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Consumer Financial Protection Bureau

Office of the Comptroller of the Currency

Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation

National Credit Union Administration

Interagency Statement on Fair Lending Compliance

and the Ability-to-Repay and Qualified Mortgage Standards Rule 

The Consumer Financial Protection Bureau (Bureau), Office of the Comptroller of the 

Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit 

Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA)

(collectively, the Agencies) are issuing this statement in response to inquiries from creditors

about whether they would be liable under the disparate impact doctrine of the Equal Credit 

Opportunity Act (ECOA), 15 U.S.C. 1691 et seq., and its implementing regulation, Regulation 

B, 12 C.F.R. Part 1002, by originating only Qualified Mortgages as defined under the Bureau’s 

recent Ability-to-Repay and Qualified Mortgage Standards Rule (Ability-to-Repay Rule), which 

implements provisions of the Truth in Lending Act (TILA).

1 The Agencies’ general approach 

and expectations regarding fair lending, including the disparate impact doctrine, are summarized 

in prior guidance.

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The Agencies are issuing this statement to describe some general principles that will 

guide supervisory and enforcement activities with respect to entities within their jurisdiction as 

the Ability-to-Repay Rule takes effect in January 2014. In the Agencies’ view, the requirements 

of the Ability-to-Repay Rule and ECOA are compatible. ECOA and Regulation B promote

creditors acting on the basis of their legitimate business needs.

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 Viewed in this context, and for 

the reasons described below, the Agencies do not anticipate that a creditor’s decision to offer 

 1 See http://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-thetruth-in-lending-act-regulation-z/. Disparate impact is one of the methods of proving lending discrimination under 

ECOA. See 12 C.F.R. pt. 1002 & Supp. I.

2 For example, in 1994, eight federal agencies published the Policy Statement on Discrimination in Lending, 59 Fed. 

Reg. 18,266 (Apr. 15, 1994), and last year the Bureau issued a bulletin on lending discrimination, CFPB Bulletin 

2012-04 (Fair Lending) (Apr. 18, 2012). In addition, the OCC, Board, FDIC, NCUA, and Bureau each have fair 

lending examination procedures. 

3 For example, even where a facially neutral practice results in a disproportionately negative impact on a protected 

class, a creditor is not liable provided the practice meets a legitimate business need that cannot reasonably be 

achieved as well by means that are less disparate in their impact. See 12 C.F.R. §1002.6; 12 C.F.R. pt. 1002, Supp. 

I, § 1002.6, ¶ 6(a)-2.
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only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair 

lending risk. 

The Bureau’s Ability-to-Repay Rule implements provisions of the Dodd-Frank Act that 

require creditors to make a reasonable, good faith determination that a consumer has the ability 

to repay a mortgage loan before extending the consumer credit.4

 TILA and the Ability-to-Repay 

Rule create a presumption of compliance with the ability-to-repay requirements for certain 

“Qualified Mortgages,” which are subject to certain restrictions as to risky features, limitations 

on upfront points and fees, and specialized underwriting requirements. However, consistent with 

the statutory framework, there are several ways to satisfy the Ability-to-Repay Rule, including 

making responsibly underwritten loans that are not Qualified Mortgages. The Bureau does not 

believe that it is possible to define by rule every instance in which a mortgage is affordable for 

the borrower. Nonetheless, the Agencies recognize that some creditors might be inclined to 

originate all or predominantly Qualified Mortgages, particularly when the Ability-to-Repay Rule 

first takes effect. The Rule includes transition mechanisms that encourage preservation of access 

to credit during this transition period.

In selecting business models and product offerings, we expect that creditors would 

consider demonstrable factors that may include credit risk, secondary market opportunities, 

capital requirements, and liability risk. The Ability-to-Repay Rule does not dictate precisely 

how creditors should balance such factors, nor do either TILA or ECOA. As creditors assess 

their business models, the Agencies understand that implementation of the Ability-to-Repay 

Rule, other Dodd-Frank Act regulations, and other changes in economic and mortgage market

conditions have real world impacts and that creditors may have a legitimate business need to 

fine-tune their product offerings over the next few years in response. 

 

Indeed, the Agencies recognize that some creditors’ existing business models are such 

that all of the loans they originate will already satisfy the requirements for Qualified Mortgages. 

For instance, a creditor that has decided to restrict its mortgage lending only to loans that are 

purchasable on the secondary market might find that—in the current market—its loans are 

Qualified Mortgages under the transition provision that gives Qualified Mortgage status to most 

loans that are eligible for purchase, guarantee, or insurance by Fannie Mae, Freddie Mac, or 

certain federal agency programs.

With respect to any fair lending risk, the situation here is not substantially different from 

what creditors have historically faced in developing product offerings or responding to 

regulatory or market changes. The decisions creditors will make about their product offerings in 

response to the Ability-to-Repay Rule are similar to the decisions that creditors have made in the 

past with regard to other significant regulatory changes affecting particular types of loans. Some 

creditors, for example, decided not to offer “higher-priced mortgage loans” after July 2008,

following the adoption of various rules regulating these loans or previously decided not to offer 

loans subject to the Home Ownership and Equity Protection Act after regulations to implement 

that statute were first adopted in 1995. We are unaware of any ECOA or Regulation B 

 4 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1411, 124 Stat. 1376, 

2142 (2010) (codified at 15 U.S.C. § 1639c).
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challenges to those decisions. Creditors should continue to evaluate fair lending risk as they 

would for other types of product selections, including by carefully monitoring their policies and 

practices and implementing effective compliance management systems. As with any other 

compliance matter, individual cases will be evaluated on their own merits.

The OCC, the Board, the FDIC, and the NCUA believe that the same principles described 

above apply in supervising institutions for compliance with the Fair Housing Act (FHA), 42 

U.S.C. § 3601 et seq., and its implementing regulation, 24 C.F.R. Part 100.5

 

October 22, 2013

 5 The OCC, Board, FDIC, and the NCUA have supervisory authority as to the FHA.