3762 Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations 

1Regulatory Capital Rule: Eligible Retained 

Income, 85 FR 15909 (March 20, 2020). 

2Regulatory Capital Rule and Total LossAbsorbing Capacity Rule: Eligible Retained Income, 

85 FR 63423 (October 8, 2020). The final rule is 

effective January 1, 2021. 1 85 FR 77987 (Dec. 3, 2020). 

ACTION: Final rule; correcting 

amendments. 

SUMMARY: The Board of Governors of the 

Federal Reserve System (Board) is 

correcting changes to the definition of 

eligible retained income in the capital 

rule. This definition is used for 

calculating limitations on capital 

distributions and discretionary bonus 

payments and was adopted in an 

interim final rule published on March 

18, 2020, and as a final rule published 

on October 8, 2020. 

DATES: This correction is effective 

January 15, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Benjamin McDonough, Associate 

General Counsel, (202) 452–2036; Mark 

Buresh, Senior Counsel, (202) 452–5270; 

or Andrew Hartlage, Counsel, (202) 

452–6483, Legal Division, Board of 

Governors of the Federal Reserve 

System, 20th Street and Constitution 

Avenue NW, Washington, DC 20551. 

Users of Telecommunications Device for 

the Deaf (TDD) only, call (202) 263– 

4869. 

SUPPLEMENTARY INFORMATION: The Board 

of Governors of the Federal Reserve 

System (Board) is issuing this correction 

to the definition of eligible retained 

income in the capital rule, 12 CFR part 

217. This definition is used for 

calculating limitations on capital 

distributions and discretionary bonus 

payments and was adopted as an 

interim final rule published on March 

18, 2020 (ERI interim final rule),1 and as 

a final rule published on October 8, 

2020 (ERI final rule).2 In the ERI interim 

final rule, the Board, together with the 

Office of the Comptroller of the 

Currency (OCC) and the Federal Deposit 

Insurance Corporation (FDIC, and 

together with the Board and the OCC, 

the agencies), revised the definition of 

eligible retained income at section 

__.11(a)(2)(i) of the capital rule on an 

interim basis and sought comment on 

the revisions. In the ERI final rule, the 

agencies adopted these changes to the 

definition of eligible retained income, 

introduced through the ERI interim final 

rule, without change. 

On March 20, 2020, the Board 

published in the Federal Register a final 

rule, effective May 18, 2020, 

implementing the stress capital buffer 

requirement in the capital rule (SCB 

final rule), which revised section 217.11 

of the Board’s capital rule generally. The 

SCB final rule revised the definition of 

eligible retained income in section 

217.11 of the Board’s capital rule in a 

manner inconsistent with the the 

Board’s intent in the ERI interim final 

rule and the ERI final rule. The Board 

is issuing this notice to correct the 

definition of eligible retained income so 

that it is consistent with the definition 

established by the ERI interim final rule 

and affirmed by the ERI final rule. 

List of Subjects in 12 CFR Part 217 

Administrative practice and 

procedure; Banks, banking; Capital; 

Federal Reserve System; Holding 

companies. 

12 CFR Chapter II 

Authority and Issuance 

For the reasons set forth in the 

Supplementary Information, chapter II 

of title 12 of the Code of Federal 

Regulations is amended as follows: 

PART 217—CAPITAL ADEQUACY OF 

BANK HOLDING COMPANIES, 

SAVINGS AND LOAN HOLDING 

COMPANIES, AND STATE MEMBER 

BANKS (REGULATION Q) 

■ 1. The authority citation for part 217 

continues to read as follows: 

Authority: 12 U.S.C. 248(a), 321–338a, 

481–486, 1462a, 1467a, 1818, 1828, 1831n, 

1831o, 1831p–1, 1831w, 1835, 1844(b), 1851, 

3904, 3906–3909, 4808, 5365, 5368, 5371, 

5371 note; and Pub. L. 116–136, 134 Stat. 

281. 

■ 2. Section 217.11 is amended by 

revising paragraph (a)(2)(i) to read as 

follows: 

§ 217.11 Capital conservation buffer, 

countercyclical capital buffer amount, and 

GSIB surcharge. 

(a) * * * 

(2) * * * 

(i) Eligible retained income. The 

eligible retained income of a Boardregulated institution is the greater of: 

(A) The Board-regulated institution’s 

net income, calculated in accordance 

with the instructions to the FR Y–9C or 

Call Report, as applicable, for the four 

calendar quarters preceding the current 

calendar quarter, net of any 

distributions and associated tax effects 

not already reflected in net income; and 

(B) The average of the Board-regulated 

institution’s net income, calculated in 

accordance with the instructions to the 

FR Y–9C or Call Report, as applicable, 

for the four calendar quarters preceding 

the current calendar quarter. 

* * * * * 

By order of the Board of Governors of 

the Federal Reserve System, acting 

through the Secretary of the Board 

under delegated authority. 

Ann Misback, 

Secretary of the Board. 

[FR Doc. 2021–00906 Filed 1–14–21; 8:45 am] 

BILLING CODE 6210–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1002 

Equal Credit Opportunity (Regulation 

B); Special Purpose Credit Programs 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Advisory opinion. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is issuing 

this Advisory Opinion (AO) to address 

regulatory uncertainty regarding 

Regulation B, which implements the 

Equal Credit Opportunity Act, as it 

applies to certain aspects of special 

purpose credit programs designed and 

implemented by for-profit organizations 

to meet special social needs. 

Specifically, this AO clarifies the 

content that a for-profit organization 

must include in a written plan that 

establishes and administers a special 

purpose credit program under 

Regulation B. In addition, this AO 

clarifies the type of research and data 

that may be appropriate to inform a forprofit organization’s determination that 

a special purpose credit program is 

needed to benefit a certain class of 

persons. 

DATES: This advisory opinion is 

effective on January 15, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Davis, Attorney-Advisor; 

Office of Fair Lending and Equal 

Opportunity, at CFPB_FairLending@

cfpb.gov or 202–435–7000. If you 

require this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: The 

Bureau is issuing this AO through the 

procedures for its Advisory Opinions 

Policy.1 Refer to those procedures for 

more information. 

I. Advisory Opinion 

A. Background 

Congress enacted the Equal Credit 

Opportunity Act (ECOA or the Act) in 

1974, initially prohibiting 

discrimination in credit on the basis of 

Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations 3763 

2See Public Law 93–495, sec. 701(a), 88 Stat. 

1500, 1521 (1974). 

3See ECOA Amendments Act, Public Law 94– 

239, sec. 701(a), 90 Stat. 251, 251 (1976). 

4See Public Law 94–239, sec. 701(c)(3), 90 Stat. 

251, 251 (1976). 

5S. Rept. 94–589, 94th Cong., 2nd Sess., at 7, 

reprinted in 1976 U.S.C.C.A.N. 403, 409. 

6See id. 

7See 42 FR 1242 (Jan. 6, 1977). 

8See Public Law 111–203, tit. X, sec. 1085, 124 

Stat. 1376, 2084. 

9 76 FR 79442 (Dec. 21, 2011) (promulgating 12 

CFR pt. 1002 & supp. I). 

10See 81 FR 46652, 46656 (July 18, 2016). 

11See Susan M. Bernard and Patrice 

Alexander Ficklin, Expanding Access to 

Credit to Underserved Communities (July 31, 

2020), https://www.consumerfinance.gov/about-us/ 

blog/expanding-access-credit-underservedcommunities/. 

12See id. 

13 85 FR 46600 (Aug. 3, 2020). 

14Fed. Reserve Bank of N.Y., Credit, Income and 

Inequality (June 2020), at 1 https://

www.newyorkfed.org/medialibrary/media/research/ 

staff_reports/sr929.pdf (‘‘[C]redit-constrained 

individuals often have limited wealth, and their 

exclusion from credit can hinder economic mobility 

and fuel persistent income inequality.’’). 

15U.S. Census Bureau, Gaps in the Wealth of 

Americans by Household Type (Aug. 27, 2019), 

https://www.census.gov/library/stories/2019/08/ 

gaps-in-wealth-americans-by-householdtype.html?utm_campaign=20190827

msacos1ccstors&utm_medium=email&utm_

source=govdelivery%. 

16Consumer Fin. Prot. Bureau, Data Point: 2019 

Mortgage Market Activity and Trends (June 2020), 

at 36, https://files.consumerfinance.gov/f/ 

documents/cfpb_2019-mortgage-market-activitytrends_report.pdf. 17See id. 18See id. at 47. 19See, e.g., Fed. Reserve Bank of N.Y., supra note 

14. 20Board of Governors of the Fed. Reserve Sys., 

Disparities in Wealth by Race and Ethnicity in the 

2019 Survey of Consumer Finances (Sept. 28, 2020), 

https://www.federalreserve.gov/econres/notes/fedsnotes/disparities-in-wealth-by-race-and-ethnicityin-the-2019-survey-of-consumer-finances20200928.htm#fig1. 21 Id. 22See, e.g., Fed. Reserve Bank of N.Y., Double 

Jeopardy: COVID–19’s Concentrated Health and 

Wealth Effects in Black Communities (Aug. 2020), 

https://www.newyorkfed.org/medialibrary/media/ 

smallbusiness/DoubleJeopardy_

COVID19andBlackOwnedBusinesses (‘‘Black 

businesses experienced the most acute decline, 

with a 41 percent drop. Latinx business owners fell 

by 32 percent and Asian business owners dropped 

by 26 percent. In contrast, the number of white 

business owners fell by 17 percent.’’); Fed. Reserve 

Bank of Minn., COVID–19 and Indian Country: 

Early snapshot reveals disproportionate economic 

exposure and uncertainty (Apr. 10, 2020), https:// 

www.minneapolisfed.org/article/2020/covid-19- 

and-indian-country-early-snapshot-revealsdisproportionate-economic-exposure-anduncertainty. 

23Board of Governors of the Fed. Reserve Sys., 

Report on the Economic Well-Being of U.S. 

Continued 

sex or marital status.2 Two years later, 

Congress expanded the prohibition 

against discrimination in credit 

transactions to include age, race, color, 

religion, national origin, receipt of 

public assistance benefits, and exercise 

of rights under the Federal Consumer 

Credit Protection Act.3 At the same 

time, under section 701(c) of the ECOA, 

Congress clarified that it does not 

constitute discrimination under the Act 

for a creditor to ‘‘refuse to extend credit 

offered pursuant to’’ ‘‘any special 

purpose credit program offered by a 

profit-making organization to meet 

special social needs which meets 

standards prescribed in regulations by 

the [Bureau].’’ 4

By permitting the consideration of a 

prohibited basis such as race, national 

origin, or sex in connection with a 

special purpose credit program, 

Congress protected a broad array of 

programs ‘‘specifically designed to 

prefer members of economically 

disadvantaged classes’’ and ‘‘to increase 

access to the credit market by persons 

previously foreclosed from it.’’ 5

Congress provided examples of such 

programs—e.g., government sponsored 

housing credit subsidies for the aged or 

the poor and programs offering credit to 

a limited clientele such as credit union 

programs and educational loan 

programs.6

The Board of Governors of the Federal 

Reserve System (Board)—which 

exercised rulemaking authority under 

the ECOA at the time—promulgated 

regulations implementing the Act’s 

special purpose credit program 

provision.7 In the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010, Congress transferred 

primary rulemaking authority over the 

ECOA to the Bureau,8 which 

subsequently republished the Board’s 

existing regulations without material 

change.9 The Bureau has addressed 

special purpose credit programs in a 

previous edition of Supervisory 

Highlights 10 and a blog,11 explaining 

that special purpose credit programs 

may be one tool available to creditors to 

‘‘meet the credit needs of underserved 

communities.’’ 12

In recent months, stakeholders have 

expressed interest in developing special 

purpose credit programs but have also 

raised questions about how to do so in 

a manner consistent with Regulation B, 

indicating that regulatory uncertainty 

may inhibit broader creation of these 

programs by creditors. Many comments 

to the Bureau’s recent Request for 

Information on the Equal Credit 

Opportunity Act and Regulation B 13

from a variety of external stakeholders, 

including both consumer and civil 

rights advocates and industry 

representatives, indicate that special 

purpose credit programs may be one 

way to promote fair and responsible 

access to credit, but that there is a need 

for further guidance on compliant 

implementation of these programs. 

The Bureau is issuing this AO to 

address this regulatory uncertainty in 

the hope that broader creation of special 

purpose credit programs by creditors 

will help expand access to credit among 

disadvantaged groups and will better 

address special social needs that exist 

today. Bureau stakeholders have called 

attention to the problem of unmet credit 

needs among minority communities and 

the role that discrimination may have 

played in creating and exacerbating 

those deficits. Research from the Federal 

Reserve Bank of New York has shown 

that inequities in credit availability and 

in the terms and conditions of credit 

appear to have led to income 

inequality.14 For consumers who own a 

home, moreover, home equity 

represents a significant share of 

household net worth,15 but Home 

Mortgage Disclosure Act (HMDA) data 

show that in 2019, Black, Hispanic 

White, and Asian borrowers had notably 

higher mortgage loan denial rates than 

non-Hispanic White borrowers, 

continuing a trend from years prior.16

For example, the denial rates for 

conventional home-purchase loans were 

16.0 percent for Black borrowers, 10.8 

percent for Hispanic White borrowers, 

and 8.6 percent for Asian borrowers; in 

contrast, denial rates for such loans 

were 6.1 percent for non-Hispanic 

White borrowers.17 Black and Hispanic 

White borrowers were also more likely 

to have higher-priced conventional and 

nonconventional loans in 2019.18

According to some studies, these 

types of racial and ethnic differences in 

access to credit perpetuate wealth 

inequality.19 The Board’s 2019 Survey 

of Consumer Finances, for example, 

indicates that the typical White family 

has $188,200 in median family wealth, 

which is eight times the wealth of the 

typical Black family ($24,100), and five 

times the wealth of the typical Hispanic 

family ($36,100).20 Other families— 

including Asian families—also ‘‘have 

lower wealth than White families.’’ 21

The economic fallout from the ongoing 

COVID–19 pandemic appears to be 

exacerbating these racial and ethnic 

disparities in wealth.22

Bureau stakeholders have also noted 

that racial and ethnic disparities in 

access to credit extend beyond the 

mortgage market. For example, a report 

from the Board documented disparities 

in both mortgage and non-mortgage 

credit denials among White, Black, and 

Hispanic credit applicants.23

3764 Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations 

Households in 2016, at 33–34 (May 2017), https:// 

www.federalreserve.gov/publications/files/2016- 

report-economic-well-being-us-households201705.pdf. 

24See id. at 34. 

25Fed. Reserve, Report on Minority-Owned Firms 

(Dec. 2019), https://www.fedsmallbusiness.org/ 

medialibrary/fedsmallbusiness/files/2019/ 

20191211-ced-minority-owned-firms-report.pdf. 

26See, e.g., Press Release, BMO, BMO Commits $5 

Billion to Advance Inclusive Economic Recovery in 

the U.S. (Nov. 10, 2020), https://

newsroom.bmo.com/2020-11-10-BMO-Commits-5- 

Billion-to-Advance-Inclusive-Economic-Recoveryin-the-U-S; Press Release, Am. Express, American 

Express Announces $1 Billion Action Plan to 

Promote Racial, Ethnic and Gender Equity for 

Colleagues, Customers and Communities (Oct. 29, 

2020), https://about.americanexpress.com/all-news/ 

news-details/2020/American-Express-Announces-1- 

Billion-Action-Plan-to-Promote-Racial-Ethnic-andGender-Equity-for-Colleagues-Customers-andCommunities/default.aspx; Press Release, JPMorgan 

Chase & Co., JPMorgan Chase Commits $30 Billion 

to Advance Racial Equity (Oct. 8, 2020), https://

www.jpmorganchase.com/news-stories/jpmccommits-30-billion-to-advance-racial-equity; Press 

Release, Citigroup Inc., Citi Launches More Than $1 

Billion in Strategic Initiatives to Help Close the 

Racial Wealth Gap (Sept. 23, 2020), https://

www.citigroup.com/citi/news/2020/200923a.htm; 

Press Release, Huntington Bancshares, Huntington 

Announces $20 Billion Community Plan to Help 

Boost Economic Opportunity Throughout its Sevenstate Footprint (Sept. 1, 2020), http://huntingtonir.com/ne/news/hban09012020.pdf; Press Release, 

PNC, PNC Commits More Than $1 Billion To Help 

End Systemic Racism and Support Economic 

Empowerment of African Americans and Low- And 

Moderate-Income Communities (June 18, 2020), 

https://pnc.mediaroom.com/2020-06-18-PNCCommits-More-Than-1-Billion-To-Help-EndSystemic-Racism-And-Support-EconomicEmpowerment-Of-African-Americans-And-LowAnd-Moderate-Income-Communities; Press Release, 

U.S. Bank, U.S. Bank to rebuild in Minneapolis; 

Announces multiple investments and initiatives to 

address social and economic inequities (June 5, 

2020), https://www.usbank.com/newsroom/stories/ 

us-bank-to-rebuild-in-minneapolis-announcesmultiple-investments-and-initiatives-to-addresssocial-and-economic-inequities.html; Press Release, 

Bank of Am., Bank of America Announces $1 

Billion/4-Year Commitment to Support Economic 

Opportunity Initiatives (June 2, 2020), https://

newsroom.bankofamerica.com/press-releases/bankamerica-announces-four-year-1-billioncommitment-supporting-economic. 

27See 12 CFR 1002.8(a)(2), (3). 

28 15 U.S.C. 1691(c). 

29 12 CFR 1002.8(a)(3)(i). 

30 12 CFR 1002.8(a)(3)(ii). 

31 12 CFR 1002.8(b)(2); see, e.g., United States v. 

Am. Future Sys., Inc., 743 F.2d 169, 180 (3d Cir. 

1984) (explaining that a creditor is ‘‘prohibited from 

discriminating on the basis of race, sex or marital 

status in a credit program designed to extend credit 

to the group of persons between the ages of 18 and 

21’’). 

32 12 CFR 1002.8(b)(2). 

33 12 CFR 1002.8(c). 

34See Official Interpretations, 12 CFR pt. 1002 

(supp. I), sec. 1002.8, ¶ 8(a)–1. 

35See id. 

36See 12 CFR 1002.8(a)(3)(i). 

Specifically, White credit applicants 

reported being denied for credit— 

including, but not limited to, mortgage 

credit—at a rate of 17.3 percent; Black 

credit applicants reported being denied 

for credit at a rate of 41.3 percent; and 

Hispanic credit applicants reported 

being denied for credit at a rate of 34.6 

percent.24 In the small business lending 

context, a report by the Board showed 

that ‘‘[o]n average, Black- and Hispanicowned firm applicants received 

approval for smaller shares of the 

financing they sought compared to 

White-owned small businesses that 

applied for financing. This same report 

noted that larger shares of Black-, 

Hispanic-, and Asian-owned firm 

applicants did not receive any of the 

financing they applied for—38%, 33%, 

and 24%, respectively—compared to 

20% of White-owned business 

applicants.’’ 25

In recent months, multiple financial 

institutions have publicly committed to 

making billions of dollars available to 

addressing racial wealth disparities.26

Bureau stakeholders have indicated that 

investments in special purpose credit 

programs may allow for better 

expansion of credit access to 

underserved communities. 

B. Coverage 

This AO applies solely to certain 

aspects of special purpose credit 

programs (i.e., those described in part 

I.C below) designed and implemented 

by for-profit organizations to meet 

special social needs under the 

Regulation B requirements identified 

below. This AO does not apply to any 

credit assistance program expressly 

authorized by Federal or State law for 

the benefit of an economically 

disadvantaged class of persons, or to 

any credit assistance program offered by 

a not-for-profit organization, as defined 

under section 501(c) of the Internal 

Revenue Code of 1954, as amended, for 

the benefit of its members or for the 

benefit of an economically 

disadvantaged class of persons.27 This 

AO has no application to any other 

circumstance and does not offer a legal 

interpretation of any other provisions of 

law. 

C. Applicable Regulatory Provisions 

It is not discrimination under the 

ECOA for a creditor to refuse to extend 

credit offered pursuant to a legally 

compliant special purpose credit 

program.28 Regulation B, which 

implements the ECOA, sets forth 

compliance standards and general rules 

for special purpose credit programs. A 

for-profit organization that offers or 

participates in a special purpose credit 

program to meet special social needs 

must establish and administer the 

special purpose credit program pursuant 

to a ‘‘written plan’’ that identifies the 

class of persons the program is designed 

to benefit and sets forth the procedures 

and standards for extending credit 

pursuant to the program.29 In addition, 

a for-profit organization that offers or 

participates in a special purpose credit 

program to meet special social needs 

must establish and administer the 

special purpose credit program to 

extend credit to a class of persons who, 

under the organization’s customary 

standards of creditworthiness, probably 

would not receive such credit or would 

receive it on less favorable terms than 

are ordinarily available to other 

applicants applying to the organization 

for a similar type and amount of 

credit.30

Regulation B is clear that a special 

purpose credit program qualifies as such 

only where the program was established 

and is administered so as not to 

discriminate against an applicant on any 

prohibited basis.31 All program 

participants may be required, however, 

to share one or more common 

characteristics (for example, race, 

national origin, or sex) so long as the 

program is not established and is not 

administered with the purpose of 

evading the requirements of the ECOA 

or Regulation B.32 If participants in a 

special purpose credit program are 

required to possess one or more 

common characteristics and if the 

program otherwise satisfies the 

applicable requirements of Regulation 

B, a creditor may request and consider 

information regarding the common 

characteristic(s) in determining the 

applicant’s eligibility for the program.33

The Bureau does not determine 

whether individual programs qualify for 

special purpose credit status.34 The 

creditor administering or offering the 

special purpose credit program must 

make these decisions regarding the 

status of its program.35 It follows that a 

creditor may initiate a special purpose 

credit program without the approval of 

the Bureau. 

D. Legal Analysis 

1. Written Plan 

A for-profit organization must 

establish and administer a special 

purpose credit program pursuant to a 

written plan.36 The plan must contain 

information that supports the need for 

the program, including: 

• The class of persons that the 

program is designed to benefit; 

• The procedures and standards for 

extending credit pursuant to the 

program; 

• Either (i) the time period during 

which the program will last or (ii) when 

the program will be reevaluated to 

Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations 3765 

37 12 CFR 1002.8(a)(3)(i)–(ii); Official 

Interpretations, 12 CFR pt. 1002 (supp. I), sec. 

1002.8, ¶ 8(a)–6. 

38Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–5. 

39See 12 CFR 1002.8(b)(2), (d). 

40 12 CFR 1002.8(a)(3)(i). 

41See 12 CFR 1002.8(a)(3)(ii). 

42See 12 CFR 1002.8(b)(2), (c). 

43Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–6. 

44 12 CFR 1002.8(a)(3)(ii). 

45Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–5. 

46 12 CFR 1002.8(a)(3)(i) (emphasis added). 

47Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–6. 

48Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–5. 

49Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–5. 

50The Official Interpretations to Regulation B 

expressly provide that a for-profit organization is 

permitted to conduct a ‘‘broad analysis.’’ 12 CFR pt. 

1002 (supp. I), sec. 1002.8, ¶ 8(a)–5 (emphasis 

added). 

51Official Interpretations, 12 CFR pt. 1002 (supp. 

I), sec. 1002.8, ¶ 8(a)–5. 

determine if there is a continuing need 

for it; and 

• A description of the analysis the 

organization conducted to determine the 

need for the program.37

Each of these required components is 

discussed in further detail below. Forprofit organizations that draft written 

plans containing the necessary elements 

as set forth in Regulation B and herein 

will satisfy the requirement of 12 CFR 

1002.8(a)(3)(i). 

a. Class of Persons 

The class of persons that a special 

purpose credit program is designed to 

benefit must consist of those ‘‘who 

would otherwise be denied credit or 

would receive it on less favorable 

terms.’’ 38 A written plan must explain 

whether the class of persons will be 

required to demonstrate a financial need 

and/or share a common characteristic.39

Such a class could be defined with or 

without reference to a characteristic that 

is otherwise a prohibited basis under 

the ECOA. For example, if need is 

determined in accordance with part 

I.D.2 below, a for-profit organization’s 

written plan might identify a class of 

persons as minority residents of low-tomoderate income census tracts, 

residents of majority-Black census 

tracts, operators of small farms in rural 

counties, minority- or woman-owned 

small business owners, consumers with 

limited English proficiency, or residents 

living on tribal lands. 

b. Procedures and Standards 

A written plan must also set forth the 

procedures and standards for extending 

credit pursuant to the special purpose 

credit program.40 Those procedures and 

standards must be designed to increase 

the likelihood that a class of persons 

‘‘who would otherwise be denied 

credit’’ will receive credit pursuant to 

the program, or that a class of persons 

who ‘‘would receive [credit] on less 

favorable terms’’ will receive credit on 

more favorable terms pursuant to the 

program.41 To accomplish these goals a 

creditor may, for example, introduce a 

new product or service, modify the 

terms and conditions or certain 

eligibility requirements for an existing 

product or service, or modify policies 

and procedures related to certain loss 

mitigation programs, such as loan 

modifications. For example, a creditor 

may offer a new small business loan 

product for woman-owned businesses 

by relaxing its customary standard of 

requiring three years of experience in 

the industry to one year, if the creditor 

has determined that this requirement 

would probably prevent woman-owned 

businesses from qualifying for small 

business financing. The written plan 

must describe the procedures and 

standards adopted and explain how 

they will increase credit availability 

with respect to the identified class of 

persons. If the class of persons the 

program is designed to benefit will be 

required to share a common 

characteristic, the written plan may also 

explain whether the organization will 

request and consider information that 

would otherwise be prohibited under 

the ECOA.42

c. Program Duration/Reevaluation 

The written plan must provide ‘‘a 

specific period of time for which the 

program will last’’ or ‘‘contain a 

statement regarding when the program 

will be reevaluated to determine if there 

is a continuing need for it.’’ 43 If an 

organization opts for the latter 

approach, reevaluation could be made 

contingent on a certain set of 

circumstances or simply a set date. The 

written plan could also adopt a 

combined approach—for example, the 

special purpose credit program could 

end on a set date, or when a preestablished origination volume has been 

reached, whichever occurs earlier. If an 

organization extends the program 

beyond what is set forth in its written 

plan, it must document the terms of that 

extension in order to ensure the 

program continues to be administered 

pursuant to a written plan. 

d. Description of Analysis 

A special purpose credit program 

must be ‘‘established and 

administered’’ 44 to benefit a class of 

people who would otherwise be denied 

credit or would receive it on less 

favorable terms, as determined by a 

‘‘broad analysis,’’ 45 and it must be 

‘‘established and administered pursuant 

to a written plan.’’ 46 The Official 

Interpretations to Regulation B further 

provide that a written plan ‘‘must 

contain information that supports the 

need for the particular program.’’ 47

Thus, a for-profit organization’s written 

plan must describe or incorporate the 

analysis that supports the need for the 

program. 

2. Determination of Need for a Special 

Purpose Credit Program 

a. Permissible Sources of Data and 

Research 

In designing a special purpose credit 

program, a for-profit organization must 

determine that the program will benefit 

a class of persons who would otherwise 

be denied credit or would receive it on 

less favorable terms. This determination 

can be based on a broad analysis using 

the organization’s own research or data 

from outside sources, including 

governmental reports and studies.48 The 

Official Interpretations to Regulation B 

provide two examples: First, ‘‘a creditor 

might design new products to reach 

consumers who would not meet, or have 

not met, its traditional standards of 

creditworthiness due to such factors as 

credit inexperience or the use of credit 

sources that may not report to consumer 

reporting agencies’’; and second, ‘‘a 

bank could review [HMDA] data along 

with demographic data for its 

assessment area and conclude that there 

is a need for a special purpose credit 

program for low-income minority 

borrowers.’’ 49

For-profit organizations may rely on a 

wide range of research or data to 

analyze whether a special purpose 

credit program is needed to benefit a 

class of persons who would otherwise 

be denied credit or would receive it on 

less favorable terms.50 A for-profit 

organization’s analysis might consider 

research or data that are already in the 

public domain. The Official 

Interpretations to Regulation B cite 

HMDA data as one example.51 In the 

case of small business lending, the 

Small Business Administration or the 

Board’s Small Business Credit Surveys 

are possible sources of information. 

Other governmental or academic reports 

and studies exploring the historical and 

societal causes and effects of 

discrimination may also be considered. 

Finally, the for-profit organization’s 

own data or research—if available—may 

be a helpful source for conducting an 

3766 Federal Register / Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations 

52 12 CFR 1002.8(a)(3)(ii). 

53The fact that a for-profit organization identifies 

a need for a special purpose credit program based 

on an analysis of its own data does not, by itself, 

create an inference or presumption that the 

organization has engaged in unlawful credit 

discrimination. Of course, the adoption of a special 

purpose credit program does not absolve a creditor 

of its ordinary obligations under the ECOA and 

Regulation B; the Bureau strongly encourages 

creditors to evaluate their fair lending risk using an 

effective compliance management system. Finally, 

Regulation B does not require a creditor to show 

that a special purpose credit program is established 

and administered to extend credit to a class of 

persons who definitely would not receive such 

credit or would receive it on less favorable terms 

than other applicants—the regulation only requires 

a showing that the class of persons ‘‘probably’’ 

would not receive such credit or would receive it 

on less favorable terms. 12 CFR 1002.8(a)(3)(ii) 

(emphasis added). 

54 12 CFR 1002.8(c); see also Official 

Interpretations, 12 CFR pt. 1002 (supp. I), sec. 

1002.6, ¶ 6(b)–1 (‘‘In a special purpose credit 

program, a creditor may consider a prohibited basis 

to determine whether the applicant possesses a 

characteristic needed for eligibility.’’). 

55See 12 CFR 1002.5(b), 1002.6(b). 

56 12 U.S.C. 5512(b)(1). The relevant provisions of 

the ECOA and Regulation B form part of Federal 

consumer financial law. 12 U.S.C. 5481(12)(D), (14). 

57 15 U.S.C. 1691e(e). 

58 5 U.S.C. 553(b). 

59 5 U.S.C. 603(a), 604(a). 

60 44 U.S.C. 3501–3521. 

61 5 U.S.C. 801 et seq. 

analysis to determine if there is a need 

for a special purpose credit program. 

b. Nexus to the Organization’s 

Customary Credit Standards 

While a for-profit organization may 

permissibly rely on a broad range of 

research or data—including historical 

and societal information—in 

determining whether a special purpose 

credit program is needed, the 

organization’s analysis must show how 

‘‘a class of people [] would otherwise be 

denied credit or would receive it on less 

favorable terms’’ under the 

organization’s customary credit 

standards.52 The for-profit organization 

must be able to show a connection 

between the research or data informing 

its analysis and the fact that, under the 

organization’s customary standards of 

creditworthiness, a class of persons 

probably would not receive credit or 

would receive it on less favorable terms 

than are ordinarily available to other 

applicants applying to the organization 

for a similar type and amount of credit. 

For example, a creditor who identifies a 

class of certain applicants who do not 

have sufficient savings to meet mortgage 

loan requirements (or who receive such 

loans on less favorable terms) could 

offer such applicants down payment 

assistance funds pursuant to a special 

purpose credit program. In this 

example, the creditor could demonstrate 

that under its own standards of 

creditworthiness, e.g., either (1) 

‘‘insufficient cash’’ is listed as a 

principal reason for the denial of similar 

mortgage loan applications among the 

identified class of applicants frequently 

enough to indicate that they probably 

would not receive credit; or (2) 

requirements regarding minimum 

amounts of cash to close or liquid assets 

will probably impair credit access for 

the identified class of applicants.53

c. Requests For and Use of Information 

Lastly, the Bureau notes that pursuant 

to Regulation B, ‘‘[i]f participants in a 

special purpose credit program . . . are 

required to possess one or more 

common characteristics (for example, 

race, national origin, or sex) and if the 

program otherwise satisfies the 

requirements of [Regulation B], a 

creditor may request and consider 

information regarding the common 

characteristic(s) in determining the 

applicant’s eligibility for the 

program.’’ 54 If no special purpose credit 

program has yet been established, 

however, a creditor may use statistical 

methods to estimate demographic 

characteristics but it cannot request 

demographic information that it is 

otherwise prohibited from collecting, 

even to determine whether there is a 

need for such a program. Moreover, 

while a for-profit organization may rely 

on a broad swath of research and data 

to determine the need for a special 

purpose credit program—including the 

organization’s own lending data—it may 

not violate Regulation B’s prohibitions 

on the collection of demographic 

information exclusively to conduct this 

preliminary analysis before establishing 

a special purpose credit program.55

Once a special purpose credit 

program has been established, a creditor 

may then request and consider 

information regarding common 

characteristic(s) if needed to determine 

the applicant’s eligibility for the 

program. For example, if a creditor 

establishes a special purpose credit 

program that requires that an applicant 

resides in an area that is designated as 

a low-to-moderate income census tract 

and is Black, Hispanic, or Asian, a 

creditor could request race or ethnicity 

information from applicants to confirm 

eligibility for the program. 

II. Regulatory Matters 

This advisory opinion is an 

interpretive rule issued under the 

Bureau’s authority to interpret the 

ECOA and Regulation B, including 

under section 1022(b)(1) of the DoddFrank Wall Street Reform and Consumer 

Protection Act, which authorized 

guidance as may be necessary or 

appropriate to enable the Bureau to 

administer and carry out the purposes 

and objectives of Federal consumer 

financial laws.56

By operation of the ECOA section 

706(e), no provision of the ECOA 

imposing any liability applies to any act 

done or omitted in good faith in 

conformity with this interpretive rule, 

notwithstanding that after such act or 

omission has occurred, the interpretive 

rule is amended, rescinded, or 

determined by judicial or other 

authority to be invalid for any reason.57

As an interpretive rule, this advisory 

opinion is exempt from the notice-andcomment rulemaking requirements of 

the Administrative Procedure Act.58

Because no notice of proposed 

rulemaking is required, the Regulatory 

Flexibility Act does not require an 

initial or final regulatory flexibility 

analysis.59 The Bureau also has 

determined that this interpretive rule 

does not impose any new or revise any 

existing recordkeeping, reporting, or 

disclosure requirements on covered 

entities or members of the public that 

would be collections of information 

requiring approval by the Office of 

Management and Budget under the 

Paperwork Reduction Act.60

Pursuant to the Congressional Review 

Act,61 the Bureau will submit a report 

containing this interpretive rule and 

other required information to the U.S. 

Senate, the U.S. House of 

Representatives, and the Comptroller 

General of the United States prior to the 

rule’s published effective date. The 

Office of Information and Regulatory 

Affairs has designated this interpretive 

rule as not a ‘‘major rule’’ as defined by 

5 U.S.C. 804(2). 

III. Signing Authority 

The Director of the Bureau, Kathleen 

L. Kraninger, having reviewed and 

approved this document, is delegating 

the authority to electronically sign this 

document to Grace Feola, a Bureau 

Federal Register Liaison, for purposes of 

publication in the Federal Register. 

Dated: December 21, 2020. 

Grace Feola, 

Federal Register Liaison, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2020–28596 Filed 1–14–21; 8:45 am] 

BILLING CODE 4810–AM–P