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FEDERAL RESERVE BANK
OF N E W YORK
Circular No. 7 7 0 6 1
September 10, 197S
[
J
TEXT OF PROPOSED REGULATION B
<5
Implementing the Equal Credit Opportunity Act
To All Member Banks, and Others Concerned,
in the Second Federal Reserve District:
Our Circular No. 7704, dated September 8, 1975, contained the text of a press statement
issued on September 5 by the Board of Governors of the Federal Reserve System regarding a re
vised proposal for a new Regulation B to implement the provisions of the Equal Credit Opportunity
Act. The Act prohibits discrimination on the basis of sex or marital status with respect to any aspect
of a credit transaction.
The Board’s statement indicated that the Equal Credit Opportunity Act is scheduled to go into
effect on October 28, 1975, and that it makes the Federal Reserve responsible for writing implement
ing regulations. The Act covers all who regularly extend credit to individuals, including banks, fi
nance companies, department stores, credit card issuers, and Government agencies such as the Small
Business Administration. Compliance, under the Act, will be the responsibility of the Federal Trade
Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Comp
troller of the Currency, and nine other Federal agencies.
Printed on the following pages is the complete text of the revised proposal as issued for com
ment by the Board of Governors. Comments on this proposal should be submitted by September 26,
and may be sent to our Bank Regulations Department.
P a u l
A.
V o l c k e r ,
President.
FEDERAL RESERVE SYSTEM
Board of Governors of the Federal Reserve System
[12 C.F.R. Part 202]
CONSUMER CREDIT PROTECTION ACT
Equal Credit Opportunity Act;
Supplemental Notice of Proposed Rulemaking
In the April 25, 1975 issue of the Federal Register
(40 FR 18183), the Board published a proposed rule which would
p r o h i b i t 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 the comments received in writing
and those presented at the hearings, the Board has revised the
proposed rule.
Pursuant to the authority of Section 703 of the
Equal Credit Opportunity Act (Pub. L. 93-495) which amends the
Consumer Credit Protection Act (15 U.S.C. § 1601 et
sea.) the
Board hereby publishes the revised proposed Part 202 (Regulation
for comment as follows:
-
2 -
INDEX TO SECTIONS
SECTION 2 0 2 .1
AUTHORITY, SCOPE AND PURPOSE
SECTION 2 0 2 .2
GENERAL RULE
SECTION 202.3
DEFINITIONS
SECTION 202.4
APPLICATIONS
SECTION 202.5
EVALUATION OF APPLICATIONS
SECTION 2 0 2 .6
FURNISHING OF CREDIT INFORMATION
SECTION 202.7
REQUEST FOR SIGNATURE OF SPOUSE OR OTHER PERSON
SECTION 2 0 2 .8
SEPARATE ACCOUNTS:
SECTION 202.9
PRESERVATION OF RECORDS
SECTION 2 0 2 .1 0
EXCEPTIONS
SECTION 2 0 2 .1 1
ADMINISTRATIVE ENFORCEMENT
SECTION 2 0 2 .1 2
PENALTIES AND LIABILITIES
SECTION 202.13
TRANSITION PERIODS
RELATION TO STATE LAW
- 3 ~
SECTION 202.1
(a)
AUTHORITY, SCOPE AND PURPOSE
Authority, scope and purpose.
(1)
This Part comprises the
regulations issued by the Board of Governors of the Federal Reserve
System pursuant to the Equal Credit Opportunity Act (Pub. L. 93-495;
88 Stat. 1521 et s e q .)
This Part applies to all persons who
regularly extend, offer to extend, arrange for or offer to arrange
for the extension of credit for any purpose whatsoever and in any
amount •
(2)
This Part implements the Act, the purpose of which is to
require that financial institutions and others engaged in the extension
of credit shall make that credit equally available to all creditworthy
persons without regard to sex or marital status.
SECTION 202.2
GENERAL RULE
A creditor shall not discriminate against any applicant, on the
basis of sex or marital status with respect to any aspect of a credit
transaction.
SECTION 202.3
DEFINITIONS
For purposes of this Part, unless the context indicates otherwise,
the following definitions apply:
(a)
"Act”means the Equal Credit Opportunity Act (Pub. L. 93-495;
88 Stat. 1521 et s e q .).
- 4 (b)
"Account" means an extension of credit.
(c)
"Applicant" means any person who applies to a creditor
directly for an extension of credit, or who applies to a creditor
indirectly by using an existing credit plan to obtain an amount
exceeding a previously established credit limit.
With respect
to any creditor the term also includes any person to whom credit
is or has been extended by that creditor.
(d)
"Application" means an oral or written request by an
applicant for an extension of credit which is made in accordance
with procedures established by a creditor for the type of credit
requested.
The term does not include the use of a credit card to
obtain an amount of credit not exceeding a previously established
credit limit.
(e)
"Application form" means a document, furnished by a
creditor to be completed by an applicant, which requests information
from the applicant to be used in evaluating creditworthiness.
The
term does not include a document filled out by a creditor which an
applicant signs.
(f)
"Arrange for the extension of credit" means to provide or
offer to provide credit which is or will be extended by another
person under a business or other relationship pursuant to which
the person arranging such credit participates in the decision to
extend credit to an applicant.
The term does not include participation
in a credit transaction which is limited to honoring a credit card.
- 5 -
(g)
"Consumer credit" means credit offered or extended to an
individual in which the property or service which is the subject of
the transaction is primarily for personal, family or household purposes.
(h)
"Contractually liable" means expressly obligated to repay
a debt by reason of having signed an agreement to that effect.
(i)
"Credit" means the right granted by a creditor to an
applicant to defer payment of a debt, or to incur debt and defer its
payment or to purchase property or services and defer payment therefor.
(j)
"Credit card" means any card, plate, coupon book or other
single credit device existing for the purpose of being used from time
to time upon presentation to obtain property or services on credit.
(k)
"Creditor" means any person who regularly extends credit
or arranges for the extension of credit.
The term includes assignees,
transferees or subrogees of an original creditor who participate in
the decision to extend credit, but does not include a person whose
only participation in a credit transaction is to honor a credit card.
(1)
"Credit transaction" means every aspect of an applicant's
dealings with a creditor including, but not limited to, solicitation
of prospective applicants by advertising or other means; information
requirements; investigatory procedures; standards of creditworthiness;
terms of credit; furnishing of credit information and collection
procedures.
(m)
"Discriminate against" means to treat an applicant or
prospective applicant less favorably than others.
-6 -
(n)
"Extension of credit" means the granting of credit in any
form and includes, but is not limited to, credit granted in addition
to any existing credit or credit limit; credit granted in the form
of a credit card, whether or not the card has been used; the r e
financing of any credit; the consolidation of two or more obligations
the issuance of a new credit card in place of an expiring credit card
or in substitution for an existing credit card; the continuing in
force of a previously issued credit card; or the continuance of
existing credit without any special effort to collect at or after
maturity.
(o)
"Marital status" means the state of being unmarried,
married, or separated, as defined by applicable State law.
For pur
poses of this Part, the term "unmarried" includes a person who is
divorced or widowed.
(p)
"Open end credit" means credit extended pursuant to a plan
under which the creditor may permit the applicant to make purchases
or obtain loans, from time to time, directly from the creditor or
indirectly by use of a credit card, check or other device, as the
plan may provide.
under
The term does not include negotiated advances
an open end real estate mortgage or a letter of credit.
(q)
"Person" means a natural person, a corporation, government
or governmental subdivision or agency, trust, estate, partnership,
cooperative or association.
-7 -
(r)
"State" means any State, the District of Columbia, the
Commonwealth of Puerto Rico, or any territory or possession of the
United States.
202.4 APPLICATIONS
(a)
General.
A creditor may request any information in an
application not prohibited by the Act or this Part.
(b)
Discouraging applications.
A creditor shall not make any
statements to applicants or prospective applicants which would dis
courage a reasonable person from applying for credit or pursuing an
application for credit on the basis of sex or marital status.
(c)
Application forms.
Where application forms are used by a
creditor, such forms shall:
(1 )
ask whether the account which the applicant is re
questing is one which the applicant's spouse may use or for which
the applicant's spouse will be contractually liable ("use" of an
account throughout this Part refers only to open end accounts);
(2 )
ask the spouse's name and address, if the applicant
indicates that a spouse may use the account or will be contractually
liable for it;
(3)
if the application form asks the applicant's marital
status, use only the terms "married," "unmarried" or "separated."
However, an inquiry as to the payment of alimony, child support or
maintenance or reliance upon the receipt of such payments is not
prohibited by this section;
(4 )
where an applicant is requested to designate a title
(such as Mr., Mrs., Ms. or Miss), state prominently that the d e sig
nation of such title is optional;
(5 )
have printed upon them in a type size no smaller than
that used throughout most of the application form the following
statement:
The Federal Equal Credit Opportunity Act requires that
all creditors, including banks, savings and loan associations, small
loan companies, retail stores and others, make credit equally avail
able to all creditworthy customers without regard to sex or marital
status. The federal agency which administers compliance with this
law concerning this (bank, store, etc.) is (name and address of the
appropriate agency).
(d)
Oral applications.
(1) Where a creditor does not use
application forms, the creditor shall:
(i)
fulfill
the requirements of Section 202.4(c)
(1), (2), (3) and (4) orally or in writing;
(ii) fulfill the requirements of Section 202.4(c)(5)
in writing, except that where application is made by telephone,
compliance with this subsection may be accomplished orally or in
writing.
(2)
Where oral application is made for an amount of credit
to exceed an existing limit on an applicant's open end account, the
requirements of Section 202.4(c) do not apply.
(e)
Designation of n a m e . A creditor shall not prohibit an
applicant from using any particular name on the basis of the appli
cant’
s sex or marital status.
-9 -
SECTION 202.5 EVALUATION OF APPLICATIONS
(a )
General. A creditor may consider any information not pro
hibited by the Act or this Part and may deny the credit requested if
an applicant is unable or unwilling to provide the information
necessary to an evaluation of creditworthiness.
-1 0 (b)
Information about a spouse.
(1)
A creditor may request and consider any information
concerning the spouse of a married or separated applicant which may
be considered about the applicant when the application indicates
that the spouse may use the account or is contractually liable upon
the account.
(2)
A creditor may request only the name and address of
the spouse of a married or separated applicant when the application
indicates that the spouse will not use the account and is not con
tractually liable upon the account.
However, a creditor may consider
information about the payor of alimony, child support or maintenance
where an application indicates reliance upon such payments as a
basis for creditworthiness.
(c)
Alimony, child support and maintenance obligations.
A creditor may ask and consider whether and to what extent an appli
cant is obligated to make alimony, child support or maintenance
payments.
(d)
A l i m o n y , child support and maintenance income.
(1)
A creditor may ask whether all or a part of the in
come upon which an applicant is relying as a basis for the credit
r e q u e s t e d is derived from alimony,
payments.
child support or maintenance
-1 1 (2)
Where an application indicates reliance on alimony,
child support or maintenance payments, a creditor shall consider
such payments as income to the extent that such payments are likely
to be consistently made.
Factors which a creditor may consider in
determining the likelihood of consistent payments include, but are
not limited to, whether the payments are received pursuant to a
written agreement or court decree; the length of time the payments
have been received; the regularity of receipt; the availability of
procedures to compel payment; and the credit history of the payor,
where available to the creditor under the Fair Credit Reporting
Act or other applicable laws.
(e)
Discounting income.
A creditor shall not discount the
income (including part-time income) of an applicant or an appli
cant's spouse on the basis of sex or marital status.
(f)
Credit scoring.
A creditor shall not assign a value to
sex or marital status in a credit scoring system or other method
of evaluating applications.
(g)
Telephone listing in applicant's n a m e .
A creditor shall not
assign a value to the existence of a telephone listing in the name of
an applicant in a credit scoring system or other method of evaluating
applications.
A creditor may consider the existence of a telephone
in the applicant's home.
-1 2 (h)
Childbearing: continued ability to p a y . A creditor shall not
request information about birth control practices or childbearing
capability.
However, a creditor may request and consider information
concerning the probable continuity of an applicant's ability to repay.
(i)
Change of name or marital status.
In the case of an existing
open end account, a creditor shall not take any of the following actions
solely on the basis of a change of name or marital status in the
absence of evidence of inability to repay;
(j)
(1 )
require a reapplic^ition;
(2 )
terminate the account; or
(3 )
require a change in the terms of the account.
Credit h i s t o r y . Where an applicant's credit history would
be considered by the creditor in evaluating an applicant of similar
qualifications for a similar type and amount of credit, a creditor
shall:
(1 )
consider the credit history of accounts designated as
accounts which may be used by both spouses or for which both are
contractually liable, and accounts reported in the applicant(s) name
or names as listed in the application, whether such information is
obtained from consumer reporting agencies or others; and
(2 )
consider the credit history, when available, of any
account established prior to November 1, 1976, which an applicant can
demonstrate reflects accurately his/her willingness or ability to repay.
-13(k) Delay in evaluating applications, A creditor shall not fail
to act upon, or unreasonably delay a decision upon an application in
whole or in part on the basis of sex or marital status.
In the event
a creditor is unable to obtain adequate credit information, a request
by the creditor for additional information does not constitute un
reasonable delay under this section.
(1) Use and retention of prohibited information. A creditor
may not use any information prohibited by the Act or this Part in
evaluating applications.
However, where such information was obtained
prior to November 1, 1976, retention of such Information in the creditor's
files does not violate the Act or this Part.
(m) State property laws.
Consideration or application of State
property laws directly or Indirectly affecting creditworthiness shall
not constitute discrimination for purposes of this Part.
(*0 Notification of action taken. A creditor shall within a
reasonable time notify the applicant of action taken upon the application.
Where such notification is in writing it shall have printed upon it
in a type size no smaller than that used throughout most of the notice
the statement contained in Section 202.4(c)(5) of this Part,
SECTION 202.6 FURNISHING OF CREDIT INFORMATION
(a)
Accounts established after November 1. 1976. A creditor,
when furnishing information to consumer reporting agencies or others
concerning any account established after November 1, 1976, which the
application indicates may be used by both spouses or upon which both
spouses are contractually liable, shall designate the account to
-1 4 -
(b)
Accounts established prior to November 1, 1 9 7 6 .
(1)
Unless already following the procedures specified in sub
section (a) as to all existing accounts established prior to November 1,
1976, a creditor shall mail to all spouses or, at the option of the
creditor, to all individuals who are contractually liable on such accounts
the notice set out below, accompanied by a return envelope addressed to
the creditor.
Such notice may be mailed with a billing statement and
all such notices shall be mailed by November 1, 1976, or within 60 days
after an account is established, whichever is later, and shall provide
as follows:
-15CREDIT HISTORY FOR MARRIED PERSONS
The Federal Equal Credit Opportunity Act forbids all creditors
from discriminating on the basis of sex or marital status in any aspect
of a credit transaction.
The Act gives every married person the right
to have information concerning all the credit accounts held or used
jointly with a spouse reported to credit bureaus and creditors in the
names of both the wife and husband.
Accounts of married persons opened
before November 1976--even those opened in the names of both spouses-are customarily reported in only the husband's name.
This is generally
true regardless of who has been paying the bills or whose income was
used to obtain the account.
As a result, most married women do not
have a credit history in their own names, although their husbands do.
If a woman ever needs to obtain credit on her own, for example, when
divorced or widowed, a credit history is usually necessary.
If you would like to have the credit information concerning
your account with us reported in both your name and the name of your
spouse, please check the box, fill out and sign the statement below
and return it to us in the enclosed envelope.
/ / When you furnish credit information on this account, please report
all information concerning it in both our names.
We would like our
names written as follows:
Signature of either husband or wife
- 16 -
(2)
A creditor, when furnishing information to consumer re
porting agencies or others concerning any account established prior to
November 1, 1976, shall designate the account to reflect the fact of
participation of both spouses and shall report the designation and
furnish all information concerning the account in the names of both
spouses beginning no later than 90 days after receipt of a request to
do s o .
SECTION 202.7 REQUEST FOR SIGNATURE OF SPOUSE OR OTHER PERSON
(a)
General.
Except as otherwise provided herein, a creditor
may require the signature of a spouse or other person on a credit
instrument if such a requirement is imposed on all similarly qualified
applicants who apply for a similar type and amount of credit without
regard to sex or marital status.
(b)
Unsecured credit in community property states. Where a married
applicant applies for unsecured credit in a community property State,
a creditor may request or require the signature of a non-applicant spouse
if:
(i)
the applicable State law denies the applicant power
to manage or control sufficient community property to qualify for
the amount of credit requested under the creditor's standards of
creditworthiness; and
(ii)
the applicant does not have sufficient separate property
to qualify for the amount of credit requested without regard to any
community property.
-17(c)
Signatures on certain instruments.
Where a married applicant
applies for secured credit, the creditor may require the signature of
the applicant's spouse on such instruments as are necessary, or are
reasonably believed by the creditor to be necessary, to create a valid
lien, pass clear title, waive inchoate rights to property or assign
earnings under the applicable statutory or decisional law of a State.
SECTION 202.8 SEPARATE ACCOUNTS:
(a)
RELATION TO STATE LAW
Separate extension of consumer credit.
Any provision of
State law which prohibits the separate extension of consumer credit to
each spouse shall not apply in any case where each spouse voluntarily
applies for separate credit from the same creditor.
In any case where
such a State law is pre-empted, each spouse shall be solely responsible
for the debt so contracted.
In a community property State, the creditor
may enforce an obligation of one spouse alone under this section as
separate post-nuptial debts are enforced under applicable State law.
(b)
Finance charges and loan ceilings.
When each spouse separately
and voluntarily applies for and obtains a separate account with the same
creditor, the accounts shall not be aggregated or otherwise combined for
purposes of determining permissible finance charges or permissible loan
ceilings under the laws of any State or of the United States.
Permissible
loan ceilings under the laws of any State or of the United States shall
be construed to permit each spouse to be separately and individually
liable up to the amount of the loan ceiling less the amount for which
- 18 -
both spouses are jointly liable.
For example, in a State with a per
missible loan ceiling of $ 1 0 0 0 , if a married couple were jointly liable
for $250, each spouse could subsequently become individually liable
for $750.
SECTION 2.02,9 PRESERVATION OF RECORDS
(a)
For a period ending twelve months after the date a creditor
takes final action on an application, the creditor shall retain for
each applicant, in original form or a copy thereof:
(1 )
any application form and all other written information
used in evaluating creditworthiness;
(2 )
any statement submitted by the applicant alleging dis
crimination prohibited by the Act and this Part.
(b)
Any creditor who has actual notice that it is under investi
gation for violation of this Part by an enforcement agency charged with
monitoring compliance with this Act, or who has been served with notice
of an action filed pursuant to Section 202.12 of this Part shall retain
such information until final disposition of the matter or such earlier
time as may be ordered by the agency or court.
SECTION 202.10 EXCEPTIONS
(a)
Business or securities credit.
As to all credit transactions
involving other than consumer credit, and as to all credit transactions
that are subject to regulation under Sections 7 and/or 11 of the
Securities Exchange Act of 1934, a creditor shall only be required to
- 19 comply with Sections 202.1, 2, 3, 4(b), 5 (k), 10, 11, 12 and 13.
(b)
Good faith compliance.
It shall not be a violation of
Section 202.4 of this Part if the creditor shows by a preponderance
of the evidence that at the time of the alleged violation the creditor
maintained reasonable procedures to assure compliance with that section.
SECTION 202.11 ADMINISTRATIVE ENFORCEMENT
(a)
As set forth more fully in Section 704 of the Act, adminis
trative enforcement of the Act and this Part with respect to certain
creditors is assigned to the Comptroller of the Currency, Board of
Governors of the Federal Reserve System, Board of Directors of the
Federal Deposit Insurance Corporation, Federal Home Loan Bank Board
acting directly or through the Federal Savings and Loan Insurance
Corporation, Administrator of the National Credit Union Administration,
Interstate Commerce Commission, Civil Aeronautics Board, Secretary of
Agriculture, Farm Credit Administration, Securities and Exchange
Commission and the Small Business Administration.
(b)
Except to the extent that administrative enforcement is
specifically committed to other authorities, Section 704 of the Act
assigns enforcement of the Act and this Part to the Federal Trade
Commission.
SECTION 202.12 PENALTIES AND LIABILITIES
(a)
Sections 706(a) through (e) of the Act provide for civil
liability for actual and punitive damages against any creditor who
fails to comply with the Act and this Part.
Section 706(b) places
a $ 1 0 ,0 0 0 limitation on the amount of punitive damages an aggrieved
applicant may seek in an individual capacit> ;md Section 706(c) limits
c. creditor's class action liability for punitive damages to the lesser
cf $ 100,000 or 170 of the creditor's net wcr'jh c.i the time the action
is brought.
Section 706(d) provides that an aggrieved applicant may
seek equitable relief in the nature of a permanent or temporary in
junction, restraining order, or other action.
Section 706(e) further
provides for the awarding of costs and reasonable attorney's feer to
an aggrieved applicant who brings a successful action under Sections 706(a)
through (d).
(b)
Section 706(f) relieves a creditor from civil liability re
sulting from any act done or omitted in good fr.ith in conformity with
any rule, regulation or interpretation by
Eeard of Governors of the
Federal Reserve System notwithstanding that ai'.cr such act or omission
has occurred, such rule, regulation or interpretation is amended, re
scinded or otherwise determined to be invalid £or any reason.
(c)
Without regard to the amount in controversy, any action
under this title may be brought in any United States district court,
- 21 or
in
any o th e r
fr o m
th e
th is
P a rt
r e c e iv e s
d a te
c o u rt
of
th e
of
o c c u rre n c e
th e v i o l a t i o n
n o tic e
c o m p e te n t j u r i s d i c t i o n ,
s h a ll
of
w ith in
th e v i o l a t i o n .
b e d eem ed
to
For
one y e a r
p u rp o s e s
o c c u r w hen th e
of
a p p lic a n t
o f a d e n ia l.
SECTION 202.13 TRANSITION PERIODS
(a)
Except as otherwise specified below, the provisions of
this Part take effect on October 28, 1975.
(b)
ta k e
S e c tio n s
e ffe c t
202.5
on J a n u a ry
(a ) - ( i ) ,
,(k )
and
(1)
and
9
of
th is
P a rt
31, 1976.
(c)
Section 202.4 of this Part takes effect on June 30, 1976.
(d )
S e c tio n s
Novem ber
1, 1976.
202.5( j )
and 6 o f
th is
P a rt
ta k e
e ffe c t
on
-
1
Notice and Comments.
22 -
Interested persons arc invited to
relevant written data, views, and arguments concerning this
s u b m it
proposal.
Any such material should be submitted in writing to the
Secretary, Board of Governors of the Federal Peservo System,
Washington, D. C.
1975.
and
20551, to be received no later than September 26,
Such material will be made available for public inspection
copying upon request, except as provided in § 261.6(a) of the
B o a r d 's
Rules Regarding Availability of Information.
All views
previously expressed in written comments on the pending proposal
are under consideration by the Board and are available for in
spection and copying in Room 1020 of the Board's building.
This notice is published pursuant to section 553(b) of
T itle
5 United States Code, and section 262.2(a) of the Rules of
P ro c e d u re
of the Board of Governor? of the federal Reserve System
(12 C.F.R. 262.2(a)).
By order of the Board of Governors, September 5. 1975.
@FedFRASER