What is a regulation B?
What Is Regulation B (Reg B)?
What regulation protects applicants from discrimination?
What would happen if a credit report was denied without Regulation B?
What is the penalty for failing to comply with Reg B?
What are the benefits of regulation B?
Can you ask for an applicant's age?
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Do all creditors have to comply with Reg B?
All lenders are required to comply with Regulation B, which protects applicants from discrimination. Reg B mandates that lenders provide explanations to rejected applicants within 30 days of receiving their completed applications. Creditors that fail to comply with Regulation B are subject to punitive damages.
What is covered under Regulation B?
Regulation B prohibits creditors from requesting and collecting specific personal information about an applicant that has no bearing on the applicant's ability or willingness to repay the credit requested and could be used to discriminate against the applicant.
Who is subject to ECOA and Reg B?
The Equal Credit Opportunity Act (ECOA), which is implemented by Regulation B, applies to all creditors. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation.
What is considered an application under Reg B?
Regulation B defines the term “application” to mean an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.
What is the difference between ECOA and regulation B?
What Is the Difference Between the ECOA and Regulation B? The ECOA is the Equal Credit Opportunity Act, which Congress passed to prohibit lending discrimination on the basis of certain factors. Regulation B is the rule that the Federal Reserve created to enforce the ECOA.
Does Reg B apply to businesses?
Regulation B – Equal Credit Opportunity Act (ECOA) The regulation prohibits creditor practices that discriminate based on any of these factors and applies to all credit, commercial as well as consumer.
What types of transactions are covered under ECOA?
ECOA prohibits discrimination in all aspects of a credit transaction and applies to any organization that extends credit—including banks, small loan and finance companies, retail stores, credit card companies, and credit unions. It also applies to anyone involved in the decision to grant credit or set credit terms.
Does Reg B require government monitoring?
As noted, Regulation B requires collection of GMI only for a home-purchase or a refinance application involving an applicant's principal residence.
At what point in the loan process does regulation B require a creditor to obtain evidence of customers intent to apply jointly for credit?
According to the commentary in Regulation B, joint intent must be evidenced at the time of application. Whenever a joint application is received, the lender must ensure both applicants indicate their intentions to apply for joint credit verbally, on the application or on the financial statement.
Does Reg B apply to deposit accounts?
Regulation B applies to credit products - so the answer would be no, as neither the regulation nor the commentary addresses the application of adverse action to non-credit products. However, the amended Section 615(a) of the FCRA would apply to any type of adverse action (deposit accounts, insurance, etc.)
Is Reg B calendar days or business days?
Regulation B (ECOA) Business day or calendar day is not stipulated. The law merely states 30 days for delivery.
What are three types of lending discrimination?
Types of Lending Discrimination The courts have recognized three methods of proof of lending discrimination under the ECOA and the FHAct: Overt evidence of disparate treatment; • Comparative evidence of disparate treatment; and • Evidence of disparate impact.
What does ECOA and Reg B apply to?
The Equal Credit Opportunity Act (ECOA), which is implemented by Regulation B, applies to all creditors. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation.
What does an adverse action notice include?
An adverse action notice is to inform you that you have been denied credit, employment, insurance, or other benefits based on information in a credit report. The notice should indicate which credit reporting agency was used, and how to contact them.
What is included in retrospective relief?
Retrospective injunctive relief may include relief for victims of past discrimination, actual and punitive damages, and offers or adjustments of credit or other forms of loan commitments.
At what point in the loan process does regulation B require a creditor to obtain evidence of customers intent to apply jointly for credit?
According to the commentary in Regulation B, joint intent must be evidenced at the time of application. Whenever a joint application is received, the lender must ensure both applicants indicate their intentions to apply for joint credit verbally, on the application or on the financial statement.
Regulation B 30 Day Rule — Compliance Cohort
When a financial institution receives a request for a loan, they are required to respond to that applicant within a certain amount of time to advise them of their credit decision. That time, however, can vary based on the specific situation and/or financial institution, which has left many
Reg B Application Requirements | Bankers Online
Question: We are hearing many contradictory things about the new application requirements in Regulation B. Some people state that we need signed letters of intent from co-borrowers that state their intent and willingness to be a co-borrower and that without this evidence, we may have a signature violation.
Commercial Loan Applications And Reg B | Bankers Online
by Kathy Curtis, Compliance Manager, Century Bank, Washington, DC As is the case apparently at many banks, the commercial loan department of my bank had a hard time getting used to the requirements and limitations Regulation B overlays onto the loan application process with regard to adverse action notices and spousal guarantees.
12 CFR Part 1002 - Equal Credit Opportunity Act (Regulation B)
Introduction Comment for 1002.1 - Authority, Scope, and Purpose Comment for 1002.2 - Definitions Comment for 1002.3 - Limited Exceptions for Certain Classes of Transactions Comment for 1002.4 - General Rules Comment for 1002.5 - Rules Concerning Requests for Information Comment for 1002.6 - Rules Concerning Evaluation of Applications Comment for 1002.7 - Rules Concerning Extensions of Credit ...
12 CFR Part 202 - EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)
§ 202.1 Authority, scope and purpose. § 202.2 Definitions. § 202.3 Limited exceptions for certain classes of transactions. § 202.4 General rules.
What is Regulation B?
In keeping with the broad reach of the statute’s prohibition, Regulation B covers creditor activities before, during, and after the extension of credit.
When did the CFPB change the regulations?
In January 2013, CFPB amended Regulation B to reflect the Dodd-Frank Act amendments requiring creditors to provide applicants with free copies of all appraisals and other written valuations developed in connection with all credit applications to be secured by a first lien on a dwelling.
What is the job of a credit reporting agency?
Obtain and review policies and procedures, training materials, and audits pertaining to the designation of accounts on furnishing them to credit reporting agencies, as well as a sample of information reported to the credit reporting agencies.
Why is it important to supplement the IFLEP examination procedures?
It is important to supplement the IFLEP examination procedures whenever statistical analysis is involved. The exam steps should be risk-focused to review the areas relating to the focal points. Follow Part III of the IFLEP to examine the credit union, including conducting comparative file reviews as appropriate.
Does the ECOA prohibit discrimination?
The ECOA and its implementing Regulation B not only prohibit discrimination in credit transactions, but also set forth additional requirements, such as requiring adverse action notices in appropriate circumstances. Thus, not all items on the checklist relate to discrimination.
Regulation inquiries
Please review the implementation and guidance materials available on our website, including regulations and official interpretation, before submitting a question about the Bureau’s rules or regulations.
User notice
The Bureau launched this resource to provide an easier-to-navigate electronic format for many of its Regulations. This resource is not an official legal edition of the Code of Federal Regulations or the Federal Register, and it does not replace the official versions of those publications.
Who does Regulation B apply?
§ 1691 et seq., which is implemented by Regulation B (12 CFR Part 1002), applies to all creditors, including credit unions. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation.
What is the Regulation B?
Reg B outlines the rules that lenders must adhere to when obtaining and processing credit information. The regulation prohibits lenders from discriminating based on age, gender, ethnicity, nationality, or marital status.
What other regulation does Regulation B implement?
Regulation B implements the Equal Credit Opportunity Act (ECOA) and, in part, prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of a credit applicant except under certain circumstances.
Does Reg B apply to deposit accounts?
Answer: Regulation B applies to credit products – so the answer would be no, as neither the regulation nor the commentary addresses the application of adverse action to non-credit products. However, the amended Section 615 (a) of the FCRA would apply to any type of adverse action (deposit accounts, insurance, etc.)
What is a Reg B violation?
Because the ECOA and Regulation B. prohibit discrimination in any aspect of a credit transaction, a creditor violates the statute and. regulation when discriminating against borrowers on a prohibited basis in approving or denying. loan modifications.
What is Reg B joint authority?
Except as otherwise permitted or required by law, a creditor shall evaluate married and unmarried applicants by the same standards; and in evaluating joint applicants, a creditor shall not treat applicants differently based on the existence, absence, or likelihood of a marital relationship between the parties.
Do I need to be regulated to lend money?
Moneylenders must have a licence to offer moneylending services in Ireland. The Central Bank of Ireland supervises moneylenders and is responsible for issuing moneylending licences and sets rules moneylenders must follow. You should only borrow from a licensed moneylender (sometimes called an ‘authorised moneylender’).
Who must be trained on the new requirements for a loan?
Loan originators, loan processors, underwriters, and especially closing department must be trained on the new requirements. Processors and underwriters need to be mindful to deliver the appraisal once they have received and reviewed it. Any corrections should be promptly ordered to ensure it does not affect the timing for loan closing. The trainings should also cover the new process for handling waivers. It is important that the staff understands what the waiver covers and the timing requirements for the waiver.
When did the CFPB change the appraisal rules?
Consumer Financial Protection Bureau (CFPB) changed the appraisal rules in Regulation B on January 18, 2013. The amendments were published in the Federal Register on January 31, 2013, in 78 FR 7248. Source : www.MortgagesAnalyzed.com.
When are the new appraisal rules effective?
The new appraisal rules are effective for any mortgage loan application received on or after January 18, 2014. Applications that were in progress prior to Jan 18, 2014 can comply with previous Reg B appraisal rules.
What is Regulation B?
Regulation B prohibits creditors from requesting and collecting specific personal information about an applicant that has no bearing on the applicant’s ability or willingness to repay the credit requested and could be used to discriminate against the applicant.
When more than one bank is involved in a transaction and adverse action is taken with respect to the application for credit by?
When more than one bank is involved in a transaction and adverse action is taken with respect to the application for credit by all the banks involved, each bank that took such action must provide a notice of action taken. The notification may be given by a third party; however, the notice must disclose the identity of each bank on whose behalf the notice is given. If one of the banks approves the application, the banks that took adverse action need not provide notification.
Can a creditor consider information in evaluating applicants?
Generally, a creditor may not
Does Regulation B require credit analysis?
Regulation B neither requires nor endorses any particular method of credit analysis. Creditors may use traditional methods, such as judgmental systems that rely on a credit officer’s subjective evaluation of an applicant’s creditworthiness, or they may use more-objective, statistically developed techniques such as credit scoring.
How is reverse mortgage disbursement determined?
Disbursements to the borrower under a reverse mortgage typically are determined by considering the value of the borrower's home, the current interest rate, and the borrower's life expectancy. A reverse mortgage program that requires borrowers to be age 62 or older is permissible under § 1002.6 (b) (2) (iv).
What is the scope of the Equal Credit Opportunity Act?
The Equal Credit Opportunity Act and Regulation B apply to all credit--commercial as well as personal-without regard to the nature or type of the credit or the creditor, except for an entity excluded from coverage of this part (but not the Act) by section 1029 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a transaction provides for the deferral of the payment of a debt, it is credit covered by Regulation B even though it may not be a credit transaction covered by Regulation Z (Truth in Lending) (12 CFR part 1026). Further, the definition of creditor is not restricted to the party or person to whom the obligation is initially payable, as is the case under Regulation Z. Moreover, the Act and regulation apply to all methods of credit evaluation, whether performed judgmentally or by use of a credit scoring system.
What is a guarantor in a student loan?
3. Student loans. In a guaranteed student loan program, a creditor may obtain the signature of a parent as a guarantor when required by Federal or state law or agency regulation, or when the student does not meet the creditor's standards of creditworthiness. (See §§ 1002.7 (d) (1) and (5).)
What is comment designation?
3. Comment designations. The comments are designated with as much specificity as possible according to the particular regulatory provision addressed. Each comment in the commentary is identified by a number and the regulatory section or paragraph that it interprets. For example, comments to § 1002.2 (c) are further divided by subparagraph, such as comment 2 (c) (1) (ii)-1 and comment 2 (c) (2) (ii)-1.
Does Regulation B apply to lending activities outside the United States?
2. Foreign applicability. Regulation B generally does not apply to lending activities that occur outside the United States. The regulation does apply to lending activities that take place within the United States (as well as the Commonwealth of Puerto Rico and any territory or possession of the United States), whether or not the applicant is a citizen.
What is a regulation B?
Regulation B covers the actions of a creditor before, during, and after a credit transaction. The CFPB lists credit transactions and aspects of credit transactions to include consumer credit, business credit, mortgage, and open-end credit. This list also includes refinancing, credit applications, information requirements, standards of creditworthiness, investigation procedures, and revocation or termination of credit.
What Is Regulation B (Reg B)?
Regulation B is intended to prevent applicants from being discriminated against in any aspect of a credit transaction. Reg B outlines the rules that lenders must adhere to when obtaining and processing credit information. The regulation prohibits lenders from discriminating based on age, gender, ethnicity, nationality, or marital status. 1
What regulation protects applicants from discrimination?
All lenders are required to comply with Regulation B, which protects applicants from discrimination.
What would happen if a credit report was denied without Regulation B?
Without Regulation B's explanation requirement, many potential borrowers with errors in their credit reports would become discouraged and give up. Once people know the reason for the denial, there is a strong incentive to correct the credit reports and reapply.
What is the penalty for failing to comply with Reg B?
Creditors that fail to comply with Reg B will be held liable for punitive damages up to $10,000 in individual actions. For class actions, the creditor could face a penalty of $500,000 or 1% of the creditor’s net worth, whichever is lower. Regulation B covers the actions of a creditor before, during, and after a credit transaction.
What are the benefits of regulation B?
Benefits of Regulation B (Reg B) The most important benefit of Regulation B is that it helps to prevent discrimination against women and minorities. Regulation B's prohibition of advertising that would discourage potential applicants from applying for loans is a crucial part of redlining cases.
Can you ask for an applicant's age?
Furthermore, an applicant's age can be requested if it appears that they cannot legally sign a contract. Creditors can ask about the number of children, their ages, and the borrower's financial obligations relating to the children. Marital status is also required if the applicant resides in a community property state. 4
Overview
- The Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691 et seq.(opens new window), which is implemented by Regulation B (12 CFR Part 1002(opens new window)), applies to all creditors, including credit unions. When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. The Dodd-Frank Wal...
Associated Risks
- Compliance riskcan occur when the credit union fails to implement the necessary controls to comply with ECOA. Reputation riskcan occur when the credit union incurs fines and penalties as a result of failure to comply with ECOA.
Examination Objectives
- To determine whether the credit union has established policies, procedures, and internal controls to ensure that it is in compliance ECOA and its implementing Regulation B.
- To determine whether the credit union discriminated against members of one or more protected classes in any aspect of its credit operations.
- To determine whether the credit union is in compliance with those requirements of ECOA tha…
- To determine whether the credit union has established policies, procedures, and internal controls to ensure that it is in compliance ECOA and its implementing Regulation B.
- To determine whether the credit union discriminated against members of one or more protected classes in any aspect of its credit operations.
- To determine whether the credit union is in compliance with those requirements of ECOA that are set forth in Regulation B.
Examination Procedures
- These examination procedures reference the Interagency Fair Lending Examination Procedures (IFLEP), which are followed during fair lending examinations.
Equal Credit Opportunity Act (Regulation B) Checklist
- Rules for Taking Applications
Obtain and review application forms (including scripts for telephone applications and screen shots of online applications), disclosures, a sample of loan files, creditor policies and procedures and audits pertaining to the taking of applications, and training materials. Conduct loan officer i… - Rules for Evaluating Applications
Obtain and review policies and procedures, training materials, a sample of loan files, audits pertaining to evaluating, and pricing applications for credit (including, but not limited to those regarding loan servicing, modifications, collections, and loss mitigation), and information regardi…
Footnotes
- If the violation of 12 CFR §§ 1002.6(b)(6)(opens new window), 1002.9(opens new window), 1002.10(opens new window), 1002.12(opens new window), or 1002.13(opens new window) results from an inadvertent error, namely a mechanical, electronic, or clerical error that the creditor demonstrates was not intentional and occurred notwithstanding the maintenance of pro…
Definition and Examples of Regulation B
- Regulation B is a federal law found in Title 12 Chapter X Part 1002 of the Code of Federal Regulations.1 It governs the behavior of any financial institution that extends credit to consumers to ensure they don't discourage people from applying for credit on the basis of prohibited factors. Regulation B also forbids lenders from considering certain ...
How Regulation B Works
- Regulation B was originally enforced by the Fed. In 2010, the Dodd-Frank Actmade the Consumer Financial Protection Bureau (CFPB) responsible for enforcing Regulation B. The CFPB, along with the Department of Justice and Federal Trade Commission, can initiate legal action against lenders that violate Regulation B. If you’ve been unlawfully discriminated against, you have the option to …
Requirements For Regulation B
- Under Regulation B, lenders cannot discriminate on the basis of prohibited factors, including: 1. Race 2. Color 3. Religion 4. National origin 5. Sex 6. Marital status 7. Age 8. Use of public assistance 9. Making past claims under certain consumer protection laws Lenders also can’t make any oral or written statements designed to discourage people from applying based on on…