Final Regulation. Consumer Financial Protection Bureau: Amendments to Regulation B

Transcription

1 Final Regulation 17-EF-13 Consumer Financial Protection Bureau: Amendments to Regulation B NAFCU would like to highlight the following: The Consumer Financial Protection Bureau (CFPB) has issued its final rule amending the Equal Credit Opportunity Act (Regulation B) to facilitate compliance with the Home Mortgage Disclosure Act (Regulation C) 2015 final rule and transition to the redesigned Uniform Residential Loan Application (URLA). The final rule adds certain model forms and removes the 2004 version of the URLA from Regulation B. The rule also makes amendments to Regulation B and its commentary to assist in the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants. The final rule will permit credit unions making mortgage loans subject to Section of Regulation B to collect an applicant's information using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories, as outlined in appendix B to Regulation C as amended by the 2015 HMDA final rule. The rule does not require credit unions that are not HMDA reporters to change their Section compliance practices, but allows them to adopt the above voluntary practices for collecting applicant information. Effective Date: January 1, 2018 February 2020 for URLA form removal 1

2 Summary The CFPB has published its final rule amending Regulation B to clarify that compliance with applicant information collection under Regulation C means you are fulfilling your requirements under Regulation B as well. Credit unions that are not HMDA reporters do not have to change their Section compliance practices but may choose to voluntarily adopt the new practices. This rule does not add the 2016 URLA to the Regulation B appendix because the CFPB must issue a separate Federal Register notice to acknowledge its compliance with Regulation B. A copy of the final rule can be found here. This Final Regulation includes this brief summary, background, and section-by-section analysis of the final rule. We urge you to read the materials carefully. Should you have any questions or require additional information, please contact Ann Kossachev, Regulatory Affairs Counsel, at (703) , or akossachev@nafcu.org. Background Section (b) of Regulation B prohibits creditors from requesting information about an applicant's race, color, religion, national origin, or sex in connection with a credit transaction. Section (a)(2), however, provides several exceptions for information creditors are required to request under Section for credit secured by the applicant's dwelling, and for information required by a regulation, such as Regulation C. Section outlines the procedure for collecting information about an applicant's ethnicity, race, sex, marital status, and age. Creditors subject to Section but not to Regulation C are required only to collect and retain, but not report, the required information. Regulation C, which implements HMDA, requires the collection, recording, reporting, and disclosure of mortgage lending information. On October 28, 2015, the CFPB published a final rule amending Regulation C to implement changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and to modernize the reporting of HMDA data. The compliance date for this final rule is January 1, The 2004 URLA is included as a model form in the Regulation B appendix for compliance with Section and as a safe harbor for compliance with Section (b) through (d). The URLA issued by Fannie Mae and Freddie Mac (the GSEs) is used by many lenders for certain dwelling-related loans and is required for a loan to be eligible for sale to the GSEs. On August 23, 2016, the GSEs issued a revised URLA, which included changes to the Demographic Information section pursuant to the requirements of the new HMDA final rule. On October 20, 2017, the GSEs released a new preferred language question to be added to the redesigned URLA and announced that lenders may begin using the redesigned URLA in July 2019, but use of the redesigned URLA will be mandatory for GSE loans in February On September 23, 2016, the CFPB issued a notice regarding the collection of expanded information about ethnicity and race, which provided that anytime from January 1, 2017 through 2

3 December 31, 2017, a creditor may permit applicants to self-identify using disaggregated ethnic and racial categories under Regulation C and shall be deemed in compliance with Regulation B. In the notice, the CFPB also approved the use of the 2016 URLA for collecting information about ethnicity and race under HMDA. Section-by-Section Analysis The following is a section-by-section analysis of some highlights of the final rule. This analysis does not summarize the entire rule; only select substantive sections of the rule, particularly those that have been changed from the proposed rule. Section Rules Concerning Requests for Information 5(a) General Rules The Bureau is adopting Section (a)(4)(i) through (iv) as proposed. These provisions will allow creditors to obtain applicant information in specific circumstances. The CFPB is adopting new Section (a)(4)(v) and (vi) in response to industry commenter suggestions. Section (a)(4)(i) and (ii) permits credit unions under revised Regulation C Section (g) to collect information regarding the ethnicity, race, and sex of an applicant (hereinafter, "applicant's demographic information") for a closed-end mortgage loan or an openend line of credit that is an excluded transaction under revised Regulation C Section (c)(11) or (12) if it submits HMDA data about those applications or loans or if it has submitted such data in any of the preceding five calendar years. Section (a)(4)(iii) permits creditors that fall below both of the revised Regulation C loanvolume thresholds to continue collecting applicant demographic information for five calendar years after first becoming exempt from HMDA reporting. Section (a)(4)(iv) permits creditors that exceed the threshold in the first year of a twoyear threshold period to begin collecting, in the second year, applicant demographic information for a loan otherwise covered under Regulation C. Section (a)(4)(v) permits a creditor that is a financial institution under Regulation C Section (g) or that submitted HMDA data for any of the preceding five calendar years, but is not currently a financial institution, to collect applicant demographic information for a dwelling-secured loan made primarily for a business or commercial purpose, regardless of whether the loan is for the purpose of home purchase, refinancing, or home improvement, and therefore reportable under revised Regulation C Section (c)(10). Section (a)(4)(vi) permits a creditor that is collecting applicant demographic information of an applicant or first co-applicant to collect applicant demographic information of a second or additional co-applicant for a covered loan under Regulation C Section (e) or for a second or additional co-applicant for a loan described in (a)(4)(i) through (v) of this section. 3

4 Section Record Retention (b)(1)(i) The CFPB is finalizing this section as proposed to include within its preservation requirements any information obtained pursuant to Section (a)(4). The CFPB is also finalizing an amendment to comment 12(b)-2 to require retention of applicant demographic information obtained pursuant to Section (a)(4). The CFPB has clarified that this section does not extend the 12-month record retention period for business credit transactions under Regulation B. Section Information for Monitoring Purposes (a) Information to be Requested (1)(i)(A) and (B) The CFPB is adopting Section (a) and comments 13(a)-7 and 13(a)-8 as proposed. Finalized Section (a)(1)(i) provides that a creditor must collect applicant information using either the aggregate ethnicity and race categories currently required or the disaggregated ethnicity and race categories and subcategories in revised Regulation C appendix B. Comments 13(a)-7 and 13(a)-8 provide that a creditor that collects applicant information in compliance with the revised Regulation C appendix will be in compliance with Section regarding collection of information about an applicant's ethnicity, race, and sex. These comments also clarify that a creditor may choose on an application-by-application basis whether to collect aggregate or disaggregated information. (b) Obtaining information The CFPB is finalizing as proposed the revisions to Section (b) regarding the collection of ethnicity and race information on the basis of visual observation or surname. This section provides that a creditor must comply with the restrictions on the collection of an applicant's ethnicity and race on the basis of visual observation or surname as outlined in the revised Regulation C appendix B, which limits such collection to the aggregate race and ethnicity categories. Based on comments requesting that the CFPB further standardize the treatment of coapplicants between Section and Regulation C, the CFPB is revising Section (b) to clarify that a creditor is permitted, but not required, to collect the information set forth in Section (a) from a second or additional co-applicant. Comment 13(b)-1, which provides guidance on the forms and collection methods a creditor may use to gather applicant information under Section (a), is being finalized as proposed. Appendix B to Part 1002 Model Application Forms Model Forms for Complying with Section (a)(1)(i) The CFPB is finalizing as proposed the addition of two new model forms for use in complying with Section The first is for creditors collecting disaggregated applicant demographic information according to Section (a)(1)(i)(B) and (ii). The CFPB is amending the Regulation B appendix to cross-reference the data collection model form included in the revised Regulation C appendix. The second form is for creditors collecting aggregate applicant demographic information under Section (a)(1)(i)(A) and (ii). This form mirrors Section X in the 2004 URLA and the data collection model form in the current Regulation C appendix. Removal of the 2004 URLA as a Model Form Given the revisions to Section (a)(1)(i), the amendment to the Regulation B appendix to 4

5 provide two new model forms, and that the CFPB approved use of the 2016 URLA in its September 23, 2016 approval notice, the CFPB is removing the 2004 URLA as a model form in Regulation B. The CFPB is finalizing the removal of the 2004 URLA from the Regulation B appendix in February 2020, which the FHFA has designated as the date for the mandatory use of the redesigned URLA. Removal of the Official Commentary to Appendix B The current commentary to the Regulation B appendix includes a discussion of two forms created by the GSEs that are no longer in use: a 1992 version of the URLA and a 1986 homeimprovement and energy loan application form. The CFPB is finalizing as proposed the removal of this commentary in its entirety. Effective Dates: January 1, 2018 and February 2020 for URLA form removal from Regulation B appendix. This document is intended for informational purposes only. It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel. 5

6 NAFCU s Regulatory Committee 2017 Debra Schwartz, Chair, Mission FCU Kammie Ahnert, Solidarity Community FCU Richard Anderson, Sandia Laboratory FCU Howard Baker, Greater TEXAS FCU Dan Berry, Duke University FCU John Buckley, Gerber FCU Bernadette Clair, Pentagon FCU Joe Clark, Truliant FCU Cutler Dawson, Navy FCU Yvonne De La Rosa, Credit Human Dawn Donovan, Price Chopper Employees FCU Gail Enda, American Airlines FCU John Farmakides, Lafayette FCU Rick Hanan, SMW 104 FCU Patrick Harrigan, Service Credit Union James Hunsanger, Michigan State University FCU Joyce Keehan, Hudson Valley FCU James Kenyon, Whitefish CU Jennifer Kuhlmeier, Credit Human Dan McCue, Alaska USA FCU Bob McFadden, Finger Lakes FCU Greg Mills, Elements Financial FCU Jim Mooney, Chevron FCU Tim Moore, Allegacy FCU Doug Nesbit, TruStone Financial FCU Dan Patterson, SAC FCU Jennifer Rue, Financial Center First Credit Union J. Kevin Ryan, Financial Center First Credit Union Wayne P. Schulman, Logix FCU Manisha Shah, United Nations FCU Paul Sosnowski, Polish & Slavic FCU Tony Steigelman, CBC FCU Steve Swanstrom, Centris FCU Jane G. Verret, Campus FCU Alexander Monterrubio, Staff Liaison, NAFCU Copyright 2017 National Association of Federally-Insured Credit Unions. All rights reserved. NAFCU does not claim a copyright to government information. Liberal copying privileges available to NAFCU members only. 6

7 NAFCU S 2017 REGULATORY ALERTS Number Topic Date Issued 17-EA-01 Treasury: Participation in the Automated Clearing House 1/3/ EA-02 CDFI Fund: RFI Regarding Policies and Procedures 1/18/ EA-03 NCUA: Alternative Capital ANPR 2/8/ EA-04 CFPB: Alternative Data 3/22/ EA-05 CFPB: Remittance Rule Assessment 4/5/ EA-06 CFPB: Amendments to HMDA Final Rule 5/2/ EA-07 CFPB: CARD Act Review 5/9/ EA-08 CFPB: Small Business Lending Information Collection RFI 5/17/ EA-09 NCUA: 2017 Regulation Review 5/19/ EA-10 NCUA: Exam Appeals 6/6/ EA-11 NCUA: Supervisory Review Committee 6/6/ EA-12 NCUA: Mergers 6/7/ EA-13 CFPB: Improving Language Access 6/9/ EA-14 CFPB: Mortgage Servicing Rules Assessment 6/9/ EA-15 Federal Reserve: Regulation CC Forged or Altered Checks 6/28/ EA-16 CFPB: Amendments to Rules Concerning Prepaid Accounts 6/29/ EA-17 CFPB: ATR/QM Rule Assessment 6/30/ EA-18 NCUA: OTR Methodology 7/10/ EA-19 DOL: Fiduciary Rule and Prohibited Transaction Exemptions 7/10/ EA-20 NCUA: Corporate Credit Unions 7/14/ EA-21 NCUA: Merger of Stabilization Fund and SIF 7/28/ EA-22 NCUA: Share Insurance Fund Equity Distributions 7/28/ EA-23 NCUA: Emergency Mergers 8/28/ EA-24 NCUA: Regulatory Reform Agenda 8/29/ EA-25 DOL: Overtime 8/30/ EA-26 CFPB: TRID 9/11/ EA-27 NCUA: Accuracy of Advertising and Notice of Insured Status 10/16/2017 NAFCU S 2017 FINAL REGULATIONS Number Topic Date Issued 17-EF-01 FHFA: Acquired Member Assets 1/12/ EF-02 FHFA: Duty to Serve Underserved Markets 1/18/ EF-03 FFIEC: CC Rating System 2/3/ EF-04 Federal Reserve: Availability of Funds and Collection of Checks 6/28/ EF-05 NCUA: Safe Harbor 7/13/ EF-06 CFPB: Arbitration Agreements 8/7/ EF-07 CFPB: TRID "Fix" 8/25/ EF-08 CFPB: Amendments to the 2015 HMDA Final Rule 9/29/ EF-09 Treasury: Federal Participation in Automated Clearing House 10/5/ EF-10 CFPB: Payday, Vehicle Title, and Certain High Cost Installment 10/10/2017 7

8 Loans 17-EF-11 NCUA: Supervisory Review Committee Appeals 10/26/ EF-12 NCUA: Appeals Procedures 10/26/ EF-13 CFPB: Amendments to Regulation B 10/27/2017 8