[Federal Register Volume 82, Number 189 (Monday, October 2, 2017)]
[Rules and Regulations]
[Pages 45680-45697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-20417]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002

[Docket No. CFPB-2017-0009]
RIN 3170-AA65


Equal Credit Opportunity Act (Regulation B) Ethnicity and Race 
Information Collection

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing a final rule that amends Regulation B to permit creditors 
additional flexibility in complying with Regulation B in order to 
facilitate compliance with Regulation C, adds certain model forms and 
removes others from Regulation B, and makes various other amendments to 
Regulation B and its commentary to facilitate the collection and 
retention of information about the ethnicity, sex, and race of certain 
mortgage applicants.

DATES: The rule is effective on January 1, 2018, except that the 
amendment to Appendix B to Part 1002 revising paragraph 1 and removing 
the existing ``Uniform Residential Loan Application'' form in 
amendatory instruction 6 is effective January 1, 2022.

FOR FURTHER INFORMATION CONTACT: Shaakira Gold-Ramirez, Paralegal 
Specialist, Kathryn Lazarev, Counsel, or James Wylie, Senior Counsel, 
Office of Regulations, at 202-435-7700 or https://www.consumerfinance.gov/policy-compliance/guidance/.

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule

    Regulation B implements the Equal Credit Opportunity Act (ECOA) \1\ 
and, in part, prohibits a creditor from inquiring about the race, 
color, religion, national origin, or sex of a credit applicant except 
under certain circumstances.\2\ Two of these circumstances are a 
requirement for creditors to collect and retain certain information 
about applicants for certain dwelling-secured loans under Regulation B 
Sec.  1002.13 and the similar applicant information that financial 
institutions are required to collect and report under Regulation C, 12 
CFR part 1003, which implements the Home Mortgage Disclosure Act 
(HMDA).\3\ Regulation B also includes certain optional model forms for 
use in complying with certain Regulation B requirements, including a 
model form for complying with Sec.  1002.13 that is a 2004 version of 
the Uniform Residential Loan Application (URLA) issued by the Federal 
National Mortgage Association (Fannie Mae) and the Federal Home Loan 
Mortgage Corporation (Freddie Mac) (collectively, the Enterprises).\4\
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    \1\ 15 U.S.C. 1691 et seq., 12 CFR part 1002.
    \2\ 12 CFR 1002.5(b).
    \3\ 12 CFR 1002.5(a)(2).
    \4\ Appendix B to 12 CFR part 1003.
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    The HMDA requirement to collect and report applicant information 
was recently updated through a final rule amending Regulation C, 
published in October of 2015 (2015 HMDA Final Rule).\5\ In 2016, the 
Enterprises issued a new version of the URLA that complies with the 
2015 HMDA Final Rule (2016 URLA).\6\ These changes to Regulation C and 
the URLA require updates to Regulation B to ensure consistency among 
regulations and facilitate compliance with Regulation B and Regulation 
C by financial institutions. To address these issues, the Bureau issued 
a proposal on March 24, 2017, which was published in the Federal 
Register on April 4, 2017 (the 2017 ECOA Proposal).\7\
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    \5\ Home Mortgage Disclosure (Regulation C), 80 FR 66128 (Oct. 
28, 2015).
    \6\ See Fannie Mae, Guide Forms, available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (last 
visited Sept. 6, 2017) (listing all selling and servicing guide 
forms); Freddie Mac, ``Forms and Documents,'' available at http://www.freddiemac.com/singlefamily/guide/ (last visited Sept. 6, 2017) 
(same).
    \7\ Amendments to Equal Credit Opportunity Act (Regulation B) 
Ethnicity and Race Information Collection, 82 FR 16307 (Apr. 4, 
2017).
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    The Bureau is now publishing final amendments to Regulation B. The 
final rule will provide creditors flexibility in complying with 
Regulation B in order to facilitate compliance with Regulation C and 
transition to the 2016 URLA. The changes to Regulation B in this rule 
are summarized briefly in this section and discussed in detail below.

A. Scope

    The final rule amends parts of Regulation B, its commentary, and 
its appendices, and affects when and how a creditor may collect 
information regarding the applicant's ethnicity, race, and sex. The 
Regulation B creditors affected by this rule are primarily those 
creditors making mortgage loans subject to Sec.  1002.13, which applies 
to purchase and refinance transactions involving an applicant's primary 
residence. Financial institutions that report under Regulation C, have 
reported in the prior five years, or may report in the near future may 
also be affected by this rule. Creditors that utilize model forms from 
appendix B to Regulation B (the Regulation B appendix) for mortgage 
loans are also affected by the rule.

B. Changes to Applicant Information Collection for Regulation B 
Creditors

    For Regulation B creditors making mortgage loans subject to Sec.  
1002.13, the rule will allow creditors to collect the applicant's 
information using either the aggregate ethnicity and race categories or 
disaggregated ethnicity and race categories and subcategories, as set 
forth in appendix B to Regulation C (the Regulation C appendix) as 
amended by the 2015 HMDA Final Rule. The rule change therefore will not 
require Regulation B creditors that are not HMDA reporters (Regulation 
B-only creditors) to change their Sec.  1002.13 compliance practices, 
but would allow them to adopt voluntarily new practices for collecting 
applicant information, including practices that would permit such 
creditors to transition to the 2016 URLA. Regulation B creditors will 
also be able to collect voluntarily certain information about 
applicants for certain mortgage loan scenarios as provided for in Sec.  
1002.5(a)(4). These scenarios

[[Page 45681]]

generally involve types of loans subject to Regulation C where a 
creditor voluntarily reports information under Regulation C, reported 
such information in the past five years, or may report such information 
in the near future.

C. Changes to Applicant Information Collection for HMDA Reporters

    Many HMDA reporters are also subject to the collection requirements 
of Sec.  1002.13. For those HMDA reporters, the rule provides clarity 
that compliance with applicant information collection under Regulation 
C generally satisfies similar requirements under Regulation B. HMDA 
reporters who at some point no longer are required to comply with HMDA 
can continue to collect certain applicant information as provided for 
in Sec.  1002.5(a)(4).

D. Changes to Regulation B Model Forms

    The rule makes certain changes to the Regulation B appendix. The 
rule amends the Regulation B appendix to provide two options: A model 
form for collecting aggregate applicant race and ethnicity information 
and a cross-reference to the Regulation C appendix model form for 
collecting disaggregated applicant race and ethnicity information. The 
rule also removes as outdated the existing version of the URLA 
contained in the Regulation B appendix, effective January 1, 2022. The 
rule does not add the 2016 URLA to the Regulation B appendix; that form 
is subject to a separate Federal Register notice issued by the Bureau 
acknowledging its compliance with certain provisions of Regulation 
B.\8\
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    \8\ Status of New Uniform Loan Application and Collection of 
Expanded Home Mortgage Information About Ethnicity and Race in 2017, 
81 FR 66930 (Sept. 29, 2016).
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II. Background

A. Regulation B and Ethnicity and Race Information Collection

    With some exceptions, Regulation B Sec.  1002.5(b) prohibits a 
creditor from inquiring about the race, color, religion, national 
origin, or sex of an applicant or any other person (protected 
applicant-characteristic information) in connection with a credit 
transaction. Section 1002.5(a)(2) provides several exceptions to that 
prohibition for information that creditors are required to request for 
certain dwelling-secured loans under Sec.  1002.13, and for information 
required by a regulation, order, or agreement issued by or entered into 
with a court or an enforcement agency to monitor or enforce compliance 
with ECOA, Regulation B or other Federal or State statutes or 
regulations, including Regulation C.
    Section 1002.13 sets forth rules for collecting information about 
an applicant's ethnicity, race, sex, marital status, and age under 
Regulation B. (In this document, ``applicant demographic information'' 
refers to information about an applicant's ethnicity, race, or sex 
information, while ``certain protected applicant-characteristic 
information'' refers to all information collected under Sec.  1002.13, 
including age and marital status.) Under Sec.  1002.13(a)(1), creditors 
that receive an application for credit primarily for the purchase or 
refinancing of a dwelling occupied (or to be occupied) by the applicant 
as a principal residence, where the extension of credit will be secured 
by the dwelling, must collect certain protected applicant-
characteristic information, including specified race and ethnicity 
categories. These race and ethnicity categories correspond to the 
Office of Management and Budget (OMB) minimum standards for the 
classification of Federal data on ethnicity and race.\9\ Certain of 
these categories include several more specific race, heritage, 
nationality, or country of origin groups. For example, Hispanic or 
Latino as defined by OMB for the 2010 Census refers to a person of 
Cuban, Mexican, Puerto Rican, South or Central American, or other 
Spanish culture or origin.\10\ Section 1002.13(b) through (c) provides 
instructions on the manner of collection. Unlike financial institutions 
covered by Regulation C, creditors subject to Sec.  1002.13 but not to 
Regulation C are required only to collect and retain, but not to 
report, the required protected applicant-characteristic information.
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    \9\ Revision of the Standards for the Classification of Federal 
Data on Race and Ethnicity, 62 FR 58782, 5878-90 (Oct. 30, 1997).
    \10\ See U.S. Census Bureau, Overview of Race and Hispanic 
Origin: 2010,'' at 2 (Mar. 2011), available at http://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf.
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B. 2015 HMDA Final Rule

    Regulation C implements HMDA and sets out specific requirements for 
the collection, recording, reporting, and disclosure of mortgage 
lending information, including a requirement to collect and report 
applicant demographic information. In July 2014, the Bureau proposed 
amendments to Regulation C to implement the Dodd-Frank Act changes to 
require collection, recording, and reporting of additional information 
to further HMDA's purposes, and to modernize the manner in which 
covered institutions report HMDA data.\11\ The Bureau published a final 
rule on October 28, 2015, amending Regulation C, with many of the 
amendments taking effect January 1, 2018.\12\ (In this document, 
``current Regulation C'' refers to Regulation C prior to January 1, 
2018, and ``revised Regulation C'' refers to Regulation C as it will be 
in effect on or after January 1, 2018, as amended by the 2015 HMDA 
Final Rule.) For data collected in or after 2018, the 2015 HMDA Final 
Rule amends the requirement for collection and reporting of applicant 
demographic information. Specifically, covered institutions must permit 
applicants to self-identify their ethnicity and race using certain 
disaggregated ethnic and racial subcategories such as Mexican, Puerto 
Rican, or Cuban under the aggregate category Hispanic or Latino. 
Covered institutions will report the disaggregated information provided 
by applicants. However, revised Regulation C will not require or permit 
covered institutions to use the disaggregated subcategories when 
collecting and reporting the applicant's ethnicity and race based on 
visual observation or surname.\13\
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    \11\ Home Mortgage Disclosure (Regulation C), 79 FR 51731 (Aug. 
29, 2014).
    \12\ 80 FR 66128 (Oct. 28, 2015).
    \13\ Id. at 66314 (amendments to appendix B to Regulation C, 
effective January 1, 2018).
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    Revised Regulation C Sec.  1003.2(g)(1)(v) and 1003.2(g)(2)(ii) 
also introduces an exclusion from the definition of financial 
institution, from which the duty to report HMDA data flows, for 
entities that, among other criteria, originated fewer than 25 closed-
end mortgage loans or fewer than 100 open-end lines of credit in either 
of the two preceding calendar years.\14\ The Bureau recently adopted 
amendments to Regulation C that will temporarily increase the threshold 
for collecting and reporting data on certain loans. Financial 
institutions originating fewer than 500 open-end lines of credit in 
either of the preceding two years will not be required to begin 
collecting such data until January 1, 2020.\15\ As a result, when 
revised Regulation C takes effect, an institution's obligation to 
collect and report information under Regulation C may change over time 
based on its prior loan volume.
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    \14\ Id. at 66148.
    \15\ 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. at 
43132, 43145 (Sec. Sec.  1003.2(g)(1)(v)(B), (g)(2)(ii)(B), and 
1003.3(c)(12)). This temporary increase in the open-end threshold 
will provide time for the Bureau to consider whether to initiate 
another rulemaking to address the appropriate level for the open-end 
threshold for data collected beginning January 1, 2020.

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[[Page 45682]]

C. Uniform Residential Loan Application

    The Enterprises, currently under the conservatorship of the Federal 
Housing Finance Agency (FHFA), prepare and periodically revise the URLA 
used by many lenders for certain dwelling-related loans. A mortgage 
loan application must be documented using the URLA in the mortgage loan 
file for the loan to be eligible for sale to the Enterprises.\16\ A 
version of the URLA dated January 2004 (2004 URLA) is included in the 
Regulation B appendix as a model form for use in complying with Sec.  
1002.13. The appendix provides that the use of its model forms is 
optional under Regulation B but that, if a creditor uses an appropriate 
appendix B model form, or modifies a form in accordance with 
instructions provided in appendix B, that creditor shall be deemed to 
be acting in compliance with Sec.  1002.5(b) through (d).\17\ The 
Enterprises, under the conservatorship of the FHFA, issued a revised 
and redesigned URLA on August 23, 2016 (2016 URLA).\18\ Among other 
changes, the 2016 URLA includes a Demographic Information section 
(section 7) that addresses the requirements in revised Regulation C for 
collecting applicant demographic information, including the requirement 
that financial institutions permit applicants to self-identify using 
disaggregated ethnicity and race categories beginning January 1, 2018. 
The Enterprises also made available a Demographic Information Addendum, 
which is identical in form to section 7 of the 2016 URLA.\19\ The 
Enterprises have advised that the Demographic Information Addendum may 
be used by lenders at any time on or after January 1, 2017, as a 
replacement for section X (Information for Government Monitoring 
Purposes) in the current URLA, dated July 2005 (revised June 2009). The 
Enterprises have not yet provided a date when lenders may begin using 
the 2016 URLA or the date lenders are required to use the 2016 URLA 
(the cutover date), but have stated their intention to collaborate with 
industry stakeholders to help shape the implementation timeline for the 
2016 URLA, with a goal to provide lenders with more precise information 
in 2017 regarding the cutover date.\20\
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    \16\ Fannie Mae, ``Selling Guide: Single Family Seller 
Servicer,'' at Sec.  B1-1-01 (Dec. 16, 2014), available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html; Freddie Mac, 
``Single-Family Seller/Servicer Guide'' (Sep. 21, 2016), Sec.  
3401.7, available at http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html.
    \17\ Comment appendix B-1 provides that a previous version of 
the URLA, dated October 1992, may be used by creditors without 
violating Regulation B. In addition, comment appendix B-2 provides 
that the home-improvement and energy loan application form prepared 
by the Enterprises, dated October 1986, complies with the 
requirements of Regulation B for some creditors but not others, 
depending on whether the creditor is governed by Sec.  1002.13(a) or 
subject to a substitute monitoring program under Sec.  1002.13(d). 
The Enterprises no longer offer the home-improvement and energy loan 
application form identified in comment app. B-2. See Fannie Mae, 
``Guide Forms,'' available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (last visited Sept. 6, 
2017) (listing all current selling and servicing guide forms); see 
also Freddie Mac, ``Forms and Documents,'' available at http://www.freddiemac.com/singlefamily/guide/ (last visited Sept. 6, 2017) 
(same).
    \18\ See Fannie Mae, ``Uniform Residential Loan Application,'' 
https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017); see also Press Release, 
Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the 
direction of the FHFA, ``The Redesigned URLA and ULAD Mapping 
Document Are Here!,'' (Aug. 23, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-august-2016.pdf.
    \19\ Fannie Mae, Form 1003 and Freddie Mac Form 65, 
``Demographic Information Addendum,'' (Aug. 2016), available at 
https://www.fanniemae.com/content/guide_form/urla-demographic-addendum.pdf.
    \20\ Press Release, Uniform Mortgage Data Program, Fannie Mae 
and Freddie Mac at the direction of the FHFA, ``URLA Implementation 
Guidance and Update,'' (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf; 
Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the 
direction of the FHFA, ``Uniform Residential Loan Application 
(URLA)/Uniform Loan Application Dataset (ULAD) FAQs,'' at ] 6 (Nov. 
1, 2016), available at https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf.
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D. Bureau Approval Notice

    On September 23, 2016, the Bureau issued a notice concerning the 
collection of expanded information about ethnicity and race in 2017 
(Bureau Approval Notice).\21\ Before the January 1, 2018, effective 
date of most provisions of the 2015 HMDA Final Rule, inquiries to 
collect applicant demographic information using disaggregated ethnic 
and racial categories are not required by current Regulation C and 
would not have been allowed under Regulation B Sec.  1002.5(a)(2), and 
therefore creditors would have been prohibited by Regulation B Sec.  
1002.5(b) from requesting applicants to self-identify using 
disaggregated ethnic and racial categories before January 1, 2018. The 
Bureau Approval Notice provided that, anytime from January 1, 2017 
through December 31, 2017, a creditor may, at its option, permit 
applicants to self-identify using disaggregated ethnic and racial 
categories as instructed in the revised Regulation C appendix. During 
this period, a creditor adopting the practice of permitting applicants 
to self-identify using disaggregated ethnic and racial categories as 
instructed in the revised Regulation C appendix shall be deemed to be 
in compliance with Regulation B Sec.  1002.13(a)(i). In the same 
notice, the Bureau also determined that the relevant language in the 
2016 URLA is in compliance with the regulatory provisions of Regulation 
B Sec.  1002.5(b) through (d), regarding requests for protected 
applicant-characteristic information and certain other information. The 
notice provides that, although the use of the 2016 URLA by creditors is 
not required under Regulation B, a creditor that uses the 2016 URLA 
without any modification that would violate Sec.  1002.5(b) through (d) 
acts in compliance with Sec.  1002.5(b) through (d).
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    \21\ 81 FR 66930 (Sept. 29, 2016).
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III. Summary of the Rulemaking Process

A. Pre-Proposal Outreach

    As part of the Bureau's outreach to financial institutions, 
vendors, and other mortgage industry participants to prepare for the 
implementation of the 2015 HMDA Final Rule, the Bureau received 
questions about the requirement to permit applicants to self-identify 
using disaggregated ethnicity and race categories. The Bureau also 
received questions as to how that requirement intersected with 
compliance obligations under Regulation B. The Bureau further received 
questions related to the Bureau Approval Notice about whether the 
approval for collecting disaggregated ethnicity and race categories 
under Regulation B in 2017 would be extended to 2018. In light of these 
inquiries, the Bureau determined that it would be beneficial to 
establish through rulemaking appropriate standards in Regulation B 
concerning the collection of an applicant's ethnicity and race 
information similar to those in revised Regulation C.
    Because many of the financial institutions most affected by this 
proposed rule are supervised by the Federal Deposit Insurance 
Corporation (FDIC), the Office of the Comptroller of the Currency 
(OCC), the Federal Reserve Board (Board), and the National Credit Union 
Administration (NCUA), the Bureau conducted outreach to these agencies. 
The Bureau specifically sought input from these agencies concerning 
their use of applicant ethnicity and race information collected under 
Sec.  1002.13 but not reported or anticipated to be reported under 
Regulation C and their views on appropriate standards for collection 
and retention of this information. The Bureau also conducted

[[Page 45683]]

outreach with other Federal agencies, including the Securities and 
Exchange Commission, the Department of Justice, the Department of 
Housing and Urban Development, the Federal Housing Finance Agency, the 
Federal Trade Commission, the Department of Veterans Affairs, the 
Department of Agriculture, the Department of the Treasury, and the 
Federal Financial Institutions Examination Counsel (FFIEC) concerning 
the proposed rule.

B. The Bureau's Proposal

    On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its 
Web site. The proposal was published in the Federal Register on April 
4, 2017.\22\
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    \22\ 82 FR 16307 (Apr. 4, 2017).
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    Specifically, the Bureau proposed an amendment to Sec.  1002.13 to 
permit a creditor additional flexibility in how it collects applicant 
ethnicity and race information by allowing use of either aggregate or 
disaggregate ethnicity and race categories on an application-by-
application basis. In addition, the Bureau proposed amendments adding 
Sec.  1002.5(a)(4) to permit creditors to collect applicant demographic 
information when they would not otherwise be required to do so in 
certain scenarios where creditors may benefit from being able to adopt 
Regulation C compliance practices before they become required or 
maintain them when they are no longer required. The Bureau also 
proposed to remove the outdated 2004 URLA from the Regulation B 
appendix, add generic model forms for compliance with Sec.  1002.13, 
and maintain approval of the 2016 URLA through a freestanding approval 
notice.

C. Feedback Provided to the Bureau

    The Bureau received approximately 36 comments on the 2017 ECOA 
Proposal during the comment period from consumer advocacy groups, 
national and State trade associations, banks, individuals, and industry 
service providers. Comments are publicly available at http://www.regulations.gov. This information is discussed below in the 
section-by-section analysis and subsequent parts of the notice, as 
applicable. The Bureau considered the comments, and adopts a modified 
final rule as described below in the section-by-section analysis.
Comments Related to 2015 HMDA Final Rule
    The Bureau received several comments on the proposal concerning the 
2015 HMDA Final Rule. These comments were primarily from small 
financial institutions. Commenters expressed concern that the data 
points added to Regulation C in the 2015 HMDA Final Rule burdened 
financial institutions and, because of this burden, the commenters 
encouraged the Bureau to reduce the HMDA data fields to only 
statutorily required fields. Commenters also requested that the Bureau 
increase the thresholds for being a HMDA reporter to a higher limit 
that would exempt more creditors from HMDA. The Bureau did not propose 
changes to Regulation C in this rulemaking. The Bureau considered these 
comments but does not believe that the comments are relevant to the 
2017 ECOA Proposal and do not provide a basis to change the approach 
proposed by the Bureau in the 2017 ECOA Proposal. The issues raised by 
these comments were considered as part of the rulemaking to revise 
Regulation C and addressed in the 2015 HMDA Final Rule, and the Bureau 
has not reassessed those issues as part of this rulemaking, which 
concerns only issues relating to the alignment of collection of certain 
information about applicants under Regulation B and Regulation C and 
the status and use of the URLA. With respect to the open-end line of 
credit threshold for HMDA reporting, the Bureau adopted amendments to 
Regulation C that temporarily increases the open-end line of credit 
threshold to 500 until January 1, 2020.\23\ This temporary increase in 
the open-end threshold will provide time for the Bureau to consider 
whether to initiate another rulemaking to address the appropriate level 
for the open-end threshold for data collected beginning January 1, 
2020.
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    \23\ 82 FR 43088, 43093-43096 (Sept. 13, 2017); see also id. at 
43132, 43145 (Sec. Sec.  1003.2(g)(1)(v)(B), (g)(2)(ii)(B), and 
1003.3(c)(12)).
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Comments Related to Other Changes to Regulation B
    Some commenters proposed other changes to Regulation B unrelated to 
alignment with Regulation C or applicant demographic information 
collection for mortgage applicants. These proposed changes included 
establishing applicant demographic information collection, reporting, 
and public disclosure requirements for automobile creditors similar to 
HMDA, requiring adverse action notices in certain situations involving 
counteroffers, and adding record-keeping and applicant demographic 
information collection requirements for brokers and arrangers of 
credit. The Bureau did not propose these changes to Regulation B. The 
Bureau does not believe that these comments are relevant to the 2017 
ECOA Proposal and do not provide a basis to change the approach 
proposed by the Bureau in the 2017 ECOA Proposal.

IV. Legal Authority

    The Bureau is issuing this final rule pursuant to its authority 
under section 703 of ECOA, as amended by section 1085 of the Dodd-Frank 
Act.\24\ ECOA authorizes the Bureau to issue regulations to carry out 
the purposes of ECOA.\25\ These regulations may contain but are not 
limited to such classifications, differentiations, or other provisions, 
and may provide for such adjustments and exceptions for any class of 
transactions, as in the judgment of the Bureau are necessary or proper 
to effectuate the purposes of ECOA, to prevent circumvention or evasion 
of ECOA, or to facilitate or substantiate compliance with ECOA.\26\ A 
purpose of ECOA is to promote the availability of credit to all 
creditworthy applicants without regard to race, color, religion, 
national origin, sex, marital status, or age (provided the applicant 
has the capacity to contract) or other protected characteristics.\27\ 
ECOA section 703 serves as a source of authority to establish rules 
concerning the taking and evaluation of credit applications, collection 
and retention of applicant demographic information concerning the 
applicant or co-applicant, use of designated model forms, and 
substantive requirements to carry out the purposes of ECOA.
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    \24\ 15 U.S.C. 1691b; Public Law 111-203, 124 Stat. 1376, 2083-
84 (2010).
    \25\ 15 U.S.C. 1691b(a).
    \26\ Id.
    \27\ 12 CFR 1002.1(b).
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    The Bureau is also issuing this final rule pursuant to its 
authority under sections 1022 and 1061 of the Dodd-Frank Act. Under 
Dodd-Frank Act section 1022(b)(1), the Bureau has authority to 
prescribe rules as may be necessary or appropriate to enable the Bureau 
to administer and carry out the purposes and objectives of the Federal 
consumer financial laws and to prevent evasions thereof.\28\ Section 
1061 of the Dodd-Frank Act transferred to the Bureau consumer financial 
protection functions previously vested in certain other Federal 
agencies, including the authority to prescribe rules or issue orders or 
guidelines pursuant to any Federal consumer financial law and perform 
appropriate functions to promulgate and review such rules,

[[Page 45684]]

orders, and guidelines.\29\ Both ECOA and title X of the Dodd-Frank Act 
are consumer financial laws.\30\ Accordingly, the Bureau has authority 
to issue regulations to administer ECOA.
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    \28\ Public Law 111-203, 124 Stat. 1375, 1980 (2010) (codified 
at 12 U.S.C. 5512(b)(1)).
    \29\ Public Law 111-203, 124 Stat. 1375, 2035-39 (2010) 
(codified at 12 U.S.C. 5581).
    \30\ 12 U.S.C. 5481(12), (14).
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V. Section-by-Section Analysis

Section 1002.5 Rules Concerning Requests for Information

5(a) General Rules
    Section 1002.5 provides rules concerning requests for information. 
In general, Sec.  1002.5(b) prohibits a creditor from inquiring about 
protected applicant-characteristic information in connection with a 
credit transaction, except under certain circumstances. The Bureau 
proposed to amend Sec.  1002.5(a)(4) to authorize creditors to collect 
such information under certain additional circumstances. In addition, 
the Bureau proposed to add commentary for Sec.  1002.5(a)(4) to provide 
guidance and proposed amendments to comment 5(a)(2)-2 to make 
conforming changes and further align Regulation B and revised 
Regulation C.
5(a)(4) Other Permissible Collection of Information
    Section 1002.5(a)(2) provides that, notwithstanding the limitations 
in Sec.  1002.5(b) through (d) on collecting protected applicant-
characteristic information and other applicant information, a creditor 
shall request information for monitoring purposes as required by Sec.  
1002.13. Section 1002.5(a)(2) further provides that a creditor may 
obtain information required by a regulation, order, or agreement issued 
by, or entered into with, a court or an enforcement agency to monitor 
or enforce compliance with ECOA, Regulation B, or other Federal or 
State statutes and regulations. However, Sec.  1002.5(a)(2) does not 
authorize collection of information beyond what is required by law. The 
Bureau proposed to add Sec.  1002.5(a)(4) to authorize a creditor to 
obtain information in certain additional specified circumstances other 
than as described in Sec.  1002.5(a)(2). Proposed Sec.  1002.5(a)(4)(i) 
and (ii) would permit a creditor that is a financial institution under 
revised Regulation C Sec.  1003.2(g) to collect demographic information 
of an applicant for a closed-end mortgage loan or an open-end line of 
credit that is an excluded transaction under revised Regulation C Sec.  
1003.3(c)(11) or Sec.  1003.3(c)(12) if it submits HMDA data concerning 
those applications and loans or if it submitted HMDA data concerning 
closed-end mortgage loans or open-end lines of credit in any of the 
preceding five calendar years.\31\
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    \31\ The Bureau recently amended Regulation C to explicitly 
permit optional reporting of closed-end mortgage loans and open-end 
lines of credit even if a financial institution does not meet the 
applicable loan volume threshold. 82 FR 43088, 43100-43102 (Sept. 
13, 2017); see also id. at 43132 (Sec.  1003.3(c)(11) and (12)). 
Regulation B Sec.  1002.5(a)(4)(i) and (ii) as finalized in this 
rule correspond to those provisions in revised Regulation C and 
permit the collection of applicant demographic information necessary 
to facilitate that optional reporting. Other circumstances 
permitting voluntary collection of applicant demographic information 
finalized in this rule do not correspond to provisions in Regulation 
C addressing optional reporting.
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    Proposed Sec.  1002.5(a)(4)(iii) would permit a creditor that falls 
below both of the revised Regulation C loan-volume thresholds to 
continue to collect applicant demographic information for five calendar 
years after first becoming exempt from HMDA reporting. Proposed Sec.  
1002.5(a)(4)(iv) would permit a creditor that exceeds a revised 
Regulation C loan-volume threshold in the first year of a two-year 
threshold period to collect, in the second year, applicant demographic 
information for a loan that would otherwise be a covered loan under 
Regulation C. For the reasons provided below, the Bureau is adopting 
Sec.  1002.5(a)(4)(i) through (iv) as proposed. In addition, the Bureau 
is adopting new Sec.  1002.5(a)(4)(v) and (vi) in response to comments, 
as discussed below.
    The Bureau solicited comment on permitting the collection of 
applicant demographic information in the circumstances described in 
proposed Sec.  1002.5(a)(4), and, in particular, regarding the proposed 
five-year time frame, and whether there are other specific, narrowly 
tailored circumstances not described in Sec.  1002.5(a)(2) or proposed 
Sec.  1002.5(a)(4) under which a creditor would benefit from being able 
to collect applicant demographic information for mortgage loan 
applicants. A large number of industry commenters supported proposed 
Sec.  1002.5(a)(4) and the five-year timeframe for Sec.  
1002.5(a)(4)(i), (ii), and (iii). Commenters noted that being able to 
collect applicant demographic data when not required by HMDA would 
facilitate better data collection procedures, aid in retaining system 
and organizational knowledge, help prepare for reporting data in 
subsequent years, and help creditors transition to the 2016 URLA. 
Commenters noted that the five-year timeframe for Sec.  
1002.5(a)(4)(i), (ii), and (iii) was realistic and would provide enough 
time to allow institutions to keep their systems updated, but not so 
long that it would be unlikely the institution would become a HMDA 
reporter again.
    One commenter requested clarification that the voluntary collection 
under proposed Sec.  1002.5(a)(4) was truly voluntary and not a new 
compliance requirement. Proposed Sec.  1002.5(a)(4) provides 
authorization to collect applicant demographic information, but does 
not require collection in the circumstances described. As discussed 
below, though, a creditor must comply with the record retention 
requirements of Sec.  1002.12 if it chooses to take advantage of the 
authorization in Sec.  1002.5(a)(4). The Bureau also proposed comment 
5(a)(4)-1 to provide guidance on proposed Sec.  1002.5(a)(4) and to 
highlight the voluntary nature of the rule. The Bureau is finalizing 
this comment as proposed. Comment 5(a)(4)-1 provides that information 
regarding ethnicity, race, and sex that is not required to be collected 
pursuant to Regulation C may nevertheless be collected under the 
circumstances set forth in Sec.  1002.5(a)(4) without violating Sec.  
1002.5(b). It also provides that the information must be retained 
pursuant to the requirements of Sec.  1002.12.
    Two industry commenters proposed two alternative voluntary 
collection authorizations that would replace proposed Sec.  
1002.5(a)(4). One alternative would permit collection of applicant 
demographic information for any loan secured by an applicant's dwelling 
with no timeframe restriction. The other alternative would permit 
collection of applicant demographic information for any covered loan 
under Regulation C with no timeframe restriction, even if the creditor 
was not a financial institution under Regulation C. The Bureau is not 
adopting these proposed alternatives. The primary difference between 
these proposals and the collection permitted by final Sec.  
1002.5(a)(4)(i), (ii), and (iii) would be the removal of the five-year 
timeframe. As the Bureau noted in the 2017 ECOA Proposal, without a 
time limit such voluntary collection would permit a creditor to collect 
protected applicant-characteristic information for a period of time 
that is too attenuated from any past Regulation C legal requirement and 
associated compliance process. While final Sec.  1002.5(a)(4) provides 
a narrow exception to the general limitations in Sec.  1002.5(b) 
through (d), these alternative proposals would create a much broader 
exception to the general limitations on collecting such information in 
Regulation B. The Bureau believes that such a broad exception could

[[Page 45685]]

significantly alter the limitations and would not be appropriate 
without further rulemaking and consideration.
    Industry commenters proposed two additional, narrowly tailored 
exceptions that the Bureau is substantially adopting. One industry 
commenter proposed permitting collection for dwelling-secured loans 
made primarily for a business or commercial purpose that might be 
covered loans, regardless of whether or not they are for the purpose of 
home purchase, refinancing, or home improvement and therefore 
reportable under revised Regulation C. Under revised Regulation C, 
dwelling-secured loans made primarily for a business or commercial 
purpose are only required to be reported if they meet the definition of 
a home purchase, refinancing, or home improvement loan.\32\ In 
contrast, dwelling-secured loans that are not made primarily for a 
business or commercial purpose are generally required to be reported 
even if they do not meet the definition of a home purchase, 
refinancing, or home improvement loan.\33\ The Bureau believes that 
permitting collection of applicant demographic information in this 
narrowly tailored circumstance may be beneficial for some financial 
institutions because it would allow them to collect applicant 
demographic information early in the collection process, when they have 
determined that the loan would be dwelling secured and primarily for a 
business or commercial purpose but may not yet have determined whether 
it meets the definition of a home purchase loan, refinancing, or home 
improvement loan under revised Regulation C. Collection of applicant 
demographic information at that point in the application process may 
allow for more consistent collection and may be easier to integrate 
into the application process when compared with collection after HMDA 
coverage has been determined. The permitted collection may also 
alleviate concerns about violating Sec.  1002.5(b) if a financial 
institution collects applicant demographic information for a particular 
dwelling-secured loan made primarily for a business or commercial 
purpose, based on the financial institution's belief that it is a home 
purchase loan, a refinancing, or a home improvement loan, but the 
financial institution later discovers that this belief was mistaken, 
and therefore collection of applicant demographic information was not 
required under Regulation C. The Bureau is adopting Sec.  
1002.5(a)(4)(v) to address the commenter's suggestion. Section 
1002.5(a)(4)(v) permits a creditor that is a financial institution 
under revised Regulation C Sec.  1003.2(g) or that submitted HMDA data 
for any of the preceding five calendar years but is not currently a 
financial institution under revised Regulation C Sec.  1003.2(g) to 
collect information regarding the ethnicity, race, and sex of an 
applicant for a loan that would otherwise be a covered loan under 
revised Regulation C Sec.  1003.2(e) if not excluded by revised 
Regulation C Sec.  1003.3(c)(10).
---------------------------------------------------------------------------

    \32\ See revised Regulation C Sec.  1003.3(c)(10). 80 FR 66128, 
66139, and 66169 (Oct. 28, 2015).
    \33\ See revised Regulation C Sec.  1003.2(e). 80 FR 66128, 80 
FR 66140, and 66144 (Oct. 28, 2015).
---------------------------------------------------------------------------

    One industry commenter also noted that the 2016 URLA includes a 
form for the collection of applicant demographic information for 
additional borrowers and does not necessarily limit the collection to 
the applicant and the first co-applicant, even though Regulation C 
requires financial institutions to provide the ethnicity, race and sex 
information only for the applicant and first co-applicant.\34\ The 
commenter suggested that the Bureau revise Sec.  1002.5(b) to permit 
collection of demographic information for any additional co-applicants 
using the 2016 URLA. As discussed below in the section-by-section 
analysis for Sec.  1002.13, the Bureau is amending Sec.  1002.13(b) to 
permit, but not require, creditors to collect the information set forth 
in Sec.  1002.13(a) from a second or additional co-applicant. With the 
introduction of the 2016 URLA the Bureau believes that permitting 
collection of applicant demographic information in this narrowly 
tailored circumstance may be beneficial for some financial institutions 
because it would allow them to use more easily standard forms for 
collection of applicant demographic information without identifying at 
the time of collection which applicants are the primary and first co-
applicant. The Bureau is adopting Sec.  1002.5(a)(4)(vi) to address the 
commenter's suggestion by clarifying that the collection of applicant 
demographic information for additional borrowers is permitted. 
Accordingly, Sec.  1002.5(a)(4)(vi) permits a creditor that is 
collecting information regarding the ethnicity, race, and sex of an 
applicant or first co-applicant to collect information regarding the 
ethnicity, race, and sex of a second or additional co-applicant for a 
covered loan under Regulation C Sec.  1003.2(e), or for a loan 
described in paragraphs (a)(4)(i) through (v). Authorization for this 
collection, consistent with the other provisions of Sec.  1002.5(a)(4), 
is not limited to collection using the 2016 URLA.
---------------------------------------------------------------------------

    \34\ Fannie Mae, ``Uniform Residential Loan Application,'' 
https://www.fanniemae.com/singlefamily/uniform-residential-loan-application# (last visited Sept. 6, 2017).
---------------------------------------------------------------------------

    Having considered the comments received and for the reasons 
discussed above, the Bureau is finalizing Sec.  1002.5(a)(4)(i) through 
(iv) generally as proposed with minor wording changes for clarity, 
finalizing new Sec.  1002.5(a)(4)(v) and (vi), and finalizing the 
conforming amendments to comment 5(a)(2)-2 and new comment 5(a)(4)-1 as 
proposed. The Bureau believes that these provisions further the 
purposes of ECOA by easing overall burden on creditors and improving 
the quality of the data that is used to promote the availability of 
credit to all creditworthy applicants. The Bureau also believes that 
permitting creditors to collect certain protected applicant-
characteristic information in these circumstances provides a narrow 
exception to the general limitations in Sec.  1002.5(b) through (d) 
respects the purposes of those prohibitions.

Section 1002.12 Record Retention

    Section 1002.12 provides rules concerning permissible and required 
record retention. In light of proposed Sec.  1002.5(a)(4), the Bureau 
also proposed to amend Sec.  1002.12(b)(1)(i) to require retention of 
certain protected applicant-characteristic information obtained 
pursuant to proposed Sec.  1002.5(a)(4).
12(b) Preservation of Records
12(b)(1) Applications
12(b)(1)(i)
    Section 1002.12(b)(1) provides that a creditor must retain certain 
records for 25 months, or 12 months for business credit.\35\ Regulation 
B Sec.  1002.2(g) defines business credit to mean, with certain 
exceptions, extensions of credit primarily for business or commercial 
purposes. Under Sec.  1002.12(b)(1)(i), these records include any 
information required to be obtained concerning characteristics of 
credit applicants to monitor compliance with ECOA and Regulation B or 
other similar law. The Bureau proposed to amend Sec.  1002.12(b)(1)(i) 
to include within its preservation requirements any information 
obtained pursuant to Sec.  1002.5(a)(4). The Bureau also proposed to 
amend comment 12(b)-2 to require retention of applicant demographic 
information obtained pursuant to Sec.  1002.5(a)(4).
---------------------------------------------------------------------------

    \35\ Section 1002.12(b)(1) provides that creditors must retain 
records for 12 months for business credit, except as provided in 
Sec.  1002.12(b)(5).
---------------------------------------------------------------------------

    Two commenters supported the proposal regarding record retention, 
noting that it would facilitate

[[Page 45686]]

monitoring of fair lending laws and serve ECOA's purposes and that it 
seemed appropriate given the proposed amendments to Sec.  1002.5(a)(4). 
One commenter noted that Regulation B Sec.  1002.12(b)(1) provides a 
25-month record retention period for most transactions, but a 12-month 
period for business credit transactions, and that the Bureau's proposal 
would create a longer retention period for business credit for which a 
creditor voluntarily collected applicant demographic information under 
proposed Sec.  1002.5(a)(4). The Bureau acknowledges that the preamble 
to the proposed rule stated that Sec.  1002.12(b)(1) required retention 
of certain records for 25 months and did not acknowledge the different 
12 month period for business credit provided for in Sec.  
1002.12(b)(1). The Bureau did not intend to extend the record retention 
period under Regulation B for business credit transactions through the 
proposal and this final rule does not do so. The Bureau is finalizing 
the amendments to Sec.  1002.12(b)(1)(i) and comment 12(b)-2 as 
proposed.
    The Bureau believes that, if a creditor voluntarily collects 
applicant demographic information pursuant to Sec.  1002.5(a)(4), the 
creditor should be required to maintain those records in the same 
manner as it does for protected applicant-characteristic information it 
is required to collect. This will allow the information to be available 
for monitoring and enforcing compliance with ECOA, Regulation B, and 
other Federal or State statutes or regulations. Without a corresponding 
record retention requirement, a creditor might collect but not retain 
the information, thus preventing the use of the information for these 
purposes.

Section 1002.13 Information for Monitoring Purposes

    Section 1002.13 sets forth the scope, required information, and 
manner for the mandatory collection of certain protected applicant-
characteristic information under Regulation B. The Bureau proposed to 
amend Sec.  1002.13(a)(1)(i) to provide a creditor flexibility to 
collect applicant ethnicity and race information using either aggregate 
or disaggregated categories, thereby furthering the purposes of ECOA, 
reducing compliance burden, and facilitating use of the 2016 URLA. In 
addition, the Bureau proposed several revisions to Sec.  1002.13(b) and 
(c) and its commentary to align further the collection requirements of 
Regulation B with revised Regulation C.
13(a) Information To Be Requested
13(a)(1)
13(a)(1)(i)
    Section 1002.13(a) sets forth certain protected applicant-
characteristic information a creditor must collect for applications on 
certain dwelling-secured loans. Current Sec.  1002.13(a)(1) requires 
that creditors collect information regarding the applicant's ethnicity 
and race using two aggregate ethnicity categories (Hispanic or Latino 
and Not Hispanic or Latino) and five aggregate race categories 
(American Indian or Alaska Native, Asian, Black or African American, 
Native Hawaiian or Other Pacific Islander, and White). Proposed Sec.  
1002.13(a)(1)(i) provided that a creditor must collect the applicant's 
information using either the aggregate ethnicity and race categories 
currently required or the ethnicity and race categories and 
subcategories set forth in the revised Regulation C appendix, which 
provide disaggregated ethnicity and race categories. Through this 
proposed change, creditors taking applications for loans subject to 
Sec.  1002.13(a)(1) but not required to submit HMDA data under 
Regulation C would have the option of either maintaining their current 
collection practices or transitioning to the revised Regulation C 
collection practices and the 2016 URLA. The Bureau also proposed 
comments 13(a)-7 and 13(a)-8 to provide that a creditor that collects 
applicant information in compliance with the revised Regulation C 
appendix will be acting in compliance with Sec.  1002.13 concerning the 
collection of an applicant's ethnicity, race, and sex information and 
to clarify that a creditor may choose on an application-by-application 
basis whether to collect aggregate or disaggregated information. For 
the reasons provided below, the Bureau is adopting Sec.  1002.13(a) and 
comments 13(a)-7 and 13(a)-8 as proposed.
    The Bureau solicited comment on its proposal to allow creditors to 
collect applicant race and ethnicity information using, at the 
creditor's option, either aggregate or disaggregated categories. A 
large number of industry commenters supported the proposed amendments 
to Sec.  1002.13(a)(1)(i). Many of these commenters stated that the 
proposal would simplify the collection process and reduce regulatory 
burden by ensuring that creditors are not subject to differing 
collection requirements under Regulation B and Regulation C. Commenters 
also expressed the view that the proposal would ease compliance burden 
because it would provide creditors the flexibility to use the method 
most suitable for them. Commenters also noted that it would facilitate 
use of the 2016 URLA. One industry commenter supporting the proposal 
stated that mandating disaggregated collection for all creditors would 
be unduly burdensome.
    A number of commenters recommended alternative approaches to 
proposed Sec.  1002.13(a)(1)(i). Two industry groups suggested that the 
Bureau remove Sec.  1002.13 altogether. One of these commenters stated 
that the collection of applicant demographic information is duplicative 
of Regulation C and that removing this requirement in Regulation B 
would reduce burden. The other commenter asserted that collection of 
applicant demographic information requires significant time and 
resources for Regulation B-only creditors and that the information is 
virtually never used.
    On the other hand, consumer advocacy groups and an industry service 
provider suggested that creditors be required to collect disaggregated 
ethnicity and race information after a multi-year phase in period. The 
consumer advocacy groups stated that mandatory disaggregated collection 
would ensure uniform data collection practices and facilitate fair 
lending analysis, including identifying potential discrimination 
against racial and ethnic subgroups. The consumer advocacy groups 
further expressed the view that mandatory disaggregated collection 
would prepare lenders to submit HMDA data in the future should they 
cross a reporting threshold and that the burden of mandatory 
disaggregated collection would not be significant because the 2016 URLA 
makes it easy to record these categories. An industry service provider 
also supported a uniform standard based on the requirements in revised 
Regulation C in order to reduce the costs of supporting dual collection 
methods. Similarly, an industry commenter stated that the collection 
methods used in Regulation B and Regulation C should match.
    The Bureau is not adopting any of the alternatives suggested by 
commenters. Although the information collected under Sec.  1002.13 and 
Regulation C overlap, in part, as discussed in the 2017 ECOA Proposal, 
regulators will rely on applicant demographic information collected 
under Sec.  1002.13 to supervise and enforce fair lending laws, 
including for a substantial number of creditors that will not be 
required to report under revised Regulation C.\36\

[[Page 45687]]

Thus, the Bureau concludes that retaining Sec.  1002.13 serves the 
purposes of ECOA to promote the availability of credit to all 
creditworthy applicants without regard to protected characteristics.
---------------------------------------------------------------------------

    \36\ 82 FR 16307, 16313, and 16317-18 (Apr. 4, 2017).
---------------------------------------------------------------------------

    On the other hand, the Bureau believes that requiring disaggregated 
collection for Regulation B-only creditors would impose additional 
burden on creditors without significant benefits. Requiring 
disaggregated collection, even after a multi-year phase in period, 
would add complexity and burden to an already complex timeline that 
includes implementation of the 2015 HMDA Final Rule and transition to 
the 2016 URLA. As further discussed in the Section 1022(b) analysis 
below, the Bureau believes that the additional burden would have few 
benefits. The incremental benefits of this alternative are also likely 
to be low because many creditors will collect disaggregated categories 
under Regulation B in any case, either because they are required to do 
so under revised Regulation C or as part of the transition to the 2016 
URLA. The Bureau is therefore not requiring the collection of 
disaggregated categories for Regulation B-only creditors. The Bureau 
may reevaluate the need for mandatory disaggregated collection under 
Sec.  1002.13 after implementation of the 2015 HMDA Final Rule and 
transition to the 2016 URLA, when more information is available on 
creditor collection practices. If it appears that action is warranted, 
the Bureau will engage in further rulemaking as appropriate.
    Two industry commenters, while supportive of the flexibility 
provided in the 2017 ECOA Proposal, sought clarification on how 
aggregate and disaggregated data will be evaluated against one another, 
including how aggregate information collected under Regulation B would 
be compared to disaggregated information collected under revised 
Regulation C. The commenters expressed concern that the optionality 
could result in dissimilar demographic reporting and potentially 
greater compliance burden for creditors who choose to continue to 
collect aggregate information. The Bureau does not believe that 
flexibility will result in additional burden and reiterates that Sec.  
1002.13(a)(1)(i) would permit a Regulation B-only creditor to maintain 
its existing practices and collect aggregate race and ethnicity 
categories. Moreover, because both methods use the same aggregate 
categories, a creditor can compare information collected under either 
method by rolling up the disaggregated subcategories into their 
corresponding aggregate categories. The Bureau, however, declines to 
set forth specific instructions on how a data user should evaluate the 
information collected pursuant to Sec.  1002.13 or Regulation C as the 
Bureau only sought comment on data collection practices under Sec.  
1002.13. Having considered the comments received and for the reasons 
discussed above, the Bureau is finalizing Sec.  1002.13(a)(1)(i) as 
proposed.
    An industry service provider asked the Bureau to provide guidance 
regarding whether the term ``natural person'' as used in Regulation B 
and Regulation C includes living trusts or sole proprietorships. 
Because Regulation B and Regulation C do not provide inconsistent 
instructions on the scope of the term ``natural person,'' the Bureau 
declines to provide additional guidance on this issue within this final 
rule, which, as related to Sec.  1002.13, is limited to modifications 
that harmonize the collection requirements of Regulation B and 
Regulation C.
    The Bureau proposed revised comment 13(a)-7 to provide that, for 
applications subject to Sec.  1002.13(a)(1), a creditor that collects 
information about the ethnicity, race, and sex of an applicant in 
compliance with the requirements of the revised Regulation C appendix 
will be acting in compliance Sec.  1002.13 concerning the collection of 
an applicant's ethnicity, race, and sex information. The Bureau 
received one industry comment supporting alignment of the instructions 
in Sec.  1002.13 with the revised Regulation C appendix. The commenter 
noted that differing instructions may lead to uncertainty and that 
Regulation B-only creditors would benefit from the additional 
instructions provided in revised Regulation C. No commenters opposed 
the proposed comment, and so the Bureau is finalizing comment 13(a)-7 
as proposed.
    As proposed, comment 13(a)-8 permitted a creditor to choose on an 
application-by-application basis whether to collect aggregate 
information pursuant to Sec.  1002.13(a)(1)(i)(A) or disaggregated 
information pursuant to Sec.  1002.13(a)(1)(i)(B). One industry 
commenter generally supported the proposal, noting the flexibility 
would reduce compliance burden. Another industry commenter was 
concerned about how a creditor would decide which collection method to 
use and whether the instruction could have a discriminatory impact. 
Various consumer advocacy groups also opposed proposed comment 13(a)-8, 
arguing that the instruction could encourage creditors to develop and 
maintain haphazard, inaccurate, and inconsistent data collection 
methods.
    The Bureau is adopting comment 13(a)-8 as proposed. The Bureau 
believes that most creditors will voluntarily adopt a consistent 
collection method because uniform practices are generally easier and 
less costly for creditors to implement. If the Bureau were to require 
creditors to adopt a consistent collection method across applications, 
the Bureau would also need to issue additional guidance in the official 
commentary concerning how often and under what circumstances a creditor 
may change its collection method, among other implementation issues. 
The Bureau believes that such guidance would add complexity and 
compliance burden on creditors without furthering the purposes of ECOA, 
and so declines to do so as part of this rulemaking.
    The Bureau received several additional comments about topics other 
than those raised by the Bureau in the 2017 ECOA Proposal. These 
included, for example, a comment supporting the collection of loan 
officers' demographic information, a request to collect information on 
whether the applicant is divorced, a request for guidance on when 
previously gathered applicant demographic information can be used for 
new applications, and a request that the Bureau provide a safe harbor 
for information collected in 2017. The Bureau did not propose these 
changes in the 2017 ECOA Proposal. The Bureau does not believe that 
these comments are relevant to the 2017 ECOA Proposal and do not 
provide a basis to change the approach proposed by the Bureau in the 
2017 ECOA Proposal, which, as related to Sec.  1002.13, is limited to 
modifications that harmonize the collection requirements of Regulation 
B and Regulation C.
    For the reasons discussed above, the Bureau is adopting Sec.  
1002.13(a)(1)(i) and comments 13(a)-7 and 13(a)-8 as proposed. The 
Bureau believes that creditors should not be subject to differing 
collection requirements, and that aligning the requirements of Sec.  
1002.13 and revised Regulation C furthers the purposes of ECOA by 
facilitating practices that promote the availability of credit to all 
creditworthy applicants.
13(b) Obtaining Information
    Section 1002.13(b) discusses how creditors may obtain applicant 
information required under Sec.  1002.13(a). Among other instructions, 
current Sec.  1002.13(b) provides that, if an applicant chooses not to 
provide some or all of the requested applicant demographic information, 
the creditor must, in certain circumstances, collect

[[Page 45688]]

the information on the basis of visual observation or surname. If a 
creditor collects disaggregated race and ethnicity information pursuant 
to Sec.  1002.13(a)(1)(i)(B), proposed Sec.  1002.13(b) provided that a 
creditor must comply with the restrictions on the collection of an 
applicant's ethnicity and race on the basis of visual observation or 
surname set forth in the revised Regulation C appendix, which limits 
such collection to the aggregate race and ethnicity categories. For the 
reasons provided below, the Bureau is adopting the revisions to Sec.  
1002.13(b) concerning the collection of ethnicity and race information 
on the basis of visual observation or surname as proposed. To further 
align the collection requirements of Regulation B and Regulation C, the 
Bureau is further amending Sec.  1002.13(b) to permit, but not require, 
creditors to collect the information set forth in Sec.  1002.13(a) from 
a second or additional co-applicant.
    The few commenters who specifically addressed the Bureau's proposed 
amendment to Sec.  1002.13(b) generally supported the modification, 
noting that it aligned with revised Regulation C and would facilitate 
consistent data collection. One commenter argued that the proposed rule 
would add complexity, however, as creditors would be required to report 
disaggregated information under revised Regulation C, permitted to 
collect such information under revised Sec.  1002.13, but prohibited 
from collecting disaggregated information if the applicant does not 
provide it.
    Two commenters opposed the collection of applicant demographic 
information on the basis of visual observation or surname under any 
circumstances. One commenter stated that extending the requirement to 
collect applicant demographic information on the basis of visual 
observation or surname to Regulation B-only creditors is outside the 
scope of ECOA. The commenters also argued that such collection is often 
inaccurate, cannot be relied upon for fair lending analysis, and is 
contrary to the purposes of ECOA. In support, one of the commenters 
cited a report finding that 10 million Americans change their racial 
and ethnic identifications between U.S. Census surveys. The same 
commenter also cited a report by health researchers discussing, among 
other topics, that observer-selected race, often used for death 
certificates, may not match self-selected race. The commenters proposed 
that the requirement to collect applicant demographic information on 
the basis of visual observation or surname should be eliminated or that 
the Bureau provide additional instructions to aid creditors to identify 
an applicant's ethnicity and race based on visual observation or 
surname.
    The Bureau will finalize as proposed the revisions to Sec.  
1002.13(b) concerning the collection of an applicant's ethnicity and 
race information on the basis of visual observation or surname. The 
requirement to collect, in certain circumstances, applicant demographic 
information on the basis of visual observation or surname where the 
applicant does not provide this information has been a longstanding 
requirement of Sec.  1002.13(b). The amendment to Sec.  1002.13(b) in 
the 2017 ECOA Proposal would not impose any new obligation on creditors 
to collect an applicant's ethnicity and race on the basis of visual 
observation or surname but, rather, would limit such collection to the 
aggregate ethnicity and race categories, even if the creditor permits 
an applicant to self-identify using the disaggregated categories. The 
proposed amendment would align Sec.  1002.13 collection of 
disaggregated information with the collection requirements of 
Regulation C. While the Bureau acknowledges that this limitation on the 
collection of applicant demographic information involves some 
complexity, the Bureau believes that, on balance, aligning Sec.  
1002.13 collection methods with Regulation C will be less complex than 
introducing different rules for Sec.  1002.13(b) alone.
    The Bureau declines to consider the proposals to eliminate 
altogether the requirement to collect applicant demographic information 
on the basis of visual observation or surname in Sec.  1002.13 or to 
provide further instructions on how to collect such information as both 
proposals go beyond the issues on which the Bureau solicited comment. 
Indeed, given that Regulation C requires collection of certain 
applicant demographic information on the basis of visual observation or 
surname, adopting either proposal would undermine the purpose of this 
rulemaking by imposing different requirements in Regulation B and 
Regulation C.\37\ Moreover, the cited studies conclude only that some 
applicants may self-identify as different races over time and that 
visual observation of race is not always accurate. Thus, even if the 
Bureau were reconsidering its approach to visual observation or surname 
collection, which it is not, the Bureau does not believe the evidence 
submitted by the commenters demonstrate that collection based on visual 
observation or surname do not serve the purposes of ECOA.
---------------------------------------------------------------------------

    \37\ 80 FR 66128, 66187-88 (Oct. 28, 2015).
---------------------------------------------------------------------------

    An industry service provider suggested the Bureau standardize the 
treatment of co-applicants between Sec.  1002.13 and Regulation C. The 
commenter noted that the two rules imposed different requirements where 
there are multiple ``applicants,'' stating that while Sec.  1002.13 
requires a financial institution to collect information from any 
applicant who is a natural person, the revised Regulation C appendix 
instructs a financial institution to provide applicant demographic 
information for only the applicant and the first co-applicant listed on 
the collection form. The industry service provider commented that this 
distinction makes data collection more complex and burdensome, and 
requested that the Bureau clarify the collection requirements for co-
applicants under Regulation B.
    The Bureau acknowledges that the requirement to collect or provide 
applicant demographic information from co-applicants differs between 
Sec.  1002.13 and revised Regulation C. The Bureau concludes that these 
differences may create additional burden and complexity for creditors, 
who may need to modify their practices concerning co-applicant 
collection depending on whether collection is required under both 
Regulation B and revised Regulation C or only under revised Regulation 
C. The Bureau is therefore revising Sec.  1002.13(b) to clarify that a 
creditor is permitted, but is not required, to collect the information 
set forth in Sec.  1002.13(a) from a second or additional co-applicant. 
The Bureau believes this clarification will simplify collection 
practices and reduce compliance burden by aligning Regulation B and 
Regulation C. The clarification will also allow Regulation B-only 
creditors to maintain their existing practices under Sec.  1002.13 if 
so desired. By providing flexibility and reducing burden, the Bureau 
believes this modification will further the purposes of ECOA by 
facilitating practices that promote the availability of credit to all 
creditworthy applicants. As discussed above in the section-by-section 
analysis for Sec.  1002.5(a)(4), the Bureau is also adopting new Sec.  
1002.5(a)(4)(vi) to permit collection of applicant demographic 
information for second or additional co-applicants in certain 
circumstances, thereby providing additional optionality for creditors 
to maintain consistent collection practices under Regulation B and 
Regulation C.

[[Page 45689]]

    For the reasons discussed above, the Bureau is finalizing as 
proposed the revisions to Sec.  1002.13(b) concerning the collection of 
ethnicity and race information on the basis of visual observation or 
surname. To facilitate compliance with Regulation B and further align 
the collection requirements of Regulations B and Regulation C, the 
Bureau is also amending Sec.  1002.13(b) to permit, but not require, 
creditors to collect the information set forth in Sec.  1002.13(a) from 
a second or additional co-applicant.
    Current comment 13(b)-1 provides guidance on the forms and 
collection methods a creditor may use to collect applicant information 
under Sec.  1002.13(a). In the 2017 ECOA Proposal, the Bureau proposed 
to amend comment 13(b)-1 to reference the data collection model forms 
the Bureau proposed to provide in the Regulation B appendix. The Bureau 
also proposed to revise comment 13(b)-1 to reiterate that when a 
creditor collects only aggregate ethnicity and race information 
pursuant to Sec.  1002.13(a)(1)(i)(A), the applicant must be offered 
the option to select more than one racial designation. If a creditor 
collects applicant information pursuant to Sec.  1002.13(a)(1)(i)(B), 
the applicant must be offered the option to select more than one 
ethnicity and more than one racial designation. The Bureau received no 
comments specifically addressing the revisions to proposed comment 
13(b)-1, and so is finalizing it as proposed. Comments related to the 
data collection model forms are addressed in the section-by-section 
analysis of the Regulation B appendix.
13(c) Disclosure to Applicant(s)
    Section 1002.13(c) sets forth disclosures a creditor must provide 
to an applicant when collecting the information set forth in Sec.  
1002.13(a). Current comment 13(c)-1 provides, among other information, 
that the Regulation B appendix contains a sample disclosure. The Bureau 
proposed to amend comment 13(c)-1 to reference two data collection 
model forms the Bureau proposed to provide in the Regulation B 
appendix. The Bureau received no comments on proposed comment 13(c)-1, 
and so is finalizing comment 13(c)-1 as proposed. Comments related to 
the data collection model forms and the 2016 URLA are addressed in the 
section-by-section analysis of the Regulation B appendix.
Appendix B to Part 1002--Model Application Forms
    Regulations B and C both contain an appendix B that provides model 
forms for use when collecting applicant demographic information 
required under the regulations. The current Regulation B appendix 
includes the 2004 URLA as a model form. The current and revised 
Regulation C appendix include instructions and a data collection model 
form for collecting applicant demographic information.
    The current Regulation B appendix includes five model forms, each 
designated for use in a particular type of consumer credit transaction. 
The fifth model form, the 2004 URLA, is described in the Regulation B 
appendix as appropriate for residential mortgage transactions and 
contains a model disclosure for use in complying with current Sec.  
1002.13. While use of the model forms is optional, if a creditor uses 
the appropriate model form, or modifies a form in accordance with the 
instructions provided in the Regulation B appendix, that creditor is 
deemed to be acting in compliance with Sec.  1002.5(b) through (d).\38\
---------------------------------------------------------------------------

    \38\ Appendix B to part 1002, at paragraphs 1, 3.
---------------------------------------------------------------------------

    As discussed above, on September 23, 2016, the Bureau issued the 
Bureau Approval Notice, pursuant to section 706(e) of ECOA.\39\ In the 
Bureau Approval Notice, the Bureau determined that, while a creditor is 
not required to use the 2016 URLA, a creditor that uses the form 
without any modification that would violate Sec.  1002.5(b) through (d) 
would act in compliance with Sec.  1002.5(b) through (d).\40\ Unlike 
prior versions of the URLA, the 2016 URLA permits an applicant to 
select disaggregated ethnicity and race categories, as required under 
revised Regulation C.
---------------------------------------------------------------------------

    \39\ 81 FR 66930 (Sept. 23, 2016).
    \40\ Id.
---------------------------------------------------------------------------

    Given the issuance of the Bureau Approval Notice and the 
modifications to Sec.  1002.13, the Bureau proposed several revisions 
to the Regulation B appendix as discussed below.
Model Forms for Complying With Section 1002.13(a)(1)(i)
    The Bureau proposed to revise the Regulation B appendix to provide 
two additional model forms for use in complying with Sec.  1002.13. 
First, for creditors collecting disaggregated applicant demographic 
information pursuant to Sec.  1002.13(a)(1)(i)(B) and (ii), the Bureau 
proposed to amend the Regulation B appendix to cross-reference the data 
collection model form included in the revised Regulation C appendix. 
Second, for creditors collecting aggregate applicant demographic 
information pursuant to Sec.  1002.13(a)(1)(i)(A) and (ii), the Bureau 
proposed to amend the Regulation B appendix to add a model form. The 
proposed model form substantially mirrors section X in the 2004 URLA 
and the data collection model form contained in the current Regulation 
C appendix. The Bureau received no comments opposing and one comment 
supporting the proposed amendments and so is finalizing the Regulation 
B appendix to provide alternative model forms as proposed.
    In the 2017 ECOA Proposal, the Bureau also considered but did not 
propose the alternative of including the 2016 URLA as a model form in 
the Regulation B appendix.\41\ No commenters opposed the decision not 
to include the 2016 URLA as a model form in the Regulation B appendix, 
and several commenters noted that the proposed rule would encourage use 
and transition to the 2016 URLA. Accordingly, the Bureau is finalizing 
the Regulation B appendix as proposed, without including the 2016 URLA.
---------------------------------------------------------------------------

    \41\ 82 FR 16307, 16315 (Apr. 4, 2017).
---------------------------------------------------------------------------

    One industry commenter requested clarification that use of the 2016 
URLA complies with Regulation B. The Bureau believes that no additional 
approval is necessary: The Bureau Approval Notice provides that a 
creditor that uses the 2016 URLA without any modification that would 
violate Sec.  1002.5(b) through (d) acts in compliance with Sec.  
1002.5(b) through (d).\42\ Similarly, because the substance and form of 
section 7 of the 2016 URLA is substantially similar to the form the 
Bureau provides as a model form in Regulation C, the 2016 URLA may be 
used in complying with Sec.  1002.13.
---------------------------------------------------------------------------

    \42\ 81 FR 66930 (Sept. 23, 2016).
---------------------------------------------------------------------------

Removal of the 2004 URLA as a Model Form
    The current Regulation B appendix includes the 2004 URLA as a model 
form for use in complying with Sec.  1002.13. In light of the revisions 
to Sec.  1002.13(a)(1)(i), the amendment to the Regulation B appendix 
to provide two additional model forms, and the fact that the Bureau 
separately approved use of the 2016 URLA in the Bureau Approval Notice, 
the Bureau proposed to remove the 2004 URLA as a model form in 
Regulation B. The Bureau proposed that the 2004 URLA be removed on the 
cutover date the Enterprises designate for use of the 2016 URLA or 
January 1, 2022, whichever comes first. The Bureau received no comments 
on the proposal to remove the 2004 URLA or the timing of the removal 
and so is finalizing removal of the 2004 URLA as proposed. The date

[[Page 45690]]

for removal of the 2004 URLA from the Regulation B appendix is 
discussed further in the Effective Date section below.
Removal of the Official Commentary to Appendix B
    Commentary to the Regulation B appendix includes a discussion of 
two forms created by the Enterprises that are no longer in use: A 1992 
version of the URLA and a 1986 home-improvement and energy loan 
application form. Given that neither of these forms is currently used 
by the Enterprises, the Bureau proposed to remove in its entirety the 
commentary to the Regulation B appendix. The Bureau received no 
comments on its proposal and so is removing the commentary to the 
Regulation B appendix in this final rule.

VI. Effective Date

    The Bureau proposed an effective date of January 1, 2018, which 
aligns with the effective date for the bulk of the revisions to 
Regulation C in the 2015 HMDA Final Rule. The effective date of the 
2015 HMDA Final Rule applies to covered loans and applications with 
respect to which final action is taken beginning on January 1, 2018, 
even if the application is received in 2017. One commenter indicated 
that the Bureau's proposed effective date for this rule creates 
concerns that it does not indicate that the collection of disaggregated 
applicant demographic information is permitted for applications 
received in 2017 for which final action is taken in 2018. The commenter 
noted that the Bureau Approval Notice applied to all applications taken 
in 2017 and suggested that the proposed effective date for this rule 
sends a mixed message. The Bureau Approval Notice provides that, at any 
time from January 1, 2017, through December 31, 2017, a creditor may, 
at its option, permit applicants to self-identify using disaggregated 
ethnic and racial categories as instructed in revised Regulation C. 
During this period, a creditor adopting the practice of permitting 
applicants to self-identify using disaggregated ethnic and racial 
categories as instructed in the Regulation C appendix is not deemed to 
violate Regulation B Sec.  1002.5(b). During this period, a creditor 
adopting the practice of permitting applicants to self-identify using 
disaggregated ethnic and racial categories as instructed in the 
Regulation C appendix is also deemed to be in compliance with 
Regulation B Sec.  1002.13(a)(1)(i) even though applicants are asked to 
self-identify using categories other than those explicitly provided in 
that section. Because the Bureau Approval Notice remains in effect for 
all of 2017, the amendments in this rule are not necessary to permit 
Regulation B-only creditors or HMDA reporters to collect disaggregated 
applicant demographic information for applications taken in 2017; they 
are already permitted to do so by the Bureau Approval Notice for any 
application for a covered loan under revised Regulation C Sec.  
1003.2(g) or any application subject to Sec.  1002.13 for all of 2017.
    The Bureau proposed as an effective date for the removal of the 
2004 URLA from Regulation B appendix either the cutover date designated 
by the Enterprises for the mandatory use of the 2016 URLA or January 1, 
2022. The Bureau did not receive any comments on the proposed effective 
date for this provision. Because the Enterprises have not announced a 
cutover date for the mandatory use of the 2016 URLA, the Bureau is 
finalizing January 1, 2022, as the effective date for the removal of 
the 2004 URLA from the Regulation B appendix.
    The rule is effective on January 1, 2018, except that the amendment 
to the Regulation B appendix removing the existing ``Uniform 
Residential Loan Application'' form is effective January 1, 2022.

VII. Dodd-Frank Act Section 1022(b) Analysis

A. Overview

    In developing the final rule, the Bureau has considered the 
potential benefits, costs, and impacts.\43\ In the 2017 ECOA Proposal, 
the Bureau set forth a preliminary analysis of these effects, and the 
Bureau requested comment and submissions of additional data that could 
inform the Bureau's analysis of the benefits, costs, and impacts of the 
proposal. The Bureau received some comments on the topic. Comments on 
the benefits and costs of the rule are also discussed above in the 
section-by-section analysis of the preamble. The Bureau has consulted, 
or offered to consult with, the prudential regulators (the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the National Credit Union Administration, and the Office 
of the Comptroller of the Currency), the Securities and Exchange 
Commission, the Department of Justice, the Department of Housing and 
Urban Development, the Federal Housing Finance Agency, the Federal 
Trade Commission, the Department of Veterans Affairs, the Department of 
Agriculture, and the Department of the Treasury, including regarding 
consistency with any prudential, market or systematic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    \43\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
calls for the Bureau to consider the potential costs of a regulation 
to consumers and covered persons, including the potential reduction 
of access by consumers to consumer financial products or services; 
the impact on depository institutions and credit unions with $10 
billion or less in total assets as described in section 1026 of the 
Dodd-Frank Act; and the impact on consumers in rural areas.
---------------------------------------------------------------------------

    A purpose of ECOA, as implemented by Regulation B, is to promote 
the availability of credit to all creditworthy applicants without 
regard to protected characteristics. The final rule will make three 
substantive changes to Regulation B, along with other clarifications, 
minor changes, and technical corrections to align the language of 
Regulation B with Regulation C as amended by the 2015 HMDA Final Rule. 
The first will give persons who collect and retain race and ethnicity 
information in compliance with Regulation B the option of permitting 
applicants to self-identify using the disaggregated race and ethnicity 
categories required by revised Regulation C. In practice, this will 
allow entities that report race and ethnicity in accordance with 
revised Regulation C to comply with Regulation B without further 
action, while entities that do not report under Regulation C but record 
and retain race and ethnicity data under Regulation B will have the 
option of recording data either using the existing aggregated 
categories or the new disaggregated categories.
    The Bureau believes that, absent this change, entities that 
currently report race and ethnicity data under Regulation C could 
conclude that they have different obligations under Regulation B and 
Regulation C once the 2015 HMDA Final Rule goes into effect on January 
1, 2018. This would lead to unnecessary burden from collecting both 
aggregate and disaggregated data. Industry commenters noted this 
potential conflict and expressed their support for the proposal. By 
making disaggregated collection an option under Regulation B, entities 
who will report race and ethnicity information under revised Regulation 
C will also be in compliance with Regulation B with certainty. The 
Bureau believes that making collection of disaggregated race and 
ethnicity an option for all entities covered by Regulation B will pose 
little or no additional burden on those entities who are not HMDA 
reporters. The final rule may have some benefits to Regulation B-only 
creditors, as the current language of Regulation B would not allow 
these entities to use the 2016

[[Page 45691]]

URLA for the purpose of collecting race and ethnicity data, as the 2016 
URLA uses the disaggregated race and ethnicity categories set forth in 
revised Regulation C and not the specific categories required by 
current Regulation B. Thus, the final rule has the added benefit that 
it will allow Regulation B-only creditors to use the 2016 URLA as an 
instrument to collect race and ethnicity information.
    The second substantive change will remove the outdated 2004 URLA as 
a model form. The Bureau issued the Bureau Approval Notice under its 
authority in section 706(e) of ECOA on September 23, 2016, which 
provides that a creditor that uses the 2016 URLA without any 
modification that would violate Sec.  1002.5(b) through (d) would act 
in compliance with Sec.  1002.5(b) through (d). The Bureau is not 
adding the 2016 URLA as a model form in place of the 2004 version. 
Instead, the Bureau is providing for two alternative data collection 
model forms for the purpose of collecting ethnicity and race 
information. The Bureau believes this practice of acknowledging future 
versions of the URLA via a Bureau Approval Notice rather than a 
revision to Regulation B will reduce the risk that the model form 
included in Regulation B will become outdated in the future.
    Finally, the Bureau is amending Regulation B and the associated 
commentary to allow creditors to collect ethnicity, race, and sex from 
mortgage applicants in certain cases where the creditor is not required 
to report under HMDA and Regulation C. These circumstances include 
when: (1) A creditor that is a financial institution under revised 
Regulation C Sec.  1003.2(g), originates a closed-end mortgage loan or 
an open-end line of credit that is an excluded transaction under 
revised Regulation C Sec.  1003.3(c)(11) or Sec.  1003.3(c)(12), if it 
submits HMDA data concerning those applications and loans or if it 
submitted HMDA data concerning closed-end mortgage loans or open-end 
lines of credit in any of the preceding five calendar years; (2) a 
creditor that submitted HMDA data in any of the preceding five calendar 
years but is not currently a financial institution under Regulation C 
Sec.  1003.2(g), collects demographic information of an applicant for a 
loan that would otherwise be a covered loan under Regulation C Sec.  
1003.2(e), if not excluded by Regulation C Sec.  1003.3(c)(11) or Sec.  
1003.3(c)(12); (3) a creditor that exceeded an applicable loan volume 
threshold in the first year of the two-year threshold period provided 
in Regulation C Sec.  1003.2(g), Sec.  1003.3(c)(11), or Sec.  
1003.3(c)(12), collects, in the second year, demographic information of 
an applicant for a loan that would otherwise be a covered loan under 
Regulation C Sec.  12 CFR 1003.2(e), if the loan were not excluded by 
Regulation C Sec.  1003.3(c)(11) or Sec.  1003.3(c)(12); (4) a creditor 
that is a financial institution under Regulation C Sec.  1003.2(g), or 
that submitted HMDA data for any of the preceding five calendar years 
but is not currently a financial institution under Regulation C Sec.  
1003.2(g), collects demographic information of an applicant for a loan 
that would otherwise be a covered loan under Regulation C Sec.  
1003.2(e) if the loan were not excluded by Regulation C Sec.  
1003.3(c)(10); and (5) a creditor that collects demographic information 
of a second or additional co-applicant for a covered loan under 
Regulation C Sec.  1003.2(e), or for a second or additional co-
applicant for a loan described in amended Sec.  1002.5(a)(4)(i) through 
(v). These changes will primarily benefit institutions that may be near 
the loan volume reporting threshold, such that they may be required to 
report under HMDA and Regulation C in some years and not others, or may 
be uncertain about their reporting status. The Bureau believes that 
allowing voluntary collection will reduce the burden of compliance with 
Regulation C on some entities and provide certainty regarding 
Regulation B compliance over time.

B. Potential Benefits and Costs to Consumers and Covered Persons

Providing an Option To Collect Disaggregated Race and Ethnicity for 
Regulation B
    Relative to current Regulation B following the effective date of 
the 2015 HMDA Final Rule, the final rule provides clear benefits to 
entities that will be required to collect and report race and ethnicity 
data under HMDA. Currently the disaggregated race and ethnicity 
categories required by the amendments to Regulation C in the 2015 HMDA 
Final Rule, effective January 1, 2018, do not match the categories 
specified in current Regulation B. Because of the differences between 
the categories, some creditors required to collect and report race and 
ethnicity using the disaggregated categories set forth in revised 
Regulation C may be uncertain whether additional collection using 
aggregated categories would also be required to satisfy current 
Regulation B. Complying with both Regulations B and C would require 
burdensome and duplicative collection of race and ethnicity data at 
both the aggregated and disaggregated level. In practice, the final 
rule simply makes clear that the existing collection required under 
revised Regulation C is sufficient for compliance with Regulation B.
    The final rule may have benefits to consumers, to the extent that 
lending entities voluntarily choose to collect disaggregated race and 
ethnicity information. As discussed in the Section 1022(b) analysis for 
the 2015 HMDA Final Rule, collection of disaggregated race and 
ethnicity data can enhance the ability of regulators, researchers and 
community groups to conduct fair lending analysis. There are three 
reasons, however, that this rule will likely have a limited effect on 
fair lending analysis. First, Regulation B-only creditors will not be 
required to permit applicants to self-identify using disaggregated 
ethnicity and race categories, likely resulting in few creditors 
adopting disaggregated ethnicity and race categories. Second, many 
Regulation B-only creditors will be exempt from reporting under revised 
Regulation C because they originate fewer than 25 closed-end mortgage 
loans in each of the two preceding calendar years, which means both 
that few consumers would be affected and any disaggregated data would 
likely be too sparse for statistical analysis. Finally, demographic 
data retained by Regulation B-only creditors is not reported under 
Regulation C. Consequently, most oversight and analysis of demographic 
data retained by Regulation B-only creditors will be done only by 
regulators, whereas researchers and community groups also conduct 
analysis of HMDA data reported under Regulation C. The Bureau believes 
the final rule will not impose any costs on consumers.
    The final rule may have benefits to some Regulation B-only 
creditors. Although these entities need not make any changes to their 
race and ethnicity collection procedures, they may desire to do so in 
the future by adopting the 2016 URLA. The Enterprises have announced 
that they will cease accepting older versions of the URLA at a date to 
be determined and require firms that sell to the Enterprises to use the 
2016 URLA form. Some Regulation B-only creditors sell mortgages to the 
Enterprises, and would benefit from being able to use the 2016 URLA. 
The Enterprises, not the Bureau, mandate the adoption of the 2016 URLA. 
Therefore, the Bureau believes any operational costs from adopting the 
2016 URLA are part of the normal course of business and are not a cost 
of the final rule.
    In addition to the amendment to Regulation B in the proposal, the 
Bureau

[[Page 45692]]

considered two alternatives to address the differing race and ethnicity 
requirements of Regulation B and revised Regulation C. The Bureau 
considered requiring all creditors subject to the collection and 
retention requirement of Regulation B to permit applicants to self-
identify using disaggregated race and ethnicity categories. To the 
extent that consumers would benefit from disaggregated race and 
ethnicity collection, this alternative would provide greater benefits 
than the Bureau's proposal. However, of the three limitations to 
consumer benefits listed above, only the first (that disaggregated 
categories would be optional) is alleviated by requiring the use of 
disaggregated race and ethnicity categories under Regulation B. It is 
still the case that due to the low volume of mortgages by many affected 
entities and the lack of reporting, disaggregated race and ethnicity 
data may have limited benefits. Finally, the Bureau believes many 
entities will adopt the 2016 URLA as part of the course of business and 
thus permit applicants to self-identify using disaggregated race and 
ethnicity categories.
    At the same time, mandatory use of disaggregated collection of race 
and ethnicity categories would impose greater costs on creditors than 
the Bureau's proposal, particularly on smaller entities. These costs 
include greater operational costs and one-time database upgrades. 
Unlike the costs associated with the adoption of the 2016 URLA, these 
costs would not otherwise be incurred in the normal course of business. 
The Bureau requested comments on both the costs and benefits associated 
with this alternative approach.
    A consumer advocacy group commenter argued that the Bureau should 
adopt the alternative of requiring all persons subject to the 
collection and retention requirement of Regulation B to permit 
applicants to self-identify using disaggregated race and ethnicity 
categories. The commenter disputed the Bureau's assessment that the 
potential alternative would impose substantial costs on Regulation B-
only creditors. The commenter argued that the availability of the 2016 
URLA would reduce the cost of collecting disaggregated race and 
ethnicity information, and advocated for a two-year implementation 
period for mandatory disaggregated collection to further reduce the 
costs. However, the commenter did not address the Bureau's conclusion, 
mentioned in the proposal and again above, that the benefits of 
mandatory disaggregated collection are quite limited. A credit union 
trade association explicitly opposed the alternative, asserting that 
its members would be unduly burdened by mandatory collection of 
disaggregated race and ethnicity information. Other commenters did not 
directly address this alternative, but several industry commenters 
supported the flexibility of the proposal with respect to collection of 
disaggregated race and ethnicity information, implicitly opposing 
making this collection mandatory.
    As discussed above in Part V, the Bureau disagrees with the 
consumer advocacy group commenter that there would be little burden to 
Regulation B-only creditors from making the collection of disaggregated 
race and ethnicity categories mandatory. Even accepting the commenter's 
premise, however, the Bureau notes again that it believes the 
additional benefits of this alternative to be quite limited because, 
among other reasons, many Regulation B-only creditors are likely to 
eventually collect disaggregated race and ethnicity data through 
adoption of the 2016 URLA. Moreover, the commenter did not address the 
limited usefulness of disaggregated race and ethnicity data from 
lenders with a very low volume of loan originations. The Bureau 
continues to believe that the benefits of this alternative are very 
low. Accordingly, the Bureau is not making disaggregated race and 
ethnicity categories mandatory for compliance with Regulation B at this 
time.
    The Bureau also considered eliminating entirely the requirement in 
Regulation B to collect and retain certain applicant information. This 
alternative would reduce burden to firms that do not report under HMDA. 
However, the Bureau believes it may impose costs on consumers. The 
prudential regulators confirm that data collected and retained by 
entities subject to Regulation B but not Regulation C may be used for 
fair lending supervision and enforcement. Institutions subject to 
Regulation B but not Regulation C include, for example, institutions 
that do not have a branch or home office in a Metropolitan Statistical 
Area (MSA), do not meet an applicable asset threshold, or do not meet 
an applicable loan volume threshold.
    For instance, the 2015 NCUA Call Report and the 2015 Nationwide 
Mortgage Licensing System & Registry (NMLS) Mortgage Call Report data 
include 489 credit unions and 161 non-depository institutions that 
originated at least 25 closed-end mortgages that are not found in the 
2015 HMDA data.\44\ In addition, many community banks in rural areas 
are already exempt from HMDA reporting because they do not have a 
branch or home office in an MSA.\45\ Demographic information collected 
under Regulation B by those institutions with larger loan volumes may 
be used in statistical analysis that supports fair lending supervision 
and enforcement. Removing the Regulation B requirement altogether would 
make detection of any discrimination by these entities more difficult, 
with potentially large costs to consumers where such discrimination 
exists. Even for institutions with very small volumes of originations 
that may not be subject to HMDA reporting because they do not meet an 
applicable loan volume threshold, the retained information may be 
useful for comparative file reviews. In 2015, there were 1,178 
institutions that reported HMDA data but had fewer than 25 originations 
and therefore would likely be exempt under the 2015 HMDA Final Rule if 
they continue to originate loans at a similar volume. Although the loan 
volumes of most of these institutions would be too sparse for 
statistical analysis, the ability to conduct comparative file reviews 
using data retained under Regulation B has some benefit.
---------------------------------------------------------------------------

    \44\ The criteria for being a financial institution and 
reporting transactions under HMDA are different in some ways from 
the criteria for reporting under the NMLS Mortgage Call Report and 
reporting transactions under it. It is possible that the NMLS omits 
some non-depository institutions that originated at least 25 closed-
end mortgages, did not report HMDA data, and are subject to 
Regulation B. Some or all of these institutions may also not have 
been required to report HMDA data.
    \45\ The Bureau does not have an estimate of the number of rural 
community banks that are currently exempt from HMDA reporting and 
originate at least 25 loans per year. The FFIEC call report for 
banks does not report originations for depository institutions that 
do not report to HMDA.
---------------------------------------------------------------------------

    A small financial institution commenter advocated for eliminating 
the Regulation B requirement to collect and retain race and ethnicity 
information. The commenter asserted the resulting data are never used 
by regulators, while the collection and retention imposes a substantial 
burden. A credit union trade association commenter also argued that the 
Bureau should remove the requirement, asserting that removing it would 
reduce the regulatory burden on its members.
    The Bureau acknowledges that the collection and retention 
requirement of Regulation B imposes some burden on financial 
institutions. As noted above, the Bureau believes that consumers could 
suffer substantial harm if the requirement were removed. Although it 
may be true in the particular case of the community bank commenter, the 
Bureau believes it is not the case that

[[Page 45693]]

these data are never used by regulators. Both the Bureau's 
consultations with the prudential regulators and its own experience in 
fair lending enforcement indicate that these data are used. 
Accordingly, the Bureau is not removing the Regulation B requirement to 
collect and retain race and ethnicity information.
Model Forms for Collecting Race and Ethnicity Data
    The Bureau believes that the provision to change the model forms 
for collecting race and ethnicity data will have modest benefits to 
firms collecting these data, by providing updated model forms, and 
reducing confusion regarding the outdated 2004 URLA. The final rule 
does not impose any new costs on firms, nor does the Bureau believe 
that consumers will experience any cost or benefit from the provision. 
The Bureau requested comment regarding the costs and benefits 
associated with this provision. Industry commenters supported the 
change, with several confirming the potential benefits noted above.
Allowing Voluntary Collection of Applicant Information
    Regarding the provision to allow certain creditors to voluntarily 
collect demographic information, the Bureau believes the financial 
institutions that will most likely exercise such options will be low-
volume, low-complexity institutions that have made a one-time 
investment in HMDA collection and reporting and would like to utilize 
that collection process already in place. The Bureau believes the final 
rule will provide modest benefits to such institutions, by saving on 
one-time adjustment costs required to shift in and out of collection. 
The Bureau expects that institutions will only exercise this option if 
voluntary collection provides a net benefit. The Bureau does not 
believe that consumers will experience any costs or benefits from this 
provision except to the extent that financial institutions achieve cost 
savings and pass any such cost savings on to their customers.
    The Bureau requested comment regarding the costs and benefits 
associated with this provision. The Bureau also requested data on the 
number of firms that might be interested in voluntary collection under 
this provision. No commenters provided such data.

C. Impact on Depository Institutions and Credit Unions With $10 Billion 
or Less in Assets, as Described in Dodd-Frank Section 1026

    The Bureau believes that depository institutions and credit unions 
with $10 billion or less in assets will not be differentially affected 
by the substantive amendments. The primary benefit to lenders from the 
final rule is the reduced uncertainty and compliance burden from 
allowing the disaggregated race and ethnicity information collected 
under Regulation C to be used to comply with Regulation B. Both certain 
depository institutions and credit unions with less than $10 billion in 
assets and covered persons with more than $10 billion in assets 
currently report data under HMDA and thus will receive these benefits. 
The benefits may be somewhat larger for depository institutions and 
credit unions with less than $10 billion in assets because the relative 
costs of duplicative collection will be greater for these entities.

D. Impact on Access to Credit

    The Bureau does not believe that there will be an adverse impact on 
access to credit resulting from any of the provisions of the final 
rule.

E. Impact on Consumers in Rural Areas

    The Bureau believes that rural areas might benefit from the 
provision to allow collection of disaggregated race and ethnicity 
information more than urban areas. One of the exceptions to the 
reporting requirements under HMDA is for entities that do not have a 
branch or home office located in an MSA. Such entities likely serve 
primarily customers in rural areas. To the extent that the provision 
benefits firms and consumers, consumers in rural areas will see the 
largest benefits.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small business, small governmental units, and small 
nonprofit organizations. The RFA defines a ``small business'' as a 
business that meets the size standard developed by the Small Business 
Administration pursuant to the Small Business Act.
    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. The Bureau also is subject to certain additional procedures 
under RFA involving the convening of a panel to consult with small 
business representatives prior to proposing a rule for which an IRFA is 
required.
    On March 24, 2017, the Bureau issued the 2017 ECOA Proposal on its 
Web site. The Bureau concluded that the proposal, if adopted, would not 
have a significant economic impact on any small entities and that an 
IRFA was therefore not required. The Bureau requested comment on the 
analysis under the RFA and any relevant data. The Bureau did not 
receive any comments on the analysis or data.
    This final rule adopts the proposed rule without making changes 
that would affect the Bureau's conclusion that the rule will not have a 
significant economic impact on any small entities. All methods of 
compliance under current law will remain available to covered persons, 
including small entities, when these provisions become effective. Thus, 
a small entity that is in compliance with current law need not take any 
additional action, save those already required by the 2015 HMDA Final 
Rule.
    Accordingly, the undersigned certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB)'s approval for information collection 
requirements prior to implementation. The collections of information 
related to Regulation B and Regulation C have been previously reviewed 
and approved by OMB and assigned OMB Control Number 3170-0013 
(Regulation B) and 3170-0008 (Regulation C). Under the PRA, the Bureau 
may not conduct or sponsor and, notwithstanding any other provision of 
law, a person is not required to respond to an information collection 
unless the information collection displays a valid control number 
assigned by OMB.
    The Bureau has determined that this final rule would not impose any 
new or revised information collection requirements (recordkeeping, 
reporting or disclosure requirements) on covered entities or members of 
the public that would constitute collections of information requiring 
OMB approval under the PRA. Although some entities subject to 
Regulation B but not Regulation C may choose to voluntarily

[[Page 45694]]

begin collecting disaggregated race and ethnicity information, the 
Bureau believes the most likely reason for this to occur is through 
adoption of the 2016 URLA, which is not part of the final rule.

List of Subjects in 12 CFR Part 1002

    Aged, Banks, Banking, Civil rights, Consumer protection, Credit, 
Credit unions, Discrimination, Fair lending, Marital status 
discrimination, National banks, National origin discrimination, 
Penalties, Race discrimination, Religious discrimination, Reporting and 
recordkeeping requirements, Savings associations, Sex discrimination.

Authority and Issuance

    For the reasons set forth above, the Bureau amends Regulation B, 12 
CFR part 1002, as set forth below:

PART 1002--EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)

0
1. The authority citation for part 1002 continues to read as follows:

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b.

0
2. Amend Sec.  1002.5 by adding paragraph (a)(4) to read as follows:


Sec.  1002.5  Rules concerning requests for information.

    (a) * * *
    (4) Other permissible collection of information. Notwithstanding 
paragraph (b) of this section, a creditor may collect information under 
the following circumstances provided that the creditor collects the 
information in compliance with appendix B to 12 CFR part 1003:
    (i) A creditor that is a financial institution under 12 CFR 
1003.2(g) may collect information regarding the ethnicity, race, and 
sex of an applicant for a closed-end mortgage loan that is an excluded 
transaction under 12 CFR 1003.3(c)(11) if it submits HMDA data 
concerning such closed-end mortgage loans and applications or if it 
submitted HMDA data concerning closed-end mortgage loans for any of the 
preceding five calendar years;
    (ii) A creditor that is a financial institution under 12 CFR 
1003.2(g) may collect information regarding the ethnicity, race, and 
sex of an applicant for an open-end line of credit that is an excluded 
transaction under 12 CFR 1003.3(c)(12) if it submits HMDA data 
concerning such open-end lines of credit and applications or if it 
submitted HMDA data concerning open-end lines of credit for any of the 
preceding five calendar years;
    (iii) A creditor that submitted HMDA data for any of the preceding 
five calendar years but is not currently a financial institution under 
12 CFR 1003.2(g) may collect information regarding the ethnicity, race, 
and sex of an applicant for a loan that would otherwise be a covered 
loan under 12 CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or 
(12);
    (iv) A creditor that exceeded an applicable loan volume threshold 
in the first year of the two-year threshold period provided in 12 CFR 
1003.2(g), 1003.3(c)(11), or 1003.3(c)(12) may, in the second year, 
collect information regarding the ethnicity, race, and sex of an 
applicant for a loan that would otherwise be a covered loan under 12 
CFR 1003.2(e) if the loan were not excluded by 12 CFR 1003.3(c)(11) or 
(12);
    (v) A creditor that is a financial institution under 12 CFR 
1003.2(g), or that submitted HMDA data for any of the preceding five 
calendar years but is not currently a financial institution under 12 
CFR 1003.2(g), may collect information regarding the ethnicity, race, 
and sex of an applicant for a loan that would otherwise be a covered 
loan under 12 CFR 1003.2(e) if the loan were not excluded by 12 CFR 
1003.3(c)(10).
    (vi) A creditor that is collecting information regarding the 
ethnicity, race, and sex of an applicant or first co-applicant may 
collect information regarding the ethnicity, race, and sex of a second 
or additional co-applicant for a covered loan under 12 CFR 1003.2(e) or 
for a second or additional co-applicant for a loan described in 
paragraphs (a)(4)(i) through (v) of this section.
* * * * *

0
3. Amend Sec.  1002.12 by revising paragraph (b)(1)(i) to read as 
follows:


Sec.  1002.12  Record retention.

* * * * *
    (b) * * *
    (1) * * *
    (i) Any application that it receives, any information required to 
be obtained concerning characteristics of the applicant to monitor 
compliance with the Act and this part or other similar law, any 
information obtained pursuant to Sec.  1002.5(a)(4), and any other 
written or recorded information used in evaluating the application and 
not returned to the applicant at the applicant's request.
* * * * *

0
4. Amend Sec.  1002.13 by revising paragraph (a)(1)(i) and paragraph 
(b) to read as follows:


Sec.  1002.13  Information for monitoring purposes.

    (a) * * *
    (1) * * *
    (i) Ethnicity and race using either:
    (A) For ethnicity, the aggregate categories Hispanic or Latino and 
not Hispanic or Latino; and, for race, the aggregate categories 
American Indian or Alaska Native, Asian, Black or African American, 
Native Hawaiian or Other Pacific Islander, and White; or
    (B) The categories and subcategories for the collection of 
ethnicity and race set forth in appendix B to 12 CFR part 1003.
* * * * *
    (b) Obtaining information. Questions regarding ethnicity, race, 
sex, marital status, and age may be listed, at the creditor's option, 
on the application form or on a separate form that refers to the 
application. The applicant(s) shall be asked but not required to supply 
the requested information. If the applicant(s) chooses not to provide 
the information or any part of it, that fact shall be noted on the 
form. The creditor shall then also note on the form, to the extent 
possible, the ethnicity, race, and sex of the applicant(s) on the basis 
of visual observation or surname. When a creditor collects ethnicity 
and race information pursuant to Sec.  1002.13(a)(1)(i)(B), the 
creditor must comply with any restrictions on the collection of an 
applicant's ethnicity or race on the basis of visual observation or 
surname set forth in appendix B to 12 CFR part 1003. If there is more 
than one co-applicant, a creditor is permitted, but is not required, to 
collect the information set forth in paragraph (a) of this section from 
a second or additional co-applicant.
* * * * *

0
5. Effective January 1, 2018, amend Appendix B to Part 1002 by revising 
paragraph 1 and adding a Data Collection Model Form to the end of the 
Appendix to read as follows:

Appendix B to Part 1002--Model Application Forms

    1. This appendix contains five model credit application forms, 
each designated for use in a particular type of consumer credit 
transaction as indicated by the bracketed caption on each form. The 
first sample form is intended for use in open-end, unsecured 
transactions; the second for closed-end, secured transactions; the 
third for closed-end transactions, whether unsecured or secured; the 
fourth in transactions involving community property or occurring in 
community property States; and the fifth in residential mortgage 
transactions which contains a model disclosure for use in complying 
with Sec.  1002.13 for certain dwelling-related loans. This appendix 
also contains a data collection model form for collecting 
information concerning an applicant's ethnicity, race, and sex that

[[Page 45695]]

complies with the requirements of Sec.  1002.13(a)(1)(i)(A) and 
(ii). Appendix B to 12 CFR part 1003 provides a data collection 
model form for collecting information concerning an applicant's 
ethnicity, race, and sex that complies with the requirements of 
Sec.  1002.13(a)(1)(i)(B) and (ii). All forms contained in this 
appendix are models; their use by creditors is optional.
* * * * *
[GRAPHIC] [TIFF OMITTED] TR02OC17.000


0
6. Effective January 1, 2022, amend Appendix B to Part 1002 by revising 
paragraph 1 and under paragraph 3 removing the form ``Uniform 
Residential Loan Application''.
    The revision reads as follows:

Appendix B to Part 1002--Model Application Forms

    1. This appendix contains four model credit application forms, 
each designated for use in a particular type of consumer credit 
transaction as indicated by the bracketed caption on each form. The 
first sample form is intended for use in open-end, unsecured 
transactions; the second for closed-end, secured transactions; the 
third for closed-end transactions, whether unsecured or secured; and 
the fourth in transactions involving community property or occurring 
in community property States. This appendix also contains a data 
collection model form for collecting information concerning an 
applicant's ethnicity, race, and sex that complies with the 
requirements of Sec.  1002.13(a)(1)(i)(A) and (ii). Appendix B to 12 
CFR part 1003 provides a data collection model form for collecting 
information concerning an applicant's ethnicity, race, and sex that 
complies with the requirements of Sec.  1002.13(a)(1)(i)(B) and 
(ii). All forms contained in this appendix are models; their use by 
creditors is optional.
* * * * *

0
7. Amend Supplement I to Part 1002:
0
a. Under Section 1002.5--Rules concerning requests for information:
0
i. Paragraph 5(a)(2) is revised.
0
ii. Paragraph 5(a)(4) is added.
0
b. Under Section 1002.12--Record retention, Paragraph 12(b) is revised.
0
c. Under Section 1002.13--Information for monitoring purposes:
0
i. Paragraph 13(a)--Information to be requested is revised.
0
ii. Paragraph 13(b)--Obtaining of information is revised.
0
iii. Paragraph 13(c)--Disclosure to applicants is revised.
0
d. Appendix B--Model Application Forms is removed.
    The revisions and additions read as follows:

Supplement I to Part 1002--Official Interpretations

* * * * *

Section 1002.5--Rules Concerning Requests for Information

    5(a) General rules.
* * * * *
    Paragraph 5(a)(2).
    1. Local laws. Information that a creditor is allowed to collect 
pursuant to a ``state'' statute or regulation includes information 
required by a local statute, regulation, or ordinance.
    2. Information required by Regulation C. Regulation C, 12 CFR part 
1003, generally requires creditors covered by the Home Mortgage 
Disclosure Act (HMDA) to collect and report information about the race, 
ethnicity, and sex of applicants for certain dwelling-secured loans, 
including some types of loans not covered by Sec.  1002.13.
    3. Collecting information on behalf of creditors. Persons such as 
loan brokers and correspondents do not violate the ECOA or Regulation B 
if they collect information that they are otherwise prohibited from 
collecting, where the purpose of collecting the information is to 
provide it to a creditor that is subject to the Home Mortgage 
Disclosure Act or another Federal or state statute or regulation 
requiring data collection.
    Paragraph 5(a)(4).
    1. Other permissible collection of information. Information 
regarding ethnicity, race, and sex that is not required to be collected 
pursuant to Regulation C, 12 CFR part 1003, may nevertheless be 
collected under the circumstances set forth in Sec.  1002.5(a)(4) 
without violating Sec.  1002.5(b). The information must be retained 
pursuant to the requirements of Sec.  1002.12.
* * * * *

Section 1002.12--Record Retention

* * * * *
    12(b) Preservation of records.
    1. Copies. Copies of the original record include carbon copies, 
photocopies, microfilm or microfiche copies, or copies produced by any 
other accurate retrieval system, such as documents stored and 
reproduced by computer. A creditor that uses a computerized or 
mechanized system

[[Page 45696]]

need not keep a paper copy of a document (for example, of an adverse 
action notice) if it can regenerate all pertinent information in a 
timely manner for examination or other purposes.
    2. Computerized decisions. A creditor that enters information items 
from a written application into a computerized or mechanized system and 
makes the credit decision mechanically, based only on the items of 
information entered into the system, may comply with Sec.  1002.12(b) 
by retaining the information actually entered. It is not required to 
store the complete written application, nor is it required to enter the 
remaining items of information into the system. If the transaction is 
subject to Sec.  1002.13 or the creditor is collecting information 
pursuant to Sec.  1002.5(a)(4), however, the creditor is required to 
enter and retain the data on personal characteristics in order to 
comply with the requirements of that section.
* * * * *

Section 1002.13--Information for Monitoring Purposes

    13(a) Information to be requested.
    1. Natural person. Section 1002.13 applies only to applications 
from natural persons.
    2. Principal residence. The requirements of Sec.  1002.13 apply 
only if an application relates to a dwelling that is or will be 
occupied by the applicant as the principal residence. A credit 
application related to a vacation home or a rental unit is not covered. 
In the case of a two-to four-unit dwelling, the application is covered 
if the applicant intends to occupy one of the units as a principal 
residence.
    3. Temporary financing. An application for temporary financing to 
construct a dwelling is not subject to Sec.  1002.13. But an 
application for both a temporary loan to finance construction of a 
dwelling and a permanent mortgage loan to take effect upon the 
completion of construction is subject to Sec.  1002.13.
    4. New principal residence. A person can have only one principal 
residence at a time. However, if a person buys or builds a new dwelling 
that will become that person's principal residence within a year or 
upon completion of construction, the new dwelling is considered the 
principal residence for purposes of Sec.  1002.13.
    5. Transactions not covered. The information-collection 
requirements of this section apply to applications for credit primarily 
for the purchase or refinancing of a dwelling that is or will become 
the applicant's principal residence. Therefore, applications for credit 
secured by the applicant's principal residence but made primarily for a 
purpose other than the purchase or refinancing of the principal 
residence (such as loans for home improvement and debt consolidation) 
are not subject to the information-collection requirements. An 
application for an open-end home equity line of credit is not subject 
to this section unless it is readily apparent to the creditor when the 
application is taken that the primary purpose of the line is for the 
purchase or refinancing of a principal dwelling.
    6. Refinancings. A refinancing occurs when an existing obligation 
is satisfied and replaced by a new obligation undertaken by the same 
borrower. A creditor that receives an application to refinance an 
existing extension of credit made by that creditor for the purchase of 
the applicant's dwelling may request the monitoring information again 
but is not required to do so if it was obtained in the earlier 
transaction.
    7. Data collection under Regulation C. For applications subject to 
Sec.  1002.13(a)(1), a creditor that collects information about the 
ethnicity, race, and sex of an applicant in compliance with the 
requirements of appendix B to 12 CFR part 1003 is acting in compliance 
with Sec.  1002.13 concerning the collection of an applicant's 
ethnicity, race, and sex information. See also comment 5(a)(2)-2.
    8. Application-by-application basis. For applications subject to 
Sec.  1002.13(a)(1), a creditor may choose on an application-by-
application basis whether to collect aggregate information pursuant to 
Sec.  1002.13(a)(1)(i)(A) or disaggregated information pursuant to 
Sec.  1002.13(a)(1)(i)(B) about the ethnicity and race of the 
applicant.
    13(b) Obtaining of information.
    1. Forms for collecting data. A creditor may collect the 
information specified in Sec.  1002.13(a) either on an application form 
or on a separate form referring to the application. Appendix B to this 
part provides for two alternative data collection model forms for use 
in complying with the requirements of Sec.  1002.13(a)(1)(i) and (ii) 
to collect information concerning an applicant's ethnicity, race, and 
sex. When a creditor collects ethnicity and race information pursuant 
to Sec.  1002.13(a)(1)(i)(A), the applicant must be offered the option 
to select more than one racial designation. When a creditor collects 
ethnicity and race information pursuant to Sec.  1002.13(a)(1)(i)(B), 
the applicant must be offered the option to select more than one 
ethnicity designation and more than one racial designation.
    2. Written applications. The regulation requires written 
applications for the types of credit covered by Sec.  1002.13. A 
creditor can satisfy this requirement by recording on paper or by means 
of computer the information that the applicant provides orally and that 
the creditor normally considers in a credit decision.
    3. Telephone, mail applications.
    i. A creditor that accepts an application by telephone or mail must 
request the monitoring information.
    ii. A creditor that accepts an application by mail need not make a 
special request for the monitoring information if the applicant has 
failed to provide it on the application form returned to the creditor.
    iii. If it is not evident on the face of an application that it was 
received by mail, telephone, or via an electronic medium, the creditor 
should indicate on the form or other application record how the 
application was received.
    4. Video and other electronic-application processes.
    i. If a creditor takes an application through an electronic medium 
that allows the creditor to see the applicant, the creditor must treat 
the application as taken in person. The creditor must note the 
monitoring information on the basis of visual observation or surname, 
if the applicant chooses not to provide the information.
    ii. If an applicant applies through an electronic medium without 
video capability, the creditor treats the application as if it were 
received by mail.
    5. Applications through loan-shopping services. When a creditor 
receives an application through an unaffiliated loan-shopping service, 
it does not have to request the monitoring information for purposes of 
the ECOA or Regulation B. Creditors subject to the Home Mortgage 
Disclosure Act should be aware, however, that data collection may be 
called for under Regulation C (12 CFR part 1003), which generally 
requires creditors to report, among other things, the sex and race of 
an applicant on brokered applications or applications received through 
a correspondent.
    6. Inadvertent notation. If a creditor inadvertently obtains the 
monitoring information in a dwelling-related transaction not covered by 
Sec.  1002.13, the creditor may process and retain the application 
without violating the regulation.
    13(c) Disclosure to applicants.
    1. Procedures for providing disclosures. The disclosure to an 
applicant regarding the monitoring information may be provided in 
writing. Appendix B provides data collection model forms for use in 
complying with Sec.  1002.13 and that comply with Sec.  1002.13(c). A 
creditor may devise its

[[Page 45697]]

own disclosure so long as it is substantially similar. The creditor 
need not orally request the monitoring information if it is requested 
in writing.
* * * * *

    Dated: September 8, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-20417 Filed 9-29-17; 8:45 am]
 BILLING CODE 4810-AM-P