Supplement I to 12 CFR Part 1002 — Official Bureau Interpretations (Regulation B Commentary)
Supplement I to 12 CFR Part 1002 is the CFPB's official staff commentary on Regulation B (ECOA). Each commentary obligation interprets a specific Reg B rule obligation via the `interprets` field.
Verbatim regulatory text
Verbatim provisions from Supplement I to 12 CFR Part 1002 — Official Bureau Interpretations (Regulation B Commentary) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Supplement I — Comment 5(a)(2)-3: Collecting information on behalf of creditors
3. Collecting information on behalf of creditors. Persons such as loan brokers and correspondents do not violate the ECOA or Regulation B if they collect information that they are otherwise prohibited from collecting, where the purpose of collecting the information is to provide it to a creditor that is subject to subpart B of this part, the Home Mortgage Disclosure Act, or another Federal or State statute or regulation requiring data collection.
Supplement I — Comment 5(d)(1)-1: Indirect disclosure of marital status
1. Indirect disclosure of prohibited information. The fact that certain credit-related information may indirectly disclose marital status does not bar a creditor from seeking such information. For example, the creditor may ask about:
Supplement I — Comment 5(d)(2)-3: Specific inquiry about sources of income
3. Specific inquiry about sources of income. A creditor need not give the disclosure if the inquiry about income is specific and worded in a way that is unlikely to lead the applicant to disclose the fact that income is derived from alimony, child support, or separate maintenance payments. For example, an application form that asks about specific types of income such as salary, wages, or investment income need not include the disclosure.
Supplement I — Comment 6(a)-2: Effects test
2. Effects test. The effects test is a judicial doctrine that was developed in a series of employment cases decided by the U.S. Supreme Court under title VII of the Civil Rights Act of 1964 ( 42 U.S.C. 2000e et seq., ) and the burdens of proof for such employment cases were codified by Congress in the Civil Rights Act of 1991 ( 42 U.S.C. 2000e-2 ). Congressional intent that this doctrine apply to the credit area is documented in the Senate Report that accompanied H.R. 6516, No. 94-589, pp. 4-5; and in the House Report that accompanied H.R. 6516, No. 94-210, p.5. The Act and regulation may prohibit a creditor practice that is discriminatory in effect because it has a disproportionately negative impact on a prohibited basis, even though the creditor has no intent to discriminate and the practice appears neutral on its face, unless the creditor practice meets a legitimate business need that cannot reasonably be achieved as well by means that are less disparate in their impact.
Supplement I — Comment 6(b)(2)-1: Favoring the elderly
1. Favoring the elderly. Any system of evaluating creditworthiness may favor a credit applicant who is age 62 or older. A credit program that offers more favorable credit terms to applicants age 62 or older is also permissible; a program that offers more favorable credit terms to applicants at an age lower than 62 is permissible only if it meets the special-purpose credit requirements of § 1002.8 .
Supplement I — Comment 6(b)(2)-2: Age in credit scoring (elderly-favorable treatment)
2. Consideration of age in a credit scoring system. Age may be taken directly into account in a credit scoring system that is “demonstrably and statistically sound,” as defined in § 1002.2(p) , with one limitation: Applicants age 62 years or older must be treated at least as favorably as applicants who are under age 62. If age is scored by assigning points to an applicant's age category, elderly applicants must receive the same or a greater number of points as the most favored class of nonelderly applicants.
Supplement I — Comment 6(b)(5)-2: Payments consistently made (alimony/child support)
2. Payments consistently made. In determining the likelihood of consistent payments of alimony, child support, or separate maintenance, a creditor may consider factors such as whether payments are received pursuant to a written agreement or court decree; the length of time that the payments have been received; whether the payments are regularly received by the applicant; the availability of court or other procedures to compel payment; and the creditworthiness of the payor, including the credit history of the payor when it is available to the creditor.
Supplement I — Comment 7(d)(1)-1: Signature of another person (impermissible cosigner requirement)
1. Signature of another person. It is impermissible for a creditor to require an applicant who is individually creditworthy to provide a cosigner—even if the creditor applies the requirement without regard to sex, marital status, or any other prohibited basis. (But see comment 7(d)(6)-1 concerning guarantors of closely held corporations.)
Supplement I — Comment 7(d)(2)-1: Jointly owned property valuation
1. Jointly owned property. If an applicant requests unsecured credit, does not own sufficient separate property, and relies on joint property to establish creditworthiness, the creditor must value the applicant's interest in the jointly owned property. A creditor may not request that a nonapplicant joint owner sign any instrument as a condition of the credit extension unless the applicant's interest does not support the amount and terms of the credit sought.
Supplement I — Comment 7(d)(4)-1: Creation of enforceable lien (note-vs-security distinction)
1. Creation of enforceable lien. Some state laws require that both spouses join in executing any instrument by which real property is encumbered. If an applicant offers such property as security for credit, a creditor may require the applicant's spouse to sign the instruments necessary to create a valid security interest in the property. The creditor may not require the spouse to sign the note evidencing the credit obligation if signing only the mortgage or other security agreement is sufficient to make the property available to satisfy the debt in the event of default. However, if under state law both spouses must sign the note to create an enforceable lien, the creditor may require the signatures.
Supplement I — Comment 9-5: Prequalification requests as applications subject to adverse-action notice
5. Prequalification requests. Whether a creditor must provide a notice of action taken for a prequalification request depends on the creditor's response to the request, as discussed in comment 2(f)-3. For instance, a creditor may treat the request as an inquiry if the creditor evaluates specific information about the consumer and tells the consumer the loan amount, rate, and other terms of credit the consumer could qualify for under various loan programs, explaining the process the consumer must follow to submit a mortgage application and the information the creditor will analyze in reaching a credit decision. On the other hand, a creditor has treated a request as an application, and is subject to the adverse action notice requirements of § 1002.9 if, after evaluating information, the creditor decides that it will not approve the request and communicates that decision to the consumer. For example, if the creditor tells the consumer that it would not approve an application for a mortgage because of a bankruptcy in the consumer's record, the creditor has denied an application for credit.
Supplement I — Comment 9(a)(1)-1: Timing of notice — when an application is complete
1. Timing of notice—when an application is complete. Once a creditor has obtained all the information it normally considers in making a credit decision, the application is complete and the creditor has 30 days in which to notify the applicant of the credit decision. (See also comment 2(f)-6.)
Supplement I — Comment 9(a)(1)-4: Incomplete application denied for non-incompleteness reasons
4. Incomplete application—denial for reasons other than incompleteness. When an application is missing information but provides sufficient data for a credit decision, the creditor may evaluate the application, make its credit decision, and notify the applicant accordingly. If credit is denied, the applicant must be given the specific reasons for the credit denial (or notice of the right to receive the reasons); in this instance missing information or “incomplete application” cannot be given as the reason for the denial.
Supplement I — Comment 9(a)(1)-6: Counteroffer combined with adverse-action notice
6. Counteroffer combined with adverse action notice. A creditor that gives the applicant a combined counteroffer and adverse action notice that complies with § 1002.9(a)(2) need not send a second adverse action notice if the applicant does not accept the counteroffer.
Supplement I — Comment 9(b)(2)-1: Number of specific reasons (more-than-four threshold)
1. Number of specific reasons. A creditor must disclose the principal reasons for denying an application or taking other adverse action. The regulation does not mandate that a specific number of reasons be disclosed, but disclosure of more than four reasons is not likely to be helpful to the applicant.
Supplement I — Comment 9(b)(2)-9: Combined ECOA-FCRA disclosures
9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of the principal reasons for denying or taking other adverse action on an application for an extension of credit. The Fair Credit Reporting Act (FCRA) requires a creditor to disclose when it has based its decision in whole or in part on information from a source other than the applicant or its own files. Disclosing that a credit report was obtained and used in the denial of the application, as the FCRA requires, does not satisfy the ECOA requirement to disclose specific reasons. For example, if the applicant's credit history reveals delinquent credit obligations and the application is denied for that reason, to satisfy § 1002.9(b)(2) the creditor must disclose that the application was denied because of the applicant's delinquent credit obligations.
Supplement I — Comment 9(g)-3: Third-party notice — liability of creditor
3. Third-party notice—liability. When a notice is to be provided through a third party, a creditor is not liable for an act or omission of the third party that constitutes a violation of the regulation if the creditor accurately and in a timely manner provided the third party with the information necessary for the notification and maintains reasonable procedures adapted to prevent such violations.
Supplement I — Comment 12(b)-1: Computerized/electronic record copies acceptable
1. Copies. Copies of the original record include carbon copies, photocopies, microfilm or microfiche copies, or copies produced by any other accurate retrieval system, such as documents stored and reproduced by computer. A creditor that uses a computerized or mechanized system need not keep a paper copy of a document (for example, of an adverse action notice) if it can regenerate all pertinent information in a timely manner for examination or other purposes.
Supplement I — Comment 13(a)-2: Principal residence requirement (vacation/rental excluded)
2. Principal residence. The requirements of § 1002.13 apply only if an application relates to a dwelling that is or will be occupied by the applicant as the principal residence. A credit application related to a vacation home or a rental unit is not covered. In the case of a two-to four-unit dwelling, the application is covered if the applicant intends to occupy one of the units as a principal residence.
Supplement I — Comment 13(a)-5: Home-improvement/debt-consolidation/HELOC not covered
5. Transactions not covered. The information-collection requirements of this section apply to applications for credit primarily for the purchase or refinancing of a dwelling that is or will become the applicant's principal residence. Therefore, applications for credit secured by the applicant's principal residence but made primarily for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to the information-collection requirements. An application for an open-end home equity line of credit is not subject to this section unless it is readily apparent to the creditor when the application is taken that the primary purpose of the line is for the purchase or refinancing of a principal dwelling.
Supplement I — Comment 14(a)(1)-1: Coverage extends to business-purpose first-lien-dwelling credit
1. Coverage. Section 1002.14 covers applications for credit to be secured by a first lien on a dwelling, as that term is defined in § 1002.14(b)(2) , whether the credit is for a business purpose (for example, a loan to start a business) or a consumer purpose (for example, a loan to purchase a home).
Supplement I — Comment 5(d)(1)-1: Indirect disclosure of marital status — enumerated items (chapeau recall fix)
i. The applicant's obligation to pay alimony, child support, or separate maintenance income. ii. The source of income to be used as the basis for repaying the credit requested, which could disclose that it is the income of a spouse. iii. Whether any obligation disclosed by the applicant has a co-obligor, which could disclose that the co-obligor is a spouse or former spouse. iv. The ownership of assets, which could disclose the interest of a spouse. Paragraph 5(d)(2).