Request for Information on the Equal Credit Opportunity Act and Regulation B
| Citation | 85 FR 46600 |
| Record Number | 2020-16722 |
| Published date | 03 August 2020 |
| Section | Notices |
| Court | Consumer Financial Protection Bureau |
Federal Register, Volume 85 Issue 149 (Monday, August 3, 2020)
[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46600-46603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16722]
[[Page 46600]]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2020-0026]
Request for Information on the Equal Credit Opportunity Act and
Regulation B
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice and request for information.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) seeks
comments and information to identify opportunities to prevent credit
discrimination, encourage responsible innovation, promote fair,
equitable, and nondiscriminatory access to credit, address potential
regulatory uncertainty, and develop viable solutions to regulatory
compliance challenges under the Equal Credit Opportunity Act (ECOA) and
Regulation B.
DATES: Comments must be received by October 2, 2020.
ADDRESSES: You may submit responsive information and other comments,
identified by Docket No. CFPB-2020-0026, by any of the following
methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments.
Email: [email protected]. Include Docket No. CFPB-
2020-0026 in the subject line of the message.
Mail/Hand Delivery/Courier: Comment Intake, Bureau of
Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552.
Please note that due to circumstances associated with the COVID-19
pandemic, the Bureau discourages the submission of comments by mail,
hand delivery, or courier.
Instructions: The Bureau encourages the early submission
of comments. All submissions must include the document title and docket
number. Because paper mail in the Washington, DC area and at the Bureau
is subject to delay, and in light of difficulties associated with mail
and hand deliveries during the COVID-19 pandemic, commenters are
encouraged to submit comments electronically. In general, all comments
received will be posted without change to http://www.regulations.gov.
In addition, once the Bureau's headquarters reopens, comments will be
available for public inspection and copying at 1700 G Street NW,
Washington, DC 20552, on official business days between the hours of 10
a.m. and 5 p.m. Eastern Time. At that time, you can make an appointment
to inspect the documents by telephoning 202-435-9169.
All submissions in response to this request for information (RFI),
including attachments and other supporting materials, will become part
of the public record and subject to public disclosure. Please do not
include in your submissions sensitive personal information, such as
account numbers or Social Security numbers, or names of other
individuals, or other information that you would not ordinarily make
public, such as trade secrets or confidential commercial information.
Submissions will not be edited to remove any identifying or contact
information, or other information that you would not ordinarily make
public. If you wish to submit trade secret or confidential commercial
information, please contact the individuals listed in the FOR FURTHER
INFORMATION CONTACT section below. Information submitted to the Bureau
will be treated in accordance with the Bureau's Rule on the Disclosure
of Records and Information, 12 CFR part 1070 et seq.
FOR FURTHER INFORMATION CONTACT: For general inquiries and submission
process questions, please call Pavy Bacon, Senior Counsel, Office of
Regulations at 202-435-7700. If you require this document in an
alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) \1\ granted primary authority to the Bureau to
supervise and enforce compliance with ECOA and its implementing
regulation, Regulation B, for entities within Bureau's jurisdiction and
to issue regulations and guidance to interpret ECOA. The Dodd-Frank Act
requires the Bureau to report on its efforts ``to fulfill the fair
lending mission of the Bureau,'' \2\ and authorizes it to ``engage in .
. . requests for information, [which] includes matters relating to fair
lending.'' \3\
---------------------------------------------------------------------------
\1\ Public Law 111-203, 124 Stat. 1376 (2010).
\2\ 12 U.S.C. 5496(c)(8).
\3\ 12 U.S.C. 5562(a)(2).
---------------------------------------------------------------------------
The Dodd-Frank Act clearly states the Bureau's purpose as follows:
``to implement and, where applicable, enforce Federal consumer
financial law consistently for the purpose of ensuring that all
consumers have access to . . . markets for consumer financial products
and services are fair, transparent, and competitive.'' \4\ The Bureau's
mission includes both protecting consumers from unlawful discrimination
and fostering innovation. Specifically, the Dodd-Frank Act makes clear
that ``[t]he Bureau is authorized to exercise its authorities under
[F]ederal consumer financial law for the purposes of ensuring that,
with respect to consumer financial products and services . . . (2)
consumers are protected from unfair, deceptive, or abusive acts and
practices and from discrimination . . . and (5) markets for consumer
financial products and services operate transparently and efficiently
to facilitate access and innovation.'' \5\ This RFI is one method by
which the Bureau is continuing to explore ways to ensure
nondiscriminatory access to credit as well as cutting-edge issues at
the intersection of fair lending and innovation, including how
innovation can increase access to credit for all consumers--and
especially unbanked and underbanked consumers (referred to as ``credit
invisibles'' in a May 2015 Bureau research report \6\)--without
unlawful discrimination.
---------------------------------------------------------------------------
\4\ 12 U.S.C. 5511(a) (emphasis added).
\5\ 12 U.S.C. 5511(b).
\6\ See The CFPB Office of Research, Data Point: Credit
Invisibles (May 2015), https://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf.
---------------------------------------------------------------------------
[[Page 46601]]
The Equal Credit Opportunity Act (ECOA),\7\ which is implemented by
Regulation B, applies to creditors. The statute makes it unlawful for
``any creditor to discriminate against any applicant, with respect to
any aspect of a credit transaction (1) on the basis of race, color,
religion, national origin, sex or marital status, or age (provided the
applicant has the capacity to contract); (2) because all or part of the
applicant's income derives from any public assistance program; or (3)
because the applicant has in good faith exercised any right under [the
Consumer Credit Protection Act].'' \8\ The Bureau has recognized the
following methods of proving lending discrimination: Overt evidence of
discrimination, evidence of disparate treatment, and evidence of
disparate impact.\9\ ECOA prohibits discrimination ``with respect to
any aspect of a credit transaction.'' \10\ As such, Regulation B covers
creditor activities before, during, and after the extension of
credit.\11\ Creditors are also prohibited from making any oral or
written statement, in advertising or otherwise, to applicants or
prospective applicants that would discourage, on a prohibited basis, a
reasonable person from making or pursuing an application.\12\ A
creditor may affirmatively solicit or encourage members of
traditionally disadvantaged groups to apply for credit, especially
groups that might not normally seek credit from that creditor.\13\
Creditors may also meet special social needs and benefit economically
disadvantaged groups through the Special Purpose Credit Program
provisions of ECOA and Regulation B.\14\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 1691 et seq.
\8\ 15 U.S.C. 1691(a).
\9\ See Comment 4(a)-1 (``Disparate treatment on a prohibited
basis is illegal whether or not it results from a conscious intent
to discriminate''); Comment 6(a)-2 (``The Act and regulation may
prohibit a creditor practice that is discriminatory in effect
because it has a disproportionately negative impact on a prohibited
basis, even though the creditor has no intent to discriminate and
the practice appears neutral on its face, unless the creditor
practice meets a legitimate business need that cannot reasonably be
achieved as well by means that are less disparate in their
impact.''); Bureau of Consumer Fin. Prot., Equal Credit Opportunity
Act (ECOA) Examination Procedures (Oct. 30, 2015), https://files.consumerfinance.gov/f/documents/201510_cfpb_ecoa-narrative-and-procedures.pdf; see also CFPB Bulletin 2012-04 (Fair Lending),
Lending Discrimination (Apr. 18, 2012), https://files.consumerfinance.gov/f/201404_cfpb_bulletin_lending_discrimination.pdf (concurring with
Interagency Task Force on Fair Lending, Policy Statement on
Discrimination in Lending, 59 FR 18266 (Apr. 15, 1994) (noting that
``courts have recognized three methods of proof of lending
discrimination under the ECOA . . .: [(1)] `Overt evidence of
discrimination,' when a lender blatantly discriminates on a
prohibited basis; [(2)] Evidence of `disparate treatment,' when a
lender treats applicants differently based on one of the prohibited
factors; and [(3)] Evidence of `disparate impact,' when a lender
applies a practice uniformly to all applicants but the practice has
a discriminatory effect on a prohibited basis and is not justified
by business necessity.'').
\10\ 15 U.S.C. 1691(a).
\11\ 12 CFR 1002.4(a). See also Comment 4(a)-1 (providing that
``1002.4(a) covers all dealings, without exception, between an
applicant and a creditor, whether or not addressed by other
provisions of the regulation . . . for example, application
procedures, criteria used to evaluate creditworthiness,
administration of accounts, and treatment of delinquent or slow
accounts'').
\12\ 12 CFR 1002.4(b).
\13\ Comment 4(b)-2.
\14\ See 12 CFR 1002.8.
---------------------------------------------------------------------------
II. Request for Information
The Bureau seeks comments on the actions it can take or should
consider taking to prevent credit discrimination, encourage responsible
innovation, promote fair, equitable, and nondiscriminatory access to
credit, address potential regulatory uncertainty, and develop viable
solutions to regulatory compliance challenges under ECOA and Regulation
B. The information provided will help the Bureau identify how it can
continue to create a regulatory environment that expands access to
credit, help to ensure that all consumers and communities are protected
from discrimination in all aspects of a credit transaction, and develop
approaches to address regulatory compliance challenges. The Bureau
encourages comments from all interested members of the public. The
Bureau anticipates that the responding public may include (among
others) financial entities or institutions and their service providers;
trade associations that represent these entities; individual consumers;
fair lending, civil rights, consumer and community advocates; Federal,
Tribal, State, and local regulators and agencies; researchers or
members of academia; or attorneys that represent any of the above. The
Bureau encourages commenters to share their views on all or a subset of
the questions included in this RFI. These questions are not meant to be
exhaustive; the Bureau welcomes additional relevant comments on these
important topics. For answers to specific questions, please note the
number associated with any question to which you are responding at the
top of each response.
In particular, the Bureau requests commenters to respond to the
following questions:
1. Disparate Impact: Regulation B provides that ECOA may prohibit
creditor practices that have a disparate impact--Regulation B
specifically states that ``Congress intended an `effects test' concept
. . . to be applicable to a creditor's determination of
creditworthiness.'' \15\ The official interpretation to Regulation B
states that ECOA/Regulation B ``may prohibit a creditor practice that
is discriminatory in effect because it has a disproportionately
negative impact on a prohibited basis, even though the creditor has no
intent to discriminate and the practice appears neutral on its face,
unless the creditor practice meets a legitimate business need that
cannot reasonably be achieved as well by means that are less disparate
in their impact.'' \16\ The official interpretation also provides an
example of how to evaluate a creditor practice for disparate
impact.\17\ Should the Bureau provide additional clarity regarding its
approach to disparate impact analysis under ECOA and/or Regulation B?
If so, in what way(s)?
---------------------------------------------------------------------------
\15\ 12 CFR 1002.6(a).
\16\ Comment 6(a)-2.
\17\ Id.
---------------------------------------------------------------------------
2. Limited English Proficiency: The Bureau seeks to foster greater
access to credit markets, including to consumers who face obstacles
because they are Limited English Proficient (LEP). The Bureau did some
work on the challenges LEP consumers encounter in 2016 and 2017.\18\ In
its continued outreach on these topics, the Bureau has heard from a
variety of stakeholders that institutions want to serve LEP consumers
but face regulatory uncertainties and perceived fair lending risks in
serving LEP consumers because the language spoken by a consumer may
correlate with prohibited bases under ECOA, including national origin.
Some financial institutions may decide against providing any LEP
products or services due to these regulatory uncertainties, while
others may vary how and when they offer products and services in non-
English languages.
---------------------------------------------------------------------------
\18\ See Bureau of Consumer Fin. Prot., Financial education
programs serving immigrant populations (July 2016), https://files.consumerfinance.gov/f/documents/20160714_cfpb_report_fined_immigrant_May_20_2016_FINAL.pdf; Bureau
of Consumer Fin. Prot., Spotlight on serving limited English
proficient consumers (Nov. 2017), https://files.consumerfinance.gov/f/documents/cfpb_spotlight-serving-lep-consumers_112017.pdf; Bureau
of Consumer Fin. Prot., Supervisory Highlights (Oct. 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
---------------------------------------------------------------------------
The Bureau seeks to understand the challenges specific to serving
LEP consumers and to find ways to encourage creditors to increase
assistance to LEP consumers. Should the Bureau provide additional
clarity under ECOA and/or Regulation B to further encourage creditors
to provide
[[Page 46602]]
assistance, products, and services in languages other than English to
consumers with limited English proficiency? If so, in what way(s)?
3. Special Purpose Credit Programs: The Special Purpose Credit
Program (SPCP) provisions of ECOA/Regulation B provide targeted means
by which creditors, under certain circumstances, can meet ``special
social needs'' and ``benefit economically disadvantaged groups.'' \19\
The official interpretation to Regulation B states that ``a for-profit
organization must determine that the program will benefit a class of
people who would otherwise be denied credit or would receive it on less
favorable terms. This determination can be based on a broad analysis
using the organization's own research or data from outside sources,
including governmental reports and studies.'' \20\ ECOA and Regulation
B also allow for special purpose credit offered under ``[a]ny credit
assistance program offered by a not-for-profit organization, as defined
under section 501(c) of the Internal Revenue Code of 1954, as amended,
for the benefit of its members or for the benefit of an economically
disadvantaged class of persons.'' \21\ Through stakeholder engagement
and its supervisory activity, the Bureau has learned that stakeholders
are interested in additional guidance on SPCPs that may be helpful to
them in developing SPCPs while ensuring regulatory compliance. In its
Summer 2016 Supervisory Highlights, the Bureau set forth observations
regarding credit decisions made pursuant to the terms of programs that
for-profit institutions have described as SPCPs.\22\
---------------------------------------------------------------------------
\19\ 12 CFR 1002.8(a).
\20\ Comment 8(a)-5.
\21\ Comments 9(b)(2)-4, 5.
\22\ See, e.g., Bureau of Consumer Fin. Prot., Supervisory
Highlights (June 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
---------------------------------------------------------------------------
Should the Bureau address any potential regulatory uncertainty and
facilitate the use of SPCPs? If so, in what way(s)? For example, should
the Bureau clarify any of the SPCP provisions in Regulation B?
4. Affirmative Advertising to Disadvantaged Groups: The official
interpretation to Regulation B states that ``[a] creditor may
affirmatively solicit or encourage members of traditionally
disadvantaged groups to apply for credit, especially groups that might
not normally seek credit from that creditor.'' \23\ The Bureau
understands from its stakeholder engagement that creditors are
interested in additional guidance that may be helpful to them in
developing such marketing campaigns while ensuring regulatory
compliance. Should the Bureau provide clarity under ECOA and/or
Regulation B to further encourage creditors to use such affirmative
advertising to reach traditionally disadvantaged consumers and
communities? If so, in what way(s)?
---------------------------------------------------------------------------
\23\ Comment 4(b)-2.
---------------------------------------------------------------------------
5. Small Business Lending: As the Bureau noted in its May 2017
white paper on small business lending, small businesses play a key role
in fostering community development and fueling economic growth both
nationally and in their local communities.\24\ Women-owned and
minority-owned small businesses play a particularly important role in
supporting their local communities.\25\ Access to credit is a crucial
component of the success of these businesses. ECOA and Regulation B
protect business owners from discrimination because of race, color,
national origin, sex, and other protected characteristics.\26\ In light
of the Bureau's authority under ECOA/Regulation B, in what way(s) might
it support efforts to meet the credit needs of small businesses,
particularly those that are minority-owned and women-owned?
---------------------------------------------------------------------------
\24\ Bureau of Consumer Fin. Prot., Key dimensions of the small
business lending landscape (May 2017), https://files.consumerfinance.gov/f/documents/201705_cfpb_Key-Dimensions-Small-Business-Lending-Landscape.pdf.
\25\ Id.
\26\ 15 U.S.C. 1691(a); 12 CFR 1002.4(a).
---------------------------------------------------------------------------
6. Sexual Orientation and Gender Identity Discrimination: On June
15, 2020, in Bostock v. Clayton County, the Supreme Court ruled that
the prohibition against sex discrimination in Title VII of the Civil
Rights Act of 1964 (Title VII) encompasses sexual orientation
discrimination and gender identity discrimination.\27\ The majority
opinion in Bostock interpreted Title VII and did not address ECOA.
Should the Supreme Court's decision in Bostock affect how the Bureau
interprets ECOA's prohibition of discrimination on the basis of sex? If
so, in what way(s)?
---------------------------------------------------------------------------
\27\ 590 U.S. , 140 S. Ct. 1731 (2020) (Bostock).
---------------------------------------------------------------------------
7. Scope of Federal Preemption of State Law: Regulation B alters,
affects, or preempts only those state laws that are inconsistent with
ECOA and/or Regulation B and then only to the extent of the
inconsistency.\28\ A state law is not inconsistent with ECOA or
Regulation B if it is more protective of an applicant.\29\ A creditor,
state, or other interested party may request that the Bureau determine
whether a state law is inconsistent with the requirements of ECOA and/
or Regulation B.\30\ What are examples of potential conflicts or
intersections between state laws, state regulations, and ECOA and/or
Regulation B, and should the Bureau address such potential conflicts or
intersections? For example, should the Bureau provide further guidance
to assist creditors evaluating whether state law is preempted to the
extent it is inconsistent with the requirements of ECOA and/or
Regulation B?
---------------------------------------------------------------------------
\28\ 12 CFR 1002.11(a).
\29\ Id.
\30\ 12 CFR 1002.11(b)(2).
---------------------------------------------------------------------------
8. Public Assistance Income: ECOA makes it ``unlawful for any
creditor to discriminate against any applicant, with respect to any
aspect of a credit transaction . . . because all or part of the
applicant's income derives from any public assistance program.'' \31\
ECOA provides that making an inquiry whether the applicant's income
derives from any public assistance program does not constitute
discrimination ``if such inquiry is for the purpose of determining the
amount and probable continuance of income levels [among other
things].'' \32\ The official interpretation to Regulation B further
provides that ``[i]n considering the separate components of an
applicant's income, the creditor may not automatically discount or
exclude from consideration any protected income. Any discounting or
exclusion must be based on the applicant's actual circumstances.'' \33\
The Bureau previously issued guidance (through a May 2015 bulletin on
the Section 8 Housing Choice Voucher Homeownership Program \34\ and a
November 2014 bulletin on Social Security Disability Income
Verification \35\) to help creditors comply with these and other
regulatory provisions. The Bureau understands that stakeholders
continue to have questions about these provisions under ECOA and/or
Regulation B.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 1691(a)(2).
\32\ 15 U.S.C. 1691(b)(2); see also 12 CFR 1002.6(b)(5) (``[A]
creditor may consider the amount and probable continuance of any
income in evaluating an applicant's creditworthiness . . . .'').
\33\ Comment 6(b)(5)-(3)(ii); see also Comment 6(b)(5)-(1) (``A
creditor must evaluate income derived from . . . public assistance
on an individual basis . . . .).
\34\ See CFPB Bulletin 2015-02, Section 8 Housing Choice Voucher
Homeownership Program (May 11, 2015), https://files.consumerfinance.gov/f/201505_cfpb_bulletin-section-8-housing-choice-voucher-homeownership-program.pdf.
\35\ See CFPB Bulletin 2014-03, Social Security Disability
Income Verification (Nov. 18, 2014), https://files.consumerfinance.gov/f/201411_cfpb_bulletin_disability-income.pdf.
---------------------------------------------------------------------------
Should the Bureau provide additional clarity under ECOA and/or
Regulation B regarding when all or part of the applicant's income
derives from any public assistance program? If so, in what way(s)? For
example, should it provide
[[Page 46603]]
guidance on how to address situations where creditors seek to ascertain
the continuance of public assistance benefits in underwriting
decisions?
9. Artificial Intelligence and Machine Learning: As the Bureau
noted in its annual fair lending report to Congress dated April 30,
2020 \36\ and a blog post dated July 7, 2020,\37\ financial
institutions are starting to deploy artificial intelligence (AI) and
machine learning (ML) across a range of functions. For example, they
are used as virtual assistants that can fulfill customer requests, in
models to detect fraud or other potential illegal activity, as
compliance monitoring tools, and in credit underwriting. Should the
Bureau provide more regulatory clarity under ECOA and/or Regulation B
to help facilitate innovation in a way that increases access to credit
for consumers and communities in the context of AI/ML without unlawful
discrimination? If so, in what way(s)?
---------------------------------------------------------------------------
\36\ See Fair Lending Report of the Bureau of Consumer Financial
Protection (Apr. 2020), 85 FR 27395, https://files.consumerfinance.gov/f/documents/cfpb_2019-fair-lending_report.pdf.
\37\ See Patrice Alexander Ficklin et al., Innovation spotlight:
Providing adverse action notices when using AI/ML models (July 7,
2020), https://www.consumerfinance.gov/about-us/blog/innovation-spotlight-providing-adverse-action-notices-when-using-ai-ml-models/.
---------------------------------------------------------------------------
Another important issue is how lenders using complex AI/ML models
satisfy ECOA's adverse action notice requirements. ECOA requires
creditors to provide consumers with the principal reason(s) for a
denial of credit or other adverse action.\38\ These notice provisions
serve important anti-discrimination, educational, and accuracy
purposes. There may be questions about how institutions can comply with
these requirements if the reasons driving an AI/ML decision are based
on complex interrelationships.\39\ Should the Bureau modify
requirements or guidance concerning notifications of action taken,
including adverse action notices, under ECOA and/or Regulation B to
better empower consumers to make more informed financial decisions and/
or to provide additional clarity when credit underwriting decisions are
based in part on models that use AI/ML? If so, in what way(s)?
---------------------------------------------------------------------------
\38\ 15 U.S.C. 1691(d).
\39\ See Fair Lending Report of the Bureau of Consumer Financial
Protection (Apr. 2020), 85 FR 27395 (May 8, 2020), https://files.consumerfinance.gov/f/documents/cfpb_2019-fair-lending_report.pdf; Patrice Alexander Ficklin et al., Innovation
spotlight: Providing adverse action notices when using AI/ML models
(July 7, 2020), https://www.consumerfinance.gov/about-us/blog/innovation-spotlight-providing-adverse-action-notices-when-using-ai-ml-models/.
---------------------------------------------------------------------------
10. ECOA Adverse Action Notices: Under ECOA and Regulation B, a
statement of reasons for adverse action must be specific and indicate
the principal reason(s) for the adverse action.\40\ The Bureau
understands from direct engagement and its supervisory work that
stakeholders continue to have questions about this requirement. Should
the Bureau provide any additional guidance under ECOA and/or Regulation
B related to when adverse action has been taken by a creditor,
requiring a notification that includes a statement of specific reasons
for the adverse action? If so, in what way(s)?
---------------------------------------------------------------------------
\40\ 15 U.S.C. 1691(d)(3); 12 CFR 1002.9(b)(2).
Authority: 12 U.S.C. 5511(c).
III. Signing Authority
The Director of the Bureau, having reviewed and approved this
document, is delegating the authority to electronically sign this
document to Laura Galban, a Bureau Federal Register Liaison, for
purposes of publication in the Federal Register.
Dated: July 28, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-16722 Filed 7-31-20; 8:45 am]
BILLING CODE 4810-AM-P
