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ACTION: Final rule; correcting SCB final rule revised the definition of through the Secretary of the Board amendments. eligible retained income in section under delegated authority. 217.11 of the Board’s capital rule in a Ann Misback, SUMMARY: The Board of Governors of the manner inconsistent with the the Federal Reserve System (Board) is Board’s intent in the ERI interim final Secretary of the Board. correcting changes to the definition of rule and the ERI final rule. The Board [FR Doc. 2021–00906 Filed 1–14–21; 8:45 am] eligible retained income in the capital is issuing this notice to correct the BILLING CODE 6210–01–P rule. This definition is used for definition of eligible retained income so calculating limitations on capital that it is consistent with the definition distributions and discretionary bonus established by the ERI interim final rule payments and was adopted in an and affirmed by the ERI final rule. BUREAU OF CONSUMER FINANCIAL interim final rule published on March PROTECTION 18, 2020, and as a final rule published List of Subjects in 12 CFR Part 217 12 CFR Part 1002 on October 8, 2020. Administrative practice and DATES: This correction is effective procedure; Banks, banking; Capital; Equal Credit Opportunity (Regulation January 15, 2021. Federal Reserve System; Holding B); Special Purpose Credit Programs FOR FURTHER INFORMATION CONTACT: companies. Benjamin McDonough, Associate AGENCY: Bureau of Consumer Financial 12 CFR Chapter II General Counsel, (202) 452–2036; Mark Protection. Buresh, Senior Counsel, (202) 452–5270; Authority and Issuance ACTION: Advisory opinion. or Andrew Hartlage, Counsel, (202) For the reasons set forth in the SUMMARY: 452–6483, Legal Division, Board of Supplementary Information, chapter II The Bureau of Consumer Governors of the Federal Reserve of title 12 of the Code of Federal Financial Protection (Bureau) is issuing System, 20th Street and Constitution Regulations is amended as follows: this Advisory Opinion (AO) to address Avenue NW, Washington, DC 20551. regulatory uncertainty regarding Users of Telecommunications Device for PART 217—CAPITAL ADEQUACY OF Regulation B, which implements the the Deaf (TDD) only, call (202) 263– BANK HOLDING COMPANIES, Equal Credit Opportunity Act, as it 4869. SAVINGS AND LOAN HOLDING applies to certain aspects of special SUPPLEMENTARY INFORMATION: The Board COMPANIES, AND STATE MEMBER purpose credit programs designed and of Governors of the Federal Reserve BANKS (REGULATION Q) implemented by for-profit organizations System (Board) is issuing this correction to meet special social needs. to the definition of eligible retained ■ 1. The authority citation for part 217 Specifically, this AO clarifies the income in the capital rule, 12 CFR part continues to read as follows: content that a for-profit organization 217. This definition is used for Authority: 12 U.S.C. 248(a), 321–338a, must include in a written plan that calculating limitations on capital 481–486, 1462a, 1467a, 1818, 1828, 1831n, establishes and administers a special distributions and discretionary bonus 1831o, 1831p–1, 1831w, 1835, 1844(b), 1851, purpose credit program under payments and was adopted as an 3904, 3906–3909, 4808, 5365, 5368, 5371, Regulation B. In addition, this AO interim final rule published on March 5371 note; and Pub. L. 116–136, 134 Stat. clarifies the type of research and data 281. 18, 2020 (ERI interim final rule),1 and as that may be appropriate to inform a for- a final rule published on October 8, ■ 2. Section 217.11 is amended by profit organization’s determination that 2020 (ERI final rule).2 In the ERI interim revising paragraph (a)(2)(i) to read as a special purpose credit program is final rule, the Board, together with the follows: needed to benefit a certain class of Office of the Comptroller of the persons. § 217.11 Capital conservation buffer, Currency (OCC) and the Federal Deposit DATES: This advisory opinion is Insurance Corporation (FDIC, and countercyclical capital buffer amount, and GSIB surcharge. effective on January 15, 2021. together with the Board and the OCC, (a) * * * FOR FURTHER INFORMATION CONTACT: the agencies), revised the definition of Christopher Davis, Attorney-Advisor; eligible retained income at section (2) * * * __ (i) Eligible retained income. The Office of Fair Lending and Equal .11(a)(2)(i) of the capital rule on an Opportunity, at CFPB_FairLending@ interim basis and sought comment on eligible retained income of a Board- regulated institution is the greater of: cfpb.gov or 202–435–7000. If you the revisions. In the ERI final rule, the require this document in an alternative agencies adopted these changes to the (A) The Board-regulated institution’s _ net income, calculated in accordance electronic format, please contact CFPB definition of eligible retained income, [email protected]. introduced through the ERI interim final with the instructions to the FR Y–9C or SUPPLEMENTARY INFORMATION: rule, without change. Call Report, as applicable, for the four The On March 20, 2020, the Board calendar quarters preceding the current Bureau is issuing this AO through the published in the Federal Register a final calendar quarter, net of any procedures for its Advisory Opinions 1 rule, effective May 18, 2020, distributions and associated tax effects Policy. Refer to those procedures for implementing the stress capital buffer not already reflected in net income; and more information. requirement in the capital rule (SCB (B) The average of the Board-regulated I. Advisory Opinion final rule), which revised section 217.11 institution’s net income, calculated in A. Background of the Board’s capital rule generally. The accordance with the instructions to the FR Y–9C or Call Report, as applicable, Congress enacted the Equal Credit 1 Regulatory Capital Rule: Eligible Retained for the four calendar quarters preceding Opportunity Act (ECOA or the Act) in Income, 85 FR 15909 (March 20, 2020). the current calendar quarter. 1974, initially prohibiting 2 Regulatory Capital Rule and Total Loss- discrimination in credit on the basis of Absorbing Capacity Rule: Eligible Retained Income, * * * * * 85 FR 63423 (October 8, 2020). The final rule is By order of the Board of Governors of effective January 1, 2021. the Federal Reserve System, acting 1 85 FR 77987 (Dec. 3, 2020).

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sex or marital status.2 Two years later, that special purpose credit programs continuing a trend from years prior.16 Congress expanded the prohibition may be one tool available to creditors to For example, the denial rates for against discrimination in credit ‘‘meet the credit needs of underserved conventional home-purchase loans were transactions to include age, race, color, communities.’’ 12 16.0 percent for Black borrowers, 10.8 religion, national origin, receipt of In recent months, stakeholders have percent for Hispanic White borrowers, public assistance benefits, and exercise expressed interest in developing special and 8.6 percent for Asian borrowers; in of rights under the Federal Consumer contrast, denial rates for such loans purpose credit programs but have also Credit Protection Act.3 At the same were 6.1 percent for non-Hispanic raised questions about how to do so in time, under section 701(c) of the ECOA, White borrowers.17 Black and Hispanic a manner consistent with Regulation B, Congress clarified that it does not White borrowers were also more likely indicating that regulatory uncertainty constitute discrimination under the Act to have higher-priced conventional and may inhibit broader creation of these for a creditor to ‘‘refuse to extend credit nonconventional loans in 2019.18 offered pursuant to’’ ‘‘any special programs by creditors. Many comments According to some studies, these purpose credit program offered by a to the Bureau’s recent Request for types of racial and ethnic differences in profit-making organization to meet Information on the Equal Credit access to credit perpetuate wealth 13 special social needs which meets Opportunity Act and Regulation B inequality.19 The Board’s 2019 Survey standards prescribed in regulations by from a variety of external stakeholders, of Consumer Finances, for example, the [Bureau].’’ 4 including both consumer and civil indicates that the typical White family By permitting the consideration of a rights advocates and industry has $188,200 in median family wealth, prohibited basis such as race, national representatives, indicate that special which is eight times the wealth of the origin, or sex in connection with a purpose credit programs may be one typical Black family ($24,100), and five special purpose credit program, way to promote fair and responsible times the wealth of the typical Hispanic Congress protected a broad array of access to credit, but that there is a need family ($36,100).20 Other families— programs ‘‘specifically designed to for further guidance on compliant including Asian families—also ‘‘have prefer members of economically implementation of these programs. lower wealth than White families.’’ 21 disadvantaged classes’’ and ‘‘to increase The Bureau is issuing this AO to The economic fallout from the ongoing access to the credit market by persons address this regulatory uncertainty in COVID–19 pandemic appears to be previously foreclosed from it.’’ 5 exacerbating these racial and ethnic the hope that broader creation of special 22 Congress provided examples of such purpose credit programs by creditors disparities in wealth. Bureau stakeholders have also noted programs—e.g., government sponsored will help expand access to credit among that racial and ethnic disparities in housing credit subsidies for the aged or disadvantaged groups and will better the poor and programs offering credit to access to credit extend beyond the address special social needs that exist mortgage market. For example, a report a limited clientele such as credit union today. Bureau stakeholders have called programs and educational loan from the Board documented disparities attention to the problem of unmet credit in both mortgage and non-mortgage programs.6 needs among minority communities and The Board of Governors of the Federal credit denials among White, Black, and the role that discrimination may have Hispanic credit applicants.23 Reserve System (Board)—which played in creating and exacerbating exercised rulemaking authority under those deficits. Research from the Federal 16 the ECOA at the time—promulgated Consumer Fin. Prot. Bureau, Data Point: 2019 Reserve Bank of New York has shown Mortgage Market Activity and Trends (June 2020), regulations implementing the Act’s that inequities in credit availability and at 36, https://files.consumerfinance.gov/f/ _ special purpose credit program in the terms and conditions of credit documents/cfpb 2019-mortgage-market-activity- provision.7 In the Dodd-Frank Wall trends_report.pdf. appear to have led to income 17 Street Reform and Consumer Protection See id. inequality.14 For consumers who own a 18 Act of 2010, Congress transferred See id. at 47. home, moreover, home equity 19 See, e.g., Fed. Reserve Bank of N.Y., supra note primary rulemaking authority over the represents a significant share of 14. ECOA to the Bureau,8 which 20 household net worth,15 but Home Board of Governors of the Fed. Reserve Sys., subsequently republished the Board’s Disparities in Wealth by Race and Ethnicity in the Mortgage Disclosure Act (HMDA) data existing regulations without material 2019 Survey of Consumer Finances (Sept. 28, 2020), show that in 2019, Black, Hispanic https://www.federalreserve.gov/econres/notes/feds- change.9 The Bureau has addressed White, and Asian borrowers had notably notes/disparities-in-wealth-by-race-and-ethnicity- special purpose credit programs in a in-the-2019-survey-of-consumer-finances- higher mortgage loan denial rates than previous edition of Supervisory 20200928.htm#fig1. non-Hispanic White borrowers, 21 Highlights 10 and a blog,11 explaining Id. 22 See, e.g., Fed. Reserve Bank of N.Y., Double 2020), https://www.consumerfinance.gov/about-us/ Jeopardy: COVID–19’s Concentrated Health and 2 See Public Law 93–495, sec. 701(a), 88 Stat. Wealth Effects in Black Communities (Aug. 2020), 1500, 1521 (1974). blog/expanding-access-credit-underserved- communities/. https://www.newyorkfed.org/medialibrary/media/ 3 See ECOA Amendments Act, Public Law 94– _ 12 smallbusiness/DoubleJeopardy 239, sec. 701(a), 90 Stat. 251, 251 (1976). See id. COVID19andBlackOwnedBusinesses (‘‘Black 13 4 See Public Law 94–239, sec. 701(c)(3), 90 Stat. 85 FR 46600 (Aug. 3, 2020). businesses experienced the most acute decline, 251, 251 (1976). 14 Fed. Reserve Bank of N.Y., Credit, Income and with a 41 percent drop. Latinx business owners fell 5 S. Rept. 94–589, 94th Cong., 2nd Sess., at 7, Inequality (June 2020), at 1 https:// by 32 percent and Asian business owners dropped reprinted in 1976 U.S.C.C.A.N. 403, 409. www.newyorkfed.org/medialibrary/media/research/ by 26 percent. In contrast, the number of white staff_reports/sr929.pdf (‘‘[C]redit-constrained 6 See id. business owners fell by 17 percent.’’); Fed. Reserve individuals often have limited wealth, and their Bank of Minn., COVID–19 and Indian Country: 7 See 42 FR 1242 (Jan. 6, 1977). exclusion from credit can hinder economic mobility Early snapshot reveals disproportionate economic 8 See Public Law 111–203, tit. X, sec. 1085, 124 and fuel persistent income inequality.’’). exposure and uncertainty (Apr. 10, 2020), https:// Stat. 1376, 2084. 15 U.S. Census Bureau, Gaps in the Wealth of www.minneapolisfed.org/article/2020/covid-19- 9 76 FR 79442 (Dec. 21, 2011) (promulgating 12 Americans by Household Type (Aug. 27, 2019), and-indian-country-early-snapshot-reveals- CFR pt. 1002 & supp. I). https://www.census.gov/library/stories/2019/08/ disproportionate-economic-exposure-and- 10 See 81 FR 46652, 46656 (July 18, 2016). gaps-in-wealth-americans-by-household- uncertainty. 11 See Susan M. Bernard and Patrice type.html?utm_campaign=20190827 23 Board of Governors of the Fed. Reserve Sys., Alexander Ficklin, Expanding Access to msacos1ccstors&utm_medium=email&utm_ Report on the Economic Well-Being of U.S. Credit to Underserved Communities (July 31, source=govdelivery%. Continued

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Specifically, White credit applicants Bureau stakeholders have indicated that receive it on less favorable terms than reported being denied for credit— investments in special purpose credit are ordinarily available to other including, but not limited to, mortgage programs may allow for better applicants applying to the organization credit—at a rate of 17.3 percent; Black expansion of credit access to for a similar type and amount of credit applicants reported being denied underserved communities. credit.30 for credit at a rate of 41.3 percent; and Regulation B is clear that a special B. Coverage Hispanic credit applicants reported purpose credit program qualifies as such being denied for credit at a rate of 34.6 This AO applies solely to certain only where the program was established percent.24 In the small business lending aspects of special purpose credit and is administered so as not to context, a report by the Board showed programs (i.e., those described in part discriminate against an applicant on any that ‘‘[o]n average, Black- and Hispanic- I.C below) designed and implemented prohibited basis.31 All program owned firm applicants received by for-profit organizations to meet participants may be required, however, approval for smaller shares of the special social needs under the to share one or more common financing they sought compared to Regulation B requirements identified characteristics (for example, race, White-owned small businesses that below. This AO does not apply to any national origin, or sex) so long as the applied for financing. This same report credit assistance program expressly program is not established and is not noted that larger shares of Black-, authorized by Federal or State law for administered with the purpose of Hispanic-, and Asian-owned firm the benefit of an economically evading the requirements of the ECOA applicants did not receive any of the disadvantaged class of persons, or to or Regulation B.32 If participants in a financing they applied for—38%, 33%, any credit assistance program offered by special purpose credit program are and 24%, respectively—compared to a not-for-profit organization, as defined required to possess one or more 20% of White-owned business under section 501(c) of the Internal common characteristics and if the applicants.’’ 25 Revenue Code of 1954, as amended, for program otherwise satisfies the In recent months, multiple financial the benefit of its members or for the applicable requirements of Regulation institutions have publicly committed to benefit of an economically B, a creditor may request and consider 27 making billions of dollars available to disadvantaged class of persons. This information regarding the common addressing racial wealth disparities.26 AO has no application to any other characteristic(s) in determining the circumstance and does not offer a legal applicant’s eligibility for the program.33 Households in 2016, at 33–34 (May 2017), https:// interpretation of any other provisions of The Bureau does not determine www.federalreserve.gov/publications/files/2016- law. report-economic-well-being-us-households- whether individual programs qualify for 34 201705.pdf. C. Applicable Regulatory Provisions special purpose credit status. The 24 See id. at 34. It is not discrimination under the creditor administering or offering the 25 Fed. Reserve, Report on Minority-Owned Firms special purpose credit program must (Dec. 2019), https://www.fedsmallbusiness.org/ ECOA for a creditor to refuse to extend credit offered pursuant to a legally make these decisions regarding the medialibrary/fedsmallbusiness/files/2019/ 35 20191211-ced-minority-owned-firms-report.pdf. compliant special purpose credit status of its program. It follows that a 26 See, e.g., Press Release, BMO, BMO Commits $5 program.28 Regulation B, which creditor may initiate a special purpose Billion to Advance Inclusive Economic Recovery in implements the ECOA, sets forth credit program without the approval of the U.S. (Nov. 10, 2020), https:// the Bureau. newsroom.bmo.com/2020-11-10-BMO-Commits-5- compliance standards and general rules Billion-to-Advance-Inclusive-Economic-Recovery- for special purpose credit programs. A D. Legal Analysis in-the-U-S; Press Release, Am. Express, American for-profit organization that offers or Express Announces $1 Billion Action Plan to participates in a special purpose credit 1. Written Plan Promote Racial, Ethnic and Gender Equity for Colleagues, Customers and Communities (Oct. 29, program to meet special social needs A for-profit organization must 2020), https://about.americanexpress.com/all-news/ must establish and administer the establish and administer a special news-details/2020/American-Express-Announces-1- special purpose credit program pursuant purpose credit program pursuant to a Billion-Action-Plan-to-Promote-Racial-Ethnic-and- to a ‘‘written plan’’ that identifies the written plan.36 The plan must contain Gender-Equity-for-Colleagues-Customers-and- Communities/default.aspx; Press Release, JPMorgan class of persons the program is designed information that supports the need for Chase & Co., JPMorgan Chase Commits $30 Billion to benefit and sets forth the procedures the program, including: to Advance Racial Equity (Oct. 8, 2020), https:// and standards for extending credit • The class of persons that the www.jpmorganchase.com/news-stories/jpmc- pursuant to the program.29 In addition, program is designed to benefit; commits-30-billion-to-advance-racial-equity; Press a for-profit organization that offers or • Release, Citigroup Inc., Citi Launches More Than $1 The procedures and standards for Billion in Strategic Initiatives to Help Close the participates in a special purpose credit extending credit pursuant to the Racial Wealth Gap (Sept. 23, 2020), https:// program to meet special social needs program; www.citigroup.com/citi/news/2020/200923a.htm; must establish and administer the • Either (i) the time period during Press Release, Huntington Bancshares, Huntington special purpose credit program to Announces $20 Billion Community Plan to Help which the program will last or (ii) when Boost Economic Opportunity Throughout its Seven- extend credit to a class of persons who, the program will be reevaluated to state Footprint (Sept. 1, 2020), http://huntington- under the organization’s customary ir.com/ne/news/hban09012020.pdf; Press Release, standards of creditworthiness, probably 30 12 CFR 1002.8(a)(3)(ii). PNC, PNC Commits More Than $1 Billion To Help would not receive such credit or would 31 12 CFR 1002.8(b)(2); see, e.g., United States v. End Systemic Racism and Support Economic Am. Future Sys., Inc., 743 F.2d 169, 180 (3d Cir. Empowerment of African Americans and Low- And 1984) (explaining that a creditor is ‘‘prohibited from Moderate-Income Communities (June 18, 2020), multiple-investments-and-initiatives-to-address- social-and-economic-inequities.html; Press Release, discriminating on the basis of race, sex or marital https://pnc.mediaroom.com/2020-06-18-PNC- status in a credit program designed to extend credit Commits-More-Than-1-Billion-To-Help-End- Bank of Am., Bank of America Announces $1 Billion/4-Year Commitment to Support Economic to the group of persons between the ages of 18 and Systemic-Racism-And-Support-Economic- 21’’). Empowerment-Of-African-Americans-And-Low- Opportunity Initiatives (June 2, 2020), https:// 32 12 CFR 1002.8(b)(2). And-Moderate-Income-Communities; Press Release, newsroom.bankofamerica.com/press-releases/bank- 33 U.S. Bank, U.S. Bank to rebuild in Minneapolis; america-announces-four-year-1-billion- 12 CFR 1002.8(c). Announces multiple investments and initiatives to commitment-supporting-economic. 34 See Official Interpretations, 12 CFR pt. 1002 address social and economic inequities (June 5, 27 See 12 CFR 1002.8(a)(2), (3). (supp. I), sec. 1002.8, ¶ 8(a)–1. 2020), https://www.usbank.com/newsroom/stories/ 28 15 U.S.C. 1691(c). 35 See id. us-bank-to-rebuild-in-minneapolis-announces- 29 12 CFR 1002.8(a)(3)(i). 36 See 12 CFR 1002.8(a)(3)(i).

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determine if there is a continuing need may offer a new small business loan Thus, a for-profit organization’s written for it; and product for woman-owned businesses plan must describe or incorporate the • A description of the analysis the by relaxing its customary standard of analysis that supports the need for the organization conducted to determine the requiring three years of experience in program. need for the program.37 the industry to one year, if the creditor Each of these required components is has determined that this requirement 2. Determination of Need for a Special discussed in further detail below. For- would probably prevent woman-owned Purpose Credit Program profit organizations that draft written businesses from qualifying for small a. Permissible Sources of Data and plans containing the necessary elements business financing. The written plan Research as set forth in Regulation B and herein must describe the procedures and will satisfy the requirement of 12 CFR standards adopted and explain how In designing a special purpose credit 1002.8(a)(3)(i). they will increase credit availability program, a for-profit organization must determine that the program will benefit a. Class of Persons with respect to the identified class of persons. If the class of persons the a class of persons who would otherwise The class of persons that a special program is designed to benefit will be be denied credit or would receive it on purpose credit program is designed to required to share a common less favorable terms. This determination benefit must consist of those ‘‘who characteristic, the written plan may also can be based on a broad analysis using would otherwise be denied credit or explain whether the organization will the organization’s own research or data would receive it on less favorable request and consider information that from outside sources, including 38 terms.’’ A written plan must explain would otherwise be prohibited under governmental reports and studies.48 The whether the class of persons will be the ECOA.42 Official Interpretations to Regulation B required to demonstrate a financial need provide two examples: First, ‘‘a creditor and/or share a common characteristic.39 c. Program Duration/Reevaluation might design new products to reach Such a class could be defined with or The written plan must provide ‘‘a consumers who would not meet, or have without reference to a characteristic that specific period of time for which the not met, its traditional standards of is otherwise a prohibited basis under program will last’’ or ‘‘contain a creditworthiness due to such factors as the ECOA. For example, if need is statement regarding when the program credit inexperience or the use of credit determined in accordance with part will be reevaluated to determine if there sources that may not report to consumer I.D.2 below, a for-profit organization’s is a continuing need for it.’’ 43 If an reporting agencies’’; and second, ‘‘a written plan might identify a class of organization opts for the latter bank could review [HMDA] data along persons as minority residents of low-to- approach, reevaluation could be made with demographic data for its moderate income census tracts, contingent on a certain set of assessment area and conclude that there residents of majority-Black census circumstances or simply a set date. The is a need for a special purpose credit tracts, operators of small farms in rural written plan could also adopt a program for low-income minority counties, minority- or woman-owned combined approach—for example, the borrowers.’’ 49 small business owners, consumers with special purpose credit program could For-profit organizations may rely on a limited English proficiency, or residents end on a set date, or when a pre- wide range of research or data to living on tribal lands. established origination volume has been analyze whether a special purpose b. Procedures and Standards reached, whichever occurs earlier. If an credit program is needed to benefit a organization extends the program A written plan must also set forth the class of persons who would otherwise beyond what is set forth in its written be denied credit or would receive it on procedures and standards for extending plan, it must document the terms of that 50 credit pursuant to the special purpose less favorable terms. A for-profit extension in order to ensure the organization’s analysis might consider credit program.40 Those procedures and program continues to be administered research or data that are already in the standards must be designed to increase pursuant to a written plan. public domain. The Official the likelihood that a class of persons Interpretations to Regulation B cite ‘‘who would otherwise be denied d. Description of Analysis HMDA data as one example.51 In the credit’’ will receive credit pursuant to A special purpose credit program case of small business lending, the the program, or that a class of persons must be ‘‘established and Small Business Administration or the who ‘‘would receive [credit] on less administered’’ 44 to benefit a class of Board’s Small Business Credit Surveys favorable terms’’ will receive credit on people who would otherwise be denied more favorable terms pursuant to the are possible sources of information. credit or would receive it on less Other governmental or academic reports program.41 To accomplish these goals a favorable terms, as determined by a and studies exploring the historical and creditor may, for example, introduce a 45 ‘‘broad analysis,’’ and it must be societal causes and effects of new product or service, modify the ‘‘established and administered pursuant discrimination may also be considered. terms and conditions or certain 46 to a written plan.’’ The Official Finally, the for-profit organization’s eligibility requirements for an existing Interpretations to Regulation B further own data or research—if available—may product or service, or modify policies provide that a written plan ‘‘must be a helpful source for conducting an and procedures related to certain loss contain information that supports the mitigation programs, such as loan need for the particular program.’’ 47 modifications. For example, a creditor 48 Official Interpretations, 12 CFR pt. 1002 (supp. I), sec. 1002.8, ¶ 8(a)–5. 42 See 12 CFR 1002.8(b)(2), (c). 49 Official Interpretations, 12 CFR pt. 1002 (supp. 37 12 CFR 1002.8(a)(3)(i)–(ii); Official 43 Official Interpretations, 12 CFR pt. 1002 (supp. I), sec. 1002.8, ¶ 8(a)–5. Interpretations, 12 CFR pt. 1002 (supp. I), sec. I), sec. 1002.8, ¶ 8(a)–6. 50 The Official Interpretations to Regulation B 1002.8, ¶ 8(a)–6. 44 12 CFR 1002.8(a)(3)(ii). expressly provide that a for-profit organization is 38 Official Interpretations, 12 CFR pt. 1002 (supp. 45 Official Interpretations, 12 CFR pt. 1002 (supp. permitted to conduct a ‘‘broad analysis.’’ 12 CFR pt. I), sec. 1002.8, ¶ 8(a)–5. I), sec. 1002.8, ¶ 8(a)–5. 1002 (supp. I), sec. 1002.8, ¶ 8(a)–5 (emphasis 39 See 12 CFR 1002.8(b)(2), (d). 46 12 CFR 1002.8(a)(3)(i) (emphasis added). added). 40 12 CFR 1002.8(a)(3)(i). 47 Official Interpretations, 12 CFR pt. 1002 (supp. 51 Official Interpretations, 12 CFR pt. 1002 (supp. 41 See 12 CFR 1002.8(a)(3)(ii). I), sec. 1002.8, ¶ 8(a)–6. I), sec. 1002.8, ¶ 8(a)–5.

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analysis to determine if there is a need c. Requests For and Use of Information and objectives of Federal consumer for a special purpose credit program. financial laws.56 Lastly, the Bureau notes that pursuant b. Nexus to the Organization’s to Regulation B, ‘‘[i]f participants in a By operation of the ECOA section Customary Credit Standards special purpose credit program . . . are 706(e), no provision of the ECOA required to possess one or more imposing any liability applies to any act While a for-profit organization may common characteristics (for example, done or omitted in good faith in permissibly rely on a broad range of race, national origin, or sex) and if the conformity with this interpretive rule, research or data—including historical program otherwise satisfies the notwithstanding that after such act or and societal information—in requirements of [Regulation B], a omission has occurred, the interpretive determining whether a special purpose creditor may request and consider rule is amended, rescinded, or credit program is needed, the information regarding the common determined by judicial or other 57 organization’s analysis must show how characteristic(s) in determining the authority to be invalid for any reason. ‘‘a class of people [] would otherwise be applicant’s eligibility for the As an interpretive rule, this advisory denied credit or would receive it on less program.’’ 54 If no special purpose credit opinion is exempt from the notice-and- favorable terms’’ under the program has yet been established, comment rulemaking requirements of organization’s customary credit the Administrative Procedure Act.58 52 however, a creditor may use statistical standards. The for-profit organization methods to estimate demographic Because no notice of proposed must be able to show a connection characteristics but it cannot request rulemaking is required, the Regulatory between the research or data informing demographic information that it is Flexibility Act does not require an its analysis and the fact that, under the otherwise prohibited from collecting, initial or final regulatory flexibility organization’s customary standards of even to determine whether there is a analysis.59 The Bureau also has creditworthiness, a class of persons need for such a program. Moreover, determined that this interpretive rule probably would not receive credit or while a for-profit organization may rely does not impose any new or revise any would receive it on less favorable terms on a broad swath of research and data existing recordkeeping, reporting, or than are ordinarily available to other to determine the need for a special disclosure requirements on covered applicants applying to the organization purpose credit program—including the entities or members of the public that for a similar type and amount of credit. organization’s own lending data—it may would be collections of information For example, a creditor who identifies a not violate Regulation B’s prohibitions requiring approval by the Office of class of certain applicants who do not on the collection of demographic Management and Budget under the have sufficient savings to meet mortgage information exclusively to conduct this Paperwork Reduction Act.60 loan requirements (or who receive such preliminary analysis before establishing loans on less favorable terms) could Pursuant to the Congressional Review a special purpose credit program.55 61 offer such applicants down payment Act, the Bureau will submit a report assistance funds pursuant to a special Once a special purpose credit containing this interpretive rule and purpose credit program. In this program has been established, a creditor other required information to the U.S. example, the creditor could demonstrate may then request and consider Senate, the U.S. House of that under its own standards of information regarding common Representatives, and the Comptroller creditworthiness, e.g., either (1) characteristic(s) if needed to determine General of the United States prior to the ‘‘insufficient cash’’ is listed as a the applicant’s eligibility for the rule’s published effective date. The principal reason for the denial of similar program. For example, if a creditor Office of Information and Regulatory mortgage loan applications among the establishes a special purpose credit Affairs has designated this interpretive identified class of applicants frequently program that requires that an applicant rule as not a ‘‘major rule’’ as defined by enough to indicate that they probably resides in an area that is designated as 5 U.S.C. 804(2). a low-to-moderate income census tract would not receive credit; or (2) III. Signing Authority requirements regarding minimum and is Black, Hispanic, or Asian, a amounts of cash to close or liquid assets creditor could request race or ethnicity The Director of the Bureau, Kathleen will probably impair credit access for information from applicants to confirm L. Kraninger, having reviewed and the identified class of applicants.53 eligibility for the program. approved this document, is delegating II. Regulatory Matters the authority to electronically sign this 52 12 CFR 1002.8(a)(3)(ii). document to Grace Feola, a Bureau 53 The fact that a for-profit organization identifies This advisory opinion is an Federal Register Liaison, for purposes of a need for a special purpose credit program based interpretive rule issued under the publication in the Federal Register. on an analysis of its own data does not, by itself, Bureau’s authority to interpret the create an inference or presumption that the Dated: December 21, 2020. ECOA and Regulation B, including organization has engaged in unlawful credit Grace Feola, discrimination. Of course, the adoption of a special under section 1022(b)(1) of the Dodd- purpose credit program does not absolve a creditor Frank Wall Street Reform and Consumer Federal Register Liaison, Bureau of Consumer of its ordinary obligations under the ECOA and Protection Act, which authorized Financial Protection. Regulation B; the Bureau strongly encourages [FR Doc. 2020–28596 Filed 1–14–21; 8:45 am] creditors to evaluate their fair lending risk using an guidance as may be necessary or effective compliance management system. Finally, appropriate to enable the Bureau to BILLING CODE 4810–AM–P Regulation B does not require a creditor to show administer and carry out the purposes that a special purpose credit program is established 56 12 U.S.C. 5512(b)(1). The relevant provisions of and administered to extend credit to a class of the ECOA and Regulation B form part of Federal 54 12 CFR 1002.8(c); see also Official persons who definitely would not receive such consumer financial law. 12 U.S.C. 5481(12)(D), (14). credit or would receive it on less favorable terms Interpretations, 12 CFR pt. 1002 (supp. I), sec. 57 15 U.S.C. 1691e(e). than other applicants—the regulation only requires 1002.6, ¶ 6(b)–1 (‘‘In a special purpose credit 58 a showing that the class of persons ‘‘probably’’ program, a creditor may consider a prohibited basis 5 U.S.C. 553(b). would not receive such credit or would receive it to determine whether the applicant possesses a 59 5 U.S.C. 603(a), 604(a). on less favorable terms. 12 CFR 1002.8(a)(3)(ii) characteristic needed for eligibility.’’). 60 44 U.S.C. 3501–3521. (emphasis added). 55 See 12 CFR 1002.5(b), 1002.6(b). 61 5 U.S.C. 801 et seq.

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