Equal Credit Opportunity (Regulation B); Special Purpose Credit Programs

Publisher lists this guidance as withdrawn/rescinded: Equal Credit Opportunity (Regulation B); Special Purpose Credit Programs, 86 FR 3762 (Jan. 15, 2021); withdrawn on June 17, 2026

3762 Federal Register/ Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations
1
Regulatory Capital Rule: Eligible Retained
Income, 85 FR 15909 (March 20, 2020).
2
Regulatory Capital Rule and Total Loss-
Absorbing Capacity Rule: Eligible Retained Income,
85 FR 63423 (October 8, 2020). The final rule is
effective January 1, 2021.
1
85 FR 77987 (Dec. 3, 2020).
ACTION: Final rule; correcting
amendments.
SUMMARY: The Board of Governors of the
Federal Reserve System (Board) is
correcting changes to the definition of
eligible retained income in the capital
rule. This definition is used for
calculating limitations on capital
distributions and discretionary bonus
payments and was adopted in an
interim final rule published on March
18, 2020, and as a final rule published
on October 8, 2020.
DATES
: This correction is effective
January 15, 2021.
FOR FURTHER INFORMATION CONTACT:
Benjamin McDonough, Associate
General Counsel, (202) 452–2036; Mark
Buresh, Senior Counsel, (202) 452–5270;
or Andrew Hartlage, Counsel, (202)
452–6483, Legal Division, Board of
Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
Users of Telecommunications Device for
the Deaf (TDD) only, call (202) 263–
4869.
SUPPLEMENTARY INFORMATION: The Board
of Governors of the Federal Reserve
System (Board) is issuing this correction
to the definition of eligible retained
income in the capital rule, 12 CFR part
217. This definition is used for
calculating limitations on capital
distributions and discretionary bonus
payments and was adopted as an
interim final rule published on March
18, 2020 (ERI interim final rule),
1
and as
a final rule published on October 8,
2020 (ERI final rule).
2
In the ERI interim
final rule, the Board, together with the
Office of the Comptroller of the
Currency (OCC) and the Federal Deposit
Insurance Corporation (FDIC, and
together with the Board and the OCC,
the agencies), revised the definition of
eligible retained income at section
__.11(a)(2)(i) of the capital rule on an
interim basis and sought comment on
the revisions. In the ERI final rule, the
agencies adopted these changes to the
definition of eligible retained income,
introduced through the ERI interim final
rule, without change.
On March 20, 2020, the Board
published in the Federal Register a final
rule, effective May 18, 2020,
implementing the stress capital buffer
requirement in the capital rule (SCB
final rule), which revised section 217.11
of the Board’s capital rule generally. The
SCB final rule revised the definition of
eligible retained income in section
217.11 of the Board’s capital rule in a
manner inconsistent with the the
Board’s intent in the ERI interim final
rule and the ERI final rule. The Board
is issuing this notice to correct the
definition of eligible retained income so
that it is consistent with the definition
established by the ERI interim final rule
and affirmed by the ERI final rule.
List of Subjects in 12 CFR Part 217
Administrative practice and
procedure; Banks, banking; Capital;
Federal Reserve System; Holding
companies.
12 CFR Chapter II
Authority and Issuance
For the reasons set forth in the
Supplementary Information, chapter II
of title 12 of the Code of Federal
Regulations is amended as follows:
PART 217—CAPITAL ADEQUACY OF
BANK HOLDING COMPANIES,
SAVINGS AND LOAN HOLDING
COMPANIES, AND STATE MEMBER
BANKS (REGULATION Q)
■1. The authority citation for part 217
continues to read as follows:
Authority: 12 U.S.C. 248(a), 321–338a,
481–486, 1462a, 1467a, 1818, 1828, 1831n,
1831o, 1831p–1, 1831w, 1835, 1844(b), 1851,
3904, 3906–3909, 4808, 5365, 5368, 5371,
5371 note; and Pub. L. 116–136, 134 Stat.
281.
■2. Section 217.11 is amended by
revising paragraph (a)(2)(i) to read as
follows:
§ 217.11 Capital conservation buffer,
countercyclical capital buffer amount, and
GSIB surcharge.
(a) * * *
(2) * * *
(i) Eligible retained income. The
eligible retained income of a Board-
regulated institution is the greater of:
(A) The Board-regulated institution’s
net income, calculated in accordance
with the instructions to the FR Y–9C or
Call Report, as applicable, for the four
calendar quarters preceding the current
calendar quarter, net of any
distributions and associated tax effects
not already reflected in net income; and
(B) The average of the Board-regulated
institution’s net income, calculated in
accordance with the instructions to the
FR Y–9C or Call Report, as applicable,
for the four calendar quarters preceding
the current calendar quarter.
* * * * *
By order of the Board of Governors of
the Federal Reserve System, acting
through the Secretary of the Board
under delegated authority.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021–00906 Filed 1–14–21; 8:45 am]
BILLING CODE 6210–01–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1002
Equal Credit Opportunity (Regulation
B); Special Purpose Credit Programs
AGENCY: Bureau of Consumer Financial
Protection.
ACTION: Advisory opinion.
SUMMARY: The Bureau of Consumer
Financial Protection (Bureau) is issuing
this Advisory Opinion (AO) to address
regulatory uncertainty regarding
Regulation B, which implements the
Equal Credit Opportunity Act, as it
applies to certain aspects of special
purpose credit programs designed and
implemented by for-profit organizations
to meet special social needs.
Specifically, this AO clarifies the
content that a for-profit organization
must include in a written plan that
establishes and administers a special
purpose credit program under
Regulation B. In addition, this AO
clarifies the type of research and data
that may be appropriate to inform a for-
profit organization’s determination that
a special purpose credit program is
needed to benefit a certain class of
persons.
DATES: This advisory opinion is
effective on January 15, 2021.
FOR FURTHER INFORMATION CONTACT:
Christopher Davis, Attorney-Advisor;
Office of Fair Lending and Equal
Opportunity, at CFPB_FairLending@
cfpb.gov or 202–435–7000. If you
require this document in an alternative
electronic format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION: The
Bureau is issuing this AO through the
procedures for its Advisory Opinions
Policy.
1
Refer to those procedures for
more information.
I. Advisory Opinion
A. Background
Congress enacted the Equal Credit
Opportunity Act (ECOA or the Act) in
1974, initially prohibiting
discrimination in credit on the basis of
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3763 Federal Register/ Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations
2
See Public Law 93–495, sec. 701(a), 88 Stat.
1500, 1521 (1974).
3
See ECOA Amendments Act, Public Law 94–
239, sec. 701(a), 90 Stat. 251, 251 (1976).
4
See Public Law 94–239, sec. 701(c)(3), 90 Stat.
251, 251 (1976).
5
S. Rept. 94–589, 94th Cong., 2nd Sess., at 7,
reprinted in 1976 U.S.C.C.A.N. 403, 409.
6
See id.
7
See 42 FR 1242 (Jan. 6, 1977).
8
See Public Law 111–203, tit. X, sec. 1085, 124
Stat. 1376, 2084.
9
76 FR 79442 (Dec. 21, 2011) (promulgating 12
CFR pt. 1002 & supp. I).
10
See 81 FR 46652, 46656 (July 18, 2016).
11
See Susan M. Bernard and Patrice
Alexander Ficklin, Expanding Access to
Credit to Underserved Communities (July 31,
2020), https://www.consumerfinance.gov/about-us/
blog/expanding-access-credit-underserved-
communities/.
12
See id.
13
85 FR 46600 (Aug. 3, 2020).
14
Fed. Reserve Bank of N.Y., Credit, Income and
Inequality (June 2020), at 1 https://
www.newyorkfed.org/medialibrary/media/research/
staff_reports/sr929.pdf (‘‘[C]redit-constrained
individuals often have limited wealth, and their
exclusion from credit can hinder economic mobility
and fuel persistent income inequality.’’).
15
U.S. Census Bureau, Gaps in the Wealth of
Americans by Household Type (Aug. 27, 2019),
https://www.census.gov/library/stories/2019/08/
gaps-in-wealth-americans-by-household-
type.html?utm_campaign=20190827
msacos1ccstors&utm_medium=email&utm_
source=govdelivery%.
16
Consumer Fin. Prot. Bureau, Data Point: 2019
Mortgage Market Activity and Trends (June 2020),
at 36, https://files.consumerfinance.gov/f/
documents/cfpb_2019-mortgage-market-activity-
trends_report.pdf.
17
See id.
18
See id. at 47.
19
See, e.g., Fed. Reserve Bank of N.Y., supra note
14.
20
Board of Governors of the Fed. Reserve Sys.,
Disparities in Wealth by Race and Ethnicity in the
2019 Survey of Consumer Finances (Sept. 28, 2020),
https://www.federalreserve.gov/econres/notes/feds-
notes/disparities-in-wealth-by-race-and-ethnicity-
in-the-2019-survey-of-consumer-finances-
20200928.htm#fig1.
21
Id.
22
See, e.g., Fed. Reserve Bank of N.Y., Double
Jeopardy: COVID–19’s Concentrated Health and
Wealth Effects in Black Communities (Aug. 2020),
https://www.newyorkfed.org/medialibrary/media/
smallbusiness/DoubleJeopardy_
COVID19andBlackOwnedBusinesses (‘‘Black
businesses experienced the most acute decline,
with a 41 percent drop. Latinx business owners fell
by 32 percent and Asian business owners dropped
by 26 percent. In contrast, the number of white
business owners fell by 17 percent.’’); Fed. Reserve
Bank of Minn., COVID–19 and Indian Country:
Early snapshot reveals disproportionate economic
exposure and uncertainty (Apr. 10, 2020), https://
www.minneapolisfed.org/article/2020/covid-19-
and-indian-country-early-snapshot-reveals-
disproportionate-economic-exposure-and-
uncertainty.
23
Board of Governors of the Fed. Reserve Sys.,
Report on the Economic Well-Being of U.S.
Continued
sex or marital status.
2
Two years later,
Congress expanded the prohibition
against discrimination in credit
transactions to include age, race, color,
religion, national origin, receipt of
public assistance benefits, and exercise
of rights under the Federal Consumer
Credit Protection Act.
3
At the same
time, under section 701(c) of the ECOA,
Congress clarified that it does not
constitute discrimination under the Act
for a creditor to ‘‘refuse to extend credit
offered pursuant to’’ ‘‘any special
purpose credit program offered by a
profit-making organization to meet
special social needs which meets
standards prescribed in regulations by
the [Bureau].’’
4

By permitting the consideration of a
prohibited basis such as race, national
origin, or sex in connection with a
special purpose credit program,
Congress protected a broad array of
programs ‘‘specifically designed to
prefer members of economically
disadvantaged classes’’ and ‘‘to increase
access to the credit market by persons
previously foreclosed from it.’’
5

Congress provided examples of such
programs—e.g., government sponsored
housing credit subsidies for the aged or
the poor and programs offering credit to
a limited clientele such as credit union
programs and educational loan
programs.
6

The Board of Governors of the Federal
Reserve System (Board)—which
exercised rulemaking authority under
the ECOA at the time—promulgated
regulations implementing the Act’s
special purpose credit program
provision.
7
In the Dodd-Frank Wall
Street Reform and Consumer Protection
Act of 2010, Congress transferred
primary rulemaking authority over the
ECOA to the Bureau,
8
which
subsequently republished the Board’s
existing regulations without material
change.
9
The Bureau has addressed
special purpose credit programs in a
previous edition of Supervisory
Highlights
10
and a blog,
11
explaining
that special purpose credit programs
may be one tool available to creditors to
‘‘meet the credit needs of underserved
communities.’’
12

In recent months, stakeholders have
expressed interest in developing special
purpose credit programs but have also
raised questions about how to do so in
a manner consistent with Regulation B,
indicating that regulatory uncertainty
may inhibit broader creation of these
programs by creditors. Many comments
to the Bureau’s recent Request for
Information on the Equal Credit
Opportunity Act and Regulation B
13

from a variety of external stakeholders,
including both consumer and civil
rights advocates and industry
representatives, indicate that special
purpose credit programs may be one
way to promote fair and responsible
access to credit, but that there is a need
for further guidance on compliant
implementation of these programs.
The Bureau is issuing this AO to
address this regulatory uncertainty in
the hope that broader creation of special
purpose credit programs by creditors
will help expand access to credit among
disadvantaged groups and will better
address special social needs that exist
today. Bureau stakeholders have called
attention to the problem of unmet credit
needs among minority communities and
the role that discrimination may have
played in creating and exacerbating
those deficits. Research from the Federal
Reserve Bank of New York has shown
that inequities in credit availability and
in the terms and conditions of credit
appear to have led to income
inequality.
14
For consumers who own a
home, moreover, home equity
represents a significant share of
household net worth,
15
but Home
Mortgage Disclosure Act (HMDA) data
show that in 2019, Black, Hispanic
White, and Asian borrowers had notably
higher mortgage loan denial rates than
non-Hispanic White borrowers,
continuing a trend from years prior.
16

For example, the denial rates for
conventional home-purchase loans were
16.0 percent for Black borrowers, 10.8
percent for Hispanic White borrowers,
and 8.6 percent for Asian borrowers; in
contrast, denial rates for such loans
were 6.1 percent for non-Hispanic
White borrowers.
17
Black and Hispanic
White borrowers were also more likely
to have higher-priced conventional and
nonconventional loans in 2019.
18

According to some studies, these
types of racial and ethnic differences in
access to credit perpetuate wealth
inequality.
19
The Board’s 2019 Survey
of Consumer Finances, for example,
indicates that the typical White family
has $188,200 in median family wealth,
which is eight times the wealth of the
typical Black family ($24,100), and five
times the wealth of the typical Hispanic
family ($36,100).
20
Other families—
including Asian families—also ‘‘have
lower wealth than White families.’’
21

The economic fallout from the ongoing
COVID–19 pandemic appears to be
exacerbating these racial and ethnic
disparities in wealth.
22

Bureau stakeholders have also noted
that racial and ethnic disparities in
access to credit extend beyond the
mortgage market. For example, a report
from the Board documented disparities
in both mortgage and non-mortgage
credit denials among White, Black, and
Hispanic credit applicants.
23

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3764 Federal Register/ Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations
Households in 2016, at 33–34 (May 2017), https://
www.federalreserve.gov/publications/files/2016-
report-economic-well-being-us-households-
201705.pdf.
24
See id. at 34.
25
Fed. Reserve, Report on Minority-Owned Firms
(Dec. 2019), https://www.fedsmallbusiness.org/
medialibrary/fedsmallbusiness/files/2019/
20191211-ced-minority-owned-firms-report.pdf.
26
See, e.g., Press Release, BMO, BMO Commits $5
Billion to Advance Inclusive Economic Recovery in
the U.S. (Nov. 10, 2020), https://
newsroom.bmo.com/2020-11-10-BMO-Commits-5-
Billion-to-Advance-Inclusive-Economic-Recovery-
in-the-U-S; Press Release, Am. Express, American
Express Announces $1 Billion Action Plan to
Promote Racial, Ethnic and Gender Equity for
Colleagues, Customers and Communities (Oct. 29,
2020), https://about.americanexpress.com/all-news/
news-details/2020/American-Express-Announces-1-
Billion-Action-Plan-to-Promote-Racial-Ethnic-and-
Gender-Equity-for-Colleagues-Customers-and-
Communities/default.aspx; Press Release, JPMorgan
Chase & Co., JPMorgan Chase Commits $30 Billion
to Advance Racial Equity (Oct. 8, 2020), https://
www.jpmorganchase.com/news-stories/jpmc-
commits-30-billion-to-advance-racial-equity; Press
Release, Citigroup Inc., Citi Launches More Than $1
Billion in Strategic Initiatives to Help Close the
Racial Wealth Gap (Sept. 23, 2020), https://
www.citigroup.com/citi/news/2020/200923a.htm;
Press Release, Huntington Bancshares, Huntington
Announces $20 Billion Community Plan to Help
Boost Economic Opportunity Throughout its Seven-
state Footprint (Sept. 1, 2020), http://huntington-
ir.com/ne/news/hban09012020.pdf; Press Release,
PNC, PNC Commits More Than $1 Billion To Help
End Systemic Racism and Support Economic
Empowerment of African Americans and Low- And
Moderate-Income Communities (June 18, 2020),
https://pnc.mediaroom.com/2020-06-18-PNC-
Commits-More-Than-1-Billion-To-Help-End-
Systemic-Racism-And-Support-Economic-
Empowerment-Of-African-Americans-And-Low-
And-Moderate-Income-Communities; Press Release,
U.S. Bank, U.S. Bank to rebuild in Minneapolis;
Announces multiple investments and initiatives to
address social and economic inequities (June 5,
2020), https://www.usbank.com/newsroom/stories/
us-bank-to-rebuild-in-minneapolis-announces-
multiple-investments-and-initiatives-to-address-
social-and-economic-inequities.html; Press Release,
Bank of Am., Bank of America Announces $1
Billion/4-Year Commitment to Support Economic
Opportunity Initiatives (June 2, 2020), https://
newsroom.bankofamerica.com/press-releases/bank-
america-announces-four-year-1-billion-
commitment-supporting-economic.
27
See 12 CFR 1002.8(a)(2), (3).
28
15 U.S.C. 1691(c).
29
12 CFR 1002.8(a)(3)(i).
30
12 CFR 1002.8(a)(3)(ii).
31
12 CFR 1002.8(b)(2); see, e.g., United States v.
Am. Future Sys., Inc., 743 F.2d 169, 180 (3d Cir.
1984) (explaining that a creditor is ‘‘prohibited from
discriminating on the basis of race, sex or marital
status in a credit program designed to extend credit
to the group of persons between the ages of 18 and
21’’).
32
12 CFR 1002.8(b)(2).
33
12 CFR 1002.8(c).
34
See Official Interpretations, 12 CFR pt. 1002
(supp. I), sec. 1002.8, ¶ 8(a)–1.
35
See id.
36
See 12 CFR 1002.8(a)(3)(i).
Specifically, White credit applicants
reported being denied for credit—
including, but not limited to, mortgage
credit—at a rate of 17.3 percent; Black
credit applicants reported being denied
for credit at a rate of 41.3 percent; and
Hispanic credit applicants reported
being denied for credit at a rate of 34.6
percent.
24
In the small business lending
context, a report by the Board showed
that ‘‘[o]n average, Black- and Hispanic-
owned firm applicants received
approval for smaller shares of the
financing they sought compared to
White-owned small businesses that
applied for financing. This same report
noted that larger shares of Black-,
Hispanic-, and Asian-owned firm
applicants did not receive any of the
financing they applied for—38%, 33%,
and 24%, respectively—compared to
20% of White-owned business
applicants.’’
25

In recent months, multiple financial
institutions have publicly committed to
making billions of dollars available to
addressing racial wealth disparities.
26

Bureau stakeholders have indicated that
investments in special purpose credit
programs may allow for better
expansion of credit access to
underserved communities.
B. Coverage
This AO applies solely to certain
aspects of special purpose credit
programs (i.e., those described in part
I.C below) designed and implemented
by for-profit organizations to meet
special social needs under the
Regulation B requirements identified
below. This AO does not apply to any
credit assistance program expressly
authorized by Federal or State law for
the benefit of an economically
disadvantaged class of persons, or to
any credit assistance program offered by
a not-for-profit organization, as defined
under section 501(c) of the Internal
Revenue Code of 1954, as amended, for
the benefit of its members or for the
benefit of an economically
disadvantaged class of persons.
27
This
AO has no application to any other
circumstance and does not offer a legal
interpretation of any other provisions of
law.
C. Applicable Regulatory Provisions
It is not discrimination under the
ECOA for a creditor to refuse to extend
credit offered pursuant to a legally
compliant special purpose credit
program.
28
Regulation B, which
implements the ECOA, sets forth
compliance standards and general rules
for special purpose credit programs. A
for-profit organization that offers or
participates in a special purpose credit
program to meet special social needs
must establish and administer the
special purpose credit program pursuant
to a ‘‘written plan’’ that identifies the
class of persons the program is designed
to benefit and sets forth the procedures
and standards for extending credit
pursuant to the program.
29
In addition,
a for-profit organization that offers or
participates in a special purpose credit
program to meet special social needs
must establish and administer the
special purpose credit program to
extend credit to a class of persons who,
under the organization’s customary
standards of creditworthiness, probably
would not receive such credit or would
receive it on less favorable terms than
are ordinarily available to other
applicants applying to the organization
for a similar type and amount of
credit.
30

Regulation B is clear that a special
purpose credit program qualifies as such
only where the program was established
and is administered so as not to
discriminate against an applicant on any
prohibited basis.
31
All program
participants may be required, however,
to share one or more common
characteristics (for example, race,
national origin, or sex) so long as the
program is not established and is not
administered with the purpose of
evading the requirements of the ECOA
or Regulation B.
32
If participants in a
special purpose credit program are
required to possess one or more
common characteristics and if the
program otherwise satisfies the
applicable requirements of Regulation
B, a creditor may request and consider
information regarding the common
characteristic(s) in determining the
applicant’s eligibility for the program.
33

The Bureau does not determine
whether individual programs qualify for
special purpose credit status.
34
The
creditor administering or offering the
special purpose credit program must
make these decisions regarding the
status of its program.
35
It follows that a
creditor may initiate a special purpose
credit program without the approval of
the Bureau.
D. Legal Analysis
1. Written Plan
A for-profit organization must
establish and administer a special
purpose credit program pursuant to a
written plan.
36
The plan must contain
information that supports the need for
the program, including:
•The class of persons that the
program is designed to benefit;
•The procedures and standards for
extending credit pursuant to the
program;
•Either (i) the time period during
which the program will last or (ii) when
the program will be reevaluated to
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3765 Federal Register/ Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations
37
12 CFR 1002.8(a)(3)(i)–(ii); Official
Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.8, ¶ 8(a)–6.
38
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–5.
39
See 12 CFR 1002.8(b)(2), (d).
40
12 CFR 1002.8(a)(3)(i).
41
See 12 CFR 1002.8(a)(3)(ii).
42
See 12 CFR 1002.8(b)(2), (c).
43
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–6.
44
12 CFR 1002.8(a)(3)(ii).
45
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–5.
46
12 CFR 1002.8(a)(3)(i) (emphasis added).
47
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–6.
48
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–5.
49
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–5.
50
The Official Interpretations to Regulation B
expressly provide that a for-profit organization is
permitted to conduct a ‘‘broad analysis.’’ 12 CFR pt.
1002 (supp. I), sec. 1002.8, ¶ 8(a)–5 (emphasis
added).
51
Official Interpretations, 12 CFR pt. 1002 (supp.
I), sec. 1002.8, ¶ 8(a)–5.
determine if there is a continuing need
for it; and
•A description of the analysis the
organization conducted to determine the
need for the program.
37

Each of these required components is
discussed in further detail below. For-
profit organizations that draft written
plans containing the necessary elements
as set forth in Regulation B and herein
will satisfy the requirement of 12 CFR
1002.8(a)(3)(i).
a. Class of Persons
The class of persons that a special
purpose credit program is designed to
benefit must consist of those ‘‘who
would otherwise be denied credit or
would receive it on less favorable
terms.’’
38
A written plan must explain
whether the class of persons will be
required to demonstrate a financial need
and/or share a common characteristic.
39

Such a class could be defined with or
without reference to a characteristic that
is otherwise a prohibited basis under
the ECOA. For example, if need is
determined in accordance with part
I.D.2 below, a for-profit organization’s
written plan might identify a class of
persons as minority residents of low-to-
moderate income census tracts,
residents of majority-Black census
tracts, operators of small farms in rural
counties, minority- or woman-owned
small business owners, consumers with
limited English proficiency, or residents
living on tribal lands.
b. Procedures and Standards
A written plan must also set forth the
procedures and standards for extending
credit pursuant to the special purpose
credit program.
40
Those procedures and
standards must be designed to increase
the likelihood that a class of persons
‘‘who would otherwise be denied
credit’’ will receive credit pursuant to
the program, or that a class of persons
who ‘‘would receive [credit] on less
favorable terms’’ will receive credit on
more favorable terms pursuant to the
program.
41
To accomplish these goals a
creditor may, for example, introduce a
new product or service, modify the
terms and conditions or certain
eligibility requirements for an existing
product or service, or modify policies
and procedures related to certain loss
mitigation programs, such as loan
modifications. For example, a creditor
may offer a new small business loan
product for woman-owned businesses
by relaxing its customary standard of
requiring three years of experience in
the industry to one year, if the creditor
has determined that this requirement
would probably prevent woman-owned
businesses from qualifying for small
business financing. The written plan
must describe the procedures and
standards adopted and explain how
they will increase credit availability
with respect to the identified class of
persons. If the class of persons the
program is designed to benefit will be
required to share a common
characteristic, the written plan may also
explain whether the organization will
request and consider information that
would otherwise be prohibited under
the ECOA.
42

c. Program Duration/Reevaluation
The written plan must provide ‘‘a
specific period of time for which the
program will last’’ or ‘‘contain a
statement regarding when the program
will be reevaluated to determine if there
is a continuing need for it.’’
43
If an
organization opts for the latter
approach, reevaluation could be made
contingent on a certain set of
circumstances or simply a set date. The
written plan could also adopt a
combined approach—for example, the
special purpose credit program could
end on a set date, or when a pre-
established origination volume has been
reached, whichever occurs earlier. If an
organization extends the program
beyond what is set forth in its written
plan, it must document the terms of that
extension in order to ensure the
program continues to be administered
pursuant to a written plan.
d. Description of Analysis
A special purpose credit program
must be ‘‘established and
administered’’
44
to benefit a class of
people who would otherwise be denied
credit or would receive it on less
favorable terms, as determined by a
‘‘broad analysis,’’
45
and it must be
‘‘established and administered pursuant
to a written plan.’’
46
The Official
Interpretations to Regulation B further
provide that a written plan ‘‘must
contain information that supports the
need for the particular program.’’
47

Thus, a for-profit organization’s written
plan must describe or incorporate the
analysis that supports the need for the
program.
2. Determination of Need for a Special
Purpose Credit Program
a. Permissible Sources of Data and
Research
In designing a special purpose credit
program, a for-profit organization must
determine that the program will benefit
a class of persons who would otherwise
be denied credit or would receive it on
less favorable terms. This determination
can be based on a broad analysis using
the organization’s own research or data
from outside sources, including
governmental reports and studies.
48
The
Official Interpretations to Regulation B
provide two examples: First, ‘‘a creditor
might design new products to reach
consumers who would not meet, or have
not met, its traditional standards of
creditworthiness due to such factors as
credit inexperience or the use of credit
sources that may not report to consumer
reporting agencies’’; and second, ‘‘a
bank could review [HMDA] data along
with demographic data for its
assessment area and conclude that there
is a need for a special purpose credit
program for low-income minority
borrowers.’’
49

For-profit organizations may rely on a
wide range of research or data to
analyze whether a special purpose
credit program is needed to benefit a
class of persons who would otherwise
be denied credit or would receive it on
less favorable terms.
50
A for-profit
organization’s analysis might consider
research or data that are already in the
public domain. The Official
Interpretations to Regulation B cite
HMDA data as one example.
51
In the
case of small business lending, the
Small Business Administration or the
Board’s Small Business Credit Surveys
are possible sources of information.
Other governmental or academic reports
and studies exploring the historical and
societal causes and effects of
discrimination may also be considered.
Finally, the for-profit organization’s
own data or research—if available—may
be a helpful source for conducting an
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3766 Federal Register/ Vol. 86, No. 10 / Friday, January 15, 2021 / Rules and Regulations
52
12 CFR 1002.8(a)(3)(ii).
53
The fact that a for-profit organization identifies
a need for a special purpose credit program based
on an analysis of its own data does not, by itself,
create an inference or presumption that the
organization has engaged in unlawful credit
discrimination. Of course, the adoption of a special
purpose credit program does not absolve a creditor
of its ordinary obligations under the ECOA and
Regulation B; the Bureau strongly encourages
creditors to evaluate their fair lending risk using an
effective compliance management system. Finally,
Regulation B does not require a creditor to show
that a special purpose credit program is established
and administered to extend credit to a class of
persons who definitely would not receive such
credit or would receive it on less favorable terms
than other applicants—the regulation only requires
a showing that the class of persons ‘‘probably’’
would not receive such credit or would receive it
on less favorable terms. 12 CFR 1002.8(a)(3)(ii)
(emphasis added).
54
12 CFR 1002.8(c); see also Official
Interpretations, 12 CFR pt. 1002 (supp. I), sec.
1002.6, ¶ 6(b)–1 (‘‘In a special purpose credit
program, a creditor may consider a prohibited basis
to determine whether the applicant possesses a
characteristic needed for eligibility.’’).
55
See 12 CFR 1002.5(b), 1002.6(b).
56
12 U.S.C. 5512(b)(1). The relevant provisions of
the ECOA and Regulation B form part of Federal
consumer financial law. 12 U.S.C. 5481(12)(D), (14).
57
15 U.S.C. 1691e(e).
58
5 U.S.C. 553(b).
59
5 U.S.C. 603(a), 604(a).
60
44 U.S.C. 3501–3521.
61
5 U.S.C. 801 et seq.
analysis to determine if there is a need
for a special purpose credit program.
b. Nexus to the Organization’s
Customary Credit Standards
While a for-profit organization may
permissibly rely on a broad range of
research or data—including historical
and societal information—in
determining whether a special purpose
credit program is needed, the
organization’s analysis must show how
‘‘a class of people [] would otherwise be
denied credit or would receive it on less
favorable terms’’ under the
organization’s customary credit
standards.
52
The for-profit organization
must be able to show a connection
between the research or data informing
its analysis and the fact that, under the
organization’s customary standards of
creditworthiness, a class of persons
probably would not receive credit or
would receive it on less favorable terms
than are ordinarily available to other
applicants applying to the organization
for a similar type and amount of credit.
For example, a creditor who identifies a
class of certain applicants who do not
have sufficient savings to meet mortgage
loan requirements (or who receive such
loans on less favorable terms) could
offer such applicants down payment
assistance funds pursuant to a special
purpose credit program. In this
example, the creditor could demonstrate
that under its own standards of
creditworthiness, e.g., either (1)
‘‘insufficient cash’’ is listed as a
principal reason for the denial of similar
mortgage loan applications among the
identified class of applicants frequently
enough to indicate that they probably
would not receive credit; or (2)
requirements regarding minimum
amounts of cash to close or liquid assets
will probably impair credit access for
the identified class of applicants.
53

c. Requests For and Use of Information
Lastly, the Bureau notes that pursuant
to Regulation B, ‘‘[i]f participants in a
special purpose credit program . . . are
required to possess one or more
common characteristics (for example,
race, national origin, or sex) and if the
program otherwise satisfies the
requirements of [Regulation B], a
creditor may request and consider
information regarding the common
characteristic(s) in determining the
applicant’s eligibility for the
program.’’
54
If no special purpose credit
program has yet been established,
however, a creditor may use statistical
methods to estimate demographic
characteristics but it cannot request
demographic information that it is
otherwise prohibited from collecting,
even to determine whether there is a
need for such a program. Moreover,
while a for-profit organization may rely
on a broad swath of research and data
to determine the need for a special
purpose credit program—including the
organization’s own lending data—it may
not violate Regulation B’s prohibitions
on the collection of demographic
information exclusively to conduct this
preliminary analysis before establishing
a special purpose credit program.
55

Once a special purpose credit
program has been established, a creditor
may then request and consider
information regarding common
characteristic(s) if needed to determine
the applicant’s eligibility for the
program. For example, if a creditor
establishes a special purpose credit
program that requires that an applicant
resides in an area that is designated as
a low-to-moderate income census tract
and is Black, Hispanic, or Asian, a
creditor could request race or ethnicity
information from applicants to confirm
eligibility for the program.
II. Regulatory Matters
This advisory opinion is an
interpretive rule issued under the
Bureau’s authority to interpret the
ECOA and Regulation B, including
under section 1022(b)(1) of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act, which authorized
guidance as may be necessary or
appropriate to enable the Bureau to
administer and carry out the purposes
and objectives of Federal consumer
financial laws.
56

By operation of the ECOA section
706(e), no provision of the ECOA
imposing any liability applies to any act
done or omitted in good faith in
conformity with this interpretive rule,
notwithstanding that after such act or
omission has occurred, the interpretive
rule is amended, rescinded, or
determined by judicial or other
authority to be invalid for any reason.
57

As an interpretive rule, this advisory
opinion is exempt from the notice-and-
comment rulemaking requirements of
the Administrative Procedure Act.
58

Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis.
59
The Bureau also has
determined that this interpretive rule
does not impose any new or revise any
existing recordkeeping, reporting, or
disclosure requirements on covered
entities or members of the public that
would be collections of information
requiring approval by the Office of
Management and Budget under the
Paperwork Reduction Act.
60

Pursuant to the Congressional Review
Act,
61
the Bureau will submit a report
containing this interpretive rule and
other required information to the U.S.
Senate, the U.S. House of
Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this interpretive
rule as not a ‘‘major rule’’ as defined by
5 U.S.C. 804(2).
III. Signing Authority
The Director of the Bureau, Kathleen
L. Kraninger, having reviewed and
approved this document, is delegating
the authority to electronically sign this
document to Grace Feola, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
Dated: December 21, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–28596 Filed 1–14–21; 8:45 am]
BILLING CODE 4810–AM–P
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