Aug 12 -- The Consumer Financial Protection Bureau (CFPB or Bureau) invites comments by September 15, 2022 to the Office of Management and Budget (OMB) regarding approval of data collection for the Equal Credit Opportunity Act (Regulation B).
The Equal Credit Opportunity Act (ECOA) was enacted to ensure that credit is made available to all creditworthy applicants without discrimination on the basis of sex, marital status, race, color, religion, national origin, age, or other prohibited bases under the ECOA. The ECOA allows for creditors to collect information for self-testing against these criteria, while not allowing creditors to use this information in making credit decisions of applicants. For certain mortgage applications, the ECOA requires creditors to ask for some of the prohibited information for monitoring purposes. Additionally, for certain mortgage applications, creditors are required to send a copy of any appraisal or written valuation used in the application process to the applicant in a timely fashion.
The ECOA also prescribes creditors must inform applicants of decisions made on credit applications. Particularly where creditors make adverse actions on credit applications or existing accounts, creditors must inform consumers as to why the adverse action was taken such that credit applicants can challenge errors or learn how to become more creditworthy. Creditors must retain all application information for 25 months including notices that they sent, and any information related to adverse actions. The ECOA requires creditors who furnish applicant information to a consumer reporting agency to reflect participation of the applicant's spouse if the spouse is permitted to use or is contractually liable on the account.
Proposed subpart B would add new disclosure requirements to Regulation B. Proposed § 1002.108 would implement the requirement in section 1071 that certain data collected (regarding whether the applicant is a minority-owned or women-owned business, and the ethnicity, race, and sex of the applicant’s principal owners) be shielded from underwriters and certain other persons; the Bureau refers to this as the “firewall.” Pursuant to proposed § 1002.108(c), this prohibition would not apply to an employee or officer if the financial institution determines that it is not feasible to limit that employee’s or officer’s access to an applicant’s responses to the financial institution’s inquiries regarding the applicant’s protected demographic information, and the financial institution provides a notice to the applicant regarding that access. The notice must be provided to each applicant whose information will be accessed or, alternatively, the financial institution could provide the notice to all applicants whose information could be accessed. The Bureau is proposing sample language that a financial institution could use in providing this notice.
The Bureau and other agencies use recordkeeping information to compare accepted and rejected applicants in order to determine whether applicants are treated less favorably on the basis of race, sex, age, or other prohibited bases under ECOA. Voluntarily collected self-test records (including for corrective action) are used by creditors to identify potential violations and reflect their efforts to correct the problem. Absent the Regulation B requirement that creditors retain monitoring information, the agencies’ ability to detect unlawful discrimination and enforce the ECOA would be significantly impaired.
The adverse action notice requirement apprises applicants of their rights under ECOA and of the basis for a creditor’s decision. Applicants use their copy of the appraisal to review (and possibly challenge) the accuracy and/or fairness of the information contained within, and to determine the role that the appraisal played in the credit decision. The self-testing disclosure explains to applicants why a creditor is collecting information and clarifies that applicants are not required to provide the information.
CFPB ECOA and Regulation B:
https://www.consumerfinance.gov/compliance/compliance-resources/other-applicable-requirements/equal-credit-opportunity-act/
Submission to OMB:
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202208-3170-001 Click on IC List for collection instruments, View Supporting Statement for technical documentation. Submit comments through this site.
FR notice inviting public comment:
https://www.federalregister.gov/d/2022-17362
For AEA members wishing to submit comments, "A Primer on How to Respond to Calls for Comment on Federal Data Collections" is available at
https://www.aeaweb.org/content/file?id=5806