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59237

Rules and Regulations

Federal Register
Vol. 76, No. 186
Monday, September 26, 2011

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.
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.

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R–1426]
RIN 7100 AD 78

Equal Credit Opportunity
Board of Governors of the
Federal Reserve System.
ACTION: Final rule.
AGENCY:

The Board is publishing a
final rule amending Regulation B (Equal
Credit Opportunity). Section 704B of the
Equal Credit Opportunity Act (ECOA),
as added by Section 1071 of the DoddFrank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act or Act),
requires that financial institutions
collect and report information
concerning credit applications made by
women or minority-owned businesses
and by small businesses. ECOA Section
704B became effective on the date that
general rulemaking authority for ECOA
was transferred to the Consumer
Financial Protection Bureau (CFPB or
Bureau), which was July 21, 2011.
Although the CFPB has the authority to
issue rules to implement ECOA Section
704B for most entities, the Board retains
authority to issue rules for certain motor
vehicle dealers. This final rule excepts
motor vehicle dealers subject to the
Board’s jurisdiction from the
requirements of ECOA Section 704B
until the effective date of final rules
issued by the Board to implement that
provision.
DATES: This final rule is effective
September 26, 2011.
FOR FURTHER INFORMATION CONTACT:
Lorna Neill or Nikita Pastor, Senior
Attorneys, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System,
Washington, DC 20551, at (202) 452–
2412 or (202) 452–3667. For users of

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SUMMARY:

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Telecommunications Device for the Deaf
(TDD) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
Section 704B of ECOA, as added by
Section 1071 of the Dodd-Frank Act,
requires that financial institutions
collect and report information
concerning credit applications made by
women or minority-owned businesses
and by small businesses. 15 U.S.C.
1691c-2. The statute directs financial
institutions to compile and maintain the
data ‘‘in accordance with regulations of
the Bureau.’’ ECOA Section 704B(e)(1),
15 U.S.C. 1691c–2(e)(1). The purpose of
Section 704B is ‘‘to facilitate
enforcement of fair lending laws and
enable communities, governmental
entities, and creditors to identify
business and community development
needs and opportunities of womenowned, minority-owned, and small
businesses.’’ ECOA Section 704B
became effective on the date that
rulemaking authority for ECOA
transferred to the CFPB, which was July
21, 2011.
On April 11, 2011, the CFPB issued a
letter concluding that financial
institutions have no obligations under
Section 704B until the CFPB issues
regulations to implement the
requirements.1 The CFPB letter notes
that Congress intended Section 704B to
produce reliable and consistent data
that can be analyzed by the CFPB, other
government agencies, and members of
the public to facilitate enforcement of
fair lending laws and to identify
business and community development
needs. Based on the statutory text,
purpose, and legislative history, the
CFPB letter concludes that
implementing regulations are necessary
to ensure that data are collected and
reported in a consistent, standardized
fashion that allows for sound analysis
by the CFPB and other users of the data.
Although the CFPB has authority to
issue rules to implement ECOA
(including data collection under Section
704B) for most entities, the Board
retains authority to issue rules under
ECOA for motor vehicle dealers covered
1 See Letter from Leonard J. Kennedy, General
Counsel, CFPB, to Chief Executive Officers of
Financial Institutions under Section 1071 of the
Dodd-Frank Act, http://www.consumerfinance.gov/
wp-content/uploads/2011/04/GC-letter-re-1071.pdf
(Apr. 11, 2011).

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by Section 1029(a) of the Dodd-Frank
Act.2 Thus, the Board is responsible for
issuing regulations to implement the
amendments made by Section 704B for
motor vehicle dealers covered by
Section 1029(a). Consequently, the
Board has received inquiries as to
whether motor vehicle dealers must
comply with the requirements of ECOA
Section 704B before implementing
regulations are issued.
The Board believes that detailed rules
to implement ECOA Section 704B are
necessary to ensure that data collected
and reported under that provision are
useful. As noted, the purposes of the
statute are to facilitate fair lending
enforcement and to identify business
and community development needs and
opportunities of women-owned,
minority-owned, and small businesses.
To support sound analysis by users of
the data, the data should be collected
and reported by motor vehicle dealers in
a consistent and standardized way. To
achieve this, implementing rules can
provide motor vehicle dealers with
uniform definitions and standards that
they can follow in collecting and
reporting data.
For these reasons, on June 23, 2011,
the Board published for public comment
a proposed rule to except motor vehicle
dealers covered by Section 1029(a) of
the Dodd-Frank Act from any obligation
to comply with ECOA Section 704B
until the Board issues final regulations
to implement that provision and those
regulations become effective. The
proposed rule was consistent with the
views expressed by the CFPB, and was
2 Section 1029(a) of the Dodd-Frank Act states:
‘‘Except as permitted in subsection (b), the Bureau
may not exercise any rulemaking * * * authority
* * * over a motor vehicle dealer that is
predominantly engaged in the sale and servicing of
motor vehicles, the leasing and servicing of motor
vehicles, or both.’’ 12 U.S.C. 5519(a). Section
1029(b) of the Dodd-Frank Act states: ‘‘Subsection
(a) shall not apply to any person, to the extent such
person (1) provides consumers with any services
related to residential or commercial mortgages or
self-financing transaction involving real property;
(2) operates a line of business (A) that involves the
extension of retail credit or retail leases involving
motor vehicles; and (B) in which (i) the extension
of retail credit or retail leases are [sic] provided
directly to consumers and (ii) the contract
governing such extension of retail credit or retail
leases is not routinely assigned to an unaffiliated
third party finance or leasing source; or (3) offers
or provides a consumer financial product or service
not involving or related to the sale, financing,
leasing, rental, repair, refurbishment, maintenance,
or other servicing of motor vehicles, motor vehicle
parts, or any related or ancillary product or
service.’’ 12 U.S.C. 5519(b).

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Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Rules and Regulations

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supported by the text and purpose of
Section 1071 of the Dodd-Frank Act.
The applicability of the proposed rule
was limited to Section 1071 and would
not affect the implementation date of
any other provision of the Dodd-Frank
Act.
The Board received five comment
letters in response to the June 2011
proposal. All of the commenters
generally supported the proposed rule.
For the reasons discussed below, the
Board is adopting the June 2011
proposal as a final rule without changes.
II. Legal Authority
ECOA Section 703, as amended by
Section 1085 of the Dodd-Frank Act,
directs the Board to prescribe
regulations to carry out ECOA’s
purposes for motor vehicle dealers
covered by Section 1029(a) of the DoddFrank Act. See 15 U.S.C. 1691b(f). In
addition, the Board’s general
rulemaking under ECOA includes
authority to issue regulations that
contain such classifications,
differentiation, or other provisions, or
that provide for such adjustments and
exceptions for any class of transactions,
as in the judgment of the Board are
necessary or proper to effectuate the
purposes of ECOA, to prevent
circumvention or evasion of ECOA, or to
facilitate or substantiate compliance
with ECOA. Id. Finally, ECOA Section
704B(g)(2) contains authority for
exceptions or exemptions for any class
of financial institutions as deemed
necessary or appropriate to carry out the
purposes of Section 704B. 15 U.S.C.
1691c-2(g)(2).
Pursuant to this authority, the final
rule excepts motor vehicle dealers
covered by Section 1029(a) of the DoddFrank Act from the requirement to
comply with ECOA Section 704B until
the effective date of final rules issued by
the Board to implement Section 704B.
The Board believes that this exception
is necessary to effectuate the purposes
of ECOA and facilitate compliance.
First, as noted, ECOA Section 704B
states that its purpose is ‘‘to facilitate
enforcement of fair lending laws and
enable communities, governmental
entities, and creditors to identify
business and community development
needs and opportunities of womenowned, minority-owned, and small
businesses.’’ 15 U.S.C. 1691c–2(a). The
Board believes that this purpose is
better served if detailed rules prescribe
the method for collecting and reporting
data under Section 704B. The collection
of data in a uniform manner under a
final regulation will enhance data
analysis and enforcement capabilities.
Second, in directing that financial

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institutions compile and maintain the
data ‘‘in accordance with regulations of
the Bureau,’’ the text of ECOA Section
704B clearly contemplates that
regulations are necessary to implement
this provision.3 Finally, delaying data
collection until there are implementing
regulations will facilitate compliance by
providing guidance on how motor
vehicle dealers can comply with the
statutory requirements in a manner that
effectuates the legislative purposes.
Effective Date
This final rule is effective upon
publication in the Federal Register. The
Administrative Procedures Act (APA), 5
U.S.C. 551 et seq., generally requires
that rules be published not less than 30
days before their effective date. See 5
U.S.C. 553(d). However, the APA
provides exceptions to this timing
requirement for certain rules. For the
reasons discussed below, the Board
believes that the final rule meets the
requirements for an exception to the
APA’s general 30-day notice
requirement.
Specifically, the APA’s 30-day notice
requirement does not apply to ‘‘a
substantive rule which grants or
recognizes an exemption or relieves a
restriction.’’ 5 U.S.C. 553(d)(1). As
explained above, the final rule
temporarily relieves motor vehicle
dealers covered under Section 1029(a)
of the Dodd-Frank Act from the
statutory obligation under ECOA
Section 704B to collect and report data
on credit applications made by womenand minority-owned businesses and
small businesses. The rule therefore
grants a temporary exemption from a
statutory obligation that might
otherwise apply.
In addition, the APA’s 30-day notice
rule does not apply when ‘‘otherwise
provided by the agency for good cause
found and published with the rule.’’ 5
U.S.C. 553(d)(3). The Board finds that
there is good cause to make this final
rule effective immediately because
Section 704B has already become
effective and the text of the statute
clearly contemplates that regulations are
necessary to implement the law’s
requirements. For the reasons discussed
above, the Board believes that
regulations are necessary to effectuate
the purposes of Section 704B and that
motor vehicle dealers should be
excepted from the statutory
requirements until such rules are in
effect.
3 See ECOA Section 704B(e)(1), 15 U.S.C. 1691c–
2(e)(1) (‘‘Each financial institution shall compile
and maintain, in accordance with regulations of the
Bureau, a record of the information provided by any
loan applicant * * *.’’).

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III. Summary of Comments Received
The Board received five comment
letters in response to the proposed rule.
Two letters were received from trade
associations that represent motor
vehicle dealers, vehicle manufacturers
and other automotive-related
companies. One letter was received
from a trade association that represents
finance companies and other financial
institutions that provide consumer and
commercial credit. Comment letters
were also received from a public policy
advocacy organization and a research
and consulting firm that focuses on
women- and minority-owned financial
institutions and investments in minority
businesses.
All of the comment letters generally
supported the Board’s proposal to
except motor vehicle dealers from the
requirements of Section 704B until the
effective date of final rules issued by the
Board to implement that provision.
Three commenters expressly urged the
Board to consult and coordinate with
the CFPB in developing substantive
rules under Section 704B so that the
rules issued by both agencies will be
uniform and consistent. The consumer
advocacy organization that commented
also urged the Board to issue rules
implementing the data collection
requirements as quickly as possible so
that motor vehicle dealers can comply
as soon as the CFPB’s rules for other
creditors become effective.
IV. Section-by-Section Analysis
Section 202.17 Data Collection for
Credit Applications by Women-Owned,
Minority-Owned, or Small Businesses
17(a) Effective Date for Motor Vehicle
Dealers
Section 704B of ECOA requires that
financial institutions collect and report
information concerning credit
applications made by women or
minority-owned businesses and by
small businesses. 15 U.S.C. 1691c-2.
This section of ECOA became effective
on the designated transfer date, which
was July 21, 2011. The term ‘‘financial
institution’’ includes any entity that
engages in any financial activity. 15
U.S.C. 1691c–2(h)(1). The term
‘‘financial activity’’ is not defined in
ECOA or the Dodd-Frank Act, but motor
vehicle dealers covered by Section
1029(a) of the Dodd-Frank Act might be
engaged in ‘‘financial activity’’ and
therefore might be financial institutions
subject to the requirements of ECOA
Section 704B.
For the reasons discussed above, the
Board is adopting Section 202.17(a) as
proposed to provide that no motor

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Federal Register / Vol. 76, No. 186 / Monday, September 26, 2011 / Rules and Regulations
vehicle dealer covered by Section
1029(a) of the Dodd-Frank Act is
required to comply with the
requirements of Section 704B of ECOA
until the effective date of final rules
issued by the Board to implement
Section 704B. In addition, the final rule
specifies that Section 202.17(a) shall not
be construed to affect the effective date
of ECOA Section 704B for any person
other than a motor vehicle dealer
covered by Section 1029(a) of the DoddFrank Act.
V. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act (PRA) of 1995, 44 U.S.C.
3506, 5 CFR part 1320 Appendix A.1,
the Board reviewed the proposed rule
under the authority delegated to the
Board by the Office of Management and
Budget. The rule contains no collections
of information under the PRA. See 44
U.S.C. 3502(3). Accordingly, no
paperwork burden is associated with the
rule.

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VI. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (RFA),
5 U.S.C. 601–612, requires an agency to
perform an initial and final regulatory
flexibility analysis on the impact a rule
is expected to have on small entities.
The Small Business Administration
(SBA) establishes size standards that
define which entities are small
businesses for purposes of the RFA.4 For
example, to be considered a small
business under the SBA size standard,
a new car dealer must have 200 or fewer
employees and a used car dealer must
have $23 million or less in annual
revenues.
Under Section 605(b) of the RFA, 5
U.S.C. 605(b), the initial regulatory
flexibility analysis otherwise required
under Section 603 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 initial and final
analysis and for the reasons stated
below, the Board believes that this final
rule will not have a significant
economic impact on a substantial
number of small entities.
A. Statement of Reasons, Objectives,
and Legal Basis for the Final Rule
Section 704B of ECOA, as added by
Section 1071 of the Dodd-Frank Act,
requires that financial institutions

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B. Summary of the Significant Issues
Raised by Public Comment on the
Board’s Initial Analysis of Issues, and a
Statement of Any Changes Made as a
Result
No public comments on the proposed
rule addressed matters relating to the
Board’s initial regulatory flexibility
analysis.
C. Small Entities Affected by the Final
Rule
The final rule applies to motor vehicle
dealers covered by Section 1029(a) of
the Dodd-Frank Act. The total number
of small entities covered by the final
rules is unknown, because the Board
does not have data on the number of
small entities that are motor vehicle
dealers covered by Section 1029(a).
Furthermore, it is unclear how many
motor vehicle dealers covered by
Section 1029(a) receive credit
applications from women-or minorityowned businesses or small businesses.
Nevertheless, no small entities are likely
to be affected by the final rule because
the rule merely preserves the status quo
by granting a temporary exemption from
the requirement to comply with the
statute, which took effect on July 21,
2011.
D. Recordkeeping, Reporting, and
Compliance Requirements

4 U.S. Small Business Administration, Table of
Small Business Size Standards Matched to North
American Industry Classification System Codes,
available at http://www.sba.gov/sites/default/files/
Size_Standards_Table.pdf.

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collect and report information
concerning credit applications made by
women or minority-owned businesses
and by small businesses. ECOA Section
704B became effective on the date that
rulemaking authority for ECOA was
transferred to the CFPB, which was July
21, 2011. Although the CFPB has the
authority to issue rules to implement
ECOA Section 704B for most entities,
the Board retains authority to issue rules
for certain motor vehicle dealers. This
final rule excepts motor vehicle dealers
that are subject to the Board’s
jurisdiction from the requirements of
ECOA Section 704B temporarily, until
the effective date of final rules that will
be issued by the Board to implement
that provision. The SUPPLEMENTARY
INFORMATION above contains information
on the reasons, objectives and legal
basis for the proposed rule.

The final rule will not impose any
new recordkeeping, reporting, or
compliance requirements. Instead, the
final rule temporarily will delay these
requirements until the Board issues
final implementing regulations and the
regulations become effective.

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E. Identification of Duplicative,
Overlapping, or Conflicting Federal
Regulations
The Board has not identified any
federal statutes or regulations that
would duplicate, overlap, or conflict
with the final rule.
F. Significant Alternatives to the
Regulatory Revisions
The Board is not aware of any
significant alternatives that would
minimize any significant economic
impact of the final rule on small
entities. Commenters did not suggest
any alternatives.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Credit, Discrimination, Federal Reserve
System, Marital status discrimination,
Penalties, Religious discrimination,
Reporting and recordkeeping
requirements, Sex discrimination.
Authority and Issuance
For the reasons set forth in the
preamble, the Board amends Regulation
B, 12 CFR part 202, as follows:
PART 202—EQUAL CREDIT
OPPORTUNITY (REGULATION B)
1. The authority citation for part 202
is revised to read as follows:

■

Authority: 15 U.S.C. 1691–1691f; Pub. L.
111–203, 124 Stat. 1376.
■

2. Add § 202.17 to read as follows:

§ 202.17 Data collection for credit
applications by women-owned, minorityowned, or small businesses.

No motor vehicle dealer covered by
section 1029(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act, 12 U.S.C. 5519(a), shall be required
to comply with the requirements of
section 704B of the Equal Credit
Opportunity Act, 15 U.S.C. 1691c-2,
until the effective date of final rules
issued by the Board to implement
section 704B of the Act, 15 U.S.C.
1691c-2. This paragraph shall not be
construed to affect the effective date of
section 704B of the Act for any person
other than a motor vehicle dealer
covered by section 1029(a) of the DoddFrank Wall Street Reform and Consumer
Protection Act.
By order of the Board of Governors of the
Federal Reserve System, September 16, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011–24300 Filed 9–23–11; 8:45 am]
BILLING CODE 6210–01–P

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