ECOA Technical Requirements

Question 1

A bank received an application for credit from two individuals seeking to be co-applicants on a loan. After reviewing the application, the bank determined that one of the applicants had very poor credit and if the application was left as is, the loan would be denied. The bank told the applicants that it would originate the loan only if the loan were solely in the name of the applicant with good credit.

Did the bank’s actions constitute a counteroffer?

Answer 1

Yes. Regulation B indicates that a counteroffer is an offer to grant credit in a different amount or on other terms from those requested in an application. 12 CFR 1002.2(c)(i). An offer of credit that requires the removal of one the applicants would constitute an offer of credit on different terms.​​

Question 2

In accordance with Section 1002.14(a) of Regulation B, a creditor shall provide a copy of an appraisal report used in connection with an application for credit that is to be secured by a lien on a dwelling.

Can a bank also stipulate additional conditions on which to provide such an appraisal?

In this case, the bank also requires the borrower to sign a letter agreeing to various conditions such as:

• The borrower will consider the appraisal confidential and will not disclose its contents to a third party,
• To waive any claims against the bank or its employees for unauthorized reliance on the appraisal, and
• To indemnify the bank from any and all losses, expenses, and claims arising from the disclosure of the information, etc.

Answer 2

So long as the bank is relying on the appraisal report in making its credit decision, it cannot condition its release of the appraisal report, as it now does, on global waivers that would preclude an applicant from challenging the appraisal.

A bank cannot make its release of an applicant’s appraisal report contingent on the applicant’s waiver of all rights to hold the bank liable for the report.

Question 3

Do the appraisal requirements under ECOA apply to a residential and commercial mixed use property?

Answer 3

If the loan is secured by a first lien on a dwelling including 1-4 units, the appraisal requirements in Section 1002.14 of Regulation B apply regardless of whether the property also includes commercial real estate.

Question 4

A bank uses an application form that covers both real-estate and non-real estate requests for credit. The government monitoring information section contains a disclaimer that the section should only be completed for home loan applications.

Is this type of application acceptable?

Should a violation be cited if the government monitoring information section is completed by the applicant for non-real estate credit requests, such as a car loan application?

Answer 4

This type of all-purpose application should be avoided as it may mislead a consumer into believing the consumer must provide the prohibited information. If it is used, the monitoring information should be carefully redacted before a consumer inserts information for a consumer loan. If monitoring information is inappropriately collected, a violation must be cited.

Question 5

Is it permissible for a bank to require all deposit account holders, regardless of their relationship to each other, to apply for an overdraft line of credit and sign the credit agreement (i.e., requiring all signers on the checking account attached to the overdraft line of credit to apply and become obligated on the note)?

How does this apply to an overdraft protection program that is not a line of credit?

Answer 5

Yes the bank can require this for an ODLOC.

For ODP, yes. Under Reg E if 2 or more consumers jointly hold an account, the bank shall treat the affirmative consent of any of the joint consumers as affirmative consent for that account when anyone opts-in to the bank’s ODProgram.

Question 6

ECOA prohibits discrimination based on…

Answer 6

• Race or Color
• Sex
• National Origin
• Religion
• Marital status
• Age
• Receipt of income derived from any public assistance program
• applicant’s exercise, in good faith, of any right under the CCPA (consumer credit protection act)

Question 7

Does a request for applicant information under regulation B limit any laws regarding privacy, privileged information, credit reporting limitations, or other similar restrictions?

Answer 7

No

Question 8

What type of information can a creditor request in connection with a credit transaction under ECOA?

When/under what circumstances can they collect the information? (3)

Answer 8

A creditor may request any information in connection with a credit transaction, unless the information requested or collected concerns a prohibited basis.

The regulations permits a creditor to collect such information for:

• monitoring purposes
• when required by court or enforcement agency
• for a special purpose credit program.

Question 9

In cases where it is not required to collect information, when can a creditor inquire about race, color, religion, national origin, or sex of an applicant or other person in connection with the transaction? (2)

Answer 9

A creditor cannot inquire about any of that information if not required to collect, except for a:

• self-test
• sex: an applicant can be requested to designate Mr. Mrs. Ms. but it must be disclosed as optional.

Question 10

When can a creditor request information concerning a spouse or former spouse? (5)

Answer 10

If:

• the spouse will be permitted to use the account
• spouse will be contractually liable on the account
• applicant is relying on the spouse’s income as a repayment for credit
• applicant resides in a community property state, or is purchasing property in that state
• applicant is relying on alimony, child support, or payments from a spouse or former spouse as basis for repayment of credit.

Question 11

True or false: a creditor can request an applicant list any account on which the applicant is contractually liable and to provide the name and addresses of the person in whose name the account is held

Answer 11

True

Question 12

True or false: A creditor cannot ask an applicant to list the names in which the applicant has previously received credit

Answer 12

False. A creditor may ask this.

Question 13

In for what credit types and in what circumstances can a creditor inquire about an applicant’s marital status? (2)

Answer 13

• Individual unsecured credit: if the applicant resides in a community property state or is relying on property in such state for repayment
• Other credit: can only use the terms “married, unmarried, and separated” terms like (single, divorced, or widowed are not allowed, but may be explained under the unmarried category)

Question 14

What limitations are there for disclosing income from alimony, child support, or separate maintenance to a creditor?

Answer 14

A creditor cannot inquire about such income unless the creditor discloses that such income is not required to be revealed if the applicant does not want the creditor to consider it to determine creditworthiness.

Question 15

Can a creditor inquire about birth control practices, intentions of bearing or raising children, or capability to bear children?

Answer 15

NO!

Question 16

Can a creditor inquire about the number and ages of an applicant’s dependents or about dependent related financial obligations or expenditures?

Answer 16

Yes as long as the information is requested without regard to sex, marital status, or any other prohibited basis.

Question 17

Can a creditor inquire about permanent residency or immigration status of an applicant or other person in connection?

Answer 17

Yes.

Question 18

What information can a creditor use to evaluate creditworthiness?

Answer 18

A creditor may consider any information obtained to evaluate creditworthiness as long as the information is not used to discriminate against the applicant on a prohibited basis.

Question 19

Is a credit program that offers more favorable terms to applicants age 60 or older permissible?

Answer 19

Only if it meets the special purpose credit requirements.

more favorable credit terms can only be offered to applicants age 62 or older.

Question 20

In any system for evaluating creditworthiness a creditor may not: (4)

Answer 20

• consider a prohibited basis
• Use childbearing/rearing to make assumptions or aggregate statistics on an applicants income
• take into account if the applicant has a telephone listing (may take into account if there is a phone in the applicants home)
• discount or exclude income of an applicant or spouse because the income is from part-time employment, annuity, pension, or retirement. (may consider the probable continuance and amount of income)

Question 21

In what systems for analyzing credit can a creditor use applicant’s age or income derived from public assistance? (3)

Answer 21

• Empirically derived and statistically sound Credit scoring system. As long as age of an elderly person is not given a negative value.
• Judgement systems: age or PA only to determine creditworthiness
• Any system, if the age of an elderly applicant is used to favor the applicant.

Question 22

How can a creditor evaluate credit history of an applicant when evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit? (3)

Answer 22

Can evaluate:
-credit history of accounts the applicant or applicant’s spouse are permitted to use if they are both contractually liable

• on the applicants request, information applicant presents that indicates credit history considered does not accurately reflect creditworthiness.
• on the applicants request, credit history, of any account reported in the name of the applicant’s spouse or former spouse that accurately demonstrates the applicant’s creditworthiness.

Question 23

Can a creditor evaluate married and unmarried applicants by different standards?

What about joint applicants?

Answer 23

No. Married and unmarried applicants must be evaluated using the same standards.

Joint applicants cannot be treated differently based on the existence, absence, or likelihood of marital relationship between the parties.

Question 24

Can a creditor allow an applicant to open or maintain an account in a birth-given first name and surname, spouses surname or combined surname?

Answer 24

Yes, a creditor shall not refuse this.

Question 25

What limitations are there on actions creditors can take concerning existing open-end accounts?

Answer 25

In the absence of evidence of the applicant’s inability or unwillingness to repay, a creditor shall not:

• require reapplication (exceptions)
• change the terms of the account
• terminate the account

based on the applicant reaching a certain age, retiring or on the basis of change in the applicants name or marital status.

Question 26

When can a creditor require reapplication on an open ended account?

Answer 26

On the basis of change in marital status if the credit was granted based on the income from the applicants spouse and if information available indicates income may not support the amount of credit currently available.

Question 27

When can a creditor require the signature of an applicant’s spouse or other person?

Answer 27

-Only if the spouse or other person is a “joint applicant”

• Unsecured Credit:
• -if an applicant relies on property owned jointly with another person to satisfy creditworthiness
• -if the applicant resides in a community property state or the property is located in such a state, and the property is necessary to satisfy the debt in event of default.
• Secured Credit: to make the property being offered as security available to satisfy the debt in event of default. ex: create a valid lien, pass clear title, waive inchoate rights, or assign earnings.
• if the application needs (but cannot require it be the spouse) an additional party to satisfy the credit requested. Ex: a co-signer or guarantor.

Question 28

Does submitting a joint financial statement or other evidence of jointly held assets indicate an application for joint credit?

Answer 28

NO! a creditor shall not deem the submission of either as an application for joint credit.

Question 29

When must a creditor notify an applicant of action taken on a completed application?

approval, counteroffer, or adverse action

Answer 29

30 days after receiving the completed application.

Question 30

When must a creditor notify an applicant of action taken on an incomplete application?

Answer 30

30 days after taking adverse action.

or provide a notice of incompleteness

Question 31

When must a creditor notify an applicant on action taken on an existing account?

Answer 31

30 days after taking adverse action

Question 32

When must a creditor notify an applicant of action taken on a counteroffer?

Answer 32

90 days after notifying the applicant of a counteroffer, but only if the applicant does not expressly accept or use the credit offered.

Question 33

What is the required content of an adverse action notice? (5)

Answer 33

Shall be in writing and contain:

• statement of action taken
• name and address of creditor
• provisions of section 701(a) of ECOA
• name and address of regulator
• Statement of reasons for action taken OR disclosure of applicants right to statement of reasons within 30 days if requested within 60 days of notification. Along with the name, address, and phone number of person/office it can be obtained from.

Question 34

Can a creditor provide the statement of reasons orally?

Answer 34

Yes, but if they choose to do this the adverse action notice must disclose the applicants right to have them confirmed in writing within 30 days of receiving the applicants written request for confirmation.

Question 35

What are the adverse action content requirements for a business applicant with GAR of 1MM or less in the prior fiscal year? (3)

Answer 35

Same content and timing requirements as for a regular applicant except:

• statement of action taken can be given orally or in writing
• Disclosure of statement of reasons rights can be provided at time of application along with the ECOA notice
• if the application is by telephone the creditor can provide an oral notice of action taken and the applicants right to a statement of reasons.

Question 36

What is the ECOA Notice? 1002.9(b)(1)

Answer 36

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 _____

Question 37

What are the adverse action notification content and timing requirements for businesses with GAR of more than 1MM?

Answer 37

• notify the applicant within a reasonable time orally or in writing of the action taken
• provide a written statement of reasons and ECOA notice if the applicant makes a written request for the reasons within 60 days of the creditors notification.

Question 38

Are the following reasons for adverse action sufficient to satisfy the statement of reasons requirements?

the adverse action was based on the creditor’s internal standards or policies

that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor’s credit scoring system

Answer 38

No, the reasons for adverse action must be specific and indicate principal reasons for the adverse action ex: credit history, insufficient DTI etc.

Question 39

How many principal reasons must a creditor give as part of the statement of reasons requirements?

Answer 39

The regulation does not mandate a specific number of reasons be disclosed, but disclosure of more than 4 reasons is unlikely to be helpful to the applicant.

Question 40

What should be included as part of a notice of incompleteness? (3) written notice

Answer 40

written notice including:

• information needed
• reasonable period of time for applicant to provide information
• inform applicant that failure to provide will result in no further consideration.

Question 41

What are the oral notice requirements for an incomplete application?

Answer 41

-can inform the applicant orally of additional information. If it remains incomplete, creditor shall send written notice

Question 42

What are the adverse action notice requirements for a small volume creditor?

Answer 42

-If the creditor did not receive more than 150 applications during the previous calendar year all notice requirements can be satisfied orally. Including statements of specific reasons.

Question 43

What are the notice timing requirements for a withdrawn approved application? (approved not accepted)

Answer 43

If the creditor approves the application and the applicant has not inquired within 30 days after applying, the creditor may treat the application as withdrawn and need not comply with standard timing requirements.

Question 44

What are the notice requirements if there is more than one applicant?

Answer 44

adverse action notification need only be given to one of them but must be the primary applicant.

Question 45

What are the notice requirements for applications submitted through a third party to more than one creditor? (3)

Answer 45

• If the applicant expressly accepts or uses one of the creditors, notification of action taken by the other creditors is not required.
• if the applicant does not accept or use the credit offered, each creditor must comply with standard notice requirements.
• if the notice is provided by the third party it must disclose the identity of each creditor on whose behalf the notice is given.

Question 46

For creditors that furnish credit information how should they designate a new or existing account to reflect joint participation?

How should it be reported on the credit report?

Answer 46

• new accounts must 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)
• existing accounts should reflect such participation within 90 days after receiving a written request to do so from one spouse.

Question 47

How should a creditor provide routine reports to a consumer reporting agency concerning an account designated to reflect joint participation?

Answer 47

In a manner that will enable the agency to provide access to the information in the name of each spouse.

Question 48

How should a creditor furnish credit information in response to an inquiry, concerning an account designated to reflect joint participation?

Answer 48

In the name of the spouse about whom the information is requested.

Question 49

A creditor may retain in its files information that is prohibited by the ECOA or Regulation B for use in evaluating applications, without violating the ECOA or Regulation B, if the information was obtained …? (3)

Answer 49

• from any source prior to March 23, 1977
• from consumer reporting agencies, an applicant, or others without the specific request of the creditor
• as required to monitor compliance with ECOA or other federal or state laws or regs.

Question 50

What are the record retention requirements for applications?

What must be retained and for how long? (6)

Answer 50

Timing: 25 months (12 months for business credit) after the adverse action notice is sent/notice of incompleteness, a creditor shall retain:

• any application received
• any monitoring information obtained
• any other information used to evaluate the application and not returned to the applicant
• a copy of the adverse action notice (oral: any notation or memo made by creditor)
• statement of reasons
• any written statements submitted by an applicant alleging a violation of ECOA

Question 51

What are the record retention requirements for existing accounts?

What must be retained and for how long? (2)

Answer 51

Timing: 25 months (12 mos business accounts) after adverse action notice date, the creditor shall retain:

• Any written or recorded information concerning the adverse action
• any written statements submitted by an applicant alleging a violation of ECOA

Question 52

What are the record retention requirements for other applications?

what must be retained and for how long?

Answer 52

25 months (12 mos business) after the date a creditor receives an application for which they are not required to comply with notification requirements, they shall retain:

-all written or recorded info concerning the applicant, including the notation of action taken.

Question 53

What are the record retention requirements for enforcement proceedings and investigations?

What must be retained and for how long?

Answer 53

Retain the information beyond the 25 months (12 mos business) if the creditor has notice of investigation or an enforcement action for an alleged violation of ECOA. It should be retained until final disposition of the matter.

Question 54

What is the special rule for certain business credit applications regarding record retention?

Answer 54

For businesses applicants with GAR greater than $1MM, the bank shall retain records for 60 days after notification of action taken.

If within that time the applicant requests in writing the statement of reasons, the creditor shall retain the records for 12 months as usual.

Question 55

What are the record retention requirements for self-tests?

What must be retained and for how long? (2)

Answer 55

• For 25 months after the completion of a self test, the bank shall retain all written or recorded info about the self-test.
• beyond the 25 months the bank shall retain info if it is under investigation or subject to an enforcement proceeding due to a potential violation or civil action. (until disposition)

Question 56

What are the record retention requirements for prescreened solicitations?

what must be retained and for how long?

Answer 56

For 25 months after the date an offer of credit is made to potential customers (12 mo business) the bank shall retain:

• text of any prescreened solicitation
• list of criteria the creditor used to select potential recipients
• any complaint correspondence

Question 57

What monitoring information is requested for application to purchase or refinance an owner occupied principal dwelling? (5)

Answer 57

• Ethnicity
• Race
• Sex
• Marital Status
• Age

Question 58

When collecting monitoring information for Ethnicity what categories can be used? (2)

Answer 58

• Hispanic or Latino

- Non Hispanic or Latino

Question 59

When collecting monitoring information for race, what categories can be used? (5)

Answer 59

• American Indian or Alaska native
• Asian
• Black or African American
• Native Hawaiian or other Pacific Islander
• White

Question 60

What is the definition of a dwelling under ECOA?

Answer 60

Residential structure that contains 1-4 units, whether or not the structure is attached to real property.

This includes an individual condo, cooperative unit, mobile home, manufactured home.

Question 61

Is an applicant required to supply GMI information?

Answer 61

No, but if they choose not to it must be noted on the form. Then the creditor shall also note on the form, to the extent possible, the ethnicity, race, and sex of the applicant on the basis of visual observation or surname.

Question 62

What are creditors required to disclose to applicants regarding GMI collection? (2)

Answer 62

• that the GMI information is being requested by the Government for the purpose of monitoring compliance with federal laws that prohibit creditors from discriminating on prohibited basis.
• That if the applicant 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.

Question 63

What is the definition of a valuation under ECOA?

Answer 63

Any estimate of the value of a dwelling developed in connection with an application for credit.

Ex: report prepared by an appraiser, valuation created by bank staff, reports from automated valuation models.

Question 64

When must an appraisal be provided for closed end credit?

open end?

Answer 64

at least three business days prior to consummation

three business days prior to account opening

Question 65

In what circumstances are creditors required to provide appraisals to applicants?

Answer 65

Creditors must provide appraisals and other written evaluations developed in connection with an application for credit to be secured by a first lien on a dwelling.

Question 66

Can an applicant waive the timing requirement for appraisals?

Answer 66

Yes an applicant can waive the requirement and agree to receive the copy at or or before consummation or account opening.

As long as the bank obtains the waiver at least 3 business days prior to account opening or consummation.

If the applicant provides waiver and the transaction is cancelled a creditor must provide the copy no later than 30 days after the date of cancellation.

Question 67

What disclosures are required regarding appraisals? when must they be provided?

Answer 67

Notice of right to receive a copy of appraisal must be provided no later than the 3rd business day after receiving an application for a first lien on a dwelling.

Can be provided electronically without consent requirements under E-Sign.

Question 68

Can a creditor charge an applicant for providing a copy of the appraisal/valuation?

Answer 68

No, but they can require applicants to pay a reasonable fee to reimburse the creditor for the cost of the appraisal/valuation.

Question 69

Are the appraisal/valuation requirements applicable to incomplete or withdrawn applications?

Answer 69

If the application is for a first lien on a dwelling then yes, it is applicable whether credit is extended, denied, incomplete or withdrawn.