[Federal Register Volume 61, Number 251 (Monday, December 30, 1996)]
[Proposed Rules]
[Pages 68688-68689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33088]
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FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R-0876]
Equal Credit Opportunity
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Withdrawal of proposed rule.
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SUMMARY: The Board is withdrawing a proposed amendment to Regulation B
(Equal Credit Opportunity) that would have eliminated the general
prohibition on collecting data relating to an applicant's sex, race,
color, religion, and national origin.
DATES: This proposed rule is withdrawn December 24, 1996.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Sheilah Goodman or
Natalie Taylor, Staff Attorneys, Division of Consumer and Community
Affairs, Board of Governors of the Federal Reserve System, at (202)
452-3667 or 452-2412; for the hearing impaired only, Dorothea Thompson,
Telecommunications Device for the Deaf, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Equal Credit Opportunity Act (ECOA) makes it unlawful for
creditors to discriminate in any aspect of a credit transaction on the
basis of sex, race, color, religion, national origin, marital status,
age (provided the applicant has the capacity to contract), because all
or part of an applicant's income derives from any public assistance, or
because an applicant has in good faith exercised any right under the
Consumer Credit Protection Act. The ECOA, which is implemented by the
Board's Regulation B, is generally silent regarding what information a
creditor may collect from an applicant. Regulation B prohibits
creditors from asking for or otherwise noting an applicant's sex, race,
color,
[[Page 68689]]
and national origin, except in connection with home mortgage loans. The
regulation also prohibits creditors from collecting information
concerning an applicant's religion.
On April 26, 1995, the Board published for public comment a
proposed amendment that would eliminate these prohibitions; the
proposed amendment would have allowed, but not required, creditors to
collect these data for any credit products. (60 FR 20436.) Creditors
that collected these data would not have been required to report or
disclose them to the public. The Board proposed that if a creditor
requested this information and the applicant chose not to provide it,
the creditor would have been prohibited from collecting the information
through visual observation or other means. The regulation would have
continued to bar creditors from considering this information in a
credit decision.
II. Comments Received
Approximately 250 comment letters were received. Nearly 70 percent
of them opposed the Board's proposal; the majority of these comments
were from creditors and their trade associations. These commenters
generally expressed concern that the amendment would lead to mandatory
data collection and result in substantially increased costs and burden.
In addition, these commenters raised concerns about the quality of the
data that would be obtained, given that supplying the information would
be voluntary and not all applicants would choose to provide it.
Of the 30 percent of commenters that supported the Board's
proposal, approximately half were creditors and half were community
representatives. Both groups believed that the data would allow
creditors to better identify underserved groups and design programs
that would address unmet credit needs. Creditors who supported the
proposal believed that it would reduce compliance burden (by allowing
them to streamline training and use one application form for multiple
credit products, for example). These creditors also stated that having
the data would give them the ability to evaluate their compliance with
fair lending laws.
III. Discussion
In 1977, when the Board chose to prohibit creditors from collecting
these data, the policy choice was seen as a way to discourage
discrimination: If creditors did not have these data, they could not
use them to discriminate. In addition, the prohibition was intended to
emphasize that factors unrelated to creditworthiness such as sex or
race should not be part of the credit decision.
The fundamental question raised by the proposal is whether the rule
prohibiting data collection furthers the ECOA's goal of preventing
discrimination in credit transactions. The comments, while helpful,
tended to focus on practical issues (such as data quality) rather than
how best to ensure fair lending. Ultimately, there is no easy way to
measure the extent to which discrimination occurs in credit
transactions, nor the effect the rule has had on the incidence of
discrimination. It is impossible to know precisely how, if at all,
lifting the prohibition and making these data available would affect
creditors' actions. On the one hand, it is likely that the prohibition
has helped to prevent discrimination in at least some credit
transactions. On the other hand, creditors have collected data in
connection with mortgage loan applications for nearly twenty years, and
there is no indication from this experience that data collection
increases the potential for discrimination.
In the past the Congress has expressed interest in this issue, at
least with respect to data collection for small business loans. Given
this history, and the significant policy issues involved in any
decision to remove the prohibition, the Board believes that this is an
issue more appropriate for the Congress to consider. Consequently, the
Board is withdrawing the proposed amendment pending further
congressional guidance.
IV. Regulatory Flexibility Analysis
The Board's Office of the Secretary has determined that no analysis
is needed since the proposal is being withdrawn.
By order of the Board of Governors of the Federal Reserve
System, December 23, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-33088 Filed 12-27-96; 8:45 am]
BILLING CODE 6210-01-P
