Federal Register, Volume 86 Issue 10 (Friday, January 15, 2021)

[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Rules and Regulations]
[Pages 3762-3766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28596]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1002

Equal Credit Opportunity (Regulation B); Special Purpose Credit
Programs

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advisory opinion.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing this Advisory Opinion (AO) to address regulatory uncertainty
regarding Regulation B, which implements the Equal Credit Opportunity
Act, as it applies to certain aspects of special purpose credit
programs designed and implemented by for-profit organizations to meet
special social needs. Specifically, this AO clarifies the content that
a for-profit organization must include in a written plan that
establishes and administers a special purpose credit program under
Regulation B. In addition, this AO clarifies the type of research and
data that may be appropriate to inform a for-profit organization's
determination that a special purpose credit program is needed to
benefit a certain class of persons.

DATES: This advisory opinion is effective on January 15, 2021.

FOR FURTHER INFORMATION CONTACT: Christopher Davis, Attorney-Advisor;
Office of Fair Lending and Equal Opportunity, at
CFPB_FairLending@cfpb.gov or 202-435-7000. If you require this document
in an alternative electronic format, please contact
CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION: The Bureau is issuing this AO through the
procedures for its Advisory Opinions Policy.\1\ Refer to those
procedures for more information.
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\1\ 85 FR 77987 (Dec. 3, 2020).
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I. Advisory Opinion

A. Background

Congress enacted the Equal Credit Opportunity Act (ECOA or the Act)
in 1974, initially prohibiting discrimination in credit on the basis of

[[Page 3763]]

sex or marital status.\2\ Two years later, Congress expanded the
prohibition against discrimination in credit transactions to include
age, race, color, religion, national origin, receipt of public
assistance benefits, and exercise of rights under the Federal Consumer
Credit Protection Act.\3\ At the same time, under section 701(c) of the
ECOA, Congress clarified that it does not constitute discrimination
under the Act for a creditor to ``refuse to extend credit offered
pursuant to'' ``any special purpose credit program offered by a profit-
making organization to meet special social needs which meets standards
prescribed in regulations by the [Bureau].'' \4\
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\2\ See Public Law 93-495, sec. 701(a), 88 Stat. 1500, 1521
(1974).
\3\ See ECOA Amendments Act, Public Law 94-239, sec. 701(a), 90
Stat. 251, 251 (1976).
\4\ See Public Law 94-239, sec. 701(c)(3), 90 Stat. 251, 251
(1976).
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By permitting the consideration of a prohibited basis such as race,
national origin, or sex in connection with a special purpose credit
program, Congress protected a broad array of programs ``specifically
designed to prefer members of economically disadvantaged classes'' and
``to increase access to the credit market by persons previously
foreclosed from it.'' \5\ Congress provided examples of such programs--
e.g., government sponsored housing credit subsidies for the aged or the
poor and programs offering credit to a limited clientele such as credit
union programs and educational loan programs.\6\
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\5\ S. Rept. 94-589, 94th Cong., 2nd Sess., at 7, reprinted in
1976 U.S.C.C.A.N. 403, 409.
\6\ See id.
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The Board of Governors of the Federal Reserve System (Board)--which
exercised rulemaking authority under the ECOA at the time--promulgated
regulations implementing the Act's special purpose credit program
provision.\7\ In the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, Congress transferred primary rulemaking
authority over the ECOA to the Bureau,\8\ which subsequently
republished the Board's existing regulations without material
change.\9\ The Bureau has addressed special purpose credit programs in
a previous edition of Supervisory Highlights \10\ and a blog,\11\
explaining that special purpose credit programs may be one tool
available to creditors to ``meet the credit needs of underserved
communities.'' \12\
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\7\ See 42 FR 1242 (Jan. 6, 1977).
\8\ See Public Law 111-203, tit. X, sec. 1085, 124 Stat. 1376,
2084.
\9\ 76 FR 79442 (Dec. 21, 2011) (promulgating 12 CFR pt. 1002 &
supp. I).
\10\ See 81 FR 46652, 46656 (July 18, 2016).
\11\ See Susan M. Bernard and Patrice Alexander Ficklin,
Expanding Access to Credit to Underserved Communities (July 31,
2020), https://www.consumerfinance.gov/about-us/blog/expanding-access-credit-underserved-communities/.
\12\ See id.
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In recent months, stakeholders have expressed interest in
developing special purpose credit programs but have also raised
questions about how to do so in a manner consistent with Regulation B,
indicating that regulatory uncertainty may inhibit broader creation of
these programs by creditors. Many comments to the Bureau's recent
Request for Information on the Equal Credit Opportunity Act and
Regulation B \13\ from a variety of external stakeholders, including
both consumer and civil rights advocates and industry representatives,
indicate that special purpose credit programs may be one way to promote
fair and responsible access to credit, but that there is a need for
further guidance on compliant implementation of these programs.
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\13\ 85 FR 46600 (Aug. 3, 2020).
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The Bureau is issuing this AO to address this regulatory
uncertainty in the hope that broader creation of special purpose credit
programs by creditors will help expand access to credit among
disadvantaged groups and will better address special social needs that
exist today. Bureau stakeholders have called attention to the problem
of unmet credit needs among minority communities and the role that
discrimination may have played in creating and exacerbating those
deficits. Research from the Federal Reserve Bank of New York has shown
that inequities in credit availability and in the terms and conditions
of credit appear to have led to income inequality.\14\ For consumers
who own a home, moreover, home equity represents a significant share of
household net worth,\15\ but Home Mortgage Disclosure Act (HMDA) data
show that in 2019, Black, Hispanic White, and Asian borrowers had
notably higher mortgage loan denial rates than non-Hispanic White
borrowers, continuing a trend from years prior.\16\ For example, the
denial rates for conventional home-purchase loans were 16.0 percent for
Black borrowers, 10.8 percent for Hispanic White borrowers, and 8.6
percent for Asian borrowers; in contrast, denial rates for such loans
were 6.1 percent for non-Hispanic White borrowers.\17\ Black and
Hispanic White borrowers were also more likely to have higher-priced
conventional and nonconventional loans in 2019.\18\
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\14\ Fed. Reserve Bank of N.Y., Credit, Income and Inequality
(June 2020), at 1 https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr929.pdf (``[C]redit-constrained individuals
often have limited wealth, and their exclusion from credit can
hinder economic mobility and fuel persistent income inequality.'').
\15\ U.S. Census Bureau, Gaps in the Wealth of Americans by
Household Type (Aug. 27, 2019), https://www.census.gov/library/stories/2019/08/gaps-in-wealth-americans-by-household-type.html?utm_campaign=20190827msacos1ccstors&utm_medium=email&utm_source=govdelivery%.
\16\ Consumer Fin. Prot. Bureau, Data Point: 2019 Mortgage
Market Activity and Trends (June 2020), at 36, https://files.consumerfinance.gov/f/documents/cfpb_2019-mortgage-market-activity-trends_report.pdf.
\17\ See id.
\18\ See id. at 47.
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According to some studies, these types of racial and ethnic
differences in access to credit perpetuate wealth inequality.\19\ The
Board's 2019 Survey of Consumer Finances, for example, indicates that
the typical White family has $188,200 in median family wealth, which is
eight times the wealth of the typical Black family ($24,100), and five
times the wealth of the typical Hispanic family ($36,100).\20\ Other
families--including Asian families--also ``have lower wealth than White
families.'' \21\ The economic fallout from the ongoing COVID-19
pandemic appears to be exacerbating these racial and ethnic disparities
in wealth.\22\
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\19\ See, e.g., Fed. Reserve Bank of N.Y., supra note 14.
\20\ Board of Governors of the Fed. Reserve Sys., Disparities in
Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances
(Sept. 28, 2020), https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm#fig1.
\21\ Id.
\22\ See, e.g., Fed. Reserve Bank of N.Y., Double Jeopardy:
COVID-19's Concentrated Health and Wealth Effects in Black
Communities (Aug. 2020), https://www.newyorkfed.org/medialibrary/media/smallbusiness/DoubleJeopardy_COVID19andBlackOwnedBusinesses
(``Black businesses experienced the most acute decline, with a 41
percent drop. Latinx business owners fell by 32 percent and Asian
business owners dropped by 26 percent. In contrast, the number of
white business owners fell by 17 percent.''); Fed. Reserve Bank of
Minn., COVID-19 and Indian Country: Early snapshot reveals
disproportionate economic exposure and uncertainty (Apr. 10, 2020),
https://www.minneapolisfed.org/article/2020/covid-19-and-indian-country-early-snapshot-reveals-disproportionate-economic-exposure-and-uncertainty.
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Bureau stakeholders have also noted that racial and ethnic
disparities in access to credit extend beyond the mortgage market. For
example, a report from the Board documented disparities in both
mortgage and non-mortgage credit denials among White, Black, and
Hispanic credit applicants.\23\

[[Page 3764]]

Specifically, White credit applicants reported being denied for
credit--including, but not limited to, mortgage credit--at a rate of
17.3 percent; Black credit applicants reported being denied for credit
at a rate of 41.3 percent; and Hispanic credit applicants reported
being denied for credit at a rate of 34.6 percent.\24\ In the small
business lending context, a report by the Board showed that ``[o]n
average, Black- and Hispanic-owned firm applicants received approval
for smaller shares of the financing they sought compared to White-owned
small businesses that applied for financing. This same report noted
that larger shares of Black-, Hispanic-, and Asian-owned firm
applicants did not receive any of the financing they applied for--38%,
33%, and 24%, respectively--compared to 20% of White-owned business
applicants.'' \25\
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\23\ Board of Governors of the Fed. Reserve Sys., Report on the
Economic Well-Being of U.S. Households in 2016, at 33-34 (May 2017),
https://www.federalreserve.gov/publications/files/2016-report-economic-well-being-us-households-201705.pdf.
\24\ See id. at 34.
\25\ Fed. Reserve, Report on Minority-Owned Firms (Dec. 2019),
https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/20191211-ced-minority-owned-firms-report.pdf.
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In recent months, multiple financial institutions have publicly
committed to making billions of dollars available to addressing racial
wealth disparities.\26\ Bureau stakeholders have indicated that
investments in special purpose credit programs may allow for better
expansion of credit access to underserved communities.
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\26\ See, e.g., Press Release, BMO, BMO Commits $5 Billion to
Advance Inclusive Economic Recovery in the U.S. (Nov. 10, 2020),
https://newsroom.bmo.com/2020-11-10-BMO-Commits-5-Billion-to-Advance-Inclusive-Economic-Recovery-in-the-U-S; Press Release, Am.
Express, American Express Announces $1 Billion Action Plan to
Promote Racial, Ethnic and Gender Equity for Colleagues, Customers
and Communities (Oct. 29, 2020), https://about.americanexpress.com/all-news/news-details/2020/American-Express-Announces-1-Billion-Action-Plan-to-Promote-Racial-Ethnic-and-Gender-Equity-for-Colleagues-Customers-and-Communities/default.aspx; Press Release,
JPMorgan Chase & Co., JPMorgan Chase Commits $30 Billion to Advance
Racial Equity (Oct. 8, 2020), https://www.jpmorganchase.com/news-stories/jpmc-commits-30-billion-to-advance-racial-equity; Press
Release, Citigroup Inc., Citi Launches More Than $1 Billion in
Strategic Initiatives to Help Close the Racial Wealth Gap (Sept. 23,
2020), https://www.citigroup.com/citi/news/2020/200923a.htm; Press
Release, Huntington Bancshares, Huntington Announces $20 Billion
Community Plan to Help Boost Economic Opportunity Throughout its
Seven-state Footprint (Sept. 1, 2020), http://huntington-ir.com/ne/news/hban09012020.pdf; Press Release, PNC, PNC Commits More Than $1
Billion To Help End Systemic Racism and Support Economic Empowerment
of African Americans and Low- And Moderate-Income Communities (June
18, 2020), https://pnc.mediaroom.com/2020-06-18-PNC-Commits-More-Than-1-Billion-To-Help-End-Systemic-Racism-And-Support-Economic-Empowerment-Of-African-Americans-And-Low-And-Moderate-Income-Communities; Press Release, U.S. Bank, U.S. Bank to rebuild in
Minneapolis; Announces multiple investments and initiatives to
address social and economic inequities (June 5, 2020), https://www.usbank.com/newsroom/stories/us-bank-to-rebuild-in-minneapolis-announces-multiple-investments-and-initiatives-to-address-social-and-economic-inequities.html; Press Release, Bank of Am., Bank of
America Announces $1 Billion/4-Year Commitment to Support Economic
Opportunity Initiatives (June 2, 2020), https://newsroom.bankofamerica.com/press-releases/bank-america-announces-four-year-1-billion-commitment-supporting-economic.
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B. Coverage

This AO applies solely to certain aspects of special purpose credit
programs (i.e., those described in part I.C below) designed and
implemented by for-profit organizations to meet special social needs
under the Regulation B requirements identified below. This AO does not
apply to any credit assistance program expressly authorized by Federal
or State law for the benefit of an economically disadvantaged class of
persons, or to any credit assistance program offered by a not-for-
profit organization, as defined under section 501(c) of the Internal
Revenue Code of 1954, as amended, for the benefit of its members or for
the benefit of an economically disadvantaged class of persons.\27\ This
AO has no application to any other circumstance and does not offer a
legal interpretation of any other provisions of law.
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\27\ See 12 CFR 1002.8(a)(2), (3).
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C. Applicable Regulatory Provisions

It is not discrimination under the ECOA for a creditor to refuse to
extend credit offered pursuant to a legally compliant special purpose
credit program.\28\ Regulation B, which implements the ECOA, sets forth
compliance standards and general rules for special purpose credit
programs. A for-profit organization that offers or participates in a
special purpose credit program to meet special social needs must
establish and administer the special purpose credit program pursuant to
a ``written plan'' that identifies the class of persons the program is
designed to benefit and sets forth the procedures and standards for
extending credit pursuant to the program.\29\ In addition, a for-profit
organization that offers or participates in a special purpose credit
program to meet special social needs must establish and administer the
special purpose credit program to extend credit to a class of persons
who, under the organization's customary standards of creditworthiness,
probably would not receive such credit or would receive it on less
favorable terms than are ordinarily available to other applicants
applying to the organization for a similar type and amount of
credit.\30\
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\28\ 15 U.S.C. 1691(c).
\29\ 12 CFR 1002.8(a)(3)(i).
\30\ 12 CFR 1002.8(a)(3)(ii).
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Regulation B is clear that a special purpose credit program
qualifies as such only where the program was established and is
administered so as not to discriminate against an applicant on any
prohibited basis.\31\ All program participants may be required,
however, to share one or more common characteristics (for example,
race, national origin, or sex) so long as the program is not
established and is not administered with the purpose of evading the
requirements of the ECOA or Regulation B.\32\ If participants in a
special purpose credit program are required to possess one or more
common characteristics and if the program otherwise satisfies the
applicable requirements of Regulation B, a creditor may request and
consider information regarding the common characteristic(s) in
determining the applicant's eligibility for the program.\33\
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\31\ 12 CFR 1002.8(b)(2); see, e.g., United States v. Am. Future
Sys., Inc., 743 F.2d 169, 180 (3d Cir. 1984) (explaining that a
creditor is ``prohibited from discriminating on the basis of race,
sex or marital status in a credit program designed to extend credit
to the group of persons between the ages of 18 and 21'').
\32\ 12 CFR 1002.8(b)(2).
\33\ 12 CFR 1002.8(c).
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The Bureau does not determine whether individual programs qualify
for special purpose credit status.\34\ The creditor administering or
offering the special purpose credit program must make these decisions
regarding the status of its program.\35\ It follows that a creditor may
initiate a special purpose credit program without the approval of the
Bureau.
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\34\ See Official Interpretations, 12 CFR pt. 1002 (supp. I),
sec. 1002.8, ] 8(a)-1.
\35\ See id.
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D. Legal Analysis

1. Written Plan
A for-profit organization must establish and administer a special
purpose credit program pursuant to a written plan.\36\ The plan must
contain information that supports the need for the program, including:
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\36\ See 12 CFR 1002.8(a)(3)(i).
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The class of persons that the program is designed to
benefit;
The procedures and standards for extending credit pursuant
to the program;
Either (i) the time period during which the program will
last or (ii) when the program will be reevaluated to

[[Page 3765]]

determine if there is a continuing need for it; and
A description of the analysis the organization conducted
to determine the need for the program.\37\
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\37\ 12 CFR 1002.8(a)(3)(i)-(ii); Official Interpretations, 12
CFR pt. 1002 (supp. I), sec. 1002.8, ] 8(a)-6.
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Each of these required components is discussed in further detail
below. For-profit organizations that draft written plans containing the
necessary elements as set forth in Regulation B and herein will satisfy
the requirement of 12 CFR 1002.8(a)(3)(i).
a. Class of Persons
The class of persons that a special purpose credit program is
designed to benefit must consist of those ``who would otherwise be
denied credit or would receive it on less favorable terms.'' \38\ A
written plan must explain whether the class of persons will be required
to demonstrate a financial need and/or share a common
characteristic.\39\ Such a class could be defined with or without
reference to a characteristic that is otherwise a prohibited basis
under the ECOA. For example, if need is determined in accordance with
part I.D.2 below, a for-profit organization's written plan might
identify a class of persons as minority residents of low-to-moderate
income census tracts, residents of majority-Black census tracts,
operators of small farms in rural counties, minority- or woman-owned
small business owners, consumers with limited English proficiency, or
residents living on tribal lands.
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\38\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-5.
\39\ See 12 CFR 1002.8(b)(2), (d).
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b. Procedures and Standards
A written plan must also set forth the procedures and standards for
extending credit pursuant to the special purpose credit program.\40\
Those procedures and standards must be designed to increase the
likelihood that a class of persons ``who would otherwise be denied
credit'' will receive credit pursuant to the program, or that a class
of persons who ``would receive [credit] on less favorable terms'' will
receive credit on more favorable terms pursuant to the program.\41\ To
accomplish these goals a creditor may, for example, introduce a new
product or service, modify the terms and conditions or certain
eligibility requirements for an existing product or service, or modify
policies and procedures related to certain loss mitigation programs,
such as loan modifications. For example, a creditor may offer a new
small business loan product for woman-owned businesses by relaxing its
customary standard of requiring three years of experience in the
industry to one year, if the creditor has determined that this
requirement would probably prevent woman-owned businesses from
qualifying for small business financing. The written plan must describe
the procedures and standards adopted and explain how they will increase
credit availability with respect to the identified class of persons. If
the class of persons the program is designed to benefit will be
required to share a common characteristic, the written plan may also
explain whether the organization will request and consider information
that would otherwise be prohibited under the ECOA.\42\
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\40\ 12 CFR 1002.8(a)(3)(i).
\41\ See 12 CFR 1002.8(a)(3)(ii).
\42\ See 12 CFR 1002.8(b)(2), (c).
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c. Program Duration/Reevaluation
The written plan must provide ``a specific period of time for which
the program will last'' or ``contain a statement regarding when the
program will be reevaluated to determine if there is a continuing need
for it.'' \43\ If an organization opts for the latter approach,
reevaluation could be made contingent on a certain set of circumstances
or simply a set date. The written plan could also adopt a combined
approach--for example, the special purpose credit program could end on
a set date, or when a pre-established origination volume has been
reached, whichever occurs earlier. If an organization extends the
program beyond what is set forth in its written plan, it must document
the terms of that extension in order to ensure the program continues to
be administered pursuant to a written plan.
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\43\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-6.
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d. Description of Analysis
A special purpose credit program must be ``established and
administered'' \44\ to benefit a class of people who would otherwise be
denied credit or would receive it on less favorable terms, as
determined by a ``broad analysis,'' \45\ and it must be ``established
and administered pursuant to a written plan.'' \46\ The Official
Interpretations to Regulation B further provide that a written plan
``must contain information that supports the need for the particular
program.'' \47\ Thus, a for-profit organization's written plan must
describe or incorporate the analysis that supports the need for the
program.
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\44\ 12 CFR 1002.8(a)(3)(ii).
\45\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-5.
\46\ 12 CFR 1002.8(a)(3)(i) (emphasis added).
\47\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-6.
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2. Determination of Need for a Special Purpose Credit Program
a. Permissible Sources of Data and Research
In designing a special purpose credit program, a for-profit
organization must determine that the program will benefit a class of
persons who would otherwise be denied credit or would receive it on
less favorable terms. This determination can be based on a broad
analysis using the organization's own research or data from outside
sources, including governmental reports and studies.\48\ The Official
Interpretations to Regulation B provide two examples: First, ``a
creditor might design new products to reach consumers who would not
meet, or have not met, its traditional standards of creditworthiness
due to such factors as credit inexperience or the use of credit sources
that may not report to consumer reporting agencies''; and second, ``a
bank could review [HMDA] data along with demographic data for its
assessment area and conclude that there is a need for a special purpose
credit program for low-income minority borrowers.'' \49\
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\48\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-5.
\49\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-5.
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For-profit organizations may rely on a wide range of research or
data to analyze whether a special purpose credit program is needed to
benefit a class of persons who would otherwise be denied credit or
would receive it on less favorable terms.\50\ A for-profit
organization's analysis might consider research or data that are
already in the public domain. The Official Interpretations to
Regulation B cite HMDA data as one example.\51\ In the case of small
business lending, the Small Business Administration or the Board's
Small Business Credit Surveys are possible sources of information.
Other governmental or academic reports and studies exploring the
historical and societal causes and effects of discrimination may also
be considered. Finally, the for-profit organization's own data or
research--if available--may be a helpful source for conducting an

[[Page 3766]]

analysis to determine if there is a need for a special purpose credit
program.
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\50\ The Official Interpretations to Regulation B expressly
provide that a for-profit organization is permitted to conduct a
``broad analysis.'' 12 CFR pt. 1002 (supp. I), sec. 1002.8, ] 8(a)-5
(emphasis added).
\51\ Official Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ] 8(a)-5.
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b. Nexus to the Organization's Customary Credit Standards
While a for-profit organization may permissibly rely on a broad
range of research or data--including historical and societal
information--in determining whether a special purpose credit program is
needed, the organization's analysis must show how ``a class of people
[] would otherwise be denied credit or would receive it on less
favorable terms'' under the organization's customary credit
standards.\52\ The for-profit organization must be able to show a
connection between the research or data informing its analysis and the
fact that, under the organization's customary standards of
creditworthiness, a class of persons probably would not receive credit
or would receive it on less favorable terms than are ordinarily
available to other applicants applying to the organization for a
similar type and amount of credit. For example, a creditor who
identifies a class of certain applicants who do not have sufficient
savings to meet mortgage loan requirements (or who receive such loans
on less favorable terms) could offer such applicants down payment
assistance funds pursuant to a special purpose credit program. In this
example, the creditor could demonstrate that under its own standards of
creditworthiness, e.g., either (1) ``insufficient cash'' is listed as a
principal reason for the denial of similar mortgage loan applications
among the identified class of applicants frequently enough to indicate
that they probably would not receive credit; or (2) requirements
regarding minimum amounts of cash to close or liquid assets will
probably impair credit access for the identified class of
applicants.\53\
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\52\ 12 CFR 1002.8(a)(3)(ii).
\53\ The fact that a for-profit organization identifies a need
for a special purpose credit program based on an analysis of its own
data does not, by itself, create an inference or presumption that
the organization has engaged in unlawful credit discrimination. Of
course, the adoption of a special purpose credit program does not
absolve a creditor of its ordinary obligations under the ECOA and
Regulation B; the Bureau strongly encourages creditors to evaluate
their fair lending risk using an effective compliance management
system. Finally, Regulation B does not require a creditor to show
that a special purpose credit program is established and
administered to extend credit to a class of persons who definitely
would not receive such credit or would receive it on less favorable
terms than other applicants--the regulation only requires a showing
that the class of persons ``probably'' would not receive such credit
or would receive it on less favorable terms. 12 CFR 1002.8(a)(3)(ii)
(emphasis added).
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c. Requests For and Use of Information
Lastly, the Bureau notes that pursuant to Regulation B, ``[i]f
participants in a special purpose credit program . . . are required to
possess one or more common characteristics (for example, race, national
origin, or sex) and if the program otherwise satisfies the requirements
of [Regulation B], a creditor may request and consider information
regarding the common characteristic(s) in determining the applicant's
eligibility for the program.'' \54\ If no special purpose credit
program has yet been established, however, a creditor may use
statistical methods to estimate demographic characteristics but it
cannot request demographic information that it is otherwise prohibited
from collecting, even to determine whether there is a need for such a
program. Moreover, while a for-profit organization may rely on a broad
swath of research and data to determine the need for a special purpose
credit program--including the organization's own lending data--it may
not violate Regulation B's prohibitions on the collection of
demographic information exclusively to conduct this preliminary
analysis before establishing a special purpose credit program.\55\
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\54\ 12 CFR 1002.8(c); see also Official Interpretations, 12 CFR
pt. 1002 (supp. I), sec. 1002.6, ] 6(b)-1 (``In a special purpose
credit program, a creditor may consider a prohibited basis to
determine whether the applicant possesses a characteristic needed
for eligibility.'').
\55\ See 12 CFR 1002.5(b), 1002.6(b).
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Once a special purpose credit program has been established, a
creditor may then request and consider information regarding common
characteristic(s) if needed to determine the applicant's eligibility
for the program. For example, if a creditor establishes a special
purpose credit program that requires that an applicant resides in an
area that is designated as a low-to-moderate income census tract and is
Black, Hispanic, or Asian, a creditor could request race or ethnicity
information from applicants to confirm eligibility for the program.

II. Regulatory Matters

This advisory opinion is an interpretive rule issued under the
Bureau's authority to interpret the ECOA and Regulation B, including
under section 1022(b)(1) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which authorized guidance as may be necessary
or appropriate to enable the Bureau to administer and carry out the
purposes and objectives of Federal consumer financial laws.\56\
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\56\ 12 U.S.C. 5512(b)(1). The relevant provisions of the ECOA
and Regulation B form part of Federal consumer financial law. 12
U.S.C. 5481(12)(D), (14).
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By operation of the ECOA section 706(e), no provision of the ECOA
imposing any liability applies to any act done or omitted in good faith
in conformity with this interpretive rule, notwithstanding that after
such act or omission has occurred, the interpretive rule is amended,
rescinded, or determined by judicial or other authority to be invalid
for any reason.\57\
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\57\ 15 U.S.C. 1691e(e).
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As an interpretive rule, this advisory opinion is exempt from the
notice-and-comment rulemaking requirements of the Administrative
Procedure Act.\58\ Because no notice of proposed rulemaking is
required, the Regulatory Flexibility Act does not require an initial or
final regulatory flexibility analysis.\59\ The Bureau also has
determined that this interpretive rule does not impose any new or
revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring approval by the Office of
Management and Budget under the Paperwork Reduction Act.\60\
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\58\ 5 U.S.C. 553(b).
\59\ 5 U.S.C. 603(a), 604(a).
\60\ 44 U.S.C. 3501-3521.
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Pursuant to the Congressional Review Act,\61\ the Bureau will
submit a report containing this interpretive rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to the rule's
published effective date. The Office of Information and Regulatory
Affairs has designated this interpretive rule as not a ``major rule''
as defined by 5 U.S.C. 804(2).
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\61\ 5 U.S.C. 801 et seq.
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III. Signing Authority

The Director of the Bureau, Kathleen L. Kraninger, having reviewed
and approved this document, is delegating the authority to
electronically sign this document to Grace Feola, a Bureau Federal
Register Liaison, for purposes of publication in the Federal Register.

Dated: December 21, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-28596 Filed 1-14-21; 8:45 am]
BILLING CODE 4810-AM-P