Equal Credit Opportunity Act (Regulation B)

Overview

The Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 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 When originally enacted, ECOA gave the Federal Reserve Board responsibility for prescribing the implementing regulation. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) transferred this authority to the Consumer Financial Protection Bureau (CFPB or Bureau). The Dodd-Frank Act granted rule-making authority under ECOA to the CFPB and, with respect to entities within its jurisdiction with over $10 billion in assets, granted authority to the CFPB to supervise for and enforce compliance with ECOA and its implementing regulations. NCUA continues to have authority to enforce ECOA for federally-chartered credit unions under its supervision with less than $10 billion in assets. NCUA is not the primary enforcement authority for ECOA in federally-insured, state-chartered credit unions (FISCUs). If you find ECOA violations at a FISCU and you feel the State Supervisory Authority is not properly addressing the issue, contact your supervisor.

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. This amendment to Regulation B also requires creditors to notify applicants in writing that copies of all appraisals will be provided to them promptly.

The purpose of ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); because all or part of the applicant’s income derives from any public assistance program; or, because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. In keeping with the broad reach of the statute’s prohibition, Regulation B covers creditor activities before, during, and after the extension of credit.

The full text of ECOA can be found here. The full text of Regulation B can be found here.


Associated Risks

Compliance risk can occur when the credit union fails to implement the necessary controls to comply with the ECOA.

Reputation risk can 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 with the Equal Credit Opportunity Act (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.

Section A: Risk Assessment

  1. Review the credit union’s overall compliance management program. Verify that ECOA compliance is effectively integrated into the credit union’s compliance management program.
  2. Consult Part II (“Compliance Management Review”) of the Interagency Fair Lending Exam Procedures (IFLEP) and apply the Compliance Management Analysis Checklist in the IFLEP Appendix.

Note: When performing 1 and 2 above, pay close attention to the credit union’s compliance management policies and procedures with respect to the following:

  1. Does any aspect of the credit union’s credit operations appear to vary by any of the prohibited bases? Examples: (i) The credit union establishes most of its branches in predominately non-minority neighborhoods and does not have a presence in nearby minority neighborhoods; or (ii) Spanish and English advertisements emphasize different credit products.
  2. Do the credit union’s underwriting or pricing guidelines contain any unusual criteria that could have a possibly negative disparate impact on a protected class? (e.g., underwriting or price models that use ZIP codes.)
  3. Are the credit union’s policies, procedures, or guidelines vague or unduly subjective with respect to (i) underwriting; (ii) pricing; (iii) referring applicants to subsidiaries, affiliates, or lending channels within the credit union; (iv) classifying applicants as “prime” or “sub-prime” borrowers; or (v) deciding what kinds of alternative loan products should be offered or recommended to applicants?
  4. Does the credit union allow exceptions to its underwriting, pricing, or product recommendation policies and procedures to be made subjectively or without clear guidance? Even if the policies and procedures are clear, does the credit union make a large number of such exceptions?
  5. Does the credit union give its employees significant discretion to decide what products to offer or the price to offer, including both interest rates and fees?
  6. Does any employee receive incentives depending, directly or indirectly, on the terms or conditions of the credit product sold or the price (including both interest rates and fees) charged?
  7. Does the credit union rely on third parties for a significant part of its credit operations?

These factors create conditions under which the risk of fair lending violations may be increased. Whether any particular factor constitutes a fair lending violation requires consideration of the particular facts and circumstances at issue.

Section B: Fair Lending Examination Procedures

Pre-Examination Procedures – Data Request

  1. Review that all of the information from the first day letter and request list has been provided by the credit union.
  2. Import HMDA data and any additional information into the fair lending software program and run analysis.

Pre-Examination Procedures – Scoping

No single fair lending examination can reasonably be expected to scrutinize every aspect of a credit union’s credit operations. The purpose of pre-examination scoping is to help examiners target areas with the highest fair lending risk.

The examiners should use statistical analyses whenever appropriate to scope fair lending examinations in addition to following the procedures in Part I of the IFLEP (“Examination Scope Guidelines”).

  1. Review the results of analysis from the fair lending software to identify possible examination focal points.
  2. Review information from previous examinations that could inform potential focal points of the current examination.
  3. Follow the Examination Scope Guidelines steps from the IFLEP.

Examination Procedures

The IFLEP’s examination procedures (Part III) are focused on conducting comparative file reviews and not statistical analysis. 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.

  1. Follow Part III of the IFLEP to examine the credit union, including conducting comparative file reviews as appropriate.
  2. Assess possible violations and discuss results with the credit union, including sharing the statistical analyses with the credit union and asking for comments and explanations.

Section C: Regulation B Examination Checklist

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. Some items on the checklist, however, do reflect a possible fair lending violation even though they are not stated in those terms.

A “No” answer indicates a possible exception or deficiency and should be explained in the work papers. [1] If a line item is not applicable within the area you are reviewing, indicate “N/A.”

EQUAL CREDIT OPPORTUNITY ACT
(REGULATION B)
CHECKLIST

Prohibited Practices

Discrimination

See Section B: Fair Lending Examination Procedures

Discouragement

Obtain and review marketing and advertising materials (including signs or other displays), prescreened solicitations, and the criteria used to determine the potential recipients of the particular solicitations, scripts, and interview forms used for pre-application interviews and for taking applications, and rate sheets and product information used in discussing available types of credit with applicants. Conduct loan agent interviews to determine whether they show an understanding of the regulatory requirements.

Prohibited Practices
Item Description YES NO N/A
1 Does the creditor not make any oral or written statements, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application? (§ 1002.4(b))      
2 Does the creditor not use statements that the applicant should not bother to apply based on a prohibited basis (e.g., you shouldn’t bother to apply because you are retired)? (Comment 1002.4(b)-1(i))      
3 Does the creditor not use words, symbols, models or other forms of communication in advertising that express, imply, or suggest a discriminatory preference or a policy of exclusion in violation of the ECOA? (Comment 1002.4(b)-1(ii))      
4 Does the creditor not use scripts that discourage applications on a prohibited basis? (Comment 1002.4(b)-1(iii))      
5 Are the criteria used for prescreened solicitations not discriminatory on a prohibited basis? (§ 1002.4(a), (b))      
6 Does the text of any prescreened solicitations avoid statements that would tend to discourage, on a prohibited basis, a reasonable person from making or pursuing an application? (§ 1002.4(b))      

Rules for Taking Applications [2]

Obtain and review application forms (including scripts for telephone applications and screen shots of online applications), disclosures, a sample of loan files, [3] creditor policies and procedures and audits pertaining to the taking of applications, and training materials. Conduct loan officer interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Rules for Taking Applications
Item Description YES NO N/A
7 Does the creditor use written applications for credit that is primarily for the purchase or refinancing of dwellings that are occupied or to be occupied by the applicant as a principal residence and where the credit will be secured by the dwellings? (§ 1002.4(c); § 1002.13(a))      
8 If the creditor collects information (in addition to information required for government monitoring purposes, such as § 1002.13, HMDA, and HAMP) on the race, color, religion, national origin, or sex of the applicant or any other person in connection with a credit transaction for purposes of a “self-test”: N/A N/A N/A
8(a) Does the creditor meet the “self-test” requirements of § 1002.15 (see Checklist Items 71–72)?      
8(b) Does the creditor disclose to the applicant, orally or in writing, when requesting the information that: (1) the applicant is not required to provide the information; (2) the creditor is requesting the information to monitor its compliance with the federal ECOA; (3) Federal law prohibits the creditor from discriminating on the basis of this information, or on the basis of an applicant’s decision not to furnish the information; and (4) if applicable, certain information will be collected based on visual observation or surname if not provided by the applicant or other person? (§ 1002.5(b)(1))      
9 If a designation of title, such as Ms., Miss, Mrs., or Mr. is requested on an application form, does the form disclose that such designation is optional, and does the application form otherwise use only terms that are neutral as to sex? (§ 1002.5(b)(2))      
10 Does the creditor only request any information concerning the spouse or former spouse of an applicant when: N/A N/A N/A
10(a) The spouse will be permitted to use the account;      
10(b) The spouse will be contractually liable on the account;      
10(c) The applicant is relying on the spouse’s income as a basis for repayment of the credit requested;      
10(d) The applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested; or      
10(e) The applicant is relying on alimony, child support, or separate maintenance payments from a spouse or former spouse as a basis for repayment of the credit requested? (§ 1002.5(c)(2))      
11 In the case of applications for individual unsecured credit, does the creditor inquire about the applicant’s marital status only when the applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested? (§ 1002.5(d)(1))      
12 In the case of applications for other than individual unsecured credit, are the creditor’s inquiries into marital status limited to the terms “married,” “unmarried,” and “separated” (a creditor may explain that the category “unmarried” includes single, divorced, and widowed persons)? (§ 1002.5(d)(1))      
13 If the creditor inquires whether income stated in an application is derived from alimony, child support, or separate maintenance payments, does the creditor also disclose to the applicant that such income need not be revealed if the applicant does not want the creditor to consider the information in determining the applicant’s creditworthiness? (§ 1002.5(d)(2))      
14 Does the creditor not inquire about birth control practices, intentions concerning the bearing or rearing of children, or capability to bear children? (A creditor may inquire about the number and ages of an applicant’s dependents or about dependent-related financial obligations or expenditures, provided such information is requested without regard to sex, marital status, or any other prohibited basis.) (§ 1002.5(d)(3))      

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 regarding statistical models used in credit evaluations. Conduct loan underwriter interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Rules for Evaluating Applications
Item Description YES NO N/A
15 To the extent that a creditor takes into account an applicant’s age (assuming that the applicant has the capacity to enter into a binding contract), determine whether the creditor uses age in an empirically derived, demonstrably and statistically sound, credit scoring system or a judgmental system. (§ 1002.6(b)(2))      
15(a) In an empirically derived, demonstrably and statistically sound, credit scoring system, is age a predictive variable and is the age of an elderly applicant (62 or older) not assigned a negative factor or value? (§ 1002.6(b)(2)(ii))      
15(b) In a judgmental system of evaluating creditworthiness, is the applicant’s age considered only for the purpose of determining a pertinent element of creditworthiness? (§ 1002.6(b)(2)(iii))      
15(c) Except as set forth in Checklist Item 15(b) above (use for pertinent element of creditworthiness), in any system for evaluating creditworthiness, is the age of an applicant 62 or older considered only to favor him or her in extending credit? (§ 1002.6(b)(2)(iv))      
16 Does the creditor only take into account whether an applicant’s income derives from any public assistance program in a judgmental system of evaluating creditworthiness and only for the purpose of determining a pertinent element of creditworthiness? (§ 1002.6(b)(2)(iii))      
17 When evaluating creditworthiness, does the creditor not make assumptions or use aggregate statistics relating to the likelihood that any category of persons will bear or rear children or will, for that reason, receive diminished or interrupted income in the future? (§ 1002.6(b)(3))      
18 Does the creditor not take into account whether there is a telephone listing in the name of an applicant for consumer credit? (§ 1002.6(b)(4))      
19 Does the creditor count, and not discount or exclude from consideration, the income of an applicant or the spouse of an applicant because of a prohibited basis? (§ 1002.6(b)(5)) (A creditor may consider the amount and probable continuance of any income in evaluating an applicant’s creditworthiness.)      
20 Does the creditor consider income derived from part-time employment, alimony, child support, separate maintenance payments, retirement benefits, or public assistance on an individual basis, and not on the basis of aggregate statistics? (Comment 1002.6(b)(5)-1)      
21 Does the creditor count, and not discount or exclude from consideration, the income of an applicant or the spouse of an applicant because the income is derived from part-time employment, is an annuity, pension, or other retirement benefit, or comes from multiple income streams? (§ 1002.6(b)(5); Comment 1002.6(b)(5)-4) (A creditor may consider the amount and probable continuance of any income in evaluating an applicant’s creditworthiness.)      
22 When an applicant relies on alimony, child support, or separate maintenance payments in applying for credit, does the creditor consider such payments as income to the extent that they are likely to be consistently made? (§ 1002.6(b)(5))      
23 To the extent the creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant’s creditworthiness, does the creditor consider: N/A N/A N/A
23(a) The credit history, when available, of accounts designated as accounts that the applicant and the applicant’s spouse are permitted to use or for which both are contractually liable? (§ 1002.6(b)(6)(i))      
23(b) On the applicant’s request, any information the applicant may present that tends to indicate the credit history being considered by the creditor does not accurately reflect the applicant’s creditworthiness? (§ 1002.6(b)(6)(ii))      
23(c) On the applicant’s request, the credit history, when available, of any account reported in the name of the applicant’s spouse or former spouse that the applicant can demonstrate accurately reflects the applicant’s creditworthiness? (§ 1002.6(b)(6)(iii))      
24 Does the creditor not deny credit in whole or in part based on the country an applicant is from? (Comment 1002.2(z)-2))      
25 Are married and unmarried applicants evaluated by the same standards? (§ 1002.6(b)(8))      
26 In evaluating joint applicants, are joint applicants treated in the same manner regardless of the existence, absence, or likelihood of a marital relationship between the parties? (§ 1002.6(b)(8))      
27 Does the creditor not consider race, color, religion, or sex (or an applicant’s or other person’s decision not to provide the information) in any aspect of a credit transaction? (§ 1002.6(b)(9))      

Rules for Extensions of Credit

Obtain and review policies and procedures, training materials, a sample of loan files, closing instructions on a sample of loans, and audits pertaining to extensions of credit (including, but not limited to signature requirements and account management). Conduct loan officer and closing agent interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Rules for Extensions of Credit
Item Description YES NO N/A
28 Does the creditor not refuse to grant an individual account to a creditworthy applicant on a prohibited basis? (§ 1002.7(a))      
29 Does the creditor not refuse to allow an applicant to open or maintain an account in a birth-given first name and a surname that is the applicant’s birth-given surname, the spouse’s surname, or a combined surname? (§ 1002.7(b))      
30 With respect to applicants who are contractually liable on an existing open-end account, does the creditor on the basis of the applicant’s reaching a certain age or retiring or on the basis of a change in the applicant’s name or marital status, not require reapplication (except as permitted by § 1002.7(c)(2), see Checklist Item 31), change the terms of the account, or terminate the account, unless there is evidence of the applicant’s inability or unwillingness to repay? (§ 1002.7(c)(1))      
31 To the extent the creditor requires reapplication for an open-end account on the basis of a change in the marital status of an applicant who is contractually liable: N/A N/A N/A
31(a) Does it do so only when (1) the original credit granted was based in whole or in part on the income of the applicant’s spouse; and (2) the creditor has information available to it indicating that the applicant’s income may not support the amount of credit currently available; and      
31(b) Does it allow the account holder full access to the account under the existing contract terms while the reapplication is pending? (§ 1002.7(c)(2); Comment 1002.7(c)(2)-1)      
32 For joint applications, is there evidence of an intent to apply for joint credit at the time of application? (The creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit.) (§ 1002.7(d)(1); Comment 1002.7(d)(1)-3)      
33 Does the creditor allow an applicant who is individually creditworthy to obtain credit without a spouse’s or other person’s signature (other than as a joint applicant)? (§ 1002.7(d)(1); Comment 1002.7(d)(1)-1)      
34 Does the creditor require a signature of an applicant’s spouse or other person, other than a joint applicant, on any credit instrument in only the following circumstances and based only on existing forms of ownership and not on the possibility of a subsequent change (§ 1002.7(d)(2); Comment 1002.7(d)(2)-1(i)):      
34(a) If an applicant requests unsecured credit and relies in part upon property that the applicant owns jointly with another person to satisfy the creditor’s standards of creditworthiness, the creditor requires the signature of the other person only on the instrument(s) necessary, or reasonably believed by the creditor to be necessary, under the law of the state in which the property is located, to enable the creditor to reach the property being relied upon in the event of the death or default of the applicant. (§ 1002.7(d)(2))      
34(b) If a married applicant requests unsecured credit and resides in a community property state, or if the applicant is relying on property located in such a state, the creditor requires the signature of the spouse only on any instrument necessary, or reasonably believed by the creditor to be necessary, under applicable state law to make the community property available to satisfy the debt in the event of default and (1) applicable state law denies the applicant power to manage or control sufficient community property to qualify for the credit requested under the creditor’s standards of creditworthiness; and (2) the applicant does not have sufficient separate property to qualify for the credit requested without regard to community property. (§ 1002.7(d)(3))      
34(c) If an applicant requests secured credit, the creditor requires the signature of the applicant’s spouse or other person only on those instruments necessary, or reasonably believed by the creditor to be necessary, under applicable state law to make the property being offered as security available to satisfy the debt in the event of default (for example, an instrument to create a valid lien, pass clear title, waive inchoate rights, or assign earnings). (§ 1002.7(d)(4))      
35 Does the creditor refrain from routinely requiring a non-applicant joint owner to sign an instrument (such as a quitclaim deed) that would result in the forfeiture of the joint owner’s interest in the property? (Comment 1002. 7(d)(2)-1(ii)(C))      
36 In those situations when under the creditor’s standards of creditworthiness, the personal liability of an additional party is necessary to support the credit requested, does the creditor allow the applicant to have either his or her spouse or someone other than his or her spouse to serve as the additional party? (§ 1002.7(d)(5))      
37 If a borrower’s creditworthiness is reevaluated when a credit obligation is renewed, does the creditor determine whether an additional party is still warranted and, if not warranted, release the additional party? (Comment 1002.7(d)(5)-3)      
38 Does the creditor not refuse to extend credit and not terminate an account because credit life, health, accident, or disability insurance is not available because of the applicant’s age? (§ 1002.7(e))      

Special-Purpose Credit Programs

Inquire as to whether the creditor offers a special-purpose credit program.

Special-Purpose Credit Programs
Item Description YES NO N/A
39 To the extent an issue arose regarding a special-purpose credit program, were the Examiner-in-Charge and Headquarters consulted? In the Basis of Conclusion section, describe the issue, the office (and person) consulted at Headquarters, and the resolution. If not applicable, please note in the Basis of Conclusion.      

Notifications

Obtain and review policies and procedures, training materials, a sample of loan files, and audits pertaining to notifications (including, but not limited to those that pertain to prequalification and preapproval processes, incomplete applications, counteroffers, loan modifications, and those that apply when there are third parties or multiple creditors). Conduct loan officer interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Consumer Credit

Consumer Credit
Item Description YES NO N/A
40 With respect to consumer credit, the creditor appropriately notified applicants as follows: N/A N/A N/A
40(a) Within 30 days after receiving a completed application, the creditor notified applicants concerning the creditor’s approval of, counteroffer to, or adverse action on the application (unless the parties contemplated that the applicant would inquire about the status, the application was approved, and the applicant failed to inquire within 30 days after applying, in which case the creditor may treat the application as withdrawn). (§ 1002.9(a)(1)(i); § 1002.9(e))      
40(b) Within 30 days after taking adverse action on an incomplete application, the creditor notified applicants of the adverse action in writing (unless written notice of incompleteness is provided within 30 days of receipt of the incomplete application, specifying the information needed, designating a reasonable period of time for the applicant to provide the information, and informing the applicant that failure to provide the information requested will result in no further consideration being given to the application), (§ 1002.9(a)(1)(ii); § 1002.9(c))      
40(c) Within 30 days after taking adverse action on an existing account, the creditor notified applicants of the adverse action in writing; (§ 1002.9(a)(1)(iii))      
40(d) Within 90 days after notifying the applicant of a counteroffer, if the applicant does not expressly accept or use the credit offered, the creditor notified applicants of the adverse action taken in writing (unless the counteroffer was accompanied by the notice of adverse action on the credit terms originally sought) (§ 1002.9(a)(1)(iv); Comment 1002.9(a)(1)-6)      
41 With respect to consumer credit, the creditor’s notifications given to an applicant when an adverse action is taken are in writing, capable of being retained, and contain all of the following:      
41(a) A statement of the action taken;      
41(b) The name and address of the creditor;      
41(c) A statement of the provisions of Section 701(a) of the ECOA; [4]      
41(d) The name and address of the federal agency that administers compliance with respect to the creditor; and      
41(e)(i) Either: A statement of specific reasons for the action taken that is specific and indicates the principal reason(s) for the adverse action (Statements that the adverse action was based on the creditor’s internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor’s credit scoring system are insufficient); or      
41(e)(ii) A disclosure (which contains the name, address, and telephone number of the person or office from which the statement of reasons can be obtained) of the applicant’s right to a statement of specific reasons within 30 days, if the statement is requested within 60 days of the creditor’s notification (and if, the creditor chooses to provide the reasons orally, the creditor shall also disclose the applicant’s right to have them confirmed in writing within 30 days of receiving the applicant’s written request for confirmation). (§ 1002.4(d)(1); § 1002.9(a)(2); (b)(1), (b)(2))      

Small Business Credit

Small Business Credit
Item Description YES NO N/A
42 Except for transactions conducted entirely by phone, in connection with business credit for businesses with gross revenues of $1 million or less in the preceding fiscal year or to start a new business (Comment 1002.9(a)(3)-1) (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit): N/A N/A N/A
42(a) Within 30 days after receiving a completed application, the creditor notified applicants concerning the creditor’s approval of, counteroffer to, or adverse action on the application orally or in writing (unless the parties contemplated that the applicant would inquire about the status, the application was approved, and the applicant failed to inquire within 30 days after applying, in which case the creditor may treat the application as withdrawn). (§ 1002.9(a)(1)(i); § 1002.9(e); § 1002.9(a)(3)(i)(A))      
42(b) Within 30 days after taking adverse action on an incomplete application, the creditor notified applicants of the adverse action orally or in writing (unless written notice of incompleteness is provided within 30 days of receipt of the incomplete application, specifying the information needed, designating a reasonable period of time for the applicant to provide the information, and informing the applicant that failure to provide the information requested will result in no further consideration being given to the application), (§ 1002.9(a)(1)(ii); § 1002.9(c)); § 1002.9(a)(3)(i)(A))      
42(c) Within 30 days after taking adverse action on an existing account, the creditor notified applicants of the adverse action orally or in writing; (§1002.9(a)(1)(iii); § 1002.9(a)(3)(i)(A))      
42(d) Within 90 days after notifying the applicant of a counteroffer, if the applicant does not expressly accept or use the credit offered, the creditor notified applicants of the adverse action orally or in writing (unless the counteroffer was accompanied by the notice of adverse action on the credit terms originally sought) (§ 1002.9(a)(1)(iv); Comment 1002.9(a)(1)-6; § 1002.9(a)(3)(i)(A))      
43 Except for transactions conducted entirely by phone, in connection with business credit for businesses with gross revenues of $1 million or less in the preceding fiscal year or to start a new business (Comment 1002.9(a)(3)-1) (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), the creditor’s adverse action notices contained (orally or in writing): N/A N/A N/A
43(a) A statement of the action taken;      
43(b) The name and address of the creditor;      
43(c) A statement of the provisions of Section 701(a) of the ECOA; [5]      
43(d) The name and address of the federal agency that administers compliance with respect to the creditor (namely, NCUA); and      
43(e)(i) Either: A statement of specific reasons for the action taken (that is specific and indicates the principal reason(s) for the adverse action); or      
43(e)(ii) Unless provided at the time of application, a written, capable of being retained, disclosure (which contains the name, address, telephone number of the person or office from which the statement of reasons can be obtained, and, if given at the time of application, a statement of the provisions of Section 701(a) of the ECOA [6]) of the applicant’s right to a statement of specific reasons within 30 days, if the statement is requested within 60 days of the creditor’s notification (and if, the creditor chooses to provide the reasons orally, the creditor shall also disclose the applicant’s right to have them confirmed in writing within 30 days of receiving the applicant’s written request for confirmation). (§ 1002.9(a)(2); § 1002.9(a)(3)(i)(A); § 1002.9(a)(3)(i)(B); § 1002.9(b)(1))      
44 With respect to applications made entirely by telephone in connection with business credit for businesses with gross revenues of $1 million or less in the preceding fiscal year or to start a new business (Comment 1002.9(a)(3)-1) (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), the creditor at least made an oral statement of the action taken and of the applicant’s right to a statement of reasons for adverse action. (§ 1002.9(a)(3)(i)(C))      

Large Business Credit

Large Business Credit
Item Description YES NO N/A
45 For businesses with gross revenues in excess of $1 million in the preceding fiscal year, or for extensions of trade credit, credit incident to a factoring agreement or other similar types of business credit, did the creditor at least: N/A N/A N/A
45(a) Communicate the notification of action taken within a reasonable time orally or in writing, and      
45(b) In response to an applicant’s written request for the reasons within 60 days of the creditor’s notification, provide in writing the reasons for adverse action and a statement of the provisions of Section 701(a) of the ECOA [7]? (§ 1002.9(a)(3)(ii))      

All Credit Transactions

All Credit Transactions
Item Description YES NO N/A
46 Within 30 days after receiving an application that is incomplete regarding matters than an applicant can complete, does the creditor (a) notify the applicant of adverse action (in the manner appropriate for the type of credit – business or consumer), or (b) send a written notice to the applicant specifying the information needed, designating a reasonable period of time for the applicant to provide the information, and informing the applicant that failure to provide the information requested will result in no further consideration being given to the application? (Although the creditor may inform the applicant orally of the need for additional information, if the application remains incomplete it must provide either notice within the specified time period.) (§ 1002.9(c))      
47 When declining a request for a modification of a loan, does the creditor always provide an adverse action notice when the consumer is not delinquent or in default? (§ 1002.2(c)(2)(ii); § 1002.9(a)(1)      
48 When an application involves multiple applicants, does the creditor provide notification of action to the primary applicant, when one is readily apparent? (§ 1002.9(f))      
49 When an application is made on behalf of an applicant by a third party to multiple creditors, including the creditor, and no credit is offered or if the applicant does not expressly accept or use the credit offered, does the creditor provide the appropriate adverse action notice either directly or through the third party (disclosing the identify of each creditor on whose behalf the notice is given)? (§ 1002.9(g))      

Designation of Accounts

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.

Designation of Accounts
Item Description YES NO N/A
50 To the extent the creditor furnishes consumer credit information, does it designate any new account to reflect the participation of both spouses if the applicant’s spouse is permitted to use or is contractually liable on the account (other than as a guarantor, surety, endorser, or similar party) (§ 1002.10(a); Comment 1002.10-1)      
51 To the extent the creditor furnishes consumer credit information, does it designate any existing account to reflect the participation of both spouses if the applicant’s spouse is permitted to use or is contractually liable on the account (other than as a guarantor, surety, endorser, or similar party) within 90 days after receiving a written request to do so from one of the spouses? (§1002.10(a); Comment 1002.10-1)      
52 To the extent the creditor furnishes consumer credit information to a consumer reporting agency concerning accounts designated to reflect the participation of both spouses, does the creditor furnish the information in a manner that enables the consumer reporting agency to provide access to the information in the name of each spouse? (§ 1002.10(b), Comment 1002.10-1)      
53 To the extent the creditor furnishes consumer credit information in response to inquiries about accounts designated to reflect the participation of both spouses, does the creditor furnish the information in the name of the spouse about whom the information is requested? (§ 1002.10(c), Comment 1002.10-1)      

Record Retention

Obtain and review policies and procedures, training materials, audits, a sample of loan files, relevant third-party contracts, and other records required to be retained (e.g., information relating to prescreened offers of credit and self-tests) that pertain to record retention (including but not limited to record retention schedules, retention of documents relating to prescreened offers of credit, and retention of documents relating to any self- tests). Inquire into whether there is any enforcement action or investigation involving the creditor.

Record Retention
Item Description YES NO N/A
54 Does the creditor retain for 25 months (12 months for business credit regarding businesses with gross revenues of $1 million or less in the previous fiscal year, except an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit) after the date that the creditor notifies an applicant of action taken or of incompleteness, an original or copy of the following: N/A N/A N/A
54(a) The application and any other written or recorded information used in evaluating the application that is not returned to the applicant at the applicant’s request? (§ 1002.12(b)(1)(i))      
54(b) Any information required to be obtained concerning characteristics of the applicant to monitor compliance with the ECOA and Regulation B or other similar law, such as the Home Mortgage Disclosure Act or Home Affordable Modification Program? (§ 1002.12(b)(1)(i))      
54(c) A copy of the notification of action taken, if written, or any notation or memorandum by the creditor, if made orally? (§ 1002.12(b)(1)(ii)(A))      
54(d) A statement of specific reasons for adverse action, if written, or any notation or memorandum by the creditor, if made orally? (§ 1002.12(b)(1)(ii)(B))      
54(e) Any written statement submitted by the applicant alleging a violation of the ECOA or Regulation B? (§ 1002.12(b)(1)(iii))      
55 Does the creditor retain for 25 months (12 months for business credit regarding businesses with gross revenues of $1 million or less in the previous fiscal year, except an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit) after the date that the creditor notifies an applicant of adverse action regarding an existing account, an original or copy of the following: N/A N/A N/A
55(a) Any written or recorded information concerning the adverse action? (§ 1002.12(b)(2)(i))      
55(b) Any written statement submitted by the applicant alleging a violation of the ECOA or Regulation B? (§ 1002.12(b)(2)(ii))      
56 Does the creditor retain for 25 months (12 months for business credit regarding businesses with gross revenues of $1 million or less in the previous fiscal year, except an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit) after the date the creditor receives an application for which 1002.9’s notification requirements do not apply (e.g., when an application is expressly withdrawn, or an application is submitted to more than one creditor on behalf of the applicant, and the application is approved by one of the other creditors) all written or recorded information in its possession concerning the applicant, including any notation of action taken? (§ 1002.12(b)(3); Comment 1002.12(b)(3)-1)      
57 If the creditor has actual notice that it is under investigation or is subject to an enforcement proceeding for an alleged violation of the ECOA or Regulation B by the Attorney General of the United States or by the NCUA, CFPB or other enforcement agency charged with monitoring the creditor’s compliance with ECOA and Regulation B, or if it has been served with notice of an action filed pursuant to Section 706 of the ECOA, did the creditor retain the foregoing information identified in Checklist Items 54–56 until final disposition of the matter (unless an earlier time is allowed by order of the agency or court). (§ 1002.12(b)(4))      
58 For business credit from businesses with gross revenues of more than $1 million in the previous fiscal year, or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, does the creditor retain records for at least 60 days after notifying the applicant of the action taken, or for 12 months if the applicant requests in writing during the 60-day time period the reasons for adverse action or that records be retained? (§ 1002.12(b)(5))      
59 If the creditor conducts a self-test pursuant to § 1002.15: N/A N/A N/A
59(a) Does the creditor retain for 25 months after the self-test is completed, all written or recorded information about the self-test?      
59(b) If the creditor has actual notice that it is under investigation or is subject to an enforcement proceeding for an alleged violation, or if it has been served with notice of a civil action, does the creditor retain the information until final disposition of the matter (unless an earlier time is allowed by the appropriate agency or court order)? (§ 1002.12(b)(6))      
60 For prescreened solicitations, does the creditor retain for 25 months (12 months for business credit except regarding businesses with gross revenues of more than $1 million in the previous fiscal year, or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit) after the date on which an offer of credit was made to potential customers: (a) the text of any prescreened solicitation; (b) the list of criteria the creditor used both to determine the potential recipients of the particular solicitation and to determine who will actually be offered credit; and (c) any correspondence related to complaints (formal or informal) about the solicitation? (§ 1002.12(b)(7); Comment 1002.12(b)(7)-2)      

Information for Monitoring Purposes as to Applications from Natural Persons

Obtain and review policies and procedures, training materials, a sample of loan files, quality control reports, and audits pertaining to information gathered for monitoring. Conduct loan officer interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Information for Monitoring Purposes as to Applications from Natural Persons
Item Description YES NO N/A
61 With respect to applications for credit that are primarily for the purchase or refinancing of dwellings (as defined in § 1002.13(a)(2)) that are occupied or to be occupied by the applicant as a principal residence where the credit will be secured by the dwelling, [8] does the creditor request (but not require) either on the application form or on a separate form that refers to the application (§ 1002.13(b)) the following information regarding the applicant: N/A N/A N/A
61(a) Ethnicity, using the categories “Hispanic or Latino,” and “Not Hispanic or Latino”; and race, using the categories “American Indian or Alaska Native,” “Asian,” “Black or African American,” “Native Hawaiian or Other Pacific Islander,” and “White,” and allowing applicants to select more than one racial designation? (§ 1002.13(a)(1)(i)), Comment 1002.13(b)-1)      
61(b) Sex? (§ 1002.13(a)(1)(ii))      
61(c) Marital status, using the categories married, unmarried, and separated? (§ 1002.13(a)(1)(iii))      
61(d) Age? (§ 1002.13(a)(1)(iv))      
62 If an applicant chooses not to provide the requested information or any part of it, does the creditor note that on the monitoring form and note on the form, to the extent possible, the ethnicity, race, and sex of the applicant(s) on the basis of visual observation or surname? (§ 1002.13(b))      
63 If the creditor receives applications by mail, telephone, or electronic media and it is not evident on the face of an application how it was received, does the creditor indicate on the form or other application record how it was received? (Comment 1002.13(b)-3(iii))      
64 Does the creditor inform applicant(s): (a) that the information regarding ethnicity, race, sex, marital status, and age is being requested by the federal government for the purpose of monitoring compliance with federal statutes that prohibit creditors from discriminating against applicants on those bases; and (b) that if the applicant(s) chooses not to provide the information, the creditor is required to note the ethnicity, race and sex on the basis of visual observation or surname? (§ 1002.13(c))      

Appraisal Reports

Obtain and review policies and procedures, training materials, a sample of loan files, and audits pertaining to providing appraisal reports. Conduct loan officer interviews to determine whether they show an understanding of the regulatory requirements and that policies and procedures are consistently applied.

Appraisal Reports
Item Description YES NO N/A
65 With respect to applications for credit to be secured by a first lien on a dwelling, in the absence of a waiver, does the creditor: N/A N/A N/A
65(a) Provide copies of all appraisals and other written valuations developed in connection with the application for credit promptly upon completion, or three business days prior to consummation of the transaction (for closed-end-credit) or at, or before, account opening (for open-end credit), whichever is earlier, whether credit is granted or denied or the application is withdrawn; or      
65(b) If the creditor obtains a waiver of the timing requirements that is not otherwise prohibited by law, does the creditor: N/A N/A N/A
65(b)(i) Obtain the waiver at least three business days prior to consummation or account opening (except in the case of waivers pertaining solely to the applicant’s receipt of a copy of an appraisal or other written valuation that contains only clerical changes from a previous version of the appraisal or other written valuation provided to the applicant three or more business days prior to consummation or account opening);      
65(b)(ii) Provide the applicant a copy of the appraisal or other valuation at or before consummation or account opening, where the loan is consummated or the account is opened; and      
65(b)(iii) Where the loan is not consummated or the account is not opened, provide the applicant with copies no later than 30 days after determining the consummation will not occur or the account will not be opened? (§ 1002.14(a))      
66 With respect to applications for credit to be secured by a first lien on a dwelling, does the creditor refrain from charging an applicant for providing required copies of appraisals and other written valuations? (A creditor may charge a reasonable fee to reimburse for the cost of the appraisal or other written valuation unless otherwise provided by the law but a creditor may not charge an applicant for providing a copy of appraisals and other written valuations.) (§ 1002.14(a)(3))      

Disclosures

Obtain and review policies and procedures, training materials, and a sample of loan files, audits related to disclosures, and disclosures.

Disclosures
Item Description YES NO N/A
67 With respect to applications for credit to be secured by a first lien on a dwelling, does the creditor mail or deliver a written notice of the applicant’s right to receive a copy of all written appraisals developed in connection with the application no later than the third business day after the creditor receives the application for credit; or if the creditor determines that credit was not to be secured by a first lien on a dwelling at the time of application but later determined the credit will be secured by a first lien on a dwelling, does the creditor mail or deliver the same written notice no later than the third business day after such determination? (§ 1002.14(a)(2))      
68 Are the creditor’s written disclosures that are required by Regulation B clear, conspicuous, and except for those required by § 1002.5 (self-tests) and § 1002.13 (monitoring), in a form the applicant can retain? (§ 1002.4(d))      
69 Are those disclosures that are required to be in writing that are made in electronic form provided in compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce (E-Sign) Act, where applicable? (§ 1002.4(d)(2))      
70 If an applicant accesses a credit application electronically from a place other than the creditor’s office, did the creditor provide the disclosures in a timely manner on or with the application, namely in electronic form (such as with the applications form on its website)? (Comment 1002.4(d)-2)      

Voluntary Self-Tests

Identify whether the creditor purports to conduct self-tests. If so, request and review information required to be maintained under § 1002.12(b)(6), including but not limited to information regarding its design and expected outputs, corrective actions, the methodology used or the scope of the self-test, the time period covered by the self-test, the dates it was conducted, and entities to whom it was disclosed.

Voluntary Self-Tests
Item Description YES NO N/A
71 To the extent the creditor conducts voluntary self-tests: N/A N/A N/A
71(a) Is the program, practice or study: (1) designed and used specifically to determine the extent or effectiveness of the creditor’s compliance with ECOA or Regulation B; and (2) resulting in data or factual information that is not available and cannot be derived from loan or application files or other records related to credit transactions; and      
71(b) Has the creditor taken or is it taking appropriate and timely corrective action when the self-test shows that it is more likely than not that a violation occurred (even though no violation has been formally adjudicated), namely action that is reasonably likely to remedy the cause and effect of a likely violation by identifying the policies and practices that are the likely cause of the violation and assessing the extent and scope of any violation? (§ 1002.15(a)(2); § 1002.15(b)(1); § 1002.15(c); Comment 1002.15(a)(2)-2)      
72 To the extent the creditor is claiming that the self-test privilege applies: N/A N/A N/A
72(a) Is the creditor providing information that is not privileged, including: (a) information about whether the creditor conducted a self-test, the methodology used or the scope of the self-test, the time period covered by the self-test, or the dates it was conducted; (b) loan and application files or other business records related to credit transactions, and information derived from such files and records, even if the information has been aggregated, summarized, or reorganized to facilitate analysis; and (c) the creditor’s property appraisal reports, minutes of loan committee meetings, analysis performed as part of processing or underwriting a credit application, or other documents reflecting the basis for a decision to approve or deny an application, loan policies or procedures, underwriting standards, and broker compensation records? (§ 1002.15(b)(3); and Comments 1002.15(b)(1)(ii)-2; 1002.15(b)(3)(ii)-1)      
72(b) Has the creditor not voluntarily disclosed any part of the report or results, or any other privileged information, as a self-test, to an applicant, government agency, or the public? (§ 1002.15(d)(2)(i))      
72(c) Has the creditor not disclosed any part of the report or results, or any other information privileged as a self-test, as a defense to charges that the creditor has violated ECOA or Regulation B? (§ 1002.15(d)(2)(ii))      
72(d) Has the creditor produced written or recorded information about the self-test that is required to be retained by § 1002.12(b)(6)? (§ 1002.15(d)(2)(iii))      
72(e) As applicable, has the creditor provided the self-test report, results, and any other information privileged under Regulation B in order to determine a penalty or remedy for a violation of ECOA or Regulation that has been adjudicated or admitted? (§ 1002.15(d)(3))      

 


Footnotes

[1] If the violation of 12 CFR §§ 1002.6(b)(6), 1002.9, 1002.10, 1002.12, or 1002.13 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 procedures reasonably adapted to avoid such errors, there is no violation. On discovering an inadvertent error under 12 CFR 1002.9 and 1002.10, the creditor must correct it as soon as possible; inadvertent errors under 12 CFR §§ 1002.12 and 1002.13 must be corrected prospectively. To determine whether an error is inadvertent, you should consult with the Examiner- in-Charge.

[2] A creditor may obtain information that is otherwise restricted to determine eligibility for a special purpose program, as provided in 12 CFR 1002.8(b), (c), and (d). To the extent there is an appropriately established and administered special purpose program under which any otherwise restricted information was requested, obtaining such information should not constitute a violation, and Headquarters and the Examiner-in-Charge should be consulted.

[3] To the extent the institution maintains any information in its files that is prohibited by the ECOA or Regulation B for use in evaluating applications, that information may be retained if it was obtained (a) prior to March 23, 1977; (b) from consumer reporting agencies, an applicant, or others without the specific request of the creditor; or (c) as required to monitor compliance with the ECOA and Regulation B or other federal or state statutes or regulations. (12 CFR 1002.12(a))

[4] This statement must be substantially similar to the following: “The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is [name and address as specified by the appropriate agency listed in appendix A of this regulation].” (12 CFR 1002.9(b)(1))

[5] See supra note 17.

[6] See supra note 17.

[7] See supra note 17.

[8] Examiners should ensure that the institution limits its requests for government monitoring information under this section to only these loans, except as permitted by 12 CFR 1002.5(a)&(b) (see Checklist Item 8) or as required by HMDA (reaching home purchase loans, home improvement loans, refinancings, and (optionally) home equity lines of credit made in whole or in part for the purpose of home improvement or home purchase), or other governmental program or directive such as the Home Affordable Modification Program (HAMP).