12 CFR Ch. X (1-1-26 Edition) — Part 1002 — Equal Credit Opportunity Act (Regulation B)
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PART 1000 [RESERVED] PART 1002—EQUAL CREDIT OPPOR-
TUNITY ACT (REGULATION B)
PART 1001—FINANCIAL PRODUCTS
OR SERVICES Subpart A—General
Sec.
Sec. 1002.1 Authority, scope and purpose.
1001.1 Authority and purpose. 1002.2 Definitions.
1001.2 Definitions. 1002.3 Limited exceptions for certain classes
of transactions.
AUTHORITY: 12 U.S.C. 5481(15)(A)(xi); and 12 1002.4 General rules.
U.S.C. 5512(b)(1). 1002.5 Rules concerning requests for infor-
SOURCE: 80 FR 37526, June 30, 2015, unless mation.
otherwise noted. 1002.6 Rules concerning evaluation of appli-
cations.
§ 1001.1 Authority and purpose. 1002.7 Rules concerning extensions of credit.
1002.8 Special purpose credit programs.
Under 12 U.S.C. 5481(15)(A)(xi), the 1002.9 Notifications.
Bureau is authorized to define certain 1002.10 Furnishing of credit information.
financial products or services for pur- 1002.11 Relation to state law.
poses of title X of the Dodd-Frank Act, 1002.12 Record retention.
1002.13 Information for monitoring pur-
Public Law 111–203, 124 Stat. 1376 (2010) poses.
(Title X) in addition to those defined in 1002.14 Rules on providing appraisal reports.
12 U.S.C. 5481(15)(A)(i)–(x). The purpose 1002.15 Incentives for self-testing and self-
of this part is to implement that au- correction.
thority. 1002.16 Enforcement, penalties and liabil-
ities.
§ 1001.2 Definitions.
Subpart B—Small Business Lending Data
Except as otherwise provided in Title Collection
X, in addition to the definitions set
forth in 12 U.S.C. 5481(15)(A)(i)–(x), the 1002.101 Authority, purpose, and scope.
1002.102 Definitions.
term ‘‘financial product or service’’
1002.103 Covered applications.
means, for purposes of Title X: 1002.104 Covered credit transactions and ex-
(a) Extending or brokering leases of cluded transactions.
an automobile, as automobile is de- 1002.105 Covered financial institutions and
fined by 12 CFR 1090.108(a), where the exempt institutions.
lease: 1002.106 Business and small business.
1002.107 Compilation of reportable data.
(1) Qualifies as a full-payout lease 1002.108 Firewall.
and a net lease, as provided by 12 CFR 1002.109 Reporting of data to the Bureau.
23.3(a), and has an initial term of not 1002.110 Publication of data and other dis-
less than 90 days, as provided by 12 closures.
CFR 23.11; and 1002.111 Recordkeeping.
(2) Is not a financial product or serv- 1002.112 Enforcement.
1002.113 Severability.
ice under 12 U.S.C. 5481(15)(A)(ii).
1002.114 Effective date, compliance date,
(b) Providing financial data proc- and special transitional rules.
essing products or services by any APPENDIX A TO PART 1002—FEDERAL AGEN-
technological means, including proc- CIES TO BE LISTED IN ADVERSE ACTION
essing, storing, aggregating, or trans- NOTICES
mitting financial or banking data, APPENDIX B TO PART 1002—MODEL APPLICA-
alone or in connection with another TION FORMS
product or service, where the financial APPENDIX C TO PART 1002—SAMPLE NOTIFICA-
TION FORMS
data processing is not offered or pro- APPENDIX D TO PART 1002—ISSUANCE OF OFFI-
vided by a person who, by operation of CIAL INTERPRETATIONS
12 U.S.C. 5481(15)(A)(vii)(I) or (II), is not APPENDIX E TO PART 1002—SAMPLE FORM FOR
a covered person. COLLECTING CERTAIN APPLICANT-PRO-
VIDED DATA UNDER SUBPART B
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(c) [Reserved]
APPENDIX F TO PART 1002—TOLERANCES FOR
[80 FR 37526, June 30, 2015, as amended at 89 BONA FIDE ERRORS IN DATA REPORTED
FR 90989, Nov. 18, 2024] UNDER SUBPART B
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§ 1002.1 12 CFR Ch. X (1–1–26 Edition)
SUPPLEMENT I TO PART 1002—OFFICIAL INTER- with copies of appraisal reports used in
PRETATIONS connection with credit transactions.
AUTHORITY: 12 U.S.C. 5512, 5581; 15 U.S.C. [76 FR 79445, Dec. 21, 2011, as amended at 88
1691b. Subpart B is also issued under 15 FR 35527, May 31, 2023]
U.S.C. 1691c–2.
SOURCE: 76 FR 79445, Dec. 21, 2011, unless § 1002.2 Definitions.
otherwise noted. For the purposes of this part, unless
the context indicates otherwise or as
Subpart A—General otherwise defined in subpart B, the fol-
lowing definitions apply:
§ 1002.1 Authority, scope and purpose. (a) Account means an extension of
(a) Authority and scope. This part, credit. When employed in relation to
known as Regulation B, is issued by an account, the word use refers only to
the Bureau of Consumer Financial Pro- open-end credit.
tection (Bureau) pursuant to title VII (b) Act means the Equal Credit Op-
(Equal Credit Opportunity Act) of the portunity Act (Title VII of the Con-
Consumer Credit Protection Act, as sumer Credit Protection Act).
amended (15 U.S.C. 1601 et seq.). Except (c) Adverse action. (1) The term
as otherwise provided herein, this sub- means:
part applies to all persons who are (i) A refusal to grant credit in sub-
creditors, as defined in § 1002.2(l), other stantially the amount or on substan-
tially the terms requested in an appli-
than a person excluded from coverage
cation unless the creditor makes a
of this part by section 1029 of the Con-
counteroffer (to grant credit in a dif-
sumer Financial Protection Act of 2010,
ferent amount or on other terms) and
title X of the Dodd-Frank Wall Street
the applicant uses or expressly accepts
Reform and Consumer Protection Act,
the credit offered;
Public Law 111–203, 124 Stat. 1376. Infor-
(ii) A termination of an account or
mation collection requirements con-
an unfavorable change in the terms of
tained in this part have been approved an account that does not affect all or
by the Office of Management and Budg- substantially all of a class of the credi-
et under the provisions of 44 U.S.C. 3501 tor’s accounts; or
et seq. and have been assigned OMB No. (iii) A refusal to increase the amount
3170–0013. of credit available to an applicant who
(b) Purpose. The purpose of this part has made an application for an in-
is to promote the availability of credit crease.
to all creditworthy applicants without (2) The term does not include:
regard to race, color, religion, national (i) A change in the terms of an ac-
origin, sex, marital status, or age (pro- count expressly agreed to by an appli-
vided the applicant has the capacity to cant;
contract); to the fact that all or part of (ii) Any action or forbearance relat-
the applicant’s income derives from a ing to an account taken in connection
public assistance program; or to the with inactivity, default, or delinquency
fact that the applicant has in good as to that account;
faith exercised any right under the (iii) A refusal or failure to authorize
Consumer Credit Protection Act. The an account transaction at point of sale
regulation prohibits creditor practices or loan, except when the refusal is a
that discriminate on the basis of any of termination or an unfavorable change
these factors. The regulation also re- in the terms of an account that does
quires creditors to notify applicants of not affect all or substantially all of a
action taken on their applications; to class of the creditor’s accounts, or
report credit history in the names of when the refusal is a denial of an appli-
both spouses on an account; to retain cation for an increase in the amount of
records of credit applications; to col- credit available under the account;
lect information about the applicant’s (iv) A refusal to extend credit be-
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race and other personal characteristics cause applicable law prohibits the cred-
in applications for certain dwelling-re- itor from extending the credit re-
lated loans; and to provide applicants quested; or
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Consumer Financial Protection Bureau § 1002.2
(v) A refusal to extend credit because (j) Credit means the right granted by
the creditor does not offer the type of a creditor to an applicant to defer pay-
credit or credit plan requested. ment of a debt, incur debt and defer its
(3) An action that falls within the payment, or purchase property or serv-
definition of both paragraphs (c)(1) and ices and defer payment therefor.
(c)(2) of this section is governed by (k) Credit card means any card, plate,
paragraph (c)(2) of this section. coupon book, or other single credit de-
(d) Age refers only to the age of nat- vice that may be used from time to
ural persons and means the number of time to obtain money, property, or
fully elapsed years from the date of an services on credit.
applicant’s birth. (l) Creditor means a person who, in
(e) Applicant means any person who the ordinary course of business, regu-
requests or who has received an exten- larly participates in a credit decision,
sion of credit from a creditor, and in- including setting the terms of the cred-
cludes any person who is or may be- it. The term creditor includes a credi-
come contractually liable regarding an tor’s assignee, transferee, or subrogee
extension of credit. For purposes of who so participates. For purposes of
§ 1002.7(d), the term includes guaran- §§ 1002.4(a) and (b), the term creditor
tors, sureties, endorsers, and similar also includes a person who, in the ordi-
parties. nary course of business, regularly re-
(f) Application means an oral or writ- fers applicants or prospective appli-
ten request for an extension of credit cants to creditors, or selects or offers
that is made in accordance with proce- to select creditors to whom requests
dures used by a creditor for the type of for credit may be made. A person is not
credit requested. The term application a creditor regarding any violation of
does not include the use of an account the Act or this part committed by an-
or line of credit to obtain an amount of other creditor unless the person knew
credit that is within a previously es-
or had reasonable notice of the act,
tablished credit limit. A completed ap-
policy, or practice that constituted the
plication means an application in con-
violation before becoming involved in
nection with which a creditor has re-
the credit transaction. The term does
ceived all the information that the
not include a person whose only par-
creditor regularly obtains and con-
ticipation in a credit transaction in-
siders in evaluating applications for
volves honoring a credit card.
the amount and type of credit re-
quested (including, but not limited to, (m) Credit transaction means every as-
credit reports, any additional informa- pect of an applicant’s dealings with a
tion requested from the applicant, and creditor regarding an application for
any approvals or reports by govern- credit or an existing extension of credit
mental agencies or other persons that (including, but not limited to, informa-
are necessary to guarantee, insure, or tion requirements; investigation proce-
provide security for the credit or col- dures; standards of creditworthiness;
lateral). The creditor shall exercise terms of credit; furnishing of credit in-
reasonable diligence in obtaining such formation; revocation, alteration, or
information. termination of credit; and collection
(g) Business credit refers to extensions procedures).
of credit primarily for business or com- (n) Discriminate against an applicant
mercial (including agricultural) pur- means to treat an applicant less favor-
poses, but excluding extensions of cred- ably than other applicants.
it of the types described in § 1002.3(a)– (o) Elderly means age 62 or older.
(d). (p) Empirically derived and other credit
(h) Consumer credit means credit ex- scoring systems—(1) A credit scoring sys-
tended to a natural person primarily tem is a system that evaluates an appli-
for personal, family, or household pur- cant’s creditworthiness mechanically,
poses. based on key attributes of the appli-
(i) Contractually liable means ex- cant and aspects of the transaction,
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pressly obligated to repay all debts and that determines, alone or in con-
arising on an account by reason of an junction with an evaluation of addi-
agreement to that effect. tional information about the applicant,
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§ 1002.2 12 CFR Ch. X (1–1–26 Edition)
whether an applicant is deemed credit- special effort to collect at or after ma-
worthy. To qualify as an empirically de- turity).
rived, demonstrably and statistically (r) Good faith means honesty in fact
sound, credit scoring system, the system in the conduct or transaction.
must be: (s) Inadvertent error means a mechan-
(i) Based on data that are derived ical, electronic, or clerical error that a
from an empirical comparison of sam- creditor demonstrates was not inten-
ple groups or the population of credit- tional and occurred notwithstanding
worthy and non-creditworthy appli- the maintenance of procedures reason-
cants who applied for credit within a ably adapted to avoid such errors.
reasonable preceding period of time; (t) Judgmental system of evaluating ap-
(ii) Developed for the purpose of eval- plicants means any system for evalu-
uating the creditworthiness of appli- ating the creditworthiness of an appli-
cants with respect to the legitimate cant other than an empirically derived,
business interests of the creditor uti- demonstrably and statistically sound,
lizing the system (including, but not credit scoring system.
limited to, minimizing bad debt losses (u) Marital status means the state of
and operating expenses in accordance being unmarried, married, or sepa-
with the creditor’s business judgment); rated, as defined by applicable state
(iii) Developed and validated using law. The term ‘‘unmarried’’ includes
persons who are single, divorced, or
accepted statistical principles and
widowed.
methodology; and
(v) Negative factor or value, in relation
(iv) Periodically revalidated by the
to the age of elderly applicants, means
use of appropriate statistical principles utilizing a factor, value, or weight that
and methodology and adjusted as nec- is less favorable regarding elderly ap-
essary to maintain predictive ability. plicants than the creditor’s experience
(2) A creditor may use an empirically warrants or is less favorable than the
derived, demonstrably and statistically factor, value, or weight assigned to the
sound, credit scoring system obtained class of applicants that are not classi-
from another person or may obtain fied as elderly and are most favored by
credit experience from which to de- a creditor on the basis of age.
velop such a system. Any such system (w) Open-end credit means credit ex-
must satisfy the criteria set forth in tended under a plan in which a creditor
paragraph (p)(1)(i) through (iv) of this may permit an applicant to make pur-
section; if the creditor is unable during chases or obtain loans from time to
the development process to validate time directly from the creditor or indi-
the system based on its own credit ex- rectly by use of a credit card, check, or
perience in accordance with paragraph other device.
(p)(1) of this section, the system must (x) Person means a natural person,
be validated when sufficient credit ex- corporation, government or govern-
perience becomes available. A system mental subdivision or agency, trust, es-
that fails this validity test is no longer tate, partnership, cooperative, or asso-
an empirically derived, demonstrably ciation.
and statistically sound, credit scoring (y) Pertinent element of creditworthi-
system for that creditor. ness, in relation to a judgmental sys-
(q) Extend credit and extension of credit tem of evaluating applicants, means
mean the granting of credit in any any information about applicants that
form (including, but not limited to, a creditor obtains and considers and
credit granted in addition to any exist- that has a demonstrable relationship
ing credit or credit limit; credit grant- to a determination of creditworthiness.
ed pursuant to an open-end credit plan; (z) Prohibited basis means race, color,
the refinancing or other renewal of religion, national origin, sex, marital
credit, including the issuance of a new status, or age (provided that the appli-
credit card in place of an expiring cred- cant has the capacity to enter into a
it card or in substitution for an exist- binding contract); the fact that all or
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ing credit card; the consolidation of part of the applicant’s income derives
two or more obligations; or the con- from any public assistance program; or
tinuance of existing credit without any the fact that the applicant has in good
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Consumer Financial Protection Bureau § 1002.3
faith exercised any right under the (v) Section 1002.7(c) relating to action
Consumer Credit Protection Act or any concerning open-end accounts, to the
state law upon which an exemption has extent the action taken is on the basis
been granted by the Bureau. of a change of name or marital status;
(aa) State means any state, the Dis- (vi) Section 1002.7(d) relating to the
trict of Columbia, the Commonwealth signature of a spouse or other person;
of Puerto Rico, or any territory or pos- (vii) Section 1002.10 relating to fur-
session of the United States.
nishing of credit information; and
[76 FR 79445, Dec. 21, 2011, as amended at 88 (viii) Section 1002.12(b) relating to
FR 35527, May 31, 2023] record retention.
§ 1002.3 Limited exceptions for certain (c) Incidental credit (1) Definition. Inci-
classes of transactions. dental credit refers to extensions of
consumer credit other than the types
(a) Public utilities credit—(1) Defini-
tion. Public utilities credit refers to ex- described in paragraphs (a) and (b) of
tensions of credit that involve public this section:
utility services provided through pipe, (i) That are not made pursuant to the
wire, or other connected facilities, or terms of a credit card account;
radio or similar transmission (includ- (ii) That are not subject to a finance
ing extensions of such facilities), if the charge (as defined in Regulation Z, 12
charges for service, delayed payment, CFR 1026.4); and
and any discount for prompt payment (iii) That are not payable by agree-
are filed with or regulated by a govern- ment in more than four installments.
ment unit. (2) Exceptions. The following provi-
(2) Exceptions. The following provi- sions of this part do not apply to inci-
sions of this part do not apply to public dental credit:
utilities credit: (i) Section 1002.5(b) concerning infor-
(i) Section 1002.5(d)(1) concerning in- mation about the sex of an applicant,
formation about marital status; and but only to the extent necessary for
(ii) Section 1002.12(b) relating to
medical records or similar purposes;
record retention.
(b) Securities credit (1) Definition. Se- (ii) Section 1002.5(c) concerning infor-
curities credit refers to extensions of mation about a spouse or former
credit subject to regulation under sec- spouse;
tion 7 of the Securities Exchange Act (iii) Section 1002.5(d)(1) concerning
of 1934 or extensions of credit by a information about marital status;
broker or dealer subject to regulation (iv) Section 1002.5(d)(2) concerning in-
as a broker or dealer under the Securi- formation about income derived from
ties Exchange Act of 1934. alimony, child support, or separate
(2) Exceptions. The following provi- maintenance payments;
sions of this part do not apply to secu- (v) Section 1002.7(d) relating to the
rities credit: signature of a spouse or other person;
(i) Section 1002.5(b) concerning infor- (vi) Section 1002.9 relating to notifi-
mation about the sex of an applicant; cations;
(ii) Section 1002.5(c) concerning infor- (vii) Section 1002.10 relating to fur-
mation about a spouse or former nishing of credit information; and
spouse;
(viii) Section 1002.12(b) relating to
(iii) Section 1002.5(d)(1) concerning
record retention.
information about marital status;
(iv) Section 1002.7(b) relating to des- (d) Government credit—(1) Definition.
ignation of name to the extent nec- Government credit refers to extensions
essary to comply with rules regarding of credit made to governments or gov-
an account in which a broker or dealer ernmental subdivisions, agencies, or
has an interest, or rules regarding the instrumentalities.
aggregation of accounts of spouses to (2) Applicability of regulation. Except
determine controlling interests, bene- for § 1002.4(a), the general rule against
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ficial interests, beneficial ownership, discrimination on a prohibited basis,
or purchase limitations and restric- the requirements of this part do not
tions; apply to government credit.
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§ 1002.4 12 CFR Ch. X (1–1–26 Edition)
§ 1002.4 General rules. action. This paragraph does not limit
or abrogate any Federal or state law
(a) Discrimination. A creditor shall
regarding privacy, privileged informa-
not discriminate against an applicant
on a prohibited basis regarding any as- tion, credit reporting limitations, or
pect of a credit transaction. similar restrictions on obtainable in-
formation.
(b) Discouragement. A creditor shall
not make any oral or written state- (2) Required collection of information.
ment, in advertising or otherwise, to Notwithstanding paragraphs (b)
applicants or prospective applicants through (d) of this section, a creditor
that would discourage on a prohibited shall request information for moni-
basis a reasonable person from making toring purposes as required by § 1002.13
or pursuing an application. for credit secured by the applicant’s
(c) Written applications. A creditor dwelling. In addition, a creditor may
shall take written applications for the obtain information required by a regu-
dwelling-related types of credit covered lation, order, or agreement issued by,
by § 1002.13(a). or entered into with, a court or an en-
(d) Form of disclosures—(1) General forcement agency (including the Attor-
rule. A creditor that provides in writ- ney General of the United States or a
ing any disclosures or information re- similar state official) to monitor or en-
quired by this part must provide the force compliance with the Act, this
disclosures in a clear and conspicuous part, or other Federal or state statutes
manner and, except for the disclosures or regulations.
required by §§ 1002.5 and 1002.13, in a (3) Special-purpose credit. A creditor
form the applicant may retain. may obtain information that is other-
(2) Disclosures in electronic form. The wise restricted to determine eligibility
disclosures required by this part that for a special purpose credit program, as
are required to be given in writing may provided in § 1002.8(b), (c), and (d).
be provided to the applicant in elec- (4) Other permissible collection of infor-
tronic form, subject to compliance mation. Notwithstanding paragraph (b)
with the consumer consent and other of this section, a creditor may collect
applicable provisions of the Electronic information under the following cir-
Signatures in Global and National cumstances provided that the creditor
Commerce Act (E-Sign Act) (15 U.S.C. collects the information in compliance
7001 et seq.). Where the disclosures with § 1002.107(a)(18) and (19) and ac-
under §§ 1002.5(b)(1), 1002.5(b)(2), companying commentary, or appendix
1002.5(d)(1), 1002.5(d)(2), 1002.13, and B to 12 CFR part 1003, as applicable:
1002.14(a)(2) accompany an application (i) A creditor that is a financial insti-
accessed by the applicant in electronic tution under 12 CFR 1003.2(g) may col-
form, these disclosures may be pro- lect information regarding the eth-
vided to the applicant in electronic nicity, race, and sex of an applicant for
form on or with the application form, a closed-end mortgage loan that is an
without regard to the consumer con- excluded transaction under 12 CFR
sent or other provisions of the E-Sign 1003.3(c)(11) if it submits HMDA data
Act. concerning such closed-end mortgage
(e) Foreign-language disclosures. Dis- loans and applications or if it sub-
closures may be made in languages mitted HMDA data concerning closed-
other than English, provided they are end mortgage loans for any of the pre-
available in English upon request. ceding five calendar years;
[76 FR 79445, Dec. 21, 2011, as amended at 78 (ii) A creditor that is a financial in-
FR 7248, Jan. 31, 2013] stitution under 12 CFR 1003.2(g) may
collect information regarding the eth-
§ 1002.5 Rules concerning requests for nicity, race, and sex of an applicant for
information. an open-end line of credit that is an ex-
(a) General rules—(1) Requests for in- cluded transaction under 12 CFR
formation. Except as provided in para- 1003.3(c)(12) if it submits HMDA data
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graphs (b) through (d) of this section, a concerning such open-end lines of cred-
creditor may request any information it and applications or if it submitted
in connection with a credit trans- HMDA data concerning open-end lines
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Consumer Financial Protection Bureau § 1002.5
of credit for any of the preceding five principal owners if it complies with the
calendar years; requirements for covered financial in-
(iii) A creditor that submitted HMDA stitutions pursuant to §§ 1002.107(a)(18)
data for any of the preceding five cal- and (19), 1002.108, 1002.111, and 1002.112
endar years but is not currently a fi- for that application. Such a creditor is
nancial institution under 12 CFR permitted, but not required, to report
1003.2(g) may collect information re- data to the Bureau collected pursuant
garding the ethnicity, race, and sex of to subpart B of this part if it complies
an applicant for a loan that would oth- with the requirements of subpart B as
erwise be a covered loan under 12 CFR otherwise required for covered finan-
1003.2(e) if not excluded by 12 CFR cial institutions pursuant to §§ 1002.109
1003.3(c)(11) or (12); and 1002.110.
(iv) A creditor that exceeded an ap- (viii) A creditor that exceeded the
plicable loan volume threshold in the loan-volume threshold in the first year
first year of the two-year threshold pe- of the two-year threshold period pro-
riod provided in 12 CFR 1003.2(g), vided in § 1002.105(b) may, in the second
1003.3(c)(11), or 1003.3(c)(12) may, in the year, collect information pursuant to
second year, collect information re- subpart B of this part for covered appli-
garding the ethnicity, race, and sex of cations from small businesses as de-
an applicant for a loan that would oth- fined in §§ 1002.103 and 1002.106(b) re-
erwise be a covered loan under 12 CFR garding whether an applicant is a mi-
1003.2(e) if the loan were not excluded nority-owned business, a women-owned
by 12 CFR 1003.3(c)(11) or (12); business, or an LGBTQI+-owned busi-
(v) A creditor that is a financial in- ness, and the ethnicity, race, and sex of
stitution under 12 CFR 1003.2(g), or the applicant’s principal owners if it
that submitted HMDA data for any of complies with the requirements for
the preceding five calendar years but is covered financial institutions pursuant
not currently a financial institution to §§ 1002.107(a)(18) and (19), 1002.108,
under 12 CFR 1003.2(g), may collect in- 1002.111, and 1002.112 for that applica-
formation regarding the ethnicity, tion. Such a creditor is permitted, but
race, and sex of an applicant for a loan not required, to report data to the Bu-
that would otherwise be a covered loan reau collected pursuant to subpart B of
under 12 CFR 1003.2(e) if the loan were this part if it complies with the re-
not excluded by 12 CFR 1003.3(c)(10). quirements of subpart B as otherwise
(vi) A creditor that is collecting in- required for covered financial institu-
formation regarding the ethnicity, tions pursuant to §§ 1002.109 and
race, and sex of an applicant or first 1002.110.
co-applicant may collect information (ix) A creditor that is not currently a
regarding the ethnicity, race, and sex covered financial institution under
of a second or additional co-applicant § 1002.105(b), and is not otherwise a
for a covered loan under 12 CFR creditor to which § 1002.5(a)(4)(vii) or
1003.2(e) or for a second or additional (viii) applies, may collect information
co-applicant for a loan described in pursuant to subpart B of this part for
paragraphs (a)(4)(i) through (v) of this covered applications from small busi-
section. nesses as defined in §§ 1002.103 and
(vii) A creditor that was required to 1002.106(b) regarding whether an appli-
report small business lending data pur- cant for a covered credit transaction is
suant to § 1002.109 for any of the pre- a minority-owned business, a women-
ceding five calendar years but is not owned business, or an LGBTQI+-owned
currently a covered financial institu- business, and the ethnicity, race, and
tion under § 1002.105(b) may collect in- sex of the applicant’s principal owners
formation pursuant to subpart B of this for a transaction if it complies with
part for covered applications from the requirements for covered financial
small businesses as defined in §§ 1002.103 institutions pursuant to §§ 1002.107
and 1002.106(b) regarding whether an through 1002.112 for that application.
applicant is a minority-owned business, (x) A creditor that is collecting infor-
jgilmore on DSK4WB1RN3PROD with CFR
a women-owned business, or an mation pursuant to subpart B of this
LGBTQI+-owned business, and the eth- part or as described in paragraphs
nicity, race, and sex of the applicant’s (a)(4)(vii) through (ix) of this section
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§ 1002.5 12 CFR Ch. X (1–1–26 Edition)
for covered applications from small concerning the spouse or former spouse
businesses as defined in §§ 1002.103 and of an applicant.
1002.106(b) regarding whether an appli- (2) Permissible inquiries. A creditor
cant for a covered credit transaction is may request any information con-
a minority-owned business, a women- cerning an applicant’s spouse (or
owned business, or an LGBTQI+-owned former spouse under paragraph (c)(2)(v)
business, and the ethnicity, race, and of this section) that may be requested
sex of the applicant’s principal owners about the applicant if:
may also collect that same informa- (i) The spouse will be permitted to
tion for any co-applicants provided use the account;
that it also complies with the relevant (ii) The spouse will be contractually
requirements of subpart B of this part liable on the account;
or as described in paragraphs (a)(4)(vii) (iii) The applicant is relying on the
through (ix) of this section with re- spouse’s income as a basis for repay-
spect to those co-applicants. ment of the credit requested;
(b) Limitation on information about (iv) The applicant resides in a com-
race, color, religion, national origin, or munity property state or is relying on
sex. A creditor shall not inquire about property located in such a state as a
the race, color, religion, national ori- basis for repayment of the credit re-
gin, or sex of an applicant or any other quested; or
person in connection with a credit (v) The applicant is relying on ali-
transaction, except as provided in para- mony, child support, or separate main-
graphs (b)(1) and (b)(2) of this section. tenance payments from a spouse or
(1) Self-test. A creditor may inquire former spouse as a basis for repayment
about the race, color, religion, national of the credit requested.
origin, or sex of an applicant or any (3) Other accounts of the applicant. A
other person in connection with a cred- creditor may request that an applicant
it transaction for the purpose of con- list any account on which the appli-
ducting a self-test that meets the re- cant is contractually liable and to pro-
quirements of § 1002.15. A creditor that vide the name and address of the per-
makes such an inquiry shall disclose son in whose name the account is held.
orally or in writing, at the time the in- A creditor may also ask an applicant
formation is requested, that: to list the names in which the appli-
(i) The applicant will not be required cant has previously received credit.
to provide the information; (d) Other limitations on information re-
(ii) The creditor is requesting the in- quests—(1) Marital status. If an appli-
formation to monitor its compliance cant applies for individual unsecured
with the Federal Equal Credit Oppor- credit, a creditor shall not inquire
tunity Act; about the applicant’s marital status
(iii) Federal law prohibits the cred- unless the applicant resides in a com-
itor from discriminating on the basis of munity property state or is relying on
this information, or on the basis of an property located in such a state as a
applicant’s decision not to furnish the basis for repayment of the credit re-
information; and quested. If an application is for other
(iv) If applicable, certain information than individual unsecured credit, a
will be collected based on visual obser- creditor may inquire about the appli-
vation or surname if not provided by cant’s marital status, but shall use
the applicant or other person. only the terms married, unmarried, and
(2) Sex. An applicant may be re- separated. A creditor may explain that
quested to designate a title on an ap- the category unmarried includes sin-
plication form (such as Ms., Miss, Mr., gle, divorced, and widowed persons.
or Mrs.) if the form discloses that the (2) Disclosure about income from ali-
designation of a title is optional. An mony, child support, or separate mainte-
application form shall otherwise use nance. A creditor shall not inquire
only terms that are neutral as to sex. whether income stated in an applica-
(c) Information about a spouse or tion is derived from alimony, child sup-
jgilmore on DSK4WB1RN3PROD with CFR
former spouse—(1) General rule. Except port, or separate maintenance pay-
as permitted in this paragraph, a cred- ments unless the creditor discloses to
itor may not request any information the applicant that such income need
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Consumer Financial Protection Bureau § 1002.6
not be revealed if the applicant does (ii) In an empirically derived, demon-
not want the creditor to consider it in strably and statistically sound, credit
determining the applicant’s credit- scoring system, a creditor may use an
worthiness. applicant’s age as a predictive variable,
(3) Childbearing, childrearing. A cred- provided that the age of an elderly ap-
itor shall not inquire about birth con- plicant is not assigned a negative fac-
trol practices, intentions concerning tor or value.
the bearing or rearing of children, or (iii) In a judgmental system of evalu-
capability to bear children. A creditor ating creditworthiness, a creditor may
may inquire about the number and consider an applicant’s age or whether
ages of an applicant’s dependents or an applicant’s income derives from any
about dependent-related financial obli- public assistance program only for the
gations or expenditures, provided such purpose of determining a pertinent ele-
information is requested without re- ment of creditworthiness.
gard to sex, marital status, or any (iv) In any system of evaluating cred-
other prohibited basis. itworthiness, a creditor may consider
(e) Permanent residency and immigra- the age of an elderly applicant when
tion status. A creditor may inquire such age is used to favor the elderly ap-
about the permanent residency and im- plicant in extending credit.
migration status of an applicant or any
(3) Childbearing, childrearing. In eval-
other person in connection with a cred-
uating creditworthiness, a creditor
it transaction.
shall not make assumptions or use ag-
[76 FR 79445, Dec. 21, 2011, as amended at 82 gregate statistics relating to the likeli-
FR 45694, Oct. 2, 2017; 88 FR 35527, May 31, hood that any category of persons will
2023] bear or rear children or will, for that
reason, receive diminished or inter-
§ 1002.6 Rules concerning evaluation
of applications. rupted income in the future.
(4) Telephone listing. A creditor shall
(a) General rule concerning use of infor- not take into account whether there is
mation. Except as otherwise provided in a telephone listing in the name of an
the Act and this part, a creditor may applicant for consumer credit but may
consider any information obtained, so take into account whether there is a
long as the information is not used to
telephone in the applicant’s residence.
discriminate against an applicant on a
prohibited basis. The legislative his- (5) Income. A creditor shall not dis-
tory of the Act indicates that the Con- count or exclude from consideration
gress intended an ‘‘effects test’’ con- the income of an applicant or the
cept, as outlined in the employment spouse of an applicant because of a pro-
field by the Supreme Court in the cases hibited basis or because the income is
of Griggs v. Duke Power Co., 401 U.S. 424 derived from part-time employment or
(1971), and Albemarle Paper Co. v. is an annuity, pension, or other retire-
Moody, 422 U.S. 405 (1975), to be applica- ment benefit; a creditor may consider
ble to a creditor’s determination of the amount and probable continuance
creditworthiness. of any income in evaluating an appli-
(b) Specific rules concerning use of in- cant’s creditworthiness. When an appli-
formation. (1) Except as provided in the cant relies on alimony, child support,
Act and this part, a creditor shall not or separate maintenance payments in
take a prohibited basis into account in applying for credit, the creditor shall
any system of evaluating the credit- consider such payments as income to
worthiness of applicants. the extent that they are likely to be
(2) Age, receipt of public assistance. (i) consistently made.
Except as permitted in this paragraph, (6) Credit history. To the extent that a
a creditor shall not take into account creditor considers credit history in
an applicant’s age (provided that the evaluating the creditworthiness of
applicant has the capacity to enter similarly qualified applicants for a
jgilmore on DSK4WB1RN3PROD with CFR
into a binding contract) or whether an similar type and amount of credit, in
applicant’s income derives from any evaluating an applicant’s creditworthi-
public assistance program. ness a creditor shall consider:
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§ 1002.7 12 CFR Ch. X (1–1–26 Edition)
(i) The credit history, when avail- to open or maintain an account in a
able, of accounts designated as ac- birth-given first name and a surname
counts that the applicant and the ap- that is the applicant’s birth-given sur-
plicant’s spouse are permitted to use or name, the spouse’s surname, or a com-
for which both are contractually liable; bined surname.
(ii) On the applicant’s request, any (c) Action concerning existing open-end
information the applicant may present accounts—(1) Limitations. In the absence
that tends to indicate the credit his- of evidence of the applicant’s inability
tory being considered by the creditor or unwillingness to repay, a creditor
does not accurately reflect the appli- shall not take any of the following ac-
cant’s creditworthiness; and tions regarding an applicant who is
(iii) On the applicant’s request, the contractually liable on an existing
credit history, when available, of any open-end account on the basis of the
account reported in the name of the ap- applicant’s reaching a certain age or
plicant’s spouse or former spouse that retiring or on the basis of a change in
the applicant can demonstrate accu- the applicant’s name or marital status:
rately reflects the applicant’s credit- (i) Require a reapplication, except as
worthiness. provided in paragraph (c)(2) of this sec-
(7) Immigration status. A creditor may tion;
consider the applicant’s immigration (ii) Change the terms of the account;
status or status as a permanent resi- or
dent of the United States, and any ad- (iii) Terminate the account.
ditional information that may be nec- (2) Requiring reapplication. A creditor
essary to ascertain the creditor’s may require a reapplication for an
rights and remedies regarding repay- open-end account on the basis of a
ment. change in the marital status of an ap-
(8) Marital status. Except as otherwise plicant who is contractually liable if
permitted or required by law, a cred- the credit granted was based in whole
itor shall evaluate married and unmar- or in part on income of the applicant’s
ried applicants by the same standards; spouse and if information available to
and in evaluating joint applicants, a the creditor indicates that the appli-
creditor shall not treat applicants dif- cant’s income may not support the
ferently based on the existence, ab- amount of credit currently available.
sence, or likelihood of a marital rela- (d) Signature of spouse or other per-
tionship between the parties. son—(1) Rule for qualified applicant. Ex-
(9) Race, color, religion, national origin, cept as provided in this paragraph, a
sex. Except as otherwise permitted or creditor shall not require the signature
required by law, a creditor shall not of an applicant’s spouse or other per-
consider race, color, religion, national son, other than a joint applicant, on
origin, or sex (or an applicant’s or any credit instrument if the applicant
other person’s decision not to provide qualifies under the creditor’s standards
the information) in any aspect of a of creditworthiness for the amount and
credit transaction. terms of the credit requested. A cred-
(c) State property laws. A creditor’s itor shall not deem the submission of a
consideration or application of state joint financial statement or other evi-
property laws directly or indirectly af- dence of jointly held assets as an appli-
fecting creditworthiness does not con- cation for joint credit.
stitute unlawful discrimination for the (2) Unsecured credit. If an applicant
purposes of the Act or this part. requests unsecured credit and relies in
part upon property that the applicant
§ 1002.7 Rules concerning extensions owns jointly with another person to
of credit. satisfy the creditor’s standards of cred-
(a) Individual accounts. A creditor itworthiness, the creditor may require
shall not refuse to grant an individual the signature of the other person only
account to a creditworthy applicant on on the instrument(s) necessary, or rea-
the basis of sex, marital status, or any sonably believed by the creditor to be
jgilmore on DSK4WB1RN3PROD with CFR
other prohibited basis. necessary, under the law of the state in
(b) Designation of name. A creditor which the property is located, to en-
shall not refuse to allow an applicant able the creditor to reach the property
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Consumer Financial Protection Bureau § 1002.8
being relied upon in the event of the available on the basis of the applicant’s
death or default of the applicant. age.
(3) Unsecured credit—community prop-
erty states. If a married applicant re- § 1002.8 Special purpose credit pro-
grams.
quests unsecured credit and resides in a
community property state, or if the ap- (a) Standards for programs. Subject to
plicant is relying on property located the provisions of paragraph (b) of this
in such a state, a creditor may require section, the Act and this part permit a
the signature of the spouse on any in- creditor to extend special purpose cred-
strument necessary, or reasonably be- it to applicants who meet eligibility
lieved by the creditor to be necessary, requirements under the following types
under applicable state law to make the of credit programs:
community property available to sat- (1) Any credit assistance program ex-
isfy the debt in the event of default if: pressly authorized by Federal or state
(i) Applicable state law denies the ap- law for the benefit of an economically
plicant power to manage or control suf- disadvantaged class of persons;
ficient community property to qualify (2) Any credit assistance program of-
for the credit requested under the fered by a not-for-profit organization,
creditor’s standards of creditworthi- as defined under section 501(c) of the
ness; and Internal Revenue Code of 1954, as
amended, for the benefit of its mem-
(ii) The applicant does not have suffi-
bers or for the benefit of an economi-
cient separate property to qualify for
cally disadvantaged class of persons; or
the credit requested without regard to
(3) Any special purpose credit pro-
community property.
gram offered by a for-profit organiza-
(4) Secured credit. If an applicant re- tion, or in which such an organization
quests secured credit, a creditor may participates to meet special social
require the signature of the applicant’s needs, if:
spouse or other person on any instru- (i) The program is established and ad-
ment necessary, or reasonably believed ministered pursuant to a written plan
by the creditor to be necessary, under that identifies the class of persons that
applicable state law to make the prop- the program is designed to benefit and
erty being offered as security available sets forth the procedures and standards
to satisfy the debt in the event of de- for extending credit pursuant to the
fault, for example, an instrument to program; and
create a valid lien, pass clear title, (ii) The program is established and
waive inchoate rights, or assign earn- administered to extend credit to a class
ings. of persons who, under the organiza-
(5) Additional parties. If, under a tion’s customary standards of credit-
creditor’s standards of creditworthi- worthiness, probably would not receive
ness, the personal liability of an addi- such credit or would receive it on less
tional party is necessary to support the favorable terms than are ordinarily
credit requested, a creditor may re- available to other applicants applying
quest a cosigner, guarantor, endorser, to the organization for a similar type
or similar party. The applicant’s and amount of credit.
spouse may serve as an additional (b) Rules in other sections—(1) General
party, but the creditor shall not re- applicability. All the provisions of this
quire that the spouse be the additional part apply to each of the special pur-
party. pose credit programs described in para-
(6) Rights of additional parties. A cred- graph (a) of this section except as
itor shall not impose requirements modified by this section.
upon an additional party that the cred- (2) Common characteristics. A program
itor is prohibited from imposing upon described in paragraph (a)(2) or (a)(3) of
an applicant under this section. this section qualifies as a special pur-
(e) Insurance. A creditor shall not pose credit program only if it was es-
refuse to extend credit and shall not tablished and is administered so as not
jgilmore on DSK4WB1RN3PROD with CFR
terminate an account because credit to discriminate against an applicant on
life, health, accident, disability, or any prohibited basis; however, all pro-
other credit-related insurance is not gram participants may be required to
17
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§ 1002.9 12 CFR Ch. X (1–1–26 Edition)
share one or more common characteris- (2) Content of notification when adverse
tics (for example, race, national origin, action is taken. A notification given to
or sex) so long as the program was not an applicant when adverse action is
established and is not administered taken shall be in writing and shall con-
with the purpose of evading the re- tain a statement of the action taken;
quirements of the Act or this part. the name and address of the creditor; a
(c) Special rule concerning requests and statement of the provisions of section
use of information. If participants in a 701(a) of the Act; the name and address
special purpose credit program de- of the Federal agency that administers
scribed in paragraph (a) of this section compliance with respect to the cred-
are required to possess one or more itor; and either:
common characteristics (for example, (i) A statement of specific reasons for
race, national origin, or sex) and if the the action taken; or
program otherwise satisfies the re- (ii) A disclosure of the applicant’s
quirements of paragraph (a) of this sec- right to a statement of specific reasons
tion, a creditor may request and con- within 30 days, if the statement is re-
sider information regarding the com- quested within 60 days of the creditor’s
mon characteristic(s) in determining notification. The disclosure shall in-
the applicant’s eligibility for the pro- clude the name, address, and telephone
gram. number of the person or office from
(d) Special rule in the case of financial which the statement of reasons can be
need. If financial need is one of the cri- obtained. If the creditor chooses to pro-
teria under a special purpose credit vide the reasons orally, the creditor
program described in paragraph (a) of shall also disclose the applicant’s right
this section, the creditor may request to have them confirmed in writing
and consider, in determining an appli- within 30 days of receiving the appli-
cant’s eligibility for the program, in- cant’s written request for confirma-
formation regarding the applicant’s tion.
marital status; alimony, child support, (3) Notification to business credit appli-
and separate maintenance income; and cants. For business credit, a creditor
the spouse’s financial resources. In ad- shall comply with the notification re-
dition, a creditor may obtain the signa- quirements of this section in the fol-
ture of an applicant’s spouse or other lowing manner:
person on an application or credit in- (i) With regard to a business that had
strument relating to a special purpose gross revenues of $1 million or less in
credit program if the signature is re- its preceding fiscal year (other than an
quired by Federal or state law. extension of trade credit, credit inci-
dent to a factoring agreement, or other
§ 1002.9 Notifications.
similar types of business credit), a
(a) Notification of action taken, ECOA creditor shall comply with paragraphs
notice, and statement of specific reasons— (a)(1) and (2) of this section, except
(1) When notification is required. A cred- that:
itor shall notify an applicant of action (A) The statement of the action
taken within: taken may be given orally or in writ-
(i) 30 days after receiving a com- ing, when adverse action is taken;
pleted application concerning the (B) Disclosure of an applicant’s right
creditor’s approval of, counteroffer to, to a statement of reasons may be given
or adverse action on the application; at the time of application, instead of
(ii) 30 days after taking adverse ac- when adverse action is taken, provided
tion on an incomplete application, un- the disclosure contains the information
less notice is provided in accordance required by paragraph (a)(2)(ii) of this
with paragraph (c) of this section; section and the ECOA notice specified
(iii) 30 days after taking adverse ac- in paragraph (b)(1) of this section;
tion on an existing account; or (C) For an application made entirely
(iv) 90 days after notifying the appli- by telephone, a creditor satisfies the
jgilmore on DSK4WB1RN3PROD with CFR
cant of a counteroffer if the applicant requirements of paragraph (a)(3)(i) of
does not expressly accept or use the this section by an oral statement of
credit offered. the action taken and of the applicant’s
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Consumer Financial Protection Bureau § 1002.9
right to a statement of reasons for ad- can complete, the creditor shall notify
verse action. the applicant either:
(ii) With regard to a business that (i) Of action taken, in accordance
had gross revenues in excess of $1 mil- with paragraph (a) of this section; or
lion in its preceding fiscal year or an (ii) Of the incompleteness, in accord-
extension of trade credit, credit inci- ance with paragraph (c)(2) of this sec-
dent to a factoring agreement, or other tion.
similar types of business credit, a cred- (2) Notice of incompleteness. If addi-
itor shall: tional information is needed from an
(A) Notify the applicant, within a applicant, the creditor shall send a
reasonable time, orally or in writing, written notice to the applicant speci-
of the action taken; and fying the information needed, desig-
(B) Provide a written statement of nating a reasonable period of time for
the reasons for adverse action and the the applicant to provide the informa-
ECOA notice specified in paragraph tion, and informing the applicant that
(b)(1) of this section if the applicant failure to provide the information re-
makes a written request for the rea- quested will result in no further con-
sons within 60 days of the creditor’s no- sideration being given to the applica-
tification. tion. The creditor shall have no further
(b) Form of ECOA notice and statement obligation under this section if the ap-
of specific reasons—(1) ECOA notice. To plicant fails to respond within the des-
satisfy the disclosure requirements of ignated time period. If the applicant
paragraph (a)(2) of this section regard- supplies the requested information
ing section 701(a) of the Act, the cred- within the designated time period, the
itor shall provide a notice that is sub- creditor shall take action on the appli-
stantially similar to the following: The cation and notify the applicant in ac-
Federal Equal Credit Opportunity Act cordance with paragraph (a) of this sec-
prohibits creditors from discriminating tion.
against credit applicants on the basis (3) Oral request for information. At its
of race, color, religion, national origin, option, a creditor may inform the ap-
sex, marital status, age (provided the plicant orally of the need for addi-
applicant has the capacity to enter tional information. If the application
into a binding contract); because all or remains incomplete the creditor shall
part of the applicant’s income derives send a notice in accordance with para-
from any public assistance program; or graph (c)(1) of this section.
because the applicant has in good faith (d) Oral notifications by small-volume
exercised any right under the Con- creditors. In the case of a creditor that
sumer Credit Protection Act. The Fed- did not receive more than 150 applica-
eral agency that administers compli- tions during the preceding calendar
ance with this law concerning this year, the requirements of this section
creditor is [name and address as speci- (including statements of specific rea-
fied by the appropriate agency or agen- sons) are satisfied by oral notifica-
cies listed in appendix A of this part]. tions.
(2) Statement of specific reasons. The (e) Withdrawal of approved application.
statement of reasons for adverse action When an applicant submits an applica-
required by paragraph (a)(2)(i) of this tion and the parties contemplate that
section must be specific and indicate the applicant will inquire about its sta-
the principal reason(s) for the adverse tus, if the creditor approves the appli-
action. Statements that the adverse cation and the applicant has not in-
action was based on the creditor’s in- quired within 30 days after applying,
ternal standards or policies or that the the creditor may treat the application
applicant, joint applicant, or similar as withdrawn and need not comply
party failed to achieve a qualifying with paragraph (a)(1) of this section.
score on the creditor’s credit scoring (f) Multiple applicants. When an appli-
system are insufficient. cation involves more than one appli-
(c) Incomplete applications—(1) Notice cant, notification need only be given to
jgilmore on DSK4WB1RN3PROD with CFR
alternatives. Within 30 days after receiv- one of them but must be given to the
ing an application that is incomplete primary applicant where one is readily
regarding matters that an applicant apparent.
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§ 1002.10 12 CFR Ch. X (1–1–26 Edition)
(g) Applications submitted through a only to the extent of the inconsistency.
third party. When an application is A state law is not inconsistent if it is
made on behalf of an applicant to more more protective of an applicant.
than one creditor and the applicant ex- (b) Preempted provisions of state law.
pressly accepts or uses credit offered (1) A state law is deemed to be incon-
by one of the creditors, notification of sistent with the requirements of the
action taken by any of the other credi- Act and this part and less protective of
tors is not required. If no credit is of- an applicant within the meaning of sec-
fered or if the applicant does not ex- tion 705(f) of the Act to the extent that
pressly accept or use the credit offered, the law:
each creditor taking adverse action (i) Requires or permits a practice or
must comply with this section, directly act prohibited by the Act or this part;
or through a third party. A notice (ii) Prohibits the individual exten-
given by a third party shall disclose sion of consumer credit to both parties
the identity of each creditor on whose to a marriage if each spouse individ-
behalf the notice is given. ually and voluntarily applies for such
[76 FR 79445, Dec. 21, 2011, as amended at 88 credit;
FR 16537, Mar. 20, 2023] (iii) Prohibits inquiries or collection
of data required to comply with the
§ 1002.10 Furnishing of credit informa- Act or this part;
tion. (iv) Prohibits asking about or consid-
(a) Designation of accounts. A creditor ering age in an empirically derived, de-
that furnishes credit information shall monstrably and statistically sound,
designate: credit scoring system to determine a
(1) Any new account to reflect the pertinent element of creditworthiness,
participation of both spouses if the ap- or to favor an elderly applicant; or
plicant’s spouse is permitted to use or (v) Prohibits inquiries necessary to
is contractually liable on the account establish or administer a special pur-
(other than as a guarantor, surety, en- pose credit program as defined by
dorser, or similar party); and § 1002.8.
(2) Any existing account to reflect (2) A creditor, state, or other inter-
such participation, within 90 days after ested party may request that the Bu-
receiving a written request to do so reau determine whether a state law is
from one of the spouses. inconsistent with the requirements of
(b) Routine reports to consumer report- the Act and this part.
ing agency. If a creditor furnishes cred- (c) Laws on finance charges, loan ceil-
it information to a consumer reporting ings. If married applicants voluntarily
agency concerning an account des- apply for and obtain individual ac-
ignated to reflect the participation of counts with the same creditor, the ac-
both spouses, the creditor shall furnish counts shall not be aggregated or oth-
the information in a manner that will erwise combined for purposes of deter-
enable the agency to provide access to mining permissible finance charges or
the information in the name of each loan ceilings under any Federal or
spouse. state law. Permissible loan ceiling laws
(c) Reporting in response to inquiry. If shall be construed to permit each
a creditor furnishes credit information spouse to become individually liable up
in response to an inquiry, concerning to the amount of the loan ceilings, less
an account designated to reflect the the amount for which the applicant is
participation of both spouses, the cred- jointly liable.
itor shall furnish the information in (d) State and Federal laws not affected.
the name of the spouse about whom the This section does not alter or annul
information is requested. any provision of state property laws,
laws relating to the disposition of dece-
§ 1002.11 Relation to state law. dents’ estates, or Federal or state
(a) Inconsistent state laws. Except as banking regulations directed only to-
otherwise provided in this section, this ward insuring the solvency of financial
jgilmore on DSK4WB1RN3PROD with CFR
part alters, affects, or preempts only institutions.
those state laws that are inconsistent (e) Exemption for state-regulated trans-
with the Act and this part and then actions—(1) Applications. A state may
20
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Consumer Financial Protection Bureau § 1002.12
apply to the Bureau for an exemption written or recorded information used
from the requirements of the Act and in evaluating the application and not
this part for any class of credit trans- returned to the applicant at the appli-
actions within the state. The Bureau cant’s request.
will grant such an exemption if the Bu- (ii) A copy of the following docu-
reau determines that: ments if furnished to the applicant in
(i) The class of credit transactions is written form (or, if furnished orally,
subject to state law requirements sub- any notation or memorandum made by
stantially similar to those of the Act the creditor):
and this part or that applicants are af- (A) The notification of action taken;
forded greater protection under state and
law; and (B) The statement of specific reasons
(ii) There is adequate provision for for adverse action; and
state enforcement. (iii) Any written statement sub-
(2) Liability and enforcement. (i) No ex- mitted by the applicant alleging a vio-
emption will extend to the civil liabil- lation of the Act or this part.
ity provisions of section 706 of the Act (2) Existing accounts. For 25 months
or the administrative enforcement pro- (12 months for business credit, except
visions of section 704 of the Act. as provided in paragraph (b)(5) of this
(ii) After an exemption has been section or otherwise provided for in
granted, the requirements of the appli- subpart B of this part) after the date
cable state law (except for additional that a creditor notifies an applicant of
requirements not imposed by Federal adverse action regarding an existing
law) will constitute the requirements account, the creditor shall retain as to
of the Act and this part. that account, in original form or a
copy thereof:
§ 1002.12 Record retention. (i) Any written or recorded informa-
(a) Retention of prohibited information. tion concerning the adverse action; and
A creditor may retain in its files infor- (ii) Any written statement submitted
mation that is prohibited by the Act or by the applicant alleging a violation of
this part for use in evaluating applica- the Act or this part.
tions, without violating the Act or this (3) Other applications. For 25 months
part, if the information was obtained: (12 months for business credit, except
(1) From any source prior to March as provided in paragraph (b)(5) of this
23, 1977; section or otherwise provided for in
(2) From consumer reporting agen- subpart B of this part) after the date
cies, an applicant, or others without that a creditor receives an application
the specific request of the creditor; or for which the creditor is not required
(3) As required to monitor compli- to comply with the notification re-
ance with the Act and this part or quirements of § 1002.9, the creditor shall
other Federal or state statutes or regu- retain all written or recorded informa-
lations. tion in its possession concerning the
(b) Preservation of records— (1) Appli- applicant, including any notation of
cations. For 25 months (12 months for action taken.
business credit, except as provided in (4) Enforcement proceedings and inves-
paragraph (b)(5) of this section or oth- tigations. A creditor shall retain the in-
erwise provided for in subpart B of this formation beyond 25 months (12
part) after the date that a creditor no- months for business credit, except as
tifies an applicant of action taken on provided in paragraph (b)(5) of this sec-
an application or of incompleteness, tion or otherwise provided for in sub-
the creditor shall retain in original part B) if the creditor has actual notice
form or a copy thereof: that it is under investigation or is sub-
(i) Any application that it receives, ject to an enforcement proceeding for
any information required to be ob- an alleged violation of the Act or this
tained concerning characteristics of part, by the Attorney General of the
the applicant to monitor compliance United States or by an enforcement
jgilmore on DSK4WB1RN3PROD with CFR
with the Act and this part or other agency charged with monitoring that
similar law, any information obtained creditor’s compliance with the Act and
pursuant to § 1002.5(a)(4), and any other this part, or if it has been served with
21
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§ 1002.13 12 CFR Ch. X (1–1–26 Edition)
notice of an action filed pursuant to § 1002.13 Information for monitoring
section 706 of the Act and § 1002.16 of purposes.
this part. The creditor shall retain the (a) Information to be requested. (1) A
information until final disposition of creditor that receives an application
the matter, unless an earlier time is al- for credit primarily for the purchase or
lowed by order of the agency or court. refinancing of a dwelling occupied or to
(5) Special rule for certain business be occupied by the applicant as a prin-
credit applications. With regard to a cipal residence, where the extension of
business that had gross revenues in ex- credit will be secured by the dwelling,
cess of $1 million in its preceding fiscal shall request as part of the application
year, or an extension of trade credit, the following information regarding
credit incident to a factoring agree- the applicant(s):
ment, or other similar types of busi- (i) Ethnicity and race using either:
(A) For ethnicity, the aggregate cat-
ness credit, the creditor shall retain
egories Hispanic or Latino and not His-
records for at least 60 days, except as
panic or Latino; and, for race, the ag-
otherwise provided for in subpart B, gregate categories American Indian or
after notifying the applicant of the ac- Alaska Native, Asian, Black or African
tion taken. If within that time period American, Native Hawaiian or Other
the applicant requests in writing the Pacific Islander, and White; or
reasons for adverse action or that (B) The categories and subcategories
records be retained, the creditor shall for the collection of ethnicity and race
retain records for 12 months. set forth in appendix B to 12 CFR part
(6) Self-tests. For 25 months after a 1003.
self-test (as defined in § 1002.15) has (ii) Sex;
been completed, the creditor shall re- (iii) Marital status, using the cat-
tain all written or recorded informa- egories married, unmarried, and sepa-
tion about the self-test. A creditor rated; and
shall retain information beyond 25 (iv) Age.
months if it has actual notice that it is (2) Dwelling means a residential
under investigation or is subject to an structure that contains one to four
enforcement proceeding for an alleged units, whether or not that structure is
attached to real property. The term in-
violation, or if it has been served with
cludes, but is not limited to, an indi-
notice of a civil action. In such cases,
vidual condominium or cooperative
the creditor shall retain the informa-
unit and a mobile or other manufac-
tion until final disposition of the mat- tured home.
ter, unless an earlier time is allowed by (b) Obtaining information. Questions
the appropriate agency or court order. regarding ethnicity, race, sex, marital
(7) Prescreened solicitations. For 25 status, and age may be listed, at the
months after the date on which an creditor’s option, on the application
offer of credit is made to potential cus- form or on a separate form that refers
tomers (12 months for business credit, to the application. The applicant(s)
except as provided in paragraph (b)(5) shall be asked but not required to sup-
of this section or otherwise provided ply the requested information. If the
for in subpart B), the creditor shall re- applicant(s) chooses not to provide the
tain in original form or a copy thereof: information or any part of it, that fact
(i) The text of any prescreened solici- shall be noted on the form. The cred-
tation; itor shall then also note on the form,
(ii) The list of criteria the creditor to the extent possible, the ethnicity,
used to select potential recipients of race, and sex of the applicant(s) on the
the solicitation; and basis of visual observation or surname.
When a creditor collects ethnicity and
(iii) Any correspondence related to
race information pursuant to
complaints (formal or informal) about
§ 1002.13(a)(1)(i)(B), the creditor must
the solicitation. comply with any restrictions on the
jgilmore on DSK4WB1RN3PROD with CFR
[76 FR 79445, Dec. 21, 2011, as amended at 82 collection of an applicant’s ethnicity
FR 45694, Oct. 2, 2017; 88 FR 35528, May 31, or race on the basis of visual observa-
2023] tion or surname set forth in appendix B
22
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Consumer Financial Protection Bureau § 1002.14
to 12 CFR part 1003. If there is more vious version of the appraisal or other
than one co-applicant, a creditor is per- written valuation provided to the ap-
mitted, but is not required, to collect plicant three or more business days
the information set forth in paragraph prior to consummation or account
(a) of this section from a second or ad- opening. If the applicant provides a
ditional co-applicant. waiver and the transaction is not con-
(c) Disclosure to applicant(s). The cred- summated or the account is not
itor shall inform the applicant(s) that opened, the creditor must provide these
the information regarding ethnicity, copies no later than 30 days after the
race, sex, marital status, and age is creditor determines consummation will
being requested by the Federal Govern- not occur or the account will not be
ment for the purpose of monitoring opened.
compliance with Federal statutes that (2) Disclosure. For applications sub-
prohibit creditors from discriminating ject to paragraph (a)(1) of this section,
against applicants on those bases. The a creditor shall mail or deliver to an
creditor shall also inform the appli- applicant, not later than the third
cant(s) that if the applicant(s) chooses business day after the creditor receives
not to provide the information, the
an application for credit that is to be
creditor is required to note the eth-
secured by a first lien on a dwelling, a
nicity, race and sex on the basis of vis-
notice in writing of the applicant’s
ual observation or surname.
right to receive a copy of all written
(d) Substitute monitoring program. A
monitoring program required by an appraisals developed in connection
agency charged with administrative with the application. In the case of an
enforcement under section 704 of the application for credit that is not to be
Act may be substituted for the require- secured by a first lien on a dwelling at
ments contained in paragraphs (a), (b), the time of application, if the creditor
and (c) of this section. later determines the credit will be se-
cured by a first lien on a dwelling, the
[76 FR 79445, Dec. 21, 2011, as amended at 82 creditor shall mail or deliver the same
FR 45694, Oct. 2, 2017] notice in writing not later than the
§ 1002.14 Rules on providing apprais- third business day after the creditor
als and other valuations. determines that the loan is to be se-
cured by a first lien on a dwelling.
(a) Providing appraisals and other valu-
(3) Reimbursement. A creditor shall
ations—(1) In general. A creditor shall
not charge an applicant for providing a
provide an applicant a copy of all ap-
copy of appraisals and other written
praisals and other written valuations
valuations as required under this sec-
developed in connection with an appli-
cation for credit that is to be secured tion, but may require applicants to pay
by a first lien on a dwelling. A creditor a reasonable fee to reimburse the cred-
shall provide a copy of each such ap- itor for the cost of the appraisal or
praisal or other written valuation other written valuation unless other-
promptly upon completion, or three wise provided by law.
business days prior to consummation (4) Withdrawn, denied, or incomplete
of the transaction (for closed-end cred- applications. The requirements set forth
it) or account opening (for open-end in paragraph (a)(1) of this section apply
credit), whichever is earlier. An appli- whether credit is extended or denied or
cant may waive the timing require- if the application is incomplete or
ment in this paragraph (a)(1) and agree withdrawn.
to receive any copy at or before con- (5) Copies in electronic form. The cop-
summation or account opening, except ies required by § 1002.14(a)(1) may be
where otherwise prohibited by law. provided to the applicant in electronic
Any such waiver must be obtained at form, subject to compliance with the
least three business days prior to con- consumer consent and other applicable
summation or account opening, unless provisions of the Electronic Signatures
the waiver pertains solely to the appli- in Global and National Commerce Act
jgilmore on DSK4WB1RN3PROD with CFR
cant’s receipt of a copy of an appraisal (E-Sign Act) (15 U.S.C. 7001 et seq.).
or other written valuation that con- (b) Definitions. For purposes of para-
tains only clerical changes from a pre- graph (a) of this section:
23
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§ 1002.15 12 CFR Ch. X (1–1–26 Edition)
(1) Consummation. The term ‘‘con- (3) Types of information not privileged.
summation’’ means the time that a The privilege under this section does
consumer becomes contractually obli- not apply to:
gated on a closed-end credit trans- (i) Information about whether a cred-
action. itor conducted a self-test, the method-
(2) Dwelling. The term ‘‘dwelling’’ ology used or the scope of the self-test,
means a residential structure that con- the time period covered by the self-
tains one to four units whether or not test, or the dates it was conducted; or
that structure is attached to real prop- (ii) Loan and application files or
erty. The term includes, but is not lim- other business records related to credit
ited to, an individual condominium or transactions, and information derived
cooperative unit, and a mobile or other from such files and records, even if the
manufactured home. information has been aggregated, sum-
(3) Valuation. The term ‘‘valuation’’ marized, or reorganized to facilitate
means any estimate of the value of a analysis.
dwelling developed in connection with (c) Appropriate corrective action—(1)
an application for credit. General requirement. For the privilege
[78 FR 7248, Jan. 31, 2013] in this section to apply, appropriate
corrective action is required when the
§ 1002.15 Incentives for self-testing self-test shows that it is more likely
and self-correction. than not that a violation occurred,
even though no violation has been for-
(a) General rules—(1) Voluntary self-
mally adjudicated.
testing and correction. The report or re-
sults of a self-test that a creditor vol- (2) Determining the scope of appropriate
untarily conducts (or authorizes) are corrective action. A creditor must take
privileged as provided in this section. corrective action that is reasonably
Data collection required by law or by likely to remedy the cause and effect
any governmental authority is not a of a likely violation by:
voluntary self-test. (i) Identifying the policies or prac-
(2) Corrective action required. The tices that are the likely cause of the
privilege in this section applies only if violation; and
the creditor has taken or is taking ap- (ii) Assessing the extent and scope of
propriate corrective action. any violation.
(3) Other privileges. The privilege cre- (3) Types of relief. Appropriate correc-
ated by this section does not preclude tive action may include both prospec-
the assertion of any other privilege tive and remedial relief, except that to
that may also apply. establish a privilege under this section:
(b) Self-test defined—(1) Definition. A (i) A creditor is not required to pro-
self-test is any program, practice, or vide remedial relief to a tester used in
study that: a self-test;
(i) Is designed and used specifically (ii) A creditor is only required to pro-
to determine the extent or effective- vide remedial relief to an applicant
ness of a creditor’s compliance with identified by the self-test as one whose
the Act or this part; and rights were more likely than not vio-
(ii) Creates data or factual informa- lated; and
tion that is not available and cannot be (iii) A creditor is not required to pro-
derived from loan or application files vide remedial relief to a particular ap-
or other records related to credit trans- plicant if the statute of limitations ap-
actions. plicable to the violation expired before
(2) Types of information privileged. The the creditor obtained the results of the
privilege under this section applies to self-test or the applicant is otherwise
the report or results of the self-test, ineligible for such relief.
data or factual information created by (4) No admission of violation. Taking
the self-test, and any analysis, opin- corrective action is not an admission
ions, and conclusions pertaining to the that a violation occurred.
jgilmore on DSK4WB1RN3PROD with CFR
self-test report or results. The privilege (d) Scope of privilege—(1) General rule.
covers workpapers or draft documents The report or results of a privileged
as well as final documents. self-test may not be obtained or used:
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Consumer Financial Protection Bureau § 1002.16
(i) By a government agency in any ernors of the Federal Reserve System,
examination or investigation relating Board of Directors of the Federal De-
to compliance with the Act or this posit Insurance Corporation, National
part; or Credit Union Administration, Surface
(ii) By a government agency or an ap- Transportation Board, Civil Aero-
plicant (including a prospective appli- nautics Board, Secretary of Agri-
cant who alleges a violation of culture, Farm Credit Administration,
§ 1002.4(b)) in any proceeding or civil Securities and Exchange Commission,
action in which a violation of the Act Small Business Administration, Sec-
or this part is alleged. retary of Transportation, and Bureau
(2) Loss of privilege. The report or re- of Consumer Financial Protection.
sults of a self-test are not privileged (2) Except to the extent that admin-
under paragraph (d)(1) of this section if istrative enforcement is specifically as-
the creditor or a person with lawful ac- signed to some government agency
cess to the report or results: other than the Bureau, and subject to
(i) Voluntarily discloses any part of subtitle B of the Consumer Financial
the report or results, or any other in- Protection Act of 2010, the Federal
formation privileged under this sec- Trade Commission is authorized to en-
tion, to an applicant or government force the requirements imposed under
agency or to the public; the Act and this part.
(ii) Discloses any part of the report (b) Penalties and liabilities. (1) Sec-
or results, or any other information tions 702(g) and 706(a) and (b) of the Act
privileged under this section, as a de- provide that any creditor that fails to
fense to charges that the creditor has comply with a requirement imposed by
violated the Act or regulation; or the Act or this part is subject to civil
(iii) Fails or is unable to produce liability for actual and punitive dam-
written or recorded information about ages in individual or class actions. Pur-
the self-test that is required to be re- suant to sections 702(g) and 704(b), (c),
tained under § 1002.12(b)(6) when the in- and (d) of the Act, violations of the Act
formation is needed to determine or this part also constitute violations
whether the privilege applies. This of other Federal laws. Liability for pu-
paragraph does not limit any other nitive damages can apply only to non-
penalty or remedy that may be avail- governmental entities and is limited to
able for a violation of § 1002.12. $10,000 in individual actions and the
(3) Limited use of privileged informa- lesser of $500,000 or 1 percent of the
tion. Notwithstanding paragraph (d)(1) creditor’s net worth in class actions.
of this section, the self-test report or Section 706(c) provides for equitable
results and any other information priv- and declaratory relief and section
ileged under this section may be ob- 706(d) authorizes the awarding of costs
tained and used by an applicant or gov- and reasonable attorney’s fees to an
ernment agency solely to determine a aggrieved applicant in a successful ac-
penalty or remedy after a violation of tion.
the Act or this part has been adju- (2) As provided in section 706(f) of the
dicated or admitted. Disclosures for Act, a civil action under the Act or
this limited purpose may be used only this part may be brought in the appro-
for the particular proceeding in which priate United States district court
the adjudication or admission was without regard to the amount in con-
made. Information disclosed under this troversy or in any other court of com-
paragraph (d)(3) remains privileged petent jurisdiction within five years
under paragraph (d)(1) of this section. after the date of the occurrence of the
violation, or within one year after the
§ 1002.16 Enforcement, penalties and commencement of an administrative
liabilities. enforcement proceeding or of a civil ac-
(a) Administrative enforcement. (1) As tion brought by the Attorney General
set forth more fully in section 704 of of the United States within five years
the Act, administrative enforcement of after the alleged violation.
jgilmore on DSK4WB1RN3PROD with CFR
the Act and this part regarding certain (3) If an agency responsible for ad-
creditors is assigned to the Comp- ministrative enforcement is unable to
troller of the Currency, Board of Gov- obtain compliance with the Act or this
25
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§ 1002.101 12 CFR Ch. X (1–1–26 Edition)
part, it may refer the matter to the At- act on the application without vio-
torney General of the United States. If lating the regulation.
the Bureau, the Comptroller of the
Currency, the Federal Deposit Insur- Subpart B—Small Business Lending
ance Corporation, the Board of Gov- Data Collection
ernors of the Federal Reserve System,
or the National Credit Union Adminis-
SOURCE: 88 FR 35528, May 31, 2023, unless
tration has reason to believe that one otherwise noted.
or more creditors have engaged in a
pattern or practice of discouraging or § 1002.101 Authority, purpose, and
denying applications in violation of the scope.
Act or this part, the agency shall refer (a) Authority and scope. This subpart
the matter to the Attorney General. If to Regulation B is issued by the Bu-
the agency has reason to believe that reau pursuant to section 704B of the
one or more creditors violated section Equal Credit Opportunity Act (15
701(a) of the Act, the agency may refer U.S.C. 1691c–2). Except as otherwise
a matter to the Attorney General. provided herein, this subpart applies to
(4) On referral, or whenever the At- covered financial institutions, as de-
torney General has reason to believe fined in § 1002.105(b), other than a per-
that one or more creditors have en- son excluded from coverage of this part
gaged in a pattern or practice in viola- by section 1029 of the Consumer Finan-
tion of the Act or this part, the Attor- cial Protection Act of 2010, title X of
ney General may bring a civil action the Dodd-Frank Wall Street Reform
for such relief as may be appropriate, and Consumer Protection Act, Public
including actual and punitive damages Law 111–203, 124 Stat. 1376, 2004 (2010).
and injunctive relief. (b) Purpose. This subpart implements
(5) If the Comptroller of the Cur- section 704B of the Equal Credit Oppor-
rency, the Federal Deposit Insurance tunity Act, which Congress intended:
Corporation, the Board of Governors of (1) To facilitate enforcement of fair
the Federal Reserve System, or the Na- lending laws; and
tional Credit Union Administration has (2) To enable communities, govern-
reason to believe (as a result of a con- mental entities, and creditors to iden-
sumer complaint, a consumer compli- tify business and community develop-
ance examination, or some other basis) ment needs and opportunities of
that a violation of the Act or this part women-owned, minority-owned, and
has occurred which is also a violation small businesses.
of the Fair Housing Act, and the mat-
ter is not referred to the Attorney Gen- § 1002.102 Definitions.
eral, the agency shall: In this subpart:
(i) Notify the Secretary of Housing (a) Affiliate means, with respect to a
and Urban Development; and financial institution, any company
(ii) Inform the applicant that the that controls, is controlled by, or is
Secretary of Housing and Urban Devel- under common control with, another
opment has been notified and that rem- company, as set forth in the Bank
edies may be available under the Fair Holding Company Act of 1956 (12 U.S.C.
Housing Act. 1841 et seq.). With respect to a business
(c) Failure of compliance. A creditor’s or an applicant, affiliate shall have the
failure to comply with § 1002.6(b)(6), same meaning as in 13 CFR 121.103.
§ 1002.9, § 1002.10, § 1002.12 or § 1002.13 is (b) Applicant means any person who
not a violation if it results from an in- requests or who has received an exten-
advertent error. On discovering an sion of business credit from a financial
error under §§ 1002.9 and 1002.10, the institution.
creditor shall correct it as soon as pos- (c) Business is defined in § 1002.106(a).
sible. If a creditor inadvertently ob- (d) Business credit shall have the same
tains the monitoring information re- meaning as in § 1002.2(g).
garding the ethnicity, race, and sex of (e) Closed-end credit transaction means
jgilmore on DSK4WB1RN3PROD with CFR
the applicant in a dwelling-related an extension of business credit that is
transaction not covered by § 1002.13, the not an open-end credit transaction
creditor may retain information and under paragraph (n) of this section.
26
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Consumer Financial Protection Bureau § 1002.104
(f) Covered application is defined in § 1002.103 Covered applications.
§ 1002.103.
(a) Covered application. Except as pro-
(g) Covered credit transaction is de- vided in paragraph (b) of this section,
fined in § 1002.104. covered application means an oral or
(h) Covered financial institution is de- written request for a covered credit
fined in § 1002.105(b). transaction that is made in accordance
(i) Credit shall have the same mean- with procedures used by a financial in-
ing as in § 1002.2(j). stitution for the type of credit re-
(j) Financial institution is defined in quested.
§ 1002.105(a). (b) Circumstances that are not covered
(k) LGBTQI+ individual includes an applications. A covered application does
individual who identifies as lesbian, not include:
gay, bisexual, transgender, queer, or (1) Reevaluation, extension, or re-
intersex. newal requests on an existing business
(l) LGBTQI+-owned business means a credit account, unless the request
business for which one or more seeks additional credit amounts.
LGBTQI+ individuals hold more than (2) Inquiries and prequalification re-
50 percent of its ownership or control, quests.
and for which more than 50 percent of
the net profits or losses accrue to one § 1002.104 Covered credit transactions
or more such individuals. and excluded transactions.
(m) Minority-owned business means a (a) Covered credit transaction means
business for which one or more Amer- an extension of business credit that is
ican Indian or Alaska Native, Asian, not an excluded transaction under
Black or African American, Native Ha- paragraph (b) of this section.
waiian or Other Pacific Islander, or (b) Excluded transactions. The require-
Hispanic or Latino individuals hold ments of this subpart do not apply to:
more than 50 percent of its ownership (1) Trade credit. A financing arrange-
or control, and for which more than 50 ment wherein a business acquires goods
percent of the net profits or losses ac- or services from another business with-
crue to one or more such individuals. out making immediate payment in full
(n) Open-end credit transaction means to the business providing the goods or
an open-end credit plan as defined in services.
Regulation Z, 12 CFR 1026.2(a)(20), but (2) Home Mortgage Disclosure Act
without regard to whether the credit is (HMDA)-reportable transactions. A cov-
consumer credit, as defined in ered loan, or application therefor, as
§ 1026.2(a)(12), is extended by a creditor, defined by Regulation C, 12 CFR
as defined in § 1026.2(a)(17), or is ex- 1003.2(e).
tended to a consumer, as defined in (3) Insurance premium financing. A fi-
§ 1026.2(a)(11). nancing arrangement wherein a busi-
(o) Principal owner means an indi- ness agrees to pay to a financial insti-
vidual who directly owns 25 percent or tution, in installments, the principal
more of the equity interests of a busi- amount advanced by the financial in-
ness. stitution to an insurer or insurance
(p) Small business is defined in producer in payment of premium on
§ 1002.106(b). the business’s insurance contract or
(q) Small business lending application contracts, plus charges, and, as secu-
register or register means the data re- rity for repayment, the business as-
ported, or required to be reported, an- signs to the financial institution cer-
nually pursuant to § 1002.109. tain rights, obligations, and/or consid-
(r) State shall have the same meaning erations (such as the unearned pre-
as in § 1002.2(aa). miums, accrued dividends, or loss pay-
(s) Women-owned business means a ments) in its insurance contract or
business for which more than 50 per- contracts. Insurance premium financ-
cent of its ownership or control is held ing does not include the financing of
jgilmore on DSK4WB1RN3PROD with CFR
by one or more women, and more than insurance policy premiums obtained in
50 percent of its net profits or losses connection with the financing of goods
accrue to one or more women. and services.
27
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§ 1002.105 12 CFR Ch. X (1–1–26 Edition)
(4) Public utilities credit. Public utili- and maintain data regarding covered
ties credit as defined in § 1002.3(a)(1). applications from small businesses.
(5) Securities credit. Securities credit The data shall be compiled in the man-
as defined in § 1002.3(b)(1). ner prescribed herein and the Filing In-
(6) Incidental credit. Incidental credit structions Guide for this subpart for
as defined in § 1002.3(c)(1), but without the appropriate year. The data com-
regard to whether the credit is con- piled shall include the items described
sumer credit, as defined in § 1002.2(h). in paragraphs (a)(1) through (20) of this
section.
§ 1002.105 Covered financial institu- (1) Unique identifier. An alphanumeric
tions and exempt institutions. identifier, starting with the legal enti-
(a) Financial institution means any ty identifier of the financial institu-
partnership, company, corporation, as- tion, unique within the financial insti-
sociation (incorporated or unincor- tution to the specific covered applica-
porated), trust, estate, cooperative or- tion, and which can be used to identify
ganization, or other entity that en- and retrieve the specific file or files
gages in any financial activity. corresponding to the application for or
(b) Covered financial institution means extension of credit.
a financial institution that originated (2) Application date. The date the cov-
at least 100 covered credit transactions ered application was received or the
for small businesses in each of the two date shown on a paper or electronic ap-
preceding calendar years. plication form.
(3) Application method. The means by
§ 1002.106 Business and small busi-
ness. which the applicant submitted the cov-
ered application directly or indirectly
(a) Business has the same meaning as to the financial institution.
the term ‘‘business concern or con- (4) Application recipient. Whether the
cern’’ in 13 CFR 121.105. applicant submitted the covered appli-
(b) Small business definition—(1) Small cation directly to the financial institu-
business has the same meaning as the tion or its affiliate, or whether the ap-
term ‘‘small business concern’’ in 15 plicant submitted the covered applica-
U.S.C. 632(a), as implemented in 13 CFR tion indirectly to the financial institu-
121.101 through 121.107. Notwith- tion via a third party.
standing the size standards set forth in
(5) Credit type. The following informa-
13 CFR 121.201, for purposes of this sub-
tion regarding the type of credit ap-
part, a business is a small business if
plied for or originated:
its gross annual revenue, as defined in
(i) Credit product. The credit product.
§ 1002.107(a)(14), for its preceding fiscal
year is $5 million or less. (ii) Guarantees. The type or types of
(2) Inflation adjustment. Every 5 years guarantees that were obtained for an
after January 1, 2025, the gross annual extension of credit, or that would have
revenue threshold set forth in para- been obtained if the covered credit
graph (b)(1) of this section shall adjust transaction were originated.
based on changes to the Consumer (iii) Loan term. The length of the loan
Price Index for All Urban Consumers term, in months, if applicable.
(U.S. city average series for all items, (6) Credit purpose. The purpose or pur-
not seasonally adjusted), as published poses of the credit applied for or origi-
by the United States Bureau of Labor nated.
Statistics. Any adjustment that takes (7) Amount applied for. The initial
effect under this paragraph shall be amount of credit or the initial credit
rounded to the nearest multiple of limit requested by the applicant.
$500,000. If an adjustment is to take ef- (8) Amount approved or originated. (i)
fect, it will do so on January 1 of the For an application for a closed-end
following calendar year. credit transaction that is approved but
not accepted, the amount approved by
§ 1002.107 Compilation of reportable the financial institution; or
jgilmore on DSK4WB1RN3PROD with CFR
data. (ii) For a closed-end credit trans-
(a) Data format and itemization. A cov- action that is originated, the amount
ered financial institution shall compile of credit originated; or
28
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Consumer Financial Protection Bureau § 1002.107
(iii) For an application for an open- (vi) Prepayment penalties. (A) Not-
end credit transaction that is origi- withstanding whether such a provision
nated or approved but not accepted, was in fact included, whether the fi-
the amount of the credit limit ap- nancial institution could have included
proved. a charge to be imposed for paying all or
(9) Action taken. The action taken by part of the transaction’s principal be-
the financial institution on the covered fore the date on which the principal is
application, reported as originated, ap- due under the policies and procedures
proved but not accepted, denied, with- applicable to the covered credit trans-
drawn by the applicant, or incomplete. action; and
(10) Action taken date. The date of the (B) Notwithstanding the response to
action taken by the financial institu- paragraph (a)(12)(vi)(A) of this section,
tion. whether the terms of the covered credit
(11) Denial reasons. For denied appli- transaction do in fact include a charge
cations, the principal reason or reasons imposed for paying all or part of the
the financial institution denied the transaction’s principal before the date
covered application. on which the principal is due.
(12) Pricing information. The following (13) Census tract. The census tract in
information regarding the pricing of a which is located:
covered credit transaction that is (i) The address or location where the
originated or approved but not accept- proceeds of the credit applied for or
ed, as applicable: originated will be or would have been
(i) Interest rate. (A) If the interest principally applied; or
rate is fixed, the interest rate that is (ii) If the information in paragraph
or would be applicable to the covered (a)(13)(i) of this section is unknown,
credit transaction; or the address or location of the main of-
(B) If the interest rate is adjustable, fice or headquarters of the applicant;
the margin, index value, initial rate or
period expressed in months (if applica- (iii) If the information in both para-
ble), and index name that is or would graphs (a)(13)(i) and (ii) of this section
be applicable to the covered credit is unknown, another address or loca-
transaction; tion associated with the applicant.
(ii) Total origination charges. The (iv) The financial institution shall
total amount of all charges payable di- also indicate which one of the three
rectly or indirectly by the applicant types of addresses or locations listed in
and imposed directly or indirectly by paragraphs (a)(13)(i), (ii), or (iii) of this
the financial institution at or before section the census tract is based on.
origination as an incident to or a con- (14) Gross annual revenue. The appli-
dition of the extension of credit, ex- cant’s gross annual revenue for its pre-
pressed in dollars; ceding fiscal year.
(iii) Broker fees. The total amount of (15) NAICS code. A 3-digit North
all charges included in paragraph American Industry Classification Sys-
(a)(12)(ii) of this section that are fees tem (NAICS) code for the applicant.
paid by the applicant directly to a (16) Number of workers. The number of
broker or to the financial institution non-owners working for the applicant.
for delivery to a broker, expressed in (17) Time in business. The time the ap-
dollars; plicant has been in business.
(iv) Initial annual charges. The total (18) Minority-owned, women-owned,
amount of all non-interest charges that and LGBTQI+-owned business statuses.
are scheduled to be imposed over the Whether the applicant is a minority-
first annual period of the covered cred- owned, women-owned, and/or
it transaction, expressed in dollars; LGBTQI+-owned business. When re-
(v) Additional cost for merchant cash questing minority-owned, women-
advances or other sales-based financing. owned, and LGBTQI+-owned business
For a merchant cash advance or other statuses from an applicant, the finan-
sales-based financing transaction, the cial institution shall inform the appli-
jgilmore on DSK4WB1RN3PROD with CFR
difference between the amount ad- cant that the financial institution can-
vanced and the amount to be repaid, not discriminate on the basis of minor-
expressed in dollars; and ity-owned, women-owned, or LGBTQI+-
29
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§ 1002.108 12 CFR Ch. X (1–1–26 Edition)
owned business statuses, or on whether agement, including low response rates
the applicant provides this informa- for applicant-provided data.
tion. (4) Low response rates. A low response
(19) Ethnicity, race, and sex of principal rate for applicant-provided data may
owners. The ethnicity, race, and sex of indicate discouragement or other fail-
the applicant’s principal owners. When ure by a covered financial institution
requesting ethnicity, race, and sex in- to maintain procedures to collect ap-
formation from an applicant, the finan- plicant-provided data that are reason-
cial institution shall inform the appli- ably designed to obtain a response.
cant that the financial institution can- (d) Previously collected data. A covered
not discriminate on the basis of a prin- financial institution is permitted, but
cipal owner’s ethnicity, race, or sex, or not required, to reuse previously col-
on whether the applicant provides this lected data to satisfy paragraphs (a)(13)
information. through (20) of this section if:
(20) Number of principal owners. The (1) To satisfy paragraphs (a)(13) and
number of the applicant’s principal (a)(15) through (20) of this section, the
owners. data were collected within the 36
(b) Reliance on and verification of ap- months preceding the current covered
plicant-provided data. Unless otherwise application, or to satisfy paragraph
provided in this subpart, the financial (a)(14) of this section, the data were
institution may rely on information collected within the same calendar
from the applicant, or appropriate year as the current covered applica-
third-party sources, when compiling tion; and
data. If the financial institution (2) The financial institution has no
verifies applicant-provided data, how- reason to believe the data are inac-
ever, it shall report the verified data. curate.
(c) Time and manner of collection—(1)
In general. A covered financial institu- § 1002.108 Firewall.
tion shall not discourage an applicant (a) Definitions. For purposes of this
from responding to requests for appli- section, the following terms shall have
cant-provided data under paragraph (a) the following meanings:
of this section and shall otherwise (1) Involved in making any determina-
maintain procedures to collect such tion concerning a covered application
data at a time and in a manner that from a small business means partici-
are reasonably designed to obtain a re- pating in a decision regarding the eval-
sponse. uation of a covered application from a
(2) Applicant-provided data collected di- small business or the creditworthiness
rectly from the applicant. For data col- of a small business applicant for a cov-
lected directly from the applicant, pro- ered credit transaction.
cedures that are reasonably designed to (2) Should have access means that an
obtain a response shall include provi- employee or officer may need to col-
sions for the following: lect, see, consider, refer to, or other-
(i) The initial request for applicant- wise use the information to perform
provided data occurs prior to notifying that employee’s or officer’s assigned
an applicant of final action taken on a job duties.
covered application; (b) Prohibition on access to certain in-
(ii) The request for applicant-pro- formation. Unless the exception under
vided data is prominently displayed or paragraph (c) of this section applies, an
presented; employee or officer of a covered finan-
(iii) The collection does not have the cial institution or a covered financial
effect of discouraging an applicant institution’s affiliate shall not have ac-
from responding to a request for appli- cess to an applicant’s responses to in-
cant-provided data; and quiries that the financial institution
(iv) Applicants can easily respond to makes pursuant to this subpart regard-
a request for applicant-provided data. ing whether the applicant is a minor-
(3) Procedures to monitor compliance. A ity-owned business, a women-owned
jgilmore on DSK4WB1RN3PROD with CFR
covered financial institution shall business, or an LGBTQI+-owned busi-
maintain procedures to identify and re- ness under § 1002.107(a)(18), and regard-
spond to indicia of potential discour- ing the ethnicity, race, and sex of the
30
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Consumer Financial Protection Bureau § 1002.109
applicant’s principal owners under business lending application register in
§ 1002.107(a)(19), if that employee or of- the format prescribed by the Bureau.
ficer is involved in making any deter- (ii) An authorized representative of
mination concerning that applicant’s the covered financial institution with
covered application. knowledge of the data shall certify to
(c) Exception to the prohibition on ac- the accuracy and completeness of the
cess to certain information. The prohibi- data reported pursuant to this para-
tion in paragraph (b) of this section graph (a).
shall not apply to an employee or offi- (iii) When the last day for submission
cer if the financial institution deter- of data prescribed under paragraph
mines that it is not feasible to limit (a)(1) of this section falls on a Saturday
that employee’s or officer’s access to or Sunday, a submission shall be con-
an applicant’s responses to the finan- sidered timely if it is submitted on the
cial institution’s inquiries under next succeeding Monday.
§ 1002.107(a)(18) or (19) and the financial (2) Reporting by subsidiaries. A covered
institution provides the notice required financial institution that is a sub-
under paragraph (d) of this section to sidiary of another covered financial in-
the applicant. It is not feasible to limit stitution shall complete a separate
access as required pursuant to para- small business lending application reg-
graph (b) of this section if the financial ister. The subsidiary shall submit its
institution determines that an em- small business lending application reg-
ployee or officer involved in making ister, directly or through its parent, to
any determination concerning a cov- the Bureau.
ered application from a small business (3) Reporting obligations where multiple
should have access to one or more ap- financial institutions are involved in a
plicants’ responses to the financial in- covered credit transaction. Where it is
stitution’s inquiries under necessary for more than one financial
§ 1002.107(a)(18) or (19). institution to make a credit decision in
(d) Notice. In order to satisfy the ex- order to approve a single covered credit
ception set forth in paragraph (c) of transaction, only the last covered fi-
this section, a financial institution nancial institution with authority to
shall provide a notice to each applicant set the material terms of the covered
whose responses will be accessed, in- credit transaction is required to report
forming the applicant that one or more the application. Financial institutions
employees or officers involved in mak- report the actions of their agents.
ing determinations concerning the cov- (b) Financial institution identifying in-
ered application may have access to formation. A financial institution shall
the applicant’s responses to the finan- provide each of the following with its
cial institution’s inquiries regarding submission:
whether the applicant is a minority- (1) Its name.
owned business, a women-owned busi- (2) Its headquarters address.
ness, or an LGBTQI+-owned business, (3) The name and business contact in-
and regarding the ethnicity, race, and formation of a person that the Bureau
sex of the applicant’s principal owners. or other regulators may contact about
The financial institution shall provide the financial institution’s submission.
the notice required by this paragraph (4) Its Federal prudential regulator,
(d) when making the inquiries required if applicable.
under § 1002.107(a)(18) and (19) and to- (5) Its Federal Taxpayer Identifica-
gether with the notices required pursu- tion Number (TIN).
ant to § 1002.107(a)(18) and (19). (6) Its Legal Entity Identifier (LEI).
(7) Its Research, Statistics, Super-
§ 1002.109 Reporting of data to the Bu- vision, and Discount identification
reau. (RSSD ID) number, if applicable.
(a) Reporting to the Bureau—(1) An- (8) Parent entity information, if ap-
nual reporting. (i) On or before June 1 plicable, including:
following the calendar year for which (i) The name of the immediate parent
jgilmore on DSK4WB1RN3PROD with CFR
data are compiled and maintained as entity;
required by § 1002.107, a covered finan- (ii) The LEI of the immediate parent
cial institution shall submit its small entity, if available;
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§ 1002.110 12 CFR Ch. X (1–1–26 Edition)
(iii) The RSSD ID number of the im- shall use language provided by the Bu-
mediate parent entity, if available; reau, or substantially similar lan-
(iv) The name of the top-holding par- guage, to satisfy the requirement to
ent entity; provide a statement pursuant to this
(v) The LEI of the top-holding parent paragraph (c).
entity, if available; and (d) Availability of statements. A cov-
(vi) The RSSD ID number of the top- ered financial institution shall make
holding parent entity, if available. the notice required by paragraph (c) of
(9) The type of financial institution this section available to the public on
that it is, indicated by selecting the its website when it submits a small
appropriate type or types of institution business lending application register to
from the list provided. the Bureau pursuant to § 1002.109(a)(1),
(10) Whether the financial institution and shall maintain the notice for as
is voluntarily reporting covered appli- long as it has an obligation to retain
cations from small businesses. its small business lending application
(c) Procedures for the submission of registers pursuant to § 1002.111(a).
data to the Bureau. The Bureau shall (e) Further disclosure prohibited—(1)
make available a Filing Instructions Disclosure by a financial institution. A fi-
Guide, containing technical instruc- nancial institution shall not disclose or
tions for the submission of data to the provide to a third party the informa-
Bureau pursuant to this section, as tion it collects pursuant to
well as any related materials, at https:// § 1002.107(a)(18) and (19) except to fur-
www.consumerfinance.gov/data-research/ ther compliance with the Act or this
small-business-lending/filing-instructions- part or as required by law.
guide/.
(2) Disclosure by a third party. A third
§ 1002.110 Publication of data and party that obtains information col-
other disclosures. lected pursuant to § 1002.107(a)(18) and
(19) for the purpose of furthering com-
(a) Publication of small business lend-
pliance with the Act or this part is pro-
ing application registers and associated fi-
hibited from any further disclosure of
nancial institution information. The Bu-
reau shall make available to the public such information except to further
generally the data reported to it by fi- compliance with the Act or this part or
nancial institutions pursuant to as required by law.
§ 1002.109, subject to deletions or modi-
§ 1002.111 Recordkeeping.
fications made by the Bureau if the Bu-
reau determines that the deletion or (a) Record retention. A covered finan-
modification of the data would advance cial institution shall retain evidence of
a privacy interest. The Bureau shall compliance with this subpart, which
make such data available on an annual includes a copy of its small business
basis. lending application register, for at
(b) Publication of aggregate data. The least three years after the register is
Bureau may compile and aggregate required to be submitted to the Bureau
data submitted by financial institu- pursuant to § 1002.109.
tions pursuant to § 1002.109, and make (b) Certain information kept separate
any compilations or aggregations of from the rest of the application. A finan-
such data publicly available as the Bu- cial institution shall maintain, sepa-
reau deems appropriate. rately from the rest of the application
(c) Statement of financial institution’s and accompanying information, an ap-
small business lending data available on plicant’s responses to the financial in-
the Bureau’s website. A covered finan- stitution’s inquiries pursuant to this
cial institution shall make available to subpart regarding whether an applicant
the public on its website, or otherwise for a covered credit transaction is a
upon request, a statement that the minority-owned business, a women-
covered financial institution’s small owned business, and/or an LGBTQI+-
business lending application register, owned business under § 1002.107(a)(18),
jgilmore on DSK4WB1RN3PROD with CFR
as modified by the Bureau pursuant to and regarding the ethnicity, race, and
§ 1002.110(a), is or will be available from sex of the applicant’s principal owners
the Bureau. A financial institution under § 1002.107(a)(19).
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Consumer Financial Protection Bureau § 1002.113
(c) Limitation on personally identifiable (2) Incorrect entry for census tract. An
information in certain records retained incorrect entry for census tract is not
under this section. In reporting a small a violation of the Act or this subpart if
business lending application register the financial institution obtained the
pursuant to § 1002.109, maintaining the census tract by correctly using a
register pursuant to paragraph (a) of geocoding tool provided by the FFIEC
this section, and maintaining a sepa- or the Bureau.
rate record of information pursuant to (3) Incorrect entry for NAICS code. An
paragraph (b) of this section, a finan- incorrect entry for a 3-digit NAICS
cial institution shall not include any code is not a violation of the Act or
name, specific address, telephone num- this subpart, provided that the finan-
ber, email address, or any other person- cial institution obtained the 3-digit
ally identifiable information con- NAICS code by:
cerning any individual who is, or is (i) Relying on an applicant’s rep-
connected with, an applicant, other resentations or on an appropriate
than as required pursuant to § 1002.107 third-party source, in accordance with
or paragraph (b) of this section. § 1002.107(b), regarding the NAICS code;
or
§ 1002.112 Enforcement. (ii) Identifying the NAICS code itself,
(a) Administrative enforcement and civil provided that the financial institution
liability. A violation of section 704B of maintains procedures reasonably
the Act or this subpart is subject to ad- adapted to correctly identify a 3-digit
ministrative sanctions and civil liabil- NAICS code.
ity as provided in sections 704 (15 (4) Incorrect determination of small
U.S.C. 1691c) and 706 (15 U.S.C. 1691e) of business status, covered credit trans-
the Act, where applicable. action, or covered application. A finan-
(b) Bona fide errors. A bona fide error cial institution that initially collects
in compiling, maintaining, or reporting data regarding whether an applicant
data with respect to a covered applica- for a covered credit transaction is a
tion is one that was unintentional and minority-owned business, a women-
occurred despite the maintenance of owned business, or an LGBTQI+-owned
procedures reasonably adapted to avoid business, and the ethnicity, race, and
such an error. A bona fide error is not sex of the applicant’s principal owners
a violation of the Act or this subpart. pursuant to § 1002.107(a)(18) and (19) but
A financial institution is presumed to later concludes that it should not have
maintain procedures reasonably adapt- collected such data does not violate the
ed to avoid such errors with respect to Act or this regulation if the financial
a given data field if the number of er- institution, at the time it collected
rors found in a random sample of the this data, had a reasonable basis for be-
financial institution’s submission for lieving that the application was a cov-
the data field does not equal or exceed ered application for a covered credit
a threshold specified by the Bureau for transaction from a small business pur-
this purpose in appendix F to this part. suant to §§ 1002.103, 1002.104, and
However, an error is not a bona fide 1002.106, respectively. A financial insti-
error if either there is a reasonable tution seeking to avail itself of this
basis to believe the error was inten- safe harbor shall comply with the re-
tional or there is evidence that the fi- quirements of this subpart as otherwise
nancial institution does not or has not required pursuant to §§ 1002.107, 1002.108,
maintained procedures reasonably and 1002.111 with respect to the col-
adapted to avoid such errors. lected data.
(c) Safe harbors—(1) Incorrect entry for
application date. A financial institution § 1002.113 Severability.
does not violate the Act or this subpart If any provision of this subpart, or
if it reports on its small business lend- any application of a provision, is
ing application register an application stayed or determined to be invalid, the
jgilmore on DSK4WB1RN3PROD with CFR
date that is within three business days remaining provisions or applications
of the actual application date pursuant are severable and shall continue in ef-
to § 1002.107(a)(2). fect.
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§ 1002.114 12 CFR Ch. X (1–1–26 Edition)
§ 1002.114 Effective date, compliance mation pursuant to this paragraph
date, and special transitional rules. (c)(1) must do so in accordance with
(a) Effective date. The effective date the requirements set out in
for this subpart is August 29, 2023. §§ 1002.107(a)(18) and (19), 1002.108, and
(b) Compliance date. The dates by 1002.111(b) and (c).
which covered financial institutions (2) Determining which compliance date
are initially required to comply with applies to a financial institution that does
the requirements of this subpart are as not collect information sufficient to deter-
follows: mine small business status. A financial
(1) A covered financial institution institution that is unable to determine
that originated at least 2,500 covered the number of covered credit trans-
credit transactions for small businesses actions it originated for small busi-
in each of calendar years 2022 and 2023 nesses in each of calendar years 2022
shall comply with the requirements of and 2023 for purposes of determining its
this subpart beginning July 1, 2026. compliance date pursuant to paragraph
(2) A covered financial institution (b) of this section, because for some or
that is not subject to paragraph (b)(1) all of this period it does not have read-
of this section and that originated at ily accessible the information needed
least 500 covered credit transactions to determine whether its covered credit
for small businesses in each of calendar transactions were originated for small
years 2022 and 2023 shall comply with businesses as defined in § 1002.106(b), is
the requirements of this subpart begin- permitted to use any reasonable meth-
ning January 1, 2027. od to estimate its originations to small
(3) A covered financial institution businesses for either or both of the cal-
that is not subject to paragraphs (b)(1) endar years 2022 and 2023.
or (2) of this section and that origi- (3) Alternative time period for deter-
nated at least 100 covered credit trans- mining compliance dates. A financial in-
actions for small businesses in each of stitution is permitted to use its origi-
calendar years 2022 and 2023 shall com- nations of covered credit transactions
ply with the requirements of this sub- in each of calendar years 2023 and 2024,
part beginning October 1, 2027. or 2024 and 2025, in lieu of calendar
(4) A financial institution that did years 2022 and 2023 as specified in para-
not originate at least 100 covered credit graphs (b) and (c)(2) of this section.
transactions for small businesses in [88 FR 35528, May 31, 2023, as amended at 89
each of calendar years 2022 and 2023 but FR 55029, July 3, 2024; 89 FR 76713, Sept. 19,
subsequently originates at least 100 2024; 90 FR 25880, June 18, 2025; 90 FR 47520,
such transactions in two consecutive Oct. 2, 2025]
calendar years shall comply with the
requirements of this subpart in accord- APPENDIX A TO PART 1002—FEDERAL
ance with § 1002.105(b), but in any case AGENCIES TO BE LISTED IN ADVERSE
no earlier than October 1, 2027. ACTION NOTICES
(c) Special transitional rules—(1) Col- The following list indicates the Federal
lection of certain information prior to a fi- agency or agencies that should be listed in
nancial institution’s compliance date. A notices provided by creditors pursuant to
financial institution as described in § 1002.9(b)(1). Any questions concerning a par-
paragraphs (b)(1), (2), or (3) of this sec- ticular creditor may be directed to such
agencies. This list is not intended to describe
tion is permitted, but not required, to
agencies’ enforcement authority for ECOA
collect information regarding whether and Regulation B. Terms that are not de-
an applicant for a covered credit trans- fined in the Federal Deposit Insurance Act
action is a minority-owned business, a (12 U.S.C. 1813(s)) shall have the meaning
women-owned business, and/or an given to them in the International Banking
LGBTQI+owned business under Act of 1978 (12 U.S.C. 3101).
§ 1002.107(a)(18), and the ethnicity, race, 1. Banks, savings associations, and credit
and sex of the applicant’s principal unions with total assets of over $10 billion and
their affiliates: Bureau of Consumer Financial
owners under § 1002.107(a)(19) beginning
Protection, 1700 G Street NW, Washington,
12 months prior to its applicable com- DC 20552. Such affiliates that are not banks,
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pliance date as set forth in paragraphs savings associations, or credit unions also
(b)(1), (2), or (3) of this section. A finan- should list, in addition to the Bureau: Fed-
cial institution collecting such infor- eral Trade Commission, Consumer Response
34
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Consumer Financial Protection Bureau Pt. 1002, App. B
Center, 600 Pennsylvania Avenue NW, Wash- 9. Retailers, Finance Companies, and All
ington, DC 20580. Other Creditors Not Listed Above: Federal
2. To the extent not included in item 1 Trade Commission, Consumer Response Cen-
above: ter, 600 Pennsylvania Avenue NW, Wash-
a. National Banks, Federal savings associa- ington, DC 20580.
tions, and Federal branches and Federal agen-
cies of foreign banks: Office of the Comp- [88 FR 58065, Aug. 25, 2023]
troller of the Currency, Customer Assistance
Group, P.O. Box 53570, Houston, TX 77052. APPENDIX B TO PART 1002—MODEL
b. State member banks, branches and agencies APPLICATION FORMS
of foreign banks (other than Federal branches,
Federal agencies, and insured State branches of 1. This appendix contains four model credit
foreign banks), commercial lending companies application forms, each designated for use in
owned or controlled by foreign banks, and orga- a particular type of consumer credit trans-
nizations operating under section 25 or 25A of action as indicated by the bracketed caption
the Federal Reserve Act: Federal Reserve Con- on each form. The first sample form is in-
sumer Help Center, P.O. Box 1200, Min- tended for use in open-end, unsecured trans-
neapolis, MN 55480. actions; the second for closed-end, secured
c. Nonmember Insured Banks, Insured State transactions; the third for closed-end trans-
Branches of Foreign Banks, and Insured State actions, whether unsecured or secured; and
Savings Associations: Division of Depositor the fourth in transactions involving commu-
and Consumer Protection, National Center nity property or occurring in community
for Consumer and Depositor Assistance, Fed- property States. This appendix also contains
eral Deposit Insurance Corporation, 1100 a data collection model form for collecting
Walnut Street, Box #11, Kansas City, MO information concerning an applicant’s eth-
64106. nicity, race, and sex that complies with the
d. Federal Credit Unions: National Credit requirements of § 1002.13(a)(1)(i)(A) and (ii).
Union Administration, Office of Consumer Appendix B to 12 CFR part 1003 provides a
Financial Protection (OCFP), 1775 Duke data collection model form for collecting in-
Street, Alexandria, VA 22314. formation concerning an applicant’s eth-
3. Air Carriers: Assistant General Counsel nicity, race, and sex that complies with the
for Office of Aviation Consumer Protection, requirements of § 1002.13(a)(1)(i)(B) and (ii).
Department of Transportation, 1200 New Jer- All forms contained in this appendix are
sey Avenue SE, Washington, DC 20590. models; their use by creditors is optional.
4. Creditors Subject to Surface Transportation 2. The use or modification of these forms is
Board: Office of Public Assistance, Govern- governed by the following instructions. A
mental Affairs, and Compliance, Surface creditor may change the forms: by asking for
Transportation Board, 395 E Street SW, additional information not prohibited by
Washington, DC 20423. § 1002.5; by deleting any information request;
5. Creditors Subject to Packers and Stockyards or by rearranging the format without modi-
Act: Nearest Packers and Stockyards Divi- fying the substance of the inquiries. In any
sion Regional Office. of these three instances, however, the appro-
6. Small Business Investment Companies: As- priate notices regarding the optional nature
sociate Administrator, Office of Capital Ac- of courtesy titles, the option to disclose ali-
cess, United States Small Business Associa- mony, child support, or separate mainte-
tion, 409 Third Street SW, Suite 8200, Wash- nance, and the limitation concerning mar-
ington, DC 20416. ital status inquiries must be included in the
7. Brokers and Dealers: Securities and Ex- appropriate places if the items to which they
change Commission, 100 F Street NE, Wash- relate appear on the creditor’s form.
ington, DC 20549. 3. If a creditor uses an appropriate appen-
8. Federal Land Banks, Federal Land Bank dix B model form, or modifies a form in ac-
Associations, Federal Intermediate Credit cordance with the above instructions, that
Banks, and Production Credit Associations: creditor shall be deemed to be acting in com-
Farm Credit Administration, 1501 Farm pliance with the provisions of paragraphs (b),
Credit Drive, McLean, VA 22102–5090. (c) and (d) of § 1002.5 of this part.
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Pt. 1002, App. C 12 CFR Ch. X (1–1–26 Edition)
[76 FR 79445, Dec. 21, 2011, as amended at 82 FR 45694, 45695, Oct. 2, 2017]
APPENDIX C TO PART 1002—SAMPLE a consumer based on information from a con-
NOTIFICATION FORMS sumer reporting agency. A creditor must
provide the section 615(b) disclosure when ad-
1. This Appendix contains ten sample noti- verse action is taken based on information
fication forms. Forms C–1 through C–4 are from an outside source other than a con-
intended for use in notifying an applicant sumer reporting agency. In addition, a cred-
that adverse action has been taken on an ap- itor must provide the section 615(b) disclo-
plication or account under §§ 1002.9(a)(1) and sure if the creditor obtained information
(2)(i) of this part. Form C–5 is a notice of dis- from an affiliate other than information in a
closure of the right to request specific rea- consumer report or other than information
sons for adverse action under §§ 1002.9(a)(1) concerning the affiliate’s own transactions
and (2)(ii). Form C–6 is designed for use in or experiences with the consumer. Creditors
notifying an applicant, under § 1002.9(c)(2),
may comply with the disclosure require-
that an application is incomplete. Forms C–
ments for adverse action based on informa-
7 and C–8 are intended for use in connection
tion in a consumer report obtained from an
with applications for business credit under
affiliate by providing either the section
§ 1002.9(a)(3). Form C–9 is designed for use in
615(a) or section 615(b) disclosure. Optional
notifying an applicant of the right to receive
a copy of appraisals under § 1002.14. Form C– language in Forms C–1 through C–5 may be
10 is designed for use in notifying an appli- used to direct the consumer to the entity
cant for nonmortgage credit that the cred- that provided the credit score for any ques-
itor is requesting applicant characteristic tions about the credit score, along with the
information. entity’s contact information. Creditors may
2. Form C–1 contains the Fair Credit Re- use or not use this additional language with-
porting Act disclosure as required by sec- out losing the safe harbor, since the lan-
tions 615(a) and (b) of that act. Forms C–2 guage is optional.
through C–5 contain only the section 615(a) 3. The sample forms are illustrative and
disclosure (that a creditor obtained informa- may not be appropriate for all creditors.
tion from a consumer reporting agency that They were designed to include some of the
jgilmore on DSK4WB1RN3PROD with CFR
was considered in the credit decision). A factors that creditors most commonly con-
creditor must provide the section 615(a) dis- sider. If a creditor chooses to use the check-
closure when adverse action is taken against list of reasons provided in one of the sample
44
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Consumer Financial Protection Bureau Pt. 1002, App. C
forms in this appendix and if reasons com- ____Unacceptable type of credit references
monly used by the creditor are not provided provided
on the form, the creditor should modify the ____Unable to verify credit references
checklist by substituting or adding other ____Temporary or irregular employment
reasons. For example, if ‘‘inadequate down ____Unable to verify employment
payment’’ or ‘‘no deposit relationship with ____Length of employment
us’’ are common reasons for taking adverse ____Income insufficient for amount of credit
action on an application, the creditor ought requested
to add or substitute such reasons for those ____Excessive obligations in relation to in-
presently contained on the sample forms. come
4. If the reasons listed on the forms are not ____Unable to verify income
the factors actually used, a creditor will not ____Length of residence
satisfy the notice requirement by simply ____Temporary residence
checking the closest identifiable factor list- ____Unable to verify residence
ed. For example, some creditors consider
____No credit file
only references from banks or other deposi-
____Limited credit experience
tory institutions and disregard finance com-
____Poor credit performance with us
pany references altogether; their statement
of reasons should disclose ‘‘insufficient bank ____Delinquent past or present credit obliga-
references,’’ not ‘‘insufficient credit ref- tions with others
erences.’’ Similarly, a creditor that con- ____Collection action or judgment
siders bank references and other credit ref- ____Garnishment or attachment
erences as distinct factors should treat the ____Foreclosure or repossession
two factors separately and disclose them as ____Bankruptcy
appropriate. The creditor should either add ____Number of recent inquiries on credit bu-
such other factors to the form or check reau report
‘‘other’’ and include the appropriate expla- ____Value or type of collateral not sufficient
nation. The creditor need not, however, de- ____Other, specify: ______
scribe how or why a factor adversely affected
the application. For example, the notice may PART II—DISCLOSURE OF USE OF INFORMATION
say ‘‘length of residence’’ rather than ‘‘too OBTAINED FROM AN OUTSIDE SOURCE
short a period of residence.’’ This section should be completed if the credit
5. A creditor may design its own notifica- decision was based in whole or in part on infor-
tion forms or use all or a portion of the mation that has been obtained from an outside
forms contained in this Appendix. Proper use source.
of Forms C–1 through C–4 will satisfy the re- ____Our credit decision was based in whole or
quirement of § 1002.9(a)(2)(i). Proper use of in part on information obtained in a report
Forms C–5 and C–6 constitutes full compli- from the consumer reporting agency listed
ance with §§ 1002.9(a)(2)(ii) and 1002.9(c)(2), re- below. You have a right under the Fair Cred-
spectively. Proper use of Forms C–7 and C–8 it Reporting Act to know the information
will satisfy the requirements of contained in your credit file at the consumer
§§ 1002.9(a)(2)(i) and (ii), respectively, for ap- reporting agency. The reporting agency
plications for business credit. Proper use of played no part in our decision and is unable
Form C–9 will satisfy the requirements of to supply specific reasons why we have de-
§ 1002.14 of this part. Proper use of Form C–10 nied credit to you. You also have a right to
will satisfy the requirements of § 1002.5(b)(1). a free copy of your report from the reporting
agency, if you request it no later than 60
FORM C–1—SAMPLE NOTICE OF ACTION TAKEN days after you receive this notice. In addi-
AND STATEMENT OF REASONS
tion, if you find that any information con-
Statement of Credit Denial, Termination or tained in the report you receive is inaccurate
Change or incomplete, you have the right to dispute
Date: llllllllllllllllllll the matter with the reporting agency.
Applicant’s Name: lllllllllllll Name: llllllllllllllllllll
Applicant’s Address: llllllllllll Address: lllllllllllllllllll
Description of Account, Transaction, or Re- [Toll-free] Telephone number: lllllll
quested Credit: llllllllllllll [We also obtained your credit score from
Description of Action Taken: llllllll the consumer reporting agency and used it in
making our credit decision. Your credit
PART I—PRINCIPAL REASON(S) FOR CREDIT DE- score is a number that reflects the informa-
NIAL, TERMINATION, OR OTHER ACTION tion in your consumer report. Your credit
TAKEN CONCERNING CREDIT score can change, depending on how the in-
This section must be completed in all in- formation in your consumer report changes.
stances. Your credit score: llllllllllllll
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____Credit application incomplete Date: llllllllllllllllllll
____Insufficient number of credit references Scores range from a low of ________ to a
provided high of ________.
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Pt. 1002, App. C 12 CFR Ch. X (1–1–26 Edition)
Key factors that adversely affected your Your Application:
credit score: ____lacks a sufficient number of credit ref-
llllllllllllllllllllllll erences.
llllllllllllllllllllllll ____lacks acceptable types of credit ref-
llllllllllllllllllllllll erences.
llllllllllllllllllllllll ____reveals that current obligations are ex-
[Number of recent inquiries on consumer re- cessive in relation to income.
port, as a key factor] Other: llllllllllllllllllll
[If you have any questions regarding your The consumer reporting agency contacted
credit score, you should contact [entity that that provided information that influenced
provided the credit score] at: our decision in whole or in part was [name,
address and [toll-free] telephone number of
Address: lllllllllllllllllll
the reporting agency]. The reporting agency
[[Toll-free] Telephone number: ________] played no part in our decision and is unable
____Our credit decision was based in whole or to supply specific reasons why we have de-
in part on information obtained from an af- nied credit to you. You have a right under
filiate or from an outside source other than the Fair Credit Reporting Act to know the
a consumer reporting agency. Under the Fair information contained in your credit file at
Credit Reporting Act, you have the right to the consumer reporting agency. You also
make a written request, no later than 60 have a right to a free copy of your report
days after you receive this notice, for disclo- from the reporting agency, if you request it
sure of the nature of this information. no later than 60 days after you receive this
If you have any questions regarding this no- notice. In addition, if you find that any in-
tice, you should contact: formation contained in the report you re-
ceive is inaccurate or incomplete, you have
Creditor’s name: llllllllllllll the right to dispute the matter with the re-
Creditor’s address: lllllllllllll porting agency. Any questions regarding
Creditor’s telephone number: llllllll such information should be directed to [con-
Notice: The Federal Equal Credit Oppor- sumer reporting agency]. If you have any
tunity Act prohibits creditors from discrimi- questions regarding this letter, you should
nating against credit applicants on the basis contact us at [creditor’s name, address and
of race, color, religion, national origin, sex, telephone number].
marital status, age (provided the applicant [We also obtained your credit score from
has the capacity to enter into a binding con- the consumer reporting agency and used it in
tract); because all or part of the applicant’s making our credit decision. Your credit
income derives from any public assistance score is a number that reflects the informa-
program; or because the applicant has in tion in your consumer report. Your credit
good faith exercised any right under the Con- score can change, depending on how the in-
sumer Credit Protection Act. The Federal formation in your consumer report changes.
agency that administers compliance with
Your credit score: llllllllllllll
this law concerning this creditor is (name
Date: llllllllllllllllllll
and address as specified by the appropriate
agency listed in appendix A). Scores range from a low of ________ to a
high of ________.
FORM C–2—SAMPLE NOTICE OF ACTION TAKEN Key factors that adversely affected your
AND STATEMENT OF REASONS credit score:
llllllllllllllllllllllll
Date
llllllllllllllllllllllll
Dear Applicant: Thank you for your recent llllllllllllllllllllllll
application. Your request for [a loan/a credit llllllllllllllllllllllll
card/an increase in your credit limit] was [Number of recent inquiries on consumer re-
carefully considered, and we regret that we port, as a key factor]
are unable to approve your application at
this time, for the following reason(s): [If you have any questions regarding your
Your Income: credit score, you should contact [entity that
provided the credit score] at:
____is below our minimum requirement.
____is insufficient to sustain payments on Address: lllllllllllllllllll
the amount of credit requested. [[Toll-free] Telephone number: ________]
____could not be verified. Notice: The Federal Equal Credit Oppor-
Your Employment: tunity Act prohibits creditors from discrimi-
nating against credit applicants on the basis
____is not of sufficient length to qualify.
of race, color, religion, national origin, sex,
____could not be verified.
marital status, age (provided the applicant
Your Credit History: has the capacity to enter into a binding con-
jgilmore on DSK4WB1RN3PROD with CFR
____of making payments on time was not sat- tract); because all or part of the applicant’s
isfactory. income derives from any public assistance
____could not be verified. program; or because the applicant has in
46
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Consumer Financial Protection Bureau Pt. 1002, App. C
good faith exercised any right under the Con- Scores range from a low of ________ to a
sumer Credit Protection Act. The Federal high of ________.
agency that administers compliance with Key factors that adversely affected your
this law concerning this creditor is (name credit score:
and address as specified by the appropriate llllllllllllllllllllllll
agency listed in appendix A). llllllllllllllllllllllll
llllllllllllllllllllllll
FORM C–3—SAMPLE NOTICE OF ACTION TAKEN llllllllllllllllllllllll
AND STATEMENT OF REASONS (CREDIT SCOR-
[Number of recent inquiries on consumer re-
ING)
port, as a key factor]
Date [If you have any questions regarding your
Dear Applicant: Thank you for your recent credit score, you should contact [entity that
application for __________. We regret that we provided the credit score] at:
are unable to approve your request. Address: lllllllllllllllllll
[Reasons for Denial of Credit] [Toll-free] Telephone number: ________]
Your application was processed by a [credit If you have any questions regarding this
scoring] system that assigns a numerical letter, you should contact us at
value to the various items of information we Creditor’s Name: llllllllllllll
consider in evaluating an application. These Address: lllllllllllllllllll
numerical values are based upon the results Telephone: lllllllllllllllll
of analyses of repayment histories of large Sincerely,
numbers of customers. Notice: The Federal Equal Credit Oppor-
The information you provided in your ap- tunity Act prohibits creditors from discrimi-
plication did not score a sufficient number of nating against credit applicants on the basis
points for approval of the application. The of race, color, religion, national origin, sex,
reasons you did not score well compared marital status, age (with certain limited ex-
with other applicants were: ceptions); because all or part of the appli-
• Insufficient bank references cant’s income derives from any public assist-
• Type of occupation ance program; or because the applicant has
• Insufficient credit experience in good faith exercised any right under the
• Number of recent inquiries on credit bu- Consumer Credit Protection Act. The Fed-
reau report eral agency that administers compliance
[Your Right to Get Your Consumer Report] with this law concerning this creditor is
In evaluating your application the con- (name and address as specified by the appro-
sumer reporting agency listed below pro- priate agency listed in appendix A).
vided us with information that in whole or in FORM C–4—SAMPLE NOTICE OF ACTION TAKEN,
part influenced our decision. The consumer STATEMENT OF REASONS AND COUNTEROFFER
reporting agency played no part in our deci-
sion and is unable to supply specific reasons Date
why we have denied credit to you. You have Dear Applicant: Thank you for your appli-
a right under the Fair Credit Reporting Act cation for __________. We are unable to offer
to know the information contained in your you credit on the terms that you requested
credit file at the consumer reporting agency. for the following reason(s):__________
It can be obtained by contacting: [Name, ad- We can, however, offer you credit on the
dress, and [toll-free] telephone number of the following terms: __________
consumer reporting agency]. You also have a If this offer is acceptable to you, please no-
right to a free copy of your report from the tify us within [amount of time] at the fol-
reporting agency, if you request it no later lowing address: __________.
than 60 days after you receive this notice. In Our credit decision on your application
addition, if you find that any information was based in whole or in part on information
contained in the report you receive is inac- obtained in a report from [name, address and
curate or incomplete, you have the right to [toll-free] telephone number of the consumer
dispute the matter with the reporting agen- reporting agency]. You have a right under
cy. the Fair Credit Reporting Act to know the
[Information about Your Credit Score] information contained in your credit file at
[Information about Your Credit Score] the consumer reporting agency. The report-
We also obtained your credit score from ing agency played no part in our decision
the consumer reporting agency and used it in and is unable to supply specific reasons why
making our credit decision. Your credit we have denied credit to you. You also have
score is a number that reflects the informa- a right to a free copy of your report from the
tion in your consumer report. Your credit reporting agency, if you request it no later
score can change, depending on how the in- than 60 days after you receive this notice. In
jgilmore on DSK4WB1RN3PROD with CFR
formation in your consumer report changes. addition, if you find that any information
Your credit score: llllllllllllll contained in the report you receive is inac-
Date: llllllllllllllllllll curate or incomplete, you have the right to
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Pt. 1002, App. C 12 CFR Ch. X (1–1–26 Edition)
dispute the matter with the reporting agen- If we obtained information from a con-
cy. sumer reporting agency as part of our con-
[We also obtained your credit score from sideration of your application, its name, ad-
the consumer reporting agency and used it in dress, and [toll-free] telephone number is
making our credit decision. Your credit shown below. The reporting agency played
score is a number that reflects the informa- no part in our decision and is unable to sup-
tion in your consumer report. Your credit ply specific reasons why we have denied cred-
score can change, depending on how the in- it to you. [You have a right under the Fair
formation in your consumer report changes. Credit Reporting Act to know the informa-
Your credit score: llllllllllllll tion contained in your credit file at the con-
Date: llllllllllllllllllll sumer reporting agency.] You have a right to
Scores range from a low of ________ to a a free copy of your report from the reporting
high of ________. agency, if you request it no later than 60
Key factors that adversely affected your days after you receive this notice. In addi-
credit score: tion, if you find that any information con-
llllllllllllllllllllllll tained in the report you received is inac-
llllllllllllllllllllllll curate or incomplete, you have the right to
llllllllllllllllllllllll dispute the matter with the reporting agen-
cy. You can find out about the information
llllllllllllllllllllllll
contained in your file (if one was used) by
[Number of recent inquiries on consumer re- contacting:
port, as a key factor]
Consumer reporting agency’s name
[If you have any questions regarding your Address
credit score, you should contact [entity that [Toll-free] Telephone number
provided the credit score] at:
[We also obtained your credit score from
Address: lllllllllllllllllll the consumer reporting agency and used it in
[Toll-free] Telephone number:________] making our credit decision. Your credit
You should know that the Federal Equal score is a number that reflects the informa-
Credit Opportunity Act prohibits creditors, tion in your consumer report. Your credit
such as ourselves, from discriminating score can change, depending on how the in-
against credit applicants on the basis of formation in your consumer report changes.
their race, color, religion, national origin, Your credit score: llllllllllllll
sex, marital status, age (provided the appli- Date: llllllllllllllllllll
cant has the capacity to enter into a binding
contract), because they receive income from Scores range from a low of ________ to a
a public assistance program, or because they high of ________.
may have exercised their rights under the Key factors that adversely affected your
Consumer Credit Protection Act. If you be- credit score:
lieve there has been discrimination in han- llllllllllllllllllllllll
dling your application you should contact llllllllllllllllllllllll
the [name and address of the appropriate llllllllllllllllllllllll
Federal enforcement agency listed in appen- llllllllllllllllllllllll
dix A]. [Number of recent inquiries on consumer re-
Sincerely, port, as a key factor]
FORM C–5—SAMPLE DISCLOSURE OF RIGHT TO [If you have any questions regarding your
REQUEST SPECIFIC REASONS FOR CREDIT DE- credit score, you should contact [entity that
NIAL
provided the credit score] at:
Address: lllllllllllllllllll
Date [Toll-free] Telephone number: ________]
Dear Applicant: Thank you for applying to Sincerely,
us for __________.
Notice: The Federal Equal Credit Oppor-
After carefully reviewing your application, tunity Act prohibits creditors from discrimi-
we are sorry to advise you that we cannot nating against credit applicants on the basis
[open an account for you/grant a loan to you/ of race, color, religion, national origin, sex,
increase your credit limit] at this time. If marital status, age (provided the applicant
you would like a statement of specific rea- has the capacity to enter into a binding con-
sons why your application was denied, please tract); because all or part of the applicant’s
contact [our credit service manager] shown income derives from any public assistance
below within 60 days of the date of this let- program; or because the applicant has in
ter. We will provide you with the statement good faith exercised any right under the Con-
of reasons within 30 days after receiving sumer Credit Protection Act. The Federal
your request. agency that administers compliance with
jgilmore on DSK4WB1RN3PROD with CFR
Creditor’s name this law concerning this creditor is (name
Address and address as specified by the appropriate
Telephone number agency listed in appendix A).
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Consumer Financial Protection Bureau Pt. 1002, App. D
FORM C–6—SAMPLE NOTICE OF INCOMPLETE for the denial within 30 days of receiving
APPLICATION AND REQUEST FOR ADDITIONAL your request for the statement.
INFORMATION Notice: The Federal Equal Credit Oppor-
Creditor’s name tunity Act prohibits creditors from discrimi-
Address nating against credit applicants on the basis
Telephone number of race, color, religion, national origin, sex,
Date marital status, age (provided the applicant
Dear Applicant: Thank you for your appli- has the capacity to enter into a binding con-
cation for credit. The following information tract); because all or part of the applicant’s
is needed to make a decision on your appli- income derives from any public assistance
cation: __________ program; or because the applicant has in
We need to receive this information by good faith exercised any right under the Con-
__________ (date). If we do not receive it by sumer Credit Protection Act. The Federal
that date, we will regrettably be unable to agency that administers compliance with
give further consideration to your credit re- this law concerning this creditor is [name
quest. and address as specified by the appropriate
Sincerely, agency listed in appendix A].
FORM C–7—SAMPLE NOTICE OF ACTION TAKEN FORM C–9—SAMPLE DISCLOSURE OF RIGHT TO
AND STATEMENT OF REASONS (BUSINESS
RECEIVE A COPY OF APPRAISALS
CREDIT)
Creditor’s name We may order an appraisal to determine
Creditor’s address the property’s value and charge you for this
Date appraisal. We will promptly give you a copy
of any appraisal, even if your loan does not
Dear Applicant: Thank you for applying to
us for credit. We have given your request close.
careful consideration, and regret that we are You can pay for an additional appraisal for
unable to extend credit to you at this time your own use at your own cost.
for the following reasons: [In your letter, give us the following infor-
(Insert appropriate reason, such as: Value mation:]
or type of collateral not sufficient; Lack of
established earnings record; Slow or past due FORM C–10—SAMPLE DISCLOSURE ABOUT
in trade or loan payments) VOLUNTARY DATA NOTATION
Sincerely, We are requesting the following informa-
Notice: The Federal Equal Credit Oppor-
tion to monitor our compliance with the
tunity Act prohibits creditors from discrimi-
Federal Equal Credit Opportunity Act, which
nating against credit applicants on the basis
of race, color, religion, national origin, sex, prohibits unlawful discrimination. You are
marital status, age (provided the applicant not required to provide this information. We
has the capacity to enter into a binding con- will not take this information (or your deci-
tract); because all or part of the applicant’s sion not to provide this information) into ac-
income derives from any public assistance count in connection with your application or
program; or because the applicant has in credit transaction. The law provides that a
good faith exercised any right under the Con- creditor may not discriminate based on this
sumer Credit Protection Act. The Federal information, or based on whether or not you
agency that administers compliance with choose to provide it. [If you choose not to
this law concerning this creditor is [name provide the information, we will note it by
and address as specified by the appropriate visual observation or surname].
agency listed in appendix A].
[76 FR 79445, Dec. 21, 2011, as amended at 78
FORM C–8—SAMPLE DISCLOSURE OF RIGHT TO FR 7248, Jan. 31, 2013]
REQUEST SPECIFIC REASONS FOR CREDIT DE-
NIAL GIVEN AT TIME OF APPLICATION (BUSI- APPENDIX D TO PART 1002—ISSUANCE OF
NESS CREDIT) OFFICIAL INTERPRETATIONS
Creditor’s name
Creditor’s address 1.Official Interpretations. Interpretations of
this part issued by officials of the Bureau
If your application for business credit is
provide the protection afforded under section
denied, you have the right to a written state-
706(e) of the Act. Except in unusual cir-
ment of the specific reasons for the denial.
To obtain the statement, please contact cumstances, such interpretations will not be
[name, address and telephone number of the issued separately but will be incorporated in
person or office from which the statement of an official commentary to the regulation,
jgilmore on DSK4WB1RN3PROD with CFR
reasons can be obtained] within 60 days from which will be amended periodically.
the date you are notified of our decision. We 2. Requests for Issuance of Official Interpreta-
will send you a written statement of reasons tions. A request for an official interpretation
49
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Pt. 1002, App. E 12 CFR Ch. X (1–1–26 Edition)
should be in writing and addressed to the As- not apply to forms or statements whose use
sistant Director, Office of Regulations, Divi- is required or sanctioned by a government
sion of Research, Monitoring, and Regula- agency.
tions, Bureau of Consumer Financial Protec-
tion, 1700 G Street, NW., Washington, DC [76 FR 79445, Dec. 21, 2011, as amended at 88
20552. The request should contain a complete FR 16538, Mar. 20, 2023]
statement of all relevant facts concerning
the issue, including copies of all pertinent APPENDIX E TO PART 1002—SAMPLE
documents. FORM FOR COLLECTING CERTAIN AP-
3. Scope of Interpretations. No interpreta- PLICANT-PROVIDED DATA UNDER
tions will be issued approving creditors’
SUBPART B
forms or statements. This restriction does
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Consumer Financial Protection Bureau Pt. 1002, App. F
[88 FR 35534, May 31, 2023] APPENDIX F TO PART 1002—TOLERANCES
FOR BONA FIDE ERRORS IN DATA RE-
jgilmore on DSK4WB1RN3PROD with CFR
PORTED UNDER SUBPART B
As set out in § 1002.112(b) and in comment
112(b)–1, a financial institution is presumed
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
to maintain procedures reasonably adapted submission for a given data field do not
to avoid errors with respect to a given data equal or exceed the threshold in column C of
field if the number of errors found in a ran- the following table (Table 1, Tolerance
dom sample of a financial institution’s data Thresholds for Bona Fide Errors):
TABLE 1 TO APPENDIX F—TOLERANCE THRESHOLDS FOR BONA FIDE ERRORS
Random Threshold Threshold
Small business lending application register count sample (#) (%)
size 986
(A) (B) (C) (D)
100–130 ........................................................................................................... 47 3 6.4
131–190 ........................................................................................................... 56 3 5.4
191–500 ........................................................................................................... 59 3 5.1
501–100,000 .................................................................................................... 79 4 5.1
100,001+ ......................................................................................................... 159 4 2.5
The size of the random sample, under col- that field were intentional or there is evi-
umn B, shall depend on the size of the finan- dence that the financial institution did not
cial institution’s small business lending ap- maintain procedures reasonably adapted to
plication register, as shown in column A of avoid such errors, then the errors are not
the Threshold Table. bona fide errors under § 1002.112(b).
The thresholds in column C of the Thresh- For purposes of determining bona fide er-
old Table reflect the number of uninten- rors under § 1002.112(b), the term ‘‘data field’’
tional errors a financial institution may generally refers to individual fields. Some
make within a particular data field (e.g., the data fields may allow for more than one re-
credit product data field within the credit sponse. For example, with respect to infor-
type data point or the ethnicity data field
mation on the ethnicity or race of an appli-
for a particular principal owner within the
cant’s principal owners, a data field may
ethnicity, race, and sex of principal owners
identify more than one race or more than
data point) in a small business lending appli-
cation register that would be deemed bona one ethnicity for a given person. If one or
fide errors for purposes of § 1002.112(b). more of the ethnicities or races identified in
For instance, a financial institution that a data field are erroneous, they count as one
submitted a small business lending applica- (and only one) error for that data field.
tion register containing 105 applications [88 FR 35534, May 31, 2023]
would be subject to a threshold of three er-
rors per data field. If the financial institu-
SUPPLEMENT I TO PART 1002—OFFICIAL
tion had made two errors in reporting loan
amount and two errors reporting gross an- INTERPRETATIONS
nual income, all of these errors would be cov-
Following is an official interpretation of
ered by the bona fide error provision of
Regulation B (12 CFR part 1002) issued by the
§ 1002.112(b) and would not constitute a viola-
Bureau of Consumer Financial Protection.
tion of the Act or this part. If the same fi-
nancial institution had made four errors in References are to sections of the regulation
reporting loan amount and two errors re- or the Equal Credit Opportunity Act (15
porting gross annual income, the bona fide U.S.C. 1601 et seq.).
error provision of § 1002.112(b) would not
INTRODUCTION
apply to the four loan amount errors but
would still apply to the two gross annual in- 1.Official status. Section 706(e) of the Equal
come errors. Credit Opportunity Act protects a creditor
Even when the number of errors in a par- from civil liability for any act done or omit-
ticular data field do not equal or exceed the ted in good faith in conformity with an in-
threshold in column C, if either there is a terpretation issued by a duly authorized offi-
reasonable basis to believe that errors in cial of the Bureau. This commentary is the
means by which the Bureau of Consumer Fi-
986 For a financial institution with fewer nancial Protection issues official interpreta-
than 30 entries in its small business lending tions of Regulation B. Good-faith compliance
application register, the full sample size is with this commentary affords a creditor pro-
the financial institution’s total number of tection under section 706(e) of the Act.
entries. The threshold number for such fi- 2. Issuance of interpretations. Under appen-
nancial institutions remains three. Accord- dix D to the regulation, any person may re-
jgilmore on DSK4WB1RN3PROD with CFR
ingly, the threshold percentage will be high- quest an official interpretation. Interpreta-
er for financial institutions with fewer than tions will be issued at the discretion of des-
30 entries in their registers ignated officials and incorporated in this
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
commentary following publication for com- vided for in the credit agreement between
ment in the FEDERAL REGISTER. Except in the parties. In cases where termination is ad-
unusual circumstances, official interpreta- verse action, notification is required under
tions will be issued only by means of this § 1002.9.
commentary. 2. Termination based on credit limit. If a cred-
3. Comment designations. The comments are itor terminates credit accounts that have
designated with as much specificity as pos- low credit limits (for example, under $400)
sible according to the particular regulatory but keeps open accounts with higher credit
provision addressed. Each comment in the limits, the termination is adverse action and
commentary is identified by a number and notification is required under § 1002.9.
the regulatory section or paragraph that it Paragraph 2(c)(2)(ii).
interprets. For example, comments to 1. Default—exercise of due-on-sale clause. If a
§ 1002.2(c) are further divided by subpara- mortgagor sells or transfers mortgaged prop-
graph, such as comment 2(c)(1)(ii)–1 and com- erty without the consent of the mortgagee,
ment 2(c)(2)(ii–1. and the mortgagee exercises its contractual
right to accelerate the mortgage loan, the
Section 1002.1—Authority, Scope, and Purpose mortgagee may treat the mortgagor as being
in default. An adverse action notice need not
1(a) Authority and scope.
be given to the mortgagor or the transferee.
1. Scope. The Equal Credit Opportunity Act
(See comment 2(e)–1 for treatment of a pur-
and Regulation B apply to all credit—com-
chaser who requests to assume the loan.)
mercial as well as personal—without regard
2. Current delinquency or default. The term
to the nature or type of the credit or the
adverse action does not include a creditor’s
creditor, except for an entity excluded from
termination of an account when the
coverage of this part (but not the Act) by
accountholder is currently in default or de-
section 1029 of the Consumer Financial Pro-
linquent on that account. Notification in ac-
tection Act of 2010 (12 U.S.C. 5519). If a trans- cordance with § 1002.9 of the regulation gen-
action provides for the deferral of the pay- erally is required, however, if the creditor’s
ment of a debt, it is credit covered by Regu- action is based on a past delinquency or de-
lation B even though it may not be a credit fault on the account.
transaction covered by Regulation Z (Truth Paragraph 2(c)(2)(iii).
in Lending) (12 CFR part 1026). Further, the 1. Point-of-sale transactions. Denial of credit
definition of creditor is not restricted to the at point of sale is not adverse action except
party or person to whom the obligation is under those circumstances specified in the
initially payable, as is the case under Regu- regulation. For example, denial at point of
lation Z. Moreover, the Act and regulation sale is not adverse action in the following
apply to all methods of credit evaluation, situations:
whether performed judgmentally or by use of i. A credit cardholder presents an expired
a credit scoring system. card or a card that has been reported to the
2. Foreign applicability. Regulation B gen- card issuer as lost or stolen.
erally does not apply to lending activities ii. The amount of a transaction exceeds a
that occur outside the United States. The cash advance or credit limit.
regulation does apply to lending activities iii. The circumstances (such as excessive
that take place within the United States (as use of a credit card in a short period of time)
well as the Commonwealth of Puerto Rico suggest that fraud is involved.
and any territory or possession of the United iv. The authorization facilities are not
States), whether or not the applicant is a functioning.
citizen. v. Billing statements have been returned
3. Bureau. The term Bureau, as used in this to the creditor for lack of a forwarding ad-
part, means the Bureau of Consumer Finan- dress.
cial Protection. 2. Application for increase in available credit.
A refusal or failure to authorize an account
Section 1002.2—Definitions
transaction at the point of sale or loan is not
2(c) Adverse action. adverse action except when the refusal is a
Paragraph 2(c)(1)(i). denial of an application, submitted in ac-
1. Application for credit. If the applicant ap- cordance with the creditor’s procedures, for
plied in accordance with the creditor’s proce- an increase in the amount of credit.
dures, a refusal to refinance or extend the Paragraph 2(c)(2)(v).
term of a business or other loan is adverse 1. Terms of credit versus type of credit offered.
action. When an applicant applies for credit and the
Paragraph 2(c)(1)(ii). creditor does not offer the credit terms re-
1. Move from service area. If a credit card quested by the applicant (for example, the
issuer terminates the open-end account of a interest rate, length of maturity, collateral,
customer because the customer has moved or amount of downpayment), a denial of the
jgilmore on DSK4WB1RN3PROD with CFR
out of the card issuer’s service area, the ter- application for that reason is adverse action
mination is adverse action unless termi- (unless the creditor makes a counteroffer
nation on this ground was explicitly pro- that is accepted by the applicant) and the
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
applicant is entitled to notification under iv. A consumer calls to ask about terms for
§ 1002.9. a loan to purchase vacant land and states his
2(e) Applicant. income and the sales price of the property to
1. Request to assume loan. If a mortgagor be financed, and asks whether he qualifies
sells or transfers the mortgaged property for a loan; the employee responds by describ-
and the buyer makes an application to the ing the general lending policies, explaining
creditor to assume the mortgage loan, the that he would need to look at all of the con-
mortgagee must treat the buyer as an appli- sumer’s qualifications before making a deci-
cant unless its policy is not to permit as- sion, and offering to send an application
sumptions. form to the consumer.
2(f) Application. 5. Examples of an application. An applica-
1. General. A creditor has the latitude tion for credit includes the following situa-
under the regulation to establish its own ap- tions:
plication process and to decide the type and i. A person asks a financial institution to
amount of information it will require from ‘‘preapprove’’ her for a loan (for example, to
credit applicants. finance a house or a vehicle she plans to buy)
2. Procedures used. The term ‘‘procedures’’ and the institution reviews the request
refers to the actual practices followed by a under a program in which the institution,
creditor for making credit decisions as well after a comprehensive analysis of her credit-
as its stated application procedures. For ex- worthiness, issues a written commitment
ample, if a creditor’s stated policy is to re- valid for a designated period of time to ex-
quire all applications to be in writing on the tend a loan up to a specified amount. The
creditor’s application form, but the creditor written commitment may not be subject to
also makes credit decisions based on oral re- conditions other than conditions that re-
quests, the creditor’s procedures are to ac- quire the identification of adequate collat-
cept both oral and written applications. eral, conditions that require no material
3. When an inquiry or prequalification request change in the applicant’s financial condition
becomes an application. A creditor is encour- or creditworthiness prior to funding the
aged to provide consumers with information loan, and limited conditions that are not re-
about loan terms. However, if in giving infor- lated to the financial condition or credit-
mation to the consumer the creditor also worthiness of the applicant that the lender
evaluates information about the consumer, ordinarily attaches to a traditional applica-
decides to decline the request, and commu- tion (such as certification of a clear termite
nicates this to the consumer, the creditor inspection for a home purchase loan, or a
has treated the inquiry or prequalification maximum mileage requirement for a used
request as an application and must then car loan). But if the creditor’s program does
comply with the notification requirements not provide for giving written commitments,
under § 1002.9. Whether the inquiry or requests for preapprovals are treated as
prequalification request becomes an applica- prequalification requests for purposes of the
tion depends on how the creditor responds to regulation.
the consumer, not on what the consumer ii. Under the same facts as above, the fi-
says or asks. (See comment 9–5 for further nancial institution evaluates the person’s
discussion of prequalification requests; see creditworthiness and determines that she
comment 2(f)–5 for a discussion of does not qualify for a preapproval.
preapproval requests.) 6. Completed application—diligence require-
4. Examples of inquiries that are not applica- ment. The regulation defines a completed ap-
tions. The following examples illustrate situ- plication in terms that give a creditor the
ations in which only an inquiry has taken latitude to establish its own information re-
place: quirements. Nevertheless, the creditor must
i. A consumer calls to ask about loan act with reasonable diligence to collect in-
terms and an employee explains the credi- formation needed to complete the applica-
tor’s basic loan terms, such as interest rates, tion. For example, the creditor should re-
loan-to-value ratio, and debt-to-income quest information from third parties, such as
ratio. a credit report, promptly after receiving the
ii. A consumer calls to ask about interest application. If additional information is
rates for car loans, and, in order to quote the needed from the applicant, such as an ad-
appropriate rate, the loan officer asks for the dress or a telephone number to verify em-
make and sales price of the car and the ployment, the creditor should contact the
amount of the downpayment, then gives the applicant promptly. (But see comment
consumer the rate. 9(a)(1)–3, which discusses the creditor’s op-
iii. A consumer asks about terms for a loan tion to deny an application on the basis of
to purchase a home and tells the loan officer incompleteness.)2(g) Business credit.
her income and intended downpayment, but 1. Definition. The test for deciding whether
the loan officer only explains the creditor’s a transaction qualifies as business credit is
jgilmore on DSK4WB1RN3PROD with CFR
loan-to-value ratio policy and other basic one of primary purpose. For example, an
lending policies, without telling the con- open-end credit account used for both per-
sumer whether she qualifies for the loan. sonal and business purposes is not business
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
credit unless the primary purpose of the ac- establish its predictive ability. A creditor is
count is business-related. A creditor may responsible for ensuring its system is vali-
rely on an applicant’s statement of the pur- dated and revalidated based on the creditor’s
pose for the credit requested. own data.
2(j) Credit. 3. Pooled data scoring systems. A scoring sys-
1. General. Regulation B covers a wider tem or the data from which to develop such
range of credit transactions than Regulation a system may be obtained from either a sin-
Z (Truth in Lending). Under Regulation B, a gle credit grantor or multiple credit
transaction is credit if there is a right to grantors. The resulting system will qualify
defer payment of a debt—regardless of as an empirically derived, demonstrably and
whether the credit is for personal or com- statistically sound, credit scoring system
mercial purposes, the number of install- provided the criteria set forth in paragraph
ments required for repayment, or whether (p)(1)(i) through (iv) of this section are met.
the transaction is subject to a finance
A creditor is responsible for ensuring its sys-
charge.
tem is validated and revalidated based on the
2(l) Creditor.
creditor’s own data when it becomes avail-
1. Assignees. The term creditor includes all
able.
persons participating in the credit decision.
This may include an assignee or a potential 4. Effects test and disparate treatment. An
purchaser of the obligation who influences empirically derived, demonstrably and sta-
the credit decision by indicating whether or tistically sound, credit scoring system may
not it will purchase the obligation if the include age as a predictive factor (provided
transaction is consummated. that the age of an elderly applicant is not as-
2. Referrals to creditors. For certain pur- signed a negative factor or value). Besides
poses, the term creditor includes persons age, no other prohibited basis may be used as
such as real estate brokers, automobile deal- a variable. Generally, credit scoring systems
ers, home builders, and home-improvement treat all applicants objectively and thus
contractors who do not participate in credit avoid problems of disparate treatment. In
decisions but who only accept applications cases where a credit scoring system is used
and refer applicants to creditors, or select or in conjunction with individual discretion,
offer to select creditors to whom credit re- disparate treatment could conceivably occur
quests can be made. These persons must in the evaluation process. In addition, neu-
comply with § 1002.4(a), the general rule pro- tral factors used in credit scoring systems
hibiting discrimination, and with § 1002.4(b), could nonetheless be subject to challenge
the general rule against discouraging appli- under the effects test. (See comment 6(a)–2
cations. for a discussion of the effects test).
2(p) Empirically derived and other credit scor- 2(w) Open-end credit.
ing systems. 1. Open-end real estate mortgages. The term
1. Purpose of definition. The definition ‘‘open-end credit’’ does not include nego-
under §§ 1002.2(p)(1)(i) through (iv) sets the tiated advances under an open-end real es-
criteria that a credit system must meet in tate mortgage or a letter of credit.
order to use age as a predictive factor. Credit
2(z) Prohibited basis.
systems that do not meet these criteria are
judgmental systems and may consider age 1. Persons associated with applicant. As used
only for the purpose of determining a ‘‘per- in this part, prohibited basis refers not only
tinent element of creditworthiness.’’ (Both to characteristics—the race, color, religion,
types of systems may favor an elderly appli- national origin, sex, marital status, or age—
cant. See § 1002.6(b)(2).) of an applicant (or officers of an applicant in
2. Periodic revalidation. The regulation does the case of a corporation) but also to the
not specify how often credit scoring systems characteristics of individuals with whom an
must be revalidated. The credit scoring sys- applicant is affiliated or with whom the ap-
tem must be revalidated frequently enough plicant associates. This means, for example,
to ensure that it continues to meet recog- that under the general rule stated in
nized professional statistical standards for § 1002.4(a), a creditor may not discriminate
statistical soundness. To ensure that pre- against an applicant because of that person’s
dictive ability is being maintained, the cred- personal or business dealings with members
itor must periodically review the perform- of a certain religion, because of the national
ance of the system. This could be done, for origin of any persons associated with the ex-
example, by analyzing the loan portfolio to tension of credit (such as the tenants in the
determine the delinquency rate for each apartment complex being financed), or be-
score interval, or by analyzing population cause of the race of other residents in the
stability over time to detect deviations of neighborhood where the property offered as
recent applications from the applicant popu- collateral is located.
lation used to validate the system. If this 2. National origin. A creditor may not
jgilmore on DSK4WB1RN3PROD with CFR
analysis indicates that the system no longer refuse to grant credit because an applicant
predicts risk with statistical soundness, the comes from a particular country but may
system must be adjusted as necessary to re- take the applicant’s immigration status into
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
account. A creditor may also take into ac- 3(d) Government credit.
count any applicable law, regulation, or ex- 1. Credit to governments. The exception re-
ecutive order restricting dealings with citi- lates to credit extended to (not by) govern-
zens (or the government) of a particular mental entities. For example, credit ex-
country or imposing limitations regarding tended to a local government is covered by
credit extended for their use. this exception, but credit extended to con-
3. Public assistance program. Any Federal, sumers by a Federal or state housing agency
state, or local governmental assistance pro- does not qualify for special treatment under
gram that provides a continuing, periodic in- this category.
come supplement, whether premised on enti-
tlement or need, is ‘‘public assistance’’ for Section 1002.4—General Rules
purposes of the regulation. The term in-
Paragraph 4(a).
cludes (but is not limited to) Temporary Aid
1. Scope of rule. The general rule stated in
to Needy Families, food stamps, rent and
§ 1002.4(a) covers all dealings, without excep-
mortgage supplement or assistance pro-
tion, between an applicant and a creditor,
grams, social security and supplemental se-
whether or not addressed by other provisions
curity income, and unemployment com-
of the regulation. Other provisions of the
pensation. Only physicians, hospitals, and
regulation identify specific practices that
others to whom the benefits are payable need
the Bureau has decided are impermissible be-
consider Medicare and Medicaid as public as-
sistance. cause they could result in credit discrimina-
tion on a basis prohibited by the Act. The
Section 1002.3—Limited Exceptions for Certain general rule covers, for example, application
Classes of Transactions procedures, criteria used to evaluate credit-
worthiness, administration of accounts, and
1. Scope. Under this section, procedural re- treatment of delinquent or slow accounts.
quirements of the regulation do not apply to Thus, whether or not specifically prohibited
certain types of credit. All classes of trans- elsewhere in the regulation, a credit practice
actions remain subject to § 1002.4(a), the gen- that treats applicants differently on a pro-
eral rule barring discrimination on a prohib- hibited basis violates the law because it vio-
ited basis, and to any other provision not
lates the general rule. Disparate treatment
specifically excepted.
on a prohibited basis is illegal whether or
3(a) Public-utilities credit.
not it results from a conscious intent to dis-
1. Definition. This definition applies only to
criminate.
credit for the purchase of a utility service,
2. Examples.
such as electricity, gas, or telephone service.
Credit provided or offered by a public utility i. Disparate treatment would exist, for ex-
for some other purpose—such as for financ- ample, in the following situations:
ing the purchase of a gas dryer, telephone A. A creditor provides information only on
equipment, or other durable goods, or for in- ‘‘subprime’’ and similar products to minority
sulation or other home improvements—is applicants who request information about
not excepted. the creditor’s mortgage products, but pro-
2. Security deposits. A utility company is a vides information on a wider variety of
creditor when it supplies utility service and mortgage products to similarly situated non-
bills the user after the service has been pro- minority applicants.
vided. Thus, any credit term (such as a re- B. A creditor provides more comprehensive
quirement for a security deposit) is subject information to men than to similarly situ-
to the regulation’s bar against discrimina- ated women.
tion on a prohibited basis. C. A creditor requires a minority applicant
3. Telephone companies. A telephone com- to provide greater documentation to obtain a
pany’s credit transactions qualify for the ex- loan than a similarly situated nonminority
ceptions provided in § 1002.3(a)(2) only if the applicant.
company is regulated by a government unit D. A creditor waives or relaxes credit
or files the charges for service, delayed pay- standards for a nonminority applicant but
ment, or any discount for prompt payment not for a similarly situated minority appli-
with a government unit. cant.
3(c) Incidental credit. ii. Treating applicants differently on a pro-
1. Examples. If a service provider (such as a hibited basis is unlawful if the creditor lacks
hospital, doctor, lawyer, or merchant) allows a legitimate nondiscriminatory reason for
the client or customer to defer the payment its action, or if the asserted reason is found
of a bill, this deferral of debt is credit for to be a pretext for discrimination.
purposes of the regulation, even though Paragraph 4(b).
there is no finance charge and no agreement 1. Prospective applicants. Generally, the reg-
for payment in installments. Because of the ulation’s protections apply only to persons
exceptions provided by this section, however, who have requested or received an extension
jgilmore on DSK4WB1RN3PROD with CFR
these particular credit extensions are ex- of credit. In keeping with the purpose of the
cepted from compliance with certain proce- Act—to promote the availability of credit on
dural requirements as specified in § 1002.3(c). a nondiscriminatory basis—§ 1002.4(b) covers
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
acts or practices directed at prospective ap- ii. In contrast, if an applicant is physically
plicants that could discourage a reasonable present in the creditor’s office, and accesses
person, on a prohibited basis, from applying a credit application electronically, such as
for credit. Practices prohibited by this sec- via a terminal or kiosk (or if the applicant
tion include: uses a terminal or kiosk located on the
i. A statement that the applicant should premises of an affiliate or third party that
not bother to apply, after the applicant has arranged with the creditor to provide ap-
states that he is retired. plications to consumers), the creditor may
ii. The use of words, symbols, models or provide disclosures in either electronic or
other forms of communication in advertising paper form, provided the creditor complies
that express, imply, or suggest a discrimina- with the timing, delivery, and retainability
tory preference or a policy of exclusion in requirements of the regulation.
violation of the Act.
iii. The use of interview scripts that dis- Section 1002.5—Rules Concerning Requests for
courage applications on a prohibited basis. Information
2. Affirmative advertising. A creditor may af- 5(a) General rules.
firmatively solicit or encourage members of Paragraph 5(a)(1).
traditionally disadvantaged groups to apply 1. Requests for information. This section
for credit, especially groups that might not governs the types of information that a cred-
normally seek credit from that creditor. itor may gather. Section1002.6 governs how
Paragraph 4(c). information may be used.
1. Requirement for written applications. 5(a)(2) Required Collection of Information
Model application forms are provided in ap- 1. Local laws. Information that a creditor is
pendix B to the regulation, although use of a allowed to collect pursuant to a ‘‘state’’
printed form is not required. A creditor will statute or regulation includes information
satisfy the requirement by writing down the required by a local statute, regulation, or or-
information that it normally considers in dinance.
making a credit decision. The creditor may 2. Information required by Regulation C. Reg-
complete an application on behalf of an ap- ulation C, 12 CFR part 1003, generally re-
plicant and need not require the applicant to quires creditors covered by the Home Mort-
sign the application. gage Disclosure Act (HMDA) to collect and
2. Telephone applications. A creditor that report information about the race, ethnicity,
accepts applications by telephone for dwell- and sex of applicants for certain dwelling-se-
ing-related credit covered by § 1002.13 can cured loans, including some types of loans
meet the requirement for written applica- not covered by § 1002.13.
tions by writing down pertinent information 3. Collecting information on behalf of credi-
that is provided by the applicant. tors. Persons such as loan brokers and cor-
3. Computerized entry. Information entered respondents do not violate the ECOA or Reg-
directly into and retained by a computerized ulation B if they collect information that
system qualifies as a written application they are otherwise prohibited from col-
under this paragraph. (See the commentary lecting, where the purpose of collecting the
to § 1002.13(b), Applications through electronic information is to provide it to a creditor
media and Applications through video.) that is subject to subpart B of this part, the
Paragraph 4(d). Home Mortgage Disclosure Act, or another
1. Clear and conspicuous. This standard re- Federal or State statute or regulation re-
quires that disclosures be presented in a rea- quiring data collection.
sonably understandable format in a way that 4. Information required by subpart B. Sub-
does not obscure the required information. part B of this part generally requires credi-
No minimum type size is mandated, but the tors that are covered financial institutions
disclosures must be legible, whether type- as defined in § 1002.105(b) to collect and re-
written, handwritten, or printed by com- port information about the ethnicity, race,
puter. and sex of the principal owners of applicants
2. Form of disclosures. Whether the disclo- for certain small business credit, as well as
sures required to be on or with an applica- whether the applicant is a minority-owned
tion must be in electronic form depends upon business, a women-owned business, or an
the following: LGBTQI+-owned business, as defined in
i. If an applicant accesses a credit applica- § 1002.102(m), (s), and (l), respectively.
tion electronically (other than as described 5(a)(4) Other Permissible Collection of Infor-
under ii below), such as online at a home mation
computer, the creditor must provide the dis- 1. Other permissible collection of information.
closures in electronic form (such as with the Information regarding ethnicity, race, and
application form on its Web site) in order to sex that is not required to be collected pur-
meet the requirement to provide disclosures suant to Regulation C, 12 CFR part 1003, or
in a timely manner on or with the applica- subpart B of this part, may nevertheless be
jgilmore on DSK4WB1RN3PROD with CFR
tion. If the creditor instead mailed paper dis- collected under the circumstances set forth
closures to the applicant, this requirement in § 1002.5(a)(4) without violating § 1002.5(b).
would not be met. The information collected pursuant to 12
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
CFR part 1003 must be retained pursuant to employment cases decided by the U.S. Su-
the requirements of § 1002.12. The informa- preme Court under title VII of the Civil
tion collected pursuant to subpart B of this Rights Act of 1964 (42 U.S.C. 2000e et seq.,) and
part must be retained pursuant to the re- the burdens of proof for such employment
quirements set forth in § 1002.111. cases were codified by Congress in the Civil
5(d) Other limitations on information requests. Rights Act of 1991 (42 U.S.C. 2000e–2). Con-
Paragraph 5(d)(1). gressional intent that this doctrine apply to
1. Indirect disclosure of prohibited informa- the credit area is documented in the Senate
tion. The fact that certain credit-related in- Report that accompanied H.R. 6516, No. 94–
formation may indirectly disclose marital 589, pp. 4–5; and in the House Report that ac-
status does not bar a creditor from seeking companied H.R. 6516, No. 94–210, p.5. The Act
such information. For example, the creditor and regulation may prohibit a creditor prac-
may ask about: tice that is discriminatory in effect because
i. The applicant’s obligation to pay ali- it has a disproportionately negative impact
mony, child support, or separate mainte- on a prohibited basis, even though the cred-
nance income. itor has no intent to discriminate and the
ii. The source of income to be used as the practice appears neutral on its face, unless
basis for repaying the credit requested, the creditor practice meets a legitimate
which could disclose that it is the income of business need that cannot reasonably be
a spouse. achieved as well by means that are less dis-
iii. Whether any obligation disclosed by parate in their impact. For example, requir-
the applicant has a co-obligor, which could ing that applicants have income in excess of
disclose that the co-obligor is a spouse or a certain amount to qualify for an overdraft
former spouse. line of credit could mean that women and
iv. The ownership of assets, which could minority applicants will be rejected at a
disclose the interest of a spouse. higher rate than men and nonminority appli-
Paragraph 5(d)(2). cants. If there is a demonstrable relationship
1. Disclosure about income. The sample ap- between the income requirement and credit-
plication forms in appendix B to the regula- worthiness for the level of credit involved,
tion illustrate how a creditor may inform an however, use of the income standard would
applicant of the right not to disclose ali- likely be permissible.
mony, child support, or separate mainte- 6(b) Specific rules concerning use of informa-
nance income. tion.
2. General inquiry about source of income. Paragraph 6(b)(1).
Since a general inquiry about the source of 1. Prohibited basis—special purpose credit.
income may lead an applicant to disclose ali- In a special purpose credit program, a cred-
mony, child support, or separate mainte- itor may consider a prohibited basis to deter-
nance income, a creditor making such an in- mine whether the applicant possesses a char-
quiry on an application form should preface acteristic needed for eligibility. (See § 1002.8.)
the request with the disclosure required by Paragraph 6(b)(2).
this paragraph. 1. Favoring the elderly. Any system of eval-
3. Specific inquiry about sources of income. A uating creditworthiness may favor a credit
creditor need not give the disclosure if the applicant who is age 62 or older. A credit pro-
inquiry about income is specific and worded gram that offers more favorable credit terms
in a way that is unlikely to lead the appli- to applicants age 62 or older is also permis-
cant to disclose the fact that income is de- sible; a program that offers more favorable
rived from alimony, child support, or sepa- credit terms to applicants at an age lower
rate maintenance payments. For example, an than 62 is permissible only if it meets the
application form that asks about specific special-purpose credit requirements of
types of income such as salary, wages, or in- § 1002.8.
vestment income need not include the disclo- 2. Consideration of age in a credit scoring sys-
sure. tem. Age may be taken directly into account
in a credit scoring system that is ‘‘demon-
Section 1002.6—Rules Concerning Evaluation of
strably and statistically sound,’’ as defined
Applications
in § 1002.2(p), with one limitation: Applicants
6(a) General rule concerning use of informa- age 62 years or older must be treated at least
tion. as favorably as applicants who are under age
1. General. When evaluating an application 62. If age is scored by assigning points to an
for credit, a creditor generally may consider applicant’s age category, elderly applicants
any information obtained. However, a cred- must receive the same or a greater number
itor may not consider in its evaluation of of points as the most favored class of non-
creditworthiness any information that it is elderly applicants.
barred by § 1002.5 from obtaining or from i. Age-split scorecards. Some credit systems
using for any purpose other than to conduct segment the population and use different
jgilmore on DSK4WB1RN3PROD with CFR
a self-test under § 1002.15. scorecards based on the age of an applicant.
2. Effects test. The effects test is a judicial In such a system, one card may cover a nar-
doctrine that was developed in a series of row age range (for example, applicants in
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
their twenties or younger) who are evaluated moves permanently from the home, or trans-
under attributes predictive for that age fers title to the home, or upon a specified
group. A second card may cover all other ap- maturity date. Disbursements to the bor-
plicants, who are evaluated under the at- rower under a reverse mortgage typically are
tributes predictive for that broader class. determined by considering the value of the
When a system uses a card covering a wide borrower’s home, the current interest rate,
age range that encompasses elderly appli- and the borrower’s life expectancy. A reverse
cants, the credit scoring system is not mortgage program that requires borrowers
deemed to score age. Thus, the system does to be age 62 or older is permissible under
not raise the issue of assigning a negative § 1002.6(b)(2)(iv). In addition, under
factor or value to the age of elderly appli- § 1002.6(b)(2)(iii), a creditor may consider a
cants. But if a system segments the popu- borrower’s age to evaluate a pertinent ele-
lation by age into multiple scorecards, and ment of creditworthiness, such as the
includes elderly applicants in a narrower age amount of the credit or monthly payments
range, the credit scoring system does score that the borrower will receive, or the esti-
age. To comply with the Act and regulation mated repayment date.
in such a case, the creditor must ensure that 5. Consideration of age in a combined system.
the system does not assign a negative factor A creditor using a credit scoring system that
or value to the age of elderly applicants as a qualifies as ‘‘empirically derived’’ under
class. § 1002.2(p) may consider other factors (such as
3. Consideration of age in a judgmental sys- a credit report or the applicant’s cash flow)
tem. In a judgmental system, defined in on a judgmental basis. Doing so will not ne-
§ 1002.2(t), a creditor may not decide whether gate the classification of the credit scoring
to extend credit or set the terms and condi- component of the combined system as ‘‘de-
tions of credit based on age or information monstrably and statistically sound.’’ While
related exclusively to age. Age or age-related age could be used in the credit scoring por-
information may be considered only in eval- tion, however, in the judgmental portion age
uating other ‘‘pertinent elements of credit- may not be considered directly. It may be
worthiness’’ that are drawn from the par- used only for the purpose of determining a
ticular facts and circumstances concerning ‘‘pertinent element of creditworthiness.’’
the applicant. For example, a creditor may (See comment 6(b)(2)–3.)
not reject an application or terminate an ac- 6. Consideration of public assistance. When
count because the applicant is 60 years old. considering income derived from a public as-
But a creditor that uses a judgmental sys- sistance program, a creditor may take into
tem may relate the applicant’s age to other account, for example:
information about the applicant that the i. The length of time an applicant will
creditor considers in evaluating credit- likely remain eligible to receive such in-
worthiness. As the following examples illus- come.
trate, the evaluation must be made in an in- ii. Whether the applicant will continue to
dividualized, case-by-case manner: qualify for benefits based on the status of
i. A creditor may consider the applicant’s the applicant’s dependents (as in the case of
occupation and length of time to retirement Temporary Aid to Needy Families, or social
to ascertain whether the applicant’s income security payments to a minor).
(including retirement income) will support iii. Whether the creditor can attach or gar-
the extension of credit to its maturity. nish the income to assure payment of the
ii. A creditor may consider the adequacy of debt in the event of default.
any security offered when the term of the Paragraph 6(b)(5).
credit extension exceeds the life expectancy 1. Consideration of an individual applicant. A
of the applicant and the cost of realizing on creditor must evaluate income derived from
the collateral could exceed the applicant’s part-time employment, alimony, child sup-
equity. An elderly applicant might not qual- port, separate maintenance payments, re-
ify for a 5 percent down, 30-year mortgage tirement benefits, or public assistance on an
loan but might qualify with a larger down- individual basis, not on the basis of aggre-
payment or a shorter loan maturity. gate statistics; and must assess its reli-
iii. A creditor may consider the applicant’s ability or unreliability by analyzing the ap-
age to assess the significance of length of plicant’s actual circumstances, not by ana-
employment (a young applicant may have lyzing statistical measures derived from a
just entered the job market) or length of group.
time at an address (an elderly applicant may 2. Payments consistently made. In deter-
recently have retired and moved from a long- mining the likelihood of consistent pay-
term residence). ments of alimony, child support, or separate
4. Consideration of age in a reverse mortgage. maintenance, a creditor may consider fac-
A reverse mortgage is a home-secured loan tors such as whether payments are received
in which the borrower receives payments pursuant to a written agreement or court de-
jgilmore on DSK4WB1RN3PROD with CFR
from the creditor, and does not become obli- cree; the length of time that the payments
gated to repay these amounts (other than in have been received; whether the payments
the case of default) until the borrower dies, are regularly received by the applicant; the
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
availability of court or other procedures to sider immigration status and differentiate,
compel payment; and the creditworthiness of for example, between a noncitizen who is a
the payor, including the credit history of the long-time resident with permanent resident
payor when it is available to the creditor. status and a noncitizen who is temporarily
3. Consideration of income. in this country on a student visa.
i. A creditor need not consider income at 2. National origin—citizenship. A denial of
all in evaluating creditworthiness. If a cred- credit on the ground that an applicant is not
itor does consider income, there are several a United States citizen is not per se discrimi-
acceptable methods, whether in a credit nation based on national origin.
scoring or a judgmental system: Paragraph 6(b)(8).
A. A creditor may score or take into ac- 1. Prohibited basis—marital status. A creditor
count the total sum of all income stated by may consider the marital status of an appli-
the applicant without taking steps to evalu- cant or joint applicant for the purpose of
ate the income for reliability. ascertaining the creditor’s rights and rem-
B. A creditor may evaluate each compo- edies applicable to the particular extension
nent of the applicant’s income, and then of credit. For example, in a secured trans-
score or take into account income deter- action involving real property, a creditor
mined to be reliable separately from other could take into account whether state law
income; or the creditor may disregard that gives the applicant’s spouse an interest in
portion of income that is not reliable when it the property being offered as collateral.
aggregates reliable income.
C. A creditor that does not evaluate all in- Section 1002.7—Rules Concerning Extensions of
come components for reliability must treat Credit
as reliable any component of protected in- 7(a) Individual accounts.
come that is not evaluated. 1. Open-end credit—authorized user. A cred-
ii. In considering the separate components itor may not require a creditworthy appli-
of an applicant’s income, the creditor may cant seeking an individual credit account to
not automatically discount or exclude from provide additional signatures. But the cred-
consideration any protected income. Any itor may condition the designation of an au-
discounting or exclusion must be based on thorized user by the account holder on the
the applicant’s actual circumstances. authorized user’s becoming contractually
4. Part-time employment, sources of income. A liable for the account, as long as the creditor
creditor may score or take into account the does not differentiate on any prohibited
fact that an applicant has more than one basis in imposing this requirement.
source of earned income—a full-time and a 2. Open-end credit—choice of authorized user.
part-time job or two part-time jobs. A cred- A creditor that permits an account holder to
itor may also score or treat earned income designate an authorized user may not re-
from a secondary source differently than strict this designation on a prohibited basis.
earned income from a primary source. The For example, if the creditor allows the des-
creditor may not, however, score or other- ignation of spouses as authorized users, the
wise take into account the number of creditor may not refuse to accept a non-
sources for income such as retirement in- spouse as an authorized user.
come, social security, supplemental security 3. Overdraft authority on transaction ac-
income, and alimony. Nor may the creditor counts. If a transaction account (such as a
treat negatively the fact that an applicant’s checking account or NOW account) includes
only earned income is derived from, for ex- an overdraft line of credit, the creditor may
ample, a part-time job. require that all persons authorized to draw
Paragraph 6(b)(6). on the transaction account assume liability
1. Types of credit references. A creditor may for any overdraft.
restrict the types of credit history and credit 7(b) Designation of name.
references that it will consider, provided 1. Single name on account. A creditor may
that the restrictions are applied to all credit require that joint applicants on an account
applicants without regard to sex, marital designate a single name for purposes of ad-
status, or any other prohibited basis. On the ministering the account and that a single
applicant’s request, however, a creditor must name be embossed on any credit cards issued
consider credit information not reported on the account. But the creditor may not re-
through a credit bureau when the informa- quire that the name be the husband’s name.
tion relates to the same types of credit ref- (See § 1002.10 for rules governing the fur-
erences and history that the creditor would nishing of credit history on accounts held by
consider if reported through a credit bureau. spouses.)
Paragraph 6(b)(7). 7(c) Action concerning existing open-end ac-
1. National origin—immigration status. The counts.
applicant’s immigration status and ties to Paragraph 7(c)(1).
the community (such as employment and 1. Termination coincidental with marital sta-
jgilmore on DSK4WB1RN3PROD with CFR
continued residence in the area) could have a tus change. When an account holder’s marital
bearing on a creditor’s ability to obtain re- status changes, a creditor generally may not
payment. Accordingly, the creditor may con- terminate the account unless it has evidence
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
that the account holder is now unable or un- as a condition for granting the credit re-
willing to repay. But the creditor may termi- quested.
nate an account on which both spouses are 3. Evidence of joint application. A person’s
jointly liable, even if the action coincides intent to be a joint applicant must be evi-
with a change in marital status, when one or denced at the time of application. Signatures
both spouses: on a promissory note may not be used to
i. Repudiate responsibility for future show intent to apply for joint credit. On the
charges on the joint account. other hand, signatures or initials on a credit
ii. Request separate accounts in their own application affirming applicants’ intent to
names. apply for joint credit may be used to estab-
iii. Request that the joint account be lish intent to apply for joint credit. (See ap-
closed. pendix B.) The method used to establish in-
2. Updating information. A creditor may pe- tent must be distinct from the means used
riodically request updated information from by individuals to affirm the accuracy of in-
applicants but may not use events related to formation. For example, signatures on a
a prohibited basis—such as an applicant’s re- joint financial statement affirming the ve-
tirement or reaching a particular age, or a racity of information are not sufficient to es-
change in name or marital status—to trigger tablish intent to apply for joint credit.
such a request. Paragraph 7(d)(2).
Paragraph 7(c)(2). 1. Jointly owned property. If an applicant re-
1. Procedure pending reapplication. A cred- quests unsecured credit, does not own suffi-
itor may require a reapplication from an ac- cient separate property, and relies on joint
count holder, even when there is no evidence property to establish creditworthiness, the
of unwillingness or inability to repay, if (1) creditor must value the applicant’s interest
the credit was based on the qualifications of in the jointly owned property. A creditor
a person who is no longer available to sup- may not request that a nonapplicant joint
port the credit and (2) the creditor has infor- owner sign any instrument as a condition of
mation indicating that the account holder’s the credit extension unless the applicant’s
income may be insufficient to support the interest does not support the amount and
credit. While a reapplication is pending, the terms of the credit sought.
creditor must allow the account holder full i. Valuation of applicant’s interest. In deter-
access to the account under the existing con- mining the value of an applicant’s interest in
tract terms. The creditor may specify a rea- jointly owned property, a creditor may con-
sonable time period within which the ac- sider factors such as the form of ownership
count holder must submit the required infor- and the property’s susceptibility to attach-
mation. ment, execution, severance, or partition; the
7(d) Signature of spouse or other person. value of the applicant’s interest after such
1. Qualified applicant. The signature rules action; and the cost associated with the ac-
ensure that qualified applicants are able to tion. This determination must be based on
obtain credit in their own names. Thus, the existing form of ownership, and not on
when an applicant requests individual credit, the possibility of a subsequent change. For
a creditor generally may not require the sig- example, in determining whether a married
nature of another person unless the creditor applicant’s interest in jointly owned prop-
has first determined that the applicant alone erty is sufficient to satisfy the creditor’s
does not qualify for the credit requested. standards of creditworthiness for individual
2. Unqualified applicant. When an applicant credit, a creditor may not consider that the
requests individual credit but does not meet applicant’s separate property could be trans-
a creditor’s standards, the creditor may re- ferred into tenancy by the entirety after
quire a cosigner, guarantor, endorser, or consummation. Similarly, a creditor may
similar party—but cannot require that it be not consider the possibility that the couple
the spouse. (See commentary to §§ 1002.7(d)(5) may divorce. Accordingly, a creditor may
and (6).) not require the signature of the non-appli-
Paragraph 7(d)(1). cant spouse in these or similar cir-
1. Signature of another person. It is imper- cumstances.
missible for a creditor to require an appli- ii. Other options to support credit. If the ap-
cant who is individually creditworthy to pro- plicant’s interest in jointly owned property
vide a cosigner—even if the creditor applies does not support the amount and terms of
the requirement without regard to sex, mar- credit sought, the creditor may offer the ap-
ital status, or any other prohibited basis. plicant other options to qualify for the ex-
(But see comment 7(d)(6)–1 concerning guar- tension of credit. For example:
antors of closely held corporations.) A. Providing a co-signer or other party
2. Joint applicant. The term ‘‘joint appli- (§ 1002.7(d)(5));
cant’’ refers to someone who applies contem- B. Requesting that the credit be granted
jgilmore on DSK4WB1RN3PROD with CFR
poraneously with the applicant for shared or on a secured basis (§ 1002.7(d)(4)); or
joint credit. It does not refer to someone C. Providing the signature of the joint
whose signature is required by the creditor owner on an instrument that ensures access
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
to the property in the event of the appli- antors, cosigners, or similar additional par-
cant’s death or default, but does not impose ties, a creditor may restrict the applicant’s
personal liability unless necessary under choice of additional parties but may not dis-
state law (such as a limited guarantee). A criminate on the basis of sex, marital status,
creditor may not routinely require, however, or any other prohibited basis. For example,
that a joint owner sign an instrument (such the creditor could require that the addi-
as a quitclaim deed) that would result in the tional party live in the creditor’s market
forfeiture of the joint owner’s interest in the area.
property.
2. Reliance on income of another person—in-
2. Need for signature—reasonable belief. A
dividual credit. An applicant who requests in-
creditor’s reasonable belief as to what in-
struments need to be signed by a person dividual credit relying on the income of an-
other than the applicant should be supported other person (including a spouse in a non-
by a thorough review of pertinent statutory community property state) may be required
and decisional law or an opinion of the state to provide the signature of the other person
attorney general. to make the income available to pay the
Paragraph 7(d)(3). debt. In community property states, the sig-
1. Residency. In assessing the creditworthi- nature of a spouse may be required if the ap-
ness of a person who applies for credit in a plicant relies on the spouse’s separate in-
community property state, a creditor may come. If the applicant relies on the spouse’s
assume that the applicant is a resident of future earnings that as a matter of state law
the state unless the applicant indicates oth- cannot be characterized as community prop-
erwise. erty until earned, the creditor may require
Paragraph 7(d)(4). the spouse’s signature, but need not do so—
1. Creation of enforceable lien. Some state even if it is the creditor’s practice to require
laws require that both spouses join in exe- the signature when an applicant relies on the
cuting any instrument by which real prop- future earnings of a person other than a
erty is encumbered. If an applicant offers
spouse. (See § 1002.6(c) on consideration of
such property as security for credit, a cred-
state property laws.)
itor may require the applicant’s spouse to
sign the instruments necessary to create a 3. Renewals. If the borrower’s creditworthi-
valid security interest in the property. The ness is reevaluated when a credit obligation
creditor may not require the spouse to sign is renewed, the creditor must determine
the note evidencing the credit obligation if whether an additional party is still war-
signing only the mortgage or other security ranted and, if not warranted, release the ad-
agreement is sufficient to make the property ditional party.
available to satisfy the debt in the event of Paragraph 7(d)(6).
default. However, if under state law both 1. Guarantees. A guarantee on an extension
spouses must sign the note to create an en- of credit is part of a credit transaction and
forceable lien, the creditor may require the therefore subject to the regulation. A cred-
signatures. itor may require the personal guarantee of
2. Need for signature—reasonable belief. Gen- the partners, directors, or officers of a busi-
erally, a signature to make the secured prop- ness, and the shareholders of a closely held
erty available will only be needed on a secu- corporation, even if the business or corpora-
rity agreement. A creditor’s reasonable be- tion is creditworthy. The requirement must
lief that, to ensure access to the property, be based on the guarantor’s relationship
the spouse’s signature is needed on an in- with the business or corporation, however,
strument that imposes personal liability and not on a prohibited basis. For example,
should be supported by a thorough review of a creditor may not require guarantees only
pertinent statutory and decisional law or an
for women-owned or minority-owned busi-
opinion of the state attorney general.
nesses. Similarly, a creditor may not require
3. Integrated instruments. When a creditor
guarantees only of the married officers of a
uses an integrated instrument that combines
business or the married shareholders of a
the note and the security agreement, the
spouse cannot be asked to sign the inte- closely held corporation.
grated instrument if the signature is only 2. Spousal guarantees. The rules in § 1002.7(d)
needed to grant a security interest. But the bar a creditor from requiring the signature
spouse could be asked to sign an integrated of a guarantor’s spouse just as they bar the
instrument that makes clear—for example, creditor from requiring the signature of an
by a legend placed next to the spouse’s signa- applicant’s spouse. For example, although a
ture—that the spouse’s signature is only to creditor may require all officers of a closely
grant a security interest and that signing held corporation to personally guarantee a
the instrument does not impose personal li- corporate loan, the creditor may not auto-
ability. matically require that spouses of married of-
jgilmore on DSK4WB1RN3PROD with CFR
Paragraph 7(d)(5). ficers also sign the guarantee. If an evalua-
1. Qualifications of additional parties. In es- tion of the financial circumstances of an of-
tablishing guidelines for eligibility of guar- ficer indicates that an additional signature
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
is necessary, however, the creditor may re- data for its assessment area and conclude
quire the signature of another person in ap- that there is a need for a special purpose
propriate circumstances in accordance with credit program for low-income minority bor-
§ 1002.7(d)(2). rowers.
7(e) Insurance. 6. Elements of the program. The written plan
1. Differences in terms. Differences in the must contain information that supports the
availability, rates, and other terms on which need for the particular program. The plan
credit-related casualty insurance or credit also must either state a specific period of
life, health, accident, or disability insurance time for which the program will last, or con-
is offered or provided to an applicant does tain a statement regarding when the pro-
not violate Regulation B. gram will be reevaluated to determine if
2. Insurance information. A creditor may ob- there is a continuing need for it.
tain information about an applicant’s age, 8(b) Rules in other sections.
sex, or marital status for insurance purposes. 1. Applicability of rules. A creditor that re-
The information may only be used for deter- jects an application because the applicant
mining eligibility and premium rates for in- does not meet the eligibility requirements
surance, however, and not in making the (common characteristic or financial need,
credit decision. for example) must nevertheless notify the
Section 1002.8—Special Purpose Credit Programs applicant of action taken as required by
§ 1002.9.
8(a) Standards for programs. 8(c) Special rule concerning requests and use
1. Determining qualified programs. The Bu- of information.
reau does not determine whether individual 1. Request of prohibited basis information.
programs qualify for special purpose credit This section permits a creditor to request
status, or whether a particular program ben- and consider certain information that would
efits an ‘‘economically disadvantaged class otherwise be prohibited by §§ 1002.5 and 1002.6
of persons.’’ The agency or creditor admin- to determine an applicant’s eligibility for a
istering or offering the loan program must particular program.
make these decisions regarding the status of 2. Examples. Examples of programs under
its program. which the creditor can ask for and consider
2. Compliance with a program authorized by information about a prohibited basis are:
Federal or state law. A creditor does not vio- i. Energy conservation programs to assist
late Regulation B when it complies in good the elderly, for which the creditor must con-
faith with a regulation promulgated by a
sider the applicant’s age.
government agency implementing a special
ii. Programs under a Minority Enterprise
purpose credit program under § 1002.8(a)(1). It
Small Business Investment Corporation, for
is the agency’s responsibility to promulgate
which a creditor must consider the appli-
a regulation that is consistent with Federal
cant’s minority status.
and state law.
3. Expressly authorized. Credit programs au- 8(d) Special rule in the case of financial need.
thorized by Federal or state law include pro- 1. Request of prohibited basis information.
grams offered pursuant to Federal, state, or This section permits a creditor to request
local statute, regulation or ordinance, or and consider certain information that would
pursuant to judicial or administrative order. otherwise be prohibited by §§ 1002.5 and 1002.6,
4. Creditor liability. A refusal to grant credit and to require signatures that would other-
to an applicant is not a violation of the Act wise be prohibited by § 1002.7(d).
or regulation if the applicant does not meet 2. Examples. Examples of programs in
the eligibility requirements under a special which financial need is a criterion are:
purpose credit program. i. Subsidized housing programs for low-to
5. Determining need. In designing a special moderate-income households, for which a
purpose credit program under § 1002.8(a), a creditor may have to consider the appli-
for-profit organization must determine that cant’s receipt of alimony or child support,
the program will benefit a class of people the spouse’s or parents’ income, etc.
who would otherwise be denied credit or ii. Student loan programs based on the
would receive it on less favorable terms. This family’s financial need, for which a creditor
determination can be based on a broad anal- may have to consider the spouse’s or par-
ysis using the organization’s own research or ents’ financial resources.
data from outside sources, including govern- 3. Student loans. In a guaranteed student
mental reports and studies. For example, a loan program, a creditor may obtain the sig-
creditor might design new products to reach nature of a parent as a guarantor when re-
consumers who would not meet, or have not quired by Federal or state law or agency reg-
met, its traditional standards of credit- ulation, or when the student does not meet
worthiness due to such factors as credit inex- the creditor’s standards of creditworthiness.
perience or the use of credit sources that (See §§ 1002.7(d)(1) and (5).) The creditor may
jgilmore on DSK4WB1RN3PROD with CFR
may not report to consumer reporting agen- not require an additional signature when a
cies. Or, a bank could review Home Mortgage student has a work or credit history that
Disclosure Act data along with demographic satisfies the creditor’s standards.
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
Section 1002.9—Notifications plicant the credit card, money, property, or
services requested.
1. Use of the term adverse action. The regula-
tion does not require that a creditor use the 3. Incomplete application—denial for incom-
term adverse action in communicating to an pleteness. When an application is incomplete
applicant that a request for an extension of regarding information that the applicant can
credit has not been approved. In notifying an provide and the creditor lacks sufficient data
applicant of adverse action as defined by for a credit decision, the creditor may deny
§ 1002.2(c)(1), a creditor may use any words or the application giving as the reason for de-
phrases that describe the action taken on nial that the application is incomplete. The
the application. creditor has the option, alternatively, of pro-
2. Expressly withdrawn applications. When viding a notice of incompleteness under
an applicant expressly withdraws a credit ap- § 1002.9(c).
plication, the creditor is not required to 4. Incomplete application—denial for reasons
comply with the notification requirements other than incompleteness. When an applica-
under § 1002.9. (The creditor must comply, tion is missing information but provides suf-
however, with the record retention require- ficient data for a credit decision, the cred-
ments of the regulation. See § 1002.12(b)(3).) itor may evaluate the application, make its
3. When notification occurs. Notification oc- credit decision, and notify the applicant ac-
curs when a creditor delivers or mails a no- cordingly. If credit is denied, the applicant
tice to the applicant’s last known address or, must be given the specific reasons for the
in the case of an oral notification, when the credit denial (or notice of the right to re-
creditor communicates the credit decision to ceive the reasons); in this instance missing
the applicant. information or ‘‘incomplete application’’
4. Location of notice. The notifications re- cannot be given as the reason for the denial.
quired under § 1002.9 may appear on either or 5. Length of counteroffer. Section
both sides of a form or letter. 1002.9(a)(1)(iv) does not require a creditor to
5. Prequalification requests. Whether a cred- hold a counteroffer open for 90 days or any
itor must provide a notice of action taken other particular length of time.
for a prequalification request depends on the 6. Counteroffer combined with adverse action
creditor’s response to the request, as dis- notice. A creditor that gives the applicant a
cussed in comment 2(f)-3. For instance, a combined counteroffer and adverse action
creditor may treat the request as an inquiry notice that complies with § 1002.9(a)(2) need
if the creditor evaluates specific information not send a second adverse action notice if
about the consumer and tells the consumer the applicant does not accept the
the loan amount, rate, and other terms of counteroffer. A sample of a combined notice
credit the consumer could qualify for under is contained in form C–4 of appendix C to the
various loan programs, explaining the proc- regulation.
ess the consumer must follow to submit a
7. Denial of a telephone application. When an
mortgage application and the information
application is made by telephone and adverse
the creditor will analyze in reaching a credit
action is taken, the creditor must request
decision. On the other hand, a creditor has
the applicant’s name and address in order to
treated a request as an application, and is
provide written notification under this sec-
subject to the adverse action notice require-
tion. If the applicant declines to provide that
ments of § 1002.9 if, after evaluating informa-
information, then the creditor has no further
tion, the creditor decides that it will not ap-
notification responsibility.
prove the request and communicates that de-
cision to the consumer. For example, if the Paragraph 9(a)(3).
creditor tells the consumer that it would not 1. Coverage. In determining which rules in
approve an application for a mortgage be- this paragraph apply to a given business
cause of a bankruptcy in the consumer’s credit application, a creditor may rely on
record, the creditor has denied an applica- the applicant’s assertion about the revenue
tion for credit. size of the business. (Applications to start a
9(a) Notification of action taken, ECOA no- business are governed by the rules in
tice, and statement of specific reasons. § 1002.9(a)(3)(i).) If an applicant applies for
Paragraph 9(a)(1). credit as a sole proprietor, the revenues of
1. Timing of notice—when an application is the sole proprietorship will determine which
complete. Once a creditor has obtained all the rules govern the application. However, if an
information it normally considers in making applicant applies for business credit as an in-
a credit decision, the application is complete dividual, the rules in § 1002.9(a)(3)(i) apply
and the creditor has 30 days in which to no- unless the application is for trade or similar
tify the applicant of the credit decision. (See credit.
also comment 2(f)-6.) 2. Trade credit. The term trade credit gen-
2. Notification of approval. Notification of erally is limited to a financing arrangement
jgilmore on DSK4WB1RN3PROD with CFR
approval may be express or by implication. that involves a buyer and a seller—such as a
For example, the creditor will satisfy the no- supplier who finances the sale of equipment,
tification requirement when it gives the ap- supplies, or inventory; it does not apply to
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
an extension of credit by a bank or other fi- ample, ‘‘age of automobile’’) even if the rela-
nancial institution for the financing of such tionship of that factor to predicting credit-
items. worthiness may not be clear to the appli-
3. Factoring. Factoring refers to a purchase cant.
of accounts receivable, and thus is not sub- 5. Credit scoring—method for selecting rea-
ject to the Act or regulation. If there is a sons. The regulation does not require that
credit extension incident to the factoring ar- any one method be used for selecting reasons
rangement, the notification rules in for a credit denial or other adverse action
§ 1002.9(a)(3)(ii) apply, as do other relevant that is based on a credit scoring system.
sections of the Act and regulation. Various methods will meet the requirements
4. Manner of compliance. In complying with of the regulation. One method is to identify
the notice provisions of the Act and regula- the factors for which the applicant’s score
tion, creditors offering business credit may fell furthest below the average score for each
follow the rules governing consumer credit. of those factors achieved by applicants
Similarly, creditors may elect to treat all whose total score was at or slightly above
business credit the same (irrespective of rev- the minimum passing score. Another method
enue size) by providing notice in accordance is to identify the factors for which the appli-
with § 1002.9(a)(3)(i). cant’s score fell furthest below the average
5. Timing of notification. A creditor subject score for each of those factors achieved by
to § 1002.9(a)(3)(ii)(A) is required to notify a all applicants. These average scores could be
business credit applicant, orally or in writ- calculated during the development or use of
ing, of action taken on an application within the system. Any other method that produces
a reasonable time of receiving a completed results substantially similar to either of
application. Notice provided in accordance these methods is also acceptable under the
with the timing requirements of § 1002.9(a)(1) regulation.
is deemed reasonable in all instances. 6. Judgmental system. If a creditor uses a
9(b) Form of ECOA notice and statement of judgmental system, the reasons for the de-
specific reasons. nial or other adverse action must relate to
Paragraph 9(b)(1). those factors in the applicant’s record actu-
1. Substantially similar notice. The ECOA no- ally reviewed by the person making the deci-
tice sent with a notification of a credit de- sion.
nial or other adverse action will comply with 7. Combined credit scoring and judgmental
the regulation if it is ‘‘substantially similar’’ system. If a creditor denies an application
to the notice contained in § 1002.9(b)(1). For based on a credit evaluation system that em-
example, a creditor may add a reference to ploys both credit scoring and judgmental
the fact that the ECOA permits age to be components, the reasons for the denial must
considered in certain credit scoring systems, come from the component of the system that
or add a reference to a similar state statute the applicant failed. For example, if a cred-
or regulation and to a state enforcement itor initially credit scores an application and
agency. denies the credit request as a result of that
Paragraph 9(b)(2). scoring, the reasons disclosed to the appli-
1. Number of specific reasons. A creditor cant must relate to the factors scored in the
must disclose the principal reasons for deny- system. If the application passes the credit
ing an application or taking other adverse scoring stage but the creditor then denies
action. The regulation does not mandate the credit request based on a judgmental as-
that a specific number of reasons be dis- sessment of the applicant’s record, the rea-
closed, but disclosure of more than four rea- sons disclosed must relate to the factors re-
sons is not likely to be helpful to the appli- viewed judgmentally, even if the factors
cant. were also considered in the credit scoring
2. Source of specific reasons. The specific component. If the application is not ap-
reasons disclosed under §§ 1002.9(a)(2) and proved or denied as a result of the credit
(b)(2) must relate to and accurately describe scoring, but falls into a gray band, and the
the factors actually considered or scored by creditor performs a judgmental assessment
a creditor. and denies the credit after that assessment,
3. Description of reasons. A creditor need the reasons disclosed must come from both
not describe how or why a factor adversely components of the system. The same result
affected an applicant. For example, the no- applies where a judgmental assessment is the
tice may say ‘‘length of residence’’ rather first component of the combined system. As
than ‘‘too short a period of residence.’’ provided in comment 9(b)(2)–1, disclosure of
4. Credit scoring system. If a creditor bases more than a combined total of four reasons
the denial or other adverse action on a credit is not likely to be helpful to the applicant.
scoring system, the reasons disclosed must 8. Automatic denial. Some credit decision
relate only to those factors actually scored methods contain features that call for auto-
in the system. Moreover, no factor that was matic denial because of one or more negative
jgilmore on DSK4WB1RN3PROD with CFR
a principal reason for adverse action may be factors in the applicant’s record (such as the
excluded from disclosure. The creditor must applicant’s previous bad credit history with
disclose the actual reasons for denial (for ex- that creditor, the applicant’s declaration of
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
bankruptcy, or the fact that the applicant is 1. Third parties. The notification of adverse
a minor). When a creditor denies the credit action may be given by one of the creditors
request because of an automatic-denial fac- to whom an application was submitted, or by
tor, the creditor must disclose that specific a noncreditor third party. If one notification
factor. is provided on behalf of multiple creditors,
9. Combined ECOA–FCRA disclosures. The the notice must contain the name and ad-
ECOA requires disclosure of the principal dress of each creditor. The notice must ei-
reasons for denying or taking other adverse ther disclose the applicant’s right to a state-
action on an application for an extension of ment of specific reasons within 30 days, or
credit. The Fair Credit Reporting Act give the primary reasons each creditor relied
(FCRA) requires a creditor to disclose when upon in taking the adverse action—clearly
it has based its decision in whole or in part indicating which reasons relate to which
on information from a source other than the creditor.
applicant or its own files. Disclosing that a 2. Third party notice—enforcement agency. If
credit report was obtained and used in the a single adverse action notice is being pro-
denial of the application, as the FCRA re- vided to an applicant on behalf of several
quires, does not satisfy the ECOA require- creditors and they are under the jurisdiction
ment to disclose specific reasons. For exam- of different Federal enforcement agencies,
ple, if the applicant’s credit history reveals the notice need not name each agency; dis-
delinquent credit obligations and the appli- closure of any one of them will suffice.
cation is denied for that reason, to satisfy 3. Third-party notice—liability. When a no-
§ 1002.9(b)(2) the creditor must disclose that tice is to be provided through a third party,
the application was denied because of the ap- a creditor is not liable for an act or omission
plicant’s delinquent credit obligations. The of the third party that constitutes a viola-
FCRA also requires a creditor to disclose, as tion of the regulation if the creditor accu-
applicable, a credit score it used in taking rately and in a timely manner provided the
adverse action along with related informa- third party with the information necessary
tion, including up to four key factors that for the notification and maintains reason-
adversely affected the consumer’s credit able procedures adapted to prevent such vio-
score (or up to five factors if the number of lations.
inquiries made with respect to that con- Section 1002.10—Furnishing of Credit
sumer report is a key factor). Disclosing the Information
key factors that adversely affected the con-
sumer’s credit score does not satisfy the 1. Scope. The requirements of § 1002.10 for
ECOA requirement to disclose specific rea- designating and reporting credit information
sons for denying or taking other adverse ac- apply only to consumer credit transactions.
tion on an application or extension of credit. Moreover, they apply only to creditors that
Sample forms C–1 through C–5 of appendix C opt to furnish credit information to credit
of the regulation provide for both the ECOA bureaus or to other creditors; there is no re-
and FCRA disclosures. See also comment quirement that a creditor furnish credit in-
9(b)(2)–1. formation on its accounts.
9(c) Incomplete applications. 2. Reporting on all accounts. The require-
ments of § 1002.10 apply only to accounts held
Paragraph 9(c)(1).
or used by spouses. However, a creditor has
1. Exception for preapprovals. The require-
the option to designate all joint accounts (or
ment to provide a notice of incompleteness
all accounts with an authorized user) to re-
does not apply to preapprovals that con-
flect the participation of both parties,
stitute applications under § 1002.2(f). whether or not the accounts are held by per-
Paragraph 9(c)(2). sons married to each other.
1. Reapplication. If information requested 3. Designating accounts. In designating ac-
by a creditor is submitted by an applicant counts and reporting credit information, a
after the expiration of the time period des- creditor need not distinguish between ac-
ignated by the creditor, the creditor may re- counts on which the spouse is an authorized
quire the applicant to make a new applica- user and accounts on which the spouse is a
tion. contractually liable party.
Paragraph 9(c)(3). 4. File and index systems. The regulation
1. Oral inquiries for additional information. If does not require the creation or maintenance
an applicant fails to provide the information of separate files in the name of each partici-
in response to an oral request, a creditor pant on a joint or user account, or require
must send a written notice to the applicant any other particular system of record-
within the 30-day period specified in keeping or indexing. It requires only that a
§§ 1002.9(c)(1) and (2). If the applicant provides creditor be able to report information in the
the information, the creditor must take ac- name of each spouse on accounts covered by
tion on the application and notify the appli- § 1002.10. Thus, if a creditor receives a credit
jgilmore on DSK4WB1RN3PROD with CFR
cant in accordance with § 1002.9(a). inquiry about the wife, it should be able to
9(g) Applications submitted through a third locate her credit file without asking the hus-
party. band’s name.
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
10(a) Designation of accounts. ernment-sponsored programs identified in
1. New parties. When new parties who are the state law.
spouses undertake a legal obligation on an
account, as in the case of a mortgage loan Section 1002.12—Record Retention
assumption, the creditor must change the
12(a) Retention of prohibited information.
designation on the account to reflect the
new parties and must furnish subsequent 1. Receipt of prohibited information. Unless
credit information on the account in the new the creditor specifically requested such in-
names. formation, a creditor does not violate this
2. Request to change designation of account. section when it receives prohibited informa-
A request to change the manner in which in- tion from a consumer reporting agency.
formation concerning an account is fur- 2. Use of retained information. Although a
nished does not alter the legal liability of ei- creditor may keep in its files prohibited in-
ther spouse on the account and does not re- formation as provided in § 1002.12(a), the
quire a creditor to change the name in which creditor may use the information in evalu-
the account is maintained. ating credit applications only if permitted to
do so by § 1002.6.
Section 1002.11—Relation to State Law 12(b) Preservation of records.
11(a) Inconsistent state laws. 1. Copies. Copies of the original record in-
1. Preemption determination—New York. The clude carbon copies, photocopies, microfilm
Bureau recognizes state law preemption de- or microfiche copies, or copies produced by
terminations made by the Board of Gov- any other accurate retrieval system, such as
ernors of the Federal Reserve System prior documents stored and reproduced by com-
to July 21, 2011, until and unless the Bureau puter. A creditor that uses a computerized or
makes and publishes any contrary deter- mechanized system need not keep a paper
mination. The Board of Governors deter- copy of a document (for example, of an ad-
mined that the following provisions in the verse action notice) if it can regenerate all
state law of New York are preempted by the pertinent information in a timely manner
Federal law, effective November 11, 1988: for examination or other purposes.
i. Article 15, section 296a(1)(b). Unlawful 2. Computerized decisions. A creditor that
discriminatory practices in relation to credit enters information items from a written ap-
on the basis of race, creed, color, national or- plication into a computerized or mechanized
igin, age, sex, marital status, or disability. system and makes the credit decision me-
This provision is preempted to the extent chanically, based only on the items of infor-
that it bars taking a prohibited basis into mation entered into the system, may comply
account when establishing eligibility for cer- with § 1002.12(b) by retaining the information
tain special-purpose credit programs. actually entered. It is not required to store
ii. Article 15, section 296a(1)(c). Unlawful the complete written application, nor is it
discriminatory practice to make any record required to enter the remaining items of in-
or inquiry based on race, creed, color, na- formation into the system. If the transaction
tional origin, age, sex, marital status, or dis- is subject to § 1002.13 or the creditor is col-
ability. This provision is preempted to the lecting information pursuant to § 1002.5(a)(4),
extent that it bars a creditor from request- however, the creditor is required to enter
ing and considering information regarding and retain the data on personal characteris-
the particular characteristics (for example, tics in order to comply with the require-
race, national origin, or sex) required for eli- ments of that section.
gibility for special-purpose credit programs. Paragraph 12(b)(3).
2. Preemption determination—Ohio. The Bu-
1. Withdrawn and brokered applications. In
reau recognizes state law preemption deter-
most cases, the 25-month retention period
minations made by the Board of Governors
for applications runs from the date a notifi-
of the Federal Reserve System prior to July
cation is sent to the applicant granting or
21, 2011, until and unless the Bureau makes
denying the credit requested. In certain
and publishes any contrary determination.
transactions, a creditor is not obligated to
The Board of Governors determined that the
provide a notice of the action taken. (See,
following provision in the state law of Ohio
is preempted by the Federal law, effective for example, comment 9–2.) In such cases, the
July 23, 1990: 25-month requirement runs from the date of
i. Section 4112.021(B)(1)—Unlawful dis- application, as when:
criminatory practices in credit transactions. i. An application is withdrawn by the ap-
This provision is preempted to the extent plicant.
that it bars asking or favorably considering ii. An application is submitted to more
the age of an elderly applicant; prohibits the than one creditor on behalf of the applicant,
consideration of age in a credit scoring sys- and the application is approved by one of the
tem; permits without limitation the consid- other creditors.
jgilmore on DSK4WB1RN3PROD with CFR
eration of age in real estate transactions; 12(b)(6) Self-tests.
and limits the consideration of age in spe- 1. The rule requires all written or recorded
cial-purpose credit programs to certain gov- information about a self-test to be retained
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
for 25 months after a self-test has been com- cipal residence within a year or upon com-
pleted. For this purpose, a self-test is com- pletion of construction, the new dwelling is
pleted after the creditor has obtained the re- considered the principal residence for pur-
sults and made a determination about what poses of § 1002.13.
corrective action, if any, is appropriate. 5. Transactions not covered. The informa-
Creditors are required to retain information tion-collection requirements of this section
about the scope of the self-test, the method- apply to applications for credit primarily for
ology used and time period covered by the the purchase or refinancing of a dwelling
self-test, the report or results of the self-test that is or will become the applicant’s prin-
including any analysis or conclusions, and cipal residence. Therefore, applications for
any corrective action taken in response to credit secured by the applicant’s principal
the self-test. residence but made primarily for a purpose
12(b)(7) Preapplication Marketing Information other than the purchase or refinancing of the
1. Prescreened credit solicitations. The rule principal residence (such as loans for home
requires creditors to retain copies of improvement and debt consolidation) are not
prescreened credit solicitations. For pur- subject to the information-collection re-
poses of this part, a prescreened solicitation quirements. An application for an open-end
is an ‘‘offer of credit’’ as described in 15 home equity line of credit is not subject to
U.S.C. 1681a(1) of the Fair Credit Reporting this section unless it is readily apparent to
Act. A creditor complies with § 1002.12(b)(7) if the creditor when the application is taken
it retains a copy of each solicitation mailing that the primary purpose of the line is for
that contains different terms, such as the the purchase or refinancing of a principal
amount of credit offered, annual percentage dwelling.
rate, or annual fee.
6. Refinancings. A refinancing occurs when
2. List of criteria. A creditor must retain the
an existing obligation is satisfied and re-
list of criteria used to select potential recipi-
placed by a new obligation undertaken by
ents. This includes the criteria used by the
the same borrower. A creditor that receives
creditor both to determine the potential re-
an application to refinance an existing ex-
cipients of the particular solicitation and to
tension of credit made by that creditor for
determine who will actually be offered cred-
the purchase of the applicant’s dwelling may
it.
3. Correspondence. A creditor may retain request the monitoring information again
correspondence relating to consumers’ com- but is not required to do so if it was obtained
plaints about prescreened solicitations in in the earlier transaction.
any manner that is reasonably accessible 7. Data collection under Regulation C. For
and is understandable to examiners. There is applications subject to § 1002.13(a)(1), a cred-
no requirement to establish a separate data- itor that collects information about the eth-
base or set of files for such correspondence, nicity, race, and sex of an applicant in com-
or to match consumer complaints with spe- pliance with the requirements of appendix B
cific solicitation programs. to 12 CFR part 1003 is acting in compliance
with § 1002.13 concerning the collection of an
Section 1002.13—Information for Monitoring applicant’s ethnicity, race, and sex informa-
Purposes tion. See also comment 5(a)(2)–2.
13(a) Information to be requested. 8. Application-by-application basis. For ap-
1. Natural person. Section 1002.13 applies plications subject to § 1002.13(a)(1), a creditor
only to applications from natural persons. may choose on an application-by-application
2. Principal residence. The requirements of basis whether to collect aggregate informa-
§ 1002.13 apply only if an application relates tion pursuant to § 1002.13(a)(1)(i)(A) or
to a dwelling that is or will be occupied by disaggregated information pursuant to
the applicant as the principal residence. A § 1002.13(a)(1)(i)(B) about the ethnicity and
credit application related to a vacation race of the applicant.
home or a rental unit is not covered. In the 13(b) Obtaining of Information
case of a two-to four-unit dwelling, the appli- 1. Forms for collecting data. A creditor may
cation is covered if the applicant intends to collect the information specified in
occupy one of the units as a principal resi- § 1002.13(a) either on an application form or
dence. on a separate form referring to the applica-
3. Temporary financing. An application for tion. Appendix B to this part provides for
temporary financing to construct a dwelling two alternative data collection model forms
is not subject to § 1002.13. But an application for use in complying with the requirements
for both a temporary loan to finance con- of § 1002.13(a)(1)(i) and (ii) to collect informa-
struction of a dwelling and a permanent tion concerning an applicant’s ethnicity,
mortgage loan to take effect upon the com- race, and sex. When a creditor collects eth-
pletion of construction is subject to § 1002.13. nicity and race information pursuant to
4. New principal residence. A person can § 1002.13(a)(1)(i)(A), the applicant must be of-
jgilmore on DSK4WB1RN3PROD with CFR
have only one principal residence at a time. fered the option to select more than one ra-
However, if a person buys or builds a new cial designation. When a creditor collects
dwelling that will become that person’s prin- ethnicity and race information pursuant to
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
§ 1002.13(a)(1)(i)(B), the applicant must be of- monitoring information may be provided in
fered the option to select more than one eth- writing. Appendix B provides data collection
nicity designation and more than one racial model forms for use in complying with
designation. § 1002.13 and that comply with § 1002.13(c). A
2. Written applications. The regulation re- creditor may devise its own disclosure so
quires written applications for the types of long as it is substantially similar. The cred-
credit covered by § 1002.13. A creditor can sat- itor need not orally request the monitoring
isfy this requirement by recording on paper information if it is requested in writing.
or by means of computer the information 13(d) Substitute monitoring program.
that the applicant provides orally and that 1. Substitute program. An enforcement agen-
the creditor normally considers in a credit cy may adopt, under its established rule-
decision. making or enforcement procedures, a pro-
3. Telephone, mail applications. i. A creditor gram requiring creditors under its jurisdic-
that accepts an application by telephone or tion to collect information in addition to in-
mail must request the monitoring informa- formation required by this section.
tion.
ii. A creditor that accepts an application Section 1002.14—Rules on Providing Appraisals
by mail need not make a special request for and Valuations
the monitoring information if the applicant
has failed to provide it on the application 14(a) Providing appraisals and other valu-
form returned to the creditor. ations.
iii. If it is not evident on the face of an ap- 1. Multiple applicants. If there is more than
plication that it was received by mail, tele- one applicant, the written disclosure about
phone, or via an electronic medium, the written appraisals, and the copies of apprais-
creditor should indicate on the form or other als and other written valuations, need only
application record how the application was be given to one applicant. However, these
received. materials must be given to the primary ap-
4. Video and other electronic-application proc- plicant where one is readily apparent. Simi-
esses. i. If a creditor takes an application larly, if there is more than one applicant for
through an electronic medium that allows credit in the transaction, one applicant may
the creditor to see the applicant, the cred- provide a waiver under § 1002.14(a)(1), but it
itor must treat the application as taken in must be the primary applicant where one is
person. The creditor must note the moni- readily apparent.
toring information on the basis of visual ob- 14(a)(1) In general.
servation or surname, if the applicant choos- 1. Coverage. Section 1002.14 covers applica-
es not to provide the information. tions for credit to be secured by a first lien
ii. If an applicant applies through an elec- on a dwelling, as that term is defined in
tronic medium without video capability, the § 1002.14(b)(2), whether the credit is for a
creditor treats the application as if it were business purpose (for example, a loan to
received by mail. start a business) or a consumer purpose (for
5. Applications through loan-shopping serv- example, a loan to purchase a home).
ices. When a creditor receives an application 2. Renewals. Section 1002.14(a)(1) applies
through an unaffiliated loan-shopping serv- when an applicant requests the renewal of an
ice, it does not have to request the moni- existing extension of credit and the creditor
toring information for purposes of the ECOA develops a new appraisal or other written
or subpart A of this Regulation B. Creditors valuation. Section 1002.14(a)(1) does not
subject to the Home Mortgage Disclosure apply to the extent a creditor uses the ap-
Act should be aware, however, that data col- praisals and other written valuations that
lection may be called for under Regulation C were previously developed in connection
(12 CFR part 1003), which generally requires with the prior extension of credit to evaluate
creditors to report, among other things, the the renewal request.
sex and race of an applicant on brokered ap- 3. Written. For purposes of § 1002.14, an ‘‘ap-
plications or applications received through a praisal or other written valuation’’ includes,
correspondent. Similarly, creditors that are without limitation, an appraisal or other
covered financial institutions under subpart valuation received or developed by the cred-
B of this Regulation may also be required to itor in paper form (hard copy); electroni-
collect, report, and maintain certain data, as cally, such as CD or email; or by any other
set forth in subpart B of this Regulation. similar media. See § 1002.14(a)(5) regarding
6. Inadvertent notation. If a creditor inad- the provision of copies of appraisals and
vertently obtains the monitoring informa- other written valuations to applicants via
tion in a dwelling-related transaction not electronic means.
covered by § 1002.13, the creditor may process 4. Timing. Section 1002.14(a)(1) requires that
and retain the application without violating the creditor ‘‘provide’’ copies of appraisals
the regulation. and other written valuations to the appli-
jgilmore on DSK4WB1RN3PROD with CFR
13(c) Disclosure to applicants. cant ‘‘promptly upon completion,’’ or no
1. Procedures for providing disclosures. The later than three business days before con-
disclosure to an applicant regarding the summation (for closed-end credit) or account
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
opening (for open-end credit), whichever is a copy of the appraisal to the applicant. The
earlier. applicant actually receives the copy more
i. For purposes of this timing requirement, than three business days before the date of
‘‘provide’’ means ‘‘deliver.’’ Delivery occurs consummation (or account opening). The
three business days after mailing or deliv- creditor has provided the copy of the ap-
ering the copies to the last-known address of praisal promptly upon completion.
the applicant, or when evidence indicates ac- ii. Sending a copy of a revised appraisal with-
tual receipt by the applicant, whichever is in a week after completion and with sufficient
earlier. Delivery to or actual receipt by the time before consummation (or account opening
applicant by electronic means must comply for open-end credit). An appraisal is being re-
with the E-Sign Act, as provided for in vised, and the creditor does not receive the
§ 1002.14(a)(5). revised appraisal until day 45 after the appli-
ii. The application and meaning of the cation, when the creditor immediately deter-
‘‘promptly upon completion’’ standard de- mines the revised appraisal is acceptable. A
pends upon the facts and circumstances, in- week later, the creditor sends a copy of the
cluding but not limited to when the creditor revised appraisal to the applicant, and does
receives the appraisal or other written valu- not send a copy of the initial appraisal to the
ation, and the extent of any review or revi- applicant. The applicant actually receives
sion after the creditor receives it. the copy of the revised appraisal three busi-
iii. ‘‘Completion’’ occurs when the last ness days before the date of consummation
version is received by the creditor, or when (or account opening). The creditor has pro-
the creditor has reviewed and accepted the vided the appraisal copy promptly upon com-
appraisal or other written valuation to in- pletion.
clude any changes or corrections required, iii. Sending a copy of an AVM report within
whichever is later. See also comment 14(a)(1)– a week after its receipt and with sufficient time
7. before consummation (or account opening for
iv. In a transaction that is being con- open-end credit). The creditor receives an
summated (for closed-end credit) or in which automated valuation model (AVM) report on
the account is being opened (for open-end day 5 after receipt of the application and
credit), if an appraisal or other written valu- treats the AVM report as complete when it is
ation has been developed but is not yet com- received. On day 12 after receipt of the appli-
plete, the deadline for providing a copy of cation, the creditor sends the applicant a
three business days before consummation or copy of the valuation. The applicant actually
account opening still applies, unless the ap- receives the valuation more than three busi-
plicant waived that deadline as provided ness days before the date of consummation
under § 1002.14(a)(1), in which case the copy (or account opening). The creditor has pro-
must be provided at or before consummation vided the copy of the AVM report promptly
or account opening. upon completion.
v. Even if the transaction will not be con- iv. Delay in sending an appraisal. On day 12
summated (for closed-end credit) or the ac- after receipt of the application, the credi-
count will not be opened (for open-end cred- tor’s underwriting department reviews an
it), the copy must be provided ‘‘promptly appraisal and determines it is acceptable. Al-
upon completion’’ as provided for in though the creditor has determined the ap-
§ 1002.14(a)(1), unless the applicant has praisal is complete, the creditor waits to
waived that deadline as provided under provide a copy to the applicant until day 42,
§ 1002.14(a)(1), in which case as provided for in when the creditor schedules the consumma-
§ 1002.14(a)(1) the copy must be provided to tion (or account opening) to occur on day 50.
the applicant no later than 30 days after the The creditor has not provided the copy of the
creditor determines the transaction will not appraisal promptly upon completion.
be consummated or the account will not be v. Delay in sending an AVM report while
opened. waiting for completion of a second valuation.
5. Promptly upon completion–examples. Ex- The creditor receives an AVM report on day
amples in which the ‘‘promptly upon comple- 5 after application and completes its review
tion’’ standard would be satisfied include, of the AVM report the day it is received. The
but are not limited to, those in subpara- creditor also has ordered an appraisal, but
graphs i, ii, and iii below. Examples in which the initial version of the appraisal received
the ‘‘promptly upon completion’’ standard by the creditor is found to be deficient and is
would not be satisfied include, but are not sent for review. The creditor waits 30 days to
limited to, those in subparagraphs iv and v provide a copy of the completed AVM report,
below. until the appraisal is completed on day 35.
i. Sending a copy of an appraisal within a The creditor then provides the applicant
week of completion with sufficient time before with copies of the AVM report and the re-
consummation (or account opening for open-end vised appraisal. While the appraisal report
credit). On day 15 after receipt of the applica- was provided promptly upon completion, the
jgilmore on DSK4WB1RN3PROD with CFR
tion, the creditor’s underwriting department AVM report was not.
reviews an appraisal and determines it is ac- 6. Waiver. Section 1002.14(a)(1) permits the
ceptable. One week later, the creditor sends applicant to waive the timing requirement if
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
the creditor provides the copies at or before or other costs incurred in providing a copy of
consummation or account opening, except an appraisal or other written valuation in
where otherwise prohibited by law. Except accordance with section 14(a)(1).
where otherwise prohibited by law, an appli- 2. Reasonable fee for reimbursement. Section
cant’s waiver is effective under § 1002.14(a)(1) 1002.14(a)(3) does not prohibit a creditor from
in either of the following two situations: imposing a reasonable fee to reimburse the
i. If, no later than three business days creditor’s costs of the appraisal or other
prior to consummation or account opening, written valuation, so long as the fee is not
the applicant provides the creditor an af- increased to cover the costs of providing cop-
firmative oral or written statement waiving ies of such appraisals or other written valu-
the timing requirement under this rule; or ations under § 1002.14(a)(1). A creditor’s cost
ii. If, within three business days of con- may include an administration fee charged
summation or account opening, the appli- to the creditor by an appraisal management
cant provides the creditor an affirmative company as defined in 12 U.S.C. 3350(11). Sec-
oral or written statement waiving the tim- tion 1002.14(a)(3) does not, however, legally
ing requirement under this rule and the obligate the applicant to pay such fees. Fur-
waiver pertains solely to the applicant’s re- ther, creditors may not impose fees for reim-
ceipt of a copy of an appraisal or other writ- bursement of the costs of an appraisal or
ten valuation that contains only clerical other valuation where otherwise prohibited
changes from a previous version of the ap- by law. For instance, a creditor may not
praisal or other written valuation provided charge a consumer a fee for the performance
to the applicant three or more business days of a second appraisal if the second appraisal
prior to consummation or account opening. is required under 15 U.S.C. 1639h(b)(2) and 12
For purpose of this second type of waiver, re- CFR 1026.35(c).
visions will only be considered to be clerical 14(b) Definitions.
in nature if they have no impact on the esti- 14(b)(1) Consummation.
mated value, and have no impact on the cal- 1. State law governs. When a contractual ob-
culation or methodology used to derive the ligation on the consumer’s part is created is
estimate. In addition, under § 1002.14(a)(1) the a matter to be determined under applicable
applicant still must receive the copy of the law; § 1002.14 does not make this determina-
revision at or prior to consummation or ac- tion. A contractual commitment agreement,
count opening. for example, that under applicable law binds
7. Multiple versions of appraisals or valu- the consumer to the credit terms would be
ations. For purposes of § 1002.14(a)(1), the ref- consummation. Consummation, however,
erence to ‘‘all’’ appraisals and other written does not occur merely because the consumer
valuations does not refer to all versions of has made some financial investment in the
the same appraisal or other valuation. If a transaction (for example, by paying a non-
creditor has received multiple versions of an refundable fee) unless, of course, applicable
appraisal or other written valuation, the law holds otherwise.
creditor is required to provide only a copy of 2. Credit vs. sale. Consummation does not
the latest version received. If, however, a occur when the consumer becomes contrac-
creditor already has provided a copy of one tually committed to a sale transaction, un-
version of an appraisal or other written valu- less the consumer also becomes legally obli-
ation to an applicant, and the creditor later gated to accept a particular credit arrange-
receives a revision of that appraisal or other ment.
written valuation, then the creditor also 14(b)(2) Dwelling.
must provide the applicant with a copy of 1. ‘‘Motor vehicles’’ not covered. The require-
the revision to comply with § 1002.14(a)(1). If ments of § 1002.14 do not apply to ‘‘motor ve-
a creditor receives only one version of an ap- hicles’’ as defined by 12 U.S.C. 5519(f)(1).
praisal or other valuation that is developed 14(b)(3) Valuation.
in connection with the applicant’s applica- 1. Valuations—examples. Examples of valu-
tion, then that version must be provided to ations include but are not limited to:
the applicant to comply with § 1002.14(a)(1). i. A report prepared by an appraiser
See also comment 14(a)(1)–4 above. (whether or not licensed or certified) includ-
14(a)(2) Disclosure. ing the appraiser’s estimate of the property’s
1. Appraisal independence requirements not value or opinion of value.
affected. Nothing in the text of the disclosure ii. A document prepared by the creditor’s
required by § 1002.14(a)(2) should be construed staff that assigns value to the property.
to affect, modify, limit, or supersede the op- iii. A report approved by a government-
eration of any legal, regulatory, or other re- sponsored enterprise for describing to the ap-
quirements or standards relating to inde- plicant the estimate of the property’s value
pendence in the conduct of appraisers or the developed pursuant to the proprietary meth-
use of applicant-ordered appraisals by credi- odology or mechanism of the government-
tors. sponsored enterprise.
jgilmore on DSK4WB1RN3PROD with CFR
14(a)(3) Reimbursement. iv. A report generated by use of an auto-
1. Photocopy, postage, or other costs. Credi- mated valuation model to estimate the prop-
tors may not charge for photocopy, postage, erty’s value.
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
v. A broker price opinion prepared by a propriate corrective action on a timely basis
real estate broker, agent, or sales person to after the results of the self-test are known.
estimate the property’s value. 3. A creditor’s determination about the
2. Attachments and exhibits. The term type of corrective action needed, or a finding
‘‘valuation’’ includes any attachments and that no corrective action is required, is not
exhibits that are an integrated part of the conclusive in determining whether the re-
valuation. quirements of this paragraph have been sat-
3. Other documentation. Not all documents isfied. If a creditor’s claim of privilege is
that discuss or restate a valuation of an ap- challenged, an assessment of the need for
plicant’s property constitute a ‘‘valuation’’ corrective action or the type of corrective
for purposes of § 1002.14(b)(3). Examples of action that is appropriate must be based on
documents that discuss the valuation of the a review of the self-testing results, which
applicant’s property or may reflect its value may require an in camera inspection of the
but nonetheless are not ‘‘valuations’’ include privileged documents.
but are not limited to: 15(a)(3) Other privileges.
i. Internal documents that merely restate 1. A creditor may assert the privilege es-
the estimated value of the dwelling con- tablished under this section in addition to
tained in an appraisal or written valuation asserting any other privilege that may
being provided to the applicant. apply, such as the attorney-client privilege
ii. Governmental agency statements of ap- or the work-product privilege. Self-testing
praised value that are publically available. data may be privileged under this section
iii. Publicly-available lists of valuations whether or not the creditor’s assertion of an-
(such as published sales prices or mortgage other privilege is upheld.
amounts, tax assessments, and retail price 15(b) Self-test defined.
ranges). 15(b)(1) Definition.
Paragraph 15(b)(1)(i).
iv. Manufacturers’ invoices for manufac-
1. To qualify for the privilege, a self-test
tured homes.
must be sufficient to constitute a determina-
v. Reports reflecting property inspections
tion of the extent or effectiveness of the
that do not provide an estimate of the value
creditor’s compliance with the Act and Reg-
of the property and are not used to develop
ulation B. Accordingly, a self-test is only
an estimate of the value of the property.
privileged if it was designed and used for
vi. Appraisal reviews that do not include that purpose. A self-test that is designed or
the appraiser’s estimate of the property’s used to determine compliance with other
value or opinion of value. laws or regulations or for other purposes is
Section 1002.15—Incentives for Self-Testing and not privileged under this rule. For example,
Self-Correction a self-test designed to evaluate employee ef-
ficiency or customers’ satisfaction with the
15(a) General rules. level of service provided by the creditor is
15(a)(1) Voluntary self-testing and correction. not privileged even if evidence of discrimina-
1. Activities required by any governmental tion is uncovered incidentally. If a self-test
authority are not voluntary self-tests. A is designed for multiple purposes, only the
governmental authority includes both ad- portion designed to determine compliance
ministrative and judicial authorities for with the ECOA is eligible for the privilege.
Federal, State, and local governments. Paragraph 15(b)(1)(ii).
15(a)(2) Corrective action required. 1. The principal attribute of self-testing is
1. To qualify for the privilege, appropriate that it constitutes a voluntary undertaking
corrective action is required when the re- by the creditor to produce new data or fac-
sults of a self-test show that it is more likely tual information that otherwise would not
than not that there has been a violation of be available and could not be derived from
the ECOA or this part. A self-test is also loan or application files or other records re-
privileged when it identifies no violations. lated to credit transactions. Self-testing in-
2. In some cases, the issue of whether cer- cludes, but is not limited to, the practice of
tain information is privileged may arise be- using fictitious applicants for credit (test-
fore the self-test is complete or corrective ers), either with or without the use of
actions are fully under way. This would not matched pairs. A creditor may elect to test
necessarily prevent a creditor from asserting a defined segment of its business, for exam-
the privilege. In situations where the self- ple, loan applications processed by a specific
test is not complete, for the privilege to branch or loan officer, or applications made
apply the lender must satisfy the regula- for a particular type of credit or loan pro-
tion’s requirements within a reasonable pe- gram. A creditor also may use other methods
riod of time. To assert the privilege where of generating information that is not avail-
the self-test shows a likely violation, the able in loan and application files, such as
rule requires, at a minimum, that the cred- surveying mortgage loan applicants. To the
jgilmore on DSK4WB1RN3PROD with CFR
itor establish a plan for corrective action extent permitted by law, creditors might
and a method to demonstrate progress in im- also develop new methods that go beyond
plementing the plan. Creditors must take ap- traditional pre-application testing, such as
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
hiring testers to submit fictitious loan appli- 1. Whether a creditor has taken or is tak-
cations for processing. ing corrective action that is appropriate will
2. The privilege does not protect a credi- be determined on a case-by-case basis. Gen-
tor’s analysis performed as part of proc- erally, the scope of the corrective action
essing or underwriting a credit application. that is needed to preserve the privilege is
A creditor’s evaluation or analysis of its governed by the scope of the self-test. For
loan files, Home Mortgage Disclosure Act example, a creditor that self-tests mortgage
data, or similar types of records (such as loans and discovers evidence of discrimina-
broker or loan officer compensation records) tion may focus its corrective actions on
does not produce new information about a mortgage loans, and is not required to ex-
creditor’s compliance and is not a self-test pand its testing to other types of loans.
for purposes of this section. Similarly, a sta- 2. In identifying the policies or practices
tistical analysis of data derived from exist- that are a likely cause of the violation, a
ing loan files is not privileged. creditor might identify inadequate or im-
15(b)(3) Types of information not privileged. proper lending policies, failure to implement
Paragraph 15(b)(3)(i). established policies, employee conduct, or
1. The information listed in this paragraph other causes. The extent and scope of a like-
is not privileged and may be used to deter- ly violation may be assessed by determining
mine whether the prerequisites for the privi- which areas of operations are likely to be af-
lege have been satisfied. Accordingly, a cred- fected by those policies and practices, for ex-
itor might be asked to identify the self-test- ample, by determining the types of loans and
ing method, for example, whether stages of the application process involved
preapplication testers were used or data were and the branches or offices where the viola-
compiled by surveying loan applicants. In- tions may have occurred.
formation about the scope of the self-test 3. Depending on the method and scope of
(such as the types of credit transactions ex- the self-test and the results of the test, ap-
amined, or the geographic area covered by propriate corrective action may include one
the test) also is not privileged. or more of the following:
Paragraph 15(b)(3)(ii). i. If the self-test identifies individuals
1. Property appraisal reports, minutes of whose applications were inappropriately
loan committee meetings or other docu- processed, offering to extend credit if the ap-
ments reflecting the basis for a decision to plication was improperly denied and compen-
approve or deny an application, loan policies sating such persons for out-of-pocket costs
or procedures, underwriting standards, and and other compensatory damages;
broker compensation records are examples of ii. Correcting institutional policies or pro-
the types of records that are not privileged. cedures that may have contributed to the
If a creditor arranges for testers to submit likely violation, and adopting new policies
loan applications for processing, the records as appropriate;
are not related to actual credit transactions iii. Identifying and then training and/or
for purposes of this paragraph and may be disciplining the employees involved;
privileged self-testing records. iv. Developing outreach programs, mar-
15(c) Appropriate corrective action. keting strategies, or loan products to serve
1. The rule only addresses the corrective more effectively segments of the lender’s
actions required for a creditor to take advan- markets that may have been affected by the
tage of the privilege in this section. A cred- likely discrimination; and
itor may be required to take other actions or v. Improving audit and oversight systems
provide additional relief if a formal finding to avoid a recurrence of the likely viola-
of discrimination is made. tions.
15(c)(1) General requirement. 15(c)(3) Types of relief.
1. Appropriate corrective action is required Paragraph 15(c)(3)(ii).
even though no violation has been formally 1. The use of pre-application testers to
adjudicated or admitted by the creditor. In identify policies and practices that illegally
determining whether it is more likely than discriminate does not require creditors to re-
not that a violation occurred, a creditor view existing loan files for the purpose of
must treat testers as if they are actual appli- identifying and compensating applicants
cants for credit. A creditor may not refuse to who might have been adversely affected.
take appropriate corrective action under 2. If a self-test identifies a specific appli-
this section because the self-test used ficti- cant who was discriminated against on a pro-
tious loan applicants. The fact that a test- hibited basis, to qualify for the privilege in
er’s agreement with the creditor waives the this section the creditor must provide appro-
tester’s legal right to assert a violation does priate remedial relief to that applicant; the
not eliminate the requirement for the cred- creditor is not required to identify other ap-
itor to take corrective action, although no plicants who might also have been adversely
remedial relief for the tester is required affected.
jgilmore on DSK4WB1RN3PROD with CFR
under paragraph 15(c)(3). Paragraph 15(c)(3)(iii).
15(c)(2) Determining the scope of appropriate 1. A creditor is not required to provide re-
corrective action. medial relief to an applicant that would not
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
be available by law. An applicant might also Paragraph 15(d)(3) Limited use of privileged
be ineligible for certain types of relief due to information.
changed circumstances. For example, a cred- 1. A creditor may be required to produce
itor is not required to offer credit to a denied privileged documents for the purpose of de-
applicant if the applicant no longer qualifies termining a penalty or remedy after a viola-
for the credit due to a change in financial tion of the ECOA or Regulation B has been
circumstances, although some other type of formally adjudicated or admitted. A credi-
relief might be appropriate. tor’s compliance with such a requirement
15(d)(1) Scope of privilege. does not evidence the creditor’s intent to
1. The privilege applies with respect to any forfeit the privilege.
examination, investigation or proceeding by
Federal, State, or local government agencies Section 1002.16—Enforcement, Penalties, and
relating to compliance with the Act or this Liabilities
part. Accordingly, in a case brought under 16(c) Failure of compliance.
the ECOA, the privilege established under 1. Inadvertent errors. Inadvertent errors in-
this section preempts any inconsistent laws clude, but are not limited to, clerical mis-
or court rules to the extent they might re- take, calculation error, computer malfunc-
quire disclosure of privileged self-testing tion, and printing error. An error of legal
data. The privilege does not apply in other judgment is not an inadvertent error under
cases (such as in litigation filed solely under the regulation.
a State’s fair lending statute). In such cases, 2. Correction of error. For inadvertent errors
if a court orders a creditor to disclose self- that occur under §§ 1002.12 and 1002.13, this
test results, the disclosure is not a voluntary section requires that they be corrected pro-
disclosure or waiver of the privilege for pur- spectively.
poses of paragraph 15(d)(2); a creditor may
protect the information by seeking a protec- Section 1002.102—Definitions
tive order to limit availability and use of the
self-testing data and prevent dissemination 102(b) Applicant
beyond what is necessary in that case. Para- 1. General. In no way are the limitations to
graph 15(d)(1) precludes a party who has ob- the term applicant in § 1002.102(b) of subpart
tained privileged information from using it B intended to repeal, abrogate, annul, im-
in a case brought under the ECOA, provided pair, change, or interfere with the scope of
the creditor has not lost the privilege the term applicant in § 1002.2(e) as applicable
through voluntary disclosure under para- to subpart A.
graph 15(d)(2).
15(d)(2) Loss of privilege. 102(l) LGBTQI+-Owned Business
Paragraph 15(d)(2)(i). 1. General. In order to be an LGBTQI+-
1. A creditor’s corrective action, by itself, owned business for purposes of subpart B of
is not considered a voluntary disclosure of this part, a business must satisfy both
the self-test report or results. For example, a prongs of the definition of LGBTQI+-owned
creditor does not disclose the results of a business. First, one or more LGBTQI+ indi-
self-test merely by offering to extend credit viduals must own or control more than 50
to a denied applicant or by inviting the ap- percent of the business. However, it is not
plicant to reapply for credit. Voluntary dis- necessary that one or more LGBTQI+ indi-
closure could occur under this paragraph, viduals both own and control more than 50
however, if the creditor disclosed the self- percent of the business. For example, a busi-
test results in connection with a new offer of ness that is owned entirely by one or more
credit. LGBTQI+ individuals but is not controlled
2. The disclosure of self-testing results to by any one or more such individuals satisfies
an independent contractor acting as an audi- the first prong of the definition. Similarly, a
tor or consultant for the creditor on compli- business that is controlled by an LGBTQI+
ance matters does not result in loss of the individual satisfies this first prong of the
privilege. definition, even if none of the individuals
Paragraph 15(d)(2)(ii). with ownership in the business are LGBTQI+
1. The privilege is lost if the creditor dis- individuals. If a business does not satisfy
closes privileged information, such as the re- this first prong of the definition, it is not an
sults of the self-test. The privilege is not lost LGBTQI+-owned business. Second, 50 percent
if the creditor merely reveals or refers to the or more of the net profits or losses must ac-
existence of the self-test. crue to one or more LGBTQI+ individuals. If
Paragraph 15(d)(2)(iii). a business does not satisfy this second prong
1. A creditor’s claim of privilege may be of the definition, it is not an LGBTQI+-
challenged in a court or administrative law owned business, regardless of whether it sat-
proceeding with appropriate jurisdiction. In isfies the first prong of the definition.
jgilmore on DSK4WB1RN3PROD with CFR
resolving the issue, the presiding officer may 2. Purpose of definition. The definition of
require the creditor to produce privileged in- LGBTQI+-owned business is used only when
formation about the self-test. an applicant determines if it is an LGBTQI+-
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
owned business for purposes of and the trust has two co-trustees, each co-
§ 1002.107(a)(18). A financial institution shall trustee owns 50 percent of the business.
provide an applicant with the definition of 5. Control. An individual controls a busi-
LGBTQI+-owned business when asking the ness if that individual has significant respon-
applicant to provide its LGBTQI+-owned sibility to manage or direct the business. An
business status pursuant to § 1002.107(a)(18). A individual controls a business if the indi-
financial institution satisfies this require- vidual is an executive officer or senior man-
ment if it provides the definition as set forth ager (e.g., a chief executive officer, chief fi-
in the sample data collection form in appen- nancial officer, chief operating officer, man-
dix E. The financial institution must provide aging member, general partner, president,
additional clarification by referencing the vice president, or treasurer) or regularly per-
definition of LGBTQI+ individual as set forth forms similar functions. Additionally, a
in § 1002.102(k) if asked by the applicant. The business may be controlled by two or more
financial institution is neither permitted nor LGBTQI+ individuals if those individuals
required to make its own determination re- collectively control the business, such as
garding the applicant’s LGBTQI+-owned constituting a majority of the board of direc-
business status. tors or a majority of the partners of a part-
nership.
3. Further clarifications of terms used in the
6. Accrual of net profits or losses. A
definition of LGBTQI+-owned business. In
business’s net profits and losses accrue to an
order to assist an applicant when deter-
individual if that individual receives the net
mining whether it is an LGBTQI+-owned
profits or losses, is legally entitled or re-
business, a financial institution may provide quired to receive the net profits or losses, or
the applicant with the definitions of owner- is legally entitled or required to recognize
ship, control, and accrual of net profits or the net profits or losses for tax purposes.
losses and related concepts set forth in com-
ments 102(l)–4 through –6. A financial institu- 102(m) Minority-Owned Business
tion may assist an applicant when the appli-
cant is determining its LGBTQI+-owned 1. General. In order to be a minority-owned
business status but is not required to do so. business for purposes of subpart B of this
For purposes of reporting an applicant’s sta- part, a business must satisfy both prongs of
tus, a financial institution relies on the ap- the definition of minority-owned business.
First, one or more American Indian or Alas-
plicant’s determinations of its ownership,
ka Native, Asian, Black or African Amer-
control, and accrual of net profits and losses.
ican, Native Hawaiian or Other Pacific Is-
4. Ownership. For purposes of determining lander, or Hispanic or Latino individuals
if a business is an LGBTQI+-owned business, must own or control more than 50 percent of
an individual owns a business if that indi- the business. However, it is not necessary
vidual directly or indirectly, through any that one or more American Indian or Alaska
contract, arrangement, understanding, rela- Native, Asian, Black or African American,
tionship or otherwise, has an equity interest Native Hawaiian or Other Pacific Islander,
in the business. Examples of ownership in- or Hispanic or Latino individuals both own
clude being the sole proprietor of a sole pro- and control more than 50 percent of the busi-
prietorship, directly or indirectly owning or ness. For example, a business that is owned
holding the stock of a corporation or com- entirely, but is not controlled by, individuals
pany, directly or indirectly having a partner- belonging to one of these groups satisfies the
ship interest in a business, or directly or in- first prong of the definition. Similarly, a
directly having a membership interest in a business that is controlled by an American
limited liability company. Indirect as well as Indian or Alaska Native, Asian, Black or Af-
direct ownership are used when determining rican American, Native Hawaiian or Other
ownership for purposes of §§ 1002.102(l) and Pacific Islander, or Hispanic or Latino indi-
1002.107(a)(18). Thus, where applicable, own- vidual satisfies this first prong of the defini-
ership must be traced through corporate or tion, even if none of the individuals with
other indirect ownership structures. For ex- ownership in the business are American In-
ample, assume that the applicant is company dian or Alaska Native, Asian, Black or Afri-
A. If company B owns 60 percent of applicant can American, Native Hawaiian or Other Pa-
company A and an individual owns 100 per- cific Islander, or Hispanic or Latino. If a
cent of company B, the individual owns 60 business does not satisfy this first prong of
percent of applicant company A. Similarly, the definition, it is not a minority-owned
if an individual directly owns 20 percent of business. Second, 50 percent or more of the
applicant company A and is an equal partner net profits or losses must accrue to one or
in partnership B that owns the remaining 80 more individuals belonging to these groups.
percent of applicant company A, the indi- If a business does not satisfy this second
vidual owns 60 percent of applicant company prong of the definition, it is not a minority-
A (i.e., 20 percent due through direct owner- owned business, regardless of whether it sat-
jgilmore on DSK4WB1RN3PROD with CFR
ship and 40 percent indirectly through part- isfies the first prong of the definition.
nership B). A trustee is considered the owner 2. Purpose of definition. The definition of
of the trust. Thus, if a trust owns a business minority-owned business is used only when
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
an applicant determines if it is a minority- ager (e.g., a chief executive officer, chief fi-
owned business for purposes of nancial officer, chief operating officer, man-
§ 1002.107(a)(18). A financial institution shall aging member, general partner, president,
provide an applicant with the definition of vice president, or treasurer) or regularly per-
minority-owned business when asking the forms similar functions. Additionally, a
applicant to provide its minority-owned business may be controlled by two or more
business status pursuant to § 1002.107(a)(18), American Indian or Alaska Native, Asian,
but the financial institution is neither per- Black or African American, Native Hawaiian
mitted nor required to make its own deter- or Other Pacific Islander, or Hispanic or
mination regarding the applicant’s minority- Latino individuals if those individuals col-
owned business status. lectively control the business, such as con-
3. Further clarifications of terms used in the stituting a majority of the board of directors
definition of minority-owned business. In order or a majority of the partners of a partner-
to assist an applicant when determining ship.
whether it is a minority-owned business, a fi- 6. Accrual of net profits or losses. A
nancial institution may provide the appli- business’s net profits and losses accrue to an
cant with the definitions of ownership, con- individual if that individual receives the net
trol, and accrual of net profits or losses and profits or losses, is legally entitled or re-
related concepts set forth in comments quired to receive the net profits or losses, or
102(m)–4 through –6. A financial institution is legally entitled or required to recognize
may assist an applicant when the applicant the net profits or losses for tax purposes.
is determining its minority-owned business 7. Multi-racial and multi-ethnic individuals.
status but is not required to do so. For pur- For purposes of subpart B of this part, an in-
poses of reporting an applicant’s status, a fi- dividual who is multi-racial or multi-ethnic
nancial institution relies on the applicant’s constitutes an individual for whom the defi-
determinations of its ownership, control, and nition of minority-owned business may
accrual of net profits and losses. apply, depending on whether the individual
4. Ownership. For purposes of determining meets the other requirements of the defini-
if a business is a minority-owned business, tion. For example, an individual who is both
an individual owns a business if that indi-
Asian and White is an individual for whom
vidual directly or indirectly, through any
the definition of minority-owned business
contract, arrangement, understanding, rela-
shall apply if the individual meets the other
tionship or otherwise, has an equity interest
requirements of the definition related to
in the business. Examples of ownership in-
ownership or control and accrual of profits
clude being the sole proprietor of a sole pro-
or losses.
prietorship, directly or indirectly owning or
8. Relationship to disaggregated subcategories
holding the stock of a corporation or com-
pany, directly or indirectly having a partner- used to determine ethnicity and race of prin-
ship interest in a business, or directly or in- cipal owners. The ethnicity and race cat-
directly having a membership interest in a egories used in this section are aggregate
limited liability company. Indirect as well as ethnicity (Hispanic or Latino) and race
direct ownership are used when determining (American Indian or Alaska Native, Asian,
ownership for purposes of §§ 1002.102(m) and Black or African American, and Native Ha-
1002.107(a)(18). Thus, where applicable, own- waiian or Other Pacific Islander) categories.
ership must be traced through corporate or Those ethnicity and race categories are the
other indirect ownership structures. For ex- same aggregate categories used (along with
ample, assume that the applicant is company Not Hispanic or Latino for ethnicity, and
A. If company B owns 60 percent of applicant White for race) to collect an applicant’s prin-
company A and an individual owns 100 per- cipal owners’ ethnicity and race pursuant to
cent of company B, the individual owns 60 § 1002.107(a)(19).
percent of applicant company A. Similarly,
102(o) Principal Owner
if an individual directly owns 20 percent of
applicant company A and is an equal partner 1. Individual. Only an individual can be a
in partnership B that owns the remaining 80 principal owner of a business for purposes of
percent of applicant company A, the indi- subpart B of this part. Entities, such as
vidual owns 60 percent of applicant company trusts, partnerships, limited liability compa-
A (i.e., 20 percent due through direct owner- nies, and corporations, are not principal
ship and 40 percent indirectly through part- owners for this purpose. Additionally, an in-
nership B). A trustee is considered the owner dividual must directly own an equity share
of the trust. Thus, if a trust owns a business of 25 percent or more in the business in order
and the trust has two co-trustees, each co- to be a principal owner. Unlike the deter-
trustee owns 50 percent of the business. mination of ownership for purposes of col-
5. Control. An individual controls a busi- lecting and reporting minority-owned busi-
ness if that individual has significant respon- ness status, women-owned business status,
jgilmore on DSK4WB1RN3PROD with CFR
sibility to manage or direct the business. An and LGBTQI+-owned business status, indi-
individual controls a business if the indi- rect ownership is not considered when deter-
vidual is an executive officer or senior man- mining if someone is a principal owner for
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
purposes of collecting and reporting prin- does not satisfy this second prong of the defi-
cipal owners’ ethnicity, race, and sex or the nition, it is not a women-owned business, re-
number of principal owners. Thus, when de- gardless of whether it satisfies the first
termining who is a principal owner, owner- prong of the definition.
ship is not traced through multiple cor- 2. Purpose of definition. The definition of
porate structures to determine if an indi- women-owned business is used only when an
vidual owns 25 percent or more of the equity applicant determines if it is a women-owned
interests. For example, if individual A di- business pursuant to § 1002.107(a)(18). A finan-
rectly owns 20 percent of a business, indi- cial institution shall provide an applicant
vidual B directly owns 20 percent, and part- with the definition of women-owned business
nership C owns 60 percent, the business does when asking the applicant to provide its
not have any owners who satisfy the defini- women-owned business status pursuant to
tion of principal owner set forth in § 1002.107(a)(18), but the financial institution
§ 1002.102(o), even if individual A and indi- is neither permitted nor required to make its
vidual B are the only partners in the part- own determination regarding the applicant’s
nership C. Similarly, if individual A directly women-owned business status.
owns 30 percent of a business, individual B 3. Further clarifications of terms used in the
directly owns 20 percent, and trust D owns 50 definition of women-owned business. In order
percent, individual A is the only principal to assist an applicant when determining
owner as defined in § 1002.102(o), even if indi- whether it is a women-owned business, a fi-
vidual B is the sole trustee of trust D. nancial institution may provide the appli-
2. Trustee. Although a trust is not consid- cant with the definitions of ownership, con-
ered a principal owner of a business for the trol, and accrual of net profits or losses and
purposes of subpart B, if the applicant for a related concepts set forth in comments
covered credit transaction is a trust, a trust- 102(s)–4 through –6. A financial institution
ee is considered the owner of the trust. Thus, may assist an applicant when the applicant
if a trust is an applicant for a covered credit is determining its women-owned business
transaction and the trust has two co-trust- status but is not required to do so. For pur-
ees, each co-trustee is considered to own 50 poses of reporting an applicant’s status, a fi-
percent of the business and would each be a nancial institution relies on the applicant’s
principal owner as defined in § 1002.102(o). In determinations of its ownership, control, and
contrast, if the trust has five co-trustees, accrual of net profits and losses.
each co-trustee is considered to own 20 per- 4. Ownership. For purposes of determining
cent of the business and would not meet the if a business is a women-owned business, an
definition of principal owner under individual owns a business if that individual
§ 1002.102(o). directly or indirectly, through any contract,
3. Purpose of definition. A financial institu- arrangement, understanding, relationship or
tion shall provide an applicant with the defi- otherwise, has an equity interest in the busi-
nition of principal owner when asking the ness. Examples of ownership include being
applicant to provide the number of its prin- the sole proprietor of a sole proprietorship,
cipal owners pursuant to § 1002.107(a)(20) and directly or indirectly owning or holding the
the ethnicity, race, and sex of its principal stock of a corporation or company, directly
owners pursuant to § 1002.107(a)(19). See com- or indirectly having a partnership interest in
ments 107(a)(19)–2 and 107(a)(20)–1. a business, or directly or indirectly having a
membership interest in a limited liability
102(s) Women-Owned Business
company. Indirect as well as direct owner-
1. General. In order to be a women-owned ship are used when determining ownership
business for purposes of subpart B of this for purposes of §§ 1002.102(s) and
part, a business must satisfy both prongs of 1002.107(a)(18). Thus, where applicable, own-
the definition of women-owned business. ership must be traced through corporate or
First, one or more women must own or con- other indirect ownership structures. For ex-
trol more than 50 percent of the business. ample, assume that the applicant is company
However, it is not necessary that one or A. If company B owns 60 percent of the appli-
more women both own and control more cant company A and an individual owns 100
than 50 percent of the business. For example, percent of company B, the individual owns 60
a business that is owned entirely by women percent of the applicant company A. Simi-
but is not controlled by any women satisfies larly, if an individual directly owns 20 per-
the first prong of the definition. Similarly, a cent of the applicant company A and is an
business that is controlled by a woman satis- equal partner in a partnership B that owns
fies this first prong of the definition, even if the remaining 80 percent of the applicant
none of the individuals with ownership in the company A, the individual owns 60 percent of
business are women. If a business does not applicant company A (i.e., 20 percent due
satisfy this first prong of the definition, it is through direct ownership and 40 percent in-
jgilmore on DSK4WB1RN3PROD with CFR
not a women-owned business. Second, 50 per- directly through partnership B). A trustee is
cent or more of the net profits or losses must considered the owner of the trust. Thus, if a
accrue to one or more women. If a business trust owns a business and the trust has two
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
co-trustees, each co-trustee owns 50 percent it, and the business does not respond, it is
of the business. not a covered application because the busi-
5. Control. An individual controls a busi- ness never made a request for credit. How-
ness if that individual has significant respon- ever, using the same example, if the business
sibility to manage or direct the business. An seeks to obtain the credit offered, assuming
individual controls a business if the indi- the requirements of a covered application
vidual is an executive officer or senior man- are otherwise met, the business’s request
ager (e.g., a chief executive officer, chief fi- constitutes a covered application for pur-
nancial officer, chief operating officer, man- poses of subpart B of this part. See also com-
aging member, general partner, president, ment 103(b)–4.
vice president, or treasurer) or regularly per- 5. Requests for multiple covered credit trans-
forms similar functions. Additionally, a actions at one time. Assuming the require-
business may be controlled by two or more ments of a covered application are met, if an
women if those women collectively control applicant makes a request for two or more
the business, such as constituting a majority covered credit transactions at the same
of the board of directors or a majority of the time, the financial institution reports each
partners of a partnership. request as a separate covered application.
6. Accrual of net profits or losses. A For example, if an applicant is seeking both
business’s net profits and losses accrue to an a term loan and a line of credit and requests
individual if that individual receives the net them both on the same application form, the
profits or losses, is legally entitled or re- financial institution reports the requests as
quired to receive the net profits or losses, or two separate covered applications, one for a
is legally entitled or required to recognize term loan and another for a line of credit.
the net profits or losses for tax purposes. See § 1002.107(d) for the requirements for
reusing data so that a financial institution
Section 1002.103—Covered Applications need only ask once for certain data required
under § 1002.107(a). If, on the other hand, the
103(a) Covered Application
applicant is only requesting a single covered
1. General. Subject to the requirements of credit transaction, but has not decided on
subpart B of this part, a financial institution which particular product, the financial insti-
has latitude to establish its own application tution reports the request as a single covered
procedures, including designating the type application. For example, if the applicant in-
and amount of information it will require dicates interest in either a term loan or a
from applicants. line of credit, but not both, the financial in-
2. Procedures used. The term ‘‘procedures’’ stitution reports the request as a single cov-
refers to the actual practices followed by a ered application. See comment 107(a)(5)–1 for
financial institution as well as its stated ap- instructions on reporting credit product in
plication procedures. For example, if a finan- this situation.
cial institution’s stated policy is to require 6. Initial request for a single covered credit
all applications to be in writing on the finan- transaction that would result in the origination
cial institution’s application form, but the of multiple covered credit transactions. Assum-
financial institution also makes credit deci- ing the requirements of a covered applica-
sions based on oral requests, the financial in- tion are met, if an applicant initially makes
stitution’s procedures are to accept both oral a request for one covered credit transaction,
and written applications. but over the course of the application proc-
3. Consistency with subpart A. Bureau inter- ess requests multiple covered credit trans-
pretations that appear in this supplement I actions, each covered credit transaction
in connection with §§ 1002.2(f) and 1002.9 are must be reported as a separate covered appli-
generally applicable to the definition of a cation. See § 1002.107(d) for the requirements
covered application in § 1002.103. However, for reusing data so that a financial institu-
the definition of a covered application in tion need only ask once for certain data re-
§ 1002.103 does not include inquiries and quired under § 1002.107(a).
prequalification requests. The definition of a 7. Requests for multiple lines of credit at one
covered application also does not include re- time. Assuming the requirements of a covered
evaluation, extension, or renewal requests on application are met, if an applicant requests
an existing business credit account, unless multiple lines of credit on a single credit ac-
the request seeks additional credit amounts. count, it is reported as one or more covered
See § 1002.103(b). applications based on the procedures used by
4. Solicitations and firm offers of credit. For the financial institution for the type of cred-
purposes of subpart B of this part, the term it account. For example, if a financial insti-
covered application does not include solicita- tution treats a request for multiple lines of
tions, firm offers of credit, or other evalua- credit at one time as sub-components of a
tions initiated by the financial institution single account, the financial institution re-
because in these situations the business has ports the request as a single covered applica-
jgilmore on DSK4WB1RN3PROD with CFR
not made a request for credit. For example, tion. If, on the other hand, the financial in-
if a financial institution sends a firm offer of stitution treats each line of credit as a sepa-
credit to a business for a $10,000 line of cred- rate account, then the financial institution
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
reports each request for a line of credit as a report data pursuant to §§ 1002.107 through
separate covered application, as set forth in 1002.109 for only a single applicant that is a
comment 103(a)–5. small business, as defined in § 1002.106(b). A
8. Duplicate applications. If a financial insti- covered financial institution shall establish
tution receives two or more duplicate cov- consistent procedures for designating a sin-
ered applications (i.e., from the same appli- gle small business for purposes of collecting
cant, for the same credit product, for the and reporting data under subpart B in situa-
same amount, at or around the same time), tions where there is more than one small
the financial institution may treat the re- business co-applicant, such as reporting on
quest as a single covered application for pur- the first small business listed on an applica-
poses of subpart B, so long as for purposes of tion form. For example, if three businesses
determining whether to extend credit, it jointly apply as co-applicants for a term loan
would also treat one or more of the applica- to purchase a piece of equipment, but only
tions as a duplicate under its procedures. one of the businesses is a small business, as
9. Changes in whether there is a covered cred- defined in § 1002.106(b), the financial institu-
it transaction. In certain circumstances, an tion reports on the single small business. If,
applicant may change the type of product re- however, two of the businesses are small
quested during the course of the application businesses, as defined in § 1002.106(b), the fi-
process. Assuming other requirements of a nancial institution must have a procedure
covered application are met, if an applicant for designating which small business among
initially requests a product that is not a cov- multiple small business co-applicants it will
ered credit transaction, but prior to final ac- report information on, such as consistently
tion taken decides to seek instead a product reporting on the first small business listed
that is a covered credit transaction, the ap- on an application form. See also
plication is a covered application and must § 1002.5(a)(4)(x), which permits a creditor to
be reported pursuant to § 1002.109. In this cir- collect certain protected information about
cumstance, the financial institution shall co-applicants under certain circumstances.
endeavor to compile, maintain, and report 11. Refinancings and evaluation, extension, or
the data required under § 1002.107(a) in a renewal requests that request additional credit
manner that is reasonable under the cir- amounts. As discussed in comments 103(b)–2
cumstances. If, on the other hand, an appli- and –3, assuming other requirements of a
cant initially requests a product that is a covered application are met, an applicant’s
covered credit transaction, but prior to final request to refinance and an applicant’s re-
action taken decides instead to seek a prod- quest for additional credit amounts on an ex-
uct that is not a covered credit transaction, isting account both constitute covered appli-
the application is not a covered application cations.
and thus is not reported. See also
§ 1002.112(c)(4), which provides a safe harbor 103(b) Circumstances That Are Not Covered
for incorrect collection of certain data if, at Applications
the time of collection, the financial institu- 1. In general. The circumstances set forth
tion had a reasonable basis for believing that in § 1002.103(b) are not covered applications
the application was a covered application. for purposes of subpart B of this part, even if
Assuming other requirements of a covered considered applications under subpart A of
application are met, if an applicant initially this part. However, in no way are the exclu-
requests a product that is a covered credit sions in § 1002.103(b) intended to repeal, abro-
transaction, the financial institution gate, annul, impair, change, or interfere with
counteroffers with a product that is not a the scope of the term application in § 1002.2(f)
covered credit transaction, and the applicant as applicable to subpart A.
declines to proceed or fails to respond, the 2. Reevaluation, extension, or renewal re-
application is reported as a covered applica- quests that do not request additional credit
tion. For example, if an applicant initially amounts. An applicant’s request to change
applies for a term loan, but then, after con- one or more terms of an existing account
sultation with the financial institution, de- does not constitute a covered application,
cides that a lease would better meet its unless the applicant is requesting additional
needs and decides to proceed with that prod- credit amounts on the account. For example,
uct, the application is not a covered applica- an applicant’s request to extend the duration
tion and thus is not reported. However, if an on a line of credit or to remove a guarantor
applicant initially applies for a term loan, would not be a covered application. However,
the financial institution offers to consider assuming other requirements of a covered
the applicant only for a lease, and the appli- application are met, an applicant’s request
cant refuses, the transaction is a covered ap- to refinance would be reportable. A refi-
plication that must be reported. nancing occurs when an existing obligation
10. Multiple unaffiliated co-applicants. If a is satisfied and replaced by a new obligation
covered financial institution receives a cov- undertaken by the same borrower.
jgilmore on DSK4WB1RN3PROD with CFR
ered application from multiple businesses 3. Reevaluation, extension, or renewal re-
that are not affiliates, as defined by quests that request additional credit amounts. A
§ 1002.102(a), it shall compile, maintain, and Assuming other requirements of a covered
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
application are met, an applicant’s request ‘‘covered applications’’ under subpart B of
for additional credit amounts on an existing this part. Whether a particular request is a
account constitutes a covered application. covered application, or whether instead it is
For example, an applicant’s request for a an inquiry or prequalification request that is
line increase on an existing line of credit, not reportable under subpart B, may turn,
made in accordance with a financial institu- for instance, on how a financial institution
tion’s procedures for the type of credit re- structures and processes such requests: does
quested, would be a covered application. As the financial institution require or encour-
discussed in comment 107(a)(7)–4, when re- age a preliminary review in order for a busi-
porting a covered application that seeks ad- ness to be considered for a covered credit
ditional credit amounts on an existing ac- transaction, or does the business voluntarily
count, the financial institution need only re- seek preliminary feedback as a tool to ex-
port the additional credit amount sought, plore its options before it decides whether to
and not the entire credit amount. For exam- apply for credit with the financial institu-
ple, if an applicant currently has a line of tion? The name used by the financial institu-
credit account for $100,000, and seeks to in- tion for such a request is not determinative.
crease the line to $150,000, the financial insti- For example, under subpart B, a review is a
tution reports the amount applied for as reportable covered application if the finan-
$50,000. cial institution requires the business, before
4. Reviews or evaluations initiated by the fi- it may apply for credit, to pass through a
nancial institution. For purposes of subpart B mandatory screening process that considers
of this part, the term covered application particular information about the business
does not include evaluations or reviews of and denies or turns away the business if it is
existing accounts initiated by the financial ineligible or unlikely to qualify for credit. In
institution because the business has not contrast, a business that requests a financial
made a request for credit. For example, if a institution to identify credit products for
financial institution conducts periodic re- which the business might qualify based on
views of its existing lines of credit and de- limited or self-described characteristics, and
cides to increase the business’s line by without any commitment from the financial
$10,000, it is not a covered application be- institution to extend credit, may not have
cause the business never made a request for submitted a covered application for purposes
the additional credit amounts. However, if of subpart B.
such an evaluation or review of an existing
account by a financial institution results in Section 1002.104—Covered Credit Transactions
the financial institution inviting the busi- and Excluded Transactions
ness to apply for additional credit amounts
on an existing account and the business does 104(a) Covered Credit Transaction
so, the business’s request constitutes a cov-
ered application for purposes of subpart B of 1. General. The term ‘‘covered credit trans-
this part, assuming other requirements of a action’’ includes all business credit (includ-
covered application are met. Similarly, as ing loans, lines of credit, credit cards, and
noted in comment 103(a)–4, the term covered merchant cash advances) unless otherwise
application also does not include solicita- excluded under § 1002.104(b).
tions and firm offers of credit. 104(b) Excluded Transactions
5. Inquiries and prequalification requests. An
inquiry is a request by a prospective appli- 1. Factoring. The term ‘‘covered credit
cant for information about credit terms of- transaction’’ does not cover factoring as de-
fered by the financial institution. A scribed herein. For the purpose of this sub-
prequalification request is a request by a part, factoring is an accounts receivable pur-
prospective applicant for a preliminary de- chase transaction between businesses that
termination on whether the prospective ap- includes an agreement to purchase, transfer,
plicant would likely qualify for credit under or sell a legally enforceable claim for pay-
a financial institution’s standards or for a ment for goods that the recipient has sup-
determination on the amount of credit for plied or services that the recipient has ren-
which the prospective applicant would likely dered but for which payment in full has not
qualify. Inquiries and prequalification re- yet been made. The name used by the finan-
quests are not covered applications under cial institution for a product is not deter-
subpart B of this part, even though in cer- minative of whether or not it is a ‘‘covered
tain circumstances inquiries and credit transaction.’’ This description of fac-
prequalification requests may constitute ap- toring is not intended to repeal, abrogate,
plications under subpart A. For example, annul, impair, or interfere with any existing
while an inquiry or prequalification request interpretations, orders, agreements, ordi-
may become an ‘‘application’’ under subpart nances, rules, or regulations adopted or
A if the creditor evaluates information about issued pursuant to comment 9(a)(3)–3. A fi-
jgilmore on DSK4WB1RN3PROD with CFR
the business, decides to decline the request, nancial institution shall report an extension
and communicates this to the business, such of business credit incident to a factoring ar-
inquiries or prequalifications would not be rangement that is otherwise a covered credit
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
transaction as ‘‘Other sales-based financing agreements, ordinances, rules, or regulations
transaction’’ under § 1002.107(a)(5). adopted or issued pursuant to comment
2. Leases. The term ‘‘covered credit trans- 9(a)(3)–2.
action’’ does not cover leases as described
herein. A lease, for the purpose of this sub- Section 1002.105—Covered Financial Institutions
part, is a transfer from one business to an- and Exempt Institutions
other of the right to possession and use of
goods for a term, and for primarily business 105(a) Financial Institution
or commercial (including agricultural) pur- 1. Examples. Section 1002.105(a) defines a fi-
poses, in return for consideration. A lease nancial institution as any partnership, com-
does not include a sale, including a sale on pany, corporation, association (incorporated
approval or a sale or return, or a transaction or unincorporated), trust, estate, cooperative
resulting in the retention or creation of a se- organization, or other entity that engages in
curity interest. The name used by the finan- any financial activity. This definition in-
cial institution for a product is not deter- cludes, but is not limited to, banks, savings
minative of whether or not it is a ‘‘covered associations, credit unions, online lenders,
credit transaction.’’ platform lenders, community development
3. Consumer-designated credit. The term financial institutions, Farm Credit System
‘‘covered credit transaction’’ does not in- lenders, lenders involved in equipment and
clude consumer-designated credit that is vehicle financing (captive financing compa-
used for business or agricultural purposes. A nies and independent financing companies),
transaction qualifies as consumer-designated commercial finance companies, organiza-
credit if the financial institution offers or tions exempt from taxation pursuant to 26
extends the credit primarily for personal, U.S.C. 501(c), and governments or govern-
family, or household purposes. For example, mental subdivisions or agencies.
an open-end credit account used for both per- 2. Motor vehicle dealers. Pursuant to
sonal and business/agricultural purposes is § 1002.101(a), subpart B of this part excludes
not business credit for the purpose of subpart
from coverage persons defined by section 1029
B of this part unless the financial institution
of the Consumer Financial Protection Act of
designated or intended for the primary pur-
2010, title X of the Dodd-Frank Wall Street
pose of the account to be business/agricul-
Reform and Consumer Protection Act, Pub-
tural-related.
lic Law 111–203, 124 Stat. 1376, 2004 (2010).
4. Credit transaction purchases, purchases of
an interest in a pool of credit transactions, and 105(b) Covered Financial Institution
purchases of a partial interest in a credit trans-
action. The term ‘‘covered credit trans- 1. Preceding calendar year. The definition of
action’’ does not cover the purchase of an covered financial institution refers to pre-
originated credit transaction, the purchase ceding calendar years. For example, in 2029,
of an interest in a pool of credit trans- the two preceding calendar years are 2027
actions, or the purchase of a partial interest and 2028. Accordingly, in 2029, Financial In-
in a credit transaction such as through a stitution A does not meet the loan-volume
loan participation agreement. Such pur- threshold in § 1002.105(b) if did not originate
chases do not, in themselves, constitute an at least 100 covered credit transactions for
application for credit. See also comment small businesses both during 2027 and during
109(a)(3)–2.i. 2028.
2. Origination threshold. A financial institu-
104(b)(1) Trade Credit tion qualifies as a covered financial institu-
1. General. Trade credit, as defined in tion based on total covered credit trans-
§ 1002.104(b)(1), is excluded from the defini- actions originated for small businesses, rath-
tion of a covered credit transaction. An ex- er than covered applications received from
ample of trade credit involves a supplier that small businesses. For example, if in both 2026
finances the sale of equipment, supplies, or and 2027, Financial Institution B received 105
inventory. However, an extension of business covered applications from small businesses
credit by a financial institution other than and originated 95 covered credit transactions
the supplier for the financing of such items for small businesses, then for 2028, Financial
is not trade credit. Also, credit extended by Institution B is not a covered financial insti-
a business providing goods or services to an- tution.
other business is not trade credit for the pur- 3. Counting originations when multiple finan-
poses of this subpart where the supplying cial institutions are involved in originating a
business intends to sell or transfer its rights covered credit transaction. For the purpose of
as a creditor to a third party. counting originations to determine whether
2. Trade credit under subpart A. The defini- a financial institution is a covered financial
tion of trade credit under comment 9(a)(3)–2 institution under § 1002.105(b), in a situation
applies to relevant provisions under subpart where multiple financial institutions are in-
jgilmore on DSK4WB1RN3PROD with CFR
A, and § 1002.104(b)(1) is not intended to re- volved in originating a single covered credit
peal, abrogate, annul, impair, or interfere transaction, only the last financial institu-
with any existing interpretations, orders, tion with authority to set the material
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
terms of the covered credit transaction is re- data collection. For example, Financial In-
quired to count the origination. stitution C originated 105 covered trans-
4. Counting originations after adjustments to actions for small businesses in both 2027 and
the gross annual revenue threshold due to infla- 2028. In 2029, Financial Institution C is a cov-
tion. Pursuant to § 1002.106(b)(2), every five ered financial institution and therefore is ob-
years, the gross annual revenue threshold ligated to compile and maintain applicable
used to define a small business in 2029 small business lending data under
§ 1002.106(b)(1) shall be adjusted, if necessary, § 1002.107(a). During 2029, Financial Institu-
to account for inflation. The first time such tion C originates 95 covered transactions for
an adjustment could occur is in 2030, with an small businesses. In 2030, Financial Institu-
effective date of January 1, 2031. A financial tion C is not a covered financial institution
institution seeking to determine whether it with respect to 2030 small business lending
is a covered financial institution applies the data, and is not obligated to compile and
gross annual revenue threshold that is in ef- maintain 2030 data under § 1002.107(a) (al-
fect for each year it is evaluating. For exam- though Financial Institution C may volun-
ple, a financial institution seeking to deter- teer to collect and maintain 2030 data pursu-
mine whether it is a covered financial insti- ant to § 1002.5(a)(4)(vii) and as explained in
tution in 2032 counts its originations of cov- comment 105(b)–10). Pursuant to § 1002.109(a),
ered credit transactions for small businesses Financial Institution C shall submit its
in calendar years 2030 and 2031. The financial small business lending application register
institution applies the initial $5 million for 2029 data in the format prescribed by the
threshold to evaluate whether its origina- Bureau by June 1, 2030 because Financial In-
tions were to small businesses in 2030. In this stitution C is a covered financial institution
example, if the small business threshold were with respect to 2029 data, and the data sub-
increased to $5.5 million effective January 1, mission deadline of June 1, 2030 applies to
2031, the financial institution applies the $5.5 2029 data.
million threshold to count its originations 7. Merger or acquisition—coverage of sur-
for small businesses in 2031. viving or newly formed institution. After a
5. Reevaluation, extension, or renewal re- merger or acquisition, the surviving or
quests, as well as credit line increases and other newly formed financial institution is a cov-
requests for additional credit amounts. While ered financial institution under § 1002.105(b)
requests for additional credit amounts on an if it, considering the combined lending activ-
existing account can constitute a ‘‘covered ity of the surviving or newly formed institu-
application’’ pursuant to § 1002.103(b)(1), such tion and the merged or acquired financial in-
requests are not counted as originations for stitutions (or acquired branches or loca-
the purpose of determining whether a finan- tions), satisfies the criteria included in
cial institution is a covered financial insti- § 1002.105(b). For example, Financial Institu-
tution pursuant to § 1002.105(b). In addition, tions A and B merge. The surviving or newly
transactions that extend, renew, or other- formed financial institution meets the
wise amend a transaction are not counted as threshold in § 1002.105(b) if the combined pre-
originations. For example, if a financial in- vious components of the surviving or newly
stitution originates 50 term loans and 30 formed financial institution (A plus B) would
lines of credit for small businesses in each of have originated at least 100 covered credit
the preceding two calendar years, along with transactions for small businesses for each of
25 line increases for small businesses in each the two preceding calendar years. Similarly,
of those years, the financial institution is if the combined previous components and the
not a covered financial institution because it surviving or newly formed financial institu-
has not originated at least 100 covered credit tion would have reported at least 100 covered
transactions in each of the two preceding transactions for small businesses for the
calendar years. year previous to the merger as well as 100
6. Annual consideration. Whether a financial covered transactions for small businesses for
institution is a covered financial institution the year of the merger, the threshold de-
for a particular year depends on its small scribed in § 1002.105(b) would be met and the
business lending activity in the preceding surviving or newly formed financial institu-
two calendar years. Therefore, whether a fi- tion would be a covered institution under
nancial institution is a covered financial in- § 1002.105(b) for the year following the merg-
stitution is an annual consideration for each er. Comment 105(b)–8 discusses a financial in-
year that data may be compiled and main- stitution’s responsibilities with respect to
tained for purposes of subpart B of this part. compiling and maintaining (and subse-
A financial institution may be a covered fi- quently reporting) data during the calendar
nancial institution for a given year of data year of a merger.
collection (and the obligations arising from 8. Merger or acquisition—coverage specific to
qualifying as a covered financial institution the calendar year of the merger or acquisition.
shall continue into subsequent years, pursu- The scenarios described below illustrate a fi-
jgilmore on DSK4WB1RN3PROD with CFR
ant to §§ 1002.110 and 1002.111), but the same nancial institution’s responsibilities specifi-
financial institution may not be a covered fi- cally for data from the calendar year of a
nancial institution for the following year of merger or acquisition. For purposes of these
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
illustrations, an ‘‘institution that is not cov- business, and/or an LGBTQI+-owned business
ered’’ means either an institution that is not under § 1002.107(a)(18), and regarding the eth-
a financial institution, as defined in nicity, race, and sex of the applicant’s prin-
§ 1002.105(a), or a financial institution that is cipal owners under § 1002.107(a)(19), it shall do
not a covered financial institution, as de- so in compliance with §§ 1002.107, 1002.108,
fined in § 1002.105(b). 1002.111, 1002.112 as though it were a covered
i. Two institutions that are not covered fi- financial institution. If a creditor is report-
nancial institutions merge. The surviving or ing those covered applications from small
newly formed institution meets all of the re- businesses to the Bureau, it shall do so in
quirements necessary to be a covered finan- compliance with §§ 1002.109 and 1002.110 as
cial institution. No data are required to be though it were a covered financial institu-
compiled, maintained, or reported for the tion.
calendar year of the merger (even though the
merger creates an institution that meets all Section 1002.106—Business and Small Business
of the requirements necessary to be a cov-
106(b) Small Business Definition
ered financial institution).
ii. A covered financial institution and an 106(b)(1) Small Business
institution that is not covered merge. The
covered financial institution is the surviving 1. Change in determination of small business
institution, or a new covered financial insti- status—business is ultimately not a small busi-
tution is formed. For the calendar year of ness. If a financial institution initially deter-
the merger, data are required to be compiled, mines an applicant is a small business as de-
maintained, and reported for covered appli- fined in § 1002.106 based on available informa-
cations from the covered financial institu- tion and collects data required by
tion and is optional for covered applications § 1002.107(a)(18) and (19) but later concludes
from the financial institution that was pre- that the applicant is not a small business,
viously not covered. the financial institution does not violate the
iii. A covered financial institution and an Act or this regulation if it meets the require-
institution that is not covered merge. The ments of § 1002.112(c)(4). The financial insti-
institution that is not covered is the sur- tution shall not report the application on its
viving institution and remains not covered small business lending application register
after the merger, or a new institution that is pursuant to § 1002.109.
not covered is formed. For the calendar year 2. Change in determination of small business
of the merger, data are required to be com- status—business is ultimately a small business.
piled and maintained (and subsequently re- Consistent with comment 107(a)(14)–1, a fi-
ported) for covered applications from the nancial institution need not independently
previously covered financial institution that verify gross annual revenue. If a financial in-
took place prior to the merger. After the stitution initially determines that the appli-
merger date, compiling, maintaining, and re- cant is not a small business as defined in
porting data is optional for applications § 1002.106(b), but later concludes the appli-
from the institution that was previously cov- cant is a small business prior to taking final
ered for the remainder of the calendar year action on the application, the financial insti-
of the merger. tution must report the covered application
iv. Two covered financial institutions pursuant to § 1002.109. In this situation, the
merge. The surviving or newly formed finan- financial institution shall endeavor to com-
cial institution is a covered financial insti- pile, maintain, and report the data required
tution. Data are required to be compiled and under § 1002.107(a) in a manner that is reason-
maintained (and subsequently reported) for able under the circumstances. For example,
the entire calendar year of the merger. The if the applicant initially provides a gross an-
surviving or newly formed financial institu- nual revenue of $5.5 million (that is, above
tion files either a consolidated submission or the threshold for a small business as ini-
separate submissions for that calendar year. tially defined in § 1002.106(b)(1)), but during
9. Foreign applicability. As discussed in the course of underwriting the financial in-
comment 1(a)–2, Regulation B (including stitution discovers the applicant’s gross an-
subpart B) generally does not apply to lend- nual revenue was in fact $4.75 million (mean-
ing activities that occur outside the United ing that the applicant is within the defini-
States. tion of a small business under § 1002.106(b)),
10. Voluntary collection and reporting. Sec- the financial institution is required to report
tion 1002.5(a)(4)(vii) through (x) permits a the covered application pursuant to
creditor that is not a covered financial insti- § 1002.109. In this situation, the financial in-
tution under § 1002.105(b) to voluntarily col- stitution shall take reasonable steps upon
lect and report information regarding cov- discovery to compile, maintain, and report
ered applications from small businesses in the data necessary under § 1002.107(a) to com-
certain circumstances. If a creditor is volun- ply with subpart B of this part for that cov-
jgilmore on DSK4WB1RN3PROD with CFR
tarily collecting information for covered ap- ered application. Thus, in this example, even
plications regarding whether the applicant is if the financial institution’s procedure is
a minority-owned business, a women-owned typically to request applicant-provided data
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
together with the application form, in this the other hand, the adjusted value were $5.7
circumstance, the financial institution shall million, then the threshold would adjust to
seek to collect the data during the applica- $5.5 million. Where the adjusted value is a
tion process necessary to comply with sub- multiple of $250,000 (e.g., $5,250,000), then the
part B in a manner that is reasonable under threshold adjusts upward (in this example, to
the circumstances. $5,500,000).
3. Applicant’s representations regarding gross 2. Substitute for CPI–U. If publication of the
annual revenue; inclusion of affiliate revenue; CPI–U ceases, or if the CPI–U otherwise be-
updated or verified information. A financial in- comes unavailable or is altered in such a way
stitution is permitted to rely on an appli- as to be unusable, then the Bureau shall sub-
cant’s representations regarding gross an- stitute another reliable cost of living indi-
nual revenue (which may or may not include cator from the United States Government
any affiliate’s revenue) for purposes of deter- for the purpose of calculating adjustments
mining small business status under pursuant to § 1002.106(b)(2).
§ 1002.106(b). However, if the applicant pro-
Section 1002.107—Compilation of Reportable
vides updated gross annual revenue informa-
Data
tion or the financial institution verifies the
gross annual revenue information (see com- 107(a) Data Format and Itemization
ment 107(b)–1), the financial institution must
use the updated or verified information in 1. General. Section 1002.107(a) describes a
determining small business status. covered financial institution’s obligation to
4. Multiple unaffiliated co-applicants—size compile and maintain data regarding the
determination. The financial institution shall covered applications it receives from small
not aggregate unaffiliated co-applicants’ businesses.
gross annual revenues for purposes of deter- i. A covered financial institution reports
mining small business status under these data even if the credit originated pur-
§ 1002.106(b). If a covered financial institution suant to the reported application was subse-
quently sold by the institution.
receives a covered application from multiple
ii. A covered financial institution annually
businesses who are not affiliates, as defined
reports data for covered applications for
by § 1002.102(a), where at least one business is
which final action was taken in the previous
a small business under § 1002.106(b), the finan-
calendar year.
cial institution shall compile, maintain, and
iii. A covered financial institution reports
report data pursuant to §§ 1002.107 through
data for a covered application on its small
1002.109 regarding the covered application for
business lending application register for the
only a single applicant that is a small busi- calendar year during which final action was
ness. See comment 103(a)–10 for additional taken on the application, even if the institu-
details. tion received the application in a previous
106(b)(2) Inflation Adjustment calendar year.
2. Free-form text fields. A covered financial
1. Inflation adjustment methodology. The institution may use technology such as
small business gross annual revenue thresh- autocorrect and predictive text when re-
old set forth in § 1002.106(b)(1) will be ad- questing applicant-provided data under sub-
justed upward or downward to reflect part B of this part that the financial institu-
changes, if any, in the Consumer Price Index tion reports via free-form text fields, pro-
for All Urban Consumers (U.S. city average vided that such technology does not restrict
series for all items, not seasonally adjusted), the applicant’s ability to write in its own re-
as published by the United States Bureau of sponse instead of using text suggested by the
Labor Statistics (‘‘CPI–U’’). The base for technology.
computing each adjustment is the January 3. Filing Instructions Guide. Additional de-
2025 CPI–U; this base value shall be compared tails and procedures for compiling data pur-
to the CPI–U value in January 2030 and every suant to § 1002.107 are included in the Filing
five years thereafter. For example, after the Instructions Guide, which is available at
January 2030 CPI–U is made available, the https://www.consumerfinance.gov/data-research/
adjustment is calculated by determining the small-business-lending/filing-instructions-guide/.
percentage change in the CPI–U between 4. Additional data point response options. The
January 2025 and January 2030, applying this Bureau may add additional response options
change to the $5 million gross annual rev- to the lists of responses contained in the
enue threshold, and rounding to the nearest commentary that follows for certain of the
$500,000. If, as a result of this rounding, there data points set forth in § 1002.107(a), via the
is no change in the gross annual revenue Filing Instructions Guide. Refer to the Fil-
threshold, there will be no adjustment. For ing Instructions Guide for any updates for
example, if in January 2030 the adjusted each reporting year.
value were $4.9 million (reflecting a $100,000
jgilmore on DSK4WB1RN3PROD with CFR
107(a)(1) Unique Identifier
decrease from January 2025 CPI–U), then the
threshold would not adjust because $4.9 mil- 1. Unique within the financial institution. A
lion would be rounded up to $5 million. If on financial institution complies with
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
§ 1002.107(a)(1) by compiling and reporting an received by the financial institution, or the
alphanumeric application or loan identifier date shown on the application form. Al-
unique within the financial institution to though a financial institution need not
the specific application. The identifier must choose the same approach for its entire
not exceed 45 characters, and must begin small business lending application register,
with the financial institution’s Legal Entity it should generally be consistent in its ap-
Identifier (LEI), as defined in comment proach by, for example, establishing proce-
109(b)(6)–1. Separate applications for the dures for how to report this date within par-
same applicant must have separate identi- ticular scenarios, products, or divisions.
fiers. The identifier may only include stand- 4. Safe harbor. Pursuant to § 1002.112(c)(1), a
ard numerical and/or upper-case alphabetical financial institution that reports on its
characters and cannot include dashes, other small business lending application register
special characters, or characters with dia- an application date that is within three busi-
critics. The financial institution may assign ness days of the actual application date pur-
the unique identifier at any time prior to re- suant to § 1002.107(a)(2) does not violate the
porting the application. Refinancings or ap- Act or subpart B of this part. For purposes of
plications for refinancing must be assigned a this paragraph, a business day means any
different identifier than the transaction that day the financial institution is open for busi-
is being refinanced. A financial institution ness.
with multiple branches must ensure that its
branches do not use the same identifiers to 107(a)(3) Application Method
refer to multiple applications.
2. Does not include directly identifying infor- 1. General. A financial institution complies
mation. The unique identifier must not in- with § 1002.107(a)(3) by reporting the means
clude any directly identifying information, by which the applicant submitted the appli-
such as a whole or partial Social Security cation from one of the following options: in-
number or employer identification number, person, telephone, online, or mail. If the fi-
about the applicant or persons (natural or nancial institution retains multiple versions
legal) associated with the applicant. See also of the application form, the institution re-
§ 1002.111(c) and related commentary. ports the means by which the first applica-
tion form satisfying the definition of covered
107(a)(2) Application Date application pursuant to § 1002.103 was sub-
mitted.
1. Consistency. Section 1002.107(a)(2) re-
i. In-person. A financial institution reports
quires that, in reporting the date of covered
the application method as ‘‘in-person’’ if the
application, a financial institution shall re-
applicant submitted the application to the
port the date the covered application was re-
ceived or the date shown on a paper or elec- financial institution, or to another party
tronic application form. Although a finan- acting on the financial institution’s behalf,
cial institution need not choose the same ap- in person. The in-person application method
proach for its entire small business lending applies, for example, to applications sub-
application register, it should generally be mitted at a branch office (including applica-
consistent in its approach by, for example, tions hand delivered by the applicant), at the
establishing procedures for how to report applicant’s place of business, or via elec-
this date within particular scenarios, prod- tronic media with a video component).
ucts, or divisions. If the financial institution ii. Telephone. A financial institution re-
chooses to report the date shown on an appli- ports the application method as ‘‘telephone’’
cation form and the institution retains mul- if the applicant submitted the application to
tiple versions of the application form, the in- the financial institution, or another party
stitution reports the date shown on the first acting on the financial institution’s behalf,
application form satisfying the definition of by telephone call or via audio-based elec-
covered application pursuant to § 1002.103. tronic media without a video component.
2. Application received. For an application iii. Online. A financial institution reports
submitted directly to the financial institu- the application method as ‘‘online’’ if the ap-
tion or its affiliate (as described in plicant submitted the application to the fi-
§ 1002.107(a)(4)), the financial institution shall nancial institution, or another party acting
report the date it received the covered appli- on the financial institution’s behalf, through
cation, as defined under § 1002.103, or the date a website, mobile application (app), fax
shown on a paper or electronic application transmission, electronic mail, text message,
form. For an application initially submitted or some other form of text-based electronic
to a third party, see comment 107(a)(2)–3. communication.
3. Indirect applications. For an application iv. Mail. A financial institution reports the
that was not submitted directly to the finan- application method as ‘‘mail’’ if the appli-
cial institution or its affiliate (as described cant submitted the application to the finan-
in § 1002.107(a)(4)), the financial institution cial institution, or another party acting on
jgilmore on DSK4WB1RN3PROD with CFR
shall report the date the application was re- the financial institution’s behalf, via United
ceived by the party that initially received States mail, courier or overnight service, or
the application, the date the application was an overnight drop box.
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
107(a)(4) Application Recipient credit device to obtain credit, except that
accounts or lines of credit secured by real
1. Agents. When a financial institution is
property and overdraft lines of credit
reporting actions taken by its agent con-
accessed by debit cards are not credit card
sistent with comment 109(a)(3)–3, the agent
accounts. The term credit card account does
is considered the financial institution for the
not include debit card accounts or closed-end
purposes of § 1002.107(a)(4). For example, as-
credit that may be accessed by a card, plate,
sume that an applicant submitted an appli-
or single credit device. The term credit card
cation to Financial Institution B, and Finan-
account does include charge card accounts
cial Institution B made the credit decision
that are generally paid in full each billing
acting as Financial Institution A’s agent period, as well as hybrid prepaid-credit
under State law. Financial Institution A re- cards. A financial institution reports mul-
ports the application and indicates that the tiple credit card account, not private-label
application was submitted directly to Finan- applications requested at one time using the
cial Institution A. guidance in comment 103(a)–7.
107(a)(5) Credit Type 3. Private-label credit card account. A finan-
cial institution complies with
1. Reporting credit product—in general. A fi- § 1002.107(a)(5)(i) by reporting the credit prod-
nancial institution complies with uct as a ‘‘private-label credit card account’’
§ 1002.107(a)(5)(i) by selecting the credit prod- when the product is a business-purpose open-
uct applied for or originated, from the list end private-label credit account that other-
below. If the credit product applied for or wise meets the description of a credit card
originated is not included on this list, the fi- account in comment 107(a)(5)–2. A private-
nancial institution selects ‘‘other,’’ and re- label credit card account is a credit card ac-
ports the credit product via free-form text count that can only be used to acquire goods
field. If an applicant requested more than or services provided by one business (for ex-
one credit product at the same time, the fi- ample, a specific merchant, retailer, inde-
nancial institution reports each credit prod- pendent dealer, or manufacturer) or a small
uct requested as a separate application. How- group of related businesses. A co-branded or
ever, if the applicant only requested a single other card that can also be used for pur-
covered credit transaction, but had not de- chases at unrelated businesses is not a pri-
cided on which particular product, the finan- vate-label credit card. A financial institu-
cial institution complies with tion reports multiple private-label credit
§ 1002.107(a)(5)(i) by reporting the credit prod- card account applications requested at one
uct originated (if originated), or the credit time in the same manner as credit card ac-
product denied (if denied), or the credit prod- count, not private-label applications, using
uct of greater interest to the applicant, if the guidance in comment 103(a)–7.
readily determinable. If the credit product of 4. Credit product not provided by the appli-
greater interest to the applicant is not read- cant and otherwise undetermined. Pursuant to
ily determinable, the financial institution § 1002.107(c), a financial institution is re-
complies with § 1002.107(a)(5)(i) by reporting quired to maintain procedures reasonably de-
one of the credit products requested as part signed to collect applicant-provided data,
of the request for a single covered credit which includes credit product. However, if a
transaction, in its discretion. See comment financial institution is nonetheless unable to
103(a)–5 for instructions on reporting re- collect or otherwise determine credit prod-
quests for multiple covered credit trans- uct information because the applicant does
actions at one time. not indicate what credit product it seeks and
i. Term loan—unsecured. the application is denied, withdrawn, or
ii. Term loan—secured. closed for incompleteness before a credit
iii. Line of credit—unsecured. product is identified, the financial institu-
iv. Line of credit—secured. tion reports that the credit product is ‘‘not
v. Credit card account, not private-label. provided by applicant and otherwise undeter-
vi. Private-label credit card account. mined.’’
vii. Merchant cash advance. 5. Reporting credit product involving counter-
viii. Other sales-based financing trans- offers. If a financial institution presents a
action. counteroffer for a different credit product
ix. Other. than the product the applicant had initially
x. Not provided by applicant and otherwise requested, and the applicant does not agree
undetermined. to proceed with the counteroffer, the finan-
2. Credit card account, not private-label. A fi- cial institution reports the application for
nancial institution complies with the original credit product as denied pursu-
§ 1002.107(a)(5)(i) by reporting the credit prod- ant to § 1002.107(a)(9). If the applicant agrees
uct as a ‘‘credit card account, not private- to proceed with consideration of the finan-
label’’ when the product is a business-pur- cial institution’s counteroffer, the financial
jgilmore on DSK4WB1RN3PROD with CFR
pose open-end credit account that is not pri- institution reports the disposition of the ap-
vate label and that may be accessed from plication based on the credit product that
time to time by a card, plate, or other single was offered and does not report the original
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
credit product applied for. See comment month or may count only full months and ig-
107(a)(9)–2. nore partial months, as it so chooses. If a
6. Other sales-based financing transaction. credit product, such as a credit card, does
For an extension of business credit incident not have a loan term, the financial institu-
to a factoring arrangement that is otherwise tion reports that the loan term is ‘‘not appli-
a covered credit transaction, a financial in- cable.’’ The financial institution also reports
stitution selects ‘‘other sales-based financing that the loan term is ‘‘not applicable’’ if the
transaction’’ as the credit product. See com- credit product is reported as ‘‘not provided
ment 104(b)–1. by applicant and otherwise undetermined.’’
7. Guarantees. A financial institution com- For a credit product that generally has a
plies with § 1002.107(a)(5)(ii) by selecting the loan term, the financial institution reports
type or types of guarantees that were ob- ‘‘not provided by applicant and otherwise un-
tained for an originated covered credit trans- determined’’ if the application is denied,
action, or that would have been obtained if withdrawn, or determined to be incomplete
the covered credit transaction was origi- before a loan term has been identified. For
nated, from the list below. The financial in- merchant cash advances and other sales-
stitution selects, if applicable, up to a max- based financing transactions, the financial
imum of five guarantees for a single applica- institution complies with § 1002.107(a)(5)(iii)
tion. If the type of guarantee does not appear by reporting the loan term, if any, that the
on the list, the financial institution selects financial institution estimated or specified
‘‘other’’ and reports the type of guarantee in processing, underwriting or providing dis-
via free-form text field. If no guarantee is closures for the application or transaction. If
obtained or would have been obtained if the more than one such loan term is estimated
covered credit transaction was originated, or specified, the financial institution reports
the financial institution selects ‘‘no guar- the one it considers to be most accurate, in
antee.’’ If an application is denied, with- its discretion. For merchant cash advances
drawn, or closed for incompleteness before and other sales-based financing transactions
any guarantee has been identified, the finan- that do not have a loan term, the financial
cial institution selects ‘‘no guarantee.’’ The institution reports ‘‘not provided by appli-
financial institution chooses State govern- cant and otherwise undetermined.’’
ment guarantee or local government guar-
antee, as applicable, based on the entity di- 107(a)(6) Credit Purpose
rectly administering the program, not the 1. General. A financial institution complies
source of funding. with § 1002.107(a)(6) by selecting the purpose
i. Personal guarantee—owner(s). or purposes of the covered credit transaction
ii. Personal guarantee—non-owner(s). applied for or originated from the list below.
iii. SBA guarantee—7(a) program. i. Purchase, construction/improvement, or
iv. SBA guarantee—504 program. refinance of non-owner-occupied real prop-
v. SBA guarantee—other. erty.
vi. USDA guarantee. ii. Purchase, construction/improvement, or
vii. FHA insurance. refinance of owner-occupied real property.
viii. Bureau of Indian Affairs guarantee. iii. Purchase, refinance, or rehabilitation/
ix. Other Federal guarantee. repair of motor vehicle(s) (including light
x. State government guarantee. and heavy trucks).
xi. Local government guarantee. iv. Purchase, refinance, or rehabilitation/
xii. Other. repair of equipment.
xiii. No guarantee. v. Working capital (includes inventory or
8. Loan term. A financial institution com- floor planning).
plies with § 1002.107(a)(5)(iii) by reporting the vi. Business start-up.
number of months in the loan term for the vii. Business expansion.
covered credit transaction. The loan term is viii. Business acquisition.
the number of months after which the legal ix. Refinance existing debt (other than
obligation will mature or terminate, meas- refinancings listed above).
ured from the date of origination. For trans- x. Line increase.
actions involving real property, the financial xi. Overdraft.
institution may instead measure the loan xii. Other.
term from the date of the first payment pe- xiii. Not provided by applicant and other-
riod and disregard the time that elapses, if wise undetermined.
any, between the settlement of the trans- xiv. Not applicable.
action and the first payment period. For ex- 2. More than one purpose. If the applicant
ample, if a loan closes on April 12, but the indicates or the financial institution is oth-
first payment is not due until June 1 and in- erwise aware of more than one purpose for
cludes the interest accrued in May (but not the credit applied for or originated, the fi-
April), the financial institution may choose nancial institution reports those purposes,
jgilmore on DSK4WB1RN3PROD with CFR
not to include the month of April in the loan up to a maximum of three, using the list pro-
term. In addition, the financial institution vided, in any order it chooses. For example,
may round the loan term to the nearest full if an applicant refinances a commercial
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
building it owns and uses the funds to pur- tion of the property is used by the owner for
chase a motor vehicle and expand the busi- any activity, including storage.
ness it runs in a part of that building, the fi- 8. Overdraft. When overdraft is provided as
nancial institution reports that the three an aspect of the covered credit transaction
purposes of the credit are purchase, con- applied for or originated, the financial insti-
struction/improvement, or refinance of tution reports ‘‘Overdraft’’ as a purpose of
owner-occupied real property; purchase, refi- the credit. The financial institution reports
nance, or rehabilitation/repair of motor vehi- credit type pursuant to § 1002.107(a)(5)(i) as
cle(s) (including light and heavy trucks); and appropriate for the underlying covered credit
business expansion. If an application has transaction, such as ‘‘Line of credit—unse-
more than three purposes, the financial in- cured.’’ Providing occasional overdraft serv-
stitution reports any three of those purposes. ices as part of a deposit account offering
In the example above, if the funds were also would not be reported for the purpose of sub-
used to purchase equipment, the financial in- part B.
stitution would select only three of the rel-
107(a)(7) Amount Applied For
evant purposes to report.
3. ‘‘Other’’ credit purpose. If a purpose of an 1. Initial amount requested. A financial in-
application does not appear on the list of stitution complies with § 1002.107(a)(7) by re-
purposes provided, the financial institution porting the initial amount of credit or the
reports ‘‘other’’ as the credit purpose and re- initial credit limit requested by the appli-
ports the credit purpose via free-form text cant. The financial institution is not re-
field. If the application has more than one quired to report credit amounts or limits dis-
‘‘other’’ purpose, the financial institution cussed before an application is made, but
chooses the most significant ‘‘other’’ pur- must capture the initial amount requested
pose, in its discretion, and reports that at the application stage. If the applicant re-
‘‘other’’ purpose. The financial institution quests an amount as a range of numbers, the
reports a maximum of three credit purposes, financial institution reports the midpoint of
including any ‘‘other’’ purpose. that range.
4. Credit purpose not provided by applicant 2. No amount requested. If the applicant
and otherwise undetermined. Pursuant to does not request a specific amount at the ap-
§ 1002.107(c), a financial institution shall plication stage, but the financial institution
maintain procedures reasonably designed to underwrites the application for a specific
collect applicant-provided data, which in- amount, the financial institution complies
cludes credit purpose. However, if a financial with § 1002.107(a)(7) by reporting the amount
institution is nonetheless unable to collect considered for underwriting as the amount
or determine credit purpose information, the applied for. If the particular type of credit
financial institution reports that the credit product applied for does not involve a spe-
purpose is ‘‘not provided by applicant and cific amount requested, the financial institu-
otherwise undetermined.’’ tion reports that the requirement is ‘‘not ap-
plicable.’’
5. Not applicable. If the application is for a
3. Firm offers. When an applicant responds
credit product that generally has indetermi-
to a ‘‘firm offer’’ that specifies an amount or
nate or numerous potential purposes, such as
limit, which may occur in conjunction with
a credit card, the financial institution may
a pre-approved credit solicitation, the finan-
report credit purpose as ‘‘not applicable.’’ cial institution reports the amount of the
6. Collecting credit purpose. Pursuant to firm offer as the amount applied for, unless
§ 1002.107(c), a financial institution shall the applicant requests a different amount. If
maintain procedures reasonably designed to the firm offer does not specify an amount or
collect applicant-provided data, including limit and the applicant does not request a
credit purpose. The financial institution is specific amount, the amount applied for is
permitted, but not required, to present the the amount underwritten by the financial in-
list of credit purposes provided in comment stitution. If the firm offer specifies an
107(a)(6)–1 to the applicant. The financial in- amount or limit as a range and the applicant
stitution is also permitted to ask about pur- does not request a specific amount, the
poses not included on the list provided in amount applied for is the amount under-
comment 107(a)(6)–1. If the applicant chooses written by the financial institution.
a purpose or purposes not included on the 4. Additional amounts on an existing account.
provided list, the financial institution fol- When reporting a covered application that
lows the instructions in comment 107(a)(6)–3 seeks additional credit amounts on an exist-
regarding reporting of ‘‘other’’ as the credit ing account, the financial institution reports
purpose. If an applicant chooses a purpose or only the additional credit amount sought,
purposes that are similar to purposes on the and not any previous amounts extended. See
list provided, but uses different language, comment 103(b)–3.
the financial institution reports the purpose 5. Initial amount otherwise undetermined.
jgilmore on DSK4WB1RN3PROD with CFR
or purposes from the list provided. Pursuant to § 1002.107(c), a financial institu-
7. Owner-occupied real property. Real prop- tion shall maintain procedures reasonably
erty is owner-occupied if any physical por- designed to collect applicant-provided data,
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
which includes the credit amount initially nated, the financial institution reports the
requested by the applicant (other than for amount granted. If an applicant does not
products that do not involve a specific agree to proceed with consideration of a
amount requested). However, if a financial counteroffer or fails to respond, the institu-
institution is nonetheless unable to collect tion reports the application as denied and re-
or otherwise determine the amount initially ports ‘‘not applicable’’ for the amount ap-
requested, the financial institution reports proved or originated. See comment 107(a)(9)–
that the amount applied for is ‘‘not provided 2.
by applicant and otherwise undetermined.’’ 6. Amount approved or originated—existing
But see comment 107(a)(7)–2 for how to re- accounts. For additional credit amounts that
port the credit amount initially requested by were approved for or originated on an exist-
the applicant for particular types of credit ing account, the financial institution reports
products that do not involve a specific only the additional credit amount approved
amount requested. or originated, and not any previous amounts
107(a)(8) Amount Approved or Originated extended.
1. General. A financial institution complies 107(a)(9) Action Taken
with § 1002.107(a)(8) by reporting the amount
approved or originated for credit that is 1. General. A financial institution complies
originated or approved but not accepted. For with § 1002.107(a)(9) by selecting the action
applications that the financial institution, taken by the financial institution on the ap-
pursuant to § 1002.107(a)(9), reports as denied, plication from the following list: originated,
withdrawn by the applicant, or incomplete, approved but not accepted, denied, with-
the financial institution reports that the drawn by the applicant, or incomplete. A fi-
amount approved or originated is ‘‘not appli- nancial institution identifies the applicable
cable.’’ action taken code based on final action
2. Multiple approval amounts. A financial in- taken on the covered application.
stitution may sometimes approve an appli- i. Originated. A financial institution re-
cant for more than one credit amount, allow- ports that the application was originated if
ing the applicant to choose which amount the financial institution made a credit deci-
the applicant prefers for the extension or sion approving the application and that cred-
line of credit. When multiple approval it decision resulted in an extension of credit.
amounts are offered for a closed-end credit ii. Approved but not accepted. A financial in-
transaction for which the action taken is ap- stitution reports that the application was
proved but not accepted, and the applicant approved but not accepted if the financial in-
does not accept the approved offer of credit stitution made a credit decision approving
in any amount, the financial institution re- the application, but the applicant or the
ports the highest amount approved. If the party that initially received the application
applicant accepts the offer of closed-end failed to respond to the financial institu-
credit, the financial institution reports the tion’s approval within the specified time, or
amount originated. When multiple approval the covered credit transaction was not other-
amounts are offered for an open-end credit wise consummated or the account was not
transaction for which the action taken is ap- otherwise opened.
proved but not accepted, and the applicant
iii. Denied. A financial institution reports
does not accept the approved offer of credit
that the application was denied if it made a
in any amount, the financial institution re-
credit decision denying the application be-
ports the highest amount approved. If the
fore an applicant withdrew the application,
applicant accepts the offer of open-end cred-
before the application was closed for incom-
it, the financial institution reports the ac-
tual credit limit established. pleteness, or before the application was de-
3. Amount approved or originated—closed-end nied on the basis of incompleteness.
credit transaction. For an originated closed- iv. Withdrawn by the applicant. A financial
end credit transaction, the financial institu- institution reports that the application was
tion reports the principal amount to be re- withdrawn if the application was expressly
paid. This amount will generally be disclosed withdrawn by the applicant before the finan-
on the legal obligation. cial institution made a credit decision ap-
4. Amount approved or originated—refi- proving or denying the application, before
nancing. For a refinancing, the financial in- the application was closed for incomplete-
stitution reports the amount of credit ap- ness, or before the application was denied on
proved or originated under the terms of the the basis of incompleteness.
new debt obligation. v. Incomplete. A financial institution re-
5. Amount approved or originated— ports that the application was incomplete if
counteroffer. If an applicant agrees to proceed the financial institution took adverse action
with consideration of a counteroffer for an on the basis of incompleteness under
jgilmore on DSK4WB1RN3PROD with CFR
amount or limit different from the amount § 1002.9(a)(1)(ii) and (c)(1)(i) or provided a
for which the applicant applied, and the cov- written notice of incompleteness under
ered credit transaction is approved and origi- § 1002.9(c)(1)(ii) and (2), and the applicant did
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
not respond to the request for additional in- conditions may include, for example, condi-
formation within the period of time specified tions that constitute a counteroffer (such as
in the notice. a demand for a higher down-payment), satis-
2. Treatment of counteroffers. If a financial factory loan-to-value ratios, or verification
institution makes a counteroffer to grant or confirmation, in whatever form the insti-
credit on terms other than those originally tution requires, that the applicant meets un-
requested by the applicant (for example, for derwriting conditions concerning applicant
a shorter loan maturity, with a different in- creditworthiness, including documentation
terest rate, or in a different amount) and the or verification of revenue, income or assets.
applicant declines the counteroffer or fails i. Conditional approval—denial. If the ap-
to respond, the institution reports the action proval is conditioned on satisfying under-
taken as a denial on the original terms re- writing or creditworthiness conditions, those
quested by the applicant. If the applicant conditions are not met, and the financial in-
agrees to proceed with consideration of the stitution takes adverse action on some basis
financial institution’s counteroffer, the fi- other than incompleteness, the financial in-
nancial institution reports the action taken stitution reports the action taken as denied.
as the disposition of the application based on ii. Conditional approval—incompleteness. If
the terms of the counteroffer. For example, the approval is conditioned on satisfying un-
assume an applicant applies for a term loan derwriting or creditworthiness conditions
and the financial institution makes a that the financial institution needs to make
counteroffer to proceed with consideration of the credit decision, and the financial institu-
a line of credit. If the applicant declines to tion takes adverse action on the basis of in-
be considered for a line of credit, the finan- completeness under § 1002.9(a)(1)(ii) and
cial institution reports the application as a (c)(1)(i), or has sent a written notice of in-
denied request for a term loan. If, on the completeness under § 1002.9(c)(1)(ii) and (2),
other hand, the applicant agrees to be con- and the applicant did not respond within the
sidered for a line of credit, then the financial period of time specified in the notice, the fi-
institution reports the action taken as the nancial institution reports the action taken
disposition of the application for the line of as incomplete.
credit. For instance, using the same exam-
iii. Conditional approval—approved but not
ple, if the financial institution makes a cred-
accepted. If the approval is conditioned on
it decision approving the line of credit, but
satisfying conditions that are solely cus-
the applicant fails to respond to the finan-
tomary commitment or closing conditions
cial institution’s approval within the speci-
and the conditions are not met, the financial
fied time by accepting the credit offer, the
institution reports the action taken as ap-
financial institution reports the application
proved but not accepted. If all the conditions
on the line of credit as approved but not ac-
(underwriting, creditworthiness, or cus-
cepted.
3. Treatment of rescinded transactions. If a tomary commitment or closing conditions)
borrower successfully rescinds a transaction are satisfied and the financial institution
after closing but before a financial institu- agrees to extend credit but the covered cred-
tion is required to submit its small business it transaction is not originated (for example,
lending application register containing the because the applicant withdraws), the finan-
information for the application under cial institution reports the action taken as
§ 1002.109, the institution reports the applica- approved but not accepted.
tion as approved but not accepted. iv. Conditional approval—withdrawn by the
4. Treatment of pending applications. A fi- applicant. If the applicant expressly with-
nancial institution does not report any ap- draws before satisfying all underwriting or
plication still pending at the end of the cal- creditworthiness conditions and before the
endar year; it reports such applications on institution denies the application or before
its small business lending application reg- the institution closes the file for incomplete-
ister for the year in which final action is ness, the financial institution reports the ac-
taken. tion taken as withdrawn.
5. Treatment of conditional approvals. If a fi-
107(a)(10) Action Taken Date
nancial institution issues an approval that is
subject to the applicant meeting certain con- 1. Reporting action taken date for denied ap-
ditions prior to closing, the financial institu- plications. For applications that are denied, a
tion reports the action taken as provided financial institution reports either the date
below dependent on whether the conditions the application was denied or the date the
are solely customary commitment or closing denial notice was sent to the applicant.
conditions or if the conditions include any 2. Reporting action taken date for applica-
underwriting or creditworthiness conditions. tions withdrawn by applicant. For applica-
Customary commitment or closing condi- tions that are withdrawn by the applicant,
tions may include, for example, a clear-title the financial institution reports the date the
jgilmore on DSK4WB1RN3PROD with CFR
requirement, proof of insurance policies, or a express withdrawal was received, or the date
subordination agreement from another shown on the notification form in the case of
lienholder. Underwriting or creditworthiness a written withdrawal.
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
3. Reporting action taken date for applica- based on an assessment of the principal
tions that are approved but not accepted. For owner(s) or guarantor(s)’s ability to meet its
applications approved by a financial institu- current or future credit obligations. Exam-
tion but not accepted by the applicant, the ples include principal owner(s) or guar-
financial institution reports any reasonable antor(s)’s credit score, history of charge offs,
date, such as the approval date, the deadline bankruptcy or delinquency, low net worth,
for accepting the offer, or the date the file limited or insufficient credit history, or his-
was closed. A financial institution should tory of excessive overdraft.
generally be consistent in its approach to re- iii. Use of credit proceeds. A financial insti-
porting by, for example, establishing proce- tution reports the denial reason as ‘‘use of
dures for how to report this date for par- credit proceeds’’ if it denies an application
ticular scenarios, products, or divisions. because, as a matter of policy or practice, it
4. Reporting action taken date for originated places limits on lending to certain kinds of
applications. For applications that result in businesses, products, or activities it has
an extension of credit, a financial institution identified as high risk.
generally reports the closing or account iv. Cashflow. A financial institution re-
opening date. If the disbursement of funds ports the denial reason as ‘‘cashflow’’ when
takes place on a date later than the closing it denies an application due to insufficient or
or account opening date, the institution inconsistent cashflow.
may, alternatively, use the date of initial v. Collateral. A financial institution reports
disbursement. A financial institution should
the denial reason as ‘‘collateral’’ when it de-
generally be consistent in its approach to re-
nies an application due to collateral that it
porting by, for example, establishing proce-
deems insufficient or otherwise unaccept-
dures for how to report this date for par-
able.
ticular scenarios, products, or divisions.
5. Reporting action taken date for incomplete vi. Time in business. A financial institution
applications. For applications closed for in- reports the denial reason as ‘‘time in busi-
completeness or denied for incompleteness, ness’’ when it denies an application due to
the financial institution reports either the insufficient time or experience in a line of
date the action was taken or the date the de- business.
nial or incompleteness notice was sent to the vii. Government loan program criteria. Cer-
applicant. tain loan programs are backed by govern-
ment agencies that have specific eligibility
107(a)(11) Denial Reasons requirements. When those requirements are
not met by an applicant, and the financial
1. Reason for denial—in general. A financial
institution denies the application, the finan-
institution complies with § 1002.107(a)(11) by
cial institution reports the denial reason as
reporting the principal reason or reasons it
‘‘government loan program criteria.’’ For ex-
denied the application, indicating up to four
ample, if an applicant cannot meet a govern-
reasons. The financial institution reports
ment-guaranteed loan program’s require-
only the principal reason or reasons it denied
the application. For example, if a financial ment to provide a guarantor or proof of in-
institution denies an application due to in- surance, the financial institution reports the
sufficient cashflow, unacceptable collateral, reason for the denial as ‘‘government loan
and unverifiable business information, the fi- program criteria.’’
nancial institution is required to report viii. Aggregate exposure. Aggregate expo-
these three reasons. The reasons reported sure is a measure of the total exposure or
must accurately describe the principal rea- level of indebtedness of the business and its
son or reasons the financial institution de- principal owner(s) associated with an appli-
nied the application. A financial institution cation. A financial institution reports the
reports denial reasons by selecting its prin- denial reason as ‘‘aggregate exposure’’ where
cipal reason or reasons for denying the appli- the total debt associated with the applica-
cation from the following list: tion is deemed high or exceeds certain debt
i. Credit characteristics of the business. A fi- thresholds set by the financial institution.
nancial institution reports the denial reason For example, if an application for unsecured
as ‘‘credit characteristics of the business’’ if credit exceeds the maximum amount a finan-
it denies the application based on an assess- cial institution is permitted to approve per
ment of the business’s ability to meet its applicant, as stated in its credit guidelines,
current or future credit obligations. Exam- and the financial institution denies the ap-
ples include business credit score, history of plication for this reason, the financial insti-
business bankruptcy or delinquency, and/or a tution reports the reason for denial as ‘‘ag-
high number of recent business credit inquir- gregate exposure.’’
ies. ix. Unverifiable information. A financial in-
ii. Credit characteristics of the principal stitution reports the denial reason as ‘‘un-
owner(s) or guarantor(s). A financial institu- verifiable information’’ when it is unable to
jgilmore on DSK4WB1RN3PROD with CFR
tion reports the denial reason as ‘‘credit verify information provided as part of the
characteristics of the principal owner(s) or application, and denies the application for
guarantor(s)’’ if it denies the application that reason. The unverifiable information
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
must be necessary for the financial institu- in a 10/1 adjustable-rate mortgage trans-
tion to make a credit decision based on its action, where the first 10 years of the repay-
procedures for the type of credit requested. ment period has a fixed rate of 3 percent and
Examples include unverifiable assets or col- after year 10 the interest rate will adjust ac-
lateral, unavailable business credit report, cording to a Prime index rate plus a 3 per-
and unverifiable business ownership com- cent margin, a financial institution complies
position. with § 1002.107(a)(12)(i) by reporting the fixed
x. Other. A financial institution reports the rate of 3 percent, the number 120 for the ini-
denial reason as ‘‘other’’ where none of the tial period, and ‘‘not applicable’’ in the fields
enumerated denial reasons adequately de- for the index, margin, and index value.
scribe the principal reason or reasons it de- 3. Multiple interest rates. If a covered credit
nied the application, and the institution re- transaction includes multiple interest rates
ports the denial reason or reasons via free- applicable to different credit features, a fi-
form text field. nancial institution complies with
2. Reason for denial—not applicable. A finan- § 1002.107(a)(12)(i) by reporting the interest
cial institution complies with § 1002.107(a)(11) rate applicable to the amount of credit ap-
by reporting that the requirement is not ap- proved or originated reported pursuant to
plicable if the action taken on the applica- § 1002.107(a)(8). For example, if a financial in-
tion, pursuant to § 1002.107(a)(9), is not a de- stitution originates a credit card with dif-
nial. For example, if the application resulted ferent interest rates for purchases, balance
in an originated covered credit transaction, transfers, cash advances, and overdraft ad-
or the application was approved but not ac- vances, the financial institution reports the
cepted, the financial institution complies interest rate applicable for purchases.
with § 1002.107(a)(11) by reporting not applica- 4. Index names. A financial institution com-
ble. plies with § 1002.107(a)(12)(i) by selecting the
index used from the following list: Wall
107(a)(12) Pricing Information Street Journal Prime, 6-month CD rate, 1-
1. General. For applications that a financial year T-Bill, 3-year T-Bill, 5-year T-Note, 12-
institution, pursuant to § 1002.107(a)(9), re- month average of 10-year T-Bill, Cost of
ports as denied, withdrawn by the applicant, Funds Index (COFI)-National, Cost of Funds
or incomplete, the financial institution re- Index (COFI)-11th District, Constant Matu-
ports that pricing information is ‘‘not appli- rity Treasury (CMT). If the index used is in-
cable.’’ ternal to the financial institution, the finan-
cial institution reports ‘‘internal index’’ via
107(a)(12)(i) Interest Rate the list of indices provided. If the index used
1. General. A financial institution complies does not appear on the list of indices pro-
with § 1002.107(a)(12)(i) by reporting the inter- vided (and is not internal to the financial in-
est rate applicable to the amount of credit stitution), the financial institution reports
approved or originated as reported pursuant ‘‘other’’ and reports the name of the index
to § 1002.107(a)(8). via free-form text field.
2. Interest rate—initial period. If a covered 5. Index value. For covered transactions
credit transaction includes an initial period with an adjustable interest rate, a financial
with an introductory interest rate of 12 institution complies with
months or less, after which the interest rate § 1002.107(a)(12)(i)(B) by reporting the index
adjusts upwards or shifts from a fixed to value used to set the rate that is or would be
variable rate, a financial institution com- applicable to the covered transaction.
plies with § 1002.107(a)(12)(i) by reporting in-
107(a)(12)(ii) Total Origination Charges
formation about the interest rate applicable
after the initial period. If a covered trans- 1. Charges in comparable cash transactions.
action includes an initial period with an in- Charges imposed uniformly in cash and cred-
terest rate of more than 12 months after it transactions are not reportable under
which the interest rate resets, a financial in- § 1002.107(a)(12)(ii). In determining whether
stitution complies with § 1002.107(a)(12)(i) by an item is part of the total origination
reporting information about the interest charges, a financial institution should com-
rate applicable prior to the reset period. For pare the covered credit transaction in ques-
example, if a financial institution originates tion with a similar cash transaction. A fi-
a covered credit transaction with a fixed, ini- nancial institution financing the sale of
tial interest rate of 0 percent for six months property or services may compare charges
following origination, after which the inter- with those payable in a similar cash trans-
est rate will adjust according to a Prime action by the seller of the property or serv-
index rate plus a 3 percent margin, the finan- ice.
cial institution reports the 3 percent margin, 2. Charges by third parties. A financial insti-
Prime as the name of the index used to ad- tution includes fees and amounts charged by
jgilmore on DSK4WB1RN3PROD with CFR
just the interest rate, the number 6 for the someone other than the financial institution
length of the initial period, and ‘‘not applica- in the total charges reported if the financial
ble’’ for the index value. As another example, institution:
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
i. Requires the use of a third party as a formation readily available to the financial
condition of or an incident to the extension institution at the time final action is taken.
of credit, even if the applicant can choose Information readily available could include,
the third party; or for example, information provided by an ap-
ii. Retains a portion of the third-party plicant or broker that the financial institu-
charge, to the extent of the portion retained. tion reasonably believes regarding the
3. Special rule; broker fees. A financial insti- amount of fees paid by the applicant directly
tution complies with § 1002.107(a)(12)(ii) by to the broker.
including fees charged by a broker (including
fees paid by the applicant directly to the 107(a)(12)(iv) Initial Annual Charges
broker or to the financial institution for de-
livery to the broker) in the total origination 1. Charges during the initial annual period.
charges reported even if the financial insti- The total initial annual charges include all
tution does not require the applicant to use charges scheduled to be imposed during the
a broker and even if the financial institution initial annual period following origination.
does not retain any portion of the charge. For example, if a financial institution origi-
For more information on broker fees, see nates a covered credit transaction with a $50
commentary for § 1002.107(a)(12)(iii). monthly fee and a $100 annual fee, the finan-
4. Bundled services. Total origination cial institution complies with
charges include all charges imposed directly § 1002.107(a)(12)(iv) by reporting $700 in the
or indirectly by the financial institution at initial annual charges reported. If there will
or before origination as an incident to or a be a charge in the initial annual period fol-
condition of the extension of credit. Accord- lowing origination but the amount of that
ingly, a financial institution complies with charge is uncertain at the time of origina-
§ 1002.107(a)(12)(ii) by including charges for tion, a financial institution complies with
other products or services paid at or before § 1002.107(a)(12)(iv) by not reporting that
origination in the total origination charges charge as scheduled to be imposed during the
reported if the financial institution requires
initial annual period following origination.
the purchase of such other product or service
as a condition of or an incident to the exten- 2. Interest excluded. A financial institution
sion of credit. complies with § 1002.107(a)(12)(iv) by exclud-
5. Origination charges—examples. Examples ing any interest expense from the initial an-
of origination charges may include applica- nual charges reported.
tion fees, credit report fees, points, appraisal 3. Avoidable charges. A financial institution
fees, and other similar charges. complies with § 1002.107(a)(12)(iv) by only in-
6. Net lender credit. If a financial institution cluding scheduled charges and excluding any
provides a credit to an applicant that is charges for events that are avoidable by the
greater than the total origination charges applicant from the initial annual charges re-
the applicant would have paid, the financial ported. Examples of avoidable charges in-
institution complies with § 1002.107(a)(12)(ii) clude charges for late payment, for exceed-
by reporting the net lender credit as a nega- ing a credit limit, for delinquency or default,
tive amount. For example, if a covered trans- or for paying items that overdraw an ac-
action has $500 provided to the applicant at count.
origination to offset closing costs, and the fi- 4. Initial annual charges—examples. Exam-
nancial institution does not charge any ples of charges scheduled to be imposed dur-
origination charges, the financial institution ing the initial annual period may include
complies with § 1002.107(a)(12)(ii) by reporting monthly fees, annual fees, and other similar
negative $500 as the total origination charges.
charges.
5. Scheduled charges with variable amounts.
107(a)(12)(iii) Broker Fees A financial institution complies with
§ 1002.107(a)(12)(iv) by reporting as the default
1. Amount. A financial institution complies the highest amount for a charge scheduled to
with § 1002.107(a)(12)(iii) by including the fees
be imposed. For example, if a covered credit
reported in § 1002.107(a)(12)(ii) that are fees
transaction has a $75 monthly fee, but the
paid by the applicant directly to the broker
fee is reduced to $0 if the applicant main-
or to the financial institution for delivery to
the broker. For example, a covered trans- tains an account at the financial institution
action has $3,000 of total origination charges. originating the covered credit transaction,
Of that $3,000, $250 are fees paid by the appli- the financial institution complies with
cant directly to a broker and an additional § 1002.107(a)(12)(iv) by reporting $900 ($75 × 12)
$300 are fees paid to the financial institution in the initial annual charges reported.
for delivery to the broker. The financial in- 6. Transactions with a term of less than one
stitution complies with § 1002.107(a)(12)(iii) year. For a transaction with a term of less
by reporting $550 in the broker fees reported. than one year, a financial institution com-
jgilmore on DSK4WB1RN3PROD with CFR
2. Fees paid directly to a broker by an appli- plies with § 1002.107(a)(12)(iv) by reporting all
cant. A financial institution complies with charges scheduled to be imposed during the
§ 1002.107(a)(12)(iii) by relying on the best in- term of the transaction.
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
107(a)(12)(v) Additional Cost for Merchant 107(a)(13) Census Tract
Cash Advances or Other Sales-Based Fi-
1. General. A financial institution complies
nancing
with § 1002.107(a)(13) by reporting a census
1. Merchant cash advances. Section tract number as defined by the U.S. Census
1002.107(a)(12)(v) requires a financial institu- Bureau, which includes State and county nu-
tion to report the difference between the merical codes. A financial institution com-
amount advanced and the amount to be re- plies with § 1002.107(a)(13) if it uses the
paid for a merchant cash advance or other boundaries and codes in effect on January 1
sales-based financing transaction. Thus, in a of the calendar year covered by the small
merchant cash advance, a financial institu- business lending application register that it
tion reports the difference between the is reporting. The financial institution re-
amount advanced and the amount to be re- ports census tract based on the following:
paid, using the amounts (expressed in dol- i. Proceeds address. A financial institution
lars) provided in the contract between the fi- complies with § 1002.107(a)(13) by reporting a
nancial institution and the applicant. census tract based on the address or location
where the proceeds of the credit applied for
107(a)(12)(vi) Prepayment Penalties or originated will be or would have been
1. Policies and procedures applicable to the principally applied, if known. For example, a
covered credit transaction. The policies and financial institution would report a census
procedures applicable to the covered credit tract based on the address or location of the
transaction include the practices that the fi- site where the proceeds of a construction
nancial institution follows when evaluating loan will be applied.
applications for the specific credit type and ii. Main office or headquarters address. If the
credit purpose requested. For example, as- address or location where the proceeds of the
sume that a financial institution’s written credit applied for or originated will be or
procedures permit it to include prepayment would have been principally applied is un-
penalties in the loan agreement for its term known, a financial institution complies with
loans secured by non-owner occupied com- § 1002.107(a)(13) by reporting a census tract
mercial real estate. For such transactions, number based on the address or location of
the financial institution includes prepay- the main office or headquarters of the appli-
ment penalties in some loan agreements but cant, if known. For example, the address or
not others. For an application for, or origi- location of the main office or headquarters
nation of, a term loan secured by non-owner of the applicant may be the home address of
occupied commercial real estate, the finan- a sole proprietor or the office address of a
cial institution reports under sole proprietor or other applicant.
§ 1002.107(a)(12)(vi)(A) that a prepayment pen- iii. Another address or location. If neither
alty could have been included under the poli- the address or location where the proceeds of
cies and procedures applicable to the trans- the credit applied for or originated will be or
action, regardless of whether the term loan would have been principally applied nor the
secured by non-owner occupied commercial address or location of the main office or
real estate actually includes a prepayment headquarters of the applicant are known, a
penalty. financial institution complies with
2. Balloon finance charges. A financial insti- § 1002.107(a)(13) by reporting a census tract
tution complies with § 1002.107(a)(12)(vi) by number based on another address or location
reporting as a prepayment penalty any bal- associated with the applicant.
loon finance charge that may be imposed for iv. Type of address used. In addition to re-
paying all or part of the transaction’s prin- porting the census tract, pursuant to
cipal before the date on which the principal § 1002.107(a)(13)(iv) a financial institution
is due. For example, under the terms of a must report which one of the three types of
transaction, the amount of funds advanced is addresses or locations listed in
$12,000, the amount to be repaid is $24,000 § 1002.107(a)(13)(i) through (iii) and described
(which includes $12,000 in principal and in comments 107(a)(13)–1.i through iii that
$12,000 in interest and fees), the length of the the census tract is determined from.
transaction is 12 months, and the applicant 2. Financial institution discretion. A finan-
must repay $2,000 per month. The terms of cial institution complies with § 1002.107(a)(13)
the transaction state that if the applicant by identifying the appropriate address or lo-
prepays the principal before the 12-month pe- cation and the type of that address or loca-
riod is over, the applicant is responsible for tion in good faith, using appropriate infor-
paying the difference between $24,000 and the mation from the applicant’s credit file or
amount the applicant has already repaid otherwise known by the financial institu-
prior to initiating prepayment. The dif- tion. A financial institution is not required
ference between the $24,000 to be repaid and to make inquiries beyond its standard proce-
what the applicant has already repaid prior dures as to the nature of the addresses or lo-
jgilmore on DSK4WB1RN3PROD with CFR
to initiating prepayment is a balloon finance cations it collects.
charge and should be reported as a prepay- 3. Address or location not provided by appli-
ment penalty. cant and otherwise undetermined. Pursuant to
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
§ 1002.107(c), a financial institution shall gross annual revenue for the applicant that
maintain procedures reasonably designed to includes the revenue of affiliates as well.
collect applicant-provided data, which in- Likewise, as explained in comment 106(b)(1)–
cludes at least one address or location for an 3, in determining whether the applicant is a
applicant for census tract reporting. How- small business under § 1002.106(b), a financial
ever, if a financial institution is nonetheless institution may rely on an applicant’s rep-
unable to collect or otherwise determine any resentations regarding gross annual revenue,
address or location for an application, the fi- which may or may not include affiliates’ rev-
nancial institution reports that the census enue.
tract information is ‘‘not provided by appli- 4. Gross annual revenue for a startup busi-
cant and otherwise undetermined.’’ ness. In a typical startup business situation
4. Safe harbor. As described in § 1002.112(c)(2) where the applicant has no gross annual rev-
and comment 112(c)–1, a financial institution enue for its fiscal year preceding when the
that obtains an incorrect census tract by information is collected, the financial insti-
correctly using a geocoding tool provided by tution reports that the applicant’s gross an-
the FFIEC or the Bureau does not violate nual revenue in the preceding fiscal year is
the Act or subpart B of this part. ‘‘zero.’’ The financial institution shall not
107(a)(14) Gross Annual Revenue report pro forma projected revenue figures
because these figures do not reflect actual
1. Collecting gross annual revenue. A finan- gross revenue.
cial institution reports the applicant’s gross
annual revenue, expressed in dollars, for its 107(a)(15) NAICS Code
fiscal year preceding when the information
was collected. A financial institution may 1. General. NAICS stands for North Amer-
rely on the applicant’s statements or on in- ican Industry Classification System. The Of-
formation provided by the applicant in col- fice of Management and Budget has charged
lecting and reporting gross annual revenue, the Economic Classification Policy Com-
even if the applicant’s statement or informa- mittee with the maintenance and review of
tion is based on estimation or extrapolation. NAICS. A financial institution complies with
However, pursuant to § 1002.107(b), if the fi- § 1002.107(a)(15) if it uses the 3-digit NAICS
nancial institution verifies the gross annual subsector codes in effect on January 1 of the
revenue provided by the applicant, it must calendar year covered by the small business
report the verified information. Also, pursu- lending application register that it is report-
ant to comment 107(c)(1)–5, a financial insti- ing.
tution reports updated gross annual revenue 2. NAICS not provided by applicant and oth-
data if it obtains more current data from the erwise undetermined. Pursuant to § 1002.107(c),
applicant during the application process. If a a financial institution shall maintain proce-
financial institution has already verified dures reasonably designed to collect appli-
gross annual revenue data and then the ap- cant-provided data, which includes NAICS
plicant updates it, the financial institution code. However, if a financial institution is
reports the information it believes to be nonetheless unable to collect or otherwise
more accurate, in its discretion. The finan- determine a NAICS code for the applicant,
cial institution may use the following lan- the financial institution reports that the
guage to ask about gross annual revenue and NAICS code is ‘‘not provided by applicant
may rely on the applicant’s answer (unless and otherwise undetermined.’’
subsequently verified or updated): 3. Safe harbor. As described in § 1002.112(c)(3)
What was the gross annual revenue of the and comment 112(c)–2, a financial institution
business applying for credit in its last full fiscal that obtains an incorrect NAICS code does
year? Gross annual revenue is the amount of not violate the Act or subpart B of this part
money the business earned before subtracting if it either relies on an applicant’s represen-
taxes and other expenses. You may provide tations or on an appropriate third-party
gross annual revenue calculated using any rea- source, in accordance with § 1002.107(b), re-
sonable method. garding the NAICS code, or identifies the
2. Gross annual revenue not provided by ap- NAICS code itself, provided that the finan-
plicant and otherwise undetermined. Pursuant cial institution maintains procedures rea-
to § 1002.107(c), a financial institution shall sonably adapted to correctly identify a 3-
maintain procedures reasonably designed to digit NAICS code.
collect applicant-provided data, which in-
cludes the gross annual revenue of the appli- 107(a)(16) Number of Workers
cant. However, if a financial institution is
nonetheless unable to collect or determine 1. General. A financial institution complies
the gross annual revenue of the applicant, with § 1002.107(a)(16) by reporting the number
the financial institution reports that the of people who work for the applicant, using
gross annual revenue is ‘‘not provided by ap- the ranges prescribed in the Filing Instruc-
jgilmore on DSK4WB1RN3PROD with CFR
plicant and otherwise undetermined.’’ tions Guide.
3. Affiliate revenue. A financial institution 2. Collecting number of workers. A financial
is permitted, but not required, to report the institution may collect number of workers
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
from an applicant using the ranges for re- the information provided by the applicant
porting as specified by the Bureau (see com- accordingly.
ment 107(a)(16)–1) or as a numerical value. 2. Time in business collected as part of the fi-
When asking for the number of workers from nancial institution’s procedures for evaluating
an applicant, a financial institution shall ex- an application for credit. A financial institu-
plain that full-time, part-time and seasonal tion that collects or obtains an applicant’s
employees, as well as contractors who work time in business as part of its procedures for
primarily for the applicant, would be count- evaluating an application for credit is not re-
ed as workers, but principal owners of the quired to collect or obtain time in business
applicant would not. If asked, the financial pursuant to any particular definition of time
institution shall explain that volunteers are in business for this purpose. For example, if
not counted as workers, and workers for af- the financial institution collects the number
filiates of the applicant are counted if the fi- of years the applicant has existed (such as by
nancial institution were also collecting the asking the applicant when its business was
affiliates’ gross annual revenue. The finan- started, or by obtaining the applicant’s date
cial institution may use the following lan- of incorporation from a Secretary of State or
guage to ask about the number of workers other State or Federal agency that registers
and may rely on the applicant’s answer (un- or licenses businesses) as the time in busi-
less subsequently verified or updated): ness, the financial institution reports that
Counting full-time, part-time and seasonal information accordingly pursuant to com-
workers, as well as contractors who work pri- ment 107(a)(17)–1.i. Similarly, if the financial
marily for the business applying for credit, but institution collects the number of years of
not counting principal owners of the business, experience the applicant’s owners have in
how many people work for the business apply- the current line of business, the financial in-
ing for credit? stitution reports that information accord-
3. Number of workers not provided by appli- ingly pursuant to comment 107(a)(17)–1.i. If,
cant and otherwise undetermined. Pursuant to however, the financial institution collects
§ 1002.107(c), a financial institution shall both the number of years the applicant has
maintain procedures reasonably designed to existed as well as some other measure of
collect applicant-provided data, which in- time in business (such as the number of
cludes the number of workers of the appli- years of experience the applicant’s owners
cant. However, if a financial institution is have in the current line of business), the fi-
nonetheless unable to collect or determine nancial institution reports the number of
the number of workers of the applicant, the years the applicant has existed as the time
financial institution reports that the number in business pursuant to comment 107(a)(17)–
of workers is ‘‘not provided by applicant and 1.i.
otherwise undetermined.’’ 3. Time in business not provided by applicant
and otherwise undetermined. Pursuant to
107(a)(17) Time in Business § 1002.107(c), a financial institution shall
1. Collecting time in business. A financial in- maintain procedures reasonably designed to
stitution complies with § 1002.107(a)(17) by re- collect applicant-provided data, which in-
porting the time the applicant has been in cludes the applicant’s time in business. How-
business. ever, if a financial institution is nonetheless
i. If a financial institution collects or oth- unable to collect or determine the appli-
erwise obtains the number of years an appli- cant’s time in business, the financial institu-
cant has been in business as part of its proce- tion reports that the time in business is ‘‘not
dures for evaluating an application for cred- provided by applicant and otherwise undeter-
it, it reports the time in business in whole mined.’’
years, rounded down to the nearest whole
107(a)(18) Minority-Owned, Women-Owned,
year.
and LGBTQI+-Owned Business Statuses
ii. If a financial institution does not col-
lect time in business as described in com- 1. General. A financial institution must ask
ment 107(a)(17)–1.i, but as part of its proce- an applicant whether it is a minority-owned,
dures determines whether or not the appli- women-owned, and/or LGBTQI+-owned busi-
cant’s time in business is less than two ness. The financial institution must permit
years, it reports the applicant’s time in busi- an applicant to refuse (i.e., decline) to an-
ness as either less than two years or two or swer the financial institution’s inquiry re-
more years in business. garding business status and must inform the
iii. If a financial institution does not col- applicant that the applicant is not required
lect time in business as part of its proce- to provide the information. See the sample
dures for evaluating an application for credit data collection form in appendix E to this
as described in comments 107(a)(17)–1.i or .ii, part for sample language for providing this
the financial institution complies with notice to applicants. The financial institu-
jgilmore on DSK4WB1RN3PROD with CFR
§ 1002.107(a)(17) by asking the applicant tion must report the applicant’s substantive
whether it has been in existence for less than response regarding each business status, that
two years or two or more years and reporting the applicant declined to answer the inquiry
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
(that is, selected an answer option of ‘‘I do tion’s inquiry pursuant to § 1002.107(a)(18)
not wish to provide this information’’ or separate from the application and accom-
similar), or its failure to respond to the in- panying information. See § 1002.111(b) and
quiry (that is, ‘‘not provided by applicant’’), comment 111(b)–1. If the financial institution
as applicable. provides a paper or electronic data collection
2. Definitions. When inquiring about minor- form, the data collection form must not be
ity-owned, women-owned, and LGBTQI+- part of the application form or any other
owned business statuses (regardless of document that the financial institution uses
whether the request is made on a paper form, to provide or collect any information other
electronically, or orally), the financial insti- than minority-owned business status,
tution also must provide the applicant with women-owned business status, LGBTQI+-
definitions of the terms ‘‘minority-owned owned business status, principal owners’ eth-
business,’’ ‘‘women-owned business,’’ and nicity, race, and sex, and the number of the
‘‘LGBTQI+-owned business’’ as set forth in applicant’s principal owners. See the sample
§ 1002.102 (m), (s) and (l), respectively. The fi- data collection form in appendix E. For ex-
nancial institution satisfies this require- ample, if the financial institution sends the
ment if it provides the definitions as set data collection form via email, the data col-
forth in the sample data collection form in lection form should be a separate attach-
appendix E. ment to the email or accessed through a sep-
3. Combining questions. A financial institu- arate link in the email. If the financial insti-
tion may combine on the same paper or elec- tution uses a web-based data collection form,
tronic data collection form the questions re- the form should be on its own page.
garding minority-owned, women-owned, and
6. Minority-owned, women-owned, and/or
LGBTQI+-owned business status pursuant to
LGBTQI+-owned business statuses not provided
§ 1002.107(a)(18) with principal owners’ eth-
by applicant. Pursuant to § 1002.107(c), a fi-
nicity, race, and sex pursuant to
nancial institution shall maintain proce-
§ 1002.107(a)(19) and the applicant’s number of
dures reasonably designed to collect appli-
principal owners pursuant to § 1002.107(a)(20).
cant-provided data, which includes the appli-
See the sample data collection form in ap-
pendix E. cant’s minority-owned, women-owned, and
4. Notices. When requesting minority- LGBTQI+-owned business statuses. However,
owned, women-owned, and LGBTQI+-owned if a financial institution does not receive a
business statuses from an applicant, a finan- response to the financial institution’s in-
cial institution must inform the applicant quiry pursuant to § 1002.107(a)(18), the finan-
that the financial institution cannot dis- cial institution reports that the applicant’s
criminate on the basis of the applicant’s mi- business statuses were ‘‘not provided by ap-
nority-owned, women-owned, or LGBTQI+- plicant.’’
owned business statuses, or on whether the 7. Applicant declines to provide information
applicant provides its minority-owned, about minority-owned, women-owned, and/or
women-owned, or LGBTQI+-owned business LGBTQI+-owned business statuses. A financial
statuses. A financial institution must also institution reports that the applicant re-
inform the applicant that Federal law re- sponded that it did not wish to provide the
quires it to ask for an applicant’s minority- information about an applicant’s minority-
owned, women-owned, and LGBTQI+-owned owned, women-owned, and LGBTQI+-owned
business statuses to help ensure that all business statuses, if the applicant declines to
small business applicants for credit are provide the information by selecting such a
treated fairly and that communities’ small response option on a paper or electronic form
business credit needs are being fulfilled. A fi- (e.g., by selecting an answer option of ‘‘I do
nancial institution may combine these no- not wish to provide this information’’ or
tices regarding minority-owned, women- similar). The financial institution also re-
owned, and LGBTQI+-owned business ports an applicant’s refusal to provide such
statuses with the notices that a financial in- information in this way, if the applicant
stitution is required to provide when re- orally declines to provide such information
questing principal owners’ ethnicity, race, for a covered application taken by telephone
and sex if a financial institution requests in- or another medium that does not involve
formation pursuant to § 1002.107(a)(18) and providing any paper or electronic documents.
(19) in the same data collection form or at 8. Conflicting responses provided by appli-
the same time. See the sample data collec- cants. If the applicant both provides a sub-
tion form in appendix E for sample language stantive response to the financial institu-
that a financial institution may use for tion’s inquiry regarding business status
these notices. (that is, indicates that it is a minority-
5. Maintaining the record of an applicant’s owned, women-owned, and/or LGBTQI+-
response regarding minority-owned, women- owned business, or checks ‘‘none apply’’ or
owned, and LGBTQI+-owned business statuses similar) and also checks the box indicating
jgilmore on DSK4WB1RN3PROD with CFR
separate from the application. A financial in- ‘‘I do not wish to provide this information’’
stitution must maintain the record of an ap- or similar, the financial institution reports
plicant’s responses to the financial institu- the substantive response(s) provided by the
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
applicant (rather than reporting that the ap- and sex, the financial institution must also
plicant declined to provide the information). provide the applicant with the definition of
9. No verification of business statuses. Not- the term ‘‘principal owner’’ as set forth in
withstanding § 1002.107(b), a financial institu- § 1002.102(o). The financial institution satis-
tion must report the applicant’s substantive fies this requirement if it provides the defi-
response(s), that the applicant declined to nition of principal owner as set forth in the
answer the inquiry (that is, selected an an- sample data collection form in appendix E.
swer option of ‘‘I do not wish to provide this 3. Combining questions. A financial institu-
information’’ or similar), or the applicant’s tion may combine on the same paper or elec-
failure to respond to the inquiry (that is, tronic data collection form the questions re-
that the information was ‘‘not provided by garding the principal owners’ ethnicity, race,
applicant’’) pursuant to § 1002.107(a)(18), even and sex pursuant to § 1002.107(a)(19) with the
if the financial institution verifies or other- applicant’s number of principal owners pur-
wise obtains an applicant’s minority-owned, suant to § 1002.107(a)(20) and the applicant’s
women-owned, and/or LGBTQI+-owned busi- minority-owned, women-owned, and
ness statuses for other purposes. For exam- LGBTQI+-owned business statuses pursuant
ple, if a financial institution uses a paper to § 1002.107(a)(18). See the sample data col-
data collection form to ask an applicant if it lection form in appendix E.
is a minority-owned business, a women- 4. Notices. When requesting a principal
owned business, and/or an LGBTQI+-owned owner’s ethnicity, race, and sex from an ap-
business and the applicant does not indicate plicant, a financial institution must inform
that it is a minority-owned business, the fi- the applicant that the financial institution
nancial institution must not report that the cannot discriminate on the basis of a prin-
applicant is a minority-owned business, even cipal owner’s ethnicity, race, or sex/gender,
if the applicant indicates that it is a minor- or on whether the applicant provides the in-
ity-owned business for other purposes, such formation. A financial institution must also
as for a special purpose credit program or a inform the applicant that Federal law re-
Small Business Administration program. quires it to ask for the principal owners’ eth-
nicity, race, and sex/gender to help ensure
107(a)(19) Ethnicity, Race, and Sex of
that all small business applicants for credit
Principal Owners
are treated fairly and that communities’
1. General. A financial institution must ask small business credit needs are being ful-
an applicant to provide its principal owners’ filled. A financial institution may combine
ethnicity, race, and sex. The financial insti- these notices with the similar notices that a
tution must permit an applicant to refuse financial institution is required to provide
(i.e., decline) to answer the financial institu- when requesting minority-owned business
tion’s inquiry and must inform the applicant status, women-owned business status, and
that it is not required to provide the infor- LGBTQI+-owned business status, if a finan-
mation. See the sample data collection form cial institution requests information pursu-
in appendix E to this part for sample lan- ant to § 1002.107(a)(18) and (19) in the same
guage for providing this notice to applicants. data collection form or at the same time.
The financial institution must report the ap- See the sample data collection form in ap-
plicant’s substantive responses regarding pendix E for sample language that a finan-
principal owners’ ethnicity, race, and sex, cial institution may use for these notices.
that the applicant declined to answer an in- 5. Maintaining the record of an applicant’s
quiry (that is, selected an answer option of responses regarding principal owners’ ethnicity,
‘‘I do not wish to provide this information’’ race, and sex separate from the application. A
or similar), or its failure to respond to an in- financial institution must maintain the
quiry (that is, ‘‘not provided by applicant’’), record of an applicant’s response to the fi-
as applicable. The financial institution must nancial institution’s inquiries pursuant to
report an applicant’s responses about its § 1002.107(a)(19) separate from the application
principal owners’ ethnicity, race, and sex, re- and accompanying information. See
gardless of whether an applicant declines or § 1002.111(b) and comment 111(b)–1. If the fi-
fails to answer an inquiry about the number nancial institution provides a paper or elec-
of its principal owners under § 1002.107(a)(20). tronic data collection form, the data collec-
If an applicant provides some, but not all, of tion form must not be part of the application
the requested information about the eth- form or any other document that the finan-
nicity, race, and sex of a principal owner, the cial institution uses to provide or collect any
financial institution reports the information information other than minority-owned busi-
that was provided by the applicant and re- ness status, women-owned business status,
ports that the applicant declined to provide LGBTQI+-owned business status, principal
or did not provide (as applicable) the remain- owners’ ethnicity, race, and sex, and the
der of the information. See comments number of the applicant’s principal owners.
jgilmore on DSK4WB1RN3PROD with CFR
107(a)(19)–6 and –7. See the sample data collection form in ap-
2. Definition of principal owner. When re- pendix E for sample language. For example,
questing a principal owner’s ethnicity, race, if the financial institution sends the data
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
collection form via email, the data collec- provide such information for a covered appli-
tion form should be a separate attachment cation taken by telephone or another me-
to the email or accessed through a separate dium that does not involve providing any
link in the email. If the financial institution paper or electronic documents.
uses a web-based data collection form, the 8. Conflicting responses provided by appli-
form should be on its own page. cant. If the applicant both provides a sub-
6. Ethnicity, race, or sex of principal owners stantive response to a request for a principal
not provided by applicant. Pursuant to owner’s ethnicity, race, or sex (that is, iden-
§ 1002.107(c), a financial institution shall tifies a principal owner’s race, ethnicity, or
maintain procedures reasonably designed to sex) and also checks the box indicating ‘‘I do
collect applicant-provided data, which in- not wish to provide this information’’ or
cludes the ethnicity, race, and sex of an ap- similar, the financial institution reports the
plicant’s principal owners. However, if an ap- information on ethnicity, race, or sex that
plicant does not provide the information, was provided by the applicant (rather than
such as in response to a request for a prin- reporting that the applicant declined provide
cipal owner’s ethnicity, race, or sex on a the information). For example, if an appli-
paper or electronic data collection form, the cant is completing a paper data collection
financial institution reports the ethnicity, form and writes in a response that a prin-
race, or sex (as applicable) as ‘‘not provided cipal owner’s sex is female and also indicates
by applicant’’ for that principal owner. For on the form that the applicant does not wish
example, if the financial institution provides to provide information regarding that prin-
a paper data collection form to an applicant cipal owner’s sex, the financial institution
with two principal owners, and asks the ap- reports the principal owner’s sex as female.
plicant to complete and return the form but
9. No verification of ethnicity, race, and sex of
the applicant does not do so, the financial in-
principal owners. Notwithstanding
stitution reports that the two principal own-
§ 1002.107(b), a financial institution must re-
ers’ ethnicity, race, and sex were ‘‘not pro-
port the applicant’s substantive responses as
vided by applicant.’’ Similarly, if the finan-
to its principal owners’ ethnicity, race, and
cial institution provides an electronic data
sex (that is, the applicant’s identification of
collection form, the applicant indicates that
its principal owners’ race, ethnicity, and
it has two principal owners, the applicant
sex), that the applicant declined to answer
provides ethnicity, race, and sex for the first
principal owner, and the applicant does not the inquiry (that is, selected an answer op-
make any selections for the second principal tion of ‘‘I do not wish to provide this infor-
owner’s ethnicity, race, and sex, the finan- mation’’ or similar), or the applicant’s fail-
cial institution reports the ethnicity, race, ure to respond to the inquiry (that is, the in-
and sex that the applicant provided for the formation was ‘‘not provided by applicant’’)
first principal owner and reports that each of pursuant to § 1002.107(a)(19), even if the finan-
the ethnicity, race, and sex for the second cial institution verifies or otherwise obtains
principal owner was ‘‘not provided by appli- the ethnicity, race, or sex of the applicant’s
cant.’’ Additionally, if the financial institu- principal owners for other purposes.
tion provides an electronic or paper data col- 10. Reporting for fewer than four principal
lection form, the applicant indicates that it owners. If an applicant has fewer than four
has one principal owner, provides the prin- principal owners, the financial institution
cipal owner’s ethnicity and sex information, reports ethnicity, race, and sex information
but does not provide information about the for the number of principal owners that the
principal owner’s race and also does not se- applicant has and reports the ethnicity, race,
lect a response of ‘‘I do not wish to provide and sex fields for additional principal owners
this information’’ with regard to race, the fi- as ‘‘not applicable.’’ For example, if an appli-
nancial institution reports the ethnicity and cant has only one principal owner, the finan-
sex provided by the applicant and reports cial institution reports ethnicity, race, and
that the race of the principal owner was ‘‘not sex information for the first principal owner
provided by applicant.’’ and reports as ‘‘not applicable’’ the eth-
7. Applicant declines to provide information nicity, race, and sex data fields for principal
about a principal owner’s ethnicity, race, or sex. owners two through four.
A financial institution reports that the ap- 11. Previously collected ethnicity, race, and
plicant responded that it did not wish to pro- sex information. If a financial institution re-
vide the information about a principal own- ports one or more principal owners’ eth-
er’s ethnicity, race, or sex (as applicable), if nicity, race, or sex information based on pre-
the applicant declines to provide the infor- viously collected data under § 1002.107(d), the
mation by selecting such a response option financial institution does not need to collect
on a paper or electronic form (e.g., by select- any additional ethnicity, race, or sex infor-
ing an answer option of ‘‘I do not wish to mation for other principal owners (if any).
provide this information’’ or similar). The fi- See also comment 107(d)–9.
jgilmore on DSK4WB1RN3PROD with CFR
nancial institution also reports an appli- 12. Guarantors. A financial institution does
cant’s refusal to provide such information in not collect or report a guarantor’s ethnicity,
this way, if the applicant orally declines to race, and sex unless the guarantor is also a
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
principal owner of the applicant, as defined categories and disaggregated subcategories
in § 1002.102(o). provided by the applicant. For example, if an
13. Ethnicity. i. Aggregate categories. A fi- applicant selects both aggregate categories
nancial institution must permit an applicant and four disaggregated subcategories for a
to provide each principal owner’s ethnicity principal owner, the financial institution re-
for purposes of § 1002.107(a)(19) using one or ports the two aggregate categories that the
more of the following aggregate categories: applicant selected and all four of the
A. Hispanic or Latino. disaggregated subcategories that the appli-
B. Not Hispanic or Latino. cant selected. Additionally, if an applicant
ii. Disaggregated subcategories. A financial selects only the Mexican disaggregated sub-
institution must permit an applicant to pro- category for a principal owner and no aggre-
vide each principal owner’s ethnicity for pur- gate categories, the financial institution re-
poses of § 1002.107(a)(19) using one or more of ports Mexican for the ethnicity of the appli-
the following disaggregated subcategories, cant’s principal owner but does not also re-
regardless of whether the applicant has indi- port Hispanic or Latino. Further, if the ap-
cated that the relevant principal owner is plicant selects an aggregate category (e.g.,
Hispanic or Latino and regardless of whether Not Hispanic or Latino) and a disaggregated
the applicant selects any aggregate cat- subcategory that does not correspond to the
egories: Cuban; Mexican; Puerto Rican; or aggregate category (e.g., Puerto Rican), the
Other Hispanic or Latino. If an applicant in- financial institution reports the information
dicates that a principal owner is Other His- as provided by the applicant (e.g., Not His-
panic or Latino, the financial institution panic or Latino, and Puerto Rican).
must permit the applicant to provide addi- 14. Race. i. Aggregate categories. A financial
tional information regarding the principal institution must permit an applicant to pro-
owner’s ethnicity, by using free-form text on vide each principal owner’s race for purposes
a paper or electronic data collection form or of § 1002.107(a)(19) using one or more of the
using language that informs the applicant of following aggregate categories:
the opportunity to self-identify when taking
A. American Indian or Alaska Native.
the application by means other than a paper
or electronic data collection form, such as by B. Asian.
telephone. The financial institution must C. Black or African American.
permit the applicant to provide additional D. Native Hawaiian or Other Pacific Is-
information indicating, for example, that lander.
the principal owner is Argentinean, Colom- E. White.
bian, Dominican, Nicaraguan, Salvadoran, or ii. Disaggregated subcategories. The finan-
Spaniard. See the sample data collection cial institution must permit an applicant to
form in appendix E for sample language. If provide a principal owner’s race for purposes
an applicant chooses to provide additional of § 1002.107(a)(19) using one or more of the
information regarding a principal owner’s disaggregated subcategories as listed in this
ethnicity, such as by indicating that a prin- comment 107(a)(19)–14.ii, regardless of wheth-
cipal owner is Argentinean orally or in writ- er the applicant has selected the cor-
ing on a paper or electronic form, a financial responding aggregate category.
institution must report that additional in- A. The Asian aggregate category includes
formation via free-form text. If the applicant the following disaggregated subcategories:
provides such additional information but Asian Indian; Chinese; Filipino; Japanese;
does not also indicate that the principal Korean; Vietnamese; and Other Asian. An
owner is Other Hispanic or Latino (e.g., by applicant must also be permitted to provide
selecting Other Hispanic or Latino on a the principal owner’s race using one or more
paper or electronic form), a financial institu- of these disaggregated subcategories regard-
tion is permitted, but not required, to report less of whether the applicant indicates that
Other Hispanic or Latino as well. the principal owner is Asian and regardless
iii. Selecting multiple categories. The finan- of whether the applicant selects any aggre-
cial institution must permit the applicant to gate categories. Additionally, if an applicant
select one, both, or none of the aggregate indicates that a principal owner is Other
categories and as many disaggregated sub- Asian, the financial institution must permit
categories as the applicant chooses. A finan- the applicant to provide additional informa-
cial institution must permit an applicant to tion about the principal owner’s race, by
select a disaggregated subcategory even if using free-form text on a paper or electronic
the applicant does not select the cor- data collection form or using language that
responding aggregate category. For example, informs the applicant of the opportunity to
an applicant must be permitted to select the self-identify when taking the application by
Mexican disaggregated subcategory for a means other than a paper or electronic data
principal owner without being required to se- collection form, such as by telephone. The fi-
lect the Hispanic or Latino aggregate cat- nancial institution must permit the appli-
jgilmore on DSK4WB1RN3PROD with CFR
egory. If an applicant provides ethnicity in- cant to provide additional information indi-
formation for a principal owner, the finan- cating, for example, that the principal owner
cial institution reports all of the aggregate is Cambodian, Hmong, Laotian, Pakistani, or
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
Thai. See the sample data collection form in port that additional information via free-
appendix E for sample language. form text in the appropriate data reporting
B. The Black or African American aggre- field. If the applicant provides such addi-
gate category includes the following tional information but does not also indicate
disaggregated subcategories: African Amer- that the principal owner is Other Asian,
ican; Ethiopian; Haitian; Jamaican; Nige- Other Black or African American, or Other
rian; Somali; or Other Black or African Pacific Islander, as applicable (e.g., by se-
American. An applicant must also be per- lecting Other Asian on a paper or electronic
mitted to provide the principal owner’s race form), a financial institution is permitted,
using one or more of these disaggregated but not required, to report the corresponding
subcategories regardless of whether the ap- ‘‘Other’’ race disaggregated subcategory (i.e.,
plicant indicates that the principal owner is Other Asian, Other Black or African Amer-
Black or African American and regardless of ican, or Other Pacific Islander).
whether the applicant selects any aggregate E. In addition to permitting an applicant
categories. Additionally, if an applicant indi- to indicate that a principal owner is Amer-
cates that a principal owner is Other Black ican Indian or Alaska Native, a financial in-
or African American, the financial institu- stitution must permit an applicant to pro-
tion must permit the applicant to provide vide the name of an enrolled or principal
additional information about the principal tribe, by using free-form text on a paper or
owner’s race, by using free-form text on a electronic data collection form or using lan-
paper or electronic data collection form or guage that informs the applicant of the op-
using language that informs the applicant of portunity to self-identify when taking the
the opportunity to self-identify when taking application by means other than a paper or
the application by means other than a paper electronic data collection form, such as by
or electronic data collection form, such as by telephone. If an applicant chooses to provide
telephone. The financial institution must the name of an enrolled or principal tribe, a
permit the applicant to provide additional financial institution must report that infor-
information indicating, for example, that mation via free-form text in the appropriate
the principal owner is Barbadian, Ghanaian, data reporting field. If the applicant provides
or South African. See the sample data col- the name of an enrolled or principal tribe
lection form in appendix E for sample lan- but does not also indicate that the principal
guage. owner is American Indian or Alaska Native
C. The Native Hawaiian or Other Pacific (e.g., by selecting American Indian or Alaska
Islander aggregate category includes the fol- Native on a paper or electronic form), a fi-
lowing disaggregated subcategories: Guama- nancial institution is permitted, but not re-
nian or Chamorro; Native Hawaiian; Sa- quired, to report American Indian or Alaska
moan; and Other Pacific Islander. An appli- Native as well.
cant must also be permitted to provide the iii. Selecting multiple categories. The finan-
principal owner’s race using one or more of cial institution must permit the applicant to
these disaggregated subcategories regardless select as many aggregate categories and
of whether the applicant indicates that the disaggregated subcategories as the applicant
principal owner is Native Hawaiian or Other chooses. A financial institution must permit
Pacific Islander and regardless of whether an applicant to select one or more
the applicant selects any aggregate cat- disaggregated subcategories even if the ap-
egories. Additionally, if an applicant indi- plicant does not select an aggregate cat-
cates that a principal owner is Other Pacific egory. For example, an applicant must be
Islander, the financial institution must per- permitted to select the Chinese
mit the applicant to provide additional in- disaggregated subcategory for a principal
formation about the principal owner’s race, owner without being required to select the
by using free-form text on a paper or elec- Asian aggregate category. If an applicant
tronic data collection form or using lan- provides race information for a principal
guage that informs the applicant of the op- owner, the financial institution reports all of
portunity to self-identify when taking the the aggregate categories and disaggregated
application by means other than a paper or subcategories provided by the applicant. For
electronic data collection form, such as by example, if an applicant selects two aggre-
telephone. The financial institution must gate categories and five disaggregated sub-
permit the applicant to provide additional categories for a principal owner, the finan-
information indicating, for example, that cial institution reports the two aggregate
the principal owner is Fijian or Tongan. See categories that the applicant selected and
the sample data collection form in appendix the five disaggregated subcategories that the
E for sample language. applicant selected. Additionally, if an appli-
D. If an applicant chooses to provide addi- cant selects only the Chinese disaggregated
tional information regarding a principal subcategory for a principal owner, the finan-
owner’s race, such as indicating that a prin- cial institution reports Chinese for the race
jgilmore on DSK4WB1RN3PROD with CFR
cipal owner is Cambodian, Barbadian, or of the principal owner but does not also re-
Fijian orally or in writing on a paper or elec- port that the principal owner is Asian. Simi-
tronic form, a financial institution must re- larly, if the applicant selects an aggregate
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
category (e.g., Asian) and a disaggregated nancial institution or were otherwise pro-
subcategory that does not correspond to the vided by the applicant.
aggregate category (e.g., Native Hawaiian), ii. More than one principal owner. If an ap-
the financial institution reports the informa- plicant has more than one principal owner,
tion as provided by the applicant (e.g., Asian the financial institution is permitted to ask
and Native Hawaiian). about ethnicity and race in a manner that
15. Sex. Generally, a financial institution reduces repetition when collecting ethnicity
must permit an applicant to provide each and race information orally, such as by tele-
principal owner’s sex for purposes of phone. For example, if an applicant has two
§ 1002.107(a)(19). When requesting information principal owners, the financial institution
about a principal owner’s sex, a financial in- may ask for both principal owners’ ethnicity
stitution shall use the term ‘‘sex/gender.’’ If at the same time, rather than asking about
the financial institution uses a paper or elec- ethnicity, race, and sex for the first principal
tronic data collection form to collect the in- owner followed by ethnicity, race, and sex
formation, the financial institution must
for the second principal owner.
allow the applicant to provide each principal
owner’s sex/gender using free-form text. 107(a)(20) Number of Principal Owners
When a financial institution collects the in-
formation orally, such as by telephone, the 1. General. If the financial institution asks
financial institution must inform the appli- the applicant to provide the number of its
cant of the opportunity to provide each prin- principal owners pursuant to § 1002.107(a)(20),
cipal owner’s sex/gender and record the ap- a financial institution must provide the defi-
plicant’s response. A financial institution re- nition of principal owner set forth in
ports the substantive information provided § 1002.102(o). The financial institution satis-
by the applicant (reported via free-form text fies this requirement if it provides the defi-
in the appropriate data reporting field), or nition of principal owner as set forth in the
reports that the applicant declined to pro- sample data collection form in appendix E.
vide the information. 2. Number of principal owners provided by ap-
16. Ethnicity and race information requested plicant; verification of number of principal own-
orally. As described in comments 107(a)(19)–13 ers. The financial institution may rely on
and –14, when collecting principal owners’ statements or information provided by the
ethnicity and race pursuant to applicant in collecting and reporting the
§ 1002.107(a)(19), a financial institution must number of the applicant’s principal owners.
present the applicant with the specified ag- However, pursuant to § 1002.107(b), if the fi-
gregate categories and disaggregated subcat- nancial institution verifies the number of
egories. When collecting ethnicity and race principal owners provided by the applicant,
information orally, such as by telephone, a it must report the verified information.
financial institution may not present the ap- 3. Number of principal owners not provided by
plicant with the option to decline to provide applicant and otherwise undetermined. Pursu-
the information without also presenting the
ant to § 1002.107(c), a financial institution
applicant with the specified aggregate cat-
shall maintain procedures reasonably de-
egories and disaggregated subcategories.
signed to collect applicant-provided data,
i. Ethnicity and race categories. Notwith-
which includes the number of principal own-
standing comments 107(a)(19)–13 and –14, a fi-
ers of the applicant. However, if a financial
nancial institution is not required to read
institution is nonetheless unable to collect
aloud every disaggregated subcategory when
or otherwise determine the applicant’s num-
collecting ethnicity and race information
ber of principal owners, the financial institu-
orally, such as by telephone. Rather, the fi-
tion reports that the number of principal
nancial institution must orally present the
owners is ‘‘not provided by applicant and
lists of aggregate ethnicity and race cat-
otherwise undetermined.’’
egories, followed by the disaggregated sub-
categories (if any) associated with the aggre- 107(b) Reliance on and Verification of
gate categories selected by the applicant or Applicant-Provided Data
which the applicant requests to be presented.
After the applicant makes any disaggregated 1. Reliance on information provided by an ap-
category selections associated with the ag- plicant or appropriate third-party sources. A fi-
gregate ethnicity or race category, the fi- nancial institution may rely on statements
nancial institution must also ask if the ap- made by an applicant (whether made in writ-
plicant wishes to hear the lists of ing or orally) or information provided by an
disaggregated subcategories for any aggre- applicant when compiling and reporting data
gate categories not selected by the appli- pursuant to subpart B of this part for appli-
cant. The financial institution must record cant-provided data; the financial institution
any aggregate categories selected by the ap- is not required to verify those statements or
plicant, as well as any disaggregated subcat- that information. However, if the financial
jgilmore on DSK4WB1RN3PROD with CFR
egories regardless of whether such subcat- institution does verify applicant statements
egories were selected based on the or information for its own business purposes,
disaggregated subcategories read by the fi- such as statements relating to gross annual
102
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
revenue or time in business, the financial in- § 1002.107(a)(19) (ethnicity, race, and sex of
stitution reports the verified information. the applicant’s principal owners), and
Depending on the circumstances and the fi- § 1002.107(a)(20) (number of principal owners).
nancial institution’s procedures, certain ap- Applicant-provided data do not include data
plicant-provided data can be collected from that are generated or supplied only by the fi-
appropriate third-party sources without a nancial institution, including § 1002.107(a)(1)
specific request from the applicant, and such (unique identifier), § 1002.107(a)(2) (applica-
information may also be relied on. For ex- tion date), § 1002.107(a)(3) (application meth-
ample, gross annual revenue or NAICS code od), § 1002.107(a)(4) (application recipient),
may be collected from tax return documents; § 1002.107(a)(8) (amount approved or origi-
a financial institution may also collect an nated), § 1002.107(a)(9) (action taken),
applicant’s NAICS code using third-party § 1002.107(a)(10) (action taken date),
sources such as business information prod- § 1002.107(a)(11) (denial reasons),
ucts. Applicant-provided data are the data § 1002.107(a)(12) (pricing information), and
that are or could be provided by the appli- § 1002.107(a)(13) (census tract, based on ad-
cant, including § 1002.107(a)(5) through (7) and dress or location provided by the applicant).
(13) through (20). See comment 107(c)(1)–3. In 4. Collecting applicant-provided data without
regard to restrictions on verification of mi- a direct request to the applicant. Depending on
nority-owned, women-owned, and LGBTQI+- the circumstances and the financial institu-
owned business statuses, and principal own- tion’s procedures, certain applicant-provided
ers’ ethnicity, race, and sex, see comments data can be collected without a direct re-
107(a)(18)–9 and 107(a)(19)–9. quest to the applicant. For example, credit
107(c) Time and Manner of Collection type may be collected based on the type of
product chosen by the applicant. Similarly, a
107(c)(1) In General financial institution may rely on appropriate
third-party sources to collect certain appli-
1. Procedures. The term ‘‘procedures’’ refers cant-provided data. See § 1002.107(b) con-
to the actual practices followed by a finan- cerning the use of third-party sources.
cial institution as well as its stated proce-
5. Data updated by the applicant. A financial
dures. For example, if a financial institu-
institution reports updated data if it obtains
tion’s stated procedure is to collect appli-
more current data from the applicant during
cant-provided data on or with a paper appli-
the application process. For example, if an
cation form, but employees encourage appli-
applicant states its gross annual revenue for
cants to skip the page that asks whether the
the preceding fiscal year was $3 million, but
applicant is a minority-owned business, a
then the applicant notifies the financial in-
women-owned business, or an LGBTQI+-
stitution that its revenue in the preceding
owned business under § 1002.107(a)(18), the fi-
fiscal year was actually $3.2 million, the fi-
nancial institution’s procedures are not rea-
sonably designed to obtain a response. nancial institution reports gross annual rev-
2. Latitude to design procedures. A financial enue of $3.2 million. For reporting verified
institution has flexibility to establish proce- applicant-provided data, see § 1002.107(b) and
dures concerning the timing and manner in comment 107(b)–1. If a financial institution
which it collects applicant-provided data has already verified data and then the appli-
that work best for its particular lending cant updates it, the financial institution re-
model and product offerings, provided those ports the information it believes to be more
procedures are reasonably designed to col- accurate, in its discretion. If a financial in-
lect the applicant-provided data in stitution receives updates from the applicant
§ 1002.107(a), as required pursuant to after the application process has closed (for
§ 1002.107(c)(1), and where applicable comply example, after closing or account opening),
with the minimum requirements set forth in the financial institution may, at its discre-
§ 1002.107(c)(2). tion, update the data at any time prior to re-
3. Applicant-provided data. Applicant-pro- porting the covered application to the Bu-
vided data are the data that are or could be reau.
provided by the applicant, including
107(c)(2) Applicant-Provided Data Collected
§ 1002.107(a)(5) (credit type), § 1002.107(a)(6)
Directly From the Applicant
(credit purpose), § 1002.107(a)(7) (amount ap-
plied for), § 1002.107(a)(13) (address or location 1. In general. Whether a financial institu-
for purposes of determining census tract), tion’s procedures are reasonably designed to
§ 1002.107(a)(14) (gross annual revenue), collect applicant-provided data is a fact-
§ 1002.107(a)(15) (NAICS code, or information based determination and may depend on the
about the business such that the financial financial institution’s particular lending
institution can determine the applicant’s model, product offerings, and other cir-
NAICS code), § 1002.107(a)(16) (number of cumstances; procedures that are reasonably
workers), § 1002.107(a)(17) (time in business), designed to obtain a response may therefore
jgilmore on DSK4WB1RN3PROD with CFR
§ 1002.107(a)(18) (minority-owned business sta- require additional provisions beyond the
tus, women-owned business status, and minimum criteria set forth in § 1002.107(c)(2).
LGBTQI+-owned business status), In general, reasonably designed procedures
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
will seek to maximize collection of appli- including, as applicable, a response of ‘‘I do
cant-provided data and minimize missing or not wish to provide this information’’ or
erroneous data. While the requirements of similar. (As described in comments
§ 1002.107(c)(2) do not apply to applicant-pro- 107(a)(18)–1 and 107(a)(19)–1, a financial insti-
vided data that a financial institution ob- tution must permit an applicant to decline
tains without a direct request to the appli- to provide the demographic data required by
cant, as explained in comment 107(c)(1)–4, in § 1002.107(a)(18) and (19), which can be satis-
such instances, a covered financial institu- fied by providing a response option of ‘‘I do
tion must still comply with § 1002.107(c)(1). not wish to provide this information’’ or
2. Specific components. i. Timing of initial col- similar.) For example, in an electronic appli-
lection attempt. While a financial institution cation, a financial institution may require
has some flexibility concerning when appli- the applicant to either make a substantive
cant-provided data is are collected, under no selection about a principal owner’s eth-
circumstances may the initial request for nicity, race, or sex, select an option of ‘‘I do
applicant-provided data occur simultaneous not wish to provide this information’’ or
with or after notifying an applicant of final similar, or indicate there are no principal
action taken on a covered application. Gen- owners before allowing the applicant to pro-
erally, the earlier in the application process ceed to the next page of requested informa-
the financial institution initially seeks to tion.
collect applicant-provided data, the more iv. The applicant can easily provide a re-
likely the timing of collection is reasonably sponse. Pursuant to § 1002.107(c)(2)(iv), a fi-
designed to obtain a response. nancial institution must structure the re-
ii. The request for applicant-provided data is quest for information in a manner that
prominently displayed or presented. Pursuant makes it easy for the applicant to provide a
to § 1002.107(c)(2)(ii), a financial institution response. For example, a financial institu-
must ensure an applicant actually sees, tion requests applicant-provided data in the
hears, or is otherwise presented with the re- same format as other information required
quest for applicant-provided data. If an ap- for the covered application, provides appli-
plicant is likely to overlook or miss a re- cants multiple methods to provide or return
quest for applicant-provided data, the finan- applicant-provided data (for example, on a
cial institution does not have reasonably de- written form, through a web portal, or
signed procedures. Similarly, a financial in- through other means), or provides the appli-
stitution also does not have reasonably de- cant some other type of straightforward and
signed procedures if it obscures, prevents, or seamless method to provide a response. Con-
inhibits an applicant from accessing or re- versely, a financial institution must avoid
viewing a request for applicant-provided imposing unnecessary burden on an appli-
data. cant to provide the information requested or
iii. The collection does not have the effect of requiring the applicant to take steps that
discouraging an applicant from responding to a are inconsistent with the rest of its applica-
request for applicant-provided data. A. A cov- tion process. For example, a financial insti-
ered financial institution avoids discour- tution does not have reasonably designed
aging a response by, for example, commu- procedures if it collects application informa-
nicating to the applicant that the collection tion related to its own creditworthiness de-
of applicant-provided data is worthy of the termination in electronic form, but mails a
applicant’s attention or is as important as paper form to the applicant initially seeking
information collected in connection with the the data required under § 1002.107(a) that the
financial institution’s creditworthiness de- financial institution does not otherwise need
termination. In contrast, a covered financial for its creditworthiness determination and
institution that collects applicant-provided requiring the applicant to mail it back. On
data in a time or manner that directly or in- the other hand, a financial institution com-
directly discourages or obstructs an appli- plies with § 1002.107(c)(2)(iv) if, at its discre-
cant from responding or providing a par- tion, it requests the applicant to respond to
ticular response violates § 1002.107(c)(2)(iii). inquiries made pursuant to § 1002.107(a)(18)
For example, a financial institution may not and (19) through a reasonable method in-
discourage a response to inquiries regarding tended to keep the applicant’s responses dis-
the demographic data pursuant to crete and protected from view.
§ 1002.107(a)(18) and (19) by communicating to v. Multiple requests for applicant-provided
the applicant that the request is unimpor- data. A financial institution is permitted,
tant, encouraging the applicant to bypass but not required, to make more than one at-
the form altogether, or attempting to influ- tempt to obtain applicant-provided data if
ence or alter the applicant’s preferred re- the applicant does not respond to an initial
sponse. request. For example, if an applicant ini-
B. A covered financial institution also tially does not respond when asked early in
avoids discouraging a response by requiring the application process (before notifying the
jgilmore on DSK4WB1RN3PROD with CFR
an applicant to provide a response to one or applicant of final action taken on the appli-
more requests for applicant-provided data in cation, pursuant to § 1002.107(c)(2)(i)) to in-
order to proceed with a covered application, quiries made pursuant to § 1002.107(a)(18) and
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
(19), a financial institution may request this may be relevant across all applicant-pro-
information again, for example, during a vided data, though are particularly relevant
subsequent in-person meeting with the appli- for the collection of the demographic data
cant or after notifying the applicant of final pursuant to § 1002.107(a)(18) and (19) given the
action taken on the covered application. heightened sensitivity of these inquiries and
the importance of those data to the purposes
107(c)(3) Procedures To Monitor Compliance of subpart B.
1. Procedures to identify and respond to indi-
107(d) Previously Collected Data
cia of potential discouragement, including low
response rates. Section 1002.107(c)(3) requires a 1. In general. A financial institution may,
covered financial institution to maintain for the purpose of reporting such data pursu-
procedures designed to identify and respond ant to § 1002.109, reuse certain previously col-
to indicia of potential discouragement, in- lected data if the requirements of § 1002.107(d)
cluding low response rates for applicant-pro- are met. In that circumstance, a financial in-
vided data. In general, these include moni- stitution need not seek to collect the data
toring for low response rates (i.e., the per- anew in connection with a subsequent cov-
centage of covered applications for which the ered application to satisfy the requirements
financial institution has obtained some type of this subpart. For example, if an applicant
of response to requests for applicant-pro- applies for and is granted a term loan, and
vided data, including, as applicable, an appli- then subsequently applies for a credit card in
cant response of ‘‘I do not wish to provide the same calendar year, the financial insti-
this information’’ or similar); monitoring for tution need not request again the data speci-
significant irregularities in any particular fied in § 1002.107(d). Similarly, if an applicant
response that may indicate steering, im- applies for more than one covered credit
proper interference, or other potential dis- transaction at one time, a financial institu-
couragement or obstruction of applicants’ tion need only ask once for the data specified
preferred responses; monitoring response in § 1002.107(d).
rates and responses by division, location, 2. Data that can be reused. Subject to the re-
loan officer, or other factors to ensure that quirements of § 1002.107(d), a financial insti-
no discouragement or improper conduct is tution may reuse the following data:
occurring in some parts of a financial insti- § 1002.107(a)(13) (address or location for pur-
tution, even if the financial institution poses of determining census tract),
maintains adequate response rates and re- § 1002.107(a)(14) (gross annual revenue) (sub-
sponses overall; providing adequate training ject to comment 107(d)–7), § 1002.107(a)(15)
to loan officers and other persons involved in (NAICS code), § 1002.107(a)(16) (number of
collecting applicant-provided data; promptly workers), § 1002.107(a)(17) (time in business)
investigating any indicia of potential dis- (subject to comment 107(d)–8), § 1002.107(a)(18)
couragement; and taking prompt remedial (minority-owned business status, women-
action if discouragement or other improper owned business status, and LGBTQI+-owned
conduct is identified. business status) (subject to comment 107(d)–
9), § 1002.107(a)(19) (ethnicity, race, and sex of
107(c)(4) Low Response Rates applicant’s principal owners) (subject to
comment 107(d)–9), and § 1002.107(a)(20) (num-
1. In general. A low response rate for appli- ber of principal owners). A financial institu-
cant-provided data may indicate that the fi- tion is not, however, permitted to reuse
nancial institution has engaged in discour- other data, such as § 1002.107(a)(6) (credit pur-
agement or otherwise failed to maintain rea- pose).
sonably designed procedures. Response rate 3. Previously reported data without a sub-
generally refers to whether the financial in- stantive response. Data have not been ‘‘pre-
stitution has obtained some type of response viously collected’’ within the meaning of
to requests for applicant-provided data (in- § 1002.107(d) if the applicant did not provide a
cluding, as applicable, an applicant response substantive response to the financial institu-
of ‘‘I do not wish to provide this informa- tion’s request for that data and the financial
tion’’ or similar). A response rate may be institution was not otherwise able to obtain
measured, as appropriate, as compared to fi- the requested data (for example, from the ap-
nancial institutions of a similar size, type, plicant’s credit report, or tax returns).
and/or geographic reach, or other factors, as 4. Updated data. If, after the application
appropriate. Similarly, significant irregular- process has closed on a prior covered applica-
ities in a particular response (for example, tion, a financial institution obtains updated
very high rates of an applicant response of ‘‘I information relevant to the data required to
do not wish to provide this information’’ or be collected and reported pursuant to
similar) may also indicate that a financial § 1002.107(a)(13) through (20), and the appli-
institution does not have reasonably de- cant subsequently submits a new covered ap-
signed procedures, for example, because of plication, the financial institution must use
jgilmore on DSK4WB1RN3PROD with CFR
steering, improper interference, or other po- the updated information in connection with
tential discouragement or obstruction of ap- the new covered application (if the require-
plicants’ preferred responses. Response rates ments of § 1002.107(d) are otherwise met) or
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
seek to collect the data again. For example, 8. Time in business. A financial institution
if a business notifies a financial institution that decides to reuse previously collected
of a change of address of its sole business lo- data to satisfy § 1002.107(a)(17) (time in busi-
cation, and subsequently submits a covered ness) must update the data to reflect the
application within the time period specified passage of time since the data were col-
in § 1002.107(d)(1) for reusing previously col- lected. If a financial institution only knows
lected data, the financial institution must that the applicant had been in business less
report census tract based on the updated in- than two years at the time the data was ini-
formation. In that circumstance, the finan- tially collected, as described in comment
cial institution may still reuse other pre- 107(a)(17)–1.ii or iii, it updates the data based
viously collected data to satisfy on the assumption that the applicant had
§ 1002.107(a)(14) through (20) if the require- been in business for 12 months at the time of
ments of § 1002.107(d) are met. the prior collection. For example:
5. Collection within the preceding 36 months. i. If a financial institution previously col-
Pursuant to § 1002.107(d)(1), data can be re- lected data on a prior covered application
used to satisfy § 1002.107(a)(13) and (15) that the applicant has been in business for
through (20) if they are collected within the four years, and then seeks to reuse that data
preceding 36 months. A financial institution for a subsequent covered application sub-
may measure the 36-month period from the mitted one year later, it must update the
date of final action taken (§ 1002.107(a)(9)) on data to reflect that the applicant has been in
a prior application to the application date business for five years.
ii. If a financial institution previously col-
(§ 1002.107(a)(2)) on a subsequent application.
lected data on a prior covered application
For example, if a financial institution takes
that the applicant had been in business less
final action on an application on February 1,
than two years (and was not aware of the
2025, it may reuse certain previously col-
business’s actual length of time in business
lected data pursuant to § 1002.107(d)(1) for
at the time), and then seeks to reuse that
subsequent covered applications dated or re-
data for a subsequent covered application
ceived by the financial institution through
submitted 18 months later, the financial in-
January 31, 2028.
stitution reports time in business on the sub-
6. Reason to believe data are inaccurate. sequent covered application as over two
Whether a financial institution has reason to years in business.
believe data are inaccurate pursuant to 9. Minority-owned business status, women-
§ 1002.107(d)(2) depends on the particular facts owned business status, LGBTQI+-owned busi-
and circumstances. For example, a financial ness status, and principal owners’ ethnicity,
institution may have reason to believe data race, and sex. A financial institution may not
on the applicant’s minority-owned business reuse data to satisfy § 1002.107(a)(18) and (19)
status, women-owned business status, and unless the data were collected in connection
LGBTQI+-owned business status may be in- with a prior covered application pursuant to
accurate if it knows that the applicant has this subpart B. If the financial institution
had a change in ownership or a change in an previously asked the applicant to provide its
owner’s percentage of ownership. minority-owned business status, women-
7. Collection of gross annual revenue in the owned business status, and LGBTQI+-owned
same calendar year. Pursuant to business status, and principal owners’ eth-
§ 1002.107(d)(1), gross annual revenue informa- nicity, race, and sex for purposes of
tion can be reused to satisfy § 1002.107(a)(14) § 1002.107(a)(18) and (19), and the applicant de-
provided it is collected in the same calendar clined to provide the information (such as by
year as the current covered application, as selecting ‘‘I do not wish to provide this infor-
measured from the application date. For ex- mation’’ or similar on a data collection form
ample, if an application is received and gross or by telling the financial institution that it
annual revenue is collected in connection did not wish to provide the information), the
with a covered application in one calendar financial institution may use that response
year, but then final action was taken on the when reporting data for a subsequent appli-
application in the following calendar year, cation pursuant to § 1002.107(d). However, if
the data may only be reused for the calendar the applicant failed to respond (such as by
year in which it was collected and not the leaving the response to the question blank or
calendar year in which final action was by failing to return a data collection form),
taken on the application. However, if an ap- the financial institution must inquire about
plication is received and gross annual rev- the applicant’s minority-owned business sta-
enue is collected in connection with a cov- tus, women-owned business status,
ered application in one calendar year, a fi- LGBTQI+-owned business status, and prin-
nancial institution may reuse that data pur- cipal owners’ ethnicity, race, or sex, as appli-
suant to § 1002.107(d) in a subsequent applica- cable, in connection with a subsequent appli-
tion initiated in the same calendar year, cation because the data were not previously
jgilmore on DSK4WB1RN3PROD with CFR
even if final action was taken on the subse- obtained. See also comment 107(a)(19)–11 con-
quent application in the following calendar cerning previously collected ethnicity, race,
year. and sex information.
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
Section 1002.108—Firewall B. Discussing credit products, loan terms,
or loan requirements with a small business
108(a) Definitions before it submits a covered application.
1. Involved in making any determination con- C. Making or participating in a decision
cerning a covered application from a small busi- after the financial institution has taken
ness. i. General. An employee or officer is in- final action on the covered application, such
volved in making a determination con- as a decision about servicing or collecting a
cerning a covered application from a small covered credit transaction.
D. Using a check box form to confirm
business for purposes of § 1002.108 if the em-
whether an applicant has submitted all nec-
ployee or officer makes, or otherwise partici-
essary documents or handling a minor or
pates in, a decision regarding the evaluation
clerical matter during the application proc-
of a covered application from a small busi-
ess, such as suggesting or selecting a time
ness or the creditworthiness of a small busi-
for an appointment with an applicant.
ness applicant for a covered credit trans-
E. Gathering information (including infor-
action. This includes, but is not limited to,
mation collected pursuant to § 1002.107(a)(18)
employees and officers serving as under-
or (19)) and forwarding the information or a
writers. The decision that an employee or of- covered application to other individuals or
ficer makes or participates in must be about entities.
a specific covered application or about the F. Reviewing previously collected data to
creditworthiness of a specific applicant. An determine if it can be reused for a later cov-
employee or officer is not involved in mak- ered application pursuant to § 1002.107(d).
ing a determination concerning a covered ap- iii. Examples of activities that constitute
plication if the employee or officer is only being involved in making a determination con-
involved in making a decision that affects cerning a covered application from a small busi-
covered applications generally, or if the em- ness. The following are examples of activities
ployee or officer only interacts with small (done individually or as part of a group) that
businesses prior to them becoming appli- constitute being involved in making a deter-
cants or submitting an application. An em- mination concerning a covered application:
ployee or officer may be participating in a A. Making or participating in a decision to
determination concerning a covered applica- approve or deny a specific covered applica-
tion even if the employee or officer is not the tion. This includes, but is not limited to,
ultimate decision maker or the sole decision making or participating in a decision that an
maker. For example, an employee partici- applicant does not satisfy one or more of the
pates in a determination concerning a cov- requirements for the covered credit trans-
ered application if the employee recommends action for which it has applied.
that another employee or officer approve or B. Making or participating in a decision re-
deny the application. Similarly, an employee garding the reason(s) for denial of a covered
or officer participates in a determination application.
concerning a covered application if the em- C. Making or participating in a decision
ployee or officer is part of a larger group, that a guarantor or collateral is required in
such as a committee, that makes a deter- order to approve a specific covered applica-
mination concerning a covered application. tion.
For example, an employee participates in a D. Making or participating in a decision
decision if the employee is a member of a regarding the credit amount or credit limit
committee that approves the terms offered that will be approved for a specific covered
to an applicant for a covered application. application.
This is true even if the employee does not E. Making or participating in a decision to
support the committee’s ultimate decision set one or more of the other terms that will
regarding the terms offered. Conversely, an be offered for a specific covered credit trans-
employee or officer does not participate in a action. This includes, but is not limited to,
determination concerning a covered applica- making or participating in a decision regard-
tion if the employee or officer only performs ing the interest rate, the loan term, or the
ministerial functions for the committee, payment schedule that will be offered for a
such as recording the minutes, or if the com- specific covered credit transaction.
mittee does not make a determination con- F. Making or participating in a decision re-
cerning a specific covered application. garding a counteroffer made to a specific ap-
ii. Examples of activities that do not con- plicant, including a decision regarding the
stitute being involved in making a determination terms of such a counteroffer.
concerning a covered application from a small G. Recommending that another decision
business. The following are examples of ac- maker approve or deny a specific covered ap-
tivities that do not constitute being involved plication, provide a specific reason for deny-
in making a determination concerning a cov- ing a covered application, require a guar-
ered application: antor or collateral in order to approve a cov-
jgilmore on DSK4WB1RN3PROD with CFR
A. Developing policies and procedures, de- ered application, approve a credit amount or
signing or programming computer or other credit limit for a covered credit transaction,
systems, or conducting marketing. set one or more other terms for a covered
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
credit transaction, make a counteroffer re- its policies or procedures for the sole purpose
garding a covered application, or set a spe- of limiting who should have access.
cific term for such a counteroffer.
2. Should have access. i. General. A financial 108(b) Prohibition on Access to Certain
institution may determine that an employee Information
or officer who is involved in making a deter- 1. Scope of persons subject to the prohibition.
mination concerning a covered application The prohibition in § 1002.108(b) applies to an
from a small business should have access to employee or officer of a covered financial in-
information otherwise subject to the prohibi- stitution or its affiliate if the employee or
tion in § 1002.108(b) if that employee or officer officer is involved in making any determina-
is assigned one or more job duties that may tion concerning a covered application from a
require the employee or officer to collect, small business. For example, if a financial
see, consider, refer to, or otherwise use infor- institution is affiliated with company B and
mation subject to the prohibition in an employee of company B is involved in
§ 1002.108(b). If the employee or officer might making a determination concerning a cov-
need to collect, see, consider, refer to, or use ered application on behalf of the financial in-
such information to perform the employee’s stitution, then the financial institution
or officer’s assigned job duties, the financial must comply with § 1002.108 with regard to
institution may determine that the em- company B’s employee. Section 1002.108 does
ployee or officer should have access. For ex- not require a financial institution to limit
ample, if a loan officer is involved in making the access of employees and officers of third
a determination concerning a covered appli- parties who are not affiliates of the financial
cation and that loan officer’s job description institution.
or the financial institution’s policies and 2. Scope of information that cannot be
procedures state that the loan officer may accessed when the prohibition applies to an em-
need to collect information pursuant to ployee or officer. i. Information that cannot be
§ 1002.107(a)(18) or (19), the financial institu- accessed when the prohibition applies. If a par-
tion may determine that the loan officer ticular employee or officer is involved in
should have access. making a determination concerning a cov-
ii. When a group of employees or officers ered application from a small business, the
should have access. A financial institution prohibition in § 1002.108(b) only limits that
may determine that all employees or officers employee’s or officer’s access to that small
with the same job description or assigned du- business applicant’s responses to the inquir-
ties should have access for purposes of ies that the covered financial institution
§ 1002.108. For example, if a job description, a makes to satisfy § 1002.107(a)(18) and (19). For
policy, a procedure, or another document example, if a financial institution uses a
states that a loan officer may have to collect paper data collection form to request infor-
or explain any part of a data collection form mation pursuant to § 1002.107(a)(18) and (19),
that includes the inquiries described in an employee or officer that is subject to the
§ 1002.107(a)(18) and (19), the financial institu- prohibition is not permitted access to the
tion may determine that all employees and paper data collection form that contains the
officers who have been assigned the position applicant’s responses to the inquiries made
of loan officer should have access for pur- pursuant to pursuant to § 1002.107(a)(18) and
poses of § 1002.108. (19), or to any other record that identifies
iii. Making a determination regarding who how the particular applicant responded to
should have access. A financial institution is those inquires. Similarly, if a financial insti-
permitted to choose what lawful factors it tution makes the inquiries required pursuant
will consider when determining whether an to § 1002.107(a)(18) and (19) during a telephone
employee or officer should have access. A fi- call, the prohibition applies to the appli-
nancial institution’s determination that an cant’s responses to those inquiries provided
employee or officer should have access may during that telephone call and to any record
take into account relevant operational fac- that identifies how the particular applicant
tors and lawful business practices. For exam- responded to those inquiries.
ple, a financial institution may consider its ii. Information that can be accessed when the
size, the number of employees and officers prohibition applies. If a particular employee
within the relevant line of business or at a or officer is involved in making a determina-
particular branch or office location, and/or tion concerning a covered application, the
the number of covered applications the fi- prohibition in § 1002.108(b) does not limit that
nancial institution has received or expects to employee’s or officer’s access to an appli-
receive. Additionally, a financial institution cant’s responses to inquiries regarding
may consider its current or its reasonably whether the applicant is a minority-owned,
anticipated staffing levels, operations, sys- women-owned, or LGBTQI+-owned business,
tems, processes, policies, and procedures. A or principal owners’ ethnicity, race, or sex,
jgilmore on DSK4WB1RN3PROD with CFR
financial institution is not required to hire made for purposes other than compliance
additional staff, upgrade its systems, change with § 1002.107(a)(18) or (19). Thus, for exam-
its lending or operational processes, or revise ple, an employee or officer who is subject to
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
the prohibition in § 1002.108(b) may have ac- it has determined that employee or officer or
cess to information regarding whether an ap- a group of which the employee or officer is a
plicant is eligible for a Small Business Ad- member should have access to the informa-
ministration program for women-owned busi- tion.
nesses without regard to whether the excep- 2. Applying the exception to a specific em-
tion in § 1002.108(c) is satisfied. Additionally, ployee or officer or group of similarly situated
an employee or officer who knows that an employees or officers. The exception applies to
applicant is a minority-owned business, an employee or officer if the financial insti-
women-owned business, or LGBTQI+-owned tution determines that the employee or offi-
business, or who knows the ethnicity, race, cer should have access to the information
or sex of any of the applicant’s principal collected pursuant to § 1002.107(a)(18) or (19),
owners due to activities unrelated to the in- and the financial institution provides the no-
quiries made to satisfy the financial institu- tice required by § 1002.108(d). A financial in-
tion’s obligations under § 1002.107(a)(18) and stitution can also determine that several
(19) is not prohibited from making a deter- employees and officers should have access,
mination concerning the applicant’s covered that all of a group of similarly situated em-
application. Thus, an employee or officer ployees or officers should have access, and
who knows, for example, that an applicant is that multiple groups of similarly situated
a minority-owned business due to a social re- employees or officers should have access to
lationship or another professional relation- information collected pursuant to
ship with the applicant or any of its prin- § 1002.107(a)(18) or (19). See also comment
cipal owners may make determinations con- 108(a)–2. For example, a financial institution
cerning the applicant’s covered application. could determine that all its small business
Furthermore, an employee or officer that is loan officers, small business loan processors,
involved in making a determination con- compliance officers, and legal officers should
cerning a covered application may see, con- have access. If the financial institution pro-
sider, refer to, or use data collected to sat- vides the notice required in § 1002.108(d), the
isfy aspects of § 1002.107 other than financial institution may permit all of its
§ 1002.107(a)(18) or (19), such as gross annual small business loan officers, small business
revenue, number of workers, and time in loan processors, compliance officers, and
business. legal officers to have access. However, the fi-
nancial institution cannot permit other em-
108(c) Exception to the Prohibition on Access ployees and officers to have access simply
to Certain Information because it has determined that the small
1. General. A financial institution is not re- business loan officers, loan processors, com-
quired to limit the access of an employee or pliance officers, and legal officers should
officer who is involved in making determina- have access. For example, in this case, the fi-
tions concerning a covered application from nancial institution may not permit its un-
a small business if the financial institution derwriters or chief executive officer to have
determines that the particular employee or access to the information collected from the
officer should have access to the information applicant pursuant to § 1002.107(a)(18) or (19)
collected pursuant to § 1002.107(a)(18) or (19), if they are involved in making any deter-
and the financial institution provides the no- mination concerning a covered application,
tice required by § 1002.108(d). A financial in- unless the financial institution also deter-
stitution is not required to perform a sepa- mines that they should have access. This
rate analysis of the feasibility of maintain- would be true even if the chief executive offi-
ing a firewall. A determination that an em- cer or underwriter had some of the same as-
ployee or officer should have access means signed duties as a loan officer, such as being
that it is not feasible to maintain a firewall a member of a credit committee, but has not
as to that particular employee or officer, and been assigned the task(s) that may require
the exception applies to that employee or of- access to one or more applicants’ responses
ficer if the financial institution provides the to the financial institution’s inquiries under
notice required by § 1002.108(d). However, the § 1002.107(a)(18) or (19). If the financial insti-
fact that a financial institution has made a tution separately determines that under-
determination that an employee or officer writers and the chief executive officer should
should have access does not mean that the fi- have access, then the underwriters and chief
nancial institution can permit other employ- executive officer may also have access.
ees and officers who are involved in making
108(d) Notice
determinations concerning a covered appli-
cation to have access to the information col- 1. General. If a financial institution deter-
lected pursuant to § 1002.107(a)(18) and (19). A mines that one or more employees or officers
financial institution may only permit an em- should have access pursuant to § 1002.108(c),
ployee or officer who is involved in making the financial institution must provide the re-
jgilmore on DSK4WB1RN3PROD with CFR
a determination concerning a covered appli- quired notice to, at a minimum, the appli-
cation to have access to information col- cant or applicants whose responses will be
lected pursuant to § 1002.107(a)(18) and (19) if accessed by an employee or officer involved
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
in making determinations concerning the 109(a)(3) Reporting Obligations Where Mul-
applicant’s or applicants’ covered applica- tiple Financial Institutions Are Involved
tions. Alternatively, a financial institution in a Covered Credit Transaction
may also provide the required notice to ap- 1. General. The following clarifies how to
plicants whose responses will not or might report applications involving more than one
not be accessed. For example, a financial in- financial institution. The discussion below
stitution could provide the notice to all ap- assumes that all parties involved with the
plicants for covered credit transactions or covered credit transaction are covered finan-
all applicants for a specific type of product. cial institutions. However, the same prin-
2. Content of the required notice. The notice ciples apply if any party is not a covered fi-
must inform the applicant that one or more nancial institution.
employees and officers involved in making i. A financial institution shall report the
determinations concerning the applicant’s action that it takes on a covered application,
covered application may have access to the whether or not the covered credit trans-
applicant’s responses regarding the appli- action closed in the financial institution’s
cant’s minority-owned business status, name and even if the financial institution
women-owned business status, LGBTQI+- used underwriting criteria supplied by an-
owned business status, and its principal own- other financial institution. However, where
ers’ ethnicity, race, and sex. See the sample it is necessary for more than one financial
data collection form in appendix E to this institution to make a credit decision in
part for sample language for providing this order to approve a single covered credit
notice to applicants. If a financial institu- transaction, only the last financial institu-
tion establishes and maintains a firewall and tion with authority to set the material
chooses to use the sample data collection terms of the covered credit transaction is re-
form, the financial institution can delete quired to report. Setting the material terms
this sample language from the form. of the covered credit transaction include, for
3. Timing for providing the notice. If the fi- example, selecting among competing offers,
nancial institution is providing the notice or modifying pricing information, amount
orally, it must provide the notice required approved or originated, or repayment dura-
tion. In this situation, the determinative
by § 1002.108(d) prior to asking the applicant
factor is not which financial institution ac-
if it is a minority-owned business, women-
tually made the last credit decision prior to
owned business, or LGBTQI+-owned business
closing, but rather which financial institu-
and prior to asking for a principal owner’s
tion last had the authority for setting the
ethnicity, race, or sex. If the notice is pro-
material terms of the covered credit trans-
vided on the same paper or electronic data
action prior to closing. Whether a financial
collection form as the inquiries about minor-
institution has taken action for purposes of
ity-owned business status, women-owned
§ 1002.109(a)(3) and comment 109(a)(3)–1 is not
business status, LGBTQI+-owned business
relevant to, and is not intended to repeal, ab-
status and the principal owners’ ethnicity,
rogate, annul, impair, or interfere with, sec-
race, or sex, the notice must appear before tion 701(d) (15 U.S.C. 1691(d)) of the Act,
the inquiries. If the notice is provided in an § 1002.9, or any other provision within sub-
electronic or paper document that is sepa- part A of this Regulation.
rate from the data collection form, the no- ii. A financial institution takes action on a
tice must be provided at the same time as covered application for purposes of
the data collection form or prior to pro- § 1002.109(a)(3) if it denies the application,
viding the data collection form. Addition- originates the application, approves the ap-
ally, the notice must be provided with the plication but the applicant did not accept
non-discrimination notices required pursu- the transaction, or closes the file or denies
ant to § 1002.107(a)(18) and (19). See appendix for incompleteness. The financial institution
E for sample language. must also report the application if it was
withdrawn. For reporting purposes, it is not
Section 1002.109—Reporting of Data to the relevant whether the financial institution
Bureau receives the application directly from the
109(a) Reporting to the Bureau applicant or indirectly through another
party, such as a broker, or (except as other-
109(a)(2) Reporting by Subsidiaries wise provided in comment 109(a)(3)–1.i)
whether another financial institution also
1. Subsidiaries. A covered financial institu- reviews and reports an action taken on a
tion is considered a subsidiary of another covered application involving the same cred-
covered financial institution for purposes of it transaction.
reporting data pursuant to § 1002.109 if more iii. Where it is necessary for more than one
than 50 percent of the ownership or control financial institution to make a credit deci-
jgilmore on DSK4WB1RN3PROD with CFR
of the first covered financial institution is sion in order to approve a single covered
held by the second covered financial institu- credit transaction and where more than one
tion. financial institution denies the application
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
or otherwise does not approve the applica- tion B’s agent. Since Financial Institution A
tion, the reporting financial institution (the took action on the application, Financial In-
last financial institution with authority to stitution A reports the application as denied.
set the material terms of the covered credit Financial Institution B does not report the
transaction) shall have a consistent proce- application.
dure for determining how it reports incon- iii. Financial Institution A reviewed a cov-
sistent or differing data points for purposes ered application and made a credit decision
of subpart B. For example, Financial Institu- to approve it using the underwriting criteria
tion A is the reporting entity because it has provided by a Financial Institution B. Finan-
the last authority to set the material credit cial Institution B did not review the applica-
terms. Financial Institution A sends the ap- tion and did not make a credit decision prior
plication to Financial Institution B and Fi- to closing. Financial Institution A was not
nancial Institution C for review, but both Fi- acting as Financial Institution B’s agent. Fi-
nancial Institution B and Financial Institu- nancial Institution A reports the applica-
tion C deny the application, with different tion. Financial Institution B has no report-
denial reasons. Based on these denials, Fi- ing obligation for this application.
nancial Institution A follows suit and denies iv. Financial Institution A reviewed and
the application. Financial Institution A made the credit decision on a covered appli-
must have a consistent procedure for what cation based on the criteria of a third-party
denial reason(s) to report, such as reporting
insurer or guarantor (for example, a govern-
the denial reason(s) from the first financial
ment or private insurer or guarantor). Fi-
institution that denied the covered applica-
nancial Institution A reports the action
tion.
taken on the application.
2. Examples. The following scenarios illus-
trate how a financial institution reports a v. Financial Institution A received a cov-
particular covered application. The illustra- ered application from an applicant and for-
tions assume that all parties involved with warded that application to Financial Institu-
the covered credit transaction are covered fi- tion B. Financial Institution B reviewed the
nancial institutions. However, the same application and made a credit decision ap-
principles apply if any party is not a covered proving the application prior to closing. The
financial institution. Examples i through iv covered credit transaction closed in Finan-
involve a single financial institution with re- cial Institution A’s name. Financial Institu-
sponsibility for making a credit decision tion B purchased the covered credit trans-
without the involvement of an intermediary. action from Financial Institution A after
Example v describes a financial institution closing. Financial Institution B was not act-
intermediary with only passive involvement ing as Financial Institution A’s agent. Since
in the covered credit transaction. Example vi Financial Institution B made the credit deci-
describes a transaction where multiple fi- sion prior to closing, and Financial Institu-
nancial institutions independently decision tion A’s approval was not necessary for the
and take action on a covered application. Ex- credit transaction, Financial Institution B
amples vii and viii describe situations where reports the origination. Financial Institu-
more than one financial institution must tion A does not report the application. As-
make a credit decision in order to approve sume the same facts, except that Financial
the covered credit transaction. Examples ix Institution B reviewed the application before
and x describe situations involving pooled the covered credit transaction would have
and participation interests. closed, but Financial Institution B denied
i. Financial Institution A received a cov- the application. Financial Institution B re-
ered application from an applicant and ap- ports the application as denied. Financial In-
proved the application before closing the stitution A does not report the application
covered credit transaction in its name. Fi- because it did not take an action on the ap-
nancial Institution A was not acting as Fi- plication. If, under the same facts, the appli-
nancial Institution B’s agent. Financial In- cation was withdrawn before Financial Insti-
stitution B later purchased the covered cred- tution B made a credit decision, Financial
it transaction from Financial Institution A. Institution B would report the application as
Financial Institution A was not acting as Fi- withdrawn and Financial Institution A
nancial Institution B’s agent. Financial In- would not report the application for the
stitution A reports the application. Finan- same reason.
cial Institution B has no reporting obliga- vi. Financial Institution A received a cov-
tion for this transaction. ered application and forwarded it to Finan-
ii. Financial Institution A received a cov- cial Institutions B and C. Financial Institu-
ered application from an applicant. If ap- tion A made a credit decision, acting as Fi-
proved, the covered credit transaction would nancial Institution D’s agent, and approved
have closed in Financial Institution B’s the application. Financial Institutions B and
name. Financial Institution A denied the ap- C are not working together with Financial
jgilmore on DSK4WB1RN3PROD with CFR
plication without sending it to Financial In- Institutions A or D, or with each other, and
stitution B for approval. Financial Institu- are solely responsible for setting the terms
tion A was not acting as Financial Institu- of their own credit transactions. Financial
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
Institution B made a credit decision approv- tion C. The applicant does not accept the
ing the application, and Financial Institu- covered credit transaction. As the last finan-
tion C made a credit decision denying the ap- cial institution with the authority for set-
plication. The applicant did not accept the ting the material terms of the covered credit
covered credit transaction from Financial transaction, Financial Institution A reports
Institution D. Financial Institution D re- the application as approved but not accept-
ports the application as approved but not ac- ed. Financial Institutions B, C, and D do not
cepted. Financial Institution A does not re- report the application because they were not
port the application, because it was acting as the last financial institution with the au-
Financial Institution D’s agent. The appli- thority for setting the material terms of the
cant accepted the offer of credit from Finan- covered credit transaction. Assume the same
cial Institution B, and credit was extended. facts, except the applicant accepts the terms
Financial Institution B reports the applica- of the covered credit transaction from Fi-
tion as originated. Financial Institution C nancial Institution B as offered by Financial
reports the application as denied. Institution A. The covered credit transaction
vii. Financial Institution A received a cov- closes in Financial Institution A’s name. Fi-
ered application and made a credit decision nancial Institution B purchases the trans-
to approve it using the underwriting criteria action after closing. Here, Financial Institu-
provided by Financial Institution B. Finan- tion A reports the application as originated.
cial Institution A was not acting as Finan- Financial Institutions B, C, and D do not re-
cial Institution B’s agent. Financial Institu- port the application because they were not
tion A forwarded the application to Finan- the last financial institution responsible for
cial Institution B. Financial Institution B setting the material terms of the covered
reviewed the application and made a credit credit transaction.
decision approving the application prior to ix. Financial Institution A receives a cov-
closing. Financial Institution A makes a ered application and approves it, and then
credit decision on the application and modi- Financial Institution A elects to organize a
fies the credit terms (the interest rate and loan participation agreement where Finan-
repayment term) offered by Financial Insti- cial Institutions B and C agree to purchase a
tution B. The covered credit transaction re- partial interest in the covered credit trans-
flecting the modified terms closes in Finan- action. Financial Institution A reports the
cial Institution A’s name. Financial Institu- application. Financial Institutions B and C
tion B purchases the covered credit trans- have no reporting obligation for this applica-
action from Financial Institution A after tion.
closing. As the last financial institution x. Financial Institution A purchases an in-
with the authority for setting the material terest in a pool of covered credit trans-
terms of the covered credit transaction, Fi- actions, such as credit-backed securities or
nancial Institution A reports the application real estate investment conduits. Financial
as originated. Financial Institution B does Institution A does not report this purchase.
not report the origination because it was not 3. Agents. If a covered financial institution
the last financial institution with the au- takes action on a covered application
thority to set the material terms on the ap- through its agent, the financial institution
plication. If, under the same facts, Financial reports the application. For example, acting
Institution A did not modify the credit as Financial Institution A’s agent, Financial
terms offered by Financial Institution B, Fi- Institution B approved an application prior
nancial Institution A still reports the appli- to closing and a covered credit transaction
cation as originated because it was still the was originated. Financial Institution A re-
last financial institution with the authority ports the covered credit transaction as an
for setting the material terms, even if it origination. State law determines whether
chose not to so do in a particular instance. one party is the agent of another.
Financial Institution B does not report the
origination. 109(b) Financial Institution Identifying
viii. Financial Institution A received a Information
covered application and forwarded it to Fi- 1. Changes to financial institution identifying
nancial Institutions B, C, and D. Financial information. If a financial institution’s infor-
Institution A was not acting as anyone’s mation required pursuant to § 1002.109(b)
agent. Financial Institution B and C re- changes, the financial institution shall pro-
viewed the application and made a credit de- vide the new information with the data sub-
cision approving the application and Finan- mission for the collection year of the change.
cial Institution D reviewed the application For example, assume two financial institu-
and made a credit decision denying the ap- tions that previously reported data under
plication. Prior to closing, Financial Institu- subpart B of this part merge and the sur-
tion A makes a credit decision on the appli- viving institution retained its Legal Entity
cation by deciding to offer to the applicant Identifier but obtained a new TIN in Feb-
jgilmore on DSK4WB1RN3PROD with CFR
the credit terms offered by Financial Institu- ruary 2028. The surviving institution must
tion B and does not convey to the applicant report the new TIN with its data submission
the credit terms offered by Financial Institu- for its 2028 data (which is due by June 1, 2029)
112
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
pursuant to § 1002.109(b)(5). Likewise, if that more than 50 percent of the financial institu-
financial institution’s Federal prudential tion.
regulator changes in February 2028 as a re- 2. Top-holding parent entity. An entity is
sult of the merger, it must identify its new the top-holding parent of a financial institu-
Federal prudential regulator in its annual tion for purposes of § 1002.109(b)(8)(iv)
submission for its 2028 data. through (vi) if it ultimately owns more than
50 percent of the financial institution, and
Paragraph 109(b)(4)
the entity itself is not controlled by any
1. Federal prudential regulator. For purposes other entity. If the immediate parent entity
of § 1002.109(b)(4), Federal prudential regulator and the top-holding parent entity are the
means, if applicable, the Federal prudential same, the financial institution reports that
regulator for a financial institution that is a § 1002.109(b)(8)(iv) through (vi) are not appli-
depository institution as determined pursu- cable.
ant to section 3q of the Federal Deposit In- 3. LEI. For purposes of § 1002.109(b)(8)(ii)
surance Act (12 U.S.C. 1813(q)), including the and (v), a financial institution shall report
Office of the Comptroller of the Currency, the LEI of a parent entity if the parent enti-
the Federal Deposit Insurance Corporation, ty has an LEI number. If a financial institu-
or the Board of Governors of the Federal Re- tion’s parent entity does not have an LEI,
serve System; or the National Credit Union the financial institution reports that this in-
Administration Board for financial institu- formation is not applicable.
tions that are Federal credit unions.
4. RSSD ID numbers. For purposes of
Paragraph 109(b)(6) § 1002.109(b)(8)(iii) and § 1002.109(b)(8)(vi), a fi-
nancial institution shall report the RSSD ID
1. Legal Entity Identifier (LEI). A Legal En- number of a parent entity if the entity has
tity Identifier is a utility endorsed by the an RSSD ID number. If a financial institu-
LEI Regulatory oversight committee, or a tion’s parent entity does not have an RSSD
utility endorsed or otherwise governed by ID, the financial institution reports that this
the Global LEI Foundation (GLEIF) (or any information is not applicable.
successor of the GLEIF) after the GLEIF as-
sumes operational governance of the global Paragraph 109(b)(9)
LEI system. A financial institution complies
with § 1002.109(b)(6) by reporting its current 1. Type of financial institution. A financial
LEI number. A financial institution that institution complies with § 1002.109(b)(9) by
does not currently possess an LEI number selecting the applicable type or types of fi-
must obtain an LEI number, and has an on- nancial institution from the list below. A fi-
going obligation to maintain the LEI num- nancial institution shall select all applicable
ber. The GLEIF website provides a list of types.
LEI issuing organizations. A financial insti- i. Bank or savings association.
tution may obtain an LEI, for purposes of ii. Minority depository institution.
complying with § 1002.109(b)(6), from any one iii. Credit union.
of the issuing organizations listed on the iv. Nondepository institution.
GLEIF website.
v. Community development financial insti-
Paragraph 109(b)(7) tution (CDFI).
vi. Other nonprofit financial institution.
1. RSSD ID number. The RSSD ID is a
vii. Farm Credit System institution.
unique identifying number assigned to insti-
tutions, including main offices and branches, viii. Government lender.
by the Board of Governors of the Federal Re- ix. Commercial finance company.
serve System. A financial institution’s RSSD x. Equipment finance company.
ID may be found on the website of the Na- xi. Industrial loan company.
tional Information Center, which provides xii. Online lender.
comprehensive financial and structure infor- xiii. Other.
mation on banks and other institutions for 2. Use of ‘‘other’’ for type of financial institu-
which the Federal Reserve Board has a su- tion. A financial institution reports type of
pervisory, regulatory, or research interest financial institution as ‘‘other’’ where none
including both domestic and foreign banking of the enumerated types of financial institu-
organizations that operate in the United tion appropriately describe the applicable
States. If a financial institution does not type of financial institution, and the institu-
have an RSSD ID, it reports that this infor- tion reports the type of financial institution
mation is not applicable. via free-form text field. A financial institu-
tion that selects at least one type from the
Paragraph 109(b)(8)
list is permitted, but not required, to also re-
1. Immediate parent entity. An entity is the port ‘‘other’’ (with appropriate free-form
jgilmore on DSK4WB1RN3PROD with CFR
immediate parent of a financial institution text) if there is an additional aspect of its
for purposes of § 1002.109(b)(8)(i) through (iii) business that is not one of the enumerated
if it is a separate entity that directly owns types set out in comment 109(b)(9)–1.
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
3. Additional types of financial institution. quired to be submitted to the Bureau pursu-
The Bureau may add additional types of fi- ant to § 1002.109. In addition to the financial
nancial institutions via the Filing Instruc- institution’s small business lending applica-
tions Guide and related materials. Refer to tion register, such evidence of compliance is
the Filing Instructions Guide for any up- likely to include, but is not limited to, the
dates for each reporting year. applications for credit from which informa-
tion in the register is drawn, as well as the
Paragraph 109(b)(10) files or documents that, under § 1002.111(b),
1. Financial institutions that voluntarily re- are kept separate from the applications for
port covered applications under subpart B of credit. This three-year record retention re-
this part. A financial institution that is not quirement applies to any records covered by
a covered financial institution pursuant to § 1002.111(a), notwithstanding the more gen-
§ 1002.105(b) but that elects to voluntarily eral 12-month retention period for records re-
compile, maintain, and report data under lated to business credit specified in
§§ 1002.107 through 1002.109 (see comment § 1002.12(b).
105(b)–10) complies with § 1002.109(b)(10) by se- 2. Record retention for creditors under
lecting ‘‘voluntary reporter.’’ § 1002.5(a)(4)(vii) and (viii). A creditor that is
voluntarily, under § 1002.5(a)(4)(vii) and (viii),
Section 1002.110—Publication of Data and Other collecting information pursuant to subpart B
Disclosures of this part complies with § 1002.111(a) by re-
110(c) Statement of Financial Institution’s taining evidence of compliance with subpart
Small Business Lending Data Available on B for at least three years after June 1 of the
the Bureau’s Website year following the year that data was col-
lected.
1. Statement. A financial institution shall
provide the statement required by 111(b) Certain Information Kept Separate
§ 1002.110(c) using the following, or substan- From the Rest of the Application
tially similar, language:
1. Separate from the application. A financial
Small Business Lending Data Notice institution may satisfy the requirement in
§ 1002.111(b) by keeping an applicant’s re-
Data about our small business lending are sponses to the financial institution’s request
available online for review at the Consumer Fi- pursuant to § 1002.107(a)(18) and (19) in a file
nancial Protection Bureau’s (CFPB’s) website or document that is discrete or distinct from
at https://www.consumerfinance.gov/data-re- the application and its accompanying infor-
search/small-business-lending/. The data show mation. For example, such information
the geographic distribution of our small business could be collected on a piece of paper that is
lending applications; information about our separate from the rest of the application
loan approvals and denials; and demographic form. In order to satisfy the requirement in
information about the principal owners of our § 1002.111(b), an applicant’s responses to the
small business applicants. The CFPB may delete financial institution’s request pursuant to
or modify portions of our data prior to posting § 1002.107(a)(18) and (19) need not be main-
it if doing so would advance a privacy interest. tained in a separate electronic system, nor
Small business lending data for many other fi- need they be removed from the physical files
nancial institutions are also available at this containing the application so long as there is
website. some separation between the demographic
2. Website. A financial institution without information and the rest of the application
a website complies with § 1002.110(c) by mak- and its accompanying information. However,
ing a written statement using the language the financial institution may nonetheless
in comment 110(c)–1, or substantially similar need to keep this information in a different
language, available upon request. electronic or physical file in order to satisfy
3. Revised location for publicly available data.
the prohibition in § 1002.108(b).
The Bureau may modify the location speci-
2. Number of principal owners. A financial
fied in comment 110(c)–1 at which small busi-
institution is permitted to maintain infor-
ness lending data are available via the Filing
mation regarding the applicant’s number of
Instructions Guide and related materials.
principal owners pursuant to § 1002.107(a)(20)
Refer to the Filing Instructions Guide for
with an applicant’s responses to the finan-
any updates for each reporting year.
cial institution’s request pursuant to
Section 1002.111—Recordkeeping § 1002.107(a)(18) and (19).
111(a) Record Retention 111(c) Limitation on Personally Identifiable
Information in Certain Records Retained
1. Evidence of compliance. Section 1002.111(a) Under This Section
requires a financial institution to retain evi-
jgilmore on DSK4WB1RN3PROD with CFR
dence of compliance with subpart B of this 1. Small business lending application register.
part for at least three years after its small The prohibition in § 1002.111(c) applies to data
business lending application register is re- in the small business lending application
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
register submitted by the financial institu- F. A financial institution has not main-
tion to the Bureau under § 1002.109, the tained procedures reasonably adapted to
version of the register that the financial in- avoid errors if either there is a reasonable
stitution maintains under § 1002.111(a), and basis to believe the error was intentional or
the separate record of certain information there is evidence that the financial institu-
created pursuant to § 1002.111(b). tion has not maintained procedures reason-
2. Examples. Section 1002.111(c) prohibits a ably adapted to avoid errors.
financial institution from including any 2. Tolerances and data fields. For purposes
name, specific address (other than the census of determining whether an error is bona fide
tract required under § 1002.107(a)(13)), tele- under § 1002.112(b), the term ‘‘data field’’ gen-
phone number, or email address of any indi- erally refers to individual fields. All required
vidual who is, or is connected with, an appli- data fields, and valid response options for
cant in the small business lending applica- those fields, are set forth in the Bureau’s Fil-
tion register it reports pursuant to § 1002.109, ing Instructions Guide, available at https://
in the copy of the register the financial in- www.consumerfinance.gov/data-research/small-
stitution retains under § 1002.111(a), and in business-lending/filing-instructions-guide/.
the records of certain information it must Some data fields may allow for more than
retain separately from the application pursu- one response. For example, with respect to
ant to § 1002.111(b). It likewise prohibits a fi- information on the ethnicity and race of an
nancial institution from including any other applicant’s principal owner, a data field may
personally identifiable information con- identify more than one race or ethnicity. If
cerning any individual who is, or is con- there are one or more errors within an eth-
nected with, an applicant, except as required nicity data field, or within a race data field,
pursuant to § 1002.107 or § 1002.111(b). Exam- for a particular principal owner, they would
ples of such personally identifiable informa- count as one (and only one) error for that
tion that a financial institution may not in- data field. For instance, in the ethnicity
clude in its small business lending applica- data field, if an applicant indicates that one
tion register include, but are not limited to, of its principal owners is Cuban, but the fi-
the following: date of birth, Social Security nancial institution reports that the principal
number, official government-issued driver’s owner is Mexican and Puerto Rican, the fi-
license or identification number, alien reg- nancial institution has made one error in the
istration number, government passport num- ethnicity data field for that principal owner.
ber, or employer or taxpayer identification For purposes of the error threshold table in
number. appendix F, the financial institution is
3. Other records. The prohibition in deemed to have made one error, not two.
§ 1002.111(c) does not extend to an application 3. Tolerances and safe harbors. An error that
for credit, or any other records that the fi- meets the criteria for one of the four safe
nancial institution maintains that are not harbor provisions in § 1002.112(c) is not count-
specifically enumerated in § 1002.111(c). ed as an error for purposes of determining
4. Name and business contact information for whether a financial institution has exceeded
submission. The prohibition in § 1002.111(c) the relevant error threshold in appendix F
does not bar financial institutions from pro- for a given data field.
viding to the Bureau, pursuant to
§ 1002.109(b)(3), the name and business con- 112(c) Safe Harbors
tact information of the person who may be 1. Information from a Federal agency—census
contacted by the Bureau or other regulators tract. Section 1002.112(c)(2) provides that an
with questions about the financial institu- incorrect entry for census tract is not a vio-
tion’s submission under § 1002.109. lation of the Act or subpart B of this part, if
the financial institution obtained the census
Section 1002.112—Enforcement tract using a geocoding tool provided by the
112(b) Bona Fide Errors FFIEC or the Bureau. However, this safe har-
bor provision does not extend to a financial
1. Tolerances for bona fide errors. Section institution’s failure to provide the correct
1002.112(b) provides that a financial institu- census tract number for a covered applica-
tion is presumed to maintain procedures rea- tion on its small business lending applica-
sonably adapted to avoid errors with respect tion register, as required by § 1002.107(a)(13),
to a given data field if the number of errors because the FFIEC or Bureau geocoding tool
found in a random sample of the financial in- did not return a census tract for the address
stitution’s data submission for the data field provided by the financial institution. In ad-
does not equal or exceed a threshold speci- dition, this safe harbor provision does not
fied by the Bureau for this purpose. The Bu- extend to a census tract error that results
reau’s thresholds appear in column C of the from a financial institution entering an in-
table in appendix F. The size of the random accurate address into the FFIEC or Bureau
sample, set out in column B, shall depend on geocoding tool.
jgilmore on DSK4WB1RN3PROD with CFR
the size of the financial institution’s small 2. Applicability of NAICS code safe harbor.
business lending application register, as The safe harbor in § 1002.112(c)(3) applies to
shown in column A of the table in appendix an incorrect entry for the 3-digit NAICS code
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
that financial institutions must collect and § 1002.111. In addition, the covered financial
report pursuant to § 1002.107(a)(15), provided institution must comply with § 1002.110(c)
certain conditions are met. For purposes of and (d) no later than June 1 of the year after
§ 1002.112(c)(3)(i), a financial institution is the applicable compliance date. For in-
permitted to rely on statements made by the stance, if § 1002.114(b)(2) applies to a financial
applicant, information provided by the appli- institution, it must comply with §§ 1002.107
cant, or on other information obtained and 1002.108, and portions of § 1002.111, begin-
through its use of appropriate third-party ning January 1, 2027, and it must comply
sources, including business information with § 1002.110(c) and (d), and portions of
products. See also comments 107(a)(15)–4 and § 1002.111, no later than June 1, 2028.
107(b)–1. 2. Initial collections pursuant to § 1002.114(b).
3. Incorrect determination of small business i. When the compliance date of July 1, 2026
status, covered credit transaction, or covered specified in § 1002.114(b)(1) applies to a cov-
application—examples. Section 1002.112(c)(4) ered financial institution, the financial in-
provides a safe harbor from violations of the stitution is required to collect data for cov-
Act or this regulation for a financial institu- ered applications during the period from
tion that initially collects data under July 1, 2026 to December 31, 2026. The finan-
§ 1002.107(a)(18) and (19) regarding whether an cial institution must compile data for this
applicant for a covered credit transaction is period pursuant to § 1002.107, comply with the
a minority-owned, a women-owned, or firewall requirements of § 1002.108, and main-
LGBTQI+-owned business, and the ethnicity, tain records as specified in § 1002.111. In addi-
race, and sex of the applicant’s principal tion, for data collected during this period,
owners, but later concludes that it should the covered financial institution must com-
not have collected this data, if certain condi- ply with §§ 1002.109 and 1002.110(c) and (d) by
tions are met. Specifically, to qualify for June 1, 2027.
this safe harbor, § 1002.112(c)(4) requires that ii. When the compliance date of January 1,
the financial institution have had a reason- 2027 specified in § 1002.114(b)(2) applies to a
able basis at the time it collected data under covered financial institution, the financial
§ 1002.107(a)(18) and (19) for believing that the institution is required to collect data for
application was a covered application for a covered applications during the period from
covered credit transaction from a small busi- January 1, 2027 to December 31, 2027. The fi-
ness pursuant to §§ 1002.103, 1002.104, and nancial institution must compile data for
1002.106, respectively. For example, Financial this period pursuant to § 1002.107, comply
Institution A collected data under with the firewall requirements of § 1002.108,
§ 1002.107(a)(18) and (19) from an applicant for and maintain records as specified in
a covered credit transaction that had self-re- § 1002.111. In addition, for data collected dur-
ported its gross annual revenue as $4.8 mil- ing this period, the covered financial institu-
lion. Sometime after Financial Institution A tion must comply with §§ 1002.109 and
had collected this data from the applicant, 1002.110(c) and (d) by June 1, 2028.
the financial institution reviewed the appli- iii. When the compliance date of October 1,
cant’s tax returns, which indicated the appli- 2027 specified in § 1002.114(b)(3) or (4) applies
cant’s gross annual revenue was in fact $5.2 to a covered financial institution, the finan-
million. Financial Institution A is permitted cial institution is required to collect data for
to rely on representations made by the appli- covered applications during the period from
cant regarding gross annual revenue in de- October 1, 2027 to December 31, 2027. The fi-
termining whether an applicant is a small nancial institution must compile data for
business (see § 1002.107(b) and comments this period pursuant to § 1002.107, comply
106(b)(1)–3 and 107(a)(14)–1). Thus, Financial with the firewall requirements of § 1002.108,
Institution A may have had a reasonable and maintain records as specified in
basis to believe, at the time it collected data § 1002.111. In addition, for data collected dur-
under § 1002.107(a)(18) and (19), that the appli- ing this period, the covered financial institu-
cant was a small business pursuant to tion must comply with §§ 1002.109 and
§ 1002.106, in which case Financial Institution 1002.110(c) and (d) by June 1, 2028.
A’s collection of such data would not violate 3. Informal names for compliance date provi-
the Act or this regulation. sions. To facilitate discussion of the compli-
ance dates specified in § 1002.114(b)(1), (2), and
Section 1002.114—Effective Date, Compliance (3), in the official commentary and any other
Date, and Special Transition Rules documents referring to these compliance
dates, the Bureau adopts the following infor-
114(b) Compliance Date
mal simplified names. Tier 1 refers to the co-
114(b) Compliance Date 1. Application of hort of covered financial institutions that
compliance date. The applicable compliance have a compliance date of July 1, 2026 pursu-
date in § 1002.114(b) is the date by which the ant to § 1002.114(b)(1). Tier 2 refers to the co-
covered financial institution must begin to hort of covered financial institutions that
jgilmore on DSK4WB1RN3PROD with CFR
compile data as specified in § 1002.107, comply have a compliance date of January 1, 2027
with the firewall requirements of § 1002.108, pursuant to § 1002.114(b)(2). Tier 3 refers to
and begin to maintain records as specified in the cohort of covered financial institutions
116
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
that have a compliance date of October 1, in Tier 1 or Tier 2. Because Financial Insti-
2027 pursuant to § 1002.114(b)(3). tution E originated at least 100 covered cred-
4. Examples. The following scenarios illus- it transactions for small businesses in each
trate how to determine whether a financial of 2022 and 2023, it is in Tier 3 and has a com-
institution is a covered financial institution pliance date of October 1, 2027. However, be-
and which compliance date specified in cause Financial Institution E did not origi-
§ 1002.114(b) applies. Unless otherwise indi- nate at least 100 covered credit transactions
cated, in each example the financial institu- for small businesses in both 2025 and 2026, it
tion has chosen to use its originations in 2022 no longer satisfies the definition of a covered
and 2023 (rather than 2023 and 2024, or 2024 financial institution in § 1002.105(b) at the
and 2025, as permitted by § 1002.114(c)(3)) to time of the compliance date for Tier 3 insti-
determine its initial compliance tier. tutions and thus is not required to comply
i. Financial Institution A originated 3,000
with the rule in 2027.
covered credit transactions for small busi-
nesses in calendar year 2022, and 3,000 in cal- vi. Financial Institution F originated 90
endar year 2023. Financial Institution A is in covered credit transactions for small busi-
Tier 1 and has a compliance date of July 1, nesses in calendar year 2022, and 120 in 2023,
2026. 2024, 2025, and 2026. Because Financial Insti-
ii. Financial Institution B originated 2,000 tution F did not originate at least 100 cov-
covered credit transactions for small busi- ered credit transactions for small businesses
nesses in calendar year 2022, and 3,000 in cal- in each of 2022 and 2023, it is not in Tier 1,
endar year 2023. Because Financial Institu- Tier 2, or Tier 3. Because Financial Institu-
tion B did not originate at least 2,500 covered tion F originated at least 100 covered credit
credit transactions for small businesses in transactions for small businesses in subse-
each of 2022 and 2023, it is not in Tier 1. Be- quent calendar years, § 1002.114(b)(4), which
cause Financial Institution B did originate cross-references § 1002.105(b), applies to Fi-
at least 500 covered credit transactions for nancial Institution F. Because Financial In-
small businesses in each of 2022 and 2023, it is stitution F originated at least 100 covered
in Tier 2 and has a compliance date of Janu- credit transactions for small businesses in
ary 1, 2027. each of 2025 and 2026, it is a covered financial
iii. Financial Institution C originated 400 institution under § 1002.105(b) and is required
covered credit transactions to small busi- to comply with the rule beginning October 1,
nesses in calendar year 2022, and 1,000 in cal- 2027. Alternatively, if Financial Institution
endar year 2023. Because Financial Institu- F chooses to use its originations in calendar
tion C did not originate at least 2,500 covered years 2023 and 2024 (or 2024 and 2025) to deter-
credit transactions for small businesses in mine its compliance tier pursuant to
each of 2022 and 2023, it is not in Tier 1, and § 1002.114(c)(3), it would be in Tier 3 and like-
because it did not originate at least 500 cov- wise required to comply with the rule begin-
ered credit transactions for small businesses ning October 1, 2027.
in each of 2022 and 2023, it is not in Tier 2.
vii. Financial Institution G originated 90
Because Financial Institution C did origi-
covered credit transactions for small busi-
nate at least 100 covered credit transactions
nesses in each of calendar years 2022, 2023,
for small businesses in each of 2022 and 2023,
it is in Tier 3 and has a compliance date of 2024, 2025, 2026, and 2027, and 120 in each of
October 1, 2027. 2028 and 2029. Because Financial Institution
iv. Financial Institution D originated 90 G did not originate at least 100 covered cred-
covered credit transactions to small busi- it transactions for small businesses in each
nesses in calendar year 2022, 120 in calendar of 2022 and 2023, it is not in Tier 1, Tier 2, or
year 2023, and 90 in calendar years 2024, 2025, Tier 3. Because Financial Institution G origi-
2026, and 2027. Because Financial Institution nated at least 100 covered credit transactions
D did not originate at least 100 covered cred- for small businesses in subsequent calendar
it transactions for small businesses in each years, § 1002.114(b)(4), which cross-references
of 2022 and 2023, it is not in Tier 1, Tier 2, or § 1002.105(b), applies to Financial Institution
Tier 3. Because Financial Institution D did G. Because Financial Institution G origi-
not originate at least 100 covered credit nated at least 100 covered credit transactions
transactions for small businesses in subse- for small businesses in each of 2028 and 2029,
quent consecutive calendar years, it is not a it is a covered financial institution under
covered financial institution under § 1002.105(b) and is required to comply with
§ 1002.105(b) and is not required to comply the rule beginning January 1, 2030.
with the rule in 2026, 2027, or 2028. viii. Financial Institution H originated 550
v. Financial Institution E originated 120 covered credit transactions for small busi-
covered credit transactions for small busi- nesses in each of calendar years 2022 and 2023,
nesses in each of calendar years 2022, 2023, 450 in 2024, and 550 in 2025 and 2026. Because
2024, 2025, and 90 in 2026. Because Financial Financial Institution H originated at least
jgilmore on DSK4WB1RN3PROD with CFR
Institution E did not originate at least 2,500 500 covered credit transactions for small
or 500 covered credit transactions for small businesses in each of 2022 and 2023, it would
businesses in each of 2022 and 2023, it is not be in Tier 2 and have a compliance date of
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Pt. 1002, Supp. I 12 CFR Ch. X (1–1–26 Edition)
January 1, 2027. However, § 1002.114(c)(3) per- nesses as defined in § 1002.106 if it did not in
mits financial institutions to use their origi- the ordinary course of business collect either
nations in 2023 and 2024 (or 2024 and 2025), precise or approximate information on
rather than in 2022 and 2023, to determine whether the businesses to which it origi-
compliance tier. If Financial Institution H nated covered credit transactions had gross
elects to use its originations in 2023 and 2024, annual revenue of $5 million or less. In addi-
it would be in Tier 3 and required to comply tion, even if precise or approximate informa-
with the rule beginning October 1, 2027. tion on gross annual revenue was initially
collected, a financial institution does not
114(c) Special Transition Rules have readily accessible this information if,
1. Collection of certain information prior to a to retrieve this information, for example, it
financial institution’s compliance date. Not- must review paper loan files, recall such in-
withstanding § 1002.5(a)(4)(ix), a financial in- formation from either archived paper records
stitution that chooses to collect information or scanned records in digital archives, or ob-
on covered applications as permitted by tain such information from third parties
§ 1002.114(c)(1) in the 12 months prior to its that initially obtained this information but
initial compliance date as specified in did not transmit such information to the fi-
§ 1002.114(b)(1), (2) or (3) need comply only nancial institution.
with the requirements set out in 5. Reasonable method to estimate the number
§§ 1002.107(a)(18) and (19), 1002.108, and of originations. The reasonable methods that
1002.111(b) and (c) with respect to the infor- financial institutions may use to estimate
mation collected. During this 12-month pe- originations for 2022 and 2023 (or for 2023 and
riod, a covered financial institution need not 2024, or 2024 and 2025, pursuant to
comply with the provisions of § 1002.107 § 1002.114(c)(3)) include, but are not limited
(other than §§ 1002.107(a)(18) and (19)), to, the following:
1002.109, 1002.110, 1002.111(a), or 1002.114. i. A financial institution may comply with
2. Transition rule for applications received § 1002.114(c)(2) by determining the small busi-
prior to a compliance date but final action is ness status of covered credit transactions by
taken after a compliance date. If a covered fi- asking every applicant, prior to the closing
nancial institution receives a covered appli- of approved transactions, to self-report
cation from a small business prior to its ini- whether it had gross annual revenue for its
tial compliance date specified in § 1002.114(b), preceding fiscal year of $5 million or less,
but takes final action on or after that date, during the period October 1 through Decem-
the financial institution is not required to ber 31, 2023. The financial institution may
collect data regarding that application pur- annualize the number of covered credit
suant to § 1002.107 nor to report the applica- transactions it originates to small busi-
tion pursuant to § 1002.109. For example, if a nesses from October 1 through December 31,
financial institution is subject to a compli- 2023 by quadrupling the originations for this
ance date of July 1, 2026, and it receives an period, and apply the annualized number of
application on June 27, 2026 but does not originations to both calendar years 2022 and
take final action on the application until 2023. Pursuant to § 1002.114(c)(3), a financial
July 25, 2026, the financial institution is not institution is permitted to use its origina-
required to collect data pursuant to § 1002.107 tions in 2023 and 2024 (or 2024 and 2025), rath-
nor to report data to the Bureau pursuant to er than 2022 and 2023, to determine its com-
§ 1002.109 regarding that application. pliance tier. Thus, for example, a financial
3. Has readily accessible the information need- institution may ask applicants to self-report
ed to determine small business status. A finan- revenue information during the period of Oc-
cial institution has readily accessible the in- tober 1 through December 31, 2024, and then
formation needed to determine whether its may annualize the number of covered credit
originations of covered credit transactions transactions it originated to small busi-
were for small businesses as defined in nesses during that period and apply the
§ 1002.106 if, for instance, it in the ordinary annualized number of originations to both
course of business collects data on the pre- calendar years 2023 and 2024.
cise gross annual revenue of the businesses ii. A financial institution may comply with
for which it originates loans, it obtains in- § 1002.114(c)(2) by assuming that every cov-
formation sufficient to determine whether ered credit transaction it originates for busi-
an applicant for business credit had gross an- ness customers in calendar years 2022 and
nual revenues of $5 million or less, or if it 2023 (or in 2023 and 2024, or 2024 and 2025) is
collects and reports similar data to Federal to a small business.
or State government agencies pursuant to iii. A financial institution may comply
other laws or regulations. with § 1002.114(c)(2) by using another method-
4. Does not have readily accessible the infor- ology provided that such methodology is rea-
mation needed to determine small business sta- sonable and documented in writing.
tus. A financial institution does not have 6. Examples. The following scenarios illus-
jgilmore on DSK4WB1RN3PROD with CFR
readily accessible the information needed to trate the potential application of
determine whether its originations of cov- § 1002.114(c)(2) to a financial institution’s
ered credit transactions were for small busi- compliance date under § 1002.114(b). Unless
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Consumer Financial Protection Bureau Pt. 1002, Supp. I
otherwise indicated, in each example the fi- 114(c)–5.iii, basing it in part on the method-
nancial institution has chosen to estimate ology specified in comment 114(c)–5.i. Start-
its originations for 2022 and 2023 (rather than ing on April 1, 2023, Financial Institution C
2023 and 2024 or 2024 or 2025 as permitted by began to ask all business applicants for cov-
§ 1002.114(c)(3)) to determine its initial com- ered credit transactions if they had gross an-
pliance tier. nual revenue in their preceding fiscal year of
i. Prior to October 1, 2023, Financial Insti- $5 million or less. Using this information, Fi-
tution A did not collect gross annual revenue nancial Institution C determined that it had
or other information that would allow it to originated 100 covered credit transactions for
determine the small business status of the businesses that were small as defined in
businesses for whom it originated covered § 1002.106. On an annualized basis, Financial
credit transactions in calendar years 2022 Institution C originated approximately 133
and 2023. Financial Institution A chose to covered credit transactions for small busi-
use the methodology set out in comment nesses ((100 originations * 365 days)/275 days =
114(c)–5.i and as of October 1, 2023 began to 132.73 originations per year). Applying this
collect information on gross annual revenue estimate of 133 originations to both calendar
as defined in § 1002.107(a)(14) for its covered years 2022 and 2023, Financial Institution C is
credit transactions originated for businesses. in Tier 3 and has a compliance date of Octo-
Using this information, Financial Institu- ber 1, 2027.
tion A determined that it had originated 750 iv. Financial Institution D did not collect
covered credit transactions for businesses
gross annual revenue or other information
that were small as defined in § 1002.106. On an
that would allow it to determine the small
annualized basis, Financial Institution A
business status of the businesses for whom it
originated 3,000 covered credit transactions
originated covered credit transactions in cal-
for small businesses (750 originations * 4 =
endar years 2022 and 2023. Financial Institu-
3,000 originations per year). Applying this
tion D determined that it had originated
annualized figure of 3,000 originations to
3,000 total covered credit transactions for
both calendar years 2022 and 2023, Financial
businesses in each of 2022 and 2023. Applying
Institution A is in Tier 1 and has a compli-
the methodology specified in comment
ance date of July 1, 2026.
ii. Prior to July 1, 2023, Financial Institu- 114(c)–5.ii, Financial Institution D assumed
tion B collected gross annual revenue infor- that all 3,000 covered credit transactions
mation for some applicants for business cred- originated in each of 2022 and 2023 were to
it, but such information was only noted in small businesses. On that basis, Financial In-
its paper loan files. Financial Institution B stitution D is in Tier 1 and has a compliance
thus does not have reasonable access to in- date of July 1, 2026.
formation that would allow it to determine v. Financial Institution E did not collect
the small business status of the businesses gross annual revenue or other information
for whom it originated covered credit trans- that would allow it to determine the small
actions for calendar years 2022 and 2023. Fi- business status of the businesses for whom it
nancial Institution B chose to use the meth- originated covered credit transactions in cal-
odology set out in comment 114(c)–5.i, and as endar years 2022 and 2023. Financial Institu-
of October 1, 2023, Financial Institution B tion E determined that it had originated 700
began to ask all businesses for whom it was total covered credit transactions for busi-
closing covered credit transactions if they nesses in each of 2022 and 2023. Applying the
had gross annual revenues in the preceding methodology specified in comment 114(c)–
fiscal year of $5 million or less. Using this in- 5.ii, Financial Institution E assumed that all
formation, Financial Institution B deter- such transactions in each of 2022 and 2023
mined that it had originated 350 covered were originated for small businesses. On that
credit transactions for businesses that were basis, Financial Institution E is in Tier 2 and
small as defined in § 1002.106. On an has a compliance date of January 1, 2027.
annualized basis, Financial Institution B vi. Financial Institution F does not have
originated 1,400 covered credit transactions readily accessible gross annual revenue or
for small businesses (350 originations * 4 = other information that would allow it to de-
1,400 originations per year). Applying this es- termine the small business status of the
timated figure of 1,400 originations to both businesses for whom it originated covered
calendar years 2022 and 2023, Financial Insti- credit transactions in calendar years 2022
tution B is in Tier 2 and has a compliance and 2023. Financial Institution F determined
date of January 1, 2027. that it had originated 80 total covered credit
iii. Prior to April 1, 2023, Financial Institu- transactions for businesses in 2022 and 150
tion C did not collect gross annual revenue total covered credit transactions for busi-
or other information that would allow it to nesses in 2023. Applying the methodology set
determine the small business status of the out in comment 114(c)–5.ii, Financial Institu-
businesses for whom it originated covered tion F assumed that all such transactions
jgilmore on DSK4WB1RN3PROD with CFR
credit transactions in calendar years 2022 originated in 2022 and 2023 were originated
and 2023. Financial Institution C chose its for small businesses. On that basis, Financial
own methodology pursuant to comment Institution F is not in Tier 1, Tier 2 or Tier
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Pt. 1003 12 CFR Ch. X (1–1–26 Edition)
3, and is subject to the compliance date pro- APPENDIX C TO PART 1003—PROCEDURES FOR
vision specified in § 1002.114(b)(4). GENERATING A CHECK DIGIT AND VALI-
vii. Financial Institution G does not have DATING A ULI
readily accessible gross annual revenue or SUPPLEMENT I TO PART 1003—OFFICIAL INTER-
other information that would allow it to de- PRETATIONS
termine the small business status of the
businesses for whom it originated covered AUTHORITY: 12 U.S.C. 2803, 2804, 2805, 5512,
credit transactions in calendar years 2022, 5581.
2023, 2024, or 2025. Financial Institution G SOURCE: 76 FR 78468, Dec. 19, 2011, unless
chose to use the methodology set out in com-
otherwise noted.
ment 114(c)–5.i, and as of October 1, 2025, Fi-
nancial Institution G began to ask all busi-
nesses for whom it was closing covered credit
§ 1003.1 Authority, purpose, and scope.
transactions if they had gross annual rev- (a) Authority. This part, known as
enue in the preceding fiscal year of $5 mil- Regulation C, is issued by the Bureau
lion or less. Using this information, Finan-
of Consumer Financial Protection (Bu-
cial Institution G determined that it had
originated 700 covered credit transactions reau) pursuant to the Home Mortgage
during that period for businesses that were Disclosure Act (HMDA) (12 U.S.C. 2801
small as defined in § 1002.106. On an et seq.,) as amended. The information-
annualized basis, Financial Institution G collection requirements have been ap-
originated 2,800 covered credit transactions proved by the U.S. Office of Manage-
for small businesses (700 originations * 4 = ment and Budget (OMB) under 44
2,800 originations per year). Applying this es-
U.S.C. 3501 et seq. and have been as-
timated figure of 2,800 originations to both
calendar years 2024 and 2025, Financial Insti- signed OMB numbers for institutions
tution G is in Tier 1 and has a compliance reporting data to the Office of the
date of July 1, 2026. Comptroller of the Currency (1557–0159),
the Federal Deposit Insurance Corpora-
APPENDIX C—SAMPLE NOTIFICATION FORMS
tion (3064–0046), the Federal Reserve
1. Form C–9. If not otherwise provided System (7100–0247), the Department of
under other applicable disclosure require- Housing and Urban Development (HUD)
ments, creditors may design their own form, (2502–0529), the National Credit Union
add to, or modify the model form to reflect
their individual policies and procedures. For
Administration (3133–0166), and the Bu-
example, a creditor may want to add: reau of Consumer Financial Protection
i. A telephone number that applicants may (3170–0008).
call to leave their name and the address to (b) Purpose. (1) This part implements
which a copy of the appraisal or other writ- the Home Mortgage Disclosure Act,
ten valuation should be sent. which is intended to provide the public
ii. A notice of the cost the applicant will
with loan data that can be used:
be required to pay the creditor for the ap-
praisal or other valuation. (i) To help determine whether finan-
cial institutions are serving the hous-
[76 FR 79445, Dec. 21, 2011, as amended at 78
ing needs of their communities;
FR 7248, Jan. 31, 2013; 82 FR 45695, Oct. 2, 2017;
88 FR 35536, May 31, 2023; 89 FR 55029, July 3, (ii) To assist public officials in dis-
2024; 90 FR 25880, June 18, 2025; 90 FR 47520, tributing public-sector investment so
Oct. 2, 2025] as to attract private investment to
areas where it is needed; and
PART 1003—HOME MORTGAGE (iii) To assist in identifying possible
DISCLOSURE (REGULATION C) discriminatory lending patterns and
enforcing antidiscrimination statutes.
Sec. (2) Neither the act nor this part is in-
1003.1 Authority, purpose, and scope. tended to encourage unsound lending
1003.2 Definitions. practices or the allocation of credit.
1003.3 Exempt institutions and excluded and (c) Scope. This part applies to finan-
partially exempt transactions.
cial institutions as defined in
1003.4 Compilation of reportable data.
1003.5 Disclosure and reporting.
§ 1003.2(g). This part requires a finan-
1003.6 Enforcement. cial institution to submit data to the
APPENDIX A TO PART 1003 [RESERVED] appropriate Federal agency for the fi-
jgilmore on DSK4WB1RN3PROD with CFR
APPENDIX B TO PART 1003—FORM AND IN- nancial institution as defined in
STRUCTIONS FOR DATA COLLECTION ON § 1003.5(a)(4), and to disclose certain
ETHNICITY, RACE, AND SEX data to the public, about covered loans
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