Full text of Federal Reserve Bank of New York Circulars : 7793. Equal Credit Opportunity

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FEDERAL RE SE R VE BANK
O F N E W YORK

r C ircular No. 7 7 9 3 1
Ja n u a ry 9, 1976

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J

EQUAL CREDIT OPPORTUNITY
Proposed Technica! Amendments to Regulation B
To .4// A/rinAcr BouAy, cud O/Acr^ Concerned,
ui /Ac .Second Frtfcrn/ Rcjrrrc DiJ/Wc/;

The Hoard of Governors of the Federal Reserve System has invited public comment on
seven proposed technical amendments to its new Regulation B, "Equal Credit Opportunity/' that
are designed to clarify certain technical questions that have arisen since the regulation went
into ehfect on October 28. 1975.
Printed below is the text of the Board of Governors' notice in this matter. Comments thereon
should be submitted by February 2 and may be sent to our Bank Regulations Department. Ad­
ditional copies of this circular will be furnished upon request.
PAUL A . VoLCKER,

[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
18183) 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 FR 42030). On October 22, 1975, the Board
published the new regulation as adopted (40 FR 49298).
In response to comments made both before and after
the hnal adoption of Regulation B, the Board is pro­
posing the following revisions to the regulation:

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).

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. iti 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

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




2. In section 202.5(d) (2), the words "under section
202.4(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.

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 writing:
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the creditor, if any, in connection with the ora! 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.

SECTION 202.5—EV ALU ATION OF
A PPLICA TIO N S
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(d) Alimony, child support and maintenance in­
come. * * *
(2)
Where an applicant chooses to disclose alimony,
child support or maintenance payments, a creditor shall
consider such payment as income * * *

6. In paragraph 202.10(c), the requirement in
sections 202.5(m )(2) and 202.5(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 of sex or marital status, fail to act upon or un­
reasonably delay a decision on an application for busi­
ness credit 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.

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SECTION 202.6—FU R N ISH IN G OF CREDIT
IN FO RM A TIO N

(a)

Accounts established on or after November 1,

1976. * * *
*

*

*

(2)
When 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:
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*
*
(ii)
to recipients other than such agencies, in the
name of each spouse about whom such information is
requested.

7. A new paragraph (f) 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. Under 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.

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SECTION 202.9—PR ESER V A TIO N OF
RECORDS
(a) * * *
(1) any application form and all other written or
recorded information used in evaluating an application;
and
(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 creditor) ;
( i ) the notification of action taken, and ;
(ii) if applicable, the reasons for denial provided to
an applicant in accordance with section 202.5(m) ; and

8. The reference to section 202.5(d) has been de­
leted from subsection 202.14(b) and added to sub­
section 202.14(d) to change its effective date from No­
vember 30, 1975 to June 30, 1976 in order to correct
an inadvertent inconsistency with the effective date of
202.4(c)(3).

(3) any written statement submitted by the appli­
cant alleging discrimination prohibited by the Act or
this Part.
(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:

Pursuant to the authority of section 703 of the Equal
Credit Opportunity Act (Pub. L. 93-495), 15 U.S.C.
§ 1691 ct .ye<y., the Board hereby proposes that Regula­
tion B, 12 CFR Part 202, be amended as follows:

(i) any written or recorded information concerning
such change or termination; and

SECTION 202.4— A PPLIC A T IO N S
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(ii) any written statement submitted by the ap­
plicant alleging discrimination prohibited by the Act
or this Part.

(d) Equal Credit Opportunity Act notice. (1) E x­
cept where application is made by telephone, or orally




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appropriate to ascertain and/or verify the applicant's
marital status and the financial resources of the appli­
cant and the applicant's spouse, if the applicant is mar­
ried, sections 202.4(c), 202.5(b), and 202.7(a) shall
not apply.

(2)
For purposes of paragraph (1), an adverse
change in the terms or conditions of credit for an ac­
count does not include:
( 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

*

Except as provided in section 202.6 with respect to
that section, the provisions of this Part shall take effect
as follows:
(a) * * *

SECTION 202.10—CERTAIN SPECIALIZED
CREDIT

(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.

(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.
*

(c) * * *
(d) Sections 202.4(c), 202.4(d), 202.5(b)
202.5(d) shall take effect on June 30, 1976.

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.

*

(f) Credit in connection with certain student loan
programs. Credit in connection with student loan pro­
grams administered by the Department of Health, Edu­
cation and Welfare shall be subject to all the provi­
sions of this Part except that to the extent necessary or




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SECTION 202.14—TR A N SITIO N PER IO D S

(ii) a change in the terms or conditions of credit
affecting all or a substantial portion of the creditor's
accounts.
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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 CFR 262.2(a)).

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