12 CFR Part 202 — Equal Credit Opportunity Act (Regulation B)

PART 202—EQUAL CREDIT OPPORTUNITY ACT (REGULATION B) Authority: 15 U.S.C. 1691-1691f; Pub. L. 111-203, 124 Stat. 1376. Source: Reg. B, 68 FR 13161, Mar. 18, 2003, unless otherwise noted. § 202.1 Authority, scope and purpose. (a) Authority and scope. et seq. et seq. (b) Purpose. § 202.2 Definitions. For the purposes of this regulation, unless the context indicates otherwise, the following definitions apply. (a) Account (b) Act (c) Adverse action. (i) A refusal to grant credit in substantially the amount or on substantially the terms requested in an application unless the creditor makes a counteroffer (to grant credit in a different amount or on other terms) and the applicant uses or expressly accepts the credit offered; (ii) A termination of an account or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor's accounts; or (iii) A refusal to increase the amount of credit available to an applicant who has made an application for an increase. (2) The term does not include: (i) A change in the terms of an account expressly agreed to by an applicant. (ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account; (iii) A refusal or failure to authorize an account transaction at point of sale or loan, except when the refusal is a termination or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor's accounts, or when the refusal is a denial of an application for an increase in the amount of credit available under the account; (iv) A refusal to extend credit because applicable law prohibits the creditor from extending the credit requested; or (v) A refusal to extend credit because the creditor does not offer the type of credit or credit plan requested. (3) An action that falls within the definition of both paragraphs (c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of this section. (d) Age (e) Applicant (f) Application completed application (g) Business credit (h) Consumer credit (i) Contractually liable (j) Credit (k) Credit card (l) Creditor (m) Credit transaction (n) Discriminate against an applicant (o) Elderly (p) Empirically derived and other credit scoring systems A credit scoring system empirically derived, demonstrably and statistically sound, credit scoring system, (i) Based on data that are derived from an empirical comparison of sample groups or the population of creditworthy and noncreditworthy applicants who applied for credit within a reasonable preceding period of time; (ii) Developed for the purpose of evaluating the creditworthiness of applicants with respect to the legitimate business interests of the creditor utilizing the system (including, but not limited to, minimizing bad debt losses and operating expenses in accordance with the creditor's business judgment); (iii) Developed and validated using accepted statistical principles and methodology; and (iv) Periodically revalidated by the use of appropriate statistical principles and methodology and adjusted as necessary to maintain predictive ability. (2) A creditor may use an empirically derived, demonstrably and statistically sound, credit scoring system obtained from another person or may obtain credit experience from which to develop such a system. Any such system must satisfy the criteria set forth in paragraph (p)(1)(i) through (iv) of this section; if the creditor is unable during the development process to validate the system based on its own credit experience in accordance with paragraph (p)(1) of this section, the system must be validated when sufficient credit experience becomes available. A system that fails this validity test is no longer an empirically derived, demonstrably and statistically sound, credit scoring system for that creditor. (q) Extend credit extension of credit (r) Good faith (s) Inadvertent error (t) Judgmental system of evaluating applicants (u) Marital status (v) Negative factor or value, (w) Open-end credit (x) Person (y) Pertinent element of creditworthiness, (z) Prohibited basis (aa) State § 202.3 Limited exceptions for certain classes of transactions. (a) Public utilities credit Definition. (2) Exceptions. (i) Section 202.5(d)(1) concerning information about marital status; and (ii) Section 202.12(b) relating to record retention. (b) Securities credit Definition. (2) Exceptions. (i) Section 202.5(b) concerning information about the sex of an applicant; (ii) Section 202.5(c) concerning information about a spouse or former spouse; (iii) Section 202.5(d)(1) concerning information about marital status; (iv) Section 202.7(b) relating to designation of name to the extent necessary to comply with rules regarding an account in which a broker or dealer has an interest, or rules regarding the aggregation of accounts of spouses to determine controlling interests, beneficial interests, beneficial ownership, or purchase limitations and restrictions; (v) Section 202.7(c) relating to action concerning open-end accounts, to the extent the action taken is on the basis of a change of name or marital status; (vi) Section 202.7(d) relating to the signature of a spouse or other person; (vii) Section 202.10 relating to furnishing of credit information; and (viii) Section 202.12(b) relating to record retention. (c) Incidental credit Definition. (i) That are not made pursuant to the terms of a credit card account; (ii) That are not subject to a finance charge (as defined in Regulation Z, 12 CFR 226.4); and (iii) That are not payable by agreement in more than four installments. (2) Exceptions. (i) Section 202.5(b) concerning information about the sex of an applicant, but only to the extent necessary for medical records or similar purposes; (ii) Section 202.5(c) concerning information about a spouse or former spouse; (iii) Section 202.5(d)(1) concerning information about marital status; (iv) Section 202.5(d)(2) concerning information about income derived from alimony, child support, or separate maintenance payments; (v) Section 202.7(d) relating to the signature of a spouse or other person; (vi) Section 202.9 relating to notifications; (vii) Section 202.10 relating to furnishing of credit information; and (viii) Section 202.12(b) relating to record retention. (d) Government credit Definition. (2) Applicability of regulation. § 202.4 General rules. (a) Discrimination. (b) Discouragement. (c) Written applications. (d) Form of disclosures General rule. (2) Disclosures in electronic form. et seq. (e) Foreign-language disclosures. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 72 FR 63451, Nov. 9, 2007] § 202.5 Rules concerning requests for information. (a) General rules Requests for information. 1 1 (2) Required collection of information. (3) Special-purpose credit. (b) Limitation on information about race, color, religion, national origin, or sex. (1) Self-test. (i) The applicant will not be required to provide the information; (ii) The creditor is requesting the information to monitor its compliance with the federal Equal Credit Opportunity Act; (iii) Federal law prohibits the creditor from discriminating on the basis of this information, or on the basis of an applicant's decision not to furnish the information; and (iv) If applicable, certain information will be collected based on visual observation or surname if not provided by the applicant or other person. (2) Sex. (c) Information about a spouse or former spouse General rule. (2) Permissible inquiries. (i) The spouse will be permitted to use the account; (ii) The spouse will be contractually liable on the account; (iii) The applicant is relying on the spouse's income as a basis for repayment of the credit requested; (iv) The applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested; or (v) The applicant is relying on alimony, child support, or separate maintenance payments from a spouse or former spouse as a basis for repayment of the credit requested. (3) Other accounts of the applicant. (d) Other limitations on information requests Marital status. married, unmarried, separated. unmarried (2) Disclosure about income from alimony, child support, or separate maintenance. (3) Childbearing, childrearing. (e) Permanent residency and immigration status. § 202.6 Rules concerning evaluation of applications. (a) General rule concerning use of information. 2 2 Griggs Duke Power Co., Albemarle Paper Co. Moody, (b) Specific rules concerning use of information. (2) Age, receipt of public assistance. (ii) In an empirically derived, demonstrably and statistically sound, credit scoring system, a creditor may use an applicant's age as a predictive variable, provided that the age of an elderly applicant is not assigned a negative factor or value. (iii) In a judgmental system of evaluating creditworthiness, a creditor may consider an applicant's age or whether an applicant's income derives from any public assistance program only for the purpose of determining a pertinent element of creditworthiness. (iv) In any system of evaluating creditworthiness, a creditor may consider the age of an elderly applicant when such age is used to favor the elderly applicant in extending credit. (3) Childbearing, childrearing. (4) Telephone listing. (5) Income. (6) Credit history. (i) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are permitted to use or for which both are contractually liable; (ii) On the applicant's request, any information the applicant may present that tends to indicate the credit history being considered by the creditor does not accurately reflect the applicant's creditworthiness; and (iii) On the applicant's request, the credit history, when available, of any account reported in the name of the applicant's spouse or former spouse that the applicant can demonstrate accurately reflects the applicant's creditworthiness. (7) Immigration status. (8) Marital status. (9) Race, color, religion, national origin, sex. (c) State property laws. § 202.7 Rules concerning extensions of credit. (a) Individual accounts. (b) Designation of name. (c) Action concerning existing open-end accounts Limitations. (i) Require a reapplication, except as provided in paragraph (c)(2) of this section; (ii) Change the terms of the account; or (iii) Terminate the account. (2) Requiring reapplication. (d) Signature of spouse or other person Rule for qualified applicant. (2) Unsecured credit. (3) Unsecured credit community property states. (i) Applicable state law denies the applicant power to manage or control sufficient community property to qualify for the credit requested under the creditor's standards of creditworthiness; and (ii) The applicant does not have sufficient separate property to qualify for the credit requested without regard to community property. (4) Secured credit. (5) Additional parties. (6) Rights of additional parties. (e) Insurance. § 202.8 Special purpose credit programs. (a) Standards for programs. (1) Any credit assistance program expressly authorized by federal or state law for the benefit of an economically disadvantaged class of persons; (2) Any credit assistance program offered by a not-for-profit organization, as defined under section 501(c) of the Internal Revenue Code of 1954, as amended, for the benefit of its members or for the benefit of an economically disadvantaged class of persons; or (3) Any special purpose credit program offered by a for-profit organization, or in which such an organization participates to meet special social needs, if: (i) The program is established and administered pursuant to a written plan that identifies the class of persons that the program is designed to benefit and sets forth the procedures and standards for extending credit pursuant to the program; and (ii) The program is established and administered to extend credit to a class of persons who, under the organization's customary standards of creditworthiness, probably would not receive such credit or would receive it on less favorable terms than are ordinarily available to other applicants applying to the organization for a similar type and amount of credit. (b) Rules in other sections General applicability. (2) Common characteristics. (c) Special rule concerning requests and use of information. (d) Special rule in the case of financial need. § 202.9 Notifications. (a) Notification of action taken, ECOA notice, and statement of specific reasons When notification is required. (i) 30 days after receiving a completed application concerning the creditor's approval of, counteroffer to, or adverse action on the application; (ii) 30 days after taking adverse action on an incomplete application, unless notice is provided in accordance with paragraph (c) of this section; (iii) 30 days after taking adverse action on an existing account; or (iv) 90 days after notifying the applicant of a counteroffer if the applicant does not expressly accept or use the credit offered. (2) Content of notification when adverse action is taken. (i) A statement of specific reasons for the action taken; or (ii) A disclosure of the applicant's right to a statement of specific reasons within 30 days, if the statement is requested within 60 days of the creditor's notification. The disclosure shall include the name, address, and telephone number of the person or office from which the statement of reasons can be obtained. If the creditor chooses to provide the reasons orally, the creditor shall also disclose the applicant's right to have them confirmed in writing within 30 days of receiving the applicant's written request for confirmation. (3) Notification to business credit applicants. (i) With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), a creditor shall comply with paragraphs (a)(1) and (2) of this section, except that: (A) The statement of the action taken may be given orally or in writing, when adverse action is taken; (B) Disclosure of an applicant's right to a statement of reasons may be given at the time of application, instead of when adverse action is taken, provided the disclosure contains the information required by paragraph (a)(2)(ii) of this section and the ECOA notice specified in paragraph (b)(1) of this section; (C) For an application made entirely by telephone, a creditor satisfies the requirements of paragraph (a)(3)(i) of this section by an oral statement of the action taken and of the applicant's right to a statement of reasons for adverse action. (ii) With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, a creditor shall: (A) Notify the applicant, within a reasonable time, orally or in writing, of the action taken; and (B) Provide a written statement of the reasons for adverse action and the ECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor's notification. (b) Form of ECOA notice and statement of specific reasons ECOA notice. (2) Statement of specific reasons. (c) Incomplete applications Notice alternatives. (i) Of action taken, in accordance with paragraph (a) of this section; or (ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section. (2) Notice of incompleteness. (3) Oral request for information. (d) Oral notifications by small-volume creditors. (e) Withdrawal of approved application. (f) Multiple applicants. (g) Applications submitted through a third party. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 72 FR 63451, Nov. 9, 2007] § 202.10 Furnishing of credit information. (a) Designation of accounts. (1) Any new account to reflect the participation of both spouses if the applicant's spouse is permitted to use or is contractually liable on the account (other than as a guarantor, surety, endorser, or similar party); and (2) Any existing account to reflect such participation, within 90 days after receiving a written request to do so from one of the spouses. (b) Routine reports to consumer reporting agency. (c) Reporting in response to inquiry. § 202.11 Relation to state law. (a) Inconsistent state laws. (b) Preempted provisions of state law. (i) Requires or permits a practice or act prohibited by the Act or this regulation; (ii) Prohibits the individual extension of consumer credit to both parties to a marriage if each spouse individually and voluntarily applies for such credit; (iii) Prohibits inquiries or collection of data required to comply with the Act or this regulation; (iv) Prohibits asking about or considering age in an empirically derived, demonstrably and statistically sound, credit scoring system to determine a pertinent element of creditworthiness, or to favor an elderly applicant; or (v) Prohibits inquiries necessary to establish or administer a special purpose credit program as defined by § 202.8. (2) A creditor, state, or other interested party may request that the Board determine whether a state law is inconsistent with the requirements of the Act and this regulation. (c) Laws on finance charges, loan ceilings. (d) State and federal laws not affected. (e) Exemption for state-regulated transactions Applications. (i) The class of credit transactions is subject to state law requirements substantially similar to those of the Act and this regulation or that applicants are afforded greater protection under state law; and (ii) There is adequate provision for state enforcement. (2) Liability and enforcement. (ii) After an exemption has been granted, the requirements of the applicable state law (except for additional requirements not imposed by federal law) will constitute the requirements of the Act and this regulation. § 202.12 Record retention. (a) Retention of prohibited information. (1) From any source prior to March 23, 1977; (2) From consumer reporting agencies, an applicant, or others without the specific request of the creditor; or (3) As required to monitor compliance with the Act and this regulation or other federal or state statutes or regulations. (b) Preservation of records Applications. (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 regulation or other similar law, and any other written or recorded information used in evaluating the application and not returned to the applicant at the applicant's request; (ii) A copy of the following documents if furnished to the applicant in written form (or, if furnished orally, any notation or memorandum made by the creditor): (A) The notification of action taken; and (B) The statement of specific reasons for adverse action; and (iii) Any written statement submitted by the applicant alleging a violation of the Act or this regulation. (2) Existing accounts. (i) Any written or recorded information concerning the adverse action; and (ii) Any written statement submitted by the applicant alleging a violation of the Act or this regulation. (3) Other applications. (4) Enforcement proceedings and investigations. (5) Special rule for certain business credit applications. (6) Self-tests. (7) Prescreened solicitations. (i) The text of any prescreened solicitation; (ii) The list of criteria the creditor used to select potential recipients of the solicitation; and (iii) Any correspondence related to complaints (formal or informal) about the solicitation. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 76 FR 41599, July 15, 2011] § 202.13 Information for monitoring purposes. (a) Information to be requested. (i) Ethnicity, using the categories Hispanic or Latino, and not Hispanic or Latino; and race, using the categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White; (ii) Sex; (iii) Marital status, using the categories married, unmarried, and separated; and (iv) Age. (2) Dwelling (b) Obtaining information. (c) Disclosure to applicant(s). (d) Substitute monitoring program. § 202.14 Rules on providing appraisal reports. (a) Providing appraisals. (1) Routine delivery. (2) Upon request. (i) Notice. (ii) Delivery. (b) Credit unions. (c) Definitions. appraisal report § 202.15 Incentives for self-testing and self-correction. (a) General rules Voluntary self-testing and correction. (2) Corrective action required. (3) Other privileges. (b) Self-test defined Definition. (i) Is designed and used specifically to determine the extent or effectiveness of a creditor's compliance with the Act or this regulation; and (ii) Creates data or factual information that is not available and cannot be derived from loan or application files or other records related to credit transactions. (2) Types of information privileged. (3) Types of information not privileged. (i) Information about whether a creditor conducted a self-test, the methodology used or the scope of the self-test, the time period covered by the self-test, or the dates it was conducted; or (ii) Loan and application files or other business records related to credit transactions, and information derived from such files and records, even if the information has been aggregated, summarized, or reorganized to facilitate analysis. (c) Appropriate corrective action General requirement. (2) Determining the scope of appropriate corrective action. (i) Identifying the policies or practices that are the likely cause of the violation; and (ii) Assessing the extent and scope of any violation. (3) Types of relief. (i) A creditor is not required to provide remedial relief to a tester used in a self-test; (ii) A creditor is only required to provide remedial relief to an applicant identified by the self-test as one whose rights were more likely than not violated; and (iii) A creditor is not required to provide remedial relief to a particular applicant if the statute of limitations applicable to the violation expired before the creditor obtained the results of the self-test or the applicant is otherwise ineligible for such relief. (4) No admission of violation. (d) Scope of privilege General rule. (i) By a government agency in any examination or investigation relating to compliance with the Act or this regulation; or (ii) By a government agency or an applicant (including a prospective applicant who alleges a violation of § 202.4(b)) in any proceeding or civil action in which a violation of the Act or this regulation is alleged. (2) Loss of privilege. (i) Voluntarily discloses any part of the report or results, or any other information privileged under this section, to an applicant or government agency or to the public; (ii) Discloses any part of the report or results, or any other information privileged under this section, as a defense to charges that the creditor has violated the Act or regulation; or (iii) Fails or is unable to produce written or recorded information about the self-test that is required to be retained under § 202.12(b)(6) when the information is needed to determine whether the privilege applies. This paragraph does not limit any other penalty or remedy that may be available for a violation of § 202.12. (3) Limited use of privileged information. § 202.16 Enforcement, penalties and liabilities. (a) Administrative enforcement. (2) Except to the extent that administrative enforcement is specifically assigned to other authorities, compliance with the requirements imposed under the Act and this regulation is enforced by the Federal Trade Commission. (b) Penalties and liabilities. (2) As provided in section 706(f), a civil action under the Act or this regulation may be brought in the appropriate United States district court without regard to the amount in controversy or in any other court of competent jurisdiction within two years after the date of the occurrence of the violation, or within one year after the commencement of an administrative enforcement proceeding or of a civil action brought by the Attorney General of the United States within two years after the alleged violation. (3) If an agency responsible for administrative enforcement is unable to obtain compliance with the Act or this regulation, it may refer the matter to the Attorney General of the United States. If the Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration has reason to believe that one or more creditors have engaged in a pattern or practice of discouraging or denying applications in violation of the Act or this regulation, the agency shall refer the matter to the Attorney General. If the agency has reason to believe that one or more creditors violated section 701(a) of the Act, the agency may refer a matter to the Attorney General. (4) On referral, or whenever the Attorney General has reason to believe that one or more creditors have engaged in a pattern or practice in violation of the Act or this regulation, the Attorney General may bring a civil action for such relief as may be appropriate, including actual and punitive damages and injunctive relief. (5) If the Board, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration has reason to believe (as a result of a consumer complaint, a consumer compliance examination, or some other basis) that a violation of the Act or this regulation has occurred which is also a violation of the Fair Housing Act, and the matter is not referred to the Attorney General, the agency shall: (i) Notify the Secretary of Housing and Urban Development; and (ii) Inform the applicant that the Secretary of Housing and Urban Development has been notified and that remedies may be available under the Fair Housing Act. (c) Failure of compliance. [Reg. B, 68 FR 13161, Mar. 18, 2003. Redesignated at 72 FR 63451, Nov. 9, 2007] § 202.17 Data collection for credit applications by women-owned, minority-owned, or small businesses. No motor vehicle dealer covered by section 1029(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5519(a), shall be required to comply with the requirements of section 704B of the Equal Credit Opportunity Act, 15 U.S.C. 1691c-2, until the effective date of final rules issued by the Board to implement section 704B of the Act, 15 U.S.C. 1691c-2. This paragraph shall not be construed to affect the effective date of section 704B of the Act for any person other than a motor vehicle dealer covered by section 1029(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. [Reg. B, 76 FR 59239, Sept. 26, 2011] Appendix A to Part 202—Federal Enforcement Agencies The following list indicates the federal agencies that enforce Regulation B for particular classes of creditors. Any questions concerning a particular creditor should be directed to its enforcement agency. Terms that are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in the International Banking Act of 1978 (12 U.S.C. 3101). National banks, and federal branches and federal agencies of foreign banks: State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act: Nonmember Insured Banks and Insured State Branches of Foreign Banks: Savings institutions under the Savings Association Insurance Fund of the FDIC and federally chartered savings banks insured under the Bank Insurance Fund of the FDIC (but not including state-chartered savings banks insured under the Bank Insurance Fund): Federal Credit Unions: Air carriers: Creditors Subject to Surface Transportation Board: Creditors Subject to Packers and Stockyards Act: Small Business Investment Companies: Brokers and Dealers: Federal Land Banks, Federal Land Bank Associations, Federal Intermediate Credit Banks, and Production Credit Associations: Retailers, Finance Companies, and All Other Creditors Not Listed Above: [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 71 FR 11296, Mar. 7, 2006; 71 FR 28563, May 17, 2006; 72 FR 55020, Sept. 28, 2007; 73 FR 33663, June 13, 2008; 73 FR 53685, Sept. 17, 2008; 76 FR 31451, June 1, 2011] Appendix B to Part 202—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 § 202.13 for certain dwelling-related loans. All forms contained in this appendix are models; their use by creditors is optional. 2. The use or modification of these forms is governed by the following instructions. A creditor may change the forms: by asking for additional information not prohibited by § 202.5; by deleting any information request; or by rearranging the format without modifying the substance of the inquiries. In any of these three instances, however, the appropriate notices regarding the optional nature of courtesy titles, the option to disclose alimony, child support, or separate maintenance, and the limitation concerning marital status inquiries must be included in the appropriate places if the items to which they relate appear on the creditor's form. 3. If a creditor uses an appropriate Appendix B model form, or modifies a form in accordance with the above instructions, that creditor shall be deemed to be acting in compliance with the provisions of paragraphs (b), (c) and (d) of § 202.5 of this regulation. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 68 FR 53491, Sept. 11, 2003] Appendix C to Part 202—Sample Notification Forms 1. This appendix contains ten sample notification forms. Forms C-1 through C-4 are intended for use in notifying an applicant that adverse action has been taken on an application or account under §§ 202.9(a)(1) and (2)(i) of this regulation. Form C-5 is a notice of disclosure of the right to request specific reasons for adverse action under §§ 202.9(a)(1) and (2)(ii). Form C-6 is designed for use in notifying an applicant, under § 202.9(c)(2), that an application is incomplete. Forms C-7 and C-8 are intended for use in connection with applications for business credit under § 202.9(a)(3). Form C-9 is designed for use in notifying an applicant of the right to receive a copy of an appraisal under § 202.14. Form C-10 is designed for use in notifying an applicant for nonmortgage credit that the creditor is requesting applicant characteristic information. 2. Form C-1 contains the Fair Credit Reporting Act disclosure as required by sections 615(a) and (b) of that act. Forms C-2 through C-5 contain only the section 615(a) disclosure (that a creditor obtained information from a consumer reporting agency that was considered in the credit decision and, as applicable, a credit score used in taking adverse action along with related information). A creditor must provide the section 615(a) disclosure when adverse action is taken against a consumer based on information from a consumer reporting agency. A creditor must provide the section 615(b) disclosure when adverse action is taken based on information from an outside source other than a consumer reporting agency. In addition, a creditor must provide the section 615(b) disclosure if the creditor obtained information from an affiliate other than information in a consumer report or other than information concerning the affiliate's own transactions or experiences with the consumer. Creditors may comply with the disclosure requirements for adverse action based on information in a consumer report obtained from an affiliate by providing either the section 615(a) or section 615(b) disclosure. Optional language in Forms C-1 through C-5 may be used to direct the consumer to the entity that provided the credit score for any questions about the credit score, along with the entity's contact information. Creditors may use or not use this additional language without losing the safe harbor, since the language is optional. 3. The sample forms are illustrative and may not be appropriate for all creditors. They were designed to include some of the factors that creditors most commonly consider. If a creditor chooses to use the checklist of reasons provided in one of the sample forms in this appendix and if reasons commonly used by the creditor are not provided on the form, the creditor should modify the checklist by substituting or adding other reasons. For example, if “inadequate down payment” or “no deposit relationship with us” are common reasons for taking adverse action on an application, the creditor ought to add or substitute such reasons for those presently contained on the sample forms. 4. If the reasons listed on the forms are not the factors actually used, a creditor will not satisfy the notice requirement by simply checking the closest identifiable factor listed. For example, some creditors consider only references from banks or other depository institutions and disregard finance company references altogether; their statement of reasons should disclose “insufficient bank references,” not “insufficient credit references.” Similarly, a creditor that considers bank references and other credit references as distinct factors should treat the two factors separately and disclose them as appropriate. The creditor should either add such other factors to the form or check “other” and include the appropriate explanation. The creditor need not, however, describe how or why a factor adversely affected the application. For example, the notice may say “length of residence” rather than “too short a period of residence.” 5. A creditor may design its own notification forms or use all or a portion of the forms contained in this appendix. Proper use of Forms C-1 through C-4 will satisfy the requirement of § 202.9(a)(2)(i). Proper use of Forms C-5 and C-6 constitutes full compliance with §§ 202.9(a)(2)(ii) and 202.9(c)(2), respectively. Proper use of Forms C-7 and C-8 will satisfy the requirements of § 202.9(a)(2)(i) and (ii), respectively, for applications for business credit. Proper use of Form C-9 will satisfy the requirements of § 202.14 of this part. Proper use of Form C-10 will satisfy the requirements of § 202.5(b)(1). Form C-1—Sample Notice of Action Taken and Statement of Reasons Statement of Credit Denial, Termination or Change Date: Applicant's Name: Applicant's Address: Description of Account, Transaction, or Requested Credit: Description of Action Taken: Part I—Principal Reason(s) for Credit Denial, Termination, or Other Action Taken Concerning Credit This section must be completed in all instances. ____Credit application incomplete ____Insufficient number of credit references provided ____Unacceptable type of credit references provided ____Unable to verify credit references ____Temporary or irregular employment ____Unable to verify employment ____Length of employment ____Income insufficient for amount of credit requested ____Excessive obligations in relation to income ____Unable to verify income ____Length of residence ____Temporary residence ____Unable to verify residence ____No credit file ____Limited credit experience ____Poor credit performance with us ____Delinquent past or present credit obligations with others ____Collection action or judgment ____Garnishment or attachment ____Foreclosure or repossession ____Bankruptcy ____Number of recent inquiries on credit bureau report ____Value or type of collateral not sufficient ____Other, specify:____________ Part II—Disclosure of Use of Information Obtained From an Outside Source This section should be completed if the credit decision was based in whole or in part on information that has been obtained from an outside source. ____Our credit decision was based in whole or in part on information obtained in a report from the consumer reporting agency listed below. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. Name: Address: [Toll-free] Telephone number [We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes. Your credit score:____________ Date:____________ Scores range from a low of____________to a high of____________ Key factors that adversely affected your credit score: ____________ ____________ ____________ ____________ [Number of recent inquiries on consumer report, as a key factor] [If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at: Address: [Toll-free] Telephone number: ____Our credit decision was based in whole or in part on information obtained from an affiliate or from an outside source other than a consumer reporting agency. Under the Fair Credit Reporting Act, you have the right to make a written request, no later than 60 days after you receive this notice, for disclosure of the nature of this information. If you have any questions regarding this notice, you should contact: Creditor's name: Creditor's address: Creditor's telephone number: Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is (name and address as specified by the appropriate agency listed in appendix A). Form C-2—Sample Notice of Action Taken and Statement of Reasons Date Dear Applicant: Thank you for your recent application. Your request for [a loan/a credit card/an increase in your credit limit] was carefully considered, and we regret that we are unable to approve your application at this time, for the following reason(s): Your Income: ____is below our minimum requirement. ____is insufficient to sustain payments on the amount of credit requested. ____could not be verified. Your Employment: ____is not of sufficient length to qualify. ____could not be verified. Your Credit History: ____of making payments on time was not satisfactory. ____could not be verified. Your Application: ____lacks a sufficient number of credit references. ____lacks acceptable types of credit references. ____reveals that current obligations are excessive in relation to income. Other: The consumer reporting agency contacted that provided information that influenced our decision in whole or in part was [name, address and [toll-free] telephone number of the reporting agency]. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. Any questions regarding such information should be directed to [consumer reporting agency]. If you have any questions regarding this letter, you should contact us at [creditor's name, address and telephone number]. [We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes. Your credit score: Date: Scores range from a low of____________to a high of____________ Key factors that adversely affected your credit score: [Number of recent inquiries on consumer report, as a key factor] [If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at: Address: [Toll-free] Telephone number:____________________]] Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is (name and address as specified by the appropriate agency listed in appendix A). Form C-3—Sample Notice of Action Taken and Statement of Reasons [(Credit Scoring)] Date Dear Applicant: Thank you for your recent application for ________. We regret that we are unable to approve your request. [ Reasons for Denial of Credit Your application was processed by a [credit scoring] system that assigns a numerical value to the various items of information we consider in evaluating an application. These numerical values are based upon the results of analyses of repayment histories of large numbers of customers. The information you provided in your application did not score a sufficient number of points for approval of the application. The reasons you did not score well compared with other applicants were • Insufficient bank references • Type of occupation • Insufficient credit experience • Number of recent inquiries on credit bureau report [ Your Right to Get Your Consumer Report In evaluating your application the consumer reporting agency listed below provided us with information that in whole or in part influenced our decision. The consumer reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. It can be obtained by contacting: [name, address, and [toll-free] telephone number of the consumer reporting agency]. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. [ Information about Your Credit Score] We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes. Your credit score: Date: Scores range from a low of ________to a high of________ Key factors that adversely affected your credit score: [Number of recent inquiries on consumer report, as a key factor] [If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at: Address: [Toll-free] Telephone number:____________________]] If you have any questions regarding this letter, you should contact us at Creditor's Name: Address: Telephone: Sincerely, Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (with certain limited exceptions); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is (name and address as specified by the appropriate agency listed in appendix A). Form C-4—Sample Notice of Action Taken, Statement of Reasons and Counteroffer Date Dear Applicant: Thank you for your application for ________. We are unable to offer you credit on the terms that you requested for the following reason(s): We can, however, offer you credit on the following terms: If this offer is acceptable to you, please notify us within [amount of time] at the following address: ________. Our credit decision on your application was based in whole or in part on information obtained in a report from [name, address and [toll-free] telephone number of the consumer reporting agency]. You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. [We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes. Your credit score: Date Scores range from a low of ____________ to a high of ____________ Key factors that adversely affected your credit score: [Number of recent inquiries on consumer report, as a key factor] [If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at: Address: [Toll-free] Telephone number:____________________]] You should know that the federal Equal Credit Opportunity Act prohibits creditors, such as ourselves, from discriminating against credit applicants on the basis of their race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract), because they receive income from a public assistance program, or because they may have exercised their rights under the Consumer Credit Protection Act. If you believe there has been discrimination in handling your application you should contact the [name and address of the appropriate federal enforcement agency listed in appendix A]. Sincerely, Form C-5—Sample Disclosure of Right to Request Specific Reasons for Credit Denial Date Dear Applicant: Thank you for applying to us for ________. After carefully reviewing your application, we are sorry to advise you that we cannot [open an account for you/grant a loan to you/increase your credit limit] at this time. If you would like a statement of specific reasons why your application was denied, please contact [our credit service manager] shown below within 60 days of the date of this letter. We will provide you with the statement of reasons within 30 days after receiving your request. Creditor's Name Address Telephone Number If we obtained information from a consumer reporting agency as part of our consideration of your application, its name, address, and [toll-free] telephone number is shown below. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. [You have a right under the Fair Credit Reporting Act to know the information contained in your credit file at the consumer reporting agency.] You have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you received is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency. You can find out about the information contained in your file (if one was used) by contacting: Consumer reporting agency's name Address [Toll-free] Telephone number [We also obtained your credit score from this consumer reporting agency and used it in making our credit decision. Your credit score is a number that reflects the information in your consumer report. Your credit score can change, depending on how the information in your consumer report changes. Your credit score: Date: Scores range from a low of ____________ to a high of ____________ Key factors that adversely affected your credit score: [Number of recent inquiries on consumer report, as a key factor] [If you have any questions regarding your credit score, you should contact [entity that provided the credit score] at: Address: [Toll-free] Telephone number:____________________]] Sincerely, Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is (name and address as specified by the appropriate agency listed in appendix A). Form C-6—Sample Notice of Incomplete Application and Request for Additional Information Creditor's name Address Telephone number Date Dear Applicant: Thank you for your application for credit. The following information is needed to make a decision on your application: __________ We need to receive this information by __________(date). If we do not receive it by that date, we will regrettably be unable to give further consideration to your credit request. Sincerely, Form C-7—Sample Notice of Action Taken and Statement of Reasons (Business Credit) Creditor's Name Creditor's address Date Dear Applicant: Thank you for applying to us for credit. We have given your request careful consideration, and regret that we are unable to extend credit to you at this time for the following reasons: (Insert appropriate reason, such as: Value or type of collateral not sufficient; Lack of established earnings record; Slow or past due in trade or loan payments) Sincerely, Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is [name and address as specified by the appropriate agency listed in appendix A]. Form C-8—Sample Disclosure of Right To Request Specific Reasons for Credit Denial Given at Time of Application (Business Credit) Creditor's name Creditor's address If your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please contact [name, address and telephone number of the person or office from which the statement of reasons can be obtained] within 60 days from the date you are notified of our decision. We will send you a written statement of reasons for the denial within 30 days of receiving your request for the statement. Notice: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is [name and address as specified by the appropriate agency listed in appendix A]. Form C-9—Sample Disclosure of Right To Receive a Copy of an Appraisal You have the right to a copy of the appraisal report used in connection with your application for credit. If you wish a copy, please write to us at the mailing address we have provided. We must hear from you no later than 90 days after we notify you about the action taken on your credit application or you withdraw your application. [In your letter, give us the following information:] Form C-10—Sample Disclosure About Voluntary Data Notation We are requesting the following information to monitor our compliance with the federal Equal Credit Opportunity Act, which prohibits unlawful discrimination. You are not required to provide this information. We will not take this information (or your decision not to provide this information) into account in connection with your application or credit transaction. The law provides that a creditor may not discriminate based on this information, or based on whether or not you choose to provide it. [If you choose not to provide the information, we will note it by visual observation or surname]. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 76 FR 41600, July 15, 2011] Appendix D to Part 202—Issuance of Staff Interpretations 1. Official Staff Interpretations. 2. Requests for Issuance of Official Staff Interpretations. 3. Scope of Interpretations. Supplement I to Part 202—Official Staff Interpretations Following is an official staff interpretation of Regulation B (12 CFR part 202) issued under authority delegated by the Federal Reserve Board to officials in the Division of Consumer and Community Affairs. References are to sections of the regulation or the Equal Credit Opportunity Act (15 U.S.C. 1601 et seq. Introduction 1. Official status. 2. Issuance of interpretations. Federal Register. 3. Status of previous interpretations. 4. Footnotes. 5. Comment designations. Section 202.1—Authority, Scope, and Purpose 1(a) Authority and scope. 1. Scope. 2. Foreign applicability. 3. Board. Board, Section 202.2—Definitions 2(c) Adverse action. Paragraph 2(c)(1)(i) 1. Application for credit. Paragraph 2(c)(1)(ii) 1. Move from service area. 2. Termination based on credit limit. Paragraph 2(c)(2)(ii) 1. Default—exercise of due-on-sale clause. 2. Current delinquency or default. Paragraph 2(c)(2)(iii) 1. Point-of-sale transactions. i. A credit cardholder presents an expired card or a card that has been reported to the card issuer as lost or stolen. ii. The amount of a transaction exceeds a cash advance or credit limit. iii. The circumstances (such as excessive use of a credit card in a short period of time) suggest that fraud is involved. iv. The authorization facilities are not functioning. v. Billing statements have been returned to the creditor for lack of a forwarding address. 2. Application for increase in available credit. Paragraph 2(c)(2)(v) 1. Terms of credit versus type of credit offered. 2(e) Applicant. 1. Request to assume loan. 2(f) Application. 1. General. 2. Procedures used. 3. When an inquiry or prequalification request becomes an application. 4. Examples of inquiries that are not applications. i. A consumer calls to ask about loan terms and an employee explains the creditor's basic loan terms, such as interest rates, loan-to-value ratio, and debt-to-income ratio. ii. A consumer calls to ask about interest rates for car loans, and, in order to quote the appropriate rate, the loan officer asks for the make and sales price of the car and the amount of the downpayment, then gives the consumer the rate. iii. A consumer asks about terms for a loan to purchase a home and tells the loan officer her income and intended downpayment, but the loan officer only explains the creditor's loan-to-value ratio policy and other basic lending policies, without telling the consumer whether she qualifies for the loan. iv. A consumer calls to ask about terms for a loan to purchase vacant land and states his income and the sales price of the property to be financed, and asks whether he qualifies for a loan; the employee responds by describing the general lending policies, explaining that he would need to look at all of the consumer's qualifications before making a decision, and offering to send an application form to the consumer. 5. Examples of an application. i. A person asks a financial institution to “preapprove” her for a loan (for example, to finance a house or a vehicle she plans to buy) and the institution reviews the request under a program in which the institution, after a comprehensive analysis of her creditworthiness, issues a written commitment valid for a designated period of time to extend a loan up to a specified amount. The written commitment may not be subject to conditions other than conditions that require the identification of adequate collateral, conditions that require no material change in the applicant's financial condition or creditworthiness prior to funding the loan, and limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender ordinarily attaches to a traditional application (such as certification of a clear termite inspection for a home purchase loan, or a maximum mileage requirement for a used car loan). But if the creditor's program does not provide for giving written commitments, requests for preapprovals are treated as prequalification requests for purposes of the regulation. ii. Under the same facts as above, the financial institution evaluates the person's creditworthiness and determines that she does not qualify for a preapproval. 6. Completed application—diligence requirement. 2(g) Business credit. 1. Definition. 2(j) Credit. 1. General. 2(l) Creditor. 1. Assignees. 2. Referrals to creditors. 2(p) Empirically derived and other credit scoring systems. 1. Purpose of definition. 2. Periodic revalidation. 3. Pooled data scoring systems. 4. Effects test and disparate treatment. 2(w) Open-end credit. 1. Open-end real estate mortgages. 2(z) Prohibited basis. 1. Persons associated with applicant. 2. National origin. 3. Public assistance program. Section 202.3—Limited Exceptions for Certain Classes of Transactions 1. Scope. 3(a) Public-utilities credit. 1. Definition. 2. Security deposits. 3. Telephone companies. 3(c) Incidental credit. 1. Examples. 3(d) Government credit. 1. Credit to governments. Section 202.4—General Rules Paragraph 4(a) 1. Scope of rule. 2. Examples. i. Disparate treatment would exist, for example, in the following situations: A. A creditor provides information only on “subprime” and similar products to minority applicants who request information about the creditor's mortgage products, but provides information on a wider variety of mortgage products to similarly situated nonminority applicants. B. A creditor provides more comprehensive information to men than to similarly situated women. C. A creditor requires a minority applicant to provide greater documentation to obtain a loan than a similarly situated nonminority applicant. D. A creditor waives or relaxes credit standards for a nonminority applicant but not for a similarly situated minority applicant. ii. Treating applicants differently on a prohibited basis is unlawful if the creditor lacks a legitimate nondiscriminatory reason for its action, or if the asserted reason is found to be a pretext for discrimination. Paragraph 4(b) 1. Prospective applicants. i. A statement that the applicant should not bother to apply, after the applicant states that he is retired. ii. The use of words, symbols, models or other forms of communication in advertising that express, imply, or suggest a discriminatory preference or a policy of exclusion in violation of the Act. iii. The use of interview scripts that discourage applications on a prohibited basis. 2. Affirmative advertising. Paragraph 4(c) 1. Requirement for written applications. 2. Telephone applications. 3. Computerized entry. Applications through electronic media Applications through video. Paragraph 4(d) 1. Clear and conspicuous. 2. Form of disclosures. i. If an applicant accesses a credit application electronically (other than as described under ii below), such as online at a home computer, the creditor must provide the disclosures in electronic form (such as with the application form on its website) in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the applicant, this requirement would not be met. ii. In contrast, if an applicant is physically present in the creditor's office, and accesses a credit application electronically, such as via a terminal or kiosk (or if the applicant uses a terminal or kiosk located on the premises of an affiliate or third party that has arranged with the creditor to provide applications to consumers), the creditor may provide disclosures in either electronic or paper form, provided the creditor complies with the timing, delivery, and retainability requirements of the regulation. Section 202.5—Rules Concerning Requests for Information 5(a) General rules. Paragraph 5(a)(1) 1. Requests for information. Paragraph 5(a)(2) 1. Local laws. 2. Information required by Regulation C. 3. Collecting information on behalf of creditors. 5(d) Other limitations on information requests. Paragraph 5(d)(1) 1. Indirect disclosure of prohibited information. i. The applicant's obligation to pay alimony, child support, or separate maintenance income. ii. The source of income to be used as the basis for repaying the credit requested, which could disclose that it is the income of a spouse. iii. Whether any obligation disclosed by the applicant has a co-obligor, which could disclose that the co-obligor is a spouse or former spouse. iv. The ownership of assets, which could disclose the interest of a spouse. Paragraph 5(d)(2) 1. Disclosure about income. 2. General inquiry about source of income. 3. Specific inquiry about sources of income. Section 202.6—Rules Concerning Evaluation of Applications 6(a) General rule concerning use of information. 1. General. 2. Effects test. et seq. 6(b) Specific rules concerning use of information. Paragraph 6(b)(1) 1. Prohibited basis—special purpose credit. Paragraph 6(b)(2) 1. Favoring the elderly. 2. Consideration of age in a credit scoring system. i. Age-split scorecards. 3. Consideration of age in a judgmental system. i. A creditor may consider the applicant's occupation and length of time to retirement to ascertain whether the applicant's income (including retirement income) will support the extension of credit to its maturity. ii. A creditor may consider the adequacy of any security offered when the term of the credit extension exceeds the life expectancy of the applicant and the cost of realizing on the collateral could exceed the applicant's equity. An elderly applicant might not qualify for a 5 percent down, 30-year mortgage loan but might qualify with a larger downpayment or a shorter loan maturity. iii. A creditor may consider the applicant's age to assess the significance of length of employment (a young applicant may have just entered the job market) or length of time at an address (an elderly applicant may recently have retired and moved from a long-term residence). 4. Consideration of age in a reverse mortgage. 5. Consideration of age in a combined system. 6. Consideration of public assistance. i. The length of time an applicant will likely remain eligible to receive such income. ii. Whether the applicant will continue to qualify for benefits based on the status of the applicant's dependents (as in the case of Temporary Aid to Needy Families, or social security payments to a minor). iii. Whether the creditor can attach or garnish the income to assure payment of the debt in the event of default. Paragraph 6(b)(5) 1. Consideration of an individual applicant. 2. Payments consistently made. 3. Consideration of income. i. A creditor need not consider income at all in evaluating creditworthiness. If a creditor does consider income, there are several acceptable methods, whether in a credit scoring or a judgmental system: A. A creditor may score or take into account the total sum of all income stated by the applicant without taking steps to evaluate the income for reliability. B. A creditor may evaluate each component of the applicant's income, and then score or take into account income determined to be reliable separately from other income; or the creditor may disregard that portion of income that is not reliable when it aggregates reliable income. C. A creditor that does not evaluate all income components for reliability must treat as reliable any component of protected income that is not evaluated. ii. In 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. 4. Part-time employment, sources of income. Paragraph 6(b)(6) 1. Types of credit references. Paragraph 6(b)(7) 1. National origin—immigration status. 2. National origin—citizenship. Paragraph 6(b)(8) 1. Prohibited basis—marital status. Section 202.7—Rules Concerning Extensions of Credit 7(a) Individual accounts. 1. Open-end credit—authorized user. 2. Open-end credit—choice of authorized user. 3. Overdraft authority on transaction accounts. 7(b) Designation of name. 1. Single name on account. 7(c) Action concerning existing open-end accounts. Paragraph 7(c)(1) 1. Termination coincidental with marital status change. i. Repudiate responsibility for future charges on the joint account. ii. Request separate accounts in their own names. iii. Request that the joint account be closed. 2. Updating information. Paragraph 7(c)(2) 1. Procedure pending reapplication. 7(d) Signature of spouse or other person. 1. Qualified applicant. 2. Unqualified applicant. Paragraph 7(d)(1) 1. Signature of another person. 2. Joint applicant. 3. Evidence of joint application. Paragraph 7(d)(2) 1. Jointly owned property. i. Valuation of applicant's interest. ii. Other options to support credit. A. Providing a co-signer or other party (§ 202.7(d)(5)); B. Requesting that the credit be granted on a secured basis (§ 202.7(d)(4)); or C. Providing the signature of the joint owner on an instrument that ensures access to the property in the event of the applicant's death or default, but does not impose personal liability unless necessary under state law (such as a limited guarantee). A creditor may not routinely require, however, that a joint owner sign an instrument (such as a quitclaim deed) that would result in the forfeiture of the joint owner's interest in the property. 2. Need for signature—reasonable belief. Paragraph 7(d)(3) 1. Residency. Paragraph 7(d)(4) 1. Creation of enforceable lien. 2. Need for signature—reasonable belief. 3. Integrated instruments. Paragraph 7(d)(5) 1. Qualifications of additional parties. 2. Reliance on income of another person—individual credit. 3. Renewals. Paragraph 7(d)(6) 1. Guarantees. 2. Spousal guarantees. 7(e) Insurance. 1. Differences in terms. 2. Insurance information. Section 202.8—Special Purpose Credit Programs 8(a) Standards for programs. 1. Determining qualified programs. 2. Compliance with a program authorized by federal or state law. 3. Expressly authorized. 4. Creditor liability. 5. Determining need. 6. Elements of the program. 8(b) Rules in other sections. 1. Applicability of rules. 8(c) Special rule concerning requests and use of information. 1. Request of prohibited basis information. 2. Examples. i. Energy conservation programs to assist the elderly, for which the creditor must consider the applicant's age. ii. Programs under a Minority Enterprise Small Business Investment Corporation, for which a creditor must consider the applicant's minority status. 8(d) Special rule in the case of financial need. 1. Request of prohibited basis information. 2. Examples. i. Subsidized housing programs for low- to moderate-income households, for which a creditor may have to consider the applicant's receipt of alimony or child support, the spouse's or parents' income, etc. ii. Student loan programs based on the family's financial need, for which a creditor may have to consider the spouse's or parents' financial resources. 3. Student loans. Section 202.9—Notifications 1. Use of the term adverse action. 2. Expressly withdrawn applications. 3. When notification occurs. 4. Location of notice. 5. Prequalification requests. 9(a) Notification of action taken, ECOA notice, and statement of specific reasons. Paragraph 9(a)(1) 1. Timing of notice—when an application is complete. 2. Notification of approval. 3. Incomplete application—denial for incompleteness. 4. Incomplete application—denial for reasons other than incompleteness. 5. Length of counteroffer. 6. Counteroffer combined with adverse action notice. 7. Denial of a telephone application. Paragraph 9(a)(3) 1. Coverage. 2. Trade credit. 3. Factoring. 4. Manner of compliance. 5. Timing of notification. 9(b) Form of ECOA notice and statement of specific reasons. Paragraph 9(b)(1) 1. Substantially similar notice. Paragraph 9(b)(2) 1. Number of specific reasons. 2. Source of specific reasons. 3. Description of reasons. 4. Credit scoring system. 5. Credit scoring—method for selecting reasons. 6. Judgmental system. 7. Combined credit scoring and judgmental system. 8. Automatic denial. 9. Combined ECOA-FCRA disclosures. 9(c) Incomplete applications. Paragraph 9(c)(1) 1. Exception for preapprovals. Paragraph 9(c)(2) 1. Reapplication. Paragraph 9(c)(3) 1. Oral inquiries for additional information. 9(g) Applications submitted through a third party. 1. Third parties. 2. Third party notice—enforcement agency. 3. Third-party notice—liability. Section 202.10—Furnishing of Credit Information 1. Scope. 2. Reporting on all accounts. 3. Designating accounts. 4. File and index systems. 10(a) Designation of accounts. 1. New parties. 2. Request to change designation of account. Section 202.11—Relation to State Law 11(a) Inconsistent state laws. 1. Preemption determination—New York. i. Article 15, section 296a(1)(b)—Unlawful discriminatory practices in relation to credit on the basis of race, creed, color, national origin, age, sex, marital status, or disability. This provision is preempted to the extent that it bars taking a prohibited basis into account when establishing eligibility for certain special-purpose credit programs. ii. Article 15, section 296a(1)(c)'Unlawful discriminatory practice to make any record or inquiry based on race, creed, color, national origin, age, sex, marital status, or disability. This provision is preempted to the extent that it bars a creditor from requesting and considering information regarding the particular characteristics (for example, race, national origin, or sex) required for eligibility for special-purpose credit programs. 2. Preemption determination—Ohio. i. Section 4112.021(B)(1)—Unlawful discriminatory practices in credit transactions. This provision is preempted to the extent that it bars asking or favorably considering the age of an elderly applicant; prohibits the consideration of age in a credit scoring system; permits without limitation the consideration of age in real estate transactions; and limits the consideration of age in special-purpose credit programs to certain government-sponsored programs identified in the state law. Section 202.12—Record Retention 12(a) Retention of prohibited information. 1. Receipt of prohibited information. 2. Use of retained information. 12(b) Preservation of records. 1. Copies. 2. Computerized decisions. Paragraph 12(b)(3) 1. Withdrawn and brokered applications. i. An application is withdrawn by the applicant. ii. An application is submitted to more than one creditor on behalf of the applicant, and the application is approved by one of the other creditors. 12(b)(6) Self-tests 1. The rule requires all written or recorded information about a self-test to be retained for 25 months after a self-test has been completed. For this purpose, a self-test is completed after the creditor has obtained the results and made a determination about what corrective action, if any, is appropriate. Creditors are required to retain information about the scope of the self-test, the methodology used and time period covered by the self-test, the report or results of the self-test including any analysis or conclusions, and any corrective action taken in response to the self-test. 12(b)(7) Preapplication marketing information. 1. Prescreened credit solicitations. 2. List of criteria. 3. Correspondence. Section 202.13—Information for Monitoring Purposes 13(a) Information to be requested. 1. Natural person. 2. Principal residence. 3. Temporary financing. 4. New principal residence. 5. Transactions not covered. 6. Refinancings. 7. Data collection under Regulation C. 13(b) Obtaining of information. 1. Forms for collecting data. 2. Written applications. 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. 6. Inadvertent notation. 13(c) Disclosure to applicants. 1. Procedures for providing disclosures. 13(d) Substitute monitoring program. 1. Substitute program. Section 202.14—Rules on Providing Appraisal Reports 14(a) Providing appraisals. 1. Coverage. 2. Renewals. 14(a)(2)(i) Notice. 1. Multiple applicants. 14(a)(2)(ii) Delivery. 1. Reimbursement. 14(c) Definitions. 1. Appraisal reports. i. A report prepared by an appraiser (whether or not licensed or certified), including written comments and other documents submitted to the creditor in support of the appraiser's estimate or opinion of the property's value. ii. A document prepared by the creditor's staff that assigns value to the property, if a third-party appraisal report has not been used. iii. An internal review document reflecting that the creditor's valuation is different from a valuation in a third party's appraisal report (or different from valuations that are publicly available or valuations such as manufacturers' invoices for mobile homes). 2. Other reports. i. Internal documents, if a third-party appraisal report was used to establish the value of the property. ii. Governmental agency statements of appraised value. iii. Valuations lists that are publicly available (such as published sales prices or mortgage amounts, tax assessments, and retail price ranges) and valuations such as manufacturers' invoices for mobile homes. Section 202.15—Incentives for Self-Testing and Self-Correction 15(a) General rules. 15(a)(1) Voluntary self-testing and correction. 1. Activities required by any governmental authority are not voluntary self-tests. A governmental authority includes both administrative and judicial authorities for federal, state, and local governments. 15(a)(2) Corrective action required. 1. To qualify for the privilege, appropriate corrective action is required when the results of a self-test show that it is more likely than not that there has been a violation of the ECOA or this regulation. A self-test is also privileged when it identifies no violations. 2. In some cases, the issue of whether certain information is privileged may arise before the self-test is complete or corrective actions are fully under way. This would not necessarily prevent a creditor from asserting the privilege. In situations where the self-test is not complete, for the privilege to apply the lender must satisfy the regulation's requirements within a reasonable period of time. To assert the privilege where the self-test shows a likely violation, the rule requires, at a minimum, that the creditor establish a plan for corrective action and a method to demonstrate progress in implementing the plan. Creditors must take appropriate corrective action on a timely basis after the results of the self-test are known. 3. A creditor's determination about the type of corrective action needed, or a finding that no corrective action is required, is not conclusive in determining whether the requirements of this paragraph have been satisfied. If a creditor's claim of privilege is challenged, an assessment of the need for corrective action or the type of corrective action that is appropriate must be based on a review of the self-testing results, which may require an in camera 15(a)(3) Other privileges. 1. A creditor may assert the privilege established under this section in addition to asserting any other privilege that may apply, such as the attorney-client privilege or the work-product privilege. Self-testing data may be privileged under this section whether or not the creditor's assertion of another privilege is upheld. 15(b) Self-test defined. 15(b)(1) Definition. Paragraph 15(b)(1)(i) 1. To qualify for the privilege, a self-test must be sufficient to constitute a determination of the extent or effectiveness of the creditor's compliance with the Act and Regulation B. Accordingly, a self-test is only privileged if it was designed and used for that purpose. A self-test that is designed or used to determine compliance with other laws or regulations or for other purposes is not privileged under this rule. For example, a self-test designed to evaluate employee efficiency or customers' satisfaction with the level of service provided by the creditor is not privileged even if evidence of discrimination is uncovered incidentally. If a self-test is designed for multiple purposes, only the portion designed to determine compliance with the ECOA is eligible for the privilege. Paragraph 15(b)(1)(ii) 1. The principal attribute of self-testing is that it constitutes a voluntary undertaking by the creditor to produce new data or factual information that otherwise would not be available and could not be derived from loan or application files or other records related to credit transactions. Self-testing includes, but is not limited to, the practice of using fictitious applicants for credit (testers), either with or without the use of matched pairs. A creditor may elect to test a defined segment of its business, for example, loan applications processed by a specific branch or loan officer, or applications made for a particular type of credit or loan program. A creditor also may use other methods of generating information that is not available in loan and application files, such as surveying mortgage loan applicants. To the extent permitted by law, creditors might also develop new methods that go beyond traditional pre-application testing, such as hiring testers to submit fictitious loan applications for processing. 2. The privilege does not protect a creditor's analysis performed as part of processing or underwriting a credit application. A creditor's evaluation or analysis of its loan files, Home Mortgage Disclosure Act data, or similar types of records (such as broker or loan officer compensation records) does not produce new information about a creditor's compliance and is not a self-test for purposes of this section. Similarly, a statistical analysis of data derived from existing loan files is not privileged. 15(b)(3) Types of information not privileged. Paragraph 15(b)(3)(i) 1. The information listed in this paragraph is not privileged and may be used to determine whether the prerequisites for the privilege have been satisfied. Accordingly, a creditor might be asked to identify the self-testing method, for example, whether preapplication testers were used or data were compiled by surveying loan applicants. Information about the scope of the self-test (such as the types of credit transactions examined, or the geographic area covered by the test) also is not privileged. Paragraph 15(b)(3)(ii) 1. Property appraisal reports, minutes of loan committee meetings or other documents reflecting the basis for a decision to approve or deny an application, loan policies or procedures, underwriting standards, and broker compensation records are examples of the types of records that are not privileged. If a creditor arranges for testers to submit loan applications for processing, the records are not related to actual credit transactions for purposes of this paragraph and may be privileged self-testing records. 15(c) Appropriate corrective action. 1. The rule only addresses the corrective actions required for a creditor to take advantage of the privilege in this section. A creditor may be required to take other actions or provide additional relief if a formal finding of discrimination is made. 15(c)(1) General requirement. 1. Appropriate corrective action is required even though no violation has been formally adjudicated or admitted by the creditor. In determining whether it is more likely than not that a violation occurred, a creditor must treat testers as if they are actual applicants for credit. A creditor may not refuse to take appropriate corrective action under this section because the self-test used fictitious loan applicants. The fact that a tester's agreement with the creditor waives the tester's legal right to assert a violation does not eliminate the requirement for the creditor to take corrective action, although no remedial relief for the tester is required under paragraph 15(c)(3). 15(c)(2) Determining the scope of appropriate corrective action. 1. Whether a creditor has taken or is taking corrective action that is appropriate will be determined on a case-by-case basis. Generally, the scope of the corrective action that is needed to preserve the privilege is governed by the scope of the self-test. For example, a creditor that self-tests mortgage loans and discovers evidence of discrimination may focus its corrective actions on mortgage loans, and is not required to expand its testing to other types of loans. 2. In identifying the policies or practices that are a likely cause of the violation, a creditor might identify inadequate or improper lending policies, failure to implement established policies, employee conduct, or other causes. The extent and scope of a likely violation may be assessed by determining which areas of operations are likely to be affected by those policies and practices, for example, by determining the types of loans and stages of the application process involved and the branches or offices where the violations may have occurred. 3. Depending on the method and scope of the self-test and the results of the test, appropriate corrective action may include one or more of the following: i. If the self-test identifies individuals whose applications were inappropriately processed, offering to extend credit if the application was improperly denied and compensating such persons for out-of-pocket costs and other compensatory damages; ii. Correcting institutional policies or procedures that may have contributed to the likely violation, and adopting new policies as appropriate; iii. Identifying and then training and/or disciplining the employees involved; iv. Developing outreach programs, marketing strategies, or loan products to serve more effectively segments of the lender's markets that may have been affected by the likely discrimination; and v. Improving audit and oversight systems to avoid a recurrence of the likely violations. 15(c)(3) Types of relief. Paragraph 15(c)(3)(ii) 1. The use of pre-application testers to identify policies and practices that illegally discriminate does not require creditors to review existing loan files for the purpose of identifying and compensating applicants who might have been adversely affected. 2. If a self-test identifies a specific applicant who was discriminated against on a prohibited basis, to qualify for the privilege in this section the creditor must provide appropriate remedial relief to that applicant; the creditor is not required to identify other applicants who might also have been adversely affected. Paragraph 15(c)(3)(iii) 1. A creditor is not required to provide remedial relief to an applicant that would not be available by law. An applicant might also be ineligible for certain types of relief due to changed circumstances. For example, a creditor is not required to offer credit to a denied applicant if the applicant no longer qualifies for the credit due to a change in financial circumstances, although some other type of relief might be appropriate. 15(d)(1) Scope of privilege. 1. The privilege applies with respect to any examination, investigation or proceeding by federal, state, or local government agencies relating to compliance with the Act or this regulation. Accordingly, in a case brought under the ECOA, the privilege established under this section preempts any inconsistent laws or court rules to the extent they might require disclosure of privileged self-testing data. The privilege does not apply in other cases (such as in litigation filed solely under a state's fair lending statute). In such cases, if a court orders a creditor to disclose self-test results, the disclosure is not a voluntary disclosure or waiver of the privilege for purposes of paragraph 15(d)(2); a creditor may protect the information by seeking a protective order to limit availability and use of the self-testing data and prevent dissemination beyond what is necessary in that case. Paragraph 15(d)(1) precludes a party who has obtained privileged information from using it in a case brought under the ECOA, provided the creditor has not lost the privilege through voluntary disclosure under paragraph 15(d)(2). 15(d)(2) Loss of privilege. Paragraph 15(d)(2)(i) 1. A creditor's corrective action, by itself, is not considered a voluntary disclosure of the self-test report or results. For example, a creditor does not disclose the results of a self-test merely by offering to extend credit to a denied applicant or by inviting the applicant to reapply for credit. Voluntary disclosure could occur under this paragraph, however, if the creditor disclosed the self-test results in connection with a new offer of credit. 2. The disclosure of self-testing results to an independent contractor acting as an auditor or consultant for the creditor on compliance matters does not result in loss of the privilege. Paragraph 15(d)(2)(ii) 1. The privilege is lost if the creditor discloses privileged information, such as the results of the self-test. The privilege is not lost if the creditor merely reveals or refers to the existence of the self-test. Paragraph 15(d)(2)(iii) 1. A creditor's claim of privilege may be challenged in a court or administrative law proceeding with appropriate jurisdiction. In resolving the issue, the presiding officer may require the creditor to produce privileged information about the self-test. Paragraph 15(d)(3) Limited use of privileged information 1. A creditor may be required to produce privileged documents for the purpose of determining a penalty or remedy after a violation of the ECOA or Regulation B has been formally adjudicated or admitted. A creditor's compliance with such a requirement does not evidence the creditor's intent to forfeit the privilege. Section 202.16—Enforcement, Penalties, and Liabilities 17(c) Failure of compliance. 1. Inadvertent errors. 2. Correction of error. Appendix B—Model Application Forms 1. Freddie Mac/Fannie Mae form—residential loan application. 2. FHLMC/FNMA form—home improvement loan application. Appendix C—Sample Notification Forms 1. Form C-9. i. A telephone number that applicants may call to leave their name and the address to which an appraisal report should be sent. ii. A notice of the cost the applicant will be required to pay the creditor for the appraisal or a copy of the report. [Reg. B, 68 FR 13161, Mar. 18, 2003, as amended at 72 FR 63451, Nov. 9, 2007; 72 FR 71057, Dec. 14, 2007; 76 FR 41602, July 15, 2011]

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