The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F e d e r a l Re s e r v e Ba n k o f D a lla s DALLAS, TEXAS 75222 C i r c u l a r No. 76-7 J a n u a r y 16, 1976 American Revolution Bicentennial REGULATION B — EQUAL CREDIT OPPORTUNITY Notice of S e v e n P r o p o s e d T e c h n i c a l A m e n d m e n t s to R e g u l a ti o n B TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e B o a r d of G o v e r n o r s of th e F e d e r a l R e s e r v e S y s t e m h a s i n v i t e d p u b l i c co m m en t on s e v e n p r o p o s e d t e c h n i c a l a m e n d m e n t s to c l a r i f y t e c h n i c a l q u e s t i o n s w h i c h h a v e a r i s e n s i n c e its Equal C r e d i t O p p o r t u n i t y R e g u l a t i o n w e n t into e ffe c t la st O c t o b e r 28. T h e B o a r d ' s n o ti c e o n t h i s m a t t e r is p r i n t e d on t h e follow ing p a g e s . I n t e r e s t e d p e r s o n s a r e i n v i t e d to s u b m i t r e l e v a n t d a t a , v i e w s , o r a r g u m e n t s o n t h i s m a t t e r . A n y s u c h m a te r i a l s h o u l d b e s u b m i t t e d in w r i t in g to th e S e c r e t a r y o f th e B o a r d , B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e S y s t e m , W a s h i n g t o n , D . C . 20551, to b e r e c e i v e d n o t la te r t h a n F e b r u a r y 2, 1976. A d d iti o n a l c o p i e s of t h i s c i r c u l a r will b e f u r n i s h e d u p o n r e q u e s t to t h e S e c r e t a r y ' s Office o f t h i s B a n k . S incerely y o u r s , T . W. P la n t F i r s t V ic e P r e s i d e n t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) [Reg. B] EQUAL CREDIT OPPORTUNITY Miscellaneous Amendments On April 25, 1975, the Board of Governors of the Federal Reserve System published for comment (40 FR 18183j a proposed regulation to implement the Equal Credit Opportunity Act (Title V of Pub. L. 93-495). Section 703 directs the Board to prescribe regulations to carry out the purposes of the Act, which prohibits discrimination on the basis of sex or marital status with respect to any aspect of a credit transaction. Numerous comments were received and public hearings were held on May 28 and 29, 1975. In response to comments re ceived and views expressed at the public hearings, the Board published a revised proposal on September 10, 1975 (40 F R 42030). On October 22, 1975, the Board published the new regulation as adopted (40 F R 49298). In response to comments made both before and after the final adoption of Regulation B, the Board is pro posing the following revisions to the regulation: 1. The word “each” has been deleted and the word "the” substituted in section 202.4(d) (1 ), which requires that applicants be furnished with a notice regarding the Act, in order to clarify that a creditor need furnish only one notice in connection with each application, and that where two or more applicants have applied jointly for a single extension of credit, the notice need be furnished to only one of them. In determining which customer shall receive disclosures, however, a creditor may not select a customer who is secondarily liable, such as an endorser, co-maker (when designated as a surety), guar antor, or a similar party (this does not prohibit the creditor from also furnishing disclosures to such per sons who are secondarily liable). 2. In section 202.5(d) (2 ), the words “under section 2 0 2 .4 (c )(3 )” have been deleted as superfluous and possibly confusing. 3. Language has been added to subsection 202.6(a) (2 ) (ii) to make it clear that in furnishing information under section 202.6 a creditor need furnish information only as to the spouse about whom the information is requested. A creditor may, however, report the fact that an account held by a spouse about whom information is requested is a joint account or is an account used by more than one spouse. 4. The requirement in section 202.9(a) that records be retained for 15 months after the date a creditor gives the applicant notice of action upon an application has been clarified to include an explicit requirement that such records shall include a copy of the notification of action taken on the application and, if applicable, a copy of the reasons for denial provided the applicant. Such a copy of the reasons for denial would include a copy of any written statement of reasons furnished to the applicant or of a notation or memorandum made by the creditor, if any, in connection with the oral fur nishing of reasons. 5. Section 202.9(b) has been clarified to make it plain that an adverse change in the terms or conditions of an account includes a termination of the account; and to provide that records need not be retained under this section in the case of such events as (1) the appli cant’s (customer’s) missing a certain number of pay ments as a result of which the computer automatically limits the applicant’s credit line to zero, or (2 ) a change in the terms or conditions of all or a substantial portion of the accounts of a creditor resulting, for example, from changes in State law or in the creditor’s business cir cumstances. 6. In paragraph 202.10(c), the requirement in sections 2 0 2 .5 (m )(2 ) and 2 0 2 .5 (m )(3 ) that reasons for denial or termination of credit be furnished to the applicant upon request has been eliminated in the case of credit in amounts over $100,000 because the burden and expense imposed by such a requirement is unlikely to be offset by a commensurate benefit. Additionally, the specific requirement that a creditor shall not, on the basis o f s€x or marital status, fail to act upon or un reasonably delay a decision on an application for busi ness crcdit has been deleted because it is unnecessary in view of the applicability of section 2 0 2 .5 (m )(l) to such credit. A provision has been added that credit extended to a business in the firm's name is not subject to the requirements of section 202.4(e) because that section would be superfluous, or to section 202.5(g) because it may be a relevant consideration in extending credit that the firm has a telephone listed in its own name and such listing would not be related to marital status. 7. A new paragraph (f j has been added to section 10 to provide relief in the case of applicants for credit under student loan programs administered by the De partment of Health, Education and Welfare. U nder ap plicable statutes and regulations, such credit may not be granted without determination being made of the ap plicant’s need, based in part upon inquiries into the resources of the parents and spouse (if any) of the ap plicant. The inquiries and verification necessary for making such determination do not appear to the Board to involve the sort of discrimination in connection with a credit transaction that the Equal Credit Opportunity Act was intended to prevent. The Board solicits com ments from interested persons as to whether any other loan programs exist where credit is extended on the basis of need and which might appropriately be entitled to similar relief. 8. The reference to section 202.5(d) has been de leted from subsection 202.14(b) and added to sub (2 ) a copy of the following if furnished to the ap plicant in written form (or if furnished orally, a nota tion or memorandum with respect thereto, if any, made by the c re d ito r); section 202.14(d) to change its effective date from N o vember 30, 1975 to June 30, 1976 in order to correct an inadvertent inconsistency with the effective date of 2 0 2 .4 (c)(3 ). ( i ) the notification of action taken, a n d ; Pursuant to the authority of section 703 of the Equal Credit Opportunity Act (Pub. L. 93-495), 15 U.S.C. § 1691 et seq., the Board hereby proposes that Regula tion B, 12 C F R P art 202, be amended as follows: (ii) if applicable, the reasons for denial provided to an applicant in accordance with section 202.5 ( m ) ; and (3 ) any written statement submitted by the appli cant alleging discrimination prohibited by the Act or this Part. S E C T IO N 202.4— A P P L IC A T IO N S * * * ( b ) ( 1 ) For a period ending 15 months after the date a creditor adversely changes the terms or condi tions of credit for an account or terminates an account, the creditor shall retain as to each account, in original form or a copy thereof: (d ) E qual C redit O pportunity Act notice. (1 ) E x cept where application is made by telephone, or orally for an amount of credit to exceed an existing limit on an applicant’s open end account, the creditor shall pro vide the applicant with the following notice in w riting: * * * (1) any written or recorded information concerning such change or termination; and (ii) any written statement submitted by the ap plicant alleging discrimination prohibited by the Act or this Part. S E C T IO N 202.5—E V A L U A T IO N O F A P P L IC A T IO N S * * * (2) For purposes of paragraph (1 ), an adverse change in the terms or conditions of credit for an ac count does not include: (d ) Alimony, child support and m aintenance in come. * * * (i) a reduction of the credit limit on an account taken after the applicant has failed to make payment as pro vided in the credit agreement; or (2) W here an applicant chooses to disclose alimony, child support or maintenance payments, a creditor shall consider such payment as income * * * * * * (ii) a change in the terms or conditions of credit affecting all or a substantial portion of the creditor’s accounts. * * * S E C T IO N 202.6—F U R N IS H IN G O F C R E D IT IN F O R M A T IO N (a ) Accounts established on or after November 1, 1976. * * * * * * (2 ) W hen furnishing information to consumer re porting agencies or others concerning an account des ignated under this section, a creditor shall report the designation and furnish any information concerning the account: * * * S E C T IO N 202.10—C E R T A IN S P E C IA L IZ E D C R E D IT * * * (c) Business credit. Business credit shall be subject to the provisions specified in sections 202.10(a), 202.5, 202.7 and 202.9, except that sections 202.5 (m ) (2 ), 202.5(m ) (3 ) and 202.9 shall only apply in those trans actions involving an application for credit in the amount of $100,000 or less where the applicant requests in writing that the creditor provide such reasons or re tain such records and sections 202.4(e) and 202.5(g) shall not apply to business credit extended in the name of a business firm. As used in this Part, business credit is credit granted for business, commercial or agricultural purposes. (ii) to recipients other than such agencies, in the name of each spouse about whom such information is requested. * * * * S E C T IO N 202.9— P R E S E R V A T IO N O F R EC O R D S * * (f) Credit in connection w ith certain student loan programs. Credit in connection with student loan pro grams administered by the Department of Health, E du cation and Welfare shall be subject to all the provi sions of this P art except that to the extent necessary or (a ) * * * (1 ) any application form and all other written or recorded information used in evaluating an application; and 2 (d ) Sections 202.4(c), 202.4(d), 202.5(b) 202.5(d) shall take effect on June 30, 1976. appropriate to ascertain an d /o r verify the applicant’s marital status and the financial resources of the appli cant and the applicant’s spouse, if the applicant is m ar ried, sections 202.4(c), 202.5(b), and 202.7(a) shall not apply. * * * and Interested persons are invited to submit relevant written data, views, and arguments concerning these proposals to the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551, to be received no later than February 2, 1976. Such ma terial will be made available for public inspection and copying upon request, except as provided in § 261.6(a) of the Board’s Rules Regarding Availability of Infor mation. S E C T IO N 202.14— T R A N S IT IO N P E R IO D S Except as provided in section 202.6 with respect to that section, the provisions of this P art shall take effect as follows: (a ) * * * (b) Sections 202.4(b), 202.4(e), 202.5(e), 202.5(f), 202.5(g), 202.9(a) and 202.9(b) shall take effect on November 30, 1975. This notice is published pursuant to section 553(b) of Title 5, United States Code, and section 262.2(a) of the Rules of Procedure of the Board of Governors of the Federal Reserve System (12 C FR 2 6 2 .2 (a)). (c) * * * 3