Full text of District Notices (Federal Reserve Bank of Dallas) : Regulation B -- Equal Credit Opportunity, Circular No. 77-10

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F ederal Reserve Bank o f Dallas
DALLAS, TEX A S

75222

C i r c u l a r No. 77-10
J a n u a r y 18, 1977

R E G U LA TIO N B— EQ UAL C R E D IT O P P O R T U N IT Y
R e vis io n of R e g u la tio n B to C a r r y O u t th e 1976 Am endm ents
T o the Equal C r e d i t O p p o r tu n ity A ct

TO A L L BANKS IN T H E
E L E V E N T H FE D E R A L RESERVE D IS T R IC T :
T h e Board of G o v e rn o rs of the F e d e ra l R e s e rv e System has issued a
r e v is e d v e r s io n of its R e gulation B , "E qual C r e d i t O p p o r t u n i t y , " to im plem ent
the 1976 am endm ents to the Equal C r e d i t O p p o r tu n ity A c t. T h e r e v is e d r e g u la ­
tion w i ll go into effect on M a rch 2 3, 1977.
A ttac h e d is an e x tra c t from the FE D E R A L R E G IS T E R o f the r e v is e d
v e r s io n of the r e g u la tio n . T h e new re g u la tio n p a m p h let w ill be sent as soon as
it is a v a ila b le .
A n y questio ns about the re g u la tio n should be d ir e c te d to R ic h a r d B .
West of o u r R egulatio ns D e p a rtm e n t at (214) 6 5 1 -6 17 1 .
A d d itio n a l copies of th e r e v is e d v e r s io n of R e gulation B w i ll be
fu r n is h e d upon re q u e s t to the S e c r e ta r y 's O ffice of this B a n k (214) 6 51 -6 26 7 .
S in c e r e ly y o u r s ,
R o b e rt H . B oy k in
F i r s t V ic e P re s id e n t

Attachment

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

RULES A N D REGULATIONS

Title 12— Banks and Banking
CHAPTER II— FEDERAL RESERVE

SYSTEM
[B e g B ; D o c k e t N o. B -0 0 8 1 ]

PART 202— EQUAL CREDIT
OPPORTUNITY
Amendm ents to Regulation B To Imple­
ment the 1976 Amendm ents to th e Equal
Credit Opportunity Act

E x tr a c t From
FE D E R A L R E G IS T E R ,
V O L . 42, N O . 4 ,
T h u r s d a y , J a n u a r y 6, 1977
p p . 1242 - 1263

The original Equal Credit O pportunity
Act (Pub. L. 93-495, th e “Act”), which
went into effect on October 28,1975, pro­
hibits discrim ination in any aspect of a
credit transaction on th e basis of sex or
m arital status. The 1976 Amendments to
th e Act (Pub. L. 94-239) were signed into
law on M arch 23, 1976, and will go into
effect on M arch 23, 1977. They extend
th e Act’s prohibition of discrim ination In
credit transactions to include discrim ina­
tion based on race, color, religion, n a­
tional origin, age (provided th e applicant
has the capacity to co n trac t), receipt of
income from a public assistance program,
and th e good fa ith exercise cf rights
under th e Consumer Credit Protection
Act.
Since the Amendments substantially
changed the Act, num erous changes were
necessary in existing Regulation B, which
implements th e Act. The Board of Gov­
ernors proposed for comment a revised
version of Regulation B on July 20, 1976
(41 FR 29870), and held hearings on
August 12 and 13, 1976. On the basis of
comments received and testimony p re­
sented, th e Board published a second pro­
posal for com m ent on November 8, 1976
(41 FR 49123).
After consideration of th e additional
comments received, th e Board has revised
th e second proposal (the “November pro­
posal”). The changes are discussed in
detail below. The revised Regulation B,
published herein, will become effective
on M arch 23, 1977. Creditors are re­
quired to comply w ith th e provisions of
th e existing Regulation B until th a t time.
S e c t i o n 202.1— A u t h o r i t y , S c o p e , E n ­
f o r c e m e n t , P e n a l t ie s and L ia b il it ie s ,
I n t e r p r e t a t io n s

Sections 202.1(a) and (b) are identical
to th e November proposal. In section
202.1(c) (1), the words “actual and puni­
tive” have been inserted before "dam ­
ages” to clarify th a t under th e Act a
creditor’s civil liability extends to both
actual and punitive damages, and th a t
the dollar lim itations in section 706(b)
of the Act apply only to th e liability for
punitive damages. The final clause of
section 202.1(c) (2) has been modified to
conform more closely to the statutory
language; “or approval” has been added
after “such rule, regulation, [or] in te r­
pretation,” and “rescinded” has been
added after “is amended.” The rest of
th is section is identical to th e November
proposal.
S e c t io n

2 0 2 .2 — D e f i n i t i o n s a n d
o f C o n s t r u c t io n

R ules

Section 202.2(a)—Definition of "Ac­
count". The definition is Identical to th e
November proposal and substantially

sim ilar to the definition in existing Regu­
lation B.
Section 2022(b)— Definition of “Act".
The definition is identical to th e Novem­
ber proposal.
Section 202.2(c)—Definition of "Ad­
verse action". The definition is drawn
from section 701(d) (6)rof th e amended
Act and is sim ilar to the November pro­
posal. Section 202.2(c)(1) describes the
actions by a creditor th a t will trigger the
requirem ents imposed by the Act and the
regulation relating to notification of ac­
tion taken, statem ent of reasons for ad­
verse action, and record retention. P ara­
graph (i) is based on the statutory lan ­
guage of section 701(d) (6); it provides
th a t adverse action occurs where an ap­
plicant requests credit and the creditor
refuses th e request. In addition, p ara­
graph (i) encompasses the situation in
which a creditor rejects an applicant’s
initial request, b ut makes a counter-offer.
This approach combines provisions of
paragraphs (i) and (ii) of the November
proposal. If the applicant uses or accepts
the counter-offer, no adverse action oc­
curs. However, if the applicant does not
use or expressly accept the credit, ad­
verse action does occur.
P aragraphs (ii) and (iii) describe
other actions on the p a rt of the creditor
th a t constitute adverse action.
Section 202.2(c)(2) lists the actions
th a t do no t constitute adverse action.
Paragraph (i) provides th a t a change in
th e term s of an account “expressly
agreed to by an applicant” is not ad ­
verse action. P aragraph (ii) provides
th a t adverse action does not occur if a
creditor takes action or forbears from
taking action regarding inactivity, de­
fault, or delinquency on an account.
Paragraph (iii) provides th a t a refusal
to authorize a point of sale or loan tra n s­
action th a t would exceed an applicant’s
existing credit lim it is n ot adverse ac­
tion. This paragraph differs from the
November proposal in not requiring th a t
the applicant be advised of the credit
lim it in advance. However, a point of sale
refusal of credit is adverse action if the
refusal occurs for a reason other than
exceeding th e pre-established credit
limit.
Paragraphs (iv) and (v) provide th a t
a refusal to extend credit because appli­
cable law prohibits th e creditor from ex­
tending such credit, or because the credi­
tor does not offer the type of credit re­
quested, does not constitute adverse ac­
tion. The la tte r provision is intended to
apply, for example, where an applicant
requests a credit card from a creditor
th a t does not issue credit cards. How­
ever, if an applicant requests a loan a t
an interest rate of 2 percent and this re­
quest is refused because the creditor’s
policy is to make loans only a t 18 per­
cent, this refusal is adverse action. P a ra ­
graph (v) is no t intended to exem pt this
type of refusal.
Section 202.2(d)—Definition of "Age”.
The definition is identical to the No­
vember proposal. I t indicates th a t the
amended Act’s protection against dis­
crim ination based on age extends only to

FEDERAL REGISTER, VOL 4 2 , NO. 4— THURSDAY, JANUARY 6, 1977

RULES A N D REGULATIONS

n atu ral persons and n o t to business
entities.
Section 202.2(e) —Definition of "Appli­
cant”. The definition is identical to the
November proposal. I t is sim ilar to the
definition in the existing regulation.
Section 202.2(f) — Definition o f "Appli­
cation”. The definition of “application"
is identical to th e November proposal and
is substantially sim ilar to existing Reg­
ulation B.
Although the definition of a “com­
pleted application for credit” has been
modified, it rem ains substantially the
same as in th e November proposal. The
words “such inform ation” in th e final
clause of the first sentence replace “the
approvals or reports” to m ake clear th a t
the requirem ent of reasonable diligence
is not lim ited to governm ental approvals
or reports. The final sentence requires
th a t, where an application is Incomplete
as to m atters susceptible to completion
by the applicant, the creditor shall make
a reasonable effort to notify the applicant
and allow, a reasonable opportunity for
completion of th e application.
Section
202.2(g)— Definition
of
“Board”, The definition is identical to the
November proposal.
Section 202.2(h)—Definition of "Con­
sumer credit”. The definition is identical
to the November proposal
Section 202.2 (i)— Definition of “Con­
tractually liable". The definition is iden­
tical to th e November proposal.
Section
220.2(f)—Definition
of
"C redit’. The definition is identical to
the November proposal.
Section 202.2(h) —Definition of “Credit
card”. The definition is identical to th e
November proposal.
Section 202.2(1)—Definition of “Credi­
tor”. The definition is substantially iden­
tical to the November proposal. The pro­
visions on potential liability of assignees
for violations committed by o ther credi­
tors is now lim ited to situations in which
th e assignee had reasonable notice of th e
illegal acts. In this respect, this defini­
tion is identical to th e July proposal.
Section
202.2 (m )—Definition
of
“Credit transaction”. The definition is
identical to th e November proposal. I t
modifies existing Regulation B by delet­
ing th e phrase “solicitation of prospec­
tive applicants by advertising or other
m eans.” Discriminatory advertising prac­
tices rem ain subject t o .5 202.5(a), which
prohibits discouraging applications.
Section 202.2 (n )—Definition o f "Dis­
criminate against an applicant”. The
definition is identical to th e November
proposal and is substantially sim ilar to
th e definition in existing Regulation B.
Section 202.2(o)— Definition of “El­
derly”. This is a new definition which sets
th e exact age a t which an applicant is
deemed elderly. Age 62 was chosen since
th a t is th e earliest age a t which retire­
m ent benefits are paid by th e Social Se­
curity Adm inistration.
The addition of this definition neces­
sitates th e reiettertng o t subsequent
(k d a itio n s
Section 202J ( p ) — Definition o f “B m pirioaOg derived credit system”. T he defi­

nition is sim ilar to th e November pro­
posal. I t implements section 701(b) (3) of
th e am ended Ac*. Section 202.2 (p) (1)
describes an “empirically derived credit
system.” Such a system is defined as a
credit scoring system th a t evaluates, on
th e basis of a num erical score, the likeli­
hood o f an applicant’s repaying the credit
requested. T he score is based on key a t­
tributes of th e applicant and the credit
which have been selected and weighted in
accordance w ith the creditor's experience
w ith p ast applicants. T he system m ust
he based on experience which is not out­
dated. The system m ay include a sub­
jective ^valuation of other Inform ation
as long as the determ ination of credit­
worthiness is prim arily controlled by the
empirically derived aspects of the system.
Section 202.2(p) (2) of th e definition
prescribes th e Board’s standards fo r a
“dem onstrably and statistically sound”
system as required by th e amended Act.
First, if th e entire applicant population
of the creditor is n ot used in developing
th e system, th e sample groups of appli­
cants which are used m ust be obtained
in accordance with appropriate sampling
principles so as to fairly represent the
characteristics of th e underlying popula­
tion. If proper methods are used in th e
system ’s development, consideration of
th e characteristics of th e applicant popu­
lation need not include actual sam pling
or scoring of rejected applicants.
Second, th e B oard’s standards perm it
a creditor, as a m atter of business judg­
m ent, to set th e acceptance score high
or low depending upon Its business ob­
jectives.
Third, th e system’s predictive ability
m ust be validated during th e develop­
m ent process. One m ethod of validation
is to apply th e model to accum ulated
credit experience and th en to use sta tis­
tical tests to compare predictive ability
w ith actual results. In addition, there
are other methods available to ascertain
w hether th e model will perform a t a sta ­
tistically significant rate. No p articular
confidence level is specified In the reg­
ulation; however, system developers may
note th a t courts In employment cases
have shown a preference for a 95 per­
cent level.
Fourth, th e system ’s predictive ability
m ust be regularly revalidated as it is
used. The techniques used for revalida­
tion, th e frequency w ith which it occurs,
and th e population of applicants used to
te st continuing predictive ability will
vary depending upon th e creditor and
credit system Involved. Usually revalida­
tion will use th e same statistical tests
as th e initial validation, except th a t
m ore recent credit experience is used.
Section 202.2 (p) (3) provides th a t a
creditor m ay borrow either a fully devel­
oped credit system or credit experience
from which an em pirical system can be
developed. A borrowed system or a system
based on borrowed inform ation m ust
m eet th e standards prescribed in subsec­
tions (1) and (2) above. In addition, a
creditor adopting a borrowed system or
using borrowed d a ta m ust validate th e

1243
system against its own credit experience,
as soon as such inform ation is available.
Thus, if th e borrowing creditor has ac­
cum ulated credit experience using a
judgm ental system or a different scoring
system, th e borrowed system can be val­
idated using this inform ation even be­
fore th e borrowing creditor commences
use of th e new em pirical system. How­
ever, if th e creditor has no credit experi­
ence of its own, th en validation may be
deferred until such experience is accu­
m ulated. If a borrowed system fails to
pass a test of its validity then it is no
longer a demonstrably and statistically
sound, empirically derived credit system.
T he borrowing creditor m ust then either
discontinue use of the system or use it
accepting th e risks and requirem ents in ­
heren t in a judgm ental system.
Section 202.2(g)— Definition of “E x­
tend cred it' and "Extension of cred it’.
The definitions are identical to the
November proposal.
Section 202J2(r)— Definition of "Good
faith.’’ The definition is Identical to the
November proposal.
Section 202.2(s)— Definition of "Inad­
vertent error”. The definition was drawn
from g 202.11(a) of existing Regulation
B, relating to m echanical errors, and is
identical to th e November proposal.
Section 202.2(t)— Definition of “Judg­
m ental system of evaluating applicants”.
T he definition Is identical to th e Novem­
ber proposal. The term is intended to en­
compass all systems for evaluating cred­
itw orthiness other th a n “dem onstrably
a n d statistically sound, empirically de­
rived credit systems.”
Section 202.2(u)—Definition of "Mari­
tal status”. The definition is identical to
th e November proposal.
Section 202.2(v)— Definition of “Nega­
tive factor or value”. Section 701(b)(3)
of th e Act forbids the assigning of a neg­
ative factor or value to th e age of an el­
derly person in th e operation of a de­
m onstrably and statistically sound, emirically derived credit system. The
efinition of “negative factor or value" is
sim ilar to th e November proposal. How­
ever, because of th e addition of a defi­
nition of th e word “elderly,” the effect of
this definition upon a credit scoring sys­
tem is now very different.
Since th e November proposal did not
define “elderly,” under th a t proposal
each applicant would haye been “elder­
ly” with respect to all younger applicants.
Accordingly, an applicant could n ot have
been given a score lower th an th a t of any
younger applicant, regardless of the
creditor’s experience. Comments indi­
cated th a t, as a general rule, older p er­
sons are the m ost creditw orthy group on
th e basis of age, b u t th a t certain groups
of m iddle-aged applicants are less credit­
w orthy th a n younger applicants. The
November proposal would have caused
undue distortion in the points assigned
to age and m ight have led system users
to cease using age as a variable. If elder­
ly applicants are empirically the most
creditw orthy, th en dropping age as an
indicator could have had th e effect of re­
ducing ther am ount of credit extended to
older persona.

S

FBJERAL REGISTER, VOL 4 2 , NO. 4— THURSDAY, JANUARY 6 , 1 9 7 7

1244

RULES A N D REGULATIONS

Because "elderly” is now defined as age
62 and above, the regulation has a dif­
feren t im pact upon scoring systems.
G enerally a dem onstrably and statis­
tically sound, em pirically derived credit
system which uses age as a scoring factor
should assign to an elderly applicant the
num ber of points indicated by experi­
ence. However, in no event may an elder­
ly applicant receive fewer points for age
th a n are assigned to the class of appli­
cants th a t are not elderly and are most
favored on the basis of th eir age. The
highest score on the basis of age given
to applicants who are less th a n 62 creates
a floor; persons 62 or older may not be
given a score beneath th a t floor. Except
for this lim itation, applicants may be
given the num ber of points on the basis
of age which experience indicates.
Section
202.2(H))—Definition
of
“Open-end credit”. T he definition is
identical to th e November rwonosal.
Section 202.2(x)— Definition of “Per­
son”. The definition is identical to th e
November proposal.
Section 202.2 (y )—Definition of “P erti­
nent elem ent of creditworthiness”. The
definition is sim ilar to the November pro­
posal. Section 701(b) (2) of th e amended
Act perm its a creditor to inquire about
an applicant’s age or w hether an appli­
ca n t’s lneome derives from a public as­
sistance program , if such inquiry is for
the purpose of determ ining p ertinent ele­
m ents of creditworthiness. The Board
has defined p ertinent elem ent of credit­
worthiness as inform ation having a de­
m onstrable relationship to a determ ina­
tion of creditworthiness. The definition
varies from th e November proposal by
expressly stating th a t this definition re ­
lates only to judgm ental systems. In ad­
dition, use of th e term “m anifest” in con­
nection w ith the inform ation’s relation to
creditw orthiness has been deleted. Credi­
tors should be on notice, however, th a t
court decisions pertaining to the socalled “effects te st” do require t t a t the
relationship between the defendant’s
practices and th e defendant’s actual
needs be “m anifest.” This definition does
not preclude a court applying the effects
test to credit practices from reading a
requirem ent of m anifestness into the re­
lationship between credit practices and
creditw orthiness.
Section 202.2(2) —Definition of “Pro­
hibited basis”. The definition is substan­
tially sim ilar to th e November proopsal.
The phrase is defined in term s of those
characteristics th a t, under the amended
Act, may not be considered in any aspect
of a credit decision or may be considered
only in a lim ited fashion. A footnote in ­
terprets the statutory language of sec­
tion 701(a)(1) as referring not only to
an applicant’s race, color, religion, n a ­
tional origin, sex, m arital status, or age,
b ut also to such characteristics of other
persons who may be indirectly Involved
in th e transaction. This definition differs
from th e November proposal by expressly
stating th a t a n exercise of rights under a
S tate law substituted for the Consumer
Credit Protection Act is equally protected
by th e A ct and th is regulation.
Section 202.2 (aa) —D efinition o f “Pub­
lic assistance program”. Section 701(a)

(2) of the am ended Act prohibits dis­
crim ination against a n applicant "be­
cause all or p a rt of th e applicant’s in ­
come derives from any public assistance
program .” The definition provides some
examples of such programs, but th e term
is not lim ited to th e types of income
cited. This definition differs from th e
November proposal by no longer requir­
ing th a t the periodic income supplem ent
be directed. A program ’s assistance m ay
be indirect while still falling w ithin the
am bit of this definition.
Section
202.2(bb)— Definition of
“State”. The definition is identical to the
November proposal.
Section 202.2 (cc) — Captions
and
catchlines. The section is intended to in ­
dicate th e non-substantive n atu re of
captions and catchlines. I t is derived
from § 226.2(11) of Regulation Z.
Section 202.2(dd)—Footnotes. The sec­
tion gives footnotes to the regulation the
same legal effect as the text.
S e c t i o n 202.3— S p e c i a l T r e a t m e n t f o r
C e r t a in C l a s s e s o f T r a n s a c t io n s

Four classes of transactions are given
special treatm ent in th e existing Regula­
tion B: incidental, business, securities,
and public utilities credit. Section 202.3
provides specialized treatm en t for these
classes and for one additional class, cred­
it extended to governm ental units. The
Board has determ ined to adopt this sec­
tion as proposed with the changes dis­
cussed below.
Public comments suggested th a t no
reason relating to creditworthiness
justifies an Inquiry concerning th e sex
of an applicant for utilities, business, or
incidental credit. In response to these
comments, th e Board has modified this
section to provide th a t S 202.5(d) (3),
which prohibits inquiries about an ap­
plicant’s sex, applies to public utilities
and business credit transactions. This
prohibition is also applicable to inci­
dental credit transaction^ unless infor­
m ation relating to th e sex of an appli­
cant is required for medical records or
sim ilar purposes. This exception is in ­
tended to allow persons providing health
services to rely upon m edical records as
a source of inform ation when extending
credit, even though the records may con­
tain inform ation relating to the sex of
an applicant.
A num ber of com m entators urged the
Board to prohibit' Inquiries as to m arital
status in business credit transactions.
The Board has not followed this sugges­
tion because to do so would require th e
revision of forms and, in view of the
variety and volume of business tran sac­
tions, the revision would be costly and
disruptive. Furtherm ore, it is doubtful
th a t this burden would be justified Blnce
the traditionally close personal contact
between business creditor and applicant
makes it likely th a t m arital statue will
be known by the creditor regardless of
the inform ational bar.
The Board believes th a t, as a general
rule, applicants for business credit are
more sophisticated th an applicants for
consumer credit and, thus, there is no

need to explain reasons for adverse ac­
tion to all business credit applicants. Ap­
plicants fo r business credit who wish to
know th e reason tor adverse action may,
of course, request an explanation from
the creditor as provided in g 202.3(e) (2).
Similarly, {202.3(e)(4) grants business
credit applicants th e rig h t to request re­
ten tio n of records by th e creditor w ithin
90 days of adverse action. Under § 202.3
(e) (2), th e period during which th e re­
quest m ust be m ade commences only
when th e applicant is notified orally or
in w riting of th e adverse action by the
creditor.
The Board has determ ined th a t spe­
cial treatm en t for business transactions
is also w arranted for record retention
provisions of the regulation. The require­
m ents to retain records involve signifi­
can t costs fo r creditors. T he recordkeep­
ing requirem ent would be particularly
burdensome since applications for com­
m ercial credit typically Involve a much
greater volume of documents than appli­
cations for consumer credit.
S e c t i o n 202.4— G e n e r a l R u l e C o n c e r n ­
in g

D is c r im in a t io n

The section is identical to the Novem­
ber proposal.
S e c t i o n 202.5—R u l e s ' C o n c e r n i n g
A p p l ic a t io n s

Section 202.5(a)—Discouraging appli­
cations. The section is identical to the
November proposal.
Section 202.5(b)— General rules con­
cerning requests for information. Section
202.5(b)(1) is unchanged from the No­
vember proposal. I t corresponds to § 202.5(a) of existing Regulation B, except
th a t the phrase “continued ability to re ­
pay” was deleted to underscore the fact
th a t a creditor’s access to inform ation is
not lim ited to determ ining the probable
continuity of an applicant’s income.
Thus, the only barriers to a creditor’s
obtaining, as opposed to considering, in­
form ation are those contained in ! 202.5.
Footnote 4 makes clear th a t § 202.5(b) (1)
neith er lim its nor abrogates laws regard­
ing privacy, privileged inform ation, or
sim ilar m atters.
Section 202.5(b) (2) deals with infor­
m ation collection relating to the moni­
toring or enforcem ent of compliance
w ith th e am ended Act, Regulation B, or
other Federal or S tate laws. The first
sentence refers explicitly to the infor­
m ation collection requirem ents of g 202.­
13. I t has been revised from the Novem­
ber proposal by the addition of an in tro ­
ductory phrase, “notw ithstanding any
other provision of this section,” to clarify
th a t this provision supersedes inform a­
tion barriers contained in subsections (c)
and (d) of g 202.5. Any S tate law th a t
precludes a creditor from requesting an
applicant’s race/national origin, sex, and
m arital status, and thus conflicts with
! 202.13, is preem pted by g 202.11(b)(1)
(ill).
The second sentence of { 202.5(b) (2)
perm its creditors to comply w ith regula­
tions, orders, or agreem ents (Issued by
or entered Into w ith a Federal o r S tate

FEDERAL REGISTER, VOL. 4 2 , NO. 4— THURSDAY, JANUARY « , 1977

1245

RULES A N D REGULATIONS

court or Enforcement agency) th a t re­ tlonal bar applies notw ithstanding the
quire the collection of inform ation to existence of a S tate necessaries law or
m onitor or enforce compliance w ith th e fam ily expense statute.
am ended Act or other S ta te or Federal
In th e second sentence of I 202.5(d)
law, such as th e Federal F air Housing (1), th e phrase th a t appeared in th e No­
Act, adm inistered by th e U, S. D epart­ vember proposal, “in all other instances,”
m ent of Housing and U rban Develop­ has been replaced by the phrase “W here
m ent. The Board h as substituted th e an application is for other th a n indi­
words “may obtain” for “shall obtain” vidual, unsecured credit • • • ” In addi­
to clarify th a t the provisions of the sec­ tion, the lim itation regarding term s th a t
ond sentence of (b) (2) are permissive m ay be used in m arital statu s inquiries
and not m andatory. In addition, the is stated in a separate sentence, to clarify
scope of th e provision has been expanded th a t the lim itation applies in all instances
by the inclusion of th e word "regulation” where such inquiries are permissible, in ­
in the first clause and by th e insertion of cluding in community property States.
the words “or enforce’’ w ithin th e phrase Section 202.5 (d) (1) also makes clear th a t
“to m onitor compliance.”
a creditor may explain th a t th e category
Finally, § 202.5(b) (3) clarifies th e “unm arried” includes single, divorced,
point th a t some inform ation barriers of and widowed persons.
§ 202.5 are not applicable to special pu r­ Section 202.5(d)(2) replaces |§ 202.4
pose credit program s as defined in I 202.8, (c) (3) and 202.5(d)(1) of existing Reg­
or with regard to 1 202.7(e) relating to ulation B relating to alimony, child sup­
insurance.
port, and separate m aintenance. The
Section 202.5(c)—Inform ation about a first sentence of this provision states the
spouse or form er spouse. Sections 202.5 general requirem ent th a t a creditor m ust
(c> and (d) are specific exceptions to the first disclose to an applicant th a t income
general rule of § 202.5(b) (1). Sections from alimony, child support, or separate
202.5(c) (1) and (2) are Identical to the m aintenance need not be revealed by
November proposal and are derived from th e applicant unless th e applicant is re ­
§ 202.5(b) of the existing regulation. lying on such income to establish cred­
Paragraph (iv), relating to reliance on itw orthiness. The second sentence is in ­
community property, differs from the tended to alert creditors th a t a general
corresponding provision of existing Reg­ inquiry regarding source of income,
ulation B, which perm its a creditor to without fu rth er specification, may lead
request and consider inform ation about an applicant to list alimony, child sup­
an applicant’s spouse if th e applicant “is port, or separate m aintenance income.
relying on community property * * * as Therefore, unless an inquiry is phrased
a basis for repaym ent of th e credit re­ in term s of salary, wages, o r sim ilarly
quested." The revised provision perm its specified income as opposed to general
such inquiries whenever th e applicant inquiries about income, disclosure by the
“resides" in a community property S tate creditor concerning th e optional n ature
or when the applicant, in applying for of such a listing is required.
credit, is relying on property th a t is
Because th e disclosure regarding ali­
relying on property th a t is located in a
mony, child support, or separate m ain­
community property State.
Section 202.5(c) (3) has been expanded. tenance income is required both in oral
As in th e November proposal, it perm its and on w ritten applications, the word
a creditor to ask an applicant to list any “appropriately” has been substituted for
account upon which the applicant is li­ “first conspicuously.”
A num ber of com m entators urged the
able and to disclose th e nam e and ad ­
dress in which such an account is car­ Board to delete the word “separate” from
ried. A second sentence has been added “separate m aintenance” In th e 202.5
th a t perm its a creditor to ask about (d) (2) disclosure provision, on th e
other nam es in which th e applicant has ground th a t m any application form s th a t
comply with the existing version of Reg­
previously received credit.
Section 202.5(d) —Inform ation a credi­ ulation B do not draw such a distinction
tor m ay not request. Except for editorial and, thus, could be considered inade­
changes, this section is th e same as th e quate under th e new regulation. The
November proposal. Section 202.5(d)(1) Board has adopted th e provision as pro­
restates the provisions of §§ 202.4(c) (1) posed. However, since these comments
and (2) of existing Regulation B, except express a valid concern, th e Board has
th a t th e language, “or as required to added a footnote to 202.5(e) of th e reg­
comply w ith S tate law governing perm is­ ulation th a t perm its a creditor to con­
sible finance charges or loan ceilings,” tinue “to use any application form th a t
was deleted as unnecessary, since § 202.11 complies w ith the-requirem ents of the
(b) (1) (11) preem pts any provision of October 28,1975, version of Regulation B
luntil its present stock of those form s is
S tate law regarding m arried persons.
exhausted or until M arch 23, 1978,
The structure of § 202.5(d) (1) has been whichever occurs first.”
changed from th e existing regulation to
Section 202.5(d)(3) expressly prohib­
state th e rule relating to m arital status
inquiries m ore clearly. If a n applicant its a creditor from asking about an ap ­
applies fo r an individual, unsecured ac­ plicant’s sex, and Incorporates th e cour­
count, a creditor m ay n o t inquire about tesy titles provision of § 202.4(c) (4) of
th e applicant’s m arital status unless th e existing Regulation B. As in § 202.5(d)
community property exception, which (2), th e word “appropriately” h as re ­
conform s to I 202.5(c)(2) (iv), applies. placed th e words “first conspicuously”
Creditors should n e ts th a t this inform a- fo r th e reasons m entioned above.

Section 202.5(d) (4) incorporates the
lim itation regarding child bearing in­
quiries contained in th e first sentence
of § 202.5(h) of th e existing regula­
tion; the second sentence of § 202.5(h)
Is found in § 202.6(b) (3) of this regu­
lation. The provision makes clear th a t
th e prohibition as to child bearing in ­
quiries does not preclude a creditor
from asking about the num ber and
ages of an applicant's dependents or
about dependent-related financial obli­
gations or expenditures. For purposes of
clarification, th e Board has added a final
clause to emphasize th a t a creditor may
ask questions relating to dependents
only if it asks all applicants such
questions.
Section 202.5(d) (5) prohibits inquiries
about th e race, color, religion, or n a ­
tional origin not only of applicants b ut
also of any other person in connection
w ith a credit transaction, except as pro­
vided by § 202.5(b) (3) relating to special
purpose credit program s or as required
by § 202.5(b) (2) for compliance-moni­
toring purposes. H ie final sentence ex­
plicitly perm its a creditor to inquire
about an applicant’s perm anent resi­
dence and im m igration status.
Section 202.5(e)—Application forms.
The content of § 202.5(e) rem ains essen­
tially unchanged from th e November
proposal. However, a num ber of com­
m ents noted th a t certain provisions of
this regulation m ight necessitate changes
in creditors’ forms less th an a year afte r
creditors modified th eir forms to comply
w ith the October 28, 1975 version of the
regulation. In order to minimize th e
financial burden of any fu rth e r changes
th a t may be required, a footnote has been
added, perm itting creditors to continue
to use application forms th a t comply
w ith the requirem ents of th e 1975 version
of Regulation B u n til present stocks of
those forms are exhausted or until
M arch 23, 1978, whichever occurs first.
In response to numerous comments,
§ 202.5(e) has also been redrafted to un­
derscore the point th a t Regulation B
does not require th e use of w ritten ap­
plications or, if w ritten forms are used,
does not require the use of any of the
sample applications approved by the
Board. If a creditor chooses to use w rit­
ten applications, it has four options.
First, a creditor may design its own
forms. Second, a creditor m ay use forms
prepared by another person, for example,
another creditor or a trade association.
Third, a creditor may use any appropri­
ate model form included in Appendix B
of Regulation B. (The Appendix B forms
will be published separately in th e n ear
future.) Finally, a creditor may use a
modified version of any appropriate Ap­
pendix B form.
T he phrase “appropriate model form ”
has been used to emphasize th a t th e flvp
form s contained In Appendix B are each
designed for use in a different situation.
F or example, one form is intended for
use only in open end, unsecured credit
transactions; another is Intended for use
In com m unity property States. T here­
fore, th e protection accorded creditors

fRDBM l REGISTER, VOL 4 1 , NO. 4 — THURSDAY, JANUARY 6 , 1 9 7 7

1246

RULES A N D REGULATIONS

using th e model forms applies only if the
form "appropriate” to a p articular situa­
tion is used or modified as provided in
§ 202.5(e).
Section 202.5(e) enum erates th e three
ways in which a creditor m ay modify an
appropriate Appendix B form to satisfy
its needs. F irst, a creditor may ask for
additional inform ation if such a request
is not prohibited by § 202.5. Second, a
creditor may delete any inform ation re­
quest. Third, a creditor m ay rearrange
the order of th e questions. In each in ­
stance, however, a creditor m ust include
th e appropriate notices in th e appropri­
a te places if inform ation regarding cour­
tesy titles, alimony, child support, or
separate m aintenance paym ents, or
m arital statu s is solicited.
The m odification of an appropriate
Appendix B form by deleting or re ­
arranging inform ational items will not
affect a creditor’s protection under sec­
tion 706(e) of th e am ended Act from
civil liability arising from th e use of the
form. If a creditor adds an inform ational
item not expressly perm itted by th e reg­
ulation, th e creditor m ay not rely upon
th e protection of § 706(e) w ith respect
to th a t additional item.
Finally, th e language of th e November
proposal expressly perm itting creditors
to add th e ECOA notice to th e ir forms
has been deleted for two reasons. First,
footnote 6 addresses th e problem of using
forms th a t contain the ECOA notice pre­
scribed by th e October 28, 1975 version
of Regulation B. Second, supplying an
ECOA notice a t th e tim e th a t an appli­
can t applies for credit will not satisfy
the requirem ent of § 202.9(a) th a t such
a notice be provided when adverse action
is taken.
S e c t i o n 202.6—R u l e s C o n c e r n i n g
E v a l u a t io n o p A p p l ic a t io n s

Section 202.6 deals w ith th e use of in ­
form ation in the evaluation of credit
applications, and elaborates on th e sub­
stantive provisions of section 701 (a)
and (b) of th e am ended Act.
Section 202.6(a)—General rule con­
cerning the use of inform ation. Section
202.6(a) is substantially sim ilar to the
November proposal. Subject to two
qualifications, th e basic provision of this
section is th a t a creditor m ay consider,
in evaluating an application, any infor­
m ation th a t it obtains. T he first qualifi­
cation is th a t no inform ation may be used
to discrim inate against an applicant on
a prohibited basis, except, as provided in
8 202.8 regarding special purpose credit
programs. Second, a creditor’s use of in ­
form ation is lim ited by the specific prohi­
bitions contained in 88 202.5 and 202.6 of
th e revised regulation. The rule adopted
in 8 202.6(a) subsumes the first sentence
of 8 202.5 (k) of existing Regulation B.
The use of the words “to discrim inate”
is Intended to underscore th e fa c t th a t
th e general rule regarding use of infor­
m ation is not lim ited to intentional acts
of discrim ination. The am ended Act pro­
scribes Intentional discrim inator, and
also m ay be interpreted as prohibiting
actions th a t have th e effect of discrim i­

natin g against applicants on any prohib­
ited basis.
The footnote has been shortened in the
final version. I t refers to th e legislative
history of the am ended Act, which shows
th a t Congress intended certain judicial
decisions enunciating the “effects test”
in the employment area to be applied in
the credit area, especially w ith respect to
th e allocation of burdens of proof.
As a judicial doctrine, the effects test
is n ot well suited to regulatory imple­
m entation. In addition, it is, of course,
subject to change as it is examined and
applied by the courts.
Section 202.6(b)— Specific rules con­
cerning use of inform ation. Section 202.6(b) is substantially sim ilar to th e No­
vember proposal and contains specific
lim itations on the use of inform ation.
Section 202.6(b)(1), which bars (with
certain exceptions) a creditor from tak ­
ing any prohibited basis into account in
evaluating creditw orthiness, is identical
to the November version.
Footnote 8 does n o t broaden the au­
thority granted by § 202.5 to ask about
m arital status; rath er, where the credi­
to r can ask m arital statu s under § 202.5,
th e footnote perm its a creditor to con­
sider it in connection w ith rights and
remedies.
Section 202.6(b)(2) has been adopted
w ithout change from th e November pro­
posal. P aragraph (i) expressly prohibits
a creditor from taking into account an
aDplicant’s age (provided th e applicant is
old enough to enter into a binding con­
tract) or w hether an applicant receives
income from any public assistance pro­
gram, except as otherwise provided in the
section. The wording of paragraphs (ii)
and (iii) emphasizes th e distinction be­
tween the consideration of age in em­
pirically derived credit systems and judg­
m ental systems. In a judgm ental system,
a creditor is perm itted to consider an
applicant’s age and w hether an appli­
c an t’s income derives from any public as­
sistance program, but only for th e pu r­
pose of determ ining a pertin en t elem ent
of creditworthiness. A creditor may use
age itself as a predictive variable in a
credit scoring system, but only if such
system is a dem onstrably and statistical­
ly sound, em pirically derived system.
Paragraph (iv) is based on section 701
(b) (4) of th e amended Act and provides
th a t, in any system of evaluating credit­
worthiness, a creditor may consider the
age of an elderly applicant when age is
used to favor th e applicant.
W ith respect to 1202.6(b)(3), th e
Board has Inserted language, which ap ­
pears in existing R egulation B, to make
clear th a t creditors are barred from con­
sidering statistics relating to childbear­
ing only in connection with evaluating
creditworthiness. Thus, for example, a
creditor may consider such statistics in
connection with m arketing research.
Section 202.6(b) (4) is identical to the
corresponding provision in th e November
proposal.
Section 202.6(b) (5) has been adopted
as it appeared in th e November proposal,

except for th e addition of annuity, pen­
sion, and other retirem ent income as in­
come th a t creditors m ay n o t discount or
exclude from consideration. This sub­
section corresponds to 88 262.5(d) (2)
and 202.5(e) of existing R egulation B.
Section 202.6(b) (6) corresponds to
8 202.5(j) of th e existing regulation, and
is unchanged from the November pro­
posal, except fo r the reinstatem ent of th e
inadvertent error defense and th e phrase
“contractually liable,” which appear in
th e existing regulation. T he words “when
available” in paragraphs (i) and (iii)
refer to th e fact th a t such credit history
may not always be available to a creditor.
A creditor is required to consider such
credit history only “to th e extent th a t a
creditor considers credit history in eval­
uating creditw orthiness of sim ilarly
qualified applicants for a sim ilar type
and am ount of credit.”
Section 202.6(b) (7) h as been adopted
w ithout change from th e November pro­
posal. I t provides th a t a creditor may
consider an applicant’s imm igration
status, w hether th e applicant is a per­
m anent resident of th e United States,
and w hatever additional inform ation is
necessary to ascertain rights and rem e­
dies regarding repaym ent.
Section 202.6(c)— State property laws.
This section incorporates th e provisions
of 8 705(b) of th e Act and is substan­
tially identical to 8 202.5(1) of th e exist­
ing regulation. The Board has adopted
it w ithout change from th e November
proposal.
S e c t i o n 202.7— R u l e s C o n c e r n i n g
E x t e n s io n s o f C r e d it

Section 202.7(a)—Individual accounts.
This section is identical to th e November
proposal. It corresponds to § 202.4(b) of
the existing regulation.
Section 202.7(b)— Designation
of
name. Section 202.7(b) has been adopted
w ithout change from th e November pro­
posal and is substantially th e same as
8 202.4(e) of existing Regulation B. The
section prohibits a creditor from requir­
ing an applicant to open and m aintain
an account in a spouse’s nam e, although
an applicant may use such a nam e if de­
sired. T he provision' perm its an appli­
can t to use a birth-given first nam e w ith
a birth-given surnam e, spouse’s sur­
nam e, or a combined or hyphenated su r­
name.
This provision should n o t be in te r­
preted as requiring creditors to redesign
systems in order to handle occasional
requests for combined nam es o r other
nam es th a t contain more th a n the usual
num ber of characters.
Section 202.7(c)— Action concerning
existing. open end accounts. Section
202.7(c) (1) is identical to th e November
proposal and is derived from 1 202.5(1)
(1) of existing R egulation B. I t pro­
hibits creditors from taking certain ac­
tions on th e basis of a n applicant’s re­
tirem ent, attain m en t of a certain age,
change of nam e, or change of m arital
status.

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Section 202.7(c) (2) is substantially
sim ilar to tile November proposal and is
derived from $202.5(1X2) of existing
Regulation B. I t perm its a creditor to re­
quire a reapplication on the basis of a
change in m arital statu s in certain in ­
stances where open end credit was
granted to an applicant based on income
earned by the applicant’s spouse. The
November proposal, unlike existing Reg­
ulation B, woukg have perm itted credi­
tors to require reapplication in those
instances on th e basis of a change in
nam e as well as on the basis of a change
in m arital status. Comments pointed out
th a t a change in nam e does n ot always
indicate a change in m arital status, and
th a t only the la tte r is a cause for possible
concern about changed financial cir­
cum stances. In addition, women are
more likely to change th eir names upon
change in m arital statu s th a n are men,
so th a t the November version of this pro­
vision m ight disfavor women. Therefore,
th e Board has decided to delete the
words “nam e or" before “m arital sta tu s”
in $ 202.7(c) (2).
Section 202.7(d)— Signature of spouse
or other person. Section 202.7(d) cor­
responds to g 202.7 of existing Regula­
tion B, governing requests for the signa­
tu re of a spouse or other person. The
section has been revised for clarity.
Section 202.7(d) (1) states the general
rule contained in § 202.7(a) of the exist­
ing regulation, and in the first sentence
of § 202.7(d) (1) of the November pro­
posal. I t prohibits a creditor from requir­
ing the signature of a spouse o r other
person, other th a n a jo in t applicant, on
any credit Instrum ent if the applicant
qualifies under the creditor’s standards
of creditw orthiness for the credit re­
quested.
The words “or other person, other th an
a joint applicant” have been added to
the November version to accomplish two.
objectives. T he addition of the first p art
of the phrase makes clear th a t creditors
may no t discrim inate in imposing signa­
ture requirem ents upon applicants,
w hether or not th e additional signature
required is th a t of the applicant’s spouse.
In this respect, the addition merely con­
tinues the rule of existing § 202.7 (a ).
The second p a rt of the phrase has been
added to underscore th e fact th a t where
two persons voluntarily apply jointly for
credit, a creditor may obtain the signa­
tu re of the joint applicant.
The rem ainder of g 202.7(d) comprises
exceptions to, and elaborations on, the
general rule. Section 202.7(d) (2) relates
to unsecured credit where property is
relied upon. This subsection includes the
second sentence of g 202.7(d) (1) of th e
November proposal, concerning th e fac­
tors th a t creditors m ay consider in eval­
uating the property relied upon, w ith
new m aterial th a t explains th a t th e cred­
ito r may require, if evaluation indicates
th a t it is necessary, a signature on any
instrum ent needed to gain access to the
property in th e event of default, For ex­
ample, such an Instrum ent m ight be a
waiver of dower rights.

Section 202.7(d) (3) relates to unse­
cured credit in community property
States, and is substantially the sam e as
g 202.7(d) (4) of the November proposal
and § 202.7(b) of th e existing regulation.
The provision adopted by the Board dif­
fers from th e November proposal in th a t
the criterion defining instrum ents on
which creditors m ay require signatures
is changed from “necessary” to "neces­
sary, or reasonably believed by th e credi­
to r to be necessary, under applicable
S tate law.” This change is in response
to comments indicating the difficulty in
some States of determ ining w hat in stru ­
m ents are legally required in some in ­
stances. I t conforms the stand ard for
this subsection to th a t established for
secured'credit in existing Regulation B,
and for all categories (unsecured rely­
ing on property, unsecured in community
property State, and secured) in the final
regulation.
Section 202.7(d) (4) relates to secured
credit, and corresponds to g 202.7(d) (2)
of the November proposal and g 202.7(c)
of the existing regulation. The phrase
“and the applicant’s spouse has or will
have an interest in the property being
offered as security,” which appeared in
the November proposal, has been deleted
because some com m entators cited S tate
laws under which, even though a per­
son’s spouse has no interest in property
owned by the person, the spouse’s signa­
ture is required to pass clear title. The
words “or other person” have been added
a fte r “spouse” to take account of the
situation where a person other th an the
applicant’s spouse holds an interest in
th e property being offered as security.
Finally, “necessary” has been changed
to “necessary, or reasonably believed
* * * ,” as explained above w ith reference
to g 202.7(d) (3).
Section 202.7(d) (5) relates to credit in
connection with which the personal lia ­
bility of a person o ther th a n the appli­
can t (and other th a n a joint applicant
or applicants, if any) has been found
necessary. An example, given in foot­
note 10, is the situation where an ap­
plicant requests individual credit and
relies on income of another person. This
subsection corresponds to g 202.7(d) (3)
of th e November proposal. Aside from
th e addition of footnote 10, It differs
from the November proposal in two re ­
spects. First, “an additional p a rty ” re­
places “a party other th a n th e appli­
can t” to indicate th a t, where persons
apply voluntarily fo r jo in t credit, the
restrictions stated in this paragraph do
not apply. "For example, if a person and
his or her spouse apply for jo in t credit,
th e creditor does n o t violate Regulation
B by obtaining th e signature of th e
spouse. Second, a new sentence has been
added, providing th a t guarantors, co­
signers, and th e like have the same pro­
tection under g 202.7(d) as do appli­
cants. For example, a creditor cannot
require th e spouse of a guarantor f a co­
sign the guarantee, unless It could re­
quire such signature if th e guarantor
w e a an applicant for the credit being
extended.

Section 202.7(e)—Insurance. T he pro­
vision is sim ilar to th e November pro­
posal. I t states th a t differences In rates
and term s of credit-related Insurance
provided to different applicants, and pro­
viding Insurance to some applicants but
n o t to others, do not constitute viola­
tions of R egulation B. In response to
public comment, th e Board has added
a proviso prohibiting creditors from de­
nying o r term inating credit because
credit life, health, accident, or disability
Insurance is unavailable due to the ap ­
plicant’s age. This proviso does not pre­
vent creditors from varying the term s
and conditions of credit because of the
unavailability, rates, and term s of in ­
surance.
The last sentence of the section, which
is also an addition to the November pro­
posal, states th a t creditors do not violate
R egulation B by asking applicants about
age, sex, or m arital status in connection
w ith insurance applications.
S e c t i o n 202.8— S p e c i a l P u r p o s e C r e d i t
P rograms

In response to comments, the Board
has made several substantive and tech ­
nical changes.
Section 202.8(a)— Standards for pro­
grams. Section 202.8(a) has been made
subject to the two general rules con­
tained in new g 202.8(b) discussed below.
Reversing th e position taken In the No­
vember proposal, the denial of credit to
an applicant under a special purpose
credit program constitutes adverse ac­
tion, triggering the notice provisions of
g 202.9. The Board has changed this sec­
tion for two reasons. F irst, th e revised
provision more closely follows the lan ­
guage of 701(c) of th e Act. Second, while
g 202.8 program s are accorded special
treatm en t by the Act and th e regulation,
the Board believes th a t the intended
beneficiaries of those program s should
have the sam e rig ht as other applicants
to receive a notice of action taken and
a statem ent of reasons for denial.
Section 202.8(a) (1) deals w ith credit
program s expressly authorized by Fed­
eral or S tate law. Despite num erous re ­
quests, the Board has not listed any
program s th a t qualify under this pro­
vision. A great num ber of program s may
satisfy the requirem ents of g 202.8(a) (1),
but any attem pt to list the program s th a t
do qualify would involve a detailed re­
view of th e facts in each case and would
require an analysis of num erous Fed­
eral and S tate statutes, regulations, and
judicial and adm inistrative decisions and
interpretations. Therefore, creditors will
have to determ ine, in conjunction with
any governm ent agency involved in the
program , w hether a p articular program
m eets the statu tory requirem ents enun­
ciated in Section 701(c) of th e Act.
Section 202.8(a) (2) concerns pro­
gram s where the credit is offered by no tfor-profit organizations. T he only
change m ade in this section is (he sub­
stitution of th e phrase “offered by” fo r
th e term s “adm inistered by.” T his sub­
stitution was m ade in response to com­
m ents to avoid any m lsunderstan ding

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RULES A N D REGULATIONS

1248

th a t a program offered by a not-forprofit entity (e«.. a tru st) may be ad­
m inistered by a for-profit organization
(e.g., a commercial b a n k ).
Section 202.8(a)(3) covers program s
involving for-profit organizations. I t has
been changed in two respects. First,
language regarding such an organiza­
tio n’s participation in a program has
been added to clarify th e point th a t a
for-profit organization may satisfy the
requirem ents of this section by extend­
ing credit pursu ant to a program spon­
sored by a not-for-profit organization
or by another for-profit organization.
For example, a student loan program
sponsored by a foundation where the
loans are m ade by commercial banks or
a program established by a for-profit
corporation where economically disad­
vantaged employees are assisted in ob­
taining credit from local creditors would
qualify.
The second change involved incor­
porating subsection (a) (3) (iii) into new
1202.8(b)(2).
Section
202.8(b)—Applicability of
other rules. This section is new. The first
paragraph has been added to m ake ex­
plicit w hat was implied in th e previous
proposals, namely, th a t all of th e other
provisions of th e regulation apply to
special purpose credit program s to the
extent th a t those provisions are n ot in ­
consistent w ith th e specific term s of
1202 .8.
T he second paragraph incorporates
th e provisions of 8 202.8(a) (3) (ill) of
th e November proposal and applies them
s o t only to program s involving forprofit organisations (as was th e case in
th e November proposal), but also to pro­
grams offered by not-for-profit organi­
sations.
Section 202.8(b) (2) provides th a t a
creditor may determ ine eligibility for a
special purpose credit program using
one o r m ore of th e prohibited bases;
but, once th e characteristics of th e class
of beneficiaries are established, a credi­
to r m ay n o t discrim inate am ong poten­
tia l beneficiaries on a prohibited basis.
F or example, a creditor m ight establish
a credit program for impoverished
American Indians. I f th e program m et
th e requirem ents of 8 202.8(a), th e cred­
ito r could refuse credit to non-Indians
but could n o t discrim inate among Indian
applicants on th e basis of sex or m arital
status.
Sections 202.8 (c) and (d )—Special
rule concerning requests and use of in ­
form ation and Special rule in the case of
financial need. Except fo r re-lettering,
the only modification in these sections
is th a t th e phrase “or will be” has been
added to th e first sentence of each to
underscore th e point th a t new special
purpose credit program s may be estab­
lished afte r th e effective date of the reg­
ulation. B oth sections perm it creditors
to seek inform ation otherwise barred by
th e regulation in order to determ ine eli­
gibility fo r special purpose credit pro­
grams.

HDRAL

S e c t io n 202.9—N o t if ic a t io n s
This section encompasses all of th e re­
quirem ents for th e notices th a t creditors
m ust provide to applicants, except for
th e credit history notice required by
8 202.10(b). These requirem ents appear
in 88 202.4(d) and 202.5(m) of existing
R egulation B.
Section 202.9(a)—Notification of ac­
tion taken, ECOA notice, and statem ent
of specific reasons. This section sets
fo rth th e requirem ents for the content
and tim ing of notices and explains to
whom and by whom notices are to be
given. Section 202.9(a) (1) requires th a t
th e notice of action taken be given w ith­
in 30 days afte r a creditor receives a
completed application, or w ithin a simi­
la r period afte r taking adverse action.
In response to public comment, the
Board has added subsection (iv) to
8 202.9(a) (1). I t provides th a t a creditor
shall notify an applicant of action taken
w ithin 90 days afte r an applicant has
been notified by th e creditor of an offer
to gran t credit other th a n in substan­
tially th e am ount or in substantially the
term s requested by a n applicant and the
applicant has not expressly accepted or
used the credit offered.
Section 202.9(a) (2) specifies th e con­
te n t of th e notification when adverse ac­
tion is taken. The notification m ust con­
tain th e statem ent of action taken re ­
quired by exlstng 8 202.5(m) (1), the
ECOA notice required by existing 8 202.4
(d ), and the statem ent of specific rea ­
sons for adverse action (or disclosure of
the rig h t to such a statem ent) sim ilar to
the statem ent required by present 8 202.5
(m) (2). The revised regulation requires
th e notices to be given together because
the Board believes th a t public under­
standing of th e notices will be thereby
enhanced. Under th e revised regulation,
th e ECOA notice need be given only when
adverse action is taken. A creditor may
continue to provide th e ECOA notice a t
the application stage, as long as the
notice is also given when adverse action
is taken.
Section 202.9(a) (3) provides th at, if
more th a n one applicant is involved In a
credit transaction, th e notification shall
be provided to the prim ary applicant
where one is readily apparent.
Section 202.9(a) (4) provides th a t, if
a transaction Involves m ore th a n one
creditor and the applicant is offered and
accepts credit from any one of them,
no creditor need furnish a notification of
adverse action, the ECOA notice, reasons
fo r denial, or disclosure of th e right to
such reasons. H ie creditor extending the
credit will, of course, give notification of
approval by implication, since the appli­
can t will have received the money, prop­
erty, or services requested. If no credit is
granted, or if credit is offered th a t is n ot
acceptable to the applicant, th en each
creditor m ust give the required notifi­
cation. For example, if an auto dealer
“shops” an appllaction to several banks
and one bank extends credit, th e provi­
sion requires only th a t bank to provide
th e notice of action taken. However, if

MOUTH.

none of th e banks offers credit o r if th e
credit offered is not acceptable to th e ap­
plicant, th en all th e banks m ust give th e
required notices, as m ust th e dealer if it
is a “creditor” in th e transaction.
W here all creditors in a m ultiple credi­
to r situation are required to furnish the
notices, they m ay arrange fo r a joint
notification to be provided through one
party, provided th a t such a Joint notifica­
tion identifies each creditor th a t consid­
ered the application. Disclosure of each
creditor’s identity, however, is required
only when the notification is provided by
a th ird party. A creditor th a t directly
furnishes th e required notification to a
rejected applicant need not identify other
creditors to whom the application was
“shopped."
The last sentence of 8 202.9(a) (4) in ­
sulates a creditor from liability for acts
or omissions of a th ird party in those
cases where th e th ird party agrees to
supply the notice, provided th a t th e cred­
itor follows reasonable procedures to in ­
sure compliance.
Section 202.9(b)— Form o f ECOA
notice and statem ent of specific reasons.
This section is identical to th e November
proposal. I t is draw n from existing
88 202.4(d) and 202.5(m)(2) and (3).
Unlike existing 8 202.4(d), which re­
quires creditors to use th e sam ple ECOA
notice verbatim , 8 202.9(b) (1) provides
th a t substantial adherence to th e sample
form constitutes compliance. In addition,
this section perm its inclusion in the
notice of a reference to a sim ilar S tate
statu te or regulation and S tate en­
forcem ent agency.
The text of th e notice is identical to
th a t contained in existing 8 202.4(d), ex­
cept th a t th e additional bases of pro­
hibited discrim ination have been added
and, in th e la st sentence, the word “cred­
ito r” is used, ra th e r th a n a blank requir­
ing a description of th e p articular type
of creditor. T he la tte r change will fa ­
cilitate th e giving of notices by th ird
parties on behalf of several different
types of creditors.
Numerous public comments strongly
urged the Board to am end 8 202.9(b) (2)
to allow creditors to sta te as th e reason
fo r adverse action the fact th a t an ap­
plicant has “failed to achieve th e qualify­
ing score on th e creditor’s credit scoring
system.” The com m entators argued th a t
such a statem ent is th e only truthful,
accurate statem ent of th e reasons for
adverse action under a statistically sound
credit scoring system.
Section 701(d) (3) of the am ended Act
provides th a t “a statem ent of reasons
meets th e requirem ents of th is section
only if it contains th e ‘specific’ reasons
for th e adverse action taken.” (Emphasis
added) T he Board is of th e opinion th a t
a statem ent th a t an applicant has failed
to achieve the qualifying score on the
creditor’s credit scoring system would
not satisfy the language or in ten t of the
statute. A statem ent th a t th e applicant
failed to achieve a qualifying score is
perhaps th e ultim ate reason for decline,
but is Itself a conclusion. Such a state­
m ent does not reveal th e more funda­

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RULES A N D REGULATIONS

m ental reasons why the applicant was
declined.
T he Board believes th a t th e in ten t of
th e Congress was t o require cr e a to rs to
provide applicants w ith a m ore m eaning­
ful explanation of denial th a n a sta te­
m ent th a t denial w as caused by a failure
to achieve a qualifying score. T he Senate
R eport on th e 1976 Amendments
states “ * * * knowing th e reasons for
adverse action will, over tim e, have a very
beneficial educational effect on th e
credit-consum ing public and a very
beneficial competitive effect on th e credit
m arketplace.” (S. Rep. No. 589, 94th
Cong., 2d Sess. (1976), p . 7.)
The knowledge th a t one failed to
achieve a minimum score can have little
educational value. Providing m ore funda­
m ental reasons fo r adverse action, as
contem plated by Regulation B, will en­
hance consumers’ awareness of th e fac­
tors th a t are considered Im portant by
credit-granters and often will enable an
applicant to correct erroneous Inform a­
tion or supplem ent Inform ation in th e
application.
Section 202.9(b) (2) provides a sug­
gested form for th e statem ent of specific
reasons for adverse action. The form in ­
cludes a section regarding disclosure of
th e use of Inform ation th a t was obtained
from a n outside source, so th a t a creditor
could also satisfy th e requirem ents of
th e F air C redit Reporting Act through
proper use of th is form. T he form also
contains a section for th e ECOA notice.
Section 202.9(c)— Oral notifications.
This section is draw n from section 701
(d) (5) of th e am ended Act and Is iden­
tical to th e November proposal.
Section 202.9(d)— W ithdrawn appli­
cations. This section is substantially
sim ilar to th e November proposal.
Section 202.9(e)—Failure of compli­
ance. T his section Is Identical to the
November proposal.
Section 202.9(f)—Notification. This
section defines w hat constitutes notifica­
tion. I t provides th a t a creditor notifies
a n applicant when a w riting addressed to
th e applicant Is delivered or mailed to
th e applicant’s la st known address or, in
the case of an oral notification, when
the creditor communicates w ith the
applicant.
S e c t io n

2 0 2 .1 0 — F urn i s h i n g o f

C re d it

I n f o r m a t io n

Although num erous changes have
been m ade in th is section, th e substantive
requirem ents rem ain substantially the
sam e as th e November proposal and
existing R egulation B, as am ended on
Septem ber 2, 1976 (41 FR 38759).
Section 202.10(a) requires th e desig­
nation and furnishing of inform ation cm
accounts established on or a fte r June 1,
1977 to reflect th e participation of each
spouse. H ie words “th a t furnishes credit
inform ation” were added a fte r “creditor”
a t th e beginning of this subsection and
I 202.10(b) to make clear th a t Regula­
tion B does n o t require creditors to pro­
vide credit inform ation to others. F u r­
therm ore, If • creditor does n o t furnish
credit inform ation to others, it need not
comply w ith th e designation require­
m ents of I 202.19. A creditor th a t chooses

to fu rn ish credit inform ation, however,
m ust do so as prescribed by this section.
Several comments requested clarifica­
tion of th e term "prim arily liable,”
which appears throughout Oils section
b u t nowhere else In th e regulation. “P ri­
m arily liable” was substituted for “con­
tractually liable” in th e November pro ­
posal in order to exclude guarantors or
sureties from th e coverage of th e sec­
tion. The retu rn to “contractually liable,”
a defined term , and th e addition of th e
words “other th a n as guarantors, sure­
ties, endorsers, or sim ilar parties” is in ­
tended to clarify the coverage of the sec­
tion.
Footnote 12 was added a t the end of
§ 202.10(a) (3) to clarify creditors’ re ­
sponsibilities when new parties assume
responsibility fo r paym ent of a debt. If
a creditor th a t is furnishing credit Infor­
m ation on an account learns th a t a new
party or parties have assumed responsi­
bility for paym ent of the debt, th e credi­
to r has the responsibility to determine
w hether th e assum ptors are m arried to
each other and, therefore, entitled to
have inform ation furnished on th e ac­
count as required by S 202.10(a) (2) and
(3). If th e new parties are so entitled,
credit Inform ation should be reported In
th e names of th e new parties. The regu­
lation does n o t require the creditor to
continue furnishing Inform ation in the
nam es of th e form er parties.
Section 202.10(a) (2) of the November
proposal would have required creditors
to furnish inform ation in th e nam e of
each spouse about whom Inform ation
was requested, except when furnishing
Inform ation to consumer reporting agen­
cies. W hen furnishing Inform ation to
consumer reporting agencies, creditors
would have been required to do so In a
m anner th a t would enable th e agency to
provide access to th e inform ation about
th e account In th e nam e of each spouse.
The approach of th e November pro­
posal was based upon th e assum ption
th a t Inform ation is supplied by creditors
to consum er reporting agencies w ithout
a request fo r inform ation about a spe­
cific account. Comments revealed th a t,
while this is generally true, some credi­
tors furnish Inform ation to consumer re ­
porting agencies only in response to a
request about a specific account. T here­
fore, creditors responding to a request
from a consum er reporting agency fo r
inform ation about one p articipant on a
Joint account, by furnishing inform ation
about both spouses, m ight be In violation
of th e F air C redit R eporting Act.
Accordingly, i 202.10(a) (2) of the No­
vember proposal was redrafted. Under
new subsections (a) (2) and (a) (3), the
m anner In which inform ation about an
account designated under th is section
m ust be furnished depends upon w hether
it is furnished an a routine basis to con­
sum er reporting agencies or pursuant to
a request fo r inform ation on a specific
account. In th e form er situation, i t m ust
be provided in a m anner th a t will enable
an agency to provide access to th e infor­
m ation about th e account in th e nam e of
each spouse, and in th e la tte r situation in
th e nam e of th e spouse about whom th e
inform ation is requested.

H rD E R A L REGISTER,

Several com m entators requested clar­
ification of. th e requirem ent in 1 202.10
(a ) (2) of th e November proposal th a t
creditors “rep o rt th e designation” of ac­
counts. Because of th e confusion caused
by this term and its doubtful value in
furthering the purpose of th e section, it
has been deleted from th e regulation.
Section 202.10(h)— Accounts estab­
lished prior to June 1, 1977. There are
two principal Ways of complying w ith the
designation and reporting requirem ents
w ith respect to accounts established
prior to June 1, 1977. F irst, a creditor
m ay review its records and designate the
files of m arried account holders. This is
th e procedure envisioned by I 202.10(b)
(1). In th e alternative, a creditor th a t
lacks inform ation regarding use or lia­
bility fo r accounts or does n o t wish to
undertake th e search of Its records nec­
essary to comply w ith subsection (1) may
m ail to all m arried account holders o r to
all account holders th e notice entitled
"C redit H istory for M arried Persons.”
In some cases, a creditor m ay possess
th e inform ation about use and liability
for accounts necessary for designation
and reporting about some accounts but
n o t for others. T he creditor m ay use both
m ethods described above, th a t is, m ail the
notice to those accounts for which It lacks
th e necessary inform ation and designate
autom atically those for which It possesses
th e inform ation.
The words "one copy of” were added
before "notice” in subsection (2) to make
It clear th a t only one notice need be sent
to each account for w hich any billing
statem ent will be sent between June 1
and October 1,1977.
Footnote 14 allows creditors to delete
any reference to “use” of an account
when notices are sen t to closed end
account holders. This change was in ­
tended to avoid the confusion th a t m ight
be caused when consumers holding ac­
counts cm which th ere can be no users re­
ceived th e notice.
H ie words “a t any tim e prior to Octo­
ber 2,1977” were added In subsection (b)
(2) to allow creditors sending billing
statem ents m onthly, regardless of activ­
ity on accounts, to begin sending th e no­
tices before June 1.
A sentence added a t th e end of sub­
section (b) (2) allows creditors to com­
bine th e altern ate methods of compliance
provided In subsection (b) by designating
those accounts on which th e creditor has
th e inform ation needed to do so and
sending th e notice where It does not.
The notice entitled “C redit History For
M arried Persons” was th e subject of sev­
eral comments requesting clarification of
th e language of th e text. As a result, the
word “bold” before "th e account” was
deleted, and th e phrase "are responsible
for" was added. As used In th e notice,
responsibility for an account is th e equiv­
alen t of contractual liability. No addi­
tional reporting requirem ents are Im­
posed by th is change.
W ith respect to the notice itself, com­
m ents reflected a general lack of anderstandm g of the phrase “paid for.” Since
the phrase merely restated th e idea that,

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RULES A N D REGULATIONS

If both spouses share contractual liability
cm a n account, they a re entitled to share
th e credit history of th a t account, th e
B oard h as decided to delete th e phrase.
T he word “complete” was substituted
fo r “fill ou t” In th e notice to m ake it clear
to consumers th a t all inform ation re ­
quested In th e notice (typed or printed
nam e, signature and account num ber)
m ust be supplied before any change in
credit Inform ation reporting will be
made.
H ie notice In th e November proposal
ended w ith th e applicant’s request to
fu rn ish inform ation in th e nam es of both
spouses “as follows.” The words “as fol­
lows” were deleted to m ake clear th a t
consumers may n o t request a change in
th e nam e in which th e account is cu r­
rently carried. A consumer may only add
a nam e to th e account.
In response to comments expressing
concern th a t one spouse m ight deny the
other spouse a credit history, one signa­
tu re line has been deleted a t th e end of
th e notice. T he words "of eith er spouse”
have been added a fte r “signature" under
th e rem aining line to indicate th a t either
spouse may authorize th e change in the
m anner in which inform ation is fu rn ­
ished on th e account.
Although several comments expressed
concern th a t, w ithout th e signature of
both spouses, a spouse could request a
change even when not entitled to share
th e credit history, th e Board believes th a t
tills potential problem is outweighed by
th e necessity to ensure th a t all m arried
account holders have access to the credit
histories th a t they have established.
Section 202.10(c) describes how credi­
tors m ust respond to requests to change
th e m anner in which inform ation is re ­
ported on an account. The words “prop­
erly completed request” were substituted
for “w ritten request” to indicate th a t
creditors need respond only to requests
th a t contain all inform ation necessary to
m ake the change on an account. L an­
guage was also added to m ake clear th a t
a creditor need n o t change th e nam e in
which an account Is carried pursuant to
a request under th is section.
Because th e Board has determ ined th a t
one signature is sufficient to authorize a
change in th e m anner in which infor­
m ation on a n account is furnished, and
th a t requiring two signatures m ight frus­
tra te the in ten t of th e section, th e pro­
vision allowing creditors to verify a re­
quest to provide separate credit histories
by signature or otherwise h as been
deleted.
S e c t i o n 202.11— R e l a t i o n t o S t a t e L a w
Section 202.11(a) —Inconsistent State
laws. Section 202.11(a) states th e gen­
eral standard for preem ption of S tate
law and is identical to the November
proposal. I t Is derived from section 705
(f) of th e am ended Act.
Section 202.11(b)— Preempted provi­
sions o f S ta te law. Subsection (b) (1)
describes provisions of State law th a t
are preem pted by th e Act and Regula­
tio n B.
T he November proposal would have
preem pted provisions of S tate law re ­
quiring a n applicant’s spouse to assume

liability fo r debts incu rred by an ap­
plicant who has established Independent
creditw orthiness. This guideline, which
was Intended to preem pt S tate neces­
saries laws and fam ily expense statutes
in lim ited situations, h as been deleted;
however, creditors In S tates where such
laws exist m ust continue to observe the
Inform ational bar relating to m arital
statu s In S 202.5.
P arag raph (11) continues th e preemp­
tion of those provisions of s ta te sm all
loan laws th a t forbid th e separate ex­
tension of credit to both parties to a
m arriage. No change from th e treatm ent
of these laws in existing Regulation B
is Intended.
P aragraph (v) of S 202.11(b) (1) is
identical to § 202.11(b) (6) of th e No­
vember proposal except th a t the words
“or adm inister” have been added to
preem pt State laws th a t forbid either
th e establishm ent or im plem entation of
special purpose credit program s as de­
fined by § 202.8.
The Board has deleted subsection (b)
(7) of the November proposal, which
would have preem pted S tate laws th a t
prohibit inquiries used in a model ap­
plication form set fo rth in Appendix B
of the regulation, because these laws may
be more protective of an applicant.
Creditors using the model forms m ust
conform them to inform ational prohi­
bitions of applicable S tate laws.
Subsection (b) (2) is new. I t requires
creditors to request a form al Board in ­
terpretation when seeking a determ ina­
tion as to w hether a S tate law is
inconsistent w ith the Act and regula­
tion. The subsection incorporates § 202.1
(d) as th a t section relates to form al
Board interpretations. T he factors upon
which such a determ ination will be based
are set fo rth in subsection (c) of Sup­
plement I. Notice of a determ ination will
be provided as specified in subsection
(e) (1) of Supplem ent I relating to revo­
cation, as modifications are also incor­
porated by reference.
The rem ainder of § 202.11(b) is iden­
tical to the November proposal, except
th a t the conjunction “an d " th a t ap ­
peared in subsection (b) h as been
changed to “or” in subsection (b) (1)
(iv) to correct an inadvertent drafting
error.
Section 202.11(c)—Finance charges
and loan ceilings. Section 202.11(c) re ­
states S 202.8(b) of existing Regulation
B w ithout substantive change. Footnote
10 in § 202.11(c) of the November pro­
posal provided an example of how th e
regulation affected loan ceilings and
finance charges. Because com m entators
found it confusing^ the footnote has been
deleted.
Section 202.11(d) — State and Federal
laws not affected. Subsection (d) saves
certain types of laws from preem ption
even though they may fall w ithin one of
the categories of S tate laws preem pted
by subsection (b )(1 ). T he coverage of
the section has been broadened by adding
th e word “Federal” before “banking reg­
ulations” and by deleting th e word “com­
m unity” before “property.” Accordingly,
Federal and S tate banking regulations
directed only towards Insuring th e sol­
vency of financial Institutions and S tate

property laws are unaffected by th e Act
n< Regulation B.
Section 202.11(e) — Exem ption for
State regulated transactions. T he stan d­
ards fo r exem ption o f S tate regulated
transactions In ! 202.11(e) are identical
to those in th e November proposal, ex­
cept th a t under this provision a violation
of an exempted S tate law Is a violation
of the Federal law only to the extent th a t
It imposes requirem ents also imposed by
th e Act or R egulation B. In response to
comments, th e Board has decided to re­
instate th e provisions of S 202.11(d) (3)
(ii) of the July proposal as the more ap­
propriate way to handle enforcem ent of
exempted S tate equal credit laws.
S e c t i o n 202.12—R e c o r d R e t e n t i o n
Section 202.12(a) —R etention of pro­
hibited information. This section Is iden­
tical to the November proposal.
Section 202.12(b) — Preservation of
records. This section is substantially sim­
ilar to the November proposal.
Section 202.12(c) — Failure of compli­
ance. In response to public comment, the
Board has added an “Inadvertent erro r”
provision to § 202.12. This section pro­
vides th a t a failure to comply w ith
§ 202.12 shall not constitute a violation
when caused by an “inadvertent error.”
The term “inadvertent error” is defined
in § 202.2 (s).
S e c t i o n 2 0 2 .1 3 — I n f o r m a t i o n f o r
M o n it o r in g P u r p o s e s

The Board has determ ined to adopt a
simple notation requirem ent applicable
to all creditors th a t extend credit for
the purpose of purchasing residential
real property. The resulting d a ta are
intended to assist the agencies respon­
sible for enforcing the am ended Act, and
to assist the D epartm ent of Housing and
U rban Development in exercising its re­
sponsibilities under T itle VTH of the Civil
Rights Act Of 1968.
This section is lim ited to applications
for loans for the purpose of purchasing
residential real property. The Board be­
lieves this lim itation is appropriate for
several reasons. First, a home is in most
cases the single most im portant purchase
a consumer makes, and access to m ort­
gage credit has a profund im pact on the
quality of life. Second, there have been
frequent and serious allegations of dis­
crim ination in this area of credit. Third,
the per u n it cost of n otation will be sm all
in relation to th e dollar am ount of appli­
cations for mortgage credit.
A num ber of com m entators urged the
Board to require notation of race/n a­
tional origin, etc., in connection w ith
secured and unsecured home improve­
m ent loans on the ground th a t home im­
provement loans are covered by the
Home M ortgage Disclosure and F air
Housing Acts. T he Board h as determ ined
not to broaden the category of a p p l i c a ­
tions subject to a notation requirem ent
for several reasons. There is no univer­
sally accepted understanding of w hat
constitutes a home im provem ent loan.
In addition, th e Board is of th e opinion
th a t th e effectiveness of racial notation
as a n enforcem ent tool should be eval­
uated before this requirem ent is applied
to other types of applications.

FEDERAL REGISTER, VOL. 42 , NO. A— THURSDAY, JANUARY 6, 1 4 7 7

RULES A N D REGULATIONS

This section requires creditors to ask
th at appUcante respond to questions
about age, sex. m arital status, and race/
national origin. The term “race/national
origin” is used instead of “n e e ” became
certain of the categories required to be
used describe national origin rather
than race.
T he racial categories to be used are
categories th a t are already widely in use
in th e employment Arid, plus one addi­
tional category, “O ther (Specify),” to
perm it an applicant to supply a differ­
e n t description of his or h er ra c e /
national origin.
The regulation gives creditors the op­
tion of placing questions regarding per­
sonal characteristics on th e creditor’s
application form or on a separate form.
O n th e Board’s Appendix B model farm
far residential loan applications, to be
published in th e n ear future, th e ques­
tions will appear on the. form itself.
Creditors are n o t required to supply
inform ation about personal ch aracter­
istics if an applicant declines to do so.
The provision requires creditors to in­
form applicants th a t answ ering the
questions is voluntary, and th a t th e in ­
form ation is sought by th e Federal gov­
ernm ent fo r th e purpose of m onitoring
compliance w ith Federal anti-discrim ­
ination laws.
In response to comments from agen­
cies charged w ith responsibility for
adm inistrative enforcem ent of th e Act,
th e Board has added a new subsection
(d), which explains th a t any m onitor­
ing program required by such an agency
m ay be substituted for the requirem ents
imposed by Regulation B. This provision
should prevent duplication as well as
facilitate experim entation.
I t was also suggested th a t the Board
add to R egulation B a requirem ent th a t
creditors tabulate th e responses to the
questions about race/n ation al origin,
etc. Since creditors affected by { 202.13
are supervised by different enforcem ent
agencies, th e B oard has determ ined th a t
to impose a uniform tabulation require­
m ent is n o t appropriate. T he Board ex­
pects th a t th e enforcem ent agencies will
devise th e ir own procedures for collec­
tion and use of th e data, acting under
th e authority granted by section 704(d)
of th e Act.
S u pplem en t I

Supplement I, which follows Appendix
A, sets fo rth th e procedure under which
a S tate m ay apply for an exemption
for any class of transactions from the
provisions of sections 701 and 702 of th e
A ct Applications m ust be signed by the
Governor, A ttorney G eneral, or other
official of th e S tate having prim ary en ­
forcem ent o r interpret i ve responsibilities
under th e S tate law in question, and
m ust include a copy a t th e fu n text of
th e State law, a comparison of sections
701 and 702 of the Act w ith correspond­
ing provisions of th e State law , verifica­
tion of the existence of adequate en­
forcem ent m echanisms, and a statem ent
pvptatntng bow any differences be­
tween the State and Federal law do not

result In a dim inution of protection to
applicants.
Footnote 1 is new. I t provides th a t
any reference to S ta te law in Supple­
m ent I includes a reference to S tate
regulations implem enting th e S tate law
and form al interpretations of th e law
or regulation tor a court or authorised
agency of th a t State.
Footnote 3 Is also new and provides
th a t any reference to sections 701 and
702 of th e A ct includes a reference to
th e corresponding and implementing
provisions of th e regulation, as well as
any form al Board or official staff in ter­
pretations of these sections. Also in ­
cluded in any reference to sections 701
and 702 are SS 705 (a ), (b ). <c>, and <d)
of th e Act and th e corresponding pro­
visions of Regulation B.
P a rt 202 is being revised as follows:

1251

(a) Authority and scope. T his P a r t1*
comprises th e regulations Issued by the
Board of Governors of th e Federal Re­
serve System pursuant to T itle VH
(Equal Credit O pportunity Act) of th e
Consumer C redit Protection Act, as
am ended (15 U.S.C. 1601 e t seq.). Ex­
cept as otherwise provided herein, this
P a rt applies to all persons who are cred­
itors, as defined in I 202.2(1).
(b) Adm inistrative enforcement. (1)
As set forth m ore fully in section 704 of
th e Act, adm inistrative enforcem ent of
th e Act and th is P a rt regarding certain
creditors is assigned to th e Comptroller
of th e Currency, Board of Governors of
th e Federal Reserve System. Board of Di­
rectors of th e Federal Deposit Insurance
Corporation, Federal Home Loan Bank
Board (acting directly or through th e
Federal Savings an d Loan Insurance
C orporation), A dm inistrator of th e Na­

tional Credit Union Administration,
interstate Commerce Onenmterton. Civil
Aeronautics Board, Secretary o f Agricul­
ture, Farm Credit Adm inistration, Secu­
rities and Exchange Onmmteston, and
Sm all Business Administration.
(2)
Except to th e e xtent th a t adm inis­
trative enforcem ent is specifically com­
m itted to other authorities, compliance
w ith th e requirem ents imposed under the
Act and th is P a rt will be enforced by the
Federal T rade Commission.
(c)
Penalties and liabilities. (1) Sec­
tions 706(a) and (b) of the Act provide
th a t any creditor who fails to comply
w ith any requirem ent imposed under the
Act or, pursuant to section 702(g), this
P a rt is subject to civil liability for actual
and punitive damages In Individual or
class actions. P ursuant to section 704 of
th e Act, violations of th e Act or, pursu­
a n t to section 702(g), th is P a rt consti­
tu te violations of o th er Federal laws th a t
may provide fu rth er penalties. Liability
for punitive damages is restricted by sec­
tion 706(b) to non-govem m ental entities
and Is lim ited to $10,000 in individual ac­
tions and th e lesser of $500,000 or one
percent of th e creditor’s n e t w orth in
class actions. Section 706(c) provides for
equitable and declaratory relief. Section
706(d) authorizes th e aw arding of costs
an d jeaso n ab le attorney’s fees to an ag­
grieved applicant in a successful action.
(2) Section 706(e) relieves a creditor
from civil liability resulting from any act
done or om itted in good fa ith in con­
form ity w ith any rule, regulation, or in ­
terpretation by th e Board of Governors
of th e Federal Reserve System, or with
any Interpretations or approvals issued
by a duly authorized official or employee
of th e Federal Reserve System, notw ith­
standing th a t a fte r such act or emission
has occurred, such rule, regulation, in ­
terpretation, or approval is amended,
rescinded, or otherwise determ ined to be
invalid for any reason.
(3) As provided in section 706(f), a
civil action under th e Act or th is P art
m ay be brought In th e appropriate
U nited States district court without
regard to the am ount in controversy or
in any other court of com petent jurisdic­
tion w ithin two years after th e date of
th e occurrence of th e violation or w ithin
one year a fte r the commencement of an
adm inistrative enforcem ent proceeding
or a civil action brought by th e Attorney
G eneral w ithin two years after th e a l­
leged violation.
(4) Section 706 (g) and (h) provide
th a t. If the agencies responsible for a d ­
m inistrative enforcem ent are unable to
obtain compliance with th e Act or, p u r­
su an t to section 702(g), this P art, they
m ay refer th e m atter to th e Attorney
General. O n such referral, or whenever
th e A ttorney G eneral has reason to be­
lieve th a t one or more creditors are en­
gaged in a p attern or practice in violation
of th e Act or this P art, th e A ttorney G en­
eral may bring a civil action.

l T b s J a p a s B x B t a n w ill t o a p p ro v e d
b y t b s B o a rd s a d p i sh e i n tb o t a n u
R egister I n t h e n e a r f u tu r e .

“ A ■ n e e d h e re in , t h e w eed s “ ih i s P a r t ”
m e a n R e g u la tio n B, 12 C F R P o r t 202.

Sec.
202.1

A u th o rity , sco p e, e n fo rc e m e n t, p e n ­
a ltie s a n d lia b ilitie s , I n te r p r e ta ­
tio n s .
202 a
D e fin itio n s a n d r u le s o f c o n s tru c ­
tio n .
202.3
S p e c ia l tr e a tm e n t fo r c e r ta in c la sse s
o f tra n s a c tio n s .
202.4
G e n e ra l r u le s p r o h ib itin g d is c rim in a ­
tio n .
202.5
R u le s c o n c e rn in g a p p lic a tio n s .
202.6
R u le s c o n c e rn in g e v a lu a tio n o f a p ­
plications.
202.7
R u le s
c o n c e rn in g
e x te n s io n s
of
c re d it.
202A
S p e c ia l p u rp o se c r e d it p ro g ra m s.
202.9
N o tific a tio n s.
202.10 F u r n is h in g o f c r e d it In fo rm a tio n .
202.11 R e la tio n t o S t a t e law .
202.12 R e c o rd r e te n tio n .
202.13 I n f o r m a tio n f o r m o n ito rin g p u r ­
p oses.
A p p en d ix A—F e d e ra l E n fo rc e m e n t A g en ­
cies.
A p p e n d ix B— M odel A p p lic a tio n F o r m s 1
[R e s e rv e d ].
S u p p le m e n t I — P ro c e d u re s fo r S ta te E x ­
e m p tio n .
A u t h o r i t y : Sec. 703 o f E q u a l C re d it O p ­
p o r tu n ity A ct, 15 U .S.C. 1691 e t se q .

§ 2 0 2 .1 A u th ority, S co p e, E n fo rcem en t,
P en a ltie s and L ia b ilities, In terp reta­
tio n s.

RME2AL 2K K T 52, VOL. 4 2 , NO. 4— 1HU2SDAY, JAMUA2Y 6, 1977

1252

RULES A ND REGULATIONS

(d)
Interpretations. (1) A request fornor required, or where tim e strictures
a form al Board interpretation o r an of­ require a rapid response.
ficial staff in terpretation of this P a rt § 2 0 2 .2 D e fin itio n s a n d R u le s o f C o n ­
m ust be addressed to th e D irector of the
s tru c tio n .
Division of Consumer Affairs, Board of
For th e purposes of this P art, unless
Governors of th e Federal Reserve Sys­
tem, W ashington, D.C. 20551. Each re ­ the context indicates otherwise, the fol­
quest for an interpretation m ust contain lowing definitions and rules of construc­
a complete statem ent, signed by the per­ tion shall apply: 2
(a) Account m eans an extension of
son m aking th e request or a duly au th o r­
ized agent, of all relevant facts of the credit. W hen employed in relation to an
transaction or credit arrangem ent re la t­ account, the word use refers only to open
ing to th e request. True copies of all per­ end credit.
(b) A ct means the Equal Credit Op­
tinent documents m ust be subm itted with
th e request. The relevance of such docu­ portunity Act (Title VII of the Consumer
m ents must, however, be set fo rth in the Credit Protection A ct).
(c) Adverse action. (1) For th e pu r­
request, and th e documents m ust not
merely be incorporated by reference. The poses of notification of action taken,
request m ust contain an analysis of the statem ent of reasons fo r denial, and rec­
bearing of th e facts on the issues and ord retention, the term m eans:
(1) A refusal to g ran t credit in sub­
m ust specify the pertinent provisions of
th e statu te and regulation. W ithin 15 stantially the am ount or on substantially
business days of receipt of the request, th e term s requested by an applicant u n ­
a substantive response will be sent to the less th e creditor offers to gran t credit
person m aking th e request, or an ac­ other th an in substantially th e am ount
knowledgment will be sent th a t sets a or on substantially th e term s requested
reasonable tim e w ithin which a substan­ by th e applicant and th e applicant uses
or expressly accepts th e credit offered;
tive response will be given.
(2) Any request for reconsideration of or
(ii) A term ination of an account or
an official staff interpretation of this
P a rt m ust be addressed to the Secretary, an unfavorable change in th e term s of
B oard of Governors of the Federal R e­ an account th a t does not affect all or a
serve System, W ashington, D.C. 20551, substantial portion of a classification of
w ithin 30 days of th e publication of such a creditor’s accounts; or
(iii) A refusal to increase the am ount
interpretation in the F ed e r a l R e g is t e r .
Each request for reconsideration m ust of credit available to an applicant when
contain a statem ent setting fo rth in full the applicant requests an increase in ac­
th e reasons why the person m aking the cordance with procedures established by
request believes reconsideration would be th e creditor for the type of credit in­
appropriate, and m ust specify and dis­ volved.
(2) The term does n o t include:
cuss th e applicability of th e relevant
(i) A change in the term s of an ac­
facts, statu te, and regulations. W ithin 15
business days of receipt of such request count expressly agreed to by an appli­
for reconsideration, a response granting cant; or
(ii) Any action or forbearance relat­
or denying th e request will be sen t to the
person m aking th e request, or an ac­ ing to an account taken in connection
knowledgment will be sent th a t sets a w ith inactivity, default, or delinquency
reasonable tim e w ithin which such re ­ as to th a t account; or
(iii) A refusal to extend credit at a
sponse will be given.
(3) P ursuant to section 706(e) of the point of sale or loan in connection with
Act, the Board has designated the Direc­ th e use of an account because th e credit
to r and other officials of th e Division of requested would exceed a previously es­
Consumer Affairs as officials “duly au­ tablished credit lim it on th e account; or
(iv) A refusal to extend credit because
thorized” to issue, a t th eir discretion,
official staff interpretations of this P art. applicable law prohibits th e creditor
This designation shall no t be interpreted from extending th e credit requested; or
(v) A refusal to extend credit because
to include authority to approve p artic­
th e creditor does not offer th e type of
ular creditors’ form s in any m anner.
(4) The type of in terpretation issued credit or credit plan requested.
(d) Age refers only to n atu ra l persons
will be determ ined by th e Board and the
designated officials by the following and m eans the num ber of fully-elapsed
years from th e date of an applicant’s
criteria:
(i) Official Board interpretations will birth.
(e) Applicant means any person who
be issued upon those requests th a t in ­
volve potentially controversial Issues of requests or who has received an exten­
general applicability dealing w ith sub­ sion of credit from a creditor, and in ­
stan tial ambiguities in this P a rt and th a t cludes any person who is or may be con­
tractually liable regarding an extension
raise significant policy questions.
(ii) Official staff interpretations will of credit other th an a guarantor, surety,
be issued upon those requests th a t, in the endorser, or sim ilar party.
(f) Application mean* an oral or w rit­
opinion of th e designated officials, re ­
quire clarification of technical ambigui­ ten request for an extension of credit
ties in this P a rt or th a t have no signifi­ th a t is made in accordance w ith proce­
c an t policy implications.
(iii) Unofficial staff interpretations
• N o te t h a t so m e o f t h e d e f in itio n s I n th is
will be Issued w here th e protection of P a r t a r e n o t Id e n tic a l to th o s e I n 12 C F R 226
§ 706(e) of th e Act is neither requested ( R e g u la tio n Z ).

dures established by a creditor for the
type of credit requested. The term does
not include th e use of an account o r line
of credit to obtain an am ount of credit
th a t does not exceed a previously estab­
lished credit lim it. A completed applica­
tion for credit means an application in
connection w ith which a creditor has re­
ceived all the inform ation th a t th e cred­
ito r regularly obtains and considers in
evaluating applications for the am ount
and type of credit requested (including,
but not lim ited to, credit reports, any
additional inform ation requested from
th e applicant, and any approvals or re­
ports by governmental agencies or other
persons th a t are necessary to guarantee,
insure, or provide security for th e credit
or co llateral); provided, however, th a t
th e creditor has exercised reasonable
diligence in obtaining such inform ation.
W here an application is incomplete re­
specting m atters th a t th e applicant can
complete, a creditor shall m ake a re a ­
sonable effort to notify the applicant of
the incompleteness and shall allow th e
applicant a reasonable opportunity to
complete th e application.
'
(g) Board means th e Board of Gov­
ernors of the Federal Reserve System.
(h) Consumer credit m eans credit ex­
tended to a n atu ral person In which the
money, property, or service th a t Is the
subject of the transaction is prim arily for
personal, family, or household purposes.
(i) Contractually liable m eans express­
ly obligated to repay all debts arising on
an account by reason of an agreem ent to
th a t effect.
(j) Credit means the rig h t granted by
a creditor to an applicant to defer pay­
m ent of a debt, incur debt and defer its
payment, or purchase property or serv­
ices and defer paym ent therefor.
(k) Credit card means any card, plate,
coupon book, or other single credit device
existing for the purpose of being used
from tim e to tim e upon presentation to
obtain money, property, or services on
credit.
(1)
Creditor means a person who, in
the ordinary course of business, regular­
ly participates in the decision of w heth­
er or not to extend credit. The term in ­
cludes an assignee, transferee, or sub­
rogee of an original creditor who so
participates; but an assignee, tra n s­
feree, subrogee, or other creditor is not
a creditor regarding any violation of
the Act or this P a rt committed by the
original or another creditor unless the
assignee, transferee, subrogee, or other
creditor knew or had reasonable notice
of the act, policy, or practice th a t con­
stituted the violation before its involve­
m ent w ith the credit transaction. The
term does not include a person whose
only participation in a credit tran sac­
tion involves honoring a credit card.
(m) Credit transaction m eans every
aspect of an applicant’s dealings w ith a
creditor regarding an application for or
an existing extension of credit, includ­
ing, b u t no t lim ited to, inform ation re ­
quirem ents ; investigation procedures;
standards of creditw orthiness; term s of
credit; furnishing of credit inform ation;

FEDERAL REGISTER, VOL. 42 , NO. 4— THURSDAY, JANUARY 6 , 1977

RULES A N D REGULATIONS

revocation, alteration, or term ination of
credit; and collection procedures.
(n) Discriminate against an applicant
m eans to tre a t an applicant less favor­
ably th a n oth er applicants.
(0) Elderly means an age of 62 or
older.
(p) Empirically derived credit system.
(1) The term means a credit scoring
system th a t evaluates an applicant’s
creditw orthiness prim arily by allocating
points (or by using a comparable basis
fo r assigning weights) to key attributes
describing th e applicant an d other as­
pects of the transaction. In such a sys­
tem, the points (or weights) assigned to
each attribute, and hence the entire
scare:
(1) Is derived from an empirical com­
parison of sample groups or the popula­
tion of creditw orthy and non-credit­
worthy applicants of a creditor who
applied for credit w ithin a reasonable
preceding period of tim e; and
(ii) Determines, alone or in conjunc­
tion w ith an evaluation of additional
inform ation about the applicant, w heth­
er an applicant is deemed creditw orthy.
(2) A demonstrably and statistically
sound, empirically derived credit sys­
tem is a system :
(i) In which the data used to develop
the system, if no t the complete popula­
tion consisting of all applicants, are ob­
tained from the applicant file by using
appropriate sam pling principles;
(ii) W hich is developed for the pu r­
pose of predicting the creditw orthiness
of applicants w ith respect to th e legiti­
m ate business interests of the creditor
utilizing th e system, including, b ut not
lim ited to, minimizing bad debt losses
and operating expenses in accordance
w ith th e creditor’s business judgm ent;
(iii) W hich, upon validation using ap­
propriate statistical principles, separates
creditw orthy and non-credltw orthy ap­
plicants a t a statistically significant rate;
and
(iv) W hich Is periodically revalidated
as to its predictive ability by the use of
approprate statistical principles and Is
adjusted as necessary to m aintain its
predictive ability.
(3) A creditor may use a demonstrably
and statistically sound, empirically de­
rived credit system obtained from
another person or may obtain credit ex­
perience from which such a system may
be developed. Any such system m ust
satisfy the tests set forth in subsections
(1) and (2 ); provided th a t, if a creditor
is unable during th e development proc­
ess to Validate th e system based on its
own cred it experience in accordance w ith
subparagraph (2) (ill) of th is paragraph
th en the system m ust be validated when
sufficient credit experience becomes
available. A system th a t fails th is valid­
ity te st shall henceforth be deemed not
to be a dem onstrably and statistically
sound, em pirically derived credit sys­
tem fo r th a t creditor.
(q) Extend credit and extension of
credit m ean th e granting of credit In any

1253

form and include, but are not lim ited to, sum er C redit Protection Act* or any
cred itg ran ted in addition to any existing S tate law upon which a n exemption has
credit or credit lim it; credit granted pu r­ been granted by th e Board.
(aa) Public assistance program means
su an t to an w e n end credit plan; th e
refinancing or other renewal of credit, any Federal, State, or local governmen­
including th e issuance of a new credit ta l assistance program th a t provides a
card in place of an expiring credit card continuing, periodic income supplement,
or in substitution for an existing credit w hether premised on entitlem ent or need.
card; the consolidation of two or more The term includes, bu t is no t lim ited to,
obligations; or the continuance of exist­ Aid to Families w ith Dependent Chil­
ing credit w ithout any special effort to dren, food stam ps, ren t and m ortgage
supplem ent or assistance programs, So­
collect a t or after m aturity.
(?) Good fa ith means honesty in fact cial Security and Supplem ental Security
Income, and unemployment compensa­
in the conduct or transaction.
(s) Inadvertent error means a me­ tion.
(bb) State means any State, the Dis­
chanical, electronic, or clerical error
th a t a creditor dem onstrates was not tric t of Columbia, the Commonwealth of
intentional and occurred notw ithstand­ Puerto Rico, or any territory or posses­
ing the m aintenance of procedures rea­ sion of th e United States.
(cc) Captions and catchlines are In­
sonably adapted to avoid any such error.
(t) Judgmental system of evaluating tended solely as aids to convenient refer­
applicants means any system for evalu­ ence, and no inference as to the sub­
ating the creditw orthiness of an appli­ stance of any provision of this P a rt may
c an t other th an a demonstrably and be draw n from them .
(dd) Footnotes shall have the same le­
statistically sound, em pirically derived
gal effect as the tex t of th e regulation,
credit system.
(u)
Marital status means th e state ofw hether they are explanatory or illustra­
being unm arried, m arried, or separated, tive in nature.
as defined by applicable S tate law. For § 2 0 2 .3 S p e c ia l T r e a tm e n t f o r C e rta in
C lasses o f tr a n s a c tio n s .
the purposes of this P art, the term “u n ­
m arried” includes persons who are sin­
(a)
Classes of transactions afforded
gle, divorced, or widowed.
special treatm ent. P u rsuan t to section
<v) Negative factor or value, in rela­ 703(a) of the Act, the following classes
tion to the age of elderly applicants, of transactions are afforded specialized
m eans utilizing a factor, value, or weight treatm ent:
th a t Is less favorable regarding elderly
(1)
Extensions of credit relating to
applicants th a n th e creditor’s experi­ transactions under public utility tariffs
ence w arrants or is less favorable th an involving services provided through pipe,
the factor, value, or w eight assigned to wire, or other connected facilities If the
th e class of applicants th a t are not charges for such public utility services,
classified as elderly applicants and are th e charges for delayed paym ent, and
m ost favored by a creditor on th e basis any discount allowed for early paym ent
of age.
(w) Open end credit means credit ex­ are filed with, or reviewed or regulated
tended pu rsuant to a plan under which by, an agency of the Federal Govern­
a creditor may perm it an applicant to
make purchases or obtain loans from
• T h e f ir s t c la u s e o f t h e d e fin itio n Is n o t
tim e to tim e directly from th e creditor lim ite d t o c h a r a c te r is tic s o f t h e a p p lic a n t.
or indirectly by use of a credit card, T h e re fo re , “p r o h ib ite d b a s is ” a s u s e d in th is
check, or other device as th e plan may P a r t r e fe rs n o t o n ly t o t h e ra c e , co lo r, r e li­
in , sex, m a r ita l s ta tu s , o r
provide. The term does not Include ne­ aggioen o, fnaantioa np ap llicoarig
n t (o r o f p a r tn e r s o r officers
gotiated advances under a n open end o f a n a p p l i c a n t ) , b u t r e fe rs a ls o t o t h e c h a r ­
real estate m ortgage or a letter of credit. a c te r is tic s o f In d iv id u a ls w ith w h o m a n a p ­
(x) Person m eans a n a tu ra l person, p lic a n t d e a ls . T h is m e a n s , f o r e x a m p le , t h a t ,
corporation, government o r govern­ u n d e r t h e g e n e ra l r u le s t a te d In S 202.4, a
m ental subdivision or agency, tru st, es­ c r e d ito r m a y n o t d is c rim in a te a g a in s t a n o n w ish a p p lic a n t b e c a u s e o f t h a t p e r s o n ’s
tate,
partnership,
cooperative,
or Je
b u sin e ss d e a lin g s w ith Je w s, o r d is c rim in a te
association.
a g a in s t a n a p p lic a n t b e c a u s e o f t h e c h a r a c ­
(y) P ertinent element of creditworth­ te r is tic s o f p e rs o n s t o w h o m t h e e x te n s io n o f
iness, in relation to a judgm ental sys­ c r e d it r e la te s ( e g ., t h e p ro s p e c tiv e t e n a n ts
tem of evaluating applicants, m eans any I n a n a p a r tm e n t co m p lex to b e c o n s tru c te d
d it r e q u e s te d ) ,
inform ation about applicants th a t a owrithb e tcha eu spe roocfe etdhse o cf ht ahrea ccter er is
s o f o th e r
creditor obtains and considers and th a t In d iv id u a ls r e s id in g i n t h e ntice ig
h b o rh o o d
has a dem onstrable relationship to a w h e re t h e p r o p e rty o ffe re d a s c o lla te ra l Is
determ ination of creditw orthiness.
lo c a te d . A c r e d ito r m a y ta k e I n to a c c o u n t,
(z) Prohibited basis m eans race, color, h o w ev er, a n y a p p lic a b le law , re g u la tio n , o r
religion, national origin, sex, m arital e x e c u tiv e o r d e r r e s tr ic tin g d e a lin g s w ith c i t i ­
status, o r age (provided th a t th e appli­ z e n s o r g o v e rn m e n ts o f o th e r c o u n tr ie s o r
p o sin g lim ita tio n s r e g a r d in g c r e d it e x ­
c an t has th e capacity to en ter in to a Im
te n d e d f o r t h e i r u se .
binding co n tract); th e fact th a t all or
T h e s e c o n d c la u s e Is lim ite d to a n a p ­
p a rt of th e applicant’s Income derives p lic a n t’s r e c e ip t ot p u b lic a s s is ta n c e In c o m e
from any pubUe assistance program , or a n d t o a n a p p lic a n t’s g oo d f a i t h e x e rc ise o f
th e fac t th a t th e applicant has in good l i g h t s u n d e r t h e C o n s u m e r C re d it P ro te c tio n
fa ith exercised any rig h t under th e Con­ A c t o r a p p lic a b le S ta te law .

FEDERAL REGISTER, VOL 42 , NO. 4— THURSDAY, JANUARY 6 , 1977

1254

RULES A N D REGULATIONS

m ent, a State, or a political subdivision
thereof;
(2) Extensions of credit subject to reg­
ulation under section 7 of th e Securities
Exchange Act of 1934 or extensions of
credit by a broker or dealer subject to
regulation as a broker or dealer under
th e Securities Exchange Act of 1934;
(3) Extensions of Incidental consumer
credit, other th a n of th e types described
In paragraph (a) (1) and (2) of this
section:
(i) T h a t are no t made p ursu ant to
th e term s of a credit card account;
(ii) On which no finance charge as
defined in § 226.4 of this Title (Regula­
tion Z, 12 CFR 226.4) is or may be im­
posed; and
(111) T h a t are not payable by agree­
m ent in more th an four installm ents;
(4) Extensions of credit prim arily for
business or commercial purposes, Includ­
ing extensions of credit prim arily for
agricultural purposes, bu t excluding ex­
tensions of credit of the types described
In paragraphs (a) (1) and (2) of this
section; and
(5) Extensions of credit m ade to gov­
ernm ents o r governm ental subdivisions,
agencies, or instrum entalities.
(b) Public utilities credit. The follow­
ing provisions of this P a rt shall n o t apply
to extensions of credit of the type de­
scribed in paragraph (a) (1) of this
section:
(1) Section 202.5(d)(1) concerning
inform ation about m arital statu s;
(2) Section 202.10 relating to furnish­
ing of credit inform ation; and
(3) Section 202.12(b) relating to rec­
ord retention.
(c) Securities credit. The following
provisions of this P a rt shall n o t apply to
extensions of credit of the type described
In paragraph (a) (2) of this section:
(1) Section 202.5(c) concerning infor­
m ation about a spouse or form er spouse;
(2) Section 202.5(d) (1) concerning
inform ation about m arital status;
(3) Section 202.5(d) (3) concerning
Inform ation about the sex of an appli­
can t;
(4) Section 202.7(b) relating to desig­
nation of nam e, but only to th e extent
necessary to prevent violation of rules
regarding an account in which a broker
or dealer has an interest, o r rules neces­
sitating th e aggregation of accounts of
spouses for the purpose of determ ining
controlling Interests, beneficial Interests,
beneficial ownership, or purchase lim ita­
tions and restrictions;
(5) Section 202.7(c) relating to action
concerning open end accounts, but only
to the extent the action taken is on the
basis of a change of nam e or m arital
sta tu s;
(6) Section 202.7(d) relating to sig­
natures of a spouse or other person;
(7) Section 202.10 relating to fu rnish­
ing of credit inform ation; and
(8) Section 202.12(b) relating to rec­
ord retention.
(d) Incidental credit. The following
provisions of this P a rt shall n ot apply to
extensions of credit of th e type described
in paragraph (a) (3) of this section:

(1) Section 202.5(c) concerning infor­
m ation about a spouse or form er spouse;
(2) Section 202.5(d)(1)
concerning
inform ation about m arital statu s;
(3) Section 202.5(d)(2)
concerning
inform ation about income derived from
alimony, child support, or separate m ain­
tenance paym ents;
(4 )
Section 202.5(d) (3)
concerning
inform ation about the sex of an appli­
can t to the extent necessary for medical
records or sim ilar purposes;
(5) Section 202.7(d) relating to sig­
natures of a spouse or other person;
(6) Section 202.9 relating to notifica­
tions ;
(7) Section 202.10 relating to furnish­
ing of credit inform ation; and
(8) Section 202.12(b) relating to rec­
ord retention.
(e) Business credit. H ie following pro­
visions of this P a rt shall not apply to
extensions of credit of the type described
in paragraph (a) ( 4 ) of this section:
(1) Section 202.5(d) (1) concerning in ­
form ation about m arital status;
(2) Section 202.9 relating to notifica­
tions, unless an applicant, w ithin 30 days
a fte r oral or w ritten notification th a t ad­
verse action has been taken, requests In
w riting the reasons fo r such action;
(3) Section 202.10 relating to furnish­
ing of credit inform ation; and
( 4 ) Section 202.12(b) relating to rec­
ord retention, unless an applicant, w ith­
in 90 days after adverse action has been
taken, requests in w riting th a t th e rec­
ords relating to the application be re­
tained.
(f) Governmental credit. Except for
§ 202.1 relating to authority, scope, en­
forcement, penalties and liabilities, and
Interpretation, § 202.2 relating to defini­
tions and rules of construction, this sec­
tion, § 202.4 relating to the general rule
prohibiting discrim ination, S 202.6(a) re ­
lating to the use of inform ation, § 202.11
relating to S tate laws, and S 202.12(a)
relating to the retention of prohibited in ­
form ation, the provisions of this P a rt
shall not apply to extension of credit of
th e type described in paragraph (a) (5)
of this section.
§ 2 0 2 .4 G e n e ra l R u le P r o h ib itin g Digc rim in a tio n .

A creditor shall not discrim inate
against an applicant on a prohibited
basis regarding any aspect of a credit
transaction.
§ 2 0 2 .5

R u le s C o n c e rn in g A p p lic a tio n s .

(a) Discouraging applications. A credi­
to r shall not make any oral or w ritten
statem ent, In advertising or otherwise, to
applicants or prospective applicants th a t
would discourage on a prohibited basis
a reasonable person from m aking or pu r­
suing an application.
(b) General rules concerning requests
for information. (1) Except as otherwise
provided In this section, a creditor may
request any inform ation In connection
w ith an application.1
• T h is s u b s e c tio n Is n o t I n te n d e d to lim it
o r a b ro g a te a n y F e d e ra l o r S t a t e la w re g a r d ­
in g p riv acy , p riv ile g e d I n fo rm a tio n , c r e d it r e -

(2) N otw ithstanding any other provi­
sion of this section, a creditor shall re­
quest an applicant’s race/natio nal origin,
sex, and m arital statu s as required In
§ 202.13 (Inform ation for m onitoring
purposes). In addition, a creditor may
obtain such inform ation as may be re­
quired by a regulation, order, o r agree­
m ent issued by or entered into w ith a
court or an enforcem ent agency (Includ­
ing th e Attorney G eneral or a sim ilar
State official) to m onitor or enforce com­
pliance w ith the Act, this P art, or other
Federal or S tate sta tu te or regulation.
(3) The provisions of th is section lim it­
ing permissible inform ation requests are
subject to th e provisions of ! 202.7(e)
regarding insurance and § 202.8 (c) and
(d) regarding special purpose credit pro­
grams.
(c) Inform ation about a spouse or
former spouse. (1) Except as perm itted
In this subsection, a creditor may n o t re­
quest any inform ation concerning the
spouse or form er spouse of an applicant.
(2) A creditor may request any Infor­
m ation concerning an applicant’s spouse
(or form er spouse under paragraph (c)
(2) (v) of this section) th a t may be re ­
quested about th e applicant if:
(i) The spouse will be perm itted to use
the account; or
(ii) The spouse will be contractually
liable upon the account; or
(iii) The applicant is relying on the
spouse’s income as a basis for repay­
m ent of th e credit requested; or
(Iv) The applicant resides in a com­
m unity property S tate or property upon
which th e applicant is relying as a basis
for repaym ent of the credit requested
are located in such a S ta te ; or
(v)
The applicant is relying on ali­
mony, child support, or separate m ain­
tenance paym ents from a spouse or for­
m er spouse as a basis for repaym ent of
th e credit requested.
(3) A creditor may request an appli­
can t to list any account upon which the
applicant is liable and to provide the
nam e and address in which such account
is carried. A creditor may also ask the
nam es in which an applicant has previ­
ously received credit.
(d) Inform ation a creditor m ay not re­
quest. (1) If an applicant applies for an
Individual, unsecured account, a creditor
shall not request the applicant’s m arital
status, unless the applicant resides in a
community property S tate or property
upon which the applicant is relying as a
basis for repaym ent of th e credit re­
quested are located in such a S tate.'
W here an application is fo r o ther th an
Individual, unsecured credit, a creditor
m ay request an applicant’s m arital
status. Only th e term s “m arried,” "un ­
m arried,” and “separated” shall be used,
and a creditor m ay explain th a t the catep a r tin g lim ita tio n s , o r s im ila r r e s tr ic tio n s o n
o b ta in a b le In fo rm a tio n . F u rth e rm o r e , p e r ­
m iss io n t o r e q u e s t I n fo r m a tio n s h o u ld n o t b e
c o n fu s e d w ith h o w I t m a y b e u tiliz e d , w h ic h
Is g o v ern ed b y § 202.6 ( ru le s c o n c e rn in g e v a l­
u a tio n s o f a p p lic a tio n s ) .

FEDERAL REGISTER, VOL 42, NO. 4— THURSDAY, JANUARY 6, 1977

1255

RULES A N D REGULATIONS

gory “unm arried” Includes single, di­ another person, cur use th e appropriate w hether an applicant's Income derives
vorced, and widowed persons.
model application form s contained In from any public assistance program .
(2) A creditor shall not Inquire w hether Appendix B. If a creditor chooses to use
(ii) In a dem onstrably and sta tis­
any Income stated In a n application Is an Appendix B form, it m ay change the tically sound, empirically derived credit
derived from alimony, child support, or form :
system, a creditor m ay use a n appli­
separate m aintenance paym ents, unless
(1) By asking for additional inform a­ c an t’s age as a predictive variable, pro­
th e creditor appropriately discloses to the tion not prohibited by this section;
vided th a t th e age of an elderly appli­
applicant th a t such Income need not be
(2) By deleting any inform ation re ­ c an t is not assigned a negative factor
revealed If th e applicant does n o t desire quest; or
or value.
the creditor to consider such Income In
(iii) In a judgm ental system of eval­
(3) By rearranging th e form at w ith­
determ ining the applicant’s creditw orthi­
uating creditworthiness, a creditor may
ness. Since a general inquiry about in ­ out modifying th e substance of the in ­ consider an applicant’s age or w hether
come, w ithout fu rth e r specification, may quiries; provided th a t in each of these an applicant’s Income derives from any
lead an applicant to list alimony, child three Instances th e appropriate notices public assistance program only for the
support, or separate m aintenance pay­ regarding the optional n ature of courtesy purpose of determ ining a pertinent ele­
m ents, a creditor shall provide an appro­ titles, th e option to disclose alimony, m ent of creditworthiness.*
support, o r'se p a ra te m aintenance,
priate notice to an applicant before in­ child
(iv) In any system of evaluating cred­
quiring about th e source of an applicant’s and th e lim itation concerning m arital
inquiries are included in th e ap­ itworthiness, a creditor may consider the
Income, unless th e term s of th e inquiry status
(such as a n inquiry about salary, wages, propriate places if the items to which age of an elderly applieant when such
Investm ent income, or sim ilarly specified they relate appear on the creditor’s form. age is to be used to favor the elderly
income) tend to preclude th e uninten­ If a creditor uses an appropriate Ap­ applicant in extending credit.
(3) A creditor shall no t use, in evalu­
tional disclosure of alimony, child sup­ pendix B model form or to the extent
port, or separate m aintenance payments. th a t it modifies such a form in accord­ ating th e creditworthiness of an appli­
(3) A creditor shall not request the ance with the provisions of clauses (2> or cant, assum ptions or aggregate statis­
sex of an applicant. An applicant may be (3) of the preceding sentence or th e in ­ tics relating to the likelihood th a t any
requested to designate a title on an ap­ structions to Appendix B, th a t creditor group of persons will bear or rear chil­
plication form (such as Ms., Miss, Mr., or shall be deemed to be acting in compli­ dren or, for th a t reason, will receive
Mrs.) if th e form appropriately discloses ance w ith th e provisions of paragraphs dim inished or interrupted income in the
future.
th a t the designation of such a title is op­ (c) and (d) of this section.
(4) A creditor shall not take into ac­
tional. An application form shall other­ § 2 0 2 .6 R u le s C o n c e rn in g E v a lu a tio n o f
count the existence of a telephone list­
A p p lic a tio n s .
wise use only term s th a t are neutral as to
sex.
(a) General rule concerning use of in ­ ing in th e nam e of an applicant for
(4) A creditor shall n ot request infor­ form ation. Except as otherwise provided consumer credit. A creditor may take
m ation about b irth control practices, in ­ in th e Act and this P art, a creditor may into account the existence of a telephone
tentions concerning the bearing or re a r­ consider in evaluating an application any in the residence of such an applicant.
ing of children, or capability to bear chil­ inform ation th a t th e creditor obtains, so
(5) A creditor shall not discount or
dren. This does not preclude a creditor long as th e Inform ation is no t used to dis­ exclude from consideration the income
from inquiring about th e num ber and crim inate against an applicant on a pro­ of an applicant or the spouse of th e ap ­
ages of an applicant’s dependents or hibited basis.*
plicant because of a prohibited basis or
about dependent-related financial obliga­
because th e income is derived from p a rt­
(b)
Specific
rules
concerning
use
of
tions or expenditures, provided such in ­ inform ation. (1) Except as provided in tim e employment, or from a n annuity,
form ation is requested w ithout regard to th e Act and this P art, a creditor shall pension, or o ther retirem ent benefit; but
sex, m arital status, or any other pro­
n o t take a prohibited basis into ac­
hibited basis.
• C o n c e rn in g in c o m e d e riv e d fro m a p u b ­
(5) A creditor shall not request the count in any system of evaluating the
lic a s s is ta n c e p ro g ra m , a c r e d ito r m a y c o n ­
race, color, religion, or national origin of creditw orthiness of applicants.'
sid e r, fo r ex a m p le , t h e le n g th o f tim e a n
(2)
(i)
Except
as
perm
itted
in
this
an applicant or any other person in con­
a p p lic a n t h a s b e e n re c e iv in g s u c h in co m e;
nection w ith a credit transaction. A section, a creditor shall not take into w h e th e r a n a p p lic a n t I n te n d s to c o n tin u e
account
an
applicant’s
age
(Provided,
creditor may Inquire, however, as to an
to re sid e in t h e J u r is d ic tio n i n r e la tio n to
applicant's perm anent residence and im­ T h at the applicant has th e capacity to re sid e n c y r e q u ire m e n ts fo r b e n e fits; a n d
enter
in
to
a
binding
contract)
or
m igration status.
t h e s t a tu s o f a n a p p lic a n t’s d e p e n d e n ts to
a s c e r ta in w h e th e r b e n e fits t h a t t h e a p p li­
(e)
Application forms. A creditor need
c a n t Is p re s e n tly re c e iv in g w ill c o n tin u e .
1978,
w
h
ic
h
e
v
e
r
o
c
c
u
rs
firs
t.
T
h
e
p
ro
v
isio
n
s
not use w ritten applications. If a creditor
o
l
t
h
i
s
P
a
r
t
s
h
a
ll
n
o
t
d
e
te
r
m
in
e
a
n
d
a
re
n
o
t
C o n c e rn in g ag e, a c r e d ito r m a y c o n sid e r,
chooses to use w ritten forms, it may
a n in g o f t h e r e q u ire m e n ts fo r ex a m p le , t h e o c c u p a tio n a n d le n g th of
design its own,* use forms prepared by eo vf idt he en cpereovf iot hues mv eers
io n o f R e g u la tio n B.
tim e to r e tir e m e n t o f a n a p p lic a n t to a s ­
• T h is p ro v is io n d o es n o t p re c lu d e r e q u e s t­
in g r e le v a n t in f o rm a tio n t h a t m a y In d ire c tly
d isc lo se m a r ita l s ta tu s , s u c h a s a s k in g a b o u t
lia b ility t o p a y a lim o n y , c h ild s u p p o r t, o r
s e p a ra te m a in te n a n c e ; th e so u rc e o f In co m e
to b e u se d a s a b a s is fo r t h e re p a y m e n t o f
th e c r e d it re q u e s te d , w h ic h m a y d isc lo se t h a t
i t is a s p o u s e 's in co m e; w h e th e r a n y o b lig a ­
tio n d isc lo se d b y t h e a p p lic a n t h a s a c o ­
o b lig o r, w h ic h m a y d isc lo se t h a t th e c o o b lig c r is a sp o u s e o r fo rm e r sp o u se ; o r t h e
o w n e rsh ip o f a s s e ts , w h ic h m a y d isc lo se t h e
I n te re s t o f a sp o u se , w h e n s u c h a s se ts a re
re lie d u p o n In e x te n d in g t h e c re d it. S u c h
in q u irie s a r e allo w ed b y t h e g e n e ra l r u le o f
s u b p a ra g r a p h (b ) (1 ) o f t h i s s e c tio n .
•A c r e d ito r a ls o m a y c o n tin u e t o u se a n y
a p p lic a tio n fo rm t h a t o o m p lles w ith t h e r e ­
q u ir e m e n ts o f t h e O c to b e r 38, 1978 v e rsio n
o f R e g u la tio n B u n t i l i t s p r e s e n t s to c k o f
th o s e fo rm s Is e x h a u s te d o r u n t i l M a rc h 33,

’ T h e le g isla tiv e h is to r y o f t h e A ct i n d i ­
c a te s t h a t t h e C o n g ress I n te n d e d a n "e ffe c ts
t e s t ” c o n c e p t, a s o u tlin e d in th e e m p lo y m e n t
fie ld b y t h e S u p re m e C o u r t In t h e c a se s o f
G rigg s v . D u k e P o w er Co., 401 U S . 434 (1 9 7 1 ),
a n d A lb e m a rle P a p er Co. v . M o ody, 423
U .S. 405 (1 9 7 5 ), t o b e a p p lic a b le t o a c r e d i­
t o r ’s d e te r m in a tio n o f c re d itw o rth in e s s . S ee
S e n a te R e p o rt t o a c c o m p a n y H_R. SS18, No.
94-589, p p . 4 -6 ; B o u s e R e p o rt to a c c o m p a n y
H R . 8518. No. 94-210 .jp. 5.
• T h is p ro v is io n d o e s n o t p re v e n t a c re d ­
i t o r fro m c o n s id e rin g t h e m a r ita l s t a tu s o f
a n a p p lic a n t o r t h e so u rc e o f a n a p p li­
c a n t ’s in c o m e f o r t h e p u rp o s e o f a s c e r ta in ­
in g t h e c r e d ito r ’s r i g h ts a n d re m e d ie s a p ­
p lic a b le t o t h e p a r tic u la r e x te n s io n o f
c r e d it a n d n o t to d is c rim in a te In a d e te r ­
m in a tio n
o f c re d itw o rth in e s s . F u r t h e r ­
m o re, a p r o h ib ite d b a s is m a y b e c o n s id e re d
i n a c c o rd a n c e w ith ( 3 0 2 8 (sp e c ia l p u rp o s e
c r e d it p ro g ra m s ).

FEDERAL REGISTER,

VOL

c e r ta in w h e th e r t h e a p p lic a n t’s In co m e
( in c lu d in g r e tir e m e n t In co m e, a s a p p li­
c a b le ) w ill s u p p o r t t h e e x te n s io n o f c r e d it
u n t i l its m a tu r ity ; o r t h e a d e q u a c y o f a n y
s e c u rity o ffered If t h e d u r a tio n o f th e
c r e d it e x te n s io n w ill ex ceed th e lif e e x ­
p e c ta n c y o f t h e a p p lic a n t. A n e ld e rly a p ­
p lic a n t. m ig h t n o t q u a lif y fo r a fiv e -p e r­
c e n t d o w n , 3 0 -y e a r m o rtg a g e lo a n b e c a u se
t h e d u r a tio n o f t h e lo a n ex ceed s th e a p ­
p lic a n t’s lif e e x p e c ta n c y a n d t h e c o s t o f
r e a liz in g o n t h e c o lla te r a l m ig h t ex ceed
t h e a p p lic a n t’s e q u ity . T h e sa m e a p p lic a n t
m ig h t q u a lif y w ith a la r g e r d o w n p a y m e n t
a n d a s h o r te r lo a n m a tu r ity . A c r e d ito r
c o u ld a ls o c o n s id e r a n a p p lic a n t’s age, fo r
e x am p le, t o a sse ss t h e sig n ific a n c e o f th e
a p p lic a n t’s le n g th o f e m p lo y m e n t o r r e s i­
d e n c e ( a y o u n g a p p lic a n t m a y h a v e J u s t
e n te r e d t h e jo b m a rk e t; a n e ld e rly a p p li­
c a n t m a y r e c e n tly h a v e r e tir e d a n d m oved
fro m a lo n g - tim e re s id e n c e ).

4 3 , NO. 4— THURSDAY, JANUARY 6 , 1*77

1256

RULES A N D REGULATIONS

a creditor may consider th e am ount and dence of inability or unwillingness to re ­ th e event of default, for example, any
probable continuance of any Income in pay, a creditor shall no t tak e any of instrum ent to create a valid lien, pass
evaluating an applicant’s creditw orthi­ th e following actions regarding an appli­ clear title, waive inchoate rights, or as­
ness. W here an applicant relies on ali­ c an t who is contractually liable on an sign earnings.
(5)
If, under a creditor's standards of
mony, child support, or separate m ain­ existing open end account on>the basis of
tenance paym ents in applying for credit, th e applicant’s reaching a certain age or creditworthiness, th e personal liability
a creditor shall consider such paym ents retiring, or on the basis of a change in of an additional party is necessary to
as income to the extent th a t they are th e applicant’s nam e or m arital status: support th e extension of th e credit re­
quested,“ a creditor m ay request th a t the
(1) Require a reapplication; or
likely to be consistently made. Factors
(ii) Change the term s of the account; applicant obtain a co-signer, guarantor,
th a t a creditor may consider in deter­
or the like. The applicant’s spouse may
m ining th e likelihood of consistent pay­ or
serve as an additional party, bu t a cred­
(iii) Term inate the account.
m ents include, b ut are n o t lim ited to,
(2) A creditor may require a reappli­ ito r shall n ot require th a t th e spouse
w hether th e paym ents are received pur­
su an t to a w ritten agreem ent or court cation regarding an open end account on be the additional party. For th e purposes
decree; th e length of tim e th a t th e pay­ th e basis of a change in an applicant’s of paragraph (d) of this section, a
m ents have been received; th e regularity m arital status where the credit granted creditor shall not Impose requirem ents
of receipt; th e availability of procedures was based on income earned by th e appli­ upon an additional party th a t th e cred­
to compel paym ent; and th e creditw orth­ c a n t’s spouse if th e applicant’s income ito r may not impose upon an applicant.
(e)
Insurance. D ifferentiation in th e
iness of th e payor, including the credit alone a t the tim e of the original applica­
history of th e payor where available to tion would not support th e am ount of availability, rates, and term s on which
credit-related casualty insurance or
the creditor under the F air Credit R e­ credit currently extended.
(d)
Signature of spouse or other per­credit life, health, accident, or disability
porting Act or other applicable laws.
(6) To th e extent th a t a creditor con­ son. (1) Except as provided in th is sub­ insurance is offered or provided to an
siders credit history in evaluating th e section, a creditor shall not require the applicant shall not constitute a violation
creditw orthiness of sim ilarly qualified signature of an applicant’s spouse or of the Act or th is P art; but a creditor
applicants for a sim ilar type and am ount other person, other th a n a joint appli­ shall not refuse to extend credit and shall
of credit, in evaluating an applicant’s cant, on any credit instrum ent if the not term inate an account because credit
creditworthiness, a creditor shall con­ applicant qualifies under the creditor’s life, health accident, or disability insur­
sider (unless th e failure to consider re­ standards of creditw orthiness for the ance is not available on th e basis of the
am ount and term s of th e credit re­ applicant’s age. N otw ithstanding any
sults from an Inadvertent e rro r):
other provision of this P art, inform ation
(i) The credit history, when available, quested.
(2) If an applicant requests unsecured about the age, sex, o r m arital status of
of accounts designated as accounts th a t
th e applicant and a spouse are perm itted credit and relies in p art upon property an applicant may be requested in an
to use or for which both are contractual­ to establish creditw orthiness, a creditor application for insurance.
m ay consider State law; th e form of
ly liable;
§ 2 0 2 .8 S p e c ia l P u rp o s e C re d it P r o ­
(ii) On th e applicant’s request, any ownership of the property; its suscepti­
g ra m s .
Inform ation th a t the applicant may pre­ bility to attachm ent, execution, sever­
(a)
Standards for programs. Subject to
ance,
and
partition;
and
other
factors
sent tending to indicate th a t th e credit
history being considered by th e creditor th a t may affect the value to th e creditor the provisions of paragraph (b) of this
does not accurately reflect th e appli­ of the applicant’s interest in th e prop­ section, the Act and this P a rt are not
erty. If necessary to satisfy th e creditor’s violated if a creditor refuses to extend
ca n t’s creditw orthiness; and
(iii) On th e applicant’s request, the standards of creditworthiness, th e credi­ credit to an applicant solely because th e
credit history, when available, of any to r may require th e signature of the ap­ applicant does not qualify under the
account reported in the nam e of th e ap­ plicant’s spouse or other person on any special requirem ents th a t define eligi­
plicant’s spouse or form er spouse th a t Instrum ent necessary, or reasonably be­ bility for the following types of special
the applicant can dem onstrate accurate­ lieved by th e creditor to be necessary, purpose credit program s:
(1) Any credit assistance program ex­
ly reflects th e applicant’s creditw orthi­ under applicable S tate law to make the
property relied upon available to satisfy pressly authorized by Federal or S tate
ness.
law for th e benefit of an economically
(7) A creditor may consider w hether th e debt in the event of default.
(3) If a m arried applicant requests disadvantaged class of persons; or
an applicant is a perm anent resident of
(2) Any credit assistance program of­
th e United States, the applicant’s im­ unsecured credit and resides in a com­
m igration status, and such additional in ­ m unity property S tate or if th e property fered by a not-for-profit organization, as
form ation as may be necessary to ascer­ upon which th e applicant is relying is defined under section 501(c) of th e In ­
in such a State, a creditor may ternal Revenue Code of 1954, as
tain its rights and remedies regarding located
require th e signature of- th e spouse on amended, for th e benefit of its members
repaym ent.
(c)
State property laws. A creditor’s any instrum ent necessary, or reasonably or for the benefit of an economically dis­
consideration or application' of S tate believed by th e creditor to be necessary, advantaged class of persons; or
applicable S tate law to m ake the
(3) Any special purpose credit pro­
property laws directly or indirectly a f­ under
property available to satisfy gram offered by a for-profit organiza­
fecting creditw orthiness shall not con­ community
tion or in which such an organization
stitu te unlawful discrim ination for th e th e debt In th e event of default if:
(I) applicable S tate law denied the ap­ participates to m eet special social needs,
purposes of th e Act or th is P art.
plicant power to m anage or control suffi­ provided th a t:
§ 2 0 2 .7 R u le s C o n c e rn in g E x te n s io n s o f cient community property to qualify for
(i) T he program is established and
C re d it.
th e am ount of credit requested under adm inistered pursuant to a w ritten plan
(a) Individual accounts. A creditor th e creditor’s standards of creditw orthi­ th a t (A) Identifies th e class o r classes of
persons th a t the program is designed to
shall not refuse to grant an individual ness; and
(II) the applicant does not have suffi­ benefit and (B) sets forth th e proce­
account to a creditw orthy applicant on
th e basis of sex, m arital status, or any cient separate property to qualify for dures and standards for extending credit
th e am ount of credit requested w ithout pursuant to th e program ; and
other prohibited basis.
(ii) T he program is established and
(b) Designation o f name. A creditor regard to community property.
shall n o t prohibit an applicant from
(4) If an applicant requests secured adm inistered to extend credit to a class
opening o r m aintaining a n account in credit, a creditor may require th e signa­ of persons who, pursuant to th e custom­
a birth-given first nam e and a surnam e tu re of the applicant’s spouse or other
th a t is th e applicant’s birth-given sur­ person on any instrum ent necessary, or
■ I f a n a p p lic a n t r e q u e s ts I n d iv id u a l c r e d it
nam e, th e spouse’s surnam e, or a com­ reasonably believed by th e creditor to be re ly
in g o n t h e s e p a ra te In c o m e o f a n o th e r
bined surnam e.
necessary, under applicable S ta te law to p e rso n , a c r e d ito r m a y r e q u ir e t h e s ig n a tu r e
(c) Action concerning existing open m ake th e property being offered as se­ o f th e o th e r p e rs o n to m a k e t h e In c o m e a v a il­
end accounts. (1) In th e absence of evi­ curity available to satisfy th e debt in a b le to p a y t h e d e b t.

FEDOtAL REGISTER, VOL 4 2 , NO. 4— THURSDAY, JANUARY 6, T977

MILES A N D REGULATIONS

1257

ary standards of creditw orthiness used addition, notw ithstanding the prohibi­
<*) M utiptc creditor*, i t a transaction
by th e organisation extending tire tion* of 1 202.7(d), a creditor m ay obtain involves m ore th a n one creditor and the
credit, either probably would n o t receive th e signature of a n applicant’s spouse or applicant expressly accepts or uses the
such credit or probably would receive It other person on a n application or credit credit offered, th is section does not re ­
on le6s favorable te a m th a n a re ordinar­ Instrum ent relating to a special purpose quire notification of adverse action by
ily available to other applicants apply­ program if required by Federal or S tate any creditor. If a transaction involves
ing to th e organization for a sim ilar type law. In such circum stances, th e solicita­ m ore th a n one creditor and either no
and am ount of credit.
tio n and consideration of th a t Inform a­ credit Is offered or th e applicant does
(b) Applicability of other rules. (1) tion and th e obtaining of a required sig­ n o t expressly accept or use any credit
All of th e provisions of this P a rt shall n atu re shall not constitute unlaw ful dis­ offered, th en each creditor taking ad­
apply to each of th e special purpose crim ination for the purposes of the Act verse action m ust comply w ith this sec­
credit program s described in paragraph or this P art.
tion. The required notification m ay be
(a) of th is section to th e exten t th a t
provided indirectly through a third
those provisions are not inconsistent w ith § 2 9 2 .9 N otifica tio n s.
party, which may be one of th e creditors,
(a)
Notification of action taken, ECOAprovided th a t th e Identity of each credi­
th e provisions of th is section.
(2)
A program described in subpara­notice, and statem ent of specific rea­ to r taking adverse action is disclosed.
graphs (a) (2) or (a) (3) of this section sons—(1) Notification of action taken. W henever th e notification is to be pro­
shall qualify as a special purpose credit A creditor shall notify an applicant of vided through a th ird party, a creditor
program under paragraph (a) of this action taken w ithin:
shall not be liable fo r any ac t or omis­
section only if it was established and is
(1) 30 days after receiving a com­ sion of th e th ird p arty th a t constitutes
adm inistered so as not to discrim inate pleted application concerning th e credi­ a violation of this section if th e creditor
against an applicant on th e basis of race, to r’s approval o f,,o r adverse action re ­ accurately and in a tim ely m anner pro­
color, religion, national origin, sex, m ari­ garding, th e application (notification of vided th e th ird p arty w ith th e inform a­
ta l status, age (Provided, T h a t th e appli­ approval may be expressed or by im plica­ tion necessary fo r th e notification and
can t has the capacity to en ter into a tion, where, for example, th e applicant was m aintaining procedures reasonably
binding co n tract), income derived from receives a credit card, money, property, adapted to avoid any such violation.
a public assistance program, or good or services in accordance w ith the appli­
(b)
Form o f ECOA notice and state­
fa ith exercise of any righ t under the cation) ;
m ent of specific reasons—(1) ECOA
Consumer Credit Protection Act or any
(ii)
30 days afte r taking adverse actionnotice. A creditor satisfies th e require­
S tate law upon which an exemption has on an uncompleted application;
m ents of paragraph (a) (2) of th is sec­
been granted therefrom by th e Board;
tion regarding a statem ent of th e provi­
(ill)
30
days
afte
r
taking
adverse
acexcept th a t all program participants tioi regarding an existing account; and sions of section 701(a) of th e Act and
m ay be required to share one or more of
(iv)
90 days afte r th e creditor has th e nam e and address of th e appropriate
those characteristics so long as th e pro­
Federal enforcem ent agency If it pro­
gram was no t established and is not ad­ notified th e applicant of an offer to g ran t vides th e following notice, or one th a t
m inistered w ith th e purpose of evading credit other th a n in substantially th e is substantially sim ilar:
th e requirem ents of the Act or this Part. am ount or on substantially th e term s
T h e F e d e ra l E q u a l C r e d it O p p o r tu n ity
(c) Special rule concerning requests requested by th e applicant if th e appli­
ct p r o h ib its c re d ito rs fro m d is c rim in a tin g
and use of inform ation. If all partici­ can t during those 90 days has not ex­ A
a
g
c r e d it a p p lic a n ts o n t h e b a s is o f
pants in a special purpose credit pro­ pressly accepted or used th e credit ra caein, sct o lo
r, re lig io n , n a tio n a l o rig in , sex,
gram described in paragraph (a) of this offered.
m a r ita l s ta tu s , s g e (p ro v id e d t h a t t h e a p p li­
(2)
Content
of
notification.
Any
noti­
section are or will be required to pos­
c a n t h a s t h e c a p a c ity t o e n te r I n to a b in d in g
sess one or more common characteris­ fication given to an applicant against c o n t r a c t ) ; b e c a u s e a ll o r p a r t o f t h e a p p li­
tics relating to race, color, religion, n a ­ whom adverse action is taken shall be In c a n t ’s In c o m e d e riv e s fro m a n y p u b lic a s ­
tional origin, sex, m arital status, age, or w riting and shall contain: a statem ent s is ta n c e p ro g ra m ; o r b e c a u s e t h e a p p lic a n t
receipt of Income from a public assist­ of th e action taken; a statem ent of th e h a s i n g o o d f a i t h ex e rc ise d a n y r i g h t u n d e r
C o n s u m e r C r e d it P ro te c tio n A ct. T h e
ance program and if th e special purpose provisions of section 701(a) of th e Act; tFheed e ra
d m in is te r s c o m p lia n c e
credit program otherwise satisfies th e th e nam e and address of th e Federal w ith t lh iasg elan cwy tchoantc ea rn
in g t h i s c r e d ito r is
requirem ents of paragraph (a) of this agency th a t adm inisters compliance ( n a m e e n d a d d re s s a s sp e c ifie d b y t h e a p ­
section, then, notw ithstanding th e pro­ concerning th e creditor giving th e no ti­ p r o p r ia te a g e n c y lis te d I n A p p e n d ix A ).
hibitions of §8 202.5 and 202.6, th e credi­ fication; and
The sample notice printed above may
to r may request of an applicant and
(i) A statem ent of specific reasons for
be modified Immediately following the
m ay consider, in determ ining eligibility the action taken; or
required references to th e Federal Act
fo r such program , inform ation regarding
(ii) A disclosure of th e applicant’s
th e common characteristics required for rig h t to a statem ent of reasons w ithin 30 and enforcem ent agency to include ref­
erences to any sim ilar S tate statu te or
eligibility.
days a fte r receipt by th e creditor of a re ­ regulation and to a S tate enforcem ent
In such circum stances, the solicitation quest m ade w ithin 60 days of such notifi­ agency.
and consideration of th a t inform ation cation, th e disclosure to Include the
(2)
Statem ent of specific reasons. A
shall not constitute unlawful discrim i­ name, address, and telephone num ber of
ent of reasons fo r adverse action
nation for the purposes of the Act o r the person or office from which the sta te ­ statem
m ent of reasons can be obtained. If th e ahull be sufficient If It Is specific and
th is P art.
(d) Special rule in the case of finan­ creditor chooses to provide th e statem ent Indicates th e principal reason(s) fo r the
cial need. If financial need is or will be of reasons orally, th e notification shall adverse action. A creditor m ay form ulate
own statem ent of reasons In check­
one of the criteria for the extension of also include a disclosure of th e appli­ Its
credit under a special purpose credit pro­ c an t’s rig h t to have any oral statem ent list or le tte r form or m ay use all or a por­
gram described in paragraph (a) of tills of reasons confirmed in w riting w ithin tion of th e sample form printed below,
which, If properly completed, satisfies th e
section, then, notw ithstanding th e pro­ 30 days a fte r a w ritten request for con­ requirem
ents of subparagraph (a) (2) (1)
hibitions of §8 202.5 and 202.6, th e cred­ firm ation is received by th e creditor.
of this section. Statem ents th a t th e ad ­
ito r m ay request and consider, in de­
(3) Multiple applicants. If there is
action was based on th e creditor’s
term ining eligibility for such program, m ore th a n one applicant, th e notifica­ verse
Intern al standards or policies o r th a t th e
Inform ation regarding an applicant’s
m arital status, income in a a alimony, tion need only be given to (me of them , applicant failed to achieve th e qualifying
child support, or separate m aintenance, but m ust be given to th e prim ary appli­ score on th e creditor’s credit scoring sys­
tem are in sufficient
and th e spouse’s financial resources. In can t where one is readily apparent.

FEDERAL REGISTER, VOL. 4 3 . NO. 4— THURSDAY, JANUARY * , 1*77

1258

RULES AND REGULATIONS

STATEMENT OF CREDIT DENIAL, TERMINATION, OR CHANGE
DATE _
Applicant's Name: ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Applicant'8 Address:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Description of Account, Transaction, or Requested Credit:

Description of Adverse Action Taken:

PRINCIPAL REASONS(S) FOR ADVERSE ACTION CONCERNING CREDIT

ED
rj
rj
D
rj
rj
rj
ED

Credit application incomplete

rj

Insufficient credit references

l T Temporary residence

Unable to verify credit references

ED
ED
ED
ED
ID

Temporary or irregular employment
Unable to verify employment
Length of employment
Insufficient income

Too short a period of residence

Unable to verify residence
No credit file
Insufficient credit file
Delinquent credit obligations
Garnishment, attachment, fore­
closure, repossession, or suit

Excessive obligations
/

7 Bankruptcy

/

/

Unable to verify income

/

/

Inadequate collateral

/

/

W e do not grant credit to any applicant on the terms and conditions
yo u request.

/ 7

Other, specify:

FEDERAL REGISTER, VOL 42 , NO. 4— THURSDAY, JANUARY 6, 1 9 7 7

RULES A N D REGULATIONS

1259

DISCLCJURE OF USE OF INFORMATION OBTAINED FROM AN OUTSIDE SOURCE

rj Disclosure inapplicable
rj Information obtained in

a report from a consumer reporting

agency
Name:

Street Address:

Fhone:
/

______ ________________________________ ____________

7 Information obtained from an outside source other than a con­
sumer reporting agency.

Under the Fair Credit Reporting Act,

you have the right to make a written request, within 60 day9
of receipt of this notice, for disclosure of the nature of the
adverse information.

C r e d i t o r ' s name:
Creditor's address:

Creditor's telephone number:

[Add ECOA Notice]
(3)
Other information. The notifica­ (c) Oral notifications. The applicable
tion required by subparagraph (a) (1) of requirem ents of this section are satis­
this section may include other inform a­ fied by oral notifications (Including state ­
tion so long as it does no t detract from m ents of specific reasons) In the case of
th e required content. This notification any creditor th a t did not receive more
also may be combined w ith any dis­ th a n 150 applications during th e cal­
closures required under other titles of endar year im mediately preceding the
th e Consumer C redit Protection Act or calendar year In which the notification
any other law, provided th a t all require­ of adverse action Is to be given to a p ar­
m ents for clarity a n d placem ent are sa t­ ticular applicant.
isfied; an d it may appear on either or
(d) W ithdrawn applications. W here an
both sides of th e paper If th ere is a clear applicant submits an application and the
reference on th e fro n t to any Inform a­ parties contem plate th a t th e applicant
tion on th e back.
win Inquire about its status, if the cred-

lto r approves th e application and the
applicant has no t inquired w ithin 30 days
after applying, then th e creditor may
tre a t th e application as w ithdraw n and
need not comply with subparagraph (a)
(1) of th is section.
(e)
Failure of compliance. A failure to
comply w ith this section shall not con­
stitu te a violation when caused by an
inadvertent error; provided th a t, on dis­
covering th e error, th e creditor corrects
It as soon as possible and commences
compliance w ith th e requirem ents of
this section.

FEDERAL REGISTER, VOL. 42 , NO. 4 — THURSDAY, JANUARY 6, 1 9 /7

1260

RULES A N D REGULATIONS

(f)
Notifibation. A creditor notifies anbilling statem ent or other mailing. All section. The signature of an applicant or
applicant when a w riting addressed to such notices shall be mailed or delivered th e applicant’s spouse on a request to
the applicant is delivered or mailed to by October 1, 1977. As to open end ac­ change th e m anner in which Inform ation
th e applicant’s last known address or, in counts, this requirem ent m ay be satisfied concerning an account is furnished shall
the case of an oral notification, when the by mailing one notice a t any tim e prior not alter ther legal liability of either
creditor communicates with th e appli­ to October 2,1977 regarding each account spouse upon th e account or require the
cant.
for which a billing statem ent is sent be­ creditor to change th e nam e in which th e
§ 2 0 2 .1 0 F u r n is h in g o f C re d it I n f o r m a ­ tween Ju ne 1 and October 1, 1977. The account is carried.
notice may be supplemented as necessary
(d)
Inadvertent errors. A failure to
tio n .
to perm it identification of the account by comply w ith th is section shall no t consti­
(a) Accounts established on or after th e creditor or by a consumer reporting tu te a violation when caused by an inad­
June 1, 1977. (1) For every account es­ agency. A creditor need only send notices vertent error, provided th a t, on discover­
tablished on or a fte r June 1, 1977, a relating to those accounts on which it ing the error, th e creditor corrects it as
creditor th a t furnishes credit inform a­ lacks the inform ation necessary to make soon as possible and commences com­
tion sh a ll:
th e proper designation regarding partici­ pliance w ith th e requirem ents of this
(1) Determ ine w hether an account pation or contractual liability.
section.
offered by the creditor is one th a t an ap­
N o t ic e
§ 202.11 R e la tio n to S ta te law.
plicant’s spouse is perm itted to use or
C r e d it H is t o r y f o r M a r r ie d P e r s o n s
upon which th e spouses are contractually
(a) Inconsistent State laws. Except as
liable other th a n as guarantors, sureties,
T h e F e d e ra l E q u a l C re d it O p p o r tu n ity A ct otherwise provided in this section, this
endorsers, or sim ilar pa rtie s; and
p r o h ib its c r e d it d is c rim in a tio n o n t h e b a sis P a rt alters, affects, or preem pts only
(ii)
Designate any such account to re­o f ra c e , co lo r, re lig io n , n a tio n a l o rig in , sex. those S tate laws th a t are inconsistent
flect th e fact of participation of both m a r ita l s ta tu s , ag e (p ro v id e d t h a t a p e rso n w ith this P a rt and th en only to the ex­
h a s t h e c a p a c ity to e n te r I n to a b in d in g c o n ­
spouses.11
te n t of the inconsistency. A S tate law is
e c a u s e a ll o r p a r t o f a p e rs o n ’s I n ­
(2) Except as provided in paragraph tcor amc et ) ;d ebriv
not inconsistent w ith this P a rt if it is
e s fro m a n y p u b lic a s s is ta n c e p ro ­
(a) (3) of this section, if a creditor fu r­ g ra m ; o r b e c a u s e a p e rs o n In go od f a i t h h a s more protective of an applicant.
nishes credit inform ation concerning an e x e rc ise d a n y r i g h t u n d e r t h e F e d e ra l C o n ­
(b) Preempted provisions of State law.
account designated under this section (or s u m e r C re d it P ro te c tio n A ct. R e g u la tio n s (1) S tate law is deemed to be inconsist­
designated prior to th e effective date of u n d e r th e A ct g ive m a rrie d p e rs o n s th e r ig h t ent with the requirem ents of th e Act and
this P art) to a consumer reporting agen­ to h a v e c re d it in f o rm a tio n in c lu d e d in c r e d it this P a rt and less protective of an appli­
cy, it shall furnish th e inform ation in a r e p o rts in t h e n a m e of b o th t h e w ife a n d t h e cant w ithin th e m eaning of section 705
m anner th a t will enable th e agency to h u s b a n d i f b o th u se o r a r e re sp o n s ib le fo r (f) of th e Act to th e extent th a t such
th e a c c o u n t. T h is r i g h t w as c re a te d , in p a r t,
provide access to the inform ation in the to
law:
in s u r e t h a t c r e d it h is to r ie s w ill b e a v a il­
nam e of each spouse.
(1) Requires or perm its a practice or
a b le to w o m en w h o b eco m e d iv o rced o r
(3) If a creditor furnishes credit in ­ w idow ed.
act prohibited by th e Act or this P a rt;
form ation concerning an account desig­
I f y o u r a c c o u n t w ith u s is o n e t h a t b o th
(ii) Prohibits th e individual extension
nated under this section (or designated h u s b a n d a n d w ife sig n e d f o r o r is a n a c c o u n t of consumer credit to both parties to a
prior to th e effective date of th is P art) t h a t is b e in g u s e d b y o n e o f y o u w h o d id n o t m arriage if each spouse individually and
in response to mi inquiry regarding a p ar­ sig n , t h e n y o u a r e e n title d to h a v e u s r e ­ voluntarily applies for such credit;
ticu lar applicant, it shall furnish the in ­ p o r t c r e d it in f o rm a tio n r e la tin g t o th e a c ­
(iii) Prohibits inquiries or collection
th y o u r n a m e s . I f y o u ch o o se to
form ation in th e nam e of the spouse ch oa vu en tc rine d bito in
of d a ta required to comply w ith th e Act
f o rm a tio n c o n c e rn in g y o u r a c ­
about whom such inform ation is re ­ c o u n t w ith u s re p o rte d in b o th y o u r n am es, or this P a rt;
quested.13
(iv) Prohibits asking age or consider­
p le a s e c o m p le te a n d s ig n th e s ta te m e n t
(b) Accounts established prior to June belo w a n d r e t u r n i t to u s.
ing age in a dem onstrably and statis­
1, 1977. For every account established
F e d e ra l r e g u la tio n s p ro v id e t h a t sig n in g
tically sound, em pirically derived credit
prior to and in existence on June 1, 1977, y o u r n a m e b elow w ill n o t c h a n g e y o u r o r system, to determ ine a p ertin en t ele­
y
o
u
r
sp
o
u
s
e
’s
le
g
a
l
lia
b
ility
o
n
t
h
e
a
c
c
o
u
n
t.
a creditor th a t furnishes credit inform a­
m ent of creditw orthiness, or to favor an
T o u r s ig n a tu r e w ill o n ly r e q u e s t t h a t c re d it
tion shall either:
in f o rm a tio n b e r e p o rte d I n b o th y o u r n am es. elderly applicant; or
(1) Not la ter th a n June 1, 1977
(v) Prohibits inquiries necessary to es­
I f y o u d o n o t c o m p le te a n d r e t u r n th e
(1) D eterqiine w hether th e account is fo rm b elo w , w e w ill c o n tin u e t o r e p o rt y o u r tablish or adm inister a special purpose
one th a t an applicant’s spouse, if any, is c r e d it h is to r y I n t h e sa m e w ay t h a t we d o credit program as defined by S 202.8.
perm itted to use or upon which the no w .
(2) A determ ination as to w hether a
spouses are contractually liable other
S tate law Is Inconsistent w ith the re­
W h e n y o u f u r n is h c r e d it In fo rm a tio n o n quirem ents of th e Act and th is P a rt will
th a n as guarantors, sureties, endorsers,
th i s a c c o u n t, p le a se r e p o r t a ll In fo r m a tio n
or sim ilar parties;
be made only in response to a request
(ii) Designate any such account to re ­ c o n c e rn in g t h e a c c o u n t in b o th o u r n am es.
fo r a form al Board interpretation. All
flect th e fa c t of participation of both
requests fo r such interpretations, In ad ­
A ccount n u m b er
P r i n t o r ty p e n a m e
spouses; “ and
dition to m eeting the requirem ents of
(iii) Comply w ith the reporting re ­
P r i n t o r ty p e n a m e
I 202.1(d), shall comply w ith the appli­
quirem ents of paragraphs (a) (2) and (a)
cable provisions of subsections (b) (1)
S ig n a tu re o f
(3) of this section; or
and (2) of Supplem ent I to this P art. A
e ith e r sp o u s e
(2) Mail or deliver to all applicants, or
determ ination shall be based on th e fac­
all m arried applicants, in whose nam e an
(c)
Requests to change manner intors enum erated in this subsection and,
account is carried on th e creditor’s rec­ which inform ation is reported. W ithin 90 as applicable, subsection (c) of Supple­
ords one copy of th e notice set fo rth days a fte r receipt of a properly com­ m ent I. Notice of the interpretation shall
below.11 The notice may be mailed with a pleted request to change th e m anner in be provided as specified in subsection
w hich Inform ation is reported to con­ (e) (1) of Supplem ent I, but th e Inter­
pretation shall be effective in accord­
U A c r e d ito r n e e d n o t d is tin g u is h b e tw e e n sum er reporting agencies and others re ­
p a r tic ip a tio n a s a u s e r o r a s a c o n tr a c tu a lly garding an account described in p a ra ­ ance w ith § 202.1. The interpretation
lia b le p a r ty .
graph (b) of this section a creditor shall shall be subject to revocation or modifi­
“ I f a c r e d ito r le a r n s t h a t n e w p a r tie s h a v e designate th e account to reflect th e fac t cation a t any time, as provided in sub­
u n d e r ta k e n p a y m e n t o n a n a c c o u n t, th e n t h e of participation of both spouses.13 W hen section (g) (4) of Supplem ent I.
s u b s e q u e n t h is to r y o f t h e a c c o u n t s h a ll b e
(c) Finance charges and loan ceilings.
fu rn is h e d i n t h e n a m e s o f t h e n e w p a r tie s furnishing Inform ation concerning any
a n d n e e d n o t c o n tin u e to b e fu rn is h e d In such account, th e creditor shall comply I f m arried applicants voluntarily apply
th e n a m e s o f t h e fo rm e r p a rtie s .
w ith th e reporting requirem ents of sub­ for and obtain Individual accounts with
13 S ee f o o tn o te 11.
paragraphs (a) (2) and (a) (3) of this th e same creditor, th e accounts shall no t
be aggregated o r otherwise combined for
14 A c r e d ito r m a y d e le te t h e re fe re n c e s to
t h e " u s e ” o f a n a c c o u n t w h e n p ro v id in g n o ­
purposes of determ ining permissible fi­
tic e s re g a rd in g clo sed e n d a c c o u n ts .
“ S ee f o o tn o te 11.
nance charges or permissible loan cefiFEDERAL REGISTER. VOL. 42, NO. 4— THURSDAY, JANUARY 6 , 1977

MILES A N D REGULATIONS

1261

ings under any Federal or S tate law. olation of th e Act or this P a rt where such til final disposition of th e m atter, u n ­
less a n earlier tim e is allowed by order
Permissible loan celling laws shall be inform ation was obtained:
construed to perm it each spouse to be­
(1) From any source prior to M arch of th e agency or c o u rt
(4)
In any transaction Involving more
come individually liable up to th e 23.1977;17or
am ount of th e loan ceilings, less th e
(2) A t any tim e from consumer re ­ th a n one creditor, any creditor not re­
quired to comply w ith 5 202.9 (notifica­
am ount for which th e applicant is jointly porting agencies; or
liable.1*
(3) A t any tim e from any applicant tions) shall retain fo r th e tim e period
(d) State and Federal laws not a f­ or others w ithout th e specific request of specified in paragraph (b) of this sec­
tion all w ritten or recorded inform ation
fected. This section does not a lte r o r a n ­ th e creditor; or
nul any provision of S ta te property laws,
(4) At any tim e as required to m onitor in its possession concerning th e appli­
laws relating to the disposition of de­ compliance w ith th e Act and this P a rt cant, Including a notation of action
cedents’ estates, or Federal or S tate or other Federal or 'S tate statutes or reg­ taken in connection with any adverse
action.
banking regulations directed only to ­ ulations.
Failure of compliance. A failure
wards Insuring the solvency of financial
(b)
Preservation of records. (1) For (c)
institutions.
26 m onths a fte r the date th a t a creditor to comply w ith this section shall not con­
(e) Exemption for State regulated notifies an applicant of action taken on stitute a violation when caused by ah in ­
transactions. (1) In accordance w ith the an application, th e creditor shall retain advertent error.
provisions of Supplem ent I to this P art, as to th a t application in original form or § 202.13 I n f o r m a tio n f o r M o n ito rin g
any S tate m ay apply to the Board for an a copy th ereo f: “
P u rp o s e s .
exem ption from th e requirem ents of sec­
(1) Any application form th a t it re ­
(a)
Scope and inform ation requested.
tions 701 and 702 of th e Act and the cor­ ceives, any inform ation required to be ob­
responding provisions of th is P a rt for any tained concerning characteristics of an (1) For th e purpose of m onitoring com­
class of credit transactions w ithin the applicant to m onitor compliance w ith pliance w ith the provisions of th e Act
State. T he Board will g ran t such an ex­ th e Act and this P a rt or other sim ilar and this P art, any creditor th a t receives
an application fo r consumer cred it re la t­
emption if :
law, and any other w ritten or recorded
(1) T he Board determ ines th at, under inform ation used In evaluating the ap ­ ing to th e purchase of residential real
the law of th a t State, th a t class of credit plication and not retu rn to th e applicant property, w here th e extension of credit
is to be secured by a lien on such prop­
transactions Is subject to requirem ents a t th e applicant’s request;
erty, shall request as p a rt of any w ritten
substantially sim ilar to those imposed
(ii) A copy of the following documents application fo r such credit th e following
under sections 701 and 702 of the Act arid if furnished to th e applicant In w ritten Inform ation regarding the applicant and
th e corresponding provisions of this form (or, if furnished orally, any n o ta­ jo int applicant (if a n y ):
P a rt, or th a t applicants are afforded tion or mem orandum w ith respect th ere­
(1) R ace/national origin, using the
g reater protection th a n is afforded under to m ade by th e c re d ito r):
categories American Indian or Alaskan
sections 701 and 702 of th e Act and the
(A) The notification of action taken; Native; Asian or Pacific Islander; Black;
corresponding provisions of this P a rt; and
W hite; Hispanic; O ther (Specify);
and
(B) The statem ent of specific reasons
(11) Sex;
(11)
There is adequate provision forfor adverse action; and
(iii) M arital status, using the catego­
S tate enforcem ent.
(iii) Any w ritten statem ent subm itted ries m arried, unm arried, and separated;
(2) In order to assure th a t the concur­ by the applicant alleging a violation of and
re n t jurisdiction of Federal and State th e Act or th is P art.
(iv) Age.
courts created in section 706(f) of the
(2) “R esidential real property’’ means
(2) For 26 m onths afte r the date th a t
Act will continue to have substantive pro­ a creditor notifies an applicant of adverse Improved real property used or Intended
visions to which such jurisdiction shall action regarding a n account, other th an to be used fo r residential purposes, in ­
apply; to allow Federal enforcem ent in connection with an application, th e cluding single fam ily homes, dwellings
agencies to retain th eir authority regard­ creditor shall retain as to th a t account, fo r from two to four families, and Indi­
ing any class of credit transactions ex­ in original form or a copy thereof:”
vidual units of condominiums and co­
em pted pursuant to paragraph (e) (1) of
(i) Any w ritten or recorded inform a­ operatives.
th is section and Supplem ent I; and, gen­ tion concerning such adverse action; and
(b) M ethod of obtaining information.
erally, to aid In implem enting th e Act:
(ii) Any w ritten statem ent subm itted Questions regarding race/national ori­
(i)
no such exemption shall be deemedby th e applicant alleging a violation of gin, sex, m arital status, and age may be
listed, a t th e creditor’s option, either on
to extend to the civil liability provisions th e Act o r th is P art.
th e application form or on a separate
of section 706 or th e adm inistrative en­
(3) In addition to th e requirem ents form th a t refers to th e application.
forcem ent provisions of section 704 of the of paragraphs (b)(1) and (2), of this
(c) Disclosure to applicant and joint
Act; and
section, any creditor th a t has actual no­
(11)
after a n exemption has beentice th a t it Is under investigation or is applicant. The applicant and jo in t ap­
granted, th e requirem ents of the appli­ subject to an enforcem ent proceeding for plicant (if any) shall be Informed th a t
cable S tate law shall constitute th e re ­ an alleged violation of th e Act or this th e inform ation regarding race/national
quirem ents of the Act and this P art, ex­ P a rt by an enforcem ent agency charged origin, sex, m arital status, and age Is
cept to th e extent such S tate law Im­ w ith m onitoring th a t creditor’s compli­ being requested by the Federal Govern­
poses requirem ents n o t imposed by the ance w ith th e Act and this P art, or th a t m ent fo r th e purpose of m onitoring
w ith Federal anti-discrim i­
Act or this P art.
has been served w ith notice of an action compliance
n statu tes and th a t those statutes
(3) Exem ptions granted by the Board filed pursuant to section 706 of th e Act natio
creditors from discrim inating
to p articu lar classes of credit tran sac­ mid § 202.1 (b) or (c) of th is P art, shall prohibit
applicants on those bases. The
tions w ithin specified States will be set retain the inform ation required in p ara­ against
graphs (b) (1) and (2) of this section u n ­ applicant and jo int applicant shall be
fo rth In Supplem ent H to this P art.
asked, but n o t required, to supply the
§ 2 0 2 .1 2 R e c o rd R etention-.
requested inform ation. If th e applicant
11 P u r s u a n t to th e O c to b e r 28. 1975 v e rsio n
(a)
R etention o f prohibited inform a­o f R e g u la tio n B, t h e a p p lic a b le d a te f o r sex or jo in t applicant chooses n o t to pro­
tion. R etention In a creditor’s files of any a n d m a r ita l s t a t u s In fo r m a tio n Is J u n e 30, vide th e inform ation or any p a rt of It,
th a t fa c t shall be noted on th e form on
inform ation, th e use of which in evalu­ 1976.
“ "A co p y th e r e o f ” in c lu d e s c a rb o n co pies, which th e inform ation Is obtained.
ating applications is prohibited by th e
c o p ie s, m ic ro film o r m ic ro fic h e co p ies,
(d) Substitute monitoring program.
A ct or this P art, shall not constitute a vl- op rh octo
o p ies p ro d u c e d b y a n y a c c u r a te In fo rm a ­
Any m onitoring program required by
tio n r e trie v a l sy s te m . A c r e d ito r w h o u se s a n agency charged w ith adm inistrative
11 F o r e x a m p le , I n a S ta te w ith a p e rm is ­ a c o m p u te riz e d o r m e c h a n iz e d s y s te m
s ib le lo a n c e llin g o f $1,000, U a m a r rie d c o u ­ n e e d n o t k e e p a w r itte n co p y o f a d o c u m e n t enforcem ent under section 704 of th e
p le w e re jo in tly lia b le f o r u n p a id d e b t I n t h e If I t o a n r e g e n e r a te t h e p re c is e t e x t o f t h e Act m ay be substituted for th e require­
m ents contained in paragraphs ( a ) , (b ).
a m o u n t o f $350, e a c h s p o u s e c o u ld su b s e ­ d o c u m e n t u p o n r e q u e s t.
and (c) of this section.
q u e n tly b eco m e In d iv id u a lly lia b le f o r $750.
“ B ee f o o tn o te 18.

FEDERAL REGISTER, VOL. 42 , NO. 4— THURSDAY, JANUARY 6 , 1977

1262

RULES A N D REGULATIONS

A p p e n d ix

A .— F e d e r a l E n f o r c e m e n t
A g e n c ie s

T h e fo llo w in g l i s t In d ic a te s w h ic h F e d ­
e r a l ag e n c y e n fo rc e s R e g u la tio n B to r p a r ­
t i c u l a r c la s se s o f c re d ito rs . A n y q u e s tio n s
c o n c e rn in g a p a r tic u la r c r e d ito r s h o u ld b e
d ir e c te d to I ts e n fo rc e m e n t ag en cy .
N a tio n a l B a n k s : C o m p tro lle r o f t h e C u r­
re n c y , C o n su m e r A ffairs D iv isio n , W a sh ­
in g to n , D .C . 2 0 2 1 9 .'
S t a t e M e m b e r B a n k s : F e d e ra l R e serv e B a n k
se rv in g t h e d i s t r i c t In w h ic h th e S ta te
m e m b e r b a n k Is lo c a te d .
N o n m e m b e r I n s u r e d B a n k s : F e d e ra l D e p o s it
I n s u r a n c e C o rp o ra tio n R e g io n a l D ire c to r
f o r th e re g io n In w h ic h t h e n o n m e m b e r
In s u re d b a n k Is lo c a te d .
S a v in g s I n s t i t u t i o n s I n s u r e d b y t h e F S L IC
a n d M e m b e rs o f t h e F N L B S y s te m (e x ­
c e p t fo r S a v in g s B a n k s in s u r e d b y
F D IC ) : T h e F e d e ra l H o m e L o a n B a n k
B o a rd S u p e rv iso ry A g e n t In t h e d is tr ic t
I n w h ic h t h e I n s t i t u t i o n Is lo c a te d .
F e d e ra l C r e d it U n io n s: R e g io n a l office o f
t h e N a tio n a l C re d it U n io n A d m in is tr a tio n
se rv in g t h e a r e a In w h ic h t h e F e d e ra l
c r e d it u n io n Is lo c a te d .
C re d ito rs S u b je c t to C iv il A e r o n a u tic s
B o a rd : D ire c to r, B u re a u o f E n fo rc e m e n t,
C iv il A e ro n a u tic s B o a rd . 1825 C o n n e c tic u t
A v en u e, N.W ., W a s h in g to n , D .C . 20428.
C re d ito rs S u b je c t to I n te r s ta te C o m m erce
C o m m is sio n : Office o f P ro c e e d in g s, I n t e r ­
s t a t e C o m m erce C o m m issio n , W a s h in g to n ,
D .C . 20523.
C re d ito rs S u b je c t to P a ckers a n d S to c k y a r d s
A c t: N e a re s t P a c k e rs a n d S to c k y a rd s A d ­
m in is tr a tio n a re a su p e rv is o r.
S m a ll B u sin e s s I n v e s tm e n t C o m p a n ie s: U.S.
S m a ll B u s in e ss A d m in is tra tio n , 1441 L
S tre e t, N.W .. W a s h in g to n . D.C. 20418.
B ro k e r s a n d D ealers: S e c u ritie s a n d E x ch an g e
C o m m issio n , W a s h in g to n , D.C. 20549.
F ederal L a n d B a n k s, F edera l L a n d B a n k A s­
s o c ia tio n s , F ederal I n te r m e d ia te C re d it
B a n k s a n d P r o d u c tio n C re d it A sso c ia tio n s:
F a r m C re d it A d m in is tra tio n , 490 L 'E n f a n t
P la z a , S.W ., W a s h in g to n , D .C. 20578.
R e ta il, D e p a r tm e n t S to re s, C o n s u m e r F i­
n a n c e C o m p a n ie s, A ll o th e r C red ito rs, a n d
A ll N o n b a n k C r e d it C ard Iss u e rs : (L e n d e rs
o p e ra tin g o n a lo cal o r re g io n a l b a s is
s h o u ld u s e t h e a d d re ss o f t h e F .T .C . R e ­
g io n a l Office In w h ic h th e y o p e r a te ) , F e d ­
e r a l T ra d e C o m m issio n , E q u a l C re d it O p ­
p o r tu n ity , W a s h in g to n , D .C . 20580.
A

p p e n d ix

B— M

*
S

ic a t io n

F

o rm s

eserved

»

u ppl e m e n t

Appl
]

o d el

[R

•
I— P
Ex e

ro cedures

•

*
fo r

State

m p t io n

P ro c e d u re s a n d c r ite r ia u n d e r w h ic h a
S ta te m a y a p p ly f o r a n e x e m p tio n p u r s u a n t
t o s e c tio n 7 0 5 (g ) o f t h e A ct a n d s e c tio n
20 2.1 1(e) o f t h i s P a r t.
(a )
A p p lic a tio n . A n y S ta te m a y a p p ly
t h e B o a rd p u r s u a n t to th e p ro v isio n s o f th is
S u p p le m e n t a n d t h e B o a rd ’s R u le s o f P ro ­
c e d u re (12 C F R 262) f o r a d e te r m in a tio n
t h a t , u n d e r t h e law s o f t h a t S ta te ,1 a c la ss
o f c r e d it tr a n s a c tio n s * w ith in t h e S ta te Is
s u b je c t to re q u ire m e n ts t h a t a r e s u b s ta n ­
tia lly s im ila r to , o r p ro v id e g r e a te r p ro te c ­
t io n f o r a p p lic a n ts t h a n th o s e Im p o sed u n d e r
1 A ny re fe re n c e to S ta te law I n th i s S u p ­
p le m e n t In c lu d e s a r e fe re n c e to a n y r e g u la ­
t io n s t h a t Im p le m e n t S ta te la w a n d fo rm a l
I n te r p r e ta tio n s th e r e o f b y a c o u r t o f c o m ­
p e te n t J u ris d ic tio n o r d u ly a u th o r iz e d ag en cy
o f t h a t S ta te .
* A s a p p lic a b le , re fe re n c e s to " c la s s o f c re d it
tr a n s a c tio n s " I n t h i s S u p p le m e n t In c lu d e
o n e o r m o re o f s u c h classes o f c r e d it t r a n s ­
a c tio n s .

s e c tio n s 701 a n d 702 o f t h e Act,* a n d t h a t
(Iv) A sc o p e o f d isc o v ery r e la tin g t o a
th e r e Is a d e q u a te p ro v isio n f o r S ta te e n fo rc e ­
c r e d ito r’s c r e d it g r a n tin g s ta n d a r d s u n d e r
m e n t o f su c h re q u ire m e n ts . T h e a p p lic a tio n
a p p r o p ria te d isc o v ery p r o c e d u re s I n a c o u r t
s h a ll b e I n w ritin g , a d d re ss e d to t h e B o a rd , a c tio n o r ag e n c y p ro e d ln g t h a t Is s u b s ta n ­
sig n e d b y th e G o v ern o r, A tto rn e y G e n e ra l, o r
t ia lly s im ila r to , o r np>i e x te n s iv e th a n , t h a t
S ta te official h a v in g p r im a ry e n fo rc e m e n t o r p ro v id e d u n d e r s e c tio n 7 0 6 (J) o f t h e A ct.
I n te rp r e tiv e r e s p o n s ib ilitie s u n d e r th e S ta te
(5)
A s ta te m e n t I d e n tify in g t h e office d e s­
law t h a t is a p p lic a b le to t h e c la ss o f c r e d it
ig n a te d o r to b e d e s ig n a te d to a d m in is te r
tr a n s a c tio n s , a n d s h a ll b e s u p p o r te d by th e
t h e S ta te la w r e fe rre d t o I n s u b p a ra g ra p h
d o c u m e n ts sp e cified In s u b s e c tio n ( b ) .
( b ) ( 1 ) o f t h i s s u p p le m e n t, to g e th e r w ith
(b )
S u p p o r tin g d o c u m e n ts . T h e a p p lic a ­ c o m p le te in f o rm a tio n re g a rd in g t h e fiscal,
t i o n s h a ll b e a c c o m p a n ie d b y :
a r ra n g e m e n ts fo r a d m in is tr a tiv e e n fo rc e ­
m e n t (In c lu d in g t h e a m o u n t o f f u n d s a v a il­
(1 ) A co p y o f t h e f u ll t e x t o f th e S ta te
a b le o r t o b e p ro v id e d ), t h e n u m b e r a n d
law t h a t Is c la im e d to c o n ta in r e q u ire m e n ts
q u a lific a tio n s o f p e rs o n n e l e n g a g e d o r to be
s u b s ta n tia lly s im ila r to th o s e Im p o sed u n d e r
e n g a g e d In e n fo rc e m e n t, a n d a d e s c rip tio n
s e c tio n s 701 a n d 702 o f t h e A ct, o r to p ro v id e
o f th e p ro c e d u re s u n d e r w h ic h s u c h S ta te
g r e a te r p r o te c tio n t o a p p lic a n ts t h a n se c ­
law Is t o b e a d m in is tr a tiv e ly e n fo rc e d , I n ­
t io n s 701 a n d 702 o f t h e A ct, re g a rd in g t h e
c lu d in g , If r e le v a n t, a d m in is tr a tiv e e n fo rc e ­
class o f c r e d it tr a n s a c tio n s w ith in t h a t S ta te .
m e n t re g a rd in g F e d e r a lly -c h a rte r e d c re d ­
(2 ) A c o m p a riso n o f e a c h p ro v isio n o f se c ­
ito rs *
tio n s 701 a n d 702 o f t h e A ct w ith t h e c o rre ­
s p o n d in g p ro v isio n o f t h e S ta te law , t o ­
T h e s ta te m e n t s h o u ld also In c lu d e re a so n s to
g e th e r w ith re a s o n s s u p p o r tin g th e c la im
s u p p o r t t h e c la im t h a t th e r e Is a d e q u a te p ro ­
t h a t th e c o rre sp o n d in g p ro v isio n s o f th e
v isio n fo r e n fo rc e m e n t o f s u c h S ta te law .
S ta te law a re s u b s ta n tia lly s im ila r to , o r
(c)
C rite ria fo r d e te r m in a tio n . T h e B o a rd
p ro v id e g re a te r p ro te c tio n t o a p p lic a n ts th a n ,
w ill c o n s id e r t h e c r ite r ia s e t f o r t h b elow , a n d
p ro v isio n s o f s e c tio n s 701 a n d 702 o f t h e A ct a n y o th e r r e le v a n t In fo rm a tio n , I n d e te r m in ­
re g a rd in g t h e c la s s o f c r e d it tr a n s a c tio n s a n d in g w h e th e r th e law o f a S ta te Is s u b s ta n ­
e x p la in in g w hy a n y d iffe re n c e s a re n o t I n ­ t ia lly s im ila r to , o r p ro v id e s g r e a te r p r o te c ­
c o n s is te n t w ith t h e p ro v isio n s o f se c tio n s 701 tio n t o a p p lic a n ts t h a n , t h e p ro v isio n s o f se c ­
a n d 702 o f t h e A ct a n d d o n o t r e s u lt I n a tio n s 701 a n d 702 o f t h e A c t re g a rd in g th e
d im in u tio n In t h e p ro te c tio n o th e rw ise a f ­
c la ss o f a c tio n tr a n s a c tio n s w ith in t h a t S ta te ,
fo rd e d a p p lic a n ts ; a n d a s ta te m e n t t h a t n o
a n d w h e th e r th e r e Is a d e q u a te p ro v isio n fo r
o th e r S ta te la w s (In c lu d in g a d m in is tr a tiv e S ta te e n fo rc e m e n t o f s u c h law . I n m a k in g
o r J u d ic ia l I n te r p r e ta tio n s ) a re r e la te d to , t h a t d e te r m in a tio n , th e B o a rd p r im a rily w ill
o r w o u ld h a v e a n effe ct u p o n , th e S ta te law
c o n s id e r e a c h p ro v isio n o f t h e S ta te la w In
t h a t Is b e in g c o n s id e re d b y th e B o a rd In
c o m p a riso n w ith e a c h c o rre sp o n d in g p ro v i­
m a k in g I ts d e te r m in a tio n .
s io n In se c tio n s 701 a n d 702 o f th e A ct, a n d
(3) A co p y o f t h e f u ll t e x t o f th e S ta te la w
n o t th e S ta te la w a s a w h o le In co m p a riso n
t h a t p ro v id e s fo r e n fo rc e m e n t o f th e S ta te
w ith th e A ct a s a w hole.
law r e fe rre d to I n s u b p a ra g r a p h ( b ) ( 1 ) o f
(1)
I n o rd e r fo r p ro v isio n s o f S ta te law to
t h i s s u p p le m e n t.
b e s u b s ta n tia lly s im ila r to , o r p ro v id e g re a te r
(4 ) A c o m p a riso n o f th e p ro v isio n s o f th e
p r o te c tio n to a p p lic a n ts t h a n t h e p ro v isio n s
S ta te law t h a t p ro v id e s f o r e n fo rc e m e n t w ith
o f se c tio n s 701 a n d 702 o f t h e A ct, t h e p r o ­
t h e p ro v isio n s o f se c tio n s 704 a n d 706 o f th e
v isio n s o f S ta te law * a t le a s t s h a ll p ro v id e
A ct, to g e th e r w ith re a so n s s u p p o r tin g th e
th a t:
c la im t h a t s u c h S ta te law .p ro v id e s f o r :
(I) D e fin itio n s a n d r u le s o f c o n s tru c tio n ,
(I) A d m in is tra tiv e e n fo rc e m e n t o f th e
a s a p p lic a b le , Im p o rt t h e sa m e m e a n in g a n d
S ta te law re fe rre d to In s u b p a ra g r a p h (b ) (1)
h a v e t h e sa m e a p p lic a tio n a s th o s e p re sc rib e d
b y se c tio n s 701 a n d 702 of th e A ct.
o f th is s u p p le m e n t t h a t Is s u b s ta n tia lly s im ­
ila r to , o r m o re e x te n s iv e th a n , t h e e n fo rc e ­
(II) C re d ito rs p ro v id e a ll o f t h e a p p lic a b le
m e n t p ro v id e d u n d e r s e c tio n 704 o f th e A ct;
n o tific a tio n s r e q u ire d b y t h e p ro v isio n s o f
se c tio n s 701 a n d 702 o f t h e A ct, w ith th e c o n ­
(II) C ivil lia b ility fo r a f a ilu r e to co m p ly
w ith th e re q u ire m e n ts o f t h e S ta te la w t h a t t e n t a n d In t h e te rm in o lo g y , fo rm , a n d tim e
Is s u b s ta n tia lly s im ila r to , o r m o re e x te n s iv e p e rio d s p re s c rib e d b y th i s F a r t p u r s u a n t to
se c tio n s 701 a n d 702; h o w ev er, r e q u ire d r e f ­
t h a n t h a t p ro v id e d u n d e r s e c tio n 706 o f th e
e re n c e s to S ta te law m a y b e s u b s titu te d fo r
A ct, In c lu d in g c la ss a c tio n lia b ility a n d t h e
a b ility o f th e S ta te A tto rn e y G e n e ra l o r o th e r t h e re fe re n c e s to F e d e ra l law r e q u ire d In th is
a p p r o p ria te S t a t e official to c o m m e n c e a c iv il F a r t. N o tific a tio n r e q u ire m e n ts u n d e r S ta te
a c tio n u n d e r c ir c u m s ta n c e s s u b s ta n tia lly
law In a d d itio n a l c ir c u m s ta n c e s o r w ith a d d i­
s im ila r t o th o s e p re s c rib e d I n s e c tio n 706 o f
tio n a l d e ta il t h a t d o es n o t f r u s t r a t e a n y o f
t h e A ct, e x c e p t t h a t s u c h S t a t e la w m a y p r o ­
v id e a g re a te r d a m a g e re m e d y o r o th e r, m o re t h e p u rp o se s o f th e A ct m a y b e d e te rm in e d
b y t h e B o a rd to b e c o n s is te n t w ith se c tio n s
e x te n s iv e rem ed ies;
701 a n d 702 o f t h e A ct.
(III) A s t a t u t e o f lim ita tio n s t h a t p r e ­
s c rib e s a p e rio d fo r c iv il a c tio n s o f s u b s ta n ­
to t ia lly sim ila r d u r a tio n t o t h a t p ro v id e d u n d e r
‘ T ra n s a c tio n s w ith in a S ta te I n w h ic h a
se c tio n 706 (f) o f th e A ct, o r a lo n g e r p e rio d ;
F e d e ra lly -c h a rte re d I n s t i t u t i o n Is a c r e d ito r
and
s h a ll n o t b e c o n sid e re d s u b je c t to e x e m p tio n ,
a n d s u c h F e d e r a lly -c h a rte r e d c re d ito rs s h a ll
r e m a in s u b je c t to t h e r e q u ire m e n ts o f t h e
* A ny re fe re n c e In t h i s S u p p le m e n t to se c ­
A ct a n d a d m in is tr a tiv e e n fo rc e m e n t b y th e
tio n s 701 a n d 702 o f th e A ct In c lu d e s a re fe r ­
a p p r o p ria te F e d e ra l a u th o r ity u n d e r se c tio n
e n c e to th e c o rre sp o n d in g a n d Im p le m e n tin g
704 o f t h e A ct, u n le s s a S ta te e s ta b lis h e s to
p ro v isio n s o f th i s P a r t, t h e B o a rd ’s fo rm a l
t h e s a tis f a c tio n o f th e B o a rd t h a t a p p ro ­
I n te rp r e ta tio n s th e re o f, a n d official I n te rp r e ­
p r ia te a r ra n g e m e n ts h a v e b e e n m a d e w ith
ta tio n s o r a p p ro v a ls Issu e d b y a n a u th o riz e d
official o r em p lo y ee o f t h e F e d e ra l R eserv e s u c h F e d e ra l a u th o r itie s t o a s s u r e effe ctiv e
S y stem . A d d itio n a lly , a n y re fe re n c e t o se c ­
e n fo rc e m e n t o f t h e r e q u ire m e n ts o f S ta te
law s re g a rd in g s u c h c re d ito rs .
tio n s 701 a n d 702 o f th e A c t In c lu d e s a r e f ­
e re n c e to s e c tio n s 705 ( a ) , ( b ) , ( c ), a n d (d )
1 T h is s u b s e c tio n la n o t to b e c o n s tru e d
o f t h e A ct a n d t h e c o rre sp o n d in g p ro v isio n s a s In d ic a tin g t h a t t h e B o a rd w o u ld c o n s id e r
o f t h i s P a r t, w h ic h , th o u g h te c h n ic a lly n o t ad v e rse ly a n y a d d itio n a l r e q u ire m e n ts o f
a p a r t o f s e c tio n s 701 a n d 702, Im p le m e n t a n d
S t a t e la w t h a t a r e n o t In c o n s is te n t w ith t h e
r e la te to s u b s ta n tiv e re q u ire m e n ts o f se c ­
p u rp o s e o f t h e A c t o r t h e r e q u ire m e n ts Im ­
tio n s 701 a n d 702.
p o se d u n d e r se c tio n s 701 a n d 702 o f th e A ct.

FEDERAL REGISTER, VOL 42 , NO. 4— THURSDAY, JANUARY 6, 1977

RULES A N D REGULATIONS

1263

(lU ) C re d ito rs ta k e a ll a ffirm a tiv e a c tio n s o f t h e A ot, a n d t o t h e A tto r n e y G e n e ra l o f p u b lis h e d a s a n o tic e o f p ro p o se d r u le m a k ­
a n d a b id e b y o b lig a tio n s s u b s ta n tia lly s im ila r t h e U n ite d S ta te s . A d d itio n a lly , t h e B o a rd in g I n t h e Federal Reoistex. a p e rio d o f
t o o r m o re e x te n s iv e t h a n , th o s e p re s c rib e d S h all In c lu d e a n y e x e m p tio n g r a n te d I n a n tim e s h a ll b e allo w ed fro m t h e d a te o f su c h
b y se c tio n s 701 a n d 702 o f t h e A ct u n d e r a p p r o p ria te lis tin g I n S u p p le m e n t n t o t h i s p u b lic a tio n f o r t h e B o a rd t o re c e iv e w r itte n
s u b s ta n tia lly s im ila r o r m o re s tr in g e n t c o n ­ F a r t. A n y e x e m p tio n g r a n te d s h a ll b e effec­ c o m m e n ts fro m I n te re s te d p e rs o n s t o s u b m it
d itio n s a n d w ith in t h e sa m e o r m o re s t r i n ­ tiv e 90 d a y s a f t e r t h e d a te o f p u b lic a tio n o f w r itte n c o m m e n ts to t h e B o a rd re g a rd in g th e
p ro p o se d r u le m a k in g .
g e n t tim e p e rio d s a s a r e p re s c rib e d in se c ­ s u c h n o tic e I n t h e F e d e b a i , R e g i s t e r .
(4 )
I f s u c h e x e m p tio n Is re v o k e d , n o tic e
(2 ) T h e a p p r o p ria te official o f a n y S ta te
tio n s 701 a n d 702 o f t h e A ct.
(Iv) C re d ito rs a b id e b y t h e sa m e o r m o re t h a t receiv es a n e x e m p tio n s h a ll In fo rm t h e o f s u c h re v o c a tio n s h a ll b e p u b lis h e d b y th e
B
o
a
rd
i
n
t h e F e d e r a l R e g i s t e r , a n d a co p y
s tr in g e n t p r o h ib itio n s a s a r e p re sc rib e d b y B o a rd I n w r itin g w ith in 30 d a y s o f a n y
o f s u c h n o tic e s h a ll b e f u rn is h e d to t h e a p ­
c h a n g e I n t h e S ta te la w s re fe rr e d t o i n s u b ­
se c tio n s 701 a n d 702 o f t h e A ct.
(v ) O b lig a tio n s o r r e s p o n s ib ilitie s Im p osed s e c tio n s (b ) (1) a n d (b ) (3 ) o f t h i s s u p p le ­ p r o p r ia te S ta te official, to t h e F e d e ra l a u ­
o n a p p lic a n ts a r e n o m o re c o stly , le n g th y , o r m e n t. T h e r e p o r t o f a n y s u c h c h a n g e s h a ll th o r itie s re sp o n s ib le f o r e n fo rc e m e n t o f t h e
b u rd e n so m e r e la tiv e to a p p lic a n ts ’ e x e rc isin g c o n ta in c o p ie s o f t h e f u ll t e x t o f t h a t c h a n g e , re q u ire m e n ts o f th e A ct, a n d to t h e A tto rn e y
a n y o f t h e r i g h ts o r g a in in g t h e b e n e fits o f to g e th e r w ith s ta te m e n ts s e ttin g f o r th t h e G e n e ra l o f t h e U n ite d S ta te s . T h e re v o c a tio n
th e p ro te c tio n s p ro v id e d In t h e S ta te law In fo r m a tio n a n d o p in io n s re g a rd in g t h a t s h a ll b eco m e effe ctiv e, a n d th e c la s s o f t r a n s ­
t h a n c o rre s p o n d in g o b lig a tio n s o r re s p o n s i­ c h a n g e t h a t a r e sp e cified I n su b s e c tio n s a c tio n s a ffe c te d w ith in t h a t S ta te s h a ll b e ­
( b ) ( 2 ) a n d ( b ) ( 4 ) o f t h i s s u p p le m e n t. T h e co m e s u b je c t to t h e r e q u ire m e n ts o f se c ­
b ilitie s Im p o se d o n a p p lic a n ts in se c tio n s 701
a p p r o p ria te official o f a n y S ta te t h a t h a s r e ­ tio n s 701 a n d 702 o f th e A ct, 00 d a y s a f te r
a n d 702 o f t h e A ct.
(v l) A p p lic a n ts ' r i g h ts a n d p ro te c tio n s a re c e iv e d s u c h a n e x e m p tio n a lso s h a ll file w ith t h e d a te o f p u b lic a tio n o f t h e n o tic e In th e
s u b s ta n tia lly s im ila r to , o r m o re fa v o ra b le th e B o a rd fro m tim e t o tim e s u c h r e p o rts as F e d e r a l R e g i s t e r .
th a n , th o s e p ro v id e d b y s e c tio n s 701 a n d 702 t h e B o a rd m a y re q u ire .
By order of the Board of Governors,
(3) T h e B o a rd s h a ll In fo rm th e a p p r o p ri­
o f t h e A ct u n d e r c o n d itio n s o r w ith in tim e
December 22, 1976.
p e rio d s t h a t a r e s u b s ta n tia lly s im ila r to , o r a te official o f a n y S ta te t h a t receiv es s u c h
m o re fa v o ra b le to a p p lic a n ts th a n , th o s e p r e ­ a n e x e m p tio n o f a n y s u b s e q u e n t a m e n d ­
T h e o d o r e E . A l l is o n ,
m e n ts o f t h e A c t (in c lu d in g th e im p le m e n t­
s c rib e d b y se c tio n s 701 a n d 702 o f t h e A ct.
Secretary of the Board.
(2 )
I n d e te r m in in g w h e th e r p ro v isio n s fo rin g p ro v isio n s o f th is P a r t, t h e B o a rd 's f o r ­
[F R D oc.77-454 F ile d l-6 -7 7 ;8 :4 5 a m ]
e n fo rc e m e n t o f t h e S ta te la w re fe rre d t o In m a l in te r p r e ta tio n s , a n d I n te r p r e ta tio n s o r
s u b s e c tio n (b ) (1) o f t h i s s u p p le m e n t a re a p p ro v a ls Issu e d b y a n a u th o r iz e d official o r
a d e q u a te , c o n s id e ra tio n w ill b e g iv e n to t h e em p lo y ee o f t h e F e d e ra l R e serv e S y ste m )
e x te n t to w h ic h , u n d e r S ta te law , p ro v isio n Is t h a t m ig h t n e c e s s ita te th e a m e n d m e n t o f
S ta te law fo r t h e e x e m p tio n t o c o n tin u e .
m a d e f o r:
(1)
A d m in is tra tiv e e n fo rc e m e n t. In c lu d in g (4 ) N o e x e m p tio n s h a ll e x te n d to t h e a d ­
m in is tr a tiv e e n fo rc e m e n t o r c iv il lia b ility
n e c e s sa ry fa c ilitie s , p e rso n n e l, a n d f u n d in g ;
(U ) C iv il lia b ility fo r a f a ilu r e to co m p ly p ro v isio n s o f se c tio n s 704 a n d 706 o f th e
w ith t h e r e q u ire m e n ts o f s u c h a S ta te law A ct. A fte r a n e x e m p tio n Is g ra n te d , th e r e ­
t h a t Is s u b s ta n tia lly s im ila r to , o r m o re ex ­ q u ir e m e n ts o f t h e a p p lic a b le S ta te law s h a ll
te n s iv e th a n , t h a t p ro v id e d u n d e r s e c tio n c o n s titu te t h e r e q u ire m e n ts o f se c tio n s 701
a n d 702 o f t h e A ct, e x c e p t to t h e e x te n t su c h
706 o f t h e A ct;
(111)
A s t a t u t e o f lim ita tio n s fo r c iv il l i a ­S ta te law Im p o ses r e q u ire m e n ts n o t Im po sed
b y t h e A ct o r t h i s F a r t.
b ility o f s u b s ta n tia lly s im ila r o r lo n g e r d u r a ­
(f) A d verse d e te r m in a tio n . (1) If, a f te r
t i o n a s t h a t p ro v id e d u n d e r se c tio n 706 o f
p u b lic a tio n o f a n o tic e i n t h e F e d e r a l R e g ­
t h e A ct; a n d
i s t e r a s p ro v id e d u n d e r s e c tio n ( d ) o f t h i s
(lv ) A sc o p e o f d isc o v ery r e la tin g t o a
s u p p le m e n t, t h e B o a rd fin d s o n t h e b a s is o f
c r e d ito r ’s c r e d it g r a n tin g s ta n d a r d s t h a t Is t h e I n fo r m a tio n b e fo re I t t h a t I t c a n n o t
s u b s ta n tia lly s im ila r to , o r m o re e x te n s iv e m a k e a fa v o ra b le d e te r m in a tio n In c o n n e c ­
t h a n , t h a t p ro v id e d u n d e r se c tio n 7 0 6 (j) o f tio n w ith t h e a p p lic a tio n , t h e B o a rd s h a ll
t h e A ct.
n o tif y t h e a p p r o p ria te S ta te official o f th e
( d ) P u b lic n o tic e o f filin g a n d p ro p o sed f a c ta u p o n w h ic h s u c h fin d in g s a re b a se d
r u le m a k in g . I n c o n n e c tio n w ith a n y a p p l i ­ a n d s h a ll a ffo rd t h a t S t a t e a u th o r ity a r e a ­
c a tio n t h a t h a s b e e n file d I n a c c o rd a n c e w ith
s o n a b le o p p o r tu n ity t o d e m o n s tr a te o r
t h e r e q u ire m e n ts o f s u b s e c tio n s (a ) a n d (b )
a c h ie v e c o m p lia n c e .
o f t h i s S u p p le m e n t a n d fo llo w in g I n itia l r e ­
(2 )
I f , a f t e r h a v in g a ffo rd e d th e S ta te a u ­
view o f t h e a p p lic a tio n , a n o tic e o f s u c h fil­
th o r ity B uch o p p o r tu n ity t o d e m o n s tr a te o r
in g a n d p ro p o se d r u l e m a k in g s h a ll b e p u b ­ a c h ie v e c o m p lia n c e , t h e B o a rd fin d s o n th e
lis h e d b y t h e B o a rd I n t h e F e d e r a l R e g i s t e r , b a s is o f t h e in f o rm a tio n b e fo re I t t h a t I t
a n d a co p y o f s u c h a p p lic a tio n s h a ll b e m a d s s till c a n n o t m a k e a fa v o ra b le d e te r m in a tio n
a v a ila b le f o r e x a m in a tio n b y in te r e s te d p e r ­ I n c o n n e c tio n w ith t h e a p p lic a tio n , t h e B o a rd
so n s d u r in g b u s in e s s h o u r s a t t h e B o a rd a n d s h a ll p u b lis h I n t h e F e d e r a l R e g i s t e r a n o ­
a t t h e F e d e ra l R e serv e B a n k f o r e a c h F e d ­ tic e o f I ts d e te r m in a tio n re g a rd in g t h e a p ­
e r a l R e serv e D is tr ic t I n w h ic h t h e S ta te m a k ­ p lic a tio n a n d s h a ll f u r n is h a co p y o f s u c h
in g t h e a p p lic a tio n Is s itu a te d . A p e rio d o f n o tic e to t h e S t a t e official w h o m a d e a p p li­
U m e s h a ll b e a llo w e d fro m t h e d a te o f s u c h
c a tio n f o r s u c h e x e m p tio n .
p u b lic a tio n fo r I n te re s te d p a r tie s t o s u b m it
(g ) R e v o c a tio n o f e x e m p tio n . (1 ) T h e
w r itte n c o m m e n ts t o t h e B o a rd re g a rd in g B o a rd re se rv e s t h e r i g h t t o rev o k e a n y ex ­
t h a t a p p lic a tio n .
e m p tio n g r a n te d u n d e r t h e p ro v isio n s o f
( e ) , E x e m p tio n fr o m r e q u ir e m e n ts . I f th e t h i s S u p p le m e n t If a t a n y tim e I t d e te rm in e s
B o a rd d e te rm in e s o n t h e b a s is o f th e I n fo r ­
t h a t t h e S t a t e la w d o e s n o t, In f a c t, Im p o se
m a tio n b e fo re I t t h a t , u n d e r t h e la w o f a r e q u ire m e n ts t h a t a re s u b s ta n tia lly s im ila r
S ta te , a c la s s o f c r e d it tr a n s a c tio n s 'is s u b je c t to , o r t h a t p ro v id e g r e a te r p r o te c tio n t o a p ­
t o r e q u ire m e n ts s u b s ta n tia lly s im ila r to , o r p lic a n ts th a n , th o s e Im p o sed u n d e r se c tio n s
t h a t p ro v id e g r e a te r p r o te c tio n t o a p p lic a n ts 701 a n d 702 o f t h e A c t o r t h a t th e r e Is n o t,
th a n , th o s e im p o se d u n d e r s e c tio n s 701 a n d In f a c t, a d e q u a te , p ro v isio n fo r S ta te e n fo rc e ­
702 o f t h e A ct a n d t h a t th e r e Is a d e q u a te m e n t.
p ro v isio n fo r S ta te e n fo rc e m e n t, t h e B o a rd
(2 ) B e fo re re v o k in g a n y s u c h e x e m p tio n ,
w ill e x e m p t t h e c la ss o f c r e d it tr a n s a c tio n s t h e B o a rd s h a ll n o tif y t h e a p p r o p ria te S t a t s
I n t h a t S ta te fro m t h e r e q u ire m e n ts o f se c ­ official o f t h e f a c ts o r c o n d u c t t h a t . I n t h e
tio n s 701 a n d 702 o f t h e A ct In t h e fo llo w in g B o a rd 's o p in io n , w a r r a n ts s u c h re v o c a tio n ,
m a n n e r a n d s u b je c t t o t h e fo llo w in g a n d s h a ll affo rd t h a t S ta te s u c h o p p o r tu n ity
c o n d itio n s :
a s t h e B o a rd d e e m s a p p r o p r ia te I n t h e c ir ­
(1)
N o tic e o f t h e e x e m p tio n s h a ll b e p u b c­ u m s ta n c e s t o d e m o n s tr a te o r a c h ie v e c o m ­
lis h e d I n t h e F e d e r a l R e g i s t e r , a n d t h e p lia n c e .
B o a rd S h all f u r n is h a co p y o f s u c h n o tic e t o
(3 ) I f , a f te r h a v in g b e e n a ffo rd e d t h e o p ­
t h e S ta te o fficial w h o m a d e a p p lic a tio n fo r p o r tu n ity t o d e m o n s tr a te o r a c h ie v e c o m p li­
s u c h e x e m p tio n , t o e a c h F e d e ra l a u th o r ity a n c e , t h e B o a rd d e te rm in e s t h a t t h e S ta te
re s p o n s ib le f o r a d m in is tr a tiv e e n fo rc e m e n t h a s n o t d o n e so , n o tic e o f t h e B o a rd 's In ­
o f t h e r e q u ire m e n ts o f s e c tio n s 701 a n d 702 t e n tio n t o rev o k e s u c h e x e m p tio n s h a ll b e