[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Rules and Regulations]
[Pages 16392-16401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8749]
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FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R-0978]
Equal Credit Opportunity
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board is amending certain model forms in its Regulation B
to reflect statutory amendments to the Fair Credit Reporting Act (FCRA)
disclosures contained in those forms. Creditors have the option of
including the FCRA disclosures with the notice of action taken required
under Regulation B. In addition, a technical revision has been made to
Appendix A.
DATES: The rule is effective April 30, 1998.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Senior Attorney, or
Pamela Morris Blumenthal, Staff Attorney, Division of Consumer and
Community Affairs, Board of Governors of the Federal Reserve System, at
(202) 452-3667 or 452-2412; users of Telecommunications Device for the
Deaf (TDD) only, contact Diane Jenkins at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
Regulation B, which implements the Equal Credit Opportunity Act,
requires creditors to provide consumers with a notice of action taken
if an application for credit is denied, an account is terminated, or
the terms of an account are unfavorably changed. The Fair Credit
Reporting Act (FCRA) (15 U.S.C. 1681a) requires creditors that take
adverse action against a consumer, such as by denying an application
for credit, to provide consumers with certain disclosures if the action
is based on information provided by a third party or a consumer
reporting agency. The required FCRA disclosures include, for example,
the name and address of the consumer reporting agency that supplied the
information. For information obtained from a third party, the required
disclosures include a statement that the consumer has the right to
request the reason for the denial within sixty days. Creditors have the
option of including the FCRA disclosures with the notice of action
taken required under Regulation B; Appendix C to Regulation B provides
model forms that combine the FCRA and ECOA disclosures.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996
(Pub. L. 104-208, 110 Stat. 3009) made extensive changes to the FCRA.
Among other changes, the amendments require that additional disclosures
be given to consumers who are denied credit based on information from
an affiliate or from a consumer reporting agency.
On July 11, 1997, the Board published for public comment proposed
amendments to several model forms in Regulation B (61 FR 37166). The
Board is issuing a final rule amending the FCRA portion of Regulation
B's model forms C-1 through C-5 and the general instructions for these
forms to reflect the changes to the FCRA, which were effective
September 30, 1997. The forms include language that may be used when
credit is denied based on information obtained from a consumer
reporting agency, from a third party other than a consumer reporting
agency, or from an affiliate. To minimize the number of changes to the
forms, and thereby ease compliance for creditors, the Board is changing
the language only in the forms that are affected by the FCRA
amendments.
II. New Model Language
Action Based on Information From a Consumer Reporting Agency
When adverse action is taken against a consumer based on
information from a consumer reporting agency, section 615(a) of the
FCRA now requires the following additional disclosures: a telephone
number for the consumer reporting agency (toll-free if the agency
compiles and maintains files on consumers nationwide); a statement that
the consumer reporting agency did not make the decision to take the
adverse action, and cannot state the reason why the adverse action was
taken; the consumer's right to a free copy of the credit report from
the consumer reporting agency, if the request is made within 60 days of
receipt of the adverse action notice; and the consumer's right to
dispute with the consumer reporting agency the accuracy or completeness
of the credit report. These revisions have been incorporated into the
model forms that may be used to comply with the FCRA when credit is
denied, an account is terminated, or the terms of an account are
unfavorably changed based on information from a consumer reporting
agency.
Action Based on Information From an Affiliate
The Board specifically solicited comment on which, if any,
disclosure should be provided when adverse action is based on a
consumer report obtained from an affiliate. The Board proposed
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that a creditor using information in a consumer report obtained from an
affiliate must provide the same disclosures as would be provided if the
report had come directly from the consumer reporting agency
(disclosures required under 615(a) of the FCRA). Some commenters agreed
with the Board's approach. These commenters believed that creditors
should provide consumers the same disclosures under FCRA whether a
consumer report is obtained from an affiliate or directly from a
consumer reporting agency.
A number of commenters disagreed with the Board's approach. They
believed that the Board's reading of the statute did not reflect
congressional intent. These commenters argued that the amendments to
the FCRA specifically require a different adverse action notice when a
consumer report is obtained from an affiliate, if the affiliate has
provided certain ``opt-out'' disclosures mentioned in the statute's
amended definition of ``consumer report.''
After reviewing the comment letters and consulting with other
federal financial regulatory agencies, the Board has determined that
this issue merits further consideration and would more appropriately be
addressed in an interpretation of the FCRA. The Board and the FTC
anticipate that they will issue jointly for public comment a proposed
interpretation of the FCRA that will clarify the disclosures that are
to be provided when adverse action is based on a consumer report
obtained from an affiliate. In the interim, institutions may provide
either the 615(a) notice or the 615(b) notice.
Third Party Notice
In the case of information from an affiliate that is neither a
consumer report nor the affiliate's own transactional experience, the
Board proposed allowing creditors to use the current third-party
notice, as amended. There is a difference, however, between the timing
provisions of section 615(b)(1) (third-party notice) and of section
615(b)(2) (affiliate notice). Under the third-party provision, a
consumer's request for the reasons for adverse action must be submitted
to the creditor within 60 days after the consumer receives the notice.
Under the affiliate provision, the request must be submitted within 60
days after the ``transmittal of the notice.''
The Board proposed that Regulation B's existing language for model
form C-1 (used for information from a third party) also be used for
information from an affiliate, and solicited comment on this approach.
Commenters generally agreed with the Board that the proposed language--
60 days from receipt of the notice--would ease compliance for creditors
and provide a more understandable time frame for consumers.
Accordingly, the Board has adopted this language in the final rule.
Technical Revisions
Commenters suggested several technical modifications to the forms.
Several commenters believed that the Board was requiring the use of
certain terms, such as ``toll-free.'' The Board did not intend this
result. The use of the words ``toll-free'' before ``telephone'' in
model forms C-1 through C-5 is not required. Although a form need not
state ``toll-free,'' a creditor must provide a toll-free number
established by the consumer reporting agency if the agency compiles and
maintains files on consumers on a nationwide basis.
In addition, to be consistent with the language in the FCRA, the
phrase ``affiliate's own experience'' in the second paragraph in
Appendix C is modified to read ``affiliates's own transactions or
experiences.'' Finally, the proposed statement concerning consumers'
right under the FCRA to know the information in their credit files in
Model Form C-5 (included in brackets) need not be provided. Commenters
noted that the revised FCRA does not require this notice, and that the
notice of the right to receive a free copy of a credit report
adequately informs consumers that they may obtain the information in
their credit report.
III. Section-by-Section Analysis
In Appendix C, the second paragraph is amended by adding two
sentences at the end of the paragraph explaining the FCRA disclosure
requirements for information obtained from an affiliate. For model
forms C-1 through C-5, the words ``toll-free'' are included in brackets
to reflect that the telephone number for the consumer reporting agency
must be toll-free if it compiles and maintains files on consumers on a
nationwide basis. Creditors have the option of using the words ``toll-
free'' before the reporting agency's telephone number when a toll-free
number is provided.
Model Form C-1
Sample Notice of Action Taken and Statement of Reasons is amended
in Part II by adding at the end of the first paragraph the FCRA
disclosures notifying the consumer of the right to request a copy of
the consumer report, and the right to dispute the accuracy of the
report with the reporting agency. In addition, in cases where a toll-
free number is provided, creditors have the option of adding the words
``toll-free'' before the reporting agency's telephone number. A
reference to an affiliate is added in the second paragraph.
Model Form C-2
Sample Notice of Action Taken and Statement of Reasons is amended
by adding to the first sentence in the second paragraph the words
``toll-free'' before the reporting agency's telephone number. The
dispute disclosure is inserted before the last sentence.
Model Form C-3
Sample Notice of Action Taken and Statement of Reasons (Credit
Scoring) is amended by adding to the fourth sentence in the fourth
paragraph the words ``toll-free'' before the reporting agency's
telephone number. The dispute disclosure is added at the end of the
paragraph.
Model Form C-4
Sample Notice of Action Taken, Statement of Reasons and
Counteroffer is amended by adding to the first sentence in the third
paragraph the words ``toll-free'' before the reporting agency's
telephone number. At the end of the paragraph the disclosure stating
that the reporting agency played no part in the decision is added along
with the dispute disclosure.
Model Form C-5
Sample Disclosure of Right to Request Specific Reasons for Credit
Denial is amended by adding to the first sentence in the fourth
paragraph the words ``toll-free'' before the reporting agency's
telephone number. At the end of the paragraph the disclosure that the
reporting agency played no part in the decision has been added, along
with the dispute disclosure. In addition, the disclosure that the
consumer has a right under the FCRA to know the information in the
credit file may be provided, but is not required.
IV. Technical Change to Appendix A
Appendix A--Federal Enforcement Agencies has been revised to
reflect a new address for the Office of the Comptroller of the Currency
(OCC). Under section 202.9(b) of Regulation B, a creditor's notice of
adverse action is required to include the name and address of the
federal agency that has enforcement responsibility for that creditor.
The OCC is the appropriate agency for national banks and federal
branches and federal agencies of foreign banks. This is a technical
revision and is not related to the FCRA amendments.
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V. Regulatory Flexibility Analysis
In accordance with section 3(a) of the Regulatory Flexibility Act
(5 U.S.C. 603), the Board's Office of the Secretary has reviewed the
amendments to Regulation B. The amendments, which provide model
language to facilitate compliance, are not likely to have a significant
impact on institutions' costs, including the costs to small
institutions.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506), the Board reviewed the rule under the authority delegated to the
Board by the Office of Management and Budget (5 CFR 1320 Appendix A.1).
The current estimated total annual burden for this information
collection is 125,177 hours. This amount reflects the burden estimate
of the Federal Reserve System for the 996 state member banks under its
supervision. This regulation applies to all types of creditors, not
just state member banks. However, under Paperwork Reduction Act
regulations, the Federal Reserve accounts for the burden of the
paperwork associated with the regulation only for state member banks.
Other agencies account for the paperwork burden for the institutions
they supervise.
The revised collection of information requirements are found in
Appendix C to 12 CFR Part 202. The burden per response for any of the
five revised disclosures is estimated to be two and one-half minutes,
on average. As the revisions are minor, this amount is not expected to
change. The Board estimates that there is no annual cost burden over
the annual hour burden associated with the revisions. The start-up cost
for modifying state member banks' current templates to conform to the
revised models is estimated to be approximately $100,000 across all 996
state member banks. No comments specifically addressing the burden
estimate were received.
This information collection is mandatory (15 USC 1691b(a)(1) and
Pub. L. 104-208, Sec. 2302(a)) to ensure that credit is made available
to all creditworthy customers without discrimination on the basis of
race, color, religion, national origin, sex, marital status, age
(provided the applicant has the capacity to contract), receipt of
public assistance, or the fact that the applicant has in good faith
exercised any right under the Consumer Credit Protection Act (15 USC
1600 et. seq.). The respondents/recordkeepers are for-profit financial
institutions, including small businesses. Creditors are required to
retain records for twelve to twenty-five months as evidence of
compliance.
Since the Federal Reserve does not collect any information, no
issue of confidentiality normally arises. However, the information may
be protected from disclosure under exemptions (b)(4), (6), and (8) of
the Freedom of Information Act (5 USC 522 (b)). The adverse action
disclosure is confidential between the institution and the consumer
involved. An agency may not conduct or sponsor, and an organization is
not required to respond to, an information collection unless it
displays a currently valid OMB control number. The OMB control number
for the Recordkeeping and Disclosure Requirements in Connection with
Regulation B is 7100-0201.
The Federal Reserve has a continuing interest in the public's
opinions of our collections of information. At any time, comments
regarding the burden estimate, or any other aspect of this collection
of information, including suggestions for reducing the burden, may be
sent to: Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, N.W., Washington, DC 20551; and to the Office of
Management and Budget, Paperwork Reduction Project (7100-0201),
Washington, DC 20503.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights, Credit, Federal Reserve System,
Marital status discrimination, Penalties, Religious discrimination,
Reporting and recordkeeping requirements, Sex discrimination.
For the reasons set forth in the preamble, 12 CFR part 202 is
amended to read as follows:
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. Appendix A is amended by revising the second paragraph to read
as follows:
Appendix A to Part 202--Federal Enforcement Agencies
* * * * *
National Banks, and Federal Branches and Federal Agencies of
Foreign Banks
Office of the Comptroller of the Currency, Customer Assistance
Unit, 1301 McKinney Avenue, Suite 3710, Houston, Texas 77010.
* * * * *
3. Appendix C is amended as follows:
a. By revising the second paragraph;
b. By revising Form C-1;
c. By revising Form C-2;
d. By revising Form C-3;
e. By revising Form C-4;
f. By revising Form C-5.
The revisions read as follows:
Appendix C to Part 202--Sample Notification Forms
* * * * *
Form C-1 contains the Fair Credit Reporting Act disclosure as
required by sections 615(a) and (b) of that act. Forms C-2 through
C-5 contain only the section 615(a) disclosure (that a creditor
obtained information from a consumer reporting agency that played a
part in the credit decision). A creditor must provide the 615(a)
disclosure when adverse action is taken against a consumer based on
information from a consumer reporting agency. A creditor must
provide the section 615(b) disclosure when adverse action is taken
based on information from an outside source other than a consumer
reporting agency. In addition, a creditor must provide the 615(b)
disclosure if the creditor obtained information from an affiliate
other than information in a consumer report or other than
information concerning the affiliate's own transactions or
experiences with the consumer. Creditors may comply with the
disclosure requirements for adverse action based on information in a
consumer report obtained from an affiliate by providing either the
615(a) or 615(b) disclosure.
* * * * *
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* * * * *
By order of the Board of Governors of the Federal Reserve
System, March 30, 1998.
William W. Wiles,
Secretary of the Board.
[FR Doc. 98-8749 Filed 4-2-98; 8:45 am]
BILLING CODE 6210-01-C
