Regulation B / ECOA

Question 1

Prohibited Basis - Reg B

Answer 1

1) Sex
2) Marital Status
3) Race
4) Color
5) National Origin
6) Religion
7) Age
8) Receipt of Public Assistance
- income comes from public assistance, not because the income is too low
9) Exercise of rights under Consumer Credit Protection Act
- can’t deny loan because of fraud alert, active duty alert, SCRA, etc

Question 2

Coverage of ECOA

Answer 2

1) Any and all loans are covered (secured/unsecured; closed end/open end; consumer/commercial)
2) Covers the entire lifecycle of the transaction (inquiry to payoff)
3) Advertising

Question 3

Types of Discrimination - Reg B

Answer 3

1) Overt Discrimination
2) Disparate Treatment
3) Disparate Impact

Question 4

Overt Discrimination

Answer 4

Obvious Discrimintation

• found in policies and procedures, or very obvious
• Ex. unmarried applicant requires cosigner but married applicants don’t

Question 5

Disparate Treatment

Answer 5

Treat members of a protected class differently because of that membership in that class
 - Ex. Minority applicant applies for loan, pull credit, credit issues, and make them provide written explanation; non-minority isn't required to provide written explanation

Question 6

Disparate Impact

Answer 6

Application of otherwise neutral policy or procedure that disproportionally negatively impacts a protected class
- Ex. won’t make a loan unless home value is $60,000; can’t make loans in underserved neighborhoods where average home value is $45,000

Question 7

What is an application? - Reg B

Answer 7

An oral or written request for an extension of credit made in accordance with procedures established for the type of credit requested

• important for adverse action timing purposes
• actual practices may override polices and procedures if there is a discrepancy

Question 8

Signature Requirements - Unsecured Credit - Reg B

Answer 8

If you receive an application from one applicant, cannot require another signature if they are creditworthy (spouse, or others)

Question 9

Signature Requirements - Secured Credit - Reg B

Answer 9

If you receive an application from one applicant, cannot require another signature if they are creditworthy; except for community property states
- may need to have spouse sign mortgage or deed to perfect the lien in certain instances

Question 10

Signature Requirements - Guarantors of Debt - Reg B

Answer 10

Co-signers (guarantors) - don’t need spousal signature on credit application, may need it on mortgage or deed

Question 11

Co-signers (guarantors) vs. Co-borrowers - Reg B

Answer 11

• Co-signers (guarantors) - required by bank

- Co-borrowers - requested by borrower

Question 12

Written Applications - Reg B

Answer 12

Written applications are only required for:

• loans with the purpose to purchase or refinance the borrower’s primary residence (and secured by it)
• collection of government monitoring information (GMI)

Question 13

Customer Inquiry vs. Application - Reg B

Answer 13

Depends on the response given by the bank. If there is an adverse response, it is an application and denial that requires an adverse action notice

Question 14

Joint Applicants - Reg B

Answer 14

Must have evidence of joint intent that was gathered at application, not later

• can’t use signatures on note as proof
• can’t use submission of joint financial statement as proof of joint intent
• proof of joint intent would be a check box on application form

Question 15

Adverse Action - Reg B

Answer 15

A refusal to grant credit

• on substantially the same terms requested by the applicant
• most any decision the applicant/borrower would not like
• refusal to increase the credit limit on an existing credit line
• a counteroffer that is made by the creditor and the applicant accepts is not adverse actions (90 day timeframe to accept a counteroffer)

Question 16

Adverse Action Exceptions - Reg B

Answer 16

1) Change in terms expressly agreed to by the applicant
2) Inactivity, default, or delinquency actions
3) Bank doesn’t offer the type of credit requested (type, not term)
4) Must provide FCRA notice if the decision was influenced partially or entirely by information in a consumer report or from a third party

Question 17

Adverse Action Notice - Consumer Credit - Reg B

Answer 17

1) Must provide adverse action form within 30 days of receipt of a completed application
2) Counteroffer may be supplied with the form
3) If application is expressly withdrawn by the applicant before a credit decision is made within 30 days of submission, no notice is required
4) Check as many denial reasons as apply

Question 18

Adverse Action Notice Part II - Consumer Credit - Reg B

Answer 18

Part II contains FCRA Adverse Action language

• only complete if the consumer report information contributed to the denial
• Contact information must be provided
• ECOA Notice must be delivered no later than time of the action taken

Question 19

Adverse Action Notice - Commercial Credit - Annual Gross Revenue over $1 Million - Reg B

Answer 19

1) Written or verbal notice must be given within a “reasonable time” after adverse action taken
2) Written statement of reasons for denial required only if applicant makes a written request for such a statement within 60 days after the notice of adverse action

Question 20

Adverse Action Notice - Commercial Credit - Annual Gross Revenue less than $1 Million - Reg B

Answer 20

1) Notice may be written or verbal
2) May tell the applicant of right to request a statement of reasons at the time the application is taken, rather than with the adverse action notice, provided the disclosure is in a form the applicant can keep
3) In the alternative, the consumer procedure may be followed (Adverse Action provided in 30 days)

Question 21

Appraisal Rules - Reg B

Answer 21

1) Notify applicants within 3 business days of application of the right to receive a free copy of written appraisals and valuations
- not governmental/publically available documents or manufactured home invoices, or valuations developed for previous loans
2) Provide applicants with a free copy of all written appraisals and valuations “developed” (whether used or not) promptly after receiving them
- no later than 3 business days prior to closing
- delivery means in the applicant’s hands (not just mailed)
- required regardless if loan closes
3) Applicants can waive 3-day requirement, provided a copy of all written appraisals and valuations are provided at or prior to closing