The CFPB released proposed changes to Regulation B on Friday, March 24th. The proposal, a mere 56 pages, is designed to permit creditors additional flexibility in complying with Regulation B, in order to facilitate compliance with Regulation C – HMDA. This proposal was not unexpected.
In October 2015, the CFPB issued final rules to implement changes to Regulation C that allow an applicant to self-identify using disaggregated ethnic and racial categories. These rules are generally effective January 1, 2018. Due to those changes to HMDA, a new Uniform Residential Loan Application (URLA) was released in 2016 by Fannie Mae and Freddie Mac that incorporated an entirely new design for the application and included the expanded monitoring information necessary under the revised HMDA requirements (link to new URLA). While the new URLA was released allowing entities to rely on it beginning January 1, 2017, the use of the new application prior to January 1, 2018 would have been prohibited by Regulation B § 1002.5(b)[Limitation on information about race, color, religion, national origin, or sex].
In September 2016, the CFPB released an “Official Approval” for the new URLA and commented there will likely be significant benefits to permitting creditors to request, before January 1, 2018, that applicants self-identify using the disaggregated ethnic and racial categories under amended Regulation C, using the processes and instructions provided in amended appendix B to Regulation C. In turn, the CFPB stated that a creditor may use the new URLA beginning January 1, 2017 that contained the expanded categories and also be deemed to be in compliance with Regulation B § 1002.13(a)(i) even though applicants are asked to self-identify using categories other than those explicitly provided in that section. The issuance of the official approval was duly authorized by the Director of the CFPB and provides the protection afforded under section 706(e) of ECOA.
So what does the new proposal include that will assist in resolving these noted issues? The Bureau proposes to amend:
- Various sections of Regulation B to further the purposes of ECOA including to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age, and other protected characteristics;
- 1002.13 which would permit a creditor additional flexibility in how it collects applicant ethnicity and race information in order to better align with Regulation C, as amended in the 2015 HMDA final rule;
- Appendix B to remove the URLA dated January 2004 (2004 URLA) from Regulation B and add additional sample forms to Regulation B to facilitate compliance;
- 1002.5 to permit creditors to collect applicant information in certain circumstances when they would not otherwise be required to do so; and
- 1002.12 to address retention of information about certain applicants.
The comment period is only 30 days so we anticipate a final regulation prior to the implementation of the new HMDA requirements on January 1, 2018.
Link to the proposed regulation.