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Federal R eserve Bank OF DALLAS ROBERT D. M C T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R April 26, 1991 DALLAS, TEXAS 75222 Notice 91-33 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT Official Staff Commentary on Regulation B (Equal Credit Opportunity) DETAILS The Federal Reserve Board has published in final form revisions to the Official Staff Commentary on Regulation B (Equal Credit Opportunity). The commentary applies and interprets the requirements of Regulation B and is a substitute for individual staff interpretations. The revisions address notification of adverse action and a state law preemption determination. The revisions became effective April 1, 1991. ATTACHMENT A copy of the B o a r d ’s notice is attached. MORE INFORMATION Questions concerning the B o a r d ’s revisions should be addressed to W. Arthur Tribble at (214) 744-7479. For additional copies of this B a n k ’s notice, please contact the Public Affairs Department at (214) 651-6289. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE SYSTEM 12 CFR Part 202 [Reg. B; EC-1] EQUAL CREDIT OPPORTUNITY Update to Official Staff Commentary AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final official staff interpretation. SUMMARY: The Board is publishing in final form revisions to the official staff commentary to Regulation B (Equal Credit Opportunity). The commentary applies and interprets the requirements of Regulation B and is a substitute for individual staff interpretations of the regulation. The revisions address notification of adverse action and a state law preemption determination. EFFECTIVE DATE: April 1, 1991. FOR FURTHER INFORMATION CONTACT: In the Division of Consumer and Community Affairs, Adrienne D. Hurt, Senior Attorney, or Jane Ahrens, Staff Attorney, at (202) 452-2412; for the hearing impaired only. contact Dorothea Thompson, Telecommunications Device for the Deaf (TDD), at (202) 452-3544, Board of Governors of the Federal Reserve System, Washington, DC 20551. - 2 - SUPPLEMENTARY INFORMATION: (1) General The Equal Credit Opportunity Act (ECOA), 15 U.S.C. §16911691f, makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or the exercise of rights under the Consumer Credit Protection Act. This statute is implemented by the Board's Regulation B (12 CFR Part 202). The Board also has an official staff commentary (12 CFR Part 202 (Supp. I)) that interprets the regulation. The commentary provides general guidance to creditors in applying the regulation to various credit transactions, and is updated periodically to address significant questions that arise. On November 28, 1990, the Board published for comment a proposed update to the commentary. (55 Fed. Reg. 49391) This notice contains in final form the 1990-91 update to the official staff commentary on Regulation B. (2) Revisions Section 202.2 - Definitions 2(c) Adverse action Comment 2(c )(2 )(ii )-2 is added to clarify the Board's long-standing position that a notice of adverse action need not be provided in instances where a creditor takes action regarding a current delinquency or default on an account -- that is, a delinquency or default that has not been cured by the time a - 3 - creditor takes action on an account. Notification generally is required, however, for action based on a past delinquency or default that may have previously existed but that no longer continues. Section 202.11 - Relation to State Law 11(a) Inconsistent state laws Comment 11(a)-2 is added to reflect a preemption determination relating to Ohio law that took effect on July 23, 1990 (55 FR 29566). List of Subjects In 12 CFR Part 202 Banks; Banking; Civil rights; Consumer protection; Credit; Federal Reserve System; Marital status discrimination; Minority groups; Penalties; Religious discrimination; Sex discrimination; Women. Pursuant to authority granted in section 703 of the Equal Credit Opportunity Act (15 U.S.C. §1691b), the Board is amending the official staff commentary to Regulation B (12 CFR 202 Supp. I) as follows: 1. The authority citation for Part 202 continues to read as follows: AUTHORITY: 2. 15 U.S.C. §1691-1691f In section 202.2, comment 2(c )(2)(ii)-2 is added to read as follows: - Section 202.2 — 4 - Definitions 2(c) Adverse action. * * ★ "k k * * * Paragraph 2(c)(2)(ii) * * 2. Current delinquency or default. The term adverse action does not include a creditor's termination of an account when the accountholder is currently in default or delinquent on that account. Notification in accordance with section 202.9 of the regulation generally is required, however, if the creditor's action is based on a past delinquency or default on the account. k k k k k 3. In section 202.11, comment ll(a)-2 is added to read as follows: Section 202.11 -11(a) Relation to State Law Inconsistent state laws. * 2. * * * * Preemption determination -- Ohio. Effective July 23, 1990, the Board has determined that the following provision in the state law of Ohio is preempted by the federal law: • Section 4112.021(B)(1) -- Unlawful discriminatory practices in credit transactions. This provision is preempted to the extent that it bars asking or favorably considering the age of an elderly applicant; prohibits the consideration of age in a credit scoring system; permits without limitation the consideration of age in real estate - 5 - transactions; and limits the consideration of age in special-purpose credit programs to certain governmentsponsored programs identified in the state law. * * * * * Board of Governors of the Federal Reserve System, April 1, 1991. (signed) William W. Wiles Secretary of the Board