[Federal Register Volume 60, Number 80 (Wednesday, April 26, 1995)]
[Proposed Rules]
[Pages 20436-20438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10230]
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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: Proposed rule.
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SUMMARY: The Board is publishing for comment a proposed amendment to
Regulation B (Equal Credit Opportunity). The proposed amendment would
eliminate the general prohibition on collecting data relating to an
applicant's race, color, sex, religion, and national origin, giving
creditors the option to ask applicants to provide the information on a
voluntary basis. This amendment would allow data collection only;
creditors still would be prohibited from considering an applicant's
race, color, sex, religion, and national origin in their credit
decisions.
DATES: Comments must be received on or before June 27, 1995.
ADDRESSES: Comments should refer to Docket No. R-0876, and may be
mailed to William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, D.C. 20551. Comments also may be delivered to Room B-2222
of the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to
the guard station in the Eccles Building courtyard on 20th Street, NW.
(between Constitution Avenue and C Street) at any time. Comments
received will be available for inspection in Room MP-500 of the Martin
Building between 9:00 a.m. and 5:00 p.m. weekdays, except as provided
in 12 CFR 261.8 of the Board's rules regarding availability of
information.
FOR FURTHER INFORMATION CONTACT: Jane 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), 15 U.S.C. 1691, makes it
unlawful for creditors to discriminate in any aspect of a credit
transaction on the basis of race, color, sex, 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 act
is implemented by the Board's Regulation B (12 CFR part 202).
[[Page 20437]]
When first passed in 1974, the ECOA barred discrimination based on
sex and marital status only. The Board's regulation, issued in 1975,
prohibited creditors from noting the sex of an applicant, or inquiring
about an applicant's childbearing or childrearing intentions. The
regulation also limited when creditors were allowed to inquire about
marital status or ask for information about a spouse or former spouse.
These provisions were opposed by creditors at the time, but received
strong support from women's groups and others who believed that if
creditors did not have this information, they could not use it to
discriminate.
The ECOA was amended in 1976 to expand its coverage to the present
scope. That year, the Board proposed amendments to Regulation B which
extended the general prohibition on inquiries into an applicant's sex
and marital status to most of the newly covered categories: race,
color, religion, and national origin. The response to the proposal was
mixed. Most consumer groups and regulatory agencies opposed the
prohibition because they believed that it would be extremely difficult
to detect discrimination without this information, while creditors
generally favored the prohibition. The Board implemented the regulation
as proposed, applying the same reasoning that supported the 1975
proposal--if creditors could not collect this information they would
not be able to use it to discriminate against applicants.
At the same time, several exceptions to the general prohibition on
data collection were added to Regulation B. The broadest exception
relates to data notation in home purchase and refinance mortgage loan
transactions involving the applicant's principal dwelling. Since 1976,
Regulation B has required creditors to collect ``monitoring
information'' (age, sex, marital status, and race or national origin)
for mortgage loan applicants. This requirement was added to the
regulation because of the concern expressed by consumer groups and
regulatory agencies regarding the need for the data to help detect
mortgage lending discrimination.
The regulation also allows creditors to collect data if required by
another regulation, order, or agreement of a court or enforcement
agency to monitor or enforce compliance with the ECOA, Regulation B, or
any other federal or state statute or regulation. This exception was
included in the regulation so that lenders would not have to choose
between competing regulations or statutes. For example, the Small
Business Administration (SBA) requires lenders participating in its
7(a), or SBA guaranteed, loan program to collect race and sex
information from each applicant. Under the regulatory exception,
lenders can comply with the SBA requirements without violating
Regulation B.
Similarly, creditors can collect data pursuant to the Home Mortgage
Disclosure Act (HMDA) without concerns about violating Regulation B.
Since 1990, HMDA has required creditors to collect race or national
origin and sex data from applicants for home mortgage loans. HMDA's
data collection requirement is broader than Regulation B's because it
applies to most applications for home improvement loans, as well as
applications for home purchase and refinance, received by lenders
subject to HMDA.
For the past several years, various creditors, consumer groups,
state and federal agencies, and congressional representatives have
requested that the Board amend Regulation B to allow creditors to
collect race and sex data, primarily in connection with small business
loans but also for consumer credit, such as installment loans. These
requests have increased with the current focus on credit discrimination
and fair lending.
Creditors have expressed a variety of reasons for wanting to
collect these data. Some say they would like to be able to better audit
their lending programs to ensure that they are in compliance with fair
lending laws. Others want the data so that they can respond more
effectively to Community Reinvestment Act (CRA) protests. In addition,
some creditors have indicated that they want to collect data so that
they can better evaluate their community outreach programs and the
effectiveness of their marketing programs.
Some regulatory agencies have expressed an interest in the data
because they believe that it may increase their ability to detect
discrimination. Community groups have expressed similar reasons for
wanting the data, that is, so that they can monitor creditors'
compliance with the CRA and fair lending laws. It should be noted,
however, that the proposed amendment would not require creditors either
to collect data or disclose the data that they collect to the public.
II. Proposed Regulatory Provisions
The proposed amendment to Regulation B would eliminate the general
prohibition on collecting data relating to an applicant's race, color,
sex, religion, or national origin. The Board is soliciting comment on
whether creditors should be allowed to collect data concerning an
applicant's religion. The Board has not received any requests to allow
creditors to collect data on religion, and, as a general matter,
government monitoring forms do not typically request such information.
It would be unusual, however, to permit data collection for all
protected characteristics except religion.
The Board believes that race, color, sex, or national origin data
may be valuable to consumers and creditors alike, regardless of the
product. The Board recognizes that for certain credit products the
amount and quality of the data collected may be of limited use, for
example with credit cards where most applications are taken by mail or
telephone. Nonetheless, the Board's proposal would remove the
prohibition for all credit products. The Board is concerned that
removing the prohibition for only certain credit products would add
needless complication to the regulation, and make compliance more
burdensome for creditors. The Board is seeking comment on this
approach.
The amendment would allow data collection only; consideration of an
applicant's race, color, sex, religion, and national origin in a credit
decision would still be prohibited. Consumers could not be required to
provide this information and creditors would not be required to collect
the information through visual observation. The amendment would
prohibit creditors from collecting race, color, sex, religion, or
national origin information by visual observation, surname, or
otherwise, if the consumer chooses not to supply it. The Board is
soliciting comment on this approach.
III. Form of Comment Letters
Comment letters should refer to Docket No. R-0876, and, when
possible, should use a standard Courier typeface with a type size of 10
or 12 characters per inch. This will enable the Board to convert the
text in machine-readable form through electronic scanning, and will
facilitate automated retrieval of comments for review. Also, if
accompanied by an original document in paper form, comments may be
submitted on 3\1/2\ inch or 5\1/4\ inch computer diskettes in any IBM-
compatible DOS-based format.
IV. Regulatory Flexibility Analysis
Compliance with the proposed amendment is voluntary, and therefore
the amendment does not of itself impose cost. For those institutions
that choose to request the data, there will be some costs associated
with redesigning application forms, developing or adapting software
programs, training [[Page 20438]] personnel, and with developing
systems to evaluate the information. Since it is unclear how many
institutions will adopt these procedures, it is not possible to
estimate the costs to institutions in general.
V. Paperwork Reduction Act
In accordance with section 3507 of the Paperwork Reduction Act of
1980 (44 U.S.C. 35; 5 CFR 1320.13), there is no reporting or
recordkeeping burden associated with Regulation B or this amendment.
List of Subjects in 12 CFR Part 202
Aged, Banks, Banking, Civil rights, Consumer protection, Credit,
Discrimination, Federal Reserve System, Marital status discrimination,
Penalties, Religious discrimination, Reporting and recordkeeping
requirements, Sex discrimination.
Certain conventions have been used to highlight the proposed
revisions to the part. New language is shown inside bold-faced arrows,
while language that would be removed is set off with bold-faced
brackets.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 202 as set forth below:
PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)
1. The authority citation for part 202 continues to read as
follows:
Authority: 15 U.S.C. 1691-1691f.
2. Section 202.5 is amended as follows:
a. Redesignating paragraph (b)(3) as paragraph (b)(5);
b. Adding a new paragraph (b)(3);
c. Adding a new paragraph (b)(4);
d. Revising paragraph (d)(3); and
e. Removing paragraph (d)(5).
The revisions and addition read as follows:
Sec. 202.5 Rules concerning taking of applications.
* * * * *
(b) * * *
(3) Permitted inquiries and collection of information. A
creditor may request applicants to provide their race, color, sex,
religion, and national origin as part of the application. Applicants
may not be required to supply the requested information. If an
applicant chooses not to supply the information, the creditor may not
note or otherwise record the race, color, sex, religion, and national
origin of the applicant based on visual observation, surname or other
means.
(4) Residency and immigration status. A creditor may inquire about
an applicant's permanent residency and immigration status.
(5) * * *
* * * * *
(d) * * *
(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.
* * * * *
[(5) Race, color, religion, national origin. A creditor shall not
inquire about the race, color, religion, or national origin of an
applicant or any other person in connection with a credit transaction.
A creditor may inquire about an applicant's permanent residency and
immigration status.]
* * * * *
By order of the Board of Governors of the Federal Reserve
System, April 20, 1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-10230 Filed 4-25-95; 8:45am]
BILLING CODE 6210-01-P
