35864 Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Rules and Regulations 

Commission is adding a note to 11 CFR 

109.10(e)(1) citing to the District Court 

and Court of Appeals decisions relating 

to this matter stating that the statutory 

provision at 52 U.S.C. 30104(c) remains 

in force. 

The Commission is issuing this rule 

as an interim final rule. This interim 

final rule will take effect thirty 

legislative days after its transmittal to 

Congress. See 52 U.S.C. 30111(d). The 

Commission welcomes public comment 

on this interim final rule and may 

address any comments received in a 

later rulemaking. 

The Administrative Procedure Act 

(‘‘APA’’) requires an agency 

promulgating regulations to publish a 

notice of a proposed rulemaking in the 

Federal Register. 5 U.S.C. 553(b). The 

notice requirement does not apply, 

however, ‘‘when the agency for good 

cause finds (and incorporates the 

finding and a brief statement of reasons 

therefor in the rules issued) that notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest.’’ 5 U.S.C. 

553(b)(B). According to the APA’s 

legislative history, a situation is 

‘‘impracticable’’ when ‘‘the due and 

required execution of the agency 

functions would be unavoidably 

prevented by its undertaking public 

rule-making proceedings.’’ See 

Administrative Procedure Act: 

Legislative History, S. Doc. No. 248 79– 

258 (1946); see also Attorney General’s 

Manual on the Administrative 

Procedure Act 15 (1947). 

‘‘ ‘Unnecessary’ means unnecessary so 

far as the public is concerned, as would 

be the case if a minor or merely 

technical amendment in which the 

public is not particularly interested 

were involved.’’ Id. ‘‘Contrary to the 

public interest’’ connotes a situation in 

which the interest of the public would 

be defeated by any requirement of 

advance notice. Id. 

The notice to remove 11 CFR 

109.10(e)(1)(vi) is unnecessary because 

that regulatory provision that has 

already been invalidated by a federal 

court and cannot be enforced. 5 U.S.C. 

553(b)(B). Removing this provision from 

the regulations does not involve any 

exercise of discretion by the 

Commission. Moreover, because this 

provision is already unenforceable, the 

Commission’s action will not affect the 

rights or interests of any person or 

entity, nor could the public notice and 

comment period benefit the 

Commission in this rulemaking. 

In addition, a notice and comment 

period may be contrary to the public 

interest. The Commission notes that the 

2022 elections for federal office are 

scheduled to take place on November 8, 

2022. Although, as noted above, the 

Commission previously issued guidance 

on reporting requirements to the 

regulated community, the fundamental 

part of that guidance should be reflected 

in the Commission’s regulation as soon 

as possible before the general election. 

In addition, because this interim final 

rule is exempt from the notice and 

comment procedure under 5 U.S.C. 

553(b), the Commission is not required 

to conduct a regulatory flexibility 

analysis under 5 U.S.C. 603 and 604 

(Regulatory Flexibility Act). See 5 

U.S.C. 601(2) and 604(a). 

List of Subjects in 11 CFR Part 109 

Coordinated and independent 

expenditures. 

For the reasons set out in the 

preamble, the Commission is amending 

11 CFR part 109 as follows: 

PART 109—COORDINATED AND 

INDEPENDENT EXPENDITURES (52 

U.S.C. 30101(17), 30116(a) AND (d), 

AND PUBLIC LAW 107–155 SEC. 

214(C)) 

■ 1. The authority citation for part 109 

continues to read as follows: 

Authority: 52 U.S.C. 30101(17), 30104(c), 

30111(a)(8), 30116, 30120; Sec. 214(c), Pub. 

L. 107–155, 116 Stat. 81. 

■ 2. Section 109.10 is amended by 

removing and reserving paragraph 

(e)(1)(vi) and by adding a note to 

paragraph (e)(1). 

The addition reads as follows: 

§ 109.10 How do political committees and 

other persons report independent 

expenditures? 

* * * * * 

(e) * * * 

(1) * * * 

Note to § 109.10(e)(1): On August 3, 2018, 

the United States District Court for the 

District of Columbia vacated 11 CFR 

109.10(e)(1)(vi). CREW v. FEC, 316 F. Supp. 

3d 349 (Aug. 3, 2018), aff’d, 971 F.3d 340 

(D.C. Cir. 2020). Section 30104(c) of title 52 

of the U.S. Code and the remaining 

provisions of 11 CFR 109.10 remain in force. 

* * * * * 

Dated: June 8, 2022. 

On behalf of the Commission, 

Allen J. Dickerson, 

Chairman, Federal Election Commission. 

[FR Doc. 2022–12771 Filed 6–13–22; 8:45 am] 

BILLING CODE 6715–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1002 

Consumer Financial Protection 

Circular 2022–03: Adverse Action 

Notification Requirements in 

Connection With Credit Decisions 

Based on Complex Algorithms 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Consumer financial protection 

circular. 

SUMMARY: The Consumer Financial 

Protection Bureau (Bureau or CFPB) has 

issued Consumer Financial Protection 

Circular 2022–03, titled, ‘‘Adverse 

Action Notification Requirements in 

Connection with Credit Decisions Based 

on Complex Algorithms.’’ In this 

circular, the Bureau responds to the 

question, ‘‘When creditors make credit 

decisions based on complex algorithms 

that prevent creditors from accurately 

identifying the specific reasons for 

denying credit or taking other adverse 

actions, do these creditors need to 

comply with the Equal Credit 

Opportunity Act’s requirement to 

provide a statement of specific reasons 

to applicants against whom adverse 

action is taken?’’ 

DATES: The Bureau released this circular 

on its website on May 26, 2022. 

ADDRESSES: Enforcers, and the broader 

public, can provide feedback and 

comments to Circulars@cfpb.gov. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Davis, Attorney-Advisor, 

Office of Fair Lending and Equal 

Opportunity, at (202) 435–7000. If you 

require this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

Question Presented 

When creditors make credit decisions 

based on complex algorithms that 

prevent creditors from accurately 

identifying the specific reasons for 

denying credit or taking other adverse 

actions, do these creditors need to 

comply with the Equal Credit 

Opportunity Act’s (ECOA’s) 

requirement to provide a statement of 

specific reasons to applicants against 

whom adverse action is taken? 

Response 

Yes. ECOA and Regulation B require 

creditors to provide statements of 

specific reasons to applicants against 

whom adverse action is taken. Some 

creditors may make credit decisions 

based on certain complex algorithms, 


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Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Rules and Regulations 35865 

1While some creditors may rely upon various 

post-hoc explanation methods, such explanations 

approximate models and creditors must still be able 

to validate the accuracy of those approximations, 

which may not be possible with less interpretable 

models. 

2 15 U.S.C. 1691(a). 

3 15 U.S.C. 1691(d)(2)(A), (B); see also 15 U.S.C. 

1691(d)(3). A creditor may either provide the notice 

or follow certain requirements to inform consumers 

on how to obtain such notice. 15 U.S.C. 

1691(d)(2)(B). 

4 12 CFR 1002.2(c). 

5 12 CFR 1002.9(b)(2) (emphasis added); see also 

12 CFR part 1002 (supp. I), sec. 1002.9, para. 

9(b)(2)–9 (‘‘The Fair Credit Reporting Act (FCRA) 

requires a creditor to disclose when it has based its 

decision in whole or in part on information from 

a source other than the applicant or its own 

files. . . . The FCRA also requires a creditor to 

disclose, as applicable, a credit score it used in 

taking adverse action along with related 

information, including up to four key factors that 

adversely affected the consumer’s credit score (or 

up to five factors if the number of inquiries made 

with respect to that consumer report is a key factor). 

Disclosing the key factors that adversely affected 

the consumer’s credit score does not satisfy the 

ECOA requirement to disclose specific reasons for 

denying or taking other adverse action on an 

application or extension of credit.’’). 

6 12 CFR 1002.9(b)(2). 

7 12 CFR part 1002 (supp. I), sec. 1002.9, para. 

9(b)(1)–2. A creditor, however, ‘‘need not describe 

how or why a factor adversely affected an 

applicant.’’ 12 CFR part 1002 (supp. I), sec. 1002.9, 

para. 9(b)(1)–3. 

8 12 CFR part 1002 (app. C), comment 4 

(emphasis added). The sample forms are illustrative 

and may not be appropriate for all creditors. If a 

creditor chooses to use the checklist of reasons 

provided in one of the sample forms and if reasons 

commonly used by the creditor are not provided on 

the form, the creditor should modify the checklist 

by substituting or adding other reasons. 12 CFR part 

1002 (app. C), comment 3. 

9 12 CFR part 1002 (supp. I), sec. 1002.9, para. 

9(b)(1)–4. 

10 Fischl v. Gen. Motors Acceptance Corp., 708 

F.2d 143, 146 (5th Cir. 1983); see also id. (calling 

these provisions ‘‘[p]erhaps the most significant of 

the 1976 amendments to the ECOA’’). 

11Treadway v. Gateway Chevrolet Oldsmobile, 

Inc., 362 F.3d 971, 977–78 (7th Cir. 2004) (quoting 

Fischl, 708 F.2d at 146); see also S. Rep. 94–589, 

94th Cong., 2d Sess., at 4, reprinted in 1976 

U.S.S.C.A.N. 403, 406 (calling the notice 

requirement ‘‘a strong and necessary adjunct to the 

antidiscrimination purpose of the legislation’’). 

12S. Rep. 94–589, 94th Cong., 2d Sess., at 4, 

reprinted in 1976 U.S.S.C.A.N. 403, 406. 13 Id. 14S. Rep. No. 94–589, at 4, 7 (1976). 15 15 U.S.C. 1691(d)(2)(A), (B); 12 CFR 

1002.9(a)(2)(i), (ii). 

16 12 CFR 1002.9(b)(2). 

sometimes referred to as uninterpretable 

or ‘‘black-box’’ models, that make it 

difficult—if not impossible—to 

accurately identify the specific reasons 

for denying credit or taking other 

adverse actions.1 The adverse action 

notice requirements of ECOA and 

Regulation B, however, apply equally to 

all credit decisions, regardless of the 

technology used to make them. Thus, 

ECOA and Regulation B do not permit 

creditors to use complex algorithms 

when doing so means they cannot 

provide the specific and accurate 

reasons for adverse actions. 

Analysis 

ECOA makes it unlawful for any 

creditor to discriminate against any 

applicant, with respect to any aspect of 

a credit transaction, on the basis of race, 

color, religion, national origin, sex or 

marital status, age (provided the 

applicant has the capacity to contract), 

because all or part of the applicant’s 

income derives from any public 

assistance program, or because the 

applicant has in good faith exercised 

any right under the Consumer Credit 

Protection Act.2 In addition, ECOA 

provides that a creditor must provide a 

statement of specific reasons in writing 

to applicants against whom adverse 

action is taken.3 ‘‘Adverse action[s]’’ 

include denying an application for 

credit, terminating an existing credit 

account, making unfavorable changes to 

the terms of an existing account, and 

refusing to increase a credit limit.4

Pursuant to Regulation B, a statement 

of reasons for adverse action taken 

‘‘must be specific and indicate the 

principal reason(s) for the adverse 

action.’’ 5 Regulation B explains that 

‘‘[s]tatements that the adverse action 

was based on the creditor’s internal 

standards or policies or that the 

applicant, joint applicant, or similar 

party failed to achieve a qualifying score 

on the creditor’s credit scoring system 

are insufficient.’’ 6 The Official 

Interpretations to Regulation B explain 

that ‘‘[t]he specific reasons disclosed 

. . . must relate to and accurately 

describe the factors actually considered 

or scored by a creditor.’’ 7 Moreover, 

while appendix C of Regulation B 

includes sample forms intended for use 

in notifying an applicant that adverse 

action has been taken, ‘‘[i]f the reasons 

listed on the forms are not the factors 

actually used, a creditor will not satisfy 

the notice requirement by simply 

checking the closest identifiable factor 

listed.’’ 8 With respect to adverse actions 

based on a credit scoring system 

specifically, the Official Interpretations 

explain that— 

[T]he reasons disclosed must relate only to 

those factors actually scored in the system. 

Moreover, no factor that was a principal 

reason for adverse action may be excluded 

from disclosure. The creditor must disclose 

the actual reasons for denial (for example, 

‘‘age of automobile’’) even if the relationship 

of that factor to predicting creditworthiness 

may not be clear to the applicant.9

ECOA’s notice requirements ‘‘were 

designed to fulfill the twin goals of 

consumer protection and education.’’ 10

In terms of consumer protection, ‘‘the 

notice requirement is intended to 

prevent discrimination ex ante because 

‘if creditors know they must explain 

their decisions . . . they [will] 

effectively be discouraged’ from 

discriminatory practices.’’ 11 The notice 

requirement ‘‘fulfills a broader need’’ as 

well by educating consumers about the 

reasons for the creditor’s action.12 As a 

result of being informed of the specific 

reasons for the adverse action, 

consumers can take steps to try to 

improve their credit status or, in cases 

‘‘where the creditor may have acted on 

misinformation or inadequate 

information[,] . . . to rectify the 

mistake.’’ 13 In addition, Congress also 

believed ECOA’s notice requirement 

would have ‘‘a beneficial competitive 

effect on the credit marketplace.’’ 14

Creditors who use complex 

algorithms, including artificial 

intelligence or machine learning, in any 

aspect of their credit decisions must still 

provide a notice that discloses the 

specific principal reasons for taking an 

adverse action. Whether a creditor is 

using a sophisticated machine learning 

algorithm or more conventional 

methods to evaluate an application, the 

legal requirement is the same: Creditors 

must be able to provide applicants 

against whom adverse action is taken 

with an accurate statement of reasons.15

The statement of reasons ‘‘must be 

specific and indicate the principal 

reason(s) for the adverse action.’’ 16 A 

creditor cannot justify noncompliance 

with ECOA and Regulation B’s 

requirements based on the mere fact that 

the technology it employs to evaluate 

applications is too complicated or 

opaque to understand. A creditor’s lack 

of understanding of its own methods is 

therefore not a cognizable defense 

against liability for violating ECOA and 

Regulation B’s requirements. 

About Consumer Financial Protection 

Circulars 

Consumer Financial Protection 

Circulars are issued to all parties with 

authority to enforce Federal consumer 

financial law. The CFPB is the principal 

Federal regulator responsible for 

administering Federal consumer 

financial law, see 12 U.S.C. 5511, 

including the Consumer Financial 

Protection Act’s prohibition on unfair, 

deceptive, and abusive acts or practices, 

12 U.S.C. 5536(a)(1)(B), and 18 other 

‘‘enumerated consumer laws,’’ 12 U.S.C. 

5481(12). However, these laws are also 

enforced by State attorneys general and 

State regulators, 12 U.S.C. 5552, and 

prudential regulators including the 

Federal Deposit Insurance Corporation, 

the Office of the Comptroller of the 


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35866 Federal Register / Vol. 87, No. 114 / Tuesday, June 14, 2022 / Rules and Regulations 

1See 12 U.S.C. 5481(12), (14), 5511. 

2See 12 U.S.C. 4301–4313; 12 CFR pt. 1030; 

CFPB Exam Handbook, at TISA 1, https://

files.consumerfinance.gov/f/documents/cfpb_

supervision-and-examination-manual.pdf. 

3See 15 U.S.C. 1693–1693r; 12 CFR pt. 1005; 

CFPB Exam Handbook, at EFTA 1, https://

files.consumerfinance.gov/f/documents/cfpb_

supervision-and-examination-manual.pdf. 

4See 12 U.S.C. 1831t(b)–(f); 12 CFR pt. 1009. 

5See 12 U.S.C. 5531, 5536; CFPB Exam 

Handbook, at UDAAP 1, https://files.consumer

finance.gov/f/documents/cfpb_supervision-andexamination-manual.pdf. 

6Additionally, accounts at federally insured 

credit unions are insured through the National 

Credit Union Share Insurance Fund (NCUSIF). See 

NCUA, How Your Accounts are Federally Insured 

(Feb. 2018), https://www.ncua.gov/files/ 

publications/guides-manuals/NCUAHowYourAcct

Insured.pdf. 

7See FDIC, Your Insured Deposits, at 3 (Jan. 

2020), https://www.fdic.gov/resources/depositinsurance/brochures/documents/your-insureddeposits-english.pdf. 

Currency, the Board of Governors of the 

Federal Reserve System, and the 

National Credit Union Administration. 

See, e.g., 12 U.S.C. 5516(d), 5581(c)(2) 

(exclusive enforcement authority for 

banks and credit unions with $10 

billion or less in assets). Some Federal 

consumer financial laws are also 

enforceable by other Federal agencies, 

including the Department of Justice and 

the Federal Trade Commission, the 

Farm Credit Administration, the 

Department of Transportation, and the 

Department of Agriculture. In addition, 

some of these laws provide for private 

enforcement. 

Consumer Financial Protection 

Circulars are intended to promote 

consistency in approach across the 

various enforcement agencies and 

parties, pursuant to the CFPB’s statutory 

objective to ensure Federal consumer 

financial law is enforced consistently. 

12 U.S.C. 5511(b)(4). 

Consumer Financial Protection 

Circulars are also intended to provide 

transparency to partner agencies 

regarding the CFPB’s intended approach 

when cooperating in enforcement 

actions. See, e.g., 12 U.S.C. 5552(b) 

(consultation with CFPB by State 

attorneys general and regulators); 12 

U.S.C. 5562(a) (joint investigatory work 

between CFPB and other agencies). 

Consumer Financial Protection 

Circulars are general statements of 

policy under the Administrative 

Procedure Act. 5 U.S.C. 553(b). They 

provide background information about 

applicable law, articulate considerations 

relevant to the Bureau’s exercise of its 

authorities, and, in the interest of 

maintaining consistency, advise other 

parties with authority to enforce Federal 

consumer financial law. They do not 

restrict the Bureau’s exercise of its 

authorities, impose any legal 

requirements on external parties, or 

create or confer any rights on external 

parties that could be enforceable in any 

administrative or civil proceeding. The 

CFPB Director is instructing CFPB staff 

as described herein, and the CFPB will 

then make final decisions on individual 

matters based on an assessment of the 

factual record, applicable law, and 

factors relevant to prosecutorial 

discretion. 

Rohit Chopra, 

Director, Consumer Financial Protection 

Bureau. 

[FR Doc. 2022–12729 Filed 6–13–22; 8:45 am] 

BILLING CODE 4810–AM–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Chapter X 

Consumer Financial Protection 

Circular 2022–02: Deceptive 

Representations Involving the FDIC’s 

Name or Logo or Deposit Insurance 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Consumer financial protection 

circular. 

SUMMARY: The Consumer Financial 

Protection Bureau (Bureau or CFPB) has 

issued Consumer Financial Protection 

Circular 2022–02, titled, ‘‘Deceptive 

representations Involving the FDIC’s 

Name or Logo or Deposit Insurance.’’ In 

this circular, the Bureau responds to the 

question, ‘‘When do representations 

involving the name or logo of the 

Federal Deposit Insurance Corporation 

(FDIC) or about deposit insurance 

constitute a deceptive act or practice in 

violation of the Consumer Financial 

Protection Act (CFPA)? ’’ 

DATES: The Bureau released this circular 

on its website on May 17, 2022. 

ADDRESSES: Enforcers, and the broader 

public, can provide feedback and 

comments to Circulars@cfpb.gov. 

FOR FURTHER INFORMATION CONTACT: Brad 

Lipton, Senior Counsel, Legal Division, 

at (202) 435–7700. If you require this 

document in an alternative electronic 

format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

Question Presented 

When do representations involving 

the name or logo of the Federal Deposit 

Insurance Corporation (FDIC) or about 

deposit insurance constitute a deceptive 

act or practice in violation of the 

Consumer Financial Protection Act 

(CFPA)? 

Response 

Covered persons or service providers 

likely violate the CFPA’s prohibition on 

deception if they misuse the name or 

logo of the FDIC or engage in false 

advertising or make misrepresentations 

to consumers about deposit insurance, 

regardless of whether such conduct 

(including the misrepresentation of 

insured status) is engaged in knowingly. 

Representations about deposit insurance 

may be particularly relevant with 

respect to new financial products or 

services, especially those involving new 

technologies such as digital assets, 

including crypto-assets. 

Analysis 

The Bureau administers a number of 

laws and regulations relating to the 

offering or providing of deposit 

accounts, including these provisions: 1

• The Truth in Savings Act and its 

implementing regulation (Regulation 

DD), which enable consumers to make 

informed decisions about their accounts 

at depository institutions through the 

use of uniform disclosures; 2

• The Electronic Fund Transfer Act 

and its implementing regulation 

(Regulation E), which protect consumers 

engaging in electronic fund transfers 

and remittance transfers; 3

• Portions of the Federal Deposit 

Insurance Act (FDI Act) and its 

implementing regulations, which 

require depository institutions lacking 

Federal deposit insurance to make 

certain disclosures; 4

• The CFPA, which, among other 

things, prohibits unfair, deceptive, or 

abusive acts or practices.5

Deposit insurance has long been a 

means to promote confidence in the 

banking system. The most common form 

of deposit insurance is administered by 

the Federal Deposit Insurance 

Corporation (FDIC).6 The FDIC insures 

deposits at FDIC-insured banks and 

savings associations up to the maximum 

deposit insurance amount, currently 

$250,000, per depositor, per FDICinsured bank, for each account 

ownership category.7

Representations about deposit 

insurance may be particularly relevant 

with respect to new financial products 

or services, especially those involving 

new technologies such as digital assets, 

including crypto assets. New 

technologies may yield significant 

benefits for consumers, workers, and 

small businesses. Nonetheless, 

especially with respect to new 


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