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ANNUAL REPORT TO THE CONGRESS
ON
THE EQUAL CREDIT OPPORTUNITY ACT
FOR THE YEAR 1979

Board o f Governors o f t h e F e d e r a l Reserve System
February 1, 1980

TABLE OF CONTENTS
Page

I.

IV.

Federal Reserve System
1. Special C i v i l Rights Enforcement Activities
2. Examinations
3. Consumer Complaints

1
1
2
4

B.

III.

1

A.

II.

ENFORCEMENT AND ASSESSMENT OF COMPLIANCE

Other Agencies

5

CONSUMER ADVISORY COUNCIL

12

UNIFORM ENFORCEMENT GUIDELINES

13

ADMINISTRATIVE FUNCTIONS

14

A.

Amendments and Interpretations
1. Amendments
2. O f f i c i a l Board Interpretation?
3. O f f i c i a l Staff Interpretations
4. Proposed Rulanaking

14
14
14
15
15

B.

Legislative Reccronendations

16

C.

Education

16




The f o u r t h Annual Report on the E q u a l C r e d i t O p p o r t u n i t y A c t

(ECOA)

d i s c u s s e s t h e enforcement o f the a c t and R e g u l a t i o n B by the F e d e r a l Reserve
System and a s s e s s e s the compliance of s t a t e member banks w i t h the a c t ; i t
examines t h e enforcement a c t i v i t i e s o f o t h e r f e d e r a l a g e n c i e s and t h e i r

also

assess-*

ments of t h e compliance o f c r e d i t o r s t h a t they s u p e r v i s e *

The r e p o r t

d e s c r i b e s the Consumer A d v i s o r y C o u n c i l and i t s a c t i v i t i e s

r e l a t i n g t o the a c t

and r e g u l a t i o n and g i v e s an account o f the u n i f o r m g u i d e l i n e s

for

then

enforcanent

o f the E q u a l C r e d i t O p p o r t u n i t y Act^ R e g u l a t i o n B^ and the F a i r Housing Act»
Finally i t
scribes

reviews t h e Board*s a d m i n i s t r a t i v e

f u n c t i o n s under the a c t and de-

the amendments and i n t e r p r e t a t i o n s adopted o r proposed i n 1979,

legislative

the

recommendations f o r amending t h e a c t as s u b m i t t e d t o the Board by

other agencies,

and the e d u c a t i o n a l e f f o r t s by the Board and o t h e r

enforcement

agencies*
T h i s r e p o r t does not c o n t a i n recommendations o f
s t a t u t o r y amendments.
Annual R e p o r t o f

I.
A.

Such recommendations,

if

the Board f o r

any, w i l l be made i n t h e 66th

the Board of Governors t o t h e Congress*

ENFORCEMENT AND ASSESSMENT OF COMPLIANCE

F e d e r a l Reserve System
1.

S p e c i a l C i v i l R i g h t s Enforcement

Activities

I n F e b r u a r y 1979, the Board announced an expanded program t o improve t h e
c o m p l i a n c e o f s t a t e member banks w i t h t h e consumer p r o t e c t i o n l a w s ,
the ECOA and o t h e r c i v i l r i g h t s s t a t u t e s *

The program p r o v i d e d F e d e r a l Reserve

Banks w i t h a v a r i e t y o f r e s o u r c e s t o be used^ i n p a r t ,
procedures to detect u n l a w f u l c r e d i t d i s c r i m i n a t i o n *
for

particularly

t o implement

strengthened

A l l o c a t i o n s were d o u b l e d

the h i r i n g o f a d d i t i o n a l consumer a f f a i r s and c i v i l

rights

examiners,

r e g i o n a l seminars were c o n d u c t e d , examiner t r a i n i n g was i n c r e a s e d , census d a t a




- 2 -

were d i s t r i b u t e d t o g i v e examiners

a demographic p i c t u r e o f the communities

that

s t a t e member banks s e r v e , and the F e d e r a l Reserve Compliance Handbook was publ i s h e d and d i s t r i b u t e d .
provides

tools,

The Handbook o u t l i n e s

new e x a m i n a t i o n p r o c e d u r e s

such as those f o r a s t a n d a r d i z e d comparison o f c r e d i t

t o h e l p examiners d e t e c t c r e d i t d i s c r i m i n a t i o n .
a substantial
also details

s e c t i o n on the h i s t o r y o f c i v i l

rights

includes
country,

investigations

such as those a l l e g i n g c r e d i t

discrim-

Other f e a t u r e s o f the program i n c l u d e the c o n t i n u a t i o n o f an e d u c a t i o n a l -

advisory service

f o r member banks p r o v i d e d by the F e d e r a l Reserve Banks, and an

adjustment o f t h e frequency o f s p e c i a l consumer a f f a i r s
tions

applicants,

legislation in this

a new procedure t h a t r e q u i r e s c o n s i d e r a t i o n o f o n - s i t e

o f consumer c o m p l a i n t s o f a s e r i o u s n a t u r e ,
ination.

The Handbook, which

and

and c i v i l

rights

examina-

so t h a t banks w i t h lower r a t i n g s r e c e i v e e x a m i n a t i o n s more f r e q u e n t l y

than

heretofore.

2.

Examinations

The F e d e r a l Reserve System e n f o r c e s

the a c t and R e g u l a t i o n B through

i t s e x a m i n a t i o n o f s t a t e member banks and i n v e s t i g a t i o n o f consumer
S p e c i a l l y t r a i n e d consumer a f f a i r s

and c i v i l

Reserve Banks conduct the e x a m i n a t i o n s ;
and Community A f f a i r s

reviews

rights

examiners

from the

and the B o a r d ' s D i v i s i o n o f

selected examination reports

complaints.
Federal

Consumer

t o determine

compliance s t a t u s o f i n d i v i d u a l banks and t o e v a l u a t e and improve the

the

examina-

t i o n program.
To ensure t h a t

i t s examiners are t h o r o u g h l y f a m i l i a r w i t h

t i o n B and o t h e r consumer and c i v i l
2-1/2 week s c h o o l s




rights

laws,

the Board conducted

Regulatwo

i n 1979, a t t e n d e d by 58 System examiners and s e v e r a l

- 3 -

representatives

of other regulatory agencies.

Instructors

from the Reserve Banks, r e v i e w examiners and a t t o r n e y s
and s t a f f members from o t h e r a g e n c i e s ,

specific

examiners

from the B o a r d ' s

c o u r t cases and t h e i r e f f e c t on c i v i l

rights
rights

legislation.
staff

conducted a s e r i e s o f t h r e e r e g i o n a l seminars a t the Reserve Banks t o

education,

As an a i d i n the examiners'

the Board a l s o r o t a t e s examiners

w i t h the Board s t a f f .

l a addition,

The

laws and an a n a l y s i s

A f t e r a d o p t i o n o f the new enforcement program, the B o a r d ' s

the f i e l d s t a f f o f the new p r o c e d u r e s .

staff,

such as the Department o f J u s t i c e .

i n s t r u c t i o n i n c l u d e d a thorough h i s t o r y o f c i v i l
of

included

inform

further

from the Reserve Banks t o work

the B o a r d ' s s t a f f , i s

i n frequent

t i o n w i t h System examiners t o keep them i n f o r m e d about c u r r e n t

communica-

developments.

I n 1979, about 77 p e r c e n t o f the s t a t e member banks examined were
r e p o r t e d as not b e i n g i n f u l l

compliance w i t h R e g u l a t i o n B, not a

iignificant

improvement over 1978, when 78 p e r c e n t o f the banks examined were r e p o r t e d
as h a v i n g v i o l a t i o n s

o f the r e g u l a t i o n .

S i n c e improved e x a m i n a t i o n

are l i k e l y t o l e a d t o more d i s c o v e r i e s o f v i o l a t i o n s ,
a c t u a l c o m p l i a n c e may have improved more than i s
Examples o f the k i n d s o f v i o l a t i o n s

rules,

failure

to d i s c l o s e

specific

the Board b e l i e v e s

i n d i c a t e d by the

t h a t were found are f a i l u r e

f i c a t i o n o f adverse a c t i o n w i t h i n 30 d a y s ,

figures.

signature

reasons f o r a d e n i a l o f c r e d i t ,

failure

and f a i l u r e

the

creditworthiness.

D u r i n g e x a m i n a t i o n s . Reserve Bank examiners e x p l a i n the n a t u r e




to

i n c o m e , " such as a l i m o n y , need not be r e v e a l e d u n l e s s

a p p l i c a n t wants t h a t income c o n s i d e r e d i n d e t e r m i n i n g

any v i o l a t i o n s

that

t o send n o t i -

f a i l u r e t o comply w i t h

t o e s t a b l i s h a procedure t o c o l l e c t m o n i t o r i n g i n f o r m a t i o n ;
explain that "other

techniques

found and o u t l i n e the c o r r e c t i v e a c t i o n n e c e s s a r y f o r

of

compliance.

- 4 At the c o n c l u s i o n o f

the e x a m i n a t i o n ,

s t a t e member banks e i t h e r

compliance or have agreed t o take s p e c i f i c

actions

are u s u a l l y

t o prevent r e c u r r e n c e

in

of

violations.
I n 1979, t h e Board e n t e r e d i n t o
member banks t h a t had f a i l e d t o c o r r e c t
and o t h e r consumer c r e d i t

laws.

its

practices

orders with

state

i n v i o l a t i o n of Regulation B

The f i r s t bank had r e p e a t e d l y f a i l e d

the o p t i o n a l n a t u r e o f r e q u e s t s
and t o c o r r e c t

two c e a s e - a n d - d e s i s t

for information regarding other

to

disclose

sources o f

income

p r o h i b i t e d use o f terms r e g a r d i n g m a r i t a l s t a t u s on forms used

i n d e t e r m i n i n g the c r e d i t w o r t h i n e s s

f o r i n d i v i d u a l unsecured c r e d i t .

The second

bank had a s t a n d a r d p o l i c y o f r e q u i r i n g spouses o f m a r r i e d borrowers

to

debt i n s t r u m e n t s on mortgage l o a n t r a n s a c t i o n s

provisions

o f R e g u l a t i o n B as w e l l .
basis,

and b o t h s e t t l e m e n t s r e q u i r e d ,

pliance officer
civil

Both c e a s e - a n d - d e s i s t

rights

3.

and i t

o r d e r s were s e t t l e d on a consent

among o t h e r t h i n g s ,

appointment o f a com-

and the t r a i n i n g o f bank employees i n consumer p r o t e c t i o n and

laws.

Consumer

Complaints

The F e d e r a l Reserve System r e p l i e s
many areas o f consumer a c t i v i t y .

to complaints

on the p a r t o f s t a t e member banks.
t o take c o r r e c t i v e a c t i o n .
enforcement e f f o r t s ,

I n the l a t t e r

t h a t may r e v e a l

case,

I n k e e p i n g w i t h the B o a r d ' s

i n v e s t i g a t i o n of c o m p l a i n t s

as mentioned

in

the bank i s

with

errors

required

special c i v i l

rights

s e p a r a t e procedures have been developed t h a t r e q u i r e

the o n - s i t e

discrimination,

and i n q u i r i e s

Responses range from p r o v i d i n g consumers

i n f o r m a t i o n o r e x p l a n a t i o n s o f laws t o i n v e s t i g a t i o n s

s i d e r a t i o n of

v i o l a t e d other

sign

alleging i l l e g a l

con-

credit

previously.

From J a n u a r y 1, 1979, t o November 30, 1979, the Board r e c e i v e d 51
complaints




alleging violations

o f R e g u l a t i o n B by s t a t e member banks.

About

- 5 75 p e r c e n t , or 38 c o m p l a i n t s ,
terms o f c r e d i t .

charged u n f a i r d e n i a l ,

F o u r t e e n o f these c o m p l a i n t s

basis of c h a r a c t e r i s t i c s

p r o t e c t e d by the a c t :

based on sex; t h r e e , on age; two, on r a c e ,
source o f income; one, on m a r i t a l s t a t u s ;

termination,

alleged unfair

or change

treatment on the

five alleged unfair

color,

in

treatment

or n a t i o n a l o r i g i n ;

two, on

and one, on e x e r c i s e o f r i g h t s

under

the Consumer C r e d i t P r o t e c t i o n A c t .

The o t h e r c o m p l a i n t s can be broken down

as f o l l o w s :

three,

of residency;

six,

on c r e d i t h i s t o r y ;

on l e v e l o f income; one, on l e n g t h

one, on l e n g t h o f employment; and t h i r t e e n ,

on m i s c e l l a n e o u s

bases.
Of the 38 c o m p l a i n t s ,

29 p e r c e n t were r e s o l v e d through

the c o m p l a i n a n t ' s m i s u n d e r s t a n d i n g o f the law; 27 p e r c e n t
t h a t r e v e a l e d no bank e r r o r ;

correcting

through

investigation

3 p e r c e n t through i n v e s t i g a t i o n t h a t r e v e a l e d a

f a c t u a l d i s p u t e between the complainant and the bank, so the consumer was r e f e r r e d t o an a t t o r n e y ;
bank v i o l a t i o n ;

3 p e r c e n t through i n v e s t i g a t i o n t h a t r e v e a l e d a p o s s i b l e

and 3 p e r c e n t were r e f e r r e d t o o t h e r a g e n c i e s

As o f November 29, 1979, t h e remaining 32 p e r c e n t were s t i l l

for

resolution.

under

investiga-

tion.

B.

Other

Agencies
Most o f the f e d e r a l agencies r e s p o n s i b l e

f o r e n f o r c i n g the E q u a l

C r e d i t O p p o r t u n i t y A c t and R e g u l a t i o n B have i n d i c a t e d t h a t compliance seems
t o have improved i n 1979.
o f the Board,

Statistics

from summaries o f e x a m i n a t i o n

reports

the F e d e r a l D e p o s i t I n s u r a n c e C o r p o r a t i o n (FDIC), the

Federal

Home Loan Bank Board (FHLBB), and the N a t i o n a l C r e d i t U n i o n A d m i n i s t r a t i o n
(NCUA), show v a r y i n g l e v e l s o f improved c o m p l i a n c e .

The Small B u s i n e s s

i s t r a t i o n (SBA), the U n i t e d S t a t e s Department o f A g r i c u l t u r e

(USDA) , t h e

A e r o n a u t i c s Board (CAB), and the Farm C r e d i t A d m i n i s t r a t i o n (FCA), a l l
t h a t compliance among the c r e d i t o r s




AdminCivil

report

they s u p e r v i s e g e n e r a l l y appears good.

- 6 1.

F e d e r a l Trade Commission (FTC)

The D i v i s i o n o f C r e d i t P r a c t i c e s
Protection is
ties

responsible for research,

investigation,

r e l a t e d to m u l t i r e g i o n a l and n a t i o n a l c r e d i t o r s .

violators

of the a c t ,

the D i v i s i o n of C r e d i t P r a c t i c e s

s u p p l i e d by consumer c o m p l a i n a n t s ,
referrals
tions

i n the F T C ' s Bureau o f

consumer and c i v i l

and enforcement

through i t s

law v i o l a t i o n s ,

potential

relies

information

upon

rights organizations,

t h e FTC may seek a d j u d i c a t i o n ,

cease-and-desist

either

court;

if

i t may recommend a c c e p t a n c e of an agreement

not w a r r a n t e d ,

and

When i n v e s t i g a -

own a d j u d i c a t i v e p r o c e s s e s o r t h r o u g h a U . S . d i s t r i c t

litigation is

activi-

To i d e n t i f y

from o t h e r f e d e r a l and s t a t e enforcement a g e n c i e s .

reveal s i g n i f i c a n t

Consumer

to

from v i o l a t i o n s

and to p r o v i d e r e m e d i a l r e l i e f

to

aggrieved

consumers.
A c c o r d i n g t o the FTC, the l e v e l of o v e r a l l compliance w i t h t h e
has i n c r e a s e d among c r e d i t o r s w i t h i n i t s

jurisdiction.

FTC has s a i d t h a t c e r t a i n types of d i s c r i m i n a t o r y
persist—practices

s u c h as improper r e q u e s t s f o r

a b o u t , an a p p l i c a n t ' s
mentioned p a r t i c u l a r l y

spouse.

At the same t i m e ,

practices are believed
signatures

o f , or

i n r e l a t i o n t o such

sales finance,

information

the p r a c t i c e s

and s m a l l l o a n companies suggests t h a t

such as d i s c r i m i n a t o r y discouragement of a p p l i c a t i o n s ,
not d e t e c t a b l e t h r o u g h the use of

traditional

of
various

Practices

the FTC has n o t e d ,

investigative

techniques

such t e c h n i q u e s produce no documents and a r e not p a r t of the w r i t t e n
involved.

were

discrimina-

t o r y l e n d i n g p r a c t i c e s documented d u r i n g t h e enactment of the ECOA.




to

practices.

s u b t l e forms of d i s c r i m i n a t i o n may be r e p l a c i n g the more b l a t a n t

p r o c e d u r e s of the companies

the

The s a l e s f i n a n c e and s m a l l l o a n i n d u s t r i e s

The FTC has a l s o r e p o r t e d t h a t i n v e s t i g a t i o n o f
mortgage l e n d e r s ,

act

are

because

operating

- 7 -

I n 1979, the FTC took f o r m a l a c t i o n a g a i n s t
v i o l a t i n g the ECOA.
i n a consent

The f i r s t ,

which i n v o l v e d a l a r g e r e t a i l company,

for

resulted

judgment which r e q u i r e d , among o t h e r t h i t i g s , t h a t the company p r o -

v i d e consumers w i t h s p e c i f i c
applications

two major c r e d i t o r s

for credit

p r i n c i p a l reasons f o r adverse a c t i o n when t h e i r

are denied.

The second, a l s o r e s o l v e d t h r o u g h a consent

agreement, e n j o i n e d a l a r g e s a l e s f i n a n c e company from c e r t a i n i l l e g a l

practices,

such as u s i n g p r o h i b i t e d m a r i t a l s t a t u s i n f o r m a t i o n i n the e v a l u a t i o n o f

applica-

tions,

and

f a i l i n g to provide s p e c i f i c

failing

t o comply w i t h r e c o r d k e e p i n g r e q u i r e m e n t s o f

investigations

of o t h e r c r e d i t o r s

resolved v o l u n t a r i l y a f t e r
and

p r i n c i p a l reasons f o r adverse a c t i o n ,
the r e g u l a t i o n .

Several

t h a t d i d not w a r r a n t f o r m a l a c t i o n s

the c r e d i t o r s had agreed t o modify t h e i r

were

policies

practices.
Based on FTC r e p o r t s ,

fewer c o m p l a i n t s r e l a t i n g t o

i n c r e d i t were r e c e i v e d i n 1979 t h a n i n the p r e v i o u s

2.

N a t i o n a l C r e d i t Union A d m i n i s t r a t i o n

discrimination

year.

(NCUA)

The NCUA e n f o r c e s consumer p r o t e c t i o n and c i v i l r i g h t s

laws

e x a m i n a t i o n of f e d e r a l c r e d i t unions and i n v e s t i g a t i o n o f consumer
The NCUA has r e p o r t e d a number of e f f o r t s

through

complaints.

t o p r o v i d e f o r more e f f e c t i v e

enforce-

ment o f consumer p r o t e c t i o n l a w s , such as d o u b l i n g t h e number of NCUA r e g i o n a l
consumer a f f a i r s a n a l y s t s ,
pliance,
of

establishing

s e p a r a t e e x a m i n a t i o n s f o r consumer com-

and e s t a b l i s h i n g e i g h t consumer-compliance examiner d i s t r i c t s

the NCUA's s i x

September 30, 1979, 44 percent of the 172 i n s t i t u t i o n s




each

regions.

The NCUA has r e p o r t e d t h a t , d u r i n g t h e one-month p e r i o d

o f R e g u l a t i o n B.

for

The NCUA says t h a t ,

for

ending

examined had v i o l a t i o n s

the most p a r t ,

the v i o l a t i o n s

resulted

- 8 from u n a c c e p t a b l e l o a n a p p l i c a t i o n s ,
proper c r e d i t

failure

r e p o r t i n g , and improper s i g n a t u r e

The NCUA has r e p o r t e d r e c e i v i n g
Credit Opportunity Act.
national origin;

150 c o m p l a i n t s r e l a t e d t o t h e E q u a l

Of t h o s e , 61 a l l e g e d d i s c r i m i n a t i o n based on r a c e or
9, on age; 5, on r e c e i p t

2, on the e x e r c i s e of r i g h t s under the Consumer C r e d i t

t e c t i o n A c t ; and 31, on m i s c e l l a n e o u s bases.
p l a i n t s r e g a r d i n g adverse a c t i o n

(FDIC)

I t s program a l l o w s f o r each bank t o be examined a t
Examiners r e p o r t v i o l a t i o n s

insured
least

to r e g i o n a l o f f i c e s ,

which

a r e r e s p o n s i b l e f o r e n c o u r a g i n g v o l u n t a r y compliance by the banks b e f o r e
mending a d m i n i s t r a t i v e

Pro-

notices.

The FDIC e n f o r c e s the ECOA and R e g u l a t i o n B w i t h r e g a r d t o

once every 18 months.

of

The NCUA a l s o r e c e i v e d 11 com-

F e d e r a l D e p o s i t Insurance C o r p o r a t i o n

nonmember banks.

for

requirements.

16, on sex; 15, on m a r i t a l s t a t u s ;

public assistance;

3.

to i d e n t i f y loan accounts

recom-

action.

The FDIC has r e p o r t e d t h a t d u r i n g the p e r i o d from October 1,

1978,

t h r o u g h September 30, 1979, the FDIC reviewed 5,824 pages of r e p o r t s on v i o l a t i o n s of R e g u l a t i o n B.
50.4 p e r c e n t , o f

Apparent v i o l a t i o n s were i n d i c a t e d i n 2,938, o r about

these r e p o r t s , compared w i t h 51.3 i n 1978.

The v i o l a t i o n s most f r e q u e n t l y r e p o r t e d — i n 22 p e r c e n t o f the
involved f a i l u r e
applicants
it

to p r o v i d e adverse a c t i o n n o t i f i c a t i o n s .

Failure

to

reports-

advise

t h a t " o t h e r income" need not be r e v e a l e d u n l e s s the a p p l i c a n t

c o n s i d e r e d as income was noted i n 6.2 p e r c e n t of t h e r e p o r t s ,

wants

improper

r e q u e s t s f o r a s p o u s e ' s s i g n a t u r e was c i t e d i n 6 . 1 p e r c e n t , and the f a i l u r e

to

d e s i g n a t e accounts i n w h i c h b o t h spouses p a r t i c i p a t e was l i s t e d i n about 6
percent.

D u r i n g the f i r s t

t e n months of 1979, t h e FDIC brought f i v e

d e s i s t actions charging v i o l a t i o n s




o f the a c t and R e g u l a t i o n B.

cease-and-

- 9 The FDIC has r e p o r t e d r e c e i v i n g 406 c o m p l a i n t s and 90 i n q u i r i e s
cerning equal c r e d i t
of adverse a c t i o n ,

opportunity.

The l a r g e s t

percentage concerned the

con-

notice

a l l e g e d d i s c r i m i n a t i o n based on sex o r m a r i t a l s t a t u s , and•

a l l e g e d d i s c r i m i n a t i o n based on r a c e o r age.

4.

F e d e r a l Home Loan Bank Board (FHLBB)

The ECOA i s

e n f o r c e d by the FHLBB through e x a m i n a t i o n s ,

v e s t i g a t i o n of consumer c o m p l a i n t s .

and the

I f v o l u n t a r y compliance i s not

the FHLBB may i s s u e a c e a s e - a n d - d e s i s t

order.

t o the s u p e r v i s o r y a g e n t s , who a r e r e s p o n s i b l e

in-

achieved,

Consumer c o m p l a i n t s a r e
f o r i n v e s t i g a t i o n and

referred

resolution,

and t h e d i s p o s i t i o n o f each case i s r e p o r t e d t o the FHLBB.
Between October 1, 1978, and September 30, 1979, t h e FHLBB conducted
3,350 r e g u l a r e x a m i n a t i o n s ;
v i o l a t i o n s o f ECOA.
their

of t h e s e , 1,198, o r about 36 p e r c e n t ,

revealed

S i n c e the FHLBB r e p o r t e d 53 p e r c e n t of c r e d i t o r s

under

j u r i s d i c t i o n as b e i n g i n apparent v i o l a t i o n i n 1978, compliance would

seem t o have s i g n i f i c a n t l y

improved i n 1979.

The t o t a l number o f R e g u l a t i o n B v i o l a t i o n s

r e p o r t e d was 8,658.

m a j o r i t y were due t o r e q u e s t s f o r improper i n f o r m a t i o n ,
applicants

failure

to

p r o p e r l y o f adverse a c t i o n or t o conform t o requirements

a c t i o n n o t i c e s , and f a i l u r e

to obtain monitoring

notify
for

adverse

information.

D u r i n g the p e r i o d January 1, 1979, t h r o u g h November 30, 1979,
FHLBB r e c e i v e d 172 consumer c o m p l a i n t s a l l e g i n g v a r i o u s t y p e s of

the

discrimination.

Of t h e s e , 7 a l l e g e d d i s c r i m i n a t i o n based on age; 39, on g e o g r a p h i c a l area;
on sex; 21, on m a r i t a l s t a t u s ;
cellaneous




bases.

The

34, on r a c e o r n a t i o n a l o r i g i n ,

32,

and 39, on m i s -

- 10 5.

O f f i c e o f the C o m p t r o l l e r o f

the C u r r e n c y (OCC)

The OCC has r e p o r t e d a 1978-79 r e o r g a n i z a t i o n a f f e c t i n g
affairs activities
compliance

i n o r d e r t o oversee more e f f e c t i v e l y

consumer

the agency's

consumer

functions.
Between J u l y 1, 1978, and June 30, 1979, 1,779 n a t i o n a l banks were

examined f o r compliance w i t h the ECOA and o t h e r l a w s .
l a t i o n s of R e g u l a t i o n B was d i s c o v e r e d .
t i o n s o f r e g u l a t o r y requirements
action notices,

A t o t a l o f 14,911 v i o -

The most f r e q u e n t l y r e p o r t e d

i n c l u d e those g o v e r n i n g the c o n t e n t o f

the c o l l e c t i o n of monitoring i n f o r m a t i o n ,

about m a r i t a l s t a t u s ,

and

viola-

requests f o r

adverse
information

signatures.

Between J u l y 1, 1978, and June 30, 1979, t h e OCC r e c e i v e d 1,084 consumer
c o m p l a i n t s i n v o l v i n g the ECOA.
a bank's f a i l u r e

The OCC has r e p o r t e d t h a t about o n e - t h i r d

t o g i v e adequate n o t i c e o f the reasons f o r c r e d i t

about t w o - t h i r d s were r e l a t e d t o bank c r e d i t

6.

Small B u s i n e s s A d m i n i s t r a t i o n

The SBA i s
recipients

alleged

denial,

cards.

(SBA)

r e s p o n s i b l e f o r a s s u r i n g t h a t the a d m i n i s t r a t i o n and

comply w i t h r e q u i r e m e n t s o f

the a c t and o f R e g u l a t i o n B.

its

During

1979 f i s c a l y e a r , 21,481 r e c i p i e n t s were m o n i t o r e d f o r c o m p l i a n c e w i t h t h e
The SBA has r e p o r t e d t h a t most c r e d i t o r s appear t o be i n
R o u t i n e r e v i e w s of a few temporary d i s a s t e r o f f i c e s

cants are being

indicated a possible

act.

problem

provisions

A l l l o a n a p p l i c a t i o n s a r e b e i n g r e v i e w e d , and r e l e v a n t

appli-

contacted.

I n 1979, the SBA r e c e i v e d 20 consumer c o m p l a i n t s a l l e g i n g t h a t
c r i m i n a t i o n had p l a y e d a p a r t i n c r e d i t




the

compliance.

on the p a r t of some temporary employees who may have v i o l a t e d the age
o f R e g u l a t i o n B.

while

denial.

dis-

- 11 7.

S e c u r i t i e s and Exchange Commission (SEC)

The SEC i s
w i t h the SEC.
is

r e s p o n s i b l e f o r examining b r o k e r - d e a l e r s

When v i o l a t i o n s

registered

of consumer laws a r e f o u n d , v o l u n t a r y

compliance

sought; f o l l o w - u p e x a m i n a t i o n s a r e used to i n s u r e such c o m p l i a n c e .

of continuing v i o l a t i o n s ,

the SEC i n v e s t i g a t e s

a g a i n s t a noncomplying b r o k e r - d e a l e r .
i n v e s t i g a t i o n of consumer

The SEC a l s o e n f o r c e s

of

the ECOA were r e p o r t e d ;

r e l a t e d t o the a c t was r e c e i v e d and

8.

responsible

the a c t and w i t h R e g u l a t i o n B.
o r d e r a g a i n s t any c r e d i t o r

through

one consumer com-

resolved.

f o r i n s u r i n g c o m p l i a n c e by a i r

In a d d i t i o n ,

to assess c i v i l

under i t s

j u r i s d i c a t i o n that v i o l a t e s

among U . S . and f o r e i g n a i r l i n e s .

act.

i t may a l s o seek an i n j u n c t i o n

l e v e l of c o m p l i a n c e

The CAB has r e p o r t e d r e c e i v i n g

i n v o l v i n g the ECOA and R e g u l a t i o n B i n 1979.

consumer c r e d i t

the

p e n a l t i e s o f up t o $1,000 f o r each v i o l a t i o n of i t s

processed i n f o r m a l l y .

with

the A i r l i n e D e r e g u l a t i o n A c t of 1978 empowers the CAB

A c c o r d i n g to the CAB, a s a t i s f a c t o r y

150 c o m p l a i n t s

carriers

I t i s a u t h o r i z e d t o seek a c e a s e - a n d - d e s i s t

I n cases o f s e r i o u s and c o n t i n u e d noncompliance,

9.

the a c t

C i v i l A e r o n a u t i c s Board (CAB)

The CAB i s

i n court.

injunction

complaints.

I n 1979, no v i o l a t i o n s
plaint

and may b r i n g an

I n case

exists

approximately

These have been

The CAB i n s t i t u t e d an i n v e s t i g a t i o n i n t o one

practices,

regulations.

airline's

but found no v i o l a t i o n s .

I n t e r s t a t e Commerce Commission (ICC)

The ICC e n f o r c e s

the a c t f o r r e g u l a t e d common c a r r i e r s .

v i e w , common c a r r i e r s a r e f o r b i d d e n to d i s c r i m i n a t e

In

i n the g r a n t i n g o f

by t h e I n t e r s t a t e Commerce A c t and by s e v e r a l ICC c r e d i t

regulations.

its
credit
The ICC

has r e p o r t e d no f o r m a l a c t i o n t a k e n and no c o m p l a i n t s r e c e i v e d under the ECOA.




- 12 -

10.

Farm C r e d i t A d m i n i s t r a t i o n

(FCA)

A d m i n i s t r a t i v e enforcement o f R e g u l a t i o n B and the ECOA i s
p l i s h e d by the FCA through i t s examination o f
l a n d bank a s s o c i a t i o n s ,
credit

federal

l a n d banks,

accom-

federal

f e d e r a l i n t e r m e d i a t e c r e d i t banks, and p r o d u c t i o n

associations.
The FCA r e p o r t s

few i n s t a n c e s o f noncompliance and no

problems i n a d m i n i s t e r i n g i t s

responsibilities

FCA r e c e i v e d 11 c o m p l a i n t s a l l e g i n g i l l e g a l

under the a c t .

significant
I n 1979,

discrimination in credit.

the
All

except two have been withdrawn or r e s o l v e d t o the s a t i s f a c t i o n o f the complainants.

Of the c o m p l a i n t s r e c e i v e d i n 1979, two a l l e g e d

based on r a c e ; one, on age and r e l i g i o n ;
and/or m a r i t a l s t a t u s ;

11.

one, on m a r i t a l

discrimination

one, on n a t i o n a l o r i g i n ;

status;

U.S.Department o f A g r i c u l t u r e

five,

and two, on an u n s p e c i f i e d

t o the P a c k e r s and Stockyards A c t o f 1921.

The USDA r e p o r t s no

cant problems a s s o c i a t e d w i t h the l i m i t e d program under t h i s
The USDA a l s o a d m i n i s t e r s a l a r g e number o f c r e d i t
t h e Farmers Home A d m i n i s t r a t i o n .
credit

programs

Although enforcement a u t h o r i t y

II.

for

those

staff,

CONSUMER ADVISORY COUNCIL

the Consumer A d v i s o r y C o u n c i l i n c l u d e s consumer, c r e d i t o r ,




through

programs.

E s t a b l i s h e d i n 1976 t o a d v i s e the Board on c o n s u m e r - r e l a t e d

sentatives.

signifi-

Opportunity

and, a l o n g w i t h the Farmers Home A d m i n i s t r a t i o n

conducts compliance r e v i e w s o f the c r e d i t

sub-

act.

programs r e s t s w i t h the FTC, the USDA's O f f i c e o f E q u a l

processes complaints

basis,

(USDA)

The ECOA g i v e s the USDA enforcement a u t h o r i t y over a c t i v i t i e s
ject

on sex

At i t s

matters,

and academic

repre-

t h r e e meetings i n 1979, the C o u n c i l d i s c u s s e d how the

- 13 a n t i - d i s c r i m i n a t i o n r u l e s o f R e g u l a t i o n B s h o u l d be a p p l i e d t o c e r t a i n

practices

o f c r e d i t o r s who use c r e d i t - s c o r i n g systems.

included

the f o l l o w i n g :
o r the number o f
the a p p l i c a n t ' s

The p r a c t i c e s

(1) a s s i g n i n g a score t o the number o f j o b s the a p p l i c a n t
sources o f income;

income from p a r t - t i m e employment, p e n s i o n , or alimony;

a r i s i n g from the c r e d i t o r ' s

s c o r i n g system; and (4) s e l e c t i n g reasons

With respect

giving

for

adverse

i n c l u d e d i n R e g u l a t i o n B,

uses a c r e d i t - s c o r i n g system w i t h a t t r i b u t e s

not r e f l e c t e d i n the model

(3)

a p p l i c a t i o n r a t h e r than those

a c t i o n from among the 20 reasons i n a model statement
even though the c r e d i t o r

has

(2) not a s s i g n i n g a s c o r e t o the amount o f

judgmental reasons f o r adverse a c t i o n on a c r e d i t

v o t e o f 13 - 3,

considered

that

are

statement.

t o the f i r s t

practice,

t h a t the Board not p r o h i b i t

the C o u n c i l recommended, by a

the p r a c t i c e aE such, but

instead

a l l o w t h e a g e n c i e s charged w i t h enforcement o f R e g u l a t i o n B t o determine on a
c a s e - b y - c a s e b a s i s whether s c o r i n g the number o f j o b s or sources o f income o f
an a p p l i c a n t has the e f f e c t
on a p r o h i b i t e d b a s i s .

of u n l a w f u l l y d i s c r i m i n a t i n g against

With r e s p e c t

t o the t h i r d p r a c t i c e ,

an a p p l i c a n t

the C o u n c i l

voted

11 - 0 t o recommend t h a t c r e d i t o r s u s i n g a c r e d i t - s c o r i n g system be a l l o w e d

to

g i v e r e j e c t e d a p p l i c a n t s e i t h e r judgmental reasons o r reasons based on the
arithmetic

o f the c r e d i t - s c o r i n g system.

The C o u n c i l d i s c u s s e d the o t h e r

two

p r a c t i c e s but reached no consensus.

III.

UNIFORM ENFORCEMENT GUIDELINES

The f i v e

f e d e r a l a g e n c i e s t h a t are r e p r e s e n t e d on the

Federal

F i n a n c i a l I n s t i t u t i o n s E x a m i n a t i o n C o u n c i l — t h e Board o f G o v e r n o r s ,




the FDIC,

- 14 -

the FHLBB, the NCUA, And the OCC~have j o i n t l y proposed u n i f o r m g u i d e l i n e s
tot

the enforcement o f

Mousing A c t .
1979.
for

the ECOA, i t s

implementing R e g u l a t i o n B, and t h e

The g u i d e l i n e s were f i e l d

At t h e end o f the y e a r ,

t e s t e d by s e v e r a l o f t h e s e a g e n c i e s

Council.

ADMINISTRATIVE FUNCTIONS

I n 1979, t h e Board o f Governors i s s u e d one amendment, one
Board i n t e r p r e t a t i o n ,
It

A.

and two o f f i c i a l

staff

interpretations

official

o f R e g u l a t i o n B.

a l s o r e q u e s t e d comment on how t h e r e g u l a t i o n s h o u l d a p p l y t o c e r t a i n

scoring

credit-

practices.

Amendments and
1.

Interpretations

C l a r i f i c a t i o n o f the D e f i n i t i o n o f

Creditor

On A p r i l 23, 1979, t h e Board amended R e g u l a t i o n B t o make i t
that,

in

the r e s u l t s were b e i n g c o m p i l e d and reviewed

f u r t h e r c o n s i d e r a t i o n i n e a r l y 1980 by the

IV.

Fair

for

the purposes o f the r u l e s p r o h i b i t i n g d i s c r i m i n a t i o n ,

of c r e d i t o r

improvement c o n t r a c t o r s ,
to c r e d i t o r s .
requirements,

Examples a r e a u t o m o b i l e d e a l e r s h i p s , home

and r e a l e s t a t e b r o k e r s who r e g u l a r l y d i r e c t

To ensure t h a t such p a r t i e s

are not overburdened by

customers

regulatory

t h e y are not s u b j e c t e d t o the m e c h a n i c a l r e q u i r e m e n t s o f

t i o n B governing a p p l i c a t i o n s ,




definition

i n c l u d e s not o n l y t h o s e who g r a n t c r e d i t but a l s o those who r e g u -

l a r l y r e f e r customers to c r e d i t o r s .

instance.

the

clear

adverse a c t i o n ,

and c r e d i t

reporting,

Regula-

for

- 15 -

2.

D e t e r m i n a t i o n t h a t a New J e r s e y S t a t u t e G o v e r n i n g C r e d i t A p p l i c a t i o n s i s Not I n c o n s i s t e n t w i t h the E q u a l C r e d i t O p p o r t u n i t y
A c t and R e g u l a t i o n B

On September 26^ 1979, t h e Board i s s u e d an i n t e r p r e t a t i o n
m i n i n g t h a t a New J e r s e y s t a t u t e t h a t p r o h i b i t s m a r i t a l s t a t u s
connection with a c r e d i t
R e g u l a t i o n B.

deter-

inquiries

in

a p p l i c a t i o n i s not i n c o n s i s t e n t w i t h the a c t and w i t h

However, when commenters r a i s e d a number o f q u e s t i o n s about

the

e f f e c t o f the New J e r s e y law, t h e i n t e r p r e t a t i o n was suspended on J a n u a r y 11,
1980, pending a r u l i n g on the New J e r s e y s t a t u t e

from the S t a t e A t t o r n e y

General's

Office.
3a.

D e t e r m i n a t i o n t h a t the N a t i o n a l C r e d i t U n i o n A d m i n i s t r a t i o n ' s
Model Loan A p p l i c a t i o n Forms Comply w i t h R e g u l a t i o n B

On June 8 ,

1979, t h e Board i s s u e d an o f f i c i a l

s t a t i n g t h a t the NCUA's model c r e d i t
r e q u i r e m e n t s o f R e g u l a t i o n B.
J u l y 30,

1979, i s

a p p l i c a t i o n form i s

The i n t e r p r e t a t i o n ,

staff

interpretation

i n compliance w i t h the

which became e f f e c t i v e

on

i n t e n d e d t o ease the r e g u l a t o r y burden on c r e d i t u n i o n s , most

o f which a r e s m a l l i n s t i t u t i o n s

lacking a large s t a f f

and access t o adequate

legal

counsel.
3b,

D e t e r m i n a t i o n t h a t a C r e d i t - C a r d I s s u e r May R e q u i r e " A u t h o r i z e d
U s e r s " t o Assume C o n t r a c t u a l L i a b i l i t y f o r the Account

On J u l y 1, 1979, t h e Board i s s u e d an o f f i c i a l

staff

interpretation

e f f e c t i v e August 30, 197f, p r o v i d i n g t h a t the i s s u e r o f a c r e d i t

c a r d may c o n d i -

t i o n the a c c e p t a n c e o f a u t h o r i z e d c r e d i t - c a r d u s e r s upon the u s e r s becoming c o obligors

and, t h u s , j o i n t

applicants.

Such a p o l i c y ,

if

applied i n a nondis-

c r i m i n a t o r y f a s h i o n , would not v i o l a t e R e g u l a t i o n B.
4.

Proposed Rulemaking;
Request f o r Comment on How the S p e c i f i c
R u l e s o f R e g u l a t i o n B Should A p p l y t o C e r t a i n C r e d i t - S c o r i n g
Practices

On A p r i l 23, 1979, the Board s o l i c i t e d comments on how t h e
r u l e s o f R e g u l a t i o n B s h o u l d a p p l y t o the f o l l o w i n g c r e d i t - s c o r i n g




specific

practices:

- 16 -

(1) s c o r i n g number o f j o b s or number o f sources o f income;
amount o f an a p p l i c a n t ' s

(2) not s c o r i n g

income from p a r t - t i m e employment, p e n s i o n ,

(3) s e l e c t i n g and d i s c l o s i n g the reasons f o r adverse a c t i o n .

or

it

Board i s s u e d ,

was l a t e r changed to August 20, 1979.
as an a i d to d i s c u s s i o n ,

a staff

the a p p l i c a t i o n o f a n t i d i s c r i m i n a t i o n r u l e s

B.

Legislative

alimony;

The c l o s i n g date

f o r comments was June 20, 1979, but because o f the number o f r e q u e s t s
extension,

for

On J u l y 24, 1979,

paper on the i s s u e s

to c r e d i t

an

the

involved

Recommendations

recommends a g a i n t h a t handicapped persons be made a p r o t e c t e d c l a s s

Second,

recommends t h a t the a c t be amended t o p l a c e enforcement a u t h o r i t y f o r USDA

credit

C.

First,

under

the a c t , by adding h a n d i c a p t o the bases o f p r o h i b i t e d d i s c r i m i n a t i o n .
it

in

scoring.

The USDA has made two recommendations f o r changes t o the ECOA.
it

the

programs i n the USDA, i n s t e a d o f i n the FTC.

Education
I n 1979, t h e F e d e r a l Reserve System p r o v i d e d a v a r i e t y o f

and a c t i v i t i e s

d e s i g n e d t o educate consumers and c r e d i t o r s

and r e s p o n s i b i l i t i e s

under the ECOA and R e g u l a t i o n B.

materials

about t h e i r

More than t h r e e

rights
million

c o p i e s o f The Consumer Handbook t o C r e d i t P r o t e c t i o n Laws, p r o b a b l y the
most p o p u l a r p u b l i c a t i o n f o r consumers, have been p r i n t e d .

I t has been w i d e l y

d i s s e m i n a t e d by the f e d e r a l Consumer I n f o r m a t i o n C e n t e r , b y c r e d i t
and by o t h e r bank r e g u l a t o r y a g e n c i e s .

Credit Opportunity,

protection:

Fair Credit Reporting,

the

Equal

T r u t h i n L e n d i n g , Consumer L e a s i n g , R e a l E s t a t e

ment P r o c e d u r e s , Home Mortgage D i s c l o s u r e ,




bureaus,

The Consumer Handbobk summarizes

main p r o v i s i o n s o f seven major laws on consumer c r e d i t

Board's

Settle-

and F a i r

- 17 -

Credit B i l l i n g .
transactions

It

also contains

a glossary of t e c h n i c a l

and i n laws and r e g u l a t i o n s on c r e d i t

terms used i n

credit

protection.

The F e d e r a l Reserve has produced and d i s t r i b u t e d move than 10 m i l l i o n
c o p i e s o f e d u c a t i o n a l pamphlets on the E q u a l C r e d i t O p p o r t u n i t y A c t ,
"The E q u a l C r e d i t O p p o r t u n i t y Act a n d . . . Women," " . . .
Lawyers and Small R e t a i l e r s , "

"...

Credit Rights

E q u a l C r e d i t O p p o r t u n i t y Act A f f e c t s Y o u . "
f r e e i n response t o i n q u i r i e s

Age," " . . .

i n H o u s i n g , " and "How the New

These pamphlets are

film,

s c h o o l and t e l e v i s i o n use, the f i l m i l l u s t r a t e s

p r o t e c t i o n a f f o r d e d by R e g u l a t i o n s B and Z.

So f a r ,

the F e d e r a l Reserve Banks to consumer and student groups,
audience of about one and o n e - h a l f
Many o f

the o t h e r

agencies,

FHLBB, FTC, NCUA, and the OCC, a l s o p r o v i d e speakers
rights

"To Your

response to consumer

Credit."

the consumer
i n showings by

laws.

i n c l u d i n g the FDIC,

f o r groups i n t e r e s t e d

The SBA p r o v i d e s

seminars

distributed.
in

inquiries.
staff

as f a c u l t y at v a r i o u s

s c h o o l s and s c h o o l s sponsored by s t a t e b a n k i n g a s s o c i a t i o n s .

professional
The OCC has

assisted

t r a d e groups i n the p u b l i c a t i o n of m a t e r i a l s

officers

d e s i g n e d to a s s i s t

also

i n complying w i t h R e g u l a t i o n B and w i t h o t h e r consumer and c i v i l

I n 1979, t h e OCC developed a computerized m a i l i n g l i s t




in

for

consumer e d u c a t i o n pamphlets on the act

The OCC has p r o v i d e d i t s

laws.

all

the f i l m has had an

women i n b u s i n e s s d u r i n g which m a t e r i a l s r e g a r d i n g the a c t are
Most o f the agencies d i s t r i b u t e

to con-

million.

f e d e r a l enforcement

consumer p r o t e c t i o n and c i v i l

distributed

staff.

I n 1979, the F e d e r a l Reserve r e l e a s e d a c o l o r

credit

Doctors,

from consumers and d u r i n g p r e s e n t a t i o n s

sumers and c r e d i t o r s by the F e d e r a l Reserve

Designed f o r

including

bank

o f consumer,

rights
civil

- 18 -

rights,

and community groups, p a r t i c u l a r l y

those r e p r e s e n t i n g

low-income

individuals.
The FTC has r e p o r t e d the development and s u c c e s s f u l p r o m o t i o n o f
public

a

s e r v i c e announcement f o r r a d i o and t e l e v i s i o n d e s i g n e d t o educate women

about t h e i r r i g h t s

under t h e a c t

vides written material

to a separate c r e d i t h i s t o r y .

to supplement the

The FDIC has r e p o r t e d t h a t i t
and b a n k e r s '
through i t s

seminars,

also

pro-

announcement.
educates bankers through

examinations

g i v e s a d v i c e t o i n s u r e d nonmember banks upon r e q u e s t

compliance examiners,

i n response to c o m p l a i n t s




It

and

and p r o v i d e s

inquiries.

i n f o r m a t i o n t o consumers

in


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102