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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 9961 1
December 2, 1985
EQUAL C RED IT O PPORTUN ITY
— Revision of R egulation B
— Official Staff C om m entary on Regulation B
To A ll D epository Institutions, and O thers C oncerned,
in the S eco n d F ed era l R eserve D istrict:
The following statement has been issued by the Board of Governors of the Federal Reserve System:
The Federal Reserve Board has issued final revisions to its Regulation B — Equal Credit Opportunity — that will
assist creditor compliance and increase protection for credit applicants. The final revisions will become effective Decem
ber 16, 1985, but creditors may continue to comply with the Board’s current regulation until October 1, 1986.
The Board’s action is part of its Regulatory Improvement Project. Under this project, the Board is reviewing and
revising all its regulations to update them, simplify their language, and eliminate unneeded provisions. The revisions to
Regulation B include:
© procedures for dealing with incomplete applications and a broader selection of sample forms for informing applicants of
the reasons for credit denial.
© changes in the data notation requirements applicable to dwelling-related mortgage loan applications.
© changes in the definition of applicant to give guarantors legal standing in the courts when there is an alleged violation of
the regulation’s signature provisions.
The major portions of the existing regulatory provisions remain virtually unchanged.
The Board is also publishing an official staff commentary to interpret the revised Regulation B.
Enclosed — for depository institutions in this District — is the text of the Board’s revision of Regulation B,
including the Official Staff Commentary on that regulation, which has been reprinted from the F e d e r a l R e g is te r of
November 20, 1985. The regulation and the commentary are effective December 16, 1985. Additional copies will be
furnished upon request directed to our Circulars Division (Tel. No. 212-791-5216).
The revised Regulation B pamphlet will be sent to all those on our lists maintaining sets of regulations as soon as
it is available. Questions regarding the regulation or the commentary may be directed to our Regulations Division
(Tel. No. 212-791-5914).
E.
G e r a l d C o r r ig a n ,
P r e s id e n t.
Federal Flesdrwe
System
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Regulation B9 Official! Staff Conrcmemtary;
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[Enc. Cir. No. 9961]
48018 Federal Register / Vol. 50, No. 224 / W ednesday, November 20, 1985 / Rules and Regulations
FEDERAL RESERVE SYSTEM
12 C m Parts 202 and 202a
[IReguSsfera B; Doeket No. R-0541]
Credit Opp©rtunity; Revision of
Regulation S; Official Staff
Commentary
Board of Governors of the
Federal Reserve System.
& 8@ Final rule and final official staff
eT f&
interpretation.
SUMMARY: The Board is issuing a final
rale revising Regulation B, its regulation
implementing the Equal Credit
Opportunity Act (ECOA). This rale
results from the Board’s review of
Regulation B pursuant to its policy of
periodically reviewing all of its
regulations. The Board considered ways
the regulation could be simplified to
ease the burdens imposed oh creditors,
consistent with the Board’s
responsibility for implementing the
ECOA, and also considered whether the
regulation could more effectively carry
out the purposes of tfie act. The Board
has made changes in the data notation
requirements applicable to dwellingrelated mortgage loan applications, and
in the definition of “applicant” to give
guarantors legal standing in the courts
when there is an alleged violation of the
signature provisions off the act or the
regulation. In light of renewed concern
about availability of business credit to
women and members of minority
groups, the Board considered (but
deferred a decision on) revising the rules
applicable to business credit
transactions; the Board will monitor
developments in this area, and if it
appears that regulatory changes are
needed, the Board will take appropriate
action. The Board also considered but
did not revise the regulation to cover
consumer leasing under the ECOA. The
Board has updated some provisions of
the regulation and revised others to
facilitate creditor compliance. The
revisions include streamlined
procedures for dealing with incomplete
applications and a broader selection of
sample forms for informing applicants of
the action taken on applications. The
major portions of the existing regulatory
provisions remain virtually unchanged.
The Board is also publishing an
economic impact analysis and an
official staff commentary. The
commentary interprets the requirements
of revised Regulation B—incorporating
prior Board and staff interpretations.
Good-faith compliance with the
commentary affords creditors protection
from civil liability under section 708(e)
of the ECOA.
EFFECTIVE ©ATS; Effective December 16,
1985, Part 202 is redesignated as Part
202a (Part 202a will be removed on
October 1,1986).
A new Part 202 is added to be
effective on December 16,1985.
F@R
INFORMATION CONTACT:
Regarding the regulatory amendments
and official staff commentary, John C.
Wood (Senior Attorney), Adrienne D.
Hurt (Staff Attorney), or James K.
Baebel (Senior Review Examiner),
Division of Consumer and Community
Affairs, Board of Governors of the
Federal Reserve System, Washington,
DC 20551 (202-452-2412); regarding the
economic impact statement, Glenn
Canner (Director, Micro-Consumer
Projects) or Robert D. Kurtz (Staff
Economist), Division of Research and
Statistics, Board of Governors of the
Federal Reserve System, Washington,
DC 20551 (202-452-2910); or Joy W.
O’Connell, Telecommunication Device
for the Deaf (TDD) (202-452-3244).
SUPPLEMENTARY INFORMATION: (1 )
Introduction. In keeping with its policy
of reviewing all of its regulations
periodically, the Board published a
notice of intent to review Regulation B
on June 21,1983 (48FR 28285). On March
18,1985, the Board published proposed
revisions to Regulation B (50 F R 10890),
and has now adopted a revised
regulation in final form. The revised
regulation and official staff commentary
will become effective December 16,
1985. However, creditors have the option
of continuing to comply with the Board’s
current regulation and existing
interpretations, which remain in effect,
until October 1,1986.
Several new rales may require
operational changes:
0 Applications subject to data
notation requirements under section
202.13 will have to be in writing and
creditors will be required to note the
applicant’s sex and race or national
origin by visual observation or surname
for applicants who do not voluntarily
provide that information.
0 Under the new rules for incomplete
applications, a creditor may act on the
application and notify the applicant of
the action taken in accordance with
§ 202.9(a) or, alternatively, may notify
the applicant in writing that additional
information is needed, under new
§ 202.9(c). The written notice of
incompleteness must specify what
information is needed and designate a
reasonable time period for the applicant
to provide the information
G Under the rules for record retention,
a creditor will be required to maintain
records for 25 months or withdrawn
applictions as well as on incomplete
applications.
Other revisions, though substantive,
will not require changes in operational
procedures:
® The revised definition of applicant
gives legal standing to guarantors and
like parties (enabling them to sue for
violations of the reguation’s signature
rales) but imposes no new requirements
on creditors.
® The Board has redefined the criteria
that a credit scoring system must meet
to qualify as “demonstrably and
statistically sound” in order to use the
applicant’s age as a factor. The change
makes clear that the criteria can be met
by “decision tree” and other systems,
but does not affect the standing of
systems that meet the current criteria.
The aforementioned rules and other
regulatory changes are discussed in
detail below.
(2)
Background. The Equal Credit
Opportunity Act (15 U.S.C. 1691 etseq.),
signed into law in 1974, makes it
unlawful for creditors to discriminate in
any aspect of a credit transaction on the
basis of sex or marital status. Under
amendments enacted by Congress in
1976, the act also bars discrimination on
the basis of race, color, religion, national
origin, age, receipt of public assistance,
and the good-faith exercise of rights
under the Consumer Credit Protection
Act. The Federal Reserve Board was
given ralewriting authority to issue
implementing regulations, and issued
Regulation B (12 CFR Part 202) in
October 1975, amending it in December
1970 to incorporate the act’s expanded
coverage.
The Board’s policy under its
Regulatory Improvement Project calls
for the periodic review of each Board
regulation. In keeping with that policy,
the Board made a detailed review to
consider whether Regulation B could be
simplified to ease the burdens imposed
on creditors, consistent with the Board's
responsibility for implementing the
ECOA, and to consider also whether the
regulation could more effectively carry
out the purposes of the ECOA. The
Board published a notice of intent to
review the regulation in June 1983, to
ensure the participation of interested
parties early in the review. Based upon
its own internal analysis and public
comments received, as well as
information from other sources, the
Board proposed a revised version of
Regulation B in March 1985. The Board
received 166 comments on that proposal
from creditors, Federal Reserve Banks,
federal and state agencies, trade
Federal Register / ¥ol. 50, .No. 224 / Wednesday,. November; 20, .1985 / Rules and Regulations 4TOL8)
associations, consumer groups, and
others.
The Board believes, on the basis of
the public comments and other available
information, that the regulation is
achieving its intended goals. The
Federal Reserve Banks and the other
federal enforcement agencies report no
major compliance problems. As a rule,
creditors appear to consider the
Regulation B requirements to be
manageable, and view the regulation as
providing certainty about how to comply
with the ECOA. Civil rights and
consumer advocates continue to view
the regulation as providing important
protections. To the exent that
consumers' views can be discerned from
Board-sponsored surveys, consumers
appear satisfied with the treatment they
are receiving in the credit market.
In light of the indications that major
revisions are not needed, the Board’s
revisions leave most of the regulatory
provisions substantially unchanged.
This is in contrast to the extensive
changes made when the Board engaged
in similar reviews of Regulation Z (Truth
in Lending) and Regulation C (Home
Mortgage Disclosure). The more limited
nature of the revisions to Regulation B
comes from the different circumstances
that have surrounded the review of the
regulation:
0 The Board’s review of the Truth in
Lending and Home Mortgage Disclosure
regulations implemented statutory
amendments, that, particularly in the
case of Truth in Lending, made
significant reductions in the disclosure
requirements. In contrast, there are no
statutory amendments of any kind to be
implemented under the ECOA.
0 The volume of litigation under the
ECOA and Regulation B has been quite
limited, and by and large the court
decisions that have been reported do
not reflect the need for simplification of
requirements that was evident in the
case of Truth in Lending.
0 It became apparent, in the course of
the review, that creditors have no major
problems in complying with Regulation
B. Many creditors may find burdensome
the notification requirements applicable
to credit denials and other adverse
action, but these provisions are drawn
directly from the statute. Some creditors
asked the Board to provide clarification
on various points: others believe that the
regulation is working effectively and
encouraged the Board to leave the
regulation substantially unchanged.
0 Civil rights and consumer advocates
have opposed any diminution of ECOA
protections, Because the ECOA is civil
rights legislation, and not strictly a
consumer protection law, there is
particular concern that the Board not cut
back on any protections currently
provided.
In the review of the regulation, it was
frequently found that no substantive
change in regulatory provisions was
required—that elaborating on a given
point in a staff commentary could
effectively facilitate creditor
compliance. Accordingly, an official
staff commentary has been prepared.
The commentary provides needed
guidance in a less formal manner than
the regulation. It is discussed further in
section (5) of this notice; the
commentary text follows the regulatory
text set forth in section (7).
The revised regulation is shorter than
current Regulation B by about onesixth—a reduction largely attributable
to the deletion of obsolete provisions
and to the transfer of explanatory
material to the official staff
commentary. The regulation also has
been improved by the rewriting of some
sections and the editing of others to
state the requirements more clearly. The
substance of all but two of the 19
footnotes contained in the current
regulation has been moved to the official
staff commentary, making the regulation
itself less cumbersome to use.
In accordance with section 3507 of the
Paperwork Reduction Act of 1980 and 5
CFR 1320.13, the revisions to Regulation
B that pertain to third-party disclosures
were approved under authority
delegated to the Board by the Office of
Management and Budget.
An economic impact statement,
required by section 604 of the
Regulatory Flexibility Act (5 U.S.C. 604),
appears in section (6) below.
(3)
Treatment o f business credit and
consumer leasing. Two areas that
received special attention in the review
of Regulation B (although no changes
resulted) deserve mention: the treatment
accorded to business credit transactions
and coverage of consumer leases under
Regulation B.
The Board considered whether any
changes might be appropriate in the
rules applicable to business credit under
the regulation, in light of renewed public
and congressional concern about the
availability of credit to businesses
owned by women and members of
minority groups. The ECOA and
Regulation B apply to all credit
transactions, including business credit.
Regulation B modifies the rules
applicable to business credit
transactions, relieving creditors from
some of the more technical procedural
requirements of the regulation. These
exceptions do not, however, affect the
basic ECOA protections against
discrimination. For example, a creditor
may not take the business applicant’s
marital status into account, and may not
request information about a married
applicant’s spouse except when the
spouse has some connection to the
business. A creditor must comply with
rules that prohibit requiring the spouse
to guarantee the loan. Women and other
business credit applicants are entitled to
notice of the action taken and, upon
request, to a written statement of the
reasons for a denial. They have the right
to ask the creditor to retain records for
the full 25-month period applicable in
consumer credit transactions.
The Board believes that these
provisions should fully protect women
and members of minority groups against
unlawful discrimination in business
credit transactions, but has not ruled out
changing the regulation to increase
protections. In particular, the Board
discussed whether the rules should be
modified to require creditors to give
business applicants who are denied
credit a written notice of their right to
receive a statement of reasons for the
denial. Modifying the business credit
rules would require new rulemaking,
however, since the Board’s March 1985
proposal did not contain proposed
changes to these rules. The Board has
deferred a decision on whether to
initiate such rulemaking. In the
meantime, the Board is developing an
educational pamphlet on the application
of the ECOA and Regulation B to
business credit transactions for
distribution to business owners through
government agencies, women’s groups,
and other organizations. Better
'informing women and minority business
owners about their rights under the law
could be an effective way to assist them
in enforcing those rights, and less costly
than subjecting business credit fully to
the rules applicable in consumer credit
transactions. The Board will monitor
developments in this area, and if it
appears that the regulatory changes are
needed, the Board will take appropriate
action.
In the review of Regulation B, the
Board also addressed the issue of
whether to establish a uniform rule
extending ECOA coverage to consumer
leases. In Brothers v. First Leasing, 724
F.2d 789 (9th Cir.), cert, denied, 105 S. Ct.
121 (1984), the U.S. Court of Appeals for
the Ninth Circuit held that consumer
leases are defined by the Consumer
Leasing Act are subject to the ECOA.
The appellate ruling in Brothers is
binding law in California and other
states within the jurisdiction of the
Ninth Circuit, and is being enforced in
those states by the Federal Reserve and
other regulatory agencies.
<S®© Federal Register / Vol. 50, No. 224 / W ednesday, November 20, 1985 / Rules and Regulations
2D
On policy grounds there is sbme
support for a regulatory amendment to
cover lease transactions. It seems
inconsistent to allow lessors to consider
marital status, sex, and other
characteristics while creditors are
prohibited from doing so. In additon,
some lease transactions are similiar in
many ways to credit transactions;
indeed, financing leases, or open-end
leases, have been held to be functionally
equivalent to credit.
Nevertheless, the Board believes that
the Ninth Circuit interpreted the ECOA’s
definition of credit too broadly when it
concluded in the Brothers case that the
granting of a lease is an extension of
credit. The Congress has consistently
viewed lease and credit transactions as
distinct and mutually exclusive financial
transactions and has treated them
separately under the Consumer Credit
Protection Act. The Board believes that
the Congress did not intend the ECOA,
which on its face applies only to credit
transactions, to cover lease transactions
unless the transaction results in a
“credit sale" as defined in the Truth in
Lending Act and Regulation Z. In
addition, aside from the Brothers case
there is little evidence of discrimination
by lessors based on the personal
characteristics of lessees, in contrast to
the situation that existed with respect to
credit transactions before the ECOA
w as enacted. Furthermore, core
provisions of Regulation B if applied to
leasing transactions could impose
significant burdens for certain segments
of the industry-—such as furniture and
appliance leasing. (Other lessors would
be less affected; financial institutions
that engage in automobile leasing, for
example, already comply with
Regulation B in many cases.)
In light of those considerations, the
Board has not applied Regulation B to
leasing. Instead, the Board will monitor
the practices followed in lease
transactions through contacts with
government agencies, the leasing
industry, and consumers. The Federal
Reserve’s enforcement activities in the
Ninth Circuit will also provide the Board
with first-hand experience regarding the
application of Regulation B to consumer
leases. Should it later appear that action
is warranted, the Board will engage in
rulemaking or make legislative
recommendations as appropriate.
(4)
Regulatory-revisions. The
following discussion covers the
revisions to Regulation B section by
section. In a number of sections,
changes in the text have been made for
the purpose of simplification or
clarification, with no substantive change
in the regulatory requirements; these
minor changes are not covered in the
discussion.
Section 202.1—Authority, Scope and
Purpose
Paragraph (a), on authority and scope,
remains unchanged'except for the
addition of a reference to the control
number assigned to Regulation B by the
Office of Management and Budget as
required by the Paperwork Reduction
Act; other minor changes include the
deletion of footnote 1 as unnecessary. A
new paragraph (b) has been added to
outline the purpose of Regulation B,
consistent with the format followed in
other Board regulations.
Paragraph (b) of the current
regulation, concerning administrative
enforcement, has been moved to new
§ 202.14, as has paragraph (c), on
penalties and liabilities. Paragraph (d),
regarding procedures for the issuance of
official staff interpretations, has been
moved to new Appendix D.
Section 202.2—Definitions
In this section, the Board has made a
substantive change to the definition of
“applicant” and a change to the
definition of “empirically derived,
demonstrably and statistically sound,
credit scoring system” that will broaden
its applicability, as discussed below.
Other changes are structural or editorial,
without substantive effect.
The references to notification of
action taken, statement of reasons for
denial, and record retention in the
definition of “adverse action" in
paragraph (c)(1) of the current regulation
have been deleted as unnecessary.
Editorial revisions have been made in
paragraph (c)(l)(i), which now explicitly
defines a counteroffer, and other
subparagraphs of this definition. No
substantive change is intended.
The Board has revised the definition
of “applicant” in paragraph (e) to
include guarantors, sureties, endorsers,
and similar parties for purposes of
§ 202.7(d), which contains rules
regarding signatures. The Board had
proposed in March to define such
parties as applicants without limitation.
The final version of the definition was
modified in response to the concerns of
industry commenters who believed that
the unlimited inclusion of guarantors
and similar parties in the definition
might subject creditors to a risk of
liability for technical violations of
various provisions of the regulation.
The principal effect of the change is to
give guarantors and similar parties
standing to seek legal remedies when a
violation occurs under § 202.7(d). The
regulation prohibits creditors, in certain
situations, from requiring the signature
of an applicant’s spouse as a guarantor,
surety, cosigner, or similar party. If a
creditor violates this provision,
however, a guarantor whose signature
has been illegally required currently has
no legal remedy because section 706 of
the act confers standing to sue only
upon an “aggrieved applicant.” The
Board has included guarantors and
similar parties within the definition of
“applicant” to resolve this question of
standing.
Material regarding notification to an
applicant that an application is
incomplete has been deleted from the
definition of “application” in paragraph
(f) and incorporated into § 202.9(c), a
new provision dealing with incomplete
applications.
The Board has broadened the
definition of an “empirically derived,
demonstrably and statistically sound,
credit scoring system” contained in
paragraph (p). The currrent language
appears to limit the applicability of the
definition to a system that uses the
allocation of points or the assigning of
weights. The revised language makes
clear that, if the system is developed
using accepted statistical principles and
methodology, a decision-tree or other
type of credit scoring system that meets
these standards also qualifies. Other
conforming technical revisions to this
paragraph have resulted in no
substantive change. Credit scoring
systems that meet the criteria as stated
in the current definition will continue to
qualify as “demonstrably and
statistically sound" under the revised
definition.
Other changes to the definitional
section include the deletion of: footnote
2 to the introductory material, the last
sentence in the definition of “open-end
credit" in paragraph (w), footnote 3 to
the definition of “prohibited basis” in
paragraph (z), the definition of “public
assistance program” in paragraph (aa),
and the rule of construction in
paragraph (dd). Comparable material
appears in the official staff commentary,
202.1(a)-!; 202.2(w)-l; 202.2(z)-l a n d -3;
and comment 4 to the Introduction,
respectively. Paragraph (cc), a rule of
construction regarding captions, has
been deleted as unnecessary.
Section 202.3—Lim ited Exceptions For
Certain Classes o f Transactions
The Board has restructured this
section for easier reference. In the
revised regulation, the definition of each
type of credit is immediately followed
by the list of exceptions applicable to it.
There are no substantive changes to any
of the existing provisions.
Federal Register / Vol. 50, No. 224 / W ednesday, November 20, 1985 / Rules and Regulations 48021
The definition of public utilities credit
in paragraph (a) has been slightly
revised to correspond more closely to
the definition in Regulation 2 (Truth hr
Lending).
In the section on business credit, the
rules relating to notification and record
retention have been placed in paragraph
(d)(3) and labeled “modified
requirements,” to emphasize that they
only modify the procedures ordinarily
required by Regulation B, rather than
provide total exceptions. Paragraph
(d)(3)(i) incorporates official staff
interpretation. EC-0009* and makes, clear
that a creditor is required to notify the
business credit applicant of the action
taken on an application or of its:
incompleteness. The provision
concerning record retention has been
edited to make clear that the time period:
for requesting record retentionxuns from
the notification of action taken, or of
incompleteness.
The list of exceptions applicable to
government credit in paragraph (e) has
been simplified without substantive
change.
Section 202,4—General' Rule Prohibiting
Discrimination
No changes have been made to this
section.
Section 202.5—Rules; Concerning Taking
o f Applications
W ith the exception ©f paragraph fe),
changes in this section are structural o r
editorial. Captions have been added to
facilitate use of the regulation. W ith the
deletion of the preceding footnotes,
footnote 4 has been renumbered
footnote 1; the part of th e footnote: that
has been deleted ferns the regulation
appears in th e official staff commentary',
202.5(h)-!.. Footnote 5 an d portions ©i.
paragraphs (b)(3) and (d)(2): also have
been deleted; comparable-material
appears in the official; staff commentary ,
202.5(d)(lH;. 202.7(e>-2; and 202
2 and -3, respectively . Footnote &has.
been deleted as obsolete.,
Revised paragraph (e) requires that
w ritten applications b e taken for
dwelling-related loans that are subject
to the data notation requirements of
§ 202.13. (In all other types of credit
transactions, w ritten applications
continue to b e optional) This changp,
along with the changes in d ata notation
requirements discussed' under § 202.13,
will increase the information available
to enforcement agencies to monitor
compliance. A creditor m ay comply with
the new requirement by writing down
the information that it normally
considers in making a credit decision;
use o f a form is not required. Some, of
the material' in paragraph (e| o f the
current regulation concerning the use of
the Board’s model application forms has;
been moved to the introductory section
in Appendix B.
Section 202,6—Rules Concerning
Evaluating o f Applications
The few changes in this section are
structural or editorial only. Captions
have been added to facilitate use of the
regulation. Footnote 7 of the current
regulation has been renumbered
footnote 2. The last sentence of the
footnote, citing portions o f the
legislative history of the act dealing with;
the “effects test,” has been deleted from
the regulation; comparable m aterial
appears in the official staff commentary,
202.6(a)r-2. Footnotes 8 and 9 of the
current regulation, as well as the
material in paragraph (b)(5) regarding
factors that a creditor may consider in
determining the likelihood of consistent
payments, have been deleted;
comparable material appears in the
official staff commentary to § 202.6(b);
The provision regarding inadvertent
errors has been deleted from paragraph
(b)(6) and has been incorporated in new
§ 202.14(c).
Section 202.7— Rules Concerning
Extensions o f Credit
Except for minor revisions to the rules
governing die treatm ent of open-end
accounts in paragraph (c), revisions to
this section are: structural m editorial,
without substantive effect, and include
the addition of captions for ease of
reference.
In paragraph (c)(l)(i); a reference to
paragraph (c)(2) has been added to
clarify the. relationship betw een the tw o
paragraphs. Paragraph (c)(2) has been
revised in minor w ays from the current
provision. New language; m akes clear
that the provision, applies, only in the.
case of an applicant who. is
contractually liable. The term “earned
by” has been deleted to clarify that the
provision1applies to any instance m
which the creditor relied upon the
income of the applicant’s spouse ingranting the credit. “Information
available to the creditor” replaces
existing language because it is. believed
to be a more appropriate basis for
determining whether- a creditor may
require reappMeatida, In the proposal
published in March, “current credit
limit” w as substituted for existing
language because it appeared to be a
more appropriate test for determining
the applicant’s overall ability to repay
than the “amount of credit currently
extended.” Because some creditors, do
not have predeterm ined cxedift limits, the
final version refers, to the "current credit!
available.”
Some editorial revisions have been
made in the signature rales of paragraph
(d), without substantive effect.
Paragraph (d)(2): has keen revised to
make clear that, in applications for
unsecured credit, if toe applicant relies
on jointly owned property, the creditor
may require the signature of the co
owner only to assure access to the
property; see the official staff
commentary, 202.7(d)(2)-l. The material
concerning factors that the creditor may
consider regarding property owned by
the- applicant has- been deleted.
Comparable materia) appears in the'
official staff commentary, 202L7(d){2j-l.
In response to public comment, the
“reasonable belief” standard omitted
from the March proposal has been
retained in the regulation.
Paragraph (d)(5) of the current
regulation has been divided into two
paragraphs, (d) (5) and (0), without
substantive effect.
Paragraph (e) prohibits' a refusal' to
grant credit because certain types of
credit-related insurance are not
available due to the applicant’s age. The
coverage of this paragraph has been
broadened to include ‘tether creditrelated insurance” as well as credit life
and other specific types already listed.
The provisions in current paragraph (e)
regarding differences in rates and the
like have been deleted; comparable
material appears in the. official staff
commentary to g 202.7(e),
S ectio n 202.8—Special Purpose Credit
Programs
The wording of this section, has hem,
edited in various places for clarity,
without substantive effect.
Section 202.9—Notifications
Substantive as. well as, structural and
editorial changes have been mad© t©
this section. As in other sections,
captions have been added throughout
for ease of reference.
In this section the Board had proposed
in March to substitute the w ords
“denying” or "denial” of credit or
“changing adversely” for the term
"adverse action.” The proposed change
w as based on the Board’s belief that us©
©f.the. term “adverse action" in theregulation raises unnecessarily negative
connotations and has also lad creditors
to believe that they must use that term
in communicating w ith applicants who
are denied credit In response topublkr
comment and upon further analysis, the
Board has retained use of the term
"adverse action” in this section, The
substitution of a term defined by the. as!
and regulation with, such undefined land. •
n o t necessarily synonymous) words a s '
48022 Federal Register / Vol. SO No; 2 2 4 ‘/ K
,
WeSnesdayJ November 2(X! 19^5 / Rules and Regulations
Section 202.11—Relation to State Law
"denial” could lead to confusion and
notify the applicant of its decision,
inadvertent noncompliance. Guidance
under paragraph (a) of this section, or
This section is virtually identical to
on use of the- term “adverse action” has
notify the applicant that additional
the current section except for editorial
been provided in the official staff
information is needed. The latter
changes. Footnote 16 has been deleted
commentary, 202.8-1.
notification must specify the information
as unnecessary.
Language has been added to
needed, designate a reasonable time
paragraph (a)(l)(i) to make clear that a
period for submission of the information, Section 202.12—Record Retention
creditor’s'counteroffer must be made
and inform the applicant that unless the
The revised Section requires creditors
within 30 days of the receipt of a
information is provided there will be no
to maintain records on withdrawn
completed application. Material that
further consideration of the application.
applications as well as on incomplete
appears in the current regulation,
(Form C-3 in Appendix C is a sample
applications. Other revisions are minor.
permitting notification of the approval of form for a notice of incompleteness
Captions have been added for ease of
an application to be either express or
under this paragraph.) If the applicant
reference.
implied, has been deleted. Comparable
fails to respond within the designated
material appears in the. official staff
Paragraph (a) permits the retention in
time period, the creditor has no
commentary, 202.9(a)(l}-2. Editorial
files, under certain circumstances, of ■
obligation to provide further notification
changes made.to paragraph (a)(l)(iv)
of any kind. If the applicant provides the . information that is generally prohibited.
have no substantive effect.
Paragraphs (a) (2) and (3) of the current
requested information in a timely
In addition to the current
regulation have been merged into
manner, the creditor must then take
requirements of paragraph (a)(2), the
paragraph (a)(2), so that a creditor is
action on the application and give
revised rale requires that an adverse
allowed to retain (without violating the
appropriate notice under paragraph (a).
action notice contain the name and
regulation) prohibited information that it
Paragraph (a)(l)(ii), concerning the
address off the creditor, identification
receives from a credit bureau, provided
denial off an incomplete application, has
that is customarily but not always
the creditor did not specifically request
been revised to include conforming
provided . That information will give
that information. There is no reason for
language.
rejected applicants a clearer indication
giving special protection, as the current
Paragraph (d) on oral notifications is
off whom to contact iff there are
rale seems to do, when prohibited
currently paragraph (c); changes are
questions about the content off the
information is obtained from a credit
' strictly editorial. Paragraph (e),
notice. Editorial changes have been
bureau at the specific request of the
currently paragraph (d), provides a
made-to paragraph (a)(2)(ii), without
creditor. A violation will not occur if a
special rule on withdrawn applications.
substantive effect.
creditor requests and receives a credit
It is virtually identical to the current
Paragraphs (a) (3) and (4) off the
report that happens to contain
provision.
current regulation have been
prohibited information. The words “at
■
Paragraph (f) is virtually identical to
redesignated as paragraphs (f) and (g),
current paragraph (a)(3). Paragraph (g) is any time” have been'deleted as
and are discussed below.
unnecessary, and footnote 17 to
Material in paragraph (b)(1) allowing ' comparable to current paragraph (a)(4).
paragraph (a) has been deleted as
That portion'off current paragraph (a)(4)
modification of the model ECOA notice,
obsolete.
to include references to similar state law dealing with liability for.acts o f third
Paragraph (b)(1) requires retention of
parties has been deleted. Comparable
and .a state enforcement agency, has
records for 25 months after the creditor.
material appears in the official staff
been deleted. Comparable material
notifies an applicant of action taken on
commentary, 2Q2.9(g)-3,
appears in the offical staff commentary,
an application. This paragraph has been
Paragraph (e) off the current
202.9(b)(1)-!.revised to require the same record
regulation, regarding inadvertent errors,
The second sentence of paragraph
retention after a notification of
has been deleted. Comparable language
(b)(2) off the current regulation has been
incompleteness because, as discussed
is contained in new section 202.14(c).
deleted. It states that a creditor may
under section 202.9, a notification off
design its owe notice form or use all or a Paragraph (f) off the current regulation
incompleteness may substitute for
has also been deleted; comparable
portion of the Board’s sample form,
notification of action taken in certain
material appears in the official staff
which if properly completed will satisfy
instances. In addition, footnote 18 to
commentary, 202.9-3.
the requirements of paragraph (a)(2)(i).
paragraph (b)(1) has been deleted;
Comparable language is contained in the Section 202.10—Furnishing of Credit
comparable material appears in the
revised introduction to Appendix G. The Information
official staff commentary, 202.12(b)-!
sample form itself has also been deleted.
and -2.
This section has been rewritten and
It has been replaced by a number of
Under paragraph.(b)(3), currently
restructured for clarity, with obsolete
sample notices in new Appendix C, as
paragraph (b)(4), record retention is material deleted. There is no substantive ■
discussed below.
change from the existing rales. .Current
required of creditors who, under
Current paragraph (b)(3), concerning
paragraph (a)(4) of the current
footnotes 11 and 12 have been deleted;
the format 'off disclosures, has been
deleted. Comparable material appears in comparable material appears in the staff regulation, do not have to give notice to
commentary, 202.10-3 and 202.10(a)-!.
the official staff commentary, 202.9-4;
an applicant of action taken.-(This result
Some material in current paragraph (c),
see also 202.9(b)(1)-!.
occurs when an application has been
Current paragraph (c) has been
dealing with the legal effect of signing a
“shopped" among several creditors and
redesignated paragraph (d) and is
request to change the manner in which
at least one creditor has granted credit.)
discussed below. New paragraph (c)
information is furnished, has been
As revised, the record retention
establishes a streamlined procedure for' deleted. Comparable material appears in provision also requires a creditor to
dealing with incomplete applications. It
the official staff commentary, 202.10(a)retain records when an applicant
provides that if a creditor receives an ■
2. Current paragraph 10(d) regarding
submits an application for credit but •
application that-is incomplete regarding
inadvertent errors has also been
then withdraws it prior to notification off
matters that the applicant can complete,
deleted; comparable language is
the creditor’s decision. This change will
within 30 days the creditor must either
contained in new | 202.14(c).
ensure more complete records off
Federal Eegisteff / Vok 50, No. 224 / .Wednesday,. November 20, 1985. f Rules and Regulations 48023
applications and better enable
regulatory agencies to assess creditorsr
compliance.
A reference to the Attorney General
of the United States has been added to
paragraph (b)(4), currently paragraph
(b)(3),. to require retention of records
until final disposition of an enforcement
proceeding or investigation conducted
by the Attorney General. Current
paragraph (c) regarding inadvertent
errors has been deleted. Comparable
language is contained in new § 202.14(c).
Section 202.13—Information For
Monitoring Purposes
This section, requires creditors to
request applicants for particular types of
dwelling-related loans to provide certain
information about their race or national
origin, sex, age, and marital status. The
purpose is to enable enforcement
agencies to monitor creditors’
compliance with the ECOA and
Regulation B. In March,, the Board
proposed a number of changes in the
section, with two purposes: first, to
attempt to achieve greater uniformity in
the data notation rales applicable to
various groups o f creditors; and second,
to improve the ability of the Federal
Reserve System and other agencies to
carry out their responsibilities under the
ECOA, Fair Housing Act, and
Community Reinvestment Act. Revised
§ 202.13 differs from both the current
regulation and the proposed version in
some respects.
Under revised paragraph (a), a
creditor must request information
regarding an applicant’s race, or national
origin, s;ex, marital status, and age-upon
receiving an application for the
purchase or the refinancing of a
dwelling occupied or to be occupied by
an applicant a s a principal residence,
where the extension of credit will b e
secured by the dwelling. This differs
from the current regulation in the
following ways:
(1) The revised rale covers all
applications for the specified types oi
loans, while the current rule applies only
to written applications. (Section 202.5(e);
of the revised regulation further requires
that applications subject to 1 202,13 be
taken in writing, as discussed' above,].
(2) The revised rule applies, to
refinancings as well as purchase loans
(including construction^permanent
financing);.
(3) The revised rule; covers loans
related to the borrower’s principal
residence,- including manufactured, or
mobile home loans w hether o r not the
structure is attached to real property.
The current provision, in contrast, only
covers m anufactured homes that are-
considered real, property under state
law.
The March proposal would have
covered, in addition, credit applications
for the repair or improvement of the
borrower’s principal residence. The
Board received 104 comments on the
proposed revisions to § 202.13. Over half
of the commenters generally opposed
the proposal. Some argued that the
addition of home improvement loans
would be unduly burdensome not only
because it would require data notation
on additional loans but in particular
because it would impose data notation
requirements on new groups of
creditors, those that do not make
purchase money mortgage loans but do
engage in secured home improvement
lending. Moreover, some of them—•
finance companies and home
improvement contractors, for e x a m p le are not subject to periodic examination
as are financial institutions, making the
usefulness of the notation questionable.
The Board believes that the final
revisions to this section move in the
direction of uniformity without imposing
undue burdens.
Under revised paragraph (b), a
creditor is required to request the race
or national origin, sex, marital status,
and age of an applicant,, as in the
current regulation. If the applicant doesnot voluntarily provide, the requested
information, the creditor m ast note the
sex and race or natkm ai origin of the
applicant on the basis of visual
observation or surname. This is the rale
currently used by the Federal Deposit
Insurance Corporation, the Federal
Home Loan Bank Board, and th e Office1
of the Comptroller of the Currency.
Thus, the revision represents a change
for state member banks, credit unions,
and mortgage bankers, all o f which
currently collect the information only on
a voluntary basis. The revision
establishes a uniform rule for
institutions supervised by federal
financial regulatory agencies and will
provide better data by which to
determine a creditor’s compliance with
the ECOA and the Fair Housing Act.
Paragraph fc) requites disclosure of the
revised requirement.
Paragraph (d) of the current regulation
permits other enforcement agencies to
substitute their own monitoring
programs for the Regulation B
procedures. The Bowd requested
specific comment on whether paragraph
(d) should be deleted. Commest® both
from other-federal enforcement age notes
and from creditors were generally
unfavorable. Therefore, the paragraph
has been retained.
A provision for inadvertent errors in
data notation is contained in new
§ 202.14(c).
Section 202.14—Enforcement, Penalties
and Liabilities
This is. a new section,, consisting
primarily of material from current
| 202.1 (b) and (c),The material has
been edited for purposes of
simplification, without substantive
effect.
Paragraph (a), identifying
administrative enforcement agencies, is
comparable to current § 202.1(b), and
reflects the transfer of the enforcement
functions of the Civil Aeronautics Board
to the Secretary of Transportation (49
FR 50994, December 31,1984); Paragraph
(b), discussing penalties and liabilities,
is comparable to current f 202.1(c)(1).
Paragraph (c) incorporates material from
current §§ 202.6(b)(6), 202.10(d), and
202.12(c) regarding inadvertent errors,
and adds a similiar provision relating to
| 202.13.
Appendix A—Federal Enforcement
Agencies
Changes have been made to this
appendix to reflect the current
addresses of the various enforcement
agencies.
Appendix B—M odel Application Forms
The introductory material to this
appendix incorporates material from
| 202.5(e) of the current regulation* so
that all directions for the proper use of
the model forms appear in. one place.
The material permitting the addition ef
three specific items to the. model forms
has been deleted because- creditors m ay
add any item not prohibited by § 202.5
(not merely these three). The discussion
of the FHLMC 65/FMMA1003 form has
been, deleted;, approval of that form
appears in the official staff commentary,
app. B -i. The Board has, ak© adopted a
sample disclosure and information ■
request form that m ay b e used to comply
with revised § 202.13; this disclosure
and request form appears on page 2 of
the model application form for
residential real/ estate k e n s . No other
change has been, m ade to the m odel
application forms.. The m odel forms w e
being reprinted in this notice.
Appendix €—. ample-N a M
S
Forms
fiG Q tk m
The regulation currently provides a
sample adverse action, notification h s m
® | 202.9(b)(2) that credsfcfoBS m ay use W
satisfy the requirement® @
§
§ 2©2.9(a)(2}{.i). In the }une !983 notice of
intent to review Regulation B, the Board
requested comment ©assenting that
48024 Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations
sample form. The Board then developed
a number of sample notices in response
to suggestions received from various
sources, including the industry, members
of the Board’s Consumer Advisory
Council, staff of other enforcement
agencies, and the Reserve Banks.
Ten sample forms were published in
the March proposal. The Board
requested comment on which of the
proposed forms would be most useful to
creditors and most informative to
consumers. Comments on the proposed
model forms were largely favorable;
there was some concern, however, that
ten forms were too many. Commenters
specified which forms they felt were
more useful than others, and also
suggested changes in the text of a
number of the forms.
New Appendix C to the regulation
contains six sample notification forms.
The Board dropped proposed forms C-2,
C-4 and C-10, combined forms C-5 and
C-8, and revised the text of some of the
forms. The availability of a variety of
model forms, in different formats, should
better convey to creditors that they have
wide latitude in the design and wording
of their own forms.
No single form contains a
comprehensive listing of possible
reasons for denial. Creditors must
incorporate into their forms the factors
on which they actually base their credit
evaluations; they should not simply
reprint a model form and check a factor
that most closely approximates the
reason for adverse action. Forms C -l
through C-4 are sample statements of
reasons for a credit denial or other
adverse action. Form C-3 is a sample
notice for use with a credit scoring
system. Form G-4 combines the
statement of reasons with notice of a
counteroffer. Form C-5 is a sample
disclosure of the right to receive a
specific statement of reasons for-a credit
denial or other adverse action. Form C-6
is a request for additional information,
as provided for in § 202.9(c); in that
circumstance, the ECOA notice is not
required,
Use of sample notices is entirely
optional, as is true of the existing notice.
A creditor may continue to use the
existing sample form if the form sets
forth accurately the factors the creditor
considers.
Appendix D—issuance o f Staff
Interpretations
This new appendix replaces § 202.1(d)
of the current regulation, which deals
with requests for and issuance of official
staff interpretations of Regulation B.
Because of changes in the procedures
(particularly the introduction of the
official staff commentary as the vehicle
for such interpretations), this appendix
differs from current § 202.1(d); it is
modeled on Appendix C to Regulation Z,
which deals with staff interpretations
under that regulation.
(5)
Discussion o f official staff
commentary. The Board is publishing an
official staff commentary to the revised
regulation. Good-faith compliance with
the commentary affords creditors
protection from civil liability under
section 706(e) of the ECOA.
A proposed version of the
commentary was published in the
Federal Register on March 18,1985 (50
FR10890). Some changes to the
substance of the proposal were
requested by the commenters; a number
have been adopted in the final
commentary. Certain provisions have
been revised and clarified. In addition,
comments have been added, modified or
deleted as necessary.
The commentary format follows that
already used for other Board regulations
such as Regulation Z (Truth in Lending)
and Regulation M (Consumer Leasing).
The commentary replaces six existing
Board interpretations, thirteen official
staff interpretations, and fifteen
informal staff letters that were
designated public information letters.
The commentary is the sole means for
issuing official interpretations of the
regulation.
As is the case with other staff
commentaries, the commentary to
Regulation B gives general guidance,
and is designed to assist creditors in
applying the regulation to specific fact
situations. Following the format used in
the commentary to Regulation Z, each
paragraph in the commentary is
identified by the relevant section or
paragraph of the regulation. For
example, commentary to | 202.7 is
designated according to the particular
paragraph addressed, such as comments
7(c)— and 7(d)(2)-l.
1
The Board has previously ruled that
several state laws in Alabama,. ■
California, and Nebraska are. not
preempted by the ECOA and Regulation
B. These nonpreemption determinations
relate to laws that deal with the age of
majority, notices to unmarried cosigners,
and Spanish language translations of
credit documents. The have been
omitted from the official staff
commentary, which will follow the rule
in Regulation Z of including only those
determinations that result in the
preemption of a state law or regulation.
Official staff interpretation EC-0009
has been incorporated info the text of
| 202.3(d) of the regulation, which now
makes clear that a creditor that denies a
business credit application must give the
applicant notice of action taken or of
incompleteness within a reasonable
time.
Certain official interpretations have
been omitted for various reasons.
Interpretation EC-0001, which
addressed the requirements for sending
credit history notices by June 1977, is
obsolete. Interpretation EC-0004 has
been omitted because it appears that the
subject matter—the application of state
laws governing graduated rates,
maximum loan ceilings, and rate
splitting—does not continue to warrant
the detailed treatment provided in that
letter. EC-0010, which dealt with the
permissibility of inquiries about a
potential customer’s religion by a seller
of religious books, has been omitted
because of its limited applicability.
Interpretations that approved certain
creditor forms—EC-0012 and EC-0015—
have been incorporated into the
commentary to Appendix B, the vehicle
for approving credit application forms
used on distributed by federal or state
agencies or federally chartered
operations. EC-0013 related to a form no
longer in use, and has been omitted.
The answers provided in other official
staff interpretations have served as the
basis for die sections of the official staff
commentary to which they relate. This
includes EC-0011 regarding the
applicability of Regulation B to lending
operations outside of the United States,
which had been omitted from the March
proposal; see 202.1(a)-2. Material from
some of the 15 staff opinion letters
originally published as public
information letters also has been used.
Proposed comment 202.2(1)-1 has
been omitted from the final version. It
appeared to create unnecessary
confusion regarding possible liability for
officers or employees of a creditor. The
proposed comment had been included
as a reminder that a court may hold an
officer or employee accountable for
individual acts of illegal discrimination,
and not to suggest that officers or
employees would be held liable for
technical violations of the regulation.
Since courts will make determinations
about individual responsibility in any
specific case involving illegal
discrimination, withdrawal of the
comment seems appropriate.
Proposed comment 202.7(d)(3)— also
2
has been omitted from the final version
of the official staff commentary. The
comment, which was based on Public
Information. Letter 15, dealt with
consideration of a spouse’s earnings in
community property states, taking the
position that in an equal management
state a creditor may not require the
signature of the nonapplicant spouse on
an application, note, or other credit
,l?©faafi.Iil®giistor / Vol. -50*
instrument. A U S. district court in
California recently ruled for the
defendant in United States, v. ITT
Consumer Financial Carp., No. C-833924 JPV (N.D. Cal. Sept. 18,1985) (order
granting motion for summary judgment)*
allowing ITT to obtain the signature in
such circumstances. (A decision by the
government on the filing of a notice of
intent to appeal is pending.) The U.S.
District Court of Arizona, in Clark v.
Avco Financial Services, No. 80-272 (D.
Ariz. June 24,1981), took a position
contrary to the California ruling.
Although the Board continues to believe
that the position stated in proposed
comment 202.7(d)(3}-2 as published in
March 1985 is correct, this portion of the
commentary is being omitted in view of
the conflicting court decisions.
(6)
Economic impact analysis.
Introduction. The benefits and costs of
the revisions to Regulation B are
discussed in this economic impact
analysis.
Redefinition of “
applicant” to include
guarantors. An applicant for credit has
standing to sue under Regulation B but a
guarantor does not. The rule redefines
“applicant” in § 202.2(e) to include
guarantors for purposes of the | 202.7(d)
signature rules. This modification of the
rule allows guarantors who believe they
have been injured by an ECOA violation
to bring suit, thereby enhancing
protections.
The new provision may increase
creditors’ costs by increasing their
exposure to litigation. Litigation would
increase to the extent guarantors sue
regarding alleged Regulation B signature
rule violations, and the alleged
violations would not have been litigated
by applicants themselves. Analysis by
the Division of Consumer and
Community Affairs suggests that this
situation will probably arise
infrequently. Applicants normally bring
suit in their own right; and guarantors, if
they have standing to sue, would merely
join in the lawsuit. Guarantors are often
the spouse or business associate of the
applicant. If it becomes a matter of
course in legal actions involving
defaulted loans that both the applicant
and the guarantor claim injury from the
same alleged violation, litigation
expense may be increased; the increase
will probably be small since the same
alleged violation is involved.
Written applications and notation of
monitoring data. Provisions in § 202.5
will for the first time require covered
creditors to take written applications for
certain home purchase and refinancing
loans. Section 202.5 provisions will
require written applications of credit
requests covering loans for the purchase
or refinancing of a dwelling occupied or
4
[
Wediie&flay, November 20, 1985- / -Rules and Regulations
to be occupied by the borrower as a
principal residence. Creditors can
satisfy the requirement for. taking
written applications by writing down
information that they normally consider
in making a credit decision. In addition,
creditors are required by § 202.13 to
record monitoring data on the face or
national origin, sex; age, and marital
status of an applicant for home purchase
and refinancing loans secured by the
dwelling. If the applicant does not
volunteer such information upon
request, loan officers are required to
observe and note the loan applicant’s
race or national origin and sex. The
applicant must be informed orally or in
writing about the purpose and
provisions of § 202.13.
At present, Regulation B requires
creditors to request the monitoring data
from applicants for home purchase loans
only if the application is in writing. The
current regulation does not require
written applications for home purchase
loans or notation of monitoring data not
volunteered by the applicant.
The changes are expected to enhance
consumer protection through more
effective enforcement. Current ECOA
enforcement techniques call for the
consumer compliance examiners to use
all available data to test for the
presence or absence of discrimination
on a prohibited basis, such as race or
national origin, sex, age, or marital
status. The primary data for examiners
are creditor loan files. In the case of
banks supervised by the Federal
Reserve System (FRS), the absence of
written applications and information on
personal characteristics of loan
applicants in many cases substantially
reduces the examiners’ ability to
perform tests f on pos sible
discrimination. (Survey results indicate
that in 1980 and 25 percent of
applications for housing-related loans
from banks examined by the Federal
Reserve did not contain monitoring
data.) The changes will facilitate more
effective enforcement.
While banks regulated by the FRS are
not required at present to take written
applications nor record monitoring data
if not provided voluntarily by the
applicant, this is not the Case for many
other creditors. Regulation B allows
agencies charged with ECOA
enforcement responsibilities to establish
their own rules regarding the recording
of monitoring data. Banks and savings
and loan associations regulated by the
Federal Deposit Insurance Corporation
(FDIC), the Office of the Comptroller of
the Currency (OCC), and the Federal
Home Loan Bank Board (FHLBB) are
required by rules established by these
agencies to take written applications
and record monitoring data on most
housing-related loans. Federally
chartered credit unions are required by
the National Credit Union
Administration to take written
applications but are not required to
record monitoring data. Mortgage
bankers are not currently required to
take written applications. However,
since these firms generally sell loans
they originate in the secondary market,
they typically use standardized written
application forms as a matter of course.
The new rule requiring creditor
notation will create uniformity in the
compliance rules established by the
various regulatory agencies regarding
home purchase and refinancing loans.
The major beneficiary of uniform rales
will be the mortgage banking industry.
Mortgage banking firms are currently in
an untenable position. On the one hand,
they must comply with Regulation B
provisions that prohibit the notation of.
monitoring data by the loan officer
when the applicant declines to provide
the data. On the other hand, in order to
sell loans in the secondary market, the
loan application generally must include
the monitoring data.: ,
The extent to which the revised rule
can be expected to result in the
detection of an increased number of
ECOA violations is uncertain. For
example, the FDIC, OCC, and FHLBB
have cited a very small number of
creditors for discrimination even though
these agencies have had access to
written applications and monitoring
data for a number of years. The inability
to detect ECOA violations may reflect'
widespread creditor compliance with
ECOA provisions. To some extent the
low number of violations may indicate
that discrimination is effectively
deterred by creditors’-knowledge that
examiners have access to written
applications and monitoring data. Under
these circumstances, the number of
cases of actual discrimination detected
by examiners; will likely be small. To the
extent the deterrent effect is important,
adoption of the rale will enhance
consumer protection.
The changes are unlikely to impose
significant costs on the industry because
most creditors are currently covered by
rules established by the FDIC, OCC, and
the FHLBB that require written housingrelated loan applications and the
recording of monitoring data. The
creditors most likely to be affected by
the changes are banks supervised by the
FRS, and to a lesser extent, federally
chartered credit unions. These financial
institutions would incur costs to modify
existing written application forms if the
monitoring data and section 202.13
4S 26
B
federal Begater / -VoL:5&
disclosure statem ent ere tob® included ■
on the loan appicatk® form, m costs to
print and store forrecord irtertio n -a •.
separate form with th® required
monitoring information. (Complying
m o rta g e loan application form©,
available from the Federal Home Loan
Mortagage Corporation and the Federal .
National: Mortgage Association co$t ..
a b o rt 2§ cents p e r form.) Currently, a
few small- banka supervised by the- FRS
d© not request monitoring d ata because
they do not take w ritten applications for
home purchase or refinancing loans.
' Public coimaents indicate that these
banks view the monitoring d ata
requirements as a significant
disturbance to the- “relaxed"1atmosphere
in which business is conducted.
A final burden associated with a
requirement to record monitoring data
involves the loss of personal privacy
some loan applicants may feel if
creditors note their personal
characteristics even though they choose
not to voluntarily supply such
information. .Information available to the
Board indicates.that in 19©0 a b o rt 10 ■
. percent of the applicants for homepurchase loans at state member banks
declined to voluntarily provide
monitoring data when asked to do so.
Presumably, these individuals are the
most likely to be offended by the
change. On the- other hand, there is no
record- of consumer complaints about
. the recording of the monitoring data,
even though the OCC, -FDIC, and F-HLBB
have been requiring information for
many years.
Incomplete applications. The current
rale requires that adverse action,
notification be given when efforts by a
.creditor to obtain missing information .
regarding an application fail to elicit a
response from the applicant. Under the
revised regulation, creditors are not ■
required to provide adverse- action
notification if the applicant does not
supply the information needed to
-complete the application within a
reasonable period. As a consequence,
creditors may provide one-less notice in
these circumtances, thereby reducing
- costs. Consumer protections will not be
significantly reduced since applicants
who do not. respond in a reasonable
time period to a creditor’s request for ■
additional information probably are no
longer interested in the loan from th a t'
creditor, or expect to be denied credit
based on the lender’s evaluation of that
additional information.
Record retention of withdrawn
applications. Under the current rale,
there is no record retention requirement
with respect to an application expressly
withdrawn by the applicant. The
NoveiaherZa 3M§ / M b®aiati Regulations
1.
Effective: December 1®, 198&Part
absence of records on withdrawn
’ 2021s redesignated as Part 202a (Part
applications© hampers ®a ©xamffiss’s202a will fee removed on October 1,
investigation off a a unusually low
190®}. Part 202a is amended by adding
application denial- rate which, the
fits©following art® at the end- c f the table
■
creditor claims reflects a
rate of
of corterts to read:
w ithdraw n applications. Therefore, th®
change requiring record retention erf.
Effective date note: Part 202, was
applications w ithdraw n by th© applicant effective on December 16,190 5 but
-,
may increase- the effectiveness of
creditors have the option of continuing
enforcement.
to comply with this Part 202a (in lieu of
.Because of the- revision, some
Part 202}- until October 1,1986.
creditors may incur costs- to expand
■ 2. A new Part 202 is added to be
record storage space for-applications
effective on December -16,' 1965 to read
expressly withdrawn by the applicant
as follows:
The cost per record.of additional storage
space will vary among creditors
PART 202— EQUAL CREDIT
depending on record- storage technology
OPPORTUNITY '
:and current storage capacity utilization.'
If examiners are correct in their belief ■ S ea
202.1 Authority, soope and purpose.
that in general there- are few
202.2 . Definitions.
nonbusiness applications expressly
202 J Limited exceptions for certain classes
w ithdrawn by applicants relative to ■
of transactions.
denials, then compliance costs of the
202.4 General rule prohibiting,
change will be small for most creditors.
discrimination.
Business applications expressly
202.5 Rules concerning taking of
withdrawn do not have to be retained
applications.'
under the revised regulation because of ■ 202.0 Rules concerning evaluation of
applications.
the business credit provisions in section
202.7 Rules concerning extensions of credit.
202.3.
Small Entities
Recent research on compliance costs
for consumer protection regulations
suggests that the -smallest commercial
banks have incurred the greatest
compliance costs per account. Similarly,
the compliance costs associated with
the regulatory changes may tend to fall
disproportionately on 'the smallest
banks. According to the Board’s
consumer compliance examiners, a few
FRS supervised banks will need to start
using w ritten application procedures,
and most of these banks are relatively
sm all Even though many of these small
banks may already satisfy the written
application requirement by noting down
information that they normally consider
in making a credit decision, these small
banks will b© recording the monitoring
data for the first time. However, the
marginal costs of the revisions to
Regulation B are not likely to be large
for any creditor, regardless of the
creditor’s size.
Last off Subjects m 12 CFR Past 2®2
Banks, Banking, Civil rights,
Consumer protection, Credit, Federal
Reserve System, Marital status ■
discrimination, Minority groups.
Penalties, Religious discrimination, Sex
discrimination, Women.
(7) Regulatory text Pursuant to the
authority granted under section 703 of
the Equal Credit Opportunity Act, 15
U.S.C. 1691b, the-Board amends 12 CF3R
Chapter II as follows*
202.8 Special purpose credit programs.
202.0 Notifications.
202.10 Furnishing of credit information.
202.11 Relation to state law,
202.12 Record retention.
202.13 Information for mon toring purposes.
202.14 Enforcement, penalt.es and
liabilities.
Appendix A—Federal Enforcement Agencies
Appendix B—Model Applies, tion Forms
Appendix G—Sample Notifu ation Forms
Appendix D—Issuance of Staff
Interpretations
Supplement I—Official Staff Interpretations
Authority: 15 U S.C. 1001 et seq.
Effective date not©: Effective December 16,
- 1985, but creditors have the option of
continuing to comply with Part 202a until
October 1 ,19S3.
Regulation B (Equal Credit
Opportunity)
§ 202.1 Authority, s© p®and purpose.
@
(a) Authority and scope. This
regulation is issued by the Board of
Governors of the Federal Reserve
System pursuant to title VII (Equal
Credit Opportunity Act) of the
Consumer Credit Protection Act, as
amended (15 USC1601 et seq.). Except
: as otherwise provided herein, the
regulation applies to all persons who are
creditors, as defined in § 202.2(1).
Information collection requirements
contained in this regulation have been
approved by the Office of Management
and Budget under the provisions of 44
USG 3501 et seq. and have been
assigned OMB No. 7100-0201.
Federal R®glst@ / Vol. 50. No* 224;/ Wednesday, November 20, 1985 / Rules and Regulations 48027
ff
(b)
Purpose. The purpose of this
regulation is to promote the availability
of credit to all creditworthy applicants
without regard to race, color, religion,
national origin, sex, marital status, or
age (provided the applicant has the
capacity to contract); to the fact that all
or part of the applicant’s income derives
from a public assistance program; or to
the fact that the applicant has in good
faith exercised any right under the
Consumer Credit Protection Act. The
regulation prohibits creditor practices
that discriminate on the basis of any of
these factors. The regulation also
requires creditors to notify applicants of
action taken on their applications; to
report credit history in the names of
both spouses on an account; .to retain
records of credit applications; and to
collect information about the applicant’s
race and other personal characteristics
in applications for certain dwellingrelated loans.
§
Definitions.
For the purposes of this regulation,
unless the context indicates otherwise,
the following definitions apply.
(a) Account means an extension of
credit. When employed in relation to an
account, the word use refers only to
open-end credit.
(b) Act means the Equal Credit
Opportunity Act (title VII of the
Consumer Credit Protection Act).
(c) Adverse action. (1) The term
means:
(1) A refusal to grant credit in
substantially the amount or on
substantially the terms requested in an
application unless the creditor makes a
counteroffer (to grant credit in a
different amount or on other terms) and
the applicant uses or expressly accepts
the credit offered;
(ii) A termination of an account or an
unfavorable change in the terms of an
account that does not affect all or a
substantial portion of a class of the
creditor’s accounts; or
(iii) A refusal to increase the amount
of credit available to an applicant who
has made an application for an increase.
(2) The term does not include:
(i) A change in the terms of an
account expressly agreed to by an
applicant.
(ii) Any action or forbearance relating
to an account taken in connection with
inactivity, default, or delinquency as to
that accounnt;
(iii) A refusal or failure to authorize
an account transaction at a point of sale
or loan, except when the refusal is a
termination or an unfavorable change in
the terms of an account that does not
affect all or a substantial portion of a
class of the creditor’s accounts, or when
.time to obtain money, property, or
the refusal is a denial of an application
services on credit.
for an increase in the amount of credit
available under the account;
(l) Creditor means a person who, in
(iv) A refusal to extend credit because
the ordinary course of business,
applicable law prohibits the creditor
regularly participates in the decision of
from extending the credit requested; or
whether or not to extend credit. The
(v) A refusal to extend credit because
term includes a creditor’s assignee,
the creditor does not offer the type of
transferee, or subrogee who so
credit or credit plan requested.
participates. For purposes of § § 202.4
(3)
An action that falls within the
and 202.5(a), the term also includes a
definition of both paragraphs (c)(1) and
person who, in the ordinary course of
(c)(2) of this section is governed by
business, regularly refers applicants or
paragraph (c)(2).
prospective applicants to creditors, or
(d) Age refers only to the age of
selects or offers to select creditors to
natural persons and means the number
whom requests for credit may be made.
of fully elapsed years from the date of
A person is not a creditor regarding any
an applicant’s birth.
violation of the act or this regulation
(e) Applicant means any person who
committed by another creditor unless
requests or who has received an
the person knew or had reasonable
extension of credit from a creditor, and
notice of the act, policy, or practice that
includes any person who is or may
constituted the violation before
become contractually liable regarding
becoming involved in the credit
an extension of credit. For purposes of
transaction. The term does not include a
§ 202.7(d), the term includes guarantors,
person whose only participation in a
sureties, endorsers and similar parties.
credit transaction involves honoring a
(f) Application means an oral or
credit card.
written request for an extension of
(m) Credit transaction means every
credit that is made m accordance with
aspect of an applicant’s dealings with a
procedures established by a creditor for
creditor regarding an application for
the type of credit requested. The term
credit or an existing extension of credit
does not include the use of an account
(including, but not limited to,
or line of credit to obtain an amount of
information requirements; investigation
credit that is within a-previously
procedures; standards of
established credit limit. A completed
creditworthiness; terms of credit;
application means an application in
furnishing of credit information;
connection with which a creditor has
revocation, alteration, or termmation of
received all the information that the
credit; and collection procedures).
creditor regularly obtains and considers
(n) Discriminate against an applicant
in evaluating applications for the
means to treat an applicant less
amount and type of credit requested
favorably than other applicants.
(including, but not limited to, credit
(o) Elderly means age 62 or older.
reports, any additional information
(p) Empirically derived and other
requested from the applicant, and any
credit scoring systems.
approvals or reports by governmental
(1)
A credit scoring system is a system
agencies or other persons that are
that evaluates, an applicant’s
necessary to guarantee, insure, or
creditworthiness mechanically, based
provide security for the credit or
on key attributes of the applicant and
collateral). The creditor shall exercise
aspects of the transaction, and that
reasonable diligence in obtaining such
determines, alone or in conjunction with
information.
an evaluation of additional information
(g) Board means the Board of
about the applicant, whether an
Governors of the Federal Reserve
applicant is deemed creditworthy. To
System.
qualify as an empirically derived,
(h) Consumer credit means credit
demonstrably and statistically sound,
extended to a natural person primarily
credit scoring system, the system must
for personal, family, or household
be:
purposes.
(i) Based on data that are derived
(i) Contractually liable means
from an empirical comparison of sample
expressly obligated to repay all debts
groups or the population of creditworthy
arising on an account by reason of an
and noncreditworthy applicants who
agreement to that effect.
applied for credit within a reasonable
(j) Credit means the right granted by a
preceding period of time;
creditor to an applicant to defer
(ii) Developed for the purpose of
payment of a debt, incur debt and defer
evaluating the creditworthiness of
its payment, or purchase property or
applicants with respect to the legitimate
services and defer payment therefor.
(k) Credit card means any card, plate,
business interests of the creditor
coupon book, or other single credit
utilizing the system (including, but not
device that may be used from time to
limited to, minimizing bad debt losses
Federal Register / VoL 50, No. 224 f Wednesday, November 20,' 10S5 / Rules and Rsgulaticmg
and operating expenses in accordance
with the creditor’s business judgment);
■ Developed and validated using
(iii)
accepted statistical principles and ■
methodology; and
(iv) Periodically revalidated by the
use of appropriate statistical principles
and methodology and adjusted as
necessary to maintain predictive ability.
(2)
A creditor may use an empirically
derived, demonstrably and statistically
sound, credit scoring system obtained
from another person or may obtain
credit experience from which to develop
such a system. Any such system must
satisfy the criteria set forth in paragraph
(p)(l) (i) through (iv) of this section; if
the creditor is unable during the
development process to validate the
system based on its own credit
experience in accordance with
paragraph (p)(l) of this section, the
system must be validated when
sufficient credit experience becomes
available.. A system, that fails this
validity test is no longer an empirically
derived, demonstrably and statistically
sound, credit scoring system for that
creditor.
(q) Extend credit and extension of
credit mean the granting of credit in any
form (including, but not limited to, credit
granted in addition to any existing credit
or credit limit; credit granted pursuant to
an open-end credit plan; the refinancing
or other renewal of credit, including the
issuance of a new credit card in place of
an expiring credit card or in substitution
for an existing credit card; the
consolidation of two or more
obligations; or the continuance of
existing credit without any special effort
to collect at or after maturity).
(r) Good faith means honesty in fact
in the conduct or transaction.
(s) Inadvertent error means a
mechanical, electronic, or clerical error
that a creditor demonstrates was not
intentional and occurred
notwithstanding the maintenance of
procedures reasonably adapted to avoid
such errors.
(t) Judgmental system of evaluating
applicants means any system for
evaluating the creditworthiness of an
applicant other than an empirically
derived, demonstrably and statistically
sound, credit scoring system.
(u) Marital status means the state of
being unmarried, married, or separated,
as defined by applicable state law. The
term “unmarried” includes persons who
are single, divorced, of widowed.
(v) Negative factor or value, in
relation to the age of elderly applicants,
means utilizing a factor, value, or weight
that is less favorable regarding elderly
applicants than the creditor’s experience
warrants or is less favorable than the
factor, value, or weight assigned to the
class of applicants that are not
classified as elderly and are most
favored by a creditor on the basis of
age.
(w) Open-end credit means credit
extended under a plan under which a
creditor may permit an 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.
(x) Person means a natural person,
corporation, government or
governmental subdivision or agency,
trust, estate, partnership, cooperative, or
association.
(y) Pertinent element of
creditworthiness, in relation to a
judgmental system of evaluating
applicants, means any information
about applicants that a creditor obtains
and considers and that has a
demonstrable relationship to a
determination of creditworthiness.
(z) Prohibited basis means race, color,
religion, national origin, sex, marital
status, or age (provided that the
applicant has the capacity to enter into
a binding contract); the fact that all or
part of the applicant’s income derives
from any public assistance program; or
the fact that the applicant has in good
faith exercised any right under the
Consumer Credit Protection Act or any
state law upon which an exemption has
been granted by the Board.
(aa) State means any State, the
District of Columbia, the
Commonwealth of Puerto Rico, or any
territory or possession of the United
States.
§ 202.3 Limited ©Hcqptens for certain
©lasses of transactors®.
(a) Public utilities credit,—{1)
Definition. Public utilities credit refers
to extensions of credit that involve
public utility services provided through
pipe, wire, or other connected facilities,
or radio or similar transmission
(including extensions of such facilities),
if the charges for service, delayed
payment, and any discount for prompt
payment are filed with or regulated by a
government unit.
(2)
Exceptions. The following
provisions of this regulation do not
apply to public utilities credit;
(i) Section 202.5(d)(1) concerning
information about marital status;
(ii) Section 202.10 relating to
furnishing of credit information; and
(iii) Section 202.12(b) relating to
record retention.
(b) Securities credit.—{1) Definition.
Securities credit refers to extensions of
credit subject to regulation under
section 7 of the Securities Exchange Act
of 1934 or extensions of credit by a
broker or dealer subject to regulation as
a broker or dealer under the Securities
Exchange Act off 1934
(2)
Exceptions. The following
provisions of this regulation do not
apply to securities credit
(i) Section 202.5(c) concerning
information about a spouse or former
spouse;
(ii) Section 202.5(d)(1) concerning
information about marital status;
(iii) Section 202.5(d)(3) concerning
information about the sex of an'
applicant
(iv) Section 202.7(b) relating to
designation of name, but only to the
extent necessary to prevent violation of
rules regarding an account in which a
broker or dealer has an interest or rules
necessitating the aggregation of
accounts of spouses for the purpose of
determining controlling interests,
beneficial interests, beneficial
ownership, or purchase limitations and
restrictions;
(v) 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 name or marital
status;
(vi) Section 202.7(d) relating to the
signature of a spouse or other person;
(vii) Section 202.10 relating to
furnishing of credit information; and
(viii) Section 202.12(b) relating to
record retention.
(c)
Incidental credit. (1) Definition.
Incidental credit refers to extensions of
consumer credit other than credit of the
types described in paragraphs (a) and
(b) of this section;
(1) That are not made pursuant to the
terms of a credit card account;
(ii) That are not subject to a finance
charge (as defined in Regulation Z, 12
CFR 226.4); and
(iii) That are not payable by
agreement in more than four
installments.
(2) Exceptions. The following
provisions of this regulation do not
apply to incidental credit;
(i) Section 202.5(c) concerning
information about a spouse or formes
spouse;
(ii) Section 202.5(d)(1) concerning
information about marital status;
(iii) Section 202.5(d)(2) concerning
information about income derived from
alimony, child support, or separate
maintenance payments;
(iv) Section 202.5(d)(3) concerning
information about the sex of an
applicant, but only to the extent
necessary for medical records or similar
purposes;
^deralRegstei-./ ¥ol
(v) Section 202.7{d} relating ttfttie ■
signature of a spouse or other person;
(vi) Section 202.9 relating to
notifications;
(vii) Section 202.10 relating to
furnishing of credit information; and
(viii) Section 202.12(b) relating to
record retention.
(d) Business credit.— (1) Definition.
Business credit refers to extensions of
credit primarily for business or
commercial (including agricultural)
purposes, but excluding extensions o f
credit o f the types described in
paragraphs (a) and (b) of this section.
(2) Exceptions. The following
provisions of this regulation do n o t'
apply to business credit:
(i) Section 202.5(d)(1) concerning
information about marital status; and
(ii) Section 202.10 relating to
furnishing of credit information.
(3) Modified requirements. The
following provisions of this regulation
apply to business credit as specified
below;
(1) Section 202.9 (a), (b), and (c)
relating to notifications: the creditor
shall notify the applicant, orally or in
writing, of action taken or of
incompleteness. When credit is denied
or when other adverse action is taken,
the creditor is required to provide a
written statement of the reasons and the
ECOA notice specified in section
202.9(b) if the applicant, makes a written
request for the reasons within 30 days of
that notification; and •
(ii) Section 202.12(b) relating to record
retention: the creditor shall retain
records as provided in § 202.12(b) if the
applicant, within SO days after being
notified of action taken or of
incompleteness, requests in writing that
records be retained.
(e) Government credit—{1)
Definition. Government credit refers to
extensions of credit made to
governments or governmental
subdivisions, agencies, or
instrumentalities.
(2) Applicability of regulation. Except
for section 2G2,4r the general rule
prohibiting discrimination on a
prohibited basis, the requirements of
this regulation do not apply to
government credit.
§ 202.4 @ G r§ Rule Prohibiting
© is© it
Discriminate!!.
A creditor shall not discriminate
against an applicant on a prohibited
basis regarding any aspect of a credit
transaction.
§ 202.5 Rules Concerning Tatung of
Applications.
(a)
Discouraging applications. A
creditor shall not make any oral or
./Wednesday, ffayginibeg; 80, 1985 / -Rules and Regulations 48029
written statement, in advertising or
otherwise, to applicants or prospective
applicants that would discourage on a •
prohibited basis a reasonable person
from making or pursuing an application.
(b) G eneral rules concerning requests
fo r inform ation . (1) Except as provided
in paragraphs (c) and (d) of this section,
a creditor may request any Information
in connection with an application.1
(2) R eq u ired collection o f inform ation.
Notwithstanding paragraphs (c) and (d)
of this section, a creditor shall request
information for monitoring purposes as
required by | 202.13 for credit secured
by the applicant’s dwelling. In addition,
a creditor may obtain information
required by a regulation, order, or
agreement issued by, or entered into
with, a court or an enforcement agency
(including the Attorney General of the
United States or a similar state official)
to monitor or enforce compliance with
the act, this regulation, or other federal
or state statute or regulation.
(3) S p ecia l purpose credit. A creditor
may obtain information that is
otherwise restricted to determine
eligibility for a special purpose credit
program, as provided in §§ 202.8 (c) and
(d ).
(c) Inform ation a bout a spouse or
fo rm er spouse. (1) Except as permitted
in this paragraph, a creditor may n o t.
request any information concerning the
spouse or former spouse of an applicant.
(2) P erm issible inquiries. A creditor
may request any information concerning
an applicant’s spouse (or former spouse
under paragraph (c)(2)(v)) that may be
requested about the applicant if:
(i) The spouse will be permitted to use
the account;
(ii) The spouse will be contractually
liable on the account;
(iii) The applicant is relying on the
spouse’s income as a basis for
repayment of the credit requested;
(iv) The applicant resides in a
community property state or property on
which the applicant is relying as a basis
for repayment of the credit requested is
located in such a state; or
(v) The applicant is relying on
alimony, child support, or separate
maintenance payments from a spouse^or
former spouse as a basis for repayment
of the credit requested.
(3) Other accounts of the applicant. A
creditor may request an applicant to list
any account upon which the applicant is
liable and to provide the name and
address in which the_ account is carried.
A creditor may also ask the names in
‘This paragraph does not limit or abrogate any
federal or state law regarding privacy privileged
information, credit reporting limitations, or similar
restrictions on obtainable information.
which an applicant has previously,
received credit.
(d) O ther lim ita tio n s on inform ation
requests , (i) M a rita l status. If an
applicant applies for Individual
unsecured cred it a creditor shall not
inquire about the applicant’s marital
status unless the applicant resides in a
community property state or is relying
on property located in such a state as a
basis for repayment of the credit
requested. If an application is for other
than individual unsecured credit a
creditor-may inquire about the
applicant’s m arital status, but shall us®
only the terms “married,” “unmarried,”
and “separated.” A creditor may explain
that the category “unmarried" includes
single, divorced, and widowed persons.
(2) D isclosure about incom e fro m
alim ony, ch ild support, or separate
m a intenance . A creditor shall not
inquire whether income stated in an
application is derived from alimony,
child support, or separate maintenance
payments unless the creditor discloses
to the applicant that such income need
not be revealed if the applicant does not
w ant the creditor to consider it in
determining the applicant’s
creditworthiness.
(3) Sex. A creditor shall not inquire
about the sex of an applicant. An
applicant may be requested to designate
a title on an application form (such as
Ms., Miss, Mr., or Mrs.) if the form
discloses that the designation of a title is
optional. An application form shall
otherwise use only terms that are
neutral as to sex.
(4) Childbearing, childrearing. A
creditor shall not inquire about birth
control practices, intentions concerning
the bearing or rearing of children, or
capability to bear children. A creditor
may inquire about the number and ages
of an applicant’s dependents-or about
dependent-related financial obligations
or expenditures, provided such
information is requested without regard
to sex, marital status, or any other'
prohibited basis.
(5) Race, color, religion, n a tio n a l
origin. A creditor shall not inquire about
the race, color, religion, or national
origin sf an applicant or any other
person in connection with a credit
transaction. A creditor may inquire
about an applicant’s permanent
residence and immigration status.
(e) W ritten applications. A creditor
shall take written applications for the
types of credit covered by § 202.13(a),
but need not take written applications
for other types of credit.
48Q3Q Federal .Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations
§ 202.6 Rules Concerning Evaluation of
Applications.
(a) General rule concerning use of
information. Except as otherwise
provided in the act and this regulation, a
creditor may consider any information
obtained, so long as the information is
not used to discriminate against an
applicant on a prohibited basis.2
(b) Specific rules concerning use of
information. (Ij Except as provided ih
the act and this regulation, a creditor
shall not take a prohibited basis into
account in any system of evaluating the
creditworthiness of applicants.
(2) Age, receipt o f public assistance.
(i) Except as permitted in this paragraph
(b)(2), a creditor shall not take into
account an applicant’s age (provided
that the applicant Has the capacity to
enter into a binding contract) or whether
an applicant’s income derives from any
public assistance program.
(ii) In an empirically derived,
demonstrably and statistically sound,
credit scoring system, a creditor may
use an applicant’s age as a predictive
variable, provided that the age of an
elderly applicant is not assigned a
negative factor or value.
(iii) In a Judgmental system of
evaluating creditworthiness, a creditor
may consider an applicant’s age or
whether an applicant’s income derives
from any public assistance program only
for the purpose of determining a
pertinent element of creditworthiness.
(iv) In any system of evaluating
creditworthiness, a creditor may
consider the age of an elderly applicant
when such age is used to favor the
elderly applicant in extending credit.
(3) Childbearing, childrearing. In
evaluating creditworthiness, a creditor
shall not use assumptions or aggregate
statistics relating to the iikelihood that
any group of persons will bear or rear
children or will, for that reason, receive
diminished or interrupted income in the
future,
(4) Telephone listing. A creditor shall
not take into account whether there is a
telephone listing in the name of an
applicant for consumer credit, but may
take into account whether there is a
telephone in the applicant’s residence.
(5) Income. A creditor shall not
discount or exclude from consideration
the income of an applicant or the spouse
of an applicant because of a prohibited
basis or because the income is derived
from part-time employment or is an
2The legislative history of the act indicates that
the Congress intended an "effects test" concept, as
outlined in the employment field by the Supreme
Court in the cases of Griggs v. Duke Power Co., 401
U.S. 424 (1971), and Albemarle Paper Co. v. Moody,
422 U.S. 405 (1975), to be applicable to a creditor’s
determination of creditworthiness.
absence of evidence of the applicant’s
annuity, pension, or other retirement
inability or unwillingness to repay, a
benefit; a creditor may consider the
creditor shall not take any of the
amount and probable continuance of
following actions regarding an applicant
any income in evaluating an applicant’s
who is contractually liable on an
creditworthiness. When an applicant
relies on alimony, child support, or
existing open-end account on the basis
of the applicant’s reaching a certain age
separate maintenance payments in
applying for credit, the creditor shall
or retiring or on the basis of a change in
consider such payments as income to
the applicant’s name or marital, status:
the extent that they are likely to be
(1) Require a reapplication, except as
consistently made.
provided in paragraph (c)(2) of this
(6) Credit history. To the-extent that a
section;
creditor considers credit history in
(ii) Change the tern\s of the account;
evaluating the creditworthiness of
or
similarly qualified applicants for a
(iii) Terminate the account,
similar type and amount of credit, in
(2) Requiring reapplication. A creditor
evaluating an applicant’s
may require a reapplication for an opencreditworthiness a creditor shall
end account on the basis of a change in
consider:
the marital status of an applicant who is
(i) The credit history, when available,
contractually liable if the credit granted
of accounts designated as accounts that
was based in whole or in part on income
the applicant and the applicant’s spouse
of the applicant’s spouse and if
are permitted to use or for which both
information available to the creditor
are contractually liable;
indicates that the applicant’s income
(ii) On the applicant’s request, any
may not support the amount of credit
information the applicant may present
currently available.
that tends to indicate that the credit
(d)
Signature o f spouse or other
history being considered by the creditor
person. (1) Rule for qualified applicant.
does not accurately reflect the
Except as provided in this paragraph, a
applicant’s creditworthiness; and
(iii) On the applicant’s request, the
creditor shall not require the signature
of an applicant’s spouse or other person,
credit history, when available, of any
other than a joint applicant, on any
account reported in the name of the
credit instrument if the applicant
applicant’s spouse or former spouse that
qualifies under die creditor’s standards
the.applicant can demonstrate
of creditworthiness for the amount and
accurately reflects the applicant’s
terms of the credit requested.
creditworthiness.
(7) Immigration status. A creditor may
(2) Unsecured credit. If an applicant
consider whether an applicant is a
requests unsecured credit and relies in
permanent resident of the United States,
part upon property that the applicant
the applicant’s immigration status, and
owns jointly with another person to
any additional information that may be
satisfy the creditor’s standards of
necessary to ascertain the creditor’s
creditworthiness, the creditor may
rights and remedies regarding
require the signature of the other person
repayment.
only on the instrument(s) necessary, or
(c)
State property laws. A creditor's reasonably believed by the creditor to
consideration or application of state
be necessary, under the law of the state
property laws directly or indirectly
in which the property is located, to
affecting creditworthiness does not
enable the creditor to reach the property
constitute unlawful discrimination for
being relied upon in the event of the
the purposes of the act or this
death or default of the applicant.
regulation.
(3) Unsecured credit—community
property states. If a married applicant
§ 202.7 Rules Concerning Extensions of
requests unsecured credit and resides in
Credit.
(a)
Individual accounts. A creditor a community property state, or if the
property upon which the applicant is
shall not refuse to grant an individual
relying is located in such a state, a
account to a creditworthy applicant on
creditor may require the, signature of the
the basis of sex, marital status, or any
spouse on any instrument necessary, or
other prohibited basis.
reasonably believed by the creditor to
(b) Designation of name. A creditor
be necessary, under applicable state law
shall not refuse to allow an applicant to
to make the community property
open or maintain an account in a birthavailable to satisfy the debt in the event
given first name and a surname that is
of default if:
the applicant’s birth-given surname, the
(i)
Applicable state law denies the
spouse’s surname, or a combined
applicant power to manage or control
surname.
sufficient community property to qualify
(c) Action concerning existing openfor the amount of credit requested under
end accounts.—(1) Limitations. In the
Federal Register / Vol. 50, No. 2M / Wednesday; November 20, "1985 / Rides and Regulations 41S31
reasons. (1) When notification is
for extending credit pursuant to the
required. A creditor shall notify an
program; and
(ii)
The program is established and
applicant of action taken within:
administered to extend credit to a class
(1) 3© days after receiving a completed
of persons who, under the. organization’s application concerning the creditor’s
customary standards of
approval of, counteroffer to, or adverse
creditworthiness, probably would not
action on the application;
receive such credit or would receive it
(ii) 30 days after taking adverse action
on less favorable terms than are
on an incomplete application, unless
ordinarily available to other applicants
notice is provided in accordance with
applying to the organization for a similar paragraph (c) of this section;
type and amount of credit
(iii) 30 days after taking adverse
(b) Rules in other sections. (1)
action on an existing account; or
General applicability. A ll of the
(iv) 80 days after notifying the
provisions of this regulation apply to
applicant of a counteroffer if the
each of the special purpose credit
applicant does not expressly accept or
programs described in paragraph (a) of
use the credit offered.
this section unless modified by this
(2) Content o f notification when
section.
adverse action is taken . A notification
(2)—Common characteristics. A
given to an applicant when adverse
program described in paragraph (a)(2) or action is taken shall be in writing and
(a)(3) of this section qualifies as a
shall contain: a statement of the action
special purpose credit program only if it
taken; the name and address of the
was established and is administered so
creditor; a statement of the provisions of
as not to discriminate against an
section 701(a) of the act; the name and
applicant on any prohibited basis;
address of the federal agency that
however, all program participants may
administers compliance with respect to
be required to share one or more
the creditor; and either:
common characteristics (for example,
(i) A statement of specific reasons for
race, national origin, or sex) so long as
the action taken; or
the program was not established and is
(ii) A disclosure of the applicant’s
not administered with the purpose of
right to a statement of specific reasons
evading the requirements of the act or
within 30 days, if the statement \a
this regulation.
requested within 60 days of the
(c) Special rule concerning requests
and use o f information. If participants in creditor’s notification. The disclosure
shall include the name, address, and
a special purpose credit program
telephone number of the person or office
described in paragraph (a) of this
from which the statement of reasons can
section are required to possess one or
be obtained. If the creditor chooses to
more common characteristics (for
provide the reasons orally, the creditor
§
Special Purpose
Programs.
example, race, national origin, or sex)
shall also disclose the applicant’s right
(a)
Standards for programs. Subject toand if the program otherwise satisfies
the provisions of paragraph (b) of this
the requirements of paragraph (a) of this to have them confirmed in writing
within 30 days of receiving a written
section, the act and this regulation
section, a creditor may request and
request for confirmation from the
permit a creditor to extend special
consider information regarding the
applicant.
purpose credit to applicants who meet
common characteristic(s) in determining
(b)
Form ofECOA notice and
eligibility requirements under the
the applicant’s eligibility for the
statement o f specific reasons.
following types of credit programs:
program..
(1) ECOA notice . To satisfy the
(1J Any credit assistance program
(d) Special rule in the case of
disclosure requirements of paragraph
expressly authorized by federal or state
financial need. If financial need is one
(a)(2) of this section regarding section
law for the benefit of an economically
of the criteria under a special purpose
701(a) of the act, the creditor shall
disadvantaged class of persons;
program described in paragraph (a) of
provide a notice that is substantially
(2] Any credit assistance program
this section, the creditor may request
similar to the following:
offered by a not-for-profit organization,
and consider, in determining an
The federal Equal Credit Opportunity
as defined under section 501(c) of the
applicant’s eligibility for the program,
Act prohibits creditors from
Internal Revenue Code of 1954, as
information regarding the applicant’s
. discriminating against credit applicants
amended, for the benefit of its members
martial status; alimony, child support,
on the basis of race, color, religion,
or for the benefit of an economically
and separate maintenance income; and
national origin, sex, marital status, age
disadvantaged class of persons; or
the spouse’s financial resources. In
(provided the applicant has the capacity
(3) Any special purpose credit,
addition, a creditor may obtain the
to enter into a binding contract);
program offered by a for-profit
signature of an applicant’s spouse or
because all or part of the applicant's
organization or in which such an
other person on an application or credit
income derives from any public
organization participates to meet special instrument relating to a special purpose
assistance program; or because the
social needs, if:
program if the signature is required by
applicant has in good faith exercised
(i)
The program is established and
federal or state law.
any right under the Consumer Credit
administered pursuant to a written plan
§202.® Notifications.
Protection Act. The federal agency that
that identifies the class of persons that
the program is designed to benefit and
(a)
Notification of action taken, ECOAadministers compliance with this law
concerning this creditor is (name and
sets forth the procedures and standards
notice, and statement of specific
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 community property.
(4) Secured credit If an applicant
requests secured credit, a creditor may
require the signature of the applicant’s
spouse or other person on any
instrument necessary, or reasonably
believed by the creditor to be necessary,
under applicable state law to make the
property being offered as security
available to satisfy the debt in the event
of default, for example, an instrument to
create a valid lien, pass clear title,
waive inchoate rights or assign earnings.
(5) Additional parties. If, under a
creditor’s standards of creditworthiness,
the personal liability of an additional
party is necessary to support the
extension of the credit requested, a
creditor may request a cosigner,
guarantor, or the like. The applicant's
spouse may serve as an additional
party, but the creditor shall not require
that the spouse be the additional party.
(6) Rights o f additional parties. A
creditor shall not impose requirements
upon an additional party that the
creditor is prohibited from imposing
upon an applicant under this section.
(e)
Insurance. A creditor shall not
refuse to extend credit and shall not
terminate an account because credit life,
health, accident, disability, or other
credit-related insurance is not available
on the basis of the applicant’s age.
48032 Federal Register / Vol. 50, No. 224 /W ednesday, November 20,1985 / Rules and Regulations
address as specified by the appropriate
days after applying, the creditor may
agency listed in Appendix A of this
treat the application as withdrawn and
regulation).
need not comply with paragraph (a)(1)
(2)
Statement o f specific reasons. The of this section.
statement of reasons for adverse action
(f) Multiple applicants. When an
required by paragraph (a)(2)(i) of this
application involves more than one
section must be specific and indicate the applicant, notification need only be
principal reason(s) for the adverse
given to one of them, but must be given
action. Statements that the adverse
to the primary applicant where one is
action was based on the creditor’s
readily apparent.
internal standards or policies or that the
(g) Applications submitted through a
applicant failed to achieve the
third party. When an application is
qualifying score on the creditor’s credit
made on behalf of an applicant to more
scoring system are insufficient.
than one creditor and the applicant
(c) Incomplete applications.—(1)
expressly accepts or uses credit offered
Notice alternatives. Within,30 days after by one of the creditors, notification of
receiving appliation that is incomplete
action taken by any of the other
regarding matters that an applicant can
creditors is not required. If no credit is
complete, the creditor shall notify the
offered or if the applicant does not
applicant either:
expressly accept or use any credit
(1) Of action taken, in accordance with offered, each creditor taking adverse
paragraph (a) of this section; or
action must comply with this section,
(ii) Of the incompleteness, in
directly or through a third party. A
accordance with paragraph (c)(2) of this notice given by a third party shall
section.
disclose the identify of each creditor on
(2) Notice o f incompleteness. If
whose behalf the notice is given.
additional information is needed from
an applicant, the creditor shall send a
written notice to the applicant
specifying the information needed,
designating a reasonable period of time
for the applicant to provide the
information, and informing the applicant
that failure to provide the information
requested will result in no further
consideration being given to the
application. The creditor shall have no
further obligation under this section if
the applicant fails to respond within the
designated time period. If the applicant
supplies the requested information
within the designated time period, the
creditor shall take action on the
application and notify the applicant in
accordance with paragraph (a) of this
section.
(3) Oral request for information. At its
option, a creditor may inform the
applicant orally of the need for
additional information; but if the
application remains incomplete the
creditor shall send a notice in
accordance with paragraph (c)(1) of this
section.
(d) Oral notifications by small-volume
creditors. The requirements of this
section (including statements of specific
reasons) are satisified by oral
notifications in the case of any creditor
that did not receive more than 150
applications during the preceding
calendar year.
(e) Withdrawal o f approved
application. When an applicant submits
an application and the parties
contemplate that the applicant will
inquire about its status, if the creditor
approves the application and the
applicant has not inquired within 30
§ 202.1® Furnishing @ Credit Information.
1
(a) Designation of accounts. A
creditor tht furnishes credit information
shall designate:
(1) Any new account to reflect the
participation of both spouses if the
applicant’s spouse is permitted to use or
is contractually liable on the account
(other than as a guarator, surety,
endorser, or similar party); and
(2) Any existing account to reflect
such participation, within 90 days after
receiving a written request to do so from
one of the spouses.
(b) Routine reports to consumer
reporting agency. If a creditor furnishes
credit information to a consumer
reporting agency concerning an account
designated to reflect the participation of
both spouses, the creditor shall furnish
the information in a manner that will
enable the agency to provide access to
the information in the name of each
spouse.
(c) Reporting in response to inquiry. If
a creditor furnishes credit information in
response to an inquiry concerning an
account designated to reflect the
participation of both spouses, the
creditor shall furnish the information in
the name of the spouse about whom the
information is requested.
inconsistent if it is more protective of an
applicant.
(b) Preempted provisions of state law.
(1) A state law is deemed to be
inconsistent with the requirements of
the act and this regulation and less
protective of an applicant within the
meaning of section 705(f) of the act to
the extent that the law:
(1) Requires or permits a practice or
act prohibited by the act or this
regulation;
(ii) Prohibits the individual extension
of consumer credit to both parties to a
marriage if each spouse individually and
voluntarily applies for such credit;
(iii) Prohibits inquiries or collection of
data required to comply with the act O
r
this regulation;
(iv) Prohibits asking or considering
age in an empirically derived,
demonstrably and statistically sound,
credit scoring system to determine a
pertinent element of creditworthiness, or
to favor an elderly applicant; O
r
(v) Prohibits inquiries necessary to
establish or administer as special
purpose credit program as defined by
§
202. 8 .
(2) A creditor, state, or other
interested party may request the Board
to determine whether a state law is
inconsistent with the requirements of
the act and this regulation.
(c) Laws on finance charges, loan
ceilings. If married applicants
voluntarily apply for and obtained
individual accounts with the same
creditor, the accounts shall not be
aggregated or otherwise combined for
purposes of determining permissible
finance charges or loan ceilings under
any federal or state law. Permissible
loan ceiling laws shall be construed to
permit each spouse to become
individually liable up to the amount of
the loan ceilings, less the amount for
which the applicant is jointly liable.
(d) State and federal laws not
affected. This section does not alter or
annul any provision of state property
laws, laws relating to the disposition of
decedents’ estates, or federal or state
banking regulations directed only
toward insuring the solvency of
financial institutions.
(e) Exemption for state-regulated
transactions. (1) Applications. A state
may apply to the Board for an
exemption from the requirements of the
§ 202.11 Relation to State Law.
act and this regulation for any class of
(a)
Inconsistent state laws. Except as credit transactions within the state. The
Board will grant such an exemption if
otherwise provided in this section, this
regulation alters, affects, or preempts
the Board determines that:
only those state laws that are
(i)
The class of credit transactions is
inconsistent with the act and this
subject to state law requirements
regulation and then only to the extent of
substantially similar to the act and this
regulation or that applicants are
the inconsistency. A state law is not
Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations 4S033
afforded greater protection under state
(ii)
Any written statement submitted
law; and
by the applicant alleging-a violation of
(ii)
There is adequate provision for
the act or this regulation.
state enforcement.
(3) Other applications. For 25 months
(2)
Liability and enforcement, (i) No after the data that a creditor receives an
exemption will extend to the civil
application for which the creditor is not
liability provisions of section 706 or the
required to comply with the notification
administrative enforcement provisions
requirements of | 202.9 the creditor shall
of section 704 of the act.'
retain all written or recorded
(ii) After an exemption has been
information in its possession concerning
granted, the requirements of the
the applicant, including any notation of
applicable state law (except for
action taken.
(4) Enforcement proceedings and
additional requirements not imposed by
investigations. A creditor shall retain
federal law) will constitute the
the information specified in this section
requirements of the act and this
beyond 25 months if it has actual notice
regulation.
that it is under investigation or is
§ 2@2.1§
d etention.
subject to an enforcement proceeding
(a) Retention o f prohibited
for an alleged violation of the act or this
information. A creditor may retain in its
regulation by the Attorney General of
files information that is prohibited by
the United States or by an enforcement
the act or this regulation in evaluating
agency charged with monitoring that
applications, without violating the act or creditor’s compliance with the act and
this regulation, if the information was
this regulation, or if it has been served
obtained;
with notice of an action filed pursuant to
(1) From any source prior to March 23,
section 706 of the act and § 202.14 of this
1977;
regulation. The creditor shall retain the
(2) From consumer reporting agencies,
information until final disposition of the
an applicant, or others without the
matter, unless an earlier time is allowed
specific request of the creditor; or
by order of the agency or court.
(3) As required to monitor compliance
§ 202.13 Information f®r itenlt©rSng
with the act and this regulation or other
Purpos©©,
federal or state statutes or regulations.
(b) Preservation o f records.-—(1)
(a) Information to be requested. A
Applications. For 25 months after the
creditor that receives an application for
credit primarily for the purchase or
date that a creditor notifies an applicant
of action taken on an application or of
refinancing of a dwelling occupied or to
be occupied by the applicant as a
incompleteness, the creditor shall retain
In original form or a copy thereof:
principal residence, where the extension
(1) any application that it receives, any of credit will be secured by the dwelling,
information required to be obtained
shall request as part of the application
concerning characteristics of the
the following information regarding the
applicant to monitor compliance with
applicant(s):
the act and this regulation or other
(1) Race or national origin, using the
similar law, and any other written or
categories American Indian or Alaskan
recorded information used in evaluating
Native; Asian or Pacific Islander; Black;
the application and not returned to the
White; Hispanic; Other (Specify);
(2) Sex;
applicant at the applicant’s request;
(3) Marital status, using the categories
(ii) A copy of the following documents
married, unmarried, and separated; and
if furnished to the applicant In written
(4) Age.
form (or, if furnished orally, any
“Dwelling’’ means a residential
notation or memorandum made by the
structure that contains one to four units,
creditor):
(A)
The notification of action taken; whether or not that structure is attached
to real property. The term includes, but
and
is not limited to, an individual
"(B The statement of specific reasons
)
condominium or cooperative unit, and a
for adverse action; and
(iii) Any written statement submitted
mobile or other manufactured home.
(b) Obtaining of information.
by the applicant alleging a violation of
Questions regarding race or national
the act or this regulation.
origin, sex, marital status, and age may
(2) Existing accounts. For 25 months
be listed, at the creditor’s option, on the
after the date that a creditor notifies an
application form or on a separate form
applicant of adverse action regarding an
existing account, the creditor shall
that refers to the application. The
applicant(s) shall be asked but not
retain as to that account, in original
required to supply the requested
form or a copy thereof:
(i)
Any written or recorded
information. If the applicant(s) chooses
information concerning the adverse
not to provide the information or any
action; and
part of it, that fact shall be noted on the
form. The creditor shall then also note
on the form, to the extent possible, the
race or national origin and sex of the
applicant(s) on the basis of visual
observation orsurname.
(c) Disclosure to applicant(s). The
creditor shall inform the applicant(s)
that the information regarding race or
national origin, sex, marital status, and
age is being requested by the federal
government for the purpose of
monitoring compliance with federal
statutes that prohibit creditors from
discriminating against appliants on
those bases. The creditor shall also
inform the:applicant(s) that if the
applicant(s) chooses note to provide the
information, the creditor is required to
note the race or national origin and sex
on the basis of visual observation or
surname,
(d) Substitute monitoring program. A
monitoring program required by an
agency charged with administrative
enforcement under section 704 of the act
may be substituted for the requirements
contained in paragraphs (a), (b), and (c).
§ 202.14 Enforcement, Penalties and
UatoDistl©©.
(a) Administrative enforcement. (1)
As set forth more fully in section 704 of
the act, administrative enforcement of
the act and this regulation regarding
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),
National Credit Union Administration,
Interstate Commerce-Commission,
Secretary of Agriculture, Farm Credit
Administration, Securities and
Exchange Commission, Small Business
Administration, and Secietary of
Transportation.
(2)
Except to the extent that
administrative enforcement is
specifically assigned to other
authorities, compliance with the
requirements imposed under the act and
this regulation is enforced by the
Federal Trade Commission.
(b) Penalties and liabilities. (1)
Sections 706 (a) and (b) and 702(g) of the
act provide that any creditor that fails to
comply with a requirement imposed by
the act or this regulation is subject to
civil liability for actual and punitive
damages in individual or class actions.
Pursuant to sections 704 (b), (c), and (d)
and 702(g) of the act, violations of the
act or regulations also constitute
violations of other federal laws. Liability
48034 Fete®! Register / VoL 50, No. 224 / Wednesday, November 20; 1^85 / Rales and Regulations
for punitive damages is restricted to
Agenete®
nongovernmental entities mid is limited
to $10,000 in individual actions and the
The follow in g list in d icates the fed eral
lesser of $500,000 or 1 percent of the
a g e n c ie s the en force R egulation B for
particular c la s s e s o f creditors. A n y q u estion s
creditor’s net worth in class actions.
concerning a particular creditor sh ou ld b e
Section 706(c) provides for equitable
and declaratory relief and section 706(d) directed to its en forcem en t agency.
authorizes the awarding of costs and
National Banks
reasonable attoreny’s feeds to an
Com ptroller o f the Currency, Consum er
aggrieved applicant in a successful
E xam inations D ivision , W ashington, D C
action.
20219.
(2) A s provided in section 706(f), a
State Member Banks
civil action under the act or this
regulation may be brought in the
Federal R eserve Bank serving the district in
appropriate United States district court
w h ich the sta te m em ber bank is located .
without regard to the amount in
Nonmember Insured Banks
controversy or in any other court of
F ederal D ep osit Insurance-C orporation
competent jurisdiction within two years
Regional- D irector for the region in w h ich the
after the date of the occurrence of the
nonm em ber in su red bank is located .
violation, or within one year after the
commencement of an administrative
Sa vings. Institutions Insured by the FSJJC
and Members of the FHLB System ^Except
enforcement proceeding or of a civil
for Savings Banks Insured by FDIC)
action brought by the Attorney General
of the United States within two years
T he F ederal H om e L oan Bank Board
after the alleged violation.
Supervisory A gent in the district in w h ich th e
institution is lo ca ted .
(3) Sections 706 (g) and (h) provide
that, if an agency responsible for
Federal Credit Unions
administrative enforcement is unable to
R egional office o f the N ational Credit
obtain compliance with the act or this
U nion A dm inistration servin g the area in
regulation, it may refer the matter to the
w h ich the federal cred it union is located .
Attorney General of the United States*
Air Carriers
On referral, or whenever the Attorney
General has reason to believe that one
A ssista n t G eneral C ounsel for A viation
or more creditors are engaged in a
E nforcem ent an d P roceedings, D epartm ent o f
pattern or practice in violation of the act T ransportation, 409 S even th Street, SW ,
W ashington, D C 20590.
or this regulation, the Attorney General
may bring a civil action.
Creditors Subject to Interstate Commerce
(c)
Failure o f compliance. A creditor’s Commission
failure to comply with § f 202.6(b)(6),
O ffice o f P roceedings, Interstate C om m erce
202.9, 202.10, 202.12 or 202.13 is not a
C om m ission, W ashington,, DC 20523.
violation if it results from an inadvertent
Creditors Subject to Packers and Stockyards
error. On discovering an error under
Act
§ § 202.9 and 202.10, the creditor shall
correct it as soon as possible. If a
N earest P ackers and Stockyards
A dm inistration area supervisor.
creditor inadvertently obtains the
monitoring information regarding the
Small Business Investment Companies
race or national origin and sex o f the
U.S. Sm all B u sin ess A dm in istration , 1441 L
applicant in a dwelling-related
Street, N W , W ash in gton , D C 29410,
transaction not overed by f 202.13, the
Brokers and Dealers
creditor may act on and retain the
application without violating the
Secu rities and E xchange C om m ission,
regulation.
W ashington, D C 2054®.
Federal Land Banks, Federal Land Bank
Associations, Federal Intermediate Credit
Banks, and Production Credit Associations
Farm Credit A dm inistration, 1501 Farm
Credit Drive, M cLean, V irginia 22102-5090t
Retailers, Finance Companies, and All Other
Creditors Not Listed Above
FTC R egional O ffice for region in w h ich the
creditor op erates or F ederal Trad©
C om m ission, Equal C redit O pportunity,
W ashington, DC 20580.
This ap p en d ix con tain s five m od el credit
ap p lication forms, each d esign a ted for u se in
a particular type o f consum er credit
transaction as in d icated by the b rack eted
cap tion on each form. T h e first sa m p le form
is in tend ed for u se in open-end, unsecured
transactions; the se c o n d for closed -en d ,
secu red tran saction s; the third for clo sed -en d
transactions, w h eth er u n secu red or secured;
the fourth in tran saction s involving
com m unity property or occurring in
com m unity property states; and the fifth in
resid en tial m ortgage tran saction s. T he
ap p en d ix a lso con tain s a m odel d isclosu re
for u se in com plying w ith § 202.13 for certain
d w ellin g-related loan s. A ll forms con tain ed in
this ap p en d ix are m odels; their u se b y
creditors is optional.
The u se or m odification o f th e se forms is
govern ed b y the follow in g instructions, A
creditor m ay ch an ge the forms; b y ask in g for
ad d ition al inform ation not prohibited' b y
§ 202.5; by d eletin g an y inform ation request;
or b y rearranging th e form at w ith o u t
m odifying the su b sta n ce o f th e inquiries. In
an y o f th ese three in stan ces, h o w ev er, the
appropriate n o tic es regarding the op tion al
natu re o f cou rtesy titles, the op tio n to
d isclo se a lim o n y , ch ild support, or separate
m ain ten an ce, and the lim itatio n concerning
m arital statu s inquiries m ust b e included in
the appropriate p la ces if the item s to w h ich
they relate appear on the creditor’s form.
ff a creditor u se s an appropriate A p p en d ix
B m od el form, or m od ifies a form in
accord an ce w ith the a b o v e instructions, that
cred itor sh a ll b e d eem ed to b e actin g in
com p lian ce w ith the p ro v isio n s o f paragraphs
(c) and (d) o f § 202.5 o f th is regulation.
BILLING ©DDE
IO jc t i ( s f l . u a re c u re d c re d it)
SBCTTHON © — A S S E T A N D D E B T IN F O R M A T IO N ( I f S ection B has been co m p le te d , th is S ection sho u ld be com p le te d g ivin g
in fo r m a tio n a b o u t b o th th e A p p lic a n t an d J o in t A p p lic a n t. U ser, o r O th e r Person. Please m a rk A p p lic a n t-re la te d
in fo r m a tio n w ith an *‘A .'* I f S e ction B w as n o t co m p le te d, o n ly g ive in fo r m a tio n a b o u t the A p p lic a n t in th is S e ctio n .)
<CI3E©inr A P P L IC A T IO N .
I M P O R T A N T : Elacd Otece © trc ettao s i b e fo re t o o ^ o d jc a «b!o A p tiH ecttoa .
C heck
A p p r o p r ia te
Boa
A S S E T S O W N E D (U s e separate eheet i f necesaary.).
I f y o u a re a p p ly in g f o r a n in d iv id u a l a c co un t in y o u r o w n nam e and are re ly in g o n y o u r o w n in co m e o r
assets a n d n o t the in c o m e o r assets o f a n othe r pe rson as the basis fo r repaym en t o f th e cre d it requested,
c o m p le te o n ly Sections A a n d O.
□
I f y o u are a p p ly in g f o r a jo in t a c c o u n t o r on a cco un t th a t you a n d a n othe r pe rson w ill une, c o m p le te
a ll Se ction s, p r o v id in g in fo r m a tio n in B a b o u t the jo in t a p p lic a n t o r user.
□
I f y o u a re a p p ly in g f o r an in d iv id u a l ac c o un t, b u t are re ly in g on inco m e fr o m a lim o n y , c h ild su p p o rt, otr
sep ara te m ainten an ce o r. o n th e inc o m e o r assets o f a n othe r person as the basis fo r repaym en t o f th e c re d it
requested, c om p le te a ll Se ction s to th e ea te nt possible, p ro v id in g in fo rm a tio n in B ab ou t the person o n w hose
a lim o n y , s u p p o rt, o r m a inten an ce pa y m en ts o r inco m e o r assets y o u are re lyin g .
D e s c rip tio n o f Assets
S u bje ci i o D eb t?
Y e o /N o
V a lue
C cda
N a m e ( 3 ) o fO w n e r( s )
5
A u to m o b ile a ( M a k s , M o d a l, Y o ta )
S E C T IO N A — I N F O R M A T IO N R E G A R D IN G A P P L IC A N T
F u ll N a m e ( L a s t. F irs t, M id d l e ) :
E lirth d a te :
Prese nt S tre e t A d d re s a :
C ity :
S ta ts :
Z ip :
S o c ia l S e c u rity N o . :
P re v io u s
S tre et
/
/
C ash V a lue o f L ife insu ra nce (is s u e r.
F ace V a lu e )
Y e o ro tb e ro :
T ele p h o n a :
R e d Eat ore ( L c c c iio a , D a te A c q u ir e d )
D riv e r's Licence N o .:
A d d re s s :
Y e a rs th e re :
C it y :
S la te :
Q
Z ip :
M a rk e ta b le Securities (Is s u e r, T y p e , N o . o f S h a m )
P rese nt E m p lo y e r :
Y e ars th e re :
P o s itio n o r t i t l e :
N a m e o f c u p e rv lm n :
E m p lo y e r'!) A d d re s a :
T ele p h o n e :
.......................................
............................................. ..........................-
P re v io u s E m p lo y e r :
O tte r . ( L is t)
Y e ars th e re :
P re v io u s E m p lo y e r's A d d re c e :
‘
------ -----------------------------------------------
.......... ................ ............ ...........
P resent n e t s a la ry o r c o m m is s io n : $
per
________. N o .'D e p e n d e n ts :
T o ta l Assets
___________ A g es:_____________________ _
A lim o n y , c h ild s u p p o rf, o r sep ara te m ain te n a n c e In c o m e need n o t bo reve aled I f y o o do n c l w ith to have h co n tide sed ne □ bade
f o r re p a y lc g Ohio o b lig a J to o .
A lim o n y , c h ild s u p p o rt, separate m a in te n a n c e rec eive d u n d e r: c o u r t o rd e r □
w ritte n agreement □ o ra l un derstanding
S
O U T S T A N D IN G D E B T S (In c lu d e cha rge accounts, insta lm e n t co n tracts, c re d it cards,
re n t, m ortgages, etc. Use separate sheet
T yp e o f D e b t
o r A c c t. N o .
i f necessary.)
N am e in W h ic h
A c c t. C a rrie d
O th e r in c o m e : %
per
■ S o u rc e (o ) o f o th e r in co m e :
1.
Is a n y in c o m e lis te d in th in S e c tio n lik e ly to be red uce d i n th e ne at tw o years?
Q Y e s ( E x p la in in d e ta il o n a sep ara te s he et.) N o Q
H a v e y o u e v e r rec e iv e d c r e d it fr o m
no?
(L a n d lo r d o r
M o rtg a g s H o ld e r )
□
0
R en t Pa ym e nt
M o rtg a g e
O rig in a l
D ebt
Present
Balance
$ ( O m it re n t)
$ (O m it re n t)
s
C re d ito r
?--------------------- i
M o n th ly
Paym ents
Past Due?
Yes, N o
s
1
W hen?
C h e c k in g A c c o u n t N o .:
In s titu tio n a n d B ra n c h :
S a ving s A c c o u n t N o .:
In s titu tio n a n d B ra n c h :
4.
N a m e o f nearest re la tiv e
n o t liv in g w ith y o u :
T e le ph on e:
R e la tio n s h ip :
y
A d d re s a :
S E C T IO N D— I N F O R M A T IO N R E G A R D IN G J O I N T A P P L IC A N T , U S E R . O R O T H E R P A R T Y (U c e reparate sheets i f necessary.)
B irth d a te :
F u ll N o m e ( L o o t. F irs t, M id d le ) :
/
/
6.
R e la tio n s h ip t o A p p lic a n t ( i f a n y ) :
P resent S tre e t A d d is o n :
Z ip :
C it y :
T ele p h o n e :
T o l d D eb lo
D riv e r'o Liceneo N o .:
S o c ia l S e c u rity N o .:
P rese nt E m p lo y e r:
Y e a rs th e re :
(C redit References)
P o s itio n o r t it le :
N a m e o f su p e rviso r:
~
D a te P a id
------------ 1
-------------------------------------- : ---------
'
E m p lo y e r’s A d d re c s :
2.
P re v io u s E m p lo y e r:
P re v io u s E m p lo y e r's A d dreo o:
Prese nt n e t s a la ry o r c o m m is s io n : $
N o . D ependents:
per
Ages:
A re y o u a co -m a lte r. endorser, o r
g u a ra n to r o n ooy lo a n o r c o n tra c t?
Yes □
No □
Jf “ yeo”
fo r w ho m ?__________________________ T o w ho th?
A lim o o y , c h ild s e p p a rt, o r sep ara te m n lc lc a o n c e In c o m e aeed n e l bo reve aled I f y o o d o c o r w ith to hove U c o o rid c re d cs a haSb
f o r re p a y lc g th is o b lig a tio n .
A lim o n y , c h ild su p p o rt, separate m a intenance rece ive d u n d e r: c o u rt o rd e r □ w r iiie n agreement □ o ra l u n d e m a n d in g L I
A r o there nay un satisfie d
Yes □
I f **yco"
ju d g m e n t* against you?______________ N o 0 ________ A m o u n t $_______________________ to w h o m owed?__________________________
O th e r in c o m e : S
O th e r O b lig a tio n s — ( E g., lia b ility to pa y a lim o n y , c h ild su p p o rt, separate m aintenance
Is an y in c o m e Its le d i n
O
P«r
. S o u rc e (s ) o f o th e r in co m e :
ih ia S e c tio n lik e ly to be red uce d in th e
Yes ( E x p la in in d e ta il o n a separate s he et.)
Q
Year
U se separate sheet i f necessary.)
ne at tw o years?
E v e ry th in g th a t I have stated in th io a p p lic a tio n is co rre ct to the best o f m y know ledge. I un de rstan d th a t y o u w ill re ta in
th is a p p lic a tio n w he the r o r n o t i t is a p pro ved . Y o u are a u th o riz e d t o check ray c re d it and e m p lo ym e n t h is to ry an d to answer Ques
tio n s a b ou t y o u r c re d it experience w ith mQ,
In s titu tio n an d B ra n ch :
In s titu tio n a n d B la n c h :
S avinga A c c o u n t N o .:
N a m e o f neare st re la tiv e n o t liv in g
w ith J o in t A p p lic a n t, U ae r, o r O th e r P a rty :
T ele ph on e:
A d d re s s :
A p p lic a n ts $i©antur©
D
ale'
O th e r S ig na ture
(W h e re A p p lic a b le )
TSio
48035
S E C T IO N C — M A R I T A L S T A T U S
( D o D ot c e m p te fo I f th in Is an a p pllc c lS o o Use an In d iv id u a l cceocust.)
A p p lic a n t:
□ M a r rie d
□ S eparated
□ U n m a rrie d (in c lu d in g single. d ivo rce d , and w ido w e d)
O th e r P a rty : □ M a r rie d
□ Sepa ra te d
□ U n m a rrie d (in c lu d in g single. div o rc e d , and a id o w e a j
______________________________________
No
C h e c k in s A c c o u n t N » - i
R e la tio n s h ip :
H ave y o u been d e clared
Yes □
I f “ yea”
b a n k ru p t in the last 14 years *1________N o □ _______ w here?
Federal Register / Vol. 50i No. 224 / W ednesday, Novem ber 20, 1985 / Rules and Regulations
O
(O o c c d end, secured eredis)
c r e d it
S E C T IO N D — ASSET
A N D D E B T IN F O R M A T IO N ( I f Section B h as been com pleted, this Section should be com pleted giving
inform ation about both the A pplicant and Joint A pplicant or O ther Person Please mark Applicant related infointa
turn with an “ A .” If Section B was nut com pleted, only give in form ation about the A p p lic a n t in this Section.)
a p s p u c a t iio n
BMPOBT^OTt C o(sjJ Ibese DlretjJJo^ baffeso coioptetfea thio AppMaolOoa5
*£1*®***
ADP7p(?r|otO
hW
E3>
Q
P a y m e n t b a te D e s ire d
D e s c rip tio n o f Assets
Subject to D eb t?
Yes /N o
V a lue
C ash
N g m t(s ) <lf O v in c ify )
s
A u to m o b ile s (M a k e , M o d e l, Y e a r)
Proceeds o f C re d it
®-
T p be U sed F o r
............................ ..................................
C is T T V ilu c o f L if T '1 n s u ran ee "(Issue r"...........1" " ..................
F aco V a lu e )
•W liW -AHNF9XM 4TION REGATOitlG APPLICANT
F u ll.N a m e ( L a o t. F iro t, M id d le ) :
B
irthdate: / /
PreaoAJ Ctcairt A d d re s s :
Ye ars th e re :
C ity ;
Stale;
.
2 ip ;
fid c lo l O s ju r iip W a .t
fe a l
( L o c a tio n , B g i* A c q u ire d )
T s ls p h o p o ;
D riv e r's License N o .:
M a rk e ta b le SecuH lles ( Issuer, T>p«^ N o . o f S hares)
P r a v ia u , S treet A d d r c o :
C it y : .
Z ip :
Present E m p lo y e r
Y e ars th e re :
P o s itio n o r t it le :
N am e o f sup ervisor:
O th e r ( L is t)
T e le p h o n e :
$
T o ta l Assets
E m p lo y e r's A d d re s s :
O U T S T A N D IN G D E B T S (In c lu d e charge accounts, in s ta lm e n t co n tra cts, c re d it ca rd *,
P re v io u s E m p lo y e r:
ren t,
m ortgages, etc.
Use separate
sheet
if
necessary.)
P re v io u s E m p lo y e r's A d d re s s :
Present n e t s a la ry o r c o m m is s io n : $
No
D ependents:
Type o f D ebt
o r A c c t. N o .
C re d ito r
A D n o n y , cbJEd s u p p o rt, &r c op c rate m a inten an ce In com e need o c l be revealed I f y o o d o w rt a ls b «o Clove U eoanSdkttred as a
VO? F3P35&3
e& J& pa& n.
l.lu (L a n d lo r d o r
M9HG38S H & id s r )
^ lh T ^ n y ^ g b jld
O rig in a l
D eb t
N am e in W h ic h
A c c t. C a rrie d
M o n th ly
Payments
Present
Balance
Past D ue?
Y e s /N o
s --------------------------------------------- -
H W Q fl,
$yp qfe|g
m a inten an ce
ita w t^ t G
received un de r: e b u rt o rd e r
per
. So urce(o )
□
w ritte n agreement
□
o ra l un de rstan din g
□
QVQV
fCSGWtf credit from us?
When?
A&WWhJ J^Ov
z
~s
Office:
jjR53ittWi®5) Oftf BfDPlCbi
H tiiuiiea
m
$
$
'
■
T o ta l D eb ts
J ? s>|):
3a c
(C redit References)
T e le p h o n e :
0 B l 9 «|opsSiip:
$ ( O m it r t i j t ) $ (O m it re n t) $
Rent P aym ent
o f o th e r inco m e :
30 003/
lio te d in th is S e c tipo liberty t o be reduced be fo re th e c re d it requested is p a id o fi?
Q Y * a ( E x p la in ip R eta il o n a separate s h e e t.) N o Q
Wove y<PU
n
D ate Paid
~r~~i
T— ------------------— '---------------------- ---------- -
~
*
A d d re s s ;
r ----- 5
—
B t Z C m m B — IN F O R M A T IO N R E G A R D IN G J O IN T A P P L IC A N T O R O T H E R P A R T Y (U s e o p a r n te fjfcwra i f necessary.)
P u ll N o m ? U A J t. F irs t, M id d l e ) :
B irth d a te :
/
----------
'’
M ■
J '
K
r
—~
^
Rslaiiem le Asstem t i l cm):
hiB
P rese pl S tre et A<fdr?53:
A r e yo u a c o -m a M r, endo rser, o r
G u arantor o n any lo a n p r c o n ira cr?
O I:
B
A r c (tssrc m
u s o q m fijd
ia d s m s n w a a s im i you?
YC6 □
WO 0
Am ouqt $
H ? v c y p q beep d f d a r c a
b a n k ru p t in tn e fast 14 years?
T S B
I f “ y e s"
w h e rj?
tfclep S !
lK M
O u io l S e c u rity N o .:
B r iv s f'o Ltoense N o .:
P rs s s t d e la y e r :
Ye ars th ere:
P c c itlo o c r t i t l e :
1
^
/
Yes p
No 0
i f 'V i* "
fo r w h o p i?
T o w hom ?
I f “ yes”
to w h o m owed?
N am e o f su p e rviso r:
T e le p h o n e :
Ye ar
O llie r p b lig ^ tio n s — ( E g . , lia b ility to• pa y a lim o n y , c h ild s u p p o rt, separate m aintenance. Use separate sheet i f necessary.)
^ c ifd o y c r'a
Ptnsi(oiK)
SECTB®B3 E — S E C U R E D C R E D IT B rie fly describe th e p ro p e rty to be g ive n as se cu rity;
Previous Eraplsyor’a Address:
F rosen t net s ala ry o r c o m m is s io n : S
A w T S S y l ^ E l s 6^ ^ ?
^
N o .‘ D spa cde nts:
“ p c m ta (aE3c,eooot® In e o a e need n o t t a
A g es:
rovsafed S y o u do c m n K b to hove f j ^ c ^ l s f o 3 os o Carts
3
e sd lis t Domes e n d addresses o f a ll c o o c m e rs o f th e p ro p e rty :
A lim o n y , c h ild
s u p p o rt, separate m ain te n a n c e
O th e r in c o m e : 8
rece ive d n n d e t:
per
c o u rt o rd e r n
w ritte n sgreem ent □
o ra l un de rsta n d in g
e os a osp rsd cfesst.) W 0
U
a e
o
Ih M o asd Q
sfM iio
taeth:
tediwiion ood Bwl>;
C b e c k in tj A c c o u n t N o .:
Savinas A c c o u n t N o .:
N o n a o f neoreot r d a f c o e s i U v ln o a i m J o in t
A p p lic o n l or O th e r P o tty ;
P tioaahlp:
clQ
^pp^ront: □ M
arrlsO
I f th e s e c u rity is re a l estate, g ive th e f u ll nam e o f y o u r spouse ( i f
&
an y):
E v e ry th in g th a t I have sta ted in th is a p p lic a tio n i | c o rre c t to th e best o f m y kno w led ge I un de rstan d th a t you w ill reta in
whfijfKiB' o r n o t i t *a a p pro ved . Y o u a re a u th o riz e d to check m y c re d it and e m p lo ym e n t h is to ry and to answer quescfeout y o tu c re d it experience w itb me.
Address:
C3SW9W C—MARITAJ. STATyg
O th e r P a rty :
WS
fM
. S o urc e(o ) o f o th e r in co m e :
So o o y In com e lis te d In th is S e c tio n U k ely to be reduced be fo re the c re d it requested Is p a id o ff?
O Vw (friptolB te
□
Q
M a r rie d
PG w
sK outf
Q
S*5WjcJ60
0
U oraartiecJ (istfu d ln a olaale. d iv e ste d , e c d o itte o a d )
0 UpmamwJ lisdudlua ^oatei divorced, and aidowed)
"B ate"
Other Signature
(Where Applicable)
D ate
F©d@ffal E@gi!£l®r / V d . 5j s No. 224 /. W ed n esd ay.N ovem b er 2Q, '1985- / Males and Regulations
0,
□
A S S E T S O W N E D (U s e separate sheet i f necessary )
W y o u are a p p ly in g fo r in d iv id u a l c re d it in y o u r o w n na nw and arc re ly in g on y o u r o w n inco m e o r assets
and n o j *h? ific p m e p r a i& a lf t f f A nother person as the basis fo r repaym ent o f the cre d it requested, com p le te
5}#:tjQfl3 A . C . D . a n d E. o m ittin g B and the second pa rt o f C
I f th is is a n a p p lic a tio n fo r jo in t c re d it w ith an other person, com plete a il Sections, p ro v id in g in fo rm a tio n
in B a b o u t th e jo in t a p p lic a n t
I f po y flftf a p p ly in g fo r in d iv id u a l c re d it, b u t are re ly in g on income fr o m ^ jim p p y , c h ild su p p o rt, o r o$pgfnaintenanee o r on th e incom e 0 1 assets o f an other person as the basis fo r repaym ent o f the cred it
requested, c om p le te a ll Sections to th e extent possible, pro v id in g - in fo rm a tio n in B ab ou t the pe rson on
w hose a lim o n y , s u p p o rt, o r m aintenance p a y m e n t p r jn$pm c P» M K is y o u »r« re lying .
[C lo s e d e n d , un secu red /eo cured cre d it)
S E C T IO N C — M A R I T A L S T A T U S
( D o o o l c o m p le te I f th is Is on a p p lic a tio n f o r In d iv id u a l unsecured c re d it.)
A p p lic a n t
f j M a r rie d
Q S eparated
£J U n m a rrie d ( in c lu d in g sing le, d ivo rce d , and w id o w e d )
O th e r P a rty : Q M a r rie d
Q Separated
( J U n m a rrie d ( in c lu d in g sing le, divo rce d , and w id o w e d )
C R E D IT A P P U C A IT O N
IM P O R T A N T ; S e n d t f c is t D fa re c tk m b w fw e c c a a tH ln s t& > Ap pS icctlo o.
ChecS
A p p r o p r ia io
°
2*i* •*£. a^ ,y‘n8 for individual credit in your own name and are relying Oft yodr own income or assets
ar»d no* the incom e or assets o f another person as (he basis for repayment o f the credit requested, com
plete only Sections A and D . If the requested credit is to be secured, also complete the first pan of
section c and section c .
□
I f y o u a re a p p ly in g f o r jo in t c r e d it w ith a n o th e r person, com p le te a l! Sections except E , p ro v id in g in fo r m a
t io n in B a b o u t th e jo in t a p p lic a n t. I f th e requested Credit is t o be secured, then com plete S ection E.
Q
I f y o u are a p p ly in g fo r In d iv id u a l c re d it, b u t are re ly in g on inco m e fro m a lim o n y, c h ild s u p p o rt o r sepa
ra te m au u e n a n c c o r o n th e in c o m e o r assets o f a n o th e r person as th e basis fo r repaym en t o f t t o c re d it
I ^ j ^ s t e d ^ C om plete aU Sections e xce pt J = t o j h e extern possible, p ro v id in g in fo rm a tio n in B a b ou t th e
*“ * *"
~
“*
"
assets y o u a re re ly in g . I f the
A m o u m k e q u e s te d
5-
P a y m e n t D a u T & e s ire d
.............. ......
P roceeds " S T C t t S lt
S E C T IO N D — A S S E T A N D D E B T IN F O R M A T IO N ( I f S ection B has been co m p le te d, th is S ection should he com p le te d g ivin g
in fo r m a tio n a b o u t b o th th e A p p lic a n t and Jo in t A p p lic a n t o r O th e r Person. Please m a rk A p p lic a n t-re la te d in fo rm a tio n
w ith a n “ A . ” I f S ection B wav n o t co m p le te d , o n ly g ive in fo r m a tio n ab ou t th e A p p lic a n t in th is S e ction .)
A S S E T S O W N E D (U s e separate sheet i f necessary.)
D e s c rip tio n o f Assets
Su bje ct to D eb t?
Yes, N o
V a lue
C ash
N am e($) o f O w iu tts )
S
A u to m o b ile s (M a k e . M o d e l. Y e a r)
T o be U sed F o r
S E C T H O N A — I N F O R M A T IO N R E G A R D IN G A P P L IC A N T
F u ll N a m e ( L a s t. F irs t. M id d le ) :
S ifth d O te :
P re s e n t S tre e t A d d re s s :
Y e ars th e re :
C ity :
State :
/
/
Zip:
S o c ia l S e c u rity N o .:
(fash V a lu e o f L ife In suran ce (Is s u e r.
F ace V a lu e )
lleoJ E tta s * ( L e g a tio n . D a re A o ju W ta }
D riv e r ’s License N o .:
P re v io u s S tre e t A d d re s s :
C it y :
S ta te :
M a rk e ta b le S e curities (Is s u e r. T yp e . N o . o f Shares)
Z ip :
Present E m p lo y e r :
Y e ars th e re :
P o s itio n o r t i t l e :
Name of supervisor:
E m p lo y e r’s
T e le p h o n e :
A d d re s s :
G tfie r ( U s s } “
“
Previous Employer:
Previous Employer’s Address:
Present p e t
s a la ry o r c o m m is s io n : $_____________ p e r
No
D ep en de nts:
Y o ta l Assets
Ages:
S
O U T S T A N D IN G D E B T S (In c lu d e charge accounts, in sta lm e n t c o n tra c ts , c re d it card s, re n t, m ortgages, etc. Use separate sheet i f
_________
ffex re p a y in g th is i
A lim o n y ,
c h ild
s u p p o rt, separate m ain te n a n c e
O th e r in c o m e : $
rece ive d u n d e r:
per
c o u rt o rd e r Q
w ritte n agreem ent C l o ra l understa n d in g
Q
C re d ito r
S o u rc e (s ) o f o th e r in co m e :
i.
Is an y in c o m e lis te d in th is S e c tio n lik e ly to be red uce d b e fo re th e c re d it requested is p a id o ff?
G
n
ecessary )__________________________________________________________________________________________ ___________
T
(Landlord
or
M o rtg a g e H o ld e r )
Type o f D ebt
o r A c c t. N o .
□
□
N am e in W h ic h
A c c t. C a rrie d
R ent P aym ent
M o rtg a g e
O rig in a l
D ebt
$ (O m it re n t)
Past D ue?
Y e s /N o
M o n th ly
Paym ents
Present
Balance
3 (O m it re n t)
%
S
%
7
□ No
V e s (E x p la in in d e ta il o n separate s he et.)
Office
H a v e y o u e v e r rece ive d c re d it fr o m us?
C h e c k in g A c c o u n t N o *
S a ving s A c c o u n t N o .:
3.
In s titu tio n and B ra n c h :
Institution and Branch:
T o ta l D eb ts
1
{Credit R eferences)
R e la tio n s h ip :
F u ll N a m e
1
r
A d d re s s :
S E C T IO N E>— I N F O R M A T IO N
R E G A R D IN G J O IN T A P P L IC A N T O R O T H E R P A R T Y (U s e separate sheets i f ne cessary.)
( L a s t. F irs t. M id d l e ) :
,
G irth d a te :
“
T.
D a te Paid
‘
~~
‘
T
'
R e la tio n s h ip t o A p p lic a n t ( i f a n y ) :
Present S treet A d d re s s :
A r e yo u a c o -m a ke r, endorser, o r
g u a ra n to r on any lo a n o f c o n tra c t?
Y e ars th e re '
C it y :
State:
S o cial S e c u rity N o :
Y e a rs th e re :
P o s itio n o r t it le :
Name of supervisor:
E m p lo y e r's
P re v io u s
No □
VeS 0
No
Yes
No Q
I f “ Y e s.”
fo r w hom ?
Am ount $
H ave you been de clared
b a n k ru p t in the last 14 years?
D riv e r ’s License N o :
Present E m p lo y e r :
Yes □
A r e th ere ahy unsatisfied
jud gm en ts against you?
Z ip :
T o w ho m ?
I f “ Yes.”
w here?
a
a
I f "Y e s ”
to w h o m ow ed?
Year
Other obligations—(E.g., liability to pay alimony, child support, separate maintenance. Use separate sheet if necessary.)
A d d re s s :
S E C T IO N E — S E C U R E D C R E D IT (C o m p le te o n ly i f c re d it is to be secured.) B rie fly de scrib e th e p ro p e rty to be g ive n as se cu rity:
E m p lo y e r :
P re v io u s E m p lo y e r's A d d re s s :
Presen t net sala r y o r c o m m is s io n :
No. D ependents
___________ pe r
A lim o n y , c h ild s u p p o rt, o r separate m a in te n a n c e In c o m e need n o t
f o r re p o y ic d tbfcj obJigaa&ua.
J u p p o rt-.y P g f? * *
O th e r in c o m e : $
M ^d er:
pet
bo reve aled Iff yo u d o c© l w b h to hove It cobsldetffcd os o basis
a rid lis t flom so bar3 fcddfcSfiso © f £31 co-o w n ers o f th e p r o p e rty :
N om e
c o u ft o rd e r
S o u rc e (s )
□
w ritte n agreement
(~) o ra l u n d e rstan din g
A d dress
□
o f o th e r inco m e :
I f th e s e cu rity is re a l estate, g ive the f u ll nam e o f y o u r Spouse ( i f a n y ) :
Is an y in c o m e lis te d in th is S e c tio n lik e ly t o be red uce d be fo re
th e c re d it requested is p a id o ff?
Q
Q
Y e s ( E x p la in in d e ta il o rt separate s h e e t.)
No
C h e c k in g A c c o u n t N o :
In s titu tio n and B ra n ch .
Savings A c c o u n t
E v e ry th in g th a t I have stated in th is a p p lic a tio n is c o rre c t to th e best o f m y kno w led ge . I un de rstan d th at y o u w ill re ta in
th is a p p lic a tio n w he the r o r n o t i t is appro ved . Y o u a re a u th o riz e d to che ck m y c re d it a n d e m p lo ym e n t n is to ry and to answ er ques
tio n s ab ou t y o u r c re d it experience w ith me.
In s titu tio n and B r a n c h -
N o .;
N a m e o f nearest re la tiv e n o t liv in g w ith
J o io t A p p lic a n t o r O th e r P a rty :
A p p lic a n ts S ig na ture
D a le
Other Signature
(W here Applicable)
Date
SECTIO N C — M A R IT A L STATUS
A pplicant: Q M arried
O ther P arty : .Q M arried *
B M P O R T A N T : R oe g these D ire rtio a s be fo re co m p le tin g th is A p p ik e ilo a .
If you are applying for individual credit in your own nam e, are noi. m arried; an d are not: relying on alim ony,
child su p p o rt, or ’sep arate m aintenance paym ents or on the income or assets oC another persoh as the ba3is
for repaym ent of the credit requested, com plete only Sections A and D. If the requested credit is to be
secured, also com plete Section E.
In all oth er situations, com plete all Sections except E. providing in fo rm atio n in B about your spouse, a
jo in t ap p lican t or user, o r the person on whose alim ony, support, o r m aintenance paym ents or incom e or
assets you a te relying If the requested credit is to be secured, also complete Section E.
A m o u n t R equested
S E C T IO N A — I N F O R M A T IO N R E G A R D IN G A P P L IC A N T
U n m arried (including single,- divorced, an d w idow ed)
□ U nm arried (including single, divorced, w idow ed)
A S S E T S O W N E D ( U r e ©aparQtfi.ohsst I f
S t e c r ip tio a o l Aazsto
V a lu e
Su bje ct to D eb t?
Y e s /N o
N am e(s) o f O w ner(s)
s
A u t o s a o it e (t^a fsa . M o fe !, Y e a )
F u ll N a m e ( L a s t, F irs t, M id d le ) .
, B irth d a fie :
P resent Street A ddress
/
Z ip :
T
elephone:
'
iie a l Sistas©. ( L o s o tlo a , Dot© A c q u ire d )
D riv e r’s License N o .;
S o c ial S e c u rity N o .:
/
H M u e o# L ife Krtsutfoncc (Hasuer,
F ace V a h B )
V eare th ere:
State :
C ity :
□
Ce3»
Proceeds of C redit
T o be Used F or
P a y m e n t D a te D e s ire d
Q S eparated
Q S eparated
SE C T IO N K> A SSET A N D D E B T IN F O R M A T IO N (If S ection B h as been com pleted, this Section should be com pleted giving
2—
inform ation about both the A pplicant an d Spouse, Jo in t A pplicant, Usep. or O th er Person. Please m ark A pplicantrelated inform ation with an “ A -” If S ection B was not com pleied, only give in fo rm atio n abo u t the A pplicant in this
Section.)
P rev io us S tre et A d d re s s :
M a rk e ta b le S ecurities (is s u e r. T yp e . N o . off Shareo)
Z ip ; .
C ity :
"
T e le p h o n e :
Present E m p lo y e r :
Y e ars th e re :
P o s itio n o r t i t l e :
N am e c l sup ervisor:
625RXE)
E m p lo y e r's A d d re s s :
P rev io us
E m p lo y e r:
s
T b to l Assets
P re v io u s E m p lo y e r’ s A d d re s s :
No
Present net s a la ry o r c o m m is s io n : $
A t e o o y , child sup port,
. ceparaSa m z&zlQm&CQ la«®S2 . Deed
Cor repoyico SE ©Mfsetloo.
afto
D ependents.
ho revealed1 if y©a do
A lim ony, child su pport, sep arate m ain tenance received u n d er, co urt order □
8© t o e .83 c©Q£Sdespot ©a
written agreement □
1.
S o u rc e (s ) o f o th e r in co m e :
O th e r in c o m e : S
T y p o o f .D eb t
o r A c c t. N o .
N am e o f C re d ito r
o ral understanding Q
iN nm e in W h ic h
A c c t. C a rrie d
M o n th ly
Payments
Present
Balance
O ricifJQ l
D eb!
S (O m it re n t)
$ ( O m it re n t)
y
Past D ue?
Y e s /N o
8.
5
OUastSlord c j
E te n o re a K o t o )
S
8
£
Bs an y inc o m e lis te d in th in S e ction lik e ly to fee reduced in th e neat tw o years o r before th e c re d it requested is p a id o fff
□ Yes ( E x p la in in d e ta il on a separate s h e e t.) N o □
H a v e y o u eve r rece ive d c re d it fr o m us?
ii
O ffice :
Whs
C h e c k in s A c c o u n t N o .:
In s titu tio n and © ran ch:
S avings A c c o u n t N o .:
In s titu tio n and B ra n ch :
- ‘ll'o te l Ittctoo
N a m e o f neare st re la tiv e n o t liv in g w ith y o u
T e le p h o n e :
R e la tio n s h ip :
(C redit References)
Addreaa:
S E C T IO N B— I N F O R M A T IO N R E G A R D IN G S P O U S E , J O IN T - A P P L I C A N T , U S E R , O R O T H E R P A R T Y (U ss
necessary-)
F u ll- N a m e ( L a s t , . F ire l, M id d l e ) :
© irth d o te : ■ /
R e la tio n s h ip to A p p lic a n t (iff aa y ):
Y earo th e re :
A r e y o u a co-ssahsr, en do rcsr, or. '
ftuara nto ? o a e a y ld a a o r eg & trcst?
Present S tre et A d d re s s :
Z ip .
C it y :
S o c ia l S e c u rity N o .:
5? “ yes,”
fo r w ho m ?
No □
H o v e y e a boon de clared
b a n k ru p t in the last Id yearn
Y earn th e re :
P o s itio n o r t itle :
T
elephone:
D riv e r'o License N o .:
P resent E m p lo y e r :
. Yes Q
A r e there any unsatia&ed
Jmgrgngats against you ?
N am e o f su p e rviso r:
Offes?
6© p a y n f e s a y , e h iM a u p p o n , oo parato m a ia ts a c ^ re . U es separate sheet i f necessary.)
E m p lo y e r’s A d d re s s :
P rev io us
E m p lo y e r: .
.S G C M W
P rev io us E m p lo y e r's A d d re s s :
AMcsotny, d^Ed support, ©r ©spajrase EssjcsSeoance fiocoss raced
Ctr repaylca this ©
o
hfetftoa.
A lim o n y , c h ild
s u p p o rt,
separate
m ain te n a n c e
O th e r in c o m e : $
G— S E b u n S D G B E D r e (C o m p le te o n ly iff c re d it is to bs secured.) B r ie fly descr-ifea th© p ro p e rty to be give n ea se cu rity:
, No. D ependento:
p re s e n t n e t s a la ry o r c o m m is s io n : $
eoS
fee revea&d M yoa do cs 3
rece ive d un de r: c o u rt o rd e r Q
S o u rc e (a )
w ritte n agreem ent
80 .fiav© B
Q
o r a l un d e rsta n d in g
□
i M -ffiESSC*
sL SS 2l
g2 da c©-©c® 2so off
q
rty :
N
csso
o f o th e r in co m e :
Is an y in c o m e lis te d in th is S e ction lik e ly to be reduced in th e neat tw o years o r before th e c r e d it requested is p a id o ff?
□ Y e s (E x p la in in d e ta il o n a sep ara te s h e e t.)
□ No
C h e c k in g A c c o u n t N o .:
Institution and Branch:
S a ving s A c c o u n t N o .:
E v e ry th in g th a t I ha ve sta ted in th is a p p lic a tio n is c o rre c t to th e best o f m y know ledge. I un de rstan d th a t y o u w ill reta in
tb ts a p p lic a tio n w he the r o r n o t i t is a p pro ved . Y o u a re a u th o ris e d to ch e ck m y c re d it and e m p lo ym e n t h is to ry and to answ er ques
t i o n a b o u t -your c re d it e s p trie a c e w ith m e.
In s titu tio n and B ra n c h ;
N a m e o f nearest re la tiv e n o t liv in g w ith
Spouse, J o in t A p p lic a n t, U s er, o r o th e r P a rty :
R e la tio n s h ip :
T e le p h o n e :
A d dress:
'
o Sigaatasse
Other Signature
(W here Applicable)
48038 ■ ' F ed eral R egister / Y qI. 5.0, No. 224 / Wednesday, Nqvpmbgt; 20, ,1985 / R ules and Regulations
[C o m m u n ity p ro p e rty ]
CREDIT APPLICATION
(Residential real estate mortgage loan}
RESIDENTIAL LOAN APPLICATION
Federal ISegiste / V ol 50, No. 224 / Wednesday, November 20,1985 / Rules and Regulations
BILLING CODE 6210-01-C
4S©4®) Federal Register / Vol, 50, No. 224 / Wednesday, Novemfeer ^O, 1985 / Rules and Regulations
Appendix C-=Sam p3 Notificaton Forms
©
T his ap p en d ix con tain s six sam ple
n otification forms. Forms C - l through C -4 are
in tend ed for u se in notifying an applicant that
ad verse action h a s b een taken on an
ap p lication or account under § 202.9 (a)(1)
and (2){i) o f this regulation. Form C -5 is a
n o tice o f d isclosu re o f the right to request
Specific rea so n s for ad verse action under
§ 202.9 (a)(1) and (2)(ii). Form C~6 is d esign ed
for u se in notifying an applicant, under
§ 202.9(c)(2), that an app lication is
incom plete.
Form C - l con tains the Fair Credit
Reporting A ct d isclosu re a s required by
sectio n s 015 (a) and (b) o f that act. Form s C -2
through C -5 con tain on ly the section 615(a)
d isclosu re (that a creditor ob tain ed
inform ation from a consum er reporting
agen cy that p layed a part in the credit
d ecision ). A creditor m ust provide the section
815(b) d isclosu re (that a creditor ob tain ed
inform ation from an ou tsid e source other
than a consum er reporting agen cy that p layed
a part in the credit d ecision ) w h ere
appropriate.
T he sam p le form s are illu strative and m ay
not b e appropriate for all creditors. T h ey
w ere d esign ed to include som e o f the factors
that creditors m ost com m only consider. If a
creditor ch o o se s to u se the ch eck list o f
reason s provid ed in on e o f the sam p le form s
in this ap p en d ix and if rea so n s com m only
u sed b y the creditor are not provid ed on the
form, the creditor should m odify the ch eck list
b y substituting or adding other reason s. For
exam p le, if “in ad eq uate d ow n p aym ent” or
"no d ep osit relation sh ip w ith u s” are
com m on reason s for taking ad verse action on
an application, the creditor ought to add or
su b stitu te.su ch rea so n s for th ose p resen tly
con tain ed on the sam p le forms.
If the reason s listed on the form s are not
the factors actu ally u sed , a creditor w ill not
sa tisfy the n otice requirem ent b y sim ply
checking the c lo s e st id en tifiab le factor listed .
For exam p le, som e creditors con sid er only
referen ces from ban k s or other d ep ository
institutions and disregard fin an ce com pany
referen ces altogether; their statem ent o f
rea so n s should d isclo se “in su fficien t bank
referen ces,” not "insufficient credit
referen ces.” Sim ilarly, a creditor that
con sid ers bank referen ces and other credit
referen ces a s d istin ct factors should treat the
tw o factors sep arately and d isc lo se them as
appropriate. T he creditor sh ou ld either add
su ch other factors to the form or ch eck
"other” and include the appropriate
exp lan ation . T he creditor n eed not, h ow ever,
d escrib e h ow or w h y a factor ad v ersely
affected the application. For exam p le, the
n otice m ay sa y “length o f resid en ce” rather
than “too short a period o f r esid en ce.”
A creditor m ay d esign its ow n n otification
form s or u se all or a portion o f the forms
con tain ed in this appendix. Proper u se o f
form s C - l through C -4 w ill sa tisfy the
requirem ent o f § 202.9(a)(2)(i). Proper u se o f
form s C -5 and C -6 con stitu tes full
com p lian ce w ith § § 202.9(a)(2)(h) and
202.9(c)(2), resp ectively.
SiUJMG CODE 6210-014S
Fsderal Register / Vol. 50, No. 224 / Wednesday, November 20,1985 / Rules and Regulations
4$®41
F R C-l — S M LE NOTICE O ACTION TAKEN A D STATEM T O R A O S
OH
AP
F
N
EN F E S N
Statement of Credit DenialB Termination^ or Change
D
ATE _ _
Applicants Nam
e:
Applicant's Address:
.
Description of Accounts Transactions ©r Requested Credit:
Description of Action Taken:
P R I - PRINCIPAL REASONS!S) F R CREDIT DENIAL, TERMINATION,
AT
O
O O H R ACTION TA E C N E N G CREDIT,,
R TE
K N O C R IN
This section must be completed in a ll Instances,
Credit application incomplete
Length of residence
Insu fficien t number of credit
references provided
Temporary residence
Unable to verify residence
Unacceptable type of credit
references provided
N credit f ile
o
Unable to verify credit references
Limited credit experience
Temporary or irregular employment
Poor credit performance with us
Unable to verify employment
Delinquent past or present cred it
obligations with others
Length of employment
Income in s u ffic ie n t for amount
’of credit requested
Excessive obligations in
relation to income
Unable to verify income
Other, specify:
Garnishment, attachment, foreclosure,
repossession, collection action, or
judgment
Bankruptcy
Value or type of collateral
not sufficent
48042
Federal Register,/ Vol. 50, No, 224 / Wednesday, November 20,1985 / Rules, and Regulations
F R C -l0 page
OM
1
PAR 11 - DISC SU E O U E O INFO ATION'' O
T
LO R F S F
RM
BTAINED F O A OUTSIDE SO R E,
RM N
UC
This section should be completed I f the credit decision was based
in whole or in part on information that has been obtained from an
outside sourceo
_
_
Our credit decision was based in whole ©r in part © Information obtained
n
in a report from the consumer reporting agency liste d below, You have a
right under the Fair Credit Reporting Act to knot* the ififormaiipacontained
in your credit f ile at the consumer reporting agency. The reporting' agency
played no part in our decision and is unable to supply specific reasons why
w have denied credit to you.
e
Nam
e:
Address:
Telephone .number: ______________
Our credit decision was based in whole or in part on information obtained
from an outside source other than a consumer reporting agency. Under the
Fair Credit Reporting Act, .you have the right to make a w ritte n request^
no later than 60 days after you receive th is notice, fo r disclosure of the
nature of this information,,
I f you have any questions regarding th is notice^ you should contact:
C reditors name: ________ __
Creditor's address: ________________
Creditor’ s telephone number: _ _ _ _ _ _
NOTICE
The federal Equal Credit Opportunity Act prohibits creditors fro® discrim inating
against credit applicants on the basis of rac@0 color,, re lig io n ,, national origin,,
$exB marital status„ age (provided the applicant has the capacity to enter into
a binding contract); because a ll or part of the applicant's income derives from
any public assistance program; ©r because the applicant has in good fa ith
exercised any right under the Consumer Credit Protection Act* The federal agency
that'administers compliance with this law concerning th is 'c re d i to r is (name and
address as specified by the appropriate agency liste d in Appendix A),
Federal Register / Vol. 50, No. 224 / Wednesday, November 20,1985 / Rules and Regulations
FORM
-C°2 — S M LE NOTICE O ACTIO TAK M A D STA M N O R A O S
AP
F
N
E N
TE E T F E S N
Date
Dear Applicant?
Thank you fo r your recent application,, Vour request for [a loan/a credit card/
an increase in your.credit lim it] was carefully considered9 and we regret that
we are unable to approve your application at th is time, for the following
reason(s):
Y U IN O E
QR C M?
is below our minimum requiremento
_ _ _ is in su fficie n t to sustain payments on the amount ©f credit
requested,,
could not be verified,,
Y U EM LO M N
O R P Y E T;
_ _ is not of sufficient length to qualify,,
~ could, not be verified,,
Y U CREDIT HISTORY;
OR
_ _ of making payments on time was not satisfactory0
_ _ could not be verified,,
Y U APPLICATION:
OR
lacks a sufficient number of credit references,,
_ _ _ lacks acceptable types of credit references,,
_ _ reveals that current obligations are excessive in relation to
incomeo
O
THER?
,
The consumer reporting agency contacted that provided information that influenced
our decision in whole or in part was [names address and telephone number of the
reporting agency],, The reporting agency is unable to supply specific reasons
why we have denied credit to you6 You do, however,, have a right under the Fair
Credit Reporting Act to know the information contained in your credit file ,, Any
questions regarding such information should be directed to [consumer reporting
agency]„
I f you have any questions regarding th is le tte r you should contact us at
[c re d ito rs namep address and telephone number],,
NO
TICE? The federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of races color0 re lig io n ,
national orgin0 sex0 marital, status;0 age (provided the applicant has the capacity
to enter into a binding contract); because a ll or part of the applicants
income derives from any public assistance program; or because the applicant has
in good fa ith exercised any right under the Consumer Credit Protection Act„
The federal agency that administers compliance with this law concerning th is
creditor is (name and address as specified by the appropriate agency lis te d in
Appendix A)„
48043
41S§#£
Federal Segfet©f / Vol. 50, No. 224 /Wednesday, November 20, 1985 / Rides and Regulations
F R C°3 — S M LE NO
OM
AP
TICE i f ACTION TAKEN AN S TE E T Of R A O S
D TA M N
ES N
(CREDIT SC R G
O IN )
Oat®
Dear Applicant:
Thank you fo r your recent application fo r
Be regret that we are unable to approve your request0
0
Your application was processed by a credit scoring system that
assigns a numerical value to the various items of information we.consider in
evaluating an application These numerical values are based upon the results
of analyses of repayment histories of large ninf>ers of customers.
The information you provided in your application did not score a
su ffic ie n t number of points for approval of the, application*, The reasons why
you did not score well compared to other applicants were:
* In su fficie n t bank references
* Type of occupation
* Insufficent credit experience
In evaluating your application the consumer reporting agency liste d
below provided us with information that in whole or in part influenced our decision0 The reporting agency played no part in our decision other than providing
us with credit information about you* Under the Fair.Credit Reporting Act, you
have a rig h t to know the information provided to us0 I t can be obtained by
contacting: [name, address, and telephone number of the consumer reporting
agency].*.
I f you have any questions regarding this le tte r, you should contact
us at
Creditor0 Name: t= = = =_ ^ ^
!
_ =_
■Address:
Telephone:
SincerelyD
NOTICE: The federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color, re lig io n ,
national o rig in , sex, marital status, age.(with certain lim ited exceptions);
because a ll or part of the applicant0! income derives from any public assistance
program; or because the applicant has in good fa itn exercised any rig h t under
the Consumer Credit Protection Act* The federal agency that administers compliance with this law concerning th is creditor is (name and address as specified
by the appropriate agency lis te d in .Appendix A)0
Federal
/ ¥©1. 50, Mo. 224 / Wednesday, ffow nb© SO 198S / Rules and Regulations
,'
FORM C-4 — SAMPLE NOTICE OF ACTION TAKEN, STATOTKT ©IF REASONS AND COUNTEROFFER
D a i®
Dear Applicant?
Thank y@ fo r your application fo r
y
■ He are-unable
«
to offer you credit on the Z m that-you requested fo r the following reasoftfgj?
®%
He can9 how®ver0
•
offer you credit on the following terras:
___________ ___ _____ __________________________________________________________________
.
_____ _____ o
If this o ffe r i$: acceptable to youplease n o tify us w ithin [amount of time] a t
the following address: _ =_ c _ _ = = = _ ^
= _
=_ =
Our credit decision on your application was te e d in'Whole or in part
on information obtained in a report from [namee address and telephone number of
the consumer reporting agency]8 You have a rig h t under the Fair Credit Reporting
Act to know the information contained in your credit f i l e at the consumer reporting
agency,,
You should know that the federal Equal Credit Opportunity Act prohibits
creditors,, .such as ourselves, from discriminating against credit applicants ©n
the basis of th e ir rac@9 c o lo r,-re lig io n , n a tio n a l'o rig in , sex0 marital status,
age because they receive income from a public assistance program,, ©r because
they m have exercised th e ir rights under the Consumer Credit Protection Act0
ay
I f you believe there has been discrimination in handling your application you
should contact the [name and address of the appropriate federal enforcement
agency liste d in Appendix A]
Si ncerely
<§© #l>
®
lacteal Register / Vol. 50, No. 224 / Wednesday, November 2G,1985 / Rules and Regulations
F R C-5 r - S M LE DISCLOSURE © RIGHT TO R Q E SPECIFIC R A O S F R CREDIT DENIAL
OM
AP
F
’ E U ST
ES N O
Date
Dear Applicant:
Thank you for applying to us for
0
After carefully reviewing your application,, we are sorry to advise you that we
cannot [open an account for you/grant a loan to you/irscrease your credit lim it]
at this time0
.,
I f you would lik e a statement of specific reasons why your application was
denied0 please contact [our credit service manager] shown below within 60 days
of the date of this Vetter. "W w ill provide you with the statement of reasons
e
within 30 days after receving your request.
Creditor's M e
am
Address
-Telephone number
I f we obtained information from a consumer reporting agency as part of our
consideration of your applications its name0 addre$s0 and telephone number is
shown belowo You can find out about the information contained in your f ile ( if.
one was used) by contacting:
Consumer reporting agency°s nam
e
. Address
Telephone number
S.incerely0
NO
TICE
The. federal Equal _-~dit Opportunity Act prohibits creditors from discriminating
against credit applicants on the basis of race8 colorD religion,, national o rig in 0
sex, marital status, age (provided the applicant has the capacity to enter into
a binding contract); because a ll or part of the applicant's income derives from
any public assistance program; or because the applicant has in good fa ith
exercised any rig ht under the Consumer Credit Protection Acto The federal agency
that administers compliance with this law concerning th is creditor is (name and
address as specified by the appropriate agency lis te d in Appendix A).
Fedora!
F R C°6
OM
j ¥oi. 50,'No. 224 / Wednesday, November 20,1SS5 /
and Regulations
SAM
PLE NOTICE O IN O PLETE APPLICATION AN R Q E F R
F CM
O E U ST O
ADDITIONAL INFO ATIO
RM N
Creditor°s nawe
Address
Telephone number
Date
Dear Applicant?
Thank you for your application for credito
The following information
is needed to wake a decision on your application?
ye need to receive this information by
(date)
I f we do not receive 1i
by that datec we w ill regrettably be unable to give further consideration to
your -credit request«
Sincerely*
BILLING CODE 8210-01-C
;48©48 lF®d©fpl Register / VoL 50, Mo. 224 / Wednesday, November 20, 1985 / Rules and Regulations
Appsw&iSn D— lssuance ® Staff
tf
Interpretations •
Official Staff Interpretations
O fficia ls in the Board’s D ivision o f
C onsum er and Com m unity A ffairs are
authorized to issu e official staff
interpretations o f this regulation. T h ese
interpretations provide the p rotection
afforded under sectio n 708(e) o f the act.
E xcep t in unusual circum stances, such
interpretations w ill not be issu ed sep arately
but w ill b e incorporated in an official
com m entary to the regulation, w h ich w ill be
am en d ed p eriodically.
Requests fdr Issuance of Official Staff
Interpretations
A request for an official sta ff interpretation
sh ou ld b e in writing and ad d ressed to the
Director, D iv isio n o f Consum er and
Com m unity A ffairs, Board o f G overnors o f
the F ederal R eserve System , W ashington,
D.C. 20551. T he request sh ou ld con tain a
co m p lete statem ent o f all relevan t facts
concerning the issu e, including co p ies o f all
pertinent docum ents.
Scope of Interpretations
N o sta ff interpretations w ill b e issu ed
approving creditor’s form s or statem ents.
T h is restriction d o es not apply to form s or
sta tem en ts w h o se u se is required or
san ctio n ed b y a governm ent agen cy.
Su p plem en t I—
-iOfficial S taff Interpretations
[Reg. B; ECO-1]
F ollow ing is an official sta ff interpretation
o f R egulation B issu ed under authority
d elegated by the Federal R eserve Board to
o fficials in the D ivision o f C onsum er and
Com m unity A ffairs. R eferen ces are to
sectio n s o f the regulation or the Equal Credit
Opportunity A ct (15 U.S.C. 1601 et seq.).
Introduction
1. Official status. S ection 708(e) o f the
Equal Credit O pportunity A ct p rotects a
creditor from civ il liab ility for an y act d on e
or om itted in good faith in conform ity w ith an
interpretation issu e d by a duly authorized
o fficial o f the F ederal R eserve Board. T his
com m entary is the m ean s b y w h ich the
D iv isio n o f C onsum er and Com m unity A ffairs
o f the F ederal R eserve Board issu es official
sta ff interpretations o f Regulation B. G oodfaith com p lian ce w ith this com m entary
affords a creditor protection under se ctio n
706(e) o f the act.
2. Issuance of interpretations. U nder
A p p en d ix D to the regulation, an y person
m ay request an official sta ff interpretation.
Interpretations w ill be issu ed at the
d iscretio n o f d esign ated officials and
incorporated in this com m entary follow in g
p u b lication for com m ent in the Federal
R egister. E xcept in unusual circu m stan ces,
o fficia l sta ff interpretations w ill b e issu ed
o n ly b y m ean s o f this com m entary.
3. Status of previous interpretations.
Interpretations o f Regulation B p reviou sly
issu ed by the Federal R eserve Board and its
sta ff h a v e b een incorporated into this
com m entary a s appropriate. A ll other
previou s Board and sta ff interpretations,
officia l and unofficial, are su p ersed ed by this
com m entary
4. Footnotes. F ootn otes in the regulation
h ave the sam e legal effect a s the text o f the
regulation, w h eth er they are exp lan atory or
illustrative in nature, .
5. Comment designations. The com m ents
are d esign ated w ith a s m uch sp ecificity as
p ossib le according to the particular
regulatory p rovision ad d ressed . Each
com m ent in the com m entary is id en tified b y a
number an d the regulatory se ctio n or
paragraph that it interprets. For exam p le,
com m ents to se ctio n 202.2(c) are further
d ivid ed b y subparagraph, su ch a s com m ent
2 (c )(l)(ii)-l and com m ent 2(c)(2 )(ii)-l.
Section 202.1—Authority, Scope, and Purpose
1(a) Authority and scope.
1. Scope. T he Equal Credit O pportunity A ct
and R egulation B ap p ly to all credit—
com m ercial a s w e ll a s p ersonal—w ithou t
regard to the nature or type o f the credit or
the creditor. If a tran saction p rovid es for the
deferral o f the p aym ent o f a debt, it is credit
covered b y R egulation B e v e n thou gh it m ay
not b e a credit tran saction covered by
R egulation Z (Truth in Lending). Further, the
definition o f creditor is n ot restricted to the
party or person to w h om the obligation is
in itially p ayab le, a s is the c a s e under
R egulation Z. M oreover, the act and
regulation apply to all m eth od s o f credit
evalu ation , w h eth er perform ed judgm entally
or by u se o f a credit scoring system .
2. Foreign applicability. R egulation B
gen erally d o es n ot ap p ly to len d in g a ctivities
that occur ou tsid e the U n ited S tates. The
regulation d o es ap p ly to len d in g a ctivities
that take p la ce w ithin the U n ited S tates (as
w e ll a s the C om m on w ealth o f Puerto Rico
and any territory or p o ss e ss io n o f the U nited
States), w h eth er or not the ap p lican t is a
citizen.
Section 202.2—Definitions
2(c) Adverse action.
Paragraph 2(c)(l)(ii)
1. Move from service area. If a credit card
issu er term inates the op en -en d accou n t o f a
custom er b eca u se the cu stom er h a s m oved
out o f the card issu er's service area, the
term ination is " adverse action" for p urposes
o f the regulation u n less term ination on this
ground w a s exp licitly p rovid ed for in the
credit agreem ent b e tw e e n the parties. In
c a s e s w ere term ination is a d verse action,
n otification is required under § 202.9.
2. Termination based on credit limit. If a
creditor term inates credit accou n ts that h ave
lo w credit lim its (for exam p le, under $400)
but k eep s op en accou n ts w ith highej credit
lim its, the term ination is a d verse action and
n otification is required under § 202.9.
Paragraph 2(c)(2)(ii)
1.
Default—exercise of due-on-sale clause.
If a m ortgagor se lls or transfers m ortgaged
property w ithou t the co n sen t o f the
m ortgagee, and the m ortgagee ex erc ises its
contractual right to accelerate the m ortgage
loan, the m ortgagee m ay treat the m ortgagor
a s being in default. A n a d verse action n otice
n eed not b e given to the m ortgagor or the
transferee. (S ee com m ent 2{e)-l for treatm ent
o f a purchaser w h o req u ests to assu m e the
loan.)
Paragraph (2)(c)(2)(iii)
1.
Point-of-sale transactions. D en ia l o f
credit at point o f s a le is n o t a d verse action
ex cep t under th ose circu m stan ces sp ecified
in the regulation. For exam p le, denial, at
point o f s a le is not ad v erse action iri the
follow in g situations:
° A credit cardholder p resen ts an expired
card or a card that h a s b een reported to the
card issu er a s lo st Or stolen .
G T he am ount o f a tran saction e x c e e d s a
ca sh ad v a n ce or credit limit.
e T he circu m stan ces (such a s e x c e s siv e
u se o f a credit card in a sh ort period o f time)
su ggests that fraud is in volved .
° T he authorization fa cilities are not
functioning.
° Billing statem en ts h a v e b een returned to
the creditor for lack o f a forw arding ad d ress.
Paragraph 2(c)(2)(v)
1.
Terms of credit versus type of credit
offered. W h en an ap p lican t ap p lies for credit
and the creditor d o es n ot offer the credit
term s req u ested b y the applicant (for
exam p le, the in terest rate, length o f maturity,
collateral, or am ount o f d ow npaym ent), a
d e n ia l o f the ap p lication for that rea so n is
ad v erse action (u n less the creditor m akes a
counteroffer that is a ccep ted b y the
ap p lican t) and the ap p lican t is en titled to
n otification under § 202.9.
2(e) Applicant.
1.
Request to assume loan. If a m ortgagor
se lls or transfers the m ortgaged property and
the buyer m akes an ap p lication to the
creditor to assu m e the m ortgage loan, the
m ortgagee m ust treat the buyer a s an
ap p lican t u n less its p olicy is not to perm it
assum ptions..
2(f) Application.
1. General. A creditor h as the latitude
under the regulation to esta b lish its o w n
ap p lication p rocess and to d ecid e the'type
an d am ount o f inform ation it w ill require
from credit a p p lican ts.
2. "Procedures established. ” T he terni
refers to the actu al p ractices fo llo w ed by a
creditor for m aking credit d ecisio n s a s w ell
a s its stated ap p lication procedures. For
exam p le, if a creditor’s stated p olicy is to
require all ap p lication s to b e in w riting on the
creditor's ap p lication form, but the creditor
a lso m akes credit d ecisio n b a sed on oral
req u ests, the creditor’s esta b lish procedures
are to accep t both oral and w ritten
ap p lication s.
3. When an inquiry becomes an
application. A creditor is en cou raged to
provide con su m ers w ith inform ation about
loan term s. H ow ever, if in giving inform ation
to the con su m er the creditor a lso ev a lu a tes
inform ation about the appliant, d ecid es to
d eclin e the request, an d com m u n icates this to
the applicant, the creditor h a s treated the
inquiry a s an ap p lication and m ust then
com p ly w ith the n otification requirem ents
under § 202.9. W h ether the inquiry b eco m es
an ap p lication d ep en d s on h o w the creditor
resp ond s to the applicant, not o n w h at the
appliant s a y s or asks.
4 Examples of inquiries that are not
applications. T he follow in g ex a m p les
illustrate situ ation s in w h ich o n ly an inquiry
h a s taken place:
Federal Register / Vo!. 50,'No. 224 / W ednesday, November 20, 1985 / Rules and Regulations 4804$
® W hen a consum er ca lls to ask s about
loan term s and an em p loyee exp lain s the
creditor’s b a sic loan term s, such a s interest
rates, lo an to valu e ration, and debt to
incom e ratio.
. *.■W h en a con su m er calls to ask about
?
interest rates for car loan s, and, in order to
quote the appropriate rate, the loan officer
a sk s for the,m ake and sa le p rice o f the car
and iamount o f the dow n-paym ent, then given
the consum er the rate.
0 W h en a consum er a sk s about term s for a
lo a n to purchase hom e and tells the loan
officer her incom e and in tend ed dow n paym ent, but the loan officer on ly exp lain s
the creditor’s loan to valu e ratio p olicy and
other b a sic lending p olicies, w ithout telling
the consum er w h eth er sh e q u alifies for the
loan.
° When a consumer calls to ask about
terms for a loan to purchase vacant land and
states.'his'income*/the. sale price of the
property to be. financed, and asks whether he
qualifies for a loan, and the employee
responds by describing the general lending
policies, explaining that he would need to
look at all of the applicant’s qualifications
before making a decision, and offering to
send an application form to the consumer.
5.
Completed application^—diligence
requirement. The regulation d efin es a
com p lete application in term s that give a
creditor the latitude to esta b lish its ow n
inform ation requirem ents. N ever th eless, the
creditor m ust act w ith reason ab le d iligen ce to
co llect inform ation n eed ed to com p lete the
application. For exam p le, the creditor should
request inform ation from third parties, such
a s a credit report, prom ptly after receiving
the application. If ad d ition al inform ation is
n eed ed from the applicant, such a s an
ad d ress or telep h one num ber n eed ed to
verify em ploym ent, the creditor should
con tact the applicant prom ptly.
2(j) Credit.
1.
General. R egulation B covers a w id er
range o f credit tran saction s than Regulation
Z (Truth in Lending). For p u rp oses o f
R egulation B a transaction is credit if there is
a right to defer paym ent o f a debt—
regard less o f w h eth er the credit is for
p ersonal or com m ercial purposes, the number
o f in stallm en ts required for repaym ent, or
w h eth er the transaction is subject to a
finan ce charge.
2(1) Creditor.
1. Assignees. T he term “creditor” in clu d es
all p erson s participating in the credit
d ecisio n . T h is m ay in clu d e an a ssig n ee or a
p otential purchaser o f the obligation w ho
in flu en ces the credit d ecisio n b y indicating
w h eth er or n ot it w ill purchase the obligation
if the transaction is consum m ated.
2. Referrals to creditors. For certain
purposes, the term “creditor” in clu d es
p erso n s su ch a s real e s ta te brokers w h o do
not p articipate in credit d ecisio n s but w h o
regularly refer applicants to creditors or w h o
se lect or offer to se lect creditors to whom
credit req u ests can b e m ade. T h e s e persons
m ust com ply w ith § 202.4, the general rule
prohibiting discrim ination, and w ith
§ 202.5(a), on discouraging a p p lication s.
2(p) Empirically derived; and other credit
systems.
, 1. Purpose o f definition. The definition
un d er § 202,2(p)(l) through (iv) se ts the
criteria that a credit system m ust m eet in
order for the system to u se age a s a
predictive factor. Credit sy stem s that do not
m eet th ese criteria are judgm ental sy stem s
and m ay con sid er age only for the purpose o f
determ ining a “pertinent elem ent o f
cred itw orth in ess.” (Both typ es o f system s
m ay favor an eld erly applicant. S ee
§ 202.6(b)(2).)
2.
Periodic revalidation. The regulation
d o es not sp ecify h o w often credit scoring
sy stem s m ust b e revalidated. To m eet the
requirem ents for statistical sou n d n ess, the
credit scoring system m ust b e revalid ated
frequently enough to assu re that it con tinu es
to m eet recognized p rofession al statistical
standards.
2(w) Open-end credit.
1.
Open-end real estate mortgages. The
term “op en -end credit” d o es not include
n egotiated a d v a n ces under an op en -end real
esta te m ortgage or a letter o f credit.
2(z) Prohibited basis.
1. Persons associated with applicant.
"Prohibited b a sis” as u sed in this regulation
refers to the race, color, religion, n ation al
origin, se x , m arital status, or age o f an
applicant (or officers of an applicant in the
c a se o f a corporation). The term a lso refers to
the ch aracteristics o f in d ivid u als w ith w hom
an applicant is affiliated or w ith w hom the
applicant a sso cia tes. This m ean s, for
exam p le, that under the general rule stated in
§ 202.4, a creditor m ay not discrim inate
against an applicant b eca u se o f that p erson ’s
p ersonal or b u sin ess d ealin gs w ith m em bers
o f a certain religion, b eca u se o f the n ation al
origin o f an y p ersons a sso cia ted ivith the
ex ten sio n o f credit (such a s the ten ants in the
apartm ent com p lex being finan ced), or
b eca u se o f the race o f other resid en ts in the
neighborhood w h ere the property offered as
collateral is located .
2. National origin. A creditor m ay not
refuse to grant credit b eca u se an applicant
com es from a particular country but m ay take
the applicant’s im m igration statu s into
account. A creditor m ay a lso take into
accou n t an y ap p licab le la w , regulation, or
ex ecu tiv e order restricting d ealin gs w ith
citizen s (or the governm ent) o f a particular
country or im posing lim itation s regarding
credit ex ten d ed for their use.
3. Public assistance program. A n y federal,
state, or lo ca l governm ental a ssista n ce
program that provides a continuing, periodic
incom e supplem ent, w h eth er p rem ised on
entitlem ent or n eed , is “public a ssista n c e ” for
p urposes o f the regulation. T he term in clu d es
(but is not lim ited to) A id to F am ilies w ith
D ep en d en t Children, food stam ps, rent and
m ortgage supplem ent or a ssista n ce program s,
S ocial Security and Supplem ental Security
Incom e, and unem ploym ent com p en sation.
O nly p h ysician s, h osp itals, and others to
w hom the b en efits are p ayab le n eed con sid er
M edicare and M edicaid a s pu b lic a ssista n ce.
on a prohibited b a sis, and to an y other
p rovision not sp ecifica lly ex cep ted .
3(a) Public utilities credit.
1. Definition. This definition ap p lies on ly to
credit for the purchase o f a utility service,
such a s electricity, gas, or telep h o n e service.
Credit provided or offered by a p u b lic utility
for som e other purpose— su ch a s for
financing the purchase o f a g a s dryer,
telep h on e equipm ent, or other durable g ood s,
or for in su lation or other hom e
im provem ents— is not ex cep ted .
2. Security deposits. A u tility com p any is a
creditor w h en it su p p lies utility se rv ice and
b ills the u ser after the se rv ice h a s b een
provided. Thus, an y credit term (su ch a s a
requirem ent for a secu rity d ep o sit) is subject
to the regulation.
3(c) Incidental credit.
1.
Examples. If a serv ice provider (such a s
a h ospital, doctor, la w y er or retailer) a llo w s
the clien t or custom er to defer the p aym ent o f
a bill, this deferral o f debt is credit for
p u rp oses o f the regulation, e v en though there
is no fin an ce charge and no agreem ent for
p aym ent in in stallm en ts. B eca u se o f the
ex cep tio n s provided b y this section , h o w ev er,
th ese particular credit ex ten sio n s are
ex cep ted from com p lian ce w ith certain
procedural requirem ents a s sp ecified in the
regulation.
3(d) Business credit.
1. Definition. T he test for d ecid in g w h eth er
a tran saction q u alifies a s b u sin ess credit is
on e o f primary purpose. For exam p le, an
op en -end credit account u sed for both
p ersonal and b u sin ess p u rp oses is not
b u sin ess credit u n less the primary purpose o f
the accou n t is b u sin ess-related . A creditor
m ay rely on an ap p lican t’s statem en t o f the
purpose for the credit requested.
Paragraph 3(d)(3)
1. Notification. A creditor is required in all
c a s e s to notify a b u sin ess credit applicant o f
action -tak en on an application w ith in a
reason ab le tim e o f receiving a co m p leted
ap p lication . T his n otification m ay b e w ritten
or oral.
3(e) Government credit.
1. Credit to governments. T he ex cep tio n
relates to credit exten d ed to (not by)
governm ental en tities. For ex a m p le, credit
exten d ed to a lo ca l governm ent b y a creditor
in the private sector is co v ered b y this
excep tion , but credit .exten d ed to consum ers
b y a fed eral or state hou sin g a g en cy d o es not
qualify for sp ecial treatm ent under this
category.
Section 202.4—General Rule Prohibiting
Discrimination
3. Scope o f section. T he gen eral rule stated
in § 202.4 covers all d ealin gs, w ithou t
excep tion , b etw een an ap p lican t and a
creditor, w h eth er or n ot a d d ressed by other
p rovision s o f the regulation. O ther sectio n s o f
the regulation id en tify sp ec ific p ractices that
Section 202.3—Lim ited Exceptions fo r
the Board h as d ecid ed are im perm issible
Certain Classes o f Transactions
b eca u se they could result in credit
1.
Scope. T his section reliev es burdens w ith discrim ination on a b a sis prohibited b y the
act. T he gen eral rule co v ers, for ex a m p le,
regard to certain typ es o f credit for w h ich full
ap p lication procedures, criteria u sed to
ap p lication o f the procedural requirem ents o f
evalu ate cred itw orth in ess, adm inistration o f
the regulation is not need ed ; AH c la s s e s of
accou n ts, and treatm ent o f delinquent or
transactions rem ain su b ject to the general
slo w accou n ts. Thus, w h eth er or not
rule given in § 202.4, barring discrim ination
4i®S0 Federal. Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations
specifically prohibited elsewhere in the
regulation, a credit practice that treats
applicants differently on a prohibited basis
violates the law because it violates the
general rule.
Section 202.5—Rules Concerning Taking of
Applications
5(a) Discouraging applications.
1. Potential applicants. Generally, the
regulation’s protections apply only to persons
who have requested or received an extension
of credit. In keeping with the purpose o f the
act—to promote the availability of credit on a
nondiscriminatory basis § 202.5(a) covers
acts or practices directed at potential
applicants. Practices prohibited by this
section include:
° A statement that the applicant should
not bother to apply, after the applicant states
that he is retired.
° Use of words, symbols, models or other
forms of communication in advertising that
express, imply or suggest a discriminatory
preference or a policy of exclusion in
violation of the act.
• Use of interview scripts that discourage
applications on a prohibited basis.
2. Affirmative advertising. A creditor may
affirmatively solicit or encourage members o f
traditionally disadvantaged groups to apply
for credit, especially groups that might not
.normally seek credit from that creditor.
5(b) General rules concerning requests for
information.
1. Requests for information. This section
governs the types of information that a
creditor may gather. Section 202.6 governs
how information may be used.
5{d) Other limitations on information
requests.
Paragraph 5(d)(1)
1. Indirect disclosure of prohibited
information. The fact that certain creditrelated information may indirectly disclose
marital status does not bar a creditor from
seeking such information. For example, the
creditor may ask about:
0 The applicant’s obligation to pay
alimony, child support, or separate
maintenance.
° The source of income to be used as the
basis for repaying the credit requested, which
could disclose that it is the income of a
spouse.
° Whether any obligation disclosed by the
applicant has a co-obligor, which could
disclose that the co-obligor is a spouse or
former spouse.
o The ownership of assets, which could
disclose the interest of a spouse.
Paragraph 5(d)(2)
1. Disclosure about income. The sample
application forms in Appendix B to the
regulation illustrate how a creditor may
inform an applicant of the right not to
disclose alimony, child support, or separate
maintenance income.
2. General inquiry about source of income.
Since a general inquiry about the source of
income may lead an applicant to disclose
alimony, child support, or separate
maintenance, a creditor may not make such
an inquiry on an application form without
prefacing the request with the disclosure
required by this paragraph.
3.
Specific inquiry about sources of income.relationship betw een the income requirement
and creditworthiness for the level of credit
A creditor need not give the disclosure if the
inquiry about income is specific and worded
involved, however, use of the income
in a w ay that is unlikely to lead the applicant
standard would likely be permissible.
to disclose the fact that income is derived
6(b) Specific rules concerning use of
from alimony, child support or separate
information.
maintenance payments. For example, an
Paragraph 6(b)(1)
application form that asks about specific
1. Prohibited basis—marital status. A
types of income such as salary, wages, or
creditor may not use marital status as a basis
investment income need not include the
for determining the applicant's
disclosure.
creditworthiness. However, a creditor may
5(e) Written applications.
consider an applicant’s marital status for the
1. Requirement for written applications.
purpose of ascertaining the creditor’s rights
The requirement of written applications for
and remedies applicable to the particular
certain types of dwelling-related loans is
extension of credit. For example, in a secured
intended to assist the federal supervisory
transaction involving real property, a creditor
agencies in monitoring compliance with the
could take into account whether state law
ECOA and the Fair Housing Act. Model
gives the applicant's spouse an interest in the
application forms are provided in Appendix B
property being offered as collateral.
to the regulation, although use of a printed
2. Prohibited basis—special purpose credit.
form of any kind is not required. A creditor
In a special purpose credit program, a
will satisfy the requirement by writing down
creditor may consider a prohibited basis to
the information that it normally considers in
determine whether the applicant p ossesses a
making a credit decision. The creditor may
characteristic needed for eligibility. (See
complete the application on behalf of an
| 202. 8 .)
applicant and need not require the applicant
Paragraph 6(b)(2)
to sign the application.
1. Favoring the elderly. Any system of
2. Telephone applications. A creditor that
evaluating creditworthiness may favor a
accepts applications by telephone for
credit applicant who is age 92 or older.
dwelling-related credit covered by section
2. Consideration of age in a credit scoring
202.13 can m eet the requirements for written
system. Age may be taken directly into
applications by writing dow n pertinent
account in a credit scoring system that is
information that is provided by the
“demonstrably and statistically sound," as
applicants).
defined in § 202.2(p), with one limitation: an
3. Computerized entry. Information entered
applicant who is 82 years old or older must
directly into and retained by a computerized
be treated at least as favorably as anyone
system qualifies as a written application
who is under age 02.
under this paragraph. (See the commentary to
3. Consideration of age in a judgmental
I 202.13(b).)
system. In a judgmental system, defined in
Section 202.6—Rules Concerning Evaluation
§ 202.2(t), a creditor may not take age directly
of Applications
into account in any aspect of the credit
6(a) General rule concerning use of
transaction. For example, the creditor may
information.
not reject an application or termiiiate an
account because the applicant is 60 years old.
1. General. W hen evaluating an application
But a creditor that uses a judgmental system
for credit, a creditor generally may consider
any information obtained. However, a
may relate the applicant’s age to other
information about the applicant that the
creditor may not consider in its evaluation of
creditor considers in evaluating
creditworthiness any information that it is
barred by § 202.5 from obtaining.
creditworthiness. For example:
° A creditor may consider the applicant's
2. Effects test The effects test is a judicial
occupation and length of time to retirement to
doctrine that w as developed in a series of
employment cases decided by the Supreme
ascertain whether the applicant’s income
(including retirement income) will support the
Court under Title VII of the Civil Rights Act
of 1984 (42 U.S.C. 2000e et seq.).
extension of credit to its maturity.
Congressional intent that this doctrine apply
° A creditor may consider the adequacy of
to the credit area is documented in the Senate
any security offered when the term of the
Report that accompanied H.R. 6516, No. 94credit extension exceeds the life expectancy
589, pp. 4-5; and in the House Report that
of the applicant and the cost of realizing on
accompanied H.R. 6516, No. 94-210, p. 5. The
the collateral could exceed the applicant’s
act and regulation may prohibit a creditor
equity. (An elderly applicant might not
practice that is discriminatory in effect
qualify for a 5 percent down, 30-year
because it has a disproportionately negative
mortgage loan but might qualify with a larger
impact on a prohibited basis, even though the
downpayment or a shorter loan maturity.)
creditor has no intent to discriminate and the
® A creditor may consider the applicant's
practice appears neutral on is face, unless the
age to a ssess the significance of the length of
creditor practice m eets a legitimate business
the applicant’s employment (a young
need that cannot reasonably be achieved as
applicant may have just entered the job
well by means that are less disparate in their
market) or length of time at an address (an
impact. For example, requiring that
elderly applicant may recently have retired
applicants have incomes in excess o f a
and moved from a long-time residence).
certain amount to qualify for an overdraft
4. Consideration of age in a combined
line of credit could mean that women and
system. A creditor using a credit scoring
minority applicants will be rejected at a
system that qualifies as “empirically derived"
higher rate than men and non-minority
under § 202.2(p) may consider other factors
applicants. If there is a demonstrable
(such as credit report or the applicant's cash
Federal Register / Vol. 50, No. 224 / Wednesday, November 20* 1985 / Rules and Regulations 48051
flow ) on a judgm ental b a sis. Doing so w ill not
n egate the classification o f the credit scoring
com p onent of the com bined system as
“d em onstrably and statistically sou n d .’’
W hile age could be u sed in the credit scoring
portion, h ow ever, in the judgm ental portion
age m ay not b e con sid ered directly. It m ay be
u sed o n ly for the purpose o f determ ining a
"pertinent elem en t o f cred itw orth in ess.” (See
com m ent 6(b)(2)—
3.)
5. Consideration of public assistance.
W hen considering incom e d erived from a
public a ssista n ce program, a creditor m ay
take into account, for exam ple:
° T he length o f tim e an applicant w ill
likely rem ain eligib le to receive such incom e.
0 W hether the applicant w ill con tinu e to
qualify for b en efits b a sed on the statu s o f the
ap p lican t’s d ep en d en ts (such a s A id to
Fam ilies w ith D ep en d en t Children or Social
Security paym ents to a minor).
0 W hether the creditor can attach or
garnish the incom e to assu re paym ent o f the
debt in the even t of default.
Paragraph 6(b)(5)
1.
Consideration of an individual applicant.
A creditor m ust evalu ate in com e d erived
from part-tim e em ploym ent, alim ony, child
support, separate m ainten an ce, retirem ent
b en efits, or public a ssista n ce (all referred to
a s “protected in com e”) on an individual
b a sis, not on the b a sis o f aggregate statistics,
and m ust a s s e s s its reliab ility or unreliability
by an alyzin g the applicant's actual
circum stances, not b y an alyzin g statistical
m easu res d erived from a group.
2. Payments consistently made. In
determ ining the lik elihood o f con sisten t
p aym ents o f alim ony, child support, or
separate m aintenance, a creditor m ay
co n sid er factors such a s w h eth er paym ents
are receiv ed pursuant to a w ritten agreem ent
or court decree; the length o f tim e that the
p aym en ts h a v e b een received; w h eth er the
paym ents are regularly received b y the
applicant; the availab ility o f court or other
procedures to com pel paym ent; and the
cred itw orth in ess o f the payor, including the
credit history o f the p ayor w h en it is
a v a ila b le to the creditor.
3. Consideration of income. A creditor n eed
not con sid er in com e at all in evalu atin g
cred itw orth in ess. If a creditor d o es con sid er
incom e, there are several a ccep tab le
m ethods, w h eth er in a credit scoring or a
judgm ental system :
° A creditor m ay score or take into
accou n t the total sum o f all in com e stated by
the applicant w ithou t taking step s to evalu ate
the incom e.
• A creditor m ay evalu ate each com ponent
o f the ap p lican t’s incom e, and then score or
ta k e into accou n t reliab le in com e separately
from in com e that is not reliab le, or the
creditor m ay disregard that portion o f incom e
that is not reliab le before aggregating it w ith
relia b le incom e.
® A creditor that-d o e s not evalu ate all
in com e com p onents for reliab ility m ust treat
a s reliab le an y com ponent o f protected
in com e that is not evalu ated .
In considering the separate, com p onents o f
an applicant's incom e, the creditor m ay not
au tom atically discou n t or ex clu d e from
con sid eration any protected in com e. A ny
discounting or exclu sion m ust b e b a sed on
the applicant’s actual circum stances.
4.
Part-time employment, sources o f
income. A creditor m ay score or take into
account the fact that an individual applicant
h as m ore than one source of earned in com e—
a full-tim e and a part-time job or tw o parttim e jobs. A creditor m ay a lso score or treat
earned incom e from a secon d ary source
differently than earned incom e from a
primary source. H ow ever, the creditor m ay
not score or oth erw ise take into accou n t the
num ber o f sou rces for protected incom e— for
exam p le, retirem ent incom e, so cia l security,
alim ony. N or m ay the creditor treat
n egatively the fact that an applicant's Only
earned incom e is derived from a part-tim e
job.
Paragraph 6(b)(6)
1.
Types of credit references. A
creditor
m ay restrict the types o f credit history and
credit referen ces that it w ill consider,
provided that the restrictions are ap p lied to
all credit ap p lican ts w ithout regard to sex,
marital statu s, or an y other prohibited b a sis.
H ow ever, on the applicant’s request, a
creditor m ust consider, credit inform ation not
reported through a credit bureau w h en the
inform ation relates to the sam e typ es o f
credit referen ces and history that the creditor
w ould con sid er if reported through a credit
bureau.
Paragraph 6(b)(7)
1. National origin—immigration status. T he
applicant’s im m igration statu s and ties to th e
com m unity (such a s em ploym ent and
continued resid en ce in the area) could h a v e a
bearing on a creditor’s ab ility to obtain
repaym ent. A ccordingly, the creditor m ay
con sid er and differentiate, for exam p le,
b etw een a n on citizen w h o is a long-tim e
resident w ith perm anent resid en t statu s and
a n on citizen w h o is tem porarily in this
country on a stu d en t v isa .
2. National origin — citizenship. U nder the
regulation a d en ial o f credit on the ground
that an ap p lican t is not a U nited S tates
citizen is nor per se d iscrim ination b a sed on
n ation al origin.
Section 202.7—Rules Concerning Extensions
o f Credit
7(a) Individual accounts.
1.
Open-end credit—authorized user. A
creditor m ay not require a creditw orthy
applicant seek ing an ind ivid u al credit
account to provide ad d ition al signatures.
H ow ever, d ie creditor m ay con d ition the
d esign ation o f an authorized u ser b y the
account holder on the authorized u ser’s
becom ing contractually liab le for the account,
as long as the creditor d o es not differentiate
on any prohibited b a sis in im posing this
requirem ent.
2. Open-end credit—choice of authorized
user. A creditor that perm its an accou n t
holder to d esign ate an authorized u ser m ay
not restrict this d esign ation on a prohibited
b a sis. For exam p le, if the creditor a llo w s the
d esign ation o f sp o u ses a s authorized users,
the creditor m ay not refuse to a ccep t a n on
sp o u se a s an authorized user.
3. Overdraft authority on transaction
accounts. If a transaction accou n t (such a s a
checking accou n t or N O W account) in clu d es
an overdraft lin e of credit, the creditor m ay
require that all p ersons authorized to draw
on the transaction accou n t a ssu m e liab ility
for any overdraft.
7(b) Designation o f name.
1. Single name on account. A creditor m ay
require that joint ap p lican ts on an accou n t
d esign ate a sin gle nam e for p u rp oses o f
adm inistering the accou n t and that a single
nam e b e em b o ssed on any credit card(s)
issu ed on the account. But the creditor m ay
not require that the nam e b e the h u sb a n d ’s
nam e. (See § 202.10 for rule governing the
furnishing o f credit history on a cco u n ts held
b y sp ou ses.)
7(c) Action concerning existing open-end
accounts.
Paragraph 7(c)(1)
1. Termination coincidental with m arital
status change. W h en an account h old er’s
m arital statu s ch an ges, a creditor gen erally
m ay n ot term inate the accou n t u n less it h as
ev id en ce that the account holder is un ab le or
unw illing to repay. But the creditor m ay
term inate an accou n t on w h ich both sp o u ses
are jointly liab le, ev en if the action co in cid es
w ith a change in m arital status, w h en on e or
both sp ou ses:
° R epudiate resp onsib ility for future
charges on the joint account.
° R equest separate accou n ts in their o w n
n am es.
° R equest that the joint accou n t b e clo sed .
2. Updating information. A creditor m ay
p eriod ically request updated inform ation
from ap p lican ts but m ay not u se ev en ts
related to a prohibited b a sis— such a s an
ap p lican t’s retirem ent, reaching a particular
age, or change in n am e or m arital statu s— to
trigger such a request.
Paragraph 7(c)(2)
1. Procedure pending reapplication. A
creditor m ay require a reapplication from a
con tractually liab le party, ev en w h en there is
n o ev id en ce o f u n w illin gn ess or in ab ility to
repay, if (1) the credit w a s b a sed on the
q u alification s o f a person w h o is n o longer
a v ailab le to support the credit and (2) the
creditor h as inform ation indicating that the
account h old er’s in com e b y itse lf m a y be
in su fficien t to Support the credit. W h ile a
reapplication is pending, the creditor m ust
a llo w the accou n t hold er full a c c e s s to the
accou n t under the ex istin g contract term s.
The creditor m ay sp ecify a rea so n a b le time
period w ithin w h ich the accou n t h o ld er m ust
subm it the required inform ation.
7(d) Signature o f spouse or other person.
1. Qualified applicant. T he signature rules
assu re that qualified a p p lican ts are a b le to
ob tain credit in their o w n n am es. Thus, w h en
an applicant req u ests in d ivid u al credit, a
Creditor gen erally m ay n ot require the
signature o f another p erson u n less the
creditor h a s first d eterm ined that the
applicant alon e d o e s n ot qu alify for the credit
requested.
2. Unqualified applicant. W h en an
applicant ap p lies for in d ivid u al credit but
d o es n ot alon e m eet a creditor’s standards,
the creditor m ay require a cosigner, guarantor
dr the like— but Cannot require that it b e the
sp ou se. (S ee com m entary to § 202.7(d) (5) and
( 6)0
4B M Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations
C S2
Paragraph 7(d)(1)
1 .Joint applicant The term “joint
applicant" refers to som eone who applies
contemporaneously with the applicant for
shared or joint credit. It does not refer to
someone whose signature is required by the
creditor as a condition for granting the credit
requested.
Paragraph 7(d)(2)
1. Jointly owned property. In determining
the value of the applicant’s interest in jointly
owned property, a creditor may consider
factors such as the form of ownership and the
property’s susceptibility to attachment,
execution, severance, or partition and the
cost of such action. If the applicant’s interest
in the property does not support the amount
and terms of credit sought, the creditor may
give the applicant some other option of
providing additional support for the
extension of credit. For example:
o Requiring an additional party under
§ 202.7(d)(5).
° Offering to grant the applicant’s request
on a secured credit basis.
° Asking for the signature of the co-owner
of the property on an instrument that assures
access to the property but does not impose
personal liability unless necessary under
state law.
2. Need for signature—reasonable belief. A
creditor’s reasonable belief as to what
instruments need to be signed by a person
other than the applicant should be supported
by a thorough review of pertinent statutory
and decisional law or an opinion of the state
attorney general.
Paragraph 7(d)(3)
1. Residency. In assessing the
creditworthiness of a person who applies for
credit in a community property state, a
creditor may assume that the applicant is a
resident of the state unless the applicant
indicates otherwise.
Paragraph 7(d)(4)
1. Creation of enforceable lien. Some state
law s require that both spouses join in
executing any instrument by which real
property is encumbered. If an applicant offers
such property as security for credit, a creditor
may require the applicant’s spouse to sign the
instruments necessary to create a valid
security interest in the property. The creditor
may not require the spouse to sign the note
evidencing the credit obligation if signing
only the mortgage or other security
agreement is sufficient to make the property
available to satisfy the debt in the event of
default. However, if under state law both
spouses must sign the note to create an
enforceable lien, the creditor may require
them to do so.
2. Need for signature—reasonable belief
Generally, a signature to make the secured
property available will only be needed on a
security agreement. A creditor’s reasonable
belief that, to assure access to the property,
the spouse’s signature is needed on an
instrument that imposes personal liability
should be supported by a thorough review of
pertinent statutory and decisional law or an
opinion of the state attorney general.
3. Integrated instruments. W hen a creditor
uses an integrated instrument that combines
the note and the security agreement, the
spouse cannot be required to sign the
integrated instrument if the signature is only
needed to grant a security interest. But the
spouse could be asked to sign an integrated
instrument that makes clear—for example, by
a legend placed next to the spouse’s
signature—that the spouse’s signature is only
to grant a security interest and that signing
the instrument does not impose personal
liability.
Paragraph 7(d)(5)
Qualifications of additional parties. In
establishing guidelines for eligibility of
guarantors, cosigners, or similar additional
parties, a creditor may restrict the applicant's
choice of additional parties but may not
discriminate on the basis of sex, marital
status or any other prohibited basis. For
example, the creditor could require that the
additional party live in the creditor’s market
area.
2. Income of another person. An applicant
who requests inidividual credit relying on the
income of another person (such as a spouse)
may be required to provide the signature of
the other, person to make the income
available to pay the d e b t In community
property states, the signature may be
required if the applicant relies on the
separate income of another person, i.e.,
income that as a matter of state law is not
community property.
3. Renewals. If the borrower’s
creditworthiness is reevaluated when a credit
obligation is renewed, the creditor must
determine whether an additional party is still
warranted and, if not, release the additional
party.
Paragraph 7(d)(6)
1. Guarantees. A guarantee on an
extension of credit is part o f a credit
transaction and therefore subject to the
regulation. The rules in | 202.7(d) bar a
creditor from requiring the signature of a
guarantor's spouse just as they bar the
creditor from requiring the signature of an
applicant's spouse. For example, when all
officers of a closely held corporation are
required to personally guarantee a corporate
loan, the creditor may not automatically
require that spouses of married officers also
sign. However, an evaluation of the financial
circumstances of an officer may indicate that
an additional signature is necessary, and this
may be the signature of a spouse in
appropriate circumstances.
7(e) Insurance,
1. Differences in terms. Differences in the
availability, rates, and other terms on which
credit-related casualty insurance or credit
life, health, accident, or disability insurance
is offered or provided to an applicant does
not violate Regulation B.
2. Insurance information. A creditor may
obtain information about an applicant’s age,
sex. or marital status for insurance purposes.
The information may only be used, however,
for determining eligibility and premium rates
for insurance, and not in making the credit
decision.
Section 202.8—Special Purpose Credit
Programs
8(a) Standards for programs.
1. Determining qualified programs. The
Board does not determine whether individual
programs qualify for special purpose credit
status, or whether a particular program
benefits an “econom ically disadvantaged
class of persons.” The agency or creditor
administering or offering the loan program
must make these decisions regarding the
status of its program.
2. Compliance with a program authorized
by federal or state law. A creditor does not
violate Regulation B when it complies in good
faith with a regulation promulgated by a
government agency implementing a special
purpose credit program under § 202.8(a)(1). It
is the agency’s responsibility to promulgate a
regulation that is consistent with federal and
state law.
3. Expressly authorized. Credit programs
authorized by federal or state law include
programs offered pursuant to federal, state or
local statute, regulation or ordinance, or by
judicial or administrative order.
4. Creditor liability. A refusal to grant
credit to an applicant is not a violation of the
act or regulation if the applicant does not
m eet the eligibility requirements under a
special purpose credit program.
8(b) Rules is other sections.
1. Applicability of rules. A creditor that
rejects an application because the applicant
does not meet the eligibility requirements
(common characteristic or financial need, for
example) must nevertheless notify the
applicant of action taker as required by 202.9.
8(c) Special rule concerning requests and
use of information.
1. Request of prohibited information. This
section permits a creditor to request and
consider certain information that would
otherwise be prohibited by §§ 202.5 and 202.0
to determine an applicant’s eligibility for a
particular program.
2. Examples. Examples of programs under
which the creditor can ask for and consider
information related to prohibited basis are:
° Energy conservation programs to assist
the elderly, for which the creditor must
consider the applicant’s age.
s Programs under a Minority Enterprise
Small Business Investment Corporation, for
which a creditor must consider the
applicant's minority status.
8(d) Special rule in the case of financial
need.
1. Request ofprohibited information. This
section permits a creditor to request and
consider certain information that would
otherwise be prohibited by §§ 202.5 and
202.6, and to require signatures that would
otherwise be prohibited by § 202.7(d).
2. Examples. Examples of programs in
which financial need is a criterion are:
° Subsidized housing programs for low- to
moderate-incojne households, for which a
creditor may have to consider the applicant’s
receipt of alimony or child support, the
spouse’s or parents’ income, etc.
° Student loan programs based on the
family's financial need, for which a creditor
may have to consider to spouse’s or parents’
financial resources.
3. Student loans. In a guaranteed student
loan program, a creditor may obtain the
signature o f a parent a s a guarantor when
Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations <S8§5$
required by federal or state law or agency
regulation, or w hen the student does not meet
the creditor's standards of creditworthiness.
(See §§ 202.7(d)(1) and (5).) The creditor may
not require an additional signature when a
student has a work or credit history that
satisfies the creditor’s standards.
Section 202.9—Notifications
i; Use of the term “
adverse action" The
regulation does not require that a creditor use
the term "adverse” in communicating to an
applicant that a request for an extension of
credit has not been approved. In notifying an
applicant of adverse action as defined by
§ 202.2(c)(1), a creditor may use any words or
phrases that describe the action taken on the
application.
2. Expressly withdrawn applications.
W hen an applicant expressly withdraws a
credit application, the creditor is not required
to comply with the notification requirements
under § 202.9. (The creditor must, however,
comply with the record retention
requirements of the regulation. See
§ 202.12(b)(3).)
3. When notification occurs. Notification
occurs when a creditor delivers or mails a
notice to the applicant’s last known address
or, in the case of an oral notification, when
the creditor communicates the credit decision
to the applicant.
4: Location of notice. The notifications
required under § 202.9 may appear on either
or both sides of a form or letter.
9(a) Notification of action taken, ECOA
notice, and statement of specific reasons.
Paragraph 9(a)(1)
1. Timing of notice—when an application is
complete. Once a creditor has obtained all
the information it normally considers in
making a credit decision, the application is
complete and the creditor has 30 days in
which to notify the applicant o f the credit
decision. (See also comment 2(f}-5.)
2. N otification o f approval. Notification of
approval may be express or by implication.
For example, the creditor will satisfy the
notification requirement when it gives the
applicant the credit card, money, property, or
services requested.
3. Incomplete application—denial for
reasons other than incompleteness. When an
application is missing information but
provides sufficient data for a credit decision,
the creditor may evaluate the application and
notify the applicant under this section as
appropriate. If credit is denied, the applicant
must be given the specific reasons for the
credit denial (or notice of the right to receive
the reasons); in this instance the
incompleteness of the application cannot be
given as the reason for the denial.
4. Length of counteroffer. Section
202.9(a)(l)(iv) does not require a creditor to
hold a counteroffer open for 90 days or any
other particular length of time.
5. Counteroffer combined with adverse
action notice. A creditor that gives the
applicant a combined counteroffer and
adverse action notice that complies with
§ 202.9(a)(2) need not send a second adverse
action notice if the applicant does not accept
the counteroffer. A sample of a combined
notice is contained in form C-4 of Appendix
C to the regulation.
6.
Denial of a telephone application. When
an application is conveyed by means of
telephone and adverse action is taken, the
creditor must request the applicant’s name
and address in order to provide written
notification under this section. If the
applicant declines to provide that
information, then the creditor has no further
notification responsibility.
9(b) Form of ECOA notice and statement
specific reasons.
Paragraph 9(b)(1)
1. Substantially similar notice. The ECOA
notice sent with a notification of a credit
denial or other adverse action will comply
with the regulation if it is “substantially
similar” to the notice contained in
§ 202.9(b)(1). For example, a creditor may add
a reference to the fact that the ECOA permits
age to be considered in certain scoring
system s, or add a reference to a similar state
statute or regulation and to a state
enforcement agency.
Paragraph 9(b)(2)
1. Number of specific reasons. A creditor
must disclose the principal reasons for
denying an application or taking other
adverse action. The regulation does not
mandate that a specific number of reasons be
disclosed, but disclosure o f more than four
reasons is not likely to be helpful to the
applicant.
2. Source of specific reasons. The specific
reasons disclosed under § 202.9 (a)(2) and
x(b)(2) must relate to and accurately describe
the factors actually considered or scored by a
creditor.
3. Description of reasons. A creditor need
not describe how or why a factor adversely
affected an applicant. For example, the notice
may say “length of residence” rather than
"too short a period of residence.”
4. Credit scoring system, if a creditor bases
the denial or other adverse action on a credit
scoring system, the reasons disclosed must
relate only to those factors actually scored in
the system* Moreover, no factor that w as a
principal reason for adverse action may be
excluded from disclosure. The creditor must
disclose the actual reasons for denial (for
example, "age of automobile”) even if the
relationship of that factor to predicting
creditworthiness may not be clear to die
applicant.
5. Credit scoring—method for selecting
reasons. The regulation does not require that
any one method be used for selecting reasons
for a credit denial or other adverse action
that is based on a credit scoring system.
Various methods will meet the requirements
of the regulation. One method is to identify
the factors for which the applicant’s score fell
furthest below the average score for each of
those factors achieved by applicants w hose
total score w as at or slightly above the
minimum passing score. Another method is to
identify the factors for which the applicant’s
score fell furthest below the average score for
each o fth o se factors achieved by all
applicants. T hese average scores could be
calculated during the development or use of
the system. Any other method that produces
results substantially similar to either of these
methods is also acceptable under the
regulation.
0. Judgmental system. If a creditor uses a
judgmental system, the reasons for the denial
or other adverse action must relate to those
factors in the applicant’s record actually
reviewed by the person making the decision.
7. Combined credit scoring and judgmental
system. If a creditor denies an application
based on a credit evaluation system that
employs both credit scoring and judgmental
components, the reasons for the denial must
come from the component of the system that
the applicant failed. For example, if a creditor
initially credit scores an application and
denies the credit request as a result of that
scoring, the reasons disclosed to the
applicant must relate to the factors scored in
the system. If the application passes the
credit scoring stage but the creditor then
denies the credit request based on a
judgmental assessm ent o f the applicant’s
record, the reasons disclosed must relate to
the factors review ed judgmentaliy, even if the
factors were also considered in the credit
scoring component.
8. Automatic denial. Some credit decision
methods contain features that call for
automatic denial because o f one or more
negative factors in the applicant’s record
(such as the applicant’s previous bad credit
history with that creditor, the applicant’s
declaration of bankruptcy, or the, fact that the
applicant is a minor). W hen a creditor denies
the credit request because o f an automaticdenial factor, the creditor must disclose that
specific factor.
9. Combined ECOA-FCRA disclosures. The
ECOA requires disclosure of the principal
reasons for denying or taking other ad v erse,
action on an application for an extension of
credit. The Fair Credit Reporting Act requires
a creditor to disclose when it has based its
decision in whole or in part on information
from a source other than the applicant or
from its own files. Disclosing that a credit
report w as obtained and used to deny the
application, as the FCRA requires, does not
satisfy the ECOA requirement to disclose
specific reasons.For example, if the
applicant's credit history reveals delinquent
credit obligations and the application is
denied for that reason, to satisfy § 202.9(b)(2)
the creditor must disclose that the application
w a s denied because of the applicant’s
delinguent credit obligations. To satisfy the
FCRA requirement, the credit must also
disclose that a credit report w as obtained
and used to deny credit. Sample forms G -l
through C-5 of Appendix C o f the regulation
provide for the two disclosures.
9(c) Incomplete applications.
Paragraph 9(c)(2)
1. Reapplication. If information requested
by a creditor is submitted by an applicant
after the expiration o f the time period
designated by the creditor, the creditor may
require the applicant to make a new
application.
Paragraph 9(c)(3)
1. Oral inquiries for additional information
if the applicant fails to provide the
information in response to an oral request, a
creditor must send a written notice to the
applicant within the 30-day period specified
in § 202.9 (c)(1) and (c)(2). If the applicant
48054 Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations:
does provide the information, the creditor
shall take action on the application and
notify the applicant in accordance with
§ 202.9(a).
9(g) Applications submitted through a third
either spouse upon the account and does not
require a creditor to change the name in
which the account is maintained.
action may be given by one of the creditors to
whom an application w as submitted.
Alternatively, the third party may be a
noncreditor.
2. Third-party notice—enforcement agency.
If a single adverse action notice is being
provided to an applicant on behalf of several
creditors and they are under the jurisdiction
of different federal enforcement agencies, the
notice need not name each agency; disclosure
of any one of them will suffice.
3. Third-party notice— liability. When a
notice is to be provided through a third party,
a creditor is not liable for an act or omission
of the third party that constitutes a violation
of the regulation if the creditor accurately
and in a timely manner provided the third
party with the information necessary for the
notification and maintains reasonable
procedures adapted to prevent such
violations.
Unless the creditor specifically requested
such information, a creditor does not violate
this section when it receives prohibited
information from a consumer reporting
agency.
2. Use of retained information. Although a
creditor may keep in its files prohibited
information as provided in § 202.12(a), the
creditor may use the information in
evaluating credit applications only if
permitted to do so by § 202.6.
12(b) Preservation of records.
1. Copies. A copy of the original record
includes carbon copies, photocopies,
microfilm or microfiche copies, or copies
produced by any other accurate retrieval
system, such as documents stored and
reproduced by computer.
2. Computerized decisions. A creditor that
enters information items from a written
application into a computerized or
mechnaized system and makes the credit
decision mechanically, based only on the
items of information entered into the system,
may comply with § 202.12(b) by retaining the
information actually entered. It is not
required to store the complete written
application, nor is it required to enter the
remaining items of information into the
system. If the transaction is subject to
| 202.13, however, the creditor is required to
enter and retain the data on personal
characteristics in order to comply with the
requirements of that section.
party.
1. Third parties. The notification of adverse
Section 202.10—Furnishing of Credit
Information
1. Scope. The requirements of § 202.10 for
designating and reporting credit information
apply only to creditors that furnish credit
information to credit bureaus or to other
creditors. There is no requirement that a
creditor furnish credit information on its
accounts.
2. Reporting on all accounts. The
requirements of § 202.10 apply only to
accounts held or used by spouses. However,
a creditor has the option to designate all joint
accounts (or all accounts with an authorized
user) to reflect the participation of both
parties, whether or not the accounts are held
by persons married to each other.
3. Designating accounts. In designating
accounts and reporting credit information, a
creditor need not distinguish between
accounts on which the spouse is an
authorized user and accounts on which the
spouse is a contractually liable party.
4. File and index systems. The regulation
does not require the creation or maintenance
of separate files in the name of each
participant on a joint or user account, or
require any other particular system of
recordkeeping or indexing. It requires only
that a creditor be able to report information
in the name of each spouse on accounts
covered by § 202.10. Thus, if a creditor
receives a credit inquiry about the wife, it
should be able to locate her credit file
without asking the husband’s name.
10(a) Designation of accounts.
1. New parties. When new parties who are
spouses undertake a legal obligation on an
account, as in the case of a mortgage loan
assumption, the creditor should change the
designation on the account to reflect the new
parties and should furnish subsequent credit
information on the account in the new names.
2. Request to change designation of
account. A request to change the manner in
which information concerning an account is
furnished does not alter the legal liability of
Section 202.12—Record Retention
12(a) Retention of prohibited information.
1. Receipt of prohibited information.
Paragraph 12(b)(3)
1. Withdrawn and brokered applications.
In most cases, the 25-month retention period
for applications runs from the date a
notification is sent to the applicant granting
or denying the credit requested. In certain
transactions, a creditor is not obligated to
provide a notice of the action taken. (See, for
example, comment 9-2.) In such cases, the 25month requirement runs froiri the date of
application, as when:
° An application is withdrawn by the
applicant.
0 An application is submitted to more than
one creditor on behalf of the applicant, and
the application is approved by one of the
other creditors.
Section 202.13—Information for Monitoring
purposes
13(a) Information to be requested.
1. Natural person. Section 202.13 applies
only to applications from natural persons.
2. Principal residence. The requirements of
§ 202.13 apply only if an application relates
to a dwelling that is or will be occupied by
the applicant as the principal residence. A
credit application related to a vacation home
or a rental unit is not covered. In the case of
a two- to four-unit dwelling, the application is
covered if the applicant intends to occupy
one of the units as a principal residence.
3. Temporaryfinancing. An application for
temporary financing to construct a dwelling
is not subject to § 202.13. But an application
for both a temporary loan to finance
construction of a dwelling and a permanent
mortgage loan to take effect upon the
completion of construction is subject to
§ 202.13.
4. New principal residence. A person can
have only one principal residence at a time.
However, if a person buys or builds a new
dwelling that will become that person’s
principal residence within a year or upon
completion of construction, the new dwelling
is considered the principal residence for
purposes of § 202.13.
5. Refinancings. A creditor who receives an
application to change the terms and
conditions of an existing extension of credit
made by that creditor for the purchase of the
applicant’s dwelling may request the
monitoring information again, but is not
required to do so if it w as obtained in the
earlier transaction.
13(b) Obtaining of information.
1. Forms for collecting data. A creditor may
collect the information specified in
§ 202.13(a) either on an application form or
on a separate form referring to the
application.
2. Written applications. The regulation
requires written applications for the types of
credit covered by § 202.13. A creditor can
satisfy this requirement by recording in
writing or by means of computer the
information that the applicant provides orally
and that the creditor normally considers in a
credit decision.
3. Telephone, mail applications. If an
applicant does not apply in person for the
credit requested, a creditor does not have to
complete the monitoring information. For
example;
° When a creditor accepts an application
by telephone, it does not have to request the
monitoring information.
e W hen a creditor accepts an application
by mail, it does not have to make a special
request to the applicant if the applicant fails
to complete the monitoring information on the
application form sent to the creditor.
If it is not evident on the face of the
application that it w as received by mail or
telephone, the creditor should indicate on the
form or other application record how the
application w as received.
4. Applications through loan shopping
services. When a creditor accepts an
application through an unaffiliated loan
shopping service,, it does not have to request
the monitoring information.
5. Inadvertent notation. If a creditor
inadvertently obtains the monitoring
information in a dwelling related transaction
not covered by § 202.13, the creditor may
process and retain the application without
violating the regulation.
13(c ) Disclosure to applicant(s).
1. Procedures for providing disclosures.
The disclosures to an applicant regarding the
monitoring information may be provided in
writing. Appendix B contains a sample
disclosure. A creditor may devise its own
disclosure so long as it is substantially
similar. The creditor need not orally request
the applicant to provide the monitoring
information if it is requested in writing.
13(d) Substitute monitoring program.
Federal Register / Vol. 50, No. 224 / Wednesday, November 20, 1985 / Rules and Regulations 418055
1. Substitute program. A n enforcem ent
agen cy m ay adopt, under its estab lish ed
rulem aking or enforcem ent procedures, a
program requiring creditors under its
jurisdiction to collect inform ation in addition
to that required by this section .
Section 202.14—Enforcement, penalties and
liabilities
44(c) Failure of compliance.
1. Inadvertent errors. Inadvertent errors,
include, but are not lim ited to, clerical
m istake, calcu lation error, com puter
m alfunction, and printing error. A n error of
legal judgm ent is not an inadvertent error
under the regulation.
2. Correction of error. For inadvertent
errors that occur under §§ 202.12 and 202.13,
this sectio n requires that they be corrected
p rosp ectively only.
A p p en d ix B— M odel A pplication Forms
1. FHLMC/FNMA form—residential loan
application. The resid en tial loan application
form (FHLMC 65/FN M A 1003) and
supplem ental form (FHLMC 65A /F N M A
1003A) prepared by the Federal H om e Loan
M ortgage Corporation and the Federal
N ational M ortgage A sso cia tio n com ply w ith
the requirem ents o f this regulation.
2. FHLMC/FNMA form—home
improvement loan application. T he hom e
im provem ent and energy loan app lication
form (FHLMC Form 703/F N M A Form 1012)
prepared by the Federal H om e Loan
M ortgage Corporation and the F ederal
N ational M ortgage A sso cia tio n com p ly w ith
the requirem ents of this regulation.
By order of the Board o f G overnors o f the
F ederal R eserve System , N ovem b er 13,1985.
W illiam W . W iles,
Secretary of the Board.
[FR D oc. 85-27459 F iled 11-10-35; 8:45 am]
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