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F E D E R A L R E S E R V E BANK
O F N E W YO R K

[ Circular No. 8158*1
August 10, 1977 J
R EG U LA TIO N B
— Interpretation Regarding Special Purpose Credit Programs
— Correction of Interpretation Regarding State Laws
Setting Different Ages of Majority for Married and Unmarried Persons
To A ll Member Banks, and Others Concerned,
in the Second Federal Reserve D istrict:

Following is the text of a statement issued August 4 by the Board of Governors of the Fed­
eral Reserve System regarding a provision of Section 202.8(a) of Regulation B (Equal Credit
Opportunity) that deals with Federal or State special purpose credit programs:
The Board of Governors of the Federal Reserve System today issued an interpretation of the provision
of its Regulation B— Equal Credit Opportunity— dealing with Federal or State special purpose credit programs.
The Equal Credit Opportunity Act and Regulation B provide that it is not illegal to deny credit solely
because the applicant does not qualify for credit “ expressly authorized by Federal or State law” for the
benefit of an economically disadvantaged class of persons. An example of such a special purpose credit program
would be one designed to benefit economically disadvantaged American Indians. It is not illegal to exclude
non-Indian applicants for credit under such a program.
The interpretation states that a credit program is considered to be “ expressly authorized by Federal or
State law” if it is authorized by the terms of a Federal or State statute or by a regulation lawfully promulgated
by the Federal or State agency responsible for implementing the program.
When it proposed (M ay 10, 1977) the interpretation now adopted, the Board announced that in its opinion
determinations whether a Federal or State special purpose credit program benefits an economically disadvan­
taged class o f persons are best made by the agency charged with the administration of the loan program.
In taking final action the Board added that it is the responsibility of governmental agencies operating special
purpose loan programs to be sure their regulations are consistent with relevant State and Federal laws. Credi­
tors will not violate Regulation B by complying with State or Federal special purpose loan program laws.

The Board of Governors has also advised us of an error in a recent interpretation of Reg­
ulation B dealing with State laws that set different ages of majority for married and unmarried
persons. That interpretation, sent to you with our Circular No. 8146, dated July 13, 1977, referred
to “ Nevada Rev. Stat. 38 § 101,” which has now been corrected to read “ Nebraska Rev. Stat. 38
§ 101.” The third, seventh, and tenth paragraphs of that interpretation have been corrected
accordingly.
Enclosed are copies of both the new interpretation and the corrected interpretation of Regu­
lation B. Inquiries regarding either of the interpretations may be directed to our Consumer A f ­
fairs Division (Tel. No. 212-791-5919).




P

aul

A. V

olcker

,

President.

Board of Governors of the Federal Reserve System
EQUAL CREDIT O P P O R TU N ITY
CO RRECTED IN T E R P R E T A T IO N OF R E G U LA TIO N B
(Docket No. R-0107)
A G E N C Y : Board of Governors of the Federal
Reserve System.
A C T IO N : Interpretation.
S U M M A R Y : In response to a request to deter­
mine whether an Alabama and a Nebraska law
are inconsistent with the Equal Credit Oppor­
tunity Act and Regulation B, and therefore pre­
empted, the Board has issued an interpretation
of its Regulation B, Equal Credit Opportunity.
The Board has determined that laws that set a
different age of majority for married and un­
married persons are not inconsistent with the
Act and regulation.
E FF E C T IV E D A T E : July 8, 1977.
FO R F U R T H E R IN F O R M A T IO N CON ­
T A C T : Anne Geary, Chief, Equal Credit Op­
portunity Section, Division of Consumer Affairs,
Board of Governors of the Federal Reserve Sys­
tem, Washington, D.C. 20551 (202-452-3946).
S U P P L E M E N T A R Y IN F O R M A T IO N :
Pursuant to its authority under § 705(f) of the
Equal Credit Opportunity Act to determine
whether State laws are inconsistent with the
Act and Regulation B, the Board has issued
the following interpretation of Regulation B,
which implements the Act.
The Board has been asked whether State
laws that set a different age of majority for
married and unmarried persons are inconsistent
with the Equal Credit Opportunity Act and are
therefore preempted. These laws, combined with
other State laws making contracts unenforceable
against persons who have not reached the age
of majority, result in different treatment of
persons who are the same age, depending upon
their marital status. Specifically, the Board has
been asked to determine whether Nebraska Rev.
Stat. 38 § 101 and Alabama Code 34 §§ 76 and
7 6 (1 ), which establish a younger age of ma­
jority for married persons than for unmarried
persons, are inconsistent with the Equal Credit
Opportunity Act. For the reasons set forth
below, the Board has determined that these
statutes are not inconsistent with the ECOA.
The Equal Credit Opportunity Act prohibits
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[Enc. Cir. No. 8158]




discrimination in the granting of credit on sev­
eral bases, including age and marital status,
and authorizes the Board to determine whether
any State laws are inconsistent with this man­
date. The Board believes that the ECOA was
not intended to preempt laws that provide rights
and remedies in the event of default. Section
7 0 1 (a )(1 ) of the Act prohibits discrimination
on the basis of age, but specifically allows credi­
tors to consider whether an applicant is old
enough to execute an enforceable contract. In
other words, a creditor may decline a credit
application from a minor because, in the event
of default, State contract law does not provide
a means to enforce the contract. In addition,
§ 7 0 1 (b )(1 ) allows creditors to ask marital
status in order to ascertain
. . the creditor’s
rights and remedies applicable to the particular
extension of credit . . . .”
Accordingly, Regulation B, which in general
prohibits the consideration of age or marital
status, permits creditors to determine whether
the applicant’s a g e1 or marital status1 will
2
affect the enforceability of the contract. Credit,
therefore, may be denied if the creditor reason­
ably believes that, because of the age or marital
status of the applicant, the credit contract would
be unenforceable.
Based upon this analysis, the Board has de­
termined that Nebraska Rev. Stat. 38 § 101 and
Alabama Code 34 §§ 76 and 76(1) are not in­
consistent with the Equal Credit Opportunity
Act and Regulation B. Creditors may, there­
fore, consider the effect of these laws without
violating the Equal Credit Opportunity Act or
Regulation B.
By order of the Board of Governors, effective
July 8, 1977, and corrected July 28, 1977.

1 § 202.6(b)

(2 ) (i) :
. . . a creditor shall not take into account an appli­
cant’s age (provided the applicant has the capacity to
enter into a binding contract). . . .
2 § 202.6(b) (1 ), footnote 8 ;
This provision does not prevent a creditor from
considering the marital status of an applicant . . . for
the purpose of ascertaining the creditor’s rights and
remedies applicable to the particular extension of
credit. . . .
N E W YORK

Board of Governors of the Federal Reserve System
EQUAL CREDIT O P P O R TU N ITY
IN T E R P R E T A T IO N OF R E G U LA TIO N B
(Docket No. R-0109)
A G E N C Y : Board of Governors of the Federal
Reserve System.
A C T IO N : Interpretation.
S U M M A R Y : In response to requests for guid­
ance concerning the meaning of the term “ ex­
pressly authorized by Federal or State law” in
Regulation B, the Board interprets it to mean
expressly authorized either by statute or law­
fully promulgated regulation. Therefore, a gov­
ernment agency implementing a loan program
authorized either by law or regulation may
determine whether it benefits an economically
disadvantaged class of persons and qualifies as
a special purpose credit program under Regu­
lation B. Participating creditors will not violate
Regulation B by complying with regulations
promulgated by a government agency to imple­
ment a special purpose credit program.
E F F E C TIVE D A T E : August 3, 1977.
FO R FU R T H E R IN F O R M A T IO N CON ­
T A C T : Anne Geary, Chief, Equal Credit
Opportunity Section, Division of Consumer
Affairs, Board of Governors of the Federal
Reserve System, Washington, D.C. 20551
(202-452-3946).
§ 202.801— Special purpose credit program may
be authorized by law or lawfully promulgated
regulation. Participating creditors will not vio­
late Regulation B by complying with regulations
implementing special purpose credit programs.
(a)
In order to provide guidance concerning
the intended coverage of § 2 02.8(a)* of Regula­
1
tion B, the Board interprets a term used in
that section as follow s: A credit program is




considered to be “ expressly authorized by Fed­
eral or State law” if it is authorized by the terms
of a Federal or State statute or by a regulation
lawfully promulgated by the administering
agency (i.e., the agency responsible for imple­
menting the program).
(b ) It is the responsibility of the administer­
ing agency to ensure that implementing regu­
lations are consistent with applicable Federal
and State law. A creditor participating in a
loan program expressly authorized by Federal
or State law will not violate Regulation B by
complying in good faith with the law authoriz­
ing a program or with a regulation promulgated
by an administering agency to implement a
program that the agency has determined is a
special purpose credit program under § 202.8
( a ) ( 1 ) of Regulation B.
(c ) In addition, the Board announces that
it will not make determinations as to whether
particular programs benefit an “ economically
disadvantaged class of persons.” The Board
believes that such a determination is more
properly made by the agency charged with the
administration of the loan program.
By order of the Board of Governors, effective
August 3, 1977.
! § 202.8(a) reads, in part, as follows:
f a ) S ta n d a r d s f o r p r o g r a m s . Subject to the provi­
sions of subsection ( b) , the Act and this Part are not
violated if a creditor refuses to extend credit to an ap­
plicant solely because the applicant does not qualify
under the special requirements that define eligibility for
the following types of special purpose credit programs :

(1 ) any credit assistance program expressly author­
ized by Federal or State law for the benefit of an
economically disadvantaged class of persons; . . .

P R IN T E D IN N E W YORK


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102