The Bureau believes
the proposal will not impose any costs on consumers.
The proposal may have benefits to some Regulation B-only creditors.
Although these entities need not make any changes to their race and
ethnicity collection procedures, they may desire to do so in the future
by adopting the 2016 URLA for non-HMDA reportable loan applications.
The Enterprises have announced that they will cease accepting older
versions of the URLA at a date to be determined and require firms that
sell to the Enterprises to use the 2016 URLA form. Some Regulation B-
only creditors sell mortgages to the Enterprises, and would benefit
from being able to use the 2016 URLA. Because the policy change on the
part of the Enterprises is not a part of the rule, the Bureau believes
any operational costs from adopting the 2016 URLA are part of the
normal course of business and are not a cost of the proposed rule
change.
In addition to the proposed change, the Bureau considered two
alternatives to address the differing race and ethnicity requirements
of Regulation B and Regulation C. The Bureau considered requiring all
persons subject to the collection and retention requirement of
Regulation B to permit applicants to self-identify using disaggregated
race and ethnicity categories. To the extent that consumers would
benefit from disaggregated race and ethnicity collection, this
alternative would provide greater benefits than the Bureau's proposal.
However, of the three limitations to consumer benefits listed above,
only the first (that disaggregated categories would be optional) is
alleviated by requiring the use of disaggregated race and ethnicity
categories under Regulation B. It is still the case that due to the low
volume of mortgages by many affected entities and the lack of
reporting, disaggregated race and ethnicity data may have limited
benefits. Finally, the Bureau believes many entities will adopt the
2016 URLA as part of the course of business and thus permit applicants
to self-identify using disaggregated race and ethnicity categories.
At the same time, mandatory use of disaggregated collection of race
and ethnicity categories would impose greater costs on firms than the
Bureau's proposal, particularly on smaller entities. These costs
include greater operational costs and one-time database upgrades.
Unlike adoption of the 2016 URLA, these costs would not be incurred in
the normal course of business. The Bureau does not have data available
to estimate these costs, but given the small marginal benefits of
mandatory use of disaggregated race and ethnicity categories, the
Bureau is not proposing making disaggregated race and ethnicity
categories mandatory for compliance with Regulation B. The Bureau
requests comments on both the costs and benefits associated with this
alternative approach.
The Bureau also considered eliminating entirely the collection and
retention requirement of Regulation B. Although this alternative would
reduce burden to firms who do not report under HMDA, the Bureau
believes it may impose costs on consumers. The prudential regulators
confirm that data collected and retained by entities subject to
Regulation B but not Regulation C may be used for fair lending
supervision and enforcement. Institutions subject to Regulation B but
not Regulation C include, for example, institutions that do not have a
branch or home office in a Metropolitan Statistical Area, do not meet
an applicable asset threshold, or do not meet an applicable loan volume
threshold.
For instance, the 2015 NCUA Call Report and the 2015 Nationwide
Mortgage Licensing System & Registry (NMLS) Mortgage Call Report data
include 489 credit unions and 161 non-depository institutions that
originated at least 25 closed-end mortgages that are not found in the
2015 HMDA data.\37\ In addition, many community banks in rural areas
are already exempt from HMDA reporting because they do not have a
branch or home office in a Metropolitan Statistical Area (MSA).\38\
Demographic information collected under Regulation B by those
institutions with larger loan volumes may be used in statistical
analysis that supports fair lending supervision and enforcement.
Removing the Regulation B requirement altogether would make detection
of any discrimination by these entities more difficult, with
potentially large costs to consumers where such discrimination exists.
Even for institutions with very small volumes of originations that may
not be subject to HMDA reporting because they do not meet an applicable
loan volume threshold, the retained information may be useful for
comparative file reviews. In 2015 there were 1,178 institutions that
reported HMDA data but had fewer than 25 originations and therefore
would likely be exempt under the 2015 HMDA Final Rule if they continue
to originate loans at a similar volume. Although the loan
[[Page 16318]]
volumes of most of these institutions would be too sparse for
statistical analysis, the ability to conduct comparative file reviews
using data retained under Regulation B has some benefit. Accordingly,
the Bureau does not propose removing the Regulation B requirement to
collect and retain race and ethnicity information.
---------------------------------------------------------------------------
\37\ The criteria for being a financial institution and
reporting transactions under HMDA are different in some ways from
the criteria for reporting under the NMLS Mortgage Call Report and
reporting transactions under it. It is possible that the NMLS omits
some non-depository institutions that originated at least 25 closed-
end mortgages, did not report HMDA data, and are subject to
Regulation B. Some or all of these institutions may also not have
been required to report HMDA data.
\38\ The Bureau does not have an estimate of the number of rural
community banks that are currently exempt from HMDA reporting and
originate at least 25 loans per year. The FFIEC call report for
banks does not report originations for depository institutions that
do not report to HMDA.
---------------------------------------------------------------------------
Model Forms for Collecting Race and Ethnicity Data
The Bureau believes that the proposal to change the model forms for
collecting race and ethnicity data will have modest benefits to firms
collecting these data, by providing updated model forms, and reducing
confusion regarding the outdated 2004 URLA. The proposal does not
impose any new costs on firms, nor does the Bureau believe that
consumers will experience any cost or benefit from the proposal. The
Bureau requests comment regarding the costs and benefits associated
with this proposal.
Allowing Voluntary Collection of Applicant Information
Regarding the proposal to allow certain creditors to voluntarily
collect demographic information, the Bureau believes the financial
institutions that will most likely exercise such options would be low-
volume, low-complexity institutions that have made a one-time
investment in HMDA collection and reporting and would like to utilize
that collection process already in place. The Bureau believes the
proposed provision will provide modest benefits to such institutions,
by saving on one-time adjustment costs required to shift in and out of
collection. The Bureau expects that institutions will only exercise
this option if voluntary collection provides a net benefit. The Bureau
does not believe that consumers will experience any cost or benefit
from the proposal. The Bureau requests comment regarding the costs and
benefits associated with this proposal, particularly data on the number
of firms that might be interested in voluntary collection under this
provision.
C. Impact on Depository Institutions and Credit Unions With $10 Billion
or Less in Assets, As Described in Dodd-Frank Section 1026
The Bureau believes that depository institutions and credit unions
with $10 billion or less in assets will not be differentially affected
by the substantive proposed amendments. The primary benefit to lenders
from the proposed rule is the reduced uncertainty and compliance burden
from allowing the disaggregated race and ethnicity information
collected under Regulation C to be used to comply with Regulation B.
Both certain depository institutions and credit unions with less than
$10 billion in assets and covered persons with more than $10 billion in
assets currently report data under HMDA and thus will receive these
benefits. The benefits may be somewhat larger for depository
institutions and credit unions with less than $10 billion in assets
because the relative costs of duplicative collection would be greater
for these entities.
D. Impact on Access to Credit
The Bureau does not believe that there will be an adverse impact on
access to credit resulting from any of the proposed provisions.
E. Impact on Consumers in Rural Areas
The Bureau believes that rural areas might benefit from the
provision to allow collection of disaggregated race and ethnicity
information more than urban areas. One of the exceptions to the
reporting requirements under HMDA is for entities which do not have a
branch or home office located in an MSA. Such entities likely serve
primarily customers in rural areas. To the extent that the proposed
provision benefits firms and consumers, consumers in rural areas will
see the largest benefits.
VIII. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires each
agency to consider the potential impact of its regulations on small
entities, including small business, small governmental units, and small
nonprofit organizations. The RFA defines a ``small business'' as a
business that meets the size standard developed by the Small Business
Administration pursuant to the Small Business Act.
The RFA generally requires an agency to conduct an initial
regulatory flexibility analysis (IRFA) and a final regulatory
flexibility analysis (FRFA) of any rule subject to notice-and-comment
rulemaking requirements, unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. The Bureau also is subject to certain additional procedures
under RFA involving the convening of a panel to consult with small
business representatives prior to proposing a rule for which an IRFA is
required.
An IRFA is not required for this proposal because the proposal, if
adopted, would not have a significant economic impact on any small
entities. The Bureau does not expect the proposal to impose costs on
covered persons. All methods of compliance under current law will
remain available to small entities if the proposal is adopted. Thus, a
small entity that is in compliance with current law need not take any
additional action if the proposal is adopted, save those already
required by the 2015 HMDA Final Rule.
Accordingly, the undersigned certifies that this proposal, if
adopted, would not have a significant economic impact on a substantial
number of small entities.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.), Federal agencies are generally required to seek the Office of
Management and Budget (OMB)'s approval for information collection
requirements prior to implementation. The collections of information
related to Regulation B and Regulation C have been previously reviewed
and approved by OMB and assigned OMB Control Number 3170-0013
(Regulation B) and 3170-0008 (Regulation C). Under the PRA, the Bureau
may not conduct or sponsor and, notwithstanding any other provision of
law, a person is not required to respond to an information collection
unless the information collection displays a valid control number
assigned by OMB.
The Bureau has determined that this Proposed Rule would not impose
any new or revised information collection requirements (recordkeeping,
reporting or disclosure requirements) on covered entities or members of
the public that would constitute collections of information requiring
OMB approval under the PRA. Although some entities subject to
Regulation B but not Regulation C may choose to voluntarily begin
collecting disaggregated race and ethnicity information, the Bureau
believes the most likely reason for this to occur is through adoption
of the 2016 URLA, which is not part of the proposed rule.
The Bureau welcomes comments on this determination, which may
submitted to the Bureau at the Consumer Financial Protection Bureau
(Attention: PRA Office), 1700 G Street NW., Washington, DC 20552, or by
email to CFPB_PRA@cfpb.gov. All Comments are matters of Public Record.
List of Subjects in 12 CFR Part 1002
Aged, Banks, Banking, Civil rights, Consumer protection, Credit,
Credit unions, Discrimination, Fair lending, Marital status
discrimination, National banks, National origin discrimination,
Penalties, Race discrimination, Religious discrimination, Reporting and
[[Page 16319]]
recordkeeping requirements, Savings associations, Sex discrimination.
Authority and Issuance
For the reasons set forth above, the Bureau proposes to amend
Regulation B, 12 CFR part 1002, as set forth below:
PART 1002--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)
0
1. The authority citation for part 1002 continues to read as follows:
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.
0
2. Section 1002.5 is amended by adding paragraph (a)(4) to read as
follows:
Sec. 1002.5 Rules concerning requests for information.
(a) * * *
(4) Other permissible collection of information. Notwithstanding
paragraph (b) of this section, a creditor may collect information under
the following circumstances provided that the creditor collects the
information in compliance with appendix B to Regulation C, 12 CFR part
1003:
(i) A creditor that is a financial institution under 12 CFR
1003.2(g) may collect information regarding the ethnicity, race, and
sex of an applicant for a closed-end mortgage loan that is an excluded
transaction under 12 CFR 1003.3(c)(11) if it submits HMDA data
concerning such closed-end mortgage loans and applications or if it
submitted HMDA data concerning closed-end mortgage loans for any of the
preceding five calendar years;
(ii) A creditor that is a financial institution under 12 CFR
1003.2(g) may collect information regarding the ethnicity, race, and
sex of an applicant for an open-end line of credit that is an excluded
transaction under 12 CFR 1003.3(c)(12) if it submits HMDA data
concerning such open-end lines of credit and applications or if it
submitted HMDA data concerning open-end lines of credit for any of the
preceding five calendar years;
(iii) A creditor that submitted HMDA data for any of the preceding
five calendar years but is not currently a financial institution under
12 CFR 1003.2(g) may collect information regarding the ethnicity, race,
and sex of an applicant for a loan that would otherwise be a covered
loan under 12 CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or
(12); and
(iv) A creditor that exceeded an applicable loan volume threshold
in the first year of the two-year threshold period provided in 12 CFR
1003.2(g), 1003.3(c)(11), or 1003.3(c)(12) may, in the subsequent year,
collect information regarding the ethnicity, race, and sex of an
applicant for a loan that would otherwise be a covered loan under 12
CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or (12).
* * * * *
0
3. Section 1002.12 is amended by revising paragraph (b)(1)(i) to read
as follows:
Sec. 1002.12 Record retention.
* * * * *
(b) * * *
(1) * * *
(i) Any application that it receives, any information required to
be obtained concerning characteristics of the applicant to monitor
compliance with the Act and this part or other similar law, any
information obtained pursuant to Sec. 1002.5(a)(4), and any other
written or recorded information used in evaluating the application and
not returned to the applicant at the applicant's request.
0
4. Section 1002.13 is amended by revising paragraphs (a)(1)(i) and (b)
to read as follows:
Sec. 1002.13 Information for monitoring purposes.
(a) * * *
(1) * * *
(i) Ethnicity and race using either:
(A) For ethnicity, the aggregate categories Hispanic or Latino and
not Hispanic or Latino; and, for race, the aggregate categories
American Indian or Alaska Native, Asian, Black or African American,
Native Hawaiian or Other Pacific Islander, and White; or
(B) The categories and subcategories for the collection of
ethnicity and race set forth in appendix B to Regulation C, 12 CFR part
1003.
* * * * *
(b) Obtaining information. Questions regarding ethnicity, race,
sex, marital status, and age may be listed, at the creditor's option,
on the application form or on a separate form that refers to the
application. The applicant(s) shall be asked but not required to supply
the requested information. If the applicant(s) chooses not to provide
the information or any part of it, that fact shall be noted on the
form. The creditor shall then also note on the form, to the extent
possible, the ethnicity, race, and sex of the applicant(s) on the basis
of visual observation or surname. When a creditor collects ethnicity
and race information pursuant to paragraph (a)(1)(i)(B), the creditor
must comply with any restrictions on the collection of an applicant's
ethnicity or race on the basis of visual observation or surname set
forth in appendix B to Regulation C, 12 CFR part 1003.
* * * * *
0
5. Appendix B to Part 1002--Model Application Forms is amended by
revising paragraph (1) and adding a Data Collection Model Form to read
as follows:
Appendix B to Part 1002--Model Application Forms
1. This appendix contains five model credit application forms,
each designated for use in a particular type of consumer credit
transaction as indicated by the bracketed caption on each form. The
first sample form is intended for use in open-end, unsecured
transactions; the second for closed-end, secured transactions; the
third for closed-end transactions, whether unsecured or secured; the
fourth in transactions involving community property or occurring in
community property States; and the fifth in residential mortgage
transactions which contains a model disclosure for use in complying
with Sec. 1002.13 for certain dwelling-related loans. This appendix
also contains a data collection model form for collecting
information concerning an applicant's ethnicity, race, and sex that
complies with the requirements of Sec. 1002.13(a)(1)(i)(A) and
(ii). Appendix B to Regulation C, 12 CFR part 1003, provides a data
collection model form for collecting information concerning an
applicant's ethnicity, race and sex that complies with the
requirements of Sec. 1002.13(a)(1)(i)(B) and (ii). All forms
contained in this appendix are models; their use by creditors is
optional.
* * * * *
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* * * * *
0
6. Appendix B to Part 1002--Model Application Forms is amended by
revising paragraph 1 and under paragraph 3 removing the form ``Uniform
Residential Loan Application''.
The revision reads as follows:
Appendix B to Part 1002--Model Application Forms
1. This appendix contains four model credit application forms,
each designated for use in a particular type of consumer credit
transaction as indicated by the bracketed caption on each form. The
first sample form is intended for use in open-end, unsecured
transactions; the second for closed-end, secured transactions; the
third for closed-end transactions, whether unsecured or secured; and
the fourth in transactions involving community property or occurring
in community property States. This appendix also contains a data
collection model form for collecting information concerning an
applicant's ethnicity, race, and sex that complies with the
requirements of Sec. 1002.13(a)(1)(i)(A) and (ii). Appendix B to
Regulation C, 12 CFR part 1003, provides a data collection model
form for collecting information concerning an applicant's ethnicity,
race and sex that complies with the requirements of Sec.
1002.13(a)(1)(i)(B) and (ii). All forms contained in this appendix
are models; their use by creditors is optional.
* * * * *
0
7. Supplement I to Part 1002--Official Interpretations:
0
a. Under Section 1002.5--Rules concerning requests for information:
0
i. Under Paragraph 5(a)(2), paragraph 2 is revised.
0
ii. New heading Paragraph 5(a)(4) is added, and under Paragraph 5(a)(4)
new paragraph 1 is added.
0
b. Under Section 1002.12--Record retention:
0
i. Under Paragraph 12(b), paragraph 2 is revised.
0
c. Under Section 1002.13--Information for monitoring purposes:
0
i. Under Paragraph 13(a) --Information to be requested, paragraph 7 is
revised and paragraph 8 is added.
0
ii. Under Paragraph 13(b)--Obtaining of information, paragraph 1 is
revised.
0
iii. Under Paragraph 13(c)--Disclosure to applicants, paragraph 1 is
revised.
0
d. The heading Appendix B--Model Application Forms and paragraphs 1 and
2 thereunder are removed.
The revisions and additions read as follows:
Supplement I to Part 1002--Official Interpretations
* * * * *
Section 1002.5--Rules Concerning Requests for Information
5(a) General Rules
* * * * *
Paragraph 5(a)(2)
* * * * *
2. Information required by Regulation C. Regulation C, 12 CFR
part 1003, generally requires creditors covered by the Home Mortgage
Disclosure Act (HMDA) to collect and report information about the
race, ethnicity, and sex of applicants for certain dwelling-secured
loans, including some types of loans not covered by Sec. 1002.13.
* * * * *
Paragraph 5(a)(4).1. Other permissible collection of
information. Information regarding ethnicity, race, and sex that is
not required to be collected pursuant to Regulation C may
nevertheless be collected under the circumstances set forth in Sec.
1002.5(a)(4) without violating Sec. 1002.5(b). The information must
be retained pursuant to the requirements of Sec. 1002.12.
* * * * *
Section 1002.12--Record Retention
* * * * *
12(b) Preservation of Records
* * * * *
2. Computerized decisions. A creditor that enters information
items from a written application into a computerized or mechanized
system and makes the credit decision mechanically, based only on the
items of information entered into the system, may comply with Sec.
1002.12(b) by retaining the information actually entered. It is not
required to store the complete written application, nor is it
required to enter the remaining items of information into the
system. If the transaction is subject to Sec. 1002.13 or the
creditor is collecting information pursuant to Sec. 1002.5(a)(4),
however, the creditor is required to enter and retain the data on
personal characteristics in order to comply with the requirements of
that section.
* * * * *
Section 1002.13--Information for Monitoring Purposes
13(a) Information To Be Requested
* * * * *
7. Data collection under Regulation C. For applications subject
to Sec. 1002.13(a)(1), a creditor that collects information about
the ethnicity, race, and sex of an applicant in compliance with the
requirements of appendix B to Regulation C, 12 CFR part
[[Page 16321]]
1003, is acting in compliance with Sec. 1002.13 concerning the
collection of an applicant's ethnicity, race, and sex information.
See also comment 5(a)(2)-2.8. Application-by-application basis. For
applications subject to Sec. 1002.13(a)(1), a creditor may choose
on an application-by-application basis whether to collect aggregate
information pursuant to Sec. 1002.13(a)(1)(i)(A) or disaggregated
information pursuant to Sec. 1002.13(a)(1)(i)(B) about the
ethnicity and race of the applicant.
13(b) Obtaining of information. 1. Forms for collecting data. A
creditor may collect the information specified in Sec. 1002.13(a)
either on an application form or on a separate form referring to the
application. Appendix B to this part provides for two alternative
data collection model forms for use in complying with the
requirements of Sec. 1002.13(a)(1)(i) and (ii) to collect
information concerning an applicant's ethnicity, race, and sex. When
a creditor collects ethnicity and race information pursuant to Sec.
1002.13(a)(1)(i)(A), the applicant must be offered the option to
select more than one racial designation. When a creditor collects
ethnicity and race information pursuant to Sec.
1002.13(a)(1)(i)(B), the applicant must be offered the option to
select more than one ethnicity designation and more than one racial
designation.
* * * * *
13(c) Disclosure to applicants. 1. Procedures for providing
disclosures. The disclosure to an applicant regarding the monitoring
information may be provided in writing. Appendix B provides data
collection model forms for use in complying with Sec. 1002.13 and
that comply with Sec. 1002.13(c). A creditor may devise its own
disclosure so long as it is substantially similar. The creditor need
not orally request the monitoring information if it is requested in
writing.
* * * * *
Dated: March 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-06195 Filed 4-3-17; 8:45 am]
BILLING CODE 4810-AM-P