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63445

Rules and Regulations

Federal Register
Vol. 72, No. 217
Friday, November 9, 2007

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R–1281]

Equal Credit Opportunity
Board of Governors of the
Federal Reserve System.
ACTION: Final rule; official staff
interpretation.

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AGENCY:

SUMMARY: The Board is amending
Regulation B, which implements the
Equal Credit Opportunity Act, and the
official staff commentary to the
regulation, to withdraw portions of the
interim final rules for the electronic
delivery of disclosures issued March 30,
2001. The interim final rules address the
timing and delivery of electronic
disclosures, consistent with the
requirements of the Electronic
Signatures in Global and National
Commerce Act (E-Sign Act). Because
compliance with the 2001 interim final
rules has not been mandatory,
withdrawal of these provisions from the
Code of Federal Regulations reduces
confusion about the status of the
provisions and simplifies the regulation.
In addition, the Board is adopting
final amendments to Regulation B to
provide guidance on the electronic
delivery of disclosures. For example, the
final rules provide that when an
application is accessed by an applicant
in electronic form, disclosures may be
provided to the consumer in electronic
form on or with the application without
regard to the consumer consent and
other provisions of the E-Sign Act.
Similar final rules are being adopted
under other consumer financial services
regulations administered by the Board.
DATES: The final rule is effective
December 10, 2007. The mandatory
compliance date is October 1, 2008.
FOR FURTHER INFORMATION CONTACT: John
C. Wood, Counsel, Division of
Consumer and Community Affairs, at

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SUPPLEMENTARY INFORMATION:

I. Statutory Background

The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.

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(202) 452–2412 or (202) 452–3667. For
users of Telecommunications Device for
the Deaf (TDD) only, contact (202) 263–
4869.

The Equal Credit Opportunity Act
(ECOA), 15 U.S.C. 1691 et seq., makes
it unlawful for creditors to discriminate
in any aspect of a credit transaction on
the basis of sex, race, color, religion,
national origin, marital status, or age
(provided the applicant has the capacity
to contract), because all or part of an
applicant’s income derives from public
assistance, or because an applicant has
in good faith exercised any right under
the Consumer Credit Protection Act.
The Board’s Regulation B (12 CFR part
202) implements the ECOA. The ECOA
and Regulation B require certain
disclosures to be provided to applicants,
and some of those disclosures must be
provided in writing.
The Electronic Signatures in Global
and National Commerce Act (the E-Sign
Act), 15 U.S.C. 7001 et seq., was enacted
in 2000. The E-Sign Act provides that
electronic documents and electronic
signatures have the same validity as
paper documents and handwritten
signatures. The E-Sign Act contains
special rules for the use of electronic
disclosures in consumer transactions.
Under the E-Sign Act, consumer
disclosures required by other laws or
regulations to be provided or made
available in writing may be provided or
made available, as applicable, in
electronic form if the consumer
affirmatively consents after receiving a
notice that contains certain information
specified in the statute, and if certain
other conditions are met.
The E-Sign Act, including the special
consumer notice and consent
provisions, became effective October 1,
2000, and did not require implementing
regulations. Thus, creditors are
currently permitted to provide in
electronic form any disclosures that are
required to be provided or made
available to the consumer in writing
under Regulation B if the consumer
affirmatively consents to receipt of
electronic disclosures in the manner
required by section 101(c) of the E-Sign
Act.

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II. Board Proposals and Interim Rules
Regarding Electronic Disclosures
On April 4, 2001, the Board published
for comment interim final rules to
establish uniform standards for the
electronic delivery of disclosures
required under Regulation B (66 FR
17779). Similar interim final rules for
Regulations E, M, Z, and DD
(implementing the Electronic Fund
Transfer Act, the Consumer Leasing Act,
the Truth in Lending Act, and the Truth
in Savings Act, respectively) were
published on March 30, 2001 (66 FR
17322 and 66 FR 17329) (Regulations M
and Z, respectively), and April 4, 2001
(66 FR 17786 and 66 FR 17795)
(Regulations E and DD, respectively).
Each of the interim final rules
incorporated, but did not interpret, the
requirements of the E-Sign Act.
Creditors and other persons, as
applicable, generally were required to
obtain consumers’ affirmative consent to
provide disclosures electronically,
consistent with the requirements of the
E-Sign Act. The interim final rules also
incorporated many of the provisions
that were part of earlier regulatory
proposals issued by the Board regarding
electronic disclosures.1
Under the 2001 interim final rules,
disclosures could be sent to an e-mail
address designated by the consumer, or
could be made available at another
location, such as an Internet Web site.
If the disclosures were not sent by email, creditors would have to provide a
notice to consumers (typically by email) alerting them to the availability of
the disclosures. Disclosures posted on a
Web site would have to be available for
at least 90 days to allow consumers
adequate time to access and retain the
information. Creditors also would be
required to make a good faith attempt to
redeliver electronic disclosures that
were returned undelivered, using the
address information available in their
files.
1 On May 2, 1996, the Board proposed to amend
Regulation E to permit financial institutions to
provide disclosures by sending them electronically
(61 FR 19696). Based on comments received, in
1998 the Board published an interim rule
permitting the electronic delivery of disclosures
under Regulation E (63 FR 14528, March 25, 1998)
and similar proposals under Regulations B, M, Z,
and DD (63 FR 14552, 14538, 14548, and 14533,
respectively, March 25, 1998). Based on comments
received on the 1998 proposals, in 1999 the Board
published revised proposals under Regulations B, E,
M, Z, and DD (64 FR 49688, 49699, 49713, 49722
and 49740, respectively, September 14, 1999).

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Commenters on the interim final rules
identified significant operational and
information security concerns with
respect to the requirement to send the
disclosure or an alert notice to an e-mail
address designated by the consumer.
For example, commenters stated that
some consumers who choose to receive
electronic disclosures do not have email addresses or may not want
personal financial information sent to
them by e-mail. Commenters also noted
that e-mail is not a secure medium for
delivering confidential information and
that consumers’ e-mail addresses
frequently change. The commenters also
opposed the requirement for redelivery
in the event a disclosure was returned
undelivered. In addition, many
commenters asserted that making the
disclosures available for at least 90 days,
as required by the interim final rule,
would increase costs and would not be
necessary for consumer protection.
In August 2001, in response to
comments received, the Board lifted the
previously established October 1, 2001
mandatory compliance date for all of the
interim final rules. (66 FR 41439,
August 8, 2001.) Thus, creditors are not
required to comply with the interim
final rules. Since that time, the Board
had not taken further action with
respect to the interim final rules on
electronic disclosures in order to allow
electronic commerce, including
electronic disclosure practices, to
continue to develop without regulatory
intervention and to allow the Board to
gather further information about such
practices.
In April 2007, the Board proposed to
amend Regulation B and the official
staff commentary by (1) withdrawing
portions of the 2001 interim final rule
that restate or cross-reference provisions
of the E-Sign Act and accordingly are
unnecessary; (2) withdrawing other
portions of the interim final rule that the
Board now believes may impose undue
burdens on electronic banking and
commerce and may be unnecessary for
consumer protection; and (3) retaining
the substance of certain provisions of
the interim final rule that provide
regulatory relief or guidance regarding
electronic disclosures. (72 FR 21125,
April 30, 2007.) Similar amendments
were also proposed by the Board under
Regulations E, M, Z, and DD (72 FR
21131, 72 FR 21135, 72 FR 21141, and
72 FR 21155, respectively).
III. Summary of the Final Rule
The Board received about 25
comments on the April 2007 proposal,
primarily from creditors and their
representatives. Most of the industry
commenters generally supported the

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proposal, although some provided
suggestions for clarifications or changes
to particular elements of the proposal. A
comment letter was also submitted on
behalf of four consumer groups. The
consumer group commenters suggested
a number of changes to strengthen
consumer protections. The comments
are discussed in more detail in the
Section-by-Section Analysis below.
For the reasons discussed below, the
Board is now adopting amendments to
Regulation B in final form, largely as
proposed in April 2007. As stated in the
proposal, because compliance with the
2001 interim final rules has not been
mandatory, the final rule will reduce
confusion about the status of the
electronic disclosure provisions and
simplify the regulation. (Certain
provisions in the 2001 interim rules,
including provisions addressing foreign
language disclosures, were not affected
by the lifting of the mandatory
compliance date and became final in
2001; thus, those provisions are not
dealt with in this rulemaking.) The
Board is also adopting certain
provisions that are identical or similar
to provisions in the 2001 interim rules
in order to enhance the ability of
consumers to shop for credit online,
minimize the information-gathering
burdens on consumers, and provide
guidance or eliminate a substantial
burden on the use of electronic
disclosures, as discussed further below.
Since 2001, industry and consumers
have gained considerable experience
with electronic disclosures. During that
period, the Board has received no
indication that consumers have been
harmed by the fact that compliance with
the interim final rules is not mandatory.
The Board also has reconsidered certain
aspects of the interim final rules, such
as sending disclosures by e-mail, in
light of concerns about data security,
identity theft, and ‘‘phishing’’ (i.e.,
prompting consumers to reveal
confidential personal or financial
information through fraudulent e-mail
requests that appear to originate from a
creditor, government agency, or other
trusted entity) that have become more
pronounced since 2001. The Board is
also eliminating certain aspects of the
2001 interim final rule, such as
provisions regarding the availability and
retention of electronic disclosures, as
unnecessary in light of current industry
practices.
The 2001 interim final rule allowed
creditors to provide certain disclosures
to applicants in electronic form without
obtaining E-Sign consent if the
disclosures were provided on or with an
application. Similarly, in the April 2007
proposal, pursuant to the Board’s

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authority under section 703(a)(1) of the
ECOA, as well as under section 104(d)
of the E-Sign Act,2 the Board proposed
to specify the circumstances under
which certain disclosures may be
provided on or with an application in
electronic form, rather than in writing as
required by Regulation B, without
obtaining the applicant’s consent under
section 101(c) of the E-Sign Act.
Commenters supported the Board’s
approach with regard to this issue. This
final rule adopts the approach in the
April 2007 proposal. The Board
continues to believe that creditors
should not be required to obtain the
consumer’s consent in order to provide
application-related disclosures if the
consumer accesses the application
containing these disclosures in
electronic form, such as at an Internet
Web site. The Board believes consumers
would not be harmed if the E-Sign
consent procedures do not apply and
would obtain significant benefits by
having timely access to applicationrelated disclosures in electronic form.
Conversely, consumers who choose to
apply for credit online would be unduly
burdened if they had to consent in
accordance with the E-Sign Act in order
to access application forms that are
accompanied by disclosures. Applying
the consumer consent provisions of the
E-Sign Act to these disclosures could
impose substantial burdens on
electronic commerce and make it more
difficult for consumers to apply for
credit.
At the same time, the Board
recognizes that consumers who apply
for credit online may not want to
receive other disclosures electronically.
Therefore, with respect to adverse
action notices and copies of appraisal
reports, creditors are required to obtain
the consumer’s consent, in accordance
with the E-Sign Act, to provide such
disclosures in electronic form, or else
provide written disclosures.
2 Section 703(a)(1) of the ECOA provides that
regulations prescribed by the Board under the
ECOA ‘‘may provide for such adjustments and
exceptions * * * as in the judgment of the Board
are necessary or proper to effectuate the purposes
of [the ECOA], * * * or to facilitate or substantiate
compliance [with the requirements of the ECOA].’’
Section 104(d) of the E-Sign Act authorizes federal
agencies to adopt exemptions for specified
categories of disclosures from the E-Sign notice and
consent requirements, ‘‘if such exemption is
necessary to eliminate a substantial burden on
electronic commerce and will not increase the
material risk of harm to consumers.’’ For the
reasons stated in this Federal Register notice, the
Board believes that these criteria are met in the case
of the application disclosures. In addition, the
Board believes ECOA section 703(a)(1) authorizes
the Board to permit creditors to provide disclosures
electronically, rather than in paper form,
independent of the E-Sign Act.

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Finally, as proposed, certain
provisions that restate or cross-reference
the E-Sign Act’s general rules regarding
electronic disclosures (including the
consumer consent provisions) and
electronic signatures are being deleted
as unnecessary, because the E-Sign Act
is a self-effectuating statute. The
revisions to Regulation B and the
official staff commentary are described
more fully below in the Section-bySection Analysis.
IV. Section-by-Section Analysis

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12 CFR Part 202 (Regulation B)
Section 202.4 General Rules
Section 202.4(d) prescribes the form
of disclosures, and specifically provides
that a creditor that provides in writing
any disclosures or information required
by the regulation must provide the
disclosures in a clear and conspicuous
manner and, except for the disclosures
required by §§ 202.5 and 202.13, in a
form that the applicant may keep. As
proposed, the Board is revising
§ 202.4(d) to clarify that, with regard to
disclosures that the regulation requires
to be given in writing, creditors may
provide such disclosures in electronic
form, subject to compliance with the
consumer consent and other applicable
provisions of the E-Sign Act. Some
creditors may provide disclosures to
applicants both in paper and electronic
form and rely on the paper form of the
disclosures to satisfy their compliance
obligations. For those creditors, the
duplicate electronic form of the
disclosures may be provided to
applicants without regard to the
consumer consent or other provisions of
the E-Sign Act because the electronic
form of the disclosure is not used to
satisfy the regulation’s disclosure
requirements.
The Board also proposed to revise
§ 202.4(d) to provide that certain
disclosures, when included on or with
an application, must be provided to the
applicant in electronic form if the
applicant accesses the application
electronically, such as on a home
computer. The proposal further
provided that, under those
circumstances, these disclosures may be
provided in electronic form without
regard to the consumer consent or other
provisions of the E-Sign Act. The
proposal affected the following
disclosures:
Section 202.5(b)(1). Section
202.5(b)(1) provides that if a creditor
inquires about an applicant’s race, color,
religion, national origin, or sex for the
purpose of conducting a self-test, the
creditor must disclose that providing
the information is optional for the

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applicant, that the information is
requested to monitor compliance with
the ECOA, and that the creditor may not
discriminate either on the basis of the
information or whether the applicant
chooses to furnish it.
Section 202.5(b)(2). Section
202.5(b)(2) provides that when a
creditor requests an applicant to
designate a title on an application form,
the application form must disclose that
the designation of a title is optional.
Section 202.5(d)(1). Section
202.5(d)(1) provides that if an
application is for other than individual
unsecured credit, a creditor may inquire
about the applicant’s marital status, but
must use only the terms married,
unmarried, and separated. The creditor
may also explain that the unmarried
category includes single, divorced, and
widowed persons.
Section 202.5(d)(2). Section
202.5(d)(2) prohibits a creditor from
inquiring whether income stated in an
application is derived from alimony,
child support, or separate maintenance
payments, unless the creditor discloses
to the applicant that such income need
not be revealed if the applicant does not
want the creditor to consider it in
determining the applicant’s
creditworthiness.
Section 202.13. Section 202.13(a)
requires a creditor to request
information regarding an applicant’s
ethnicity, race, sex, marital status, and
age as part of an application for
dwelling-secured credit primarily for
the purchase or refinancing of a
dwelling occupied or to be occupied by
the applicant as a principal residence.
Section 202.13(b) provides that
questions about 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.
Section 202.13(c) requires the creditor
to disclose to the applicant that the
information about ethnicity, race, sex,
marital, status and age is being
requested by the federal government to
monitor compliance with federal
statutes that prohibit creditors from
discriminating against applicants. The
creditor must also disclose that if the
applicant chooses not to provide the
information, the creditor is required to
note the ethnicity, race, and sex on the
basis of visual observation or surname.
Section 202.14(a)(2)(i). Section
202.14(a)(2)(i) requires a creditor that
provides copies of appraisal reports
only upon request (rather than
routinely) to notify the applicant of the
right to obtain a copy of the report.
Under Regulation B, an application
generally is not required to be in

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63447

writing.3 Section 202.2(f) of the
regulation defines the term
‘‘application’’ to include ‘‘an oral or
written request for an extension of
credit that is made in accordance with
procedures used by a creditor for the
type of credit requested.’’ Since an
application does not have to be in
writing, the disclosures that are
provided on or with an application in
certain circumstances do not have to be
provided in writing in all cases. These
disclosures include those required
under §§ 202.5(b)(1), 202.5(b)(2),
202.5(d)(1), 202.5(d)(2), and 202.13.
(Section 202.14(a)(2)(i) specifies that the
notice of the right to a copy of the
appraisal report must be provided in
writing.) However, most creditors use
written or electronic application forms
and make these disclosures, where
applicable, on the written or electronic
application form or a separate
accompanying form. The Board’s Model
Application Forms in Appendix B to the
regulation include some of these
disclosures on the application forms.
The April proposal revised § 202.4(d)
to provide that each of the disclosures
noted above, where given on or with the
application form and where the
application is accessed by the applicant
in electronic form, must be provided to
the applicant in electronic form on or
with the application. The proposed
revision also clarified that under these
circumstances, the disclosures may be
provided in electronic form without
regard to the consumer consent or other
provisions of the E-Sign Act. The Board
proposed to add comment 4(d)–2 to
clarify this point and also to make clear
that if an applicant is provided with a
paper application form, the required
disclosures must be provided in paper
form on or with the application (and
not, for example, by including a
reference in the paper application to the
Web site where the disclosures are
located).
Many creditor commenters urged the
Board to revise the regulation and
commentary to permit disclosures to be
given in paper form in appropriate
cases, even where an application is in
electronic form. In particular,
commenters noted that requiring
electronic disclosures could present
problems for applications taken in
person using electronic means.
3 Under § 202.4(c), a creditor must take written
applications for dwelling-related credit for which
monitoring information (under § 202.13) must be
collected. However, use of a printed form is not
required. A creditor may accept telephone or other
oral applications and either write down or enter
into a computer the pertinent information provided
orally by the applicant. See Comments 202.4(c)–1
and 2.

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Commenters stated, for example, that a
consumer or creditor employee might
complete an electronic application by
entering information at a terminal or
kiosk in the creditor’s office. These
commenters noted that paper
disclosures would be more appropriate
in such cases, because the applicant
would be able to retain them. For
example, a loan officer could give the
disclosures to the consumer, or in the
case of an unattended kiosk, the kiosk
could have a printer to provide paper
disclosures.
Some creditor commenters argued
that the proposed requirement would
contravene the E-Sign Act, based on the
provisions in E-Sign that state (1) that
the statute does not require any person
to accept or use electronic records in
place of paper, and (2) that any
regulations interpreting E-Sign may not
add to its requirements. Creditor
commenters suggested that, at a
minimum, the regulation should
provide an exception to allow paper
disclosures for in-person electronic
applications. Consumer group
commenters stated that the regulation
should not only permit, but should
require, paper disclosures in the case of
in-person electronic applications. For
example, the commenters noted that a
door-to-door solicitor could otherwise
simply display certain disclosures to a
consumer on the screen of a laptop
computer, even though the consumer
would have no way to later access the
disclosures.
One creditor commenter suggested
that, in addition to permitting paper
disclosures for electronic applications,
the regulation should also permit
electronic disclosures for paper
applications without consumers’
consent in certain cases. For example,
the commenter suggested, a basic or
short-form disclosure could be provided
in paper form along with the paper
application, together with a Web site
where a more complete disclosure could
be obtained.
In the final regulation, § 202.4(d) is
revised to state that if an application is
accessed by the consumer in electronic
form, the required application-related
disclosures may (rather than must) be
provided in electronic form, without
regard to the consumer consent or other
provisions of the E-Sign Act. The Board
believes that this will eliminate a
potential significant burden on
electronic commerce without increasing
the risk of harm to consumers. This
approach will facilitate applications for
credit by enabling applicants to receive
important disclosures at the same time
they access an application electronically
without first having to provide consent

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in accordance with the requirements of
the E-Sign Act. Requiring applicants to
follow the consent procedures set forth
in the E-Sign Act in order to complete
an online application is potentially
burdensome and could discourage
applicants from shopping for credit
online. Moreover, because these
applicants are viewing the application
online, there appears to be little, if any,
risk that the applicant will be unable to
view the disclosures online as well.
The final rule states that the
disclosures may, rather than must, be
provided in electronic form. The
proposal to require electronic
disclosures for credit applications that
are accessed electronically was intended
to ensure that the disclosures are
provided on or with the application in
compliance with the timing and
delivery requirements of Regulation B.
Several sections of the regulation that
relate to credit applications already
require that the credit application
disclosures be provided on or with the
application, and this requirement
applies to electronic as well as paper
applications; the only added
requirement under the proposal would
have been to require that, in the case of
an electronic application, the
disclosures be in electronic form.
Where a consumer accesses and
submits an application form using a
home computer via a creditor’s Web
site, the creditor must provide the
disclosures in electronic form with the
application form on the Web site in
order to meet the requirement to
provide disclosures in a timely manner
on or with the application. If the
creditor instead mailed paper
disclosures to the consumer, this
requirement would not be met. This
guidance is stated in new comment
4(d)–2.
In contrast, if a consumer is
physically present in the creditor’s
office, and accesses and submits an
electronic application—such as via a
terminal or kiosk—the Board believes
the creditor could provide disclosures
in paper form and comply with the
timing and delivery requirements of the
regulation. In addition, as discussed by
the commenters, paper disclosures may
be preferable in this situation because
they can be retained by the consumer.
Therefore, paper disclosures are
permissible in the case of in-person
electronic applications in a creditor’s
office, when the timing and delivery
requirements are met. This guidance is
also stated in new comment 4(d)–2.
The final regulation, however, does
not require paper disclosures for such
in-person electronic applications, as
suggested by the consumer group

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commenters. Electronic disclosures
would comply with the regulation for
these applications in some cases. For
example, for an electronic in-person
credit application in a creditor’s office,
the creditor could display most of the
required Regulation B disclosures to the
consumer on a terminal or kiosk screen.
The requirement to provide disclosures
in a form the consumer may retain does
not apply to the application-related
disclosures under §§ 202.5 and 202.13,
so this procedure would comply with
the regulation for those disclosures. In
the case of the notice regarding copies
of appraisal reports under § 202.14, the
retainability requirement does apply,
and therefore creditors would likely
have to provide that disclosure in paper
form in an in-person application in a
creditor’s office.
New comment 4(d)–2 is modified
from the proposal to provide the
guidance discussed above. In addition,
the portion of the proposed comment
stating that paper applications must be
accompanied by paper disclosures has
been deleted as unnecessary. For
example, if a credit application in paper
form did not contain all of the required
disclosures, but instead referred the
consumer to a Web site where some or
all of the disclosures could be found,
the application would not be in
compliance with the requirement that
the disclosures be provided in a timely
manner on or with the application. In
addition, the provisions that state that
electronic disclosures may be provided
without regard to the consumer consent
or other provisions of the E-Sign Act are
limited to situations where the
application itself is in electronic form.
Thus, if a creditor wanted to provide
electronic disclosures for a paper
application (for example, where a paper
application is submitted in person at the
creditor’s office), the creditor would
first have to comply with the E-Sign
notice and consent requirements.
Section 202.9 Notifications
Section 202.9(g) provides that when
an application for credit is submitted
through a third party to more than one
creditor and no credit is offered (or the
applicant does not expressly accept or
use any credit offered), each creditor
taking adverse action must provide the
notice required by § 202.9(a), but may
do so through a third party. The 2001
interim final rule added a new
§ 202.9(h) to clarify that such third
parties may use electronic disclosures to
provide the required adverse action
notice. As proposed in April 2007, this
provision is being deleted as
unnecessary because the E-Sign Act is a
self-effectuating statute and permits any

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person to use electronic records subject
to the conditions set forth in the Act.
Section 202.16 Requirements for
Electronic Communication
Section 202.16 was added by the 2001
interim final rule to address the general
requirements for electronic
communications.4 In the April 2007
proposal, the Board proposed to delete
§ 202.16 from Regulation B and the
accompanying sections of the staff
commentary. Creditor commenters
largely supported the proposed deletion,
and § 202.16 and the accompanying
commentary are deleted in the final
rule.
In the interim rule, § 202.16(a)
defined the term ‘‘electronic
communication’’ to mean a message
transmitted electronically that can be
displayed on equipment as visual text,
such as a message displayed on a
personal computer monitor screen. The
deletion of § 202.16(a) does not change
applicable legal requirements under the
E-Sign Act.
Sections 202.16(b), (c) and (f)
incorporated by reference provisions of
the E-Sign Act, such as the provision
allowing disclosures to be provided in
electronic form, the requirement to
obtain the applicant’s affirmative
consent before providing such
disclosures, and the provision allowing
electronic signatures. The deletion of
these provisions has no impact on the
general applicability of the E-Sign Act to
Regulation B disclosures.
The special rule in § 202.16(c)
exempting the disclosures relating to
adverse action in connection with
business credit, appraisal reports, and
the collection of monitoring information
from the E-Sign Act consent
requirements has been eliminated. The
special rule for disclosures relating to
adverse action notices provided in
connection with business credit has
been removed because the E-Sign Act’s
consumer consent requirements do not
apply to business credit. The special
rules for disclosures relating to
appraisal reports and the collection of
monitoring information are addressed in
§ 202.4(d)(2) of the final rule.
Sections 202.16(d) and (e) of the
interim final rule addressed specific
timing and delivery requirements for
electronic disclosures under Regulation
B, such as the requirement to send
disclosures to an applicant’s e-mail
address (or post the disclosures on a
Web site and send a notice alerting the
4 The requirements for electronic communication
were initially adopted in § 202.17. In the Board’s
comprehensive review of Regulation B, this
provision was renumbered as § 202.16. (68 FR
13144, March 18, 2003.)

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applicant to the disclosures). The Board
stated in the proposal that it no longer
believed that these additional
provisions were necessary or
appropriate. The Board noted that
electronic disclosures have evolved
since 2001, as industry and consumers
have gained experience with them, and
also noted concerns about e-mail related
to data security, identity theft, and
phishing.
The consumer group commenters
urged the Board to require the use of email to provide required disclosures in
electronic form, arguing that e-mail is
the only reliable way to ensure that
consumers are able to actually access,
receive, and retain disclosures. The
consumer groups also disagreed with
the statement that concerns relating to
phishing, identity theft, and data
security are a valid reason for not
requiring the use of e-mail, noting that
phishing involves gathering information
from the consumer, while disclosures
would be provided to the consumer, and
need not include sensitive information.
While the consumer’s receipt of an email message that is actually from the
consumer’s creditor would not in
general pose a security risk, consumers
might ignore or delete e-mails from
creditors (real or purported), in order to
avoid falling victim to fraud schemes.
Thus, disclosures sent by consumers’
creditors may not receive the attention
they should. Consequently, some
creditors may be reluctant to
communicate by e-mail. To the extent
consumers are instructed not to ignore
electronic mail messages from their
creditors, the risk of consumers being
victimized by fraudulent e-mail might
be increased. In any event, the Board
believes it is preferable not to mandate
the use of any particular means of
electronic delivery of disclosures, but
instead to allow flexibility for creditors
to use whatever method may be best
suited to particular types of disclosure.
Under the April 2007 proposed rule,
the requirement in the 2001 interim
final rule for creditors to maintain
disclosures posted on a Web site for at
least 90 days would be deleted. Creditor
commenters supported the proposed
deletion; consumer group commenters
expressed concern about its impact on
consumers. The Board continues to
believe that an appropriate time period
consumers may want electronic
disclosures to be available may vary
depending upon the type of disclosure,
and is reluctant to establish specific
time periods that would vary depending
on the disclosures, which would
increase the compliance burden.
Therefore, the 90-day retention
provision is deleted as proposed.

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63449

Nevertheless, while the Board is not
requiring disclosures to be maintained
on an Internet Web site for any specific
time period, the general requirements of
Regulation B continue to apply to
electronic disclosures, such as the
requirement to provide disclosures to
consumers at certain specified times
and in a form that the consumer may
keep. The Board expects creditors to
maintain disclosures on Web sites for a
reasonable period of time (which may
vary depending upon the particular
disclosure) so that consumers have an
opportunity to access, view, and retain
the disclosures. As stated in the April
2007 proposal, the Board will monitor
creditors’ electronic disclosure practices
with regard to the ability of consumers
to retain Regulation Z disclosures and
would consider further revisions to the
regulation to address this issue if
necessary.
Section 202.17
and Liabilities

Enforcement, Penalties,

As proposed, § 202.17 is redesignated
as § 202.16 (together with the
corresponding section of the official
staff commentary), concurrent with the
deletion of current § 202.16, as
discussed above.
V. Other Issues Raised by Commenters
Clear and Conspicuous Disclosures
An issue raised in the comments on
the April 2007 proposal related to small
hand-held electronic devices through
which consumers may conduct financial
transactions using the Internet or other
electronic means (for example, personal
digital assistants, Internet-enabled
cellphones, and similar devices). One
commenter requested clarification on
whether creditors would be deemed to
comply with the requirement to provide
disclosures in a clear and conspicuous
form, even when the consumer views
them on a small screen of a hand-held
electronic device. The commenter noted
that the creditor has no control over
what devices consumers choose to use,
for example, to view disclosures on a
web page. The Board believes that
disclosures comply with the ‘‘clear and
conspicuous’’ requirement as long as
they are provided in a manner such that
they would be clear and conspicuous
when viewed on a typical home
personal computer monitor.
Retainable Form
Several industry commenters
requested guidance on how creditors
can be sure of meeting the requirement
to provide disclosures in a form that the
consumer can keep. Commenters noted
that some of the disclosures that are

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exempted from the E-Sign requirements
regarding notice and consent are
nevertheless required to be given in
retainable form (for example, the notice
of right to a copy of an appraisal report,
under § 202.14(a)(2)(i)). Commenters
pointed out that the E-Sign Act requires,
with regard to consumer disclosures
generally, that a creditor disclose ‘‘the
hardware and software requirements for
access to and retention of the electronic
records’’ and that the consumer consent
to electronic disclosures ‘‘in a manner
that reasonably demonstrates that the
consumer can access’’ the disclosures
electronically. A commenter noted that
if the E-Sign procedures are followed, a
creditor has some degree of comfort that
the retainability requirement has been
met; however, with regard to disclosures
that are exempted from the E-Sign
notice and consent provisions (such as
those under § 202.14(a)(2)(i)), it is not
clear how the creditor can demonstrate
compliance with the retainability
requirement.
The consumer group commenters
were concerned about retainability of
disclosures in light of the deletion of the
requirement to maintain disclosures on
a Web site for at least 90 days. They
urged that the final regulations require
that disclosures be delivered in a format
that is both downloadable and printable.
The Board believes that creditors
satisfy the requirement for providing
electronic disclosures in a form the
consumer can retain if they are provided
in a standard electronic format that can
be downloaded and saved or printed on
a typical home personal computer.
Typically, any document that can be
downloaded by the consumer can also
be printed. The Board will, however,
monitor creditors’ practices to evaluate
whether further guidance is needed on
this issue. In a situation where the
consumer is provided electronic
disclosures through equipment under
the creditor’s control—such as a
terminal or kiosk in the creditor’s
offices—the creditor could, for example,
provide a printer that automatically
prints the disclosures.
Expansion of Exception From E-Sign
Notice and Consent Requirements
One commenter suggested that the
Board adopt an additional exception
from the E-Sign notice and consent
requirements. Specifically, the
commenter suggested that the regulation
should allow adverse action notices and
incomplete application notices, under
§ 202.9, to be provided in electronic
form without E-Sign notice and consent
if the consumer applies online, or
applies by telephone and orally
consents to receiving these notices

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electronically. The commenter argued
that such an exception would permit
faster notice, and that online credit
applicants expect to receive
communications from the creditor
online. The Board believes that, at this
time, there is insufficient evidence that
the consent requirements are a burden
on electronic commerce in this
situation.
VI. Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. In the proposal, the Board
invited comments on whether the
proposed rules are clearly stated and
effectively organized, and how the
Board might make the proposed text
easier to understand. No comments
were received on ‘‘plain language’’
issues involving Regulation B.
VII. Final Regulatory Flexibility
Analysis
The Board prepared an initial
regulatory flexibility analysis as
required by the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) (RFA) in
connection with the April 2007
proposal. The Board received no
comments on its initial regulatory
flexibility analysis.
The RFA generally requires an agency
to perform an assessment of the impact
a rule is expected to have on small
entities. However, under section 605(b)
of the RFA, 5 U.S.C. 605(b), the
regulatory flexibility analysis otherwise
required under section 604 of the RFA
is not required if an agency certifies,
along with a statement providing the
factual basis for such certification, that
the rule will not have a significant
economic impact on a substantial
number of small entities. Based on its
analysis and for the reasons stated
below, the Board certifies that the rule
will not have a significant economic
impact on a substantial number of small
entities.
1. Statement of the need for, and
objectives of, the final rule. The Board
is adopting revisions to Regulation B to
withdraw the 2001 interim final rule on
electronic communication and to allow
creditors to provide certain disclosures
to applicants in electronic form on or
with an application that is accessed by
the consumer in electronic form without
regard to the consumer consent and
other provisions of the E-Sign Act. The
Board is also clarifying that other
Regulation B disclosures may be
provided to applicants in electronic
form in accordance with the consumer

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consent and other applicable provisions
of the E-Sign Act.
The ECOA was enacted to promote
the availability of credit to all
creditworthy applicants without regard
to race, color, religion, national origin,
sex, marital status, age, the fact that all
or part of the applicant’s income derives
form a public assistance program, or the
fact that the applicant has in good faith
exercised any right under the Consumer
Credit Protection Act. The primary
objective of the ECOA is to prohibit
creditors from discriminating against
any applicant on any of these grounds
with respect to any aspect of a credit
transaction. 15 U.S.C. 1691(a). The
ECOA authorizes the Board to prescribe
regulations to carry out the purposes of
the statute. 15 U.S.C. 1691b(a)(1). The
Act expressly states that the Board’s
regulations may contain ‘‘such
classifications, differentiations, or other
provisions, * * * as, in the judgment of
the Board, are necessary or proper to
carry out the purposes of [the Act], to
prevent circumvention or evasion [of
the Act], or to facilitate compliance
[with the Act].’’ 15 U.S.C. 1691b(a)(1).
The Board believes that the proposed
revisions to Regulation B discussed
above are within the Congress’s broad
grant of authority to the Board to adopt
provisions that carry out the purposes of
the statute.
2. Issues raised by comments in
response to the initial regulatory
flexibility analysis. In accordance with
section 603(a) of the RFA, the Board
conducted an initial regulatory
flexibility analysis in connection with
the proposed rule. The Board did not
receive any comments on its initial
regulatory flexibility analysis.
3. Small entities affected by the final
rule. The ability to provide applicationrelated disclosures in electronic form on
or with an application that is accessed
by the applicant in electronic form
applies to all creditors, regardless of
their size. Accordingly, the final rule
would reduce burden and compliance
costs for small entities by providing
relief, to the extent the E-Sign Act
applies in these circumstances. The
number of small entities affected by this
final rule is unknown.
4. Other federal rules. The Board
believes no federal rules duplicate,
overlap, or conflict with the final
revisions to Regulation B.
5. Significant alternatives to the
proposed revisions. The Board solicited
comment on any significant alternatives
that could provide additional ways to
reduce regulatory burden associated
with the proposed rule. Commenters
suggested that in certain circumstances
where a consumer accesses a credit

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application in electronic form, creditors
should be permitted to provide the
required disclosures in paper form
(rather than electronic form as would be
required under the proposed rule). The
final rule permits paper disclosures in
certain circumstances as suggested by
the commenters. A commenter also
suggested that in certain cases where a
consumer receives a credit application
in paper form, creditors should be
permitted to provide the required
disclosures in electronic form without
the consumer’s consent. The final rule
allows electronic disclosures in the case
of applications in paper form, but only
if the consumer consents in accordance
with the E-Sign Act.
VIII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3506; 5 CFR part 1320 Appendix A.1),
the Board reviewed the rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The collection of information
that is subject to the PRA by this final
rulemaking is found in 12 CFR part 202.
The Federal Reserve may not conduct or
sponsor, and an organization is not
required to respond to, this information
collection unless it displays a currently
valid OMB control number. The OMB
control number is 7100–0201.
Section 703(a)(1) of the Equal Credit
Opportunity Act (15 U.S.C. 1691b(a)(1))
authorizes the Board to issue regulations
to carry out the provisions of the Act.
The purpose of the Act is to ensure that
credit is made available to all
creditworthy customers without
discrimination on the basis of race,
color, religion, national origin, sex,
marital status, age (provided the
applicant has the capacity to contract),
receipt of public assistance income, or
the fact that the applicant has in good
faith exercised any right under the
Consumer Credit Protection Act (15
U.S.C. 1601 et seq.). This information
collection is mandatory. Since the
Federal Reserve does not collect any
information, no issue of confidentiality
normally arises. However, in the event
the Board were to retain records during
the course of an examination, the
information may be protected from
disclosure under the exemptions (b)(4),
(6), and (8) of the Freedom of
Information Act (5 U.S.C. 522 (b)). The
adverse action disclosure is confidential
between the creditor and the consumer
involved.
Regulation B applies to all types of
creditors, not just state member banks.
However, under the Paperwork
Reduction Act, the Federal Reserve
accounts for the burden of the

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paperwork associated with the
regulation only for entities that are
supervised by the Federal Reserve.
Appendix A of Regulation B defines
these creditors as state member banks,
branches and agencies of foreign banks
(other than federal branches, federal
agencies, and insured state branches of
foreign banks), commercial lending
companies owned or controlled by
foreign banks, and organizations
operating under section 25 or 25A of the
Federal Reserve Act. Other federal
agencies account for the paperwork
burden for the institutions they
supervise. Creditors are required to
retain records for 12 to 25 months as
evidence of compliance.
The annual burden is estimated to be
165,630 hours for the 1,172 Federal
Reserve-supervised creditors that are
respondents for purposes of the PRA. As
mentioned in the Preamble, on April 30,
2007, a notice of proposed rulemaking
was published in the Federal Register
(72 FR 21125). No comments
specifically addressing the burden
estimate were received.
The Federal Reserve has a continuing
interest in the public’s opinions of our
collections of information. At any time,
comments regarding the burden
estimate, or any other aspect of this
collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0201), Washington, DC 20503.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Credit, Federal Reserve System, Marital
status discrimination, Penalties,
Religious discrimination, Reporting and
recordkeeping requirements, Sex
discrimination.
■ For the reasons set forth in the
preamble, the Board amends 12 CFR
part 202 as set forth below:

any disclosures or information required
by this regulation must provide the
disclosures in a clear and conspicuous
manner and, except for the disclosures
required by §§ 202.5 and 202.13, in a
form the applicant may retain.
(2) Disclosures in electronic form. The
disclosures required by this part that are
required to be given in writing may be
provided to the applicant in electronic
form, subject to compliance with the
consumer consent and other applicable
provisions of the Electronic Signatures
in Global and National Commerce Act
(E-Sign Act) (15 U.S.C. 7001 et seq.).
Where the disclosures under
§§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1),
202.5(d)(2), 202.13, and 202.14(a)(2)(i)
accompany an application accessed by
the applicant in electronic form, these
disclosures may be provided to the
applicant in electronic form on or with
the application form, without regard to
the consumer consent or other
provisions of the E-Sign Act.
*
*
*
*
*
§ 202.9

3. Section 202.9 is amended by
removing paragraph (h).

§ 202.16
■

5. Section 202.17 is redesignated as
§ 202.16.

6. In Supplement I to Part 202, the
following amendments are made:
■ a. In Section 202.4—General Rules,
under Paragraph (4)(d), new paragraph
2. is added.
■ b. Section 202.16—Requirements for
Electronic Communication is removed;
■ c. Section 202.17—Enforcement,
Penalties, and Liabilities is redesignated
as section 202.16.
The amendments to read as follows:
■

SUPPLEMENT I TO PART 202—
OFFICIAL STAFF INTERPRETATIONS
*

§ 202.4

General rules.

*

*
*
*
*
(d) Form of disclosures—(1) General
rule. A creditor that provides in writing

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*

*

*

*

Section 202.4—General Rules

*

2. Section 202.4 is amended by
revising paragraph (d) to read as
follows:

[Redesignated]

■

1. The authority citation for part 202
continues to read as follows:

■

[Removed]

4. Section 202.16 is removed.

§ 202.17

*

Authority: 15 U.S.C. 1691–1691f.

[Removed]

■

PART 202—EQUAL CREDIT
OPPORTUNITY (REGULATION B)
■

63451

*

*

*

*

*

*

Paragraph (4)(d)

*

*

2. Form of disclosures. Whether the
disclosures required to be on or with an
application must be in electronic form
depends upon the following:
i. If an applicant accesses a credit
application electronically other than inperson in a creditor’s office (covered under
ii. below), such as online at a home
computer, the creditor must provide the
disclosures in electronic form (such as with
the application form on its Web site) in order
to meet the requirement to provide

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disclosures in a timely manner on or with the
application. If the creditor instead mailed
paper disclosures to the applicant, this
requirement would not be met.
ii. In contrast, if an applicant is physically
present in the creditor’s office, and accesses
a credit application electronically, such as
via a terminal or kiosk, the creditor may
provide disclosures in either electronic or
paper form, provided the creditor complies
with the timing, delivery, and retainability
requirements of the regulation.

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System, October 31, 2007.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E7–21697 Filed 11–8–07; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R–1282]

Electronic Fund Transfer
Board of Governors of the
Federal Reserve System.
ACTION: Final rule; official staff
interpretation.

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AGENCY:

SUMMARY: The Board is amending
Regulation E, which implements the
Electronic Fund Transfer Act, and the
official staff commentary to the
regulation, to withdraw portions of the
interim final rules for the electronic
delivery of disclosures issued March 30,
2001. The interim final rules addressed
the timing and delivery of electronic
disclosures, consistent with the
requirements of the Electronic
Signatures in Global and National
Commerce Act (E-Sign Act). Because
compliance with the 2001 interim final
rules has not been mandatory,
withdrawal of these provisions from the
Code of Federal Regulations reduces
confusion about the status of the
provisions and simplifies the regulation.
Similar rules are being adopted under
other consumer fair lending and
financial services regulations
administered by the Board.
DATES: The final rule is effective
December 10, 2007. The mandatory
compliance date is October 1, 2008.
FOR FURTHER INFORMATION CONTACT: John
C. Wood, Counsel, Division of
Consumer and Community Affairs, at
(202) 452–2412 or (202) 452–3667. For
users of Telecommunications Device for
the Deaf (TDD) only, contact (202) 263–
4869.
SUPPLEMENTARY INFORMATION:

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I. Statutory Background
The purpose of the Electronic Fund
Transfer Act (EFTA), 15 U.S.C. 1693 et
seq., is to provide a basic framework
establishing the rights, liabilities, and
responsibilities of participants in
electronic fund transfer (EFT) systems,
and to provide individual consumer
rights. The Board’s Regulation E (12
CFR part 205) implements the EFTA.
Examples of types of transfers covered
by the EFTA and Regulation E include
transfers initiated through an automated
teller machine (ATM), point-of-sale
(POS) terminal, automated
clearinghouse (ACH), telephone billpayment plan, or remote banking
service. The EFTA and Regulation E
require financial institutions to provide
certain disclosures to consumers in
writing, including but not limited to
initial disclosures of terms and
conditions of an EFT service,
documentation of EFTs by means of
terminal receipts and periodic account
activity statements, and change in terms
notices. Certain persons other than
financial institutions are also required
to comply with specific disclosure
provisions of Regulation E.
The Electronic Signatures in Global
and National Commerce Act (the E-Sign
Act), 15 U.S.C. 7001 et seq., was enacted
in 2000. The E-Sign Act provides that
electronic documents and electronic
signatures have the same validity as
paper documents and handwritten
signatures. The E-Sign Act contains
special rules for the use of electronic
disclosures in consumer transactions.
Under the E-Sign Act, consumer
disclosures required by other laws or
regulations to be provided or made
available in writing may be provided or
made available, as applicable, in
electronic form if the consumer
affirmatively consents after receiving a
notice that contains certain information
specified in the statute, and if certain
other conditions are met.
The E-Sign Act, including the special
consumer notice and consent
provisions, became effective October 1,
2000, and did not require implementing
regulations. Thus, financial institutions
are currently permitted to provide in
electronic form any disclosures that are
required to be provided or made
available to the consumer in writing
under Regulation E if the consumer
affirmatively consents to receipt of
electronic disclosures in the manner
required by section 101(c) of the E-Sign
Act.

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II. Board Proposals and Interim Rules
Regarding Electronic Disclosures
On April 4, 2001, the Board published
for comment interim final rules to
establish uniform standards for the
electronic delivery of disclosures
required under Regulation E (66 FR
17786). Similar interim final rules for
Regulations B, M, Z, and DD
(implementing the Equal Credit
Opportunity Act, the Consumer Leasing
Act, the Truth in Lending Act, and the
Truth in Savings Act, respectively) were
published on March 30, 2001 (66 FR
17322 and 66 FR 17329) (Regulations M
and Z, respectively), and April 4, 2001
(66 FR 17779 and 66 FR 17795)
(Regulations B and DD, respectively).
Each of the interim final rules
incorporated, but did not interpret, the
requirements of the E-Sign Act.
Financial institutions and other persons,
as applicable, generally were required to
obtain consumers’ affirmative consent to
provide disclosures electronically,
consistent with the requirements of the
E-Sign Act. The interim final rules also
incorporated many of the provisions
that were part of earlier regulatory
proposals issued by the Board regarding
electronic disclosures.1
Under the 2001 interim final rules,
disclosures could be sent to an e-mail
address designated by the consumer, or
could be made available at another
location, such as an Internet Web site.
If the disclosures were not sent by email, financial institutions would have
to provide a notice to consumers
(typically by e-mail) alerting them to the
availability of the disclosures.
Disclosures posted on a Web site would
have to be available for at least 90 days
to allow consumers adequate time to
access and retain the information.
Institutions also would be required to
make a good faith attempt to redeliver
electronic disclosures that were
returned undelivered, using the address
information available in their files.
Commenters on the interim final rules
identified significant operational and
information security concerns with
respect to the requirement to send the
disclosure or an alert notice to an e-mail
address designated by the consumer.
1 On May 2, 1996, the Board proposed to amend
Regulation E to permit financial institutions to
provide disclosures by sending them electronically
(61 FR 19696). Based on comments received, in
1998 the Board published an interim rule
permitting the electronic delivery of disclosures
under Regulation E (63 FR 14528, March 25, 1998)
and similar proposals under Regulations B, M, Z,
and DD (63 FR 14552, 14538, 14548, and 14533,
respectively, March 25, 1998). Based on comments
received on the 1998 proposals, in 1999 the Board
published revised proposals under Regulations B, E,
M, Z, and DD (64 FR 49688, 49699, 49713, 49722
and 49740, respectively, September 14, 1999).

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