[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2024 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 12

Banks and Banking


________________________

Parts 900 to 1025

                         Revised as of January 1, 2024

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2024
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter IX [Reserved]
          Chapter X--Consumer Financial Protection Bureau            5
  Finding Aids:
      Table of CFR Titles and Chapters........................     789
      Alphabetical List of Agencies Appearing in the CFR......     809
      List of CFR Sections Affected...........................     819

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 1001.1 refers 
                       to title 12, part 1001, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2024), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not dropped in error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
an approved incorporation by reference, please contact the agency that 
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CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
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alphabetical list of agencies publishing in the CFR are also included in 
this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.

[[Page vii]]

    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

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in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
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Connect to NARA's website at www.archives.gov/federal-register.
    The eCFR is a regularly updated, unofficial editorial compilation of 
CFR material and Federal Register amendments, produced by the Office of 
the Federal Register and the Government Publishing Office. It is 
available at www.ecfr.gov.

    Oliver A. Potts,
    Director,
    Office of the Federal Register
    January 1, 2024







[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of ten volumes. The parts in 
these volumes are arranged in the following order: Parts 1-199, 200-219, 
220-229, 230-299, 300-346, 347-599, 600-899, 900-1025, 1026-1099, and 
1100-end. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of January 1, 2024.

    For this volume, Christine Colaninno was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of John 
Hyrum Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                 (This book contains parts 900 to 1025)

  --------------------------------------------------------------------
                                                                    Part
chapter ix [Reserved]

chapter x--Consumer Financial Protection Bureau.............        1001

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                          CHAPTER IX [RESERVED]




  -------------------------------------------------------------------- 





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             CHAPTER X--CONSUMER FINANCIAL PROTECTION BUREAU




  --------------------------------------------------------------------
Part                                                                Page
1000            [Reserved]

1001            Financial products or services..............           7
1002            Equal Credit Opportunity Act (Regulation B).           7
1003            Home mortgage disclosure (Regulation C).....         119
1004            Alternative mortgage transaction parity 
                    (Regulation D)..........................         182
1005            Electronic fund transfers (Regulation E)....         186
1006            Debt Collection Practices (Regulation F)....         367
1007            S.A.F.E. Mortgage Licensing Act--Federal 
                    registration of residential mortgage 
                    loan originators (Regulation G).........         413
1008            S.A.F.E. Mortgage Licensing Act--State 
                    compliance and bureau registration 
                    system (Regulation H)...................         421
1009            Disclosure requirements for depository 
                    institutions lacking Federal deposit 
                    insurance (Regulation I)................         435
1010            Land registration (Regulation J)............         438
1011            Purchasers' revocation rights, sales 
                    practices and standards (Regulation K)..         496
1012            Special rules of practice (Regulation L)....         500
1013            Consumer leasing (Regulation M).............         504
1014            Mortgage acts and practices--Advertising 
                    (Regulation N)..........................         530
1015            Mortgage assistance relief services 
                    (Regulation O)..........................         533
1016            Privacy of consumer financial information 
                    (Regulation P)..........................         540
1022            Fair credit reporting (Regulation V)........         575
1024            Real Estate Settlement Procedures Act 
                    (Regulation X)..........................         673
1025

[Reserved]

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                          PART 1000 [RESERVED]



PART 1001_FINANCIAL PRODUCTS OR SERVICES--Table of Contents



Sec.
1001.1 Authority and purpose.
1001.2 Definitions.

    Authority: 12 U.S.C. 5481(15)(A)(xi); and 12 U.S.C. 5512(b)(1).

    Source: 80 FR 37526, June 30, 2015, unless otherwise noted.



Sec.  1001.1  Authority and purpose.

    Under 12 U.S.C. 5481(15)(A)(xi), the Bureau is authorized to define 
certain financial products or services for purposes of title X of the 
Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376 (2010) (Title X) in 
addition to those defined in 12 U.S.C. 5481(15)(A)(i)-(x). The purpose 
of this part is to implement that authority.



Sec.  1001.2  Definitions.

    Except as otherwise provided in Title X, in addition to the 
definitions set forth in 12 U.S.C. 5481(15)(A)(i)-(x), the term 
``financial product or service'' means, for purposes of Title X:
    (a) Extending or brokering leases of an automobile, as automobile is 
defined by 12 CFR 1090.108(a), where the lease:
    (1) Qualifies as a full-payout lease and a net lease, as provided by 
12 CFR 23.3(a), and has an initial term of not less than 90 days, as 
provided by 12 CFR 23.11; and
    (2) Is not a financial product or service under 12 U.S.C. 
5481(15)(A)(ii).
    (b) [Reserved]



PART 1002_EQUAL CREDIT OPPORTUNITY ACT (REGULATION B)--Table of Contents



                            Subpart A_General

Sec.
1002.1 Authority, scope and purpose.
1002.2 Definitions.
1002.3 Limited exceptions for certain classes of transactions.
1002.4 General rules.
1002.5 Rules concerning requests for information.
1002.6 Rules concerning evaluation of applications.
1002.7 Rules concerning extensions of credit.
1002.8 Special purpose credit programs.
1002.9 Notifications.
1002.10 Furnishing of credit information.
1002.11 Relation to state law.
1002.12 Record retention.
1002.13 Information for monitoring purposes.
1002.14 Rules on providing appraisal reports.
1002.15 Incentives for self-testing and self-correction.
1002.16 Enforcement, penalties and liabilities.

            Subpart B_Small Business Lending Data Collection

1002.101 Authority, purpose, and scope.
1002.102 Definitions.
1002.103 Covered applications.
1002.104 Covered credit transactions and excluded transactions.
1002.105 Covered financial institutions and exempt institutions.
1002.106 Business and small business.
1002.107 Compilation of reportable data.
1002.108 Firewall.
1002.109 Reporting of data to the Bureau.
1002.110 Publication of data and other disclosures.
1002.111 Recordkeeping.
1002.112 Enforcement.
1002.113 Severability.
1002.114 Effective date, compliance date, and special transitional 
          rules.

Appendix A to Part 1002--Federal Agencies To Be Listed in Adverse Action 
          Notices
Appendix B to Part 1002--Model Application Forms
Appendix C to Part 1002--Sample Notification Forms
Appendix D to Part 1002--Issuance of Official Interpretations
Appendix E to Part 1002--Sample Form for Collecting Certain Applicant-
          Provided Data Under Subpart B
Appendix F to Part 1002--Tolerances for Bona Fide Errors in Data 
          Reported Under Subpart B
Supplement I to Part 1002--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1691b. Subpart B is also 
issued under 15 U.S.C. 1691c-2.

    Source: 76 FR 79445, Dec. 21, 2011, unless otherwise noted.



                            Subpart A_General



Sec.  1002.1  Authority, scope and purpose.

    (a) Authority and scope. This part, known as Regulation B, is issued 
by the Bureau of Consumer Financial Protection (Bureau) pursuant to 
title VII

[[Page 8]]

(Equal Credit Opportunity Act) of the Consumer Credit Protection Act, as 
amended (15 U.S.C. 1601 et seq.). Except as otherwise provided herein, 
this subpart applies to all persons who are creditors, as defined in 
Sec.  1002.2(l), other than a person excluded from coverage of this part 
by section 1029 of the Consumer Financial Protection Act of 2010, title 
X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376. Information collection requirements 
contained in this part have been approved by the Office of Management 
and Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 3170-0013.
    (b) Purpose. The purpose of this part is to promote the availability 
of credit to all creditworthy applicants without regard to race, color, 
religion, national origin, sex, marital status, or age (provided the 
applicant has the capacity to contract); to the fact that all or part of 
the applicant's income derives from a public assistance program; or to 
the fact that the applicant has in good faith exercised any right under 
the Consumer Credit Protection Act. The regulation prohibits creditor 
practices that discriminate on the basis of any of these factors. The 
regulation also requires creditors to notify applicants of action taken 
on their applications; to report credit history in the names of both 
spouses on an account; to retain records of credit applications; to 
collect information about the applicant's race and other personal 
characteristics in applications for certain dwelling-related loans; and 
to provide applicants with copies of appraisal reports used in 
connection with credit transactions.

[76 FR 79445, Dec. 21, 2011, as amended at 88 FR 35527, May 31, 2023]



Sec.  1002.2  Definitions.

    For the purposes of this part, unless the context indicates 
otherwise or as otherwise defined in subpart B, the following 
definitions apply:
    (a) Account means an extension of credit. When employed in relation 
to an account, the word use refers only to open-end credit.
    (b) Act means the Equal Credit Opportunity Act (Title VII of the 
Consumer Credit Protection Act).
    (c) Adverse action. (1) The term means:
    (i) A refusal to grant credit in substantially the amount or on 
substantially the terms requested in an application unless the creditor 
makes a counteroffer (to grant credit in a different amount or on other 
terms) and the applicant uses or expressly accepts the credit offered;
    (ii) A termination of an account or an unfavorable change in the 
terms of an account that does not affect all or substantially all of a 
class of the creditor's accounts; or
    (iii) A refusal to increase the amount of credit available to an 
applicant who has made an application for an increase.
    (2) The term does not include:
    (i) A change in the terms of an account expressly agreed to by an 
applicant;
    (ii) Any action or forbearance relating to an account taken in 
connection with inactivity, default, or delinquency as to that account;
    (iii) A refusal or failure to authorize an account transaction at 
point of sale or loan, except when the refusal is a termination or an 
unfavorable change in the terms of an account that does not affect all 
or substantially all of a class of the creditor's accounts, or when the 
refusal is a denial of an application for an increase in the amount of 
credit available under the account;
    (iv) A refusal to extend credit because applicable law prohibits the 
creditor from extending the credit requested; or
    (v) A refusal to extend credit because the creditor does not offer 
the type of credit or credit plan requested.
    (3) An action that falls within the definition of both paragraphs 
(c)(1) and (c)(2) of this section is governed by paragraph (c)(2) of 
this section.
    (d) Age refers only to the age of natural persons and means the 
number of fully elapsed years from the date of an applicant's birth.
    (e) Applicant means any person who requests or who has received an 
extension of credit from a creditor, and includes any person who is or 
may become contractually liable regarding an extension of credit. For 
purposes of

[[Page 9]]

Sec.  1002.7(d), the term includes guarantors, sureties, endorsers, and 
similar parties.
    (f) Application means an oral or written request for an extension of 
credit that is made in accordance with procedures used by a creditor for 
the type of credit requested. The term application does not include the 
use of an account or line of credit to obtain an amount of credit that 
is within a previously established credit limit. A completed application 
means an application in connection with which a creditor has received 
all the information that the creditor regularly obtains and considers in 
evaluating applications for the amount and type of credit requested 
(including, but not limited to, credit reports, any additional 
information requested from the applicant, and any approvals or reports 
by governmental agencies or other persons that are necessary to 
guarantee, insure, or provide security for the credit or collateral). 
The creditor shall exercise reasonable diligence in obtaining such 
information.
    (g) Business credit refers to extensions of credit primarily for 
business or commercial (including agricultural) purposes, but excluding 
extensions of credit of the types described in Sec.  1002.3(a)-(d).
    (h) Consumer credit means credit extended to a natural person 
primarily for personal, family, or household purposes.
    (i) Contractually liable means expressly obligated to repay all 
debts arising on an account by reason of an agreement to that effect.
    (j) Credit means the right granted by a creditor to an applicant to 
defer payment of a debt, incur debt and defer its payment, or purchase 
property or services and defer payment therefor.
    (k) Credit card means any card, plate, coupon book, or other single 
credit device that may be used from time to time to obtain money, 
property, or services on credit.
    (l) Creditor means a person who, in the ordinary course of business, 
regularly participates in a credit decision, including setting the terms 
of the credit. The term creditor includes a creditor's assignee, 
transferee, or subrogee who so participates. For purposes of Sec. Sec.  
1002.4(a) and (b), the term creditor also includes a person who, in the 
ordinary course of business, regularly refers applicants or prospective 
applicants to creditors, or selects or offers to select creditors to 
whom requests for credit may be made. A person is not a creditor 
regarding any violation of the Act or this part committed by another 
creditor unless the person knew or had reasonable notice of the act, 
policy, or practice that constituted the violation before becoming 
involved in the credit transaction. The term does not include a person 
whose only participation in a credit transaction involves honoring a 
credit card.
    (m) Credit transaction means every aspect of an applicant's dealings 
with a creditor regarding an application for credit or an existing 
extension of credit (including, but not limited to, information 
requirements; investigation procedures; standards of creditworthiness; 
terms of credit; furnishing of credit information; revocation, 
alteration, or termination of credit; and collection procedures).
    (n) Discriminate against an applicant means to treat an applicant 
less favorably than other applicants.
    (o) Elderly means age 62 or older.
    (p) Empirically derived and other credit scoring systems--(1) A 
credit scoring system is a system that evaluates an applicant's 
creditworthiness mechanically, based on key attributes of the applicant 
and aspects of the transaction, and that determines, alone or in 
conjunction with an evaluation of additional information about the 
applicant, whether an applicant is deemed creditworthy. To qualify as an 
empirically derived, demonstrably and statistically sound, credit 
scoring system, the system must be:
    (i) Based on data that are derived from an empirical comparison of 
sample groups or the population of creditworthy and non-creditworthy 
applicants who applied for credit within a reasonable preceding period 
of time;
    (ii) Developed for the purpose of evaluating the creditworthiness of 
applicants with respect to the legitimate business interests of the 
creditor utilizing the system (including, but not limited to, minimizing 
bad debt losses

[[Page 10]]

and operating expenses in accordance with the creditor's business 
judgment);
    (iii) Developed and validated using accepted statistical principles 
and methodology; and
    (iv) Periodically revalidated by the use of appropriate statistical 
principles and methodology and adjusted as necessary to maintain 
predictive ability.
    (2) A creditor may use an empirically derived, demonstrably and 
statistically sound, credit scoring system obtained from another person 
or may obtain credit experience from which to develop such a system. Any 
such system must satisfy the criteria set forth in paragraph (p)(1)(i) 
through (iv) of this section; if the creditor is unable during the 
development process to validate the system based on its own credit 
experience in accordance with paragraph (p)(1) of this section, the 
system must be validated when sufficient credit experience becomes 
available. A system that fails this validity test is no longer an 
empirically derived, demonstrably and statistically sound, credit 
scoring system for that creditor.
    (q) Extend credit and extension of credit mean the granting of 
credit in any form (including, but not limited to, credit granted in 
addition to any existing credit or credit limit; credit granted pursuant 
to an open-end credit plan; the refinancing or other renewal of credit, 
including the issuance of a new credit card in place of an expiring 
credit card or in substitution for an existing credit card; the 
consolidation of two or more obligations; or the continuance of existing 
credit without any special effort to collect at or after maturity).
    (r) Good faith means honesty in fact in the conduct or transaction.
    (s) Inadvertent error means a mechanical, electronic, or clerical 
error that a creditor demonstrates was not intentional and occurred 
notwithstanding the maintenance of procedures reasonably adapted to 
avoid such errors.
    (t) Judgmental system of evaluating applicants means any system for 
evaluating the creditworthiness of an applicant other than an 
empirically derived, demonstrably and statistically sound, credit 
scoring system.
    (u) Marital status means the state of being unmarried, married, or 
separated, as defined by applicable state law. The term ``unmarried'' 
includes persons who are single, divorced, or widowed.
    (v) Negative factor or value, in relation to the age of elderly 
applicants, means utilizing a factor, value, or weight that is less 
favorable regarding elderly applicants than the creditor's experience 
warrants or is less favorable than the factor, value, or weight assigned 
to the class of applicants that are not classified as elderly and are 
most favored by a creditor on the basis of age.
    (w) Open-end credit means credit extended under a plan in which a 
creditor may permit an applicant to make purchases or obtain loans from 
time to time directly from the creditor or indirectly by use of a credit 
card, check, or other device.
    (x) Person means a natural person, corporation, government or 
governmental subdivision or agency, trust, estate, partnership, 
cooperative, or association.
    (y) Pertinent element of creditworthiness, in relation to a 
judgmental system of evaluating applicants, means any information about 
applicants that a creditor obtains and considers and that has a 
demonstrable relationship to a determination of creditworthiness.
    (z) Prohibited basis means race, color, religion, national origin, 
sex, marital status, or age (provided that the applicant has the 
capacity to enter into a binding contract); the fact that all or part of 
the applicant's income derives from any public assistance program; or 
the fact that the applicant has in good faith exercised any right under 
the Consumer Credit Protection Act or any state law upon which an 
exemption has been granted by the Bureau.
    (aa) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, or any territory or possession of the 
United States.

[76 FR 79445, Dec. 21, 2011, as amended at 88 FR 35527, May 31, 2023]



Sec.  1002.3  Limited exceptions for certain classes of transactions.

    (a) Public utilities credit--(1) Definition. Public utilities credit 
refers to extensions of credit that involve public utility services 
provided through pipe, wire, or other connected facilities, or

[[Page 11]]

radio or similar transmission (including extensions of such facilities), 
if the charges for service, delayed payment, and any discount for prompt 
payment are filed with or regulated by a government unit.
    (2) Exceptions. The following provisions of this part do not apply 
to public utilities credit:
    (i) Section 1002.5(d)(1) concerning information about marital 
status; and
    (ii) Section 1002.12(b) relating to record retention.
    (b) Securities credit (1) Definition. Securities credit refers to 
extensions of credit subject to regulation under section 7 of the 
Securities Exchange Act of 1934 or extensions of credit by a broker or 
dealer subject to regulation as a broker or dealer under the Securities 
Exchange Act of 1934.
    (2) Exceptions. The following provisions of this part do not apply 
to securities credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;
    (iii) Section 1002.5(d)(1) concerning information about marital 
status;
    (iv) Section 1002.7(b) relating to designation of name to the extent 
necessary to comply with rules regarding an account in which a broker or 
dealer has an interest, or rules regarding the aggregation of accounts 
of spouses to determine controlling interests, beneficial interests, 
beneficial ownership, or purchase limitations and restrictions;
    (v) Section 1002.7(c) relating to action concerning open-end 
accounts, to the extent the action taken is on the basis of a change of 
name or marital status;
    (vi) Section 1002.7(d) relating to the signature of a spouse or 
other person;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (c) Incidental credit (1) Definition. Incidental credit refers to 
extensions of consumer credit other than the types described in 
paragraphs (a) and (b) of this section:
    (i) That are not made pursuant to the terms of a credit card 
account;
    (ii) That are not subject to a finance charge (as defined in 
Regulation Z, 12 CFR 1026.4); and
    (iii) That are not payable by agreement in more than four 
installments.
    (2) Exceptions. The following provisions of this part do not apply 
to incidental credit:
    (i) Section 1002.5(b) concerning information about the sex of an 
applicant, but only to the extent necessary for medical records or 
similar purposes;
    (ii) Section 1002.5(c) concerning information about a spouse or 
former spouse;
    (iii) Section 1002.5(d)(1) concerning information about marital 
status;
    (iv) Section 1002.5(d)(2) concerning information about income 
derived from alimony, child support, or separate maintenance payments;
    (v) Section 1002.7(d) relating to the signature of a spouse or other 
person;
    (vi) Section 1002.9 relating to notifications;
    (vii) Section 1002.10 relating to furnishing of credit information; 
and
    (viii) Section 1002.12(b) relating to record retention.
    (d) Government credit--(1) Definition. Government credit refers to 
extensions of credit made to governments or governmental subdivisions, 
agencies, or instrumentalities.
    (2) Applicability of regulation. Except for Sec.  1002.4(a), the 
general rule against discrimination on a prohibited basis, the 
requirements of this part do not apply to government credit.



Sec.  1002.4  General rules.

    (a) Discrimination. A creditor shall not discriminate against an 
applicant on a prohibited basis regarding any aspect of a credit 
transaction.
    (b) Discouragement. A creditor shall not make any oral or written 
statement, in advertising or otherwise, to applicants or prospective 
applicants that would discourage on a prohibited basis a reasonable 
person from making or pursuing an application.
    (c) Written applications. A creditor shall take written applications 
for the dwelling-related types of credit covered by Sec.  1002.13(a).

[[Page 12]]

    (d) Form of disclosures--(1) General rule. A creditor that provides 
in writing any disclosures or information required by this part must 
provide the disclosures in a clear and conspicuous manner and, except 
for the disclosures required by Sec. Sec.  1002.5 and 1002.13, in a form 
the applicant may retain.
    (2) Disclosures in electronic form. The disclosures required by this 
part that are required to be given in writing may be provided to the 
applicant in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
Where the disclosures under Sec. Sec.  1002.5(b)(1), 1002.5(b)(2), 
1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) accompany an 
application accessed by the applicant in electronic form, these 
disclosures may be provided to the applicant in electronic form on or 
with the application form, without regard to the consumer consent or 
other provisions of the E-Sign Act.
    (e) Foreign-language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



Sec.  1002.5  Rules concerning requests for information.

    (a) General rules--(1) Requests for information. Except as provided 
in paragraphs (b) through (d) of this section, a creditor may request 
any information in connection with a credit transaction. This paragraph 
does not limit or abrogate any Federal or state law regarding privacy, 
privileged information, credit reporting limitations, or similar 
restrictions on obtainable information.
    (2) Required collection of information. Notwithstanding paragraphs 
(b) through (d) of this section, a creditor shall request information 
for monitoring purposes as required by Sec.  1002.13 for credit secured 
by the applicant's dwelling. In addition, a creditor may obtain 
information required by a regulation, order, or agreement issued by, or 
entered into with, a court or an enforcement agency (including the 
Attorney General of the United States or a similar state official) to 
monitor or enforce compliance with the Act, this part, or other Federal 
or state statutes or regulations.
    (3) Special-purpose credit. A creditor may obtain information that 
is otherwise restricted to determine eligibility for a special purpose 
credit program, as provided in Sec.  1002.8(b), (c), and (d).
    (4) Other permissible collection of information. Notwithstanding 
paragraph (b) of this section, a creditor may collect information under 
the following circumstances provided that the creditor collects the 
information in compliance with Sec.  1002.107(a)(18) and (19) and 
accompanying commentary, or appendix B to 12 CFR part 1003, as 
applicable:
    (i) A creditor that is a financial institution under 12 CFR 
1003.2(g) may collect information regarding the ethnicity, race, and sex 
of an applicant for a closed-end mortgage loan that is an excluded 
transaction under 12 CFR 1003.3(c)(11) if it submits HMDA data 
concerning such closed-end mortgage loans and applications or if it 
submitted HMDA data concerning closed-end mortgage loans for any of the 
preceding five calendar years;
    (ii) A creditor that is a financial institution under 12 CFR 
1003.2(g) may collect information regarding the ethnicity, race, and sex 
of an applicant for an open-end line of credit that is an excluded 
transaction under 12 CFR 1003.3(c)(12) if it submits HMDA data 
concerning such open-end lines of credit and applications or if it 
submitted HMDA data concerning open-end lines of credit for any of the 
preceding five calendar years;
    (iii) A creditor that submitted HMDA data for any of the preceding 
five calendar years but is not currently a financial institution under 
12 CFR 1003.2(g) may collect information regarding the ethnicity, race, 
and sex of an applicant for a loan that would otherwise be a covered 
loan under 12 CFR 1003.2(e) if not excluded by 12 CFR 1003.3(c)(11) or 
(12);
    (iv) A creditor that exceeded an applicable loan volume threshold in 
the first year of the two-year threshold period provided in 12 CFR 
1003.2(g), 1003.3(c)(11), or 1003.3(c)(12) may, in the

[[Page 13]]

second year, collect information regarding the ethnicity, race, and sex 
of an applicant for a loan that would otherwise be a covered loan under 
12 CFR 1003.2(e) if the loan were not excluded by 12 CFR 1003.3(c)(11) 
or (12);
    (v) A creditor that is a financial institution under 12 CFR 
1003.2(g), or that submitted HMDA data for any of the preceding five 
calendar years but is not currently a financial institution under 12 CFR 
1003.2(g), may collect information regarding the ethnicity, race, and 
sex of an applicant for a loan that would otherwise be a covered loan 
under 12 CFR 1003.2(e) if the loan were not excluded by 12 CFR 
1003.3(c)(10).
    (vi) A creditor that is collecting information regarding the 
ethnicity, race, and sex of an applicant or first co-applicant may 
collect information regarding the ethnicity, race, and sex of a second 
or additional co-applicant for a covered loan under 12 CFR 1003.2(e) or 
for a second or additional co-applicant for a loan described in 
paragraphs (a)(4)(i) through (v) of this section.
    (vii) A creditor that was required to report small business lending 
data pursuant to Sec.  1002.109 for any of the preceding five calendar 
years but is not currently a covered financial institution under Sec.  
1002.105(b) may collect information pursuant to subpart B of this part 
for covered applications from small businesses as defined in Sec. Sec.  
1002.103 and 1002.106(b) regarding whether an applicant is a minority-
owned business, a women-owned business, or an LGBTQI+-owned business, 
and the ethnicity, race, and sex of the applicant's principal owners if 
it complies with the requirements for covered financial institutions 
pursuant to Sec. Sec.  1002.107(a)(18) and (19), 1002.108, 1002.111, and 
1002.112 for that application. Such a creditor is permitted, but not 
required, to report data to the Bureau collected pursuant to subpart B 
of this part if it complies with the requirements of subpart B as 
otherwise required for covered financial institutions pursuant to 
Sec. Sec.  1002.109 and 1002.110.
    (viii) A creditor that exceeded the loan-volume threshold in the 
first year of the two-year threshold period provided in Sec.  
1002.105(b) may, in the second year, collect information pursuant to 
subpart B of this part for covered applications from small businesses as 
defined in Sec. Sec.  1002.103 and 1002.106(b) regarding whether an 
applicant is a minority-owned business, a women-owned business, or an 
LGBTQI+-owned business, and the ethnicity, race, and sex of the 
applicant's principal owners if it complies with the requirements for 
covered financial institutions pursuant to Sec. Sec.  1002.107(a)(18) 
and (19), 1002.108, 1002.111, and 1002.112 for that application. Such a 
creditor is permitted, but not required, to report data to the Bureau 
collected pursuant to subpart B of this part if it complies with the 
requirements of subpart B as otherwise required for covered financial 
institutions pursuant to Sec. Sec.  1002.109 and 1002.110.
    (ix) A creditor that is not currently a covered financial 
institution under Sec.  1002.105(b), and is not otherwise a creditor to 
which Sec.  1002.5(a)(4)(vii) or (viii) applies, may collect information 
pursuant to subpart B of this part for covered applications from small 
businesses as defined in Sec. Sec.  1002.103 and 1002.106(b) regarding 
whether an applicant for a covered credit transaction is a minority-
owned business, a women-owned business, or an LGBTQI+-owned business, 
and the ethnicity, race, and sex of the applicant's principal owners for 
a transaction if it complies with the requirements for covered financial 
institutions pursuant to Sec. Sec.  1002.107 through 1002.112 for that 
application.
    (x) A creditor that is collecting information pursuant to subpart B 
of this part or as described in paragraphs (a)(4)(vii) through (ix) of 
this section for covered applications from small businesses as defined 
in Sec. Sec.  1002.103 and 1002.106(b) regarding whether an applicant 
for a covered credit transaction is a minority-owned business, a women-
owned business, or an LGBTQI+-owned business, and the ethnicity, race, 
and sex of the applicant's principal owners may also collect that same 
information for any co-applicants provided that it also complies with 
the relevant requirements of subpart B of this part or as described in 
paragraphs (a)(4)(vii) through (ix) of this section with respect to 
those co-applicants.
    (b) Limitation on information about race, color, religion, national 
origin, or

[[Page 14]]

sex. A creditor shall not inquire about the race, color, religion, 
national origin, or sex of an applicant or any other person in 
connection with a credit transaction, except as provided in paragraphs 
(b)(1) and (b)(2) of this section.
    (1) Self-test. A creditor may inquire about the race, color, 
religion, national origin, or sex of an applicant or any other person in 
connection with a credit transaction for the purpose of conducting a 
self-test that meets the requirements of Sec.  1002.15. A creditor that 
makes such an inquiry shall disclose orally or in writing, at the time 
the information is requested, that:
    (i) The applicant will not be required to provide the information;
    (ii) The creditor is requesting the information to monitor its 
compliance with the Federal Equal Credit Opportunity Act;
    (iii) Federal law prohibits the creditor from discriminating on the 
basis of this information, or on the basis of an applicant's decision 
not to furnish the information; and
    (iv) If applicable, certain information will be collected based on 
visual observation or surname if not provided by the applicant or other 
person.
    (2) Sex. An applicant may be requested to designate a title on an 
application form (such as Ms., Miss, Mr., or Mrs.) if the form discloses 
that the designation of a title is optional. An application form shall 
otherwise use only terms that are neutral as to sex.
    (c) Information about a spouse or former spouse--(1) General rule. 
Except as permitted in this paragraph, a creditor may not request any 
information concerning the spouse or former spouse of an applicant.
    (2) Permissible inquiries. A creditor may request any information 
concerning an applicant's spouse (or former spouse under paragraph 
(c)(2)(v) of this section) that may be requested about the applicant if:
    (i) The spouse will be permitted to use the account;
    (ii) The spouse will be contractually liable on the account;
    (iii) The applicant is relying on the spouse's income as a basis for 
repayment of the credit requested;
    (iv) The applicant resides in a community property state or is 
relying on property located in such a state as a basis for repayment of 
the credit requested; or
    (v) The applicant is relying on alimony, child support, or separate 
maintenance payments from a spouse or former spouse as a basis for 
repayment of the credit requested.
    (3) Other accounts of the applicant. A creditor may request that an 
applicant list any account on which the applicant is contractually 
liable and to provide the name and address of the person in whose name 
the account is held. A creditor may also ask an applicant to list the 
names in which the applicant has previously received credit.
    (d) Other limitations on information requests--(1) Marital status. 
If an applicant applies for individual unsecured credit, a creditor 
shall not inquire about the applicant's marital status unless the 
applicant resides in a community property state or is relying on 
property located in such a state as a basis for repayment of the credit 
requested. If an application is for other than individual unsecured 
credit, a creditor may inquire about the applicant's marital status, but 
shall use only the terms married, unmarried, and separated. A creditor 
may explain that the category unmarried includes single, divorced, and 
widowed persons.
    (2) Disclosure about income from alimony, child support, or separate 
maintenance. A creditor shall not inquire whether income stated in an 
application is derived from alimony, child support, or separate 
maintenance payments unless the creditor discloses to the applicant that 
such income need not be revealed if the applicant does not want the 
creditor to consider it in determining the applicant's creditworthiness.
    (3) Childbearing, childrearing. A creditor shall not inquire about 
birth control practices, intentions concerning the bearing or rearing of 
children, or capability to bear children. A creditor may inquire about 
the number and ages of an applicant's dependents or about dependent-
related financial obligations or expenditures, provided such information 
is requested without regard to sex, marital status, or any other 
prohibited basis.

[[Page 15]]

    (e) Permanent residency and immigration status. A creditor may 
inquire about the permanent residency and immigration status of an 
applicant or any other person in connection with a credit transaction.

[76 FR 79445, Dec. 21, 2011, as amended at 82 FR 45694, Oct. 2, 2017; 88 
FR 35527, May 31, 2023]



Sec.  1002.6  Rules concerning evaluation of applications.

    (a) General rule concerning use of information. Except as otherwise 
provided in the Act and this part, a creditor may consider any 
information obtained, so long as the information is not used to 
discriminate against an applicant on a prohibited basis. The legislative 
history of the Act indicates that the Congress intended an ``effects 
test'' concept, as outlined in the employment field by the Supreme Court 
in the cases of Griggs v. Duke Power Co., 401 U.S. 424 (1971), and 
Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975), to be applicable to a 
creditor's determination of creditworthiness.
    (b) Specific rules concerning use of information. (1) Except as 
provided in the Act and this part, a creditor shall not take a 
prohibited basis into account in any system of evaluating the 
creditworthiness of applicants.
    (2) Age, receipt of public assistance. (i) Except as permitted in 
this paragraph, a creditor shall not take into account an applicant's 
age (provided that the applicant has the capacity to enter into a 
binding contract) or whether an applicant's income derives from any 
public assistance program.
    (ii) In an empirically derived, demonstrably and statistically 
sound, credit scoring system, a creditor may use an applicant's age as a 
predictive variable, provided that the age of an elderly applicant is 
not assigned a negative factor or value.
    (iii) In a judgmental system of evaluating creditworthiness, a 
creditor may consider an applicant's age or whether an applicant's 
income derives from any public assistance program only for the purpose 
of determining a pertinent element of creditworthiness.
    (iv) In any system of evaluating creditworthiness, a creditor may 
consider the age of an elderly applicant when such age is used to favor 
the elderly applicant in extending credit.
    (3) Childbearing, childrearing. In evaluating creditworthiness, a 
creditor shall not make assumptions or use aggregate statistics relating 
to the likelihood that any category of persons will bear or rear 
children or will, for that reason, receive diminished or interrupted 
income in the future.
    (4) Telephone listing. A creditor shall not take into account 
whether there is a telephone listing in the name of an applicant for 
consumer credit but may take into account whether there is a telephone 
in the applicant's residence.
    (5) Income. A creditor shall not discount or exclude from 
consideration the income of an applicant or the spouse of an applicant 
because of a prohibited basis or because the income is derived from 
part-time employment or is an annuity, pension, or other retirement 
benefit; a creditor may consider the amount and probable continuance of 
any income in evaluating an applicant's creditworthiness. When an 
applicant relies on alimony, child support, or separate maintenance 
payments in applying for credit, the creditor shall consider such 
payments as income to the extent that they are likely to be consistently 
made.
    (6) Credit history. To the extent that a creditor considers credit 
history in evaluating the creditworthiness of similarly qualified 
applicants for a similar type and amount of credit, in evaluating an 
applicant's creditworthiness a creditor shall consider:
    (i) The credit history, when available, of accounts designated as 
accounts that the applicant and the applicant's spouse are permitted to 
use or for which both are contractually liable;
    (ii) On the applicant's request, any information the applicant may 
present that tends to indicate the credit history being considered by 
the creditor does not accurately reflect the applicant's 
creditworthiness; and
    (iii) On the applicant's request, the credit history, when 
available, of any account reported in the name of the applicant's spouse 
or former spouse that the applicant can demonstrate accurately reflects 
the applicant's creditworthiness.

[[Page 16]]

    (7) Immigration status. A creditor may consider the applicant's 
immigration status or status as a permanent resident of the United 
States, and any additional information that may be necessary to 
ascertain the creditor's rights and remedies regarding repayment.
    (8) Marital status. Except as otherwise permitted or required by 
law, a creditor shall evaluate married and unmarried applicants by the 
same standards; and in evaluating joint applicants, a creditor shall not 
treat applicants differently based on the existence, absence, or 
likelihood of a marital relationship between the parties.
    (9) Race, color, religion, national origin, sex. Except as otherwise 
permitted or required by law, a creditor shall not consider race, color, 
religion, national origin, or sex (or an applicant's or other person's 
decision not to provide the information) in any aspect of a credit 
transaction.
    (c) State property laws. A creditor's consideration or application 
of state property laws directly or indirectly affecting creditworthiness 
does not constitute unlawful discrimination for the purposes of the Act 
or this part.



Sec.  1002.7  Rules concerning extensions of credit.

    (a) Individual accounts. A creditor shall not refuse to grant an 
individual account to a creditworthy applicant on the basis of sex, 
marital status, or any other prohibited basis.
    (b) Designation of name. A creditor shall not refuse to allow an 
applicant to open or maintain an account in a birth-given first name and 
a surname that is the applicant's birth-given surname, the spouse's 
surname, or a combined surname.
    (c) Action concerning existing open-end accounts--(1) Limitations. 
In the absence of evidence of the applicant's inability or unwillingness 
to repay, a creditor shall not take any of the following actions 
regarding an applicant who is contractually liable on an existing open-
end account on the basis of the applicant's reaching a certain age or 
retiring or on the basis of a change in the applicant's name or marital 
status:
    (i) Require a reapplication, except as provided in paragraph (c)(2) 
of this section;
    (ii) Change the terms of the account; or
    (iii) Terminate the account.
    (2) Requiring reapplication. A creditor may require a reapplication 
for an open-end account on the basis of a change in the marital status 
of an applicant who is contractually liable if the credit granted was 
based in whole or in part on income of the applicant's spouse and if 
information available to the creditor indicates that the applicant's 
income may not support the amount of credit currently available.
    (d) Signature of spouse or other person--(1) Rule for qualified 
applicant. Except as provided in this paragraph, a creditor shall not 
require the signature of an applicant's spouse or other person, other 
than a joint applicant, on any credit instrument if the applicant 
qualifies under the creditor's standards of creditworthiness for the 
amount and terms of the credit requested. A creditor shall not deem the 
submission of a joint financial statement or other evidence of jointly 
held assets as an application for joint credit.
    (2) Unsecured credit. If an applicant requests unsecured credit and 
relies in part upon property that the applicant owns jointly with 
another person to satisfy the creditor's standards of creditworthiness, 
the creditor may require the signature of the other person only on the 
instrument(s) necessary, or reasonably believed by the creditor to be 
necessary, under the law of the state in which the property is located, 
to enable the creditor to reach the property being relied upon in the 
event of the death or default of the applicant.
    (3) Unsecured credit--community property states. If a married 
applicant requests unsecured credit and resides in a community property 
state, or if the applicant is relying on property located in such a 
state, a creditor may require the signature of the spouse on any 
instrument necessary, or reasonably believed by the creditor to be 
necessary, under applicable state law to make the community property 
available to satisfy the debt in the event of default if:

[[Page 17]]

    (i) Applicable state law denies the applicant power to manage or 
control sufficient community property to qualify for the credit 
requested under the creditor's standards of creditworthiness; and
    (ii) The applicant does not have sufficient separate property to 
qualify for the credit requested without regard to community property.
    (4) Secured credit. If an applicant requests secured credit, a 
creditor may require the signature of the applicant's spouse or other 
person on any instrument necessary, or reasonably believed by the 
creditor to be necessary, under applicable state law to make the 
property being offered as security available to satisfy the debt in the 
event of default, for example, an instrument to create a valid lien, 
pass clear title, waive inchoate rights, or assign earnings.
    (5) Additional parties. If, under a creditor's standards of 
creditworthiness, the personal liability of an additional party is 
necessary to support the credit requested, a creditor may request a 
cosigner, guarantor, endorser, or similar party. The applicant's spouse 
may serve as an additional party, but the creditor shall not require 
that the spouse be the additional party.
    (6) Rights of additional parties. A creditor shall not impose 
requirements upon an additional party that the creditor is prohibited 
from imposing upon an applicant under this section.
    (e) Insurance. A creditor shall not refuse to extend credit and 
shall not terminate an account because credit life, health, accident, 
disability, or other credit-related insurance is not available on the 
basis of the applicant's age.



Sec.  1002.8  Special purpose credit programs.

    (a) Standards for programs. Subject to the provisions of paragraph 
(b) of this section, the Act and this part permit a creditor to extend 
special purpose credit to applicants who meet eligibility requirements 
under the following types of credit programs:
    (1) Any credit assistance program expressly authorized by Federal or 
state law for the benefit of an economically disadvantaged class of 
persons;
    (2) 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; or
    (3) Any special purpose credit program offered by a for-profit 
organization, or in which such an organization participates to meet 
special social needs, if:
    (i) The program is established and administered pursuant to a 
written plan that identifies the class of persons that the program is 
designed to benefit and sets forth the procedures and standards for 
extending credit pursuant to the program; and
    (ii) The program is established and administered 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.
    (b) Rules in other sections--(1) General applicability. All the 
provisions of this part apply to each of the special purpose credit 
programs described in paragraph (a) of this section except as modified 
by this section.
    (2) Common characteristics. A program described in paragraph (a)(2) 
or (a)(3) of this section qualifies as a special purpose credit program 
only if it was established and is administered so as not to discriminate 
against an applicant on any prohibited basis; however, all program 
participants may be required to share one or more common characteristics 
(for example, race, national origin, or sex) so long as the program was 
not established and is not administered with the purpose of evading the 
requirements of the Act or this part.
    (c) Special rule concerning requests and use of information. If 
participants in a special purpose credit program described in paragraph 
(a) of this section are required to possess one or more common 
characteristics (for example, race, national origin, or sex) and if the

[[Page 18]]

program otherwise satisfies the requirements of paragraph (a) of this 
section, a creditor may request and consider information regarding the 
common characteristic(s) in determining the applicant's eligibility for 
the program.
    (d) Special rule in the case of financial need. If financial need is 
one of the criteria under a special purpose credit program described in 
paragraph (a) of this section, the creditor may request and consider, in 
determining an applicant's eligibility for the program, information 
regarding the applicant's marital status; alimony, child support, and 
separate maintenance income; and the spouse's financial resources. In 
addition, a creditor may obtain the signature of an applicant's spouse 
or other person on an application or credit instrument relating to a 
special purpose credit program if the signature is required by Federal 
or state law.



Sec.  1002.9  Notifications.

    (a) Notification of action taken, ECOA notice, and statement of 
specific reasons--(1) When notification is required. A creditor shall 
notify an applicant of action taken within:
    (i) 30 days after receiving a completed application concerning the 
creditor's approval of, counteroffer to, or adverse action on the 
application;
    (ii) 30 days after taking adverse action on an incomplete 
application, unless notice is provided in accordance with paragraph (c) 
of this section;
    (iii) 30 days after taking adverse action on an existing account; or
    (iv) 90 days after notifying the applicant of a counteroffer if the 
applicant does not expressly accept or use the credit offered.
    (2) Content of notification when adverse action is taken. A 
notification given to an applicant when adverse action is taken shall be 
in writing and shall contain a statement of the action taken; the name 
and address of the creditor; a statement of the provisions of section 
701(a) of the Act; the name and address of the Federal agency that 
administers compliance with respect to the creditor; and either:
    (i) A statement of specific reasons for the action taken; or
    (ii) A disclosure of the applicant's right to a statement of 
specific reasons within 30 days, if the statement is requested within 60 
days of the creditor's notification. The disclosure shall include the 
name, address, and telephone number of the person or office from which 
the statement of reasons can be obtained. If the creditor chooses to 
provide the reasons orally, the creditor shall also disclose the 
applicant's right to have them confirmed in writing within 30 days of 
receiving the applicant's written request for confirmation.
    (3) Notification to business credit applicants. For business credit, 
a creditor shall comply with the notification requirements of this 
section in the following manner:
    (i) With regard to a business that had gross revenues of $1 million 
or less in its preceding fiscal year (other than an extension of trade 
credit, credit incident to a factoring agreement, or other similar types 
of business credit), a creditor shall comply with paragraphs (a)(1) and 
(2) of this section, except that:
    (A) The statement of the action taken may be given orally or in 
writing, when adverse action is taken;
    (B) Disclosure of an applicant's right to a statement of reasons may 
be given at the time of application, instead of when adverse action is 
taken, provided the disclosure contains the information required by 
paragraph (a)(2)(ii) of this section and the ECOA notice specified in 
paragraph (b)(1) of this section;
    (C) For an application made entirely by telephone, a creditor 
satisfies the requirements of paragraph (a)(3)(i) of this section by an 
oral statement of the action taken and of the applicant's right to a 
statement of reasons for adverse action.
    (ii) With regard to a business that had gross revenues in excess of 
$1 million in its preceding fiscal year or an extension of trade credit, 
credit incident to a factoring agreement, or other similar types of 
business credit, a creditor shall:
    (A) Notify the applicant, within a reasonable time, orally or in 
writing, of the action taken; and
    (B) Provide a written statement of the reasons for adverse action 
and the

[[Page 19]]

ECOA notice specified in paragraph (b)(1) of this section if the 
applicant makes a written request for the reasons within 60 days of the 
creditor's notification.
    (b) Form of ECOA notice and statement of specific reasons--(1) ECOA 
notice. To satisfy the disclosure requirements of paragraph (a)(2) of 
this section regarding section 701(a) of the Act, the creditor shall 
provide a notice that is substantially similar to the following: 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 [name 
and address as specified by the appropriate agency or agencies listed in 
appendix A of this part].
    (2) Statement of specific reasons. The statement of reasons for 
adverse action required by paragraph (a)(2)(i) of this section must be 
specific and indicate the principal reason(s) for the adverse action. 
Statements that the adverse action was based on the creditor's internal 
standards or policies or that the applicant, joint applicant, or similar 
party failed to achieve a qualifying score on the creditor's credit 
scoring system are insufficient.
    (c) Incomplete applications--(1) Notice alternatives. Within 30 days 
after receiving an application that is incomplete regarding matters that 
an applicant can complete, the creditor shall notify the applicant 
either:
    (i) Of action taken, in accordance with paragraph (a) of this 
section; or
    (ii) Of the incompleteness, in accordance with paragraph (c)(2) of 
this section.
    (2) Notice of incompleteness. If additional information is needed 
from an applicant, the creditor shall send a written notice to the 
applicant specifying the information needed, designating a reasonable 
period of time for the applicant to provide the information, and 
informing the applicant that failure to provide the information 
requested will result in no further consideration being given to the 
application. The creditor shall have no further obligation under this 
section if the applicant fails to respond within the designated time 
period. If the applicant supplies the requested information within the 
designated time period, the creditor shall take action on the 
application and notify the applicant in accordance with paragraph (a) of 
this section.
    (3) Oral request for information. At its option, a creditor may 
inform the applicant orally of the need for additional information. If 
the application remains incomplete the creditor shall send a notice in 
accordance with paragraph (c)(1) of this section.
    (d) Oral notifications by small-volume creditors. In the case of a 
creditor that did not receive more than 150 applications during the 
preceding calendar year, the requirements of this section (including 
statements of specific reasons) are satisfied by oral notifications.
    (e) Withdrawal of approved application. When an applicant submits an 
application and the parties contemplate that the applicant will inquire 
about its status, 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 
paragraph (a)(1) of this section.
    (f) Multiple applicants. When an application involves more than one 
applicant, notification need only be given to one of them but must be 
given to the primary applicant where one is readily apparent.
    (g) Applications submitted through a third party. When an 
application is made on behalf of an applicant to more than one creditor 
and the applicant expressly accepts or uses credit offered by one of the 
creditors, notification of action taken by any of the other creditors is 
not required. If no credit is offered or if the applicant does not 
expressly accept or use the credit offered, each creditor taking adverse 
action must comply with this section, directly or through a third party. 
A notice given by a third party shall disclose

[[Page 20]]

the identity of each creditor on whose behalf the notice is given.

[76 FR 79445, Dec. 21, 2011, as amended at 88 FR 16537, Mar. 20, 2023]



Sec.  1002.10  Furnishing of credit information.

    (a) Designation of accounts. A creditor that furnishes credit 
information shall designate:
    (1) Any new account to 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); and
    (2) Any existing account to reflect such participation, within 90 
days after receiving a written request to do so from one of the spouses.
    (b) Routine reports to consumer reporting agency. If a creditor 
furnishes credit information to a consumer reporting agency concerning 
an account designated to reflect the participation of both spouses, the 
creditor shall furnish the information in a manner that will enable the 
agency to provide access to the information in the name of each spouse.
    (c) Reporting in response to inquiry. If a creditor furnishes credit 
information in response to an inquiry, concerning an account designated 
to reflect the participation of both spouses, the creditor shall furnish 
the information in the name of the spouse about whom the information is 
requested.



Sec.  1002.11  Relation to state law.

    (a) Inconsistent state laws. Except as otherwise provided in this 
section, this part alters, affects, or preempts only those state laws 
that are inconsistent with the Act and this part and then only to the 
extent of the inconsistency. A state law is not inconsistent if it is 
more protective of an applicant.
    (b) Preempted provisions of state law. (1) A state law is deemed to 
be inconsistent with the requirements of the Act and this part and less 
protective of an applicant within the meaning of section 705(f) of the 
Act to the extent that the law:
    (i) Requires or permits a practice or act prohibited by the Act or 
this part;
    (ii) Prohibits the individual extension of consumer credit to both 
parties to a marriage if each spouse individually and voluntarily 
applies for such credit;
    (iii) Prohibits inquiries or collection of data required to comply 
with the Act or this part;
    (iv) Prohibits asking about or considering age in an empirically 
derived, demonstrably and statistically sound, credit scoring system to 
determine a pertinent element of creditworthiness, or to favor an 
elderly applicant; or
    (v) Prohibits inquiries necessary to establish or administer a 
special purpose credit program as defined by Sec.  1002.8.
    (2) A creditor, state, or other interested party may request that 
the Bureau determine whether a state law is inconsistent with the 
requirements of the Act and this part.
    (c) Laws on finance charges, loan ceilings. If married applicants 
voluntarily apply for and obtain individual accounts with the same 
creditor, the accounts shall not be aggregated or otherwise combined for 
purposes of determining permissible finance charges or loan ceilings 
under any Federal or state law. Permissible loan ceiling laws shall be 
construed to permit each spouse to become individually liable up to the 
amount of the loan ceilings, less the amount for which the applicant is 
jointly liable.
    (d) State and Federal laws not affected. This section does not alter 
or annul any provision of state property laws, laws relating to the 
disposition of decedents' estates, or Federal or state banking 
regulations directed only toward insuring the solvency of financial 
institutions.
    (e) Exemption for state-regulated transactions--(1) Applications. A 
state may apply to the Bureau for an exemption from the requirements of 
the Act and this part for any class of credit transactions within the 
state. The Bureau will grant such an exemption if the Bureau determines 
that:
    (i) The class of credit transactions is subject to state law 
requirements substantially similar to those of the Act and this part or 
that applicants are afforded greater protection under state law; and
    (ii) There is adequate provision for state enforcement.

[[Page 21]]

    (2) Liability and enforcement. (i) No exemption will extend to the 
civil liability provisions of section 706 of the Act or the 
administrative enforcement provisions of section 704 of the Act.
    (ii) After an exemption has been granted, the requirements of the 
applicable state law (except for additional requirements not imposed by 
Federal law) will constitute the requirements of the Act and this part.



Sec.  1002.12  Record retention.

    (a) Retention of prohibited information. A creditor may retain in 
its files information that is prohibited by the Act or this part for use 
in evaluating applications, without violating the Act or this part, if 
the information was obtained:
    (1) From any source prior to March 23, 1977;
    (2) From consumer reporting agencies, an applicant, or others 
without the specific request of the creditor; or
    (3) As required to monitor compliance with the Act and this part or 
other Federal or state statutes or regulations.
    (b) Preservation of records-- (1) Applications. For 25 months (12 
months for business credit, except as provided in paragraph (b)(5) of 
this section or otherwise provided for in subpart B of this part) after 
the date that a creditor notifies an applicant of action taken on an 
application or of incompleteness, the creditor shall retain in original 
form or a copy thereof:
    (i) Any application that it receives, any information required to be 
obtained concerning characteristics of the applicant to monitor 
compliance with the Act and this part or other similar law, any 
information obtained pursuant to Sec.  1002.5(a)(4), and any other 
written or recorded information used in evaluating the application and 
not returned to the applicant at the applicant's request.
    (ii) A copy of the following documents if furnished to the applicant 
in written form (or, if furnished orally, any notation or memorandum 
made by the creditor):
    (A) The notification of action taken; and
    (B) The statement of specific reasons for adverse action; and
    (iii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (2) Existing accounts. For 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section or otherwise 
provided for in subpart B of this part) after the date that a creditor 
notifies an applicant of adverse action regarding an existing account, 
the creditor shall retain as to that account, in original form or a copy 
thereof:
    (i) Any written or recorded information concerning the adverse 
action; and
    (ii) Any written statement submitted by the applicant alleging a 
violation of the Act or this part.
    (3) Other applications. For 25 months (12 months for business 
credit, except as provided in paragraph (b)(5) of this section or 
otherwise provided for in subpart B of this part) after the date that a 
creditor receives an application for which the creditor is not required 
to comply with the notification requirements of Sec.  1002.9, the 
creditor shall retain all written or recorded information in its 
possession concerning the applicant, including any notation of action 
taken.
    (4) Enforcement proceedings and investigations. A creditor shall 
retain the information beyond 25 months (12 months for business credit, 
except as provided in paragraph (b)(5) of this section or otherwise 
provided for in subpart B) if the creditor has actual notice that it is 
under investigation or is subject to an enforcement proceeding for an 
alleged violation of the Act or this part, by the Attorney General of 
the United States or by an enforcement agency charged with monitoring 
that creditor's compliance with the Act and this part, or if it has been 
served with notice of an action filed pursuant to section 706 of the Act 
and Sec.  1002.16 of this part. The creditor shall retain the 
information until final disposition of the matter, unless an earlier 
time is allowed by order of the agency or court.
    (5) Special rule for certain business credit applications. With 
regard to a business that had gross revenues in excess of $1 million in 
its preceding fiscal year, or an extension of trade credit,

[[Page 22]]

credit incident to a factoring agreement, or other similar types of 
business credit, the creditor shall retain records for at least 60 days, 
except as otherwise provided for in subpart B, after notifying the 
applicant of the action taken. If within that time period the applicant 
requests in writing the reasons for adverse action or that records be 
retained, the creditor shall retain records for 12 months.
    (6) Self-tests. For 25 months after a self-test (as defined in Sec.  
1002.15) has been completed, the creditor shall retain all written or 
recorded information about the self-test. A creditor shall retain 
information beyond 25 months if it has actual notice that it is under 
investigation or is subject to an enforcement proceeding for an alleged 
violation, or if it has been served with notice of a civil action. In 
such cases, the creditor shall retain the information until final 
disposition of the matter, unless an earlier time is allowed by the 
appropriate agency or court order.
    (7) Prescreened solicitations. For 25 months after the date on which 
an offer of credit is made to potential customers (12 months for 
business credit, except as provided in paragraph (b)(5) of this section 
or otherwise provided for in subpart B), the creditor shall retain in 
original form or a copy thereof:
    (i) The text of any prescreened solicitation;
    (ii) The list of criteria the creditor used to select potential 
recipients of the solicitation; and
    (iii) Any correspondence related to complaints (formal or informal) 
about the solicitation.

[76 FR 79445, Dec. 21, 2011, as amended at 82 FR 45694, Oct. 2, 2017; 88 
FR 35528, May 31, 2023]



Sec.  1002.13  Information for monitoring purposes.

    (a) Information to be requested. (1) A creditor that receives an 
application for credit primarily for the purchase or refinancing of a 
dwelling occupied or to be occupied by the applicant as a principal 
residence, where the extension of credit will be secured by the 
dwelling, shall request as part of the application the following 
information regarding the applicant(s):
    (i) Ethnicity and race using either:
    (A) For ethnicity, the aggregate categories Hispanic or Latino and 
not Hispanic or Latino; and, for race, the aggregate categories American 
Indian or Alaska Native, Asian, Black or African American, Native 
Hawaiian or Other Pacific Islander, and White; or
    (B) The categories and subcategories for the collection of ethnicity 
and race set forth in appendix B to 12 CFR part 1003.
    (ii) Sex;
    (iii) Marital status, using the categories married, unmarried, and 
separated; and
    (iv) Age.
    (2) Dwelling means a residential structure that contains one to four 
units, whether or not that structure is attached to real property. The 
term includes, but is not limited to, an individual condominium or 
cooperative unit and a mobile or other manufactured home.
    (b) Obtaining information. Questions regarding ethnicity, race, sex, 
marital status, and age may be listed, at the creditor's option, on the 
application form or on a separate form that refers to the application. 
The applicant(s) shall be asked but not required to supply the requested 
information. If the applicant(s) chooses not to provide the information 
or any part of it, that fact shall be noted on the form. The creditor 
shall then also note on the form, to the extent possible, the ethnicity, 
race, and sex of the applicant(s) on the basis of visual observation or 
surname. When a creditor collects ethnicity and race information 
pursuant to Sec.  1002.13(a)(1)(i)(B), the creditor must comply with any 
restrictions on the collection of an applicant's ethnicity or race on 
the basis of visual observation or surname set forth in appendix B to 12 
CFR part 1003. If there is more than one co-applicant, a creditor is 
permitted, but is not required, to collect the information set forth in 
paragraph (a) of this section from a second or additional co-applicant.
    (c) Disclosure to applicant(s). The creditor shall inform the 
applicant(s) that the information regarding ethnicity, race, sex, 
marital status, and age is being requested by the Federal Government for 
the purpose of monitoring compliance with Federal statutes that

[[Page 23]]

prohibit creditors from discriminating against applicants on those 
bases. The creditor shall also inform the applicant(s) that if the 
applicant(s) 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.
    (d) Substitute monitoring program. A monitoring program required by 
an agency charged with administrative enforcement under section 704 of 
the Act may be substituted for the requirements contained in paragraphs 
(a), (b), and (c) of this section.

[76 FR 79445, Dec. 21, 2011, as amended at 82 FR 45694, Oct. 2, 2017]



Sec.  1002.14  Rules on providing appraisals and other valuations.

    (a) Providing appraisals and other valuations--(1) In general. A 
creditor shall provide an applicant a copy of all appraisals and other 
written valuations developed in connection with an application for 
credit that is to be secured by a first lien on a dwelling. A creditor 
shall provide a copy of each such appraisal or other written valuation 
promptly upon completion, or three business days prior to consummation 
of the transaction (for closed-end credit) or account opening (for open-
end credit), whichever is earlier. An applicant may waive the timing 
requirement in this paragraph (a)(1) and agree to receive any copy at or 
before consummation or account opening, except where otherwise 
prohibited by law. Any such waiver must be obtained at least three 
business days prior to consummation or account opening, unless the 
waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical changes 
from a previous version of the appraisal or other written valuation 
provided to the applicant three or more business days prior to 
consummation or account opening. If the applicant provides a waiver and 
the transaction is not consummated or the account is not opened, the 
creditor must provide these copies no later than 30 days after the 
creditor determines consummation will not occur or the account will not 
be opened.
    (2) Disclosure. For applications subject to paragraph (a)(1) of this 
section, a creditor shall mail or deliver to an applicant, not later 
than the third business day after the creditor receives an application 
for credit that is to be secured by a first lien on a dwelling, a notice 
in writing of the applicant's right to receive a copy of all written 
appraisals developed in connection with the application. In the case of 
an application for credit that is not to be secured by a first lien on a 
dwelling at the time of application, if the creditor later determines 
the credit will be secured by a first lien on a dwelling, the creditor 
shall mail or deliver the same notice in writing not later than the 
third business day after the creditor determines that the loan is to be 
secured by a first lien on a dwelling.
    (3) Reimbursement. A creditor shall not charge an applicant for 
providing a copy of appraisals and other written valuations as required 
under this section, but may require applicants to pay a reasonable fee 
to reimburse the creditor for the cost of the appraisal or other written 
valuation unless otherwise provided by law.
    (4) Withdrawn, denied, or incomplete applications. The requirements 
set forth in paragraph (a)(1) of this section apply whether credit is 
extended or denied or if the application is incomplete or withdrawn.
    (5) Copies in electronic form. The copies required by Sec.  
1002.14(a)(1) may be provided to the applicant in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the Electronic Signatures in Global and National Commerce 
Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (b) Definitions. For purposes of paragraph (a) of this section:
    (1) Consummation. The term ``consummation'' means the time that a 
consumer becomes contractually obligated on a closed-end credit 
transaction.
    (2) Dwelling. The term ``dwelling'' means a residential structure 
that contains one to four units whether or not that structure is 
attached to real property. The term includes, but is not limited to, an 
individual condominium or cooperative unit, and a mobile or other 
manufactured home.

[[Page 24]]

    (3) Valuation. The term ``valuation'' means any estimate of the 
value of a dwelling developed in connection with an application for 
credit.

[78 FR 7248, Jan. 31, 2013]



Sec.  1002.15  Incentives for self-testing and self-correction.

    (a) General rules--(1) Voluntary self-testing and correction. The 
report or results of a self-test that a creditor voluntarily conducts 
(or authorizes) are privileged as provided in this section. Data 
collection required by law or by any governmental authority is not a 
voluntary self-test.
    (2) Corrective action required. The privilege in this section 
applies only if the creditor has taken or is taking appropriate 
corrective action.
    (3) Other privileges. The privilege created by this section does not 
preclude the assertion of any other privilege that may also apply.
    (b) Self-test defined--(1) Definition. A self-test is any program, 
practice, or study that:
    (i) Is designed and used specifically to determine the extent or 
effectiveness of a creditor's compliance with the Act or this part; and
    (ii) Creates data or factual information that is not available and 
cannot be derived from loan or application files or other records 
related to credit transactions.
    (2) Types of information privileged. The privilege under this 
section applies to the report or results of the self-test, data or 
factual information created by the self-test, and any analysis, 
opinions, and conclusions pertaining to the self-test report or results. 
The privilege covers workpapers or draft documents as well as final 
documents.
    (3) Types of information not privileged. The privilege under this 
section does not apply to:
    (i) Information about whether a creditor conducted a self-test, the 
methodology used or the scope of the self-test, the time period covered 
by the self-test, or the dates it was conducted; or
    (ii) Loan and application files or other business records related to 
credit transactions, and information derived from such files and 
records, even if the information has been aggregated, summarized, or 
reorganized to facilitate analysis.
    (c) Appropriate corrective action--(1) General requirement. For the 
privilege in this section to apply, appropriate corrective action is 
required when the self-test shows that it is more likely than not that a 
violation occurred, even though no violation has been formally 
adjudicated.
    (2) Determining the scope of appropriate corrective action. A 
creditor must take corrective action that is reasonably likely to remedy 
the cause and effect of a likely violation by:
    (i) Identifying the policies or practices that are the likely cause 
of the violation; and
    (ii) Assessing the extent and scope of any violation.
    (3) Types of relief. Appropriate corrective action may include both 
prospective and remedial relief, except that to establish a privilege 
under this section:
    (i) A creditor is not required to provide remedial relief to a 
tester used in a self-test;
    (ii) A creditor is only required to provide remedial relief to an 
applicant identified by the self-test as one whose rights were more 
likely than not violated; and
    (iii) A creditor is not required to provide remedial relief to a 
particular applicant if the statute of limitations applicable to the 
violation expired before the creditor obtained the results of the self-
test or the applicant is otherwise ineligible for such relief.
    (4) No admission of violation. Taking corrective action is not an 
admission that a violation occurred.
    (d) Scope of privilege--(1) General rule. The report or results of a 
privileged self-test may not be obtained or used:
    (i) By a government agency in any examination or investigation 
relating to compliance with the Act or this part; or
    (ii) By a government agency or an applicant (including a prospective 
applicant who alleges a violation of Sec.  1002.4(b)) in any proceeding 
or civil action in which a violation of the Act or this part is alleged.
    (2) Loss of privilege. The report or results of a self-test are not 
privileged under paragraph (d)(1) of this section if

[[Page 25]]

the creditor or a person with lawful access to the report or results:
    (i) Voluntarily discloses any part of the report or results, or any 
other information privileged under this section, to an applicant or 
government agency or to the public;
    (ii) Discloses any part of the report or results, or any other 
information privileged under this section, as a defense to charges that 
the creditor has violated the Act or regulation; or
    (iii) Fails or is unable to produce written or recorded information 
about the self-test that is required to be retained under Sec.  
1002.12(b)(6) when the information is needed to determine whether the 
privilege applies. This paragraph does not limit any other penalty or 
remedy that may be available for a violation of Sec.  1002.12.
    (3) Limited use of privileged information. Notwithstanding paragraph 
(d)(1) of this section, the self-test report or results and any other 
information privileged under this section may be obtained and used by an 
applicant or government agency solely to determine a penalty or remedy 
after a violation of the Act or this part has been adjudicated or 
admitted. Disclosures for this limited purpose may be used only for the 
particular proceeding in which the adjudication or admission was made. 
Information disclosed under this paragraph (d)(3) remains privileged 
under paragraph (d)(1) of this section.



Sec.  1002.16  Enforcement, penalties and liabilities.

    (a) Administrative enforcement. (1) As set forth more fully in 
section 704 of the Act, administrative enforcement of the Act and this 
part regarding certain creditors is assigned to the Comptroller of the 
Currency, Board of Governors of the Federal Reserve System, Board of 
Directors of the Federal Deposit Insurance Corporation, National Credit 
Union Administration, Surface Transportation Board, Civil Aeronautics 
Board, Secretary of Agriculture, Farm Credit Administration, Securities 
and Exchange Commission, Small Business Administration, Secretary of 
Transportation, and Bureau of Consumer Financial Protection.
    (2) Except to the extent that administrative enforcement is 
specifically assigned to some government agency other than the Bureau, 
and subject to subtitle B of the Consumer Financial Protection Act of 
2010, the Federal Trade Commission is authorized to enforce the 
requirements imposed under the Act and this part.
    (b) Penalties and liabilities. (1) Sections 702(g) and 706(a) and 
(b) of the Act provide that any creditor that fails to comply with a 
requirement imposed by the Act or this part is subject to civil 
liability for actual and punitive damages in individual or class 
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the 
Act, violations of the Act or this part also constitute violations of 
other Federal laws. Liability for punitive damages can apply only to 
nongovernmental entities and is limited to $10,000 in individual actions 
and the lesser of $500,000 or 1 percent of the creditor's net worth in 
class actions. Section 706(c) provides for equitable and declaratory 
relief and section 706(d) authorizes the awarding of costs and 
reasonable attorney's fees to an aggrieved applicant in a successful 
action.
    (2) As provided in section 706(f) of the Act, a civil action under 
the Act or this part may be brought in the appropriate United States 
district court without regard to the amount in controversy or in any 
other court of competent jurisdiction within five years after the date 
of the occurrence of the violation, or within one year after the 
commencement of an administrative enforcement proceeding or of a civil 
action brought by the Attorney General of the United States within five 
years after the alleged violation.
    (3) If an agency responsible for administrative enforcement is 
unable to obtain compliance with the Act or this part, it may refer the 
matter to the Attorney General of the United States. If the Bureau, the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Board of Governors of the Federal Reserve System, or the National 
Credit Union Administration has reason to believe that one or more 
creditors have engaged in a pattern or practice of discouraging or 
denying applications in violation of the Act or this part, the agency 
shall refer the matter to the Attorney General. If

[[Page 26]]

the agency has reason to believe that one or more creditors violated 
section 701(a) of the Act, the agency may refer a matter to the Attorney 
General.
    (4) On referral, or whenever the Attorney General has reason to 
believe that one or more creditors have engaged in a pattern or practice 
in violation of the Act or this part, the Attorney General may bring a 
civil action for such relief as may be appropriate, including actual and 
punitive damages and injunctive relief.
    (5) If the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Board of Governors of the Federal Reserve 
System, or the National Credit Union Administration has reason to 
believe (as a result of a consumer complaint, a consumer compliance 
examination, or some other basis) that a violation of the Act or this 
part has occurred which is also a violation of the Fair Housing Act, and 
the matter is not referred to the Attorney General, the agency shall:
    (i) Notify the Secretary of Housing and Urban Development; and
    (ii) Inform the applicant that the Secretary of Housing and Urban 
Development has been notified and that remedies may be available under 
the Fair Housing Act.
    (c) Failure of compliance. A creditor's failure to comply with Sec.  
1002.6(b)(6), Sec.  1002.9, Sec.  1002.10, Sec.  1002.12 or Sec.  
1002.13 is not a violation if it results from an inadvertent error. On 
discovering an error under Sec. Sec.  1002.9 and 1002.10, the creditor 
shall correct it as soon as possible. If a creditor inadvertently 
obtains the monitoring information regarding the ethnicity, race, and 
sex of the applicant in a dwelling-related transaction not covered by 
Sec.  1002.13, the creditor may retain information and act on the 
application without violating the regulation.



            Subpart B_Small Business Lending Data Collection

    Source: 88 FR 35528, May 31, 2023, unless otherwise noted.



Sec.  1002.101  Authority, purpose, and scope.

    (a) Authority and scope. This subpart to Regulation B is issued by 
the Bureau pursuant to section 704B of the Equal Credit Opportunity Act 
(15 U.S.C. 1691c-2). Except as otherwise provided herein, this subpart 
applies to covered financial institutions, as defined in Sec.  
1002.105(b), other than a person excluded from coverage of this part by 
section 1029 of the Consumer Financial Protection Act of 2010, title X 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public 
Law 111-203, 124 Stat. 1376, 2004 (2010).
    (b) Purpose. This subpart implements section 704B of the Equal 
Credit Opportunity Act, which Congress intended:
    (1) To facilitate enforcement of fair lending laws; and
    (2) To enable communities, governmental entities, and creditors to 
identify business and community development needs and opportunities of 
women-owned, minority-owned, and small businesses.



Sec.  1002.102  Definitions.

    In this subpart:
    (a) Affiliate means, with respect to a financial institution, any 
company that controls, is controlled by, or is under common control 
with, another company, as set forth in the Bank Holding Company Act of 
1956 (12 U.S.C. 1841 et seq.). With respect to a business or an 
applicant, affiliate shall have the same meaning as in 13 CFR 121.103.
    (b) Applicant means any person who requests or who has received an 
extension of business credit from a financial institution.
    (c) Business is defined in Sec.  1002.106(a).
    (d) Business credit shall have the same meaning as in Sec.  
1002.2(g).
    (e) Closed-end credit transaction means an extension of business 
credit that is not an open-end credit transaction under paragraph (n) of 
this section.
    (f) Covered application is defined in Sec.  1002.103.
    (g) Covered credit transaction is defined in Sec.  1002.104.
    (h) Covered financial institution is defined in Sec.  1002.105(b).
    (i) Credit shall have the same meaning as in Sec.  1002.2(j).
    (j) Financial institution is defined in Sec.  1002.105(a).
    (k) LGBTQI+ individual includes an individual who identifies as 
lesbian,

[[Page 27]]

gay, bisexual, transgender, queer, or intersex.
    (l) LGBTQI+-owned business means a business for which one or more 
LGBTQI+ individuals hold more than 50 percent of its ownership or 
control, and for which more than 50 percent of the net profits or losses 
accrue to one or more such individuals.
    (m) Minority-owned business means a business for which one or more 
American Indian or Alaska Native, Asian, Black or African American, 
Native Hawaiian or Other Pacific Islander, or Hispanic or Latino 
individuals hold more than 50 percent of its ownership or control, and 
for which more than 50 percent of the net profits or losses accrue to 
one or more such individuals.
    (n) Open-end credit transaction means an open-end credit plan as 
defined in Regulation Z, 12 CFR 1026.2(a)(20), but without regard to 
whether the credit is consumer credit, as defined in Sec.  
1026.2(a)(12), is extended by a creditor, as defined in Sec.  
1026.2(a)(17), or is extended to a consumer, as defined in Sec.  
1026.2(a)(11).
    (o) Principal owner means an individual who directly owns 25 percent 
or more of the equity interests of a business.
    (p) Small business is defined in Sec.  1002.106(b).
    (q) Small business lending application register or register means 
the data reported, or required to be reported, annually pursuant to 
Sec.  1002.109.
    (r) State shall have the same meaning as in Sec.  1002.2(aa).
    (s) Women-owned business means a business for which more than 50 
percent of its ownership or control is held by one or more women, and 
more than 50 percent of its net profits or losses accrue to one or more 
women.



Sec.  1002.103  Covered applications.

    (a) Covered application. Except as provided in paragraph (b) of this 
section, covered application means an oral or written request for a 
covered credit transaction that is made in accordance with procedures 
used by a financial institution for the type of credit requested.
    (b) Circumstances that are not covered applications. A covered 
application does not include:
    (1) Reevaluation, extension, or renewal requests on an existing 
business credit account, unless the request seeks additional credit 
amounts.
    (2) Inquiries and prequalification requests.



Sec.  1002.104  Covered credit transactions and excluded transactions.

    (a) Covered credit transaction means an extension of business credit 
that is not an excluded transaction under paragraph (b) of this section.
    (b) Excluded transactions. The requirements of this subpart do not 
apply to:
    (1) Trade credit. A financing arrangement wherein a business 
acquires goods or services from another business without making 
immediate payment in full to the business providing the goods or 
services.
    (2) Home Mortgage Disclosure Act (HMDA)-reportable transactions. A 
covered loan, or application therefor, as defined by Regulation C, 12 
CFR 1003.2(e).
    (3) Insurance premium financing. A financing arrangement wherein a 
business agrees to pay to a financial institution, in installments, the 
principal amount advanced by the financial institution to an insurer or 
insurance producer in payment of premium on the business's insurance 
contract or contracts, plus charges, and, as security for repayment, the 
business assigns to the financial institution certain rights, 
obligations, and/or considerations (such as the unearned premiums, 
accrued dividends, or loss payments) in its insurance contract or 
contracts. Insurance premium financing does not include the financing of 
insurance policy premiums obtained in connection with the financing of 
goods and services.
    (4) Public utilities credit. Public utilities credit as defined in 
Sec.  1002.3(a)(1).
    (5) Securities credit. Securities credit as defined in Sec.  
1002.3(b)(1).
    (6) Incidental credit. Incidental credit as defined in Sec.  
1002.3(c)(1), but without regard to whether the credit is consumer 
credit, as defined in Sec.  1002.2(h).

[[Page 28]]



Sec.  1002.105  Covered financial institutions and exempt institutions.

    (a) Financial institution means any partnership, company, 
corporation, association (incorporated or unincorporated), trust, 
estate, cooperative organization, or other entity that engages in any 
financial activity.
    (b) Covered financial institution means a financial institution that 
originated at least 100 covered credit transactions for small businesses 
in each of the two preceding calendar years.



Sec.  1002.106  Business and small business.

    (a) Business has the same meaning as the term ``business concern or 
concern'' in 13 CFR 121.105.
    (b) Small business definition--(1) Small business has the same 
meaning as the term ``small business concern'' in 15 U.S.C. 632(a), as 
implemented in 13 CFR 121.101 through 121.107. Notwithstanding the size 
standards set forth in 13 CFR 121.201, for purposes of this subpart, a 
business is a small business if its gross annual revenue, as defined in 
Sec.  1002.107(a)(14), for its preceding fiscal year is $5 million or 
less.
    (2) Inflation adjustment. Every 5 years after January 1, 2025, the 
gross annual revenue threshold set forth in paragraph (b)(1) of this 
section shall adjust based on changes to the Consumer Price Index for 
All Urban Consumers (U.S. city average series for all items, not 
seasonally adjusted), as published by the United States Bureau of Labor 
Statistics. Any adjustment that takes effect under this paragraph shall 
be rounded to the nearest multiple of $500,000. If an adjustment is to 
take effect, it will do so on January 1 of the following calendar year.



Sec.  1002.107  Compilation of reportable data.

    (a) Data format and itemization. A covered financial institution 
shall compile and maintain data regarding covered applications from 
small businesses. The data shall be compiled in the manner prescribed 
herein and the Filing Instructions Guide for this subpart for the 
appropriate year. The data compiled shall include the items described in 
paragraphs (a)(1) through (20) of this section.
    (1) Unique identifier. An alphanumeric identifier, starting with the 
legal entity identifier of the financial institution, unique within the 
financial institution to the specific covered application, and which can 
be used to identify and retrieve the specific file or files 
corresponding to the application for or extension of credit.
    (2) Application date. The date the covered application was received 
or the date shown on a paper or electronic application form.
    (3) Application method. The means by which the applicant submitted 
the covered application directly or indirectly to the financial 
institution.
    (4) Application recipient. Whether the applicant submitted the 
covered application directly to the financial institution or its 
affiliate, or whether the applicant submitted the covered application 
indirectly to the financial institution via a third party.
    (5) Credit type. The following information regarding the type of 
credit applied for or originated:
    (i) Credit product. The credit product.
    (ii) Guarantees. The type or types of guarantees that were obtained 
for an extension of credit, or that would have been obtained if the 
covered credit transaction were originated.
    (iii) Loan term. The length of the loan term, in months, if 
applicable.
    (6) Credit purpose. The purpose or purposes of the credit applied 
for or originated.
    (7) Amount applied for. The initial amount of credit or the initial 
credit limit requested by the applicant.
    (8) Amount approved or originated. (i) For an application for a 
closed-end credit transaction that is approved but not accepted, the 
amount approved by the financial institution; or
    (ii) For a closed-end credit transaction that is originated, the 
amount of credit originated; or
    (iii) For an application for an open-end credit transaction that is 
originated or approved but not accepted, the amount of the credit limit 
approved.
    (9) Action taken. The action taken by the financial institution on 
the covered application, reported as originated, approved but not 
accepted, denied, withdrawn by the applicant, or incomplete.

[[Page 29]]

    (10) Action taken date. The date of the action taken by the 
financial institution.
    (11) Denial reasons. For denied applications, the principal reason 
or reasons the financial institution denied the covered application.
    (12) Pricing information. The following information regarding the 
pricing of a covered credit transaction that is originated or approved 
but not accepted, as applicable:
    (i) Interest rate. (A) If the interest rate is fixed, the interest 
rate that is or would be applicable to the covered credit transaction; 
or
    (B) If the interest rate is adjustable, the margin, index value, 
initial rate period expressed in months (if applicable), and index name 
that is or would be applicable to the covered credit transaction;
    (ii) Total origination charges. The total amount of all charges 
payable directly or indirectly by the applicant and imposed directly or 
indirectly by the financial institution at or before origination as an 
incident to or a condition of the extension of credit, expressed in 
dollars;
    (iii) Broker fees. The total amount of all charges included in 
paragraph (a)(12)(ii) of this section that are fees paid by the 
applicant directly to a broker or to the financial institution for 
delivery to a broker, expressed in dollars;
    (iv) Initial annual charges. The total amount of all non-interest 
charges that are scheduled to be imposed over the first annual period of 
the covered credit transaction, expressed in dollars;
    (v) Additional cost for merchant cash advances or other sales-based 
financing. For a merchant cash advance or other sales-based financing 
transaction, the difference between the amount advanced and the amount 
to be repaid, expressed in dollars; and
    (vi) Prepayment penalties. (A) Notwithstanding whether such a 
provision was in fact included, whether the financial institution could 
have included a charge to be imposed for paying all or part of the 
transaction's principal before the date on which the principal is due 
under the policies and procedures applicable to the covered credit 
transaction; and
    (B) Notwithstanding the response to paragraph (a)(12)(vi)(A) of this 
section, whether the terms of the covered credit transaction do in fact 
include a charge imposed for paying all or part of the transaction's 
principal before the date on which the principal is due.
    (13) Census tract. The census tract in which is located:
    (i) The address or location where the proceeds of the credit applied 
for or originated will be or would have been principally applied; or
    (ii) If the information in paragraph (a)(13)(i) of this section is 
unknown, the address or location of the main office or headquarters of 
the applicant; or
    (iii) If the information in both paragraphs (a)(13)(i) and (ii) of 
this section is unknown, another address or location associated with the 
applicant.
    (iv) The financial institution shall also indicate which one of the 
three types of addresses or locations listed in paragraphs (a)(13)(i), 
(ii), or (iii) of this section the census tract is based on.
    (14) Gross annual revenue. The applicant's gross annual revenue for 
its preceding fiscal year.
    (15) NAICS code. A 3-digit North American Industry Classification 
System (NAICS) code for the applicant.
    (16) Number of workers. The number of non-owners working for the 
applicant.
    (17) Time in business. The time the applicant has been in business.
    (18) Minority-owned, women-owned, and LGBTQI+-owned business 
statuses. Whether the applicant is a minority-owned, women-owned, and/or 
LGBTQI+-owned business. When requesting minority-owned, women-owned, and 
LGBTQI+-owned business statuses from an applicant, the financial 
institution shall inform the applicant that the financial institution 
cannot discriminate on the basis of minority-owned, women-owned, or 
LGBTQI+-owned business statuses, or on whether the applicant provides 
this information.
    (19) Ethnicity, race, and sex of principal owners. The ethnicity, 
race, and sex of the applicant's principal owners. When

[[Page 30]]

requesting ethnicity, race, and sex information from an applicant, the 
financial institution shall inform the applicant that the financial 
institution cannot discriminate on the basis of a principal owner's 
ethnicity, race, or sex, or on whether the applicant provides this 
information.
    (20) Number of principal owners. The number of the applicant's 
principal owners.
    (b) Reliance on and verification of applicant-provided data. Unless 
otherwise provided in this subpart, the financial institution may rely 
on information from the applicant, or appropriate third-party sources, 
when compiling data. If the financial institution verifies applicant-
provided data, however, it shall report the verified data.
    (c) Time and manner of collection--(1) In general. A covered 
financial institution shall not discourage an applicant from responding 
to requests for applicant-provided data under paragraph (a) of this 
section and shall otherwise maintain procedures to collect such data at 
a time and in a manner that are reasonably designed to obtain a 
response.
    (2) Applicant-provided data collected directly from the applicant. 
For data collected directly from the applicant, procedures that are 
reasonably designed to obtain a response shall include provisions for 
the following:
    (i) The initial request for applicant-provided data occurs prior to 
notifying an applicant of final action taken on a covered application;
    (ii) The request for applicant-provided data is prominently 
displayed or presented;
    (iii) The collection does not have the effect of discouraging an 
applicant from responding to a request for applicant-provided data; and
    (iv) Applicants can easily respond to a request for applicant-
provided data.
    (3) Procedures to monitor compliance. A covered financial 
institution shall maintain procedures to identify and respond to indicia 
of potential discouragement, including low response rates for applicant-
provided data.
    (4) Low response rates. A low response rate for applicant-provided 
data may indicate discouragement or other failure by a covered financial 
institution to maintain procedures to collect applicant-provided data 
that are reasonably designed to obtain a response.
    (d) Previously collected data. A covered financial institution is 
permitted, but not required, to reuse previously collected data to 
satisfy paragraphs (a)(13) through (20) of this section if:
    (1) To satisfy paragraphs (a)(13) and (a)(15) through (20) of this 
section, the data were collected within the 36 months preceding the 
current covered application, or to satisfy paragraph (a)(14) of this 
section, the data were collected within the same calendar year as the 
current covered application; and
    (2) The financial institution has no reason to believe the data are 
inaccurate.



Sec.  1002.108  Firewall.

    (a) Definitions. For purposes of this section, the following terms 
shall have the following meanings:
    (1) Involved in making any determination concerning a covered 
application from a small business means participating in a decision 
regarding the evaluation of a covered application from a small business 
or the creditworthiness of a small business applicant for a covered 
credit transaction.
    (2) Should have access means that an employee or officer may need to 
collect, see, consider, refer to, or otherwise use the information to 
perform that employee's or officer's assigned job duties.
    (b) Prohibition on access to certain information. Unless the 
exception under paragraph (c) of this section applies, an employee or 
officer of a covered financial institution or a covered financial 
institution's affiliate shall not have access to an applicant's 
responses to inquiries that the financial institution makes pursuant to 
this subpart regarding whether the applicant is a minority-owned 
business, a women-owned business, or an LGBTQI+-owned business under 
Sec.  1002.107(a)(18), and regarding the ethnicity, race, and sex of the 
applicant's principal owners under Sec.  1002.107(a)(19), if that 
employee or officer is involved in making any determination concerning 
that applicant's covered application.

[[Page 31]]

    (c) Exception to the prohibition on access to certain information. 
The prohibition in paragraph (b) of this section shall not apply to an 
employee or officer if the financial institution determines that it is 
not feasible to limit that employee's or officer's access to an 
applicant's responses to the financial institution's inquiries under 
Sec.  1002.107(a)(18) or (19) and the financial institution provides the 
notice required under paragraph (d) of this section to the applicant. It 
is not feasible to limit access as required pursuant to paragraph (b) of 
this section if the financial institution determines that an employee or 
officer involved in making any determination concerning a covered 
application from a small business should have access to one or more 
applicants' responses to the financial institution's inquiries under 
Sec.  1002.107(a)(18) or (19).
    (d) Notice. In order to satisfy the exception set forth in paragraph 
(c) of this section, a financial institution shall provide a notice to 
each applicant whose responses will be accessed, informing the applicant 
that one or more employees or officers involved in making determinations 
concerning the covered application may have access to the applicant's 
responses to the financial institution's inquiries regarding whether the 
applicant is a minority-owned business, a women-owned business, or an 
LGBTQI+-owned business, and regarding the ethnicity, race, and sex of 
the applicant's principal owners. The financial institution shall 
provide the notice required by this paragraph (d) when making the 
inquiries required under Sec.  1002.107(a)(18) and (19) and together 
with the notices required pursuant to Sec.  1002.107(a)(18) and (19).



Sec.  1002.109  Reporting of data to the Bureau.

    (a) Reporting to the Bureau--(1) Annual reporting. (i) On or before 
June 1 following the calendar year for which data are compiled and 
maintained as required by Sec.  1002.107, a covered financial 
institution shall submit its small business lending application register 
in the format prescribed by the Bureau.
    (ii) An authorized representative of the covered financial 
institution with knowledge of the data shall certify to the accuracy and 
completeness of the data reported pursuant to this paragraph (a).
    (iii) When the last day for submission of data prescribed under 
paragraph (a)(1) of this section falls on a Saturday or Sunday, a 
submission shall be considered timely if it is submitted on the next 
succeeding Monday.
    (2) Reporting by subsidiaries. A covered financial institution that 
is a subsidiary of another covered financial institution shall complete 
a separate small business lending application register. The subsidiary 
shall submit its small business lending application register, directly 
or through its parent, to the Bureau.
    (3) Reporting obligations where multiple financial institutions are 
involved in a covered credit transaction. Where it is necessary for more 
than one financial institution to make a credit decision in order to 
approve a single covered credit transaction, only the last covered 
financial institution with authority to set the material terms of the 
covered credit transaction is required to report the application. 
Financial institutions report the actions of their agents.
    (b) Financial institution identifying information. A financial 
institution shall provide each of the following with its submission:
    (1) Its name.
    (2) Its headquarters address.
    (3) The name and business contact information of a person that the 
Bureau or other regulators may contact about the financial institution's 
submission.
    (4) Its Federal prudential regulator, if applicable.
    (5) Its Federal Taxpayer Identification Number (TIN).
    (6) Its Legal Entity Identifier (LEI).
    (7) Its Research, Statistics, Supervision, and Discount 
identification (RSSD ID) number, if applicable.
    (8) Parent entity information, if applicable, including:
    (i) The name of the immediate parent entity;
    (ii) The LEI of the immediate parent entity, if available;
    (iii) The RSSD ID number of the immediate parent entity, if 
available;
    (iv) The name of the top-holding parent entity;

[[Page 32]]

    (v) The LEI of the top-holding parent entity, if available; and
    (vi) The RSSD ID number of the top-holding parent entity, if 
available.
    (9) The type of financial institution that it is, indicated by 
selecting the appropriate type or types of institution from the list 
provided.
    (10) Whether the financial institution is voluntarily reporting 
covered applications from small businesses.
    (c) Procedures for the submission of data to the Bureau. The Bureau 
shall make available a Filing Instructions Guide, containing technical 
instructions for the submission of data to the Bureau pursuant to this 
section, as well as any related materials, at https://
www.consumerfinance.gov/ data-research/small-business-lending/ filing-
instructions-guide/.



Sec.  1002.110  Publication of data and other disclosures.

    (a) Publication of small business lending application registers and 
associated financial institution information. The Bureau shall make 
available to the public generally the data reported to it by financial 
institutions pursuant to Sec.  1002.109, subject to deletions or 
modifications made by the Bureau if the Bureau determines that the 
deletion or modification of the data would advance a privacy interest. 
The Bureau shall make such data available on an annual basis.
    (b) Publication of aggregate data. The Bureau may compile and 
aggregate data submitted by financial institutions pursuant to Sec.  
1002.109, and make any compilations or aggregations of such data 
publicly available as the Bureau deems appropriate.
    (c) Statement of financial institution's small business lending data 
available on the Bureau's website. A covered financial institution shall 
make available to the public on its website, or otherwise upon request, 
a statement that the covered financial institution's small business 
lending application register, as modified by the Bureau pursuant to 
Sec.  1002.110(a), is or will be available from the Bureau. A financial 
institution shall use language provided by the Bureau, or substantially 
similar language, to satisfy the requirement to provide a statement 
pursuant to this paragraph (c).
    (d) Availability of statements. A covered financial institution 
shall make the notice required by paragraph (c) of this section 
available to the public on its website when it submits a small business 
lending application register to the Bureau pursuant to Sec.  
1002.109(a)(1), and shall maintain the notice for as long as it has an 
obligation to retain its small business lending application registers 
pursuant to Sec.  1002.111(a).
    (e) Further disclosure prohibited--(1) Disclosure by a financial 
institution. A financial institution shall not disclose or provide to a 
third party the information it collects pursuant to Sec.  
1002.107(a)(18) and (19) except to further compliance with the Act or 
this part or as required by law.
    (2) Disclosure by a third party. A third party that obtains 
information collected pursuant to Sec.  1002.107(a)(18) and (19) for the 
purpose of furthering compliance with the Act or this part is prohibited 
from any further disclosure of such information except to further 
compliance with the Act or this part or as required by law.



Sec.  1002.111  Recordkeeping.

    (a) Record retention. A covered financial institution shall retain 
evidence of compliance with this subpart, which includes a copy of its 
small business lending application register, for at least three years 
after the register is required to be submitted to the Bureau pursuant to 
Sec.  1002.109.
    (b) Certain information kept separate from the rest of the 
application. A financial institution shall maintain, separately from the 
rest of the application and accompanying information, an applicant's 
responses to the financial institution's inquiries pursuant to this 
subpart regarding whether an applicant for a covered credit transaction 
is a minority-owned business, a women-owned business, and/or an LGBTQI+-
owned business under Sec.  1002.107(a)(18), and regarding the ethnicity, 
race, and sex of the applicant's principal owners under Sec.  
1002.107(a)(19).
    (c) Limitation on personally identifiable information in certain 
records retained under this section. In reporting a small business 
lending application register

[[Page 33]]

pursuant to Sec.  1002.109, maintaining the register pursuant to 
paragraph (a) of this section, and maintaining a separate record of 
information pursuant to paragraph (b) of this section, a financial 
institution shall not include any name, specific address, telephone 
number, email address, or any other personally identifiable information 
concerning any individual who is, or is connected with, an applicant, 
other than as required pursuant to Sec.  1002.107 or paragraph (b) of 
this section.



Sec.  1002.112  Enforcement.

    (a) Administrative enforcement and civil liability. A violation of 
section 704B of the Act or this subpart is subject to administrative 
sanctions and civil liability as provided in sections 704 (15 U.S.C. 
1691c) and 706 (15 U.S.C. 1691e) of the Act, where applicable.
    (b) Bona fide errors. A bona fide error in compiling, maintaining, 
or reporting data with respect to a covered application is one that was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such an error. A bona fide error is not a 
violation of the Act or this subpart. A financial institution is 
presumed to maintain procedures reasonably adapted to avoid such errors 
with respect to a given data field if the number of errors found in a 
random sample of the financial institution's submission for the data 
field does not equal or exceed a threshold specified by the Bureau for 
this purpose in appendix F to this part. However, an error is not a bona 
fide error if either there is a reasonable basis to believe the error 
was intentional or there is evidence that the financial institution does 
not or has not maintained procedures reasonably adapted to avoid such 
errors.
    (c) Safe harbors--(1) Incorrect entry for application date. A 
financial institution does not violate the Act or this subpart if it 
reports on its small business lending application register an 
application date that is within three business days of the actual 
application date pursuant to Sec.  1002.107(a)(2).
    (2) Incorrect entry for census tract. An incorrect entry for census 
tract is not a violation of the Act or this subpart if the financial 
institution obtained the census tract by correctly using a geocoding 
tool provided by the FFIEC or the Bureau.
    (3) Incorrect entry for NAICS code. An incorrect entry for a 3-digit 
NAICS code is not a violation of the Act or this subpart, provided that 
the financial institution obtained the 3-digit NAICS code by:
    (i) Relying on an applicant's representations or on an appropriate 
third-party source, in accordance with Sec.  1002.107(b), regarding the 
NAICS code; or
    (ii) Identifying the NAICS code itself, provided that the financial 
institution maintains procedures reasonably adapted to correctly 
identify a 3-digit NAICS code.
    (4) Incorrect determination of small business status, covered credit 
transaction, or covered application. A financial institution that 
initially collects data regarding whether an applicant for a covered 
credit transaction is a minority-owned business, a women-owned business, 
or an LGBTQI+-owned business, and the ethnicity, race, and sex of the 
applicant's principal owners pursuant to Sec.  1002.107(a)(18) and (19) 
but later concludes that it should not have collected such data does not 
violate the Act or this regulation if the financial institution, at the 
time it collected this data, had a reasonable basis for believing that 
the application was a covered application for a covered credit 
transaction from a small business pursuant to Sec. Sec.  1002.103, 
1002.104, and 1002.106, respectively. A financial institution seeking to 
avail itself of this safe harbor shall comply with the requirements of 
this subpart as otherwise required pursuant to Sec. Sec.  1002.107, 
1002.108, and 1002.111 with respect to the collected data.



Sec.  1002.113  Severability.

    If any provision of this subpart, or any application of a provision, 
is stayed or determined to be invalid, the remaining provisions or 
applications are severable and shall continue in effect.



Sec.  1002.114  Effective date, compliance date, and special transitional 
rules.

    (a) Effective date. The effective date for this subpart is August 
29, 2023.

[[Page 34]]

    (b) Compliance date. The dates by which covered financial 
institutions are initially required to comply with the requirements of 
this subpart are as follows:
    (1) A covered financial institution that originated at least 2,500 
covered credit transactions for small businesses in each of calendar 
years 2022 and 2023 shall comply with the requirements of this subpart 
beginning October 1, 2024.
    (2) A covered financial institution that is not subject to paragraph 
(b)(1) of this section and that originated at least 500 covered credit 
transactions for small businesses in each of calendar years 2022 and 
2023 shall comply with the requirements of this subpart beginning April 
1, 2025.
    (3) A covered financial institution that is not subject to 
paragraphs (b)(1) or (2) of this section and that originated at least 
100 covered credit transactions for small businesses in each of calendar 
years 2022 and 2023 shall comply with the requirements of this subpart 
beginning January 1, 2026.
    (4) A financial institution that did not originate at least 100 
covered credit transactions for small businesses in each of calendar 
years 2022 and 2023 but subsequently originates at least 100 such 
transactions in two consecutive calendar years shall comply with the 
requirements of this subpart in accordance with Sec.  1002.105(b), but 
in any case no earlier than January 1, 2026.
    (c) Special transitional rules--(1) Collection of certain 
information prior to a financial institution's compliance date. A 
financial institution as described in paragraphs (b)(1), (2), or (3) of 
this section is permitted, but not required, to collect information 
regarding whether an applicant for a covered credit transaction is a 
minority-owned business, a women-owned business, and/or an LGBTQI+-owned 
business under Sec.  1002.107(a)(18), and the ethnicity, race, and sex 
of the applicant's principal owners under Sec.  1002.107(a)(19) 
beginning 12 months prior to its applicable compliance date as set forth 
in paragraphs (b)(1), (2), or (3) of this section. A financial 
institution collecting such information pursuant to this paragraph 
(c)(1) must do so in accordance with the requirements set out in 
Sec. Sec.  1002.107(a)(18) and (19), 1002.108, and 1002.111(b) and (c).
    (2) Determining which compliance date applies to a financial 
institution that does not collect information sufficient to determine 
small business status. A financial institution that is unable to 
determine the number of covered credit transactions it originated for 
small businesses in each of calendar years 2022 and 2023 for purposes of 
determining its compliance date pursuant to paragraph (b) of this 
section, because for some or all of this period it does not have readily 
accessible the information needed to determine whether its covered 
credit transactions were originated for small businesses as defined in 
Sec.  1002.106(b), is permitted to use any reasonable method to estimate 
its originations to small businesses for either or both of the calendar 
years 2022 and 2023.



 Sec. Appendix A to Part 1002--Federal Agencies To Be Listed in Adverse 
                             Action Notices

    The following list indicates the Federal agency or agencies that 
should be listed in notices provided by creditors pursuant to Sec.  
1002.9(b)(1). Any questions concerning a particular creditor may be 
directed to such agencies. This list is not intended to describe 
agencies' enforcement authority for ECOA and Regulation B. Terms that 
are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) 
shall have the meaning given to them in the International Banking Act of 
1978 (12 U.S.C. 3101).
    1. Banks, savings associations, and credit unions with total assets 
of over $10 billion and their affiliates: Bureau of Consumer Financial 
Protection, 1700 G Street NW, Washington, DC 20552. Such affiliates that 
are not banks, savings associations, or credit unions also should list, 
in addition to the Bureau: Federal Trade Commission, Consumer Response 
Center, 600 Pennsylvania Avenue NW, Washington, DC 20580.
    2. To the extent not included in item 1 above:
    a. National Banks, Federal savings associations, and Federal 
branches and Federal agencies of foreign banks: Office of the 
Comptroller of the Currency, Customer Assistance Group, P.O. Box 53570, 
Houston, TX 77052.
    b. State member banks, branches and agencies of foreign banks (other 
than Federal branches, Federal agencies, and insured State branches of 
foreign banks), commercial lending companies owned or controlled by 
foreign banks, and organizations operating under section 25 or 25A of

[[Page 35]]

the Federal Reserve Act: Federal Reserve Consumer Help Center, P.O. Box 
1200, Minneapolis, MN 55480.
    c. Nonmember Insured Banks, Insured State Branches of Foreign Banks, 
and Insured State Savings Associations: Division of Depositor and 
Consumer Protection, National Center for Consumer and Depositor 
Assistance, Federal Deposit Insurance Corporation, 1100 Walnut Street, 
Box 11, Kansas City, MO 64106.
    d. Federal Credit Unions: National Credit Union Administration, 
Office of Consumer Financial Protection (OCFP), 1775 Duke Street, 
Alexandria, VA 22314.
    3. Air Carriers: Assistant General Counsel for Office of Aviation 
Consumer Protection, Department of Transportation, 1200 New Jersey 
Avenue SE, Washington, DC 20590.
    4. Creditors Subject to Surface Transportation Board: Office of 
Public Assistance, Governmental Affairs, and Compliance, Surface 
Transportation Board, 395 E Street SW, Washington, DC 20423.
    5. Creditors Subject to Packers and Stockyards Act: Nearest Packers 
and Stockyards Division Regional Office.
    6. Small Business Investment Companies: Associate Administrator, 
Office of Capital Access, United States Small Business Association, 409 
Third Street SW, Suite 8200, Washington, DC 20416.
    7. Brokers and Dealers: Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549.
    8. Federal Land Banks, Federal Land Bank Associations, Federal 
Intermediate Credit Banks, and Production Credit Associations: Farm 
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    9. Retailers, Finance Companies, and All Other Creditors Not Listed 
Above: Federal Trade Commission, Consumer Response Center, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

[88 FR 58065, Aug. 25, 2023]



          Sec. Appendix B to Part 1002--Model Application Forms

    1. This appendix contains four model credit application forms, each 
designated for use in a particular type of consumer credit transaction 
as indicated by the bracketed caption on each form. The first sample 
form is intended for use in open-end, unsecured transactions; the second 
for closed-end, secured transactions; the third for closed-end 
transactions, whether unsecured or secured; and the fourth in 
transactions involving community property or occurring in community 
property States. This appendix also contains a data collection model 
form for collecting information concerning an applicant's ethnicity, 
race, and sex that complies with the requirements of Sec.  
1002.13(a)(1)(i)(A) and (ii). Appendix B to 12 CFR part 1003 provides a 
data collection model form for collecting information concerning an 
applicant's ethnicity, race, and sex that complies with the requirements 
of Sec.  1002.13(a)(1)(i)(B) and (ii). All forms contained in this 
appendix are models; their use by creditors is optional.
    2. The use or modification of these forms is governed by the 
following instructions. A creditor may change the forms: by asking for 
additional information not prohibited by Sec.  1002.5; by deleting any 
information request; or by rearranging the format without modifying the 
substance of the inquiries. In any of these three instances, however, 
the appropriate notices regarding the optional nature of courtesy 
titles, the option to disclose alimony, child support, or separate 
maintenance, and the limitation concerning marital status inquiries must 
be included in the appropriate places if the items to which they relate 
appear on the creditor's form.
    3. If a creditor uses an appropriate appendix B model form, or 
modifies a form in accordance with the above instructions, that creditor 
shall be deemed to be acting in compliance with the provisions of 
paragraphs (b), (c) and (d) of Sec.  1002.5 of this part.

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[76 FR 79445, Dec. 21, 2011, as amended at 82 FR 45694, 45695, Oct. 2, 
2017]



         Sec. Appendix C to Part 1002--Sample Notification Forms

    1. This Appendix contains ten sample notification forms. Forms C-1 
through C-4 are intended for use in notifying an applicant that adverse 
action has been taken on an application or account under Sec. Sec.  
1002.9(a)(1) and (2)(i) of this part. Form C-5 is a notice of disclosure 
of the right to request specific reasons for adverse action under 
Sec. Sec.  1002.9(a)(1) and (2)(ii). Form C-6 is designed for use in 
notifying an applicant, under Sec.  1002.9(c)(2), that an application is 
incomplete. Forms C-7 and C-8 are intended for use in connection with 
applications for business credit under Sec.  1002.9(a)(3). Form C-9 is 
designed for use in notifying an applicant of the right to receive a 
copy of appraisals under Sec.  1002.14. Form C-10 is designed for use in 
notifying an applicant for nonmortgage credit that the creditor is 
requesting applicant characteristic information.
    2. Form C-1 contains the Fair Credit Reporting Act disclosure as 
required by sections 615(a) and (b) of that act. Forms C-2 through C-5 
contain only the section 615(a) disclosure (that a creditor obtained 
information from a consumer reporting agency that was considered in the 
credit decision). A creditor must provide the section 615(a) disclosure 
when adverse action is taken against a consumer based on information 
from a consumer reporting agency. A creditor must provide the section 
615(b) disclosure when adverse action is taken based on information from 
an outside source other than a consumer reporting agency. In addition, a 
creditor must provide the section 615(b) disclosure if the creditor 
obtained information from an affiliate other than information in a 
consumer report or other than information concerning the affiliate's own 
transactions or experiences with the consumer. Creditors may comply with 
the disclosure requirements for adverse action based on information in a 
consumer report obtained from an affiliate by providing either the 
section 615(a) or section 615(b) disclosure. Optional language in Forms 
C-1 through C-5 may be used to direct the consumer to the entity that 
provided the credit score for any questions about the credit score, 
along with the entity's contact information. Creditors may use or not 
use this additional language without losing the safe harbor, since the 
language is optional.
    3. The sample forms are illustrative and may not be appropriate for 
all creditors. They were designed to include some of the factors that 
creditors most commonly consider. If a creditor chooses to use the 
checklist of reasons provided in one of the sample

[[Page 45]]

forms in this appendix and if reasons commonly used by the creditor are 
not provided on the form, the creditor should modify the checklist by 
substituting or adding other reasons. For example, if ``inadequate down 
payment'' or ``no deposit relationship with us'' are common reasons for 
taking adverse action on an application, the creditor ought to add or 
substitute such reasons for those presently contained on the sample 
forms.
    4. If the reasons listed on the forms are not the factors actually 
used, a creditor will not satisfy the notice requirement by simply 
checking the closest identifiable factor listed. For example, some 
creditors consider only references from banks or other depository 
institutions and disregard finance company references altogether; their 
statement of reasons should disclose ``insufficient bank references,'' 
not ``insufficient credit references.'' Similarly, a creditor that 
considers bank references and other credit references as distinct 
factors should treat the two factors separately and disclose them as 
appropriate. The creditor should either add such other factors to the 
form or check ``other'' and include the appropriate explanation. The 
creditor need not, however, describe how or why a factor adversely 
affected the application. For example, the notice may say ``length of 
residence'' rather than ``too short a period of residence.''
    5. A creditor may design its own notification forms or use all or a 
portion of the forms contained in this Appendix. Proper use of Forms C-1 
through C-4 will satisfy the requirement of Sec.  1002.9(a)(2)(i). 
Proper use of Forms C-5 and C-6 constitutes full compliance with 
Sec. Sec.  1002.9(a)(2)(ii) and 1002.9(c)(2), respectively. Proper use 
of Forms C-7 and C-8 will satisfy the requirements of Sec. Sec.  
1002.9(a)(2)(i) and (ii), respectively, for applications for business 
credit. Proper use of Form C-9 will satisfy the requirements of Sec.  
1002.14 of this part. Proper use of Form C-10 will satisfy the 
requirements of Sec.  1002.5(b)(1).

    Form C-1--Sample Notice of Action Taken and Statement of Reasons

Statement of Credit Denial, Termination or Change

Date:___________________________________________________________________
Applicant's Name:_______________________________________________________
Applicant's Address:____________________________________________________
Description of Account, Transaction, or Requested Credit:_______________
Description of Action Taken:____________________________________________

  Part I--Principal Reason(s) for Credit Denial, Termination, or Other 
                     Action Taken Concerning Credit

    This section must be completed in all instances.

____Credit application incomplete
____Insufficient number of credit references provided
____Unacceptable type of credit references provided
____Unable to verify credit references
____Temporary or irregular employment
____Unable to verify employment
____Length of employment
____Income insufficient for amount of credit requested
____Excessive obligations in relation to income
____Unable to verify income
____Length of residence
____Temporary residence
____Unable to verify residence
____No credit file
____Limited credit experience
____Poor credit performance with us
____Delinquent past or present credit obligations with others
____Collection action or judgment
____Garnishment or attachment
____Foreclosure or repossession
____Bankruptcy
____Number of recent inquiries on credit bureau report
____Value or type of collateral not sufficient
____Other, specify: ______

   Part II--Disclosure of Use of Information Obtained From an Outside 
                                 Source

    This section should be completed if the credit decision was based in 
whole or in part on information that has been obtained from an outside 
source.
____Our credit decision was based in whole or in part on information 
obtained in a report from the consumer reporting agency listed below. 
You have a right under the Fair Credit Reporting Act to know the 
information contained in your credit file at the consumer reporting 
agency. The reporting agency played no part in our decision and is 
unable to supply specific reasons why we have denied credit to you. You 
also have a right to a free copy of your report from the reporting 
agency, if you request it no later than 60 days after you receive this 
notice. In addition, if you find that any information contained in the 
report you receive is inaccurate or incomplete, you have the right to 
dispute the matter with the reporting agency.
 Name:__________________________________________________________________
 Address:_______________________________________________________________
 [Toll-free] Telephone number:__________________________________________
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.

Your credit score:______________________________________________________
Date:___________________________________________________________________

    Scores range from a low of ________ to a high of ________.

[[Page 46]]

    Key factors that adversely affected your credit score:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

Address:________________________________________________________________

[[Toll-free] Telephone number: ________]

____Our credit decision was based in whole or in part on information 
obtained from an affiliate or from an outside source other than a 
consumer reporting agency. Under the Fair Credit Reporting Act, you have 
the right to make a written request, no later than 60 days after you 
receive this notice, for disclosure of the nature of this information.

    If you have any questions regarding this notice, you should contact:

Creditor's name:________________________________________________________
Creditor's address:_____________________________________________________
Creditor's telephone number:____________________________________________

    Notice: 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 (name 
and address as specified by the appropriate agency listed in appendix 
A).

    Form C-2--Sample Notice of Action Taken and Statement of Reasons

Date

    Dear Applicant: Thank you for your recent application. Your request 
for [a loan/a credit card/an increase in your credit limit] was 
carefully considered, and we regret that we are unable to approve your 
application at this time, for the following reason(s):
    Your Income:

____is below our minimum requirement.
____is insufficient to sustain payments on the amount of credit 
requested.
____could not be verified.

    Your Employment:

____is not of sufficient length to qualify.
____could not be verified.

    Your Credit History:

____of making payments on time was not satisfactory.
____could not be verified.

    Your Application:

____lacks a sufficient number of credit references.
____lacks acceptable types of credit references.
____reveals that current obligations are excessive in relation to 
income.
Other:__________________________________________________________________

    The consumer reporting agency contacted that provided information 
that influenced our decision in whole or in part was [name, address and 
[toll-free] telephone number of the reporting agency]. The reporting 
agency played no part in our decision and is unable to supply specific 
reasons why we have denied credit to you. You have a right under the 
Fair Credit Reporting Act to know the information contained in your 
credit file at the consumer reporting agency. You also have a right to a 
free copy of your report from the reporting agency, if you request it no 
later than 60 days after you receive this notice. In addition, if you 
find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to dispute the matter with 
the reporting agency. Any questions regarding such information should be 
directed to [consumer reporting agency]. If you have any questions 
regarding this letter, you should contact us at [creditor's name, 
address and telephone number].

    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.

Your credit score:______________________________________________________
Date:___________________________________________________________________

    Scores range from a low of ________ to a high of ________.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

Address:________________________________________________________________

[[Toll-free] Telephone number: ________]
    Notice: 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

[[Page 47]]

good faith exercised any right under the Consumer Credit Protection Act. 
The Federal agency that administers compliance with this law concerning 
this creditor is (name and address as specified by the appropriate 
agency listed in appendix A).

Form C-3--Sample Notice of Action Taken and Statement of Reasons (Credit 
                                Scoring)

Date

    Dear Applicant: Thank you for your recent application for 
__________. We regret that we are unable to approve your request.
    [Reasons for Denial of Credit]
    Your application was processed by a [credit scoring] system that 
assigns a numerical value to the various items of information we 
consider in evaluating an application. These numerical values are based 
upon the results of analyses of repayment histories of large numbers of 
customers.
    The information you provided in your application did not score a 
sufficient number of points for approval of the application. The reasons 
you did not score well compared with other applicants were:

 Insufficient bank references
 Type of occupation
 Insufficient credit experience
 Number of recent inquiries on credit bureau report

    [Your Right to Get Your Consumer Report]
    In evaluating your application the consumer reporting agency listed 
below provided us with information that in whole or in part influenced 
our decision. The consumer reporting agency played no part in our 
decision and is unable to supply specific reasons why we have denied 
credit to you. You have a right under the Fair Credit Reporting Act to 
know the information contained in your credit file at the consumer 
reporting agency. It can be obtained by contacting: [Name, address, and 
[toll-free] telephone number of the consumer reporting agency]. You also 
have a right to a free copy of your report from the reporting agency, if 
you request it no later than 60 days after you receive this notice. In 
addition, if you find that any information contained in the report you 
receive is inaccurate or incomplete, you have the right to dispute the 
matter with the reporting agency.
    [Information about Your Credit Score]
    [Information about Your Credit Score]
    We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
Your credit score:______________________________________________________
Date:___________________________________________________________________

    Scores range from a low of ________ to a high of ________.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:
Address:________________________________________________________________

[Toll-free] Telephone number: ________]
    If you have any questions regarding this letter, you should contact 
us at
Creditor's Name:________________________________________________________
Address:________________________________________________________________
Telephone:______________________________________________________________
     Sincerely,
    Notice: 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 (with certain 
limited exceptions); 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 (name and address as specified by the 
appropriate agency listed in appendix A).

   Form C-4--Sample Notice of Action Taken, Statement of Reasons and 
                              Counteroffer

Date

    Dear Applicant: Thank you for your application for __________. We 
are unable to offer you credit on the terms that you requested for the 
following reason(s):__________
    We can, however, offer you credit on the following terms: __________
    If this offer is acceptable to you, please notify us within [amount 
of time] at the following address: __________.
    Our credit decision on your application was based in whole or in 
part on information obtained in a report from [name, address and [toll-
free] telephone number of the consumer reporting agency]. You have a 
right under the Fair Credit Reporting Act to know the information 
contained in your credit file at the consumer reporting agency. The 
reporting agency played no part in our decision and is unable to supply 
specific reasons why we have denied credit to you. You also have a right 
to a free copy of your report from the reporting agency, if you request 
it no later than 60 days after you receive this notice. In addition, if 
you find that any information contained in the report you receive is 
inaccurate or incomplete, you have the right to

[[Page 48]]

dispute the matter with the reporting agency.
    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
Your credit score:______________________________________________________
Date:___________________________________________________________________
    Scores range from a low of ________ to a high of ________.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

Address:________________________________________________________________
    [Toll-free] Telephone number:________]
    You should know that the Federal Equal Credit Opportunity Act 
prohibits creditors, such as ourselves, from discriminating against 
credit applicants on the basis of their race, color, religion, national 
origin, sex, marital status, age (provided the applicant has the 
capacity to enter into a binding contract), because they receive income 
from a public assistance program, or because they may have exercised 
their rights under the Consumer Credit Protection Act. If you believe 
there has been discrimination in handling your application you should 
contact the [name and address of the appropriate Federal enforcement 
agency listed in appendix A].
     Sincerely,

  Form C-5--Sample Disclosure of Right To Request Specific Reasons for 
                              Credit Denial

Date
    Dear Applicant: Thank you for applying to us for __________.
    After carefully reviewing your application, we are sorry to advise 
you that we cannot [open an account for you/grant a loan to you/increase 
your credit limit] at this time. If you would like a statement of 
specific reasons why your application was denied, please contact [our 
credit service manager] shown below within 60 days of the date of this 
letter. We will provide you with the statement of reasons within 30 days 
after receiving your request.

Creditor's name
Address
Telephone number

    If we obtained information from a consumer reporting agency as part 
of our consideration of your application, its name, address, and [toll-
free] telephone number is shown below. The reporting agency played no 
part in our decision and is unable to supply specific reasons why we 
have denied credit to you. [You have a right under the Fair Credit 
Reporting Act to know the information contained in your credit file at 
the consumer reporting agency.] You have a right to a free copy of your 
report from the reporting agency, if you request it no later than 60 
days after you receive this notice. In addition, if you find that any 
information contained in the report you received is inaccurate or 
incomplete, you have the right to dispute the matter with the reporting 
agency. You can find out about the information contained in your file 
(if one was used) by contacting:

Consumer reporting agency's name
Address
[Toll-free] Telephone number

    [We also obtained your credit score from the consumer reporting 
agency and used it in making our credit decision. Your credit score is a 
number that reflects the information in your consumer report. Your 
credit score can change, depending on how the information in your 
consumer report changes.
Your credit score:______________________________________________________
Date:___________________________________________________________________

    Scores range from a low of ________ to a high of ________.
    Key factors that adversely affected your credit score:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[Number of recent inquiries on consumer report, as a key factor]

    [If you have any questions regarding your credit score, you should 
contact [entity that provided the credit score] at:

Address:________________________________________________________________
[Toll-free] Telephone number: ________]
     Sincerely,
    Notice: 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 (name 
and address as specified by the appropriate agency listed in appendix 
A).

[[Page 49]]

   Form C-6--Sample Notice of Incomplete Application and Request for 
                         Additional Information

Creditor's name
Address
Telephone number
Date

    Dear Applicant: Thank you for your application for credit. The 
following information is needed to make a decision on your application: 
__________
    We need to receive this information by __________ (date). If we do 
not receive it by that date, we will regrettably be unable to give 
further consideration to your credit request.
     Sincerely,

    Form C-7--Sample Notice of Action Taken and Statement of Reasons 
                            (Business Credit)

Creditor's name
Creditor's address
Date

    Dear Applicant: Thank you for applying to us for credit. We have 
given your request careful consideration, and regret that we are unable 
to extend credit to you at this time for the following reasons:
    (Insert appropriate reason, such as: Value or type of collateral not 
sufficient; Lack of established earnings record; Slow or past due in 
trade or loan payments)
     Sincerely,
    Notice: 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 [name 
and address as specified by the appropriate agency listed in appendix 
A].

  Form C-8--Sample Disclosure of Right To Request Specific Reasons for 
      Credit Denial Given at Time of Application (Business Credit)

Creditor's name
Creditor's address

    If your application for business credit is denied, you have the 
right to a written statement of the specific reasons for the denial. To 
obtain the statement, please contact [name, address and telephone number 
of the person or office from which the statement of reasons can be 
obtained] within 60 days from the date you are notified of our decision. 
We will send you a written statement of reasons for the denial within 30 
days of receiving your request for the statement.
    Notice: 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 [name 
and address as specified by the appropriate agency listed in appendix 
A].

  Form C-9--Sample Disclosure of Right To Receive a Copy of Appraisals

    We may order an appraisal to determine the property's value and 
charge you for this appraisal. We will promptly give you a copy of any 
appraisal, even if your loan does not close.
    You can pay for an additional appraisal for your own use at your own 
cost.
    [In your letter, give us the following information:]

       Form C-10--Sample Disclosure About Voluntary Data Notation

    We are requesting the following information to monitor our 
compliance with the Federal Equal Credit Opportunity Act, which 
prohibits unlawful discrimination. You are not required to provide this 
information. We will not take this information (or your decision not to 
provide this information) into account in connection with your 
application or credit transaction. The law provides that a creditor may 
not discriminate based on this information, or based on whether or not 
you choose to provide it. [If you choose not to provide the information, 
we will note it by visual observation or surname].

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013]



   Sec. Appendix D to Part 1002--Issuance of Official Interpretations

    1.Official Interpretations. Interpretations of this part issued by 
officials of the Bureau provide the protection afforded under section 
706(e) of the Act. Except in unusual circumstances, such interpretations 
will not be issued separately but will be incorporated in an official 
commentary to the regulation, which will be amended periodically.
    2. Requests for Issuance of Official Interpretations. A request for 
an official interpretation

[[Page 50]]

should be in writing and addressed to the Assistant Director, Office of 
Regulations, Division of Research, Monitoring, and Regulations, Bureau 
of Consumer Financial Protection, 1700 G Street, NW., Washington, DC 
20552. The request should contain a complete statement of all relevant 
facts concerning the issue, including copies of all pertinent documents.
    3. Scope of Interpretations. No interpretations will be issued 
approving creditors' forms or statements. This restriction does not 
apply to forms or statements whose use is required or sanctioned by a 
government agency.

[76 FR 79445, Dec. 21, 2011, as amended at 88 FR 16538, Mar. 20, 2023]



    Sec. Appendix E to Part 1002--Sample Form for Collecting Certain 
                 Applicant-Provided Data Under Subpart B
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[GRAPHIC] [TIFF OMITTED] TR31MY23.212


[88 FR 35534, May 31, 2023]



 Sec. Appendix F to Part 1002--Tolerances for Bona Fide Errors in Data 
                        Reported Under Subpart B

    As set out in Sec.  1002.112(b) and in comment 112(b)-1, a financial 
institution is presumed

[[Page 52]]

to maintain procedures reasonably adapted to avoid errors with respect 
to a given data field if the number of errors found in a random sample 
of a financial institution's data submission for a given data field do 
not equal or exceed the threshold in column C of the following table 
(Table 1, Tolerance Thresholds for Bona Fide Errors):

                        Table 1 to Appendix F--Tolerance Thresholds for Bona Fide Errors
----------------------------------------------------------------------------------------------------------------
                                                                  Random  sample
       Small business lending application register count            size \986\    Threshold  ()  Threshold  (%)
(A)                                                                          (B)             (C)             (D)
----------------------------------------------------------------------------------------------------------------
100-130........................................................               47               3             6.4
131-190........................................................               56               3             5.4
191-500........................................................               59               3             5.1
501-100,000....................................................               79               4             5.1
100,001+.......................................................              159               4             2.5
----------------------------------------------------------------------------------------------------------------

    The size of the random sample, under column B, shall depend on the 
size of the financial institution's small business lending application 
register, as shown in column A of the Threshold Table.
---------------------------------------------------------------------------

    \986\ For a financial institution with fewer than 30 entries in its 
small business lending application register, the full sample size is the 
financial institution's total number of entries. The threshold number 
for such financial institutions remains three. Accordingly, the 
threshold percentage will be higher for financial institutions with 
fewer than 30 entries in their registers
---------------------------------------------------------------------------

    The thresholds in column C of the Threshold Table reflect the number 
of unintentional errors a financial institution may make within a 
particular data field (e.g., the credit product data field within the 
credit type data point or the ethnicity data field for a particular 
principal owner within the ethnicity, race, and sex of principal owners 
data point) in a small business lending application register that would 
be deemed bona fide errors for purposes of Sec.  1002.112(b).
    For instance, a financial institution that submitted a small 
business lending application register containing 105 applications would 
be subject to a threshold of three errors per data field. If the 
financial institution had made two errors in reporting loan amount and 
two errors reporting gross annual income, all of these errors would be 
covered by the bona fide error provision of Sec.  1002.112(b) and would 
not constitute a violation of the Act or this part. If the same 
financial institution had made four errors in reporting loan amount and 
two errors reporting gross annual income, the bona fide error provision 
of Sec.  1002.112(b) would not apply to the four loan amount errors but 
would still apply to the two gross annual income errors.
    Even when the number of errors in a particular data field do not 
equal or exceed the threshold in column C, if either there is a 
reasonable basis to believe that errors in that field were intentional 
or there is evidence that the financial institution did not maintain 
procedures reasonably adapted to avoid such errors, then the errors are 
not bona fide errors under Sec.  1002.112(b).
    For purposes of determining bona fide errors under Sec.  
1002.112(b), the term ``data field'' generally refers to individual 
fields. Some data fields may allow for more than one response. For 
example, with respect to information on the ethnicity or race of an 
applicant's principal owners, a data field may identify more than one 
race or more than one ethnicity for a given person. If one or more of 
the ethnicities or races identified in a data field are erroneous, they 
count as one (and only one) error for that data field.

[88 FR 35534, May 31, 2023]



        Sec. Supplement I to Part 1002--Official Interpretations

    Following is an official interpretation of Regulation B (12 CFR part 
1002) issued by the Bureau of Consumer Financial Protection. References 
are to sections of the regulation or the Equal Credit Opportunity Act 
(15 U.S.C. 1601 et seq.).

                              Introduction

    1.Official status. Section 706(e) of the Equal Credit Opportunity 
Act protects a creditor from civil liability for any act done or omitted 
in good faith in conformity with an interpretation issued by a duly 
authorized official of the Bureau. This commentary is the means by which 
the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation B. Good-faith compliance with this 
commentary affords a creditor protection under section 706(e) of the 
Act.
    2. Issuance of interpretations. Under appendix D to the regulation, 
any person may request an official interpretation. Interpretations will 
be issued at the discretion of designated officials and incorporated in 
this

[[Page 53]]

commentary following publication for comment in the Federal Register. 
Except in unusual circumstances, official interpretations will be issued 
only by means of this commentary.
    3. Comment designations. The comments are designated with as much 
specificity as possible according to the particular regulatory provision 
addressed. Each comment in the commentary is identified by a number and 
the regulatory section or paragraph that it interprets. For example, 
comments to Sec.  1002.2(c) are further divided by subparagraph, such as 
comment 2(c)(1)(ii)-1 and comment 2(c)(2)(ii-1.

              Section 1002.1--Authority, Scope, and Purpose

    1(a) Authority and scope.
    1. Scope. The Equal Credit Opportunity Act and Regulation B apply to 
all credit--commercial as well as personal--without regard to the nature 
or type of the credit or the creditor, except for an entity excluded 
from coverage of this part (but not the Act) by section 1029 of the 
Consumer Financial Protection Act of 2010 (12 U.S.C. 5519). If a 
transaction provides for the deferral of the payment of a debt, it is 
credit covered by Regulation B even though it may not be a credit 
transaction covered by Regulation Z (Truth in Lending) (12 CFR part 
1026). Further, the definition of creditor is not restricted to the 
party or person to whom the obligation is initially payable, as is the 
case under Regulation Z. Moreover, the Act and regulation apply to all 
methods of credit evaluation, whether performed judgmentally or by use 
of a credit scoring system.
    2. Foreign applicability. Regulation B generally does not apply to 
lending activities that occur outside the United States. The regulation 
does apply to lending activities that take place within the United 
States (as well as the Commonwealth of Puerto Rico and any territory or 
possession of the United States), whether or not the applicant is a 
citizen.
    3. Bureau. The term Bureau, as used in this part, means the Bureau 
of Consumer Financial Protection.

                       Section 1002.2--Definitions

    2(c) Adverse action.
    Paragraph 2(c)(1)(i).
    1. Application for credit. If the applicant applied in accordance 
with the creditor's procedures, a refusal to refinance or extend the 
term of a business or other loan is adverse action.
    Paragraph 2(c)(1)(ii).
    1. Move from service area. If a credit card issuer terminates the 
open-end account of a customer because the customer has moved out of the 
card issuer's service area, the termination is adverse action unless 
termination on this ground was explicitly provided for in the credit 
agreement between the parties. In cases where termination is adverse 
action, notification is required under Sec.  1002.9.
    2. Termination based on credit limit. If a creditor terminates 
credit accounts that have low credit limits (for example, under $400) 
but keeps open accounts with higher credit limits, the termination is 
adverse action and notification is required under Sec.  1002.9.
    Paragraph 2(c)(2)(ii).
    1. Default--exercise of due-on-sale clause. If a mortgagor sells or 
transfers mortgaged property without the consent of the mortgagee, and 
the mortgagee exercises its contractual right to accelerate the mortgage 
loan, the mortgagee may treat the mortgagor as being in default. An 
adverse action notice need not be given to the mortgagor or the 
transferee. (See comment 2(e)-1 for treatment of a purchaser who 
requests to assume the loan.)
    2. Current delinquency or default. The term adverse action does not 
include a creditor's termination of an account when the accountholder is 
currently in default or delinquent on that account. Notification in 
accordance with Sec.  1002.9 of the regulation generally is required, 
however, if the creditor's action is based on a past delinquency or 
default on the account.
    Paragraph 2(c)(2)(iii).
    1. Point-of-sale transactions. Denial of credit at point of sale is 
not adverse action except under those circumstances specified in the 
regulation. For example, denial at point of sale is not adverse action 
in the following situations:
    i. A credit cardholder presents an expired card or a card that has 
been reported to the card issuer as lost or stolen.
    ii. The amount of a transaction exceeds a cash advance or credit 
limit.
    iii. The circumstances (such as excessive use of a credit card in a 
short period of time) suggest that fraud is involved.
    iv. The authorization facilities are not functioning.
    v. Billing statements have been returned to the creditor for lack of 
a forwarding address.
    2. Application for increase in available credit. A refusal or 
failure to authorize an account transaction at the point of sale or loan 
is not adverse action except when the refusal is a denial of an 
application, submitted in accordance with the creditor's procedures, for 
an increase in the amount of credit.
    Paragraph 2(c)(2)(v).
    1. Terms of credit versus type of credit offered. When an applicant 
applies for credit and the creditor does not offer the credit terms 
requested by the applicant (for example, the interest rate, length of 
maturity, collateral, or amount of downpayment), a denial of the 
application for that reason is adverse action (unless the creditor makes 
a counteroffer that is accepted by the applicant) and the

[[Page 54]]

applicant is entitled to notification under Sec.  1002.9.
    2(e) Applicant.
    1. Request to assume loan. If a mortgagor sells or transfers the 
mortgaged property and the buyer makes an application to the creditor to 
assume the mortgage loan, the mortgagee must treat the buyer as an 
applicant unless its policy is not to permit assumptions.
    2(f) Application.
    1. General. A creditor has the latitude under the regulation to 
establish its own application process and to decide the type and amount 
of information it will require from credit applicants.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a creditor for making credit decisions as well as 
its stated application procedures. For example, if a creditor's stated 
policy is to require all applications to be in writing on the creditor's 
application form, but the creditor also makes credit decisions based on 
oral requests, the creditor's procedures are to accept both oral and 
written applications.
    3. When an inquiry or prequalification request becomes an 
application. A creditor is encouraged to provide consumers with 
information about loan terms. However, if in giving information to the 
consumer the creditor also evaluates information about the consumer, 
decides to decline the request, and communicates this to the consumer, 
the creditor has treated the inquiry or prequalification request as an 
application and must then comply with the notification requirements 
under Sec.  1002.9. Whether the inquiry or prequalification request 
becomes an application depends on how the creditor responds to the 
consumer, not on what the consumer says or asks. (See comment 9-5 for 
further discussion of prequalification requests; see comment 2(f)-5 for 
a discussion of preapproval requests.)
    4. Examples of inquiries that are not applications. The following 
examples illustrate situations in which only an inquiry has taken place:
    i. A consumer calls to ask about loan terms and an employee explains 
the creditor's basic loan terms, such as interest rates, loan-to-value 
ratio, and debt-to-income ratio.
    ii. A consumer calls to ask about interest rates for car loans, and, 
in order to quote the appropriate rate, the loan officer asks for the 
make and sales price of the car and the amount of the downpayment, then 
gives the consumer the rate.
    iii. A consumer asks about terms for a loan to purchase a home and 
tells the loan officer her income and intended downpayment, but the loan 
officer only explains the creditor's loan-to-value ratio policy and 
other basic lending policies, without telling the consumer whether she 
qualifies for the loan.
    iv. A consumer calls to ask about terms for a loan to purchase 
vacant land and states his income and the sales price of the property to 
be financed, and asks whether he qualifies for a loan; the employee 
responds by describing the general lending policies, explaining that he 
would need to look at all of the consumer's qualifications before making 
a decision, and offering to send an application form to the consumer.
    5. Examples of an application. An application for credit includes 
the following situations:
    i. A person asks a financial institution to ``preapprove'' her for a 
loan (for example, to finance a house or a vehicle she plans to buy) and 
the institution reviews the request under a program in which the 
institution, after a comprehensive analysis of her creditworthiness, 
issues a written commitment valid for a designated period of time to 
extend a loan up to a specified amount. The written commitment may not 
be subject to conditions other than conditions that require the 
identification of adequate collateral, conditions that require no 
material change in the applicant's financial condition or 
creditworthiness prior to funding the loan, and limited conditions that 
are not related to the financial condition or creditworthiness of the 
applicant that the lender ordinarily attaches to a traditional 
application (such as certification of a clear termite inspection for a 
home purchase loan, or a maximum mileage requirement for a used car 
loan). But if the creditor's program does not provide for giving written 
commitments, requests for preapprovals are treated as prequalification 
requests for purposes of the regulation.
    ii. Under the same facts as above, the financial institution 
evaluates the person's creditworthiness and determines that she does not 
qualify for a preapproval.
    6. Completed application--diligence requirement. The regulation 
defines a completed application in terms that give a creditor the 
latitude to establish its own information requirements. Nevertheless, 
the creditor must act with reasonable diligence to collect information 
needed to complete the application. For example, the creditor should 
request information from third parties, such as a credit report, 
promptly after receiving the application. If additional information is 
needed from the applicant, such as an address or a telephone number to 
verify employment, the creditor should contact the applicant promptly. 
(But see comment 9(a)(1)-3, which discusses the creditor's option to 
deny an application on the basis of incompleteness.)2(g) Business 
credit.
    1. Definition. The test for deciding whether a transaction qualifies 
as business credit is one of primary purpose. For example, an open-end 
credit account used for both personal and business purposes is not 
business

[[Page 55]]

credit unless the primary purpose of the account is business-related. A 
creditor may rely on an applicant's statement of the purpose for the 
credit requested.
    2(j) Credit.
    1. General. Regulation B covers a wider range of credit transactions 
than Regulation Z (Truth in Lending). Under Regulation B, a transaction 
is credit if there is a right to defer payment of a debt--regardless of 
whether the credit is for personal or commercial purposes, the number of 
installments required for repayment, or whether the transaction is 
subject to a finance charge.
    2(l) Creditor.
    1. Assignees. The term creditor includes all persons participating 
in the credit decision. This may include an assignee or a potential 
purchaser of the obligation who influences the credit decision by 
indicating whether or not it will purchase the obligation if the 
transaction is consummated.
    2. Referrals to creditors. For certain purposes, the term creditor 
includes persons such as real estate brokers, automobile dealers, home 
builders, and home-improvement contractors who do not participate in 
credit decisions but who only accept applications and refer applicants 
to creditors, or select or offer to select creditors to whom credit 
requests can be made. These persons must comply with Sec.  1002.4(a), 
the general rule prohibiting discrimination, and with Sec.  1002.4(b), 
the general rule against discouraging applications.
    2(p) Empirically derived and other credit scoring systems.
    1. Purpose of definition. The definition under Sec. Sec.  
1002.2(p)(1)(i) through (iv) sets the criteria that a credit system must 
meet in order to use age as a predictive factor. Credit systems that do 
not meet these criteria are judgmental systems and may consider age only 
for the purpose of determining a ``pertinent element of 
creditworthiness.'' (Both types of systems may favor an elderly 
applicant. See Sec.  1002.6(b)(2).)
    2. Periodic revalidation. The regulation does not specify how often 
credit scoring systems must be revalidated. The credit scoring system 
must be revalidated frequently enough to ensure that it continues to 
meet recognized professional statistical standards for statistical 
soundness. To ensure that predictive ability is being maintained, the 
creditor must periodically review the performance of the system. This 
could be done, for example, by analyzing the loan portfolio to determine 
the delinquency rate for each score interval, or by analyzing population 
stability over time to detect deviations of recent applications from the 
applicant population used to validate the system. If this analysis 
indicates that the system no longer predicts risk with statistical 
soundness, the system must be adjusted as necessary to reestablish its 
predictive ability. A creditor is responsible for ensuring its system is 
validated and revalidated based on the creditor's own data.
    3. Pooled data scoring systems. A scoring system or the data from 
which to develop such a system may be obtained from either a single 
credit grantor or multiple credit grantors. The resulting system will 
qualify as an empirically derived, demonstrably and statistically sound, 
credit scoring system provided the criteria set forth in paragraph 
(p)(1)(i) through (iv) of this section are met. A creditor is 
responsible for ensuring its system is validated and revalidated based 
on the creditor's own data when it becomes available.
    4. Effects test and disparate treatment. An empirically derived, 
demonstrably and statistically sound, credit scoring system may include 
age as a predictive factor (provided that the age of an elderly 
applicant is not assigned a negative factor or value). Besides age, no 
other prohibited basis may be used as a variable. Generally, credit 
scoring systems treat all applicants objectively and thus avoid problems 
of disparate treatment. In cases where a credit scoring system is used 
in conjunction with individual discretion, disparate treatment could 
conceivably occur in the evaluation process. In addition, neutral 
factors used in credit scoring systems could nonetheless be subject to 
challenge under the effects test. (See comment 6(a)-2 for a discussion 
of the effects test).
    2(w) Open-end credit.
    1. Open-end real estate mortgages. The term ``open-end credit'' does 
not include negotiated advances under an open-end real estate mortgage 
or a letter of credit.
    2(z) Prohibited basis.
    1. Persons associated with applicant. As used in this part, 
prohibited basis refers not only to characteristics--the race, color, 
religion, national origin, sex, marital status, or age--of an applicant 
(or officers of an applicant in the case of a corporation) but also to 
the characteristics of individuals with whom an applicant is affiliated 
or with whom the applicant associates. This means, for example, that 
under the general rule stated in Sec.  1002.4(a), a creditor may not 
discriminate against an applicant because of that person's personal or 
business dealings with members of a certain religion, because of the 
national origin of any persons associated with the extension of credit 
(such as the tenants in the apartment complex being financed), or 
because of the race of other residents in the neighborhood where the 
property offered as collateral is located.
    2. National origin. A creditor may not refuse to grant credit 
because an applicant comes from a particular country but may take the 
applicant's immigration status into

[[Page 56]]

account. A creditor may also take into account any applicable law, 
regulation, or executive order restricting dealings with citizens (or 
the government) of a particular country or imposing limitations 
regarding credit extended for their use.
    3. Public assistance program. Any Federal, state, or local 
governmental assistance program that provides a continuing, periodic 
income supplement, whether premised on entitlement or need, is ``public 
assistance'' for purposes of the regulation. The term includes (but is 
not limited to) Temporary Aid to Needy Families, food stamps, rent and 
mortgage supplement or assistance programs, social security and 
supplemental security income, and unemployment compensation. Only 
physicians, hospitals, and others to whom the benefits are payable need 
consider Medicare and Medicaid as public assistance.

 Section 1002.3--Limited Exceptions for Certain Classes of Transactions

    1. Scope. Under this section, procedural requirements of the 
regulation do not apply to certain types of credit. All classes of 
transactions remain subject to Sec.  1002.4(a), the general rule barring 
discrimination on a prohibited basis, and to any other provision not 
specifically excepted.
    3(a) Public-utilities credit.
    1. Definition. This definition applies only to credit for the 
purchase of a utility service, such as electricity, gas, or telephone 
service. Credit provided or offered by a public utility for some other 
purpose--such as for financing the purchase of a gas dryer, telephone 
equipment, or other durable goods, or for insulation or other home 
improvements--is not excepted.
    2. Security deposits. A utility company is a creditor when it 
supplies utility service and bills the user after the service has been 
provided. Thus, any credit term (such as a requirement for a security 
deposit) is subject to the regulation's bar against discrimination on a 
prohibited basis.
    3. Telephone companies. A telephone company's credit transactions 
qualify for the exceptions provided in Sec.  1002.3(a)(2) only if the 
company is regulated by a government unit or files the charges for 
service, delayed payment, or any discount for prompt payment with a 
government unit.
    3(c) Incidental credit.
    1. Examples. If a service provider (such as a hospital, doctor, 
lawyer, or merchant) allows the client or customer to defer the payment 
of a bill, this deferral of debt is credit for purposes of the 
regulation, even though there is no finance charge and no agreement for 
payment in installments. Because of the exceptions provided by this 
section, however, these particular credit extensions are excepted from 
compliance with certain procedural requirements as specified in Sec.  
1002.3(c).
    3(d) Government credit.
    1. Credit to governments. The exception relates to credit extended 
to (not by) governmental entities. For example, credit extended to a 
local government is covered by this exception, but credit extended to 
consumers by a Federal or state housing agency does not qualify for 
special treatment under this category.

                      Section 1002.4--General Rules

    Paragraph 4(a).
    1. Scope of rule. The general rule stated in Sec.  1002.4(a) covers 
all dealings, without exception, between an applicant and a creditor, 
whether or not addressed by other provisions of the regulation. Other 
provisions of the regulation identify specific practices that the Bureau 
has decided are impermissible because they could result in credit 
discrimination on a basis prohibited by the Act. The general rule 
covers, for example, application procedures, criteria used to evaluate 
creditworthiness, administration of accounts, and treatment of 
delinquent or slow accounts. Thus, whether or not specifically 
prohibited elsewhere in the regulation, a credit practice that treats 
applicants differently on a prohibited basis violates the law because it 
violates the general rule. Disparate treatment on a prohibited basis is 
illegal whether or not it results from a conscious intent to 
discriminate.
    2. Examples.
    i. Disparate treatment would exist, for example, in the following 
situations:
    A. A creditor provides information only on ``subprime'' and similar 
products to minority applicants who request information about the 
creditor's mortgage products, but provides information on a wider 
variety of mortgage products to similarly situated nonminority 
applicants.
    B. A creditor provides more comprehensive information to men than to 
similarly situated women.
    C. A creditor requires a minority applicant to provide greater 
documentation to obtain a loan than a similarly situated nonminority 
applicant.
    D. A creditor waives or relaxes credit standards for a nonminority 
applicant but not for a similarly situated minority applicant.
    ii. Treating applicants differently on a prohibited basis is 
unlawful if the creditor lacks a legitimate nondiscriminatory reason for 
its action, or if the asserted reason is found to be a pretext for 
discrimination.
    Paragraph 4(b).
    1. Prospective applicants. Generally, the regulation's protections 
apply only to persons who have requested or received an extension of 
credit. In keeping with the purpose of the Act--to promote the 
availability of credit on a nondiscriminatory basis--Sec.  1002.4(b) 
covers

[[Page 57]]

acts or practices directed at prospective applicants that could 
discourage a reasonable person, on a prohibited basis, from applying for 
credit. Practices prohibited by this section include:
    i. A statement that the applicant should not bother to apply, after 
the applicant states that he is retired.
    ii. The use of words, symbols, models or other forms of 
communication in advertising that express, imply, or suggest a 
discriminatory preference or a policy of exclusion in violation of the 
Act.
    iii. The use of interview scripts that discourage applications on a 
prohibited basis.
    2. Affirmative advertising. A creditor may affirmatively solicit or 
encourage members of traditionally disadvantaged groups to apply for 
credit, especially groups that might not normally seek credit from that 
creditor.
    Paragraph 4(c).
    1. Requirement for written applications. Model application forms are 
provided in appendix B to the regulation, although use of a printed form 
is not required. A creditor will satisfy the requirement by writing down 
the information that it normally considers in making a credit decision. 
The creditor may complete an application on behalf of an applicant and 
need not require the applicant to sign the application.
    2. Telephone applications. A creditor that accepts applications by 
telephone for dwelling-related credit covered by Sec.  1002.13 can meet 
the requirement for written applications by writing down pertinent 
information that is provided by the applicant.
    3. Computerized entry. Information entered directly into and 
retained by a computerized system qualifies as a written application 
under this paragraph. (See the commentary to Sec.  1002.13(b), 
Applications through electronic media and Applications through video.)
    Paragraph 4(d).
    1. Clear and conspicuous. This standard requires that disclosures be 
presented in a reasonably understandable format in a way that does not 
obscure the required information. No minimum type size is mandated, but 
the disclosures must be legible, whether typewritten, handwritten, or 
printed by computer.
    2. Form of disclosures. Whether the disclosures required to be on or 
with an application must be in electronic form depends upon the 
following:
    i. If an applicant accesses a credit application electronically 
(other than as described under ii below), such as online at a home 
computer, the creditor must provide the disclosures in electronic form 
(such as with the application form on its Web site) in order to meet the 
requirement to provide disclosures in a timely manner on or with the 
application. If the creditor instead mailed paper disclosures to the 
applicant, this requirement would not be met.
    ii. In contrast, if an applicant is physically present in the 
creditor's office, and accesses a credit application electronically, 
such as via a terminal or kiosk (or if the applicant uses a terminal or 
kiosk located on the premises of an affiliate or third party that has 
arranged with the creditor to provide applications to consumers), the 
creditor may provide disclosures in either electronic or paper form, 
provided the creditor complies with the timing, delivery, and 
retainability requirements of the regulation.

        Section 1002.5--Rules Concerning Requests for Information

    5(a) General rules.
    Paragraph 5(a)(1).
    1. Requests for information. This section governs the types of 
information that a creditor may gather. Section1002.6 governs how 
information may be used.
    5(a)(2) Required Collection of Information
    1. Local laws. Information that a creditor is allowed to collect 
pursuant to a ``state'' statute or regulation includes information 
required by a local statute, regulation, or ordinance.
    2. Information required by Regulation C. Regulation C, 12 CFR part 
1003, generally requires creditors covered by the Home Mortgage 
Disclosure Act (HMDA) to collect and report information about the race, 
ethnicity, and sex of applicants for certain dwelling-secured loans, 
including some types of loans not covered by Sec.  1002.13.
    3. Collecting information on behalf of creditors. Persons such as 
loan brokers and correspondents do not violate the ECOA or Regulation B 
if they collect information that they are otherwise prohibited from 
collecting, where the purpose of collecting the information is to 
provide it to a creditor that is subject to subpart B of this part, the 
Home Mortgage Disclosure Act, or another Federal or State statute or 
regulation requiring data collection.
    4. Information required by subpart B. Subpart B of this part 
generally requires creditors that are covered financial institutions as 
defined in Sec.  1002.105(b) to collect and report information about the 
ethnicity, race, and sex of the principal owners of applicants for 
certain small business credit, as well as whether the applicant is a 
minority-owned business, a women-owned business, or an LGBTQI+-owned 
business, as defined in Sec.  1002.102(m), (s), and (l), respectively.
    5(a)(4) Other Permissible Collection of Information
    1. Other permissible collection of information. Information 
regarding ethnicity, race, and sex that is not required to be collected 
pursuant to Regulation C, 12 CFR part 1003, or subpart B of this part, 
may nevertheless be collected under the circumstances set forth in Sec.  
1002.5(a)(4) without violating Sec.  1002.5(b). The information 
collected pursuant to 12

[[Page 58]]

CFR part 1003 must be retained pursuant to the requirements of Sec.  
1002.12. The information collected pursuant to subpart B of this part 
must be retained pursuant to the requirements set forth in Sec.  
1002.111.
    5(d) Other limitations on information requests.
    Paragraph 5(d)(1).
    1. Indirect disclosure of prohibited information. The fact that 
certain credit-related information may indirectly disclose marital 
status does not bar a creditor from seeking such information. For 
example, the creditor may ask about:
    i. The applicant's obligation to pay alimony, child support, or 
separate maintenance income.
    ii. The source of income to be used as the basis for repaying the 
credit requested, which could disclose that it is the income of a 
spouse.
    iii. Whether any obligation disclosed by the applicant has a co-
obligor, which could disclose that the co-obligor is a spouse or former 
spouse.
    iv. The ownership of assets, which could disclose the interest of a 
spouse.
    Paragraph 5(d)(2).
    1. Disclosure about income. The sample application forms in appendix 
B to the regulation illustrate how a creditor may inform an applicant of 
the right not to disclose alimony, child support, or separate 
maintenance income.
    2. General inquiry about source of income. Since a general inquiry 
about the source of income may lead an applicant to disclose alimony, 
child support, or separate maintenance income, a creditor making such an 
inquiry on an application form should preface the request with the 
disclosure required by this paragraph.
    3. Specific inquiry about sources of income. A creditor need not 
give the disclosure if the inquiry about income is specific and worded 
in a way that is unlikely to lead the applicant to disclose the fact 
that income is derived from alimony, child support, or separate 
maintenance payments. For example, an application form that asks about 
specific types of income such as salary, wages, or investment income 
need not include the disclosure.

       Section 1002.6--Rules Concerning Evaluation of Applications

    6(a) General rule concerning use of information.
    1. General. When evaluating an application for credit, a creditor 
generally may consider any information obtained. However, a creditor may 
not consider in its evaluation of creditworthiness any information that 
it is barred by Sec.  1002.5 from obtaining or from using for any 
purpose other than to conduct a self-test under Sec.  1002.15.
    2. Effects test. The effects test is a judicial doctrine that was 
developed in a series of employment cases decided by the U.S. Supreme 
Court under title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e 
et seq.,) and the burdens of proof for such employment cases were 
codified by Congress in the Civil Rights Act of 1991 (42 U.S.C. 2000e-
2). Congressional intent that this doctrine apply to the credit area is 
documented in the Senate Report that accompanied H.R. 6516, No. 94-589, 
pp. 4-5; and in the House Report that accompanied H.R. 6516, No. 94-210, 
p.5. The Act and regulation may prohibit a creditor practice that is 
discriminatory in effect because it has a disproportionately negative 
impact on a prohibited basis, even though the creditor has no intent to 
discriminate and the practice appears neutral on its face, unless the 
creditor practice meets a legitimate business need that cannot 
reasonably be achieved as well by means that are less disparate in their 
impact. For example, requiring that applicants have income in excess of 
a certain amount to qualify for an overdraft line of credit could mean 
that women and minority applicants will be rejected at a higher rate 
than men and nonminority applicants. If there is a demonstrable 
relationship between the income requirement and creditworthiness for the 
level of credit involved, however, use of the income standard would 
likely be permissible.
    6(b) Specific rules concerning use of information.
    Paragraph 6(b)(1).
    1. Prohibited basis--special purpose credit. In a special purpose 
credit program, a creditor may consider a prohibited basis to determine 
whether the applicant possesses a characteristic needed for eligibility. 
(See Sec.  1002.8.)
    Paragraph 6(b)(2).
    1. Favoring the elderly. Any system of evaluating creditworthiness 
may favor a credit applicant who is age 62 or older. A credit program 
that offers more favorable credit terms to applicants age 62 or older is 
also permissible; a program that offers more favorable credit terms to 
applicants at an age lower than 62 is permissible only if it meets the 
special-purpose credit requirements of Sec.  1002.8.
    2. Consideration of age in a credit scoring system. Age may be taken 
directly into account in a credit scoring system that is ``demonstrably 
and statistically sound,'' as defined in Sec.  1002.2(p), with one 
limitation: Applicants age 62 years or older must be treated at least as 
favorably as applicants who are under age 62. If age is scored by 
assigning points to an applicant's age category, elderly applicants must 
receive the same or a greater number of points as the most favored class 
of nonelderly applicants.
    i. Age-split scorecards. Some credit systems segment the population 
and use different scorecards based on the age of an applicant. In such a 
system, one card may cover a narrow age range (for example, applicants 
in

[[Page 59]]

their twenties or younger) who are evaluated under attributes predictive 
for that age group. A second card may cover all other applicants, who 
are evaluated under the attributes predictive for that broader class. 
When a system uses a card covering a wide age range that encompasses 
elderly applicants, the credit scoring system is not deemed to score 
age. Thus, the system does not raise the issue of assigning a negative 
factor or value to the age of elderly applicants. But if a system 
segments the population by age into multiple scorecards, and includes 
elderly applicants in a narrower age range, the credit scoring system 
does score age. To comply with the Act and regulation in such a case, 
the creditor must ensure that the system does not assign a negative 
factor or value to the age of elderly applicants as a class.
    3. Consideration of age in a judgmental system. In a judgmental 
system, defined in Sec.  1002.2(t), a creditor may not decide whether to 
extend credit or set the terms and conditions of credit based on age or 
information related exclusively to age. Age or age-related information 
may be considered only in evaluating other ``pertinent elements of 
creditworthiness'' that are drawn from the particular facts and 
circumstances concerning the applicant. For example, a creditor may not 
reject an application or terminate an account because the applicant is 
60 years old. But a creditor that uses a judgmental system may relate 
the applicant's age to other information about the applicant that the 
creditor considers in evaluating creditworthiness. As the following 
examples illustrate, the evaluation must be made in an individualized, 
case-by-case manner:
    i. A creditor may consider the applicant's occupation and length of 
time to retirement to ascertain whether the applicant's income 
(including retirement income) will support the extension of credit to 
its maturity.
    ii. A creditor may consider the adequacy of any security offered 
when the term of the credit extension exceeds the life expectancy of the 
applicant and the cost of realizing on the collateral could exceed the 
applicant's equity. An elderly applicant might not qualify for a 5 
percent down, 30-year mortgage loan but might qualify with a larger 
downpayment or a shorter loan maturity.
    iii. A creditor may consider the applicant's age to assess the 
significance of length of employment (a young applicant may have just 
entered the job market) or length of time at an address (an elderly 
applicant may recently have retired and moved from a long-term 
residence).
    4. Consideration of age in a reverse mortgage. A reverse mortgage is 
a home-secured loan in which the borrower receives payments from the 
creditor, and does not become obligated to repay these amounts (other 
than in the case of default) until the borrower dies, moves permanently 
from the home, or transfers title to the home, or upon a specified 
maturity date. Disbursements to the borrower under a reverse mortgage 
typically are determined by considering the value of the borrower's 
home, the current interest rate, and the borrower's life expectancy. A 
reverse mortgage program that requires borrowers to be age 62 or older 
is permissible under Sec.  1002.6(b)(2)(iv). In addition, under Sec.  
1002.6(b)(2)(iii), a creditor may consider a borrower's age to evaluate 
a pertinent element of creditworthiness, such as the amount of the 
credit or monthly payments that the borrower will receive, or the 
estimated repayment date.
    5. Consideration of age in a combined system. A creditor using a 
credit scoring system that qualifies as ``empirically derived'' under 
Sec.  1002.2(p) may consider other factors (such as a credit report or 
the applicant's cash flow) on a judgmental basis. Doing so will not 
negate the classification of the credit scoring component of the 
combined system as ``demonstrably and statistically sound.'' While age 
could be used in the credit scoring portion, however, in the judgmental 
portion age may not be considered directly. It may be used only for the 
purpose of determining a ``pertinent element of creditworthiness.'' (See 
comment 6(b)(2)-3.)
    6. Consideration of public assistance. When considering income 
derived from a public assistance program, a creditor may take into 
account, for example:
    i. The length of time an applicant will likely remain eligible to 
receive such income.
    ii. Whether the applicant will continue to qualify for benefits 
based on the status of the applicant's dependents (as in the case of 
Temporary Aid to Needy Families, or social security payments to a 
minor).
    iii. Whether the creditor can attach or garnish the income to assure 
payment of the debt in the event of default.
    Paragraph 6(b)(5).
    1. Consideration of an individual applicant. A creditor must 
evaluate income derived from part-time employment, alimony, child 
support, separate maintenance payments, retirement benefits, or public 
assistance on an individual basis, not on the basis of aggregate 
statistics; and must assess its reliability or unreliability by 
analyzing the applicant's actual circumstances, not by analyzing 
statistical measures derived from a group.
    2. Payments consistently made. In determining the likelihood of 
consistent payments of alimony, child support, or separate maintenance, 
a creditor may consider factors such as whether payments are received 
pursuant to a written agreement or court decree; the length of time that 
the payments have been received; whether the payments are regularly 
received by the applicant; the

[[Page 60]]

availability of court or other procedures to compel payment; and the 
creditworthiness of the payor, including the credit history of the payor 
when it is available to the creditor.
    3. Consideration of income.
    i. A creditor need not consider income at all in evaluating 
creditworthiness. If a creditor does consider income, there are several 
acceptable methods, whether in a credit scoring or a judgmental system:
    A. A creditor may score or take into account the total sum of all 
income stated by the applicant without taking steps to evaluate the 
income for reliability.
    B. A creditor may evaluate each component of the applicant's income, 
and then score or take into account income determined to be reliable 
separately from other income; or the creditor may disregard that portion 
of income that is not reliable when it aggregates reliable income.
    C. A creditor that does not evaluate all income components for 
reliability must treat as reliable any component of protected income 
that is not evaluated.
    ii. In considering the separate components of an applicant's income, 
the creditor may not automatically discount or exclude from 
consideration any protected income. Any discounting or exclusion must be 
based on the applicant's actual circumstances.
    4. Part-time employment, sources of income. A creditor may score or 
take into account the fact that an applicant has more than one source of 
earned income--a full-time and a part-time job or two part-time jobs. A 
creditor may also score or treat earned income from a secondary source 
differently than earned income from a primary source. The creditor may 
not, however, score or otherwise take into account the number of sources 
for income such as retirement income, social security, supplemental 
security income, and alimony. Nor may the creditor treat negatively the 
fact that an applicant's only earned income is derived from, for 
example, a part-time job.
    Paragraph 6(b)(6).
    1. Types of credit references. A creditor may restrict the types of 
credit history and credit references that it will consider, provided 
that the restrictions are applied to all credit applicants without 
regard to sex, marital status, or any other prohibited basis. On the 
applicant's request, however, a creditor must consider credit 
information not reported through a credit bureau when the information 
relates to the same types of credit references and history that the 
creditor would consider if reported through a credit bureau.
    Paragraph 6(b)(7).
    1. National origin--immigration status. The applicant's immigration 
status and ties to the community (such as employment and continued 
residence in the area) could have a bearing on a creditor's ability to 
obtain repayment. Accordingly, the creditor may consider immigration 
status and differentiate, for example, between a noncitizen who is a 
long-time resident with permanent resident status and a noncitizen who 
is temporarily in this country on a student visa.
    2. National origin--citizenship. A denial of credit on the ground 
that an applicant is not a United States citizen is not per se 
discrimination based on national origin.
    Paragraph 6(b)(8).
    1. Prohibited basis--marital status. A creditor may consider the 
marital status of an applicant or joint applicant for the purpose of 
ascertaining the creditor's rights and remedies applicable to the 
particular extension of credit. For example, in a secured transaction 
involving real property, a creditor could take into account whether 
state law gives the applicant's spouse an interest in the property being 
offered as collateral.

          Section 1002.7--Rules Concerning Extensions of Credit

    7(a) Individual accounts.
    1. Open-end credit--authorized user. A creditor may not require a 
creditworthy applicant seeking an individual credit account to provide 
additional signatures. But the creditor may condition the designation of 
an authorized user by the account holder on the authorized user's 
becoming contractually liable for the account, as long as the creditor 
does not differentiate on any prohibited basis in imposing this 
requirement.
    2. Open-end credit--choice of authorized user. A creditor that 
permits an account holder to designate an authorized user may not 
restrict this designation on a prohibited basis. For example, if the 
creditor allows the designation of spouses as authorized users, the 
creditor may not refuse to accept a non-spouse as an authorized user.
    3. Overdraft authority on transaction accounts. If a transaction 
account (such as a checking account or NOW account) includes an 
overdraft line of credit, the creditor may require that all persons 
authorized to draw on the transaction account assume liability for any 
overdraft.
    7(b) Designation of name.
    1. Single name on account. A creditor may require that joint 
applicants on an account designate a single name for purposes of 
administering the account and that a single name be embossed on any 
credit cards issued on the account. But the creditor may not require 
that the name be the husband's name. (See Sec.  1002.10 for rules 
governing the furnishing of credit history on accounts held by spouses.)
    7(c) Action concerning existing open-end accounts.
    Paragraph 7(c)(1).
    1. Termination coincidental with marital status change. When an 
account holder's marital status changes, a creditor generally may not 
terminate the account unless it has evidence

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that the account holder is now unable or unwilling to repay. But the 
creditor may terminate an account on which both spouses are jointly 
liable, even if the action coincides with a change in marital status, 
when one or both spouses:
    i. Repudiate responsibility for future charges on the joint account.
    ii. Request separate accounts in their own names.
    iii. Request that the joint account be closed.
    2. Updating information. A creditor may periodically request updated 
information from applicants but may not use events related to a 
prohibited basis--such as an applicant's retirement or reaching a 
particular age, or a change in name or marital status--to trigger such a 
request.
    Paragraph 7(c)(2).
    1. Procedure pending reapplication. A creditor may require a 
reapplication from an account holder, even when there is no evidence of 
unwillingness or inability to repay, if (1) the credit was based on the 
qualifications of a person who is no longer available to support the 
credit and (2) the creditor has information indicating that the account 
holder's income may be insufficient to support the credit. While a 
reapplication is pending, the creditor must allow the account holder 
full access to the account under the existing contract terms. The 
creditor may specify a reasonable time period within which the account 
holder must submit the required information.
    7(d) Signature of spouse or other person.
    1. Qualified applicant. The signature rules ensure that qualified 
applicants are able to obtain credit in their own names. Thus, when an 
applicant requests individual credit, a creditor generally may not 
require the signature of another person unless the creditor has first 
determined that the applicant alone does not qualify for the credit 
requested.
    2. Unqualified applicant. When an applicant requests individual 
credit but does not meet a creditor's standards, the creditor may 
require a cosigner, guarantor, endorser, or similar party--but cannot 
require that it be the spouse. (See commentary to Sec. Sec.  
1002.7(d)(5) and (6).)
    Paragraph 7(d)(1).
    1. Signature of another person. It is impermissible for a creditor 
to require an applicant who is individually creditworthy to provide a 
cosigner--even if the creditor applies the requirement without regard to 
sex, marital status, or any other prohibited basis. (But see comment 
7(d)(6)-1 concerning guarantors of closely held corporations.)
    2. Joint applicant. The term ``joint applicant'' refers to someone 
who applies contemporaneously with the applicant for shared or joint 
credit. It does not refer to someone whose signature is required by the 
creditor as a condition for granting the credit requested.
    3. Evidence of joint application. A person's intent to be a joint 
applicant must be evidenced at the time of application. Signatures on a 
promissory note may not be used to show intent to apply for joint 
credit. On the other hand, signatures or initials on a credit 
application affirming applicants' intent to apply for joint credit may 
be used to establish intent to apply for joint credit. (See appendix B.) 
The method used to establish intent must be distinct from the means used 
by individuals to affirm the accuracy of information. For example, 
signatures on a joint financial statement affirming the veracity of 
information are not sufficient to establish intent to apply for joint 
credit.
    Paragraph 7(d)(2).
    1. Jointly owned property. If an applicant requests unsecured 
credit, does not own sufficient separate property, and relies on joint 
property to establish creditworthiness, the creditor must value the 
applicant's interest in the jointly owned property. A creditor may not 
request that a nonapplicant joint owner sign any instrument as a 
condition of the credit extension unless the applicant's interest does 
not support the amount and terms of the credit sought.
    i. Valuation of applicant's interest. In determining the value of an 
applicant's interest in jointly owned property, a creditor may consider 
factors such as the form of ownership and the property's susceptibility 
to attachment, execution, severance, or partition; the value of the 
applicant's interest after such action; and the cost associated with the 
action. This determination must be based on the existing form of 
ownership, and not on the possibility of a subsequent change. For 
example, in determining whether a married applicant's interest in 
jointly owned property is sufficient to satisfy the creditor's standards 
of creditworthiness for individual credit, a creditor may not consider 
that the applicant's separate property could be transferred into tenancy 
by the entirety after consummation. Similarly, a creditor may not 
consider the possibility that the couple may divorce. Accordingly, a 
creditor may not require the signature of the non-applicant spouse in 
these or similar circumstances.
    ii. Other options to support credit. If the applicant's interest in 
jointly owned property does not support the amount and terms of credit 
sought, the creditor may offer the applicant other options to qualify 
for the extension of credit. For example:
    A. Providing a co-signer or other party (Sec.  1002.7(d)(5));
    B. Requesting that the credit be granted on a secured basis (Sec.  
1002.7(d)(4)); or
    C. Providing the signature of the joint owner on an instrument that 
ensures access

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to the property in the event of the applicant's death or default, but 
does not impose personal liability unless necessary under state law 
(such as a limited guarantee). A creditor may not routinely require, 
however, that a joint owner sign an instrument (such as a quitclaim 
deed) that would result in the forfeiture of the joint owner's interest 
in the property.
    2. Need for signature--reasonable belief. A creditor's reasonable 
belief as to what instruments need to be signed by a person other than 
the applicant should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    Paragraph 7(d)(3).
    1. Residency. In assessing the creditworthiness of a person who 
applies for credit in a community property state, a creditor may assume 
that the applicant is a resident of the state unless the applicant 
indicates otherwise.
    Paragraph 7(d)(4).
    1. Creation of enforceable lien. Some state laws require that both 
spouses join in executing any instrument by which real property is 
encumbered. If an applicant offers such property as security for credit, 
a creditor may require the applicant's spouse to sign the instruments 
necessary to create a valid security interest in the property. The 
creditor may not require the spouse to sign the note evidencing the 
credit obligation if signing only the mortgage or other security 
agreement is sufficient to make the property available to satisfy the 
debt in the event of default. However, if under state law both spouses 
must sign the note to create an enforceable lien, the creditor may 
require the signatures.
    2. Need for signature--reasonable belief. Generally, a signature to 
make the secured property available will only be needed on a security 
agreement. A creditor's reasonable belief that, to ensure access to the 
property, the spouse's signature is needed on an instrument that imposes 
personal liability should be supported by a thorough review of pertinent 
statutory and decisional law or an opinion of the state attorney 
general.
    3. Integrated instruments. When a creditor uses an integrated 
instrument that combines the note and the security agreement, the spouse 
cannot be asked to sign the integrated instrument if the signature is 
only needed to grant a security interest. But the spouse could be asked 
to sign an integrated instrument that makes clear--for example, by a 
legend placed next to the spouse's signature--that the spouse's 
signature is only to grant a security interest and that signing the 
instrument does not impose personal liability.
    Paragraph 7(d)(5).
    1. Qualifications of additional parties. In establishing guidelines 
for eligibility of guarantors, cosigners, or similar additional parties, 
a creditor may restrict the applicant's choice of additional parties but 
may not discriminate on the basis of sex, marital status, or any other 
prohibited basis. For example, the creditor could require that the 
additional party live in the creditor's market area.
    2. Reliance on income of another person--individual credit. An 
applicant who requests individual credit relying on the income of 
another person (including a spouse in a non-community property state) 
may be required to provide the signature of the other person to make the 
income available to pay the debt. In community property states, the 
signature of a spouse may be required if the applicant relies on the 
spouse's separate income. If the applicant relies on the spouse's future 
earnings that as a matter of state law cannot be characterized as 
community property until earned, the creditor may require the spouse's 
signature, but need not do so--even if it is the creditor's practice to 
require the signature when an applicant relies on the future earnings of 
a person other than a spouse. (See Sec.  1002.6(c) on consideration of 
state property laws.)
    3. Renewals. If the borrower's creditworthiness is reevaluated when 
a credit obligation is renewed, the creditor must determine whether an 
additional party is still warranted and, if not warranted, release the 
additional party.
    Paragraph 7(d)(6).
    1. Guarantees. A guarantee on an extension of credit is part of a 
credit transaction and therefore subject to the regulation. A creditor 
may require the personal guarantee of the partners, directors, or 
officers of a business, and the shareholders of a closely held 
corporation, even if the business or corporation is creditworthy. The 
requirement must be based on the guarantor's relationship with the 
business or corporation, however, and not on a prohibited basis. For 
example, a creditor may not require guarantees only for women-owned or 
minority-owned businesses. Similarly, a creditor may not require 
guarantees only of the married officers of a business or the married 
shareholders of a closely held corporation.
    2. Spousal guarantees. The rules in Sec.  1002.7(d) bar a creditor 
from requiring the signature of a guarantor's spouse just as they bar 
the creditor from requiring the signature of an applicant's spouse. For 
example, although a creditor may require all officers of a closely held 
corporation to personally guarantee a corporate loan, the creditor may 
not automatically require that spouses of married officers also sign the 
guarantee. If an evaluation of the financial circumstances of an officer 
indicates that an additional signature

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is necessary, however, the creditor may require the signature of another 
person in appropriate circumstances in accordance with Sec.  
1002.7(d)(2).
    7(e) Insurance.
    1. Differences in terms. Differences in the availability, rates, and 
other terms on which credit-related casualty insurance or credit life, 
health, accident, or disability insurance is offered or provided to an 
applicant does not violate Regulation B.
    2. Insurance information. A creditor may obtain information about an 
applicant's age, sex, or marital status for insurance purposes. The 
information may only be used for determining eligibility and premium 
rates for insurance, however, and not in making the credit decision.

             Section 1002.8--Special Purpose Credit Programs

    8(a) Standards for programs.
    1. Determining qualified programs. The Bureau does not determine 
whether individual programs qualify for special purpose credit status, 
or whether a particular program benefits an ``economically disadvantaged 
class of persons.'' The agency or creditor administering or offering the 
loan program must make these decisions regarding the status of its 
program.
    2. Compliance with a program authorized by Federal or state law. A 
creditor does not violate Regulation B when it complies in good faith 
with a regulation promulgated by a government agency implementing a 
special purpose credit program under Sec.  1002.8(a)(1). It is the 
agency's responsibility to promulgate a regulation that is consistent 
with Federal and state law.
    3. Expressly authorized. Credit programs authorized by Federal or 
state law include programs offered pursuant to Federal, state, or local 
statute, regulation or ordinance, or pursuant to judicial or 
administrative order.
    4. Creditor liability. A refusal to grant credit to an applicant is 
not a violation of the Act or regulation if the applicant does not meet 
the eligibility requirements under a special purpose credit program.
    5. Determining need. In designing a special purpose credit program 
under Sec.  1002.8(a), a for-profit organization must determine that the 
program will benefit a class of people 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. For example, 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. Or, a bank could review Home Mortgage Disclosure Act 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.
    6. Elements of the program. The written plan must contain 
information that supports the need for the particular program. The plan 
also must either state 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.
    8(b) Rules in other sections.
    1. Applicability of rules. A creditor that rejects an application 
because the applicant does not meet the eligibility requirements (common 
characteristic or financial need, for example) must nevertheless notify 
the applicant of action taken as required by Sec.  1002.9.
    8(c) Special rule concerning requests and use of information.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Sec. Sec.  1002.5 and 1002.6 to determine an 
applicant's eligibility for a particular program.
    2. Examples. Examples of programs under which the creditor can ask 
for and consider information about a prohibited basis are:
    i. Energy conservation programs to assist the elderly, for which the 
creditor must consider the applicant's age.
    ii. Programs under a Minority Enterprise Small Business Investment 
Corporation, for which a creditor must consider the applicant's minority 
status.
    8(d) Special rule in the case of financial need.
    1. Request of prohibited basis information. This section permits a 
creditor to request and consider certain information that would 
otherwise be prohibited by Sec. Sec.  1002.5 and 1002.6, and to require 
signatures that would otherwise be prohibited by Sec.  1002.7(d).
    2. Examples. Examples of programs in which financial need is a 
criterion are:
    i. Subsidized housing programs for low-to moderate-income 
households, for which a creditor may have to consider the applicant's 
receipt of alimony or child support, the spouse's or parents' income, 
etc.
    ii. Student loan programs based on the family's financial need, for 
which a creditor may have to consider the spouse's or parents' financial 
resources.
    3. Student loans. In a guaranteed student loan program, a creditor 
may obtain the signature of a parent as a guarantor when required by 
Federal or state law or agency regulation, or when the student does not 
meet the creditor's standards of creditworthiness. (See Sec. Sec.  
1002.7(d)(1) and (5).) The creditor may not require an additional 
signature when a student has a work or credit history that satisfies the 
creditor's standards.

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                      Section 1002.9--Notifications

    1. Use of the term adverse action. The regulation does not require 
that a creditor use the term adverse action in communicating to an 
applicant that a request for an extension of credit has not been 
approved. In notifying an applicant of adverse action as defined by 
Sec.  1002.2(c)(1), a creditor may use any words or phrases that 
describe the action taken on the application.
    2. Expressly withdrawn applications. When an applicant expressly 
withdraws a credit application, the creditor is not required to comply 
with the notification requirements under Sec.  1002.9. (The creditor 
must comply, however, with the record retention requirements of the 
regulation. See Sec.  1002.12(b)(3).)
    3. When notification occurs. Notification occurs when a creditor 
delivers or mails a notice to the applicant's last known address or, in 
the case of an oral notification, when the creditor communicates the 
credit decision to the applicant.
    4. Location of notice. The notifications required under Sec.  1002.9 
may appear on either or both sides of a form or letter.
    5. Prequalification requests. Whether a creditor must provide a 
notice of action taken for a prequalification request depends on the 
creditor's response to the request, as discussed in comment 2(f)-3. For 
instance, a creditor may treat the request as an inquiry if the creditor 
evaluates specific information about the consumer and tells the consumer 
the loan amount, rate, and other terms of credit the consumer could 
qualify for under various loan programs, explaining the process the 
consumer must follow to submit a mortgage application and the 
information the creditor will analyze in reaching a credit decision. On 
the other hand, a creditor has treated a request as an application, and 
is subject to the adverse action notice requirements of Sec.  1002.9 if, 
after evaluating information, the creditor decides that it will not 
approve the request and communicates that decision to the consumer. For 
example, if the creditor tells the consumer that it would not approve an 
application for a mortgage because of a bankruptcy in the consumer's 
record, the creditor has denied an application for credit.
    9(a) Notification of action taken, ECOA notice, and statement of 
specific reasons.
    Paragraph 9(a)(1).
    1. Timing of notice--when an application is complete. Once a 
creditor has obtained all the information it normally considers in 
making a credit decision, the application is complete and the creditor 
has 30 days in which to notify the applicant of the credit decision. 
(See also comment 2(f)-6.)
    2. Notification of approval. Notification of approval may be express 
or by implication. For example, the creditor will satisfy the 
notification requirement when it gives the applicant the credit card, 
money, property, or services requested.
    3. Incomplete application--denial for incompleteness. When an 
application is incomplete regarding information that the applicant can 
provide and the creditor lacks sufficient data for a credit decision, 
the creditor may deny the application giving as the reason for denial 
that the application is incomplete. The creditor has the option, 
alternatively, of providing a notice of incompleteness under Sec.  
1002.9(c).
    4. Incomplete application--denial for reasons other than 
incompleteness. When an application is missing information but provides 
sufficient data for a credit decision, the creditor may evaluate the 
application, make its credit decision, and notify the applicant 
accordingly. If credit is denied, the applicant must be given the 
specific reasons for the credit denial (or notice of the right to 
receive the reasons); in this instance missing information or 
``incomplete application'' cannot be given as the reason for the denial.
    5. Length of counteroffer. Section 1002.9(a)(1)(iv) does not require 
a creditor to hold a counteroffer open for 90 days or any other 
particular length of time.
    6. Counteroffer combined with adverse action notice. A creditor that 
gives the applicant a combined counteroffer and adverse action notice 
that complies with Sec.  1002.9(a)(2) need not send a second adverse 
action notice if the applicant does not accept the counteroffer. A 
sample of a combined notice is contained in form C-4 of appendix C to 
the regulation.
    7. Denial of a telephone application. When an application is made by 
telephone and adverse action is taken, the creditor must request the 
applicant's name and address in order to provide written notification 
under this section. If the applicant declines to provide that 
information, then the creditor has no further notification 
responsibility.
    Paragraph 9(a)(3).
    1. Coverage. In determining which rules in this paragraph apply to a 
given business credit application, a creditor may rely on the 
applicant's assertion about the revenue size of the business. 
(Applications to start a business are governed by the rules in Sec.  
1002.9(a)(3)(i).) If an applicant applies for credit as a sole 
proprietor, the revenues of the sole proprietorship will determine which 
rules govern the application. However, if an applicant applies for 
business credit as an individual, the rules in Sec.  1002.9(a)(3)(i) 
apply unless the application is for trade or similar credit.
    2. Trade credit. The term trade credit generally is limited to a 
financing arrangement that involves a buyer and a seller--such as a 
supplier who finances the sale of equipment, supplies, or inventory; it 
does not apply to

[[Page 65]]

an extension of credit by a bank or other financial institution for the 
financing of such items.
    3. Factoring. Factoring refers to a purchase of accounts receivable, 
and thus is not subject to the Act or regulation. If there is a credit 
extension incident to the factoring arrangement, the notification rules 
in Sec.  1002.9(a)(3)(ii) apply, as do other relevant sections of the 
Act and regulation.
    4. Manner of compliance. In complying with the notice provisions of 
the Act and regulation, creditors offering business credit may follow 
the rules governing consumer credit. Similarly, creditors may elect to 
treat all business credit the same (irrespective of revenue size) by 
providing notice in accordance with Sec.  1002.9(a)(3)(i).
    5. Timing of notification. A creditor subject to Sec.  
1002.9(a)(3)(ii)(A) is required to notify a business credit applicant, 
orally or in writing, of action taken on an application within a 
reasonable time of receiving a completed application. Notice provided in 
accordance with the timing requirements of Sec.  1002.9(a)(1) is deemed 
reasonable in all instances.
    9(b) Form of ECOA notice and statement of specific reasons.
    Paragraph 9(b)(1).
    1. Substantially similar notice. The ECOA notice sent with a 
notification of a credit denial or other adverse action will comply with 
the regulation if it is ``substantially similar'' to the notice 
contained in Sec.  1002.9(b)(1). For example, a creditor may add a 
reference to the fact that the ECOA permits age to be considered in 
certain credit scoring systems, or add a reference to a similar state 
statute or regulation and to a state enforcement agency.
    Paragraph 9(b)(2).
    1. Number of specific reasons. A creditor must disclose the 
principal reasons for denying an application or taking other adverse 
action. The regulation does not mandate that a specific number of 
reasons be disclosed, but disclosure of more than four reasons is not 
likely to be helpful to the applicant.
    2. Source of specific reasons. The specific reasons disclosed under 
Sec. Sec.  1002.9(a)(2) and (b)(2) must relate to and accurately 
describe the factors actually considered or scored by a creditor.
    3. Description of reasons. A creditor need not describe how or why a 
factor adversely affected an applicant. For example, the notice may say 
``length of residence'' rather than ``too short a period of residence.''
    4. Credit scoring system. If a creditor bases the denial or other 
adverse action on a credit scoring system, the reasons disclosed must 
relate only to those factors actually scored in the system. Moreover, no 
factor that was a principal reason for adverse action may be excluded 
from disclosure. The creditor must disclose the actual reasons for 
denial (for example, ``age of automobile'') even if the relationship of 
that factor to predicting creditworthiness may not be clear to the 
applicant.
    5. Credit scoring--method for selecting reasons. The regulation does 
not require that any one method be used for selecting reasons for a 
credit denial or other adverse action that is based on a credit scoring 
system. Various methods will meet the requirements of the regulation. 
One method is to identify the factors for which the applicant's score 
fell furthest below the average score for each of those factors achieved 
by applicants whose total score was at or slightly above the minimum 
passing score. Another method is to identify the factors for which the 
applicant's score fell furthest below the average score for each of 
those factors achieved by all applicants. These average scores could be 
calculated during the development or use of the system. Any other method 
that produces results substantially similar to either of these methods 
is also acceptable under the regulation.
    6. Judgmental system. If a creditor uses a judgmental system, the 
reasons for the denial or other adverse action must relate to those 
factors in the applicant's record actually reviewed by the person making 
the decision.
    7. Combined credit scoring and judgmental system. If a creditor 
denies an application based on a credit evaluation system that employs 
both credit scoring and judgmental components, the reasons for the 
denial must come from the component of the system that the applicant 
failed. For example, if a creditor initially credit scores an 
application and denies the credit request as a result of that scoring, 
the reasons disclosed to the applicant must relate to the factors scored 
in the system. If the application passes the credit scoring stage but 
the creditor then denies the credit request based on a judgmental 
assessment of the applicant's record, the reasons disclosed must relate 
to the factors reviewed judgmentally, even if the factors were also 
considered in the credit scoring component. If the application is not 
approved or denied as a result of the credit scoring, but falls into a 
gray band, and the creditor performs a judgmental assessment and denies 
the credit after that assessment, the reasons disclosed must come from 
both components of the system. The same result applies where a 
judgmental assessment is the first component of the combined system. As 
provided in comment 9(b)(2)-1, disclosure of more than a combined total 
of four reasons is not likely to be helpful to the applicant.
    8. Automatic denial. Some credit decision methods contain features 
that call for automatic denial because of one or more negative factors 
in the applicant's record (such as the applicant's previous bad credit 
history with that creditor, the applicant's declaration of

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bankruptcy, or the fact that the applicant is a minor). When a creditor 
denies the credit request because of an automatic-denial factor, the 
creditor must disclose that specific factor.
    9. Combined ECOA-FCRA disclosures. The ECOA requires disclosure of 
the principal reasons for denying or taking other adverse action on an 
application for an extension of credit. The Fair Credit Reporting Act 
(FCRA) requires a creditor to disclose when it has based its decision in 
whole or in part on information from a source other than the applicant 
or its own files. Disclosing that a credit report was obtained and used 
in the denial of the application, as the FCRA requires, does not satisfy 
the ECOA requirement to disclose specific reasons. For example, if the 
applicant's credit history reveals delinquent credit obligations and the 
application is denied for that reason, to satisfy Sec.  1002.9(b)(2) the 
creditor must disclose that the application was denied because of the 
applicant's delinquent credit obligations. The FCRA also requires a 
creditor to disclose, as applicable, a credit score it used in taking 
adverse action along with related information, including up to four key 
factors that adversely affected the consumer's credit score (or up to 
five factors if the number of inquiries made with respect to that 
consumer report is a key factor). Disclosing the key factors that 
adversely affected the consumer's credit score does not satisfy the ECOA 
requirement to disclose specific reasons for denying or taking other 
adverse action on an application or extension of credit. Sample forms C-
1 through C-5 of appendix C of the regulation provide for both the ECOA 
and FCRA disclosures. See also comment 9(b)(2)-1.
    9(c) Incomplete applications.
    Paragraph 9(c)(1).
    1. Exception for preapprovals. The requirement to provide a notice 
of incompleteness does not apply to preapprovals that constitute 
applications under Sec.  1002.2(f).
    Paragraph 9(c)(2).
    1. Reapplication. If information requested by a creditor is 
submitted by an applicant after the expiration of the time period 
designated by the creditor, the creditor may require the applicant to 
make a new application.
    Paragraph 9(c)(3).
    1. Oral inquiries for additional information. If an applicant fails 
to provide the information in response to an oral request, a creditor 
must send a written notice to the applicant within the 30-day period 
specified in Sec. Sec.  1002.9(c)(1) and (2). If the applicant provides 
the information, the creditor must take action on the application and 
notify the applicant in accordance with Sec.  1002.9(a).
    9(g) Applications submitted through a third party.
    1. Third parties. The notification of adverse action may be given by 
one of the creditors to whom an application was submitted, or by a 
noncreditor third party. If one notification is provided on behalf of 
multiple creditors, the notice must contain the name and address of each 
creditor. The notice must either disclose the applicant's right to a 
statement of specific reasons within 30 days, or give the primary 
reasons each creditor relied upon in taking the adverse action--clearly 
indicating which reasons relate to which creditor.
    2. Third party notice--enforcement agency. If a single adverse 
action notice is being provided to an applicant on behalf of several 
creditors and they are under the jurisdiction of different Federal 
enforcement agencies, the notice need not name each agency; disclosure 
of any one of them will suffice.
    3. Third-party notice--liability. When a notice is to be provided 
through a third party, a creditor is not liable for an act or omission 
of the third party that constitutes a violation of the regulation if the 
creditor accurately and in a timely manner provided the third party with 
the information necessary for the notification and maintains reasonable 
procedures adapted to prevent such violations.

            Section 1002.10--Furnishing of Credit Information

    1. Scope. The requirements of Sec.  1002.10 for designating and 
reporting credit information apply only to consumer credit transactions. 
Moreover, they apply only to creditors that opt to furnish credit 
information to credit bureaus or to other creditors; there is no 
requirement that a creditor furnish credit information on its accounts.
    2. Reporting on all accounts. The requirements of Sec.  1002.10 
apply only to accounts held or used by spouses. However, a creditor has 
the option to designate all joint accounts (or all accounts with an 
authorized user) to reflect the participation of both parties, whether 
or not the accounts are held by persons married to each other.
    3. Designating accounts. In designating accounts and reporting 
credit information, a creditor need not distinguish between accounts on 
which the spouse is an authorized user and accounts on which the spouse 
is a contractually liable party.
    4. File and index systems. The regulation does not require the 
creation or maintenance of separate files in the name of each 
participant on a joint or user account, or require any other particular 
system of recordkeeping or indexing. It requires only that a creditor be 
able to report information in the name of each spouse on accounts 
covered by Sec.  1002.10. Thus, if a creditor receives a credit inquiry 
about the wife, it should be able to locate her credit file without 
asking the husband's name.

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    10(a) Designation of accounts.
    1. New parties. When new parties who are spouses undertake a legal 
obligation on an account, as in the case of a mortgage loan assumption, 
the creditor must change the designation on the account to reflect the 
new parties and must furnish subsequent credit information on the 
account in the new names.
    2. Request to change designation of account. A request to change the 
manner in which information concerning an account is furnished does not 
alter the legal liability of either spouse on the account and does not 
require a creditor to change the name in which the account is 
maintained.

                 Section 1002.11--Relation to State Law

    11(a) Inconsistent state laws.
    1. Preemption determination--New York. The Bureau recognizes state 
law preemption determinations made by the Board of Governors of the 
Federal Reserve System prior to July 21, 2011, until and unless the 
Bureau makes and publishes any contrary determination. The Board of 
Governors determined that the following provisions in the state law of 
New York are preempted by the Federal law, effective November 11, 1988:
    i. Article 15, section 296a(1)(b). Unlawful discriminatory practices 
in relation to credit on the basis of race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars taking a prohibited basis into 
account when establishing eligibility for certain special-purpose credit 
programs.
    ii. Article 15, section 296a(1)(c). Unlawful discriminatory practice 
to make any record or inquiry based on race, creed, color, national 
origin, age, sex, marital status, or disability. This provision is 
preempted to the extent that it bars a creditor from requesting and 
considering information regarding the particular characteristics (for 
example, race, national origin, or sex) required for eligibility for 
special-purpose credit programs.
    2. Preemption determination--Ohio. The Bureau recognizes state law 
preemption determinations made by the Board of Governors of the Federal 
Reserve System prior to July 21, 2011, until and unless the Bureau makes 
and publishes any contrary determination. The Board of Governors 
determined that the following provision in the state law of Ohio is 
preempted by the Federal law, effective July 23, 1990:
    i. Section 4112.021(B)(1)--Unlawful discriminatory practices in 
credit transactions. This provision is preempted to the extent that it 
bars asking or favorably considering the age of an elderly applicant; 
prohibits the consideration of age in a credit scoring system; permits 
without limitation the consideration of age in real estate transactions; 
and limits the consideration of age in special-purpose credit programs 
to certain government-sponsored programs identified in the state law.

                    Section 1002.12--Record Retention

    12(a) Retention of prohibited information.
    1. Receipt of prohibited information. Unless the creditor 
specifically requested such information, a creditor does not violate 
this section when it receives prohibited information from a consumer 
reporting agency.
    2. Use of retained information. Although a creditor may keep in its 
files prohibited information as provided in Sec.  1002.12(a), the 
creditor may use the information in evaluating credit applications only 
if permitted to do so by Sec.  1002.6.
    12(b) Preservation of records.
    1. Copies. Copies of the original record include carbon copies, 
photocopies, microfilm or microfiche copies, or copies produced by any 
other accurate retrieval system, such as documents stored and reproduced 
by computer. A creditor that uses a computerized or mechanized system 
need not keep a paper copy of a document (for example, of an adverse 
action notice) if it can regenerate all pertinent information in a 
timely manner for examination or other purposes.
    2. Computerized decisions. A creditor that enters information items 
from a written application into a computerized or mechanized system and 
makes the credit decision mechanically, based only on the items of 
information entered into the system, may comply with Sec.  1002.12(b) by 
retaining the information actually entered. It is not required to store 
the complete written application, nor is it required to enter the 
remaining items of information into the system. If the transaction is 
subject to Sec.  1002.13 or the creditor is collecting information 
pursuant to Sec.  1002.5(a)(4), however, the creditor is required to 
enter and retain the data on personal characteristics in order to comply 
with the requirements of that section.
    Paragraph 12(b)(3).
    1. Withdrawn and brokered applications. In most cases, the 25-month 
retention period for applications runs from the date a notification is 
sent to the applicant granting or denying the credit requested. In 
certain transactions, a creditor is not obligated to provide a notice of 
the action taken. (See, for example, comment 9-2.) In such cases, the 
25-month requirement runs from the date of application, as when:
    i. An application is withdrawn by the applicant.
    ii. An application is submitted to more than one creditor on behalf 
of the applicant, and the application is approved by one of the other 
creditors.
    12(b)(6) Self-tests.
    1. The rule requires all written or recorded information about a 
self-test to be retained

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for 25 months after a self-test has been completed. For this purpose, a 
self-test is completed after the creditor has obtained the results and 
made a determination about what corrective action, if any, is 
appropriate. Creditors are required to retain information about the 
scope of the self-test, the methodology used and time period covered by 
the self-test, the report or results of the self-test including any 
analysis or conclusions, and any corrective action taken in response to 
the self-test.
    12(b)(7) Preapplication Marketing Information
    1. Prescreened credit solicitations. The rule requires creditors to 
retain copies of prescreened credit solicitations. For purposes of this 
part, a prescreened solicitation is an ``offer of credit'' as described 
in 15 U.S.C. 1681a(1) of the Fair Credit Reporting Act. A creditor 
complies with Sec.  1002.12(b)(7) if it retains a copy of each 
solicitation mailing that contains different terms, such as the amount 
of credit offered, annual percentage rate, or annual fee.
    2. List of criteria. A creditor must retain the list of criteria 
used to select potential recipients. This includes the criteria used by 
the creditor both to determine the potential recipients of the 
particular solicitation and to determine who will actually be offered 
credit.
    3. Correspondence. A creditor may retain correspondence relating to 
consumers' complaints about prescreened solicitations in any manner that 
is reasonably accessible and is understandable to examiners. There is no 
requirement to establish a separate database or set of files for such 
correspondence, or to match consumer complaints with specific 
solicitation programs.

          Section 1002.13--Information for Monitoring Purposes

    13(a) Information to be requested.
    1. Natural person. Section 1002.13 applies only to applications from 
natural persons.
    2. Principal residence. The requirements of Sec.  1002.13 apply only 
if an application relates to a dwelling that is or will be occupied by 
the applicant as the principal residence. A credit application related 
to a vacation home or a rental unit is not covered. In the case of a 
two-to four-unit dwelling, the application is covered if the applicant 
intends to occupy one of the units as a principal residence.
    3. Temporary financing. An application for temporary financing to 
construct a dwelling is not subject to Sec.  1002.13. But an application 
for both a temporary loan to finance construction of a dwelling and a 
permanent mortgage loan to take effect upon the completion of 
construction is subject to Sec.  1002.13.
    4. New principal residence. A person can have only one principal 
residence at a time. However, if a person buys or builds a new dwelling 
that will become that person's principal residence within a year or upon 
completion of construction, the new dwelling is considered the principal 
residence for purposes of Sec.  1002.13.
    5. Transactions not covered. The information-collection requirements 
of this section apply to applications for credit primarily for the 
purchase or refinancing of a dwelling that is or will become the 
applicant's principal residence. Therefore, applications for credit 
secured by the applicant's principal residence but made primarily for a 
purpose other than the purchase or refinancing of the principal 
residence (such as loans for home improvement and debt consolidation) 
are not subject to the information-collection requirements. An 
application for an open-end home equity line of credit is not subject to 
this section unless it is readily apparent to the creditor when the 
application is taken that the primary purpose of the line is for the 
purchase or refinancing of a principal dwelling.
    6. Refinancings. A refinancing occurs when an existing obligation is 
satisfied and replaced by a new obligation undertaken by the same 
borrower. A creditor that receives an application to refinance an 
existing extension of credit made by that creditor for the purchase of 
the applicant's dwelling may request the monitoring information again 
but is not required to do so if it was obtained in the earlier 
transaction.
    7. Data collection under Regulation C. For applications subject to 
Sec.  1002.13(a)(1), a creditor that collects information about the 
ethnicity, race, and sex of an applicant in compliance with the 
requirements of appendix B to 12 CFR part 1003 is acting in compliance 
with Sec.  1002.13 concerning the collection of an applicant's 
ethnicity, race, and sex information. See also comment 5(a)(2)-2.
    8. Application-by-application basis. For applications subject to 
Sec.  1002.13(a)(1), a creditor may choose on an application-by-
application basis whether to collect aggregate information pursuant to 
Sec.  1002.13(a)(1)(i)(A) or disaggregated information pursuant to Sec.  
1002.13(a)(1)(i)(B) about the ethnicity and race of the applicant.
    13(b) Obtaining of Information
    1. Forms for collecting data. A creditor may collect the information 
specified in Sec.  1002.13(a) either on an application form or on a 
separate form referring to the application. Appendix B to this part 
provides for two alternative data collection model forms for use in 
complying with the requirements of Sec.  1002.13(a)(1)(i) and (ii) to 
collect information concerning an applicant's ethnicity, race, and sex. 
When a creditor collects ethnicity and race information pursuant to 
Sec.  1002.13(a)(1)(i)(A), the applicant must be offered the option to 
select more than one racial designation. When a creditor collects 
ethnicity and race information pursuant to

[[Page 69]]

Sec.  1002.13(a)(1)(i)(B), the applicant must be offered the option to 
select more than one ethnicity designation and more than one racial 
designation.
    2. Written applications. The regulation requires written 
applications for the types of credit covered by Sec.  1002.13. A 
creditor can satisfy this requirement by recording on paper or by means 
of computer the information that the applicant provides orally and that 
the creditor normally considers in a credit decision.
    3. Telephone, mail applications. i. A creditor that accepts an 
application by telephone or mail must request the monitoring 
information.
    ii. A creditor that accepts an application by mail need not make a 
special request for the monitoring information if the applicant has 
failed to provide it on the application form returned to the creditor.
    iii. If it is not evident on the face of an application that it was 
received by mail, telephone, or via an electronic medium, the creditor 
should indicate on the form or other application record how the 
application was received.
    4. Video and other electronic-application processes. i. If a 
creditor takes an application through an electronic medium that allows 
the creditor to see the applicant, the creditor must treat the 
application as taken in person. The creditor must note the monitoring 
information on the basis of visual observation or surname, if the 
applicant chooses not to provide the information.
    ii. If an applicant applies through an electronic medium without 
video capability, the creditor treats the application as if it were 
received by mail.
    5. Applications through loan-shopping services. When a creditor 
receives an application through an unaffiliated loan-shopping service, 
it does not have to request the monitoring information for purposes of 
the ECOA or subpart A of this Regulation B. Creditors subject to the 
Home Mortgage Disclosure Act should be aware, however, that data 
collection may be called for under Regulation C (12 CFR part 1003), 
which generally requires creditors to report, among other things, the 
sex and race of an applicant on brokered applications or applications 
received through a correspondent. Similarly, creditors that are covered 
financial institutions under subpart B of this Regulation may also be 
required to collect, report, and maintain certain data, as set forth in 
subpart B of this Regulation.
    6. Inadvertent notation. If a creditor inadvertently obtains the 
monitoring information in a dwelling-related transaction not covered by 
Sec.  1002.13, the creditor may process and retain the application 
without violating the regulation.
    13(c) Disclosure to applicants.
    1. Procedures for providing disclosures. The disclosure to an 
applicant regarding the monitoring information may be provided in 
writing. Appendix B provides data collection model forms for use in 
complying with Sec.  1002.13 and that comply with Sec.  1002.13(c). A 
creditor may devise its own disclosure so long as it is substantially 
similar. The creditor need not orally request the monitoring information 
if it is requested in writing.
    13(d) Substitute monitoring program.
    1. Substitute program. An enforcement agency may adopt, under its 
established rulemaking or enforcement procedures, a program requiring 
creditors under its jurisdiction to collect information in addition to 
information required by this section.

      Section 1002.14--Rules on Providing Appraisals and Valuations

    14(a) Providing appraisals and other valuations.
    1. Multiple applicants. If there is more than one applicant, the 
written disclosure about written appraisals, and the copies of 
appraisals and other written valuations, need only be given to one 
applicant. However, these materials must be given to the primary 
applicant where one is readily apparent. Similarly, if there is more 
than one applicant for credit in the transaction, one applicant may 
provide a waiver under Sec.  1002.14(a)(1), but it must be the primary 
applicant where one is readily apparent.
    14(a)(1) In general.
    1. Coverage. Section 1002.14 covers applications for credit to be 
secured by a first lien on a dwelling, as that term is defined in Sec.  
1002.14(b)(2), whether the credit is for a business purpose (for 
example, a loan to start a business) or a consumer purpose (for example, 
a loan to purchase a home).
    2. Renewals. Section 1002.14(a)(1) applies when an applicant 
requests the renewal of an existing extension of credit and the creditor 
develops a new appraisal or other written valuation. Section 
1002.14(a)(1) does not apply to the extent a creditor uses the 
appraisals and other written valuations that were previously developed 
in connection with the prior extension of credit to evaluate the renewal 
request.
    3. Written. For purposes of Sec.  1002.14, an ``appraisal or other 
written valuation'' includes, without limitation, an appraisal or other 
valuation received or developed by the creditor in paper form (hard 
copy); electronically, such as CD or email; or by any other similar 
media. See Sec.  1002.14(a)(5) regarding the provision of copies of 
appraisals and other written valuations to applicants via electronic 
means.
    4. Timing. Section 1002.14(a)(1) requires that the creditor 
``provide'' copies of appraisals and other written valuations to the 
applicant ``promptly upon completion,'' or no later than three business 
days before consummation (for closed-end credit) or account

[[Page 70]]

opening (for open-end credit), whichever is earlier.
    i. For purposes of this timing requirement, ``provide'' means 
``deliver.'' Delivery occurs three business days after mailing or 
delivering the copies to the last-known address of the applicant, or 
when evidence indicates actual receipt by the applicant, whichever is 
earlier. Delivery to or actual receipt by the applicant by electronic 
means must comply with the E-Sign Act, as provided for in Sec.  
1002.14(a)(5).
    ii. The application and meaning of the ``promptly upon completion'' 
standard depends upon the facts and circumstances, including but not 
limited to when the creditor receives the appraisal or other written 
valuation, and the extent of any review or revision after the creditor 
receives it.
    iii. ``Completion'' occurs when the last version is received by the 
creditor, or when the creditor has reviewed and accepted the appraisal 
or other written valuation to include any changes or corrections 
required, whichever is later. See also comment 14(a)(1)-7.
    iv. In a transaction that is being consummated (for closed-end 
credit) or in which the account is being opened (for open-end credit), 
if an appraisal or other written valuation has been developed but is not 
yet complete, the deadline for providing a copy of three business days 
before consummation or account opening still applies, unless the 
applicant waived that deadline as provided under Sec.  1002.14(a)(1), in 
which case the copy must be provided at or before consummation or 
account opening.
    v. Even if the transaction will not be consummated (for closed-end 
credit) or the account will not be opened (for open-end credit), the 
copy must be provided ``promptly upon completion'' as provided for in 
Sec.  1002.14(a)(1), unless the applicant has waived that deadline as 
provided under Sec.  1002.14(a)(1), in which case as provided for in 
Sec.  1002.14(a)(1) the copy must be provided to the applicant no later 
than 30 days after the creditor determines the transaction will not be 
consummated or the account will not be opened.
    5. Promptly upon completion-examples. Examples in which the 
``promptly upon completion'' standard would be satisfied include, but 
are not limited to, those in subparagraphs i, ii, and iii below. 
Examples in which the ``promptly upon completion'' standard would not be 
satisfied include, but are not limited to, those in subparagraphs iv and 
v below.
    i. Sending a copy of an appraisal within a week of completion with 
sufficient time before consummation (or account opening for open-end 
credit). On day 15 after receipt of the application, the creditor's 
underwriting department reviews an appraisal and determines it is 
acceptable. One week later, the creditor sends a copy of the appraisal 
to the applicant. The applicant actually receives the copy more than 
three business days before the date of consummation (or account 
opening). The creditor has provided the copy of the appraisal promptly 
upon completion.
    ii. Sending a copy of a revised appraisal within a week after 
completion and with sufficient time before consummation (or account 
opening for open-end credit). An appraisal is being revised, and the 
creditor does not receive the revised appraisal until day 45 after the 
application, when the creditor immediately determines the revised 
appraisal is acceptable. A week later, the creditor sends a copy of the 
revised appraisal to the applicant, and does not send a copy of the 
initial appraisal to the applicant. The applicant actually receives the 
copy of the revised appraisal three business days before the date of 
consummation (or account opening). The creditor has provided the 
appraisal copy promptly upon completion.
    iii. Sending a copy of an AVM report within a week after its receipt 
and with sufficient time before consummation (or account opening for 
open-end credit). The creditor receives an automated valuation model 
(AVM) report on day 5 after receipt of the application and treats the 
AVM report as complete when it is received. On day 12 after receipt of 
the application, the creditor sends the applicant a copy of the 
valuation. The applicant actually receives the valuation more than three 
business days before the date of consummation (or account opening). The 
creditor has provided the copy of the AVM report promptly upon 
completion.
    iv. Delay in sending an appraisal. On day 12 after receipt of the 
application, the creditor's underwriting department reviews an appraisal 
and determines it is acceptable. Although the creditor has determined 
the appraisal is complete, the creditor waits to provide a copy to the 
applicant until day 42, when the creditor schedules the consummation (or 
account opening) to occur on day 50. The creditor has not provided the 
copy of the appraisal promptly upon completion.
    v. Delay in sending an AVM report while waiting for completion of a 
second valuation. The creditor receives an AVM report on day 5 after 
application and completes its review of the AVM report the day it is 
received. The creditor also has ordered an appraisal, but the initial 
version of the appraisal received by the creditor is found to be 
deficient and is sent for review. The creditor waits 30 days to provide 
a copy of the completed AVM report, until the appraisal is completed on 
day 35. The creditor then provides the applicant with copies of the AVM 
report and the revised appraisal. While the appraisal report was 
provided promptly upon completion, the AVM report was not.
    6. Waiver. Section 1002.14(a)(1) permits the applicant to waive the 
timing requirement if

[[Page 71]]

the creditor provides the copies at or before consummation or account 
opening, except where otherwise prohibited by law. Except where 
otherwise prohibited by law, an applicant's waiver is effective under 
Sec.  1002.14(a)(1) in either of the following two situations:
    i. If, no later than three business days prior to consummation or 
account opening, the applicant provides the creditor an affirmative oral 
or written statement waiving the timing requirement under this rule; or
    ii. If, within three business days of consummation or account 
opening, the applicant provides the creditor an affirmative oral or 
written statement waiving the timing requirement under this rule and the 
waiver pertains solely to the applicant's receipt of a copy of an 
appraisal or other written valuation that contains only clerical changes 
from a previous version of the appraisal or other written valuation 
provided to the applicant three or more business days prior to 
consummation or account opening. For purpose of this second type of 
waiver, revisions will only be considered to be clerical in nature if 
they have no impact on the estimated value, and have no impact on the 
calculation or methodology used to derive the estimate. In addition, 
under Sec.  1002.14(a)(1) the applicant still must receive the copy of 
the revision at or prior to consummation or account opening.
    7. Multiple versions of appraisals or valuations. For purposes of 
Sec.  1002.14(a)(1), the reference to ``all'' appraisals and other 
written valuations does not refer to all versions of the same appraisal 
or other valuation. If a creditor has received multiple versions of an 
appraisal or other written valuation, the creditor is required to 
provide only a copy of the latest version received. If, however, a 
creditor already has provided a copy of one version of an appraisal or 
other written valuation to an applicant, and the creditor later receives 
a revision of that appraisal or other written valuation, then the 
creditor also must provide the applicant with a copy of the revision to 
comply with Sec.  1002.14(a)(1). If a creditor receives only one version 
of an appraisal or other valuation that is developed in connection with 
the applicant's application, then that version must be provided to the 
applicant to comply with Sec.  1002.14(a)(1). See also comment 14(a)(1)-
4 above.
    14(a)(2) Disclosure.
    1. Appraisal independence requirements not affected. Nothing in the 
text of the disclosure required by Sec.  1002.14(a)(2) should be 
construed to affect, modify, limit, or supersede the operation of any 
legal, regulatory, or other requirements or standards relating to 
independence in the conduct of appraisers or the use of applicant-
ordered appraisals by creditors.
    14(a)(3) Reimbursement.
    1. Photocopy, postage, or other costs. Creditors may not charge for 
photocopy, postage, or other costs incurred in providing a copy of an 
appraisal or other written valuation in accordance with section 
14(a)(1).
    2. Reasonable fee for reimbursement. Section 1002.14(a)(3) does not 
prohibit a creditor from imposing a reasonable fee to reimburse the 
creditor's costs of the appraisal or other written valuation, so long as 
the fee is not increased to cover the costs of providing copies of such 
appraisals or other written valuations under Sec.  1002.14(a)(1). A 
creditor's cost may include an administration fee charged to the 
creditor by an appraisal management company as defined in 12 U.S.C. 
3350(11). Section 1002.14(a)(3) does not, however, legally obligate the 
applicant to pay such fees. Further, creditors may not impose fees for 
reimbursement of the costs of an appraisal or other valuation where 
otherwise prohibited by law. For instance, a creditor may not charge a 
consumer a fee for the performance of a second appraisal if the second 
appraisal is required under 15 U.S.C. 1639h(b)(2) and 12 CFR 1026.35(c).
    14(b) Definitions.
    14(b)(1) Consummation.
    1. State law governs. When a contractual obligation on the 
consumer's part is created is a matter to be determined under applicable 
law; Sec.  1002.14 does not make this determination. A contractual 
commitment agreement, for example, that under applicable law binds the 
consumer to the credit terms would be consummation. Consummation, 
however, does not occur merely because the consumer has made some 
financial investment in the transaction (for example, by paying a 
nonrefundable fee) unless, of course, applicable law holds otherwise.
    2. Credit vs. sale. Consummation does not occur when the consumer 
becomes contractually committed to a sale transaction, unless the 
consumer also becomes legally obligated to accept a particular credit 
arrangement.
    14(b)(2) Dwelling.
    1. ``Motor vehicles'' not covered. The requirements of Sec.  1002.14 
do not apply to ``motor vehicles'' as defined by 12 U.S.C. 5519(f)(1).
    14(b)(3) Valuation.
    1. Valuations--examples. Examples of valuations include but are not 
limited to:
    i. A report prepared by an appraiser (whether or not licensed or 
certified) including the appraiser's estimate of the property's value or 
opinion of value.
    ii. A document prepared by the creditor's staff that assigns value 
to the property.
    iii. A report approved by a government-sponsored enterprise for 
describing to the applicant the estimate of the property's value 
developed pursuant to the proprietary methodology or mechanism of the 
government-sponsored enterprise.
    iv. A report generated by use of an automated valuation model to 
estimate the property's value.

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    v. A broker price opinion prepared by a real estate broker, agent, 
or sales person to estimate the property's value.
    2. Attachments and exhibits. The term ``valuation'' includes any 
attachments and exhibits that are an integrated part of the valuation.
    3. Other documentation. Not all documents that discuss or restate a 
valuation of an applicant's property constitute a ``valuation'' for 
purposes of Sec.  1002.14(b)(3). Examples of documents that discuss the 
valuation of the applicant's property or may reflect its value but 
nonetheless are not ``valuations'' include but are not limited to:
    i. Internal documents that merely restate the estimated value of the 
dwelling contained in an appraisal or written valuation being provided 
to the applicant.
    ii. Governmental agency statements of appraised value that are 
publically available.
    iii. Publicly-available lists of valuations (such as published sales 
prices or mortgage amounts, tax assessments, and retail price ranges).
    iv. Manufacturers' invoices for manufactured homes.
    v. Reports reflecting property inspections that do not provide an 
estimate of the value of the property and are not used to develop an 
estimate of the value of the property.
    vi. Appraisal reviews that do not include the appraiser's estimate 
of the property's value or opinion of value.

    Section 1002.15--Incentives for Self-Testing and Self-Correction

    15(a) General rules.
    15(a)(1) Voluntary self-testing and correction.
    1. Activities required by any governmental authority are not 
voluntary self-tests. A governmental authority includes both 
administrative and judicial authorities for Federal, State, and local 
governments.
    15(a)(2) Corrective action required.
    1. To qualify for the privilege, appropriate corrective action is 
required when the results of a self-test show that it is more likely 
than not that there has been a violation of the ECOA or this part. A 
self-test is also privileged when it identifies no violations.
    2. In some cases, the issue of whether certain information is 
privileged may arise before the self-test is complete or corrective 
actions are fully under way. This would not necessarily prevent a 
creditor from asserting the privilege. In situations where the self-test 
is not complete, for the privilege to apply the lender must satisfy the 
regulation's requirements within a reasonable period of time. To assert 
the privilege where the self-test shows a likely violation, the rule 
requires, at a minimum, that the creditor establish a plan for 
corrective action and a method to demonstrate progress in implementing 
the plan. Creditors must take appropriate corrective action on a timely 
basis after the results of the self-test are known.
    3. A creditor's determination about the type of corrective action 
needed, or a finding that no corrective action is required, is not 
conclusive in determining whether the requirements of this paragraph 
have been satisfied. If a creditor's claim of privilege is challenged, 
an assessment of the need for corrective action or the type of 
corrective action that is appropriate must be based on a review of the 
self-testing results, which may require an in camera inspection of the 
privileged documents.
    15(a)(3) Other privileges.
    1. A creditor may assert the privilege established under this 
section in addition to asserting any other privilege that may apply, 
such as the attorney-client privilege or the work-product privilege. 
Self-testing data may be privileged under this section whether or not 
the creditor's assertion of another privilege is upheld.
    15(b) Self-test defined.
    15(b)(1) Definition.
    Paragraph 15(b)(1)(i).
    1. To qualify for the privilege, a self-test must be sufficient to 
constitute a determination of the extent or effectiveness of the 
creditor's compliance with the Act and Regulation B. Accordingly, a 
self-test is only privileged if it was designed and used for that 
purpose. A self-test that is designed or used to determine compliance 
with other laws or regulations or for other purposes is not privileged 
under this rule. For example, a self-test designed to evaluate employee 
efficiency or customers' satisfaction with the level of service provided 
by the creditor is not privileged even if evidence of discrimination is 
uncovered incidentally. If a self-test is designed for multiple 
purposes, only the portion designed to determine compliance with the 
ECOA is eligible for the privilege.
    Paragraph 15(b)(1)(ii).
    1. The principal attribute of self-testing is that it constitutes a 
voluntary undertaking by the creditor to produce new data or factual 
information that otherwise would not be available and could not be 
derived from loan or application files or other records related to 
credit transactions. Self-testing includes, but is not limited to, the 
practice of using fictitious applicants for credit (testers), either 
with or without the use of matched pairs. A creditor may elect to test a 
defined segment of its business, for example, loan applications 
processed by a specific branch or loan officer, or applications made for 
a particular type of credit or loan program. A creditor also may use 
other methods of generating information that is not available in loan 
and application files, such as surveying mortgage loan applicants. To 
the extent permitted by law, creditors might also develop new methods 
that go beyond traditional pre-application testing, such as

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hiring testers to submit fictitious loan applications for processing.
    2. The privilege does not protect a creditor's analysis performed as 
part of processing or underwriting a credit application. A creditor's 
evaluation or analysis of its loan files, Home Mortgage Disclosure Act 
data, or similar types of records (such as broker or loan officer 
compensation records) does not produce new information about a 
creditor's compliance and is not a self-test for purposes of this 
section. Similarly, a statistical analysis of data derived from existing 
loan files is not privileged.
    15(b)(3) Types of information not privileged.
    Paragraph 15(b)(3)(i).
    1. The information listed in this paragraph is not privileged and 
may be used to determine whether the prerequisites for the privilege 
have been satisfied. Accordingly, a creditor might be asked to identify 
the self-testing method, for example, whether preapplication testers 
were used or data were compiled by surveying loan applicants. 
Information about the scope of the self-test (such as the types of 
credit transactions examined, or the geographic area covered by the 
test) also is not privileged.
    Paragraph 15(b)(3)(ii).
    1. Property appraisal reports, minutes of loan committee meetings or 
other documents reflecting the basis for a decision to approve or deny 
an application, loan policies or procedures, underwriting standards, and 
broker compensation records are examples of the types of records that 
are not privileged. If a creditor arranges for testers to submit loan 
applications for processing, the records are not related to actual 
credit transactions for purposes of this paragraph and may be privileged 
self-testing records.
    15(c) Appropriate corrective action.
    1. The rule only addresses the corrective actions required for a 
creditor to take advantage of the privilege in this section. A creditor 
may be required to take other actions or provide additional relief if a 
formal finding of discrimination is made.
    15(c)(1) General requirement.
    1. Appropriate corrective action is required even though no 
violation has been formally adjudicated or admitted by the creditor. In 
determining whether it is more likely than not that a violation 
occurred, a creditor must treat testers as if they are actual applicants 
for credit. A creditor may not refuse to take appropriate corrective 
action under this section because the self-test used fictitious loan 
applicants. The fact that a tester's agreement with the creditor waives 
the tester's legal right to assert a violation does not eliminate the 
requirement for the creditor to take corrective action, although no 
remedial relief for the tester is required under paragraph 15(c)(3).
    15(c)(2) Determining the scope of appropriate corrective action.
    1. Whether a creditor has taken or is taking corrective action that 
is appropriate will be determined on a case-by-case basis. Generally, 
the scope of the corrective action that is needed to preserve the 
privilege is governed by the scope of the self-test. For example, a 
creditor that self-tests mortgage loans and discovers evidence of 
discrimination may focus its corrective actions on mortgage loans, and 
is not required to expand its testing to other types of loans.
    2. In identifying the policies or practices that are a likely cause 
of the violation, a creditor might identify inadequate or improper 
lending policies, failure to implement established policies, employee 
conduct, or other causes. The extent and scope of a likely violation may 
be assessed by determining which areas of operations are likely to be 
affected by those policies and practices, for example, by determining 
the types of loans and stages of the application process involved and 
the branches or offices where the violations may have occurred.
    3. Depending on the method and scope of the self-test and the 
results of the test, appropriate corrective action may include one or 
more of the following:
    i. If the self-test identifies individuals whose applications were 
inappropriately processed, offering to extend credit if the application 
was improperly denied and compensating such persons for out-of-pocket 
costs and other compensatory damages;
    ii. Correcting institutional policies or procedures that may have 
contributed to the likely violation, and adopting new policies as 
appropriate;
    iii. Identifying and then training and/or disciplining the employees 
involved;
    iv. Developing outreach programs, marketing strategies, or loan 
products to serve more effectively segments of the lender's markets that 
may have been affected by the likely discrimination; and
    v. Improving audit and oversight systems to avoid a recurrence of 
the likely violations.
    15(c)(3) Types of relief.
    Paragraph 15(c)(3)(ii).
    1. The use of pre-application testers to identify policies and 
practices that illegally discriminate does not require creditors to 
review existing loan files for the purpose of identifying and 
compensating applicants who might have been adversely affected.
    2. If a self-test identifies a specific applicant who was 
discriminated against on a prohibited basis, to qualify for the 
privilege in this section the creditor must provide appropriate remedial 
relief to that applicant; the creditor is not required to identify other 
applicants who might also have been adversely affected.
    Paragraph 15(c)(3)(iii).
    1. A creditor is not required to provide remedial relief to an 
applicant that would not

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be available by law. An applicant might also be ineligible for certain 
types of relief due to changed circumstances. For example, a creditor is 
not required to offer credit to a denied applicant if the applicant no 
longer qualifies for the credit due to a change in financial 
circumstances, although some other type of relief might be appropriate.
    15(d)(1) Scope of privilege.
    1. The privilege applies with respect to any examination, 
investigation or proceeding by Federal, State, or local government 
agencies relating to compliance with the Act or this part. Accordingly, 
in a case brought under the ECOA, the privilege established under this 
section preempts any inconsistent laws or court rules to the extent they 
might require disclosure of privileged self-testing data. The privilege 
does not apply in other cases (such as in litigation filed solely under 
a State's fair lending statute). In such cases, if a court orders a 
creditor to disclose self-test results, the disclosure is not a 
voluntary disclosure or waiver of the privilege for purposes of 
paragraph 15(d)(2); a creditor may protect the information by seeking a 
protective order to limit availability and use of the self-testing data 
and prevent dissemination beyond what is necessary in that case. 
Paragraph 15(d)(1) precludes a party who has obtained privileged 
information from using it in a case brought under the ECOA, provided the 
creditor has not lost the privilege through voluntary disclosure under 
paragraph 15(d)(2).
    15(d)(2) Loss of privilege.
    Paragraph 15(d)(2)(i).
    1. A creditor's corrective action, by itself, is not considered a 
voluntary disclosure of the self-test report or results. For example, a 
creditor does not disclose the results of a self-test merely by offering 
to extend credit to a denied applicant or by inviting the applicant to 
reapply for credit. Voluntary disclosure could occur under this 
paragraph, however, if the creditor disclosed the self-test results in 
connection with a new offer of credit.
    2. The disclosure of self-testing results to an independent 
contractor acting as an auditor or consultant for the creditor on 
compliance matters does not result in loss of the privilege.
    Paragraph 15(d)(2)(ii).
    1. The privilege is lost if the creditor discloses privileged 
information, such as the results of the self-test. The privilege is not 
lost if the creditor merely reveals or refers to the existence of the 
self-test.
    Paragraph 15(d)(2)(iii).
    1. A creditor's claim of privilege may be challenged in a court or 
administrative law proceeding with appropriate jurisdiction. In 
resolving the issue, the presiding officer may require the creditor to 
produce privileged information about the self-test.
    Paragraph 15(d)(3) Limited use of privileged information.
    1. A creditor may be required to produce privileged documents for 
the purpose of determining a penalty or remedy after a violation of the 
ECOA or Regulation B has been formally adjudicated or admitted. A 
creditor's compliance with such a requirement does not evidence the 
creditor's intent to forfeit the privilege.

        Section 1002.16--Enforcement, Penalties, and Liabilities

    16(c) Failure of compliance.
    1. Inadvertent errors. Inadvertent errors include, but are not 
limited to, clerical mistake, calculation error, computer malfunction, 
and printing error. An error of legal judgment is not an inadvertent 
error under the regulation.
    2. Correction of error. For inadvertent errors that occur under 
Sec. Sec.  1002.12 and 1002.13, this section requires that they be 
corrected prospectively.

                      Section 1002.102--Definitions

                            102(b) Applicant

    1. General. In no way are the limitations to the term applicant in 
Sec.  1002.102(b) of subpart B intended to repeal, abrogate, annul, 
impair, change, or interfere with the scope of the term applicant in 
Sec.  1002.2(e) as applicable to subpart A.

                      102(l) LGBTQI+-Owned Business

    1. General. In order to be an LGBTQI+-owned business for purposes of 
subpart B of this part, a business must satisfy both prongs of the 
definition of LGBTQI+-owned business. First, one or more LGBTQI+ 
individuals must own or control more than 50 percent of the business. 
However, it is not necessary that one or more LGBTQI+ individuals both 
own and control more than 50 percent of the business. For example, a 
business that is owned entirely by one or more LGBTQI+ individuals but 
is not controlled by any one or more such individuals satisfies the 
first prong of the definition. Similarly, a business that is controlled 
by an LGBTQI+ individual satisfies this first prong of the definition, 
even if none of the individuals with ownership in the business are 
LGBTQI+ individuals. If a business does not satisfy this first prong of 
the definition, it is not an LGBTQI+-owned business. Second, 50 percent 
or more of the net profits or losses must accrue to one or more LGBTQI+ 
individuals. If a business does not satisfy this second prong of the 
definition, it is not an LGBTQI+-owned business, regardless of whether 
it satisfies the first prong of the definition.
    2. Purpose of definition. The definition of LGBTQI+-owned business 
is used only when an applicant determines if it is an LGBTQI+-

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owned business for purposes of Sec.  1002.107(a)(18). A financial 
institution shall provide an applicant with the definition of LGBTQI+-
owned business when asking the applicant to provide its LGBTQI+-owned 
business status pursuant to Sec.  1002.107(a)(18). A financial 
institution satisfies this requirement if it provides the definition as 
set forth in the sample data collection form in appendix E. The 
financial institution must provide additional clarification by 
referencing the definition of LGBTQI+ individual as set forth in Sec.  
1002.102(k) if asked by the applicant. The financial institution is 
neither permitted nor required to make its own determination regarding 
the applicant's LGBTQI+-owned business status.
    3. Further clarifications of terms used in the definition of 
LGBTQI+-owned business. In order to assist an applicant when determining 
whether it is an LGBTQI+-owned business, a financial institution may 
provide the applicant with the definitions of ownership, control, and 
accrual of net profits or losses and related concepts set forth in 
comments 102(l)-4 through -6. A financial institution may assist an 
applicant when the applicant is determining its LGBTQI+-owned business 
status but is not required to do so. For purposes of reporting an 
applicant's status, a financial institution relies on the applicant's 
determinations of its ownership, control, and accrual of net profits and 
losses.
    4. Ownership. For purposes of determining if a business is an 
LGBTQI+-owned business, an individual owns a business if that individual 
directly or indirectly, through any contract, arrangement, 
understanding, relationship or otherwise, has an equity interest in the 
business. Examples of ownership include being the sole proprietor of a 
sole proprietorship, directly or indirectly owning or holding the stock 
of a corporation or company, directly or indirectly having a partnership 
interest in a business, or directly or indirectly having a membership 
interest in a limited liability company. Indirect as well as direct 
ownership are used when determining ownership for purposes of Sec. Sec.  
1002.102(l) and 1002.107(a)(18). Thus, where applicable, ownership must 
be traced through corporate or other indirect ownership structures. For 
example, assume that the applicant is company A. If company B owns 60 
percent of applicant company A and an individual owns 100 percent of 
company B, the individual owns 60 percent of applicant company A. 
Similarly, if an individual directly owns 20 percent of applicant 
company A and is an equal partner in partnership B that owns the 
remaining 80 percent of applicant company A, the individual owns 60 
percent of applicant company A (i.e., 20 percent due through direct 
ownership and 40 percent indirectly through partnership B). A trustee is 
considered the owner of the trust. Thus, if a trust owns a business and 
the trust has two co-trustees, each co-trustee owns 50 percent of the 
business.
    5. Control. An individual controls a business if that individual has 
significant responsibility to manage or direct the business. An 
individual controls a business if the individual is an executive officer 
or senior manager (e.g., a chief executive officer, chief financial 
officer, chief operating officer, managing member, general partner, 
president, vice president, or treasurer) or regularly performs similar 
functions. Additionally, a business may be controlled by two or more 
LGBTQI+ individuals if those individuals collectively control the 
business, such as constituting a majority of the board of directors or a 
majority of the partners of a partnership.
    6. Accrual of net profits or losses. A business's net profits and 
losses accrue to an individual if that individual receives the net 
profits or losses, is legally entitled or required to receive the net 
profits or losses, or is legally entitled or required to recognize the 
net profits or losses for tax purposes.

                     102(m) Minority-Owned Business

    1. General. In order to be a minority-owned business for purposes of 
subpart B of this part, a business must satisfy both prongs of the 
definition of minority-owned business. First, one or more American 
Indian or Alaska Native, Asian, Black or African American, Native 
Hawaiian or Other Pacific Islander, or Hispanic or Latino individuals 
must own or control more than 50 percent of the business. However, it is 
not necessary that one or more American Indian or Alaska Native, Asian, 
Black or African American, Native Hawaiian or Other Pacific Islander, or 
Hispanic or Latino individuals both own and control more than 50 percent 
of the business. For example, a business that is owned entirely, but is 
not controlled by, individuals belonging to one of these groups 
satisfies the first prong of the definition. Similarly, a business that 
is controlled by an American Indian or Alaska Native, Asian, Black or 
African American, Native Hawaiian or Other Pacific Islander, or Hispanic 
or Latino individual satisfies this first prong of the definition, even 
if none of the individuals with ownership in the business are American 
Indian or Alaska Native, Asian, Black or African American, Native 
Hawaiian or Other Pacific Islander, or Hispanic or Latino. If a business 
does not satisfy this first prong of the definition, it is not a 
minority-owned business. Second, 50 percent or more of the net profits 
or losses must accrue to one or more individuals belonging to these 
groups. If a business does not satisfy this second prong of the 
definition, it is not a minority-owned business, regardless of whether 
it satisfies the first prong of the definition.
    2. Purpose of definition. The definition of minority-owned business 
is used only when

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an applicant determines if it is a minority-owned business for purposes 
of Sec.  1002.107(a)(18). A financial institution shall provide an 
applicant with the definition of minority-owned business when asking the 
applicant to provide its minority-owned business status pursuant to 
Sec.  1002.107(a)(18), but the financial institution is neither 
permitted nor required to make its own determination regarding the 
applicant's minority-owned business status.
    3. Further clarifications of terms used in the definition of 
minority-owned business. In order to assist an applicant when 
determining whether it is a minority-owned business, a financial 
institution may provide the applicant with the definitions of ownership, 
control, and accrual of net profits or losses and related concepts set 
forth in comments 102(m)-4 through -6. A financial institution may 
assist an applicant when the applicant is determining its minority-owned 
business status but is not required to do so. For purposes of reporting 
an applicant's status, a financial institution relies on the applicant's 
determinations of its ownership, control, and accrual of net profits and 
losses.
    4. Ownership. For purposes of determining if a business is a 
minority-owned business, an individual owns a business if that 
individual directly or indirectly, through any contract, arrangement, 
understanding, relationship or otherwise, has an equity interest in the 
business. Examples of ownership include being the sole proprietor of a 
sole proprietorship, directly or indirectly owning or holding the stock 
of a corporation or company, directly or indirectly having a partnership 
interest in a business, or directly or indirectly having a membership 
interest in a limited liability company. Indirect as well as direct 
ownership are used when determining ownership for purposes of Sec. Sec.  
1002.102(m) and 1002.107(a)(18). Thus, where applicable, ownership must 
be traced through corporate or other indirect ownership structures. For 
example, assume that the applicant is company A. If company B owns 60 
percent of applicant company A and an individual owns 100 percent of 
company B, the individual owns 60 percent of applicant company A. 
Similarly, if an individual directly owns 20 percent of applicant 
company A and is an equal partner in partnership B that owns the 
remaining 80 percent of applicant company A, the individual owns 60 
percent of applicant company A (i.e., 20 percent due through direct 
ownership and 40 percent indirectly through partnership B). A trustee is 
considered the owner of the trust. Thus, if a trust owns a business and 
the trust has two co-trustees, each co-trustee owns 50 percent of the 
business.
    5. Control. An individual controls a business if that individual has 
significant responsibility to manage or direct the business. An 
individual controls a business if the individual is an executive officer 
or senior manager (e.g., a chief executive officer, chief financial 
officer, chief operating officer, managing member, general partner, 
president, vice president, or treasurer) or regularly performs similar 
functions. Additionally, a business may be controlled by two or more 
American Indian or Alaska Native, Asian, Black or African American, 
Native Hawaiian or Other Pacific Islander, or Hispanic or Latino 
individuals if those individuals collectively control the business, such 
as constituting a majority of the board of directors or a majority of 
the partners of a partnership.
    6. Accrual of net profits or losses. A business's net profits and 
losses accrue to an individual if that individual receives the net 
profits or losses, is legally entitled or required to receive the net 
profits or losses, or is legally entitled or required to recognize the 
net profits or losses for tax purposes.
    7. Multi-racial and multi-ethnic individuals. For purposes of 
subpart B of this part, an individual who is multi-racial or multi-
ethnic constitutes an individual for whom the definition of minority-
owned business may apply, depending on whether the individual meets the 
other requirements of the definition. For example, an individual who is 
both Asian and White is an individual for whom the definition of 
minority-owned business shall apply if the individual meets the other 
requirements of the definition related to ownership or control and 
accrual of profits or losses.
    8. Relationship to disaggregated subcategories used to determine 
ethnicity and race of principal owners. The ethnicity and race 
categories used in this section are aggregate ethnicity (Hispanic or 
Latino) and race (American Indian or Alaska Native, Asian, Black or 
African American, and Native Hawaiian or Other Pacific Islander) 
categories. Those ethnicity and race categories are the same aggregate 
categories used (along with Not Hispanic or Latino for ethnicity, and 
White for race) to collect an applicant's principal owners' ethnicity 
and race pursuant to Sec.  1002.107(a)(19).

                         102(o) Principal Owner

    1. Individual. Only an individual can be a principal owner of a 
business for purposes of subpart B of this part. Entities, such as 
trusts, partnerships, limited liability companies, and corporations, are 
not principal owners for this purpose. Additionally, an individual must 
directly own an equity share of 25 percent or more in the business in 
order to be a principal owner. Unlike the determination of ownership for 
purposes of collecting and reporting minority-owned business status, 
women-owned business status, and LGBTQI+-owned business status, indirect 
ownership is not considered when determining if someone is a principal 
owner for

[[Page 77]]

purposes of collecting and reporting principal owners' ethnicity, race, 
and sex or the number of principal owners. Thus, when determining who is 
a principal owner, ownership is not traced through multiple corporate 
structures to determine if an individual owns 25 percent or more of the 
equity interests. For example, if individual A directly owns 20 percent 
of a business, individual B directly owns 20 percent, and partnership C 
owns 60 percent, the business does not have any owners who satisfy the 
definition of principal owner set forth in Sec.  1002.102(o), even if 
individual A and individual B are the only partners in the partnership 
C. Similarly, if individual A directly owns 30 percent of a business, 
individual B directly owns 20 percent, and trust D owns 50 percent, 
individual A is the only principal owner as defined in Sec.  
1002.102(o), even if individual B is the sole trustee of trust D.
    2. Trustee. Although a trust is not considered a principal owner of 
a business for the purposes of subpart B, if the applicant for a covered 
credit transaction is a trust, a trustee is considered the owner of the 
trust. Thus, if a trust is an applicant for a covered credit transaction 
and the trust has two co-trustees, each co-trustee is considered to own 
50 percent of the business and would each be a principal owner as 
defined in Sec.  1002.102(o). In contrast, if the trust has five co-
trustees, each co-trustee is considered to own 20 percent of the 
business and would not meet the definition of principal owner under 
Sec.  1002.102(o).
    3. Purpose of definition. A financial institution shall provide an 
applicant with the definition of principal owner when asking the 
applicant to provide the number of its principal owners pursuant to 
Sec.  1002.107(a)(20) and the ethnicity, race, and sex of its principal 
owners pursuant to Sec.  1002.107(a)(19). See comments 107(a)(19)-2 and 
107(a)(20)-1.

                       102(s) Women-Owned Business

    1. General. In order to be a women-owned business for purposes of 
subpart B of this part, a business must satisfy both prongs of the 
definition of women-owned business. First, one or more women must own or 
control more than 50 percent of the business. However, it is not 
necessary that one or more women both own and control more than 50 
percent of the business. For example, a business that is owned entirely 
by women but is not controlled by any women satisfies the first prong of 
the definition. Similarly, a business that is controlled by a woman 
satisfies this first prong of the definition, even if none of the 
individuals with ownership in the business are women. If a business does 
not satisfy this first prong of the definition, it is not a women-owned 
business. Second, 50 percent or more of the net profits or losses must 
accrue to one or more women. If a business does not satisfy this second 
prong of the definition, it is not a women-owned business, regardless of 
whether it satisfies the first prong of the definition.
    2. Purpose of definition. The definition of women-owned business is 
used only when an applicant determines if it is a women-owned business 
pursuant to Sec.  1002.107(a)(18). A financial institution shall provide 
an applicant with the definition of women-owned business when asking the 
applicant to provide its women-owned business status pursuant to Sec.  
1002.107(a)(18), but the financial institution is neither permitted nor 
required to make its own determination regarding the applicant's women-
owned business status.
    3. Further clarifications of terms used in the definition of women-
owned business. In order to assist an applicant when determining whether 
it is a women-owned business, a financial institution may provide the 
applicant with the definitions of ownership, control, and accrual of net 
profits or losses and related concepts set forth in comments 102(s)-4 
through -6. A financial institution may assist an applicant when the 
applicant is determining its women-owned business status but is not 
required to do so. For purposes of reporting an applicant's status, a 
financial institution relies on the applicant's determinations of its 
ownership, control, and accrual of net profits and losses.
    4. Ownership. For purposes of determining if a business is a women-
owned business, an individual owns a business if that individual 
directly or indirectly, through any contract, arrangement, 
understanding, relationship or otherwise, has an equity interest in the 
business. Examples of ownership include being the sole proprietor of a 
sole proprietorship, directly or indirectly owning or holding the stock 
of a corporation or company, directly or indirectly having a partnership 
interest in a business, or directly or indirectly having a membership 
interest in a limited liability company. Indirect as well as direct 
ownership are used when determining ownership for purposes of Sec. Sec.  
1002.102(s) and 1002.107(a)(18). Thus, where applicable, ownership must 
be traced through corporate or other indirect ownership structures. For 
example, assume that the applicant is company A. If company B owns 60 
percent of the applicant company A and an individual owns 100 percent of 
company B, the individual owns 60 percent of the applicant company A. 
Similarly, if an individual directly owns 20 percent of the applicant 
company A and is an equal partner in a partnership B that owns the 
remaining 80 percent of the applicant company A, the individual owns 60 
percent of applicant company A (i.e., 20 percent due through direct 
ownership and 40 percent indirectly through partnership B). A trustee is 
considered the owner of the trust. Thus, if a trust owns a business and 
the trust has two

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co-trustees, each co-trustee owns 50 percent of the business.
    5. Control. An individual controls a business if that individual has 
significant responsibility to manage or direct the business. An 
individual controls a business if the individual is an executive officer 
or senior manager (e.g., a chief executive officer, chief financial 
officer, chief operating officer, managing member, general partner, 
president, vice president, or treasurer) or regularly performs similar 
functions. Additionally, a business may be controlled by two or more 
women if those women collectively control the business, such as 
constituting a majority of the board of directors or a majority of the 
partners of a partnership.
    6. Accrual of net profits or losses. A business's net profits and 
losses accrue to an individual if that individual receives the net 
profits or losses, is legally entitled or required to receive the net 
profits or losses, or is legally entitled or required to recognize the 
net profits or losses for tax purposes.

                 Section 1002.103--Covered Applications

                       103(a) Covered Application

    1. General. Subject to the requirements of subpart B of this part, a 
financial institution has latitude to establish its own application 
procedures, including designating the type and amount of information it 
will require from applicants.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a financial institution as well as its stated 
application procedures. For example, if a financial institution's stated 
policy is to require all applications to be in writing on the financial 
institution's application form, but the financial institution also makes 
credit decisions based on oral requests, the financial institution's 
procedures are to accept both oral and written applications.
    3. Consistency with subpart A. Bureau interpretations that appear in 
this supplement I in connection with Sec. Sec.  1002.2(f) and 1002.9 are 
generally applicable to the definition of a covered application in Sec.  
1002.103. However, the definition of a covered application in Sec.  
1002.103 does not include inquiries and prequalification requests. The 
definition of a covered application also does not include reevaluation, 
extension, or renewal requests on an existing business credit account, 
unless the request seeks additional credit amounts. See Sec.  
1002.103(b).
    4. Solicitations and firm offers of credit. For purposes of subpart 
B of this part, the term covered application does not include 
solicitations, firm offers of credit, or other evaluations initiated by 
the financial institution because in these situations the business has 
not made a request for credit. For example, if a financial institution 
sends a firm offer of credit to a business for a $10,000 line of credit, 
and the business does not respond, it is not a covered application 
because the business never made a request for credit. However, using the 
same example, if the business seeks to obtain the credit offered, 
assuming the requirements of a covered application are otherwise met, 
the business's request constitutes a covered application for purposes of 
subpart B of this part. See also comment 103(b)-4.
    5. Requests for multiple covered credit transactions at one time. 
Assuming the requirements of a covered application are met, if an 
applicant makes a request for two or more covered credit transactions at 
the same time, the financial institution reports each request as a 
separate covered application. For example, if an applicant is seeking 
both a term loan and a line of credit and requests them both on the same 
application form, the financial institution reports the requests as two 
separate covered applications, one for a term loan and another for a 
line of credit. See Sec.  1002.107(d) for the requirements for reusing 
data so that a financial institution need only ask once for certain data 
required under Sec.  1002.107(a). If, on the other hand, the applicant 
is only requesting a single covered credit transaction, but has not 
decided on which particular product, the financial institution reports 
the request as a single covered application. For example, if the 
applicant indicates interest in either a term loan or a line of credit, 
but not both, the financial institution reports the request as a single 
covered application. See comment 107(a)(5)-1 for instructions on 
reporting credit product in this situation.
    6. Initial request for a single covered credit transaction that 
would result in the origination of multiple covered credit transactions. 
Assuming the requirements of a covered application are met, if an 
applicant initially makes a request for one covered credit transaction, 
but over the course of the application process requests multiple covered 
credit transactions, each covered credit transaction must be reported as 
a separate covered application. See Sec.  1002.107(d) for the 
requirements for reusing data so that a financial institution need only 
ask once for certain data required under Sec.  1002.107(a).
    7. Requests for multiple lines of credit at one time. Assuming the 
requirements of a covered application are met, if an applicant requests 
multiple lines of credit on a single credit account, it is reported as 
one or more covered applications based on the procedures used by the 
financial institution for the type of credit account. For example, if a 
financial institution treats a request for multiple lines of credit at 
one time as sub-components of a single account, the financial 
institution reports the request as a single covered application. If, on 
the other hand, the financial institution treats each line of credit as 
a separate account, then the financial institution

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reports each request for a line of credit as a separate covered 
application, as set forth in comment 103(a)-5.
    8. Duplicate applications. If a financial institution receives two 
or more duplicate covered applications (i.e., from the same applicant, 
for the same credit product, for the same amount, at or around the same 
time), the financial institution may treat the request as a single 
covered application for purposes of subpart B, so long as for purposes 
of determining whether to extend credit, it would also treat one or more 
of the applications as a duplicate under its procedures.
    9. Changes in whether there is a covered credit transaction. In 
certain circumstances, an applicant may change the type of product 
requested during the course of the application process. Assuming other 
requirements of a covered application are met, if an applicant initially 
requests a product that is not a covered credit transaction, but prior 
to final action taken decides to seek instead a product that is a 
covered credit transaction, the application is a covered application and 
must be reported pursuant to Sec.  1002.109. In this circumstance, the 
financial institution shall endeavor to compile, maintain, and report 
the data required under Sec.  1002.107(a) in a manner that is reasonable 
under the circumstances. If, on the other hand, an applicant initially 
requests a product that is a covered credit transaction, but prior to 
final action taken decides instead to seek a product that is not a 
covered credit transaction, the application is not a covered application 
and thus is not reported. See also Sec.  1002.112(c)(4), which provides 
a safe harbor for incorrect collection of certain data if, at the time 
of collection, the financial institution had a reasonable basis for 
believing that the application was a covered application. Assuming other 
requirements of a covered application are met, if an applicant initially 
requests a product that is a covered credit transaction, the financial 
institution counteroffers with a product that is not a covered credit 
transaction, and the applicant declines to proceed or fails to respond, 
the application is reported as a covered application. For example, if an 
applicant initially applies for a term loan, but then, after 
consultation with the financial institution, decides that a lease would 
better meet its needs and decides to proceed with that product, the 
application is not a covered application and thus is not reported. 
However, if an applicant initially applies for a term loan, the 
financial institution offers to consider the applicant only for a lease, 
and the applicant refuses, the transaction is a covered application that 
must be reported.
    10. Multiple unaffiliated co-applicants. If a covered financial 
institution receives a covered application from multiple businesses that 
are not affiliates, as defined by Sec.  1002.102(a), it shall compile, 
maintain, and report data pursuant to Sec. Sec.  1002.107 through 
1002.109 for only a single applicant that is a small business, as 
defined in Sec.  1002.106(b). A covered financial institution shall 
establish consistent procedures for designating a single small business 
for purposes of collecting and reporting data under subpart B in 
situations where there is more than one small business co-applicant, 
such as reporting on the first small business listed on an application 
form. For example, if three businesses jointly apply as co-applicants 
for a term loan to purchase a piece of equipment, but only one of the 
businesses is a small business, as defined in Sec.  1002.106(b), the 
financial institution reports on the single small business. If, however, 
two of the businesses are small businesses, as defined in Sec.  
1002.106(b), the financial institution must have a procedure for 
designating which small business among multiple small business co-
applicants it will report information on, such as consistently reporting 
on the first small business listed on an application form. See also 
Sec.  1002.5(a)(4)(x), which permits a creditor to collect certain 
protected information about co-applicants under certain circumstances.
    11. Refinancings and evaluation, extension, or renewal requests that 
request additional credit amounts. As discussed in comments 103(b)-2 and 
-3, assuming other requirements of a covered application are met, an 
applicant's request to refinance and an applicant's request for 
additional credit amounts on an existing account both constitute covered 
applications.

         103(b) Circumstances That Are Not Covered Applications

    1. In general. The circumstances set forth in Sec.  1002.103(b) are 
not covered applications for purposes of subpart B of this part, even if 
considered applications under subpart A of this part. However, in no way 
are the exclusions in Sec.  1002.103(b) intended to repeal, abrogate, 
annul, impair, change, or interfere with the scope of the term 
application in Sec.  1002.2(f) as applicable to subpart A.
    2. Reevaluation, extension, or renewal requests that do not request 
additional credit amounts. An applicant's request to change one or more 
terms of an existing account does not constitute a covered application, 
unless the applicant is requesting additional credit amounts on the 
account. For example, an applicant's request to extend the duration on a 
line of credit or to remove a guarantor would not be a covered 
application. However, assuming other requirements of a covered 
application are met, an applicant's request to refinance would be 
reportable. A refinancing occurs when an existing obligation is 
satisfied and replaced by a new obligation undertaken by the same 
borrower.
    3. Reevaluation, extension, or renewal requests that request 
additional credit amounts. A Assuming other requirements of a covered

[[Page 80]]

application are met, an applicant's request for additional credit 
amounts on an existing account constitutes a covered application. For 
example, an applicant's request for a line increase on an existing line 
of credit, made in accordance with a financial institution's procedures 
for the type of credit requested, would be a covered application. As 
discussed in comment 107(a)(7)-4, when reporting a covered application 
that seeks additional credit amounts on an existing account, the 
financial institution need only report the additional credit amount 
sought, and not the entire credit amount. For example, if an applicant 
currently has a line of credit account for $100,000, and seeks to 
increase the line to $150,000, the financial institution reports the 
amount applied for as $50,000.
    4. Reviews or evaluations initiated by the financial institution. 
For purposes of subpart B of this part, the term covered application 
does not include evaluations or reviews of existing accounts initiated 
by the financial institution because the business has not made a request 
for credit. For example, if a financial institution conducts periodic 
reviews of its existing lines of credit and decides to increase the 
business's line by $10,000, it is not a covered application because the 
business never made a request for the additional credit amounts. 
However, if such an evaluation or review of an existing account by a 
financial institution results in the financial institution inviting the 
business to apply for additional credit amounts on an existing account 
and the business does so, the business's request constitutes a covered 
application for purposes of subpart B of this part, assuming other 
requirements of a covered application are met. Similarly, as noted in 
comment 103(a)-4, the term covered application also does not include 
solicitations and firm offers of credit.
    5. Inquiries and prequalification requests. An inquiry is a request 
by a prospective applicant for information about credit terms offered by 
the financial institution. A prequalification request is a request by a 
prospective applicant for a preliminary determination on whether the 
prospective applicant would likely qualify for credit under a financial 
institution's standards or for a determination on the amount of credit 
for which the prospective applicant would likely qualify. Inquiries and 
prequalification requests are not covered applications under subpart B 
of this part, even though in certain circumstances inquiries and 
prequalification requests may constitute applications under subpart A. 
For example, while an inquiry or prequalification request may become an 
``application'' under subpart A if the creditor evaluates information 
about the business, decides to decline the request, and communicates 
this to the business, such inquiries or prequalifications would not be 
``covered applications'' under subpart B of this part. Whether a 
particular request is a covered application, or whether instead it is an 
inquiry or prequalification request that is not reportable under subpart 
B, may turn, for instance, on how a financial institution structures and 
processes such requests: does the financial institution require or 
encourage a preliminary review in order for a business to be considered 
for a covered credit transaction, or does the business voluntarily seek 
preliminary feedback as a tool to explore its options before it decides 
whether to apply for credit with the financial institution? The name 
used by the financial institution for such a request is not 
determinative. For example, under subpart B, a review is a reportable 
covered application if the financial institution requires the business, 
before it may apply for credit, to pass through a mandatory screening 
process that considers particular information about the business and 
denies or turns away the business if it is ineligible or unlikely to 
qualify for credit. In contrast, a business that requests a financial 
institution to identify credit products for which the business might 
qualify based on limited or self-described characteristics, and without 
any commitment from the financial institution to extend credit, may not 
have submitted a covered application for purposes of subpart B.

 Section 1002.104--Covered Credit Transactions and Excluded Transactions

                    104(a) Covered Credit Transaction

    1. General. The term ``covered credit transaction'' includes all 
business credit (including loans, lines of credit, credit cards, and 
merchant cash advances) unless otherwise excluded under Sec.  
1002.104(b).

                      104(b) Excluded Transactions

    1. Factoring. The term ``covered credit transaction'' does not cover 
factoring as described herein. For the purpose of this subpart, 
factoring is an accounts receivable purchase transaction between 
businesses that includes an agreement to purchase, transfer, or sell a 
legally enforceable claim for payment for goods that the recipient has 
supplied or services that the recipient has rendered but for which 
payment in full has not yet been made. The name used by the financial 
institution for a product is not determinative of whether or not it is a 
``covered credit transaction.'' This description of factoring is not 
intended to repeal, abrogate, annul, impair, or interfere with any 
existing interpretations, orders, agreements, ordinances, rules, or 
regulations adopted or issued pursuant to comment 9(a)(3)-3. A financial 
institution shall report an extension of business credit incident to a 
factoring arrangement that is otherwise a covered credit

[[Page 81]]

transaction as ``Other sales-based financing transaction'' under Sec.  
1002.107(a)(5).
    2. Leases. The term ``covered credit transaction'' does not cover 
leases as described herein. A lease, for the purpose of this subpart, is 
a transfer from one business to another of the right to possession and 
use of goods for a term, and for primarily business or commercial 
(including agricultural) purposes, in return for consideration. A lease 
does not include a sale, including a sale on approval or a sale or 
return, or a transaction resulting in the retention or creation of a 
security interest. The name used by the financial institution for a 
product is not determinative of whether or not it is a ``covered credit 
transaction.''
    3. Consumer-designated credit. The term ``covered credit 
transaction'' does not include consumer-designated credit that is used 
for business or agricultural purposes. A transaction qualifies as 
consumer-designated credit if the financial institution offers or 
extends the credit primarily for personal, family, or household 
purposes. For example, an open-end credit account used for both personal 
and business/agricultural purposes is not business credit for the 
purpose of subpart B of this part unless the financial institution 
designated or intended for the primary purpose of the account to be 
business/agricultural-related.
    4. Credit transaction purchases, purchases of an interest in a pool 
of credit transactions, and purchases of a partial interest in a credit 
transaction. The term ``covered credit transaction'' does not cover the 
purchase of an originated credit transaction, the purchase of an 
interest in a pool of credit transactions, or the purchase of a partial 
interest in a credit transaction such as through a loan participation 
agreement. Such purchases do not, in themselves, constitute an 
application for credit. See also comment 109(a)(3)-2.i.

                         104(b)(1) Trade Credit

    1. General. Trade credit, as defined in Sec.  1002.104(b)(1), is 
excluded from the definition of a covered credit transaction. An example 
of trade credit involves a supplier that finances the sale of equipment, 
supplies, or inventory. However, an extension of business credit by a 
financial institution other than the supplier for the financing of such 
items is not trade credit. Also, credit extended by a business providing 
goods or services to another business is not trade credit for the 
purposes of this subpart where the supplying business intends to sell or 
transfer its rights as a creditor to a third party.
    2. Trade credit under subpart A. The definition of trade credit 
under comment 9(a)(3)-2 applies to relevant provisions under subpart A, 
and Sec.  1002.104(b)(1) is not intended to repeal, abrogate, annul, 
impair, or interfere with any existing interpretations, orders, 
agreements, ordinances, rules, or regulations adopted or issued pursuant 
to comment 9(a)(3)-2.

Section 1002.105--Covered Financial Institutions and Exempt Institutions

                      105(a) Financial Institution

    1. Examples. Section 1002.105(a) defines a financial institution as 
any partnership, company, corporation, association (incorporated or 
unincorporated), trust, estate, cooperative organization, or other 
entity that engages in any financial activity. This definition includes, 
but is not limited to, banks, savings associations, credit unions, 
online lenders, platform lenders, community development financial 
institutions, Farm Credit System lenders, lenders involved in equipment 
and vehicle financing (captive financing companies and independent 
financing companies), commercial finance companies, organizations exempt 
from taxation pursuant to 26 U.S.C. 501(c), and governments or 
governmental subdivisions or agencies.
    2. Motor vehicle dealers. Pursuant to Sec.  1002.101(a), subpart B 
of this part excludes from coverage persons defined by section 1029 of 
the Consumer Financial Protection Act of 2010, title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376, 2004 (2010).

                  105(b) Covered Financial Institution

    1. Preceding calendar year. The definition of covered financial 
institution refers to preceding calendar years. For example, in 2029, 
the two preceding calendar years are 2027 and 2028. Accordingly, in 
2029, Financial Institution A does not meet the loan-volume threshold in 
Sec.  1002.105(b) if did not originate at least 100 covered credit 
transactions for small businesses both during 2027 and during 2028.
    2. Origination threshold. A financial institution qualifies as a 
covered financial institution based on total covered credit transactions 
originated for small businesses, rather than covered applications 
received from small businesses. For example, if in both 2024 and 2025, 
Financial Institution B received 105 covered applications from small 
businesses and originated 95 covered credit transactions for small 
businesses, then for 2026, Financial Institution B is not a covered 
financial institution.
    3. Counting originations when multiple financial institutions are 
involved in originating a covered credit transaction. For the purpose of 
counting originations to determine whether a financial institution is a 
covered financial institution under Sec.  1002.105(b), in a situation 
where multiple financial institutions are involved in originating a 
single covered credit transaction, only the last financial institution 
with authority to set the material

[[Page 82]]

terms of the covered credit transaction is required to count the 
origination.
    4. Counting originations after adjustments to the gross annual 
revenue threshold due to inflation. Pursuant to Sec.  1002.106(b)(2), 
every five years, the gross annual revenue threshold used to define a 
small business in Sec.  1002.106(b)(1) shall be adjusted, if necessary, 
to account for inflation. The first time such an adjustment could occur 
is in 2030, with an effective date of January 1, 2031. A financial 
institution seeking to determine whether it is a covered financial 
institution applies the gross annual revenue threshold that is in effect 
for each year it is evaluating. For example, a financial institution 
seeking to determine whether it is a covered financial institution in 
2032 counts its originations of covered credit transactions for small 
businesses in calendar years 2030 and 2031. The financial institution 
applies the initial $5 million threshold to evaluate whether its 
originations were to small businesses in 2030. In this example, if the 
small business threshold were increased to $5.5 million effective 
January 1, 2031, the financial institution applies the $5.5 million 
threshold to count its originations for small businesses in 2031.
    5. Reevaluation, extension, or renewal requests, as well as credit 
line increases and other requests for additional credit amounts. While 
requests for additional credit amounts on an existing account can 
constitute a ``covered application'' pursuant to Sec.  1002.103(b)(1), 
such requests are not counted as originations for the purpose of 
determining whether a financial institution is a covered financial 
institution pursuant to Sec.  1002.105(b). In addition, transactions 
that extend, renew, or otherwise amend a transaction are not counted as 
originations. For example, if a financial institution originates 50 term 
loans and 30 lines of credit for small businesses in each of the 
preceding two calendar years, along with 25 line increases for small 
businesses in each of those years, the financial institution is not a 
covered financial institution because it has not originated at least 100 
covered credit transactions in each of the two preceding calendar years.
    6. Annual consideration. Whether a financial institution is a 
covered financial institution for a particular year depends on its small 
business lending activity in the preceding two calendar years. 
Therefore, whether a financial institution is a covered financial 
institution is an annual consideration for each year that data may be 
compiled and maintained for purposes of subpart B of this part. A 
financial institution may be a covered financial institution for a given 
year of data collection (and the obligations arising from qualifying as 
a covered financial institution shall continue into subsequent years, 
pursuant to Sec. Sec.  1002.110 and 1002.111), but the same financial 
institution may not be a covered financial institution for the following 
year of data collection. For example, Financial Institution C originated 
105 covered transactions for small businesses in both 2024 and 2025. In 
2026, Financial Institution C is a covered financial institution and 
therefore is obligated to compile and maintain applicable 2026 small 
business lending data under Sec.  1002.107(a). During 2026, Financial 
Institution C originates 95 covered transactions for small businesses. 
In 2027, Financial Institution C is not a covered financial institution 
with respect to 2027 small business lending data, and is not obligated 
to compile and maintain 2027 data under Sec.  1002.107(a) (although 
Financial Institution C may volunteer to collect and maintain 2027 data 
pursuant to Sec.  1002.5(a)(4)(vii) and as explained in comment 105(b)-
10). Pursuant to Sec.  1002.109(a), Financial Institution C shall submit 
its small business lending application register for 2026 data in the 
format prescribed by the Bureau by June 1, 2027 because Financial 
Institution C is a covered financial institution with respect to 2026 
data, and the data submission deadline of June 1, 2027 applies to 2026 
data.
    7. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed financial institution is a covered financial institution under 
Sec.  1002.105(b) if it, considering the combined lending activity of 
the surviving or newly formed institution and the merged or acquired 
financial institutions (or acquired branches or locations), satisfies 
the criteria included in Sec.  1002.105(b). For example, Financial 
Institutions A and B merge. The surviving or newly formed financial 
institution meets the threshold in Sec.  1002.105(b) if the combined 
previous components of the surviving or newly formed financial 
institution (A plus B) would have originated at least 100 covered credit 
transactions for small businesses for each of the two preceding calendar 
years. Similarly, if the combined previous components and the surviving 
or newly formed financial institution would have reported at least 100 
covered transactions for small businesses for the year previous to the 
merger as well as 100 covered transactions for small businesses for the 
year of the merger, the threshold described in Sec.  1002.105(b) would 
be met and the surviving or newly formed financial institution would be 
a covered institution under Sec.  1002.105(b) for the year following the 
merger. Comment 105(b)-8 discusses a financial institution's 
responsibilities with respect to compiling and maintaining (and 
subsequently reporting) data during the calendar year of a merger.
    8. Merger or acquisition--coverage specific to the calendar year of 
the merger or acquisition. The scenarios described below illustrate a 
financial institution's responsibilities specifically for data from the 
calendar year of a merger or acquisition. For purposes of these

[[Page 83]]

illustrations, an ``institution that is not covered'' means either an 
institution that is not a financial institution, as defined in Sec.  
1002.105(a), or a financial institution that is not a covered financial 
institution, as defined in Sec.  1002.105(b).
    i. Two institutions that are not covered financial institutions 
merge. The surviving or newly formed institution meets all of the 
requirements necessary to be a covered financial institution. No data 
are required to be compiled, maintained, or reported for the calendar 
year of the merger (even though the merger creates an institution that 
meets all of the requirements necessary to be a covered financial 
institution).
    ii. A covered financial institution and an institution that is not 
covered merge. The covered financial institution is the surviving 
institution, or a new covered financial institution is formed. For the 
calendar year of the merger, data are required to be compiled, 
maintained, and reported for covered applications from the covered 
financial institution and is optional for covered applications from the 
financial institution that was previously not covered.
    iii. A covered financial institution and an institution that is not 
covered merge. The institution that is not covered is the surviving 
institution and remains not covered after the merger, or a new 
institution that is not covered is formed. For the calendar year of the 
merger, data are required to be compiled and maintained (and 
subsequently reported) for covered applications from the previously 
covered financial institution that took place prior to the merger. After 
the merger date, compiling, maintaining, and reporting data is optional 
for applications from the institution that was previously covered for 
the remainder of the calendar year of the merger.
    iv. Two covered financial institutions merge. The surviving or newly 
formed financial institution is a covered financial institution. Data 
are required to be compiled and maintained (and subsequently reported) 
for the entire calendar year of the merger. The surviving or newly 
formed financial institution files either a consolidated submission or 
separate submissions for that calendar year.
    9. Foreign applicability. As discussed in comment 1(a)-2, Regulation 
B (including subpart B) generally does not apply to lending activities 
that occur outside the United States.
    10. Voluntary collection and reporting. Section 1002.5(a)(4)(vii) 
through (x) permits a creditor that is not a covered financial 
institution under Sec.  1002.105(b) to voluntarily collect and report 
information regarding covered applications from small businesses in 
certain circumstances. If a creditor is voluntarily collecting 
information for covered applications regarding whether the applicant is 
a minority-owned business, a women-owned business, and/or an LGBTQI+-
owned business under Sec.  1002.107(a)(18), and regarding the ethnicity, 
race, and sex of the applicant's principal owners under Sec.  
1002.107(a)(19), it shall do so in compliance with Sec. Sec.  1002.107, 
1002.108, 1002.111, 1002.112 as though it were a covered financial 
institution. If a creditor is reporting those covered applications from 
small businesses to the Bureau, it shall do so in compliance with 
Sec. Sec.  1002.109 and 1002.110 as though it were a covered financial 
institution.

              Section 1002.106--Business and Small Business

                    106(b) Small Business Definition

                        106(b)(1) Small Business

    1. Change in determination of small business status--business is 
ultimately not a small business. If a financial institution initially 
determines an applicant is a small business as defined in Sec.  1002.106 
based on available information and collects data required by Sec.  
1002.107(a)(18) and (19) but later concludes that the applicant is not a 
small business, the financial institution does not violate the Act or 
this regulation if it meets the requirements of Sec.  1002.112(c)(4). 
The financial institution shall not report the application on its small 
business lending application register pursuant to Sec.  1002.109.
    2. Change in determination of small business status--business is 
ultimately a small business. Consistent with comment 107(a)(14)-1, a 
financial institution need not independently verify gross annual 
revenue. If a financial institution initially determines that the 
applicant is not a small business as defined in Sec.  1002.106(b), but 
later concludes the applicant is a small business prior to taking final 
action on the application, the financial institution must report the 
covered application pursuant to Sec.  1002.109. In this situation, the 
financial institution shall endeavor to compile, maintain, and report 
the data required under Sec.  1002.107(a) in a manner that is reasonable 
under the circumstances. For example, if the applicant initially 
provides a gross annual revenue of $5.5 million (that is, above the 
threshold for a small business as initially defined in Sec.  
1002.106(b)(1)), but during the course of underwriting the financial 
institution discovers the applicant's gross annual revenue was in fact 
$4.75 million (meaning that the applicant is within the definition of a 
small business under Sec.  1002.106(b)), the financial institution is 
required to report the covered application pursuant to Sec.  1002.109. 
In this situation, the financial institution shall take reasonable steps 
upon discovery to compile, maintain, and report the data necessary under 
Sec.  1002.107(a) to comply with subpart B of this part for that covered 
application. Thus, in this example, even if the financial institution's 
procedure is typically to request applicant-provided data

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together with the application form, in this circumstance, the financial 
institution shall seek to collect the data during the application 
process necessary to comply with subpart B in a manner that is 
reasonable under the circumstances.
    3. Applicant's representations regarding gross annual revenue; 
inclusion of affiliate revenue; updated or verified information. A 
financial institution is permitted to rely on an applicant's 
representations regarding gross annual revenue (which may or may not 
include any affiliate's revenue) for purposes of determining small 
business status under Sec.  1002.106(b). However, if the applicant 
provides updated gross annual revenue information or the financial 
institution verifies the gross annual revenue information (see comment 
107(b)-1), the financial institution must use the updated or verified 
information in determining small business status.
    4. Multiple unaffiliated co-applicants--size determination. The 
financial institution shall not aggregate unaffiliated co-applicants' 
gross annual revenues for purposes of determining small business status 
under Sec.  1002.106(b). If a covered financial institution receives a 
covered application from multiple businesses who are not affiliates, as 
defined by Sec.  1002.102(a), where at least one business is a small 
business under Sec.  1002.106(b), the financial institution shall 
compile, maintain, and report data pursuant to Sec. Sec.  1002.107 
through 1002.109 regarding the covered application for only a single 
applicant that is a small business. See comment 103(a)-10 for additional 
details.

                     106(b)(2) Inflation Adjustment

    1. Inflation adjustment methodology. The small business gross annual 
revenue threshold set forth in Sec.  1002.106(b)(1) will be adjusted 
upward or downward to reflect changes, if any, in the Consumer Price 
Index for All Urban Consumers (U.S. city average series for all items, 
not seasonally adjusted), as published by the United States Bureau of 
Labor Statistics (``CPI-U''). The base for computing each adjustment is 
the January 2025 CPI-U; this base value shall be compared to the CPI-U 
value in January 2030 and every five years thereafter. For example, 
after the January 2030 CPI-U is made available, the adjustment is 
calculated by determining the percentage change in the CPI-U between 
January 2025 and January 2030, applying this change to the $5 million 
gross annual revenue threshold, and rounding to the nearest $500,000. 
If, as a result of this rounding, there is no change in the gross annual 
revenue threshold, there will be no adjustment. For example, if in 
January 2030 the adjusted value were $4.9 million (reflecting a $100,000 
decrease from January 2025 CPI-U), then the threshold would not adjust 
because $4.9 million would be rounded up to $5 million. If on the other 
hand, the adjusted value were $5.7 million, then the threshold would 
adjust to $5.5 million. Where the adjusted value is a multiple of 
$250,000 (e.g., $5,250,000), then the threshold adjusts upward (in this 
example, to $5,500,000).
    2. Substitute for CPI-U. If publication of the CPI-U ceases, or if 
the CPI-U otherwise becomes unavailable or is altered in such a way as 
to be unusable, then the Bureau shall substitute another reliable cost 
of living indicator from the United States Government for the purpose of 
calculating adjustments pursuant to Sec.  1002.106(b)(2).

            Section 1002.107--Compilation of Reportable Data

                   107(a) Data Format and Itemization

    1. General. Section 1002.107(a) describes a covered financial 
institution's obligation to compile and maintain data regarding the 
covered applications it receives from small businesses.
    i. A covered financial institution reports these data even if the 
credit originated pursuant to the reported application was subsequently 
sold by the institution.
    ii. A covered financial institution annually reports data for 
covered applications for which final action was taken in the previous 
calendar year.
    iii. A covered financial institution reports data for a covered 
application on its small business lending application register for the 
calendar year during which final action was taken on the application, 
even if the institution received the application in a previous calendar 
year.
    2. Free-form text fields. A covered financial institution may use 
technology such as autocorrect and predictive text when requesting 
applicant-provided data under subpart B of this part that the financial 
institution reports via free-form text fields, provided that such 
technology does not restrict the applicant's ability to write in its own 
response instead of using text suggested by the technology.
    3. Filing Instructions Guide. Additional details and procedures for 
compiling data pursuant to Sec.  1002.107 are included in the Filing 
Instructions Guide, which is available at https://
www.consumerfinance.gov/ data-research/small-business-lending/ filing-
instructions-guide/.
    4. Additional data point response options. The Bureau may add 
additional response options to the lists of responses contained in the 
commentary that follows for certain of the data points set forth in 
Sec.  1002.107(a), via the Filing Instructions Guide. Refer to the 
Filing Instructions Guide for any updates for each reporting year.

                       107(a)(1) Unique Identifier

    1. Unique within the financial institution. A financial institution 
complies with

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Sec.  1002.107(a)(1) by compiling and reporting an alphanumeric 
application or loan identifier unique within the financial institution 
to the specific application. The identifier must not exceed 45 
characters, and must begin with the financial institution's Legal Entity 
Identifier (LEI), as defined in comment 109(b)(6)-1. Separate 
applications for the same applicant must have separate identifiers. The 
identifier may only include standard numerical and/or upper-case 
alphabetical characters and cannot include dashes, other special 
characters, or characters with diacritics. The financial institution may 
assign the unique identifier at any time prior to reporting the 
application. Refinancings or applications for refinancing must be 
assigned a different identifier than the transaction that is being 
refinanced. A financial institution with multiple branches must ensure 
that its branches do not use the same identifiers to refer to multiple 
applications.
    2. Does not include directly identifying information. The unique 
identifier must not include any directly identifying information, such 
as a whole or partial Social Security number or employer identification 
number, about the applicant or persons (natural or legal) associated 
with the applicant. See also Sec.  1002.111(c) and related commentary.

                       107(a)(2) Application Date

    1. Consistency. Section 1002.107(a)(2) requires that, in reporting 
the date of covered application, a financial institution shall report 
the date the covered application was received or the date shown on a 
paper or electronic application form. Although a financial institution 
need not choose the same approach for its entire small business lending 
application register, it should generally be consistent in its approach 
by, for example, establishing procedures for how to report this date 
within particular scenarios, products, or divisions. If the financial 
institution chooses to report the date shown on an application form and 
the institution retains multiple versions of the application form, the 
institution reports the date shown on the first application form 
satisfying the definition of covered application pursuant to Sec.  
1002.103.
    2. Application received. For an application submitted directly to 
the financial institution or its affiliate (as described in Sec.  
1002.107(a)(4)), the financial institution shall report the date it 
received the covered application, as defined under Sec.  1002.103, or 
the date shown on a paper or electronic application form. For an 
application initially submitted to a third party, see comment 107(a)(2)-
3.
    3. Indirect applications. For an application that was not submitted 
directly to the financial institution or its affiliate (as described in 
Sec.  1002.107(a)(4)), the financial institution shall report the date 
the application was received by the party that initially received the 
application, the date the application was received by the financial 
institution, or the date shown on the application form. Although a 
financial institution need not choose the same approach for its entire 
small business lending application register, it should generally be 
consistent in its approach by, for example, establishing procedures for 
how to report this date within particular scenarios, products, or 
divisions.
    4. Safe harbor. Pursuant to Sec.  1002.112(c)(1), a financial 
institution that reports on its small business lending application 
register an application date that is within three business days of the 
actual application date pursuant to Sec.  1002.107(a)(2) does not 
violate the Act or subpart B of this part. For purposes of this 
paragraph, a business day means any day the financial institution is 
open for business.

                      107(a)(3) Application Method

    1. General. A financial institution complies with Sec.  
1002.107(a)(3) by reporting the means by which the applicant submitted 
the application from one of the following options: in-person, telephone, 
online, or mail. If the financial institution retains multiple versions 
of the application form, the institution reports the means by which the 
first application form satisfying the definition of covered application 
pursuant to Sec.  1002.103 was submitted.
    i. In-person. A financial institution reports the application method 
as ``in-person'' if the applicant submitted the application to the 
financial institution, or to another party acting on the financial 
institution's behalf, in person. The in-person application method 
applies, for example, to applications submitted at a branch office 
(including applications hand delivered by the applicant), at the 
applicant's place of business, or via electronic media with a video 
component).
    ii. Telephone. A financial institution reports the application 
method as ``telephone'' if the applicant submitted the application to 
the financial institution, or another party acting on the financial 
institution's behalf, by telephone call or via audio-based electronic 
media without a video component.
    iii. Online. A financial institution reports the application method 
as ``online'' if the applicant submitted the application to the 
financial institution, or another party acting on the financial 
institution's behalf, through a website, mobile application (app), fax 
transmission, electronic mail, text message, or some other form of text-
based electronic communication.
    iv. Mail. A financial institution reports the application method as 
``mail'' if the applicant submitted the application to the financial 
institution, or another party acting on the financial institution's 
behalf, via United States mail, courier or overnight service, or an 
overnight drop box.

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                     107(a)(4) Application Recipient

    1. Agents. When a financial institution is reporting actions taken 
by its agent consistent with comment 109(a)(3)-3, the agent is 
considered the financial institution for the purposes of Sec.  
1002.107(a)(4). For example, assume that an applicant submitted an 
application to Financial Institution B, and Financial Institution B made 
the credit decision acting as Financial Institution A's agent under 
State law. Financial Institution A reports the application and indicates 
that the application was submitted directly to Financial Institution A.

                          107(a)(5) Credit Type

    1. Reporting credit product--in general. A financial institution 
complies with Sec.  1002.107(a)(5)(i) by selecting the credit product 
applied for or originated, from the list below. If the credit product 
applied for or originated is not included on this list, the financial 
institution selects ``other,'' and reports the credit product via free-
form text field. If an applicant requested more than one credit product 
at the same time, the financial institution reports each credit product 
requested as a separate application. However, if the applicant only 
requested a single covered credit transaction, but had not decided on 
which particular product, the financial institution complies with Sec.  
1002.107(a)(5)(i) by reporting the credit product originated (if 
originated), or the credit product denied (if denied), or the credit 
product of greater interest to the applicant, if readily determinable. 
If the credit product of greater interest to the applicant is not 
readily determinable, the financial institution complies with Sec.  
1002.107(a)(5)(i) by reporting one of the credit products requested as 
part of the request for a single covered credit transaction, in its 
discretion. See comment 103(a)-5 for instructions on reporting requests 
for multiple covered credit transactions at one time.
    i. Term loan--unsecured.
    ii. Term loan--secured.
    iii. Line of credit--unsecured.
    iv. Line of credit--secured.
    v. Credit card account, not private-label.
    vi. Private-label credit card account.
    vii. Merchant cash advance.
    viii. Other sales-based financing transaction.
    ix. Other.
    x. Not provided by applicant and otherwise undetermined.
    2. Credit card account, not private-label. A financial institution 
complies with Sec.  1002.107(a)(5)(i) by reporting the credit product as 
a ``credit card account, not private-label'' when the product is a 
business-purpose open-end credit account that is not private label and 
that may be accessed from time to time by a card, plate, or other single 
credit device to obtain credit, except that accounts or lines of credit 
secured by real property and overdraft lines of credit accessed by debit 
cards are not credit card accounts. The term credit card account does 
not include debit card accounts or closed-end credit that may be 
accessed by a card, plate, or single credit device. The term credit card 
account does include charge card accounts that are generally paid in 
full each billing period, as well as hybrid prepaid-credit cards. A 
financial institution reports multiple credit card account, not private-
label applications requested at one time using the guidance in comment 
103(a)-7.
    3. Private-label credit card account. A financial institution 
complies with Sec.  1002.107(a)(5)(i) by reporting the credit product as 
a ``private-label credit card account'' when the product is a business-
purpose open-end private-label credit account that otherwise meets the 
description of a credit card account in comment 107(a)(5)-2. A private-
label credit card account is a credit card account that can only be used 
to acquire goods or services provided by one business (for example, a 
specific merchant, retailer, independent dealer, or manufacturer) or a 
small group of related businesses. A co-branded or other card that can 
also be used for purchases at unrelated businesses is not a private-
label credit card. A financial institution reports multiple private-
label credit card account applications requested at one time in the same 
manner as credit card account, not private-label applications, using the 
guidance in comment 103(a)-7.
    4. Credit product not provided by the applicant and otherwise 
undetermined. Pursuant to Sec.  1002.107(c), a financial institution is 
required to maintain procedures reasonably designed to collect 
applicant-provided data, which includes credit product. However, if a 
financial institution is nonetheless unable to collect or otherwise 
determine credit product information because the applicant does not 
indicate what credit product it seeks and the application is denied, 
withdrawn, or closed for incompleteness before a credit product is 
identified, the financial institution reports that the credit product is 
``not provided by applicant and otherwise undetermined.''
    5. Reporting credit product involving counteroffers. If a financial 
institution presents a counteroffer for a different credit product than 
the product the applicant had initially requested, and the applicant 
does not agree to proceed with the counteroffer, the financial 
institution reports the application for the original credit product as 
denied pursuant to Sec.  1002.107(a)(9). If the applicant agrees to 
proceed with consideration of the financial institution's counteroffer, 
the financial institution reports the disposition of the application 
based on the credit product that was offered and does not report the 
original

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credit product applied for. See comment 107(a)(9)-2.
    6. Other sales-based financing transaction. For an extension of 
business credit incident to a factoring arrangement that is otherwise a 
covered credit transaction, a financial institution selects ``other 
sales-based financing transaction'' as the credit product. See comment 
104(b)-1.
    7. Guarantees. A financial institution complies with Sec.  
1002.107(a)(5)(ii) by selecting the type or types of guarantees that 
were obtained for an originated covered credit transaction, or that 
would have been obtained if the covered credit transaction was 
originated, from the list below. The financial institution selects, if 
applicable, up to a maximum of five guarantees for a single application. 
If the type of guarantee does not appear on the list, the financial 
institution selects ``other'' and reports the type of guarantee via 
free-form text field. If no guarantee is obtained or would have been 
obtained if the covered credit transaction was originated, the financial 
institution selects ``no guarantee.'' If an application is denied, 
withdrawn, or closed for incompleteness before any guarantee has been 
identified, the financial institution selects ``no guarantee.'' The 
financial institution chooses State government guarantee or local 
government guarantee, as applicable, based on the entity directly 
administering the program, not the source of funding.
    i. Personal guarantee--owner(s).
    ii. Personal guarantee--non-owner(s).
    iii. SBA guarantee--7(a) program.
    iv. SBA guarantee--504 program.
    v. SBA guarantee--other.
    vi. USDA guarantee.
    vii. FHA insurance.
    viii. Bureau of Indian Affairs guarantee.
    ix. Other Federal guarantee.
    x. State government guarantee.
    xi. Local government guarantee.
    xii. Other.
    xiii. No guarantee.
    8. Loan term. A financial institution complies with Sec.  
1002.107(a)(5)(iii) by reporting the number of months in the loan term 
for the covered credit transaction. The loan term is the number of 
months after which the legal obligation will mature or terminate, 
measured from the date of origination. For transactions involving real 
property, the financial institution may instead measure the loan term 
from the date of the first payment period and disregard the time that 
elapses, if any, between the settlement of the transaction and the first 
payment period. For example, if a loan closes on April 12, but the first 
payment is not due until June 1 and includes the interest accrued in May 
(but not April), the financial institution may choose not to include the 
month of April in the loan term. In addition, the financial institution 
may round the loan term to the nearest full month or may count only full 
months and ignore partial months, as it so chooses. If a credit product, 
such as a credit card, does not have a loan term, the financial 
institution reports that the loan term is ``not applicable.'' The 
financial institution also reports that the loan term is ``not 
applicable'' if the credit product is reported as ``not provided by 
applicant and otherwise undetermined.'' For a credit product that 
generally has a loan term, the financial institution reports ``not 
provided by applicant and otherwise undetermined'' if the application is 
denied, withdrawn, or determined to be incomplete before a loan term has 
been identified. For merchant cash advances and other sales-based 
financing transactions, the financial institution complies with Sec.  
1002.107(a)(5)(iii) by reporting the loan term, if any, that the 
financial institution estimated or specified in processing, underwriting 
or providing disclosures for the application or transaction. If more 
than one such loan term is estimated or specified, the financial 
institution reports the one it considers to be most accurate, in its 
discretion. For merchant cash advances and other sales-based financing 
transactions that do not have a loan term, the financial institution 
reports ``not provided by applicant and otherwise undetermined.''

                        107(a)(6) Credit Purpose

    1. General. A financial institution complies with Sec.  
1002.107(a)(6) by selecting the purpose or purposes of the covered 
credit transaction applied for or originated from the list below.
    i. Purchase, construction/improvement, or refinance of non-owner-
occupied real property.
    ii. Purchase, construction/improvement, or refinance of owner-
occupied real property.
    iii. Purchase, refinance, or rehabilitation/repair of motor 
vehicle(s) (including light and heavy trucks).
    iv. Purchase, refinance, or rehabilitation/repair of equipment.
    v. Working capital (includes inventory or floor planning).
    vi. Business start-up.
    vii. Business expansion.
    viii. Business acquisition.
    ix. Refinance existing debt (other than refinancings listed above).
    x. Line increase.
    xi. Overdraft.
    xii. Other.
    xiii. Not provided by applicant and otherwise undetermined.
    xiv. Not applicable.
    2. More than one purpose. If the applicant indicates or the 
financial institution is otherwise aware of more than one purpose for 
the credit applied for or originated, the financial institution reports 
those purposes, up to a maximum of three, using the list provided, in 
any order it chooses. For example, if an applicant refinances a 
commercial

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building it owns and uses the funds to purchase a motor vehicle and 
expand the business it runs in a part of that building, the financial 
institution reports that the three purposes of the credit are purchase, 
construction/improvement, or refinance of owner-occupied real property; 
purchase, refinance, or rehabilitation/repair of motor vehicle(s) 
(including light and heavy trucks); and business expansion. If an 
application has more than three purposes, the financial institution 
reports any three of those purposes. In the example above, if the funds 
were also used to purchase equipment, the financial institution would 
select only three of the relevant purposes to report.
    3. ``Other'' credit purpose. If a purpose of an application does not 
appear on the list of purposes provided, the financial institution 
reports ``other'' as the credit purpose and reports the credit purpose 
via free-form text field. If the application has more than one ``other'' 
purpose, the financial institution chooses the most significant 
``other'' purpose, in its discretion, and reports that ``other'' 
purpose. The financial institution reports a maximum of three credit 
purposes, including any ``other'' purpose.
    4. Credit purpose not provided by applicant and otherwise 
undetermined. Pursuant to Sec.  1002.107(c), a financial institution 
shall maintain procedures reasonably designed to collect applicant-
provided data, which includes credit purpose. However, if a financial 
institution is nonetheless unable to collect or determine credit purpose 
information, the financial institution reports that the credit purpose 
is ``not provided by applicant and otherwise undetermined.''
    5. Not applicable. If the application is for a credit product that 
generally has indeterminate or numerous potential purposes, such as a 
credit card, the financial institution may report credit purpose as 
``not applicable.''
    6. Collecting credit purpose. Pursuant to Sec.  1002.107(c), a 
financial institution shall maintain procedures reasonably designed to 
collect applicant-provided data, including credit purpose. The financial 
institution is permitted, but not required, to present the list of 
credit purposes provided in comment 107(a)(6)-1 to the applicant. The 
financial institution is also permitted to ask about purposes not 
included on the list provided in comment 107(a)(6)-1. If the applicant 
chooses a purpose or purposes not included on the provided list, the 
financial institution follows the instructions in comment 107(a)(6)-3 
regarding reporting of ``other'' as the credit purpose. If an applicant 
chooses a purpose or purposes that are similar to purposes on the list 
provided, but uses different language, the financial institution reports 
the purpose or purposes from the list provided.
    7. Owner-occupied real property. Real property is owner-occupied if 
any physical portion of the property is used by the owner for any 
activity, including storage.
    8. Overdraft. When overdraft is provided as an aspect of the covered 
credit transaction applied for or originated, the financial institution 
reports ``Overdraft'' as a purpose of the credit. The financial 
institution reports credit type pursuant to Sec.  1002.107(a)(5)(i) as 
appropriate for the underlying covered credit transaction, such as 
``Line of credit--unsecured.'' Providing occasional overdraft services 
as part of a deposit account offering would not be reported for the 
purpose of subpart B.

                      107(a)(7) Amount Applied For

    1. Initial amount requested. A financial institution complies with 
Sec.  1002.107(a)(7) by reporting the initial amount of credit or the 
initial credit limit requested by the applicant. The financial 
institution is not required to report credit amounts or limits discussed 
before an application is made, but must capture the initial amount 
requested at the application stage. If the applicant requests an amount 
as a range of numbers, the financial institution reports the midpoint of 
that range.
    2. No amount requested. If the applicant does not request a specific 
amount at the application stage, but the financial institution 
underwrites the application for a specific amount, the financial 
institution complies with Sec.  1002.107(a)(7) by reporting the amount 
considered for underwriting as the amount applied for. If the particular 
type of credit product applied for does not involve a specific amount 
requested, the financial institution reports that the requirement is 
``not applicable.''
    3. Firm offers. When an applicant responds to a ``firm offer'' that 
specifies an amount or limit, which may occur in conjunction with a pre-
approved credit solicitation, the financial institution reports the 
amount of the firm offer as the amount applied for, unless the applicant 
requests a different amount. If the firm offer does not specify an 
amount or limit and the applicant does not request a specific amount, 
the amount applied for is the amount underwritten by the financial 
institution. If the firm offer specifies an amount or limit as a range 
and the applicant does not request a specific amount, the amount applied 
for is the amount underwritten by the financial institution.
    4. Additional amounts on an existing account. When reporting a 
covered application that seeks additional credit amounts on an existing 
account, the financial institution reports only the additional credit 
amount sought, and not any previous amounts extended. See comment 
103(b)-3.
    5. Initial amount otherwise undetermined. Pursuant to Sec.  
1002.107(c), a financial institution shall maintain procedures 
reasonably designed to collect applicant-provided data,

[[Page 89]]

which includes the credit amount initially requested by the applicant 
(other than for products that do not involve a specific amount 
requested). However, if a financial institution is nonetheless unable to 
collect or otherwise determine the amount initially requested, the 
financial institution reports that the amount applied for is ``not 
provided by applicant and otherwise undetermined.'' But see comment 
107(a)(7)-2 for how to report the credit amount initially requested by 
the applicant for particular types of credit products that do not 
involve a specific amount requested.

                 107(a)(8) Amount Approved or Originated

    1. General. A financial institution complies with Sec.  
1002.107(a)(8) by reporting the amount approved or originated for credit 
that is originated or approved but not accepted. For applications that 
the financial institution, pursuant to Sec.  1002.107(a)(9), reports as 
denied, withdrawn by the applicant, or incomplete, the financial 
institution reports that the amount approved or originated is ``not 
applicable.''
    2. Multiple approval amounts. A financial institution may sometimes 
approve an applicant for more than one credit amount, allowing the 
applicant to choose which amount the applicant prefers for the extension 
or line of credit. When multiple approval amounts are offered for a 
closed-end credit transaction for which the action taken is approved but 
not accepted, and the applicant does not accept the approved offer of 
credit in any amount, the financial institution reports the highest 
amount approved. If the applicant accepts the offer of closed-end 
credit, the financial institution reports the amount originated. When 
multiple approval amounts are offered for an open-end credit transaction 
for which the action taken is approved but not accepted, and the 
applicant does not accept the approved offer of credit in any amount, 
the financial institution reports the highest amount approved. If the 
applicant accepts the offer of open-end credit, the financial 
institution reports the actual credit limit established.
    3. Amount approved or originated--closed-end credit transaction. For 
an originated closed-end credit transaction, the financial institution 
reports the principal amount to be repaid. This amount will generally be 
disclosed on the legal obligation.
    4. Amount approved or originated--refinancing. For a refinancing, 
the financial institution reports the amount of credit approved or 
originated under the terms of the new debt obligation.
    5. Amount approved or originated--counteroffer. If an applicant 
agrees to proceed with consideration of a counteroffer for an amount or 
limit different from the amount for which the applicant applied, and the 
covered credit transaction is approved and originated, the financial 
institution reports the amount granted. If an applicant does not agree 
to proceed with consideration of a counteroffer or fails to respond, the 
institution reports the application as denied and reports ``not 
applicable'' for the amount approved or originated. See comment 
107(a)(9)-2.
    6. Amount approved or originated--existing accounts. For additional 
credit amounts that were approved for or originated on an existing 
account, the financial institution reports only the additional credit 
amount approved or originated, and not any previous amounts extended.

                         107(a)(9) Action Taken

    1. General. A financial institution complies with Sec.  
1002.107(a)(9) by selecting the action taken by the financial 
institution on the application from the following list: originated, 
approved but not accepted, denied, withdrawn by the applicant, or 
incomplete. A financial institution identifies the applicable action 
taken code based on final action taken on the covered application.
    i. Originated. A financial institution reports that the application 
was originated if the financial institution made a credit decision 
approving the application and that credit decision resulted in an 
extension of credit.
    ii. Approved but not accepted. A financial institution reports that 
the application was approved but not accepted if the financial 
institution made a credit decision approving the application, but the 
applicant or the party that initially received the application failed to 
respond to the financial institution's approval within the specified 
time, or the covered credit transaction was not otherwise consummated or 
the account was not otherwise opened.
    iii. Denied. A financial institution reports that the application 
was denied if it made a credit decision denying the application before 
an applicant withdrew the application, before the application was closed 
for incompleteness, or before the application was denied on the basis of 
incompleteness.
    iv. Withdrawn by the applicant. A financial institution reports that 
the application was withdrawn if the application was expressly withdrawn 
by the applicant before the financial institution made a credit decision 
approving or denying the application, before the application was closed 
for incompleteness, or before the application was denied on the basis of 
incompleteness.
    v. Incomplete. A financial institution reports that the application 
was incomplete if the financial institution took adverse action on the 
basis of incompleteness under Sec.  1002.9(a)(1)(ii) and (c)(1)(i) or 
provided a written notice of incompleteness under Sec.  1002.9(c)(1)(ii) 
and (2), and the applicant did

[[Page 90]]

not respond to the request for additional information within the period 
of time specified in the notice.
    2. Treatment of counteroffers. If a financial institution makes a 
counteroffer to grant credit on terms other than those originally 
requested by the applicant (for example, for a shorter loan maturity, 
with a different interest rate, or in a different amount) and the 
applicant declines the counteroffer or fails to respond, the institution 
reports the action taken as a denial on the original terms requested by 
the applicant. If the applicant agrees to proceed with consideration of 
the financial institution's counteroffer, the financial institution 
reports the action taken as the disposition of the application based on 
the terms of the counteroffer. For example, assume an applicant applies 
for a term loan and the financial institution makes a counteroffer to 
proceed with consideration of a line of credit. If the applicant 
declines to be considered for a line of credit, the financial 
institution reports the application as a denied request for a term loan. 
If, on the other hand, the applicant agrees to be considered for a line 
of credit, then the financial institution reports the action taken as 
the disposition of the application for the line of credit. For instance, 
using the same example, if the financial institution makes a credit 
decision approving the line of credit, but the applicant fails to 
respond to the financial institution's approval within the specified 
time by accepting the credit offer, the financial institution reports 
the application on the line of credit as approved but not accepted.
    3. Treatment of rescinded transactions. If a borrower successfully 
rescinds a transaction after closing but before a financial institution 
is required to submit its small business lending application register 
containing the information for the application under Sec.  1002.109, the 
institution reports the application as approved but not accepted.
    4. Treatment of pending applications. A financial institution does 
not report any application still pending at the end of the calendar 
year; it reports such applications on its small business lending 
application register for the year in which final action is taken.
    5. Treatment of conditional approvals. If a financial institution 
issues an approval that is subject to the applicant meeting certain 
conditions prior to closing, the financial institution reports the 
action taken as provided below dependent on whether the conditions are 
solely customary commitment or closing conditions or if the conditions 
include any underwriting or creditworthiness conditions. Customary 
commitment or closing conditions may include, for example, a clear-title 
requirement, proof of insurance policies, or a subordination agreement 
from another lienholder. Underwriting or creditworthiness conditions may 
include, for example, conditions that constitute a counteroffer (such as 
a demand for a higher down-payment), satisfactory loan-to-value ratios, 
or verification or confirmation, in whatever form the institution 
requires, that the applicant meets underwriting conditions concerning 
applicant creditworthiness, including documentation or verification of 
revenue, income or assets.
    i. Conditional approval--denial. If the approval is conditioned on 
satisfying underwriting or creditworthiness conditions, those conditions 
are not met, and the financial institution takes adverse action on some 
basis other than incompleteness, the financial institution reports the 
action taken as denied.
    ii. Conditional approval--incompleteness. If the approval is 
conditioned on satisfying underwriting or creditworthiness conditions 
that the financial institution needs to make the credit decision, and 
the financial institution takes adverse action on the basis of 
incompleteness under Sec.  1002.9(a)(1)(ii) and (c)(1)(i), or has sent a 
written notice of incompleteness under Sec.  1002.9(c)(1)(ii) and (2), 
and the applicant did not respond within the period of time specified in 
the notice, the financial institution reports the action taken as 
incomplete.
    iii. Conditional approval--approved but not accepted. If the 
approval is conditioned on satisfying conditions that are solely 
customary commitment or closing conditions and the conditions are not 
met, the financial institution reports the action taken as approved but 
not accepted. If all the conditions (underwriting, creditworthiness, or 
customary commitment or closing conditions) are satisfied and the 
financial institution agrees to extend credit but the covered credit 
transaction is not originated (for example, because the applicant 
withdraws), the financial institution reports the action taken as 
approved but not accepted.
    iv. Conditional approval--withdrawn by the applicant. If the 
applicant expressly withdraws before satisfying all underwriting or 
creditworthiness conditions and before the institution denies the 
application or before the institution closes the file for 
incompleteness, the financial institution reports the action taken as 
withdrawn.

                      107(a)(10) Action Taken Date

    1. Reporting action taken date for denied applications. For 
applications that are denied, a financial institution reports either the 
date the application was denied or the date the denial notice was sent 
to the applicant.
    2. Reporting action taken date for applications withdrawn by 
applicant. For applications that are withdrawn by the applicant, the 
financial institution reports the date the express withdrawal was 
received, or the date shown on the notification form in the case of a 
written withdrawal.

[[Page 91]]

    3. Reporting action taken date for applications that are approved 
but not accepted. For applications approved by a financial institution 
but not accepted by the applicant, the financial institution reports any 
reasonable date, such as the approval date, the deadline for accepting 
the offer, or the date the file was closed. A financial institution 
should generally be consistent in its approach to reporting by, for 
example, establishing procedures for how to report this date for 
particular scenarios, products, or divisions.
    4. Reporting action taken date for originated applications. For 
applications that result in an extension of credit, a financial 
institution generally reports the closing or account opening date. If 
the disbursement of funds takes place on a date later than the closing 
or account opening date, the institution may, alternatively, use the 
date of initial disbursement. A financial institution should generally 
be consistent in its approach to reporting by, for example, establishing 
procedures for how to report this date for particular scenarios, 
products, or divisions.
    5. Reporting action taken date for incomplete applications. For 
applications closed for incompleteness or denied for incompleteness, the 
financial institution reports either the date the action was taken or 
the date the denial or incompleteness notice was sent to the applicant.

                        107(a)(11) Denial Reasons

    1. Reason for denial--in general. A financial institution complies 
with Sec.  1002.107(a)(11) by reporting the principal reason or reasons 
it denied the application, indicating up to four reasons. The financial 
institution reports only the principal reason or reasons it denied the 
application. For example, if a financial institution denies an 
application due to insufficient cashflow, unacceptable collateral, and 
unverifiable business information, the financial institution is required 
to report these three reasons. The reasons reported must accurately 
describe the principal reason or reasons the financial institution 
denied the application. A financial institution reports denial reasons 
by selecting its principal reason or reasons for denying the application 
from the following list:
    i. Credit characteristics of the business. A financial institution 
reports the denial reason as ``credit characteristics of the business'' 
if it denies the application based on an assessment of the business's 
ability to meet its current or future credit obligations. Examples 
include business credit score, history of business bankruptcy or 
delinquency, and/or a high number of recent business credit inquiries.
    ii. Credit characteristics of the principal owner(s) or 
guarantor(s). A financial institution reports the denial reason as 
``credit characteristics of the principal owner(s) or guarantor(s)'' if 
it denies the application based on an assessment of the principal 
owner(s) or guarantor(s)'s ability to meet its current or future credit 
obligations. Examples include principal owner(s) or guarantor(s)'s 
credit score, history of charge offs, bankruptcy or delinquency, low net 
worth, limited or insufficient credit history, or history of excessive 
overdraft.
    iii. Use of credit proceeds. A financial institution reports the 
denial reason as ``use of credit proceeds'' if it denies an application 
because, as a matter of policy or practice, it places limits on lending 
to certain kinds of businesses, products, or activities it has 
identified as high risk.
    iv. Cashflow. A financial institution reports the denial reason as 
``cashflow'' when it denies an application due to insufficient or 
inconsistent cashflow.
    v. Collateral. A financial institution reports the denial reason as 
``collateral'' when it denies an application due to collateral that it 
deems insufficient or otherwise unacceptable.
    vi. Time in business. A financial institution reports the denial 
reason as ``time in business'' when it denies an application due to 
insufficient time or experience in a line of business.
    vii. Government loan program criteria. Certain loan programs are 
backed by government agencies that have specific eligibility 
requirements. When those requirements are not met by an applicant, and 
the financial institution denies the application, the financial 
institution reports the denial reason as ``government loan program 
criteria.'' For example, if an applicant cannot meet a government-
guaranteed loan program's requirement to provide a guarantor or proof of 
insurance, the financial institution reports the reason for the denial 
as ``government loan program criteria.''
    viii. Aggregate exposure. Aggregate exposure is a measure of the 
total exposure or level of indebtedness of the business and its 
principal owner(s) associated with an application. A financial 
institution reports the denial reason as ``aggregate exposure'' where 
the total debt associated with the application is deemed high or exceeds 
certain debt thresholds set by the financial institution. For example, 
if an application for unsecured credit exceeds the maximum amount a 
financial institution is permitted to approve per applicant, as stated 
in its credit guidelines, and the financial institution denies the 
application for this reason, the financial institution reports the 
reason for denial as ``aggregate exposure.''
    ix. Unverifiable information. A financial institution reports the 
denial reason as ``unverifiable information'' when it is unable to 
verify information provided as part of the application, and denies the 
application for that reason. The unverifiable information

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must be necessary for the financial institution to make a credit 
decision based on its procedures for the type of credit requested. 
Examples include unverifiable assets or collateral, unavailable business 
credit report, and unverifiable business ownership composition.
    x. Other. A financial institution reports the denial reason as 
``other'' where none of the enumerated denial reasons adequately 
describe the principal reason or reasons it denied the application, and 
the institution reports the denial reason or reasons via free-form text 
field.
    2. Reason for denial--not applicable. A financial institution 
complies with Sec.  1002.107(a)(11) by reporting that the requirement is 
not applicable if the action taken on the application, pursuant to Sec.  
1002.107(a)(9), is not a denial. For example, if the application 
resulted in an originated covered credit transaction, or the application 
was approved but not accepted, the financial institution complies with 
Sec.  1002.107(a)(11) by reporting not applicable.

                     107(a)(12) Pricing Information

    1. General. For applications that a financial institution, pursuant 
to Sec.  1002.107(a)(9), reports as denied, withdrawn by the applicant, 
or incomplete, the financial institution reports that pricing 
information is ``not applicable.''

                       107(a)(12)(i) Interest Rate

    1. General. A financial institution complies with Sec.  
1002.107(a)(12)(i) by reporting the interest rate applicable to the 
amount of credit approved or originated as reported pursuant to Sec.  
1002.107(a)(8).
    2. Interest rate--initial period. If a covered credit transaction 
includes an initial period with an introductory interest rate of 12 
months or less, after which the interest rate adjusts upwards or shifts 
from a fixed to variable rate, a financial institution complies with 
Sec.  1002.107(a)(12)(i) by reporting information about the interest 
rate applicable after the initial period. If a covered transaction 
includes an initial period with an interest rate of more than 12 months 
after which the interest rate resets, a financial institution complies 
with Sec.  1002.107(a)(12)(i) by reporting information about the 
interest rate applicable prior to the reset period. For example, if a 
financial institution originates a covered credit transaction with a 
fixed, initial interest rate of 0 percent for six months following 
origination, after which the interest rate will adjust according to a 
Prime index rate plus a 3 percent margin, the financial institution 
reports the 3 percent margin, Prime as the name of the index used to 
adjust the interest rate, the number 6 for the length of the initial 
period, and ``not applicable'' for the index value. As another example, 
in a 10/1 adjustable-rate mortgage transaction, where the first 10 years 
of the repayment period has a fixed rate of 3 percent and after year 10 
the interest rate will adjust according to a Prime index rate plus a 3 
percent margin, a financial institution complies with Sec.  
1002.107(a)(12)(i) by reporting the fixed rate of 3 percent, the number 
120 for the initial period, and ``not applicable'' in the fields for the 
index, margin, and index value.
    3. Multiple interest rates. If a covered credit transaction includes 
multiple interest rates applicable to different credit features, a 
financial institution complies with Sec.  1002.107(a)(12)(i) by 
reporting the interest rate applicable to the amount of credit approved 
or originated reported pursuant to Sec.  1002.107(a)(8). For example, if 
a financial institution originates a credit card with different interest 
rates for purchases, balance transfers, cash advances, and overdraft 
advances, the financial institution reports the interest rate applicable 
for purchases.
    4. Index names. A financial institution complies with Sec.  
1002.107(a)(12)(i) by selecting the index used from the following list: 
Wall Street Journal Prime, 6-month CD rate, 1-year T-Bill, 3-year T-
Bill, 5-year T-Note, 12-month average of 10-year T-Bill, Cost of Funds 
Index (COFI)-National, Cost of Funds Index (COFI)-11th District, 
Constant Maturity Treasury (CMT). If the index used is internal to the 
financial institution, the financial institution reports ``internal 
index'' via the list of indices provided. If the index used does not 
appear on the list of indices provided (and is not internal to the 
financial institution), the financial institution reports ``other'' and 
reports the name of the index via free-form text field.
    5. Index value. For covered transactions with an adjustable interest 
rate, a financial institution complies with Sec.  1002.107(a)(12)(i)(B) 
by reporting the index value used to set the rate that is or would be 
applicable to the covered transaction.

                107(a)(12)(ii) Total Origination Charges

    1. Charges in comparable cash transactions. Charges imposed 
uniformly in cash and credit transactions are not reportable under Sec.  
1002.107(a)(12)(ii). In determining whether an item is part of the total 
origination charges, a financial institution should compare the covered 
credit transaction in question with a similar cash transaction. A 
financial institution financing the sale of property or services may 
compare charges with those payable in a similar cash transaction by the 
seller of the property or service.
    2. Charges by third parties. A financial institution includes fees 
and amounts charged by someone other than the financial institution in 
the total charges reported if the financial institution:

[[Page 93]]

    i. Requires the use of a third party as a condition of or an 
incident to the extension of credit, even if the applicant can choose 
the third party; or
    ii. Retains a portion of the third-party charge, to the extent of 
the portion retained.
    3. Special rule; broker fees. A financial institution complies with 
Sec.  1002.107(a)(12)(ii) by including fees charged by a broker 
(including fees paid by the applicant directly to the broker or to the 
financial institution for delivery to the broker) in the total 
origination charges reported even if the financial institution does not 
require the applicant to use a broker and even if the financial 
institution does not retain any portion of the charge. For more 
information on broker fees, see commentary for Sec.  
1002.107(a)(12)(iii).
    4. Bundled services. Total origination charges include all charges 
imposed directly or indirectly by the financial institution at or before 
origination as an incident to or a condition of the extension of credit. 
Accordingly, a financial institution complies with Sec.  
1002.107(a)(12)(ii) by including charges for other products or services 
paid at or before origination in the total origination charges reported 
if the financial institution requires the purchase of such other product 
or service as a condition of or an incident to the extension of credit.
    5. Origination charges--examples. Examples of origination charges 
may include application fees, credit report fees, points, appraisal 
fees, and other similar charges.
    6. Net lender credit. If a financial institution provides a credit 
to an applicant that is greater than the total origination charges the 
applicant would have paid, the financial institution complies with Sec.  
1002.107(a)(12)(ii) by reporting the net lender credit as a negative 
amount. For example, if a covered transaction has $500 provided to the 
applicant at origination to offset closing costs, and the financial 
institution does not charge any origination charges, the financial 
institution complies with Sec.  1002.107(a)(12)(ii) by reporting 
negative $500 as the total origination charges.

                       107(a)(12)(iii) Broker Fees

    1. Amount. A financial institution complies with Sec.  
1002.107(a)(12)(iii) by including the fees reported in Sec.  
1002.107(a)(12)(ii) that are fees paid by the applicant directly to the 
broker or to the financial institution for delivery to the broker. For 
example, a covered transaction has $3,000 of total origination charges. 
Of that $3,000, $250 are fees paid by the applicant directly to a broker 
and an additional $300 are fees paid to the financial institution for 
delivery to the broker. The financial institution complies with Sec.  
1002.107(a)(12)(iii) by reporting $550 in the broker fees reported.
    2. Fees paid directly to a broker by an applicant. A financial 
institution complies with Sec.  1002.107(a)(12)(iii) by relying on the 
best information readily available to the financial institution at the 
time final action is taken. Information readily available could include, 
for example, information provided by an applicant or broker that the 
financial institution reasonably believes regarding the amount of fees 
paid by the applicant directly to the broker.

                  107(a)(12)(iv) Initial Annual Charges

    1. Charges during the initial annual period. The total initial 
annual charges include all charges scheduled to be imposed during the 
initial annual period following origination. For example, if a financial 
institution originates a covered credit transaction with a $50 monthly 
fee and a $100 annual fee, the financial institution complies with Sec.  
1002.107(a)(12)(iv) by reporting $700 in the initial annual charges 
reported. If there will be a charge in the initial annual period 
following origination but the amount of that charge is uncertain at the 
time of origination, a financial institution complies with Sec.  
1002.107(a)(12)(iv) by not reporting that charge as scheduled to be 
imposed during the initial annual period following origination.
    2. Interest excluded. A financial institution complies with Sec.  
1002.107(a)(12)(iv) by excluding any interest expense from the initial 
annual charges reported.
    3. Avoidable charges. A financial institution complies with Sec.  
1002.107(a)(12)(iv) by only including scheduled charges and excluding 
any charges for events that are avoidable by the applicant from the 
initial annual charges reported. Examples of avoidable charges include 
charges for late payment, for exceeding a credit limit, for delinquency 
or default, or for paying items that overdraw an account.
    4. Initial annual charges--examples. Examples of charges scheduled 
to be imposed during the initial annual period may include monthly fees, 
annual fees, and other similar charges.
    5. Scheduled charges with variable amounts. A financial institution 
complies with Sec.  1002.107(a)(12)(iv) by reporting as the default the 
highest amount for a charge scheduled to be imposed. For example, if a 
covered credit transaction has a $75 monthly fee, but the fee is reduced 
to $0 if the applicant maintains an account at the financial institution 
originating the covered credit transaction, the financial institution 
complies with Sec.  1002.107(a)(12)(iv) by reporting $900 ($75 x 12) in 
the initial annual charges reported.
    6. Transactions with a term of less than one year. For a transaction 
with a term of less than one year, a financial institution complies with 
Sec.  1002.107(a)(12)(iv) by reporting all charges scheduled to be 
imposed during the term of the transaction.

[[Page 94]]

107(a)(12)(v) Additional Cost for Merchant Cash Advances or Other Sales-
                             Based Financing

    1. Merchant cash advances. Section 1002.107(a)(12)(v) requires a 
financial institution to report the difference between the amount 
advanced and the amount to be repaid for a merchant cash advance or 
other sales-based financing transaction. Thus, in a merchant cash 
advance, a financial institution reports the difference between the 
amount advanced and the amount to be repaid, using the amounts 
(expressed in dollars) provided in the contract between the financial 
institution and the applicant.

                   107(a)(12)(vi) Prepayment Penalties

    1. Policies and procedures applicable to the covered credit 
transaction. The policies and procedures applicable to the covered 
credit transaction include the practices that the financial institution 
follows when evaluating applications for the specific credit type and 
credit purpose requested. For example, assume that a financial 
institution's written procedures permit it to include prepayment 
penalties in the loan agreement for its term loans secured by non-owner 
occupied commercial real estate. For such transactions, the financial 
institution includes prepayment penalties in some loan agreements but 
not others. For an application for, or origination of, a term loan 
secured by non-owner occupied commercial real estate, the financial 
institution reports under Sec.  1002.107(a)(12)(vi)(A) that a prepayment 
penalty could have been included under the policies and procedures 
applicable to the transaction, regardless of whether the term loan 
secured by non-owner occupied commercial real estate actually includes a 
prepayment penalty.
    2. Balloon finance charges. A financial institution complies with 
Sec.  1002.107(a)(12)(vi) by reporting as a prepayment penalty any 
balloon finance charge that may be imposed for paying all or part of the 
transaction's principal before the date on which the principal is due. 
For example, under the terms of a transaction, the amount of funds 
advanced is $12,000, the amount to be repaid is $24,000 (which includes 
$12,000 in principal and $12,000 in interest and fees), the length of 
the transaction is 12 months, and the applicant must repay $2,000 per 
month. The terms of the transaction state that if the applicant prepays 
the principal before the 12-month period is over, the applicant is 
responsible for paying the difference between $24,000 and the amount the 
applicant has already repaid prior to initiating prepayment. The 
difference between the $24,000 to be repaid and what the applicant has 
already repaid prior to initiating prepayment is a balloon finance 
charge and should be reported as a prepayment penalty.

                         107(a)(13) Census Tract

    1. General. A financial institution complies with Sec.  
1002.107(a)(13) by reporting a census tract number as defined by the 
U.S. Census Bureau, which includes State and county numerical codes. A 
financial institution complies with Sec.  1002.107(a)(13) if it uses the 
boundaries and codes in effect on January 1 of the calendar year covered 
by the small business lending application register that it is reporting. 
The financial institution reports census tract based on the following:
    i. Proceeds address. A financial institution complies with Sec.  
1002.107(a)(13) by reporting a census tract based on the address or 
location where the proceeds of the credit applied for or originated will 
be or would have been principally applied, if known. For example, a 
financial institution would report a census tract based on the address 
or location of the site where the proceeds of a construction loan will 
be applied.
    ii. Main office or headquarters address. If the address or location 
where the proceeds of the credit applied for or originated will be or 
would have been principally applied is unknown, a financial institution 
complies with Sec.  1002.107(a)(13) by reporting a census tract number 
based on the address or location of the main office or headquarters of 
the applicant, if known. For example, the address or location of the 
main office or headquarters of the applicant may be the home address of 
a sole proprietor or the office address of a sole proprietor or other 
applicant.
    iii. Another address or location. If neither the address or location 
where the proceeds of the credit applied for or originated will be or 
would have been principally applied nor the address or location of the 
main office or headquarters of the applicant are known, a financial 
institution complies with Sec.  1002.107(a)(13) by reporting a census 
tract number based on another address or location associated with the 
applicant.
    iv. Type of address used. In addition to reporting the census tract, 
pursuant to Sec.  1002.107(a)(13)(iv) a financial institution must 
report which one of the three types of addresses or locations listed in 
Sec.  1002.107(a)(13)(i) through (iii) and described in comments 
107(a)(13)-1.i through iii that the census tract is determined from.
    2. Financial institution discretion. A financial institution 
complies with Sec.  1002.107(a)(13) by identifying the appropriate 
address or location and the type of that address or location in good 
faith, using appropriate information from the applicant's credit file or 
otherwise known by the financial institution. A financial institution is 
not required to make inquiries beyond its standard procedures as to the 
nature of the addresses or locations it collects.
    3. Address or location not provided by applicant and otherwise 
undetermined. Pursuant to

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Sec.  1002.107(c), a financial institution shall maintain procedures 
reasonably designed to collect applicant-provided data, which includes 
at least one address or location for an applicant for census tract 
reporting. However, if a financial institution is nonetheless unable to 
collect or otherwise determine any address or location for an 
application, the financial institution reports that the census tract 
information is ``not provided by applicant and otherwise undetermined.''
    4. Safe harbor. As described in Sec.  1002.112(c)(2) and comment 
112(c)-1, a financial institution that obtains an incorrect census tract 
by correctly using a geocoding tool provided by the FFIEC or the Bureau 
does not violate the Act or subpart B of this part.

                     107(a)(14) Gross Annual Revenue

    1. Collecting gross annual revenue. A financial institution reports 
the applicant's gross annual revenue, expressed in dollars, for its 
fiscal year preceding when the information was collected. A financial 
institution may rely on the applicant's statements or on information 
provided by the applicant in collecting and reporting gross annual 
revenue, even if the applicant's statement or information is based on 
estimation or extrapolation. However, pursuant to Sec.  1002.107(b), if 
the financial institution verifies the gross annual revenue provided by 
the applicant, it must report the verified information. Also, pursuant 
to comment 107(c)(1)-5, a financial institution reports updated gross 
annual revenue data if it obtains more current data from the applicant 
during the application process. If a financial institution has already 
verified gross annual revenue data and then the applicant updates it, 
the financial institution reports the information it believes to be more 
accurate, in its discretion. The financial institution may use the 
following language to ask about gross annual revenue and may rely on the 
applicant's answer (unless subsequently verified or updated):
    What was the gross annual revenue of the business applying for 
credit in its last full fiscal year? Gross annual revenue is the amount 
of money the business earned before subtracting taxes and other 
expenses. You may provide gross annual revenue calculated using any 
reasonable method.
    2. Gross annual revenue not provided by applicant and otherwise 
undetermined. Pursuant to Sec.  1002.107(c), a financial institution 
shall maintain procedures reasonably designed to collect applicant-
provided data, which includes the gross annual revenue of the applicant. 
However, if a financial institution is nonetheless unable to collect or 
determine the gross annual revenue of the applicant, the financial 
institution reports that the gross annual revenue is ``not provided by 
applicant and otherwise undetermined.''
    3. Affiliate revenue. A financial institution is permitted, but not 
required, to report the gross annual revenue for the applicant that 
includes the revenue of affiliates as well. Likewise, as explained in 
comment 106(b)(1)-3, in determining whether the applicant is a small 
business under Sec.  1002.106(b), a financial institution may rely on an 
applicant's representations regarding gross annual revenue, which may or 
may not include affiliates' revenue.
    4. Gross annual revenue for a startup business. In a typical startup 
business situation where the applicant has no gross annual revenue for 
its fiscal year preceding when the information is collected, the 
financial institution reports that the applicant's gross annual revenue 
in the preceding fiscal year is ``zero.'' The financial institution 
shall not report pro forma projected revenue figures because these 
figures do not reflect actual gross revenue.

                          107(a)(15) NAICS Code

    1. General. NAICS stands for North American Industry Classification 
System. The Office of Management and Budget has charged the Economic 
Classification Policy Committee with the maintenance and review of 
NAICS. A financial institution complies with Sec.  1002.107(a)(15) if it 
uses the 3-digit NAICS subsector codes in effect on January 1 of the 
calendar year covered by the small business lending application register 
that it is reporting.
    2. NAICS not provided by applicant and otherwise undetermined. 
Pursuant to Sec.  1002.107(c), a financial institution shall maintain 
procedures reasonably designed to collect applicant-provided data, which 
includes NAICS code. However, if a financial institution is nonetheless 
unable to collect or otherwise determine a NAICS code for the applicant, 
the financial institution reports that the NAICS code is ``not provided 
by applicant and otherwise undetermined.''
    3. Safe harbor. As described in Sec.  1002.112(c)(3) and comment 
112(c)-2, a financial institution that obtains an incorrect NAICS code 
does not violate the Act or subpart B of this part if it either relies 
on an applicant's representations or on an appropriate third-party 
source, in accordance with Sec.  1002.107(b), regarding the NAICS code, 
or identifies the NAICS code itself, provided that the financial 
institution maintains procedures reasonably adapted to correctly 
identify a 3-digit NAICS code.

                      107(a)(16) Number of Workers

    1. General. A financial institution complies with Sec.  
1002.107(a)(16) by reporting the number of people who work for the 
applicant, using the ranges prescribed in the Filing Instructions Guide.
    2. Collecting number of workers. A financial institution may collect 
number of workers

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from an applicant using the ranges for reporting as specified by the 
Bureau (see comment 107(a)(16)-1) or as a numerical value. When asking 
for the number of workers from an applicant, a financial institution 
shall explain that full-time, part-time and seasonal employees, as well 
as contractors who work primarily for the applicant, would be counted as 
workers, but principal owners of the applicant would not. If asked, the 
financial institution shall explain that volunteers are not counted as 
workers, and workers for affiliates of the applicant are counted if the 
financial institution were also collecting the affiliates' gross annual 
revenue. The financial institution may use the following language to ask 
about the number of workers and may rely on the applicant's answer 
(unless subsequently verified or updated):
    Counting full-time, part-time and seasonal workers, as well as 
contractors who work primarily for the business applying for credit, but 
not counting principal owners of the business, how many people work for 
the business applying for credit?
    3. Number of workers not provided by applicant and otherwise 
undetermined. Pursuant to Sec.  1002.107(c), a financial institution 
shall maintain procedures reasonably designed to collect applicant-
provided data, which includes the number of workers of the applicant. 
However, if a financial institution is nonetheless unable to collect or 
determine the number of workers of the applicant, the financial 
institution reports that the number of workers is ``not provided by 
applicant and otherwise undetermined.''

                       107(a)(17) Time in Business

    1. Collecting time in business. A financial institution complies 
with Sec.  1002.107(a)(17) by reporting the time the applicant has been 
in business.
    i. If a financial institution collects or otherwise obtains the 
number of years an applicant has been in business as part of its 
procedures for evaluating an application for credit, it reports the time 
in business in whole years, rounded down to the nearest whole year.
    ii. If a financial institution does not collect time in business as 
described in comment 107(a)(17)-1.i, but as part of its procedures 
determines whether or not the applicant's time in business is less than 
two years, it reports the applicant's time in business as either less 
than two years or two or more years in business.
    iii. If a financial institution does not collect time in business as 
part of its procedures for evaluating an application for credit as 
described in comments 107(a)(17)-1.i or .ii, the financial institution 
complies with Sec.  1002.107(a)(17) by asking the applicant whether it 
has been in existence for less than two years or two or more years and 
reporting the information provided by the applicant accordingly.
    2. Time in business collected as part of the financial institution's 
procedures for evaluating an application for credit. A financial 
institution that collects or obtains an applicant's time in business as 
part of its procedures for evaluating an application for credit is not 
required to collect or obtain time in business pursuant to any 
particular definition of time in business for this purpose. For example, 
if the financial institution collects the number of years the applicant 
has existed (such as by asking the applicant when its business was 
started, or by obtaining the applicant's date of incorporation from a 
Secretary of State or other State or Federal agency that registers or 
licenses businesses) as the time in business, the financial institution 
reports that information accordingly pursuant to comment 107(a)(17)-1.i. 
Similarly, if the financial institution collects the number of years of 
experience the applicant's owners have in the current line of business, 
the financial institution reports that information accordingly pursuant 
to comment 107(a)(17)-1.i. If, however, the financial institution 
collects both the number of years the applicant has existed as well as 
some other measure of time in business (such as the number of years of 
experience the applicant's owners have in the current line of business), 
the financial institution reports the number of years the applicant has 
existed as the time in business pursuant to comment 107(a)(17)-1.i.
    3. Time in business not provided by applicant and otherwise 
undetermined. Pursuant to Sec.  1002.107(c), a financial institution 
shall maintain procedures reasonably designed to collect applicant-
provided data, which includes the applicant's time in business. However, 
if a financial institution is nonetheless unable to collect or determine 
the applicant's time in business, the financial institution reports that 
the time in business is ``not provided by applicant and otherwise 
undetermined.''

   107(a)(18) Minority-Owned, Women-Owned, and LGBTQI+-Owned Business 
                                Statuses

    1. General. A financial institution must ask an applicant whether it 
is a minority-owned, women-owned, and/or LGBTQI+-owned business. The 
financial institution must permit an applicant to refuse (i.e., decline) 
to answer the financial institution's inquiry regarding business status 
and must inform the applicant that the applicant is not required to 
provide the information. See the sample data collection form in appendix 
E to this part for sample language for providing this notice to 
applicants. The financial institution must report the applicant's 
substantive response regarding each business status, that the applicant 
declined to answer the inquiry

[[Page 97]]

(that is, selected an answer option of ``I do not wish to provide this 
information'' or similar), or its failure to respond to the inquiry 
(that is, ``not provided by applicant''), as applicable.
    2. Definitions. When inquiring about minority-owned, women-owned, 
and LGBTQI+-owned business statuses (regardless of whether the request 
is made on a paper form, electronically, or orally), the financial 
institution also must provide the applicant with definitions of the 
terms ``minority-owned business,'' ``women-owned business,'' and 
``LGBTQI+-owned business'' as set forth in Sec.  1002.102 (m), (s) and 
(l), respectively. The financial institution satisfies this requirement 
if it provides the definitions as set forth in the sample data 
collection form in appendix E.
    3. Combining questions. A financial institution may combine on the 
same paper or electronic data collection form the questions regarding 
minority-owned, women-owned, and LGBTQI+-owned business status pursuant 
to Sec.  1002.107(a)(18) with principal owners' ethnicity, race, and sex 
pursuant to Sec.  1002.107(a)(19) and the applicant's number of 
principal owners pursuant to Sec.  1002.107(a)(20). See the sample data 
collection form in appendix E.
    4. Notices. When requesting minority-owned, women-owned, and 
LGBTQI+-owned business statuses from an applicant, a financial 
institution must inform the applicant that the financial institution 
cannot discriminate on the basis of the applicant's minority-owned, 
women-owned, or LGBTQI+-owned business statuses, or on whether the 
applicant provides its minority-owned, women-owned, or LGBTQI+-owned 
business statuses. A financial institution must also inform the 
applicant that Federal law requires it to ask for an applicant's 
minority-owned, women-owned, and LGBTQI+-owned business statuses to help 
ensure that all small business applicants for credit are treated fairly 
and that communities' small business credit needs are being fulfilled. A 
financial institution may combine these notices regarding minority-
owned, women-owned, and LGBTQI+-owned business statuses with the notices 
that a financial institution is required to provide when requesting 
principal owners' ethnicity, race, and sex if a financial institution 
requests information pursuant to Sec.  1002.107(a)(18) and (19) in the 
same data collection form or at the same time. See the sample data 
collection form in appendix E for sample language that a financial 
institution may use for these notices.
    5. Maintaining the record of an applicant's response regarding 
minority-owned, women-owned, and LGBTQI+-owned business statuses 
separate from the application. A financial institution must maintain the 
record of an applicant's responses to the financial institution's 
inquiry pursuant to Sec.  1002.107(a)(18) separate from the application 
and accompanying information. See Sec.  1002.111(b) and comment 111(b)-
1. If the financial institution provides a paper or electronic data 
collection form, the data collection form must not be part of the 
application form or any other document that the financial institution 
uses to provide or collect any information other than minority-owned 
business status, women-owned business status, LGBTQI+-owned business 
status, principal owners' ethnicity, race, and sex, and the number of 
the applicant's principal owners. See the sample data collection form in 
appendix E. For example, if the financial institution sends the data 
collection form via email, the data collection form should be a separate 
attachment to the email or accessed through a separate link in the 
email. If the financial institution uses a web-based data collection 
form, the form should be on its own page.
    6. Minority-owned, women-owned, and/or LGBTQI+-owned business 
statuses not provided by applicant. Pursuant to Sec.  1002.107(c), a 
financial institution shall maintain procedures reasonably designed to 
collect applicant-provided data, which includes the applicant's 
minority-owned, women-owned, and LGBTQI+-owned business statuses. 
However, if a financial institution does not receive a response to the 
financial institution's inquiry pursuant to Sec.  1002.107(a)(18), the 
financial institution reports that the applicant's business statuses 
were ``not provided by applicant.''
    7. Applicant declines to provide information about minority-owned, 
women-owned, and/or LGBTQI+-owned business statuses. A financial 
institution reports that the applicant responded that it did not wish to 
provide the information about an applicant's minority-owned, women-
owned, and LGBTQI+-owned business statuses, if the applicant declines to 
provide the information by selecting such a response option on a paper 
or electronic form (e.g., by selecting an answer option of ``I do not 
wish to provide this information'' or similar). The financial 
institution also reports an applicant's refusal to provide such 
information in this way, if the applicant orally declines to provide 
such information for a covered application taken by telephone or another 
medium that does not involve providing any paper or electronic 
documents.
    8. Conflicting responses provided by applicants. If the applicant 
both provides a substantive response to the financial institution's 
inquiry regarding business status (that is, indicates that it is a 
minority-owned, women-owned, and/or LGBTQI+-owned business, or checks 
``none apply'' or similar) and also checks the box indicating ``I do not 
wish to provide this information'' or similar, the financial institution 
reports the substantive response(s) provided by the

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applicant (rather than reporting that the applicant declined to provide 
the information).
    9. No verification of business statuses. Notwithstanding Sec.  
1002.107(b), a financial institution must report the applicant's 
substantive response(s), that the applicant declined to answer the 
inquiry (that is, selected an answer option of ``I do not wish to 
provide this information'' or similar), or the applicant's failure to 
respond to the inquiry (that is, that the information was ``not provided 
by applicant'') pursuant to Sec.  1002.107(a)(18), even if the financial 
institution verifies or otherwise obtains an applicant's minority-owned, 
women-owned, and/or LGBTQI+-owned business statuses for other purposes. 
For example, if a financial institution uses a paper data collection 
form to ask an applicant if it is a minority-owned business, a women-
owned business, and/or an LGBTQI+-owned business and the applicant does 
not indicate that it is a minority-owned business, the financial 
institution must not report that the applicant is a minority-owned 
business, even if the applicant indicates that it is a minority-owned 
business for other purposes, such as for a special purpose credit 
program or a Small Business Administration program.

         107(a)(19) Ethnicity, Race, and Sex of Principal Owners

    1. General. A financial institution must ask an applicant to provide 
its principal owners' ethnicity, race, and sex. The financial 
institution must permit an applicant to refuse (i.e., decline) to answer 
the financial institution's inquiry and must inform the applicant that 
it is not required to provide the information. See the sample data 
collection form in appendix E to this part for sample language for 
providing this notice to applicants. The financial institution must 
report the applicant's substantive responses regarding principal owners' 
ethnicity, race, and sex, that the applicant declined to answer an 
inquiry (that is, selected an answer option of ``I do not wish to 
provide this information'' or similar), or its failure to respond to an 
inquiry (that is, ``not provided by applicant''), as applicable. The 
financial institution must report an applicant's responses about its 
principal owners' ethnicity, race, and sex, regardless of whether an 
applicant declines or fails to answer an inquiry about the number of its 
principal owners under Sec.  1002.107(a)(20). If an applicant provides 
some, but not all, of the requested information about the ethnicity, 
race, and sex of a principal owner, the financial institution reports 
the information that was provided by the applicant and reports that the 
applicant declined to provide or did not provide (as applicable) the 
remainder of the information. See comments 107(a)(19)-6 and -7.
    2. Definition of principal owner. When requesting a principal 
owner's ethnicity, race, and sex, the financial institution must also 
provide the applicant with the definition of the term ``principal 
owner'' as set forth in Sec.  1002.102(o). The financial institution 
satisfies this requirement if it provides the definition of principal 
owner as set forth in the sample data collection form in appendix E.
    3. Combining questions. A financial institution may combine on the 
same paper or electronic data collection form the questions regarding 
the principal owners' ethnicity, race, and sex pursuant to Sec.  
1002.107(a)(19) with the applicant's number of principal owners pursuant 
to Sec.  1002.107(a)(20) and the applicant's minority-owned, women-
owned, and LGBTQI+-owned business statuses pursuant to Sec.  
1002.107(a)(18). See the sample data collection form in appendix E.
    4. Notices. When requesting a principal owner's ethnicity, race, and 
sex from an applicant, a financial institution must inform the applicant 
that the financial institution cannot discriminate on the basis of a 
principal owner's ethnicity, race, or sex/gender, or on whether the 
applicant provides the information. A financial institution must also 
inform the applicant that Federal law requires it to ask for the 
principal owners' ethnicity, race, and sex/gender to help ensure that 
all small business applicants for credit are treated fairly and that 
communities' small business credit needs are being fulfilled. A 
financial institution may combine these notices with the similar notices 
that a financial institution is required to provide when requesting 
minority-owned business status, women-owned business status, and 
LGBTQI+-owned business status, if a financial institution requests 
information pursuant to Sec.  1002.107(a)(18) and (19) in the same data 
collection form or at the same time. See the sample data collection form 
in appendix E for sample language that a financial institution may use 
for these notices.
    5. Maintaining the record of an applicant's responses regarding 
principal owners' ethnicity, race, and sex separate from the 
application. A financial institution must maintain the record of an 
applicant's response to the financial institution's inquiries pursuant 
to Sec.  1002.107(a)(19) separate from the application and accompanying 
information. See Sec.  1002.111(b) and comment 111(b)-1. If the 
financial institution provides a paper or electronic data collection 
form, the data collection form must not be part of the application form 
or any other document that the financial institution uses to provide or 
collect any information other than minority-owned business status, 
women-owned business status, LGBTQI+-owned business status, principal 
owners' ethnicity, race, and sex, and the number of the applicant's 
principal owners. See the sample data collection form in appendix E for 
sample language. For example, if the financial institution sends the 
data

[[Page 99]]

collection form via email, the data collection form should be a separate 
attachment to the email or accessed through a separate link in the 
email. If the financial institution uses a web-based data collection 
form, the form should be on its own page.
    6. Ethnicity, race, or sex of principal owners not provided by 
applicant. Pursuant to Sec.  1002.107(c), a financial institution shall 
maintain procedures reasonably designed to collect applicant-provided 
data, which includes the ethnicity, race, and sex of an applicant's 
principal owners. However, if an applicant does not provide the 
information, such as in response to a request for a principal owner's 
ethnicity, race, or sex on a paper or electronic data collection form, 
the financial institution reports the ethnicity, race, or sex (as 
applicable) as ``not provided by applicant'' for that principal owner. 
For example, if the financial institution provides a paper data 
collection form to an applicant with two principal owners, and asks the 
applicant to complete and return the form but the applicant does not do 
so, the financial institution reports that the two principal owners' 
ethnicity, race, and sex were ``not provided by applicant.'' Similarly, 
if the financial institution provides an electronic data collection 
form, the applicant indicates that it has two principal owners, the 
applicant provides ethnicity, race, and sex for the first principal 
owner, and the applicant does not make any selections for the second 
principal owner's ethnicity, race, and sex, the financial institution 
reports the ethnicity, race, and sex that the applicant provided for the 
first principal owner and reports that each of the ethnicity, race, and 
sex for the second principal owner was ``not provided by applicant.'' 
Additionally, if the financial institution provides an electronic or 
paper data collection form, the applicant indicates that it has one 
principal owner, provides the principal owner's ethnicity and sex 
information, but does not provide information about the principal 
owner's race and also does not select a response of ``I do not wish to 
provide this information'' with regard to race, the financial 
institution reports the ethnicity and sex provided by the applicant and 
reports that the race of the principal owner was ``not provided by 
applicant.''
    7. Applicant declines to provide information about a principal 
owner's ethnicity, race, or sex. A financial institution reports that 
the applicant responded that it did not wish to provide the information 
about a principal owner's ethnicity, race, or sex (as applicable), if 
the applicant declines to provide the information by selecting such a 
response option on a paper or electronic form (e.g., by selecting an 
answer option of ``I do not wish to provide this information'' or 
similar). The financial institution also reports an applicant's refusal 
to provide such information in this way, if the applicant orally 
declines to provide such information for a covered application taken by 
telephone or another medium that does not involve providing any paper or 
electronic documents.
    8. Conflicting responses provided by applicant. If the applicant 
both provides a substantive response to a request for a principal 
owner's ethnicity, race, or sex (that is, identifies a principal owner's 
race, ethnicity, or sex) and also checks the box indicating ``I do not 
wish to provide this information'' or similar, the financial institution 
reports the information on ethnicity, race, or sex that was provided by 
the applicant (rather than reporting that the applicant declined provide 
the information). For example, if an applicant is completing a paper 
data collection form and writes in a response that a principal owner's 
sex is female and also indicates on the form that the applicant does not 
wish to provide information regarding that principal owner's sex, the 
financial institution reports the principal owner's sex as female.
    9. No verification of ethnicity, race, and sex of principal owners. 
Notwithstanding Sec.  1002.107(b), a financial institution must report 
the applicant's substantive responses as to its principal owners' 
ethnicity, race, and sex (that is, the applicant's identification of its 
principal owners' race, ethnicity, and sex), that the applicant declined 
to answer the inquiry (that is, selected an answer option of ``I do not 
wish to provide this information'' or similar), or the applicant's 
failure to respond to the inquiry (that is, the information was ``not 
provided by applicant'') pursuant to Sec.  1002.107(a)(19), even if the 
financial institution verifies or otherwise obtains the ethnicity, race, 
or sex of the applicant's principal owners for other purposes.
    10. Reporting for fewer than four principal owners. If an applicant 
has fewer than four principal owners, the financial institution reports 
ethnicity, race, and sex information for the number of principal owners 
that the applicant has and reports the ethnicity, race, and sex fields 
for additional principal owners as ``not applicable.'' For example, if 
an applicant has only one principal owner, the financial institution 
reports ethnicity, race, and sex information for the first principal 
owner and reports as ``not applicable'' the ethnicity, race, and sex 
data fields for principal owners two through four.
    11. Previously collected ethnicity, race, and sex information. If a 
financial institution reports one or more principal owners' ethnicity, 
race, or sex information based on previously collected data under Sec.  
1002.107(d), the financial institution does not need to collect any 
additional ethnicity, race, or sex information for other principal 
owners (if any). See also comment 107(d)-9.
    12. Guarantors. A financial institution does not collect or report a 
guarantor's ethnicity, race, and sex unless the guarantor is also a

[[Page 100]]

principal owner of the applicant, as defined in Sec.  1002.102(o).
    13. Ethnicity. i. Aggregate categories. A financial institution must 
permit an applicant to provide each principal owner's ethnicity for 
purposes of Sec.  1002.107(a)(19) using one or more of the following 
aggregate categories:
    A. Hispanic or Latino.
    B. Not Hispanic or Latino.
    ii. Disaggregated subcategories. A financial institution must permit 
an applicant to provide each principal owner's ethnicity for purposes of 
Sec.  1002.107(a)(19) using one or more of the following disaggregated 
subcategories, regardless of whether the applicant has indicated that 
the relevant principal owner is Hispanic or Latino and regardless of 
whether the applicant selects any aggregate categories: Cuban; Mexican; 
Puerto Rican; or Other Hispanic or Latino. If an applicant indicates 
that a principal owner is Other Hispanic or Latino, the financial 
institution must permit the applicant to provide additional information 
regarding the principal owner's ethnicity, by using free-form text on a 
paper or electronic data collection form or using language that informs 
the applicant of the opportunity to self-identify when taking the 
application by means other than a paper or electronic data collection 
form, such as by telephone. The financial institution must permit the 
applicant to provide additional information indicating, for example, 
that the principal owner is Argentinean, Colombian, Dominican, 
Nicaraguan, Salvadoran, or Spaniard. See the sample data collection form 
in appendix E for sample language. If an applicant chooses to provide 
additional information regarding a principal owner's ethnicity, such as 
by indicating that a principal owner is Argentinean orally or in writing 
on a paper or electronic form, a financial institution must report that 
additional information via free-form text. If the applicant provides 
such additional information but does not also indicate that the 
principal owner is Other Hispanic or Latino (e.g., by selecting Other 
Hispanic or Latino on a paper or electronic form), a financial 
institution is permitted, but not required, to report Other Hispanic or 
Latino as well.
    iii. Selecting multiple categories. The financial institution must 
permit the applicant to select one, both, or none of the aggregate 
categories and as many disaggregated subcategories as the applicant 
chooses. A financial institution must permit an applicant to select a 
disaggregated subcategory even if the applicant does not select the 
corresponding aggregate category. For example, an applicant must be 
permitted to select the Mexican disaggregated subcategory for a 
principal owner without being required to select the Hispanic or Latino 
aggregate category. If an applicant provides ethnicity information for a 
principal owner, the financial institution reports all of the aggregate 
categories and disaggregated subcategories provided by the applicant. 
For example, if an applicant selects both aggregate categories and four 
disaggregated subcategories for a principal owner, the financial 
institution reports the two aggregate categories that the applicant 
selected and all four of the disaggregated subcategories that the 
applicant selected. Additionally, if an applicant selects only the 
Mexican disaggregated subcategory for a principal owner and no aggregate 
categories, the financial institution reports Mexican for the ethnicity 
of the applicant's principal owner but does not also report Hispanic or 
Latino. Further, if the applicant selects an aggregate category (e.g., 
Not Hispanic or Latino) and a disaggregated subcategory that does not 
correspond to the aggregate category (e.g., Puerto Rican), the financial 
institution reports the information as provided by the applicant (e.g., 
Not Hispanic or Latino, and Puerto Rican).
    14. Race. i. Aggregate categories. A financial institution must 
permit an applicant to provide each principal owner's race for purposes 
of Sec.  1002.107(a)(19) using one or more of the following aggregate 
categories:
    A. American Indian or Alaska Native.
    B. Asian.
    C. Black or African American.
    D. Native Hawaiian or Other Pacific Islander.
    E. White.
    ii. Disaggregated subcategories. The financial institution must 
permit an applicant to provide a principal owner's race for purposes of 
Sec.  1002.107(a)(19) using one or more of the disaggregated 
subcategories as listed in this comment 107(a)(19)-14.ii, regardless of 
whether the applicant has selected the corresponding aggregate category.
    A. The Asian aggregate category includes the following disaggregated 
subcategories: Asian Indian; Chinese; Filipino; Japanese; Korean; 
Vietnamese; and Other Asian. An applicant must also be permitted to 
provide the principal owner's race using one or more of these 
disaggregated subcategories regardless of whether the applicant 
indicates that the principal owner is Asian and regardless of whether 
the applicant selects any aggregate categories. Additionally, if an 
applicant indicates that a principal owner is Other Asian, the financial 
institution must permit the applicant to provide additional information 
about the principal owner's race, by using free-form text on a paper or 
electronic data collection form or using language that informs the 
applicant of the opportunity to self-identify when taking the 
application by means other than a paper or electronic data collection 
form, such as by telephone. The financial institution must permit the 
applicant to provide additional information indicating, for example, 
that the principal owner is Cambodian, Hmong, Laotian, Pakistani, or

[[Page 101]]

Thai. See the sample data collection form in appendix E for sample 
language.
    B. The Black or African American aggregate category includes the 
following disaggregated subcategories: African American; Ethiopian; 
Haitian; Jamaican; Nigerian; Somali; or Other Black or African American. 
An applicant must also be permitted to provide the principal owner's 
race using one or more of these disaggregated subcategories regardless 
of whether the applicant indicates that the principal owner is Black or 
African American and regardless of whether the applicant selects any 
aggregate categories. Additionally, if an applicant indicates that a 
principal owner is Other Black or African American, the financial 
institution must permit the applicant to provide additional information 
about the principal owner's race, by using free-form text on a paper or 
electronic data collection form or using language that informs the 
applicant of the opportunity to self-identify when taking the 
application by means other than a paper or electronic data collection 
form, such as by telephone. The financial institution must permit the 
applicant to provide additional information indicating, for example, 
that the principal owner is Barbadian, Ghanaian, or South African. See 
the sample data collection form in appendix E for sample language.
    C. The Native Hawaiian or Other Pacific Islander aggregate category 
includes the following disaggregated subcategories: Guamanian or 
Chamorro; Native Hawaiian; Samoan; and Other Pacific Islander. An 
applicant must also be permitted to provide the principal owner's race 
using one or more of these disaggregated subcategories regardless of 
whether the applicant indicates that the principal owner is Native 
Hawaiian or Other Pacific Islander and regardless of whether the 
applicant selects any aggregate categories. Additionally, if an 
applicant indicates that a principal owner is Other Pacific Islander, 
the financial institution must permit the applicant to provide 
additional information about the principal owner's race, by using free-
form text on a paper or electronic data collection form or using 
language that informs the applicant of the opportunity to self-identify 
when taking the application by means other than a paper or electronic 
data collection form, such as by telephone. The financial institution 
must permit the applicant to provide additional information indicating, 
for example, that the principal owner is Fijian or Tongan. See the 
sample data collection form in appendix E for sample language.
    D. If an applicant chooses to provide additional information 
regarding a principal owner's race, such as indicating that a principal 
owner is Cambodian, Barbadian, or Fijian orally or in writing on a paper 
or electronic form, a financial institution must report that additional 
information via free-form text in the appropriate data reporting field. 
If the applicant provides such additional information but does not also 
indicate that the principal owner is Other Asian, Other Black or African 
American, or Other Pacific Islander, as applicable (e.g., by selecting 
Other Asian on a paper or electronic form), a financial institution is 
permitted, but not required, to report the corresponding ``Other'' race 
disaggregated subcategory (i.e., Other Asian, Other Black or African 
American, or Other Pacific Islander).
    E. In addition to permitting an applicant to indicate that a 
principal owner is American Indian or Alaska Native, a financial 
institution must permit an applicant to provide the name of an enrolled 
or principal tribe, by using free-form text on a paper or electronic 
data collection form or using language that informs the applicant of the 
opportunity to self-identify when taking the application by means other 
than a paper or electronic data collection form, such as by telephone. 
If an applicant chooses to provide the name of an enrolled or principal 
tribe, a financial institution must report that information via free-
form text in the appropriate data reporting field. If the applicant 
provides the name of an enrolled or principal tribe but does not also 
indicate that the principal owner is American Indian or Alaska Native 
(e.g., by selecting American Indian or Alaska Native on a paper or 
electronic form), a financial institution is permitted, but not 
required, to report American Indian or Alaska Native as well.
    iii. Selecting multiple categories. The financial institution must 
permit the applicant to select as many aggregate categories and 
disaggregated subcategories as the applicant chooses. A financial 
institution must permit an applicant to select one or more disaggregated 
subcategories even if the applicant does not select an aggregate 
category. For example, an applicant must be permitted to select the 
Chinese disaggregated subcategory for a principal owner without being 
required to select the Asian aggregate category. If an applicant 
provides race information for a principal owner, the financial 
institution reports all of the aggregate categories and disaggregated 
subcategories provided by the applicant. For example, if an applicant 
selects two aggregate categories and five disaggregated subcategories 
for a principal owner, the financial institution reports the two 
aggregate categories that the applicant selected and the five 
disaggregated subcategories that the applicant selected. Additionally, 
if an applicant selects only the Chinese disaggregated subcategory for a 
principal owner, the financial institution reports Chinese for the race 
of the principal owner but does not also report that the principal owner 
is Asian. Similarly, if the applicant selects an aggregate

[[Page 102]]

category (e.g., Asian) and a disaggregated subcategory that does not 
correspond to the aggregate category (e.g., Native Hawaiian), the 
financial institution reports the information as provided by the 
applicant (e.g., Asian and Native Hawaiian).
    15. Sex. Generally, a financial institution must permit an applicant 
to provide each principal owner's sex for purposes of Sec.  
1002.107(a)(19). When requesting information about a principal owner's 
sex, a financial institution shall use the term ``sex/gender.'' If the 
financial institution uses a paper or electronic data collection form to 
collect the information, the financial institution must allow the 
applicant to provide each principal owner's sex/gender using free-form 
text. When a financial institution collects the information orally, such 
as by telephone, the financial institution must inform the applicant of 
the opportunity to provide each principal owner's sex/gender and record 
the applicant's response. A financial institution reports the 
substantive information provided by the applicant (reported via free-
form text in the appropriate data reporting field), or reports that the 
applicant declined to provide the information.
    16. Ethnicity and race information requested orally. As described in 
comments 107(a)(19)-13 and -14, when collecting principal owners' 
ethnicity and race pursuant to Sec.  1002.107(a)(19), a financial 
institution must present the applicant with the specified aggregate 
categories and disaggregated subcategories. When collecting ethnicity 
and race information orally, such as by telephone, a financial 
institution may not present the applicant with the option to decline to 
provide the information without also presenting the applicant with the 
specified aggregate categories and disaggregated subcategories.
    i. Ethnicity and race categories. Notwithstanding comments 
107(a)(19)-13 and -14, a financial institution is not required to read 
aloud every disaggregated subcategory when collecting ethnicity and race 
information orally, such as by telephone. Rather, the financial 
institution must orally present the lists of aggregate ethnicity and 
race categories, followed by the disaggregated subcategories (if any) 
associated with the aggregate categories selected by the applicant or 
which the applicant requests to be presented. After the applicant makes 
any disaggregated category selections associated with the aggregate 
ethnicity or race category, the financial institution must also ask if 
the applicant wishes to hear the lists of disaggregated subcategories 
for any aggregate categories not selected by the applicant. The 
financial institution must record any aggregate categories selected by 
the applicant, as well as any disaggregated subcategories regardless of 
whether such subcategories were selected based on the disaggregated 
subcategories read by the financial institution or were otherwise 
provided by the applicant.
    ii. More than one principal owner. If an applicant has more than one 
principal owner, the financial institution is permitted to ask about 
ethnicity and race in a manner that reduces repetition when collecting 
ethnicity and race information orally, such as by telephone. For 
example, if an applicant has two principal owners, the financial 
institution may ask for both principal owners' ethnicity at the same 
time, rather than asking about ethnicity, race, and sex for the first 
principal owner followed by ethnicity, race, and sex for the second 
principal owner.

                  107(a)(20) Number of Principal Owners

    1. General. If the financial institution asks the applicant to 
provide the number of its principal owners pursuant to Sec.  
1002.107(a)(20), a financial institution must provide the definition of 
principal owner set forth in Sec.  1002.102(o). The financial 
institution satisfies this requirement if it provides the definition of 
principal owner as set forth in the sample data collection form in 
appendix E.
    2. Number of principal owners provided by applicant; verification of 
number of principal owners. The financial institution may rely on 
statements or information provided by the applicant in collecting and 
reporting the number of the applicant's principal owners. However, 
pursuant to Sec.  1002.107(b), if the financial institution verifies the 
number of principal owners provided by the applicant, it must report the 
verified information.
    3. Number of principal owners not provided by applicant and 
otherwise undetermined. Pursuant to Sec.  1002.107(c), a financial 
institution shall maintain procedures reasonably designed to collect 
applicant-provided data, which includes the number of principal owners 
of the applicant. However, if a financial institution is nonetheless 
unable to collect or otherwise determine the applicant's number of 
principal owners, the financial institution reports that the number of 
principal owners is ``not provided by applicant and otherwise 
undetermined.''

     107(b) Reliance on and Verification of Applicant-Provided Data

    1. Reliance on information provided by an applicant or appropriate 
third-party sources. A financial institution may rely on statements made 
by an applicant (whether made in writing or orally) or information 
provided by an applicant when compiling and reporting data pursuant to 
subpart B of this part for applicant-provided data; the financial 
institution is not required to verify those statements or that 
information. However, if the financial institution does verify applicant 
statements or information for its own business purposes, such as 
statements relating to gross annual

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revenue or time in business, the financial institution reports the 
verified information. Depending on the circumstances and the financial 
institution's procedures, certain applicant-provided data can be 
collected from appropriate third-party sources without a specific 
request from the applicant, and such information may also be relied on. 
For example, gross annual revenue or NAICS code may be collected from 
tax return documents; a financial institution may also collect an 
applicant's NAICS code using third-party sources such as business 
information products. Applicant-provided data are the data that are or 
could be provided by the applicant, including Sec.  1002.107(a)(5) 
through (7) and (13) through (20). See comment 107(c)(1)-3. In regard to 
restrictions on verification of minority-owned, women-owned, and 
LGBTQI+-owned business statuses, and principal owners' ethnicity, race, 
and sex, see comments 107(a)(18)-9 and 107(a)(19)-9.

                  107(c) Time and Manner of Collection

                          107(c)(1) In General

    1. Procedures. The term ``procedures'' refers to the actual 
practices followed by a financial institution as well as its stated 
procedures. For example, if a financial institution's stated procedure 
is to collect applicant-provided data on or with a paper application 
form, but employees encourage applicants to skip the page that asks 
whether the applicant is a minority-owned business, a women-owned 
business, or an LGBTQI+-owned business under Sec.  1002.107(a)(18), the 
financial institution's procedures are not reasonably designed to obtain 
a response.
    2. Latitude to design procedures. A financial institution has 
flexibility to establish procedures concerning the timing and manner in 
which it collects applicant-provided data that work best for its 
particular lending model and product offerings, provided those 
procedures are reasonably designed to collect the applicant-provided 
data in Sec.  1002.107(a), as required pursuant to Sec.  1002.107(c)(1), 
and where applicable comply with the minimum requirements set forth in 
Sec.  1002.107(c)(2).
    3. Applicant-provided data. Applicant-provided data are the data 
that are or could be provided by the applicant, including Sec.  
1002.107(a)(5) (credit type), Sec.  1002.107(a)(6) (credit purpose), 
Sec.  1002.107(a)(7) (amount applied for), Sec.  1002.107(a)(13) 
(address or location for purposes of determining census tract), Sec.  
1002.107(a)(14) (gross annual revenue), Sec.  1002.107(a)(15) (NAICS 
code, or information about the business such that the financial 
institution can determine the applicant's NAICS code), Sec.  
1002.107(a)(16) (number of workers), Sec.  1002.107(a)(17) (time in 
business), Sec.  1002.107(a)(18) (minority-owned business status, women-
owned business status, and LGBTQI+-owned business status), Sec.  
1002.107(a)(19) (ethnicity, race, and sex of the applicant's principal 
owners), and Sec.  1002.107(a)(20) (number of principal owners). 
Applicant-provided data do not include data that are generated or 
supplied only by the financial institution, including Sec.  
1002.107(a)(1) (unique identifier), Sec.  1002.107(a)(2) (application 
date), Sec.  1002.107(a)(3) (application method), Sec.  1002.107(a)(4) 
(application recipient), Sec.  1002.107(a)(8) (amount approved or 
originated), Sec.  1002.107(a)(9) (action taken), Sec.  1002.107(a)(10) 
(action taken date), Sec.  1002.107(a)(11) (denial reasons), Sec.  
1002.107(a)(12) (pricing information), and Sec.  1002.107(a)(13) (census 
tract, based on address or location provided by the applicant).
    4. Collecting applicant-provided data without a direct request to 
the applicant. Depending on the circumstances and the financial 
institution's procedures, certain applicant-provided data can be 
collected without a direct request to the applicant. For example, credit 
type may be collected based on the type of product chosen by the 
applicant. Similarly, a financial institution may rely on appropriate 
third-party sources to collect certain applicant-provided data. See 
Sec.  1002.107(b) concerning the use of third-party sources.
    5. Data updated by the applicant. A financial institution reports 
updated data if it obtains more current data from the applicant during 
the application process. For example, if an applicant states its gross 
annual revenue for the preceding fiscal year was $3 million, but then 
the applicant notifies the financial institution that its revenue in the 
preceding fiscal year was actually $3.2 million, the financial 
institution reports gross annual revenue of $3.2 million. For reporting 
verified applicant-provided data, see Sec.  1002.107(b) and comment 
107(b)-1. If a financial institution has already verified data and then 
the applicant updates it, the financial institution reports the 
information it believes to be more accurate, in its discretion. If a 
financial institution receives updates from the applicant after the 
application process has closed (for example, after closing or account 
opening), the financial institution may, at its discretion, update the 
data at any time prior to reporting the covered application to the 
Bureau.

 107(c)(2) Applicant-Provided Data Collected Directly From the Applicant

    1. In general. Whether a financial institution's procedures are 
reasonably designed to collect applicant-provided data is a fact-based 
determination and may depend on the financial institution's particular 
lending model, product offerings, and other circumstances; procedures 
that are reasonably designed to obtain a response may therefore require 
additional provisions beyond the minimum criteria set forth in Sec.  
1002.107(c)(2). In general, reasonably designed procedures

[[Page 104]]

will seek to maximize collection of applicant-provided data and minimize 
missing or erroneous data. While the requirements of Sec.  
1002.107(c)(2) do not apply to applicant-provided data that a financial 
institution obtains without a direct request to the applicant, as 
explained in comment 107(c)(1)-4, in such instances, a covered financial 
institution must still comply with Sec.  1002.107(c)(1).
    2. Specific components. i. Timing of initial collection attempt. 
While a financial institution has some flexibility concerning when 
applicant-provided data is are collected, under no circumstances may the 
initial request for applicant-provided data occur simultaneous with or 
after notifying an applicant of final action taken on a covered 
application. Generally, the earlier in the application process the 
financial institution initially seeks to collect applicant-provided 
data, the more likely the timing of collection is reasonably designed to 
obtain a response.
    ii. The request for applicant-provided data is prominently displayed 
or presented. Pursuant to Sec.  1002.107(c)(2)(ii), a financial 
institution must ensure an applicant actually sees, hears, or is 
otherwise presented with the request for applicant-provided data. If an 
applicant is likely to overlook or miss a request for applicant-provided 
data, the financial institution does not have reasonably designed 
procedures. Similarly, a financial institution also does not have 
reasonably designed procedures if it obscures, prevents, or inhibits an 
applicant from accessing or reviewing a request for applicant-provided 
data.
    iii. The collection does not have the effect of discouraging an 
applicant from responding to a request for applicant-provided data. A. A 
covered financial institution avoids discouraging a response by, for 
example, communicating to the applicant that the collection of 
applicant-provided data is worthy of the applicant's attention or is as 
important as information collected in connection with the financial 
institution's creditworthiness determination. In contrast, a covered 
financial institution that collects applicant-provided data in a time or 
manner that directly or indirectly discourages or obstructs an applicant 
from responding or providing a particular response violates Sec.  
1002.107(c)(2)(iii). For example, a financial institution may not 
discourage a response to inquiries regarding the demographic data 
pursuant to Sec.  1002.107(a)(18) and (19) by communicating to the 
applicant that the request is unimportant, encouraging the applicant to 
bypass the form altogether, or attempting to influence or alter the 
applicant's preferred response.
    B. A covered financial institution also avoids discouraging a 
response by requiring an applicant to provide a response to one or more 
requests for applicant-provided data in order to proceed with a covered 
application, including, as applicable, a response of ``I do not wish to 
provide this information'' or similar. (As described in comments 
107(a)(18)-1 and 107(a)(19)-1, a financial institution must permit an 
applicant to decline to provide the demographic data required by Sec.  
1002.107(a)(18) and (19), which can be satisfied by providing a response 
option of ``I do not wish to provide this information'' or similar.) For 
example, in an electronic application, a financial institution may 
require the applicant to either make a substantive selection about a 
principal owner's ethnicity, race, or sex, select an option of ``I do 
not wish to provide this information'' or similar, or indicate there are 
no principal owners before allowing the applicant to proceed to the next 
page of requested information.
    iv. The applicant can easily provide a response. Pursuant to Sec.  
1002.107(c)(2)(iv), a financial institution must structure the request 
for information in a manner that makes it easy for the applicant to 
provide a response. For example, a financial institution requests 
applicant-provided data in the same format as other information required 
for the covered application, provides applicants multiple methods to 
provide or return applicant-provided data (for example, on a written 
form, through a web portal, or through other means), or provides the 
applicant some other type of straightforward and seamless method to 
provide a response. Conversely, a financial institution must avoid 
imposing unnecessary burden on an applicant to provide the information 
requested or requiring the applicant to take steps that are inconsistent 
with the rest of its application process. For example, a financial 
institution does not have reasonably designed procedures if it collects 
application information related to its own creditworthiness 
determination in electronic form, but mails a paper form to the 
applicant initially seeking the data required under Sec.  1002.107(a) 
that the financial institution does not otherwise need for its 
creditworthiness determination and requiring the applicant to mail it 
back. On the other hand, a financial institution complies with Sec.  
1002.107(c)(2)(iv) if, at its discretion, it requests the applicant to 
respond to inquiries made pursuant to Sec.  1002.107(a)(18) and (19) 
through a reasonable method intended to keep the applicant's responses 
discrete and protected from view.
    v. Multiple requests for applicant-provided data. A financial 
institution is permitted, but not required, to make more than one 
attempt to obtain applicant-provided data if the applicant does not 
respond to an initial request. For example, if an applicant initially 
does not respond when asked early in the application process (before 
notifying the applicant of final action taken on the application, 
pursuant to Sec.  1002.107(c)(2)(i)) to inquiries made pursuant to Sec.  
1002.107(a)(18) and

[[Page 105]]

(19), a financial institution may request this information again, for 
example, during a subsequent in-person meeting with the applicant or 
after notifying the applicant of final action taken on the covered 
application.

               107(c)(3) Procedures To Monitor Compliance

    1. Procedures to identify and respond to indicia of potential 
discouragement, including low response rates. Section 1002.107(c)(3) 
requires a covered financial institution to maintain procedures designed 
to identify and respond to indicia of potential discouragement, 
including low response rates for applicant-provided data. In general, 
these include monitoring for low response rates (i.e., the percentage of 
covered applications for which the financial institution has obtained 
some type of response to requests for applicant-provided data, 
including, as applicable, an applicant response of ``I do not wish to 
provide this information'' or similar); monitoring for significant 
irregularities in any particular response that may indicate steering, 
improper interference, or other potential discouragement or obstruction 
of applicants' preferred responses; monitoring response rates and 
responses by division, location, loan officer, or other factors to 
ensure that no discouragement or improper conduct is occurring in some 
parts of a financial institution, even if the financial institution 
maintains adequate response rates and responses overall; providing 
adequate training to loan officers and other persons involved in 
collecting applicant-provided data; promptly investigating any indicia 
of potential discouragement; and taking prompt remedial action if 
discouragement or other improper conduct is identified.

                      107(c)(4) Low Response Rates

    1. In general. A low response rate for applicant-provided data may 
indicate that the financial institution has engaged in discouragement or 
otherwise failed to maintain reasonably designed procedures. Response 
rate generally refers to whether the financial institution has obtained 
some type of response to requests for applicant-provided data 
(including, as applicable, an applicant response of ``I do not wish to 
provide this information'' or similar). A response rate may be measured, 
as appropriate, as compared to financial institutions of a similar size, 
type, and/or geographic reach, or other factors, as appropriate. 
Similarly, significant irregularities in a particular response (for 
example, very high rates of an applicant response of ``I do not wish to 
provide this information'' or similar) may also indicate that a 
financial institution does not have reasonably designed procedures, for 
example, because of steering, improper interference, or other potential 
discouragement or obstruction of applicants' preferred responses. 
Response rates may be relevant across all applicant-provided data, 
though are particularly relevant for the collection of the demographic 
data pursuant to Sec.  1002.107(a)(18) and (19) given the heightened 
sensitivity of these inquiries and the importance of those data to the 
purposes of subpart B.

                    107(d) Previously Collected Data

    1. In general. A financial institution may, for the purpose of 
reporting such data pursuant to Sec.  1002.109, reuse certain previously 
collected data if the requirements of Sec.  1002.107(d) are met. In that 
circumstance, a financial institution need not seek to collect the data 
anew in connection with a subsequent covered application to satisfy the 
requirements of this subpart. For example, if an applicant applies for 
and is granted a term loan, and then subsequently applies for a credit 
card in the same calendar year, the financial institution need not 
request again the data specified in Sec.  1002.107(d). Similarly, if an 
applicant applies for more than one covered credit transaction at one 
time, a financial institution need only ask once for the data specified 
in Sec.  1002.107(d).
    2. Data that can be reused. Subject to the requirements of Sec.  
1002.107(d), a financial institution may reuse the following data: Sec.  
1002.107(a)(13) (address or location for purposes of determining census 
tract), Sec.  1002.107(a)(14) (gross annual revenue) (subject to comment 
107(d)-7), Sec.  1002.107(a)(15) (NAICS code), Sec.  1002.107(a)(16) 
(number of workers), Sec.  1002.107(a)(17) (time in business) (subject 
to comment 107(d)-8), Sec.  1002.107(a)(18) (minority-owned business 
status, women-owned business status, and LGBTQI+-owned business status) 
(subject to comment 107(d)-9), Sec.  1002.107(a)(19) (ethnicity, race, 
and sex of applicant's principal owners) (subject to comment 107(d)-9), 
and Sec.  1002.107(a)(20) (number of principal owners). A financial 
institution is not, however, permitted to reuse other data, such as 
Sec.  1002.107(a)(6) (credit purpose).
    3. Previously reported data without a substantive response. Data 
have not been ``previously collected'' within the meaning of Sec.  
1002.107(d) if the applicant did not provide a substantive response to 
the financial institution's request for that data and the financial 
institution was not otherwise able to obtain the requested data (for 
example, from the applicant's credit report, or tax returns).
    4. Updated data. If, after the application process has closed on a 
prior covered application, a financial institution obtains updated 
information relevant to the data required to be collected and reported 
pursuant to Sec.  1002.107(a)(13) through (20), and the applicant 
subsequently submits a new covered application, the financial 
institution must use the updated information in connection with the new 
covered application (if the requirements of Sec.  1002.107(d) are 
otherwise met) or

[[Page 106]]

seek to collect the data again. For example, if a business notifies a 
financial institution of a change of address of its sole business 
location, and subsequently submits a covered application within the time 
period specified in Sec.  1002.107(d)(1) for reusing previously 
collected data, the financial institution must report census tract based 
on the updated information. In that circumstance, the financial 
institution may still reuse other previously collected data to satisfy 
Sec.  1002.107(a)(14) through (20) if the requirements of Sec.  
1002.107(d) are met.
    5. Collection within the preceding 36 months. Pursuant to Sec.  
1002.107(d)(1), data can be reused to satisfy Sec.  1002.107(a)(13) and 
(15) through (20) if they are collected within the preceding 36 months. 
A financial institution may measure the 36-month period from the date of 
final action taken (Sec.  1002.107(a)(9)) on a prior application to the 
application date (Sec.  1002.107(a)(2)) on a subsequent application. For 
example, if a financial institution takes final action on an application 
on February 1, 2025, it may reuse certain previously collected data 
pursuant to Sec.  1002.107(d)(1) for subsequent covered applications 
dated or received by the financial institution through January 31, 2028.
    6. Reason to believe data are inaccurate. Whether a financial 
institution has reason to believe data are inaccurate pursuant to Sec.  
1002.107(d)(2) depends on the particular facts and circumstances. For 
example, a financial institution may have reason to believe data on the 
applicant's minority-owned business status, women-owned business status, 
and LGBTQI+-owned business status may be inaccurate if it knows that the 
applicant has had a change in ownership or a change in an owner's 
percentage of ownership.
    7. Collection of gross annual revenue in the same calendar year. 
Pursuant to Sec.  1002.107(d)(1), gross annual revenue information can 
be reused to satisfy Sec.  1002.107(a)(14) provided it is collected in 
the same calendar year as the current covered application, as measured 
from the application date. For example, if an application is received 
and gross annual revenue is collected in connection with a covered 
application in one calendar year, but then final action was taken on the 
application in the following calendar year, the data may only be reused 
for the calendar year in which it was collected and not the calendar 
year in which final action was taken on the application. However, if an 
application is received and gross annual revenue is collected in 
connection with a covered application in one calendar year, a financial 
institution may reuse that data pursuant to Sec.  1002.107(d) in a 
subsequent application initiated in the same calendar year, even if 
final action was taken on the subsequent application in the following 
calendar year.
    8. Time in business. A financial institution that decides to reuse 
previously collected data to satisfy Sec.  1002.107(a)(17) (time in 
business) must update the data to reflect the passage of time since the 
data were collected. If a financial institution only knows that the 
applicant had been in business less than two years at the time the data 
was initially collected, as described in comment 107(a)(17)-1.ii or iii, 
it updates the data based on the assumption that the applicant had been 
in business for 12 months at the time of the prior collection. For 
example:
    i. If a financial institution previously collected data on a prior 
covered application that the applicant has been in business for four 
years, and then seeks to reuse that data for a subsequent covered 
application submitted one year later, it must update the data to reflect 
that the applicant has been in business for five years.
    ii. If a financial institution previously collected data on a prior 
covered application that the applicant had been in business less than 
two years (and was not aware of the business's actual length of time in 
business at the time), and then seeks to reuse that data for a 
subsequent covered application submitted 18 months later, the financial 
institution reports time in business on the subsequent covered 
application as over two years in business.
    9. Minority-owned business status, women-owned business status, 
LGBTQI+-owned business status, and principal owners' ethnicity, race, 
and sex. A financial institution may not reuse data to satisfy Sec.  
1002.107(a)(18) and (19) unless the data were collected in connection 
with a prior covered application pursuant to this subpart B. If the 
financial institution previously asked the applicant to provide its 
minority-owned business status, women-owned business status, and 
LGBTQI+-owned business status, and principal owners' ethnicity, race, 
and sex for purposes of Sec.  1002.107(a)(18) and (19), and the 
applicant declined to provide the information (such as by selecting ``I 
do not wish to provide this information'' or similar on a data 
collection form or by telling the financial institution that it did not 
wish to provide the information), the financial institution may use that 
response when reporting data for a subsequent application pursuant to 
Sec.  1002.107(d). However, if the applicant failed to respond (such as 
by leaving the response to the question blank or by failing to return a 
data collection form), the financial institution must inquire about the 
applicant's minority-owned business status, women-owned business status, 
LGBTQI+-owned business status, and principal owners' ethnicity, race, or 
sex, as applicable, in connection with a subsequent application because 
the data were not previously obtained. See also comment 107(a)(19)-11 
concerning previously collected ethnicity, race, and sex information.

[[Page 107]]

                       Section 1002.108--Firewall

                           108(a) Definitions

    1. Involved in making any determination concerning a covered 
application from a small business. i. General. An employee or officer is 
involved in making a determination concerning a covered application from 
a small business for purposes of Sec.  1002.108 if the employee or 
officer makes, or otherwise participates in, a decision regarding the 
evaluation of a covered application from a small business or the 
creditworthiness of a small business applicant for a covered credit 
transaction. This includes, but is not limited to, employees and 
officers serving as underwriters. The decision that an employee or 
officer makes or participates in must be about a specific covered 
application or about the creditworthiness of a specific applicant. An 
employee or officer is not involved in making a determination concerning 
a covered application if the employee or officer is only involved in 
making a decision that affects covered applications generally, or if the 
employee or officer only interacts with small businesses prior to them 
becoming applicants or submitting an application. An employee or officer 
may be participating in a determination concerning a covered application 
even if the employee or officer is not the ultimate decision maker or 
the sole decision maker. For example, an employee participates in a 
determination concerning a covered application if the employee 
recommends that another employee or officer approve or deny the 
application. Similarly, an employee or officer participates in a 
determination concerning a covered application if the employee or 
officer is part of a larger group, such as a committee, that makes a 
determination concerning a covered application. For example, an employee 
participates in a decision if the employee is a member of a committee 
that approves the terms offered to an applicant for a covered 
application. This is true even if the employee does not support the 
committee's ultimate decision regarding the terms offered. Conversely, 
an employee or officer does not participate in a determination 
concerning a covered application if the employee or officer only 
performs ministerial functions for the committee, such as recording the 
minutes, or if the committee does not make a determination concerning a 
specific covered application.
    ii. Examples of activities that do not constitute being involved in 
making a determination concerning a covered application from a small 
business. The following are examples of activities that do not 
constitute being involved in making a determination concerning a covered 
application:
    A. Developing policies and procedures, designing or programming 
computer or other systems, or conducting marketing.
    B. Discussing credit products, loan terms, or loan requirements with 
a small business before it submits a covered application.
    C. Making or participating in a decision after the financial 
institution has taken final action on the covered application, such as a 
decision about servicing or collecting a covered credit transaction.
    D. Using a check box form to confirm whether an applicant has 
submitted all necessary documents or handling a minor or clerical matter 
during the application process, such as suggesting or selecting a time 
for an appointment with an applicant.
    E. Gathering information (including information collected pursuant 
to Sec.  1002.107(a)(18) or (19)) and forwarding the information or a 
covered application to other individuals or entities.
    F. Reviewing previously collected data to determine if it can be 
reused for a later covered application pursuant to Sec.  1002.107(d).
    iii. Examples of activities that constitute being involved in making 
a determination concerning a covered application from a small business. 
The following are examples of activities (done individually or as part 
of a group) that constitute being involved in making a determination 
concerning a covered application:
    A. Making or participating in a decision to approve or deny a 
specific covered application. This includes, but is not limited to, 
making or participating in a decision that an applicant does not satisfy 
one or more of the requirements for the covered credit transaction for 
which it has applied.
    B. Making or participating in a decision regarding the reason(s) for 
denial of a covered application.
    C. Making or participating in a decision that a guarantor or 
collateral is required in order to approve a specific covered 
application.
    D. Making or participating in a decision regarding the credit amount 
or credit limit that will be approved for a specific covered 
application.
    E. Making or participating in a decision to set one or more of the 
other terms that will be offered for a specific covered credit 
transaction. This includes, but is not limited to, making or 
participating in a decision regarding the interest rate, the loan term, 
or the payment schedule that will be offered for a specific covered 
credit transaction.
    F. Making or participating in a decision regarding a counteroffer 
made to a specific applicant, including a decision regarding the terms 
of such a counteroffer.
    G. Recommending that another decision maker approve or deny a 
specific covered application, provide a specific reason for denying a 
covered application, require a guarantor or collateral in order to 
approve a covered application, approve a credit amount or credit limit 
for a covered credit transaction, set one or more other terms for a 
covered

[[Page 108]]

credit transaction, make a counteroffer regarding a covered application, 
or set a specific term for such a counteroffer.
    2. Should have access. i. General. A financial institution may 
determine that an employee or officer who is involved in making a 
determination concerning a covered application from a small business 
should have access to information otherwise subject to the prohibition 
in Sec.  1002.108(b) if that employee or officer is assigned one or more 
job duties that may require the employee or officer to collect, see, 
consider, refer to, or otherwise use information subject to the 
prohibition in Sec.  1002.108(b). If the employee or officer might need 
to collect, see, consider, refer to, or use such information to perform 
the employee's or officer's assigned job duties, the financial 
institution may determine that the employee or officer should have 
access. For example, if a loan officer is involved in making a 
determination concerning a covered application and that loan officer's 
job description or the financial institution's policies and procedures 
state that the loan officer may need to collect information pursuant to 
Sec.  1002.107(a)(18) or (19), the financial institution may determine 
that the loan officer should have access.
    ii. When a group of employees or officers should have access. A 
financial institution may determine that all employees or officers with 
the same job description or assigned duties should have access for 
purposes of Sec.  1002.108. For example, if a job description, a policy, 
a procedure, or another document states that a loan officer may have to 
collect or explain any part of a data collection form that includes the 
inquiries described in Sec.  1002.107(a)(18) and (19), the financial 
institution may determine that all employees and officers who have been 
assigned the position of loan officer should have access for purposes of 
Sec.  1002.108.
    iii. Making a determination regarding who should have access. A 
financial institution is permitted to choose what lawful factors it will 
consider when determining whether an employee or officer should have 
access. A financial institution's determination that an employee or 
officer should have access may take into account relevant operational 
factors and lawful business practices. For example, a financial 
institution may consider its size, the number of employees and officers 
within the relevant line of business or at a particular branch or office 
location, and/or the number of covered applications the financial 
institution has received or expects to receive. Additionally, a 
financial institution may consider its current or its reasonably 
anticipated staffing levels, operations, systems, processes, policies, 
and procedures. A financial institution is not required to hire 
additional staff, upgrade its systems, change its lending or operational 
processes, or revise its policies or procedures for the sole purpose of 
limiting who should have access.

           108(b) Prohibition on Access to Certain Information

    1. Scope of persons subject to the prohibition. The prohibition in 
Sec.  1002.108(b) applies to an employee or officer of a covered 
financial institution or its affiliate if the employee or officer is 
involved in making any determination concerning a covered application 
from a small business. For example, if a financial institution is 
affiliated with company B and an employee of company B is involved in 
making a determination concerning a covered application on behalf of the 
financial institution, then the financial institution must comply with 
Sec.  1002.108 with regard to company B's employee. Section 1002.108 
does not require a financial institution to limit the access of 
employees and officers of third parties who are not affiliates of the 
financial institution.
    2. Scope of information that cannot be accessed when the prohibition 
applies to an employee or officer. i. Information that cannot be 
accessed when the prohibition applies. If a particular employee or 
officer is involved in making a determination concerning a covered 
application from a small business, the prohibition in Sec.  1002.108(b) 
only limits that employee's or officer's access to that small business 
applicant's responses to the inquiries that the covered financial 
institution makes to satisfy Sec.  1002.107(a)(18) and (19). For 
example, if a financial institution uses a paper data collection form to 
request information pursuant to Sec.  1002.107(a)(18) and (19), an 
employee or officer that is subject to the prohibition is not permitted 
access to the paper data collection form that contains the applicant's 
responses to the inquiries made pursuant to pursuant to Sec.  
1002.107(a)(18) and (19), or to any other record that identifies how the 
particular applicant responded to those inquires. Similarly, if a 
financial institution makes the inquiries required pursuant to Sec.  
1002.107(a)(18) and (19) during a telephone call, the prohibition 
applies to the applicant's responses to those inquiries provided during 
that telephone call and to any record that identifies how the particular 
applicant responded to those inquiries.
    ii. Information that can be accessed when the prohibition applies. 
If a particular employee or officer is involved in making a 
determination concerning a covered application, the prohibition in Sec.  
1002.108(b) does not limit that employee's or officer's access to an 
applicant's responses to inquiries regarding whether the applicant is a 
minority-owned, women-owned, or LGBTQI+-owned business, or principal 
owners' ethnicity, race, or sex, made for purposes other than compliance 
with Sec.  1002.107(a)(18) or (19). Thus, for example, an employee or 
officer who is subject to

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the prohibition in Sec.  1002.108(b) may have access to information 
regarding whether an applicant is eligible for a Small Business 
Administration program for women-owned businesses without regard to 
whether the exception in Sec.  1002.108(c) is satisfied. Additionally, 
an employee or officer who knows that an applicant is a minority-owned 
business, women-owned business, or LGBTQI+-owned business, or who knows 
the ethnicity, race, or sex of any of the applicant's principal owners 
due to activities unrelated to the inquiries made to satisfy the 
financial institution's obligations under Sec.  1002.107(a)(18) and (19) 
is not prohibited from making a determination concerning the applicant's 
covered application. Thus, an employee or officer who knows, for 
example, that an applicant is a minority-owned business due to a social 
relationship or another professional relationship with the applicant or 
any of its principal owners may make determinations concerning the 
applicant's covered application. Furthermore, an employee or officer 
that is involved in making a determination concerning a covered 
application may see, consider, refer to, or use data collected to 
satisfy aspects of Sec.  1002.107 other than Sec.  1002.107(a)(18) or 
(19), such as gross annual revenue, number of workers, and time in 
business.

  108(c) Exception to the Prohibition on Access to Certain Information

    1. General. A financial institution is not required to limit the 
access of an employee or officer who is involved in making 
determinations concerning a covered application from a small business if 
the financial institution determines that the particular employee or 
officer should have access to the information collected pursuant to 
Sec.  1002.107(a)(18) or (19), and the financial institution provides 
the notice required by Sec.  1002.108(d). A financial institution is not 
required to perform a separate analysis of the feasibility of 
maintaining a firewall. A determination that an employee or officer 
should have access means that it is not feasible to maintain a firewall 
as to that particular employee or officer, and the exception applies to 
that employee or officer if the financial institution provides the 
notice required by Sec.  1002.108(d). However, the fact that a financial 
institution has made a determination that an employee or officer should 
have access does not mean that the financial institution can permit 
other employees and officers who are involved in making determinations 
concerning a covered application to have access to the information 
collected pursuant to Sec.  1002.107(a)(18) and (19). A financial 
institution may only permit an employee or officer who is involved in 
making a determination concerning a covered application to have access 
to information collected pursuant to Sec.  1002.107(a)(18) and (19) if 
it has determined that employee or officer or a group of which the 
employee or officer is a member should have access to the information.
    2. Applying the exception to a specific employee or officer or group 
of similarly situated employees or officers. The exception applies to an 
employee or officer if the financial institution determines that the 
employee or officer should have access to the information collected 
pursuant to Sec.  1002.107(a)(18) or (19), and the financial institution 
provides the notice required by Sec.  1002.108(d). A financial 
institution can also determine that several employees and officers 
should have access, that all of a group of similarly situated employees 
or officers should have access, and that multiple groups of similarly 
situated employees or officers should have access to information 
collected pursuant to Sec.  1002.107(a)(18) or (19). See also comment 
108(a)-2. For example, a financial institution could determine that all 
its small business loan officers, small business loan processors, 
compliance officers, and legal officers should have access. If the 
financial institution provides the notice required in Sec.  1002.108(d), 
the financial institution may permit all of its small business loan 
officers, small business loan processors, compliance officers, and legal 
officers to have access. However, the financial institution cannot 
permit other employees and officers to have access simply because it has 
determined that the small business loan officers, loan processors, 
compliance officers, and legal officers should have access. For example, 
in this case, the financial institution may not permit its underwriters 
or chief executive officer to have access to the information collected 
from the applicant pursuant to Sec.  1002.107(a)(18) or (19) if they are 
involved in making any determination concerning a covered application, 
unless the financial institution also determines that they should have 
access. This would be true even if the chief executive officer or 
underwriter had some of the same assigned duties as a loan officer, such 
as being a member of a credit committee, but has not been assigned the 
task(s) that may require access to one or more applicants' responses to 
the financial institution's inquiries under Sec.  1002.107(a)(18) or 
(19). If the financial institution separately determines that 
underwriters and the chief executive officer should have access, then 
the underwriters and chief executive officer may also have access.

                              108(d) Notice

    1. General. If a financial institution determines that one or more 
employees or officers should have access pursuant to Sec.  1002.108(c), 
the financial institution must provide the required notice to, at a 
minimum, the applicant or applicants whose responses will be accessed by 
an employee or officer involved

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in making determinations concerning the applicant's or applicants' 
covered applications. Alternatively, a financial institution may also 
provide the required notice to applicants whose responses will not or 
might not be accessed. For example, a financial institution could 
provide the notice to all applicants for covered credit transactions or 
all applicants for a specific type of product.
    2. Content of the required notice. The notice must inform the 
applicant that one or more employees and officers involved in making 
determinations concerning the applicant's covered application may have 
access to the applicant's responses regarding the applicant's minority-
owned business status, women-owned business status, LGBTQI+-owned 
business status, and its principal owners' ethnicity, race, and sex. See 
the sample data collection form in appendix E to this part for sample 
language for providing this notice to applicants. If a financial 
institution establishes and maintains a firewall and chooses to use the 
sample data collection form, the financial institution can delete this 
sample language from the form.
    3. Timing for providing the notice. If the financial institution is 
providing the notice orally, it must provide the notice required by 
Sec.  1002.108(d) prior to asking the applicant if it is a minority-
owned business, women-owned business, or LGBTQI+-owned business and 
prior to asking for a principal owner's ethnicity, race, or sex. If the 
notice is provided on the same paper or electronic data collection form 
as the inquiries about minority-owned business status, women-owned 
business status, LGBTQI+-owned business status and the principal owners' 
ethnicity, race, or sex, the notice must appear before the inquiries. If 
the notice is provided in an electronic or paper document that is 
separate from the data collection form, the notice must be provided at 
the same time as the data collection form or prior to providing the data 
collection form. Additionally, the notice must be provided with the non-
discrimination notices required pursuant to Sec.  1002.107(a)(18) and 
(19). See appendix E for sample language.

            Section 1002.109--Reporting of Data to the Bureau

                     109(a) Reporting to the Bureau

                   109(a)(2) Reporting by Subsidiaries

    1. Subsidiaries. A covered financial institution is considered a 
subsidiary of another covered financial institution for purposes of 
reporting data pursuant to Sec.  1002.109 if more than 50 percent of the 
ownership or control of the first covered financial institution is held 
by the second covered financial institution.

 109(a)(3) Reporting Obligations Where Multiple Financial Institutions 
              Are Involved in a Covered Credit Transaction

    1. General. The following clarifies how to report applications 
involving more than one financial institution. The discussion below 
assumes that all parties involved with the covered credit transaction 
are covered financial institutions. However, the same principles apply 
if any party is not a covered financial institution.
    i. A financial institution shall report the action that it takes on 
a covered application, whether or not the covered credit transaction 
closed in the financial institution's name and even if the financial 
institution used underwriting criteria supplied by another financial 
institution. However, where it is necessary for more than one financial 
institution to make a credit decision in order to approve a single 
covered credit transaction, only the last financial institution with 
authority to set the material terms of the covered credit transaction is 
required to report. Setting the material terms of the covered credit 
transaction include, for example, selecting among competing offers, or 
modifying pricing information, amount approved or originated, or 
repayment duration. In this situation, the determinative factor is not 
which financial institution actually made the last credit decision prior 
to closing, but rather which financial institution last had the 
authority for setting the material terms of the covered credit 
transaction prior to closing. Whether a financial institution has taken 
action for purposes of Sec.  1002.109(a)(3) and comment 109(a)(3)-1 is 
not relevant to, and is not intended to repeal, abrogate, annul, impair, 
or interfere with, section 701(d) (15 U.S.C. 1691(d)) of the Act, Sec.  
1002.9, or any other provision within subpart A of this Regulation.
    ii. A financial institution takes action on a covered application 
for purposes of Sec.  1002.109(a)(3) if it denies the application, 
originates the application, approves the application but the applicant 
did not accept the transaction, or closes the file or denies for 
incompleteness. The financial institution must also report the 
application if it was withdrawn. For reporting purposes, it is not 
relevant whether the financial institution receives the application 
directly from the applicant or indirectly through another party, such as 
a broker, or (except as otherwise provided in comment 109(a)(3)-1.i) 
whether another financial institution also reviews and reports an action 
taken on a covered application involving the same credit transaction.
    iii. Where it is necessary for more than one financial institution 
to make a credit decision in order to approve a single covered credit 
transaction and where more than one financial institution denies the 
application

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or otherwise does not approve the application, the reporting financial 
institution (the last financial institution with authority to set the 
material terms of the covered credit transaction) shall have a 
consistent procedure for determining how it reports inconsistent or 
differing data points for purposes of subpart B. For example, Financial 
Institution A is the reporting entity because it has the last authority 
to set the material credit terms. Financial Institution A sends the 
application to Financial Institution B and Financial Institution C for 
review, but both Financial Institution B and Financial Institution C 
deny the application, with different denial reasons. Based on these 
denials, Financial Institution A follows suit and denies the 
application. Financial Institution A must have a consistent procedure 
for what denial reason(s) to report, such as reporting the denial 
reason(s) from the first financial institution that denied the covered 
application.
    2. Examples. The following scenarios illustrate how a financial 
institution reports a particular covered application. The illustrations 
assume that all parties involved with the covered credit transaction are 
covered financial institutions. However, the same principles apply if 
any party is not a covered financial institution. Examples i through iv 
involve a single financial institution with responsibility for making a 
credit decision without the involvement of an intermediary. Example v 
describes a financial institution intermediary with only passive 
involvement in the covered credit transaction. Example vi describes a 
transaction where multiple financial institutions independently decision 
and take action on a covered application. Examples vii and viii describe 
situations where more than one financial institution must make a credit 
decision in order to approve the covered credit transaction. Examples ix 
and x describe situations involving pooled and participation interests.
    i. Financial Institution A received a covered application from an 
applicant and approved the application before closing the covered credit 
transaction in its name. Financial Institution A was not acting as 
Financial Institution B's agent. Financial Institution B later purchased 
the covered credit transaction from Financial Institution A. Financial 
Institution A was not acting as Financial Institution B's agent. 
Financial Institution A reports the application. Financial Institution B 
has no reporting obligation for this transaction.
    ii. Financial Institution A received a covered application from an 
applicant. If approved, the covered credit transaction would have closed 
in Financial Institution B's name. Financial Institution A denied the 
application without sending it to Financial Institution B for approval. 
Financial Institution A was not acting as Financial Institution B's 
agent. Since Financial Institution A took action on the application, 
Financial Institution A reports the application as denied. Financial 
Institution B does not report the application.
    iii. Financial Institution A reviewed a covered application and made 
a credit decision to approve it using the underwriting criteria provided 
by a Financial Institution B. Financial Institution B did not review the 
application and did not make a credit decision prior to closing. 
Financial Institution A was not acting as Financial Institution B's 
agent. Financial Institution A reports the application. Financial 
Institution B has no reporting obligation for this application.
    iv. Financial Institution A reviewed and made the credit decision on 
a covered application based on the criteria of a third-party insurer or 
guarantor (for example, a government or private insurer or guarantor). 
Financial Institution A reports the action taken on the application.
    v. Financial Institution A received a covered application from an 
applicant and forwarded that application to Financial Institution B. 
Financial Institution B reviewed the application and made a credit 
decision approving the application prior to closing. The covered credit 
transaction closed in Financial Institution A's name. Financial 
Institution B purchased the covered credit transaction from Financial 
Institution A after closing. Financial Institution B was not acting as 
Financial Institution A's agent. Since Financial Institution B made the 
credit decision prior to closing, and Financial Institution A's approval 
was not necessary for the credit transaction, Financial Institution B 
reports the origination. Financial Institution A does not report the 
application. Assume the same facts, except that Financial Institution B 
reviewed the application before the covered credit transaction would 
have closed, but Financial Institution B denied the application. 
Financial Institution B reports the application as denied. Financial 
Institution A does not report the application because it did not take an 
action on the application. If, under the same facts, the application was 
withdrawn before Financial Institution B made a credit decision, 
Financial Institution B would report the application as withdrawn and 
Financial Institution A would not report the application for the same 
reason.
    vi. Financial Institution A received a covered application and 
forwarded it to Financial Institutions B and C. Financial Institution A 
made a credit decision, acting as Financial Institution D's agent, and 
approved the application. Financial Institutions B and C are not working 
together with Financial Institutions A or D, or with each other, and are 
solely responsible for setting the terms of their own credit 
transactions. Financial

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Institution B made a credit decision approving the application, and 
Financial Institution C made a credit decision denying the application. 
The applicant did not accept the covered credit transaction from 
Financial Institution D. Financial Institution D reports the application 
as approved but not accepted. Financial Institution A does not report 
the application, because it was acting as Financial Institution D's 
agent. The applicant accepted the offer of credit from Financial 
Institution B, and credit was extended. Financial Institution B reports 
the application as originated. Financial Institution C reports the 
application as denied.
    vii. Financial Institution A received a covered application and made 
a credit decision to approve it using the underwriting criteria provided 
by Financial Institution B. Financial Institution A was not acting as 
Financial Institution B's agent. Financial Institution A forwarded the 
application to Financial Institution B. Financial Institution B reviewed 
the application and made a credit decision approving the application 
prior to closing. Financial Institution A makes a credit decision on the 
application and modifies the credit terms (the interest rate and 
repayment term) offered by Financial Institution B. The covered credit 
transaction reflecting the modified terms closes in Financial 
Institution A's name. Financial Institution B purchases the covered 
credit transaction from Financial Institution A after closing. As the 
last financial institution with the authority for setting the material 
terms of the covered credit transaction, Financial Institution A reports 
the application as originated. Financial Institution B does not report 
the origination because it was not the last financial institution with 
the authority to set the material terms on the application. If, under 
the same facts, Financial Institution A did not modify the credit terms 
offered by Financial Institution B, Financial Institution A still 
reports the application as originated because it was still the last 
financial institution with the authority for setting the material terms, 
even if it chose not to so do in a particular instance. Financial 
Institution B does not report the origination.
    viii. Financial Institution A received a covered application and 
forwarded it to Financial Institutions B, C, and D. Financial 
Institution A was not acting as anyone's agent. Financial Institution B 
and C reviewed the application and made a credit decision approving the 
application and Financial Institution D reviewed the application and 
made a credit decision denying the application. Prior to closing, 
Financial Institution A makes a credit decision on the application by 
deciding to offer to the applicant the credit terms offered by Financial 
Institution B and does not convey to the applicant the credit terms 
offered by Financial Institution C. The applicant does not accept the 
covered credit transaction. As the last financial institution with the 
authority for setting the material terms of the covered credit 
transaction, Financial Institution A reports the application as approved 
but not accepted. Financial Institutions B, C, and D do not report the 
application because they were not the last financial institution with 
the authority for setting the material terms of the covered credit 
transaction. Assume the same facts, except the applicant accepts the 
terms of the covered credit transaction from Financial Institution B as 
offered by Financial Institution A. The covered credit transaction 
closes in Financial Institution A's name. Financial Institution B 
purchases the transaction after closing. Here, Financial Institution A 
reports the application as originated. Financial Institutions B, C, and 
D do not report the application because they were not the last financial 
institution responsible for setting the material terms of the covered 
credit transaction.
    ix. Financial Institution A receives a covered application and 
approves it, and then Financial Institution A elects to organize a loan 
participation agreement where Financial Institutions B and C agree to 
purchase a partial interest in the covered credit transaction. Financial 
Institution A reports the application. Financial Institutions B and C 
have no reporting obligation for this application.
    x. Financial Institution A purchases an interest in a pool of 
covered credit transactions, such as credit-backed securities or real 
estate investment conduits. Financial Institution A does not report this 
purchase.
    3. Agents. If a covered financial institution takes action on a 
covered application through its agent, the financial institution reports 
the application. For example, acting as Financial Institution A's agent, 
Financial Institution B approved an application prior to closing and a 
covered credit transaction was originated. Financial Institution A 
reports the covered credit transaction as an origination. State law 
determines whether one party is the agent of another.

          109(b) Financial Institution Identifying Information

    1. Changes to financial institution identifying information. If a 
financial institution's information required pursuant to Sec.  
1002.109(b) changes, the financial institution shall provide the new 
information with the data submission for the collection year of the 
change. For example, assume two financial institutions that previously 
reported data under subpart B of this part merge and the surviving 
institution retained its Legal Entity Identifier but obtained a new TIN 
in February 2026. The surviving institution must report the new TIN with 
its data submission for its 2026 data (which is due by June 1, 2027)

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pursuant to Sec.  1002.109(b)(5). Likewise, if that financial 
institution's Federal prudential regulator changes in February 2026 as a 
result of the merger, it must identify its new Federal prudential 
regulator in its annual submission for its 2026 data.

                           Paragraph 109(b)(4)

    1. Federal prudential regulator. For purposes of Sec.  
1002.109(b)(4), Federal prudential regulator means, if applicable, the 
Federal prudential regulator for a financial institution that is a 
depository institution as determined pursuant to section 3q of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(q)), including the Office 
of the Comptroller of the Currency, the Federal Deposit Insurance 
Corporation, or the Board of Governors of the Federal Reserve System; or 
the National Credit Union Administration Board for financial 
institutions that are Federal credit unions.

                           Paragraph 109(b)(6)

    1. Legal Entity Identifier (LEI). A Legal Entity Identifier is a 
utility endorsed by the LEI Regulatory oversight committee, or a utility 
endorsed or otherwise governed by the Global LEI Foundation (GLEIF) (or 
any successor of the GLEIF) after the GLEIF assumes operational 
governance of the global LEI system. A financial institution complies 
with Sec.  1002.109(b)(6) by reporting its current LEI number. A 
financial institution that does not currently possess an LEI number must 
obtain an LEI number, and has an ongoing obligation to maintain the LEI 
number. The GLEIF website provides a list of LEI issuing organizations. 
A financial institution may obtain an LEI, for purposes of complying 
with Sec.  1002.109(b)(6), from any one of the issuing organizations 
listed on the GLEIF website.

                           Paragraph 109(b)(7)

    1. RSSD ID number. The RSSD ID is a unique identifying number 
assigned to institutions, including main offices and branches, by the 
Board of Governors of the Federal Reserve System. A financial 
institution's RSSD ID may be found on the website of the National 
Information Center, which provides comprehensive financial and structure 
information on banks and other institutions for which the Federal 
Reserve Board has a supervisory, regulatory, or research interest 
including both domestic and foreign banking organizations that operate 
in the United States. If a financial institution does not have an RSSD 
ID, it reports that this information is not applicable.

                           Paragraph 109(b)(8)

    1. Immediate parent entity. An entity is the immediate parent of a 
financial institution for purposes of Sec.  1002.109(b)(8)(i) through 
(iii) if it is a separate entity that directly owns more than 50 percent 
of the financial institution.
    2. Top-holding parent entity. An entity is the top-holding parent of 
a financial institution for purposes of Sec.  1002.109(b)(8)(iv) through 
(vi) if it ultimately owns more than 50 percent of the financial 
institution, and the entity itself is not controlled by any other 
entity. If the immediate parent entity and the top-holding parent entity 
are the same, the financial institution reports that Sec.  
1002.109(b)(8)(iv) through (vi) are not applicable.
    3. LEI. For purposes of Sec.  1002.109(b)(8)(ii) and (v), a 
financial institution shall report the LEI of a parent entity if the 
parent entity has an LEI number. If a financial institution's parent 
entity does not have an LEI, the financial institution reports that this 
information is not applicable.
    4. RSSD ID numbers. For purposes of Sec.  1002.109(b)(8)(iii) and 
Sec.  1002.109(b)(8)(vi), a financial institution shall report the RSSD 
ID number of a parent entity if the entity has an RSSD ID number. If a 
financial institution's parent entity does not have an RSSD ID, the 
financial institution reports that this information is not applicable.

                           Paragraph 109(b)(9)

    1. Type of financial institution. A financial institution complies 
with Sec.  1002.109(b)(9) by selecting the applicable type or types of 
financial institution from the list below. A financial institution shall 
select all applicable types.
    i. Bank or savings association.
    ii. Minority depository institution.
    iii. Credit union.
    iv. Nondepository institution.
    v. Community development financial institution (CDFI).
    vi. Other nonprofit financial institution.
    vii. Farm Credit System institution.
    viii. Government lender.
    ix. Commercial finance company.
    x. Equipment finance company.
    xi. Industrial loan company.
    xii. Online lender.
    xiii. Other.
    2. Use of ``other'' for type of financial institution. A financial 
institution reports type of financial institution as ``other'' where 
none of the enumerated types of financial institution appropriately 
describe the applicable type of financial institution, and the 
institution reports the type of financial institution via free-form text 
field. A financial institution that selects at least one type from the 
list is permitted, but not required, to also report ``other'' (with 
appropriate free-form text) if there is an additional aspect of its 
business that is not one of the enumerated types set out in comment 
109(b)(9)-1.

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    3. Additional types of financial institution. The Bureau may add 
additional types of financial institutions via the Filing Instructions 
Guide and related materials. Refer to the Filing Instructions Guide for 
any updates for each reporting year.

                          Paragraph 109(b)(10)

    1. Financial institutions that voluntarily report covered 
applications under subpart B of this part. A financial institution that 
is not a covered financial institution pursuant to Sec.  1002.105(b) but 
that elects to voluntarily compile, maintain, and report data under 
Sec. Sec.  1002.107 through 1002.109 (see comment 105(b)-10) complies 
with Sec.  1002.109(b)(10) by selecting ``voluntary reporter.''

       Section 1002.110--Publication of Data and Other Disclosures

110(c) Statement of Financial Institution's Small Business Lending Data 
                    Available on the Bureau's Website

    1. Statement. A financial institution shall provide the statement 
required by Sec.  1002.110(c) using the following, or substantially 
similar, language:

                   Small Business Lending Data Notice

    Data about our small business lending are available online for 
review at the Consumer Financial Protection Bureau's (CFPB's) website at 
https://www.consumerfinance.gov/ data-research/small- business-lending/. 
The data show the geographic distribution of our small business lending 
applications; information about our loan approvals and denials; and 
demographic information about the principal owners of our small business 
applicants. The CFPB may delete or modify portions of our data prior to 
posting it if doing so would advance a privacy interest. Small business 
lending data for many other financial institutions are also available at 
this website.
    2. Website. A financial institution without a website complies with 
Sec.  1002.110(c) by making a written statement using the language in 
comment 110(c)-1, or substantially similar language, available upon 
request.
    3. Revised location for publicly available data. The Bureau may 
modify the location specified in comment 110(c)-1 at which small 
business lending data are available via the Filing Instructions Guide 
and related materials. Refer to the Filing Instructions Guide for any 
updates for each reporting year.

                     Section 1002.111--Recordkeeping

                         111(a) Record Retention

    1. Evidence of compliance. Section 1002.111(a) requires a financial 
institution to retain evidence of compliance with subpart B of this part 
for at least three years after its small business lending application 
register is required to be submitted to the Bureau pursuant to Sec.  
1002.109. In addition to the financial institution's small business 
lending application register, such evidence of compliance is likely to 
include, but is not limited to, the applications for credit from which 
information in the register is drawn, as well as the files or documents 
that, under Sec.  1002.111(b), are kept separate from the applications 
for credit. This three-year record retention requirement applies to any 
records covered by Sec.  1002.111(a), notwithstanding the more general 
12-month retention period for records related to business credit 
specified in Sec.  1002.12(b).
    2. Record retention for creditors under Sec.  1002.5(a)(4)(vii) and 
(viii). A creditor that is voluntarily, under Sec.  1002.5(a)(4)(vii) 
and (viii), collecting information pursuant to subpart B of this part 
complies with Sec.  1002.111(a) by retaining evidence of compliance with 
subpart B for at least three years after June 1 of the year following 
the year that data was collected.

     111(b) Certain Information Kept Separate From the Rest of the 
                               Application

    1. Separate from the application. A financial institution may 
satisfy the requirement in Sec.  1002.111(b) by keeping an applicant's 
responses to the financial institution's request pursuant to Sec.  
1002.107(a)(18) and (19) in a file or document that is discrete or 
distinct from the application and its accompanying information. For 
example, such information could be collected on a piece of paper that is 
separate from the rest of the application form. In order to satisfy the 
requirement in Sec.  1002.111(b), an applicant's responses to the 
financial institution's request pursuant to Sec.  1002.107(a)(18) and 
(19) need not be maintained in a separate electronic system, nor need 
they be removed from the physical files containing the application so 
long as there is some separation between the demographic information and 
the rest of the application and its accompanying information. However, 
the financial institution may nonetheless need to keep this information 
in a different electronic or physical file in order to satisfy the 
prohibition in Sec.  1002.108(b).
    2. Number of principal owners. A financial institution is permitted 
to maintain information regarding the applicant's number of principal 
owners pursuant to Sec.  1002.107(a)(20) with an applicant's responses 
to the financial institution's request pursuant to Sec.  1002.107(a)(18) 
and (19).

  111(c) Limitation on Personally Identifiable Information in Certain 
                   Records Retained Under This Section

    1. Small business lending application register. The prohibition in 
Sec.  1002.111(c) applies to data in the small business lending 
application

[[Page 115]]

register submitted by the financial institution to the Bureau under 
Sec.  1002.109, the version of the register that the financial 
institution maintains under Sec.  1002.111(a), and the separate record 
of certain information created pursuant to Sec.  1002.111(b).
    2. Examples. Section 1002.111(c) prohibits a financial institution 
from including any name, specific address (other than the census tract 
required under Sec.  1002.107(a)(13)), telephone number, or email 
address of any individual who is, or is connected with, an applicant in 
the small business lending application register it reports pursuant to 
Sec.  1002.109, in the copy of the register the financial institution 
retains under Sec.  1002.111(a), and in the records of certain 
information it must retain separately from the application pursuant to 
Sec.  1002.111(b). It likewise prohibits a financial institution from 
including any other personally identifiable information concerning any 
individual who is, or is connected with, an applicant, except as 
required pursuant to Sec.  1002.107 or Sec.  1002.111(b). Examples of 
such personally identifiable information that a financial institution 
may not include in its small business lending application register 
include, but are not limited to, the following: date of birth, Social 
Security number, official government-issued driver's license or 
identification number, alien registration number, government passport 
number, or employer or taxpayer identification number.
    3. Other records. The prohibition in Sec.  1002.111(c) does not 
extend to an application for credit, or any other records that the 
financial institution maintains that are not specifically enumerated in 
Sec.  1002.111(c).
    4. Name and business contact information for submission. The 
prohibition in Sec.  1002.111(c) does not bar financial institutions 
from providing to the Bureau, pursuant to Sec.  1002.109(b)(3), the name 
and business contact information of the person who may be contacted by 
the Bureau or other regulators with questions about the financial 
institution's submission under Sec.  1002.109.

                      Section 1002.112--Enforcement

                         112(b) Bona Fide Errors

    1. Tolerances for bona fide errors. Section 1002.112(b) provides 
that a financial institution is presumed to maintain procedures 
reasonably adapted to avoid errors with respect to a given data field if 
the number of errors found in a random sample of the financial 
institution's data submission for the data field does not equal or 
exceed a threshold specified by the Bureau for this purpose. The 
Bureau's thresholds appear in column C of the table in appendix F. The 
size of the random sample, set out in column B, shall depend on the size 
of the financial institution's small business lending application 
register, as shown in column A of the table in appendix F. A financial 
institution has not maintained procedures reasonably adapted to avoid 
errors if either there is a reasonable basis to believe the error was 
intentional or there is evidence that the financial institution has not 
maintained procedures reasonably adapted to avoid errors.
    2. Tolerances and data fields. For purposes of determining whether 
an error is bona fide under Sec.  1002.112(b), the term ``data field'' 
generally refers to individual fields. All required data fields, and 
valid response options for those fields, are set forth in the Bureau's 
Filing Instructions Guide, available at https://www.consumerfinance.gov/ 
data-research/small-business- lending/filing-instructions-guide/. Some 
data fields may allow for more than one response. For example, with 
respect to information on the ethnicity and race of an applicant's 
principal owner, a data field may identify more than one race or 
ethnicity. If there are one or more errors within an ethnicity data 
field, or within a race data field, for a particular principal owner, 
they would count as one (and only one) error for that data field. For 
instance, in the ethnicity data field, if an applicant indicates that 
one of its principal owners is Cuban, but the financial institution 
reports that the principal owner is Mexican and Puerto Rican, the 
financial institution has made one error in the ethnicity data field for 
that principal owner. For purposes of the error threshold table in 
appendix F, the financial institution is deemed to have made one error, 
not two.
    3. Tolerances and safe harbors. An error that meets the criteria for 
one of the four safe harbor provisions in Sec.  1002.112(c) is not 
counted as an error for purposes of determining whether a financial 
institution has exceeded the relevant error threshold in appendix F for 
a given data field.

                           112(c) Safe Harbors

    1. Information from a Federal agency--census tract. Section 
1002.112(c)(2) provides that an incorrect entry for census tract is not 
a violation of the Act or subpart B of this part, if the financial 
institution obtained the census tract using a geocoding tool provided by 
the FFIEC or the Bureau. However, this safe harbor provision does not 
extend to a financial institution's failure to provide the correct 
census tract number for a covered application on its small business 
lending application register, as required by Sec.  1002.107(a)(13), 
because the FFIEC or Bureau geocoding tool did not return a census tract 
for the address provided by the financial institution. In addition, this 
safe harbor provision does not extend to a census tract error that 
results from a financial institution entering an inaccurate address into 
the FFIEC or Bureau geocoding tool.
    2. Applicability of NAICS code safe harbor. The safe harbor in Sec.  
1002.112(c)(3) applies to an incorrect entry for the 3-digit NAICS code

[[Page 116]]

that financial institutions must collect and report pursuant to Sec.  
1002.107(a)(15), provided certain conditions are met. For purposes of 
Sec.  1002.112(c)(3)(i), a financial institution is permitted to rely on 
statements made by the applicant, information provided by the applicant, 
or on other information obtained through its use of appropriate third-
party sources, including business information products. See also 
comments 107(a)(15)-4 and 107(b)-1.
    3. Incorrect determination of small business status, covered credit 
transaction, or covered application--examples. Section 1002.112(c)(4) 
provides a safe harbor from violations of the Act or this regulation for 
a financial institution that initially collects data under Sec.  
1002.107(a)(18) and (19) regarding whether an applicant for a covered 
credit transaction is a minority-owned, a women-owned, or LGBTQI+-owned 
business, and the ethnicity, race, and sex of the applicant's principal 
owners, but later concludes that it should not have collected this data, 
if certain conditions are met. Specifically, to qualify for this safe 
harbor, Sec.  1002.112(c)(4) requires that the financial institution 
have had a reasonable basis at the time it collected data under Sec.  
1002.107(a)(18) and (19) for believing that the application was a 
covered application for a covered credit transaction from a small 
business pursuant to Sec. Sec.  1002.103, 1002.104, and 1002.106, 
respectively. For example, Financial Institution A collected data under 
Sec.  1002.107(a)(18) and (19) from an applicant for a covered credit 
transaction that had self-reported its gross annual revenue as $4.8 
million. Sometime after Financial Institution A had collected this data 
from the applicant, the financial institution reviewed the applicant's 
tax returns, which indicated the applicant's gross annual revenue was in 
fact $5.2 million. Financial Institution A is permitted to rely on 
representations made by the applicant regarding gross annual revenue in 
determining whether an applicant is a small business (see Sec.  
1002.107(b) and comments 106(b)(1)-3 and 107(a)(14)-1). Thus, Financial 
Institution A may have had a reasonable basis to believe, at the time it 
collected data under Sec.  1002.107(a)(18) and (19), that the applicant 
was a small business pursuant to Sec.  1002.106, in which case Financial 
Institution A's collection of such data would not violate the Act or 
this regulation.

     Section 1002.114--Effective Date, Compliance Date, and Special 
                            Transition Rules

                         114(b) Compliance Date

    1. Application of compliance date. The applicable compliance date in 
Sec.  1002.114(b) is the date by which the covered financial institution 
must begin to compile data as specified in Sec.  1002.107, comply with 
the firewall requirements of Sec.  1002.108, and begin to maintain 
records as specified in Sec.  1002.111. In addition, the covered 
financial institution must comply with Sec.  1002.110(c) and (d) no 
later than June 1 of the year after the applicable compliance date. For 
instance, if Sec.  1002.114(b)(2) applies to a financial institution, it 
must comply with Sec. Sec.  1002.107 and 1002.108, and portions of Sec.  
1002.111, beginning April 1, 2025, and it must comply with Sec.  
1002.110(c) and (d), and portions of Sec.  1002.111, no later than June 
1, 2026.
    2. Initial partial year collections pursuant to Sec.  1002.114(b). 
i. When the compliance date of October 1, 2024 specified in Sec.  
1002.114(b)(1) applies to a covered financial institution, the financial 
institution is required to collect data for covered applications during 
the period from October 1, 2024 to December 31, 2024. The financial 
institution must compile data for this period pursuant to Sec.  
1002.107, comply with the firewall requirements of Sec.  1002.108, and 
maintain records as specified in Sec.  1002.111. In addition, for data 
collected during this period, the covered financial institution must 
comply with Sec. Sec.  1002.109 and 1002.110(c) and (d) by June 1, 2025.
    ii. When the compliance date of April 1, 2025 specified in Sec.  
1002.114(b)(2) applies to a covered financial institution, the financial 
institution is required to collect data for covered applications during 
the period from April 1, 2025 to December 31, 2025. The financial 
institution must compile data for this period pursuant to Sec.  
1002.107, comply with the firewall requirements of Sec.  1002.108, and 
maintain records as specified in Sec.  1002.111. In addition, for data 
collected during this period, the covered financial institution must 
comply with Sec. Sec.  1002.109 and 1002.110(c) and (d) by June 1, 2026.
    3. Informal names for compliance date provisions. To facilitate 
discussion of the compliance dates specified in Sec.  1002.114(b)(1), 
(2), and (3), in the official commentary and any other documents 
referring to these compliance dates, the Bureau adopts the following 
informal simplified names. Tier 1 refers to the cohort of covered 
financial institutions that have a compliance date of October 1, 2024 
pursuant to Sec.  1002.114(b)(1). Tier 2 refers to the cohort of covered 
financial institutions that have a compliance date of April 1, 2025 
pursuant to Sec.  1002.114(b)(2). Tier 3 refers to the cohort of covered 
financial institutions that have a compliance date of January 1, 2026 
pursuant to Sec.  1002.114(b)(3).
    4. Examples. The following scenarios illustrate how to determine 
whether a financial institution is a covered financial institution and 
which compliance date specified in Sec.  1002.114(b) applies.
    i. Financial Institution A originated 3,000 covered credit 
transactions for small businesses in calendar year 2022, and 3,000 in 
calendar year 2023. Financial Institution A is in Tier 1 and has a 
compliance date of October 1, 2024.

[[Page 117]]

    ii. Financial Institution B originated 2,000 covered credit 
transactions for small businesses in calendar year 2022, and 3,000 in 
calendar year 2023. Because Financial Institution B did not originate at 
least 2,500 covered credit transactions for small businesses in each of 
2022 and 2023, it is not in Tier 1. Because Financial Institution B did 
originate at least 500 covered credit transactions for small businesses 
in each of 2022 and 2023, it is in Tier 2 and has a compliance date of 
April 1, 2025.
    iii. Financial Institution C originated 400 covered credit 
transactions to small businesses in calendar year 2022, and 1,000 in 
calendar year 2023. Because Financial Institution C did not originate at 
least 2,500 covered credit transactions for small businesses in each of 
2022 and 2023, it is not in Tier 1, and because it did not originate at 
least 500 covered credit transactions for small businesses in each of 
2022 and 2023, it is not in Tier 2. Because Financial Institution C did 
originate at least 100 covered credit transactions for small businesses 
in each of 2022 and 2023, it is in Tier 3 and has a compliance date of 
January 1, 2026.
    iv. Financial Institution D originated 90 covered credit 
transactions to small businesses in calendar year 2022, 120 in calendar 
year 2023, and 90 in both of the calendar years 2024 and 2025. Because 
Financial Institution D did not originate at least 100 covered credit 
transactions for small businesses in each of 2022 and 2023, it is not in 
Tier 1, Tier 2, or Tier 3. Because Financial Institution D did not 
originate at least 100 covered credit transactions for small businesses 
in subsequent consecutive calendar years, it is not a covered financial 
institution under Sec.  1002.105(b) and is not required to comply with 
the rule in 2024, 2025, or 2026.
    v. Financial Institution E originated 120 covered credit 
transactions for small businesses in each of calendar years 2022, 2023, 
and 2024, and 90 in 2025. Because Financial Institution E did not 
originate at least 2,500 or 500 covered credit transactions for small 
businesses in each of 2022 and 2023, it is not in Tier 1 or Tier 2. 
Because Financial Institution E originated at least 100 covered credit 
transactions for small businesses in each of 2022 and 2023, it is in 
Tier 3 and has a compliance date of January 1, 2026. However, because 
Financial Institution E did not originate at least 100 covered credit 
transactions for small businesses in each of 2024 and 2025, it no longer 
satisfies the definition of a covered financial institution in Sec.  
1002.105(b) at the time of the compliance date for Tier 3 institutions 
and thus is not required to comply with the rule in 2026.
    vi. Financial Institution F originated 90 covered credit 
transactions for small businesses in calendar year 2022, and 120 in 
2023, 2024, and 2025. Because Financial Institution F did not originate 
at least 100 covered credit transactions for small businesses in each of 
2022 and 2023, it is not in Tier 1, Tier 2, or Tier 3. Because Financial 
Institution F originated at least 100 covered credit transactions for 
small businesses in subsequent calendar years, Sec.  1002.114(b)(4), 
which cross-references Sec.  1002.105(b), applies to Financial 
Institution F. Because Financial Institution F originated at least 100 
covered credit transactions for small businesses in each of 2024 and 
2025, it is a covered financial institution under Sec.  1002.105(b) and 
is required to comply with the rule beginning January 1, 2026.
    vii. Financial Institution G originated 90 covered credit 
transactions for small businesses in each of calendar years 2022, 2023, 
2024, and 2025, and 120 in each of 2026 and 2027. Because Financial 
Institution F did not originate at least 100 covered credit transactions 
for small businesses in each of 2022 and 2023, it is not in Tier 1, Tier 
2, or Tier 3. Because Financial Institution G originated at least 100 
covered credit transactions for small businesses in subsequent calendar 
years, Sec.  1002.114(b)(4), which cross-references Sec.  1002.105(b), 
applies to Financial Institution G. Because Financial Institution G 
originated at least 100 covered credit transactions for small businesses 
in each of 2026 and 2027, it is a covered financial institution under 
Sec.  1002.105(b) and is required to comply with the rule beginning 
January 1, 2028.

                     114(c) Special Transition Rules

    1. Collection of certain information prior to a financial 
institution's compliance date. Notwithstanding Sec.  1002.5(a)(4)(ix), a 
financial institution that chooses to collect information on covered 
applications as permitted by Sec.  1002.114(c)(1) in the 12 months prior 
to its initial compliance date as specified in Sec.  1002.114(b)(1), (2) 
or (3) need comply only with the requirements set out in Sec. Sec.  
1002.107(a)(18) and (19), 1002.108, and 1002.111(b) and (c) with respect 
to the information collected. During this 12-month period, a covered 
financial institution need not comply with the provisions of Sec.  
1002.107 (other than Sec. Sec.  1002.107(a)(18) and (19)), 1002.109, 
1002.110, 1002.111(a), or 1002.114.
    2. Transition rule for applications received prior to a compliance 
date but final action is taken after a compliance date. If a covered 
financial institution receives a covered application from a small 
business prior to its initial compliance date specified in Sec.  
1002.114(b), but takes final action on or after that date, the financial 
institution is not required to collect data regarding that application 
pursuant to Sec.  1002.107 nor to report the application pursuant to 
Sec.  1002.109. For example, if a financial institution is subject to a 
compliance date of October 1, 2024, and it receives an application on 
September 15, 2024 but does not take final action on the application 
until October 5, 2024, the financial institution is

[[Page 118]]

not required to collect data pursuant to Sec.  1002.107 nor to report 
data to the Bureau pursuant to Sec.  1002.109 regarding that 
application.
    3. Has readily accessible the information needed to determine small 
business status. A financial institution has readily accessible the 
information needed to determine whether its originations of covered 
credit transactions were for small businesses as defined in Sec.  
1002.106 if, for instance, it in the ordinary course of business 
collects data on the precise gross annual revenue of the businesses for 
which it originates loans, it obtains information sufficient to 
determine whether an applicant for business credit had gross annual 
revenues of $5 million or less, or if it collects and reports similar 
data to Federal or State government agencies pursuant to other laws or 
regulations.
    4. Does not have readily accessible the information needed to 
determine small business status. A financial institution does not have 
readily accessible the information needed to determine whether its 
originations of covered credit transactions were for small businesses as 
defined in Sec.  1002.106 if it did not in the ordinary course of 
business collect either precise or approximate information on whether 
the businesses to which it originated covered credit had gross annual 
revenue of $5 million or less. In addition, even if precise or 
approximate information on gross annual revenue was initially collected, 
a financial institution does not have readily accessible this 
information if, to retrieve this information, for example, it must 
review paper loan files, recall such information from either archived 
paper records or scanned records in digital archives, or obtain such 
information from third parties that initially obtained this information 
but did not transmit such information to the financial institution.
    5. Reasonable method to estimate the number of originations. The 
reasonable methods that financial institutions may use to estimate 
originations for 2022 and 2023 include, but are not limited to, the 
following:
    i. A financial institution may comply with Sec.  1002.114(c)(2) by 
determining the small business status of covered credit transactions by 
asking every applicant, prior to the closing of approved transactions, 
to self-report whether it had gross annual revenue for its preceding 
fiscal year of $5 million or less, during the period October 1 through 
December 31, 2023. The financial institution may annualize the number of 
covered credit transactions it originates to small businesses from 
October 1 through December 31, 2023 by quadrupling the originations for 
this period, and apply the annualized number of originations to both 
calendar years 2022 and 2023.
    ii. A financial institution may comply with Sec.  1002.114(c)(2) by 
assuming that every covered credit transaction it originates for 
business customers in calendar years 2022 and 2023 is to a small 
business.
    iii. A financial institution may comply with Sec.  1002.114(c)(2) by 
using another methodology provided that such methodology is reasonable 
and documented in writing.
    6. Examples. The following scenarios illustrate the potential 
application of Sec.  1002.114(c)(2) to a financial institution's 
compliance date under Sec.  1002.114(b).
    i. Prior to October 1, 2023, Financial Institution A did not collect 
gross annual revenue or other information that would allow it to 
determine the small business status of the businesses for whom it 
originated covered credit transactions in calendar years 2022 and 2023. 
Financial Institution A chose to use the methodology set out in comment 
114(c)-5.i and as of October 1, 2023 began to collect information on 
gross annual revenue as defined in Sec.  1002.107(a)(14) for its covered 
credit transactions originated for businesses. Using this information, 
Financial Institution A determined that it had originated 750 covered 
credit transactions for businesses that were small as defined in Sec.  
1002.106. On an annualized basis, Financial Institution A originated 
3,000 covered credit transactions for small businesses (750 originations 
* 4 = 3,000 originations per year). Applying this annualized figure of 
3,000 originations to both calendar years 2022 and 2023, Financial 
Institution A is in Tier 1 and has a compliance date of October 1, 2024.
    ii. Prior to July 1, 2023, Financial Institution B collected gross 
annual revenue information for some applicants for business credit, but 
such information was only noted in its paper loan files. Financial 
Institution B thus does not have reasonable access to information that 
would allow it to determine the small business status of the businesses 
for whom it originated covered credit transactions for calendar years 
2022 and 2023. Financial Institution B chose to use the methodology set 
out in comment 114(c)-5.i, and as of October 1, 2023, Financial 
Institution B began to ask all businesses for whom it was closing 
covered credit transactions if they had gross annual revenues in the 
preceding fiscal year of $5 million or less. Using this information, 
Financial Institution B determined that it had originated 350 covered 
credit transactions for businesses that were small as defined in Sec.  
1002.106. On an annualized basis, Financial Institution B originated 
1,400 covered credit transactions for small businesses (350 originations 
* 4 = 1,400 originations per year). Applying this estimated figure of 
1,400 originations to both calendar years 2022 and 2023, Financial 
Institution B is in Tier 2 and has a compliance date of April 1, 2025.
    iii. Prior to April 1, 2023, Financial Institution C did not collect 
gross annual revenue or other information that would allow it to

[[Page 119]]

determine the small business status of the businesses for whom it 
originated covered credit transactions in calendar years 2022 and 2023. 
Financial Institution C chose its own methodology pursuant to comment 
114(c)-5.iii, basing it in part on the methodology specified in comment 
114(c)-5.i. Starting on April 1, 2023, Financial Institution C began to 
ask all business applicants for covered credit transactions if they had 
gross annual revenue in their preceding fiscal year of $5 million or 
less. Using this information, Financial Institution C determined that it 
had originated 100 covered credit transactions for businesses that were 
small as defined in Sec.  1002.106. On an annualized basis, Financial 
Institution C originated approximately 133 covered credit transactions 
for small businesses ((100 originations * 365 days)/275 days = 132.73 
originations per year). Applying this estimate of 133 originations to 
both calendar years 2022 and 2023, Financial Institution C is in Tier 3 
and has a compliance date of January 1, 2026.
    iv. Financial Institution D did not collect gross annual revenue or 
other information that would allow it to determine the small business 
status of the businesses for whom it originated covered credit 
transactions in calendar years 2022 and 2023. Financial Institution D 
determined that it had originated 3,000 total covered credit 
transactions for businesses in each of 2022 and 2023. Applying the 
methodology specified in comment 114(c)-5.ii, Financial Institution D 
assumed that all 3,000 covered credit transactions originated in each of 
2022 and 2023 were to small businesses. On that basis, Financial 
Institution D is in Tier 1 and has a compliance date of October 1, 2024.
    v. Financial Institution E did not collect gross annual revenue or 
other information that would allow it to determine the small business 
status of the businesses for whom it originated covered credit 
transactions in calendar years 2022 and 2023. Financial Institution E 
determined that it had originated 700 total covered credit transactions 
for businesses in each of 2022 and 2023. Applying the methodology 
specified in comment 114(c)-5.ii, Financial Institution E assumed that 
all such transactions in each of 2022 and 2023 were originated for small 
businesses. On that basis, Financial Institution E is in Tier 2 and has 
a compliance date of April 1, 2025.
    vi. Financial Institution F did does not have readily accessible 
gross annual revenue or other information that would allow it to 
determine the small business status of the businesses for whom it 
originated covered credit transactions in calendar years 2022 and 2023. 
Financial Institution F determined that it had originated 80 total 
covered credit transactions for businesses in 2022 and 150 total covered 
credit transactions for businesses in 2023. Applying the methodology set 
out in comment 114(c)-5.ii, Financial Institution F assumed that all 
such transactions originated in 2022 and 2023 were originated for small 
businesses. On that basis, Financial Institution E is not in Tier 1, 
Tier 2 or Tier 3, and is subject to the compliance date provision 
specified in Sec.  1002.114(b)(4).

                  Appendix C--Sample Notification Forms

    1. Form C-9. If not otherwise provided under other applicable 
disclosure requirements, creditors may design their own form, add to, or 
modify the model form to reflect their individual policies and 
procedures. For example, a creditor may want to add:
    i. A telephone number that applicants may call to leave their name 
and the address to which a copy of the appraisal or other written 
valuation should be sent.
    ii. A notice of the cost the applicant will be required to pay the 
creditor for the appraisal or other valuation.

[76 FR 79445, Dec. 21, 2011, as amended at 78 FR 7248, Jan. 31, 2013; 82 
FR 45695, Oct. 2, 2017; 88 FR 35536, May 31, 2023]



PART 1003_HOME MORTGAGE DISCLOSURE (REGULATION C)--Table of Contents



Sec.
1003.1 Authority, purpose, and scope.
1003.2 Definitions.
1003.3 Exempt institutions and excluded and partially exempt 
          transactions.
1003.4 Compilation of reportable data.
1003.5 Disclosure and reporting.
1003.6 Enforcement.

Appendix A to Part 1003 [Reserved]
Appendix B to Part 1003--Form and Instructions for Data Collection on 
          Ethnicity, Race, and Sex
Appendix C to Part 1003--Procedures for Generating a Check Digit and 
          Validating a ULI
Supplement I to Part 1003--Official Interpretations

    Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.

    Source: 76 FR 78468, Dec. 19, 2011, unless otherwise noted.



Sec.  1003.1  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation C, is issued by the 
Bureau of Consumer Financial Protection (Bureau) pursuant to the Home 
Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801 et seq.,) as amended. The 
information-collection requirements have been approved by the U.S. 
Office of Management and Budget (OMB) under 44 U.S.C. 3501 et seq. and 
have been assigned OMB numbers for institutions

[[Page 120]]

reporting data to the Office of the Comptroller of the Currency (1557-
0159), the Federal Deposit Insurance Corporation (3064-0046), the 
Federal Reserve System (7100-0247), the Department of Housing and Urban 
Development (HUD) (2502-0529), the National Credit Union Administration 
(3133-0166), and the Bureau of Consumer Financial Protection (3170-
0008).
    (b) Purpose. (1) This part implements the Home Mortgage Disclosure 
Act, which is intended to provide the public with loan data that can be 
used:
    (i) To help determine whether financial institutions are serving the 
housing needs of their communities;
    (ii) To assist public officials in distributing public-sector 
investment so as to attract private investment to areas where it is 
needed; and
    (iii) To assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes.
    (2) Neither the act nor this part is intended to encourage unsound 
lending practices or the allocation of credit.
    (c) Scope. This part applies to financial institutions as defined in 
Sec.  1003.2(g). This part requires a financial institution to submit 
data to the appropriate Federal agency for the financial institution as 
defined in Sec.  1003.5(a)(4), and to disclose certain data to the 
public, about covered loans for which the financial institution receives 
applications, or that it originates or purchases, and that are secured 
by a dwelling located in a State of the United States of America, the 
District of Columbia, or the Commonwealth of Puerto Rico.

[76 FR 78468, Dec. 19, 2011, as amended at 80 FR 66308, Oct. 28, 2015]



Sec.  1003.2  Definitions.

    In this part:
    (a) Act means the Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 
2801 et seq.), as amended.
    (b) Application--(1) In general. Application means an oral or 
written request for a covered loan that is made in accordance with 
procedures used by a financial institution for the type of credit 
requested.
    (2) Preapproval programs. A request for preapproval for a home 
purchase loan, other than a home purchase loan that will be an open-end 
line of credit, a reverse mortgage, or secured by a multifamily 
dwelling, is an application under this section if the request is 
reviewed under a program in which the financial institution, after a 
comprehensive analysis of the creditworthiness of the applicant, issues 
a written commitment to the applicant valid for a designated period of 
time to extend a home purchase loan up to a specified amount. The 
written commitment may not be subject to conditions other than:
    (i) Conditions that require the identification of a suitable 
property;
    (ii) Conditions that require that no material change has occurred in 
the applicant's financial condition or creditworthiness prior to 
closing; and
    (iii) Limited conditions that are not related to the financial 
condition or creditworthiness of the applicant that the financial 
institution ordinarily attaches to a traditional home mortgage 
application.
    (c) Branch office means:
    (1) Any office of a bank, savings association, or credit union that 
is considered a branch by the Federal or State supervisory agency 
applicable to that institution, excluding automated teller machines and 
other free-standing electronic terminals; and
    (2) Any office of a for-profit mortgage-lending institution (other 
than a bank, savings association, or credit union) that takes 
applications from the public for covered loans. A for-profit mortgage-
lending institution (other than a bank, savings association, or credit 
union) is also deemed to have a branch office in an MSA or in an MD, if, 
in the preceding calendar year, it received applications for, 
originated, or purchased five or more covered loans related to property 
located in that MSA or MD, respectively.
    (d) Closed-end mortgage loan means an extension of credit that is 
secured by a lien on a dwelling and that is not an open-end line of 
credit under paragraph (o) of this section.
    (e) Covered loan means a closed-end mortgage loan or an open-end 
line of credit that is not an excluded transaction under Sec.  
1003.3(c).
    (f) Dwelling means a residential structure, whether or not attached 
to

[[Page 121]]

real property. The term includes but is not limited to a detached home, 
an individual condominium or cooperative unit, a manufactured home or 
other factory-built home, or a multifamily residential structure or 
community.
    (g) Financial institution means a depository financial institution 
or a nondepository financial institution, where:
    (1) Depository financial institution means a bank, savings 
association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Bureau for coverage 
by the Act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in an 
MSA;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan or refinancing of a home purchase loan, secured by a first 
lien on a one- to four-unit dwelling;
    (iv) Meets one or more of the following two criteria:
    (A) The institution is federally insured or regulated; or
    (B) Any loan referred to in paragraph (g)(1)(iii) of this section 
was insured, guaranteed, or supplemented by a Federal agency, or was 
intended by the institution for sale to the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation; and
    (v) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at least 
25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(13); or
    (B) In each of the two preceding calendar years, originated at least 
200 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10); and
    (2) Nondepository financial institution means a for-profit mortgage-
lending institution (other than a bank, savings association, or credit 
union) that:
    (i) On the preceding December 31, had a home or branch office in an 
MSA; and
    (ii) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at least 
25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(13); or
    (B) In each of the two preceding calendar years, originated at least 
200 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
    (h) [Reserved]
    (i) Home improvement loan means a closed-end mortgage loan or an 
open-end line of credit that is for the purpose, in whole or in part, of 
repairing, rehabilitating, remodeling, or improving a dwelling or the 
real property on which the dwelling is located.
    (j) Home purchase loan means a closed-end mortgage loan or an open-
end line of credit that is for the purpose, in whole or in part, of 
purchasing a dwelling.
    (k) Loan/Application Register means both the record of information 
required to be collected pursuant to Sec.  1003.4 and the record 
submitted annually or quarterly, as applicable, pursuant to Sec.  
1003.5(a).
    (l) Manufactured home means any residential structure as defined 
under regulations of the U.S. Department of Housing and Urban 
Development establishing manufactured home construction and safety 
standards (24 CFR 3280.2). For purposes of Sec.  1003.4(a)(5), the term 
also includes a multifamily dwelling that is a manufactured home 
community.
    (m) Metropolitan Statistical Area (MSA) and Metropolitan Division 
(MD). (1) Metropolitan Statistical Area or MSA means a Metropolitan 
Statistical Area as defined by the U.S. Office of Management and Budget.
    (2) Metropolitan Division (MD) means a Metropolitan Division of an 
MSA, as defined by the U.S. Office of Management and Budget.
    (n) Multifamily dwelling means a dwelling, regardless of 
construction method, that contains five or more individual dwelling 
units.
    (o) Open-end line of credit means an extension of credit that:

[[Page 122]]

    (1) Is secured by a lien on a dwelling; and
    (2) Is an open-end credit plan as defined in Regulation Z, 12 CFR 
1026.2(a)(20), but without regard to whether the credit is consumer 
credit, as defined in Sec.  1026.2(a)(12), is extended by a creditor, as 
defined in Sec.  1026.2(a)(17), or is extended to a consumer, as defined 
in Sec.  1026.2(a)(11).
    (p) Refinancing means a closed-end mortgage loan or an open-end line 
of credit in which a new, dwelling-secured debt obligation satisfies and 
replaces an existing, dwelling-secured debt obligation by the same 
borrower.
    (q) Reverse mortgage means a closed-end mortgage loan or an open-end 
line of credit that is a reverse mortgage transaction as defined in 
Regulation Z, 12 CFR 1026.33(a), but without regard to whether the 
security interest is created in a principal dwelling.

[80 FR 66308, Oct. 28, 2015, as amended at 82 FR 43132, Sept. 13, 2017; 
84 FR 57980, Oct. 29, 2019; 85 FR 28404, 28406, May 12, 2020; 87 FR 
77981, Dec. 21, 2022]



Sec.  1003.3  Exempt institutions and excluded and partially exempt 
transactions.

    (a) Exemption based on state law. (1) A state-chartered or state-
licensed financial institution is exempt from the requirements of this 
part if the Bureau determines that the institution is subject to a state 
disclosure law that contains requirements substantially similar to those 
imposed by this part and that contains adequate provisions for 
enforcement.
    (2) Any state, state-chartered or state-licensed financial 
institution, or association of such institutions, may apply to the 
Bureau for an exemption under paragraph (a) of this section.
    (3) An institution that is exempt under paragraph (a) of this 
section shall use the disclosure form required by its state law and 
shall submit the data required by that law to its state supervisory 
agency for purposes of aggregation.
    (b) Loss of exemption. An institution losing a state-law exemption 
under paragraph (a) of this section shall comply with this part 
beginning with the calendar year following the year for which it last 
reported loan data under the state disclosure law.
    (c) Excluded transactions. The requirements of this part do not 
apply to:
    (1) A closed-end mortgage loan or open-end line of credit originated 
or purchased by a financial institution acting in a fiduciary capacity;
    (2) A closed-end mortgage loan or open-end line of credit secured by 
a lien on unimproved land;
    (3) Temporary financing;
    (4) The purchase of an interest in a pool of closed-end mortgage 
loans or open-end lines of credit;
    (5) The purchase solely of the right to service closed-end mortgage 
loans or open-end lines of credit;
    (6) The purchase of closed-end mortgage loans or open-end lines of 
credit as part of a merger or acquisition, or as part of the acquisition 
of all of the assets and liabilities of a branch office as defined in 
Sec.  1003.2(c);
    (7) A closed-end mortgage loan or open-end line of credit, or an 
application for a closed-end mortgage loan or open-end line of credit, 
for which the total dollar amount is less than $500;
    (8) The purchase of a partial interest in a closed-end mortgage loan 
or open-end line of credit;
    (9) A closed-end mortgage loan or open-end line of credit used 
primarily for agricultural purposes;
    (10) A closed-end mortgage loan or open-end line of credit that is 
or will be made primarily for a business or commercial purpose, unless 
the closed-end mortgage loan or open-end line of credit is a home 
improvement loan under Sec.  1003.2(i), a home purchase loan under Sec.  
1003.2(j), or a refinancing under Sec.  1003.2(p);
    (11) A closed-end mortgage loan, if the financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years; a financial institution may collect, record, 
report, and disclose information, as described in Sec. Sec.  1003.4 and 
1003.5, for such an excluded closed-end mortgage loan as though it were 
a covered loan, provided that the financial institution complies with 
such requirements for all applications for closed-end mortgage loans 
that it receives, closed-end mortgage loans

[[Page 123]]

that it originates, and closed-end mortgage loans that it purchases that 
otherwise would have been covered loans during the calendar year during 
which final action is taken on the excluded closed-end mortgage loan;
    (12) An open-end line of credit, if the financial institution 
originated fewer than 200 open-end lines of credit in either of the two 
preceding calendar years; a financial institution may collect, record, 
report, and disclose information, as described in Sec. Sec.  1003.4 and 
1003.5, for such an excluded open-end line of credit as though it were a 
covered loan, provided that the financial institution complies with such 
requirements for all applications for open-end lines of credit that it 
receives, open-end lines of credit that it originates, and open-end 
lines of credit that it purchases that otherwise would have been covered 
loans during the calendar year during which final action is taken on the 
excluded open-end line of credit; or
    (13) A transaction that provided or, in the case of an application, 
proposed to provide new funds to the applicant or borrower in advance of 
being consolidated in a New York State consolidation, extension, and 
modification agreement classified as a supplemental mortgage under New 
York Tax Law section 255; the transaction is excluded only if final 
action on the consolidation was taken in the same calendar year as final 
action on the new funds transaction.
    (d) Partially exempt transactions. (1) For purposes of this 
paragraph (d), the following definitions apply:
    (i) Insured credit union means an insured credit union as defined in 
section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
    (ii) Insured depository institution means an insured depository 
institution as defined in section 3 of the Federal Deposit Insurance Act 
(12 U.S.C. 1813).
    (iii) Optional data means the data identified in Sec.  
1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15) through (30), and (32) 
through (38).
    (iv) Partially exempt transaction means a covered loan or 
application that is partially exempt under paragraph (d)(2) or (3) of 
this section.
    (2) Except as provided in paragraph (d)(6) of this section, an 
insured depository institution or insured credit union that, in each of 
the two preceding calendar years, originated fewer than 500 closed-end 
mortgage loans that are not excluded from this part pursuant to 
paragraphs (c)(1) through (10) or paragraph (c)(13) of this section is 
not required to collect, record, or report optional data as defined in 
paragraph (d)(1)(iii) of this section for applications for closed-end 
mortgage loans that it receives, closed-end mortgage loans that it 
originates, and closed-end mortgage loans that it purchases.
    (3) Except as provided in paragraph (d)(6) of this section, an 
insured depository institution or insured credit union that, in each of 
the two preceding calendar years, originated fewer than 500 open-end 
lines of credit that are not excluded from this part pursuant to 
paragraphs (c)(1) through (10) of this section is not required to 
collect, record, or report optional data as defined in paragraph 
(d)(1)(iii) of this section for applications for open-end lines of 
credit that it receives, open-end lines of credit that it originates, 
and open-end lines of credit that it purchases.
    (4) A financial institution eligible for a partial exemption under 
paragraph (d)(2) or (3) of this section may collect, record, and report 
optional data as defined in paragraph (d)(1)(iii) of this section for a 
partially exempt transaction as though the institution were required to 
do so, provided that:
    (i) If the institution reports the street address, city name, or Zip 
Code for the property securing a covered loan, or in the case of an 
application, proposed to secure a covered loan pursuant to Sec.  
1003.4(a)(9)(i), it reports all data that would be required by Sec.  
1003.4(a)(9)(i) if the transaction were not partially exempt;
    (ii) If the institution reports any data for the transaction 
pursuant to Sec.  1003.4(a)(15), (16), (17), (27), (33), or (35), it 
reports all data that would be required by Sec.  1003.4(a)(15), (16), 
(17), (27), (33), or (35), respectively, if the transaction were not 
partially exempt.
    (5) If, pursuant to paragraph (d)(2) or (3) of this section, a 
financial institution does not report a universal loan identifier (ULI) 
pursuant to

[[Page 124]]

Sec.  1003.4(a)(1)(i) for an application for a covered loan that it 
receives, a covered loan that it originates, or a covered loan that it 
purchases, the financial institution shall assign and report a non-
universal loan identifier (NULI). The NULI must be composed of up to 22 
characters to identify the covered loan or application, which:
    (i) May be letters, numerals, or a combination of letters and 
numerals;
    (ii) Must be unique within the annual loan/application register in 
which the covered loan or application is included; and
    (iii) Must not include any information that could be used to 
directly identify the applicant or borrower.
    (6) Paragraphs (d)(2) and (3) of this section do not apply to an 
insured depository institution that, as of the preceding December 31, 
had received a rating of ``needs to improve record of meeting community 
credit needs'' during each of its two most recent examinations or a 
rating of ``substantial noncompliance in meeting community credit 
needs'' on its most recent examination under section 807(b)(2) of the 
Community Reinvestment Act of 1977 (12 U.S.C. 2906(b)(2)).

[76 FR 78468, Dec. 19, 2011, as amended at 80 FR 66309, Oct. 28, 2015; 
82 FR 43132, Sept. 13, 2017; 84 FR 57980, Oct. 29, 2019; 85 FR 28404, 
28406, May 12, 2020; 87 FR 77981, Dec. 21, 2022]



Sec.  1003.4  Compilation of reportable data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for covered loans that it receives, 
covered loans that it originates, and covered loans that it purchases 
for each calendar year. A financial institution shall collect data 
regarding requests under a preapproval program, as defined in Sec.  
1003.2(b)(2), only if the preapproval request is denied, is approved by 
the financial institution but not accepted by the applicant, or results 
in the origination of a home purchase loan. Except as provided in Sec.  
1003.3(d), the data collected shall include the following items:
    (1)(i) A universal loan identifier (ULI) or, for a partially exempt 
transaction under Sec.  1003.3(d), either a ULI or a non-universal loan 
identifier (NULI) as described in Sec.  1003.3(d)(5) for the covered 
loan or application that can be used to identify and retrieve the 
covered loan or application file. Except for a purchased covered loan or 
application described in paragraphs (a)(1)(i)(D) and (E) of this section 
or a partially exempt transaction for which a NULI is assigned and 
reported under Sec.  1003.3(d), the financial institution shall assign 
and report a ULI that:
    (A) Begins with the financial institution's Legal Entity Identifier 
(LEI) that is issued by:
    (1) A utility endorsed by the LEI Regulatory Oversight Committee; or
    (2) A utility endorsed or otherwise governed by the Global LEI 
Foundation (GLEIF) (or any successor of the GLEIF) after the GLEIF 
assumes operational governance of the global LEI system.
    (B) Follows the LEI with up to 23 additional characters to identify 
the covered loan or application, which:
    (1) May be letters, numerals, or a combination of letters and 
numerals;
    (2) Must be unique within the financial institution; and
    (3) Must not include any information that could be used to directly 
identify the applicant or borrower; and
    (C) Ends with a two-character check digit, as prescribed in appendix 
C to this part.
    (D) For a purchased covered loan that any financial institution has 
previously assigned or reported with a ULI under this part, the 
financial institution that purchases the covered loan must use the ULI 
that was assigned or previously reported for the covered loan.
    (E) For an application that was previously reported with a ULI under 
this part and that results in an origination during the same calendar 
year that is reported in a subsequent reporting period pursuant to Sec.  
1003.5(a)(1)(ii), the financial institution may report the same ULI for 
the origination that was previously reported for the application.
    (ii) Except for purchased covered loans, the date the application 
was received or the date shown on the application form.
    (2) Whether the covered loan is, or in the case of an application 
would have been, insured by the Federal Housing

[[Page 125]]

Administration, guaranteed by the Department of Veterans Affairs, or 
guaranteed by the Rural Housing Service or the Farm Service Agency.
    (3) Whether the covered loan is, or the application is for, a home 
purchase loan, a home improvement loan, a refinancing, a cash-out 
refinancing, or for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing.
    (4) Whether the application or covered loan involved a request for a 
preapproval of a home purchase loan under a preapproval program.
    (5) Whether the construction method for the dwelling related to the 
property identified in paragraph (a)(9) of this section is site-built or 
a manufactured home.
    (6) Whether the property identified in paragraph (a)(9) of this 
section is or will be used by the applicant or borrower as a principal 
residence, as a second residence, or as an investment property.
    (7) The amount of the covered loan or the amount applied for, as 
applicable.
    (i) For a closed-end mortgage loan, other than a purchased loan, an 
assumption, or a reverse mortgage, the amount to be repaid as disclosed 
on the legal obligation. For a purchased closed-end mortgage loan or an 
assumption of a closed-end mortgage loan, the unpaid principal balance 
at the time of purchase or assumption.
    (ii) For an open-end line of credit, other than a reverse mortgage 
open-end line of credit, the amount of credit available to the borrower 
under the terms of the plan.
    (iii) For a reverse mortgage, the initial principal limit, as 
determined pursuant to section 255 of the National Housing Act (12 
U.S.C. 1715z-20) and implementing regulations and mortgagee letters 
issued by the U.S. Department of Housing and Urban Development.
    (8) The following information about the financial institution's 
action:
    (i) The action taken by the financial institution, recorded as one 
of the following:
    (A) Whether a covered loan was originated or purchased;
    (B) Whether an application for a covered loan that did not result in 
the origination of a covered loan was approved but not accepted, denied, 
withdrawn by the applicant, or closed for incompleteness; and
    (C) Whether a preapproval request that did not result in the 
origination of a home purchase loan was denied or approved but not 
accepted.
    (ii) The date of the action taken by the financial institution.
    (9) The following information about the location of the property 
securing the covered loan or, in the case of an application, proposed to 
secure the covered loan:
    (i) The property address; and
    (ii) If the property is located in an MSA or MD in which the 
financial institution has a home or branch office, or if the institution 
is subject to paragraph (e) of this section, the location of the 
property by:
    (A) State;
    (B) County; and
    (C) Census tract if the property is located in a county with a 
population of more than 30,000 according to the most recent decennial 
census conducted by the U.S. Census Bureau.
    (10) The following information about the applicant or borrower:
    (i) Ethnicity, race, and sex, and whether this information was 
collected on the basis of visual observation or surname;
    (ii) Age; and
    (iii) Except for covered loans or applications for which the credit 
decision did not consider or would not have considered income, the gross 
annual income relied on in making the credit decision or, if a credit 
decision was not made, the gross annual income relied on in processing 
the application.
    (11) The type of entity purchasing a covered loan that the financial 
institution originates or purchases and then sells within the same 
calendar year.
    (12)(i) For covered loans and applications that are approved but not 
accepted, and that are subject to Regulation Z, 12 CFR part 1026, other 
than assumptions, purchased covered loans, and reverse mortgages, the 
difference between the covered loan's annual percentage rate and the 
average prime offer rate for a comparable transaction as of the date the 
interest rate is set.

[[Page 126]]

    (ii) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates and other loan pricing terms 
currently offered to consumers by a set of creditors for mortgage loans 
that have low-risk pricing characteristics. The Bureau publishes tables 
of average prime offer rates by transaction type at least weekly and 
also publishes the methodology it uses to derive these rates.
    (13) For covered loans subject to the Home Ownership and Equity 
Protection Act of 1994, as implemented in Regulation Z, 12 CFR 1026.32, 
whether the covered loan is a high-cost mortgage under Regulation Z, 12 
CFR 1026.32(a).
    (14) The lien status (first or subordinate lien) of the property 
identified under paragraph (a)(9) of this section.
    (15)(i) Except for purchased covered loans, the credit score or 
scores relied on in making the credit decision and the name and version 
of the scoring model used to generate each credit score.
    (ii) For purposes of this paragraph (a)(15), ``credit score'' has 
the meaning set forth in 15 U.S.C. 1681g(f)(2)(A).
    (16) The principal reason or reasons the financial institution 
denied the application, if applicable.
    (17) For covered loans subject to Regulation Z, 12 CFR 1026.43(c), 
the following information:
    (i) If a disclosure is provided for the covered loan pursuant to 
Regulation Z, 12 CFR 1026.19(f), the amount of total loan costs, as 
disclosed pursuant to Regulation Z, 12 CFR 1026.38(f)(4); or
    (ii) If the covered loan is not subject to the disclosure 
requirements in Regulation Z, 12 CFR 1026.19(f), and is not a purchased 
covered loan, the total points and fees charged in connection with the 
covered loan, expressed in dollars and calculated pursuant to Regulation 
Z, 12 CFR 1026.32(b)(1).
    (18) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the total of all itemized amounts that 
are designated borrower-paid at or before closing, as disclosed pursuant 
to Regulation Z, 12 CFR 1026.38(f)(1).
    (19) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the points paid to the creditor to 
reduce the interest rate, expressed in dollars, as described in 
Regulation Z, 12 CFR 1026.37(f)(1)(i), and disclosed pursuant to 
Regulation Z, 12 CFR 1026.38(f)(1).
    (20) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the amount of lender credits, as 
disclosed pursuant to Regulation Z, 12 CFR 1026.38(h)(3).
    (21) The interest rate applicable to the approved application, or to 
the covered loan at closing or account opening.
    (22) For covered loans or applications subject to Regulation Z, 12 
CFR part 1026, other than reverse mortgages or purchased covered loans, 
the term in months of any prepayment penalty, as defined in Regulation 
Z, 12 CFR 1026.32(b)(6)(i) or (ii), as applicable.
    (23) Except for purchased covered loans, the ratio of the 
applicant's or borrower's total monthly debt to the total monthly income 
relied on in making the credit decision.
    (24) Except for purchased covered loans, the ratio of the total 
amount of debt secured by the property to the value of the property 
relied on in making the credit decision.
    (25) The scheduled number of months after which the legal obligation 
will mature or terminate or would have matured or terminated.
    (26) The number of months, or proposed number of months in the case 
of an application, until the first date the interest rate may change 
after closing or account opening.
    (27) Whether the contractual terms include or would have included 
any of the following:
    (i) A balloon payment as defined in Regulation Z, 12 CFR 
1026.18(s)(5)(i);
    (ii) Interest-only payments as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(iv);
    (iii) A contractual term that would cause the covered loan to be a 
negative amortization loan as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(v); or
    (iv) Any other contractual term that would allow for payments other 
than fully amortizing payments, as defined in Regulation Z, 12 CFR 
1026.43(b)(2), during the loan term, other than the contractual terms 
described in this paragraph (a)(27)(i), (ii), and (iii).

[[Page 127]]

    (28) The value of the property securing the covered loan or, in the 
case of an application, proposed to secure the covered loan relied on in 
making the credit decision.
    (29) If the dwelling related to the property identified in paragraph 
(a)(9) of this section is a manufactured home and not a multifamily 
dwelling, whether the covered loan is, or in the case of an application 
would have been, secured by a manufactured home and land, or by a 
manufactured home and not land.
    (30) If the dwelling related to the property identified in paragraph 
(a)(9) of this section is a manufactured home and not a multifamily 
dwelling, whether the applicant or borrower:
    (i) Owns the land on which it is or will be located or, in the case 
of an application, did or would have owned the land on which it would 
have been located, through a direct or indirect ownership interest; or
    (ii) Leases or, in the case of an application, leases or would have 
leased the land through a paid or unpaid leasehold.
    (31) The number of individual dwelling units related to the property 
securing the covered loan or, in the case of an application, proposed to 
secure the covered loan.
    (32) If the property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan includes a multifamily 
dwelling, the number of individual dwelling units related to the 
property that are income-restricted pursuant to Federal, State, or local 
affordable housing programs.
    (33) Except for purchased covered loans, the following information 
about the application channel of the covered loan or application:
    (i) Whether the applicant or borrower submitted the application for 
the covered loan directly to the financial institution; and
    (ii) Whether the obligation arising from the covered loan was, or in 
the case of an application, would have been initially payable to the 
financial institution.
    (34) For a covered loan or application, the unique identifier 
assigned by the Nationwide Mortgage Licensing System and Registry for 
the mortgage loan originator, as defined in Regulation G, 12 CFR 
1007.102, or Regulation H, 12 CFR 1008.23, as applicable.
    (35)(i) Except for purchased covered loans, the name of the 
automated underwriting system used by the financial institution to 
evaluate the application and the result generated by that automated 
underwriting system.
    (ii) For purposes of this paragraph (a)(35), an ``automated 
underwriting system'' means an electronic tool developed by a 
securitizer, Federal government insurer, or Federal government guarantor 
of closed-end mortgage loans or open-end lines of credit that provides a 
result regarding the credit risk of the applicant and whether the 
covered loan is eligible to be originated, purchased, insured, or 
guaranteed by that securitizer, Federal government insurer, or Federal 
government guarantor. A person is a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans or 
open-end lines of credit, respectively, if it has ever securitized, 
provided Federal government insurance, or provided a Federal government 
guarantee for a closed-end mortgage loan or open-end line of credit.
    (36) Whether the covered loan is, or the application is for, a 
reverse mortgage.
    (37) Whether the covered loan is, or the application is for, an 
open-end line of credit.
    (38) Whether the covered loan is, or the application is for a 
covered loan that will be, made primarily for a business or commercial 
purpose.
    (b) Collection of data on ethnicity, race, sex, age, and income. (1) 
A financial institution shall collect data about the ethnicity, race, 
and sex of the applicant or borrower as prescribed in appendix B to this 
part.
    (2) Ethnicity, race, sex, age, and income data may but need not be 
collected for covered loans purchased by a financial institution.
    (c)-(d) [Reserved]
    (e) Data reporting for banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending

[[Page 128]]

under CRA. Banks and savings associations that are required to report 
data on small business, small farm, and community development lending 
under regulations that implement the Community Reinvestment Act of 1977 
(12 U.S.C. 2901 et seq.) shall also collect the information required by 
paragraph (a)(9)(ii) of this section for property located outside MSAs 
and MDs in which the institution has a home or branch office, or outside 
any MSA.
    (f) Quarterly recording of data. A financial institution shall 
record the data collected pursuant to this section on a loan/application 
register within 30 calendar days after the end of the calendar quarter 
in which final action is taken (such as origination or purchase of a 
covered loan, sale of a covered loan in the same calendar year it is 
originated or purchased, or denial or withdrawal of an application).

[80 FR 66310, Oct. 28, 2015, as amended at 82 FR 43132, Sept. 13, 2017; 
84 FR 57981, Oct. 29, 2019]



Sec.  1003.5  Disclosure and reporting.

    (a) Reporting to agency--(1)(i) Annual reporting. By March 1 
following the calendar year for which data are collected and recorded as 
required by Sec.  1003.4, a financial institution shall submit its 
annual loan/application register in electronic format to the appropriate 
Federal agency at the address identified by such agency. An authorized 
representative of the financial institution with knowledge of the data 
submitted shall certify to the accuracy and completeness of data 
submitted pursuant to this paragraph (a)(1)(i). The financial 
institution shall retain a copy of its annual loan/application register 
submitted pursuant to this paragraph (a)(1)(i) for its records for at 
least three years.
    (ii) Quarterly reporting. Within 60 calendar days after the end of 
each calendar quarter except the fourth quarter, a financial institution 
that reported for the preceding calendar year at least 60,000 covered 
loans and applications, combined, excluding purchased covered loans, 
shall submit to the appropriate Federal agency its loan/application 
register containing all data required to be recorded for that quarter 
pursuant to Sec.  1003.4(f). The financial institution shall submit its 
quarterly loan/application register pursuant to this paragraph 
(a)(1)(ii) in electronic format at the address identified by the 
appropriate Federal agency for the institution.
    (iii) When the last day for submission of data prescribed under this 
paragraph (a)(1) falls on a Saturday or Sunday, a submission shall be 
considered timely if it is submitted on the next succeeding Monday.
    (2) A financial institution that is a subsidiary of a bank or 
savings association shall complete a separate loan/application register. 
The subsidiary shall submit the loan/application register, directly or 
through its parent, to the appropriate Federal agency for the 
subsidiary's parent at the address identified by the agency.
    (3) A financial institution shall provide with its submission:
    (i) Its name;
    (ii) The calendar year the data submission covers pursuant to 
paragraph (a)(1)(i) of this section or calendar quarter and year the 
data submission covers pursuant to paragraph (a)(1)(ii) of this section;
    (iii) The name and contact information of a person who may be 
contacted with questions about the institution's submission;
    (iv) Its appropriate Federal agency;
    (v) The total number of entries contained in the submission;
    (vi) Its Federal Taxpayer Identification number; and
    (vii) Its Legal Entity Identifier (LEI) as described in Sec.  
1003.4(a)(1)(i)(A).
    (4) For purposes of paragraph (a) of this section, ``appropriate 
Federal agency'' means the appropriate agency for the financial 
institution as determined pursuant to section 304(h)(2) of the Home 
Mortgage Disclosure Act (12 U.S.C. 2803(h)(2)) or, with respect to a 
financial institution subject to the Bureau's supervisory authority 
under section 1025(a) of the Consumer Financial Protection Act of 2010 
(12 U.S.C. 5515(a)), the Bureau.
    (5) Procedures for the submission of data pursuant to paragraph (a) 
of this section are available at www.consumerfinance.gov/hmda.

[[Page 129]]

    (b) Disclosure statement. (1) The Federal Financial Institutions 
Examination Council (FFIEC) will make available a disclosure statement 
based on the data each financial institution submits for the preceding 
calendar year pursuant to paragraph (a)(1)(i) of this section.
    (2) No later than three business days after receiving notice from 
the FFIEC that a financial institution's disclosure statement is 
available, the financial institution shall make available to the public 
upon request at its home office, and each branch office physically 
located in each MSA and each MD, a written notice that clearly conveys 
that the institution's disclosure statement may be obtained on the 
Bureau's Web site at www.consumerfinance.gov/hmda.
    (c) Modified loan/application register. (1) A financial institution 
shall make available to the public upon request at its home office, and 
each branch office physically located in each MSA and each MD, a written 
notice that clearly conveys that the institution's loan/application 
register, as modified by the Bureau to protect applicant and borrower 
privacy, may be obtained on the Bureau's Web site at 
www.consumerfinance.gov/hmda.
    (2) A financial institution shall make available the notice required 
by paragraph (c)(1) of this section following the calendar year for 
which the data are collected.
    (d) Availability of written notices. (1) A financial institution 
shall make the notice required by paragraph (c) of this section 
available to the public for a period of three years and the notice 
required by paragraph (b)(2) of this section available to the public for 
a period of five years. An institution shall make these notices 
available during the hours the office is normally open to the public for 
business.
    (2) A financial institution may make available to the public, at its 
discretion and in addition to the written notices required by paragraphs 
(b)(2) or (c)(1) of this section, as applicable, its disclosure 
statement or its loan/application register, as modified by the Bureau to 
protect applicant and borrower privacy. A financial institution may 
impose a reasonable fee for any cost incurred in providing or 
reproducing these data.
    (e) Posted notice of availability of data. A financial institution 
shall post a general notice about the availability of its HMDA data in 
the lobby of its home office and of each branch office physically 
located in each MSA and each MD. This notice must clearly convey that 
the institution's HMDA data is available on the Bureau's Web site at 
www.consumerfinance.gov/hmda.
    (f) Aggregated data. Using data submitted by financial institutions 
pursuant to paragraph (a)(1)(i) of this section, the FFIEC will make 
available aggregate data for each MSA and MD, showing lending patterns 
by property location, age of housing stock, and income level, sex, 
ethnicity, and race.

[80 FR 66312, Oct. 28, 2015, as amended at 80 FR 66313, Oct. 28, 2015; 
82 FR 43145, Sept. 13, 2017]



Sec.  1003.6  Enforcement.

    (a) Administrative enforcement. A violation of the Act or this part 
is subject to administrative sanctions as provided in section 305 of the 
Act (12 U.S.C. 2804), including the imposition of civil money penalties, 
where applicable. Compliance is enforced by the agencies listed in 
section 305 of the Act.
    (b) Bona fide errors. (1) An error in compiling or recording data 
for a covered loan or application is not a violation of the Act or this 
part if the error was unintentional and occurred despite the maintenance 
of procedures reasonably adapted to avoid such an error.
    (2) An incorrect entry for a census tract number is deemed a bona 
fide error, and is not a violation of the Act or this part, provided 
that the financial institution maintains procedures reasonably adapted 
to avoid such an error.
    (c) Quarterly recording and reporting. (1) If a financial 
institution makes a good-faith effort to record all data required to be 
recorded pursuant to Sec.  1003.4(f) fully and accurately within 30 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the inaccuracy or omission is not 
a violation of the Act or this part provided that the institution 
corrects or completes the data prior to submitting its

[[Page 130]]

annual loan/application register pursuant to Sec.  1003.5(a)(1)(i).
    (2) If a financial institution required to comply with Sec.  
1003.5(a)(1)(ii) makes a good-faith effort to report all data required 
to be reported pursuant to Sec.  1003.5(a)(1)(ii) fully and accurately 
within 60 calendar days after the end of each calendar quarter, and some 
data are nevertheless inaccurate or incomplete, the inaccuracy or 
omission is not a violation of the Act or this part provided that the 
institution corrects or completes the data prior to submitting its 
annual loan/application register pursuant to Sec.  1003.5(a)(1)(i).

[80 FR 66313, Oct. 28, 2015, as amended at 82 FR 43145, 43146, Sept. 13, 
2017]



                 Sec. Appendix A to Part 1003 [Reserved]



Sec. Appendix B to Part 1003--Form and Instructions for Data Collection 
                       on Ethnicity, Race, and Sex

    You may list questions regarding the ethnicity, race, and sex of the 
applicant on your loan application form, or on a separate form that 
refers to the application. (See the sample data collection form below 
for model language.)
    1. You must ask the applicant for this information (but you cannot 
require the applicant to provide it) whether the application is taken in 
person, by mail or telephone, or on the internet. For applications taken 
by telephone, you must state the information in the collection form 
orally, except for that information which pertains uniquely to 
applications taken in writing, for example, the italicized language in 
the sample data collection form.
    2. Inform the applicant that Federal law requires this information 
to be collected in order to protect consumers and to monitor compliance 
with Federal statutes that prohibit discrimination against applicants on 
these bases. Inform the applicant that if the information is not 
provided where the application is taken in person, you are required to 
note the information on the basis of visual observation or surname.
    3. If you accept an application through electronic media with a 
video component, you must treat the application as taken in person. If 
you accept an application through electronic media without a video 
component (for example, facsimile), you must treat the application as 
accepted by mail.
    4. For purposes of Sec.  1003.4(a)(10)(i), if a covered loan or 
application includes a guarantor, you do not report the guarantor's 
ethnicity, race, and sex.
    5. If there are no co-applicants, you must report that there is no 
co-applicant. If there is more than one co-applicant, you must provide 
the ethnicity, race, and sex only for the first co-applicant listed on 
the collection form. A co-applicant may provide an absent co-applicant's 
ethnicity, race, and sex on behalf of the absent co-applicant. If the 
information is not provided for an absent co-applicant, you must report 
``information not provided by applicant in mail, internet, or telephone 
application'' for the absent co-applicant.
    6. When you purchase a covered loan and you choose not to report the 
applicant's or co-applicant's ethnicity, race, and sex, you must report 
that the requirement is not applicable.
    7. You must report that the requirement to report the applicant's or 
co-applicant's ethnicity, race, and sex is not applicable when the 
applicant or co-applicant is not a natural person (for example, a 
corporation, partnership, or trust). For example, for a transaction 
involving a trust, you must report that the requirement to report the 
applicant's ethnicity, race, and sex is not applicable if the trust is 
the applicant. On the other hand, if the applicant is a natural person, 
and is the beneficiary of a trust, you must report the applicant's 
ethnicity, race, and sex.
    8. You must report the ethnicity, race, and sex of an applicant as 
provided by the applicant. For example, if an applicant selects the 
``Asian'' box the institution reports ``Asian'' for the race of the 
applicant. Only an applicant may self-identify as being of a particular 
Hispanic or Latino subcategory (Mexican, Puerto Rican, Cuban, Other 
Hispanic or Latino) or of a particular Asian subcategory (Asian Indian, 
Chinese, Filipino, Japanese, Korean, Vietnamese, Other Asian) or of a 
particular Native Hawaiian or Other Pacific Islander subcategory (Native 
Hawaiian, Guamanian or Chamorro, Samoan, Other Pacific Islander) or of a 
particular American Indian or Alaska Native enrolled or principal tribe. 
An applicant may select an ethnicity or race subcategory even if the 
applicant does not select an aggregate ethnicity or aggregate race 
category. For example, if an applicant selects only the ``Mexican'' box, 
the institution reports ``Mexican'' for the ethnicity of the applicant 
but does not also report ``Hispanic or Latino.''
    9. You must offer the applicant the option of selecting more than 
one ethnicity or race. If an applicant selects more than one ethnicity 
or race, you must report each selected designation, subject to the 
limits described below.
    i. Ethnicity--Aggregate categories and subcategories. There are two 
aggregate ethnicity

[[Page 131]]

categories: Hispanic or Latino; and Not Hispanic or Latino. The Hispanic 
or Latino category has four subcategories: Mexican; Puerto Rican; Cuban; 
and Other Hispanic or Latino. You must report every aggregate ethnicity 
category selected by the applicant. If the applicant also selects one or 
more ethnicity subcategories, you must report each ethnicity subcategory 
selected by the applicant, except that you must not report more than a 
total of five aggregate ethnicity categories and ethnicity subcategories 
combined. For example, if the applicant selects both aggregate ethnicity 
categories and also selects all four ethnicity subcategories, you must 
report Hispanic or Latino, Not Hispanic or Latino, and any three, at 
your option, of the four ethnicity subcategories selected by the 
applicant. To determine how to report the Other Hispanic or Latino 
ethnicity subcategory for purposes of the five-ethnicity maximum, see 
paragraph 9.ii below.
    ii. Ethnicity--Other subcategories. An applicant may select the 
Other Hispanic or Latino ethnicity subcategory, an applicant may provide 
a particular Hispanic or Latino ethnicity not listed in the standard 
subcategories, or an applicant may do both. If the applicant provides 
only a particular Hispanic or Latino ethnicity in the space provided, 
you are permitted, but are not required, to report Other Hispanic or 
Latino in addition to reporting the particular Hispanic or Latino 
ethnicity provided by the applicant. For example, if an applicant 
provides only ``Dominican,'' you should report ``Dominican.'' You are 
permitted, but not required, to report Other Hispanic or Latino as well. 
If an applicant selects the Other Hispanic or Latino ethnicity 
subcategory and also provides a particular Hispanic or Latino ethnicity 
not listed in the standard subcategories, you must report both the 
selection of Other Hispanic or Latino and the additional information 
provided by the applicant, subject to the five-ethnicity maximum. For 
purposes of the maximum of five reportable ethnicity categories and 
ethnicity subcategories combined, as set forth in paragraph 9.i, the 
Other Hispanic or Latino subcategory and additional information provided 
by the applicant together constitute only one selection. For example, if 
the applicant selects Other Hispanic or Latino and enters ``Dominican'' 
in the space provided, Other Hispanic or Latino and ``Dominican'' are 
considered one selection. Similarly, if the applicant only enters 
``Dominican'' in the space provided and you report both ``Dominican'' 
and Other Hispanic or Latino as permitted by this paragraph 9.ii, the 
reported items together are considered one selection.
    iii. Race--Aggregate categories and subcategories. There are five 
aggregate race categories: American Indian or Alaska Native; Asian; 
Black or African American; Native Hawaiian or Other Pacific Islander; 
and White. The Asian and the Native Hawaiian or Other Pacific Islander 
aggregate categories have seven and four subcategories, respectively. 
The Asian race subcategories are: Asian Indian; Chinese; Filipino; 
Japanese; Korean; Vietnamese; and Other Asian. The Native Hawaiian or 
Other Pacific Islander race subcategories are: Native Hawaiian; 
Guamanian or Chamorro; Samoan; and Other Pacific Islander. You must 
report every aggregate race category selected by the applicant. If the 
applicant also selects one or more race subcategories, you must report 
each race subcategory selected by the applicant, except that you must 
not report more than a total of five aggregate race categories and race 
subcategories combined. For example, if the applicant selects all five 
aggregate race categories and also selects some race subcategories, you 
report only the five aggregate race categories. On the other hand, if 
the applicant selects the White, Asian, and Native Hawaiian or Other 
Pacific Islander aggregate race categories, and the applicant also 
selects the Korean, Vietnamese, and Samoan race subcategories, you must 
report White, Asian, Native Hawaiian or Other Pacific Islander, and any 
two, at your option, of the three race subcategories selected by the 
applicant. In this example, you must report White, Asian, and Native 
Hawaiian or Other Pacific Islander, and in addition you must report (at 
your option) either Korean and Vietnamese, Korean and Samoan, or 
Vietnamese and Samoan. To determine how to report an Other race 
subcategory and the American Indian or Alaska Native category for 
purposes of the five-race maximum, see paragraphs 9.iv and 9.v below.
    iv. Race--Other subcategories. An applicant may select the Other 
Asian race subcategory or the Other Pacific Islander race subcategory, 
an applicant may provide a particular Asian race or Pacific Islander 
race not listed in the standard subcategories, or an applicant may do 
both. If the applicant provides only a particular Asian race or Pacific 
Islander race in the space provided, you are permitted, but are not 
required, to report Other Asian or Other Pacific Islander, as 
applicable, in addition to reporting the particular Asian race or 
Pacific Islander race provided by the applicant. For example, if an 
applicant provides only ``Hmong,'' you should report ``Hmong.'' You are 
permitted, but not required, to report Other Asian as well. If an 
applicant selects the Other Asian race or the Other Pacific Islander 
race subcategory and provides a particular Asian race or Pacific 
Islander race not listed in the standard subcategories, you must report 
both the selection of Other Asian or Other Pacific Islander, as 
applicable, and the additional information provided by the applicant, 
subject to the five-race maximum. For

[[Page 132]]

purposes of the maximum of five reportable race categories and race 
subcategories combined, as set forth in paragraph 9.iii, the Other race 
subcategory and additional information provided by the applicant 
together constitute only one selection. Thus, using the same facts in 
the example offered in paragraph 9.iii above, if the applicant also 
selects Other Asian and enters ``Thai'' in the space provided, Other 
Asian and Thai are considered one selection. Similarly, if the applicant 
enters only ``Thai'' in the space provided and you report both ``Thai'' 
and Other Asian as permitted by this paragraph 9.iv, the reported items 
together are considered one selection. In the same example, you must 
report any two (at your option) of the four race subcategories selected 
by the applicant, Korean, Vietnamese, Other Asian-Thai, and Samoan, in 
addition to the three aggregate race categories selected by the 
applicant.
    v. Race--American Indian or Alaska Native category. An applicant may 
select the American Indian or Alaska Native race category, an applicant 
may provide a particular American Indian or Alaska Native enrolled or 
principal tribe, or an applicant may do both. If the applicant provides 
only a particular American Indian or Alaska Native enrolled or principal 
tribe in the space provided, you are permitted, but are not required, to 
report American Indian or Alaska Native in addition to reporting the 
particular American Indian or Alaska Native enrolled or principal tribe 
provided by the applicant. For example, if an applicant provides only 
``Navajo,'' you should report ``Navajo.'' You are permitted, but not 
required, to report American Indian or Alaska Native as well. If an 
applicant selects the American Indian or Alaska Native race category and 
also provides a particular American Indian or Alaska Native enrolled or 
principal tribe, you must report both the selection of American Indian 
or Alaska Native and the additional information provided by the 
applicant. For purposes of the maximum of five reportable race 
categories and race subcategories combined, as set forth in paragraph 
9.iii, the American Indian or Alaska Native category and additional 
information provided by the applicant together constitute only one 
selection.
    10. If the applicant chooses not to provide the information for an 
application taken in person, note this fact on the collection form and 
then collect the applicant's ethnicity, race, and sex on the basis of 
visual observation or surname. You must report whether the applicant's 
ethnicity, race, and sex was collected on the basis of visual 
observation or surname. When you collect an applicant's ethnicity, race, 
and sex on the basis of visual observation or surname, you must select 
from the following aggregate categories: Ethnicity (Hispanic or Latino; 
not Hispanic or Latino); race (American Indian or Alaska Native; Asian; 
Black or African American; Native Hawaiian or Other Pacific Islander; 
White); sex (male; female).
    11. If the applicant declines to answer these questions by checking 
the ``I do not wish to provide this information'' box on an application 
that is taken by mail or on the internet, or declines to provide this 
information by stating orally that he or she does not wish to provide 
this information on an application that is taken by telephone, you must 
report ``information not provided by applicant in mail, internet, or 
telephone application.''
    12. If the applicant begins an application by mail, internet, or 
telephone, and does not provide the requested information on the 
application but does not check or select the ``I do not wish to provide 
this information'' box on the application, and the applicant meets in 
person with you to complete the application, you must request the 
applicant's ethnicity, race, and sex. If the applicant does not provide 
the requested information during the in-person meeting, you must collect 
the information on the basis of visual observation or surname. If the 
meeting occurs after the application process is complete, for example, 
at closing or account opening, you are not required to obtain the 
applicant's ethnicity, race, and sex.
    13. When an applicant provides the requested information for some 
but not all fields, you report the information that was provided by the 
applicant, whether partial or complete. If an applicant provides partial 
or complete information on ethnicity, race, and sex and also checks the 
``I do not wish to provide this information'' box on an application that 
is taken by mail or on the internet, or makes that selection when 
applying by telephone, you must report the information on ethnicity, 
race, and sex that was provided by the applicant.

[[Page 133]]

[GRAPHIC] [TIFF OMITTED] TR13SE17.000


[[Page 134]]



[80 FR 66314, Oct. 28, 2015, as amended at 82 FR 43133, Sept. 13, 2017]



 Sec. Appendix C to Part 1003--Procedures for Generating a Check Digit 
                          and Validating a ULI

    The check digit for the Universal Loan Identifier (ULI) pursuant to 
Sec.  1003.4(a)(1)(i)(C) is calculated using the ISO/IEC 7064, MOD 97-10 
as it appears on the International Standard ISO/IEC 7064:2003, which is 
published by the International Organization for Standardization (ISO).
    (copyright)ISO. This material is reproduced from ISO/IEC 7064:2003 
with permission of the American National Standards Institute (ANSI) on 
behalf of ISO. All rights reserved.

                        Generating a Check Digit

    Step 1: Starting with the leftmost character in the string that 
consists of the combination of the Legal Entity Identifier (LEI) 
pursuant to Sec.  1003.4(a)(1)(i)(A) and the additional characters 
identifying the covered loan or application pursuant to Sec.  
1003.4(a)(1)(i)(B), replace each alphabetic character with numbers in 
accordance with Table I below to obtain all numeric values in the 
string.

             Table I--Alphabetic to Numeric Conversion Table

    The alphabetic characters are not case-sensitive and each letter, 
whether it is capitalized or in lower-case, is equal to the same value 
as each letter illustrates in the conversion table. For example, A and a 
are each equal to 10.

A = 10
B = 11
C = 12
D = 13
E = 14
F = 15
G = 16
H = 17
I = 18
J = 19
K = 20
L = 21
M = 22
N = 23
O = 24
P = 25
Q = 26
R = 27
S = 28
T = 29
U = 30
V = 31
W = 32
X = 33
Y = 34
Z = 35

    Step 2: After converting the combined string of characters to all 
numeric values, append two zeros to the rightmost positions.
    Step 3: Apply the mathematical function mod = (n,97) where n = the 
number obtained in step 2 above and 97 is the divisor.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. Truncate the remainder to 
three digits and multiply it by 97. Round the result to the nearest 
whole number.
    Step 4: Subtract the result in step 3 from 98. If the result is one 
digit, add a leading 0 to make it two digits.
    Step 5: The two digits in the result from step 4 is the check digit. 
Append the resulting check digit to the rightmost position in the 
combined string of characters described in step 1 above to generate the 
ULI.

                                 Example

    For example, assume the LEI for a financial institution is 
10Bx939c5543TqA1144M and the financial institution assigned the 
following string of characters to identify the covered loan: 999143X. 
The combined string of characters is 10Bx939c5543TqA 1144M999143X.
    Step 1: Starting with the leftmost character in the combined string 
of characters, replace each alphabetic character with numbers in 
accordance with Table I above to obtain all numeric values in the 
string. The result is 1011339391255432 9261011442299914333.
    Step 2: Append two zeros to the rightmost positions in the combined 
string. The result is 1011339391255432926101144229991433300.
    Step 3: Apply the mathematical function mod = (n,97) where n = the 
number obtained in step 2 above and 97 is the divisor. The result is 60.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. The result is 
10426179291293122 94946332267952920.618556701030928. Truncate the 
remainder to three digits, which is .618, and multiply it by 97. The 
result is 59.946. Round this result to the nearest whole number, which 
is 60.
    Step 4: Subtract the result in step 3 from 98. The result is 38.
    Step 5: The two digits in the result from step 4 is the check digit. 
Append the check digit to the rightmost positions in the combined string 
of characters that consists of the LEI and the string of characters 
assigned by the financial institution to identify the covered loan to 
obtain the ULI. In this example, the ULI would be 10Bx939c5543T 
qA1144M999143X38.

                            Validating A ULI

    To determine whether the ULI contains a transcription error using 
the check digit calculation, the procedures are described below.

[[Page 135]]

    Step 1: Starting with the leftmost character in the ULI, replace 
each alphabetic character with numbers in accordance with Table I above 
to obtain all numeric values in the string.
    Step 2: Apply the mathematical function mod=(n,97) where n=the 
number obtained in step 1 above and 97 is the divisor.
    Step 3: If the result is 1, the ULI does not contain transcription 
errors.

                                 Example

    For example, the ULI assigned to a covered loan is 10Bx939c5543T 
qA1144M999143X38.
    Step 1: Starting with the leftmost character in the ULI, replace 
each alphabetic character with numbers in accordance with Table I above 
to obtain all numeric values in the string. The result is 10113393912554 
32926101144229991 433338.
    Step 2: Apply the mathematical function mod=(n,97) where n is the 
number obtained in step 1 above and 97 is the divisor.
    Step 3: The result is 1. The ULI does not contain transcription 
errors.

[80 FR 66316, Oct. 28, 2015, as amended at 82 FR 43135, Sept. 13, 2017]



        Sec. Supplement I to Part 1003--Official Interpretations

                              Introduction

    1. Status. The commentary in this supplement is the vehicle by which 
the Bureau of Consumer Financial Protection issues formal 
interpretations of Regulation C (12 CFR part 1003).

                       Section 1003.2--Definitions

                            2(b) Application

    1. Consistency with Regulation B. Bureau interpretations that appear 
in the official commentary to Regulation B (Equal Credit Opportunity 
Act, 12 CFR part 1002, Supplement I) are generally applicable to the 
definition of application under Regulation C. However, under Regulation 
C the definition of an application does not include prequalification 
requests.
    2. Prequalification. A prequalification request is a request by a 
prospective loan applicant (other than a request for preapproval) for a 
preliminary determination on whether the prospective loan applicant 
would likely qualify for credit under an institution's standards, or for 
a determination on the amount of credit for which the prospective 
applicant would likely qualify. Some institutions evaluate 
prequalification requests through a procedure that is separate from the 
institution's normal loan application process; others use the same 
process. In either case, Regulation C does not require an institution to 
report prequalification requests on the loan/application register, even 
though these requests may constitute applications under Regulation B for 
purposes of adverse action notices.
    3. Requests for preapproval. To be a preapproval program as defined 
in Sec.  1003.2(b)(2), the written commitment issued under the program 
must result from a comprehensive review of the creditworthiness of the 
applicant, including such verification of income, resources, and other 
matters as is typically done by the institution as part of its normal 
credit evaluation program. In addition to conditions involving the 
identification of a suitable property and verification that no material 
change has occurred in the applicant's financial condition or 
creditworthiness, the written commitment may be subject only to other 
conditions (unrelated to the financial condition or creditworthiness of 
the applicant) that the lender ordinarily attaches to a traditional home 
mortgage application approval. These conditions are limited to 
conditions such as requiring an acceptable title insurance binder or a 
certificate indicating clear termite inspection, and, in the case where 
the applicant plans to use the proceeds from the sale of the applicant's 
present home to purchase a new home, a settlement statement showing 
adequate proceeds from the sale of the present home. Regardless of its 
name, a program that satisfies the definition of a preapproval program 
in Sec.  1003.2(b)(2) is a preapproval program for purposes of 
Regulation C. Conversely, a program that a financial institution 
describes as a ``preapproval program'' that does not satisfy the 
requirements of Sec.  1003.2(b)(2) is not a preapproval program for 
purposes of Regulation C. If a financial institution does not regularly 
use the procedures specified in Sec.  1003.2(b)(2), but instead 
considers requests for preapprovals on an ad hoc basis, the financial 
institution need not treat ad hoc requests as part of a preapproval 
program for purposes of Regulation C. A financial institution should, 
however, be generally consistent in following uniform procedures for 
considering such ad hoc requests.

                           2(c) Branch Office

                            Paragraph 2(c)(1)

    1. Credit unions. For purposes of Regulation C, a ``branch'' of a 
credit union is any office where member accounts are established or 
loans are made, whether or not the office has been approved as a branch 
by a Federal or State agency. (See 12 U.S.C. 1752.)
    2. Bank, savings association, or credit unions. A branch office of a 
bank, savings association, or credit union does not include a loan-
production office if the loan-production office is not considered a 
branch by the Federal or State supervisory authority applicable to that 
institution. A branch office also does not include the office of an 
affiliate or

[[Page 136]]

of a third party, such as a third-party broker.

                            Paragraph 2(c)(2)

    1. General. A branch office of a for-profit mortgage lending 
institution, other than a bank savings association or credit union, does 
not include the office of an affiliate or of a third party, such as a 
third-party broker.

                      2(d) Closed-end Mortgage Loan

    1. Dwelling-secured. Section 1003.2(d) defines a closed-end mortgage 
loan as an extension of credit that is secured by a lien on a dwelling 
and that is not an open-end line of credit under Sec.  1003.2(o). Thus, 
for example, a loan to purchase a dwelling and secured only by a 
personal guarantee is not a closed-end mortgage loan because it is not 
dwelling-secured.
    2. Extension of credit. Under Sec.  1003.2(d), a dwelling-secured 
loan is not a closed-end mortgage loan unless it involves an extension 
of credit. For example, some transactions completed pursuant to 
installment sales contracts, such as some land contracts, depending on 
the facts and circumstances, may or may not involve extensions of credit 
rendering the transactions closed-end mortgage loans. In general, 
extension of credit under Sec.  1003.2(d) refers to the granting of 
credit only pursuant to a new debt obligation. Thus, except as described 
in comments 2(d)-2.i and .ii, if a transaction modifies, renews, 
extends, or amends the terms of an existing debt obligation, but the 
existing debt obligation is not satisfied and replaced, the transaction 
is not a closed-end mortgage loan under Sec.  1003.2(d) because there 
has been no new extension of credit. The phrase extension of credit thus 
is defined differently under Regulation C than under Regulation B, 12 
CFR part 1002.
    i. Assumptions. For purposes of Regulation C, an assumption is a 
transaction in which an institution enters into a written agreement 
accepting a new borrower in place of an existing borrower as the obligor 
on an existing debt obligation. For purposes of Regulation C, 
assumptions include successor-in-interest transactions, in which an 
individual succeeds the prior owner as the property owner and then 
assumes the existing debt secured by the property. Under Sec.  
1003.2(d), assumptions are extensions of credit even if the new borrower 
merely assumes the existing debt obligation and no new debt obligation 
is created. See also comment 2(j)-5.
    ii. New York State consolidation, extension, and modification 
agreements. A transaction completed pursuant to a New York State 
consolidation, extension, and modification agreement and classified as a 
supplemental mortgage under New York Tax Law section 255, such that the 
borrower owes reduced or no mortgage recording taxes, is an extension of 
credit under Sec.  1003.2(d). Comments 2(i)-1, 2(j)-5, and 2(p)-2 
clarify whether such transactions are home improvement loans, home 
purchase loans, or refinancings, respectively. Section 1003.3(c)(13) 
provides an exclusion from the reporting requirement for a preliminary 
transaction providing or, in the case of an application, proposing to 
provide new funds to the borrower in advance of being consolidated 
within the same calendar year into a supplemental mortgage under New 
York Tax Law section 255. See comment 3(c)(13)-1 concerning how to 
report a supplemental mortgage under New York Tax Law section 255 in 
this situation.

                              2(f) Dwelling

    1. General. The definition of a dwelling is not limited to the 
principal or other residence of the applicant or borrower, and thus 
includes vacation or second homes and investment properties.
    2. Multifamily residential structures and communities. A dwelling 
also includes a multifamily residential structure or community such as 
an apartment, condominium, cooperative building or housing complex, or a 
manufactured home community. A loan related to a manufactured home 
community is secured by a dwelling for purposes of Sec.  1003.2(f) even 
if it is not secured by any individual manufactured homes, but only by 
the land that constitutes the manufactured home community including 
sites for manufactured homes. However, a loan related to a multifamily 
residential structure or community that is not a manufactured home 
community is not secured by a dwelling for purposes of Sec.  1003.2(f) 
if it is not secured by any individual dwelling units and is, for 
example, instead secured only by property that only includes common 
areas, or is secured only by an assignment of rents or dues.
    3. Exclusions. Recreational vehicles, including boats, campers, 
travel trailers, and park model recreational vehicles, are not 
considered dwellings for purposes of Sec.  1003.2(f), regardless of 
whether they are used as residences. Houseboats, floating homes, and 
mobile homes constructed before June 15, 1976, are also excluded, 
regardless of whether they are used as residences. Also excluded are 
transitory residences such as hotels, hospitals, college dormitories, 
and recreational vehicle parks, and structures originally designed as 
dwellings but used exclusively for commercial purposes, such as homes 
converted to daycare facilities or professional offices.
    4. Mixed-use properties. A property used for both residential and 
commercial purposes, such as a building containing apartment units and 
retail space, is a dwelling if the property's primary use is 
residential. An institution may use any reasonable standard

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to determine the primary use of the property, such as by square footage 
or by the income generated. An institution may select the standard to 
apply on a case-by-case basis.
    5. Properties with service and medical components. For purposes of 
Sec.  1003.2(f), a property used for both long-term housing and to 
provide related services, such as assisted living for senior citizens or 
supportive housing for persons with disabilities, is a dwelling and does 
not have a non-residential purpose merely because the property is used 
for both housing and to provide services. However, transitory residences 
that are used to provide such services are not dwellings. See comment 
2(f)-3. Properties that are used to provide medical care, such as 
skilled nursing, rehabilitation, or long-term medical care, also are not 
dwellings. See comment 2(f)-3. If a property that is used for both long-
term housing and to provide related services also is used to provide 
medical care, the property is a dwelling if its primary use is 
residential. An institution may use any reasonable standard to determine 
the property's primary use, such as by square footage, income generated, 
or number of beds or units allocated for each use. An institution may 
select the standard to apply on a case-by-case basis.

                       2(g) Financial Institution

    1. Preceding calendar year and preceding December 31. The definition 
of financial institution refers both to the preceding calendar year and 
the preceding December 31. These terms refer to the calendar year and 
the December 31 preceding the current calendar year. For example, in 
2019, the preceding calendar year is 2018 and the preceding December 31 
is December 31, 2018. Accordingly, in 2019, Financial Institution A 
satisfies the asset-size threshold described in Sec.  1003.2(g)(1)(i) if 
its assets exceeded the threshold specified in comment 2(g)-2 on 
December 31, 2018. Likewise, in 2020, Financial Institution A does not 
meet the loan-volume test described in Sec.  1003.2(g)(1)(v)(A) if it 
originated fewer than 25 closed-end mortgage loans during either 2018 or 
2019.
    2. Adjustment of exemption threshold for banks, savings 
associations, and credit unions. For data collection in 2024, the asset-
size exemption threshold is $56 million. Banks, savings associations, 
and credit unions with assets at or below $56 million as of December 31, 
2023, are exempt from collecting data for 2024.
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec.  1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec.  1003.2(g). For example, A and B merge. The surviving or newly 
formed institution meets the loan threshold described in Sec.  
1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and 
B originated a combined total of at least 200 open-end lines of credit 
in each of the two preceding calendar years. Likewise, the surviving or 
newly formed institution meets the asset-size threshold in Sec.  
1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec.  1003.2(g)(1)(i). Comment 2(g)-4 discusses a financial 
institution's responsibilities during the calendar year of a merger.
    4. Merger or acquisition--coverage for calendar year of merger or 
acquisition. The scenarios described below illustrate a financial 
institution's responsibilities for the calendar year of a merger or 
acquisition. For purposes of these illustrations, a ``covered 
institution'' means a financial institution, as defined in Sec.  
1003.2(g), that is not exempt from reporting under Sec.  1003.3(a), and 
``an institution that is not covered'' means either an institution that 
is not a financial institution, as defined in Sec.  1003.2(g), or an 
institution that is exempt from reporting under Sec.  1003.3(a).
    i. Two institutions that are not covered merge. The surviving or 
newly formed institution meets all of the requirements necessary to be a 
covered institution. No data collection is required for the calendar 
year of the merger (even though the merger creates an institution that 
meets all of the requirements necessary to be a covered institution). 
When a branch office of an institution that is not covered is acquired 
by another institution that is not covered, and the acquisition results 
in a covered institution, no data collection is required for the 
calendar year of the acquisition.
    ii. A covered institution and an institution that is not covered 
merge. The covered institution is the surviving institution, or a new 
covered institution is formed. For the calendar year of the merger, data 
collection is required for covered loans and applications handled in the 
offices of the merged institution that was previously covered and is 
optional for covered loans and applications handled in offices of the 
merged institution that was previously not covered. When a covered 
institution acquires a branch office of an institution that is not 
covered, data collection is optional for covered loans and applications 
handled by the acquired branch office for the calendar year of the 
acquisition.
    iii. A covered institution and an institution that is not covered 
merge. The institution that is not covered is the surviving institution, 
or a new institution that is not covered is formed. For the calendar 
year of the merger, data collection is required for

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covered loans and applications handled in offices of the previously 
covered institution that took place prior to the merger. After the 
merger date, data collection is optional for covered loans and 
applications handled in the offices of the institution that was 
previously covered. When an institution remains not covered after 
acquiring a branch office of a covered institution, data collection is 
required for transactions of the acquired branch office that take place 
prior to the acquisition. Data collection by the acquired branch office 
is optional for transactions taking place in the remainder of the 
calendar year after the acquisition.
    iv. Two covered institutions merge. The surviving or newly formed 
institution is a covered institution. Data collection is required for 
the entire calendar year of the merger. The surviving or newly formed 
institution files either a consolidated submission or separate 
submissions for that calendar year. When a covered institution acquires 
a branch office of a covered institution, data collection is required 
for the entire calendar year of the merger. Data for the acquired branch 
office may be submitted by either institution.
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years or 
at least 200 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec.  1003.2(g).
    6. Branches of foreign banks--treated as banks. A Federal branch or 
a State-licensed or insured branch of a foreign bank that meets the 
definition of a ``bank'' under section 3(a)(1) of the Federal Deposit 
Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes of Sec.  
1003.2(g).
    7. Branches and offices of foreign banks and other entities--treated 
as nondepository financial institutions. A Federal agency, State-
licensed agency, State-licensed uninsured branch of a foreign bank, 
commercial lending company owned or controlled by a foreign bank, or 
entity operating under section 25 or 25A of the Federal Reserve Act, 12 
U.S.C. 601 and 611 (Edge Act and agreement corporations) may not meet 
the definition of ``bank'' under the Federal Deposit Insurance Act and 
may thereby fail to satisfy the definition of a depository financial 
institution under Sec.  1003.2(g)(1). An entity is nonetheless a 
financial institution if it meets the definition of nondepository 
financial institution under Sec.  1003.2(g)(2).

                       2(i) Home Improvement Loan

    1. General. Section 1003.2(i) defines a home improvement loan as a 
closed-end mortgage loan or an open-end line of credit that is for the 
purpose, in whole or in part, of repairing, rehabilitating, remodeling, 
or improving a dwelling or the real property on which the dwelling is 
located. For example, a closed-end mortgage loan obtained to repair a 
dwelling by replacing a roof is a home improvement loan under Sec.  
1003.2(i). A loan or line of credit is a home improvement loan even if 
only a part of the purpose is for repairing, rehabilitating, remodeling, 
or improving a dwelling. For example, an open-end line of credit 
obtained in part to remodel a kitchen and in part to pay college tuition 
is a home improvement loan under Sec.  1003.2(i). Similarly, for 
example, a loan that is completed pursuant to a New York State 
consolidation, extension, and modification agreement and that is 
classified as a supplemental mortgage under New York Tax Law section 
255, such that the borrower owes reduced or no mortgage recording taxes, 
is a home improvement loan if any of the loan's funds are for home 
improvement purposes. See also comment 2(d)-2.ii.
    2. Improvements to real property. Home improvements include 
improvements both to a dwelling and to the real property on which the 
dwelling is located (for example, installation of a swimming pool, 
construction of a garage, or landscaping).
    3. Commercial and other loans. A home improvement loan may include a 
closed-end mortgage loan or an open-end line of credit originated 
outside an institution's residential mortgage lending division, such as 
a loan or line of credit to improve an apartment building originated in 
the commercial loan department.
    4. Mixed-use property. A closed-end mortgage loan or an open-end 
line of credit to improve a multifamily dwelling used for residential 
and commercial purposes (for example, a building containing apartment 
units and retail space), or the real property on which such a dwelling 
is located, is a home improvement loan if the loan's proceeds are used 
either to improve the entire property (for example, to replace the 
heating system), or if the proceeds are used primarily to improve the 
residential portion of the property. An institution may use any 
reasonable standard to determine the primary use of the loan proceeds. 
An institution may select the standard to apply on a case-by-case basis. 
See comment 3(c)(10)-3.ii for guidance on loans to improve primarily the 
commercial portion of a dwelling other than a multifamily dwelling.
    5. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a home improvement loan under Sec.  1003.2(i) 
may also be a refinancing under Sec.  1003.2(p) if the transaction is a 
cash-out refinancing and the funds will be used to improve a home. Such

[[Page 139]]

a transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.
    6. Statement of borrower. In determining whether a closed-end 
mortgage loan or an open-end line of credit, or an application for a 
closed-end mortgage loan or an open-end line of credit, is for home 
improvement purposes, an institution may rely on the applicant's or 
borrower's stated purpose(s) for the loan or line of credit at the time 
the application is received or the credit decision is made. An 
institution need not confirm that the borrower actually uses any of the 
funds for the stated purpose(s).

                         2(j) Home Purchase Loan

    1. Multiple properties. A home purchase loan includes a closed-end 
mortgage loan or an open-end line of credit secured by one dwelling and 
used to purchase another dwelling. For example, if a person obtains a 
home-equity loan or a reverse mortgage secured by dwelling A to purchase 
dwelling B, the home-equity loan or the reverse mortgage is a home 
purchase loan under Sec.  1003.2(j).
    2. Commercial and other loans. A home purchase loan may include a 
closed-end mortgage loan or an open-end line of credit originated 
outside an institution's residential mortgage lending division, such as 
a loan or line of credit to purchase an apartment building originated in 
the commercial loan department.
    3. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan or line of credit, 
and the separate permanent financing that replaces a construction-only 
loan or line of credit for the same borrower at a later time. A home 
purchase loan does not include a construction-only loan or line of 
credit that is designed to be replaced by separate permanent financing 
extended by any financial institution to the same borrower at a later 
time or that is extended to a person exclusively to construct a dwelling 
for sale, which are excluded from Regulation C as temporary financing 
under Sec.  1003.3(c)(3). Comments 3(c)(3)-1 and -2 provide additional 
details about transactions that are excluded as temporary financing.
    4. Second mortgages that finance the downpayments on first 
mortgages. If an institution making a first mortgage loan to a home 
purchaser also makes a second mortgage loan or line of credit to the 
same purchaser to finance part or all of the home purchaser's 
downpayment, both the first mortgage loan and the second mortgage loan 
or line of credit are home purchase loans.
    5. Assumptions. Under Sec.  1003.2(j), an assumption is a home 
purchase loan when an institution enters into a written agreement 
accepting a new borrower as the obligor on an existing obligation to 
finance the new borrower's purchase of the dwelling securing the 
existing obligation, if the resulting obligation is a closed-end 
mortgage loan or an open-end line of credit. A transaction in which 
borrower B finances the purchase of borrower A's dwelling by assuming 
borrower A's existing debt obligation and that is completed pursuant to 
a New York State consolidation, extension, and modification agreement 
and is classified as a supplemental mortgage under New York Tax Law 
section 255, such that the borrower owes reduced or no mortgage 
recording taxes, is an assumption and a home purchase loan. See comment 
2(d)-2.ii. On the other hand, a transaction in which borrower B, a 
successor-in-interest, assumes borrower A's existing debt obligation 
only after acquiring title to borrower A's dwelling is not a home 
purchase loan because borrower B did not assume the debt obligation for 
the purpose of purchasing a dwelling. See Sec.  1003.4(a)(3) and comment 
4(a)(3)-4 for guidance about how to report covered loans that are not 
home improvement loans, home purchase loans, or refinancings.
    6. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a home purchase loan under Sec.  1003.2(j) may 
also be a home improvement loan under Sec.  1003.2(i) and a refinancing 
under Sec.  1003.2(p) if the transaction is a cash-out refinancing and 
the funds will be used to purchase and improve a dwelling. Such a 
transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.

                         2(l) Manufactured Home

    1. Definition of a manufactured home. The definition in Sec.  
1003.2(l) refers to the Federal building code for manufactured housing 
established by the U.S. Department of Housing and Urban Development 
(HUD) (24 CFR part 3280.2). Modular or other factory-built homes that do 
not meet the HUD code standards are not manufactured homes for purposes 
of Sec.  1003.2(l). Recreational vehicles are excluded from the HUD code 
standards pursuant to 24 CFR 3282.8(g) and are also excluded from the 
definition of dwelling for purposes of Sec.  1003.2(f). See comment 
2(f)-3.
    2. Identification. A manufactured home will generally bear a data 
plate affixed in a permanent manner near the main electrical panel or 
other readily accessible and visible location noting its compliance with 
the Federal Manufactured Home Construction and Safety Standards in force 
at the time of manufacture and providing other information about its 
manufacture pursuant to 24 CFR 3280.5. A manufactured home will 
generally also bear a HUD Certification Label pursuant to 24 CFR 
3280.11.

[[Page 140]]

 2(m) Metropolitan Statistical Area (MD) or Metropolitan Division (MD).

    1. Use of terms ``Metropolitan Statistical Area (MSA)'' and 
``Metropolitan Division (MD).'' The U.S. Office of Management and Budget 
(OMB) defines Metropolitan Statistical Areas (MSAs) and Metropolitan 
Divisions (MDs) to provide nationally consistent definitions for 
collecting, tabulating, and publishing Federal statistics for a set of 
geographic areas. For all purposes under Regulation C, if an MSA is 
divided by OMB into MDs, the appropriate geographic unit to be used is 
the MD; if an MSA is not so divided by OMB into MDs, the appropriate 
geographic unit to be used is the MSA.

                        2(n) Multifamily Dwelling

    1. Multifamily residential structures. The definition of dwelling in 
Sec.  1003.2(f) includes multifamily residential structures and the 
corresponding commentary provides guidance on when such residential 
structures are included in that definition. See comments 2(f)-2 through 
-5.
    2. Special reporting requirements for multifamily dwellings. The 
definition of multifamily dwelling in Sec.  1003.2(n) includes a 
dwelling, regardless of construction method, that contains five or more 
individual dwelling units. Covered loans secured by a multifamily 
dwelling are subject to additional reporting requirements under Sec.  
1003.4(a)(32), but are not subject to reporting requirements under Sec.  
1003.4(a)(4), (10)(iii), (23), (29), or (30).
    3. Separate dwellings. A covered loan secured by five or more 
separate dwellings, which are not multifamily dwellings, in more than 
one location is not a loan secured by a multifamily dwelling. For 
example, assume a landlord uses a covered loan to improve five or more 
dwellings, each with one individual dwelling unit, located in different 
parts of a town, and the loan is secured by those properties. The 
covered loan is not secured by a multifamily dwelling as defined by 
Sec.  1003.2(n). Likewise, a covered loan secured by five or more 
separate dwellings that are located within a multifamily dwelling, but 
which is not secured by the entire multifamily dwelling (e.g., an entire 
apartment building or housing complex), is not secured by a multifamily 
dwelling as defined by Sec.  1003.2(n). For example, assume that an 
investor purchases 10 individual unit condominiums in a 100-unit 
condominium complex using a covered loan. The covered loan would not be 
secured by a multifamily dwelling as defined by Sec.  1003.2(n). In both 
of these situations, a financial institution reporting a covered loan or 
application secured by these separate dwellings would not be subject to 
the additional reporting requirements for covered loans secured by or 
applications proposed to be secured by multifamily dwellings under Sec.  
1003.4(a)(32). However, a financial institution would report the 
information required by Sec.  1003.4(a)(4), (a)(10)(iii), and (a)(23), 
(29), and (30), which is not applicable to covered loans secured by and 
applications proposed to be secured by multifamily dwellings. See 
comment 2(n)-2. In addition, in both of these situations, the financial 
institution reports the number of individual dwelling units securing the 
covered loan or proposed to secure a covered loan as required by Sec.  
1003.4(a)(31). See comment 4(a)(31)-3.

                      2(o) Open-End Line of Credit

    1. General. Section 1003.2(o) defines an open-end line of credit as 
an extension of credit that is secured by a lien on a dwelling and that 
is an open-end credit plan as defined in Regulation Z, 12 CFR 
1026.2(a)(20), but without regard to whether the credit is consumer 
credit, as defined in Sec.  1026.2(a)(12), is extended by a creditor, as 
defined in Sec.  1026.2(a)(17), or is extended to a consumer, as defined 
in Sec.  1026.2(a)(11). Aside from these distinctions, institutions may 
rely on 12 CFR 1026.2(a)(20) and its related commentary in determining 
whether a transaction is an open-end line of credit under Sec.  
1003.2(o). For example, assume a business-purpose transaction that is 
exempt from Regulation Z pursuant to Sec.  1026.3(a)(1) but that 
otherwise is open-end credit under Regulation Z Sec.  1026.2(a)(20). The 
business-purpose transaction is an open-end line of credit under 
Regulation C, provided the other requirements of Sec.  1003.2(o) are 
met. Similarly, assume a transaction in which the person extending open-
end credit is a financial institution under Sec.  1003.2(g) but is not a 
creditor under Regulation Z, Sec.  1026.2(a)(17). In this example, the 
transaction is an open-end line of credit under Regulation C, provided 
the other requirements of Sec.  1003.2(o) are met.
    2. Extension of credit. Extension of credit has the same meaning 
under Sec.  1003.2(o) as under Sec.  1003.2(d) and comment 2(d)-2. Thus, 
for example, a renewal of an open-end line of credit is not an extension 
of credit under Sec.  1003.2(o) and is not covered by Regulation C 
unless the existing debt obligation is satisfied and replaced. Likewise, 
under Sec.  1003.2(o), each draw on an open-end line of credit is not an 
extension of credit.

                            2(p) Refinancing

    1. General. Section 1003.2(p) defines a refinancing as a closed-end 
mortgage loan or an open-end line of credit in which a new, dwelling-
secured debt obligation satisfies and replaces an existing, dwelling-
secured debt obligation by the same borrower. Except as described in 
comment 2(p)-2, whether a refinancing has occurred is determined by 
reference to whether, based on the parties' contract and applicable law, 
the original debt obligation has been satisfied or replaced by a

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new debt obligation. Whether the original lien is satisfied is 
irrelevant. For example:
    i. A new closed-end mortgage loan that satisfies and replaces one or 
more existing closed-end mortgage loans is a refinancing under Sec.  
1003.2(p).
    ii. A new open-end line of credit that satisfies and replaces an 
existing closed-end mortgage loan is a refinancing under Sec.  
1003.2(p).
    iii. Except as described in comment 2(p)-2, a new debt obligation 
that renews or modifies the terms of, but that does not satisfy and 
replace, an existing debt obligation, is not a refinancing under Sec.  
1003.2(p).
    2. New York State consolidation, extension, and modification 
agreements. Where a transaction is completed pursuant to a New York 
State consolidation, extension, and modification agreement and is 
classified as a supplemental mortgage under New York Tax Law 
sectionSec.  255, such that the borrower owes reduced or no mortgage 
recording taxes, and where, but for the agreement, the transaction would 
have met the definition of a refinancing under Sec.  1003.2(p), the 
transaction is considered a refinancing under Sec.  1003.2(p). See also 
comment 2(d)-2.ii.
    3. Existing debt obligation. A closed-end mortgage loan or an open-
end line of credit that satisfies and replaces one or more existing debt 
obligations is not a refinancing under Sec.  1003.2(p) unless the 
existing debt obligation (or obligations) also was secured by a 
dwelling. For example, assume that a borrower has an existing $30,000 
closed-end mortgage loan and obtains a new $50,000 closed-end mortgage 
loan that satisfies and replaces the existing $30,000 loan. The new 
$50,000 loan is a refinancing under Sec.  1003.2(p). However, if the 
borrower obtains a new $50,000 closed-end mortgage loan that satisfies 
and replaces an existing $30,000 loan secured only by a personal 
guarantee, the new $50,000 loan is not a refinancing under Sec.  
1003.2(p). See Sec.  1003.4(a)(3) and related commentary for guidance 
about how to report the loan purpose of such transactions, if they are 
not otherwise excluded under Sec.  1003.3(c).
    4. Same borrower. Section 1003.2(p) provides that, even if all of 
the other requirements of Sec.  1003.2(p) are met, a closed-end mortgage 
loan or an open-end line of credit is not a refinancing unless the same 
borrower undertakes both the existing and the new obligation(s). Under 
Sec.  1003.2(p), the ``same borrower'' undertakes both the existing and 
the new obligation(s) even if only one borrower is the same on both 
obligations. For example, assume that an existing closed-end mortgage 
loan (obligation X) is satisfied and replaced by a new closed-end 
mortgage loan (obligation Y). If borrowers A and B both are obligated on 
obligation X, and only borrower B is obligated on obligation Y, then 
obligation Y is a refinancing under Sec.  1003.2(p), assuming the other 
requirements of Sec.  1003.2(p) are met, because borrower B is obligated 
on both transactions. On the other hand, if only borrower A is obligated 
on obligation X, and only borrower B is obligated on obligation Y, then 
obligation Y is not a refinancing under Sec.  1003.2(p). For example, 
assume that two spouses are divorcing. If both spouses are obligated on 
obligation X, but only one spouse is obligated on obligation Y, then 
obligation Y is a refinancing under Sec.  1003.2(p), assuming the other 
requirements of Sec.  1003.2(p) are met. On the other hand, if only 
spouse A is obligated on obligation X, and only spouse B is obligated on 
obligation Y, then obligation Y is not a refinancing under Sec.  
1003.2(p). See Sec.  1003.4(a)(3) and related commentary for guidance 
about how to report the loan purpose of such transactions, if they are 
not otherwise excluded under Sec.  1003.3(c).
    5. Two or more debt obligations. Section 1003.2(p) provides that, to 
be a refinancing, a new debt obligation must satisfy and replace an 
existing debt obligation. Where two or more new obligations replace an 
existing obligation, each new obligation is a refinancing if, taken 
together, the new obligations satisfy the existing obligation. 
Similarly, where one new obligation replaces two or more existing 
obligations, the new obligation is a refinancing if it satisfies each of 
the existing obligations.
    6. Multiple-purpose loans. A closed-end mortgage loan or an open-end 
line of credit may be used for multiple purposes. For example, a closed-
end mortgage loan that is a refinancing under Sec.  1003.2(p) may also 
be a home improvement loan under Sec.  1003.2(i) and be used for other 
purposes if the refinancing is a cash-out refinancing and the funds will 
be used both for home improvement and to pay college tuition. Such a 
transaction is a multiple-purpose loan. Comment 4(a)(3)-3 provides 
details about how to report multiple-purpose covered loans.

 Section 1003.3--Exempt Institutions and Excluded and Partially Exempt 
                              Transactions

                       3(c) Excluded Transactions

                            Paragraph 3(c)(1)

    1. Financial institution acting in a fiduciary capacity. Section 
1003.3(c)(1) provides that a closed-end mortgage loan or an open-end 
line of credit originated or purchased by a financial institution acting 
in a fiduciary capacity is an excluded transaction. A financial 
institution acts in a fiduciary capacity if, for example, the financial 
institution acts as a trustee.

                            Paragraph 3(c)(2)

    1. Loan or line of credit secured by a lien on unimproved land. 
Section 1003.3(c)(2) provides that a closed-end mortgage loan or an 
open-end line of credit secured by a lien on unimproved land is an 
excluded transaction. A

[[Page 142]]

loan or line of credit is secured by a lien on unimproved land if the 
loan or line of credit is secured by vacant or unimproved property, 
unless the institution knows, based on information that it receives from 
the applicant or borrower at the time the application is received or the 
credit decision is made, that the proceeds of that loan or credit line 
will be used within two years after closing or account opening to 
construct a dwelling on, or to purchase a dwelling to be placed on, the 
land. A loan or line of credit that is not excludable under Sec.  
1003.3(c)(2) nevertheless may be excluded, for example, as temporary 
financing under Sec.  1003.3(c)(3).

                            Paragraph 3(c)(3)

    1. Temporary financing. Section 1003.3(c)(3) provides that closed-
end mortgage loans or open-end lines of credit obtained for temporary 
financing are excluded transactions. A loan or line of credit is 
considered temporary financing and excluded under Sec.  1003.3(c)(3) if 
the loan or line of credit is designed to be replaced by separate 
permanent financing extended by any financial institution to the same 
borrower at a later time. For example:
    i. Lender A extends credit in the form of a bridge or swing loan to 
finance a borrower's down payment on a home purchase. The borrower pays 
off the bridge or swing loan with funds from the sale of his or her 
existing home and obtains permanent financing for his or her new home 
from Lender A or from another lender. The bridge or swing loan is 
excluded as temporary financing under Sec.  1003.3(c)(3).
    ii. Lender A extends credit to a borrower to finance construction of 
a dwelling. The borrower will obtain a new extension of credit for 
permanent financing for the dwelling, either from Lender A or from 
another lender, and either through a refinancing of the initial 
construction loan or a separate loan. The initial construction loan is 
excluded as temporary financing under Sec.  1003.3(c)(3).
    iii. Assume the same scenario as in comment 3(c)(3)-1.ii, except 
that the initial construction loan is, or may be, renewed one or more 
times before the separate permanent financing is obtained. The initial 
construction loan, including any renewal thereof, is excluded as 
temporary financing under Sec.  1003.3(c)(3).
    iv. Lender A extends credit to finance construction of a dwelling. 
The loan automatically will convert to permanent financing extended to 
the same borrower with Lender A once the construction phase is complete. 
Under Sec.  1003.3(c)(3), the loan is not designed to be replaced by 
separate permanent financing extended to the same borrower, and 
therefore the temporary financing exclusion does not apply. See also 
comment 2(j)-3.
    v. Lender A originates a loan with a nine-month term to enable an 
investor to purchase a home, renovate it, and re-sell it before the term 
expires. Under Sec.  1003.3(c)(3), the loan is not designed to be 
replaced by separate permanent financing extended to the same borrower, 
and therefore the temporary financing exclusion does not apply. Such a 
transaction is not temporary financing under Sec.  1003.3(c)(3) merely 
because its term is short.
    2. Loan or line of credit to construct a dwelling for sale. A 
construction-only loan or line of credit is considered temporary 
financing and excluded under Sec.  1003.3(c)(3) if the loan or line of 
credit is extended to a person exclusively to construct a dwelling for 
sale. See comment 3(c)(3)-1.ii through .iv for examples of the reporting 
requirement for construction loans that are not extended to a person 
exclusively to construct a dwelling for sale.

                            Paragraph 3(c)(4)

    1. Purchase of an interest in a pool of loans. Section 1003.3(c)(4) 
provides that the purchase of an interest in a pool of closed-end 
mortgage loans or open-end lines of credit is an excluded transaction. 
The purchase of an interest in a pool of loans or lines of credit 
includes, for example, mortgage-participation certificates, mortgage-
backed securities, or real estate mortgage investment conduits.

                            Paragraph 3(c)(6)

    1. Mergers and acquisitions. Section 1003.3(c)(6) provides that the 
purchase of closed-end mortgage loans or open-end lines of credit as 
part of a merger or acquisition, or as part of the acquisition of all of 
the assets and liabilities of a branch office, are excluded 
transactions. If a financial institution acquires loans or lines of 
credit in bulk from another institution (for example, from the receiver 
for a failed institution), but no merger or acquisition of an 
institution, or acquisition of a branch office, is involved and no other 
exclusion applies, the acquired loans or lines of credit are covered 
loans and are reported as described in comment 4(a)-1.iii.

                            Paragraph 3(c)(8)

    1. Partial interest. Section 1003.3(c)(8) provides that the purchase 
of a partial interest in a closed-end mortgage loan or an open-end line 
of credit is an excluded transaction. If an institution acquires only a 
partial interest in a loan or line of credit, the institution does not 
report the transaction even if the institution participated in the 
underwriting and origination of the loan or line of credit. If an 
institution acquires a 100 percent interest in a loan or line of credit, 
the transaction is not excluded under Sec.  1003.3(c)(8).

[[Page 143]]

                            Paragraph 3(c)(9)

    1. Loan or line of credit used primarily for agricultural purposes. 
Section 1003.3(c)(9) provides that an institution does not report a 
closed-end mortgage loan or an open-end line of credit used primarily 
for agricultural purposes. A loan or line of credit is used primarily 
for agricultural purposes if its funds will be used primarily for 
agricultural purposes, or if the loan or line of credit is secured by a 
dwelling that is located on real property that is used primarily for 
agricultural purposes (e.g., a farm). An institution may refer to 
comment 3(a)-8 in the official interpretations of Regulation Z, 12 CFR 
part 1026, supplement I, for guidance on what is an agricultural 
purpose. An institution may use any reasonable standard to determine the 
primary use of the property. An institution may select the standard to 
apply on a case-by-case basis.

                           Paragraph 3(c)(10)

    1. General. Section 1003.3(c)(10) provides a special rule for 
reporting a closed-end mortgage loan or an open-end line of credit that 
is or will be made primarily for a business or commercial purpose. If an 
institution determines that a closed-end mortgage loan or an open-end 
line of credit primarily is for a business or commercial purpose, then 
the loan or line of credit is a covered loan only if it is a home 
improvement loan under Sec.  1003.2(i), a home purchase loan under Sec.  
1003.2(j), or a refinancing under Sec.  1003.2(p) and no other exclusion 
applies. Section 1003.3(c)(10) does not categorically exclude all 
business- or commercial-purpose loans and lines of credit from coverage.
    2. Primary purpose. An institution must determine in each case if a 
closed-end mortgage loan or an open-end line of credit primarily is for 
a business or commercial purpose. If a closed-end mortgage loan or an 
open-end line of credit is deemed to be primarily for a business, 
commercial, or organizational purpose under Regulation Z, 12 CFR 
1026.3(a) and its related commentary, then the loan or line of credit 
also is deemed to be primarily for a business or commercial purpose 
under Sec.  1003.3(c)(10).
    3. Examples--covered business- or commercial-purpose transactions. 
The following are examples of closed-end mortgage loans and open-end 
lines of credit that are not excluded from reporting under Sec.  
1003.3(c)(10) because, although they primarily are for a business or 
commercial purpose, they also meet the definition of a home improvement 
loan under Sec.  1003.2(i), a home purchase loan under Sec.  1003.2(j), 
or a refinancing under Sec.  1003.2(p):
    i. A closed-end mortgage loan or an open-end line of credit to 
purchase or to improve a multifamily dwelling or a single-family 
investment property, or a refinancing of a closed-end mortgage loan or 
an open-end line of credit secured by a multifamily dwelling or a 
single-family investment property;
    ii. A closed-end mortgage loan or an open-end line of credit to 
improve a doctor's office or a daycare center that is located in a 
dwelling other than a multifamily dwelling; and
    iii. A closed-end mortgage loan or an open-end line of credit to a 
corporation, if the funds from the loan or line of credit will be used 
to purchase or to improve a dwelling, or if the transaction is a 
refinancing.
    4. Examples--excluded business- or commercial-purpose transactions. 
The following are examples of closed-end mortgage loans and open-end 
lines of credit that are not covered loans because they primarily are 
for a business or commercial purpose, but they do not meet the 
definition of a home improvement loan under Sec.  1003.2(i), a home 
purchase loan under Sec.  1003.2(j), or a refinancing under Sec.  
1003.2(p):
    i. A closed-end mortgage loan or an open-end line of credit whose 
funds will be used primarily to improve or expand a business, for 
example to renovate a family restaurant that is not located in a 
dwelling, or to purchase a warehouse, business equipment, or inventory;
    ii. A closed-end mortgage loan or an open-end line of credit to a 
corporation whose funds will be used primarily for business purposes, 
such as to purchase inventory; and
    iii. A closed-end mortgage loan or an open-end line of credit whose 
funds will be used primarily for business or commercial purposes other 
than home purchase, home improvement, or refinancing, even if the loan 
or line of credit is cross-collateralized by a covered loan.

                           Paragraph 3(c)(11)

    1. General. Section 1003.3(c)(11) provides that a closed-end 
mortgage loan is an excluded transaction if a financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years. For example, assume that a bank is a financial 
institution in 2018 under Sec.  1003.2(g) because it originated 600 
open-end lines of credit in 2016, 650 open-end lines of credit in 2017, 
and met all of the other requirements under Sec.  1003.2(g)(1). Also 
assume that the bank originated 10 and 20 closed-end mortgage loans in 
2016 and 2017, respectively. The open-end lines of credit that the bank 
originated or purchased, or for which it received applications, during 
2018 are covered loans and must be reported, unless they otherwise are 
excluded transactions under Sec.  1003.3(c). However, the closed-end 
mortgage loans that the bank originated or purchased, or for which it 
received applications, during 2018 are excluded transactions under Sec.  
1003.3(c)(11) and need not be reported. See comments 4(a)-2 through -4 
for guidance about the activities that constitute an origination.

[[Page 144]]

    2. Optional reporting. A financial institution may report 
applications for, originations of, or purchases of closed-end mortgage 
loans that are excluded transactions because the financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years. However, a financial institution that chooses 
to report such excluded applications for, originations of, or purchases 
of closed-end mortgage loans must report all such applications for 
closed-end mortgage loans that it receives, closed-end mortgage loans 
that it originates, and closed-end mortgage loans that it purchases that 
otherwise would be covered loans for a given calendar year. Note that 
applications which remain pending at the end of a calendar year are not 
reported, as described in comment 4(a)(8)(i)-14.

                           Paragraph 3(c)(12)

    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 200 open-end lines of credit in either of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2022 under Sec.  1003.2(g) because it originated 100 
closed-end mortgage loans in 2020, 175 closed-end mortgage loans in 
2021, and met all of the other requirements under Sec.  1003.2(g)(1). 
Also assume that the bank originated 175 and 185 open-end lines of 
credit in 2020 and 2021, respectively. The closed-end mortgage loans 
that the bank originated or purchased, or for which it received 
applications, during 2022 are covered loans and must be reported, unless 
they otherwise are excluded transactions under Sec.  1003.3(c). However, 
the open-end lines of credit that the bank originated or purchased, or 
for which it received applications, during 2022 are excluded 
transactions under Sec.  1003.3(c)(12) and need not be reported. See 
comments 4(a)-2 through -4 for guidance about the activities that 
constitute an origination.
    2. Optional reporting. A financial institution may report 
applications for, originations of, or purchases of open-end lines of 
credit that are excluded transactions because the financial institution 
originated fewer than 200 open-end lines of credit in either of the two 
preceding calendar years. However, a financial institution that chooses 
to report such excluded applications for, originations of, or purchases 
of open-end lines of credit must report all such applications for open-
end lines of credit which it receives, open-end lines of credit that it 
originates, and open-end lines of credit that it purchases that 
otherwise would be covered loans for a given calendar year. Note that 
applications which remain pending at the end of a calendar year are not 
reported, as described in comment 4(a)(8)(i)-14.

                           Paragraph 3(c)(13)

    1. New funds extended before consolidation. Section 1003.3(c)(13) 
provides an exclusion for a transaction that provided or, in the case of 
an application, proposed to provide new funds to the borrower in advance 
of being consolidated in a New York State consolidation, extension, and 
modification agreement classified as a supplemental mortgage under New 
York Tax Law section 255 (New York CEMA) and for which final action is 
taken on both transactions within the same calendar year. The excluded 
transaction provides or proposes to provide funds that are not part of 
any existing debt obligation of the borrower and that are then 
consolidated or proposed to be consolidated with an existing debt 
obligation or obligations as part of the supplemental mortgage. The new 
funds are reported only insofar as they form part of the total amount of 
the reported New York CEMA, and not as a separate amount. This exclusion 
applies only if, at the time the transaction that provided new funds was 
originated, the financial institution intended to consolidate the loan 
into a New York CEMA. If a New York CEMA that consolidates an excluded 
preliminary transaction is carried out in a transaction involving an 
assumption, the financial institution reports the New York CEMA and does 
not report the preliminary transaction separately. The Sec.  
1003.3(c)(13) exclusion does not apply to similar preliminary 
transactions that provide or propose to provide new funds to be 
consolidated not pursuant to New York Tax Law section 255 but under some 
other law in a transaction that is not an extension of credit. For 
example, assume a financial institution extends new funds to a consumer 
in a preliminary transaction that is then consolidated as part of a 
consolidation, extension and modification agreement pursuant to the law 
of a State other than New York. If the preliminary extension of new 
funds is a covered loan, it must be reported. If the consolidation, 
extension and modification agreement pursuant to the law of a State 
other than New York is not an extension of credit pursuant to Regulation 
C, it may not be reported. For discussion of how to report a cash-out 
refinancing, see comment 4(a)(3)-2.

                   3(d) Partially Exempt Transactions

    1. Merger or acquisition--application of partial exemption 
thresholds to surviving or newly formed institution. After a merger or 
acquisition, the surviving or newly formed institution falls below the 
loan threshold described in Sec.  1003.3(d)(2) or (3) if it, considering 
the combined lending activity of the surviving or newly formed 
institution and the merged or acquired institutions or acquired 
branches, falls below the loan threshold described in Sec.  1003.3(d)(2) 
or (3). For example, A and B merge. The surviving or newly formed

[[Page 145]]

institution falls below the loan threshold described in Sec.  
1003.3(d)(2) if the surviving or newly formed institution, A, and B 
originated a combined total of fewer than 500 closed-end mortgage loans 
that are not excluded from this part pursuant to Sec.  1003.3(c)(1) 
through (10) or (c)(13) in each of the two preceding calendar years. 
Comment 3(d)-3 discusses eligibility for partial exemptions during the 
calendar year of a merger.
    2. Merger or acquisition--Community Reinvestment Act examination 
history. After a merger or acquisition, the surviving or newly formed 
institution is deemed to be ineligible for the partial exemptions 
pursuant to Sec.  1003.3(d)(6) if either it or any of the merged or 
acquired institutions received a rating of ``needs to improve record of 
meeting community credit needs'' during each of its two most recent 
examinations or a rating of ``substantial noncompliance in meeting 
community credit needs'' on its most recent examination under section 
807(b)(2) of the Community Reinvestment Act of 1977 (12 U.S.C. 
2906(b)(2)). Comment 3(d)-3.iii discusses eligibility for partial 
exemptions during the calendar year of a merger when an institution that 
is eligible for a partial exemption merges with an institution that is 
ineligible for the partial exemption (including, for example, an 
institution that is ineligible for the partial exemptions pursuant to 
Sec.  1003.3(d)(6)) and the surviving or newly formed institution is 
ineligible for the partial exemption.
    3. Merger or acquisition--applicability of partial exemptions during 
calendar year of merger or acquisition. The scenarios described below 
illustrate the applicability of partial exemptions under Sec.  1003.3(d) 
during the calendar year of a merger or acquisition. For purposes of 
these illustrations, ``institution'' means a financial institution, as 
defined in Sec.  1003.2(g), that is not exempt from reporting under 
Sec.  1003.3(a). Although the scenarios below refer to the partial 
exemption for closed-end mortgage loans under Sec.  1003.3(d)(2), the 
same principles apply with respect to the partial exemption for open-end 
lines of credit under Sec.  1003.3(d)(3).
    i. Assume two institutions that are eligible for the partial 
exemption for closed-end mortgage loans merge and the surviving or newly 
formed institution meets all of the requirements for the partial 
exemption. The partial exemption for closed-end mortgage loans applies 
for the calendar year of the merger.
    ii. Assume two institutions that are eligible for the partial 
exemption for closed-end mortgage loans merge and the surviving or newly 
formed institution does not meet the requirements for the partial 
exemption. Collection of optional data for closed-end mortgage loans is 
permitted but not required for the calendar year of the merger (even 
though the merger creates an institution that does not meet the 
requirements for the partial exemption for closed-end mortgage loans). 
When a branch office of an institution that is eligible for the partial 
exemption is acquired by another institution that is eligible for the 
partial exemption, and the acquisition results in an institution that is 
not eligible for the partial exemption, data collection for closed-end 
mortgage loans is permitted but not required for the calendar year of 
the acquisition.
    iii. Assume an institution that is eligible for the partial 
exemption for closed-end mortgage loans merges with an institution that 
is ineligible for the partial exemption and the surviving or newly 
formed institution is ineligible for the partial exemption. For the 
calendar year of the merger, collection of optional data as defined in 
Sec.  1003.3(d)(1)(iii) for closed-end mortgage loans is required for 
covered loans and applications handled in the offices of the merged 
institution that was previously ineligible for the partial exemption. 
For the calendar year of the merger, collection of optional data for 
closed-end mortgage loans is permitted but not required for covered 
loans and applications handled in the offices of the merged institution 
that was previously eligible for the partial exemption. When an 
institution that is ineligible for the partial exemption for closed-end 
mortgage loans acquires a branch office of an institution that is 
eligible for the partial exemption, collection of optional data for 
closed-end mortgage loans is permitted but not required for covered 
loans and applications handled by the acquired branch office for the 
calendar year of the acquisition.
    iv. Assume an institution that is eligible for the partial exemption 
for closed-end mortgage loans merges with an institution that is 
ineligible for the partial exemption and the surviving or newly formed 
institution is eligible for the partial exemption. For the calendar year 
of the merger, collection of optional data for closed-end mortgage loans 
is required for covered loans and applications handled in the offices of 
the previously ineligible institution that took place prior to the 
merger. After the merger date, collection of optional data for closed-
end mortgage loans is permitted but not required for covered loans and 
applications handled in the offices of the institution that was 
previously ineligible for the partial exemption. When an institution 
remains eligible for the partial exemption for closed-end mortgage loans 
after acquiring a branch office of an institution that is ineligible for 
the partial exemption, collection of optional data for closed-end 
mortgage loans is required for transactions of the acquired branch 
office that take place prior to the acquisition. Collection of optional 
data for closed-end mortgage loans by the acquired branch office is 
permitted but not required for transactions

[[Page 146]]

taking place in the remainder of the calendar year after the 
acquisition.
    4. Originations. Whether applications for covered loans that an 
insured depository institution or insured credit union receives, covered 
loans that it originates, or covered loans that it purchases are 
partially exempt transactions under Sec.  1003.3(d) depends, in part, on 
whether the institution originated fewer than 500 closed-end mortgage 
loans that are not excluded from this part pursuant to Sec.  
1003.3(c)(1) through (10) or (c)(13) in each of the two preceding 
calendar years or fewer than 500 open-end lines of credit that are not 
excluded from this part pursuant to Sec.  1003.3(c)(1) through (10) in 
each of the two preceding calendar years. See comments 4(a)-2 through -4 
for guidance about the activities that constitute an origination for 
purposes of Sec.  1003.3(d).
    5. Affiliates. A financial institution that is not itself an insured 
credit union or an insured depository institution as defined in Sec.  
1003.3(d)(1)(i) and (ii) is not eligible for the partial exemptions 
under Sec.  1003.3(d)(1) through (3), even if it is owned by or 
affiliated with an insured credit union or an insured depository 
institution. For example, an institution that is a subsidiary of an 
insured credit union or insured depository institution may not claim a 
partial exemption under Sec.  1003.3(d) for its closed-end mortgage 
loans unless the subsidiary institution itself:
    i. Is an insured credit union or insured depository institution,
    ii. In each of the two preceding calendar years originated fewer 
than 500 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(13), and
    iii. If the subsidiary is an insured depository institution, had not 
received as of the preceding December 31 a rating of ``needs to improve 
record of meeting community credit needs'' during each of its two most 
recent examinations or a rating of ``substantial noncompliance in 
meeting community credit needs'' on its most recent examination under 
section 807(b)(2) of the Community Reinvestment Act of 1977 (12 U.S.C. 
2906(b)(2)).

                         Paragraph 3(d)(1)(iii)

    1. Optional data. The definition of optional data in Sec.  
1003.3(d)(1)(iii) identifies the data that are covered by the partial 
exemptions for certain transactions of insured depository institutions 
and insured credit unions under Sec.  1003.3(d). If a transaction is not 
partially exempt under Sec.  1003.3(d)(2) or (3), a financial 
institution must collect, record, and report optional data as otherwise 
required under this part.

                            Paragraph 3(d)(2)

    1. General. Section 1003.3(d)(2) provides that, except as provided 
in Sec.  1003.3(d)(6), an insured depository institution or insured 
credit union that, in each of the two preceding calendar years, 
originated fewer than 500 closed-end mortgage loans that are not 
excluded from this part pursuant to Sec.  1003.3(c)(1) through (10) or 
(c)(13) is not required to collect, record, or report optional data as 
defined in Sec.  1003.3(d)(1)(iii) for applications for closed-end 
mortgage loans that it receives, closed-end mortgage loans that it 
originates, and closed-end mortgage loans that it purchases. For 
example, assume that an insured credit union is a financial institution 
in 2020 under Sec.  1003.2(g) and originated, in 2018 and 2019 
respectively, 100 and 200 closed-end mortgage loans that are not 
excluded from this part pursuant to Sec.  1003.3(c)(1) through (10) or 
(c)(13). The closed-end mortgage loans that the insured credit union 
originated or purchased, or for which it received applications, during 
2020 are not excluded transactions under Sec.  1003.3(c)(11). However, 
due to the partial exemption in Sec.  1003.3(d)(2), the insured credit 
union is not required to collect, record, or report optional data as 
defined in Sec.  1003.3(d)(1)(iii) for the closed-end mortgage loans 
that it originated or purchased, or for which it received applications, 
for which final action is taken during 2020. See comments 4(a)-2 through 
-4 for guidance about the activities that constitute an origination.

                            Paragraph 3(d)(3)

    1. General. Section 1003.3(d)(3) provides that, except as provided 
in Sec.  1003.3(d)(6), an insured depository institution or insured 
credit union that, in each of the two preceding calendar years, 
originated fewer than 500 open-end lines of credit that are not excluded 
from this part pursuant to Sec.  1003.3(c)(1) through (10) is not 
required to collect, record, or report optional data as defined in Sec.  
1003.3(d)(1)(iii) for applications for open-end lines of credit that it 
receives, open-end lines of credit that it originates, and open-end 
lines of credit that it purchases. See Sec.  1003.3(c)(12) and comments 
3(c)(12)-1 and -2, which provide an exclusion for certain open-end lines 
of credit from this part and permit voluntary reporting of such 
transactions under certain circumstances. See also comments 4(a)-2 
through -4 for guidance about the activities that constitute an 
origination.

                            Paragraph 3(d)(4)

    1. General. Section 1003.3(d)(4) provides that an insured depository 
institution or insured credit union may collect, record, and report 
optional data as defined in Sec.  1003.3(d)(1)(iii) for a partially 
exempt transaction as though the institution were required to do so, 
provided that, if an institution voluntarily reports any data pursuant 
to any of the seven paragraphs identified in Sec.  1003.3(d)(4)(i) and

[[Page 147]]

(ii) (Sec.  1003.4(a)(9)(i) and (a)(15), (16), (17), (27), (33), and 
(35)), it also must report all other data for the covered loan or 
application that would be required by that applicable paragraph if the 
transaction were not partially exempt. For example, an insured 
depository institution or insured credit union may voluntarily report 
the existence of a balloon payment for a partially exempt transaction 
pursuant to Sec.  1003.4(a)(27), but, if it does so, it must also report 
all other data for the transaction that would be required by Sec.  
1003.4(a)(27) if the transaction were not partially exempt (i.e., 
whether the transaction has interest-only payments, negative 
amortization, or other non-amortizing features).
    2. Partially exempt transactions within the same loan/application 
register. A financial institution may collect, record, and report 
optional data for some partially exempt transactions under Sec.  
1003.3(d) in the manner specified in Sec.  1003.3(d)(4), even if it does 
not collect, record, and report optional data for other partially exempt 
transactions under Sec.  1003.3(d).
    3. Exempt or not applicable. i. If a financial institution would 
otherwise report that a transaction is partially exempt pursuant to 
Sec.  1003.3(d) and a particular requirement to report optional data is 
not applicable to the transaction, the insured depository institution or 
insured credit union complies with the particular requirement by 
reporting either that the transaction is exempt from the requirement or 
that the requirement is not applicable. For example, assume that an 
insured depository institution or insured credit union originates a 
partially exempt reverse mortgage. The requirement to report lender 
credits is not applicable to reverse mortgages, as comment 4(a)(20)-1 
explains. Accordingly, the institution could report either exempt or not 
applicable for lender credits for the reverse mortgage transaction.
    ii. An institution is considered as reporting data in a data field 
for purposes of Sec.  1003.3(d)(4)(i) and (ii) when it reports not 
applicable for that data field for a partially exempt transaction. For 
example, assume an insured depository institution or insured credit 
union originates a covered loan that is eligible for a partial exemption 
and is made primarily for business or commercial purposes. The 
requirement to report total loan costs or total points and fees is not 
applicable to loans made primarily for business or commercial purposes, 
as comments 4(a)(17)(i)-1 and (ii)-1 explain. The institution can report 
not applicable for both total loan costs and total points and fees, or 
it can report exempt for both total loan costs and total points and fees 
for the loan. Pursuant to Sec.  1003.3(d)(4)(ii), the institution is not 
permitted to report not applicable for total loan costs and report 
exempt for total points and fees for the business or commercial purpose 
loan.

                          Paragraph 3(d)(4)(i)

    1. State. Section 1003.3(d)(4)(i) provides that if an institution 
eligible for a partial exemption under Sec.  1003.3(d)(2) or (3) reports 
the street address, city name, or Zip Code for a partially exempt 
transaction pursuant to Sec.  1003.4(a)(9)(i), it reports all data that 
would be required by Sec.  1003.4(a)(9)(i) if the transaction were not 
partially exempt, including the State. An insured depository institution 
or insured credit union that reports the State pursuant to Sec.  
1003.4(a)(9)(ii) or comment 4(a)(9)(ii)-1 for a partially exempt 
transaction without reporting any other data required by Sec.  
1003.4(a)(9)(i) is not required to report the street address, city name, 
or Zip Code pursuant to Sec.  1003.4(a)(9)(i).

                            Paragraph 3(d)(5)

    1. NULI--uniqueness. For a partially exempt transaction under Sec.  
1003.3(d), a financial institution may report a ULI or a NULI. Section 
1003.3(d)(5)(ii) requires an insured depository institution or insured 
credit union that assigns a NULI to a covered loan or application to 
ensure that the character sequence it assigns is unique within the 
institution's annual loan/application register in which it appears. A 
financial institution should assign only one NULI to any particular 
covered loan or application within each annual loan/application 
register, and each NULI should correspond to a single application and 
ensuing loan within the annual loan/application register in which the 
NULI appears in the case that the application is approved and a loan is 
originated. A financial institution may use a NULI more than once within 
an annual loan/application register only if the NULI refers to the same 
loan or application or a loan that ensues from an application referred 
to elsewhere in the annual loan/application register. Refinancings or 
applications for refinancing that are included in same annual loan/
application register as the loan that is being refinanced should be 
assigned a different NULI than the loan that is being refinanced. An 
insured depository institution or insured credit union with multiple 
branches must ensure that its branches do not use the same NULI to refer 
to multiple covered loans or applications within the institution's same 
annual loan/application register.
    2. NULI--privacy. Section 1003.3(d)(5)(iii) prohibits an insured 
depository institution or insured credit union from including 
information in the NULI that could be used to directly identify the 
applicant or borrower. Information that could be used to directly 
identify the applicant or borrower includes, but is not limited to, the 
applicant's or borrower's name, date of birth, Social Security number, 
official government-issued driver's

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license or identification number, alien registration number, government 
passport number, or employer or taxpayer identification number.

                            Paragraph 3(d)(6)

    1. Preceding calendar year. Section 1003.3(d)(6) refers to the 
preceding December 31, which means the December 31 preceding the current 
calendar year. For example, in 2020, the preceding December 31 is 
December 31, 2019. Assume that, as of December 31, 2019, an insured 
depository institution received ratings of ``needs to improve record of 
meeting community credit needs'' during its two most recent examinations 
under section 807(b)(2) of the Community Reinvestment Act (12 U.S.C. 
2906(b)(2)) in 2018 and 2014. Accordingly, in 2020, the insured 
depository institution's transactions are not partially exempt pursuant 
to Sec.  1003.3(d).

             Section 1003.4--Compilation of Reportable Data

                    4(a) Data Format and Itemization

    1. General. Except as otherwise provided in Sec.  1003.3, Sec.  
1003.4(a) describes a financial institution's obligation to collect data 
on applications it received, on covered loans that it originated, and on 
covered loans that it purchased during the calendar year covered by the 
loan/application register.
    i. A financial institution reports these data even if the covered 
loans were subsequently sold by the institution.
    ii. A financial institution reports data for applications that did 
not result in an origination but on which actions were taken--for 
example, an application that the institution denied, that it approved 
but that was not accepted, that it closed for incompleteness, or that 
the applicant withdrew during the calendar year covered by the loan/
application register. A financial institution is required to report data 
regarding requests under a preapproval program (as defined in Sec.  
1003.2(b)(2)) only if the preapproval request is denied, results in the 
origination of a home purchase loan, or was approved but not accepted.
    iii. If a financial institution acquires covered loans in bulk from 
another institution (for example, from the receiver for a failed 
institution), but no merger or acquisition of an institution, or 
acquisition of a branch office, is involved, the acquiring financial 
institution reports the covered loans as purchased loans.
    iv. A financial institution reports the data for an application on 
the loan/application register for the calendar year during which the 
application was acted upon even if the institution received the 
application in a previous calendar year.
    2. Originations and applications involving more than one 
institution. Section 1003.4(a) requires a financial institution to 
collect certain information regarding applications for covered loans 
that it receives and regarding covered loans that it originates. The 
following provides guidance on how to report originations and 
applications involving more than one institution. The discussion below 
assumes that all of the parties are financial institutions as defined by 
Sec.  1003.2(g). The same principles apply if any of the parties is not 
a financial institution. Comment 4(a)-3 provides examples of 
transactions involving more than one institution, and comment 4(a)-4 
discusses how to report actions taken by agents.
    i. Only one financial institution reports each originated covered 
loan as an origination. If more than one institution was involved in the 
origination of a covered loan, the financial institution that made the 
credit decision approving the application before closing or account 
opening reports the loan as an origination. It is not relevant whether 
the loan closed or, in the case of an application, would have closed in 
the institution's name. If more than one institution approved an 
application prior to closing or account opening and one of those 
institutions purchased the loan after closing, the institution that 
purchased the loan after closing reports the loan as an origination. If 
a financial institution reports a transaction as an origination, it 
reports all of the information required for originations, even if the 
covered loan was not initially payable to the financial institution that 
is reporting the covered loan as an origination.
    ii. In the case of an application for a covered loan that did not 
result in an origination, a financial institution reports the action it 
took on that application if it made a credit decision on the application 
or was reviewing the application when the application was withdrawn or 
closed for incompleteness. It is not relevant whether the financial 
institution received the application from the applicant or from another 
institution, such as a broker, or whether another financial institution 
also reviewed and reported an action taken on the same application.
    3. Examples--originations and applications involving more than one 
institution. The following scenarios illustrate how an institution 
reports a particular application or covered loan. The illustrations 
assume that all of the parties are financial institutions as defined by 
Sec.  1003.2(g). However, the same principles apply if any of the 
parties is not a financial institution.
    i. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application and 
approved the

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loan prior to closing. The loan closed in Financial Institution A's 
name. Financial Institution B purchased the loan from Financial 
Institution A after closing. Financial Institution B was not acting as 
Financial Institution A's agent. Since Financial Institution B made the 
credit decision prior to closing, Financial Institution B reports the 
transaction as an origination, not as a purchase. Financial Institution 
A does not report the transaction.
    ii. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application before 
the loan would have closed, but the application did not result in an 
origination because Financial Institution B denied the application. 
Financial Institution B was not acting as Financial Institution A's 
agent. Since Financial Institution B made the credit decision, Financial 
Institution B reports the application as a denial. Financial Institution 
A does not report the application. If, under the same facts, the 
application was withdrawn before Financial Institution B made a credit 
decision, Financial Institution B would report the application as 
withdrawn and Financial Institution A would not report the application.
    iii. Financial Institution A received an application for a covered 
loan from an applicant and approved the application before closing the 
loan in its name. Financial Institution A was not acting as Financial 
Institution B's agent. Financial Institution B purchased the covered 
loan from Financial Institution A. Financial Institution B did not 
review the application before closing. Financial Institution A reports 
the loan as an origination. Financial Institution B reports the loan as 
a purchase.
    iv. Financial Institution A received an application for a covered 
loan from an applicant. If approved, the loan would have closed in 
Financial Institution B's name. Financial Institution A denied the 
application without sending it to Financial Institution B for approval. 
Financial Institution A was not acting as Financial Institution B's 
agent. Since Financial Institution A made the credit decision before the 
loan would have closed, Financial Institution A reports the application. 
Financial Institution B does not report the application.
    v. Financial Institution A reviewed an application and made the 
credit decision to approve a covered loan using the underwriting 
criteria provided by a third party (e.g., another financial institution, 
Fannie Mae, or Freddie Mac). The third party did not review the 
application and did not make a credit decision prior to closing. 
Financial Institution A was not acting as the third party's agent. 
Financial Institution A reports the application or origination. If the 
third party purchased the loan and is subject to Regulation C, the third 
party reports the loan as a purchase whether or not the third party 
reviewed the loan after closing. Assume the same facts, except that 
Financial Institution A approved the application, and the applicant 
chose not to accept the loan from Financial Institution A. Financial 
Institution A reports the application as approved but not accepted and 
the third party, assuming the third party is subject to Regulation C, 
does not report the application.
    vi. Financial Institution A reviewed and made the credit decision on 
an application based on the criteria of a third-party insurer or 
guarantor (for example, a government or private insurer or guarantor). 
Financial Institution A reports the action taken on the application.
    vii. Financial Institution A received an application for a covered 
loan and forwarded it to Financial Institutions B and C. Financial 
Institution A made a credit decision, acting as Financial Institution 
D's agent, and approved the application. The applicant did not accept 
the loan from Financial Institution D. Financial Institution D reports 
the application as approved but not accepted. Financial Institution A 
does not report the application. Financial Institution B made a credit 
decision, approving the application, the applicant accepted the offer of 
credit from Financial Institution B, and credit was extended. Financial 
Institution B reports the origination. Financial Institution C made a 
credit decision and denied the application. Financial Institution C 
reports the application as denied.
    4. Agents. If a financial institution made the credit decision on a 
covered loan or application through the actions of an agent, the 
institution reports the application or origination. State law determines 
whether one party is the agent of another. For example, acting as 
Financial Institution A's agent, Financial Institution B approved an 
application prior to closing and a covered loan was originated. 
Financial Institution A reports the loan as an origination.
    5. Purchased loans. i. A financial institution is required to 
collect data regarding covered loans it purchases. For purposes of Sec.  
1003.4(a), a purchase includes a repurchase of a covered loan, 
regardless of whether the institution chose to repurchase the covered 
loan or was required to repurchase the covered loan because of a 
contractual obligation and regardless of whether the repurchase occurs 
within the same calendar year that the covered loan was originated or in 
a different calendar year. For example, assume that Financial 
Institution A originates or purchases a covered loan and then sells it 
to Financial Institution B, who later requires Financial Institution A 
to repurchase the covered loan pursuant to the relevant contractual 
obligations. Financial Institution B reports the

[[Page 150]]

purchase from Financial Institution A, assuming it is a financial 
institution as defined under Sec.  1003.2(g). Financial Institution A 
reports the repurchase from Financial Institution B as a purchase.
    ii. In contrast, for purposes of Sec.  1003.4(a), a purchase does 
not include a temporary transfer of a covered loan to an interim funder 
or warehouse creditor as part of an interim funding agreement under 
which the originating financial institution is obligated to repurchase 
the covered loan for sale to a subsequent investor. Such agreements, 
often referred to as ``repurchase agreements,'' are sometimes employed 
as functional equivalents of warehouse lines of credit. Under these 
agreements, the interim funder or warehouse creditor acquires legal 
title to the covered loan, subject to an obligation of the originating 
institution to repurchase at a future date, rather than taking a 
security interest in the covered loan as under the terms of a more 
conventional warehouse line of credit. To illustrate, assume Financial 
Institution A has an interim funding agreement with Financial 
Institution B to enable Financial Institution B to originate loans. 
Assume further that Financial Institution B originates a covered loan 
and that, pursuant to this agreement, Financial Institution A takes a 
temporary transfer of the covered loan until Financial Institution B 
arranges for the sale of the covered loan to a subsequent investor and 
that Financial Institution B repurchases the covered loan to enable it 
to complete the sale to the subsequent investor (alternatively, 
Financial Institution A may transfer the covered loan directly to the 
subsequent investor at Financial Institution B's direction, pursuant to 
the interim funding agreement). The subsequent investor could be, for 
example, a financial institution or other entity that intends to hold 
the loan in portfolio, a GSE or other securitizer, or a financial 
institution or other entity that intends to package and sell multiple 
loans to a GSE or other securitizer. In this example, the temporary 
transfer of the covered loan from Financial Institution B to Financial 
Institution A is not a purchase, and any subsequent transfer back to 
Financial Institution B for delivery to the subsequent investor is not a 
purchase, for purposes of Sec.  1003.4(a). Financial Institution B 
reports the origination of the covered loan as well as its sale to the 
subsequent investor. If the subsequent investor is a financial 
institution under Sec.  1003.2(g), it reports a purchase of the covered 
loan pursuant to Sec.  1003.4(a), regardless of whether it acquired the 
covered loan from Financial Institution B or directly from Financial 
Institution A.

             Section 1003.4--Compilation of Reportable Data

                          Paragraph 4(a)(1)(i)

    1. ULI--uniqueness. Section 1003.4(a)(1)(i)(B)(2) requires a 
financial institution that assigns a universal loan identifier (ULI) to 
each covered loan or application (except as provided in Sec.  
1003.4(a)(1)(i)(D) and (E)) to ensure that the character sequence it 
assigns is unique within the institution and used only for the covered 
loan or application. A financial institution should assign only one ULI 
to any particular covered loan or application, and each ULI should 
correspond to a single application and ensuing loan in the case that the 
application is approved and a loan is originated. A financial 
institution may use a ULI that was reported previously to refer only to 
the same loan or application for which the ULI was used previously or a 
loan that ensues from an application for which the ULI was used 
previously. A financial institution may not report an application for a 
covered loan in 2030 using the same ULI that was reported for a covered 
loan that was originated in 2020. Similarly, refinancings or 
applications for refinancing should be assigned a different ULI than the 
loan that is being refinanced. A financial institution with multiple 
branches must ensure that its branches do not use the same ULI to refer 
to multiple covered loans or applications.
    2. ULI--privacy. Section 1003.4(a)(1)(i)(B)(3) prohibits a financial 
institution from including information that could be used to directly 
identify the applicant or borrower in the identifier that it assigns for 
the application or covered loan of the applicant or borrower. 
Information that could be used to directly identify the applicant or 
borrower includes, but is not limited to, the applicant's or borrower's 
name, date of birth, Social Security number, official government-issued 
driver's license or identification number, alien registration number, 
government passport number, or employer or taxpayer identification 
number.
    3. ULI--purchased covered loan. If a financial institution has 
previously assigned a covered loan with a ULI or reported a covered loan 
with a ULI under this part, a financial institution that purchases that 
covered loan must report the same ULI that was previously assigned or 
reported unless the purchase of the covered loan is a partially exempt 
transaction under Sec.  1003.3(d). For example, if a financial 
institution that submits an annual loan/application register pursuant to 
Sec.  1003.5(a)(1)(i) originates a covered loan that is purchased by a 
financial institution that also submits an annual loan/application 
register pursuant to Sec.  1003.5(a)(1)(i), the financial institution 
that purchases the covered loan must report the purchase of the covered 
loan using the same ULI that was reported

[[Page 151]]

by the originating financial institution if the purchase is not a 
partially exempt transaction. If a financial institution that originates 
a covered loan has previously assigned the covered loan with a ULI under 
this part but has not yet reported the covered loan, a financial 
institution that purchases that covered loan must report the same ULI 
that was previously assigned if the purchase is not a partially exempt 
transaction. For example, if a financial institution that submits an 
annual loan/application register pursuant to Sec.  1003.5(a)(1)(i) 
(Institution A) originates a covered loan that is purchased by a 
financial institution that submits a quarterly loan/application register 
pursuant to Sec.  1003.5(a)(1)(ii) (Institution B) and Institution A 
assigned a ULI to the loan, then unless the purchase is a partially 
exempt transaction Institution B must report the ULI that was assigned 
by Institution A on Institution B's quarterly loan/application register 
pursuant to Sec.  1003.5(a)(1)(ii), even though Institution A has not 
yet submitted its annual loan/application register pursuant to Sec.  
1003.5(a)(1)(i). A financial institution that purchases a covered loan 
and is ineligible for a partial exemption with respect to the purchased 
covered loan must assign it a ULI pursuant to Sec.  1003.4(a)(1)(i) and 
report it pursuant to Sec.  1003.5(a)(1)(i) or (ii), whichever is 
applicable, if the covered loan was not assigned a ULI by the financial 
institution that originated the loan because, for example, the loan was 
originated prior to January 1, 2018, the loan was originated by an 
institution not required to report under this part, or the loan was 
assigned a non-universal loan identifier (NULI) under Sec.  1003.3(d)(5) 
rather than a ULI by the loan originator.
    4. ULI--reinstated or reconsidered application. A financial 
institution may, at its option, report a ULI previously reported under 
this part if, during the same calendar year, an applicant asks the 
institution to reinstate a counteroffer that the applicant previously 
did not accept or asks the financial institution to reconsider an 
application that was previously denied, withdrawn, or closed for 
incompleteness. For example, if a financial institution reports a denied 
application in its second-quarter 2020 data submission, pursuant to 
Sec.  1003.5(a)(1)(ii), but then reconsiders the application, resulting 
in an origination in the third quarter of 2020, the financial 
institution may report the origination in its third-quarter 2020 data 
submission using the same ULI that was reported for the denied 
application in its second-quarter 2020 data submission, so long as the 
financial institution treats the origination as the same transaction for 
reporting. However, a financial institution may not use a ULI previously 
reported if it reinstates or reconsiders an application that was 
reported in a prior calendar year. For example, if a financial 
institution reports a denied application that is not partially exempt in 
its fourth-quarter 2020 data submission, pursuant to Sec.  
1003.5(a)(1)(ii), but then reconsiders the application, resulting in an 
origination that is not partially exempt in the first quarter of 2021, 
the financial institution reports a denied application under the 
original ULI in its fourth-quarter 2020 data submission and an 
origination with a different ULI in its first-quarter 2021 data 
submission, pursuant to Sec.  1003.5(a)(1)(ii).
    5. ULI--check digit. Section 1003.4(a)(1)(i)(C) requires that the 
two right-most characters in the ULI represent the check digit. Appendix 
C prescribes the requirements for generating a check digit and 
validating a ULI.
    6. NULI. For a partially exempt transaction under Sec.  1003.3(d), a 
financial institution may report a ULI or a NULI. See Sec.  1003.3(d)(5) 
and comments 3(d)(5)-1 and -2 for guidance on the NULI.

                          Paragraph 4(a)(1)(ii)

    1. Application date--consistency. Section 1003.4(a)(1)(ii) requires 
that, in reporting the date of application, a financial institution 
report the date it received the application, as defined under Sec.  
1003.2(b), or the date shown on the application form. Although a 
financial institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans). If the financial institution chooses to report 
the date shown on the application form and the institution retains 
multiple versions of the application form, the institution reports the 
date shown on the first application form satisfying the application 
definition provided under Sec.  1003.2(b).
    2. Application date--indirect application. For an application that 
was not submitted directly to the financial institution, the institution 
may report the date the application was received by the party that 
initially received the application, the date the application was 
received by the institution, or the date shown on the application form. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks a financial institution to reinstate a 
counteroffer that the applicant previously did not accept (or asks the 
institution to reconsider an application that was denied, withdrawn, or 
closed for incompleteness), the institution may treat that request as 
the continuation of the earlier transaction using the same ULI or NULI 
or as a new transaction with a new ULI or NULI. If the institution 
treats the request for reinstatement

[[Page 152]]

or reconsideration as a new transaction, it reports the date of the 
request as the application date. If the institution does not treat the 
request for reinstatement or reconsideration as a new transaction, it 
reports the original application date.

                            Paragraph 4(a)(2)

    1. Loan type--general. If a covered loan is not, or in the case of 
an application would not have been, insured by the Federal Housing 
Administration, guaranteed by the Department of Veterans Affairs, or 
guaranteed by the Rural Housing Service or the Farm Service Agency, an 
institution complies with Sec.  1003.4(a)(2) by reporting the covered 
loan as not insured or guaranteed by the Federal Housing Administration, 
Department of Veterans Affairs, Rural Housing Service, or Farm Service 
Agency.

                            Paragraph 4(a)(3)

    1. Purpose--statement of applicant. A financial institution may rely 
on the oral or written statement of an applicant regarding the proposed 
use of covered loan proceeds. For example, a lender could use a check-
box or a purpose line on a loan application to determine whether the 
applicant intends to use covered loan proceeds for home improvement 
purposes. If an applicant provides no statement as to the proposed use 
of covered loan proceeds and the covered loan is not a home purchase 
loan, cash-out refinancing, or refinancing, a financial institution 
reports the covered loan as for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing for purposes of Sec.  
1003.4(a)(3).
    2. Purpose--refinancing and cash-out refinancing. Section 
1003.4(a)(3) requires a financial institution to report whether a 
covered loan is, or an application is for, a refinancing or a cash-out 
refinancing. A financial institution reports a covered loan or an 
application as a cash-out refinancing if it is a refinancing as defined 
by Sec.  1003.2(p) and the institution considered it to be a cash-out 
refinancing in processing the application or setting the terms (such as 
the interest rate or origination charges) under its guidelines or an 
investor's guidelines. For example:
    i. Assume a financial institution considers an application for a 
loan product to be a cash-out refinancing under an investor's guidelines 
because of the amount of cash received by the borrower at closing or 
account opening. Assume also that under the investor's guidelines, the 
applicant qualifies for the loan product and the financial institution 
approves the application, originates the covered loan, and sets the 
terms of the covered loan consistent with the loan product. In this 
example, the financial institution would report the covered loan as a 
cash-out refinancing for purposes of Sec.  1003.4(a)(3).
    ii. Assume a financial institution does not consider an application 
for a covered loan to be a cash-out refinancing under its own guidelines 
because the amount of cash received by the borrower does not exceed a 
certain threshold. Assume also that the institution approves the 
application, originates the covered loan, and sets the terms of the 
covered loan consistent with its own guidelines applicable to 
refinancings other than cash-out refinancings. In this example, the 
financial institution would report the covered loan as a refinancing for 
purposes of Sec.  1003.4(a)(3).
    iii. Assume a financial institution does not distinguish between a 
cash-out refinancing and a refinancing under its own guidelines, and 
sets the terms of all refinancings without regard to the amount of cash 
received by the borrower at closing or account opening, and does not 
offer loan products under investor guidelines. In this example, the 
financial institution reports all covered loans and applications for 
covered loans that are defined by Sec.  1003.2(p) as refinancings for 
purposes of Sec.  1003.4(a)(3).
    3. Purpose--multiple-purpose loan. Section 1003.4(a)(3) requires a 
financial institution to report the purpose of a covered loan or 
application. If a covered loan is a home purchase loan as well as a home 
improvement loan, a refinancing, or a cash-out refinancing, an 
institution complies with Sec.  1003.4(a)(3) by reporting the loan as a 
home purchase loan. If a covered loan is a home improvement loan as well 
as a refinancing or cash-out refinancing, but the covered loan is not a 
home purchase loan, an institution complies with Sec.  1003.4(a)(3) by 
reporting the covered loan as a refinancing or a cash-out refinancing, 
as appropriate. If a covered loan is a refinancing or cash-out 
refinancing as well as for another purpose, such as for the purpose of 
paying educational expenses, but the covered loan is not a home purchase 
loan, an institution complies with Sec.  1003.4(a)(3) by reporting the 
covered loan as a refinancing or a cash-out refinancing, as appropriate. 
See comment 4(a)(3)-2. If a covered loan is a home improvement loan as 
well as for another purpose, but the covered loan is not a home purchase 
loan, a refinancing, or cash-out refinancing, an institution complies 
with Sec.  1003.4(a)(3) by reporting the covered loan as a home 
improvement loan. See comment 2(i)-1.
    4. Purpose--other. If a covered loan is not, or an application is 
not for, a home purchase loan, a home improvement loan, a refinancing, 
or a cash-out refinancing, a financial institution complies with Sec.  
1003.4(a)(3) by reporting the covered loan or application as for a 
purpose other than home purchase, home improvement, refinancing, or 
cash-out refinancing. For example, if a covered loan is for the purpose 
of paying educational expenses, the financial institution complies

[[Page 153]]

with Sec.  1003.4(a)(3) by reporting the covered loan as for a purpose 
other than home purchase, home improvement, refinancing, or cash-out 
refinancing. Section 1003.4(a)(3) also requires an institution to report 
a covered loan or application as for a purpose other than home purchase, 
home improvement, refinancing, or cash-out refinancing if it is a 
refinancing but, under the terms of the agreement, the financial 
institution was unconditionally obligated to refinance the obligation 
subject to conditions within the borrower's control.
    5. Purpose--business or commercial purpose loans. If a covered loan 
primarily is for a business or commercial purpose as described in Sec.  
1003.3(c)(10) and comment 3(c)(10)-2 and is a home purchase loan, home 
improvement loan, or a refinancing, Sec.  1003.4(a)(3) requires the 
financial institution to report the applicable loan purpose. If a loan 
primarily is for a business or commercial purpose but is not a home 
purchase loan, home improvement loan, or a refinancing, the loan is an 
excluded transaction under Sec.  1003.3(c)(10).
    6. Purpose--purchased loans. For purchased covered loans where 
origination took place prior to January 1, 2018, a financial institution 
complies with Sec.  1003.4(a)(3) by reporting that the requirement is 
not applicable.

                            Paragraph 4(a)(4)

    1. Request under a preapproval program. Section 1003.4(a)(4) 
requires a financial institution to report whether an application or 
covered loan involved a request for a preapproval of a home purchase 
loan under a preapproval program as defined by Sec.  1003.2(b)(2). If an 
application or covered loan did not involve a request for a preapproval 
of a home purchase loan under a preapproval program as defined by Sec.  
1003.2(b)(2), a financial institution complies with Sec.  1003.4(a)(4) 
by reporting that the application or covered loan did not involve such a 
request, regardless of whether the institution has such a program and 
the applicant did not apply through that program or the institution does 
not have a preapproval program as defined by Sec.  1003.2(b)(2).
    2. Scope of requirement. A financial institution reports that the 
application or covered loan did not involve a preapproval request for a 
purchased covered loan; an application or covered loan for any purpose 
other than a home purchase loan; an application for a home purchase loan 
or a covered loan that is a home purchase loan secured by a multifamily 
dwelling; an application or covered loan that is an open-end line of 
credit or a reverse mortgage; or an application that is denied, 
withdrawn by the applicant, or closed for incompleteness.

                            Paragraph 4(a)(5)

    1. Modular homes and prefabricated components. Covered loans or 
applications related to modular homes should be reported with a 
construction method of site-built, regardless of whether they are on-
frame or off-frame modular homes. Modular homes comply with local or 
other recognized buildings codes rather than standards established by 
the National Manufactured Housing Construction and Safety Standards Act, 
42 U.S.C. 5401 et seq. Modular homes are not required to have HUD 
Certification Labels under 24 CFR 3280.11 or data plates under 24 CFR 
3280.5. Modular homes may have a certification from a State licensing 
agency that documents compliance with State or other applicable building 
codes. On-frame modular homes are constructed on permanent metal chassis 
similar to those used in manufactured homes. The chassis are not removed 
on site and are secured to the foundation. Off-frame modular homes 
typically have floor construction similar to the construction of other 
site-built homes, and the construction typically includes wooden floor 
joists and does not include permanent metal chassis. Dwellings built 
using prefabricated components assembled at the dwelling's permanent 
site should also be reported with a construction method of site-built.
    2. Multifamily dwelling. For a covered loan or an application for a 
covered loan related to a multifamily dwelling, the financial 
institution should report the construction method as site-built unless 
the multifamily dwelling is a manufactured home community, in which case 
the financial institution should report the construction method as 
manufactured home.
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.

                            Paragraph 4(a)(6)

    1. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    2. Principal residence. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the covered loan 
or application relates is or will be used as a residence that the 
applicant or borrower physically occupies and uses, or will occupy and 
use, as his or her principal residence. For purposes of Sec.  
1003.4(a)(6), an applicant or borrower can have only one principal 
residence at a time. Thus, a vacation or other second home would not be 
a principal residence. However, if an applicant or borrower buys or 
builds a new dwelling that will become the applicant's or borrower's 
principal

[[Page 154]]

residence within a year or upon the completion of construction, the new 
dwelling is considered the principal residence for purposes of applying 
this definition to a particular transaction.
    3. Second residences. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the loan or 
application relates is or will be used as a second residence. For 
purposes of Sec.  1003.4(a)(6), a property is a second residence of an 
applicant or borrower if the property is or will be occupied by the 
applicant or borrower for a portion of the year and is not the 
applicant's or borrower's principal residence. For example, if a person 
purchases a property, occupies the property for a portion of the year, 
and rents the property for the remainder of the year, the property is a 
second residence for purposes of Sec.  1003.4(a)(6). Similarly, if a 
couple occupies a property near their place of employment on weekdays, 
but the couple returns to their principal residence on weekends, the 
property near the couple's place of employment is a second residence for 
purposes of Sec.  1003.4(a)(6).
    4. Investment properties. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the covered loan 
or application relates is or will be used as an investment property. For 
purposes of Sec.  1003.4(a)(6), a property is an investment property if 
the borrower does not, or the applicant will not, occupy the property. 
For example, if a person purchases a property, does not occupy the 
property, and generates income by renting the property, the property is 
an investment property for purposes of Sec.  1003.4(a)(6). Similarly, if 
a person purchases a property, does not occupy the property, and does 
not generate income by renting the property, but intends to generate 
income by selling the property, the property is an investment property 
for purposes of Sec.  1003.4(a)(6). Section 1003.4(a)(6) requires a 
financial institution to identify a property as an investment property 
if the borrower or applicant does not or will not occupy the property, 
even if the borrower or applicant does not consider the property as 
owned for investment purposes. For example, if a corporation purchases a 
property that is a dwelling under Sec.  1003.2(f), that it does not 
occupy, but that is for the long-term residential use of its employees, 
the property is an investment property for purposes of Sec.  
1003.4(a)(6), even if the corporation considers the property as owned 
for business purposes rather than investment purposes, does not generate 
income by renting the property, and does not intend to generate income 
by selling the property at some point in time. If the property is for 
transitory use by employees, the property would not be considered a 
dwelling under Sec.  1003.2(f). See comment 2(f)-3.
    5. Purchased covered loans. For purchased covered loans, a financial 
institution may report principal residence unless the loan documents or 
application indicate that the property will not be occupied as a 
principal residence.

                            Paragraph 4(a)(7)

    1. Covered loan amount--counteroffer. If an applicant accepts a 
counteroffer for an amount different from the amount for which the 
applicant applied, the financial institution reports the covered loan 
amount granted. If an applicant does not accept a counteroffer or fails 
to respond, the institution reports the amount initially requested.
    2. Covered loan amount--application approved but not accepted or 
preapproval request approved but not accepted. A financial institution 
reports the covered loan amount that was approved.
    3. Covered loan amount--preapproval request denied, application 
denied, closed for incompleteness or withdrawn. For a preapproval 
request that was denied, and for an application that was denied, closed 
for incompleteness, or withdrawn, a financial institution reports the 
amount for which the applicant applied.
    4. Covered loan amount--multiple-purpose loan. A financial 
institution reports the entire amount of the covered loan, even if only 
a part of the proceeds is intended for home purchase, home improvement, 
or refinancing.
    5. Covered loan amount--closed-end mortgage loan. For a closed-end 
mortgage loan, other than a purchased loan, an assumption, or a reverse 
mortgage, a financial institution reports the amount to be repaid as 
disclosed on the legal obligation. For a purchased closed-end mortgage 
loan or an assumption of a closed-end mortgage loan, a financial 
institution reports the unpaid principal balance at the time of purchase 
or assumption.
    6. Covered loan amount--open-end line of credit. For an open-end 
line of credit, a financial institution reports the entire amount of 
credit available to the borrower under the terms of the open-end plan, 
including a purchased open-end line of credit and an assumption of an 
open-end line of credit, but not for a reverse mortgage open-end line of 
credit.
    7. Covered loan amount--refinancing. For a refinancing, a financial 
institution reports the amount of credit extended under the terms of the 
new debt obligation.
    8. Covered loan amount--home improvement loan. A financial 
institution reports the entire amount of a home improvement loan, even 
if only a part of the proceeds is intended for home improvement.
    9. Covered loan amount--non-federally insured reverse mortgage. A 
financial institution reports the initial principal limit of a non-
federally insured reverse mortgage as set forth in Sec.  
1003.4(a)(7)(iii).

[[Page 155]]

                          Paragraph 4(a)(8)(i)

    1. Action taken--covered loan originated. A financial institution 
reports that the covered loan was originated if the financial 
institution made a credit decision approving the application before 
closing or account opening and that credit decision results in an 
extension of credit. The same is true for an application that began as a 
request for a preapproval that subsequently results in a covered loan 
being originated. See comments 4(a)-2 through -4 for guidance on 
transactions in which more than one institution is involved.
    2. Action taken--covered loan purchased. A financial institution 
reports that the covered loan was purchased if the covered loan was 
purchased by the financial institution after closing or account opening 
and the financial institution did not make a credit decision on the 
application prior to closing or account opening, or if the financial 
institution did make a credit decision on the application prior to 
closing or account opening, but is repurchasing the loan from another 
entity that the loan was sold to. See comment 4(a)-5. See comments 4(a)-
2 through -4 for guidance on transactions in which more than one 
financial institution is involved.
    3. Action taken--application approved but not accepted. A financial 
institution reports application approved but not accepted if the 
financial institution made a credit decision approving the application 
before closing or account opening, subject solely to outstanding 
conditions that are customary commitment or closing conditions, but the 
applicant or the party that initially received the application fails to 
respond to the financial institution's approval within the specified 
time, or the closed-end mortgage loan was not otherwise consummated or 
the account was not otherwise opened. See comment 4(a)(8)(i)-13.
    4. Action taken--application denied. A financial institution reports 
that the application was denied if it made a credit decision denying the 
application before an applicant withdraws the application or the file is 
closed for incompleteness. See comments 4(a)-2 through -4 for guidance 
on transactions in which more than one institution is involved.
    5. Action taken--application withdrawn. A financial institution 
reports that the application was withdrawn when the application is 
expressly withdrawn by the applicant before the financial institution 
makes a credit decision denying the application, before the financial 
institution makes a credit decision approving the application, or before 
the file is closed for incompleteness. A financial institution also 
reports application withdrawn if the financial institution provides a 
conditional approval specifying underwriting or creditworthiness 
conditions, pursuant to comment 4(a)(8)(i)-13, and the application is 
expressly withdrawn by the applicant before the applicant satisfies all 
specified underwriting or creditworthiness conditions. A preapproval 
request that is withdrawn is not reportable under HMDA. See Sec.  
1003.4(a).
    6. Action taken--file closed for incompleteness. A financial 
institution reports that the file was closed for incompleteness if the 
financial institution sent a written notice of incompleteness under 
Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond to 
the request for additional information within the period of time 
specified in the notice before the applicant satisfies all underwriting 
or creditworthiness conditions. See comment 4(a)(8)(i)-13. If a 
financial institution then provides a notification of adverse action on 
the basis of incompleteness under Regulation B, 12 CFR 1002.9(c)(1)(i), 
the financial institution may report the action taken as either file 
closed for incompleteness or application denied. A preapproval request 
that is closed for incompleteness is not reportable under HMDA. See 
Sec.  1003.4(a) and comment 4(a)-1.ii.
    7. Action taken--preapproval request denied. A financial institution 
reports that the preapproval request was denied if the application was a 
request for a preapproval under a preapproval program as defined in 
Sec.  1003.2(b)(2) and the institution made a credit decision denying 
the preapproval request.
    8. Action taken--preapproval request approved but not accepted. A 
financial institution reports that the preapproval request was approved 
but not accepted if the application was a request for a preapproval 
under a preapproval program as defined in Sec.  1003.2(b)(2) and the 
institution made a credit decision approving the preapproval request but 
the application did not result in a covered loan originated by the 
financial institution.
    9. Action taken--counteroffers. If a financial institution makes a 
counteroffer to lend on terms different from the applicant's initial 
request (for example, for a shorter loan maturity, with a different 
interest rate, or in a different amount) and the applicant declines to 
proceed with the counteroffer or fails to respond, the institution 
reports the action taken as a denial on the original terms requested by 
the applicant. If the applicant agrees to proceed with consideration of 
the financial institution's counteroffer, the financial institution 
reports the action taken as the disposition of the application based on 
the terms of the counteroffer. For example, assume a financial 
institution makes a counteroffer, the applicant agrees to proceed with 
the terms of the counteroffer, and the financial institution then makes 
a credit decision approving the application conditional on satisfying 
underwriting or creditworthiness conditions, and the applicant expressly 
withdraws before satisfying all underwriting or creditworthiness 
conditions and before

[[Page 156]]

the institution denies the application or closes the file for 
incompleteness. The financial institution reports the action taken as 
application withdrawn in accordance with comment 4(a)(8)(i)-13.i. 
Similarly, assume a financial institution makes a counteroffer, the 
applicant agrees to proceed with consideration of the counteroffer, and 
the financial institution provides a conditional approval stating the 
conditions to be met to originate the counteroffer. The financial 
institution reports the action taken on the application in accordance 
with comment 4(a)(8)(i)-13 regarding conditional approvals.
    10. Action taken--rescinded transactions. If a borrower rescinds a 
transaction after closing and before a financial institution is required 
to submit its loan/application register containing the information for 
the transaction under Sec.  1003.5(a), the institution reports the 
transaction as an application that was approved but not accepted.
    11. Action taken--purchased covered loans. An institution reports 
the covered loans that it purchased during the calendar year. An 
institution does not report the covered loans that it declined to 
purchase, unless, as discussed in comments 4(a)-2 through -4, the 
institution reviewed the application prior to closing, in which case it 
reports the application or covered loan according to comments 4(a)-2 
through -4.
    12. Action taken--repurchased covered loans. See comment 4(a)-5 
regarding reporting requirements when a covered loan is repurchased by 
the originating financial institution.
    13. Action taken--conditional approvals. If an institution issues an 
approval other than a commitment pursuant to a preapproval program as 
defined under Sec.  1003.2(b)(2), and that approval is subject to the 
applicant meeting certain conditions, the institution reports the action 
taken as provided below dependent on whether the conditions are solely 
customary commitment or closing conditions or if the conditions include 
any underwriting or creditworthiness conditions.
    i. Action taken examples. If the approval is conditioned on 
satisfying underwriting or creditworthiness conditions and they are not 
met, the institution reports the action taken as a denial. If, however, 
the conditions involve submitting additional information about 
underwriting or creditworthiness that the institution needs to make the 
credit decision, and the institution has sent a written notice of 
incompleteness under Regulation B, 12 CFR 1002.9(c)(2), and the 
applicant did not respond within the period of time specified in the 
notice, the institution reports the action taken as file closed for 
incompleteness. See comment 4(a)(8)(i)-6. If the conditions are solely 
customary commitment or closing conditions and the conditions are not 
met, the institution reports the action taken as approved but not 
accepted. If all the conditions (underwriting, creditworthiness, or 
customary commitment or closing conditions) are satisfied and the 
institution agrees to extend credit but the covered loan is not 
originated, the institution reports the action taken as application 
approved but not accepted. If the applicant expressly withdraws before 
satisfying all underwriting or creditworthiness conditions and before 
the institution denies the application or closes the file for 
incompleteness, the institution reports the action taken as application 
withdrawn. If all underwriting and creditworthiness conditions have been 
met, and the outstanding conditions are solely customary commitment or 
closing conditions and the applicant expressly withdraws before the 
covered loan is originated, the institution reports the action taken as 
application approved but not accepted.
    ii. Customary commitment or closing conditions. Customary commitment 
or closing conditions include, for example: A clear-title requirement, 
an acceptable property survey, acceptable title insurance binder, clear 
termite inspection, a subordination agreement from another lienholder, 
and, where the applicant plans to use the proceeds from the sale of one 
home to purchase another, a settlement statement showing adequate 
proceeds from the sale.
    iii. Underwriting or creditworthiness conditions. Underwriting or 
creditworthiness conditions include, for example: Conditions that 
constitute a counter-offer, such as a demand for a higher down-payment; 
satisfactory debt-to-income or loan-to-value ratios, a determination of 
need for private mortgage insurance, or a satisfactory appraisal 
requirement; or verification or confirmation, in whatever form the 
institution requires, that the applicant meets underwriting conditions 
concerning applicant creditworthiness, including documentation or 
verification of income or assets.
    14. Action taken--pending applications. An institution does not 
report any covered loan application still pending at the end of the 
calendar year; it reports that application on its loan/application 
register for the year in which final action is taken.

                          Paragraph 4(a)(8)(ii)

    1. Action taken date--general. A financial institution reports the 
date of the action taken.
    2. Action taken date--applications denied and files closed for 
incompleteness. For applications, including requests for a preapproval, 
that are denied or for files closed for incompleteness, the financial 
institution reports either the date the action was taken or the date the 
notice was sent to the applicant.
    3. Action taken date--application withdrawn. For applications 
withdrawn, the financial institution may report the date the express 
withdrawal was received or the date shown

[[Page 157]]

on the notification form in the case of a written withdrawal.
    4. Action taken date--approved but not accepted. For a covered loan 
approved by an institution but not accepted by the applicant, the 
institution reports any reasonable date, such as the approval date, the 
deadline for accepting the offer, or the date the file was closed. 
Although an institution need not choose the same approach for its entire 
HMDA submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution or 
for a category of covered loans).
    5. Action taken date--originations. For covered loan originations, 
including a preapproval request that leads to an origination by the 
financial institution, an institution generally reports the closing or 
account opening date. For covered loan originations that an institution 
acquires from a party that initially received the application, the 
institution reports either the closing or account opening date, or the 
date the institution acquired the covered loan from the party that 
initially received the application. If the disbursement of funds takes 
place on a date later than the closing or account opening date, the 
institution may use the date of initial disbursement. For a 
construction/permanent covered loan, the institution reports either the 
closing or account opening date, or the date the covered loan converts 
to the permanent financing. Although an institution need not choose the 
same approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans). 
Notwithstanding this flexibility regarding the use of the closing or 
account opening date in connection with reporting the date action was 
taken, the institution must report the origination as occurring in the 
year in which the origination goes to closing or the account is opened.
    6. Action taken date--loan purchased. For covered loans purchased, a 
financial institution reports the date of purchase.

                            Paragraph 4(a)(9)

    1. Multiple properties with one property taken as security. If a 
covered loan is related to more than one property, but only one property 
is taken as security (or, in the case of an application, proposed to be 
taken as security), a financial institution reports the information 
required by Sec.  1003.4(a)(9) for the property taken as or proposed to 
be taken as security. A financial institution does not report the 
information required by Sec.  1003.4(a)(9) for the property or 
properties related to the loan that are not taken as or proposed to be 
taken as security. For example, if a covered loan is secured by property 
A, and the proceeds are used to purchase or rehabilitate (or to 
refinance home purchase or home improvement loans related to) property 
B, the institution reports the information required by Sec.  
1003.4(a)(9) for property A and does not report the information required 
by Sec.  1003.4(a)(9) for property B.
    2. Multiple properties with more than one property taken as 
security. If more than one property is taken or, in the case of an 
application, proposed to be taken as security for a single covered loan, 
a financial institution reports the covered loan or application in a 
single entry on its loan/application register and provides the 
information required by Sec.  1003.4(a)(9) for one of the properties 
taken as security that contains a dwelling. A financial institution does 
not report information about the other properties taken as security. If 
an institution is required to report specific information about the 
property identified in Sec.  1003.4(a)(9), the institution reports the 
information that relates to the property identified in Sec.  
1003.4(a)(9) (or, if the transaction is partially exempt under Sec.  
1003.3(d) and no data are reported pursuant to Sec.  1003.4(a)(9), the 
property that the institution would have identified in Sec.  
1003.4(a)(9) if the transaction were not partially exempt). For example, 
Financial Institution A originated a covered loan that is secured by 
both property A and property B, each of which contains a dwelling. 
Financial Institution A reports the loan as one entry on its loan/
application register, reporting the information required by Sec.  
1003.4(a)(9) for either property A or property B. If Financial 
Institution A elects to report the information required by Sec.  
1003.4(a)(9) about property A, Financial Institution A also reports the 
information required by Sec.  1003.4(a)(5), (6), (14), (29), and (30) 
related to property A. For aspects of the entries that do not refer to 
the property identified in Sec.  1003.4(a)(9) (i.e., Sec.  1003.4(a)(1) 
through (4), (7), (8), (10) through (13), (15) through (28), and (31) 
through (38)), Financial Institution A reports the information 
applicable to the covered loan or application and not information that 
relates only to the property identified in Sec.  1003.4(a)(9).
    3. Multifamily dwellings. A single multifamily dwelling may have 
more than one postal address. For example, three apartment buildings, 
each with a different street address, comprise a single multifamily 
dwelling that secures a covered loan. For the purposes of Sec.  
1003.4(a)(9), a financial institution reports the information required 
by Sec.  1003.4(a)(9) in the same manner described in comment 4(a)(9)-2.
    4. Loans purchased from another institution. The requirement to 
report the property location information required by Sec.  1003.4(a)(9) 
applies not only to applications and originations but also to purchased 
covered loans.
    5. Manufactured home. If the site of a manufactured home has not 
been identified, a financial institution complies by reporting

[[Page 158]]

that the information required by Sec.  1003.4(a)(9) is not applicable.

                          Paragraph 4(a)(9)(i)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(9)(i) requires a financial institution to 
report the property address of the location of the property securing a 
covered loan or, in the case of an application, proposed to secure a 
covered loan. The address should correspond to the property identified 
on the legal obligation related to the covered loan. For applications 
that did not result in an origination, the address should correspond to 
the location of the property proposed to secure the loan as identified 
by the applicant. For example, assume a loan is secured by a property 
located at 123 Main Street, and the applicant's or borrower's mailing 
address is a post office box. The financial institution should not 
report the post office box, and should report 123 Main Street.
    2. Property address--format. A financial institution complies with 
the requirements in Sec.  1003.4(a)(9)(i) by reporting the following 
information about the physical location of the property securing the 
loan.
    i. Street address. When reporting the street address of the 
property, a financial institution complies by including, as applicable, 
the primary address number, the predirectional, the street name, street 
prefixes and/or suffixes, the postdirectional, the secondary address 
identifier, and the secondary address, as applicable. For example, 100 N 
Main ST Apt 1.
    ii. City name. A financial institution complies by reporting the 
name of the city in which the property is located.
    iii. State name. A financial institution complies by reporting the 
two letter State code for the State in which the property is located, 
using the U.S. Postal Service official State abbreviations.
    iv. Zip Code. A financial institution complies by reporting the five 
or nine digit Zip Code in which the property is located.
    3. Property address--not applicable. A financial institution 
complies with Sec.  1003.4(a)(9)(i) by reporting that the requirement is 
not applicable if the property address of the property securing the 
covered loan is not known. For example, if the property did not have a 
property address at closing or if the applicant did not provide the 
property address of the property to the financial institution before the 
application was denied, withdrawn, or closed for incompleteness, the 
financial institution complies with Sec.  1003.4(a)(9)(i) by reporting 
that the requirement is not applicable.

                          Paragraph 4(a)(9)(ii)

    1. Optional reporting. Section 1003.4(a)(9)(ii) requires a financial 
institution to report the State, county, and census tract of the 
property securing the covered loan or, in the case of an application, 
proposed to secure the covered loan if the property is located in an MSA 
or MD in which the financial institution has a home or branch office or 
if the institution is subject to Sec.  1003.4(e). Section 
1003.4(a)(9)(ii)(C) further limits the requirement to report census 
tract to covered loans secured by or applications proposed to be secured 
by properties located in counties with a population of more than 30,000 
according to the most recent decennial census conducted by the U.S. 
Census Bureau. For transactions for which State, county, or census tract 
reporting is not required under Sec.  1003.4(a)(9)(ii) or (e), financial 
institutions may report that the requirement is not applicable, or they 
may voluntarily report the State, county, or census tract information.

                        Paragraph 4(a)(9)(ii)(A)

    1. Applications--State not provided. When reporting an application, 
a financial institution complies with Sec.  1003.4(a)(9)(ii)(A) by 
reporting that the requirement is not applicable if the State in which 
the property is located was not known before the application was denied, 
withdrawn, or closed for incompleteness.

                        Paragraph 4(a)(9)(ii)(B)

    1. General. A financial institution complies by reporting the five-
digit Federal Information Processing Standards (FIPS) numerical county 
code.
    2. Applications--county not provided. When reporting an application, 
a financial institution complies with Sec.  1003.4(a)(9)(ii)(B) by 
reporting that the requirement is not applicable if the county in which 
the property is located was not known before the application was denied, 
withdrawn, or closed for incompleteness.

                        Paragraph 4(a)(9)(ii)(C)

    1. General. Census tract numbers are defined by the U.S. Census 
Bureau. A financial institution complies with Sec.  1003.4(a)(9)(ii)(C) 
if it uses the boundaries and codes in effect on January 1 of the 
calendar year covered by the loan/application register that it is 
reporting.
    2. Applications--census tract not provided. When reporting an 
application, a financial institution complies with Sec.  
1003.4(a)(9)(ii)(C) by reporting that the requirement is not applicable 
if the census tract in which the property is located was not known 
before the application was denied, withdrawn, or closed for 
incompleteness.

[[Page 159]]

                          Paragraph 4(a)(10)(i)

    1. Applicant data--general. Refer to appendix B to this part for 
instructions on collection of an applicant's ethnicity, race, and sex.
    2. Transition rule for applicant data collected prior to January 1, 
2018. If a financial institution receives an application prior to 
January 1, 2018, but final action is taken on or after January 1, 2018, 
the financial institution complies with Sec.  1003.4(a)(10)(i) and (b) 
if it collects the information in accordance with the requirements in 
effect at the time the information was collected. For example, if a 
financial institution receives an application on November 15, 2017, 
collects the applicant's ethnicity, race, and sex in accordance with the 
instructions in effect on that date, and takes final action on the 
application on January 5, 2018, the financial institution has complied 
with the requirements of Sec.  1003.4(a)(10)(i) and (b), even though 
those instructions changed after the information was collected but 
before the date of final action. However, if, in this example, the 
financial institution collected the applicant's ethnicity, race, and sex 
on or after January 1, 2018, Sec.  1003.4(a)(10)(i) and (b) requires the 
financial institution to collect the information in accordance with the 
amended instructions.

                         Paragraph 4(a)(10)(ii)

    1. Applicant data--completion by financial institution. A financial 
institution complies with Sec.  1003.4(a)(10)(ii) by reporting the 
applicant's age, as of the application date under Sec.  
1003.4(a)(1)(ii), as the number of whole years derived from the date of 
birth as shown on the application form. For example, if an applicant 
provides a date of birth of 01/15/1970 on the application form that the 
financial institution receives on 01/14/2015, the institution reports 44 
as the applicant's age.
    2. Applicant data--co-applicant. If there are no co-applicants, the 
financial institution reports that there is no co-applicant. If there is 
more than one co-applicant, the financial institution reports the age 
only for the first co-applicant listed on the application form. A co-
applicant may provide an absent co-applicant's age on behalf of the 
absent co-applicant.
    3. Applicant data--purchased loan. A financial institution complies 
with Sec.  1003.4(a)(10)(ii) by reporting that the requirement is not 
applicable when reporting a purchased loan for which the institution 
chooses not to report the age.
    4. Applicant data--non-natural person. A financial institution 
complies with Sec.  1003.4(a)(10)(ii) by reporting that the requirement 
is not applicable if the applicant or co-applicant is not a natural 
person (for example, a corporation, partnership, or trust). For example, 
for a transaction involving a trust, a financial institution reports 
that the requirement to report the applicant's age is not applicable if 
the trust is the applicant. On the other hand, if the applicant is a 
natural person, and is the beneficiary of a trust, a financial 
institution reports the applicant's age.
    5. Applicant data--guarantor. For purposes of Sec.  
1003.4(a)(10)(ii), if a covered loan or application includes a 
guarantor, a financial institution does not report the guarantor's age.

                         Paragraph 4(a)(10)(iii)

    1. Income data--income relied on. When a financial institution 
evaluates income as part of a credit decision, it reports the gross 
annual income relied on in making the credit decision. For example, if 
an institution relies on an applicant's salary to compute a debt-to-
income ratio but also relies on the applicant's annual bonus to evaluate 
creditworthiness, the institution reports the salary and the bonus to 
the extent relied upon. If an institution relies on only a portion of an 
applicant's income in its determination, it does not report that portion 
of income not relied on. For example, if an institution, pursuant to 
lender and investor guidelines, does not rely on an applicant's 
commission income because it has been earned for less than 12 months, 
the institution does not include the applicant's commission income in 
the income reported. Likewise, if an institution relies on the verified 
gross income of the applicant in making the credit decision, then the 
institution reports the verified gross income. Similarly, if an 
institution relies on the income of a cosigner to evaluate 
creditworthiness, the institution includes the cosigner's income to the 
extent relied upon. An institution, however, does not include the income 
of a guarantor who is only secondarily liable.
    2. Income data--co-applicant. If two persons jointly apply for a 
covered loan and both list income on the application, but the financial 
institution relies on the income of only one applicant in evaluating 
creditworthiness, the institution reports only the income relied on.
    3. Income data--loan to employee. A financial institution complies 
with Sec.  1003.4(a)(10)(iii) by reporting that the requirement is not 
applicable for a covered loan to, or an application from, its employee 
to protect the employee's privacy, even though the institution relied on 
the employee's income in making the credit decision.
    4. Income data--assets. A financial institution does not include as 
income amounts considered in making a credit decision based on factors 
that an institution relies on in addition to income, such as amounts 
derived from underwriting calculations of the potential annuitization or 
depletion of an applicant's remaining assets. Actual distributions from 
retirement accounts or other assets

[[Page 160]]

that are relied on by the financial institution as income should be 
reported as income. The interpretation of income in this paragraph does 
not affect Sec.  1003.4(a)(23), which requires, except for purchased 
covered loans, the collection of the ratio of the applicant's or 
borrower's total monthly debt to the total monthly income relied on in 
making the credit decision.
    5. Income data--credit decision not made. Section 1003.4(a)(10)(iii) 
requires a financial institution to report the gross annual income 
relied on in processing the application if a credit decision was not 
made. For example, assume an institution received an application that 
included an applicant's self-reported income, but the application was 
withdrawn before a credit decision that would have considered income was 
made. The financial institution reports the income information relied on 
in processing the application at the time that the application was 
withdrawn or the file was closed for incompleteness.
    6. Income data--credit decision not requiring consideration of 
income. A financial institution complies with Sec.  1003.4(a)(10)(iii) 
by reporting that the requirement is not applicable if the application 
did not or would not have required a credit decision that considered 
income under the financial institution's policies and procedures. For 
example, if the financial institution's policies and procedures do not 
consider income for a streamlined refinance program, the institution 
reports that the requirement is not applicable, even if the institution 
received income information from the applicant.
    7. Income data--non-natural person. A financial institution reports 
that the requirement is not applicable when the applicant or co-
applicant is not a natural person (e.g., a corporation, partnership, or 
trust). For example, for a transaction involving a trust, a financial 
institution reports that the requirement to report income data is not 
applicable if the trust is the applicant. On the other hand, if the 
applicant is a natural person, and is the beneficiary of a trust, a 
financial institution is required to report the information described in 
Sec.  1003.4(a)(10)(iii).
    8. Income data--multifamily properties. A financial institution 
complies with Sec.  1003.4(a)(10)(iii) by reporting that the requirement 
is not applicable when the covered loan is secured by, or application is 
proposed to be secured by, a multifamily dwelling.
    9. Income data--purchased loans. A financial institution complies 
with Sec.  1003.4(a)(10)(iii) by reporting that the requirement is not 
applicable when reporting a purchased covered loan for which the 
institution chooses not to report the income.
    10. Income data--rounding. A financial institution complies by 
reporting the dollar amount of the income in thousands, rounded to the 
nearest thousand ($500 rounds up to the next $1,000). For example, 
$35,500 is reported as 36.

                           Paragraph 4(a)(11)

    1. Type of purchaser--loan-participation interests sold to more than 
one entity. A financial institution that originates a covered loan, and 
then sells it to more than one entity, reports the ``type of purchaser'' 
based on the entity purchasing the greatest interest, if any. For 
purposes of Sec.  1003.4(a)(11), if a financial institution sells some 
interest or interests in a covered loan but retains a majority interest 
in that loan, it does not report the sale.
    2. Type of purchaser--swapped covered loans. Covered loans 
``swapped'' for mortgage-backed securities are to be treated as sales; 
the purchaser is the entity receiving the covered loans that are 
swapped.
    3. Type of purchaser--affiliate institution. For purposes of 
complying with Sec.  1003.4(a)(11), the term ``affiliate'' means any 
company that controls, is controlled by, or is under common control 
with, another company, as set forth in the Bank Holding Company Act of 
1956 (12 U.S.C. 1841 et seq.).
    4. Type of purchaser--private securitizations. A financial 
institution that knows or reasonably believes that the covered loan it 
is selling will be securitized by the entity purchasing the covered 
loan, other than by one of the government-sponsored enterprises, reports 
the purchasing entity type as a private securitizer regardless of the 
type or affiliation of the purchasing entity. Knowledge or reasonable 
belief could, for example, be based on the purchase agreement or other 
related documents, the financial institution's previous transactions 
with the purchaser, or the purchaser's role as a securitizer (such as an 
investment bank). If a financial institution selling a covered loan does 
not know or reasonably believe that the purchaser will securitize the 
loan, and the seller knows that the purchaser frequently holds or 
disposes of loans by means other than securitization, then the financial 
institution should report the covered loan as purchased by, as 
appropriate, a commercial bank, savings bank, savings association, life 
insurance company, credit union, mortgage company, finance company, 
affiliate institution, or other type of purchaser.
    5. Type of purchaser--mortgage company. For purposes of complying 
with Sec.  1003.4(a)(11), a mortgage company means a nondepository 
institution that purchases covered loans and typically originates such 
loans. A mortgage company might be an affiliate or a subsidiary of a 
bank holding company or thrift holding company, or it might be an 
independent mortgage company. Regardless, a financial institution 
reports the purchasing entity type as a mortgage company, unless the 
mortgage company is an affiliate of the

[[Page 161]]

seller institution, in which case the seller institution should report 
the loan as purchased by an affiliate institution.
    6. Purchases by subsidiaries. A financial institution that sells a 
covered loan to its subsidiary that is a commercial bank, savings bank, 
or savings association, should report the covered loan as purchased by a 
commercial bank, savings bank, or savings association. A financial 
institution that sells a covered loan to its subsidiary that is a life 
insurance company, should report the covered loan as purchased by a life 
insurance company. A financial institution that sells a covered loan to 
its subsidiary that is a credit union, mortgage company, or finance 
company, should report the covered loan as purchased by a credit union, 
mortgage company, or finance company. If the subsidiary that purchases 
the covered loan is not a commercial bank, savings bank, savings 
association, life insurance company, credit union, mortgage company, or 
finance company, the seller institution should report the loan as 
purchased by other type of purchaser. The financial institution should 
report the covered loan as purchased by an affiliate institution when 
the subsidiary is an affiliate of the seller institution.
    7. Type of purchaser--bank holding company or thrift holding 
company. When a financial institution sells a covered loan to a bank 
holding company or thrift holding company (rather than to one of its 
subsidiaries), it should report the loan as purchased by other type of 
purchaser, unless the bank holding company or thrift holding company is 
an affiliate of the seller institution, in which case the seller 
institution should report the loan as purchased by an affiliate 
institution.
    8. Repurchased covered loans. See comment 4(a)-5 regarding reporting 
requirements when a covered loan is repurchased by the originating 
financial institution.
    9. Type of purchaser--quarterly recording. For purposes of recording 
the type of purchaser within 30 calendar days after the end of the 
calendar quarter pursuant to Sec.  1003.4(f), a financial institution 
records that the requirement is not applicable if the institution 
originated or purchased a covered loan and did not sell it during the 
calendar quarter for which the institution is recording the data. If the 
financial institution sells the covered loan in a subsequent quarter of 
the same calendar year, the financial institution records the type of 
purchaser on its loan/application register for the quarter in which the 
covered loan was sold. If a financial institution sells the covered loan 
in a succeeding year, the financial institution should not record the 
sale.
    10. Type of purchaser--not applicable. A financial institution 
reports that the requirement is not applicable for applications that 
were denied, withdrawn, closed for incompleteness or approved but not 
accepted by the applicant; and for preapproval requests that were denied 
or approved but not accepted by the applicant. A financial institution 
also reports that the requirement is not applicable if the institution 
originated or purchased a covered loan and did not sell it during that 
same calendar year.

                           Paragraph 4(a)(12)

    1. Average prime offer rate. Average prime offer rates are annual 
percentage rates derived from average interest rates and other loan 
pricing terms offered to borrowers by a set of creditors for mortgage 
loans that have low-risk pricing characteristics. Other loan pricing 
terms may include commonly used indices, margins, and initial fixed-rate 
periods for variable-rate transactions. Relevant pricing characteristics 
may include a consumer's credit history and transaction characteristics 
such as the loan-to-value ratio, owner-occupant status, and purpose of 
the transaction. To obtain average prime offer rates, the Bureau uses 
creditor data by transaction type.
    2. Bureau tables. The Bureau publishes tables of current and 
historic average prime offer rates by transaction type on the FFIEC's 
website (http://www.ffiec.gov/hmda) and the Bureau's website (https://
www.consumerfinance.gov). The Bureau calculates an annual percentage 
rate, consistent with Regulation Z (see 12 CFR 1026.22 and 12 CFR part 
1026, appendix J), for each transaction type for which pricing terms are 
available from the creditor data described in comment 4(a)(12)-1. The 
Bureau uses loan pricing terms available in the creditor data and other 
information to estimate annual percentage rates for other types of 
transactions for which the creditor data are limited or not available. 
The Bureau publishes on the FFIEC's website and the Bureau's website the 
methodology it uses to arrive at these estimates. A financial 
institution may either use the average prime offer rates published by 
the Bureau or determine average prime offer rates itself by employing 
the methodology published on the FFIEC's website and the Bureau's 
website. A financial institution that determines average prime offer 
rates itself, however, is responsible for correctly determining the 
rates in accordance with the published methodology.
    3. Rate spread calculation--annual percentage rate. The requirements 
of Sec.  1003.4(a)(12)(i) refer to the covered loan's annual percentage 
rate. For closed-end mortgage loans, a financial institution complies 
with Sec.  1003.4(a)(12)(i) by relying on the annual percentage rate for 
the covered loan, as calculated and disclosed pursuant to Regulation Z, 
12 CFR 1026.18 or 1026.38. For open-end lines of credit, a financial 
institution complies with Sec.  1003.4(a)(12)(i) by relying on the 
annual percentage rate for the covered loan, as calculated and disclosed

[[Page 162]]

pursuant to Regulation Z, 12 CFR 1026.6. If multiple annual percentage 
rates are calculated and disclosed pursuant to Regulation Z, 12 CFR 
1026.6, a financial institution relies on the annual percentage rate in 
effect at the time of account opening. If an open-end line of credit has 
a variable-rate feature and a fixed-rate and -term payment option during 
the draw period, a financial institution relies on the annual percentage 
rate in effect at the time of account opening under the variable-rate 
feature, which would be a discounted initial rate if one is offered 
under the variable-rate feature. See comment 4(a)(12)-8 for guidance 
regarding the annual percentage rate a financial institution relies on 
in the case of an application or preapproval request that was approved 
but not accepted.
    4. Rate spread calculation--comparable transaction. The rate spread 
calculation in Sec.  1003.4(a)(12)(i) is defined by reference to a 
comparable transaction, which is determined according to the covered 
loan's amortization type (i.e., fixed- or variable-rate) and loan term. 
For covered loans that are open-end lines of credit, Sec.  
1003.4(a)(12)(i) requires a financial institution to identify the most 
closely comparable closed-end transaction. The tables of average prime 
offer rates published by the Bureau (see comment 4(a)(12)-2) provide 
additional detail about how to identify the comparable transaction.
    i. Fixed-rate transactions. For fixed-rate covered loans, the term 
for identifying the comparable transaction is the transaction's maturity 
(i.e., the period until the last payment will be due under the closed-
end mortgage loan contract or open-end line of credit agreement). If an 
open-end credit plan has a fixed rate but no definite plan length, a 
financial institution complies with Sec.  1003.4(a)(12)(i) by using a 
30-year fixed-rate loan as the most closely comparable closed-end 
transaction. Financial institutions may refer to the table on the FFIEC 
website entitled ``Average Prime Offer Rates-Fixed'' when identifying a 
comparable fixed-rate transaction.
    ii. Variable-rate transactions. For variable-rate covered loans, the 
term for identifying the comparable transaction is the initial, fixed-
rate period (i.e., the period until the first scheduled rate 
adjustment). For example, five years is the relevant term for a 
variable-rate transaction with a five-year, fixed-rate introductory 
period that is amortized over thirty years. Financial institutions may 
refer to the table on the FFIEC website entitled ``Average Prime Offer 
Rates-Variable'' when identifying a comparable variable-rate 
transaction. If an open-end line of credit has a variable rate and an 
optional, fixed-rate feature, a financial institution uses the rate 
table for variable-rate transactions.
    iii. Term not in whole years. When a covered loan's term to maturity 
(or, for a variable-rate transaction, the initial fixed-rate period) is 
not in whole years, the financial institution uses the number of whole 
years closest to the actual loan term or, if the actual loan term is 
exactly halfway between two whole years, by using the shorter loan term. 
For example, for a loan term of ten years and three months, the relevant 
term is ten years; for a loan term of ten years and nine months, the 
relevant term is 11 years; for a loan term of ten years and six months, 
the relevant term is ten years. If a loan term includes an odd number of 
days, in addition to an odd number of months, the financial institution 
rounds to the nearest whole month, or rounds down if the number of odd 
days is exactly halfway between two months. The financial institution 
rounds to one year any covered loan with a term shorter than six months, 
including variable-rate covered loans with no initial, fixed-rate 
periods. For example, if an open-end covered loan has a rate that varies 
according to an index plus a margin, with no introductory, fixed-rate 
period, the transaction term is one year.
    iv. Amortization period longer than loan term. If the amortization 
period of a covered loan is longer than the term of the transaction to 
maturity, Sec.  1003.4(a)(12)(i) requires a financial institution to use 
the loan term to determine the applicable average prime offer rate. For 
example, assume a financial institution originates a closed-end, fixed-
rate loan that has a term to maturity of five years and a thirty-year 
amortization period that results in a balloon payment. The financial 
institution complies with Sec.  1003.4(a)(12)(i) by using the five-year 
loan term.
    5. Rate-set date. The relevant date to use to determine the average 
prime offer rate for a comparable transaction is the date on which the 
interest rate was set by the financial institution for the final time 
before final action is taken (i.e., the application was approved but not 
accepted or the covered loan was originated).
    i. Rate-lock agreement. If an interest rate is set pursuant to a 
``lock-in'' agreement between the financial institution and the 
borrower, then the date on which the agreement fixes the interest rate 
is the date the rate was set. Except as provided in comment 4(a)(12)-
5.ii, if a rate is reset after a lock-in agreement is executed (for 
example, because the borrower exercises a float-down option or the 
agreement expires), then the relevant date is the date the financial 
institution exercises discretion in setting the rate for the final time 
before final action is taken. The same rule applies when a rate-lock 
agreement is extended and the rate is reset at the same rate, regardless 
of whether market rates have increased, decreased, or remained the same 
since the initial rate was set. If no

[[Page 163]]

lock-in agreement is executed, then the relevant date is the date on 
which the institution sets the rate for the final time before final 
action is taken.
    ii. Change in loan program. If a financial institution issues a 
rate-lock commitment under one loan program, the borrower subsequently 
changes to another program that is subject to different pricing terms, 
and the financial institution changes the rate promised to the borrower 
under the rate-lock commitment accordingly, the rate-set date is the 
date of the program change. However, if the financial institution 
changes the promised rate to the rate that would have been available to 
the borrower under the new program on the date of the original rate-lock 
commitment, then that is the date the rate is set, provided the 
financial institution consistently follows that practice in all such 
cases or the original rate-lock agreement so provided. For example, 
assume that a borrower locks a rate of 2.5 percent on June 1 for a 30-
year, variable-rate loan with a five-year, fixed-rate introductory 
period. On June 15, the borrower decides to switch to a 30-year, fixed-
rate loan, and the rate available to the borrower for that product on 
June 15 is 4.0 percent. On June 1, the 30-year, fixed-rate loan would 
have been available to the borrower at a rate of 3.5 percent. If the 
financial institution offers the borrower the 3.5 percent rate (i.e., 
the rate that would have been available to the borrower for the fixed-
rate product on June 1, the date of the original rate-lock) because the 
original agreement so provided or because the financial institution 
consistently follows that practice for borrowers who change loan 
programs, then the financial institution should use June 1 as the rate-
set date. In all other cases, the financial institution should use June 
15 as the rate-set date.
    iii. Brokered loans. When a financial institution has reporting 
responsibility for an application for a covered loan that it received 
from a broker, as discussed in comment 4(a)-2 (e.g., because the 
financial institution makes a credit decision prior to closing or 
account opening), the rate-set date is the last date the financial 
institution set the rate with the broker, not the date the broker set 
the borrower's rate.
    6. Compare the annual percentage rate to the average prime offer 
rate. Section 1003.4(a)(12)(i) requires a financial institution to 
compare the covered loan's annual percentage rate to the most recently 
available average prime offer rate that was in effect for the comparable 
transaction as of the rate-set date. For purposes of Sec.  
1003.4(a)(12)(i), the most recently available rate means the average 
prime offer rate set forth in the applicable table with the most recent 
effective date as of the date the interest rate was set. However, Sec.  
1003.4(a)(12)(i) does not permit a financial institution to use an 
average prime offer rate before its effective date.
    7. Rate spread--scope of requirement. If the covered loan is an 
assumption, reverse mortgage, a purchased loan, or is not subject to 
Regulation Z, 12 CFR part 1026, a financial institution complies with 
Sec.  1003.4(a)(12) by reporting that the requirement is not applicable. 
If the application did not result in an origination for a reason other 
than the application was approved but not accepted by the applicant, a 
financial institution complies with Sec.  1003.4(a)(12) by reporting 
that the requirement is not applicable. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository institution or 
insured credit union is not required to report the rate spread. See 
Sec.  1003.3(d) and related commentary.
    8. Application or preapproval request approved but not accepted. In 
the case of an application or preapproval request that was approved but 
not accepted, Sec.  1003.4(a)(12) requires a financial institution to 
report the applicable rate spread. In such cases, the financial 
institution would provide early disclosures under Regulation Z, 12 CFR 
1026.18 or 1026.37 (for closed-end mortgage loans), or 1026.40 (for 
open-end lines of credit), but might never provide any subsequent 
disclosures. In such cases where no subsequent disclosures are provided, 
a financial institution complies with Sec.  1003.4(a)(12)(i) by relying 
on the annual percentage rate for the application or preapproval 
request, as calculated and disclosed pursuant to Regulation Z, 12 CFR 
1026.18 or 1026.37 (for closed-end mortgage loans), or 1026.40 (for 
open-end lines of credit), as applicable. For transactions subject to 
Regulation C for which no disclosures under Regulation Z are required, a 
financial institution complies with Sec.  1003.4(a)(12)(i) by reporting 
that the requirement is not applicable.
    9. Corrected disclosures. In the case of a covered loan or an 
application that was approved but not accepted, if the annual percentage 
rate changes because a financial institution provides a corrected 
version of the disclosures required under Regulation Z, 12 CFR 
1026.19(a), pursuant to 12 CFR 1026.19(a)(2), under 12 CFR 1026.19(f), 
pursuant to 12 CFR 1026.19(f)(2), or under 12 CFR 1026.6(a), the 
financial institution complies with Sec.  1003.4(a)(12)(i) by comparing 
the corrected and disclosed annual percentage rate to the most recently 
available average prime offer rate that was in effect for a comparable 
transaction as of the rate-set date, provided that the corrected 
disclosure was provided to the borrower prior to the end of the 
reporting period in which final action is taken. For purposes of Sec.  
1003.4(a)(12), the date the corrected disclosure was provided to the 
borrower is the date the disclosure was mailed or delivered to the 
borrower in person; the financial institution's method of delivery does

[[Page 164]]

not affect the date provided. For example, where a financial institution 
provides a corrected version of the disclosures required under 12 CFR 
1026.19(f), pursuant to 12 CFR 1026.19(f)(2), the date provided is the 
date disclosed pursuant to Regulation Z, 12 CFR 1026.38(a)(3)(i). The 
provision of a corrected disclosure does not affect how a financial 
institution determines the rate-set date. See comment 4(a)(12)-5. For 
example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2)(v), that reflects a corrected annual 
percentage rate, the financial institution reports the difference 
between the corrected annual percentage rate and the most recently 
available average prime offer rate that was in effect for a comparable 
transaction as of the rate-set date only if the corrected disclosure was 
provided to the borrower prior to the end of the calendar year in which 
final action is taken.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), that reflects a corrected annual percentage rate, the 
financial institution reports the difference between the corrected 
annual percentage rate and the most recently available average prime 
offer rate that was in effect for a comparable transaction as of the 
rate-set date only if the corrected disclosure was provided to the 
borrower prior to the end of the quarter in which final action is taken. 
The financial institution does not report the difference between the 
corrected annual percentage rate and the most recently available average 
prime offer rate that was in effect for a comparable transaction as of 
the rate-set date if the corrected disclosure was provided to the 
borrower after the end of the quarter in which final action is taken, 
even if the corrected disclosure was provided to the borrower prior to 
the deadline for timely submission of the financial institution's 
quarterly data. However, the financial institution reports the 
difference between the corrected annual percentage rate and the most 
recently available average prime offer rate that was in effect for a 
comparable transaction as of the rate-set date on its annual loan/
application register, provided that the corrected disclosure was 
provided to the borrower prior to the end of the calendar year in which 
final action is taken.

                           Paragraph 4(a)(13)

    1. HOEPA status--not applicable. If the covered loan is not subject 
to the Home Ownership and Equity Protection Act of 1994, as implemented 
in Regulation Z, 12 CFR 1026.32, a financial institution complies with 
Sec.  1003.4(a)(13) by reporting that the requirement is not applicable. 
If an application did not result in an origination, a financial 
institution complies with Sec.  1003.4(a)(13) by reporting that the 
requirement is not applicable.

                           Paragraph 4(a)(14)

    1. Determining lien status for applications and covered loans 
originated and purchased.
    i. Financial institutions are required to report lien status for 
covered loans they originate and purchase and applications that do not 
result in originations (preapproval requests that are approved but not 
accepted, preapproval requests that are denied, applications that are 
approved but not accepted, denied, withdrawn, or closed for 
incompleteness). For covered loans purchased by a financial institution, 
lien status is determined by reference to the best information readily 
available to the financial institution at the time of purchase. For 
covered loans that a financial institution originates and applications 
that do not result in originations, lien status is determined by 
reference to the best information readily available to the financial 
institution at the time final action is taken and to the financial 
institution's own procedures. Thus, financial institutions may rely on 
the title search they routinely perform as part of their underwriting 
procedures--for example, for home purchase loans. Regulation C does not 
require financial institutions to perform title searches solely to 
comply with HMDA reporting requirements. Financial institutions may rely 
on other information that is readily available to them at the time final 
action is taken and that they reasonably believe is accurate, such as 
the applicant's statement on the application or the applicant's credit 
report. For example, where the applicant indicates on the application 
that there is a mortgage on the property or where the applicant's credit 
report shows that the applicant has a mortgage--and that mortgage will 
not be paid off as part of the transaction--the financial institution 
may assume that the loan it originates is secured by a subordinate lien. 
If the same application did not result in an origination--for example, 
because the application was denied or withdrawn--the financial 
institution would report the application as an application for a 
subordinate-lien loan.
    ii. Financial institutions may also consider their established 
procedures when determining lien status for applications that do not 
result in originations. For example, assume an applicant applies to a 
financial institution to refinance a $100,000 first mortgage; the 
applicant also has an open-end line of credit for $20,000. If the 
financial institution's practice in such a case is to ensure that it 
will have first-lien position--through

[[Page 165]]

a subordination agreement with the holder of the lien securing the open-
end line of credit--then the financial institution should report the 
application as an application for a first-lien covered loan.
    2. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.

                           Paragraph 4(a)(15)

    1. Credit score--relied on. Except for purchased covered loans and 
partially exempt transactions under Sec.  1003.3(d), Sec.  1003.4(a)(15) 
requires a financial institution to report the credit score or scores 
relied on in making the credit decision and information about the 
scoring model used to generate each score. A financial institution 
relies on a credit score in making the credit decision if the credit 
score was a factor in the credit decision even if it was not a 
dispositive factor. For example, if a credit score is one of multiple 
factors in a financial institution's credit decision, the financial 
institution has relied on the credit score even if the financial 
institution denies the application because one or more underwriting 
requirements other than the credit score are not satisfied.
    2. Credit score--multiple credit scores. When a financial 
institution obtains or creates two or more credit scores for a single 
applicant or borrower but relies on only one score in making the credit 
decision (for example, by relying on the lowest, highest, most recent, 
or average of all of the scores), the financial institution complies 
with Sec.  1003.4(a)(15) by reporting that credit score and information 
about the scoring model used. When a financial institution uses more 
than one credit scoring model and combines the scores into a composite 
credit score that it relies on, the financial institution reports that 
score and reports that more than one credit scoring model was used. When 
a financial institution obtains or creates two or more credit scores for 
an applicant or borrower and relies on multiple scores for the applicant 
or borrower in making the credit decision (for example, by relying on a 
scoring grid that considers each of the scores obtained or created for 
the applicant or borrower without combining the scores into a composite 
score), Sec.  1003.4(a)(15) requires the financial institution to report 
one of the credit scores for the applicant or borrower that was relied 
on in making the credit decision. In choosing which credit score to 
report in this circumstance, a financial institution need not use the 
same approach for its entire HMDA submission, but it should be generally 
consistent (such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans). In 
instances such as these, the financial institution should report the 
name and version of the credit scoring model for the score reported.
    3. Credit score--multiple applicants or borrowers. In a transaction 
involving two or more applicants or borrowers for whom the financial 
institution obtains or creates a single credit score and relies on that 
credit score in making the credit decision for the transaction, the 
institution complies with Sec.  1003.4(a)(15) by reporting that credit 
score for the applicant and reporting that the requirement is not 
applicable for the first co-applicant or, at the financial institution's 
discretion, by reporting that credit score for the first co-applicant 
and reporting that the requirement is not applicable for the applicant. 
Otherwise, a financial institution complies with Sec.  1003.4(a)(15) by 
reporting a credit score for the applicant that it relied on in making 
the credit decision, if any, and a credit score for the first co-
applicant that it relied on in making the credit decision, if any. To 
illustrate, assume a transaction involves one applicant and one co-
applicant and that the financial institution obtains or creates two 
credit scores for the applicant and two credit scores for the co-
applicant. Assume further that the financial institution relies on a 
single credit score that is the lowest, highest, most recent, or average 
of all of the credit scores obtained or created to make the credit 
decision for the transaction. The financial institution complies with 
Sec.  1003.4(a)(15) by reporting that credit score and information about 
the scoring model used for the applicant and reporting that the 
requirement is not applicable for the first co-applicant or, at the 
financial institution's discretion, by reporting the data for the first 
co-applicant and reporting that the requirement is not applicable for 
the applicant. Alternatively, assume a transaction involves one 
applicant and one co-applicant and that the financial institution 
obtains or creates three credit scores for the applicant and three 
credit scores for the co-applicant. Assume further that the financial 
institution relies on the middle credit score for the applicant and the 
middle credit score for the co-applicant to make the credit decision for 
the transaction. The financial institution complies with Sec.  
1003.4(a)(15) by reporting both the middle score for the applicant and 
the middle score for the co-applicant.
    4. Transactions for which no credit decision was made. If a file was 
closed for incompleteness or the application was withdrawn before a 
credit decision was made, the financial institution complies with Sec.  
1003.4(a)(15) by reporting that the requirement is not applicable, even 
if the financial institution had obtained or created a credit score for 
the applicant or co-applicant. For example, if a file is closed for 
incompleteness and is so reported in accordance with Sec.  1003.4(a)(8), 
the financial

[[Page 166]]

institution complies with Sec.  1003.4(a)(15) by reporting that the 
requirement is not applicable, even if the financial institution had 
obtained or created a credit score for the applicant or co-applicant. 
Similarly, if an application was withdrawn by the applicant before a 
credit decision was made and is so reported in accordance with Sec.  
1003.4(a)(8), the financial institution complies with Sec.  
1003.4(a)(15) by reporting that the requirement is not applicable, even 
if the financial institution had obtained or created a credit score for 
the applicant or co-applicant.
    5. Transactions for which no credit score was relied on. If a 
financial institution makes a credit decision without relying on a 
credit score for the applicant or borrower, the financial institution 
complies with Sec.  1003.4(a)(15) by reporting that the requirement is 
not applicable.
    6. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(15) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.
    7. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution complies 
with Sec.  1003.4(a)(15) by reporting that the requirement is not 
applicable.

                           Paragraph 4(a)(16)

    1. Reason for denial--general. A financial institution complies with 
Sec.  1003.4(a)(16) by reporting the principal reason or reasons it 
denied the application, indicating up to four reasons. The financial 
institution should report only the principal reason or reasons it denied 
the application, even if there are fewer than four reasons. For example, 
if a financial institution denies the application because of the 
applicant's credit history and debt-to-income ratio, the financial 
institution need only report these two principal reasons. The reasons 
reported must be specific and accurately describe the principal reason 
or reasons the financial institution denied the application.
    2. Reason for denial--preapproval request denied. Section 
1003.4(a)(16) requires a financial institution to report the principal 
reason or reasons it denied the application. A request for a preapproval 
under a preapproval program as defined by Sec.  1003.2(b)(2) is an 
application. If a financial institution denies a preapproval request, 
the financial institution complies with Sec.  1003.4(a)(16) by reporting 
the reason or reasons it denied the preapproval request.
    3. Reason for denial--adverse action model form or similar form. If 
a financial institution chooses to provide the applicant the reason or 
reasons it denied the application using the model form contained in 
appendix C to Regulation B (Form C-1, Sample Notice of Action Taken and 
Statement of Reasons) or a similar form, Sec.  1003.4(a)(16) requires 
the financial institution to report the reason or reasons that were 
specified on the form by the financial institution, which includes 
reporting the ``Other'' reason or reasons that were specified on the 
form by the financial institution, if applicable. If a financial 
institution chooses to provide a disclosure of the applicant's right to 
a statement of specific reasons using the model form contained in 
appendix C to Regulation B (Form C-5, Sample Disclosure of Right to 
Request Specific Reasons for Credit Denial) or a similar form, or 
chooses to provide the denial reason or reasons orally under Regulation 
B, 12 CFR 1002.9(a)(2)(ii), the financial institution complies with 
Sec.  1003.4(a)(16) by entering the principal reason or reasons it 
denied the application.
    4. Reason for denial--scope of requirement. A financial institution 
complies with Sec.  1003.4(a)(16) by reporting that the requirement is 
not applicable if the action taken on the application, pursuant to Sec.  
1003.4(a)(8), is not a denial. For example, a financial institution 
complies with Sec.  1003.4(a)(16) by reporting that the requirement is 
not applicable if the loan is originated or purchased by the financial 
institution, or the application or preapproval request was approved but 
not accepted, or the application was withdrawn before a credit decision 
was made, or the file was closed for incompleteness. For partially 
exempt transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
principal reason or reasons it denied an application. See Sec.  
1003.3(d) and related commentary.

                          Paragraph 4(a)(17)(i)

    1. Total loan costs--scope of requirement. Section 1003.4(a)(17)(i) 
does not require financial institutions to report the total loan costs 
for applications, or for transactions not subject to Regulation Z, 12 
CFR 1026.43(c), and 12 CFR 1026.19(f), such as open-end lines of credit, 
reverse mortgages, or loans or lines of credit made primarily for 
business or commercial purposes. In these cases, a financial institution 
complies with Sec.  1003.4(a)(17)(i) by reporting that the requirement 
is not applicable to the transaction. For partially exempt transactions 
under Sec.  1003.3(d), an insured depository institution or insured 
credit union is not required to report the total loan costs. See Sec.  
1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec.  1003.4(a)(17)(i) 
by reporting that the requirement is not applicable to the transaction.
    3. Corrected disclosures. If the amount of total loan costs changes 
because a financial

[[Page 167]]

institution provides a corrected version of the disclosures required 
under Regulation Z, 12 CFR 1026.19(f), pursuant to 12 CFR 1026.19(f)(2), 
the financial institution complies with Sec.  1003.4(a)(17)(i) by 
reporting the corrected amount, provided that the corrected disclosure 
was provided to the borrower prior to the end of the reporting period in 
which closing occurs. For purposes of Sec.  1003.4(a)(17)(i), the date 
the corrected disclosure was provided to the borrower is the date 
disclosed pursuant to Regulation Z, 12 CFR 1026.38(a)(3)(i). For 
example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower to 
reflect a refund made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), 
the financial institution reports the corrected amount of total loan 
costs only if the corrected disclosure was provided to the borrower 
prior to the end of the calendar year in which closing occurs.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund made 
pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of total loan costs only if the 
corrected disclosure was provided to the borrower prior to the end of 
the quarter in which closing occurs. The financial institution does not 
report the corrected amount of total loan costs in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurs, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of total 
loan costs on its annual loan/application register, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the calendar year in which closing occurs.

                         Paragraph 4(a)(17)(ii)

    1. Total points and fees--scope of requirement. Section 
1003.4(a)(17)(ii) does not require financial institutions to report the 
total points and fees for transactions not subject to Regulation Z, 12 
CFR 1026.43(c), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for business or commercial 
purposes, or for applications or purchased covered loans. In these 
cases, a financial institution complies with Sec.  1003.4(a)(17)(ii) by 
reporting that the requirement is not applicable to the transaction. For 
partially exempt transactions under Sec.  1003.3(d), an insured 
depository institution or insured credit union is not required to report 
the total points and fees. See Sec.  1003.3(d) and related commentary.
    2. Total points and fees cure mechanism. For covered loans subject 
to this reporting requirement, if a financial institution determines 
that the transaction's total points and fees exceeded the applicable 
limit and cures the overage pursuant to Regulation Z, 12 CFR 
1026.43(e)(3)(iii) and (iv), a financial institution complies with Sec.  
1003.4(a)(17)(ii) by reporting the correct amount of total points and 
fees, provided that the cure was effected during the same reporting 
period in which closing occurred. For example, in the case of a 
financial institution's quarterly submission, the financial institution 
reports the revised amount of total points and fees only if it cured the 
overage prior to the end of the quarter in which closing occurred. The 
financial institution does not report the revised amount of total points 
and fees in its quarterly submission if it cured the overage after the 
end of the quarter, even if the cure was effected prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the revised amount of total 
points and fees on its annual loan/application register.

                           Paragraph 4(a)(18)

    1. Origination charges--scope of requirement. Section 1003.4(a)(18) 
does not require financial institutions to report the total borrower-
paid origination charges for applications, or for transactions not 
subject to Regulation Z, 12 CFR 1026.19(f), such as open-end lines of 
credit, reverse mortgages, or loans or lines of credit made primarily 
for business or commercial purposes. In these cases, a financial 
institution complies with Sec.  1003.4(a)(18) by reporting that the 
requirement is not applicable to the transaction. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository institution or 
insured credit union is not required to report the total borrower-paid 
origination charges. See Sec.  1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec.  1003.4(a)(18) by 
reporting that the requirement is not applicable to the transaction.
    3. Corrected disclosures. If the total amount of borrower-paid 
origination charges changes because a financial institution provides a 
corrected version of the disclosures required under Regulation Z, 12 CFR 
1026.19(f), pursuant to 12 CFR 1026.19(f)(2), the financial institution 
complies with Sec.  1003.4(a)(18) by reporting the corrected amount, 
provided that the

[[Page 168]]

corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(18), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower to 
reflect a refund made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), 
the financial institution reports the corrected amount of borrower-paid 
origination charges only if the corrected disclosure was provided to the 
borrower prior to the end of the calendar year in which closing occurs.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund made 
pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of borrower-paid origination 
charges only if the corrected disclosure was provided to the borrower 
prior to the end of the quarter in which closing occurs. The financial 
institution does not report the corrected amount of borrower-paid 
origination charges in its quarterly submission if the corrected 
disclosure was provided to the borrower after the end of the quarter in 
which closing occurs, even if the corrected disclosure was provided to 
the borrower prior to the deadline for timely submission of the 
financial institution's quarterly data. However, the financial 
institution reports the corrected amount of borrower-paid origination 
charges on its annual loan/application register, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the calendar year in which closing occurs.

                           Paragraph 4(a)(19)

    1. Discount points--scope of requirement. Section 1003.4(a)(19) does 
not require financial institutions to report the discount points for 
applications, or for transactions not subject to Regulation Z, 12 CFR 
1026.19(f), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for business or commercial 
purposes. In these cases, a financial institution complies with Sec.  
1003.4(a)(19) by reporting that the requirement is not applicable to the 
transaction. For partially exempt transactions under Sec.  1003.3(d), an 
insured depository institution or insured credit union is not required 
to report the discount points. See Sec.  1003.3(d) and related 
commentary.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec.  1003.4(a)(19) by 
reporting that the requirement is not applicable to the transaction.
    3. Corrected disclosures. If the amount of discount points changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(19) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(19), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower to 
reflect a refund made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), 
the financial institution reports the corrected amount of discount 
points only if the corrected disclosure was provided to the borrower 
prior to the end of the calendar year in which closing occurred.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund made 
pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of discount points only if the 
corrected disclosure was provided to the borrower prior to the end of 
the quarter in which closing occurred. The financial institution does 
not report the corrected amount of discount points in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurred, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of 
discount points on its annual loan/application register, provided that 
the corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which closing occurred.

                           Paragraph 4(a)(20)

    1. Lender credits--scope of requirement. Section 1003.4(a)(20) does 
not require financial institutions to report lender credits for 
applications, or for transactions not subject to Regulation Z, 12 CFR 
1026.19(f), such as open-end lines of credit, reverse mortgages, or 
loans or lines of credit made primarily for

[[Page 169]]

business or commercial purposes. In these cases, a financial institution 
complies with Sec.  1003.4(a)(20) by reporting that the requirement is 
not applicable to the transaction. For partially exempt transactions 
under Sec.  1003.3(d), an insured depository institution or insured 
credit union is not required to report lender credits. See Sec.  
1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the integrated 
disclosure effective date. For purchased covered loans subject to this 
reporting requirement for which applications were received by the 
selling entity prior to the effective date of Regulation Z, 12 CFR 
1026.19(f), a financial institution complies with Sec.  1003.4(a)(20) by 
reporting that the requirement is not applicable to the transaction.
    3. Corrected disclosures. If the amount of lender credits changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(20) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurred. For purposes of Sec.  
1003.4(a)(20), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower to 
reflect a refund made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), 
the financial institution reports the corrected amount of lender credits 
only if the corrected disclosure was provided to the borrower prior to 
the end of the calendar year in which closing occurred.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund made 
pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of lender credits only if the 
corrected disclosure was provided to the borrower prior to the end of 
the quarter in which closing occurred. The financial institution does 
not report the corrected amount of lender credits in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurred, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of 
lender credits on its annual loan/application register, provided that 
the corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which closing occurred.

                           Paragraph 4(a)(21)

    1. Interest rate--disclosures. Except for partially exempt 
transactions under Sec.  1003.3(d), Sec.  1003.4(a)(21) requires a 
financial institution to identify the interest rate applicable to the 
approved application, or to the covered loan at closing or account 
opening. For covered loans or applications subject to the integrated 
mortgage disclosure requirements of Regulation Z, 12 CFR 1026.19(e) and 
(f), a financial institution complies with Sec.  1003.4(a)(21) by 
reporting the interest rate disclosed on the applicable disclosure. For 
covered loans or approved applications for which disclosures were 
provided pursuant to both the early and the final disclosure 
requirements in Regulation Z, 12 CFR 1026.19(e) and (f), a financial 
institution reports the interest rate disclosed pursuant to 12 CFR 
1026.19(f). A financial institution may rely on the definitions and 
commentary to the sections of Regulation Z relevant to the disclosure of 
the interest rate pursuant to 12 CFR 1026.19(e) or (f). If a financial 
institution provides a revised or corrected version of the disclosures 
required under Regulation Z, 12 CFR 1026.19(e) or (f), pursuant to 12 
CFR 1026.19(e)(3)(iv) or (f)(2), as applicable, the financial 
institution complies with Sec.  1003.4(a)(21) by reporting the interest 
rate on the revised or corrected disclosure, provided that the revised 
or corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which final action is taken. For purposes of 
Sec.  1003.4(a)(21), the date the revised or corrected disclosure was 
provided to the borrower is the date disclosed pursuant to Regulation Z, 
12 CFR 1026.37(a)(4) or 1026.38(a)(3)(i), as applicable.
    2. Applications. In the case of an application, Sec.  1003.4(a)(21) 
requires a financial institution to report the applicable interest rate 
only if the application has been approved by the financial institution 
but not accepted by the borrower. In such cases, a financial institution 
reports the interest rate applicable at the time that the application 
was approved by the financial institution. A financial institution may 
report the interest rate appearing on the disclosure provided pursuant 
to 12 CFR 1026.19(e) or (f) if such disclosure accurately reflects the 
interest rate at the time the application was approved. For applications 
that have been denied or withdrawn, or files closed for incompleteness, 
a financial institution reports that no interest rate was applicable to 
the application.
    3. Adjustable rate--interest rate unknown. Except as provided in 
comment 4(a)(21)-1, for adjustable-rate covered loans or applications, 
if the interest rate is unknown at the time that the application was 
approved, or

[[Page 170]]

at closing or account opening, a financial institution reports the 
fully-indexed rate based on the index applicable to the covered loan or 
application. For purposes of Sec.  1003.4(a)(21), the fully-indexed rate 
is the index value and margin at the time that the application was 
approved, or, for covered loans, at closing or account opening.

                           Paragraph 4(a)(22)

    1. Prepayment penalty term--scope of requirement. Section 
1003.4(a)(22) does not require financial institutions to report the term 
of any prepayment penalty for transactions not subject to Regulation Z, 
12 CFR part 1026, such as loans or lines of credit made primarily for 
business or commercial purposes, or for reverse mortgages or purchased 
covered loans. In these cases, a financial institution complies with 
Sec.  1003.4(a)(22) by reporting that the requirement is not applicable 
to the transaction. For partially exempt transactions under Sec.  
1003.3(d), an insured depository institution or insured credit union is 
not required to report the term of any prepayment penalty. See Sec.  
1003.3(d) and related commentary.
    2. Transactions for which no prepayment penalty exists. For covered 
loans or applications that have no prepayment penalty, a financial 
institution complies with Sec.  1003.4(a)(22) by reporting that the 
requirement is not applicable to the transaction. A financial 
institution may rely on the definitions and commentary to Regulation Z, 
12 CFR 1026.32(b)(6)(i) or (ii) in determining whether the terms of a 
transaction contain a prepayment penalty.

                           Paragraph 4(a)(23)

    1. General. For covered loans that are not purchased covered loans 
and that are not partially exempt under Sec.  1003.3(d), Sec.  
1003.4(a)(23) requires a financial institution to report the ratio of 
the applicant's or borrower's total monthly debt to total monthly income 
(debt-to-income ratio) relied on in making the credit decision. For 
example, if a financial institution calculated the applicant's or 
borrower's debt-to-income ratio twice--once according to the financial 
institution's own requirements and once according to the requirements of 
a secondary market investor--and the financial institution relied on the 
debt-to-income ratio calculated according to the secondary market 
investor's requirements in making the credit decision, Sec.  
1003.4(a)(23) requires the financial institution to report the debt-to-
income ratio calculated according to the requirements of the secondary 
market investor.
    2. Transactions for which a debt-to-income ratio was one of multiple 
factors. A financial institution relies on the ratio of the applicant's 
or borrower's total monthly debt to total monthly income (debt-to-income 
ratio) in making the credit decision if the debt-to-income ratio was a 
factor in the credit decision even if it was not a dispositive factor. 
For example, if the debt-to-income ratio was one of multiple factors in 
a financial institution's credit decision, the financial institution has 
relied on the debt-to-income ratio and complies with Sec.  1003.4(a)(23) 
by reporting the debt-to-income ratio, even if the financial institution 
denied the application because one or more underwriting requirements 
other than the debt-to-income ratio were not satisfied.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness, or if an application was withdrawn before a 
credit decision was made, a financial institution complies with Sec.  
1003.4(a)(23) by reporting that the requirement is not applicable, even 
if the financial institution had calculated the ratio of the applicant's 
total monthly debt to total monthly income (debt-to-income ratio). For 
example, if a file was closed for incompleteness and was so reported in 
accordance with Sec.  1003.4(a)(8), the financial institution complies 
with Sec.  1003.4(a)(23) by reporting that the requirement is not 
applicable, even if the financial institution had calculated the 
applicant's debt-to-income ratio. Similarly, if an application was 
withdrawn by the applicant before a credit decision was made, the 
financial institution complies with Sec.  1003.4(a)(23) by reporting 
that the requirement is not applicable, even if the financial 
institution had calculated the applicant's debt-to-income ratio.
    4. Transactions for which no debt-to-income ratio was relied on. 
Section 1003.4(a)(23) does not require a financial institution to 
calculate the ratio of an applicant's or borrower's total monthly debt 
to total monthly income (debt-to-income ratio), nor does it require a 
financial institution to rely on an applicant's or borrower's debt-to-
income ratio in making a credit decision. If a financial institution 
made a credit decision without relying on the applicant's or borrower's 
debt-to-income ratio, the financial institution complies with Sec.  
1003.4(a)(23) by reporting that the requirement is not applicable since 
no debt-to-income ratio was relied on in connection with the credit 
decision.
    5. Non-natural person. A financial institution complies with Sec.  
1003.4(a)(23) by reporting that the requirement is not applicable when 
the applicant and co-applicant, if applicable, are not natural persons.
    6. Multifamily dwellings. A financial institution complies with 
Sec.  1003.4(a)(23) by reporting that the requirement is not applicable 
for a covered loan secured by, or an application proposed to be secured 
by, a multifamily dwelling.
    7. Purchased covered loans. A financial institution complies with 
Sec.  1003.4(a)(23) by reporting that the requirement is not applicable 
when reporting a purchased covered loan.

[[Page 171]]

                           Paragraph 4(a)(24)

    1. General. Except for purchased covered loans and partially exempt 
transactions under Sec.  1003.3(d), Sec.  1003.4(a)(24) requires a 
financial institution to report the ratio of the total amount of debt 
secured by the property to the value of the property (combined loan-to-
value ratio) relied on in making the credit decision. For example, if a 
financial institution calculated a combined loan-to-value ratio twice--
once according to the financial institution's own requirements and once 
according to the requirements of a secondary market investor--and the 
financial institution relied on the combined loan-to-value ratio 
calculated according to the secondary market investor's requirements in 
making the credit decision, Sec.  1003.4(a)(24) requires the financial 
institution to report the combined loan-to-value ratio calculated 
according to the requirements of the secondary market investor.
    2. Transactions for which a combined loan-to-value ratio was one of 
multiple factors. A financial institution relies on the ratio of the 
total amount of debt secured by the property to the value of the 
property (combined loan-to-value ratio) in making the credit decision if 
the combined loan-to-value ratio was a factor in the credit decision, 
even if it was not a dispositive factor. For example, if the combined 
loan-to-value ratio is one of multiple factors in a financial 
institution's credit decision, the financial institution has relied on 
the combined loan-to-value ratio and complies with Sec.  1003.4(a)(24) 
by reporting the combined loan-to-value ratio, even if the financial 
institution denies the application because one or more underwriting 
requirements other than the combined loan-to-value ratio are not 
satisfied.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness, or if an application was withdrawn before a 
credit decision was made, a financial institution complies with Sec.  
1003.4(a)(24) by reporting that the requirement is not applicable, even 
if the financial institution had calculated the ratio of the total 
amount of debt secured by the property to the value of the property 
(combined loan-to-value ratio). For example, if a file is closed for 
incompleteness and is so reported in accordance with Sec.  1003.4(a)(8), 
the financial institution complies with Sec.  1003.4(a)(24) by reporting 
that the requirement is not applicable, even if the financial 
institution had calculated a combined loan-to-value ratio. Similarly, if 
an application was withdrawn by the applicant before a credit decision 
was made and is so reported in accordance with Sec.  1003.4(a)(8), the 
financial institution complies with Sec.  1003.4(a)(24) by reporting 
that the requirement is not applicable, even if the financial 
institution had calculated a combined loan-to-value ratio.
    4. Transactions for which no combined loan-to-value ratio was relied 
on. Section 1003.4(a)(24) does not require a financial institution to 
calculate the ratio of the total amount of debt secured by the property 
to the value of the property (combined loan-to-value ratio), nor does it 
require a financial institution to rely on a combined loan-to-value 
ratio in making a credit decision. If a financial institution makes a 
credit decision without relying on a combined loan-to-value ratio, the 
financial institution complies with Sec.  1003.4(a)(24) by reporting 
that the requirement is not applicable since no combined loan-to-value 
ratio was relied on in making the credit decision.
    5. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(24) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.
    6. Property. A financial institution reports the combined loan-to-
value ratio relied on in making the credit decision, regardless of which 
property or properties it used in the combined loan-to-value ratio 
calculation. The property used in the combined loan-to-value ratio 
calculation does not need to be the property identified in Sec.  
1003.4(a)(9) and may include more than one property and non-real 
property. For example, if a financial institution originated a covered 
loan for the purchase of a multifamily dwelling, the loan was secured by 
the multifamily dwelling and by non-real property, such as securities, 
and the financial institution used the multifamily dwelling and the non-
real property to calculate the combined loan-to-value ratio that it 
relied on in making the credit decision, Sec.  1003.4(a)(24) requires 
the financial institution to report the relied upon ratio. Section 
1003.4(a)(24) does not require a financial institution to use a 
particular combined loan-to-value ratio calculation method but instead 
requires financial institutions to report the combined loan-to-value 
ratio relied on in making the credit decision.

                           Paragraph 4(a)(25)

    1. Amortization and maturity. For a fully amortizing covered loan, 
the number of months after which the legal obligation matures is the 
number of months in the amortization schedule, ending with the final 
payment. Some covered loans do not fully amortize during the maturity 
term, such as covered loans with a balloon payment; such loans should 
still be reported using the maturity term rather than the amortization 
term, even in the case of covered loans that mature before fully 
amortizing but have reset options. For example, a 30-year fully 
amortizing covered loan would be reported with a term of ``360,'' while 
a five year balloon covered loan would be reported with a loan term of 
``60.''

[[Page 172]]

    2. Non-monthly repayment periods. If a covered loan or application 
includes a schedule with repayment periods measured in a unit of time 
other than months, the financial institution should report the covered 
loan or application term using an equivalent number of whole months 
without regard for any remainder.
    3. Purchased loans. For a covered loan that was purchased, a 
financial institution reports the number of months after which the legal 
obligation matures as measured from the covered loan's origination.
    4. Open-end line of credit. For an open-end line of credit with a 
definite term, a financial institution reports the number of months from 
origination until the account termination date, including both the draw 
and repayment period.
    5. Loan term--scope of requirement. For a covered loan or 
application without a definite term, such as a reverse mortgage, a 
financial institution complies with Sec.  1003.4(a)(25) by reporting 
that the requirement is not applicable. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository institution or 
insured credit union is not required to report the loan term. See Sec.  
1003.3(d) and related commentary.

                           Paragraph 4(a)(26)

    1. Types of introductory rates. Except for partially exempt 
transactions under Sec.  1003.3(d), Sec.  1003.4(a)(26) requires a 
financial institution to report the number of months, or proposed number 
of months in the case of an application, from closing or account opening 
until the first date the interest rate may change. For example, assume 
an open-end line of credit contains an introductory or ``teaser'' 
interest rate for two months after the date of account opening, after 
which the interest rate may adjust. In this example, the financial 
institution complies with Sec.  1003.4(a)(26) by reporting the number of 
months as ``2.'' Section 1003.4(a)(26) requires a financial institution 
to report the number of months based on when the first interest rate 
adjustment may occur, even if an interest rate adjustment is not 
required to occur at that time and even if the rates that will apply, or 
the periods for which they will apply, are not known at closing or 
account opening. For example, if a closed-end mortgage loan with a 30-
year term has an adjustable-rate product with an introductory interest 
rate for the first 60 months, after which the interest rate is 
permitted, but not required to vary, according to the terms of an index 
rate, the financial institution complies with Sec.  1003.4(a)(26) by 
reporting the number of months as ``60.'' Similarly, if a closed-end 
mortgage loan with a 30-year term is a step-rate product with an 
introductory interest rate for the first 24 months, after which the 
interest rate will increase to a different known interest rate for the 
next 36 months, the financial institution complies with Sec.  
1003.4(a)(26) by reporting the number of months as ``24.''
    2. Preferred rates. Section 1003.4(a)(26) does not require reporting 
of introductory interest rate periods based on preferred rates unless 
the terms of the legal obligation provide that the preferred rate will 
expire at a certain defined date. Preferred rates include terms of the 
legal obligation that provide that the initial underlying rate is fixed 
but that it may increase or decrease upon the occurrence of some future 
event, such as an employee leaving the employ of the financial 
institution, the borrower closing an existing deposit account with the 
financial institution, or the borrower revoking an election to make 
automated payments. In these cases, because it is not known at the time 
of closing or account opening whether the future event will occur, and 
if so, when it will occur, Sec.  1003.4(a)(26) does not require 
reporting of an introductory interest rate period.
    3. Loan or application with a fixed rate. A financial institution 
complies with Sec.  1003.4(a)(26) by reporting that the requirement is 
not applicable for a covered loan with a fixed rate or an application 
for a covered loan with a fixed rate.
    4. Purchased loan. A financial institution complies with Sec.  
1003.4(a)(26) by reporting that requirement is not applicable when the 
covered loan is a purchased covered loan with a fixed rate.
    5. Non-monthly introductory periods. If a covered loan or 
application includes an introductory interest rate period measured in a 
unit of time other than months, the financial institution complies with 
Sec.  1003.4(a)(26) by reporting the introductory interest rate period 
for the covered loan or application using an equivalent number of whole 
months without regard for any remainder. For example, assume an open-end 
line of credit contains an introductory interest rate for 50 days after 
the date of account opening, after which the interest rate may adjust. 
In this example, the financial institution complies with Sec.  
1003.4(a)(26) by reporting the number of months as ``1.'' The financial 
institution must report one month for any introductory interest rate 
period that totals less than one whole month.

                           Paragraph 4(a)(27)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(27) requires reporting of contractual 
features that would allow payments other than fully amortizing payments. 
Section 1003.4(a)(27) defines the contractual features by reference to 
Regulation Z, 12 CFR part 1026, but without regard to whether the 
covered loan is consumer credit, as defined in Sec.  1026.2(a)(12), is 
extended by a creditor, as defined in Sec.  1026.2(a)(17), or is 
extended to a consumer,

[[Page 173]]

as defined in Sec.  1026.2(a)(11), and without regard to whether the 
property is a dwelling as defined in Sec.  1026.2(a)(19). For example, 
assume that a financial institution originates a business-purpose 
transaction that is exempt from Regulation Z pursuant to 12 CFR 
1026.3(a)(1), to finance the purchase of a multifamily dwelling, and 
that there is a balloon payment, as defined by Regulation Z, 12 CFR 
1026.18(s)(5)(i), at the end of the loan term. The multifamily dwelling 
is a dwelling under Sec.  1003.2(f), but not under Regulation Z, 12 CFR 
1026.2(a)(19). In this example, the financial institution should report 
the business-purpose transaction as having a balloon payment under Sec.  
1003.4(a)(27)(i), assuming the other requirements of this part are met. 
Aside from these distinctions, financial institutions may rely on the 
definitions and related commentary provided in the appropriate sections 
of Regulation Z referenced in Sec.  1003.4(a)(27) of this part in 
determining whether the contractual feature should be reported.

                           Paragraph 4(a)(28)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(28) requires a financial institution to 
report the property value relied on in making the credit decision. For 
example, if the institution relies on an appraisal or other valuation 
for the property in calculating the loan-to-value ratio, it reports that 
value; if the institution relies on the purchase price of the property 
in calculating the loan-to-value ratio, it reports that value.
    2. Multiple property values. When a financial institution obtains 
two or more valuations of the property securing or proposed to secure 
the covered loan, the financial institution complies with Sec.  
1003.4(a)(28) by reporting the value relied on in making the credit 
decision. For example, when a financial institution obtains an 
appraisal, an automated valuation model report, and a broker price 
opinion with different values for the property, it reports the value 
relied on in making the credit decision. Section Sec.  1003.4(a)(28) 
does not require a financial institution to use a particular property 
valuation method, but instead requires a financial institution to report 
the valuation relied on in making the credit decision.
    3. Transactions for which no credit decision was made. If a file was 
closed for incompleteness or the application was withdrawn before a 
credit decision was made, the financial institution complies with Sec.  
1003.4(a)(28) by reporting that the requirement is not applicable, even 
if the financial institution had obtained a property value. For example, 
if a file is closed for incompleteness and is so reported in accordance 
with Sec.  1003.4(a)(8), the financial institution complies with Sec.  
1003.4(a)(28) by reporting that the requirement is not applicable, even 
if the financial institution had obtained a property value. Similarly, 
if an application was withdrawn by the applicant before a credit 
decision was made and is so reported in accordance with Sec.  
1003.4(a)(8), the financial institution complies with Sec.  
1003.4(a)(28) by reporting that the requirement is not applicable, even 
if the financial institution had obtained a property value.
    4. Transactions for which no property value was relied on. Section 
1003.4(a)(28) does not require a financial institution to obtain a 
property valuation, nor does it require a financial institution to rely 
on a property value in making a credit decision. If a financial 
institution makes a credit decision without relying on a property value, 
the financial institution complies with Sec.  1003.4(a)(28) by reporting 
that the requirement is not applicable since no property value was 
relied on in making the credit decision.

                           Paragraph 4(a)(29)

    1. Classification under State law. A financial institution should 
report a covered loan that is or would have been secured only by a 
manufactured home but not the land on which it is sited as secured by a 
manufactured home and not land, even if the manufactured home is 
considered real property under applicable State law.
    2. Manufactured home community. A manufactured home community that 
is a multifamily dwelling is not considered a manufactured home for 
purposes of Sec.  1003.4(a)(29).
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    4. Scope of requirement. A financial institution reports that the 
requirement is not applicable for a covered loan where the dwelling 
related to the property identified in Sec.  1003.4(a)(9) is not a 
manufactured home. For partially exempt transactions under Sec.  
1003.3(d), an insured depository institution or insured credit union is 
not required to report the information specified in Sec.  1003.4(a)(29). 
See Sec.  1003.3(d) and related commentary.

                           Paragraph 4(a)(30)

    1. Indirect land ownership. Indirect land ownership can occur when 
the applicant or borrower is or will be a member of a resident-owned 
community structured as a housing cooperative in which the occupants own 
an entity that holds the underlying land of the manufactured home 
community. In such communities, the applicant or borrower may still have 
a lease and pay rent for the lot on which his or her manufactured home 
is or will be located, but the property interest

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type for such an arrangement should be reported as indirect ownership if 
the applicant is or will be a member of the cooperative that owns the 
underlying land of the manufactured home community. If an applicant 
resides or will reside in such a community but is not a member, the 
property interest type should be reported as a paid leasehold.
    2. Leasehold interest. A leasehold interest could be formalized in a 
lease with a defined term and specified rent payments, or could arise as 
a tenancy at will through permission of a land owner without any 
written, formal arrangement. For example, assume a borrower will locate 
the manufactured home in a manufactured home community, has a written 
lease for a lot in that park, and the lease specifies rent payments. In 
this example, a financial institution complies with Sec.  1003.4(a)(30) 
by reporting a paid leasehold. However, if instead the borrower will 
locate the manufactured home on land owned by a family member without a 
written lease and with no agreement as to rent payments, a financial 
institution complies with Sec.  1003.4(a)(30) by reporting an unpaid 
leasehold.
    3. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    4. Manufactured home community. A manufactured home community that 
is a multifamily dwelling is not considered a manufactured home for 
purposes of Sec.  1003.4(a)(30).
    5. Direct ownership. An applicant or borrower has a direct ownership 
interest in the land on which the dwelling is or is to be located when 
it has a more than possessory real property ownership interest in the 
land such as fee simple ownership.
    6. Scope of requirement. A financial institution reports that the 
requirement is not applicable for a covered loan where the dwelling 
related to the property identified in Sec.  1003.4(a)(9) is not a 
manufactured home. For partially exempt transactions under Sec.  
1003.3(d), an insured depository institution or insured credit union is 
not required to report the information specified in Sec.  1003.4(a)(30). 
See Sec.  1003.3(d) and related commentary.

                           Paragraph 4(a)(31)

    1. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    2. Manufactured home community. For an application or covered loan 
secured by a manufactured home community, the financial institution 
should include in the number of individual dwelling units the total 
number of manufactured home sites that secure the loan and are available 
for occupancy, regardless of whether the sites are currently occupied or 
have manufactured homes currently attached. A financial institution may 
include in the number of individual dwelling units other units such as 
recreational vehicle pads, manager apartments, rental apartments, site-
built homes or other rentable space that are ancillary to the operation 
of the secured property if it considers such units under its 
underwriting guidelines or the guidelines of an investor, or if it 
tracks the number of such units for its own internal purposes. For a 
loan secured by a single manufactured home that is or will be located in 
a manufactured home community, the financial institution should report 
one individual dwelling unit.
    3. Condominium and cooperative projects. For a covered loan secured 
by a condominium or cooperative property, the financial institution 
reports the total number of individual dwelling units securing the 
covered loan or proposed to secure the covered loan in the case of an 
application. For example:
    i. Assume that a loan is secured by the entirety of a cooperative 
property. The financial institution would report the number of 
individual dwelling units in the cooperative property.
    ii. Assume that a covered loan is secured by 30 individual dwelling 
units in a condominium property that contains 100 individual dwelling 
units and that the loan is not exempt from Regulation C under Sec.  
1003.3(c)(3). The financial institution reports 30 individual dwelling 
units.
    4. Best information available. A financial institution may rely on 
the best information readily available to the financial institution at 
the time final action is taken and on the financial institution's own 
procedures in reporting the information required by Sec.  1003.4(a)(31). 
Information readily available could include, for example, information 
provided by an applicant that the financial institution reasonably 
believes, information contained in a property valuation or inspection, 
or information obtained from public records.

                           Paragraph 4(a)(32)

    1. Affordable housing income restrictions. For purposes of Sec.  
1003.4(a)(32), affordable housing income-restricted units are individual 
dwelling units that have restrictions based on the income level of 
occupants pursuant to restrictive covenants encumbering the property. 
Such income levels are frequently expressed as a percentage of area 
median income by household size as established by the U.S. Department of 
Housing and Urban Development or another agency responsible for 
implementing the applicable affordable housing program. Such 
restrictions are frequently part of compliance with programs

[[Page 175]]

that provide public funds, special tax treatment, or density bonuses to 
encourage development or preservation of affordable housing. Such 
restrictions are frequently evidenced by a use agreement, regulatory 
agreement, land use restriction agreement, housing assistance payments 
contract, or similar agreement. Rent control or rent stabilization laws, 
and the acceptance by the owner or manager of a multifamily dwelling of 
Housing Choice Vouchers (24 CFR part 982) or other similar forms of 
portable housing assistance that are tied to an occupant and not an 
individual dwelling unit, are not affordable housing income-restricted 
dwelling units for purposes of Sec.  1003.4(a)(32).
    2. Federal affordable housing sources. Examples of Federal programs 
and funding sources that may result in individual dwelling units that 
are reportable under Sec.  1003.4(a)(32) include, but are not limited 
to:
    i. Affordable housing programs pursuant to Section 8 of the United 
States Housing Act of 1937 (42 U.S.C. 1437f);
    ii. Public housing (42 U.S.C. 1437a(b)(6));
    iii. The HOME Investment Partnerships program (24 CFR part 92);
    iv. The Community Development Block Grant program (24 CFR part 570);
    v. Multifamily tax subsidy project funding through tax-exempt bonds 
or tax credits (26 U.S.C. 42; 26 U.S.C. 142(d));
    vi. Project-based vouchers (24 CFR part 983);
    vii. Federal Home Loan Bank affordable housing program funding (12 
CFR part 1291); and
    viii. Rural Housing Service multifamily housing loans and grants (7 
CFR part 3560).
    3. State and local government affordable housing sources. Examples 
of State and local sources that may result in individual dwelling units 
that are reportable under Sec.  1003.4(a)(32) include, but are not 
limited to: State or local administration of Federal funds or programs; 
State or local funding programs for affordable housing or rental 
assistance, including programs operated by independent public 
authorities; inclusionary zoning laws; and tax abatement or tax 
increment financing contingent on affordable housing requirements.
    4. Multiple properties. See comment 4(a)(9)-2 regarding transactions 
involving multiple properties with more than one property taken as 
security.
    5. Best information available. A financial institution may rely on 
the best information readily available to the financial institution at 
the time final action is taken and on the financial institution's own 
procedures in reporting the information required by Sec.  1003.4(a)(32). 
Information readily available could include, for example, information 
provided by an applicant that the financial institution reasonably 
believes, information contained in a property valuation or inspection, 
or information obtained from public records.
    6. Scope of requirement. A financial institution reports that the 
requirement is not applicable if the property securing the covered loan 
or, in the case of an application, proposed to secure the covered loan 
is not a multifamily dwelling. For partially exempt transactions under 
Sec.  1003.3(d), an insured depository institution or insured credit 
union is not required to report the information specified in Sec.  
1003.4(a)(32). See Sec.  1003.3(d) and related commentary.

                           Paragraph 4(a)(33)

    1. Agents. If a financial institution is reporting actions taken by 
its agent consistent with comment 4(a)-4, the agent is not considered 
the financial institution for the purposes of Sec.  1003.4(a)(33). For 
example, assume that an applicant submitted an application to Financial 
Institution A, and Financial Institution A made the credit decision 
acting as Financial Institution B's agent under State law. A covered 
loan was originated and the obligation arising from a covered loan was 
initially payable to Financial Institution A. Financial Institution B 
purchased the loan. Financial Institution B reports the origination and 
not the purchase, and indicates that the application was not submitted 
directly to the financial institution and that the transaction was not 
initially payable to the financial institution.

                          Paragraph 4(a)(33)(i)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(33)(i) requires a financial institution to 
indicate whether the applicant or borrower submitted the application 
directly to the financial institution that is reporting the covered loan 
or application. The following scenarios demonstrate whether an 
application was submitted directly to the financial institution that is 
reporting the covered loan or application.
    i. The application was submitted directly to the financial 
institution if the mortgage loan originator identified pursuant to Sec.  
1003.4(a)(34) was an employee of the reporting financial institution 
when the originator performed the origination activities for the covered 
loan or application that is being reported.
    ii. The application was also submitted directly to the financial 
institution reporting the covered loan or application if the reporting 
financial institution directed the applicant to a third-party agent 
(e.g., a credit union service organization) that performed loan 
origination activities on behalf of the financial institution and did 
not assist the applicant with applying for covered loans with other 
institutions.

[[Page 176]]

    iii. If an applicant contacted and completed an application with a 
broker or correspondent that forwarded the application to a financial 
institution for approval, an application was not submitted to the 
financial institution.

                         Paragraph 4(a)(33)(ii)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(33)(ii) requires financial institutions to 
report whether the obligation arising from a covered loan was or, in the 
case of an application, would have been initially payable to the 
institution. An obligation is initially payable to the institution if 
the obligation is initially payable either on the face of the note or 
contract to the financial institution that is reporting the covered loan 
or application. For example, if a financial institution reported an 
origination of a covered loan that it approved prior to closing, that 
closed in the name of a third-party, such as a correspondent lender, and 
that the financial institution purchased after closing, the covered loan 
was not initially payable to the financial institution.
    2. Applications. A financial institution complies with Sec.  
1003.4(a)(33)(ii) by reporting that the requirement is not applicable if 
the institution had not determined whether the covered loan would have 
been initially payable to the institution reporting the application when 
the application was withdrawn, denied, or closed for incompleteness.

                           Paragraph 4(a)(34)

    1. NMLSR ID. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(34) requires a financial institution to 
report the Nationwide Mortgage Licensing System and Registry unique 
identifier (NMLSR ID) for the mortgage loan originator, as defined in 
Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, as 
applicable. The NMLSR ID is a unique number or other identifier 
generally assigned to individuals registered or licensed through NMLSR 
to provide loan originating services. For more information, see the 
Secure and Fair Enforcement for Mortgage Licensing Act of 2008, title V 
of the Housing and Economic Recovery Act of 2008 (S.A.F.E. Act), 12 
U.S.C. 5101 et seq., and its implementing regulations (12 CFR part 1007 
and 12 CFR part 1008).
    2. Mortgage loan originator without NMLSR ID. An NMLSR ID for the 
mortgage loan originator is not required by Sec.  1003.4(a)(34) to be 
reported by a financial institution if the mortgage loan originator is 
not required to obtain and has not been assigned an NMLSR ID. For 
example, certain individual mortgage loan originators may not be 
required to obtain an NMLSR ID for the particular transaction being 
reported by the financial institution, such as a commercial loan. 
However, some mortgage loan originators may have obtained an NMLSR ID 
even if they are not required to obtain one for that particular 
transaction. If a mortgage loan originator has been assigned an NMLSR 
ID, a financial institution complies with Sec.  1003.4(a)(34) by 
reporting the mortgage loan originator's NMLSR ID regardless of whether 
the mortgage loan originator is required to obtain an NMLSR ID for the 
particular transaction being reported by the financial institution. In 
the event that the mortgage loan originator is not required to obtain 
and has not been assigned an NMLSR ID, a financial institution complies 
with Sec.  1003.4(a)(34) by reporting that the requirement is not 
applicable.
    3. Multiple mortgage loan originators. If more than one individual 
associated with a covered loan or application meets the definition of a 
mortgage loan originator, as defined in Regulation G, 12 CFR 1007.102, 
or Regulation H, 12 CFR 1008.23, a financial institution complies with 
Sec.  1003.4(a)(34) by reporting the NMLSR ID of the individual mortgage 
loan originator with primary responsibility for the transaction as of 
the date of action taken pursuant to Sec.  1003.4(a)(8)(ii). A financial 
institution that establishes and follows a reasonable, written policy 
for determining which individual mortgage loan originator has primary 
responsibility for the reported transaction as of the date of action 
taken complies with Sec.  1003.4(a)(34).
    4. Purchased loans. If a financial institution purchases a covered 
loan that satisfies the coverage criteria of Regulation Z, 12 CFR 
1026.36(g), and that was originated prior to January 10, 2014, the 
financial institution complies with Sec.  1003.4(a)(34) by reporting 
that the requirement is not applicable. In addition, if a financial 
institution purchases a covered loan that does not satisfy the coverage 
criteria of Regulation Z, 12 CFR 1026.36(g), and that was originated 
prior to January 1, 2018, the financial institution complies with Sec.  
1003.4(a)(34) by reporting that the requirement is not applicable. 
Purchasers of both such types of covered loans may report the NMLSR ID.

                           Paragraph 4(a)(35)

    1. Automated underwriting system data--general. Except for purchased 
covered loans and partially exempt transactions under Sec.  1003.3(d), 
Sec.  1003.4(a)(35) requires a financial institution to report the name 
of the automated underwriting system (AUS) used by the financial 
institution to evaluate the application and the result generated by that 
AUS. The following scenarios illustrate when a financial institution 
reports the name of the AUS used by the financial institution to 
evaluate the application and the result generated by that AUS.
    i. A financial institution that uses an AUS, as defined in Sec.  
1003.4(a)(35)(ii), to evaluate an

[[Page 177]]

application, must report the name of the AUS used by the financial 
institution to evaluate the application and the result generated by that 
system, regardless of whether the AUS was used in its underwriting 
process. For example, if a financial institution uses an AUS to evaluate 
an application prior to submitting the application through its 
underwriting process, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of the AUS it used to evaluate the 
application and the result generated by that system.
    ii. A financial institution that uses an AUS, as defined in Sec.  
1003.4(a)(35)(ii), to evaluate an application, must report the name of 
the AUS it used to evaluate the application and the result generated by 
that system, regardless of whether the financial institution intends to 
hold the covered loan in its portfolio or sell the covered loan. For 
example, if a financial institution uses an AUS developed by a 
securitizer to evaluate an application and intends to sell the covered 
loan to that securitizer but ultimately does not sell the covered loan 
and instead holds the covered loan in its portfolio, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name of 
the securitizer's AUS that the institution used to evaluate the 
application and the result generated by that system. Similarly, if a 
financial institution uses an AUS developed by a securitizer to evaluate 
an application to determine whether to originate the covered loan but 
does not intend to sell the covered loan to that securitizer and instead 
holds the covered loan in its portfolio, the financial institution 
complies with Sec.  1003.4(a)(35) by reporting the name of the 
securitizer's AUS that the institution used to evaluate the application 
and the result generated by that system.
    iii. A financial institution that uses an AUS, as defined in Sec.  
1003.4(a)(35)(ii), that is developed by a securitizer to evaluate an 
application, must report the name of the AUS it used to evaluate the 
application and the result generated by that system, regardless of 
whether the securitizer intends to hold the covered loan it purchased 
from the financial institution in its portfolio or securitize the 
covered loan. For example, if a financial institution uses an AUS 
developed by a securitizer to evaluate an application and the financial 
institution sells the covered loan to that securitizer but the 
securitizer holds the covered loan it purchased in its portfolio, the 
financial institution complies with Sec.  1003.4(a)(35) by reporting the 
name of the securitizer's AUS that the institution used to evaluate the 
application and the result generated by that system.
    iv. A financial institution, which is also a securitizer, that uses 
its own AUS, as defined in Sec.  1003.4(a)(35)(ii), to evaluate an 
application, must report the name of the AUS it used to evaluate the 
application and the result generated by that system, regardless of 
whether the financial institution intends to hold the covered loan it 
originates in its portfolio, purchase the covered loan, or securitize 
the covered loan. For example, if a financial institution, which is also 
a securitizer, has developed its own AUS and uses that AUS to evaluate 
an application that it intends to originate and hold in its portfolio 
and not purchase or securitize the covered loan, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name of 
its AUS that it used to evaluate the application and the result 
generated by that system.
    2. Definition of automated underwriting system. A financial 
institution must report the information required by Sec.  
1003.4(a)(35)(i) if the financial institution uses an automated 
underwriting system (AUS), as defined in Sec.  1003.4(a)(35)(ii), to 
evaluate an application. To be covered by the definition in Sec.  
1003.4(a)(35)(ii), a system must be an electronic tool that has been 
developed by a securitizer, Federal government insurer, or a Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. A person is a securitizer, Federal government insurer, or 
Federal government guarantor of closed-end mortgage loans or open-end 
lines of credit, respectively, if it has securitized, provided Federal 
government insurance, or provided a Federal government guarantee for a 
closed-end mortgage loan or open-end line of credit at any point in 
time. A person may be a securitizer, Federal government insurer, or 
Federal government guarantor of closed-end mortgage loans or open-end 
lines of credit, respectively, for purposes of Sec.  1003.4(a)(35) even 
if it is not actively securitizing, insuring, or guaranteeing closed-end 
mortgage loans or open-end lines of credit at the time a financial 
institution uses the AUS to evaluate an application. Where the person 
that developed the electronic tool has never been a securitizer, Federal 
government insurer, or Federal government guarantor of closed-end 
mortgage loans or open-end lines of credit, respectively, at the time a 
financial institution uses the tool to evaluate an application, the 
financial institution complies with Sec.  1003.4(a)(35) by reporting 
that the requirement is not applicable because an AUS was not used to 
evaluate the application. If a financial institution has developed its 
own proprietary system that it uses to evaluate an application and the 
financial institution is also a securitizer, then the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name of 
that system and the result generated by that system. On the other hand, 
if a financial institution has developed its own proprietary system that 
it uses to evaluate an application and the financial institution is not 
a securitizer, then the financial institution is not required by Sec.  
1003.4(a)(35) to report the use of that system

[[Page 178]]

and the result generated by that system. In addition, for an AUS to be 
covered by the definition in Sec.  1003.4(a)(35)(ii), the system must 
provide a result regarding both the credit risk of the applicant and the 
eligibility of the covered loan to be originated, purchased, insured, or 
guaranteed by the securitizer, Federal government insurer, or Federal 
government guarantor that developed the system being used to evaluate 
the application. For example, if a system is an electronic tool that 
provides a determination of the eligibility of the covered loan to be 
originated, purchased, insured, or guaranteed by the securitizer, 
Federal government insurer, or Federal government guarantor that 
developed the system being used by a financial institution to evaluate 
the application, but the system does not also provide an assessment of 
the creditworthiness of the applicant--such as an evaluation of the 
applicant's income, debt, and credit history--then that system does not 
qualify as an AUS, as defined in Sec.  1003.4(a)(35)(ii). A financial 
institution that uses a system that is not an AUS, as defined in Sec.  
1003.4(a)(35)(ii), to evaluate an application does not report the 
information required by Sec.  1003.4(a)(35)(i).
    3. Reporting automated underwriting system data--multiple results. 
When a financial institution uses one or more automated underwriting 
systems (AUS) to evaluate the application and the system or systems 
generate two or more results, the financial institution complies with 
Sec.  1003.4(a)(35) by reporting, except for purchased covered loans, 
the name of the AUS used by the financial institution to evaluate the 
application and the result generated by that AUS as determined by the 
following principles. To determine what AUS (or AUSs) and result (or 
results) to report under Sec.  1003.4(a)(35), a financial institution 
follows each of the principles that is applicable to the application in 
question, in the order in which they are set forth below.
    i. If a financial institution obtains two or more AUS results and 
the AUS generating one of those results corresponds to the loan type 
reported pursuant to Sec.  1003.4(a)(2), the financial institution 
complies with Sec.  1003.4(a)(35) by reporting that AUS name and result. 
For example, if a financial institution evaluates an application using 
the Federal Housing Administration's (FHA) Technology Open to Approved 
Lenders (TOTAL) Scorecard and subsequently evaluates the application 
with an AUS used to determine eligibility for a non-FHA loan, but 
ultimately originates an FHA loan, the financial institution complies 
with Sec.  1003.4(a)(35) by reporting TOTAL Scorecard and the result 
generated by that system. If a financial institution obtains two or more 
AUS results and more than one of those AUS results is generated by a 
system that corresponds to the loan type reported pursuant to Sec.  
1003.4(a)(2), the financial institution identifies which AUS result 
should be reported by following the principle set forth below in comment 
4(a)(35)-3.ii.
    ii. If a financial institution obtains two or more AUS results and 
the AUS generating one of those results corresponds to the purchaser, 
insurer, or guarantor, if any, the financial institution complies with 
Sec.  1003.4(a)(35) by reporting that AUS name and result. For example, 
if a financial institution evaluates an application with the AUS of 
Securitizer A and subsequently evaluates the application with the AUS of 
Securitizer B, but the financial institution ultimately originates a 
covered loan that it sells within the same calendar year to Securitizer 
A, the financial institution complies with Sec.  1003.4(a)(35) by 
reporting the name of Securitizer A's AUS and the result generated by 
that system. If a financial institution obtains two or more AUS results 
and more than one of those AUS results is generated by a system that 
corresponds to the purchaser, insurer, or guarantor, if any, the 
financial institution identifies which AUS result should be reported by 
following the principle set forth below in comment 4(a)(35)-3.iii.
    iii. If a financial institution obtains two or more AUS results and 
none of the systems generating those results correspond to the 
purchaser, insurer, or guarantor, if any, or the financial institution 
is following this principle because more than one AUS result is 
generated by a system that corresponds to either the loan type or the 
purchaser, insurer, or guarantor, the financial institution complies 
with Sec.  1003.4(a)(35) by reporting the AUS result generated closest 
in time to the credit decision and the name of the AUS that generated 
that result. For example, if a financial institution evaluates an 
application with the AUS of Securitizer A, subsequently again evaluates 
the application with Securitizer A's AUS, the financial institution 
complies with Sec.  1003.4(a)(35) by reporting the name of Securitizer 
A's AUS and the second AUS result. Similarly, if a financial institution 
obtains a result from an AUS that requires the financial institution to 
underwrite the loan manually, but the financial institution subsequently 
processes the application through a different AUS that also generates a 
result, the financial institution complies with Sec.  1003.4(a)(35) by 
reporting the name of the second AUS that it used to evaluate the 
application and the AUS result generated by that system.
    iv. If a financial institution obtains two or more AUS results at 
the same time and the principles in comment 4(a)(35)-3.i through .iii do 
not apply, the financial institution complies with Sec.  1003.4(a)(35) 
by reporting the name of all of the AUSs used by the financial 
institution to evaluate the application and the results generated by 
each of those systems. For example, if a financial institution

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simultaneously evaluates an application with the AUS of Securitizer A 
and the AUS of Securitizer B, the financial institution complies with 
Sec.  1003.4(a)(35) by reporting the name of both Securitizer A's AUS 
and Securitizer B's AUS and the results generated by each of those 
systems. In any event, however, the financial institution does not 
report more than five AUSs and five results. If more than five AUSs and 
five results meet the criteria in this principle, the financial 
institution complies with Sec.  1003.4(a)(35) by choosing any five among 
them to report.
    4. Transactions for which an automated underwriting system was not 
used to evaluate the application. Section 1003.4(a)(35) does not require 
a financial institution to evaluate an application using an automated 
underwriting system (AUS), as defined in Sec.  1003.4(a)(35)(ii). For 
example, if a financial institution only manually underwrites an 
application and does not use an AUS to evaluate the application, the 
financial institution complies with Sec.  1003.4(a)(35) by reporting 
that the requirement is not applicable since an AUS was not used to 
evaluate the application.
    5. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(35) by reporting that the requirement is not applicable 
when the covered loan is a purchased covered loan.
    6. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution complies 
with Sec.  1003.4(a)(35) by reporting that the requirement is not 
applicable.
    7. Determination of securitizer, Federal government insurer, or 
Federal government guarantor. Section 1003.4(a)(35)(ii) provides that an 
``automated underwriting system'' means an electronic tool developed by 
a securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit that 
provides a result regarding the credit risk of the applicant and whether 
the covered loan is eligible to be originated, purchased, insured, or 
guaranteed by that securitizer, Federal government insurer, or Federal 
government guarantor. A person is a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans or 
open-end lines of credit, respectively, if it has ever securitized, 
insured, or guaranteed a closed-end mortgage loan or open-end line of 
credit. If a financial institution knows or reasonably believes that the 
system it is using to evaluate an application is an electronic tool that 
has been developed by a securitizer, Federal government insurer, or 
Federal government guarantor of closed-end mortgage loans or open-end 
lines of credit, then the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of that system and the result 
generated by that system. Knowledge or reasonable belief could, for 
example, be based on a sales agreement or other related documents, the 
financial institution's previous transactions or relationship with the 
developer of the electronic tool, or representations made by the 
developer of the electronic tool demonstrating that the developer of the 
electronic tool is a securitizer, Federal government insurer, or Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. If a financial institution does not know or reasonably believe 
that the system it is using to evaluate an application is an electronic 
tool that has been developed by a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans or 
open-end lines of credit, the financial institution complies with Sec.  
1003.4(a)(35) by reporting that the requirement is not applicable, 
provided that the financial institution maintains procedures reasonably 
adapted to determine whether the electronic tool it is using to evaluate 
an application meets the definition in Sec.  1003.4(a)(35)(ii). 
Reasonably adapted procedures include attempting to determine with 
reasonable frequency, such as annually, whether the developer of the 
electronic tool is a securitizer, Federal government insurer, or Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. For example:
    i. In the course of renewing an annual sales agreement the developer 
of the electronic tool represents to the financial institution that it 
has never been a securitizer, Federal government insurer, or Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. On this basis, the financial institution does not know or 
reasonably believe that the system it is using to evaluate an 
application is an electronic tool that has been developed by a 
securitizer, Federal government insurer, or Federal government guarantor 
of closed-end mortgage loans or open-end lines of credit and complies 
with Sec.  1003.4(a)(35) by reporting that the requirement is not 
applicable.
    ii. Based on their previous transactions a financial institution is 
aware that the developer of the electronic tool it is using to evaluate 
an application has securitized a closed-end mortgage loan or open-end 
line of credit in the past. On this basis, the financial institution 
knows or reasonably believes that the developer of the electronic tool 
is a securitizer and complies with Sec.  1003.4(a)(35) by reporting the 
name of that system and the result generated by that system.

                           Paragraph 4(a)(37)

    1. Open-end line of credit. Except for partially exempt transactions 
under Sec.  1003.3(d), Sec.  1003.4(a)(37) requires a financial 
institution to identify whether the covered loan or the application is 
for an open-end line of credit.

[[Page 180]]

See comments 2(o)-1 and -2 for a discussion of open-end line of credit 
and extension of credit.

                           Paragraph 4(a)(38)

    1. Primary purpose. Except for partially exempt transactions under 
Sec.  1003.3(d), Sec.  1003.4(a)(38) requires a financial institution to 
identify whether the covered loan is, or the application is for a 
covered loan that will be, made primarily for a business or commercial 
purpose. See comment 3(c)(10)-2 for a discussion of how to determine the 
primary purpose of the transaction and the standard applicable to a 
financial institution's determination of the primary purpose of the 
transaction. See comments 3(c)(10)-3 and 4 for examples of excluded and 
reportable business- or commercial-purpose transactions.

                    4(f) Quarterly Recording of Data

    1. General. Section 1003.4(f) requires a financial institution to 
record the data collected pursuant to Sec.  1003.4 on a loan/application 
register within 30 calendar days after the end of the calendar quarter 
in which final action is taken. Section 1003.4(f) does not require a 
financial institution to record data on a single loan/application 
register on a quarterly basis. Rather, for purposes of Sec.  1003.4(f), 
a financial institution may record data on a single loan/application 
register or separately for different branches or different loan types 
(such as home purchase or home improvement loans, or loans on 
multifamily dwellings).
    2. Agency requirements. Certain State or Federal regulations may 
require a financial institution to record its data more frequently than 
is required under Regulation C.
    3. Form of quarterly records. A financial institution may maintain 
the records required by Sec.  1003.4(f) in electronic or any other 
format, provided the institution can make the information available to 
its regulatory agency in a timely manner upon request.

                Section 1003.5--Disclosure and Reporting

                        5(a) Reporting to Agency

    1. Quarterly reporting--coverage. i. Section 1003.5(a)(1)(ii) 
requires that, within 60 calendar days after the end of each calendar 
quarter except the fourth quarter, a financial institution that reported 
for the preceding calendar year at least 60,000 covered loans and 
applications, combined, excluding purchased covered loans, must submit 
its loan/application register containing all data required to be 
recorded for that quarter pursuant to Sec.  1003.4(f). For example, if 
for calendar year 2019 Financial Institution A reports 60,000 covered 
loans, excluding purchased covered loans, it must comply with Sec.  
1003.5(a)(1)(ii) in calendar year 2020. Similarly, if for calendar year 
2019 Financial Institution A reports 20,000 applications and 40,000 
covered loans, combined, excluding purchased covered loans, it must 
comply with Sec.  1003.5(a)(1)(ii) in calendar year 2020. If for 
calendar year 2020 Financial Institution A reports fewer than 60,000 
covered loans and applications, combined, excluding purchased covered 
loans, it is not required to comply with Sec.  1003.5(a)(1)(ii) in 
calendar year 2021.
    ii. In the calendar year of a merger or acquisition, the surviving 
or newly formed financial institution is required to comply with Sec.  
1003.5(a)(1)(ii), effective the date of the merger or acquisition, if a 
combined total of at least 60,000 covered loans and applications, 
combined, excluding purchased covered loans, is reported for the 
preceding calendar year by or for the surviving or newly formed 
financial institution and each financial institution or branch office 
merged or acquired. For example, Financial Institution A and Financial 
Institution B merge to form Financial Institution C in 2020. Financial 
Institution A reports 40,000 covered loans and applications, combined, 
excluding purchased covered loans, for 2019. Financial Institution B 
reports 21,000 covered loans and applications, combined, excluding 
purchased covered loans, for 2019. Financial Institution C is required 
to comply with Sec.  1003.5(a)(1)(ii) effective the date of the merger. 
Similarly, for example, Financial Institution A acquires a branch office 
of Financial Institution B in 2020. Financial Institution A reports 
58,000 covered loans and applications, combined, excluding purchased 
covered loans, for 2019. Financial Institution B reports 3,000 covered 
loans and applications, combined, excluding purchased covered loans, for 
2019 for the branch office acquired by Financial Institution A. 
Financial Institution A is required to comply with Sec.  
1003.5(a)(1)(ii) in 2020 effective the date of the branch acquisition.
    iii. In the calendar year following a merger or acquisition, the 
surviving or newly formed financial institution is required to comply 
with Sec.  1003.5(a)(1)(ii) if a combined total of at least 60,000 
covered loans and applications, combined, excluding purchased covered 
loans, is reported for the preceding calendar year by or for the 
surviving or newly formed financial institution and each financial 
institution or branch office merged or acquired. For example, Financial 
Institution A and Financial Institution B merge to form Financial 
Institution C in 2019. Financial Institution C reports 21,000 covered 
loans and applications, combined, excluding purchased covered loans, 
each for Financial Institution A, B, and C for 2019, for a combined 
total of 63,000 covered loans and applications reported, excluding 
purchased covered loans. Financial Institution C is required to comply 
with Sec.  1003.5(a)(1)(ii) in 2020. Similarly, for example, Financial 
Institution A acquires a branch office of Financial Institution B in

[[Page 181]]

2019. Financial Institution A reports 58,000 covered loans and 
applications, combined, excluding purchased covered loans, for 2019. 
Financial Institution A or B reports 3,000 covered loans and 
applications, combined, excluding purchased covered loans, for 2019 for 
the branch office acquired by Financial Institution A. Financial 
Institution A is required to comply with Sec.  1003.5(a)(1)(ii) in 2020.
    2. Change in appropriate Federal agency. If the appropriate Federal 
agency for a financial institution changes (as a consequence of a merger 
or a change in the institution's charter, for example), the institution 
must identify its new appropriate Federal agency in its annual 
submission of data pursuant to Sec.  1003.5(a)(1)(i) for the year of the 
change. For example, if an institution's appropriate Federal agency 
changes in February 2018, it must identify its new appropriate Federal 
agency beginning with the annual submission of its 2018 data by March 1, 
2019 pursuant to Sec.  1003.5(a)(1)(i). For an institution required to 
comply with Sec.  1003.5(a)(1)(ii), the institution also must identify 
its new appropriate Federal agency in its quarterly submission of data 
pursuant to Sec.  1003.5(a)(1)(ii) beginning with its submission for the 
quarter of the change, unless the change occurs during the fourth 
quarter. For example, if the appropriate Federal agency for an 
institution required to comply with Sec.  1003.5(a)(1)(ii) changes 
during February 2020, the institution must identify its new appropriate 
Federal agency beginning with its quarterly submission pursuant to Sec.  
1003.5(a)(1)(ii) for the first quarter of 2020. If the appropriate 
Federal agency for an institution required to comply with Sec.  
1003.5(a)(1)(ii) changes during December 2020, the institution must 
identify its new appropriate Federal agency beginning with the annual 
submission of its 2020 data by March 1, 2021 pursuant to Sec.  
1003.5(a)(1)(i).
    3. Subsidiaries. A financial institution is a subsidiary of a bank 
or savings association (for purposes of reporting HMDA data to the same 
agency as the parent) if the bank or savings association holds or 
controls an ownership interest in the institution that is greater than 
50 percent.
    4. Retention. A financial institution may satisfy the requirement 
under Sec.  1003.5(a)(1)(i) that it retain a copy of its submitted 
annual loan/application register for three years by retaining a copy of 
the annual loan/application register in either electronic or paper form.
    5. Federal Taxpayer Identification Number. Section 1003.5(a)(3) 
requires a financial institution to provide its Federal Taxpayer 
Identification Number with its data submission. If a financial 
institution obtains a new Federal Taxpayer Identification Number, it 
should provide the new number in its subsequent data submission. For 
example, if two financial institutions that previously reported HMDA 
data under this part merge and the surviving institution retained its 
Legal Entity Identifier but obtained a new Federal Taxpayer 
Identification Number, then the surviving institution should report the 
new Federal Taxpayer Identification Number with its HMDA data 
submission.

                        5(b) Disclosure Statement

    1. Business day. For purposes of Sec.  1003.5(b), a business day is 
any calendar day other than a Saturday, Sunday, or legal public holiday.
    2. Format of notice. A financial institution may make the written 
notice required under Sec.  1003.5(b)(2) available in paper or 
electronic form.
    3. Notice--suggested text. A financial institution may use any text 
that meets the requirements of Sec.  1003.5(b)(2). The following 
language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. These data 
are available online at the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda). HMDA data for many other financial 
institutions are also available at this Web site.
    4. Combined notice. A financial institution may use the same notice 
to satisfy the requirements of both Sec.  1003.5(b)(2) and Sec.  
1003.5(c).

                 5(c) Modified loan/application Register

    1. Format of notice. A financial institution may make the written 
notice required under Sec.  1003.5(c)(1) available in paper or 
electronic form.
    2. Notice--suggested text. A financial institution may use any text 
that meets the requirements of Sec.  1003.5(c)(1). The following 
language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. These data 
are available online at the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda). HMDA data for many other financial 
institutions are also available at this Web site.
    3. Combined notice. A financial institution may use the same notice 
to satisfy the requirements of both Sec.  1003.5(c) and Sec.  
1003.5(b)(2).

[[Page 182]]

               5(e) Posted Notice of Availability of Data

    1. Posted notice--suggested text. A financial institution may post 
any text that meets the requirements of Sec.  1003.5(e). The Bureau or 
other appropriate Federal agency for a financial institution may provide 
a notice that the institution can post to inform the public of the 
availability of its HMDA data, or an institution may create its own 
notice. The following language is suggested but is not required:

                   Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are available 
online for review. The data show geographic distribution of loans and 
applications; ethnicity, race, sex, age, and income of applicants and 
borrowers; and information about loan approvals and denials. HMDA data 
for many other financial institutions are also available online. For 
more information, visit the Consumer Financial Protection Bureau's Web 
site (www.consumerfinance.gov/hmda).

                       Section 1003.6--Enforcement

                          6(b) Bona Fide Errors

    1. Information from third parties. Section 1003.6(b) provides that 
an error in compiling or recording data for a covered loan or 
application is not a violation of the Act or this part if the error was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such an error. A financial institution that 
obtains the required data, such as property-location information, from 
third parties is responsible for ensuring that the information reported 
pursuant to Sec.  1003.5 is correct. See comment 6(b)-2 concerning 
obtaining census tract information from a geocoding tool that the Bureau 
makes available on its Web site.
    2. Information from the Bureau. Section 1003.6(b)(2) provides that 
an incorrect entry for census tract number is deemed a bona fide error, 
and is not a violation of the Act or this part, provided that the 
financial institution maintains procedures reasonably adapted to avoid 
an error. Obtaining the census tract numbers for covered loans and 
applications from a geocoding tool available on the Bureau's Web site 
that identifies the census tract of a property using property addresses 
entered by users is an example of a procedure reasonably adapted to 
avoid errors under Sec.  1003.6(b)(2). Accordingly, a census tract error 
is not a violation of the Act or this part if the financial institution 
obtained the census tract number from the geocoding tool on the Bureau's 
Web site. However, a financial institution's failure to provide the 
correct census tract number for a covered loan or application on its 
loan/application register, as required by Sec.  1003.4(a)(9)(ii)(C) or 
(e), because the geocoding tool on the Bureau's Web site did not provide 
a census tract number for the property address entered by the financial 
institution is not excused as a bona fide error. In addition, a census 
tract error caused by a financial institution entering an inaccurate 
property address into the geocoding tool on the Bureau's Web site is not 
excused as a bona fide error.

[80 FR 66317, 66339, Oct. 28, 2015, as amended at 82 FR 43136, 43145, 
Sept. 13, 2017; 82 FR 61146, Dec. 27, 2017; 84 FR 514, Jan. 31, 2019; 84 
FR 57981, Oct. 29, 2019; 84 FR 69994, Dec. 20, 2019; 85 FR 28404, 28406, 
May 12, 2020; 85 FR 83410, Dec. 22, 2020; 86 FR 72819, Dec. 23, 2021; 87 
FR 77981, Dec. 21, 2022; 87 FR 80434, Dec. 30, 2022; 88 FR 88222, Dec. 
21, 2023]



PART 1004_ALTERNATIVE MORTGAGE TRANSACTION PARITY (REGULATION D)--Table of 
Contents



Sec.
1004.1 Authority, purpose, and scope.
1004.2 Definitions.
1004.3 Preemption of State law.
1004.4 Requirements for alternative mortgage transactions.

Appendix A to Part 1004--Official Commentary on Regulation D

    Authority: 12 U.S.C. 3802, 3803; 15 U.S.C. 1604, 1639b; Pub. L. No. 
111-203, 124 Stat. 1376.

    Source: 76 FR 44242, July 22, 2011, unless otherwise noted.



Sec.  1004.1  Authority, purpose, and scope.

    (a) Authority. This regulation, known as Regulation D, is issued by 
the Bureau of Consumer Financial Protection to implement the Alternative 
Mortgage Transaction Parity Act, 12 U.S.C. 3801 et seq., as amended by 
title X, Section 1083 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203, 124 Stat. 1376). Section 1004.4 is 
issued pursuant to the Alternative Mortgage Transaction Parity Act (as 
amended) and the Truth in Lending Act, 15 U.S.C. 1601 et seq.
    (b) Purpose. Consistent with the Alternative Mortgage Transaction 
Parity Act, the Truth in Lending Act, and the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, the purpose of this regulation is to 
balance access to responsible credit and enhanced parity between State 
and federal housing creditors regarding the making, purchase, and 
enforcement of alternative mortgage transactions with consumer

[[Page 183]]

protection and the interests of the States in regulating mortgage 
transactions generally.
    (c) Scope. This regulation applies to an alternative mortgage 
transaction if the creditor received an application for that transaction 
on or after July 22, 2011. This regulation does not apply to a 
transaction if the creditor received the application for that 
transaction before July 22, 2011.



Sec.  1004.2  Definitions.

    For purposes of this part:
    Alternative mortgage transaction means a loan, credit sale, or 
account:
    (1) That is secured by an interest in a residential structure that 
contains one to four units, whether or not that structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence;
    (2) That is made primarily for personal, family, or household 
purposes; and
    (3) In which the interest rate or finance charge may be adjusted or 
renegotiated.
    Creditor shall have the same meaning as in 12 CFR 226.2.
    Housing creditor means:
    (1) A depository institution, as defined in section 501(a)(2) of the 
Depository Institutions Deregulation and Monetary Control Act of 1980;
    (2) A lender approved by the Secretary of Housing and Urban 
Development for participation in any mortgage insurance program under 
the National Housing Act;
    (3) Any person who regularly makes loans, credit sales, or advances 
on an account secured by an interest in a residential structure that 
contains one to four units, whether or not the structure is attached to 
real property, including an individual condominium unit, cooperative 
unit, mobile home, or trailer, if it is used as a residence; and
    (4) Any transferee of a party listed in paragraph (c)(1), (2), or 
(3) of this section.
    State means any State of the United States of America, the District 
of Columbia, Puerto Rico, the Virgin Islands, the Northern Mariana 
Islands, American Samoa, Guam, and any other territory or possession of 
the United States.
    State law means a State constitution, statute, or regulation or any 
provision thereof.



Sec.  1004.3  Preemption of State law.

    Pursuant to 12 U.S.C. 3803, a State-chartered or -licensed housing 
creditor may make, purchase, and enforce alternative mortgage 
transactions in accordance with Sec.  1004.4(a) through (c) of this part 
(as applicable), notwithstanding any provision of State law that 
restricts the ability of the housing creditor to adjust or renegotiate 
an interest rate or finance charge with respect to the transaction or to 
change the amount of interest or finance charges included in a regular 
periodic payment as a result of such an adjustment or renegotiation.



Sec.  1004.4  Requirements for alternative mortgage transactions.

    (a) Mortgages with adjustable rates or finance charges and home 
equity lines of credit. A creditor that makes an alternative mortgage 
transaction with an adjustable rate or finance charge may only increase 
the interest rate or finance charge as follows:
    (1) If the transaction is subject to 12 CFR 226.5b, the creditor 
must comply with 12 CFR 226.5b(f)(1).
    (2) For all other transactions, the creditor must use either:
    (i) An index to which changes in the interest rate are tied that is 
readily available to and verifiable by the borrower and beyond the 
control of the creditor; or
    (ii) A formula or schedule identifying the amount that the interest 
rate or finance charge may increase and the times at which, or 
circumstances under which, a change may be made.
    (b) Renegotiable rates for renewable balloon-payment mortgages. A 
creditor that makes an alternative mortgage transaction with payments 
based on an amortization period and a large final payment due after a 
shorter term may negotiate an increase or decrease in the interest rate 
when the transaction is renewed only if the creditor makes a written 
commitment to renew the transaction at specified intervals throughout 
the amortization period.

[[Page 184]]

However, the creditor is not required to renew the transaction if:
    (1) Any action or inaction by the consumer materially and adversely 
affects the creditor's security for the transaction or any right of the 
creditor in such security;
    (2) There is a material failure by the consumer to meet the 
repayment terms of the transaction;
    (3) There is fraud or a willful or knowing material 
misrepresentation by the consumer in connection with the transaction; or
    (4) Federal law dealing with credit extended by a depository 
institution to its executive officers specifically requires that as a 
condition of the extension the credit shall become due and payable on 
demand, provided that the creditor includes such a provision in the 
initial agreement.
    (c) Requirements for high-cost and higher-priced mortgage loans. (1) 
If an alternative mortgage transaction is subject to 12 CFR 226.32, the 
creditor must comply with 12 CFR 226.32 and 12 CFR 226.34.
    (2) If an alternative mortgage transaction is subject to 12 CFR 
226.35, the creditor must comply with 12 CFR 226.35.
    (d) Other applicable law. Notwithstanding paragraphs (a) through (c) 
of this section, a housing creditor that is not making an alternative 
mortgage transaction pursuant to Sec.  1004.3 of this part may make that 
transaction consistent with applicable State or Federal law other than 
this section.
    (e) Reductions in interest rate or finance charge. Nothing in this 
section prohibits a creditor from decreasing the interest rate or 
finance charge on an alternative mortgage transaction.



    Sec. Appendix A to Part 1004--Official Commentary on Regulation D

               Sec.  1004.1 Authority, Purpose, and Scope

                               1(c) Scope.

    1. Application received before July 22, 2011. This part does not 
apply to a transaction if the creditor received the application for that 
transaction before July 22, 2011, even if the transaction was 
consummated or completed on or after July 22, 2011. Whether 12 U.S.C. 
3803(c) preempts State law with respect to such a transaction depends on 
whether: (1) The transaction was an alternative mortgage transaction as 
defined by the version of 12 U.S.C. 3802(1) in effect at the time of 
application; and (2) the State housing creditor complied with applicable 
federal regulations issued by the Office of the Comptroller of the 
Currency, the National Credit Union Administration, the Office of Thrift 
Supervision, or the Federal Home Loan Bank Board in effect at the time 
of application.
    2. Subsequent modifications and other actions. If applicable 
regulations under 12 U.S.C. 3803(c) (including this Part) preempted 
State law with respect to an alternative mortgage transaction at the 
time the application was received, the following actions with respect to 
that transaction are entitled to the same degree of preemption under 
such regulations:
    i. The subsequent consummation, completion, purchase, or enforcement 
of the transaction by a housing creditor.
    ii. The subsequent modification, renewal, or extension of the 
transaction. However, if such a transaction is satisfied and replaced by 
another transaction, the second transaction must independently meet the 
requirements for preemption in effect at the time the application for 
the second transaction was received.

                        Sec.  1004.2 Definitions

                  2(a) Alternative Mortgage Transaction

    1. Alternative mortgage transaction. For purposes of this Part, an 
alternative mortgage transaction that meets the definition in Sec.  
1004.2(a) includes any consumer credit transaction that is secured by a 
mortgage, deed of trust, or other equivalent consensual security 
interest in a dwelling or in residential real property that includes a 
dwelling. The dwelling need not be the primary dwelling of the consumer. 
Home equity lines of credit and subordinate lien mortgages are 
alternative mortgage transactions for purposes of this part to the 
extent they meet the definition in Sec.  1004.2(a).
    2. Examples of alternative mortgage transactions. Examples of 
alternative mortgage transactions include:
    i. Transactions in which the interest rate changes in accordance 
with fluctuations in an index.
    ii. Transactions in which the interest rate or finance charge may be 
increased or decreased after a specified period of time or under 
specified circumstances.
    iii. Balloon transactions in which payments are based on an 
amortization schedule and a large final payment is due after a shorter 
term, where the creditor makes a commitment to renew the transaction at 
specified intervals throughout the amortization period, but the interest 
rate may be renegotiated at renewal. For example, a fixed-rate mortgage 
loan with a 30-year amortization period but a balloon payment due five 
years after consummation is an alternative

[[Page 185]]

mortgage transaction under Sec.  1004.2(a) if the creditor commits to 
renew the mortgage at five-year intervals for the entire 30-year 
amortization period.
    iv. Transactions in which the creditor and the consumer agree to 
share some or all of the appreciation in the value of the property 
(shared equity/shared appreciation).
    However, this part preempts State law only to the extent provided in 
Sec.  1004.3 and only to the extent that the requirements of Sec.  
1004.4(a) through (c) (as applicable) are met.
    3. Examples of transactions that are not alternative mortgage 
transactions. The following are examples of transactions that are not 
alternative mortgage transactions:
    i. Transactions with a fixed interest rate where one or more of the 
regular periodic payments may be applied solely to accrued interest and 
not to loan principal (an interest-only feature).
    ii. Balloon transactions with a fixed interest rate where payments 
are based on an amortization schedule and a large final payment is due 
after a shorter term, where the creditor does not make a commitment to 
renew the transaction at specified intervals throughout the amortization 
period.
    iii. Transactions with a fixed interest rate where one or more of 
the regular periodic payments may result in an increase in the principal 
balance (a negative amortization feature).

                              2(b) Creditor

    1. Creditor. As defined in 12 CFR 226.2, ``creditor'' includes 
federally and State-chartered banks, thrifts, and credit unions, as well 
as non-depository institutions, such as State-licensed lenders. The 
Official Staff Commentary to 12 CFR 226.2 contains additional guidance 
on the definition of the term ``creditor.'' See 12 CFR 226.2, Supp. I.

                  Sec.  1004.3 Preemption of State Law

    1. Scope of State laws. Regardless of whether a State law applies 
solely to alternative mortgage transactions or applies to both 
alternative mortgage transactions and other mortgage or consumer credit 
transactions, that law is preempted by Sec.  1004.3 only to the extent 
that it restricts the ability of a State-chartered or -licensed housing 
creditor to adjust or renegotiate an interest rate or finance charge 
with respect to an alternative mortgage transaction or to change the 
amount of interest or finance charges included in a regular periodic 
payment as a result of such an adjustment or renegotiation.
    2. Examples of State laws that are preempted. The following are 
examples of State laws that are preempted by Sec.  1004.3:
    i. Restrictions on the adjustment or renegotiation of an interest 
rate or finance charge, including restrictions on the circumstances 
under which a rate or charge may be adjusted, the method by which a rate 
or charge may be adjusted, and the amount of the adjustment to the rate 
or charge. For example, if a provision of State law prohibits creditors 
from increasing an adjustable rate more than two percentage points or 
from increasing an adjustable rate more than once during a year, that 
provision is preempted by Sec.  1004.3 with respect to alternative 
mortgage transactions that comply with Sec.  1004.4(a) through (c), as 
applicable. Similarly, if a provision of State law prohibits housing 
creditors from renewing balloon transactions that meet the definition of 
an alternative mortgage transaction in Sec.  1004.2(a) on different 
terms, that provision is preempted by Sec.  1004.3 only to the extent 
that it restricts a state housing creditor's ability to adjust or 
renegotiate the interest rate or finance charge at renewal. See also 
comment 1004.3-3.i.
    ii. Restrictions on the ability of a housing creditor to change the 
amount of interest or finance charges included in regular periodic 
payments as a result of the adjustment or renegotiation of an interest 
rate or finance charge. For example, if a provision of State law 
prohibits housing creditors from increasing payments or limits the 
amount of such increases with respect to both alternative mortgage 
transactions and other mortgage or consumer credit transactions, that 
provision is preempted by Sec.  1004.3 to the extent that it restricts a 
housing creditor's ability to adjust payments as a result of the 
adjustment or renegotiation of an interest rate on an alternative 
mortgage transaction. Other restrictions on changes to payments are not 
preempted, including restrictions on transactions in which one or more 
of the regular periodic payments may result in an increase in the 
principal balance (a negative amortization feature) or may be applied 
solely to accrued interest and not to loan principal (an interest-only 
feature).
    iii. Restrictions on the creditor and the consumer sharing some or 
all of the appreciation in the value of the property (shared equity/
shared appreciation).
    iv. Underwriting requirements that address the adjustment or 
renegotiation of interest rates or finance charges. For example, if a 
provision of State law requires housing creditors to underwrite based on 
the maximum contractual rate, that provision is preempted by Sec.  
1004.3 with respect to alternative mortgage transactions, regardless of 
whether the provision applies solely to alternative mortgage 
transactions or to both alternative mortgage transactions and other 
mortgage or consumer credit transactions.
    3. Examples of State laws that are not preempted. The following are 
examples of State laws that are not preempted by Sec.  1004.3 regardless 
of whether the provision applies solely to alternative mortgage 
transactions or to both alternative mortgage transactions

[[Page 186]]

and other mortgage or consumer credit transactions:
    i. Restrictions on prepayment penalties or late charges (including 
an increase in an interest rate or finance charge as a result of a late 
payment).
    ii. Restrictions on transactions in which one or more of the regular 
periodic payments may result in an increase in the principal balance (a 
negative amortization feature) or may be applied solely to accrued 
interest and not to loan principal (an interest-only feature).
    iii. Requirements that disclosures be provided.

     Sec.  1004.4 Requirements for Alternative Mortgage Transactions

4(a) Mortgages With Adjustable or Renegotiable Rates or Finance Charges 
                     and Home Equity Lines of Credit

    1. Index values. A creditor may use any measure of index values that 
meets the requirements in Sec.  1004.4(a)(2)(i). For example, the index 
may be either single values as of a specific date or an average of 
values calculated over a specified period.
    2. Index beyond creditor's control. A creditor may increase an 
adjustable interest rate pursuant to Sec.  1004.4(a)(2)(i) only if the 
increase is based on an index that is beyond the creditor's control. For 
purposes of Sec.  1004.4(a)(2)(i), an index is not beyond the creditor's 
control if the index is the creditor's own prime rate or cost of funds. 
A creditor is permitted, however, to use a published prime rate, such as 
the prime rate published in the Wall Street Journal, even if the 
creditor's own prime rate is one of several rates used to establish the 
published rate.
    3. Publicly available. For purposes of Sec.  1004.4(a)(2)(i), the 
index must be available to the public. A publicly available index need 
not be published in a newspaper, but it must be one the consumer can 
independently obtain (by telephone, for example) and use to verify the 
annual percentage rate applied to the alternative mortgage transaction.

    4(c) Requirements for High-Cost and Higher-Priced Mortgage Loans

    1. Prepayment penalties. If applicable, creditors must comply with 
12 CFR 226.32, including 12 CFR 226.32(d)(6) and (d)(7) which provide 
limitations on prepayment penalties. Similarly, if applicable, creditors 
must comply with 12 CFR 226.35, including 12 CFR 226.35(b)(2), which 
also provides limitations on prepayment penalties. However, under Sec.  
1004.3, State laws regarding prepayment penalties are not preempted. See 
comment 1004.3-3.i. Accordingly, creditors must also comply with any 
State laws regarding prepayment penalties unless an independent basis 
for preemption exists, such as because the State law is inconsistent 
with the requirements of Regulation Z, 12 CFR part 226. See 12 CFR 
226.28.

                        4(d) Other Applicable Law

    1. Other applicable law. Section 1004.4(d) permits state housing 
creditors that do not seek preemption under Sec.  1004.3 and federal 
housing creditors to make alternative mortgage transactions consistent 
with applicable State or federal law other than Sec.  1004.4(a) through 
(c). However, Sec.  1004.4(d) does not exempt those housing creditors 
from complying with the provisions of federal law that are incorporated 
by reference in Sec.  1004.4 and are otherwise applicable to the 
creditor. Specifically, nothing in Sec.  1004.4(d) exempts a housing 
creditor from complying with 12 CFR 226.5b, 226.32, 226.34, or 226.35.



PART 1005_ELECTRONIC FUND TRANSFERS (REGULATION E)--Table of Contents



                            Subpart A_General

Sec.
1005.1 Authority and purpose.
1005.2 Definitions.
1005.3 Coverage.
1005.4 General disclosure requirements; jointly offered services.
1005.5 Issuance of access devices.
1005.6 Liability of consumer for unauthorized transfers.
1005.7 Initial disclosures.
1005.8 Change in terms notice; error resolution notice.
1005.9 Receipts at electronic terminals; periodic statements.
1005.10 Preauthorized transfers.
1005.11 Procedures for resolving errors.
1005.12 Relation to other laws.
1005.13 Administrative enforcement; record retention.
1005.14 Electronic fund transfer service provider not holding consumer's 
          account.
1005.15 Electronic fund transfer of government benefits.
1005.16 Disclosures at automated teller machines.
1005.17 Requirements for overdraft services.
1005.18 Requirements for financial institutions offering prepaid 
          accounts.
1005.19 Internet posting of prepaid account agreements.
1005.20 Requirements for gift cards and gift certificates.

             Subpart B_Requirements for Remittance Transfers

1005.30 Remittance transfer definitions.
1005.31 Disclosures.
1005.32 Estimates.
1005.33 Procedures for resolving errors.
1005.34 Procedures for cancellation and refund of remittance transfers.

[[Page 187]]

1005.35 Acts of agents.
1005.36 Transfers scheduled before the date of transfer.

Appendix A to Part 1005--Model Disclosure Clauses and Forms
Appendix B to Part 1005 [Reserved]
Appendix C to Part 1005--Issuance of Official Interpretations
Supplement I to Part 1005--Official Interpretations

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is also 
issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o-1.

    Source: 76 FR 81023, Dec. 27, 2011, unless otherwise noted.



                            Subpart A_General



Sec.  1005.1  Authority and purpose.

    (a) Authority. The regulation in this part, known as Regulation E, 
is issued by the Bureau of Consumer Financial Protection (Bureau) 
pursuant to the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.). 
The information-collection requirements have been approved by the Office 
of Management and Budget under 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 3170-0014.
    (b) Purpose. This part carries out the purposes of the Electronic 
Fund Transfer Act, which establishes the basic rights, liabilities, and 
responsibilities of consumers who use electronic fund transfer and 
remittance transfer services and of financial institutions or other 
persons that offer these services. The primary objective of the act and 
this part is the protection of individual consumers engaging in 
electronic fund transfers and remittance transfers.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec.  1005.2  Definitions.

    Except as otherwise provided in subpart B, for purposes of this 
part, the following definitions apply:
    (a)(1) ``Access device'' means a card, code, or other means of 
access to a consumer's account, or any combination thereof, that may be 
used by the consumer to initiate electronic fund transfers.
    (2) An access device becomes an ``accepted access device'' when the 
consumer:
    (i) Requests and receives, or signs, or uses (or authorizes another 
to use) the access device to transfer money between accounts or to 
obtain money, property, or services;
    (ii) Requests validation of an access device issued on an 
unsolicited basis; or
    (iii) Receives an access device in renewal of, or in substitution 
for, an accepted access device from either the financial institution 
that initially issued the device or a successor.
    (b)(1) ``Account'' means a demand deposit (checking), savings, or 
other consumer asset account (other than an occasional or incidental 
credit balance in a credit plan) held directly or indirectly by a 
financial institution and established primarily for personal, family, or 
household purposes.
    (2) The term does not include an account held by a financial 
institution under a bona fide trust agreement.
    (3) The term includes a prepaid account.
    (i) ``Prepaid account'' means:
    (A) A ``payroll card account,'' which is an account that is directly 
or indirectly established through an employer and to which electronic 
fund transfers of the consumer's wages, salary, or other employee 
compensation (such as commissions) are made on a recurring basis, 
whether the account is operated or managed by the employer, a third-
party payroll processor, a depository institution, or any other person; 
or
    (B) A ``government benefit account,'' as defined in Sec.  
1005.15(a)(2); or
    (C) An account that is marketed or labeled as ``prepaid'' and that 
is redeemable upon presentation at multiple, unaffiliated merchants for 
goods or services or usable at automated teller machines; or
    (D) An account:
    (1) That is issued on a prepaid basis in a specified amount or not 
issued on a prepaid basis but capable of being loaded with funds 
thereafter,
    (2) Whose primary function is to conduct transactions with multiple, 
unaffiliated merchants for goods or services, or at automated teller 
machines, or to conduct person-to-person transfers, and

[[Page 188]]

    (3) That is not a checking account, share draft account, or 
negotiable order of withdrawal account.
    (ii) For purposes of paragraphs (b)(3)(i)(C) and (D) of this 
section, the term ``prepaid account'' does not include:
    (A) An account that is loaded only with funds from a health savings 
account, flexible spending arrangement, medical savings account, health 
reimbursement arrangement, dependent care assistance program, or transit 
or parking reimbursement arrangement;
    (B) An account that is directly or indirectly established through a 
third party and loaded only with qualified disaster relief payments;
    (C) The person-to-person functionality of an account established by 
or through the United States government whose primary function is to 
conduct closed-loop transactions on U.S. military installations or 
vessels, or similar government facilities;
    (D)(1) A gift certificate as defined in Sec.  1005.20(a)(1) and (b);
    (2) A store gift card as defined in Sec.  1005.20(a)(2) and (b);
    (3) A loyalty, award, or promotional gift card as defined in Sec.  
1005.20(a)(4), or that satisfies the criteria in Sec.  1005.20(a)(4)(i) 
and (ii) and is excluded from Sec.  1005.20 pursuant to Sec.  
1005.20(b)(4); or
    (4) A general-use prepaid card as defined in Sec.  1005.20(a)(3) and 
(b) that is both marketed and labeled as a gift card or gift 
certificate; or
    (E) An account established for distributing needs-tested benefits in 
a program established under state or local law or administered by a 
state or local agency, as set forth in Sec.  1005.15(a)(2).
    (c) ``Act'' means the Electronic Fund Transfer Act (Title IX of the 
Consumer Credit Protection Act, 15 U.S.C. 1693 et seq.).
    (d) ``Business day'' means any day on which the offices of the 
consumer's financial institution are open to the public for carrying on 
substantially all business functions.
    (e) ``Consumer'' means a natural person.
    (f) ``Credit'' means the right granted by a financial institution to 
a consumer to defer payment of debt, incur debt and defer its payment, 
or purchase property or services and defer payment therefor.
    (g) ``Electronic fund transfer'' is defined in Sec.  1005.3.
    (h) ``Electronic terminal'' means an electronic device, other than a 
telephone operated by a consumer, through which a consumer may initiate 
an electronic fund transfer. The term includes, but is not limited to, 
point-of-sale terminals, automated teller machines (ATMs), and cash 
dispensing machines.
    (i) ``Financial institution'' means a bank, savings association, 
credit union, or any other person that directly or indirectly holds an 
account belonging to a consumer, or that issues an access device and 
agrees with a consumer to provide electronic fund transfer services, 
other than a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 1376.
    (j) ``Person'' means a natural person or an organization, including 
a corporation, government agency, estate, trust, partnership, 
proprietorship, cooperative, or association.
    (k) ``Preauthorized electronic fund transfer'' means an electronic 
fund transfer authorized in advance to recur at substantially regular 
intervals.
    (l) ``State'' means any state, territory, or possession of the 
United States; the District of Columbia; the Commonwealth of Puerto 
Rico; or any political subdivision of the thereof in this paragraph (l).
    (m) ``Unauthorized electronic fund transfer'' means an electronic 
fund transfer from a consumer's account initiated by a person other than 
the consumer without actual authority to initiate the transfer and from 
which the consumer receives no benefit. The term does not include an 
electronic fund transfer initiated:
    (1) By a person who was furnished the access device to the 
consumer's account by the consumer, unless the consumer has notified the 
financial institution that transfers by that person are no longer 
authorized;

[[Page 189]]

    (2) With fraudulent intent by the consumer or any person acting in 
concert with the consumer; or
    (3) By the financial institution or its employee.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012; 81 
FR 84325, Nov. 22, 2016; 83 FR 6417, Feb. 13, 2018]



Sec.  1005.3  Coverage.

    (a) General. This part applies to any electronic fund transfer that 
authorizes a financial institution to debit or credit a consumer's 
account. Generally, this part applies to financial institutions. For 
purposes of Sec. Sec.  1005.3(b)(2) and (3), 1005.10(b), (d), and (e), 
1005.13, and 1005.20, this part applies to any person, other than a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376. The requirements of subpart B apply to remittance transfer 
providers.
    (b) Electronic fund transfer--(1) Definition. The term ``electronic 
fund transfer'' means any transfer of funds that is initiated through an 
electronic terminal, telephone, computer, or magnetic tape for the 
purpose of ordering, instructing, or authorizing a financial institution 
to debit or credit a consumer's account. The term includes, but is not 
limited to:
    (i) Point-of-sale transfers;
    (ii) Automated teller machine transfers;
    (iii) Direct deposits or withdrawals of funds;
    (iv) Transfers initiated by telephone; and
    (v) Transfers resulting from debit card transactions, whether or not 
initiated through an electronic terminal.
    (2) Electronic fund transfer using information from a check. (i) 
This part applies where a check, draft, or similar paper instrument is 
used as a source of information to initiate a one-time electronic fund 
transfer from a consumer's account. The consumer must authorize the 
transfer.
    (ii) The person initiating an electronic fund transfer using the 
consumer's check as a source of information for the transfer must 
provide a notice that the transaction will or may be processed as an 
electronic fund transfer, and obtain a consumer's authorization for each 
transfer. A consumer authorizes a one-time electronic fund transfer (in 
providing a check to a merchant or other payee for the MICR encoding, 
that is, the routing number of the financial institution, the consumer's 
account number and the serial number) when the consumer receives notice 
and goes forward with the underlying transaction. For point-of-sale 
transfers, the notice must be posted in a prominent and conspicuous 
location, and a copy thereof, or a substantially similar notice, must be 
provided to the consumer at the time of the transaction.
    (iii) A person may provide notices that are substantially similar to 
those set forth in appendix A-6 to comply with the requirements of this 
paragraph (b)(2).
    (3) Collection of returned item fees via electronic fund transfer--
(i) General. The person initiating an electronic fund transfer to 
collect a fee for the return of an electronic fund transfer or a check 
that is unpaid, including due to insufficient or uncollected funds in 
the consumer's account, must obtain the consumer's authorization for 
each transfer. A consumer authorizes a one-time electronic fund transfer 
from his or her account to pay the fee for the returned item or transfer 
if the person collecting the fee provides notice to the consumer stating 
that the person may electronically collect the fee, and the consumer 
goes forward with the underlying transaction. The notice must state that 
the fee will be collected by means of an electronic fund transfer from 
the consumer's account if the payment is returned unpaid and must 
disclose the dollar amount of the fee. If the fee may vary due to the 
amount of the transaction or due to other factors, then, except as 
otherwise provided in paragraph (b)(3)(ii) of this section, the person 
collecting the fee may disclose, in place of the dollar amount of the 
fee, an explanation of how the fee will be determined.
    (ii) Point-of-sale transactions. If a fee for an electronic fund 
transfer or check returned unpaid may be collected electronically in 
connection with a point-

[[Page 190]]

of-sale transaction, the person initiating an electronic fund transfer 
to collect the fee must post the notice described in paragraph (b)(3)(i) 
of this section in a prominent and conspicuous location. The person also 
must either provide the consumer with a copy of the posted notice (or a 
substantially similar notice) at the time of the transaction, or mail 
the copy (or a substantially similar notice) to the consumer's address 
as soon as reasonably practicable after the person initiates the 
electronic fund transfer to collect the fee. If the amount of the fee 
may vary due to the amount of the transaction or due to other factors, 
the posted notice may explain how the fee will be determined, but the 
notice provided to the consumer must state the dollar amount of the fee 
if the amount can be calculated at the time the notice is provided or 
mailed to the consumer.
    (c) Exclusions from coverage. The term ``electronic fund transfer'' 
does not include:
    (1) Checks. Any transfer of funds originated by check, draft, or 
similar paper instrument; or any payment made by check, draft, or 
similar paper instrument at an electronic terminal.
    (2) Check guarantee or authorization. Any transfer of funds that 
guarantees payment or authorizes acceptance of a check, draft, or 
similar paper instrument but that does not directly result in a debit or 
credit to a consumer's account.
    (3) Wire or other similar transfers. Any transfer of funds through 
Fedwire or through a similar wire transfer system that is used primarily 
for transfers between financial institutions or between businesses.
    (4) Securities and commodities transfers. Any transfer of funds the 
primary purpose of which is the purchase or sale of a security or 
commodity, if the security or commodity is:
    (i) Regulated by the Securities and Exchange Commission or the 
Commodity Futures Trading Commission;
    (ii) Purchased or sold through a broker-dealer regulated by the 
Securities and Exchange Commission or through a futures commission 
merchant regulated by the Commodity Futures Trading Commission; or
    (iii) Held in book-entry form by a Federal Reserve Bank or Federal 
agency.
    (5) Automatic transfers by account-holding institution. Any transfer 
of funds under an agreement between a consumer and a financial 
institution which provides that the institution will initiate individual 
transfers without a specific request from the consumer:
    (i) Between a consumer's accounts within the financial institution;
    (ii) From a consumer's account to an account of a member of the 
consumer's family held in the same financial institution; or
    (iii) Between a consumer's account and an account of the financial 
institution, except that these transfers remain subject to Sec.  
1005.10(e) regarding compulsory use and sections 916 and 917 of the Act 
regarding civil and criminal liability.
    (6) Telephone-initiated transfers. Any transfer of funds that:
    (i) Is initiated by a telephone communication between a consumer and 
a financial institution making the transfer; and
    (ii) Does not take place under a telephone bill-payment or other 
written plan in which periodic or recurring transfers are contemplated.
    (7) Small institutions. Any preauthorized transfer to or from an 
account if the assets of the account-holding financial institution were 
$100 million or less on the preceding December 31. If assets of the 
account-holding institution subsequently exceed $100 million, the 
institution's exemption for preauthorized transfers terminates one year 
from the end of the calendar year in which the assets exceed $100 
million. Preauthorized transfers exempt under this paragraph (c)(7) 
remain subject to Sec.  1005.10(e) regarding compulsory use and sections 
916 and 917 of the Act regarding civil and criminal liability.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6285, Feb. 7, 2012]



Sec.  1005.4  General disclosure requirements; jointly offered services.

    (a)(1) Form of disclosures. Disclosures required under this part 
shall be clear and readily understandable, in writing, and in a form the 
consumer may keep,

[[Page 191]]

except as otherwise provided in this part. The disclosures required by 
this part may be provided to the consumer in electronic form, subject to 
compliance with the consumer-consent and other applicable provisions of 
the Electronic Signatures in Global and National Commerce Act (E-Sign 
Act) (15 U.S.C. 7001 et seq.). A financial institution may use commonly 
accepted or readily understandable abbreviations in complying with the 
disclosure requirements of this part.
    (2) Foreign language disclosures. Disclosures required under this 
part may be made in a language other than English, provided that the 
disclosures are made available in English upon the consumer's request.
    (b) Additional information; disclosures required by other laws. A 
financial institution may include additional information and may combine 
disclosures required by other laws (such as the Truth in Lending Act (15 
U.S.C. 1601 et seq.) or the Truth in Savings Act (12 U.S.C. 4301 et 
seq.) with the disclosures required by this part.
    (c) Multiple accounts and account holders--(1) Multiple accounts. A 
financial institution may combine the required disclosures into a single 
statement for a consumer who holds more than one account at the 
institution.
    (2) Multiple account holders. For joint accounts held by two or more 
consumers, a financial institution need provide only one set of the 
required disclosures and may provide them to any of the account holders.
    (d) Services offered jointly. Financial institutions that provide 
electronic fund transfer services jointly may contract among themselves 
to comply with the requirements that this part imposes on any or all of 
them. An institution need make only the disclosures required by 
Sec. Sec.  1005.7 and 1005.8 that are within its knowledge and within 
the purview of its relationship with the consumer for whom it holds an 
account.



Sec.  1005.5  Issuance of access devices.

    (a) Solicited issuance. Except as provided in paragraph (b) of this 
section, a financial institution may issue an access device to a 
consumer only:
    (1) In response to an oral or written request for the device; or
    (2) As a renewal of, or in substitution for, an accepted access 
device whether issued by the institution or a successor.
    (b) Unsolicited issuance. A financial institution may distribute an 
access device to a consumer on an unsolicited basis if the access device 
is:
    (1) Not validated, meaning that the institution has not yet 
performed all the procedures that would enable a consumer to initiate an 
electronic fund transfer using the access device;
    (2) Accompanied by a clear explanation that the access device is not 
validated and how the consumer may dispose of it if validation is not 
desired;
    (3) Accompanied by the disclosures required by Sec.  1005.7, of the 
consumer's rights and liabilities that will apply if the access device 
is validated; and
    (4) Validated only in response to the consumer's oral or written 
request for validation, after the institution has verified the 
consumer's identity by a reasonable means.



Sec.  1005.6  Liability of consumer for unauthorized transfers.

    (a) Conditions for liability. A consumer may be held liable, within 
the limitations described in paragraph (b) of this section, for an 
unauthorized electronic fund transfer involving the consumer's account 
only if the financial institution has provided the disclosures required 
by Sec.  1005.7(b)(1), (2), and (3). If the unauthorized transfer 
involved an access device, it must be an accepted access device and the 
financial institution must have provided a means to identify the 
consumer to whom it was issued.
    (b) Limitations on amount of liability. A consumer's liability for 
an unauthorized electronic fund transfer or a series of related 
unauthorized transfers shall be determined as follows:
    (1) Timely notice given. If the consumer notifies the financial 
institution within two business days after learning of the loss or theft 
of the access device, the consumer's liability shall not exceed the 
lesser of $50 or the amount of unauthorized transfers that occur before 
notice to the financial institution.

[[Page 192]]

    (2) Timely notice not given. If the consumer fails to notify the 
financial institution within two business days after learning of the 
loss or theft of the access device, the consumer's liability shall not 
exceed the lesser of $500 or the sum of:
    (i) $50 or the amount of unauthorized transfers that occur within 
the two business days, whichever is less; and
    (ii) The amount of unauthorized transfers that occur after the close 
of two business days and before notice to the institution, provided the 
institution establishes that these transfers would not have occurred had 
the consumer notified the institution within that two-day period.
    (3) Periodic statement; timely notice not given. A consumer must 
report an unauthorized electronic fund transfer that appears on a 
periodic statement within 60 days of the financial institution's 
transmittal of the statement to avoid liability for subsequent 
transfers. If the consumer fails to do so, the consumer's liability 
shall not exceed the amount of the unauthorized transfers that occur 
after the close of the 60 days and before notice to the institution, and 
that the institution establishes would not have occurred had the 
consumer notified the institution within the 60-day period. When an 
access device is involved in the unauthorized transfer, the consumer may 
be liable for other amounts set forth in paragraphs (b)(1) or (b)(2) of 
this section, as applicable.
    (4) Extension of time limits. If the consumer's delay in notifying 
the financial institution was due to extenuating circumstances, the 
institution shall extend the times specified above to a reasonable 
period.
    (5) Notice to financial institution. (i) Notice to a financial 
institution is given when a consumer takes steps reasonably necessary to 
provide the institution with the pertinent information, whether or not a 
particular employee or agent of the institution actually receives the 
information.
    (ii) The consumer may notify the institution in person, by 
telephone, or in writing.
    (iii) Written notice is considered given at the time the consumer 
mails the notice or delivers it for transmission to the institution by 
any other usual means. Notice may be considered constructively given 
when the institution becomes aware of circumstances leading to the 
reasonable belief that an unauthorized transfer to or from the 
consumer's account has been or may be made.
    (6) Liability under state law or agreement. If state law or an 
agreement between the consumer and the financial institution imposes 
less liability than is provided by this section, the consumer's 
liability shall not exceed the amount imposed under the state law or 
agreement.



Sec.  1005.7  Initial disclosures.

    (a) Timing of disclosures. A financial institution shall make the 
disclosures required by this section at the time a consumer contracts 
for an electronic fund transfer service or before the first electronic 
fund transfer is made involving the consumer's account.
    (b) Content of disclosures. A financial institution shall provide 
the following disclosures, as applicable:
    (1) Liability of consumer. A summary of the consumer's liability, 
under Sec.  1005.6 or under state or other applicable law or agreement, 
for unauthorized electronic fund transfers.
    (2) Telephone number and address. The telephone number and address 
of the person or office to be notified when the consumer believes that 
an unauthorized electronic fund transfer has been or may be made.
    (3) Business days. The financial institution's business days.
    (4) Types of transfers; limitations. The type of electronic fund 
transfers that the consumer may make and any limitations on the 
frequency and dollar amount of transfers. Details of the limitations 
need not be disclosed if confidentiality is essential to maintain the 
security of the electronic fund transfer system.
    (5) Fees. Any fees imposed by the financial institution for 
electronic fund transfers or for the right to make transfers.
    (6) Documentation. A summary of the consumer's right to receipts and 
periodic statements, as provided in Sec.  1005.9 of this part, and 
notices regarding

[[Page 193]]

preauthorized transfers as provided in Sec.  1005.10(a) and (d).
    (7) Stop payment. A summary of the consumer's right to stop payment 
of a preauthorized electronic fund transfer and the procedure for 
placing a stop-payment order, as provided in Sec.  1005.10(c).
    (8) Liability of institution. A summary of the financial 
institution's liability to the consumer under section 910 of the Act for 
failure to make or to stop certain transfers.
    (9) Confidentiality. The circumstances under which, in the ordinary 
course of business, the financial institution may provide information 
concerning the consumer's account to third parties.
    (10) Error resolution. A notice that is substantially similar to 
Model Form A-3 as set out in appendix A of this part concerning error 
resolution.
    (11) ATM fees. A notice that a fee may be imposed by an automated 
teller machine operator as defined in Sec.  1005.16(a), when the 
consumer initiates an electronic fund transfer or makes a balance 
inquiry, and by any network used to complete the transaction.
    (c) Addition of electronic fund transfer services. If an electronic 
fund transfer service is added to a consumer's account and is subject to 
terms and conditions different from those described in the initial 
disclosures, disclosures for the new service are required.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 70320, Oct. 12, 2016]



Sec.  1005.8  Change in terms notice; error resolution notice.

    (a) Change in terms notice--(1) Prior notice required. A financial 
institution shall mail or deliver a written notice to the consumer, at 
least 21 days before the effective date, of any change in a term or 
condition required to be disclosed under Sec.  1005.7(b) of this part if 
the change would result in:
    (i) Increased fees for the consumer;
    (ii) Increased liability for the consumer;
    (iii) Fewer types of available electronic fund transfers; or
    (iv) Stricter limitations on the frequency or dollar amount of 
transfers.
    (2) Prior notice exception. A financial institution need not give 
prior notice if an immediate change in terms or conditions is necessary 
to maintain or restore the security of an account or an electronic fund 
transfer system. If the institution makes such a change permanent and 
disclosure would not jeopardize the security of the account or system, 
the institution shall notify the consumer in writing on or with the next 
regularly scheduled periodic statement or within 30 days of making the 
change permanent.
    (b) Error resolution notice. For accounts to or from which 
electronic fund transfers can be made, a financial institution shall 
mail or deliver to the consumer, at least once each calendar year, an 
error resolution notice substantially similar to the model form set 
forth in appendix A of this part (Model Form A-3). Alternatively, an 
institution may include an abbreviated notice substantially similar to 
the model form error resolution notice set forth in appendix A of this 
part (Model Form A-3), on or with each periodic statement required by 
Sec.  1005.9(b).



Sec.  1005.9  Receipts at electronic terminals; periodic statements.

    (a) Receipts at electronic terminals--General. Except as provided in 
paragraph (e) of this section, a financial institution shall make a 
receipt available to a consumer at the time the consumer initiates an 
electronic fund transfer at an electronic terminal. The receipt shall 
set forth the following information, as applicable:
    (1) Amount. The amount of the transfer. A transaction fee may be 
included in this amount, provided the amount of the fee is disclosed on 
the receipt and displayed on or at the terminal.
    (2) Date. The date the consumer initiates the transfer.
    (3) Type. The type of transfer and the type of the consumer's 
account(s) to or from which funds are transferred. The type of account 
may be omitted if the access device used is able to access only one 
account at that terminal.
    (4) Identification. A number or code that identifies the consumer's 
account or accounts, or the access device used to initiate the transfer. 
The number or code need not exceed four digits or letters to comply with 
the requirements of this paragraph (a)(4).

[[Page 194]]

    (5) Terminal location. The location of the terminal where the 
transfer is initiated, or an identification such as a code or terminal 
number. Except in limited circumstances where all terminals are located 
in the same city or state, if the location is disclosed, it shall 
include the city and state or foreign country and one of the following:
    (i) The street address; or
    (ii) A generally accepted name for the specific location; or
    (iii) The name of the owner or operator of the terminal if other 
than the account-holding institution.
    (6) Third party transfer. The name of any third party to or from 
whom funds are transferred.
    (b) Periodic statements. For an account to or from which electronic 
fund transfers can be made, a financial institution shall send a 
periodic statement for each monthly cycle in which an electronic fund 
transfer has occurred; and shall send a periodic statement at least 
quarterly if no transfer has occurred. The statement shall set forth the 
following information, as applicable:
    (1) Transaction information. For each electronic fund transfer 
occurring during the cycle:
    (i) The amount of the transfer;
    (ii) The date the transfer was credited or debited to the consumer's 
account;
    (iii) The type of transfer and type of account to or from which 
funds were transferred;
    (iv) For a transfer initiated by the consumer at an electronic 
terminal (except for a deposit of cash or a check, draft, or similar 
paper instrument), the terminal location described in paragraph (a)(5) 
of this section; and
    (v) The name of any third party to or from whom funds were 
transferred.
    (2) Account number. The number of the account.
    (3) Fees. The amount of any fees assessed against the account during 
the statement period for electronic fund transfers, the right to make 
transfers, or account maintenance.
    (4) Account balances. The balance in the account at the beginning 
and at the close of the statement period.
    (5) Address and telephone number for inquiries. The address and 
telephone number to be used for inquiries or notice of errors, preceded 
by ``Direct inquiries to'' or similar language. The address and 
telephone number provided on an error resolution notice under Sec.  
1005.8(b) given on or with the statement satisfies this requirement.
    (6) Telephone number for preauthorized transfers. A telephone number 
the consumer may call to ascertain whether preauthorized transfers to 
the consumer's account have occurred, if the financial institution uses 
the telephone-notice option under Sec.  1005.10(a)(1)(iii).
    (c) Exceptions to the periodic statement requirement for certain 
accounts--(1) Preauthorized transfers to accounts. For accounts that may 
be accessed only by preauthorized transfers to the account the following 
rules apply:
    (i) Passbook accounts. For passbook accounts, the financial 
institution need not provide a periodic statement if the institution 
updates the passbook upon presentation or enters on a separate document 
the amount and date of each electronic fund transfer since the passbook 
was last presented.
    (ii) Other accounts. For accounts other than passbook accounts, the 
financial institution must send a periodic statement at least quarterly.
    (2) Intra-institutional transfers. For an electronic fund transfer 
initiated by the consumer between two accounts of the consumer in the 
same institution, documenting the transfer on a periodic statement for 
one of the two accounts satisfies the periodic statement requirement.
    (3) Relationship between paragraphs (c)(1) and (2) of this section. 
An account that is accessed by preauthorized transfers to the account 
described in paragraph (c)(1) of this section and by intra-institutional 
transfers described in paragraph (c)(2) of this section, but by no other 
type of electronic fund transfers, qualifies for the exceptions provided 
by paragraph (c)(1) of this section.
    (d) Documentation for foreign-initiated transfers. The failure by a 
financial institution to provide a terminal receipt for an electronic 
fund transfer or to document the transfer on a periodic statement does 
not violate this part if:
    (1) The transfer is not initiated within a state; and

[[Page 195]]

    (2) The financial institution treats an inquiry for clarification or 
documentation as a notice of error in accordance with Sec.  1005.11.
    (e) Exception for receipts in small-value transfers. A financial 
institution is not subject to the requirement to make available a 
receipt under paragraph (a) of this section if the amount of the 
transfer is $15 or less.



Sec.  1005.10  Preauthorized transfers.

    (a) Preauthorized transfers to consumer's account--(1) Notice by 
financial institution. When a person initiates preauthorized electronic 
fund transfers to a consumer's account at least once every 60 days, the 
account-holding financial institution shall provide notice to the 
consumer by:
    (i) Positive notice. Providing oral or written notice of the 
transfer within two business days after the transfer occurs; or
    (ii) Negative notice. Providing oral or written notice, within two 
business days after the date on which the transfer was scheduled to 
occur, that the transfer did not occur; or
    (iii) Readily-available telephone line. Providing a readily 
available telephone line that the consumer may call to determine whether 
the transfer occurred and disclosing the telephone number on the initial 
disclosure of account terms and on each periodic statement.
    (2) Notice by payor. A financial institution need not provide notice 
of a transfer if the payor gives the consumer positive notice that the 
transfer has been initiated.
    (3) Crediting. A financial institution that receives a preauthorized 
transfer of the type described in paragraph (a)(1) of this section shall 
credit the amount of the transfer as of the date the funds for the 
transfer are received.
    (b) Written authorization for preauthorized transfers from 
consumer's account. Preauthorized electronic fund transfers from a 
consumer's account may be authorized only by a writing signed or 
similarly authenticated by the consumer. The person that obtains the 
authorization shall provide a copy to the consumer.
    (c) Consumer's right to stop payment--(1) Notice. A consumer may 
stop payment of a preauthorized electronic fund transfer from the 
consumer's account by notifying the financial institution orally or in 
writing at least three business days before the scheduled date of the 
transfer.
    (2) Written confirmation. The financial institution may require the 
consumer to give written confirmation of a stop-payment order within 14 
days of an oral notification. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification. An oral stop-payment order ceases to be binding after 
14 days if the consumer fails to provide the required written 
confirmation.
    (d) Notice of transfers varying in amount--(1) Notice. When a 
preauthorized electronic fund transfer from the consumer's account will 
vary in amount from the previous transfer under the same authorization 
or from the preauthorized amount, the designated payee or the financial 
institution shall send the consumer written notice of the amount and 
date of the transfer at least 10 days before the scheduled date of 
transfer.
    (2) Range. The designated payee or the institution shall inform the 
consumer of the right to receive notice of all varying transfers, but 
may give the consumer the option of receiving notice only when a 
transfer falls outside a specified range of amounts or only when a 
transfer differs from the most recent transfer by more than an agreed-
upon amount.
    (e) Compulsory use--(1) Credit. No financial institution or other 
person may condition an extension of credit to a consumer on the 
consumer's repayment by preauthorized electronic fund transfers, except 
for credit extended under an overdraft credit plan or extended to 
maintain a specified minimum balance in the consumer's account. This 
exception does not apply to a covered separate credit feature accessible 
by a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 
1026.61.
    (2) Employment or government benefit. No financial institution or 
other person may require a consumer to establish an account for receipt 
of electronic

[[Page 196]]

fund transfers with a particular institution as a condition of 
employment or receipt of a government benefit.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 84326, Nov. 22, 2016]



Sec.  1005.11  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. The term ``error'' means:
    (i) An unauthorized electronic fund transfer;
    (ii) An incorrect electronic fund transfer to or from the consumer's 
account;
    (iii) The omission of an electronic fund transfer from a periodic 
statement;
    (iv) A computational or bookkeeping error made by the financial 
institution relating to an electronic fund transfer;
    (v) The consumer's receipt of an incorrect amount of money from an 
electronic terminal;
    (vi) An electronic fund transfer not identified in accordance with 
Sec.  1005.9 or Sec.  1005.10(a); or
    (vii) The consumer's request for documentation required by Sec.  
1005.9 or Sec.  1005.10(a) or for additional information or 
clarification concerning an electronic fund transfer, including a 
request the consumer makes to determine whether an error exists under 
paragraphs (a)(1)(i) through (vi) of this section.
    (2) Types of inquiries not covered. The term ``error'' does not 
include:
    (i) A routine inquiry about the consumer's account balance;
    (ii) A request for information for tax or other recordkeeping 
purposes; or
    (iii) A request for duplicate copies of documentation.
    (b) Notice of error from consumer--(1) Timing; contents. A financial 
institution shall comply with the requirements of this section with 
respect to any oral or written notice of error from the consumer that:
    (i) Is received by the institution no later than 60 days after the 
institution sends the periodic statement or provides the passbook 
documentation, required by Sec.  1005.9, on which the alleged error is 
first reflected;
    (ii) Enables the institution to identify the consumer's name and 
account number; and
    (iii) Indicates why the consumer believes an error exists and 
includes to the extent possible the type, date, and amount of the error, 
except for requests described in paragraph (a)(1)(vii) of this section.
    (2) Written confirmation. A financial institution may require the 
consumer to give written confirmation of an error within 10 business 
days of an oral notice. An institution that requires written 
confirmation shall inform the consumer of the requirement and provide 
the address where confirmation must be sent when the consumer gives the 
oral notification.
    (3) Request for documentation or clarifications. When a notice of 
error is based on documentation or clarification that the consumer 
requested under paragraph (a)(1)(vii) of this section, the consumer's 
notice of error is timely if received by the financial institution no 
later than 60 days after the institution sends the information 
requested.
    (c) Time limits and extent of investigation--(1) Ten-day period. A 
financial institution shall investigate promptly and, except as 
otherwise provided in this paragraph (c), shall determine whether an 
error occurred within 10 business days of receiving a notice of error. 
The institution shall report the results to the consumer within three 
business days after completing its investigation. The institution shall 
correct the error within one business day after determining that an 
error occurred.
    (2) Forty-five day period. If the financial institution is unable to 
complete its investigation within 10 business days, the institution may 
take up to 45 days from receipt of a notice of error to investigate and 
determine whether an error occurred, provided the institution does the 
following:
    (i) Provisionally credits the consumer's account in the amount of 
the alleged error (including interest where applicable) within 10 
business days of receiving the error notice. If the financial 
institution has a reasonable basis for believing that an unauthorized 
electronic fund transfer has occurred and

[[Page 197]]

the institution has satisfied the requirements of Sec.  1005.6(a), the 
institution may withhold a maximum of $50 from the amount credited. An 
institution need not provisionally credit the consumer's account if:
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220).
    (ii) Informs the consumer, within two business days after the 
provisional crediting, of the amount and date of the provisional 
crediting and gives the consumer full use of the funds during the 
investigation;
    (iii) Corrects the error, if any, within one business day after 
determining that an error occurred; and
    (iv) Reports the results to the consumer within three business days 
after completing its investigation (including, if applicable, notice 
that a provisional credit has been made final).
    (3) Extension of time periods. The time periods in paragraphs (c)(1) 
and (c)(2) of this section are extended as follows:
    (i) The applicable time is 20 business days in place of 10 business 
days under paragraphs (c)(1) and (2) of this section if the notice of 
error involves an electronic fund transfer to or from the account within 
30 days after the first deposit to the account was made.
    (ii) The applicable time is 90 days in place of 45 days under 
paragraph (c)(2) of this section, for completing an investigation, if a 
notice of error involves an electronic fund transfer that:
    (A) Was not initiated within a state;
    (B) Resulted from a point-of-sale debit card transaction; or
    (C) Occurred within 30 days after the first deposit to the account 
was made.
    (4) Investigation. With the exception of transfers covered by Sec.  
1005.14 of this part, a financial institution's review of its own 
records regarding an alleged error satisfies the requirements of this 
section if:
    (i) The alleged error concerns a transfer to or from a third party; 
and
    (ii) There is no agreement between the institution and the third 
party for the type of electronic fund transfer involved.
    (d) Procedures if financial institution determines no error or 
different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the financial institution 
shall follow the procedures set forth in this paragraph (d) if it 
determines that no error occurred or that an error occurred in a manner 
or amount different from that described by the consumer:
    (1) Written explanation. The institution's report of the results of 
its investigation shall include a written explanation of the 
institution's findings and shall note the consumer's right to request 
the documents that the institution relied on in making its 
determination. Upon request, the institution shall promptly provide 
copies of the documents.
    (2) Debiting provisional credit. Upon debiting a provisionally 
credited amount, the financial institution shall:
    (i) Notify the consumer of the date and amount of the debiting;
    (ii) Notify the consumer that the institution will honor checks, 
drafts, or similar instruments payable to third parties and 
preauthorized transfers from the consumer's account (without charge to 
the consumer as a result of an overdraft) for five business days after 
the notification. The institution shall honor items as specified in the 
notice, but need honor only items that it would have paid if the 
provisionally credited funds had not been debited.
    (e) Reassertion of error. A financial institution that has fully 
complied with the error resolution requirements has no further 
responsibilities under this section should the consumer later reassert 
the same error, except in the case of an error asserted by the consumer 
following receipt of information provided under paragraph (a)(1)(vii) of 
this section.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 84326, Nov. 22, 2016; 
83 FR 6417, Feb. 13, 2018]



Sec.  1005.12  Relation to other laws.

    (a) Relation to Truth in Lending. (1) The Electronic Fund Transfer 
Act and this part govern:

[[Page 198]]

    (i) The addition to an accepted credit card, as defined in 
Regulation Z (12 CFR 1026.12, comment 12-2), of the capability to 
initiate electronic fund transfers;
    (ii) The issuance of an access device (other than an access device 
for a prepaid account) that permits credit extensions (under a 
preexisting agreement between a consumer and a financial institution) 
only when the consumer's account is overdrawn or to maintain a specified 
minimum balance in the consumer's account, or under an overdraft 
service, as defined in Sec.  1005.17(a) of this part;
    (iii) The addition of an overdraft service, as defined in Sec.  
1005.17(a), to an accepted access device; and
    (iv) A consumer's liability for an unauthorized electronic fund 
transfer and the investigation of errors involving:
    (A) Except with respect to a prepaid account, an extension of credit 
that is incident to an electronic fund transfer that occurs under an 
agreement between the consumer and a financial institution to extend 
credit when the consumer's account is overdrawn or to maintain a 
specified minimum balance in the consumer's account, or under an 
overdraft service, as defined in Sec.  1005.17(a);
    (B) With respect to transactions that involve a covered separate 
credit feature and an asset feature on a prepaid account that are both 
accessible by a hybrid prepaid-credit card as those terms are defined in 
Regulation Z, 12 CFR 1026.61, an extension of credit that is incident to 
an electronic fund transfer that occurs when the hybrid prepaid-credit 
card accesses both funds in the asset feature of the prepaid account and 
a credit extension from the credit feature with respect to a particular 
transaction;
    (C) Transactions that involves credit extended through a negative 
balance to the asset feature of a prepaid account that meets the 
conditions set forth in Regulation Z, 12 CFR 1026.61(a)(4); and
    (D) With respect to transactions involving a prepaid account and a 
non-covered separate credit feature as defined in Regulation Z, 12 CFR 
1026.61, transactions that access the prepaid account, as applicable.
    (2) The Truth in Lending Act and Regulation Z (12 CFR part 1026), 
which prohibit the unsolicited issuance of credit cards, govern:
    (i) The addition of a credit feature or plan to an accepted access 
device, including an access device for a prepaid account, that would 
make the access device into a credit card under Regulation Z (12 CFR 
part 1026);
    (ii) Except as provided in paragraph (a)(1)(ii) of this section, the 
issuance of a credit card that is also an access device; and
    (iii) With respect to transactions involving a prepaid account and a 
non-covered separate credit feature as defined in Regulation Z, 12 CFR 
1026.61, a consumer's liability for unauthorized use and the 
investigation of errors involving transactions that access the non-
covered separate credit feature, as applicable.
    (b) Preemption of inconsistent state laws--(1) Inconsistent 
requirements. The Bureau shall determine, upon its own motion or upon 
the request of a state, financial institution, or other interested 
party, whether the Act and this part preempt state law relating to 
electronic fund transfers, or dormancy, inactivity, or service fees, or 
expiration dates in the case of gift certificates, store gift cards, or 
general-use prepaid cards.
    (2) Standards for determination. State law is inconsistent with the 
requirements of the Act and this part if state law:
    (i) Requires or permits a practice or act prohibited by the Federal 
law;
    (ii) Provides for consumer liability for unauthorized electronic 
fund transfers that exceeds the limits imposed by the Federal law;
    (iii) Allows longer time periods than the Federal law for 
investigating and correcting alleged errors, or does not require the 
financial institution to credit the consumer's account during an error 
investigation in accordance with Sec.  1005.11(c)(2)(i) of this part; or
    (iv) Requires initial disclosures, periodic statements, or receipts 
that are different in content from those required by the Federal law 
except to the extent that the disclosures relate to consumer rights 
granted by the state law and not by the Federal law.

[[Page 199]]

    (c) State exemptions--(1) General rule. Any state may apply for an 
exemption from the requirements of the Act or this part for any class of 
electronic fund transfers within the state. The Bureau shall grant an 
exemption if it determines that:
    (i) Under state law the class of electronic fund transfers is 
subject to requirements substantially similar to those imposed by the 
Federal law; and
    (ii) There is adequate provision for state enforcement.
    (2) Exception. To assure that the Federal and state courts continue 
to have concurrent jurisdiction, and to aid in implementing the Act:
    (i) No exemption shall extend to the civil liability provisions of 
section 916 of the Act; and
    (ii) When the Bureau grants an exemption, the state law requirements 
shall constitute the requirements of the Federal law for purposes of 
section 916 of the Act, except for state law requirements not imposed by 
the Federal law.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 84326, Nov. 22, 2016]



Sec.  1005.13  Administrative enforcement; record retention.

    (a) Enforcement by Federal agencies. Compliance with this part is 
enforced in accordance with section 918 of the Act.
    (b) Record retention. (1) Any person subject to the Act and this 
part shall retain evidence of compliance with the requirements imposed 
by the Act and this part for a period of not less than two years from 
the date disclosures are required to be made or action is required to be 
taken.
    (2) Any person subject to the Act and this part having actual notice 
that it is the subject of an investigation or an enforcement proceeding 
by its enforcement agency, or having been served with notice of an 
action filed under sections 910, 916, or 917(a) of the Act, shall retain 
the records that pertain to the investigation, action, or proceeding 
until final disposition of the matter unless an earlier time is allowed 
by court or agency order.



Sec.  1005.14  Electronic fund transfer service provider not holding 
consumer's account.

    (a) Provider of electronic fund transfer service. A person that 
provides an electronic fund transfer service to a consumer but that does 
not hold the consumer's account is subject to all requirements of this 
part if the person:
    (1) Issues a debit card (or other access device) that the consumer 
can use to access the consumer's account held by a financial 
institution; and
    (2) Has no agreement with the account-holding institution regarding 
such access.
    (b) Compliance by service provider. In addition to the requirements 
generally applicable under this part, the service provider shall comply 
with the following special rules:
    (1) Disclosures and documentation. The service provider shall give 
the disclosures and documentation required by Sec. Sec.  1005.7, 1005.8, 
and 1005.9 of this part that are within the purview of its relationship 
with the consumer. The service provider need not furnish the periodic 
statement required by Sec.  1005.9(b) if the following conditions are 
met:
    (i) The debit card (or other access device) issued to the consumer 
bears the service provider's name and an address or telephone number for 
making inquiries or giving notice of error;
    (ii) The consumer receives a notice concerning use of the debit card 
that is substantially similar to the notice contained in appendix A of 
this part;
    (iii) The consumer receives, on or with the receipts required by 
Sec.  1005.9(a), the address and telephone number to be used for an 
inquiry, to give notice of an error, or to report the loss or theft of 
the debit card;
    (iv) The service provider transmits to the account-holding 
institution the information specified in Sec.  1005.9(b)(1), in the 
format prescribed by the automated clearinghouse (ACH) system used to 
clear the fund transfers;
    (v) The service provider extends the time period for notice of loss 
or theft of a debit card, set forth in Sec.  1005.6(b)(1) and (2), from 
two business days to four business days after the consumer learns of the 
loss or theft; and extends the time periods for reporting unauthorized 
transfers or errors, set forth

[[Page 200]]

in Sec. Sec.  1005.6(b)(3) and 1005.11(b)(1)(i), from 60 days to 90 days 
following the transmittal of a periodic statement by the account-holding 
institution.
    (2) Error resolution. (i) The service provider shall extend by a 
reasonable time the period in which notice of an error must be received, 
specified in Sec.  1005.11(b)(1)(i), if a delay resulted from an initial 
attempt by the consumer to notify the account-holding institution.
    (ii) The service provider shall disclose to the consumer the date on 
which it initiates a transfer to effect a provisional credit in 
accordance with Sec.  1005.11(c)(2)(ii).
    (iii) If the service provider determines an error occurred, it shall 
transfer funds to or from the consumer's account, in the appropriate 
amount and within the applicable time period, in accordance with Sec.  
1005.11(c)(2)(i).
    (iv) If funds were provisionally credited and the service provider 
determines no error occurred, it may reverse the credit. The service 
provider shall notify the account-holding institution of the period 
during which the account-holding institution must honor debits to the 
account in accordance with Sec.  1005.11(d)(2)(ii). If an overdraft 
results, the service provider shall promptly reimburse the account-
holding institution in the amount of the overdraft.
    (c) Compliance by account-holding institution. The account-holding 
institution need not comply with the requirements of the Act and this 
part with respect to electronic fund transfers initiated through the 
service provider except as follows:
    (1) Documentation. The account-holding institution shall provide a 
periodic statement that describes each electronic fund transfer 
initiated by the consumer with the access device issued by the service 
provider. The account-holding institution has no liability for the 
failure to comply with this requirement if the service provider did not 
provide the necessary information; and
    (2) Error resolution. Upon request, the account-holding institution 
shall provide information or copies of documents needed by the service 
provider to investigate errors or to furnish copies of documents to the 
consumer. The account-holding institution shall also honor debits to the 
account in accordance with Sec.  1005.11(d)(2)(ii).



Sec.  1005.15  Electronic fund transfer of government benefits.

    (a) Government agency subject to regulation. (1) A government agency 
is deemed to be a financial institution for purposes of the Act and this 
part if directly or indirectly it issues an access device to a consumer 
for use in initiating an electronic fund transfer of government benefits 
from an account, other than needs-tested benefits in a program 
established under state or local law or administered by a state or local 
agency. The agency shall comply with all applicable requirements of the 
Act and this part except as modified by this section.
    (2) For purposes of this section, the term ``account'' or 
``government benefit account'' means an account established by a 
government agency for distributing government benefits to a consumer 
electronically, such as through automated teller machines or point-of-
sale terminals, but does not include an account for distributing needs-
tested benefits in a program established under state or local law or 
administered by a state or local agency.
    (b) Issuance of access devices. For purposes of this section, a 
consumer is deemed to request an access device when the consumer applies 
for government benefits that the agency disburses or will disburse by 
means of an electronic fund transfer. The agency shall verify the 
identity of the consumer receiving the device by reasonable means before 
the device is activated.
    (c) Pre-acquisition disclosure requirements. (1) Before a consumer 
acquires a government benefit account, a government agency shall comply 
with the pre-acquisition disclosure requirements applicable to prepaid 
accounts as set forth in Sec.  1005.18(b).
    (2) Additional content for government benefit accounts--(i) 
Statement regarding consumer's payment options. As part of its short 
form pre-acquisition disclosures, the agency must provide a statement 
that the consumer does not have to accept the government benefit account 
and directing the consumer to ask about other ways to receive their

[[Page 201]]

benefit payments from the agency instead of receiving them via the 
account, using the following clause or a substantially similar clause: 
``You do not have to accept this benefits card. Ask about other ways to 
receive your benefits.'' Alternatively, an agency may provide a 
statement that the consumer has several options to receive benefit 
payments, followed by a list of the options available to the consumer, 
and directing the consumer to indicate which option the consumer chooses 
using the following clause or a substantially similar clause: ``You have 
several options to receive your payments: [list of options available to 
the consumer]; or this benefits card. Tell the benefits office which 
option you choose.'' This statement must be located above the 
information required by Sec.  1005.18(b)(2)(i) through (iv). This 
statement must appear in a minimum type size of eight points (or 11 
pixels) and appear in no larger a type size than what is used for the 
fee headings required by Sec.  1005.18(b)(2)(i) through (iv).
    (ii) Statement regarding state-required information or other fee 
discounts and waivers. An agency may, but is not required to, include a 
statement in one additional line of text in the short form disclosure 
directing the consumer to a particular location outside the short form 
disclosure for information on ways the consumer may access government 
benefit account funds and balance information for free or for a reduced 
fee. This statement must be located directly below any statements 
disclosed pursuant to Sec.  1005.18(b)(3)(i) and (ii), or, if no such 
statements are disclosed, above the statement required by Sec.  
1005.18(b)(2)(x). This statement must appear in the same type size used 
to disclose variable fee information pursuant to Sec.  1005.18(b)(3)(i) 
and (ii), or, if none, the same type size used for the information 
required by Sec.  1005.18(b)(2)(x) through (xiii).
    (3) Form of disclosures. When a short form disclosure required by 
paragraph (c) of this section is provided in writing or electronically, 
the information required by Sec.  1005.18(b)(2)(i) through (ix) shall be 
provided in the form of a table. Except as provided in Sec.  
1005.18(b)(6)(iii)(B), the short form disclosure required by Sec.  
1005.18(b)(2) shall be provided in a form substantially similar to Model 
Form A-10(a) of appendix A of this part. Sample Form A-10(f) in appendix 
A of this part provides an example of the long form disclosure required 
by Sec.  1005.18(b)(4) when the agency does not offer multiple service 
plans.
    (d) Access to account information--(1) Periodic statement 
alternative. A government agency need not furnish periodic statements 
required by Sec.  1005.9(b) if the agency makes available to the 
consumer:
    (i) The consumer's account balance, through a readily available 
telephone line and at a terminal (such as by providing balance 
information at a balance-inquiry terminal or providing it, routinely or 
upon request, on a terminal receipt at the time of an electronic fund 
transfer);
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 12 months preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers at least 24 months preceding the date the agency receives the 
consumer's request.
    (2) Additional access to account information requirements. For 
government benefit accounts, a government agency shall comply with the 
account information requirements applicable to prepaid accounts as set 
forth in Sec.  1005.18(c)(3) through (5).
    (e) Modified disclosure, limitations on liability, and error 
resolution requirements. A government agency that provides information 
under paragraph (d)(1) of this section shall comply with the following:
    (1) Initial disclosures. The agency shall modify the disclosures 
under Sec.  1005.7(b) by disclosing:
    (i) Access to account information. A telephone number that the 
consumer may call to obtain the account balance, the means by which the 
consumer can obtain an electronic account history, such as the address 
of a Web site, and a summary of the consumer's

[[Page 202]]

right to receive a written account history upon request (in place of the 
summary of the right to receive a periodic statement required by Sec.  
1005.7(b)(6)), including a telephone number to call to request a 
history. The disclosure required by this paragraph (e)(1)(i) may be made 
by providing a notice substantially similar to the notice contained in 
paragraph (a) of appendix A-5 of this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-5 of this part, in place of the notice required by Sec.  
1005.7(b)(10).
    (2) Annual error resolution notice. The agency shall provide an 
annual notice concerning error resolution that is substantially similar 
to the notice contained in paragraph (b) of appendix A-5 of this part, 
in place of the notice required by Sec.  1005.8(b). Alternatively, the 
agency may include on or with each electronic or written history 
provided in accordance with paragraph (d)(1) of this section, a notice 
substantially similar to the abbreviated notice for periodic statements 
contained in paragraph (b) in appendix A-3 of this part, modified as 
necessary to reflect the error resolution provisions set forth in this 
section.
    (3) Modified limitations on liability requirements. (i) For purposes 
of Sec.  1005.6(b)(3), the 60-day period for reporting any unauthorized 
transfer shall begin on the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account under paragraph (d)(1)(ii) of this section, provided that the 
electronic history made available to the consumer reflects the 
unauthorized transfer; or
    (B) The date the agency sends a written history of the consumer's 
account transactions requested by the consumer under paragraph 
(d)(1)(iii) of this section in which the unauthorized transfer is first 
reflected.
    (ii) An agency may comply with paragraph (e)(3)(i) of this section 
by limiting the consumer's liability for an unauthorized transfer as 
provided under Sec.  1005.6(b)(3) for any transfer reported by the 
consumer within 120 days after the transfer was credited or debited to 
the consumer's account.
    (4) Modified error resolution requirements. (i) The agency shall 
comply with the requirements of Sec.  1005.11 in response to an oral or 
written notice of an error from the consumer that is received by the 
earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (d)(1)(ii) of this section, 
provided that the electronic history made available to the consumer 
reflects the alleged error; or
    (B) Sixty days after the date the agency sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (d)(1)(iii) of this section in which the alleged error is 
first reflected.
    (ii) In lieu of following the procedures in paragraph (e)(4)(i) of 
this section, an agency complies with the requirements for resolving 
errors in Sec.  1005.11 if it investigates any oral or written notice of 
an error from the consumer that is received by the agency within 120 
days after the transfer allegedly in error was credited or debited to 
the consumer's account.
    (f) Disclosure of fees and other information. For government benefit 
accounts, a government agency shall comply with the disclosure and 
change-in-terms requirements applicable to prepaid accounts as set forth 
in Sec.  1005.18(f).
    (g) Government benefit accounts accessible by hybrid prepaid-credit 
cards. For government benefit accounts accessible by hybrid prepaid-
credit cards as defined in Regulation Z, 12 CFR 1026.61, a government 
agency shall comply with prohibitions and requirements applicable to 
prepaid accounts as set forth in Sec.  1005.18(g).

[81 FR 84326, Nov. 22, 2016]



Sec.  1005.16  Disclosures at automated teller machines.

    (a) Definition. ``Automated teller machine operator'' means any 
person that operates an automated teller machine at which a consumer 
initiates an electronic fund transfer or a balance inquiry and that does 
not hold the account to or from which the transfer is made, or about 
which an inquiry is made.
    (b) General. An automated teller machine operator that imposes a fee 
on a

[[Page 203]]

consumer for initiating an electronic fund transfer or a balance inquiry 
must provide a notice that a fee will be imposed for providing 
electronic fund transfer services or a balance inquiry that discloses 
the amount of the fee.
    (c) Notice requirement. An automated teller machine operator must 
provide the notice required by paragraph (b) of this section either by 
showing it on the screen of the automated teller machine or by providing 
it on paper, before the consumer is committed to paying a fee.
    (d) Imposition of fee. An automated teller machine operator may 
impose a fee on a consumer for initiating an electronic fund transfer or 
a balance inquiry only if:
    (1) The consumer is provided the notice required under paragraph (c) 
of this section, and
    (2) The consumer elects to continue the transaction or inquiry after 
receiving such notice.

[76 FR 81023, Dec. 27, 2011, as amended at 78 FR 18224, Mar. 26, 2013]



Sec.  1005.17  Requirements for overdraft services.

    (a) Definition. For purposes of this section, the term ``overdraft 
service'' means a service under which a financial institution assesses a 
fee or charge on a consumer's account held by the institution for paying 
a transaction (including a check or other item) when the consumer has 
insufficient or unavailable funds in the account. The term ``overdraft 
service'' does not include any payment of overdrafts pursuant to:
    (1) A line of credit subject to Regulation Z (12 CFR part 1026), 
including transfers from a credit card account, home equity line of 
credit, or overdraft line of credit;
    (2) A service that transfers funds from another account held 
individually or jointly by a consumer, such as a savings account;
    (3) A line of credit or other transaction exempt from Regulation Z 
(12 CFR part 1026) pursuant to 12 CFR 1026.3(d); or
    (4) A covered separate credit feature accessible by a hybrid 
prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61; or 
credit extended through a negative balance on the asset feature of the 
prepaid account that meets the conditions of 12 CFR 1026.61(a)(4).
    (b) Opt-in requirement--(1) General. Except as provided under 
paragraph (c) of this section, a financial institution holding a 
consumer's account shall not assess a fee or charge on a consumer's 
account for paying an ATM or one-time debit card transaction pursuant to 
the institution's overdraft service, unless the institution:
    (i) Provides the consumer with a notice in writing, or if the 
consumer agrees, electronically, segregated from all other information, 
describing the institution's overdraft service;
    (ii) Provides a reasonable opportunity for the consumer to 
affirmatively consent, or opt in, to the service for ATM and one-time 
debit card transactions;
    (iii) Obtains the consumer's affirmative consent, or opt-in, to the 
institution's payment of ATM or one-time debit card transactions; and
    (iv) Provides the consumer with confirmation of the consumer's 
consent in writing, or if the consumer agrees, electronically, which 
includes a statement informing the consumer of the right to revoke such 
consent.
    (2) Conditioning payment of other overdrafts on consumer's 
affirmative consent. A financial institution shall not:
    (i) Condition the payment of any overdrafts for checks, ACH 
transactions, and other types of transactions on the consumer 
affirmatively consenting to the institution's payment of ATM and one-
time debit card transactions pursuant to the institution's overdraft 
service; or
    (ii) Decline to pay checks, ACH transactions, and other types of 
transactions that overdraw the consumer's account because the consumer 
has not affirmatively consented to the institution's overdraft service 
for ATM and one-time debit card transactions.
    (3) Same account terms, conditions, and features. A financial 
institution shall provide to consumers who do not affirmatively consent 
to the institution's overdraft service for ATM and one-time debit card 
transactions the same account terms, conditions, and features that it 
provides to consumers who affirmatively consent, except for the

[[Page 204]]

overdraft service for ATM and one-time debit card transactions.
    (c) Timing--(1) Existing account holders. For accounts opened prior 
to July 1, 2010, the financial institution must not assess any fees or 
charges on a consumer's account on or after August 15, 2010, for paying 
an ATM or one-time debit card transaction pursuant to the overdraft 
service, unless the institution has complied with Sec.  1005.17(b)(1) 
and obtained the consumer's affirmative consent.
    (2) New account holders. For accounts opened on or after July 1, 
2010, the financial institution must comply with Sec.  1005.17(b)(1) and 
obtain the consumer's affirmative consent before the institution 
assesses any fee or charge on the consumer's account for paying an ATM 
or one-time debit card transaction pursuant to the institution's 
overdraft service.
    (d) Content and format. The notice required by paragraph (b)(1)(i) 
of this section shall be substantially similar to Model Form A-9 set 
forth in appendix A of this part, include all applicable items in this 
paragraph, and may not contain any information not specified in or 
otherwise permitted by this paragraph.
    (1) Overdraft service. A brief description of the financial 
institution's overdraft service and the types of transactions for which 
a fee or charge for paying an overdraft may be imposed, including ATM 
and one-time debit card transactions.
    (2) Fees imposed. The dollar amount of any fees or charges assessed 
by the financial institution for paying an ATM or one-time debit card 
transaction pursuant to the institution's overdraft service, including 
any daily or other overdraft fees. If the amount of the fee is 
determined on the basis of the number of times the consumer has 
overdrawn the account, the amount of the overdraft, or other factors, 
the institution must disclose the maximum fee that may be imposed.
    (3) Limits on fees charged. The maximum number of overdraft fees or 
charges that may be assessed per day, or, if applicable, that there is 
no limit.
    (4) Disclosure of opt-in right. An explanation of the consumer's 
right to affirmatively consent to the financial institution's payment of 
overdrafts for ATM and one-time debit card transactions pursuant to the 
institution's overdraft service, including the methods by which the 
consumer may consent to the service; and
    (5) Alternative plans for covering overdrafts. If the institution 
offers a line of credit subject to Regulation Z (12 CFR part 1026) or a 
service that transfers funds from another account of the consumer held 
at the institution to cover overdrafts, the institution must state that 
fact. An institution may, but is not required to, list additional 
alternatives for the payment of overdrafts.
    (6) Permitted modifications and additional content. If applicable, 
the institution may modify the content required by Sec.  1005.17(d) to 
indicate that the consumer has the right to opt into, or opt out of, the 
payment of overdrafts under the institution's overdraft service for 
other types of transactions, such as checks, ACH transactions, or 
automatic bill payments; to provide a means for the consumer to exercise 
this choice; and to disclose the associated returned item fee and that 
additional merchant fees may apply. The institution may also disclose 
the consumer's right to revoke consent. For notices provided to 
consumers who have opened accounts prior to July 1, 2010, the financial 
institution may describe the institution's overdraft service with 
respect to ATM and one-time debit card transactions with a statement 
such as ``After August 15, 2010, we will not authorize and pay 
overdrafts for the following types of transactions unless you ask us to 
(see below).''
    (e) Joint relationships. If two or more consumers jointly hold an 
account, the financial institution shall treat the affirmative consent 
of any of the joint consumers as affirmative consent for that account. 
Similarly, the financial institution shall treat a revocation of 
affirmative consent by any of the joint consumers as revocation of 
consent for that account.
    (f) Continuing right to opt in or to revoke the opt-in. A consumer 
may affirmatively consent to the financial institution's overdraft 
service at any time in the manner described in the notice required by 
paragraph (b)(1)(i) of

[[Page 205]]

this section. A consumer may also revoke consent at any time in the 
manner made available to the consumer for providing consent. A financial 
institution must implement a consumer's revocation of consent as soon as 
reasonably practicable.
    (g) Duration and revocation of opt-in. A consumer's affirmative 
consent to the institution's overdraft service is effective until 
revoked by the consumer, or unless the financial institution terminates 
the service.

[76 FR 81023, Dec. 27, 2011, as amended at 81 FR 84328, Nov. 22, 2016]



Sec.  1005.18  Requirements for financial institutions offering prepaid 
accounts.

    (a) Coverage. A financial institution shall comply with all 
applicable requirements of the Act and this part with respect to prepaid 
accounts except as modified by this section. For rules governing 
government benefit accounts, see Sec.  1005.15.
    (b) Pre-acquisition disclosure requirements--(1) Timing of 
disclosures--(i) General. Except as provided in paragraph (b)(1)(ii) or 
(iii) of this section, a financial institution shall provide the 
disclosures required by paragraph (b) of this section before a consumer 
acquires a prepaid account. When a prepaid account is used for 
disbursing funds to a consumer, and the financial institution or third 
party making the disbursement does not offer any alternative means for 
the consumer to receive those funds in lieu of accepting the prepaid 
account, for purposes of this paragraph, the disclosures required by 
paragraph (b) of this section may be provided at the time the consumer 
receives the prepaid account.
    (ii) Disclosures for prepaid accounts acquired in retail locations. 
A financial institution is not required to provide the long form 
disclosure required by paragraph (b)(4) of this section before a 
consumer acquires a prepaid account in person at a retail location if 
the following conditions are met:
    (A) The prepaid account access device is contained inside the 
packaging material.
    (B) The disclosure required by paragraph (b)(2) of this section is 
provided on or are visible through an outward-facing, external surface 
of a prepaid account access device's packaging material.
    (C) The disclosure required by paragraph (b)(2) of this section 
includes the information set forth in paragraph (b)(2)(xiii) of this 
section that allows a consumer to access the information required to be 
disclosed by paragraph (b)(4) of this section by telephone and via a 
website.
    (D) The long form disclosure required by paragraph (b)(4) of this 
section is provided after the consumer acquires the prepaid account. If 
a financial institution does not provide the long form disclosure inside 
the prepaid account packaging material, and it is not otherwise already 
mailing or delivering to the consumer written account-related 
communications within 30 days of obtaining the consumer's contact 
information, it may provide the long form disclosure pursuant to this 
paragraph in electronic form without regard to the consumer notice and 
consent requirements of section 101(c) of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (iii) Disclosures for prepaid accounts acquired orally by telephone. 
A financial institution is not required to provide the long form 
disclosure required by paragraph (b)(4) of this section before a 
consumer acquires a prepaid account orally by telephone if the following 
conditions are met:
    (A) The financial institution communicates to the consumer orally, 
before the consumer acquires the prepaid account, that the information 
required to be disclosed by paragraph (b)(4) of this section is 
available both by telephone and on a Web site.
    (B) The financial institution makes the information required to be 
disclosed by paragraph (b)(4) of this section available both by 
telephone and on a Web site.
    (C) The long form disclosure required by paragraph (b)(4) of this 
section is provided after the consumer acquires the prepaid account.
    (2) Short form disclosure content. In accordance with paragraph 
(b)(1) of this section, a financial institution shall provide a 
disclosure setting forth the

[[Page 206]]

following fees and information for a prepaid account, as applicable:
    (i) Periodic fee. The periodic fee charged for holding the prepaid 
account, assessed on a monthly or other periodic basis, using the term 
``Monthly fee,'' ``Annual fee,'' or a substantially similar term.
    (ii) Per purchase fee. The fee for making a purchase using the 
prepaid account, using the term ``Per purchase'' or a substantially 
similar term.
    (iii) ATM withdrawal fees. Two fees for using an automated teller 
machine to initiate a withdrawal of cash in the United States from the 
prepaid account, both within and outside of the financial institution's 
network or a network affiliated with the financial institution, using 
the term ``ATM withdrawal'' or a substantially similar term, and ``in-
network'' or ``out-of-network,'' respectively, or substantially similar 
terms.
    (iv) Cash reload fee. The fee for reloading cash into the prepaid 
account using the term ``Cash reload'' or a substantially similar term. 
The fee disclosed must be the total of all charges from the financial 
institution and any third parties for a cash reload.
    (v) ATM balance inquiry fees. Two fees for using an automated teller 
machine to check the balance of the prepaid account in the United 
States, both within and outside of the financial institution's network 
or a network affiliated with the financial institution, using the term 
``ATM balance inquiry'' or a substantially similar term, and ``in-
network'' or ``out-of-network,'' respectively, or substantially similar 
terms.
    (vi) Customer service fees. Two fees for calling the financial 
institution about the prepaid account, both for calling an interactive 
voice response system and a live customer service agent, using the term 
``Customer service'' or a substantially similar term, and ``automated'' 
or ``live agent,'' or substantially similar terms, respectively, and 
``per call'' or a substantially similar term. When providing a short 
form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, disclose only the fee for calling the 
live agent customer service about the prepaid account, using the term 
``Live customer service'' or a substantially similar term and ``per 
call'' or a substantially similar term.
    (vii) Inactivity fee. The fee for non-use, dormancy, or inactivity 
of the prepaid account, using the term ``Inactivity'' or a substantially 
similar term, as well as the conditions that trigger the financial 
institution to impose that fee.
    (viii) Statements regarding additional fee types--(A) Statement 
regarding number of additional fee types charged. A statement disclosing 
the number of additional fee types the financial institution may charge 
consumers with respect to the prepaid account, using the following 
clause or a substantially similar clause: ``We charge [x] other types of 
fees.'' The number of additional fee types disclosed must reflect the 
total number of fee types under which the financial institution may 
charge fees, excluding:
    (1) Fees required to be disclosed pursuant to paragraphs (b)(2)(i) 
through (vii) and (b)(5) of this section; and
    (2) Any finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in 12 CFR 
1026.61.
    (B) Statement directing consumers to disclosure of additional fee 
types. If a financial institution makes a disclosure pursuant to 
paragraph (b)(2)(ix) of this section, a statement directing consumers to 
that disclosure, located after but on the same line of text as the 
statement regarding the number of additional fee types required by 
paragraph (b)(2)(viii)(A) of this section, using the following clause or 
a substantially similar clause: ``Here are some of them:''.
    (ix) Disclosure of additional fee types--(A) Determination of which 
additional fee types to disclose. The two fee types that generate the 
highest revenue from consumers for the prepaid account program or across 
prepaid account programs that share the same fee schedule during the 
time period provided in paragraphs (b)(2)(ix)(D) and (E) of this 
section, excluding:
    (1) Fees required to be disclosed pursuant to paragraphs (b)(2)(i) 
through (vii) and (b)(5) of this section;

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    (2) Any fee types that generated less than 5 percent of the total 
revenue from consumers for the prepaid account program or across prepaid 
account programs that share the same fee schedule during the time period 
provided in paragraphs (b)(2)(ix)(D) and (E) of this section; and
    (3) Any finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in 12 CFR 
1026.61.
    (B) Disclosure of fewer than two additional fee types. A financial 
institution that has only one additional fee type that satisfies the 
criteria in paragraph (b)(2)(ix)(A) of this section must disclose that 
one additional fee type; it may, but is not required to, also disclose 
another additional fee type of its choice. A financial institution that 
has no additional fee types that satisfy the criteria in paragraph 
(b)(2)(ix)(A) of this section is not required to make a disclosure under 
this paragraph (b)(2)(ix); it may, but is not required to, disclose one 
or two fee types of its choice.
    (C) Fee variations in additional fee types. If an additional fee 
type required to be disclosed pursuant to paragraph (b)(2)(ix)(A) of 
this section has more than two fee variations, or when providing a short 
form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, the financial institution must 
disclose the name of the additional fee type and the highest fee amount 
in accordance with paragraph (b)(3)(i) of this section; for disclosures 
other than for multiple service plans, it may, but is not required to, 
consolidate the fee variations into two categories and disclose the 
names of those two fee variation categories and the fee amounts in a 
format substantially similar to that used to disclose the two-tier fees 
required by paragraphs (b)(2)(v) and (vi) of this section and in 
accordance with paragraphs (b)(3)(i) and (b)(7)(ii)(B)(1) of this 
section. Except when providing a short form disclosure for multiple 
service plans pursuant to paragraph (b)(6)(iii)(B)(2) of this section, 
if an additional fee type has two fee variations, the financial 
institution must disclose the name of the additional fee type together 
with the names of the two fee variations and the fee amounts in a format 
substantially similar to that used to disclose the two-tier fees 
required by paragraphs (b)(2)(v) and (vi) of this section and in 
accordance with paragraph (b)(7)(ii)(B)(1) of this section. If a 
financial institution only charges one fee under a particular fee type, 
the financial institution must disclose the name of the additional fee 
type and the fee amount; it may, but is not required to, disclose also 
the name of the one fee variation for which the fee amount is charged, 
in a format substantially similar to that used to disclose the two-tier 
fees required by paragraphs (b)(2)(v) and (vi) of this section, except 
that the financial institution would disclose only the one fee variation 
name and fee amount instead of two.
    (D) Timing of initial assessment of additional fee types 
disclosure--(1) Existing prepaid account programs as of April 1, 2019. 
For a prepaid account program in effect as of April 1, 2019, the 
financial institution must disclose the additional fee types based on 
revenue for a 24-month period that begins no earlier than October 1, 
2014.
    (2) Existing prepaid account programs as of April 1, 2019 with 
unavailable data. If a financial institution does not have 24 months of 
fee revenue data for a particular prepaid account program from which to 
calculate the additional fee types disclosure in advance of April 1, 
2019, the financial institution must disclose the additional fee types 
based on revenue it reasonably anticipates the prepaid account program 
will generate over the 24-month period that begins on April 1, 2019.
    (3) New prepaid account programs created on or after April 1, 2019. 
For a prepaid account program created on or after April 1, 2019, the 
financial institution must disclose the additional fee types based on 
revenue it reasonably anticipates the prepaid account program will 
generate over the first 24 months of the program.
    (E) Timing of periodic reassessment and update of additional fee 
types disclosure--(1) General. A financial institution must reassess its 
additional fee types disclosure periodically as described in

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paragraph (b)(2)(ix)(E)(2) of this section and upon a fee schedule 
change as described in paragraph (b)(2)(ix)(E)(3) of this section. The 
financial institution must update its additional fee types disclosure if 
the previous disclosure no longer complies with the requirements of this 
paragraph (b)(2)(ix).
    (2) Periodic reassessment. A financial institution must reassess 
whether its previously disclosed additional fee types continue to comply 
with the requirements of this paragraph (b)(2)(ix) every 24 months based 
on revenue for the previous 24-month period. The financial institution 
must complete this reassessment and update its disclosure, if 
applicable, within three months of the end of the 24-month period, 
except as provided in the update printing exception in paragraph 
(b)(2)(ix)(E)(4) of this section. A financial institution may, but is 
not required to, carry out this reassessment and update, if applicable, 
more frequently than every 24 months, at which time a new 24-month 
period commences.
    (3) Fee schedule change. If a financial institution revises the fee 
schedule for a prepaid account program, it must determine whether it 
reasonably anticipates that the previously disclosed additional fee 
types will continue to comply with the requirements of this paragraph 
(b)(2)(ix) for the 24 months following implementation of the fee 
schedule change. If the financial institution reasonably anticipates 
that the previously disclosed additional fee types will not comply with 
the requirements of this paragraph (b)(2)(ix), it must update the 
disclosure based on its reasonable anticipation of what those additional 
fee types will be at the time the fee schedule change goes into effect, 
except as provided in the update printing exception in paragraph 
(b)(2)(ix)(E)(4) of this section. If an immediate change in terms and 
conditions is necessary to maintain or restore the security of an 
account or an electronic fund transfer system as described in Sec.  
1005.8(a)(2) and that change affects the prepaid account program's fee 
schedule, the financial institution must complete its reassessment and 
update its disclosure, if applicable, within three months of the date it 
makes the change permanent, except as provided in the update printing 
exception in paragraph (b)(2)(ix)(E)(4) of this section.
    (4) Update printing exception. Notwithstanding the requirements to 
update an additional fee types disclosure in paragraph (b)(2)(ix)(E) of 
this section, a financial institution is not required to update the 
listing of additional fee types that are provided on, in, or with 
prepaid account packaging materials that were manufactured, printed, or 
otherwise produced prior to a periodic reassessment and update pursuant 
to paragraph (b)(2)(ix)(E)(2) of this section or prior to a fee schedule 
change pursuant to paragraph (b)(2)(ix)(E)(3) of this section.
    (x) Statement regarding overdraft credit features. If a covered 
separate credit feature accessible by a hybrid prepaid-credit card as 
defined in Regulation Z, 12 CFR 1026.61, may be offered at any point to 
a consumer in connection with the prepaid account, a statement that 
overdraft/credit may be offered, the time period after which it may be 
offered, and that fees would apply, using the following clause or a 
substantially similar clause: ``You may be offered overdraft/credit 
after [x] days. Fees would apply.'' If no such credit feature will be 
offered at any point to a consumer in connection with the prepaid 
account, a statement that no overdraft credit feature is offered, using 
the following clause or a substantially similar clause: ``No overdraft/
credit feature.''
    (xi) Statement regarding registration and FDIC or NCUA insurance. A 
statement regarding the prepaid account program's eligibility for FDIC 
deposit insurance or NCUA share insurance, as appropriate, and directing 
the consumer to register the prepaid account for insurance and other 
account protections, where applicable, as follows:
    (A) Account is insurance eligible and does not have pre-acquisition 
consumer identification/verification. If a prepaid account program is 
set up to be eligible for FDIC deposit or NCUA share insurance, and 
consumer identification and verification does not occur before the 
account is opened, using the following clause or a substantially similar 
clause: ``Register your card for [FDIC

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insurance eligibility] [NCUA insurance, if eligible,] and other 
protections.''
    (B) Account is not insurance eligible and does not have pre-
acquisition consumer identification/verification. If a prepaid account 
program is not set up to be eligible for FDIC deposit or NCUA share 
insurance, and consumer identification and verification does not occur 
before the account is opened, using the following clause or a 
substantially similar clause: ``Not [FDIC] [NCUA] insured. Register your 
card for other protections.''
    (C) Account is insurance eligible and has pre-acquisition consumer 
identification/verification. If a prepaid account program is set up to 
be eligible for FDIC deposit or NCUA share insurance, and consumer 
identification and verification occurs for all prepaid accounts within 
the prepaid program before the account is opened, using the following 
clause or a substantially similar clause: ``Your funds are [eligible for 
FDIC insurance] [NCUA insured, if eligible].''
    (D) Account is not insurance eligible and has pre-acquisition 
consumer identification/verification. If a prepaid account program is 
not set up to be eligible for FDIC deposit or NCUA share insurance, and 
consumer identification and verification occurs for all prepaid accounts 
within the prepaid account program before the account is opened, using 
the following clause or a substantially similar clause: ``Your funds are 
not [FDIC] [NCUA] insured.''
    (E) No consumer identification/verification. If a prepaid account 
program is set up such that there is no consumer identification and 
verification process for any prepaid accounts within the prepaid account 
program, using the following clause or a substantially similar clause: 
``Treat this card like cash. Not [FDIC] [NCUA] insured.''
    (xii) Statement regarding CFPB Web site. A statement directing the 
consumer to a Web site URL of the Consumer Financial Protection Bureau 
(cfpb.gov/prepaid) for general information about prepaid accounts, using 
the following clause or a substantially similar clause: ``For general 
information about prepaid accounts, visit cfpb.gov/prepaid.''
    (xiii) Statement regarding information on all fees and services. A 
statement directing the consumer to the location of the long form 
disclosure required by paragraph (b)(4) of this section to find details 
and conditions for all fees and services. For a financial institution 
offering prepaid accounts at a retail location pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section, this 
statement must also include a telephone number and a Web site URL that a 
consumer may use to directly access, respectively, an oral and an 
electronic version of the long form disclosure required under paragraph 
(b)(4) of this section. The disclosure required by this paragraph must 
be made using the following clause or a substantially similar clause: 
``Find details and conditions for all fees and services in [location]'' 
or, for prepaid accounts offered at retail locations pursuant to 
paragraph (b)(1)(ii) of this section, made using the following clause or 
a substantially similar clause: ``Find details and conditions for all 
fees and services inside the package, or call [telephone number] or 
visit [Web site].'' The Web site URL may not exceed 22 characters and 
must be meaningfully named. A financial institution may, but is not 
required to, disclose an SMS code at the end of the statement disclosing 
the telephone number and Web site URL, if the SMS code can be 
accommodated on the same line of text as the statement required by this 
paragraph.
    (xiv) Additional content for payroll card accounts--(A) Statement 
regarding wage or salary payment options. For payroll card accounts, a 
statement that the consumer does not have to accept the payroll card 
account and directing the consumer to ask about other ways to receive 
wages or salary from the employer instead of receiving them via the 
payroll card account using the following clause or a substantially 
similar clause: ``You do not have to accept this payroll card. Ask your 
employer about other ways to receive your wages.'' Alternatively, a 
financial institution may provide a statement that the consumer has 
several options to receive wages or salary, followed by a list of the 
options available to the consumer, and directing the consumer to

[[Page 210]]

tell the employer which option the consumer chooses using the following 
clause or a substantially similar clause: ``You have several options to 
receive your wages: [list of options available to the consumer]; or this 
payroll card. Tell your employer which option you choose.'' This 
statement must be located above the information required by paragraphs 
(b)(2)(i) through (iv).
    (B) Statement regarding state-required information or other fee 
discounts and waivers. For payroll card accounts, a financial 
institution may, but is not required to, include a statement in one 
additional line of text directing the consumer to a particular location 
outside the short form disclosure for information on ways the consumer 
may access payroll card account funds and balance information for free 
or for a reduced fee. This statement must be located directly below any 
statements disclosed pursuant to paragraphs (b)(3)(i) and (ii) of this 
section, or, if no such statements are disclosed, above the statement 
required by paragraph (b)(2)(x) of this section.
    (3) Short form disclosure of variable fees and third-party fees and 
prohibition on disclosure of finance charges--(i) General disclosure of 
variable fees. If the amount of any fee that is required to be disclosed 
in the short form disclosure pursuant to paragraphs (b)(2)(i) through 
(vii) and (ix) of this section could vary, a financial institution shall 
disclose the highest amount it may impose for that fee, followed by a 
symbol, such as an asterisk, linked to a statement explaining that the 
fee could be lower depending on how and where the prepaid account is 
used, using the following clause or a substantially similar clause: 
``This fee can be lower depending on how and where this card is used.'' 
Except as provided in paragraph (b)(3)(ii) of this section, a financial 
institution must use the same symbol and statement for all fees that 
could vary. The linked statement must be located above the statement 
required by paragraph (b)(2)(x) of this section.
    (ii) Disclosure of variable periodic fee. If the amount of the 
periodic fee disclosed in the short form disclosure pursuant to 
paragraph (b)(2)(i) of this section could vary, as an alternative to the 
disclosure required by paragraph (b)(3)(i) of this section, the 
financial institution may disclose the highest amount it may impose for 
the periodic fee, followed by a symbol, such as a dagger, that is 
different from the symbol the financial institution uses pursuant to 
paragraph (b)(3)(i) of this section, to indicate that a waiver of the 
fee or a lower fee might apply, linked to a statement in one additional 
line of text disclosing the waiver or reduced fee amount and explaining 
the circumstances under which the fee waiver or reduction may occur. The 
linked statement must be located directly above or in place of the 
linked statement required by paragraph (b)(3)(i) of this section, as 
applicable.
    (iii) Single disclosure for like fees. As an alternative to the two-
tier fee disclosure required by paragraphs (b)(2)(iii), (v), and (vi) of 
this section and any two-tier fee required by paragraph (b)(2)(ix) of 
this section, a financial institution may disclose a single fee amount 
when the amount is the same for both fees.
    (iv) Third-party fees in general. Except as provided in paragraph 
(b)(3)(v) of this section, a financial institution may not include any 
third-party fees in a disclosure made pursuant to paragraph (b)(2) of 
this section.
    (v) Third-party cash reload fees. Any third-party fee included in 
the cash reload fee disclosed in the short form pursuant to paragraph 
(b)(2)(iv) of this section must be the highest fee known by the 
financial institution at the time it prints, or otherwise prepares, the 
short form disclosure required by paragraph (b)(2) of this section. A 
financial institution is not required to revise its short form 
disclosure to reflect a cash reload fee change by a third party until 
such time that the financial institution manufactures, prints, or 
otherwise produces new prepaid account packaging materials or otherwise 
updates the short form disclosure.
    (vi) Prohibition on disclosure of finance charges. A financial 
institution may not include in a disclosure made pursuant to paragraphs 
(b)(2)(i) through (ix) of this section any finance charges as described 
in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection with a 
covered separate credit feature

[[Page 211]]

accessible by a hybrid prepaid-credit card as defined in 12 CFR 1026.61.
    (4) Long form disclosure content. In accordance with paragraph 
(b)(1) of this section, a financial institution shall provide a 
disclosure setting forth the following fees and information for a 
prepaid account, as applicable:
    (i) Title for long form disclosure. A heading stating the name of 
the prepaid account program and that the long form disclosure contains a 
list of all fees for that particular prepaid account program.
    (ii) Fees. All fees that may be imposed in connection with a prepaid 
account. For each fee, the financial institution must disclose the 
amount of the fee and the conditions, if any, under which the fee may be 
imposed, waived, or reduced. A financial institution may not use any 
symbols, such as an asterisk, to explain conditions under which any fee 
may be imposed. A financial institution may, but is not required to, 
include in the long form disclosure any service or feature it provides 
or offers at no charge to the consumer. The financial institution must 
also disclose any third-party fee amounts known to the financial 
institution that may apply. For any such third-party fee disclosed, the 
financial institution may, but is not required to, include either or 
both a statement that the fee is accurate as of or through a specific 
date or that the third-party fee is subject to change. If a third-party 
fee may apply but the amount of that fee is not known by the financial 
institution, it must include a statement indicating that the third-party 
fee may apply without specifying the fee amount. A financial institution 
is not required to revise the long form disclosure required by paragraph 
(b)(4) of this section to reflect a fee change by a third party until 
such time that the financial institution manufactures, prints, or 
otherwise produces new prepaid account packaging materials or otherwise 
updates the long form disclosure.
    (iii) Statement regarding registration and FDIC or NCUA insurance. 
The statement required by paragraph (b)(2)(xi) of this section, together 
with an explanation of FDIC or NCUA insurance coverage and the benefit 
of such coverage or the consequence of the lack of such coverage, as 
applicable.
    (iv) Statement regarding overdraft credit features. The statement 
required by paragraph (b)(2)(x) of this section.
    (v) Statement regarding financial institution contact information. A 
statement directing the consumer to a telephone number, mailing address, 
and Web site URL of the person or office that a consumer may contact to 
learn about the terms and conditions of the prepaid account, to obtain 
prepaid account balance information, to request a copy of transaction 
history pursuant to paragraph (c)(1)(iii) of this section if the 
financial institution does not provide periodic statements pursuant to 
Sec.  1005.9(b), or to notify the financial institution when the 
consumer believes that an unauthorized electronic fund transfer occurred 
as required by Sec.  1005.7(b)(2) and paragraph (d)(1)(ii) of this 
section.
    (vi) Statement regarding CFPB Web site and telephone number. A 
statement directing the consumer to a Web site URL of the Consumer 
Financial Protection Bureau (cfpb.gov/prepaid) for general information 
about prepaid accounts, and a statement directing the consumer to a 
Consumer Financial Protection Bureau telephone number (1-855-411-2372) 
and Web site URL (cfpb.gov/complaint) to submit a complaint about a 
prepaid account, using the following clause or a substantially similar 
clause: ``For general information about prepaid accounts, visit 
cfpb.gov/prepaid. If you have a complaint about a prepaid account, call 
the Consumer Financial Protection Bureau at 1-855-411-2372 or visit 
cfpb.gov/complaint.''
    (vii) Regulation Z disclosures for overdraft credit features. The 
disclosures described in Regulation Z, 12 CFR 1026.60(e)(1), in 
accordance with the requirements for such disclosures in 12 CFR 1026.60, 
if, at any point, a covered separate credit feature accessible by a 
hybrid prepaid-credit card as defined in 12 CFR 1026.61, may be offered 
in connection with the prepaid account. A financial institution may, but 
is not required to, include above the Regulation Z disclosures required 
by this paragraph a heading and other explanatory information 
introducing the overdraft

[[Page 212]]

credit feature. A financial institution is not required to revise the 
disclosure required by this paragraph to reflect a change in the fees or 
other terms disclosed therein until such time as the financial 
institution manufactures, prints, or otherwise produces new prepaid 
account packaging materials or otherwise updates the long form 
disclosure.
    (5) Disclosure requirements outside the short form disclosure. At 
the time a financial institution provides the short form disclosure, it 
must also disclose the following information: the name of the financial 
institution; the name of the prepaid account program; the purchase price 
for the prepaid account, if any; and the fee for activating the prepaid 
account, if any. In a setting other than in a retail location, this 
information must be disclosed in close proximity to the short form. In a 
retail location, this information, other than the purchase price, must 
be disclosed on the exterior of the access device's packaging material. 
In a retail location, the purchase price must be disclosed either on the 
exterior of or in close proximity to the prepaid account access device's 
packaging material.
    (6) Form of pre-acquisition disclosures--(i) General--(A) Written 
disclosures. Except as provided in paragraphs (b)(6)(i)(B) and (C) of 
this section, disclosures required by paragraph (b) of this section must 
be in writing.
    (B) Electronic disclosures. Unless provided in written form prior to 
acquisition pursuant to paragraph (b)(1)(i) of this section, the 
disclosures required by paragraph (b) of this section must be provided 
in electronic form when a consumer acquires a prepaid account through 
electronic means, including via a website or mobile application, and 
must be viewable across all screen sizes. The long form disclosure must 
be provided electronically through a website when a financial 
institution is offering prepaid accounts at a retail location pursuant 
to the retail location exception in paragraph (b)(1)(ii) of this 
section. Electronic disclosures must be provided in a manner which is 
reasonably expected to be accessible in light of how a consumer is 
acquiring the prepaid account, in a responsive form, and using machine-
readable text that is accessible via Web browsers or mobile 
applications, as applicable, and via screen readers. Electronic 
disclosures provided pursuant to paragraph (b) of this section need not 
meet the consumer consent and other applicable provisions of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.).
    (C) Oral disclosures. Unless provided in written form prior to 
acquisition pursuant to paragraph (b)(1)(i) of this section, disclosures 
required by paragraphs (b)(2) and (5) of this section must be provided 
orally when a consumer acquires a prepaid account orally by telephone 
pursuant to the exception in paragraph (b)(1)(iii) of this section. For 
prepaid accounts acquired in retail locations or orally by telephone, 
the disclosure required by paragraph (b)(4) of this section provided by 
telephone pursuant to paragraph (b)(1)(ii)(C) or (b)(1)(iii)(B) of this 
section also must be made orally.
    (ii) Retainable form. Pursuant to Sec.  1005.4(a)(1), disclosures 
required by paragraph (b) of this section must be made in a form that a 
consumer may keep, except for disclosures provided orally pursuant to 
paragraphs (b)(1)(ii) or (iii) of this section, a long form disclosure 
provided via SMS as permitted by paragraph (b)(2)(xiii) of this section 
for a prepaid account sold at retail locations pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section, and the 
disclosure of a purchase price pursuant to paragraph (b)(5) of this 
section that is not disclosed on the exterior of the packaging material 
for a prepaid account sold at a retail location pursuant to the retail 
location exception in paragraph (b)(1)(ii) of this section.
    (iii) Tabular format--(A) General. When a short form disclosure is 
provided in writing or electronically, the information required by 
paragraphs (b)(2)(i) through (ix) of this section shall be provided in 
the form of a table. Except as provided in paragraph (b)(6)(iii)(B) of 
this section, the short form disclosure required by paragraph (b)(2) of 
this section shall be provided in a form substantially similar to Model 
Forms A-10(a) through (d) in appendix A of this part, as applicable.

[[Page 213]]

When a long form disclosure is provided in writing or electronically, 
the information required by paragraph (b)(4)(ii) of this section shall 
be provided in the form of a table. Sample Form A-10(f) in appendix A of 
this part provides an example of the long form disclosure required by 
paragraph (b)(4) of this section when the financial institution does not 
offer multiple service plans.
    (B) Multiple service plans--(1) Short form disclosure for default 
service plan. When a financial institution offers multiple service plans 
within a particular prepaid account program and each plan has a 
different fee schedule, the information required by paragraphs (b)(2)(i) 
through (ix) of this section may be provided in the tabular format 
described in paragraph (b)(6)(iii)(A) of this section for the service 
plan in which a consumer is initially enrolled by default upon acquiring 
the prepaid account.
    (2) Short form disclosure for multiple service plans. As an 
alternative to disclosing the default service plan pursuant to paragraph 
(b)(6)(iii)(B)(1) of this section, when a financial institution offers 
multiple service plans within a particular prepaid account program and 
each plan has a different fee schedule, fee disclosures required by 
paragraphs (b)(2)(i) through (vii) and (ix) of this section may be 
provided in the form of a table with separate columns for each service 
plan, in a form substantially similar to Model Form A-10(e) in appendix 
A of this part. Column headings must describe each service plan included 
in the table, using the terms ``Pay-as-you-go plan,'' ``Monthly plan,'' 
``Annual plan,'' or substantially similar terms; or, for multiple 
service plans offering preferred rates or fees for the prepaid accounts 
of consumers who also use another non-prepaid service, column headings 
must describe each service plan included in the table for the preferred 
and non-preferred service plans, as applicable.
    (3) Long form disclosure. The information in the long form 
disclosure required by paragraph (b)(4)(ii) of this section must be 
presented in the form of a table for all service plans.
    (7) Specific formatting requirements for pre-acquisition 
disclosures--(i) Grouping--(A) Short form disclosure. The information 
required in the short form disclosure by paragraphs (b)(2)(i) through 
(iv) of this section must be grouped together and provided in that 
order. The information required by paragraphs (b)(2)(v) through (ix) of 
this section must be generally grouped together and provided in that 
order. The information required by paragraphs (b)(3)(i) and (ii) of this 
section, as applicable, must be generally grouped together and in the 
location described by paragraphs (b)(3)(i) and (ii) of this section. The 
information required by paragraphs (b)(2)(x) through (xiii) of this 
section must be generally grouped together and provided in that order. 
The statement regarding wage or salary payment options for payroll card 
accounts required by paragraph (b)(2)(xiv)(A) of this section must be 
located above the information required by paragraphs (b)(2)(i) through 
(iv) of this section, as described in paragraph (b)(2)(xiv)(A) of this 
section. The statement regarding state-required information or other fee 
discounts or waivers permitted by paragraph (b)(2)(xiv)(B) of this 
section, when applicable, must appear in the location described by 
paragraph (b)(2)(xiv)(B) of this section.
    (B) Long form disclosure. The information required by paragraph 
(b)(4)(i) of this section must be located in the first line of the long 
form disclosure. The information required by paragraph (b)(4)(ii) of 
this section must be generally grouped together and organized under 
subheadings by the categories of function for which a financial 
institution may impose the fee. Text describing the conditions under 
which a fee may be imposed must appear in the table required by 
paragraph (b)(6)(iii)(A) of this section in close proximity to the fee 
amount. The statements in the long form disclosure required by 
paragraphs (b)(4)(iii) through (vi) of this section must be generally 
grouped together, provided in that order, and appear below the 
information required by paragraph (b)(4)(ii) of this section. If, 
pursuant to paragraph (b)(4)(vii) of this section, the financial 
institution includes the disclosures described in Regulation Z, 12 CFR

[[Page 214]]

1026.60(e)(1), such disclosures must appear below the statements 
required by paragraph (b)(4)(vi) of this section.
    (C) Multiple service plan disclosure. When providing a short form 
disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, in lieu of the requirements in 
paragraph (b)(7)(i)(A) of this section for grouping of the disclosures 
required by paragraphs (b)(2)(i) through (iv) and (v) through (ix) of 
this section, the information required by paragraphs (b)(2)(i) through 
(ix) of this section must be grouped together and provided in that 
order.
    (ii) Prominence and size--(A) General. All text used to disclose 
information in the short form or in the long form disclosure pursuant to 
paragraphs (b)(2), (b)(3)(i) and (ii), and (b)(4) of this section must 
be in a single, easy-to-read type that is all black or one color and 
printed on a background that provides a clear contrast.
    (B) Short form disclosure--(1) Fees and other information. The 
information required in the short form disclosure by paragraphs 
(b)(2)(i) through (iv) of this section must appear as follows: Fee 
amounts in bold-faced type; single fee amounts in a minimum type size of 
15 points (or 21 pixels); two-tier fee amounts for ATM withdrawal in a 
minimum type size of 11 points (or 16 pixels) and in no larger a type 
size than what is used for the single fee amounts; and fee headings in a 
minimum type size of eight points (or 11 pixels) and in no larger a type 
size than what is used for the single fee amounts. The information 
required by paragraphs (b)(2)(v) through (ix) of this section must 
appear in a minimum type size of eight points (or 11 pixels) and appear 
in the same or a smaller type size than what is used for the fee 
headings required by paragraphs (b)(2)(i) through (iv) of this section. 
The information required by paragraphs (b)(2)(x) through (xiii) of this 
section must appear in a minimum type size of seven points (or nine 
pixels) and appear in no larger a type size than what is used for the 
information required to be disclosed by paragraphs (b)(2)(v) through 
(ix) of this section. Additionally, the statements disclosed pursuant to 
paragraphs (b)(2)(viii)(A) and (b)(2)(x) of this section and the 
telephone number and URL disclosed pursuant to paragraph (b)(2)(xiii) of 
this section, where applicable, must appear in bold-faced type. The 
following information must appear in a minimum type size of six points 
(or eight pixels) and appear in no larger a type size that what is used 
for the information required by paragraphs (b)(2)(x) through (xiii) of 
this section: text used to distinguish each of the two-tier fees 
pursuant to paragraphs (b)(2)(iii), (v), (vi), and (ix) of this section; 
text used to explain that the fee required by paragraph (b)(2)(vi) of 
this section applies ``per call,'' where applicable; and text used to 
explain the conditions that trigger an inactivity fee and that the fee 
applies monthly or for the applicable time period, pursuant to paragraph 
(b)(2)(vii) of this section.
    (2) Variable fees. The symbols and corresponding statements 
regarding variable fees disclosed in the short form pursuant to 
paragraphs (b)(3)(i) and (ii) of this section, when applicable, must 
appear in a minimum type size of seven points (or nine pixels) and 
appear in no larger a type size than what is used for the information 
required by paragraphs (b)(2)(x) through (xiii) of this section. A 
symbol required next to the fee amount pursuant to paragraphs (b)(3)(i) 
and (ii) of this section must appear in the same type size or pixel size 
as what is used for the corresponding fee amount.
    (3) Payroll card account additional content. The statement regarding 
wage or salary payment options for payroll card accounts required by 
paragraph (b)(2)(xiv)(A) of this section, when applicable, must appear 
in a minimum type size of eight points (or 11 pixels) and appear in no 
larger a type size than what is used for the fee headings required by 
paragraphs (b)(2)(i) through (iv) of this section. The statement 
regarding state-required information and other fee discounts or waivers 
permitted by paragraph (b)(2)(xiv)(B) of this section must appear in the 
same type size used to disclose variable fee information pursuant to 
paragraph (b)(3)(i) and (ii) of this section, or, if none, the same type 
size used for the information required by paragraphs (b)(2)(x) through 
(xiii) of this section.
    (C) Long form disclosure. The long form disclosure required by 
paragraph

[[Page 215]]

(b)(4) of this section must appear in a minimum type size of eight 
points (or 11 pixels).
    (D) Multiple service plan short form disclosure. When providing a 
short form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, the fee headings required by 
paragraphs (b)(2)(i) through (iv) of this section must appear in bold-
faced type. The information required by paragraphs (b)(2)(i) through 
(xiii) of this section must appear in a minimum type size of seven 
points (or nine pixels), except the following must appear in a minimum 
type size of six points (or eight pixels) and appear in no larger a type 
size than what is used for the information required by paragraphs 
(b)(2)(i) through (xiii) of this section: Text used to distinguish each 
of the two-tier fees required by paragraphs (b)(2)(iii) and (v) of this 
section; text used to explain that the fee required by paragraph 
(b)(2)(vi) of this section applies ``per call,'' where applicable; text 
used to explain the conditions that trigger an inactivity fee pursuant 
to paragraph (b)(2)(vii) of this section; and text used to distinguish 
that fees required by paragraphs (b)(2)(i) and (vii) of this section 
apply monthly or for the applicable time period.
    (iii) Segregation. Short form and long form disclosures required by 
paragraphs (b)(2) and (4) of this section must be segregated from other 
information and must contain only information that is required or 
permitted for those disclosures by paragraph (b) of this section.
    (8) Terminology of pre-acquisition disclosures. Fee names and other 
terms must be used consistently within and across the disclosures 
required by paragraph (b) of this section.
    (9) Prepaid accounts acquired in foreign languages--(i) General. A 
financial institution must provide the pre-acquisition disclosures 
required by paragraph (b) of this section in a foreign language, if the 
financial institution uses that same foreign language in connection with 
the acquisition of a prepaid account in the following circumstances:
    (A) The financial institution principally uses a foreign language on 
the prepaid account packaging material;
    (B) The financial institution principally uses a foreign language to 
advertise, solicit, or market a prepaid account and provides a means in 
the advertisement, solicitation, or marketing material that the consumer 
uses to acquire the prepaid account by telephone or electronically; or
    (C) The financial institution provides a means for the consumer to 
acquire a prepaid account by telephone or electronically principally in 
a foreign language. However, foreign language pre-acquisition 
disclosures are not required for payroll card accounts and government 
benefit accounts where the foreign language is offered by telephone via 
a real-time language interpretation service provided by a third party or 
by the employer or government agency on an informal or ad hoc basis as 
an accommodation to prospective payroll card account or government 
benefit account holders.
    (ii) Long form disclosures in English upon request. A financial 
institution required to provide pre-acquisition disclosures in a foreign 
language pursuant to paragraph (b)(9)(i) of this section must also 
provide the information required to be disclosed in its pre-acquisition 
long form disclosure pursuant to paragraph (b)(4) of this section in 
English upon a consumer's request and on any part of the Web site where 
it discloses this information in a foreign language.
    (c) Access to prepaid account information--(1) Periodic statement 
alternative. A financial institution need not furnish periodic 
statements required by Sec.  1005.9(b) if the financial institution 
makes available to the consumer:
    (i) The consumer's account balance, through a readily available 
telephone line;
    (ii) An electronic history of the consumer's account transactions, 
such as through a Web site, that covers at least 12 months preceding the 
date the consumer electronically accesses the account; and
    (iii) A written history of the consumer's account transactions that 
is provided promptly in response to an oral or written request and that 
covers

[[Page 216]]

at least 24 months preceding the date the financial institution receives 
the consumer's request.
    (2) Periodic statement alternative for unverified prepaid accounts. 
For prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to provide a 
written history of the consumer's account transactions pursuant to 
paragraph (c)(1)(iii) of this section for any prepaid account for which 
the financial institution has not completed its consumer identification 
and verification process as described in paragraph (e)(3)(i)(A) through 
(C) of this section.
    (3) Information included on electronic or written histories. The 
history of account transactions provided under paragraphs (c)(1)(ii) and 
(iii) of this section must include the information set forth in Sec.  
1005.9(b).
    (4) Inclusion of all fees charged. A financial institution must 
disclose the amount of any fees assessed against the account, whether 
for electronic fund transfers or otherwise, on any periodic statement 
provided pursuant to Sec.  1005.9(b) and on any history of account 
transactions provided or made available by the financial institution.
    (5) Summary totals of fees. A financial institution must display a 
summary total of the amount of all fees assessed by the financial 
institution against the consumer's prepaid account for the prior 
calendar month and for the calendar year to date on any periodic 
statement provided pursuant to Sec.  1005.9(b) and on any history of 
account transactions provided or made available by the financial 
institution.
    (d) Modified disclosure requirements. A financial institution that 
provides information under paragraph (c)(1) of this section shall comply 
with the following:
    (1) Initial disclosures. The financial institution shall modify the 
disclosures under Sec.  1005.7(b) by disclosing:
    (i) Access to account information. A telephone number that the 
consumer may call to obtain the account balance, the means by which the 
consumer can obtain an electronic account transaction history, such as 
the address of a Web site, and a summary of the consumer's right to 
receive a written account transaction history upon request (in place of 
the summary of the right to receive a periodic statement required by 
Sec.  1005.7(b)(6)), including a telephone number to call to request a 
history. The disclosure required by this paragraph may be made by 
providing a notice substantially similar to the notice contained in 
paragraph (a) of appendix A-7 of this part.
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-7 of this part, in place of the notice required by Sec.  
1005.7(b)(10). Alternatively, for prepaid account programs for which the 
financial institution does not have a consumer identification and 
verification process, the financial institution must describe its error 
resolution process and limitations on consumers' liability for 
unauthorized transfers or, if none, state that there are no such 
protections.
    (2) Annual error resolution notice. The financial institution shall 
provide an annual notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-7 of this part, in place of the notice required by Sec.  
1005.8(b). Alternatively, a financial institution may include on or with 
each electronic and written account transaction history provided in 
accordance with paragraph (c)(1) of this section, a notice substantially 
similar to the abbreviated notice for periodic statements contained in 
paragraph (b) of appendix A-3 of this part, modified as necessary to 
reflect the error resolution provisions set forth in paragraph (e) of 
this section.
    (e) Modified limitations on liability and error resolution 
requirements--(1) Modified limitations on liability requirements. A 
financial institution that provides information under paragraph (c)(1) 
of this section shall comply with the following:
    (i) For purposes of Sec.  1005.6(b)(3), the 60-day period for 
reporting any unauthorized transfer shall begin on the earlier of:
    (A) The date the consumer electronically accesses the consumer's 
account

[[Page 217]]

under paragraph (c)(1)(ii) of this section, provided that the electronic 
account transaction history made available to the consumer reflects the 
unauthorized transfer; or
    (B) The date the financial institution sends a written history of 
the consumer's account transactions requested by the consumer under 
paragraph (c)(1)(iii) of this section in which the unauthorized transfer 
is first reflected.
    (ii) A financial institution may comply with paragraph (e)(1)(i) of 
this section by limiting the consumer's liability for an unauthorized 
transfer as provided under Sec.  1005.6(b)(3) for any transfer reported 
by the consumer within 120 days after the transfer was credited or 
debited to the consumer's account.
    (2) Modified error resolution requirements. A financial institution 
that provides information under paragraph (c)(1) of this section shall 
comply with the following:
    (i) The financial institution shall comply with the requirements of 
Sec.  1005.11 in response to an oral or written notice of an error from 
the consumer that is received by the earlier of:
    (A) Sixty days after the date the consumer electronically accesses 
the consumer's account under paragraph (c)(1)(ii) of this section, 
provided that the electronic account transaction history made available 
to the consumer reflects the alleged error; or
    (B) Sixty days after the date the financial institution sends a 
written history of the consumer's account transactions requested by the 
consumer under paragraph (c)(1)(iii) of this section in which the 
alleged error is first reflected.
    (ii) In lieu of following the procedures in paragraph (e)(2)(i) of 
this section, a financial institution complies with the requirements for 
resolving errors in Sec.  1005.11 if it investigates any oral or written 
notice of an error from the consumer that is received by the institution 
within 120 days after the transfer allegedly in error was credited or 
debited to the consumer's account.
    (3) Limitations on liability and error resolution for unverified 
accounts. (i) For prepaid accounts that are not payroll card accounts or 
government benefit accounts, a financial institution is not required to 
comply with the liability limits and error resolution requirements in 
Sec. Sec.  1005.6 and 1005.11 for any prepaid account for which it has 
not successfully completed its consumer identification and verification 
process.
    (ii) For purposes of paragraph (e)(3)(i) of this section, a 
financial institution has not successfully completed its consumer 
identification and verification process where:
    (A) The financial institution has not concluded its consumer 
identification and verification process with respect to a particular 
prepaid account, provided that it has disclosed to the consumer the 
risks of not registering and verifying the account using a notice that 
is substantially similar to the model notice contained in paragraph (c) 
of appendix A-7 of this part.
    (B) The financial institution has concluded its consumer 
identification and verification process with respect to a particular 
prepaid account, but could not verify the identity of the consumer, 
provided that it has disclosed to the consumer the risks of not 
registering and verifying the account using a notice that is 
substantially similar to the model notice contained in paragraph (c) of 
appendix A-7 of this part; or
    (C) The financial institution does not have a consumer 
identification and verification process for the prepaid account program, 
provided that it has made the alternative disclosure described in 
paragraph (d)(1)(ii) of this section and complies with the process it 
has disclosed.
    (iii) Resolution of errors following successful verification. Once a 
financial institution successfully completes its consumer identification 
and verification process with respect to a prepaid account, the 
financial institution must limit the consumer's liability for 
unauthorized transfers and resolve errors that occur following 
verification in accordance with Sec.  1005.6 or Sec.  1005.11, or the 
modified timing requirements in this paragraph (e), as applicable.
    (f) Disclosure of fees and other information--(1) Initial disclosure 
of fees and other information. A financial institution must include, as 
part of the initial disclosures given pursuant to Sec.  1005.7, all of 
the information required to be

[[Page 218]]

disclosed in its pre-acquisition long form disclosure pursuant to 
paragraph (b)(4) of this section.
    (2) Change-in-terms notice. The change-in-terms notice provisions in 
Sec.  1005.8(a) apply to any change in a term or condition that is 
required to be disclosed under Sec.  1005.7 or paragraph (f)(1) of this 
section. If a financial institution discloses the amount of a third-
party fee in its pre-acquisition long form disclosure pursuant to 
paragraph (b)(4)(ii) of this section and initial disclosures pursuant to 
paragraph (f)(1) of this section, the financial institution is not 
required to provide a change-in-terms notice solely to reflect a change 
in that fee amount imposed by the third party. If a financial 
institution provides pursuant to paragraph (f)(1) of this section the 
Regulation Z disclosures required by paragraph (b)(4)(vii) of this 
section for an overdraft credit feature, the financial institution is 
not required to provide a change-in-terms notice solely to reflect a 
change in the fees or other terms disclosed therein.
    (3) Disclosures on prepaid account access devices. The name of the 
financial institution and the Web site URL and a telephone number a 
consumer can use to contact the financial institution about the prepaid 
account must be disclosed on the prepaid account access device. If a 
financial institution does not provide a physical access device in 
connection with a prepaid account, the disclosure must appear on the Web 
site, mobile application, or other entry point a consumer must visit to 
access the prepaid account electronically.
    (g) Prepaid accounts accessible by hybrid prepaid-credit cards--(1) 
In general. Except as provided in paragraph (g)(2) of this section, with 
respect to a prepaid account program where consumers may be offered a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined by Regulation Z, 12 CFR 1026.61, a financial institution 
must provide to any prepaid account without a covered separate credit 
feature the same account terms, conditions, and features that it 
provides on prepaid accounts in the same prepaid account program that 
have such a credit feature.
    (2) Exception for higher fees or charges. A financial institution is 
not prohibited under paragraph (g)(1) of this section from imposing a 
higher fee or charge on the asset feature of a prepaid account with a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card than the amount of a comparable fee or charge that it imposes on 
any prepaid account in the same prepaid account program that does not 
have such a credit feature.
    (h) Effective date and special transition rules for disclosure 
provisions--(1) Effective date generally. Except as provided in 
paragraphs (h)(2) and (3) of this section, the requirements of this 
subpart, as modified by this section, apply to prepaid accounts as 
defined in Sec.  1005.2(b)(3), including government benefit accounts 
subject to Sec.  1005.15, beginning April 1, 2019.
    (2) Early disclosures--(i) Exception for disclosures on existing 
prepaid account access devices and prepaid account packaging materials. 
The disclosure requirements of this subpart, as modified by this 
section, shall not apply to any disclosures that are provided, or that 
would otherwise be required to be provided, on prepaid account access 
devices, or on, in, or with prepaid account packaging materials that 
were manufactured, printed, or otherwise produced in the normal course 
of business prior to April 1, 2019.
    (ii) Disclosures for prepaid accounts acquired on or after April 1, 
2019. This paragraph applies to prepaid accounts acquired by consumers 
on or after April 1, 2019 via packaging materials that were 
manufactured, printed, or otherwise produced prior to April 1, 2019.
    (A) Notices of certain changes. If a financial institution has 
changed a prepaid account's terms and conditions as a result of 
paragraph (h)(1) of this section taking effect such that a change-in-
terms notice would have been required under Sec.  1005.8(a) or paragraph 
(f)(2) of this section for existing customers, the financial institution 
must provide to the consumer a notice of the change within 30 days of 
obtaining the consumer's contact information.
    (B) Initial disclosures. The financial institution must mail or 
deliver to the consumer initial disclosures pursuant

[[Page 219]]

to Sec.  1005.7 and paragraph (f)(1) of this section that have been 
updated as a result of paragraph (h)(1) of this section taking effect, 
within 30 days of obtaining the consumer's contact information.
    (iii) Disclosures for prepaid accounts acquired before April 1, 
2019. This paragraph applies to prepaid accounts acquired by consumers 
before April 1, 2019. If a financial institution has changed a prepaid 
account's terms and conditions as a result of paragraph (h)(1) of this 
section taking effect such that a change-in-terms notice would have been 
required under Sec.  1005.8(a) or paragraph (f)(2) of this section for 
existing customers, the financial institution must provide to the 
consumer a notice of the change at least 21 days in advance of the 
change becoming effective, provided the financial institution has the 
consumer's contact information. If the financial institution obtains the 
consumer's contact information less than 30 days in advance of the 
change becoming effective or after it has become effective, the 
financial institution is permitted instead to notify the consumer of the 
change in accordance with the timing requirements set forth in paragraph 
(h)(2)(ii)(A) of this section.
    (iv) Method of providing notice to consumers. With respect to 
prepaid accounts governed by paragraph (h)(2)(ii) or (iii) of this 
section, if a financial institution has not obtained a consumer's 
consent to provide disclosures in electronic form pursuant to the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.), or is not otherwise already mailing or 
delivering to the consumer written account-related communications within 
the respective time periods specified in paragraphs (h)(2)(ii) or (iii) 
of this section, the financial institution may provide to the consumer a 
notice of a change in terms and conditions pursuant to paragraph 
(h)(2)(ii) or (iii) of this section or required or voluntary updated 
initial disclosures as a result of paragraph (h)(1) of this section 
taking effect in electronic form without regard to the consumer notice 
and consent requirements of section 101(c) of the E-Sign Act.
    (3) Account information not available on April 1, 2019--(i) 
Electronic and written account transaction history. If, on April 1, 
2019, a financial institution does not have readily accessible the data 
necessary to make available 12 months of electronic account transaction 
history pursuant to paragraph (c)(1)(ii) of this section or to provide 
24 months of written account transaction history upon request pursuant 
to paragraph (c)(1)(iii) of this section, the financial institution may 
make available or provide such histories using the data for the time 
period it has until the financial institution has accumulated the data 
necessary to comply in full with the requirements set forth in 
paragraphs (c)(1)(ii) and (iii) of this section.
    (ii) Summary totals of fees. If, on April 1, 2019, the financial 
institution does not have readily accessible the data necessary to 
calculate the summary totals of the amount of all fees assessed by the 
financial institution on the consumer's prepaid account for the prior 
calendar month and for the calendar year to date pursuant to paragraph 
(c)(5) of this section, the financial institution may display the 
summary totals using the data it has until the financial institution has 
accumulated the data necessary to display the summary totals as required 
by paragraph (c)(5) of this section.

[81 FR 84328, Nov. 22, 2016, as amended at 82 FR 18980, Apr. 25, 2017; 
83 FR 6417, Feb. 13, 2018]



Sec.  1005.19  Internet posting of prepaid account agreements.

    (a) Definitions--(1) Agreement. For purposes of this section, 
``agreement'' or ``prepaid account agreement'' means the written 
document or documents evidencing the terms of the legal obligation, or 
the prospective legal obligation, between a prepaid account issuer and a 
consumer for a prepaid account. ``Agreement'' or ``prepaid account 
agreement'' also includes fee information, as defined in paragraph 
(a)(3) of this section.
    (2) Amends. For purposes of this section, an issuer ``amends'' an 
agreement if it makes a substantive change (an ``amendment'') to the 
agreement. A change is substantive if it alters the

[[Page 220]]

rights or obligations of the issuer or the consumer under the agreement. 
Any change in the fee information, as defined in paragraph (a)(3) of 
this section, is deemed to be substantive.
    (3) Fee information. For purposes of this section, ``fee 
information'' means the short form disclosure for the prepaid account 
pursuant to Sec.  1005.18(b)(2) and the fee information and statements 
required to be disclosed in the pre-acquisition long form disclosure for 
the prepaid account pursuant to Sec.  1005.18(b)(4).
    (4) Issuer. For purposes of this section, ``issuer'' or ``prepaid 
account issuer'' means the entity to which a consumer is legally 
obligated, or would be legally obligated, under the terms of a prepaid 
account agreement.
    (5) Offers. For purposes of this section, an issuer ``offers'' an 
agreement if the issuer markets, solicits applications for, or otherwise 
makes available a prepaid account that would be subject to that 
agreement, regardless of whether the issuer offers the prepaid account 
to the general public.
    (6) Offers to the general public. For purposes of this section, an 
issuer ``offers to the general public'' an agreement if the issuer 
markets, solicits applications for, or otherwise makes available to the 
general public a prepaid account that would be subject to that 
agreement.
    (7) Open account. For purposes of this section, a prepaid account is 
an ``open account'' or ``open prepaid account'' if: There is an 
outstanding balance in the account; the consumer can load funds to the 
account even if the account does not currently hold a balance; or the 
consumer can access credit from a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in Regulation Z, 
12 CFR 1026.61, in connection with the account. A prepaid account that 
has been suspended temporarily (for example, due to a report by the 
consumer of unauthorized use of the card) is considered an ``open 
account'' or ``open prepaid account.''
    (8) Prepaid account. For purposes of this section, ``prepaid 
account'' means a prepaid account as defined in Sec.  1005.2(b)(3).
    (b) Submission of agreements to the Bureau--(1) Submissions on a 
rolling basis. An issuer must make submissions of prepaid account 
agreements to the Bureau on a rolling basis, in the form and manner 
specified by the Bureau. Rolling submissions must be sent to the Bureau 
no later than 30 days after an issuer offers, amends, or ceases to offer 
any prepaid account agreement as described in paragraphs (b)(1)(ii) 
through (iv) of this section. Each submission must contain:
    (i) Identifying information about the issuer and the agreements 
submitted, including the issuer's name, address, and identifying number 
(such as an RSSD ID number or tax identification number), the effective 
date of the prepaid account agreement, the name of the program manager, 
if any, and the list of names of other relevant parties, if applicable 
(such as the employer for a payroll card program or the agency for a 
government benefit program);
    (ii) Any prepaid account agreement offered by the issuer that has 
not been previously submitted to the Bureau;
    (iii) Any prepaid account agreement previously submitted to the 
Bureau that has been amended, as described in paragraph (b)(2)(i) of 
this section; and
    (iv) Notification regarding any prepaid account agreement previously 
submitted to the Bureau that the issuer is withdrawing, as described in 
paragraphs (b)(3), (b)(4)(ii), and (b)(5)(ii) of this section.
    (2) Amended agreements--(i) Submission of amended agreements 
generally. If a prepaid account agreement previously submitted to the 
Bureau is amended, the issuer must submit the entire amended agreement 
to the Bureau, in the form and manner specified by the Bureau, no later 
than 30 days after the change becomes effective. If other identifying 
information about the issuer and its submitted agreements pursuant to 
paragraph (b)(1)(i) of this section previously submitted to the Bureau 
is amended, the issuer must submit updated information to the Bureau, in 
the form and manner specified by the Bureau, no later than 30 days after 
the change becomes effective.
    (ii) Submission of updated list of names of other relevant parties. 
Notwithstanding paragraph (b)(2)(i) of this section, an issuer may delay 
submitting a change to the list of names of other

[[Page 221]]

relevant parties to a particular agreement until the earlier of:
    (A) Such time as the issuer is otherwise submitting an amended 
agreement or changes to other identifying information about the issuer 
and its submitted agreements pursuant to paragraph (b)(1)(i) of this 
section; or
    (B) May 1 of each year, for any updates to the list of names of 
other relevant parties for that agreement that occurred between the 
issuer's last submission of relevant party information and April 1 of 
that year.
    (3) Withdrawal of agreements no longer offered. If an issuer no 
longer offers a prepaid account agreement that was previously submitted 
to the Bureau, the issuer must notify the Bureau, in the form and manner 
specified by the Bureau, no later than 30 days after the issuer ceases 
to offer the agreement, that it is withdrawing the agreement.
    (4) De minimis exception. (i) An issuer is not required to submit 
any prepaid account agreements to the Bureau if the issuer has fewer 
than 3,000 open prepaid accounts. If the issuer has 3,000 or more open 
prepaid accounts as of the last day of the calendar quarter, the issuer 
must submit to the Bureau its prepaid account agreements no later than 
30 days after the last day of that calendar quarter.
    (ii) If an issuer that did not previously qualify for the de minimis 
exception newly qualifies for the de minimis exception, the issuer must 
continue to make submissions to the Bureau on a rolling basis until the 
issuer notifies the Bureau that the issuer is withdrawing all agreements 
it previously submitted to the Bureau.
    (5) Product testing exception. (i) An issuer is not required to 
submit a prepaid account agreement to the Bureau if the agreement meets 
the criteria set forth in paragraphs (b)(5)(i)(A) through (C) of this 
section. If the agreement fails to meet the criteria set forth in 
paragraphs (b)(5)(i)(A) through (C) of this section as of the last day 
of the calendar quarter, the issuer must submit to the Bureau that 
prepaid account agreement no later than 30 days after the last day of 
that calendar quarter. An agreement qualifies for the product testing 
exception if the agreement:
    (A) Is offered as part of a product test offered to only a limited 
group of consumers for a limited period of time;
    (B) Is used for fewer than 3,000 open prepaid accounts; and
    (C) Is not offered other than in connection with such a product 
test.
    (ii) If an agreement that did not previously qualify for the product 
testing exception newly qualifies for the exception, the issuer must 
continue to make submissions to the Bureau on a rolling basis with 
respect to that agreement until the issuer notifies the Bureau that the 
issuer is withdrawing the agreement.
    (6) Form and content of agreements submitted to the Bureau--(i) Form 
and content generally. (A) Each agreement must contain the provisions of 
the agreement and the fee information currently in effect.
    (B) Agreements must not include any personally identifiable 
information relating to any consumer, such as name, address, telephone 
number, or account number.
    (C) The following are not deemed to be part of the agreement for 
purposes of this section, and therefore are not required to be included 
in submissions to the Bureau:
    (1) Ancillary disclosures required by state or Federal law, such as 
affiliate marketing notices, privacy policies, or disclosures under the 
E-Sign Act;
    (2) Solicitation or marketing materials;
    (3) Periodic statements; and
    (4) Documents that may be sent to the consumer along with the 
prepaid account or prepaid account agreement such as a cover letter, a 
validation sticker on the card, or other information about card 
security.
    (D) Agreements must be presented in a clear and legible font.
    (ii) Fee information. Fee information must be set forth either in 
the prepaid account agreement or in addenda to that agreement that 
attach either or both the short form disclosure for the prepaid account 
pursuant to Sec.  1005.18(b)(2) and the fee information and statements 
required to be disclosed in the long form disclosure for the prepaid 
account pursuant to Sec.  1005.18(b)(4). The agreement or addenda 
thereto

[[Page 222]]

must contain all of the fee information, as defined by paragraph (a)(3) 
of this section.
    (iii) Integrated agreement. An issuer may not provide provisions of 
the agreement or fee information to the Bureau in the form of change-in-
terms notices or riders (other than the optional fee information addenda 
described in paragraph (b)(6)(ii) of this section). Changes in 
provisions or fee information must be integrated into the text of the 
agreement, or the optional fee information addenda, as appropriate.
    (c) Posting of agreements offered to the general public. (1) An 
issuer must post and maintain on its publicly available Web site any 
prepaid account agreements offered to the general public that the issuer 
is required to submit to the Bureau under paragraph (b) of this section.
    (2) Agreements posted pursuant to this paragraph (c) must conform to 
the form and content requirements for agreements submitted to the Bureau 
set forth in paragraph (b)(6) of this section.
    (3) The issuer must post and update the agreements posted on its Web 
site pursuant to this paragraph (c) as frequently as the issuer is 
required to submit new or amended agreements to the Bureau pursuant to 
paragraph (b)(2)(i) of this section.
    (4) Agreements posted pursuant to this paragraph (c) may be posted 
in any electronic format that is readily usable by the general public. 
Agreements must be placed in a location that is prominent and readily 
accessible to the public and must be accessible without submission of 
personally identifiable information.
    (d) Agreements for all open accounts--(1) Availability of an 
individual consumer's prepaid account agreement. With respect to any 
open prepaid account, an issuer must either:
    (i) Post and maintain the consumer's agreement on its Web site; or
    (ii) Promptly provide a copy of the consumer's agreement to the 
consumer upon the consumer's request. If the issuer makes an agreement 
available upon request, the issuer must provide the consumer with the 
ability to request a copy of the agreement by telephone. The issuer must 
send to the consumer a copy of the consumer's prepaid account agreement 
no later than five business days after the issuer receives the 
consumer's request.
    (2) Form and content of agreements. (i) Except as provided in this 
paragraph (d), agreements posted on the issuer's Web site pursuant to 
paragraph (d)(1)(i) of this section or sent to the consumer upon the 
consumer's request pursuant to paragraph (d)(1)(ii) of this section must 
conform to the form and content requirements for agreements submitted to 
the Bureau as set forth in paragraph (b)(6) of this section.
    (ii) If the issuer posts an agreement on its Web site under 
paragraph (d)(1)(i) of this section, the agreement may be posted in any 
electronic format that is readily usable by the general public and must 
be placed in a location that is prominent and readily accessible to the 
consumer.
    (iii) Agreements posted or otherwise provided pursuant to this 
paragraph (d) may contain personally identifiable information relating 
to the consumer, such as name, address, telephone number, or account 
number, provided that the issuer takes appropriate measures to make the 
agreement accessible only to the consumer or other authorized persons.
    (iv) Agreements posted or otherwise provided pursuant to this 
paragraph (d) must set forth the specific provisions and fee information 
applicable to the particular consumer.
    (v) Agreements posted pursuant to paragraph (d)(1)(i) of this 
section must be updated as frequently as the issuer is required to 
submit amended agreements to the Bureau pursuant to paragraph (b)(2)(i) 
of this section. Agreements provided upon consumer request pursuant to 
paragraph (d)(1)(ii) of this section must be accurate as of the date the 
agreement is sent to the consumer.
    (vi) Agreements provided upon consumer request pursuant to paragraph 
(d)(1)(ii) of this section must be provided by the issuer in paper form, 
unless the consumer agrees to receive the agreement electronically.
    (e) E-Sign Act requirements. Except as otherwise provided in this 
section, issuers may provide prepaid account agreements in electronic 
form under

[[Page 223]]

paragraphs (c) and (d) of this section without regard to the consumer 
notice and consent requirements of section 101(c) of the Electronic 
Signatures in Global and National Commerce Act(E-Sign Act) (15 U.S.C. 
7001 et seq.).
    (f) Initial submission date. The requirements of this section apply 
to prepaid accounts beginning on April 1, 2019. An issuer must submit to 
the Bureau no later than May 1, 2019 all prepaid account agreements it 
offers as of April 1, 2019.

[81 FR 84336, Nov. 22, 2016, as amended at 83 FR 6419, Feb. 13, 2018]



Sec.  1005.20  Requirements for gift cards and gift certificates.

    (a) Definitions. For purposes of this section, except as excluded 
under paragraph (b), the following definitions apply:
    (1) ``Gift certificate'' means a card, code, or other device that 
is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount that may not be 
increased or reloaded in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (2) ``Store gift card'' means a card, code, or other device that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at a single merchant or an 
affiliated group of merchants for goods or services.
    (3) ``General-use prepaid card'' means a card, code, or other device 
that is:
    (i) Issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in a specified amount, whether or not 
that amount may be increased or reloaded, in exchange for payment; and
    (ii) Redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, or usable at automated teller machines.
    (4) ``Loyalty, award, or promotional gift card'' means a card, code, 
or other device that:
    (i) Is issued on a prepaid basis primarily for personal, family, or 
household purposes to a consumer in connection with a loyalty, award, or 
promotional program;
    (ii) Is redeemable upon presentation at one or more merchants for 
goods or services, or usable at automated teller machines; and
    (iii) Sets forth the following disclosures, as applicable:
    (A) A statement indicating that the card, code, or other device is 
issued for loyalty, award, or promotional purposes, which must be 
included on the front of the card, code, or other device;
    (B) The expiration date for the underlying funds, which must be 
included on the front of the card, code, or other device;
    (C) The amount of any fees that may be imposed in connection with 
the card, code, or other device, and the conditions under which they may 
be imposed, which must be provided on or with the card, code, or other 
device; and
    (D) A toll-free telephone number and, if one is maintained, a Web 
site, that a consumer may use to obtain fee information, which must be 
included on the card, code, or other device.
    (5) Dormancy or inactivity fee. The terms ``dormancy fee'' and 
``inactivity fee'' mean a fee for non-use of or inactivity on a gift 
certificate, store gift card, or general-use prepaid card.
    (6) Service fee. The term ``service fee'' means a periodic fee for 
holding or use of a gift certificate, store gift card, or general-use 
prepaid card. A periodic fee includes any fee that may be imposed on a 
gift certificate, store gift card, or general-use prepaid card from time 
to time for holding or using the certificate or card.
    (7) Activity. The term ``activity'' means any action that results in 
an increase or decrease of the funds underlying a certificate or card, 
other than the imposition of a fee, or an adjustment due to an error or 
a reversal of a prior transaction.
    (b) Exclusions. The terms ``gift certificate,'' ``store gift card,'' 
and ``general-use prepaid card'', as defined in

[[Page 224]]

paragraph (a) of this section, do not include any card, code, or other 
device that is:
    (1) Useable solely for telephone services;
    (2) Reloadable and not marketed or labeled as a gift card or gift 
certificate. For purposes of this paragraph (b)(2), the term 
``reloadable'' includes a temporary non-reloadable card issued solely in 
connection with a reloadable card, code, or other device;
    (3) A loyalty, award, or promotional gift card;
    (4) Not marketed to the general public;
    (5) Issued in paper form only; or
    (6) Redeemable solely for admission to events or venues at a 
particular location or group of affiliated locations, or to obtain goods 
or services in conjunction with admission to such events or venues, 
either at the event or venue or at specific locations affiliated with 
and in geographic proximity to the event or venue.
    (c) Form of disclosures--(1) Clear and conspicuous. Disclosures made 
under this section must be clear and conspicuous. The disclosures may 
contain commonly accepted or readily understandable abbreviations or 
symbols.
    (2) Format. Disclosures made under this section generally must be 
provided to the consumer in written or electronic form. Except for the 
disclosures in paragraphs (c)(3) and (h)(2) of this section, written and 
electronic disclosures made under this section must be in a retainable 
form. Only disclosures provided under paragraphs (c)(3) and (h)(2) may 
be given orally.
    (3) Disclosures prior to purchase. Before a gift certificate, store 
gift card, or general-use prepaid card is purchased, a person that 
issues or sells such certificate or card must disclose to the consumer 
the information required by paragraphs (d)(2), (e)(3), and (f)(1) of 
this section. The fees and terms and conditions of expiration that are 
required to be disclosed prior to purchase may not be changed after 
purchase.
    (4) Disclosures on the certificate or card. Disclosures required by 
paragraphs (a)(4)(iii), (d)(2), (e)(3), and (f)(2) of this section must 
be made on the certificate or card, or in the case of a loyalty, award, 
or promotional gift card, on the card, code, or other device. A 
disclosure made in an accompanying terms and conditions document, on 
packaging surrounding a certificate or card, or on a sticker or other 
label affixed to the certificate or card does not constitute a 
disclosure on the certificate or card. For an electronic certificate or 
card, disclosures must be provided electronically on the certificate or 
card provided to the consumer. An issuer that provides a code or 
confirmation to a consumer orally must provide to the consumer a written 
or electronic copy of the code or confirmation promptly, and the 
applicable disclosures must be provided on the written copy of the code 
or confirmation.
    (d) Prohibition on imposition of fees or charges. No person may 
impose a dormancy, inactivity, or service fee with respect to a gift 
certificate, store gift card, or general-use prepaid card, unless:
    (1) There has been no activity with respect to the certificate or 
card, in the one-year period ending on the date on which the fee is 
imposed;
    (2) The following are stated, as applicable, clearly and 
conspicuously on the gift certificate, store gift card, or general-use 
prepaid card:
    (i) The amount of any dormancy, inactivity, or service fee that may 
be charged;
    (ii) How often such fee may be assessed; and
    (iii) That such fee may be assessed for inactivity; and
    (3) Not more than one dormancy, inactivity, or service fee is 
imposed in any given calendar month.
    (e) Prohibition on sale of gift certificates or cards with 
expiration dates. No person may sell or issue a gift certificate, store 
gift card, or general-use prepaid card with an expiration date, unless:
    (1) The person has established policies and procedures to provide 
consumers with a reasonable opportunity to purchase a certificate or 
card with at least five years remaining until the certificate or card 
expiration date;
    (2) The expiration date for the underlying funds is at least the 
later of:

[[Page 225]]

    (i) Five years after the date the gift certificate was initially 
issued, or the date on which funds were last loaded to a store gift card 
or general-use prepaid card; or
    (ii) The certificate or card expiration date, if any;
    (3) The following disclosures are provided on the certificate or 
card, as applicable:
    (i) The expiration date for the underlying funds or, if the 
underlying funds do not expire, that fact;
    (ii) A toll-free telephone number and, if one is maintained, a Web 
site that a consumer may use to obtain a replacement certificate or card 
after the certificate or card expires if the underlying funds may be 
available; and
    (iii) Except where a non-reloadable certificate or card bears an 
expiration date that is at least seven years from the date of 
manufacture, a statement, disclosed with equal prominence and in close 
proximity to the certificate or card expiration date, that:
    (A) The certificate or card expires, but the underlying funds either 
do not expire or expire later than the certificate or card, and;
    (B) The consumer may contact the issuer for a replacement card; and
    (4) No fee or charge is imposed on the cardholder for replacing the 
gift certificate, store gift card, or general-use prepaid card or for 
providing the certificate or card holder with the remaining balance in 
some other manner prior to the funds expiration date, unless such 
certificate or card has been lost or stolen.
    (f) Additional disclosure requirements for gift certificates or 
cards. The following disclosures must be provided in connection with a 
gift certificate, store gift card, or general-use prepaid card, as 
applicable:
    (1) Fee disclosures. For each type of fee that may be imposed in 
connection with the certificate or card (other than a dormancy, 
inactivity, or service fee subject to the disclosure requirements under 
paragraph (d)(2) of this section), the following information must be 
provided on or with the certificate or card:
    (i) The type of fee;
    (ii) The amount of the fee (or an explanation of how the fee will be 
determined); and
    (iii) The conditions under which the fee may be imposed.
    (2) Telephone number for fee information. A toll-free telephone 
number and, if one is maintained, a Web site, that a consumer may use to 
obtain information about fees described in paragraphs (d)(2) and (f)(1) 
of this section must be disclosed on the certificate or card.
    (g) Compliance dates--(1) Effective date for gift certificates, 
store gift cards, and general-use prepaid cards. Except as provided in 
paragraph (h) of this section, the requirements of this section apply to 
any gift certificate, store gift card, or general-use prepaid card sold 
to a consumer on or after August 22, 2010, or provided to a consumer as 
a replacement for such certificate or card.
    (2) Effective date for loyalty, award, or promotional gift cards. 
The requirements in paragraph (a)(4)(iii) of this section apply to any 
card, code, or other device provided to a consumer in connection with a 
loyalty, award, or promotional program if the period of eligibility for 
such program began on or after August 22, 2010.
    (h) Temporary exemption--(1) Delayed mandatory compliance date. For 
any gift certificate, store gift card, or general-use prepaid card 
produced prior to April 1, 2010, the mandatory compliance date of the 
requirements of paragraphs (c)(3), (d)(2), (e)(1), (e)(3), and (f) of 
this section is January 31, 2011, provided that an issuer of such 
certificate or card:
    (i) Complies with all other provisions of this section;
    (ii) Does not impose an expiration date with respect to the funds 
underlying such certificate or card;
    (iii) At the consumer's request, replaces such certificate or card 
if it has funds remaining at no cost to the consumer; and
    (iv) Satisfies the requirements of paragraph (h)(2) of this section.
    (2) Additional disclosures. Issuers relying on the delayed effective 
date in Sec.  1005.20(h)(1) must disclose through in-store signage, 
messages during customer service calls, Web sites, and general 
advertising, that:
    (i) The underlying funds of such certificate or card do not expire;

[[Page 226]]

    (ii) Consumers holding such certificate or card have a right to a 
free replacement certificate or card, which must be accompanied by the 
packaging and materials typically associated with such certificate or 
card; and
    (iii) Any dormancy, inactivity, or service fee for such certificate 
or card that might otherwise be charged will not be charged if such fees 
do not comply with section 916 of the Act.
    (3) Expiration of additional disclosure requirements. The 
disclosures in paragraph (h)(2) of this section:
    (i) Are not required to be provided on or after January 31, 2011, 
with respect to in-store signage and general advertising.
    (ii) Are not required to be provided on or after January 31, 2013, 
with respect to messages during customer service calls and Web sites.



             Subpart B_Requirements for Remittance Transfers

    Source: 77 FR 6285, Feb. 7, 2012, unless otherwise noted.



Sec.  1005.30  Remittance transfer definitions.

    Except as otherwise provided, for purposes of this subpart, the 
following definitions apply:
    (a) ``Agent'' means an agent, authorized delegate, or person 
affiliated with a remittance transfer provider, as defined under State 
or other applicable law, when such agent, authorized delegate, or 
affiliate acts for that remittance transfer provider.
    (b) ``Business day'' means any day on which the offices of a 
remittance transfer provider are open to the public for carrying on 
substantially all business functions.
    (c) ``Designated recipient'' means any person specified by the 
sender as the authorized recipient of a remittance transfer to be 
received at a location in a foreign country.
    (d) ``Preauthorized remittance transfer'' means a remittance 
transfer authorized in advance to recur at substantially regular 
intervals.
    (e) Remittance transfer--(1) General definition. A ``remittance 
transfer'' means the electronic transfer of funds requested by a sender 
to a designated recipient that is sent by a remittance transfer 
provider. The term applies regardless of whether the sender holds an 
account with the remittance transfer provider, and regardless of whether 
the transaction is also an electronic fund transfer, as defined in Sec.  
1005.3(b).
    (2) Exclusions from coverage. The term ``remittance transfer'' does 
not include:
    (i) Small value transactions. Transfer amounts, as described in 
Sec.  1005.31(b)(1)(i), of $15 or less.
    (ii) Securities and commodities transfers. Any transfer that is 
excluded from the definition of electronic fund transfer under Sec.  
1005.3(c)(4).
    (f) Remittance transfer provider--(1) General definition. 
``Remittance transfer provider'' or ``provider'' means any person that 
provides remittance transfers for a consumer in the normal course of its 
business, regardless of whether the consumer holds an account with such 
person.
    (2) Normal course of business--(i) Safe harbor. For purposes of 
paragraph (f)(1) of this section, a person is deemed not to be providing 
remittance transfers for a consumer in the normal course of its business 
if the person:
    (A) Provided 500 or fewer remittance transfers in the previous 
calendar year; and
    (B) Provides 500 or fewer remittance transfers in the current 
calendar year.
    (ii) Transition period--coming into compliance. Beginning on July 
21, 2020, if a person that provided 500 or fewer remittance transfers in 
the previous calendar year provides more than 500 remittance transfers 
in the current calendar year, and if that person is then providing 
remittance transfers for a consumer in the normal course of its business 
pursuant to paragraph (f)(1) of this section, the person has a 
reasonable period of time, not to exceed six months, to begin complying 
with this subpart. Compliance with this subpart will not be required for 
any remittance transfers for which payment is made during that 
reasonable period of time.
    (iii) Transition period--qualifying for the safe harbor. If a person 
who previously provided remittance transfers in the normal course of its 
business in excess of the safe harbor threshold set

[[Page 227]]

forth in this paragraph (f)(2) determines that, as of a particular date, 
it will qualify for the safe harbor, it may cease complying with the 
requirements of this subpart with respect to any remittance transfers 
for which payment is made after that date. The requirements of the Act 
and this part, including those set forth in Sec. Sec.  1005.33 and 
1005.34, as well as the requirements set forth in Sec.  1005.13, 
continue to apply to transfers for which payment is made prior to that 
date.
    (g) ``Sender'' means a consumer in a State who primarily for 
personal, family, or household purposes requests a remittance transfer 
provider to send a remittance transfer to a designated recipient.
    (h) Third-party fees. (1) ``Covered third-party fees.'' The term 
``covered third-party fees'' means any fees imposed on the remittance 
transfer by a person other than the remittance transfer provider except 
for fees described in paragraph (h)(2) of this section.
    (2) ``Non-covered third-party fees.'' The term ``non-covered third-
party fees'' means any fees imposed by the designated recipient's 
institution for receiving a remittance transfer into an account except 
if the institution acts as an agent of the remittance transfer provider.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 78 
FR 30703, May 22, 2013; 85 FR 34904, June 5, 2020]



Sec.  1005.31  Disclosures.

    (a) General form of disclosures--(1) Clear and conspicuous. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section or Sec.  1005.33(h)(3) must be clear and 
conspicuous. Disclosures required by this subpart or permitted by 
paragraph (b)(1)(viii) of this section or Sec.  1005.33(h)(3) may 
contain commonly accepted or readily understandable abbreviations or 
symbols.
    (2) Written and electronic disclosures. Disclosures required by this 
subpart generally must be provided to the sender in writing. Disclosures 
required by paragraph (b)(1) of this section may be provided 
electronically, if the sender electronically requests the remittance 
transfer provider to send the remittance transfer. Written and 
electronic disclosures required by this subpart generally must be made 
in a retainable form. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, need not be retainable.
    (3) Disclosures for oral telephone transactions. The information 
required by paragraph (b)(1) of this section may be disclosed orally if:
    (i) The transaction is conducted orally and entirely by telephone;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally a statement about the rights of 
the sender regarding cancellation required by paragraph (b)(2)(iv) of 
this section pursuant to the timing requirements in paragraph (e)(1) of 
this section; and
    (iv) The provider discloses orally, as each is applicable, the 
information required by paragraph (b)(2)(vii) of this section and the 
information required by Sec.  1005.36(d)(1)(i)(A), with respect to 
transfers subject to Sec.  1005.36(d)(2)(ii), pursuant to the timing 
requirements in paragraph (e)(1) of this section.
    (4) Oral disclosures for certain error resolution notices. The 
information required by Sec.  1005.33(c)(1) may be disclosed orally if:
    (i) The remittance transfer provider determines that an error 
occurred as described by the sender; and
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section.
    (5) Disclosures for mobile application or text message transactions. 
The information required by paragraph (b)(1) of this section may be 
disclosed orally or via mobile application or text message if:
    (i) The transaction is conducted entirely by telephone via mobile 
application or text message;
    (ii) The remittance transfer provider complies with the requirements 
of paragraph (g)(2) of this section;
    (iii) The provider discloses orally or via mobile application or 
text message a statement about the rights of the sender regarding 
cancellation required by paragraph (b)(2)(iv) of this section pursuant 
to the timing requirements in paragraph (e)(1) of this section; and

[[Page 228]]

    (iv) The provider discloses orally or via mobile application or text 
message, as each is applicable, the information required by paragraph 
(b)(2)(vii) of this section and the information required by Sec.  
1005.36(d)(1)(i)(A), with respect to transfers subject to Sec.  
1005.36(d)(2)(ii), pursuant to the timing requirements in paragraph 
(e)(1) of this section.
    (b) Disclosure requirements--(1) Pre-payment disclosure. A 
remittance transfer provider must disclose to a sender, as applicable:
    (i) The amount that will be transferred to the designated recipient, 
in the currency in which the remittance transfer is funded, using the 
term ``Transfer Amount'' or a substantially similar term;
    (ii) Any fees imposed and any taxes collected on the remittance 
transfer by the provider, in the currency in which the remittance 
transfer is funded, using the terms ``Transfer Fees'' for fees and 
``Transfer Taxes'' for taxes, or substantially similar terms;
    (iii) The total amount of the transaction, which is the sum of 
paragraphs (b)(1)(i) and (ii) of this section, in the currency in which 
the remittance transfer is funded, using the term ``Total'' or a 
substantially similar term;
    (iv) The exchange rate used by the provider for the remittance 
transfer, rounded consistently for each currency to no fewer than two 
decimal places and no more than four decimal places, using the term 
``Exchange Rate'' or a substantially similar term;
    (v) The amount in paragraph (b)(1)(i) of this section, in the 
currency in which the funds will be received by the designated 
recipient, but only if covered third-party fees are imposed under 
paragraph (b)(1)(vi) of this section, using the term ``Transfer Amount'' 
or a substantially similar term. The exchange rate used to calculate 
this amount is the exchange rate in paragraph (b)(1)(iv) of this 
section, including an estimated exchange rate to the extent permitted by 
Sec.  1005.32, prior to any rounding of the exchange rate;
    (vi) Any covered third-party fees, in the currency in which the 
funds will be received by the designated recipient, using the term 
``Other Fees,'' or a substantially similar term. The exchange rate used 
to calculate any covered third-party fees is the exchange rate in 
paragraph (b)(1)(iv) of this section, including an estimated exchange 
rate to the extent permitted by Sec.  1005.32, prior to any rounding of 
the exchange rate;
    (vii) The amount that will be received by the designated recipient, 
in the currency in which the funds will be received, using the term 
``Total to Recipient'' or a substantially similar term except that this 
amount shall not include non-covered third party fees or taxes collected 
on the remittance transfer by a person other than the provider 
regardless of whether such fees or taxes are disclosed pursuant to 
paragraph (b)(1)(viii) of this section. The exchange rate used to 
calculate this amount is the exchange rate in paragraph (b)(1)(iv) of 
this section, including an estimated exchange rate to the extent 
permitted by Sec.  1005.32, prior to any rounding of the exchange rate.
    (viii) A statement indicating that non-covered third-party fees or 
taxes collected on the remittance transfer by a person other than the 
provider may apply to the remittance transfer and result in the 
designated recipient receiving less than the amount disclosed pursuant 
to paragraph (b)(1)(vii) of this section. A provider may only include 
this statement to the extent that such fees or taxes do or may apply to 
the transfer, using the language set forth in Model Forms A-30(a) 
through (c) of Appendix A to this part, as appropriate, or substantially 
similar language. In this statement, a provider also may, but is not 
required, to disclose any applicable non-covered third-party fees or 
taxes collected by a person other than the provider. Any such figure 
must be disclosed in the currency in which the funds will be received, 
using the language set forth in Model Forms A-30(b) through (d) of 
Appendix A to this part, as appropriate, or substantially similar 
language. The exchange rate used to calculate any disclosed non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider is the exchange rate in paragraph 
(b)(1)(iv) of this section, including an estimated exchange rate to the 
extent permitted by Sec.  1005.32, prior to any rounding of the exchange 
rate;

[[Page 229]]

    (2) Receipt. A remittance transfer provider must disclose to a 
sender, as applicable:
    (i) The disclosures described in paragraphs (b)(1)(i) through (viii) 
of this section;
    (ii) The date in the foreign country on which funds will be 
available to the designated recipient, using the term ``Date Available'' 
or a substantially similar term. A provider may provide a statement that 
funds may be available to the designated recipient earlier than the date 
disclosed, using the term ``may be available sooner'' or a substantially 
similar term;
    (iii) The name and, if provided by the sender, the telephone number 
and/or address of the designated recipient, using the term ``Recipient'' 
or a substantially similar term;
    (iv) A statement about the rights of the sender regarding the 
resolution of errors and cancellation, using language set forth in Model 
Form A-37 of Appendix A to this part or substantially similar language. 
For any remittance transfer scheduled by the sender at least three 
business days before the date of the transfer, the statement about the 
rights of the sender regarding cancellation must instead reflect the 
requirements of Sec.  1005.36(c);
    (v) The name, telephone number(s), and Web site of the remittance 
transfer provider;
    (vi) A statement that the sender can contact the State agency that 
licenses or charters the remittance transfer provider with respect to 
the remittance transfer and the Consumer Financial Protection Bureau for 
questions or complaints about the remittance transfer provider, using 
language set forth in Model Form A-37 of Appendix A to this part or 
substantially similar language. The disclosure must provide the name, 
telephone number(s), and Web site of the State agency that licenses or 
charters the remittance transfer provider with respect to the remittance 
transfer and the name, toll-free telephone number(s), and Web site of 
the Consumer Financial Protection Bureau; and
    (vii) For any remittance transfer scheduled by the sender at least 
three business days before the date of the transfer, or the first 
transfer in a series of preauthorized remittance transfers, the date the 
remittance transfer provider will make or made the remittance transfer, 
using the term ``Transfer Date,'' or a substantially similar term.
    (3) Combined disclosure--(i) In general. As an alternative to 
providing the disclosures described in paragraph (b)(1) and (2) of this 
section, a remittance transfer provider may provide the disclosures 
described in paragraph (b)(2) of this section, as applicable, in a 
single disclosure pursuant to the timing requirements in paragraph 
(e)(1) of this section. Except as provided in paragraph (b)(3)(ii) of 
this section, if the remittance transfer provider provides the combined 
disclosure and the sender completes the transfer, the remittance 
transfer provider must provide the sender with proof of payment when 
payment is made for the remittance transfer. The proof of payment must 
be clear and conspicuous, provided in writing or electronically, and 
provided in a retainable form.
    (ii) Transfers scheduled before the date of transfer. If the 
disclosure described in paragraph (b)(3)(i) of this section is provided 
in accordance with Sec.  1005.36(a)(1)(i) and payment is not processed 
by the remittance transfer provider at the time the remittance transfer 
is scheduled, a remittance transfer provider may provide confirmation 
that the transaction has been scheduled in lieu of the proof of payment 
otherwise required by paragraph (b)(3)(i) of this section. The 
confirmation of scheduling must be clear and conspicuous, provided in 
writing or electronically, and provided in a retainable form.
    (4) Long form error resolution and cancellation notice. Upon the 
sender's request, a remittance transfer provider must promptly provide 
to the sender a notice describing the sender's error resolution and 
cancellation rights, using language set forth in Model Form A-36 of 
Appendix A to this part or substantially similar language. For any 
remittance transfer scheduled by the sender at least three business days 
before the date of the transfer, the description of the rights of the 
sender regarding cancellation must instead reflect the requirements of 
Sec.  1005.36(c).

[[Page 230]]

    (c) Specific format requirements--(1) Grouping. The information 
required by paragraphs (b)(1)(i), (ii), and (iii) of this section 
generally must be grouped together. The information required by 
paragraphs (b)(1)(v), (vi), (vii), and (viii) of this section generally 
must be grouped together. Disclosures provided via mobile application or 
text message, to the extent permitted by paragraph (a)(5) of this 
section, generally need not comply with the grouping requirements of 
this paragraph, however information required or permitted by paragraph 
(b)(1)(viii) of this section must be grouped with information required 
by paragraph (b)(1)(vii) of this section.
    (2) Proximity. The information required by paragraph (b)(1)(iv) of 
this section generally must be disclosed in close proximity to the other 
information required by paragraph (b)(1) of this section. The 
information required by paragraph (b)(2)(iv) of this section generally 
must be disclosed in close proximity to the other information required 
by paragraph (b)(2) of this section. The information required or 
permitted by paragraph (b)(1)(viii) must be in close proximity to the 
information required by paragraph (b)(1)(vii) of this section. 
Disclosures provided via mobile application or text message, to the 
extent permitted by paragraph (a)(5) of this section, generally need not 
comply with the proximity requirements of this paragraph, however 
information required or permitted by paragraph (b)(1)(viii) of this 
section must follow the information required by paragraph (b)(1)(vii) of 
this section.
    (3) Prominence and size. Written disclosures required by this 
subpart or permitted by paragraph (b)(1)(viii) of this section must be 
provided on the front of the page on which the disclosure is printed. 
Disclosures required by this subpart or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in a minimum eight-point font, except for 
disclosures provided via mobile application or text message, to the 
extent permitted by paragraph (a)(5) of this section. Disclosures 
required by paragraph (b) of this section or permitted by paragraph 
(b)(1)(viii) of this section that are provided in writing or 
electronically must be in equal prominence to each other.
    (4) Segregation. Except for disclosures provided via mobile 
application or text message, to the extent permitted by paragraph (a)(5) 
of this section, disclosures required by this subpart that are provided 
in writing or electronically must be segregated from everything else and 
must contain only information that is directly related to the 
disclosures required under this subpart.
    (d) Estimates. Estimated disclosures may be provided to the extent 
permitted by Sec.  1005.32. Estimated disclosures must be described 
using the term ``Estimated'' or a substantially similar term in close 
proximity to the estimated term or terms.
    (e) Timing. (1) Except as provided in Sec.  1005.36(a), a pre-
payment disclosure required by paragraph (b)(1) of this section or a 
combined disclosure required by paragraph (b)(3) of this section must be 
provided to the sender when the sender requests the remittance transfer, 
but prior to payment for the transfer.
    (2) Except as provided in Sec.  1005.36(a), a receipt required by 
paragraph (b)(2) of this section generally must be provided to the 
sender when payment is made for the remittance transfer. If a 
transaction is conducted entirely by telephone, a receipt required by 
paragraph (b)(2) of this section may be mailed or delivered to the 
sender no later than one business day after the date on which payment is 
made for the remittance transfer. If a transaction is conducted entirely 
by telephone and involves the transfer of funds from the sender's 
account held by the provider, the receipt required by paragraph (b)(2) 
of this section may be provided on or with the next regularly scheduled 
periodic statement for that account or within 30 days after payment is 
made for the remittance transfer if a periodic statement is not 
provided. The statement about the rights of the sender regarding 
cancellation required by paragraph (b)(2)(iv) of this section may, but 
need not, be disclosed pursuant to the timing requirements of this 
paragraph if a provider discloses this information pursuant to 
paragraphs (a)(3)(iii) or (a)(5)(iii) of this section.

[[Page 231]]

    (f) Accurate when payment is made. Except as provided in Sec.  
1005.36(b), disclosures required by this section or permitted by 
paragraph (b)(1)(viii) of this section must be accurate when a sender 
makes payment for the remittance transfer, except to the extent 
estimates are permitted by Sec.  1005.32.
    (g) Foreign language disclosures--(1) General. Except as provided in 
paragraph (g)(2) of this section, disclosures required by this subpart 
or permitted by paragraph (b)(1)(viii) of this section or Sec.  
1005.33(h)(3) must be made in English and, if applicable, either in:
    (i) Each of the foreign languages principally used by the remittance 
transfer provider to advertise, solicit, or market remittance transfer 
services, either orally, in writing, or electronically, at the office in 
which a sender conducts a transaction or asserts an error; or
    (ii) The foreign language primarily used by the sender with the 
remittance transfer provider to conduct the transaction (or for written 
or electronic disclosures made pursuant to Sec.  1005.33, in the foreign 
language primarily used by the sender with the remittance transfer 
provider to assert the error), provided that such foreign language is 
principally used by the remittance transfer provider to advertise, 
solicit, or market remittance transfer services, either orally, in 
writing, or electronically, at the office in which a sender conducts a 
transaction or asserts an error, respectively.
    (2) Oral, mobile application, or text message disclosures. 
Disclosures provided orally for transactions conducted orally and 
entirely by telephone under paragraph (a)(3) of this section or orally 
or via mobile application or text message for transactions conducted via 
mobile application or text message under paragraph (a)(5) of this 
section shall be made in the language primarily used by the sender with 
the remittance transfer provider to conduct the transaction. Disclosures 
provided orally under paragraph (a)(4) of this section for error 
resolution purposes shall be made in the language primarily used by the 
sender with the remittance transfer provider to assert the error.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50282, Aug. 20, 2012; 77 
FR 30703, May 22, 2013]



Sec.  1005.32  Estimates.

    (a) Temporary exception for insured institutions--(1) General. For 
disclosures described in Sec. Sec.  1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided in accordance with 
paragraph (c) of this section for the amounts required to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (vii), if:
    (i) A remittance transfer provider cannot determine the exact 
amounts for reasons beyond its control;
    (ii) A remittance transfer provider is an insured institution; and
    (iii) The remittance transfer is sent from the sender's account with 
the institution; provided however, for the purposes of this paragraph, a 
sender's account does not include a prepaid account, unless the prepaid 
account is a payroll card account or a government benefit account.
    (2) Sunset date. Paragraph (a)(1) of this section expires on July 
21, 2020.
    (3) Insured institution. For purposes of this section, the term 
``insured institution'' means insured depository institutions (which 
includes uninsured U.S. branches and agencies of foreign depository 
institutions) as defined in section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813), and insured credit unions as defined in section 
101 of the Federal Credit Union Act (12 U.S.C. 1752).
    (b) Permanent exceptions--(1) Permanent exception for transfers to 
certain countries--(i) General. For disclosures described in Sec. Sec.  
1005.31(b)(1) through (b)(3) and 1005.36(a)(1) and (a)(2), estimates may 
be provided for transfers to certain countries in accordance with 
paragraph (c) of this section for the amounts required to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (b)(1)(vii), if a remittance 
transfer provider cannot determine the exact amounts when the disclosure 
is required because:
    (A) The laws of the recipient country do not permit such a 
determination, or
    (B) The method by which transactions are made in the recipient 
country does not permit such determination.

[[Page 232]]

    (ii) Safe harbor. A remittance transfer provider may rely on the 
list of countries published by the Bureau to determine whether estimates 
may be provided under paragraph (b)(1) of this section, unless the 
provider has information that a country's laws or the method by which 
transactions are conducted in that country permits a determination of 
the exact disclosure amount.
    (2) Permanent exception for transfers scheduled before the date of 
transfer. (i) Except as provided in paragraph (b)(2)(ii) of this 
section, for disclosures described in Sec. Sec.  1005.36(a)(1)(i) and 
(a)(2)(i), estimates may be provided in accordance with paragraph (d) of 
this section for the amounts to be disclosed under Sec. Sec.  
1005.31(b)(1)(iv) through (vii) if the remittance transfer is scheduled 
by a sender five or more business days before the date of the transfer. 
In addition, if, at the time the sender schedules such a transfer, the 
provider agrees to a sender's request to fix the amount to be 
transferred in the currency in which the remittance transfer will be 
received and not the currency in which it is funded, estimates may also 
be provided for the amounts to be disclosed under Sec. Sec.  
1005.31(b)(1)(i) through (iii), except as provided in paragraph 
(b)(2)(iii) of this section.
    (ii) Covered third-party fees described in Sec.  1005.31(b)(1)(vi) 
may be estimated under paragraph (b)(2)(i) of this section only if the 
exchange rate is also estimated under paragraph (b)(2)(i) of this 
section and the estimated exchange rate affects the amount of such fees.
    (iii) Fees and taxes described in Sec.  1005.31(b)(1)(ii) may be 
estimated under paragraph (b)(2)(i) of this section only if the amount 
that will be transferred in the currency in which it is funded is also 
estimated under paragraph (b)(2)(i) of this section, and the estimated 
amount affects the amount of such fees and taxes.
    (3) Permanent exception for optional disclosure of non-covered 
third-party fees and taxes collected by a person other than the 
provider. For disclosures described in Sec. Sec.  1005.31(b)(1) through 
(3) and 1005.36(a)(1) and (2), estimates may be provided for applicable 
non-covered third-party fees and taxes collected on the remittance 
transfer by a person other than the provider, which are permitted to be 
disclosed under Sec.  1005.31(b)(1)(viii), provided such estimates are 
based on reasonable sources of information.
    (4) Permanent exception for estimation of the exchange rate by an 
insured institution. (i) Except as provided in paragraph (b)(4)(ii) of 
this section, for disclosures described in Sec. Sec.  1005.31(b)(1) 
through (3) and 1005.36(a)(1) and (2), estimates may be provided for a 
remittance transfer to a particular country in accordance with paragraph 
(c) of this section for the amounts required to be disclosed under Sec.  
1005.31(b)(1)(iv) through (vii), if the designated recipient of the 
remittance transfer will receive funds in the country's local currency 
and all of the following conditions are met:
    (A) The remittance transfer provider is an insured institution as 
defined in paragraph (a)(3) of this section;
    (B) At the time the insured institution must provide, as applicable, 
the disclosure required by Sec.  1005.31(b)(1) through (3) or Sec.  
1005.36(a)(1) or (2), the insured institution cannot determine the exact 
exchange rate required to be disclosed under Sec.  1005.31(b)(1)(iv) for 
that remittance transfer;
    (C) The insured institution made 1,000 or fewer remittance transfers 
in the prior calendar year to the particular country for which the 
designated recipients of those transfers received funds in the country's 
local currency; and
    (D) The remittance transfer is sent from the sender's account with 
the insured institution; provided however, for the purposes of this 
paragraph, a sender's account does not include a prepaid account, unless 
the prepaid account is a payroll card account or a government benefit 
account.
    (ii) The disclosures in Sec.  1005.31(b)(1)(v) through (vii) may be 
estimated under paragraph (b)(4)(i) of this section only if the exchange 
rate is permitted to be estimated under paragraph (b)(4)(i) of this 
section and the estimated exchange rate affects the amount of such 
disclosures.
    (5) Permanent exception for estimation of covered third-party fees 
by an insured institution. (i) Except as provided in paragraph 
(b)(5)(ii) of this section, for

[[Page 233]]

disclosures described in Sec. Sec.  1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided for a remittance 
transfer to a particular designated recipient's institution in 
accordance with paragraph (c) of this section for the amounts required 
to be disclosed under Sec.  1005.31(b)(1)(vi) through (vii), if all of 
the following conditions are met:
    (A) The remittance transfer provider is an insured institution as 
defined in paragraph (a)(3) of this section;
    (B) At the time the insured institution must provide, as applicable, 
the disclosure required by Sec.  1005.31(b)(1) through (3) or Sec.  
1005.36(a)(1) or (2), the insured institution cannot determine the exact 
covered third-party fees required to be disclosed under Sec.  
1005.31(b)(1)(vi) for that remittance transfer;
    (C) The insured institution made 500 or fewer remittance transfers 
in the prior calendar year to that designated recipient's institution, 
or a United States Federal statute or regulation prohibits the insured 
institution from being able to determine the exact covered third-party 
fees required to be disclosed under Sec.  1005.31(b)(1)(vi) for that 
remittance transfer; and
    (D) The remittance transfer is sent from the sender's account with 
the insured institution; provided however, for the purposes of this 
paragraph, a sender's account does not include a prepaid account, unless 
the prepaid account is a payroll card account or a government benefit 
account.
    (ii) The disclosure in Sec.  1005.31(b)(1)(vii) may be estimated 
under paragraph (b)(5)(i) of this section only if covered third-party 
fees are permitted to be estimated under paragraph (b)(5)(i) of this 
section and the estimated covered third-party fees affect the amount of 
such disclosure.
    (c) Bases for estimates generally. Estimates provided pursuant to 
the exceptions in paragraph (a) or (b)(1), (4), or (5) of this section 
must be based on the below-listed approach or approaches, except as 
otherwise permitted by this paragraph. If a remittance transfer provider 
bases an estimate on an approach that is not listed in this paragraph, 
the provider is deemed to be in compliance with this paragraph so long 
as the designated recipient receives the same, or greater, amount of 
funds than the remittance transfer provider disclosed under Sec.  
1005.31(b)(1)(vii).
    (1) Exchange rate. In disclosing the exchange rate as required under 
Sec.  1005.31(b)(1)(iv), an estimate must be based on one of the 
following:
    (i) For remittance transfers sent via international ACH that qualify 
for the exception in paragraph (b)(1)(ii) of this section, the most 
recent exchange rate set by the recipient country's central bank or 
other governmental authority and reported by a Federal Reserve Bank;
    (ii) The most recent publicly available wholesale exchange rate and, 
if applicable, any spread that the remittance transfer provider or its 
correspondent typically applies to such a wholesale rate for remittance 
transfers for that currency; or
    (iii) The most recent exchange rate offered or used by the person 
making funds available directly to the designated recipient or by the 
person setting the exchange rate.
    (2) Transfer amount in the currency in which the funds will be 
received by the designated recipient. In disclosing the transfer amount 
in the currency in which the funds will be received by the designated 
recipient, as required under Sec.  1005.31(b)(1)(v), an estimate must be 
based on the estimated exchange rate provided in accordance with 
paragraph (c)(1) of this section, prior to any rounding of the estimated 
exchange rate.
    (3) Covered third-party fees--(i) Imposed as percentage of amount 
transferred. In disclosing covered third-party fees, as described under 
Sec.  1005.31(b)(1)(vi), that are a percentage of the amount transferred 
to the designated recipient, an estimated exchange rate must be based on 
the estimated exchange rate provided in accordance with paragraph (c)(1) 
of this section, prior to any rounding of the estimated exchange rate.
    (ii) Imposed by the intermediary or final institution. In disclosing 
covered third-party fees pursuant to Sec.  1005.31(b)(1)(vi), an 
estimate must be based on one of the following:
    (A) The remittance transfer provider's most recent remittance 
transfer

[[Page 234]]

to the designated recipient's institution, or
    (B) A representative transmittal route identified by the remittance 
transfer provider.
    (4) Amount of currency that will be received by the designated 
recipient. In disclosing the amount of currency that will be received by 
the designated recipient as required under Sec.  1005.31(b)(1)(vii), an 
estimate must be based on the information provided in accordance with 
paragraphs (c)(1) through (3) of this section, as applicable.
    (d) Bases for estimates for transfers scheduled before the date of 
transfer. Estimates provided pursuant to paragraph (b)(2) of this 
section must be based on the exchange rate or, where applicable, the 
estimated exchange rate based on an estimation methodology permitted 
under paragraph (c) of this section that the provider would have used or 
did use that day in providing disclosures to a sender requesting such a 
remittance transfer to be made on the same day. If, in accordance with 
this paragraph, a remittance transfer provider uses a basis described in 
paragraph (c) of this section but not listed in paragraph (c)(1) of this 
section, the provider is deemed to be in compliance with this paragraph 
regardless of the amount received by the designated recipient, so long 
as the estimation methodology is the same that the provider would have 
used or did use in providing disclosures to a sender requesting such a 
remittance transfer to be made on the same day.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50283, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 79 FR 55991, Sept. 18, 2014; 81 FR 84338, Nov. 
22, 2016; 85 FR 34904, June 5, 2020]



Sec.  1005.33  Procedures for resolving errors.

    (a) Definition of error--(1) Types of transfers or inquiries 
covered. For purposes of this section, the term error means:
    (i) An incorrect amount paid by a sender in connection with a 
remittance transfer unless the disclosure stated an estimate of the 
amount paid by a sender in accordance with Sec.  1005.32(b)(2) and the 
difference results from application of the actual exchange rate, fees, 
and taxes, rather than any estimated amount;
    (ii) A computational or bookkeeping error made by the remittance 
transfer provider relating to a remittance transfer;
    (iii) The failure to make available to a designated recipient the 
amount of currency disclosed pursuant to Sec.  1005.31(b)(1)(vii) and 
stated in the disclosure provided to the sender under Sec.  
1005.31(b)(2) or (3) for the remittance transfer, unless:
    (A) The disclosure stated an estimate of the amount to be received 
in accordance with Sec.  1005.32(a) or (b)(1), (2), (4), or (5) and the 
difference results from application of the actual exchange rate, fees, 
and taxes, rather than any estimated amounts; or
    (B) The failure resulted from extraordinary circumstances outside 
the remittance transfer provider's control that could not have been 
reasonably anticipated; or
    (C) The difference results from the application of non-covered 
third-party fees or taxes collected on the remittance transfer by a 
person other than the provider and the provider provided the disclosure 
required by Sec.  1005.31(b)(1)(viii).
    (iv) The failure to make funds available to a designated recipient 
by the date of availability stated in the disclosure provided to the 
sender under Sec.  1005.31(b)(2) or (3) for the remittance transfer, 
unless the failure to make the funds available resulted from:
    (A) Extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated;
    (B) Delays related to a necessary investigation or other special 
action by the remittance transfer provider or a third party as required 
by the provider's fraud screening procedures or in accordance with the 
Bank Secrecy Act, 31 U.S.C. 5311 et seq., Office of Foreign Assets 
Control requirements, or similar laws or requirements;
    (C) The remittance transfer being made with fraudulent intent by the 
sender or any person acting in concert with the sender; or

[[Page 235]]

    (D) The sender having provided the remittance transfer provider an 
incorrect account number or recipient institution identifier for the 
designated recipient's account or institution, provided that the 
remittance transfer provider meets the conditions set forth in paragraph 
(h) of this section;
    (v) The sender's request for documentation required by Sec.  1005.31 
or for additional information or clarification concerning a remittance 
transfer, including a request a sender makes to determine whether an 
error exists under paragraphs (a)(1)(i) through (iv) of this section.
    (2) Types of transfers or inquiries not covered. The term error does 
not include:
    (i) An inquiry about the status of a remittance transfer, except 
where the funds from the transfer were not made available to a 
designated recipient by the disclosed date of availability as described 
in paragraph (a)(1)(iv) of this section;
    (ii) A request for information for tax or other recordkeeping 
purposes;
    (iii) A change requested by the designated recipient; or
    (iv) A change in the amount or type of currency received by the 
designated recipient from the amount or type of currency stated in the 
disclosure provided to the sender under Sec.  1005.31(b)(2) or (3) if 
the remittance transfer provider relied on information provided by the 
sender as permitted under Sec.  1005.31 in making such disclosure.
    (b) Notice of error from sender--(1) Timing; contents. A remittance 
transfer provider shall comply with the requirements of this section 
with respect to any oral or written notice of error from a sender that:
    (i) Is received by the remittance transfer provider no later than 
180 days after the disclosed date of availability of the remittance 
transfer;
    (ii) Enables the provider to identify:
    (A) The sender's name and telephone number or address;
    (B) The recipient's name, and if known, the telephone number or 
address of the recipient; and
    (C) The remittance transfer to which the notice of error applies; 
and
    (iii) Indicates why the sender believes an error exists and includes 
to the extent possible the type, date, and amount of the error, except 
for requests for documentation, additional information, or clarification 
described in paragraph (a)(1)(v) of this section.
    (2) Request for documentation or clarification. When a notice of 
error is based on documentation, additional information, or 
clarification that the sender previously requested under paragraph 
(a)(1)(v) of this section, the sender's notice of error is timely if 
received by the remittance transfer provider the later of 180 days after 
the disclosed date of availability of the remittance transfer or 60 days 
after the provider sent the documentation, information, or clarification 
that had been requested.
    (c) Time limits and extent of investigation--(1) Time limits for 
investigation and report to consumer of error. A remittance transfer 
provider shall investigate promptly and determine whether an error 
occurred within 90 days of receiving a notice of error. The remittance 
transfer provider shall report the results to the sender, including 
notice of any remedies available for correcting any error that the 
provider determines has occurred, within three business days after 
completing its investigation.
    (2) Remedies. Except as provided in paragraph (c)(2)(iii) of this 
section, if, following an assertion of an error by a sender, the 
remittance transfer provider determines an error occurred, the provider 
shall, within one business day of, or as soon as reasonably practicable 
after, receiving the sender's instructions regarding the appropriate 
remedy, correct the error as designated by the sender by:
    (i) In the case of any error under paragraphs (a)(1)(i) through 
(iii) of this section, as applicable, either:
    (A) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (B) Making available to the designated recipient, without additional 
cost to the sender or to the designated recipient, the amount 
appropriate to resolve the error;
    (ii) Except as provided in paragraph (c)(2)(iii) of this section, in 
the case of

[[Page 236]]

an error under paragraph (a)(1)(iv) of this section
    (A) As applicable, either:
    (1) Refunding to the sender the amount of funds provided by the 
sender in connection with a remittance transfer which was not properly 
transmitted, or the amount appropriate to resolve the error; or
    (2) Making available to the designated recipient the amount 
appropriate to resolve the error. Such amount must be made available to 
the designated recipient without additional cost to the sender or to the 
designated recipient; and
    (B) Refunding to the sender any fees imposed and, to the extent not 
prohibited by law, taxes collected on the remittance transfer;
    (iii) In the case of an error under paragraph (a)(1)(iv) of this 
section that occurred because the sender provided incorrect or 
insufficient information in connection with the remittance transfer, the 
remittance transfer provider shall provide the remedies required by 
paragraphs (c)(2)(ii)(A)(1) and (c)(2)(ii)(B) of this section within 
three business days of providing the report required by paragraph (c)(1) 
or (d)(1) of this section except that the provider may agree to the 
sender's request, upon receiving the results of the error investigation, 
that the funds be applied towards a new remittance transfer, rather than 
be refunded, if the provider has not yet processed a refund. The 
provider may deduct from the amount refunded or applied towards a new 
transfer any fees actually imposed on or, to the extent not prohibited 
by law, taxes actually collected on the remittance transfer as part of 
the first unsuccessful remittance transfer attempt except that the 
provider shall not deduct its own fee.
    (iv) In the case of a request under paragraph (a)(1)(v) of this 
section, providing the requested documentation, information, or 
clarification.
    (d) Procedures if remittance transfer provider determines no error 
or different error occurred. In addition to following the procedures 
specified in paragraph (c) of this section, the remittance transfer 
provider shall follow the procedures set forth in this paragraph (d) if 
it determines that no error occurred or that an error occurred in a 
manner or amount different from that described by the sender.
    (1) Explanation of results of investigation. The remittance transfer 
provider's report of the results of the investigation shall include a 
written explanation of the provider's findings and shall note the 
sender's right to request the documents on which the provider relied in 
making its determination. The explanation shall also address the 
specific complaint of the sender.
    (2) Copies of documentation. Upon the sender's request, the 
remittance transfer provider shall promptly provide copies of the 
documents on which the provider relied in making its error 
determination.
    (e) Reassertion of error. A remittance transfer provider that has 
fully complied with the error resolution requirements of this section 
has no further responsibilities under this section should the sender 
later reassert the same error, except in the case of an error asserted 
by the sender following receipt of information provided under paragraph 
(a)(1)(v) of this section.
    (f) Relation to other laws--(1) Relation to Regulation E Sec.  
1005.11 for incorrect EFTs from a sender's account. If an alleged error 
involves an incorrect electronic fund transfer from a sender's account 
in connection with a remittance transfer, and the sender provides a 
notice of error to the account-holding institution, the account-holding 
institution shall comply with the requirements of Sec.  1005.11 
governing error resolution rather than the requirements of this section, 
provided that the account-holding institution is not also the remittance 
transfer provider. If the remittance transfer provider is also the 
financial institution that holds the consumer's account, then the error-
resolution provisions of this section apply when the sender provides 
such notice of error.
    (2) Relation to Truth in Lending Act and Regulation Z. If an alleged 
error involves an incorrect extension of credit in connection with a 
remittance transfer, an incorrect amount received by the designated 
recipient under paragraph (a)(1)(iii) of this section that is an 
extension of credit for property or services not delivered as agreed, or 
the

[[Page 237]]

failure to make funds available by the disclosed date of availability 
under paragraph (a)(1)(iv) of this section that is an extension of 
credit for property or services not delivered as agreed, and the sender 
provides a notice of error to the creditor extending the credit, the 
provisions of Regulation Z, 12 CFR 1026.13, governing error resolution 
apply to the creditor, rather than the requirements of this section, 
even if the creditor is the remittance transfer provider. However, if 
the creditor is the remittance transfer provider, paragraph (b) of this 
section will apply instead of 12 CFR 1026.13(b). If the sender instead 
provides a notice of error to the remittance transfer provider that is 
not also the creditor, then the error-resolution provisions of this 
section apply to the remittance transfer provider.
    (3) Unauthorized remittance transfers. If an alleged error involves 
an unauthorized electronic fund transfer for payment in connection with 
a remittance transfer, Sec. Sec.  1005.6 and 1005.11 apply with respect 
to the account-holding institution. If an alleged error involves an 
unauthorized use of a credit account for payment in connection with a 
remittance transfer, the provisions of Regulation Z, 12 CFR 1026.12(b), 
if applicable, and Sec.  1026.13, apply with respect to the creditor.
    (g) Error resolution standards and recordkeeping requirements--(1) 
Compliance program. A remittance transfer provider shall develop and 
maintain written policies and procedures that are designed to ensure 
compliance with the error resolution requirements applicable to 
remittance transfers under this section.
    (2) Retention of error-related documentation. The remittance 
transfer provider's policies and procedures required under paragraph 
(g)(1) of this section shall include policies and procedures regarding 
the retention of documentation related to error investigations. Such 
policies and procedures must ensure, at a minimum, the retention of any 
notices of error submitted by a sender, documentation provided by the 
sender to the provider with respect to the alleged error, and the 
findings of the remittance transfer provider regarding the investigation 
of the alleged error. Remittance transfer providers are subject to the 
record retention requirements under Sec.  1005.13.
    (h) Incorrect account number or recipient institution identifier 
provided by the sender. The exception in paragraph (a)(1)(iv)(D) of this 
section applies if:
    (1) The remittance transfer provider can demonstrate that the sender 
provided an incorrect account number or recipient institution identifier 
to the provider in connection with the remittance transfer;
    (2) For any instance in which the sender provided the incorrect 
recipient institution identifier, prior to or when sending the transfer, 
the provider used reasonably available means to verify that the 
recipient institution identifier provided by the sender corresponded to 
the recipient institution name provided by the sender;
    (3) The provider provided notice to the sender before the sender 
made payment for the remittance transfer that, in the event the sender 
provided an incorrect account number or recipient institution 
identifier, the sender could lose the transfer amount. For purposes of 
providing this disclosure, Sec.  1005.31(a)(2) applies to this notice 
unless the notice is given at the same time as other disclosures 
required by this subpart for which information is permitted to be 
disclosed orally or via mobile application or text message, in which 
case this disclosure may be given in the same medium as those other 
disclosures;
    (4) The incorrect account number or recipient institution identifier 
resulted in the deposit of the remittance transfer into a customer's 
account that is not the designated recipient's account; and
    (5) The provider promptly used reasonable efforts to recover the 
amount that was to be received by the designated recipient.

[77 FR 6285, Feb. 7, 2012, as amended at 77 FR 50284, Aug. 20, 2012; 78 
FR 30704, May 22, 2013; 78 FR 49366, Aug. 14, 2013; 79 FR 55991, Sept. 
18, 2014; 85 FR 34904, June 5, 2020]



Sec.  1005.34  Procedures for cancellation and refund of remittance 
transfers.

    (a) Sender right of cancellation and refund. Except as provided in 
Sec.  1005.36(c), a remittance transfer provider shall

[[Page 238]]

comply with the requirements of this section with respect to any oral or 
written request to cancel a remittance transfer from the sender that is 
received by the provider no later than 30 minutes after the sender makes 
payment in connection with the remittance transfer if:
    (1) The request to cancel enables the provider to identify the 
sender's name and address or telephone number and the particular 
transfer to be cancelled; and
    (2) The transferred funds have not been picked up by the designated 
recipient or deposited into an account of the designated recipient.
    (b) Time limits and refund requirements. A remittance transfer 
provider shall refund, at no additional cost to the sender, the total 
amount of funds provided by the sender in connection with a remittance 
transfer, including any fees and, to the extent not prohibited by law, 
taxes imposed in connection with the remittance transfer, within three 
business days of receiving a sender's request to cancel the remittance 
transfer.



Sec.  1005.35  Acts of agents.

    A remittance transfer provider is liable for any violation of this 
subpart by an agent when such agent acts for the provider.



Sec.  1005.36  Transfers scheduled before the date of transfer.

    (a) Timing. (1) For a one-time transfer scheduled five or more 
business days before the date of transfer or for the first in a series 
of preauthorized remittance transfers, the remittance transfer provider 
must:
    (i) Provide either the pre-payment disclosure described in Sec.  
1005.31(b)(1) and the receipt described in Sec.  1005.31(b)(2) or the 
combined disclosure described in Sec.  1005.31(b)(3), in accordance with 
the timing requirements set forth in Sec.  1005.31(e); and
    (ii) If any of the disclosures provided pursuant to paragraph 
(a)(1)(i) of this section contain estimates as permitted by Sec.  
1005.32(b)(2), mail or deliver to the sender an additional receipt 
meeting the requirements described in Sec.  1005.31(b)(2) no later than 
one business day after the date of the transfer. If the transfer 
involves the transfer of funds from the sender's account held by the 
provider, the receipt required by this paragraph may be provided on or 
with the next periodic statement for that account, or within 30 days 
after the date of the transfer if a periodic statement is not provided.
    (2) For each subsequent preauthorized remittance transfer:
    (i) If any of the information on the most recent receipt provided 
pursuant to paragraph (a)(1)(i) of this section, or by this paragraph 
(a)(2)(i), other than the temporal disclosures required by Sec.  
1005.31(b)(2)(ii) and (b)(2)(vii), is no longer accurate with respect to 
a subsequent preauthorized remittance transfer for reasons other than as 
permitted by Sec.  1005.32, then the remittance transfer provider must 
provide an updated receipt meeting the requirements described in Sec.  
1005.31(b)(2) to the sender. The provider must mail or deliver this 
receipt to the sender within a reasonable time prior to the scheduled 
date of the next subsequent preauthorized remittance transfer. Such 
receipt must clearly and conspicuously indicate that it contains updated 
disclosures.
    (ii) Unless a receipt was provided in accordance with paragraph 
(a)(2)(i) of this section that contained no estimates pursuant to Sec.  
1005.32, the remittance transfer provider must mail or deliver to the 
sender a receipt meeting the requirements described in Sec.  
1005.31(b)(2) no later than one business day after the date of the 
transfer. If the remittance transfer involves the transfer of funds from 
the sender's account held by the provider, the receipt required by this 
paragraph may be provided on or with the next periodic statement for 
that account, or within 30 days after the date of the transfer if a 
periodic statement is not provided.
    (iii) A remittance transfer provider must provide the disclosures 
required by paragraph (d) of this section in accordance with the timing 
requirements of that section.
    (b) Accuracy. (1) For a one-time transfer scheduled five or more 
business days in advance or for the first in a series of preauthorized 
remittance transfers, disclosures provided pursuant to paragraph 
(a)(1)(i) of this section

[[Page 239]]

must comply with Sec.  1005.31(f) by being accurate when a sender makes 
payment except to the extent estimates are permitted by Sec.  1005.32.
    (2) For each subsequent preauthorized remittance transfer, the most 
recent receipt provided pursuant to paragraph (a)(1)(i) or (a)(2)(i) of 
this section must be accurate as of when such transfer is made, except:
    (i) The temporal elements required by Sec.  1005.31(b)(2)(ii) and 
(b)(2)(vii) must be accurate only if the transfer is the first transfer 
to occur after the disclosure was provided; and
    (ii) To the extent estimates are permitted by Sec.  1005.32.
    (3) Disclosures provided pursuant to paragraph (a)(1)(ii) or 
(a)(2)(ii) of this section must be accurate as of when the remittance 
transfer to which it pertains is made, except to the extent estimates 
are permitted by Sec.  1005.32(a) or (b)(1), (4), or (5).
    (c) Cancellation. For any remittance transfer scheduled by the 
sender at least three business days before the date of the transfer, a 
remittance transfer provider shall comply with any oral or written 
request to cancel the remittance transfer from the sender if the request 
to cancel:
    (1) Enables the provider to identify the sender's name and address 
or telephone number and the particular transfer to be cancelled; and
    (2) Is received by the provider at least three business days before 
the scheduled date of the remittance transfer.
    (d) Additional requirements for subsequent preauthorized remittance 
transfers--(1) Disclosure requirement. (i) For any subsequent transfer 
in a series of preauthorized remittance transfers, the remittance 
transfer provider must disclose to the sender:
    (A) The date the provider will make the subsequent transfer, using 
the term ``Future Transfer Date,'' or a substantially similar term;
    (B) A statement about the rights of the sender regarding 
cancellation as described in Sec.  1005.31(b)(2)(iv); and
    (C) The name, telephone number(s), and Web site of the remittance 
transfer provider.
    (ii) If the future date or dates of transfer are described as 
occurring in regular periodic intervals, e.g., the 15th of every month, 
rather than as a specific calendar date or dates, the remittance 
transfer provider must disclose any future date or dates of transfer 
that do not conform to the described interval.
    (2) Notice requirements. (i) Except as described in paragraph 
(d)(2)(ii) of this section, the disclosures required by paragraph (d)(1) 
of this section must be received by the sender no more than 12 months, 
and no less than five business days prior to the date of any subsequent 
transfer to which it pertains. The disclosures required by paragraph 
(d)(1) of this section may be provided in a separate disclosure or may 
be provided on one or more disclosures required by this subpart related 
to the same series of preauthorized transfers, so long as the consumer 
receives the required information for each subsequent preauthorized 
remittance transfer in accordance with the timing requirements of this 
paragraph (d)(2)(i).
    (ii) For any subsequent preauthorized remittance transfer for which 
the date of transfer is four or fewer business days after the date 
payment is made for that transfer, the information required by paragraph 
(d)(1) of this section must be provided on or with the receipt described 
in Sec.  1005.31(b)(2), or disclosed as permitted by Sec.  1005.31(a)(3) 
or (a)(5), for the initial transfer in that series in accordance with 
paragraph (a)(1)(i) of this section.
    (3) Specific format requirement. The information required by 
paragraph (d)(1)(i)(A) of this section generally must be disclosed in 
close proximity to the other information required by paragraph 
(d)(1)(i)(B) of this section.
    (4) Accuracy. Any disclosure required by paragraph (d)(1) of this 
section must be accurate as of the date the preauthorized remittance 
transfer to which it pertains is made.

[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 50284, Aug. 20, 2012; 
85 FR 34904, June 5, 2020]



    Sec. Appendix A to Part 1005--Model Disclosure Clauses and Forms

A-1--Model Clauses for Unsolicited Issuance (Sec.  1005.5(b)(2))
A-2--Model Clauses for Initial Disclosures (Sec.  1005.7(b))

[[Page 240]]

A-3--Model Forms for Error Resolution Notice (Sec. Sec.  1005.7(b)(10) 
          and 1005.8(b))
A-4--Model Form for Service-Providing Institutions (Sec.  
          1005.14(b)(1)(ii))
A-5--Model Clauses for Government Agencies (Sec.  1005.15(e)(1) and (2))
A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
          Using Information From a Check (Sec.  1005.3(b)(2))
A-7--Model Clauses for Financial Institutions Offering Prepaid Accounts 
          (Sec.  1005.18(d) and (e)(3))
A-8--Model Clause for Electronic Collection of Returned Item Fees (Sec.  
          1005.3(b)(3))
A-9--Model Consent Form for Overdraft Services (Sec.  1005.17)
A-10(a)--Model Form for Short Form Disclosures for Government Benefit 
          Accounts (Sec. Sec.  1005.15(c) and 1005.18(b)(2), (3), (6), 
          and (7))
A-10(b)--Model Form for Short Form Disclosures for Payroll Card Accounts 
          (Sec.  1005.18(b)(2), (3), (6), and (7))
A-10(c)--Model Form for Short Form Disclosures for Prepaid Accounts, 
          Example 1 (Sec.  1005.18(b)(2), (3), (6), and (7))
A-10(d)--Model Form for Short Form Disclosures for Prepaid Accounts, 
          Example 2 (Sec.  1005.18(b)(2), (3), (6), and (7))
A-10(e)--Model Form for Short Form Disclosures for Prepaid Accounts with 
          Multiple Service Plans (Sec.  1005.18(b)(2), (3), (6), and 
          (7))
A-10(f)--Sample Form for Long Form Disclosures for Prepaid Accounts 
          (Sec.  1005.18(b)(4), (6), and (7))
A-11 through A-30 [Reserved]
A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
          Exchanged into Local Currency including a disclaimer where 
          non-covered third-party fees and foreign taxes may apply 
          (Sec.  1005.31(b)(1))
A-30(b) --Model Form for Pre-Payment Disclosures for Remittance 
          Transfers Exchanged into Local Currency including a disclaimer 
          with estimate for non-covered third-party fees (Sec.  
          1005.31(b)(1) and Sec.  1005.32(b)(3))
A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
          Exchanged into Local Currency including a disclaimer with 
          estimate for foreign taxes (Sec.  1005.31(b)(1) and Sec.  
          1005.32(b)(3))
A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
          Exchanged into Local Currency, including a disclaimer with 
          estimates for non-covered third-party fees and foreign taxes 
          (Sec.  1005.31(b)(1) and Sec.  1005.32(b)(3))
A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
          Local Currency (Sec.  1005.31(b)(2))
A-32--Model Form for Combined Disclosures for Remittance Transfers 
          Exchanged into Local Currency (Sec.  1005.31(b)(3))
A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
          (Sec.  1005.31(b)(2))
A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
          Remittance Transfers (Sec.  1005.31(b)(3))
A-36--Model Form for Error Resolution and Cancellation Disclosures 
          (Long) (Sec.  1005.31(b)(4))
A-37--Model Form for Error Resolution and Cancellation Disclosures 
          (Short) (Sec.  1005.31(b)(2)(iv) and (b)(2)(vi))
A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
          Local Currency--Spanish (Sec.  1005.31(b)(2))
A-40--Model Form for Combined Disclosures for Remittance Transfers 
          Exchanged into Local Currency--Spanish (Sec.  1005.31(b)(3))
A-41--Model Form for Error Resolution and Cancellation Disclosures 
          (Long)--Spanish (Sec.  1005.31(b)(4))

    A-1--Model Clauses for Unsolicited Issuance (Sec.  1005.5(b)(2))

    (a) Accounts using cards. You cannot use the enclosed card to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the card, please (destroy it at once by 
cutting it in half).
    [Financial institution may add validation instructions here.]
    (b) Accounts using codes. You cannot use the enclosed code to 
transfer money into or out of your account until we have validated it. 
If you do not want to use the code, please (destroy this notice at 
once).
    [Financial institution may add validation instructions here.]

      A-2--Model Clauses for Initial Disclosures (Sec.  1005.7(b))

    (a) Consumer Liability (Sec.  1005.7(b)(1)).
    (Tell us AT ONCE if you believe your [card] [code] has been lost or 
stolen, or if you believe that an electronic fund transfer has been made 
without your permission using information from your check. Telephoning 
is the best way of keeping your possible losses down. You could lose all 
the money in your account (plus your maximum overdraft line of credit). 
If you tell us within 2 business days after you learn of the loss or 
theft of your [card] [code], you can lose no more than $50 if someone 
used your [card][code] without your permission.)
    If you do NOT tell us within 2 business days after you learn of the 
loss or theft of your [card] [code], and we can prove we could have 
stopped someone from using your [card] [code] without your permission if 
you had told us, you could lose as much as $500.
    Also, if your statement shows transfers that you did not make, 
including those made by card, code or other means, tell us at once. If 
you do not tell us within 60 days after the statement was mailed to you, 
you may not

[[Page 241]]

get back any money you lost after the 60 days if we can prove that we 
could have stopped someone from taking the money if you had told us in 
time. If a good reason (such as a long trip or a hospital stay) kept you 
from telling us, we will extend the time periods.
    (b) Contact in event of unauthorized transfer (Sec.  1005.7(b)(2)). 
If you believe your [card] [code] has been lost or stolen, call: 
[Telephone number] or write: [Name of person or office to be notified] 
[Address].
    You should also call the number or write to the address listed above 
if you believe a transfer has been made using the information from your 
check without your permission.
    (c) Business days (Sec.  1005.7(b)(3)). For purposes of these 
disclosures, our business days are (Monday through Friday) (Monday 
through Saturday) (any day including Saturdays and Sundays). Holidays 
are (not) included.
    (d) Transfer types and limitations (Sec.  1005.7(b)(4)) (1) Account 
access. You may use your [card][code] to:
    (i) Withdraw cash from your [checking] [or] [savings] account.
    (ii) Make deposits to your [checking] [or] [savings] account.
    (iii) Transfer funds between your checking and savings accounts 
whenever you request.
    (iv) Pay for purchases at places that have agreed to accept the 
[card] [code].
    (v) Pay bills directly [by telephone] from your [checking] [or] 
[savings] account in the amounts and on the days you request.
    Some of these services may not be available at all terminals.
    (2) Electronic check conversion. You may authorize a merchant or 
other payee to make a one-time electronic payment from your checking 
account using information from your check to:
    (i) Pay for purchases.
    (ii) Pay bills.
    (3) Limitations on frequency of transfers. (i) You may make only 
[insert number, e.g., 3] cash withdrawals from our terminals each 
[insert time period, e.g., week].
    (ii) You can use your telephone bill-payment service to pay [insert 
number] bills each [insert time period] [telephone call].
    (iii) You can use our point-of-sale transfer service for [insert 
number] transactions each [insert time period].
    (iv) For security reasons, there are limits on the number of 
transfers you can make using our [terminals] [telephone bill-payment 
service] [point-of-sale transfer service].
    (4) Limitations on dollar amounts of transfers (i) You may withdraw 
up to [insert dollar amount] from our terminals each [insert time 
period] time you use the [card] [code].
    (ii) You may buy up to [insert dollar amount] worth of goods or 
services each [insert time period] time you use the [card] [code] in our 
point-of-sale transfer service.
    (e) Fees (Sec.  1005.7(b)(5)) (1) Per transfer charge. We will 
charge you [insert dollar amount] for each transfer you make using our 
[automated teller machines] [telephone bill-payment service] [point-of-
sale transfer service].
    (2) Fixed charge. We will charge you [insert dollar amount] each 
[insert time period] for our [automated teller machine service] 
[telephone bill-payment service] [point-of-sale transfer service].
    (3) Average or minimum balance charge. We will only charge you for 
using our [automated teller machines] [telephone bill-payment service] 
[point-of-sale transfer service] if the [average] [minimum] balance in 
your [checking account] [savings account] [accounts] falls below [insert 
dollar amount]. If it does, we will charge you [insert dollar amount] 
each [transfer] [insert time period].
    (f) Confidentiality (Sec.  1005.7(b)(9)). We will disclose 
information to third parties about your account or the transfers you 
make:
    (i) Where it is necessary for completing transfers, or
    (ii) In order to verify the existence and condition of your account 
for a third party, such as a credit bureau or merchant, or
    (iii) In order to comply with government agency or court orders, or
    (iv) If you give us your written permission.
    (g) Documentation (Sec.  1005.7(b)(6)) (1) Terminal transfers. You 
can get a receipt at the time you make any transfer to or from your 
account using one of our [automated teller machines] [or] [point-of-sale 
terminals].
    (2) Preauthorized credits. If you have arranged to have direct 
deposits made to your account at least once every 60 days from the same 
person or company, (we will let you know if the deposit is [not] made.) 
[the person or company making the deposit will tell you every time they 
send us the money] [you can call us at (insert telephone number) to find 
out whether or not the deposit has been made].
    (3) Periodic statements. You will get a [monthly] [quarterly] 
account statement (unless there are no transfers in a particular month. 
In any case you will get the statement at least quarterly).
    (4) Passbook account where the only possible electronic fund 
transfers are preauthorized credits. If you bring your passbook to us, 
we will record any electronic deposits that were made to your account 
since the last time you brought in your passbook.
    (h) Preauthorized payments (Sec.  1005.7(b) (6), (7) and (8); Sec.  
1005.10(d)) (1) Right to stop payment and procedure for doing so. If you 
have told us in advance to make regular payments out of your account, 
you can stop any of these payments. Here's how:
    Call us at [insert telephone number], or write us at [insert 
address], in time for us to receive your request 3 business days or more

[[Page 242]]

before the payment is scheduled to be made. If you call, we may also 
require you to put your request in writing and get it to us within 14 
days after you call. (We will charge you [insert amount] for each stop-
payment order you give.)
    (2) Notice of varying amounts. If these regular payments may vary in 
amount, [we] [the person you are going to pay] will tell you, 10 days 
before each payment, when it will be made and how much it will be. (You 
may choose instead to get this notice only when the payment would differ 
by more than a certain amount from the previous payment, or when the 
amount would fall outside certain limits that you set.)
    (3) Liability for failure to stop payment of preauthorized transfer. 
If you order us to stop one of these payments 3 business days or more 
before the transfer is scheduled, and we do not do so, we will be liable 
for your losses or damages.
    (i) Financial institution's liability (Sec.  1005.7(b)(8)). If we do 
not complete a transfer to or from your account on time or in the 
correct amount according to our agreement with you, we will be liable 
for your losses or damages. However, there are some exceptions. We will 
not be liable, for instance:
    (1) If, through no fault of ours, you do not have enough money in 
your account to make the transfer.
    (2) If the transfer would go over the credit limit on your overdraft 
line.
    (3) If the automated teller machine where you are making the 
transfer does not have enough cash.
    (4) If the [terminal] [system] was not working properly and you knew 
about the breakdown when you started the transfer.
    (5) If circumstances beyond our control (such as fire or flood) 
prevent the transfer, despite reasonable precautions that we have taken.
    (6) There may be other exceptions stated in our agreement with you.
    (j) ATM fees (Sec.  1005.7(b)(11)). When you use an ATM not owned by 
us, you may be charged a fee by the ATM operator [or any network used] 
(and you may be charged a fee for a balance inquiry even if you do not 
complete a fund transfer).

 A-3--Model Forms for Error Resolution Notice (Sec. Sec.  1005.7(b)(10) 
                             and 1005.8(b))

    (a) Initial and annual error resolution notice (Sec. Sec.  
1005.7(b)(10) and 1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] Write us at [insert address] 
[or email us at [insert email address]] as soon as you can, if you think 
your statement or receipt is wrong or if you need more information about 
a transfer listed on the statement or receipt. We must hear from you no 
later than 60 days after we sent the FIRST statement on which the 
problem or error appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation. You may ask for copies of the 
documents that we used in our investigation.
    (b) Error resolution notice on periodic statements (Sec.  
1005.8(b)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [insert telephone number] or Write us at [insert 
address] as soon as you can, if you think your statement or receipt is 
wrong or if you need more information about a transfer on the statement 
or receipt. We must hear from you no later than 60 days after we sent 
you the FIRST statement on which the error or problem appeared.
    (1) Tell us your name and account number (if any).
    (2) Describe the error or the transfer you are unsure about, and 
explain as clearly as you can why you believe it is an error or why you 
need more information.
    (3) Tell us the dollar amount of the suspected error.
    We will investigate your complaint and will correct any error 
promptly. If we take more than 10 business days to do this, we will 
credit your account for the amount you think is in error, so that you 
will have the use of the money during the time it takes us to complete 
our investigation.

[[Page 243]]

       A-4--Model Form for Service-Providing Institutions (Sec.  
                           1005.14(b)(1)(ii))

    ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR (NAME OF CARD) CARD 
MUST BE DIRECTED TO US (NAME OF SERVICE PROVIDER), AND NOT TO THE BANK 
OR OTHER FINANCIAL INSTITUTION WHERE YOU HAVE YOUR ACCOUNT. We are 
responsible for the [name of service] service and for resolving any 
errors in transactions made with your [name of card] card.
    We will not send you a periodic statement listing transactions that 
you make using your [name of card] card. The transactions will appear 
only on the statement issued by your bank or other financial 
institution. SAVE THE RECEIPTS YOU ARE GIVEN WHEN YOU USE YOUR [NAME OF 
CARD] CARD, AND CHECK THEM AGAINST THE ACCOUNT STATEMENT YOU RECEIVE 
FROM YOUR BANK OR OTHER FINANCIAL INSTITUTION. If you have any questions 
about one of these transactions, call or write us at [telephone number 
and address] [the telephone number and address indicated below].
    IF YOUR [NAME OF CARD] CARD IS LOST OR STOLEN, NOTIFY US AT ONCE by 
calling or writing to us at [telephone number and address].

A-5--Model Clauses for Government Agencies (Sec.  1005.15(e)(1) and (2))

    (a) Disclosure by government agencies of information about obtaining 
account information for government benefit accounts (Sec.  
1005.15(e)(1)(i)).
    You may obtain information about the amount of benefits you have 
remaining by calling [telephone number]. That information is also 
available [on the receipt you get when you make a transfer with your 
card at (an ATM) (a POS terminal)] [when you make a balance inquiry at 
an ATM] [when you make a balance inquiry at specified locations]. This 
information, along with a 12-month history of account transactions, is 
also available online at [Internet address].
    You also have the right to obtain at least 24 months of written 
history of account transactions by calling [telephone number], or by 
writing to us at [address]. You will not be charged a fee for this 
information unless you request it more than once per month. [Optional: 
Or you may request a written history of account transactions by 
contacting your caseworker.]
    (b) Disclosure of error resolution procedures for government 
agencies that do not provide periodic statements (Sec.  
1005.15(e)(1)(ii) and (e)(2)).
    In Case of Errors or Questions About Your Electronic Transfers 
Telephone us at [telephone number] Write us at [address] [or email us at 
[email address]] as soon as you can, if you think an error has occurred 
in your [agency's name for program] account. We must allow you to report 
an error until 60 days after the earlier of the date you electronically 
access your account, if the error could be viewed in your electronic 
history, or the date we sent the FIRST written history on which the 
error appeared. You may request a written history of your transactions 
at any time by calling us at [telephone number] or writing us at 
[address] [optional: or by contacting your caseworker]. You will need to 
tell us:
     Your name and [case] [file] number.
     Why you believe there is an error, and the dollar 
amount involved.
     Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, we will credit your 
account within 10 business days for the amount you think is in error, so 
that you will have the use of the money during the time it takes us to 
complete our investigation. If we ask you to put your complaint or 
question in writing and we do not receive it within 10 business days, we 
may not credit your account.
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error resolution procedures, 
call us at [telephone number][the telephone number shown above].

 A-6--Model Clauses for Authorizing One-Time Electronic Fund Transfers 
           Using Information From a Check (Sec.  1005.3(b)(2))

    (a) Notice About Electronic Check Conversion.
    When you provide a check as payment, you authorize us either to use 
information from your check to make a one-time electronic fund transfer 
from your account or to process the payment as a check transaction.
    (b) Alternative Notice About Electronic Check Conversion (Optional).
    When you provide a check as payment, you authorize us to use 
information from your check to make a one-time electronic fund

[[Page 244]]

transfer from your account. In certain circumstances, such as for 
technical or processing reasons, we may process your payment as a check 
transaction.
    [Specify other circumstances (at payee's option).]
    (c) Notice For Providing Additional Information About Electronic 
Check Conversion.
    When we use information from your check to make an electronic fund 
transfer, funds may be withdrawn from your account as soon as the same 
day [you make] [we receive] your payment[, and you will not receive your 
check back from your financial institution].

A-7--Model Clauses for Financial Institutions Offering Prepaid Accounts 
                      (Sec.  1005.18(d) and (e)(3))

    (a) Disclosure by financial institutions of information about 
obtaining account information for prepaid accounts (Sec.  
1005.18(d)(1)(i)).
    You may obtain information about the amount of money you have 
remaining in your prepaid account by calling [telephone number]. This 
information, along with a 12-month history of account transactions, is 
also available online at [internet address].
    [For accounts that are or can be registered:] [If your account is 
registered with us,] You also have the right to obtain at least 24 
months of written history of account transactions by calling [telephone 
number], or by writing us at [address]. You will not be charged a fee 
for this information unless you request it more than once per month.
    (b) Disclosure of error-resolution procedures for financial 
institutions that do not provide periodic statements (Sec.  
1005.18(d)(1)(ii) and (d)(2)).
    In Case of Errors or Questions About Your Prepaid Account Telephone 
us at [telephone number] or Write us at [address] [or email us at [email 
address]] as soon as you can, if you think an error has occurred in your 
prepaid account. We must allow you to report an error until 60 days 
after the earlier of the date you electronically access your account, if 
the error could be viewed in your electronic history, or the date we 
sent the FIRST written history on which the error appeared. You may 
request a written history of your transactions at any time by calling us 
at [telephone number] or writing us at [address]. You will need to tell 
us:
    Your name and [prepaid account] number.
    Why you believe there is an error, and the dollar amount involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business days 
after we hear from you and will correct any error promptly. If we need 
more time, however, we may take up to 45 days to investigate your 
complaint or question. If we decide to do this, [and your account is 
registered with us,] we will credit your account within 10 business days 
for the amount you think is in error, so that you will have the money 
during the time it takes us to complete our investigation. If we ask you 
to put your complaint or question in writing and we do not receive it 
within 10 business days, we may not credit your account. [Keep reading 
to learn more about how to register your card.]
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate your 
complaint or question. For new accounts, we may take up to 20 business 
days to credit your account for the amount you think is in error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, we 
will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution procedures, 
call us at [telephone number] [the telephone number shown above] [or 
visit [internet address]].
    (c) Warning regarding unverified prepaid accounts (Sec.  
1005.18(e)(3)).
    It is important to register your prepaid account as soon as 
possible. Until you register your account and we verify your identity, 
we are not required to research or resolve any errors regarding your 
account. To register your account, go to [internet address] or call us 
at [telephone number]. We will ask you for identifying information about 
yourself (including your full name, address, date of birth, and [Social 
Security Number] [government-issued identification number]), so that we 
can verify your identity.

A-8--Model Clause for Electronic Collection of Returned Item Fees (Sec.  
                              1005.3(b)(3))

    If your payment is returned unpaid, you authorize [us/name of person 
collecting the fee electronically] to make a one-time electronic fund 
transfer from your account to collect a fee of [$________]. [If your 
payment is returned unpaid, you authorize [us/name of person collecting 
the fee electronically] to make a one-time electronic fund transfer from 
your account to collect a fee. The fee will be determined [by]/[as 
follows]:

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[GRAPHIC] [TIFF OMITTED] TR27DE11.000


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[GRAPHIC] [TIFF OMITTED] TR22NO16.005


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[GRAPHIC] [TIFF OMITTED] TR22NO16.006


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[GRAPHIC] [TIFF OMITTED] TR22NO16.007

[GRAPHIC] [TIFF OMITTED] TR22NO16.008


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[GRAPHIC] [TIFF OMITTED] TR22NO16.010

                      A-11 through A-29 [Reserved]

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A-30(a)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.242

A-30(b)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.243


[[Page 252]]


A-30(c)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.244

A-30(d)--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.245


[[Page 253]]


A-31--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency (Sec.  1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR18SE14.015


[[Page 254]]


A-32--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency (Sec.  1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.247


[[Page 255]]


[GRAPHIC] [TIFF OMITTED] TR22MY13.248

A-33--Model Form for Pre-Payment Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.249


[[Page 256]]


A-34--Model Form for Receipts for Dollar-to-Dollar Remittance Transfers 
(Sec.  1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.250


[[Page 257]]


A-35--Model Form for Combined Disclosures for Dollar-to-Dollar 
Remittance Transfers (Sec.  1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.251


[[Page 258]]


A-36--Model Form for Error Resolution and Cancellation Disclosures 
(Long) (Sec.  1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.252

A-37--Model Form for Error Resolution and Cancellation Disclosures 
(Short)
(Sec.  1005.31(b)(2)(iv) and (b)(2)(vi))

    You have a right to dispute errors in your transaction. If you think 
there is an error, contact us within 180 days at [insert telephone 
number] or [insert website]. You can also contact us for a written 
explanation of your rights.
    You can cancel for a full refund within 30 minutes of payment, 
unless the funds have been picked up or deposited.
    For questions or complaints about [insert name of remittance 
transfer provider], contact:

State Regulatory Agency, 800-111-2222, www.stateregulatoryagency.gov
Consumer Financial Protection Bureau, 855-411-2372, 855-729-2372 (TTY/
TDD), www.consumerfinance.gov

[[Page 259]]

A-38--Model Form for Pre-Payment Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec.  1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.254


[[Page 260]]


A-39--Model Form for Receipts for Remittance Transfers Exchanged into 
Local Currency--Spanish (Sec.  1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.255


[[Page 261]]


[GRAPHIC] [TIFF OMITTED] TR22MY13.256


[[Page 262]]


A-40--Model Form for Combined Disclosures for Remittance Transfers 
Exchanged into Local Currency--Spanish (Sec.  1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR18SE14.016


[[Page 263]]


A-41--Model Form for Error Resolution and Cancellation Disclosures 
(Long)--Spanish (Sec.  1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.258


[76 FR 81023, Dec. 27, 2011, as amended at 77 FR 6290, Feb. 7, 2012; 77 
FR 40459, July 10, 2012; 78 FR 30705, May 22, 2013; 79 FR 55991, Sept. 
18, 2014; 81 FR 70320, Oct. 12, 2016; 81 FR 84338, Nov. 22, 2016; 83 FR 
6419, Feb. 13, 2018]

[[Page 264]]



                 Sec. Appendix B to Part 1005 [Reserved]



   Sec. Appendix C to Part 1005--Issuance of Official Interpretations

                        Official Interpretations

    Interpretations of this part issued by duly authorized officials of 
the Bureau provide the protection afforded under section 916(d) of the 
Act. Except in unusual circumstances, such interpretations will not be 
issued separately but will be incorporated in an official commentary to 
this part, which will be amended periodically.

            Requests for Issuance of Official Interpretations

    A request for an official interpretation shall be in writing and 
addressed to the Bureau of Consumer Financial Protection, 1700 G Street 
NW, Washington, DC 20552. The request shall contain a complete statement 
of all relevant facts concerning the issue, including copies of all 
pertinent documents.

                        Scope of Interpretations

    No interpretations will be issued approving financial institutions' 
forms or statements. This restriction does not apply to forms or 
statements whose use is required or sanctioned by a government agency.

[88 FR 16538, Mar. 20, 2023]



        Sec. Supplement I to Part 1005--Official Interpretations

                       Section 1005.2 Definitions

                           2(a) Access Device

    1. Examples. The term ``access device'' includes debit cards, 
personal identification numbers (PINs), telephone transfer and telephone 
bill payment codes, and other means that may be used by a consumer to 
initiate an electronic fund transfer (EFT) to or from a consumer 
account. The term does not include magnetic tape or other devices used 
internally by a financial institution to initiate electronic transfers.
    2. Checks used to capture information. The term ``access device'' 
does not include a check or draft used to capture the Magnetic Ink 
Character Recognition (MICR) encoding to initiate a one-time automated 
clearinghouse (ACH) debit. For example, if a consumer authorizes a one-
time ACH debit from the consumer's account using a blank, partially 
completed, or fully completed and signed check for the merchant to 
capture the routing, account, and serial numbers to initiate the debit, 
the check is not an access device. (Although the check is not an access 
device under Regulation E, the transaction is nonetheless covered by the 
regulation. See comment 3(b)(1)-1.v.)

                              2(b) Account

    1. Consumer asset account. The term ``consumer asset account'' 
includes:
    i. Club accounts, such as vacation clubs. In many cases, however, 
these accounts are exempt from the regulation under Sec.  1005.3(c)(5) 
because all electronic transfers to or from the account have been 
preauthorized by the consumer and involve another account of the 
consumer at the same institution.
    ii. A retail repurchase agreement (repo), which is a loan made to a 
financial institution by a consumer that is collateralized by government 
or government-insured securities.
    2. Examples of accounts not covered by Regulation E (12 CFR part 
1005) include:
    i. Profit-sharing and pension accounts established under a trust 
agreement, which are exempt under Sec.  1005.2(b)(2).
    ii. Escrow accounts, such as those established to ensure payment of 
items such as real estate taxes, insurance premiums, or completion of 
repairs or improvements.
    iii. Accounts for accumulating funds to purchase U.S. savings bonds.

                            Paragraph 2(b)(2)

    1. Bona fide trust agreements. The term ``bona fide trust 
agreement'' is not defined by the Act or regulation; therefore, 
financial institutions must look to state or other applicable law for 
interpretation.
    2. Custodial agreements. An account held under a custodial agreement 
that qualifies as a trust under the Internal Revenue Code, such as an 
individual retirement account, is considered to be held under a trust 
agreement for purposes of Regulation E.

                            Paragraph 2(b)(3)

                          Paragraph 2(b)(3)(i)

    1. Debit card includes prepaid card. For purposes of subpart A of 
Regulation E, unless otherwise specified, the term debit card also 
includes a prepaid card.
    2. Certain employment-related cards not covered as payroll card 
accounts. The term ``payroll card account'' does not include an account 
used solely to disburse incentive-based payments (other than commissions 
which can represent the primary means through which a consumer is paid), 
such as bonuses, which are unlikely to be a consumer's primary source of 
salary or other compensation. The term also does not include an account 
used solely to make disbursements unrelated to compensation, such as 
petty cash reimbursements or travel per diem payments. Similarly, a 
payroll card account does not include an account that is used in 
isolated instances to which an employer typically does not make 
recurring payments, such as when providing final payments or in 
emergency situations when other payment

[[Page 265]]

methods are unavailable. While such accounts would not be payroll card 
accounts, such accounts could constitute prepaid accounts generally, 
provided the other conditions of the definition of that term in Sec.  
1005.2(b)(3) are satisfied. In addition, all transactions involving the 
transfer of funds to or from a payroll card account or prepaid account 
are covered by the regulation, even if a particular transaction involves 
payment of a bonus, other incentive-based payment, or reimbursement, or 
the transaction does not represent a transfer of wages, salary, or other 
employee compensation.
    3. Marketed or labeled as ``prepaid.'' The term ``marketed or 
labeled as `prepaid' '' means promoting or advertising an account using 
the term ``prepaid.'' For example, an account is marketed or labeled as 
prepaid if the term ``prepaid'' appears on the access device associated 
with the account or the access device's packaging materials, or on a 
display, advertisement, or other publication to promote purchase or use 
of the account. An account may be marketed or labeled as prepaid if the 
financial institution, its service provider, including a program 
manager, or the payment network on which an access device for the 
account is used, promotes or advertises, or contracts with another party 
to promote or advertise, the account using the label ``prepaid.'' A 
product or service that is marketed or labeled as prepaid is not a 
``prepaid account'' pursuant to Sec.  1005.2(b)(3)(i)(C) if it does not 
otherwise meet the definition of account under Sec.  1005.2(b)(1).
    4. Issued on a prepaid basis. To be issued on a prepaid basis, a 
prepaid account must be loaded with funds when it is first provided to 
the consumer for use. For example, if a consumer purchases a prepaid 
account and provides funds that are loaded onto a card at the time of 
purchase, the prepaid account is issued on a prepaid basis.
    5. Capable of being loaded with funds. A prepaid account that is not 
issued on a prepaid basis but is capable of being loaded with funds 
thereafter includes a prepaid card issued to a consumer with a zero 
balance to which funds may be loaded by the consumer or a third party 
subsequent to issuance.
    6. Product acting as a pass-through vehicle for funds. To satisfy 
Sec.  1005.2(b)(3)(i)(D), a prepaid account must be issued on a prepaid 
basis or be capable of being loaded with funds. This means that the 
prepaid account must be capable of holding funds, rather than merely 
acting as a pass-through vehicle. For example, if a product, such as a 
digital wallet, is only capable of storing a consumer's payment 
credentials for other accounts but is incapable of having funds stored 
on it, such a product is not a prepaid account. However, if a product 
allows a consumer to transfer funds, which can be stored before the 
consumer designates a destination for the funds, the product satisfies 
Sec.  1005.2(b)(3)(i)(D).
    7. Not required to be reloadable. Prepaid accounts need not be 
reloadable by the consumer or a third party.
    8. Primary function. To satisfy Sec.  1005.2(b)(3)(i)(D), an 
account's primary function must be to provide consumers with general 
transaction capability, which includes the general ability to use loaded 
funds to conduct transactions with multiple, unaffiliated merchants for 
goods or services, or at automated teller machines, or to conduct 
person-to-person transfers. This definition excludes accounts that 
provide such capability only incidentally. For example, the primary 
function of a brokerage account is to hold funds so that the consumer 
can conduct transactions through a licensed broker or firm, not to 
conduct transactions with multiple, unaffiliated merchants for good or 
services, or at automated teller machines, or to conduct person-to-
person transfers. Similarly, the primary function of a savings account 
is to accrue interest on funds held in the account; such accounts 
restrict the extent to which the consumer can conduct general 
transactions and withdrawals. Accordingly, brokerage accounts and 
savings accounts do not satisfy Sec.  1005.2(b)(3)(i)(D), and thus are 
not prepaid accounts as defined by Sec.  1005.2(b)(3). The following 
examples provide additional guidance:
    i. An account's primary function is to enable a consumer to conduct 
transactions with multiple, unaffiliated merchants for goods or 
services, at automated teller machines, or to conduct person-to-person 
transfers, even if the account also enables a third party to disburse 
funds to a consumer. For example, a prepaid account that conveys tax 
refunds or insurance proceeds to a consumer meets the primary function 
test if the account can be used, e.g., to purchase goods or services at 
multiple, unaffiliated merchants.
    ii. Whether an account satisfies Sec.  1005.2(b)(3)(i)(D) is 
determined by reference to the account, not the access device associated 
with the account. An account satisfies Sec.  1005.2(b)(3)(i)(D) even if 
the account's access device can be used for other purposes, for example, 
as a form of identification. Such accounts may include, for example, a 
prepaid account used to disburse student loan proceeds via a card device 
that can be used at unaffiliated merchants or to withdraw cash from an 
automated teller machine, even if that access device also acts as a 
student identification card.
    iii. Where multiple accounts are associated with the same access 
device, the primary function of each account is determined separately. 
One or more accounts can satisfy Sec.  1005.2(b)(3)(i)(D) even if other 
accounts associated with the same access device do not. For example, a 
student identification card may act as an access device associated with

[[Page 266]]

two separate accounts: An account used to conduct transactions with 
multiple, unaffiliated merchants for goods or services, and an account 
used to conduct closed-loop transactions on campus. The account used to 
conduct transactions with multiple, unaffiliated merchants for goods or 
services satisfies Sec.  1005.2(b)(3)(i)(D), even though the account 
used to conduct closed-loop transactions does not (and as such the 
latter is not a prepaid account as defined by Sec.  1005.2(b)(3)).
    iv. An account satisfies Sec.  1005.2(b)(3)(i)(D) if its primary 
function is to provide general transaction capability, even if an 
individual consumer does not in fact use it to conduct multiple 
transactions. For example, the fact that a consumer may choose to 
withdraw the entire account balance at an automated teller machine or 
transfer it to another account held by the consumer does not change the 
fact that the account's primary function is to provide general 
transaction capability.
    v. An account whose primary function is other than to conduct 
transactions with multiple, unaffiliated merchants for goods or 
services, or at automated teller machines, or to conduct person-to-
person transfers, does not satisfy Sec.  1005.2(b)(3)(i)(D). Such 
accounts may include, for example, a product whose only function is to 
make a one-time transfer of funds into a separate prepaid account.
    9. Redeemable upon presentation at multiple, unaffiliated merchants. 
For guidance, see comments 20(a)(3)-1 and -2.
    10. Person-to-person transfers. A prepaid account whose primary 
function is to conduct person-to-person transfers is an account that 
allows a consumer to send funds by electronic fund transfer to another 
consumer or business. An account may qualify as a prepaid account if its 
primary function is person-to-person transfers even if it is neither 
redeemable upon presentation at multiple, unaffiliated merchants for 
goods or services, nor usable at automated teller machines. A 
transaction involving a store gift card would not be a person-to-person 
transfer if it could only be used to make payments to the merchant or 
affiliated group of merchants on whose behalf the card was issued.

                          Paragraph 2(b)(3)(ii)

    1. Excluded health care and employee benefit related prepaid 
products. For purposes of Sec.  1005.2(b)(3)(ii)(A), ``health savings 
account'' means a health savings account as defined in 26 U.S.C. 223(d); 
``flexible spending arrangement'' means a health benefits or a health 
flexible spending arrangement pursuant to 26 U.S.C. 125; ``medical 
savings account'' means an Archer MSA as defined in 26 U.S.C. 220(d); 
``health reimbursement arrangement'' means a health reimbursement 
arrangement which is treated as employer-provided coverage under an 
accident or health plan for purposes of 26 U.S.C. 106; ``dependent care 
assistance program'' means a dependent care assistance program pursuant 
to 26 U.S.C. 129; and ``transit or parking reimbursement arrangement'' 
means a qualified transportation fringe benefit provided by an employer 
pursuant to 26 U.S.C. 132.
    2. Excluded disaster relief funds. For purposes of Sec.  
1005.2(b)(3)(ii)(B), ``qualified disaster relief funds'' means funds 
made available through a qualified disaster relief program as defined in 
26 U.S.C. 139(b).
    3. Marketed and labeled as a gift card or gift certificate. Section 
1005.2(b)(3)(ii)(D) excludes, among other things, reloadable general-use 
prepaid cards that are both marketed and labeled as gift cards or gift 
certificates, whereas Sec.  1005.20(b)(2) excludes such products that 
are marketed or labeled as gift cards or gift certificates. Comment 
20(b)(2)-2 describes, in part, a network-branded GPR card that is 
principally advertised as a less-costly alternative to a bank account 
but is promoted in a television, radio, newspaper, or internet 
advertisement, or on signage as ``the perfect gift'' during the holiday 
season. For purposes of Sec.  1005.20, such a product would be 
considered marketed as a gift card or gift certificate because of this 
occasional holiday marketing activity. For purposes of Sec.  
1005.2(b)(3)(ii)(D), however, such a product would not be considered to 
be both marketed and labeled as a gift card or gift certificate and thus 
would be covered by the definition of prepaid account.
    4. Loyalty, award, or promotional gift cards. Section 
1005.2(b)(3)(ii)(D)(3) excludes loyalty, award, or promotional gift 
cards as defined in Sec.  1005.20(a)(4); those cards are excluded from 
coverage under Sec.  1005.20 pursuant to Sec.  1005.20(b)(3). Section 
1005.2(b)(3)(ii)(D)(3) also excludes cards that satisfy the criteria in 
Sec.  1005.20(a)(4)(i) and (ii) and are excluded from coverage under 
Sec.  1005.20 pursuant to Sec.  1005.20(b)(4) because they are not 
marketed to the general public; such products are not required to set 
forth the disclosures enumerated in Sec.  1005.20(a)(4)(iii) in order to 
be excluded pursuant to Sec.  1005.2(b)(3)(ii)(D)(3).

                            2(d) Business Day

    1. Duration. A business day includes the entire 24-hour period 
ending at midnight, and a notice required by the regulation is effective 
even if given outside normal business hours. The regulation does not 
require, however, that a financial institution make telephone lines 
available on a 24-hour basis.
    2. Substantially all business functions. Substantially all business 
functions include both the public and the back-office operations of the 
institution. For example, if the offices of an institution are open on 
Saturdays for handling some consumer transactions (such as deposits, 
withdrawals, and other teller transactions), but not for performing 
internal functions (such as investigating account errors), then Saturday 
is not a business day for that institution. In this case, Saturday

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does not count toward the business-day standard set by the regulation 
for reporting lost or stolen access devices, resolving errors, etc.
    3. Short hours. A financial institution may determine, at its 
election, whether an abbreviated day is a business day. For example, if 
an institution engages in substantially all business functions until 
noon on Saturdays instead of its usual 3 p.m. closing, it may consider 
Saturday a business day.
    4. Telephone line. If a financial institution makes a telephone line 
available on Sundays for reporting the loss or theft of an access 
device, but performs no other business functions, Sunday is not a 
business day under the substantially all business functions standard.

                        2(h) Electronic Terminal

    1. Point-of-sale (POS) payments initiated by telephone. Because the 
term ``electronic terminal'' excludes a telephone operated by a 
consumer, a financial institution need not provide a terminal receipt 
when:
    i. A consumer uses a debit card at a public telephone to pay for the 
call.
    ii. A consumer initiates a transfer by a means analogous in function 
to a telephone, such as by home banking equipment or a facsimile 
machine.
    2. POS terminals. A POS terminal that captures data electronically, 
for debiting or crediting to a consumer's asset account, is an 
electronic terminal for purposes of Regulation E even if no access 
device is used to initiate the transaction. See Sec.  1005.9 for receipt 
requirements.
    3. Teller-operated terminals. A terminal or other computer equipment 
operated by an employee of a financial institution is not an electronic 
terminal for purposes of the regulation. However, transfers initiated at 
such terminals by means of a consumer's access device (using the 
consumer's PIN, for example) are EFTs and are subject to other 
requirements of the regulation. If an access device is used only for 
identification purposes or for determining the account balance, the 
transfers are not EFTs for purposes of the regulation.

               2(k) Preauthorized Electronic Fund Transfer

    1. Advance authorization. A preauthorized electronic fund transfer 
under Regulation E is one authorized by the consumer in advance of a 
transfer that will take place on a recurring basis, at substantially 
regular intervals, and will require no further action by the consumer to 
initiate the transfer. In a bill-payment system, for example, if the 
consumer authorizes a financial institution to make monthly payments to 
a payee by means of EFTs, and the payments take place without further 
action by the consumer, the payments are preauthorized EFTs. In 
contrast, if the consumer must take action each month to initiate a 
payment (such as by entering instructions on a touch-tone telephone or 
home computer), the payments are not preauthorized EFTs.

               2(m) Unauthorized Electronic Fund Transfer

    1. Transfer by institution's employee. A consumer has no liability 
for erroneous or fraudulent transfers initiated by an employee of a 
financial institution.
    2. Authority. If a consumer furnishes an access device and grants 
authority to make transfers to a person (such as a family member or co-
worker) who exceeds the authority given, the consumer is fully liable 
for the transfers unless the consumer has notified the financial 
institution that transfers by that person are no longer authorized.
    3. Access device obtained through robbery or fraud. An unauthorized 
EFT includes a transfer initiated by a person who obtained the access 
device from the consumer through fraud or robbery.
    4. Forced initiation. An EFT at an ATM is an unauthorized transfer 
if the consumer has been induced by force to initiate the transfer.
    5. Reversal of direct deposits. The reversal of a direct deposit 
made in error is not an unauthorized EFT when it involves:
    i. A credit made to the wrong consumer's account;
    ii. A duplicate credit made to a consumer's account; or
    iii. A credit in the wrong amount (for example, when the amount 
credited to the consumer's account differs from the amount in the 
transmittal instructions).

                         Section 1005.3 Coverage

                              3(a) General

    1. Accounts covered. The requirements of the regulation apply only 
to an account for which an agreement for EFT services to or from the 
account has been entered into between:
    i. The consumer and the financial institution (including an account 
for which an access device has been issued to the consumer, for 
example);
    ii. The consumer and a third party (for preauthorized debits or 
credits, for example), when the account-holding institution has received 
notice of the agreement and the fund transfers have begun.
    2. Automated clearing house (ACH) membership. The fact that 
membership in an ACH requires a financial institution to accept EFTs to 
accounts at the institution does not make every account of that 
institution subject to the regulation.
    3. Foreign applicability. Regulation E applies to all persons 
(including branches and other offices of foreign banks located in the 
United States) that offer EFT services to

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residents of any state, including resident aliens. It covers any account 
located in the United States through which EFTs are offered to a 
resident of a state. This is the case whether or not a particular 
transfer takes place in the United States and whether or not the 
financial institution is chartered in the United States or a foreign 
country. The regulation does not apply to a foreign branch of a U.S. 
bank unless the EFT services are offered in connection with an account 
in a state as defined in Sec.  1005.2(l).

                      3(b) Electronic Fund Transfer

                           3(b)(1) Definition

    1. Fund transfers covered. The term ``electronic fund transfer'' 
includes:
    i. A deposit made at an ATM or other electronic terminal (including 
a deposit in cash or by check) provided a specific agreement exists 
between the financial institution and the consumer for EFTs to or from 
the account to which the deposit is made.
    ii. A transfer sent via ACH. For example, social security benefits 
under the U.S. Treasury's direct-deposit program are covered, even if 
the listing of payees and payment amounts reaches the account-holding 
institution by means of a computer printout from a correspondent bank.
    iii. A preauthorized transfer credited or debited to an account in 
accordance with instructions contained on magnetic tape, even if the 
financial institution holding the account sends or receives a composite 
check.
    iv. A transfer from the consumer's account resulting from a debit-
card transaction at a merchant location, even if no electronic terminal 
is involved at the time of the transaction, if the consumer's asset 
account is subsequently debited for the amount of the transfer.
    v. A transfer via ACH where a consumer has provided a check to 
enable the merchant or other payee to capture the routing, account, and 
serial numbers to initiate the transfer, whether the check is blank, 
partially completed, or fully completed and signed; whether the check is 
presented at POS or is mailed to a merchant or other payee or lockbox 
and later converted to an EFT; or whether the check is retained by the 
consumer, the merchant or other payee, or the payee's financial 
institution.
    vi. A payment made by a bill payer under a bill-payment service 
available to a consumer via computer or other electronic means, unless 
the terms of the bill-payment service explicitly state that all 
payments, or all payments to a particular payee or payees, will be 
solely by check, draft, or similar paper instrument drawn on the 
consumer's account, and the payee or payees that will be paid in this 
manner are identified to the consumer.
    2. Fund transfers not covered. The term ``electronic fund transfer'' 
does not include:
    i. A payment that does not debit or credit a consumer asset account, 
such as a payroll allotment to a creditor to repay a credit extension 
(which is deducted from salary).
    ii. A payment made in currency by a consumer to another person at an 
electronic terminal.
    iii. A preauthorized check drawn by the financial institution on the 
consumer's account (such as an interest or other recurring payment to 
the consumer or another party), even if the check is computer-generated.
    iv. Transactions arising from the electronic collection, 
presentment, or return of checks through the check collection system, 
such as through transmission of electronic check images.

     3(b)(2) Electronic Fund Transfer Using Information From a Check

    1. Notice at POS not furnished due to inadvertent error. If the copy 
of the notice under section 1005.3(b)(2)(ii) for electronic check 
conversion (ECK) transactions is not provided to the consumer at POS 
because of a bona fide unintentional error, such as when a terminal 
printing mechanism jams, no violation results if the payee maintains 
procedures reasonably adapted to avoid such occurrences.
    2. Authorization to process a transaction as an EFT or as a check. 
In order to process a transaction as an EFT, or alternatively as a 
check, the payee must obtain the consumer's authorization to do so. A 
payee may, at its option, specify the circumstances under which a check 
may not be converted to an EFT. See model clauses in appendix A-6.
    3. Notice for each transfer. Generally, a notice to authorize an 
electronic check conversion transaction must be provided for each 
transaction. For example, a consumer must receive a notice that the 
transaction will be processed as an EFT for each transaction at POS or 
each time a consumer mails a check in an accounts receivable (ARC) 
transaction to pay a bill, such as a utility bill, if the payee intends 
to convert a check received as payment. Similarly, the consumer must 
receive notice if the payee intends to collect a service fee for 
insufficient or uncollected funds via an EFT for each transaction 
whether at POS or if the consumer mails a check to pay a bill. The 
notice about when funds may be debited from a consumer's account and the 
non-return of consumer checks by the consumer's financial institution 
must also be provided for each transaction. However, if in an ARC 
transaction, a payee provides a coupon book to a consumer, for example, 
for mortgage loan payments, and the payment dates and amounts are set 
out in the coupon book, the payee may provide a single notice on the 
coupon book stating all of the required disclosures under

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paragraph (b)(2) of this section in order to obtain authorization for 
each conversion of a check and any debits via EFT to the consumer's 
account to collect any service fees imposed by the payee for 
insufficient or uncollected funds in the consumer's account. The notice 
must be placed on a conspicuous location of the coupon book that a 
consumer can retain--for example, on the first page, or inside the front 
cover.
    4. Multiple payments/multiple consumers. If a merchant or other 
payee will use information from a consumer's check to initiate an EFT 
from the consumer's account, notice to a consumer listed on the billing 
account that a check provided as payment during a single billing cycle 
or after receiving an invoice or statement will be processed as a one-
time EFT or as a check transaction constitutes notice for all checks 
provided in payment for the billing cycle or the invoice for which 
notice has been provided, whether the check(s) is submitted by the 
consumer or someone else. The notice applies to all checks provided in 
payment for the billing cycle or invoice until the provision of notice 
on or with the next invoice or statement. Thus, if a merchant or other 
payee receives a check as payment for the consumer listed on the billing 
account after providing notice that the check will be processed as a 
one-time EFT, the authorization from that consumer constitutes 
authorization to convert any other checks provided for that invoice or 
statement. Other notices required under this paragraph (b)(2) (for 
example, to collect a service fee for insufficient or uncollected funds 
via an EFT) provided to the consumer listed on the billing account also 
constitutes notice to any other consumer who may provide a check for the 
billing cycle or invoice.
    5. Additional disclosures about ECK transactions at POS. When a 
payee initiates an EFT at POS using information from the consumer's 
check, and returns the check to the consumer at POS, the payee need not 
provide a notice to the consumer that the check will not be returned by 
the consumer's financial institution.

  3(b)(3) Collection of Returned Item Fees via Electronic Fund Transfer

    1. Fees imposed by account-holding institution. The requirement to 
obtain a consumer's authorization to collect a fee via EFT for the 
return of an EFT or check unpaid applies only to the person that intends 
to initiate an EFT to collect the returned item fee from the consumer's 
account. The authorization requirement does not apply to any fees 
assessed by the consumer's account-holding financial institution when it 
returns the unpaid underlying EFT or check or pays the amount of an 
overdraft.
    2. Accounts receivable transactions. In an ARC transaction where a 
consumer sends in a payment for amounts owed (or makes an in-person 
payment at a biller's physical location, such as when a consumer makes a 
loan payment at a bank branch or places a payment in a drop box), a 
person seeking to electronically collect a fee for items returned unpaid 
must obtain the consumer's authorization to collect the fee in this 
manner. A consumer authorizes a person to electronically collect a 
returned item fee when the consumer receives notice, typically on an 
invoice or statement, that the person may collect the fee through an EFT 
to the consumer's account, and the consumer goes forward with the 
underlying transaction by providing payment. The notice must also state 
the dollar amount of the fee. However, an explanation of how that fee 
will be determined may be provided in place of the dollar amount of the 
fee if the fee may vary due to the amount of the transaction or due to 
other factors, such as the number of days the underlying transaction is 
left outstanding. For example, if a state law permits a maximum fee of 
$30 or 10% of the underlying transaction, whichever is greater, the 
person collecting the fee may explain how the fee is determined, rather 
than state a specific dollar amount for the fee.
    3. Disclosure of dollar amount of fee for POS transactions. The 
notice provided to the consumer in connection with a POS transaction 
under Sec.  1005.3(b)(3)(ii) must state the amount of the fee for a 
returned item if the dollar amount of the fee can be calculated at the 
time the notice is provided or mailed. For example, if notice is 
provided to the consumer at the time of the transaction, if the 
applicable state law sets a maximum fee that may be collected for a 
returned item based on the amount of the underlying transaction (such as 
where the amount of the fee is expressed as a percentage of the 
underlying transaction), the person collecting the fee must state the 
actual dollar amount of the fee on the notice provided to the consumer. 
Alternatively, if the amount of the fee to be collected cannot be 
calculated at the time of the transaction (for example, where the amount 
of the fee will depend on the number of days a debt continues to be 
owed), the person collecting the fee may provide a description of how 
the fee will be determined on both the posted notice as well as on the 
notice provided at the time of the transaction. However, if the person 
collecting the fee elects to send the consumer notice after the person 
has initiated an EFT to collect the fee, that notice must state the 
amount of the fee to be collected.
    4. Third party providing notice. The person initiating an EFT to a 
consumer's account to electronically collect a fee for an item returned 
unpaid may obtain the authorization and provide the notices required 
under Sec.  1005.3(b)(3) through third parties, such as merchants.

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                      3(c) Exclusions From Coverage

                             3(c)(1) Checks

    1. Re-presented checks. The electronic re-presentment of a returned 
check is not covered by Regulation E because the transaction originated 
by check. Regulation E does apply, however, to any fee debited via an 
EFT from a consumer's account by the payee because the check was 
returned for insufficient or uncollected funds. The person debiting the 
fee electronically must obtain the consumer's authorization.
    2. Check used to capture information for a one-time EFT. See comment 
3(b)(1)-1.v.

                3(c)(2) Check Guarantee or Authorization

    1. Memo posting. Under a check guarantee or check authorization 
service, debiting of the consumer's account occurs when the check or 
draft is presented for payment. These services are exempt from coverage, 
even when a temporary hold on the account is memo-posted electronically 
at the time of authorization.

                 3(c)(3) Wire or Other Similar Transfers

    1. Fedwire and ACH. If a financial institution makes a fund transfer 
to a consumer's account after receiving funds through Fedwire or a 
similar network, the transfer by ACH is covered by the regulation even 
though the Fedwire or network transfer is exempt.
    2. Article 4A. Financial institutions that offer telephone-initiated 
Fedwire payments are subject to the requirements of UCC section 4A-202, 
which encourages verification of Fedwire payment orders pursuant to a 
security procedure established by agreement between the consumer and the 
receiving bank. These transfers are not subject to Regulation E and the 
agreement is not considered a telephone plan if the service is offered 
separately from a telephone bill-payment or other prearranged plan 
subject to Regulation E. Regulation J of the Board of Governors of the 
Federal Reserve System (12 CFR part 210) specifies the rules applicable 
to funds handled by Federal Reserve Banks. To ensure that the rules for 
all fund transfers through Fedwire are consistent, the Board of 
Governors used its preemptive authority under UCC section 4A-107 to 
determine that subpart B of the Board's Regulation J, including the 
provisions of Article 4A, applies to all fund transfers through Fedwire, 
even if a portion of the fund transfer is governed by the EFTA. The 
portion of the fund transfer that is governed by the EFTA is not 
governed by subpart B of the Board's Regulation J.
    3. Similar fund transfer systems. Fund transfer systems that are 
similar to Fedwire include the Clearing House Interbank Payments System 
(CHIPS), Society for Worldwide Interbank Financial Telecommunication 
(SWIFT), Telex, and transfers made on the books of correspondent banks.

              3(c)(4) Securities and Commodities Transfers

    1. Coverage. The securities exemption applies to securities and 
commodities that may be sold by a registered broker-dealer or futures 
commission merchant, even when the security or commodity itself is not 
regulated by the Securities and Exchange Commission or the Commodity 
Futures Trading Commission.
    2. Example of exempt transfer. The exemption applies to a transfer 
involving a transfer initiated by a telephone order to a stockbroker to 
buy or sell securities or to exercise a margin call.
    3. Examples of nonexempt transfers. The exemption does not apply to 
a transfer involving:
    i. A debit card or other access device that accesses a securities or 
commodities account such as a money market mutual fund and that the 
consumer uses for purchasing goods or services or for obtaining cash.
    ii. A payment of interest or dividends into the consumer's account 
(for example, from a brokerage firm or from a Federal Reserve Bank for 
government securities).

       3(c)(5) Automatic Transfers by Account-Holding Institution

    1. Automatic transfers exempted. The exemption applies to:
    i. Electronic debits or credits to consumer accounts for check 
charges, stop-payment charges, non-sufficient funds (NSF) charges, 
overdraft charges, provisional credits, error adjustments, and similar 
items that are initiated automatically on the occurrence of certain 
events.
    ii. Debits to consumer accounts for group insurance available only 
through the financial institution and payable only by means of an 
aggregate payment from the institution to the insurer.
    iii. EFTs between a thrift institution and its paired commercial 
bank in the state of Rhode Island, which are deemed under state law to 
be intra-institutional.
    iv. Automatic transfers between a consumer's accounts within the 
same financial institution, even if the account holders on the two 
accounts are not identical.
    2. Automatic transfers not exempted. Transfers between accounts of 
the consumer at affiliated institutions (such as between a bank and its 
subsidiary or within a holding company) are not intra-institutional 
transfers, and thus do not qualify for the exemption.

                  3(c)(6) Telephone-Initiated Transfers

    1. Written plan or agreement. A transfer that the consumer initiates 
by telephone is covered by Regulation E if the transfer is made

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under a written plan or agreement between the consumer and the financial 
institution making the transfer. A written statement available to the 
public or to account holders that describes a service allowing a 
consumer to initiate transfers by telephone constitutes a plan; for 
example, a brochure, or material included with periodic statements. The 
following, however, do not by themselves constitute a written plan or 
agreement:
    i. A hold-harmless agreement on a signature card that protects the 
institution if the consumer requests a transfer.
    ii. A legend on a signature card, periodic statement, or passbook 
that limits the number of telephone-initiated transfers the consumer can 
make from a savings account because of reserve requirements under 
Regulation D of the Board of Governors of the Federal Reserve System (12 
CFR part 204).
    iii. An agreement permitting the consumer to approve by telephone 
the rollover of funds at the maturity of an instrument.
    2. Examples of covered transfers. When a written plan or agreement 
has been entered into, a transfer initiated by a telephone call from a 
consumer is covered even though:
    i. An employee of the financial institution completes the transfer 
manually (for example, by means of a debit memo or deposit slip).
    ii. The consumer is required to make a separate request for each 
transfer.
    iii. The consumer uses the plan infrequently.
    iv. The consumer initiates the transfer via a facsimile machine.
    v. The consumer initiates the transfer using a financial 
institution's audio-response or voice-response telephone system.

                       3(c)(7) Small Institutions

    1. Coverage. This exemption is limited to preauthorized transfers; 
institutions that offer other EFTs must comply with the applicable 
sections of the regulation as to such services. The preauthorized 
transfers remain subject to sections 913, 916, and 917 of the Act and 
Sec.  1005.10(e), and are therefore exempt from UCC Article 4A.

Section 1005.4 General Disclosure Requirements; Jointly Offered Services

                        4(a) Form of Disclosures

    1. General. The disclosures required by this part must be in a clear 
and readily understandable written form that the consumer may retain. 
Additionally, except as otherwise set forth in Sec. Sec.  1005.18(b)(7) 
and 1005.31(c), no particular rules govern type size, number of pages, 
or the relative conspicuousness of various terms. Numbers or codes are 
considered readily understandable if explained elsewhere on the 
disclosure form.
    2. Foreign language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.

                Section 1005.5 Issuance of Access Devices

    1. Coverage. The provisions of this section limit the circumstances 
under which a financial institution may issue an access device to a 
consumer. Making an additional account accessible through an existing 
access device is equivalent to issuing an access device and is subject 
to the limitations of this section.

                         5(a) Solicited Issuance

                            Paragraph 5(a)(1)

    1. Joint account. For a joint account, a financial institution may 
issue an access device to each account holder if the requesting holder 
specifically authorizes the issuance.
    2. Permissible forms of request. The request for an access device 
may be written or oral (for example, in response to a telephone 
solicitation by a card issuer).

                            Paragraph 5(a)(2)

    1. One-for-one rule. In issuing a renewal or substitute access 
device, only one renewal or substitute device may replace a previously 
issued device. For example, only one new card and PIN may replace a card 
and PIN previously issued. A financial institution may provide 
additional devices at the time it issues the renewal or substitute 
access device, however, provided the institution complies with Sec.  
1005.5(b). See comment 5(b)-5. If the replacement device or the 
additional device permits either fewer or additional types of electronic 
fund transfer services, a change-in-terms notice or new disclosures are 
required.
    2. Renewal or substitution by a successor institution. A successor 
institution is an entity that replaces the original financial 
institution (for example, following a corporate merger or acquisition) 
or that acquires accounts or assumes the operation of an EFT system.

                        5(b) Unsolicited Issuance

    1. Compliance. A financial institution may issue an unsolicited 
access device (such as the combination of a debit card and PIN) if the 
institution's ATM system has been programmed not to accept the access 
device until after the consumer requests and the institution validates 
the device. Merely instructing a consumer not to use an unsolicited 
debit card and PIN until after the institution verifies the consumer's 
identity does not comply with the regulation.
    2. PINs. A financial institution may impose no liability on a 
consumer for unauthorized transfers involving an unsolicited access 
device until the device becomes an ``accepted access device'' under the 
regulation. A card and PIN combination may be treated as an

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accepted access device once the consumer has used it to make a transfer.
    3. Functions of PIN. If an institution issues a PIN at the 
consumer's request, the issuance may constitute both a way of validating 
the debit card and the means to identify the consumer (required as a 
condition of imposing liability for unauthorized transfers).
    4. Verification of identity. To verify the consumer's identity, a 
financial institution may use any reasonable means, such as a 
photograph, fingerprint, personal visit, signature comparison, or 
personal information about the consumer. However, even if reasonable 
means were used, if an institution fails to verify correctly the 
consumer's identity and an imposter succeeds in having the device 
validated, the consumer is not liable for any unauthorized transfers 
from the account.
    5. Additional access devices in a renewal or substitution. A 
financial institution may issue more than one access device in 
connection with the renewal or substitution of a previously issued 
accepted access device, provided that any additional access device 
(beyond the device replacing the accepted access device) is not 
validated at the time it is issued, and the institution complies with 
the other requirements of Sec.  1005.5(b). The institution may, if it 
chooses, set up the validation procedure such that both the device 
replacing the previously issued device and the additional device are not 
validated at the time they are issued, and validation will apply to both 
devices. If the institution sets up the validation procedure in this 
way, the institution should provide a clear and readily understandable 
disclosure to the consumer that both devices are unvalidated and that 
validation will apply to both devices.

     Section 1005.6 Liability of Consumer for Unauthorized Transfers

                      6(a) Conditions for Liability

    1. Means of identification. A financial institution may use various 
means for identifying the consumer to whom the access device is issued, 
including but not limited to:
    i. Electronic or mechanical confirmation (such as a PIN).
    ii. Comparison of the consumer's signature, fingerprint, or 
photograph.
    2. Multiple users. When more than one access device is issued for an 
account, the financial institution may, but need not, provide a separate 
means to identify each user of the account.

                 6(b) Limitations on Amount of Liability

    1. Application of liability provisions. There are three possible 
tiers of consumer liability for unauthorized EFTs depending on the 
situation. A consumer may be liable for: (1) up to $50; (2) up to $500; 
or (3) an unlimited amount depending on when the unauthorized EFT 
occurs. More than one tier may apply to a given situation because each 
corresponds to a different (sometimes overlapping) time period or set of 
conditions.
    2. Consumer negligence. Negligence by the consumer cannot be used as 
the basis for imposing greater liability than is permissible under 
Regulation E. Thus, consumer behavior that may constitute negligence 
under state law, such as writing the PIN on a debit card or on a piece 
of paper kept with the card, does not affect the consumer's liability 
for unauthorized transfers. (However, refer to comment 2(m)-2 regarding 
termination of the authority of given by the consumer to another 
person.)
    3. Limits on liability. The extent of the consumer's liability is 
determined solely by the consumer's promptness in reporting the loss or 
theft of an access device. Similarly, no agreement between the consumer 
and an institution may impose greater liability on the consumer for an 
unauthorized transfer than the limits provided in Regulation E.

                       6(b)(1) Timely Notice Given

    1. $50 limit applies. The basic liability limit is $50. For example, 
the consumer's card is lost or stolen on Monday and the consumer learns 
of the loss or theft on Wednesday. If the consumer notifies the 
financial institution within two business days of learning of the loss 
or theft (by midnight Friday), the consumer's liability is limited to 
$50 or the amount of the unauthorized transfers that occurred before 
notification, whichever is less.
    2. Knowledge of loss or theft of access device. The fact that a 
consumer has received a periodic statement that reflects unauthorized 
transfers may be a factor in determining whether the consumer had 
knowledge of the loss or theft, but cannot be deemed to represent 
conclusive evidence that the consumer had such knowledge.
    3. Two business day rule. The two business day period does not 
include the day the consumer learns of the loss or theft or any day that 
is not a business day. The rule is calculated based on two 24-hour 
periods, without regard to the financial institution's business hours or 
the time of day that the consumer learns of the loss or theft. For 
example, a consumer learns of the loss or theft at 6 p.m. on Friday. 
Assuming that Saturday is a business day and Sunday is not, the two 
business day period begins on Saturday and expires at 11:59 p.m. on 
Monday, not at the end of the financial institution's business day on 
Monday.

                     6(b)(2) Timely Notice Not Given

    1. $500 limit applies. The second tier of liability is $500. For 
example, the consumer's card is stolen on Monday and the consumer

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learns of the theft that same day. The consumer reports the theft on 
Friday. The $500 limit applies because the consumer failed to notify the 
financial institution within two business days of learning of the theft 
(which would have been by midnight Wednesday). How much the consumer is 
actually liable for, however, depends on when the unauthorized transfers 
take place. In this example, assume a $100 unauthorized transfer was 
made on Tuesday and a $600 unauthorized transfer on Thursday. Because 
the consumer is liable for the amount of the loss that occurs within the 
first two business days (but no more than $50), plus the amount of the 
unauthorized transfers that occurs after the first two business days and 
before the consumer gives notice, the consumer's total liability is $500 
($50 of the $100 transfer plus $450 of the $600 transfer, in this 
example). But if $600 was taken on Tuesday and $100 on Thursday, the 
consumer's maximum liability would be $150 ($50 of the $600 plus $100).

           6(b)(3) Periodic Statement; Timely Notice Not Given

    1. Unlimited liability applies. The standard of unlimited liability 
applies if unauthorized transfers appear on a periodic statement, and 
may apply in conjunction with the first two tiers of liability. If a 
periodic statement shows an unauthorized transfer made with a lost or 
stolen debit card, the consumer must notify the financial institution 
within 60 calendar days after the periodic statement was sent; 
otherwise, the consumer faces unlimited liability for all unauthorized 
transfers made after the 60-day period. The consumer's liability for 
unauthorized transfers before the statement is sent, and up to 60 days 
following, is determined based on the first two tiers of liability: up 
to $50 if the consumer notifies the financial institution within two 
business days of learning of the loss or theft of the card and up to 
$500 if the consumer notifies the institution after two business days of 
learning of the loss or theft.
    2. Transfers not involving access device. The first two tiers of 
liability do not apply to unauthorized transfers from a consumer's 
account made without an access device. If, however, the consumer fails 
to report such unauthorized transfers within 60 calendar days of the 
financial institution's transmittal of the periodic statement, the 
consumer may be liable for any transfers occurring after the close of 
the 60 days and before notice is given to the institution. For example, 
a consumer's account is electronically debited for $200 without the 
consumer's authorization and by means other than the consumer's access 
device. If the consumer notifies the institution within 60 days of the 
transmittal of the periodic statement that shows the unauthorized 
transfer, the consumer has no liability. However, if in addition to the 
$200, the consumer's account is debited for a $400 unauthorized transfer 
on the 61st day and the consumer fails to notify the institution of the 
first unauthorized transfer until the 62nd day, the consumer may be 
liable for the full $400.

                    6(b)(4) Extension of Time Limits

    1. Extenuating circumstances. Examples of circumstances that require 
extension of the notification periods under this section include the 
consumer's extended travel or hospitalization.

                 6(b)(5) Notice to Financial Institution

    1. Receipt of notice. A financial institution is considered to have 
received notice for purposes of limiting the consumer's liability if 
notice is given in a reasonable manner, even if the consumer notifies 
the institution but uses an address or telephone number other than the 
one specified by the institution.
    2. Notice by third party. Notice to a financial institution by a 
person acting on the consumer's behalf is considered valid under this 
section. For example, if a consumer is hospitalized and unable to report 
the loss or theft of an access device, notice is considered given when 
someone acting on the consumer's behalf notifies the bank of the loss or 
theft. A financial institution may require appropriate documentation 
from the person representing the consumer to establish that the person 
is acting on the consumer's behalf.
    3. Content of notice. Notice to a financial institution is 
considered given when a consumer takes reasonable steps to provide the 
institution with the pertinent account information. Even when the 
consumer is unable to provide the account number or the card number in 
reporting a lost or stolen access device or an unauthorized transfer, 
the notice effectively limits the consumer's liability if the consumer 
otherwise identifies sufficiently the account in question. For example, 
the consumer may identify the account by the name on the account and the 
type of account in question.

                   Section 1005.7 Initial Disclosures

                       7(a) Timing of Disclosures

    1. Early disclosures. Disclosures given by a financial institution 
earlier than the regulation requires (for example, when the consumer 
opens a checking account) need not be repeated when the consumer later 
enters into an agreement with a third party to initiate preauthorized 
transfers to or from the consumer's account, unless the terms and 
conditions differ from those that the institution previously disclosed. 
This interpretation also applies to any notice provided about one-time 
EFTs from a consumer's account initiated using information from the

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consumer's check. On the other hand, if an agreement for EFT services to 
be provided by an account-holding institution is directly between the 
consumer and the account-holding institution, disclosures must be given 
in close proximity to the event requiring disclosure, for example, when 
the consumer contracts for a new service.
    2. Lack of advance notice of a transfer. Where a consumer authorizes 
a third party to debit or credit the consumer's account, an account-
holding institution that has not received advance notice of the transfer 
or transfers must provide the required disclosures as soon as reasonably 
possible after the first debit or credit is made, unless the institution 
has previously given the disclosures.
    3. Addition of new accounts. If a consumer opens a new account 
permitting EFTs at a financial institution, and the consumer already has 
received Regulation E disclosures for another account at that 
institution, the institution need only disclose terms and conditions 
that differ from those previously given.
    4. Addition of service in interchange systems. If a financial 
institution joins an interchange or shared network system (which 
provides access to terminals operated by other institutions), 
disclosures are required for additional EFT services not previously 
available to consumers if the terms and conditions differ from those 
previously disclosed.
    5. Disclosures covering all EFT services offered. An institution may 
provide disclosures covering all EFT services that it offers, even if 
some consumers have not arranged to use all services.

                       7(b) Content of Disclosures

                      7(b)(1) Liability of Consumer

    1. No liability imposed by financial institution. If a financial 
institution chooses to impose zero liability for unauthorized EFTs, it 
need not provide the liability disclosures. If the institution later 
decides to impose liability, however, it must first provide the 
disclosures.
    2. Preauthorized transfers. If the only EFTs from an account are 
preauthorized transfers, liability could arise if the consumer fails to 
report unauthorized transfers reflected on a periodic statement. To 
impose such liability on the consumer, the institution must have 
disclosed the potential liability and the telephone number and address 
for reporting unauthorized transfers.
    3. Additional information. At the institution's option, the summary 
of the consumer's liability may include advice on promptly reporting 
unauthorized transfers or the loss or theft of the access device.

                  7(b)(2) Telephone Number and Address

    1. Disclosure of telephone numbers. An institution may use the same 
or different telephone numbers in the disclosures for the purpose of:
    i. Reporting the loss or theft of an access device or possible 
unauthorized transfers;
    ii. Inquiring about the receipt of a preauthorized credit;
    iii. Stopping payment of a preauthorized debit;
    iv. Giving notice of an error.
    2. Location of telephone number. The telephone number need not be 
incorporated into the text of the disclosure; for example, the 
institution may instead insert a reference to a telephone number that is 
readily available to the consumer, such as ``Call your branch office. 
The number is shown on your periodic statement.'' However, an 
institution must provide a specific telephone number and address, on or 
with the disclosure statement, for reporting a lost or stolen access 
device or a possible unauthorized transfer.

                 7(b)(4) Types of Transfers; Limitations

    1. Security limitations. Information about limitations on the 
frequency and dollar amount of transfers generally must be disclosed in 
detail, even if related to security aspects of the system. If the 
confidentiality of certain details is essential to the security of an 
account or system, these details may be withheld (but the fact that 
limitations exist must still be disclosed). For example, an institution 
limits cash ATM withdrawals to $100 per day. The institution may 
disclose that daily withdrawal limitations apply and need not disclose 
that the limitations may not always be in force (such as during periods 
when its ATMs are off-line).
    2. Restrictions on certain deposit accounts. A limitation on account 
activity that restricts the consumer's ability to make EFTs must be 
disclosed even if the restriction also applies to transfers made by non-
electronic means. For example, Regulation D of the Board of Governors of 
the Federal Reserve System (12 CFR part 204) restricts the number of 
payments to third parties that may be made from a money market deposit 
account; an institution that does not execute fund transfers in excess 
of those limits must disclose the restriction as a limitation on the 
frequency of EFTs.
    3. Preauthorized transfers. Financial institutions are not required 
to list preauthorized transfers among the types of transfers that a 
consumer can make.
    4. One-time EFTs initiated using information from a check. Financial 
institutions must disclose the fact that one-time EFTs initiated using 
information from a consumer's check are among the types of transfers 
that a consumer can make. See appendix A-2.

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                              7(b)(5) Fees

    1. Disclosure of EFT fees. An institution is required to disclose 
all fees for EFTs or the right to make them. Others fees (for example, 
minimum-balance fees, stop-payment fees, or account overdrafts) may, but 
need not, be disclosed. But see Regulation DD, 12 CFR part 1030. An 
institution is not required to disclose fees for inquiries made at an 
ATM since no transfer of funds is involved.
    2. Fees also applicable to non-EFT. A per-item fee for EFTs must be 
disclosed even if the same fee is imposed on non-electronic transfers. 
If a per-item fee is imposed only under certain conditions, such as when 
the transactions in the cycle exceed a certain number, those conditions 
must be disclosed. Itemization of the various fees may be provided on 
the disclosure statement or on an accompanying document that is 
referenced in the statement.
    3. Interchange system fees. Fees paid by the account-holding 
institution to the operator of a shared or interchange ATM system need 
not be disclosed, unless they are imposed on the consumer by the 
account-holding institution. Fees for use of an ATM that are debited 
directly from the consumer's account by an institution other than the 
account-holding institution (for example, fees included in the transfer 
amount) need not be disclosed. See Sec.  1005.7(b)(11) for the general 
notice requirement regarding fees that may be imposed by ATM operators 
and by a network used to complete the transfer.

                         7(b)(9) Confidentiality

    1. Information provided to third parties. An institution must 
describe the circumstances under which any information relating to an 
account to or from which EFTs are permitted will be made available to 
third parties, not just information concerning those EFTs. The term 
``third parties'' includes affiliates such as other subsidiaries of the 
same holding company.

                        7(b)(10) Error Resolution

    1. Substantially similar. The error resolution notice must be 
substantially similar to the model form in appendix A of part 1005. An 
institution may use different wording so long as the substance of the 
notice remains the same, may delete inapplicable provisions (for 
example, the requirement for written confirmation of an oral 
notification), and may substitute substantive state law requirements 
affording greater consumer protection than Regulation E.
    2. Extended time-period for certain transactions. To take advantage 
of the longer time periods for resolving errors under Sec.  
1005.11(c)(3) (for new accounts as defined in Regulation CC of the Board 
of Governors of the Federal Reserve System (12 CFR part 229), transfers 
initiated outside the United States, or transfers resulting from POS 
debit-card transactions), a financial institution must have disclosed 
these longer time periods. Similarly, an institution that relies on the 
exception from provisional crediting in Sec.  1005.11(c)(2) for accounts 
subject to Regulation T of the Board of Governors of the Federal Reserve 
System (12 CFR part 220) must have disclosed accordingly.

           7(c) Addition of Electronic Fund Transfer Services

    1. Addition of electronic check conversion services. One-time EFTs 
initiated using information from a consumer's check are a new type of 
transfer requiring new disclosures, as applicable. See appendix A-2.

     Section 1005.8 Change-in-Terms Notice; Error Resolution Notice

                       8(a) Change-in-Terms Notice

    1. Form of notice. No specific form or wording is required for a 
change-in-terms notice. The notice may appear on a periodic statement, 
or may be given by sending a copy of a revised disclosure statement, 
provided attention is directed to the change (for example, in a cover 
letter referencing the changed term).
    2. Changes not requiring notice. The following changes do not 
require disclosure:
    i. Closing some of an institution's ATMs;
    ii. Cancellation of an access device.
    3. Limitations on transfers. When the initial disclosures omit 
details about limitations because secrecy is essential to the security 
of the account or system, a subsequent increase in those limitations 
need not be disclosed if secrecy is still essential. If, however, an 
institution had no limits in place when the initial disclosures were 
given and now wishes to impose limits for the first time, it must 
disclose at least the fact that limits have been adopted. See also Sec.  
1005.7(b)(4) and the related commentary.
    4. Change in telephone number or address. When a financial 
institution changes the telephone number or address used for reporting 
possible unauthorized transfers, a change-in-terms notice is required 
only if the institution will impose liability on the consumer for 
unauthorized transfers under Sec.  1005.6. See also Sec.  1005.6(a) and 
the related commentary.

                      8(b) Error Resolution Notice

    1. Change between annual and periodic notice. If an institution 
switches from an annual to a periodic notice, or vice versa, the first 
notice under the new method must be sent no later than 12 months after 
the last notice sent under the old method.
    2. Exception for new accounts. For new accounts, disclosure of the 
longer error resolution time periods under Sec.  1005.11(c)(3) is not

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required in the annual error resolution notice or in the notice that may 
be provided with each periodic statement as an alternative to the annual 
notice.

  Section 1005.9 Receipts at Electronic Terminals; Periodic Statements

                  9(a) Receipts at Electronic Terminals

    1. Receipts furnished only on request. The regulation requires that 
a receipt be ``made available.'' A financial institution may program its 
electronic terminals to provide a receipt only to consumers who elect to 
receive one.
    2. Third party providing receipt. An account-holding institution may 
make terminal receipts available through third parties such as merchants 
or other financial institutions.
    3. Inclusion of promotional material. A financial institution may 
include promotional material on receipts if the required information is 
set forth clearly (for example, by separating it from the promotional 
material). In addition, a consumer may not be required to surrender the 
receipt or that portion containing the required disclosures in order to 
take advantage of a promotion.
    4. Transfer not completed. The receipt requirement does not apply to 
a transfer that is initiated but not completed (for example, if the ATM 
is out of currency or the consumer decides not to complete the 
transfer).
    5. Receipts not furnished due to inadvertent error. If a receipt is 
not provided to the consumer because of a bona fide unintentional error, 
such as when a terminal runs out of paper or the mechanism jams, no 
violation results if the financial institution maintains procedures 
reasonably adapted to avoid such occurrences.
    6. Multiple transfers. If the consumer makes multiple transfers at 
the same time, the financial institution may document them on a single 
or on separate receipts.

                             9(a)(1) Amount

    1. Disclosure of transaction fee. The required display of a fee 
amount on or at the terminal may be accomplished by displaying the fee 
on a sign at the terminal or on the terminal screen for a reasonable 
duration. Displaying the fee on a screen provides adequate notice, as 
long as a consumer is given the option to cancel the transaction after 
receiving notice of a fee. See Sec.  1005.16 for the notice requirements 
applicable to ATM operators that impose a fee for providing EFT 
services.
    2. Relationship between Sec.  1005.9(a)(1) and Sec.  1005.16. The 
requirements of Sec. Sec.  1005.9(a)(1) and 1005.16 are similar but not 
identical.
    i. Section 1005.9(a)(1) requires that if the amount of the transfer 
as shown on the receipt will include the fee, then the fee must be 
disclosed either on a sign on or at the terminal, or on the terminal 
screen. Section 1005.16 requires disclosure both on a sign on or at the 
terminal (in a prominent and conspicuous location) and on the terminal 
screen. Section 1005.16 permits disclosure on a paper notice as an 
alternative to the on-screen disclosure.
    ii. The disclosure of the fee on the receipt under Sec.  
1005.9(a)(1) cannot be used to comply with the alternative paper 
disclosure procedure under Sec.  1005.16, if the receipt is provided at 
the completion of the transaction because, pursuant to the statute, the 
paper notice must be provided before the consumer is committed to paying 
the fee.
    iii. Section 1005.9(a)(1) applies to any type of electronic terminal 
as defined in Regulation E (for example, to POS terminals as well as to 
ATMs), while Sec.  1005.16 applies only to ATMs.

                              9(a)(2) Date

    1. Calendar date. The receipt must disclose the calendar date on 
which the consumer uses the electronic terminal. An accounting or 
business date may be disclosed in addition if the dates are clearly 
distinguished.

                              9(a)(3) Type

    1. Identifying transfer and account. Examples identifying the type 
of transfer and the type of the consumer's account include ``withdrawal 
from checking,'' ``transfer from savings to checking,'' or ``payment 
from savings.''
    2. Exception. Identification of an account is not required when the 
consumer can access only one asset account at a particular time or 
terminal, even if the access device can normally be used to access more 
than one account. For example, the consumer may be able to access only 
one particular account at terminals not operated by the account-holding 
institution, or may be able to access only one particular account when 
the terminal is off-line. The exception is available even if, in 
addition to accessing one asset account, the consumer also can access a 
credit line.
    3. Access to multiple accounts. If the consumer can use an access 
device to make transfers to or from different accounts of the same type, 
the terminal receipt must specify which account was accessed, such as 
``withdrawal from checking I'' or ``withdrawal from checking II.'' If 
only one account besides the primary checking account can be debited, 
the receipt can identify the account as ``withdrawal from other 
account.''
    4. Generic descriptions. Generic descriptions may be used for 
accounts that are similar in function, such as share draft or NOW 
accounts and checking accounts. In a shared system, for example, when a 
credit union member initiates transfers to or from a share draft account 
at a terminal owned or operated by a bank, the receipt may identify a 
withdrawal from the account as a ``withdrawal from checking.''

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    5. Point-of-sale transactions. There is no prescribed terminology 
for identifying a transfer at a merchant's POS terminal. A transfer may 
be identified, for example, as a purchase, a sale of goods or services, 
or a payment to a third party. When a consumer obtains cash from a POS 
terminal in addition to purchasing goods, or obtains cash only, the 
documentation need not differentiate the transaction from one involving 
the purchase of goods.

                        9(a)(5) Terminal Location

    1. Options for identifying terminal. The institution may provide 
either:
    i. The city, state or foreign country, and the information in Sec.  
1005.9(a)(5) (i), (ii), or (iii), or
    ii. A number or a code identifying the terminal. If the institution 
chooses the second option, the code or terminal number identifying the 
terminal where the transfer is initiated may be given as part of a 
transaction code.
    2. Omission of city name. The city may be omitted if the generally 
accepted name (such as a branch name) contains the city name.
    3. Omission of a state. A state may be omitted from the location 
information on the receipt if:
    i. All the terminals owned or operated by the financial institution 
providing the statement (or by the system in which it participates) are 
located in that state, or
    ii. All transfers occur at terminals located within 50 miles of the 
financial institution's main office.
    4. Omission of a city and state. A city and state may be omitted if 
all the terminals owned or operated by the financial institution 
providing the statement (or by the system in which it participates) are 
located in the same city.

                          Paragraph 9(a)(5)(i)

    1. Street address. The address should include number and street (or 
intersection); the number (or intersecting street) may be omitted if the 
street alone uniquely identifies the terminal location.

                          Paragraph 9(a)(5)(ii)

    1. Generally accepted name. Examples of a generally accepted name 
for a specific location include a branch of the financial institution, a 
shopping center, or an airport.

                         Paragraph 9(a)(5)(iii)

    1. Name of owner or operator of terminal. Examples of an owner or 
operator of a terminal are a financial institution or a retail merchant.

                      9(a)(6) Third Party Transfer

    1. Omission of third-party name. The receipt need not disclose the 
third-party name if the name is provided by the consumer in a form that 
is not machine readable (for example, if the consumer indicates the 
payee by depositing a payment stub into the ATM). If, on the other hand, 
the consumer keys in the identity of the payee, the receipt must 
identify the payee by name or by using a code that is explained 
elsewhere on the receipt.
    2. Receipt as proof of payment. Documentation required under the 
regulation constitutes prima facie proof of a payment to another person, 
except in the case of a terminal receipt documenting a deposit.

                        9(b) Periodic Statements

    1. Periodic cycles. Periodic statements may be sent on a cycle that 
is shorter than monthly. The statements must correspond to periodic 
cycles that are reasonably equal, that is, do not vary by more than four 
days from the regular cycle. The requirement of reasonably equal cycles 
does not apply when an institution changes cycles for operational or 
other reasons, such as to establish a new statement day or date.
    2. Interim statements. Generally, a financial institution must 
provide periodic statements for each monthly cycle in which an EFT 
occurs, and at least quarterly if a transfer has not occurred. Where 
EFTs occur between regularly-scheduled cycles, interim statements must 
be provided. For example, if an institution issues quarterly statements 
at the end of March, June, September and December, and the consumer 
initiates an EFT in February, an interim statement for February must be 
provided. If an interim statement contains interest or rate information, 
the institution must comply with Regulation DD, 12 CFR 1030.6.
    3. Inactive accounts. A financial institution need not send 
statements to consumers whose accounts are inactive as defined by the 
institution.
    4. Statement pickup. A financial institution may permit, but may not 
require, consumers to pick up their periodic statements at the financial 
institution.
    5. Periodic statements limited to EFT activity. A financial 
institution that uses a passbook as the primary means for displaying 
account activity, but also allows the account to be debited 
electronically, may provide a periodic statement requirement that 
reflects only the EFTs and other required disclosures (such as charges, 
account balances, and address and telephone number for inquiries). See 
Sec.  1005.9(c)(1)(i) for the exception applicable to preauthorized 
transfers for passbook accounts.
    6. Codes and accompanying documents. To meet the documentation 
requirements for periodic statements, a financial institution may:
    i. Include copies of terminal receipts to reflect transfers 
initiated by the consumer at electronic terminals;

[[Page 278]]

    ii. Enclose posting memos, deposit slips, and other documents that, 
together with the statement, disclose all the required information;
    iii. Use codes for names of third parties or terminal locations and 
explain the information to which the codes relate on an accompanying 
document.

                     9(b)(1) Transaction Information

    1. Information obtained from others. While financial institutions 
must maintain reasonable procedures to ensure the integrity of data 
obtained from another institution, a merchant, or other third parties, 
verification of each transfer that appears on the periodic statement is 
not required.

                          Paragraph 9(b)(1)(i)

    1. Incorrect deposit amount. If a financial institution determines 
that the amount actually deposited at an ATM is different from the 
amount entered by the consumer, the institution need not immediately 
notify the consumer of the discrepancy. The periodic statement 
reflecting the deposit may show either the correct amount of the deposit 
or the amount entered by the consumer along with the institution's 
adjustment.

                         Paragraph 9(b)(1)(iii)

    1. Type of transfer. There is no prescribed terminology for 
describing a type of transfer. Placement of the amount of the transfer 
in the debit or the credit column is sufficient if other information on 
the statement, such as a terminal location or third-party name, enables 
the consumer to identify the type of transfer.

                          Paragraph 9(b)(1)(iv)

    1. Nonproprietary terminal in network. An institution need not 
reflect on the periodic statement the street addresses, identification 
codes, or terminal numbers for transfers initiated in a shared or 
interchange system at a terminal operated by an institution other than 
the account-holding institution. The statement must, however, specify 
the entity that owns or operates the terminal, plus the city and state.

                          Paragraph 9(b)(1)(v)

    1. Recurring payments by government agency. The third-party name for 
recurring payments from Federal, state, or local governments need not 
list the particular agency. For example, ``U.S. gov't'' or ``N.Y. sal'' 
will suffice.
    2. Consumer as third-party payee. If a consumer makes an electronic 
fund transfer to another consumer, the financial institution must 
identify the recipient by name (not just by an account number, for 
example).
    3. Terminal location/third party. A single entry may be used to 
identify both the terminal location and the name of the third party to 
or from whom funds are transferred. For example, if a consumer purchases 
goods from a merchant, the name of the party to whom funds are 
transferred (the merchant) and the location of the terminal where the 
transfer is initiated will be satisfied by a disclosure such as ``XYZ 
Store, Anytown, Ohio.''
    4. Account-holding institution as third party. Transfers to the 
account-holding institution (by ATM, for example) must show the 
institution as the recipient, unless other information on the statement 
(such as, ``loan payment from checking'') clearly indicates that the 
payment was to the account-holding institution.
    5. Consistency in third-party identity. The periodic statement must 
disclose a third-party name as it appeared on the receipt, whether it 
was, for example, the ``dba'' (doing business as) name of the third 
party or the parent corporation's name.
    6. Third-party identity on deposits at electronic terminal. A 
financial institution need not identify third parties whose names appear 
on checks, drafts, or similar paper instruments deposited to the 
consumer's account at an electronic terminal.

                              9(b)(3) Fees

    1. Disclosure of fees. The fees disclosed may include fees for EFTs 
and for other non-electronic services, and both fixed fees and per-item 
fees; they may be given as a total or may be itemized in part or in 
full.
    2. Fees in interchange system. An account-holding institution must 
disclose any fees it imposes on the consumer for EFTs, including fees 
for ATM transactions in an interchange or shared ATM system. Fees for 
use of an ATM imposed on the consumer by an institution other than the 
account-holding institution and included in the amount of the transfer 
by the terminal-operating institution need not be separately disclosed 
on the periodic statement.
    3. Finance charges. The requirement to disclose any fees assessed 
against the account does not include a finance charge imposed on the 
account during the statement period.

                        9(b)(4) Account Balances

    1. Opening and closing balances. The opening and closing balances 
must reflect both EFTs and other account activity.

           9(b)(5) Address and Telephone Number for Inquiries

    1. Telephone number. A single telephone number, preceded by the 
``direct inquiries to'' language, will satisfy the requirements of 
Sec. Sec.  1005.9(b)(5) and (6).

[[Page 279]]

          9(b)(6) Telephone Number for Preauthorized Transfers

    1. Telephone number. See comment 9(b)(5)-1.

   9(c) Exceptions to the Periodic Statement Requirements for Certain 
                                Accounts

    1. Transfers between accounts. The regulation provides an exception 
from the periodic statement requirement for certain intra-institutional 
transfers between a consumer's accounts. The financial institution must 
still comply with the applicable periodic statement requirements for any 
other EFTs to or from the account. For example, a Regulation E statement 
must be provided quarterly for an account that also receives payroll 
deposits electronically, or for any month in which an account is also 
accessed by a withdrawal at an ATM.

               9(c)(1) Preauthorized Transfers to Accounts

    1. Accounts that may be accessed only by preauthorized transfers to 
the account. The exception for ``accounts that may be accessed only by 
preauthorized transfers to the account'' includes accounts that can be 
accessed by means other than EFTs, such as checks. If, however, an 
account may be accessed by any EFT other than preauthorized credits to 
the account, such as preauthorized debits or ATM transactions, the 
account does not qualify for the exception.
    2. Reversal of direct deposits. For direct-deposit-only accounts, a 
financial institution must send a periodic statement at least quarterly. 
A reversal of a direct deposit to correct an error does not trigger the 
monthly statement requirement when the error represented a credit to the 
wrong consumer's account, a duplicate credit, or a credit in the wrong 
amount. See also comment 2(m)-5.

           9(d) Documentation for Foreign-Initiated Transfers

    1. Foreign-initiated transfers. An institution must make a good 
faith effort to provide all required information for foreign-initiated 
transfers. For example, even if the institution is not able to provide a 
specific terminal location, it should identify the country and city in 
which the transfer was initiated.

                 Section 1005.10 Preauthorized Transfers

           10(a) Preauthorized Transfers to Consumer's Account

                10(a)(1) Notice by Financial Institution

    1. Content. No specific language is required for notice regarding 
receipt of a preauthorized transfer. Identifying the deposit is 
sufficient; however, simply providing the current account balance is 
not.
    2. Notice of credit. A financial institution may use different 
methods of notice for various types or series of preauthorized 
transfers, and the institution need not offer consumers a choice of 
notice methods.
    3. Positive notice. A periodic statement sent within two business 
days of the scheduled transfer, showing the transfer, can serve as 
notice of receipt.
    4. Negative notice. The absence of a deposit entry (on a periodic 
statement sent within two business days of the scheduled transfer date) 
will serve as negative notice.
    5. Telephone notice. If a financial institution uses the telephone 
notice option, the institution should be able in most instances to 
verify during a consumer's initial call whether a transfer was received. 
The institution must respond within two business days to any inquiry not 
answered immediately.
    6. Phone number for passbook accounts. The financial institution may 
use any reasonable means necessary to provide the telephone number to 
consumers with passbook accounts that can only be accessed by 
preauthorized credits and that do not receive periodic statements. For 
example, it may print the telephone number in the passbook, or include 
the number with the annual error resolution notice.
    7. Telephone line availability. To satisfy the readily-available 
standard, the financial institution must provide enough telephone lines 
so that consumers get a reasonably prompt response. The institution need 
only provide telephone service during normal business hours. Within its 
primary service area, an institution must provide a local or toll-free 
telephone number. It need not provide a toll-free number or accept 
collect long-distance calls from outside the area where it normally 
conducts business.

10(b) Written Authorization for Preauthorized Transfers From Consumer's 
                                 Account

    1. Preexisting authorizations. The financial institution need not 
require a new authorization before changing from paper-based to 
electronic debiting when the existing authorization does not specify 
that debiting is to occur electronically or specifies that the debiting 
will occur by paper means. A new authorization also is not required when 
a successor institution begins collecting payments.
    2. Authorization obtained by third party. The account-holding 
financial institution does not violate the regulation when a third-party 
payee fails to obtain the authorization in writing or fails to give a 
copy to the consumer; rather, it is the third-party payee that is in 
violation of the regulation.
    3. Written authorization for preauthorized transfers. The 
requirement that preauthorized EFTs be authorized by the consumer ``only 
by a writing'' cannot be met by a payee's signing a written 
authorization on the consumer's behalf with only an oral authorization 
from the consumer.

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    4. Use of a confirmation form. A financial institution or designated 
payee may comply with the requirements of this section in various ways. 
For example, a payee may provide the consumer with two copies of a 
preauthorization form, and ask the consumer to sign and return one and 
to retain the second copy.
    5. Similarly authenticated. The similarly authenticated standard 
permits signed, written authorizations to be provided electronically. 
The writing and signature requirements of this section are satisfied by 
complying with the Electronic Signatures in Global and National Commerce 
Act, 15 U.S.C. 7001 et seq., which defines electronic records and 
electronic signatures. Examples of electronic signatures include, but 
are not limited to, digital signatures and security codes. A security 
code need not originate with the account-holding institution. The 
authorization process should evidence the consumer's identity and assent 
to the authorization. The person that obtains the authorization must 
provide a copy of the terms of the authorization to the consumer either 
electronically or in paper form. Only the consumer may authorize the 
transfer and not, for example, a third-party merchant on behalf of the 
consumer.
    6. Requirements of an authorization. An authorization is valid if it 
is readily identifiable as such and the terms of the preauthorized 
transfer are clear and readily understandable.
    7. Bona fide error. Consumers sometimes authorize third-party 
payees, by telephone or online, to submit recurring charges against a 
credit card account. If the consumer indicates use of a credit card 
account when in fact a debit card is being used, the payee does not 
violate the requirement to obtain a written authorization if the failure 
to obtain written authorization was not intentional and resulted from a 
bona fide error, and if the payee maintains procedures reasonably 
adapted to avoid any such error. Procedures reasonably adapted to avoid 
error will depend upon the circumstances. Generally, requesting the 
consumer to specify whether the card to be used for the authorization is 
a debit (or check) card or a credit card is a reasonable procedure. 
Where the consumer has indicated that the card is a credit card (or that 
the card is not a debit or check card), the payee may rely on the 
consumer's statement without seeking further information about the type 
of card. If the payee believes, at the time of the authorization, that a 
credit card is involved, and later finds that the card used is a debit 
card (for example, because the consumer later brings the matter to the 
payee's attention), the payee must obtain a written and signed or (where 
appropriate) a similarly authenticated authorization as soon as 
reasonably possible, or cease debiting the consumer's account.

                 10(c) Consumer's Right to Stop Payment

    1. Stop-payment order. The financial institution must honor an oral 
stop-payment order made at least three business days before a scheduled 
debit. If the debit item is resubmitted, the institution must continue 
to honor the stop-payment order (for example, by suspending all 
subsequent payments to the payee-originator until the consumer notifies 
the institution that payments should resume).
    2. Revocation of authorization. Once a financial institution has 
been notified that the consumer's authorization is no longer valid, it 
must block all future payments for the particular debit transmitted by 
the designated payee-originator. But see comment 10(c)-3. The 
institution may not wait for the payee-originator to terminate the 
automatic debits. The institution may confirm that the consumer has 
informed the payee-originator of the revocation (for example, by 
requiring a copy of the consumer's revocation as written confirmation to 
be provided within 14 days of an oral notification). If the institution 
does not receive the required written confirmation within the 14-day 
period, it may honor subsequent debits to the account.
    3. Alternative procedure for processing a stop-payment request. If 
an institution does not have the capability to block a preauthorized 
debit from being posted to the consumer's account--as in the case of a 
preauthorized debit made through a debit card network or other system, 
for example--the institution may instead comply with the stop-payment 
requirements by using a third party to block the transfer(s), as long as 
the consumer's account is not debited for the payment.

               10(d) Notice of Transfers Varying in Amount

                             10(d)(1) Notice

    1. Preexisting authorizations. A financial institution holding the 
consumer's account does not violate the regulation if the designated 
payee fails to provide notice of varying amounts.

                             10(d)(2) Range

    1. Range. A financial institution or designated payee that elects to 
offer the consumer a specified range of amounts for debiting (in lieu of 
providing the notice of transfers varying in amount) must provide an 
acceptable range that could be anticipated by the consumer. For example, 
if the transfer is for payment of a gas bill, an appropriate range might 
be based on the highest bill in winter and the lowest bill in summer.

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    2. Transfers to an account of the consumer held at another 
institution. A financial institution need not provide a consumer the 
option of receiving notice with each varying transfer, and may instead 
provide notice only when a debit to an account of the consumer falls 
outside a specified range or differs by more than a specified amount 
from the most recent transfer, if the funds are transferred and credited 
to an account of the consumer held at another financial institution. The 
specified range or amount, however, must be one that reasonably could be 
anticipated by the consumer, and the institution must notify the 
consumer of the range or amount at the time the consumer provides 
authorization for the preauthorized transfers. For example, if the 
transfer is for payment of interest for a fixed-rate certificate of 
deposit account, an appropriate range might be based on a month 
containing 28 days and a month containing 31 days.

                          10(e) Compulsory Use

                             10(e)(1) Credit

    1. General rule for loan payments. Creditors may not require 
repayment of loans by electronic means on a preauthorized, recurring 
basis.
    2. Overdraft credit plans not accessible by hybrid prepaid-credit 
cards. i. Section 1005.10(e)(1) provides an exception from the general 
rule for an overdraft credit plan other than for a covered separate 
credit feature accessible by a hybrid prepaid-credit card as defined in 
Regulation Z, 12 CFR 1026.61. A financial institution may therefore 
require the automatic repayment of an overdraft credit plan, other than 
a covered separate credit feature accessible by a hybrid prepaid-credit 
card, even if the overdraft extension is charged to an open-end account 
that may be accessed by the consumer in ways other than by overdrafts.
    ii. Credit extended through a negative balance on the asset feature 
of a prepaid account that meets the conditions of Regulation Z, 12 CFR 
1026.61(a)(4), is considered credit extended pursuant to an overdraft 
credit plan for purposes of Sec.  1005.10(e)(1). Thus, the exception for 
overdraft credit plans in Sec.  1005.10(e)(1) applies to this credit.
    3. Applicability to covered separate credit features accessible by 
hybrid prepaid-credit cards. i. Under Sec.  1005.10(e)(1), creditors may 
not require by electronic means on a preauthorized, recurring basis 
repayment of credit extended under a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in Regulation Z, 
12 CFR 1026.61. The prohibition in Sec.  1005.10(e)(1) applies to any 
credit extended under such a credit feature, including preauthorized 
checks. See Regulation Z, 12 CFR 1026.61, and comment 61(a)(1)-3.
    ii. Under Regulation Z, 12 CFR 1026.12(d)(1), a card issuer may not 
take any action, either before or after termination of credit card 
privileges, to offset a cardholder's indebtedness arising from a 
consumer credit transaction under the relevant credit card plan against 
funds of the cardholder held on deposit with the card issuer. Under 
Regulation Z, 12 CFR 1026.12(d)(3), with respect to covered separate 
credit features accessible by hybrid prepaid-credit cards as defined in 
12 CFR 1026.61, a card issuer generally is not prohibited from 
periodically deducting all or part of the cardholder's credit card debt 
from a deposit account (such as a prepaid account) held with the card 
issuer under a plan that is authorized in writing by the cardholder, so 
long as the card issuer does not make such deductions to the plan more 
frequently than once per calendar month. A card issuer is prohibited 
under Regulation Z, 12 CFR 1026.12(d), from automatically deducting all 
or part of the cardholder's credit card debt under a covered separate 
credit feature from a deposit account (such as a prepaid account) held 
with the card issuer on a daily or weekly basis, or whenever deposits 
are made to the deposit account. Section 1005.10(e)(1) further restricts 
the card issuer from requiring payment from a deposit account (such as a 
prepaid account) of credit card balances of a covered separate credit 
feature accessible by a hybrid prepaid-credit card by electronic means 
on a preauthorized, recurring basis.
    4. Incentives. A creditor may offer a program with a reduced annual 
percentage rate or other cost-related incentive for an automatic 
repayment feature, provided the program with the automatic payment 
feature is not the only loan program offered by the creditor for the 
type of credit involved. Examples include:
    i. Mortgages with graduated payments in which a pledged savings 
account is automatically debited during an initial period to supplement 
the monthly payments made by the borrower.
    ii. Mortgage plans calling for preauthorized biweekly payments that 
are debited electronically to the consumer's account and produce a lower 
total finance charge.

                10(e)(2) Employment or Government Benefit

    1. Payroll. An employer (including a financial institution) may not 
require its employees to receive their salary by direct deposit to any 
particular institution. An employer may require direct deposit of salary 
by electronic means if employees are allowed to choose the institution 
that will receive the direct deposit. Alternatively, an employer may 
give employees the choice of having their salary deposited at a 
particular institution (designated by the employer) or receiving their 
salary by another means, such as by check or cash.

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    2. Government benefit. A government agency may not require consumers 
to receive government benefits by direct deposit to any particular 
institution. A government agency may require direct deposit of benefits 
by electronic means if recipients are allowed to choose the institution 
that will receive the direct deposit. Alternatively, a government agency 
may give recipients the choice of having their benefits deposited at a 
particular institution (designated by the government agency) or 
receiving their benefits by another means.

             Section 1005.11 Procedures for Resolving Errors

                        11(a) Definition of Error

    1. Terminal location. With regard to deposits at an ATM, a 
consumer's request for the terminal location or other information 
triggers the error resolution procedures, but the financial institution 
need only provide the ATM location if it has captured that information.
    2. Verifying an account debit or credit. If the consumer contacts 
the financial institution to ascertain whether a payment (for example, 
in a home-banking or bill-payment program) or any other type of EFT was 
debited to the account, or whether a deposit made via ATM, preauthorized 
transfer, or any other type of EFT was credited to the account, without 
asserting an error, the error resolution procedures do not apply.
    3. Loss or theft of access device. A financial institution is 
required to comply with the error resolution procedures when a consumer 
reports the loss or theft of an access device if the consumer also 
alleges possible unauthorized use as a consequence of the loss or theft.
    4. Error asserted after account closed. The financial institution 
must comply with the error resolution procedures when a consumer 
properly asserts an error, even if the account has been closed.
    5. Request for documentation or information. A request for 
documentation or other information must be treated as an error unless it 
is clear that the consumer is requesting a duplicate copy for tax or 
other record-keeping purposes.
    6. Terminal receipts for transfers of $15 or less. The fact that an 
institution does not make a terminal receipt available for a transfer of 
$15 or less in accordance with Sec.  1005.9(e) is not an error for 
purposes of Sec.  1005.11(a)(1)(vi) or (vii).

                   11(b) Notice of Error From Consumer

                        11(b)(1) Timing; Contents

    1. Content of error notice. The notice of error is effective even if 
it does not contain the consumer's account number, so long as the 
financial institution is able to identify the account in question. For 
example, the consumer could provide a Social Security number or other 
unique means of identification.
    2. Investigation pending receipt of information. While a financial 
institution may request a written, signed statement from the consumer 
relating to a notice of error, it may not delay initiating or completing 
an investigation pending receipt of the statement.
    3. Statement held for consumer. When a consumer has arranged for 
periodic statements to be held until picked up, the statement for a 
particular cycle is deemed to have been transmitted on the date the 
financial institution first makes the statement available to the 
consumer.
    4. Failure to provide statement. When a financial institution fails 
to provide the consumer with a periodic statement, a request for a copy 
is governed by this section if the consumer gives notice within 60 days 
from the date on which the statement should have been transmitted.
    5. Discovery of error by institution. The error resolution 
procedures of this section apply when a notice of error is received from 
the consumer, and not when the financial institution itself discovers 
and corrects an error.
    6. Notice at particular phone number or address. A financial 
institution may require the consumer to give notice only at the 
telephone number or address disclosed by the institution, provided the 
institution maintains reasonable procedures to refer the consumer to the 
specified telephone number or address if the consumer attempts to give 
notice to the institution in a different manner.
    7. Effect of late notice. An institution is not required to comply 
with the requirements of this section for any notice of error from the 
consumer that is received by the institution later than 60 days from the 
date on which the periodic statement first reflecting the error is sent. 
Where the consumer's assertion of error involves an unauthorized EFT, 
however, the institution must comply with Sec.  1005.6 before it may 
impose any liability on the consumer.

                      11(b)(2) Written Confirmation

    1. Written confirmation-of-error notice. If the consumer sends a 
written confirmation of error to the wrong address, the financial 
institution must process the confirmation through normal procedures. But 
the institution need not provisionally credit the consumer's account if 
the written confirmation is delayed beyond 10 business days in getting 
to the right place because it was sent to the wrong address.

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              11(c) Time Limits and Extent of Investigation

    1. Notice to consumer. Unless otherwise indicated in this section, 
the financial institution may provide the required notices to the 
consumer either orally or in writing.
    2. Written confirmation of oral notice. A financial institution must 
begin its investigation promptly upon receipt of an oral notice. It may 
not delay until it has received a written confirmation.
    3. Charges for error resolution. If a billing error occurred, 
whether as alleged or in a different amount or manner, the financial 
institution may not impose a charge related to any aspect of the error-
resolution process (including charges for documentation or 
investigation). Since the Act grants the consumer error-resolution 
rights, the institution should avoid any chilling effect on the good-
faith assertion of errors that might result if charges are assessed when 
no billing error has occurred.
    4. Correction without investigation. A financial institution may 
make, without investigation, a final correction to a consumer's account 
in the amount or manner alleged by the consumer to be in error, but must 
comply with all other applicable requirements of Sec.  1005.11.
    5. Correction notice. A financial institution may include the notice 
of correction on a periodic statement that is mailed or delivered within 
the 10-business-day or 45-calendar-day time limits and that clearly 
identifies the correction to the consumer's account. The institution 
must determine whether such a mailing will be prompt enough to satisfy 
the requirements of this section, taking into account the specific facts 
involved.
    6. Correction of an error. If the financial institution determines 
an error occurred, within either the 10-day or 45-day period, it must 
correct the error (subject to the liability provisions of Sec. Sec.  
1005.6(a) and (b)) including, where applicable, the crediting of 
interest and the refunding of any fees imposed by the institution. In a 
combined credit/EFT transaction, for example, the institution must 
refund any finance charges incurred as a result of the error. The 
institution need not refund fees that would have been imposed whether or 
not the error occurred.
    7. Extent of required investigation. A financial institution 
complies with its duty to investigate, correct, and report its 
determination regarding an error described in Sec.  1005.11(a)(1)(vii) 
by transmitting the requested information, clarification, or 
documentation within the time limits set forth in Sec.  1005.11(c). If 
the institution has provisionally credited the consumer's account in 
accordance with Sec.  1005.11(c)(2), it may debit the amount upon 
transmitting the requested information, clarification, or documentation.

                          Paragraph 11(c)(2)(i)

    1. Compliance with all requirements. Financial institutions exempted 
from provisionally crediting a consumer's account under Sec. Sec.  
1005.11(c)(2)(i)(A) and (B) must still comply with all other 
requirements of Sec.  1005.11.

                   11(c)(3) Extension of Time Periods

    1. POS debit card transactions. The extended deadlines for 
investigating errors resulting from POS debit card transactions apply to 
all debit card transactions, including those for cash only, at 
merchants' POS terminals, and also including mail and telephone orders. 
The deadlines do not apply to transactions at an ATM, however, even 
though the ATM may be in a merchant location.

                         11(c)(4) Investigation

    1. Third parties. When information or documentation requested by the 
consumer is in the possession of a third party with whom the financial 
institution does not have an agreement, the institution satisfies the 
error resolution requirement by so advising the consumer within the 
specified time period.
    2. Scope of investigation. When an alleged error involves a payment 
to a third party under the financial institution's telephone bill-
payment plan, a review of the institution's own records is sufficient, 
assuming no agreement exists between the institution and the third party 
concerning the bill-payment service.
    3. POS transfers. When a consumer alleges an error involving a 
transfer to a merchant via a POS terminal, the institution must verify 
the information previously transmitted when executing the transfer. For 
example, the financial institution may request a copy of the sales 
receipt to verify that the amount of the transfer correctly corresponds 
to the amount of the consumer's purchase.
    4. Agreement. An agreement that a third party will honor an access 
device is an agreement for purposes of this paragraph. A financial 
institution does not have an agreement for purposes of Sec.  
1005.11(c)(4)(ii) solely because it participates in transactions that 
occur under the Federal recurring payments programs, or that are cleared 
through an ACH or similar arrangement for the clearing and settlement of 
fund transfers generally, or because the institution agrees to be bound 
by the rules of such an arrangement.
    5. No EFT agreement. When there is no agreement between the 
institution and the third party for the type of EFT involved, the 
financial institution must review any relevant information within the 
institution's own records for the particular account to resolve the 
consumer's claim. The extent of the investigation required may vary 
depending on the facts and circumstances. However,

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a financial institution may not limit its investigation solely to the 
payment instructions where additional information within its own records 
pertaining to the particular account in question could help to resolve a 
consumer's claim. Information that may be reviewed as part of an 
investigation might include:
    i. The ACH transaction records for the transfer;
    ii. The transaction history of the particular account for a 
reasonable period of time immediately preceding the allegation of error;
    iii. Whether the check number of the transaction in question is 
notably out-of-sequence;
    iv. The location of either the transaction or the payee in question 
relative to the consumer's place of residence and habitual transaction 
area;
    v. Information relative to the account in question within the 
control of the institution's third-party service providers if the 
financial institution reasonably believes that it may have records or 
other information that could be dispositive; or
    vi. Any other information appropriate to resolve the claim.

    11(d) Procedures if Financial Institution Determines No Error or 
                        Different Error Occurred

    1. Error different from that alleged. When a financial institution 
determines that an error occurred in a manner or amount different from 
that described by the consumer, it must comply with the requirements of 
both Sec. Sec.  1005.11(c) and (d), as relevant. The institution may 
give the notice of correction and the explanation separately or in a 
combined form.

                      11(d)(1) Written Explanation

    1. Request for documentation. When a consumer requests copies of 
documents, the financial institution must provide the copies in an 
understandable form. If an institution relied on magnetic tape, it must 
convert the applicable data into readable form, for example, by printing 
it and explaining any codes.

                  11(d)(2) Debiting Provisional Credit

    1. Alternative procedure for debiting of credited funds. The 
financial institution may comply with the requirements of this section 
by notifying the consumer that the consumer's account will be debited 
five business days from the transmittal of the notification, specifying 
the calendar date on which the debiting will occur.
    2. Fees for overdrafts. The financial institution may not impose 
fees for items it is required to honor under Sec.  1005.11. It may, 
however, impose any normal transaction or item fee that is unrelated to 
an overdraft resulting from the debiting. If the account is still 
overdrawn after five business days, the institution may impose the fees 
or finance charges to which it is entitled, if any, under an overdraft 
credit plan.

                       11(e) Reassertion of Error

    1. Withdrawal of error; right to reassert. The financial institution 
has no further error resolution responsibilities if the consumer 
voluntarily withdraws the notice alleging an error. A consumer who has 
withdrawn an allegation of error has the right to reassert the 
allegation unless the financial institution had already complied with 
all of the error resolution requirements before the allegation was 
withdrawn. The consumer must do so, however, within the original 60-day 
period.

                 Section 1005.12 Relation to Other Laws

                   12(a) Relation to Truth in Lending

    1. Issuance rules for access devices other than access devices for 
prepaid accounts. For access devices that also constitute credit cards 
(other than access devices for prepaid accounts), the issuance rules of 
Regulation E apply if the only credit feature is a preexisting credit 
line attached to the asset account to cover overdrafts (or to maintain a 
specified minimum balance) or an overdraft service, as defined in Sec.  
1005.17(a). Regulation Z (12 CFR part 1026) rules apply if there is 
another type of credit feature; for example, one permitting direct 
extensions of credit that do not involve the asset account.
    2. Overdraft services. The addition of an overdraft service, as that 
term is defined in Sec.  1005.17(a), to an accepted access device does 
not constitute the addition of a credit feature subject to Regulation Z. 
Instead, the provisions of Regulation E apply, including the liability 
limitations (Sec.  1005.6) and the requirement to obtain consumer 
consent to the service before any fees or charges for paying an 
overdraft may be assessed on the account (Sec.  1005.17).
    3. Issuance of prepaid access devices that can access a covered 
separate credit feature subject to Regulation Z. An access device for a 
prepaid account cannot access a covered separate credit feature as 
defined in Regulation Z, 12 CFR 1026.61, when the access device is 
issued if the access device is issued prior to the expiration of the 30-
day period set forth in 12 CFR 1026.61(c). Regulation Z, 12 CFR 
1026.61(c), provides that with respect to a covered separate credit 
feature that could be accessible by a hybrid prepaid-credit card at any 
point, a card issuer must not do any of the following until 30 days 
after the prepaid account has been registered: (1) Open a covered 
separate credit feature accessible by the hybrid prepaid-credit card; 
(2) make a solicitation or provide an application to open a covered 
separate credit feature accessible by the hybrid prepaid-credit card; or 
(3) allow

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an existing credit feature that was opened prior to the consumer to 
become a covered separate credit feature accessible by the hybrid 
prepaid-credit card. An access device for a prepaid account that is not 
a hybrid prepaid-credit card as that term is defined in Regulation Z, 12 
CFR 1026.61, is subject to the issuance rules in Regulation E.
    4. Addition of a covered separate credit feature to an existing 
access device for a prepaid account. Regulation Z governs the addition 
of a covered separate credit feature as that term is defined in 
Regulation Z, 12 CFR 1026.61, to an existing access device for a prepaid 
account. In this case, the access device would become a hybrid prepaid-
credit card under Regulation Z (12 CFR part 1026). A covered separate 
credit feature may be added to a previously issued access device for a 
prepaid account only upon the consumer's application or specific request 
as described in Regulation Z, 12 CFR 1026.12(a)(1), and only in 
compliance with 12 CFR 1026.61(c).
    5. Determining applicable regulation related to liability and error 
resolution. i. Under Sec.  1005.12(a)(1)(iv)(B), with respect to a 
transaction that involves a covered separate credit feature and an asset 
feature on a prepaid account that are both accessible by a hybrid 
prepaid-credit card as those terms are defined in Regulation Z, 12 CFR 
1026.61, where credit is extended under a covered separate credit 
feature accessible by a hybrid prepaid-credit card that is incident to 
an electronic fund transfer when the hybrid prepaid-credit card accesses 
both funds in the asset feature of a prepaid account and credit 
extensions from the credit feature with respect to a particular 
transaction, Regulation E's liability limitations and error resolution 
provisions apply to the transaction, in addition to Regulation Z, 12 CFR 
1026.13(d) and (g) (which apply because of the extension of credit 
associated with the covered separate credit feature). Section 
1005.12(a)(1)(iv)(C) provides that with respect to transactions that 
involves credit extended through a negative balance to the asset feature 
of a prepaid account that meets the conditions set forth in Regulation 
Z, 12 CFR 1026.61(a)(4), these transactions are governed solely by the 
liability limitations and error resolution procedures in Regulation E, 
and Regulation Z does not apply. Section 1005.12(a)(1)(iv)(D) and 
(a)(2)(iii), taken together, provide that with respect to transactions 
involving a prepaid account and a non-covered separate credit feature as 
defined in Regulation Z, 12 CFR 1026.61, a financial institution must 
comply with Regulation E's liability limitations and error resolution 
procedures with respect to transactions that access the prepaid account 
as applicable, and the creditor must comply with Regulation Z's 
liability limitations and error resolution procedures with respect to 
transactions that access the non-covered separate credit feature, as 
applicable.
    ii. Under Sec.  1005.12(a)(1)(iv)(A), with respect to an account 
(other than a prepaid account) where credit is extended incident to an 
electronic fund transfer under an agreement to extend overdraft credit 
between the consumer and the financial institution, Regulation E's 
liability limitations and error resolution provisions apply to the 
transaction, in addition to Regulation Z, 12 CFR 1026.13(d) and (g) 
(which apply because of the extension of credit associated with the 
overdraft feature on the asset account).
    iii. For transactions involving access devices that also function as 
credit cards under Regulation Z (12 CFR part 1026), whether Regulation E 
or Regulation Z applies depends on the nature of the transaction. For 
example, if the transaction solely involves an extension of credit, and 
does not access funds in a consumer asset account, such as a checking 
account or prepaid account, the liability limitations and error 
resolution requirements of Regulation Z apply. If the transaction 
accesses funds in an asset account only (with no credit extended), the 
provisions of Regulation E apply. If the transaction access funds in an 
asset account but also involves an extension of credit under the 
overdraft credit feature subject to Regulation Z attached to the 
account, Regulation E's liability limitations and error resolution 
provisions apply, in addition to Regulation Z, 12 CFR 1026.13(d) and (g) 
(which apply because of the extension of credit associated with the 
overdraft feature on the asset account). If a consumer's access device 
is also a credit card and the device is used to make unauthorized 
withdrawals from an asset account, but also is used to obtain 
unauthorized cash advances directly from a credit feature that is 
subject to Regulation Z that is separate from the asset account, both 
Regulation E and Regulation Z apply.
    iv. The following examples illustrate these principles:
    A. A consumer has a card that can be used either as a credit card or 
an access device that draws on the consumer's checking account. When 
used as a credit card, the card does not first access any funds in the 
checking account but draws only on a separate credit feature subject to 
Regulation Z. If the card is stolen and used as a credit card to make 
purchases or to get cash advances at an ATM from the line of credit, the 
liability limits and error resolution provisions of Regulation Z apply; 
Regulation E does not apply.
    B. In the same situation, if the card is stolen and is used as an 
access device to make purchases or to get cash withdrawals at an ATM 
from the checking account, the liability limits and error resolution 
provisions of Regulation E apply; Regulation Z does not apply.

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    C. In the same situation, assume the card is stolen and used both as 
an access device for the checking account and as a credit card; for 
example, the thief makes some purchases using the card to access funds 
in the checking account and other purchases using the card as a credit 
card. Here, the liability limits and error resolution provisions of 
Regulation E apply to the unauthorized transactions in which the card 
was used as an access device for the checking account, and the 
corresponding provisions of Regulation Z apply to the unauthorized 
transactions in which the card was used as a credit card.
    D. Assume a somewhat different type of card, one that draws on the 
consumer's checking account and can also draw on an overdraft credit 
feature subject to Regulation Z attached to the checking account. The 
overdraft credit feature associated with the card is accessed only when 
the consumer uses the card to make a purchase (or other transaction) for 
which there are insufficient or unavailable funds in the checking 
account. In this situation, if the card is stolen and used to make 
purchases funded entirely by available funds in the checking account, 
the liability limits and the error resolution provisions of Regulation E 
apply. If the use of the card results in an extension of credit that is 
incident to an electronic fund transfer where the transaction is funded 
partially by funds in the consumer's asset account and partially by 
credit extended under the overdraft credit feature, the error resolution 
provisions of Regulation Z, 12 CFR 1026.13(d) and (g), apply in addition 
to the Regulation E provisions, but the other liability limit and error 
resolution provisions of Regulation Z do not. Relatedly, if the use of 
the card is funded entirely by credit extended under the overdraft 
credit feature, the transaction is governed solely by the liability 
limitations and error resolution requirements of Regulation Z. See 
Regulation Z, 12 CFR 1026.13(i).
    E. The same principles in comment 12(a)-5.iv.A, B, C, and D apply to 
an access device for a prepaid account that also is a hybrid prepaid-
credit card with respect to a covered separate credit feature under 
Regulation Z, 12 CFR 1026.61. See also Regulation Z, 12 CFR 
1026.13(i)(2) and comment 13(i)-4.

               12(b) Preemption of Inconsistent State Laws

    1. Specific determinations. The regulation prescribes standards for 
determining whether state laws that govern EFTs, and state laws 
regarding gift certificates, store gift cards, or general-use prepaid 
cards that govern dormancy, inactivity, or service fees, or expiration 
dates, are preempted by the Act and the regulation. A state law that is 
inconsistent may be preempted even if the Bureau has not issued a 
determination. However, nothing in Sec.  1005.12(b) provides a financial 
institution with immunity for violations of state law if the institution 
chooses not to make state disclosures and the Bureau later determines 
that the state law is not preempted.
    2. Preemption determinations generally. The Bureau recognizes state 
law preemption determinations made by the Board of Governors of the 
Federal Reserve System prior to July 21, 2011, until and unless the 
Bureau makes and publishes any contrary determination.
    3. Preemption determination--Michigan. The Board of Governors of the 
Federal Reserve System determined that certain provisions in the state 
law of Michigan are preempted by the Federal law, effective March 30, 
1981:
    i. Definition of unauthorized use. Section 488.5(4) of the state law 
of Michigan, governing electronic fund transfers, is preempted to the 
extent that it relates to the section of state law governing consumer 
liability for unauthorized use of an access device.
    ii. Consumer liability for unauthorized use of an account. Section 
488.14 of the state law of Michigan, governing electronic fund 
transfers, is preempted because it is inconsistent with Sec.  1005.6 and 
is less protective of the consumer than the Federal law. The state law 
places liability on the consumer for the unauthorized use of an account 
in cases involving the consumer's negligence. Under the Federal law, a 
consumer's liability for unauthorized use is not related to the 
consumer's negligence and depends instead on the consumer's promptness 
in reporting the loss or theft of the access device.
    iii. Error resolution. Section 488.15 of the state law of Michigan, 
governing electronic fund transfers, is preempted because it is 
inconsistent with Sec.  1005.11 and is less protective of the consumer 
than the Federal law. The state law allows financial institutions up to 
70 days to resolve errors, whereas the Federal law generally requires 
errors to be resolved within 45 days.
    iv. Receipts and periodic statements. Sections 488.17 and 488.18 of 
the state law of Michigan, governing electronic fund transfers, are 
preempted because they are inconsistent with Sec.  1005.9, other than 
for transfers of $15 or less pursuant to Sec.  1005.9(e). The state 
provisions require a different disclosure of information than does the 
Federal law. The receipt provision is also preempted because it allows 
the consumer to be charged for receiving a receipt if a machine cannot 
furnish one at the time of a transfer.
    4. Preemption determination--Tennessee. The Bureau determined that 
the following provision in the state law of Tennessee is preempted by 
the Federal law, effective April 25, 2013:
    i. Gift certificates, store gift cards, and general-use prepaid 
cards. Section 66-29-116 of

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Tennessee's Uniform Disposition of Unclaimed (Personal) Property Act is 
preempted to the extent that it permits gift certificates, store gift 
cards, and general-use prepaid cards, as defined in Sec.  1005.20(a), to 
be declined at the point-of-sale sooner than the gift certificates, 
store gift cards, or general-use prepaid cards and their underlying 
funds are permitted to expire under Sec.  1005.20(e).

      Section 1005.13 Administrative Enforcement; Record Retention

                         13(b) Record Retention

    1. Requirements. A financial institution need not retain records 
that it has given disclosures and documentation to each consumer; it 
need only retain evidence demonstrating that its procedures reasonably 
ensure the consumers' receipt of required disclosures and documentation.

 Section 1005.14 Electronic Fund Transfer Service Provider Not Holding 
                           Consumer's Account

 14(a) Electronic Fund Transfer Service Providers Subject to Regulation

    1. Applicability. This section applies only when a service provider 
issues an access device to a consumer for initiating transfers to or 
from the consumer's account at a financial institution and the two 
entities have no agreement regarding this EFT service. If the service 
provider does not issue an access device to the consumer for accessing 
an account held by another institution, it does not qualify for the 
treatment accorded by Sec.  1005.14. For example, this section does not 
apply to an institution that initiates preauthorized payroll deposits to 
consumer accounts on behalf of an employer. By contrast, Sec.  1005.14 
can apply to an institution that issues a code for initiating telephone 
transfers to be carried out through the ACH from a consumer's account at 
another institution. This is the case even if the consumer has accounts 
at both institutions.
    2. ACH agreements. The ACH rules generally do not constitute an 
agreement for purposes of this section. However, an ACH agreement under 
which members specifically agree to honor each other's debit cards is an 
``agreement,'' and thus this section does not apply.

      14(b) Compliance by Electronic Fund Transfer Service Provider

    1. Liability. The service provider is liable for unauthorized EFTs 
that exceed limits on the consumer's liability under Sec.  1005.6.

                 14(b)(1) Disclosures and Documentation

    1. Periodic statements from electronic fund transfer service 
provider. A service provider that meets the conditions set forth in this 
paragraph does not have to issue periodic statements. A service provider 
that does not meet the conditions need only include on periodic 
statements information about transfers initiated with the access device 
it has issued.

                        14(b)(2) Error Resolution

    1. Error resolution. When a consumer notifies the service provider 
of an error, the EFT service provider must investigate and resolve the 
error in compliance with Sec.  1005.11 as modified by Sec.  
1005.14(b)(2). If an error occurred, any fees or charges imposed as a 
result of the error, either by the service provider or by the account-
holding institution (for example, overdraft or dishonor fees) must be 
reimbursed to the consumer by the service provider.

             14(c) Compliance by Account-Holding Institution

                         14(c)(1) Documentation

    1. Periodic statements from account-holding institution. The 
periodic statement provided by the account-holding institution need only 
contain the information required by Sec.  1005.9(b)(1).

    Section 1005.15--Electronic Fund Transfer of Government Benefits

              15(c) Pre-Acquisition Disclosure Requirements

    1. Disclosing the short and long form before acquisition. Section 
1005.15(c)(1) requires that, before a consumer acquires an account 
governed by Sec.  1005.15, a government agency must comply with the pre-
acquisition disclosure requirements applicable to prepaid accounts as 
set forth in Sec.  1005.18(b). Section 1005.18(b)(1)(i) generally 
requires delivery of both the short form disclosure required by Sec.  
1005.18(b)(2), accompanied by the information in Sec.  1005.18(b)(5), 
and the long form disclosure required by Sec.  1005.18(b)(4) before a 
consumer acquires a prepaid account. For purposes of Sec.  1005.15(c), a 
consumer is deemed to have received the disclosures required by Sec.  
1005.18(b) prior to acquisition when the consumer receives the 
disclosures before choosing to receive benefits via the government 
benefit account. The following example illustrates when a consumer 
receives disclosures before acquisition of an account for purposes of 
Sec.  1005.15(c):
    i. A government agency informs a consumer that she can receive 
distribution of benefits via a government benefit account in the form of 
a prepaid card. The consumer receives the prepaid card and the 
disclosures required by Sec.  1005.18(b) to review at the time the 
consumer receives benefits eligibility information from the agency. 
After receiving the disclosures, the consumer chooses to receive 
benefits via the government benefit account. These disclosures were 
provided to

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the consumer pre-acquisition, and the agency has complied with Sec.  
1005.15(c). By contrast, if the consumer does not receive the 
disclosures required by Sec.  1005.18(b) to review until the time at 
which the consumer received the first benefit payment deposited into the 
government benefit account, these disclosures were provided to the 
consumer post-acquisition, and were not provided in compliance with 
Sec.  1005.15(c).
    2. Acquisition and disclosures given during the same appointment. 
The disclosures and notice required by Sec.  1005.15(c) may be given in 
the same process or appointment during which the consumer receives a 
government benefit card. When a consumer receives benefits eligibility 
information and enrolls to receive benefits during the same process or 
appointment, a government agency that gives the disclosures and notice 
required by Sec.  1005.15(c) before the consumer chooses to receive the 
first benefit payment on the card complies with the timing requirements 
of Sec.  1005.15(c).
    3. Form and formatting requirements for government benefit account 
disclosures. The form and formatting requirements for government benefit 
accounts in Sec.  1005.15(c) correspond to those for payroll card 
accounts set forth in Sec.  1005.18(b). See comments 18(b)(2)(xiv)(A)-1 
and 18(b)(2)(xiv)(B)-1 for additional guidance regarding the 
requirements set forth in Sec.  1005.15(c)(2)(i) and (ii), respectively.
    4. Disclosure requirements outside the short form disclosure. 
Section 1005.18(b)(5) requires that the name of the financial 
institution be disclosed outside the short form disclosure. For 
government benefit accounts, the financial institution that must be 
disclosed pursuant to Sec.  1005.18(b)(5) is the financial institution 
that directly holds the account or issues the account's access device. 
The disclosure provided outside the short form disclosure may, but is 
not required to, also include the name of the government agency that 
established the government benefit account.

                   15(d) Access to Account Information

    1. Access to account information. For guidance, see comments 18(c)-1 
through -3 and 18(c)-5 through -9.

     15(e) Modified Disclosure, Limitations on Liability, and Error 
                         Resolution Requirements

    1. Modified limitations on liability and error resolution 
requirements. For guidance, see comments 18(e)-1 through -3.

             15(f) Disclosure of Fees and Other Information

    1. Disclosures on prepaid account access devices. Pursuant to Sec.  
1005.18(f)(3), the name of the financial institution and the Web site 
URL and a telephone number a consumer can use to contact the financial 
institution about the prepaid account must be disclosed on the prepaid 
account access device. For government benefit accounts, the financial 
institution whose name and contact information must be disclosed 
pursuant to Sec.  1005.18(f)(3) is the financial institution that 
directly holds the account or issues the account's access device.

           Section 1005.17 Requirements for Overdraft Services

                            17(a) Definition

    1. Exempt securities- and commodities-related lines of credit. The 
definition of ``overdraft service'' does not include the payment of 
transactions in a securities or commodities account pursuant to which 
credit is extended by a broker-dealer registered with the Securities and 
Exchange Commission or the Commodity Futures Trading Commission.

                        17(b) Opt-In Requirement

    1. Scope. i. Account-holding institutions. Section 1005.17(b) 
applies to ATM and one-time debit card transactions made with a debit 
card issued by or on behalf of the account-holding institution. Section 
1005.17(b) does not apply to ATM and one-time debit card transactions 
made with a debit card issued by or through a third party unless the 
debit card is issued on behalf of the account-holding institution.
    ii. Coding of transactions. A financial institution complies with 
the rule if it adapts its systems to identify debit card transactions as 
either one-time or recurring. If it does so, the financial institution 
may rely on the transaction's coding by merchants, other institutions, 
and other third parties as a one-time or a preauthorized or recurring 
debit card transaction.
    iii. One-time debit card transactions. The opt-in applies to any 
one-time debit card transaction, whether the card is used, for example, 
at a point-of-sale, in an online transaction, or in a telephone 
transaction.
    iv. Application of fee prohibition. The prohibition on assessing 
overdraft fees under Sec.  1005.17(b)(1) applies to all institutions. 
For example, the prohibition applies to an institution that has a policy 
and practice of declining to authorize and pay any ATM or one-time debit 
card transactions when the institution has a reasonable belief at the 
time of the authorization request that the consumer does not have 
sufficient funds available to cover the transaction. However, the 
institution is not required to comply with Sec. Sec.  1005.17(b)(1)(i)-
(iv), including the notice and opt-in requirements, if it does not 
assess overdraft fees for paying ATM or one-time debit card transactions 
that overdraw the consumer's account. Assume an institution does not 
provide an opt-in notice, but authorizes an ATM or one-time debit card 
transaction on the reasonable belief that the

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consumer has sufficient funds in the account to cover the transaction. 
If, at settlement, the consumer has insufficient funds in the account 
(for example, due to intervening transactions that post to the 
consumer's account), the institution is not permitted to assess an 
overdraft fee or charge for paying that transaction.
    2. No affirmative consent. A financial institution may pay 
overdrafts for ATM and one-time debit card transactions even if a 
consumer has not affirmatively consented or opted in to the 
institution's overdraft service. If the institution pays such an 
overdraft without the consumer's affirmative consent, however, it may 
not impose a fee or charge for doing so. These provisions do not limit 
the institution's ability to debit the consumer's account for the amount 
overdrawn if the institution is permitted to do so under applicable law.
    3. Overdraft transactions not required to be authorized or paid. 
Section 1005.17 does not require a financial institution to authorize or 
pay an overdraft on an ATM or one-time debit card transaction even if 
the consumer has affirmatively consented to an institution's overdraft 
service for such transactions.
    4. Reasonable opportunity to provide affirmative consent. A 
financial institution provides a consumer with a reasonable opportunity 
to provide affirmative consent when, among other things, it provides 
reasonable methods by which the consumer may affirmatively consent. A 
financial institution provides such reasonable methods, if:
    i. By mail. The institution provides a form for the consumer to fill 
out and mail to affirmatively consent to the service.
    ii. By telephone. The institution provides a readily-available 
telephone line that consumers may call to provide affirmative consent.
    iii. By electronic means. The institution provides an electronic 
means for the consumer to affirmatively consent. For example, the 
institution could provide a form that can be accessed and processed at 
its Web site, where the consumer may click on a check box to provide 
consent and confirm that choice by clicking on a button that affirms the 
consumer's consent.
    iv. In person. The institution provides a form for the consumer to 
complete and present at a branch or office to affirmatively consent to 
the service.
    5. Implementing opt-in at account-opening. A financial institution 
may provide notice regarding the institution's overdraft service prior 
to or at account-opening. A financial institution may require a 
consumer, as a necessary step to opening an account, to choose whether 
or not to opt into the payment of ATM or one-time debit card 
transactions pursuant to the institution's overdraft service. For 
example, the institution could require the consumer, at account opening, 
to sign a signature line or check a box on a form (consistent with 
comment 17(b)-6) indicating whether or not the consumer affirmatively 
consents at account opening. If the consumer does not check any box or 
provide a signature, the institution must assume that the consumer does 
not opt in. Or, the institution could require the consumer to choose 
between an account that does not permit the payment of ATM or one-time 
debit card transactions pursuant to the institution's overdraft service 
and an account that permits the payment of such overdrafts, provided 
that the accounts comply with Sec.  1005.17(b)(2) and Sec.  
1005.17(b)(3).
    6. Affirmative consent required. A consumer's affirmative consent, 
or opt-in, to a financial institution's overdraft service must be 
obtained separately from other consents or acknowledgements obtained by 
the institution, including a consent to receive disclosures 
electronically. An institution may obtain a consumer's affirmative 
consent by providing a blank signature line or check box that the 
consumer could sign or select to affirmatively consent, provided that 
the signature line or check box is used solely for purposes of 
evidencing the consumer's choice whether or not to opt into the 
overdraft service and not for other purposes. An institution does not 
obtain a consumer's affirmative consent by including preprinted language 
about the overdraft service in an account disclosure provided with a 
signature card or contract that the consumer must sign to open the 
account and that acknowledges the consumer's acceptance of the account 
terms. Nor does an institution obtain a consumer's affirmative consent 
by providing a signature card that contains a pre-selected check box 
indicating that the consumer is requesting the service.
    7. Confirmation. A financial institution may comply with the 
requirement in Sec.  1005.17(b)(1)(iv) to provide confirmation of the 
consumer's affirmative consent by mailing or delivering to the consumer 
a copy of the consumer's completed opt-in notice, or by mailing or 
delivering a letter or notice to the consumer acknowledging that the 
consumer has elected to opt into the institution's service. The 
confirmation, which must be provided in writing, or electronically if 
the consumer agrees, must include a statement informing the consumer of 
the right to revoke the opt-in at any time. See Sec.  1005.17(d)(6), 
which permits institutions to include the revocation statement on the 
initial opt-in notice. An institution complies with the confirmation 
requirement if it has adopted reasonable procedures designed to ensure 
that overdraft fees are assessed only in connection with transactions 
paid after the confirmation has been mailed or delivered to the 
consumer.

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    8. Outstanding Negative Balance. If a fee or charge is based on the 
amount of the outstanding negative balance, an institution is prohibited 
from assessing any such fee if the negative balance is solely 
attributable to an ATM or one-time debit card transaction, unless the 
consumer has opted into the institution's overdraft service for ATM or 
one-time debit card transactions. However, the rule does not prohibit an 
institution from assessing such a fee if the negative balance is 
attributable in whole or in part to a check, ACH, or other type of 
transaction not subject to the prohibition on assessing overdraft fees 
in Sec.  1005.17(b)(1).
    9. Daily or Sustained Overdraft, Negative Balance, or Similar Fee or 
Charge i. Daily or sustained overdraft, negative balance, or similar 
fees or charges. If a consumer has not opted into the institution's 
overdraft service for ATM or one-time debit card transactions, the fee 
prohibition in Sec.  1005.17(b)(1) applies to all overdraft fees or 
charges for paying those transactions, including but not limited to 
daily or sustained overdraft, negative balance, or similar fees or 
charges. Thus, where a consumer's negative balance is solely 
attributable to an ATM or one-time debit card transaction, the rule 
prohibits the assessment of such fees unless the consumer has opted in. 
However, the rule does not prohibit an institution from assessing daily 
or sustained overdraft, negative balance, or similar fees or charges if 
a negative balance is attributable in whole or in part to a check, ACH, 
or other type of transaction not subject to the fee prohibition. When 
the negative balance is attributable in part to an ATM or one-time debit 
card transaction, and in part to a check, ACH, or other type of 
transaction not subject to the fee prohibition, the date on which such a 
fee may be assessed is based on the date on which the check, ACH, or 
other type of transaction is paid into overdraft.
    ii. Examples. The following examples illustrate how an institution 
complies with the fee prohibition. For each example, assume the 
following: (a) The consumer has not opted into the payment of ATM or 
one-time debit card overdrafts; (b) these transactions are paid into 
overdraft because the amount of the transaction at settlement exceeded 
the amount authorized or the amount was not submitted for authorization; 
(c) under the account agreement, the institution may charge a per-item 
fee of $20 for each overdraft, and a one-time sustained overdraft fee of 
$20 on the fifth consecutive day the consumer's account remains 
overdrawn; (d) the institution posts ATM and debit card transactions 
before other transactions; and (e) the institution allocates deposits to 
account debits in the same order in which it posts debits.
    A. Assume that a consumer has a $50 account balance on March 1. That 
day, the institution posts a one-time debit card transaction of $60 and 
a check transaction of $40. The institution charges an overdraft fee of 
$20 for the check overdraft but cannot assess an overdraft fee for the 
debit card transaction. At the end of the day, the consumer has an 
account balance of negative $70. The consumer does not make any deposits 
to the account, and no other transactions occur between March 2 and 
March 6. Because the consumer's negative balance is attributable in part 
to the $40 check (and associated overdraft fee), the institution may 
charge a sustained overdraft fee on March 6 in connection with the 
check.
    B. Same facts as in A., except that on March 3, the consumer 
deposits $40 in the account. The institution allocates the $40 to the 
debit card transaction first, consistent with its posting order policy. 
At the end of the day on March 3, the consumer has an account balance of 
negative $30, which is attributable to the check transaction (and 
associated overdraft fee). The consumer does not make any further 
deposits to the account, and no other transactions occur between March 4 
and March 6. Because the remaining negative balance is attributable to 
the March 1 check transaction, the institution may charge a sustained 
overdraft fee on March 6 in connection with the check.
    C. Assume that a consumer has a $50 account balance on March 1. That 
day, the institution posts a one-time debit card transaction of $60. At 
the end of that day, the consumer has an account balance of negative 
$10. The institution may not assess an overdraft fee for the debit card 
transaction. On March 3, the institution pays a check transaction of 
$100 and charges an overdraft fee of $20. At the end of that day, the 
consumer has an account balance of negative $130. The consumer does not 
make any deposits to the account, and no other transactions occur 
between March 4 and March 8. Because the consumer's negative balance is 
attributable in part to the check, the institution may assess a $20 
sustained overdraft fee. However, because the check was paid on March 3, 
the institution must use March 3 as the start date for determining the 
date on which the sustained overdraft fee may be assessed. Thus, the 
institution may charge a $20 sustained overdraft fee on March 8.
    iii. Alternative approach. For a consumer who does not opt into the 
institution's overdraft service for ATM and one-time debit card 
transactions, an institution may also comply with the fee prohibition in 
Sec.  1005.17(b)(1) by not assessing daily or sustained overdraft, 
negative balance, or similar fees or charges unless a consumer's 
negative balance is attributable solely to check, ACH or other types of 
transactions not subject to the fee prohibition while that negative 
balance remains outstanding. In such

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case, the institution would not have to determine how to allocate 
subsequent deposits that reduce but do not eliminate the negative 
balance. For example, if a consumer has a negative balance of $30, of 
which $10 is attributable to a one-time debit card transaction, an 
institution complies with the fee prohibition if it does not assess a 
sustained overdraft fee while that negative balance remains outstanding.

    17(b)(2) Conditioning Payment of Other Overdrafts on Consumer's 
                           Affirmative Consent

    1. Application of the same criteria. The prohibitions on 
conditioning in Sec.  1005.17(b)(2) generally require an institution to 
apply the same criteria for deciding when to pay overdrafts for checks, 
ACH transactions, and other types of transactions, whether or not the 
consumer has affirmatively consented to the institution's overdraft 
service with respect to ATM and one-time debit card overdrafts. For 
example, if an institution's internal criteria would lead the 
institution to pay a check overdraft if the consumer had affirmatively 
consented to the institution's overdraft service for ATM and one-time 
debit card transactions, it must also apply the same criteria in a 
consistent manner in determining whether to pay the check overdraft if 
the consumer has not opted in.
    2. No requirement to pay overdrafts on checks, ACH transactions, or 
other types of transactions. The prohibition on conditioning in Sec.  
1005.17(b)(2) does not require an institution to pay overdrafts on 
checks, ACH transactions, or other types of transactions in all 
circumstances. Rather, the rule simply prohibits institutions from 
considering the consumer's decision not to opt in when deciding whether 
to pay overdrafts for checks, ACH transactions, or other types of 
transactions.217(b)(3) Same Account Terms, Conditions, and 
Features
    1. Variations in terms, conditions, or features. A financial 
institution may not vary the terms, conditions, or features of an 
account provided to a consumer who does not affirmatively consent to the 
payment of ATM or one-time debit card transactions pursuant to the 
institution's overdraft service. This includes, but is not limited to:
    i. Interest rates paid and fees assessed;
    ii. The type of ATM or debit card provided to the consumer. For 
instance, an institution may not provide consumers who do not opt in a 
PIN-only card while providing a debit card with both PIN and signature-
debit functionality to consumers who opt in;
    iii. Minimum balance requirements; or
    iv. Account features such as online bill payment services.
    2. Limited-feature bank accounts. Section 1005.17(b)(3) does not 
prohibit institutions from offering deposit account products with 
limited features, provided that a consumer is not required to open such 
an account because the consumer did not opt in. For example, Sec.  
1005.17(b)(3) does not prohibit an institution from offering a checking 
account designed to comply with state basic banking laws, or designed 
for consumers who are not eligible for a checking account because of 
their credit or checking account history, which may include features 
limiting the payment of overdrafts. However, a consumer who applies, and 
is otherwise eligible, for a full-service or other particular deposit 
account product may not be provided instead with the account with more 
limited features because the consumer has declined to opt in.

                              17(c) Timing

    1. Permitted fees or charges. Fees or charges for ATM and one-time 
debit card overdrafts may be assessed only for overdrafts paid on or 
after the date the financial institution receives the consumer's 
affirmative consent to the institution's overdraft service. See also 
comment 17(b)-7.

                        17(d) Content and Format

    1. Overdraft service. The description of the institution's overdraft 
service should indicate that the consumer has the right to affirmatively 
consent, or opt into payment of overdrafts for ATM and one-time debit 
card transactions. The description should also disclose the 
institution's policies regarding the payment of overdrafts for other 
transactions, including checks, ACH transactions, and automatic bill 
payments, provided that this content is not more prominent than the 
description of the consumer's right to opt into payment of overdrafts 
for ATM and one-time debit card transactions. As applicable, the 
institution also should indicate that it pays overdrafts at its 
discretion, and should briefly explain that if the institution does not 
authorize and pay an overdraft, it may decline the transaction.
    2. Maximum fee. If the amount of a fee may vary from transaction to 
transaction, the financial institution may indicate that the consumer 
may be assessed a fee ``up to'' the maximum fee. The financial 
institution must disclose all applicable overdraft fees, including but 
not limited to:
    i. Per item or per transaction fees;
    ii. Daily overdraft fees;
    iii. Sustained overdraft fees, where fees are assessed when the 
consumer has not repaid the amount of the overdraft after some period of 
time (for example, if an account remains overdrawn for five or more 
business days); or
    iv. Negative balance fees.
    3. Opt-in methods. The opt-in notice must include the methods by 
which the consumer may consent to the overdraft service for ATM and one-
time debit card transactions. Institutions may tailor Model Form A-9 to

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the methods offered to consumers for affirmatively consenting to the 
service. For example, an institution need not provide the tear-off 
portion of Model Form A-9 if it is only permitting consumers to opt-in 
telephonically or electronically. Institutions may, but are not 
required, to provide a signature line or check box where the consumer 
can indicate that he or she declines to opt in.
    4. Identification of consumer's account. An institution may use any 
reasonable method to identify the account for which the consumer submits 
the opt-in notice. For example, the institution may include a line for a 
printed name and an account number, as shown in Model Form A-9. Or, the 
institution may print a bar code or use other tracking information. See 
also comment 17(b)-6, which describes how an institution obtains a 
consumer's affirmative consent.
    5. Alternative plans for covering overdrafts. If the institution 
offers both a line of credit subject to Regulation Z (12 CFR part 1026) 
and a service that transfers funds from another account of the consumer 
held at the institution to cover overdrafts, the institution must state 
in its opt-in notice that both alternative plans are offered. For 
example, the notice might state ``We also offer overdraft protection 
plans, such as a link to a savings account or to an overdraft line of 
credit, which may be less expensive than our standard overdraft 
practices.'' If the institution offers one, but not the other, it must 
state in its opt-in notice the alternative plan that it offers. If the 
institution does not offer either plan, it should omit the reference to 
the alternative plans.

        17(f) Continuing Right To Opt-In or To Revoke the Opt-In

    1. Fees or charges for overdrafts incurred prior to revocation. 
Section 1005.17(f)(1) provides that a consumer may revoke his or her 
prior consent at any time. If a consumer does so, this provision does 
not require the financial institution to waive or reverse any overdraft 
fees assessed on the consumer's account prior to the institution's 
implementation of the consumer's revocation request.

                        17(g) Duration of Opt-In

    1. Termination of overdraft service. A financial institution may, 
for example, terminate the overdraft service when the consumer makes 
excessive use of the service.

   Section 1005.18--Requirements for Financial Institutions Offering 
                            Prepaid Accounts

                             18(a) Coverage

    1. Issuance of access device. Consistent with Sec.  1005.5(a) and 
except as provided, as applicable, in Sec.  1005.5(b), a financial 
institution may issue an access device only in response to an oral or 
written request for the device, or as a renewal or substitute for an 
accepted access device. A consumer is deemed to request an access device 
for a payroll card account when the consumer chooses to receive salary 
or other compensation through a payroll card account. A consumer is 
deemed to request an access device for a prepaid account when, for 
example, the consumer acquires a prepaid account offered for sale at a 
retail location or applies for a prepaid account by telephone or online. 
If an access device for a prepaid account is provided on an unsolicited 
basis where the prepaid account is used for disbursing funds to a 
consumer, and the financial institution or third party making the 
disbursement does not offer any alternative means for the consumer to 
receive those funds in lieu of accepting the prepaid account, in order 
to satisfy Sec.  1005.5(b)(2), the financial institution must inform the 
consumer that the consumer has no other means by which to initially 
receive the funds in the prepaid account other than by accepting the 
access device, as well as the consequences of disposing of the access 
device.
    2. Application to employers and service providers. Typically, 
employers and third-party service providers do not meet the definition 
of a ``financial institution'' subject to the regulation because they 
neither hold prepaid accounts (including payroll card accounts) nor 
issue prepaid cards and agree with consumers to provide EFT services in 
connection with prepaid accounts. However, to the extent an employer or 
a service provider undertakes either of these functions, it would be 
deemed a financial institution under the regulation.

              18(b) Pre-Acquisition Disclosure Requirements

    1. Written and electronic pre-acquisition disclosures. Section 
1005.4(a)(1) generally requires that disclosures be made in writing; 
written disclosures may be provided in electronic form in accordance 
with the Electronic Signatures in Global and National Commerce Act (E-
Sign Act) (15 U.S.C. 7001 et seq.). Because Sec.  1005.18(b)(6)(i)(B) 
provides that electronic disclosures required by Sec.  1005.18(b) need 
not meet the consumer consent or other applicable provisions of the E-
Sign Act, Sec.  1005.18(b) addresses certain requirements for written 
and electronic pre-acquisition disclosures separately. Section 
1005.18(b) also addresses specific requirements for pre-acquisition 
disclosures provided orally.
    2. Currency. Fee amounts required to be disclosed by Sec.  
1005.18(b) may be disclosed in a foreign currency for a prepaid account 
denominated in that foreign currency, other than the fee for the 
purchase price required by Sec.  1005.18(b)(5). For example, a prepaid 
account sold in a U.S. airport intended for use in England may disclose 
in pound sterling ([pound])

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the fees required to be disclosed in the short form and long form 
disclosures and outside the short form disclosure, except for the 
purchase price.

                           18(b)(1)(i) General

    1. Disclosing the short form and long form before acquisition. 
Section 1005.18(b)(1)(i) generally requires delivery of a short form 
disclosure as described in Sec.  1005.18(b)(2), accompanied by the 
information required to be disclosed by Sec.  1005.18(b)(5), and a long 
form disclosure as described in Sec.  1005.18(b)(4) before a consumer 
acquires a prepaid account.
    i. For purposes of Sec.  1005.18(b)(1)(i), a consumer acquires a 
prepaid account by purchasing, opening or choosing to be paid via a 
prepaid account, as illustrated by the following examples:
    A. A consumer inquires about obtaining a prepaid account at a branch 
location of a bank. A consumer then receives the disclosures required by 
Sec.  1005.18(b). After receiving the disclosures, a consumer then opens 
a prepaid account with the bank. This consumer received the short form 
and long form pre-acquisition in accordance with Sec.  1005.18(b)(1)(i).
    B. A consumer learns that he or she can receive wages via a payroll 
card account, at which time the consumer is provided with a payroll card 
and the disclosures required by Sec.  1005.18(b) to review. The consumer 
then chooses to receive wages via a payroll card account. These 
disclosures were provided pre-acquisition in compliance with Sec.  
1005.18(b)(1)(i). By contrast, if a consumer receives the disclosures 
required by Sec.  1005.18(b) to review at the end of the first pay 
period, after the consumer received the first payroll payment on the 
payroll card, these disclosures were provided to a consumer post-
acquisition, and thus not provided in compliance with Sec.  
1005.18(b)(1)(i).
    ii. Section 1005.18(b)(1)(i) permits delivery of the disclosures 
required by Sec.  1005.18(b) at the time the consumer receives the 
prepaid account, rather than prior to acquisition, for prepaid accounts 
that are used for disbursing funds to consumers when the financial 
institution or third party making the disbursement does not offer any 
alternative means for the consumer to receive those funds in lieu of 
accepting the prepaid account. For example, a utility company refunds 
consumers' initial deposits for its utility services via prepaid 
accounts delivered to consumers by mail. Neither the utility company nor 
the financial institution that issues the prepaid accounts offer another 
means for a consumer to receive that refund other than by accepting the 
prepaid account. In this case, the financial institution may provide the 
disclosures required by Sec.  1005.18(b) together with the prepaid 
account (e.g., in the same envelope as the prepaid account); it is not 
required to deliver the disclosures separately prior to delivery of the 
prepaid account.
    2. Disclosures provided electronically. Disclosures required by 
Sec.  1005.18(b) may be provided before or after a consumer has 
initiated the process of acquiring a prepaid account electronically. 
When the disclosures required by Sec.  1005.18(b) are presented after a 
consumer has initiated the process for acquiring a prepaid account 
online or via a mobile device, but before a consumer chooses to accept 
the prepaid account, such disclosures are also made pre-acquisition in 
accordance with Sec.  1005.18(b)(1)(i). The disclosures required by 
Sec.  1005.18(b) that are provided electronically when a consumer 
acquires a prepaid account electronically are not considered to be given 
pre-acquisition unless a consumer must view the web page containing the 
disclosures before choosing to accept the prepaid account. The following 
examples illustrate several methods by which a financial institution may 
present Sec.  1005.18(b) disclosures before a consumer acquires a 
prepaid account electronically in compliance with Sec.  
1005.18(b)(1)(i):
    i. A financial institution presents the short form disclosure 
required by Sec.  1005.18(b)(2), together with the information required 
by Sec.  1005.18(b)(5), and the long form disclosure required by Sec.  
1005.18(b)(4) on the same web page. A consumer must view the web page 
before choosing to accept the prepaid account.
    ii. A financial institution presents the short form disclosure 
required by Sec.  1005.18(b)(2), together with the information required 
by Sec.  1005.18(b)(5), on a web page. The financial institution 
includes, after the short form disclosure or as part of the statement 
required by Sec.  1005.18(b)(2)(xiii), a link that directs the consumer 
to a separate web page containing the long form disclosure required by 
Sec.  1005.18(b)(4). The consumer must view the web page containing the 
long form disclosure before choosing to accept the prepaid account.
    iii. A financial institution presents on a web page the short form 
disclosure required by Sec.  1005.18(b)(2), together with the 
information required by Sec.  1005.18(b)(5), followed by the initial 
disclosures required by Sec.  1005.7(b), which contains the long form 
disclosure required by Sec.  1005.18(b)(4), in accordance with Sec.  
1005.18(f)(1). The financial institution includes, after the short form 
disclosure or as part of the statement required by Sec.  
1005.18(b)(2)(xiii), a link that directs the consumer to the section of 
the initial disclosures containing the long form disclosure pursuant to 
Sec.  1005.18(b)(4). A consumer must view this web page before choosing 
to accept the prepaid account.

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    18(b)(1)(ii) Disclosures for Prepaid Accounts Acquired in Retail 
                                Locations

    1. Retail locations. Section 1005.18(b)(1)(ii) sets forth an 
alternative timing regime for pre-acquisition disclosures for prepaid 
accounts acquired in person at retail locations. For purposes of Sec.  
1005.18(b)(1)(ii), a retail location is a store or other physical site 
where a consumer can purchase a prepaid account in person and that is 
operated by an entity other than the financial institution that issues 
the prepaid account. A branch of a financial institution that offers its 
own prepaid accounts is not a retail location with respect to those 
accounts and, thus, both the short form and the long form disclosure 
must be provided pre-acquisition pursuant to the timing requirement set 
forth in Sec.  1005.18(b)(1)(i).
    2. Disclosures provided inside prepaid account access device 
packaging material. Except when providing the long form disclosure post-
acquisition in accordance with the retail location exception set forth 
in Sec.  1005.18(b)(1)(ii), the disclosures required by Sec.  
1005.18(b)(2), (4), and (5) must be provided to a consumer pre-
acquisition in compliance with Sec.  1005.18(b)(1)(i). A short form 
disclosure is not considered to have been provided pre-acquisition if, 
for example, it is inside the packaging material accompanying a prepaid 
account access device such that the consumer cannot see or access the 
disclosure before acquiring the prepaid account.
    3. Consumers working in retail locations. A payroll card account 
offered to consumers working in retail locations is not eligible for the 
retail location exception in Sec.  1005.18(b)(1)(ii); thus, a consumer 
employee must receive both the short form and long form disclosures for 
the payroll card account pre-acquisition pursuant to the timing 
requirement set forth in Sec.  1005.18(b)(1)(i).
    4. Providing the long form disclosure by telephone and website 
pursuant to the retail location exception. Pursuant to Sec.  
1005.18(b)(1)(ii), a financial institution may provide the long form 
disclosure described in Sec.  1005.18(b)(4) after a consumer acquires a 
prepaid account in a retail location, if the conditions set forth in 
Sec.  1005.18(b)(1)(ii)(A) through (D) are met. Pursuant to Sec.  
1005.18(b)(1)(ii)(C), a financial institution must make the long form 
disclosure accessible to consumers by telephone and via a website when 
not providing a written version of the long form disclosure pre-
acquisition. A financial institution may, for example, provide the long 
form disclosure by telephone using an interactive voice response or 
similar system or by using a customer service agent. A financial 
institution that has not obtained the consumer's contact information is 
not required to comply with the requirements set forth in Sec.  
1005.18(b)(1)(ii)(D). A financial institution is able to contact the 
consumer when, for example, it has the consumer's mailing address or 
email address.

   18(b)(1)(iii) Disclosures for Prepaid Accounts Acquired Orally by 
                                Telephone

    1. Prepaid accounts acquired by telephone. Section 
1005.18(b)(1)(iii) sets forth requirements for prepaid accounts acquired 
orally by telephone. For purposes of Sec.  1005.18(b)(1)(iii), a prepaid 
account is considered to have been acquired orally by telephone when a 
consumer speaks to a customer service agent or communicates with an 
automated system, such as an interactive voice response system, to 
provide personally identifiable information to acquire a prepaid 
account. Prepaid accounts acquired using a mobile device without 
speaking to a customer service agent or communicating with an automated 
system are not considered to have been acquired orally by telephone.

                 18(b)(2) Short Form Disclosure Content

    1. Disclosures that are not applicable or are free. The short form 
disclosures required by Sec.  1005.18(b)(2) must always be provided 
prior to prepaid account acquisition, even when a particular feature is 
free or is not applicable to a specific prepaid account product. For 
example, if a financial institution does not charge a fee to a consumer 
for withdrawing money at an automated teller machine in the financial 
institution's network or an affiliated network, which is required to be 
disclosed pursuant to Sec.  1005.18(b)(2)(iii), the financial 
institution would list ``ATM withdrawal in-network'' on the short form 
disclosure and list ``$0'' as the fee. If, however, the financial 
institution does not have its own network or an affiliated network from 
which a consumer can withdraw money via automated teller machine, the 
financial institution would list ``ATM withdrawal in-network'' on the 
short form disclosure but instead of disclosing a fee amount, state ``N/
A.'' (The financial institution must still disclose any fee it charges 
for out-of-network ATM withdrawals.)
    2. Prohibition on disclosure of finance charges. Pursuant to Sec.  
1005.18(b)(3)(vi), a financial institution may not include in the short 
form disclosure finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in Sec.  
1026.61. See also comment 18(b)(3)(vi)-1.

                        18(b)(2)(i) Periodic Fee

    1. Periodic fee variation. If the amount of a fee disclosed on the 
short form could vary, the financial institution must disclose in the 
short form the information required by Sec.  1005.18(b)(3)(i). If the 
amount of the periodic fee could vary, the financial institution may opt 
instead to use an alternative disclosure

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pursuant to Sec.  1005.18(b)(3)(ii). See comments 18(b)(3)(i)-1 and 
18(b)(3)(ii)-1.

                    18(b)(2)(iii) ATM Withdrawal Fees

    1. International ATM withdrawal fees. Pursuant to Sec.  
1005.18(b)(2)(iii), a financial institution must disclose the fees 
imposed when a consumer uses an automated teller machine to initiate a 
withdrawal of cash in the United States from the prepaid account, both 
within and outside of the financial institution's network or a network 
affiliated with the financial institution. A financial institution may 
not disclose its fee (if any) for using an automated teller machine to 
initiate a withdrawal of cash in a foreign country in the disclosure 
required by Sec.  1005.18(b)(2)(iii), although it may be required to 
disclose that fee as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix).

                      18(b)(2)(iv) Cash Reload Fee

    1. Total of all charges. Pursuant to Sec.  1005.18(b)(2)(iv), a 
financial institution must disclose the total of all charges imposed 
when a consumer reloads cash into a prepaid account, including charges 
imposed by the financial institution as well as any charges that may be 
imposed by third parties for the cash reload. The cash reload fee 
includes the cost of adding cash to the prepaid account at a point-of-
sale terminal, the cost of purchasing an additional card or other device 
on which cash is loaded and then transferred into the prepaid account, 
or any other method a consumer may use to reload cash into the prepaid 
account. For example, a financial institution does not have its own 
proprietary cash reload network and instead contracts with a third-party 
reload network for this service. The financial institution itself does 
not charge any fee related to cash reloads but the third-party reload 
network charges a fee of $3.95 per cash reload. The financial 
institution must disclose the cash reload fee as $3.95. If the financial 
institution offers more than one method to reload cash into the prepaid 
account, Sec.  1005.18(b)(3)(i) requires disclosure of the highest cash 
reload fee. For example, a financial institution contracts with two 
third-party cash reload networks; one third party charges $3.95 for a 
point-of-sale reload and the other third party charges $2.95 for 
purchase of a reload pack. In addition to the third-party cash reload 
charge, the financial institution charges a $1 fee for every cash 
reload. The financial institution must disclose the cash reload fee on 
the short form as $4.95, that is, the highest third-party fee plus the 
financial institution's $1 fee. See comment 18(b)(3)(v)-1 for additional 
guidance regarding third-party fees for cash reloads.
    2. Cash deposit fee. If a financial institution does not permit cash 
reloads via a third-party reload network but instead permits cash 
deposits, for example, in a bank branch, the term ``cash deposit'' may 
be substituted for ``cash reload.''

                  18(b)(2)(v) ATM Balance Inquiry Fees

    1. International ATM balance inquiry fees. Pursuant to Sec.  
1005.18(b)(2)(v), a financial institution must disclose the fees imposed 
when a consumer uses an automated teller machine to check the balance of 
the prepaid account in the United States, both within and outside of the 
financial institution's network or a network affiliated with the 
financial institution. A financial institution may not disclose its fee 
(if any) for using an automated teller machine to check the balance of 
the prepaid account in a foreign country in the disclosure required by 
Sec.  1005.18(b)(2)(v), although it may be required to disclose that fee 
as an additional fee type pursuant to Sec.  1005.18(b)(2)(ix).

                      18(b)(2)(vii) Inactivity Fee

    1. Inactivity fee conditions. Section 1005.18(b)(2)(vii) requires 
disclosure of any fee for non-use, dormancy, or inactivity of the 
prepaid account as well as the conditions that trigger the financial 
institution to impose that fee. For example, a financial institution 
that imposes an inactivity fee of $1 per month after 12 months without 
any transactions on the prepaid account would disclose on the short form 
``Inactivity (after 12 months with no transactions)'' and ``$1.00 per 
month.''

        18(b)(2)(viii) Statements Regarding Additional Fee Types

  18(b)(2)(viii)(A) Statement Regarding Number of Additional Fee Types 
                                 Charged

    1. Fee types counted in total number of additional fee types. 
Section 1005.18(b)(2)(viii)(A) requires a statement disclosing the 
number of additional fee types the financial institution may charge 
consumers with respect to the prepaid account, using the following 
clause or a substantially similar clause: ``We charge [x] other types of 
fees.'' The number of additional fee types disclosed must reflect the 
total number of fee types under which the financial institution may 
charge fees, excluding fees required to be disclosed pursuant to Sec.  
1005.18(b)(2)(i) through (vii) and (b)(5) and any finance charges as 
described in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection 
with a covered separate credit feature accessible by a hybrid prepaid-
credit card as defined in 12 CFR 1026.61. The following clarify which 
fee types to include in the total number of additional fee types:
    i. Fee types excluded from the number of additional fee types. The 
number of additional fee types required to be disclosed pursuant to 
Sec.  1005.18(b)(2)(viii)(A) does not include the fees otherwise 
required to be disclosed in the

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short form pursuant to Sec.  1005.18(b)(2)(i) through (vii), nor any 
purchase fee or activation fee required to be disclosed outside the 
short form pursuant to Sec.  1005.18(b)(5). It also does not include any 
finance charges as described in Regulation Z, 12 CFR 1026.4(b)(11), 
imposed in connection with a credit feature defined in 12 CFR 1026.61. 
The number of additional fee types includes only fee types under which 
the financial institution may charge fees; accordingly, third-party fees 
are not included unless they are imposed for services performed on 
behalf of the financial institution. In addition, the number of 
additional fee types includes only fee types the financial institution 
may charge consumers with respect to the prepaid account; accordingly, 
additional fee types does not include other revenue sources such as 
interchange fees or fees paid by employers for payroll card programs, 
government agencies for government benefit programs, or other entities 
sponsoring prepaid account programs for financial disbursements.
    ii. Fee types counted in the number of additional fee types. Fee 
types that bear a relationship to, but are separate from, the static fee 
types disclosed in the short form must be counted as additional fees for 
purposes of Sec.  1005.18(b)(2)(viii). For example, the ATM withdrawal 
and ATM balance inquiry fee types required to be disclosed respectively 
by Sec.  1005.18(b)(2)(iii) and (v) that are excluded from the number of 
additional fee types pursuant to Sec.  1005.18(b)(2)(viii) do not 
include such services outside of the United States. Thus, any 
international ATM fees charged by the financial institution for ATM 
withdrawal or balance inquiries must each be counted in the total number 
of additional fee types. Similarly, any fees for reloading funds into a 
prepaid account in a form other than cash (such as electronic reload and 
check reload, as described in comment 18(b)(2)(viii)(A)-2) must be 
counted in the total number of additional fee types because Sec.  
1005.18(b)(2)(iv) is limited to cash reloads. Also, additional fee types 
disclosed in the short form pursuant to Sec.  1005.18(b)(2)(ix) must be 
counted in the total number of additional fee types.
    2. Examples of fee types and fee variations. The term fee type, as 
used in Sec.  1005.18(b)(2)(viii) and (ix), is a general category under 
which a financial institution charges fees to consumers. A financial 
institution may charge only one fee within a particular fee type, or may 
charge two or more variations of fees within the same fee type. The 
following is a list of examples of fee types a financial institution may 
use when determining both the number of additional fee types charged 
pursuant to Sec.  1005.18(b)(2)(viii)(A) and any additional fee types to 
disclose pursuant to Sec.  1005.18(b)(2)(ix). A financial institution 
may create an appropriate name for other additional fee types.
    i. Fee types related to reloads of funds. Fee types for reloading 
funds into a prepaid account. Fees for cash reloads are required to be 
disclosed in the short form pursuant to Sec.  1005.18(b)(2)(iv) and that 
such fees are not counted in the total number of additional fee types or 
disclosed as an additional fee type pursuant to Sec.  1005.18(b)(2)(ix). 
Fee types for other methods to reload funds, such as Electronic reload 
or Check reload, would be counted in the total number of additional fee 
types and may be required to be disclosed as additional fee types 
pursuant to Sec.  1005.18(b)(2)(ix).
    A. Electronic reload. Fees for reloading a prepaid account through 
electronic methods. Fee variations within this fee type may include fees 
for transferring funds from a consumer's bank account via ACH, reloads 
conducted using a debit card or credit card, and for incoming wire 
transfers.
    B. Check reload. Fees for reloading a prepaid account using checks. 
Fee variations within this fee type may include fees for depositing 
checks at an ATM, depositing checks with a teller at the financial 
institution's branch location, mailing checks to the financial 
institution for deposit, and depositing checks using remote deposit 
capture.
    ii. Fee types related to withdrawals of funds. Fee types for 
withdrawing funds from a prepaid account. Per purchase fees and ATM 
withdrawal fees within the United States are fee types required to be 
disclosed in the short form respectively pursuant to Sec.  
1005.18(b)(2)(ii) and (iii) and thus such fees are not counted in the 
total number of additional fee types or disclosed as an additional fee 
type pursuant to Sec.  1005.18(b)(2)(ix). Fee types for other methods to 
withdraw funds, such as Electronic withdrawal, Teller withdrawal, Cash 
back at point of sale (POS), and Account closure would be counted in the 
total of additional fee types and may be required to be disclosed as 
additional fee types pursuant to Sec.  1005.18(b)(2)(ix).
    A. Electronic withdrawal. Fees for withdrawing funds from a prepaid 
account through electronic methods other than an ATM. Fee variations 
within this fee type may include fees for transferring funds from the 
prepaid account to a consumer's bank account or other destination.
    B. Teller withdrawal. Fees for withdrawing funds from a prepaid 
account in person with a teller at a bank or credit union. Fee 
variations within this fee type may include fees for withdrawing funds, 
whether at the financial institution's own branch locations or at 
another bank or credit union.
    C. Cash back at POS. Fees for withdrawing cash from a prepaid 
account via cash back at a merchant's point-of-sale terminal.
    D. Account closure. Fees for closing out a prepaid account, such as 
for a check refund.

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Fee variations within this fee type may include fees for regular and 
expedited delivery of close-out funds.
    iii. Fee types related to international transactions. Fee types for 
international transactions and ATM activity.
    A. International ATM withdrawal. Fees for withdrawing funds at an 
ATM outside the United States. This fee type does not include fees for 
ATM withdrawals in the United States, as such fees are required to be 
disclosed in the short form pursuant to Sec.  1005.18(b)(2)(iii).
    B. International ATM balance inquiry. Fees for balance inquiries at 
an ATM outside the United States. This fee type does not include fees 
for ATM balance inquiries in the United States, as such fees are 
required to be disclosed in the short form pursuant to Sec.  
1005.18(b)(2)(v).
    C. International transaction (excluding ATM withdrawal and balance 
inquiry). Fees for transactions outside the United States. Fee 
variations within this fee type may include fees for currency 
conversion, foreign exchange processing, and other charges for 
transactions outside of the United States.
    iv. Bill payment. Fees for bill payment services. Fee variations 
within this fee type may include fees for ACH bill payment, paper check 
bill payment, check cancellation, and expedited delivery of paper check.
    v. Person-to-person or card-to-card transfer of funds. Fees for 
transferring funds from one prepaid account to another prepaid account. 
Fee variations within this fee type may include fees for transferring 
funds to another prepaid account within or outside of a specified 
prepaid account program, transferring funds to another cardholder within 
the United States or outside the United States, and expedited transfer 
of funds.
    vi. Paper checks. Fees for providing paper checks that draw on the 
prepaid account. Fee variations within this fee type may include fees 
for providing checks and associated shipping costs. This does not 
include checks issued as part of a bill pay service, which are addressed 
in comment 18(b)(2)(viii)(A)-2.iv above.
    vii. Stop payment. Fees for stopping payment of a preauthorized 
transfer of funds.
    viii. Fee types related to card services. Fee types for card 
services.
    A. Card replacement. Fees for replacing or reissuing a prepaid card 
that has been lost, stolen, damaged, or that has expired. Fee variations 
within this fee types may include fees for replacing the card, regular 
or expedited delivery of the replacement card, and international card 
replacement.
    B. Secondary card. Fees for issuing an additional access device 
assigned to a particular prepaid account.
    C. Personalized card. Fees for customizing or personalizing a 
prepaid card.
    ix. Legal. Fees for legal process. Fee variations within this fee 
type may include fees for garnishments, attachments, levies, and other 
court or administrative orders against a prepaid account.
    3. Multiple service plans. Pursuant to Sec.  1005.18(b)(2)(vi), a 
financial institution using the multiple service plan short form 
disclosure pursuant to Sec.  1005.18(b)(6)(iii)(B)(2) must disclose only 
the fee for calling customer service via a live agent. Thus, pursuant to 
Sec.  1005.18(b)(2)(viii), any charge for calling customer service via 
an interactive voice response system must be counted in the total number 
of additional fee types.
    4. Consistency in additional fee type categorization. A financial 
institution must use the same categorization of fee types in the number 
of additional fee types disclosed pursuant to Sec.  1005.18(b)(2)(viii) 
and in its determination of which additional fee types to disclose 
pursuant to Sec.  1005.18(b)(2)(ix).

    18(b)(2)(viii)(B) Statement Directing Consumers to Disclosure of 
                          Additional Fee Types

    1. Statement clauses. Section 1005.18(b)(2)(viii)(B) requires, if a 
financial institution makes a disclosure of additional fee types 
pursuant to Sec.  1005.18(b)(2)(ix), it must include in the short form a 
statement directing consumers to that disclosure, located after but on 
the same line of text as the statement regarding the number of 
additional fee types required by Sec.  1005.18(b)(2)(viii)(A), using the 
following clause or a substantially similar clause: ``Here are some of 
them:''. A financial institution that makes no disclosure pursuant to 
Sec.  1005.18(b)(2)(ix) may not include a disclosure pursuant to Sec.  
1005.18(b)(2)(viii)(B). The following examples provide guidance 
regarding substantially similar clauses a financial institution may use 
in certain circumstances to make its disclosures under Sec.  
1005.18(b)(2)(viii)(A) and (B):
    i. A financial institution that has one additional fee type and 
discloses that additional fee type pursuant to Sec.  1005.18(b)(2)(ix) 
might provide the statements required by Sec.  1005.18(b)(2)(viii)(A) 
and (B) together as: ``We charge 1 other type of fee. It is:''.
    ii. A financial institution that has five additional fee types and 
discloses one of those additional fee types pursuant to Sec.  
1005.18(b)(2)(ix) might provide the statements required by Sec.  
1005.18(b)(2)(viii)(A) and (B) together as: ``We charge 5 other types of 
fees. Here is 1 of them:''.
    iii. A financial institution that has two additional fee types and 
discloses both of those fee types pursuant to Sec.  1005.18(b)(2)(ix) 
might provide the statement required by Sec.  1005.18(b)(2)(viii)(A) and 
(B) together as: ``We charge 2 other types of fees. They are:''.

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             18(b)(2)(ix) Disclosure of Additional Fee Types

 18(b)(2)(ix)(A) Determination of Which Additional Fee Types To Disclose

    1. Number of fee types to disclose. Section 1005.18(b)(2)(ix)(A) 
requires disclosure of the two fee types that generate the highest 
revenue from consumers for the prepaid account program or across prepaid 
account programs that share the same fee schedule during the time period 
provided in Sec.  1005.18(b)(2)(ix)(D) and (E), excluding the categories 
set forth in Sec.  1005.18(b)(2)(ix)(A)(1) through (3). See comment 
18(b)(2)(viii)(A)-2 for guidance on and examples of fee types. If a 
prepaid account program has two fee types that satisfy the criteria in 
Sec.  1005.18(b)(2)(ix)(A), it must disclose both fees. If a prepaid 
account program has three or more fee types that potentially satisfy the 
criteria in Sec.  1005.18(b)(2)(ix)(A), the financial institution must 
disclose only the two fee types that generate the highest revenue from 
consumers. See comment 18(b)(2)(ix)(B)-1 for guidance regarding the 
disclosure of additional fee types for a prepaid account with fewer than 
two fee types that satisfy the criteria in Sec.  1005.18(b)(2)(ix)(A).
    2. Abbreviations. Commonly accepted or readily understandable 
abbreviations may be used as needed for additional fee types and fee 
variations disclosed pursuant to Sec.  1005.18(b)(2)(ix). For example, 
to accommodate on one line in the short form disclosure the additional 
fee types ``international ATM balance inquiry'' or ``person-to-person 
transfer of funds,'' with or without fee variations, a financial 
institution may choose to abbreviate the fee type name as ``Int'l ATM 
inquiry'' or ``P2P transfer.''
    3. Revenue from consumers. The revenue calculation for the 
disclosure of additional fee types pursuant to Sec.  
1005.18(b)(2)(ix)(A) is based on fee types that the financial 
institution may charge consumers with respect to the prepaid account. 
The calculation excludes other revenue sources such as revenue generated 
from interchange fees and fees paid by employers for payroll card 
programs, government agencies for government benefit programs, and other 
entities sponsoring prepaid account programs for financial 
disbursements. It also excludes third-party fees, unless they are 
imposed for services performed on behalf of the financial institution.
    4. Assessing revenue within and across prepaid account programs to 
determine disclosure of additional fee types. Pursuant to Sec.  
1005.18(b)(2)(ix)(A), the disclosure of the two fee types that generate 
the highest revenue from consumers must be determined for each prepaid 
account program or across prepaid account programs that share the same 
fee schedule. Thus, if a financial institution offers more than one 
prepaid account program, unless the programs share the same fee 
schedule, the financial institution must consider the fee revenue data 
separately for each prepaid account program and not consolidate the fee 
revenue data across prepaid account programs. Prepaid account programs 
are deemed to have the same fee schedules if they charge the same fee 
amounts, including offering the same fee waivers and fee reductions for 
the same features. The following examples illustrate how to assess 
revenue within and across prepaid account programs to determine the 
disclosure of additional fee types:
    i. Prepaid account programs with different fee schedules. A 
financial institution offers multiple prepaid account programs and each 
program has a different fee schedule. The financial institution must 
consider the revenue from consumers for each program separately; it may 
not consider the revenue from all of its prepaid account programs 
together in determining the disclosure of additional fee types for its 
programs.
    ii. Prepaid account programs with identical fee schedules. A 
financial institution offers multiple prepaid account programs and they 
all share the same fee schedule. The financial institution may consider 
the revenue across all of its prepaid account programs together in 
determining the disclosure of additional fee types for its programs.
    iii. Prepaid account programs with both different fee schedules and 
identical fee schedules. A financial institution offers multiple prepaid 
account programs, some of which share the same fee schedule. The 
financial institution may consider the revenue across all prepaid 
account programs with identical fee schedules in determining the 
disclosure of additional fee types for those programs. The financial 
institution must separately consider the revenue from each of the 
prepaid account programs with unique fee schedules.
    iv. Multiple service plan prepaid account programs. A financial 
institution that discloses multiple service plans on a short form 
disclosure as permitted by Sec.  1005.18(b)(6)(iii)(B)(2) must consider 
revenue across all of those plans in determining the disclosure of 
additional fee types for that program. If, however, the financial 
institution instead is disclosing the default service plan pursuant to 
Sec.  1005.18(b)(6)(iii)(B)(1), the financial institution must consider 
the revenue generated from consumers for the default service plan only. 
See Sec.  1005.18(b)(6)(iii)(B)(2) and comment 18(b)(6)(iii)(B)(2)-1 for 
guidance on what constitutes multiple service plans.
    5. Exclusions. Once the financial institution has calculated the fee 
revenue data for the prepaid account program or across prepaid account 
programs that share the same fee schedule during the appropriate time 
period, it must remove from consideration the categories excluded 
pursuant to

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Sec.  1005.18(b)(2)(ix)(A)(1) through (3) before determining the fee 
types, if any, that generated the highest revenue.
    i. Exclusion for fee types required to be disclosed elsewhere. Fee 
types otherwise required to be disclosed in or outside the short form 
are excluded from the additional fee types required to be disclosed 
pursuant to Sec.  1005.18(b)(2)(ix)(A)(1). Thus, the following fee types 
are excluded: Periodic fee, per purchase fee, ATM withdrawal fees (for 
ATM withdrawals in the United States), cash reload fee, ATM balance 
inquiry fees (for ATM balance inquiries in the United States), customer 
service fees, and inactivity fee. However, while the cash reload fee 
type is excluded, other reload fee types, such as electronic reload and 
check reload, are not excluded under Sec.  1005.18(b)(2)(ix)(A)(1) and 
thus may be disclosed as additional fee types pursuant to Sec.  
1005.18(b)(2)(ix). Similarly, while the fee types ATM withdrawal and ATM 
balance inquiry in the United States are excluded, international ATM 
withdrawal and international ATM balance inquiry fees are not excluded 
under Sec.  1005.18(b)(2)(ix)(A)(1) and thus may be disclosed as 
additional fee types pursuant to Sec.  1005.18(b)(2)(ix). Also pursuant 
to Sec.  1005.18(b)(2)(ix)(A)(1), the purchase price and activation fee, 
if any, required to be disclosed outside the short form disclosure 
pursuant to Sec.  1005.18(b)(5), are excluded from the additional fee 
types required to be disclosed pursuant to Sec.  1005.18(b)(2)(ix).
    ii. De minimis exclusion. Any fee types that generated less than 5 
percent of the total revenue from consumers for the prepaid account 
program or across prepaid account programs that share the same fee 
schedule during the time period provided in Sec.  1005.18(b)(2)(ix)(D) 
and (E) are excluded from the additional fee types required to be 
disclosed pursuant to Sec.  1005.18(b)(2)(ix)(A)(2). For example, for a 
particular prepaid account program over the appropriate time period, 
bill payment, check reload, and card replacement are the only fee types 
that generated 5 percent or more of the total revenue from consumers at, 
respectively, 15 percent, 10 percent, and 7 percent. Two other fee 
types, legal fee and personalized card, generated revenue below 1 
percent of the total revenue from consumers. The financial institution 
must disclose bill payment and check reload as the additional fee types 
for that particular prepaid account program because those two fee types 
generated the highest revenue from consumers from among the categories 
not excluded from disclosure as additional fee types. For a different 
prepaid account program over the appropriate time period, bill payment 
is the only fee type that generated 5 percent or more of the total 
revenue from consumers. Two other fee types, check reload and card 
replacement, each generated revenue below 5 percent of the total revenue 
from consumers. The financial institution must disclose bill payment as 
an additional fee type for that particular prepaid account program 
because it is the only fee type that satisfies the criteria of Sec.  
1005.18(b)(2)(ix)(A). The financial institution may, but is not required 
to, disclose either check reload or card replacement on the short form 
as well, pursuant to Sec.  1005.18(b)(2)(ix)(B). See comment 
18(b)(2)(ix)(B)-1.
    iii. Exclusion for credit-related fees. Any finance charges as 
described in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection 
with a covered separate credit feature accessible by a hybrid prepaid-
credit card as defined in 12 CFR 1026.61, are excluded from the 
additional fee types required to be disclosed pursuant to Sec.  
1005.18(b)(2)(ix)(A)(3). Pursuant to Sec.  1005.18(b)(2)(viii)(A)(2), 
such finance charges are also excluded from the number of additional fee 
types disclosed.

    18(b)(2)(ix)(B) Disclosure of Fewer Than Two Additional Fee Types

    1. Disclosure of one or no additional fee types. The following 
examples provide guidance on the additional fee types disclosure 
pursuant to Sec.  1005.18(b)(2)(ix)(B) for a prepaid account with fewer 
than two fee types that satisfy the criteria in Sec.  
1005.18(b)(2)(ix)(A):
    i. A financial institution has a prepaid account program with only 
one fee type that satisfies the criteria in Sec.  1005.18(b)(2)(ix)(A) 
and thus, pursuant to Sec.  1005.18(b)(2)(ix)(A), the financial 
institution must disclose that one fee type. The prepaid account program 
has three other fee types that generate revenue from consumers, but they 
do not exceed the de minimis threshold or otherwise satisfy the criteria 
in Sec.  1005.18(b)(2)(ix)(B). Pursuant to Sec.  1005.18(b)(2)(ix)(B), 
the financial institution is not required to make any additional 
disclosure, but it may choose to disclose one of the three fee types 
that do not meet the criteria in Sec.  1005.18(b)(2)(ix)(A).
    ii. A financial institution has a prepaid account program with four 
fee types that generate revenue from consumers, but none exceeds the de 
minimis threshold or otherwise satisfy the criteria in Sec.  
1005.18(b)(2)(ix)(A). Pursuant to Sec.  1005.18(b)(2)(ix)(B), the 
financial institution is not required to make any disclosure, but it may 
choose to disclose one or two of the fee types that do not meet the 
criteria in Sec.  1005.18(b)(2)(ix)(A).
    2. No disclosure of finance charges as an additional fee type. 
Pursuant to Sec.  1005.18(b)(3)(vi), a financial institution may not 
disclose any finance charges as a voluntary additional fee disclosure 
under Sec.  1005.18(b)(2)(ix)(B).

         18(b)(2)(ix)(C) Fee Variations in Additional Fee Types

    1. Two or more fee variations. Section 1005.18(b)(2)(ix)(C) 
specifies how to disclose additional fee types with two fee variations,

[[Page 300]]

more than two fee variations, and for multiple service plans pursuant to 
Sec.  1005.18(b)(6)(iii)(B)(2). See comment 18(b)(2)(viii)(A)-2 for 
guidance on and examples of fee types and fee variations within those 
fee types. The following examples illustrate how to disclose two-tier 
fees and other fee variations in additional fee types:
    i. Two fee variations with different fee amounts. A financial 
institution charges a fee of $1 for providing a card replacement using 
standard mail service and charges a fee of $5 for providing a card 
replacement using expedited delivery. The financial institution must 
calculate the total revenue generated from consumers for all card 
replacements, both via standard mail service and expedited delivery, 
during the required time period to determine whether it is required to 
disclose card replacement as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Because there are only two fee variations for the fee 
type ``card replacement,'' if card replacement is required to be 
disclosed as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix)(A), the financial institution must disclose both fee 
variations pursuant to Sec.  1005.18(b)(2)(ix)(C). Thus, the financial 
institution would disclose on the short form the fee type and two 
variations as ``Card replacement (regular or expedited delivery)'' and 
the fee amount as ``$1.00 or $5.00''.
    ii. More than two fee variations. A financial institution offers two 
methods of bill payment--via ACH and paper check--and offers two modes 
of delivery for bill payments made by paper check--regular standard mail 
service and expedited delivery. The financial institution charges $0.25 
for bill pay via ACH, $0.50 for bill pay via paper check sent by regular 
standard mail service, and $3 for bill pay via paper check sent via 
expedited delivery. The financial institution must calculate the total 
revenue generated from consumers for all methods of bill pay and all 
modes of delivery during the required time period to determine whether 
it must disclose bill payment as an additional fee type pursuant to 
Sec.  1005.18(b)(2)(ix). Because there are more than two fee variations 
for the fee type ``bill payment,'' if bill payment is required to be 
disclosed as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix)(A), the financial institution has two options for the 
disclosure. The financial institution may disclose the highest fee, $3, 
followed by a symbol, such as an asterisk, linked to a statement 
explaining that the fee could be lower depending on how and where the 
prepaid account is used, pursuant to Sec.  1005.18(b)(3)(i). Thus, the 
financial institution would disclose on the short form the fee type as 
``Bill payment'' and the fee amount as ``$3.00*''. Alternatively, the 
financial institution may consolidate the fee variations into two 
categories, such as regular delivery and expedited delivery. In this 
case, the financial institution would make this disclosure on the short 
form as: ``Bill payment (regular or expedited delivery)'' and the fee 
amount as ``$0.50* or $3.00''.
    iii. Two fee variations with like fee amounts. A financial 
institution offers two methods of check reload for which it charges a 
fee--depositing checks at an ATM and depositing checks with a teller at 
the financial institution's branch locations. There is a fee of $0.50 
for both methods of check deposit. The financial institution must 
calculate the total revenue generated from both of these check reload 
methods during the required time period to determine whether it must 
disclose this fee type as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Because the fee amounts are the same for the two 
methods of check deposit, if the fee type is required to be disclosed as 
an additional fee type, the financial institution's options for 
disclosing this fee type in accordance with Sec.  1005.18(b)(2)(ix)(C) 
and (b)(3)(iii) include: ``Check reload (ATM or teller check dep)'' and 
the fee amount as ``$0.50'' or ``Check reload'' and the fee amount as 
``$0.50''.
    iv. Multiple service plans. A financial institution provides a short 
form disclosure for multiple service plans pursuant to Sec.  
1005.18(b)(6)(iii)(B)(2). Notwithstanding that an additional fee type 
has only two fee variations, a financial institution must disclose the 
highest fee in accordance with Sec.  1005.18(b)(3)(i).
    2. One fee variation under a particular fee type. Section 
1005.18(b)(2)(ix)(C) provides in part that, if a financial institution 
only charges one fee under a particular fee type, the financial 
institution must disclose the name of the additional fee type and the 
fee amount; it may, but is not required to, disclose also the name of 
the one fee variation, if any, for which the fee amount is charged, in a 
format substantially similar to that used to disclose the two-tier fees 
required by Sec.  1005.18(b)(2)(v) and (vi), except that the financial 
institution must disclose only the one fee variation name and fee amount 
instead of two. For example, a financial institution offers one method 
of electronic reload for which it charges a fee--electronic reload 
conducted using a debit card. The financial institution must calculate 
the total revenue generated from consumers for the fee type electronic 
reload (i.e., in this case, electronic reloads conducted using a debit 
card) during the required time period to determine whether it must 
disclose electronic reload as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Because the financial institution only charges one 
fee variation under the fee type electronic reload, if this fee type is 
required to be disclosed as an additional fee type, the financial 
institution has two options for disclosing this fee type in accordance 
with Sec.  1005.18(b)(2)(ix)(C): ``Electronic reload (debit card)'' and 
the fee amount as

[[Page 301]]

``$1.00'' or ``Electronic reload'' and the fee amount as ``$1.00''.

  18(b)(2)(ix)(D) Timing of Initial Assessment of Additional Fee Types 
                               Disclosure

18(b)(2)(ix)(D)(1) Existing Prepaid Account Programs as of April 1, 2019

    1. 24 month period with available data. Section 
1005.18(b)(2)(ix)(D)(1) requires for a prepaid account program in effect 
as of April 1, 2019 the financial institution must disclose additional 
fee types based on revenue for a 24-month period that begins no earlier 
than October 1, 2014. Thus, a prepaid account program that was in 
existence as of April 1, 2019 must assess its additional fee types 
disclosure from data collected during a consecutive 24-month period that 
took place between October 1, 2014 and April 1, 2019. For example, an 
existing prepaid account program was first offered to consumers on 
January 1, 2012 and provides its first short form disclosure on April 1, 
2019. The earliest 24-month period from which that financial institution 
could calculate its first additional fee types disclosure would be from 
October 1, 2014 to September 30, 2016.

18(b)(2)(ix)(D)(2) Existing Prepaid Account Programs as of April 1, 2019 
                          With Unavailable Data

    1. 24 month period without available data. Section 
1005.18(b)(2)(ix)(D)(2) requires that if a financial institution does 
not have 24 months of fee revenue data for a particular prepaid account 
program from which to calculate the additional fee types disclosure in 
advance of April 1, 2019, the financial institution must disclose the 
additional fee types based on revenue it reasonably anticipates the 
prepaid account program will generate over the 24-month period that 
begins on April 1, 2019. For example, a financial institution begins 
offering to consumers a prepaid account program six months before April 
1, 2019. Because the prepaid account program will not have 24 months of 
fee revenue data prior to April 1, 2019, pursuant to Sec.  
1005.18(b)(2)(ix)(D)(2) the financial institution must disclose the 
additional fee types it reasonably anticipates the prepaid account 
program will generate over the 24-month period that begins on April 1, 
2019. The financial institution would take into account the data it had 
accumulated at the time of its calculation to arrive at the reasonably 
anticipated additional fee types for the prepaid account program.

18(b)(2)(ix)(E) Timing of Periodic Reassessment and Update of Additional 
                          Fee Types Disclosure

                18(b)(2)(ix)(E)(2) Periodic Reassessment

    1. Periodic reassessment and, if applicable, update of additional 
fee types disclosure. Pursuant to Sec.  1005.18(b)(2)(ix)(E)(2), a 
financial institution must reassess whether its previously disclosed 
additional fee types continue to comply with the requirements of Sec.  
1005.18(b)(2)(ix) every 24 months based on revenue for the previous 24-
month period. The financial institution must complete this reassessment 
and update its disclosure, if applicable, within three months of the end 
of the 24-month period, except as provided in the update printing 
exception in Sec.  1005.18(b)(2)(ix)(E)(4). The following examples 
provide guidance on the periodic assessment and, if applicable, update 
of the disclosure of additional fee types pursuant to Sec.  
1005.18(b)(2)(ix)(E)(2):
    i. Reassessment with no change in the additional fee types 
disclosed. A financial institution disclosed two additional fee types 
(bill payment and card replacement) for a particular prepaid account 
program on April 1, 2019. Starting on April 1, 2021, the financial 
institution assessed the fee revenue data it collected over the previous 
24 months, and the two additional fee types previously disclosed 
continue to qualify as additional fee types pursuant to Sec.  
1005.18(b)(2)(ix). The financial institution is not required to take any 
action with regard to the disclosure of additional fee types for that 
prepaid account program.
    ii. Reassessment with a change in the additional fee types 
disclosed. A financial institution disclosed two additional fee types 
(bill payment and card replacement) for a particular prepaid account 
program on April 1, 2019. Starting on April 1, 2021, the financial 
institution assessed the fee revenue data it collected over the previous 
24 months, and bill payment continued to qualify as an additional fee 
type pursuant to Sec.  1005.18(b)(2)(ix) but check reload qualified as 
the second additional fee type instead of card replacement. The 
financial institution must update the additional fee types disclosure in 
its short form disclosures provided electronically, orally, and in 
writing (other than for printed materials that qualify for the update 
printing exception in Sec.  1005.18(b)(2)(ix)(E)(4)) no later than July 
1, 2021, which is three months after the end of the 24-month period.
    iii. Reassessment with the addition of an additional fee type 
already voluntarily disclosed. A financial institution disclosed one 
additional fee type (bill payment) and voluntarily disclosed one other 
additional fee type (card replacement, both for regular and expedited 
delivery) for a particular prepaid account program on April 1, 2019. 
Starting on

[[Page 302]]

April 1, 2021, the financial institution assessed the fee revenue data 
it collected over the previous 24 months, and bill payment continued to 
qualify as an additional fee type pursuant to Sec.  1005.18(b)(2)(ix) 
and card replacement now qualified as the second additional fee type. 
Because the financial institution already had disclosed its card 
replacement fees in the format required for an additional fee type 
disclosure, the financial institution is not required to take any action 
with regard to the additional fee types disclosure in the short form for 
that prepaid account program.
    2. Reassessment more frequently than every 24 months. Pursuant to 
Sec.  1005.18(b)(2)(ix)(E)(2), a financial institution may, but is not 
required to, carry out the reassessment and update, if applicable, more 
frequently than every 24 months, at which time a new 24-month period 
commences. A financial institution may choose to do this, for example, 
to sync its reassessment process for additional fee types with its 
financial reporting schedule or other financial analysis it performs 
regarding the particular prepaid account program. If a financial 
institution chooses to reassess its additional fee types disclosure more 
frequently than every 24 months, it is still required to use 24 months 
of fee revenue data to conduct the reassessment. For example, a 
financial institution first offered a particular prepaid account program 
on April 1, 2018 and thus was required to estimate its initial 
additional fee types disclosure pursuant to Sec.  
1005.18(b)(2)(ix)(D)(2). If the financial institution chooses to begin 
its reassessment of its fee revenue data on April 1, 2020, it would use 
the data it collected over the previous 24 months (April 1, 2018 to 
March 31, 2020) and complete its reassessment and its update, if 
applicable, by July 1, 2020.

                 18(b)(2)(ix)(E)(3) Fee Schedule Change

    1. Revised prepaid account programs. Section 1005.18(b)(2)(ix)(E)(3) 
requires that if a financial institution revises the fee schedule for a 
prepaid account program, it must determine whether it reasonably 
anticipates that the previously disclosed additional fee types will 
continue to comply with the requirements of Sec.  1005.18(b)(2)(ix) for 
the 24 months following implementation of the fee schedule change. A fee 
schedule change resets the 24-month period for assessment; a financial 
institution must comply with the requirements of Sec.  
1005.18(b)(2)(ix)(E)(2) at the end of the 24-month period following 
implementation of the fee schedule change. If the financial institution 
reasonably anticipates that the previously disclosed additional fee 
types will not comply with the requirements of Sec.  1005.18(b)(2)(ix), 
it must update the disclosure based on its reasonable anticipation of 
what those additional fee types will be at the time the fee schedule 
change goes into effect, except as provided in the update printing 
exception in Sec.  1005.18(b)(2)(ix)(E)(4). For example, if a financial 
institution lowers its card replacement fee from $4 to $3 on June 1, 
2019 after having first assessed its additional fee types disclosure as 
of April 1, 2019, the financial institution would assess whether it 
reasonably anticipates that the existing additional fee types disclosure 
will continue to reflect the additional fee types that generate the 
highest revenue from consumers for that prepaid account program for the 
next 24 months (until June 1, 2021). If the financial institution 
reasonably anticipates that its additional fee types will remain 
unchanged over the next 24 months, the financial institution is not 
required to take any action with regard to the additional fee types 
disclosure for that prepaid account program. In the same example, if the 
financial institution reasonably anticipates that the previously 
disclosed additional fee types will not comply with the requirements of 
Sec.  1005.18(b)(2)(ix) for the 24 months following implementation of 
the fee schedule change, the financial institution must update the 
listing of additional fee types at the time the fee schedule change goes 
into effect, except as provided in the update printing exception 
pursuant to Sec.  1005.18(b)(2)(ix)(E)(4).

              18(b)(2)(ix)(E)(4) Update Printing Exception

    1. Application of the update printing exception to prepaid accounts 
sold in retail locations. Pursuant to Sec.  1005.18(b)(2)(ix)(E)(4), 
notwithstanding the requirements to update the additional fee types 
disclosure in Sec.  1005.18(b)(2)(ix)(E), a financial institution is not 
required to update the listing of additional fee types that are provided 
on, in, or with prepaid account packaging materials that were 
manufactured, printed, or otherwise produced prior to a periodic 
reassessment and update pursuant to Sec.  1005.18(b)(2)(ix)(E)(2) or 
prior to a fee schedule change pursuant to Sec.  
1005.18(b)(2)(ix)(E)(3). For prepaid accounts sold in retail locations, 
for example, Sec.  1005.18(b)(2)(ix)(E)(4) permits a financial 
institution to implement any necessary updates to the listing of the 
additional fee types on the short form disclosure that appear on its 
physical prepaid account packaging materials at the time the financial 
institution prints new materials. Section 1005.18(b)(2)(ix)(E)(4) does 
not require financial institutions to destroy existing inventory in 
retail locations or elsewhere in the distribution channel, to the extent 
the disclosures on such packaging materials are otherwise accurate, to 
comply with this requirement. For example, a financial institution 
determines that an additional fee type listed on a short form disclosure 
in a retail location no longer qualifies as an additional

[[Page 303]]

fee type pursuant to Sec.  1005.18(b)(2)(ix). The financial institution 
must update any electronic and oral short form disclosures pursuant to 
the timing requirements set forth in Sec.  1005.18(b)(2)(ix)(E). 
Pursuant to Sec.  1005.18(b)(2)(ix)(E)(4), the financial institution may 
continue selling any previously printed prepaid account packages that 
contain the prior listing of additional fee types; prepaid account 
packages printed after that time must contain the updated listing of 
additional fee types.

        18(b)(2)(x) Statement Regarding Overdraft Credit Features

    1. Short form disclosure when overdraft credit feature may be 
offered. Section 1005.18(b)(2)(x) requires disclosure of a statement if 
a covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined in Regulation Z, 12 CFR 1026.61, may be offered at any 
point to a consumer in connection with the prepaid account. This 
statement must be provided on the short form disclosures for all prepaid 
accounts that may offer such a feature, regardless of whether some 
consumers may never be solicited or qualify to enroll in such a feature.

18(b)(2)(xi) Statement Regarding Registration and FDIC or NCUA Insurance

    1. Disclosure of FDIC or NCUA insurance. Section 1005.18(b)(2)(xi) 
requires a statement regarding the prepaid account program's eligibility 
for FDIC deposit insurance or NCUA share insurance, as appropriate, and 
directing the consumer to register the prepaid account for insurance and 
other account protections, where applicable. If the consumer's prepaid 
account funds are held at a credit union, the disclosure must indicate 
NCUA insurance eligibility. If the consumer's prepaid account funds are 
held at a financial institution other than a credit union, the 
disclosure must indicate FDIC insurance eligibility.
    2. Consumer identification and verification processes. For 
additional guidance on the timing of consumer identification and 
verification processes, and on prepaid account programs for which there 
is no consumer identification and verification process for any prepaid 
accounts within the prepaid account program, see Sec.  1005.18(e)(3) and 
comments 18(e)-4 through 6.

 18(b)(2)(xiii) Statement Regarding Information on All Fees and Services

    1. Financial institution's telephone number. For a financial 
institution offering prepaid accounts at a retail location pursuant to 
the retail location exception in Sec.  1005.18(b)(1)(ii), the statement 
required by Sec.  1005.18(b)(2)(xiii) must also include a telephone 
number (and the website URL) that a consumer may use to directly access 
an oral version of the long form disclosure. To provide the long form 
disclosure by telephone, a financial institution could use a live 
customer service agent or an interactive voice response system. The 
financial institution could use a telephone number specifically 
dedicated to providing the long form disclosure or a more general 
customer service telephone number for the prepaid account program. For 
example, a financial institution would be deemed to provide direct 
access pursuant to Sec.  1005.18(b)(2)(xiii) if a consumer navigates one 
or two prompts to reach the oral long form disclosure via a live 
customer service agent or an interactive voice response system using 
either a specifically dedicated telephone number of a more general 
customer service telephone number.
    2. Financial institution's website. For a financial institution 
offering prepaid accounts at a retail location pursuant to the retail 
location exception in Sec.  1005.18(b)(1)(ii), the statement required by 
Sec.  1005.18(b)(2)(xiii) must also include a website URL (and a 
telephone number) that a consumer may use to directly access an 
electronic version of the long form disclosure. For example, a financial 
institution that requires a consumer to navigate various other web pages 
before viewing the long form disclosure would not be deemed to provide 
direct access pursuant to Sec.  1005.18(b)(2)(xiii). Trademark and 
product names and their commonly accepted or readily understandable 
abbreviations comply with the requirement in Sec.  1005.18(b)(2)(xiii) 
that the URL be meaningfully named. For example, ABC or ABCard would be 
readily understandable abbreviations for a prepaid account program named 
the Alpha Beta Card.

       18(b)(2)(xiv) Additional Content for Payroll Card Accounts

   18(b)(2)(xiv)(A) Statement Regarding Wage or Salary Payment Options

    1. Statement options for payroll card accounts. Section 
1005.18(b)(2)(xiv)(A) requires a financial institution to include at the 
top of the short form disclosure for payroll card accounts, above the 
information required by Sec.  1005.18(b)(2)(i) through (iv), one of two 
statements regarding wage payment options. Financial institutions 
offering payroll card accounts may choose which of the two statements 
required by Sec.  1005.18(b)(2)(xiv)(A) to use in the short form 
disclosure. The list of other options required in the second statement 
might include the following, as applicable: Direct deposit to the 
consumer's bank account, direct deposit to the consumer's own prepaid 
account, paper check, or cash. A financial institution may, but is not 
required to, provide more specificity as to whom consumers must ask or 
inform of their choice of wage payment method, such as specifying

[[Page 304]]

the employer's Human Resources Department.
    2. Statement options for government benefit accounts. See Sec.  
1005.15(c)(2)(i) for statement options for government benefit accounts.
    3. Statement permitted for other prepaid accounts. A financial 
institution offering a prepaid account other than a payroll card account 
or government benefit account may, but is not required to, include a 
statement in the short form disclosure regarding payment options that is 
similar to either of the statements required for payroll card accounts 
pursuant to Sec.  1005.18(b)(2)(xiv)(A) or government benefit accounts 
pursuant to Sec.  1005.15(c)(2)(i). For example, a financial institution 
issuing a prepaid account to disburse student financial aid proceeds may 
disclose a statement such as the following: ``You have several options 
to receive your financial aid payments: Direct deposit to your bank 
account, direct deposit to your own prepaid card, paper check, or this 
prepaid card. Tell your school which option you choose.''

18(b)(2)(xiv)(B) Statement Regarding State-Required Information or Other 
                        Fee Discounts and Waivers

    1. Statement options for state-required information or other fee 
discounts or waivers. Section 1005.18(b)(2)(xiv)(B) permits, but does 
not require, a financial institution to include in the short form 
disclosure for payroll card accounts one additional line of text 
directing the consumer to a particular location outside the short form 
disclosure for information on ways the consumer may access payroll card 
account funds and balance information for free or for a reduced fee. For 
example, a financial institution might include the following line of 
text in the short form disclosure: ``See below for free ways to access 
your funds and balance information'' and then list below, but on the 
same page as, the short form disclosure several ways consumers can 
access their prepaid account funds and balance information for free. 
Alternatively, the financial institution might direct the consumer to 
another location for that information, such as by stating ``See the 
cardholder agreement for free ways to access your funds and balance 
information.'' A similar statement is permitted for government benefit 
accounts pursuant to Sec.  1005.15(c)(2)(ii).

18(b)(3) Short Form Disclosure of Variable Fees and Third-Party Fees and 
              Prohibition on Disclosure of Finance Charges

             18(b)(3)(i) General Disclosure of Variable Fees

    1. Short form disclosure of variable fees. Section 1005.18(b)(3)(i) 
requires disclosure in the short form of the highest fee when a fee can 
vary, followed by a symbol, such as an asterisk, linked to a statement 
explaining that the fee could be lower depending on how and where the 
prepaid account is used. For example, a financial institution provides 
interactive voice response (IVR) customer service for free and provides 
the first three live agent customer service calls per month for free, 
after which it charges $0.50 for each additional live agent customer 
service call during that month. Pursuant to Sec.  1005.18(b)(2)(vi), the 
financial institution must disclose both its IVR and live agent customer 
service fees on the short form disclosure. The financial institution 
would disclose the IVR fee as $0 and the live agent customer service fee 
as $0.50, followed by an asterisk (or other symbol) linked to a 
statement explaining that the fee can be lower depending on how and 
where the prepaid account is used. Except as described in Sec.  
1005.18(b)(3)(ii), Sec.  1005.18(b)(3)(i) does not permit a financial 
institution to describe in the short form disclosure the specific 
conditions under which a fee may be reduced or waived, but the financial 
institution could use, for example, any other part of the prepaid 
account's packaging or other printed materials to disclose that 
information. The conditions under which a fee may be lower are required 
to be disclosed in the long form disclosure pursuant to Sec.  
1005.18(b)(4)(ii).

            18(b)(3)(ii) Disclosure of Variable Periodic Fee

    1. Periodic fee variation alternative. If the amount of the periodic 
fee disclosed in the short form pursuant to Sec.  1005.18(b)(2)(i) could 
vary, a financial institution has two alternatives for disclosing the 
variation, as set forth in Sec.  1005.18(b)(3)(i) and (ii). For example, 
a financial institution charges a monthly fee of $4.95, but waives this 
fee if a consumer receives direct deposit into the prepaid account or 
conducts 30 or more transactions during that month. Pursuant to Sec.  
1005.18(b)(3)(ii), the financial institution could list its monthly fee 
of $4.95 on the short form disclosure followed by a dagger symbol that 
links to a statement that states, for example, ``No monthly fee with 
direct deposit or 30 transactions per month.'' This statement may take 
up no more than one line of text in the short form disclosure and must 
be located directly above or in place of the linked statement required 
by Sec.  1005.18(b)(3)(i). Alternatively, pursuant to Sec.  
1005.18(b)(3)(i), the financial institution could list its monthly fee 
of $4.95 on the short form disclosure followed by an asterisk that links 
to a statement that states, ``This fee can be lower depending on how and 
where this card is used.''

              18(b)(3)(iii) Single Disclosure for Like Fees

    1. Alternative for two-tier fees in the short form disclosure. 
Pursuant to Sec.  1005.18(b)(3)(iii),

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a financial institution may opt to disclose one fee instead of the two 
fees required by Sec.  1005.18(b)(2)(iii), (v), and (vi) and any two-
tier fee required by Sec.  1005.18(b)(2)(ix), when the amount is the 
same for both fees. The following examples illustrate how to provide a 
single disclosure for like fees on both the short form disclosure and 
the multiple service plan short form disclosure:
    i. A financial institution charges $1 for both in-network and out-
of-network automated teller machine withdrawals in the United States. 
The financial institution may list the $1 fee once under the general 
heading ``ATM withdrawal'' required by Sec.  1005.18(b)(2)(iii); in that 
case, it need not disclose the terms ``in-network'' or ``out-of-
network.''
    ii. A financial institution using the multiple service plan short 
form disclosure pursuant to Sec.  1005.18(b)(6)(iii)(B)(2) charges $1 
under each of its service plans for both in-network and out-of-network 
automated teller machine withdrawals in the United States. The financial 
institution may disclose the ATM withdrawal fee on one line, instead of 
two, using the general heading ``ATM withdrawal'' required by Sec.  
1005.18(b)(2)(iii); in that case, it need not disclose the terms ``in-
network'' or ``out-of-network.''

                18(b)(3)(iv) Third-Party Fees in General

    1. General prohibition on disclosure of third-party fees in the 
short form. Section 1005.18(b)(3)(iv) states that a financial 
institution may not include any third-party fees in a disclosure made 
pursuant to Sec.  1005.18(b)(2), except for, as provided by Sec.  
1005.18(b)(3)(v), the cash reload fee required to be disclosed by Sec.  
1005.18(b)(2)(iv). Fees imposed by another party, such as a program 
manager, for services performed on behalf of the financial institution 
are not third-party fees and therefore must be disclosed pursuant to 
Sec.  1005.18(b)(3)(iv). For example, if a program manager performs 
customer service functions for a financial institution's prepaid account 
program, and charges a fee for live agent customer service, that fee 
must be disclosed pursuant to Sec.  1005.18(b)(2)(iv).

                18(b)(3)(v) Third-Party Cash Reload Fees

    1. Updating third-party fees. Section 1005.18(b)(3)(v) provides that 
a financial institution is not required to revise its short form 
disclosure to reflect a cash reload fee change by a third party until 
such time that the financial institution manufactures, prints, or 
otherwise produces new prepaid account packaging materials or otherwise 
updates the short form disclosure. For example, at the time a financial 
institution first prints packaging material for its prepaid account 
program, it discloses on the short form the $3.99 fee charged by the 
third-party reload network with which it contracts to provide cash 
reloads. Ten months later, the third-party reload network raises its 
cash reload fee to $4.25. The financial institution is not required to 
update its on-package disclosures to reflect the change in the cash 
reload fee until the financial institution next prints packaging 
materials for that prepaid account program. With respect to that 
financial institution's electronic and oral disclosures for that prepaid 
account program, the financial institution may, but is not required to, 
update its short form disclosure immediately upon learning of the third-
party reload network's change to its cash reload fee. Alternatively, the 
financial institution may wait to update its electronic and oral short 
form disclosures to reflect the change in the cash reload fee until it 
otherwise updates those disclosures.

        18(b)(3)(vi) Prohibition on Disclosure of Finance Charges

    1. No disclosure of finance charges in the short form. Section 
1005.18(b)(3)(vi) provides that a financial institution may not include 
in a disclosure made pursuant to Sec.  1005.18(b)(2)(i) through (ix) any 
finance charges as described in Regulation Z, 12 CFR 1026.4(b)(11), 
imposed in connection with a covered separate credit feature accessible 
by a hybrid prepaid-credit card as defined in 12 CFR 1026.61. If a 
financial institution imposes a higher fee or charge on the asset 
feature of a prepaid account with a covered separate credit feature 
accessible by a hybrid prepaid-credit card than the amount of a 
comparable fee or charge it imposes on any prepaid account in the same 
prepaid account program that does not have such a credit feature, it 
must disclose on the short form for purposes of Sec.  1005.18(b)(2)(i) 
through (vii) and (ix) the amount of the comparable fee rather than the 
higher fee. See, e.g., Sec.  1005.18(g)(2) and related commentary.

                  18(b)(4) Long Form Disclosure Content

                            18(b)(4)(ii) Fees

    1. Disclosure of all fees. Section 1005.18(b)(4)(ii) requires a 
financial institution to disclose in the long form all fees that may be 
imposed in connection with a prepaid account, not just fees for 
electronic fund transfers or the right to make transfers. The 
requirement to disclose all fees in the long form includes any finance 
charges imposed on the prepaid account as described in Regulation Z, 12 
CFR 1026.4(b)(11)(ii), in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in 12 CFR 
1026.61 but does not include finance charges imposed on the covered 
separate credit feature as described in 12 CFR 1026.4(b)(11)(i). See 
comment 18(b)(7)(i)(B)-2 for guidance on disclosure of finance charges

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as part of the Sec.  1005.18(b)(4)(ii) fee disclosure in the long form. 
A financial institution may also be required to include finance charges 
in the Regulation Z disclosures required pursuant to Sec.  
1005.18(b)(4)(vii).
    2. Disclosure of conditions. Section 1005.18(b)(4)(ii) requires a 
financial institution to disclose the amount of each fee and the 
conditions, if any, under which the fee may be imposed, waived, or 
reduced. For example, if a financial institution charges a cash reload 
fee, the financial institution must list the amount of the cash reload 
fee and also specify any circumstances under which a consumer can 
qualify for a lower fee. Similarly, if a financial institution discloses 
both a periodic fee and an inactivity fee, it must indicate whether the 
inactivity fee will be charged in addition to, or instead of, the 
periodic fee. A financial institution may, but is not required to, also 
include on the long form disclosure additional information or 
limitations related to the service or feature for which a fee is 
charged, such as, for cash reloads, any limit on the amount of cash a 
consumer may load into the prepaid account in a single transaction or 
during a particular time period. The general requirement in Sec.  
1005.18(b)(4)(ii) does not apply to individual fee waivers or reductions 
granted to a particular consumer or group of consumers on a 
discretionary or case-by-case basis.
    3. Disclosure of a service or feature without a charge. Pursuant to 
Sec.  1005.18(b)(4)(ii), a financial institution may, but is not 
required to, list in the long form disclosure any service or feature it 
provides or offers at no charge to the consumer. For example, a 
financial institution may list ``online bill pay'' in its long form 
disclosure and indicate a fee amount of ``$0'' when the financial 
institution does not charge consumers a fee for that feature. By 
contrast, where a fee is waived or reduced under certain circumstances 
or where a service or feature is available for an introductory period 
without a fee, the financial institution may not list the fee amount as 
``$0''. Rather, the financial institution must list the highest fee, 
accompanied by an explanation of the waived or reduced fee amount and 
any conditions for the waiver or discount. For example, if a financial 
institution waives its monthly fee for any consumer who receives direct 
deposit payments into the prepaid account or conducts 30 or more 
transactions in a given month, the long form disclosure must list the 
regular monthly fee amount along with an explanation that the monthly 
fee is waived if the consumer receives direct deposit or conducts 30 or 
more transactions each month. Similarly, for an introductory fee, the 
financial institution would list the highest fee, and explain the 
introductory fee amount, the duration of the introductory period, and 
any conditions that apply during the introductory period.
    4. Third-party fees. Section 1005.18(b)(4)(ii) requires disclosure 
in the long form of any third-party fee amounts known to the financial 
institution that may apply. Fees imposed by another party, such as a 
program manager, for services performed on behalf of the financial 
institution are not third-party fees and therefore must be disclosed on 
the long form pursuant to Sec.  1005.18(b)(4)(ii). Also pursuant to 
Sec.  1005.18(b)(4)(ii), for any third-party fee disclosed, a financial 
institution may, but is not required to, include either or both a 
statement that the fee is accurate as of or through a specific date or 
that the third-party fee is subject to change. For example, a financial 
institution that contracts with a third-party remote deposit capture 
service must include in the long form disclosure the amount of the fee 
known to the financial institution that is charged by the third party 
for remote deposit capture services. The financial institution may, but 
is not required to, also state that the third-party remote deposit 
capture fee is accurate as of or through a specific date, such as the 
date the financial institution prints the long form disclosure. The 
financial institution may also state that the fee is subject to change. 
Section 1005.18(b)(4)(ii) also provides that, if a third-party fee may 
apply but the amount of the fee is not known by the financial 
institution, it must include a statement indicating that a third-party 
fee may apply without specifying the fee amount. For example, a 
financial institution that permits out-of-network ATM withdrawals would 
disclose that, for ATM withdrawals that occur outside the financial 
institution's network, the ATM operator may charge the consumer a fee 
for the withdrawal, but the financial institution is not required to 
disclose the out-of-network ATM operator's fee amount if it does not 
know the amount of the fee.

    18(b)(4)(iii) Statement Regarding Registration and FDIC or NCUA 
                                Insurance

    1. Statement regarding registration and FDIC or NCUA insurance, 
including implications thereof. Section 1005.18(b)(4)(iii) requires that 
the long form disclosure include the same statement regarding prepaid 
account registration and FDIC or NCUA insurance eligibility required by 
Sec.  1005.18(b)(2)(xi) in the short form disclosure, together with an 
explanation of FDIC or NCUA insurance coverage and the benefit of such 
coverage or the consequence of the lack of such coverage, as applicable.
    i. Bank disclosure of FDIC insurance. For example, XYZ Bank offers a 
prepaid account program for sale at retail locations that is set up to 
be eligible for FDIC deposit insurance, but does not conduct consumer 
identification and verification before consumers purchase the prepaid 
account. XYZ Bank may disclose the required statements as

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``Register your card for FDIC insurance eligibility and other 
protections. Your funds will be held at or transferred to XYZ Bank, an 
FDIC-insured institution. Once there, your funds are insured up to 
$250,000 by the FDIC in the event XYZ Bank fails, if specific deposit 
insurance requirements are met and your card is registered. See 
fdic.gov/deposit/deposits/prepaid.html for details.'' Conversely, if XYZ 
Bank offers another prepaid account program for sale at retail locations 
for which it conducts consumer identification and verification after 
purchase of the prepaid account, but the program is not set up to be 
eligible for FDIC insurance, XYZ Bank may disclose the required 
statements as ``Not FDIC insured. Your funds will be held at or 
transferred to XYZ Bank. If XYZ Bank fails, you are not protected by 
FDIC deposit insurance and could lose some or all of your money. 
Register your card for other protections.''
    ii. Credit union disclosure of NCUA insurance. For example, ABC 
Credit Union offers a prepaid account program for sale at its own 
branches that is set up to be eligible for NCUA share insurance, but 
does not conduct consumer identification and verification before 
consumers purchase the prepaid account. ABC Credit Union may disclose 
the requirement statements as ``Register your card for NCUA insurance, 
if eligible, and other protections. Your funds will be held at or 
transferred to ABC Credit Union, an NCUA-insured institution. Once 
there, if specific share insurance requirements are met and your card is 
registered, your funds are insured up to $250,000 by the NCUA in the 
event ABC Credit Union fails.'' See comment 18(b)(2)(xi)-1 for guidance 
as to when NCUA insurance coverage should be disclosed instead of FDIC 
insurance coverage.

  18(b)(4)(vii) Regulation Z Disclosures for Overdraft Credit Features

    1. Long form Regulation Z disclosure of overdraft credit features. 
Section 1005.18(b)(4)(vii) requires that the long form include the 
disclosures described in Regulation Z, 12 CFR 1026.60(e)(1), in 
accordance with the requirements for such disclosures in 12 CFR 1026.60, 
if, at any point, a covered separate credit feature accessible by a 
hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61, 
may be offered to a consumer in connection with the prepaid account. If 
the financial institution includes the disclosures described in 
Regulation Z, 12 CFR 1026.60(e)(1), pursuant to Sec.  
1005.18(b)(7)(i)(B), such disclosures must appear below the statements 
required by Sec.  1005.18(b)(4)(vi). If the disclosures provided 
pursuant to Regulation Z, 12 CFR 1026.60(e)(1), are provided in writing, 
these disclosures must be provided in the form required by 12 CFR 
1026.60(a)(2), and to the extent possible, on the same page as the other 
disclosures required by Sec.  1005.18(b)(4).
    2. Updates to the long form for changes to the Regulation Z 
disclosures. Pursuant to Sec.  1005.18(b)(4)(vii), a financial 
institution is not required to revise the disclosure required by that 
paragraph to reflect a change in the fees or other terms disclosed 
therein until such time as the financial institution manufactures, 
prints, or otherwise produces new prepaid account packaging materials or 
otherwise updates the long form disclosure. This exception does not 
extend to any finance charges imposed on the prepaid account as 
described in Regulation Z, 12 CFR 1026.4(b)(11)(ii), in connection with 
a covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined in 12 CFR 1026.61 that are required to be disclosed on 
the long form pursuant to Sec.  1005.18(b)(4)(ii). See comment 
18(b)(4)(ii)-1.

   18(b)(5) Disclosure Requirements Outside the Short Form Disclosure

    1. Content of disclosure. Section 1005.18(b)(5) requires that the 
name of the financial institution, the name of the prepaid account 
program, and any purchase price or activation fee for the prepaid 
account be disclosed outside the short form disclosure. A financial 
institution may, but is not required to, also disclose the name of the 
program manager or other service provider involved in the prepaid 
account program.
    2. Location of disclosure. In addition to setting forth the required 
content for disclosures outside the short form disclosure, Sec.  
1005.18(b)(5) requires that, in a setting other than a retail location, 
the information required by Sec.  1005.18(b)(5) must be disclosed in 
close proximity to the short form. For example, if the financial 
institution provides the short form disclosure online, the information 
required by Sec.  1005.18(b)(5) is deemed disclosed in close proximity 
to the short form if it appears on the same web page as the short form 
disclosure. If the financial institution offers the prepaid account in 
its own branch locations and provides the short form disclosure on the 
exterior of its preprinted packaging materials, the information required 
by Sec.  1005.18(b)(5) is deemed disclosed in close proximity to the 
short form disclosure if it appears on the exterior of the packaging. If 
the financial institution provides a written short form disclosure in a 
manner other than on preprinted packaging materials, such as on paper, 
the information required by Sec.  1005.18(b)(5) is deemed disclosed in 
close proximity if it appears on the same piece of paper as the short 
form disclosure. If the financial institution provides the short form 
disclosure orally, the information required by Sec.  1005.18(b)(5) is 
deemed disclosed in close proximity to the short form disclosure if it 
is

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provided immediately before or after disclosing the fees and information 
required pursuant to Sec.  1005.18(b)(2). For prepaid accounts sold in a 
retail location pursuant to the retail location exception in Sec.  
1005.18(b)(1)(ii), Sec.  1005.18(b)(5) requires the information other 
than purchase price be disclosed on the exterior of the access device's 
packaging material. If the purchase price, if any, is not also disclosed 
on the exterior of the packaging, disclosure of the purchase price on or 
near the sales rack or display for the packaging material is deemed in 
close proximity to the access device's packaging material.

              18(b)(6) Form of Pre-Acquisition Disclosures

                           18(b)(6)(i) General

    1. Written pre-acquisition disclosures. If a financial institution 
provides the disclosures required by Sec.  1005.18(b) in written form 
prior to acquisition pursuant to Sec.  1005.18(b)(1)(i), they need not 
also be provided electronically or orally. For example, an employer 
distributes to new employees printed copies of the disclosures required 
by Sec.  1005.18(b) for a payroll card account, together with 
instructions to complete the payroll card account acquisition process 
online if the employee wishes to be paid via a payroll card account. The 
financial institution is not required to provide the Sec.  1005.18(b) 
disclosures electronically via the website because the consumer has 
already received the disclosures pre-acquisition in written form.

                  18(b)(6)(i)(B) Electronic Disclosures

    1. Providing pre-acquisition disclosures electronically. Unless 
provided in written form prior to acquisition pursuant to Sec.  
1005.18(b)(1)(i), Sec.  1005.18(b)(6)(i)(B) requires electronic delivery 
of the disclosures required by Sec.  1005.18(b) when a consumer acquires 
a prepaid account through electronic means, including via a website or 
mobile application, and, among other things, in a manner which is 
reasonably expected to be accessible in light of how a consumer is 
acquiring the prepaid account. For example, if a consumer is acquiring a 
prepaid account via a website or mobile application, it would be 
reasonable to expect that a consumer would be able to access the 
disclosures required by Sec.  1005.18(b) on the first page or via a 
direct link from the first page of the website or mobile application or 
on the first page that discloses the details about the specific prepaid 
account program. See comment 18(b)(1)(i)-2 for additional guidance on 
placement of the short form and long form disclosures on a web page.
    2. Disclosures responsive to smaller screens. In accordance with the 
requirement in Sec.  1005.18(b)(6)(i)(B) that electronic disclosures be 
provided in a responsive form, electronic disclosures provided pursuant 
to Sec.  1005.18(b) must be provided in a way that responds to different 
screen sizes, for example, by stacking elements of the disclosures in a 
manner that accommodates consumer viewing on smaller screens, while 
still meeting the other formatting requirements set forth in Sec.  
1005.18(b)(7). For example, the disclosures permitted by Sec.  
1005.18(b)(2)(xiv)(B) or (b)(3)(ii) must take up no more than one 
additional line of text in the short form disclosure. If a consumer is 
acquiring a prepaid account using a mobile device with a screen too 
small to accommodate these disclosures on one line of text in accordance 
with the size requirements set forth in Sec.  1005.18(b)(7)(ii)(B), a 
financial institution is permitted to display the disclosures permitted 
by Sec.  1005.18(b)(2)(xiv)(B) and (b)(3)(ii), for example, by stacking 
those disclosures in a way that responds to smaller screen sizes, while 
still meeting the other formatting requirements in Sec.  1005.18(b)(7).
    3. Machine-readable text. Section 1005.18(b)(6)(i)(B) requires that 
electronic disclosures must be provided using machine-readable text that 
is accessible via both Web browsers (or mobile applications, as 
applicable) and screen readers. A disclosure would not be deemed to 
comply with this requirement if it was not provided in a form that can 
be read automatically by internet search engines or other computer 
systems.

                     18(b)(6)(i)(C) Oral Disclosures

    1. Disclosures for prepaid accounts acquired by telephone. Unless it 
provides disclosures in written form prior to acquisition pursuant to 
Sec.  1005.18(b)(1)(i), a financial institution must disclose the 
information required by Sec.  1005.18(b)(2) and (5) orally before a 
consumer acquires a prepaid account orally by telephone pursuant to the 
exception in Sec.  1005.18(b)(1)(iii). A financial institution may, for 
example, provide these disclosures by using an interactive voice 
response or similar system or by using a customer service agent, after 
the consumer has initiated the purchase of a prepaid account by 
telephone, but before the consumer acquires the prepaid account. In 
addition, a financial institution must provide the initial disclosures 
required by Sec.  1005.7, as modified by Sec.  1005.18(f)(1), before the 
first electronic fund transfer is made involving the prepaid account.

                      18(b)(6)(ii) Retainable Form

    1. Retainable disclosures. Section 1005.18(b)(6)(ii) requires that, 
except for disclosures provided orally pursuant to Sec.  
1005.18(b)(1)(ii) or (iii), long form disclosures provided via SMS as 
permitted by Sec.  1005.18(b)(2)(xiii) for a prepaid account sold

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at retail locations pursuant to the retail location exception in Sec.  
1005.18(b)(1)(ii), and the disclosure of a purchase price pursuant to 
Sec.  1005.18(b)(5) that is not disclosed on the exterior of the 
packaging material for a prepaid account sold at a retail location 
pursuant to the retail location exception in Sec.  1005.18(b)(1)(ii), 
disclosures provided pursuant to Sec.  1005.18(b) must be made in a form 
that a consumer may keep. For example, a short form disclosure with a 
tear strip running though it would not be deemed retainable because use 
of the tear strip to gain access to the prepaid account access device 
inside the packaging would destroy part of the short form disclosure. 
Electronic disclosures are deemed retainable if the consumer is able to 
print, save, and email the disclosures from the Web site or mobile 
application on which they are displayed.

                      18(b)(6)(iii) Tabular Format

                 18(b)(6)(iii)(B) Multiple Service Plans

   18(b)(6)(iii)(B)(1) Short Form Disclosure for Default Service Plan

    1. Disclosure of default service plan excludes short-term or 
promotional service plans. Section 1005.18(b)(6)(iii)(B)(1) provides 
that when a financial institution offers multiple service plans within a 
particular prepaid account program and each plan has a different fee 
schedule, the information required by final Sec.  1005.18(b)(2)(i) 
through (ix) may be provided in the tabular format described in final 
Sec.  1005.18(b)(6)(iii)(A) for the service plan in which a consumer is 
initially enrolled by default upon acquiring a prepaid account. Pursuant 
to the requirement in Sec.  1005.18(b)(3)(i) to disclose the highest 
amount a financial institution may impose for a fee disclosed pursuant 
to Sec.  1005.18(b)(2)(i) through (vii) and (ix), a financial 
institution would not be permitted to disclose any short-term or 
promotional service plans as a default service plan.

  18(b)(6)(iii)(B)(2) Short Form Disclosure for Multiple Service Plans

    1. Disclosure of multiple service plans. The multiple service plan 
disclosure requirements in Sec.  1005.18(b)(6)(iii)(B)(2) apply when a 
financial institution offers more than one service plan within a 
particular prepaid account program, each plan has a different fee 
schedule, and the financial institution opts not to disclose the default 
service plan pursuant to Sec.  1005.18(b)(6)(iii)(B)(1). See Model Form 
A-10(e). For example, a financial institution that offers a prepaid 
account program with one service plan for which a consumer pays no 
periodic fee but instead pays a fee for each transaction, and another 
plan that includes a monthly fee but no per transaction fee may use the 
short form disclosure for multiple service plans pursuant to Sec.  
1005.18(b)(6)(iii)(B)(2). Similarly, a financial institution that offers 
a prepaid account program with preferred rates or fees for the prepaid 
accounts of consumers who also use another non-prepaid service (e.g., a 
mobile phone service), often referred to as ``loyalty plans,'' may also 
use the short form disclosure for multiple service plans pursuant to 
Sec.  1005.18(b)(6)(iii)(B)(2). Pricing variations based on whether a 
consumer elects to use a specific feature of a prepaid account, such as 
waiver of the monthly fee for consumers electing to receive direct 
deposit, does not constitute multiple service plans or a loyalty plan. 
See comment 18(b)(3)(iii)-1.ii for guidance on providing a single 
disclosure for like fees for multiple service plan short form 
disclosures.

     18(b)(7) Specific Formatting Requirements for Pre-Acquisition 
                               Disclosures

                          18(b)(7)(i) Grouping

                   18(b)(7)(i)(B) Long Form Disclosure

    1. Conditions must be in close proximity to fee amount. Pursuant to 
Sec.  1005.18(b)(4)(ii), the long form disclosure generally must 
disclose all fees that may be imposed in connection with a prepaid 
account, including the amount of the fee and any conditions under which 
the fee may be imposed, waived, or reduced. Pursuant to Sec.  
1005.18(b)(7)(i)(B), text describing the conditions under which a fee 
may be imposed must appear in the table in the long form disclosure in 
close proximity to the fee amount disclosed pursuant to Sec.  
1005.18(b)(4)(ii). For example, a financial institution is deemed to 
comply with this requirement if the text describing the conditions is 
located directly to the right of the fee amount in the long form 
disclosure, as illustrated in Sample Form A-10(f). See comment 
18(b)(6)(i)(B)-2 regarding stacking of electronic disclosures for 
display on smaller screen sizes.
    2. Category of function for finance charges. Section 
1005.18(b)(7)(i)(B) requires that the information required by Sec.  
1005.18(b)(4)(ii) must be generally grouped together and organized under 
subheadings by the categories of function for which a financial 
institution may impose the fee. If any finance charges may be imposed on 
the prepaid account as described in Regulation Z, 12 CFR 
1026.4(b)(11)(ii), in connection with a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in 12 CFR 1026.61, 
the financial institution may, but is not required to, group all finance 
charges together under a single subheading. This includes situations 
where the financial institution imposes a higher fee or charge on the 
asset feature of a prepaid account with a covered separate credit 
feature accessible by a hybrid prepaid-credit card than the

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amount of a comparable fee or charge it imposes on any prepaid account 
in the same prepaid account program that does not have such a credit 
feature. For example, if a financial institution charges on the prepaid 
account a $0.50 per transaction fee for each transaction that accesses 
funds in the asset feature of a prepaid account and a $1.25 per 
transaction fee for each transaction where the hybrid prepaid-credit 
card accesses credit from the covered separate credit feature in the 
course of the transaction, the financial institution is permitted to 
disclose the $0.50 per transaction fee under a general transactional 
subheading and disclose the additional $0.75 per transaction fee under a 
separate subheading together with any other finance charges that may be 
imposed on the prepaid account.

                    18(b)(7)(ii) Prominence and Size

    1. Minimum type size. Section 1005.18(b)(7)(ii) sets forth minimum 
point/pixel size requirements for each element of the disclosures 
required by Sec.  1005.18(b)(2), (b)(3)(i) and (ii), and (b)(4). A 
financial institution may provide disclosures in a type size larger than 
the required minimum to enhance consumer comprehension in any 
acquisition scenario, as long as the financial institution complies with 
the point/pixel size hierarchy set forth in Sec.  1005.18(b)(7)(ii).
    2. ``Point'' refers to printed disclosures and ``pixel'' refers to 
electronic disclosures. References in Sec.  1005.18(b)(7)(ii) to 
``point'' size correspond to printed disclosures and references to 
``pixel'' size correspond to disclosures provided via electronic means.

                         18(b)(7)(ii)(A) General

    1. Contrast required between type color and background of 
disclosures. Section Sec.  1005.18(b)(7)(ii)(A) requires that all text 
used to disclose information in the short form or in the long form 
disclosure pursuant to Sec.  1005.18(b)(2), (b)(3)(i) and (ii), and 
(b)(4) must be in a single, easy-to-read type that is all black or one 
color and printed on a background that provides a clear contrast. A 
financial institution complies with the color requirements if, for 
example, it provides the disclosures required by Sec.  1005.18(b)(2), 
(b)(3)(i) and (ii), and (b)(4) printed in black type on a white 
background or white type on a black background. Also, pursuant to Sec.  
1005.18(b)(7)(ii)(A), the type and color may differ between the short 
form disclosure and the long form disclosure provided for a particular 
prepaid account program. For example, a financial institution may use 
one font/type style for the short form disclosure for a particular 
prepaid account program and use a different font/type style for the long 
form disclosure for that same prepaid account program. Similarly, a 
financial institution may use black type for the short form disclosure 
for a particular prepaid account program and use blue type for the long 
form disclosure for that same prepaid account program.

                        18(b)(7)(iii) Segregation

    1. Permitted information outside the short form and long form 
disclosures. Section 1005.18(b)(7)(iii) requires that the short form and 
long form disclosures required by Sec.  1005.18(b)(2) and (4) be 
segregated from other information and contain only information that is 
required or permitted for those disclosures by Sec.  1005.18(b). This 
segregation requirement does not prohibit the financial institution from 
providing information elsewhere on the same page as the short form 
disclosure, such as the information required by Sec.  1005.18(b)(5), 
additional disclosures required by state law for payroll card accounts, 
or any other information the financial institution wishes to provide 
about the prepaid account. Similarly, the segregation requirement does 
not prohibit a financial institution from providing the long form 
disclosure on the same page as other disclosures or information, or as 
part of a larger document, such as the prepaid account agreement. See 
also Sec.  1005.18(b)(1) and (f)(1).

           18(b)(8) Terminology of Pre-Acquisition Disclosures

    1. Consistent terminology. Section 1005.18(b)(8) requires that fee 
names and other terms be used consistently within and across the 
disclosures required by Sec.  1005.18(b). For example, a financial 
institution may not name the fee required to be disclosed by Sec.  
1005.18(b)(2)(vii) an ``inactivity fee'' in the short form disclosure 
and a ``dormancy fee'' in the long form disclosure. However, a financial 
institution may substitute the term prepaid ``account'' for the term 
prepaid ``card,'' as appropriate, wherever it is used in Sec.  
1005.18(b).

         18(b)(9) Prepaid Accounts Acquired in Foreign Languages

    1. Prepaid accounts acquired in foreign languages. Section 
1005.18(b)(9)(i) requires a financial institution to provide the pre-
acquisition disclosures required by Sec.  1005.18(b) in a foreign 
language in certain circumstances.
    i. Examples of situations in which foreign language disclosures are 
required. The following examples illustrate situations in which a 
financial institution must provide the pre-acquisition disclosures in a 
foreign language in connection with the acquisition of that prepaid 
account:
    A. The financial institution principally uses a foreign language on 
the packaging material of a prepaid account sold in a retail location or 
distributed at a bank or credit union branch, even though a few words 
appear in English on the packaging.

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    B. The financial institution principally uses a foreign language in 
a television advertisement for a prepaid account. That advertisement 
includes a telephone number a consumer can call to acquire the prepaid 
account, whether by speaking to a customer service representative or 
interacting with an interactive voice response (IVR) system.
    C. The financial institution principally uses a foreign language in 
an online advertisement for a prepaid account. That advertisement 
includes a website URL through which a consumer can acquire the prepaid 
account.
    D. The financial institution principally uses a foreign language on 
a printed advertisement for a prepaid account. That advertisement 
includes a telephone number or a website URL a consumer can call or 
visit to acquire the prepaid account. The pre-acquisition disclosures 
must be provided to the consumer in that same foreign language prior to 
the consumer acquiring the prepaid account.
    E. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market a prepaid 
account. A consumer calls the financial institution and has the option 
to proceed with the prepaid account acquisition process in a foreign 
language, whether by speaking to a customer service representative or 
interacting with an IVR system. (But see Sec.  1005.18(b)(9)(i)(C), 
which limits the obligation to provide foreign language disclosures for 
payroll card accounts and government benefit accounts acquired orally by 
telephone in certain circumstances.)
    F. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market a prepaid 
account. A consumer visits the financial institution's website. On that 
website, the consumer has the option to proceed with the prepaid account 
acquisition process in a foreign language.
    ii. Examples of situations in which foreign language disclosures are 
not required. The following examples illustrate situations in which a 
financial institution is not required to provide the pre-acquisition 
disclosures in a foreign language:
    A. A consumer visits the financial institution's branch location in 
person and speaks to an employee in a foreign language about acquiring a 
prepaid account. The consumer proceeds with the acquisition process in 
that foreign language.
    B. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market a prepaid 
account. A consumer calls the financial institution's customer service 
line and speaks to a customer service representative in a foreign 
language. However, if the customer service representative proceeds with 
the prepaid account acquisition process over the telephone, the 
financial institution would be required to provide the pre-acquisition 
disclosures in that foreign language. (But see Sec.  
1005.18(b)(9)(i)(C), which limits the obligation to provide foreign 
language disclosures for payroll card accounts and government benefit 
accounts acquired orally by telephone in certain circumstances.)
    C. The financial institution principally uses a foreign language in 
an advertisement for a prepaid account. That advertisement includes a 
telephone number a consumer can call to acquire the prepaid account. The 
consumer calls the telephone number provided on the advertisement and 
has the option to proceed with the prepaid account acquisition process 
in English or in a foreign language. The consumer chooses to proceed 
with the acquisition process in English.
    D. A consumer calls a government agency to enroll in a government 
benefits program. The government agency does not offer through its 
telephone system an option for consumers to proceed in a foreign 
language. An employee of the government agency assists the consumer with 
the enrollment process, including helping the consumer acquire a 
government benefits account. The employee also happens to speak the 
foreign language in which the consumer is most comfortable 
communicating, and chooses to communicate with the consumer in that 
language to facilitate the enrollment process. In this case, the 
employee offered language interpretation assistance on an informal or ad 
hoc basis to accommodate the prospective government benefits account 
holder.
    2. Principally used. All relevant facts and circumstances determine 
whether a foreign language is principally used by the financial 
institution to advertise, solicit, or market under Sec.  1005.18(b)(9). 
Whether a foreign language is principally used is determined at the 
packaging material, advertisement, solicitation, or marketing 
communication level, not at the prepaid account program level or across 
the financial institution's activities as a whole. A financial 
institution that advertises a prepaid account program in multiple 
languages would evaluate its use of foreign language in each 
advertisement to determine whether it has principally used a foreign 
language therein.
    3. Advertise, solicit, or market a prepaid account. Any commercial 
message, appearing in any medium, that promotes directly or indirectly 
the availability of prepaid accounts constitutes advertising, 
soliciting, or marketing for purposes of Sec.  1005.18(b)(9). Examples 
illustrating advertising, soliciting, or marketing include, but are not 
limited to:

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    i. Messages in a leaflet, promotional flyer, newspaper, or magazine.
    ii. Electronic messages, such as on a website or mobile application.
    iii. Telephone solicitations.
    iv. Solicitations sent to the consumer by mail or email.
    v. Television or radio commercials.
    4. Information in the long form disclosure in English. Section 
1005.18(b)(9)(ii) states that a financial institution required to 
provide pre-acquisition disclosures in a foreign language pursuant to 
Sec.  1005.18(b)(9)(i) must also provide the information required to be 
disclosed in its pre-acquisition long form disclosure pursuant to Sec.  
1005.18(b)(4) in English upon a consumer's request and on any part of 
the website where it discloses this information in a foreign language. A 
financial institution may, but is not required to, provide the English 
version of the information required by Sec.  1005.18(b)(4) in accordance 
with the formatting, grouping, size and other requirements set forth in 
Sec.  1005.18(b) for the long form disclosure.

               18(c) Access to Prepaid Account Information

    1. Posted transactions. The electronic and written history of the 
consumer's account transactions provided under Sec.  1005.18(c)(1)(ii) 
and (iii), respectively, shall reflect transfers once they have been 
posted to the account. Thus, a financial institution does not need to 
include transactions that have been authorized but that have not yet 
posted to the account.
    2. Electronic history. The electronic history required under Sec.  
1005.18(c)(1)(ii) must be made available in a form that the consumer may 
keep, as required under Sec.  1005.4(a)(1). Financial institutions may 
satisfy this requirement if they make the electronic history available 
in a format that is capable of being retained. For example, a financial 
institution satisfies the requirement if it provides electronic history 
on a website in a format that is capable of being printed or stored 
electronically using a web browser.
    3. Written history. Requests that exceed the requirements of Sec.  
1005.18(c)(1)(iii) for providing written account transaction history, 
and which therefore a financial institution may charge a fee, include 
the following:
    i. A financial institution may assess a fee or charge to a consumer 
for responding to subsequent requests for written account transaction 
history made in a single calendar month. For example, if a consumer 
requests written account transaction history on June 1 and makes another 
request on August 5, the financial institution may not assess a fee or 
charge to the consumer for responding to either request. However, if the 
consumer requests written account transaction history on June 1 and then 
makes another request on June 15, the financial institution may assess a 
fee or charge to the consumer for responding to the request made on June 
15, as this is the second response in the same month.
    ii. If a financial institution maintains more than 24 months of 
written account transaction history, it may assess a fee or charge to 
the consumer for providing a written history for transactions occurring 
more than 24 months preceding the date the financial institution 
receives the consumer's request, provided the consumer specifically 
requests the written account transaction history for that time period.
    iii. If a financial institution offers a consumer the ability to 
request automatic mailings of written account transaction history on a 
monthly or other periodic basis, it may assess a fee or charge for such 
automatic mailings but not for the written account transaction history 
requested pursuant to Sec.  1005.18(c)(1)(iii). See comment 18(c)-6.
    4. 12 months of electronic account transaction history. Section 
1005.18(c)(1)(ii) requires a financial institution to make available at 
least 12 months of account transaction history electronically. If a 
prepaid account has been opened for fewer than 12 months, the financial 
institution need only provide electronic account transaction history 
pursuant to Sec.  1005.18(c)(1)(ii) since the time of account opening. 
If a prepaid account is closed or becomes inactive, as defined by the 
financial institution, the financial institution need not make available 
electronic account transaction history. See comment 9(b)-3. If an 
inactive account becomes active, the financial institution must again 
make available 12 months of electronic account transaction history.
    5. 24 months of written account transaction history. Section 
1005.18(c)(1)(iii) requires a financial institution to provide at least 
24 months of account transaction history in writing upon the consumer's 
request. A financial institution may provide fewer than 24 months of 
written account transaction history if the consumer requests a shorter 
period of time. If a prepaid account has been opened for fewer than 24 
months, the financial institution need only provide written account 
transaction history pursuant to Sec.  1005.18(c)(1)(iii) since the time 
of account opening. Even if a prepaid account is closed or becomes 
inactive, the financial institution must continue to provide upon 
request at least 24 months of written account transaction history 
preceding the date the request is received. When a prepaid account has 
been closed or inactive for 24 months or longer, the financial 
institution is no longer required to provide any written account 
transaction history pursuant to Sec.  1005.18(c)(1)(iii).
    6. Periodic statement alternative for unverified prepaid accounts. 
For prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to provide a 
written

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history of the consumer's account transactions for any prepaid account 
for which the financial institution has not completed its consumer 
identification and verification process as described in Sec.  
1005.18(e)(3)(ii)(A) through (C). If a prepaid account is verified, a 
financial institution must provide written account transaction history 
upon the consumer's request that includes the period during which the 
account was not verified, provided that the period is within the 24-
month time frame specified in Sec.  1005.18(c)(1)(iii).
    7. Inclusion of all fees charged. A financial institution that 
furnishes a periodic statement pursuant to Sec.  1005.9(b) for a prepaid 
account must disclose the amount of any fees assessed against the 
account, whether for electronic fund transfers or otherwise, on the 
periodic statement as well as on any electronic or written account 
transaction history the financial institution makes available or 
provides to the consumer. For example, if a financial institution sends 
periodic statements and also makes available the consumer's electronic 
account transaction history on its website, the financial institution 
must disclose the amount of any fees assessed against the account, 
whether for electronic fund transfers or otherwise, on the periodic 
statement and on the consumer's electronic account transaction history 
made available on its website. Likewise, a financial institution that 
follows the periodic statement alternative in Sec.  1005.18(c)(1) must 
disclose the amount of any fees assessed against the account, whether 
for electronic fund transfers or otherwise, on the electronic history of 
the consumer's account transactions made available pursuant to Sec.  
1005.18(c)(1)(ii) and any written history of the consumer's account 
transactions provided pursuant to Sec.  1005.18(c)(1)(iii).
    8. Summary totals of fees. Section 1005.18(c)(5) requires a 
financial institution to disclose a summary total of the amount of all 
fees assessed by the financial institution against a prepaid account for 
the prior calendar month and for the calendar year to date.
    i. Generally. A financial institution that furnishes a periodic 
statement pursuant to Sec.  1005.9(b) for a prepaid account must display 
the monthly and annual fee totals on the periodic statement as well as 
on any electronic or written account transaction history the financial 
institution makes available or provides to the consumer. For example, if 
a financial institution sends periodic statements and also makes 
available the consumer's electronic account transaction history on its 
website, the financial institution must display the monthly and annual 
fee totals on the periodic statement and on the consumer's electronic 
account transaction history made available on its website. Likewise, a 
financial institution that follows the periodic statement alternative in 
Sec.  1005.18(c)(1) must display the monthly and annual fee totals on 
the electronic history of the consumer's account transactions made 
available pursuant to Sec.  1005.18(c)(1)(ii) and any written history of 
the consumer's account transactions provided pursuant to Sec.  
1005.18(c)(1)(iii). If a financial institution provides periodic 
statements pursuant to Sec.  1005.9(b), fee totals may be disclosed for 
each statement period rather than each calendar month, if different. The 
summary totals of fees should be net of any fee reversals.
    ii. Third-party fees. A financial institution may, but is not 
required to, include third-party fees in its summary totals of fees 
provided pursuant to Sec.  1005.18(c)(5). For example, a financial 
institution must include in the summary totals of fees the fee it 
charges a consumer for using an out-of-network ATM, but it need not 
include any fee charged by an ATM operator, with whom the financial 
institution has no relationship, for the consumer's use of that 
operator's ATM. Similarly, a financial institution need not include in 
the summary totals of fees the fee charged by a third-party reload 
network for the service of adding cash to a prepaid account at a point-
of-sale terminal. A financial institution may, but is not required to, 
inform consumers of third-party fees such as by providing a disclaimer 
to indicate that the summary totals do not include certain third-party 
fees or to explain when third-party fees may occur or through some other 
method.
    9. Display of summary totals of fees. A financial institution may, 
but is not required to, also include sub-totals of the types of fees 
that make up the summary totals of fees as required by Sec.  
1005.18(c)(5). For example, if a financial institution distinguishes 
optional fees (e.g., custom card design fees) from fees to use the 
account, in displaying the summary totals of fees, the financial 
institution may include sub-totals of those fees, provided the financial 
institution also presents the combined totals of all fees.

      18(e) Modified Limitations on Liability and Error Resolution 
                              Requirements

    1. Error resolution safe harbor provision. Institutions that choose 
to investigate notices of error provided up to 120 days from the date a 
transaction has posted to a consumer's account may still disclose the 
error resolution time period required by the regulation (as set forth in 
the model clause in paragraph (b) of appendix A-7 of this part). 
Specifically, an institution may disclose to prepaid account holders 
that the institution will investigate any notice of error provided 
within 60 days of the consumer electronically accessing an account or 
receiving a written history upon request that reflects

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the error, even if, for some or all transactions, the institution 
investigates any notice of error provided up to 120 days from the date 
that the transaction alleged to be in error has posted to the consumer's 
account. Similarly, an institution's summary of the consumer's liability 
(as required under Sec.  1005.7(b)(1)) may disclose that liability is 
based on the consumer providing notice of error within 60 days of the 
consumer electronically accessing an account or receiving a written 
history reflecting the error, even if, for some or all transactions, the 
institution allows a consumer to assert a notice of error up to 120 days 
from the date of posting of the alleged error.
    2. Electronic access. A consumer is deemed to have accessed a 
prepaid account electronically when the consumer enters a user 
identification code or password or otherwise complies with a security 
procedure used by an institution to verify the consumer's identity and 
to provide access to a website or mobile application through which 
account information can be viewed. An institution is not required to 
determine whether a consumer has in fact accessed information about 
specific transactions to trigger the beginning of the 60-day periods for 
liability limits and error resolution under Sec. Sec.  1005.6 and 
1005.11. A consumer is not deemed to have accessed a prepaid account 
electronically when the consumer receives an automated text message or 
other automated account alert, or checks the account balance by 
telephone.
    3. Untimely notice of error. An institution that provides a 
transaction history under Sec.  1005.18(c)(1) is not required to comply 
with the requirements of Sec.  1005.11 for any notice of error from the 
consumer received more than 60 days after the earlier of the date the 
consumer electronically accesses the account transaction history or the 
date the financial institution sends a written account transaction 
history upon the consumer's request. (Alternatively, as provided in 
Sec.  1005.18(e)(2)(ii), an institution need not comply with the 
requirements of Sec.  1005.11 with respect to any notice of error 
received from the consumer more than 120 days after the date of posting 
of the transfer allegedly in error.) Where the consumer's assertion of 
error involves an unauthorized EFT, however, the institution must comply 
with Sec.  1005.6 (including the extension of time limits in Sec.  
1005.6(b)(4)) before it may impose any liability on the consumer.
    4. Verification of accounts. Section 1005.18(e)(3)(i) provides that 
for prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to comply with 
the liability limits and error resolution requirements in Sec. Sec.  
1005.6 and 1005.11 for any prepaid account for which it has not 
successfully completed its consumer identification and verification 
process. Consumer identifying information may include the consumer's 
full name, address, date of birth, and Social Security number or other 
government-issued identification number. Section 1005.18(e)(3)(iii) 
provides that once a financial institution successfully completes its 
consumer identification and verification process with respect to a 
prepaid account, the financial institution must limit the consumer's 
liability for unauthorized transfers and resolve errors that occur 
following verification in accordance with Sec.  1005.6 or Sec.  1005.11, 
or the modified timing requirements in Sec.  1005.18(e), as applicable. 
A financial institution is not required to limit a consumer's liability 
for unauthorized transfers or resolve errors that occur prior to the 
financial institution's successful completion of its consumer 
identification and verification process with respect to a prepaid 
account.
    5. Financial institution has not successfully completed 
verification. Section 1005.18(e)(3)(ii)(A) states that, provided it 
discloses to the consumer the risks of not registering and verifying a 
prepaid account, a financial institution has not successfully completed 
its consumer identification and verification process where it has not 
concluded the process with respect to a particular prepaid account. For 
example, a financial institution initiates its consumer identification 
and verification process by collecting identifying information about a 
consumer, and attempts to verify the consumer's identity. The financial 
institution is unable to conclude the process because of conflicting 
information about the consumer's current address. The financial 
institution informs the consumer about the nature of the information at 
issue and requests additional documentation, but the consumer does not 
provide the requested documentation. As long as the information needed 
to complete the verification process remains outstanding, the financial 
institution has not concluded its consumer identification and 
verification process with respect to that consumer. A financial 
institution may not delay completing its consumer identification and 
verification process or refuse to verify a consumer's identity based on 
the consumer's assertion of an error.
    6. Account verification prior to acquisition. A financial 
institution that collects and verifies consumer identifying information, 
or that obtains such information after it has been collected and 
verified by a third party, prior to or as part of the account 
acquisition process, is deemed to have successfully completed its 
consumer identification and verification process with respect to that 
account. For example, a university contracts with a financial 
institution to disburse financial aid to students via the financial 
institution's prepaid accounts. To facilitate

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the accurate disbursal of aid awards, the university provides the 
financial institution with identifying information about the 
university's students, whose identities the university had previously 
verified. The financial institution is deemed to have successfully 
completed its consumer identification and verification process with 
respect to those accounts.

             18(f) Disclosure of Fees and Other Information

    1. Initial disclosure of fees and other information. Section 
1005.18(f)(1) requires a financial institution to include, as part of 
the initial disclosures given pursuant to Sec.  1005.7, all of the 
information required to be disclosed in its pre-acquisition long form 
disclosure pursuant to Sec.  1005.18(b)(4). Section 1005.18(b)(4)(ii) 
requires a financial institution to disclose in its pre-acquisition long 
form disclosure all fees imposed in connection with a prepaid account. 
Section 1005.18(b)(4) also contains several specific statements that 
must be provided as part of the long form disclosure. A financial 
institution may, but is not required to, disclose the information 
required by Sec.  1005.18(b)(4) in accordance with the formatting, 
grouping, size and other requirements set forth in Sec.  1005.18(b) for 
the long form disclosure as part of its initial disclosures provided 
pursuant to Sec.  1005.7; a financial institution may choose to do so, 
however, in order to satisfy other requirements in Sec.  1005.18. See, 
e.g., Sec.  1005.18(b)(1)(ii) regarding the retail location exception.
    2. Changes to the Regulation Z disclosures for overdraft credit 
features. Pursuant to Sec.  1005.18(f)(2), if a financial institution 
provides pursuant Sec.  1005.18(f)(1) the Regulation Z disclosures 
required by Sec.  1005.18(b)(4)(vii) for an overdraft credit feature, 
the financial institution is not required to provide a change-in-terms 
notice solely to reflect a change in the fees or other terms disclosed 
therein. This exception does not extend to any finance charges imposed 
on the prepaid account as described in Regulation Z, 12 CFR 
1026.4(b)(11)(ii), in connection with a covered separate credit feature 
accessible by a hybrid prepaid-credit card as defined in 12 CFR 1026.61 
that are required to be disclosed pursuant to Sec.  1005.18(b)(4)(ii). 
See comment 18(b)(4)(ii)-1.
    3. Web site and telephone number on a prepaid account access device. 
Section 1005.18(f)(3) requires that the name of a financial institution 
and the Web site URL and a telephone number that a consumer can use to 
contact the financial institution about the prepaid account must be 
disclosed on the prepaid account access device. A disclosure made on an 
accompanying document, such as a terms and conditions document, on 
packaging material surrounding an access device, or on a sticker or 
other label affixed to an access device does not constitute a disclosure 
on the access device. The financial institution must provide this 
information to allow consumers to, for example, contact the financial 
institution to learn about the terms and conditions of the prepaid 
account, obtain prepaid account balance information, request a copy of 
transaction history pursuant to Sec.  1005.18(c)(1)(iii) if the 
financial institution does not provide periodic statements pursuant to 
Sec.  1005.9(b), or to notify the financial institution when the 
consumer believes that an unauthorized electronic fund transfer has 
occurred as required by Sec. Sec.  1005.7(b)(2) and 1005.18(d)(1)(ii).

    18(g) Prepaid Accounts Accessible by Hybrid Prepaid-Credit Cards

    1. Covered separate credit feature accessible by a hybrid prepaid-
credit card. Regulation Z, 12 CFR 1026.61, defines the term covered 
separate credit feature accessible by a hybrid prepaid-credit card.
    2. Asset feature. i. Regulation Z, 12 CFR 1026.61(a)(5)(ii), defines 
the term asset feature.
    ii. Section 1005.18(g) applies to account terms, conditions, and 
features that apply to the asset feature of the prepaid account. Section 
1005.18(g) does not apply to the account terms, conditions, or features 
that apply to the covered separate credit feature, regardless of whether 
it is structured as a separate credit account or as a credit subaccount 
of the prepaid account that is separate from the asset feature of the 
prepaid account.
    3. Scope of Sec.  1005.18(g). Under Sec.  1005.18(g), a financial 
institution may offer different terms on different prepaid account 
programs. For example, the terms may differ between a prepaid account 
program where a covered separate credit feature accessible by a hybrid 
prepaid-credit card is not offered in connection with any prepaid 
accounts within the prepaid account program, and a prepaid account 
program where a covered separate credit feature accessible by a hybrid 
prepaid-credit card may be offered to some consumers in connection with 
their prepaid accounts.
    4. Variation in account terms, conditions, or features. i. Account 
terms, conditions, and features subject to Sec.  1005.18(g) include, but 
are not limited to:
    A. Interest paid on funds deposited into the asset feature of the 
prepaid account, if any;
    B. Fees or charges imposed on the asset feature of the prepaid 
account. See comment 18(g)-5 for additional guidance on how Sec.  
1005.18(g) applies to fees or charges imposed on the asset feature of 
the prepaid account.
    C. The type of access device provided to the consumer. For instance, 
an institution may not provide a PIN-only card on prepaid accounts 
without a covered separate credit

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feature that is accessible by a hybrid prepaid-credit card, while 
providing a prepaid card with both PIN and signature-debit functionality 
for prepaid accounts in the same prepaid account program with such a 
credit feature;
    D. Minimum balance requirements on the asset feature of the prepaid 
account; or
    E. Account features offered in connection with the asset feature of 
the prepaid account, such as online bill payment services.
    5. Fees. i. With respect to a prepaid account program where 
consumers may be offered a covered separate credit feature accessible by 
a hybrid prepaid-credit card as defined by Regulation Z, 12 CFR 1026.61, 
Sec.  1005.18(g) only permits a financial institution to charge the same 
or higher fees on the asset feature of a prepaid account with a covered 
separate credit feature than the amount of a comparable fee it charges 
on prepaid accounts in the same prepaid account program that do not have 
a such a credit feature. Section 1005.18(g) prohibits a financial 
institution from imposing a lower fee or charge on prepaid accounts with 
a covered separate credit feature than the amount of a comparable fee or 
charge it charges on prepaid accounts in the same prepaid account 
program without such a credit feature. With regard to a covered separate 
credit feature and an asset feature of a prepaid account that are both 
accessible by a hybrid prepaid-credit card as defined in Regulation Z, 
12 CFR 1026.61, a fee or charge imposed on the asset feature of the 
prepaid account generally is a finance charge under Regulation Z (12 CFR 
part 1026) to the extent that the amount of the fee or charge exceeds 
the amount of a comparable fee or charge imposed on prepaid accounts in 
the same prepaid account program that do not have such a credit feature. 
See Regulation Z, 12 CFR 1026.4(b)(11)(ii). With regard to a covered 
separate credit feature and an asset feature of a prepaid account that 
are both accessible by a hybrid prepaid-credit card as defined in 
Regulation Z, 12 CFR 1026.61, this comment below provides illustrations 
of how Sec.  1005.18(g) applies to fees or charges imposed on the asset 
feature of a prepaid account. The term ``non-covered separate credit 
feature'' refers to a separate credit feature that is not accessible by 
a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61.
    ii. The following examples illustrate how Sec.  1005.18(g) applies 
to per transaction fees for each transaction to access funds available 
in the asset feature of the prepaid account.
    A. Assume that a consumer has selected a prepaid account program 
where a covered separate credit feature accessible by a hybrid prepaid-
credit card may be offered. For prepaid accounts without such a credit 
feature, the financial institution charges $0.50 for each transaction 
conducted that accesses funds available in the prepaid account. For 
prepaid accounts with a credit feature, the financial institution also 
charges $0.50 on the asset feature for each transaction conducted that 
accesses funds available in the asset feature of the prepaid account. In 
this case, for purposes of Sec.  1005.18(g), the financial institution 
is imposing the same fee for each transaction that accesses funds in the 
asset feature of the prepaid account, regardless of whether the prepaid 
account has a covered separate credit feature accessible by a hybrid 
prepaid-credit card. Also, with regard to a covered separate credit 
feature and an asset feature of a prepaid account that are both 
accessible by a hybrid prepaid-credit card as those terms are defined in 
Regulation Z, 12 CFR 1026.61, the $0.50 per transaction fee imposed on 
the asset feature for each transaction that accesses funds available in 
the asset feature of the prepaid account is not a finance charge under 
12 CFR 1026.4(b)(11)(ii). See Regulation Z, 12 CFR 1026.4(b)(11)(ii) and 
comment 4(b)(11)(ii)-1, for a discussion of the definition of finance 
charge with respect to fees or charges imposed on the asset feature of a 
prepaid account with regard to a covered separate credit feature and an 
asset feature of a prepaid account that are both accessible by a hybrid 
prepaid-credit card as defined in 12 CFR 1026.61.
    B. Same facts as in paragraph A, except that for prepaid accounts 
with a covered separate credit feature, the financial institution 
imposes a $1.25 fee for each transaction conducted that accesses funds 
available in the asset feature of the prepaid account. In this case, the 
financial institution is permitted to charge a higher fee under Sec.  
1005.18(g)(2) on prepaid accounts with a covered separate credit feature 
than it charges on prepaid accounts without such a credit feature. The 
$0.75 excess is a finance charge under Regulation Z, 12 CFR 
1026.4(b)(11)(ii).
    C. Same facts as in paragraph A, except that for prepaid accounts 
with a covered separate credit feature, the financial institution 
imposes a $0.25 fee for each transaction conducted that accesses funds 
available in the asset feature of the prepaid account. In this case, the 
financial institution is in violation of Sec.  1005.18(g) because it is 
imposing a lower fee on the asset feature of a prepaid account with a 
covered separate credit feature than it imposes on prepaid accounts in 
the same program without such a credit feature.
    iii. Where the hybrid prepaid-credit card accesses credit from a 
covered separate credit feature in the course of authorizing, settling, 
or otherwise completing a transaction conducted with the card to obtain 
goods or services, obtain cash, or conduct person-to-person transfers, 
any per transaction fees imposed on the asset feature of prepaid 
accounts, including load and transfer fees, with such a credit feature 
are comparable only to per transaction fees for each transaction to

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access funds in the asset feature of a prepaid account that are imposed 
on prepaid accounts in the same prepaid account program that does not 
have such a credit feature. Per transaction fees for a transaction that 
is conducted to load or draw funds into a prepaid account from a source 
other than the funds in the asset feature are not comparable for 
purposes of Sec.  1005.18(g). To illustrate:
    A. Assume a financial institution charges $0.50 on prepaid accounts 
for each transaction that accesses funds in the asset feature of the 
prepaid accounts without a covered separate credit feature. Also, assume 
that the financial institution charges $0.50 per transaction on the 
asset feature of prepaid accounts in the same prepaid program where the 
hybrid prepaid-credit card accesses credit from a covered separate 
credit feature in the course of a transaction. In this case, for 
purposes of Sec.  1005.18(g), the financial institution is imposing the 
same fee for each transaction it pays, regardless of whether the 
transaction accesses funds available in the asset feature of the prepaid 
accounts without a covered separate credit feature, or is paid from 
credit from a covered separate credit feature in the course of 
authorizing, settling, or otherwise completing a transaction conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers. Also, for purposes of Regulation Z, 12 CFR 
1026.4(b)(11)(ii), the $0.50 per transaction fee imposed on the asset 
feature of the prepaid account with a covered separate credit feature is 
not a finance charge.
    B. Assume same facts as in paragraph A above, except that assume the 
financial institution charges $1.25 on the asset feature of a prepaid 
account for each transaction where the hybrid prepaid-credit card 
accesses credit from the covered separate credit feature in the course 
of the transaction. The financial institution is permitted to charge the 
higher fee under Sec.  1005.18(g) for transactions that access the 
covered separate credit feature in the course of the transaction than 
the amount of the comparable fee it charges for each transaction that 
accesses funds available in the asset feature of the prepaid accounts 
without such a credit feature. The $0.75 excess is a finance charge 
under Regulation Z, 12 CFR 1026.4(b)(11)(ii).
    C. Same facts as in paragraph A, except that the financial 
institution imposes $0.25 on the asset feature of the prepaid account 
for each transaction conducted where the hybrid prepaid-credit card 
accesses credit from the covered separate credit feature in the course 
of the transaction. In this case, the financial institution is in 
violation of Sec.  1005.18(g) because it is imposing a lower fee on the 
asset feature of a prepaid account with a covered separate credit 
feature than the amount of the comparable fee it imposes on prepaid 
accounts in the same program without such a credit feature.
    D. Assume a financial institution charges $0.50 on prepaid accounts 
for each transaction that accesses funds in the asset feature of the 
prepaid accounts without a covered separate credit feature. Assume also 
that the financial institution charges both a $0.50 per transaction fee 
and a $1.25 transfer fee on the asset feature of prepaid accounts in the 
same prepaid program where the hybrid prepaid-credit card accesses 
credit from a covered separate credit feature in the course of a 
transaction. In this case, both fees charged on a per-transaction basis 
for the credit transaction (i.e., a combined fee of $1.75 per 
transaction) must be compared to the $0.50 per transaction fee to access 
funds in the asset feature of the prepaid account without a covered 
separate credit feature. The financial institution is permitted to 
charge a higher fee under Sec.  1005.18(g) for transactions that access 
the covered separate credit feature in the course of the transaction 
than the amount of the comparable fee it charges for each transaction 
that accesses funds available in the asset feature of the prepaid 
accounts without such a credit feature. The $1.25 excess is a finance 
charge under Regulation Z, 12 CFR 1026.4(b)(11)(ii).
    E. Assume same facts as in paragraph D above, except that assume the 
financial institution also charges a load fee of $1.25 whenever funds 
are transferred or loaded from a separate asset account, such as from a 
deposit account via a debit card, in the course of a transaction on 
prepaid accounts without a covered separate credit feature, in addition 
to charging a $0.50 per transaction fee. In this case, both fees charged 
on a per-transaction basis for the credit transaction (i.e., a combined 
fee of $1.75 per transaction) must be compared to the per transaction 
fee (i.e., the fee of $0.50) to access funds available in the asset 
feature of the prepaid accounts on a prepaid account without a covered 
separate credit feature. Per transaction fees for a transaction that is 
conducted by drawing funds into a prepaid account from some other source 
(i.e., the fee of $1.25) are not comparable for purposes of Sec.  
1005.18(g). The financial institution is permitted to charge a higher 
fee under Sec.  1005.18(g) for transactions that access the covered 
separate credit feature in the course of the transaction than the amount 
of the comparable fee it charges for each transaction to access funds 
available in the asset feature of the prepaid accounts without such a 
credit feature. The $1.25 excess is a finance charge under Regulation Z, 
12 CFR 1026.4(b)(11)(ii).
    iv. A consumer may choose in a particular circumstance to draw or 
transfer credit from the covered separate credit feature outside the 
course of a transaction conducted with the card to obtain goods or 
service, obtain cash, or conduct person-to-person transfers.

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For example, a consumer may use the prepaid card at the financial 
institution's Web site to load funds from the covered separate credit 
feature outside the course of a transaction conducted with the card to 
obtain goods or services, obtain cash, or conduct person-to-person 
transfers. See Regulation Z, 12 CFR 1026.61(a)(2)(i)(B) and comment 
61(a)(2)-4.ii. In these situations, load or transfer fees imposed for 
draws or transfers of credit from the covered separate credit feature 
outside the course of a transaction are compared only with fees, if any, 
to load funds as a direct deposit of salary from an employer or a direct 
deposit of government benefits that are charged on prepaid accounts 
without a covered separate credit feature. Fees imposed on prepaid 
accounts without a covered separate credit feature for a one-time load 
or transfer of funds from a separate asset account or from a non-covered 
separate credit feature are not comparable for purposes of Sec.  
1005.18(g). To illustrate:
    A. Assume a financial institution charges a $1.25 load fee to 
transfer funds from a non-covered separate credit feature, such as a 
non-covered separate credit card account, into prepaid accounts that do 
not have a covered separate credit feature and does not charge a fee for 
a direct deposit of salary from an employer or a direct deposit of 
government benefits on those prepaid accounts. Assume the financial 
institution charges $1.25 on the asset feature of a prepaid account with 
a covered separate credit feature to load funds from the covered 
separate credit feature outside the course of a transaction. In this 
case, the load or transfer fees imposed for draws or transfers of credit 
from the covered separate credit feature outside the course of a 
transaction (i.e., the fee of $1.25) is compared with the fees to load 
funds as a direct deposit of salary from an employer or a direct deposit 
of government benefits that are charged on prepaid accounts without a 
covered separate credit feature (i.e., the fee of $0). Fees imposed on 
prepaid accounts without a covered separate credit feature for a one-
time load or transfer of funds from a separate asset account (i.e., the 
fee of $1.25) is not comparable for purposes of Sec.  1005.18(g). In 
this case, the financial institution is permitted to charge a higher fee 
under Sec.  1005.18(g) for transactions that access the covered separate 
credit feature on prepaid accounts with a credit feature than the amount 
of the comparable fee it charges on prepaid accounts in the same program 
without such a credit feature. The $1.25 fee imposed on the asset 
feature of the prepaid account with a separate credit feature is a 
finance charge under Regulation Z, 12 CFR 1026.4(b)(11)(ii).
    B. Assume that a financial institution charges a $1.25 load fee for 
a one-time transfer of funds from a separate asset account, such as from 
a deposit account via a debit card, to a prepaid account without a 
covered separate credit feature and does not charge a fee for a direct 
deposit of salary from an employer or a direct deposit of government 
benefits on those prepaid accounts. Assume the financial institution 
charges $1.25 on the asset feature of a prepaid account with a covered 
separate credit feature to load funds from the covered separate credit 
feature outside the course of a transaction. In this case, the load or 
transfer fees imposed for draws or transfers of credit from the covered 
separate credit feature outside the course of a transaction (i.e., the 
fee of $1.25) is compared with the fees to load funds as a direct 
deposit of salary from an employer or a direct deposit of government 
benefits that are charged on prepaid accounts without a covered separate 
credit feature (i.e., the fee of $0). Fees imposed on prepaid accounts 
without a covered separate credit feature for a one-time load or 
transfer of funds from a separate asset account (i.e., the fee of $1.25) 
is not comparable for purposes of Sec.  1005.18(g). In this case, the 
financial institution is permitted to charge a higher fee under Sec.  
1005.18(g) for transactions that access the covered separate credit 
feature on prepaid accounts with a credit feature than the amount of the 
comparable fee it charges on prepaid accounts in the same program 
without such a credit feature. The $1.25 fee imposed on the asset 
feature of the prepaid account with a covered separate credit feature is 
a finance charge under Regulation Z, 12 CFR 1026.4(b)(11)(ii).

    18(h) Effective Date and Special Transition Rules for Disclosure 
                               Provisions

    1. Disclosures not on prepaid account access devices and prepaid 
account packaging materials. Section 1005.18(h)(1) provides that, except 
as provided in Sec.  1005.18(h)(2) and (3), the disclosure requirements 
of subpart A, as modified by Sec.  1005.18, apply to prepaid accounts as 
defined in Sec.  1005.2(b)(3), including government benefit accounts 
subject to Sec.  1005.15, beginning April 1, 2019. This effective date 
applies to disclosures made available or provided to consumers 
electronically, orally by telephone, or in a form other than on pre-
printed materials, such as disclosures printed on paper by a financial 
institution upon a consumer's request.
    2. Disclosures on prepaid account access devices and prepaid account 
packaging materials. Section 1005.18(h)(2)(i) provides that the 
disclosure requirements of subpart A, as modified by Sec.  1005.18, do 
not apply to any disclosures that are provided, or that would otherwise 
be required to be provided, on prepaid account access devices, or on, 
in, or with prepaid account packaging materials that were manufactured, 
printed, or otherwise produced in the normal course of business prior to 
April 1, 2019. This includes, for example, disclosures contained on or 
in packages for

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prepaid accounts sold at retail, or disclosures for payroll card 
accounts or government benefit accounts that are distributed to 
employees or benefits recipients in packages or envelopes. Disclosures 
on, in, or with access devices or packaging materials that are 
manufactured, printed, or otherwise produced on or after April 1, 2019 
must comply with all the requirements of subpart A.
    3. Form of notice to consumers. A financial institution that is 
required to notify consumers of a change in terms and conditions 
pursuant to Sec.  1005.18(h)(2)(ii) or (iii), or that otherwise provides 
updated initial disclosures as a result of Sec.  1005.18(h)(1) taking 
effect, may provide the notice or disclosures either as a separate 
document or included in another notice or mailing that the consumer 
receives regarding the prepaid account to the extent permitted by other 
laws and regulations.
    4. Ability to contact the consumer. A financial institution that has 
not obtained the consumer's contact information is not required to 
comply with the requirements set forth in Sec.  1005.18(h)(2)(ii) or 
(iii). A financial institution is able to contact the consumer when, for 
example, it has the consumer's mailing address or email address.
    5. Closed and inactive prepaid accounts. The requirements of Sec.  
1005.18(h)(2)(iii) do not apply to prepaid accounts that are closed or 
inactive, as defined by the financial institution. However, if an 
inactive account becomes active, the financial institution must comply 
with the requirements of Sec.  1005.18(h)(2)(ii) within 30 days of the 
account becoming active again in order to avail itself of the timing 
requirements and accommodations set forth in Sec.  1005.18(h)(2)(iii) 
and (iv).
    6. Account information not available on April 1, 2019. i. Electronic 
and written account transaction history. A financial institution 
following the periodic statement alternative in Sec.  1005.18(c) must 
make available 12 months of electronic account transaction history 
pursuant to Sec.  1005.18(c)(1)(ii) and must provide 24 months of 
written account transaction history upon request pursuant to Sec.  
1005.18(c)(1)(iii) beginning April 1, 2019. If, on April 1, 2019, the 
financial institution does not have readily accessible the data 
necessary to make available or provide the account histories for the 
required time periods, the financial institution may make available or 
provide such histories using the data for the time period it has until 
the financial institution has accumulated the data necessary to comply 
in full with the requirements set forth in Sec.  1005.18(c)(1)(ii) and 
(iii). For example, a financial institution that had been retaining only 
60 days of account history before April 1, 2019 would provide 60 days of 
written account transaction history upon a consumer's request on April 
1, 2019. If, on May 1, 2019, the consumer made another request for 
written account transaction history, the financial institution would be 
required to provide three months of account history. The financial 
institution must continue to provide as much account history as it has 
accumulated at the time of a consumer's request until it has accumulated 
24 months of account history. Thus, all financial institutions must 
fully comply with the electronic account transaction history requirement 
set forth in Sec.  1005.18(c)(1)(ii) no later than April 1, 2020 and 
must fully comply with the written account transaction history 
requirement set forth in Sec.  1005.18(c)(1)(iii) no later than April 1, 
2021.
    ii. Summary totals of fees. A financial institution must display a 
summary total of the amount of all fees assessed by the financial 
institution on the consumer's prepaid account for the prior calendar 
month and for the calendar year to date pursuant to Sec.  1005.18(c)(5) 
beginning April 1, 2019. If, on April 1, 2019, the financial institution 
does not have readily accessible the data necessary to calculate the 
summary totals of fees for the prior calendar month or the calendar year 
to date, the financial institution may provide the summary totals using 
the data it has until the financial institution has accumulated the data 
necessary to display the summary totals as required by Sec.  
1005.18(c)(5). That is, the financial institution would first display 
the monthly fee total beginning on May 1, 2019 for the month of April, 
and the year-to-date fee total beginning on April 1, 2019, provided the 
financial institution discloses that it is displaying the year-to-date 
total beginning on April 1, 2019 rather than for the entire calendar 
year 2019. On January 1, 2020, financial institutions must begin 
displaying year-to-date fee totals for calendar year 2020.

     Section 1005.19 Internet Posting of Prepaid Account Agreements

                            19(a) Definitions

                           19(a)(1) Agreement

    1. Provisions contained in separate documents included. Section 
1005.19(a)(1) defines a prepaid account agreement, for purposes of Sec.  
1005.19, as the written document or documents evidencing the terms of 
the legal obligation, or the prospective legal obligation, between a 
prepaid account issuer and a consumer for a prepaid account. An 
agreement may consist of several documents that, taken together, define 
the legal obligation between the issuer and consumer.

                             19(a)(2) Amends

    1. Substantive changes. A change to an agreement is substantive, and 
therefore is deemed an amendment of the agreement, if it alters the 
rights or obligations of the parties. Section 1005.19(a)(2) provides 
that any

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change in the fee information, as defined in Sec.  1005.19(a)(3), is 
deemed to be substantive. Examples of other changes that generally would 
be considered substantive include:
    i. Addition or deletion of a provision giving the issuer or consumer 
a right under the agreement, such as a clause that allows an issuer to 
unilaterally change the terms of an agreement.
    ii. Addition or deletion of a provision giving the issuer or 
consumer an obligation under the agreement, such as a clause requiring 
the consumer to pay an additional fee.
    iii. Changes that may affect the cost of the prepaid account to the 
consumer, such as changes in a provision describing how the prepaid 
account's monthly fee will be calculated.
    iv. Changes that may affect how the terms of the agreement are 
construed or applied, such as changes to a choice of law provision.
    v. Changes that may affect the parties to whom the agreement may 
apply, such as changes to provisions regarding authorized users or 
assignment of the agreement.
    vi. Changes to the corporate name of the issuer or program manager, 
or to the issuer's address or identifying number, such as its RSSD ID 
number or tax identification number.
    vii. Changes to the list of names of other relevant parties, such as 
the employer for a payroll card program or the agency for a government 
benefit program. But see Sec.  1005.19(b)(2)(ii) regarding the timing of 
submitting such changes to the Bureau.
    viii. Changes to the name of the prepaid account program to which 
the agreement applies.
    2. Non-substantive changes. Changes that generally would not be 
considered substantive include, for example:
    i. Correction of typographical errors that do not affect the meaning 
of any terms of the agreement.
    ii. Changes to the issuer's corporate logo or tagline.
    iii. Changes to the format of the agreement, such as conversion to a 
booklet from a full-sheet format, changes in font, or changes in 
margins.
    iv. Reordering sections of the agreement without affecting the 
meaning of any terms of the agreement.
    v. Adding, removing, or modifying a table of contents or index.
    vi. Changes to titles, headings, section numbers, or captions.

                             19(a)(4) Issuer

    1. Issuer. Section 1005.19(a)(4) provides that, for purposes of 
Sec.  1005.19, issuer or prepaid account issuer means the entity to 
which a consumer is legally obligated, or would be legally obligated, 
under the terms of a prepaid account agreement. For example, Bank X and 
Bank Y work together to issue prepaid accounts. A consumer that obtains 
a prepaid account issued pursuant to this arrangement between Bank X and 
Bank Y is subject to an agreement that states ``This is an agreement 
between you, the consumer, and Bank X that governs the terms of your 
Bank Y Prepaid Account.'' The prepaid account issuer in this example is 
Bank X, because the agreement creates a legally enforceable obligation 
between the consumer and Bank X. Bank X is the issuer even if the 
consumer applied for the prepaid account through a link on Bank Y's 
website and the cards prominently feature the Bank Y logo on the front 
of the card.
    2. Use of third-party service providers. An issuer has a legal 
obligation to comply with the requirements of Sec.  1005.19. However, an 
issuer generally may use a third-party service provider to satisfy its 
obligations under Sec.  1005.19, provided that the issuer acts in 
accordance with regulatory guidance regarding use of third-party service 
providers and other applicable regulatory guidance. In some cases, an 
issuer may wish to arrange for the entity with which it partners to 
issue prepaid accounts to fulfill the requirements of Sec.  1005.19 on 
the issuer's behalf. For example, Program Manager and Bank work together 
to issue prepaid accounts. Under the Sec.  1005.19(a)(4) definition of 
issuer, Bank is the issuer of these prepaid accounts for purposes of 
Sec.  1005.19. However, Program Manager services the prepaid accounts, 
including mailing to consumers account opening materials and making 
available to consumers their electronic account transaction history, 
pursuant to Sec.  1005.18(c)(1)(ii). While Bank is responsible for 
ensuring compliance with Sec.  1005.19, Bank may arrange for Program 
Manager (or another appropriate third-party service provider) to make 
submissions of prepaid account agreements to the Bureau under Sec.  
1005.19 on Bank's behalf. Bank must comply with regulatory guidance 
regarding use of third-party service providers and other applicable 
regulatory guidance.
    3. Third-party websites. As explained in comment 19(c)-2, if an 
issuer provides consumers with access to specific information about 
their individual accounts, such as making available to consumers their 
electronic account transaction history, pursuant to Sec.  
1005.18(c)(1)(ii), through a third-party website, the issuer is deemed 
to maintain that website for purposes of Sec.  1005.19. Such a website 
is deemed to be maintained by the issuer for purposes of Sec.  1005.19 
even where, for example, an unaffiliated entity designs the website and 
owns and maintains the information technology infrastructure that 
supports the website, consumers with prepaid accounts from multiple 
issuers can access individual account information through the same 
website, and the website is not labeled, branded, or otherwise held out 
to the public

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as belonging to the issuer. A partner institution's website is an 
example of a third-party website that may be deemed to be maintained by 
the issuer for purposes of Sec.  1005.19. For example, Program Manager 
and Bank work together to issue prepaid accounts. Under the Sec.  
1005.19(a)(4) definition of issuer, Bank is the issuer of these prepaid 
accounts for purposes of Sec.  1005.19. Bank does not maintain a website 
specifically related to prepaid accounts. However, consumers can access 
information about their individual accounts, such as an electronic 
account transaction history, through a website maintained by Program 
Manager. Program Manager designs the website and owns and maintains the 
information technology infrastructure that supports the website. The 
website is branded and held out to the public as belonging to Program 
Manager. Because consumers can access information about their individual 
accounts through this website, the website is deemed to be maintained by 
Bank for purposes of Sec.  1005.19. Bank therefore may comply with Sec.  
1005.19(c) or (d)(1) by ensuring that agreements offered by Bank are 
posted on Program Manager's website in accordance with Sec.  1005.19(c) 
or (d)(1), respectively. Bank need not create and maintain a website 
branded and held out to the public as belonging to Bank in order to 
comply with Sec.  1005.19(c) and (d) as long as Bank ensures that 
Program Manager's website complies with these sections.

                  19(a)(6) Offers to the General Public

    1. Prepaid accounts offered to limited groups. An issuer is deemed 
to offer a prepaid account agreement to the general public even if the 
issuer markets, solicits applications for, or otherwise makes available 
prepaid accounts only to a limited group of persons. For example, an 
issuer may solicit only residents of a specific geographic location for 
a particular prepaid account; in this case, the agreement would be 
considered to be offered to the general public. Similarly, agreements 
for prepaid accounts issued by a credit union are considered to be 
offered to the general public even though such prepaid accounts are 
available only to credit union members.
    2. Prepaid account agreements not offered to the general public. A 
prepaid account agreement is not offered to the general public when a 
consumer is offered the agreement only by virtue of the consumer's 
relationship with a third party. Examples of agreements not offered to 
the general public include agreements for payroll card accounts, 
government benefit accounts, or for prepaid accounts used to distribute 
student financial aid disbursements, or property and casualty insurance 
payouts, and other similar programs.

                          19(a)(7) Open Account

    1. Open account. A prepaid account is an open account if (i) there 
is an outstanding balance in the account; (ii) the consumer can load 
more funds to the account even if the account does not currently hold a 
balance; or (iii) the consumer can access credit from a covered separate 
credit feature accessible by a hybrid prepaid-credit card as defined in 
Regulation Z, 12 CFR 1026.61, in connection with a prepaid account. 
Under this definition, an account that meets any of these criteria is 
considered to be open even if the account is deemed inactive by the 
issuer.

                        19(a)(8) Prepaid Account

    1. Prepaid account. Section 1005.19(a)(7) provides that, for 
purposes of Sec.  1005.19, the term prepaid account means a prepaid 
account as defined in Sec.  1005.2(b)(3). Therefore, for purposes of 
Sec.  1005.19, a prepaid account includes, among other things, a payroll 
card account as defined in Sec.  1005.2(b)(3)(iii) and a government 
benefit account as defined in Sec. Sec.  1005.2(b)(3)(iii) and 
1005.15(a)(2).

              19(b) Submission of Agreements to the Bureau

                 19(b)(1) Submissions on a Rolling Basis

    1. Rolling submission requirement. Section 1005.19(b)(1) requires 
issuers to send submissions to the Bureau no later than 30 days after 
offering, amending, or ceasing to offer any prepaid account agreement, 
as described in Sec.  1005.19(b)(1)(ii) through (iv). For example, if on 
July 1 an issuer offers a prepaid account agreement that has not been 
previously submitted to the Bureau, it must submit that agreement to the 
Bureau by July 31 of the same year. Similarly, if on August 1 an issuer 
amends a prepaid account agreement previously submitted to the Bureau, 
and the change becomes effective on September 15, the issuer must submit 
the entire amended agreement as required by Sec.  1005.19(b)(2)(i) by 
October 15 of the same year. Furthermore, if on December 31 an issuer 
ceases to offer a prepaid account agreement that was previously 
submitted to the Bureau, it must submit notification to the Bureau that 
it is withdrawing that agreement as required by Sec.  1005.19(b)(3) by 
January 30 of the following year.
    2. Prepaid accounts offered in conjunction with multiple issuers. If 
a program manager offers prepaid account agreements in conjunction with 
multiple issuers, each issuer must submit its own agreement to the 
Bureau. Alternatively, each issuer may use the program manager to submit 
the agreement on its behalf, in accordance with comment 19(a)(4)-2.

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                       19(b)(2) Amended Agreements

    1. Change-in-terms notices not permissible. Section 1005.19(b)(2)(i) 
requires that if an agreement previously submitted to the Bureau is 
amended, the issuer must submit the entire revised agreement to the 
Bureau. An issuer may not fulfill this requirement by submitting a 
change-in-terms or similar notice covering only the terms that have 
changed. Amendments must be integrated into the text of the agreement 
(or the optional addenda described in Sec.  1005.19(b)(6)), not provided 
as separate riders.
    2. Updates to the list of names of other relevant parties to an 
agreement. Section 1005.19(b)(2)(ii) permits an issuer to delay making a 
submission to the Bureau regarding a change in the list of other 
relevant parties to a particular agreement until the earlier of such 
time as the issuer is otherwise submitting an amended agreement or 
changes to other identifying information about the issuer and its 
submitted agreements pursuant to Sec.  1005.19(b)(1)(i); or May 1 of 
each year, for any updates to the list of names of other relevant 
parties that occurred between the issuer's last submission of relevant 
party information for that agreement and April 1 of that year. Section 
1005.19(b)(2)(ii) thus ensures that the Bureau has a list of names of 
other relevant parties for all submitted agreements that is up-to-date 
as of April 1 of each year. The following examples illustrate these 
requirements:
    i. An issuer first submits to the Bureau a payroll card agreement, 
along with a list of names of the other relevant parties (i.e., 
employers) to that agreement, on May 1, 2019. On July 1, 2020, the 
issuer adds four new employers under the agreement. The issuer is not 
required to make a submission to the Bureau regarding the addition of 
other relevant parties to that agreement at that time.
    ii. On January 1, 2020, a change to the payroll card agreement 
becomes effective reflecting a new feature and accompanying fee that the 
issuer has added to the program. The issuer is required, by January 31, 
2020, to submit to the Bureau its entire revised agreement and an 
updated list of the names of other relevant parties to that agreement.
    iii. If the issuer has not added any other employers to the 
agreement by April 1, 2020, the issuer is not required to submit to the 
Bureau an updated list of names of other relevant parties to that 
agreement, because the list it previously submitted to the Bureau 
remains current.
    iv. If, however, on March 1, 2020, the issuer adds two new employers 
under the agreement but makes no other changes to the agreement, then as 
of April 1 there are new relevant parties to the agreement that the 
issuer has not submitted to the Bureau. The issuer is required, by May 
1, 2020, to submit to the Bureau an updated list of names of other 
relevant parties to that agreement reflecting the two employers it added 
in March. Because the issuer has not made any other changes to the 
agreement since it was submitted in January, the issuer is not required 
to re-submit the agreement itself by May 1, 2020.

           19(b)(3) Withdrawal of Agreements No Longer Offered

    1. No longer offers agreement. Section 1005.19(b)(3) provides that, 
if an issuer no longer offers an agreement that was previously submitted 
to the Bureau, the issuer must notify the Bureau no later than 30 days 
after the issuer ceases to offer the agreement that it is withdrawing 
the agreement. An issuer no longer offers an agreement when it no longer 
allows a consumer to activate or register a new account in connection 
with that agreement.

                      19(b)(4) De Minimis Exception

    1. Relationship to other exceptions. The de minimis exception in 
Sec.  1005.19(b)(4) is distinct from the product testing exception under 
Sec.  1005.19(b)(5). The de minimis exception provides that an issuer 
with fewer than 3,000 open prepaid accounts is not required to submit 
any agreements to the Bureau, regardless of whether those agreements 
qualify for the product testing exception. In contrast, the product 
testing exception provides that an issuer is not required to submit to 
the Bureau agreements offered solely in connection with certain types of 
prepaid account programs with fewer than 3,000 open accounts, regardless 
of the issuer's total number of open accounts.
    2. De minimis exception. Under Sec.  1005.19(b)(4), an issuer is not 
required to submit any prepaid account agreements to the Bureau under 
Sec.  1005.19(b)(1) if the issuer has fewer than 3,000 open prepaid 
accounts. For example, an issuer has 2,000 open prepaid accounts. The 
issuer is not required to submit any agreements to the Bureau because 
the issuer qualifies for the de minimis exception.
    3. Date for determining whether issuer qualifies. Whether an issuer 
qualifies for the de minimis exception is determined as of the last day 
of each calendar quarter. For example, an issuer has 2,500 open prepaid 
accounts as of December 31, the last day of the calendar quarter. As of 
January 30, the issuer has 3,100 open prepaid accounts. As of March 31, 
the last day of the following calendar quarter, the issuer has 2,700 
open prepaid accounts. Even though the issuer had 3,100 open prepaid 
accounts at one time during the calendar quarter, the issuer qualifies 
for the de minimis exception because the number of open prepaid accounts 
was less than 3,000 as

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of March 31. The issuer therefore is not required to submit any 
agreements to the Bureau under Sec.  1005.19(b)(1).
    4. Date for determining whether issuer ceases to qualify. Whether an 
issuer ceases to qualify for the de minimis exception under Sec.  
1005.19(b)(4) is determined as of the last day of the calendar quarter. 
For example, an issuer has 2,500 open prepaid accounts as of June 30, 
the last day of the calendar quarter. The issuer is not required to 
submit any agreements to the Bureau under Sec.  1005.19(b) by July 30 
(the 30th day after June 30) because the issuer qualifies for the de 
minimis exception. As of July 15, the issuer has 3,100 open prepaid 
accounts. The issuer is not required to take any action at this time, 
because whether an issuer qualifies for the de minimis exception under 
Sec.  1005.19(b)(4) is determined as of the last day of the calendar 
quarter. The issuer still has 3,100 open prepaid accounts as of 
September 30. Because the issuer had 3,100 open prepaid accounts as of 
September 30, the issuer ceases to qualify for the de minimis exception 
and must submit its agreements to the Bureau by October 30, the 30th day 
after the last day of the calendar quarter.
    5. Option to withdraw agreements. Section 1005.19(b)(4) provides 
that if an issuer that did not previously qualify for the de minimis 
exception newly qualifies for the de minimis exception, the issuer must 
continue to make rolling submissions to the Bureau as required by Sec.  
1005.19(b)(1) until the issuer notifies the Bureau that the issuer is 
withdrawing all agreements it previously submitted to the Bureau. For 
example, an issuer offers three agreements and has 3,001 open accounts 
as of December 31. The issuer submitted each of the three agreements to 
the Bureau by January 30 as required under Sec.  1005.19(b). As of March 
31, the issuer has only 2,999 open accounts. The issuer has two options. 
First, the issuer may notify the Bureau that the issuer is withdrawing 
each of the three agreements it previously submitted. Once the issuer 
has notified the Bureau, the issuer is no longer required to make 
rolling submissions to the Bureau under Sec.  1005.19(b) unless it later 
ceases to qualify for the de minimis exception. Alternatively, the 
issuer may choose not to notify the Bureau that it is withdrawing its 
agreements. In this case, the issuer must continue making rolling 
submissions to the Bureau as required by Sec.  1005.19(b). The issuer 
might choose not to withdraw its agreements if, for example, the issuer 
believes it will likely cease to qualify for the de minimis exception 
again in the near future.

     19(b)(6) Form and Content of Agreements Submitted to the Bureau

    1. Agreements currently in effect. Agreements submitted to the 
Bureau must contain the provisions of the agreement and fee information 
currently in effect. For example, on June 1, an issuer decides to 
decrease the out-of-network ATM withdrawal fee associated with one of 
the agreements it offers. The change in that fee will become effective 
on August 1. The issuer must submit and post the amended agreement with 
the decreased out-of-network ATM withdrawal fee to the Bureau by August 
31 as required by Sec.  1005.19(b)(2)(i) and (c).
    2. Fee information variations do not constitute separate agreements. 
Fee information that may vary from one consumer to another depending on 
the consumer's state of residence or other factors must be disclosed by 
setting forth all the possible variations. For example, an issuer offers 
a prepaid account with a monthly fee of $4.95 or $0 if the consumer 
regularly receives direct deposit to the prepaid account. The issuer 
must submit to the Bureau one agreement with fee information listing the 
possible monthly fees of $4.95 or $0 and including the explanation that 
the latter fee is dependent upon the consumer regularly receiving direct 
deposit.
    3. Integrated agreement requirement. Issuers may not submit 
provisions of the agreement or fee information in the form of change-in-
terms notices or riders. The only addenda that may be submitted as part 
of an agreement are the optional fee information addenda described in 
Sec.  1005.19(b)(6)(ii). Changes in provisions or fee information must 
be integrated into the body of the agreement or the optional fee 
information addenda. For example, it would be impermissible for an 
issuer to submit to the Bureau an agreement in the form of a terms and 
conditions document on January 1 and subsequently submit a change-in-
terms notice to indicate amendments to the previously submitted 
agreement. Instead, the issuer must submit a document that integrates 
the changes made by each of the change-in-terms notices into the body of 
the original terms and conditions document and the optional addenda 
displaying variations in fee information.

        19(c) Posting of Agreements Offered to the General Public

    1. Requirement applies only to agreements offered to the general 
public. An issuer is only required to post and maintain on its publicly 
available Web site the prepaid account agreements that the issuer offers 
to the general public as defined by Sec.  1005.19(a)(6) and must submit 
to the Bureau under Sec.  1005.19(b). For agreements not offered to the 
general public, the issuer is not required to post and maintain the 
agreements on its publicly available Web site, but is still required to 
provide each individual consumer with access to his or her specific 
prepaid account agreement under Sec.  1005.19(d). This posting 
requirement is distinct from that of Sec.  1005.7, as

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modified by Sec.  1005.18(f)(1), which requires an issuer to provide 
certain disclosures at the time a consumer contracts for an electronic 
fund transfer service or before the first electronic fund transfer is 
made involving the consumer's account, and the change-in-terms notice 
required under Sec.  1005.8(a), as modified by Sec.  1005.18(f)(2). This 
requirement is also distinct from that of Sec.  1005.18(b)(4), which 
requires issuers to make the long form disclosure available to consumers 
prior to prepaid account acquisition and which, depending on the methods 
an issuer offers prepaid accounts to consumers, may require posting of 
the long form disclosure on the issuer's Web site. Additionally, if an 
issuer is not required to submit any agreements to the Bureau because 
the issuer qualifies for the de minimis exception under Sec.  
1005.19(b)(4) or the agreement qualifies for the product testing 
exception under Sec.  1005.19(b)(5), the issuer is not required to post 
and maintain any agreements on its Web site under Sec.  1005.19(c). The 
issuer is still required to provide each individual consumer with access 
to his or her specific prepaid account agreement under Sec.  1005.19(d) 
by posting and maintaining the agreement on the issuer's Web site or by 
providing a copy of the agreement upon the consumer's request.
    2. Issuers that do not otherwise maintain Web sites. If an issuer 
offers an agreement to the general public as defined by Sec.  
1005.19(a)(6), that issuer must post that agreement on a publicly 
available Web site it maintains. If an issuer provides consumers with 
access to specific information about their individual accounts, such as 
balance information or copies of statements, through a third-party Web 
site, the issuer is considered to maintain that Web site for purposes of 
Sec.  1005.19. Such a third-party Web site is deemed to be maintained by 
the issuer for purposes of Sec.  1005.19(c) even where, for example, an 
unaffiliated entity designs the Web site and owns and maintains the 
information technology infrastructure that supports the Web site, 
consumers with prepaid accounts from multiple issuers can access 
individual account information through the same Web site, and the Web 
site is not labeled, branded, or otherwise held out to the public as 
belonging to the issuer. Therefore, issuers that provide consumers with 
access to account-specific information through a third-party Web site 
can comply with Sec.  1005.19(c) by ensuring that the agreements the 
issuer submits to the Bureau are posted on the third-party Web site in 
accordance with Sec.  1005.19(c).

                 19(d) Agreements for All Open Accounts

    1. Requirement applies to all open accounts. The requirement to 
provide access to prepaid account agreements under Sec.  1005.19(d) 
applies to all open prepaid accounts. For example, an issuer that is not 
required to post agreements on its Web site because it qualifies for the 
de minimis exception under Sec.  1005.19(b)(4) would still be required 
to provide consumers with access to their specific agreements under 
Sec.  1005.19(d). Similarly, an agreement that is no longer offered 
would not be required to be posted on the issuer's Web site, but would 
still need to be provided to the consumer to whom it applies under Sec.  
1005.19(d). Additionally, an issuer is not required to post on its Web 
site agreements not offered to the general public, such as agreements 
for payroll card accounts and government benefit accounts, as explained 
in comment 19(c)-1, but the issuer must still provide consumers with 
access to their specific agreements under Sec.  1005.19(d).
    2. Agreements sent to consumers. Section 1005.19(d)(1)(ii) provides, 
in part, that if an issuer makes an agreement available upon request, 
the issuer must send the consumer a copy of the consumer's prepaid 
account agreement no later than five business days after the issuer 
receives the consumer's request. If the issuer mails the agreement, the 
agreement must be posted in the mail five business days after the issuer 
receives the consumer's request. If the issuer hand delivers or provides 
the agreement electronically, the agreement must be hand delivered or 
provided electronically five business days after the issuer receives the 
consumer's request. For example, if the issuer emails the agreement, the 
email with the attached agreement must be sent no later than five 
business days after the issuer receives the consumer's request.

    Section 1005.20 Requirements for Gift Cards and Gift Certificates

                            20(a) Definitions

    1. Form of card, code, or device. Section 1005.20 applies to any 
card, code, or other device that meets one of the definitions in 
Sec. Sec.  1005.20(a)(1) through (a)(3) (and is not otherwise excluded 
by Sec.  1005.20(b)), even if it is not issued in card form. Section 
1005.20 applies, for example, to an account number or bar code that can 
be used to access underlying funds. Similarly, Sec.  1005.20 applies to 
a device with a chip or other embedded mechanism that links the device 
to stored funds, such as a mobile phone or sticker containing a 
contactless chip that enables the consumer to access the stored funds. A 
card, code, or other device that meets the definition in Sec. Sec.  
1005.20(a)(1) through (a)(3) includes an electronic promise (see comment 
20(a)-2) as well as a promise that is not electronic. See, however, 
Sec.  1005.20(b)(5). In addition, Sec.  1005.20 applies if a merchant 
issues a code that entitles a consumer to redeem the code for goods or 
services, regardless of the medium in which the code is issued (see, 
however, Sec.  1005.20(b)(5)), and whether or not it may be redeemed 
electronically or in the merchant's

[[Page 325]]

store. Thus, for example, if a merchant emails a code that a consumer 
may redeem in a specified amount either online or in the merchant's 
store, that code is covered under Sec.  1005.20, unless one of the 
exclusions in Sec.  1005.20(b) apply.
    2. Electronic promise. The term ``electronic promise'' as used in 
EFTA sections 915(a)(2)(B), (a)(2)(C), and (a)(2)(D) means a person's 
commitment or obligation communicated or stored in electronic form made 
to a consumer to provide payment for goods or services for transactions 
initiated by the consumer. The electronic promise is itself represented 
by a card, code or other device that is issued or honored by the person, 
reflecting the person's commitment or obligation to pay. For example, if 
a merchant issues a code that can be given as a gift and that entitles 
the recipient to redeem the code in an online transaction for goods or 
services, that code represents an electronic promise by the merchant and 
is a card, code, or other device covered by Sec.  1005.20.
    3. Cards, codes, or other devices redeemable for specific goods or 
services. Certain cards, codes, or other devices may be redeemable upon 
presentation for a specific good or service, or ``experience,'' such as 
a spa treatment, hotel stay, or airline flight. In other cases, a card, 
code, or other device may entitle the consumer to a certain percentage 
off the purchase of a good or service, such as 20% off of any purchase 
in a store. Such cards, codes, or other devices generally are not 
subject to the requirements of this section because they are not issued 
to a consumer ``in a specified amount'' as required under the 
definitions of ``gift certificate,'' ``store gift card,'' or ``general-
use prepaid card.'' However, if the card, code, or other device is 
issued in a specified or denominated amount that can be applied toward 
the purchase of a specific good or service, such as a certificate or 
card redeemable for a spa treatment up to $50, the card, code, or other 
device is subject to this section, unless one of the exceptions in Sec.  
1005.20(b) apply. See, e.g., Sec.  1005.20(b)(3). Similarly, if the 
card, code, or other device states a specific monetary value, such as 
``a $50 value,'' the card, code, or other device is subject to this 
section, unless an exclusion in Sec.  1005.20(b) applies.
    4. Issued primarily for personal, family, or household purposes. 
Section 1005.20 only applies to cards, codes, or other devices that are 
sold or issued to a consumer primarily for personal, family, or 
household purposes. A card, code, or other device initially purchased by 
a business is subject to this section if the card, code, or other device 
is purchased for redistribution or resale to consumers primarily for 
personal, family, or household purposes. Moreover, the fact that a card, 
code, or other device may be primarily funded by a business, for 
example, in the case of certain rewards or incentive cards, does not 
mean the card, code, or other device is outside the scope of Sec.  
1005.20, if the card, code, or other device will be provided to a 
consumer primarily for personal, family, or household purposes. But see 
Sec.  1005.20(b)(3). Whether a card, code, or other device is issued to 
a consumer primarily for personal, family, or household purposes will 
depend on the facts and circumstances. For example, if a program manager 
purchases store gift cards directly from an issuing merchant and sells 
those cards through the program manager's retail outlets, such gift 
cards are subject to the requirements of Sec.  1005.20 because the store 
gift cards are sold to consumers primarily for personal, family, or 
household purposes. In contrast, a card, code, or other device generally 
would not be issued to consumers primarily for personal, family, or 
household purposes, and therefore would fall outside the scope of Sec.  
1005.20, if the purchaser of the card, code, or device is contractually 
prohibited from reselling or redistributing the card, code, or device to 
consumers primarily for personal, family, or household purposes, and 
reasonable policies and procedures are maintained to avoid such sale or 
distribution for such purposes. However, if an entity that has purchased 
cards, codes, or other devices for business purposes sells or 
distributes such cards, codes, or other devices to consumers primarily 
for personal, family, or household purposes, that entity does not comply 
with Sec.  1005.20 if it has not otherwise met the substantive and 
disclosure requirements of the rule or unless an exclusion in Sec.  
1005.20(b) applies.
    5. Examples of cards, codes, or other devices issued for business 
purposes. Examples of cards, codes, or other devices that are issued and 
used for business purposes and therefore excluded from the definitions 
of ``gift certificate,'' ``store gift card,'' or ``general-use prepaid 
card'' include:
    i. Cards, codes, or other devices to reimburse employees for travel 
or moving expenses.
    ii. Cards, codes, or other devices for employees to use to purchase 
office supplies and other business-related items.

                        20(a)(2) Store Gift Card

    1. Relationship between ``gift certificate'' and ``store gift 
card.'' The term ``store gift card'' in Sec.  1005.20(a)(2) includes 
``gift certificate'' as defined in Sec.  1005.20(a)(1). For example, a 
numeric or alphanumeric code representing a specified dollar amount or 
value that is electronically sent to a consumer as a gift which can be 
redeemed or exchanged by the recipient to obtain goods or services may 
be both a ``gift certificate'' and a ``store gift card'' if the 
specified amount or value cannot be increased.
    2. Affiliated group of merchants. The term ``affiliated group of 
merchants'' means two

[[Page 326]]

or more affiliated merchants or other persons that are related by common 
ownership or common corporate control (see, e.g., 12 CFR 227.3(b) and 12 
CFR 223.2) and that share the same name, mark, or logo. For example, the 
term includes franchisees that are subject to a common set of corporate 
policies or practices under the terms of their franchise licenses. The 
term also applies to two or more merchants or other persons that agree 
among themselves, by contract or otherwise, to redeem cards, codes, or 
other devices bearing the same name, mark, or logo (other than the mark, 
logo, or brand of a payment network), for the purchase of goods or 
services solely at such merchants or persons. For example, assume a 
movie theatre chain and a restaurant chain jointly agree to issue cards 
that share the same ``Flix and Food'' logo that can be redeemed solely 
towards the purchase of movie tickets or concessions at any of the 
participating movie theatres, or towards the purchase of food or 
beverages at any of the participating restaurants. For purposes of Sec.  
1005.20, the movie theatre chain and the restaurant chain would be 
considered to be an affiliated group of merchants, and the cards are 
considered to be ``store gift cards.'' However, merchants or other 
persons are not considered to be affiliated merely because they agree to 
accept a card that bears the mark, logo, or brand of a payment network.
    3. Mall gift cards. See comment 20(a)(3)-2.

                    20(a)(3) General-Use Prepaid Card

    1. Redeemable upon presentation at multiple, unaffiliated merchants. 
A card, code, or other device is redeemable upon presentation at 
multiple, unaffiliated merchants if, for example, such merchants agree 
to honor the card, code, or device if it bears the mark, logo, or brand 
of a payment network, pursuant to the rules of the payment network.
    2. Mall gift cards. Mall gift cards that are intended to be used or 
redeemed for goods or services at participating retailers within a 
shopping mall may be considered store gift cards or general-use prepaid 
cards depending on the merchants with which the cards may be redeemed. 
For example, if a mall card may only be redeemed at merchants within the 
mall itself, the card is more likely to be redeemable at an affiliated 
group of merchants and considered a store gift card. However, certain 
mall cards also carry the brand of a payment network and can be used at 
any retailer that accepts that card brand, including retailers located 
outside of the mall. Such cards are considered general-use prepaid 
cards.

            20(a)(4) Loyalty, Award, or Promotional Gift Card

    1. Examples of loyalty, award, or promotional programs. Examples of 
loyalty, award, or promotional programs under Sec.  1005.20(a)(4) 
include, but are not limited to:
    i. Consumer retention programs operated or administered by a 
merchant or other person that provide to consumers cards or coupons 
redeemable for or towards goods or services or other monetary value as a 
reward for purchases made or for visits to the participating merchant.
    ii. Sales promotions operated or administered by a merchant or 
product manufacturer that provide coupons or discounts redeemable for or 
towards goods or services or other monetary value.
    iii. Rebate programs operated or administered by a merchant or 
product manufacturer that provide cards redeemable for or towards goods 
or services or other monetary value to consumers in connection with the 
consumer's purchase of a product or service and the consumer's 
completion of the rebate submission process.
    iv. Sweepstakes or contests that distribute cards redeemable for or 
towards goods or services or other monetary value to consumers as an 
invitation to enter into the promotion for a chance to win a prize.
    v. Referral programs that provide cards redeemable for or towards 
goods or services or other monetary value to consumers in exchange for 
referring other potential consumers to a merchant.
    vi. Incentive programs through which an employer provides cards 
redeemable for or towards goods or services or other monetary value to 
employees, for example, to recognize job performance, such as increased 
sales, or to encourage employee wellness and safety.
    vii. Charitable or community relations programs through which a 
company provides cards redeemable for or towards goods or services or 
other monetary value to a charity or community group for their 
fundraising purposes, for example, as a reward for a donation or as a 
prize in a charitable event.
    2. Issued for loyalty, award, or promotional purposes. To indicate 
that a card, code, or other device is issued for loyalty, award, or 
promotional purposes as required by Sec.  1005.20(a)(4)(iii), it is 
sufficient for the card, code, or other device to state on the front, 
for example, ``Reward'' or ``Promotional.''
    3. Reference to toll-free number and Web site. If a card, code, or 
other device issued in connection with a loyalty, award, or promotional 
program does not have any fees, the disclosure under Sec.  
1005.20(a)(4)(iii)(D) is not required on the card, code, or other 
device.

                          20(a)(6) Service Fee

    1. Service fees. Under Sec.  1005.20(a)(6), a service fee includes a 
periodic fee for holding or use of a gift certificate, store gift card, 
or general-use prepaid card. A periodic fee includes

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any fee that may be imposed on a gift certificate, store gift card, or 
general-use prepaid card from time to time for holding or using the 
certificate or card, such as a monthly maintenance fee, a transaction 
fee, an ATM fee, a reload fee, a foreign currency transaction fee, or a 
balance inquiry fee, whether or not the fee is waived for a certain 
period of time or is only imposed after a certain period of time. A 
service fee does not include a one-time fee or a fee that is unlikely to 
be imposed more than once while the underlying funds are still valid, 
such as an initial issuance fee, a cash-out fee, a supplemental card 
fee, or a lost or stolen certificate or card replacement fee.

                            20(a)(7) Activity

    1. Activity. Under Sec.  1005.20(a)(7), any action that results in 
an increase or decrease of the funds underlying a gift certificate, 
store gift card, or general-use prepaid card, other than the imposition 
of a fee, or an adjustment due to an error or a reversal of a prior 
transaction, constitutes activity for purposes of Sec.  1005.20. For 
example, the purchase and activation of a certificate or card, the use 
of the certificate or card to purchase a good or service, or the 
reloading of funds onto a store gift card or general-use prepaid card 
constitutes activity. However, the imposition of a fee, the replacement 
of an expired, lost, or stolen certificate or card, and a balance 
inquiry do not constitute activity. In addition, if a consumer attempts 
to engage in a transaction with a gift certificate, store gift card, or 
general-use prepaid card, but the transaction cannot be completed due to 
technical or other reasons, such attempt does not constitute activity. 
Furthermore, if the funds underlying a gift certificate, store gift 
card, or general-use prepaid card are adjusted because there was an 
error or the consumer has returned a previously purchased good, the 
adjustment also does not constitute activity with respect to the 
certificate or card.

                            20(b) Exclusions

    1. Application of exclusion. A card, code, or other device is 
excluded from the definition of ``gift certificate,'' ``store gift 
card,'' or ``general-use prepaid card'' if it meets any of the 
exclusions in Sec.  1005.20(b). An excluded card, code, or other device 
generally is not subject to any of the requirements of this section. 
See, however, Sec.  1005.20(a)(4)(iii), requiring certain disclosures 
for loyalty, award, or promotional gift cards.
    2. Eligibility for multiple exclusions. A card, code, or other 
device may qualify for one or more exclusions. For example, a 
corporation may give its employees a gift card that is marketed solely 
to businesses for incentive-related purposes, such as to reward job 
performance or promote employee safety. In this case, the card may 
qualify for the exclusion for loyalty, award, or promotional gift cards 
under Sec.  1005.20(b)(3), or for the exclusion for cards, codes, or 
other devices not marketed to the general public under Sec.  
1005.20(b)(4). In addition, as long as any one of the exclusions 
applies, a card, code, or other device is not covered by Sec.  1005.20, 
even if other exclusions do not apply. In the above example, the 
corporation may give its employees a type of gift card that can also be 
purchased by a consumer directly from a merchant. Under these 
circumstances, while the card does not qualify for the exclusion for 
cards, codes, or other devices not marketed to the general public under 
Sec.  1005.20(b)(4) because the card can also be obtained through retail 
channels, it is nevertheless exempt from the substantive requirements of 
Sec.  1005.20 because it is a loyalty, award, or promotional gift card. 
See, however, Sec.  1005.20(a)(4)(iii), requiring certain disclosures 
for loyalty, award, or promotional gift cards. Similarly, a person may 
market a reloadable card to teenagers for occasional expenses that 
enables parents to monitor spending. Although the card does not qualify 
for the exclusion for cards, codes, or other devices not marketed to the 
general public under Sec.  1005.20(b)(4), it may nevertheless be exempt 
from the requirements of Sec.  1005.20 under Sec.  1005.20(b)(2) if it 
is reloadable and not marketed or labeled as a gift card or gift 
certificate.

                           Paragraph 20(b)(1)

    1. Examples of excluded products. The exclusion for products usable 
solely for telephone services applies to prepaid cards for long-distance 
telephone service, prepaid cards for wireless telephone service and 
prepaid cards for other services that function similar to telephone 
services, such as prepaid cards for voice over Internet protocol (VoIP) 
access time.

                           Paragraph 20(b)(2)

    1. Reloadable. A card, code, or other device is ``reloadable'' if 
the terms and conditions of the agreement permit funds to be added to 
the card, code, or other device after the initial purchase or issuance. 
A card, code, or other device is not ``reloadable'' merely because the 
issuer or processor is technically able to add functionality that would 
otherwise enable the card, code, or other device to be reloaded.
    2. Marketed or labeled as a gift card or gift certificate. The term 
``marketed or labeled as a gift card or gift certificate'' means 
directly or indirectly offering, advertising, or otherwise suggesting 
the potential use of a card, code or other device, as a gift for another 
person. Whether the exclusion applies generally does not depend on the 
type of entity that makes the promotional message. For

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example, a card may be marketed or labeled as a gift card or gift 
certificate if anyone (other than the purchaser of the card), including 
the issuer, the retailer, the program manager that may distribute the 
card, or the payment network on which a card is used, promotes the use 
of the card as a gift card or gift certificate. A card, code, or other 
device, including a general-purpose reloadable card, is marketed or 
labeled as a gift card or gift certificate even if it is only 
occasionally marketed as a gift card or gift certificate. For example, a 
network-branded general purpose reloadable card would be marketed or 
labeled as a gift card or gift certificate if the issuer principally 
advertises the card as a less costly alternative to a bank account but 
promotes the card in a television, radio, newspaper, or Internet 
advertisement, or on signage as ``the perfect gift'' during the holiday 
season. However, the mere mention of the availability of gift cards or 
gift certificates in an advertisement or on a sign that also indicates 
the availability of other excluded prepaid cards does not by itself 
cause the excluded prepaid cards to be marketed as a gift card or a gift 
certificate. For example, the posting of a sign in a store that refers 
to the availability of gift cards does not by itself constitute the 
marketing of otherwise excluded prepaid cards that may also be sold in 
the store as gift cards or gift certificates, provided that a consumer 
acting reasonably under the circumstances would not be led to believe 
that the sign applies to all prepaid cards sold in the store. See, 
however, comment 20(b)(2)-4.ii.
    3. Examples of marketed or labeled as a gift card or gift 
certificate. i. Examples of marketed or labeled as a gift card or gift 
certificate include:
    A. Using the word ``gift'' or ``present'' on a card, certificate, or 
accompanying material, including documentation, packaging and 
promotional displays.
    B. Representing or suggesting that a certificate or card can be 
given to another person, for example, as a ``token of appreciation'' or 
a ``stocking stuffer,'' or displaying a congratulatory message on the 
card, certificate or accompanying material.
    C. Incorporating gift-giving or celebratory imagery or motifs, such 
as a bow, ribbon, wrapped present, candle, or congratulatory message, on 
a card, certificate, accompanying documentation, or promotional 
material.
    ii. The term does not include:
    A. Representing that a card or certificate can be used as a 
substitute for a checking, savings, or deposit account.
    B. Representing that a card or certificate can be used to pay for a 
consumer's health-related expenses--for example, a card tied to a health 
savings account.
    C. Representing that a card or certificate can be used as a 
substitute for traveler's checks or cash.
    D. Representing that a card or certificate can be used as a 
budgetary tool, for example, by teenagers, or to cover emergency 
expenses.
    4. Reasonable policies and procedures to avoid marketing as a gift 
card. The exclusion for a card, code, or other device that is reloadable 
and not marketed or labeled as a gift card or gift certificate in Sec.  
1005.20(b)(2) applies if a reloadable card, code, or other device is not 
marketed or labeled as a gift card or gift certificate and if persons 
subject to the rule, including issuers, program managers, and retailers, 
maintain policies and procedures reasonably designed to avoid such 
marketing. Such policies and procedures may include contractual 
provisions prohibiting a reloadable card, code, or other device from 
being marketed or labeled as a gift card or gift certificate, 
merchandising guidelines or plans regarding how the product must be 
displayed in a retail outlet, and controls to regularly monitor or 
otherwise verify that the card, code or other device is not being 
marketed as a gift card. Whether a reloadable card, code, or other 
device has been marketed as a gift card or gift certificate will depend 
on the facts and circumstances, including whether a reasonable consumer 
would be led to believe that the card, code, or other device is a gift 
card or gift certificate. The following examples illustrate the 
application of Sec.  1005.20(b)(2):
    i. An issuer or program manager of prepaid cards agrees to sell 
general-purpose reloadable cards through a retailer. The contract 
between the issuer or program manager and the retailer establishes the 
terms and conditions under which the cards may be sold and marketed at 
the retailer. The terms and conditions prohibit the general-purpose 
reloadable cards from being marketed as a gift card or gift certificate, 
and require policies and procedures to regularly monitor or otherwise 
verify that the cards are not being marketed as such. The issuer or 
program manager sets up one promotional display at the retailer for gift 
cards and another physically separated display for excluded products 
under Sec.  1005.20(b), including general-purpose reloadable cards and 
wireless telephone cards, such that a reasonable consumer would not 
believe that the excluded cards are gift cards. The exclusion in Sec.  
1005.20(b)(2) applies because policies and procedures reasonably 
designed to avoid the marketing of the general-purpose reloadable cards 
as gift cards or gift certificates are maintained, even if a retail 
clerk inadvertently stocks or a consumer inadvertently places a general-
purpose reloadable card on the gift card display.
    ii. Same facts as in i., except that the issuer or program manager 
sets up a single

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promotional display at the retailer on which a variety of prepaid cards 
are sold, including store gift cards and general-purpose reloadable 
cards. A sign stating ``Gift Cards'' appears prominently at the top of 
the display. The exclusion in Sec.  1005.20(b)(2) does not apply with 
respect to the general-purpose reloadable cards because policies and 
procedures reasonably designed to avoid the marketing of excluded cards 
as gift cards or gift certificates are not maintained.
    iii. Same facts as in i., except that the issuer or program manager 
sets up a single promotional multi-sided display at the retailer on 
which a variety of prepaid card products, including store gift cards and 
general-purpose reloadable cards are sold. Gift cards are segregated 
from excluded cards, with gift cards on one side of the display and 
excluded cards on a different side of a display. Signs of equal 
prominence at the top of each side of the display clearly differentiate 
between gift cards and the other types of prepaid cards that are 
available for sale. The retailer does not use any more conspicuous 
signage suggesting the general availability of gift cards, such as a 
large sign stating ``Gift Cards'' at the top of the display or located 
near the display. The exclusion in Sec.  1005.20(b)(2) applies because 
policies and procedures reasonably designed to avoid the marketing of 
the general-purpose reloadable cards as gift cards or gift certificates 
are maintained, even if a retail clerk inadvertently stocks or a 
consumer inadvertently places a general-purpose reloadable card on the 
gift card display.
    iv. Same facts as in i., except that the retailer sells a variety of 
prepaid card products, including store gift cards and general-purpose 
reloadable cards, arranged side-by-side in the same checkout lane. The 
retailer does not affirmatively indicate or represent that gift cards 
are available, such as by displaying any signage or other indicia at the 
checkout lane suggesting the general availability of gift cards. The 
exclusion in Sec.  1005.20(b)(2) applies because policies and procedures 
reasonably designed to avoid marketing the general-purpose reloadable 
cards as gift cards or gift certificates are maintained.
    5. Online sales of prepaid cards. Some Web sites may prominently 
advertise or promote the availability of gift cards or gift certificates 
in a manner that suggests to a consumer that the Web site exclusively 
sells gift cards or gift certificates. For example, a Web site may 
display a banner advertisement or a graphic on the home page that 
prominently states ``Gift Cards,'' ``Gift Giving,'' or similar language 
without mention of other available products, or use a web address that 
includes only a reference to gift cards or gift certificates in the 
address. In such a case, a consumer acting reasonably under the 
circumstances could be led to believe that all prepaid products sold on 
the Web site are gift cards or gift certificates. Under these facts, the 
Web site has marketed all such products, including general-purpose 
reloadable cards, as gift cards or gift certificates, and the exclusion 
in Sec.  1005.20(b)(2) does not apply.
    6. Temporary non-reloadable cards issued in connection with a 
general-purpose reloadable card. Certain general-purpose reloadable 
cards that are typically marketed as an account substitute initially may 
be sold or issued in the form of a temporary non-reloadable card. After 
the card is purchased, the cardholder is typically required to call the 
issuer to register the card and to provide identifying information in 
order to obtain a reloadable replacement card. In most cases, the 
temporary non-reloadable card can be used for purchases until the 
replacement reloadable card arrives and is activated by the cardholder. 
Because the temporary non-reloadable card may only be obtained in 
connection with the general-purpose reloadable card, the exclusion in 
Sec.  1005.20(b)(2) applies so long as the card is not marketed as a 
gift card or gift certificate.

                           Paragraph 20(b)(4)

    1. Marketed to the general public. A card, code, or other device is 
marketed to the general public if the potential use of the card, code, 
or other device is directly or indirectly offered, advertised, or 
otherwise promoted to the general public. A card, code, or other device 
may be marketed to the general public through any advertising medium, 
including television, radio, newspaper, the Internet, or signage. 
However, the posting of a company policy that funds may be disbursed by 
prepaid card (such as a sign posted at a cash register or customer 
service center stating that store credit will be issued by prepaid card) 
does not constitute the marketing of a card, code, or other device to 
the general public. In addition, the method of distribution by itself is 
not dispositive in determining whether a card, code, or other device is 
marketed to the general public. Factors that may be considered in 
determining whether the exclusion applies to a particular card, code, or 
other device include the means or channel through which the card, code, 
or device may be obtained by a consumer, the subset of consumers that 
are eligible to obtain the card, code, or device, and whether the 
availability of the card, code, or device is advertised or otherwise 
promoted in the marketplace.
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec.  1005.20(b)(4):
    i. A merchant sells its gift cards at a discount to a business which 
may give them to employees or loyal consumers as incentives or rewards. 
In determining whether the gift card falls within the exclusion in Sec.  
1005.20(b)(4), the merchant must consider

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whether the card is of a type that is advertised or made available to 
consumers generally or can be obtained elsewhere. If the card can also 
be purchased through retail channels, the exclusion in Sec.  
1005.20(b)(4) does not apply, even if the consumer obtained the card 
from the business as an incentive or reward. See, however, Sec.  
1005.20(b)(3).
    ii. A national retail chain decides to market its gift cards only to 
members of its frequent buyer program. Similarly, a bank may decide to 
sell gift cards only to its customers. If a member of the general public 
may become a member of the program or a customer of the bank, the card 
does not fall within the exclusion in Sec.  1005.20(b)(4) because the 
general public has the ability to obtain the cards. See, however, Sec.  
1005.20(b)(3).
    iii. A card issuer advertises a reloadable card to teenagers and 
their parents promoting the card for use by teenagers for occasional 
expenses, schoolbooks and emergencies and by parents to monitor 
spending. Because the card is marketed to and may be sold to any member 
of the general public, the exclusion in Sec.  1005.20(b)(4) does not 
apply. See, however, Sec.  1005.20(b)(2).
    iv. An insurance company settles a policyholder's claim and 
distributes the insurance proceeds to the consumer by means of a prepaid 
card. Because the prepaid card is simply the means for providing the 
insurance proceeds to the consumer and the availability of the card is 
not advertised to the general public, the exclusion in Sec.  
1005.20(b)(4) applies.
    v. A merchant provides store credit to a consumer following a 
merchandise return by issuing a prepaid card that clearly indicates that 
the card contains funds for store credit. Because the prepaid card is 
issued for the stated purpose of providing store credit to the consumer 
and the ability to receive refunds by a prepaid card is not advertised 
to the general public, the exclusion in Sec.  1005.20(b)(4) applies.
    vi. A tax preparation company elects to distribute tax refunds to 
its clients by issuing prepaid cards, but does not advertise or 
otherwise promote the ability to receive proceeds in this manner. 
Because the prepaid card is simply the mechanism for providing the tax 
refund to the consumer, and the tax preparer does not advertise the 
ability to obtain tax refunds by a prepaid card, the exclusion in Sec.  
1005.20(b)(4) applies. However, if the tax preparer promotes the ability 
to receive tax refund proceeds through a prepaid card as a way to obtain 
``faster'' access to the proceeds, the exclusion in Sec.  1005.20(b)(4) 
does not apply.

                           Paragraph 20(b)(5)

    1. Exclusion explained. To qualify for the exclusion in Sec.  
1005.20(b)(5), the sole means of issuing the card, code, or other device 
must be in a paper form. Thus, the exclusion generally applies to 
certificates issued in paper form where solely the paper itself may be 
used to purchase goods or services. A card, code or other device is not 
issued solely in paper form simply because it may be reproduced or 
printed on paper. For example, a bar code, card or certificate number, 
or certificate or coupon electronically provided to a consumer and 
redeemable for goods and services is not issued in paper form, even if 
it may be reproduced or otherwise printed on paper by the consumer. In 
this circumstance, although the consumer might hold a paper facsimile of 
the card, code, or other device, the exclusion does not apply because 
the information necessary to redeem the value was initially issued in 
electronic form. A paper certificate is within the exclusion regardless 
of whether it may be redeemed electronically. For example, a paper 
certificate or receipt that bears a bar code, code, or account number 
falls within the exclusion in Sec.  1005.20(b)(5) if the bar code, code, 
or account number is not issued in any form other than on the paper. In 
addition, the exclusion in Sec.  1005.20(b)(5) continues to apply in 
circumstances where an issuer replaces a gift certificate that was 
initially issued in paper form with a card or electronic code (for 
example, to replace a lost paper certificate).
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec.  1005.20(b)(5):
    i. A merchant issues a paper gift certificate that entitles the 
bearer to a specified dollar amount that can be applied towards a future 
meal. The merchant fills in the certificate with the name of the 
certificate holder and the amount of the certificate. The certificate 
falls within the exclusion in Sec.  1005.20(b)(5) because it is issued 
in paper form only.
    ii. A merchant allows a consumer to prepay for a good or service, 
such as a car wash or time at a parking meter, and issues a paper 
receipt bearing a numerical or bar code that the consumer may redeem to 
obtain the good or service. The exclusion in Sec.  1005.20(b)(5) applies 
because the code is issued in paper form only.
    iii. A merchant issues a paper certificate or receipt bearing a bar 
code or certificate number that can later be scanned or entered into the 
merchant's system and redeemed by the certificate or receipt holder 
towards the purchase of goods or services. The bar code or certificate 
number is not issued by the merchant in any form other than paper. The 
exclusion in Sec.  1005.20(b)(5) applies because the bar code or 
certificate number is issued in paper form only.
    iv. An online merchant electronically provides a bar code, card or 
certificate number, or certificate or coupon to a consumer that the 
consumer may print on a home printer and later redeem towards the 
purchase of goods or services. The exclusion in Sec.  1005.20(b)(5) does 
not apply because the bar

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code or card or certificate number was issued to the consumer in 
electronic form, even though it can be reproduced or otherwise printed 
on paper by the consumer.

                           Paragraph 20(b)(6)

    1. Exclusion explained. The exclusion for cards, codes, or other 
devices that are redeemable solely for admission to events or venues at 
a particular location or group of affiliated locations generally applies 
to cards, codes, or other devices that are not redeemed for a specified 
monetary value, but rather solely for admission or entry to an event or 
venue. The exclusion also covers a card, code, or other device that is 
usable to purchase goods or services in addition to entry into the event 
or the venue, either at the event or venue or at an affiliated location 
or location in geographic proximity to the event or venue.
    2. Examples. The following examples illustrate the application of 
the exclusion in Sec.  1005.20(b)(6):
    i. A consumer purchases a prepaid card that entitles the holder to a 
ticket for entry to an amusement park. The prepaid card may only be used 
for entry to the park. The card qualifies for the exclusion in Sec.  
1005.20(b)(6) because it is redeemable for admission or entry and for 
goods or services in conjunction with that admission. In addition, if 
the prepaid card does not have a monetary value, and therefore is not 
``issued in a specified amount,'' the card does not meet the definitions 
of ``gift certificate,'' ``store gift card,'' or ``general-use prepaid 
card'' in Sec.  1005.20(a). See comment 20(a)-3.
    ii. Same facts as in i., except that the gift card also entitles the 
holder of the gift card to a dollar amount that can be applied towards 
the purchase of food and beverages or goods or services at the park or 
at nearby affiliated locations. The card qualifies for the exclusion in 
Sec.  1005.20(b)(6) because it is redeemable for admission or entry and 
for goods or services in conjunction with that admission.
    iii. A consumer purchases a $25 gift card that the holder of the 
gift card can use to make purchases at a merchant, or, alternatively, 
can apply towards the cost of admission to the merchant's affiliated 
amusement park. The card is not eligible for the exclusion in Sec.  
1005.20(b)(6) because it is not redeemable solely for the admission or 
ticket itself (or for goods and services purchased in conjunction with 
such admission). The card meets the definition of ``store gift card'' 
and is therefore subject to Sec.  1005.20, unless a different exclusion 
applies.

                        20(c) Form of Disclosures

                     20(c)(1) Clear and Conspicuous

    1. Clear and conspicuous standard. All disclosures required by this 
section must be clear and conspicuous. Disclosures are clear and 
conspicuous for purposes of this section if they are readily 
understandable and, in the case of written and electronic disclosures, 
the location and type size are readily noticeable to consumers. 
Disclosures need not be located on the front of the certificate or card, 
except where otherwise required, to be considered clear and conspicuous. 
Disclosures are clear and conspicuous for the purposes of this section 
if they are in a print that contrasts with and is otherwise not 
obstructed by the background on which they are printed. For example, 
disclosures on a card or computer screen are not likely to be 
conspicuous if obscured by a logo printed in the background. Similarly, 
disclosures on the back of a card that are printed on top of 
indentations from embossed type on the front of the card are not likely 
to be conspicuous if the indentations obstruct the readability of the 
disclosures. To the extent permitted, oral disclosures meet the standard 
when they are given at a volume and speed sufficient for a consumer to 
hear and comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``mo.'' for month or a ``/'' to indicate ``per.'' Under the clear and 
conspicuous standard, it is sufficient to state, for example, that a 
particular fee is charged ``$2.50/mo. after 12 mos.''

                             20(c)(2) Format

    1. Electronic disclosures. Disclosures provided electronically 
pursuant to this section are not subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
Electronic disclosures must be in a retainable form. For example, a 
person may satisfy the requirement if it provides an online disclosure 
in a format that is capable of being printed. Electronic disclosures may 
not be provided through a hyperlink or in another manner by which the 
purchaser can bypass the disclosure. A person is not required to confirm 
that the consumer has read the electronic disclosures.

                  20(c)(3) Disclosure Prior to Purchase

    1. Method of purchase. The disclosures required by this paragraph 
must be provided before a certificate or card is purchased regardless of 
whether the certificate or card is purchased in person, online, by 
telephone, or by other means.
    2. Electronic disclosures. Section 1005.20(c)(3) provides that the 
disclosures required by this section must be provided to the consumer 
prior to purchase. For certificates or cards purchased electronically, 
disclosures made

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to the consumer after a consumer has initiated an online purchase of a 
certificate or card, but prior to completing the purchase of the 
certificate or card, would satisfy the prior-to-purchase requirement. 
However, electronic disclosures made available on a person's Web site 
that may or may not be accessed by the consumer are not provided to the 
consumer and therefore would not satisfy the prior-to-purchase 
requirement.
    3. Non-physical certificates and cards. If no physical certificate 
or card is issued, the disclosures must be provided to the consumer 
before the certificate or card is purchased. For example, where a gift 
certificate or card is a code that is provided by telephone, the 
required disclosures may be provided orally prior to purchase. See also 
Sec.  1005.20(c)(2).

             20(c)(4) Disclosures on the Certificate or Card

    1. Non-physical certificates and cards. If no physical certificate 
or card is issued, the disclosures required by this paragraph must be 
disclosed on the code, confirmation, or other written or electronic 
document provided to the consumer. For example, where a gift certificate 
or card is a code or confirmation that is provided to a consumer online 
or sent to a consumer's email address, the required disclosures may be 
provided electronically on the same document as the code or 
confirmation.2. No disclosures on a certificate or card. Disclosures 
required by Sec.  1005.20(c)(4) need not be made on a certificate or 
card if it is accompanied by a certificate or card that complies with 
this section. For example, a person may issue or sell a supplemental 
gift card that is smaller than a standard size and that does not bear 
the applicable disclosures if it is accompanied by a fully compliant 
certificate or card. See also comment 20(c)(2)-2.

           20(d) Prohibition on Imposition of Fees or Charges

    1. One-year period. Section 1005.20(d) provides that a person may 
impose a dormancy, inactivity, or service fee only if there has been no 
activity with respect to a certificate or card for one year. The 
following examples illustrate this rule:
    i. A certificate or card is purchased on January 15 of year one. If 
there has been no activity on the certificate or card since the 
certificate or card was purchased, a dormancy, inactivity, or service 
fee may be imposed on the certificate or card on January 15 of year two.
    ii. Same facts as i., and a fee was imposed on January 15 of year 
two. Because no more than one dormancy, inactivity, or service fee may 
be imposed in any given calendar month, the earliest date that another 
dormancy, inactivity, or service fee may be imposed, assuming there 
continues to be no activity on the certificate or card, is February 1 of 
year two. A dormancy, inactivity, or service fee is permitted to be 
imposed on February 1 of year two because there has been no activity on 
the certificate or card for the preceding year (February 1 of year one 
through January 31 of year two), and February is a new calendar month. 
The imposition of a fee on January 15 of year two is not activity for 
purposes of Sec.  1005.20(d). See comment 20(a)(7)-1.
    iii. Same facts as i., and a fee was imposed on January 15 of year 
two. On January 31 of year two, the consumer uses the card to make a 
purchase. Another dormancy, inactivity, or service fee could not be 
imposed until January 31 of year three, assuming there has been no 
activity on the certificate or card since January 31 of year two.
    2. Relationship between Sec. Sec.  1005.20(d)(2) and (c)(3). 
Sections 1005.20(d)(2) and (c)(3) contain similar, but not identical, 
disclosure requirements. Section 1005.20(d)(2) requires the disclosure 
of dormancy, inactivity, and service fees on a certificate or card. 
Section 1005.20(c)(3) requires that vendor person that issues or sells 
such certificate or card disclose to a consumer any dormancy, 
inactivity, and service fees associated with the certificate or card 
before such certificate or card may be purchased. Depending on the 
context, a single disclosure that meets the clear and conspicuous 
requirements of both Sec. Sec.  1005.20(d)(2) and (c)(3) may be used to 
disclose a dormancy, inactivity, or service fee. For example, if the 
disclosures on a certificate or card, required by Sec.  1005.20(d)(2), 
are visible to the consumer without having to remove packaging or other 
materials sold with the certificate or card, for a purchase made in 
person, the disclosures also meet the requirements of Sec.  
1005.20(c)(3). Otherwise, a dormancy, inactivity, or service fee may 
need to be disclosed multiple times to satisfy the requirements of 
Sec. Sec.  1005.20(d)(2) and (c)(3). For example, if the disclosures on 
a certificate or card, required by Sec.  1005.20(d)(2), are obstructed 
by packaging sold with the certificate or card, for a purchase made in 
person, they also must be disclosed on the packaging sold with the 
certificate or card to meet the requirements of Sec.  1005.20(c)(3).
    3. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required under Sec.  
1005.20(d)(2), any applicable disclosures under Sec. Sec.  1005.20(e)(3) 
and (f)(2) of this section must also be provided on the certificate or 
card.
    4. One fee per month. Under Sec.  1005.20(d)(3), no more than one 
dormancy, inactivity, or service fee may be imposed in any given 
calendar month. For example, if a dormancy fee is imposed on January 1, 
following a year of inactivity, and a consumer makes a balance inquiry 
on January 15, a balance inquiry fee may not be imposed at that time 
because a dormancy fee was already imposed earlier that month and a 
balance inquiry fee is a

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type of service fee. If, however, the dormancy fee could be imposed on 
January 1, following a year of inactivity, and the consumer makes a 
balance inquiry on the same date, the person assessing the fees may 
choose whether to impose the dormancy fee or the balance inquiry fee on 
January 1. The restriction in Sec.  1005.20(d)(3) does not apply to any 
fee that is not a dormancy, inactivity, or service fee. For example, 
assume a service fee is imposed on a general-use prepaid card on January 
1, following a year of inactivity. If a consumer cashes out the 
remaining funds by check on January 15, a cash-out fee, to the extent 
such cash-out fee is permitted under Sec.  1005.20(e)(4), may be imposed 
at that time because a cash-out fee is not a dormancy, inactivity, or 
service fee.
    5. Accumulation of fees. Section 1005.20(d) prohibits the 
accumulation of dormancy, inactivity, or service fees for previous 
periods into a single fee because such a practice would circumvent the 
limitation in Sec.  1005.20(d)(3) that only one fee may be charged per 
month. For example, if a consumer purchases and activates a store gift 
card on January 1 but never uses the card, a monthly maintenance fee of 
$2.00 a month may not be accumulated such that a fee of $24 is imposed 
on January 1 the following year.

20(e) Prohibition on Sale of Gift Certificates or Cards With Expiration 
                                  Dates

    1. Reasonable opportunity. Under Sec.  1005.20(e)(1), no person may 
sell or issue a gift certificate, store gift card, or general-use 
prepaid card with an expiration date, unless there are policies and 
procedures in place to provide consumers with a reasonable opportunity 
to purchase a certificate or card with at least five years remaining 
until the certificate or card expiration date. Consumers are deemed to 
have a reasonable opportunity to purchase a certificate or card with at 
least five years remaining until the certificate or card expiration date 
if:
    i. There are policies and procedures established to prevent the sale 
of a certificate or card unless the certificate or card expiration date 
is at least five years after the date the certificate or card was sold 
or initially issued to a consumer; or
    ii. A certificate or card is available to consumers to purchase five 
years and six months before the certificate or card expiration date.
    2. Applicability to replacement certificates or cards. Section 
1005.20(e)(1) applies solely to the purchase of a certificate or card. 
Therefore, Sec.  1005.20(e)(1) does not apply to the replacement of such 
certificates or cards. Certificates or cards issued as a replacement may 
bear a certificate or card expiration date of less than five years from 
the date of issuance of the replacement certificate or card. If the 
certificate or card expiration date for a replacement certificate or 
card is later than the date set forth in Sec.  1005.20(e)(2)(i), then 
pursuant to Sec.  1005.20(e)(2), the expiration date for the underlying 
funds at the time the replacement certificate or card is issued must be 
no earlier than the expiration date for the replacement certificate or 
card. For purposes of Sec.  1005.20(e)(2), funds are not considered to 
be loaded to a store gift card or general-use prepaid card solely 
because a replacement card has been issued or activated for use.
    3. Disclosure of funds expiration--date not required. Section 
1005.20(e)(3)(i) does not require disclosure of the precise date the 
funds will expire. It is sufficient to disclose, for example, ``Funds 
expire 5 years from the date funds last loaded to the card.''; ``Funds 
can be used 5 years from the date money was last added to the card.''; 
or ``Funds do not expire.''
    4. Disclosure not required if no expiration date. If the certificate 
or card and underlying funds do not expire, the disclosure required by 
Sec.  1005.20(e)(3)(i) need not be stated on the certificate or card. If 
the certificate or card and underlying funds expire at the same time, 
only one expiration date need be disclosed on the certificate or card.
    5. Reference to toll-free telephone number and Web site. If a 
certificate or card does not expire, or if the underlying funds are not 
available after the certificate or card expires, the disclosure required 
by Sec.  1005.20(e)(3)(ii) need not be stated on the certificate or 
card. See, however, Sec.  1005.20(f)(2).
    6. Relationship to Sec.  226.20(f)(2). The same toll-free telephone 
number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web site 
must be maintained or disclosed if no fees are imposed in connection 
with a certificate or card, and the certificate or card and the 
underlying funds do not expire.
    7. Distinguishing between certificate or card expiration and funds 
expiration. If applicable, a disclosure must be made on the certificate 
or card that notifies a consumer that the certificate or card expires, 
but the funds either do not expire or expire later than the certificate 
or card, and that the consumer may contact the issuer for a replacement 
card. The disclosure must be made with equal prominence and in close 
proximity to the certificate or card expiration date. The close 
proximity requirement does not apply to oral disclosures. In the case of 
a certificate or card, close proximity means that the disclosure must be 
on the same side as the certificate or card expiration date. For 
example, if the disclosure is the same type size and is located 
immediately next to or directly above or below the certificate or card 
expiration date, without any intervening text or graphical displays, the 
disclosures would be deemed to be equally prominent and in close 
proximity. The disclosure need

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not be embossed on the certificate or card to be deemed equally 
prominent, even if the expiration date is embossed on the certificate or 
card. The disclosure may state on the front of the card, for example, 
``Funds expire after card. Call for replacement card.'' or ``Funds do 
not expire. Call for new card after 09/2016.'' Disclosures made pursuant 
to Sec.  1005.20(e)(3)(iii)(A) may also fulfill the requirements of 
Sec.  1005.20(e)(3)(i). For example, making a disclosure that ``Funds do 
not expire'' to comply with Sec.  1005.20(e)(3)(iii)(A) also fulfills 
the requirements of Sec.  1005.20(e)(3)(i).
    8. Expiration date safe harbor. A non-reloadable certificate or card 
that bears an expiration date that is at least seven years from the date 
of manufacture need not state the disclosure required by Sec.  
1005.20(e)(3)(iii). However, Sec.  1005.20(e)(1) still prohibits the 
sale or issuance of such certificate or card unless there are policies 
and procedures in place to provide a consumer with a reasonable 
opportunity to purchase the certificate or card with at least five years 
remaining until the certificate or card expiration date. In addition, 
under Sec.  1005.20(e)(2), the funds may not expire before the 
certificate or card expiration date, even if the expiration date of the 
certificate or card bears an expiration date that is more than five 
years from the date of purchase. For purposes of this safe harbor, the 
date of manufacture is the date on which the certificate or card 
expiration date is printed on the certificate or card.
    9. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required to be made under Sec.  
1005.20(e)(3), any applicable disclosures under Sec. Sec.  1005.20(d)(2) 
and (f)(2) must also be provided on the certificate or card.
    10. Replacement or remaining balance of an expired certificate or 
card. When a certificate or card expires, but the underlying funds have 
not expired, an issuer, at its option in accordance with applicable 
state law, may provide either a replacement certificate or card or 
otherwise provide the certificate or card holder, for example, by check, 
with the remaining balance on the certificate or card. In either case, 
the issuer may not charge a fee for the service.
    11. Replacement of a lost or stolen certificate or card not 
required. Section 1005.20(e)(4) does not require the replacement of a 
certificate or card that has been lost or stolen.
    12. Date of issuance or loading. For purposes of Sec.  
1005.20(e)(2)(i), a certificate or card is not issued or loaded with 
funds until the certificate or card is activated for use.
    13. Application of expiration date provisions after redemption of 
certificate or card. The requirement that funds underlying a certificate 
or card must not expire for at least five years from the date of 
issuance or date of last load ceases to apply once the certificate or 
card has been fully redeemed, even if the underlying funds are not used 
to contemporaneously purchase a specific good or service. For example, 
some certificates or cards can be used to purchase music, media, or 
virtual goods. Once redeemed by a consumer, the entire balance on the 
certificate or card is debited from the certificate or card and credited 
or transferred to another ``account'' established by the merchant of 
such goods or services. The consumer can then make purchases of songs, 
media, or virtual goods from the merchant using that ``account'' either 
at the time the value is transferred from the certificate or card or at 
a later time. Under these circumstances, once the card has been fully 
redeemed and the ``account'' credited with the amount of the underlying 
funds, the five-year minimum expiration term no longer applies to the 
underlying funds. However, if the consumer only partially redeems the 
value of the certificate or card, the five-year minimum expiration term 
requirement continues to apply to the funds remaining on the certificate 
or card.

 20(f) Additional Disclosure Requirements for Gift Certificates or Cards

    1. Reference to toll-free telephone number and Web site. If a 
certificate or card does not have any fees, the disclosure under Sec.  
1005.20(f)(2) is not required on the certificate or card. See, however, 
Sec.  1005.20(e)(3)(ii).
    2. Relationship to Sec.  226.20(e)(3)(ii). The same toll-free 
telephone number and Web site may be used to comply with Sec. Sec.  
226.20(e)(3)(ii) and (f)(2). Neither a toll-free number nor a Web site 
must be maintained or disclosed if no fees are imposed in connection 
with a certificate or card, and both the certificate or card and 
underlying funds do not expire.
    3. Relationship between Sec. Sec.  1005.20(d)(2), (e)(3), and 
(f)(2). In addition to any disclosures required pursuant to Sec.  
1005.20(f)(2), any applicable disclosures under Sec. Sec.  1005.20(d)(2) 
and (e)(3) must also be provided on the certificate or card.

                         20(g) Compliance Dates

    1. Period of eligibility for loyalty, award, or promotional 
programs. For purposes of Sec.  1005.20(g)(2), the period of eligibility 
is the time period during which a consumer must engage in a certain 
action or actions to meet the terms of eligibility for a loyalty, award, 
or promotional program and obtain the card, code, or other device. Under 
Sec.  1005.20(g)(2), a gift card issued pursuant to a loyalty, award, or 
promotional program that began prior to August 22, 2010 need not state 
the disclosures in Sec.  1005.20(a)(4)(iii) regardless of whether the 
consumer became eligible to receive the gift card prior to August 22, 
2010, or after that date. For example, a product manufacturer may 
provide a $20 rebate card to a consumer

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if the consumer purchases a particular product and submits a fully 
completed entry between January 1, 2010 and December 31, 2010. 
Similarly, a merchant may provide a $20 gift card to a consumer if the 
consumer makes $200 worth of qualifying purchases between June 1, 2010 
and October 30, 2010. Under both examples, gift cards provided pursuant 
to these loyalty, award, or promotional programs need not state the 
disclosures in Sec.  1005.20(a)(4)(iii) to qualify for the exclusion in 
Sec.  1005.20(b)(3) for loyalty, award, or promotional gift cards 
because the period of eligibility for each program began prior to August 
22, 2010.

                        20(h) Temporary Exemption

                     20(h)(1) Delayed Effective Date

    1. Application to certificates or cards produced prior to April 1, 
2010. Certificates or cards produced prior to April 1, 2010 may be sold 
to a consumer on or after August 22, 2010 without satisfying the 
requirements of Sec. Sec.  1005.20(c)(3), (d)(2), (e)(1), (e)(3), and 
(f) through January 30, 2011, provided that issuers of such certificates 
or cards comply with the additional substantive and disclosure 
requirements of Sec. Sec.  1005.20(h)(1)(i) through (iv). Issuers of 
certificates or cards produced prior to April 1, 2010 need not satisfy 
these additional requirements if the certificates or cards fully comply 
with the rule (Sec. Sec.  1005.20(a) through (f)). For example, the in-
store signage and other disclosures required by Sec.  1005.20(h)(2) do 
not apply to gift cards produced prior to April 1, 2010 that do not have 
fees and do not expire, and which otherwise comply with the rule.
    2. Expiration of temporary exemption. Certificates or cards produced 
prior to April 1, 2010 that do not fully comply with Sec. Sec.  
1005.20(a) through (f) may not be issued or sold to consumers on or 
after January 31, 2011.

                     20(h)(2) Additional Disclosures

    1. Disclosures through third parties. Issuers may make the 
disclosures required by Sec.  1005.20(h)(2) through a third party, such 
as a retailer or merchant. For example, an issuer may have a merchant 
install in-store signage with the disclosures required by Sec.  
1005.20(h)(2) on the issuer's behalf.
    2. General advertising disclosures. Section 1005.20(h)(2) does not 
impose an obligation on the issuer to advertise gift certificates, store 
gift cards, or general-use prepaid cards.

            Section 1005.30--Remittance Transfer Definitions

    1. Applicability of definitions in subpart A. Except as modified or 
limited by subpart B (which modifications or limitations apply only to 
subpart B), the definitions in Sec.  1005.2 apply to all of Regulation 
E, including subpart B.

                           30(b) Business Day

    1. General. A business day, as defined in Sec.  1005.30(b), includes 
the entire 24-hour period ending at midnight, and a notice given 
pursuant to any section of subpart B is effective even if given outside 
of normal business hours. A remittance transfer provider is not required 
under subpart B to make telephone lines available on a 24-hour basis.
    2. Substantially all business functions. ``Substantially all 
business functions'' include both the public and the back-office 
operations of the provider. For example, if the offices of a provider 
are open on Saturdays for customers to request remittance transfers, but 
not for performing internal functions (such as investigating errors), 
then Saturday is not a business day for that provider. In this case, 
Saturday does not count toward the business-day standard set by subpart 
B for resolving errors, processing refunds, etc.
    3. Short hours. A provider may determine, at its election, whether 
an abbreviated day is a business day. For example, if a provider engages 
in substantially all business functions until noon on Saturdays instead 
of its usual 3 p.m. closing, it may consider Saturday a business day.
    4. Telephone line. If a provider makes a telephone line available on 
Sundays for cancelling the transfer, but performs no other business 
functions, Sunday is not a business day under the ``substantially all 
business functions'' standard.

                       30(c) Designated Recipient

    1. Person. A designated recipient can be either a natural person or 
an organization, such as a corporation. See Sec.  1005.2(j) (definition 
of person). The designated recipient is identified by the name of the 
person provided by the sender to the remittance transfer provider and 
disclosed by the provider to the sender pursuant to Sec.  
1005.31(b)(1)(iii).
    2. Location in a foreign country. i. A remittance transfer is 
received at a location in a foreign country if funds are to be received 
at a location physically outside of any State, as defined in Sec.  
1005.2(l). A specific pick-up location need not be designated for funds 
to be received at a location in a foreign country. If it is specified 
that the funds will be transferred to a foreign country to be picked up 
by the designated recipient, the transfer will be received at a location 
in a foreign country, even though a specific pick-up location within 
that country has not been designated. If it is specified that the funds 
will be received at a location on a U.S. military installation that is 
physically located in a foreign country, the transfer will be received 
in a State.
    ii. For transfers to a prepaid account (other than a prepaid account 
that is a payroll card account or a government benefit account), where 
the funds are to be received in

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a location physically outside of any State depends on whether the 
provider at the time the transfer is requested has information 
indicating that funds are to be received in a foreign country. See 
comments 30(c)-2.iii and 30(e)-3.i.C for illustrations of when a 
remittance transfer provider would have such information and when the 
provider would not. For transfers to all other accounts, whether funds 
are to be received at a location physically outside of any State depends 
on where the account is located. If the account is located in a State, 
the funds will not be received at a location in a foreign country. 
Further, for these accounts, if they are located on a U.S. military 
installation that is physically located in a foreign country, then these 
accounts are located in a State.
    iii. Where the sender does not specify information about a 
designated recipient's account, but instead provides information about 
the recipient, a remittance transfer provider may make the determination 
of whether the funds will be received at a location in a foreign country 
on information that is provided by the sender, and other information the 
provider may have, at the time the transfer is requested. For example, 
if a consumer in a State gives a provider the recipient's email address, 
and the provider has no other information about whether the funds will 
be received by the recipient at a location in a foreign country, then 
the provider may determine that funds are not to be received at a 
location in a foreign country. However, if the provider at the time the 
transfer is requested has additional information indicating that funds 
are to be received in a foreign country, such as if the recipient's 
email address is already registered with the provider and associated 
with a foreign account, then the provider has sufficient information to 
conclude that the remittance transfer will be received at a location in 
a foreign country. Similarly, if a consumer in a State purchases a 
prepaid card, and the provider mails or delivers the card directly to 
the consumer, the provider may conclude that funds are not to be 
received in a foreign country, because the provider does not know 
whether the consumer will subsequently send the prepaid card to a 
recipient in a foreign country. In contrast, the provider has sufficient 
information to conclude that the funds are to be received in a foreign 
country if the remittance transfer provider sends a prepaid card to a 
specified recipient in a foreign country, even if a person located in a 
State, including the sender, retains the ability to access funds on the 
prepaid card.
    3. Sender as designated recipient. A ``sender,'' as defined in Sec.  
1005.30(g), may also be a designated recipient if the sender meets the 
definition of ``designated recipient'' in Sec.  1005.30(c). For example, 
a sender may request that a provider send an electronic transfer of 
funds from the sender's checking account in a State to the sender's 
checking account located in a foreign country. In this case, the sender 
would also be a designated recipient.

                 30(d) Preauthorized Remittance Transfer

    1. Advance authorization. A preauthorized remittance transfer is a 
remittance transfer authorized in advance of a transfer that will take 
place on a recurring basis, at substantially regular intervals, and will 
require no further action by the consumer to initiate the transfer. In a 
bill-payment system, for example, if the consumer authorizes a 
remittance transfer provider to make monthly payments to a payee by 
means of a remittance transfer, and the payments take place without 
further action by the consumer, the payments are preauthorized 
remittance transfers. In contrast, if the consumer must take action each 
month to initiate a transfer (such as by entering instructions on a 
telephone or home computer), the payments are not preauthorized 
remittance transfers.

                        30(e) Remittance Transfer

    1. Electronic transfer of funds. The definition of ``remittance 
transfer'' requires an electronic transfer of funds. The term electronic 
has the meaning given in section 106(2) of the Electronic Signatures in 
Global and National Commerce Act. There may be an electronic transfer of 
funds if a provider makes an electronic book entry between different 
settlement accounts to effectuate the transfer. However, where a sender 
mails funds directly to a recipient, or provides funds to a courier for 
delivery to a foreign country, there is not an electronic transfer of 
funds. Similarly, generally, where a provider issues a check, draft, or 
other paper instrument to be mailed to a person abroad, there is not an 
electronic transfer of funds. Nonetheless, an electronic transfer of 
funds occurs for a payment made by a provider under a bill-payment 
service available to a consumer via computer or other electronic means, 
unless the terms of the bill-payment service explicitly state that all 
payments, or all payments to a particular payee or payees, will be 
solely by check, draft, or similar paper instrument drawn on the 
consumer's account to be mailed abroad, and the payee or payees that 
will be paid in this manner are identified to the consumer. With respect 
to such a bill-payment service, if a provider provides a check, draft or 
similar paper instrument drawn on a consumer's account to be mailed 
abroad for a payee that is not identified to the consumer as described 
above, this payment by check, draft or similar payment instrument will 
be an electronic transfer of funds.
    2. Sent by a remittance transfer provider. i. The definition of 
``remittance transfer'' requires that a transfer be ``sent by a 
remittance transfer provider.'' This means that

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there must be an intermediary that is directly engaged with the sender 
to send an electronic transfer of funds on behalf of the sender to a 
designated recipient.
    ii. A payment card network or other third party payment service that 
is functionally similar to a payment card network does not send a 
remittance transfer when a consumer provides a debit, credit or prepaid 
card directly to a foreign merchant as payment for goods or services. In 
such a case, the payment card network or third party payment service is 
not directly engaged with the sender to send a transfer of funds to a 
person in a foreign country; rather, the network or third party payment 
service is merely providing contemporaneous third-party payment 
processing and settlement services on behalf of the merchant or the card 
issuer, rather than on behalf of the sender. In such a case, the card 
issuer also is not directly engaged with the sender to send an 
electronic transfer of funds to the foreign merchant when the card 
issuer provides payment to the merchant. Similarly, where a consumer 
provides a checking or other account number, or a debit, credit or 
prepaid card, directly to a foreign merchant as payment for goods or 
services, the merchant is not acting as an intermediary that sends a 
transfer of funds on behalf of the sender when it submits the payment 
information for processing.
    iii. However, a card issuer or a payment network may offer a service 
to a sender where the card issuer or a payment network is an 
intermediary that is directly engaged with the sender to obtain funds 
using the sender's debit, prepaid or credit card and to send those funds 
to a recipient's checking account located in a foreign country. In this 
case, the card issuer or the payment network is an intermediary that is 
directly engaged with the sender to send an electronic transfer of funds 
on behalf of the sender, and this transfer of funds is a remittance 
transfer because it is made to a designated recipient. See comment 
30(c)-2.ii.
    3. Examples of remittance transfers.
    i. Examples of remittance transfers include:
    A. Transfers where the sender provides cash or another method of 
payment to a money transmitter or financial institution and requests 
that funds be sent to a specified location or account in a foreign 
country.
    B. Consumer wire transfers, where a financial institution executes a 
payment order upon a sender's request to wire money from the sender's 
account to a designated recipient.
    C. An addition of funds to a prepaid card by a participant in a 
prepaid card program, such as a prepaid card issuer or its agent, that 
is directly engaged with the sender to add these funds, where the 
prepaid card is sent or was previously sent by a participant in the 
prepaid card program to a person in a foreign country, even if a person 
located in a State (including a sender) retains the ability to withdraw 
such funds.
    D. International ACH transactions sent by the sender's financial 
institution at the sender's request.
    E. Online bill payments and other electronic transfers that a sender 
schedules in advance, including preauthorized remittance transfers, made 
by the sender's financial institution at the sender's request to a 
designated recipient.
    ii. The term remittance transfer does not include, for example:
    A. A consumer's provision of a debit, credit or prepaid card, 
directly to a foreign merchant as payment for goods or services because 
the issuer is not directly engaged with the sender to send an electronic 
transfer of funds to the foreign merchant when the issuer provides 
payment to the merchant. See comment 30(e)-2.
    B. A consumer's deposit of funds to a checking or savings account 
located in a State, because there has not been a transfer of funds to a 
designated recipient. See comment 30(c)-2.ii.
    C. Online bill payments and other electronic transfers that senders 
can schedule in advance, including preauthorized transfers, made through 
the Web site of a merchant located in a foreign country and via direct 
provision of a checking account, credit card, debit card or prepaid card 
number to the merchant, because the financial institution is not 
directly engaged with the sender to send an electronic transfer of funds 
to the foreign merchant when the institution provides payment to the 
merchant. See comment 30(e)-2.

                   30(f) Remittance Transfer Provider

    1. Agents. A person is not deemed to be acting as a remittance 
transfer provider when it performs activities as an agent on behalf of a 
remittance transfer provider.
    2. Normal course of business. i. General. Whether a person provides 
remittance transfers in the normal course of business depends on the 
facts and circumstances, including the total number and frequency of 
remittance transfers sent by the provider. For example, if a financial 
institution generally does not make remittance transfers available to 
customers, but sends a couple of such transfers in a given year as an 
accommodation for a customer, the institution does not provide 
remittance transfers in the normal course of business. In contrast, if a 
financial institution makes remittance transfers generally available to 
customers (whether described in the institution's deposit account 
agreement, or in practice) and makes transfers more frequently than on 
an occasional basis, the institution provides remittance transfers in 
the normal course of business.

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    ii. Safe harbor. On July 21, 2020, the safe harbor threshold in 
Sec.  1005.30(f)(2)(i) changed from 100 remittance transfers to 500 
remittance transfers. Under Sec.  1005.30(f)(2)(i), beginning on July 
21, 2020, a person that provided 500 or fewer remittance transfers in 
the previous calendar year and provides 500 or fewer remittance 
transfers in the current calendar year is deemed not to be providing 
remittance transfers in the normal course of its business. Accordingly, 
a person that qualifies for the safe harbor in Sec.  1005.30(f)(2)(i) is 
not a ``remittance transfer provider'' and is not subject to the 
requirements of subpart B. For purposes of determining whether a person 
qualifies for the safe harbor under Sec.  1005.30(f)(2)(i), the number 
of remittance transfers provided includes any transfers excluded from 
the definition of ``remittance transfer'' due simply to the safe harbor. 
In contrast, the number of remittance transfers provided does not 
include any transfers that are excluded from the definition of 
``remittance transfer'' for reasons other than the safe harbor, such as 
small value transactions or securities and commodities transfers that 
are excluded from the definition of ``remittance transfer'' by Sec.  
1005.30(e)(2).
    iii. Transition period. A person may cease to satisfy the 
requirements of the safe harbor described in Sec.  1005.30(f)(2)(i) if, 
beginning on July 21, 2020, the person provides in excess of 500 
remittance transfers in a calendar year. For example, if a person that 
provided 500 or fewer remittance transfers in the previous calendar year 
provides more than 500 remittance transfers in the current calendar 
year, the safe harbor applies to the first 500 remittance transfers that 
the person provides in the current calendar year. For any additional 
remittance transfers provided in the current calendar year and for any 
remittance transfers provided in the subsequent calendar year, whether 
the person provides remittance transfers for a consumer in the normal 
course of its business, as defined in Sec.  1005.30(f)(1), and is thus a 
remittance transfer provider for those additional transfers, depends on 
the facts and circumstances. Section 1005.30(f)(2)(ii) provides a 
reasonable period of time, not to exceed six months, for such a person 
to begin complying with subpart B, if that person is then providing 
remittance transfers in the normal course of its business. At the end of 
that reasonable period of time, such person would be required to comply 
with subpart B unless, based on the facts and circumstances, the person 
is not a remittance transfer provider.
    iv. Examples. A. Example of safe harbor and transition period for 
100-transfer safe harbor threshold effective prior to July 21, 2020. 
Assume that a person provided 90 remittance transfers in 2012 and 90 
such transfers in 2013. The safe harbor applied to the person's 
transfers in 2013, as well as the person's first 100 remittance 
transfers in 2014. However, if the person provided a 101st transfer on 
September 5, 2014, the facts and circumstances determine whether the 
person provided remittance transfers in the normal course of business 
and was thus a remittance transfer provider for the 101st and any 
subsequent remittance transfers that it provided in 2014. Furthermore, 
the person would not have qualified for the safe harbor described in 
Sec.  1005.30(f)(2)(i) in 2015 because the person did not provide 100 or 
fewer remittance transfers in 2014. However, for the 101st remittance 
transfer provided in 2014, as well as additional remittance transfers 
provided thereafter in 2014 and 2015, if that person was then providing 
remittance transfers for a consumer in the normal course of business, 
the person had a reasonable period of time, not to exceed six months, to 
come into compliance with subpart B. Assume that in this case, a 
reasonable period of time is six months. Thus, compliance with subpart B 
was not required for remittance transfers made on or before March 5, 
2015 (i.e., six months after September 5, 2014). After March 5, 2015, 
the person was required to comply with subpart B if, based on the facts 
and circumstances, the person provided remittance transfers in the 
normal course of business and was thus a remittance transfer provider.
    B. Example of safe harbor for a person that provided 500 or fewer 
transfers in 2019 and provides 500 or fewer transfers in 2020. On July 
21, 2020, the safe harbor threshold in Sec.  1005.30(f)(2)(i) changed 
from 100 remittance transfers to 500 remittance transfers. Thus, 
beginning on July 21, 2020, pursuant to Sec.  1005.30(f)(2)(i), a person 
is deemed not to be providing remittance transfers for a consumer in the 
normal course of its business if the person provided 500 or fewer 
remittance transfers in the previous calendar year and provides 500 or 
fewer remittance transfers in the current calendar year. If a person 
provided 500 or fewer transfers in 2019 and provides 500 or fewer 
remittance transfers in 2020, that person qualifies for the safe harbor 
threshold in 2020. For example, assume that a person provided 200 
remittance transfers in 2019 and 400 remittance transfers in 2020. The 
safe harbor will apply to the person's transfers in 2020 beginning on 
July 21, 2020, as well as the person's first 500 transfers in 2021. See 
comment 30(f)-2.iv.C for an example regarding the transition period if 
the 500-transfer safe harbor is exceeded.
    C. Example of safe harbor and transition period for the 500-transfer 
safe harbor threshold beginning on July 21, 2020. Assume that a person 
provided 490 remittance transfers in 2020 and 490 such transfers in 
2021. The safe harbor will apply to the person's transfers in 2021, as 
well as the person's first 500 remittance transfers in 2022. However, if 
the person provides a 501st transfer on September 5, 2022, the facts and 
circumstances determine whether the person provides remittance

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transfers in the normal course of business and is thus a remittance 
transfer provider for the 501st and any subsequent remittance transfers 
that it provides in 2022. Furthermore, the person would not qualify for 
the safe harbor described in Sec.  1005.30(f)(2)(i) in 2023 because the 
person did not provide 500 or fewer remittance transfers in 2022. 
However, for the 501st remittance transfer provided in 2022, as well as 
additional remittance transfers provided thereafter in 2022 and 2023, if 
that person is then providing remittance transfers for a consumer in the 
normal course of business, the person will have a reasonable period of 
time, not to exceed six months, to come into compliance with subpart B 
of Regulation E. Assume that in this case, a reasonable period of time 
is six months. Thus, compliance with subpart B is not required for 
remittance transfers made on or before March 5, 2023 (i.e., six months 
after September 5, 2022). After March 5, 2023, the person is required to 
comply with subpart B if, based on the facts and circumstances, the 
person provides remittance transfers in the normal course of business 
and is thus a remittance transfer provider.
    v. Continued compliance for transfers for which payment was made 
before a person qualifies for the safe harbor. Section 
1005.30(f)(2)(iii) addresses situations where a person who previously 
was required to comply with subpart B of Regulation E newly qualifies 
for the safe harbor in Sec.  1005.30(f)(2)(i). That section states that 
the requirements of EFTA and Regulation E, including those set forth in 
Sec. Sec.  1005.33 and 1005.34 (which address procedures for resolving 
errors and procedures for cancellation and refund of remittance 
transfers, respectively), as well as the requirements set forth in Sec.  
1005.13 (which, in part, governs record retention), continue to apply to 
transfers for which payment is made prior to the date the person 
qualifies for the safe harbor in Sec.  1005.30(f)(2)(i). Qualifying for 
the safe harbor in Sec.  1005.30(f)(2)(i) likewise does not excuse 
compliance with any other applicable law or regulation. For example, if 
a remittance transfer is also an electronic fund transfer, any 
requirements in subpart A of Regulation E that apply to the transfer 
continue to apply, regardless of whether the person must comply with 
subpart B. Relevant requirements in subpart A may include, but are not 
limited to, those relating to initial disclosures, change-in-terms 
notices, liability of consumers for unauthorized transfers, and 
procedures for resolving errors.
    3. Multiple remittance transfer providers. If the remittance 
transfer involves more than one remittance transfer provider, only one 
set of disclosures must be given, and the remittance transfer providers 
must agree among themselves which provider must take the actions 
necessary to comply with the requirements that subpart B imposes on any 
or all of them. Even though the providers must designate one provider to 
take the actions necessary to comply with the requirements that subpart 
B imposes on any or all of them, all remittance transfer providers 
involved in the remittance transfer remain responsible for compliance 
with the applicable provisions of the EFTA and Regulation E.

                              30(g) Sender

    1. Determining whether a consumer is located in a State. Under Sec.  
1005.30(g), the definition of ``sender'' means a consumer in a State 
who, primarily for personal, family, or household purposes, requests a 
remittance transfer provider to send a remittance transfer to a 
designated recipient. A sender located on a U.S. military installation 
that is physically located in a foreign country is located in a State. 
For transfers sent from a prepaid account (other than a prepaid account 
that is a payroll card account or a government benefit account), whether 
the consumer is located in a State depends on the location of the 
consumer. If the provider does not know where the consumer is at the 
time the consumer requests the transfer from the consumer's prepaid 
account (other than a prepaid account that is a payroll card account or 
a government benefit account) the provider may make the determination of 
whether a consumer is located in a State based on information that is 
provided by the consumer and on any records associated with the consumer 
that the provider may have, such as an address provided by the consumer. 
For transfers from all other accounts belonging to a consumer, whether a 
consumer is located in a State depends on where the consumer's account 
is located. If the account is located in a State, the consumer will be 
located in a State for purposes of the definition of ``sender'' in Sec.  
1005.30(g), notwithstanding comment 3(a)-3. For these accounts, if they 
are located on a U.S. military installation that is physically located 
in a foreign country, then these accounts are located in a State. Where 
a transfer is requested electronically or by telephone and the transfer 
is not from an account, the provider may make the determination of 
whether a consumer is located in a State based on information that is 
provided by the consumer and on any records associated with the consumer 
that the provider may have, such as an address provided by the consumer.
    2. Personal, family, or household purposes. Under Sec.  1005.30(g), 
a consumer is a ``sender'' only where he or she requests a transfer 
primarily for personal, family, or household purposes. A consumer who 
requests a transfer primarily for other purposes, such as business or 
commercial purposes, is not a sender under Sec.  1005.30(g). For 
transfers from an account that was established primarily for personal, 
family, or household purposes,

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a remittance transfer provider may generally deem that the transfer is 
requested primarily for personal, family, or household purposes and the 
consumer is therefore a ``sender'' under Sec.  1005.30(g). But if the 
consumer indicates that he or she is requesting the transfer primarily 
for other purposes, such as business or commercial purposes, then the 
consumer is not a sender under Sec.  1005.30(g), even if the consumer is 
requesting the transfer from an account that is used primarily for 
personal, family, or household purposes.
    3. Non-consumer accounts. A transfer that is requested to be sent 
from an account that was not established primarily for personal, family, 
or household purposes, such as an account that was established as a 
business or commercial account or an account held by a business entity 
such as a corporation, not-for-profit corporation, professional 
corporation, limited liability company, partnership, or sole 
proprietorship, is not requested primarily for personal, family, or 
household purposes. A consumer requesting a transfer from such an 
account therefore is not a sender under Sec.  1005.30(g). Additionally, 
a transfer that is requested to be sent from an account held by a 
financial institution under a bona fide trust agreement pursuant to 
Sec.  1005.2(b)(2) is not requested primarily for personal, family, or 
household purposes, and a consumer requesting a transfer from such an 
account is therefore not a sender under Sec.  1005.30(g).

                         30(h) Third-Party Fees

    1. Fees imposed on the remittance transfer. Fees imposed on the 
remittance transfer by a person other than the remittance transfer 
provider include only those fees that are charged to the designated 
recipient and are specifically related to the remittance transfer. For 
example, overdraft fees that are imposed by a recipient's bank or funds 
that are garnished from the proceeds of a remittance transfer to satisfy 
an unrelated debt are not fees imposed on the remittance transfer 
because these charges are not specifically related to the remittance 
transfer. Account fees are also not specifically related to a remittance 
transfer if such fees are merely assessed based on general account 
activity and not for receiving transfers. Where an incoming remittance 
transfer results in a balance increase that triggers a monthly 
maintenance fee, that fee is not specifically related to a remittance 
transfer. Similarly, fees that banks charge one another for handling a 
remittance transfer or other fees that do not affect the total amount of 
the transaction or the amount that will be received by the designated 
recipient are not fees imposed on the remittance transfer. For example, 
an interchange fee that is charged to a provider when a sender uses a 
credit or debit card to pay for a remittance transfer is not a fee 
imposed upon the remittance transfer. Fees that specifically relate to a 
remittance transfer may be structured on a flat per-transaction basis, 
or may be conditioned on other factors (such as account status or the 
quantity of remittance transfers received) in addition to the remittance 
transfer itself. For example, where an institution charges an incoming 
transfer fee on most customers' accounts, but not on preferred accounts, 
such a fee is nonetheless specifically related to a remittance transfer. 
Similarly, if the institution assesses a fee for every transfer beyond 
the fifth received each month, such a fee would be specifically related 
to the remittance transfer regardless of how many remittance transfers 
preceded it that month.
    2. Covered third-party fees. i. Under Sec.  1005.30(h)(1), a covered 
third-party fee means any fee that is imposed on the remittance transfer 
by a person other than the remittance transfer provider that is not a 
non-covered third-party fee.
    ii. Examples of covered third-party fees include:
    A. Fees imposed on a remittance transfer by intermediary 
institutions in connection with a wire transfer (sometimes referred to 
as ``lifting fees'').
    B. Fees imposed on a remittance transfer by an agent of the provider 
at pick-up for receiving the transfer.
    3. Non-covered third-party fees. Under Sec.  1005.30(h)(2), a non-
covered third-party fee means any fee imposed by the designated 
recipient's institution for receiving a remittance transfer into an 
account except if such institution acts as the agent of the remittance 
transfer provider. For example, a fee imposed by the designated 
recipient's institution for receiving an incoming transfer into an 
account is a non-covered third-party fee, provided such institution is 
not acting as the agent of the remittance transfer provider. See also 
comment 31(b)(1)(viii)-1. Furthermore, designated recipient's account in 
Sec.  1005.30(h)(2) refers to an asset account, regardless of whether it 
is a consumer asset account, established for any purpose and held by a 
bank, savings association, credit union, or equivalent institution. A 
designated recipient's account does not, however, include a credit card, 
prepaid card, or a virtual account held by an Internet-based or mobile 
telephone company that is not a bank, savings association, credit union 
or equivalent institution.

                      Section 1005.31--Disclosures

                    31(a) General Form of Disclosures

                     31(a)(1) Clear and Conspicuous

    1. Clear and conspicuous standard. Disclosures are clear and 
conspicuous for purposes

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of subpart B if they are readily understandable and, in the case of 
written and electronic disclosures, the location and type size are 
readily noticeable to senders. Oral disclosures as permitted by Sec.  
1005.31(a)(3), (4), and (5) are clear and conspicuous when they are 
given at a volume and speed sufficient for a sender to hear and 
comprehend them.
    2. Abbreviations and symbols. Disclosures may contain commonly 
accepted or readily understandable abbreviations or symbols, such as 
``USD'' to indicate currency in U.S. dollars or ``MXN'' to indicate 
currency in Mexican pesos.

               31(a)(2) Written and Electronic Disclosures

    1. E-Sign Act requirements. If a sender electronically requests the 
remittance transfer provider to send a remittance transfer, the 
disclosures required by Sec.  1005.31(b)(1) may be provided to the 
sender in electronic form without regard to the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). If a sender 
electronically requests the provider to send a remittance transfer, the 
disclosures required by Sec.  1005.31(b)(2) may be provided to the 
sender in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act. See Sec.  
1005.4(a)(1).
    2. Paper size. Written disclosures may be provided on any size 
paper, as long as the disclosures are clear and conspicuous. For 
example, disclosures may be provided on a register receipt or on an 8.5 
inch by 11 inch sheet of paper.
    3. Retainable electronic disclosures. A remittance transfer provider 
may satisfy the requirement to provide electronic disclosures in a 
retainable form if it provides an online disclosure in a format that is 
capable of being printed. Electronic disclosures may not be provided 
through a hyperlink or in another manner by which the sender can bypass 
the disclosure. A provider is not required to confirm that the sender 
has read the electronic disclosures.
    4. Pre-payment disclosures to a mobile telephone. Disclosures 
provided via mobile application or text message, to the extent permitted 
by Sec.  1005.31(a)(5), need not be retainable. However, disclosures 
provided electronically to a mobile telephone that are not provided via 
mobile application or text message must be retainable. For example, 
disclosures provided via email must be retainable, even if a sender 
accesses them by mobile telephone.
    5. Disclosures provided by fax. For purposes of disclosures required 
to be provided pursuant to Sec.  1005.31 or Sec.  1005.36, disclosures 
provided by facsimile transmission (i.e., fax) are considered to be 
provided in writing for purposes of providing disclosures in writing 
pursuant to subpart B and are not subject to the requirements for 
electronic disclosures set forth in Sec.  1005.31(a)(2).

          31(a)(3) Disclosures for Oral Telephone Transactions

    1. Transactions conducted partially by telephone. Except as provided 
in comment 31(a)(3)-2, for transactions conducted partially by 
telephone, providing the information required by Sec.  1005.31(b)(1) to 
a sender orally does not fulfill the requirement to provide the 
disclosures required by Sec.  1005.31(b)(1). For example, a sender may 
begin a remittance transfer at a remittance transfer provider's 
dedicated telephone in a retail store, and then provide payment in 
person to a store clerk to complete the transaction. In such cases, all 
disclosures must be provided in writing. A provider complies with this 
requirement, for example, by providing the written pre-payment 
disclosure in person prior to the sender's payment for the transaction, 
and the written receipt when the sender pays for the transaction.
    2. Oral telephone transactions. Section 1005.31(a)(3) applies to 
transactions conducted orally and entirely by telephone, such as 
transactions conducted orally on a landline or mobile telephone. A 
remittance transfer provider may treat a written or electronic 
communication as an inquiry when it believes that treating the 
communication as a request would be impractical. For example, if a 
sender physically located abroad contacts a U.S. branch of the sender's 
financial institution and attempts to initiate a remittance transfer by 
first sending a mailed letter, further communication with the sender by 
letter may be impractical due to the physical distance and likely mail 
delays. In such circumstances, a provider may conduct the transaction 
orally and entirely by telephone pursuant to Sec.  1005.31(a)(3) when 
the provider treats that initial communication as an inquiry and 
subsequently responds to the consumer's inquiry by calling the consumer 
on a telephone and orally gathering or confirming the information needed 
to identify and understand a request for a remittance transfer and 
otherwise conducts the transaction orally and entirely by telephone.

31(a)(5) Disclosures for Mobile Application or Text Message Transactions

    1. Mobile application and text message transactions. A remittance 
transfer provider may provide the required pre-payment disclosures 
orally or via mobile application or text message if the transaction is 
conducted entirely by telephone via mobile application or text message, 
the remittance transfer provider complies with the requirements of Sec.  
1005.31(g)(2), and the provider discloses orally or via mobile 
application or text message a statement about the rights of the sender

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regarding cancellation required by Sec.  1005.31(b)(2)(iv) pursuant to 
the timing requirements in Sec.  1005.31(e)(1). For example, if a sender 
conducts a transaction via text message on a mobile telephone, the 
remittance transfer provider may call the sender and orally provide the 
required pre-payment disclosures. Alternatively, the provider may 
provide the required pre-payment disclosures via text message. Section 
1005.31(a)(5) applies only to transactions conducted entirely by mobile 
telephone via mobile application or text message.

                      31(b) Disclosure Requirements

    1. Disclosures provided as applicable. Disclosures required by Sec.  
1005.31(b) need only be provided to the extent applicable. A remittance 
transfer provider may choose to omit an item of information required by 
Sec.  1005.31(b) if it is inapplicable to a particular transaction. 
Alternatively, for disclosures required by Sec.  1005.31(b)(1)(i) 
through (vii), a provider may disclose a term and state that an amount 
or item is ``not applicable,'' ``N/A,'' or ``None.'' For example, if 
fees or taxes are not imposed in connection with a particular 
transaction, the provider need not provide the disclosures about fees 
and taxes generally required by Sec.  1005.31(b)(1)(ii), the disclosures 
about covered third-party fees generally required by Sec.  
1005.31(b)(1)(vi), or the disclaimers about non-covered third-party fees 
and taxes collected by a person other than the provider generally 
required by Sec.  1005.31(b)(1)(viii). Similarly, a Web site need not be 
disclosed if the provider does not maintain a Web site. A provider need 
not provide the exchange rate disclosure required by Sec.  
1005.31(b)(1)(iv) if a recipient receives funds in the currency in which 
the remittance transfer is funded, or if funds are delivered into an 
account denominated in the currency in which the remittance transfer is 
funded. For example, if a sender in the United States sends funds from 
an account denominated in Euros to an account in France denominated in 
Euros, no exchange rate would need to be provided. Similarly, if a 
sender funds a remittance transfer in U.S. dollars and requests that a 
remittance transfer be delivered to the recipient in U.S. dollars, a 
provider need not disclose an exchange rate.
    2. Substantially similar terms, language, and notices. Certain 
disclosures required by Sec.  1005.31(b) must be described using the 
terms set forth in Sec.  1005.31(b) or substantially similar terms. 
Terms may be more specific than those provided. For example, a 
remittance transfer provider sending funds may describe fees imposed by 
an agent at pick-up as ``Pick-up Fees'' in lieu of describing them as 
``Other Fees.'' Foreign language disclosures required under Sec.  
1005.31(g) must contain accurate translations of the terms, language, 
and notices required by Sec.  1005.31(b) or permitted by Sec.  
1005.31(b)(1)(viii) and Sec.  1005.33(h)(3).

                    31(b)(1) Pre-Payment Disclosures

    1. Fees and taxes. i. Taxes collected on the remittance transfer by 
the remittance transfer provider include taxes collected on the 
remittance transfer by a State or other governmental body. A provider 
need only disclose fees imposed or taxes collected on the remittance 
transfer by the provider in Sec.  1005.31(b)(1)(ii), as applicable. For 
example, if no transfer taxes are imposed on a remittance transfer, a 
provider would only disclose applicable transfer fees. See comment 
31(b)-1. If both fees and taxes are imposed, the fees and taxes must be 
disclosed as separate, itemized disclosures. For example, a provider 
would disclose all transfer fees using the term ``Transfer Fees'' or a 
substantially similar term and would separately disclose all transfer 
taxes using the term ``Transfer Taxes'' or a substantially similar term.
    ii. The fees and taxes required to be disclosed by Sec.  
1005.31(b)(1)(ii) include all fees imposed and all taxes collected on 
the remittance transfer by the provider. For example, a provider must 
disclose any service fee, any fees imposed by an agent of the provider 
at the time of the transfer, and any State taxes collected on the 
remittance transfer at the time of the transfer. Fees imposed on the 
remittance transfer by the provider required to be disclosed under Sec.  
1005.31(b)(1)(ii) include only those fees that are charged to the sender 
and are specifically related to the remittance transfer. See also 
comment 30(h)-1. In contrast, the fees required to be disclosed by Sec.  
1005.31(b)(1)(vi) are any covered third-party fees as defined in Sec.  
1005.30(h)(1).
    iii. The term used to describe the fees imposed on the remittance 
transfer by the provider in Sec.  1005.31(b)(1)(ii) and the term used to 
describe covered third-party fees under Sec.  1005.31(b)(1)(vi) must 
differentiate between such fees. For example the terms used to describe 
fees disclosed under Sec.  1005.31(b)(1)(ii) and (vi) may not both be 
described solely as ``Fees.''
    2. Transfer amount. Sections 1005.31(b)(1)(i) and (v) require two 
transfer amount disclosures. First, under Sec.  1005.31(b)(1)(i), a 
provider must disclose the transfer amount in the currency in which the 
remittance transfer is funded to show the calculation of the total 
amount of the transaction. Typically, the remittance transfer is funded 
in U.S. dollars, so the transfer amount would be expressed in U.S. 
dollars. However, if the remittance transfer is funded, for example, 
from a Euro-denominated account, the transfer amount would be expressed 
in Euros. Second, under Sec.  1005.31(b)(1)(v), a provider must disclose 
the transfer amount in the currency in which the funds will be made 
available to the designated recipient. For example, if the funds

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will be picked up by the designated recipient in Japanese yen, the 
transfer amount would be expressed in Japanese yen. However, this second 
transfer amount need not be disclosed if covered third-party fees as 
described under Sec.  1005.31(b)(1)(vi) are not imposed on the 
remittance transfer. The terms used to describe each transfer amount 
should be the same.
    3. Exchange rate for calculation. The exchange rate used to 
calculate the transfer amount in Sec.  1005.31(b)(1)(v), the covered 
third-party fees in Sec.  1005.31(b)(1)(vi), the amount received in 
Sec.  1005.31(b)(1)(vii), and the optional disclosures of non-covered 
third-party fees and other taxes permitted by Sec.  1005.31(b)(1)(viii) 
is the exchange rate in Sec.  1005.31(b)(1)(iv), including an estimated 
exchange rate to the extent permitted by Sec.  1005.32, prior to any 
rounding of the exchange rate. For example, if one U.S. dollar exchanges 
for 11.9483779 Mexican pesos, a provider must calculate these 
disclosures using this rate, even though the provider may disclose 
pursuant to Sec.  1005.31(b)(1)(iv) that the U.S. dollar exchanges for 
11.9484 Mexican pesos. Similarly, if a provider estimates pursuant to 
Sec.  1005.32 that one U.S. dollar exchanges for 11.9483 Mexican pesos, 
a provider must calculate these disclosures using this rate, even though 
the provider may disclose pursuant to Sec.  1005.31(b)(1)(iv) that the 
U.S. dollar exchanges for 11.95 Mexican pesos (Estimated). If an 
exchange rate need not be rounded, a provider must use that exchange 
rate to calculate these disclosures. For example, if one U.S. dollar 
exchanges for exactly 11.9 Mexican pesos, a provider must calculate 
these disclosures using this exchange rate.

                       31(b)(1)(iv) Exchange Rate

    1. Applicable exchange rate. If the designated recipient will 
receive funds in a currency other than the currency in which the 
remittance transfer is funded, a remittance transfer provider must 
disclose the exchange rate to be used by the provider for the remittance 
transfer. An exchange rate that is estimated must be disclosed pursuant 
to the requirements of Sec.  1005.32. A remittance transfer provider may 
not disclose, for example, that an exchange rate is ``unknown,'' 
``floating,'' or ``to be determined.'' If a provider does not have 
specific knowledge regarding the currency in which the funds will be 
received, the provider may rely on a sender's representation as to the 
currency in which funds will be received for purposes of determining 
whether an exchange rate is applied to the transfer. For example, if a 
sender requests that a remittance transfer be deposited into an account 
in U.S. dollars, the provider need not disclose an exchange rate, even 
if the account is actually denominated in Mexican pesos and the funds 
are converted prior to deposit into the account. If a sender does not 
know the currency in which funds will be received, the provider may 
assume that the currency in which funds will be received is the currency 
in which the remittance transfer is funded.
    2. Rounding. The exchange rate disclosed by the provider for the 
remittance transfer is required to be rounded. The provider may round to 
two, three, or four decimal places, at its option. For example, if one 
U.S. dollar exchanges for 11.9483779 Mexican pesos, a provider may 
disclose that the U.S. dollar exchanges for 11.9484 Mexican pesos. The 
provider may alternatively disclose, for example, that the U.S. dollar 
exchanges for 11.948 pesos or 11.95 pesos. On the other hand, if one 
U.S. dollar exchanges for exactly 11.9 Mexican pesos, the provider may 
disclose that ``US$1 = 11.9 MXN'' in lieu of, for example, ``US$1 = 
11.90 MXN.'' The exchange rate disclosed for the remittance transfer 
must be rounded consistently for each currency. For example, a provider 
may not round to two decimal places for some transactions exchanged into 
Euros and round to four decimal places for other transactions exchanged 
into Euros.
    3. Exchange rate used. The exchange rate used by the provider for 
the remittance transfer need not be set by that provider. For example, 
an exchange rate set by an intermediary institution and applied to the 
remittance transfer would be the exchange rate used for the remittance 
transfer and must be disclosed by the provider.

           31(b)(1)(vi) Disclosure of Covered Third-Party Fees

    1. Fees disclosed in the currency in which the funds will be 
received. Section 1005.31(b)(1)(vi) requires the disclosure of covered 
third-party fees in the currency in which the funds will be received by 
the designated recipient. A covered third-party fee described in Sec.  
1005.31(b)(1)(vi) may be imposed in one currency, but the funds may be 
received by the designated recipient in another currency. In such cases, 
the remittance transfer provider must calculate the fee to be disclosed 
under Sec.  1005.31(b)(1)(vi) in the currency of receipt using the 
exchange rate in Sec.  1005.31(b)(1)(iv), including an estimated 
exchange rate to the extent permitted by Sec.  1005.32, prior to any 
rounding of the exchange rate. For example, an intermediary institution 
involved in sending an international wire transfer funded in U.S. 
dollars may impose a fee in U.S. dollars, but funds are ultimately 
deposited in the recipient's account in Euros. In this case, the 
provider would disclose the covered third-party fee to the sender 
expressed in Euros, calculated using the exchange rate disclosed under 
Sec.  1005.31(b)(1)(iv), prior to any rounding of the exchange rate. For 
purposes of Sec.  1005.31(b)(1)(v), (vi), and (vii), if a provider

[[Page 344]]

does not have specific knowledge regarding the currency in which the 
funds will be received, the provider may rely on a sender's 
representation as to the currency in which funds will be received. For 
example, if a sender requests that a remittance transfer be deposited 
into an account in U.S. dollars, the provider may provide the 
disclosures required in Sec.  1005.31(b)(1)(v), (vi), and (vii) in U.S. 
dollars, even if the account is actually denominated in Mexican pesos 
and the funds are subsequently converted prior to deposit into the 
account. If a sender does not know the currency in which funds will be 
received, the provider may assume that the currency in which funds will 
be received is the currency in which the remittance transfer is funded.

                      31(b)(1)(vii) Amount Received

    1. Amount received. The remittance transfer provider is required to 
disclose the amount that will be received by the designated recipient in 
the currency in which the funds will be received. The amount received 
must reflect the exchange rate, all fees imposed and all taxes collected 
on the remittance transfer by the remittance transfer provider, as well 
as any covered third-party fees required to be disclosed by Sec.  
1005.31(b)(1)(vi). The disclosed amount received must be reduced by the 
amount of any fee or tax--except for a non-covered third-party fee or 
tax collected on the remittance transfer by a person other than the 
provider--that is imposed on the remittance transfer that affects the 
amount received even if that amount is imposed or itemized separately 
from the transaction amount.

    31(b)(1)(viii) Statement When Additional Fees and Taxes May Apply

    1. Required disclaimer when non-covered third-party fees and taxes 
collected by a person other than the provider may apply. If non-covered 
third-party fees or taxes collected by a person other than the provider 
apply to a particular remittance transfer or if a provider does not know 
if such fees or taxes may apply to a particular remittance transfer, 
Sec.  1005.31(b)(1)(viii) requires the provider to include the 
disclaimer with respect to such fees and taxes. Required disclosures 
under Sec.  1005.31(b)(1)(viii) may only be provided to the extent 
applicable. For example, if the designated recipient's institution is an 
agent of the provider and thus, non-covered third-party fees cannot 
apply to the transfer, the provider must disclose all fees imposed on 
the remittance transfer and may not provide the disclaimer regarding 
non-covered third-party fees. In this scenario, the provider may only 
provide the disclaimer regarding taxes collected on the remittance 
transfer by a person other than the provider, as applicable. See Model 
Form A-30(c).
    2. Optional disclosure of non-covered third-party fees and taxes 
collected by a person other than the provider. When a remittance 
transfer provider knows the non-covered third-party fees or taxes 
collected on the remittance transfer by a person other than the provider 
that will apply to a particular transaction, Sec.  1005.31(b)(1)(viii) 
permits the provider to disclose the amount of such fees and taxes. 
Section 1005.32(b)(3) additionally permits a provider to disclose an 
estimate of such fees and taxes, provided any estimates are based on 
reasonable source of information. See comment 32(b)(3)-1. For example, a 
provider may know that the designated recipient's institution imposes an 
incoming wire fee for receiving a transfer. Alternatively, a provider 
may know that foreign taxes will be collected on the remittance transfer 
by a person other than the remittance transfer provider. In these 
examples, the provider may choose, at its option, to disclose the 
amounts of the relevant recipient institution fee and tax as part of the 
information disclosed pursuant to Sec.  1005.31(b)(1)(viii). The 
provider must not include that fee or tax in the amount disclosed 
pursuant to Sec.  1005.31(b)(1)(vi) or (b)(1)(vii). Fees and taxes 
disclosed under Sec.  1005.31(b)(1)(viii) must be disclosed in the 
currency in which the funds will be received. See comment 31(b)(1)(vi)-
1. Estimates of any non-covered third-party fees and any taxes collected 
on the remittance transfer by a person other than the provider must be 
disclosed in accordance with Sec.  1005.32(b)(3).

                            31(b)(2) Receipt

    1. Date funds will be available. A remittance transfer provider does 
not comply with the requirements of Sec.  1005.31(b)(2)(ii) if it 
provides a range of dates that the remittance transfer may be available 
or an estimate of the date on which funds will be available. If a 
provider does not know the exact date on which funds will be available, 
the provider may disclose the latest date on which the funds will be 
available. For example, if funds may be available on January 3, but are 
not certain to be available until January 10, then a provider complies 
with Sec.  1005.31(b)(2)(ii) if it discloses January 10 as the date 
funds will be available. However, a remittance transfer provider may 
also disclose that funds ``may be available sooner'' or use a 
substantially similar term to inform senders that funds may be available 
to the designated recipient on a date earlier than the date disclosed. 
For example, a provider may disclose ``January 10 (may be available 
sooner).''
    2. Agencies required to be disclosed. A remittance transfer provider 
must only disclose information about a State agency that licenses or 
charters the remittance transfer provider with respect to the remittance

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transfer as applicable. For example, if a financial institution is 
solely regulated by a Federal agency, and not licensed or chartered by a 
State agency, then the institution need not disclose information about a 
State agency. A remittance transfer provider must disclose information 
about the Consumer Financial Protection Bureau, whether or not the 
Consumer Financial Protection Bureau is the provider's primary Federal 
regulator.
    3. State agency that licenses or charters a provider. A remittance 
transfer provider must only disclose information about one State agency 
that licenses or charters the remittance transfer provider with respect 
to the remittance transfer, even if other State agencies also regulate 
the remittance transfer provider. For example, a provider may disclose 
information about the State agency which granted its license. If a 
provider is licensed in multiple States, and the State agency that 
licenses the provider with respect to the remittance transfer is 
determined by a sender's location, a provider may make the determination 
as to the State in which the sender is located based on information that 
is provided by the sender and on any records associated with the sender. 
For example, if the State agency that licenses the provider with respect 
to an online remittance transfer is determined by a sender's location, a 
provider could rely on the sender's statement regarding the State in 
which the sender is located and disclose the State agency that licenses 
the provider in that State. A State-chartered bank must disclose 
information about the State agency that granted its charter, regardless 
of the location of the sender.
    4. Web site of the Consumer Financial Protection Bureau. Section 
1005.31(b)(2)(vi) requires a remittance transfer provider to disclose 
the name, toll-free telephone number(s), and Web site of the Consumer 
Financial Protection Bureau. Providers may satisfy this requirement by 
disclosing the Web site of the Consumer Financial Protection Bureau's 
homepage, www.consumerfinance.gov, as shown on Model Forms A-32, A-34, 
A-35, and A-39. Alternatively, providers may, but are not required to, 
disclose the Bureau's Web site as the address of a page on the Bureau's 
Web site that provides information for consumers about remittance 
transfers, currently, consumerfinance.gov/sending-money, as shown on 
Model Form A-31. In addition, providers making disclosures in a language 
other than English pursuant to Sec.  1005.31(g) may, but are not 
required to, disclose the Bureau's Web site as a page on the Bureau's 
Web site that provides information for consumers about remittance 
transfers in the relevant language, if such Web site exists. For 
example, a provider that is making disclosures in Spanish under Sec.  
1005.31(g) may, but is not required to, disclose the Bureau's Web site 
on Spanish-language disclosures as the page on the Bureau's Web site 
that provides information regarding remittance transfers in Spanish, 
currently consumerfinance.gov/envios. This optional disclosure is shown 
on Model A-40. The Bureau will publish a list of any other foreign 
language Web sites that provide information regarding remittance 
transfers.
    5. Date of transfer on receipt. Where applicable, Sec.  
1005.31(b)(2)(vii) requires disclosure of the date of transfer for the 
remittance transfer that is the subject of a receipt required by Sec.  
1005.31(b)(2), including a receipt that is provided in accordance with 
the timing requirements in Sec.  1005.36(a). For any subsequent 
preauthorized remittance transfer subject to Sec.  1005.36(d)(2)(ii), 
the future date of transfer must be provided on any receipt provided for 
the initial transfer in that series of preauthorized remittance 
transfers, or where permitted, or disclosed as permitted by Sec.  
1005.31(a)(3) and (a)(5), in accordance with Sec.  1005.36(a)(1)(i).
    6. Transfer date disclosures. The following example demonstrates how 
the information required by Sec.  1005.31(b)(2)(vii) and Sec.  
1005.36(d)(1) should be disclosed on receipts: On July 1, a sender 
instructs the provider to send a preauthorized remittance transfer of 
US$100 each week to a designated recipient. The sender requests that 
first transfer in the series be sent on July 15. On the receipt, the 
remittance transfer provider discloses an estimated exchange rate to the 
sender pursuant to Sec.  1005.32(b)(2). In accordance with Sec.  
1005.31(b)(2)(vii), the provider should disclose the date of transfer 
for that particular transaction (i.e., July 15) on the receipt provided 
when payment is made for the transfer pursuant to the timing 
requirements in Sec.  1005.36(a)(1)(i). The second receipt, which Sec.  
1005.36(a)(1)(ii) requires to be provided within one business day after 
the date of the transfer or, for transfers from the sender's account 
held by the provider, on the next regularly scheduled periodic statement 
or within 30 days after payment is made if a periodic statement is not 
provided, is also required to include the date of transfer. If the 
provider discloses on either receipt the cancellation period applicable 
to and dates of subsequent preauthorized remittance transfers in 
accordance with Sec.  1005.36(d)(2), the disclosure must be phrased and 
formatted in such a way that it is clear to the sender which 
cancellation period is applicable to any date of transfer on the 
receipt.
    7. Cancellation disclosure. Remittance transfer providers that offer 
remittance transfers scheduled three or more business days before the 
date of the transfer, as well as remittance transfers scheduled fewer 
than three business days before the date of the transfer, may meet the 
cancellation disclosure requirements in Sec.  1005.31(b)(2)(iv) by 
describing the three-business-day and 30-minute cancellation periods on 
the same disclosure and

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using a checkbox or other method to clearly designate the applicable 
cancellation period. The provider may use a number of methods to 
indicate which cancellation period applies to the transaction including, 
but not limited to, a statement to that effect, use of a checkbox, 
highlighting, circling, and the like. For transfers scheduled three 
business days before the date of the transfer, the cancellation 
disclosures provided pursuant to Sec.  1005.31(b)(2)(iv) should be 
phrased and formatted in such a way that it is clear to the sender which 
cancellation period is applicable to the date of transfer disclosed on 
the receipt.

                      31(b)(3) Combined Disclosure

    1. Proof of payment. If a sender initiating a remittance transfer 
receives a combined disclosure provided under Sec.  1005.31(b)(3) and 
then completes the transaction, the remittance transfer provider must 
provide the sender with proof of payment. The proof of payment must be 
clear and conspicuous, provided in writing or electronically, and 
provided in a retainable form. The combined disclosure must be provided 
to the sender when the sender requests the remittance transfer, but 
prior to payment for the transfer, pursuant to Sec.  1005.31(e)(1), and 
the proof of payment must be provided when payment is made for the 
remittance transfer. The proof of payment for the transaction may be 
provided on the same piece of paper as the combined disclosure or on a 
separate piece of paper. For example, a provider may feed a combined 
disclosure through a computer printer when payment is made to add the 
date and time of the transaction, a confirmation code, and an indication 
that the transfer was paid in full. A provider may also provide this 
additional information to a sender on a separate piece of paper when 
payment is made. A remittance transfer provider does not comply with the 
requirements of Sec.  1005.31(b)(3) by providing a combined disclosure 
with no further indication that payment has been received.
    2. Confirmation of scheduling. As discussed in comment 31(e)-2, 
payment is considered to be made when payment is authorized for purposes 
of various timing requirements in subpart B, including with regard to 
the timing requirement for provision of the proof of payment described 
in Sec.  1005.31(b)(3)(i). However, where a transfer (whether a one-time 
remittance transfer or the first in a series of preauthorized remittance 
transfers) is scheduled before the date of transfer and the provider 
does not intend to process payment until at or near the date of 
transfer, the provider may provide a confirmation of scheduling in lieu 
of the proof of payment required by Sec.  1005.31(b)(3)(i). No further 
proof of payment is required when payment is later processed.

                   31(c) Specific Format Requirements

                            31(c)(1) Grouping

    1. Grouping. Information is grouped together for purposes of subpart 
B if multiple disclosures are in close proximity to one another and a 
sender can reasonably calculate the total amount of the transaction and 
the amount that will be received by the designated recipient. Model 
Forms A-30(a)-(d) through A-35 in Appendix A illustrate how information 
may be grouped to comply with the rule, but a remittance transfer 
provider may group the information in another manner. For example, a 
provider could provide the grouped information as a horizontal, rather 
than a vertical, calculation. A provider could also send multiple text 
messages sequentially to provide the full disclosure.

                          31(c)(4) Segregation

    1. Segregation. Disclosures may be segregated from other information 
in a variety of ways. For example, the disclosures may appear on a 
separate sheet of paper or may appear on the front of a page where other 
information appears on the back of that page. The disclosures may be set 
off from other information on a notice by outlining them in a box or 
series of boxes, with bold print dividing lines or a different color 
background, or by using other means.
    2. Directly related. For purposes of Sec.  1005.31(c)(4), the 
following is directly related information:
    i. The date and time of the transaction;
    ii. The sender's name and contact information;
    iii. The location at which the designated recipient may pick up the 
funds;
    iv. The confirmation or other identification code;
    v. A company name and logo;
    vi. An indication that a disclosure is or is not a receipt or other 
indicia of proof of payment;
    vii. A designated area for signatures or initials;
    viii. A statement that funds may be available sooner, as permitted 
by Sec.  1005.31(b)(2)(ii);
    ix. Instructions regarding the retrieval of funds, such as the 
number of days the funds will be available to the recipient before they 
are returned to the sender; and
    x. A statement that the provider makes money from foreign currency 
exchange.
    xi. Disclosure of any non-covered third-party fees and any taxes 
collected by a person other than the provider pursuant to Sec.  
1005.31(b)(1)(viii).

                             31(d) Estimates

    1. Terms. A remittance transfer provider may provide estimates of 
the amounts required by Sec.  1005.31(b), to the extent permitted by 
Sec.  1005.32. An estimate must be described

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using the term ``Estimated'' or a substantially similar term in close 
proximity to the term or terms described. For example, a remittance 
transfer provider could describe an estimated disclosure as ``Estimated 
Transfer Amount,'' ``Other Estimated Fees and Taxes,'' or ``Total to 
Recipient (Est.).''

                              31(e) Timing

    1. Request to send a remittance transfer. Except as provided in 
Sec.  1005.36(a), pre-payment and combined disclosures are required to 
be provided to the sender when the sender requests the remittance 
transfer, but prior to payment for the transfer. Whether a consumer has 
requested a remittance transfer depends on the facts and circumstances. 
A sender that asks a provider to send a remittance transfer, and 
provides transaction-specific information to the provider in order to 
send funds to a designated recipient, has requested a remittance 
transfer. A sender that has sent an email, fax, mailed letter, or 
similar written or electronic communication has not requested a 
remittance transfer if the provider believes that it is impractical for 
the provider to treat that communication as a request and if the 
provider treats the communication as an inquiry and subsequently 
responds to that inquiry by calling the consumer on a telephone and 
orally gathering or confirming the information needed to process a 
request for a remittance transfer. See comment 31(a)(3)-2. Likewise, a 
consumer who solely inquires about that day's rates and fees to send to 
Mexico has not requested the provider to send a remittance transfer. 
Conversely, a sender who asks the provider at an agent location to send 
money to a recipient in Mexico and provides the sender and recipient 
information to the provider has requested a remittance transfer.
    2. When payment is made. Except as provided in Sec.  1005.36(a), a 
receipt required by Sec.  1005.31(b)(2) must be provided to the sender 
when payment is made for the remittance transfer. For example, a 
remittance transfer provider could give the sender the disclosures after 
the sender pays for the remittance transfer, but before the sender 
leaves the counter. A provider could also give the sender the 
disclosures immediately before the sender pays for the transaction. For 
purposes of subpart B, payment is made, for example, when a sender 
provides cash to the remittance transfer provider or when payment is 
authorized.
    3. Telephone transfer from an account. A sender may transfer funds 
from his or her account, as defined by Sec.  1005.2(b), that is held by 
the remittance transfer provider. For example, a financial institution 
may send an international wire transfer for a sender using funds from 
the sender's account with the institution. Except as provided in Sec.  
1005.36(a), if the sender conducts such a transfer entirely by 
telephone, the institution may provide a receipt required by Sec.  
1005.31(b)(2) on or with the sender's next regularly scheduled periodic 
statement for that account or within 30 days after payment is made for 
the remittance transfer if a periodic statement is not provided.
    4. Mobile application and text message transactions. If a 
transaction is conducted entirely by telephone via mobile application or 
text message, a receipt required by Sec.  1005.31(b)(2) may be mailed or 
delivered to the sender pursuant to the timing requirements in Sec.  
1005.31(e)(2). For example, if a sender conducts a transfer entirely by 
telephone via mobile application, a remittance transfer provider may 
mail or deliver the disclosures to a sender pursuant to the timing 
requirements in Sec.  1005.31(e)(2).
    5. Statement about cancellation rights. The statement about the 
rights of the sender regarding cancellation required by Sec.  
1005.31(b)(2)(iv) may, but need not, be disclosed pursuant to the timing 
requirements of Sec.  1005.31(e)(2) if a provider discloses this 
information pursuant to Sec.  1005.31(a)(3)(iii) or (a)(5)(iii). The 
statement about the rights of the sender regarding error resolution 
required by Sec.  1005.31(b)(2)(iv), however, must be disclosed pursuant 
to the timing requirements of Sec.  1005.31(e)(2).

                   31(f) Accurate When Payment Is Made

    1. No guarantee of disclosures provided before payment. Except as 
provided in Sec.  1005.36(b), disclosures required by Sec.  1005.31(b) 
or permitted by Sec.  1005.31(b)(1)(viii) must be accurate when a sender 
makes payment for the remittance transfer. A remittance transfer 
provider is not required to guarantee the terms of the remittance 
transfer in the disclosures required or permitted by Sec.  1005.31(b) 
for any specific period of time. However, if any of the disclosures 
required by Sec.  1005.31(b) or permitted by Sec.  1005.31(b)(1)(viii) 
are not accurate when a sender makes payment for the remittance 
transfer, a provider must give new disclosures before accepting payment.

                   31(g) Foreign Language Disclosures

    1. Number of foreign languages used in written disclosure. Section 
1005.31(g)(1) does not limit the number of languages that may be used on 
a single document, but such disclosures must be clear and conspicuous 
pursuant to Sec.  1005.31(a)(1). Under Sec.  1005.31(g)(1), a remittance 
transfer provider may, but need not, provide the sender with a written 
or electronic disclosure that is in English and, if applicable, in each 
foreign language that the remittance transfer provider principally uses 
to advertise, solicit, or market either orally, in writing, or 
electronically, at the office in which a sender conducts a transaction 
or asserts an error, respectively. Alternatively, the remittance 
transfer provider

[[Page 348]]

may provide the disclosure solely in English and, if applicable, the 
foreign language primarily used by the sender with the remittance 
transfer provider to conduct the transaction or assert an error, 
provided such language is principally used by the remittance transfer 
provider to advertise, solicit, or market either orally, in writing, or 
electronically, at the office in which the sender conducts the 
transaction or asserts the error, respectively. If the remittance 
transfer provider chooses the alternative method, it may provide 
disclosures in a single document with both languages or in two separate 
documents with one document in English and the other document in the 
applicable foreign language. The following examples illustrate this 
concept.
    i. A remittance transfer provider principally uses only Spanish and 
Vietnamese to advertise, solicit, or market remittance transfer services 
at a particular office. The remittance transfer provider may provide all 
senders with disclosures in English, Spanish, and Vietnamese, regardless 
of the language the sender uses with the remittance transfer provider to 
conduct the transaction or assert an error.
    ii. Same facts as i. If a sender primarily uses Spanish with the 
remittance transfer provider to conduct a transaction or assert an 
error, the remittance transfer provider may provide a written or 
electronic disclosure in English and Spanish, whether in a single 
document or two separate documents. If the sender primarily uses English 
with the remittance transfer provider to conduct the transaction or 
assert an error, the remittance transfer provider may provide a written 
or electronic disclosure solely in English. If the sender primarily uses 
a foreign language with the remittance transfer provider to conduct the 
transaction or assert an error that the remittance transfer provider 
does not use to advertise, solicit, or market either orally, in writing, 
or electronically, at the office in which the sender conducts the 
transaction or asserts the error, respectively, the remittance transfer 
provider may provide a written or electronic disclosure solely in 
English.
    2. Primarily used. The language primarily used by the sender with 
the remittance transfer provider to conduct the transaction is the 
primary language used by the sender with the remittance transfer 
provider to convey the information necessary to complete the 
transaction. Similarly, the language primarily used by the sender with 
the remittance transfer provider to assert the error is the primary 
language used by the sender with the remittance transfer provider to 
provide the information required by Sec.  1005.33(b) to assert an error. 
For example:
    i. A sender initiates a conversation with a remittance transfer 
provider with a greeting in English and expresses interest in sending a 
remittance transfer to Mexico in English. If the remittance transfer 
provider thereafter communicates with the sender in Spanish and the 
sender conveys the other information needed to complete the transaction, 
including the designated recipient's information and the amount and 
funding source of the transfer, in Spanish, then Spanish is the language 
primarily used by the sender with the remittance transfer provider to 
conduct the transaction.
    ii. A sender initiates a conversation with the remittance transfer 
provider with a greeting in English and states in English that there was 
a problem with a prior remittance transfer to Vietnam. If the remittance 
transfer provider thereafter communicates with the sender in Vietnamese 
and the sender uses Vietnamese to convey the information required by 
Sec.  1005.33(b) to assert an error, then Vietnamese is the language 
primarily used by the sender with the remittance transfer provider to 
assert the error.
    iii. A sender accesses the Web site of a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors. The Web site is offered in English and French. If the 
sender uses the French version of the Web site to conduct the remittance 
transfer, then French is the language primarily used by the sender with 
the remittance transfer provider to conduct the transaction.

                            31(g)(1) General

    1. Principally used. i. All relevant facts and circumstances 
determine whether a foreign language is principally used by the 
remittance transfer provider to advertise, solicit, or market under 
Sec.  1005.31(g)(1). Generally, whether a foreign language is considered 
to be principally used by the remittance transfer provider to advertise, 
solicit, or market is based on:
    A. The frequency with which the foreign language is used in 
advertising, soliciting, or marketing of remittance transfer services at 
that office;
    B. The prominence of the advertising, soliciting, or marketing of 
remittance transfer services in that foreign language at that office; 
and
    C. The specific foreign language terms used in the advertising 
soliciting, or marketing of remittance transfer service at that office.
    ii. For example, if a remittance transfer provider posts several 
prominent advertisements in a foreign language for remittance transfer 
services, including rate and fee information, on a consistent basis in 
an office, the provider is creating an expectation that a consumer could 
receive information on remittance transfer services in the foreign 
language used in the advertisements. The foreign language used in such 
advertisements would be considered to be principally used at

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that office based on the frequency and prominence of the advertising. In 
contrast, an advertisement for remittance transfer services, including 
rate and fee information, that is featured prominently at an office and 
is entirely in English, except for a greeting in a foreign language, 
does not create an expectation that a consumer could receive information 
on remittance transfer services in the foreign language used for such 
greeting. The foreign language used in such an advertisement is not 
considered to be principally used at that office based on the incidental 
specific foreign language term used.
    2. Advertise, solicit, or market. i. Any commercial message in a 
foreign language, appearing in any medium, that promotes directly or 
indirectly the availability of remittance transfer services constitutes 
advertising, soliciting, or marketing in such foreign language for 
purposes of Sec.  1005.31(g)(1). Examples illustrating when a foreign 
language is used to advertise, solicit, or market include:
    A. Messages in a foreign language in a leaflet or promotional flyer 
at an office.
    B. Announcements in a foreign language on a public address system at 
an office.
    C. On-line messages in a foreign language, such as on the internet.
    D. Printed material in a foreign language on any exterior or 
interior sign at an office.
    E. Point-of-sale displays in a foreign language at an office.
    F. Telephone solicitations in a foreign language.
    ii. Examples illustrating use of a foreign language for purposes 
other than to advertise, solicit, or market include:
    A. Communicating in a foreign language (whether by telephone, 
electronically, or otherwise) about remittance transfer services in 
response to a consumer-initiated inquiry.
    B. Making disclosures in a foreign language that are required by 
Federal or other applicable law.
    3. Office. An office includes any physical location, telephone 
number, or Web site of a remittance transfer provider where a sender may 
conduct a remittance transfer or assert an error for a remittance 
transfer. The location need not exclusively offer remittance transfer 
services. For example, if an agent of a remittance transfer provider is 
located in a grocery store, the grocery store is considered an office 
for purposes of Sec.  1005.31(g)(1). Because a consumer must be located 
in a State in order to be considered a ``sender'' under Sec.  
1005.30(g), a Web site is not an office for purposes of Sec.  
1005.31(g)(1), even if the Web site can be accessed by consumers that 
are located in the United States, unless a sender may conduct a 
remittance transfer on the Web site or may assert an error for a 
remittance transfer on the Web site.
    4. At the office. Any advertisement, solicitation, or marketing is 
considered to be made at the office in which a sender conducts a 
transaction or asserts an error if such advertisement, solicitation, or 
marketing is posted, provided, or made: at a physical office of a 
remittance transfer provider; on a Web site of a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors; during a telephone call with a remittance transfer 
provider that may be used by senders to conduct remittance transfers or 
assert errors; or via mobile application or text message by a remittance 
transfer provider if the mobile application or text message may be used 
by senders to conduct remittance transfers or assert errors. An 
advertisement, solicitation, or marketing that is considered to be made 
at an office does not include general advertisements, solicitations, or 
marketing that are not intended to be made at a particular office. For 
example, if an advertisement for remittance transfers in Chinese appears 
in a Chinese newspaper that is being distributed at a grocery store in 
which the agent of a remittance transfer provider is located, such 
advertisement would not be considered to be made at that office. For 
disclosures provided pursuant to Sec.  1005.31, the relevant office is 
the office in which the sender conducts the transaction. For disclosures 
provided pursuant to Sec.  1005.33 for error resolution purposes, the 
relevant office is the office in which the sender first asserts the 
error, not the office where the transaction was conducted.

                       Section 1005.32--Estimates

    1. Disclosures where estimates can be used. Sections 1005.32(a) and 
(b)(1), (b)(4), and (b)(5) permit estimates to be used in certain 
circumstances for disclosures described in Sec. Sec.  1005.31(b)(1) 
through (3) and 1005.36(a)(1) and (2). To the extent permitted in Sec.  
1005.32(a) and (b)(1), (b)(4), and (b)(5), estimates may be used in the 
pre-payment disclosure described in Sec.  1005.31(b)(1), the receipt 
disclosure described in Sec.  1005.31(b)(2), the combined disclosure 
described in Sec.  1005.31(b)(3), and the pre-payment disclosures and 
receipt disclosures for both first and subsequent preauthorized 
remittance transfers described in Sec.  1005.36(a)(1) and (2). Section 
1005.32(b)(2) permits estimates to be used for certain information if 
the remittance transfer is scheduled by a sender five or more business 
days before the date of the transfer, for disclosures described in Sec.  
1005.36(a)(1)(i) and (a)(2)(i).

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           32(a) Temporary Exception for Insured Institutions

                            32(a)(1) General

    1. Control. For purposes of this section, an insured institution 
cannot determine exact amounts ``for reasons beyond its control'' when a 
person other than the insured institution or with which the insured 
institution has no correspondent relationship sets the exchange rate 
required to be disclosed under Sec.  1005.31(b)(1)(iv) or imposes a 
covered third-party fee required to be disclosed under Sec.  
1005.31(b)(1)(vi). For example, if an insured institution has a 
correspondent relationship with an intermediary financial institution in 
another country and that intermediary institution sets the exchange rate 
or imposes a fee for remittance transfers sent from the insured 
institution to the intermediary institution, then the insured 
institution must determine exact amounts for the disclosures required 
under Sec.  1005.31(b)(1)(iv) or (vi), because the determination of 
those amounts are not beyond the insured institution's control.
    2. Examples of scenarios that qualify for the temporary exception. 
The following examples illustrate when an insured institution cannot 
determine an exact amount ``for reasons beyond its control'' and thus 
would qualify for the temporary exception.
    i. Exchange rate. An insured institution cannot determine the exact 
exchange rate to disclose under Sec.  1005.31(b)(1)(iv) for an 
international wire transfer if the insured institution does not set the 
exchange rate, and the rate is set when the funds are deposited into the 
recipient's account by the designated recipient's institution with which 
the insured institution does not have a correspondent relationship. The 
insured institution will not know the exchange rate that the recipient 
institution will apply when the funds are deposited into the recipient's 
account.
    ii. Covered third-party fees. An insured institution cannot 
determine the exact covered third-party fees to disclose under Sec.  
1005.31(b)(1)(vi) if an intermediary institution with which the insured 
institution does not have a correspondent relationship, imposes a 
transfer or conversion fee.
    3. Examples of scenarios that do not qualify for the temporary 
exception. The following examples illustrate when an insured institution 
can determine exact amounts and thus would not qualify for the temporary 
exception.
    i. Exchange rate. An insured institution can determine the exact 
exchange rate required to be disclosed under Sec.  1005.31(b)(1)(iv) if 
it converts the funds into the local currency to be received by the 
designated recipient using an exchange rate that it sets. The 
determination of the exchange rate is in the insured institution's 
control even if there is no correspondent relationship with an 
intermediary institution in the transmittal route or the designated 
recipient's institution.
    ii. Covered third-party fees. An insured institution can determine 
the exact covered third-party fees required to be disclosed under Sec.  
1005.31(b)(1)(vi) if it has agreed upon the specific fees with an 
intermediary correspondent institution, and this correspondent 
institution is the only institution in the transmittal route to the 
designated recipient's institution.

                       32(b) Permanent Exceptions

    32(b)(1) Permanent Exceptions for Transfers to Certain Countries

    1. Laws of the recipient country. The laws of the recipient country 
do not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when a law or regulation of the recipient 
country requires the person making funds directly available to the 
designated recipient to apply an exchange rate that is:
    i. Set by the government of the recipient country after the 
remittance transfer provider sends the remittance transfer or
    ii. Set when the designated recipient receives the funds.
    2. Example illustrating when exact amounts can and cannot be 
determined because of the laws of the recipient country.
    i. The laws of the recipient country do not permit a remittance 
transfer provider to determine the exact exchange rate required to be 
disclosed under Sec.  1005.31(b)(1)(iv) when, for example, the 
government of the recipient country, on a daily basis, sets the exchange 
rate that must, by law, apply to funds received and the funds are made 
available to the designated recipient in the local currency the day 
after the remittance transfer provider sends the remittance transfer.
    ii. In contrast, the laws of the recipient country permit a 
remittance transfer provider to determine the exact exchange rate 
required to be disclosed under Sec.  1005.31(b)(1)(iv) when, for 
example, the government of the recipient country ties the value of its 
currency to the U.S. dollar.
    3. Method by which transactions are made in the recipient country. 
The method by which transactions are made in the recipient country does 
not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when transactions are sent via international 
ACH on terms negotiated between the United States government and the 
recipient country's government, under which the exchange rate is a rate 
set by the recipient country's central bank or other governmental 
authority after the provider sends the remittance transfer.
    4. Example illustrating when exact amounts can and cannot be 
determined because of the method by which transactions are made in the 
recipient country.

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    i. The method by which transactions are made in the recipient 
country does not permit a remittance transfer provider to determine the 
exact exchange rate required to be disclosed under Sec.  
1005.31(b)(1)(iv) when the provider sends a remittance transfer via 
international ACH on terms negotiated between the United States 
government and the recipient country's government, under which the 
exchange rate is a rate set by the recipient country's central bank on 
the business day after the provider has sent the remittance transfer.
    ii. In contrast, a remittance transfer provider would not qualify 
for the Sec.  1005.32(b)(1)(i)(B) methods exception if it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and a private-sector entity or entities in 
the recipient country, under which the exchange rate is set by the 
institution acting as the entry point to the recipient country's 
payments system on the next business day. However, a remittance transfer 
provider sending a remittance transfer using such a method may qualify 
for the Sec.  1005.32(a) temporary exception or the exception set forth 
in Sec.  1005.32(b)(4).
    iii. A remittance transfer provider would not qualify for the Sec.  
1005.32(b)(1)(i)(B) methods exception if, for example, it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and the recipient country's government, 
under which the exchange rate is set by the recipient country's central 
bank or other governmental authority before the sender requests a 
transfer.
    5. Safe harbor list. If a country is included on a safe harbor list 
published by the Bureau under Sec.  1005.32(b)(1)(ii), a remittance 
transfer provider may provide estimates of the amounts to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (vii). If a country does not 
appear on the Bureau's list, a remittance transfer provider may provide 
estimates under Sec.  1005.32(b)(1)(i) if the provider determines that 
the recipient country does not legally permit or the method by which 
transactions are conducted in that country does not permit the provider 
to determine exact disclosure amounts.
    6. Reliance on Bureau list of countries. A remittance transfer 
provider may rely on the list of countries published by the Bureau to 
determine whether the laws of a recipient country do not permit the 
remittance transfer provider to determine exact amounts required to be 
disclosed under Sec.  1005.31(b)(1)(iv) through (vii). Thus, if a 
country is on the Bureau's list, the provider may give estimates under 
this section, unless a remittance transfer provider has information that 
a country on the Bureau's list legally permits the provider to determine 
exact disclosure amounts.
    7. Change in laws of recipient country.
    i. If the laws of a recipient country change such that a remittance 
transfer provider can determine exact amounts, the remittance transfer 
provider must begin providing exact amounts for the required disclosures 
as soon as reasonably practicable if the provider has information that 
the country legally permits the provider to determine exact disclosure 
amounts.
    ii. If the laws of a recipient country change such that a remittance 
transfer provider cannot determine exact disclosure amounts, the 
remittance transfer provider may provide estimates under Sec.  
1005.32(b)(1)(i), even if that country does not appear on the list 
published by the Bureau.
    2. Example illustrating when exact amounts can and cannot be 
determined because of the laws of the recipient country.
    i. The laws of the recipient country do not permit a remittance 
transfer provider to determine the exact exchange rate required to be 
disclosed under Sec.  1005.31(b)(1)(iv) when, for example, the 
government of the recipient country, on a daily basis, sets the exchange 
rate that must, by law, apply to funds received and the funds are made 
available to the designated recipient in the local currency the day 
after the remittance transfer provider sends the remittance transfer.
    ii. In contrast, the laws of the recipient country permit a 
remittance transfer provider to determine the exact exchange rate 
required to be disclosed under Sec.  1005.31(b)(1)(iv) when, for 
example, the government of the recipient country ties the value of its 
currency to the U.S. dollar.
    3. Method by which transactions are made in the recipient country. 
The method by which transactions are made in the recipient country does 
not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when transactions are sent via international 
ACH on terms negotiated between the United States government and the 
recipient country's government, under which the exchange rate is a rate 
set by the recipient country's central bank or other governmental 
authority after the provider sends the remittance transfer.
    4. Example illustrating when exact amounts can and cannot be 
determined because of the method by which transactions are made in the 
recipient country.
    i. The method by which transactions are made in the recipient 
country does not permit a remittance transfer provider to determine the 
exact exchange rate required to be disclosed under Sec.  
1005.31(b)(1)(iv) when the provider sends a remittance transfer via 
international ACH on terms negotiated between the United States 
government and the recipient country's government, under which the 
exchange rate is a rate set by the recipient country's central bank on 
the business day after the provider has sent the remittance transfer.

[[Page 352]]

    ii. In contrast, a remittance transfer provider would not qualify 
for the Sec.  1005.32(b)(1)(i)(B) methods exception if it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and a private-sector entity or entities in 
the recipient country, under which the exchange rate is set by the 
institution acting as the entry point to the recipient country's 
payments system on the next business day. However, a remittance transfer 
provider sending a remittance transfer using such a method may qualify 
for the Sec.  1005.32(a) temporary exception.
    iii. A remittance transfer provider would not qualify for the Sec.  
1005.32(b)(1)(i)(B) methods exception if, for example, it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and the recipient country's government, 
under which the exchange rate is set by the recipient country's central 
bank or other governmental authority before the sender requests a 
transfer.
    5. Safe harbor list. If a country is included on a safe harbor list 
published by the Bureau under Sec.  1005.32(b)(1)(ii), a remittance 
transfer provider may provide estimates of the amounts to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (b)(1)(vii). If a country does not 
appear on the Bureau's list, a remittance transfer provider may provide 
estimates under Sec.  1005.32(b)(1)(i) if the provider determines that 
the recipient country does not legally permit or method by which 
transactions are conducted in that country does not permit the provider 
to determine exact disclosure amounts.
    6. Reliance on Bureau list of countries. A remittance transfer 
provider may rely on the list of countries published by the Bureau to 
determine whether the laws of a recipient country do not permit the 
remittance transfer provider to determine exact amounts required to be 
disclosed under Sec.  1005.31(b)(1)(iv) through (vii). Thus, if a 
country is on the Bureau's list, the provider may give estimates under 
this section, unless a remittance transfer provider has information that 
a country on the Bureau's list legally permits the provider to determine 
exact disclosure amounts.
    7. Change in laws of recipient country. i. If the laws of a 
recipient country change such that a remittance transfer provider can 
determine exact amounts, the remittance transfer provider must begin 
providing exact amounts for the required disclosures as soon as 
reasonably practicable if the provider has information that the country 
legally permits the provider to determine exact disclosure amounts.
    ii. If the laws of a recipient country change such that a remittance 
transfer provider cannot determine exact disclosure amounts, the 
remittance transfer provider may provide estimates under Sec.  
1005.32(b)(1)(i), even if that country does not appear on the list 
published by the Bureau.

32(b)(2) Permanent Exceptions for Transfers Scheduled Before the Date of 
                                Transfer

    1. Fixed amount of foreign currency. The following is an example of 
when and how a remittance transfer provider may disclose estimates for 
remittance transfers scheduled five or more business days before the 
date of transfer where the provider agrees to the sender's request to 
fix the amount to be transferred in a currency in which the transfer 
will be received and not the currency in which it was funded. If on 
February 1, a sender schedules a 1000 Euro wire transfer to be sent from 
the sender's bank account denominated in U.S. dollars to a designated 
recipient on February 15, Sec.  1005.32(b)(2) allows the provider to 
estimate the amount that will be transferred to the designated recipient 
(i.e., the amount described in Sec.  1005.31(b)(1)(i)), any fees imposed 
or taxes collected on the remittance transfer by the provider (if based 
on the amount transferred) (i.e., the amount described in Sec.  
1005.31(b)(1)(ii)), and the total amount of the transaction (i.e., the 
amount described in Sec.  1005.31(b)(1)(iii)). The provider may also 
estimate any covered third-party fees if the exchange rate is also 
estimated and the estimated exchange rate affects the amount of fees (as 
allowed by Sec.  1005.32(b)(2)(ii)).
    2. Relationship to Sec.  1005.10(d). To the extent Sec.  1005.10(d) 
requires, for an electronic fund transfer that is also a remittance 
transfer, notice when a preauthorized electronic fund transfer from the 
consumer's account will vary in amount from the previous transfer under 
the same authorization or from the preauthorized amount, that provision 
applies even if subpart B would not otherwise require notice before the 
date of transfer. However, insofar as Sec.  1005.10(d) does not specify 
the form of such notice, a notice sent pursuant to Sec.  
1005.36(a)(2)(i) will satisfy Sec.  1005.10(d) as long as the timing 
requirements of Sec.  1005.10(d) are satisfied.

  32(b)(3) Permanent Exception for Optional Disclosure of Non-Covered 
  Third-Party Fees and Taxes Collected on the Remittance Transfer by a 
                     Person Other Than the Provider

    1. Reasonable sources of information. Pursuant to Sec.  
1005.32(b)(3) a remittance transfer provider may estimate applicable 
non-covered third-party fees and taxes collected on the remittance 
transfer by a person other than the provider using reasonable sources of 
information. Reasonable sources of information may include, for example: 
information obtained from recent transfers to the same institution or 
the same country or region; fee schedules from the recipient 
institution; fee schedules from the recipient institution's competitors; 
surveys of recipient institution

[[Page 353]]

fees in the same country or region as the recipient institution; 
information provided or surveys of recipient institutions' regulators or 
taxing authorities; commercially or publicly available databases, 
services or sources; and information or resources developed by 
international nongovernmental organizations or intergovernmental 
organizations.

 32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an 
                           Insured Institution

    1. Determining the exact exchange rate. For purposes of Sec.  
1005.32(b)(4)(i)(B), an insured institution cannot determine, at the 
time it must provide the applicable disclosures, the exact exchange rate 
required to be disclosed under Sec.  1005.31(b)(1)(iv) for a remittance 
transfer to a particular country where the designated recipient of the 
transfer will receive funds in the country's local currency if a person 
other than the insured institution sets the exchange rate for that 
transfer, except where that person has a correspondent relationship with 
the insured institution, that person is a service provider for the 
insured institution, or that person acts as an agent of the insured 
institution.
    i. Example where an insured institution cannot determine the exact 
exchange rate. The following example illustrates when an insured 
institution cannot determine an exact exchange rate under Sec.  
1005.32(b)(4)(i)(B) for a remittance transfer:
    A. An insured institution or its service provider does not set the 
exchange rate required to be disclosed under Sec.  1005.31(b)(1)(iv), 
and the rate is set when the funds are deposited into the recipient's 
account by the designated recipient's institution that does not have a 
correspondent relationship with, and does not act as an agent of, the 
insured institution.
    ii. Examples where an insured institution can determine the exact 
exchange rate. The following examples illustrate when an insured 
institution can determine an exact exchange rate under Sec.  
1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured 
institution may not use the exception in Sec.  1005.32(b)(4) to estimate 
the disclosures required under Sec.  1005.31(b)(1)(iv) through (vii) for 
the remittance transfer:
    A. An insured institution has a correspondent relationship with an 
intermediary financial institution (or the intermediary financial 
institution acts as an agent of the insured institution) and that 
intermediary financial institution sets the exchange rate required to be 
disclosed under Sec.  1005.31(b)(1)(iv) for a remittance transfer.
    B. An insured institution or its service provider converts the funds 
into the local currency to be received by the designated recipient for a 
remittance transfer using an exchange rate that the insured institution 
or its service provider sets. The insured institution can determine the 
exact exchange rate for purposes of Sec.  1005.32(b)(4)(i)(B) for the 
remittance transfer even if the insured institution does not have a 
correspondent relationship with an intermediary financial institution in 
the transmittal route or the designated recipient's institution, and an 
intermediary financial institution in the transmittal route or the 
designed recipient's institution does not act as an agent of the insured 
institution.
    2. Threshold. For purposes of determining whether an insured 
institution made 1,000 or fewer remittance transfers in the prior 
calendar year to a particular country pursuant to Sec.  
1005.32(b)(4)(i)(C):
    i. The number of remittance transfers provided includes transfers in 
the prior calendar year to that country when the designated recipients 
of those transfers received funds in the country's local currency 
regardless of whether the exchange rate was estimated for those 
transfers. For example, an insured institution exceeds the 1,000-
transfer threshold in the prior calendar year if the insured institution 
provided 700 remittance transfers to a country in the prior calendar 
year when the designated recipients of those transfers received funds in 
the country's local currency when the exchange rate was estimated for 
those transfers and also sends 400 remittance transfers to the same 
country in the prior calendar year when the designated recipients of 
those transfers received funds in the country's local currency and the 
exchange rate for those transfers was not estimated.
    ii. The number of remittance transfers does not include remittance 
transfers to a country in the prior calendar year when the designated 
recipients of those transfers did not receive the funds in the country's 
local currency. For example, an insured institution does not exceed the 
1,000-transfer threshold in the prior calendar year if the insured 
institution provides 700 remittance transfers to a country in the prior 
calendar year when the designated recipients of those transfers received 
funds in the country's local currency and also sends 400 remittance 
transfers to the same country in the prior calendar year when the 
designated recipients of those transfers did not receive funds in the 
country's local currency.
    3. Transition period. If an insured institution in the prior 
calendar year did not exceed the 1,000-transfer threshold to a 
particular country pursuant to Sec.  1005.32(b)(4)(i)(C), but does 
exceed the 1,000-transfer threshold in the current calendar year, the 
insured institution has a reasonable amount of time after exceeding the 
1,000-transfer threshold to begin providing exact exchange rates in 
disclosures (assuming it cannot rely on another exception in Sec.  
1005.32 to estimate the exchange rate). The reasonable amount of time 
must not exceed the later of six months after exceeding the 1,000-
transfer threshold in the

[[Page 354]]

current calendar year or January 1 of the next year. For example, assume 
an insured institution did not exceed the 1,000-transfer threshold to a 
particular country pursuant to Sec.  1005.32(b)(4)(i)(C) in 2020, but 
does exceed the 1,000-transfer threshold on December 1, 2021. The 
insured institution would have a reasonable amount of time after 
December 1, 2021 to begin providing exact exchange rates in disclosures 
(assuming it cannot rely on another exception in Sec.  1005.32 to 
estimate the exchange rate). In this case, the reasonable amount of time 
must not exceed June 1, 2022 (which is six months after the insured 
institution exceeds the 1,000-transfer threshold in the previous year).

32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees 
                        by an Insured Institution

    1. Insured institution cannot determine the exact covered third-
party fees. For purposes of Sec.  1005.32(b)(5)(i)(B), an insured 
institution cannot determine, at the time it must provide the applicable 
disclosures, the exact covered third-party fees required to be disclosed 
under Sec.  1005.31(b)(1)(vi) for a remittance transfer to a designated 
recipient's institution when all of the following conditions are met:
    i. The insured institution does not have a correspondent 
relationship with the designated recipient's institution;
    ii. The designated recipient's institution does not act as an agent 
of the insured institution;
    iii. The insured institution does not have an agreement with the 
designated recipient's institution with respect to the imposition of 
covered third-party fees on the remittance transfer (e.g., an agreement 
whereby the designated recipient's institution agrees to charge back any 
covered third-party fees to the insured institution rather than impose 
the fees on the remittance transfer); and
    iv. The insured institution does not know at the time the 
disclosures are given that the only intermediary financial institutions 
that will impose covered third-party fees on the transfer are those 
institutions that have a correspondent relationship with or act as an 
agent for the insured institution, or have otherwise agreed upon the 
covered third-party fees with the insured institution.
    2. Insured institution can determine the exact covered third-party 
fees. For purposes of Sec.  1005.32(b)(5)(i)(B), an insured institution 
can determine, at the time it must provide the applicable disclosures, 
exact covered third-party fees, and thus the insured institution may not 
use the exception in Sec.  1005.32(b)(5) to estimate the disclosures 
required under Sec.  1005.31(b)(1)(vi) or (vii) for the transfer, if any 
of the following conditions are met:
    i. An insured institution has a correspondent relationship with the 
designated recipient's institution;
    ii. The designated recipient's institution acts as an agent of the 
insured institution;
    iii. An insured institution has an agreement with the designated 
recipient's institution with respect to the imposition of covered third-
party fees on the remittance transfer; or
    iv. An insured institution knows at the time the disclosures are 
given that the only intermediary financial institutions that will impose 
covered third-party fees on the transfer are those institutions that 
have a correspondent relationship with or act as an agent for the 
insured institution, or have otherwise agreed upon the covered third-
party fees with the insured institution.
    3. Threshold. For purposes of determining whether an insured 
institution made 500 or fewer remittance transfers in the prior calendar 
year to a particular designated recipient's institution pursuant to 
Sec.  1005.32(b)(5)(i)(C):
    i. The number of remittance transfers provided includes remittance 
transfers in the prior calendar year to that designated recipient's 
institution regardless of whether the covered third-party fees were 
estimated for those transfers. For example, an insured institution 
exceeds the 500-transfer threshold in the prior calendar year if an 
insured institution provides 300 remittance transfers to the designated 
recipient's institution in the prior calendar year when the covered 
third-party fees were estimated for those transfers and also sends 400 
remittance transfers to the designated recipient's institution in the 
prior calendar year and the covered third-party fees for those transfers 
were not estimated.
    ii. The number of remittance transfers includes remittance transfers 
provided to the designated recipient's institution in the prior calendar 
year regardless of whether the designated recipients received the funds 
in the country's local currency or in another currency. For example, an 
insured institution exceeds the 500-transfer threshold in the prior 
calendar year if the insured institution provides 300 remittance 
transfers to the designated recipient's institution in the prior 
calendar year when the designated recipients of those transfers received 
funds in the country's local currency and also sends 400 remittance 
transfers to the same designated recipient's institution in the prior 
calendar year when the designated recipients of those transfers did not 
receive funds in the country's local currency.
    iii. The number of remittance transfers includes remittance 
transfers provided to the designated recipient's institution and any of 
its branches in the country to which the particular transfer described 
in Sec.  1005.32(b)(5) is being sent. For example, if the particular 
remittance transfer described in Sec.  1005.32(b)(5) is being sent to 
the designated recipient's institution Bank XYZ in Nigeria, the number

[[Page 355]]

of remittance transfers for purposes of the 500-transfer threshold would 
include remittances transfers in the previous calendar year that were 
sent to Bank XYZ, or to its branches, in Nigeria. The 500-transfer 
threshold would not include remittance transfers that were sent to 
branches of Bank XYZ that were located in any country other than 
Nigeria.
    4. United States Federal statute or regulation. An insured 
institution can still use Sec.  1005.32(b)(5) to provide estimates of 
covered third-party fees for a remittance transfer sent to a particular 
designated recipient's institution even if the insured institution sent 
more than 500 transfers to the designated recipient's institution in the 
prior calendar year if a United States Federal statute or regulation 
prohibits the insured institution from being able to determine the exact 
covered third-party fees required to be disclosed under Sec.  
1005.31(b)(1)(vi) for the remittance transfer and the insured 
institution meets the other conditions set forth in Sec.  1005.32(b)(5). 
A United States Federal statute or regulation specifically prohibits the 
insured institution from being able to determine the exact covered 
third-party fees for the remittance transfer if the United States 
Federal statute or regulation:
    i. Prohibits the insured institution from disclosing exact covered 
third-party fees in disclosures for transfers to a designated 
recipient's institution; or
    ii. Makes it infeasible for the insured institution to form a 
relationship with the designated recipient's institution and that 
relationship is necessary for the insured institution to be able to 
determine, at the time it must provide the applicable disclosures, exact 
covered third-party fees.
    5. Transition period. If an insured institution in the prior 
calendar year did not exceed the 500-transfer threshold to a particular 
designated recipient's institution pursuant to Sec.  
1005.32(b)(5)(i)(C), but does exceed the 500-transfer threshold in the 
current calendar year, the insured institution has a reasonable amount 
of time after exceeding the 500-transfer threshold to begin providing 
exact covered third-party fees in disclosures (assuming that a United 
States Federal statute or regulation does not prohibit the insured 
institution from being able to determine the exact covered third-party 
fees, or the insured institution cannot rely on another exception in 
Sec.  1005.32 to estimate covered third-party fees). The reasonable 
amount of time must not exceed the later of six months after exceeding 
the 500-transfer threshold in the current calendar year or January 1 of 
the next year. For example, assume an insured institution did not exceed 
the 500-transfer threshold to a particular designated recipient's 
institution pursuant to Sec.  1005.32(b)(5)(i)(C) in 2020, but does 
exceed the 500-transfer threshold on December 1, 2021. The insured 
institution would have a reasonable amount of time after December 1, 
2021 to begin providing exact covered third-party fees in disclosures 
(assuming that a United States Federal statute or regulation does not 
prohibit the insured institution from being able to determine the exact 
covered third-party fees, or the insured institution cannot rely on 
another exception in Sec.  1005.32 to estimate covered third-party 
fees). In this case, the reasonable amount of time must not exceed June 
1, 2022 (which is six months after the insured institution exceeds the 
500-transfer threshold in the previous year).

                        32(c) Bases for Estimates

                         32(c)(1) Exchange Rate

    1. Most recent exchange rate for qualifying international ACH 
transfers. If the exchange rate for a remittance transfer sent via 
international ACH that qualifies for the Sec.  1005.32(b)(1)(i)(B) 
exception is set the following business day, the most recent exchange 
rate available for a transfer is the exchange rate set for the day that 
the disclosure is provided, i.e., the current business day's exchange 
rate.
    2. Publicly available. Examples of publicly available sources of 
information containing the most recent wholesale exchange rate for a 
currency include U.S. news services, such as Bloomberg, the Wall Street 
Journal, and the New York Times; a recipient country's national news 
services, and a recipient country's central bank or other government 
agency.
    3. Spread. An estimate for disclosing the exchange rate based on the 
most recent publicly available wholesale exchange rate must also reflect 
any spread the remittance transfer provider typically applies to the 
wholesale exchange rate for remittance transfers for a particular 
currency.
    4. Most recent. For the purposes of Sec.  1005.32(c)(1)(ii) and 
(iii), if the exchange rate with respect to a particular currency is 
published or provided multiple times throughout the day because the 
exchange rate fluctuates throughout the day, a remittance transfer 
provider may use any exchange rate available on that day to determine 
the most recent exchange rate.

                    32(c)(3) Covered Third-Party Fees

    1. Potential transmittal routes. A remittance transfer from the 
sender's account at an insured institution to the designated recipient's 
institution may take several routes, depending on the correspondent 
relationships each institution in the transmittal route has with other 
institutions. In providing an estimate of the fees required to be 
disclosed under Sec.  1005.31(b)(1)(vi) pursuant to the Sec.  1005.32(a) 
temporary exception or the exception under Sec.  1005.32(b)(5), an 
insured institution may rely upon the representations

[[Page 356]]

of the designated recipient's institution and the institutions that act 
as intermediaries in any one of the potential transmittal routes that it 
reasonably believes a requested remittance transfer may travel.

  32(d) Bases for Estimates for Transfers Scheduled Before the Date of 
                                Transfer

    1. In general. When providing an estimate pursuant to Sec.  
1005.32(b)(2), Sec.  1005.32(d) requires that a remittance transfer 
provider's estimated exchange rate must be the exchange rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use that day in providing disclosures to a sender 
requesting such a remittance transfer to be made on the same day. If, 
for the same-day remittance transfer, the provider could utilize an 
exception permitting the provision of estimates in Sec.  1005.32(a) or 
(b)(1), or (4), the provider may provide estimates based on a 
methodology permitted under Sec.  1005.32(c). For example, if, on 
February 1, the sender schedules a remittance transfer to occur on 
February 10, the provider should disclose the exchange rate as if the 
sender was requesting the transfer be sent on February 1. However, if at 
the time payment is made for the requested transfer, the remittance 
transfer provider could not send any remittance transfer until the next 
day (for reasons such as the provider's deadline for the batching of 
transfers), the remittance transfer provider can use the rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use in providing disclosures that day with respect to a 
remittance transfer requested that day that could not be sent until the 
following day.

            Section 1005.33--Procedures for Resolving Errors

                        33(a) Definition of Error

    1. Incorrect amount of currency paid by sender. Section 
1005.33(a)(1)(i) covers circumstances in which a sender pays an amount 
that differs from the total amount of the transaction, including fees 
imposed in connection with the transfer, stated in the receipt or 
combined disclosure provided under Sec.  1005.31(b)(2) or (3). Such 
error may be asserted by a sender regardless of the form or method of 
payment provided, including when a debit, credit, or prepaid card is 
used to fund the transfer and an excess amount is paid. For example, if 
a remittance transfer provider incorrectly charged a sender's credit 
card account for US$150, and US$120 was sent, plus a transfer fee of 
US$10, the sender could assert an error with the remittance transfer 
provider for the incorrect charge under Sec.  1005.33(a)(1)(i).
    2. Incorrect amount of currency received--coverage. Section 
1005.33(a)(1)(iii) covers circumstances in which the designated 
recipient receives an amount of currency that differs from the amount of 
currency identified on the disclosures provided to the sender, except 
where the disclosure stated an estimate of the amount of currency to be 
received in accordance with Sec.  1005.32 and the difference results 
from application of the actual exchange rate, fees, and taxes, rather 
than any estimated amounts, or the failure was caused by circumstances 
outside the remittance transfer provider's control. A designated 
recipient may receive an amount of currency that differs from the amount 
of currency disclosed, for example, if an exchange rate other than the 
disclosed rate is applied to the remittance transfer, or if the provider 
fails to account for fees or taxes that may be imposed by the provider 
or a third party before the transfer is picked up by the designated 
recipient or deposited into the recipient's account in the foreign 
country. However, if the provider rounds the exchange rate used to 
calculate the amount received consistent with Sec.  1005.31(b)(1)(iv) 
and comment 31(b)(1)(iv)-2 for the disclosed rate, there is no error if 
the designated recipient receives an amount of currency that results 
from applying the exchange rate used, prior to any rounding of the 
exchange rate, to calculate fees, taxes, or the amount received rather 
than the disclosed rate. Section 1005.33(a)(1)(iii) also covers 
circumstances in which the remittance transfer provider transmits an 
amount that differs from the amount requested by the sender.
    3. Incorrect amount of currency received--examples. For purposes of 
the following examples illustrating the error for an incorrect amount of 
currency received under Sec.  1005.33(a)(1)(iii), assume that none of 
the circumstances permitting an estimate under Sec.  1005.32 apply 
(unless otherwise stated).
    i. A consumer requests to send funds to a relative in Mexico to be 
received in local currency. Upon receiving the sender's payment, the 
remittance transfer provider provides a receipt indicating that the 
amount of currency that will be received by the designated recipient 
will be 1180 Mexican pesos, after fees and taxes are applied. However, 
when the relative picks up the transfer in Mexico a day later, he only 
receives 1150 Mexican pesos because the exchange rate applied by the 
recipient agent in Mexico was lower than the exchange rate used by the 
provider, prior to any rounding of the exchange rate, to disclose the 
amount of currency to be received by the designated recipient on the 
receipt. Because the designated recipient has received less than the 
amount of currency disclosed on the receipt, an error has occurred.
    ii. A consumer requests to send funds to a relative in Colombia to 
be received in local currency. The remittance transfer provider provides 
the sender a receipt stating an

[[Page 357]]

amount of currency that will be received by the designated recipient, 
which does not reflect the additional foreign taxes that will be 
collected in Colombia on the transfer but does include the statement 
required by Sec.  1005.31(b)(1)(viii). If the designated recipient will 
receive less than the amount of currency disclosed on the receipt due 
solely to the additional foreign taxes that the provider was not 
required to disclose, no error has occurred.
    iii. Same facts as in ii., except that the receipt provided by the 
remittance transfer provider does not reflect additional fees that are 
imposed by the receiving agent in Colombia on the transfer. Because the 
designated recipient will receive less than the amount of currency 
disclosed in the receipt due to the additional covered third-party fees, 
an error has occurred.
    iv. A consumer requests to send US$250 to a relative in India to a 
U.S. dollar-denominated account held by the relative at an Indian bank. 
Instead of the US$250 disclosed on the receipt as the amount to be sent, 
the remittance transfer provider sends US$200, resulting in a smaller 
deposit to the designated recipient's account than was disclosed as the 
amount to be received after fees and taxes. Because the designated 
recipient received less than the amount of currency that was disclosed, 
an error has occurred.
    v. A consumer requests to send US$100 to a relative in a foreign 
country to be received in local currency. The remittance transfer 
provider provides the sender a receipt that discloses an estimated 
exchange rate, other taxes, and amount of currency that will be received 
due to the law in the foreign country requiring that the exchange rate 
be set by the foreign country's central bank. When the relative picks up 
the remittance transfer, the relative receives less currency than the 
estimated amount disclosed to the sender on the receipt due to 
application of the actual exchange rate, fees, and taxes, rather than 
any estimated amounts. Because Sec.  1005.32(b) permits the remittance 
transfer provider to disclose an estimate of the amount of currency to 
be received, no error has occurred unless the estimate was not based on 
an approach set forth under Sec.  1005.32(c).
    vi. A sender requests that his bank send US$120 to a designated 
recipient's account at an institution in a foreign country. The foreign 
institution is not an agent of the provider. Only US$100 is deposited 
into the designated recipient's account because the recipient 
institution imposed a US$20 incoming wire fee and deducted the fee from 
the amount transferred. Because this fee is a non-covered third-party 
fee that the provider is not required to disclose under Sec.  
1005.31(b)(1)(vi), no error has occurred if the provider provided the 
disclosure required by Sec.  1005.31(b)(1)(viii).
    4. Incorrect amount of currency received--extraordinary 
circumstances. Under Sec.  1005.33(a)(1)(iii)(B), a remittance transfer 
provider's failure to make available to a designated recipient the 
amount of currency disclosed pursuant to Sec.  1005.31(b)(1)(vii) and 
stated in the disclosure provided pursuant to Sec.  1005.31(b)(2) or (3) 
for the remittance transfer is not an error if such failure was caused 
by extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated. 
Examples of extraordinary circumstances outside the remittance transfer 
provider's control that could not have been reasonably anticipated under 
Sec.  1005.33(a)(1)(iii)(B) include circumstances such as war or civil 
unrest, natural disaster, garnishment or attachment of some of the funds 
after the transfer is sent, and government actions or restrictions that 
could not have been reasonably anticipated by the remittance transfer 
provider, such as the imposition of foreign currency controls or foreign 
taxes unknown at the time the receipt or combined disclosure is provided 
under Sec.  1005.31(b)(2) or (3).
    5. Failure to make funds available by disclosed date of 
availability--coverage. Section 1005.33(a)(1)(iv) generally covers 
disputes about the failure to make funds available in connection with a 
remittance transfer to a designated recipient by the disclosed date of 
availability. If only a portion of the funds were made available by the 
disclosed date of availability, then Sec.  1005.33(a)(1)(iv) does not 
apply, but Sec.  1005.33(a)(1)(iii) may apply instead. The following are 
examples of errors for failure to make funds available by the disclosed 
date of availability (assuming that none of the exceptions in Sec.  
1005.33(a)(1)(iv)(A), (B), or (C) apply).
    i. Late or non-delivery of a remittance transfer;
    ii. Delivery of funds to the wrong account;
    iii. The fraudulent pick-up of a remittance transfer in a foreign 
country by a person other than the designated recipient;
    iv. The recipient agent or institution's retention of the remittance 
transfer, instead of making the funds available to the designated 
recipient.
    6. Failure to make funds available by disclosed date of 
availability--extraordinary circumstances. Under Sec.  
1005.33(a)(1)(iv)(A), a remittance transfer provider's failure to 
deliver or transmit a remittance transfer by the disclosed date of 
availability is not an error if such failure was caused by extraordinary 
circumstances outside the remittance transfer provider's control that 
could not have been reasonably anticipated. Examples of extraordinary 
circumstances outside the remittance transfer provider's control that 
could not have been reasonably anticipated under Sec.  
1005.33(a)(1)(iv)(A) include circumstances such as war or civil unrest, 
natural disaster, garnishment or attachment of

[[Page 358]]

funds after the transfer is sent, and government actions or restrictions 
that could not have been reasonably anticipated by the remittance 
transfer provider, such as the imposition of foreign currency controls.
    7. Failure to make funds available by disclosed date of 
availability--fraud and other screening procedures. Under Sec.  
1005.33(a)(1)(iv)(B), a remittance transfer provider's failure to 
deliver funds by the disclosed date of availability is not an error if 
such delay is related to the provider's or any third party's 
investigation necessary to address potentially suspicious, blocked or 
prohibited activity, and the provider did not and could not have 
reasonably foreseen the delay so as to enable it to timely disclose an 
accurate date of availability when providing the sender with a receipt 
or combined disclosure. For example, no error occurs if delivery of 
funds is delayed because, after the receipt is provided, the provider's 
fraud screening system flags a remittance transfer because the 
designated recipient has a name similar to the name of a blocked person 
under a sanctions program and further investigation is needed to 
determine that the designated recipient is not actually a blocked 
person. Similarly, no error occurs where, after disclosing a date of 
availability to the sender, a remittance transfer provider receives 
specific law enforcement information indicating that the characteristics 
of a remittance transfer match a pattern of fraudulent activity, and as 
a result, the provider deems it necessary to delay delivery of the funds 
to allow for further investigation. However, if a delay could have been 
reasonably foreseen, the exception in Sec.  1005.33(a)(1)(iv)(B) would 
not apply. For example, if a provider knows in time to make a disclosure 
that all remittance transfers to a certain geographic area must undergo 
screening procedures that routinely delay such transfers by two days, 
the provider's failure to include the additional two days in its 
disclosure of the date of availability constitutes an error if delivery 
of the funds is indeed delayed beyond the disclosed date of 
availability.
    8. Sender account number or recipient institution identifier error. 
The exception in Sec.  1005.33(a)(1)(iv)(D) applies where a sender gives 
the remittance transfer provider an incorrect account number or 
recipient institution identifier and all five conditions in Sec.  
1005.33(h) are satisfied. The exception does not apply, however, where 
the failure to make funds available is the result of a mistake by a 
provider or a third party or due to incorrect or insufficient 
information provided by the sender other than an incorrect account 
number or recipient institution identifier, such as an incorrect name of 
the recipient institution.
    9. Account number or recipient institution identifier. For purposes 
of the exception in Sec.  1005.33(a)(1)(iv)(D), the terms account number 
and recipient institution identifier refer to alphanumerical account or 
institution identifiers other than names or addresses, such as account 
numbers, routing numbers, Canadian transit numbers, International Bank 
Account Numbers (IBANs), Business Identifier Codes (BICs) and other 
similar account or institution identifiers used to route a transaction. 
In addition and for purposes of this exception, the term designated 
recipient's account in Sec.  1005.33(a)(1)(iv)(D) refers to an asset 
account, regardless of whether it is a consumer asset account, 
established for any purpose and held by a bank, savings association, 
credit union, or equivalent institution. A designated recipient's 
account does not, however, include a credit card, prepaid card, or a 
virtual account held by an Internet-based or mobile telephone company 
that is not a bank, savings association, credit union or equivalent 
institution.
    10. Recipient-requested changes. Under Sec.  1005.33(a)(2)(iii), a 
change requested by the designated recipient that the remittance 
transfer provider or others involved in the remittance transfer decide 
to accommodate is not considered an error. The exception under Sec.  
1005.33(a)(2)(iii) is available only if the change is made solely 
because the designated recipient requested the change. For example, if a 
sender requests to send US$100 to a designated recipient at a designated 
location, but the designated recipient requests the amount in a 
different currency (either at the sender-designated location or another 
location requested by the recipient) and the remittance transfer 
provider accommodates the recipient's request, the change does not 
constitute an error.
    11. Change from disclosure made in reliance on sender information. 
Under the commentary accompanying Sec.  1005.31, the remittance transfer 
provider may rely on the sender's representations in making certain 
disclosures. See, e.g., comments 31(b)(1)(iv)-1 and 31(b)(1)(vi)-1. For 
example, suppose a sender requests U.S. dollars to be deposited into an 
account of the designated recipient and represents that the account is 
U.S. dollar-denominated. If the designated recipient's account is 
actually denominated in local currency and the recipient account-holding 
institution must convert the remittance transfer into local currency in 
order to deposit the funds and complete the transfer, the change in 
currency does not constitute an error pursuant to Sec.  
1005.33(a)(2)(iv).

                    33(b) Notice of Error From Sender

    1. Person asserting or discovering error. The error resolution 
procedures of this section apply only when a notice of error is received 
from the sender, and not when a notice of error is received from the 
designated recipient or when the remittance transfer provider itself 
discovers and corrects an error.

[[Page 359]]

    2. Content of error notice. The notice of error is effective so long 
as the remittance transfer provider is able to identify the elements in 
Sec.  1005.33(b)(1)(ii). For example, the sender could provide the 
confirmation number or code that would be used by the designated 
recipient to pick up the transfer, or other identification number or 
code supplied by the remittance transfer provider in connection with the 
transfer, if such number or code is sufficient for the remittance 
transfer provider to identify the sender (and contact information), 
designated recipient, and the transfer in question. For an account-based 
remittance transfer, the notice of error is effective even if it does 
not contain the sender's account number, so long as the remittance 
transfer provider is able to identify the account and the transfer in 
question.
    3. Address on notice of error. A remittance transfer provider may 
request, or a sender may provide, the sender's or designated recipient's 
email address, as applicable, instead of a physical address, on a notice 
of error.
    4. Effect of late notice. A remittance transfer provider is not 
required to comply with the requirements of this section for any notice 
of error from a sender that is received by the provider more than 180 
days from the disclosed date of availability of the remittance transfer 
to which the notice of error applies or, if applicable, more than 60 
days after a provider sent documentation, additional information, or 
clarification requested by the sender, provided such date is later than 
180 days after the disclosed date of availability.
    5. Notice of error provided to agent. A notice of error provided by 
a sender to an agent of the remittance transfer provider is deemed to be 
received by the provider under Sec.  1005.33(b)(1)(i) when received by 
the agent.
    6. Consumer notice of error resolution rights. Section 1005.31 
requires a remittance transfer provider to include an abbreviated notice 
of the consumer's error resolution rights on the receipt or combined 
notice provided under Sec.  1005.31(b)(2) or (3). In addition, the 
remittance transfer provider must make available to a sender upon 
request, a notice providing a full description of the sender's error 
resolution rights, using language set forth in Appendix A of this part 
(Model Form A-36) or substantially similar language.

              33(c) Time Limits and Extent of Investigation

    1. Notice to sender of finding of error. If the remittance transfer 
provider determines during its investigation that an error occurred as 
described by the sender, the remittance provider may inform the sender 
of its findings either orally or in writing. However, if the provider 
determines that no error or a different error occurred, the provider 
must provide a written explanation of its findings under Sec.  
1005.33(d)(1).
    2. Incorrect or insufficient information provided for transfer. The 
remedy in Sec.  1005.33(c)(2)(iii) applies if a remittance transfer 
provider's failure to make funds in connection with a remittance 
transfer available to a designated recipient by the disclosed date of 
availability occurred because the sender provided incorrect or 
insufficient information in connection with the transfer, such as by 
erroneously identifying the designated recipient's address or by 
providing insufficient information such that the entity distributing the 
funds cannot identify the correct designated recipient. A sender is not 
considered to have provided incorrect or insufficient information for 
purposes of Sec.  1005.33(c)(2)(iii) if the provider discloses the 
incorrect location where the transfer may be picked up, gives the wrong 
confirmation number/code for the transfer, or otherwise miscommunicates 
information necessary for the designated recipient to pick-up the 
transfer. The remedies in Sec.  1005.33(c)(2)(iii) do not apply if the 
sender provided an incorrect account number or recipient institution 
identifier and the provider has met the requirements of Sec.  1005.33(h) 
because under Sec.  1005.33(a)(1)(iv)(D) no error would have occurred. 
See Sec.  1005.33(a)(1)(iv)(D) and comment 33(a)-7.
    3. Designation of requested remedy. Under Sec.  1005.33(c)(2)(ii), 
the sender may generally choose to obtain a refund of funds that were 
not properly transmitted or delivered to the designated recipient or, 
request redelivery of the amount appropriate to correct the error at no 
additional cost unless the error is determined to have occurred because 
the sender provided incorrect or insufficient information. Upon 
receiving the sender's request, the remittance transfer provider shall 
correct the error within one business day, or as soon as reasonably 
practicable, applying the same exchange rate, fees, and taxes stated in 
the disclosure provided under Sec.  1005.31(b)(2) or (3), if the sender 
requests delivery of the amount appropriate to correct the error and the 
error did not occur because the sender provided incorrect or 
insufficient information. The provider may also request that the sender 
indicate the preferred remedy at the time the sender provides notice of 
the error although if provider does so, it should indicate that the if 
the sender chooses a resend at the time, the remedy may be unavailable 
if the error occurred because the sender provided incorrect or 
insufficient information. However, if the sender does not indicate the 
desired remedy at the time of providing notice of error, the remittance 
transfer provider must notify the sender of any available remedies in 
the report provided under Sec.  1005.33(c)(1) or (d)(1) if the provider 
determines an error occurred.
    4. Default remedy. Unless the sender provided incorrect or 
insufficient information and Sec.  1005.33(c)(2)(iii) applies, the 
remittance

[[Page 360]]

transfer provider may set a default remedy that the provider will 
provide if the sender does not designate a remedy within a reasonable 
time after the sender receives the report provided under Sec.  
1005.33(c)(1). A provider that permits a sender to designate a remedy 
within 10 days after the provider has sent the report provided under 
Sec.  1005.33(c)(1) or (d)(1) before imposing the default remedy is 
deemed to have provided the sender with a reasonable time to designate a 
remedy. In the case a default remedy is provided, the provider must 
correct the error within one business day, or as soon as reasonably 
practicable, after the reasonable time for the sender to designate the 
remedy has passed, consistent with Sec.  1005.33(c)(2).
    5. Amount appropriate to resolve the error. For purposes of the 
remedies set forth in Sec.  1005.33(c)(2)(i)(A), (c)(2)(i)(B), 
(c)(2)(ii)(A)(1), and (c)(2)(i)(A)(2) the amount appropriate to resolve 
the error is the specific amount of transferred funds that should have 
been received if the remittance transfer had been effected without 
error. The amount appropriate to resolve the error does not include 
consequential damages. For example, when the amount that was disclosed 
pursuant to Sec.  1005.31(b)(1)(vii) was received by the designated 
recipient before the provider must determine the appropriate remedy for 
an error under Sec.  1005.33(a)(1)(iv), no additional amounts are 
required to resolve the error after the remittance transfer provider 
refunds the appropriate fees and taxes paid by the sender pursuant to 
Sec.  1005.33(c)(2)(ii)(B) or (c)(2)(iii), as applicable.
    6. Form of refund. For a refund provided under Sec.  
1005.33(c)(2)(i)(A), (c)(2)(ii)(A)(1), (c)(2)(ii)(B), or (c)(2)(iii), a 
remittance transfer provider may generally, at its discretion, issue a 
refund either in cash or in the same form of payment that was initially 
provided by the sender for the remittance transfer. For example, if the 
sender originally provided a credit card as payment for the transfer, 
the remittance transfer provider may issue a credit to the sender's 
credit card account in the appropriate amount. However, if a sender 
initially provided cash for the remittance transfer, a provider may 
issue a refund by check. For example, if the sender originally provided 
cash as payment for the transfer, the provider may mail a check to the 
sender in the amount of the payment.
    7. Remedies for incorrect amount paid. If an error under Sec.  
1005.33(a)(1)(i) occurred, the sender may request the remittance 
transfer provider refund the amount necessary to resolve the error under 
Sec.  1005.33(c)(2)(i)(A) or that the remittance transfer provider make 
the amount necessary to resolve the error available to the designated 
recipient at no additional cost under Sec.  1005.33(c)(2)(i)(B).
    8. Correction of an error if funds not available by disclosed date. 
If the remittance transfer provider determines an error of failure to 
make funds available by the disclosed date occurred under Sec.  
1005.33(a)(1)(iv), it must correct the error in accordance with Sec.  
1005.33(c)(2)(ii)(A), as applicable, and refund any fees imposed for the 
transfer (unless the sender provided incorrect or insufficient 
information to the remittance transfer provider in connection with the 
remittance transfer), whether the fee was imposed by the provider or a 
third party involved in sending the transfer, such as an intermediary 
bank involved in sending a wire transfer or the institution from which 
the funds are picked up in accordance with Sec.  1005.33(c)(2)(ii)(B).
    9. Charges for error resolution. If an error occurred, whether as 
alleged or in a different amount or manner, the remittance transfer 
provider may not impose a charge related to any aspect of the error 
resolution process (including charges for documentation or 
investigation).
    10. Correction without investigation. A remittance transfer provider 
may correct an error, without investigation, in the amount or manner 
alleged by the sender, or otherwise determined, to be in error, but must 
comply with all other applicable requirements of Sec.  1005.33.
    11. Procedure for sending a new remittance transfer after a sender 
provides incorrect or insufficient information. Section 
1005.33(c)(2)(iii) generally requires a remittance transfer provider to 
refund the transfer amount to the sender even if the sender's previously 
designated remedy was a resend or if the provider's default remedy in 
other circumstances is a resend. However, if before the refund is 
processed, the sender receives notice pursuant to Sec.  1005.33(c)(1) or 
(d)(1) that an error occurred because the sender provided incorrect or 
insufficient information and then requests that the provider send the 
remittance transfer again, and the provider agrees to that request, 
Sec.  1005.33(c)(2)(iii) requires that the request be treated as a new 
remittance transfer and the provider must provide new disclosures in 
accordance with Sec.  1005.31 and all other applicable provisions of 
subpart B. However, Sec.  1005.33(c)(2)(iii) does not obligate the 
provider to agree to a sender's request to send a new remittance 
transfer.
    12. Determining amount of refund. Section 1005.33(c)(2)(iii) permits 
the provider to deduct from the amount refunded, or applied towards a 
new transfer, any fees or taxes actually deducted from the transfer 
amount by a person other than the provider as part of the first 
unsuccessful remittance transfer attempt or that were deducted in the 
course of returning the transfer amount to the provider following a 
failed delivery. However, a provider may not deduct those fees and taxes 
that will ultimately be refunded to the provider. When the provider 
deducts fees or taxes from the amount refunded pursuant to

[[Page 361]]

Sec.  1005.33(c)(2)(iii), the provider must inform the sender of the 
deduction as part of the notice required by either Sec.  1005.33(c)(1) 
or (d)(1) and the reason for the deduction. The following examples 
illustrate these concepts.
    i. A sender instructs a remittance transfer provider to send US$100 
to a designated recipient in local currency, for which the provider 
charges a transfer fee of US$10 (and thus the sender pays the provider 
$110). The provider's correspondent imposes a fee of US$15 that it 
deducts from the amount of the transfer. The sender provides incorrect 
or insufficient information that results in non-delivery of the 
remittance transfer as requested. Once the provider determines that an 
error occurred because the sender provided incorrect or insufficient 
information, the provider must provide the report required by Sec.  
1005.33(c)(1) or (d)(1) and inform the sender, pursuant to Sec.  
1005.33(c)(1) or (d)(1), that it will refund US$95 to the sender within 
three business days, unless the sender chooses to apply the US$95 
towards a new remittance transfer and the provider agrees. Of the $95 
that is refunded to the sender, $10 reflects the refund of the 
provider's transfer fee, and $85 reflects the refund of the amount of 
funds provided by the sender in connection with the transfer which was 
not properly transmitted. The provider is not required to refund the 
US$15 fee imposed by the correspondent (unless the $15 will be refunded 
to the provider by the correspondent).
    ii. A sender instructs a remittance transfer provider to send US$100 
to a designated recipient in a foreign country, for which the provider 
charges a transfer fee of US$10 (and thus the sender pays the provider 
US$110) and an intermediary institution charges a lifting fee of US$5, 
such that the designated recipient is expected to receive only US$95, as 
indicated in the receipt. If an error occurs because the sender provides 
incorrect or insufficient information that results in non-delivery of 
the remittance transfer by the date of availability stated in the 
disclosure provided to the sender for the remittance transfer under 
Sec.  1005.31(b)(2) or (3), the provider is required to refund, or 
reapply if requested and the provider agrees, $105 unless the 
intermediary institution refunds to the provider the US$5 fee. If the 
sender requests to have the transfer amount applied to a new remittance 
transfer pursuant to Sec.  1005.33(c)(2)(iii) and provides the corrected 
or additional information, and the remittance transfer provider agrees 
to a resend remedy, the remittance transfer provider may charge the 
sender another transfer fee of US$10 to send the remittance transfer 
again with the corrected or additional information necessary to complete 
the transfer. Insofar as the resend is an entirely new remittance 
transfer, the provider must provide a prepayment disclosure and receipt 
or combined disclosure in accordance with, among other provisions, the 
timing requirements of Sec.  1005.31(f) and the cancellation provision 
of Sec.  1005.34(a).
    iii. In connection with a remittance transfer, a provider imposes a 
$15 tax that it then remits to a State taxing authority. An error occurs 
because the sender provided incorrect or insufficient information that 
resulted in non-delivery of the transfer to the designated recipient. 
The provider may deduct $15 from the amount it refunds to the sender 
pursuant to Sec.  1005.33(c)(2)(iii) unless the relevant tax law will 
result in the $15 tax being refunded to the provider by the State taxing 
authority because the transfer was not completed.

33(d) Procedures if Remittance Transfer Provider Determines No Error or 
                        Different Error Occurred

    1. Error different from that alleged. When a remittance transfer 
provider determines that an error occurred in a manner or amount 
different from that described by the sender, it must comply with the 
requirements of both Sec.  1005.33(c) and (d), as applicable. The 
provider may give the notice of correction and the explanation 
separately or in a combined form.

                       33(e) Reassertion of Error

    1. Withdrawal of error; right to reassert. The remittance transfer 
provider has no further error resolution responsibilities if the sender 
voluntarily withdraws the notice alleging an error. A sender who has 
withdrawn an allegation of error has the right to reassert the 
allegation unless the remittance transfer provider had already complied 
with all of the error resolution requirements before the allegation was 
withdrawn. The sender must do so, however, within the original 180-day 
period from the disclosed date of availability or, if applicable, the 
60-day period for a notice of error asserted pursuant to Sec.  
1005.33(b)(2).

                      33(f) Relation to Other Laws

    1. Concurrent error obligations. A financial institution that is 
also the remittance transfer provider may have error obligations under 
both Sec. Sec.  1005.11 and 1005.33. For example, if a sender asserts an 
error under Sec.  1005.11 with a remittance transfer provider that holds 
the sender's account, and the error is not also an error under Sec.  
1005.33 (such as the omission of an EFT on a periodic statement), then 
the error-resolution provisions of Sec.  1005.11 exclusively apply to 
the error. However, if a sender asserts an error under Sec.  1005.33 
with a remittance transfer provider that holds the sender's account, and 
the error is also an error under Sec.  1005.11 (such as when the amount 
the sender requested to be deducted from the sender's account and sent 
for the remittance transfer differs from the

[[Page 362]]

amount that was actually deducted from the account and sent), then the 
error-resolution provisions of Sec.  1005.33 exclusively apply to the 
error.
    2. Holder in due course. Nothing in this section limits a sender's 
rights to assert claims and defenses against a card issuer concerning 
property or services purchased with a credit card under Regulation Z, 12 
CFR 1026.12(c)(1), as applicable.
    3. Assertion of same error with multiple parties. If a sender 
receives credit to correct an error of an incorrect amount paid in 
connection with a remittance transfer from either the remittance 
transfer provider or account-holding institution (or creditor), and 
subsequently asserts the same error with another party, that party has 
no further responsibilities to investigate the error if the error has 
been corrected. For example, assume that a sender initially asserts an 
error with a remittance transfer provider with respect to a remittance 
transfer alleging that US$130 was debited from his checking account, but 
the sender only requested a remittance transfer for US$100, plus a US$10 
transfer fee. If the remittance transfer provider refunds US$20 to the 
sender to correct the error, and the sender subsequently asserts the 
same error with his account-holding institution, the account-holding 
institution has no error resolution responsibilities under Regulation E 
because the error has been fully corrected. In addition, nothing in this 
section prevents an account-holding institution or creditor from 
reversing amounts it has previously credited to correct an error if a 
sender receives more than one credit to correct the same error. For 
example, assume that a sender concurrently asserts an error with his or 
her account-holding institution and remittance transfer provider for the 
same error, and the sender receives credit from the account-holding 
institution for the error within 45 days of the notice of error. If the 
remittance transfer provider subsequently provides a credit of the same 
amount to the sender for the same error, the account-holding institution 
may reverse the amounts it had previously credited to the consumer's 
account, even after the 45-day error resolution period under Sec.  
1005.11.

     33(g) Error Resolution Standards and Recordkeeping Requirements

    1. Record retention requirements. As noted in Sec.  1005.33(g)(2), 
remittance transfer providers are subject to the record retention 
requirements under Sec.  1005.13. Therefore, remittance transfer 
providers must retain documentation, including documentation related to 
error investigations, for a period of not less than two years from the 
date a notice of error was submitted to the provider or action was 
required to be taken by the provider. A remittance transfer provider 
need not maintain records of individual disclosures that it has provided 
to each sender; it need only retain evidence demonstrating that its 
procedures reasonably ensure the sender's receipt of required 
disclosures and documentation.

                 33(h) Incorrect Account Number Supplied

    1. Reasonable methods of verification. When a sender provides an 
incorrect recipient institution identifier, Sec.  1005.33(h)(2) limits 
the exception in Sec.  1005.33(a)(1)(iv)(D) to situations where the 
provider used reasonably available means to verify that the recipient 
institution identifier provided by the sender did correspond to the 
recipient institution name provided by the sender. Reasonably available 
means may include accessing a directory of Business Identifier Codes and 
verifying that the code provided by the sender matches the provided 
institution name, and, if possible, the specific branch or location 
provided by the sender. Providers may also rely on other commercially 
available databases or directories to check other recipient institution 
identifiers. If reasonable verification means fail to identify that the 
recipient institution identifier is incorrect, the exception in Sec.  
1005.33(a)(1)(iv)(D) will apply, assuming that the provider can satisfy 
the other conditions in Sec.  1005.33(h). Similarly, if no reasonably 
available means exist to verify the accuracy of the recipient 
institution identifier, Sec.  1005.33(h)(2) would be satisfied and thus 
the exception in Sec.  1005.33(a)(1)(iv)(D) also will apply, again 
assuming the provider can satisfy the other conditions in Sec.  
1005.33(h). However, where a provider does not employ reasonably 
available means to verify a recipient institution identifier, Sec.  
1005.33(h)(2) is not satisfied and the exception in Sec.  
1005.33(a)(1)(iv)(D) will not apply.
    2. Reasonable efforts. Section 1005.33(h)(5) requires a remittance 
transfer provider to use reasonable efforts to recover the amount that 
was to be received by the designated recipient. Whether a provider has 
used reasonable efforts does not depend on whether the provider is 
ultimately successful in recovering the amount that was to be received 
by the designated recipient. Under Sec.  1005.33(h)(5), if the 
remittance transfer provider is requested to provide documentation or 
other supporting information in order for the pertinent institution or 
authority to obtain the proper authorization for the return of the 
incorrectly credited amount, reasonable efforts to recover the amount 
include timely providing any such documentation to the extent that it is 
available and permissible under law. The following are examples of 
reasonable efforts:
    i. The remittance transfer provider promptly calls or otherwise 
contacts the institution that received the transfer, either

[[Page 363]]

directly or indirectly through any correspondent(s) or other 
intermediaries or service providers used for the particular transfer, to 
request that the amount that was to be received by the designated 
recipient be returned, and if required by law or contract, by requesting 
that the recipient institution obtain a debit authorization from the 
holder of the incorrectly credited account.
    ii. The remittance transfer provider promptly uses a messaging 
service through a funds transfer system to contact institution that 
received the transfer, either directly or indirectly through any 
correspondent(s) or other intermediaries or service providers used for 
the particular transfer, to request that the amount that was to be 
received by the designated recipient be returned, in accordance with the 
messaging service's rules and protocol, and if required by law or 
contract, by requesting that the recipient institution obtain a debit 
authorization from the holder of the incorrectly credited account.
    3. Promptness of Reasonable Efforts. Section 1005.33(h)(5) requires 
that a remittance transfer provider act promptly in using reasonable 
efforts to recover the amount that was to be received by the designated 
recipient. Whether a provider acts promptly to use reasonable efforts 
depends on the facts and circumstances. For example, if, before the date 
of availability disclosed pursuant to Sec.  1005.31(b)(2)(ii), the 
sender informs the provider that the sender provided a mistaken account 
number, the provider will have acted promptly if it attempts to contact 
the recipient's institution before the date of availability.

 Section 1005.34--Procedures for Cancellation and Refund of Remittance 
                                Transfers

              34(a) Sender Right of Cancellation and Refund

    1. Content of cancellation request. A request to cancel a remittance 
transfer is valid so long as the remittance transfer provider is able to 
identify the remittance transfer in question. For example, the sender 
could provide the confirmation number or code that would be used by the 
designated recipient to pick up the transfer or other identification 
number or code supplied by the remittance transfer provider in 
connection with the transfer, if such number or code is sufficient for 
the remittance transfer provider to identify the transfer. A remittance 
transfer provider may also request, or the sender may provide, the 
sender's email address instead of a physical address, so long as the 
remittance transfer provider is able to identify the transfer to which 
the request to cancel applies.
    2. Notice of cancellation right. Section 1005.31 requires a 
remittance transfer provider to include an abbreviated notice of the 
sender's right to cancel a remittance transfer on the receipt or 
combined disclosure given under Sec.  1005.31(b)(2) or (3). In addition, 
the remittance transfer provider must make available to a sender upon 
request, a notice providing a full description of the right to cancel a 
remittance transfer using language that is set forth in Model Form A-36 
of Appendix A to this part or substantially similar language.
    3. Thirty-minute cancellation right. A remittance transfer provider 
must comply with the cancellation and refund requirements of Sec.  
1005.34 if the cancellation request is received by the provider no later 
than 30 minutes after the sender makes payment. The provider may, at its 
option, provide a longer time period for cancellation. A provider must 
provide the 30-minute cancellation right regardless of the provider's 
normal business hours. For example, if an agent closes less than 30 
minutes after the sender makes payment, the provider could opt to take 
cancellation requests through the telephone number disclosed on the 
receipt. The provider could also set a cutoff time after which the 
provider will not accept requests to send a remittance transfer. For 
example, a financial institution that closes at 5:00 p.m. could stop 
accepting payment for remittance transfers after 4:30 p.m.
    4. Cancellation request provided to agent. A cancellation request 
provided by a sender to an agent of the remittance transfer provider is 
deemed to be received by the provider under Sec.  1005.34(a) when 
received by the agent.
    5. Payment made. For purposes of subpart B, payment is made, for 
example, when a sender provides cash to the remittance transfer provider 
or when payment is authorized.

                34(b) Time Limits and Refund Requirements

    1. Form of refund. At its discretion, a remittance transfer provider 
generally may issue a refund either in cash or in the same form of 
payment that was initially provided by the sender for the remittance 
transfer. For example, if the sender originally provided a credit card 
as payment for the transfer, the remittance transfer provider may issue 
a credit to the sender's credit card account in the amount of the 
payment. However, if a sender initially provided cash for the remittance 
transfer, a provider may issue a refund by check. For example, if the 
sender originally provided cash as payment for the transfer, the 
provider may mail a check to the sender in the amount of the payment.
    2. Fees and taxes refunded. If a sender provides a timely request to 
cancel a remittance transfer, a remittance transfer provider must refund 
all funds provided by the sender in connection with the remittance 
transfer, including any fees and, to the extent not prohibited by law, 
taxes that have been imposed for the transfer, whether the fee or tax 
was assessed by the provider or a

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third party, such as an intermediary institution, the agent or bank in 
the recipient country, or a State or other governmental body.

                     Section 1005.35--Acts of Agents

    1. General. Remittance transfer providers must comply with the 
requirements of subpart B, including, but not limited to, providing the 
disclosures set forth in Sec.  1005.31 and providing any remedies as set 
forth in Sec.  1005.33, even if an agent or other person performs 
functions for the remittance transfer provider, and regardless of 
whether the provider has an agreement with a third party that transfers 
or otherwise makes funds available to a designated recipient.

    Section 1005.36--Transfers Scheduled Before the Date of Transfer

    1. Applicability of subpart B. The requirements set forth in subpart 
B apply to remittance transfers subject to Sec.  1005.36, to the extent 
that Sec.  1005.36 does not modify those requirements. For example, the 
foreign language disclosure requirements in Sec.  1005.31(g) and related 
commentary continue to apply to disclosures provided in accordance with 
Sec.  1005.36(a)(2).

                              36(a) Timing

         36(a)(2) Subsequent Preauthorized Remittance Transfers

    1. Changes in Disclosures. When a sender schedules a series of 
preauthorized remittance transfers, the provider is generally not 
required to provide a pre-payment disclosure prior to the date of each 
subsequent transfer. However, Sec.  1005.36(a)(1)(i) requires the 
provider to provide a pre-payment disclosure and receipt for the first 
in the series of preauthorized remittance transfers in accordance with 
the timing requirements set forth in Sec.  1005.31(e). While certain 
information in those disclosures is expressly permitted to be estimated 
(see Sec.  1005.32(b)(2)), other information is not permitted to be 
estimated, or is limited in how it may be estimated. When any of the 
information on the most recent receipt provided pursuant to Sec.  
1005.36(a)(1)(i) or (a)(2)(i), other than the temporal disclosures 
required by Sec.  1005.31(b)(2)(ii) and (b)(2)(vii), is no longer 
accurate with respect to a subsequent preauthorized remittance transfer 
for reasons other than as permitted by Sec.  1005.32, the provider must 
provide, within a reasonable time prior to the scheduled date of the 
next preauthorized remittance transfer, a receipt that complies with 
Sec.  1005.31(b)(2) and which discloses, among the other disclosures 
required by Sec.  1005.31(b)(2), the changed terms. For example, if the 
provider discloses in the pre-payment disclosure for the first in the 
series of preauthorized remittance transfers that its fee for each 
remittance transfer is $20 and, after six preauthorized remittance 
transfers, the provider increases its fee to $30 (to the extent 
permitted by contract law), the provider must provide the sender a 
receipt that complies with Sec. Sec.  1005.31(b)(2) and 1005.36(b)(2) 
within a reasonable time prior to the seventh transfer. Barring a 
further change, this receipt will apply to transfers after the seventh 
transfer. Or, if, after the sixth transfer, a tax collected by the 
provider increases from 1.5% of the amount that will be transferred to 
the designated recipient to 2.0% of the amount that will be transferred 
to the designated recipient, the provider must provide the sender a 
receipt that complies with Sec. Sec.  1005.31(b)(2) and 1005.36(b)(2) 
within a reasonable time prior to the seventh transfer. In contrast, 
Sec.  1005.36(a)(2)(i) does not require an updated receipt where an 
exchange rate, estimated as permitted by Sec.  1005.32(b)(2), changes.
    2. Clearly and conspicuously. In order to indicate clearly and 
conspicuously that the provider's fee has changed as required by Sec.  
1005.36(a)(2)(i), the provider could, for example, state on the receipt: 
``Transfer Fees (UPDATED) * * * $30.'' To the extent that other figures 
on the receipt must be revised because of the new fee, the receipt 
should also indicate that those figures are updated.
    3. Reasonable time. If a disclosure required by Sec.  
1005.36(a)(2)(i) or (d)(1) is mailed, the disclosure would be considered 
to be received by the sender five business days after it is posted in 
the mail. If hand delivered or provided electronically, the receipt 
would be considered to be received by the sender at the time of 
delivery. Thus, if the provider mails a disclosure required by Sec.  
1005.36(a)(2)(i) or (d)(1) not later than ten business days before the 
scheduled date of the transfer, or hand or electronically delivers a 
disclosure not later than five business days before the scheduled date 
of the transfer, the provider would be deemed to have provided the 
disclosure within a reasonable time prior to the scheduled date of the 
subsequent preauthorized remittance transfer.

                             36(b) Accuracy

    1. Use of estimates. In providing the disclosures described in Sec.  
1005.36(a)(1)(i) or (a)(2)(i), remittance transfer providers may use 
estimates to the extent permitted by any of the exceptions in Sec.  
1005.32. When estimates are permitted, however, they must be disclosed 
in accordance with Sec.  1005.31(d).
    2. Subsequent preauthorized remittance transfers. For a subsequent 
transfer in a series of preauthorized remittance transfers, the receipt 
provided pursuant to Sec.  1005.36(a)(1)(i), except for the temporal 
disclosures in that receipt required by Sec.  1005.31(b)(2)(ii) (Date

[[Page 365]]

Available) and (b)(2)(vii) (Transfer Date), applies to each subsequent 
preauthorized remittance transfer unless and until it is superseded by a 
receipt provided pursuant to Sec.  1005.36(a)(2)(i). For each subsequent 
preauthorized remittance transfer, only the most recent receipt provided 
pursuant to Sec.  1005.36(a)(1)(i) or (a)(2)(i) must be accurate as of 
the date each subsequent transfer is made.
    3. Receipts. A receipt required by Sec.  1005.36(a)(1)(ii) or 
(a)(2)(ii) must accurately reflect the details of the transfer to which 
it pertains and may not contain estimates pursuant to Sec.  
1005.32(b)(2). However, the remittance transfer provider may continue to 
disclose estimates to the extent permitted by Sec.  1005.32(a) or 
(b)(1), (4), or (5). In providing receipts pursuant to Sec.  
1005.36(a)(1)(ii) or (a)(2)(ii), Sec.  1005.36(b)(2) and (3) do not 
allow a remittance transfer provider to change figures previously 
disclosed on a receipt provided pursuant to Sec.  1005.36(a)(1)(i) or 
(a)(2)(i), unless a figure was an estimate or based on an estimate 
disclosed pursuant to Sec.  1005.32. Thus, for example, if a provider 
disclosed its fee as $10 in a receipt provided pursuant to Sec.  
1005.36(a)(1)(i) and that receipt contained an estimate of the exchange 
rate pursuant to Sec.  1005.32(b)(2), the second receipt provided 
pursuant to Sec.  1005.36(a)(1)(ii) must also disclose the fee as $10.

                           36(c) Cancellation

    1. Scheduled remittance transfer. Section 1005.36(c) applies when a 
remittance transfer is scheduled by the sender at least three business 
days before the date of the transfer, whether the sender schedules a 
preauthorized remittance transfer or a one-time transfer. A remittance 
transfer is scheduled if it will require no further action by the sender 
to send the transfer after the sender requests the transfer. For 
example, a remittance transfer is scheduled at least three business days 
before the date of the transfer, and Sec.  1005.36(c) applies, where a 
sender on March 1 requests a remittance transfer provider to send a wire 
transfer to pay a bill in a foreign country on March 15, if it will 
require no further action by the sender to send the transfer after the 
sender requests the transfer. A remittance transfer is not scheduled, 
and Sec.  1005.36(c) does not apply, where a transfer occurs more than 
three days after the date the sender requests the transfer solely due to 
the provider's processing time. The following are examples of when a 
sender has not scheduled a remittance transfer at least three business 
days before the date of the remittance transfer, such that the 
cancellation rule in Sec.  1005.34 applies.
    i. A sender on March 1 requests a remittance transfer provider to 
send a wire transfer to pay a bill in a foreign country on March 3.
    ii. A sender on March 1 requests that a remittance transfer provider 
send a remittance transfer on March 15, but the provider requires the 
sender to confirm the request on March 14 in order to send the transfer.
    iii. A sender on March 1 requests that a remittance transfer 
provider send an ACH transfer, and that transfer is sent on March 2, but 
due to the time required for processing, funds will not be deducted from 
the sender's account until March 5.
    2. Cancelled preauthorized remittance transfers. For preauthorized 
remittance transfers, the provider must assume the request to cancel 
applies to all future preauthorized remittance transfers, unless the 
sender specifically indicates that it should apply only to the next 
scheduled remittance transfer.
    3. Concurrent cancellation obligations. A financial institution that 
is also a remittance transfer provider may have both stop payment 
obligations under Sec.  1005.10 and cancellation obligations under Sec.  
1005.36. If a sender cancels a remittance transfer under Sec.  1005.36 
with a remittance transfer provider that holds the sender's account, and 
the transfer is a preauthorized transfer under Sec.  1005.10, then the 
cancellation provisions of Sec.  1005.36 exclusively apply.

36(d) Date of Transfer for Subsequent Preauthorized Remittance Transfers

    1. General. Section 1005.36(d)(2)(i) permits remittance transfer 
providers some flexibility in determining how and when the disclosures 
required by Sec.  1005.36(d)(1) may be provided to senders. The 
disclosure described in Sec.  1005.36(d)(1) may be provided as a 
separate disclosure, or on or with any other disclosure required by this 
subpart B related to the same series of preauthorized remittance 
transfers, provided that the disclosure and timing requirements in Sec.  
1005.36(d)(2) and other applicable provisions in subpart B are 
satisfied. For example, the required disclosures may be made on or with 
a receipt provided pursuant to Sec.  1005.36(a)(1)(i); a receipt 
provided pursuant to Sec.  1005.36(a)(2); or in a separate disclosure 
created by the provider. Thus, for example, a remittance transfer 
provider complies with Sec.  1005.36(d)(1) for a period of one year if 
it provides in the receipt provided to the sender when payment is made 
for the initial preauthorized remittance transfer, a schedule or summary 
of the dates of transfer of all the subsequent preauthorized remittance 
transfers in the series scheduled to occur over the next 12 months (and 
the applicable cancellation requirements and contact information).
    2. Delivery of disclosure. Section 1005.36(d)(2)(i) requires that 
the sender receive disclosure of the date of transfer, applicable 
cancellation requirements, and the provider's contact information no 
more than

[[Page 366]]

12 months, and no less than 5 business days prior to the date of 
transfer of the subsequent preauthorized remittance transfer. For 
purposes of determining when a disclosure required by Sec.  
1005.36(d)(1) is received by the sender, refer to comment 36(a)(2)-3.
    3. Disclosure of the date of transfer. The date of transfer of a 
subsequent preauthorized remittance transfer may be disclosed as a 
specific date (e.g., July 19, 2013) or by using a method that clearly 
permits identification of the date of the transfer, such as periodic 
intervals (e.g., the third Monday of every month, or the 15th of every 
month). If the future dates of transfer are disclosed as occurring 
periodically and there is a break in the sequence, or the date of 
transfer does not otherwise conform to the described period, e.g., if a 
holiday or weekend causes the provider to deviate from the normal 
schedule, the remittance transfer provider should disclose the specific 
date of transfer for the affected transfer.
    4. Accuracy requirements. Section 1005.36(d)(4) sets forth accuracy 
requirements for disclosures required for subsequent preauthorized 
remittance transfers under Sec.  1005.36(d)(1). If any of the 
information provided in these disclosures change, the provider must 
provide an updated disclosure with the revised information that is 
accurate as of when the transfer is made, pursuant to Sec.  
1005.36(d)(2).

             Appendix A--Model Disclosure Clauses and Forms

    1. Review of forms. The Bureau will not review or approve disclosure 
forms or statements for financial institutions. However, the Bureau has 
issued model clauses for institutions to use in designing their 
disclosures. If an institution uses these clauses accurately to reflect 
its service, the institution is protected from liability for failure to 
make disclosures in proper form.
    2. Use of forms. The appendix contains model disclosure clauses for 
optional use by financial institutions and remittance transfer providers 
to facilitate compliance with the disclosure requirements of Sec. Sec.  
1005.5(b)(2) and (3), 1005.6(a), 1005.7, 1005.8(b), 1005.14(b)(1)(ii), 
1005.15(c), 1005.15(e)(1) and (2), 1005.18(b)(2), (3), (6) and (7), 
1005.18(d)(1) and (2), 1005.31, 1005.32 and 1005.36. The use of 
appropriate clauses in making disclosures will protect a financial 
institution and a remittance transfer provider from liability under 
sections 916 and 917 of the act provided the clauses accurately reflect 
the institution's EFT services and the provider's remittance transfer 
services, respectively.
    3. Altering the clauses. Unless otherwise expressly addressed in the 
rule, the following applies. Financial institutions may use clauses of 
their own design in conjunction with the Bureau's model clauses. The 
inapplicable words or portions of phrases in parentheses should be 
deleted. The catchlines are not part of the clauses and need not be 
used. Financial institutions may make alterations, substitutions, or 
additions in the clauses to reflect the services offered, such as 
technical changes (including the substitution of a trade name for the 
word ``card,'' deletion of inapplicable services, or substitution of 
lesser liability limits). Several of the model clauses include 
references to a telephone number and address. Where two or more of these 
clauses are used in a disclosure, the telephone number and address may 
be referenced and need not be repeated.
    4. Model forms for remittance transfers. The Bureau will not review 
or approve disclosure forms for remittance transfer providers. However, 
this appendix contains 15 model forms for use in connection with 
remittance transfers. These model forms are intended to demonstrate 
several formats a remittance transfer provider may use to comply with 
the requirements of Sec.  1005.31(b). Model Forms A-30 through A-32 
demonstrate how a provider could provide the required disclosures for a 
remittance transfer exchanged into local currency. Model Forms A-30(a), 
(b), (c), and (d) demonstrate four options regarding model language 
related to the required disclaimer, where applicable, of non-covered 
third-party fees and taxes on the remittance transfer collected by a 
person other than the provider under Sec.  1005.31(b)(1)(viii). Model 
forms 30(b) through (d) also include language that may be used if a 
provider elects to estimate either these non-covered third-party fees or 
taxes collected by a person other than the provider as part of the 
disclaimer. Model Forms A-33 through A-35 demonstrate how a provider 
could provide the required disclosures for dollar-to-dollar remittance 
transfers. These forms also demonstrate disclosure of the required 
content, in accordance with the grouping and proximity requirements of 
Sec.  1005.31(c)(1) and (2), in both a register receipt format and an 
8.5 inch by 11 inch format. Model Form A-36 provides long form model 
error resolution and cancellation disclosures required by Sec.  
1005.31(b)(4), and Model Form A-37 provides short form model error 
resolution and cancellation disclosures required by Sec.  
1005.31(b)(2)(iv) and (vi). Model Forms A-38 through A-41 provide 
language for Spanish language disclosures.
    i. The model forms contain information that is not required by 
subpart B, including a confirmation code, the sender's name and contact 
information, and the optional disclosure of the estimated amount of 
these non-covered third-party fees and taxes collected by a person other 
than the provider as part of the disclaimer. Additional information not 
required by subpart B may be presented on the model forms as permitted 
by Sec.  1005.31(b)(1)(viii) and (c)(4). Any additional information must 
be presented consistent

[[Page 367]]

with a remittance transfer provider's obligation to provide required 
disclosures in a clear and conspicuous manner.
    ii. Use of the model forms is optional. A remittance transfer 
provider may change the forms by rearranging the format or by making 
modifications to the language of the forms, in each case without 
modifying the substance of the disclosures. Any rearrangement or 
modification of the format of the model forms must be consistent with 
the form, grouping, proximity, and other requirements of Sec.  
1005.31(a) and (c). Providers making revisions that do not comply with 
this section will lose the benefit of the safe harbor for appropriate 
use of Model Forms A-30 to A-41.
    iii. Permissible changes to the language and format of the model 
forms include, for example:
    A. Substituting the information contained in the model forms that is 
intended to demonstrate how to complete the information in the model 
forms--such as names, addresses, and Web sites; dates; numbers; and 
State-specific contact information--with information applicable to the 
remittance transfer. In addition, if the applicable non-covered third-
party fees are imposed by an institution other than a bank, a provider 
could modify the disclaimer accordingly.
    B. Eliminating disclosures that are not applicable to the transfer, 
as described under Sec.  1005.31(b). For example, if only covered third-
party fees are imposed, a provider would not use a disclaimer related to 
additional fees that may apply because all applicable fees are covered 
and included in the disclosure as required under Sec.  
1005.31(b)(1)(vi).
    C. Correcting or updating telephone numbers, mailing addresses, or 
Web site addresses that may change over time.
    D. Providing the disclosures on a paper size that is different from 
a register receipt and 8.5 inch by 11 inch formats.
    E. Adding a term substantially similar to ``estimated'' in close 
proximity to the specified terms in Sec.  1005.31(b)(1) and (2), as 
required under Sec.  1005.31(d).
    F. Providing the disclosures in a foreign language, or multiple 
foreign languages, subject to the requirements of Sec.  1005.31(g).
    G. Substituting cancellation language to reflect the right to a 
cancellation made pursuant to the requirements of Sec.  1005.36(c).
    iv. Changes to the model forms that are not permissible include, for 
example, adding information that is not segregated from the required 
disclosures, other than as permitted by Sec.  1005.31(c)(4).

[76 FR 81023, Dec. 27, 2011, as amended at 78 FR 18224, Mar. 26, 2013; 
77 FR 6297, Feb. 7, 2012; 77 FR 50285; 77 FR 50285, Aug. 20, 2012; 78 FR 
30714, May 22, 2013; 78 FR 49366, Aug. 14, 2013; 79 FR 55993, Sept. 18, 
2014; 81 FR 70320, Oct. 12, 2016; 81 FR 84345, Nov. 22, 2016; 83 FR 
6420, Feb. 13, 2018; 85 FR 34905, June 5, 2020]



PART 1006_DEBT COLLECTION PRACTICES (REGULATION F)--Table of Contents



                            Subpart A_General

Sec.
1006.1 Authority, purpose, and coverage.
1006.2 Definitions.

                Subpart B_Rules for FDCPA Debt Collectors

1006.6 Communications in connection with debt collection.
1006.10 Acquisition of location information.
1006.14 Harassing, oppressive, or abusive conduct.
1006.18 False, deceptive, or misleading representations or means.
1006.22 Unfair or unconscionable means.
1006.26 Collection of time-barred debts.
1006.30 Other prohibited practices.
1006.34 Notice for validation of debts.
1006.38 Disputes and requests for original-creditor information.
1006.42 Sending required disclosures.

Subpart C [Reserved]

                         Subpart D_Miscellaneous

1006.100 Record retention.
1006.104 Relation to State laws.
1006.108 Exemption for State regulation.

Appendix A to Part 1006--Procedures for State Application for Exemption 
          From the Provisions of the Act
Appendix B to Part 1006--Model Forms
Appendix C to Part 1006--Issuance of Advisory Opinions
Supplement I to Part 1006--Official Interpretations

    Authority: 12 U.S.C. 5512, 5514(b), 5532; 15 U.S.C. 1692l(d), 1692o, 
7004.

    Source: 85 FR 76887, Nov. 30, 2020, unless otherwise noted.



                            Subpart A_General



Sec.  1006.1  Authority, purpose, and coverage.

    (a) Authority. This part, known as Regulation F, is issued by the 
Bureau

[[Page 368]]

of Consumer Financial Protection pursuant to sections 814(d) and 817 of 
the Fair Debt Collection Practices Act (FDCPA or Act), 15 U.S.C. 
1692l(d), 1692o; title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act), 12 U.S.C. 5481 et seq.; and 
paragraph (b)(1) of section 104 of the Electronic Signatures in Global 
and National Commerce Act (E-SIGN Act), 15 U.S.C. 7004.
    (b) Purpose. This part carries out the purposes of the FDCPA, which 
include eliminating abusive debt collection practices by debt 
collectors, ensuring that debt collectors who refrain from using abusive 
debt collection practices are not competitively disadvantaged, and 
promoting consistent State action to protect consumers against debt 
collection abuses. This part also prescribes requirements to ensure that 
certain features of debt collection are disclosed fully, accurately, and 
effectively to consumers in a manner that permits consumers to 
understand the costs, benefits, and risks associated with debt 
collection, in light of the facts and circumstances. Finally, this part 
imposes record retention requirements to enable the Bureau to administer 
and carry out the purposes of the FDCPA, the Dodd-Frank Act, and this 
part, as well as to prevent evasions thereof. The record retention 
requirements also will facilitate supervision of debt collectors and the 
assessment and detection of risks to consumers.
    (c) Coverage. (1) Except as provided in Sec.  1006.108 and appendix 
A of this part regarding applications for State exemptions from the 
FDCPA, this part applies to debt collectors, as defined in Sec.  
1006.2(i), other than a person excluded from coverage by section 1029(a) 
of the Consumer Financial Protection Act of 2010, title X of the Dodd-
Frank Act (12 U.S.C. 5519(a)).
    (2) Section 1006.34(c)(2)(iii) and (c)(3)(iv) applies to debt 
collectors only when they are collecting debt related to a consumer 
financial product or service as defined in Sec.  1006.2(f).

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5853, Jan. 19, 2021]



Sec.  1006.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Act or FDCPA means the Fair Debt Collection Practices Act (15 
U.S.C. 1692 et seq.).
    (b) Attempt to communicate means any act to initiate a communication 
or other contact about a debt with any person through any medium, 
including by soliciting a response from such person. An attempt to 
communicate includes leaving a limited-content message, as defined in 
paragraph (j) of this section.
    (c) Bureau means the Bureau of Consumer Financial Protection.
    (d) Communicate or communication means the conveying of information 
regarding a debt directly or indirectly to any person through any 
medium.
    (e) Consumer means any natural person, whether living or deceased, 
obligated or allegedly obligated to pay any debt. For purposes of Sec.  
1006.6, the term consumer includes the persons described in Sec.  
1006.6(a).
    (f) Consumer financial product or service has the same meaning given 
to it in section 1002(5) of the Dodd-Frank Act (12 U.S.C. 5481(5)).
    (g) Creditor means any person who offers or extends credit creating 
a debt or to whom a debt is owed. The term creditor does not, however, 
include any person to the extent that such person receives an assignment 
or transfer of a debt in default solely to facilitate collection of the 
debt for another.
    (h) Debt means any obligation or alleged obligation of a consumer to 
pay money arising out of a transaction in which the money, property, 
insurance, or services that are the subject of the transaction are 
primarily for personal, family, or household purposes, whether or not 
the obligation has been reduced to judgment.
    (i)(1) Debt collector means any person who uses any instrumentality 
of interstate commerce or mail in any business the principal purpose of 
which is the collection of debts, or who regularly collects or attempts 
to collect, directly or indirectly, debts owed or due, or asserted to be 
owed or due, to another. Notwithstanding paragraph (i)(2)(vi) of this 
section, the term debt collector includes any creditor that, in the 
process of collecting its own debts, uses any name other than its own 
that would indicate that a third person is collecting

[[Page 369]]

or attempting to collect such debts. For purposes of Sec.  1006.22(e), 
the term also includes any person who uses any instrumentality of 
interstate commerce or mail in any business the principal purpose of 
which is the enforcement of security interests.
    (2) The term debt collector excludes:
    (i) Any officer or employee of a creditor while the officer or 
employee is collecting debts for the creditor in the creditor's name;
    (ii) Any person while acting as a debt collector for another person 
if:
    (A) The person acting as a debt collector does so only for persons 
with whom the person acting as a debt collector is related by common 
ownership or affiliated by corporate control; and
    (B) The principal business of the person acting as a debt collector 
is not the collection of debts;
    (iii) Any officer or employee of the United States or any State to 
the extent that collecting or attempting to collect any debt is in the 
performance of the officer's or employee's official duties;
    (iv) Any person while serving or attempting to serve legal process 
on any other person in connection with the judicial enforcement of any 
debt;
    (v) Any nonprofit organization that, at the request of consumers, 
performs bona fide consumer credit counseling and assists consumers in 
liquidating their debts by receiving payment from such consumers and 
distributing such amounts to creditors;
    (vi) Any person collecting or attempting to collect any debt owed or 
due, or asserted to be owed or due to another, to the extent such debt 
collection activity:
    (A) Is incidental to a bona fide fiduciary obligation or a bona fide 
escrow arrangement;
    (B) Concerns a debt that such person originated;
    (C) Concerns a debt that was not in default at the time such person 
obtained it; or
    (D) Concerns a debt that such person obtained as a secured party in 
a commercial credit transaction involving the creditor; and
    (vii) A private entity, to the extent such private entity is 
operating a bad check enforcement program that complies with section 818 
of the Act.
    (j) Limited-content message means a voicemail message for a consumer 
that includes all of the content described in paragraph (j)(1) of this 
section, that may include any of the content described in paragraph 
(j)(2) of this section, and that includes no other content.
    (1) Required content. A limited-content message is a voicemail 
message for a consumer that includes:
    (i) A business name for the debt collector that does not indicate 
that the debt collector is in the debt collection business;
    (ii) A request that the consumer reply to the message;
    (iii) The name or names of one or more natural persons whom the 
consumer can contact to reply to the debt collector; and
    (iv) A telephone number or numbers that the consumer can use to 
reply to the debt collector.
    (2) Optional content. In addition to the content described in 
paragraph (j)(1) of this section, a limited-content message may include 
one or more of the following:
    (i) A salutation;
    (ii) The date and time of the message;
    (iii) Suggested dates and times for the consumer to reply to the 
message; and
    (iv) A statement that if the consumer replies, the consumer may 
speak to any of the company's representatives or associates.
    (k) Person includes natural persons, corporations, companies, 
associations, firms, partnerships, societies, and joint stock companies.
    (l) State means any State, territory, or possession of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, or 
any political subdivision of any of the foregoing.

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5853, Jan. 19, 2021]



                Subpart B_Rules for FDCPA Debt Collectors



Sec.  1006.6  Communications in connection with debt collection.

    (a) Definition. For purposes of this section, the term consumer 
includes:

[[Page 370]]

    (1) The consumer's spouse;
    (2) The consumer's parent, if the consumer is a minor;
    (3) The consumer's legal guardian;
    (4) The executor or administrator of the consumer's estate, if the 
consumer is deceased; and
    (5) A confirmed successor in interest, as defined in Regulation X, 
12 CFR 1024.31, or Regulation Z, 12 CFR 1026.2(a)(27)(ii).
    (b) Communications with a consumer--(1) Prohibitions regarding 
unusual or inconvenient times or places. Except as provided in paragraph 
(b)(4) of this section, a debt collector must not communicate or attempt 
to communicate with a consumer in connection with the collection of any 
debt:
    (i) At any unusual time, or at a time that the debt collector knows 
or should know is inconvenient to the consumer. In the absence of the 
debt collector's knowledge of circumstances to the contrary, a time 
before 8:00 a.m. and after 9:00 p.m. local time at the consumer's 
location is inconvenient; or
    (ii) At any unusual place, or at a place that the debt collector 
knows or should know is inconvenient to the consumer.
    (2) Prohibitions regarding consumer represented by an attorney. 
Except as provided in paragraph (b)(4) of this section, a debt collector 
must not communicate or attempt to communicate with a consumer in 
connection with the collection of any debt if the debt collector knows 
the consumer is represented by an attorney with respect to such debt and 
knows, or can readily ascertain, the attorney's name and address, unless 
the attorney:
    (i) Fails to respond within a reasonable period of time to a 
communication from the debt collector; or
    (ii) Consents to the debt collector's direct communication with the 
consumer.
    (3) Prohibitions regarding consumer's place of employment. Except as 
provided in paragraph (b)(4) of this section, a debt collector must not 
communicate or attempt to communicate with a consumer in connection with 
the collection of any debt at the consumer's place of employment, if the 
debt collector knows or has reason to know that the consumer's employer 
prohibits the consumer from receiving such communication.
    (4) Exceptions. The prohibitions in paragraphs (b)(1) through (3) of 
this section do not apply when a debt collector communicates or attempts 
to communicate with a consumer in connection with the collection of any 
debt with:
    (i) The prior consent of the consumer, given directly to the debt 
collector during a communication that does not violate paragraphs (b)(1) 
through (3) of this section; or
    (ii) The express permission of a court of competent jurisdiction.
    (c) Communications with a consumer--after refusal to pay or cease 
communication notice--(1) Prohibition. Except as provided in paragraph 
(c)(2) of this section, if a consumer notifies a debt collector in 
writing that the consumer refuses to pay a debt or that the consumer 
wants the debt collector to cease further communication with the 
consumer, the debt collector must not communicate or attempt to 
communicate further with the consumer with respect to such debt.
    (2) Exceptions. The prohibition in paragraph (c)(1) of this section 
does not apply when a debt collector communicates or attempts to 
communicate further with a consumer with respect to such debt:
    (i) To advise the consumer that the debt collector's further efforts 
are being terminated;
    (ii) To notify the consumer that the debt collector or creditor may 
invoke specified remedies that the debt collector or creditor ordinarily 
invokes; or
    (iii) Where applicable, to notify the consumer that the debt 
collector or creditor intends to invoke a specified remedy.
    (d) Communications with third parties--(1) Prohibitions. Except as 
provided in paragraph (d)(2) of this section, a debt collector must not 
communicate, in connection with the collection of any debt, with any 
person other than:
    (i) The consumer;
    (ii) The consumer's attorney;
    (iii) A consumer reporting agency, if otherwise permitted by law;
    (iv) The creditor;
    (v) The creditor's attorney; or

[[Page 371]]

    (vi) The debt collector's attorney.
    (2) Exceptions. The prohibition in paragraph (d)(1) of this section 
does not apply when a debt collector communicates, in connection with 
the collection of any debt, with a person:
    (i) For the purpose of acquiring location information, as provided 
in Sec.  1006.10;
    (ii) With the prior consent of the consumer given directly to the 
debt collector;
    (iii) With the express permission of a court of competent 
jurisdiction; or
    (iv) As reasonably necessary to effectuate a postjudgment judicial 
remedy.
    (3) Reasonable procedures for email and text message communications. 
A debt collector maintains procedures that are reasonably adapted, for 
purposes of FDCPA section 813(c), to avoid a bona fide error in sending 
an email or text message communication that would result in a violation 
of paragraph (d)(1) of this section if those procedures include steps to 
reasonably confirm and document that:
    (i) The debt collector communicated with the consumer by sending an 
email to an email address described in paragraph (d)(4) of this section 
or a text message to a telephone number described in paragraph (d)(5) of 
this section; and
    (ii) The debt collector did not communicate with the consumer by 
sending an email to an email address or a text message to a telephone 
number that the debt collector knows has led to a disclosure prohibited 
by paragraph (d)(1) of this section.
    (4) Procedures for email addresses. For purposes of paragraph 
(d)(3)(i) of this section, a debt collector may send an email to an 
email address if:
    (i) Procedures based on communication between the consumer and the 
debt collector. (A) The consumer used the email address to communicate 
with the debt collector about the debt and the consumer has not since 
opted out of communications to that email address; or
    (B) The debt collector has received directly from the consumer prior 
consent to use the email address to communicate with the consumer about 
the debt and the consumer has not withdrawn that consent; or
    (ii) Procedures based on communication by the creditor. (A) A 
creditor obtained the email address from the consumer;
    (B) The creditor used the email address to communicate with the 
consumer about the account and the consumer did not ask the creditor to 
stop using it;
    (C) Before the debt collector used the email address to communicate 
with the consumer about the debt, the creditor sent the consumer a 
written or electronic notice, to an address the creditor obtained from 
the consumer and used to communicate with the consumer about the 
account, that clearly and conspicuously disclosed:
    (1) That the debt has been or will be transferred to the debt 
collector;
    (2) The email address and the fact that the debt collector might use 
the email address to communicate with the consumer about the debt;
    (3) That, if others have access to the email address, then it is 
possible they may see the emails;
    (4) Instructions for a reasonable and simple method by which the 
consumer could opt out of such communications; and
    (5) The date by which the debt collector or the creditor must 
receive the consumer's request to opt out, which must be at least 35 
days after the date the notice is sent;
    (D) The opt-out period provided under paragraph (d)(4)(ii)(C)(5) of 
this section has expired and the consumer has not opted out; and
    (E) The email address has a domain name that is available for use by 
the general public, unless the debt collector knows the address is 
provided by the consumer's employer.
    (iii) Procedures based on communication by the prior debt collector. 
(A) Any prior debt collector obtained the email address in accordance 
with paragraph (d)(4)(i) or (ii) of this section;
    (B) The immediately prior debt collector used the email address to 
communicate with the consumer about the debt; and
    (C) The consumer did not opt out of such communications.
    (5) Procedures for telephone numbers for text messages. For purposes 
of paragraph (d)(3)(i) of this section, a debt

[[Page 372]]

collector may send a text message to a telephone number if:
    (i) The consumer used the telephone number to communicate with the 
debt collector about the debt by text message, the consumer has not 
since opted out of text message communications to that telephone number, 
and within the past 60 days either:
    (A) The consumer sent the text message described in paragraph 
(d)(5)(i) of this section or a new text message to the debt collector 
from that telephone number; or
    (B) The debt collector confirmed, using a complete and accurate 
database, that the telephone number has not been reassigned from the 
consumer to another user since the date of the consumer's most recent 
text message to the debt collector from that telephone number; or
    (ii) The debt collector received directly from the consumer prior 
consent to use the telephone number to communicate with the consumer 
about the debt by text message, the consumer has not since withdrawn 
that consent, and within the past 60 days the debt collector either:
    (A) Obtained the prior consent described in paragraph (d)(5)(ii) of 
this section or renewed consent from the consumer; or
    (B) Confirmed, using a complete and accurate database, that the 
telephone number has not been reassigned from the consumer to another 
user since the date of the consumer's most recent consent to use that 
telephone number to communicate about the debt by text message.
    (e) Opt-out notice for electronic communications or attempts to 
communicate. A debt collector who communicates or attempts to 
communicate with a consumer electronically in connection with the 
collection of a debt using a specific email address, telephone number 
for text messages, or other electronic-medium address must include in 
such communication or attempt to communicate a clear and conspicuous 
statement describing a reasonable and simple method by which the 
consumer can opt out of further electronic communications or attempts to 
communicate by the debt collector to that address or telephone number. 
The debt collector may not require, directly or indirectly, that the 
consumer, in order to opt out, pay any fee to the debt collector or 
provide any information other than the consumer's opt-out preferences 
and the email address, telephone number for text messages, or other 
electronic-medium address subject to the opt-out request.



Sec.  1006.10  Acquisition of location information.

    (a) Definition. The term location information means a consumer's:
    (1) Place of abode and telephone number at such place; or
    (2) Place of employment.
    (b) Form and content of location communications. A debt collector 
communicating with a person other than the consumer for the purpose of 
acquiring location information must:
    (1) Identify himself or herself individually by name, state that he 
or she is confirming or correcting the consumer's location information, 
and, only if expressly requested, identify his or her employer;
    (2) Not state that the consumer owes any debt;
    (3) Not communicate by postcard;
    (4) Not use any language or symbol on any envelope or in the 
contents of any communication by mail indicating that the debt collector 
is in the debt collection business or that the communication relates to 
the collection of a debt; and
    (5) After the debt collector knows the consumer is represented by an 
attorney with regard to the subject debt and has knowledge of, or can 
readily ascertain, such attorney's name and address, not communicate 
with any person other than that attorney, unless the attorney fails to 
respond to the debt collector's communication within a reasonable period 
of time.
    (c) Frequency of location communications. In addition to complying 
with Sec.  1006.14(b)(1), a debt collector communicating with any person 
other than the consumer for the purpose of acquiring location 
information about the consumer must not communicate more than once with 
such person unless requested to do so by such person, or unless the debt 
collector reasonably believes that the earlier response of such

[[Page 373]]

person is erroneous or incomplete and that such person now has correct 
or complete location information.



Sec.  1006.14  Harassing, oppressive, or abusive conduct.

    (a) In general. A debt collector must not engage in any conduct the 
natural consequence of which is to harass, oppress, or abuse any person 
in connection with the collection of a debt, including, but not limited 
to, the conduct described in paragraphs (b) through (h) of this section.
    (b) Repeated or continuous telephone calls or telephone 
conversations--(1) In general. In connection with the collection of a 
debt, a debt collector must not place telephone calls or engage any 
person in telephone conversation repeatedly or continuously with intent 
to annoy, abuse, or harass any person at the called number.
    (2) Telephone call frequencies; presumptions of compliance and 
violation. (i) Subject to the exclusions in paragraph (b)(3) of this 
section, a debt collector is presumed to comply with paragraph (b)(1) of 
this section and FDCPA section 806(5) (15 U.S.C. 1692d(5)) if the debt 
collector places a telephone call to a particular person in connection 
with the collection of a particular debt neither:
    (A) More than seven times within seven consecutive days; nor
    (B) Within a period of seven consecutive days after having had a 
telephone conversation with the person in connection with the collection 
of such debt. The date of the telephone conversation is the first day of 
the seven-consecutive-day period.
    (ii) Subject to the exclusions in paragraph (b)(3) of this section, 
a debt collector is presumed to violate paragraph (b)(1) of this section 
and FDCPA section 806(5) if the debt collector places a telephone call 
to a particular person in connection with the collection of a particular 
debt in excess of either of the telephone call frequencies described in 
paragraph (b)(2)(i) of this section.
    (3) Certain telephone calls excluded from the telephone call 
frequencies. Telephone calls placed to a person do not count toward the 
telephone call frequencies described in paragraph (b)(2)(i) of this 
section if they are:
    (i) Placed with such person's prior consent given directly to the 
debt collector and within a period no longer than seven consecutive days 
after receiving the prior consent, with the date the debt collector 
receives prior consent counting as the first day of the seven-
consecutive-day period;
    (ii) Not connected to the dialed number; or
    (iii) Placed to the persons described in Sec.  1006.6(d)(1)(ii) 
through (vi).
    (4) Definition. For purposes of this paragraph (b), particular debt 
means each of a consumer's debts in collection. However, in the case of 
student loan debts, the term particular debt means all student loan 
debts that a consumer owes or allegedly owes that were serviced under a 
single account number at the time the debts were obtained by a debt 
collector.
    (c) Violence or other criminal means. In connection with the 
collection of a debt, a debt collector must not use or threaten to use 
violence or other criminal means to harm the physical person, 
reputation, or property of any person.
    (d) Obscene or profane language. In connection with the collection 
of a debt, a debt collector must not use obscene or profane language, or 
language the natural consequence of which is to abuse the hearer or 
reader.
    (e) Debtor's list. In connection with the collection of a debt, a 
debt collector must not publish a list of consumers who allegedly refuse 
to pay debts, except to a consumer reporting agency or to persons 
meeting the requirements of sections 603(f) or 604(a)(3) of the Fair 
Credit Reporting Act (15 U.S.C. 1681a(f) or 1681b(a)(3)).
    (f) Coercive advertisements. In connection with the collection of a 
debt, a debt collector must not advertise for sale any debt to coerce 
payment of the debt.
    (g) Meaningful disclosure of identity. In connection with the 
collection of a debt, a debt collector must not place telephone calls 
without meaningfully disclosing the caller's identity, except as 
provided in Sec.  1006.10.
    (h) Prohibited communication media--(1) In general. In connection 
with the collection of any debt, a debt collector must not communicate 
or attempt to communicate with a person through a

[[Page 374]]

medium of communication if the person has requested that the debt 
collector not use that medium to communicate with the person.
    (2) Exceptions. Notwithstanding the prohibition in paragraph (h)(1) 
of this section:
    (i) If a person opts out of receiving electronic communications from 
a debt collector, a debt collector may send an electronic confirmation 
of the person's request to opt out, provided that the electronic 
confirmation contains no information other than a statement confirming 
the person's request and that the debt collector will honor it;
    (ii) If a person initiates contact with a debt collector using a 
medium of communication that the person previously requested the debt 
collector not use, the debt collector may respond once through the same 
medium of communication used by the person; or
    (iii) If otherwise required by applicable law, a debt collector may 
communicate or attempt to communicate with a person in connection with 
the collection of any debt through a medium of communication that the 
person has requested the debt collector not use to communicate with the 
person.



Sec.  1006.18  False, deceptive, or misleading representations or means.

    (a) In general. A debt collector must not use any false, deceptive, 
or misleading representation or means in connection with the collection 
of any debt, including, but not limited to, the conduct described in 
paragraphs (b) through (d) of this section.
    (b) False, deceptive, or misleading representations. (1) A debt 
collector must not falsely represent or imply that:
    (i) The debt collector is vouched for, bonded by, or affiliated with 
the United States or any State, including through the use of any badge, 
uniform, or facsimile thereof.
    (ii) The debt collector operates or is employed by a consumer 
reporting agency, as defined by section 603(f) of the Fair Credit 
Reporting Act (15 U.S.C. 1681a(f)).
    (iii) Any individual is an attorney or that any communication is 
from an attorney.
    (iv) The consumer committed any crime or other conduct in order to 
disgrace the consumer.
    (v) A sale, referral, or other transfer of any interest in a debt 
causes or will cause the consumer to:
    (A) Lose any claim or defense to payment of the debt; or
    (B) Become subject to any practice prohibited by this part.
    (vi) Accounts have been turned over to innocent purchasers for 
value.
    (vii) Documents are legal process.
    (viii) Documents are not legal process forms or do not require 
action by the consumer.
    (2) A debt collector must not falsely represent:
    (i) The character, amount, or legal status of any debt.
    (ii) Any services rendered, or compensation that may be lawfully 
received, by any debt collector for the collection of a debt.
    (3) A debt collector must not represent or imply that nonpayment of 
any debt will result in the arrest or imprisonment of any person or the 
seizure, garnishment, attachment, or sale of any property or wages of 
any person unless such action is lawful and the debt collector or 
creditor intends to take such action.
    (c) False, deceptive, or misleading collection means. A debt 
collector must not:
    (1) Threaten to take any action that cannot legally be taken or that 
is not intended to be taken.
    (2) Communicate or threaten to communicate to any person credit 
information that the debt collector knows or should know is false, 
including the failure to communicate that a disputed debt is disputed.
    (3) Use or distribute any written communication that simulates or 
that the debt collector falsely represents to be a document authorized, 
issued, or approved by any court, official, or agency of the United 
States or any State, or that creates a false impression about its 
source, authorization, or approval.
    (4) Use any business, company, or organization name other than the 
true name of the debt collector's business, company, or organization.

[[Page 375]]

    (d) False representations or deceptive means. A debt collector must 
not use any false representation or deceptive means to collect or 
attempt to collect any debt or to obtain information concerning a 
consumer.
    (e) Disclosures required--(1) Initial communications. A debt 
collector must disclose in its initial communication with a consumer 
that the debt collector is attempting to collect a debt and that any 
information obtained will be used for that purpose. If the debt 
collector's initial communication with the consumer is oral, the debt 
collector must make the disclosure required by this paragraph again in 
its initial written communication with the consumer.
    (2) Subsequent communications. In each communication with the 
consumer subsequent to the communications described in paragraph (e)(1) 
of this section, the debt collector must disclose that the communication 
is from a debt collector.
    (3) Exception. Disclosures under paragraphs (e)(1) and (2) of this 
section are not required in a formal pleading made in connection with a 
legal action.
    (4) Translated disclosures. A debt collector must make the 
disclosures required by paragraphs (e)(1) and (2) of this section in the 
same language or languages used for the rest of the communication in 
which the debt collector conveyed the disclosures. Any translation of 
the disclosures a debt collector uses must be complete and accurate.
    (f) Assumed names. This section does not prohibit a debt collector's 
employee from using an assumed name when communicating or attempting to 
communicate with a person, provided that the employee uses the assumed 
name consistently and that the debt collector can readily identify any 
employee using an assumed name.



Sec.  1006.22  Unfair or unconscionable means.

    (a) In general. A debt collector must not use unfair or 
unconscionable means to collect or attempt to collect any debt, 
including, but not limited to, the conduct described in paragraphs (b) 
through (f) of this section.
    (b) Collection of unauthorized amounts. A debt collector must not 
collect any amount unless such amount is expressly authorized by the 
agreement creating the debt or permitted by law. For purposes of this 
paragraph, the term ``any amount'' includes any interest, fee, charge, 
or expense incidental to the principal obligation.
    (c) Postdated payment instruments. A debt collector must not:
    (1) Accept from any person a check or other payment instrument 
postdated by more than five days unless such person is notified in 
writing of the debt collector's intent to deposit such check or 
instrument not more than ten, nor less than three, days (excluding legal 
public holidays identified in 5 U.S.C. 6103(a), Saturdays, and Sundays) 
prior to such deposit.
    (2) Solicit any postdated check or other postdated payment 
instrument for the purpose of threatening or instituting criminal 
prosecution.
    (3) Deposit or threaten to deposit any postdated check or other 
postdated payment instrument prior to the date on such check or 
instrument.
    (d) Charges resulting from concealment of purpose. A debt collector 
must not cause charges to be made to any person for communications by 
concealment of the true purpose of the communication. Such charges 
include, but are not limited to, collect telephone calls and telegram 
fees.
    (e) Nonjudicial action regarding property. A debt collector must not 
take or threaten to take any nonjudicial action to effect dispossession 
or disablement of property if:
    (1) There is no present right to possession of the property claimed 
as collateral through an enforceable security interest;
    (2) There is no present intention to take possession of the 
property; or
    (3) The property is exempt by law from such dispossession or 
disablement.
    (f) Restrictions on use of certain media. A debt collector must not:
    (1) Communicate with a consumer regarding a debt by postcard.
    (2) Use any language or symbol, other than the debt collector's 
address, on any envelope when communicating with a consumer by mail, 
except that a debt collector may use the debt collector's business name 
on an envelope if

[[Page 376]]

such name does not indicate that the debt collector is in the debt 
collection business.
    (3) Communicate or attempt to communicate with a consumer by sending 
an email to an email address that the debt collector knows is provided 
to the consumer by the consumer's employer, unless the email address is 
one described in Sec.  1006.6(d)(4)(i) or (iii).
    (4) Communicate or attempt to communicate with a person in 
connection with the collection of a debt through a social media platform 
if the communication or attempt to communicate is viewable by the 
general public or the person's social media contacts.
    (g) Safe harbor for certain emails and text messages relating to the 
collection of a debt. A debt collector who communicates with a consumer 
by sending an email or text message in accordance with the procedures 
described in Sec.  1006.6(d)(3) does not violate paragraph (a) of this 
section by revealing in the email or text message the debt collector's 
name or other information indicating that the communication relates to 
the collection of a debt.



Sec.  1006.26  Collection of time-barred debts.

    (a) Definitions. For purposes of this section:
    (1) Statute of limitations means the period prescribed by applicable 
law for bringing a legal action against the consumer to collect a debt.
    (2) Time-barred debt means a debt for which the applicable statute 
of limitations has expired.
    (b) Legal actions and threats of legal actions prohibited. A debt 
collector must not bring or threaten to bring a legal action against a 
consumer to collect a time-barred debt. This paragraph (b) does not 
apply to proofs of claim filed in connection with a bankruptcy 
proceeding.

[86 FR 5854, Jan. 19, 2021]



Sec.  1006.30  Other prohibited practices.

    (a) Required actions prior to furnishing information--(1) In 
general. Except as provided in paragraph (a)(2) of this section, a debt 
collector must not furnish to a consumer reporting agency, as defined in 
section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)), 
information about a debt before the debt collector:
    (i) Speaks to the consumer about the debt in person or by telephone; 
or
    (ii) Places a letter in the mail or sends an electronic message to 
the consumer about the debt and waits a reasonable period of time to 
receive a notice of undeliverability. During the reasonable period, the 
debt collector must permit receipt of, and monitor for, notifications of 
undeliverability from communications providers. If the debt collector 
receives such a notification during the reasonable period, the debt 
collector must not furnish information about the debt to a consumer 
reporting agency until the debt collector otherwise satisfies this 
paragraph (a)(1).
    (2) Special rule--information furnished to certain specialty 
consumer reporting agencies. Paragraph (a)(1) of this section does not 
apply to a debt collector's furnishing of information about a debt to a 
nationwide specialty consumer reporting agency that compiles and 
maintains information on a consumer's check writing history, as 
described in section 603(x)(3) of the Fair Credit Reporting Act (15 
U.S.C. 1681a(x)(3)).
    (b) Prohibition on the sale, transfer for consideration, or 
placement for collection of certain debts--(1) In general. Except as 
provided in paragraph (b)(2) of this section, a debt collector must not 
sell, transfer for consideration, or place for collection a debt if the 
debt collector knows or should know that the debt has been paid or 
settled or discharged in bankruptcy.
    (2) Exceptions--(i) In general. A debt collector may transfer for 
consideration a debt described in paragraph (b)(1) of this section if 
the debt collector:
    (A) Transfers the debt to the debt's owner;
    (B) Transfers the debt to a previous owner of the debt, if the 
transfer is authorized under the terms of the original contract between 
the debt collector and the previous owner; or
    (C) Transfers the debt as a result of a merger, acquisition, 
purchase and assumption transaction, or a transfer of substantially all 
of the debt collector's assets.

[[Page 377]]

    (ii) Secured claims in bankruptcy. A debt collector may sell, 
transfer for consideration, or place for collection a debt that has been 
discharged in bankruptcy if the debt is secured by an enforceable lien 
and the debt collector notifies the transferee that the consumer's 
personal liability for the debt was discharged in bankruptcy.
    (iii) Securitizations and pledges of debt. Paragraph (b)(1) of this 
section does not prohibit the securitization of a debt or the pledging 
of a portfolio of debt as collateral in connection with a borrowing.
    (c) Multiple debts. If a consumer makes any single payment to a debt 
collector with respect to multiple debts owed by the consumer to the 
debt collector, the debt collector:
    (1) Must not apply the payment to any debt that is disputed by the 
consumer; and
    (2) If applicable, must apply the payment in accordance with the 
consumer's directions.
    (d) Legal actions by debt collectors--(1) Action to enforce interest 
in real property. A debt collector who brings a legal action against a 
consumer to enforce an interest in real property securing the consumer's 
debt must bring the action only in a judicial district or similar legal 
entity in which such real property is located.
    (2) Other legal actions. A debt collector who brings a legal action 
against a consumer other than to enforce an interest in real property 
securing the consumer's debt must bring such action only in the judicial 
district or similar legal entity in which the consumer:
    (i) Signed the contract sued upon; or
    (ii) Resides at the commencement of the action.
    (3) Authorization of actions. Nothing in this part authorizes debt 
collectors to bring legal actions.
    (e) Furnishing certain deceptive forms. A debt collector must not 
design, compile, and furnish any form that the debt collector knows 
would be used to cause a consumer falsely to believe that a person other 
than the consumer's creditor is participating in collecting or 
attempting to collect a debt that the consumer allegedly owes to the 
creditor.

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5854, Jan. 19, 2021]



Sec.  1006.34  Notice for validation of debts.

    (a) Validation information required--(1) In general. Except as 
provided in paragraph (a)(2) of this section, a debt collector must 
provide a consumer with the validation information required by paragraph 
(c) of this section either:
    (i) By sending the consumer a validation notice in the manner 
required by Sec.  1006.42:
    (A) In the initial communication, as defined in paragraph (b)(2) of 
this section; or
    (B) Within five days of that initial communication; or
    (ii) By providing the validation information orally in the initial 
communication.
    (2) Exception. A debt collector who otherwise would be required to 
send a validation notice pursuant to paragraph (a)(1)(i)(B) of this 
section is not required to do so if the consumer has paid the debt prior 
to the time that paragraph (a)(1)(i)(B) of this section would require 
the validation notice to be sent.
    (b) Definitions. For purposes of this section:
    (1) Clear and conspicuous means readily understandable. In the case 
of written and electronic disclosures, the location and type size also 
must be readily noticeable and legible to consumers, although no minimum 
type size is mandated. In the case of oral disclosures, the disclosures 
also must be given at a volume and speed sufficient for the consumer to 
hear and comprehend them.
    (2) Initial communication means the first time that, in connection 
with the collection of a debt, a debt collector conveys information, 
directly or indirectly, regarding the debt to the consumer, other than a 
communication in the form of a formal pleading in a civil action, or any 
form or notice that does not relate to the collection of the debt and is 
expressly required by:
    (i) The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);

[[Page 378]]

    (ii) Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 through 
6827); or
    (iii) Any provision of Federal or State law or regulation mandating 
notice of a data security breach or privacy risk.
    (3) Itemization date means any one of the following five reference 
dates for which a debt collector can ascertain the amount of the debt:
    (i) The last statement date, which is the date of the last periodic 
statement or written account statement or invoice provided to the 
consumer by a creditor;
    (ii) The charge-off date, which is the date the debt was charged 
off;
    (iii) The last payment date, which is the date the last payment was 
applied to the debt;
    (iv) The transaction date, which is the date of the transaction that 
gave rise to the debt; or
    (v) The judgment date, which is the date of a final court judgment 
that determines the amount of the debt owed by the consumer.
    (4) Validation notice means a written or electronic notice that 
provides the validation information required by paragraph (c) of this 
section.
    (5) Validation period means the period starting on the date that a 
debt collector provides the validation information required by paragraph 
(c) of this section and ending 30 days after the consumer receives or is 
assumed to receive the validation information. For purposes of 
determining the end of the validation period, the debt collector may 
assume that a consumer receives the validation information on any date 
that is at least five days (excluding legal public holidays identified 
in 5 U.S.C. 6103(a), Saturdays, and Sundays) after the debt collector 
provides it.
    (c) Validation information. Pursuant to paragraph (a)(1) of this 
section, a debt collector must provide the following validation 
information.
    (1) Debt collector communication disclosure. The statement required 
by Sec.  1006.18(e).
    (2) Information about the debt. Except as provided in paragraph 
(c)(5) of this section:
    (i) The debt collector's name and the mailing address at which the 
debt collector accepts disputes and requests for original-creditor 
information.
    (ii) The consumer's name and mailing address.
    (iii) If the debt collector is collecting a debt related to a 
consumer financial product or service as defined in Sec.  1006.2(f), the 
name of the creditor to whom the debt was owed on the itemization date.
    (iv) The account number, if any, associated with the debt on the 
itemization date, or a truncated version of that number.
    (v) The name of the creditor to whom the debt currently is owed.
    (vi) The itemization date.
    (vii) The amount of the debt on the itemization date.
    (viii) An itemization of the current amount of the debt reflecting 
interest, fees, payments, and credits since the itemization date. A debt 
collector may disclose the itemization on a separate page provided in 
the same communication with a validation notice, if the debt collector 
includes on the validation notice, where the itemization would have 
appeared, a statement referring to that separate page.
    (ix) The current amount of the debt.
    (3) Information about consumer protections. (i) The date that the 
debt collector will consider the end date of the validation period and a 
statement that, if the consumer notifies the debt collector in writing 
on or before that date that the debt, or any portion of the debt, is 
disputed, the debt collector must cease collection of the debt, or the 
disputed portion of the debt, until the debt collector sends the 
consumer either verification of the debt or a copy of a judgment.
    (ii) The date that the debt collector will consider the end date of 
the validation period and a statement that, if the consumer requests in 
writing on or before that date the name and address of the original 
creditor, the debt collector must cease collection of the debt until the 
debt collector sends the consumer the name and address of the original 
creditor, if different from the current creditor.
    (iii) The date that the debt collector will consider the end date of 
the validation period and a statement that, unless the consumer contacts 
the debt

[[Page 379]]

collector to dispute the validity of the debt, or any portion of the 
debt, on or before that date, the debt collector will assume that the 
debt is valid.
    (iv) If the debt collector is collecting debt related to a consumer 
financial product or service as defined in Sec.  1006.2(f), a statement 
that informs the consumer that additional information regarding consumer 
protections in debt collection is available on the Bureau's website at 
www.cfpb.gov/debt-collection.
    (v) If the debt collector sends the validation notice 
electronically, a statement explaining how a consumer can, as described 
in paragraphs (c)(4)(i) and (ii) of this section, dispute the debt or 
request original-creditor information electronically.
    (4) Consumer-response information. The following information, 
segregated from the validation information required by paragraphs (c)(1) 
through (3) of this section and from any optional information included 
pursuant to paragraphs (d)(3)(i) and (ii), (d)(3)(iii)(A), (d)(3)(iv) 
and (v), (d)(3)(vi)(A), and (d)(3)(vii) and (viii) of this section, and, 
if provided on a validation notice, located at the bottom of the notice 
under the headings, ``How do you want to respond?'' and ``Check all that 
apply:'':
    (i) Dispute prompts. The following statements, listed in the 
following order, and using the following phrasing or substantially 
similar phrasing, each next to a prompt:
    (A) ``I want to dispute the debt because I think:'';
    (B) ``This is not my debt.'';
    (C) ``The amount is wrong.''; and
    (D) ``Other (please describe on reverse or attach additional 
information).''
    (ii) Original-creditor information prompt. The statement, ``I want 
you to send me the name and address of the original creditor.'', using 
that phrase or a substantially similar phrase, next to a prompt.
    (iii) Mailing addresses. Mailing addresses for the consumer and the 
debt collector, which are the debt collector's and the consumer's names 
and mailing addresses as disclosed pursuant to Sec.  1006.34(c)(2)(i) 
and (ii).
    (5) Special rule for certain residential mortgage debt. For 
residential mortgage debt, if a periodic statement is required under 
Regulation Z, 12 CFR 1026.41, at the time a debt collector provides the 
validation notice, a debt collector need not provide the validation 
information required by paragraphs (c)(2)(vi) through (viii) of this 
section if the debt collector:
    (i) Provides the consumer, in the same communication with the 
validation notice, a copy of the most recent periodic statement provided 
to the consumer under Regulation Z, 12 CFR 1026.41(b); and
    (ii) Includes on the validation notice, where the validation 
information required by paragraphs (c)(2)(vi) through (viii) of this 
section would have appeared, a statement referring to that periodic 
statement.
    (d) Form of validation information--(1) In general. The validation 
information required by paragraph (c) of this section must be clear and 
conspicuous.
    (2) Safe harbor--(i) In general. Model Form B-1 in appendix B to 
this part contains the validation information required by paragraph (c) 
of this section and certain optional disclosures permitted by paragraph 
(d)(3) of this section. A debt collector who uses Model Form B-1 
complies with the information and form requirements of paragraphs (c) 
and (d)(1) of this section, including if the debt collector:
    (A) Omits any or all of the optional disclosures shown on Model Form 
B-1; or
    (B) Adds any or all of the optional disclosures described in 
paragraph (d)(3) of this section that are not shown on Model Form B-1, 
provided that any such optional disclosures are no more prominent than 
any of the validation information required by paragraph (c) of this 
section.
    (ii) Certain disclosures on a separate page. A debt collector who 
uses Model Form B-1 as described in paragraph (d)(2)(i) of this section 
and who, pursuant to paragraph (c)(2)(viii) or (c)(5) of this section, 
includes certain disclosures on a separate page in the same 
communication with the validation notice and, on the notice, the 
required statement referring to those disclosures, receives a safe 
harbor for compliance with the information and form requirements of 
paragraphs (c) and

[[Page 380]]

(d)(1) of this section except with respect to the disclosures on the 
separate page.
    (iii) Substantially similar form. A debt collector who uses Model 
Form B-1 as described in paragraph (d)(2)(i) or (ii) of this section may 
make changes to the form and retain a safe harbor for compliance with 
the information and form requirements of paragraphs (c) and (d)(1) of 
this section provided that the form remains substantially similar to 
Model Form B-1.
    (3) Optional disclosures. A debt collector may include any of the 
following information when providing the validation information required 
by paragraph (c) of this section. A debt collector who includes any of 
the following information receives the safe harbor described in 
paragraph (d)(2) of this section, provided that the debt collector 
otherwise uses Model Form B-1 in appendix B to this part, or a variation 
of Model Form B-1, as described in paragraph (d)(2) of this section.
    (i) Telephone contact information. The debt collector's telephone 
contact information.
    (ii) Reference code. A number or code that the debt collector uses 
to identify the debt or the consumer.
    (iii) Payment disclosures. Either or both of the following phrases:
    (A) The statement, ``Contact us about your payment options.'', using 
that phrase or a substantially similar phrase; and
    (B) Below the consumer-response information required by paragraphs 
(c)(4)(i) and (ii) of this section, the statement, ``I enclosed this 
amount:'', using that phrase or a substantially similar phrase, payment 
instructions after that statement, and a prompt.
    (iv) Disclosures under applicable law--(A) Disclosures on the 
reverse of the validation notice. On the reverse of the validation 
notice, any disclosures that are specifically required by, or that 
provide safe harbors under, applicable law and, if any such disclosures 
are included, a statement on the front of the validation notice 
referring to those disclosures. Any such disclosures must not appear 
directly on the reverse of the consumer-response information required by 
paragraph (c)(4) of this section.
    (B) Disclosures on the front of the validation notice. If a debt 
collector is collecting time-barred debt, on the front of the validation 
notice below the disclosure required by paragraph (c)(2)(ix) of this 
section, any time-barred debt disclosure that is specifically required 
by, or that provides a safe harbor under, applicable law, provided that 
applicable law specifies the content of the disclosure.
    (v) Information about electronic communications. The following 
information:
    (A) The debt collector's website and email address.
    (B) If the validation information is not provided electronically, a 
statement explaining how a consumer can, as described in paragraphs 
(c)(4)(i) and (ii) of this section, dispute the debt or request 
original-creditor information electronically.
    (vi) Spanish-language translation disclosures. Either or both of the 
following disclosures regarding a consumer's ability to request a 
Spanish-language translation of a validation notice:
    (A) The statement, ``P[oacute]ngase en contacto con nosotros para 
solicitar una copia de este formulario en espa[ntilde]ol'' (which means 
``Contact us to request a copy of this form in Spanish''), using that 
phrase or a substantially similar phrase in Spanish. If providing this 
optional disclosure, a debt collector may include supplemental 
information in Spanish that specifies how a consumer may request a 
Spanish-language validation notice.
    (B) With the consumer-response information required by paragraph 
(c)(4) of this section, the statement ``Quiero este formulario en 
espa[ntilde]ol'' (which means ``I want this form in Spanish''), using 
that phrase or a substantially similar phrase in Spanish, next to a 
prompt.
    (vii) The merchant brand, affinity brand, or facility name, if any, 
associated with the debt.
    (viii) If a debt collector is collecting debt other than debt 
related to a consumer financial product or service as defined in Sec.  
1006.2(f), the information specified in paragraph (c)(2)(iii) or 
(c)(3)(iv) of this section.
    (4) Validation notices delivered electronically. If a debt collector 
delivers a validation notice electronically, a debt

[[Page 381]]

collector may, at its option, format the validation notice as follows:
    (i) Prompts. Any prompt required by paragraph (c)(4)(i) or (ii) or 
paragraph (d)(3)(iii)(B) or (d)(3)(vi)(B) of this section may be 
displayed electronically as a fillable field.
    (ii) Hyperlinks. Hyperlinks may be embedded that, when clicked:
    (A) Connect a consumer to the debt collector's website;
    (B) Connect a consumer to the Bureau's debt collection website as 
disclosed pursuant to paragraph (c)(3)(iv) of this section; or
    (C) Permit a consumer to respond to the dispute and original-
creditor information prompts required by paragraphs (c)(4)(i) and (ii) 
of this section.
    (e) Translation into other languages--(1) In general. A debt 
collector may send a consumer a validation notice completely and 
accurately translated into any language if the debt collector:
    (i) Sends the consumer an English-language validation notice in the 
same communication as the translated validation notice; or
    (ii) Previously provided the consumer an English-language validation 
notice, in which case the debt collector need not send the consumer an 
English-language validation notice in the same communication as the 
translated validation notice.
    (2) Spanish-language validation notice--requirement to provide after 
optional disclosure. A debt collector who includes in the validation 
information either or both of the optional disclosures described in 
paragraph (d)(3)(vi) of this section, and who thereafter receives a 
request from the consumer for a Spanish-language validation notice, must 
provide the consumer a validation notice completely and accurately 
translated into Spanish.

[86 FR 5854, Jan. 19, 2021]



Sec.  1006.38  Disputes and requests for original-creditor information.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Duplicative dispute means a dispute submitted by the consumer in 
writing within the validation period that:
    (i) Is substantially the same as a dispute previously submitted by 
the consumer in writing within the validation period for which the debt 
collector already has satisfied the requirements of paragraph (d)(2)(i) 
of this section; and
    (ii) Does not include new and material information to support the 
dispute.
    (2) Validation period has the same meaning given to it in Sec.  
1006.34(b)(5).
    (b) Overshadowing of rights to dispute or request original-creditor 
information--(1) Prohibition. During the validation period, a debt 
collector must not engage in any collection activities or communications 
that overshadow or are inconsistent with the disclosure of the 
consumer's rights to dispute the debt and to request the name and 
address of the original creditor.
    (2) Safe harbor. A debt collector who uses Model Form B-1 in 
appendix B to this part in a manner described in Sec.  1006.34(d)(2) has 
not thereby violated paragraph (b)(1) of this section.
    (c) Requests for original-creditor information. Upon receipt of a 
request for the name and address of the original creditor submitted by 
the consumer in writing within the validation period, a debt collector 
must cease collection of the debt until the debt collector:
    (1) In general. Sends the name and address of the original creditor 
to the consumer in writing or electronically in the manner required by 
Sec.  1006.42; or
    (2) Special rule if the current creditor and the original creditor 
are the same. In lieu of taking the actions described in paragraph 
(c)(1) of this section, reasonably determines that the original creditor 
is the same as the current creditor, notifies the consumer of that fact 
in writing or electronically in the manner required by Sec.  1006.42, 
and refers the consumer to the validation information previously 
provided pursuant to Sec.  1006.34(a)(1).
    (d) Disputes--(1) Failure to dispute. The failure of a consumer to 
dispute the validity of a debt does not constitute a legal admission of 
liability by the consumer.
    (2) Response to disputes. Upon receipt of a dispute submitted by the 
consumer in writing within the validation period, a debt collector must 
cease collection of the debt, or any disputed portion of the debt, until 
the debt collector:

[[Page 382]]

    (i) Sends a copy either of verification of the debt or of a judgment 
to the consumer in writing or electronically in the manner required by 
Sec.  1006.42; or
    (ii) In the case of a dispute that the debt collector reasonably 
determines is a duplicative dispute, either:
    (A) Notifies the consumer in writing or electronically in the manner 
required by Sec.  1006.42(a)(1) that the dispute is duplicative, 
provides a brief statement of the reasons for the determination, and 
refers the consumer to the debt collector's response to the earlier 
dispute; or
    (B) Satisfies paragraph (d)(2)(i) of this section.

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5856, Jan. 19, 2021]



Sec.  1006.42  Sending required disclosures.

    (a) Sending required disclosures--(1) In general. A debt collector 
who sends disclosures required by the Act and this part in writing or 
electronically must do so in a manner that is reasonably expected to 
provide actual notice, and in a form that the consumer may keep and 
access later.
    (2) Exceptions. A debt collector need not comply with paragraph 
(a)(1) of this section when sending the disclosure required by Sec.  
1006.6(e) or Sec.  1006.18(e) in writing or electronically, unless the 
disclosure is included on a notice required by Sec.  1006.34(a)(1)(i) or 
Sec.  1006.38(c) or (d)(2).
    (b) Requirements for certain disclosures sent electronically. To 
comply with paragraph (a) of this section, a debt collector who sends 
the notice required by Sec.  1006.34(a)(1)(i)(B), or the disclosures 
described in Sec.  1006.38(c) or (d)(2)(i), electronically must do so in 
accordance with section 101(c) of the Electronic Signatures in Global 
and National Commerce Act (E-SIGN Act) (15 U.S.C. 7001(c)).

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5856, Jan. 19, 2021]

Subpart C [Reserved]



                         Subpart D_Miscellaneous



Sec.  1006.100  Record retention.

    (a) In general. Except as provided in paragraph (b) of this section, 
a debt collector must retain records that are evidence of compliance or 
noncompliance with the FDCPA and this part starting on the date that the 
debt collector begins collection activity on a debt until three years 
after the debt collector's last collection activity on the debt.
    (b) Special rule for telephone call recordings. If a debt collector 
records telephone calls made in connection with the collection of a 
debt, the debt collector must retain the recording of each such 
telephone call for three years after the date of the call.



Sec.  1006.104  Relation to State laws.

    Neither the Act nor the corresponding provisions of this part annul, 
alter, affect, or exempt any person subject to the provisions of the Act 
or the corresponding provisions of this part from complying with the 
laws of any State with respect to debt collection practices, except to 
the extent that those laws are inconsistent with any provision of the 
Act or the corresponding provisions of this part, and then only to the 
extent of the inconsistency. For purposes of this section, a State law 
is not inconsistent with the Act or the corresponding provisions of this 
part if the protection such law affords any consumer is greater than the 
protection provided by the Act or the corresponding provisions of this 
part.



Sec.  1006.108  Exemption for State regulation.

    (a) Exemption for State regulation. Any State may apply to the 
Bureau for a determination that, under the laws of that State, any class 
of debt collection practices within that State is subject to 
requirements that are substantially similar to those imposed under 
sections 803 through 812 of the Act (15 U.S.C. 1692a through 1692j) and 
the corresponding provisions of this part, and that there is adequate 
provision for State enforcement of such requirements.
    (b) Procedures and criteria. The procedures and criteria whereby 
States may apply to the Bureau for exemption of a class of debt 
collection practices within the applying State from the provisions of 
the Act and the corresponding provisions of this part as provided in

[[Page 383]]

section 817 of the Act (15 U.S.C. 1692o) are set forth in appendix A of 
this part.



   Sec. Appendix A to Part 1006--Procedures for State Application for 
                Exemption From the Provisions of the Act

                       I. Purpose and Definitions

    (a) This appendix establishes procedures and criteria whereby States 
may apply to the Bureau for exemption of a class of debt collection 
practices within the applying State from the provisions of the Act and 
the corresponding provisions of this part as provided in section 817 of 
the Act (15 U.S.C. 1692o).
    (b) For purposes of this appendix:
    (1) Applicant State law means the State law that, for a class of 
debt collection practices within that State, is claimed to contain 
requirements that are substantially similar to the requirements that 
relevant Federal law imposes on that class of debt collection practices, 
and that contains adequate provision for State enforcement.
    (2) Class of debt collection practices includes one or more such 
classes of debt collection practices referred to in paragraph I(b)(1) of 
this appendix.
    (3) Relevant Federal law means sections 803 through 812 of the Act 
(15 U.S.C. 1692a through 1692j) and the corresponding provisions of this 
part.
    (4) State law includes State statutes, any regulations that 
implement State statutes, and formal interpretations of State statutes 
or regulations by a court of competent jurisdiction or duly authorized 
State agency.

                             II. Application

    Any State may apply to the Bureau pursuant to the terms of this 
appendix for a determination that the applicant State law contains 
requirements that, for a class of debt collection practices within that 
State, are substantially similar to the requirements that relevant 
Federal law imposes on that class of debt collection practices, and that 
the applicant State law contains adequate provision for State 
enforcement. The application must be in writing, addressed to the 
Assistant Director, Office of Regulations, Division of Research, 
Monitoring, and Regulations, Bureau of Consumer Financial Protection, 
1700 G Street NW, Washington, DC 20552, signed by the Governor, Attorney 
General, or State official having primary enforcement responsibility 
under the State law that applies to the class of debt collection 
practices, and must be supported by the documents specified in this 
appendix.

                        III. Supporting Documents

    The application must be accompanied by the following, which may be 
submitted in paper or electronic form:
    (a) A copy of the applicant State law.
    (b) A comparison of each provision of relevant Federal law with the 
corresponding provisions of the applicant State law, together with 
reasons supporting the claim that the corresponding provisions of the 
applicant State law are substantially similar to the provisions of 
relevant Federal law, and an explanation as to why any differences 
between the State statute or regulation and Federal law are not 
inconsistent with the provisions of relevant Federal law and do not 
result in a diminution in the protection otherwise afforded consumers; 
and a statement that no other State laws (including administrative or 
judicial interpretations) are related to, or would have an effect upon, 
the State law that is being considered by the Bureau in making its 
determination.
    (c) A comparison of the provisions of the State law that provide for 
enforcement with the provisions of section 814 of the Act (15 U.S.C. 
1692l), together with reasons supporting the claim that the applicant 
State law provides for adequate administrative enforcement.
    (d) A statement identifying the office designated or to be 
designated to enforce the applicant State law. The statement must show 
how the office provides for adequate enforcement of the applicant State 
law, including by showing that the office has necessary facilities, 
personnel, and funding. The statement must include, for example, 
complete information regarding the fiscal arrangements for 
administrative enforcement (including the amount of funds available or 
to be provided), the number and qualifications of personnel engaged or 
to be engaged in enforcement, and a description of the procedures under 
which the applicant State law is to be enforced by the State.

                     IV. Criteria for Determination

    The Bureau will consider the criteria set forth below, and any other 
relevant information, in determining whether the applicant State law is 
substantially similar to relevant Federal law and whether there is 
adequate provision for enforcement of the applicant State law. In making 
that determination, the Bureau primarily will consider each provision of 
the applicant State law in comparison with each corresponding provision 
in relevant Federal law, and not the State law as a whole in comparison 
with the Act as a whole.
    (a)(1) In order for the applicant State law to be substantially 
similar to relevant Federal law, the applicant State law at least must 
provide that:

[[Page 384]]

    (i) Definitions and rules of construction, as applicable, import a 
meaning and have an application that are substantially similar to those 
prescribed by relevant Federal law.
    (ii) Debt collectors provide all of the applicable notices required 
by relevant Federal law, with the content and in the terminology, form, 
and time periods prescribed pursuant to relevant Federal law. The Bureau 
may determine whether additional notice requirements under the applicant 
State law affect a determination that the applicant State law is 
substantially similar to relevant Federal law.
    (iii) Debt collectors take all affirmative actions and abide by 
obligations substantially similar to those prescribed by relevant 
Federal law under substantially similar conditions and within 
substantially similar time periods as are prescribed under relevant 
Federal law;
    (iv) Debt collectors abide by prohibitions that are substantially 
similar to those prescribed by relevant Federal law;
    (v) Consumers' obligations or responsibilities are no more costly, 
lengthy, or burdensome than consumers' corresponding obligations or 
responsibilities under relevant Federal law; and
    (vi) Consumers' rights and protections are substantially similar to 
those provided by relevant Federal law under conditions or within time 
periods that are substantially similar to those prescribed by relevant 
Federal law.
    (2) In applying the criteria set forth in paragraph IV(a)(1) of this 
appendix, the Bureau will not consider adversely any additional 
requirements of State law that are not inconsistent with the purpose of 
the Act or the requirements imposed under relevant Federal law.
    (b) In determining whether provisions for enforcement of the 
applicant State law are adequate, consideration will be given to the 
extent to which, under the applicant State law, provision is made for 
administrative enforcement, including necessary facilities, personnel, 
and funding.

                            V. Public Comment

    In connection with any application that has been filed in accordance 
with the requirements of parts II and III of this appendix and following 
initial review of the application, a proposed rule concerning the 
application for exemption will be published by the Bureau in the Federal 
Register, and a copy of such application will be made available for 
examination by interested persons during business hours at the Bureau of 
Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. A 
comment period will be allowed from the date of such publication for 
interested parties to submit written comments to the Bureau regarding 
that application.

                     VI. Exemption From Requirements

    If the Bureau determines on the basis of the information before it 
that, under the applicant State law, a class of debt collection 
practices is subject to requirements substantially similar to those 
imposed under relevant Federal law and that there is adequate provision 
for State enforcement, the Bureau will exempt the class of debt 
collection practices in that State from the requirements of relevant 
Federal law and section 814 of the Act in the following manner and 
subject to the following conditions:
    (a) A final rule granting the exemption will be published in the 
Federal Register, and the Bureau will furnish a copy of such rule to the 
State official who made application for such exemption, to each Federal 
authority responsible for administrative enforcement of the requirements 
of relevant Federal law, and to the Attorney General of the United 
States. Any exemption granted will be effective 90 days after the date 
of publication of such rule in the Federal Register.
    (b) Any State that receives an exemption must, through its 
appropriate official, take the following steps:
    (i) Inform the Assistant Director, Office of Regulations, Division 
of Research, Monitoring, and Regulations, Bureau of Consumer Financial 
Protection, 1700 G Street NW, Washington, DC 20552 in writing within 30 
days of any change in the applicant State law. The report of any such 
change must contain copies of the full text of that change, together 
with statements setting forth the information and opinions regarding 
that change that are specified in paragraph III.
    (ii) Provide, not later than two years after the date the exemption 
is granted, and every two years thereafter, a report to the Bureau in 
writing concerning the manner in which the State has enforced the 
applicant State law in the preceding two years and an update of the 
information required under paragraph III(d) of this appendix.
    (c) The Bureau will inform any State that receives such an 
exemption, through its appropriate official, of any subsequent 
amendments of the Act or this part that might necessitate the amendment 
of State law for the exemption to continue.
    (d) After an exemption is granted, the requirements of the 
applicable State law constitute the requirements of relevant Federal 
law, except to the extent such State law imposes requirements not 
imposed by the Act or this part.

                       VII. Adverse Determination

    (a) If, after publication of a proposed rule in the Federal Register 
as provided under part V of this appendix, the Bureau finds on the basis 
of the information before it that it cannot make a favorable 
determination in connection with the application, the Bureau

[[Page 385]]

will notify the appropriate State official of the facts upon which such 
findings are based and will afford that State authority a reasonable 
opportunity to submit additional materials that demonstrate the basis 
for granting an exemption.
    (b) If, after having afforded the State authority such opportunity 
to demonstrate the basis for granting an exemption, the Bureau finds on 
the basis of the information before it that it still cannot make a 
favorable determination in connection with the application, the Bureau 
will publish in the Federal Register a final rule containing its 
determination regarding the application and will furnish a copy of such 
rule to the State official who made application for such exemption.

                      VIII. Revocation of Exemption

    (a) The Bureau reserves the right to revoke any exemption granted 
under the provisions of the Act or this part, if at any time it 
determines that the State law does not, in fact, impose requirements 
that are substantially similar to relevant Federal law or that there is 
not, in fact, adequate provision for State enforcement.
    (b) Before revoking any such exemption, the Bureau will notify the 
State of the facts or conduct that, in the Bureau's opinion, warrant 
such revocation, and will afford that State such opportunity as the 
Bureau deems appropriate in the circumstances to demonstrate continued 
eligibility for an exemption.
    (c) If, after having been afforded the opportunity to demonstrate or 
achieve compliance, the Bureau determines that the State has not done 
so, a proposed rule to revoke such exemption will be published in the 
Federal Register. A comment period will be allowed from the date of such 
publication for interested persons to submit written comments to the 
Bureau regarding the intention to revoke.
    (d) If such exemption is revoked, a final rule revoking the 
exemption will be published by the Bureau in the Federal Register, and a 
copy of such rule will be furnished to the State, to the Federal 
authorities responsible for enforcement of the requirements of the Act, 
and to the Attorney General of the United States. The revocation becomes 
effective, and the class of debt collection practices affected within 
that State become subject to the requirements of sections 803 through 
812 of the Act and the corresponding provisions of this part, 90 days 
after the date of publication of the final rule in the Federal Register.

[85 FR 76887, Nov. 30, 2020, as amended at 88 FR 16538, Mar. 20, 2023]

[[Page 386]]



                Sec. Appendix B to Part 1006--Model Forms

                  B-1 Model Form for Validation Notice
[GRAPHIC] [TIFF OMITTED] TR19JA21.028


[86 FR 5856, Jan. 19, 2021]



       Sec. Appendix C to Part 1006--Issuance of Advisory Opinions

    1. Advisory opinions. Any act done or omitted in good faith in 
conformity with any advisory opinion issued by the Bureau, including 
advisory opinions referenced in this appendix, provides the protection 
afforded under section 813(e) of the Act. The Bureau will amend this 
appendix periodically to incorporate references to advisory opinions 
that the Bureau issues.
    2. Requests for issuance of advisory opinions. A request for an 
advisory opinion may be submitted in accordance with the instructions 
regarding submission and content of

[[Page 387]]

requests applicable to any relevant advisory opinion program that the 
Bureau offers. Requests for advisory opinions will be reviewed 
consistent with the process outlined in any such program, and any 
resulting advisory opinions will be published in the Federal Register 
and on consumerfinance.gov.
    3. Bureau-issued advisory opinions. The Bureau has issued the 
following advisory opinions:
    a. Safe Harbors from Liability under the Fair Debt Collection 
Practices Act for Certain Actions Taken in Compliance with Mortgage 
Servicing Rules under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z), 81 FR 71977 
(Oct. 19, 2016).



        Sec. Supplement I to Part 1006--Official Interpretations

                              Introduction

    1. Official status. This commentary is the vehicle by which the 
Bureau of Consumer Financial Protection supplements Regulation F, 12 CFR 
part 1006. The provisions of the commentary are issued under the same 
authorities as the corresponding provisions of Regulation F and have 
been adopted in accordance with the notice-and-comment procedures of the 
Administrative Procedure Act (5 U.S.C. 553). Unless specified otherwise, 
references in this commentary are to sections of Regulation F or the 
Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. No commentary 
is expected to be issued other than by means of this Supplement I.
    2. Procedure for requesting interpretations. Anyone may request that 
an official interpretation of the regulation be added to this 
commentary. A request for such an official interpretation must be in 
writing and addressed to the Assistant Director, Office of Regulations, 
Division of Research, Monitoring, and Regulations, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552. The 
request must contain a complete statement of all relevant facts 
concerning the issue, including copies of all pertinent documents. 
Revisions to this commentary that are adopted in accordance with the 
rulemaking procedures of section 553 of the Administrative Procedure Act 
(5 U.S.C. 553) will be incorporated in the commentary following 
publication in the Federal Register.
    3. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that it 
interprets. The comments are designated with as much specificity as 
possible according to the particular regulatory provision addressed. For 
example, comments to Sec.  1006.6(d)(4) are further divided by 
subparagraph, such as comment 6(d)(4)(i)-1 and comment 6(d)(4)(ii)-1. 
Comments that have more general application are designated, for example, 
as comments 38-1 and 38-2. This introduction may be cited as comments I-
1, I-2, and I-3.

                           Subpart A--General

                       Section 1006.2--Definitions

                       2(b) Attempt To Communicate

    1. Examples. Section 1006.2(b) defines an attempt to communicate as 
any act to initiate a communication or other contact about a debt with 
any person through any medium, including by soliciting a response from 
such person. An act to initiate a communication or other contact about a 
debt is an attempt to communicate regardless of whether the attempt, if 
successful, would be a communication that conveys information regarding 
a debt directly or indirectly to any person. For example:
    i. Assume that a debt collector places a telephone call to a person 
about a debt. Regardless of whether the debt collector reaches the 
person, the debt collector has attempted to communicate with the person.
    ii. Assume that a debt collector places a telephone call to a person 
about a debt and leaves a voicemail message. Regardless of whether the 
voicemail message consists solely of a limited-content message or 
includes content that conveys, directly or indirectly, information about 
a debt, the debt collector has attempted to communicate with the person.

                    2(d) Communicate or Communication

    1. Any medium. Section 1006.2(d) provides, in relevant part, that a 
communication can occur through any medium. ``Any medium'' includes any 
oral, written, electronic, or other medium. For example, a communication 
may occur in person or by telephone, audio recording, paper document, 
mail, email, text message, social media, or other electronic media.
    2. Information regarding a debt. Section 1006.2(d) provides, in 
relevant part, that a communication means conveying information 
regarding a debt. A debt collector does not convey information regarding 
a debt directly or indirectly to any person if the debt collector leaves 
only a limited-content message, as defined in Sec.  1006.2(j). A debt 
collector who provides marketing or advertising that does not contain 
information about a specific debt or debts has not communicated under 
Sec.  1006.2(d), even if the debt collector transmits the marketing or 
advertising message to a consumer, because the debt collector has not 
conveyed information regarding a debt.

                                2(h) Debt

    1. Consumer. Section 1006.2(h) defines debt to mean, in part, any 
obligation or alleged

[[Page 388]]

obligation of a consumer to pay money arising out of a transaction. 
Section 1006.2(e), in turn, defines consumer to mean any natural person 
obligated or allegedly obligated to pay any debt. Only natural persons, 
therefore, can incur debts as defined in Sec.  1006.2(h).

                           2(i) Debt Collector

    1. In general. Section 1006.2(i) provides, in part, that a debt 
collector is any person who uses any instrumentality of interstate 
commerce or mail in any business the principal purpose of which is the 
collection of debts, or who regularly collects or attempts to collect, 
directly or indirectly, debts owed or due, or asserted to be owed or 
due, to another. A person who collects or attempts to collect defaulted 
debts that the person has purchased, but who does not collect or attempt 
to collect, directly or indirectly, debts owed or due, or asserted to be 
owed or due, to another, and who does not have a business the principal 
purpose of which is the collection of debts, is not a debt collector as 
defined in Sec.  1006.2(i).

                      2(j) Limited-Content Message

    1. In general. Section 1006.2(j) provides that a limited-content 
message is a voicemail message for a consumer that includes all of the 
content described in Sec.  1006.2(j)(1), that may include any of the 
content described in Sec.  1006.2(j)(2), and that includes no other 
content. Any other message is not a limited-content message. If a 
voicemail message includes content other than the specific items 
described in Sec.  1006.2(j)(1) and (2), and such other content directly 
or indirectly conveys any information about a debt, the message is a 
communication, as defined in Sec.  1006.2(d). For example, a voicemail 
message that includes a statement that the message is from a debt 
collector and a request to speak to a particular consumer is not a 
limited-content message because it includes more than the required or 
permitted content.
    2. Message for a consumer. Section 1006.2(j) provides, in part, that 
a limited-content message is a voicemail message for a consumer. A 
message knowingly left for a third party is not a limited-content 
message because it is not for a consumer. For example, assume that a 
debt collector has a telephone number that the debt collector knows 
belongs to the consumer's friend. A voicemail message left after calling 
that number is not a limited-content message, even if the message 
includes no more than the content described in Sec.  1006.2(j)(1) and 
(2) because the debt collector knowingly left the message for someone 
other than the consumer. Other provisions of this part may, in certain 
circumstances, restrict a debt collector from leaving a limited-content 
message or otherwise attempting to communicate with a consumer. See 
Sec. Sec.  1006.6(b) and (c) and 1006.22(f) and their related commentary 
for further guidance regarding when a debt collector is prohibited from 
attempting to communicate with a consumer.
    3. Meaningful disclosure of identity. A debt collector who leaves 
only a limited-content message for a consumer does not violate Sec.  
1006.14(g)'s requirement to meaningfully disclose the caller's identity 
with respect to that voicemail message.

                        2(j)(1) Required Content

    1. Example. The following example illustrates a limited-content 
message that includes only the content described in Sec.  1006.2(j)(1): 
``This is Robin Smith calling from ABC Inc. Please contact me or Jim 
Johnson at 1-800-555-1212.''

                        2(j)(2) Optional Content

    1. In general. Section 1006.2(j)(2)(iv) provides that a limited-
content message may include a statement that, if the consumer replies, 
the consumer may speak to any of the company's representatives or 
associates. A message that includes a more detailed description of the 
representative or associate group is not a limited-content message. For 
example, a reference to an agent with the ``credit card receivables 
group'' is not a limited-content message because it includes more than a 
statement that the consumer's reply may be answered by a representative 
or associate.
    2. Example. The following example illustrates a limited-content 
message that includes the content described in both Sec.  1006.2(j)(1) 
and (2): ``Hi, this is Robin Smith calling from ABC Inc. It is 4:15 p.m. 
on Wednesday, September 1. Please contact me or any of our 
representatives at 1-800-555-1212 today until 6:00 p.m. Eastern time, or 
any weekday from 8:00 a.m. to 6:00 p.m. Eastern time.''

               Subpart B--Rules for FDCPA Debt Collectors

    Section 1006.6--Communications in Connection With Debt Collection

                              6(a) Consumer

                            Paragraph 6(a)(1)

    1. Spouse. Section 1006.6(a)(1) provides that, for purposes of Sec.  
1006.6, the term consumer includes a consumer's spouse. The surviving 
spouse of a deceased consumer is a spouse as that term is used in Sec.  
1006.6(a)(1).

                            Paragraph 6(a)(2)

    1. Parent. Section 1006.6(a)(2) provides that, for purposes of Sec.  
1006.6, the term consumer includes a consumer's parent, if the consumer 
is a minor. A parent of a deceased minor consumer is a parent as that 
term is used in Sec.  1006.6(a)(2).

[[Page 389]]

                            Paragraph 6(a)(4)

    1. Personal representative. Section 1006.6(a)(4) provides that, for 
purposes of Sec.  1006.6, the term consumer includes the executor or 
administrator of the consumer's estate, if the consumer is deceased. The 
terms executor or administrator include the personal representative of 
the consumer's estate. A personal representative is any person who is 
authorized to act on behalf of the deceased consumer's estate. Persons 
with such authority may include personal representatives under the 
informal probate and summary administration procedures of many States, 
persons appointed as universal successors, persons who sign declarations 
or affidavits to effectuate the transfer of estate assets, and persons 
who dispose of the deceased consumer's financial assets or other assets 
of monetary value extrajudicially.

                   6(b) Communications With a Consumer

 6(b)(1) Prohibitions Regarding Unusual or Inconvenient Times or Places

    1. Designation of inconvenience. Section 1006.6(b)(1) prohibits a 
debt collector from, among other things, communicating or attempting to 
communicate with a consumer in connection with the collection of any 
debt at a time or place that the debt collector knows or should know is 
inconvenient to the consumer, unless an exception in Sec.  1006.6(b)(4) 
applies. For example, a debt collector knows or should know that a time 
or place is inconvenient to a consumer if the consumer uses the word 
``inconvenient'' to notify the debt collector. In addition, depending on 
the facts and circumstances, the debt collector knows or should know 
that a time or place is inconvenient even if the consumer does not 
specifically state to the debt collector that a time or place is 
``inconvenient.'' The debt collector may ask follow-up questions 
regarding whether a time or place is convenient to clarify statements by 
the consumer. For example:
    i. Assume that a creditor places a debt for collection with a debt 
collector. To facilitate collection of the debt, the creditor provides 
the debt collector a file that includes recent notes stating that the 
consumer cannot be disturbed on Tuesdays and Thursdays through the end 
of the calendar year. Based on these facts, the debt collector knows or 
should know that Tuesdays and Thursdays through the end of the calendar 
year are inconvenient to the consumer. Unless the consumer informs the 
debt collector that those times are no longer inconvenient, Sec.  
1006.6(b)(1)(i) prohibits the debt collector from communicating or 
attempting to communicate with the consumer on those days through the 
end of the calendar year.
    ii. Assume that a debt collector calls a consumer. The consumer 
answers the call but states ``I am busy'' or ``I cannot talk now.'' The 
debt collector asks the consumer when would be a convenient time. The 
consumer responds, ``on weekdays, except from 3:00 p.m. to 5:00 p.m.'' 
The debt collector asks the consumer whether there would be a convenient 
time on weekends. The consumer responds ``no.'' Based on these facts, 
the debt collector knows or should know that the time period between 
3:00 p.m. and 5:00 p.m. on weekdays, and all times on weekends, are 
inconvenient to the consumer. Thereafter, unless the consumer informs 
the debt collector that those times are no longer inconvenient, Sec.  
1006.6(b)(1)(i) prohibits the debt collector from communicating or 
attempting to communicate with the consumer at those times.
    iii. Assume that a consumer tells a debt collector not to 
communicate with the consumer at a particular place, such as the 
consumer's home. The debt collector asks whether the consumer intends to 
prohibit the debt collector from communicating with the consumer through 
all media associated with the consumer's home, including, for example, 
mail. Absent such additional information, the debt collector knows or 
should know that communications to the consumer at home, including mail 
to the consumer's home address and calls to the consumer's home landline 
telephone number, are inconvenient. Thereafter, unless the consumer 
informs the debt collector that the place is no longer inconvenient, 
Sec.  1006.6(b)(1)(ii) prohibits the debt collector from communicating 
or attempting to communicate with the consumer at the consumer's home. 
See comment 6(b)(1)(ii)-1 for additional guidance regarding 
communications or attempts to communicate at an inconvenient place.
    2. Consumer-initiated communication. If a consumer initiates a 
communication with a debt collector at a time or from a place that the 
consumer previously designated as inconvenient, the debt collector may 
respond once at that time or place through the same medium of 
communication used by the consumer. (For more on medium of 
communication, see Sec.  1006.14(h) and its associated commentary.) 
After that response, Sec.  1006.6(b)(1) prohibits the debt collector 
from communicating or attempting to communicate further with the 
consumer at that time or place until the consumer conveys that the time 
or place is no longer inconvenient, unless an exception in Sec.  
1006.6(b)(4) applies. For example:
    i. Assume the same facts as in comment 6(b)(1)-1.ii, except that, 
after the consumer tells the debt collector that weekdays from 3:00 p.m. 
to 5:00 p.m. and weekends are inconvenient, the consumer sends an email 
message to the debt collector at 3:30 p.m. on Wednesday. Based on these 
facts, Sec.  1006.6(b)(1)(i) does not prohibit the debt collector from 
responding once by email message before 5:00 p.m. on that day. Unless 
the

[[Page 390]]

consumer informs the debt collector that those times are no longer 
inconvenient, Sec.  1006.6(b)(1)(i) prohibits the debt collector from 
future communications or attempts to communicate with the consumer on 
weekdays between 3:00 p.m. and 5:00 p.m. and on weekends. Additionally, 
if the consumer responds to the debt collector's email message, the debt 
collector may continue to respond once to each consumer-initiated email 
message before 5:00 p.m. on that day.
    ii. Assume the same facts as in comment 6(b)(1)-1.iii, except that, 
after the consumer tells the debt collector not to communicate with the 
consumer at home, the consumer calls the debt collector from the 
consumer's home landline telephone number. Based on these facts, Sec.  
1006.6(b)(1)(ii) does not prohibit the debt collector from responding 
once by communicating with the consumer on that telephone call. Unless 
the consumer informs the debt collector that the place is no longer 
inconvenient, Sec.  1006.6(b)(1)(ii) prohibits the debt collector from 
future communications or attempts to communicate with the consumer at 
home.
    iii. Assume that a consumer tells a debt collector that all 
communications to the consumer on Friday every week are inconvenient to 
the consumer. On a Friday, the consumer visits the debt collector's 
website and uses the debt collector's mobile application. Based on these 
facts, while the consumer navigates the website or uses the mobile 
application, Sec.  1006.6(b)(1)(i) does not prohibit the debt collector 
from conveying information to the consumer about the debt through the 
website or mobile application. Once the consumer stops navigating the 
website or using the mobile application, however, Sec.  1006.6(b)(1)(i) 
prohibits the debt collector from further communications or attempts to 
communicate on that day. And unless the consumer informs the debt 
collector that those times are no longer inconvenient, Sec.  
1006.6(b)(1)(i) prohibits the debt collector from future communications 
or attempts to communicate with the consumer on Fridays.
    iv. Assume the same facts as in comment 6(b)(1)-2.iii, except that 
after the consumer visits the debt collector's website and uses the debt 
collector's mobile application, the consumer sends an email message to 
the debt collector at 8:30 p.m. on Friday. Based on these facts, Sec.  
1006.6(b)(1)(i) does not prohibit the debt collector from responding 
once, such as by sending an automated email message reply generated in 
response to the consumer's email message. Unless the consumer informs 
the debt collector that those times are no longer inconvenient, Sec.  
1006.6(b)(1)(i) prohibits the debt collector from future communications 
or attempts to communicate with the consumer on Fridays.

                          Paragraph 6(b)(1)(i)

    1. Time of electronic communication. Section 1006.6(b)(1)(i) 
prohibits a debt collector from communicating or attempting to 
communicate, including through electronic communication media, at any 
unusual time, or at a time that the debt collector knows or should know 
is inconvenient to the consumer. For purposes of determining the time of 
an electronic communication, such as an email or text message, under 
Sec.  1006.6(b)(1)(i), an electronic communication occurs when the debt 
collector sends it, not, for example, when the consumer receives or 
views it.
    2. Consumer's location. Under Sec.  1006.6(b)(1)(i), in the absence 
of a debt collector's knowledge of circumstances to the contrary, an 
inconvenient time for communicating with a consumer is before 8:00 a.m. 
and after 9:00 p.m. local time at the consumer's location. If a debt 
collector has conflicting or ambiguous information regarding a 
consumer's location, then, in the absence of knowledge of circumstances 
to the contrary, the debt collector complies with Sec.  1006.6(b)(1)(i) 
if the debt collector communicates or attempts to communicate with the 
consumer at a time that would be convenient in all of the locations at 
which the debt collector's information indicates the consumer might be 
located. The following examples, which assume that the debt collector 
has no information about times the consumer considers inconvenient or 
other information about the consumer's location, illustrate the rule.
    i. Assume that a debt collector's information indicates that a 
consumer has a mobile telephone number with an area code associated with 
the Eastern time zone and a residential address in the Pacific time 
zone. The convenient times to communicate with the consumer are after 
11:00 a.m. Eastern time (8:00 a.m. Pacific time) and before 9:00 p.m. 
Eastern time (6:00 p.m. Pacific time).
    ii. Assume that a debt collector's information indicates that a 
consumer has a mobile telephone number with an area code associated with 
the Eastern time zone and a landline telephone number with an area code 
associated with the Mountain time zone. The convenient times to 
communicate with the consumer are after 10:00 a.m. Eastern time (8:00 
a.m. Mountain time) and before 9:00 p.m. Eastern time (7:00 p.m. 
Mountain time).

                          Paragraph 6(b)(1)(ii)

    1. Communications or attempts to communicate at unusual or 
inconvenient places. Section 1006.6(b)(1)(ii) prohibits a debt collector 
from communicating or attempting to communicate with a consumer in 
connection with the collection of any debt at any unusual place, or at a 
place that the debt collector knows or should know is inconvenient to 
the consumer. Some communication media, such as mailing addresses and

[[Page 391]]

landline telephone numbers, are associated with a place. Pursuant to 
Sec.  1006.6(b)(1)(ii), a debt collector must not communicate or attempt 
to communicate with a consumer through media associated with an unusual 
place, or with a place that the debt collector knows or should know is 
inconvenient to the consumer. Other communication media, such as email 
addresses and mobile telephone numbers, are not associated with a place. 
Section 1006.6(b)(1)(ii) does not prohibit a debt collector from 
communicating or attempting to communicate with a consumer through such 
media unless the debt collector knows that the consumer is at an unusual 
place, or at a place that the debt collector knows or should know is 
inconvenient to the consumer. For example:
    i. Assume the same facts as in comment 6(b)(1)-1.iii. Unless the 
debt collector knows that the consumer is at home, a telephone call to 
the consumer's mobile telephone number or an electronic communication, 
including, for example, an email message or a text message to the 
consumer's mobile telephone, does not violate Sec.  1006.6(b)(1)(ii) 
even if the consumer receives or views the communication while at home.

   6(b)(2) Prohibitions Regarding Consumer Represented by an Attorney

    1. Consumer-initiated communications. A consumer-initiated 
communication from a consumer represented by an attorney constitutes the 
consumer's prior consent to that communication under Sec.  
1006.6(b)(4)(i); therefore, a debt collector may respond to that 
consumer-initiated communication. However, the consumer's act of 
initiating the communication does not negate the debt collector's 
knowledge that the consumer is represented by an attorney and does not 
revoke the protections afforded the consumer under Sec.  1006.6(b)(2). 
After the debt collector's response, the debt collector must not 
communicate or attempt to communicate further with the consumer unless 
the debt collector knows the consumer is not represented by an attorney 
with respect to the debt, either based on information from the consumer 
or the consumer's attorney, or unless an exception under Sec.  
1006.6(b)(2)(i) or (ii) or Sec.  1006.6(b)(4) applies.

      6(b)(3) Prohibitions Regarding Consumer's Place of Employment

    1. Communications at consumer's place of employment. Section 
1006.6(b)(3) prohibits a debt collector from communicating or attempting 
to communicate with a consumer in connection with the collection of any 
debt at the consumer's place of employment, if the debt collector knows 
or has reason to know that the consumer's employer prohibits the 
consumer from receiving such communication. A debt collector knows or 
has reason to know that a consumer's employer prohibits the consumer 
from receiving such communication if, for example, the consumer tells 
the debt collector that the consumer cannot take personal calls at work. 
The debt collector may ask follow-up questions regarding the employer's 
prohibitions or limitations on contacting the consumer at the place of 
employment to clarify statements by the consumer.
    2. Employer-provided email. For special rules regarding employer-
provided email addresses, see Sec.  1006.22(f)(3) and its associated 
commentary.

                           6(b)(4) Exceptions

                          Paragraph 6(b)(4)(i)

    1. Prior consent--in general. Section 1006.6(b)(4)(i) provides, in 
part, that the prohibitions in Sec.  1006.6(b)(1) through (3) on a debt 
collector communicating or attempting to communicate with a consumer in 
connection with the collection of any debt do not apply if the debt 
collector communicates or attempts to communicate with the prior consent 
of the consumer. If the debt collector learns during a communication 
that the debt collector is communicating with the consumer at an 
inconvenient time or place, for example, the debt collector may ask the 
consumer during that communication what time or place would be 
convenient. However, Sec.  1006.6(b)(4)(i) prohibits the debt collector 
from asking the consumer to consent to the continuation of that 
inconvenient communication.
    2. Directly to the debt collector. Section 1006.6(b)(4)(i) requires 
the prior consent of the consumer to be given directly to the debt 
collector. For example, a debt collector cannot rely on the prior 
consent of the consumer given to a creditor or to a previous debt 
collector.

   6(c) Communications With a Consumer--After Refusal To Pay or Cease 
                          Communication Notice

                          6(c)(1) Prohibitions

    1. Notification complete upon receipt. If, pursuant to Sec.  
1006.6(c)(1), a consumer notifies a debt collector in writing or 
electronically using a medium of electronic communication through which 
a debt collector accepts electronic communications from consumers that 
the consumer either refuses to pay a debt or wants the debt collector to 
cease further communication with the consumer, notification is complete 
upon the debt collector's receipt of that information. The following 
example illustrates the rule.
    i. Assume that on August 3, a consumer places in the mail a written 
notification to a debt collector that the consumer either refuses to pay 
a debt or wants the debt collector to cease further communication with

[[Page 392]]

the consumer pursuant to Sec.  1006.6(c)(1). On August 4, the debt 
collector sends the consumer an email message. The debt collector 
receives the consumer's written notification on August 6. Because the 
consumer's notification is complete upon the debt collector's receipt of 
that information on August 6, the debt collector's email message 
communication on August 4 does not violate Sec.  1006.6(c)(1).
    2. Interpretation of the E-SIGN Act. Comment 6(c)(1)-1 constitutes 
the Bureau's interpretation of section 101 of the E-SIGN Act as applied 
to FDCPA section 805(c). Under this interpretation, section 101(a) of 
the E-SIGN Act enables a consumer to satisfy the requirement in FDCPA 
section 805(c) that the consumer's notification of the debt collector be 
``in writing'' through an electronic request. Further, because the 
consumer may only satisfy the writing requirement using a medium of 
electronic communication through which a debt collector accepts 
electronic communications from consumers, section 101(b) of the E-SIGN 
Act is not contravened.

                           6(c)(2) Exceptions

    1. Written early intervention notice for mortgage servicers. The 
Bureau has interpreted the written early intervention notice required by 
12 CFR 1024.39(d)(3) to fall within the exceptions to the cease 
communication provision in FDCPA section 805(c)(2) and (3). See 12 CFR 
1024.39(d)(3), its commentary, and the Bureau's 2016 FDCPA Interpretive 
Rule (81 FR 71977 (Oct. 19, 2016)).
    2. Other mortgage servicing rule provisions. Notwithstanding a 
consumer's cease communication request pursuant to Sec.  1006.6(c)(1), a 
mortgage servicer who is subject to the FDCPA with respect to a mortgage 
loan is not liable under the FDCPA for complying with certain servicing 
rule provisions, including requirements to provide a consumer with 
disclosures regarding the forced placement of hazard insurance as 
required by 12 CFR 1024.37, a disclosure regarding an adjustable-rate 
mortgage's initial interest rate adjustment as required by 12 CFR 
1026.20(d), and a periodic statement for each billing cycle as required 
by 12 CFR 1026.41. See CFPB Bulletin 2013-12 (Oct. 15, 2013) providing 
implementation guidance for certain mortgage servicing rules.

                 6(d) Communications With Third Parties

                           6(d)(2) Exceptions

    1. Prior consent. See the commentary to Sec.  1006.6(b)(4)(i) for 
guidance concerning a consumer giving prior consent directly to a debt 
collector.

 6(d)(3) Reasonable Procedures for Email and Text Message Communications

                          Paragraph 6(d)(3)(ii)

    1. Knowledge of prohibited disclosure. For purposes of Sec.  
1006.6(d)(3)(ii), a debt collector knows that sending an email to an 
email address or a text message to a telephone number has led to a 
disclosure prohibited by Sec.  1006.6(d)(1) if any person has informed 
the debt collector of that fact.

                 6(d)(4) Procedures for Email Addresses

 6(d)(4)(i) Procedures Based on Communication Between the Consumer and 
                           the Debt Collector

                         Paragraph 6(d)(4)(i)(B)

    1. Prior consent--in general. Section 1006.6(d)(4)(i)(B) provides 
that, for purposes of Sec.  1006.6(d)(3)(i), a debt collector may send 
an email to an email address if, among other things, the debt collector 
has received directly from the consumer prior consent to use the email 
address to communicate with the consumer about the debt. For purposes of 
Sec.  1006.6(d)(4)(i)(B), a consumer may provide consent directly to a 
debt collector through any medium of communication, such as in writing, 
electronically, or orally.
    2. Prior consent--consumer-provided email address. If a consumer 
provides an email address to a debt collector (including on the debt 
collector's website or online portal), the debt collector may treat the 
consumer as having consented directly to the debt collector's use of the 
email address to communicate with the consumer about the debt for 
purposes of Sec.  1006.6(d)(4)(i)(B) if the debt collector discloses 
clearly and conspicuously that the debt collector may use the email 
address to communicate with the consumer about the debt.

      6(d)(4)(ii) Procedures Based on Communication by the Creditor

                        Paragraph 6(d)(4)(ii)(B)

    1. Communications about the account. Section 1006.6(d)(4)(ii)(B) 
provides that, for purposes of Sec.  1006.6(d)(3)(i), a debt collector 
may send an email to an email address if, among other things, the 
creditor used the email address to communicate with the consumer about 
the account giving rise to the debt. For purposes of Sec.  
1006.6(d)(4)(ii)(B), communications about the account include, for 
example, required disclosures, bills, invoices, periodic statements, 
payment reminders, and payment confirmations. Communications about the 
account do not include, for example, marketing or advertising materials 
unrelated to the consumer's account.

[[Page 393]]

                        Paragraph 6(d)(4)(ii)(C)

    1. Clear and conspicuous. Clear and conspicuous means readily 
understandable. In the case of written and electronic disclosures, the 
location and type size also must be readily noticeable and legible to 
consumers, although no minimum type size is mandated.
    2. Sample language. Section 1006.6(d)(4)(ii)(C) provides that, for 
purposes of Sec.  1006.6(d)(3)(i), a debt collector may send an email to 
an email address if, among other things, the creditor sent the consumer 
a written or electronic notice that clearly and conspicuously disclosed 
that the debt would be transferred to the debt collector; that the debt 
collector might use the email address to communicate with the consumer 
about the debt; that, if others have access to this email address, then 
it is possible they may see the emails; instructions for a reasonable 
and simple method by which the consumer could opt out of such 
communications; and the date by which the debt collector or creditor 
must receive the consumer's request to opt out.
    i. When a creditor sends the notice in writing, the creditor may 
use, but is not required to use, the following language to satisfy Sec.  
1006.6(d)(4)(ii)(C): ``We are transferring your account to ABC debt 
collector, and we are providing ABC debt collector with the following 
email address for you: [email address]. ABC debt collector may use this 
email address to communicate with you about the debt. If others have 
access to this email address, then it is possible they may see the 
emails. If you would like to opt out of communications by ABC debt 
collector to [email address], please fill out the enclosed form and 
return it in the enclosed envelope so that we receive it by [date].''
    ii. When a creditor sends the notice electronically, the creditor 
may use, but is not required to use, the following language to satisfy 
Sec.  1006.6(d)(4)(ii)(C): ``We are transferring your account to ABC 
debt collector, and we are providing ABC debt collector with the 
following email address for you: [email address]. ABC debt collector may 
use this email address to communicate with you about the debt. If others 
have access to this email address, then it is possible they may see the 
emails. If you would like to opt out of communications by ABC debt 
collector to [email address], please click here by [date].''
    3. Combined notice. A notice provided by the creditor under Sec.  
1006.6(d)(4)(ii)(C) may be contained in a larger communication that 
conveys other information, as long as the notice is clear and 
conspicuous.

                       Paragraph 6(d)(4)(ii)(C)(1)

    1. Identification of the debt collector. Under Sec.  
1006.6(d)(4)(ii)(C)(1), the notice must clearly and conspicuously 
disclose, among other things, that the debt has been or will be 
transferred to the debt collector. To satisfy this requirement, the 
notice must identify the name of the specific debt collector to which 
the debt has been or will be transferred.

                       Paragraph 6(d)(4)(ii)(C)(4)

    1. Reasonable and simple method to opt out. Under Sec.  
1006.6(d)(4)(ii)(C)(4), the notice must clearly and conspicuously 
disclose instructions for a reasonable and simple method by which the 
consumer can opt out of the debt collector's use of the email address to 
communicate about the debt. The following examples illustrate the rule.
    i. When the creditor sends the notice in writing, reasonable and 
simple methods for opting out include providing a reply form and a pre-
addressed envelope together with the opt-out notice. Requiring a 
consumer to call or write to obtain a form for opting out, rather than 
including the form with the opt-out notice, does not meet the 
requirement to provide a reasonable and simple method for opting out.
    ii. When the creditor sends the notice electronically, reasonable 
and simple methods for opting out include providing an electronic means 
to opt out, such as a hyperlink, or allowing the consumer to opt out by 
replying to the communication with the word ``stop.'' Requiring a 
consumer who receives the opt-out notice electronically to opt out by 
postal mail, telephone, or visiting a website without providing a link 
does not meet the requirement to provide a reasonable and simple method 
for opting out.

                       Paragraph 6(d)(4)(ii)(C)(5)

    1. Recipient of opt-out request. Under Sec.  1006.6(d)(4)(ii)(C)(5), 
the notice must clearly and conspicuously disclose the date by which a 
debt collector or creditor must receive a consumer's request to opt out, 
which must be at least 35 days after the date the notice is sent. The 
notice may instruct the consumer to respond to the debt collector or to 
the creditor but not to both.

                        Paragraph 6(d)(4)(ii)(D)

    1. Effect of opt-out request after expiration of opt-out period. If 
a consumer requests after the expiration of the opt-out period that the 
debt collector not communicate using the email address identified in the 
opt-out notice, such as by returning the notice or opting out under 
Sec.  1006.6(e), Sec.  1006.14(h)(1) prohibits the debt collector from 
communicating or attempting to communicate with the consumer using that 
email address. If the consumer requests after the expiration of the opt-
out period that the debt collector not communicate with the consumer by 
email, Sec.  1006.14(h)(1) prohibits the debt collector from 
communicating or attempting to communicate with the consumer by email,

[[Page 394]]

including by using the specific email address identified in the notice. 
For more on prohibited communication media and certain exceptions, see 
Sec.  1006.14(h) and its associated commentary. If after the expiration 
of the opt-out period the consumer notifies the debt collector in 
writing or electronically using a medium of electronic communication 
through which a debt collector accepts electronic communications from 
consumers that the consumer refuses to pay the debt or wants the debt 
collector to cease further communication with the consumer, Sec.  
1006.6(c)(1) prohibits the debt collector from communicating or 
attempting to communicate with the consumer with respect to the debt, 
subject to the exceptions in Sec.  1006.6(c)(2). For more on 
communications with a consumer after refusal to pay or a cease 
communication notice, see Sec.  1006.6(c) and its associated commentary.
    2. Scope of opt-out request. In the absence of evidence that the 
consumer refuses to pay the debt or wants the debt collector to cease 
all communication with the consumer, a consumer's request under Sec.  
1006.6(d)(4)(ii)(D) to opt out of a debt collector's use of a particular 
email address to communicate with the consumer by email does not 
constitute a notification to cease further communication with respect to 
the debt under Sec.  1006.6(c)(1).

                        Paragraph 6(d)(4)(ii)(E)

    1. Domain name available for use by the general public. Under Sec.  
1006.6(d)(4)(ii)(E), the domain name of an email address is available 
for use by the general public when multiple members of the general 
public are permitted to use the same domain name, whether for free or 
through a paid subscription. Such a name does not include one that is 
reserved for use by specific registrants, such as a domain name branded 
for use by a particular commercial entity (e.g., 
[email protected]) or reserved for particular types of 
institutions (e.g., [email protected], [email protected], or 
[email protected]).
    2. Knowledge of employer-provided email address. For purposes of 
Sec.  1006.6(d)(4)(ii)(E), a debt collector knows that an email address 
is provided by the consumer's employer if any person has informed the 
debt collector that the address is employer provided. However, Sec.  
1006.6(d)(4)(ii)(E) does not require a debt collector to conduct a 
manual review of consumer accounts to determine whether an email address 
might be employer provided.

    6(d)(4)(iii) Procedures Based on Communication by the Prior Debt 
                                Collector

    1. Immediately prior debt collector. Section 1006.6(d)(4)(iii) 
provides that, for purposes of Sec.  1006.6(d)(3)(i), a debt collector 
may send an email to an email address if, among other things, the 
immediately prior debt collector used the email address to communicate 
with the consumer about the debt. For purposes of Sec.  
1006.6(d)(4)(iii), the immediately prior debt collector is the debt 
collector immediately preceding the current debt collector. For example, 
if ABC debt collector returns a debt to the creditor and the creditor 
places the debt with XYZ debt collector, ABC debt collector is the 
immediately prior debt collector for purposes of Sec.  
1006.6(d)(4)(iii).
    2. Examples. The following examples illustrate the rule.
    i. After obtaining a consumer's email address in accordance with the 
procedures in Sec.  1006.6(d)(4)(i) or (ii), ABC debt collector 
communicates with the consumer about the debt using that email address 
and the consumer does not opt out. ABC debt collector returns the debt 
to the creditor, who places it with XYZ debt collector. XYZ debt 
collector communicates with the consumer about the debt using the email 
address obtained by ABC debt collector. Assuming that the requirements 
of Sec.  1006.6(d)(3)(ii) are satisfied, XYZ debt collector may have a 
bona fide error defense to civil liability for any unintentional third-
party disclosure that occurs during that communication because a prior 
debt collector (i.e., ABC debt collector) obtained the email address in 
accordance with the procedures in Sec.  1006.6(d)(4)(i) or (ii), the 
immediately prior debt collector (i.e., ABC debt collector) used the 
email address to communicate with the consumer about the debt, and the 
consumer did not opt out of such communications by ABC debt collector.
    ii. After obtaining a consumer's email address in accordance with 
the procedures in Sec.  1006.6(d)(4)(i) or (ii), ABC debt collector 
communicates with the consumer about the debt using that email address 
and the consumer does not opt out. ABC debt collector returns the debt 
to the creditor, who places it with EFG debt collector. EFG debt 
collector communicates with the consumer about the debt using the email 
address obtained by ABC debt collector, and the consumer does not opt 
out. EFG debt collector returns the debt to the creditor, who places it 
with XYZ debt collector. XYZ debt collector communicates with the 
consumer about the debt using the email address obtained by ABC debt 
collector and used by EFG debt collector. Assuming that the requirements 
of Sec.  1006.6(d)(3)(ii) are satisfied, XYZ debt collector may have a 
bona fide error defense to civil liability for any unintentional third-
party disclosure that occurs during that communication because a prior 
debt collector (i.e., ABC debt collector) obtained the email address in 
accordance with the procedures in Sec.  1006.6(d)(4)(i) or (ii), the 
immediately prior debt collector (i.e., EFG debt collector) used the 
email address to communicate with the consumer about the debt, and the 
consumer did not opt out of such communications by EFG debt collector.

[[Page 395]]

    iii. After obtaining a consumer's email address in accordance with 
the procedures in Sec.  1006.6(d)(4)(i) or (ii), ABC debt collector 
communicates with the consumer about the debt using that email address 
and the consumer does not opt out. ABC debt collector returns the debt 
to the creditor, who places it with EFG debt collector, who chooses not 
to communicate with the consumer by email. EFG debt collector returns 
the debt to the creditor, who places it with XYZ debt collector. XYZ 
debt collector communicates with the consumer about the debt using the 
email address obtained by ABC debt collector. Section 1006.6(d)(4)(iii) 
does not provide XYZ debt collector with a bona fide error defense to 
civil liability for any unintentional third-party disclosure that occurs 
during that communication because the immediately prior debt collector 
(i.e., EFG debt collector) did not use the email address to communicate 
with the consumer about the debt.

       6(d)(5) Procedures for Telephone Numbers for Text Messages

    1. Complete and accurate database. Section 1006.6(d)(5)(i) and (ii) 
provides that, for purposes of Sec.  1006.6(d)(3)(i), a debt collector 
may send a text message to a telephone number if, among other things, 
the debt collector confirms, using a complete and accurate database, 
that the telephone number has not been reassigned from the consumer to 
another user. For purposes of Sec.  1006.6(d)(5)(i) and (ii), the 
database established by the FCC in In re Advanced Methods to Target & 
Eliminate Unlawful Robocalls (33 FCC Rcd. 12024 (Dec. 12, 2018)) 
qualifies as a complete and accurate database, as does any commercially 
available database that is substantially similar in terms of 
completeness and accuracy to the FCC's database.

                          Paragraph 6(d)(5)(i)

    1. Response to telephone call by consumer. Section 1006.6(d)(5)(i) 
provides that, for purposes of Sec.  1006.6(d)(3)(i), a debt collector 
may send a text message to a telephone number if, among other things, 
the consumer used the telephone number to communicate by text message 
with the debt collector about the debt. Section 1006.6(d)(5)(i) does not 
apply if the consumer used the telephone number to communicate only by 
telephone call with the debt collector about the debt.

                          Paragraph 6(d)(5)(ii)

    1. Prior consent. See comment 6(d)(4)(i)(B)-1 for guidance 
concerning how a consumer may provide prior consent directly to a debt 
collector. See comment 6(d)(4)(i)(B)-2 for guidance concerning when a 
debt collector may treat a consumer who provides a telephone number for 
text messages as having consented directly to the debt collector.

    6(e) Opt-Out Notice for Electronic Communications or Attempts To 
                               Communicate

    1. In general. Section 1006.6(e) requires a debt collector who 
communicates or attempts to communicate with a consumer electronically 
in connection with the collection of a debt using a specific email 
address, telephone number for text messages, or other electronic-medium 
address to include in such communication or attempt to communicate a 
clear and conspicuous statement describing a reasonable and simple 
method by which the consumer can opt out of further electronic 
communications or attempts to communicate by the debt collector to that 
address or telephone number. See comment 6(d)(4)(ii)(C)-1 for guidance 
on the meaning of clear and conspicuous. See comment 6(d)(4)(ii)(C)(4)-1 
for guidance on the meaning of reasonable and simple. The following 
examples illustrate the rule.
    i. Assume that a debt collector sends a text message to a consumer's 
mobile telephone number. The text message includes the following 
instruction: ``Reply STOP to stop texts to this telephone number.'' 
Assuming that it is readily noticeable and legible to consumers, this 
instruction constitutes a clear and conspicuous statement describing a 
reasonable and simple method to opt out of receiving further text 
messages from the debt collector to that telephone number consistent 
with Sec.  1006.6(e). No minimum type size is mandated.
    ii. Assume that a debt collector sends the consumer an email that 
includes a hyperlink labeled: ``Click here to opt out of further emails 
to this email address.'' Assuming that it is readily noticeable and 
legible to consumers, this instruction constitutes a clear and 
conspicuous statement describing a reasonable and simple method to opt 
out of receiving further emails from the debt collector to that email 
address consistent with Sec.  1006.6(e). No minimum type size is 
mandated.
    iii. Assume that a debt collector sends the consumer an email that 
includes instructions in a textual format explaining that the consumer 
may opt out of receiving further email communications from the debt 
collector to that email address by replying with the word ``stop'' in 
the subject line. Assuming that it is readily noticeable and legible to 
consumers, this instruction constitutes a clear and conspicuous 
statement describing a reasonable and simple method to opt out of 
receiving further emails from the debt collector to that email address 
consistent with Sec.  1006.6(e). No minimum type size is mandated.

[[Page 396]]

          Section 1006.10--Acquisition of Location Information

                            10(a) Definition

    1. Location information about deceased consumers. If a consumer 
obligated or allegedly obligated to pay any debt is deceased, location 
information includes the information described in Sec.  1006.10(a) for a 
person who is authorized to act on behalf of the deceased consumer's 
estate, as described in Sec.  1006.6(a)(4) and its associated 
commentary.

            10(b) Form and Content of Location Communications

                           Paragraph 10(b)(2)

    1. Executors, administrators, or personal representatives of a 
deceased consumer's estate. Section 1006.10(b)(2) prohibits a debt 
collector who is communicating with any person other than the consumer 
for the purpose of acquiring location information about the consumer 
from stating that the consumer owes any debt. If the consumer obligated 
or allegedly obligated to pay the debt is deceased, and the debt 
collector is attempting to locate the person who is authorized to act on 
behalf of the deceased consumer's estate, the debt collector does not 
violate Sec.  1006.10(b)(2) by stating that the debt collector is 
seeking to identify and locate the person who is authorized to act on 
behalf of the deceased consumer's estate. The debt collector may also 
state that the debt collector is seeking to identify and locate the 
person handling the financial affairs of the deceased consumer. For more 
on executors, administrators, and personal representatives, see Sec.  
1006.6(a)(4) and its associated commentary.

       Section 1006.14--Harassing, Oppressive, or Abusive Conduct

                            14(a) In General

    1. General prohibition. Section 1006.14(a), which implements FDCPA 
section 806 (15 U.S.C. 1692d), sets forth a general standard that 
prohibits a debt collector from engaging in any conduct the natural 
consequence of which is to harass, oppress, or abuse any person in 
connection with the collection of a debt. The general prohibition covers 
the specific conduct described in Sec.  1006.14(b) through (h), as well 
as any conduct by the debt collector that is not specifically prohibited 
by Sec.  1006.14(b) through (h) but the natural consequence of which is 
to harass, oppress, or abuse any person in connection with the 
collection of a debt. Such conduct can occur regardless of the 
communication media the debt collector uses, including in-person 
interactions, telephone calls, audio recordings, paper documents, mail, 
email, text messages, social media, or other electronic media, even if 
not specifically addressed by Sec.  1006.14(b) through (h). The 
following example illustrates the rule.
    i. Assume that, in connection with the collection of a debt, a debt 
collector sends a consumer numerous, unsolicited text messages per day 
for several consecutive days. The consumer does not respond. Assume 
further that the debt collector does not communicate or attempt to 
communicate with the consumer using any other communication medium and 
that, by sending the text messages, the debt collector has not violated 
Sec.  1006.14(b) through (h). Even though the debt collector's conduct 
does not violate any specific prohibition under Sec.  1006.14(b) through 
(h), it is likely that the natural consequence of the debt collector's 
text messages is to harass, oppress, or abuse the person receiving the 
text messages; when such natural consequence occurs, the debt collector 
has violated Sec.  1006.14(a) and FDCPA section 806.
    2. Cumulative effect of conduct. Whether a debt collector's conduct 
violates the general standard in Sec.  1006.14(a) may depend on the 
cumulative effect of the debt collector's conduct through any 
communication medium the debt collector uses, including in-person 
interactions, telephone calls, audio recordings, paper documents, mail, 
email, text messages, social media, or other electronic media. Depending 
on the facts and circumstances, conduct that on its own would violate 
neither the general prohibition in Sec.  1006.14(a), nor any specific 
prohibition in Sec.  1006.14(b) through (h), nonetheless may violate 
Sec.  1006.14(a) when such conduct is evaluated cumulatively with other 
conduct. The following example illustrates the rule as applied to a debt 
collector who uses multiple communication media to communicate or 
attempt to communicate with a person.
    i. Assume that a debt collector places seven unanswered telephone 
calls within seven consecutive days to a consumer in connection with the 
collection of a debt. During this same period, the debt collector also 
sends multiple additional unsolicited emails about the debt to the 
consumer. The consumer does not respond. The frequency of the debt 
collector's telephone calls during the seven-day period does not exceed 
the telephone call frequencies described in Sec.  1006.14(b)(2)(i), so 
the debt collector is presumed to comply with Sec.  1006.14(b)(1). 
Assume further that no evidence is offered to rebut the presumption of 
compliance, such that the debt collector complies with Sec.  
1006.14(b)(1). Also assume that, for purposes of this illustrative 
example only, the frequency of the debt collector's emails alone does 
not violate Sec.  1006.14(a). It nevertheless is likely that the 
cumulative effect of the debt collector's telephone calls and emails is 
harassment; when such natural consequence occurs, the debt collector has 
violated Sec.  1006.14(a) and FDCPA section 806.

[[Page 397]]

 14(b) Repeated or Continuous Telephone Calls or Telephone Conversations

    1. Placing telephone calls repeatedly or continuously. Section 
1006.14(b) prohibits a debt collector from, in connection with the 
collection of a debt, placing telephone calls or engaging any person in 
telephone conversation repeatedly or continuously with intent to annoy, 
abuse, or harass any person at the called number, and it describes when 
a debt collector is presumed to have complied with or violated that 
prohibition. For purposes of Sec.  1006.14(b)(1) through (4), ``placing 
a telephone call'' includes conveying a ringless voicemail but does not 
include sending an electronic message (e.g., a text message or an email) 
that may be received on a mobile telephone.

                           14(b)(1) In General

    1. Effect of compliance. A debt collector who complies with Sec.  
1006.14(b)(1) and FDCPA section 806(5) (15 U.S.C. 1692d(5)) complies 
with Sec.  1006.14(a) and FDCPA section 806 (15 U.S.C. 1692d) solely 
with respect to the frequency of its telephone calls. The debt collector 
nevertheless could violate Sec.  1006.14(a) and FDCPA section 806 if the 
natural consequence of another aspect of the debt collector's telephone 
calls, unrelated to frequency, is to harass, oppress, or abuse any 
person in connection with the collection of a debt. See also comment 
14(a)-2 regarding the cumulative effect of the debt collector's conduct.
    2. Example. Assume that a debt collector communicates or attempts to 
communicate with a consumer about a particular debt only by telephone. 
The debt collector does not exceed either of the telephone call 
frequencies described in Sec.  1006.14(b)(2)(i). Under Sec.  
1006.14(b)(2)(i), the debt collector is presumed to comply with Sec.  
1006.14(b)(1). Assume, further, that no evidence is offered to rebut 
that presumption of compliance. Pursuant to Sec.  1006.14(b)(1), the 
debt collector complies with Sec.  1006.14(a) and FDCPA section 806, but 
only with respect to the frequency of its telephone calls. Assume, 
however, that one of the debt collector's telephone calls results in the 
debt collector leaving a voicemail that contains obscene language. Even 
though the debt collector does not violate Sec.  1006.14(a) and FDCPA 
section 806 based solely on the frequency of the telephone calls, the 
debt collector's obscene voicemail would violate Sec.  1006.14(a) and 
(d) and FDCPA section 806 and 806(2) (15 U.S.C. 1692, 1692d(2)).

  14(b)(2) Telephone Call Frequencies; Presumptions of Compliance and 
                                Violation

                          Paragraph 14(b)(2)(i)

    1. Presumption of compliance; examples. Section 1006.14(b)(2)(i) 
provides that a debt collector is presumed to comply with Sec.  
1006.14(b)(1) and FDCPA section 806(5) (15 U.S.C. 1692d(5)) if the debt 
collector places a telephone call to a particular person in connection 
with the collection of a particular debt neither: More than seven times 
within seven consecutive days (Sec.  1006.14(b)(2)(i)(A)); nor within a 
period of seven consecutive days after having had a telephone 
conversation with the person in connection with the collection of such 
debt (Sec.  1006.14(b)(2)(i)(B)). For the presumption of compliance to 
apply, the debt collector's telephone call frequencies must not exceed 
either prong of Sec.  1006.14(b)(2)(i). The telephone call frequencies 
are subject to the exclusions in Sec.  1006.14(b)(3). In addition, for 
purposes of Sec.  1006.14(b)(2)(i)(B), the date of the telephone 
conversation is the first day of the seven-consecutive-day period. The 
following examples illustrate the rule.
    i. On Wednesday, April 1, a debt collector first attempts to 
communicate with a consumer in connection with the collection of a 
credit card debt by placing a telephone call and leaving a limited-
content message. Between Thursday, April 2, and Tuesday, April 7, the 
debt collector places six more telephone calls to the consumer about the 
debt, all of which go unanswered. As of Tuesday, April 7, the debt 
collector has placed seven telephone calls to the consumer in connection 
with the collection of the credit card debt within the period of seven 
consecutive days that started on Wednesday, April 1. Assume the debt 
collector does not place any additional telephone calls about the debt 
until Wednesday, April 8. Under Sec.  1006.14(b)(2)(i), the debt 
collector is presumed to comply with Sec.  1006.14(b)(1) and FDCPA 
section 806(5).
    ii. On Thursday, August 13, a consumer places a telephone call to, 
and initiates a telephone conversation with, a debt collector regarding 
a particular debt. Assume that the debt collector does not place a 
telephone call to the consumer in connection with the collection of that 
debt again prior to Thursday, August 20. The debt collector is presumed 
to comply with Sec.  1006.14(b)(1) and FDCPA section 806(5).
    iii. On Tuesday, October 6, a debt collector first attempts to 
communicate with a particular third party for the purpose of acquiring 
location information about a consumer by placing a telephone call to 
that third party. The call is unanswered. The debt collector places up 
to six more unanswered telephone calls to that third party for the 
purpose of acquiring location information about the consumer through 
Monday, October 12. The debt collector is presumed to comply with Sec.  
1006.14(b)(1) and FDCPA section 806(5). See Sec.  1006.10(c) for further 
guidance concerning when a debt collector is prohibited from 
communicating with a person other than the consumer for the purpose of 
acquiring location information.

[[Page 398]]

    2. Factors to rebut the presumption of compliance. To rebut the 
presumption of compliance, it must be proven that a debt collector who 
did not place a telephone call in excess of either of the telephone call 
frequencies described in Sec.  1006.14(b)(2)(i) nevertheless placed a 
telephone call or engaged a person in telephone conversation repeatedly 
or continuously with intent to annoy, abuse, or harass any person at the 
called number. For purposes of determining whether the presumption of 
compliance has been rebutted, it is assumed that debt collectors intend 
the natural consequence of their actions. Comments 14(b)(2)(i)-2.i 
through .iv provide a non-exhaustive list of factors that may rebut the 
presumption of compliance. The factors may be considered either 
individually or in combination with one another (or other non-specified 
factors). The factors may be viewed in light of any other relevant facts 
and circumstances and therefore may apply to varying degrees. Factors 
that may rebut the presumption of compliance include:
    i. The frequency and pattern of telephone calls the debt collector 
places to a person, including the intervals between them. The 
considerations relevant to this factor include whether the debt 
collector placed telephone calls to a person in rapid succession (e.g., 
two unanswered telephone calls to the same telephone number within five 
minutes) or in a highly concentrated manner (e.g., seven telephone calls 
to the same telephone number within one day). For example, assume the 
same facts as in comment 14(b)(2)(i)-1.i, except assume that, after the 
debt collector placed the first telephone call to the consumer about the 
credit card debt on Wednesday, April 1, the debt collector placed six 
additional telephone calls to the consumer about that debt on Friday, 
April 3. Under Sec.  1006.14(b)(2)(i), the debt collector is presumed to 
comply with Sec.  1006.14(b)(1) and FDCPA section 806(5), but the high 
concentration of telephone calls on Friday, April 3, is a factor that 
may rebut the presumption of compliance.
    ii. The frequency and pattern of any voicemails that the debt 
collector leaves for a person, including the intervals between them. The 
considerations relevant to this factor include whether the debt 
collector left voicemails for a person in rapid succession (e.g., two 
voicemails within five minutes left at the same telephone number) or in 
a highly concentrated manner (e.g., seven voicemails left at the same 
telephone number within one day).
    iii. The content of a person's prior communications with the debt 
collector. Among the considerations relevant to this factor are whether 
the person previously informed the debt collector, for example, that the 
person did not wish to be contacted again about the particular debt, 
that the person was refusing to pay the particular debt, or that the 
person did not owe the particular debt. This factor also includes a 
consumer's cease communication notification described in Sec.  1006.6(c) 
and a consumer's request under Sec.  1006.14(h) that the debt collector 
not use telephone calls to communicate or attempt to communicate with 
the consumer. The amount of time elapsed since any such prior 
communications also may be relevant to this factor.
    iv. The debt collector's conduct in prior communications or attempts 
to communicate with the person. Among the considerations relevant to 
this factor are whether, during a prior communication or attempt to 
communicate with a person, the debt collector, for example, used 
obscene, profane, or otherwise abusive language (see Sec.  1006.14(d)), 
used or threatened to use violence or other criminal means to harm the 
person (see Sec.  1006.14(c)), or called at an inconvenient time or 
place (see Sec.  1006.6(b)(1)). The amount of time elapsed since any 
such prior communications or attempts to communicate also may be 
relevant to this factor.
    3. Misdirected telephone calls. Section 1006.14(b)(2)(i) provides 
that a debt collector is presumed to comply with Sec.  1006.14(b)(1) and 
FDCPA section 806(5) (15 U.S.C. 1692d(5)) if the debt collector's 
telephone call frequencies do not exceed the telephone call frequencies 
described in Sec.  1006.14(b)(2)(i). If, within a period of seven 
consecutive days, a debt collector attempts to communicate with a 
particular person by placing telephone calls to a particular telephone 
number, and the debt collector then learns that the telephone number is 
not that person's number, the telephone calls that the debt collector 
made to that number are not considered to have been telephone calls 
placed to that person during that seven-consecutive-day period for 
purposes of Sec.  1006.14(b)(2)(i). For example:
    i. Assume that a debt collector first attempts to communicate with a 
consumer on Monday, and again on Wednesday, by placing one unanswered 
telephone call to a particular telephone number on each of those days. 
On Thursday, the debt collector learns that the telephone number belongs 
to someone else and that the consumer does not answer telephone calls to 
that number. For purposes of Sec.  1006.14(b)(2)(i), the debt collector 
has not yet placed any telephone calls to that consumer during that 
seven-consecutive-day period.

                         Paragraph 14(b)(2)(ii)

    1. Presumption of a violation; examples. Section 1006.14(b)(2)(ii) 
provides that a debt collector is presumed to violate Sec.  
1006.14(b)(1) and FDCPA section 806(5) (15 U.S.C. 1692d(5)) if the debt 
collector places a telephone call to a particular person in connection 
with the collection of a particular debt in excess of either of the 
telephone call frequencies described in Sec.  1006.14(b)(2)(i). The 
telephone call

[[Page 399]]

frequencies are subject to the exclusions in Sec.  1006.14(b)(3). The 
following examples illustrate the rule.
    i. On Wednesday, April 1, a debt collector first attempts to 
communicate with a consumer in connection with the collection of a 
mortgage debt by placing a telephone call and leaving a limited-content 
message. On each of the next three business days (i.e., on Thursday, 
April 2, Friday, April 3, and Monday, April 6), the debt collector 
places two additional telephone calls to the consumer about the debt, 
all of which go unanswered. On Tuesday, April 7, the debt collector 
places an additional telephone call to the consumer about the debt. The 
debt collector has placed a total of eight telephone calls to the 
consumer about the debt during the seven-day period starting Wednesday, 
April 1. None of the calls was subject to the exclusions in Sec.  
1006.14(b)(3). The debt collector is presumed to violate Sec.  
1006.14(b)(1) and FDCPA section 806(5).
    ii. On Tuesday, August 11, a debt collector first attempts to 
communicate with a consumer in connection with the collection of a 
credit card debt by placing a telephone call to the consumer that the 
consumer does not answer. On Friday, August 14, the debt collector again 
places a telephone call to the consumer and has a telephone conversation 
with the consumer in connection with the collection of the debt. Subject 
to the exclusions in Sec.  1006.14(b)(3), the debt collector is presumed 
to violate Sec.  1006.14(b)(1) and FDCPA section 806(5) if the debt 
collector places a telephone call to the consumer in connection with the 
collection of that debt again prior to Friday, August 21.
    2. Factors to rebut the presumption of a violation. To rebut the 
presumption of a violation, it must be proven that a debt collector who 
placed telephone calls in excess of either of the frequencies described 
in Sec.  1006.14(b)(2)(i) nevertheless did not place a telephone call or 
engage any person in telephone conversation repeatedly or continuously 
with intent to annoy, abuse, or harass any person at the called number. 
For purposes of determining whether the presumption of a violation has 
been rebutted, it is assumed that debt collectors intend the natural 
consequence of their actions. Comments 14(b)(2)(ii)-2.i through .iv 
provide a non-exhaustive list of factors that may rebut the presumption 
of a violation. The factors may be considered either individually or in 
combination with one another (or other non-specified factors). The 
factors may be viewed in light of any other relevant facts and 
circumstances and therefore may apply to varying degrees. Factors that 
may rebut the presumption of a violation include:
    i. Whether a debt collector placed a telephone call to comply with, 
or as required by, applicable law. For example, assume the same facts as 
in comment 14(b)(2)(ii)-1.i, except assume that the debt collector 
placed the final telephone call of the seven-consecutive-day period to 
inform the consumer of available loss mitigation options in compliance 
with the Bureau's mortgage servicing rules under Regulation X, 12 CFR 
1024.39(a). The debt collector's compliance with applicable law is a 
factor that may rebut the presumption of a violation.
    ii. Whether a debt collector placed a telephone call that was 
directly related to active litigation involving the collection of a 
particular debt. For example, assume the same facts as in comment 
14(b)(2)(ii)-1.ii, except assume that, after the debt collector and the 
consumer had a telephone conversation about the credit card debt on 
Friday, August 14, the debt collector placed another telephone call to 
the consumer before Friday, August 21, to complete a court-ordered 
communication with the consumer about the debt, or as part of 
negotiations to settle active debt collection litigation regarding the 
debt. The direct relationship between the additional telephone call and 
the active debt collection litigation is a factor that may rebut the 
presumption of a violation.
    iii. Whether a debt collector placed a telephone call in response to 
a consumer's request for additional information when the exclusion in 
Sec.  1006.14(b)(3)(i) for telephone calls made with the consumer's 
prior consent given directly to the debt collector did not apply. For 
example, assume the same facts as in comment 14(b)(2)(ii)-1.ii, except 
assume that, during the telephone conversation about the credit card 
debt on Friday, August 14, the consumer told the debt collector that the 
consumer would like more information about the amount of the debt but 
that the consumer could not talk at that moment. The consumer ended the 
telephone call before the debt collector could seek prior consent under 
Sec.  1006.14(b)(3)(i) to call back with the requested information. The 
debt collector placed another telephone call to the consumer prior to 
Friday, August 21, to provide the requested information. The fact that 
the debt collector placed the additional telephone call in response to 
the consumer's request is a factor that may rebut the presumption of a 
violation.
    iv. Whether a debt collector placed a telephone call to convey 
information to the consumer that, as shown through evidence, would 
provide the consumer with an opportunity to avoid a demonstrably 
negative effect relating to the collection of the particular debt, where 
the negative effect was not in the debt collector's control, and where 
time was of the essence. For example, in each of the following three 
scenarios, assume the same facts as in comment 14(b)(2)(ii)-1.ii, and 
also assume that:
    A. During the telephone conversation about the credit card debt on 
Friday, August 14, the debt collector and the consumer engaged in a 
lengthy conversation regarding

[[Page 400]]

settlement terms, and, toward the end of the conversation, the telephone 
call dropped. The debt collector immediately placed an additional 
telephone call to the consumer to complete the conversation. The fact 
that the debt collector placed the telephone call to permit the debt 
collector and the consumer to complete the conversation about settlement 
terms, which provided the consumer an opportunity to avoid a 
demonstrably negative effect that was not in the debt collector's 
control (i.e., having to repeat a substantive conversation with a 
potentially different representative of the debt collector) and where 
time was of the essence (i.e., to prevent the delay of settlement 
negotiations by seven days) is a factor that may rebut the presumption 
of a violation.
    B. The consumer previously entered into a payment plan with the debt 
collector regarding the credit card debt. The conditions for the payment 
plan were set by the creditor, and among those conditions is that only 
the creditor, in its sole discretion, may approve waivers of late fees. 
On Monday, August 17, the debt collector learned that the consumer's 
payment failed to process, and the applicable grace period was set to 
expire on Tuesday, August 18. The debt collector placed a telephone call 
to the consumer on Monday to remind the consumer that a late fee would 
be applied by the creditor for non-payment unless the consumer made the 
payment by the next day. The fact that the debt collector placed the 
telephone call to alert the consumer to the pending penalty, giving the 
consumer an opportunity to avoid a demonstrably negative effect that was 
not in the debt collector's control and where time was of the essence, 
is a factor that may rebut the presumption of a violation.
    C. On Monday, August 17, the debt collector placed a telephone call 
to the consumer to offer the consumer a ``one-time only'' discount on 
the payment of the credit card debt. The debt collector stated that the 
offer would expire the next day when, in fact, the debt collector could 
have offered the same or a similar discount through the end of August. 
Because the negative effect on the consumer was in the debt collector's 
control, the discount offer is not a factor that may rebut the 
presumption of a violation.

     14(b)(3) Certain Telephone Calls Excluded From Telephone Call 
                               Frequencies

                          Paragraph 14(b)(3)(i)

    1. Prior consent. Section 1006.14(b)(3)(i) excludes from the 
telephone call frequencies described in Sec.  1006.14(b)(2) certain 
telephone calls placed to a person who gives prior consent. See Sec.  
1006.6(b)(4)(i) and its associated commentary for guidance about giving 
prior consent directly to a debt collector. Nothing in Sec.  
1006.14(b)(3)(i) regarding prior consent for telephone call frequencies 
permits a debt collector to communicate, or attempt to communicate, with 
a consumer as prohibited by Sec. Sec.  1006.6(b) and 1006.14(h).
    2. Duration of prior consent. For purposes of Sec.  
1006.14(b)(3)(i), if a person gives prior consent for additional 
telephone calls about a particular debt directly to a debt collector, 
any telephone calls that the debt collector thereafter places to the 
person about that particular debt do not count toward the telephone call 
frequencies described in Sec.  1006.14(b)(2) for a period of up to seven 
consecutive days. A person's prior consent may expire before the 
conclusion of the seven-consecutive-day period. A person's prior consent 
expires when any of the following occurs: (1) The person consented to 
the additional telephone calls for a shorter time period and such time 
period has ended; (2) the person revokes such prior consent; or (3) the 
debt collector has a telephone conversation with the person regarding 
the particular debt.
    3. Examples. The following examples illustrate how Sec.  
1006.14(b)(3)(i) applies:
    i. On Friday, April 3, a debt collector places a telephone call to a 
consumer. During the ensuing telephone conversation in connection with 
the collection of a debt, the consumer tells the debt collector to 
``call back on Monday.'' Absent an exception, under Sec.  
1006.14(b)(2)(ii), the debt collector would be presumed to violate Sec.  
1006.14(b)(1) and FDCPA section 806(5) (15 U.S.C. 1692d(5)) if the debt 
collector called the consumer on Monday, April 6, because the additional 
telephone call would exceed the frequency described in Sec.  
1006.14(b)(2)(i)(B). Under Sec.  1006.14(b)(3)(i), however, in the 
scenario described (and absent any other facts), the debt collector 
could, pursuant to the consumer's prior consent, place telephone calls 
to the consumer on Monday, April 6, and not lose a presumption of 
compliance with Sec.  1006.14(b)(1) and FDCPA section 806(5).
    ii. Assume the same facts as in the preceding example, except that 
the consumer does not specify a particular day the debt collector may 
call back. Assume further that, on Monday, April 6, the debt collector 
calls the consumer back and has a telephone conversation with the 
consumer. The exception in Sec.  1006.14(b)(3)(i) does not apply to 
subsequent telephone calls placed by the debt collector to the consumer, 
absent additional prior consent from the consumer. For example, if the 
debt collector, without additional prior consent, placed a telephone 
call to the consumer on Wednesday, April 8, that telephone call would 
count toward the telephone call frequencies described in Sec.  
1006.14(b)(2), and, pursuant to Sec.  1006.14(b)(2)(ii), the debt 
collector would be presumed to violate Sec.  1006.14(b)(1) and FDCPA 
section 806(5).
    iii. Between Monday, June 1, and Wednesday, June 3, a debt collector 
places three unanswered telephone calls to a consumer in

[[Page 401]]

connection with the collection of a debt. Also on Wednesday, June 3, the 
debt collector sends the consumer an email message in connection with 
the collection of the debt. The consumer responds by email on Thursday, 
June 4, requesting additional information about available repayment 
options related to the debt and writes, ``You can call me at 123-456-
7891 to discuss the repayment options.'' The debt collector receives the 
consumer's prior consent by email on Thursday, June 4, and thereafter 
places eight unanswered telephone calls to the consumer between Monday, 
June 8, and Wednesday, June 10. Because the consumer provided prior 
consent directly to the debt collector, the exclusion in Sec.  
1006.14(b)(3)(i) applies to the eight telephone calls placed by the debt 
collector during the seven-consecutive-day period that began with 
receipt of the consumer's consent on Thursday, June 4. Those telephone 
calls therefore do not count toward the telephone call frequencies 
described in Sec.  1006.14(b)(2)(i). However, any telephone calls placed 
by the debt collector after the end of the seven-day period (i.e., on or 
after Thursday, June 11) would count toward the telephone call 
frequencies described in Sec.  1006.14(b)(2)(i), unless the consumer 
again gives prior consent directly to the debt collector.

                         Paragraph 14(b)(3)(ii)

    1. Unconnected telephone calls. Section 1006.14(b)(3)(ii) provides 
that telephone calls placed to a person do not count toward the 
telephone call frequencies described in Sec.  1006.14(b)(2)(i) if they 
do not connect to the dialed number. A debt collector's telephone call 
does not connect to the dialed number if, for example, the debt 
collector receives a busy signal or an indication that the dialed number 
is not in service. Conversely, a telephone call placed to a person 
counts toward the telephone call frequencies described in Sec.  
1006.14(b)(2)(i) if it connects to the dialed number, unless an 
exclusion in Sec.  1006.14(b)(3) applies. A debt collector's telephone 
call connects to the dialed number if, for example, the telephone call 
is answered, even if it subsequently drops; if the telephone call causes 
a telephone to ring at the dialed number but no one answers it; or if 
the telephone call is connected to a voicemail or other recorded 
message, even if it does not cause a telephone to ring and even if the 
debt collector is unable to leave a voicemail.

                           14(b)(4) Definition

    1. Particular debt. Section 1006.14(b)(2) establishes presumptions 
of compliance and violation with respect to Sec.  1006.14(b)(1) and 
FDCPA section 806(5) (15 U.S.C. 1692d(5)) based on the frequency with 
which a debt collector places telephone calls to, or engages in 
telephone conversation with, a person in connection with the collection 
of a particular debt. Section 1006.14(b)(4) provides that, except in the 
case of student loan debt, the term particular debt means each of a 
consumer's debts in collection. For student loan debt, Sec.  
1006.14(b)(4) provides that the term particular debt means all student 
loan debts that a consumer owes or allegedly owes that were serviced 
under a single account number at the time the debts were obtained by a 
debt collector.
    i. Placing a telephone call in connection with the collection of a 
particular debt. Under Sec.  1006.14(b)(2)(i)(A), if a debt collector 
places a telephone call to a person and initiates a conversation or 
leaves a voicemail about one particular debt, the debt collector counts 
the telephone call as a telephone call in connection with the collection 
of the particular debt, subject to the exclusions in Sec.  
1006.14(b)(3). If a debt collector places a telephone call to a person 
and initiates a conversation or leaves a voicemail about more than one 
particular debt, the debt collector counts the telephone call as a 
telephone call in connection with the collection of each such particular 
debt, subject to the exclusions in Sec.  1006.14(b)(3). If a debt 
collector places a telephone call to a person but neither initiates a 
conversation about a particular debt nor leaves a voicemail that refers 
to a particular debt, or if the debt collector's telephone call is 
unanswered, the debt collector counts the telephone call as a telephone 
call in connection with the collection of at least one particular debt, 
unless an exclusion in Sec.  1006.14(b)(3) applies.
    ii. Engaging in a telephone conversation in connection with the 
collection of a particular debt. Under Sec.  1006.14(b)(2)(i)(B), if a 
debt collector and a person discuss one particular debt during a 
telephone conversation, the debt collector has engaged in a telephone 
conversation in connection with the collection of the particular debt, 
regardless of which party initiated the discussion about the particular 
debt, subject to the exclusions in Sec.  1006.14(b)(3). If a debt 
collector and a person discuss more than one particular debt during a 
telephone conversation, the debt collector has engaged in a telephone 
conversation in connection with the collection of each such particular 
debt, regardless of which party initiated the discussion about the 
particular debts, subject to the exclusions in Sec.  1006.14(b)(3). If 
no particular debt is discussed during a telephone conversation between 
a debt collector and a person, the debt collector counts the 
conversation as a telephone conversation in connection with the 
collection of at least one particular debt, unless an exclusion in Sec.  
1006.14(b)(3) applies.
    2. Examples. The following examples illustrate the rule.
    i. A debt collector is attempting to collect a medical debt and two 
credit card debts (denominated A and B for this example) from the same 
consumer. Under

[[Page 402]]

Sec.  1006.14(b)(2)(i)(A), a debt collector may count an unanswered 
telephone call as one telephone call placed toward any one particular 
debt, even if the debt collector intended to discuss more than one 
particular debt had the telephone call resulted in a telephone 
conversation. Therefore, if the debt collector, within a period of seven 
consecutive days, places a total of 21 unanswered telephone calls, seven 
of which the debt collector counted as unanswered telephone calls to the 
consumer in connection with the collection of the medical debt, seven of 
which the debt collector counted as unanswered telephone calls to the 
consumer in connection with the collection of credit card debt A, and 
seven of which the debt collector counted as unanswered telephone calls 
to the consumer in connection with the collection of credit card debt B, 
the debt collector is presumed to comply with Sec.  1006.14(b)(1) and 
FDCPA section 806(5), even if, for example, the debt collector intended 
to discuss both credit card debt A and credit card debt B had any of the 
telephone calls with respect to the credit card debts resulted in a 
telephone conversation.
    ii. A debt collector is attempting to collect a medical debt and a 
credit card debt from the same consumer. The debt collector places a 
telephone call to the consumer, intending to discuss both particular 
debts, but the consumer does not answer, and the telephone call goes to 
voicemail. The debt collector leaves a limited-content message, as 
defined in Sec.  1006.2(j). Because the limited-content message does not 
specifically refer to any particular debt, under Sec.  
1006.14(b)(2)(i)(A), a debt collector may count the voicemail as one 
telephone call placed toward either of the particular debts, even though 
the debt collector intended to discuss both particular debts if the 
telephone call had resulted in a telephone conversation.
    iii. A debt collector is attempting to collect a medical debt and a 
credit card debt from the same consumer. On Monday, November 9, the debt 
collector places a telephone call to, and engages in a telephone 
conversation with, the consumer solely in connection with the collection 
of the medical debt. The debt collector does not place any telephone 
calls to the consumer in connection with the collection of the credit 
card debt. Regarding the medical debt, under Sec.  1006.14(b)(2)(i)(A) 
and (B) respectively, the debt collector has placed a telephone call to, 
and has and engaged in a telephone conversation with, the consumer in 
connection with the collection of the particular debt, unless an 
exclusion in Sec.  1006.14(b)(3) applies. Regarding the credit card 
debt, under Sec.  1006.14(b)(2)(i)(A) and (B) respectively, the debt 
collector has neither placed a telephone call to, nor engaged in a 
telephone conversation with, the consumer in connection with the 
collection of the particular debt.
    iv. Assume the same facts as in the preceding example, except that 
on Monday, November 9, the debt collector engages in a telephone 
conversation with the consumer in connection with the collection of both 
the medical debt and the credit card debt. Under Sec.  
1006.14(b)(2)(i)(A) and (B) respectively, the debt collector has placed 
a telephone call to, and has engaged in a telephone conversation with, 
the consumer in connection with the collection of both the medical debt 
and the credit card debt, unless an exclusion in Sec.  1006.14(b)(3) 
applies.
    v. A debt collector is attempting to collect a medical debt and a 
credit card debt from the same consumer. Beginning on Monday, November 
9, and through Wednesday, November 11, the debt collector places two 
unanswered telephone calls to the consumer which the debt collector 
counts as telephone calls in connection with the collection of the 
medical debt, and four unanswered telephone calls to the consumer which 
the debt collector counts as telephone calls in connection with the 
collection of the credit card debt. On Thursday, November 12, the debt 
collector places a telephone call to, and engages in a general telephone 
conversation with, the consumer, but the debt collector and the consumer 
do not discuss either particular debt. Under Sec.  1006.14(b)(2)(i)(A) 
and (B) respectively, the debt collector may count the November 12 
telephone call and ensuing conversation toward either the medical debt 
or the credit card debt. For example, if the debt collector counts the 
November 12 telephone call and ensuing conversation toward the 
collection of only the medical debt, then, during this time period, the 
debt collector has placed three telephone calls and has had one 
conversation in connection with the collection of the medical debt, and 
has placed four telephone calls and has had no conversations in 
connection with the collection of the credit card debt.
    vi. A debt collector is attempting to collect a medical debt and a 
credit card debt from the same consumer. On Monday, November 9, the debt 
collector places a telephone call to, and initiates a telephone 
conversation with, the consumer about the collection of the medical 
debt. The consumer states that the consumer does not want to discuss the 
medical debt, and instead initiates a discussion about the credit card 
debt. Under Sec.  1006.14(b)(2)(i)(A) and (B) respectively, the debt 
collector has both placed a telephone call to, and engaged in a 
telephone conversation with, the consumer in connection with the 
collection of the medical debt, even though the consumer was unwilling 
to engage in the discussion initiated by the debt collector regarding 
the medical debt. Under Sec.  1006.14(b)(2)(i)(A) and (B) respectively, 
the debt collector has not placed a

[[Page 403]]

telephone call to the consumer in connection with the credit card debt, 
but the debt collector has engaged in a telephone conversation in 
connection with the collection of the credit card debt, even though the 
consumer, not the debt collector, initiated the discussion about the 
credit card debt.
    vii. A debt collector is attempting to collect three student loan 
debts that were serviced under a single account number at the time that 
they were obtained by a debt collector and that are owed or allegedly 
owed by the same consumer. All three debts are treated as a single debt 
for purposes of Sec.  1006.14(b)(2). The debt collector is presumed to 
comply with Sec.  1006.14(b)(1) and FDCPA section 806(5) if the debt 
collector places seven or fewer telephone calls within seven consecutive 
days to the consumer in connection with the collection of the three 
student loan debts, and the debt collector does not place a telephone 
call within a period of seven consecutive days after having had a 
telephone conversation with the consumer in connection with the 
collection of any one of the three student loan debts, unless an 
exclusion in Sec.  1006.14(b)(3) applies.

                  14(h) Prohibited Communication Media

                           14(h)(1) In General

    1. Communication media designations. Section 1006.14(h)(1) prohibits 
a debt collector from communicating or attempting to communicate with a 
person in connection with the collection of any debt through a medium of 
communication if the person has requested that the debt collector not 
use that medium to communicate with the person. The debt collector may 
ask follow-up questions regarding preferred communication media to 
clarify statements by the person. For examples of communication media, 
see comment 2(d)-1.
    2. Specific address or telephone number. Within a medium of 
communication, a person may request that a debt collector not use a 
specific address or telephone number. For example, if a person has two 
mobile telephone numbers, the person may request that the debt collector 
not use one or both mobile telephone numbers.
    3. Examples. The following examples illustrate the prohibition in 
Sec.  1006.14(h)(1).
    i. Assume that a person tells a debt collector to ``stop calling'' 
the person. Based on these facts, the person has requested that the debt 
collector not use telephone calls to communicate with the person and, 
thereafter, Sec.  1006.14(h)(1) prohibits the debt collector from 
communicating or attempting to communicate with the person through 
telephone calls.
    ii. Assume that, in response to receipt of either the opt-out 
procedures described in Sec.  1006.6(d)(4)(ii) or the opt-out notice in 
Sec.  1006.6(e), a consumer requests to opt out of receiving electronic 
communications from a debt collector at a particular email address or 
telephone number. Based on these facts, the consumer has requested that 
the debt collector not use that email address or telephone number to 
electronically communicate with the consumer for any debt and, 
thereafter, Sec.  1006.14(h)(1) prohibits the debt collector from 
electronically communicating or attempting to communicate with the 
consumer through that email address or telephone number.

                           14(h)(2) Exceptions

    1. Legally required communication media. Under Sec.  
1006.14(h)(2)(iii), if otherwise required by applicable law, a debt 
collector may communicate or attempt to communicate with a person in 
connection with the collection of any debt through a medium of 
communication that the person has requested the debt collector not use 
to communicate with the person. For example, assume that a debt 
collector who is also a mortgage servicer subject to the periodic 
statement requirement for residential mortgage loans under Regulation Z, 
12 CFR 1026.41, is engaging in debt collection communications with a 
person about the person's residential mortgage loan. The person tells 
the debt collector to stop mailing letters to the person, and the person 
has not consented to receive statements electronically in accordance 
with 12 CFR 1026.41(c). Although the person has requested that the debt 
collector not use mail to communicate with the person, Sec.  
1006.14(h)(2)(iii) permits the debt collector to mail the person 
periodic statements, because the periodic statements are required by 
applicable law.

  Section 1006.18--False, Deceptive, or Misleading Representations or 
                                  Means

             18(d) False Representations or Deceptive Means

    1. Social media. Under Sec.  1006.18(d), a debt collector may not 
use any false representation or deceptive means to collect any debt or 
to obtain information concerning a consumer. In the social media 
context, the following examples illustrate the rule:
    i. Assume that a debt collector sends a private message, in 
connection with the collection of a debt, requesting to be added as one 
of the consumer's contacts on a social media platform marketed for 
social or professional networking purposes. A debt collector makes a 
false representation or implication if the debt collector does not 
disclose his or her identity as a debt collector in the request.
    ii. Assume that a debt collector communicates privately with a 
friend or coworker of a consumer on a social media platform, for the 
purpose of acquiring location information about the consumer. Pursuant 
to

[[Page 404]]

Sec.  1006.10(b)(1), the debt collector must identify himself or herself 
individually by name when communicating for the purpose of acquiring 
location information. To avoid violating Sec.  1006.18(d), the debt 
collector must communicate using a profile that accurately identifies 
the debt collector's individual name. (But see Sec.  1006.18(f) and its 
associated commentary regarding use of assumed names.) The debt 
collector also must comply with the other applicable requirements for 
obtaining location information in Sec.  1006.10 (e.g., with respect to 
stating that the debt collector is confirming or correcting location 
information concerning the consumer and, only if expressly requested, 
identifying the name of the debt collector's employer), for 
communicating with third parties in Sec.  1006.6(d)(1), and for 
communicating through social media in Sec.  1006.22(f)(4).

                       18(e) Disclosures Required

    1. Communication. A limited-content message, as defined in Sec.  
1006.2(j), is not a communication, as that term is defined in Sec.  
1006.2(d). Thus, a debt collector who leaves only a limited-content 
message for a consumer need not make the disclosures required by Sec.  
1006.18(e)(1) and (2). However, if a debt collector leaves a voicemail 
message for a consumer that includes content in addition to the content 
described in Sec.  1006.2(j)(1) and (2) and that directly or indirectly 
conveys any information regarding a debt, the voicemail message is a 
communication, and the debt collector is required to make the Sec.  
1006.18(e) disclosures. See the commentary to Sec.  1006.2(d) and (j) 
for additional clarification regarding the definitions of communication 
and limited-content message.

                     18(e)(1) Initial Communications

    1. Example. A debt collector must make the disclosure required by 
Sec.  1006.18(e)(1) in the debt collector's initial communication with a 
consumer, regardless of the medium of communication and regardless of 
whether the debt collector or the consumer initiated the communication. 
For example, assume that a debt collector who has not previously 
communicated with a consumer attempts to communicate with the consumer 
by leaving a limited-content message, as defined in Sec.  1006.2(j). 
After listening to the debt collector's limited-content message, the 
consumer initiates a telephone call to, and communicates with, the debt 
collector. Pursuant to Sec.  1006.18(e)(1), because the consumer-
initiated call is the initial communication between the debt collector 
and the consumer, the debt collector must disclose to the consumer 
during that telephone call that the debt collector is attempting to 
collect a debt and that any information obtained will be used for that 
purpose.

                     18(e)(4) Translated Disclosures

    1. Example. Section 1006.18(e)(4) provides that a debt collector 
must make the disclosures required by Sec.  1006.18(e)(1) and (2) in the 
same language or languages used for the rest of the communication in 
which the disclosures are conveyed. The following example illustrates 
the rule:
    i. ABC debt collector is collecting a debt. ABC debt collector's 
initial communication with the consumer takes place in Spanish. Section 
1006.18(e)(4) requires ABC debt collector to provide in Spanish the 
disclosure required by Sec.  1006.18(e)(1). Thereafter, ABC debt 
collector has a communication with the consumer that takes place partly 
in English and partly in Spanish. During this communication, the debt 
collector must provide the disclosure required by Sec.  1006.18(e)(2) in 
both English and Spanish.

                           18(f) Assumed Names

    1. Readily identifiable by the employer. Section 1006.18(f) 
provides, in part, that Sec.  1006.18 does not prohibit a debt 
collector's employee from using an assumed name when communicating or 
attempting to communicate with a person, provided that the debt 
collector can readily identify any employee using an assumed name. A 
debt collector may use any method of managing assumed names that enables 
the debt collector to determine the true identity of any employee using 
an assumed name. For example, a debt collector may require an employee 
to use the same assumed name when communicating or attempting to 
communicate with any person and may prohibit any other employee from 
using the same assumed name.

             Section 1006.22--Unfair or Unconscionable Means

               22(f) Restrictions on Use of Certain Media

                           Paragraph 22(f)(2)

    1. Language or symbol. Section 1006.22(f)(2) provides, in relevant 
part, that a debt collector must not use any language or symbol, other 
than the debt collector's address, on any envelope when communicating 
with a consumer by mail. For purposes of Sec.  1006.22(f)(2), the phrase 
``language or symbol'' does not include language and symbols that 
facilitate communications by mail, such as: The debtor's name and 
address; postage; language such as ``forwarding and address correction 
requested''; and the United States Postal Service's Intelligent Mail 
barcode.

                           Paragraph 22(f)(3)

    1. Email addresses described in Sec.  1006.6(d)(4). Section 
1006.22(f)(3) generally prohibits a debt collector from communicating or 
attempting to communicate with a consumer

[[Page 405]]

by sending an email to an email address that the debt collector knows is 
provided to the consumer by the consumer's employer. The prohibition 
does not apply if the debt collector sends the email to an email address 
described in Sec.  1006.6(d)(4)(i) or (iii), which specifically 
contemplate debt collectors sending emails to any email address--
including an email address that a debt collector knows is employer 
provided--if the consumer has used the email address to communicate with 
the debt collector about a debt (Sec.  1006.6(d)(4)(i)(A)), has provided 
prior consent directly to the debt collector to use the email address 
(Sec.  1006.6(d)(4)(i)(B)), or has obtained the email address from a 
prior debt collector who satisfied either Sec.  1006.6(d)(4)(i) or (ii). 
A debt collector who sends an email to an email address described in 
Sec.  1006.6(d)(4)(ii) complies with the prohibition in Sec.  
1006.22(f)(3) because the procedures in Sec.  1006.6(d)(4)(ii) do not 
permit debt collectors to send emails to email addresses that the debt 
collector knows are employer provided.

                           Paragraph 22(f)(4)

    1. Social media. Section 1006.22(f)(4) prohibits a debt collector 
from communicating or attempting to communicate with a person in 
connection with the collection of a debt through a social media platform 
if the communication or attempt to communicate is viewable by the 
general public or the person's social media contacts. For example, Sec.  
1006.22(f)(4) prohibits a debt collector from posting, in connection 
with the collection of a debt, any message for a person on a social 
media web page if that web page is viewable by the general public or the 
person's social media contacts. Section 1006.22(f)(4) does not prohibit 
a debt collector from sending a message to a person if the message is 
not viewable by the general public or the person's social media 
contacts. Section 1006.6(b) or Sec.  1006.14(h) nonetheless may prohibit 
the debt collector from sending such a message, and a debt collector who 
communicates by sending such a message about the debt to the wrong 
person violates Sec.  1006.6(d)(1). See also comment 18(d)-1 with 
respect to communications and attempts to communicate with consumers and 
third parties on social media platforms.

               Section 1006.30--Other Prohibited Practices

         30(a) Required actions prior to furnishing information.

                           30(a)(1) In general

    1. About the debt. Section 1006.30(a)(1) provides, in relevant part, 
that a debt collector must not furnish to a consumer reporting agency, 
as defined in section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 
1681a(f)), information about a debt before taking one of the actions 
described in Sec.  1006.30(a)(1)(i) or (ii). Each of the actions 
includes conveying information ``about the debt'' to the consumer. The 
validation information required by Sec.  1006.34(c), including such 
information if provided in a validation notice, is information ``about 
the debt.''
    2. Reasonable period of time. Section 1006.30(a)(1)(ii) provides, in 
relevant part, that a debt collector who places a letter about a debt in 
the mail, or who sends an electronic message about a debt to the 
consumer, must wait a reasonable period of time to receive a notice of 
undeliverability before furnishing information about the debt to a 
consumer reporting agency. The reasonable period of time begins on the 
date that the debt collector places the letter in the mail or sends the 
electronic message. A period of 14 consecutive days after the date that 
the debt collector places a letter in the mail or sends an electronic 
message is a reasonable period of time.
    3. Notices of undeliverability. Section 1006.30(a)(1)(ii) provides, 
in relevant part, that, if a debt collector who places a letter about a 
debt in the mail, or who sends an electronic message about a debt to the 
consumer, receives a notice of undeliverability during the reasonable 
period of time, the debt collector must not furnish information about 
the debt to a consumer reporting agency until the debt collector 
otherwise satisfies Sec.  1006.30(a)(1). A debt collector who does not 
receive a notice of undeliverability during the reasonable period and 
who thereafter furnishes information about the debt to a consumer 
reporting agency does not violate Sec.  1006.30(a)(1) even if the debt 
collector subsequently receives a notice of undeliverability. The 
following examples illustrate the rule:
    i. Assume that, on May 1, a debt collector mails the consumer a 
validation notice as described in Sec.  1006.34(a)(1)(i)(A). On May 10, 
the debt collector receives a notice of undeliverability and, without 
taking any additional action described in Sec.  1006.30(a)(1), 
subsequently furnishes information about the debt to a consumer 
reporting agency. The debt collector has violated Sec.  1006.30(a)(1).
    ii. Assume that, on May 1, a debt collector mails the consumer a 
validation notice as described in Sec.  1006.34(a)(1)(i)(A). On May 10, 
the debt collector receives a notice of undeliverability. On May 11, the 
debt collector mails the consumer another validation notice as described 
in Sec.  1006.34(a)(1)(i)(A). From May 11 to May 24, the debt collector 
permits receipt of, monitors for, and does not receive, a notice of 
undeliverability and thereafter furnishes information about the debt to 
a consumer reporting agency. The debt collector has not violated Sec.  
1006.30(a)(1).
    iii. Assume that, on May 1, a debt collector mails the consumer a 
validation notice as described in Sec.  1006.34(a)(1)(i)(A). From May 1 
to May 14, the debt collector permits receipt

[[Page 406]]

of, monitors for, and does not receive, a notice of undeliverability and 
thereafter furnishes information about the debt to a consumer reporting 
agency. After furnishing the information, the debt collector receives a 
notice of undeliverability. The debt collector has not violated Sec.  
1006.30(a)(1) and, without taking any further action, may furnish 
additional information about the debt to a consumer reporting agency.

30(b) Prohibition on the Sale, Transfer for Consideration, or Placement 
                     for Collection of Certain Debts

                           30(b)(1) In General

    1. Transfer for consideration. Section 1006.30(b)(1) prohibits, 
among other things, a debt collector from transferring for consideration 
a debt that has been paid or settled or discharged in bankruptcy. A debt 
collector transfers a debt for consideration when the debt collector 
receives or expects to receive compensation for the transfer of the 
debt. A debt collector does not transfer a debt for consideration when 
the debt collector sends information about the debt, as opposed to the 
debt itself, to another party. For example, a debt collector does not 
transfer a debt for consideration when the debt collector sends a file 
with data about the debt to another person for analytics, ``scrubbing,'' 
or archiving. A debt collector also does not transfer a debt for 
consideration when the debt collector reports to a credit reporting 
agency information that a debt has been paid or settled or discharged in 
bankruptcy.
    2. Debt that resulted from identity theft. Section 615(f)(1) of the 
Fair Credit Reporting Act (15 U.S.C. 1681m(f)(1)) states that no person 
shall sell, transfer for consideration, or place for collection a debt 
if such person has been notified under section 605B of the Fair Credit 
Reporting Act (15 U.S.C. 1681c-2) that the debt has resulted from 
identity theft. Nothing in Sec.  1006.30(b)(1) alters a debt collector's 
obligation to comply with the prohibition set forth in section 615(f)(1) 
of the Fair Credit Reporting Act.

                           30(b)(2) Exceptions

                         30(b)(2)(i) In General

                        Paragraph 30(b)(2)(i)(A)

    1. In general. Under Sec.  1006.30(b)(2)(i)(A), a debt collector who 
is collecting a debt described in Sec.  1006.30(b)(1) may transfer the 
debt to the debt's owner. However, unless another exception under Sec.  
1006.30(b)(2) applies, the debt collector may not transfer the debt or 
the right to collect the debt to another entity on behalf of the debt 
owner.

             Section 1006.34--Notice for Validation of Debts

                 34(a) Validation information required.

                          34(a)(1) In general.

    1. Deceased consumers. Section 1006.34(a)(1) generally requires a 
debt collector to provide the validation information required by Sec.  
1006.34(c) either by sending the consumer a validation notice in the 
manner required by Sec.  1006.42, or by providing the information orally 
in the debt collector's initial communication. If the debt collector 
knows or should know that the consumer is deceased, and if the debt 
collector has not previously provided the validation information to the 
deceased consumer, a person who is authorized to act on behalf of the 
deceased consumer's estate operates as the consumer for purposes of 
Sec.  1006.34(a)(1). In such circumstances, to comply with Sec.  
1006.34(a)(1), a debt collector must provide the validation information 
to an individual that the debt collector identifies by name who is 
authorized to act on behalf of the deceased consumer's estate.

                           34(b) Definitions.

                     34(b)(2) Initial communication.

    1. Bankruptcy proofs of claim. Section 1006.34(b)(2) defines initial 
communication and states that the term does not include a communication 
in the form of a formal pleading in a civil action. A proof of claim 
that a debt collector files in a bankruptcy proceeding in accordance 
with the requirements of the United States Bankruptcy Code (Title 11 of 
the U.S. Code) is a communication in the form of a formal pleading in a 
civil action and therefore is not an initial communication for purposes 
of Sec.  1006.34.

                       34(b)(3) Itemization date.

    1. In general. Section 1006.34(b)(3) defines itemization date for 
purposes of Sec.  1006.34. Section 1006.34(b)(3) states that the 
itemization date is any one of five reference dates for which a debt 
collector can ascertain the amount of the debt. The reference dates are 
the last statement date, the charge-off date, the last payment date, the 
transaction date, and the judgment date. A debt collector may select any 
of these dates as the itemization date to comply with Sec.  1006.34. 
Once a debt collector uses a reference date for a debt in a 
communication with a consumer, the debt collector must use that 
reference date for that debt consistently when providing the information 
required by Sec.  1006.34(c) to that consumer. For example, if a debt 
collector uses the last statement date to determine and disclose the 
account number associated with the debt

[[Page 407]]

pursuant to Sec.  1006.34(c)(2)(iv), the debt collector may not use the 
charge-off date to determine and disclose the amount of the debt 
pursuant to Sec.  1006.34(c)(2)(vii).
    2. Subsequent debt collectors. When selecting an itemization date 
pursuant to Sec.  1006.34(b)(3), a debt collector may use a different 
reference date than a prior debt collector who attempted to collect the 
debt.

                         Paragraph 34(b)(3)(i).

    1. Last statement date. Under Sec.  1006.34(b)(3)(i), the last 
statement date is the date of the last periodic statement or written 
account statement or invoice provided to the consumer by a creditor. For 
purposes of Sec.  1006.34(b)(3)(i), the last statement may be provided 
by a creditor or a third party acting on the creditor's behalf, 
including a creditor's service provider. However, a statement or invoice 
provided by a debt collector is not a last statement for purposes of 
Sec.  1006.34(b)(3)(i), unless the debt collector is also a creditor.

                        Paragraph 34(b)(3)(iii).

    1. Last payment date. Under Sec.  1006.34(b)(3)(iii), the last 
payment date is the date the last payment was applied to the debt. A 
third-party payment applied to the debt, such as a payment from an auto 
repossession agent or an insurance company, can be a last payment for 
purposes of Sec.  1006.34(b)(3)(iii).

                         Paragraph 34(b)(3)(iv).

    1. Transaction date. Section 1006.34(b)(3)(iv) provides that the 
itemization date may be the date of the transaction that gave rise to 
the debt. The transaction date is the date that the good or service that 
gave rise to the debt was provided or made available to the consumer. 
For example, the transaction date for a debt arising from a medical 
procedure may be the date the medical procedure was performed, and the 
transaction date for a consumer's gym membership may be the date the 
membership contract was executed. In some cases, a debt may have more 
than one transaction date. This could occur, for example, if a contract 
for a service is executed on one date and the service is performed on 
another date. If a debt has more than one transaction date, a debt 
collector may use any such date as the transaction date for purposes of 
Sec.  1006.34(b)(3)(iv), but the debt collector must use whichever 
transaction date is selected consistently, as described in comment 
34(b)(3)-1.

                       34(b)(5) Validation period.

    1. Assumed receipt of validation information. Section 1006.34(b)(5) 
defines the validation period as the period starting on the date that a 
debt collector provides the validation information required by Sec.  
1006.34(c) and ending 30 days after the consumer receives or is assumed 
to receive it. Section 1006.34(c)(3)(i) through (iii) requires 
statements that specify the end date of the validation period. If a debt 
collector provides the validation information in writing or 
electronically, then, at the time that the debt collector calculates the 
validation period end date, the debt collector will know only the date 
on which the consumer is assumed to receive the validation information. 
In such cases, the debt collector may use that date to calculate the 
validation period end date even if the debt collector later learns that 
the consumer received the validation information on a different date.
    2. Updated validation period. If a debt collector sends a subsequent 
validation notice to a consumer because the consumer did not receive the 
original validation notice and the consumer has not otherwise received 
the validation information required by Sec.  1006.34(c), the debt 
collector must calculate the end date of the validation period specified 
in the Sec.  1006.34(c)(3) disclosures based on the date the consumer 
receives or is assumed to receive the subsequent validation notice. For 
example, assume a debt collector sends a consumer a validation notice on 
January 1, and that notice is returned as undeliverable. After obtaining 
accurate location information, the debt collector sends the consumer a 
subsequent validation notice on January 15. Pursuant to Sec.  
1006.34(b)(5), the end date of the validation period specified in the 
Sec.  1006.34(c)(3) disclosures is based on the date the consumer 
receives or is assumed to receive the validation notice sent on January 
15.

                      34(c) Validation information.

            34(c)(1) Debt collector communication disclosure.

    1. Statement required by Sec.  1006.18(e). Section 1006.34(c)(1) 
provides that validation information includes the statement required by 
Sec.  1006.18(e). Section 1006.18(e)(1) requires a debt collector to 
disclose in its initial communication that the debt collector is 
attempting to collect a debt and that any information obtained will be 
used for that purpose. Section 1006.18(e)(2) requires a debt collector 
to disclose in each subsequent communication that the communication is 
from a debt collector. A debt collector who provides a validation notice 
as described in Sec.  1006.34(a)(1)(i)(A) complies with Sec.  
1006.34(c)(1) by providing on the validation notice the disclosure 
required by Sec.  1006.18(e)(1). A debt collector who provides a 
validation notice as described in Sec.  1006.34(a)(1)(i)(B) complies 
with Sec.  1006.34(c)(1) by providing either the disclosure required by 
Sec.  1006.18(e)(1) or the disclosure required by Sec.  1006.18(e)(2). 
The following example illustrates the rule:

[[Page 408]]

    i. ABC debt collector has an initial communication with the consumer 
by telephone. Within five days of that initial communication, ABC debt 
collector sends the consumer a validation notice using Model Form B-1 in 
appendix B to this part. ABC debt collector has complied with Sec.  
1006.34(c)(1) even though Model Form B-1 includes the disclosure 
described in Sec.  1006.18(e)(1) rather than the disclosure described in 
Sec.  1006.18(e)(2).

                  34(c)(2) Information about the debt.

                         Paragraph 34(c)(2)(i).

    1. Debt collector's name. Section 1006.34(c)(2)(i) provides, in 
part, that validation information includes the debt collector's name. A 
debt collector may disclose its trade or doing-business-as name, instead 
of its legal name.
    2. Debt collector's mailing address. Section 1006.34(c)(2)(i) 
provides, in part, that validation information includes the mailing 
address at which the debt collector accepts disputes and requests for 
original-creditor information. A debt collector may disclose a vendor's 
mailing address, if that is an address at which the debt collector 
accepts disputes and requests for original-creditor information.

                         Paragraph 34(c)(2)(ii).

    1. Consumer's name. Section 1006.34(c)(2)(ii) provides, in part, 
that validation information includes the consumer's name. To satisfy the 
requirement to provide this validation information, a debt collector 
must disclose the version of the consumer's name that the debt collector 
reasonably determines is the most complete and accurate version of the 
name about which the debt collector has knowledge. A debt collector does 
not disclose the most complete and accurate version of the consumer's 
name if the debt collector omits known name information in a manner that 
creates a false, misleading, or confusing impression about the 
consumer's identity. For example, assume the creditor provides the 
consumer's first name, middle name, last name, and name suffix to the 
debt collector. In this scenario, the debt collector would reasonably 
determine that the most complete and accurate version of the consumer's 
name about which the debt collector has knowledge includes the first 
name, middle name, last name, and name suffix. If the debt collector 
omits any of this information, the debt collector has not satisfied the 
requirement to provide the consumer's name pursuant to Sec.  
1006.34(c)(2)(ii).

                        Paragraph 34(c)(2)(iii).

    1. Creditor's name. Section 1006.34(c)(2)(iii) provides that, if a 
debt collector is collecting debt related to a consumer financial 
product or service as defined in Sec.  1006.2(f), validation information 
includes the name of the creditor to whom the debt was owed on the 
itemization date. Pursuant to Sec.  1006.34(c)(2)(iii), a debt collector 
may disclose this creditor's trade or doing-business-as name, instead of 
its legal name.

                         Paragraph 34(c)(2)(iv).

    1. Account number truncation. Section 1006.34(c)(2)(iv) provides 
that validation information includes the account number, if any, 
associated with the debt on the itemization date, or a truncated version 
of that number. If a debt collector uses a truncated account number, the 
account number must remain recognizable. For example, a debt collector 
may truncate a credit card account number so that only the last four 
digits are provided.

                         Paragraph 34(c)(2)(v).

    1. Creditor's name. Section 1006.34(c)(2)(v) provides that 
validation information includes the name of the creditor to whom the 
debt currently is owed. A debt collector may disclose this creditor's 
trade or doing-business-as name, instead of its legal name.

                        Paragraph 34(c)(2)(vii).

    1. Amount of the debt on the itemization date. Section 
1006.34(c)(2)(vii) provides that validation information includes the 
amount of the debt on the itemization date. The amount of the debt on 
the itemization date includes any fees, interest, or other charges owed 
as of that date.

                        Paragraph 34(c)(2)(viii).

    1. Itemization of the debt. Section 1006.34(c)(2)(viii) provides 
that validation information includes an itemization of the current 
amount of the debt reflecting interest, fees, payments, and credits 
since the itemization date. If providing a validation notice, a debt 
collector must include fields in the notice for all of these items even 
if none of the items have been assessed or applied to the debt since the 
itemization date. A debt collector may indicate that the value of a 
required field is ``0,'' ``none,'' or may state that no interest, fees, 
payments, or credits have been assessed or applied to the debt; a debt 
collector may not leave a required field blank.
    2. Itemization required by other applicable law. If a debt collector 
is required by other applicable law to provide an itemization of the 
current amount of the debt with the validation information, the debt 
collector may comply with Sec.  1006.34(c)(2)(viii) by disclosing the 
itemization required by other applicable law in lieu of the itemization 
described in Sec.  1006.34(c)(2)(viii), if the itemization required

[[Page 409]]

by other applicable law is substantially similar to the itemization that 
appears on Model Form B-1 in appendix B to this part.
    3. Itemization on a separate page. Section 1006.34(c)(2)(viii) 
provides that a debt collector may disclose the itemization of the 
current amount of the debt on a separate page provided in the same 
communication with a validation notice if the debt collector includes on 
the validation notice, where the itemization would have appeared, a 
statement referring to that separate page. A debt collector may comply 
with the requirement to refer to the separate page by, for example, 
including on the validation notice the statement, ``See the enclosed 
separate page for an itemization of the debt,'' situated next to the 
information about the current amount of the debt required by Sec.  
1006.34(c)(2)(ix).
    4. Debt collectors collecting multiple debts. A debt collector who 
combines multiple debts on a single validation notice complies with 
Sec.  1006.34(c)(2)(viii) by disclosing either a single, cumulative 
itemization on the validation notice or a separate itemization of each 
debt on a separate page or pages provided in the same communication as 
the validation notice.

                         Paragraph 34(c)(2)(ix).

    1. Current amount of the debt. Section 1006.34(c)(2)(ix) provides 
that validation information includes the current amount of the debt 
(i.e., the amount as of when the validation information is provided). 
For residential mortgage debt subject to Regulation Z, 12 CFR 1026.41, a 
debt collector may comply with the requirement to provide the current 
amount of the debt by providing the consumer the total balance of the 
outstanding mortgage, including principal, interest, fees, and other 
charges.
    2. Debt collectors collecting multiple debts. A debt collector who 
combines multiple debts on a single validation notice complies with 
Sec.  1006.34(c)(2)(ix) by disclosing on the validation notice a single 
cumulative figure that is the sum of the current amount of all the 
debts.

            34(c)(3) Information about consumer protections.

                         Paragraph 34(c)(3)(v).

    1. Electronic communication media. Section 1006.34(c)(3)(v) provides 
that, if the debt collector provides the validation notice 
electronically, validation information includes a statement explaining 
how a consumer can, as described in paragraphs (c)(4)(i) and (ii) of 
this section, dispute the debt or request original-creditor information 
electronically. A debt collector may provide the information required by 
Sec.  1006.34(c)(3)(v) by including the statements, ``We accept disputes 
electronically at,'' using that phrase or a substantially similar 
phrase, followed by an email address or website portal that a consumer 
can use to take the action described in Sec.  1006.34(c)(4)(i), and ``We 
accept original creditor information requests electronically,'' using 
that phrase or a substantially similar phrase, followed by an email 
address or website portal that a consumer can use to take the action 
described in Sec.  1006.34(c)(4)(ii). If a debt collector accepts 
electronic communications from consumers through more than one medium, 
such as by email and through a website portal, the debt collector is 
required to provide information regarding only one of these media but 
may provide information on any additional media.

                 34(c)(4) Consumer-response information.

    1. Prompts. If the validation information is provided in writing or 
electronically, a prompt required by Sec.  1006.34(c)(4) may be 
formatted as a checkbox as in Model Form B-1 in appendix B to this part.

      34(c)(5) Special rule for certain residential mortgage debt.

    1. In general. Section 1006.34(c)(5) provides that, for residential 
mortgage debt, if a periodic statement is required under Regulation Z, 
12 CFR 1026.41, at the time a debt collector provides the validation 
notice, a debt collector need not provide the validation information 
required by Sec.  1006.34(c)(2)(vi) through (viii) if the debt collector 
provides the consumer, in the same communication with the validation 
notice, a copy of the most recent periodic statement provided to the 
consumer under 12 CFR 1026.41(b), and the debt collector includes on the 
validation notice, where the validation information required by 
paragraphs (c)(2)(vi) through (viii) of this section would have 
appeared, a statement referring to that periodic statement. A debt 
collector may comply with the requirement to refer to the periodic 
statement in the validation notice by, for example, including on the 
validation notice the statement, ``See the enclosed periodic statement 
for an itemization of the debt.''

                  34(d) Form of validation information.

                          34(d)(2) Safe harbor.

    1. In general. A debt collector who provides a validation notice 
that is neither a notice described in Sec.  1006.34(d)(2)(i) or (ii), 
nor a substantially similar notice as described in Sec.  
1006.34(d)(2)(iii), does not receive a safe harbor for compliance with 
the information and form requirements of Sec.  1006.34(c) and (d)(1).

                         34(d)(2)(i) In general.

    1. Disclosure required by Sec.  1006.18(e). Section 1006.18(e)(1) 
requires a debt collector to disclose in its initial communication that 
the debt collector is attempting to collect a debt and that any 
information obtained will be

[[Page 410]]

used for that purpose. Section 1006.18(e)(2) requires a debt collector 
to disclose in each subsequent communication that the communication is 
from a debt collector. Model Form B-1 in appendix B to this part 
includes the disclosure required by Sec.  1006.18(e)(1). A debt 
collector who uses Model Form B-1 to provide a validation notice as 
described in Sec.  1006.34(a)(1)(i)(B) may replace the disclosure 
required by Sec.  1006.18(e)(1) with the disclosure required by Sec.  
1006.18(e)(2) without losing the safe harbor described in Sec.  
1006.34(d)(2). See comment 34(c)(1)-1 for further guidance related to 
providing the disclosure required by Sec.  1006.18(e) on a validation 
notice.

                34(d)(2)(iii) Substantially similar form.

    1. Substantially similar form. Pursuant to Sec.  1006.34(d)(2)(iii), 
a debt collector who uses Model Form B-1 as described in Sec.  
1006.34(d)(2)(i) may make changes to the form and retain the safe harbor 
for compliance with the information and form requirements of Sec.  
1006.34(c) and (d)(1) provided that the form remains substantially 
similar in substance, clarity, and meaningful sequence to Model Form B-
1. Permissible changes include, for example:
    i. Modifications to remove language that could suggest liability for 
the debt if such language is not applicable. For example, if a debt 
collector sends a validation notice to a person who is authorized to act 
on behalf of the deceased consumer's estate (see comment 34(a)(1)-1), 
and that person is not liable for the debt, the debt collector may use 
the name of the deceased consumer instead of ``you'';
    ii. Relocating the consumer-response information required by Sec.  
1006.34(c)(4) to facilitate mailing;
    iii. Adding barcodes or QR codes, as long as the inclusion of such 
items does not violate Sec.  1006.38(b);
    iv. Adding the date the form is generated; and
    v. Embedding hyperlinks, if delivering the form electronically.

                     34(d)(3) Optional disclosures.

               34(d)(3)(i) Telephone contact information.

    1. In general. Section 1006.34(d)(3)(i) permits a debt collector to 
include telephone contact information. Telephone contact information may 
include, for example, a telephone number as well as the times that the 
debt collector accepts consumer telephone calls.

             34(d)(3)(iv) Disclosures under applicable law.

  34(d)(3)(iv)(A) Disclosures on the reverse of the validation notice.

    1. In general. Section 1006.34(d)(3)(iv)(A) permits, in relevant 
part, a debt collector to include on the reverse of the validation 
notice any disclosures that are specifically required by, or that 
provide safe harbors under, applicable law. If a debt collector provides 
a validation notice in the body of an email, the debt collector may, in 
lieu of including the disclosures permitted by Sec.  
1006.34(d)(3)(iv)(A) on the reverse of the validation notice, include 
them in the same communication below the content of the validation 
notice. Disclosures permitted by Sec.  1006.34(d)(3)(iv)(A) include, for 
example, specific disclosures required by Federal, State, or municipal 
statutes or regulations, and specific disclosures required by judicial 
or administrative decisions or orders, including administrative consent 
orders. Such disclosures could include, for example, time-barred debt 
disclosures and disclosures that the current amount of the debt may 
increase or vary due to interest, fees, or other charges, provided that 
such disclosures are specifically required by applicable law.
    2. Statement referring to disclosures. If a debt collector includes 
disclosures pursuant to Sec.  1006.34(d)(3)(iv)(A), the debt collector 
must include a statement on the front of the validation notice referring 
to those disclosures. A debt collector may comply with the requirement 
to refer to the disclosures by including on the front of the validation 
notice the statement, ``Notice: See reverse side for important 
information,'' or a substantially similar statement. If, as permitted by 
comment 34(d)(3)(iv)(A)-1, a debt collector places the disclosures below 
the content of the validation notice, the debt collector may comply with 
the requirement to refer to the disclosures by stating, ``Notice: See 
below for important information,'' or a substantially similar statement.

   34(d)(3)(iv)(B) Disclosures on the front of the validation notice.

    1. In general. Section 1006.34(d)(3)(iv)(B) provides, in relevant 
part that, if a debt collector is collecting time-barred debt, the debt 
collector may include on the front of the validation notice any time-
barred debt disclosure that is specifically required by, or that 
provides a safe harbor under, applicable law, provided that applicable 
law specifies the content of the disclosure. For example, if applicable 
State law requires a debt collector who is collecting time-barred debt 
to disclose to the consumer that the law limits how long a consumer can 
be sued on a debt and that the debt collector cannot or will not sue the 
consumer to collect it, the debt collector may include that disclosure 
on the front of the validation notice. See Sec.  1006.26(a)(2) for the 
definition of time-barred debt. For purposes of Sec.  
1006.34(d)(3)(iv)(B), time-barred debt disclosures may include 
disclosures about revival of debt collectors' right to bring a legal 
action to enforce the debt.

[[Page 411]]

         34(d)(3)(vi) Spanish-language translation disclosures.

                       Paragraph 34(d)(3)(vi)(A).

    1. Supplemental information in Spanish. Section 1006.34(d)(3)(vi)(A) 
permits a debt collector to include supplemental information in Spanish 
that specifies how a consumer may request a Spanish-language validation 
notice. For example, a debt collector may include a statement in Spanish 
that a consumer can request a Spanish-language validation notice by 
telephone or email, if the debt collector accepts consumer requests 
through those communication media.

                        Paragraph 34(d)(3)(vii).

    1. Merchant brand. Section 1006.34(d)(3)(vii) permits a debt 
collector to include the merchant brand, if any, associated with debt. 
For example, assume that a debt collector is attempting to collect a 
consumer's credit card debt. The credit card was issued by ABC Bank and 
was co-branded XYZ Store. ``XYZ Store'' is the merchant brand.
    2. Affinity brand. Section 1006.34(d)(3)(vii) permits a debt 
collector to include the affinity brand, if any, associated with the 
debt. For example, assume that a debt collector is attempting to collect 
a consumer's credit card debt. The credit card was issued by ABC Bank, 
and the logo for the College of Columbia appears on the credit card. 
``College of Columbia'' is the affinity brand.
    3. Facility name. Section 1006.34(d)(3)(vii) permits a debt 
collector to include the facility name, if any, associated with the 
debt. For example, assume that a debt collector is attempting to collect 
a consumer's medical debt. The medical debt relates to a treatment that 
the consumer received at ABC Hospital. ``ABC Hospital'' is the facility 
name.

                 34(e) Translation into other languages.

    1. Safe harbor for complete and accurate translation. Section 
1006.34(e) provides, among other things, that, if a debt collector sends 
a consumer a validation notice translated into a language other than 
English, the translation must be complete and accurate. The language of 
a validation notice that a debt collector obtains from the Bureau's 
website is considered a complete and accurate translation. Debt 
collectors are permitted to use other validation notice translations if 
they are complete and accurate.

Section 1006.38--Disputes and Requests for Original-Creditor Information

    1. In writing. Section 1006.38 contains requirements related to a 
dispute or request for the name and address of the original creditor 
timely submitted in writing by the consumer. A consumer has disputed the 
debt or requested the name and address of the original creditor in 
writing for purposes of Sec.  1006.38(c) or (d)(2) if the consumer, for 
example:
    i. Mails the written dispute or request to the debt collector;
    ii. Returns to the debt collector the consumer-response form that 
Sec.  1006.34(c)(4) requires to appear on the validation notice and 
indicates on the form the dispute or request;
    iii. Provides the dispute or request to the debt collector using a 
medium of electronic communication through which the debt collector 
accepts electronic communications from consumers, such as an email 
address or a website portal; or
    iv. Delivers the written dispute or request in person or by courier 
to the debt collector.
    2. Interpretation of the E-SIGN Act. Comment 38-1.iii constitutes 
the Bureau's interpretation of section 101 of the E-SIGN Act as applied 
to section 809(b) of the FDCPA. Under this interpretation, section 
101(a) of the E-SIGN Act enables a consumer to satisfy through an 
electronic request the requirement in section 809(b) of the FDCPA that 
the consumer's notification of the debt collector be ``in writing.'' 
Further, because the consumer may only use a medium of electronic 
communication through which a debt collector accepts electronic 
communications from consumers, section 101(b) of the E-SIGN Act is not 
contravened.
    3. Deceased consumers. If the debt collector knows or should know 
that the consumer is deceased, and if the consumer has not previously 
disputed the debt or requested the name and address of the original 
creditor, a person who is authorized to act on behalf of the deceased 
consumer's estate operates as the consumer for purposes of Sec.  
1006.38. In such circumstances, to comply with Sec.  1006.38(c) or 
(d)(2), respectively, a debt collector must respond to a request for the 
name and address of the original creditor or to a dispute timely 
submitted in writing by a person who is authorized to act on behalf of 
the deceased consumer's estate.

                            38(a) Definitions

                      38(a)(1) Duplicative Dispute

    1. Substantially the same. Section 1006.38(a)(1) provides that a 
dispute is a duplicative dispute if, among other things, the dispute is 
substantially the same as a dispute previously submitted by the consumer 
in writing within the validation period for which the debt collector has 
already satisfied the requirements of Sec.  1006.38(d)(2)(i). A later 
dispute can be substantially the same as an earlier dispute even if the 
later dispute does not repeat verbatim the language of the earlier 
dispute.
    2. New and material information. Section 1006.38(a)(1) provides that 
a dispute that is

[[Page 412]]

substantially the same as a dispute previously submitted by the consumer 
in writing within the validation period for which the debt collector has 
already satisfied the requirements of Sec.  1006.38(d)(2)(i) is not a 
duplicative dispute if the consumer provides new and material 
information to support the dispute. Information is new if the consumer 
did not provide the information when submitting an earlier dispute. 
Information is material if it is reasonably likely to change the 
verification the debt collector provided or would have provided in 
response to the earlier dispute. The following example illustrates the 
rule:
    i. ABC debt collector is collecting a debt from a consumer and sends 
the consumer a validation notice. In response, the consumer submits a 
written dispute to ABC debt collector within the validation period 
asserting that the consumer does not owe the debt. The consumer does not 
include any information in support of the dispute. Pursuant to Sec.  
1006.38(d)(2)(i), ABC debt collector provides the consumer a copy of 
verification of the debt. The consumer then sends a cancelled check 
showing the consumer paid the debt. The cancelled check is new and 
material information.

                             38(d) Disputes

                      38(d)(2) Response to Disputes

                         Paragraph 38(d)(2)(ii)

    1. Duplicative dispute notice. Section 1006.38(d)(2)(ii) provides 
that, in the case of a dispute that a debt collector reasonably 
determines is a duplicative dispute, the debt collector must cease 
collection of the debt, or any disputed portion of the debt, until the 
debt collector either notifies the consumer that the dispute is 
duplicative (Sec.  1006.38(d)(2)(ii)(A)) or provides a copy either of 
verification of the debt or of a judgment to the consumer (Sec.  
1006.38(d)(2)(ii)(B)). If the debt collector notifies the consumer that 
the dispute is duplicative, Sec.  1006.38(d)(2)(ii)(A) requires that the 
notice provide a brief statement of the reasons for the debt collector's 
determination that the dispute is duplicative and refer the consumer to 
the debt collector's response to the earlier dispute. A debt collector 
complies with the requirement to provide a brief statement of the 
reasons for its determination if the notice states that the dispute is 
substantially the same as an earlier dispute submitted by the consumer 
and the consumer has not included any new and material information in 
support of the earlier dispute. A debt collector complies with the 
requirement to refer the consumer to the debt collector's response to 
the earlier dispute if the notice states that the debt collector 
responded to the earlier dispute and provides the date of that response.

              Section 1006.42--Sending Required Disclosures

                   42(a) Sending Required Disclosures

                           42(a)(1) In General

    1. Relevant factors. Section 1006.42(a)(1) provides, in part, that a 
debt collector who sends disclosures required by the Act or this part in 
writing or electronically must, among other things, do so in a manner 
that is reasonably expected to provide actual notice. In determining 
whether a debt collector has complied with this requirement, relevant 
factors include whether the debt collector:
    i. Identified the purpose of the communication by including, in the 
subject line of an electronic communication transmitting the disclosure, 
the name of the creditor to whom the debt currently is owed or allegedly 
is owed and one additional piece of information identifying the debt, 
other than the amount, such as a truncated account number; the name of 
the original creditor; the name of any store brand associated with the 
debt; the date of sale of a product or service giving rise to the debt; 
the physical address of service; and the billing or mailing address on 
the account;
    ii. Permitted receipt of notifications of undeliverability from 
communications providers, monitored for any such notifications, and 
treated any such notifications as precluding a reasonable expectation of 
actual notice for that delivery attempt; and
    iii. Identified itself as the sender of the communication by 
including a business name that the consumer would be likely to 
recognize, such as the name included in the notice described in Sec.  
1006.6(d)(4)(ii)(C), or the name that the debt collector has used in a 
prior limited-content message left for the consumer or in an email 
message sent to the consumer.
    2. Notice of undeliverability. A debt collector who sends a required 
disclosure in writing or electronically and who receives a notice that 
the disclosure was not delivered has not sent the disclosure in a manner 
that is reasonably expected to provide actual notice under Sec.  
1006.42(a)(1).
    3. Safe harbor for notices sent by mail. Subject to comment 
42(a)(1)-2, a debt collector satisfies Sec.  1006.42(a)(1) if the debt 
collector mails a printed copy of a disclosure to the consumer's last 
known address, unless the debt collector, at the time of mailing, knows 
or should know that the consumer does not currently reside at, or 
receive mail at, that location.
    4. Effect of consumer opt out. If a consumer has opted out of debt 
collection communications to a particular email address or telephone 
number by, for example, following the instructions provided pursuant to 
Sec.  1006.6(e), then a debt collector cannot use that email

[[Page 413]]

address or telephone number to send required disclosures.

                          Subpart C--[Reserved]

                        Subpart D--Miscellaneous

                   Section 1006.100--Record Retention

    1. Three-year retention period. Section 1006.100 requires a debt 
collector to maintain records that are evidence of compliance or 
noncompliance with the FDCPA and this part starting on the date that the 
debt collector begins collection activity on a debt until three years 
after the debt collector's last collection activity on the debt or, in 
the case of telephone call recordings, until three years after the dates 
of the telephone calls. Nothing in Sec.  1006.100 prohibits a debt 
collector from retaining records that are evidence of compliance or 
noncompliance with the FDCPA and this part for more than three years 
after the applicable date.

                           100(a) In general.

    1. Records that evidence compliance. Section 1006.100(a) provides, 
in part, that a debt collector must retain records that are evidence of 
compliance or noncompliance with the FDCPA and this part. Thus, under 
Sec.  1006.100(a), a debt collector must retain records that evidence 
that the debt collector performed the actions and made the disclosures 
required by the FDCPA and this part, as well as records that evidence 
that the debt collector refrained from conduct prohibited by the FDCPA 
and this part. If a record is of a type that could evidence compliance 
or noncompliance depending on the conduct of the debt collector that is 
revealed within the record, then the record is one that is evidence of 
compliance or noncompliance, and the debt collector must retain it. Such 
records include, but are not limited to, records that evidence that the 
debt collector's communications and attempts to communicate in 
connection with the collection of a debt complied (or did not comply) 
with the FDCPA and this part. For example, a debt collector must retain:
    i. Telephone call logs as evidence of compliance or noncompliance 
with the prohibition against harassing telephone calls in Sec.  
1006.14(b)(1); and
    ii. Copies of documents provided to consumers as evidence that the 
debt collector provided the information required by Sec. Sec.  1006.34 
and 1006.38 and met the delivery requirements of Sec.  1006.42.

            100(b) Special Rule for Telephone Call Recordings

    1. Recorded telephone calls. Nothing in Sec.  1006.100 requires a 
debt collector to record telephone calls. However, if a debt collector 
records telephone calls, the recordings are evidence of compliance or 
noncompliance with the FDCPA and this part, and, under Sec.  
1006.100(b), the debt collector must retain the recording of each such 
telephone call for three years after the date of the call.

                Section 1006.104--Relation to State Laws

    1. State law disclosure requirements. The Act and the corresponding 
provisions of Regulation F do not annul, alter, or affect, or exempt any 
person subject to these requirements from complying with a disclosure 
requirement under applicable State law that describes additional 
protections under State law that are not inconsistent with the Act and 
Regulation F. A disclosure required by State law is not inconsistent 
with the FDCPA or Regulation F if the disclosure describes a protection 
that such law affords any consumer that is greater than the protection 
provided by the FDCPA or Regulation F.

[85 FR 76887, Nov. 30, 2020, as amended at 86 FR 5857, Jan. 19, 2021; 87 
FR 65669, Nov. 1, 2022; 88 FR 16538, Mar. 20, 2023]



PART 1007_S.A.F.E. MORTGAGE LICENSING ACT_FEDERAL REGISTRATION OF 
RESIDENTIAL MORTGAGE LOAN ORIGINATORS (REGULATION G)--Table of Contents



Sec.
1007.101 Authority, purpose, and scope of this part.
1007.102 Definitions applicable to this part.
1007.103 Registration of mortgage loan originators.
1007.104 Policies and procedures.
1007.105 Use of Unique Identifier.

Appendix A to Part 1007--Examples of Mortgage Loan Originator Activities

    Authority: 12 U.S.C. 5101-5116; 15 U.S.C. 1604(a), 1639b; Pub. L. 
111-203, 124 Stat. 1376.

    Source: 76 FR 78487, Dec. 19, 2011, unless otherwise noted.



Sec.  1007.101  Authority, purpose, and scope.

    (a) Authority. This part, known as Regulation G, is issued by the 
Bureau of Consumer Financial Protection pursuant to the Secure and Fair 
Enforcement for Mortgage Licensing Act of 2008, title V of the Housing 
and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110-289, 122 
Stat. 2654, 12 U.S.C. 5101 et seq.,) 12 U.S.C. 5512, 5581, 15 U.S.C. 
1604(a), 1639b.

[[Page 414]]

    (b) Purpose. This part implements the S.A.F.E. Act's Federal 
registration requirement for mortgage loan originators. The S.A.F.E. Act 
provides that the objectives of this registration include aggregating 
and improving the flow of information to and between regulators; 
providing increased accountability and tracking of mortgage loan 
originators; enhancing consumer protections; supporting anti-fraud 
measures; and providing consumers with easily accessible information at 
no charge regarding the employment history of, and publicly adjudicated 
disciplinary and enforcement actions against, mortgage loan originators.
    (c) Scope--(1) In general. This part applies to:
    (i) National banks, Federal branches and agencies of foreign banks, 
their operating subsidiaries (collectively referred to in this part as 
national banks), and their employees who act as mortgage loan 
originators;
    (ii) Member banks of the Federal Reserve System; their respective 
subsidiaries that are not functionally regulated within the meaning of 
section 5(c)(5) of the Bank Holding Company Act, as amended (12 U.S.C. 
1844(c)(5)); branches and agencies of foreign banks; commercial lending 
companies owned or controlled by foreign banks (collectively referred to 
in this part as member banks); and their employees who act as mortgage 
loan originators;
    (iii) Insured state nonmember banks (including state-licensed 
insured branches of foreign banks), their subsidiaries (except brokers, 
dealers, persons providing insurance, investment companies, and 
investment advisers) (collectively referred to in this part as insured 
state nonmember banks), and employees of such banks or subsidiaries who 
act as mortgage loan originators;
    (iv) Savings associations, their operating subsidiaries 
(collectively referred to in this part as savings associations), and 
their employees who act as mortgage loan originators;
    (v) Farm Credit System lending institutions that actually originate 
residential mortgage loans pursuant to sections 1.9(3), 1.11 or 2.4(a) 
and (b) of the Farm Credit Act of 1971 (collectively referred to in this 
part as Farm Credit System institutions), and their employees who act as 
mortgage loan originators; and
    (vi) Any federally insured credit union and its employees, including 
volunteers, who act as mortgage loan originators. This part also applies 
to non-federally insured credit unions and their employees, including 
volunteers, who act as mortgage loan originators, subject to the 
conditions in paragraph (c)(3) of this section.
    (2) De minimis exception. (i) This part and the requirements of 12 
U.S.C. 5103(a)(1)(A) and (2) of the S.A.F.E. Act do not apply to any 
employee of a national bank, member bank, insured state nonmember bank, 
savings association, Farm Credit System institution, or credit union who 
has never been registered or licensed through the Registry as a mortgage 
loan originator if during the past 12 months the employee acted as a 
mortgage loan originator for 5 or fewer residential mortgage loans.
    (ii) Prior to engaging in mortgage loan origination activity that 
exceeds the exception limit in paragraph (c)(2)(i) of this section, an 
employee must register with the Registry pursuant to this part.
    (iii) Evasion. National banks, member banks, insured state nonmember 
banks, savings associations, Farm Credit System institutions, and credit 
unions are prohibited from engaging in any act or practice to evade the 
limits of the de minimis exception set forth in paragraph (c)(2)(i) of 
this section.
    (3) For non-federally insured credit unions. A non-federally insured 
credit union in a state identified on the National Credit Union 
Administration's Web site (NCUA.gov) as one where the appropriate state 
supervisory authority has executed a Memorandum of Understanding (MOU) 
with the National Credit Union Administration may register under this 
rule provided that any Nationwide Mortgage Licensing System and Registry 
listing of the non-federally insured credit union and its employees 
contains a clear and conspicuous statement that the non-federally 
insured credit union is not insured

[[Page 415]]

by the National Credit Union Share Insurance Fund, and the state 
supervisory authority where the non-federally insured credit union is 
located maintains an agreement with the National Credit Union 
Administration for this registration process and oversight. If the state 
supervisory authority where the non-federally insured credit union is 
located fails to maintain such an agreement, the non-federally insured 
credit union and its employees in that state may not register or 
maintain registration under the Federal system. They instead must use 
the appropriate state licensing and registration system, or if the state 
does not have such a system, the licensing and registration system 
established by the Bureau for mortgage loan originators and their 
employees.



Sec.  1007.102  Definitions.

    For purposes of this part, the following definitions apply:
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting of 
a loan in the residential mortgage industry and communication with a 
consumer to obtain information necessary for the processing or 
underwriting of a residential mortgage loan.
    Annual renewal period means November 1 through December 31 of each 
year.
    Bureau means the Bureau of Consumer Financial Protection.
    Covered financial institution means any national bank, member bank, 
insured state nonmember bank, savings association, Farm Credit System 
institution, or federally insured credit union as any such term is 
defined in Sec.  1007.101(c)(1). Covered financial institution also 
includes a non-federally insured credit union that registers subject to 
the conditions of Sec.  1007.101(c)(3).
    Mortgage loan originator means
    (1) An individual who:
    (i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain.
    (2)(i) The term mortgage loan originator does not include:
    (A) An individual who performs purely administrative or clerical 
tasks on behalf of an individual who is described as a mortgage loan 
originator in this section;
    (B) An individual who only performs real estate brokerage activities 
(as defined in 12 U.S.C. 5102(4)(D)) and is licensed or registered as a 
real estate broker in accordance with applicable state law, unless the 
individual is compensated by a lender, a mortgage broker, or other 
mortgage loan originator or by any agent of such lender, mortgage 
broker, or other mortgage loan originator, and meets the definition of 
mortgage loan originator in this section; or
    (C) An individual or entity solely involved in extensions of credit 
related to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D).
    (ii) Examples of activities that would, and would not, result in an 
employee meeting the definition of mortgage loan originator are provided 
in appendix A to this part.
    Nationwide Mortgage Licensing System and Registry or Registry means 
the system developed and maintained by the Conference of State Bank 
Supervisors and the American Association of Residential Mortgage 
Regulators for the state licensing and registration of state-licensed 
mortgage loan originators and the registration of mortgage loan 
originators pursuant to 12 U.S.C. 5107.
    Registered mortgage loan originator or registrant means any 
individual who:
    (1) Meets the definition of mortgage loan originator and is an 
employee of a covered financial institution; and
    (2) Is registered pursuant to this part with, and maintains a unique 
identifier through, the Registry.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(v) of the Truth in Lending Act, 15 U.S.C. 
1602(v)) or residential real estate upon which is constructed or 
intended to be constructed a dwelling, and includes refinancings, 
reverse mortgages, home equity lines of credit and other first and 
additional lien loans that meet the

[[Page 416]]

qualifications listed in this definition. This definition does not amend 
or supersede 12 CFR 613.3030(c) with respect to Farm Credit System 
institutions.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a registered mortgage loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate:
    (i) Electronic tracking of mortgage loan originators; and
    (ii) Uniform identification of, and public access to, the employment 
history of and the publicly adjudicated disciplinary and enforcement 
actions against mortgage loan originators; and
    (3) Must not be used for purposes other than those set forth under 
the S.A.F.E. Act.



Sec.  1007.103  Registration of mortgage loan originators.

    (a) Registration requirement--(1) Employee registration. Each 
employee of a covered financial institution who acts as a mortgage loan 
originator must register with the Registry, obtain a unique identifier, 
and maintain this registration in accordance with the requirements of 
this part. Any such employee who is not in compliance with the 
registration and unique identifier requirements set forth in this part 
is in violation of the S.A.F.E. Act and this part.
    (2) Covered financial institution requirement--(i) In general. A 
covered financial institution that employs one or more individuals who 
act as a residential mortgage loan originator must require each such 
employee to register with the Registry, maintain this registration, and 
obtain a unique identifier in accordance with the requirements of this 
part.
    (ii) Prohibition. A covered financial institution must not permit an 
employee who is subject to the registration requirements of this part to 
act as a mortgage loan originator for the covered financial institution 
unless such employee is registered with the Registry pursuant to this 
part.
    (3) [Reserved]
    (4) Employees previously registered or licensed through the 
Registry--(i) In general. If an employee of a covered financial 
institution was registered or licensed through, and obtained a unique 
identifier from, the Registry and has maintained this registration or 
license before the employee becomes subject to this part at the current 
covered financial institution, then the registration requirements of the 
S.A.F.E. Act and this part are deemed to be met, provided that:
    (A) The employment information in paragraphs (d)(1)(i)(C) and 
(d)(1)(ii) of this section is updated and the requirements of paragraph 
(d)(2) of this section are met;
    (B) New fingerprints of the employee are submitted to the Registry 
for a background check, as required by paragraph (d)(1)(ix) of this 
section, unless the employee has fingerprints on file with the Registry 
that are less than 3 years old;
    (C) The covered financial institution information required in 
paragraphs (e)(1)(i) (to the extent the covered financial institution 
has not previously met these requirements) and (e)(2)(i) of this section 
is submitted to the Registry; and
    (D) The registration is maintained pursuant to paragraphs (b) and 
(e)(1)(ii) of this section, as of the date that the employee becomes 
subject to this part.
    (ii) Rule for certain acquisitions, mergers, or reorganizations. 
When registered or licensed mortgage loan originators become covered 
financial institution employees as a result of an acquisition, 
consolidation, merger, or reorganization, only the requirements of 
paragraphs (a)(4)(i)(A), (C), and (D) of this section must be met, and 
these requirements must be met within 60 days from the effective date of 
the acquisition, merger, or reorganization.
    (b) Maintaining registration. (1) A mortgage loan originator who is 
registered with the Registry pursuant to paragraph (a) of this section 
must:
    (i) Except as provided in paragraph (b)(3) of this section, renew 
the registration during the annual renewal period, confirming the 
responses set forth in paragraphs (d)(1)(i) through (viii) of this 
section remain accurate and complete, and updating this information, as 
appropriate; and

[[Page 417]]

    (ii) Update the registration within 30 days of any of the following 
events:
    (A) A change in the name of the registrant;
    (B) The registrant ceases to be an employee of the covered financial 
institution; or
    (C) The information required under paragraphs (d)(1)(iii) through 
(viii) of this section becomes inaccurate, incomplete, or out-of-date.
    (2) A registered mortgage loan originator must maintain his or her 
registration, unless the individual is no longer engaged in the activity 
of a mortgage loan originator.
    (3) The annual registration renewal requirement set forth in 
paragraph (b)(1) of this section does not apply to a registered mortgage 
loan originator who has completed his or her registration with the 
Registry pursuant to paragraph (a)(1) of this section less than 6 months 
prior to the end of the annual renewal period.
    (c) Effective dates--(1) Registration. A registration pursuant to 
paragraph (a)(1) of this section is effective on the date the Registry 
transmits notification to the registrant that the registrant is 
registered.
    (2) Renewals or updates. A renewal or update pursuant to paragraph 
(b) of this section is effective on the date the Registry transmits 
notification to the registrant that the registration has been renewed or 
updated.
    (d) Required employee information--(1) In general. For purposes of 
the registration required by this section, a covered financial 
institution must require each employee who is a mortgage loan originator 
to submit to the Registry, or must submit on behalf of the employee, the 
following categories of information, to the extent this information is 
collected by the Registry:
    (i) Identifying information, including the employee's:
    (A) Name and any other names used;
    (B) Home address and contact information;
    (C) Principal business location address and business contact 
information;
    (D) Social security number;
    (E) Gender; and
    (F) Date and place of birth;
    (ii) Financial services-related employment history for the 10 years 
prior to the date of registration or renewal, including the date the 
employee became an employee of the covered financial institution;
    (iii) Convictions of any criminal offense involving dishonesty, 
breach of trust, or money laundering against the employee or 
organizations controlled by the employee, or agreements to enter into a 
pretrial diversion or similar program in connection with the prosecution 
for such offense(s);
    (iv) Civil judicial actions against the employee in connection with 
financial services-related activities, dismissals with settlements, or 
judicial findings that the employee violated financial services-related 
statutes or regulations, except for actions dismissed without a 
settlement agreement;
    (v) Actions or orders by a state or Federal regulatory agency or 
foreign financial regulatory authority that:
    (A) Found the employee to have made a false statement or omission or 
been dishonest, unfair or unethical; to have been involved in a 
violation of a financial services-related regulation or statute; or to 
have been a cause of a financial services-related business having its 
authorization to do business denied, suspended, revoked, or restricted;
    (B) Are entered against the employee in connection with a financial 
services-related activity;
    (C) Denied, suspended, or revoked the employee's registration or 
license to engage in a financial services-related activity; disciplined 
the employee or otherwise by order prevented the employee from 
associating with a financial services-related business or restricted the 
employee's activities; or
    (D) Barred the employee from association with an entity or its 
officers regulated by the agency or authority or from engaging in a 
financial services-related business;
    (vi) Final orders issued by a state or Federal regulatory agency or 
foreign financial regulatory authority based on violations of any law or 
regulation that prohibits fraudulent, manipulative, or deceptive 
conduct;
    (vii) Revocation or suspension of the employee's authorization to 
act as an

[[Page 418]]

attorney, accountant, or state or Federal contractor;
    (viii) Customer-initiated financial services-related arbitration or 
civil action against the employee that required action, including 
settlements, or which resulted in a judgment; and
    (ix) Fingerprints of the employee, in digital form if practicable, 
and any appropriate identifying information for submission to the 
Federal Bureau of Investigation and any governmental agency or entity 
authorized to receive such information in connection with a state and 
national criminal history background check; however, fingerprints 
provided to the Registry that are less than 3 years old may be used to 
satisfy this requirement.
    (2) Employee authorizations and attestation. An employee registering 
as a mortgage loan originator or renewing or updating his or her 
registration under this part, and not the employing covered financial 
institution or other employees of the covered financial institution, 
must:
    (i) Authorize the Registry and the employing institution to obtain 
information related to sanctions or findings in any administrative, 
civil, or criminal action, to which the employee is a party, made by any 
governmental jurisdiction;
    (ii) Attest to the correctness of all information required by 
paragraph (d) of this section, whether submitted by the employee or on 
behalf of the employee by the employing covered financial institution; 
and
    (iii) Authorize the Registry to make available to the public 
information required by paragraphs (d)(1)(i)(A) and (C), and (d)(1)(ii) 
through (viii) of this section.
    (3) Submission of information. A covered financial institution may 
identify one or more employees of the covered financial institution who 
may submit the information required by paragraph (d)(1) of this section 
to the Registry on behalf of the covered financial institution's 
employees provided that this individual, and any employee delegated such 
authority, does not act as a mortgage loan originator, consistent with 
paragraph (e)(1)(i)(F) of this section. In addition, a covered financial 
institution may submit to the Registry some or all of the information 
required by paragraphs (d)(1) and (e)(2) of this section for multiple 
employees in bulk through batch processing in a format to be specified 
by the Registry, to the extent such batch processing is made available 
by the Registry.
    (e) Required covered financial institution information. A covered 
financial institution must submit the following categories of 
information to the Registry:
    (1) Covered financial institution record. (i) In connection with the 
registration of one or more mortgage loan originators:
    (A) Name, main office address, and business contact information;
    (B) Internal Revenue Service Employer Tax Identification Number 
(EIN);
    (C) Research Statistics Supervision and Discount (RSSD) number, as 
issued by the Board of Governors of the Federal Reserve System;
    (D) Identification of its primary Federal regulator;
    (E) Name(s) and contact information of the individual(s) with 
authority to act as the covered financial institution's primary point of 
contact for the Registry;
    (F) Name(s) and contact information of the individual(s) with 
authority to enter the information required by paragraphs (d)(1) and (e) 
of this section to the Registry and who may delegate this authority to 
other individuals. For the purpose of providing information required by 
paragraph (e) of this section, this individual and their delegates must 
not act as mortgage loan originators unless the covered financial 
institution has 10 or fewer full time or equivalent employees and is not 
a subsidiary; and
    (G) If a subsidiary of a national bank, member bank, savings 
association, or insured state nonmember bank, indication that it is a 
subsidiary and the RSSD number of the parent institution; if an 
operating subsidiary of an agricultural credit association, indication 
that it is a subsidiary, and the RSSD number of the parent agricultural 
credit association.
    (ii) Attestation. The individual(s) identified in paragraphs 
(e)(1)(i)(E) and (F) of this section must comply with

[[Page 419]]

Registry protocols to verify their identity and must attest that they 
have the authority to enter data on behalf of the covered financial 
institution, that the information provided to the Registry pursuant to 
this paragraph (e) is correct, and that the covered financial 
institution will keep the information required by this paragraph (e) 
current and will file accurate supplementary information on a timely 
basis.
    (iii) A covered financial institution must update the information 
required by this paragraph (e) of this section within 30 days of the 
date that this information becomes inaccurate.
    (iv) A covered financial institution must renew the information 
required by paragraph (e) of this section on an annual basis.
    (2) Employee information. In connection with the registration of 
each employee who acts as a mortgage loan originator:
    (i) After the information required by paragraph (d) of this section 
has been submitted to the Registry, confirmation that it employs the 
registrant; and
    (ii) Within 30 days of the date the registrant ceases to be an 
employee of the covered financial institution, notification that it no 
longer employs the registrant and the date the registrant ceased being 
an employee.



Sec.  1007.104  Policies and procedures.

    A covered financial institution that employs one or more mortgage 
loan originators must adopt and follow written policies and procedures 
designed to assure compliance with this part. These policies and 
procedures must be appropriate to the nature, size, complexity, and 
scope of the mortgage lending activities of the covered financial 
institution, and apply only to those employees acting within the scope 
of their employment at the covered financial institution. At a minimum, 
these policies and procedures must:
    (a) Establish a process for identifying which employees of the 
covered financial institution are required to be registered mortgage 
loan originators;
    (b) Require that all employees of the covered financial institution 
who are mortgage loan originators be informed of the registration 
requirements of the S.A.F.E. Act and this part and be instructed on how 
to comply with such requirements and procedures;
    (c) Establish procedures to comply with the unique identifier 
requirements in Sec.  1007.105;
    (d) Establish reasonable procedures for confirming the adequacy and 
accuracy of employee registrations, including updates and renewals, by 
comparisons with its own records;
    (e) Establish reasonable procedures and tracking systems for 
monitoring compliance with registration and renewal requirements and 
procedures;
    (f) Provide for independent testing for compliance with this part to 
be conducted at least annually by covered financial institution 
personnel or by an outside party;
    (g) Provide for appropriate action in the case of any employee who 
fails to comply with the registration requirements of the S.A.F.E. Act, 
this part, or the covered financial institution's related policies and 
procedures, including prohibiting such employees from acting as mortgage 
loan originators or other appropriate disciplinary actions;
    (h) Establish a process for reviewing employee criminal history 
background reports received pursuant to this part, taking appropriate 
action consistent with applicable Federal law, including section 19 of 
the Federal Deposit Insurance Act (12 U.S.C. 1829), section 206 of the 
Federal Credit Union Act (12 U.S.C. 1786(i)), and section 5.65(d) of the 
Farm Credit Act of 1971, as amended (12 U.S.C. 2277a-14(d)), and 
implementing regulations with respect to these reports, and maintaining 
records of these reports and actions taken with respect to applicable 
employees; and
    (i) Establish procedures designed to ensure that any third party 
with which the covered financial institution has arrangements related to 
mortgage loan origination has policies and procedures to comply with the 
S.A.F.E. Act, including appropriate licensing and/or registration of 
individuals acting as mortgage loan originators.



Sec.  1007.105  Use of unique identifier.

    (a) The covered financial institution shall make the unique 
identifier(s) of

[[Page 420]]

its registered mortgage loan originator(s) available to consumers in a 
manner and method practicable to the institution.
    (b) A registered mortgage loan originator shall provide his or her 
unique identifier to a consumer:
    (1) Upon request;
    (2) Before acting as a mortgage loan originator; and
    (3) Through the originator's initial written communication with a 
consumer, if any, whether on paper or electronically.



   Sec. Appendix A to Part 1007--Examples of Mortgage Loan Originator 
                               Activities

    This appendix provides examples to aid in the understanding of 
activities that would cause an employee of a covered financial 
institution to fall within or outside the definition of mortgage loan 
originator. The examples in this appendix are not all-inclusive. They 
illustrate only the issue described and do not illustrate any other 
issues that may arise under this part. For purposes of the examples 
below, the term ``loan'' refers to a residential mortgage loan.
    (a) Taking a loan application. The following examples illustrate 
when an employee takes, or does not take, a loan application.
    (1) Taking an application includes: receiving information provided 
in connection with a request for a loan to be used to determine whether 
the consumer qualifies for a loan, even if the employee:
    (i) Has received the consumer's information indirectly in order to 
make an offer or negotiate a loan;
    (ii) Is not responsible for verifying information;
    (iii) Is inputting information into an online application or other 
automated system on behalf of the consumer; or
    (iv) Is not engaged in approval of the loan, including determining 
whether the consumer qualifies for the loan.
    (2) Taking an application does not include any of the following 
activities performed solely or in combination:
    (i) Contacting a consumer to verify the information in the loan 
application by obtaining documentation, such as tax returns or payroll 
receipts;
    (ii) Receiving a loan application through the mail and forwarding 
it, without review, to loan approval personnel;
    (iii) Assisting a consumer who is filling out an application by 
clarifying what type of information is necessary for the application or 
otherwise explaining the qualifications or criteria necessary to obtain 
a loan product;
    (iv) Describing the steps that a consumer would need to take to 
provide information to be used to determine whether the consumer 
qualifies for a loan or otherwise explaining the loan application 
process;
    (v) In response to an inquiry regarding a prequalified offer that a 
consumer has received from a covered financial institution, collecting 
only basic identifying information about the consumer and forwarding the 
consumer to a mortgage loan originator; or
    (vi) Receiving information in connection with a modification to the 
terms of an existing loan to a borrower as part of the covered financial 
institution's loss mitigation efforts when the borrower is reasonably 
likely to default.
    (b) Offering or negotiating terms of a loan. The following examples 
are designed to illustrate when an employee offers or negotiates terms 
of a loan, and conversely, what does not constitute offering or 
negotiating terms of a loan.
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting a loan offer to a consumer for acceptance, either 
verbally or in writing, including, but not limited to, providing a 
disclosure of the loan terms after application under the Truth in 
Lending Act, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process; or
    (D) Only the rate approved by the covered financial institution's 
loan approval mechanism function for a specific loan product is 
communicated without authority to negotiate the rate.
    (ii) Responding to a consumer's request for a lower rate or lower 
points on a pending loan application by presenting to the consumer a 
revised loan offer, either verbally or in writing, that includes a lower 
interest rate or lower points than the original offer.
    (2) Offering or negotiating terms of a loan does not include solely 
or in combination:
    (i) Providing general explanations or descriptions in response to 
consumer queries regarding qualification for a specific loan product, 
such as explaining loan terminology (e.g., debt-to-income ratio); 
lending policies (e.g., the loan-to-value ratio policy of the covered 
financial institution); or product-related services;
    (ii) In response to a consumer's request, informing a consumer of 
the loan rates that are publicly available, such as on the covered 
financial institution's Web site, for specific types of loan products 
without communicating to the consumer whether qualifications are met for 
that loan product;
    (iii) Collecting information about a consumer in order to provide 
the consumer with information on loan products for which the consumer 
generally may qualify, without

[[Page 421]]

presenting a specific loan offer to the consumer for acceptance, either 
verbally or in writing;
    (iv) Arranging the loan closing or other aspects of the loan 
process, including communicating with a consumer about those 
arrangements, provided that communication with the consumer only 
verifies loan terms already offered or negotiated;
    (v) Providing a consumer with information unrelated to loan terms, 
such as the best days of the month for scheduling loan closings at the 
covered financial institution;
    (vi) Making an underwriting decision about whether the consumer 
qualifies for a loan;
    (vii) Explaining or describing the steps or process that a consumer 
would need to take in order to obtain a loan offer, including 
qualifications or criteria that would need to be met without providing 
guidance specific to that consumer's circumstances; or
    (viii) Communicating on behalf of a mortgage loan originator that a 
written offer, including disclosures provided pursuant to the Truth in 
Lending Act, has been sent to a consumer without providing any details 
of that offer.
    (c) Offering or negotiating a loan for compensation or gain. The 
following examples illustrate when an employee does or does not offer or 
negotiate terms of a loan ``for compensation or gain.''
    (1) Offering or negotiating terms of a loan for compensation or gain 
includes engaging in any of the activities in paragraph (b)(1) of this 
appendix in the course of carrying out employment duties, even if the 
employee does not receive a referral fee or commission or other special 
compensation for the loan.
    (2) Offering or negotiating terms of a loan for compensation or gain 
does not include engaging in a seller-financed transaction for the 
employee's personal property that does not involve the covered financial 
institution.



PART 1008_S.A.F.E. MORTGAGE LICENSING ACT_STATE COMPLIANCE AND BUREAU 
REGISTRATION SYSTEM (REGULATION H)--Table of Contents



Sec.
1008.1 Purpose.
1008.3 Confidentiality of information.

                            Subpart A_General

1008.20 Scope of this subpart.
1008.23 Definitions.

    Subpart B_Determination of State Compliance With the S.A.F.E. Act

1008.101 Scope of this subpart.
1008.103 Individuals required to be licensed by states.
1008.105 Minimum loan originator license requirements.
1008.107 Minimum annual license renewal requirements.
1008.109 Effective date of state requirements imposed on individuals.
1008.111 Other minimum requirements for state licensing systems.
1008.113 Performance standards.
1008.115 Determination of noncompliance.

    Subpart C_Bureau's Loan Originator Licensing System and Bureau's 
            Nationwide Mortgage Licensing and Registry System

1008.201 Scope of this subpart.
1008.203 Bureau's establishment of loan originator licensing system.
1008.205 Bureau's establishment of nationwide mortgage licensing system 
          and registry.

     Subpart D_Minimum Requirements for Administration of the NMLSR

1008.301 Scope of this subpart.
1008.303 Financial reporting.
1008.305 Data security.
1008.307 Fees.
1008.309 Absence of liability for good-faith administration.

            Subpart E_Enforcement of Bureau Licensing System

1008.401 Bureau's authority to examine loan originator records.
1008.403-1008.405 [Reserved]

Appendix A to Part 1008--Examples of Mortgage Loan Originator Activities
Appendix B to Part 1008--Engaging in the Business of a Loan Originator: 
          Commercial Context and Habitualness
Appendix C to Part 1008--Independent Contractors and Loan Processor and 
          Underwriter Activities That Require a State Mortgage Loan 
          Originator License
Appendix D to Part 1008--Attorneys: Circumstances that Require a State 
          Mortgage Loan Originator License

    Authority: 12 U.S.C. 5101-5116; Pub. L. 111-203, 124 Stat. 1376.

    Source: 76 FR 78487, Dec. 19, 2011, unless otherwise noted.



Sec.  1008.1  Purpose.

    (a) Authority. This part, known as Regulation H, is issued by the 
Bureau of Consumer Financial Protection to implement the Secure and Fair 
Enforcement for Mortgage Licensing Act

[[Page 422]]

of 2008, title V of the Housing and Economic Recovery Act of 2008 
(S.A.F.E. Act) (Pub. L. 110-289, 122 Stat. 2654, 12 U.S.C. 5101 et 
seq.).
    (b) Purpose. The purpose of this part is to enhance consumer 
protection and reduce fraud by directing states to adopt minimum uniform 
standards for the licensing and registration of residential mortgage 
loan originators and to participate in a nationwide mortgage licensing 
system and registry database of residential mortgage loan originators. 
Under the S.A.F.E. Act, if the Bureau determines that a state's loan 
origination licensing system does not meet the minimum requirements of 
the S.A.F.E. Act, the Bureau is charged with establishing and 
implementing a system for all loan originators in that state. 
Additionally, if at any time the Bureau determines that the nationwide 
mortgage licensing system and registry is failing to meet the S.A.F.E. 
Act's requirements, the Bureau is charged with establishing and 
maintaining a licensing and registry database for loan originators.
    (c) Organization. The regulation is divided into subparts and 
appendices as follows:
    (1) Subpart A establishes the definitions applicable to this part.
    (2) Subpart B provides the minimum standards that a state must meet 
in licensing loan originators, including standards for whom a state must 
require to be licensed, and sets forth the Bureau's procedure for 
determining a state's compliance with the minimum standards.
    (3) Subpart C provides the requirements that the Bureau will apply 
in any state that the Bureau determines has not established a licensing 
and registration system in compliance with the minimum standards of the 
S.A.F.E. Act.
    (4) Subpart D provides minimum requirements for the administration 
of the Nationwide Mortgage Licensing System and Registry.
    (5) Subpart E clarifies the Bureau's enforcement authority in states 
in which it operates a state licensing system.
    (6) Appendices A through D set forth examples to aid in the 
understanding and application of the regulations.



Sec.  1008.3  Confidentiality of information.

    (a) Except as otherwise provided in this part, any requirement under 
Federal or state law regarding the privacy or confidentiality of any 
information or material provided to the Nationwide Mortgage Licensing 
System and Registry or a system established by the Director under this 
part, and any privilege arising under Federal or state law (including 
the rules of any Federal or state court) with respect to such 
information or material, shall continue to apply to such information or 
material after the information or material has been disclosed to the 
system. Such information and material may be shared with all state and 
Federal regulatory officials with mortgage industry oversight authority 
without the loss of privilege or the loss of confidentiality protections 
provided by Federal and state laws.
    (b) Information or material that is subject to a privilege or 
confidentiality under paragraph (a) of this section shall not be subject 
to:
    (1) Disclosure under any Federal or state law governing the 
disclosure to the public of information held by an officer or an agency 
of the Federal Government or the respective state; or
    (2) Subpoena or discovery, or admission into evidence, in any 
private civil action or administrative process, unless with respect to 
any privilege held by the Nationwide Mortgage Licensing System and 
Registry or by the Director with respect to such information or 
material, the person to whom such information or material pertains, 
waives, in whole or in part, in the discretion of such person, that 
privilege.
    (c) Any state law, including any state open record law, relating to 
the disclosure of confidential supervisory information or any 
information or material described in paragraph (a) of this section that 
is inconsistent with paragraph (a), shall be superseded by the 
requirements of such provision to the extent that state law provides 
less confidentiality or a weaker privilege.
    (d) This section shall not apply with respect to the information or 
material relating to the employment history of, and any publicly 
adjudicated disciplinary and enforcement action against, any loan 
originator that is included in

[[Page 423]]

the Nationwide Mortgage Licensing System and Registry for access by the 
public.



                            Subpart A_General



Sec.  1008.20  Scope of this subpart.

    This subpart provides the definitions applicable to this part, and 
other general requirements applicable to this part.



Sec.  1008.23  Definitions.

    Terms that are defined in the S.A.F.E. Act and used in this part 
have the same meaning as in the S.A.F.E. Act, unless otherwise provided 
in this section.
    Administrative or clerical tasks means the receipt, collection, and 
distribution of information common for the processing or underwriting of 
a loan in the mortgage industry and communication with a consumer to 
obtain information necessary for the processing or underwriting of a 
residential mortgage loan.
    American Association of Residential Mortgage Regulators (AARMR) is 
the national association of executives and employees of the various 
states who are charged with the responsibility for administration and 
regulation of residential mortgage lending, servicing, and brokering, 
and dedicated to the goals described at www.aarmr.org.
    Application means a request, in any form, for an offer (or a 
response to a solicitation of an offer) of residential mortgage loan 
terms, and the information about the borrower or prospective borrower 
that is customary or necessary in a decision on whether to make such an 
offer.
    Bureau means the Bureau of Consumer Financial Protection.
    Clerical or support duties:
    (1) Include:
    (i) The receipt, collection, distribution, and analysis of 
information common for the processing or underwriting of a residential 
mortgage loan; and
    (ii) Communicating with a consumer to obtain the information 
necessary for the processing or underwriting of a loan, to the extent 
that such communication does not include offering or negotiating loan 
rates or terms, or counseling consumers about residential mortgage loan 
rates or terms; and
    (2) Does not include:
    (i) Taking a residential mortgage loan application; or
    (ii) Offering or negotiating terms of a residential mortgage loan.
    Conference of State Bank Supervisors (CSBS) is the national 
organization composed of state bank supervisors dedicated to maintaining 
the state banking system and state regulation of financial services in 
accordance with the CSBS statement of principles described at 
www.csbs.org.
    Director means the Director of the Bureau of Consumer Financial 
Protection.
    Employee means an individual:
    (1) Whose manner and means of performance of work are subject to the 
right of control of, or are controlled by, a person, and
    (2) Whose compensation for Federal income tax purposes is reported, 
or required to be reported, on a W-2 form issued by the controlling 
person.
    Farm Credit Administration means the independent Federal agency, 
authorized by the Farm Credit Act of 1971, that examines and regulates 
the Farm Credit System.
    For compensation or gain. See Sec.  1008.103(c)(2)(ii).
    Independent contractor means an individual who performs his or her 
duties other than at the direction of and subject to the supervision and 
instruction of an individual who is licensed and registered in 
accordance with Sec.  1008.103(a), or is not required to be licensed, in 
accordance with Sec.  1008.103(e)(5), (6), or (7).
    Loan originator. See Sec.  1008.103.
    Loan processor or underwriter, for purposes of this part, means an 
individual who, with respect to the origination of a residential 
mortgage loan, performs clerical or support duties at the direction of 
and subject to the supervision and instruction of:
    (1) A state-licensed loan originator; or
    (2) A registered loan originator.
    Nationwide Mortgage Licensing System and Registry or NMLSR means the 
mortgage licensing system developed and maintained by the Conference of 
State Bank Supervisors and the American Association of Residential 
Mortgage

[[Page 424]]

Regulators for the licensing and registration of loan originators and 
the registration of registered loan originators or any system 
established by the Director, as provided in subpart D of this part.
    Nontraditional mortgage product means any mortgage product other 
than a 30-year fixed-rate mortgage.
    Origination of a residential mortgage loan, for purposes of the 
definition of loan processor or underwriter, means all residential 
mortgage loan-related activities from the taking of a residential 
mortgage loan application through the completion of all required loan 
closing documents and funding of the residential mortgage loan.
    Real estate brokerage activities mean any activity that involves 
offering or providing real estate brokerage services to the public 
including--
    (1) Acting as a real estate agent or real estate broker for a buyer, 
seller, lessor, or lessee of real property;
    (2) Bringing together parties interested in the sale, purchase, 
lease, rental, or exchange of real property;
    (3) Negotiating, on behalf of any party, any portion of a contract 
relating to the sale, purchase, lease, rental, or exchange of real 
property (other than in connection with providing financing with respect 
to any such transaction);
    (4) Engaging in any activity for which a person engaged in the 
activity is required to be registered as a real estate agent or real 
estate broker under any applicable law; and
    (5) Offering to engage in any activity, or act in any capacity, 
described in paragraphs (1), (2), (3), or (4) of this definition.
    Residential mortgage loan means any loan primarily for personal, 
family, or household use that is secured by a mortgage, deed of trust, 
or other equivalent consensual security interest on a dwelling (as 
defined in section 103(w) of the Truth in Lending Act) or residential 
real estate upon which is constructed or intended to be constructed a 
dwelling (as so defined).
    State means any state of the United States, the District of 
Columbia, any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Virgin Islands, and the Commonwealth of the Northern 
Mariana Islands.
    Unique identifier means a number or other identifier that:
    (1) Permanently identifies a loan originator;
    (2) Is assigned by protocols established by the Nationwide Mortgage 
Licensing System and Registry and the Bureau to facilitate electronic 
tracking of loan originators and uniform identification of, and public 
access to, the employment history of and the publicly adjudicated 
disciplinary and enforcement actions against loan originators; and
    (3) Shall not be used for purposes other than those set forth under 
the S.A.F.E. Act.



    Subpart B_Determination of State Compliance With the S.A.F.E. Act



Sec.  1008.101  Scope of this subpart.

    This subpart describes the minimum standards of the S.A.F.E. Act 
that apply to a state's licensing and registering of loan originators. 
This subpart also provides the procedures that the Bureau follows to 
determine that a state does not have in place a system for licensing and 
registering mortgage loan originators that complies with the minimum 
standards. Upon making such a determination, the Bureau will impose the 
requirements and exercise the enforcement authorities described in 
subparts C and E of this part.



Sec.  1008.103  Individuals required to be licensed by states.

    (a) Except as provided in paragraph (e) of this section, in order to 
operate a S.A.F.E.-compliant program, a state must prohibit an 
individual from engaging in the business of a loan originator with 
respect to any dwelling or residential real estate in the state, unless 
the individual first:
    (1) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (2) Obtains and maintains a valid loan originator license from the 
state.
    (b) An individual engages in the business of a loan originator if 
the individual, in a commercial context and habitually or repeatedly:

[[Page 425]]

    (1)(i) Takes a residential mortgage loan application; and
    (ii) Offers or negotiates terms of a residential mortgage loan for 
compensation or gain; or
    (2) Represents to the public, through advertising or other means of 
communicating or providing information (including the use of business 
cards, stationery, brochures, signs, rate lists, or other promotional 
items), that such individual can or will perform the activities 
described in paragraph (b)(1) of this section.
    (c)(1) An individual ``takes a residential mortgage loan 
application'' if the individual receives a residential mortgage loan 
application for the purpose of facilitating a decision whether to extend 
an offer of residential mortgage loan terms to a borrower or prospective 
borrower (or to accept the terms offered by a borrower or prospective 
borrower in response to a solicitation), whether the application is 
received directly or indirectly from the borrower or prospective 
borrower.
    (2) An individual ``offers or negotiates terms of a residential 
mortgage loan for compensation or gain'' if the individual:
    (i)(A) Presents for consideration by a borrower or prospective 
borrower particular residential mortgage loan terms;
    (B) Communicates directly or indirectly with a borrower, or 
prospective borrower for the purpose of reaching a mutual understanding 
about prospective residential mortgage loan terms; or
    (C) Recommends, refers, or steers a borrower or prospective borrower 
to a particular lender or set of residential mortgage loan terms, in 
accordance with a duty to or incentive from any person other than the 
borrower or prospective borrower; and
    (ii) Receives or expects to receive payment of money or anything of 
value in connection with the activities described in paragraph (c)(2)(i) 
of this section or as a result of any residential mortgage loan terms 
entered into as a result of such activities.
    (d)(1) Except as provided in paragraph (e) of this section, a state 
must prohibit an individual who is an independent contractor from 
engaging in residential mortgage loan origination activities as a loan 
processor or underwriter with respect to any dwelling or residential 
real estate in the state, unless the individual first:
    (i) Registers as a loan originator through and obtains a unique 
identifier from the NMLSR, and
    (ii) Obtains and maintains a valid loan originator license from the 
state.
    (2) An individual ``engage[s] in residential mortgage loan 
origination activities as a loan processor or underwriter'' if, with 
respect to a residential mortgage loan application, the individual 
performs clerical or support duties.
    (e) A state is not required to impose the prohibitions required 
under paragraphs (a) and (d) of this section on the following 
individuals:
    (1) An individual who performs only real estate brokerage activities 
and is licensed or registered in accordance with applicable state law, 
unless the individual is compensated directly or indirectly by a lender, 
mortgage broker, or other loan originator or by an agent of such lender, 
mortgage broker, or other loan originator;
    (2) An individual who is involved only in extensions of credit 
relating to timeshare plans, as that term is defined in 11 U.S.C. 
101(53D);
    (3) An individual who performs only clerical or support duties and:
    (i) Who does so at the direction of and subject to the supervision 
and instruction of an individual who:
    (A) Is licensed and registered in accordance with paragraph (a) of 
this section, or
    (B) Is not required to be licensed in accordance with paragraph 
(e)(5); or
    (ii) Who performs such duties solely with respect to transactions 
for which the individual who acts as a loan originator is not required 
to be licensed, in accordance with paragraph (e)(2), (6), or (7) of this 
section;
    (4) An individual who performs only purely administrative or 
clerical tasks on behalf of a loan originator;
    (5) An individual who is lawfully registered with, and maintains a 
unique identifier through, the Nationwide

[[Page 426]]

Mortgage Licensing System and Registry, and who is an employee of a 
covered financial institution, as that term is defined in 12 CFR part 
1007.
    (6)(i) An individual who is an employee of a Federal, state, or 
local government agency or housing finance agency and who acts as a loan 
originator only pursuant to his or her official duties as an employee of 
the Federal, state, or local government agency or housing finance 
agency.
    (ii) For purposes of this paragraph (e)(6), the term employee has 
the meaning provided in paragraph (1) of the definition of employee in 
Sec.  1008.23 and excludes the meaning provided in paragraph (2) of the 
definition.
    (iii) For purposes of this paragraph (e)(6), the term housing 
finance agency means any authority:
    (A) That is chartered by a state to help meet the affordable housing 
needs of the residents of the state;
    (B) That is supervised directly or indirectly by the state 
government;
    (C) That is subject to audit and review by the state in which it 
operates; and
    (D) Whose activities make it eligible to be a member of the National 
Council of State Housing Agencies.
    (7)(i) An employee of a bona fide nonprofit organization who acts as 
a loan originator only with respect to his or her work duties to the 
bona fide nonprofit organization, and who acts as a loan originator only 
with respect to residential mortgage loans with terms that are favorable 
to the borrower.
    (ii) For an organization to be considered a bona fide nonprofit 
organization under this paragraph, a state supervisory authority that 
opts not to require licensing of the employee must determine, under 
criteria and pursuant to processes established by the state, that the 
organization:
    (A) Has the status of a tax-exempt organization under section 
501(c)(3) of the Internal Revenue Code of 1986;
    (B) Promotes affordable housing or provides homeownership education, 
or similar services;
    (C) Conducts its activities in a manner that serves public or 
charitable purposes, rather than commercial purposes;
    (D) Receives funding and revenue and charges fees in a manner that 
does not incentivize it or its employees to act other than in the best 
interests of its clients;
    (E) Compensates its employees in a manner that does not incentivize 
employees to act other than in the best interests of its clients;
    (F) Provides or identifies for the borrower residential mortgage 
loans with terms favorable to the borrower and comparable to mortgage 
loans and housing assistance provided under government housing 
assistance programs; and
    (G) Meets other standards that the state determines are appropriate.
    (iii) A state must periodically examine the books and activities of 
an organization it determines is a bona fide nonprofit organization and 
revoke its status as a bona fide nonprofit organization if it does not 
continue to meet the criteria under paragraph (e)(7)(ii) of this 
section;
    (iv) For residential mortgage loans to have terms that are favorable 
to the borrower, a state must determine that the terms are consistent 
with loan origination in a public or charitable context, rather than a 
commercial context.
    (f) A state must require an individual licensed in accordance with 
paragraphs (a) or (d) of this section to renew the loan originator 
license no less often than annually.



Sec.  1008.105  Minimum loan originator license requirements.

    For an individual to be eligible for a loan originator license 
required under Sec.  1008.103(a) and (d), a state must require and find, 
at a minimum, that an individual:
    (a) Has never had a loan originator license revoked in any 
governmental jurisdiction, except that a formally vacated revocation 
shall not be deemed a revocation;
    (b)(1) Has never been convicted of, or pled guilty or nolo 
contendere to, a felony in a domestic, foreign, or military court:
    (i) During the 7-year period preceding the date of the application 
for licensing; or

[[Page 427]]

    (ii) At any time preceding such date of application, if such felony 
involved an act of fraud, dishonesty, a breach of trust, or money 
laundering.
    (2) For purposes of this paragraph (b):
    (i) Expunged convictions and pardoned convictions do not, in 
themselves, affect the eligibility of the individual; and
    (ii) Whether a particular crime is classified as a felony is 
determined by the law of the jurisdiction in which an individual is 
convicted.
    (c) Has demonstrated financial responsibility, character, and 
general fitness, such as to command the confidence of the community and 
to warrant a determination that the loan originator will operate 
honestly, fairly, and efficiently, under reasonable standards 
established by the individual state.
    (d) Completed at least 20 hours of pre-licensing education that has 
been reviewed and approved by the Nationwide Mortgage Licensing System 
and Registry. The pre-licensing education completed by the individual 
must include at least:
    (1) 3 hours of Federal law and regulations;
    (2) 3 hours of ethics, which must include instruction on fraud, 
consumer protection, and fair lending issues; and
    (3) 2 hours of training on lending standards for the nontraditional 
mortgage product marketplace.
    (e)(1) Achieved a test score of not less than 75 percent correct 
answers on a written test developed by the NMLSR in accordance with 12 
U.S.C. 5105(d).
    (2) To satisfy the requirement under paragraph (e)(1) of this 
section, an individual may take a test three consecutive times, with 
each retest occurring at least 30 days after the preceding test. If an 
individual fails three consecutive tests, the individual must wait at 
least 6 months before taking the test again.
    (3) If a formerly state-licensed loan originator fails to maintain a 
valid license for 5 years or longer, not taking into account any time 
during which such individual is a registered loan originator, the 
individual must retake the test and achieve a test score of not less 
than 75 percent correct answers.
    (f) Be covered by either a net worth or surety bond requirement, or 
pays into a state fund, as required by the state loan originator 
supervisory authority.
    (g) Has submitted to the NMLSR fingerprints for submission to the 
Federal Bureau of Investigation and to any government agency for a state 
and national criminal history background check; and
    (h) Has submitted to the NMLSR personal history and experience, 
which must include authorization for the NMLSR to obtain:
    (1) Information related to any administrative, civil, or criminal 
findings by any governmental jurisdiction; and
    (2) An independent credit report.



Sec.  1008.107  Minimum annual license renewal requirements.

    (a) For an individual to be eligible to renew a loan originator 
license as required under Sec.  1008.103(f), a state must require the 
individual:
    (1) To continue to meet the minimum standards for license issuance 
provided in Sec.  1008.105; and
    (2) To satisfy annual continuing education requirements, which must 
include at least 8 hours of education approved by the NMLSR. The 8 hours 
of annual continuing education must include at least:
    (i) 3 hours of Federal law and regulations;
    (ii) 2 hours of ethics (including instruction on fraud, consumer 
protection, and fair lending issues); and
    (iii) 2 hours of training related to lending standards for the 
nontraditional mortgage product marketplace.
    (b) A state must provide that a state-licensed loan originator may 
only receive credit for a continuing education course in the year in 
which the course is taken, and that a state-licensed loan originator may 
not apply credits for education courses taken in one year to meet the 
continuing education requirements of subsequent years. A state must 
provide that an individual may not meet the annual requirements for 
continuing education by taking an approved course more than one time in 
the same year or in successive years.
    (c) An individual who is an instructor of an approved continuing 
education

[[Page 428]]

course may receive credit for the individual's own annual continuing 
education requirement at the rate of 2 hours credit for every one hour 
taught.



Sec.  1008.109  Effective date of state requirements imposed on 
individuals.

    (a) Except as provided in paragraphs (b) and (c) of this section, a 
state must provide that the effective date for requirements it imposes 
in accordance with Sec. Sec.  1008.103, 1008.105, and 1008.107 is no 
later than August 29, 2011.
    (b) For an individual who was permitted to perform residential 
mortgage loan originations under state legislation or regulations 
enacted or promulgated prior to the state's enactment or promulgation of 
a licensing system that complies with this subpart, a state may delay 
the effective date for requirements it imposes in accordance with 
Sec. Sec.  1008.103, 1008.105, and 1008.107 to no later than August 29, 
2011. For purposes of this paragraph (b), an individual was permitted to 
perform residential mortgage loan originations only if prior state law 
required the individual to be licensed, authorized, registered, or 
otherwise granted a form of affirmative and revocable government 
permission for individuals as a condition of performing residential 
mortgage loan originations.
    (c) The Bureau may approve a later effective date only upon a 
state's demonstration that substantial numbers of loan originators (or 
of a class of loan originators) who require a state license face unusual 
hardship, through no fault of their own or of the state government, in 
complying with the standards required by the S.A.F.E. Act and in 
obtaining state licenses within one year.



Sec.  1008.111  Other minimum requirements for state licensing systems.

    (a) General. A state must maintain a loan originator licensing, 
supervisory, and oversight authority (supervisory authority) that 
provides effective supervision and enforcement, in accordance with the 
minimum standards provided in this section and in Sec.  1008.113.
    (b) Authorities. A supervisory authority must have the legal 
authority and mechanisms:
    (1) To examine any books, papers, records, or other data of any loan 
originator operating in the state;
    (2) To summon any loan originator operating in the state, or any 
person having possession, custody, or care of the reports and records 
relating to such a loan originator, to appear before the supervisory 
authority at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act;
    (3) To administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the affairs 
of any such loan originator;
    (4) To enter an order requiring any individual or person that is, 
was, or would be a cause of a violation of the S.A.F.E. Act as 
implemented by the state, due to an act or omission the person knew or 
should have known would contribute to such violation, to cease and 
desist from committing or causing such violation and any future 
violation of the same requirement;
    (5) To suspend, terminate, and refuse renewal of a loan originator 
license for violation of state or Federal law; and
    (6) To impose civil money penalties for individuals acting as loan 
originators, or representing themselves to the public as loan 
originators, in the state without a valid license or registration.
    (c) A supervisory authority must have established processes in place 
to verify that individuals subject to the requirement described in Sec.  
1008.103(a)(1) and (d)(1) are registered with the NMLSR.
    (d) The supervisory authority must be required under state law to 
regularly report violations of such law, as well as enforcement actions 
and other relevant information, to the NMLSR.
    (e) The supervisory authority must have a process in place for 
challenging information contained in the NMLSR.
    (f) The supervisory authority must require a loan originator to 
ensure that all residential mortgage loans that close as a result of the 
loan originator engaging in activities described in Sec.  1008.103(b)(1) 
are included in reports of

[[Page 429]]

condition submitted to the NMLSR. Such reports of condition shall be in 
such form, shall contain such information, and shall be submitted with 
such frequency and by such dates as the NMLSR may reasonably require.



Sec.  1008.113  Performance standards.

    (a) For the Bureau to determine that a state is providing effective 
supervision and enforcement, a supervisory authority must meet the 
following performance standards:
    (1) The supervisory authority must participate in the NMLSR;
    (2) The supervisory authority must approve or deny loan originator 
license applications and must renew or refuse to renew existing loan 
originator licenses for violations of state or Federal law;
    (3) The supervisory authority must discipline loan originator 
licensees with appropriate enforcement actions, such as license 
suspensions or revocations, cease-and-desist orders, civil money 
penalties, and consumer refunds for violations of state or Federal law;
    (4) The supervisory authority must examine or investigate loan 
originator licensees in a systematic manner based on identified risk 
factors or on a periodic schedule.
    (b) A supervisory authority that is accredited under the Conference 
of State Bank Supervisors-American Association of Residential Mortgage 
Regulators Mortgage Accreditation Program will be presumed by the Bureau 
to be compliant with the requirements of this section.



Sec.  1008.115  Determination of noncompliance.

    (a) Evidence of compliance. Any time a state enacts legislation that 
affects its compliance with the S.A.F.E. Act, it must notify the Bureau. 
Upon request from the Bureau, a state must provide evidence that it is 
in compliance with the requirements of the S.A.F.E. Act and this part, 
including citations to applicable state law and regulations; 
descriptions of processes followed by the state's supervisory authority; 
and data concerning examination, investigation, and enforcement actions.
    (b) Initial determination of noncompliance. If the Bureau makes an 
initial determination that a state is not in compliance with the 
S.A.F.E. Act, the Bureau will notify the state and will publish, in the 
Federal Register, a notice providing the Bureau's initial determination 
and presenting the opportunity for public comment for a period of no 
less than 30 days. This public comment period will allow the residents 
of the state and other interested members of the public to comment on 
the Bureau's initial determination.
    (c) Final determination of noncompliance. In making a final 
determination of noncompliance, the Bureau will review additional 
information that may be offered by a state and the comments submitted 
during the public comment period described in paragraph (b) of this 
section. If the Bureau makes a final determination that a state does not 
have in place by law or regulation a system that complies with the 
minimum requirements of the S.A.F.E. Act, as described in this part, the 
Bureau will publish that final determination in the Federal Register.
    (d) Good-faith effort to comply. If the Bureau makes the final 
determination described in paragraph (c) of this section, but the Bureau 
finds that the state is making a good-faith effort to meet the 
requirements of 12 U.S.C. 5104, 5105, 5107(d), and this subpart, the 
Bureau may grant the state a period of not more than 24 months to comply 
with these requirements. If an extension is granted to the state in 
accordance with this paragraph (d), then the Bureau will provide an 
additional initial and final determination process before it determines 
that the state is not in compliance and is subject to subparts C and E 
of this part.
    (e) Effective date of subparts C and E. The provisions of subparts C 
and E of this part will become effective with respect to a state for 
which a final determination of noncompliance has been made upon:
    (1) The effective date of the Bureau's final determination with 
respect to the state, pursuant to paragraph (c) of this section, unless 
an extension had been granted to the state in accordance with paragraph 
(d) of this section; or
    (2) If an extension had been granted to the state in accordance with 
paragraph (d) of this section, the effective

[[Page 430]]

date of the Bureau's subsequent final determination with respect to the 
state following the expiration of the period of time granted pursuant to 
paragraph (d) of this section.



 Subpart C_The Bureau's Loan Originator Licensing System and Nationwide 
                 Mortgage Licensing and Registry System



Sec.  1008.201  Scope of this subpart.

    The S.A.F.E. Act provides the Bureau with ``backup authority'' to 
establish a loan originator licensing system for any state that is 
determined by the Bureau not to be in compliance with the minimum 
standards of the S.A.F.E. Act. The provisions of this subpart become 
applicable to individuals in a state as provided in Sec.  1008.115(e). 
The S.A.F.E. Act also authorizes the Bureau to establish and maintain a 
nationwide mortgage licensing system and registry if the Bureau 
determines that the NMLSR is failing to meet the purposes and 
requirements of the S.A.F.E. Act for a comprehensive licensing, 
supervisory, and tracking system for loan originators.



Sec.  1008.203  The Bureau's establishment of loan originator licensing 
system.

    If the Bureau determines, in accordance with Sec.  1008.115(e), that 
a state has not established a licensing and registration system in 
compliance with the minimum standards of the S.A.F.E. Act, the Bureau 
shall apply to individuals in that state the minimum standards of the 
S.A.F.E. Act, as specified in subpart B, which provides the minimum 
requirements that a state must meet to be in compliance with the 
S.A.F.E. Act, and as may be further specified in this part.



Sec.  1008.205  The Bureau's establishment of nationwide mortgage licensing 
system and registry.

    If the Bureau determines that the NMLSR established by CSBS and 
AARMR does not meet the minimum requirements of subpart D of this part, 
the Bureau will establish and maintain a nationwide mortgage licensing 
system and registry.



     Subpart D_Minimum Requirements for Administration of the NMLSR



Sec.  1008.301  Scope of this subpart.

    This subpart establishes minimum requirements that apply to 
administration of the NMLSR by the Conference of State Bank Supervisors 
or by the Bureau. The NMLSR must accomplish the following objectives:
    (a) Provide uniform license applications and reporting requirements 
for state-licensed loan originators.
    (b) Provide a comprehensive licensing and supervisory database.
    (c) Aggregate and improve the flow of information to and between 
regulators.
    (d) Provide increased accountability and tracking of loan 
originators.
    (e) Streamline the licensing process and reduce the regulatory 
burden.
    (f) Enhance consumer protections and support anti-fraud measures.
    (g) Provide consumers with easily accessible information, offered at 
no charge, utilizing electronic media, including the Internet, regarding 
the employment history of, and publicly adjudicated disciplinary and 
enforcement actions against, loan originators.
    (h) Establish a means by which residential mortgage loan originators 
would, to the greatest extent possible, be required to act in the best 
interests of the consumer.
    (i) Facilitate responsible behavior in the mortgage marketplace and 
provide comprehensive training and examination requirements related to 
mortgage lending.
    (j) Facilitate the collection and disbursement of consumer 
complaints on behalf of state and Federal mortgage regulators.



Sec.  1008.303  Financial reporting.

    To the extent that CSBS maintains the NMLSR, CSBS must annually 
provide to the Bureau, and the Bureau will annually collect and make 
available to the public, NMLSR financial statements, audited in 
accordance with Generally Accepted Accounting Principles (GAAP) 
promulgated by the Federal Accounting Standards Advisory Board, and 
other data. These financial statements and other data shall include, but

[[Page 431]]

not be limited to, the level and categories of funds received in 
relation to the NMLSR and how such funds are spent, including the 
aggregate total of funds paid for system development and improvements, 
the aggregate total of salaries and bonuses paid, the aggregate total of 
other administrative costs, and detail on other money spent, including 
money and interest paid to reimburse system investors or lenders, and a 
report of each state's activity with respect to the NMLSR, including the 
number of licensees, the state's financial commitment to the system, and 
the fees collected by the state through the NMLSR.



Sec.  1008.305  Data security.

    (a) To the extent that CSBS, AARMR, or their successors maintain the 
NMLSR, CSBS, AARMR, and their successors, as applicable, must complete a 
background check on their employees, contractors, or other persons who 
have access to loan originators' Social Security Numbers, fingerprints, 
or any credit reports collected by the system.
    (b) To the extent that CSBS, AARMR, or their successors maintain the 
NMLSR, CSBS, AARMR, and their successors as applicable, must keep and 
adhere to an appropriate information security and privacy policy. If the 
NMLSR forms a reasonable belief that a security breach has occurred, it 
shall notify affected parties, as soon as practicable, including the 
Bureau, any loan originator or registrant whose data may have been 
compromised, and the employer of the loan originator or registrant, if 
such employer is also licensed through the system.



Sec.  1008.307  Fees.

    CSBS, AARMR, or the Bureau, as applicable, may charge reasonable 
fees to cover the costs of maintaining and providing access to 
information from the Nationwide Mortgage Licensing System and Registry. 
Fees shall not be charged to consumers for access to such system and 
registry. If the Bureau determines to charge fees, the fees to be 
charged shall be issued by notice with the opportunity for comment prior 
to any fees being charged.



Sec.  1008.309  Absence of liability for good-faith administration.

    The Bureau or any organization serving as the administrator of the 
Nationwide Mortgage Licensing System and Registry or a system 
established by the Bureau under 12 U.S.C. 5108 and in accordance with 
subpart C, or any officer or employee of the Bureau or the Bureau's 
designee, shall not be subject to any civil action or proceeding for 
monetary damages by reason of the good-faith action or omission of any 
officer or employee of any such entity, while acting within the scope of 
office or employment, relating to the collection, furnishing, or 
dissemination of information concerning persons who are loan originators 
or are applying for licensing or registration as loan originators.



         Subpart E_Enforcement of the Bureau's Licensing System



Sec.  1008.401  The Bureau's authority to examine loan originator records.

    (a) Summons authority. The Bureau may:
    (1) Examine any books, papers, records, or other data of any loan 
originator operating in any state which is subject to a licensing system 
established by the Bureau under subpart C of this part; and
    (2) Summon any loan originator referred to in paragraph (a)(1) of 
this section or any person having possession, custody, or care of the 
reports and records relating to such loan originator, to appear before 
the Bureau at a time and place named in the summons and to produce such 
books, papers, records, or other data, and to give testimony, under 
oath, as may be relevant or material to an investigation of such loan 
originator for compliance with the requirements of the S.A.F.E. Act.
    (b) Examination authority--(1) In general. If the Bureau establishes 
a licensing system under 12 U.S.C. 5107 and in accordance with subpart C 
of this part for any state, the Bureau shall appoint examiners for the 
purposes of ensuring the appropriate administration of the Bureau's 
licensing system.
    (2) Power to examine. Any examiner appointed under paragraph (b)(1) 
of this section shall have power, on behalf of

[[Page 432]]

the Bureau, to make any examination of any loan originator operating in 
any state which is subject to a licensing system established by the 
Bureau under 12 U.S.C. 5107 and in accordance with subpart C of this 
part, whenever the Bureau determines that an examination of any loan 
originator is necessary to determine the compliance by the originator 
with minimum requirements of the S.A.F.E. Act.
    (3) Report of examination. Each Bureau examiner appointed under 
paragraph (b)(1) of this section shall make a full and detailed report 
to the Bureau of examination of any loan originator examined under this 
section.
    (4) Administration of oaths and affirmations; evidence. In 
connection with examinations of loan originators operating in any state 
which is subject to a licensing system established by the Bureau under 
12 U.S.C. 5107, and in accordance with subpart C of this part, or with 
other types of investigations to determine compliance with applicable 
law and regulations, the Bureau and the examiners appointed by the 
Bureau may administer oaths and affirmations and examine and take and 
preserve testimony under oath as to any matter in respect to the affairs 
of any such loan originator.
    (5) Assessments. The cost of conducting any examination of any loan 
originator operating in any state which is subject to a licensing system 
established by the Bureau under 12 U.S.C 5107 and in accordance with 
subpart C of this part shall be assessed by the Bureau against the loan 
originator to meet the Director's expenses in carrying out such 
examination.



Sec. Sec.  1008.403-1008.405  [Reserved]





   Sec. Appendix A to Part 1008--Examples of Mortgage Loan Originator 
                               Activities

    This appendix provides examples to aid in the understanding of 
activities that would cause an individual to fall within or outside the 
definition of a mortgage loan originator under part 1008. The examples 
in this appendix are not all-inclusive. They illustrate only the issue 
described and do not illustrate any other issues that may arise. For 
purposes of the examples below, the term ``loan'' refers to a 
residential mortgage loan as defined in Sec.  1008.23 of this part.
    (a) Taking a Loan Application. Taking a residential mortgage loan 
application within the meaning of Sec.  1008.103(c)(1) means receipt by 
an individual, for the purpose of facilitating a decision whether to 
extend an offer of loan terms to a borrower or prospective borrower, of 
an application as defined in Sec.  1008.23 (a request in any form for an 
offer, or a response to a solicitation of an offer, of residential 
mortgage loan terms, and the information about the borrower or 
prospective borrower that is customary or necessary in a decision 
whether to make such an offer).
    (1) The following are examples to illustrate when an individual 
takes, or does not take, a loan application:
    (i) An individual ``takes a residential mortgage loan application'' 
even if the individual:
    (A) Has received the borrower or prospective borrower's request or 
information indirectly. Section 1008.103(c)(1) provides that an 
individual takes an application, whether he or she receives it 
``directly or indirectly'' from the borrower or prospective borrower. 
This means that an individual who offers or negotiates residential 
mortgage loan terms for compensation or gain cannot avoid licensing 
requirements simply by having another person physically receive the 
application from the prospective borrower and then pass the application 
to the individual;
    (B) Is not responsible for verifying information. The fact that an 
individual who takes application information from a borrower or 
prospective borrower is not responsible for verifying that information--
for example, the individual is a mortgage broker who collects and sends 
that information to a lender--does not mean that the individual is not 
taking an application;
    (C) Only inputs the information into an online application or other 
automated system; or
    (D) Is not involved in approval of the loan, including determining 
whether the consumer qualifies for the loan. Similar to an individual 
who is not responsible for verification, an individual can still ``take 
a residential mortgage loan application'' even if he or she is not 
ultimately responsible for approving the loan. A mortgage broker, for 
example, can take a residential mortgage loan application even though it 
is passed on to a lender for a decision on whether the borrower 
qualifies for the loan and for the ultimate loan approval.
    (ii) An individual does not take a loan application merely because 
the individual performs any of the following actions:
    (A) Receives a loan application through the mail and forwards it, 
without review, to loan approval personnel. The Bureau interprets the 
term ``takes a residential mortgage loan application'' to exclude an 
individual

[[Page 433]]

whose only role with respect to the application is physically handling a 
completed application form or transmitting a completed form to a lender 
on behalf of a borrower or prospective borrower. This interpretation is 
consistent with the definition of ``loan originator'' in section 1503(3) 
of the S.A.F.E. Act.
    (B) Assists a borrower or prospective borrower who is filling out an 
application by explaining the contents of the application and where 
particular borrower information is to be provided on the application;
    (C) Generally describes for a borrower or prospective borrower the 
loan application process without a discussion of particular loan 
products; or
    (D) In response to an inquiry regarding a prequalified offer that a 
borrower or prospective borrower has received from a lender, collects 
only basic identifying information about the borrower or prospective 
borrower on behalf of that lender.
    (b) Offering or Negotiating Terms of a Loan. The following examples 
are designed to illustrate when an individual offers or negotiates terms 
of a loan within the meaning of Sec.  1008.103(c)(2) and, conversely, 
what does not constitute offering or negotiating terms of a loan:
    (1) Offering or negotiating the terms of a loan includes:
    (i) Presenting for consideration by a borrower or prospective 
borrower particular loan terms, whether verbally, in writing, or 
otherwise, even if:
    (A) Further verification of information is necessary;
    (B) The offer is conditional;
    (C) Other individuals must complete the loan process;
    (D) The individual lacks authority to negotiate the interest rate or 
other loan terms; or
    (E) The individual lacks authority to bind the person that is the 
source of the prospective financing.
    (ii) Communicating directly or indirectly with a borrower or 
prospective borrower for the purpose of reaching a mutual understanding 
about prospective residential mortgage loan terms, including responding 
to a borrower or prospective borrower's request for a different rate or 
different fees on a pending loan application by presenting to the 
borrower or prospective borrower a revised loan offer, even if a mutual 
understanding is not subsequently achieved.
    (2) Offering or negotiating terms of a loan does not include any of 
the following activities:
    (i) Providing general explanations or descriptions in response to 
consumer queries, such as explaining loan terminology (e.g., debt-to-
income ratio) or lending policies (e.g., the loan-to-value ratio policy 
of the lender), or describing product-related services;
    (ii) Arranging the loan closing or other aspects of the loan 
process, including by communicating with a borrower or prospective 
borrower about those arrangements, provided that any communication that 
includes a discussion about loan terms only verifies terms already 
agreed to by the borrower or prospective borrower;
    (iii) Providing a borrower or prospective borrower with information 
unrelated to loan terms, such as the best days of the month for 
scheduling loan closings at the bank;
    (iv) Making an underwriting decision about whether the borrower or 
prospective borrower qualifies for a loan;
    (v) Explaining or describing the steps that a borrower or 
prospective borrower would need to take in order to obtain a loan offer, 
including providing general guidance about qualifications or criteria 
that would need to be met that is not specific to that borrower or 
prospective borrower's circumstances;
    (vi) Communicating on behalf of a mortgage loan originator that a 
written offer has been sent to a borrower or prospective borrower 
without providing any details of that offer; or
    (vii) Offering or negotiating loan terms solely through a third-
party licensed loan originator, so long as the nonlicensed individual 
does not represent to the public that he or she can or will perform 
covered activities and does not communicate with the borrower or 
potential borrower. For example:
    (A) A seller who provides financing to a purchaser of a dwelling 
owned by that seller in which the offer and negotiation of loan terms 
with the borrower or prospective borrower is conducted exclusively by a 
third-party licensed loan originator;
    (B) An individual who works solely for a lender, when the individual 
offers loan terms exclusively to third-party licensed loan originators 
and not to borrowers or potential borrowers.
    (c) For Compensation or Gain. (1) An individual acts ``for 
compensation or gain'' within the meaning of Sec.  1008.103(c)(2)(ii) if 
the individual receives or expects to receive in connection with the 
individual's activities anything of value, including, but not limited 
to, payment of a salary, bonus, or commission. The concept ``anything of 
value'' is interpreted broadly and is not limited only to payments that 
are contingent upon the closing of a loan.
    (2) An individual does not act ``for compensation or gain'' if the 
individual acts as a volunteer without receiving or expecting to receive 
anything of value in connection with the individual's activities.

[[Page 434]]



    Sec. Appendix B to Part 1008--Engaging in the Business of a Loan 
             Originator: Commercial Context and Habitualness

    An individual who acts (or holds himself or herself out as acting) 
as a loan originator in a commercial context and with some degree of 
habitualness or repetition is considered to be ``engage[d] in the 
business of a loan originator[.]'' An individual who acts as a loan 
originator does so in a commercial context if the individual acts for 
the purpose of obtaining anything of value for himself or herself, or 
for an entity or individual for which the individual acts, rather than 
exclusively for public, charitable, or family purposes. The habitualness 
or repetition of the origination activities that is needed to ``engage 
in the business of a loan originator'' may be met either if the 
individual who acts as a loan originator does so with a degree of 
habitualness or repetition, or if the source of the prospective 
financing provides mortgage financing or performs other origination 
activities with a degree of habitualness or repetition. This appendix 
provides examples to aid in the understanding of activities that would 
not constitute engaging in the business of a loan originator, such that 
an individual is not required to obtain and maintain a state mortgage 
loan originator license. The examples in this appendix are not all-
inclusive. They illustrate only the issue described and do not 
illustrate any other issues that may arise under part 1008. For purposes 
of the examples below, the term ``loan'' refers to a ``residential 
mortgage loan'' as defined in Sec.  1008.23 of this part.
    (a) Not Engaged in the Business of a Mortgage Loan Originator. The 
following examples illustrate when an individual generally does not 
``engage in the business of a loan originator'':
    (1) An individual who acts as a loan originator in providing 
financing for the sale of that individual's own residence, provided that 
the individual does not act as a loan originator or provide financing 
for such sales so frequently and under such circumstances that it 
constitutes a habitual and commercial activity.
    (2) An individual who acts as a loan originator in providing 
financing for the sale of a property owned by that individual, provided 
that such individual does not engage in such activity with habitualness.
    (3) A parent who acts as a loan originator in providing loan 
financing to his or her child.
    (4) An employee of a government entity who acts as a loan originator 
only pursuant to his or her official duties as an employee of that 
government entity, if all applicable conditions in Sec.  1008.103(e)(6) 
of this part are met.
    (5) If all applicable conditions in Sec.  1008.103(e)(7) of this 
part are met, an employee of a nonprofit organization that has been 
determined to be a bona fide nonprofit organization by the state 
supervisory authority, when the employee acts as a loan originator 
pursuant to his or her duties as an employee of that organization.
    (6) An individual who does not act as a loan originator habitually 
or repeatedly, provided that the source of prospective financing does 
not provide mortgage financing or perform other loan origination 
activities habitually or repeatedly.



Sec. Appendix C to Part 1008--Independent Contractors and Loan Processor 
and Underwriter Activities That Require a State Mortgage Loan Originator 
                                 License

    The examples below are designed to aid in the understanding of loan 
processing or underwriting activities for which an individual is 
required to obtain a S.A.F.E. Act-compliant mortgage loan originator 
license. The examples in this appendix are not all-inclusive. They 
illustrate only the issue described and do not illustrate any other 
issues that may arise under part 1008. For purposes of the examples 
below, the term ``loan'' refers to a residential mortgage loan as 
defined in Sec.  1008.23 of this part.
    (a) An individual who is a loan processor or underwriter who must 
obtain and maintain a state loan originator license includes:
    (1) Any individual who engages in the business of a loan originator, 
as defined in Sec.  1008.103 of this part;
    (2) Any individual who performs clerical or support duties and who 
is an independent contractor, as those terms are defined in Sec.  
1008.23;
    (3) Any individual who collects, receives, distributes, or analyzes 
information in connection with the making of a credit decision and who 
is an independent contractor, as that term is defined in Sec.  1008.23; 
and
    (4) Any individual who communicates with a consumer to obtain 
information necessary for making a credit decision and who is an 
independent contractor, as that term is defined in Sec.  1008.23.
    (b) A state is not required to impose S.A.F.E. Act licensing 
requirements on any individual loan processor or underwriter who, for 
example:
    (1) Performs only clerical or support duties (i.e., the loan 
processor's or underwriter's activities do not include, e.g., offering 
or negotiating loan rates or terms, or counseling borrowers or 
prospective borrowers about loan rates or terms), and who performs those 
clerical or support duties at the direction of and subject to the 
supervision and instruction of an individual who either: Is licensed and 
registered in accordance with

[[Page 435]]

Sec.  1008.103(a) (state licensing of loan originators); or is not 
required to be licensed because he or she is excluded from the licensing 
requirement pursuant to Sec.  1008.103(e)(2) (time-share exclusion), 
(e)(5)(federally registered loan originator), (e)(6) (government 
employees exclusion), or (e)(7) (nonprofit exclusion).
    (2) Performs only clerical or support duties as an employee of a 
mortgage lender or mortgage brokerage firm, and who performs those 
duties at the direction of and subject to the supervision and 
instruction of an individual who is employed by the same employer and 
who is licensed in accordance with Sec.  1008.103(a) (state licensing of 
loan originators).
    (3) Is an employee of a loan processing or underwriting company that 
provides loan processing or underwriting services to one or more 
mortgage lenders or mortgage brokerage firms under a contract between 
the loan processing or underwriting company and the mortgage lenders or 
mortgage brokerage firms, provided the employee performs only clerical 
or support duties and performs those duties only at the direction of and 
subject to the supervision and instruction of a licensed loan originator 
employee of the same loan processing and underwriting company.
    (4) Is an individual who does not otherwise perform the activities 
of a loan originator and is not involved in the receipt, collection, 
distribution, or analysis of information common for the processing or 
underwriting of a residential mortgage loan, nor is in communication 
with the consumer to obtain such information.
    (c) In order to conclude that an individual who performs clerical or 
support duties is doing so at the direction of and subject to the 
supervision and instruction of a loan originator who is licensed or 
registered in accordance with Sec.  1008.103 (or, as applicable, an 
individual who is excluded from the licensing and registration 
requirements under Sec.  1008.103(e)(2), (e)(6), or (e)(7)), there must 
be an actual nexus between the licensed or registered loan originator's 
(or excluded individual's) direction, supervision, and instruction and 
the loan processor or underwriter's activities. This actual nexus must 
be more than a nominal relationship on an organizational chart. For 
example, there is an actual nexus when:
    (1) The supervisory licensed or registered loan originator assigns, 
authorizes, and monitors the loan processor or underwriter employee's 
performance of clerical and support duties.
    (2) The supervisory licensed or registered loan originator exercises 
traditional supervisory responsibilities, including, but not limited to, 
the training, mentoring, and evaluation of the loan processor or 
underwriter employee.



 Sec. Appendix D to Part 1008--Attorneys: Circumstances That Require a 
                 State Mortgage Loan Originator License

    This appendix D clarifies the circumstances in which the S.A.F.E. 
Act requires a licensed attorney who engages in loan origination 
activities to obtain a state loan originator license and registration. 
This special category recognizes limited, heavily regulated activities 
that meet strict criteria that are different from the criteria for 
specific exemptions from the S.A.F.E. Act requirements and the 
exclusions set forth in the regulations and illustrated in other 
appendices of part 1008.
    (a) S.A.F.E. Act-compliant licensing required. An individual who is 
a licensed attorney is required to be licensed if the individual is 
engaged in the business of a loan originator as defined in Sec.  
1008.103 and such loan origination activities are not all of the 
following:
    (1) Considered by the state's court of last resort (or other state 
governing body responsible for regulating the practice of law) to be 
part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all applicable 
laws, rules, ethics, and standards.
    (b) S.A.F.E. Act-compliant licensing not required. A licensed 
attorney performing activities that come within the definition of a loan 
originator is not required to be licensed, provided that such activities 
are:
    (1) Considered by the state's court of last resort (or other state 
governing body responsible for regulating the practice of law) to be 
part of the authorized practice of law within the state;
    (2) Carried out within an attorney-client relationship; and
    (3) Accomplished by the attorney in compliance with all applicable 
laws, rules, ethics, and standards.




PART 1009_DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS LACKING 
FEDERAL DEPOSIT INSURANCE (REGULATION I)--Table of Contents



Sec.
1009.1 Scope.
1009.2 Definitions.
1009.3 Disclosures in periodic statements and account records.
1009.4 Disclosures in advertising and on the premises.
1009.5 Disclosure acknowledgment.

[[Page 436]]

1009.6 Exception for certain depository institutions.
1009.7 Enforcement.

    Authority: 12 U.S.C. 1831t, 5512, 5581.

    Source: 76 FR 78129, Dec. 16, 2011, unless otherwise noted.



Sec.  1009.1  Scope.

    This part, known as Regulation I, is issued by the Bureau of 
Consumer Financial Protection. This part applies to all depository 
institutions lacking Federal deposit insurance. It requires the 
disclosure of certain insurance-related information in periodic 
statements, account records, locations where deposits are normally 
received, and advertising. This part also requires such depository 
institutions to obtain a written acknowledgment from depositors 
regarding the institution's lack of Federal deposit insurance.



Sec.  1009.2  Definitions.

    For purposes of this part:
    Depository institution means any bank or savings association as 
defined under 12 U.S.C. 1813, or any credit union organized and operated 
according to the laws of any state, the District of Columbia, the 
several territories and possessions of the United States, the Panama 
Canal Zone, or the Commonwealth of Puerto Rico, which laws provide for 
the organization of credit unions similar in principle and objectives to 
Federal credit unions.
    Lacking Federal deposit insurance means the depository institution 
is neither an insured depository institution as defined in 12 U.S.C. 
1813(c)(2), nor an insured credit union as defined in section 101 of the 
Federal Credit Union Act, 12 U.S.C. 1752.
    Standard maximum deposit insurance amount means the maximum amount 
of deposit insurance as determined under section 11(a)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(a)(1)).



Sec.  1009.3  Disclosures in periodic statements and account records.

    Depository institutions lacking Federal deposit insurance must 
include a notice disclosing clearly and conspicuously that the 
institution is not federally insured, and that if the institution fails, 
the Federal Government does not guarantee that depositors will get back 
their money, in all periodic statements of account, on each signature 
card, and on each passbook, certificate of deposit, or share 
certificate. For example, a notice would comply with the requirement if 
it conspicuously stated: ``[Institution's name] is not federally 
insured. If it fails, the Federal Government does not guarantee that you 
will get your money back.'' The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.



Sec.  1009.4  Disclosures in advertising and on the premises.

    (a) Required disclosures. Each depository institution lacking 
Federal deposit insurance must include a clear and conspicuous notice 
disclosing that the institution is not federally insured:
    (1) At each station or window where deposits are normally received, 
its principal place of business and all its branches where it accepts 
deposits or opens accounts (excluding automated teller machines or point 
of sale terminals), and on its main internet page; and
    (2) In all advertisements except as provided in paragraph (c) of 
this section.
    (b) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.
    (c) Exceptions. The following need not include a notice that the 
institution is not federally insured:
    (1) Any sign, document, or other item that contains the name of the 
depository institution, its logo, or its contact information, but only 
if the sign, document, or item does not include any information about 
the institution's products or services or information otherwise 
promoting the institution; and
    (2) Small utilitarian items that do not mention deposit products or 
insurance, if inclusion of the notice would be impractical.



Sec.  1009.5  Disclosure acknowledgment.

    (a) New depositors obtained other than through a conversion or 
merger. With respect to any depositor who was not a depositor at the 
depository institution

[[Page 437]]

on or before October 13, 2006, and who is not a depositor as described 
in paragraph (b) of this section, a depository institution lacking 
Federal deposit insurance may receive a deposit for the account of such 
depositor only if the institution has obtained the depositor's signed 
written acknowledgement that:
    (1) The institution is not federally insured; and
    (2) If the institution fails, the Federal Government does not 
guarantee that the depositor will get back the depositor's money.
    (b) New depositors obtained through a conversion or merger. With 
respect to a depositor at a federally insured depository institution 
that converts to, or merges into, a depository institution lacking 
Federal insurance after October 13, 2006, a depository institution 
lacking Federal deposit insurance may receive a deposit for the account 
of such depositor only if:
    (1) The institution has obtained the depositor's signed written 
acknowledgement described in paragraph (a) of this section; or
    (2) The institution makes an attempt, sent by mail no later than 45 
days after the effective date of the conversion or merger, to obtain the 
acknowledgment. In making such an attempt, the institution must transmit 
to each depositor who has not signed and returned a written 
acknowledgement described in paragraph (a) of this section:
    (i) A conspicuous card containing the information described in 
paragraphs (a)(1) and (2) of this section, and a line for the signature 
of the depositor; and
    (ii) Accompanying materials requesting the depositor to sign the 
card, and return the signed card to the institution.
    (c) Depositors obtained on or before October 13, 2006. (1) Any 
depository institution lacking Federal deposit insurance may receive any 
deposit after October 13, 2006, for the account of a depositor who was a 
depositor on or before that date only if:
    (i) The depositor has signed a written acknowledgement described in 
paragraph (a) of this section; or
    (ii) The institution has transmitted to the depositor:
    (A) A conspicuous card containing the information described in 
paragraphs (a)(1) and (2) of this section, and a line for the signature 
of the depositor; and
    (B) Accompanying materials requesting that the depositor sign the 
card, and return the signed card to the institution.
    (2) An institution described in paragraph (c)(1) of this section 
must have made the transmission described in paragraph (c)(1)(ii) of 
this section via mail not later than three months after October 13, 
2006. The institution must have made a second identical transmission via 
mail not less than 30 days, and not more than three months, after the 
first transmission to the depositor in accordance with paragraph 
(c)(1)(ii) of this section, if the institution has not, by the date of 
such mailing, received from the depositor a card referred to in 
paragraph (c)(1)(i) of this section which has been signed by the 
depositor.
    (d) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.



Sec.  1009.6  Exception for certain depository institutions.

    The requirements of this part do not apply to any depository 
institution lacking Federal deposit insurance and located within the 
United States that does not receive initial deposits of less than an 
amount equal to the standard maximum deposit insurance amount from 
individuals who are citizens or residents of the United States, other 
than money received in connection with any draft or similar instrument 
issued to transmit money.



Sec.  1009.7  Enforcement.

    Compliance with the requirements of this part shall be enforced 
under the Consumer Financial Protection Act of 2010, Public Law 111-203, 
title X, 124 Stat. 1955, by the Bureau of Consumer Financial Protection, 
subject to subtitle B of the Consumer Financial Protection Act of 2010, 
and under the Federal Trade Commission Act, 15 U.S.C. 41 et seq, by the 
Federal Trade Commission.

[[Page 438]]



PART 1010_LAND REGISTRATION (REGULATION J)--Table of Contents



                     Subpart A_General Requirements

Sec.
1010.1 Definitions.
1010.2 [Reserved]
1010.3 General applicability.
1010.4 Exemptions--general.
1010.5 Statutory exemptions.
1010.6 One hundred lot exemption.
1010.7 Twelve lot exemption.
1010.8 Scattered site subdivisions.
1010.9 Twenty acre lots.
1010.10 Single-family residence exemption.
1010.11 Manufactured home exemption.
1010.12 Intrastate exemption.
1010.13 Metropolitan Statistical Area (MSA) exemption.
1010.14 Regulatory exemptions.
1010.15 Regulatory exemption--multiple site subdivision--determination 
          required.
1010.16 Regulatory exemption--determination required.
1010.17 Advisory opinion.
1010.18 No action letter.
1010.19 [Reserved]
1010.20 Requirements for registering a subdivision--Statement of 
          Record--filing and form.
1010.21 Effective dates.
1010.22 Statement of record--initial or consolidated.
1010.23 Amendment--filing and form.
1010.24-1010.28 [Reserved]
1010.29 Use of property report--misstatements, omissions or 
          representation of Bureau approval prohibited.
1010.35 Payment of fees.
1010.45 Suspensions.

                    Subpart B_Reporting Requirements

1010.100 Statement of Record--format.
1010.101 [Reserved]
1010.102 General instructions for completing the Statement of Record.
1010.103 Developer obligated improvements.
1010.104 [Reserved]
1010.105 Cover page.
1010.106 Table of contents.
1010.107 Risks of buying land.
1010.108 General information.
1010.109 Title to the property and land use.
1010.110 Roads.
1010.111 Utilities.
1010.112 Financial information.
1010.113 Local services.
1010.114 Recreational facilities.
1010.115 Subdivision characteristics and climate.
1010.116 Additional information.
1010.117 Cost sheet, signature of Senior Executive Officer
1010.118 Receipt, agent certification and cancellation page.
1010.200 Instructions for Statement of Record, Additional Information 
          and Documentation.
1010.201-1010.207 [Reserved]
1010.208 General information.
1010.209 Title and land use.
1010.210 Roads.
1010.211 Utilities.
1010.212 Financial information.
1010.214 Recreational facilities.
1010.215 Subdivision characteristics and climate.
1010.216 Additional information.
1010.219 Affirmation.
1010.310 Annual report of activity.

      Subpart C_Certification of Substantially Equivalent State Law

1010.500 General.
1010.503 Notice of certification.
1010.504 Cooperation among certified states and between certified states 
          and the Director.
1010.505 Withdrawal of state certification.
1010.506 State/Federal filing requirements.
1010.507 Effect of suspension or withdrawal of certification granted 
          under 15 U.S.C. 1708(a)(1): Full disclosure requirement.
1010.508 Effect of suspension of certification granted under 15 U.S.C. 
          1708(a)(2): Sufficient protection requirement.
1010.552 Previously accepted state filings.
1010.556 Previously accepted state filings--amendments and 
          consolidations.
1010.558 Previously accepted state filings--notice of revocation rights 
          on property report cover page.
1010.559 Previously accepted state filings--notice of revocation rights 
          in contracts and agreements.

Appendix A to Part 1010--Standard and Model Forms and Clauses

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79489, Dec. 21, 2011, unless otherwise noted.



                     Subpart A_General Requirements



Sec.  1010.1  Definitions.

    (a) Statutory terms. All terms are used in accordance with their 
statutory meaning in 15 U.S.C. 1701, unless otherwise defined in 
paragraph (b) of this section or elsewhere in this part.
    (b) Other terms. As used in this part:
    Act means the Interstate Land Sales Full Disclosure Act, 15 U.S.C. 
1701.
    Advisory opinion means the formal written opinion of the Director as 
to jurisdiction in a particular case or the applicability of an 
exemption under

[[Page 439]]

Sec. Sec.  1010.5 through 1010.15, based on facts submitted to the 
Director.
    Available for use means that in addition to being constructed, the 
subject facility is fully operative and supplied with any materials and 
staff necessary for its intended purpose.
    Beneficial property restrictions means restrictions that are 
enforceable by the lot owners and are designed to control the use of the 
lot and to preserve or enhance the environment and the aesthetic and 
economic value of the subdivision.
    Date of filing means the date a Statement of Record, amendment, or 
consolidation, accompanied by the applicable fee, is received by the 
Director.
    Good faith estimate means an estimate based on documentary evidence. 
In the case of cost estimates, the documentation may be obtained from 
the suppliers of the services. In the case of estimates of completion 
dates, the documentation may be actual contracts let, engineering 
schedules, or other evidence of commitments to complete the amenities.
    ILSRP means the Interstate Land Sales Registration Program.
    Lot means any portion, piece, division, unit, or undivided interest 
in land located in any state or foreign country, if the interest 
includes the right to the exclusive use of a specific portion of the 
land.
    Owner means the person or entity who holds the fee title to the land 
and has the power to convey that title to others.
    Parent corporation means that entity which ultimately controls the 
subsidiary, even though the control may arise through any series or 
chain of other subsidiaries or entities.
    Principal means any person or entity holding at least a 10 percent 
financial or ownership interest in the developer or owner, directly or 
through any series or chain of subsidiaries or other entities.
    Rules means all rules adopted pursuant to the Act, including the 
general requirements published in this part.
    Sale means any obligation or arrangement for consideration to 
purchase or lease a lot directly or indirectly. The terms ``sale'' or 
``seller'' include in their meanings the terms ``lease'' and ``lessor''.
    Senior Executive Officer means the individual of highest rank 
responsible for the day-to-day operations of the developer and who has 
the authority to bind or commit the developing entity to contractual 
obligations.
    Site means a group of contiguous lots, whether such lots are 
actually divided or proposed to be divided. Lots are considered to be 
contiguous even though contiguity may be interrupted by a road, park, 
small body of water, recreational facility, or any similar object.
    Start of construction means breaking ground for building a facility, 
followed by diligent action to complete the facility.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29115, May 11, 2016]



Sec.  1010.2  [Reserved]



Sec.  1010.3  General applicability.

    Except in the case of an exempt transaction, a developer may not 
sell or lease lots in a subdivision, making use of any means or 
instruments of transportation or communication in interstate commerce, 
or of the mails, unless a Statement of Record is in effect in accordance 
with the provisions of this part. In non-exempt transactions, the 
developer must give each purchaser a printed Property Report, meeting 
the requirements of this part, in advance of the purchaser's signing of 
any contract or agreement for sale or lease. Information collection 
requirements contained in this part have been approved by the Office of 
Management and Budget under the provisions of 44 U.S.C. 3501 et seq. and 
have been assigned OMB Control No. 3170-0012.



Sec.  1010.4  Exemptions--general.

    (a) The exemptions available under Sec. Sec.  1010.5 through 1010.16 
are not applicable when the method of sale, lease or other disposition 
of land or an interest in land is adopted for the purpose of evasion of 
the Act.
    (b) With the exception of the sales or leases which are exempt under 
Sec.  1010.5, the anti-fraud provisions of the Act (15 U.S.C. 
1703(a)(2)) apply to exempt transactions. The anti-fraud provisions

[[Page 440]]

make it unlawful for a developer or agent to employ any device, scheme, 
or artifice to:
    (1) Defraud;
    (2) To obtain money or property by means of any untrue statement of 
a material fact, or
    (3) To omit to state a material fact necessary in order to make the 
statements made not misleading, with respect to any information 
pertinent to the lot or subdivision; or
    (4) To engage in any transaction, practice, or course of business 
which operates or would operate as a fraud or deceit upon a purchaser.
    (c) The anti-fraud provisions of the Act require that certain 
representations be included in the contract in transactions which are 
not exempt under Sec.  1010.5. Specifically, the Act requires that if a 
developer or agent represents that roads, sewers, water, gas or electric 
service or recreational amenities will be provided or completed by the 
developer, the contract must stipulate that the services or amenities 
will be provided or completed.
    (d) Eligibility for exemptions available under Sec. Sec.  1010.5 
through 1010.14 is self-determining. With the exception of the 
exemptions available under Sec. Sec.  1010.15 and 1010.16, a developer 
is not required to file notice with or obtain the approval of the 
Director in order to take advantage of an exemption. If a developer 
elects to take advantage of an exemption, the developer is responsible 
for maintaining records to demonstrate that the requirements of the 
exemption have been met.
    (e) A developer may present evidence, or otherwise discuss, in an 
informal hearing before the Office of Supervision Examinations, the 
Bureau's position on the jurisdiction or non-exempt status of a 
particular subdivision.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29115, May 11, 2016]



Sec.  1010.5  Statutory exemptions.

    A listing of the statutory exemptions is contained in 15 U.S.C. 
1702. In accordance with 15 U.S.C. 1702(a)(2), if the sale involves a 
condominium or multi-unit construction, a presale clause conditioning 
the sale of a unit on a certain percentage of sales of other units is 
permissible if it is legally binding on the parties and is for a period 
not to exceed 180 days. However, the 180-day provision cannot extend the 
2-year period for performance. The permissible 180 days is calculated 
from the date the first purchaser signs a sales contract in the project 
or, if a phased project, from the date the first purchaser signs the 
first sales contract in each phase.

[81 FR 29116, May 11, 2016]



Sec.  1010.6  One hundred lot exemption.

    The sale of lots in a subdivision is exempt from the registration 
requirements of the Act if, since April 28, 1969, the subdivision has 
contained fewer than 100 lots, exclusive of lots which are exempt from 
jurisdiction under Sec.  1010.5. In the sale of lots in the subdivision 
that are not exempt under Sec.  1010.5, the developer must comply with 
the Act's anti-fraud provisions, set forth in Sec.  1010.4(b) and (c).



Sec.  1010.7  Twelve lot exemption.

    (a) The sale of lots is exempt from the registration requirements of 
the Act if, beginning with the first sale after June 20, 1980, no more 
than twelve lots in the subdivision are sold in the subsequent twelve-
month period. Thereafter, the sale of the first twelve lots is exempt 
from the registration requirements if no more than twelve lots were sold 
in each previous twelve month period which began with the anniversary 
date of the first sale after June 20, 1980.
    (b) A developer may apply to the Director to establish a different 
twelve month period for use in determining eligibility for the exemption 
and the Director may allow the change if it is for good cause and 
consistent with the purpose of this section.
    (c) In determining eligibility for this exemption, all lots sold or 
leased in the subdivision after June 20, 1980, are counted, whether or 
not the transactions are otherwise exempt. Sales or leases made prior to 
June 21, 1980, are not considered in determining eligibility for the 
exemption.
    (d) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.

[[Page 441]]



Sec.  1010.8  Scattered site subdivisions.

    (a) The sale of lots in a subdivision consisting of noncontiguous 
parts is exempt from the registration requirements of the Act if:
    (1) Each noncontiguous part of the subdivision contains twenty or 
fewer lots; and
    (2) Each purchaser or purchaser's spouse makes a personal, on-the-
lot inspection of the lot purchased prior to signing a contract.
    (b) For purposes of this exemption, interruptions such as roads, 
parks, small bodies of water or recreational facilities do not serve to 
break the contiguity of parts of a subdivision.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.9  Twenty acre lots.

    (a) The sale of lots in a subdivision is exempt from the 
registration requirements of the Act if, since April 28, 1969, each lot 
in the subdivision has contained at least twenty acres. In determining 
eligibility for the exemption, easements for ingress and egress or 
public utilities are considered part of the total acreage of the lot if 
the purchaser retains ownership of the property affected by the 
easement.
    (b) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.10  Single-family residence exemption.

    (a) General. The sale of a lot which meets the requirements 
specified under paragraphs (b) and (c) of this section is exempt from 
the registration requirements of the Act.
    (b) Subdivision requirements. (1) The subdivision must meet all 
local codes and standards.
    (2) In the promotion of the subdivision there must be no offers, by 
direct mail or telephone solicitation, of gifts, trips, dinners or use 
of similar promotional techniques to induce prospective purchasers to 
visit the subdivision or to purchase a lot.
    (c) Lot requirements. (1) The lot must be located within a 
municipality or county where a unit of local government or the state 
specifies minimum standards in the following areas for the development 
of subdivision lots taking place within its boundaries:
    (i) Lot dimensions.
    (ii) Plat approval and recordation.
    (iii) Roads and access.
    (iv) Drainage.
    (v) Flooding.
    (vi) Water supply.
    (vii) Sewage disposal.
    (2) Each lot sold under the exemption must be either zoned for 
single-family residences or, in the absence of a zoning ordinance, 
limited exclusively by enforceable covenants or restrictions to single-
family residences. Manufactured homes, townhouses, and residences for 
one-to-four family use are considered single-family residences for 
purposes of this exemption provision.
    (3) The lot must be situated on a paved street or highway which has 
been built to standards established by the state or the unit of local 
government in which the subdivision is located. If the roads are to be 
public roads they must be acceptable to the unit of local government 
that will be responsible for maintenance. If the street or highway is 
not complete, the developer must post a bond or other surety acceptable 
to the municipality or county in the full amount of the cost of 
completing the street or highway to assure completion to local 
standards. For purposes of this exemption, paved means concrete or 
pavement with a bituminous surface that is impervious to water, protects 
the base and is durable under the traffic load and maintenance 
contemplated.
    (4) The unit of local government or a homeowners association must 
have accepted or be obligated to accept the responsibility for 
maintaining the street or highway upon which the lot is situated. In any 
case in which a homeowners association has accepted or is obligated to 
accept maintenance responsibility, the developer must, prior to signing 
of a contract or agreement to purchase, provide the purchaser with a 
good faith written estimate of the cost of carrying out the 
responsibility over the first ten years of ownership.
    (5) At the time of closing, potable water, sanitary sewage disposal, 
and electricity must be extended to the lot or the unit of local 
government must

[[Page 442]]

be obligated to install the facilities within 180 days following 
closing. For subdivisions which will not have a central water or sewage 
disposal system, there must be assurances that an adequate potable water 
supply is available year-round and that the lot is approved for the 
installation of a septic tank.
    (6) The contract of sale must require delivery within 180 days after 
the signing of the sales contract of a warranty deed, which at the time 
of delivery is free from monetary liens and encumbrances. If a warranty 
deed is not commonly used in the jurisdiction where the lot is located, 
a deed or grant which warrants that the seller has not conveyed the lot 
to another person may be delivered in lieu of a warranty deed. The deed 
or grant used must warrant that the lot is free from encumbrances made 
by the seller or any other person claiming by, through, or under the 
seller.
    (7) At the time of closing, a title insurance binder or title 
opinion reflecting the condition of title must be in existence and 
issued or presented to the purchaser showing that, subject only to 
exceptions which are approved in writing by the purchaser at the time of 
closing, marketable title to the lot is vested in the seller.
    (8) The purchaser or purchaser's spouse must make a personal, on-
the-lot inspection of the lot purchased prior to signing a contract or 
agreement to purchase.
    (d) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.11  Manufactured home exemption.

    (a) The sale of a lot is exempt from the registration requirements 
of the Act when the following eligibility requirements are met:
    (1) The lot is sold as a homesite by one party and a manufactured 
home is sold by another party and the contracts of sale:
    (i) Obligate the sellers to perform, contingent upon the other 
seller carrying out its obligations so that a completed manufactured 
home will be erected on a completed homesite within two years after the 
date the purchaser signed the contract to purchase the lot;
    (ii) Provide that all funds received by the sellers are to be 
deposited in escrow accounts independent of the sellers until the 
transactions are completed;
    (iii) Provide that funds received by the sellers will be released to 
the buyer upon demand if the lot on which the manufactured home has been 
erected is not conveyed within two years; and
    (iv) Contain no provisions which restrict the purchaser's remedy of 
bringing suit for specific performance.
    (2) The homesite is developed in conformance with all local codes 
and standards, if any, for manufactured home subdivisions.
    (3) At the time of closing:
    (i) Potable water and sanitary sewage disposal are available to the 
homesite and electricity has been extended to the lot line;
    (ii) The homesite is accessible by roads;
    (iii) The purchaser receives marketable title to the lot; and
    (iv) Other common facilities represented in any manner by the 
developer or agent to be provided are completed or there are letters of 
credit, cash escrows or surety bonds in the form acceptable to the local 
government in an amount equal to 100 percent of the estimated cost of 
completion. Corporate bonds are not acceptable for purposes of the 
exemption.
    (4) For purposes of this section, a manufactured home is a unit 
receiving a label in conformance with U.S. Department of Housing and 
Urban Development (HUD) regulations implementing the National 
Manufactured Housing Construction and Safety Standards Act of 1974 (42 
U.S.C. 5401).
    (b) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.12  Intrastate exemption.

    (a) Eligibility requirements. The sale of a lot is exempt from the 
registration requirements of the Act if the following requirements are 
met:
    (1) The sale of lots in the subdivision after December 20, 1979, is 
restricted solely to residents of the state in which the subdivision is 
located unless the

[[Page 443]]

sale is exempt under Sec.  1010.5, Sec.  1010.11, or Sec.  1010.13.
    (2) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (3) Each contract:
    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed; and
    (iii) Contains a non-waivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract. If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (4) The lot being sold is free and clear of all liens, encumbrances 
and adverse claims except the following:
    (i) Mortgages or deeds of trust which contain release provisions for 
the individual lot purchased if:
    (A) The contract of sale obligates the developer to deliver, within 
180 days, a warranty deed (or its equivalent under local law), which at 
the time of delivery is free from any monetary liens or encumbrances; 
and
    (B) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (ii) Liens which are subordinate to the leasehold interest and do 
not affect the lessee's right to use or enjoy the lot.
    (iii) Property reservations which are for the purpose of bringing 
public services to the land being developed, such as easements for water 
and sewer lines.
    (iv) Taxes or assessments which constitute liens before they are due 
and payable if imposed by a state or other public body having authority 
to assess and tax property or by a property owners' association.
    (v) Beneficial property restrictions that are mutually enforceable 
by the lot owners in the subdivision. Restrictions, whether separately 
recorded or incorporated into individual deeds, must be applied 
uniformly to every lot or group of lots. To be considered beneficial and 
enforceable, any restriction or covenant that imposes an assessment on 
lot owners must apply to the developer on the same basis as other lot 
owners. Developers who maintain control of a subdivision through a 
Property Owners' Association, Architectural Control Committee, 
restrictive covenant or otherwise, shall transfer such control to the 
lot owners no later than when the developer ceases to own a majority of 
total lots in, or planned for, the subdivision. Relinquishment of 
developer control shall require affirmative action, usually in the form 
of an election based upon one vote per lot.
    (vi) Reservations contained in United States land patents and 
similar Federal grants or reservations.
    (5) Prior to the sale the developer discloses in a written statement 
to the purchaser all qualifying liens, reservations, taxes, assessments 
and restrictions applicable to the lot purchased. The developer must 
obtain a written receipt from the purchaser acknowledging that the 
statement required by this subparagraph was delivered to the purchaser.
    (6) Prior to the sale the developer provides in a written statement 
good faith estimates of the cost to the purchaser of providing electric, 
water, sewer, gas and telephone service to the lot. The estimates for 
unsold lots must be updated every two years or more frequently if the 
developer has reason to believe that significant cost increases have 
occurred. The dates on which the estimates were made must be included in 
the statement. The developer must obtain a written receipt from the 
purchaser acknowledging that the statement required by this subparagraph 
was delivered to the purchaser.
    (b) Intrastate Exemption Statement. To satisfy the requirements of 
paragraphs (a)(5) and (6) of this section, an Intrastate Exemption 
Statement containing the information prescribed in each such paragraph 
shall be given to each purchaser. A State-approved disclosure

[[Page 444]]

document may be used to satisfy this requirement if all the information 
required by paragraphs (a)(5) and (6) of this section is included in 
this disclosure. In such a case, the developer must obtain a written 
receipt from the purchaser and comply with all other requirements of the 
exemption. To be acceptable for purposes of the exemption, the 
statement(s) given to purchasers must contain neither advertising nor 
promotion on behalf of the developer or subdivision nor references to 
the Bureau of Consumer Financial Protection or the Consumer Financial 
Protection Bureau. A sample Intrastate Exemption Statement is included 
in the exemption guidelines.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.13  Metropolitan Statistical Area (MSA) exemption.

    (a) Eligibility requirements. The sale of a lot which meets the 
following requirements is exempt from registration requirements of the 
Act:
    (1) The lot is in a subdivision which contains fewer than 300 lots 
and has contained fewer than 300 lots since April 28, 1969.
    (2) The lot is located within a Metropolitan Statistical Area (MSA) 
as defined by the Office of Management and Budget and characterized in 
paragraph (b) of this section.
    (3) The principal residence of the purchaser is within the same MSA 
as the subdivision.
    (4) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased prior to signing a contract or 
agreement.
    (5) Each contract:
    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed;
    (iii) Contains a nonwaivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract, or, if the purchaser is entitled to a longer revocation period 
by operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (6) The lot being sold must be free and clear of liens such as 
mortgages, deeds of trust, tax liens, mechanics' liens, or judgments. 
For purposes of this exemption, the term liens does not include the 
following:
    (i) Mortgages or deeds of trust which contain release provisions for 
the individual lot purchased if:
    (A) The contract of sale obligates the developer to deliver, within 
180 days, a warranty deed (or its equivalent under local law), which at 
the time of delivery is free from any monetary liens or encumbrances; 
and
    (B) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (ii) Liens which are subordinate to the leasehold interest and do 
not affect the lessee's right to use or enjoy the lot.
    (iii) Property reservations which are for the purpose of bringing 
public services to the land being developed, such as easements for water 
and sewer lines.
    (iv) Taxes or assessments which constitute liens before they are due 
and payable if imposed by a state or other public body having authority 
to assess and tax property or by a property owners' association.
    (v) Beneficial property restrictions that are mutually enforceable 
by the lot owners in the subdivision. Restrictions, whether separately 
recorded or incorporated into individual deeds, must be applied 
uniformly to every lot or group of lots. To be considered beneficial and 
enforceable, any restriction or covenant that imposes an assessment on 
lot owners must apply to the developer on the same basis as other lot 
owners. Developers who maintain control of a subdivision through a 
Property Owners' Association, Architectural Control Committee, 
restrictive covenants, or otherwise, shall transfer such control to the 
lot owners no later than when the developer

[[Page 445]]

ceases to own a majority of total lots in, or planned for, the 
subdivision. Relinquishment of developer control shall require 
affirmative action, usually in the form of an election based upon one 
vote per lot.
    (vi) Reservations contained in United States land patents and 
similar Federal grants or reservations.
    (7) Before the sale the developer gives a written MSA Exemption 
Statement to the purchaser and obtains a written receipt acknowledging 
that the statement was received. A sample MSA Exemption Statement is 
included in the exemption guidelines. A State-approved disclosure 
document may be used to satisfy this requirement if all of the 
information required by this section is included. The statement(s) given 
to purchasers must contain neither advertising nor promotion on behalf 
of the developer or the subdivision nor references to the Bureau of 
Consumer Financial Protection or the Consumer Financial Protection 
Bureau. In descriptive and concise terms, the statement that the 
developer must give the purchaser shall disclose the following:
    (i) All liens, reservations, taxes, assessments, beneficial property 
restrictions which are enforceable by other lot owners in the 
subdivision, and adverse claims which are applicable to the lot to be 
purchased.
    (ii) Good faith estimates of the cost to the purchaser of providing 
electric, water, sewer, gas and telephone service to the lot. The 
estimates for unsold lots must be updated every two years, or more 
frequently if the developer has reason to believe that significant cost 
increases have occurred. The dates on which the estimates were made must 
be included in the statement.
    (8) The developer executes and gives to the purchaser a written 
instrument designating a person within the state of residence of the 
purchaser as the developer's agent for service of process. The developer 
must also acknowledge in writing that it submits to the legal 
jurisdiction of the state in which the purchaser or lessee resides.
    (9) The developer executes a written affirmation for each sale made 
under this exemption. By January 31 of each year, the developer submits 
to the Director a copy of the executed affirmation for each sale made 
during the preceding calendar year or a master affirmation in which are 
listed all purchasers' names and addresses and the identity of the lots 
purchased. Individual affirmations must be available for the Director's 
review at all times during the year. The affirmation must be in the form 
provided in section I of the appendix to this part: Form for Developer's 
Affirmation for Land Sale.
    (b) Metropolitan Statistical Area. Metropolitan Statistical Areas 
are defined by the Office of Management and Budget generally on the 
basis of population statistics reported in a census. To determine 
whether a subdivision is located within an MSA and the boundaries of an 
MSA, contact the Office of Information and Regulatory Affairs, Office of 
Management and Budget, 726 Jackson Place NW., Washington, DC 20503.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c).



Sec.  1010.14  Regulatory exemptions.

    (a) Eligibility requirements. The following transactions are exempt 
from the registration requirements of the Act unless the Director has 
terminated the exemption in accordance with paragraph (b) of this 
section.
    (1) The sale of lots, each of which will be sold for less than $100, 
including closing costs, if the purchaser will not be required to 
purchase more than one lot.
    (2) The lease of lots for a term not to exceed five years if the 
terms of the lease do not obligate the lessee to renew.
    (3) The sale of lots to a person who is engaged in a bona fide land 
sales business.
    (4) The sale of a lot to a person who owns the contiguous lot which 
has a residential, commercial or industrial building on it.
    (5) The sale of real estate to a government or government agency.
    (6) The sale of a lot to a person who has leased and resided 
primarily on the lot for at least the year preceding the sale.

[[Page 446]]

    (b) Termination. If the Director has reasonable grounds to believe 
that exemption from the registration requirements in a particular case 
is not in the public interest, the Director may, after issuing a notice 
and giving the respondent an opportunity to request a hearing within 
fifteen days of receipt of the notice, terminate eligibility for 
exemption. The basis for issuing a notice may be the conduct of the 
developer or agent, such as unlawful conduct or insolvency, or adverse 
information about the lots or real estate that should be disclosed to 
the purchasers. Proceedings will be governed by Sec.  1012.238.
    (c) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.



Sec.  1010.15  Regulatory exemption--multiple site subdivision--
determination required.

    (a) General. (1) The sale of lots contained in multiple sites of 
fewer than 100 lots each, offered pursuant to a single common 
promotional plan, is exempt from the registration requirements.
    (2) For purposes of this exemption, the sale of lots in an 
individual site that exceeds 99 lots is not exempt from registration. 
Likewise, the sale of lots in a site containing fewer than 100 lots, 
where the developer either owns contiguous land or holds an option or 
other evidence of intent to acquire contiguous land which, when taken 
cumulatively, would or could result in one site of 100 or more lots, is 
not exempt from registration. Furthermore, the sale of lots that are 
within a subdivision established by a separate developer is not exempt 
from registration by this provision.
    (b) Eligibility requirements. The sale of each lot must meet the 
following requirements to be eligible for this exemption.
    (1) The lot is sold ``as is'' with all advertised improvements and 
amenities completed and in the condition advertised.
    (2) The lot is in conformance with all local codes and standards.
    (3) The lot is accessible, both legally and physically. For lots 
which are advertised or otherwise represented as ``residential,'' either 
primary or secondary, with any inference that a permanent or temporary 
dwelling unit of any description (excluding collapsible tents) can be 
built or installed, physical access must be available by automobile, 
pick-up truck or equivalent ``on-road'' vehicle.
    (4) At the time of closing, a title insurance binder or title 
opinion reflecting the condition of title must be issued to the 
purchaser showing that, subject only to exceptions approved in writing 
by the purchaser at the time of closing, marketable title is vested in 
the seller.
    (5) Each contract or agreement and any promissory notes:
    (i) Contain the non-waivable provision found in section II of the 
appendix to this part: Language Notifying Buyer of Option to Cancel 
Contract in bold face type (which must be distinguished from the type 
used for the rest of the document) on the face or signature page above 
all signatures. If the purchaser is entitled to a longer revocation 
period by operation of state or local law, that period becomes the 
Federal revocation period and the contract must reflect the requirement 
of the longer period rather than the seven days. The revocation 
provisions may not be limited or qualified in the contract or other 
document by requiring a specific type of notice or by requiring that 
notice be given at a specified place.
    (ii) Obligate the developer to deliver, within 180 days, a warranty 
deed (or its equivalent under local law) for the lot which at the time 
of delivery is free from any monetary liens or encumbrances.
    (6) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (7) The purchaser's payments are deposited in an escrow account 
independent of the developer until a deed is delivered.
    (8) Prior to the purchaser signing a contract or agreement of sale, 
the developer discloses in a written Lot Information Statement all 
liens, reservations, taxes, assessments, easements and restrictions 
applicable to the lot

[[Page 447]]

purchased (see paragraph (b)(11) of this section).
    (9) Prior to the purchaser signing a contract or agreement of sale, 
the developer discloses in a written Lot Information Statement the name, 
address and telephone number of the local governmental agency or 
agencies from which information on permits or other requirements for 
water, sewer and electrical installations can be obtained. This 
Statement will also contain the name, address and telephone number of 
the suppliers which would or could provide the foregoing services.
    (10) The lot sale must comply with the anti-fraud provisions of 12 
CFR 1010.4(b) and (c) and the sales practices and standards in 
Sec. Sec.  1011.10 through 1011.28.
    (11) A written Lot Information Statement must be delivered to, and 
acknowledged by, each purchaser prior to his or her signing a contract 
or agreement of sale, and must contain the information shown in the 
format below. The Statement must be typed or printed in at least 10 
point font. A copy of the acknowledgement will be maintained by the 
developer for three years and will be made available to ILSRP upon 
request. If the Statement is not delivered as required, the contract or 
agreement of sale may be revoked and a full refund paid, at the option 
of the purchaser, within two years of the signing date and the contract 
or agreement of sale will clearly provide this right. A sample format 
for the Statement is provided in section III of the appendix to this 
part: Sample Lot Information Statement and Sample Receipt.
    (c) Request for Multiple Site Subdivision Exemption. (1) The 
developer must file a request for the Multiple Site Subdivision 
Exemption. The request must be accompanied by a filing fee of $500 
(prepared in accordance with Sec.  1010.35(a)) and a sample Lot 
Information Statement, substantially in the form set forth in section IV 
of the appendix to this part: Request for Multiple Site Subdivision 
Exemption.
    (2) This exemption will become effective upon issuance of an 
Exemption Order by the Director.
    (d) Annual Report. (1) By January 31 of each year the developer will 
send a report to the Director listing each site and its location 
available for a sale pursuant to the exemption during the preceding year 
and indicate the number of lot sales made in each site. The report will 
describe any changes in the information provided in the Request for the 
Multiple Site Subdivision Exemption or contain a statement that there 
are no changes.
    (2) The Annual Report must be accompanied by a filing fee of $100.
    (3) The Annual Report must be signed and dated by the developer, 
attesting to its completeness and accuracy.
    (4) Failure to submit the Annual Report within ten days after the 
receipt of notice from the Director will automatically terminate 
eligibility for the exemption as of the Report due date.
    (e) Termination. If, subsequent to the issuance of an Exemption 
Order, the Director has reasonable grounds to believe that exemption 
from the registration requirements in the particular case is not in the 
public interest, the Director may, after issuing a notice and giving the 
respondent an opportunity to request a hearing within fifteen days of 
receipt of the notice, terminate the exemption order. The basis for 
issuing a notice may be apparent omissions or misrepresentations in the 
documents submitted to the Director, the conduct of the developer or 
agent, such as unlawful conduct or insolvency, or adverse information 
about the real estate that should be disclosed to purchasers. 
Proceedings will be governed by Sec.  1012.238.



Sec.  1010.16  Regulatory exemption--determination required.

    (a) General. The Director may exempt from the registration 
requirements of the Act any subdivision or lots in a subdivision by 
issuing an order in writing if it is determined that registration is not 
necessary in the public interest and for the protection of purchasers on 
the basis of the small amount or limited character of the offering and 
the requirements contained in paragraph (b) of this section.
    (b) Eligibility requirements. An exemption order may be issued at 
the discretion of the Director on the basis of the small amount or 
limited character of

[[Page 448]]

the offering if the following requirements are met:
    (1) The subdivision or sales substantially meet the requirements of 
one of the exemptions available under this chapter.
    (2) Each contract:
    (i) Specifies the developer's and purchaser's responsibilities for 
providing and maintaining roads, water and sewer facilities and any 
existing or promised amenities;
    (ii) Contains a good faith estimate of the year in which the roads, 
water and sewer facilities and promised amenities will be completed;
    (iii) Contains a non-waivable provision giving the purchaser the 
opportunity to revoke the contract until at least midnight of the 
seventh calendar day following the date the purchaser signed the 
contract. If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the contract must reflect the requirements of the longer 
period.
    (iv) Contains a provision that obligates the developer to deliver to 
the purchaser within 180 days of the date the purchaser signed the sales 
contract, a warranty deed, or its equivalent under local law, which at 
the time of delivery is free from any monetary liens or encumbrances.
    (3) The purchaser or purchaser's spouse makes a personal on-the-lot 
inspection of the lot to be purchased before signing a contract.
    (4) The developer files a request for an exemption order and 
supporting documentation in accordance with paragraphs (c) and (d) of 
this section and submits a filing fee of $500.00 in accordance with 
Sec.  1010.35(a) of this part. This fee is not refundable.
    (c) Request. The request for an Exemption Order must be 
substantially in the format set forth in section V of the appendix to 
this part: Request for Regulatory Exemption Order.
    (d) Supporting documentation. A request for an exemption order must 
be accompanied by the following documentation:
    (1) A plat of the entire subdivision with the lots subject to the 
exemption request delineated thereon.
    (2) A copy of the contract to be used.
    (3) A clear and specific statement detailing how the proposed sales 
of lots subject to the exemption request substantially complies with one 
of the available exemption provisions.
    (4) A description of the method by which the lots have been and will 
be promoted and to which population centers the promotion has been and 
will be directed.
    (e) The sale must also comply with the anti-fraud provisions of 
Sec.  1010.4(b) and (c) of this part.
    (f) Termination. If, subsequent to the issuance of an exemption 
order, the Director has reasonable grounds to believe that exemption 
from the registration requirements in the particular case is not in the 
public interest, the Director may, after issuing a notice and giving the 
respondent an opportunity to request a hearing within fifteen days of 
receipt of the notice, terminate the exemption order. The basis for 
issuing a notice may be apparent omissions or misrepresentations in the 
documents submitted to the Director, the conduct of the developer or 
agent, such as unlawful conduct or insolvency, or adverse information 
about the real estate that should be disclosed to purchasers. 
Proceedings will be governed by Sec.  1012.238.



Sec.  1010.17  Advisory opinion.

    (a) General. A developer may request an opinion from the Director as 
to whether an offering qualifies for an exemption or is subject to the 
jurisdiction of the Act.
    (b) Requirements. All requests for Advisory Opinions must be 
accompanied by the following:
    (1) A $500.00 filing fee submitted in accordance with Sec.  
1010.35(a). This fee is not refundable.
    (2) A comprehensive description of the conditions and operations of 
the offering. There is no prescribed format for submitting this 
information, but the developer should at least cite the applicable 
statutory or regulatory basis for the exemption or lack of jurisdiction 
and thoroughly explain how the offering either satisfies the 
requirements for exemption or falls outside the purview of the Act.
    (3) An affirmation as set forth in section VI of the appendix to 
this part:

[[Page 449]]

Developer's Affirmation for Advisory Opinion.



Sec.  1010.18  No Action Letter.

    (a) If the sale of lots is subject to the registration requirements 
of the Act but the circumstances of the sale are such that no 
affirmative action to enforce the registration requirements is needed to 
protect the public interest or prospective purchasers, the Director may 
issue a No Action Letter.
    (b) To obtain a No Action Letter a developer must submit a request 
which includes a thorough description of the proposed transaction, the 
property involved, and the circumstances surrounding the sale.
    (c) The issuance of a No Action Letter will not affect any right 
which a purchaser has under the Act, and it will not limit future action 
by the Director if there is evidence to show that affirmative action is 
necessary to protect the public interest or prospective purchasers. In 
no event will a No Action Letter be issued after the sale has occurred.



Sec.  1010.19  [Reserved]



Sec.  1010.20  Requirements for registering a subdivision--Statement of 
Record--filing and form.

    (a) Filing. (1) In order to register a subdivision and receive an 
effective date, the developer or owner of the subdivision must file a 
Statement of Record with the Director by either:
    (i) U.S. Mail, to the following official address: Consumer Financial 
Protection Bureau, Interstate Land Sales Registration Program, 1700 G 
Street NW., Washington, DC 20552; or
    (ii) Electronic means designated on the ILSA program page on the 
Bureau's Web site at www.consumerfinance.gov/.
    (2) When the Statement of Record is filed, a fee in the amount set 
out in Sec.  1010.35(b) must be paid in accordance with Sec.  
1010.35(a).
    (b) Form. (1) The Statement of Record shall be in the format 
specified in Sec.  1010.100 and shall be completed in accordance with 
the instructions in Sec. Sec.  1010.102, 1010.105 through 1010.118, 
1010.200, 1010.208 through 1010.216, and 1010.219. It shall be supported 
by the documents required by Sec. Sec.  1010.208 through 1010.216 and 
1010.219. It shall include any other information or documents which the 
Director may require as being necessary or appropriate for the 
protection of purchasers.
    (2) The requirements relating to paper type, tabs, folding, and 
ordering for filings with the Bureau in Sec.  1010.102(a), (g), and (h) 
do not apply if a Statement of Record is filed with the Bureau via 
electronic means designated on the Bureau's Web site pursuant to Sec.  
1010.20(a).
    (c) State filings. A Statement of Record submitted under the 
provisions of 12 CFR part 1010, subpart C--Certification of 
Substantially Equivalent State Law, shall consist of the materials 
designated by the Certification Agreement between the Director and the 
certified state in which the subdivision is located.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29116, May 11, 2016]



Sec.  1010.21  Effective dates.

    (a) General. The effective date of an initial, consolidated or 
amended Statement of Record is the 30th day after the filing of the 
latest amendatory material unless the Director notifies the developer in 
writing prior to such 30th day that:
    (1) The effective date has been suspended in accordance with Sec.  
1010.45(a), or
    (2) An earlier effective date has been determined.
    (b) Suspension of effective date by developer. (1) A developer, or 
owner, may request that the effective date of its Statement of Record be 
suspended, provided there are no administrative proceedings pending 
against either of them at the time the request is submitted. The request 
must include any consolidations or amendments which have been made to 
the initial Statement of Record and may be submitted via the electronic 
means of submission described in Sec.  1010.20(a). Forms for this 
purpose will be furnished by the Director upon request.
    (2) Upon acceptance by the Director, the effectiveness of the 
Statement of Record shall be suspended as of the date the request was 
executed by the developer or owner.

[[Page 450]]

    (3) The suspension shall continue until the developer, or owner, 
submits all amendments necessary to bring the registration into full 
compliance with the Regulations which are in effect on the date of the 
amendments and the Director allows those amendments to become effective.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29116, May 11, 2016]



Sec.  1010.22  Statement of record--initial or consolidated.

    (a) Initial Statement of Record. (1) Except in the case of exempt 
transactions, an initial Statement of Record shall be filed, and an 
effective date issued, prior to selling or leasing any lot in a 
subdivision.
    (2) If a developer buys from another developer 100 or more lots from 
an existing registration, the new developer, or owner, may have to 
submit a new initial Statement of Record and receive an effective date 
covering the acquired lots prior to selling or leasing any of those 
lots.
    (3) Changes in principals due to a sale of stock in a corporation or 
changes in partners or joint venturers which are accomplished in 
accordance with the partnership or joint venture agreement but which do 
not cause a change in the title to the land in the subdivision may be 
submitted as an amendment.
    (4) Any initial Statement of Record must be accompanied by a fee, as 
specified in Sec.  1010.35(b), based upon the number of lots sought to 
be registered.
    (b) Consolidated Statement of Record. (1) If the developer intends 
to sell or lease additional lots as part of the same common promotional 
plan with lots already registered, a consolidated Statement of Record 
may be submitted for the additional lots. A fee, as specified in Sec.  
1010.35(b) and based on the number of additional lots, must accompany 
the submission. The additional lots may not be sold or leased until a 
new effective date is issued.
    (2) If the additional lots are simply the result of a replatting of 
lots previously registered and enumerated in the Property Report and do 
not include any additional land, the change may be made by an amendment. 
However, the amendment must be accompanied by a fee, as specified in 
Sec.  1010.35(b), based on the number of additional lots.
    (c) Consolidated Statement of Record--Form. A consolidated Statement 
of Record shall contain the elements listed in paragraphs (c)(1) through 
(4) of this section. Pages having no changes and documents in previous 
submissions which apply equally to the additional lots may be included 
by reference. However, the developer may, at its option, submit the 
entire format for an initial filing, including copies of previously 
submitted documents, to expedite the examination process.
    (1) Those pages of the Property Report portion and Additional 
Information and Documentation portion which contain changes which have 
occurred since the last effective submission, and
    (2) A recapitulation or listing of each of the section headings, and 
subheadings if necessary, of the Additional Information and 
Documentation portion. Each item of the listing shall contain a 
statement as to whether or not any change is made in the section; 
whether any new or additional information is being submitted and, if 
documentation is added by cross reference, the previous submission in 
which that documentation may be found, and
    (3) Documentation to support the additional lots (e.g., plat maps, 
topographic maps and general plan to reflect new lots, title 
information, permits for additional facilities, financial assurances of 
completion of additional facilities, financial statements) or updated or 
expanded documents in support of previous submissions, and
    (4) The affirmation required by Sec.  1010.219.
    (d) Consolidated Statement of Record amends prior Statement of 
Record. A Consolidated Statement of Record shall contain all applicable 
information for all registered lots in the subdivision except those 
deleted pursuant to other provisions in these regulations. The resulting 
Property Report shall be used for all sales in the subdivision, except 
for those transactions which are exempt from the provisions of the Act 
or which have been granted an exempt status by the Director, unless the 
Director has specifically authorized the use of multiple Property 
Reports.

[[Page 451]]

    (e) Initial Statement of Record--when prior approval to submit is 
required. In those subdivisions where there is a disparity between the 
lots already registered and those sought to be registered because of 
location, terrain, proposed use of the lots or the amenities to be 
furnished or available, the developer may present a resume of the 
differences and request the Director's permission to file a separate 
initial Statement of Record for the additional lots. Upon consideration 
of the facts submitted, the Director may allow such a procedure.
    (f) Lots which have been deleted from registration. Should the 
developer, for any reason, delete by amendment any registered lots from 
an effective Statement of Record, those lots must be reregistered by a 
consolidation and a new effective date issued, before they can be sold 
or leased. An appropriate fee must accompany the submission.
    (g) Lots sold to individual purchasers. It is not necessary to 
delete from the registration those lots which have been sold to 
individual purchasers for their own use.



Sec.  1010.23  Amendment--filing and form.

    (a) Filing. If any change occurs in any representation of material 
fact required to be stated in an effective Statement of Record, an 
amendment shall be filed. The amendment shall be filed within 15 days of 
the date on which the developer knows, or should have known, that there 
has been a change in material fact. The amendment may be filed via the 
electronic means of submission described in Sec.  1010.20(a).
    (b) Form. An amendment shall include by reference the prior 
Statement of Record except for any changes in material fact. A change in 
material fact shall be specifically described and supported by the same 
documentation which would be required for an initial submission. Any 
amendment shall be accompanied by:
    (1) A letter from the developer giving a clear and concise 
description of the purpose and significance of the amendment and 
referring to the section and page of the Statement of Record which is 
being amended, and
    (2) All pages of the Statement of Record, which have been amended, 
retyped in the required format to reflect the changes. The ILSRP number 
of the Statement of Record shall appear at the top of each page of the 
material submitted.
    (c) Amendments to suspended filings. Developers wishing to 
reactivate a suspended filing shall file the following:
    (1) Any amendments necessary to bring the filing into compliance, 
submitted in accordance with paragraphs (a) and (b) of this section;
    (2) An activity report in the form prescribed by Sec.  1010.310; and
    (3) An amendment fee, if required under Sec.  1010.35(d)(2).

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29116, May 11, 2016]



Sec. Sec.  1010.24-1010.28  [Reserved]



Sec.  1010.29  Use of property report--misstatements, omissions, or 
representation of Bureau approval prohibited.

    Nothing in these regulations shall be construed to authorize or 
approve the use of a property report containing any untrue statement of 
a material fact or omitting to state a material fact required to be 
stated therein. Nor shall anything in these regulations be construed to 
authorize or permit any representation that the Property Report is 
prepared or approved by the Director, ILSRP or the Bureau of Consumer 
Financial Protection.



Sec.  1010.35  Payment of fees.

    (a) Method of payment. (1) Each fee must be paid by:
    (i) Certified check, cashier's check, or postal money order made 
payable to the Treasurer of the United States, with the registration 
number, when known, and the name, of the subdivision on the face of the 
check, and mailed to an address specified by the Director; or
    (ii) Electronic payment in a manner specified by the Director.
    (2) Information regarding the current mailing address or electronic 
payment procedures is available from: Consumer Financial Protection 
Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., 
Washington,

[[Page 452]]

DC 20552, or on the Bureau's Web site at www.consumerfinance.gov.
    (b) Fees for registration. The fee for each initial and consolidated 
registration is set forth in section VII of the appendix to this part: 
Initial and Consolidated Registration Fee Schedule.
    (c) Fee for Exemption Order or Advisory Opinion. The filing fee for 
an Exemption Order or an Advisory Opinion (Sec.  1010.16 or Sec.  
1010.17) is $500. This fee is not refundable.
    (d) Amendment fee. (1) A fee of $800 is charged when an Annual 
Activity Report reflects an annual ending inventory of 101 or more 
unsold registered lots.
    (2) A fee of $800 is charged for an amendment to reactivate a 
Statement of Record subsequent to its suspension, unless the developer 
has 100 or fewer unsold lots included in the Statement of Record.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29116, May 11, 2016]



Sec.  1010.45  Suspensions.

    (a) Suspension notice--prior to effective date. (1) If it appears to 
the Director that a Statement of Record or an amendment is on its face 
incomplete or inaccurate in any material respect, the Director shall so 
advise the developer, by issuing a suspension notice, within a 
reasonable time after the filing of such materials but prior to the time 
the materials would otherwise be effective.
    (2) A suspension notice issued pursuant to this subsection shall 
suspend the effective date of the Statement of Record or the amendment. 
It shall continue in effect until 30 days, or such earlier date as the 
Director may determine, after the necessary amendments are submitted 
which correct all deficiencies cited in the notice.
    (3) Upon receipt of a suspension notice, the developer has 15 days 
in which to request a hearing. If a hearing is requested, it shall be 
held within 20 days of the receipt of the request by the Director.
    (b) Suspension orders--subsequent to effective date. (1) A notice of 
proceedings to suspend an effective Statement of Record may be issued to 
a developer if the Director has reasonable grounds to believe that an 
effective Statement of Record includes an untrue statement of a material 
fact, or omits a material fact required by the Act or rules and 
regulations, or omits a material fact which is necessary to make the 
statements therein not misleading. The Director may, after notice, and 
after opportunity for a hearing requested pursuant to Sec.  1012.220 
within 15 days of receipt of such notice, issue an order suspending the 
Statement of Record. In the event that a suspension order is issued, 
such order shall remain in effect until the developer has amended the 
Statement of Record or otherwise complied with the requirements of the 
order. When the developer has complied with the requirements of the 
order, the Director shall so declare and thereupon the suspension order 
shall cease to be effective.
    (2) If the Director undertakes an examination of a developer or its 
records to determine whether a suspension order should be issued, and 
the developer fails to cooperate with the Director or obstructs, or 
refuses to permit the Director to make such examination, the Director 
may issue an order suspending the Statement of Record. Such order shall 
remain in effect until the developer has complied with the requirements 
of the order. When the developer has complied with the requirements of 
the order, the Director shall so declare and thereupon the suspension 
order shall cease to be effective. In accordance with the procedure 
described in Sec.  1012.235, a hearing may be requested.
    (3) Upon receipt of an amendment to an effective Statement of 
Record, the Director may issue an order suspending the Statement of 
Record until the amendment becomes effective if the Director has 
reasonable grounds to believe that such action is necessary or 
appropriate in the public interest or for the protection of purchasers. 
In accordance with the procedure described in Sec.  1012.235, a hearing 
may be requested.
    (4) Suspension orders issued pursuant to this subsection shall 
operate to suspend the Statement of Record as of the date the order is 
either served on the developer or its registered agent or is delivered 
by certified or registered mail to the address of the developer or its 
authorized agent.

[[Page 453]]



                    Subpart B_Reporting Requirements



Sec.  1010.100  Statement of Record--format.

    (a) The Statement of Record consists of two portions; the Property 
Report portion and the Additional Information and Documentation portion.
    (b) General format. The Statement of Record shall be prepared in 
accordance with the format set forth in section VIII of the appendix to 
this part: Property Report:



Sec.  1010.101  [Reserved]



Sec.  1010.102  General instructions for completing the Statement of 
Record.

    (a) Paper and type. The Statement of Record shall be on good 
quality, unglazed white or pastel paper. Letter size paper, 
approximately 8\1/2\ x 11 inches in size, will be used for the Property 
Report portion, and either letter size paper, approximately 8\1/2\ x 11 
inches in size, or legal size paper, approximately 8\1/2\ x 14 inches in 
size, will be used for the Additional Information and Documentation 
portion. Side margins shall be no less than 1 inch and no greater than 
1\1/2\ inches. Top and bottom margins shall be no less than 1 inch. In 
the preparation of the charts to be included in the Property Report, the 
developer may vary from the above margin requirements or print the 
charts lengthwise on the required size paper if such measures are 
necessary to make the charts readable. The Statement of Record shall be 
prepared in an easily readable, uniform font.
    (b) Numbering and dating. Each page of the Statement of Record as 
submitted to ILSRP shall be numbered and shall include the date of 
typing or preparation in the lower right hand corner, except in the 
final printed version of the Property Report portion.
    (c) Signing. The Statement of Record shall be signed by the senior 
executive officer of the developer or a designated agent.
    (d) Printing. The Statement of Record and, insofar as practical, all 
papers and documents filed as a part thereof, shall be printed, 
lithographed, photocopied, typewritten or prepared by any similar 
process which, in the opinion of the Director, produces copies suitable 
for a permanent record. Irrespective of the process used, all copies of 
any such materials shall be clear and easily readable.
    (e) Headings, subheadings, captions, introductory paragraphs, 
warnings. Property Report subject ``headings'' are those descriptive 
introductory words which appear immediately after section numbers 
1010.106 through 1010.116 (e.g. Sec.  1010.108 has ``General 
Information'' and Sec.  1010.111 has ``Utilities''). Each such heading 
shall be printed in the Property Report in underlined capital letters 
and centered at the top of a new page. Section numbers shall not be 
printed in the Property Report. Property Report subheadings are those 
descriptive introductory words which appear in italics in the 
regulations at the beginning of paragraphs designated by paragraph 
letters (a), (b), (c) etc. An example of a subheading is ``water'' found 
immediately after the paragraph letter (a) in Sec.  1010.111. These 
subheadings will be printed in the Property Report only if they are 
relevant to the subject subdivision. If printed these subheadings shall 
be capitalized and shall begin at the left hand margin of the page. 
Property Report ``captions'' are those descriptive introductory words 
which appear in italics in the Regulations at the beginning of 
paragraphs designated by numbers (1), (2), (3), etc. An example of such 
captions is ``Sales Contract and Delivery of Deed'' found immediately 
after the paragraph number ``(1)'' in Sec.  1010.109(b). These captions 
are to be printed in the Property Report only if they are applicable to 
the subject subdivision. If printed, these captions shall be centered on 
the page from the side margins, and shall have only the first letter of 
each word capitalized. Headings and subheadings will be used in the 
Property Report in accordance with the sample page appearing in section 
IX of the appendix to this part. Introductory paragraphs will follow 
headings if they are applicable and necessary for a readable entry into 
the subject matters, but note, the introductory paragraphs for ``Title 
to the Property and Land Use'' are to be used in every case as provided 
in

[[Page 454]]

Sec.  1010.109(a)(1). Subheadings and captions which do not apply to the 
subdivision should be omitted from the Property Report portion and 
answered ``not applicable'' in the Additional Information and 
Documentation portion, unless specifically required to be included 
elsewhere in these instructions. Warnings shall be printed substantially 
as they appear in the instructions in Sec. Sec.  1010.105 through 
1010.118. They shall be printed in capital letters and may be enclosed 
in a box. The paragraphs in the Property Report portion need not be 
numbered. A sample page is set forth in section IX of the appendix to 
this part: Sample Page for Statement of Record.
    (f) Language style. All information given in the Property Report 
portion shall be stated in narrative form using plain, concise, everyday 
language which can be readily understood by purchasers who are 
unfamiliar with real estate transactions. Excessively long paragraphs 
should be avoided. Keep them as brief as possible. Use separate 
paragraphs for different points discussed. Disclose all pertinent facts. 
Potential consequences to a purchaser must be made clear even though not 
specifically asked for in the format and the instructions. In the 
Property Report the pronouns ``you'' and ``your'' shall generally be 
used in referring to the prospective purchaser and the pronouns ``we,'' 
``us,'' and ``our'' shall generally be used in referring to the 
developer. The Director specifically reserves the right to require 
modification of the text when the narrative does not meet the standards 
of this section.
    (g) Format of the Additional Information and Documentation portion 
of the Statement of Record. The supporting information and documentation 
required by these regulations shall be identified by affixing a tab on 
the right side of the cover sheet of the required information or 
documentation and by identifying on the tab the section number of the 
Statement of Record instructions to which the information or 
documentation corresponds. This information or documentation shall then 
be placed immediately after the page(s) on which the section number and 
answers for that section appear. If the data in a document is applicable 
to more than one section of instructions, the developer may substitute 
as a document in the second case a statement incorporating the earlier 
document. Deeds, title policies, subdivision plats or maps and other 
documentary information required to be contained in the Additional 
Information and Documentation portion of the Statement of Record need 
not be on the same size paper as the Statement of Record but, if larger, 
shall be folded to a size no larger than 8\1/2\ x 14 inches. Supporting 
documents shall be inserted into the binding in such a manner as to 
permit them to be examined without the necessity of removing them from 
the binding. This may be accomplished by proper folding or through the 
use of envelopes.
    (h) Ordering. The Statement of Record shall be filed with the 
Property Report portion on top, including any documents which may be 
required to be attached when delivered to the purchaser, followed by the 
Additional Information and Documentation portion.
    (i) Advertising and promotional material. No advertising, or 
promotional material or statements which are self-serving on behalf of 
the developer or owner may be included in the Statement of Record or 
resulting Property Report.
    (j) Additional information. (1) In addition to the information 
expressly required to be stated in the Statement of Record, there shall 
be added, and the Director may require, such further material 
information, documentation and certification as may be necessary in the 
public interest and for the protection of purchasers or necessary in 
order to make the statements not misleading in the light of 
circumstances under which they are made.
    (2) The instructions are not all inclusive. The developer shall 
include any other facts which would have a bearing upon the use by the 
purchaser of any of the facilities, services or amenities; which would 
cause or result in additional expenses to the purchaser; which would 
have an effect upon the use and enjoyment of the lot by the purchaser 
for the purpose for which it is sold or which would adversely affect the 
value of the lot.

[[Page 455]]

    (k) Modification of format or content. The Director may require or 
permit modification to the content and format of the Property Report to 
include additional information, to modify or omit required information, 
or to change the sequence or position of information when such changes 
are deemed to be in the public interest or for the protection of 
purchasers.
    (l) Required documentation. Where the documentation required by the 
Statement of Record cannot be obtained, the Director may permit the best 
available alternative documentation to be substituted.
    (m) Final version of Property Report. On the date that a Statement 
of Record becomes effective, the Property Report portion shall become 
the Property Report for the subject subdivision. The version of the 
Property Report delivered to prospective lot purchasers shall be 
verbatim to that found effective by the Director and shall have no 
covers, pictures, emblems, logograms or identifying insignia other than 
as required by these regulations. It shall meet the same standards as to 
grade of paper, type size, margins, style and color of print as those 
set herein for the Statement of Record, except where required otherwise 
by these regulations. However, the date of typing or preparation of the 
pages and the ILSRP number shall not appear in the final version. If the 
final version of the Property Report is commercially printed, or 
photocopied by a process which results in a commercial printing quality, 
and is bound on the left side, both sides of the pages may be used for 
printed material. If it is typed or photocopied by a process which does 
not result in a clear and legible product on both sides of the page or 
is bound at the top, printing shall be done on only one side of the 
page. If a Statement of Record is filed with the Bureau via electronic 
means pursuant to Sec.  1010.20(a), the version of the Property Report 
delivered to prospective lot purchasers shall meet the same standards 
that apply under these regulations to a Statement of Record not filed 
with the Bureau via electronic means. One copy of the final version of 
the Property Report, in the exact form in which it is delivered to 
prospective lot purchasers, shall be sent to ILSRP Office within 20 days 
of the date on which the Statement of Record, amendment, or 
consolidation is allowed to become effective by the Director. If a 
Property Report in a foreign language is used as required by Sec.  
1011.25(g), a copy of that Property Report together with a copy of the 
translated documents shall be furnished the Director within 20 days of 
the date on which the advertising is first used. A Property Report 
prepared pursuant to these regulations shall not be distributed to 
potential lot purchasers until after the Statement of Record of which it 
is a part or any amendment to that Statement of Record has been made 
effective by the Director.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29116, May 11, 2016]



Sec.  1010.103  Developer obligated improvements.

    (a) If the developer represents either orally or in writing that it 
will provide or complete roads or facilities for water, sewer, gas, 
electricity or recreational amenities, it must be contractually 
obligated to do so, and the obligation shall be clearly stated in the 
Property Report. While the developer may disclose relevant facts about 
completion, the obligation to complete cannot be conditioned, other than 
as permitted by 15 U.S.C. 1703(a)(2), and an estimated completion date 
(month and year) must be stated in the Property Report. However, a 
developer that has only tentative plans to complete may so state in the 
Property Report, provided that the statement clearly identifies 
conditions to which the completion of the facilities are subject and 
states that there are no guarantees the facilities will be completed.
    (b) If a party other than the developer is responsible for providing 
or completing roads or facilities for water, sewer, gas, electricity or 
recreational amenities, that entity shall be clearly identified in the 
Property Report under the categories described in Sec.  1010.110, Sec.  
1010.111 or Sec.  1010.114, as applicable. A statement shall be included 
in the proper section of the Property Report that the developer is not 
responsible for providing or completing the facility or amenity and can 
give no

[[Page 456]]

assurance that it will be completed or available for use.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29117, May 11, 2016]



Sec.  1010.104  [Reserved]



Sec.  1010.105  Cover page.

    The cover page of the Property Report shall be prepared in 
accordance with the following directions:
    (a) The margins shall be at least 1 inch.
    (b) The next 3 inches shall contain a warning, centered, in \1/2\ 
inch capital letters in red type with \1/4\ inch space between the lines 
which reads as follows: ``READ THIS PROPERTY REPORT BEFORE SIGNING 
ANYTHING''.
    (c) The remainder of the page shall contain the language set forth 
in section X of the appendix to this part: Language for Warning on Cover 
Page of Property Report beginning \1/4\-inch below the last line of the 
warning.
    (d)(1) If the purchaser is entitled to a longer revocation period by 
operation of state law, that period becomes the Federal revocation 
period and the Cover Page must reflect the requirements of the longer 
period, rather than the seven days.
    (2)(i) If a deed is not delivered within 180 days of the signing of 
the contract or agreement of sale or unless certain provisions are 
included in the contract or agreement, the purchaser is entitled to 
cancel the contract within two years from the date of signing the 
contract or agreement.
    (ii) The deed must be a warranty deed, or where such a deed is not 
commonly used, a similar deed legally acceptable in the jurisdiction 
where the lot is located. The deed must be free and clear of liens and 
encumbrances.
    (iii) The contract provisions are:
    (A) A legally sufficient and recordable lot description; and
    (B) A provision that the seller will give the purchaser written 
notification of purchaser's default or breach of contract and the 
opportunity to have at least 20 days from the receipt of notice to 
correct the default or breach; and
    (C) A provision that, if the purchaser loses rights and interest in 
the lot because of the purchaser's default or breach of contract after 
15% of the purchase price, exclusive of interest, has been paid, the 
seller shall refund to the purchaser any amount which remains from the 
payments made after subtracting 15% of the purchase price, exclusive of 
interest, or the amount of the seller's actual damages, whichever is the 
greater.
    (iv) If a deed is not delivered within 180 days of the signing of 
the contract or if the necessary provisions are not included in the 
contract, the following statement shall be used in place of any other 
rescission language: ``Under Federal law you may cancel your contract or 
agreement of sale any time within two years from the date of signing.''
    (e) At the time of submission, the developer may indicate its 
intention to comply with the red printing by an illustration or by a 
statement to that effect.
    (f) The ``Date of This Report'' shall be the date on which the 
Director allows the Statement of Record to become effective and shall 
not be entered until the submission has become effective.



Sec.  1010.106  Table of contents.

    (a) The second page(s) shall consist of a Table of Contents which 
lists the headings in the Property Report, the major subheadings, if 
any, and the page on which they appear. An example is set forth in 
section XI of the appendix to this part: Sample Entry in Table of 
Contents for Statement of Record.
    (b) Use of ``You'' and ``We.'' At the end of the Table of Contents 
insert the following remark: ``In this Property Report, the words 
``you'' and ``your'' refer to the buyer. The words ``we,'' ``us'' and 
``our'' refer to the developer.''



Sec.  1010.107  Risks of buying land.

    (a) The next page shall be headed ``Risks of Buying Land'' and shall 
contain the paragraphs listed in section XII of the appendix to this 
part: Required Paragraphs for Risks of Buying Land.
    (b) Warnings. If the instructions of the Director require any 
warnings to be included in the Property Report portion, the following 
statement shall be added beneath the ``Risks of Buying Land'' under a 
heading ``Warnings'':

[[Page 457]]

``Throughout this Property Report there are specific warnings concerning 
the developer, the subdivision or individual lots. Be sure to read all 
warnings carefully before signing any contract or agreement.'' Both the 
heading, ``Warnings,'' and the statement shall be printed in capital 
letters and enclosed in a box.



Sec.  1010.108  General information.

    Insert and complete the format set forth in section XIII of the 
appendix to this part: Format for General Information.



Sec.  1010.109  Title to the property and land use.

    (a) General instructions. (1) Below the heading ``Title to the 
Property and Land Use'' insert the introductory paragraphs set forth in 
section XIV of the appendix to this part: Paragraphs to be included in 
the General Report--Title to the Property and Land Use.
    (2) Information to be provided. After the above introductory 
paragraphs provide the information required by the following 
instructions and questions. Follow a general form identical to the 
sample page set forth in section IX of the appendix to this part: Sample 
Page for Statement of Record.
    (b) Method of sale:
    (1) Sales contract and delivery of deed. (i) Will the buyer sign a 
purchase money or installment contract or similar instrument in 
connection with the purchase of the lot? When will a deed be delivered?
    (ii) If an installment contract is used, include the following, or 
substantially the same, language in the disclosure narrative under 
``Method of Sale'': ``If you fail to make your payments required by the 
contract, you may lose your lot and all monies paid.''
    (iii) If, at the time of a credit sale, the developer gives the 
buyer a deed to the lot, what type of security must the buyer give the 
seller?
    (iv) If the lots are to be sold on the basis of an installment 
contract, can the developer or the owner of the subdivision or their 
creditors encumber the lots under contract? If so, include the following 
warning in the disclosure narrative under the caption ``Sales contract 
and delivery of deed'': ``The (indicate subdivision developer, owner, or 
their creditors) can place a mortgage on or encumber the lots in this 
subdivision after they are under contract. This may cause you to lose 
your lot and any monies paid on it.''
    (2) Type of deed. What type of deed will be used to convey title to 
lots in the subdivision?
    (3) Quitclaim deeds. If a quitclaim deed is to be given to lot 
purchasers insert the below warning, or a warning which is substantially 
the same, in the disclosure narrative below the caption ``Quitclaim 
Deeds.'' This particular warning may be deleted at the direction of the 
Director if an acceptable attorney's opinion is submitted with the 
Statement of Record which indicates that a quitclaim deed has a meaning 
in the jurisdiction where the subdivision is located which is 
substantially contrary to the effect of this warning. This warning shall 
be phrased substantially as follows: ``The Quitclaim deed used to 
transfer title to lots in this subdivision gives you no assurance of 
ownership of your lot.''
    (4) Oil, gas, and mineral rights. If oil, gas or mineral rights have 
been reserved, insert the following statement or one substantially the 
same in the narrative answer under the caption ``oil, gas, and mineral 
rights'': ``The (indicate oil, gas, or mineral rights) to (state which 
lots) in this subdivision will not belong to the purchaser of those 
lots. The exercise of these rights could affect the use, enjoyment and 
value of your lot.''
    (c) Encumbrances, mortgages and liens--(1) In general. State whether 
any of the lots or common facilities which serve the subdivision, other 
than recreation facilities, are subject to a blanket encumbrance, 
mortgage or lien. If yes, identify the type of encumbrance (e.g., deed 
of trust, mortgage, mechanics liens), the holder of the lien, and the 
lots covered by the lien. If any blanket encumbrance, mortgage, or lien 
is not current in accordance with its terms, so indicate.
    (2) Release provisions. (i) Explain the effect of any release 
provisions of any blanket encumbrance, mortgage or lien and include the 
one of the following statements that pertains.

[[Page 458]]

    (A) If the release clauses are not included in a recorded 
instrument, insert the statement set forth in section XV of the appendix 
to this part: Statement on Release Provisions, or one substantially the 
same in the disclosure narrative below under the caption ``Release 
Provisions.''
    (B) If the developer or subdivision owner states that the release 
provisions are recorded and that the lot purchaser may pay the release 
price of the mortgage, the statement shall be supported by documentation 
supplied in Sec.  1010.209. If the purchaser may pay the release fee, 
state the amount of the release fee and inform the purchaser that the 
amount may be in addition to the contract payments unless there is a 
bona fide trust or escrow arrangement in which the purchaser's payments 
are set aside to pay the release price before any payments are made to 
the developer.
    (C)(1) If there are no provisions in the blanket encumbrance for 
release of an individual purchaser's lot from a blanket encumbrance, 
include the warning set forth in section XVI of the appendix to this 
part: Warning for Release Provisions or a warning substantially the 
same, in the disclosure narrative under the ``Release Provisions'' 
caption.
    (2) If the provisions for release of individual lots from the 
blanket encumbrance may be exercised only by the developer insert the 
following statement, or one substantially the same, in the disclosure 
narrative under the ``Release Provisions'' caption: ``The release 
provisions in the (state the type of encumbrance) on (indicate all or 
particular lots) in this subdivision may be exercised only by us. 
Therefore, if we default on the (state type of encumbrance) before 
obtaining a release of your lot, you may lose your lot and any money you 
have paid for it.''
    (d) Recording the contract and deed--(1) Method or purpose of 
recording. (i) State what protection, if any, recording of deeds and 
contracts gives a lot purchaser in your jurisdiction.
    (ii) If the sales contract or deed may be recorded, so state. Also 
state whose responsibility it is to record the contract or deed.
    (iii) If the developer or subdivision owner will not have the sales 
contract officially acknowledged or if the applicable jurisdiction will 
not record sales contracts, state that sales contracts will not be 
recorded and why they will not be recorded.
    (iv) If at, or immediately after, the signing of a contract, the 
contract or a deed transfer to the buyer is not recorded by the 
developer or owner or if title to the lot is not otherwise transferred 
of record to a trust, or if other sufficient notice of transfer or sale 
is not placed of record, then the developer shall include the warning 
set forth in section XVII of the appendix to this part: Method and 
Purpose of Recording Warning, or substantially the same warning in the 
disclosure narrative under the caption ``Method and Purpose of 
Recording.'' The reference to contracts shall be deleted from the above 
warning if the answer to paragraph (d)(1)(i) of this section indicates 
that recording of a contract in the subject jurisdiction does not 
protect the purchaser from claims of later purchasers or creditors of 
anyone having an interest in the land.
    (2) Title insurance. If the developer does not deliver a title 
insurance policy to the buyer, state that the purchaser should obtain an 
attorney's opinion of title or a title insurance policy which will 
describe the rights of ownership which are being acquired in the lot. 
Recommend that an appropriate professional should interpret the opinion 
or policy.
    (e) Payments--(1) Escrow. If purchasers' deposits, down payments, or 
installment payments are to be placed in a third party controlled escrow 
or similar account, describe the arrangement including the name and 
address of the escrow holder or similar person. If there is no such 
arrangement, insert the statement set forth in section XVIII of the 
appendix to this part: Escrow Statement. The questions regarding an 
escrow agreement or similar protection may be answered affirmatively 
only if the money is under the control of an independent third party, 
allowing a purchaser to receive a return of all money paid in the event 
of the developer's failure to convey title or the developer's default on 
any obligation which would otherwise result in the purchaser's loss of 
that money.

[[Page 459]]

    (2) Prepayments. Explain any prepayment penalties or privileges in 
everyday language.
    (3) Default. What are the developer's or subdivision owners' 
remedies against a defaulted purchaser?
    (f) Restrictions on the use of your lot--(1) Restrictive covenants. 
(i) Have any restrictive covenants been recorded against the land in the 
subdivision? If so, do they contain items which require the purchaser to 
secure permissions, approvals or take any other action prior to using or 
disposing of his lot (e.g., architectural control, developer's right of 
first refusal, building deadlines, etc.)? If any of these or similar 
items are included, explain their meaning and effect upon the purchaser.
    (ii) If any restrictive covenants are to be used and if they have 
not been recorded, how will they be imposed? Include a statement to the 
effect that the restrictive covenants have not been recorded; that there 
is no assurance they will be applied uniformly; that they may be changed 
and that they may be difficult to enforce. If no restrictive covenants 
will be imposed, include a statement to the effect that, since there are 
no restrictive covenants on the use of the lots, they may be used for 
purposes which could adversely affect the use and enjoyment of 
surrounding lots.
    (iii) If there are restrictive covenants, whether recorded or 
unrecorded, the following statement shall be made: ``A complete copy of 
these restrictions is available upon request.''
    (2) Easements. (i) Are there easements which may have an effect on 
the purchaser's building or lot use plans (e.g., large drainage 
easements along lot lines, high voltage electric transmission lines, 
pipe lines or drainage easements which encroach upon the building area 
of the lot or inhibit its use)?
    (ii) Is the subdivision subject to any type of flood control or 
flowage easements?
    (iii) If the answer to either (2)(i) or (2)(ii) is in the 
affirmative, identify the affected lots and state the effect upon the 
use of the lots.
    (g) Plats, zoning, surveying, permits and environment--(1) Plats. 
(i) Have the subdivision plans and plats of specific units been approved 
by the regulatory authorities? If the approvals have not been obtained, 
include a warning to the effect that regulatory authorities have not 
approved the proposed plats; that they may require significant 
alterations before they will approve them and they may not allow the 
land to be used for the purpose for which it is being sold.
    (ii) Have plats covering the lots in this Report been recorded? If 
so, where are they recorded? If they have not been recorded, is the 
description of the lots given in this Report legally adequate for the 
conveyance of land in the jurisdiction where the subdivision is located? 
If it is not, include a statement to the effect that the description of 
the lots is not legally adequate for the conveyance of the lots and that 
it will not be until the plat is recorded.
    (2) Zoning. For what purpose may the lots be used (e.g., single 
family homes, camping, commercial)? Does this use conform to local 
zoning requirements and the restrictive covenants?
    (3) Surveying. Has each lot been surveyed and is each lot marked for 
identification? If not, and the purchaser is responsible for the 
expense, state the estimated cost.
    (4) Permits. Must the purchaser obtain a building permit before 
beginning construction on his lot? Where is the permit obtained? Are any 
other permits necessary to use the lot for the purpose for which it is 
sold or for construction in connection with its use?
    (5) Environment. Has there been any environmental impact study 
prepared which considers the effect of the subdivision on the 
environment? If a study has been prepared, summarize any adverse 
conclusions and refer the lot buyer to the proper State Clearinghouse 
for complete information. If a study has not been prepared, include a 
statement that ``No determination has been made as to the possible 
adverse effects the subdivision may have upon the environment and 
surrounding area.'' If the developer does not know whether an 
environmental impact study has been prepared, or the name and location 
of the Office where any study made can be found, inquiry should be made 
to the State or Area Clearinghouse established under the

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authority of title IV of the Intergovernmental Cooperation Act of 1968.



Sec.  1010.110  Roads.

    (a) Access to the subdivision. (1) Is access to the subdivision 
provided by public or private roads? What type of surface do they have? 
How many lanes? What is the width of the wearing surface?
    (2) Who is responsible for their maintenance? What is the cost to 
the purchaser, if any? Are any improvements contemplated? If so, when 
will they begin and when will they be completed? At whose expense?
    (b) Access within the subdivision. (1) How have legal and physical 
access by conventional automobile been or will they be, provided to the 
lots (e.g., road on recorded easement; right of way dedicated to the 
public; right of way dedicated to use of lot owners)?
    (2) Who is responsible for the road construction? Is there any 
construction cost to the purchaser? Is there any financial assurance of 
completion? If there is no financial assurance of completion, enter a 
warning to the effect that no funds have been set aside in an escrow or 
trust account and there are no other financial arrangements to assure 
completion of the roads.
    (3) How many lanes do the interior roads have? What is the estimated 
starting date of construction (month and year); the present percentage 
of construction now complete; the present surface; the estimated 
completion date (month and year) and what is the final surface to be? If 
there are separate units or sections in the subdivision which will have 
different completion dates or different surfaces, the chart in section 
XIX of the appendix to this part: Road Chart shall be used rather than a 
narrative paragraph.
    (4) Who is responsible for road maintenance? If the roads are to be 
maintained by a public authority, a property owners' association or some 
other entity at some time in the future, who is responsible for their 
maintenance during the interim period? What is the cost to the purchaser 
during the interim period and after acceptance for permanent 
maintenance? Will they be maintained so as to provide access to the lots 
on a year round basis? If not, include a warning which informs the 
purchaser that access may not be available year round. Identify the 
months when access may not be available to lots. If there are no 
arrangements for maintenance, include a warning to the effect that 
purchasers are responsible for maintaining the roads and that, if 
maintenance is not performed, the roads may soon deteriorate and access 
may become difficult or impossible.
    (5) If estimated completion dates given in prior Statements of 
Record have not been met, state that previous dates have not been met 
and give the previous dates. Underline the answer. If the roads are 100 
percent completed, no dates are needed.
    (6) Complete the chart in section XX of the appendix to this part: 
Nearby Communities Chart by listing the county seat (identify) and at 
least two nearby communities. Include at least one community of 
significant size which offers general services.
    (7) If the purchasers will be individually responsible for providing 
access to their lots and for maintaining that access, what is the 
estimated cost of construction and maintenance?



Sec.  1010.111  Utilities.

    (a) Water. (1) How is water to be supplied to the individual lots 
(e.g., central system or individual wells)? Of the following items only 
those which apply to the subdivision need be included.
    (i) Individual system. (A) If water is to be supplied by an 
individual private well, cistern or other individual system, what are 
the total estimated costs of the system, including but not limited to, 
the costs of installation, storage, any treatment facilities and other 
necessary equipment?
    (B) If individual cisterns or similar storage tanks are to be used, 
state where water to fill them can be secured; the cost of the water, 
and its delivery costs for a supply sufficient to serve the monthly 
needs of a family of four living in a house on a year-round basis. 
Include a statement to the effect that water stored for extended periods 
tends to become stale and may acquire an unpleasant taste or odor.
    (C) If individual wells are to be used and if the sales contract 
contains no

[[Page 461]]

provisions for refund or exchange in the event a productive well cannot 
be installed, include a statement to the effect that there is no 
assurance a productive well can be installed and, if it cannot, no 
refund of the purchase price of the lot will be made.
    (D) If individual wells or individual cisterns are to be used, 
include a brief statement to the effect that the purity and chemical 
content of the water cannot be determined until each individual well or 
source of water is completed and tested.
    (E) If there have been no hydrological surveys in connection with 
the use of individual wells or sources of hauled water for cisterns, 
include a warning to the effect that there is no assurance of a 
sufficient supply of water for the anticipated population.
    (F) Is a permit required to install the individual system to be 
used? If so, from whom and where is the permit secured? State the cost 
of a permit.
    (ii) Central system. (A) If water is to be provided by a central 
system, who is the supplier? What is the supplier's address?
    (B) Will the water mains be extended in front of, or adjacent to, 
each lot? When will construction begin? What is the present percentage 
of completion of the water mains and central supply plant? When will 
service be available to the individual lots? If the central system is 
not complete and there are separate units or sections of the subdivision 
included in the Statement of Record which have different completion 
dates, then the starting date for construction (month and year), the 
percentage of construction now complete and the estimated service 
availability date (month and year) shall be set forth in the chart in 
section XXI of the appendix to this part: Water Chart Form rather than 
in a narrative paragraph.
    (C) What is the present capacity of the central plant (i.e., how 
many connections can be supplied)? If the capacity is not sufficient to 
serve all lots in the Statement of Record and is to be expanded in 
phases, what is the time-table for each phase to be in service and what 
will trigger the beginning of the expansion for each phase? If an entity 
other than the developer or an affiliate or subsidiary of the developer 
will supply the water for the central system; if the operation of that 
entity is supervised by a governmental agency and if that entity states 
it can supply the anticipated population of the development, then 
information as to the capacity of the plant and a hydrological survey is 
not necessary. If the entity does not indicate it can supply enough 
water for the anticipated population or if the capacity of any central 
system is not sufficient to serve all lots in the Statement of Record, 
include a warning which describes the limitations and sets forth the 
number of lots which can now be served.
    (D) Have there been any hydrological surveys to determine that a 
sufficient source of water is available to serve the anticipated 
population of the subdivision? Has the water in the central system been 
tested for purity and chemical content? If so, did the results show that 
the water meets all standards for a public water supply? If there have 
been no hydrological surveys showing a sufficient supply of water or no 
tests for purity and chemical content for the central system, include a 
warning to the effect that there is no assurance of a sufficient supply 
or that the water is drinkable.
    (E) Is there any financial assurance of completion of the central 
system and any future expansion? If not, include a warning to the effect 
that no funds have been set aside in an escrow or trust account nor have 
any other financial arrangements been made to assure completion of the 
water system.
    (F) If the developer or an affiliate or subsidiary of the developer 
operates the central system, have all permits been obtained from the 
proper agencies for the construction, use and operation of the central 
system? If not, include a warning to the effect that the required 
permits, approvals or licenses for construction, operation or use of the 
water system have not been obtained, therefore there is no assurance the 
system can be constructed or used.
    (G) If previous completion dates given in prior Statements of Record 
have not been met, state that previous completion dates have not been 
met and give the previous dates. Underline

[[Page 462]]

the answer. If the central water system is 100 percent completed, no 
dates are needed.
    (H) Is the purchaser to pay any construction costs, one-time 
connection fees, availability fees, special assessments or deposits for 
the central system? If so, what are the amounts? If not, state that 
there are no charges other than use fees. If the purchaser will be 
responsible for construction costs of the water mains, state the cost to 
install the mains to the most remote lot covered by this report.
    (I) If a purchaser wishes to use a lot prior to the date central 
water is available to it, may the purchaser install an individual 
system? If so, include the information required for individual systems 
in Sec.  1010.111(a)(1)(i). Will the purchaser be required to 
discontinue use of any individual system and connect to the central 
system when service is available to the lot? If the purchaser is not 
required to connect to the central system, must any construction costs, 
connection fees, availability fees, special assessments or deposits in 
connection with the central system still be paid? If an individual 
system may not be installed, so state and indicate water will not be 
available until the central system is extended to the lot.
    (J) If connection to the system is voluntary and not all purchasers 
elect to use the system, will the cost to those who do use the system be 
increased? If so, include a statement to the effect that connection to 
the central system is voluntary and those who use the system may have to 
pay a disproportionate share of the cost of the system and its 
operation.
    (K) If the developer is to construct the system and will later turn 
it over to a property owners' association for operation and maintenance, 
state the estimated date and conditions of the conveyance and if it will 
be conveyed free and clear of any encumbrance. If there is a charge or 
if the association must assume an encumbrance, state the estimated 
amount of either and the terms for retirement of either obligation.
    (L) If the supplier of water is other than a governmental agency or 
an entity which is regulated and supervised by a governmental agency, 
state that neither the operation of the water system nor the rates are 
regulated by a public authority.
    (M) The warning ``We do not own or operate the central water system 
so we cannot assure its continued availability for your use'' shall be 
included unless:
    (1) The central water system is owned and operated by the developer, 
or an affiliate or subsidiary of the developer, or
    (2) The central water system is owned and operated by a governmental 
agency or by an entity which is regulated and supervised by a 
governmental agency.
    (b) Sewer. (1) What methods of sewage disposal are to be used (e.g., 
central system, comfort stations or individual on-site systems such as 
septic tanks, holding tanks, etc.) in the subdivision? Of the following 
items, only those which apply to the subdivision need be included.
    (i) Individual systems. (A) If individual systems are to be used, 
have the local authorities given general approval to the use of these 
systems in the subdivision or have they given specific approval for each 
lot? Are permits necessary? From whom and where are they obtained? Must 
testing of the lot be done prior to the issuance of a permit? State the 
cost of a permit and the estimated costs of the system and any necessary 
tests.
    (B) If holding tanks are to be used, state whether pumping and 
hauling service is available and the estimated monthly costs of that 
service for a family of four living in a house on a year-round basis.
    (C) If each and every lot has not been approved for the use of an 
individual on-site system, include a warning to the effect that there is 
no assurance permits can be obtained for the installation and use of 
individual on-site systems. If the sales contract contains no provisions 
for refund or exchange in the event a permit cannot be obtained, include 
a statement to the effect that there is no assurance an individual on-
site system can be installed and, if it cannot, no refund of the 
purchase price of the lot will be made.
    (D) If no permit is required for the installation and use of 
individual on-site

[[Page 463]]

systems, explain whether this may have an effect upon the purchaser or 
the availability of construction or permanent financing.
    (E) If the developer has knowledge that permits for the installation 
of individual on-site systems have been denied; that there have been 
unsatisfactory percolation tests or that systems have not operated 
satisfactory in the subdivision, state the number of these rejections, 
unsatisfactory tests or operations.
    (ii) Comfort stations. (A) If comfort stations are to be used, how 
many lots will be served by each station? When will construction be 
started? When will the station or stations be completed and ready for 
use? Have the necessary permits been obtained for the construction and 
use of comfort stations? If the necessary permits have not been 
obtained, include a warning that the necessary permits, approvals or 
licenses have not been obtained for the construction and use of the 
comfort stations; therefore there is no assurance they can be 
constructed or used. If there are comfort stations located in different 
units and having different completion dates, the chart found in section 
XXII of the appendix to this part: Comfort Station Chart shall be used 
to show the estimated construction starting date (month and year), the 
present percentage of completion and the date on which they will be used 
rather than a narrative paragraph.
    (B) Who is to construct the comfort stations? Is there any financial 
assurance of their completion? If not, include a warning to the effect 
that no funds have been set aside in an escrow or trust account nor have 
any other financial arrangements been made to assure completion of the 
comfort stations and there is no assurance the facilities will be 
completed.
    (C) Who will be responsible for maintenance of the comfort stations? 
Is there any cost to the purchaser for construction, use or maintenance?
    (iii) Central system. (A) If a central sewage treatment and 
collection system is being installed, who is responsible for 
construction of the system? Will the sewer mains be installed in front 
of, or adjacent to, each lot? When will construction be started (month 
and year)? When will service be available (month and year)? Who will own 
and operate the system? Give the name and address of the entity.
    (B) What is the present percentage of completion and the present 
capacity of the system (i.e., number of connections which can be 
served)? If the present capacity is not sufficient to serve all lots in 
the Statement of Record and it is to be expanded in phases, what is the 
time-table for expansion and what will trigger that expansion? If the 
central system is not complete and there are separate units or sections 
of the subdivision which have different service availability dates, the 
chart found in section XXIII of the appendix to this part: Sewer Chart 
shall be used to show the construction starting date (month and year); 
the percentage of completion and service availability date (month and 
year) in each unit or section rather than a narrative paragraph. If 
sewage treatment facilities are to be supplied by an entity which is 
regulated by a governmental agency and which is not the developer or an 
affiliate or subsidiary of the developer and the entity has stated it 
can serve the anticipated population of the development, then 
information on capacity need not appear.
    (C) If the developer or an affiliate or subsidiary of the developer 
operates the central system, have all necessary permits been obtained 
for the construction, operation and use of the central system? Do these 
permits limit the number of connections or homes which the system may 
serve? If the permits have not been obtained, enter a warning to the 
effect that the necessary permits, approvals or licenses have not been 
obtained for the central sewage system; therefore there is no assurance 
that the system can be completed, operated or used.
    (D) If the system cannot now serve all lots included in the 
Statement of Record, either because the supplier of the service has not 
stated it can and will serve all lots or if construction has not reached 
a stage where all lots can be served or permits to serve all lots have 
not been obtained, include a warning which states that all lots cannot 
now be served; the number which

[[Page 464]]

can be served and the reason for the lack of capacity.
    (E) Will the purchaser pay any construction costs, special 
assessments, one time connection fees or availability fees? What are the 
amounts of these charges? If the purchaser is to pay construction costs 
of the sewer mains, state the cost of installation of the mains to the 
most remote lot in this Report.
    (F) If the purchaser wishes to use the lot prior to the date central 
sewer service is available, may the purchaser install an individual 
system? If so, include the information on individual systems required by 
Sec.  1010.111(b)(1)(i). Will the purchaser be required to discontinue 
use of the individual system and connect to the central system when 
service is available? If the purchaser is not required to connect to the 
central system, must the purchaser still pay any construction costs, 
connection fees, availability fees, or special assessments? If the 
purchaser may not install an individual system, so state and indicate 
service will not be available until the central system reaches the lot.
    (G) If connection to the system is voluntary and not all purchasers 
elect to use the system, will the cost to those who do use the system be 
increased? If so, include a statement to the effect that connection to 
the central system is voluntary and those who use the system may have to 
pay a disproportionate share of the cost of the system and its 
operation.
    (H) Is there any financial assurance of completion of the central 
system and any future expansion? If not, include a warning that no funds 
have been set aside in an escrow or trust account nor have any other 
financial arrangements been made to assure the completion of the central 
system; therefore there is no assurance that it will be completed.
    (I) If previous completion dates given in prior Statements of Record 
have not been met, state that previous dates have not been met and give 
the previous dates. Underline the answer. If the central sewage 
treatment and collection system are 100 percent completed, no dates are 
needed.
    (J) If the developer is to construct the system and will later turn 
it over to a property owners' association for operation and maintenance, 
state the date of the transfer and whether there will be any charge for 
the conveyance and if it will be conveyed free and clear of any 
encumbrance. If there is a charge or if the association must assume an 
encumbrance, state the estimated amount of either and the terms for 
retirement of either obligation.
    (K) If the owner or operator of the central sewer system is other 
than a governmental agency or an entity which is regulated and 
supervised by a governmental agency, state that neither the operation of 
the sewer system nor the rates are regulated by a public authority.
    (L) The warning ``We do not own or operate the central sewer system 
so we cannot assure its continued availability for your use.'' shall be 
included unless:
    (1) The central sewer system is owned and operated by the developer, 
or an affiliate or subsidiary of the developer, or
    (2) The central sewer system is owned and operated by a governmental 
agency or by an entity which is regulated and supervised by a 
governmental agency.
    (c) Electricity. (1) Who will provide electrical services to the 
subdivision?
    (2) Have primary electrical service lines been extended in front of, 
or adjacent to, all of the lots? If not, when (month and year) or under 
what conditions will construction begin and when will service be 
available? If they have not been installed, who is responsible for their 
construction? If electrical service lines have not been extended in 
front of, or adjacent to, all lots and there are separate units or 
sections having different service availability dates, the chart found in 
section XXIV of the appendix to this part: Electric Service Chart shall 
be used rather than a narrative paragraph.
    (3) If construction of the lines or service to the ultimate consumer 
is provided by an entity other than a publicly regulated utility, who 
provides, or will provide, the service? Who will be responsible for 
maintenance? What is the assurance of completion? If service

[[Page 465]]

is not provided by a publicly regulated utility, what charges or 
assessments will the purchaser pay?
    (4) If the primary service lines have not been extended in front of, 
or adjacent to each lot, will the purchaser be responsible for any 
construction costs? If so, what is the utility company's policy and 
charges for extension of primary lines? Based on that policy, what would 
be the cost to the purchaser for extending primary service to the most 
remote lot in this Report?
    (5) If electrical service will not be provided, what is an alternate 
source (e.g., generators, etc.) and what are the estimated costs?
    (6) If the lines are to be installed by some entity other than a 
publicly regulated utility and if there is no financial assurance of 
completion, include a warning to the effect that no funds have been set 
aside in an escrow or trust account nor have any other financial 
arrangements been made to assure construction of the electric lines.
    (d) Telephone. (1) Is telephone service now, or will it be, 
available? Who will furnish the service?
    (2) Have the service lines been extended in front of, or adjacent 
to, each of the lots? If not, when, and under what conditions, will 
construction be started and when will service be available (month and 
year)?
    (3) If the service lines have not been extended in front of, or 
adjacent to, each lot, will the purchaser be responsible for any 
construction costs? If so, what is the utility company's policy and 
charges for extension of service lines? Based on that policy, what would 
be the cost to the purchaser of extending service lines to the most 
remote lot in this Report?
    (e) Fuel or other energy source. (1) What fuel, or other energy 
source, will be available for heating, cooking, etc. in the subdivision? 
If other than electricity is to be used, describe the availability of 
the fuel or other energy source. Give the name and address of the 
supplier. If the fuel is natural gas, when will the mains be installed 
to the lots? What is the cost to the purchaser for installation fees and 
connection fees? If oil or propane gas will be used, include the cost of 
a storage tank.
    (2) [Reserved]



Sec.  1010.112  Financial information.

    (a) The information required by paragraphs (b) and (c) of this 
section need appear only if the answer to the question is an affirmative 
one.
    (b) Has the developer had a deficit in retained earnings or 
experienced an operating loss during the last fiscal year or, if less 
than a year old, since its formation? If so, include a statement to the 
effect that this may affect the developer's ability to complete promised 
facilities and to discharge financial obligations. This statement may be 
omitted if:
    (1) All facilities, utilities and amenities proposed to be completed 
by the developer in the Property Report and sales contract have been 
completed so that the lots included in the Statement of Record are 
immediately usable for the purpose for which they are sold, or if:
    (2) The developer is contractually obligated to the purchaser to 
complete all facilities, utilities and amenities promised by it in the 
Statement of Record, and:
    (i) The developer has made financial arrangements, such as the 
posting of surety bonds (corporate or individual notes or bonds are not 
acceptable), irrevocable letters of credit, escrow or trust accounts, to 
assure that the facilities, utilities and amenities will be completed by 
the dates set out in the Property Report or contract;
    (ii) The sales contract provides for delivery of a deed within 180 
days of the signing of the contract which conveys title free of any 
mortgage or lien, or the developer has filed an assurance of title 
agreement with ILSRP as outlined in Sec.  1010.212(e); and
    (iii) Any down payments or deposits are held in an escrow or trust 
account.
    (c) If the developer's financial statements have been audited, did 
the accountant qualify the opinion or decline to give an opinion? If so, 
why was the opinion qualified or declined?
    (d) The following statement shall appear: ``A copy of our financial 
statements for the period ending __________________ is available from us 
upon request.''
    (e) The information furnished in Sec.  1010.212(b) may necessitate a 
warning

[[Page 466]]

as to costs and/or feasibility of the completion of the subdivision.



Sec.  1010.113  Local services.

    (a) Fire protection. Describe the availability of fire protection 
and indicate whether it is available year round.
    (b) Police protection. Describe the availability of police 
protection.
    (c) Schools. State whether elementary, junior high and senior high 
schools are available to residents of the subdivision. Is school bus 
transportation available from within the subdivision?
    (d) Hospital. Give the name and location of the nearest hospital and 
state whether ambulance service is available.
    (e) Physicians and dentists. State the location of the nearest 
physicians' and dentists' offices.
    (f) Shopping facilities. State the location of the nearest shopping 
facilities.
    (g) Mail service. If there is no mail service to the subdivision, 
describe the arrangements the purchasers must make to receive mail 
service.
    (h) Public transportation. Is there public transportation available 
in the subdivision or to nearby towns? If not, give the location of the 
nearest public transportation and the distance from the subdivision.



Sec.  1010.114  Recreational facilities.

    (a) Recreational facilities to be covered. Unless otherwise 
indicated, all information required by paragraphs (b) and (c) of this 
section shall be provided for only those recreational facilities which
    (1) The developer is contractually responsible to provide or 
complete and which are:
    (i) Within, adjacent or contiguous to the subdivision, and
    (ii) Maintained substantially for the use of lot owners; or
    (2) For which a third party is responsible and which are:
    (i) Within, adjacent or contiguous to the subdivision, and
    (ii) Maintained substantially for the use of lot owners.
    (b) Recreational facility chart. Complete the chart found in section 
XXV of the appendix to this part: Recreational Facility Chart in 
accordance with the instructions which follow it. This chart shall 
immediately follow the Sec.  1010.114 heading. Limit the chart to 
facilities provided essentially for use of lot buyers.
    (1) Facility. Identify each recreational facility. Identify closely 
related facilities (e.g., swimming pool and bathhouse) separately only 
if their availability dates differ. If any recreational facility is not 
owned by the developer, insert a warning below the chart phrased 
substantially as follows: ``We do not own the (name of facility or 
facilities) so we can not assure its (their) continued availability.''
    (2) Percent complete. State the present percentage of completion of 
construction for each recreational facility.
    (3) Estimated date of start of construction. Insert the estimated 
date of the start of construction for the facility (month and year).
    (4) Estimated date available for use. If the construction of the 
facility is not complete or if it is not available to lot owners for its 
intended use, indicate the estimated date (month and year) that the 
facility will be available for use. If the ``estimated date available 
for use'' for any facility has been amended to delay it to a later date, 
indicate such delay in a statement immediately below the chart. 
Underline the response. This statement shall include the name of the 
facility and the prior estimated availability date, and it shall be 
referenced to the appropriate facility listed on the chart by use of an 
asterisk or other appropriate symbol. If a facility is 100 percent 
completed and in use, no date is needed.
    (5) Financial assurance of completion. If the construction of the 
facility is not complete, state whether there is any financial assurance 
of completion. If none, state ``none.'' If such exists, state the type 
of assurance (i.e., bond, escrow, or trust). If no documentation for 
such assurance has been provided in Sec.  1010.214 of the Statement of 
Record, then do not indicate such assurance on the chart, but in place 
of such assurance on the chart state ``none.''
    (6) Buyer's annual cost or assessments. State the lot buyer's annual 
cost or assessments for using the facility. These costs should include 
any applicable property owners' association assessment, and the 
developer's maintenance

[[Page 467]]

assessment. If the cost information is lengthy, you may use an asterisk 
or other appropriate symbol and include the cost information in a 
paragraph below the chart.
    (c) Information to be provided below the recreational facility chart 
and related warnings.
    (1) Constructing the facilities. If the facilities are not complete, 
indicate who is responsible for the construction of the facilities. 
Indicate whether the purchaser will be required to pay any of the cost 
of construction of these facilities (estimate and disclose such cost, if 
any).
    (2) Maintaining the facilities. Indicate who is responsible for the 
operation and maintenance of these facilities.
    (3) Facilities which will be leased to lot purchasers. If no 
facilities covered here will be leased to a Property Owners' Association 
or other lot owners in the subject subdivision, omit this caption and 
any information requested under it from the Property Report. If such 
leases exist or are anticipated, state which facilities are or will be 
leased and indicate the term of the lease. Also, state whether the lot 
owners will have an opportunity to terminate or ratify the lease after 
control of the Property Owners' Association is turned over to them. 
Indicate whether the owner of a recreational facility leased to the 
Property Owners' Association or other lot owners may encumber it and 
whether the holders of such encumbrances may acquire the leased 
facilities and not honor the lease. Indicate whether the lease payments 
may be increased on an escalating or other basis and what costs or 
expenses, if any, will be borne by the owner. State whether the lease 
can be assigned or sublet. State how the lease can be terminated.
    (4) Transfer of the facilities. If there are presently any liens or 
mortgages on any of these recreational facilities, describe such liens 
or mortgages. If the developer, or owner of the subdivision, their 
principals, or subsidiaries, intend to transfer the title of a listed 
recreational facility in the future, explain at what time, by what type 
of conveyance, and to whom such transfer will be made. Disclose any 
adverse effects on, or cost to, lot purchasers which may be caused by 
such transfer. If any facility is to be transferred to lot owners as a 
Property Owners' Association or otherwise, state whether the facility 
will be transferred free and clear of all liens and encumbrances. If 
not, state the amount of the encumbrance to be assumed and disclose any 
contractual conditions on such transfer which relate to lot purchasers.
    (5) Permits. If the necessary permits have not been obtained for the 
construction and/or use of the facilities, identify the facilities for 
which such permits have not been obtained and include the following 
statement, or one substantially the same, in the narrative under the 
caption ``Permits'': ``The (identify the permit or license) has not been 
obtained and therefore there is no assurance that the lot owners will be 
able to use the (identify the facility).''
    (6) Who may use the facilities. Indicate who will be permitted to 
use the recreational facilities (e.g., lot owners, their guests, 
employees of developer, general public). If the general public will be 
permitted to use the facilities include the following statement in the 
narrative under the caption ``Who may use the facilities'': ``The 
(identify the facility) is open to use by the general public and their 
use of the facility may limit use of it by lot owners.''



Sec.  1010.115  Subdivision characteristics and climate.

    (a) General topography. What is the general topography and the major 
physical characteristics of the land in the subdivision? State the 
percentage of the subdivision which is to remain as natural open space 
and as developed parkland. Are there any steep slopes, rock 
outcroppings, unstable or expansive soil conditions, etc., which will 
necessitate the use of special construction techniques to build on, or 
use, any lot in the subdivision? If so, identify the lots affected, and 
describe the techniques recommended. If any lots in the subdivision have 
a slope of 20%, or more, include a warning that ``Some lots in this 
subdivision have a slope of 20%, or more. This may affect the type and 
cost of construction.''
    (b) Water coverage. Are any lots, or portions of any lots, covered 
by water at any time? What lots are affected?

[[Page 468]]

When are they covered by water? How does this affect their use for the 
purpose for which they are sold? Can the condition be corrected? At what 
cost to the purchaser?
    (c) Drainage and fill. Identify the lots which require draining or 
fill prior to being used for the purpose for which they are being sold. 
Who will be responsible for any corrective action? If the purchaser is 
responsible, what are the estimated costs?
    (d) Flood plain. Is the subdivision located within a flood plain or 
an area designated by any Federal, state or local agency as being flood 
prone? What lots are affected? Is flood insurance available? Is it 
required in connection with the financing of any improvements to the 
lot? What is the estimated cost of the flood insurance?
    (e) Flooding and soil erosion. (1) Does the developer have a program 
which provides, or will provide, at least minimum controls for soil 
erosion, sedimentation or periodic flooding throughout the subdivision?
    (2) If there is a program, describe it. Include in the description 
information as to whether the program has been approved by the 
appropriate government officials; when it is to start; when it is to be 
completed (month and year); whether the developer is obligated to comply 
with the program and whether there is any financial assurance of 
completion.
    (3) If there is no program or if the program has not been approved 
by the appropriate officials or if the program does not provide minimum 
protection, include a statement to the effect that the measures being 
taken may not be sufficient to prevent property damage or health and 
safety hazards. A minimum program will usually provide for:
    (i) Temporary measures such as mulching and seeding of exposed areas 
and silt basins to trap sediments in runoff water, and
    (ii) Permanent measures such as sodding and seeding in areas of 
heavy grading or cut and fill along with the construction of diversion 
channels, ditches, outlet channels, waterway stabilizers and sediment 
control basins.
    (f) Nuisances. Are there any land uses which may adversely affect 
the subdivision (e.g., unusual or unpleasant noises or odors, pollutants 
or nuisances such as existing or proposed industrial activity, military 
installations, airports, railroads, truck terminals, race tracks, animal 
pens, noxious smoke, chemical fumes, stagnant ponds, marshes, 
slaughterhouses and sewage treatment facilities)? If any nuisances 
exist, describe them. If there are none, state there are no nuisances 
which affect the subdivision.
    (g) Hazards. (1) Are there any unusual safety factors which affect 
the subdivision (e.g., dilapidated buildings, abandoned mines or wells, 
air or vehicular traffic hazards, danger from fire or explosion or 
radiation hazards)? Is the developer aware of any proposed plans for 
construction which may create a nuisance or safety hazard or adversely 
affect the subdivision? If there are any existing hazards or if there is 
any proposed construction which will create a nuisance or hazard, 
describe the hazard or nuisance. If there are no existing or possible 
future hazards, state that there are none.
    (2) Is the area subject to natural hazards or has it been formally 
identified by any Federal, state or local agency as an area subject to 
the frequent occurrence of natural hazards (e.g., tornadoes, hurricanes, 
earthquakes, mudslides, forest fires, brush fires, avalanches, flash 
flooding)? If the jurisdiction in which the subdivision is located has a 
rating system for fire hazard, state the rating assigned to the land in 
the subdivision and explain its meaning.
    (h) Climate. What are the average temperature ranges, summer and 
winter, for the area in which the subdivision is located (i.e., high, 
low and mean)? What is the average annual rainfall and snowfall?
    (i) Occupancy. How many homes are occupied on a full- or part-time 
basis as of (date of submission)?



Sec.  1010.116  Additional information.

    (a) Property Owners' Association. (1) Will there be a property 
owners' association for the subdivision? Has it been formed? What is its 
name? Is it operating? If not yet formed, when will it be formed? Who is 
responsible for its formation?

[[Page 469]]

    (2) Does the developer exercise, or have the right to exercise, any 
control over the Association because of voting rights or placement of 
officers or directors? For how long will this control last?
    (3) Is membership in the association voluntary? Will non-member lot 
owners be subject to the payment of dues or assessments? What are the 
association dues? Can they be increased? Are members subject to special 
assessments? For what purpose? If membership in the association is 
voluntary and if the association is responsible for operating or 
maintaining facilities which serve all lot owners, include the following 
statement: ``Since membership in the association is voluntary, you may 
be required to pay a disproportionate share of the association costs or 
it may not be able to carry out its responsibilities.''
    (4) What are the functions and responsibilities of the association? 
Will the association hold architectural control over the subdivision?
    (5) Are there any functions or services that the developer now 
provides at no charge for which the association may be required to 
assume responsibility in the future? If so, will an increase in 
assessments or fees be necessary to continue these functions or 
services?
    (6) Does the current level of assessments, fees, charges or other 
income provide the capability for the association to meet its present, 
or planned, financial obligations including operating costs, maintenance 
and repair costs and reserves for replacement? If not, how will any 
deficit be made up?
    (b) Taxes. (1) When will the purchaser's obligation to pay taxes 
begin? To whom are the taxes paid? What are the annual taxes on an 
unimproved lot after the sale to a purchaser? If the taxes are to paid 
to the developer, include a statement that ``Should we not forward the 
tax funds to the proper authorities, a tax lien may be placed against 
your lot.''
    (2) If the subdivision is encompassed within a special improvement 
district or if a special district is proposed, describe the purpose of 
the district and state the amount of assessments. Describe the 
purchaser's obligation to retire the debt.
    (c) Violations and litigations. This information need appear only if 
any of the questions are answered in the affirmative. Unless the 
Director gives prior approval for it to be omitted, a brief description 
of the action and its present status or disposition shall be given.
    (1) With respect to activities relating to or in violation of a 
Federal, state or local law concerned with the environment, land sales, 
securities sales, construction or sale of homes or home improvements, 
consumer fraud or similar activity, has the developer, the owner of the 
land or any of their principals, officers, directors, parent 
corporation, subsidiaries or an entity in which any of them hold a 10% 
or more financial interest, been:
    (i) Disciplined, debarred or suspended by any governmental agency, 
or is there now pending against them an action which could result in 
their being disciplined, debarred or suspended or,
    (ii) Convicted by any court, or is there now pending against them 
any criminal proceedings in any court? ILSRP suspension notices on pre-
effective Statements of Record and amendments need not be listed.
    (2) Has the developer, the owner of the land, any principal, any 
person holding a 10% or more financial or ownership interest in either, 
or any officer or director of either, filed a petition in bankruptcy? 
Has an involuntary petition in bankruptcy been filed against it or them 
or have they been an officer or director of a company which became 
insolvent or was involved, as a debtor, in any proceedings under the 
Bankruptcy Act during the last 13 years?
    (3) Is the developer or any of its principals, any parent 
corporation or subsidiary, any officer or director a party to any 
litigation which may have a material adverse impact upon its financial 
condition or its ability to transfer title to a purchaser or to complete 
promised facilities? If so, include a warning which describes the 
possible effects which the action may have upon the subdivision.
    (d) Resale or exchange program. (1) Are there restrictions which 
might hinder

[[Page 470]]

lot owners in the resale of their lots (e.g., a prohibition against 
posting signs, limitations on access to the subdivision by outside 
brokers or prospective buyers; the developer's right of first refusal; 
membership requirements)? If so, briefly explain the restrictions.
    (2) Does the developer have an active resale program? If the answer 
is ``no,'' include the following statement: ``We have no program to 
assist you in the sale of your lot.''
    (3) Does the developer have a lot exchange program? If the answer is 
``yes,'' describe the program; state any conditions and indicate if the 
program reserves a sufficient number of lots to accommodate all those 
wishing to participate. If there is no program or if sufficient lots are 
not reserved, include one of the following statements as applicable: 
``We do not have any provision to allow you to exchange one lot for 
another'' or ``We do not have a program which assures that you will be 
able to exchange your lot for another.''
    (e) Unusual situations. This topic need appear only if one or more 
of the following cases apply to the subdivision, then only the 
applicable subject, or subjects, will appear.
    (1) Leases. What is the term of the lease? Is it renewable? Is it 
recordable? Can creditors of the developer, or owner, acquire title to 
the property without any obligation to honor the terms of the lease? Are 
the lease payments a flat sum or are they graduated? Can the lessee 
mortgage or otherwise encumber the leasehold? Will the lessee be 
permitted to remove any improvements which have been installed when the 
lease expires or is terminated?
    (2) Foreign subdivision. (i) Is the owner or developer of the 
subdivision a foreign country corporation? If legal action is necessary 
to enforce the contract, must it be taken in the courts of the country 
where the subdivision is located?(ii) Does the country in which the 
subdivision is located have any laws which restrict, in any way, the 
ownership of land by aliens? If so, what are the restrictions?
    (iii) Must an alien obtain a permit or license to own land, build a 
home, live, work or do business in the country where the subdivision is 
located? If so, where is such permit or license secured; for how long is 
it valid and what is its cost?
    (3) Time sharing. (i) How is title to be conveyed? How many shares 
will be sold in each lot? How is use time allocated? How are taxes, 
maintenance and utility expenses divided and billed? How are voting 
rights in any Association apportioned? Are there management fees? If so, 
what are their amounts and how are they apportioned?
    (ii) Is conveyance of any portion of the lot contingent upon the 
sale of the remaining portions? Is the initial buyer responsible for any 
greater portion of the expense than his normal share until the remaining 
interests are sold? If the purchase of any of the portions is financed, 
will the default of one owner have any effect upon the remaining owners?
    (4) Memberships. (i) Does the purchaser receive any interest in 
title to the land? What is the term of the membership? Is it renewable? 
What disposition is made of the membership in the event of the death of 
the member? Are the lots individually surveyed and the corners marked? 
If not, how does the member identify the area which the member is 
entitled to use? What is the approximate square footage the member is 
entitled to use? Are there different classes of membership? How are the 
different classes identified and what are the differences between them?
    (ii) If the member does not receive any interest in the title to the 
land, include a warning to the effect that ``you receive no interest in 
the title to the land but only the right to use it for a certain period 
of time.''
    (f) Equal opportunity in lot sales. State whether or not the 
developer is in compliance with title VIII of the Civil Rights Act of 
1968 by not directly or indirectly discriminating on the basis of race, 
color, religion, sex, national origin, familial status, and handicap in 
any of the following general areas: Lot marketing and advertising, 
rendering of lot services, and in requiring terms and conditions on lot 
sales and leases. An affirmative answer cannot be given if the 
developer, directly or indirectly,

[[Page 471]]

because of race, color, religion, sex, national origin, familial status, 
or handicap is:
    (1) Refusing to sell or lease lots after the making of a bona fide 
offer or to negotiate for the sale or lease of lots or is otherwise 
making unavailable or denying a lot to any person, or
    (2) Discriminating against any person in the terms, conditions or 
privileges in the sale or leasing of lots or in providing services or 
facilities in connection therewith, or
    (3) Making, printing, publishing or causing to be made, printed or 
published any notice, statement or advertisement with respect to the 
sale or leasing of lots that indicates any preference, limitation or 
discrimination against any person, or
    (4) Representing to any person that any lot is not available for 
inspection, sale or lease when such lot is in fact available, or
    (5) For profit, inducing or attempting to induce any person to sell 
or lease any lot by representations regarding the entry or non-entry 
into the neighborhood of a person or persons of a particular race, 
color, religion, sex, national origin, familial status, or handicap.
    (g) Listing of lots. Provide a listing of lots which shall consist 
of a description of the lots included in the Statement of Record by the 
names or number of the section or unit, if any; the block number, if 
any; and the lot numbers. The lots shall be listed in the most efficient 
and concise manner. If the filing is a consolidation, the listing shall 
include all lots registered to date in the subdivision, except any which 
have been deleted by amendment.



Sec.  1010.117  Cost sheet, signature of Senior Executive Officer.

    (a) Cost sheet--Format. (1) The cost sheet shall be prepared in 
accordance with the format found in section XXVI of the appendix to this 
part: Cost Sheet Format and paragraph (a)(2) of this section.
    (2) Cost sheet instructions. (i) All amounts for cost sheet items 
will be entered before the purchaser signs the receipt. However, any 
costs that are identical for all lots may be pre-printed.
    (ii) If a central water or sewer system will be used in all or part 
of the subdivision and a private system in all or other parts, then the 
portion that does not apply to the purchaser's lot shall be crossed out.
    (iii) If individual private systems may be used prior to the 
availability of service from any central system and the purchaser is not 
required to connect to any central system, both figures may be entered 
or only the highest cost figures may be used with a parenthetical 
explanation or footnote. If the purchaser is required to connect to any 
central system and discontinue the use of his private system when 
central service is available, both cost figures shall be given, together 
with an explanation or footnote.
    (iv) If there is a one time, lump sum ``availability fee'' which is 
assessed to the purchaser in connection with a central utility, include 
under ``other'' and identify.
    (v) Dues and assessments need be included only if they are 
involuntary regardless of use.
    (vi) At the discretion of the Director, where there is extreme 
diversity in the figures for different areas of the subdivision, 
variations may be permitted as to whether the figures will be printed, 
entered manually, or a range of costs used or any combination of these 
features.
    (vii) The estimated annual taxes shall be based upon the projected 
valuation of the lot after sale to a purchaser.
    (b) Signature of the Senior Executive Officer. The Senior Executive 
Officer or a duly authorized agent shall sign the property report. 
Facsimile signatures may be used for purposes of reproduction of the 
property report.



Sec.  1010.118  Receipt, agent certification, and cancellation page.

    (a) Format. The receipt, agent certification and cancellation page 
shall be prepared in accordance with the sample found in section XXVII 
of the appendix to this part: Sample Receipt, Agent Certification and 
Cancellation Page.
    (b) The original and one copy of this executed page shall be 
attached to the Property Report delivered to prospective purchasers. 
After the purchaser

[[Page 472]]

has signed the receipt and the salesman has signed the certification, 
the copies can be retained by the developer for a period of three years 
from the date of execution or the term of the contract, whichever is the 
longer. Upon demand by the Director, the developer shall, without delay, 
make the copies of these receipts and certifications available for 
inspection by the Director or the developer shall forward to the 
Director any of the receipts and certifications, or copies thereof, as 
the Director may specify.
    (c) If the transaction takes place through the mails, the cost 
figures shall be entered and the person most active in dealing with the 
prospective purchaser shall sign the certification prior to mailing the 
Property Report to the purchaser. Otherwise, the certification shall be 
executed in the presence of the purchaser.
    (d) The date of Report appearing on the receipt shall be the same as 
that appearing on the cover sheet of the Property Report.
    (e) Notification of cancellation by mail shall be considered given 
at the time post-marked.



Sec.  1010.200  Instructions for Statement of Record, Additional 
Information and Documentation.

    The Additional Information and Documentation portion of the 
Statement of Record shall contain the statements and documents required 
in Sec. Sec.  1010.208 through 1010.219. Each section number and its 
associated heading and each paragraph letter or number and their 
associated subheadings or captions must appear in this portion. 
Following each heading, subheading, or caption printed in this portion, 
the registrant shall insert an appropriate response. If a heading, 
subheading, or caption does not apply to the subdivision, it shall be 
followed by the words ``not applicable''. Immediately after the page(s) 
on which the section number and answers for that section appear, insert 
the information or documents which support that section. In addition to 
the statements and documentation expressly required there shall be added 
any further material, information, documentation and certifications as 
may be necessary in the public interest and for the protection of 
purchasers or to cause the statements made to be not misleading in the 
light of the circumstances under which they are made.



Sec. Sec.  1010.201-1010.207  [Reserved]



Sec.  1010.208  General information.

    (a) Administrative information. (1) State whether the material 
represents an initial Statement of Record or a consolidated Statement of 
Record. If it is a consolidated Statement of Record, identify the 
original ILSRP number assigned to the initial Statement of Record. State 
whether subsequent Statements of Record will be submitted for additional 
lots in the subdivision.
    (2) Has the developer submitted a request for an exemption for the 
subdivision?
    (3) List the states in which registration has been made by the 
developer for the sale of lots in the subdivision.
    (4) If any state listed in paragraph (a)(3) of this section has not 
permitted a registration to become effective or has suspended the 
registration or prohibited sales, name the state involved and give the 
reasons cited by the state for their action.
    (5) State whether the developer has made, or intends to make, a 
filing with the U.S. Securities and Exchange Commission (SEC) which is 
related in any way to the subdivision. If a filing has been made with 
the SEC, give the SEC identification number; identify the prospectus by 
name; date of filing and state the page number of the prospectus upon 
which specific reference to the subdivision is made. Any disciplinary 
action taken against the developer by the SEC should be disclosed in 
Sec. Sec.  1010.116 and 1010.216.
    (b) Subdivision information. (1) If this is a consolidated Statement 
of Record, state the number of lots being added, the number of lots in 
prior Statements of Record and the new total number of lots. The 
Director must be able to reconcile the numbers stated here with the 
title evidence; the plat maps and the disclosure in Sec.  1010.108.
    (2) State the number of acres represented by the lots in this 
Statement of Record. If this is a consolidated Statement of Record, 
state the number

[[Page 473]]

of acres being added, the number of acres in prior Statements of Record 
and the new total number of acres. State the total acreage owned in the 
subdivision, the number of acres under option or similar arrangement for 
acquisition of title to the land and the total acreage to be offered 
pursuant to the same common promotional plan.
    (3) State whether any lots have been sold in this subdivision since 
April 28, 1969, and prior to registration with ILSRP. If they were sold 
pursuant to an exemption, identify the exemption provision and state 
whether an advisory opinion, exemption order or exemption determination 
was obtained with respect to those lots sales. Give the ILSRP number 
assigned to the exemption, if any.
    (c) Developer information. (1) State the name, address, Internal 
Revenue Service number and telephone number of the owner of the land. If 
the owner is other than an individual, name the type of legal entity and 
list the interest, and extent thereof, of each principal. Identify the 
officers and directors.
    (2) If the developer is not the owner of the land, state the 
developer's name, address, Internal Revenue Service number and telephone 
number. If the developer is other than an individual, name the type of 
legal entity and list the interest, and the extent thereof, of each 
principal. Identify the officers and directors.
    (3) If you wish to appoint an authorized agent, state the agent's 
name, address and telephone number and scope of responsibility. This 
shall be the party designated by the developer to receive 
correspondence, service of process and notice of any action taken by 
ILSRP. In all Statements of Record, including those for foreign 
subdivisions, the authorized agent shall be a resident of the United 
States. A change of the authorized agent will require an appropriate 
amendment.
    (4) State whether the owner of the land, the developer, its parent, 
subsidiaries or any of the principals, officers or directors of any of 
them are directly or indirectly involved in any other subdivision 
containing 100 or more lots. If so, identify the subdivision by name, 
location, and ILSRP number, if any.
    (5) State whether the owner or developer is a subsidiary 
corporation. If either the owner or developer is a subsidiary 
corporation or if any of the principals of the owner or developer are 
corporate entities, name the parent and/or corporate entity and state 
the principals of each to the ultimate parent entity.
    (d) Documentation. (1) Submit a copy of the property report, 
subdivision report, offering statement or similar document filed with 
the state or states with which the subdivision has been registered.
    (2) Submit a copy of a general plan of the subdivision. This general 
plan must consist of a map, prepared to scale, and it must identify the 
various proposed sections or blocks within the subdivision, the existing 
or proposed roads or streets, and the location of the existing or 
proposed recreational and/or common facilities. In an initial filing, 
this map must at least show the area included in the Statement of 
Record. In a consolidated Statement of Record, show areas being added, 
as well as the areas previously registered. If a map of the entire 
subdivision is submitted with the initial Statement of Record, and if no 
substantial changes are made when material for a consolidated Statement 
of Record is submitted, the original map may be included by reference.
    (3)(i) If the developer is a corporation, submit a copy of the 
articles of incorporation, with all amendments; a copy of the 
certificate of incorporation or a certificate of a corporation in good 
standing and, if the subdivision is located in a state other than the 
one in which the original certificate of corporation was issued, a 
certificate of registration as a foreign corporation with the state 
where the subdivision is located.
    (ii) If the developer is a partnership, unincorporated association, 
joint stock company, joint venture or other form of organization, submit 
a copy of the articles of partnership or association and all other 
documents relating to its organization.
    (iii) If the developer is not the owner of the land, submit copies 
of the above documents for the owner.

[[Page 474]]



Sec.  1010.209  Title and land use.

    (a) General information. (1) State whether the developer has 
reserved the right to exchange or withdraw lots after a purchaser has 
signed a sales contract (e.g., for prior sales, failure to pass credit 
check). If yes, indicate this authority and make reference to the 
applicable paragraph in the sales contract or other document.
    (2) State whether there is a provision giving purchasers an option 
to exchange lots. If yes, indicate this and make reference to the 
applicable paragraph in the sales contract or other document.
    (3) State whether the developer knows of any instruments not of 
record which, if recorded, would affect title to the subdivision. If 
yes, copies of these instruments shall be submitted, except that copies 
of unrecorded contracts for sales of lots in the subdivision need not be 
submitted.
    (4)(i) Identify the Federal, State, and local agencies or similar 
organizations which have the authority to regulate or issue permits, 
approvals or licenses which may have a material effect on the 
developer's plans with respect to the proposed division of the land, and 
any existing or proposed facilities, common areas or improvements to the 
subdivision.
    (ii) Describe or identify the land or facilities affected; the 
permit, approval or license required; and indicate whether the permit, 
approval or license has been obtained by the developer.
    (iii) If no agency regulates the division of the land or issues any 
permits, approvals or licenses with respect to improvements, so state.
    (iv) Answers must specifically cover the areas of environmental 
protection; environmental impact statements; and construction, dredging, 
bulkheading, etc. that affect bodies of water within or around the 
subdivision. Also include licenses or permits required by water 
resources boards, pollution control boards, river basin commissions, 
conservation agencies or similar organizations.
    (5) State whether it is unlawful to sell lots prior to the final 
approval and recording of a plat map in the jurisdiction where the 
subdivision is located.
    (b) Title evidence. (1) Submit title evidence that specifically 
states the status of the legal and equitable title to the land 
comprising the lots covered by the Statement of Record and any common 
areas or facilities disclosed in the Property Report. Title evidence 
need not be submitted for those common areas and facilities which are 
not owned by the developer.
    (2) Acceptable title evidence shall be dated no earlier than 20 
business days preceding the date of the filing of the Statement of 
Record with the Director. Previously issued title evidence may be 
updated to the date referred to in the preceding sentence by 
endorsements or attorneys' opinions of title.
    (3) The developer shall amend the title evidence to reflect the 
change in status of title of any previously registered, reacquired lots 
unless their status is at least as marketable as they were when first 
offered for sale by the developer as registered lots.
    (c) Forms of acceptable title evidence. (1) An original or a copy of 
a signed owner's or mortgagee's policy of title insurance, title 
commitment, certificate of title or similar instrument issued by a title 
company authorized by law to issue such instruments in the state in 
which the subdivision is located. Title evidence that limits insurance 
or negligence liability to amounts less than the market value of the 
subject land at the time of its acquisition by the subdivision owner is 
not acceptable;
    (2) A legal opinion stating the condition of title, prepared and 
signed by an attorney at law experienced in the examination of titles 
and a member of the Bar in the state in which the property is located. 
The title opinion may be based on a Torrens land registration system 
certificate of title, or similar instrument, provided it meets all 
general title evidence requirements of this section and a copy of the 
registration certificate of title is submitted. Title opinions that 
limit negligence liability to amounts less than the market value of the 
subject land at the time of its acquisition by the subdivision owner are 
not acceptable.
    (d) Title searches. The required evidence of the status of title 
shall be based on a search of all public records

[[Page 475]]

which may contain documents affecting title to the land or the 
developer's ability to deliver marketable title. The search must cover a 
period which is required or generally considered adequate for insuring 
marketability of title in the jurisdiction in which the subdivision is 
located. Such search shall include an examination of at least the 
documents listed in paragraphs (d)(1) through (5) of this section. This 
search may be accomplished through the use of a title insurance company 
title plant, the information in which is based on current searches of 
the appropriate and necessary documents, including as a minimum those 
listed immediately above. For any attorney's title opinion based on 
Torrens certificates of title, the title search need only go beyond the 
original time of registration of the certificate of title for those 
types of encumbrances which were not conclusively settled by the 
proceedings at the time of such registration. In such cases, the 
required statement shall clearly reflect the documents and periods 
searched.
    (1) The records of the recorder of deeds or similar authority;
    (2) U.S. Internal Revenue Liens;
    (3) The records of the circuit, probate, or other courts including 
Federal courts and bankruptcy or reorganization proceedings which have 
jurisdiction to affect the title to the land;
    (4) The tax records;
    (5) Financing statements filed pursuant to the Uniform Commercial 
Code or similar law. If it is held that the financing statements do not 
affect the title of the land, include a statement of the legal authority 
for that opinion.
    (e) Items to be included in the title evidence. The acceptable title 
evidence must include the following information, instruments and 
statements and need not be repeated or duplicated elsewhere in the 
Statement of Record.
    (1) A legal description of the land on which the lots, common areas, 
and facilities covered by the title evidence are located. This legal 
description shall be adequate for conveying land in the jurisdiction in 
which the subdivision is located. If this legal description is based on 
a recorded plat, the lot numbers, recording place, book name, book 
number, and page number shall be stated in the description. If this 
legal description is given by metes and bounds, the title evidence shall 
include or be accompanied by a certified statement of the preparer of 
the title evidence, a licensed attorney, or an engineer or surveyor, 
indicating that all subject lots, common areas, and common facilities 
are encompassed within the metes and bounds description in the evidence. 
If at any time after the submission of the legal description required 
above, the description of the subject land is changed or found to be in 
error, a correcting amendment shall be made to the Statement of Record.
    (2) The name of the person(s) or other legal entity(ies) holding fee 
title to the property described.
    (3) The name of any person(s) or other legal entity(ies) holding a 
leasehold estate or other interest of record in the property described.
    (4) A listing of any and all exceptions or objections to the title, 
estate or interest of the person(s) or legal entity(ies) referred to in 
paragraph (e)(2) or (3) of this section, including any encumbrances, 
easements, covenants, conditions, reservations, limitations or 
restrictions of record. Any reference to exceptions or objections to 
title shall include specific references to the instruments in the public 
records upon which they are based. When an objection or exception to 
title affects less than all of the property covered by this Statement of 
Record, the title evidence shall specifically note what portion of the 
property is so affected.
    (5) Copies of all instruments in the public records specifically 
referred to in paragraph (e)(4) of this section. Abstracts of such 
instruments are acceptable if prepared by an attorney or professional or 
official abstractor qualified and authorized by law to prepare and 
certify such abstracts and if the abstracts contain a material portion 
of the recorded instruments sufficient to determine the nature and 
effect of such instruments. Also include copies of any release 
provisions, relating to encumbrances on the property described, which 
are not included in the documents otherwise required by this section.

[[Page 476]]

    (6) If an attorney's title opinion has been submitted pursuant to 
this section which has been based on a Torrens land registration 
certificate of title, submit a copy of such certificate.
    (f) Supplemental title information. (1) If there is a holder of an 
ownership interest in the land other than the developer, submit a copy 
of any documentation which evidences the developers' authorization to 
develop and/or sell the land.
    (2) Submit copies of any trust deeds, deeds in trust, escrow 
agreements or other instruments which purport to protect the purchaser 
in the event of default or bankruptcy by the developer on any instrument 
or instruments which create a blanket encumbrance upon the property 
unless they have been previously provided as part of ``title evidence'' 
submitted pursuant to paragraph (e) of this section.
    (3)(i) Submit copies of all forms of contracts or agreements and 
notes to be used in selling or leasing lots. The contracts or 
agreements, including promissory notes, must contain the following 
language in boldface type (which must be distinguished from the type 
used for the rest of the contract) on the face or signature page above 
all signatures: ``You have the option to cancel your contract or 
agreement of sale by notice to the seller until midnight of the seventh 
day following the signing of the contract or agreement. If you did not 
receive a Property Report prepared pursuant to the rules and regulations 
of the Bureau of Consumer Financial Protection, in advance of your 
signing the contract or agreement, the contract or agreement of sale may 
be cancelled at your option for two years from the date of signing.''
    (ii) If the purchaser is entitled to a longer revocation period by 
operation of state law or the Act, that period becomes the Federal 
revocation period and the contract or agreement must reflect the 
requirements of the longer period, rather than the seven days. This 
language shall be consistent with that shown on the cover page (see 
Sec.  1010.105).
    (iii) The revocation provisions may not be limited or qualified in 
the contract or other document by requiring a specific type of notice or 
by requiring that notice be given at a specified place.
    (iv) If it is represented that the developer will provide or 
complete roads or facilities for waters, sewer, gas, electric service or 
recreational amenities, the contract must contain a provision that the 
developer is obligated to provide or complete such roads, facilities and 
amenities.
    (4) Submit copies of deeds and leases by which the developer will 
lease or convey title to the lots to purchasers or lessees.
    (g) Plat maps, environmental studies and restrictions--(1) Plat 
maps. (i) In those jurisdictions where it is unlawful to sell lots prior 
to final approval and recording of the plat, and in those cases where a 
plat has been recorded, submit a copy of the recorded plat. This plat 
should be an exact copy of the recorded document. It should reflect the 
signatures of the approving authorities and bear a stamp or notation by 
the recorder of deeds, or similarly constituted officer, as to the 
recording data.
    (ii) If the plat has not been approved by the local authorities nor 
recorded, and if it is not unlawful to sell lots prior to final approval 
and recording, submit a map which has been prepared to scale and which 
shows the proposed division of the land, the lot dimensions and their 
relation to proposed or existing streets and roads. The map shall 
contain sufficient engineering data to enable a surveyor to locate the 
lots.
    (iii) Whether recorded or unrecorded, the plat or map should show:
    (A) The dimensions of each lot, stated in the standard unit of 
measure acceptable for such purposes in the political subdivision where 
the land is located.
    (B) A clear delineation of each of the lots and any common areas or 
facilities.
    (C) Any encroachments or rights-of-way on, over, or under the land, 
or a notation of these items together with the identity of the lots 
affected.
    (D) The courses, distances and monuments, natural or otherwise, of 
the land's boundaries; contiguous boundaries and identification or 
ownership of adjoining land and names of abutting streets, ways, etc.

[[Page 477]]

    (E) The location of the section or unit encompassing the lots in 
relationship to the larger tract, or tracts, in the subdivision.
    (F) The delineation of any flood plains or flood control easements 
affecting any of the lots.
    (iv) The plat, or map shall be prepared by a licensed surveyor or 
engineer.
    (v) If all lots on each page of the plat are not included in the 
Statement of Record with which the plat or map is submitted, then the 
lots which are to be included in the Statement of Record shall be 
identified on the plat or map; a legend describing the method of 
identification shall be entered on the face of the plat or map and the 
number of lots so identified entered in the lower right hand corner of 
the plat map. The Director must be able to reconcile the totals of these 
numbers with the information given in Sec. Sec.  1010.108 and 1010.208 
of the Statement of Record and the title evidence.
    (2) Environmental impact study. If the developer is aware of any 
environmental impact study which considers the effect of the subdivision 
on the environment, submit a summary of that study.
    (3) Restrictions or covenants. Submit a copy of any recorded or 
proposed restrictions or covenants for the subdivision if not submitted 
elsewhere in this Statement of Record. A copy of these restrictions or 
covenants shall be delivered to a prospective purchaser upon request. A 
supply shall be maintained at whatever place or places as will be 
necessary to allow immediate delivery upon request.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29117, May 11, 2016]



Sec.  1010.210  Roads.

    (a) State the estimated cost to the developer of the proposed road 
system.
    (b) If the developer is to complete any roads providing access to 
the subdivision, submit copies of any bonds or escrow agreements which 
have been posted to guarantee completion thereof.
    (c) Submit copies of any bonds or escrow agreements which have been 
posted to assure completion of the roads within the subdivision.
    (d) If the interior roads are to be maintained by a public 
authority, submit a copy of a letter from that authority which states 
that the roads have been, or the conditions upon which they will be, 
accepted for maintenance and when.



Sec.  1010.211  Utilities.

    (a) Water. (1) State the estimated cost to the developer of the 
central water system.
    (2) If water is to be supplied by a central system, furnish a letter 
from the supplier that it will supply the water. If the system is 
operated by a governmental division or by an entity whose operations are 
regulated by a governmental agency but which is not affiliated with or 
under the control of the developer, the letter shall include a statement 
that the supply of water will be sufficient to serve the anticipated 
population of the subdivision or how many homes or connections it can 
and will serve and that the water is tested at regular intervals and has 
been found to meet all standards for a public water supply.
    (3) If the water is to be supplied by individual wells, by an entity 
which is not regulated by a governmental agency, by the developer or by 
an entity which is affiliated with or controlled by the developer, 
submit a copy of any engineers' reports or hydrological surveys which 
indicate there is a sufficient supply of water to serve the anticipated 
population of the subdivision.
    (4) If the supplier of water is not in one of the categories in 
paragraph (a)(2) of this section, submit a copy of a letter or report 
from a cognizant health officer, or from a private laboratory licensed 
by the state to perform tests and issue reports on water, to the effect 
that the water was found to meet all drinking water standards required 
by the state for a public water system.
    (5) If any bond, escrow agreement or other financial assurance of 
the completion of the central system, including any phases which are to 
be constructed in the future, has been posted by the developer or an 
entity not regulated by a government agency, furnish a copy of the 
document.

[[Page 478]]

    (6) Furnish a copy of any permits which have been obtained by the 
developer or any entity affiliated with or under the control of the 
developer in connection with the construction and operation of the 
central system. If a permit is required to install individual wells, 
submit a letter from the proper authority which states the requirements 
for obtaining the permit and that there is no objection to the use of 
individual wells in the subdivision.
    (7) Furnish a copy of any membership agreement or contract which 
allows or requires lot owners to use the central water system. If this 
document is furnished elsewhere in the Statement of Record, reference to 
it may be made here.
    (b) Sewer. (1) State the estimated cost to the developer of the 
central sewer system.
    (2) If sewage disposal is to be by individual on-site systems, 
furnish a letter from the local health authorities giving general 
approval to the use of these systems in the subdivision or giving 
specific approval for each and every lot.
    (3) If sewage disposal is to be through a central system which is 
owned and operated by a governmental division, or by an entity whose 
operations are regulated by a governmental agency but which is not 
affiliated with, or under the control of, the developer, furnish a 
letter from the entity that it will provide this service and that its 
treatment facilities have the capacity to serve the anticipated 
population of the subdivision or how many homes or connections it can 
and will serve.
    (4) Furnish a copy of any permits obtained by the developer or any 
entity affiliated with or under the control of the developer, for the 
construction and operation of the central sewer system or construction 
and use of any other method of sewage disposal contemplated for the 
subdivision except those to be obtained by individual lot owners at a 
later date.
    (5) If any bond, escrow agreement or other financial assurance of 
the completion of the central system or other system for which the 
developer is responsible, and any future expansion, has been posted, 
furnish a copy of the document.
    (6) Furnish a copy of any membership agreement of contract which 
allows, or requires, the lot owners to use the central system. If this 
document is furnished elsewhere in the Statement of Record, it may be 
included here by reference.
    (c) Electricity. Give an estimate of the total construction cost to 
be expended by the developer and submit any instrument providing 
financial assurance of completion of the facilities which has been 
posted by the developer.
    (d) Telephone. Give an estimate of the total construction cost to be 
expended by the developer and submit a copy of any instrument providing 
financial assurance of the completion of the facilities which has been 
posted by the developer.



Sec.  1010.212  Financial information.

    (a) Financing of improvements. Describe the financing plan that is 
to be used in financing on-site or off-site improvements proposed in the 
Statement of Record.
    (b) Complete the following format (If the subdivision or common 
promotional plan contains, or will contain, 1000 or more lots, furnish 
this information in its entirety. If the subdivision or common 
promotional plan contains, or will contain, less than 1,000 lots, only 
paragraphs (b)(3)(iii) and (iv) of this section need be completed.)
    (1) Estimated date for full completion of amenities
    (2) Projected date for complete sell out of subdivision
    (3) Cost and expense recap for lots included in this Statement of 
Record:
    (i) Land acquisition cost or current fair market value of land.
    (ii) Development and improvement costs (include the estimated cost 
of such items as roads, utilities, and amenities which the developer 
will incur).
    (iii) Estimated marketing and advertising costs.
    (iv) Estimated sales commission.
    (v) Interest (include cost in financing the land purchase, 
improvements, or other borrowings).
    (vi) Estimated other expenses (include general costs, administrative 
costs, profit, etc.).

[[Page 479]]

    (vii) Total.
    (4) Total land sales revenue:
    (i) Estimated total land sales income.
    (ii) Estimated other income.
    (iii) Total income.
    (c) Financial statements. (1) Submit a copy of the developer's 
financial statements for the last full fiscal year. These statements 
shall be prepared in accordance with generally accepted accounting 
principles as prescribed by the Financial Accounting Standards Board and 
generally accepted auditing standards as prescribed by the American 
Institute of Certified Public Accountants, and shall be audited by an 
independent licensed public accountant. They shall include a balance 
sheet, a statement of profit and loss, a statement of changes in 
financial condition and a certified opinion by the accountant. The 
statements shall be no more than six months old on the date the 
Statement of Record is submitted.
    (2) If the audited statements are more than six months old at the 
date of submission of the Statement of Record, or if the last full 
fiscal year has ended within the last 90 days and audited Statements are 
not yet available, the developer may submit a copy of the audited 
statements for the previous full fiscal year and supplement them with 
unaudited, interim statements so that the financial information is no 
more than six months old on the date that the Statement of Record is 
submitted. The interim statements may be prepared by company personnel 
but must contain a balance sheet, a statement of profit and loss and a 
statement of changes in financial condition and be prepared in 
accordance with generally accepted accounting principles.
    (d) Annual report. (1) Each year after the initial effective date, 
the developer shall submit a copy of its latest financial statements. 
These statements must meet the standards set out in Sec.  
1010.212(c)(1), unless the developer has qualified for an exception 
under Sec.  1010.212(e), and must be submitted within 120 days after the 
close of the developer's fiscal year.
    (2) If a developer has submitted its latest statements with a 
consolidated filing since the close of its fiscal year and prior to the 
end of the 120 day period, a second submission of the statements to 
comply with this section is not necessary.
    (3) If the developer no longer has an active sales program on the 
date this report is due, the information set forth in Sec.  
1010.310(c)(7)(iii) may be furnished in lieu of this report.
    (e) Exceptions. (1) If the developer does not have audited financial 
statements and the criteria in one of the following exceptions are met, 
statements need not be audited and certified but must meet all of the 
other requirements set forth in paragraphs (c)(1) and (2) of this 
section.
    (2) The term ``conveys title free of any mortgage or lien'' in these 
exceptions is not intended to prohibit the taking of an instrument as 
security for the lot purchase price after title is conveyed. For the 
purposes of these exceptions, these definitions shall apply:
    (i) Deed shall mean a warranty deed, or its equivalent, which 
conveys title free and clear of liens and encumbrances.
    (ii) Assurance of Title Agreement shall mean a legal arrangement 
whereby the purchaser is guaranteed a deed upon payment of no more than 
the full purchase price of the lot (e.g. subdivision trust). In addition 
to a copy of any Assurance of Title Agreement, the Director may require 
additional documentation such as an attorney's opinion letter to assure 
that the purchaser's title is fully protected.
    (iii) Date of contract shall mean the date on which the contract or 
agreement is signed by the purchaser.
    (iv) Escrow or trust account as to down payments and deposits shall 
mean an account, established in accordance with local real estate laws 
or regulations, which assures the return to the purchaser of any monies 
paid in the event title is not delivered to the purchaser in accordance 
with the terms of the contract.
    (3) The exceptions are:
    (i) The aggregate sales price of all lots offered pursuant to a 
common promotional plan equals $500,000.00 or less; or
    (ii) Each of the following conditions of paragraphs (e)(3)(ii)(A) 
and (B) of

[[Page 480]]

this section are met, plus the conditions of one of paragraphs 
(e)(3)(ii)(C), (D), or (E) of this section:
    (A) Down payments and deposits are held in an escrow or trust 
account.
    (B) The contract provides for delivery of a deed which conveys title 
free of any mortgage or lien within 180 days of the signing of the 
contract. (In lieu of delivery of a deed, the developer may submit to 
ILSRP an Assurance of Title Agreement.)
    (C) The aggregate sales prices of all lots offered pursuant to a 
common promotional plan is at least $500,000 but less than $1,500,000.
    (D) All facilities, utilities and amenities proposed by the 
developer in the Property Report or sales contract have been completed 
so that the lots in the Statement of Record are immediately usable for 
the purpose for which they are sold.
    (E) (1) The developer is contractually obligated to the purchaser to 
complete all facilities, utilities and amenities proposed by the 
developer in the Property Report and sales contract so that all lots 
included in the Statement of Record will be usable for the purpose for 
which they are sold by the dates set out in the Property Report, and;
    (2) The developer has made financial arrangements, such as the 
posting of surety bonds (corporate bonds or individual notes or bonds 
are not acceptable), irrevocable letters of credit or the establishment 
of escrow or trust accounts, which assure completion of all facilities, 
utilities and amenities proposed by the developer in the Property Report 
or contract.
    (f) Newly-formed entity. If the developer is newly formed or has not 
had any significant operating experience, an audited or unaudited 
balance sheet and statements of receipts and disbursements of funds may 
be submitted.
    (g) Use of parent company statements. (1) If the developer is a 
subsidiary company and does not have audited financial statements, the 
Director may permit the use of the audited and certified statements of 
the parent company: Provided, That those statements are accompanied by 
an unconditional guaranty that the parent shall perform and fulfill the 
obligations of the subsidiary. If this procedure is adopted, the 
developer shall submit the following:
    (i) The audited and certified financial statements of the parent 
company, together with interim statements if necessary, which comply 
with Sec.  1010.212(c).
    (ii) A properly executed guaranty in a form acceptable to the 
Director.
    (2) In cases described in paragraph (g)(1) of this section, the 
disclosure information required in Sec.  1010.112 shall be appropriately 
amended to reference the parent company and not the developer and must 
include a statement to the effect that the developer's parent company 
(insert name) has entered into an unconditional guaranty to perform and 
fulfill the obligations of the developer.
    (h) Opinions. If the accountant qualifies or disclaims his opinion, 
the Director may accept the statements and require such additional 
disclosure as the Director deems necessary in the public interest or for 
the protection of purchasers.
    (i) Copies for prospective purchasers. Copies of the financial 
statements filed with the Statement of Record shall be made available to 
prospective purchasers upon request. A supply of the latest submitted 
statements shall be maintained at whatever place, or places, as is 
necessary to allow immediate delivery upon request by a prospective 
purchaser. These statements shall contain financial information only and 
shall not include any promotional material such as that usually set 
forth in annual reports.
    (j) Change from audited to unaudited statements. (1) Developers who 
file audited statements must continue with audited statements throughout 
the duration of the registration unless, at a later date, the developer 
submits amendments which demonstrate to the satisfaction of the Director 
that it then qualifies for an exception from audited statements under 
paragraph (e)(3)(ii) of this section. For purposes of paragraph 
(e)(3)(ii)(C) of this section, the Director will consider the aggregate 
sales prices of only the lots yet to be sold, and may consider whether 
any additions to the subdivisions or reacquisitions of lots already sold 
would be likely to cause the dollar limits to be exceeded.

[[Page 481]]

    (i) The aggregate sales prices of the lots yet to be sold in the 
subdivision has been reduced to less than $1,500,000.00, and that it 
will not exceed this amount through further additions to the 
subdivision, or through the reacquisition of lots already sold, and;
    (ii) The sales contract provides for delivery of a deed within 120 
days of the date of the contract which conveys title free and clear of 
any mortgage or lien or the developer files an Assurance of Title 
Agreement with ILSRP, and;
    (iii) Any down payments or deposits are held in an escrow or trust 
account, or;
    (iv) The developer then qualifies for exception (e)(3)(iii) or (iv) 
of this section.
    (2) The Director may allow a developer, who has made sales prior to 
registration, to submit unaudited statements under the provisions of 
paragraph (j)(1)(i) of this section. The developer must demonstrate to 
the satisfaction of the Director that the acceptance of unaudited 
statements would not be a detriment to the public interest or to the 
protection of purchasers.



Sec.  1010.214  Recreational facilities.

    (a) Submit a synopsis of the proposed plans and estimated cost of 
any proposed or partially constructed recreational facility disclosed in 
Sec.  1010.114. This item should include the general dimensions and a 
brief description of the facility but it should not include blueprints 
or similar technical materials.
    (b) Submit a copy of any bond or escrow arrangements to assure 
completion of the recreational facilities disclosed in Sec.  1010.114 
which are not structurally complete.
    (c) Submit a copy of the lease for any leased recreational facility.



Sec.  1010.215  Subdivision characteristics and climate.

    (a) Submit a copy of a current geological survey topographic map, or 
maps, of the largest scale available from the U.S. Geological Survey 
with an outline of the entire subdivision and the area included in this 
Statement of Record clearly indicated. Do not shade the areas on the 
maps which have been outlined.
    (b) If drainage facilities are proposed but not yet completed, 
submit a synopsis of the developer's proposed plans that includes a 
description of the system of collecting surface waters; a description of 
the steps to be taken to control erosion and sedimentation and the 
estimated cost of the drainage facilities.
    (c) Submit copies of any bonds, escrow or trust accounts or other 
financial assurance of completion of the drainage facilities.
    (d) State whether the jurisdiction in which the subdivision is 
located has a system for rating the land for fire hazards.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29117, May 11, 2016]



Sec.  1010.216  Additional information.

    (a) Property Owners' Association. (1) If the association has been 
formed as a legal entity, submit a copy of the articles of association, 
bylaws or similar documents, and a copy of the charter or certificate of 
incorporation.
    (2) If the developer exercises any control over the association, 
state whether any contracts have been executed between the association 
and the developer or any affiliate or principal of the developer. If 
there have been, briefly summarize the terms of the contracts, their 
purpose, their duration and the method and rate of payment required by 
the contract. State whether the association may modify or terminate the 
contracts after the owners assume control of the association.
    (3) State whether there is any agreement which would require the 
association to reimburse the developer, its affiliates or successors for 
any attorney's fees or costs arising from an action brought against them 
by the association or individual property owners regardless of the 
outcome of the action.
    (4) If the answer to paragraph (a)(2) or (a)(3) of this section is 
in the affirmative, disclosure may be required in Sec.  1010.116(a) at 
the discretion of the Director.
    (5) Submit a copy of any membership agreement or similar document.
    (b) Price range, type of sales and marketing. (1) State the price 
range of lots in the subdivision.

[[Page 482]]

    (2) State the type of sales to be made, i.e., contract for deed, 
cash, deed with security instrument, etc.
    (3) Describe the methods of advertising and marketing to be used for 
the subdivision. The description should include, but need not be limited 
to, information on such matters as to:
    (i) Whether the developer will employ his own sales force or will 
contract with an outside group;
    (ii) Whether wide area telephone solicitation will be employed;
    (iii) Whether presentations will be made away from the immediate 
vicinity of the subdivision and/or if prospective purchasers will be 
furnished transportation from distant cities to the subdivision;
    (iv) Whether mass mailing techniques will be used and gifts offered 
to those who respond.
    (4) For any subdivision that meets any of the criteria in paragraphs 
(b)(4)(i) through (iii) of this section, submit a copy of any 
advertising or promotional material that is, or has been, used for the 
subdivision. Amendments to reflect changes in advertising or promotional 
material need be filed only when there is a material change related to 
one of the above factors. Depending upon the content of the material 
submitted, the Director may require additional warnings in the Property 
Report portion. This requirement applies to any subdivision that:
    (i) Mentions or refers to recreational facilities which are not 
disclosed in Sec.  1010.114, or;
    (ii) Promotes the sale of lots based on the investment potential or 
expected profits, or;
    (iii) Contains information which is in conflict with that disclosed 
in this Statement of Record.
    (c) Violations and litigation. (1) Submit a copy of the 
complaint(s), the answer(s) and the decision(s) for any litigation 
listed in Sec.  1010.116(c).
    (2) If it is indicated in Sec.  1010.116(c) that the developer or 
any of the parties involved in the subdivision are, or have been, the 
subject of any bankruptcy proceedings, furnish a copy of the schedules 
of liabilities and assets (or a recap of those schedules); the petition 
number; the date of the filing of the petition; names and addresses of 
the petitioners, trustee and counsel; the name and location of the court 
where the proceedings took place and the status or disposition of the 
petition. Explain, briefly, the cause of the action.
    (3) Furnish a copy of any orders issued in connection with any 
violations listed in Sec.  1010.116(c).
    (d) Resale or exchange program. (1) If it is stated in Sec.  
1010.116(d)(3) that there is an exchange program which provides 
sufficient lots to satisfy all requests for exchange, describe the 
method used to determine the number of lots required; state whether 
these lots have been reserved or set aside; whether additional lots will 
be provided if the lots available for exchange are exhausted and the 
source of any additional lots.
    (e) Unusual situations--(1) Foreign subdivisions. If the subdivision 
is located outside the several States, the District of Columbia, the 
Commonwealth of Puerto Rico or the territories or possession of the 
United States, the Statement of Record shall be submitted in the English 
language and all supporting documents, including copies of any laws 
which restrict the ownership of land by aliens, shall be submitted in 
their original language and shall be accompanied by a translation into 
English.



Sec.  1010.219  Affirmation.

    The affirmation set forth in section XXVIII of the appendix to this 
part: Affirmation of Senior Executive Officer shall be executed by the 
senior executive officer or a duly authorized agent:



Sec.  1010.310  Annual report of activity.

    (a) As an integral part of the Statement of Record, the developer 
shall file with the Director an Annual Report of Activity on any initial 
or consolidated registration not under suspension. For this purpose, 
only one Annual Report of Activity will be expected for subdivisions on 
which developers have filed consolidations. For registrations certified 
by a state as provided for in Sec.  1010.500, a developer need file only 
one Annual Report of Activity for any registration for which the ILSRP 
number is the same (alphabetic designators indicate that the 
registration has been treated as a consolidation).

[[Page 483]]

    (b) The report shall be submitted within 30 days of the annual 
anniversary of the effective date of the initial Statement of Record. 
The report may be submitted via the electronic means described in Sec.  
1010.20(a).
    (c) The report shall contain the following information:
    (1) Subdivision name and address.
    (2) Developer's name, address and telephone number.
    (3) Agent's name, address and telephone number.
    (4) Interstate Land Sales Registration number.
    (5) The date on which the initial filing first became effective.
    (6) The number of registered lots, parcels or units which are unsold 
as of the date on which the report is due.
    (7) One of the following:
    (i) A statement that the developer is still engaged in land sales 
activity at the subject subdivision and that there have been no changes 
in material fact since the last effective date was issued which would 
require an amendment to the Statement of Record; or
    (ii) A statement that the developer is still engaged in land sales 
activity at the subject subdivision, that material changes have occurred 
since the last effective date, and that corrected pages to the Property 
Report portion or Additional Information and Documentation portion of 
the Statement accompany the report; or
    (iii) A statement that the developer is no longer engaged in land 
sales activity at the subject subdivision, together with the reason the 
developer is no longer selling (e.g., all lots sold to the public or the 
remaining lots sold to another developer, along with the date of sale 
and the new developer's name, address and telephone number). A request 
may be made that the Statement of Record be voluntarily suspended. The 
request should be submitted in duplicate and will become effective upon 
the counter-signature of the Director (or an authorized Designee) with 
the duplicate being returned to the developer.
    (8) The report shall be dated and shall be signed by the senior 
executive officer of the developer on a signature line above his typed 
name and title. The senior executive officer's acknowledgement shall be 
attested to or certified by a notary public or similar public official 
authorized to attest or certify acknowledgements in the jurisdiction in 
which the report is executed.
    (d) If the report indicates that there are 101 or more registered 
lots, parcels or units remaining for sale, the report shall be 
accompanied by an amendment fee in the amount and form prescribed in 
Sec.  1010.35.
    (e) Failure to submit the report when due shall be grounds for an 
action to suspend the effective Statement of Record.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29117, May 11, 2016]



      Subpart C_Certification of Substantially Equivalent State Law



Sec.  1010.500  General.

    (a) This subpart establishes procedures and criteria for certifying 
state land sale or lease disclosure programs and state land development 
standards programs. The purpose of State Certification is to lessen the 
administrative burden on the individual developer, arising where there 
are duplicative state and Federal registration and disclosure 
requirements, without affecting the level of protection given to the 
individual purchaser or lessee. If the Director determines that a state 
has adopted and is effectively administering a program that gives 
purchasers and lessees the same level of protection given to them by the 
Interstate Land Sales Registration Program, then the Director shall 
certify that state. Developers who accomplish an effective registration 
with a state in which the land is located after the Director has 
certified the state may satisfy the registration requirements of the 
Director by filing with the Director materials designated by agreement 
with certified states in lieu of the Federal Statement of Record and 
Property Report.
    (b) A state that is certified by the Director shall be known as the 
situs certified state for all land located within its borders.
    (c) After a developer is effectively registered with the Director 
through a certified state, the Director has the

[[Page 484]]

same authority over that developer as the Director has over developers 
who file directly with the Director. This includes the authority to 
subpoena information and to examine, evaluate and suspend a developer's 
registration under sections 1407(d) and (e) of the Act and Sec.  
1010.45(b)(1) and (b)(2) of these regulations.
    (d) The prohibitions against the use of the Property Report 
contained in Sec.  1010.29 apply to state disclosure materials and 
substantive development standards. In addition, for purposes of this 
paragraph, references made to the Director, ILSRP and the Bureau in 
Sec.  1010.29 will include a reference to the equivalent state officer 
or agency.
    (e) The Purchaser's Revocation Rights, Sales Practices and Standards 
rules contained in part 1011 of these regulations apply to developers 
who register with the Director through certified States. All of the 
rules in part 1011 apply, excepting the disclaimer statement in Sec.  
1011.50(a) which is modified to read as follows: ``Obtain the Property 
Report or its equivalent, required by Federal and State law and read it 
before signing anything. No Federal or State agency has judged the 
merits or value, if any, of this property.''
    (f) Developers are obliged to pay filing fees as set forth in Sec.  
1010.35 of this part.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29117, May 11, 2016]



Sec.  1010.503  Notice of certification.

    (a) If the Director determines that a state qualifies for 
certification under this subpart, the Director shall so notify the state 
in writing. The state will be effectively certified under the section 
and as of the date specified in the notice.
    (b) If the Director determines that a state does not meet the 
standards for certification, the Director shall so notify the state in 
writing. The notice will specify particular changes in state law, 
regulations or administration that are needed to obtain certification. 
The Director shall not be bound in advance to certify a state that makes 
the suggested changes if other deficiencies become apparent at a later 
time.
    (c) The Director's final determination to accept or reject a State's 
Application for Certification of Land Sales Program shall be published 
in the Federal Register.
    (d) A state's certification will remain in effect until it is 
voluntarily suspended by the state or withdrawn by the Director. A state 
can voluntarily suspend its certification by notifying the Director in 
writing. The suspension will take effect as of the date and time 
specified in the notice to the Director, or upon receipt by the Director 
if no date is specified. The Director may withdraw certification as 
provided in Sec.  1010.505.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]



Sec.  1010.504  Cooperation among certified states and between 
certified states and the Director.

    (a) By filing an Application for Certification of State Land Sales 
Program pursuant to this subpart, a state agrees that, if it is 
certified by the Director, it will:
    (1) Accept for filing and allow to be distributed as the sole 
disclosure document, a disclosure document currently in effect in the 
situs certified state. Only those documents filed with the situs state 
after certification by the Director must automatically be accepted by 
other certified states;
    (2) Certify copies of all disclosure documents, amendments and 
consolidations filed with it by developers of land located within its 
borders for and as needed by developers required to submit certified 
copies to the Director and all other certified states. The certification 
shall indicate whether the documents are currently in effect. The 
certification should be in the format set forth in section XXIX of the 
appendix to this part: Form for Certification for Disclosure Documents.
    (3) Assist and cooperate with the Director and other certified 
states by requiring that developers of land within its borders amend 
disclosure documents if any change occurs in any representation of 
material fact required to be stated in the disclosure documents, 
including a change resulting from the

[[Page 485]]

developer's compliance with the requirements of the law in another 
certified state. The state shall require developers to send certified 
copies of the amended documents to the Director and requesting certified 
states. All amendments to such materials, which reflect changes in 
material facts regarding the subdivision, shall be submitted to the 
situs certified state authorities within 15 days of the date on which 
the developer knows, or should have known, of such change. Certified 
copies of the disclosure documents shall be submitted by the developer 
to the Director and the other certified states within 15 days after it 
becomes effective under the situs certified state laws.
    (4) Continue to effectively operate its Land Sales Program as that 
Program is described in the Application for Certification and as it was 
certified by the Director.
    (5) Assist and cooperate with the Director by monitoring the sales 
practices of developers registered with it directly or through another 
certified state, and by reporting to the Director any violations of the 
Act, including but not limited to the required contract provisions, 
revocation rights and anti-fraud provisions of 15 U.S.C. 1703, or the 
regulations.
    (b) A state required to accept the disclosure documents of another 
situs certified state pursuant to paragraph (a)(1) of this section, may, 
in its discretion, require the developer to furnish it with copies 
certified pursuant to paragraph (a)(2) of this section.
    (c) No state shall be prevented from establishing substantive or 
disclosure requirements which exceed the Federal standard provided that 
such requirements are not in conflict with the Act or these regulations. 
For example, a certified state may impose additional disclosure 
requirements on developers of land located within its borders but may 
not impose additional disclosure requirements on developers whose 
disclosure documents it is required to accept pursuant to paragraph 
(a)(1) of this section. However, a certified state may impose additional 
nondisclosure requirements on out of state developers even though the 
developer is registered in the certified state in which the land is 
located.
    (d) After a developer is effectively registered with a certified 
state through a situs certified state, either or both certified states 
may exercise full enforcement authorities and powers over that developer 
according to applicable law and regulations.
    (e) The Director shall cooperate with the certified states by 
offering a forum for nonbinding arbitration of disputes between two or 
more certified States arising out of the State Certification Program.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]



Sec.  1010.505  Withdrawal of state certification.

    (a) The Director shall periodically review the laws, regulations and 
administration thereof, of a certified state. If the Director finds 
that, taken as a whole, the laws, regulations or administration thereof, 
no longer meet the requirements of subpart C, then the Director may 
issue a notice to withdraw the certification of that state.
    (b) The notice of proceedings to withdraw a state's certification 
will be issued to the state by the Director pursuant to Sec.  1012.236. 
The Director may, after notice and after an opportunity for a hearing, 
pursuant to Sec.  1012.237, issue an order withdrawing certification. In 
the event that a withdrawal order is issued, the order shall remain in 
effect until the state has amended its laws, regulations or the 
administration thereof or has otherwise complied with the requirements 
of the order. When the state has complied with the requirements of the 
order, the Director shall so declare and the withdrawal order shall 
cease to be effective.
    (c) Withdrawal orders issued pursuant to this subsection will be 
effective as of the date the order is received by the state. The 
withdrawal order shall be published in the Federal Register.
    (d) The rules of 12 CFR part 1080, unless otherwise specified in 12 
CFR part 1012, subpart D, will generally apply to hearings on withdrawal 
of a state's certification.

[[Page 486]]



Sec.  1010.506  State/Federal filing requirements.

    (a)(1) If the Director has certified a state under this subpart, the 
Director shall accept for filing disclosure materials or other 
acceptable documents which have been approved by the certified state 
within which the subdivision is located. Only those filings made by the 
developer with the state after the state was certified by the Director 
shall be automatically accepted by the Director.
    (2) Retroactive application of the effectiveness of state's 
certification to a specified date may be granted on a state-by-state 
basis, where the Director determines that retroactive application will 
not result in automatic Federal registration of any state filing that 
has not met the requirements of the certified state laws.
    (b) For a developer to be registered with the Director, the 
developer shall file with the Director a state certified copy of the 
Property Report or its equivalent, and any other documentation as 
stipulated in the Director's Notice of Certification to the state.
    (c) The documents and materials filed under paragraph (b) of this 
section will be automatically effective as the Federal Statement of 
Record and Property Report after these materials and the proper filing 
fee have been received by the Director.
    (d) The Director has authority pursuant to Sec.  1010.45(b)(1) and 
(b)(2) to suspend individual filings which fail to meet the requirements 
of the certified state's law or regulations or the standards in the 
certification agreement whether or not the state agency has initiated a 
similar action.
    (e)(1) State accepted materials filed with the Director pursuant to 
this section must be amended to reflect any amendment to such materials 
made effective by the state. All amendments to such materials must be 
submitted to the Director within 15 days after becoming effective under 
the applicable state laws. Amendments are automatically effective upon 
their receipt by the Director and the provisions of Sec.  1010.45(b)(1) 
and (2) apply to amendments filed under this section.
    (2) Amendments shall include or be accompanied by:
    (i) A letter from the developer giving a narrative statement fully 
explaining the purpose and significance of the amendment and referring 
to that section and page of the material which is being amended, and;
    (ii) A signed state acceptance certification substantially the same 
as that required by Sec.  1010.504(a)(2).
    (f) If a certified state suspends the registration of a particular 
subdivision for any reason, the subdivision's Federal registration with 
the Director shall be automatically suspended as a result of the state 
action. No action need be taken by the Director to effect the 
suspension.
    (g) A state is certified only with regard to land located within the 
state borders. The Director is not required to accept filings which have 
been accepted by a certified state if the land which is the subject of 
the filing is not located within that certified state. For example, if 
State A is certified by the Director and State B is not, the Director is 
not required to accept filings from State B simply because State A 
accepts filings from State B.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]



Sec.  1010.507  Effect of suspension or withdrawal of certification 
granted under 15 U.S.C. 1708(a)(1): Full disclosure requirement.

    (a) If a state certified under 15 U.S.C. 1708(a)(1) suspends its own 
certification or has its certification withdrawn under Sec.  1010.505, 
the Federal disclosure materials accepted and made effective by the 
Director, pursuant to Sec.  1010.506, prior to the suspension or 
withdrawal shall remain in effect unless otherwise suspended by the 
Director.
    (b) In the event that there is a change in a material fact with 
regard to a subdivision that remains registered under the provisions of 
paragraph (a) of this section, the developer shall file a new 
registration with the Director meeting the requirements of the then 
applicable Federal registration regulations. Modifications of the 
Federal format may be used as specified by the Director.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]

[[Page 487]]



Sec.  1010.508  Effect of suspension of certification granted 
under 15 U.S.C. 1708(a)(2): Sufficient protection requirement.

    (a) If a state certified under 15 U.S.C 1708(a)(2) suspends its own 
certification or has its certification withdrawn under Sec.  1010.505, 
the effectiveness of the Federal disclosure materials accepted and made 
effective by the Director, pursuant to Sec.  1010.506, prior to the 
suspension or withdrawal shall terminate ninety (90) days after the 
notice of withdrawal order is published in the Federal Register as 
provided in Sec.  1010.505(c).
    (b) At the end of the ninety day period, or during the ninety day 
period in the event that there is a change in material fact with regard 
to a subdivision that remains registered under the provisions of 
paragraph (a) of this section, the developer shall file a new 
registration with the Director meeting the requirements of the then 
applicable Federal registration regulations. Modifications of the 
Federal format may be used as specified by the Director.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]



Sec.  1010.552  Previously accepted state filings.

    (a) Materials filed with a state and accepted by the HUD Secretary 
as a Statement of Record prior to January 1, 1981, pursuant to 24 CFR 
1010.52 through 1010.59 (as published in the Federal Register on April 
10, 1979) may continue in effect. However, developers must comply with 
the applicable amendments to the Federal act and the regulations 
thereunder. In particular, see Sec. Sec.  1010.558 and 1010.559, which 
require that the Property Report and contracts or agreements contain 
notice of purchaser's revocation rights. In addition, see 15 U.S.C. 
1703(a)(2)(D), which provides that it is unlawful to make any 
representations with regard to the developer's obligation to provide or 
complete roads, water, sewers, gas, electrical facilities or 
recreational amenities, unless the developer is obligated to do so in 
the contract.
    (b) If any such filing becomes inactive or suspended under the laws 
of the state, the registration with the Director shall be ineffective 
from that time.
    (c) Such Statement of Record may be suspended pursuant to Sec.  
1010.45.
    (d) The Director may refuse to accept any particular filing under 
this section when it is determined that acceptance is not in the public 
interest.
    (e) The Director may require such changes, additional information, 
documents or certification as the Director determines to be reasonably 
necessary or appropriate in the public interest.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016]



Sec.  1010.556  Previously accepted state filings--amendments and 
consolidations.

    (a) Amendments--(1) General requirements. State accepted materials, 
filed with the Director pursuant to Sec.  1010.552, shall be amended to 
reflect any amendment to such materials made effective by the state or 
any change of a material fact regarding the subdivision. All amendments 
to such materials, which reflect changes in material facts regarding the 
subdivision, shall be submitted to the state authorities within 15 days 
of the date on which the developer knows, or should have known, of such 
change and to the Director within 15 days after it becomes effective 
under the applicable State laws. However, such amendment shall not be 
effective as a Federal registration until the Director has determined 
that the amendment meets all applicable requirements of these 
regulations.
    (2) Amendments shall include or be accompanied by:
    (i) A letter from the developer giving a narrative statement fully 
explaining the purpose and significance of the amendment and referring 
to that section and page of the Statement of Record which is being 
amended, and;
    (ii) All amended pages of the state accepted materials filed with 
the Director. These pages shall be copied together with their 
amendments. Each such page shall have its date of preparation in the 
lower right hand corner, and;
    (iii) A signed state acceptance certification, and;
    (iv) The appropriate fees as indicated in Sec.  1010.35.
    (b) Consolidations--(1) When consolidations allowed. If lots are to 
be registered

[[Page 488]]

pursuant to Sec.  1010.552 which are in the same common promotional plan 
with other lots already registered with the Director, then new 
consolidated state accepted materials including such lots may be filed 
with the Director as a Statement of Record following the format of the 
previously accepted filing.
    (2) Consolidated Statements of Record shall include or be 
accompanied by:
    (i) State accepted consolidation materials which are also acceptable 
to the Director as a Statement of Record (state property report 
inclusive). These state accepted consolidation materials shall cover all 
lots previously registered in the common promotional plan except those 
deleted pursuant to other provisions in these regulations. These 
materials shall also include information and items required for state 
accepted materials filed as an initial registration Statement of Record, 
except that, supporting documentation in materials previously made 
effective by the Director for other lots in the subject common 
promotional plan may be included incorporated by reference into the new 
consolidation materials submitted as a Statement of Record. However, 
such documentation may be incorporated by reference included only if it 
is applicable to the new consolidated lots as well as to the previously 
registered lots.
    (ii) A signed state acceptance certification.
    (iii) The appropriate fees as indicated in Sec.  1010.35.
    (c) Effective date; state filing. The effective dates of state 
materials filed as amendments and consolidated Statements of Record 
shall be determined in accordance with the provisions of Sec.  1010.21.



Sec.  1010.558  Previously accepted state filings--notice of revocation 
rights on property report cover page.

    (a)(1) The cover page on Property Reports for filings made with the 
Director pursuant to Sec.  1010.552 shall be prepared in accordance with 
Sec.  1010.105 and shall include the paragraphs set forth in section XXX 
of the appendix to this part: Language to be Included on Property Report 
Cover Page.
    (2) If the purchaser is entitled to a longer revocation period by 
operation of State law, that period becomes the Federal revocation 
period and the cover page must reflect the longer period, rather than 
the seven days.
    (b)(1) If a deed is not delivered within 180 days of the signing of 
the contract or agreement of sale or unless certain provisions are 
included in the contract or agreement, the purchaser is entitled to 
cancel the contract within two years from the date of signing the 
contract or agreement.
    (2) The deed must be a warranty deed, or where such a deed is not 
commonly used, a similar deed legally acceptable in the jurisdiction 
where the lot is located. The deed must be free and clear of liens and 
encumbrances.
    (3) The contract provisions are:
    (i) A legally sufficient and recordable lot description, and;
    (ii) A provision that the seller will give the purchaser written 
notification of purchaser's default or breach of contract and the 
opportunity to remedy the default or breach within 20 days of the 
notice; and
    (iii) A provision that, if the purchaser loses rights and interest 
in the lot because of the purchaser's default or breach of contract 
after 15 percent of the purchase price, exclusive of interest, has been 
paid, the seller shall refund to the purchaser any amount which remains 
from the payments made after subtracting 15 percent of the purchase 
price, exclusive of interest, or the amount of the seller's actual 
damages, whichever is the greater.
    (4) If a deed is not delivered within 180 days of the signing of the 
contract or if the necessary provisions are not included in the 
contract, the following statement shall be used in place of any other 
rescission language: ``Under Federal law you may cancel your contract or 
agreement of sale any time within two years from the date of signing.''



Sec.  1010.559  Previously accepted state filings--notice of revocation 
rights in contracts and agreements.

    (a)(1) All contracts or agreements, including promissory notes used 
in sale of lots for filings made with the Director pursuant to Sec.  
1010.552, must contain the language set forth in section XXXI

[[Page 489]]

of the appendix to this part: Notice of Revocation Rights in boldface 
type (which must be distinguished from the type used for the rest of the 
contract) on the face or signature page above all signatures:
    (2) If the purchaser is entitled to a longer revocation period by 
operation of State law or the Act, that period becomes the Federal 
revocation period and the contract or agreement must reflect the longer 
period, rather than the seven days. The language shall be consistent 
with that shown on the Cover Page (see Sec.  1010.558).
    (b) The above revocation provisions may not be limited or qualified 
in the contract or other document by requiring a specific type of notice 
or by requiring that notice be given at a specified place.





   Sec. Appendix A to Part 1010--Standard and Model Forms and Clauses

 I. Forms for Developer's Affirmation for Land Sale--Sec.  1010.13(a)(9)

Developer's Name________________________________________________________
Developer's Address_____________________________________________________
Purchaser's Name(s)_____________________________________________________
Purchaser's Address(es) (including county)______________________________
Name of Subdivision_____________________________________________________
Legal Description of Lot(s) Purchased___________________________________

    I hereby affirm that all of the requirements of the MSA exemption as 
set forth in 15 U.S.C. 1702(b)(8) and 12 CFR 1010.13 have been met in 
the sale or lease of the lot(s) described above.
    I also affirm that I submit to the jurisdiction of the Interstate 
Land Sales Full Disclosure Act with regard to the sale or lease cited 
above.

(Date)__________________________________________________________________
(Signature of Developer or Authorized Agent)____________________________
(Title)_________________________________________________________________

    II. Language Notifying Buyer of Option to Cancel Contract--Sec.  
                            1010.15(b)(5)(i)

    You have the option to cancel your contract or agreement of sale by 
notice to the seller until midnight of the seventh day following the 
date of signing of the contract or agreement.
    If you did not receive a Lot Information Statement prepared pursuant 
to the rules and regulations of the Bureau of Consumer Financial 
Protection in advance of your signing the contract or agreement, the 
contract or agreement of sale may be cancelled at your option for two 
years from the date of signing.

    III. Sample Lot Information Statement and Sample Receipt--Sec.  
                             1010.15(b)(11)

                              Sample Format

    (Use of the following headings and first paragraph are mandatory.)

                        Lot Information Statement

            Important: Read Carefully Before Signing Anything

    The developer has obtained a regulatory exemption from registration 
under the Interstate Land Sales Full Disclosure Act. One requirement of 
that exemption is that you must receive this Statement prior to the time 
you sign an agreement (contract) to purchase a lot.

                             Right To Cancel

    (Under this heading the developer is to state the specific 
rescission rights provided for in the contract pursuant to 
1010.15(b)(5)(i)).

                           Risk of Buying Land

    (Under this heading the developer is to list the following 
information:)
    There are certain risks in purchasing real estate that you should be 
aware of. The following are some of those risks:
    The future value of land is uncertain and dependent upon many 
factors. Do not expect all land to automatically increase in value.
    Any value which your lot may have will be affected if roads, 
utilities and/or amenities cannot be completed or maintained.
    Any development will likely have some impact on the surrounding 
environment. Development which adversely affects the environment may 
cause governmental agencies to impose restriction on the use of the 
land.
    In the purchase of real estate, many technical requirements must be 
met to assure that you receive proper title and that you will be able to 
use the land for its intended purpose. Since this purchase involves a 
major expenditure of money, it is recommended that you seek professional 
advice before you obligate yourself.
    If adequate provisions have not been made for maintenance of the 
roads or if the land is not served by publicly maintained roads, you may 
have to maintain the roads at your expense.
    If the land is not served by a central sewage system and/or water 
system, you should contact the local authorities to determine whether a 
permit will be given for an on-site sewage disposal system and/or well 
and whether there is an adequate supply of water. You should also become 
familiar with

[[Page 490]]

the requirements for, and the cost of, obtaining electrical service to 
the lot.

                          Developer Information

    (Under this heading the developer is to list the following 
information:)

Developer's Name:_______________________________________________________
Address:________________________________________________________________
Telephone Number:_______________________________________________________

                             Lot Information

    (Under this heading the developer is to list the following 
information:)

Lot Location:___________________________________________________________

    (Enter a statement disclosing all liens, reservations, taxes, 
assessments, easements and restrictions applicable to the lot. A copy of 
the restrictions may be attached in lieu of recitation.)

              Suppliers of Utilities and Issuers of Permits

    (Under this heading the developer is to list the name, address and 
phone number of the appropriate governmental agency or agencies, if any, 
that will provide information on permits or other requirements for 
water, sewer and electrical installations. The information will also 
contain the name, address and telephone number of the suppliers of such 
utilities which can provide information to the purchaser on costs and 
availability of such services. A chart similar to the one below may be 
used to supply this information).
    Listed below are contact points for determining permit requirements, 
if any, and to obtain information on approximate costs and availability 
for the listed services:

------------------------------------------------------------------------
                                            Name, address and telephone
                                                     number of
                                         -------------------------------
                                           Governmental
                                              agency         Supplier
------------------------------------------------------------------------
Water
Sewer
Electricity
------------------------------------------------------------------------

    If misrepresentations are made in the sale of this lot to you, you 
may have rights under the Interstate Land Sales Full Disclosure Act. If 
you have evidence of any scheme, artifice or device used to defraud you, 
you may wish to contact: Consumer Financial Protection Bureau, 
Interstate Land Sales Registration Program, 1700 G Street NW., 
Washington DC 20552.
    (The Receipt is to be in the following form:)

              Sample Receipt for Lot Information Statement

Purchaser (print or type):______________________________________________
Date:___________________________________________________________________
Signature of purchaser:_________________________________________________
________________________________________________________________________
Street Address:_________________________________________________________
City:___________________________________________________________________
State:__________________________________________________________________
Zip:____________________________________________________________________
Name of salesperson (print or type):____________________________________
Signature of salesperson:_______________________________________________

IV. Request for Multiple Site Subdivision Exemption--Sec.  1010.15(c)(1)

             Request for Multiple Site Subdivision Exemption

    Developer:

Name:___________________________________________________________________
Address:________________________________________________________________
Telephone No.:__________________________________________________________

    Agent:

Name:___________________________________________________________________
Address:________________________________________________________________
Telephone No.:__________________________________________________________


    (Insert a general description of the developer's method of 
operation.)
    I affirm that I am, or will be, the developer of the property and/or 
method of operation described above.
    I affirm that the lots in said property will be sold in compliance 
with all of the requirements of 12 CFR 1010.15.
    I further affirm that the statements contained in all documents 
submitted with this request for an Exemption Order are true and 
complete.

Date:___________________________________________________________________
Signature:______________________________________________________________
Title:__________________________________________________________________


    WARNING: 18 U.S.C. 1001 provides, among other things, that whoever 
knowingly and willingly makes or uses a document or writing containing 
any false, fictitious, or fraudulent statement or entry, in any matter 
within the jurisdiction of any department or agency of the United 
States, shall be fined not more than $10,000 or imprisoned for not more 
than 5 years or both.

       V. Request for Regulatory Exemption Order--Sec.  1010.16(c)

                       REQUEST FOR EXEMPTION ORDER

Subdivision_____________________________________________________________
Location (including county)_____________________________________________
Developer_______________________________________________________________
Address_________________________________________________________________
Authorized Agent or President of Developer______________________________
________________________________________________________________________
Address_________________________________________________________________
Number of Lots Subject to Exemption Request_____________________________
Description of Lots (list lot and block number or other identifying 
designation)____________________________________________________________
________________________________________________________________________

    I affirm that I am the developer or owner of the property described 
above or will be the developer or owner at the time the lots are

[[Page 491]]

offered for sale to the public, or that I am the agent authorized by the 
developer or owner to complete this statement. I further affirm that the 
statements contained in all documents submitted with the request for an 
exemption order are true and complete.

________________________________________________________________________
(Date)__________________________________________________________________

(Signature of Developer, Owner or Authorized Agent)
________________________________________________________________________
(Title)

    WARNING: Section 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

  VI. Developer's Affirmation for Advisory Opinion--Sec.  1010.17(b)(3)

                         Developer's Affirmation

Name of Subdivision_____________________________________________________
Location (Including County and State)___________________________________
Name of Developer_______________________________________________________
Address of Developer____________________________________________________
Name of Agent___________________________________________________________
Address of Agent________________________________________________________
Number of Lots in Subdivision___________________________________________
Number of Acres in Subdivision__________________________________________

    I affirm that I am the developer or owner of the property described 
above or will be the developer or owner at the time the lots are offered 
for sale to the public, or that I am the agent authorized by the 
developer or owner to complete this statement.I further affirm that the 
statements contained in all documents submitted with the request for an 
Advisory Opinion are true and complete.

________________________________________________________________________
(Date)
________________________________________________________________________
(Signature)
________________________________________________________________________
(Title);

    WARNING: 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

     VII. Initial and Consolidated Registration Fee Schedule--Sec.  
                               1010.35(b)

------------------------------------------------------------------------
                        Number of lots                            Fees
------------------------------------------------------------------------
200 or fewer lots............................................       $800
201 or more lots.............................................      1,000
------------------------------------------------------------------------

    VIII. Property Report for Statement of Record--Sec.  1010.100(b)

 
 
 
                             Property Report
                       Heading and Section Number
Cover Sheet................................................     1010.105
Table of Contents..........................................     1010.106
Risks of Buying Land.......................................     1010.107
General Information........................................     1010.108
Title and Land Use.........................................     1010.109
 

    (a) General Instructions
    (b) Method of Sale
    (c) Encumbrances, Mortgages and Liens
    (d) Recording the Contract and Deed
    (e) Payments
    (f) Restrictions
    (g) Plats, Zoning, Surveying, Permits, Environment

 
 
 
Roads......................................................     1010.110
Utilities..................................................     1010.111
 

    (a) Water
    (b) Sewer
    (c) Electricity
    (d) Telephone
    (e) Fuel or other Energy Source

 
 
 
Financial Information......................................     1010.112
Local Services.............................................     1010.113
Recreational Facilities....................................     1010.114
Subdivision Characteristics and Climate....................     1010.115
 

    (a) General Topography
    (b) Water Coverage
    (c) Drainage and Fill
    (d) Flood Plain
    (e) Flooding and Soil Erosion
    (f) Nuisances
    (g) Hazards
    (h) Climate
    (i) Occupancy

 
 
 
Additional Information.....................................     1010.116
 

    (a) Property Owners' Association
    (b) Taxes
    (c) Violations and Litigation
    (d) Resale or Exchange Program
    (e) Unusual Situations
    1. Leases
    2. Foreign Subdivision
    3. Time Sharing
    4. Membership
    (f) Equal Opportunity in Lot Sales
    (g) Listing of lots

 
 
 
Cost Sheet.................................................     1010.117

[[Page 492]]

 
Receipt, Agent Certification and Cancellation Page.........     1010.118
 
                ADDITIONAL INFORMATION AND DOCUMENTATION
 
General Information........................................     1010.208
Title and Land Use.........................................     1010.209
Roads......................................................     1010.210
Utilities..................................................     1010.211
Financial Information......................................     1010.212
Recreational Facilities....................................     1010.214
Subdivision Characteristics................................     1010.215
Additional Information.....................................     1010.216
Affirmation................................................     1010.219
 

    The Bureau's OMB control number for this information collection is: 
3170-0012.

          IX. Sample Page for Statement of Record--1010.102(e)

                               SAMPLE PAGE

                                  ROADS

    Here we discuss the roads that lead to the subdivision, those within 
the subdivision and the location of nearby communities.
    ACCESS TO THE SUBDIVISION.
    County road 43 leads to the subdivision. It has two lanes and the 
width of the wearing surface is 22 feet. It's paved with a macadam 
surface.
    This road is maintained by Bottineau County with County funds. No 
improvements are planned at this time.
    ACCESS WITHIN THE SUBDIVISION.
    The roads within the subdivision will be located on rights of way 
dedicated to the public.
    We are responsible for constructing the interior roads. There will 
be no additional cost to you for this construction.
    WE HAVE NOT SET ASIDE ANY FUNDS IN AN ESCROW OR TRUST ACCOUNT OR 
MADE ANY OTHER FINANCIAL ARRANGEMENTS TO ASSURE COMPLETION OF THE ROADS, 
SO THERE IS NO ASSURANCE WE WILL BE ABLE TO COMPLETE THE ROADS.
    At present, the roads are under construction and do not provide 
access to the lots in Units 2 and 3 during wet weather. The succeeding 
chart describes their present condition and estimated completion dates.

----------------------------------------------------------------------------------------------------------------
                        Estimated       Percentage of      Estimated
       UUnit          starting date     construction    completion date     Present surface      Final surface
                     (month and year)   now complete    (month and year)
----------------------------------------------------------------------------------------------------------------
1.................  February 2010....              50  December 2010....  Gravel............  Asphalt.
2.................  August 2010......               0  June 2011........  Dirt..............  Do.
3.................  April 2011.......               0  October 2011.....  None..............  Do.
----------------------------------------------------------------------------------------------------------------

    X. Language for Warning on Cover Page of Property Report--Sec.  
                               1010.105(c)

    This Report is prepared and issued by the developer of this 
subdivision. It is not prepared or issued by the Federal Government.
    Federal law requires that you receive this Report prior to your 
signing a contract or agreement to buy or lease a lot in this 
subdivision. However, NO FEDERAL AGENCY HAS JUDGED THE MERITS OR VALUE, 
IF ANY, OF THIS PROPERTY.
    If you received this Report prior to signing a contract or 
agreement, you may cancel your contract or agreement by giving notice to 
the seller any time before midnight of the seventh day following the 
signing of the contract or agreement.
    If you did not receive this Report before you signed a contract or 
agreement, you may cancel the contract or agreement any time within two 
years from the date of signing.

Name of Subdivision_____________________________________________________
Name of Developer_______________________________________________________
Date of This Report_____________________________________________________

  XI. Sample Entry in Table of Contents for Statement of Record--Sec.  
                               1010.106(a)

    Title and Land Use  Page 
    Method of Sale
    Encumbrances, Mortgages and Liens
    Recording the Contract and Deed
    Payments
    Restrictions on the Use of Your Lot
    Plat Maps, Zoning, Surveying, Permits and Environment

   XII. Required Language for Risks of Buying Land--Sec.  1010.107(a)

    (1) The future value of any land is uncertain and dependent upon 
many factors. DO NOT expect all land to increase in value.
    (2) Any value which your lot may have will be affected if the roads, 
utilities and all proposed improvements are not completed. This 
paragraph may be omitted if all improvements have been completed or if 
no improvements are proposed.
    (3) Resale of your lot may be difficult or impossible, since you may 
face the competition of our own sales program and local real estate 
brokers may not be interested in listing your lot.
    (4) Any subdivision will have an impact on the surrounding 
environment. Whether or not the impact is adverse and the degree of 
impact, will depend on the location, size,

[[Page 493]]

planning and extent of development. Subdivisions which adversely affect 
the environment may cause governmental agencies to impose restrictions 
on the use of the land. Changes in plant and animal life, air and water 
quality and noise levels may affect your use and enjoyment of your lot 
and your ability to sell it.
    (5) In the purchase of real estate, many technical requirements must 
be met to assure that you receive proper title. Since this purchase 
involves a major expenditure of money, it is recommended that you seek 
professional advice before you obligate yourself.

          XIII. Format for General Information--Sec.  1010.108

    ``This Report covers ____ lots located in ____________ County, 
(State). See Page ____ for a listing of these lots. It is estimated that 
this subdivision will eventually contain ____ lots.''
    ``The developer of this subdivision is:
________________________________________________________________________
(Developer's Name)
________________________________________________________________________
(Developer's Address)
________________________________________________________________________
(Developer's telephone number)

    ``Answers to questions and information about this subdivision may be 
obtained by telephoning the developer at the number listed above.''

   XIV. Paragraphs to be included in the General Report--Title to the 
               Property and Land Use--Sec.  1010.109(a)(1)

    ``A person with legal title to property generally has the right to 
own, use and enjoy the property. A contract to buy a lot may give you 
possession but doesn't give you legal title. You won't have legal title 
until you receive a valid deed. A restriction or an encumbrance on your 
lot, or on the subdivision, could adversely affect your title.''
    ``Here we will discuss the sales contract you will sign and the deed 
you will receive. We will also provide you with information about any 
land use restrictions and encumbrances, mortgages, or liens affecting 
your lot and some important facts about payments, recording, and title 
insurance.''

     XV. Statement on Release Provisions--Sec.  1010.109(c)(2)(i)(A)

    ``The release provisions for the (indicate all or particular lots) 
have not been recorded. Therefore, they may not be honored by subsequent 
holders of the mortgage. If they are not honored, you may not be able to 
obtain clear title to a lot covered by this mortgage until we have paid 
the mortgage in full, even if you have paid the full purchase price of 
the lot. If we should default on the mortgage prior to obtaining a 
release of your lot, you may lose your lot and all monies paid.''

   XVI. Warning for Release Provisions--Sec.  1010.109(c)(2)(i)(C)(1)

    ``The (state type of encumbrance) on (indicate all or particular 
lots) in this subdivision does not contain any provisions for the 
release of an individual lot when the full purchase price of the lot has 
been paid. Therefore, if your lot is subject to this (state type of 
encumbrance), you may not be able to obtain clear title to your lot 
until we have paid the (state type of encumbrance) in full, even though 
you may have received a deed and paid the full purchase price of the 
lot. If we should default on the (state type of encumbrance) prior to 
obtaining a release, you may lose your lot and all monies paid.''

 XVII. Method and Purpose of Recording Warning--Sec.  1010.109(d)(1)(iv)

    ``Unless your contract or deed is recorded you may lose your lot 
through the claims of subsequent purchasers or subsequent creditors of 
anyone having an interest in the land''.

        XVIII. Escrow Statement--Disclosure Sec.  1010.109(e)(1)

    ``You may lose your (indicate deposit, down payment and/or 
installment payments) on your lot if we fail to deliver legal title to 
you as called for in the contract, because (they are/it is) not held in 
an escrow account which fully protects you.''

                  XIX. Road Chart--Sec.  1010.110(b)(3)

----------------------------------------------------------------------------------------------------------------
                       Estimated        Percentage of        Estimated
      UUnit          starting date     construction now   completion date    Present surface     Final surface
                      (month/year)         complete         (month/year)
----------------------------------------------------------------------------------------------------------------
                   .................
----------------------------------------------------------------------------------------------------------------

           XX. Nearby Communities Chart--Sec.  1010.110(b)(6)

Nearby Communities...........................................  .........
Population...................................................  .........
Distance Over Paved Roads....................................  .........
Distance Over Unpaved Roads..................................  .........
  Total......................................................
 

           XXI. Water Chart Form--Sec.  1010.111(a)(1)(ii)(B)

[[Page 494]]



                                  Water
------------------------------------------------------------------------
                                                            Estimated
                       Estimated        Percentage of        service
      UUnit          starting date    construction now    availability
                    (month and year)      complete       date (month and
                                                              year)
------------------------------------------------------------------------
                   .................
------------------------------------------------------------------------

          XXII. Comfort Station Chart--Sec.  1010.111(b)(1)(ii)

                            Comfort Stations

Unit____________________________________________________________________
Estimated Starting Date (month-year)____________________________________
Percentage of Construction now complete_________________________________
Estimated Service Availability Date (month and year)____________________

            XXIII. Sewer Chart--Sec.  1010.111(b)(1)(iii)(B)

                                  Sewer

Unit Estimated Starting Date (month/year)_______________________________
Percentage of Construction now complete_________________________________
Estimated Service Availability Date (month/year)________________________

           XXIV. Electric Service Chart--Sec.  1010.111(c)(2)

                            Electric Service
------------------------------------------------------------------------
                                                            Estimated
                       Estimated        Percentage of        service
      UUnit          starting date      construction      availability
                    (month and year)      complete       date (month and
                                                              year)
------------------------------------------------------------------------
                   .................
------------------------------------------------------------------------

           XXV. Recreational Facility Chart--Sec.  1010.114(b)

----------------------------------------------------------------------------------------------------------------
                                      Estimated date of
                     Percentage of         start of        Estimated date       Financial        Buyer's annual
     Facility       construction now     construction    available for use     assurance of         cost or
                        complete         (month/year)       (month/year)        completion        assessments
----------------------------------------------------------------------------------------------------------------
                   .................
----------------------------------------------------------------------------------------------------------------

               XXVI. Cost Sheet Format--Sec.  1010.117(a)

                               Cost Sheet

    In addition to the purchase price of your lot, there are other 
expenditures which must be made.
    Listed below are the major costs. There may be other fees for use of 
the recreational facilities.
    All costs are subject to change.

                               Sales Price
Cash Price of lot.........................  $
Finance Charge............................  $
                                           -----------------------------
  Total...................................  $
 
                       Estimated one-time charges
 
1. Water connection fee/installation or     $
 private well.
2. Sewer connection fee/installation of     $
 private on-site sewer system.
3. Construction costs to extend electric    $
 and/or telephone services.
4. Other (Identify).......................  $
                                           -----------------------------
                                            $
  Total of estimated sales price and one-   $
   time charges.
 
     Estimated monthly/annual charges, exclusive of utility use fees
 
1. Taxes--Average unimproved lot after      $
 sale to purchaser.
2. Dues and assessments...................  $
 

    The information contained in this Property Report is an accurate 
description of our subdivision and development plans.

________________________________________________________________________
Signature of Senior Executive Officer

XXVII. Sample Receipt, Agent Certification and Cancellation Page--Sec.  
                               1010.118(a)

  Receipt, Agent Certification and Cancellation Page purchaser receipt 
                        Important: Read Carefully

Name of subdivision_____________________________________________________
ILSRP number____________________________________________________________
Date of report__________________________________________________________

    We must give you a copy of this Property Report and give you an 
opportunity to read

[[Page 495]]

it before you sign any contract or agreement. By signing this receipt, 
you acknowledge that you have received a copy of our Property Report.

Received by_____________________________________________________________
Date____________________________________________________________________
Street address__________________________________________________________
City____________________________________________________________________
State___________________________________________________________________
Zip_____________________________________________________________________

    If any representations are made to you which are contrary to those 
in this Report, please notify the:

Bureau of Consumer Financial Protection
1700 G Street NW
Washington, DC 20552

                           Agent Certification

    I certify that I have made no representations to the person(s) 
receiving this Property Report which are contrary to the information 
contained in this Property Report.

Lot_____________________________________________________________________
Block___________________________________________________________________
Section_________________________________________________________________
Name of salesperson_____________________________________________________
Signature_______________________________________________________________
Date____________________________________________________________________

                          Purchase Cancellation

    If you are entitled to cancel your purchase contract, and wish to do 
so, you may cancel by personal notice, or in writing. If you cancel in 
person or by telephone, it is recommended that you immediately confirm 
the cancellation by certified mail. You may use the form below.

Name of subdivision_____________________________________________________
Date of contract________________________________________________________

    This will confirm that I/we wish to cancel our purchase contract.


Purchaser(s) signature__________________________________________________
Date____________________________________________________________________

     XXVIII. Affirmation of Senior Executive Officer--Sec.  1010.219

    I hereby affirm that I am the Senior Executive Officer of the 
developer of the lots herein described or will be the Senior Executive 
Officer of the developer at the time lots are offered for sale or lease 
to the public, or that I am the agent authorized by the Senior Executive 
Officer of such developer to complete this statement (if agent, submit 
written authorization to act as agent); and,
    That the statements contained in this Statement of Record and any 
supplement hereto, together with any documents submitted herein, are 
full, true, complete, and correct; and,
    That the developer is bound to carry out the promises and 
obligations set forth in this Statement of Record and Property Report or 
I have clearly stated who is or will be responsible; and
    That the fees accompanying this submission are in the amount 
required by the rules and regulations of the Bureau of Consumer 
Financial Protection.
________________________________________________________________________
(Date)
________________________________________________________________________
(Signature)
________________________________________________________________________
(Corporate seal if applicable)
________________________________________________________________________
(Title)

    WARNING: 15 U.S.C. 1717 provides: ``Any person who willfully 
violates any of the provisions of this title or of the rules and 
regulations or any person who willfully, in a Statement of Record filed 
under, or in a Property Report issued pursuant to this title, makes any 
untrue statement of a material fact shall upon conviction be fined not 
more than $10,000.00 or imprisoned not more than 5 years, or both.''

      XXIX. Form for Certification for Disclosure Documents--Sec.  
                             1010.504(a)(2)

    The (indicate the State Department of Real Estate or other 
appropriate entity) has reviewed the attached materials and finds they 
are true copies of (1) the (indicate Property Report or other similar 
state accepted document or amendment to such document) for (indicate the 
name of the subdivision), made effective by the state of ____________ on 
____________ (give date) and still in effect; and (2) the supporting 
documentation upon which such (indicate the document or amendment) is 
based.

________________________________________________________________________
Signature

   XXX. Language to be Included on Property Report Cover Page--Sec.  
                             1010.558(a)(1)

    ``If you received this Report prior to signing a contract or 
agreement, you may cancel your contract or agreement by giving notice to 
the seller anytime before midnight of the seventh day following the 
signing of the contract or agreement.
    ``If you did not receive this Report before you signed a contract or 
agreement, you may cancel the contract or agreement anytime within two 
years from the date of signing.''

         XXXI. Notice of Revocation Rights--Sec.  1010.559(a)(1)

    You have the option to cancel your contract or agreement of sale by 
notice to the seller until midnight of the seventh day following the 
signing of the contract or agreement. If you did not receive a Property 
Report prepared pursuant to the rules and regulations of the Bureau of 
Consumer Financial Protection, in advance of your signing the

[[Page 496]]

contract or agreement, this contract or agreement may be revoked at your 
option for two years from the date of signing.

[76 FR 79489, Dec. 21, 2011, as amended at 81 FR 29118, May 11, 2016; 88 
FR 16538, Mar. 20, 2023]



PART 1011_PURCHASERS' REVOCATION RIGHTS, SALES PRACTICES AND STANDARDS 
(REGULATION K)--Table of Contents



                 Subpart A_Purchasers' Revocation Rights

Sec.
1011.1 General.
1011.2 Revocation regardless of registration.
1011.4 Contract requirements and revocation.
1011.5 Reimbursement.

                 Subpart B_Sales Practices and Standards

1011.10 General.
1011.15 Unlawful sales practices--statutory provisions.
1011.20 Unlawful sales practices--regulatory provisions.
1011.25 Misleading sales practices.
1011.27 Fair housing.
1011.30 Persons to whom subpart B is inapplicable.

                    Subpart C_Advertising Disclaimers

1011.50 Advertising disclaimers; subdivisions registered and effective 
          with the Bureau.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79522, Dec. 21, 2011, unless otherwise noted.



                 Subpart A_Purchasers' Revocation Rights



Sec.  1011.1  General.

    The purpose of this subpart A is to elaborate on the revocation 
rights in 15 U.S.C. 1703, by enumerating certain conditions under which 
purchasers may exercise revocation rights. Generally, whenever 
revocation rights are available, they apply to promissory notes, as well 
as traditional agreements.



Sec.  1011.2  Revocation regardless of registration.

    All purchasers have the option to revoke a contract or lease with 
regard to a lot not exempt under Sec. Sec.  1010.5 through 1010.11 and 
1010.14 until midnight of the seventh day after the day that the 
purchaser signs a contract or lease. If a purchaser is entitled to a 
longer revocation period under state law, that period is deemed the 
Federal revocation period rather than the 7 days, and all contracts and 
agreements (including promissory notes) shall so state.



Sec.  1011.4  Contract requirements and revocation.

    (a) In accordance with 15 U.S.C. 1703(d)(3), the refund to the 
purchaser is calculated by subtracting from the amount described in 15 
U.S.C. 1703(d)(3)(B), the greater of:
    (1) Fifteen percent of the purchase or lease price of the lot 
(excluding interest owed) at the time of the default or breach of 
contract or agreement; or
    (2) The amount of damages incurred by the seller or lessor due to 
the default or breach of contract.
    (b) For the purposes of this section:
    Damages incurred by the seller or lessor means actual damages 
resulting from the default or breach, as determined by the law of the 
jurisdiction governing the contract. However, no damages may be 
specified in the contract or agreement, except a liquidated damages 
clause not exceeding 15 percent of the purchase price of the lot, 
excluding any interest owed.
    Purchase price means the cash sales price of the lot shown on the 
contract.
    (c) The contractual requirements of 15 U.S.C. 1703(d) do not apply 
to the sale of a lot for which, within 180 days after the signing of the 
sales contract, the purchaser receives a warranty deed or, where 
warranty deeds are not commonly used, its equivalent under state law.



Sec.  1011.5  Reimbursement.

    If a purchaser exercises rights under 15 U.S.C. 1703(b), (c), or 
(d), but cannot reconvey the lot in substantially similar condition, the 
developer may subtract from the amount paid by the purchaser, and 
otherwise due to the purchaser under 15 U.S.C. 1703, any diminished 
value in the lot caused by the acts of the purchaser.

[[Page 497]]



                 Subpart B_Sales Practices and Standards



Sec.  1011.10  General.

    Sales practices means any conduct or advertising by a developer or 
its agents to induce a person to buy or lease a lot. This subpart 
describes certain unlawful sales practices and provides standards to 
illustrate what other sales practices are considered misleading in light 
of certain circumstances in which they are made and within the context 
of the overall offer and sale or lease.



Sec.  1011.15  Unlawful sales practices--statutory provisions.

    The statutory prohibitions against fraudulent or misleading sales 
practices are set forth at 15 U.S.C. 1703(a). With respect to the 
prohibitions against representing that certain facilities will be 
provided or completed unless there is a contractual obligation to do so 
by the developer:
    (a) The contractual covenant to provide or complete the services or 
amenities may be conditioned only upon grounds that are legally 
sufficient to establish impossibility of performance in the jurisdiction 
where the services or amenities are being provided or completed;
    (b) Contingencies such as acts of God, strikes, or material 
shortages are recognized as permissible to defer completion of services 
or amenities; and
    (c) In creating these contractual obligations developers have the 
option of incorporating by reference the Property Report in effect at 
the time of the sale or lease. If a developer chooses to incorporate the 
Property Report by reference, the effective date of the Property Report 
being included by reference must be specified in the contract of sale or 
lease.



Sec.  1011.20  Unlawful sales practices--regulatory provisions.

    In selling, leasing or offering to sell or lease any lot in a 
subdivision it is an unlawful sales practice for any developer or agent, 
directly or indirectly, to:
    (a) Give the Property Report to a purchaser along with other 
materials when done in such a manner so as to conceal the Property 
Report from the purchaser.
    (b) Give a contract to a purchaser or encourage him to sign anything 
before delivery of the Property Report.
    (c) Refer to the Property Report or Offering Statement as anything 
other than a Property Report or Offering Statement.
    (d) Use any misleading practice, device or representation which 
would deny a purchaser any cancellation or refund rights or privileges 
granted the purchaser by the terms of a contract or any other document 
used by the developer as a sales inducement.
    (e) Refuse to deliver a Property Report to any person who exhibits 
an interest in buying or leasing a lot in the subdivision and requests a 
copy of the Property Report.
    (f) Use a Property Report, note, contract, deed or other document 
prepared in a language other than that in which the sales campaign is 
conducted, unless an accurate translation is attached to the document.
    (g) Deliberately fail to maintain a sufficient supply of restrictive 
covenants and financial statements or to deliver a copy to a purchaser 
upon request as required by Sec. Sec.  1010.109(f), 1010.112(d), 
1010.209(g), and 1010.212(i).
    (h) Use, as a sales inducement, any representation that any lot has 
good investment potential or will increase in value unless it can be 
established, in writing, that:
    (1) Comparable lots or parcels in the subdivision have, in fact, 
been resold by their owners on the open market at a profit, or;
    (2) There is a factual basis for the represented future increase in 
value and the factual basis is certain, and;
    (3) The sales price of the offered lot does not already reflect the 
anticipated increase in value due to any promised facilities or 
amenities. The burden of establishing the relevancy of any comparable 
sales and the certainty of the factual basis of the increase in value 
shall rest upon the developer.
    (i) Represent a lot as a homesite or building lot unless:
    (1) Potable water is available at a reasonable cost;
    (2) The lot is suitable for a septic tank operation or there is 
reasonable

[[Page 498]]

assurance that the lot can be served by a central sewage system;
    (3) The lot is legally accessible; and
    (4) The lot is free from periodic flooding.



Sec.  1011.25  Misleading sales practices.

    Generally, promotional statements or material will be judged on the 
basis of the affirmative representations contained therein and the 
reasonable inferences to be drawn therefrom, unless the contrary is 
affirmatively stated or appears in promotional material, or unless 
adequate safeguards have been provided by the seller to reasonably 
guarantee the occurrence of the thing inferred. For example, when a lot 
is represented as being sold by a warranty deed, the inference is that 
the seller can and will convey fee simple title free and clear of all 
liens, encumbrances, and defects except those which are disclosed in 
writing to the prospective purchaser prior to conveyance. The following 
advertising and promotional practices, while not all inclusive, are 
considered misleading, and are used to evaluate a developer's or agent's 
representations in determining possible violations of the Act or 
regulations. In this section ``represent'' carries its common meaning.
    (a) Proposed improvements. References to proposed improvements of 
any land unless it is clearly indicated that the improvements are only 
proposed or what the completion date is for the proposed improvement.
    (b) Off-premises representations. Representing scenes or proposed 
improvements other than those in the subdivision unless
    (1) It is clearly stated that the scenes or improvements are not 
related to the subdivision offered; or
    (2) In the case of drawings that the scenes or improvements are 
artists' renderings;
    (3) If the areas or improvements shown are available to purchasers, 
what the distance in road miles is to the scenes or improvements 
represented.
    (c) Land use representations. Representing uses to which the offered 
land can be put unless the land can be put to such use without 
unreasonable cost to the purchaser and unless no fact or circumstance 
exists which would prohibit the immediate use of the land for its 
represented use.
    (d) Use of ``road'' and ``street.'' Using the words ``road'' or 
``street'' unless the type of road surface is disclosed. All roads and 
streets shown on subdivision maps are presumed to be of an all-weather 
graded gravel quality or higher and are presumed to be traversable by 
conventional automobile under all normal weather conditions unless 
otherwise shown on the map.
    (e) Road access and use. Representing the existence of a road 
easement or right-of-way unless the easement or right-of-way is 
dedicated to the public, to property owners or to the appropriate 
property owners association.
    (f) Waterfront property. References to waterfront property, unless 
the property being offered actually fronts on a body of water. 
Representations which refer to ``canal'' or ``canals'' must state the 
specific use to which such canal or canals can be put.
    (g) Maps and distances. (1) The use of maps to show proximity to 
other communities, unless the maps are drawn to scale and scale 
included, or the specific road mileage appears in easily readable print.
    (2) The use of the terms such as ``minutes away,'' ``short 
distance,'' ``only miles,'' or ``near'' or similar terms to indicate 
distance unless the actual distance in road miles is used in conjunction 
with such terms. Road miles will be measured from the approximate 
geographical center of the subdivided lands to the approximate downtown 
or geographical center of the community.
    (h) Lot size. Representation of the size of a lot offered unless the 
lot size represented is exclusive of all easements to which the lot may 
be subject, except for those for providing utilities to the lot.
    (i) ``Free'' lots. Representing lots as ``free'' if the prospective 
purchaser is required to give any consideration whatsoever, offering 
lots for ``closing costs only'' when the closing costs are substantially 
more than customary, or when an additional lot must be purchased at a 
higher price.
    (j) Pre-development prices. References to pre-development sales at a 
lower

[[Page 499]]

price because the land has not yet been developed unless there are plans 
for development, and reasonable assurance is available that the plans 
will be completed.
    (k) False reports of lot sales. Repeatedly announcing that lots are 
being sold or to make repetitive announcements of the same lot being 
sold when in fact this is not the case.
    (l) Guaranteed refund. Use of the word ``guarantee'' or phrase 
``guaranteed refund'' or similar language implying a money-back 
guarantee unless the refund is unconditional.
    (m) Discount certificates. The use of discount certificates when in 
fact there is no actual price reduction or when a discount certificate 
is regularly used.
    (n) Lot exchanges. Representations regarding property exchange 
privileges unless any applicable conditions are clearly stated.
    (o) Resale program. Making any representation that implies that the 
developer or agent will resell or repurchase the property being offered 
at some future time unless the developer or agent has an ongoing program 
for doing so.
    (p) Symbols for conditions. The use of asterisks or any other 
reference symbol or oral parenthetical expression as a means of 
contradicting or substantially changing any previously made statement or 
as a means of obscuring material facts.
    (q) Proposed public facilities. References to a proposed public 
facility unless money has been budgeted for construction of the facility 
and is available to the public authority having the responsibility of 
construction, or unless disclosure of the existing facts concerning the 
public facility is made.
    (r) Non-profit or institutional name use. The use of names or trade 
styles which imply that the developer is a nonprofit research 
organization, public bureau, group, etc., when such is not the case.



Sec.  1011.27  Fair housing.

    Title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601, et seq., 
and its implementing regulations and guidelines apply to land sales 
transactions to the extent warranted by the facts of the transaction.



Sec.  1011.30  Persons to whom subpart B is inapplicable.

    Newspaper or periodical publishers, job printers, broadcasters, or 
telecasters, or any of the employees thereof, are not subject to this 
subpart unless the publishers, printers, broadcasters, or telecasters:
    (a) Have actual knowledge of the falsity of the advertisement or
    (b) Have any interest in the subdivision advertised or
    (c) Also serve directly or indirectly as the advertising agent or 
agency for the developer.



                    Subpart C_Advertising Disclaimers



Sec.  1011.50  Advertising disclaimers; subdivisions registered and 
effective with the Bureau.

    (a) The following disclaimer statement shall be displayed below the 
text of all printed material and literature used in connection with the 
sale or lease of lots in a subdivision for which an effective Statement 
or Record is on file with the Director: ``Obtain the Property Report 
required by Federal law and read it before signing anything. No Federal 
agency has judged the merits or value, if any, of this property.'' If 
the material or literature consists of more than one page, it shall 
appear at the bottom of the front page. The disclaimer statement shall 
be set in type of at least ten point font.
    (b) If the advertising is of a classified type; is not more than 
five inches long and not more than one column in print wide, the 
disclaimer statement may be set in type of at least six point font.
    (c) This disclaimer statement need not appear on billboards, on 
normal size matchbook folders or business cards which are used in 
advertising nor in advertising of a classified type which is less than 
one column in print wide and is less than five inches long.
    (d) A developer who is required by any state, or states, to display 
an advertising disclaimer in the same location, or one of equal 
prominence, as that of the Federal disclaimer, may combine the wording 
of the disclaimers. All of the wording of the Federal disclaimer must be 
included in the resulting combined disclaimer.

[[Page 500]]



PART 1012_SPECIAL RULES OF PRACTICE (REGULATION L)--Table of Contents



Subpart A [Reserved]

                       Subpart B_Filing Assistance

Sec.
1012.30 Scope of this subpart.
1012.35 Prefiling assistance.
1012.40 Processing of filings.

Subpart C [Reserved]

                   Subpart D_Adjudicatory Proceedings

1012.105-1012.200 [Reserved]
1012.205 Suspension notice prior to effective date.
1012.210 Hearings--suspension notice prior to effective date.
1012.215 Notice of proceedings subsequent to effective date.
1012.220 Hearings--notice of proceedings subsequent to effective date.
1012.225 Suspension order for failure to cooperate.
1012.230 Suspension order pending amendments.
1012.235 Hearings--suspension orders for failure to cooperate and 
          pending amendments.
1012.236 Notice of proceedings to withdraw a State's certification.
1012.237 Hearings--notice of proceedings pursuant to withdrawal of state 
          certification.
1012.238 Notices of proceedings to terminate exemptions.
1012.239 Hearings--notice of proceedings pursuant to exemptions.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1718.

    Source: 76 FR 79524, Dec. 21, 2011, unless otherwise noted.

Subpart A [Reserved]



                       Subpart B_Filing Assistance



Sec.  1012.30  Scope of this subpart.

    This subpart applies to and governs procedures under which 
developers may obtain prefiling assistance and be notified of and 
permitted to correct deficiencies in the Statement of Record.



Sec.  1012.35  Prefiling assistance.

    Persons intending to file with the Bureau of Consumer Financial 
Protection, Office of Supervision Examinations may receive advice of a 
general nature as to the preparation of the filing including information 
as to proper format to be used and the scope of the items to be included 
in the format. Inquiries and requests for informal discussions with 
staff members should be directed to the Consumer Financial Protection 
Bureau, Interstate Land Sales Registration Program, 1700 G Street NW., 
Washington, DC 20552.

[81 FR 29119, May 11, 2016]



Sec.  1012.40  Processing of filings.

    (a) Statements of Record and accompanying filing fees will be 
received on behalf of the Director by the Office of Supervision 
Examinations, for determination of whether the criteria set forth in 
paragraphs (a)(1) through (3) of this section have been satisfied. Where 
it appears that all three criteria are satisfied and it is otherwise 
practicable, acceleration of the effectiveness of the Statement of 
Record will normally be granted.
    (1) Completeness of the statement
    (2) Adequacy of the filing fee, and
    (3) Adequacy of disclosure.
    (b) Filings intended as Statements of Record but which do not comply 
in form with Sec. Sec.  1010.105 and 1010.120 of this chapter, whichever 
is applicable, and Statements of Record accompanied by inadequate filing 
fees will not be effective to accomplish any purpose under the Act. At 
the discretion of the Interstate Land Sales Registration Program, such 
filings and any moneys accompanying them may be immediately returned to 
the sender or after notification may be held pending the sender's 
appropriate response.
    (c) Persons filing incomplete or inaccurate Statements of Record 
will be notified of the deficiencies therein by the Suspension Notice 
procedure described in Sec.  1010.45(a) of this chapter.

[76 FR 79524, Dec. 21, 2011, as amended at 81 FR 29119, May 11, 2016]

Subpart C [Reserved]

[[Page 501]]



                   Subpart D_Adjudicatory Proceedings



Sec. Sec.  1012.105-1012.200  [Reserved]



Sec.  1012.205  Suspension notice prior to effective date.

    A suspension pursuant to Sec.  1010.45(a) of this chapter shall be 
effected by service of a suspension notice which shall contain:
    (a) An identification of the filing to which the notice applies.
    (b) A specification of the deficiencies of form, disclosure, 
accuracy, documentation or fee tender which constitute the grounds under 
Sec.  1010.45(a) of this chapter, of the suspension, and of the 
additional or corrective procedure, information, documentation, or 
tender which will satisfy the Director's requirements.
    (c) A notice of the hearing rights of the developer under Sec.  
1012.210 and of the procedures for invoking those rights.
    (d) A notice that, unless otherwise ordered, the suspension shall 
remain in effect until 30 days after the developer cures the specified 
deficiencies as required by the notice.



Sec.  1012.210  Hearings--suspension notice prior to effective date.

    (a) A developer, upon receipt of a suspension notice issued pursuant 
to Sec.  1010.45(a) of this chapter, may obtain a hearing by filing a 
written request in accordance with the instructions regarding such 
request contained in the suspension notice. Such a request must be filed 
within 15 days of receipt of the suspension notice and must be 
accompanied by an answer and 3 copies thereof signed by the respondent 
or the respondent's attorney conforming to the requirements of 
1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 20 days of receipt of the 
request. The time and place for hearing shall be fixed with due regard 
for the public interest and the convenience and necessity of the parties 
or their representatives.
    (c) A request for hearing filed pursuant to paragraph (a) of this 
section shall not interrupt or annul the effectiveness of the suspension 
notice, and suspension of the effective date of the Statement or 
amendment shall continue until vacated by order of the Director or 
administrative law judge. Except in cases in which the developer shall 
waive or withdraw the request for such hearing, or shall fail to pursue 
the same by appropriate appearance at a hearing duly scheduled, noticed 
and convened, the suspended filing shall be reinstated in the event of 
failure of the Director to schedule, give notice of or hold a duly-
requested hearing within the time specified in paragraph (b) of this 
section, or in the event of a finding that the Director has failed to 
support at such hearing the propriety of the suspension with respect to 
the material issues of law and fact raised by the answer. Such 
reinstatement shall be effective on the date on which the filing would 
have become effective had no notice of suspension been issued with 
respect to it.
    (d) If there is an outstanding suspension notice under Sec.  
1010.45(a) with respect to the same matter for which a suspension order 
under Sec.  1010.45(b)(3) is issued, the notice and order shall be 
consolidated for the purposes of hearing. In the event that allegations 
upon which the suspension notice and suspension order are based are 
identical, only one answer need be filed.



Sec.  1012.215  Notice of proceedings subsequent to effective date.

    A proceeding pursuant to Sec.  1010.45(b)(1) of this chapter is 
commenced by issuance and service of a notice which shall contain:
    (a) A clear and accurate identification of the filing or filings to 
which the notice relates.
    (b) A clear and concise statement of material facts, sufficient to 
inform the respondent with reasonable definiteness of the statements, 
omissions, conduct, circumstances or practices alleged to constitute the 
grounds for the proposed suspension order under Sec.  1010.45(b)(1) of 
this chapter.
    (c) A notice of hearing rights of the developer under Sec.  1012.220 
and of the procedures for invoking those rights.
    (d) Designation of the administrative law judge appointed to preside 
over pre-hearing procedures and over the hearings.

[[Page 502]]

    (e) A notice that failure to file an answer conforming to the 
requirements of Sec.  1081.201(b) and (c) will result in an order 
suspending the Statement of Record.



Sec.  1012.220  Hearings--notice of proceedings subsequent to effective 
date.

    (a) A developer, upon receipt of a notice of proceedings issued 
pursuant to Sec.  1010.45(b)(1) of this chapter, may obtain a hearing by 
filing a written request in accordance with the instructions regarding 
such request contained in the notice of proceedings. Such a request must 
be filed within 15 days of receipt of the notice of proceedings and must 
be accompanied by an answer conforming to the requirements of Sec.  
1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45 days of receipt of the 
request by the Director unless it is determined that it is not in the 
public interest. The time and place for hearing shall be fixed with due 
regard for the public interest and the convenience and necessity of the 
parties or their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section or failure of a developer to appear at a hearing duly 
scheduled shall result in an appropriate order under Sec.  1010.45(b)(1) 
of this chapter suspending the statement of record. Such order shall be 
effective as of the date of service or receipt.



Sec.  1012.225  Suspension order for failure to cooperate.

    A suspension pursuant to Sec.  1010.45(b)(2) of this chapter shall 
be effected by service of a suspension order which shall contain:
    (a) An identification of the filing to which the order applies.
    (b) Bases for issuance of order.
    (c) A notice of the hearing rights of the developer under Sec.  
1012.235 the procedures for invoking those rights.
    (d) A statement that the order shall remain in effect until the 
developer has complied with the Director's requirements.



Sec.  1012.230  Suspension order pending amendments.

    A suspension pursuant to paragraph (b)(3) of Sec.  1010.45 of this 
chapter shall be effected by service of a suspension order which shall 
contain:
    (a) An identification of the filing to which the order applies.
    (b) An identification of the amendment to the filing which generated 
the order.
    (c) A statement that the issuance of the order is necessary or 
appropriate in the public interest or for the protection of purchasers.
    (d) A statement that the order shall remain in effect until the 
amendment becomes effective.
    (e) A notice of the hearing rights of the developer under Sec.  
1012.235 and of the procedure for invoking those rights.



Sec.  1012.235  Hearings--suspension orders for failure to cooperate 
and pending amendments.

    (a) A developer, upon receipt of a suspension order issued pursuant 
to Sec.  1010.45(b)(2) or Sec.  1010.45(b)(3) of this chapter, may 
obtain a hearing by filing a written request in accordance with the 
instructions regarding such request contained in the suspension order. 
Such request must be filed within 15 days of receipt of the suspension 
order and must be accompanied by an answer and 3 copies thereof signed 
by the respondent or respondent's attorney conforming to the 
requirements of Sec.  1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 20 days of receipt of the 
request. The time and place for hearing shall be fixed with due regard 
for the public interest and the convenience and necessity of the parties 
or their representatives.
    (c) A request for hearing filed pursuant to paragraph (a) of this 
section shall not interrupt or annul the effectiveness of the suspension 
order.



Sec.  1012.236  Notice of proceedings to withdraw a State's certification.

    A proceeding pursuant to Sec.  1010.505 of this chapter is commenced 
by issuance and service of a notice which shall contain:

[[Page 503]]

    (a) An identification of the state certification to which the notice 
applies.
    (b) A clear and concise statement of material facts, sufficient to 
inform the respondent with reasonable definiteness of the basis for the 
Director's determination, pursuant to Sec.  1010.505, that the State's 
laws, regulations and the administration thereof, taken as a whole, no 
longer meet the requirements of subpart C of part 1010.
    (c) A notice of hearing rights of the state under Sec.  1012.237 and 
of the procedures for invoking those rights.
    (d) A notice that failure to file an answer conforming to the 
requirements of Sec.  1081.201(b) and (c) will result in an order 
suspending the State's certification.

[76 FR 79524, Dec. 21, 2011, as amended at 81 FR 29119, May 11, 2016]



Sec.  1012.237  Hearings--notice of proceedings pursuant to withdrawal 
of state certification.

    (a) A State, upon receipt of a notice of proceedings issued pursuant 
to Sec.  1010.505 of this chapter, may obtain a hearing by filing a 
written request in accordance with the instructions regarding such 
request contained in the notice of proceedings. Such request must be 
filed within 15 days of receipt of the notice of proceedings and must be 
accompanied by an answer conforming to the requirements of Sec.  
1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45 days of receipt of this 
request. The time and place for the hearing shall be fixed with due 
regard for the public interest and the convenience and necessity of the 
parties or their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section or failure to appear at a hearing duly scheduled shall 
result in an appropriate order under Sec.  1010.505 of this chapter 
withdrawing the State's certification. Such order shall be effective as 
of the date of service or receipt.



Sec.  1012.238  Notices of proceedings to terminate exemptions.

    A proceeding to terminate a self-determining exemption under Sec.  
1010.14 or an exemption order under Sec.  1010.15 or Sec.  1010.16 is 
commenced by issuance and service of a notice which shall contain:
    (a) In the case of an exemption under Sec.  1010.14, an 
identification of the developer and subdivision to which this notice 
applies. In the case of an exemption under either Sec.  1010.15 or Sec.  
1010.16, an identification of the exemption order to which the notice 
applies.
    (b) A clear and concise statement of material facts, sufficient to 
inform the respondent with reasonable definiteness of the basis for the 
Director's determination that further exemption from the registration 
and disclosure requirements is not in the public interest or that the 
sales or leases do not meet the requirements for exemption, or both.
    (c) A notice of hearing rights of the respondent under Sec.  
1012.239 and of the procedures for invoking those rights.
    (d) A notice that failure to file an answer conforming to the 
requirements of Sec.  1081.201(b) and (c) will result, in the case of a 
notice issued under Sec.  1010.14, in an order terminating eligibility 
for the exemption, or, in the case of a notice issued under either Sec.  
1010.15 or Sec.  1010.16, in an order terminating the exemption order.



Sec.  1012.239  Hearings--notice of proceedings pursuant to exemptions.

    (a) A developer, upon receipt of a notice of proceedings issued 
under Sec. Sec.  1010.14, 1010.15, and 1010.16 of this chapter, may 
obtain a hearing by filing a written request contained in the notice of 
proceedings. The request must be filed within 15 days of receipt of the 
notice of proceedings and must be accompanied by an answer conforming to 
the requirements of Sec.  1081.201(b) and (c).
    (b) When a hearing is requested pursuant to paragraph (a) of this 
section, such hearing shall be held within 45 days of receipt of this 
request. The time and place for the hearing shall be fixed with due 
regard for the public interest and the convenience and necessity of the 
parties of their representatives.
    (c) Failure to answer within the time allowed by paragraph (a) of 
this section, or failure to appear at a duly scheduled hearing shall 
result in an appropriate order under Sec.  1010.14, Sec.  1010.15,

[[Page 504]]

or Sec.  1010.16 of this chapter terminating the developer's exemption. 
The order shall be effective as of the date of service or receipt.



PART 1013_CONSUMER LEASING (REGULATION M)--Table of Contents



Sec.
1013.1 Authority, scope, purpose, and enforcement.
1013.2 Definitions.
1013.3 General disclosure requirements.
1013.4 Content of disclosures.
1013.5 Renegotiations, extensions, and assumptions.
1013.6 [Reserved]
1013.7 Advertising.
1013.8 Record retention.
1013.9 Relation to state laws.

Appendix A to Part 1013--Model Forms
Appendix B to Part 1013 [Reserved]
Appendix C to Part 1013--Issuance of Official Interpretations
Supplement I to Part 1013--Official Interpretations

    Authority: 15 U.S.C. 1604 and 1667f; Pub. L. 111-203 section 1100E, 
124 Stat. 1376.

    Source: 76 FR 78502, Dec. 19, 2011, unless otherwise noted.



Sec.  1013.1  Authority, scope, purpose, and enforcement.

    (a) Authority. The regulation in this part, known as Regulation M, 
is issued by the Bureau of Consumer Financial Protection to implement 
the consumer leasing provisions of the Truth in Lending Act, which is 
title I of the Consumer Credit Protection Act, as amended (15 U.S.C. 
1601 et seq.). Information collection requirements contained in this 
part have been approved by the Office of Management and Budget under the 
provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB control 
number 3170-0006.
    (b) Scope and purpose. This part applies to all persons that are 
lessors of personal property under consumer leases as those terms are 
defined in Sec.  1013.2(e)(1) and (h), except persons excluded from 
coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act), Public Law 111-203, 124 Stat. 
1376. The purpose of this part is:
    (1) To ensure that lessees of personal property receive meaningful 
disclosures that enable them to compare lease terms with other leases 
and, where appropriate, with credit transactions;
    (2) To limit the amount of balloon payments in consumer lease 
transactions; and
    (3) To provide for the accurate disclosure of lease terms in 
advertising.
    (c) Enforcement and liability. Section 108 of the Act contains the 
administrative enforcement provisions. Sections 112, 130, 131, and 185 
of the Act contain the liability provisions for failing to comply with 
the requirements of the Act and this part.



Sec.  1013.2  Definitions.

    For the purposes of this part the following definitions apply:
    (a) Act means the Truth in Lending Act (15 U.S.C. 1601 et seq.) and 
the Consumer Leasing Act is Chapter 5 of the Truth in Lending Act.
    (b) Advertisement means a commercial message in any medium that 
directly or indirectly promotes a consumer lease transaction.
    (c) Bureau refers to the Bureau of Consumer Financial Protection.
    (d) Closed-end lease means a consumer lease other than an open-end 
lease as defined in this section.
    (e)(1) Consumer lease means a contract in the form of a bailment or 
lease for the use of personal property by a natural person primarily for 
personal, family, or household purposes, for a period exceeding four 
months and for a total contractual obligation not exceeding the 
applicable threshold amount, whether or not the lessee has the option to 
purchase or otherwise become the owner of the property at the expiration 
of the lease. The threshold amount is adjusted annually to reflect 
increases in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers, as applicable. See the official commentary to this 
paragraph (e) for the threshold amount applicable to a specific consumer 
lease. Unless the context indicates otherwise, in this part ``lease'' 
means ``consumer lease.''
    (2) The term does not include a lease that meets the definition of a 
credit sale in Regulation Z (12 CFR 226.2(a)).

[[Page 505]]

It also does not include a lease for agricultural, business, or 
commercial purposes or a lease made to an organization.
    (3) This part does not apply to a lease transaction of personal 
property which is incident to the lease of real property and which 
provides that:
    (i) The lessee has no liability for the value of the personal 
property at the end of the lease term except for abnormal wear and tear; 
and
    (ii) The lessee has no option to purchase the leased property.
    (f) Gross capitalized cost means the amount agreed upon by the 
lessor and the lessee as the value of the leased property and any items 
that are capitalized or amortized during the lease term, including but 
not limited to taxes, insurance, service agreements, and any outstanding 
prior credit or lease balance. Capitalized cost reduction means the 
total amount of any rebate, cash payment, net trade-in allowance, and 
noncash credit that reduces the gross capitalized cost. The adjusted 
capitalized cost equals the gross capitalized cost less the capitalized 
cost reduction, and is the amount used by the lessor in calculating the 
base periodic payment.
    (g) Lessee means a natural person who enters into or is offered a 
consumer lease.
    (h) Lessor means a person who regularly leases, offers to lease, or 
arranges for the lease of personal property under a consumer lease. A 
person who has leased, offered, or arranged to lease personal property 
more than five times in the preceding calendar year or more than five 
times in the current calendar year is subject to the Act and this part.
    (i) Open-end lease means a consumer lease in which the lessee's 
liability at the end of the lease term is based on the difference 
between the residual value of the leased property and its realized 
value.
    (j) Organization means a corporation, trust, estate, partnership, 
cooperative, association, or government entity or instrumentality.
    (k) Person means a natural person or an organization.
    (l) Personal property means any property that is not real property 
under the law of the state where the property is located at the time it 
is offered or made available for lease.
    (m) Realized value means:
    (1) The price received by the lessor for the leased property at 
disposition;
    (2) The highest offer for disposition of the leased property; or
    (3) The fair market value of the leased property at the end of the 
lease term.
    (n) Residual value means the value of the leased property at the end 
of the lease term, as estimated or assigned at consummation by the 
lessor, used in calculating the base periodic payment.
    (o) Security interest and security mean any interest in property 
that secures the payment or performance of an obligation.
    (p) State means any state, the District of Columbia, the 
Commonwealth of Puerto Rico, and any territory or possession of the 
United States.



Sec.  1013.3  General disclosure requirements.

    (a) General requirements. A lessor shall make the disclosures 
required by Sec.  1013.4, as applicable. The disclosures shall be made 
clearly and conspicuously in writing in a form the consumer may keep, in 
accordance with this section. The disclosures required by this part may 
be provided to the lessee in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.). For an advertisement accessed by the consumer in 
electronic form, the disclosures required by Sec.  1013.7 may be 
provided to the consumer in electronic form in the advertisement, 
without regard to the consumer consent or other provisions of the E-Sign 
Act.
    (1) Form of disclosures. The disclosures required by Sec.  1013.4 
shall be given to the lessee together in a dated statement that 
identifies the lessor and the lessee; the disclosures may be made either 
in a separate statement that identifies the consumer lease transaction 
or in the contract or other document evidencing the lease. 
Alternatively, the disclosures required to be segregated

[[Page 506]]

from other information under paragraph (a)(2) of this section may be 
provided in a separate dated statement that identifies the lease, and 
the other required disclosures may be provided in the lease contract or 
other document evidencing the lease. In a lease of multiple items, the 
property description required by Sec.  1013.4(a) may be given in a 
separate statement that is included in the disclosure statement required 
by this paragraph.
    (2) Segregation of certain disclosures. The following disclosures 
shall be segregated from other information and shall contain only 
directly related information: Sec. Sec.  1013.4(b) through (f), (g)(2), 
(h)(3), (i)(1), (j), and (m)(1). The headings, content, and format for 
the disclosures referred to in this paragraph (a)(2) shall be provided 
in a manner substantially similar to the applicable model form in 
appendix A of this part.
    (3) Timing of disclosures. A lessor shall provide the disclosures to 
the lessee prior to the consummation of a consumer lease.
    (4) Language of disclosures. The disclosures required by Sec.  
1013.4 may be made in a language other than English provided that they 
are made available in English upon the lessee's request.
    (b) Additional information; nonsegregated disclosures. Additional 
information may be provided with any disclosure not listed in paragraph 
(a)(2) of this section, but it shall not be stated, used, or placed so 
as to mislead or confuse the lessee or contradict, obscure, or detract 
attention from any disclosure required by this part.
    (c) Multiple lessors or lessees. When a transaction involves more 
than one lessor, the disclosures required by this part may be made by 
one lessor on behalf of all the lessors. When a lease involves more than 
one lessee, the lessor may provide the disclosures to any lessee who is 
primarily liable on the lease.
    (d) Use of estimates. If an amount or other item needed to comply 
with a required disclosure is unknown or unavailable after reasonable 
efforts have been made to ascertain the information, the lessor may use 
a reasonable estimate that is based on the best information available to 
the lessor, is clearly identified as an estimate, and is not used to 
circumvent or evade any disclosures required by this part.
    (e) Effect of subsequent occurrence. If a required disclosure 
becomes inaccurate because of an event occurring after consummation, the 
inaccuracy is not a violation of this part.
    (f) Minor variations. A lessor may disregard the effects of the 
following in making disclosures:
    (1) That payments must be collected in whole cents;
    (2) That dates of scheduled payments may be different because a 
scheduled date is not a business day;
    (3) That months have different numbers of days; and
    (4) That February 29 occurs in a leap year.



Sec.  1013.4  Content of disclosures.

    For any consumer lease subject to this part, the lessor shall 
disclose the following information, as applicable:
    (a) Description of property. A brief description of the leased 
property sufficient to identify the property to the lessee and lessor.
    (b) Amount due at lease signing or delivery. The total amount to be 
paid prior to or at consummation or by delivery, if delivery occurs 
after consummation, using the term ``amount due at lease signing or 
delivery.'' The lessor shall itemize each component by type and amount, 
including any refundable security deposit, advance monthly or other 
periodic payment, and capitalized cost reduction; and in motor vehicle 
leases, shall itemize how the amount due will be paid, by type and 
amount, including any net trade-in allowance, rebates, noncash credits, 
and cash payments in a format substantially similar to the model forms 
in appendix A of this part.
    (c) Payment schedule and total amount of periodic payments. The 
number, amount, and due dates or periods of payments scheduled under the 
lease, and the total amount of the periodic payments.
    (d) Other charges. The total amount of other charges payable to the 
lessor, itemized by type and amount, that are not included in the 
periodic payments. Such charges include the amount of any liability the 
lease imposes upon the lessee at the end of the lease term;

[[Page 507]]

the potential difference between the residual and realized values 
referred to in paragraph (k) of this section is excluded.
    (e) Total of payments. The total of payments, with a description 
such as ``the amount you will have paid by the end of the lease.'' This 
amount is the sum of the amount due at lease signing (less any 
refundable amounts), the total amount of periodic payments (less any 
portion of the periodic payment paid at lease signing), and other 
charges under paragraphs (b), (c), and (d) of this section. In an open-
end lease, a description such as ``you will owe an additional amount if 
the actual value of the vehicle is less than the residual value'' shall 
accompany the disclosure.
    (f) Payment calculation. In a motor vehicle lease, a mathematical 
progression of how the scheduled periodic payment is derived, in a 
format substantially similar to the applicable model form in appendix A 
of this part, which shall contain the following:
    (1) Gross capitalized cost. The gross capitalized cost, including a 
disclosure of the agreed upon value of the vehicle, a description such 
as ``the agreed upon value of the vehicle [state the amount] and any 
items you pay for over the lease term (such as service contracts, 
insurance, and any outstanding prior credit or lease balance),'' and a 
statement of the lessee's option to receive a separate written 
itemization of the gross capitalized cost. If requested by the lessee, 
the itemization shall be provided before consummation.
    (2) Capitalized cost reduction. The capitalized cost reduction, with 
a description such as ``the amount of any net trade-in allowance, 
rebate, noncash credit, or cash you pay that reduces the gross 
capitalized cost.''
    (3) Adjusted capitalized cost. The adjusted capitalized cost, with a 
description such as ``the amount used in calculating your base 
[periodic] payment.''
    (4) Residual value. The residual value, with a description such as 
``the value of the vehicle at the end of the lease used in calculating 
your base [periodic] payment.''
    (5) Depreciation and any amortized amounts. The depreciation and any 
amortized amounts, which is the difference between the adjusted 
capitalized cost and the residual value, with a description such as 
``the amount charged for the vehicle's decline in value through normal 
use and for any other items paid over the lease term.''
    (6) Rent charge. The rent charge, with a description such as ``the 
amount charged in addition to the depreciation and any amortized 
amounts.'' This amount is the difference between the total of the base 
periodic payments over the lease term minus the depreciation and any 
amortized amounts.
    (7) Total of base periodic payments. The total of base periodic 
payments with a description such as ``depreciation and any amortized 
amounts plus the rent charge.''
    (8) Lease payments. The lease payments with a description such as 
``the number of payments in your lease.''
    (9) Base periodic payment. The total of the base periodic payments 
divided by the number of payment periods in the lease.
    (10) Itemization of other charges. An itemization of any other 
charges that are part of the periodic payment.
    (11) Total periodic payment. The sum of the base periodic payment 
and any other charges that are part of the periodic payment.
    (g) Early termination--(1) Conditions and disclosure of charges. A 
statement of the conditions under which the lessee or lessor may 
terminate the lease prior to the end of the lease term; and the amount 
or a description of the method for determining the amount of any penalty 
or other charge for early termination, which must be reasonable.
    (2) Early termination notice. In a motor vehicle lease, a notice 
substantially similar to the following: ``Early Termination. You may 
have to pay a substantial charge if you end this lease early. The charge 
may be up to several thousand dollars. The actual charge will depend on 
when the lease is terminated. The earlier you end the lease, the greater 
this charge is likely to be.''
    (h) Maintenance responsibilities. The following provisions are 
required:
    (1) Statement of responsibilities. A statement specifying whether 
the lessor or the lessee is responsible for maintaining or servicing the 
leased

[[Page 508]]

property, together with a brief description of the responsibility;
    (2) Wear and use standard. A statement of the lessor's standards for 
wear and use (if any), which must be reasonable; and
    (3) Notice of wear and use standard. In a motor vehicle lease, a 
notice regarding wear and use substantially similar to the following: 
``Excessive Wear and Use. You may be charged for excessive wear based on 
our standards for normal use.'' The notice shall also specify the amount 
or method for determining any charge for excess mileage.
    (i) Purchase option. A statement of whether or not the lessee has 
the option to purchase the leased property, and:
    (1) End of lease term. If at the end of the lease term, the purchase 
price; and
    (2) During lease term. If prior to the end of the lease term, the 
purchase price or the method for determining the price and when the 
lessee may exercise this option.
    (j) Statement referencing nonsegregated disclosures. A statement 
that the lessee should refer to the lease documents for additional 
information on early termination, purchase options and maintenance 
responsibilities, warranties, late and default charges, insurance, and 
any security interests, if applicable.
    (k) Liability between residual and realized values. A statement of 
the lessee's liability, if any, at early termination or at the end of 
the lease term for the difference between the residual value of the 
leased property and its realized value.
    (l) Right of appraisal. If the lessee's liability at early 
termination or at the end of the lease term is based on the realized 
value of the leased property, a statement that the lessee may obtain, at 
the lessee's expense, a professional appraisal by an independent third 
party (agreed to by the lessee and the lessor) of the value that could 
be realized at sale of the leased property. The appraisal shall be final 
and binding on the parties.
    (m) Liability at end of lease term based on residual value. If the 
lessee is liable at the end of the lease term for the difference between 
the residual value of the leased property and its realized value:
    (1) Rent and other charges. The rent and other charges, paid by the 
lessee and required by the lessor as an incident to the lease 
transaction, with a description such as ``the total amount of rent and 
other charges imposed in connection with your lease [state the 
amount].''
    (2) Excess liability. A statement about a rebuttable presumption 
that, at the end of the lease term, the residual value of the leased 
property is unreasonable and not in good faith to the extent that the 
residual value exceeds the realized value by more than three times the 
base monthly payment (or more than three times the average payment 
allocable to a monthly period, if the lease calls for periodic payments 
other than monthly); and that the lessor cannot collect the excess 
amount unless the lessor brings a successful court action and pays the 
lessee's reasonable attorney's fees, or unless the excess of the 
residual value over the realized value is due to unreasonable or 
excessive wear or use of the leased property (in which case the 
rebuttable presumption does not apply).
    (3) Mutually agreeable final adjustment. A statement that the lessee 
and lessor are permitted, after termination of the lease, to make any 
mutually agreeable final adjustment regarding excess liability.
    (n) Fees and taxes. The total dollar amount for all official and 
license fees, registration, title, or taxes required to be paid in 
connection with the lease.
    (o) Insurance. A brief identification of insurance in connection 
with the lease including:
    (1) Through the lessor. If the insurance is provided by or paid 
through the lessor, the types and amounts of coverage and the cost to 
the lessee; or
    (2) Through a third party. If the lessee must obtain the insurance, 
the types and amounts of coverage required of the lessee.
    (p) Warranties or guarantees. A statement identifying all express 
warranties and guarantees from the manufacturer or lessor with respect 
to the leased property that apply to the lessee.
    (q) Penalties and other charges for delinquency. The amount or the 
method of determining the amount of any penalty or other charge for 
delinquency,

[[Page 509]]

default, or late payments, which must be reasonable.
    (r) Security interest. A description of any security interest, other 
than a security deposit disclosed under paragraph (b) of this section, 
held or to be retained by the lessor; and a clear identification of the 
property to which the security interest relates.
    (s) Limitations on rate information. If a lessor provides a 
percentage rate in an advertisement or in documents evidencing the lease 
transaction, a notice stating that ``this percentage may not measure the 
overall cost of financing this lease'' shall accompany the rate 
disclosure. The lessor shall not use the term ``annual percentage 
rate,'' ``annual lease rate,'' or any equivalent term.
    (t) Non-motor vehicle open-end leases. Non-motor vehicle open-end 
leases remain subject to section 182(10) of the Act regarding end of 
term liability.



Sec.  1013.5  Renegotiations, extensions, and assumptions.

    (a) Renegotiation. A renegotiation occurs when a consumer lease 
subject to this part is satisfied and replaced by a new lease undertaken 
by the same consumer. A renegotiation requires new disclosures, except 
as provided in paragraph (d) of this section.
    (b) Extension. An extension is a continuation, agreed to by the 
lessor and the lessee, of an existing consumer lease beyond the 
originally scheduled end of the lease term, except when the continuation 
is the result of a renegotiation. An extension that exceeds six months 
requires new disclosures, except as provided in paragraph (d) of this 
section.
    (c) Assumption. New disclosures are not required when a consumer 
lease is assumed by another person, whether or not the lessor charges an 
assumption fee.
    (d) Exceptions. New disclosures are not required for the following, 
even if they meet the definition of a renegotiation or an extension:
    (1) A reduction in the rent charge;
    (2) The deferment of one or more payments, whether or not a fee is 
charged;
    (3) The extension of a lease for not more than six months on a 
month-to-month basis or otherwise;
    (4) A substitution of leased property with property that has a 
substantially equivalent or greater economic value, provided no other 
lease terms are changed;
    (5) The addition, deletion, or substitution of leased property in a 
multiple-item lease, provided the average periodic payment does not 
change by more than 25 percent; or
    (6) An agreement resulting from a court proceeding.



Sec.  1013.6  [Reserved]



Sec.  1013.7  Advertising.

    (a) General rule. An advertisement for a consumer lease may state 
that a specific lease of property at specific amounts or terms is 
available only if the lessor usually and customarily leases or will 
lease the property at those amounts or terms.
    (b) Clear and conspicuous standard. Disclosures required by this 
section shall be made clearly and conspicuously.
    (1) Amount due at lease signing or delivery. Except for the 
statement of a periodic payment, any affirmative or negative reference 
to a charge that is a part of the disclosure required under paragraph 
(d)(2)(ii) of this section shall not be more prominent than that 
disclosure.
    (2) Advertisement of a lease rate. If a lessor provides a percentage 
rate in an advertisement, the rate shall not be more prominent than any 
of the disclosures in Sec.  1013.4, with the exception of the notice in 
Sec.  1013.4(s) required to accompany the rate; and the lessor shall not 
use the term ``annual percentage rate,'' ``annual lease rate,'' or 
equivalent term.
    (c) Catalogs or other multipage advertisements; electronic 
advertisements. A catalog or other multipage advertisement, or an 
electronic advertisement (such as an advertisement appearing on an 
Internet Web site), that provides a table or schedule of the required 
disclosures shall be considered a single advertisement if, for lease 
terms that appear without all the required disclosures, the 
advertisement refers to the page or pages on which the table or schedule 
appears.

[[Page 510]]

    (d) Advertisement of terms that require additional disclosure--(1) 
Triggering terms. An advertisement that states any of the following 
items shall contain the disclosures required by paragraph (d)(2) of this 
section, except as provided in paragraphs (e) and (f) of this section:
    (i) The amount of any payment; or
    (ii) A statement of any capitalized cost reduction or other payment 
(or that no payment is required) prior to or at consummation or by 
delivery, if delivery occurs after consummation.
    (2) Additional terms. An advertisement stating any item listed in 
paragraph (d)(1) of this section shall also state the following items:
    (i) That the transaction advertised is a lease;
    (ii) The total amount due prior to or at consummation or by 
delivery, if delivery occurs after consummation;
    (iii) The number, amounts, and due dates or periods of scheduled 
payments under the lease;
    (iv) A statement of whether or not a security deposit is required; 
and
    (v) A statement that an extra charge may be imposed at the end of 
the lease term where the lessee's liability (if any) is based on the 
difference between the residual value of the leased property and its 
realized value at the end of the lease term.
    (e) Alternative disclosures--merchandise tags. A merchandise tag 
stating any item listed in paragraph (d)(1) of this section may comply 
with paragraph (d)(2) of this section by referring to a sign or display 
prominently posted in the lessor's place of business that contains a 
table or schedule of the required disclosures.
    (f) Alternative disclosures--television or radio advertisements--(1) 
Toll-free number or print advertisement. An advertisement made through 
television or radio stating any item listed in paragraph (d)(1) of this 
section complies with paragraph (d)(2) of this section if the 
advertisement states the items listed in paragraphs (d)(2)(i) through 
(iii) of this section, and:
    (i) Lists a toll-free telephone number along with a reference that 
such number may be used by consumers to obtain the information required 
by paragraph (d)(2) of this section; or
    (ii) Directs the consumer to a written advertisement in a 
publication of general circulation in the community served by the media 
station, including the name and the date of the publication, with a 
statement that information required by paragraph (d)(2) of this section 
is included in the advertisement. The written advertisement shall be 
published beginning at least three days before and ending at least ten 
days after the broadcast.
    (2) Establishment of toll-free number. (i) The toll-free telephone 
number shall be available for no fewer than ten days, beginning on the 
date of the broadcast.
    (ii) The lessor shall provide the information required by paragraph 
(d)(2) of this section orally, or in writing upon request.



Sec.  1013.8  Record retention.

    A lessor shall retain evidence of compliance with the requirements 
imposed by this part, other than the advertising requirements under 
Sec.  1013.7, for a period of not less than two years after the date the 
disclosures are required to be made or an action is required to be 
taken.



Sec.  1013.9  Relation to state laws.

    (a) Inconsistent state law. A state law that is inconsistent with 
the requirements of the Act and this part is preempted to the extent of 
the inconsistency. If a lessor cannot comply with a state law without 
violating a provision of this part, the state law is inconsistent within 
the meaning of section 186(a) of the Act and is preempted, unless the 
state law gives greater protection and benefit to the consumer. A state, 
through an official having primary enforcement or interpretative 
responsibilities for the state consumer leasing law, may apply to the 
Bureau for a preemption determination.
    (b) Exemptions--(1) Application. A state may apply to the Bureau for 
an exemption from the requirements of the Act and this part for any 
class of lease transactions within the state. The Bureau will grant such 
an exemption if the Bureau determines that:
    (i) The class of leasing transactions is subject to state law 
requirements substantially similar to the Act and

[[Page 511]]

this part or that lessees are afforded greater protection under state 
law; and
    (ii) There is adequate provision for state enforcement.
    (2) Enforcement and liability. After an exemption has been granted, 
the requirements of the applicable state law (except for additional 
requirements not imposed by Federal law) will constitute the 
requirements of the Act and this part. No exemption will extend to the 
civil liability provisions of sections 130, 131, and 185 of the Act.



                Sec. Appendix A to Part 1013--Model Forms

A-1--Model Open-End or Finance Vehicle Lease Disclosures
A-2--Model Closed-End or Net Vehicle Lease Disclosures
A-3--Model Furniture Lease Disclosures

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                 Sec. Appendix B to Part 1013 [Reserved]



   Sec. Appendix C to Part 1013--Issuance of Official Interpretations

    Interpretations of this part issued by officials of the Bureau 
provide the formal protection afforded under section 130(f) of the Act. 
Except in unusual circumstances, interpretations will not be issued 
separately but will be incorporated in an official commentary to 
Regulation M (Supplement I of this part), which will be amended 
periodically. No official interpretations will be issued approving a 
lessor's forms, statements, or calculation tools or methods.



        Sec. Supplement I to Part 1013--Official Interpretations

                              Introduction

    1. Official status. The commentary in Supplement I is the vehicle by 
which the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation M (12 CFR part 1013). Good faith 
compliance with this commentary affords protection from liability under 
section 130(f) of the Truth in Lending Act (15 U.S.C. 1640(f)). Section 
130(f) protects lessors from civil liability for any act done or omitted 
in good faith in conformity with any interpretation issued by the 
Bureau.
    2. Procedures for requesting interpretations. Under appendix C of 
Regulation M, anyone may request an official interpretation. 
Interpretations that are adopted will be incorporated in this commentary 
following publication in the Federal Register. No official 
interpretations are expected to be issued other than by means of this 
commentary.
    3. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that it 
interprets. The comments are designated with as much specificity as 
possible according to the particular regulatory provision addressed. For 
example, some of the comments to Sec.  1013.4(f) are further divided by 
subparagraph, such as comment 4(f)(1)-1 and comment 4(f)(2)-1. In other 
cases, comments have more general application and are designated, for 
example, as comment 4(a)-1. This introduction may be cited as comments 
I-1 through I-4. An appendix may be cited as comment app. A-1.
    4. Illustrations. Lists that appear in the commentary may be 
exhaustive or illustrative; the appropriate construction should be clear 
from the context. Illustrative lists are introduced by phrases such as 
``including,'' ``such as,'' ``to illustrate,'' and ``for example.''

       Section 1013.1--Authority, Scope, Purpose, and Enforcement

    1. Foreign applicability. Regulation M applies to all persons 
(including branches of foreign banks or leasing companies located in the 
United States) that offer consumer leases to residents of any state 
(including foreign nationals) as defined in Sec.  1013.2(p), except 
persons excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 
Stat. 1376. The regulation does not apply to a foreign branch of a U.S. 
bank or to a leasing company leasing to a U.S. citizen residing or 
visiting abroad or to a foreign national abroad.

                       Section 1013.2--Definitions

                           2(b) Advertisement

    1. Coverage. The term advertisement includes messages inviting, 
offering, or otherwise generally announcing to prospective customers the 
availability of consumer leases, whether in visual, oral, print or 
electronic media. Examples include:
    i. Messages in newspapers, magazines, leaflets, catalogs, and 
fliers.
    ii. Messages on radio, television, and public address systems.
    iii. Direct mail literature.
    iv. Printed material on any interior or exterior sign or display, in 
any window display, in any point-of-transaction literature or price tag 
that is delivered or made available to a lessee or prospective lessee in 
any manner whatsoever.
    v. Telephone solicitations.
    vi. Online messages, such as those on the Internet.
    2. Exclusions. The term does not apply to the following:
    i. Direct personal contacts, including follow-up letters, cost 
estimates for individual lessees, or oral or written communications 
relating to the negotiation of a specific transaction.
    ii. Informational material distributed only to businesses.
    iii. Notices required by Federal or state law, if the law mandates 
that specific information be displayed and only the mandated information 
is included in the notice.
    iv. News articles controlled by the news medium.
    v. Market research or educational materials that do not solicit 
business.
    3. Persons covered. See the commentary to Sec.  1013.7(a).

                          2(d) Closed-End Lease

    1. General. In closed-end leases, sometimes referred to as ``walk-
away'' leases, the lessee is not responsible for the residual value of

[[Page 519]]

the leased property at the end of the lease term.
    2(e) Consumer Lease
    1. Primary purposes. A lessor must determine in each case if the 
leased property will be used primarily for personal, family, or 
household purposes. If a question exists as to the primary purpose for a 
lease, the fact that a lessor gives disclosures is not controlling on 
the question of whether the transaction is covered. The primary purpose 
of a lease is determined before or at consummation and a lessor need not 
provide Regulation M disclosures where there is a subsequent change in 
the primary use.
    2. Period of time. To be a consumer lease, the initial term of the 
lease must be more than four months. Thus, a lease of personal property 
for four months, three months or on a month-to-month or week-to-week 
basis (even though the lease actually extends beyond four months) is not 
a consumer lease and is not subject to the disclosure requirements of 
the regulation. However, a lease that imposes a penalty for not 
continuing the lease beyond four months is considered to have a term of 
more than four months. To illustrate:
    i. A three-month lease extended on a month-to-month basis and 
terminated after one year is not subject to the regulation.
    ii. A month-to-month lease with a penalty, such as the forfeiture of 
a security deposit for terminating before one year, is subject to the 
regulation.
    3. Total contractual obligation. The total contractual obligation is 
not necessarily the same as the total of payments disclosed under Sec.  
1013.4(e). The total contractual obligation includes nonrefundable 
amounts a lessee is contractually obligated to pay to the lessor, but 
excludes items such as:
    i. Residual value amounts or purchase-option prices;
    ii. Amounts collected by the lessor but paid to a third party, such 
as taxes, licenses, and registration fees.
    4. Credit sale. The regulation does not cover a lease that meets the 
definition of a credit sale in Regulation Z, 12 CFR 226.2(a)(16), which 
is defined, in part, as a bailment or lease (unless terminable without 
penalty at any time by the consumer) under which the consumer:
    i. Agrees to pay as compensation for use a sum substantially 
equivalent to, or in excess of, the total value of the property and 
services involved; and
    ii. Will become (or has the option to become), for no additional 
consideration or for nominal consideration, the owner of the property 
upon compliance with the agreement.
    5. Agricultural purpose. Agricultural purpose means a purpose 
related to the production, harvest, exhibition, marketing, 
transportation, processing, or manufacture of agricultural products by a 
natural person who cultivates, plants, propagates, or nurtures those 
agricultural products, including but not limited to the acquisition of 
personal property and services used primarily in farming. Agricultural 
products include horticultural, viticultural, and dairy products, 
livestock, wildlife, poultry, bees, forest products, fish and shellfish, 
and any products thereof, including processed and manufactured products, 
and any and all products raised or produced on farms and any processed 
or manufactured products thereof.
    6. Organization or other entity. A consumer lease does not include a 
lease made to an organization such as a corporation or a government 
agency or instrumentality. Such a lease is not covered by the regulation 
even if the leased property is used (by an employee, for example) 
primarily for personal, family or household purposes, or is guaranteed 
by or subsequently assigned to a natural person.
    7. Leases of personal property incidental to a service. The 
following leases of personal property are deemed incidental to a service 
and thus are not subject to the regulation:
    i. Home entertainment systems requiring the consumer to lease 
equipment that enables a television to receive the transmitted 
programming.
    ii. Security alarm systems requiring the installation of leased 
equipment intended to monitor unlawful entries into a home and in some 
cases to provide fire protection.
    iii. Propane gas service where the consumer must lease a propane 
tank to receive the service.
    8. Safe deposit boxes. The lease of a safe deposit box is not a 
consumer lease under Sec.  1013.2(e).
    9. Threshold amount. A consumer lease is exempt from the 
requirements of this part if the total contractual obligation exceeds 
the threshold amount in effect at the time of consummation. The 
threshold amount in effect during a particular time period is the amount 
stated in comment 2(e)-11 for that period. The threshold amount is 
adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and Clerical 
Workers (CPI-W) that was in effect on the preceding June 1. Comment 
2(e)-11 will be amended to provide the threshold amount for the upcoming 
year after the annual percentage change in the CPI-W that was in effect 
on June 1 becomes available. Any increase in the threshold amount will 
be rounded to the nearest $100 increment. For example, if the annual 
percentage increase in the CPI-W would result in a $950 increase in the 
threshold amount, the threshold amount will be increased by $1,000. 
However, if the annual percentage increase in the CPI-W would result in 
a $949 increase in the threshold amount, the threshold amount will be 
increased by $900. If a consumer lease is exempt from the

[[Page 520]]

requirements of this part because the total contractual obligation 
exceeds the threshold amount in effect at the time of consummation, the 
lease remains exempt regardless of a subsequent increase in the 
threshold amount.
    10. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted, after rounding, if decreases and any subsequent increases 
in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, is greater than the current threshold, then the threshold 
effective January 1 the following year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated, after 
rounding, is equal to or less than the current threshold, then the 
threshold effective January 1 the following year will not change, but 
future increases will be calculated based on the amount that would have 
resulted.
    11. Threshold. For purposes of Sec.  1013.2(e)(1), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. Prior to July 21, 2011, the threshold amount is $25,000.
    ii. From July 21, 2011, through December 31, 2011, the threshold 
amount is $50,000.
    iii. From January 1, 2012, through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013, through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014, through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015, through December 31, 2015, the threshold 
amount is $54,600.
    vii. From January 1, 2016, through December 31, 2016, the threshold 
amount is $54,600.
    viii. From January 1, 2017, through December 31, 2017, the threshold 
amount is $54,600.
    ix. From January 1, 2018, through December 31, 2018, the threshold 
amount is $55,800.
    x. From January 1, 2019, through December 31, 2019, the threshold 
amount is $57,200.
    xi. From January 1, 2020, through December 31, 2020, the threshold 
amount is $58,300.
    xii. From January 1, 2021, through December 31, 2021, the threshold 
amount is $58,300.
    xiii. From January 1, 2022, through December 31, 2022, the threshold 
amount is $61,000.
    xiv. From January 1, 2023, through December 31, 2023, the threshold 
amount is $66,400.
    xv. From January 1, 2024, through December 31, 2024, the threshold 
amount is $69,500.

                               2(g) Lessee

    1. Guarantors. Guarantors are not lessees for purposes of the 
regulation.

                               2(h) Lessor

    1. Arranger of a lease. To ``arrange'' for the lease of personal 
property means to provide or offer to provide a lease that is or will be 
extended by another person under a business or other relationship 
pursuant to which the person arranging the lease (a) receives or will 
receive a fee, compensation, or other consideration for the service or 
(b) has knowledge of the lease terms and participates in the preparation 
of the contract documents required in connection with the lease. To 
illustrate:
    i. An entity that, pursuant to a business relationship, completes 
the necessary lease agreement before forwarding it for execution to the 
leasing company (to whom the obligation is payable on its face) is 
``arranging'' for the lease.
    ii. An entity that, without receiving a fee for the service, refers 
a customer to a leasing company that will prepare all relevant contract 
documents is not ``arranging'' for the lease.
    2. Consideration. The term ``other consideration'' as used in 
comment 2(h)-1 refers to an actual payment corresponding to a fee or 
similar compensation and not to intangible benefits, such as the 
advantage of increased business, which may flow from the relationship 
between the parties.
    3. Assignees. An assignee may be a lessor for purposes of the 
regulation in circumstances where the assignee has substantial 
involvement in the lease transaction. See cf. Ford Motor Credit Co. v. 
Cenance, 452 U.S. 155 (1981) (held that an assignee was a creditor for 
purposes of the pre-1980 Truth in Lending Act and Regulation Z because 
of its substantial involvement in the credit transaction).
    4. Multiple lessors. See the commentary to Sec.  1013.3(c).

                            2(j) Organization

    1. Coverage. The term ``organization'' includes joint ventures and 
persons operating under a business name.

                         2(l) Personal Property

    1. Coverage. Whether property is personal property depends on state 
or other applicable law. For example, a mobile home or houseboat may be 
considered personal property in one state but real property in another.

                           2(m) Realized Value

    1. General. Realized value refers to either the retail or wholesale 
value of the leased property at early termination or at the end

[[Page 521]]

of the lease term. It is not a required disclosure. Realized value is 
relevant only to leases in which the lessee's liability at early 
termination or at the end of the lease term typically is based on the 
difference between the residual value (or the adjusted lease balance) of 
the leased property and its realized value.
    2. Options. Subject to the contract and to state or other applicable 
law, the lessor may calculate the realized value in determining the 
lessee's liability at the end of the lease term or at early termination 
in one of the three ways stated in Sec.  1013.2(m). If the lessor sells 
the property prior to making the determination about liability, the 
price received for the property (or the fair market value) is the 
realized value. If the lessor does not sell the property prior to making 
that determination, the highest offer or the fair market value is the 
realized value.
    3. Determination of realized value. Disposition charges are not 
subtracted in determining the realized value but amounts attributable to 
taxes may be subtracted.
    4. Offers. In determining the highest offer for disposition, the 
lessor may disregard offers that an offeror has withdrawn or is unable 
or unwilling to perform.
    5. Lessor's appraisal. See commentary to Sec.  1013.4(l).

                   2(o) Security Interest and Security

    1. Disclosable interests. For purposes of disclosure, a security 
interest is an interest taken by the lessor to secure performance of the 
lessee's obligation. For example, if a bank that is not a lessor makes a 
loan to a leasing company and takes assignments of consumer leases 
generated by that company to secure the loan, the bank's security 
interest in the lessor's receivables is not a security interest for 
purposes of this part.
    2. General coverage. An interest the lessor may have in leased 
property must be disclosed only if it is considered a security interest 
under state or other applicable law. The term includes, but is not 
limited to, security interests under the Uniform Commercial Code; real 
property mortgages, deeds of trust, and other consensual or confessed 
liens whether or not recorded; mechanic's, materialman's, artisan's, and 
other similar liens; vendor's liens in both real and personal property; 
liens on property arising by operation of law; and any interest in a 
lease when used to secure payment or performance of an obligation.
    3. Insurance exception. The lessor's right to insurance proceeds or 
unearned insurance premiums is not a security interest for purposes of 
this part.

             Section 1013.3--General Disclosure Requirements

                        3(a) General Requirements

    1. Basis of disclosures. Disclosures must reflect the terms of the 
legal obligation between the parties. For example:
    i. In a three-year lease with no penalty for termination after a 
one-year minimum term, disclosures are based on the full three-year term 
of the lease. The one-year minimum term is only relevant to the early 
termination provisions of Sec. Sec.  1013.4 (g)(1), (k) and (l).
    2. Clear and conspicuous standard. The clear and conspicuous 
standard requires that disclosures be reasonably understandable. For 
example, the disclosures must be presented in a way that does not 
obscure the relationship of the terms to each other; appendix A of this 
part contains model forms that meet this standard. In addition, although 
no minimum typesize is required, the disclosures must be legible, 
whether typewritten, handwritten, or printed by computer.
    3. Multipurpose disclosure forms. A lessor may use a multipurpose 
disclosure form provided the lessor is able to designate the specific 
disclosures applicable to a given transaction, consistent with the 
requirement that disclosures be clearly and conspicuously provided.
    4. Number of transactions. Lessors have flexibility in handling 
lease transactions that may be viewed as multiple transactions. For 
example:
    i. When a lessor leases two items to the same lessee on the same 
day, the lessor may disclose the leases as either one or two lease 
transactions.
    ii. When a lessor sells insurance or other incidental services in 
connection with a lease, the lessor may disclose in one of two ways: As 
a single lease transaction (in which case Regulation M, not Regulation 
Z, disclosures are required) or as a lease transaction and a credit 
transaction.
    iii. When a lessor includes an outstanding lease or credit balance 
in a lease transaction, the lessor may disclose the outstanding balance 
as part of a single lease transaction (in which case Regulation M, not 
Regulation Z, disclosures are required) or as a lease transaction and a 
credit transaction.

                       3(a)(1) Form of Disclosures

    1. Cross-references. Lessors may include in the nonsegregated 
disclosures a cross-reference to items in the segregated disclosures 
rather than repeat those items. A lessor may include in the segregated 
disclosures numeric or alphabetic designations as cross-references to 
related information so long as such references do not obscure or detract 
from the segregated disclosures.

[[Page 522]]

    2. Identification of parties. While disclosures must be made clearly 
and conspicuously, lessors are not required to use the word ``lessor'' 
and ``lessee'' to identify the parties to the lease transaction.
    3. Lessor's address. The lessor must be identified by name; an 
address (and telephone number) may be provided.
    4. Multiple lessors and lessees. In transactions involving multiple 
lessors and multiple lessees, a single lessor may make all the 
disclosures to a single lessee as long as the disclosure statement 
identifies all the lessors and lessees.
    5. Lessee's signature. The regulation does not require that the 
lessee sign the disclosure statement, whether disclosures are separately 
provided or are part of the lease contract. Nevertheless, to provide 
evidence that disclosures are given before a lessee becomes obligated on 
the lease transaction, the lessor may, for example, ask the lessee to 
sign the disclosure statement or an acknowledgement of receipt, may 
place disclosures that are included in the lease documents above the 
lessee's signature, or include instructions alerting a lessee to read 
the disclosures prior to signing the lease.

               3(a)(2) Segregation of Certain Disclosures

    1. Location. The segregated disclosures referred to in Sec.  
1013.3(a)(2) may be provided on a separate document and the other 
required disclosures may be provided in the lease contract, so long as 
all disclosures are given at the same time. Alternatively, all 
disclosures may be provided in a separate document or in the lease 
contract.
    2. Additional information among segregated disclosures. The 
disclosures required to be segregated may contain only the information 
required or permitted to be included among the segregated disclosures.
    3. Substantially similar. See commentary to appendix A of this part.

                      3(a)(3) Timing of Disclosures

    1. Consummation. When a contractual relationship is created between 
the lessor and the lessee is a matter to be determined under state or 
other applicable law.

         3(b) Additional Information; Nonsegregated Disclosures

    1. State law disclosures. A lessor may include in the nonsegregated 
disclosures any state law disclosures that are not inconsistent with the 
Act and regulation under Sec.  1013.9 as long as, in accordance with the 
standard set forth in Sec.  1013.3(b) for additional information, the 
state law disclosures are not used or placed to mislead or confuse or 
detract from any disclosure required by the regulation.

                    3(c) Multiple Lessors or Lessees

    1. Multiple lessors. If a single lessor provides disclosures to a 
lessee on behalf of several lessors, all disclosures for the transaction 
must be given, even if the lessor making the disclosures would not 
otherwise have been obligated to make a particular disclosure.

                          3(d) Use of Estimates

    1. Time of estimated disclosure. The lessor may, after making a 
reasonable effort to obtain information, use estimates to make 
disclosures if necessary information is unknown or unavailable at the 
time the disclosures are made.
    2. Basis of estimates. Estimates must be made on the basis of the 
best information reasonably available at the time disclosures are made. 
The ``reasonably available'' standard requires that the lessor, acting 
in good faith, exercise due diligence in obtaining information. The 
lessor may rely on the representations of other parties. For example, 
the lessor might look to the consumer to determine the purpose for which 
leased property will be used, to insurance companies for the cost of 
insurance, or to an automobile manufacturer or dealer for the date of 
delivery. See commentary to Sec.  1013.4(n) for estimating official fees 
and taxes.
    3. Residual value of leased property at termination. In an open-end 
lease where the lessee's liability at the end of the lease term is based 
on the residual value of the leased property as determined at 
consummation, the estimate of the residual value must be reasonable and 
based on the best information reasonably available to the lessor (see 
Sec.  1013.4(m)). A lessor should generally use an accepted trade 
publication listing estimated current or future market prices for the 
leased property unless other information or a reasonable belief based on 
its experience provides the better information. For example:
    i. An automobile lessor offering a three-year open-end lease assigns 
a wholesale value to the vehicle at the end of the lease term. The 
lessor may disclose as an estimate a wholesale value derived from a 
generally accepted trade publication listing current wholesale values.
    ii. Same facts as above, except that the lessor discloses an 
estimated value derived by adjusting the residual value quoted in the 
trade publication because, in its experience, the trade publication 
values either understate or overstate the prices actually received in 
local used vehicle markets. The lessor may adjust estimated values 
quoted in trade publications if the lessor reasonably believes based on 
its experience that the values are understated or overstated.
    4. Retail or wholesale value. The lessor may choose either a retail 
or a wholesale value in estimating the value of leased property at

[[Page 523]]

termination of an open-end lease provided the choice is consistent with 
the lessor's general practice when determining the value of the property 
at the end of the lease term. The lessor should indicate whether the 
value disclosed is a retail or wholesale value.
    5. Labeling estimates. Generally, only the disclosure for which the 
exact information is unknown is labeled as an estimate. Nevertheless, 
when several disclosures are affected because of the unknown 
information, the lessor has the option of labeling as an estimate every 
affected disclosure or only the disclosure primarily affected.

                  3(e) Effect of Subsequent Occurrence

    1. Subsequent occurrences. Examples of subsequent occurrences 
include:
    i. An agreement between the lessee and lessor to change from a 
monthly to a weekly payment schedule.
    ii. An increase in official fees or taxes.
    iii. An increase in insurance premiums or coverage caused by a 
change in the law.
    iv. Late delivery of an automobile caused by a strike.
    2. Redisclosure. When a disclosure becomes inaccurate because of a 
subsequent occurrence, the lessor need not make new disclosures unless 
new disclosures are required under Sec.  1013.5.
    3. Lessee's failure to perform. The lessor does not violate the 
regulation if a previously given disclosure becomes inaccurate when a 
lessee fails to perform obligations under the contract and a lessor 
takes actions that are necessary and proper in such circumstances to 
protect its interest. For example, the addition of insurance or a 
security interest by the lessor because the lessee has not performed 
obligations contracted for in the lease is not a violation of the 
regulation.

                 Section 1013.4--Content of Disclosures

                      4(a) Description of Property

    1. Placement of description. Although the description of leased 
property may not be included among the segregated disclosures, a lessor 
may choose to place the description directly above the segregated 
disclosures.

              4(b) Amount Due at Lease Signing or Delivery

    1. Consummation. See commentary to Sec.  1013.3(a)(3).
    2. Capitalized cost reduction. A capitalized cost reduction is a 
payment in the nature of a downpayment on the leased property that 
reduces the amount to be capitalized over the term of the lease. This 
amount does not include any amounts included in a periodic payment paid 
at lease signing or delivery.
    3. ``Negative'' equity trade-in allowance. If an amount owed on a 
prior lease or credit balance exceeds the agreed upon value of a trade-
in, the difference is not reflected as a negative trade-in allowance 
under Sec.  1013.4(b). The lessor may disclose the trade-in allowance as 
zero or not applicable, or may leave a blank line.
    4. Rebates. Only rebates applied toward an amount due at lease 
signing or delivery are required to be disclosed under Sec.  1013.4(b).
    5. Balance sheet approach. In motor vehicle leases, the total for 
the column labeled ``total amount due at lease signing or delivery'' 
must equal the total for the column labeled ``how the amount due at 
lease signing or delivery will be paid.''
    6. Amounts to be paid in cash. The term cash is intended to include 
payments by check or other payment methods in addition to currency; 
however, a lessor may add a line item under the column ``how the amount 
due at lease signing or delivery will be paid'' for non-currency 
payments such as credit cards.

       4(c) Payment Schedule and Total Amount of Periodic Payments

    1. Periodic payments. The phrase ``number, amount, and due dates or 
periods of payments'' requires the disclosure of all payments that are 
made at regular or irregular intervals and generally derived from rent, 
capitalized or amortized amounts such as depreciation, and other amounts 
that are collected by the lessor at the same interval(s), including, for 
example, taxes, maintenance, and insurance charges. Other periodic 
payments may, but need not, be disclosed under Sec.  1013.4(c).

                           4(d) Other Charges

    1. Coverage. Section 1013.4(d) requires the disclosure of charges 
that are anticipated by the parties incident to the normal operation of 
the lease agreement. If a lessor is unsure whether a particular fee is 
an ``other charge,'' the lessor may disclose the fee as such without 
violating Sec.  1013.4(d) or the segregation rule under Sec.  
1013.3(a)(2).
    2. Excluded charges. This section does not require disclosure of 
charges that are imposed when the lessee terminates early, fails to 
abide by, or modifies the terms of the existing lease agreement, such as 
charges for:
    i. Late payment.
    ii. Default.
    iii. Early termination.
    iv. Deferral of payments.
    v. Extension of the lease.
    3. Third-party fees and charges. Third-party fees or charges 
collected by the lessor on behalf of third parties, such as taxes, are 
not disclosed under Sec.  1013.4(d).
    4. Relationship to other provisions. The other charges mentioned in 
this paragraph are charges that are not required to be disclosed under 
some other provision of Sec.  1013.4. To illustrate:

[[Page 524]]

    i. The price of a mechanical breakdown protection (MBP) contract is 
sometimes disclosed as an ``other charge.'' Nevertheless, the price of 
MBP is sometimes reflected in the periodic payment disclosure under 
Sec.  1013.4(c) or in states where MBP is regarded as insurance, the 
cost is be disclosed in accordance with Sec.  1013.4(o).
    5. Lessee's liabilities at the end of the lease term. Liabilities 
that the lessor imposes upon the lessee at the end of the scheduled 
lease term and that must be disclosed under Sec.  1013.4(d) include 
disposition and ``pick-up'' charges.
    6. Optional ``disposition'' charges. Disposition and similar charges 
that are anticipated by the parties as an incident to the normal 
operation of the lease agreement must be disclosed under Sec.  
1013.4(d). If, under a lease agreement, a lessee may return leased 
property to various locations, and the lessor charges a disposition fee 
depending upon the location chosen, under Sec.  1013.4(d), the lessor 
must disclose the highest amount charged. In such circumstances, the 
lessor may also include a brief explanation of the fee structure in the 
segregated disclosure. For example, if no fee or a lower fee is imposed 
for returning a leased vehicle to the originating dealer as opposed to 
another location, that fact may be disclosed. By contrast, if the terms 
of the lease treat the return of the leased property to a location 
outside the lessor's service area as a default, the fee imposed is not 
disclosed as an ``other charge,'' although it may be required to be 
disclosed under Sec.  1013.4(q).

                         4(e) Total of Payments

    1. Open-end lease. The additional statement is required under Sec.  
1013.4(e) for open-end leases because, with some limitations, a lessee 
is liable at the end of the lease term for the difference between the 
residual and realized values of the leased property.

                        4(f) Payment Calculation

    1. Motor vehicle lease. Whether leased property is a motor vehicle 
is determined by state or other applicable law.
    2. Multiple items. If a lease transaction involves multiple items of 
leased property, one of which is not a motor vehicle under state law, at 
their option, lessors may include all items in the disclosures required 
under Sec.  1013.4(f). See comment 3(a)-4 regarding disclosure of 
multiple transactions.

                     4(f)(1) Gross Capitalized Cost

    1. Agreed upon value of the vehicle. The agreed upon value of a 
motor vehicle includes the amount of capitalized items such as charges 
for vehicle accessories and options, and delivery or destination 
charges. The lessor may also include taxes and fees for title, licenses, 
and registration that are capitalized. Charges for service or 
maintenance contracts, insurance products, guaranteed automobile 
protection, or an outstanding balance on a prior lease or credit 
transaction are not included in the agreed upon value.
    2. Itemization of the gross capitalized cost. The lessor may choose 
to provide the itemization of the gross capitalized cost only on request 
or may provide the itemization as a matter of course. In the latter 
case, the lessor need not provide a statement of the lessee's option to 
receive an itemization. The gross capitalized cost must be itemized by 
type and amount. The lessor may include in the itemization an 
identification of the items and amounts of some or all of the items 
contained in the agreed upon value of the vehicle. The itemization must 
be provided at the same time as the other disclosures required by Sec.  
1013.4, but it may not be included among the segregated disclosures.

                 4(f)(7) Total of Base Periodic Payments

    1. Accuracy of disclosure. If the periodic payment calculation under 
Sec.  1013.4(f) has been calculated correctly, the amount disclosed 
under Sec.  1013.4(f)(7)--the total of base periodic payments--is 
correct for disclosure purposes even if that amount differs from the 
base periodic payment disclosed under Sec.  1013.4(f)(9) multiplied by 
the number of lease payments disclosed under Sec.  1013.4(f)(8), when 
the difference is due to rounding.

                         4(f)(8) Lease Payments

    1. Lease Term. The lease term may be disclosed among the segregated 
disclosures.

                         4(g) Early Termination

              4(g)(1) Conditions and Disclosure of Charges

    1. Reasonableness of charges. See the commentary to Sec.  1013.4(q).
    2. Description of the method. Section 1013.4(g)(1) requires a full 
description of the method of determining an early termination charge. 
The lessor should attempt to provide consumers with clear and 
understandable descriptions of its early termination charges. 
Descriptions that are full, accurate, and not intended to be misleading 
will comply with Sec.  1013.4(g)(1), even if the descriptions are 
complex. In providing a full description of an early termination method, 
a lessor may use the name of a generally accepted method of computing 
the unamortized cost portion (also known as the ``adjusted lease 
balance'') of its early termination charges. For example, a lessor may 
state that the ``constant yield'' method will be utilized in obtaining 
the adjusted lease balance, but must specify how that figure, and any 
other term or figure, is used in computing the total early termination 
charge imposed upon the consumer. Additionally, if a lessor refers to a

[[Page 525]]

named method in this manner, the lessor must provide a written 
explanation of that method if requested by the consumer. The lessor has 
the option of providing the explanation as a matter of course in the 
lease documents or on a separate document.
    3. Timing of written explanation of a named method. While a lessor 
may provide an address or telephone number for the consumer to request a 
written explanation of the named method used to calculate the adjusted 
leased balance, if at consummation a consumer requests such an 
explanation, the lessor must provide a written explanation at that time. 
If a consumer requests an explanation after consummation, the lessor 
must provide a written explanation within a reasonable time after the 
request is made.
    4. Default. When default is a condition for early termination of a 
lease, default charges must be disclosed under Sec.  1013.4(g)(1). See 
the commentary to Sec.  1013.4(q).
    5. Lessee's liability at early termination. When the lessee is 
liable for the difference between the unamortized cost and the realized 
value at early termination, the method of determining the amount of the 
difference must be disclosed under Sec.  1013.4(g)(1).

                    4(h) Maintenance Responsibilities

    1. Standards for wear and use. No disclosure is required if a lessor 
does not set standards or impose charges for wear and use (such as 
excess mileage).

                          4(i) Purchase Option

    1. Mandatory disclosure of no purchase option. Generally the lessor 
need only make the specific required disclosures that apply to a 
transaction. In the case of a purchase option disclosure, however, a 
lessor must disclose affirmatively that the lessee has no option to 
purchase the leased property if the purchase option is inapplicable.
    2. Existence of purchase option. Whether a purchase option exists 
under the lease is determined by state or other applicable law. The 
lessee's right to submit a bid to purchase property at termination of 
the lease is not an option to purchase under Sec.  1013.4(i) if the 
lessor is not required to accept the lessee's bid and the lessee does 
not receive preferential treatment.
    3. Purchase-option fee. A purchase-option fee is disclosed under 
Sec.  1013.4(i), not Sec.  1013.4(d). The fee may be separately itemized 
or disclosed as part of the purchase-option price.
    4. Official fees and taxes. Official fees such as those for taxes, 
licenses, and registration charged in connection with the exercise of a 
purchase option may be disclosed under Sec.  1013.4(i) as part of the 
purchase-option price (with or without a reference to their inclusion in 
that price) or may be separately disclosed and itemized by category. 
Alternatively, a lessor may provide a statement indicating that the 
purchase-option price does not include fees for tags, taxes, and 
registration.
    5. Purchase-option price. Lessors must disclose the purchase-option 
price as a sum certain or as a sum certain to be determined at a future 
date by reference to a readily available independent source. The 
reference should provide sufficient information so that the lessee will 
be able to determine the actual price when the option becomes available. 
Statements of a purchase price as the ``negotiated price'' or the ``fair 
market value'' do not comply with the requirements of Sec.  1013.4(i).

          4(j) Statement Referencing Nonsegregated Disclosures

    1. Content. A lessor may delete inapplicable items from the 
disclosure. For example, if a lease contract does not include a security 
interest, the reference to a security interest may be omitted.

                         4(l) Right of Appraisal

    1. Disclosure inapplicable. The lessee does not have the right to an 
independent appraisal merely because the lessee is liable at the end of 
the lease term or at early termination for unreasonable wear or use. 
Thus, the disclosure under Sec.  1013.4(l) does not apply. For example:
    i. The automobile lessor might expect a lessee to return an undented 
car with four good tires at the end of the lease term. Even though it 
may hold the lessee liable for the difference between a dented car with 
bald tires and the value of a car in reasonably good repair, the 
disclosure under Sec.  1013.4(l) is not required.
    2. Lessor's appraisal. If the lessor obtains an appraisal of the 
leased property to determine its realized value, that appraisal does not 
suffice for purposes of section 183(c) of the Act; the lessor must 
disclose the lessee's right to an independent appraisal under Sec.  
1013.4(l).
    3. Retail or wholesale. In providing the disclosures in Sec.  
1013.4(l), a lessor must indicate whether the wholesale or retail 
appraisal value will be used.
    4. Time restriction on appraisal. The regulation does not specify a 
time period in which the lessee must exercise the appraisal right. The 
lessor may require a lessee to obtain the appraisal within a reasonable 
time after termination of the lease.

       4(m) Liability at End of Lease Term Based on Residual Value

    1. Open-end leases. Section 1013.4(m) applies only to open-end 
leases.
    2. Lessor's payment of attorney's fees. Section 183(a) of the Act 
requires that the lessor

[[Page 526]]

pay the lessee's attorney's fees in all actions under Sec.  1013.4(m), 
whether successful or not.

                     4(m)(1) Rent and Other Charges

    1. General. This disclosure is intended to represent the cost of 
financing an open-end lease based on charges and fees that the lessor 
requires the lessee to pay. Examples of disclosable charges, in addition 
to the rent charge, include acquisition, disposition, or assignment 
fees. Charges imposed by a third party whose services are not required 
by the lessor (such as official fees and voluntary insurance) are not 
included in the Sec.  1013.4(m)(1) disclosure.

                        4(m)(2) Excess Liability

    1. Coverage. The disclosure limiting the lessee's liability for the 
value of the leased property does not apply in the case of early 
termination.
    2. Leases with a minimum term. If a lease has an alternative minimum 
term, the disclosures governing the liability limitation are not 
applicable for the minimum term.
    3. Charges not subject to rebuttable presumption. The limitation on 
liability applies only to liability at the end of the lease term that is 
based on the difference between the residual value of the leased 
property and its realized value. The regulation does not preclude a 
lessor from recovering other charges from the lessee at the end of the 
lease term. Examples of such charges include:
    i. Disposition charges.
    ii. Excess mileage charges.
    iii. Late payment and default charges.
    iv. In simple-interest accounting leases, amount by which the 
unamortized cost exceeds the residual value because the lessee has not 
made timely payments.

                           4(n) Fees and Taxes

    1. Treatment of certain taxes. Taxes paid in connection with the 
lease are generally disclosed under Sec.  1013.4(n), but there are 
exceptions. To illustrate:
    i. Taxes paid by lease signing or delivery are disclosed under Sec.  
1013.4(b) and Sec.  1013.4(n).
    ii. Taxes that are part of the scheduled payments are reflected in 
the disclosure under Sec.  1013.4(c), (f), and (n).
    iii. A tax payable by the lessor that is passed on to the consumer 
and is reflected in the lease documentation must be disclosed under 
Sec.  1013.4(n). A tax payable by the lessor and absorbed as a cost of 
doing business need not be disclosed.
    iv. Taxes charged in connection with the exercise of a purchase 
option are disclosed under Sec.  1013.4(i), not Sec.  1013.4(n).
    2. Estimates. In disclosing the total amount of fees and taxes under 
Sec.  1013.4(n), lessors may need to base the disclosure on estimated 
tax rates or amounts and are afforded great flexibility in doing so. 
Where a rate is applied to the future value of leased property, lessors 
have flexibility in estimating that value, including, but not limited 
to, using the mathematical average of the agreed upon value and the 
residual value or published valuation guides; or a lessor could prepare 
estimates using the agreed upon value and disclose a reasonable estimate 
of the total fees and taxes. Lessors may include a statement that the 
actual total of fees and taxes may be higher or lower depending on the 
tax rates in effect or the value of the leased property at the time a 
fee or tax is assessed.

                             4(o) Insurance

    1. Coverage. If insurance is obtained through the lessor, 
information on the type and amount of insurance coverage (whether 
voluntary or required) as well as the cost, must be disclosed.
    2. Lessor's insurance. Insurance purchased by the lessor primarily 
for its own benefit, and absorbed as a business expense and not 
separately charged to the lessee, need not be disclosed under Sec.  
1013.4(o) even if it provides an incidental benefit to the lessee.
    3. Mechanical breakdown protection and other products. Whether 
products purchased in conjunction with a lease, such as mechanical 
breakdown protection (MBP) or guaranteed automobile protection (GAP), 
should be treated as insurance is determined by state or other 
applicable law. In states that do not treat MBP or GAP as insurance, 
Sec.  1013.4(o) disclosures are not required. In such cases the lessor 
may, however, disclose this information in accordance with the 
additional information provision in Sec.  1013.3(b). For MBP insurance 
contracts not capped by a dollar amount, lessors may describe coverage 
by referring to a limitation by mileage or time period, for example, by 
indicating that the mechanical breakdown contract insures parts of the 
automobile for up to 100,000 miles.

                      4(p) Warranties or Guarantees

    1. Brief identification. The statement identifying warranties may be 
brief and need not describe or list all warranties applicable to 
specific parts such as for air conditioning, radio, or tires in an 
automobile. For example, manufacturer's warranties may be identified 
simply by a reference to the standard manufacturer's warranty. If a 
lessor provides a comprehensive list of warranties that may not all 
apply, to comply with Sec.  1013.4(p) the lessor must indicate which 
warranties apply or, alternatively, which warranties do not apply.
    2. Warranty disclaimers. Although a disclaimer of warranties is not 
required by the regulation, the lessor may give a disclaimer as 
additional information in accordance with Sec.  1013.3(b).

[[Page 527]]

    3. State law. Whether an express warranty or guaranty exists is 
determined by state or other law.

            4(q) Penalties and Other Charges for Delinquency

    1. Collection costs. The automatic imposition of collection costs or 
attorney fees upon default must be disclosed under Sec.  1013.4(q). 
Collection costs or attorney fees that are not imposed automatically, 
but are contingent upon expenditures in conjunction with a collection 
proceeding or upon the employment of an attorney to effect collection, 
need not be disclosed.
    2. Charges for early termination. When default is a condition for 
early termination of a lease, default charges must also be disclosed 
under Sec.  1013.4(g)(1). The Sec.  1013.4(q) and (g)(1) disclosures 
may, but need not, be combined. Examples of combined disclosures are 
provided in the model lease disclosure forms in appendix A.
    3. Simple-interest leases. In a simple-interest accounting lease, 
the additional rent charge that accrues on the lease balance when a 
periodic payment is made after the due date does not constitute a 
penalty or other charge for late payment. Similarly, continued accrual 
of the rent charge after termination of the lease because the lessee 
fails to return the leased property does not constitute a default 
charge. But in either case, if the additional charge accrues at a rate 
higher than the normal rent charge, the lessor must disclose the amount 
of or the method of determining the additional charge under Sec.  
1013.4(q).
    4. Extension charges. Extension charges that exceed the rent charge 
in a simple-interest accounting lease or that are added separately are 
disclosed under Sec.  1013.4(q).
    5. Reasonableness of charges. Pursuant to section 183(b) of the Act, 
penalties or other charges for delinquency, default, or early 
termination may be specified in the lease but only in an amount that is 
reasonable in light of the anticipated or actual harm caused by the 
delinquency, default, or early termination, the difficulties of proof of 
loss, and the inconvenience or nonfeasibility of otherwise obtaining an 
adequate remedy.

                         4(r) Security Interest

    1. Disclosable security interests. See Sec.  1013.2(o) and 
accompanying commentary to determine what security interests must be 
disclosed.

                  4(s) Limitations on Rate Information

    1. Segregated disclosures. A lease rate may not be included among 
the segregated disclosures referenced in Sec.  1013.3(a)(2).

       Section 1013.5--Renegotiations, Extensions, and Assumptions

    1. Coverage. Section 1013.5 applies only to existing leases that are 
covered by the regulation. It does not apply to the renegotiation or 
extension of leases with an initial term of four months or less, because 
such leases are not covered by the definition of consumer lease in Sec.  
1013.2(e). Whether and when a lease is satisfied and replaced by a new 
lease is determined by state or other applicable law.

                           5(a) Renegotiation

    1. Basis of disclosures. Lessors have flexibility in making 
disclosures so long as they reflect the legal obligation under the 
renegotiated lease. For example, assume that a 24-month lease is 
replaced by a 36-month lease. The initial lease began on January 1, 
1998, and was renegotiated and replaced on July 1, 1998, so that the new 
lease term ends on January 1, 2001.
    i. If the renegotiated lease covers the 36-month period beginning 
January 1, 1998, the new disclosures would reflect all payments made by 
the lessee on the initial lease and all payments on the renegotiated 
lease. In this example, since the renegotiated lease covers a 36-month 
period beginning January 1, 1998, the disclosures must reflect payments 
made since that date. On the model form, the ``total of base periodic 
payments'' disclosed under Sec.  1013.4(f)(7) should reflect periodic 
payments to be made over the entire 36-month term. Payments received 
since January 1, 1998, are added as a new line item disclosed as ``total 
of payments received'' and are subtracted from the ``total of base 
periodic payments'' in calculating a new item disclosed as the ``total 
of base periodic payments remaining.'' For example, if 6 monthly 
payments of $300 were received since January 1, 1998, the disclosure 
form should include a ``total of base periodic payments'' line from 
which $1,800 is subtracted to arrive at the ``total of base periodic 
payments remaining.'' The remainder of the disclosures would not change.
    ii. If the renegotiated lease covers only the remaining 30 months, 
from July 1, 1998, to January 1, 2001, the disclosures would reflect 
only the charges incurred in connection with the renegotiation and the 
payments for the remaining period.

                             5(b) Extension

    1. Time of extension disclosures. If a consumer lease is extended 
for a specified term greater than six months, new disclosures are 
required at the time the extension is agreed upon. If the lease is 
extended on a month-to-month basis and the cumulative extensions exceed 
six months, new disclosures are required at the commencement of the 
seventh month and at the commencement of each seventh month thereafter 
for as long as the

[[Page 528]]

extensions continue. If a consumer lease is extended for terms of 
varying durations, one of which will exceed six months beyond the 
originally scheduled termination date of the lease, new disclosures are 
required at the commencement of the term that will exceed six months 
beyond the originally scheduled termination date.
    2. Content of disclosures for month-to-month extensions. The 
disclosures for a lease extended on a month-to-month basis for more than 
six months should reflect the month-to-month nature of the transaction.
    3. Basis of disclosures. The disclosures should be based on the 
extension period, including any upfront costs paid in connection with 
the extension. For example, assume that initially a lease ends on March 
1, 1999. In January 1999, agreement is reached to extend the lease until 
October 1, 1999. The disclosure would include any extension fee paid in 
January and the periodic payments for the seven-month extension period 
beginning in March.

                        Section 1013.6 [Reserved]

                       Section 1013.7--Advertising

                            7(a) General Rule

    1. Persons covered. All ``persons'' must comply with the advertising 
provisions in this section, not just those that meet the definition of a 
lessor in Sec.  1013.2(h). Thus, automobile dealers (to the extent they 
are not excluded from the Bureau's rulemaking authority by section 1029 
of the Dodd-Frank Act), merchants, and others who are not themselves 
lessors must comply with the advertising provisions of the regulation if 
they advertise consumer lease transactions. Pursuant to section 184(b) 
of the Act, however, owners and personnel of the media in which an 
advertisement appears or through which it is disseminated are not 
subject to civil liability for violations under section 185(b) of the 
Act.
    2. ``Usually and customarily.'' Section 1013.7(a) does not prohibit 
the advertising of a single item or the promotion of a new leasing 
program, but prohibits the advertising of terms that are not and will 
not be available. Thus, an advertisement may state terms that will be 
offered for only a limited period or terms that will become available at 
a future date.
    3. Total contractual obligation of advertised lease. Section 1013.7 
applies to advertisements for consumer leases, as defined in Sec.  
1013.2(e). Under Sec.  1013.2(e), a consumer lease is exempt from the 
requirements of this part if the total contractual obligation exceeds 
the threshold amount in effect at the time of consummation. See comment 
2(e)-9. Accordingly, Sec.  1013.7 does not apply to an advertisement for 
a specific consumer lease if the total contractual obligation for that 
lease exceeds the threshold amount in effect when the advertisement is 
made. If a lessor promotes multiple consumer leases in a single 
advertisement, the entire advertisement must comply with Sec.  1013.7 
unless all of the advertised leases are exempt under Sec.  1013.2(e). 
For example:
    i. Assume that, in an advertisement, a lessor states that certain 
terms apply to a consumer lease for a specific automobile. The total 
contractual obligation of the advertised lease exceeds the threshold 
amount in effect when the advertisement is made. Although the 
advertisement does not refer to any other lease, some or all of the 
advertised terms for the exempt lease also apply to other leases offered 
by the lessor with total contractual obligations that do not exceed the 
applicable threshold amount. The advertisement is not required to comply 
with Sec.  1013.7 because it refers only to an exempt lease.
    ii. Assume that, in an advertisement, a lessor states certain terms 
(such as the amount due at lease signing) that will apply to consumer 
leases for automobiles of a particular brand. However, the advertisement 
does not refer to a specific lease. The total contractual obligations of 
the leases for some of the automobiles will exceed the threshold amount 
in effect when the advertisement is made, but the total contractual 
obligations of the leases for other automobiles will not exceed the 
threshold. The entire advertisement must comply with Sec.  1013.7 
because it refers to terms for consumer leases that are not exempt.
    iii. Assume that, in a single advertisement, a lessor states that 
certain terms apply to consumer leases for two different automobiles. 
The total contractual obligation of the lease for the first automobile 
exceeds the threshold amount in effect when the advertisement is made, 
but the total contractual obligation of the lease for the second 
automobile does not exceed the threshold. The entire advertisement must 
comply with Sec.  1013.7 because it refers to a consumer lease that is 
not exempt.

                   7(b) Clear and Conspicuous Standard

    1. Standard. The disclosures in an advertisement in any media must 
be reasonably understandable. For example, very fine print in a 
television advertisement or detailed and very rapidly stated information 
in a radio advertisement does not meet the clear and conspicuous 
standard if consumers cannot see and read or hear, and cannot 
comprehend, the information required to be disclosed.

             7(b)(1) Amount Due at Lease Signing or Delivery

    1. Itemization not required. Only a total of amounts due at lease 
signing or delivery is

[[Page 529]]

required to be disclosed, not an itemization of its component parts. 
Such an itemization is provided in any transaction-specific disclosures 
provided under Sec.  1013.4.
    2. Prominence rule. Except for a periodic payment, oral or written 
references to components of the total due at lease signing or delivery 
(for example, a reference to a capitalized cost reduction, where 
permitted) may not be more prominent than the disclosure of the total 
amount due at lease signing or delivery.

                  7(b)(2) Advertisement of a Lease Rate

    1. Location of statement. The notice required to accompany a 
percentage rate stated in an advertisement must be placed in close 
proximity to the rate without any other intervening language or symbols. 
For example, a lessor may not place an asterisk next to the rate and 
place the notice elsewhere in the advertisement. In addition, with the 
exception of the notice required by Sec.  1013.4(s), the rate cannot be 
more prominent than any other Sec.  1013.4 disclosure stated in the 
advertisement.

      7(c) Catalogs or Other Multi-Page Advertisements; Electronic 
                             Advertisements

    1. General rule. The multiple-page advertisements referred to in 
Sec.  1013.7(c) are advertisements consisting of a series of numbered 
pages--for example, a supplement to a newspaper. A mailing comprising 
several separate flyers or pieces of promotional material in a single 
envelope is not a single multiple-page advertisement.
    2. Cross references. A catalog or other multiple-page advertisement 
or an electronic advertisement (such as an advertisement appearing on an 
internet Web site) is a single advertisement (requiring only one set of 
lease disclosures) if it contains a table, chart, or schedule with the 
disclosures required under Sec.  1013.7(d)(2)(i) through (v). If one of 
the triggering terms listed in Sec.  1013.7(d)(1) appears in a catalog, 
or in a multiple-page or electronic advertisement, it must clearly 
direct the consumer to the page or location where the table, chart, or 
schedule begins. For example, in an electronic advertisement, a term 
triggering additional disclosures may be accompanied by a link that 
directly connects the consumer to the additional information.

                        7(d)(1) Triggering Terms

    1. Typical example. When any triggering term appears in a lease 
advertisement, the additional terms enumerated in Sec.  1013.7(d)(2)(i) 
through (v) must also appear. In a multi-lease advertisement, an example 
of one or more typical leases with a statement of all the terms 
applicable to each may be used. The examples must be labeled as such and 
must reflect representative lease terms that are made available by the 
lessor to consumers.

                        7(d)(2) Additional Terms

    1. Third-party fees that vary by state or locality. The disclosure 
of a periodic payment or total amount due at lease signing or delivery 
may:
    i. Exclude third-party fees, such as taxes, licenses, and 
registration fees and disclose that fact; or
    ii. Provide a periodic payment or total that includes third-party 
fees based on a particular state or locality as long as that fact and 
the fact that fees may vary by state or locality are disclosed.

             7(e) Alternative Disclosures--Merchandise Tags

    1. Multiple-item leases. Multiple-item leases that utilize 
merchandise tags requiring additional disclosures may use the alternate 
disclosure rule.

    7(f) Alternative Disclosures--Television or Radio Advertisements

             7(f)(1) Toll-Free Number or Print Advertisement

    1. Publication in general circulation. A reference to a written 
advertisement appearing in a newspaper circulated nationally, for 
example, USA Today or the Wall Street Journal, may satisfy the general 
circulation requirement in Sec.  1013.7(f)(1)(ii).
    2. Toll-free number, local or collect calls. In complying with the 
disclosure requirements of Sec.  1013.7(f)(1)(i), a lessor must provide 
a toll-free number for nonlocal calls made from an area code other than 
the one used in the lessor's dialing area. Alternatively, a lessor may 
provide any telephone number that allows a consumer to reverse the phone 
charges when calling for information.
    3. Multi-purpose number. When an advertised toll-free number 
responds with a recording, lease disclosures must be provided early in 
the sequence to ensure that the consumer receives the required 
disclosures. For example, in providing several dialing options--such as 
providing directions to the lessor's place of business--the option 
allowing the consumer to request lease disclosures should be provided 
early in the telephone message to ensure that the option to request 
disclosures is not obscured by other information.
    4. Statement accompanying toll free number. Language must accompany 
a telephone and television number indicating that disclosures are 
available by calling the toll-free number, such as ``call 1-(800) 000-
0000 for details about costs and terms.''

                    Section 1013.8--Record Retention

    1. Manner of retaining evidence. A lessor must retain evidence of 
having performed required actions and of having made required

[[Page 530]]

disclosures. Such records may be retained in paper form, on microfilm, 
microfiche, or computer, or by any other method designed to reproduce 
records accurately. The lessor need retain only enough information to 
reconstruct the required disclosures or other records.

                 Section 1013.9--Relation to State Laws

    1. Exemptions granted. The Bureau recognizes exemptions granted by 
the Board of Governors of the Federal Reserve System prior to July 21, 
2011, until and unless the Bureau makes and publishes any contrary 
determination. Effective October 1, 1982, the Board of Governors of the 
Federal Reserve System granted the following exemptions from portions of 
the Consumer Leasing Act:
    i. Maine. Lease transactions subject to the Maine Consumer Credit 
Code and its implementing regulations are exempt from Chapters 2, 4, and 
5 of the Federal act. (The exemption does not apply to transactions in 
which a federally chartered institution is a lessor.)
    ii. Oklahoma. Lease transactions subject to the Oklahoma Consumer 
Credit Code are exempt from Chapters 2 and 5 of the Federal act. (The 
exemption does not apply to sections 132 through 135 of the Federal act, 
nor does it apply to transactions in which a federally chartered 
institution is a lessor.)

                         Appendix A--Model Forms

    1. Permissible changes. Although use of the model forms is not 
required, lessors using them properly will be deemed to be in compliance 
with the regulation. Generally, lessors may make certain changes in the 
format or content of the forms and may delete any disclosures that are 
inapplicable to a transaction without losing the Act's protection from 
liability. For example, the model form based on monthly periodic 
payments may be modified for single-payment lease transactions or for 
quarterly or other regular or irregular periodic payments. The model 
form may also be modified to reflect that a transaction is an extension. 
The content, format, and headings for the segregated disclosures must be 
substantially similar to those contained in the model forms; therefore, 
any changes should be minimal. The changes to the model forms should not 
be so extensive as to affect the substance and the clarity of the 
disclosures.
    2. Examples of acceptable changes.
    i. Using the first person, instead of the second person, in 
referring to the lessee.
    ii. Using ``lessee,'' ``lessor,'' or names instead of pronouns.
    iii. Rearranging the sequence of the nonsegregated disclosures.
    iv. Incorporating certain state ``plain English'' requirements.
    v. Deleting or blocking out inapplicable disclosures, filling in 
``N/A'' (not applicable) or ``0,'' crossing out, leaving blanks, 
checking a box for applicable items, or circling applicable items (this 
should facilitate use of multipurpose standard forms).
    vi. Adding language or symbols to indicate estimates.
    vii. Adding numeric or alphabetic designations.
    viii. Rearranging the disclosures into vertical columns, except for 
Sec.  1013.4(b) through (e) disclosures.
    ix. Using icons and other graphics.
    3. Model closed-end or net vehicle lease disclosure. Model A-2 is 
designed for a closed-end or net vehicle lease. Under the ``Early 
Termination and Default'' provision a reference to the lessee's right to 
an independent appraisal of the leased vehicle under Sec.  1013.4(l) is 
included for those closed-end leases in which the lessee's liability at 
early termination is based on the vehicle's realized value.
    4. Model furniture lease disclosures. Model A-3 is a closed-end 
lease disclosure statement designed for a typical furniture lease. It 
does not include a disclosure of the appraisal right at early 
termination required under Sec.  1013.4(l) because few closed-end 
furniture leases base the lessee's liability at early termination on the 
realized value of the leased property. The disclosure should be added if 
it is applicable.

[76 FR 78502, Dec. 19, 2011, as amended at 76 FR 81790, Dec. 29, 2011; 
77 FR 69736, Nov. 21, 2012; 79 FR 70194, Nov. 25, 2013; 79 FR 56483, 
Sept. 22, 2014; 80 FR 73947, Nov. 27, 2015, as amended at 81 FR 86259, 
Nov. 30, 2016; 82 FR 51977, Nov. 9, 2017; 83 FR 59276, Nov. 23, 2018; 84 
FR 58019, Oct. 30, 2019; 85 FR 79393, Dec. 10, 2020; 86 FR 67850, Nov. 
30, 2021; 87 FR 63669, Oct. 20, 2022; 88 FR 83321, Nov. 29, 2023]



PART 1014_MORTGAGE ACTS AND PRACTICES_ADVERTISING (REGULATION N)--Table 
of Contents



Sec.
1014.1 Scope of regulations in this part.
1014.2 Definitions.
1014.3 Prohibited representations.
1014.4 Waiver not permitted.
1014.5 Recordkeeping requirements.
1014.6 Actions by states.
1014.7 Severability.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1638 note.

    Source: 76 FR 78133, Dec. 16, 2011, unless otherwise noted.

[[Page 531]]



Sec.  1014.1  Scope of regulations in this part.

    This part, known as Regulation N, is issued by the Bureau of 
Consumer Financial Protection to implement the 2009 Omnibus 
Appropriations Act, Public L. 111-8, section 626, 123 Stat. 524 (Mar. 
11, 2009), as amended by the Credit Card Accountability Responsibility 
and Disclosure Act of 2009, Public Law 111-24, section 511, 123 Stat. 
1734 (May 22, 2009), and as amended by the Dodd-Frank Wall Street Reform 
and Consumer Financial Protection Act of 2010, Public Law 111-203, 
section 1097, 124 Stat. 1376 (July 21, 2010). This part applies to 
persons over which the Federal Trade Commission has jurisdiction under 
the Federal Trade Commission Act.



Sec.  1014.2  Definitions.

    For the purposes of this part:
    Commercial communication means any written or oral statement, 
illustration, or depiction, whether in English or any other language, 
that is designed to effect a sale or create interest in purchasing goods 
or services, whether it appears on or in a label, package, package 
insert, radio, television, cable television, brochure, newspaper, 
magazine, pamphlet, leaflet, circular, mailer, book insert, free 
standing insert, letter, catalogue, poster, chart, billboard, public 
transit card, point of purchase display, film, slide, audio program 
transmitted over a telephone system, telemarketing script, on-hold 
script, upsell script, training materials provided to telemarketing 
firms, program-length commercial (``infomercial''), the internet, 
cellular network, or any other medium. Promotional materials and items 
and Web pages are included in the term commercial communication.
    Consumer means a natural person to whom a mortgage credit product is 
offered or extended.
    Credit means the right to defer payment of debt or to incur debt and 
defer its payment.
    Dwelling means a residential structure that contains one to four 
units, whether or not that structure is attached to real property. The 
term includes any of the following if used as a residence: an individual 
condominium unit, cooperative unit, mobile home, manufactured home, or 
trailer.
    Mortgage credit product means any form of credit that is secured by 
real property or a dwelling and that is offered or extended to a 
consumer primarily for personal, family, or household purposes.
    Person means any individual, group, unincorporated association, 
limited or general partnership, corporation, or other business entity.
    Term means any of the fees, costs, obligations, or characteristics 
of or associated with the product. It also includes any of the 
conditions on or related to the availability of the product.



Sec.  1014.3  Prohibited representations.

    It is a violation of this part for any person to make any material 
misrepresentation, expressly or by implication, in any commercial 
communication, regarding any term of any mortgage credit product, 
including but not limited to misrepresentations about:
    (a) The interest charged for the mortgage credit product, including 
but not limited to misrepresentations concerning:
    (1) The amount of interest that the consumer owes each month that is 
included in the consumer's payments, loan amount, or total amount due, 
or
    (2) Whether the difference between the interest owed and the 
interest paid is added to the total amount due from the consumer;
    (b) The annual percentage rate, simple annual rate, periodic rate, 
or any other rate;
    (c) The existence, nature, or amount of fees or costs to the 
consumer associated with the mortgage credit product, including but not 
limited to misrepresentations that no fees are charged;
    (d) The existence, cost, payment terms, or other terms associated 
with any additional product or feature that is or may be sold in 
conjunction with the mortgage credit product, including but not limited 
to credit insurance or credit disability insurance;
    (e) The terms, amounts, payments, or other requirements relating to 
taxes or insurance associated with the mortgage credit product, 
including but not limited to misrepresentations about:

[[Page 532]]

    (1) Whether separate payment of taxes or insurance is required; or
    (2) The extent to which payment for taxes or insurance is included 
in the loan payments, loan amount, or total amount due from the 
consumer;
    (f) Any prepayment penalty associated with the mortgage credit 
product, including but not limited to misrepresentations concerning the 
existence, nature, amount, or terms of such penalty;
    (g) The variability of interest, payments, or other terms of the 
mortgage credit product, including but not limited to misrepresentations 
using the word ``fixed'';
    (h) Any comparison between:
    (1) Any rate or payment that will be available for a period less 
than the full length of the mortgage credit product; and
    (2) Any actual or hypothetical rate or payment;
    (i) The type of mortgage credit product, including but not limited 
to misrepresentations that the product is or involves a fully amortizing 
mortgage;
    (j) The amount of the obligation, or the existence, nature, or 
amount of cash or credit available to the consumer in connection with 
the mortgage credit product, including but not limited to 
misrepresentations that the consumer will receive a certain amount of 
cash or credit as part of a mortgage credit transaction;
    (k) The existence, number, amount, or timing of any minimum or 
required payments, including but not limited to misrepresentations about 
any payments or that no payments are required in a reverse mortgage or 
other mortgage credit product;
    (l) The potential for default under the mortgage credit product, 
including but not limited to misrepresentations concerning the 
circumstances under which the consumer could default for nonpayment of 
taxes, insurance, or maintenance, or for failure to meet other 
obligations;
    (m) The effectiveness of the mortgage credit product in helping the 
consumer resolve difficulties in paying debts, including but not limited 
to misrepresentations that any mortgage credit product can reduce, 
eliminate, or restructure debt or result in a waiver or forgiveness, in 
whole or in part, of the consumer's existing obligation with any person;
    (n) The association of the mortgage credit product or any provider 
of such product with any other person or program, including but not 
limited to misrepresentations that:
    (1) The provider is, or is affiliated with, any governmental entity 
or other organization; or
    (2) The product is or relates to a government benefit, or is 
endorsed, sponsored by, or affiliated with any government or other 
program, including but not limited to through the use of formats, 
symbols, or logos that resemble those of such entity, organization, or 
program;
    (o) The source of any commercial communication, including but not 
limited to misrepresentations that a commercial communication is made by 
or on behalf of the consumer's current mortgage lender or servicer;
    (p) The right of the consumer to reside in the dwelling that is the 
subject of the mortgage credit product, or the duration of such right, 
including but not limited to misrepresentations concerning how long or 
under what conditions a consumer with a reverse mortgage can stay in the 
dwelling;
    (q) The consumer's ability or likelihood to obtain any mortgage 
credit product or term, including but not limited to misrepresentations 
concerning whether the consumer has been preapproved or guaranteed for 
any such product or term;
    (r) The consumer's ability or likelihood to obtain a refinancing or 
modification of any mortgage credit product or term, including but not 
limited to misrepresentations concerning whether the consumer has been 
preapproved or guaranteed for any such refinancing or modification; and
    (s) The availability, nature, or substance of counseling services or 
any other expert advice offered to the consumer regarding any mortgage 
credit product or term, including but not limited to the qualifications 
of those offering the services or advice.



Sec.  1014.4  Waiver not permitted.

    It is a violation of this part for any person to obtain, or attempt 
to obtain,

[[Page 533]]

a waiver from any consumer of any protection provided by or any right of 
the consumer under this part.



Sec.  1014.5  Recordkeeping requirements.

    (a) Any person subject to this part shall keep, for a period of 
twenty-four months from the last date the person made or disseminated 
the applicable commercial communication regarding any term of any 
mortgage credit product, the following evidence of compliance with this 
part:
    (1) Copies of all materially different commercial communications as 
well as sales scripts, training materials, and marketing materials, 
regarding any term of any mortgage credit product, that the person made 
or disseminated during the relevant time period;
    (2) Documents describing or evidencing all mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such mortgage credit product available to consumers; and
    (3) Documents describing or evidencing all additional products or 
services (such as credit insurance or credit disability insurance) that 
are or may be offered or provided with the mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such additional product or service available to consumers.
    (b) Any person subject to this part may keep the records required by 
paragraph (a) of this section in any legible form, and in the same 
manner, format, or place as they keep such records in the ordinary 
course of business. Failure to keep all records required under paragraph 
(a) of this section shall be a violation of this part.



Sec.  1014.6  Actions by states.

    Any attorney general or other officer of a state authorized by the 
state to bring an action under this part may do so pursuant to section 
626(b) of the 2009 Omnibus Appropriations Act, Public Law 111-8, section 
626, 123 Stat. 524 (Mar. 11, 2009), as amended by the Credit Card 
Accountability Responsibility and Disclosure Act of 2009, Public Law 
111-24, section 511, 123 Stat. 1734 (May 22, 2009), and as amended by 
Public Law 111-203, section 1097, 124 Stat. 2102 (July 21, 2010).



Sec.  1014.7  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Bureau of Consumer Financial Protection's intention that the 
remaining provisions shall continue in effect.



PART 1015_MORTGAGE ASSISTANCE RELIEF SERVICES (REGULATION O)--Table 
of Contents



Sec.
1015.1 Scope of regulations in this part.
1015.2 Definitions.
1015.3 Prohibited representations.
1015.4 Disclosures required in commercial communications.
1015.5 Prohibition on collection of advance payments and related 
          disclosures.
1015.6 Assisting and facilitating.
1015.7 Exemptions.
1015.8 Waiver not permitted.
1015.9 Recordkeeping and compliance requirements.
1015.10 Actions by states.
1015.11 Severability.

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1638 note.

    Source: 76 FR 78133, Dec. 16, 2011, unless otherwise noted.



Sec.  1015.1  Scope of regulations in this part.

    This part, known as Regulation O, is issued by the Bureau of 
Consumer Financial Protection to implement the 2009 Omnibus 
Appropriations Act, Public Law 111-8, section 626, 123 Stat. 524 (Mar. 
11, 2009), as clarified by the Credit Card Accountability Responsibility 
and Disclosure Act of 2009, Public Law 111-24, section 511, 123 Stat. 
1734 (May 22, 2009), and as amended by the Dodd-Frank Wall Street Reform 
and Consumer Financial Protection Act of 2010, Public Law 111-203, 
section 1097, 124 Stat. 1376 (July 21, 2010). This part applies to 
persons over which the Federal

[[Page 534]]

Trade Commission has jurisdiction under the Federal Trade Commission 
Act.



Sec.  1015.2  Definitions.

    For the purposes of this part:
    Clear and prominent means:
    (1) In textual communications, the required disclosures shall be 
easily readable; in a high degree of contrast from the immediate 
background on which it appears; in the same languages that are 
substantially used in the commercial communication; in a format so that 
the disclosure is distinct from other text, such as inside a border; in 
a distinct type style, such as bold; parallel to the base of the 
commercial communication, and, except as otherwise provided in this 
rule, each letter of the disclosure shall be, at a minimum, the larger 
of 12-point type or one-half the size of the largest letter or numeral 
used in the name of the advertised Web site or telephone number to which 
consumers are referred to receive information relating to any mortgage 
assistance relief service. Textual communications include any 
communications in a written or printed form such as print publications 
or words displayed on the screen of a computer;
    (2) In communications disseminated orally or through audible means, 
such as radio or streaming audio, the required disclosures shall be 
delivered in a slow and deliberate manner and in a reasonably 
understandable volume and pitch;
    (3) In communications disseminated through video means, such as 
television or streaming video, the required disclosures shall appear 
simultaneously in the audio and visual parts of the commercial 
communication and be delivered in a manner consistent with paragraphs 
(1) and (2) of this definition. The visual disclosure shall be at least 
four percent of the vertical picture or screen height and appear for the 
duration of the oral disclosure;
    (4) In communications made through interactive media, such as the 
internet, online services, and software, the required disclosures shall:
    (i) Be consistent with paragraphs (1) through (3) of this 
definition;
    (ii) Be made on, or immediately prior to, the page on which the 
consumer takes any action to incur any financial obligation;
    (iii) Be unavoidable, i.e., visible to consumers without requiring 
them to scroll down a Web page; and
    (iv) Appear in type at least the same size as the largest character 
of the advertisement;
    (5) In all instances, the required disclosures shall be presented in 
an understandable language and syntax, and with nothing contrary to, 
inconsistent with, or in mitigation of the disclosures used in any 
communication of them; and
    (6) For program-length television, radio, or internet-based 
multimedia commercial communications, the required disclosures shall be 
made at the beginning, near the middle, and at the end of the commercial 
communication.
    Client trust account means a separate account created by a licensed 
attorney for the purpose of holding client funds, which is:
    (1) Maintained in compliance with all applicable state laws and 
regulations, including licensing regulations; and
    (2) Located in the state where the attorney's office is located, or 
elsewhere in the United States with the consent of the consumer on whose 
behalf the funds are held.
    Commercial communication means any written or oral statement, 
illustration, or depiction, whether in English or any other language, 
that is designed to effect a sale or create interest in purchasing any 
service, plan, or program, whether it appears on or in a label, package, 
package insert, radio, television, cable television, brochure, 
newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, 
free standing insert, letter, catalogue, poster, chart, billboard, 
public transit card, point of purchase display, film, slide, audio 
program transmitted over a telephone system, telemarketing script, 
onhold script, upsell script, training materials provided to 
telemarketing firms, program-length commercial (``infomercial''), the 
internet, cellular network, or any other medium. Promotional materials 
and items and Web pages are included in the term ``commercial 
communication.''
    (1) General Commercial Communication means a commercial 
communication

[[Page 535]]

that occurs prior to the consumer agreeing to permit the provider to 
seek offers of mortgage assistance relief on behalf of the consumer, or 
otherwise agreeing to use the mortgage assistance relief service, and 
that is not directed at a specific consumer.
    (2) Consumer-Specific Commercial Communication means a commercial 
communication that occurs prior to the consumer agreeing to permit the 
provider to seek offers of mortgage assistance relief on behalf of the 
consumer, or otherwise agreeing to use the mortgage assistance relief 
service, and that is directed at a specific consumer.
    Consumer means any natural person who is obligated under any loan 
secured by a dwelling.
    Dwelling means a residential structure containing four or fewer 
units, whether or not that structure is attached to real property, that 
is primarily for personal, family, or household purposes. The term 
includes any of the following if used as a residence: An individual 
condominium unit, cooperative unit, mobile home, manufactured home, or 
trailer.
    Dwelling loan means any loan secured by a dwelling, and any 
associated deed of trust or mortgage.
    Dwelling Loan Holder means any individual or entity who holds the 
dwelling loan that is the subject of the offer to provide mortgage 
assistance relief services.
    Material means likely to affect a consumer's choice of, or conduct 
regarding, any mortgage assistance relief service.
    Mortgage Assistance Relief Service means any service, plan, or 
program, offered or provided to the consumer in exchange for 
consideration, that is represented, expressly or by implication, to 
assist or attempt to assist the consumer with any of the following:
    (1) Stopping, preventing, or postponing any mortgage or deed of 
trust foreclosure sale for the consumer's dwelling, any repossession of 
the consumer's dwelling, or otherwise saving the consumer's dwelling 
from foreclosure or repossession;
    (2) Negotiating, obtaining, or arranging a modification of any term 
of a dwelling loan, including a reduction in the amount of interest, 
principal balance, monthly payments, or fees;
    (3) Obtaining any forbearance or modification in the timing of 
payments from any dwelling loan holder or servicer on any dwelling loan;
    (4) Negotiating, obtaining, or arranging any extension of the period 
of time within which the consumer may:
    (i) Cure his or her default on a dwelling loan,
    (ii) Reinstate his or her dwelling loan,
    (iii) Redeem a dwelling, or
    (iv) Exercise any right to reinstate a dwelling loan or redeem a 
dwelling;
    (5) Obtaining any waiver of an acceleration clause or balloon 
payment contained in any promissory note or contract secured by any 
dwelling; or
    (6) Negotiating, obtaining or arranging:
    (i) A short sale of a dwelling,
    (ii) A deed-in-lieu of foreclosure, or
    (iii) Any other disposition of a dwelling other than a sale to a 
third party who is not the dwelling loan holder.
    Mortgage Assistance Relief Service Provider or Provider means any 
person that provides, offers to provide, or arranges for others to 
provide, any mortgage assistance relief service. This term does not 
include:
    (1) The dwelling loan holder, or any agent or contractor of such 
individual or entity.
    (2) The servicer of a dwelling loan, or any agent or contractor of 
such individual or entity.
    Person means any individual, group, unincorporated association, 
limited or general partnership, corporation, or other business entity, 
except to the extent that any person is specifically excluded from the 
Federal Trade Commission's jurisdiction pursuant to 15 U.S.C. 44 and 
45(a)(2).
    Servicer means the individual or entity responsible for:
    (1) Receiving any scheduled periodic payments from a consumer 
pursuant to the terms of the dwelling loan that is the subject of the 
offer to provide mortgage assistance relief services, including amounts 
for escrow accounts under section 10 of the Real Estate Settlement 
Procedures Act (12 U.S.C. 2609); and

[[Page 536]]

    (2) Making the payments of principal and interest and such other 
payments with respect to the amounts received from the consumer as may 
be required pursuant to the terms of the mortgage servicing loan 
documents or servicing contract.
    Telemarketing means a plan, program, or campaign which is conducted 
to induce the purchase of any service, by use of one or more telephones 
and which involves more than one interstate telephone call.



Sec.  1015.3  Prohibited representations.

    It is a violation of this rule for any mortgage assistance relief 
service provider to engage in the following conduct:
    (a) Representing, expressly or by implication, in connection with 
the advertising, marketing, promotion, offering for sale, sale, or 
performance of any mortgage assistance relief service, that a consumer 
cannot or should not contact or communicate with his or her lender or 
servicer.
    (b) Misrepresenting, expressly or by implication, any material 
aspect of any mortgage assistance relief service, including but not 
limited to:
    (1) The likelihood of negotiating, obtaining, or arranging any 
represented service or result, such as those set forth in the definition 
of Mortgage Assistance Relief Service in Sec.  1015.2;
    (2) The amount of time it will take the mortgage assistance relief 
service provider to accomplish any represented service or result, such 
as those set forth in the definition of Mortgage Assistance Relief 
Service in Sec.  1015.2;
    (3) That a mortgage assistance relief service is affiliated with, 
endorsed or approved by, or otherwise associated with:
    (i) The United States government,
    (ii) Any governmental homeowner assistance plan,
    (iii) Any Federal, State, or local government agency, unit, or 
department,
    (iv) Any nonprofit housing counselor agency or program,
    (v) The maker, holder, or servicer of the consumer's dwelling loan, 
or
    (vi) Any other individual, entity, or program;
    (4) The consumer's obligation to make scheduled periodic payments or 
any other payments pursuant to the terms of the consumer's dwelling 
loan;
    (5) The terms or conditions of the consumer's dwelling loan, 
including but not limited to the amount of debt owed;
    (6) The terms or conditions of any refund, cancellation, exchange, 
or repurchase policy for a mortgage assistance relief service, including 
but not limited to the likelihood of obtaining a full or partial refund, 
or the circumstances in which a full or partial refund will be granted, 
for a mortgage assistance relief service;
    (7) That the mortgage assistance relief service provider has 
completed the represented services or has a right to claim, demand, 
charge, collect, or receive payment or other consideration;
    (8) That the consumer will receive legal representation;
    (9) The availability, performance, cost, or characteristics of any 
alternative to for-profit mortgage assistance relief services through 
which the consumer can obtain mortgage assistance relief, including 
negotiating directly with the dwelling loan holder or servicer, or using 
any nonprofit housing counselor agency or program;
    (10) The amount of money or the percentage of the debt amount that a 
consumer may save by using the mortgage assistance relief service;
    (11) The total cost to purchase the mortgage assistance relief 
service; or
    (12) The terms, conditions, or limitations of any offer of mortgage 
assistance relief the provider obtains from the consumer's dwelling loan 
holder or servicer, including the time period in which the consumer must 
decide to accept the offer;
    (c) Making a representation, expressly or by implication, about the 
benefits, performance, or efficacy of any mortgage assistance relief 
service unless, at the time such representation is made, the provider 
possesses and relies upon competent and reliable evidence that 
substantiates that the representation is true. For the purposes of this 
paragraph, competent and reliable evidence means tests, analyses, 
research, studies, or other evidence based on the expertise of 
professionals in the relevant area, that have been conducted and 
evaluated in an objective

[[Page 537]]

manner by individuals qualified to do so, using procedures generally 
accepted in the profession to yield accurate and reliable results.



Sec.  1015.4  Disclosures required in commercial communications.

    It is a violation of this rule for any mortgage assistance relief 
service provider to engage in the following conduct:
    (a) Disclosures in All General Commercial Communications--Failing to 
place the following statements in every general commercial communication 
for any mortgage assistance relief service:
    (1) ``(Name of company) is not associated with the government, and 
our service is not approved by the government or your lender.''
    (2) In cases where the mortgage assistance relief service provider 
has represented, expressly or by implication, that consumers will 
receive any service or result set forth in paragraphs (2) through (6) of 
the definition of Mortgage Assistance Relief Service in Sec.  1015.2, 
``Even if you accept this offer and use our service, your lender may not 
agree to change your loan.''
    (3) The disclosures required by this paragraph must be made in a 
clear and prominent manner, and--
    (i) In textual communications the disclosures must appear together 
and be preceded by the heading ``IMPORTANT NOTICE,'' which must be in 
bold face font that is two point-type larger than the font size of the 
required disclosures; and
    (ii) In communications disseminated orally or through audible means, 
wholly or in part, the audio component of the required disclosures must 
be preceded by the statement ``Before using this service, consider the 
following information.''
    (b) Disclosures in All Consumer-Specific Commercial Communications--
Failing to disclose the following information in every consumer-specific 
commercial communication for any mortgage assistance relief service:
    (1) ``You may stop doing business with us at any time. You may 
accept or reject the offer of mortgage assistance we obtain from your 
lender [or servicer]. If you reject the offer, you do not have to pay 
us. If you accept the offer, you will have to pay us (insert amount or 
method for calculating the amount) for our services.'' For the purposes 
of this paragraph (b)(1), the amount ``you will have to pay'' shall 
consist of the total amount the consumer must pay to purchase, receive, 
and use all of the mortgage assistance relief services that are the 
subject of the sales offer, including, but not limited to, all fees and 
charges.
    (2) ``(Name of company) is not associated with the government, and 
our service is not approved by the government or your lender.''
    (3) In cases where the mortgage assistance relief service provider 
has represented, expressly or by implication, that consumers will 
receive any service or result set forth in paragraphs (2) through (6) of 
the definition of Mortgage Assistance Relief Service in Sec.  1015.2, 
``Even if you accept this offer and use our service, your lender may not 
agree to change your loan.''
    (4) The disclosures required by this paragraph must be made in a 
clear and prominent manner, and--
    (i) In textual communications the disclosures must appear together 
and be preceded by the heading ``IMPORTANT NOTICE,'' which must be in 
bold face font that is two point-type larger than the font size of the 
required disclosures; and
    (ii) In communications disseminated orally or through audible means, 
wholly or in part, the audio component of the required disclosures must 
be preceded by the statement ``Before using this service, consider the 
following information'' and, in telephone communications, must be made 
at the beginning of the call.
    (c) Disclosures in All General Commercial Communications, Consumer-
Specific Commercial Communications, and Other Communications--In cases 
where the mortgage assistance relief service provider has represented, 
expressly or by implication, in connection with the advertising, 
marketing, promotion, offering for sale, sale, or performance of any 
mortgage assistance relief service, that the consumer should temporarily 
or permanently discontinue payments, in whole or in part, on a dwelling 
loan, failing to disclose, clearly and prominently, and in close 
proximity to any

[[Page 538]]

such representation that ``If you stop paying your mortgage, you could 
lose your home and damage your credit rating.''



Sec.  1015.5  Prohibition on collection of advance payments and 
related disclosures.

    It is a violation of this rule for any mortgage assistance relief 
service provider to:
    (a) Request or receive payment of any fee or other consideration 
until the consumer has executed a written agreement between the consumer 
and the consumer's dwelling loan holder or servicer incorporating the 
offer of mortgage assistance relief the provider obtained from the 
consumer's dwelling loan holder or servicer;
    (b) Fail to disclose, at the time the mortgage assistance relief 
service provider furnishes the consumer with the written agreement 
specified in paragraph (a) of this section, the following information: 
``This is an offer of mortgage assistance we obtained from your lender 
[or servicer]. You may accept or reject the offer. If you reject the 
offer, you do not have to pay us. If you accept the offer, you will have 
to pay us [same amount as disclosed pursuant to Sec.  1015.4(b)(1)] for 
our services.'' The disclosure required by this paragraph must be made 
in a clear and prominent manner, on a separate written page, and 
preceded by the heading: ``IMPORTANT NOTICE: Before buying this service, 
consider the following information.'' The heading must be in bold face 
font that is two point-type larger than the font size of the required 
disclosure; or
    (c)(1) Fail to provide, at the time the mortgage assistance relief 
service provider furnishes the consumer with the written agreement 
specified in paragraph (a) of this section, a notice from the consumer's 
dwelling loan holder or servicer that describes all material differences 
between the terms, conditions, and limitations associated with the 
consumer's current mortgage loan and the terms, conditions, and 
limitations associated with the consumer's mortgage loan if he or she 
accepts the dwelling loan holder's or servicer's offer, including but 
not limited to differences in the loan's:
    (i) Principal balance;
    (ii) Contract interest rate, including the maximum rate and any 
adjustable rates, if applicable;
    (iii) Amount and number of the consumer's scheduled periodic 
payments on the loan;
    (iv) Monthly amounts owed for principal, interest, taxes, and any 
mortgage insurance on the loan;
    (v) Amount of any delinquent payments owing or outstanding;
    (vi) Assessed fees or penalties; and
    (vii) Term.
    (2) The notice must be made in a clear and prominent manner, on a 
separate written page, and preceded by heading: ``IMPORTANT INFORMATION 
FROM YOUR [name of lender or servicer] ABOUT THIS OFFER.'' The heading 
must be in bold face font that is two-point-type larger than the font 
size of the required disclosure.
    (d) Fail to disclose in the notice specified in paragraph (c) of 
this section, in cases where the offer of mortgage assistance relief the 
provider obtained from the consumer's dwelling loan holder or servicer 
is a trial mortgage loan modification, the terms, conditions, and 
limitations of this offer, including but not limited to:
    (1) The fact that the consumer may not qualify for a permanent 
mortgage loan modification; and
    (2) The likely amount of the scheduled periodic payments and any 
arrears, payments, or fees that the consumer would owe in failing to 
qualify.



Sec.  1015.6  Assisting and facilitating.

    It is a violation of this rule for a person to provide substantial 
assistance or support to any mortgage assistance relief service provider 
when that person knows or consciously avoids knowing that the provider 
is engaged in any act or practice that violates this rule.



Sec.  1015.7  Exemptions.

    (a) An attorney is exempt from this part, with the exception of 
Sec.  1015.5, if the attorney:
    (1) Provides mortgage assistance relief services as part of the 
practice of law;
    (2) Is licensed to practice law in the state in which the consumer 
for whom

[[Page 539]]

the attorney is providing mortgage assistance relief services resides or 
in which the consumer's dwelling is located; and
    (3) Complies with state laws and regulations that cover the same 
type of conduct the rule requires.
    (b) An attorney who is exempt pursuant to paragraph (a) of this 
section is also exempt from Sec.  1015.5 if the attorney:
    (1) Deposits any funds received from the consumer prior to 
performing legal services in a client trust account; and
    (2) Complies with all state laws and regulations, including 
licensing regulations, applicable to client trust accounts.



Sec.  1015.8  Waiver not permitted.

    It is a violation of this rule for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this rule.



Sec.  1015.9  Recordkeeping and compliance requirements.

    (a) Any mortgage assistance relief provider must keep, for a period 
of twenty-four (24) months from the date the record is created, the 
following records:
    (1) All contracts or other agreements between the provider and any 
consumer for any mortgage assistance relief service;
    (2) Copies of all written communications between the provider and 
any consumer occurring prior to the date on which the consumer entered 
into an agreement with the provider for any mortgage assistance relief 
service;
    (3) Copies of all documents or telephone recordings created in 
connection with compliance with paragraph (b) of this section;
    (4) All consumer files containing the names, phone numbers, dollar 
amounts paid, and descriptions of mortgage assistance relief services 
purchased, to the extent the mortgage assistance relief service provider 
keeps such information in the ordinary course of business;
    (5) Copies of all materially different sales scripts, training 
materials, commercial communications, or other marketing materials, 
including Web sites and weblogs, for any mortgage assistance relief 
service; and
    (6) Copies of the documentation provided to the consumer as 
specified in Sec.  1015.5 of this rule;
    (b) A mortgage assistance relief service provider also must:
    (1) Take reasonable steps sufficient to monitor and ensure that all 
employees and independent contractors comply with this rule. Such steps 
shall include the monitoring of communications directed at specific 
consumers, and shall also include, at a minimum, the following:
    (i) If the mortgage assistance relief service provider is engaged in 
the telemarketing of mortgage assistance relief services, performing 
random, blind recording and testing of the oral representations made by 
individuals engaged in sales or other customer service functions;
    (ii) Establishing a procedure for receiving and responding to all 
consumer complaints; and
    (iii) Ascertaining the number and nature of consumer complaints 
regarding transactions in which all employees and independent 
contractors are involved;
    (2) Investigate promptly and fully each consumer complaint received;
    (3) Take corrective action with respect to any employee or 
contractor whom the mortgage assistance relief service provider 
determines is not complying with this rule, which may include training, 
disciplining, or terminating such individual; and
    (4) Maintain any information and material necessary to demonstrate 
its compliance with paragraphs (b)(1) through (3) of this section.
    (c) A mortgage assistance relief provider may keep the records 
required by paragraphs (a) and (b) of this section in any form, and in 
the same manner, format, or place as it keeps such records in the 
ordinary course of business.
    (d) It is a violation of this rule for a mortgage assistance relief 
service provider not to comply with this section.



Sec.  1015.10  Actions by states.

    Any attorney general or other officer of a state authorized by the 
state to bring an action under this part may do so pursuant to section 
626(b) of the 2009

[[Page 540]]

Omnibus Appropriations Act, Public Law 111-8, section 626, 123 Stat. 524 
(Mar. 11, 2009), as amended by Public Law 111-24, section 511, 123 Stat. 
1734 (May 22, 2009), and as amended by Public Law 111-203, section 1097, 
124 Stat. 2102 (July 21, 2010).



Sec.  1015.11  Severability.

    The provisions of this rule are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Bureau of Consumer Financial Protection's intention that the 
remaining provisions shall continue in effect.



PART 1016_PRIVACY OF CONSUMER FINANCIAL INFORMATION (REGULATION P)--Table 
of Contents



Sec.
1016.1 Purpose and scope.
1016.2 Model privacy form and examples.
1016.3 Definitions.

                  Subpart A_Privacy and Opt Out Notices

1016.4 Initial privacy notice to consumers required.
1016.5 Annual privacy notice to customers required.
1016.6 Information to be included in privacy notices.
1016.7 Form of opt out notice to consumers; opt out methods.
1016.8 Revised privacy notices.
1016.9 Delivering privacy and opt out notices.

                     Subpart B_Limits on Disclosures

1016.10 Limits on disclosure of nonpublic personal information to 
          nonaffiliated third parties.
1016.11 Limits on redisclosure and reuse of information.
1016.12 Limits on sharing account number information for marketing 
          purposes.

                          Subpart C_Exceptions

1016.13 Exception to opt out requirements for service providers and 
          joint marketing.
1016.14 Exceptions to notice and opt out requirements for processing and 
          servicing transactions.
1016.15 Other exceptions to notice and opt out requirements.

                    Subpart D_Relation to Other Laws

1016.16 Protection of Fair Credit Reporting Act.
1016.17 Relation to state laws.

Appendix to Part 1016--Model Privacy Form

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 6804.

    Source: 76 FR 79028, Dec. 21, 2011, unless otherwise noted.



Sec.  1016.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution may 
disclose nonpublic personal information about consumers to nonaffiliated 
third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most nonaffiliated third 
parties by ``opting out'' of that disclosure, subject to the exceptions 
in Sec. Sec.  1016.13, 1016.14, and 1016.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information about 
companies or about individuals who obtain financial products or services 
for business, commercial, or agricultural purposes. This part applies to 
those financial institutions and other persons for which the Bureau of 
Consumer Financial Protection (Bureau) has rulemaking authority pursuant 
to section 504(a)(1)(A) of the Gramm-Leach-Bliley Act (GLB Act) (15 
U.S.C. 6804(a)(1)(A)). Specifically, this part applies to any financial 
institution and other covered person or service provider that is subject 
to Subtitle A of Title V of the GLB Act, including third parties that 
are not financial institutions but that receive nonpublic personal 
information from financial institutions with whom they are not 
affiliated. This part does

[[Page 541]]

not apply to certain motor vehicle dealers described in 12 U.S.C. 5519 
or to entities for which the Securities and Exchange Commission or the 
Commodity Futures Trading Commission has rulemaking authority pursuant 
to sections 504(a)(1)(A)-(B) of the GLB Act (15 U.S.C. 6804(a)(1)(A)-
(B)). Except as otherwise specifically provided herein, entities to 
which this part applies are referred to in this part as ``you.''
    (2)(i) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).
    (ii) Any institution of higher education that complies with the 
Federal Educational Rights and Privacy Act (FERPA), 20 U.S.C. 1232g, and 
its implementing regulations, 34 CFR part 99, and that is also a 
financial institution described in Sec.  1016.3(l)(3) of this part, 
shall be deemed to be in compliance with this part if it is in 
compliance with FERPA.
    (3) Nothing in this part shall apply to:
    (i) A financial institution that is a person described in section 
1029(a) of the Consumer Financial Protection Act of 2010, title X of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), Public Law 111-203, 124 Stat. 1376 (12 U.S.C. 5519(a));
    (ii) A financial institution or other person subject to the 
jurisdiction on the Commodity Futures Trading Commission under 7 U.S.C. 
7b-2;
    (iii) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.;)
    (iv) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any state, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (v) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.;) or
    (vi) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a state insurance regulator.

[76 FR 79028, Dec. 21, 2011, as amended at 79 FR 64081, Oct. 28, 2014]



Sec.  1016.2  Model privacy form and examples.

    (a) Model privacy form. Use of the model privacy form in the 
appendix to this part, consistent with the instructions in the appendix 
constitutes compliance with the notice content requirements of 
Sec. Sec.  1016.6 and 1016.7 of this part, although use of the model 
privacy form is not required.
    (b) Examples. The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.



Sec.  1016.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a)(1) Affiliate means any company that controls, is controlled by, 
or is under common control with another company.
    (2) Examples in the case of a credit union. (i) An affiliate of a 
Federal credit union is a credit union service organization (CUSO), as 
provided in 12 CFR part 712, that is controlled by the Federal credit 
union.
    (ii) An affiliate of a federally-insured, state-chartered credit 
union is a company that is controlled by the credit union.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice whenever 
possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and

[[Page 542]]

    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on Web sites. If you provide a notice on a Web site, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the Web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and you 
either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly to 
the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other identifying particular assigned to the individual, irrespective 
of the source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples in the case of a financial institution other than a 
credit union. For purposes of this paragraph (e)(2), ``you'' is limited 
to financial institutions other than credit unions.
    (i) An individual who applies to you for credit for personal, 
family, or household purposes is a consumer of a financial service, 
regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household purposes, 
the individual is your consumer, even if you hold those rights in 
conjunction with one or more other institutions. (The individual is also 
a consumer with respect to the other financial institutions involved.) 
An individual who has a loan in which you have ownership or servicing 
rights is your consumer, even if you, or another institution with those 
rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial institution 
is not your consumer solely because you act as agent for, or provide 
processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she has 
designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she is 
a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or

[[Page 543]]

for which you act as a trustee or fiduciary.
    (3) Examples in the case of a credit union. For purposes of this 
paragraph (e)(3), ``you'' is limited to credit unions.
    (i) An individual who provides nonpublic personal information to you 
in connection with obtaining or seeking to obtain credit union 
membership is your consumer regardless of whether you establish a 
customer relationship.
    (ii) An individual who provides nonpublic personal information to 
you in connection with using your ATM is your consumer.
    (iii) If you hold ownership or servicing rights to an individual's 
loan, the individual is your consumer, even if you hold those rights in 
conjunction with one or more financial institutions. The individual is 
also a consumer with respect to the other financial institutions 
involved. This applies even if you, or another financial institution 
with those rights, hire an agent to collect on the loan or to provide 
processing or other services.
    (iv) An individual who is a consumer of another financial 
institution is not your consumer solely because you act as agent for, or 
provide processing or other services to, that financial institution.
    (v) An individual is not your consumer solely because he or she is a 
participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company as determined 
by the applicable prudential regulator (as defined in 12 U.S.C. 
5481(24)), if any.
    (4) Example in the case of credit unions. A credit union is presumed 
to have a controlling influence over the management or policies of a 
CUSO, if the CUSO is 67% owned by credit unions.
    (h) Credit union means a Federal or state-chartered credit union 
that the National Credit Union Share Insurance Fund insures.
    (i) Customer means a consumer who has a customer relationship with 
you.
    (j)(1) Customer relationship means a continuing relationship between 
a consumer and you under which you provide one or more financial 
products or services to the consumer that are to be used primarily for 
personal, family, or household purposes. As noted in the examples, and 
for purposes of this part only, in the case of a credit union, a 
customer relationship will exist between a credit union and certain 
consumers that are not the credit union's members.
    (2) Examples in the case of financial institutions other than credit 
unions and covered entities subject to FTC enforcement jurisdiction. For 
purposes of this paragraph (j)(2), ``you'' is limited to financial 
institutions other than credit unions and financial institutions 
described in paragraph (l)(3) of this section.
    (i) Continuing relationship. A consumer has a continuing 
relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act as 
a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or

[[Page 544]]

    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's check 
or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (3) Examples in the case of covered entities subject to FTC 
enforcement jurisdiction. For purposes of this paragraph (j)(3), ``you'' 
is limited to financial institutions described in paragraph (l)(3) of 
this section.
    (i) Continuing relationship. A consumer has a continuing 
relationship with you if the consumer:
    (A) Has a credit or investment account with you;
    (B) Obtains a loan from you;
    (C) Purchases an insurance product from you;
    (D) Holds an investment product through you, such as when you act as 
a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (E) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan, or credit to 
purchase a vehicle, for the consumer;
    (F) Enters into a lease of personal property on a non-operating 
basis with you;
    (G) Obtains financial, investment, or economic advisory services 
from you for a fee;
    (H) Becomes your client for the purpose of obtaining tax preparation 
or credit counseling services from you;
    (I) Obtains career counseling while seeking employment with a 
financial institution or the finance, accounting, or audit department of 
any company (or while employed by such a financial institution or 
department of any company);
    (J) Is obligated on an account that you purchase from another 
financial institution, regardless of whether the account is in default 
when purchased, unless you do not locate the consumer or attempt to 
collect any amount from the consumer on the account;
    (K) Obtains real estate settlement services from you; or
    (L) Has a loan for which you own the servicing rights.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service from you 
only in isolated transactions, such as using your ATM to withdraw cash 
from an account at another financial institution; purchasing a money 
order from you; cashing a check with you; or making a wire transfer 
through you;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan;
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions;
    (D) The consumer obtains one-time personal or real property 
appraisal services from you; or
    (E) The consumer purchases checks for a personal checking account 
from you.
    (4) Examples in the case of a credit union. (i) Continuing 
relationship. A consumer has a continuing relationship with a credit 
union if the consumer:
    (A) Is a member as defined in the credit union's bylaws;
    (B) Is a nonmember who has a share, share draft, or credit card 
account with the credit union jointly with a member;
    (C) Is a nonmember who has a loan that the credit union services;
    (D) Is a nonmember who has an account with a credit union that has 
been designated as a low-income credit union; or
    (E) Is a nonmember who has an account in a federally-insured, state-
chartered credit union pursuant to state law.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with a credit union if the consumer is a 
nonmember and:

[[Page 545]]

    (A) The consumer only obtains a financial product or service in 
isolated transactions, such as using the credit union's ATM to withdraw 
cash from an account maintained at another financial institution or 
purchasing travelers checks; or
    (B) The credit union sells the consumer's loan and does not retain 
the rights to service that loan.
    (k) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The National Credit Union Administration Board; and
    (5) The Securities and Exchange Commission.
    (l)(1) Except for entities described in paragraph (l)(3) of this 
section, financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) For purposes of paragraph (l)(1) of this section, financial 
institution does not include:
    (i) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.;)
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.;) or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party.
    (3)(i) Special definition for entities subject to the Federal Trade 
Commission's enforcement jurisdiction. In the case of an entity 
described in section 505(a)(7) of the GLB Act (other than such an entity 
described in section 504(a)(1)(C) of that Act), financial institution 
means any institution the business of which is engaging in financial 
activities as described in section 4(k) of the Bank Holding Company Act 
of 1956 (12 U.S.C. 1843(k)). For purposes of this paragraph (l)(3), an 
institution that is significantly engaged in financial activities is a 
financial institution.
    (ii) Examples of financial institution. For purposes of this 
paragraph (l)(3):
    (A) A retailer that extends credit by issuing its own credit card 
directly to consumers is a financial institution because extending 
credit is a financial activity listed in 12 CFR 225.28(b)(1) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act and 
issuing that extension of credit through a proprietary credit card 
demonstrates that a retailer is significantly engaged in extending 
credit.
    (B) A personal property or real estate appraiser is a financial 
institution because real and personal property appraisal is a financial 
activity listed in 12 CFR 225.28(b)(2)(i) and referenced in section 
4(k)(4)(F) of the Bank Holding Company Act.
    (C) An automobile dealership that is not described in section 
1029(a) of the Dodd-Frank Act (12 U.S.C. 5519(a)) and that, as a usual 
part of its business, leases automobiles on a nonoperating basis for 
longer than 90 days is a financial institution with respect to its 
leasing business because leasing personal property on a nonoperating 
basis where the initial term of the lease is at least 90 days is a 
financial activity listed in 12 CFR 225.28(b)(3) and referenced in 
section 4(k)(4)(F) of the Bank Holding Company Act.
    (D) A career counselor that specializes in providing career 
counseling services to individuals currently employed by or recently 
displaced from a financial organization, individuals who are seeking 
employment with a financial organization, or individuals who are 
currently employed by or seeking placement with the finance, accounting 
or audit departments of any company is a financial institution because 
such career counseling activities are financial activities listed in 12 
CFR 225.28(b)(9)(iii) and referenced in section 4(k)(4)(F) of the Bank 
Holding Company Act.

[[Page 546]]

    (E) A business that prints and sells checks for consumers, either as 
its sole business or as one of its product lines, is a financial 
institution because printing and selling checks is a financial activity 
that is listed in 12 CFR 225.28(b)(10)(ii) and referenced in section 
4(k)(4)(F) of the Bank Holding Company Act.
    (F) A business that regularly wires money to and from consumers is a 
financial institution because transferring money is a financial activity 
referenced in section 4(k)(4)(A) of the Bank Holding Company Act and 
regularly providing that service demonstrates that the business is 
significantly engaged in that activity.
    (G) A check cashing business is a financial institution because 
cashing a check is exchanging money, which is a financial activity 
listed in section 4(k)(4)(A) of the Bank Holding Company Act.
    (H) An accountant or other tax preparation service that is in the 
business of completing income tax returns is a financial institution 
because tax preparation services is a financial activity listed in 12 
CFR 225.28(b)(6)(vi) and referenced in section 4(k)(4)(G) of the Bank 
Holding Company Act.
    (I) A business that operates a travel agency in connection with 
financial services is a financial institution because operating a travel 
agency in connection with financial services is a financial activity 
listed in 12 CFR 211.5(d)(15) and referenced in section 4(k)(4)(G) of 
the Bank Holding Company Act.
    (J) An entity that provides real estate settlement services is a 
financial institution because providing real estate settlement services 
is a financial activity listed in 12 CFR 225.28(b)(2)(viii) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act.
    (K) A mortgage broker is a financial institution because brokering 
loans is a financial activity listed in 12 CFR 225.28(b)(1) and 
referenced in section 4(k)(4)(F) of the Bank Holding Company Act.
    (L) An investment advisory company and a credit counseling service 
are each financial institutions because providing financial and 
investment advisory services are financial activities referenced in 
section 4(k)(4)(C) of the Bank Holding Company Act.
    (iii) For purposes of this paragraph (l)(3), financial institution 
does not include:
    (A) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.;)
    (B) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.;) or
    (C) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights) or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party other than as permitted by 
Sec. Sec.  1016.14 and 1016.15 of this part.
    (D) Entities that engage in financial activities but that are not 
significantly engaged in those financial activities.
    (iv) Examples of entities that are not significantly engaged in 
financial activities. (A) A retailer is not a financial institution if 
its only means of extending credit are occasional ``lay away'' and 
deferred payment plans or accepting payment by means of credit cards 
issued by others.
    (B) A retailer is not a financial institution merely because it 
accepts payment in the form of cash, checks, or credit cards that it did 
not issue.
    (C) A merchant is not a financial institution merely because it 
allows an individual to ``run a tab.''
    (D) A grocery store is not a financial institution merely because it 
allows individuals to whom it sells groceries to cash a check, or write 
a check for a higher amount than the grocery purchase and obtain cash in 
return.
    (m)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of

[[Page 547]]

the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Special definition for entities subject to the Federal Trade 
Commission's enforcement jurisdiction. In the case of an entity 
described in section 505(a)(7) of the GLB Act (other than such an entity 
described in section 504(a)(1)(C) of that Act), financial product or 
service means any product or service that a financial holding company 
could offer by engaging in a financial activity under section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (3) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (n) Member means a consumer who is a member of a credit union, as 
defined in the credit union's bylaws.
    (o)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other company 
that jointly employs the person).
    (2) Nonaffiliated third party includes, for financial institutions 
other than credit unions, any company that is an affiliate solely by 
virtue of your or your affiliate's direct or indirect ownership or 
control of the company in conducting merchant banking or investment 
banking activities of the type described in section 4(k)(4)(H) or 
insurance company investment activities of the type described in section 
4(k)(4)(I) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)(4)(H) and (I)).
    (p)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived using 
any personally identifiable financial information that is not publicly 
available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (p)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.
    (3) Examples of lists. (i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (q)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, a credit card, a credit union membership, or other 
financial product or service;
    (B) Account balance information, payment history, overdraft history, 
and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your customers 
or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;

[[Page 548]]

    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on, or 
servicing, a loan or a credit account;
    (F) Any information you collect through an internet ``cookie'' (an 
information collecting device from a Web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as aggregate 
information or blind data that does not contain personal identifiers 
such as account numbers, names, or addresses.
    (r)(1) Publicly available information means any information that you 
have a reasonable basis to believe is lawfully made available to the 
general public from:
    (i) Federal, state, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be made 
by Federal, state, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you have 
taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples--(i) Government records. Publicly available information 
in government records includes information in government real estate 
records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a Web site that is 
available to the general public on an unrestricted basis. A Web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available to 
the general public.
    (iii) Reasonable basis. (A) You have a reasonable basis to believe 
that mortgage information is lawfully made available to the general 
public if you have determined that the information is of the type 
included on the public record in the jurisdiction where the mortgage 
would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if you 
have located the telephone number in the telephone book or the consumer 
has informed you that the telephone number is not unlisted.
    (s)(1) You means a financial institution for which the Bureau has 
rulemaking authority under section 504(a)(1)(A) of the GLB Act (15 
U.S.C. 6804(a)(1)(A)).
    (2) You does not include:
    (i) A financial institution that is a person described in section 
1029(a) of the Consumer Financial Protection Act of 2010 (12 U.S.C. 
5519(a));
    (ii) A financial institution or other person subject to the 
jurisdiction on the Commodity Futures Trading Commission under 7 U.S.C. 
7b-2;
    (iii) A broker or dealer that is registered under the Securities 
Exchange Act of 1934 (15 U.S.C. 78a et seq.;)
    (iv) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any State, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (v) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.;) or
    (vi) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a State insurance regulator.

[76 FR 79028, Dec. 21, 2011, as amended by CFPB-2016-0032, 83 FR 40958, 
Aug. 17, 2018]

[[Page 549]]



                  Subpart A_Privacy and Opt Out Notices



Sec.  1016.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic personal 
information about the consumer to any nonaffiliated third party, if you 
make such a disclosure other than as authorized by Sec. Sec.  1016.14 
and 1016.15 of this part.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about the 
consumer to any nonaffiliated third party, other than as authorized by 
Sec. Sec.  1016.14 and 1016.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans. You establish a customer relationship 
with a consumer when you originate or acquire the servicing rights to a 
loan to the consumer for personal, family, or household purposes. If you 
subsequently transfer the servicing rights to that loan to another 
financial institution, the customer relationship transfers with the 
servicing rights.
    (3) Examples--(i) Examples of establishing customer relationship by 
financial institutions other than credit unions and covered entities 
subject to FTC enforcement jurisdiction. For purposes of this paragraph 
(c)(3)(i), ``you'' is limited to financial institutions other than 
credit unions and financial institutions described in Sec.  
1016.3(l)(3). You establish a customer relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of establishing customer relationship by covered 
entities subject to FTC enforcement jurisdiction. For purposes of this 
paragraph (c)(3)(ii), ``you'' is limited to financial institutions 
described in Sec.  1016.3(l)(3) of this part. You establish a customer 
relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to obtain credit from you or purchases 
insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee;
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services or to obtain career counseling 
while seeking employment with a financial institution or the finance, 
accounting, or audit department of any company (or while employed by 
such a company or financial institution);
    (E) Provides any personally identifiable financial information to 
you in an effort to obtain a mortgage loan through you;
    (F) Executes the lease for personal property with you;
    (G) Is an obligor on an account that you purchased from another 
financial institution and whom you have located and begun attempting to 
collect amounts owed on the account; or
    (H) Provides you with the information necessary for you to compile 
and provide access to all of the consumer's online financial accounts at 
your Web site.
    (iii) Examples of establishing customer relationship by credit 
unions. For purposes of this paragraph (c)(3)(iii), ``you'' is limited 
to a credit union. You establish a customer relationship when the 
consumer:
    (A) Becomes your member under your bylaws;

[[Page 550]]

    (B) Is a nonmember and opens a credit card account with you jointly 
with a member under your procedures;
    (C) Is a nonmember and executes the contract to open a share or 
share draft account with you or obtains credit from you jointly with a 
member, including an individual acting as a guarantor;
    (D) Is a nonmember and opens an account with you and you are a 
credit union designated as a low-income credit union;
    (E) Is a nonmember and opens an account with you pursuant to State 
law and you are a State-chartered credit union.
    (iv) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:
    (1) You may provide a revised privacy notice, under Sec.  1016.8 of 
this part, that covers the customer's new financial product or service; 
or
    (2) If the initial, revised, or annual notice that you most recently 
provided to that customer was accurate with respect to the new financial 
product or service, you do not need to provide a new privacy notice 
under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.
    (2) Examples of exceptions--(i) Not at customer's election. (A) In 
the case of financial institutions other than credit unions and 
financial institutions described in Sec.  1016.3(l)(3), establishing a 
customer relationship is not at the customer's election if you acquire a 
customer's deposit liability or the servicing rights to a customer's 
loan from another financial institution and the customer does not have a 
choice about your acquisition.
    (B) In the case of financial institutions described in Sec.  
1016.3(l)(3), establishing a customer relationship is not at the 
customer's election if you acquire a customer's loan or the servicing 
rights from another financial institution and the customer does not have 
a choice about your acquisition.
    (C) In the case of credit unions, establishing a customer 
relationship is not at the customer's election if you acquire a 
customer's deposit liability from another financial institution and the 
customer does not have a choice about your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial product 
or service; or
    (B) You establish a customer relationship with an individual under a 
program authorized by title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the relationship 
is initiated in person at your office or through other means by which 
the customer may view the notice, such as on a Web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec.  1016.9 of 
this part. If you use a

[[Page 551]]

short-form initial notice for non-customers according to Sec.  1016.6(d) 
of this part, you may deliver your privacy notice according to Sec.  
1016.6(d)(3).



Sec.  1016.5  Annual privacy notice to customers required.

    (a)(1) General rule. Except as provided by paragraph (e) of this 
section, you must provide a clear and conspicuous notice to customers 
that accurately reflects your privacy policies and practices not less 
than annually during the continuation of the customer relationship. 
Annually means at least once in any period of 12 consecutive months 
during which that relationship exists. You may define the 12-
consecutive-month period, but you must apply it to the customer on a 
consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the calendar 
year in which you provided the initial notice. For example, if a 
customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required to 
provide an annual notice to a former customer.
    (2) Examples in the case of financial institutions other than credit 
unions and covered entities subject to FTC enforcement jurisdiction. For 
purposes of this paragraph (b)(2), ``you'' is limited to financial 
institutions other than credit unions and financial institutions 
described in Sec.  1016.3(l)(3). Your customer becomes a former customer 
when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan in 
full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (3) Examples in the case of covered entities subject to FTC 
enforcement jurisdiction. For purposes of this paragraph (b)(3), ``you'' 
is limited to financial institutions described in Sec.  1016.3(l)(3) of 
this part. Your customer becomes a former customer when:
    (i) In the case of a closed-end loan, the customer pays the loan in 
full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (ii) In the case of a credit card relationship or other open-end 
credit relationship, you sell the receivables without retaining 
servicing rights;
    (iii) In the case of credit counseling services, the customer has 
failed to make required payments under a debt management plan, has been 
notified that the plan is terminated, and you no longer provide any 
statements or notices to the customer concerning that relationship;
    (iv) In the case of mortgage or vehicle loan brokering services, 
your customer has obtained a loan through you (and you no longer provide 
any statements or notices to the customer concerning that relationship), 
or has ceased using your services for such purposes;
    (v) In the case of tax preparation services, you have provided and 
received payment for the service and no longer provide any statements or 
notices to the customer concerning that relationship;
    (vi) In the case of providing real estate settlement services, at 
the time the customer completes execution of all documents related to 
the real estate closing, you have received payment, or you have 
completed all of your responsibilities with respect to the settlement, 
including filing documents on the public record, whichever is later; or
    (vii) In cases where there is no definitive time at which the 
customer relationship has terminated, you have not communicated with the 
customer about the relationship for a period of 12 consecutive months, 
other than to provide annual privacy notices or promotional material.

[[Page 552]]

    (4) Examples in the case of a credit union. An individual becomes a 
former customer of a credit union when:
    (i) The individual is no longer the credit union's member as defined 
in the credit union's bylaws;
    (ii) In the case of a nonmember's share or share draft account, the 
account is inactive under the credit union's policies;
    (iii) In the case of a nonmember's closed-end loan, the loan is paid 
in full, the credit union charges off the loan, or the credit union 
sells the loan without retaining servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship with a nonmember, the credit union no longer 
provides any statements or notices to the nonmember concerning that 
relationship, or the credit union sells the credit card receivables 
without retaining servicing rights; or
    (v) The credit union has not communicated with the nonmember about 
the relationship for a period of 12 consecutive months, other than to 
provide annual privacy notices or promotional material.
    (c) Special rule for loans in the case of a financial institution 
other than a credit union. If a financial institution other than a 
credit union does not have a customer relationship with a consumer under 
the special rule for loans in Sec.  1016.4(c)(2) of this part, then it 
need not provide an annual notice to that consumer under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec.  1016.9 of 
this part.
    (e) Exception to annual privacy notice requirement--(1) When 
exception available. You are not required to deliver an annual privacy 
notice if you:
    (i) Provide nonpublic personal information to nonaffiliated third 
parties only in accordance with the provisions of Sec.  1016.13, Sec.  
1016.14, or Sec.  1016.15; and
    (ii) Have not changed your policies and practices with regard to 
disclosing nonpublic personal information from the policies and 
practices that were disclosed to the customer under Sec.  1016.6(a)(2) 
through (5) and (9) in the most recent privacy notice provided pursuant 
to this part.
    (2) Delivery of annual privacy notice after financial institution no 
longer meets requirements for exception. If you have been excepted from 
delivering an annual privacy notice pursuant to paragraph (e)(1) of this 
section and change your policies or practices in such a way that you no 
longer meet the requirements for that exception, you must comply with 
paragraph (e)(2)(i) or (e)(2)(ii) of this section, as applicable.
    (i) Changes preceded by a revised privacy notice. If you no longer 
meet the requirements of paragraph (e)(1) of this section because you 
change your policies or practices in such a way that Sec.  1016.8 
requires you to provide a revised privacy notice, you must provide an 
annual privacy notice in accordance with the timing requirements in 
paragraph (a) of this section, treating the revised privacy notice as an 
initial privacy notice.
    (ii) Changes not preceded by a revised privacy notice. If you no 
longer meet the requirements of paragraph (e)(1) of this section because 
you change your policies or practices in such a way that Sec.  1016.8 
does not require you to provide a revised privacy notice, you must 
provide an annual privacy notice within 100 days of the change in your 
policies or practices that causes you to no longer meet the requirements 
of paragraph (e)(1) of this section.
    (iii) Examples. (A) You change your policies and practices in such a 
way that you no longer meet the requirements of paragraph (e)(1) of this 
section effective April 1 of year 1. Assuming you define the 12-
consecutive-month period pursuant to paragraph (a) of this section as a 
calendar year, if you were required to provide a revised privacy notice 
under Sec.  1016.8 and you provided that notice on March 1 of year 1, 
you must provide an annual privacy notice by December 31 of year 2. If 
you were not required to provide a revised privacy notice under Sec.  
1016.8, you must provide an annual privacy notice by July 9 of year 1.
    (B) You change your policies and practices in such a way that you no 
longer meet the requirements of paragraph (e)(1) of this section, and so 
provide an annual notice to your customers. After providing the annual 
notice to your customers, you once again

[[Page 553]]

meet the requirements of paragraph (e)(1) of this section for an 
exception to the annual notice requirement. You do not need to provide 
additional annual notices to your customers until such time as you no 
longer meet the requirements of paragraph (e)(1) of this section.

[76 FR 79028, Dec. 21, 2011, as amended by CFPB-2016-0032, 83 FR 40958, 
Aug. 17, 2018]



Sec.  1016.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual, and revised privacy notices 
that you provide under Sec. Sec.  1016.4, 1016.5, and 1016.8 of this 
part must include each of the following items of information, in 
addition to any other information you wish to provide, that applies to 
you and to the consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Sec. Sec.  1016.14 and 
1016.15 of this part;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Sec. Sec.  1016.14 and 1016.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec.  1016.13 (and no other exception in 
Sec.  1016.14 or Sec.  1016.15 applies to that disclosure), a separate 
statement of the categories of information you disclose and the 
categories of third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec.  1016.10(a) of 
this part to opt out of the disclosure of nonpublic personal information 
to nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, 
notices regarding the ability to opt out of disclosures of information 
among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Sec. Sec.  1016.14 and 1016.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Sec. Sec.  1016.4 and 1016.5. When describing the 
categories with respect to those parties, it is sufficient to state that 
you make disclosures to other nonaffiliated companies:
    (1) For your everyday business purposes, such as [include all that 
apply] to process transactions, maintain account(s), respond to court 
orders and legal investigations, or report to credit bureaus; or
    (2) As permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose. (i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (c)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or

[[Page 554]]

examples of the nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to whom 
you disclose. You satisfy the requirement to categorize the affiliates 
and nonaffiliated third parties to whom you disclose nonpublic personal 
information if you list the following categories, as applicable, and a 
few examples to illustrate the types of third parties in each category.
    (i) Financial service providers, followed by illustrative examples 
such as mortgage bankers, securities broker-dealers, and insurance 
agents;
    (ii) Non-financial companies, followed by illustrative examples such 
as retailers, magazine publishers, airlines, and direct marketers; and
    (iii) Others, followed by examples such as nonprofit organizations.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec.  1016.13 of this part to a nonaffiliated third party 
to market products or services that you offer alone or jointly with 
another financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Sec. Sec.  1016.14 and 1016.15, you 
may simply state that fact, in addition to the information you must 
provide under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this 
section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security of 
nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical information 
about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-customers. 
(1) You may satisfy the initial notice requirements in Sec. Sec.  
1016.4(a)(2), 1016.7(b), and 1016.7(c) of this part for a consumer who 
is not a customer by providing a short-form initial notice at the same 
time as you deliver an opt out notice as required in Sec.  1016.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec.  1016.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a consumer 
who receives your short-form notice requests your privacy notice, you 
must deliver your privacy notice according to Sec.  1016.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and

[[Page 555]]

    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Model privacy form. Pursuant to Sec.  1016.2(a) of this part, a 
model privacy form that meets the notice content requirements of this 
section is included in the appendix to this part.



Sec.  1016.7  Form of opt out notice to consumers; opt out methods.

    (a)(1) Form of opt out notice. If you are required to provide an opt 
out notice under Sec.  1016.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal information 
that you disclose or reserve the right to disclose, and all of the 
categories of nonaffiliated third parties to which you disclose the 
information, as described in Sec.  1016.6(a)(2) and (3) of this part, 
and state that the consumer can opt out of the disclosure of that 
information; and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice that, in 
the case of financial institutions described in Sec.  1016.3(l)(3) of 
this part, includes the address to which the form should be mailed;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your Web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his or 
her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provided with the initial notice but did not include with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec.  1016.4.
    (c) Initial notice required when opt out notice delivered subsequent 
to initial notice. If you provide the opt out notice later than required 
for the initial notice in accordance with Sec.  1016.4 of this part, you 
must also include a copy of the initial notice with the opt out notice 
in writing or, if the consumer agrees, electronically.
    (d) Joint relationships in the case of financial institutions other 
than credit unions and covered entities subject to FTC enforcement 
jurisdiction. For purposes of this paragraph (d), ``you'' is limited to 
financial institutions other than credit unions and financial 
institutions described in Sec.  1016.3(l)(3) of this part.
    (1) If two or more consumers jointly obtain a financial product or 
service from you, you may provide a single opt out notice. Your opt out 
notice must explain how you will treat an opt out

[[Page 556]]

direction by a joint consumer (as explained in paragraph (d)(5) of this 
section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with you 
and arrange for you to send statements to John's address, you may do any 
of the following, but you must explain in your opt out notice which opt 
out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Joint relationships in the case of credit unions. (1) If two or 
more consumers jointly obtain a financial product or service, other than 
a loan, from a credit union, the credit union may provide only a single 
opt out notice. The opt out notice must explain how the credit union 
will treat an opt out direction by a joint consumer (as explained in the 
examples in paragraph (e)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. A 
credit union may either:
    (i) Treat an opt out direction by a joint consumer to apply to all 
of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If a credit union permits each joint consumer to opt out 
separately, the credit union must permit one of the joint consumers to 
opt out on behalf of all of the joint consumers.
    (4) A credit union may not require all joint consumers to opt out 
before the credit union implements any opt out direction.
    (5) Example. If John and Mary have a joint share account with a 
credit union and arrange for the credit union to send statements to 
John's address, the credit union may do any of the following, but it 
must explain in its opt out notice which opt out policy it will follow:
    (i) Send a single opt out notice to John's address, but it must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If it does so, and John opts out, it may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
it does so, and if John and Mary both opt out, it must permit one or 
both of them to notify it in a single response (such as on a form or 
through a telephone call).
    (6) Special rule for loans. (i) A credit union is required to 
provide an initial opt out notice to a borrower or guarantor on a loan 
if it shares his or her nonpublic personal information with 
nonaffiliated third parties other than for purposes under Sec. Sec.  
1016.13, 1016.14, and 1016.15.
    (ii) A credit union may satisfy its annual opt out notice 
requirement by providing one notice to those borrowers and guarantors 
jointly.
    (f) Joint relationships in the case of covered entities subject to 
FTC enforcement

[[Page 557]]

jurisdiction. For purposes of this paragraph (f), ``you'' is limited to 
the financial institutions described in Sec.  1016.3(l)(3).
    (1) If two or more consumers jointly obtain a financial product or 
service from you, you may provide a single opt out notice, unless one or 
more of those consumers requests a separate opt out notice. Your opt out 
notice must explain how you will treat an opt out direction by a joint 
consumer (as explained in paragraph (f)(5) of this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint credit card account with 
you and arrange for you to send statements to John's address, you may do 
any of the following, but you must explain in your opt out notice which 
opt out policy you will follow:
    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (g) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (h) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (i) Duration of consumer's opt out direction. (1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (j) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec.  1016.9 of this 
part.
    (k) Model privacy form. Pursuant to Sec.  1016.2(a) of this part, a 
model privacy form that meets the notice content requirements of this 
section is included in the appendix to this part.



Sec.  1016.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec.  1016.4 of this part, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before you 
disclose the information to the nonaffiliated third party, to opt out of 
the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples. (1) Except as otherwise permitted by Sec. Sec.  
1016.13, 1016.14, and

[[Page 558]]

1016.15 of this part, you must provide a revised notice before you:
    (i) Disclose a new category of nonpublic personal information to any 
nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has not 
had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec.  1016.9 of 
this part.



Sec.  1016.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices and 
opt out notices, including short-form initial notices, that this part 
requires so that each consumer can reasonably be expected to receive 
actual notice in writing or, if the consumer agrees, electronically.
    (b)(1) Examples of reasonable expectation of actual notice. You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically:
    (A) In the case of financial institutions other than those described 
in Sec.  1016.3(l)(3) of this part, post the notice on the electronic 
site and require the consumer to acknowledge receipt of the notice as a 
necessary step to obtaining a particular financial product or service; 
or
    (B) In the case of financial institutions described in Sec.  
1016.3(l)(3), clearly and conspicuously post the notice on the 
electronic site and require the consumer to acknowledge receipt of the 
notice as a necessary step to obtaining a particular financial product 
or service;
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a customer 
will receive actual notice of your annual privacy notice if:
    (1) The customer uses your website to access financial products and 
services electronically and agrees to receive notices at the website, 
and you post your current privacy notice continuously in a clear and 
conspicuous manner on the website; or
    (2) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. You may not provide any 
notice required by this part solely by orally explaining the notice, 
either in person or over the telephone.
    (e) Retention or accessibility of notices for customers. (1) For 
customers only, you must provide the initial notice required by Sec.  
1016.4(a)(1), the annual notice required by Sec.  1016.5(a), and the 
revised notice required by Sec.  1016.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:

[[Page 559]]

    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer, or, in the case of credit unions, mail a printed copy of 
the notice to the last known address of the customer upon request of the 
customer; or
    (iii) Make your current privacy notice available on a Web site (or a 
link to another Web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the Web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships in the case of financial institutions other 
than credit unions and covered entities subject to FTC enforcement 
jurisdiction. For purposes of this paragraph (g), ``you'' is limited to 
financial institutions other than credit unions and the financial 
institutions described in Sec.  1016.3(l)(3). If two or more consumers 
jointly obtain a financial product or service from you, you may satisfy 
the initial, annual, and revised notice requirements of Sec. Sec.  
1016.4(a), 1016.5(a), and 1016.8(a), respectively, by providing one 
notice to those consumers jointly.
    (h) Joint relationships in the case of covered entities subject to 
FTC enforcement jurisdiction. For purposes of this paragraph (h), 
``you'' is limited to the financial institutions described in Sec.  
1016.3(l)(3). If two or more consumers jointly obtain a financial 
product or service from you, you may satisfy the initial, annual, and 
revised notice requirements of Sec. Sec.  1016.4(a), 1016.5(a), and 
1016.8(a) by providing one notice to those consumers jointly, unless one 
or more of those consumers requests separate notices.
    (i) Joint relationships in the case of credit unions. (1) If two or 
more consumers jointly obtain a financial product or service, other than 
a loan, from a credit union, the credit union may satisfy the 
requirements of Sec.  1016.4(a) by providing one initial notice to those 
consumers jointly.
    (2) Special rule for loans in the case of credit unions. (i) A 
credit union is required to provide an initial notice to a borrower or 
guarantor on a loan if the credit union shares his or her nonpublic 
personal information with nonaffiliated third parties other than for 
purposes under Sec. Sec.  1016.13, 1016.14, and 1016.15.
    (ii) A credit union may satisfy the annual notice requirements of 
Sec.  1016.5 by providing one notice to those borrowers and guarantors 
jointly.

[76 FR 79028, Dec. 21, 2011, as amended at 79 FR 64081, Oct. 28, 2014; 
CFPB-2016-0032, 83 FR 40959, Aug. 17, 2018]



                     Subpart B_Limits on Disclosures



Sec.  1016.10  Limits on disclosure of nonpublic personal information 
to nonaffiliated third parties.

    (a)(1) Conditions for disclosure. Except as otherwise authorized in 
this part, you may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated third 
party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec.  1016.4 of this part;
    (ii) You have provided to the consumer an opt out notice as required 
in Sec.  1016.7 of this part;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not disclose nonpublic personal information about that consumer 
to a nonaffiliated third party, other than as permitted by Sec. Sec.  
1016.13, 1016.14, and 1016.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.

[[Page 560]]

    (ii) By electronic means. A customer opens an online account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if you 
provide the notices required in paragraph (a)(1) of this section at the 
time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information. (1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information about 
a consumer that you have collected, regardless of whether you collected 
it before or after receiving the direction to opt out from the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.



Sec.  1016.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec.  1016.14 or Sec.  1016.15 of this 
part, your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec.  1016.14 or Sec.  1016.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
you received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec.  1016.14(a), you may disclose that 
information under any exception in Sec.  1016.14 or Sec.  1016.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or, in the case of financial institutions other than 
those described in Sec.  1016.3(l)(3), to your attorneys, accountants, 
and auditors. You could not disclose that information to a third party 
for marketing purposes or use that information for your own marketing 
purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec.  1016.14 or Sec.  
1016.15 of this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if made 
directly to that person by the financial institution from which you 
received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. Sec.  1016.14 
and 1016.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third party 
only if the financial institution from which you purchased the list 
could have lawfully disclosed the list to that third party. That is, you 
may disclose the list in accordance with the privacy policy of the 
financial institution from

[[Page 561]]

which you received the list, as limited by the opt out direction of each 
consumer whose nonpublic personal information you intend to disclose, 
and you may disclose the list in accordance with an exception in Sec.  
1016.14 or Sec.  1016.15, such as to your attorneys or accountants.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec.  1016.14 or Sec.  1016.15 of this part, the third 
party may disclose and use that information only as follows:
    (1) The third party may disclose the information to your affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the information; 
and
    (3) The third party may disclose and use the information pursuant to 
an exception in Sec.  1016.14 or Sec.  1016.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec.  1016.14 or Sec.  1016.15 of this 
part, the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose the 
information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.



Sec.  1016.12  Limits on sharing account number information for 
marketing purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, share account, or transaction account to any nonaffiliated 
third party for use in telemarketing, direct mail marketing, or other 
marketing through electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar form 
of access number or access code, does not include a number or code in an 
encrypted form, as long as you do not provide the recipient with a means 
to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account, a share account, or a credit card account. A 
transaction account does not include an account to which third parties 
cannot initiate charges.



                          Subpart C_Exceptions



Sec.  1016.13  Exception to opt out requirements for service providers 
and joint marketing.

    (a) General rule. (1) The opt out requirements in Sec. Sec.  1016.7 
and 1016.10 of this part do not apply when you provide nonpublic 
personal information to a nonaffiliated third party to perform services 
for you or functions on your behalf, if you:
    (i) Provide the initial notice in accordance with Sec.  1016.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information other 
than to carry out the purposes for which you disclosed the information, 
including use under an exception in Sec.  1016.14 or Sec.  1016.15 in 
the ordinary course of business to carry out those purposes.

[[Page 562]]

    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits the 
institution from disclosing or using the nonpublic personal information 
except as necessary to carry out the joint marketing or under an 
exception in Sec.  1016.14 or Sec.  1016.15 in the ordinary course of 
business to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.



Sec.  1016.14  Exceptions to notice and opt out requirements for 
processing and servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec.  1016.4(a)(2), for the opt 
out in Sec. Sec.  1016.7 and 1016.10, and for service providers and 
joint marketing in Sec.  1016.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related to 
a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain the 
consumer's account in the ordinary course of providing the financial 
service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or state law; or
    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.

[[Page 563]]



Sec.  1016.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for initial 
notice in Sec.  1016.4(a)(2), for the opt out in Sec. Sec.  1016.7 and 
1016.10, and for service providers and joint marketing in Sec.  1016.13 
do not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2)(i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory organizations, 
guaranty funds or agencies, agencies that are rating you, persons that 
are assessing your compliance with industry standards, and your 
attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.) to law enforcement agencies 
(including the Bureau, a Federal functional regulator, the Secretary of 
the Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II 
(Records and Reports on Monetary Instruments and Transactions) and 12 
U.S.C. Chapter 21 (Financial Recordkeeping), a state insurance 
authority, with respect to any person domiciled in that insurance 
authority's state that is engaged in providing insurance, and the 
Federal Trade Commission), self-regulatory organizations, or for an 
investigation on a matter related to public safety;
    (5)(i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.); or
    (ii) From a consumer report reported by a consumer reporting agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7)(i) To comply with Federal, state, or local laws, rules and other 
applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, state, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, or 
other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated insurance 
company of the fact that the consumer has applied to you for a mortgage 
so that the insurance company can offer homeowner's insurance to the 
consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal information 
as permitted under Sec.  1016.7(h) of this part.



                    Subpart D_Relation to Other Laws



Sec.  1016.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), and no inference shall be drawn on the basis of the provisions 
of this part regarding whether information is transaction or experience 
information under section 603 of that Act.



Sec.  1016.17  Relation to state laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or interpretation 
in effect in any state, except to the extent that such state statute, 
regulation, order, or interpretation is inconsistent with the

[[Page 564]]

provisions of this part, and then only to the extent of the 
inconsistency.
    (b) Greater protection under state law. For purposes of this 
section, a state statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Bureau, on its own motion or upon the petition of any interested 
party, after consultation with the agency or authority with jurisdiction 
under section 505(a) of the GLB Act (15 U.S.C. 6805(a)) over either the 
person that initiated the complaint or that is the subject of the 
complaint.

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             Sec. Appendix to Part 1016--Model Privacy Form

                        A. The Model Privacy Form
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                         B. General Instructions

                  1. How the Model Privacy Form Is Used

    (a) The model form may be used, at the option of a financial 
institution, including a group of financial institutions that use a 
common privacy notice, to meet the content requirements of the privacy 
notice and opt-out notice set forth in Sec. Sec.  1016.6 and 1016.7 of 
this part.
    (b) The model form is a standardized form, including page layout, 
content, format, style, pagination, and shading. Institutions seeking to 
obtain the safe harbor through use of the model form may modify it only 
as described in these Instructions.
    (c) Note that disclosure of certain information, such as assets, 
income, and information from a consumer reporting agency, may give rise 
to obligations under the Fair Credit Reporting Act [15 U.S.C. 1681-
1681x] (FCRA), such as a requirement to permit a consumer to opt out of 
disclosures to affiliates or designation as a consumer reporting agency 
if disclosures are made to nonaffiliated third parties.
    (d) The word ``customer'' may be replaced by the word ``member'' 
whenever it appears in the model form, as appropriate.

                2. The Contents of the Model Privacy Form

    The model form consists of two pages, which may be printed on both 
sides of a single sheet of paper, or may appear on two separate pages. 
Where an institution provides a long list of institutions at the end of 
the model form in accordance with Instruction C.3(a)(1), or provides 
additional information in accordance with Instruction C.3(c), and such 
list or additional information exceeds the space available on page two 
of the model form, such list or additional information may extend to a 
third page.
    (a) Page One. The first page consists of the following components:
    (1) Date last revised (upper right-hand corner).
    (2) Title.
    (3) Key frame (Why?, What?, How?).
    (4) Disclosure table (``Reasons we can share your personal 
information'').
    (5) ``To limit our sharing'' box, as needed, for the financial 
institution's opt-out information.
    (6) ``Questions'' box, for customer service contact information.
    (7) Mail-in opt-out form, as needed.
    (b) Page Two. The second page consists of the following components:
    (1) Heading (Page 2).
    (2) Frequently Asked Questions (``Who we are'' and ``What we do'').
    (3) Definitions.
    (4) ``Other important information'' box, as needed.

                 3. The Format of the Model Privacy Form

    The format of the model form may be modified only as described 
below.
    (a) Easily readable type font. Financial institutions that use the 
model form must use an easily readable type font. While a number of 
factors together produce easily readable type font, institutions are 
required to use a minimum of 10-point font (unless otherwise expressly 
permitted in these Instructions) and sufficient spacing between the 
lines of type.
    (b) Logo. A financial institution may include a corporate logo on 
any page of the notice, so long as it does not interfere with the 
readability of the model form or the space constraints of each page.

[[Page 572]]

    (c) Page size and orientation. Each page of the model form must be 
printed on paper in portrait orientation, the size of which must be 
sufficient to meet the layout and minimum font size requirements, with 
sufficient white space on the top, bottom, and sides of the content.
    (d) Color. The model form must be printed on white or light color 
paper (such as cream) with black or other contrasting ink color. Spot 
color may be used to achieve visual interest, so long as the color 
contrast is distinctive and the color does not detract from the 
readability of the model form. Logos may also be printed in color.
    (e) Languages. The model form may be translated into languages other 
than English.

            C. Information Required in the Model Privacy Form

    The information in the model form may be modified only as described 
below:

1. Name of the Institution or Group of Affiliated Institutions Providing 
                               the Notice

    Insert the name of the financial institution providing the notice or 
a common identity of affiliated institutions jointly providing the 
notice on the form wherever [name of financial institution] appears.

                               2. Page One

    (a) Last revised date. The financial institution must insert in the 
upper right-hand corner the date on which the notice was last revised. 
The information shall appear in minimum 8-point font as ``rev. [month/
year]'' using either the name or number of the month, such as ``rev. 
July 2009'' or ``rev. 7/09''.
    (b) General instructions for the ``What?'' box.
    (1) The bulleted list identifies the types of personal information 
that the institution collects and shares. All institutions must use the 
term ``Social Security number'' in the first bullet.
    (2) Institutions must use five (5) of the following terms to 
complete the bulleted list: Income; account balances; payment history; 
transaction history; transaction or loss history; credit history; credit 
scores; assets; investment experience; credit-based insurance scores; 
insurance claim history; medical information; overdraft history; 
purchase history; account transactions; risk tolerance; medical-related 
debts; credit card or other debt; mortgage rates and payments; 
retirement assets; checking account information; employment information; 
wire transfer instructions.
    (c) General instructions for the disclosure table. The left column 
lists reasons for sharing or using personal information. Each reason 
correlates to a specific legal provision described in paragraph C.2(d) 
of this Instruction. In the middle column, each institution must provide 
a ``Yes'' or ``No'' response that accurately reflects its information 
sharing policies and practices with respect to the reason listed on the 
left. In the right column, each institution must provide in each box one 
of the following three (3) responses, as applicable, that reflects 
whether a consumer can limit such sharing: ``Yes'' if it is required to 
or voluntarily provides an opt-out; ``No'' if it does not provide an 
opt-out; or ``We don't share'' if it answers ``No'' in the middle 
column. Only the sixth row (``For our affiliates to market to you'') may 
be omitted at the option of the institution. See paragraph C.2(d)(6) of 
this Instruction.
    (d) Specific disclosures and corresponding legal provisions.
    (1) For our everyday business purposes. This reason incorporates 
sharing information under Sec. Sec.  1016.14 and 1016.15 and with 
service providers pursuant to Sec.  1016.13 of this part other than the 
purposes specified in paragraphs C.2(d)(2) or C.2(d)(3) of these 
Instructions.
    (2) For our marketing purposes. This reason incorporates sharing 
information with service providers by an institution for its own 
marketing pursuant to Sec.  1016.13 of this part. An institution that 
shares for this reason may choose to provide an opt-out.
    (3) For joint marketing with other financial companies. This reason 
incorporates sharing information under joint marketing agreements 
between two or more financial institutions and with any service provider 
used in connection with such agreements pursuant to Sec.  1016.13 of 
this part. An institution that shares for this reason may choose to 
provide an opt-out.
    (4) For our affiliates' everyday business purposes--information 
about transactions and experiences. This reason incorporates sharing 
information specified in sections 603(d)(2)(A)(i) and (ii) of the FCRA. 
An institution that shares for this reason may choose to provide an opt-
out.
    (5) For our affiliates' everyday business purposes--information 
about creditworthiness. This reason incorporates sharing information 
pursuant to section 603(d)(2)(A)(iii) of the FCRA. An institution that 
shares for this reason must provide an opt-out.
    (6) For our affiliates to market to you. This reason incorporates 
sharing information specified in section 624 of the FCRA. This reason 
may be omitted from the disclosure table when: the institution does not 
have affiliates (or does not disclose personal information to its 
affiliates); the institution's affiliates do not use personal 
information in a manner that requires an opt-out; or the institution 
provides the affiliate marketing notice separately. Institutions that 
include this reason must provide an opt-out of indefinite duration. An 
institution that is required to provide an affiliate marketing opt-

[[Page 573]]

out, but does not include that opt-out in the model form under this 
part, must comply with section 624 of the FCRA and 12 CFR part 1022, 
subpart C, with respect to the initial notice and opt-out and any 
subsequent renewal notice and opt-out. An institution not required to 
provide an opt-out under this subparagraph may elect to include this 
reason in the model form.
    (7) For nonaffiliates to market to you. This reason incorporates 
sharing described in Sec. Sec.  1016.7 and 1016.10(a) of this part. An 
institution that shares personal information for this reason must 
provide an opt-out.
    (e) To limit our sharing: A financial institution must include this 
section of the model form only if it provides an opt-out. The word 
``choice'' may be written in either the singular or plural, as 
appropriate. Institutions must select one or more of the applicable opt-
out methods described: Telephone, such as by a toll-free number; a Web 
site; or use of a mail-in opt-out form. Institutions may include the 
words ``toll-free'' before telephone, as appropriate. An institution 
that allows consumers to opt out online must provide either a specific 
Web address that takes consumers directly to the opt-out page or a 
general Web address that provides a clear and conspicuous direct link to 
the opt-out page. The opt-out choices made available to the consumer who 
contacts the institution through these methods must correspond 
accurately to the ``Yes'' responses in the third column of the 
disclosure table. In the part titled ``Please note,'' institutions may 
insert a number that is 30 or greater in the space marked ``[30].'' 
Instructions on voluntary or state privacy law opt-out information are 
in paragraph C.2(g)(5) of these Instructions.
    (f) Questions box. Customer service contact information must be 
inserted as appropriate, where [phone number] or [Web site] appear. 
Institutions may elect to provide either a phone number, such as a toll-
free number, or a web address, or both. Institutions may include the 
words ``toll-free'' before the telephone number, as appropriate.
    (g) Mail-in opt-out form. Financial institutions must include this 
mail-in form only if they state in the ``To limit our sharing'' box that 
consumers can opt out by mail. The mail-in form must provide opt-out 
options that correspond accurately to the ``Yes'' responses in the third 
column in the disclosure table. Institutions that require customers to 
provide only name and address may omit the section identified as 
``[account ].'' Institutions that require additional or different 
information, such as a random opt-out number or a truncated account 
number, to implement an opt-out election should modify the ``[account 
]'' reference accordingly. This includes institutions that require 
customers with multiple accounts to identify each account to which the 
opt-out should apply. An institution must enter its opt-out mailing 
address: in the far right of this form (see version 3); or below the 
form (see version 4). The reverse side of the mail-in opt-out form must 
not include any content of the model form.
    (1) Joint accountholder. Only institutions that provide their joint 
accountholders the choice to opt out for only one accountholder, in 
accordance with paragraph C.3(a)(5) of these Instructions, must include 
in the far left column of the mail-in form the following statement: ``If 
you have a joint account, your choice(s) will apply to everyone on your 
account unless you mark below. Apply my choice(s) only to me.'' The word 
``choice'' may be written in either the singular or plural, as 
appropriate. Financial institutions that provide insurance products or 
services, provide this option, and elect to use the model form may 
substitute the word ``policy'' for ``account'' in this statement. 
Institutions that do not provide this option may eliminate this left 
column from the mail-in form.
    (2) FCRA section 603(d)(2)(A)(iii) opt-out. If the institution 
shares personal information pursuant to section 603(d)(2)(A)(iii) of the 
FCRA, it must include in the mail-in opt-out form the following 
statement: `` Do not share information about my creditworthiness with 
your affiliates for their everyday business purposes.''
    (3) FCRA section 624 opt-out. If the institution incorporates 
section 624 of the FCRA in accord with paragraph C.2(d)(6) of these 
Instructions, it must include in the mail-in opt-out form the following 
statement: `` Do not allow your affiliates to use my personal 
information to market to me.''
    (4) Nonaffiliate opt-out. If the financial institution shares 
personal information pursuant to Sec.  1016.10(a) of this part, it must 
include in the mail-in opt-out form the following statement: `` Do not 
share my personal information with nonaffiliates to market their 
products and services to me.''
    (5) Additional opt-outs. Financial institutions that use the 
disclosure table to provide opt-out options beyond those required by 
Federal law must provide those opt-outs in this section of the model 
form. A financial institution that chooses to offer an opt-out for its 
own marketing in the mail-in opt-out form must include one of the two 
following statements: `` Do not share my personal information to market 
to me.'' or `` Do not use my personal information to market to me.'' A 
financial institution that chooses to offer an opt-out for joint 
marketing must include the following statement: `` Do not share my 
personal information with other financial institutions to jointly market 
to me.''
    (h) Barcodes. A financial institution may elect to include a barcode 
and/or ``tagline'' (an internal identifier) in 6-point font at the 
bottom of page one, as needed for information internal to the 
institution, so long as

[[Page 574]]

these do not interfere with the clarity or text of the form.

                               3. Page Two

    (a) General Instructions for the Questions. Certain of the Questions 
may be customized as follows:
    (1) ``Who is providing this notice?'' This question may be omitted 
where only one financial institution provides the model form and that 
institution is clearly identified in the title on page one. Two or more 
financial institutions that jointly provide the model form must use this 
question to identify themselves as required by Sec.  1016.9(f) of this 
part. Where the list of institutions exceeds four (4) lines, the 
institution must describe in the response to this question the general 
types of institutions jointly providing the notice and must separately 
identify those institutions, in minimum 8-point font, directly following 
the ``Other important information'' box, or, if that box is not included 
in the institution's form, directly following the ``Definitions.'' The 
list may appear in a multi-column format.
    (2) ``How does [name of financial institution] protect my personal 
information?'' The financial institution may only provide additional 
information pertaining to its safeguards practices following the 
designated response to this question. Such information may include 
information about the institution's use of cookies or other measures it 
uses to safeguard personal information. Institutions are limited to a 
maximum of 30 additional words.
    (3) ``How does [name of financial institution] collect my personal 
information?'' Institutions must use five (5) of the following terms to 
complete the bulleted list for this question: Open an account; deposit 
money; pay your bills; apply for a loan; use your credit or debit card; 
seek financial or tax advice; apply for insurance; pay insurance 
premiums; file an insurance claim; seek advice about your investments; 
buy securities from us; sell securities to us; direct us to buy 
securities; direct us to sell your securities; make deposits or 
withdrawals from your account; enter into an investment advisory 
contract; give us your income information; provide employment 
information; give us your employment history; tell us about your 
investment or retirement portfolio; tell us about your investment or 
retirement earnings; apply for financing; apply for a lease; provide 
account information; give us your contact information; pay us by check; 
give us your wage statements; provide your mortgage information; make a 
wire transfer; tell us who receives the money; tell us where to send the 
money; show your government-issued ID; show your driver's license; order 
a commodity futures or option trade. Institutions that collect personal 
information from their affiliates and/or credit bureaus must include 
after the bulleted list the following statement: ``We also collect your 
personal information from others, such as credit bureaus, affiliates, or 
other companies.'' Institutions that do not collect personal information 
from their affiliates or credit bureaus but do collect information from 
other companies must include the following statement instead: ``We also 
collect your personal information from other companies.'' Only 
institutions that do not collect any personal information from 
affiliates, credit bureaus, or other companies can omit both statements.
    (4) ``Why can't I limit all sharing?'' Institutions that describe 
state privacy law provisions in the ``Other important information'' box 
must use the bracketed sentence: ``See below for more on your rights 
under state law.'' Other institutions must omit this sentence.
    (5) ``What happens when I limit sharing for an account I hold 
jointly with someone else?'' Only financial institutions that provide 
opt-out options must use this question. Other institutions must omit 
this question. Institutions must choose one of the following two 
statements to respond to this question: ``Your choices will apply to 
everyone on your account.'' or ``Your choices will apply to everyone on 
your account--unless you tell us otherwise.'' Financial institutions 
that provide insurance products or services and elect to use the model 
form may substitute the word ``policy'' for ``account'' in these 
statements.
    (b) General Instructions for the Definitions. The financial 
institution must customize the space below the responses to the three 
definitions in this section. This specific information must be in 
italicized lettering to set off the information from the standardized 
definitions.
    (1) Affiliates. As required by Sec.  1016.6(a)(3) of this part, 
where [affiliate information] appears, the financial institution must:
    (i) If it has no affiliates, state: ``[name of financial 
institution] has no affiliates'';
    (ii) If it has affiliates but does not share personal information, 
state: ``[name of financial institution] does not share with our 
affiliates''; or
    (iii) If it shares with its affiliates, state, as applicable: ``Our 
affiliates include companies with a [common corporate identity of 
financial institution] name; financial companies such as [insert 
illustrative list of companies]; nonfinancial companies, such as [insert 
illustrative list of companies]; and others, such as [insert 
illustrative list].''
    (2) Nonaffiliates. As required by Sec.  1016.6(c)(3) of this part, 
where [nonaffiliate information] appears, the financial institution 
must:
    (i) If it does not share with nonaffiliated third parties, state: 
``[name of financial institution] does not share with nonaffiliates so 
they can market to you''; or

[[Page 575]]

    (ii) If it shares with nonaffiliated third parties, state, as 
applicable: ``Nonaffiliates we share with can include [list categories 
of companies such as mortgage companies, insurance companies, direct 
marketing companies, and nonprofit organizations].''
    (3) Joint Marketing. As required by Sec.  1016.13 of this part, 
where [joint marketing] appears, the financial institution must:
    (i) If it does not engage in joint marketing, state: ``[name of 
financial institution] doesn't jointly market''; or
    (ii) If it shares personal information for joint marketing, state, 
as applicable: ``Our joint marketing partners include [list categories 
of companies such as credit card companies].''
    (c) General instructions for the ``Other important information 
box.'' This box is optional. The space provided for information in this 
box is not limited. Only the following types of information can appear 
in this box.
    (1) State and/or international privacy law information; and/or
    (2) Acknowledgment of receipt form.



PART 1022_FAIR CREDIT REPORTING (REGULATION V)--Table of Contents



                      Subpart A_General Provisions

Sec.
1022.1 Purpose, scope, and model forms and disclosures.
1022.2 Examples.
1022.3 Definitions.

Subpart B [Reserved]

                      Subpart C_Affiliate Marketing

1022.20 Coverage and definitions.
1022.21 Affiliate marketing opt-out and exceptions.
1022.22 Scope and duration of opt-out.
1022.23 Contents of opt-out notice; consolidated and equivalent notices.
1022.24 Reasonable opportunity to opt out.
1022.25 Reasonable and simple methods of opting out.
1022.26 Delivery of opt-out notices.
1022.27 Renewal of opt-out.

                      Subpart D_Medical Information

1022.30 Obtaining or using medical information in connection with a 
          determination of eligibility for credit.
1022.31 Limits on redisclosure of information.
1022.32 Sharing medical information with affiliates.

              Subpart E_Duties of Furnishers of Information

1022.40 Scope.
1022.41 Definitions.
1022.42 Reasonable policies and procedures concerning the accuracy and 
          integrity of furnished information.
1022.43 Direct disputes.

Subpart F_Duties of Users Regarding Obtaining and Using Consumer Reports

1022.50-1022.53 [Reserved]
1022.54 Duties of users making written firm offers of credit or 
          insurance based on information contained in consumer files.

Subpart G [Reserved]

         Subpart H_Duties of Users Regarding Risk-Based Pricing

1022.70 Scope.
1022.71 Definitions.
1022.72 General requirements for risk-based pricing notices.
1022.73 Content, form, and timing of risk-based pricing notices.
1022.74 Exceptions.
1022.75 Rules of construction.

 Subpart I_Duties of Users of Consumer Reports Regarding Identity Theft

1022.80-1022.81 [Reserved]
1022.82 Duties of users regarding address discrepancies.

Subparts J-L [Reserved]

Subpart M_Duties of Consumer Reporting Agencies Regarding Identity Theft

1022.120 [Reserved]
1022.121 Active duty alerts.
1022.122 [Reserved]
1022.123 Proof of identity.

Subpart N_Duties of Consumer Reporting Agencies Regarding Disclosures to 
                                Consumers

1022.130 Definitions
1022.131-1022.135 [Reserved]
1022.136 Centralized source for requesting annual file disclosures from 
          nationwide consumer reporting agencies.
1022.137 Streamlined process for requesting annual file disclosures from 
          nationwide specialty consumer reporting agencies.
1022.138 Prevention of deceptive marketing of free credit reports.

      Subpart O_Miscellaneous Duties of Consumer Reporting Agencies

1022.140 Prohibition against circumventing or evading treatment as a 
          consumer reporting agency.
1022.141 Reasonable charges for certain disclosures.

[[Page 576]]

1022.142 Prohibition on inclusion of adverse information in consumer 
          reporting in cases of human trafficking.

Appendix A to Part 1022 [Reserved]
Appendix B to Part 1022--Model Notices of Furnishing Negative 
          Information
Appendix C to Part 1022--Model Forms for Opt-Out Notices
Appendix D to Part 1022--Model Forms for Firm Offers of Credit or 
          Insurance
Appendix E to Part 1022-- Interagency Guidelines Concerning the Accuracy 
          and Integrity of Information Furnished to Consumer Reporting 
          Agencies
Appendixes F-G to Part 1022 [Reserved]
Appendix H to Part 1022--Model Forms for Risk-Based Pricing and Credit 
          Score Disclosure Exception Notices
Appendix I to Part 1022--Summary of Consumer Identity Theft Rights
Appendix J to Part 1022 [Reserved]
Appendix K to Part 1022--Summary of Consumer Rights
Appendix L to Part 1022--Standardized Form for Requesting Annual File 
          Disclosures
Appendix M to Part 1022--Notice of Furnisher Responsibilities
Appendix N to Part 1022--Notice of User Responsibilities
Appendix O to Part 1022--Reasonable Charges for Certain Disclosures

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1681a, 1681b, 1681c, 
1681c-1, 1681c-3, 1681e, 1681g, 1681i, 1681j, 1681m, 1681s, 1681s-2, 
1681s-3, and 1681t; Sec. 214, Pub. L. 108-159, 117 Stat. 1952.

    Source: 76 FR 79312, Dec. 21, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  1022.1  Purpose, scope, and model forms and disclosures.

    (a) Purpose. The purpose of this part is to implement the Fair 
Credit Reporting Act (FCRA). This part generally applies to persons that 
obtain and use information about consumers to determine the consumer's 
eligibility for products, services, or employment, share such 
information among affiliates, and furnish information to consumer 
reporting agencies.
    (b) Scope. (1) [Reserved]
    (2) Institutions covered. (i) Except as otherwise provided in this 
part, this part applies to any person subject to the FCRA except for a 
person excluded from coverage of this part by section 1029 of the 
Consumer Financial Protection Act of 2010, title X of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 
Stat. 1376.
    (ii) For purposes of appendix B to this part, financial institutions 
as defined in section 509 of the Gramm-Leach-Bliley Act (12 U.S.C. 
6809), may use the model notices in appendix B to this part to comply 
with the notice requirement in section 623(a)(7) of the FCRA (15 U.S.C. 
1681s-2(a)(7)).
    (c) Model forms and disclosures--(1) Use. Appendices D, H, I, K, L, 
M, and N contain model forms and disclosures. These appendices carry out 
the directive in FCRA that the Bureau prescribe such model forms and 
disclosures. Use or distribution of these model forms and disclosures, 
or substantially similar forms and disclosures, will constitute 
compliance with any section or subsection of the FCRA requiring that 
such forms and disclosures be used by or supplied to any person.
    (2) Definition. Substantially similar means that all information in 
the Bureau's prescribed model is included in the document that is 
distributed, and that the document distributed is formatted in a way 
consistent with the format prescribed by the Bureau. The document that 
is distributed shall not include anything that interferes with, detracts 
from, or otherwise undermines the information contained in the Bureau's 
prescribed model. Until January 1, 2013, the model forms in appendices 
B, E, F, G, and H to 16 CFR part 698, as those appendices existed as of 
October 1, 2011, are deemed substantially similar to the corresponding 
model forms in appendices H, I, K, M, and N to this part, and the model 
forms in appendix H to 12 CFR part 222, as that appendix existed as of 
October 1, 2011, are deemed substantially similar to the corresponding 
model forms in appendix H to this part.



Sec.  1022.2  Examples.

    The examples in this part are not exclusive. Compliance with an 
example, to the extent applicable, constitutes compliance with this 
part. Examples in a paragraph illustrate only the issue described in the 
paragraph and do not illustrate any other issue that may arise in this 
part.

[[Page 577]]



Sec.  1022.3  Definitions.

    For purposes of this part, unless explicitly stated otherwise:
    (a) Act means the FCRA (15 U.S.C. 1681 et seq.).
    (b) Affiliate means any company that is related by common ownership 
or common corporate control with another company. For example, an 
affiliate of a Federal credit union is a credit union service 
corporation, as provided in 12 CFR part 712, that is controlled by the 
Federal credit union.
    (c) [Reserved]
    (d) Common ownership or common corporate control means a 
relationship between two companies under which:
    (1) One company has, with respect to the other company:
    (i) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of a company, 
directly or indirectly, or acting through one or more other persons;
    (ii) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of a company; or
    (iii) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of a company, as determined by 
the applicable prudential regulator (as defined in 12 U.S.C. 5481(24)) 
(a credit union is presumed to have a controlling influence over the 
management or policies of a credit union service corporation if the 
credit union service corporation is 67% owned by credit unions) or, 
where there is no prudential regulator, by the Bureau; or
    (2) Any other person has, with respect to both companies, a 
relationship described in paragraphs (d)(1)(i) through (d)(1)(ii).
    (e) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (f) Consumer means an individual.
    (g) Identifying information means any name or number that may be 
used, alone or in conjunction with any other information, to identify a 
specific person, including any:
    (1) Name, social security number, date of birth, official state or 
government issued driver's license or identification number, alien 
registration number, government passport number, employer or taxpayer 
identification number;
    (2) Unique biometric data, such as fingerprint, voice print, retina 
or iris image, or other unique physical representation;
    (3) Unique electronic identification number, address, or routing 
code; or
    (4) Telecommunication identifying information or access device (as 
defined in 18 U.S.C. 1029(e)).
    (h) Identity theft means a fraud committed or attempted using the 
identifying information of another person without authority.
    (i)(1) Identity theft report means a report:
    (i) That alleges identity theft with as much specificity as the 
consumer can provide;
    (ii) That is a copy of an official, valid report filed by the 
consumer with a Federal, state, or local law enforcement agency, 
including the United States Postal Inspection Service, the filing of 
which subjects the person filing the report to criminal penalties 
relating to the filing of false information, if, in fact, the 
information in the report is false; and
    (iii) That may include additional information or documentation that 
an information furnisher or consumer reporting agency reasonably 
requests for the purpose of determining the validity of the alleged 
identity theft, provided that the information furnisher or consumer 
reporting agency:
    (A) Makes such request not later than fifteen days after the date of 
receipt of the copy of the report form identified in Paragraph 
(i)(1)(ii) of this section or the request by the consumer for the 
particular service, whichever shall be the later;
    (B) Makes any supplemental requests for information or documentation 
and final determination on the acceptance of the identity theft report 
within another fifteen days after its initial request for information or 
documentation; and
    (C) Shall have five days to make a final determination on the 
acceptance of the identity theft report, in the event that the consumer 
reporting

[[Page 578]]

agency or information furnisher receives any such additional information 
or documentation on the eleventh day or later within the fifteen day 
period set forth in Paragraph (i)(1)(iii)(B) of this section.
    (2) Examples of the specificity referenced in Paragraph (i)(1)(i) of 
this section are provided for illustrative purposes only, as follows:
    (i) Specific dates relating to the identity theft such as when the 
loss or theft of personal information occurred or when the fraud(s) 
using the personal information occurred, and how the consumer discovered 
or otherwise learned of the theft.
    (ii) Identification information or any other information about the 
perpetrator, if known.
    (iii) Name(s) of information furnisher(s), account numbers, or other 
relevant account information related to the identity theft.
    (iv) Any other information known to the consumer about the identity 
theft.
    (3) Examples of when it would or would not be reasonable to request 
additional information or documentation referenced in Paragraph 
(i)(1)(iii) of this section are provided for illustrative purposes only, 
as follows:
    (i) A law enforcement report containing detailed information about 
the identity theft and the signature, badge number or other 
identification information of the individual law enforcement official 
taking the report should be sufficient on its face to support a victim's 
request. In this case, without an identifiable concern, such as an 
indication that the report was fraudulent, it would not be reasonable 
for an information furnisher or consumer reporting agency to request 
additional information or documentation.
    (ii) A consumer might provide a law enforcement report similar to 
the report in Paragraph (i)(1) of this section but certain important 
information such as the consumer's date of birth or Social Security 
number may be missing because the consumer chose not to provide it. The 
information furnisher or consumer reporting agency could accept this 
report, but it would be reasonable to require that the consumer provide 
the missing information. The Bureau's Identity Theft Affidavit is 
available on the Bureau's Web site (consumerfinance.gov/learnmore). The 
version of this form developed by the Federal Trade Commission, 
available on the FTC's Web site (ftc.gov/idtheft), remains valid and 
sufficient for this purpose.
    (iii) A consumer might provide a law enforcement report generated by 
an automated system with a simple allegation that an identity theft 
occurred to support a request for a tradeline block or cessation of 
information furnishing. In such a case, it would be reasonable for an 
information furnisher or consumer reporting agency to ask that the 
consumer fill out and have notarized the Bureau's Identity Theft 
Affidavit or a similar form and provide some form of identification 
documentation.
    (iv) A consumer might provide a law enforcement report generated by 
an automated system with a simple allegation that an identity theft 
occurred to support a request for an extended fraud alert. In this case, 
it would not be reasonable for a consumer reporting agency to require 
additional documentation or information, such as a notarized affidavit.
    (j) [Reserved]
    (k) Medical information means:
    (1) Information or data, whether oral or recorded, in any form or 
medium, created by or derived from a health care provider or the 
consumer, that relates to:
    (i) The past, present, or future physical, mental, or behavioral 
health or condition of an individual;
    (ii) The provision of health care to an individual; or
    (iii) The payment for the provision of health care to an individual.
    (2) The term does not include:
    (i) The age or gender of a consumer;
    (ii) Demographic information about the consumer, including a 
consumer's residence address or email address;
    (iii) Any other information about a consumer that does not relate to 
the physical, mental, or behavioral health or condition of a consumer, 
including the existence or value of any insurance policy; or
    (iv) Information that does not identify a specific consumer.

[[Page 579]]

    (l) Person means any individual, partnership, corporation, trust, 
estate cooperative, association, government or governmental subdivision 
or agency, or other entity.

Subpart B [Reserved]



                      Subpart C_Affiliate Marketing



Sec.  1022.20  Coverage and definitions.

    (a) Coverage. Subpart C of this part applies to any person that uses 
information from its affiliates for the purpose of marketing 
solicitations, or provides information to its affiliates for that 
purpose, other than a person excluded from coverage of this part by 
section 1029 of the Consumer Financial Protection Act of 2010, title X 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public 
Law 111-203, 124 Stat. 137.
    (b) Definitions. For purposes of this subpart:
    (1) Clear and conspicuous. The term ``clear and conspicuous'' means 
reasonably understandable and designed to call attention to the nature 
and significance of the information presented.
    (2) Concise--(i) In general. The term ``concise'' means a reasonably 
brief expression or statement.
    (ii) Combination with other required disclosures. A notice required 
by this subpart may be concise even if it is combined with other 
disclosures required or authorized by Federal or state law.
    (3) Eligibility information. The term ``eligibility information'' 
means any information the communication of which would be a consumer 
report if the exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the Act did not apply. Eligibility information 
does not include aggregate or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (4) Pre-existing business relationship--(i) In general. The term 
``pre-existing business relationship'' means a relationship between a 
person, or a person's licensed agent, and a consumer based on:
    (A) A financial contract between the person and the consumer which 
is in force on the date on which the consumer is sent a solicitation 
covered by this subpart;
    (B) The purchase, rental, or lease by the consumer of the person's 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which the consumer is sent a 
solicitation covered by this subpart; or
    (C) An inquiry or application by the consumer regarding a product or 
service offered by that person during the three-month period immediately 
preceding the date on which the consumer is sent a solicitation covered 
by this subpart.
    (ii) Examples of pre-existing business relationships. (A) If a 
consumer has a time deposit account, such as a certificate of deposit, 
at a financial institution that is currently in force, the financial 
institution has a pre-existing business relationship with the consumer 
and can use eligibility information it receives from its affiliates to 
make solicitations to the consumer about its products or services.
    (B) If a consumer obtained a certificate of deposit from a financial 
institution, but did not renew the certificate at maturity, the 
financial institution has a pre-existing business relationship with the 
consumer and can use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for 18 months after the date of maturity of the certificate of 
deposit.
    (C) If a consumer obtains a mortgage, the mortgage lender has a pre-
existing business relationship with the consumer. If the mortgage lender 
sells the consumer's entire loan to an investor, the mortgage lender has 
a pre-existing business relationship with the consumer and can use 
eligibility information it receives from its affiliates to make 
solicitations to the consumer about its products or services for 18 
months after the date it sells the loan, and the investor has a pre-
existing business relationship with the consumer upon purchasing the 
loan. If, however, the mortgage lender sells a fractional interest in 
the consumer's

[[Page 580]]

loan to an investor but also retains an ownership interest in the loan, 
the mortgage lender continues to have a pre-existing business 
relationship with the consumer, but the investor does not have a pre-
existing business relationship with the consumer. If the mortgage lender 
retains ownership of the loan, but sells ownership of the servicing 
rights to the consumer's loan, the mortgage lender continues to have a 
pre-existing business relationship with the consumer. The purchaser of 
the servicing rights also has a pre-existing business relationship with 
the consumer as of the date it purchases ownership of the servicing 
rights, but only if it collects payments from or otherwise deals 
directly with the consumer on a continuing basis.
    (D) If a consumer applies to a financial institution for a product 
or service that it offers, but does not obtain a product or service from 
or enter into a financial contract or transaction with the institution, 
the financial institution has a pre-existing business relationship with 
the consumer and can therefore use eligibility information it receives 
from an affiliate to make solicitations to the consumer about its 
products or services for three months after the date of the application.
    (E) If a consumer makes a telephone inquiry to a financial 
institution about its products or services and provides contact 
information to the institution, but does not obtain a product or service 
from or enter into a financial contract or transaction with the 
institution, the financial institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (F) If a consumer makes an inquiry to a financial institution by 
email about its products or services, but does not obtain a product or 
service from or enter into a financial contract or transaction with the 
institution, the financial institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (G) If a consumer has an existing relationship with a financial 
institution that is part of a group of affiliated companies, makes a 
telephone call to the centralized call center for the group of 
affiliated companies to inquire about products or services offered by 
the insurance affiliate, and provides contact information to the call 
center, the call constitutes an inquiry to the insurance affiliate that 
offers those products or services. The insurance affiliate has a pre-
existing business relationship with the consumer and can therefore use 
eligibility information it receives from its affiliated financial 
institution to make solicitations to the consumer about its products or 
services for three months after the date of the inquiry.
    (iii) Examples where no pre-existing business relationship is 
created. (A) If a consumer makes a telephone call to a centralized call 
center for a group of affiliated companies to inquire about the 
consumer's existing account at a financial institution, the call does 
not constitute an inquiry to any affiliate other than the financial 
institution that holds the consumer's account and does not establish a 
pre-existing business relationship between the consumer and any 
affiliate of the account-holding financial institution.
    (B) If a consumer who has a deposit account with a financial 
institution makes a telephone call to an affiliate of the institution to 
ask about the affiliate's retail locations and hours, but does not make 
an inquiry about the affiliate's products or services, the call does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate. Also, the 
affiliate's capture of the consumer's telephone number does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate.
    (C) If a consumer makes a telephone call to a financial institution 
in response to an advertisement that offers a free promotional item to 
consumers who call a toll-free number, but the advertisement does not 
indicate that the

[[Page 581]]

financial institution's products or services will be marketed to 
consumers who call in response, the call does not create a pre-existing 
business relationship between the consumer and the financial institution 
because the consumer has not made an inquiry about a product or service 
offered by the institution, but has merely responded to an offer for a 
free promotional item.
    (5) Solicitation--(i) In general. The term ``solicitation'' means 
the marketing of a product or service initiated by a person to a 
particular consumer that is:
    (A) Based on eligibility information communicated to that person by 
its affiliate as described in this subpart; and
    (B) Intended to encourage the consumer to purchase or obtain such 
product or service.
    (ii) Exclusion of marketing directed at the general public. A 
solicitation does not include marketing communications that are directed 
at the general public. For example, television, general circulation 
magazine, and billboard advertisements do not constitute solicitations, 
even if those communications are intended to encourage consumers to 
purchase products and services from the person initiating the 
communications.
    (iii) Examples of solicitations. A solicitation would include, for 
example, a telemarketing call, direct mail, email, or other form of 
marketing communication directed to a particular consumer that is based 
on eligibility information received from an affiliate.
    (6) You means a person described in paragraph (a) of this section.



Sec.  1022.21  Affiliate marketing opt-out and exceptions.

    (a) Initial notice and opt-out requirement--(1) In general. You may 
not use eligibility information about a consumer that you receive from 
an affiliate to make a solicitation for marketing purposes to the 
consumer, unless:
    (i) It is clearly and conspicuously disclosed to the consumer in 
writing or, if the consumer agrees, electronically, in a concise notice 
that you may use eligibility information about that consumer received 
from an affiliate to make solicitations for marketing purposes to the 
consumer;
    (ii) The consumer is provided a reasonable opportunity and a 
reasonable and simple method to ``opt out,'' or prohibit you from using 
eligibility information to make solicitations for marketing purposes to 
the consumer; and
    (iii) The consumer has not opted out.
    (2) Example. A consumer has a homeowner's insurance policy with an 
insurance company. The insurance company furnishes eligibility 
information about the consumer to its affiliated creditor. Based on that 
eligibility information, the creditor wants to make a solicitation to 
the consumer about its home equity loan products. The creditor does not 
have a pre-existing business relationship with the consumer and none of 
the other exceptions apply. The creditor is prohibited from using 
eligibility information received from its insurance affiliate to make 
solicitations to the consumer about its home equity loan products unless 
the consumer is given a notice and opportunity to opt out and the 
consumer does not opt out.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By an affiliate that has or has previously had a pre-existing 
business relationship with the consumer; or
    (ii) As part of a joint notice from two or more members of an 
affiliated group of companies, provided that at least one of the 
affiliates on the joint notice has or has previously had a pre-existing 
business relationship with the consumer.
    (b) Making solicitations--(1) In general. For purposes of this 
subpart, you make a solicitation for marketing purposes if:
    (i) You receive eligibility information from an affiliate;
    (ii) You use that eligibility information to do one or more of the 
following:
    (A) Identify the consumer or type of consumer to receive a 
solicitation;
    (B) Establish criteria used to select the consumer to receive a 
solicitation; or
    (C) Decide which of your products or services to market to the 
consumer or tailor your solicitation to that consumer; and

[[Page 582]]

    (iii) As a result of your use of the eligibility information, the 
consumer is provided a solicitation.
    (2) Receiving eligibility information from an affiliate, including 
through a common database. You may receive eligibility information from 
an affiliate in various ways, including when the affiliate places that 
information into a common database that you may access.
    (3) Receipt or use of eligibility information by your service 
provider. Except as provided in paragraph (b)(5) of this section, you 
receive or use an affiliate's eligibility information if a service 
provider acting on your behalf (whether an affiliate or a nonaffiliated 
third party) receives or uses that information in the manner described 
in paragraphs (b)(1)(i) or (b)(1)(ii) of this section. All relevant 
facts and circumstances will determine whether a person is acting as 
your service provider when it receives or uses an affiliate's 
eligibility information in connection with marketing your products and 
services.
    (4) Use by an affiliate of its own eligibility information. Unless 
you have used eligibility information that you receive from an affiliate 
in the manner described in paragraph (b)(1)(ii) of this section, you do 
not make a solicitation subject to this subpart if your affiliate:
    (i) Uses its own eligibility information that it obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer to market your products or services to the consumer; or
    (ii) Directs its service provider to use the affiliate's own 
eligibility information that it obtained in connection with a pre-
existing business relationship it has or had with the consumer to market 
your products or services to the consumer, and you do not communicate 
directly with the service provider regarding that use.
    (5) Use of eligibility information by a service provider--(i) In 
general. You do not make a solicitation subject to subpart C of this 
part if a service provider (including an affiliated or third-party 
service provider that maintains or accesses a common database that you 
may access) receives eligibility information from your affiliate that 
your affiliate obtained in connection with a pre-existing business 
relationship it has or had with the consumer and uses that eligibility 
information to market your products or services to the consumer, so long 
as:
    (A) Your affiliate controls access to and use of its eligibility 
information by the service provider (including the right to establish 
the specific terms and conditions under which the service provider may 
use such information to market your products or services);
    (B) Your affiliate establishes specific terms and conditions under 
which the service provider may access and use the affiliate's 
eligibility information to market your products and services (or those 
of affiliates generally) to the consumer, such as the identity of the 
affiliated companies whose products or services may be marketed to the 
consumer by the service provider, the types of products or services of 
affiliated companies that may be marketed, and the number of times the 
consumer may receive marketing materials, and periodically evaluates the 
service provider's compliance with those terms and conditions;
    (C) Your affiliate requires the service provider to implement 
reasonable policies and procedures designed to ensure that the service 
provider uses the affiliate's eligibility information in accordance with 
the terms and conditions established by the affiliate relating to the 
marketing of your products or services;
    (D) Your affiliate is identified on or with the marketing materials 
provided to the consumer; and
    (E) You do not directly use your affiliate's eligibility information 
in the manner described in paragraph (b)(1)(ii) of this section.
    (ii) Writing requirements. (A) The requirements of paragraphs 
(b)(5)(i)(A) and (C) of this section must be set forth in a written 
agreement between your affiliate and the service provider; and
    (B) The specific terms and conditions established by your affiliate 
as provided in paragraph (b)(5)(i)(B) of this section must be set forth 
in writing.
    (6) Examples of making solicitations. (i) A consumer has a deposit 
account with a financial institution, which is affiliated with an 
insurance company. The insurance company receives eligibility

[[Page 583]]

information about the consumer from the financial institution. The 
insurance company uses that eligibility information to identify the 
consumer to receive a solicitation about insurance products, and, as a 
result, the insurance company provides a solicitation to the consumer 
about its insurance products. Pursuant to paragraph (b)(1) of this 
section, the insurance company has made a solicitation to the consumer.
    (ii) The same facts as in the example in paragraph (b)(6)(i) of this 
section, except that after using the eligibility information to identify 
the consumer to receive a solicitation about insurance products, the 
insurance company asks the financial institution to send the 
solicitation to the consumer and the financial institution does so. 
Pursuant to paragraph (b)(1) of this section, the insurance company has 
made a solicitation to the consumer because it used eligibility 
information about the consumer that it received from an affiliate to 
identify the consumer to receive a solicitation about its products or 
services, and, as a result, a solicitation was provided to the consumer 
about the insurance company's products.
    (iii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that eligibility information about consumers that 
have deposit accounts with the financial institution is placed into a 
common database that all members of the affiliated group of companies 
may independently access and use. Without using the financial 
institution's eligibility information, the insurance company develops 
selection criteria and provides those criteria, marketing materials, and 
related instructions to the financial institution. The financial 
institution reviews eligibility information about its own consumers 
using the selection criteria provided by the insurance company to 
determine which consumers should receive the insurance company's 
marketing materials and sends marketing materials about the insurance 
company's products to those consumers. Even though the insurance company 
has received eligibility information through the common database as 
provided in paragraph (b)(2) of this section, it did not use that 
information to identify consumers or establish selection criteria; 
instead, the financial institution used its own eligibility information. 
Therefore, pursuant to paragraph (b)(4)(i) of this section, the 
insurance company has not made a solicitation to the consumer.
    (iv) The same facts as in the example in paragraph (b)(6)(iii) of 
this section, except that the financial institution provides the 
insurance company's criteria to the financial institution's service 
provider and directs the service provider to use the financial 
institution's eligibility information to identify financial institution 
consumers who meet the criteria and to send the insurance company's 
marketing materials to those consumers. The insurance company does not 
communicate directly with the service provider regarding the use of the 
financial institution's information to market its products to the 
financial institution's consumers. Pursuant to paragraph (b)(4)(ii) of 
this section, the insurance company has not made a solicitation to the 
consumer.
    (v) An affiliated group of companies includes a financial 
institution, an insurance company, and a service provider. Each 
affiliate in the group places information about its consumers into a 
common database. The service provider has access to all information in 
the common database. The financial institution controls access to and 
use of its eligibility information by the service provider. This control 
is set forth in a written agreement between the financial institution 
and the service provider. The written agreement also requires the 
service provider to establish reasonable policies and procedures 
designed to ensure that the service provider uses the financial 
institution's eligibility information in accordance with specific terms 
and conditions established by the financial institution relating to the 
marketing of the products and services of all affiliates, including the 
insurance company. In a separate written communication, the financial 
institution specifies the terms and conditions under which the service 
provider may use the financial institution's eligibility information to

[[Page 584]]

market the insurance company's products and services to the financial 
institution's consumers. The specific terms and conditions are: a list 
of affiliated companies (including the insurance company) whose products 
or services may be marketed to the financial institution's consumers by 
the service provider; the specific products or types of products that 
may be marketed to the financial institution's consumers by the service 
provider; the categories of eligibility information that may be used by 
the service provider in marketing products or services to the financial 
institution's consumers; the types or categories of the financial 
institution's consumers to whom the service provider may market products 
or services of financial institution affiliates; the number and/or types 
of marketing communications that the service provider may send to the 
financial institution's consumers; and the length of time during which 
the service provider may market the products or services of the 
financial institution's affiliates to its consumers. The financial 
institution periodically evaluates the service provider's compliance 
with these terms and conditions. The insurance company asks the service 
provider to market insurance products to certain consumers who have 
deposit accounts with the financial institution. Without using the 
financial institution's eligibility information, the insurance company 
develops selection criteria and provides those criteria, marketing 
materials, and related instructions to the service provider. The service 
provider uses the financial institution's eligibility information from 
the common database to identify the financial institution's consumers to 
whom insurance products will be marketed. When the insurance company's 
marketing materials are provided to the identified consumers, the name 
of the financial institution is displayed on the insurance marketing 
materials, an introductory letter that accompanies the marketing 
materials, an account statement that accompanies the marketing 
materials, or the envelope containing the marketing materials. The 
requirements of paragraph (b)(5) of this section have been satisfied, 
and the insurance company has not made a solicitation to the consumer.
    (vi) The same facts as in the example in paragraph (b)(6)(v) of this 
section, except that the terms and conditions permit the service 
provider to use the financial institution's eligibility information to 
market the products and services of other affiliates to the financial 
institution's consumers whenever the service provider deems it 
appropriate to do so. The service provider uses the financial 
institution's eligibility information in accordance with the discretion 
afforded to it by the terms and conditions. Because the terms and 
conditions are not specific, the requirements of paragraph (b)(5) of 
this section have not been satisfied.
    (c) Exceptions. The provisions of this subpart do not apply to you 
if you use eligibility information that you receive from an affiliate:
    (1) To make a solicitation for marketing purposes to a consumer with 
whom you have a pre-existing business relationship;
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the current employment 
relationship or status of the individual as a participant or beneficiary 
of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
subparagraph shall not be construed as permitting you to send 
solicitations on behalf of an affiliate if the affiliate would not be 
permitted to send the solicitation as a result of the election of the 
consumer to opt out under this subpart;
    (4) In response to a communication about your products or services 
initiated by the consumer;
    (5) In response to an authorization or request by the consumer to 
receive solicitations; or
    (6) If your compliance with this subpart would prevent you from 
complying with any provision of state insurance laws pertaining to 
unfair discrimination in any state in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Example of the pre-existing business 
relationship

[[Page 585]]

exception. A consumer has a deposit account with a financial 
institution. The consumer also has a relationship with the financial 
institution's securities affiliate for management of the consumer's 
securities portfolio. The financial institution receives eligibility 
information about the consumer from its securities affiliate and uses 
that information to make a solicitation to the consumer about the 
financial institution's wealth management services. The financial 
institution may make this solicitation even if the consumer has not been 
given a notice and opportunity to opt out because the financial 
institution has a pre-existing business relationship with the consumer.
    (2) Examples of service provider exception. (i) A consumer has an 
insurance policy issued by an insurance company. The insurance company 
furnishes eligibility information about the consumer to its affiliated 
financial institution. Based on that eligibility information, the 
financial institution wants to make a solicitation to the consumer about 
its deposit products. The financial institution does not have a pre-
existing business relationship with the consumer and none of the other 
exceptions in paragraph (c) of this section apply. The consumer has been 
given an opt-out notice and has elected to opt out of receiving such 
solicitations. The financial institution asks a service provider to send 
the solicitation to the consumer on its behalf. The service provider may 
not send the solicitation on behalf of the financial institution 
because, as a result of the consumer's opt-out election, the financial 
institution is not permitted to make the solicitation.
    (ii) The same facts as in paragraph (d)(2)(i) of this section, 
except the consumer has been given an opt-out notice, but has not 
elected to opt out. The financial institution asks a service provider to 
send the solicitation to the consumer on its behalf. The service 
provider may send the solicitation on behalf of the financial 
institution because, as a result of the consumer's not opting out, the 
financial institution is permitted to make the solicitation.
    (3) Examples of consumer-initiated communications. (i) A consumer 
who has a deposit account with a financial institution initiates a 
communication with the financial institution's credit card affiliate to 
request information about a credit card. The credit card affiliate may 
use eligibility information about the consumer it obtains from the 
financial institution or any other affiliate to make solicitations 
regarding credit card products in response to the consumer-initiated 
communication.
    (ii) A consumer who has a deposit account with a financial 
institution contacts the institution to request information about how to 
save and invest for a child's college education without specifying the 
type of product in which the consumer may be interested. Information 
about a range of different products or services offered by the financial 
institution and one or more affiliates of the institution may be 
responsive to that communication. Such products or services may include 
the following: mutual funds offered by the institution's mutual fund 
affiliate; section 529 plans offered by the institution, its mutual fund 
affiliate, or another securities affiliate; or trust services offered by 
a different financial institution in the affiliated group. Any affiliate 
offering investment products or services that would be responsive to the 
consumer's request for information about saving and investing for a 
child's college education may use eligibility information to make 
solicitations to the consumer in response to this communication.
    (iii) A credit card issuer makes a marketing call to the consumer 
without using eligibility information received from an affiliate. The 
issuer leaves a voice-mail message that invites the consumer to call a 
toll-free number to apply for the issuer's credit card. If the consumer 
calls the toll-free number to inquire about the credit card, the call is 
a consumer-initiated communication about a product or service and the 
credit card issuer may now use eligibility information it receives from 
its affiliates to make solicitations to the consumer.
    (iv) A consumer calls a financial institution to ask about retail 
locations and hours, but does not request information about products or 
services. The institution may not use eligibility information it 
receives from an affiliate

[[Page 586]]

to make solicitations to the consumer about its products or services 
because the consumer-initiated communication does not relate to the 
financial institution's products or services. Thus, the use of 
eligibility information received from an affiliate would not be 
responsive to the communication and the exception does not apply.
    (v) A consumer calls a financial institution to ask about retail 
locations and hours. The customer service representative asks the 
consumer if there is a particular product or service about which the 
consumer is seeking information. The consumer responds that the consumer 
wants to stop in and find out about certificates of deposit. The 
customer service representative offers to provide that information by 
telephone and mail additional information and application materials to 
the consumer. The consumer agrees and provides or confirms contact 
information for receipt of the materials to be mailed. The financial 
institution may use eligibility information it receives from an 
affiliate to make solicitations to the consumer about certificates of 
deposit because such solicitations would respond to the consumer-
initiated communication about products or services.
    (4) Examples of consumer authorization or request for solicitations. 
(i) A consumer who obtains a mortgage from a mortgage lender authorizes 
or requests information about homeowner's insurance offered by the 
mortgage lender's insurance affiliate. Such authorization or request, 
whether given to the mortgage lender or to the insurance affiliate, 
would permit the insurance affiliate to use eligibility information 
about the consumer it obtains from the mortgage lender or any other 
affiliate to make solicitations to the consumer about homeowner's 
insurance.
    (ii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's online application 
contains a blank check box that the consumer may check to authorize or 
request information from the credit card issuer's affiliates. The 
consumer checks the box. The consumer has authorized or requested 
solicitations from the card issuer's affiliates.
    (iii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's online application 
contains a pre-selected check box indicating that the consumer 
authorizes or requests information from the issuer's affiliates. The 
consumer does not deselect the check box. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (iv) The terms and conditions of a credit card account agreement 
contain preprinted boilerplate language stating that by applying to open 
an account the consumer authorizes or requests to receive solicitations 
from the credit card issuer's affiliates. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (e) Relation to affiliate-sharing notice and opt-out. Nothing in 
this subpart limits the responsibility of a person to comply with the 
notice and opt-out provisions of section 603(d)(2)(A)(iii) of the Act 
where applicable.



Sec.  1022.22  Scope and duration of opt-out.

    (a) Scope of opt-out--(1) In general. Except as otherwise provided 
in this section, the consumer's election to opt out prohibits any 
affiliate covered by the opt-out notice from using eligibility 
information received from another affiliate as described in the notice 
to make solicitations to the consumer.
    (2) Continuing relationship. (i) In general. If the consumer 
establishes a continuing relationship with you or your affiliate, an 
opt-out notice may apply to eligibility information obtained in 
connection with:
    (A) A single continuing relationship or multiple continuing 
relationships that the consumer establishes with you or your affiliates, 
including continuing relationships established subsequent to delivery of 
the opt-out notice, so long as the notice adequately describes the 
continuing relationships covered by the opt-out; or
    (B) Any other transaction between the consumer and you or your 
affiliates as described in the notice.

[[Page 587]]

    (ii) Examples of continuing relationships. A consumer has a 
continuing relationship with you or your affiliate if the consumer:
    (A) Opens a deposit or investment account with you or your 
affiliate;
    (B) Obtains a loan for which you or your affiliate owns the 
servicing rights;
    (C) Purchases an insurance product from you or your affiliate;
    (D) Holds an investment product through you or your affiliate, such 
as when you act or your affiliate acts as a custodian for securities or 
for assets in an individual retirement arrangement;
    (E) Enters into an agreement or understanding with you or your 
affiliate whereby you or your affiliate undertakes to arrange or broker 
a home mortgage loan for the consumer;
    (F) Enters into a lease of personal property with you or your 
affiliate; or
    (G) Obtains financial, investment, or economic advisory services 
from you or your affiliate for a fee.
    (3) No continuing relationship. (i) In general. If there is no 
continuing relationship between a consumer and you or your affiliate, 
and you or your affiliate obtain eligibility information about a 
consumer in connection with a transaction with the consumer, such as an 
isolated transaction or a credit application that is denied, an opt-out 
notice provided to the consumer only applies to eligibility information 
obtained in connection with that transaction.
    (ii) Examples of isolated transactions. An isolated transaction 
occurs if:
    (A) The consumer uses your or your affiliate's ATM to withdraw cash 
from an account at another financial institution; or
    (B) You or your affiliate sells the consumer a cashier's check or 
money order, airline tickets, travel insurance, or traveler's checks in 
isolated transactions.
    (4) Menu of alternatives. A consumer may be given the opportunity to 
choose from a menu of alternatives when electing to prohibit 
solicitations, such as by electing to prohibit solicitations from 
certain types of affiliates covered by the opt-out notice but not other 
types of affiliates covered by the notice, electing to prohibit 
solicitations based on certain types of eligibility information but not 
other types of eligibility information, or electing to prohibit 
solicitations by certain methods of delivery but not other methods of 
delivery. However, one of the alternatives must allow the consumer to 
prohibit all solicitations from all of the affiliates that are covered 
by the notice.
    (5) Special rule for a notice following termination of all 
continuing relationships--(i) In general. A consumer must be given a new 
opt-out notice if, after all continuing relationships with you or your 
affiliate(s) are terminated, the consumer subsequently establishes 
another continuing relationship with you or your affiliate(s) and the 
consumer's eligibility information is to be used to make a solicitation. 
The new opt-out notice must apply, at a minimum, to eligibility 
information obtained in connection with the new continuing relationship. 
Consistent with paragraph (b) of this section, the consumer's decision 
not to opt out after receiving the new opt-out notice would not override 
a prior opt-out election by the consumer that applies to eligibility 
information obtained in connection with a terminated relationship, 
regardless of whether the new opt-out notice applies to eligibility 
information obtained in connection with the terminated relationship.
    (ii) Example. A consumer has a checking account with a financial 
institution that is part of an affiliated group. The consumer closes the 
checking account. One year after closing the checking account, the 
consumer opens a savings account with the same financial institution. 
The consumer must be given a new notice and opportunity to opt out 
before the financial institution's affiliates may make solicitations to 
the consumer using eligibility information obtained by the financial 
institution in connection with the new savings account relationship, 
regardless of whether the consumer opted out in connection with the 
checking account.
    (b) Duration of opt-out. The election of a consumer to opt out must 
be effective for a period of at least five years (the ``opt-out 
period'') beginning when the consumer's opt-out election is received and 
implemented, unless the

[[Page 588]]

consumer subsequently revokes the opt-out in writing or, if the consumer 
agrees, electronically. An opt-out period of more than five years may be 
established, including an opt-out period that does not expire unless 
revoked by the consumer.
    (c) Time of opt-out. A consumer may opt out at any time.



Sec.  1022.23  Contents of opt-out notice; consolidated and equivalent 
notices.

    (a) Contents of opt-out notice--(1) In general. A notice must be 
clear, conspicuous, and concise, and must accurately disclose:
    (i) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies;''
    (ii) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies;''
    (iii) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (iv) That the consumer may elect to limit the use of eligibility 
information to make solicitations to the consumer;
    (v) That the consumer's election will apply for the specified period 
of time stated in the notice and, if applicable, that the consumer will 
be allowed to renew the election once that period expires;
    (vi) If the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, that 
the consumer who has chosen to limit solicitations does not need to act 
again until the consumer receives a renewal notice; and
    (vii) A reasonable and simple method for the consumer to opt out.
    (2) Joint relationships. (i) If two or more consumers jointly obtain 
a product or service, a single opt-out notice may be provided to the 
joint consumers. Any of the joint consumers may exercise the right to 
opt out.
    (ii) The opt-out notice must explain how an opt-out direction by a 
joint consumer will be treated. An opt-out direction by a joint consumer 
may be treated as applying to all of the associated joint consumers, or 
each joint consumer may be permitted to opt out separately. If each 
joint consumer is permitted to opt out separately, one of the joint 
consumers must be permitted to opt out on behalf of all of the joint 
consumers and the joint consumers must be permitted to exercise their 
separate rights to opt out in a single response.
    (iii) It is impermissible to require all joint consumers to opt out 
before implementing any opt-out direction.

[[Page 589]]

    (3) Alternative contents. If the consumer is afforded a broader 
right to opt out of receiving marketing than is required by this 
subpart, the requirements of this section may be satisfied by providing 
the consumer with a clear, conspicuous, and concise notice that 
accurately discloses the consumer's opt-out rights.
    (4) Model notices. Model notices are provided in appendix C of this 
part.
    (b) Coordinated and consolidated notices. A notice required by this 
subpart may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law by the 
entity providing the notice, including but not limited to the notice 
described in section 603(d)(2)(A)(iii) of the Act and the Gramm-Leach-
Bliley Act privacy notice.
    (c) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this subpart, and that is provided 
to a consumer together with disclosures required by any other provision 
of law, satisfies the requirements of this section.



Sec.  1022.24  Reasonable opportunity to opt out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable opportunity to opt out, as required by Sec.  
1022.21(a)(1)(ii) of this part.
    (b) Examples of a reasonable opportunity to opt out. The consumer is 
given a reasonable opportunity to opt out if:
    (1) By mail. The opt-out notice is mailed to the consumer. The 
consumer is given 30 days from the date the notice is mailed to elect to 
opt out by any reasonable means.
    (2) By electronic means. (i) The opt-out notice is provided 
electronically to the consumer, such as by posting the notice at a Web 
site at which the consumer has obtained a product or service. The 
consumer acknowledges receipt of the electronic notice. The consumer is 
given 30 days after the date the consumer acknowledges receipt to elect 
to opt out by any reasonable means.
    (ii) The opt-out notice is provided to the consumer by email where 
the consumer has agreed to receive disclosures by email from the person 
sending the notice. The consumer is given 30 days after the email is 
sent to elect to opt out by any reasonable means.
    (3) At the time of an electronic transaction. The opt-out notice is 
provided to the consumer at the time of an electronic transaction, such 
as a transaction conducted on a Web site. The consumer is required to 
decide, as a necessary part of proceeding with the transaction, whether 
to opt out before completing the transaction. There is a simple process 
that the consumer may use to opt out at that time using the same 
mechanism through which the transaction is conducted.
    (4) At the time of an in-person transaction. The opt-out notice is 
provided to the consumer in writing at the time of an in-person 
transaction. The consumer is required to decide, as a necessary part of 
proceeding with the transaction, whether to opt out before completing 
the transaction, and is not permitted to complete the transaction 
without making a choice. There is a simple process that the consumer may 
use during the course of the in-person transaction to opt out, such as 
completing a form that requires consumers to write a ``yes'' or ``no'' 
to indicate their opt-out preference or that requires the consumer to 
check one of two blank check boxes; one that allows consumers to 
indicate that they want to opt out and one that allows consumers to 
indicate that they do not want to opt out.
    (5) By including in a privacy notice. The opt-out notice is included 
in a Gramm-Leach-Bliley Act privacy notice. The consumer is allowed to 
exercise the opt-out within a reasonable period of time and in the same 
manner as the opt-out under that privacy notice.



Sec.  1022.25  Reasonable and simple methods of opting out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable

[[Page 590]]

and simple method to opt out, as required by Sec.  1022.21(a)(1)(ii) of 
this part.
    (b) Examples--(1) Reasonable and simple opt-out methods. Reasonable 
and simple methods for exercising the opt-out right include:
    (i) Designating a check-off box in a prominent position on the opt-
out form;
    (ii) Including a reply form and a self-addressed envelope together 
with the opt-out notice;
    (iii) Providing an electronic means to opt out, such as a form that 
can be electronically mailed or processed at a Web site, if the consumer 
agrees to the electronic delivery of information;
    (iv) Providing a toll-free telephone number that consumers may call 
to opt out; or
    (v) Allowing consumers to exercise all of their opt-out rights 
described in a consolidated opt-out notice that includes the privacy 
opt-out under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., the 
affiliate sharing opt-out under the Act, and the affiliate marketing 
opt-out under the Act, by a single method, such as by calling a single 
toll-free telephone number.
    (2) Opt-out methods that are not reasonable and simple. Reasonable 
and simple methods for exercising an opt-out right do not include--
    (i) Requiring the consumer to write his or her own letter;
    (ii) Requiring the consumer to call or write to obtain a form for 
opting out, rather than including the form with the opt-out notice;
    (iii) Requiring the consumer who receives the opt-out notice in 
electronic form only, such as through posting at a Web site, to opt out 
solely by paper mail or by visiting a different Web site without 
providing a link to that site.
    (c) Specific opt-out means. Each consumer may be required to opt out 
through a specific means, as long as that means is reasonable and simple 
for that consumer.



Sec.  1022.26  Delivery of opt-out notices.

    (a) In general. The opt-out notice must be provided so that each 
consumer can reasonably be expected to receive actual notice. For opt-
out notices provided electronically, the notice may be provided in 
compliance with either the electronic disclosure provisions in this 
subpart or the provisions in section 101 of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq.
    (b) Examples of reasonable expectation of actual notice. A consumer 
may reasonably be expected to receive actual notice if the affiliate 
providing the notice:
    (1) Hand-delivers a printed copy of the notice to the consumer;
    (2) Mails a printed copy of the notice to the last known mailing 
address of the consumer;
    (3) Provides a notice by email to a consumer who has agreed to 
receive electronic disclosures by email from the affiliate providing the 
notice; or
    (4) Posts the notice on the Web site at which the consumer obtained 
a product or service electronically and requires the consumer to 
acknowledge receipt of the notice.
    (c) Examples of no reasonable expectation of actual notice. A 
consumer may not reasonably be expected to receive actual notice if the 
affiliate providing the notice:
    (1) Only posts the notice on a sign in a branch or office or 
generally publishes the notice in a newspaper;
    (2) Sends the notice via email to a consumer who has not agreed to 
receive electronic disclosures by email from the affiliate providing the 
notice; or
    (3) Posts the notice on a Web site without requiring the consumer to 
acknowledge receipt of the notice.



Sec.  1022.27  Renewal of opt-out.

    (a) Renewal notice and opt-out requirement--(1) In general. After 
the opt-out period expires, you may not make solicitations based on 
eligibility information you receive from an affiliate to a consumer who 
previously opted out, unless:
    (i) The consumer has been given a renewal notice that complies with 
the requirements of this section and Sec. Sec.  1022.24 through 1022.26 
of this part, and a reasonable opportunity and a reasonable and simple 
method to renew the opt-out, and the consumer does not renew the opt-
out; or
    (ii) An exception in Sec.  1022.21(c) of this part applies.

[[Page 591]]

    (2) Renewal period. Each opt-out renewal must be effective for a 
period of at least five years as provided in Sec.  1022.22(b) of this 
part.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By the affiliate that provided the previous opt-out notice, or 
its successor; or
    (ii) As part of a joint renewal notice from two or more members of 
an affiliated group of companies, or their successors, that jointly 
provided the previous opt-out notice.
    (b) Contents of renewal notice. The renewal notice must be clear, 
conspicuous, and concise, and must accurately disclose:
    (1) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies'';
    (2) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies;''
    (3) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (4) That the consumer previously elected to limit the use of certain 
information to make solicitations to the consumer;
    (5) That the consumer's election has expired or is about to expire;
    (6) That the consumer may elect to renew the consumer's previous 
election;
    (7) If applicable, that the consumer's election to renew will apply 
for the specified period of time stated in the notice and that the 
consumer will be allowed to renew the election once that period expires; 
and
    (8) A reasonable and simple method for the consumer to opt out.
    (c) Timing of the renewal notice--(1) In general. A renewal notice 
may be provided to the consumer either:
    (i) A reasonable period of time before the expiration of the opt-out 
period; or
    (ii) Any time after the expiration of the opt-out period but before 
solicitations that would have been prohibited by the expired opt-out are 
made to the consumer.
    (2) Combination with annual privacy notice. If you provide an annual 
privacy notice under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., 
providing a renewal notice with the last annual privacy notice provided 
to the consumer before expiration of the opt-out period is a reasonable 
period of time before expiration of the opt-out in all cases.
    (d) No effect on opt-out period. An opt-out period may not be 
shortened by sending a renewal notice to the consumer before expiration 
of the opt-out

[[Page 592]]

period, even if the consumer does not renew the opt out.



                      Subpart D_Medical Information



Sec.  1022.30  Obtaining or using medical information in connection with 
a determination of eligibility for credit.

    (a) Scope. This section applies to any person that participates as a 
creditor in a transaction, except for a person excluded from coverage of 
this part by section 1029 of the Consumer Financial Protection Act of 
2010, title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) General prohibition on obtaining or using medical information--
(1) In general. A creditor may not obtain or use medical information 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit, except as 
provided in this section.
    (2) Definitions. (i) Credit has the same meaning as in section 702 
of the Equal Credit Opportunity Act, 15 U.S.C. 1691a.
    (ii) Creditor has the same meaning as in section 702 of the Equal 
Credit Opportunity Act, 15 U.S.C. 1691a.
    (iii) Eligibility, or continued eligibility, for credit means the 
consumer's qualification or fitness to receive, or continue to receive, 
credit, including the terms on which credit is offered. The term does 
not include:
    (A) Any determination of the consumer's qualification or fitness for 
employment, insurance (other than a credit insurance product), or other 
non-credit products or services;
    (B) Authorizing, processing, or documenting a payment or transaction 
on behalf of the consumer in a manner that does not involve a 
determination of the consumer's eligibility, or continued eligibility, 
for credit; or
    (C) Maintaining or servicing the consumer's account in a manner that 
does not involve a determination of the consumer's eligibility, or 
continued eligibility, for credit.
    (c) Rule of construction for obtaining and using unsolicited medical 
information--(1) In general. A creditor does not obtain medical 
information in violation of the prohibition if it receives medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit without specifically requesting medical information.
    (2) Use of unsolicited medical information. A creditor that receives 
unsolicited medical information in the manner described in paragraph 
(c)(1) of this section may use that information in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit to the extent the creditor can rely on at least one of the 
exceptions in Sec.  1022.30(d) or (e).
    (3) Examples. A creditor does not obtain medical information in 
violation of the prohibition if, for example:
    (i) In response to a general question regarding a consumer's debts 
or expenses, the creditor receives information that the consumer owes a 
debt to a hospital.
    (ii) In a conversation with the creditor's loan officer, the 
consumer informs the creditor that the consumer has a particular medical 
condition.
    (iii) In connection with a consumer's application for an extension 
of credit, the creditor requests a consumer report from a consumer 
reporting agency and receives medical information in the consumer report 
furnished by the agency even though the creditor did not specifically 
request medical information from the consumer reporting agency.
    (d) Financial information exception for obtaining and using medical 
information--(1) In general. A creditor may obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit so long as:
    (i) The information is the type of information routinely used in 
making credit eligibility determinations, such as information relating 
to debts, expenses, income, benefits, assets, collateral, or the purpose 
of the loan, including the use of proceeds;
    (ii) The creditor uses the medical information in a manner and to an 
extent that is no less favorable than it would use comparable 
information that is not medical information in a credit transaction; and

[[Page 593]]

    (iii) The creditor does not take the consumer's physical, mental, or 
behavioral health, condition or history, type of treatment, or prognosis 
into account as part of any such determination.
    (2) Examples--(i) Examples of the types of information routinely 
used in making credit eligibility determinations. Paragraph (d)(1)(i) of 
this section permits a creditor, for example, to obtain and use 
information about:
    (A) The dollar amount, repayment terms, repayment history, and 
similar information regarding medical debts to calculate, measure, or 
verify the repayment ability of the consumer, the use of proceeds, or 
the terms for granting credit;
    (B) The value, condition, and lien status of a medical device that 
may serve as collateral to secure a loan;
    (C) The dollar amount and continued eligibility for disability 
income, workers' compensation income, or other benefits related to 
health or a medical condition that is relied on as a source of 
repayment; or
    (D) The identity of creditors to whom outstanding medical debts are 
owed in connection with an application for credit, including but not 
limited to, a transaction involving the consolidation of medical debts.
    (ii) Examples of uses of medical information consistent with the 
exception. (A) A consumer includes on an application for credit 
information about two $20,000 debts. One debt is to a hospital; the 
other debt is to a retailer. The creditor contacts the hospital and the 
retailer to verify the amount and payment status of the debts. The 
creditor learns that both debts are more than 90 days past due. Any two 
debts of this size that are more than 90 days past due would disqualify 
the consumer under the creditor's established underwriting criteria. The 
creditor denies the application on the basis that the consumer has a 
poor repayment history on outstanding debts. The creditor has used 
medical information in a manner and to an extent no less favorable than 
it would use comparable non-medical information.
    (B) A consumer indicates on an application for a $200,000 mortgage 
loan that she receives $15,000 in long-term disability income each year 
from her former employer and has no other income. Annual income of 
$15,000, regardless of source, would not be sufficient to support the 
requested amount of credit. The creditor denies the application on the 
basis that the projected debt-to-income ratio of the consumer does not 
meet the creditor's underwriting criteria. The creditor has used medical 
information in a manner and to an extent that is no less favorable than 
it would use comparable non-medical information.
    (C) A consumer includes on an application for a $10,000 home equity 
loan that he has a $50,000 debt to a medical facility that specializes 
in treating a potentially terminal disease. The creditor contacts the 
medical facility to verify the debt and obtain the repayment history and 
current status of the loan. The creditor learns that the debt is 
current. The applicant meets the income and other requirements of the 
creditor's underwriting guidelines. The creditor grants the application. 
The creditor has used medical information in accordance with the 
exception.
    (iii) Examples of uses of medical information inconsistent with the 
exception. (A) A consumer applies for $25,000 of credit and includes on 
the application information about a $50,000 debt to a hospital. The 
creditor contacts the hospital to verify the amount and payment status 
of the debt, and learns that the debt is current and that the consumer 
has no delinquencies in her repayment history. If the existing debt were 
instead owed to a retail department store, the creditor would approve 
the application and extend credit based on the amount and repayment 
history of the outstanding debt. The creditor, however, denies the 
application because the consumer is indebted to a hospital. The creditor 
has used medical information, here the identity of the medical creditor, 
in a manner and to an extent that is less favorable than it would use 
comparable non-medical information.
    (B) A consumer meets with a loan officer of a creditor to apply for 
a mortgage loan. While filling out the loan application, the consumer 
informs the loan officer orally that she has a potentially terminal 
disease. The consumer

[[Page 594]]

meets the creditor's established requirements for the requested mortgage 
loan. The loan officer recommends to the credit committee that the 
consumer be denied credit because the consumer has that disease. The 
credit committee follows the loan officer's recommendation and denies 
the application because the consumer has a potentially terminal disease. 
The creditor has used medical information in a manner inconsistent with 
the exception by taking into account the consumer's physical, mental, or 
behavioral health, condition, or history, type of treatment, or 
prognosis as part of a determination of eligibility or continued 
eligibility for credit.
    (C) A consumer who has an apparent medical condition, such as a 
consumer who uses a wheelchair or an oxygen tank, meets with a loan 
officer to apply for a home equity loan. The consumer meets the 
creditor's established requirements for the requested home equity loan 
and the creditor typically does not require consumers to obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product in connection with such loans. However, based on the consumer's 
apparent medical condition, the loan officer recommends to the credit 
committee that credit be extended to the consumer only if the consumer 
obtains a debt cancellation contract, debt suspension agreement, or 
credit insurance product from a nonaffiliated third party. The credit 
committee agrees with the loan officer's recommendation. The loan 
officer informs the consumer that the consumer must obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product from a nonaffiliated third party to qualify for the loan. The 
consumer obtains one of these products and the creditor approves the 
loan. The creditor has used medical information in a manner inconsistent 
with the exception by taking into account the consumer's physical, 
mental, or behavioral health, condition, or history, type of treatment, 
or prognosis in setting conditions on the consumer's eligibility for 
credit.
    (e) Specific exceptions for obtaining and using medical 
information--(1) In general. A creditor may obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit:
    (i) To determine whether the use of a power of attorney or legal 
representative that is triggered by a medical condition or event is 
necessary and appropriate or whether the consumer has the legal capacity 
to contract when a person seeks to exercise a power of attorney or act 
as legal representative for a consumer based on an asserted medical 
condition or event;
    (ii) To comply with applicable requirements of local, state, or 
Federal laws;
    (iii) To determine, at the consumer's request, whether the consumer 
qualifies for a legally permissible special credit program or credit-
related assistance program that is:
    (A) Designed to meet the special needs of consumers with medical 
conditions; and
    (B) Established and administered pursuant to a written plan that:
    (1) Identifies the class of persons that the program is designed to 
benefit; and
    (2) Sets forth the procedures and standards for extending credit or 
providing other credit-related assistance under the program;
    (iv) To the extent necessary for purposes of fraud prevention or 
detection;
    (v) In the case of credit for the purpose of financing medical 
products or services, to determine and verify the medical purpose of a 
loan and the use of proceeds;
    (vi) Consistent with safe and sound practices, if the consumer or 
the consumer's legal representative specifically requests that the 
creditor use medical information in determining the consumer's 
eligibility, or continued eligibility, for credit, to accommodate the 
consumer's particular circumstances, and such request is documented by 
the creditor;
    (vii) Consistent with safe and sound practices, to determine whether 
the provisions of a forbearance practice or program that is triggered by 
a medical condition or event apply to a consumer;
    (viii) To determine the consumer's eligibility for, the triggering 
of, or the

[[Page 595]]

reactivation of a debt cancellation contract or debt suspension 
agreement if a medical condition or event is a triggering event for the 
provision of benefits under the contract or agreement; or
    (ix) To determine the consumer's eligibility for, the triggering of, 
or the reactivation of a credit insurance product if a medical condition 
or event is a triggering event for the provision of benefits under the 
product.
    (2) Example of determining eligibility for a special credit program 
or credit assistance program. A not-for-profit organization establishes 
a credit assistance program pursuant to a written plan that is designed 
to assist disabled veterans in purchasing homes by subsidizing the down 
payment for the home purchase mortgage loans of qualifying veterans. The 
organization works through mortgage lenders and requires mortgage 
lenders to obtain medical information about the disability of any 
consumer that seeks to qualify for the program, use that information to 
verify the consumer's eligibility for the program, and forward that 
information to the organization. A consumer who is a veteran applies to 
a creditor for a home purchase mortgage loan. The creditor informs the 
consumer about the credit assistance program for disabled veterans and 
the consumer seeks to qualify for the program. Assuming that the program 
complies with all applicable law, including applicable fair lending 
laws, the creditor may obtain and use medical information about the 
medical condition and disability, if any, of the consumer to determine 
whether the consumer qualifies for the credit assistance program.
    (3) Examples of verifying the medical purpose of the loan or the use 
of proceeds. (i) If a consumer applies for $10,000 of credit for the 
purpose of financing vision correction surgery, the creditor may verify 
with the surgeon that the procedure will be performed. If the surgeon 
reports that surgery will not be performed on the consumer, the creditor 
may use that medical information to deny the consumer's application for 
credit, because the loan would not be used for the stated purpose.
    (ii) If a consumer applies for $10,000 of credit for the purpose of 
financing cosmetic surgery, the creditor may confirm the cost of the 
procedure with the surgeon. If the surgeon reports that the cost of the 
procedure is $5,000, the creditor may use that medical information to 
offer the consumer only $5,000 of credit.
    (iii) A creditor has an established medical loan program for 
financing particular elective surgical procedures. The creditor receives 
a loan application from a consumer requesting $10,000 of credit under 
the established loan program for an elective surgical procedure. The 
consumer indicates on the application that the purpose of the loan is to 
finance an elective surgical procedure not eligible for funding under 
the guidelines of the established loan program. The creditor may deny 
the consumer's application because the purpose of the loan is not for a 
particular procedure funded by the established loan program.
    (4) Examples of obtaining and using medical information at the 
request of the consumer. (i) If a consumer applies for a loan and 
specifically requests that the creditor consider the consumer's medical 
disability at the relevant time as an explanation for adverse payment 
history information in his credit report, the creditor may consider such 
medical information in evaluating the consumer's willingness and ability 
to repay the requested loan to accommodate the consumer's particular 
circumstances, consistent with safe and sound practices. The creditor 
may also decline to consider such medical information to accommodate the 
consumer, but may evaluate the consumer's application in accordance with 
its otherwise applicable underwriting criteria. The creditor may not 
deny the consumer's application or otherwise treat the consumer less 
favorably because the consumer specifically requested a medical 
accommodation, if the creditor would have extended the credit or treated 
the consumer more favorably under the creditor's otherwise applicable 
underwriting criteria.
    (ii) If a consumer applies for a loan by telephone and explains that 
his income has been and will continue to be interrupted on account of a 
medical condition and that he expects to repay the loan by liquidating 
assets, the

[[Page 596]]

creditor may, but is not required to, evaluate the application using the 
sale of assets as the primary source of repayment, consistent with safe 
and sound practices, provided that the creditor documents the consumer's 
request by recording the oral conversation or making a notation of the 
request in the consumer's file.
    (iii) If a consumer applies for a loan and the application form 
provides a space where the consumer may provide any other information or 
special circumstances, whether medical or non-medical, that the consumer 
would like the creditor to consider in evaluating the consumer's 
application, the creditor may use medical information provided by the 
consumer in that space on that application to accommodate the consumer's 
application for credit, consistent with safe and sound practices, or may 
disregard that information.
    (iv) If a consumer specifically requests that the creditor use 
medical information in determining the consumer's eligibility, or 
continued eligibility, for credit and provides the creditor with medical 
information for that purpose, and the creditor determines that it needs 
additional information regarding the consumer's circumstances, the 
creditor may request, obtain, and use additional medical information 
about the consumer as necessary to verify the information provided by 
the consumer or to determine whether to make an accommodation for the 
consumer. The consumer may decline to provide additional information, 
withdraw the request for an accommodation, and have the application 
considered under the creditor's otherwise applicable underwriting 
criteria.
    (v) If a consumer completes and signs a credit application that is 
not for medical purpose credit and the application contains boilerplate 
language that routinely requests medical information from the consumer 
or that indicates that by applying for credit the consumer authorizes or 
consents to the creditor obtaining and using medical information in 
connection with a determination of the consumer's eligibility, or 
continued eligibility, for credit, the consumer has not specifically 
requested that the creditor obtain and use medical information to 
accommodate the consumer's particular circumstances.
    (5) Example of a forbearance practice or program. After an 
appropriate safety and soundness review, a creditor institutes a program 
that allows consumers who are or will be hospitalized to defer payments 
as needed for up to three months, without penalty, if the credit account 
has been open for more than one year and has not previously been in 
default, and the consumer provides confirming documentation at an 
appropriate time. A consumer is hospitalized and does not pay her bill 
for a particular month. This consumer has had a credit account with the 
creditor for more than one year and has not previously been in default. 
The creditor attempts to contact the consumer and speaks with the 
consumer's adult child, who is not the consumer's legal representative. 
The adult child informs the creditor that the consumer is hospitalized 
and is unable to pay the bill at that time. The creditor defers payments 
for up to three months, without penalty, for the hospitalized consumer 
and sends the consumer a letter confirming this practice and the date on 
which the next payment will be due. The creditor has obtained and used 
medical information to determine whether the provisions of a medically-
triggered forbearance practice or program apply to a consumer.



Sec.  1022.31  Limits on redisclosure of information.

    (a) Scope. This section applies to any person, except for a person 
excluded from coverage of this part by section 1029 of the Consumer 
Financial Protection Act of 2010, title X of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) Limits on redisclosure. If a person described in paragraph (a) 
of this section receives medical information about a consumer from a 
consumer reporting agency or its affiliate, the person must not disclose 
that information to any other person, except as necessary to carry out 
the purpose for which the information was initially disclosed, or as 
otherwise permitted by statute, regulation, or order.

[[Page 597]]



Sec.  1022.32  Sharing medical information with affiliates.

    (a) Scope. This section applies to any person, except for a person 
excluded from coverage of this part by section 1029 of the Consumer 
Financial Protection Act of 2010, title X of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) In general. The exclusions from the term ``consumer report'' in 
section 603(d)(2) of the Act that allow the sharing of information with 
affiliates do not apply to a person described in paragraph (a) of this 
section if that person communicates to an affiliate:
    (1) Medical information;
    (2) An individualized list or description based on the payment 
transactions of the consumer for medical products or services; or
    (3) An aggregate list of identified consumers based on payment 
transactions for medical products or services.
    (c) Exceptions. A person described in paragraph (a) of this section 
may rely on the exclusions from the term ``consumer report'' in section 
603(d)(2) of the Act to communicate the information in paragraph (b) of 
this section to an affiliate:
    (1) In connection with the business of insurance or annuities 
(including the activities described in section 18B of the model Privacy 
of Consumer Financial and Health Information Regulation issued by the 
National Association of Insurance Commissioners, as in effect on January 
1, 2003);
    (2) For any purpose permitted without authorization under the 
regulations promulgated by the Department of Health and Human Services 
pursuant to the Health Insurance Portability and Accountability Act of 
1996 (HIPAA);
    (3) For any purpose referred to in section 1179 of HIPAA;
    (4) For any purpose described in section 502(e) of the Gramm-Leach-
Bliley Act;
    (5) In connection with a determination of the consumer's 
eligibility, or continued eligibility, for credit consistent with Sec.  
1022.30 of this part; or
    (6) As otherwise permitted by order of the Bureau.



              Subpart E_Duties of Furnishers of Information



Sec.  1022.40  Scope.

    Subpart E of this part applies to any person that furnishes 
information to a consumer reporting agency, except for a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376.



Sec.  1022.41  Definitions.

    For purposes of this subpart and appendix E of this part, the 
following definitions apply:
    (a) Accuracy means that information that a furnisher provides to a 
consumer reporting agency about an account or other relationship with 
the consumer correctly:
    (1) Reflects the terms of and liability for the account or other 
relationship;
    (2) Reflects the consumer's performance and other conduct with 
respect to the account or other relationship; and
    (3) Identifies the appropriate consumer.
    (b) Direct dispute means a dispute submitted directly to a furnisher 
(including a furnisher that is a debt collector) by a consumer 
concerning the accuracy of any information contained in a consumer 
report and pertaining to an account or other relationship that the 
furnisher has or had with the consumer.
    (c) Furnisher means an entity that furnishes information relating to 
consumers to one or more consumer reporting agencies for inclusion in a 
consumer report. An entity is not a furnisher when it:
    (1) Provides information to a consumer reporting agency solely to 
obtain a consumer report in accordance with sections 604(a) and (f) of 
the FCRA;
    (2) Is acting as a ``consumer reporting agency'' as defined in 
section 603(f) of the FCRA;
    (3) Is a consumer to whom the furnished information pertains; or
    (4) Is a neighbor, friend, or associate of the consumer, or another 
individual with whom the consumer is acquainted or who may have 
knowledge about the

[[Page 598]]

consumer, and who provides information about the consumer's character, 
general reputation, personal characteristics, or mode of living in 
response to a specific request from a consumer reporting agency.
    (d) Integrity means that information that a furnisher provides to a 
consumer reporting agency about an account or other relationship with 
the consumer:
    (1) Is substantiated by the furnisher's records at the time it is 
furnished;
    (2) Is furnished in a form and manner that is designed to minimize 
the likelihood that the information may be incorrectly reflected in a 
consumer report; and
    (3) Includes the information in the furnisher's possession about the 
account or other relationship that the Bureau has:
    (i) Determined that the absence of which would likely be materially 
misleading in evaluating a consumer's creditworthiness, credit standing, 
credit capacity, character, general reputation, personal 
characteristics, or mode of living; and
    (ii) Listed in section I(b)(2)(iii) of appendix E of this part.



Sec.  1022.42  Reasonable policies and procedures concerning the accuracy 
and integrity of furnished information.

    (a) Policies and procedures. Each furnisher must establish and 
implement reasonable written policies and procedures regarding the 
accuracy and integrity of the information relating to consumers that it 
furnishes to a consumer reporting agency. The policies and procedures 
must be appropriate to the nature, size, complexity, and scope of each 
furnisher's activities.
    (b) Guidelines. Each furnisher must consider the guidelines in 
appendix E of this part in developing its policies and procedures 
required by this section, and incorporate those guidelines that are 
appropriate.
    (c) Reviewing and updating policies and procedures. Each furnisher 
must review its policies and procedures required by this section 
periodically and update them as necessary to ensure their continued 
effectiveness.



Sec.  1022.43  Direct disputes.

    (a) General rule. Except as otherwise provided in this section, a 
furnisher must conduct a reasonable investigation of a direct dispute if 
it relates to:
    (1) The consumer's liability for a credit account or other debt with 
the furnisher, such as direct disputes relating to whether there is or 
has been identity theft or fraud against the consumer, whether there is 
individual or joint liability on an account, or whether the consumer is 
an authorized user of a credit account;
    (2) The terms of a credit account or other debt with the furnisher, 
such as direct disputes relating to the type of account, principal 
balance, scheduled payment amount on an account, or the amount of the 
credit limit on an open-end account;
    (3) The consumer's performance or other conduct concerning an 
account or other relationship with the furnisher, such as direct 
disputes relating to the current payment status, high balance, date a 
payment was made, the amount of a payment made, or the date an account 
was opened or closed; or
    (4) Any other information contained in a consumer report regarding 
an account or other relationship with the furnisher that bears on the 
consumer's creditworthiness, credit standing, credit capacity, 
character, general reputation, personal characteristics, or mode of 
living.
    (b) Exceptions. The requirements of paragraph (a) of this section do 
not apply to a furnisher if:
    (1) The direct dispute relates to:
    (i) The consumer's identifying information (other than a direct 
dispute relating to a consumer's liability for a credit account or other 
debt with the furnisher, as provided in paragraph (a)(1) of this 
section) such as name(s), date of birth, Social Security number, 
telephone number(s), or address(es);
    (ii) The identity of past or present employers;
    (iii) Inquiries or requests for a consumer report;
    (iv) Information derived from public records, such as judgments, 
bankruptcies, liens, and other legal matters (unless provided by a 
furnisher with an account or other relationship with the consumer);

[[Page 599]]

    (v) Information related to fraud alerts or active duty alerts; or
    (vi) Information provided to a consumer reporting agency by another 
furnisher; or
    (2) The furnisher has a reasonable belief that the direct dispute is 
submitted by, is prepared on behalf of the consumer by, or is submitted 
on a form supplied to the consumer by, a credit repair organization, as 
defined in 15 U.S.C. 1679a(3), or an entity that would be a credit 
repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
    (c) Direct dispute address. A furnisher is required to investigate a 
direct dispute only if a consumer submits a dispute notice to the 
furnisher at:
    (1) The address of a furnisher provided by a furnisher and set forth 
on a consumer report relating to the consumer;
    (2) An address clearly and conspicuously specified by the furnisher 
for submitting direct disputes that is provided to the consumer in 
writing or electronically (if the consumer has agreed to the electronic 
delivery of information from the furnisher); or
    (3) Any business address of the furnisher if the furnisher has not 
so specified and provided an address for submitting direct disputes 
under paragraphs (c)(1) or (2) of this section.
    (d) Direct dispute notice contents. A dispute notice must include:
    (1) Sufficient information to identify the account or other 
relationship that is in dispute, such as an account number and the name, 
address, and telephone number of the consumer, if applicable;
    (2) The specific information that the consumer is disputing and an 
explanation of the basis for the dispute; and
    (3) All supporting documentation or other information reasonably 
required by the furnisher to substantiate the basis of the dispute. This 
documentation may include, for example: a copy of the relevant portion 
of the consumer report that contains the allegedly inaccurate 
information; a police report; a fraud or identity theft affidavit; a 
court order; or account statements.
    (e) Duty of furnisher after receiving a direct dispute notice. After 
receiving a dispute notice from a consumer pursuant to paragraphs (c) 
and (d) of this section, the furnisher must:
    (1) Conduct a reasonable investigation with respect to the disputed 
information;
    (2) Review all relevant information provided by the consumer with 
the dispute notice;
    (3) Complete its investigation of the dispute and report the results 
of the investigation to the consumer before the expiration of the period 
under section 611(a)(1) of the FCRA (15 U.S.C. 1681i(a)(1)) within which 
a consumer reporting agency would be required to complete its action if 
the consumer had elected to dispute the information under that section; 
and
    (4) If the investigation finds that the information reported was 
inaccurate, promptly notify each consumer reporting agency to which the 
furnisher provided inaccurate information of that determination and 
provide to the consumer reporting agency any correction to that 
information that is necessary to make the information provided by the 
furnisher accurate.
    (f) Frivolous or irrelevant disputes. (1) A furnisher is not 
required to investigate a direct dispute if the furnisher has reasonably 
determined that the dispute is frivolous or irrelevant. A dispute 
qualifies as frivolous or irrelevant if:
    (i) The consumer did not provide sufficient information to 
investigate the disputed information as required by paragraph (d) of 
this section;
    (ii) The direct dispute is substantially the same as a dispute 
previously submitted by or on behalf of the consumer, either directly to 
the furnisher or through a consumer reporting agency, with respect to 
which the furnisher has already satisfied the applicable requirements of 
the Act or this section; provided, however, that a direct dispute is not 
substantially the same as a dispute previously submitted if the dispute 
includes information listed in paragraph (d) of this section that had 
not previously been provided to the furnisher; or
    (iii) The furnisher is not required to investigate the direct 
dispute because one or more of the exceptions listed in paragraph (b) of 
this section applies.

[[Page 600]]

    (2) Notice of determination. Upon making a determination that a 
dispute is frivolous or irrelevant, the furnisher must notify the 
consumer of the determination not later than five business days after 
making the determination, by mail or, if authorized by the consumer for 
that purpose, by any other means available to the furnisher.
    (3) Contents of notice of determination that a dispute is frivolous 
or irrelevant. A notice of determination that a dispute is frivolous or 
irrelevant must include the reasons for such determination and identify 
any information required to investigate the disputed information, which 
notice may consist of a standardized form describing the general nature 
of such information.



Subpart F_Duties of Users Regarding Obtaining and Using Consumer Reports



Sec. Sec.  1022.50-1022.53  [Reserved]



Sec.  1022.54  Duties of users making written firm offers of credit or 
insurance based on information contained in consumer files.

    (a) Scope. This subpart applies to any person who uses a consumer 
report on any consumer in connection with any credit or insurance 
transaction that is not initiated by the consumer, and that is provided 
to that person under section 604(c)(1)(B) of the FCRA (15 U.S.C. 
1681b(c)(1)(B)), except for a person excluded from coverage of this part 
by section 1029 of the Consumer Financial Protection Act of 2010, title 
X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 137.
    (b) Definitions. For purposes of this section and appendix D of this 
part, the following definitions apply:
    (1) Simple and easy to understand means:
    (i) A layered format as described in paragraph (c) of this section;
    (ii) Plain language designed to be understood by ordinary consumers; 
and
    (iii) Use of clear and concise sentences, paragraphs, and sections.
    (iv) Examples. For purposes of this part, examples of factors to be 
considered in determining whether a statement is in plain language and 
uses clear and concise sentences, paragraphs, and sections include:
    (A) Use of short explanatory sentences;
    (B) Use of definite, concrete, everyday words;
    (C) Use of active voice;
    (D) Avoidance of multiple negatives;
    (E) Avoidance of legal and technical business terminology;
    (F) Avoidance of explanations that are imprecise and reasonably 
subject to different interpretations; and
    (G) Use of language that is not misleading.
    (2) Principal promotional document means the document designed to be 
seen first by the consumer, such as the cover letter.
    (c) Prescreen opt-out notice. Any person who uses a consumer report 
on any consumer in connection with any credit or insurance transaction 
that is not initiated by the consumer, and that is provided to that 
person under section 604(c)(1)(B) of the FCRA (15 U.S.C. 
1681b(c)(1)(B)), shall, with each written solicitation made to the 
consumer about the transaction, provide the consumer with the following 
statement, consisting of a short portion and a long portion, which shall 
be in the same language as the offer of credit or insurance:
    (1) Short notice. The short notice shall be a clear and conspicuous, 
and simple and easy to understand statement as follows:
    (i) Content. The short notice shall state that the consumer has the 
right to opt out of receiving prescreened solicitations, and shall 
provide the toll-free number the consumer can call to exercise that 
right. The short notice also shall direct the consumer to the existence 
and location of the long notice, and shall state the heading for the 
long notice. The short notice shall not contain any other information.
    (ii) Form. The short notice shall be:
    (A) In a type size that is larger than the type size of the 
principal text on the same page, but in no event smaller than 12 point 
type, or if provided by electronic means, then reasonable steps shall be 
taken to ensure that the type size is larger than the type size of the 
principal text on the same page;

[[Page 601]]

    (B) On the front side of the first page of the principal promotional 
document in the solicitation, or, if provided electronically, on the 
same page and in close proximity to the principal marketing message;
    (C) Located on the page and in a format so that the statement is 
distinct from other text, such as inside a border; and
    (D) In a type style that is distinct from the principal type style 
used on the same page, such as bolded, italicized, underlined, and/or in 
a color that contrasts with the color of the principal text on the page, 
if the solicitation is in more than one color.
    (2) Long notice. The long notice shall be a clear and conspicuous, 
and simple and easy to understand statement as follows:
    (i) Content. The long notice shall state the information required by 
section 615(d) of the Fair Credit Reporting Act (15 U.S.C. 1681m(d)). 
The long notice shall not include any other information that interferes 
with, detracts from, contradicts, or otherwise undermines the purpose of 
the notice.
    (ii) Form. The long notice shall:
    (A) Appear in the solicitation;
    (B) Be in a type size that is no smaller than the type size of the 
principal text on the same page, and, for solicitations provided other 
than by electronic means, the type size shall in no event be smaller 
than 8 point type;
    (C) Begin with a heading in capital letters and underlined, and 
identifying the long notice as the ``PRESCREEN&OPT-OUT NOTICE;''
    (D) Be in a type style that is distinct from the principal type 
style used on the same page, such as bolded, italicized, underlined, 
and/or in a color that contrasts with the color of the principal text on 
the page, if the solicitation is in more than one color; and
    (E) Be set apart from other text on the page, such as by including a 
blank line above and below the statement, and by indenting both the left 
and right margins from other text on the page.



Sec. Sec.  1022.55-1022.59  [Reserved]

Subpart G [Reserved]



         Subpart H_Duties of Users Regarding Risk-Based Pricing



Sec.  1022.70  Scope.

    (a) Coverage--(1) In general. This subpart applies to any person, 
except for a person excluded from coverage of this part by section 1029 
of the Consumer Financial Protection Act of 2010, title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 124 Stat. 137, that both:
    (i) Uses a consumer report in connection with an application for, or 
a grant, extension, or other provision of, credit to a consumer that is 
primarily for personal, family, or household purposes; and
    (ii) Based in whole or in part on the consumer report, grants, 
extends, or otherwise provides credit to the consumer on material terms 
that are materially less favorable than the most favorable material 
terms available to a substantial proportion of consumers from or through 
that person.
    (2) Business credit excluded. This subpart does not apply to an 
application for, or a grant, extension, or other provision of, credit to 
a consumer or to any other applicant primarily for a business purpose.
    (b) Enforcement. The provisions of this subpart will be enforced in 
accordance with the enforcement authority set forth in sections 621(a) 
and (b) of the FCRA.



Sec.  1022.71  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Adverse action has the same meaning as in 15 U.S.C. 
1681a(k)(1)(A).
    (b) Annual percentage rate has the same meaning as in 12 CFR 
1026.14(b) with respect to an open-end credit plan and as in 12 CFR 
1026.22 with respect to closed-end credit.
    (c) Closed-end credit has the same meaning as in 12 CFR 
1026.2(a)(10).
    (d) Consumer has the same meaning as in 15 U.S.C. 1681a(c).
    (e) Consummation has the same meaning as in 12 CFR 1026.2(a)(13).
    (f) Consumer report has the same meaning as in 15 U.S.C. 1681a(d).
    (g) Consumer reporting agency has the same meaning as in 15 U.S.C. 
1681a(f).

[[Page 602]]

    (h) Credit has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (i) Creditor has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (j) Credit card has the same meaning as in 15 U.S.C. 1681a(r)(2).
    (k) Credit card issuer has the same meaning as card issuer, as 
defined in 15 U.S.C. 1681a(r)(1)(A).
    (l) Credit score has the same meaning as in 15 U.S.C. 
1681g(f)(2)(A).
    (m) Firm offer of credit has the same meaning as in 15 U.S.C. 
1681a(l).
    (n) Material terms means:
    (1)(i) Except as otherwise provided in paragraphs (n)(1)(ii) and 
(n)(3) of this section, in the case of credit extended under an open-end 
credit plan, the annual percentage rate required to be disclosed under 
12 CFR 1026.6(a)(1)(ii) or 12 CFR 1026.6(b)(2)(i), excluding any 
temporary initial rate that is lower than the rate that will apply after 
the temporary rate expires, any penalty rate that will apply upon the 
occurrence of one or more specific events, such as a late payment or an 
extension of credit that exceeds the credit limit, and any fixed annual 
percentage rate option for a home equity line of credit;
    (ii) In the case of a credit card (other than a credit card that is 
used to access a home equity line of credit or a charge card), the 
annual percentage rate required to be disclosed under 12 CFR 
1026.6(b)(2)(i) that applies to purchases (``purchase annual percentage 
rate'') and no other annual percentage rate, or in the case of a credit 
card that has no purchase annual percentage rate, the annual percentage 
rate that varies based on information in a consumer report and that has 
the most significant financial impact on consumers;
    (2) In the case of closed-end credit, the annual percentage rate 
required to be disclosed under 12 CFR 1026.17(c) and 1026.18(e); and
    (3) In the case of credit for which there is no annual percentage 
rate, the financial term that varies based on information in a consumer 
report and that has the most significant financial impact on consumers, 
such as a deposit required in connection with credit extended by a 
telephone company or utility or an annual membership fee for a charge 
card.
    (o) Materially less favorable means, when applied to material terms, 
that the terms granted, extended, or otherwise provided to a consumer 
differ from the terms granted, extended, or otherwise provided to 
another consumer from or through the same person such that the cost of 
credit to the first consumer would be significantly greater than the 
cost of credit granted, extended, or otherwise provided to the other 
consumer. For purposes of this definition, factors relevant to 
determining the significance of a difference in cost include the type of 
credit product, the term of the credit extension, if any, and the extent 
of the difference between the material terms granted, extended, or 
otherwise provided to the two consumers.
    (p) Open-end credit plan has the same meaning as in 15 U.S.C. 
1602(i), as interpreted by the Bureau in Regulation Z (12 CFR part 1026) 
and the Official Interpretations to Regulation Z (Supplement I to 12 CFR 
part 1026).
    (q) Person has the same meaning as in 15 U.S.C. 1681a(b).



Sec.  1022.72  General requirements for risk-based pricing notices.

    (a) In general. Except as otherwise provided in this subpart, a 
person must provide to a consumer a notice (``risk-based pricing 
notice'') in the form and manner required by this subpart if the person 
both:
    (1) Uses a consumer report in connection with an application for, or 
a grant, extension, or other provision of, credit to that consumer that 
is primarily for personal, family, or household purposes; and
    (2) Based in whole or in part on the consumer report, grants, 
extends, or otherwise provides credit to that consumer on material terms 
that are materially less favorable than the most favorable material 
terms available to a substantial proportion of consumers from or through 
that person.
    (b) Determining which consumers must receive a notice. A person may 
determine whether paragraph (a) of this section applies by directly 
comparing the material terms offered to each consumer and the material 
terms offered to other consumers for a specific type of credit product. 
For purposes of this

[[Page 603]]

section, a ``specific type of credit product'' means one or more credit 
products with similar features that are designed for similar purposes. 
Examples of a specific type of credit product include student loans, 
unsecured credit cards, secured credit cards, new automobile loans, used 
automobile loans, fixed-rate mortgage loans, and variable-rate mortgage 
loans. As an alternative to making this direct comparison, a person may 
make the determination by using one of the following methods:
    (1) Credit score proxy method--(i) In general. A person that sets 
the material terms of credit granted, extended, or otherwise provided to 
a consumer, based in whole or in part on a credit score, may comply with 
the requirements of paragraph (a) of this section by:
    (A) Determining the credit score (hereafter referred to as the 
``cutoff score'') that represents the point at which approximately 40 
percent of the consumers to whom it grants, extends, or provides credit 
have higher credit scores and approximately 60 percent of the consumers 
to whom it grants, extends, or provides credit have lower credit scores; 
and
    (B) Providing a risk-based pricing notice to each consumer to whom 
it grants, extends, or provides credit whose credit score is lower than 
the cutoff score.
    (ii) Alternative to the 40/60 cutoff score determination. In the 
case of credit that has been granted, extended, or provided on the most 
favorable material terms to more than 40 percent of consumers, a person 
may, at its option, set its cutoff score at a point at which the 
approximate percentage of consumers who historically have been granted, 
extended, or provided credit on material terms other than the most 
favorable terms would receive risk-based pricing notices under this 
section.
    (iii) Determining the cutoff score--(A) Sampling approach. A person 
that currently uses risk-based pricing with respect to the credit 
products it offers must calculate the cutoff score by considering the 
credit scores of all or a representative sample of the consumers to whom 
it has granted, extended, or provided credit for a specific type of 
credit product.
    (B) Secondary source approach in limited circumstances. A person 
that is a new entrant into the credit business, introduces new credit 
products, or starts to use risk-based pricing with respect to the credit 
products it currently offers may initially determine the cutoff score 
based on information derived from appropriate market research or 
relevant third-party sources for a specific type of credit product, such 
as research or data from companies that develop credit scores. A person 
that acquires a credit portfolio as a result of a merger or acquisition 
may determine the cutoff score based on information from the party which 
it acquired, with which it merged, or from which it acquired the 
portfolio.
    (C) Recalculation of cutoff scores. A person using the credit score 
proxy method must recalculate its cutoff score(s) no less than every two 
years in the manner described in paragraph (b)(1)(iii)(A) of this 
section. A person using the credit score proxy method using market 
research, third-party data, or information from a party which it 
acquired, with which it merged, or from which it acquired the portfolio 
as permitted by paragraph (b)(1)(iii)(B) of this section generally must 
calculate a cutoff score(s) based on the scores of its own consumers in 
the manner described in paragraph (b)(1)(iii)(A) of this section within 
one year after it begins using a cutoff score derived from market 
research, third-party data, or information from a party which it 
acquired, with which it merged, or from which it acquired the portfolio. 
If such a person does not grant, extend, or provide credit to new 
consumers during that one-year period such that it lacks sufficient data 
with which to recalculate a cutoff score based on the credit scores of 
its own consumers, the person may continue to use a cutoff score derived 
from market research, third-party data, or information from a party 
which it acquired, with which it merged, or from which it acquired the 
portfolio as provided in paragraph (b)(1)(iii)(B) until it obtains 
sufficient data on which to base the recalculation. However, the person 
must recalculate its cutoff score(s) in the

[[Page 604]]

manner described in paragraph (b)(1)(iii)(A) of this section within two 
years, if it has granted, extended, or provided credit to some new 
consumers during that two-year period.
    (D) Use of two or more credit scores. A person that generally uses 
two or more credit scores in setting the material terms of credit 
granted, extended, or provided to a consumer must determine the cutoff 
score using the same method the person uses to evaluate multiple scores 
when making credit decisions. These evaluation methods may include, but 
are not limited to, selecting the low, median, high, most recent, or 
average credit score of each consumer to whom it grants, extends, or 
provides credit. If a person that uses two or more credit scores does 
not consistently use the same method for evaluating multiple credit 
scores (e.g., if the person sometimes chooses the median score and other 
times calculates the average score), the person must determine the 
cutoff score using a reasonable means. In such cases, use of any one of 
the methods that the person regularly uses or the average credit score 
of each consumer to whom it grants, extends, or provides credit is 
deemed to be a reasonable means of calculating the cutoff score.
    (iv) Credit score not available. For purposes of this section, a 
person using the credit score proxy method who grants, extends, or 
provides credit to a consumer for whom a credit score is not available 
must assume that the consumer receives credit on material terms that are 
materially less favorable than the most favorable credit terms offered 
to a substantial proportion of consumers from or through that person and 
must provide a risk-based pricing notice to the consumer.
    (v) Examples. (A) A credit card issuer engages in risk-based pricing 
and the annual percentage rates it offers to consumers are based in 
whole or in part on a credit score. The credit card issuer takes a 
representative sample of the credit scores of consumers to whom it 
issued credit cards within the preceding three months. The credit card 
issuer determines that approximately 40 percent of the sampled consumers 
have a credit score at or above 720 (on a scale of 350 to 850) and 
approximately 60 percent of the sampled consumers have a credit score 
below 720. Thus, the card issuer selects 720 as its cutoff score. A 
consumer applies to the credit card issuer for a credit card. The card 
issuer obtains a credit score for the consumer. The consumer's credit 
score is 700. Since the consumer's 700 credit score falls below the 720 
cutoff score, the credit card issuer must provide a risk-based pricing 
notice to the consumer.
    (B) A credit card issuer engages in risk-based pricing, and the 
annual percentage rates it offers to consumers are based in whole or in 
part on a credit score. The credit card issuer takes a representative 
sample of the consumers to whom it issued credit cards over the 
preceding six months. The credit card issuer determines that 
approximately 80 percent of the sampled consumers received credit at its 
lowest annual percentage rate, and 20 percent received credit at a 
higher annual percentage rate. Approximately 80 percent of the sampled 
consumers have a credit score at or above 750 (on a scale of 350 to 
850), and 20 percent have a credit score below 750. Thus, the card 
issuer selects 750 as its cutoff score. A consumer applies to the credit 
card issuer for a credit card. The card issuer obtains a credit score 
for the consumer. The consumer's credit score is 740. Since the 
consumer's 740 credit score falls below the 750 cutoff score, the credit 
card issuer must provide a risk-based pricing notice to the consumer.
    (C) An auto lender engages in risk-based pricing, obtains credit 
scores from one of the nationwide consumer reporting agencies, and uses 
the credit score proxy method to determine which consumers must receive 
a risk-based pricing notice. A consumer applies to the auto lender for 
credit to finance the purchase of an automobile. A credit score about 
that consumer is not available from the consumer reporting agency from 
which the lender obtains credit scores. The lender nevertheless grants, 
extends, or provides credit to the consumer. The lender must provide a 
risk-based pricing notice to the consumer.
    (2) Tiered pricing method--(i) In general. A person that sets the 
material terms of credit granted, extended, or provided to a consumer by 
placing the

[[Page 605]]

consumer within one of a discrete number of pricing tiers for a specific 
type of credit product, based in whole or in part on a consumer report, 
may comply with the requirements of paragraph (a) of this section by 
providing a risk-based pricing notice to each consumer who is not placed 
within the top pricing tier or tiers, as described below.
    (ii) Four or fewer pricing tiers. If a person using the tiered 
pricing method has four or fewer pricing tiers, the person complies with 
the requirements of paragraph (a) of this section by providing a risk-
based pricing notice to each consumer to whom it grants, extends, or 
provides credit who does not qualify for the top tier (that is, the 
lowest-priced tier). For example, a person that uses a tiered pricing 
structure with annual percentage rates of 8, 10, 12, and 14 percent 
would provide the risk-based pricing notice to each consumer to whom it 
grants, extends, or provides credit at annual percentage rates of 10, 
12, and 14 percent.
    (iii) Five or more pricing tiers. If a person using the tiered 
pricing method has five or more pricing tiers, the person complies with 
the requirements of paragraph (a) of this section by providing a risk-
based pricing notice to each consumer to whom it grants, extends, or 
provides credit who does not qualify for the top two tiers (that is, the 
two lowest-priced tiers) and any other tier that, together with the top 
tiers, comprise no less than the top 30 percent but no more than the top 
40 percent of the total number of tiers. Each consumer placed within the 
remaining tiers must receive a risk-based pricing notice. For example, 
if a person has nine pricing tiers, the top three tiers (that is, the 
three lowest-priced tiers) comprise no less than the top 30 percent but 
no more than the top 40 percent of the tiers. Therefore, a person using 
this method would provide a risk-based pricing notice to each consumer 
to whom it grants, extends, or provides credit who is placed within the 
bottom six tiers.
    (c) Application to credit card issuers--(1) In general. A credit 
card issuer subject to the requirements of paragraph (a) of this section 
may use one of the methods set forth in paragraph (b) of this section to 
identify consumers to whom it must provide a risk-based pricing notice. 
Alternatively, a credit card issuer may satisfy its obligations under 
paragraph (a) of this section by providing a risk-based pricing notice 
to a consumer when:
    (i) A consumer applies for a credit card either in connection with 
an application program, such as a direct-mail offer or a take-one 
application, or in response to a solicitation under 12 CFR 1026.60, and 
more than a single possible purchase annual percentage rate may apply 
under the program or solicitation; and
    (ii) Based in whole or in part on a consumer report, the credit card 
issuer provides a credit card to the consumer with an annual percentage 
rate referenced in Sec.  1022.71(n)(1)(ii) that is greater than the 
lowest annual percentage rate referenced in Sec.  1022.71(n)(1)(ii) 
available in connection with the application or solicitation.
    (2) No requirement to compare different offers. A credit card issuer 
is not subject to the requirements of paragraph (a) of this section and 
is not required to provide a risk-based pricing notice to a consumer if:
    (i) The consumer applies for a credit card for which the card issuer 
provides a single annual percentage rate referenced in Sec.  
1022.71(n)(1)(ii), excluding a temporary initial rate that is lower than 
the rate that will apply after the temporary rate expires and a penalty 
rate that will apply upon the occurrence of one or more specific events, 
such as a late payment or an extension of credit that exceeds the credit 
limit; or
    (ii) The credit card issuer offers the consumer the lowest annual 
percentage rate referenced in Sec.  1022.71(n)(1)(ii) available under 
the credit card offer for which the consumer applied, even if a lower 
annual percentage rate referenced in Sec.  1022.71(n)(1)(ii) is 
available under a different credit card offer issued by the card issuer.
    (3) Examples. (i) A credit card issuer sends a solicitation to the 
consumer that discloses several possible purchase annual percentage 
rates that may apply, such as 10, 12, or 14 percent, or a range of 
purchase annual percentage

[[Page 606]]

rates from 10 to 14 percent. The consumer applies for a credit card in 
response to the solicitation. The card issuer provides a credit card to 
the consumer with a purchase annual percentage rate of 12 percent based 
in whole or in part on a consumer report. Unless an exception applies 
under Sec.  1022.74, the card issuer may satisfy its obligations under 
paragraph (a) of this section by providing a risk-based pricing notice 
to the consumer because the consumer received credit at a purchase 
annual percentage rate greater than the lowest purchase annual 
percentage rate available under that solicitation.
    (ii) The same facts as in the example in paragraph (c)(3)(i) of this 
section, except that the card issuer provides a credit card to the 
consumer at a purchase annual percentage rate of 10 percent. The card 
issuer is not required to provide a risk-based pricing notice to the 
consumer even if, under a different credit card solicitation, that 
consumer or other consumers might qualify for a purchase annual 
percentage rate of 8 percent.
    (d) Account review--(1) In general. Except as otherwise provided in 
this subpart, a person is subject to the requirements of paragraph (a) 
of this section and must provide a risk-based pricing notice to a 
consumer in the form and manner required by this subpart if the person:
    (i) Uses a consumer report in connection with a review of credit 
that has been extended to the consumer; and
    (ii) Based in whole or in part on the consumer report, increases the 
annual percentage rate (the annual percentage rate referenced in Sec.  
1022.71(n)(1)(ii) in the case of a credit card).
    (2) Example. A credit card issuer periodically obtains consumer 
reports for the purpose of reviewing the terms of credit it has extended 
to consumers in connection with credit cards. As a result of this 
review, the credit card issuer increases the purchase annual percentage 
rate applicable to a consumer's credit card based in whole or in part on 
information in a consumer report. The credit card issuer is subject to 
the requirements of paragraph (a) of this section and must provide a 
risk-based pricing notice to the consumer.



Sec.  1022.73  Content, form, and timing of risk-based pricing notices.

    (a) Content of the notice--(1) In general. The risk-based pricing 
notice required by Sec.  1022.72(a) or (c) must include:
    (i) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that history;
    (ii) A statement that the terms offered, such as the annual 
percentage rate, have been set based on information from a consumer 
report;
    (iii) A statement that the terms offered may be less favorable than 
the terms offered to consumers with better credit histories;
    (iv) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (v) The identity of each consumer reporting agency that furnished a 
consumer report used in the credit decision;
    (vi) A statement that Federal law gives the consumer the right to 
obtain a copy of a consumer report from the consumer reporting agency or 
agencies identified in the notice without charge for 60 days after 
receipt of the notice;
    (vii) A statement informing the consumer how to obtain a consumer 
report from the consumer reporting agency or agencies identified in the 
notice and providing contact information (including a toll-free 
telephone number, where applicable) specified by the consumer reporting 
agency or agencies;
    (viii) A statement directing consumers to the Web site of the Bureau 
to obtain more information about consumer reports; and
    (ix) If a credit score of the consumer to whom a person grants, 
extends, or otherwise provides credit is used in setting the material 
terms of credit:
    (A) A statement that a credit score is a number that takes into 
account information in a consumer report, that the consumer's credit 
score was used to set the terms of credit offered, and that a credit 
score can change over time to reflect changes in the consumer's credit 
history;

[[Page 607]]

    (B) The credit score used by the person in making the credit 
decision;
    (C) The range of possible credit scores under the model used to 
generate the credit score;
    (D) All of the key factors that adversely affected the credit score, 
which shall not exceed four key factors, except that if one of the key 
factors is the number of enquiries made with respect to the consumer 
report, the number of key factors shall not exceed five;
    (E) The date on which the credit score was created; and
    (F) The name of the consumer reporting agency or other person that 
provided the credit score.
    (2) Account review. The risk-based pricing notice required by Sec.  
1022.72(d) must include:
    (i) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that credit history;
    (ii) A statement that the person has conducted a review of the 
account using information from a consumer report;
    (iii) A statement that as a result of the review, the annual 
percentage rate on the account has been increased based on information 
from a consumer report;
    (iv) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (v) The identity of each consumer reporting agency that furnished a 
consumer report used in the account review;
    (vi) A statement that Federal law gives the consumer the right to 
obtain a copy of a consumer report from the consumer reporting agency or 
agencies identified in the notice without charge for 60 days after 
receipt of the notice;
    (vii) A statement informing the consumer how to obtain a consumer 
report from the consumer reporting agency or agencies identified in the 
notice and providing contact information (including a toll-free 
telephone number, where applicable) specified by the consumer reporting 
agency or agencies;
    (viii) A statement directing consumers to the Web site of the Bureau 
to obtain more information about consumer reports; and
    (ix) If a credit score of the consumer whose extension of credit is 
under review is used in increasing the annual percentage rate:
    (A) A statement that a credit score is a number that takes into 
account information in a consumer report, that the consumer's credit 
score was used to set the terms of credit offered, and that a credit 
score can change over time to reflect changes in the consumer's credit 
history;
    (B) The credit score used by the person in making the credit 
decision;
    (C) The range of possible credit scores under the model used to 
generate the credit score;
    (D) All of the key factors that adversely affected the credit score, 
which shall not exceed four key factors, except that if one of the key 
factors is the number of enquires made with respect to the consumer 
report, the number of key factors shall not exceed five;
    (E) The date on which the credit score was created; and
    (F) The name of the consumer reporting agency or other person that 
provided the credit score.
    (b) Form of the notice--(1) In general. The risk-based pricing 
notice required by Sec.  1022.72(a), (c), or (d) must be:
    (i) Clear and conspicuous; and
    (ii) Provided to the consumer in oral, written, or electronic form.
    (2) Model forms. Model forms of the risk-based pricing notice 
required by Sec.  1022.72(a) and (c) are contained in appendices H-1 and 
H-6 of this part. Appropriate use of Model Form H-1 or H-6 is deemed to 
comply with the requirements of Sec.  1022.72(a) and (c). Model forms of 
the risk-based pricing notice required by Sec.  1022.72(d) are contained 
in appendices H-2 and H-7 of this part. Appropriate use of Model Form H-
2 or H-7 is deemed to comply with the requirements of Sec.  1022.72(d). 
Use of the model forms is optional.
    (c) Timing--(1) General. Except as provided in paragraph (c)(3) of 
this section, a risk-based pricing notice must be provided to the 
consumer:
    (i) In the case of a grant, extension, or other provision of closed-
end credit,

[[Page 608]]

before consummation of the transaction, but not earlier than the time 
the decision to approve an application for, or a grant, extension, or 
other provision of, credit, is communicated to the consumer by the 
person required to provide the notice;
    (ii) In the case of credit granted, extended, or provided under an 
open-end credit plan, before the first transaction is made under the 
plan, but not earlier than the time the decision to approve an 
application for, or a grant, extension, or other provision of, credit is 
communicated to the consumer by the person required to provide the 
notice; or
    (iii) In the case of a review of credit that has been extended to 
the consumer, at the time the decision to increase the annual percentage 
rate (annual percentage rate referenced in Sec.  1022.71(n)(1)(ii) in 
the case of a credit card) based on a consumer report is communicated to 
the consumer by the person required to provide the notice, or if no 
notice of the increase in the annual percentage rate is provided to the 
consumer prior to the effective date of the change in the annual 
percentage rate (to the extent permitted by law), no later than five 
days after the effective date of the change in the annual percentage 
rate.
    (2) Application to certain automobile lending transactions. When a 
person to whom a credit obligation is initially payable grants, extends, 
or provides credit to a consumer for the purpose of financing the 
purchase of an automobile from an auto dealer or other party that is not 
affiliated with the person, any requirement to provide a risk-based 
pricing notice pursuant to this subpart is satisfied if the person:
    (i) Provides a notice described in Sec. Sec.  1022.72(a), 
1022.74(e), or 1022.74(f) to the consumer within the time periods set 
forth in paragraph (c)(1)(i) of this section, Sec.  1022.74(e)(3), or 
Sec.  1022.74(f)(4), as applicable; or
    (ii) Arranges to have the auto dealer or other party provide a 
notice described in Sec. Sec.  1022.72(a), 1022.74(e), or 1022.74(f) to 
the consumer on its behalf within the time periods set forth in 
paragraph (c)(1)(i) of this section, Sec.  1022.74(e)(3), or Sec.  
1022.74(f)(4), as applicable, and maintains reasonable policies and 
procedures to verify that the auto dealer or other party provides such 
notice to the consumer within the applicable time periods. If the person 
arranges to have the auto dealer or other party provide a notice 
described in Sec.  1022.74(e), the person's obligation is satisfied if 
the consumer receives a notice containing a credit score obtained by the 
dealer or other party, even if a different credit score is obtained and 
used by the person on whose behalf the notice is provided.
    (3) Timing requirements for contemporaneous purchase credit. When 
credit under an open-end credit plan is granted, extended, or provided 
to a consumer in person or by telephone for the purpose of financing the 
contemporaneous purchase of goods or services, any risk-based pricing 
notice required to be provided pursuant to this subpart (or the 
disclosures permitted under Sec.  1022.74(e) or (f)) may be provided at 
the earlier of:
    (i) The time of the first mailing by the person to the consumer 
after the decision is made to approve the grant, extension, or other 
provision of open-end credit, such as in a mailing containing the 
account agreement or a credit card; or
    (ii) Within 30 days after the decision to approve the grant, 
extension, or other provision of credit.
    (d) Multiple credit scores--(1) In general. When a person obtains or 
creates two or more credit scores and uses one of those credit scores in 
setting the material terms of credit, for example, by using the low, 
middle, high, or most recent score, the notices described in paragraphs 
(a)(1) and (2) of this section must include that credit score and 
information relating to that credit score required by paragraphs 
(a)(1)(ix) and (a)(2)(ix). When a person obtains or creates two or more 
credit scores and uses multiple credit scores in setting the material 
terms of credit by, for example, computing the average of all the credit 
scores obtained or created, the notices described in paragraphs (a)(1) 
and (2) of this section must include one of those credit scores and 
information relating to credit scores required by paragraphs (a)(1)(ix) 
and (a)(2)(ix). The notice may, at the person's option, include more 
than one credit score, along

[[Page 609]]

with the additional information specified in paragraphs (a)(1)(ix) and 
(a)(2)(ix) of this section for each credit score disclosed.
    (2) Examples. (i) A person that uses consumer reports to set the 
material terms of credit cards granted, extended, or provided to 
consumers regularly requests credit scores from several consumer 
reporting agencies and uses the low score when determining the material 
terms it will offer to the consumer. That person must disclose the low 
score in the notices described in paragraphs (a)(1) and (2) of this 
section.
    (ii) A person that uses consumer reports to set the material terms 
of automobile loans granted, extended, or provided to consumers 
regularly requests credit scores from several consumer reporting 
agencies, each of which it uses in an underwriting program in order to 
determine the material terms it will offer to the consumer. That person 
may choose one of these scores to include in the notices described in 
paragraph (a)(1) and (2) of this section.



Sec.  1022.74  Exceptions.

    (a) Application for specific terms--(1) In general. A person is not 
required to provide a risk-based pricing notice to the consumer under 
Sec.  1022.72(a) or (c) if the consumer applies for specific material 
terms and is granted those terms, unless those terms were specified by 
the person using a consumer report after the consumer applied for or 
requested credit and after the person obtained the consumer report. For 
purposes of this section, ``specific material terms'' means a single 
material term, or set of material terms, such as an annual percentage 
rate of 10 percent, and not a range of alternatives, such as an annual 
percentage rate that may be 8, 10, or 12 percent, or between 8 and 12 
percent.
    (2) Example. A consumer receives a firm offer of credit from a 
credit card issuer. The terms of the firm offer are based in whole or in 
part on information from a consumer report that the credit card issuer 
obtained under the FCRA's firm offer of credit provisions. The 
solicitation offers the consumer a credit card with a single purchase 
annual percentage rate of 12 percent. The consumer applies for and 
receives a credit card with an annual percentage rate of 12 percent. 
Other customers with the same credit card have a purchase annual 
percentage rate of 10 percent. The exception applies because the 
consumer applied for specific material terms and was granted those 
terms. Although the credit card issuer specified the annual percentage 
rate in the firm offer of credit based in whole or in part on a consumer 
report, the credit card issuer specified that material term before, not 
after, the consumer applied for or requested credit.
    (b) Adverse action notice. A person is not required to provide a 
risk-based pricing notice to the consumer under Sec.  1022.72(a), (c), 
or (d) if the person provides an adverse action notice to the consumer 
under section 615(a) of the FCRA.
    (c) Prescreened solicitations--(1) In general. A person is not 
required to provide a risk-based pricing notice to the consumer under 
Sec.  1022.72(a) or (c) if the person:
    (i) Obtains a consumer report that is a prescreened list as 
described in section 604(c)(2) of the FCRA; and
    (ii) Uses the consumer report for the purpose of making a firm offer 
of credit to the consumer.
    (2) More favorable material terms. This exception applies to any 
firm offer of credit offered by a person to a consumer, even if the 
person makes other firm offers of credit to other consumers on more 
favorable material terms.
    (3) Example. A credit card issuer obtains two prescreened lists from 
a consumer reporting agency. One list includes consumers with high 
credit scores. The other list includes consumers with low credit scores. 
The issuer mails a firm offer of credit to the high credit score 
consumers with a single purchase annual percentage rate of 10 percent. 
The issuer also mails a firm offer of credit to the low credit score 
consumers with a single purchase annual percentage rate of 14 percent. 
The credit card issuer is not required to provide a risk-based pricing 
notice to the low credit score consumers who receive the 14 percent 
offer because use of a consumer report to make a firm offer of credit 
does not trigger the risk-based pricing notice requirement.

[[Page 610]]

    (d) Loans secured by residential real property--credit score 
disclosure--(1) In general. A person is not required to provide a risk-
based pricing notice to a consumer under Sec.  1022.72(a) or (c) if:
    (i) The consumer requests from the person an extension of credit 
that is or will be secured by one to four units of residential real 
property; and
    (ii) The person provides to each consumer described in paragraph 
(d)(1)(i) of this section a notice that contains the following:
    (A) A statement that a consumer report (or credit report) is a 
record of the consumer's credit history and includes information about 
whether the consumer pays his or her obligations on time and how much 
the consumer owes to creditors;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time to reflect changes in the consumer's credit history;
    (C) A statement that the consumer's credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;
    (D) The information required to be disclosed to the consumer 
pursuant to section 609(g) of the FCRA;
    (E) The distribution of credit scores among consumers who are scored 
under the same scoring model that is used to generate the consumer's 
credit score using the same scale as that of the credit score that is 
provided to the consumer, presented in the form of a bar graph 
containing a minimum of six bars that illustrates the percentage of 
consumers with credit scores within the range of scores reflected in 
each bar or by other clear and readily understandable graphical means, 
or a clear and readily understandable statement informing the consumer 
how his or her credit score compares to the scores of other consumers. 
Use of a graph or statement obtained from the person providing the 
credit score that meets the requirements of this paragraph (d)(1)(ii)(E) 
is deemed to comply with this requirement;
    (F) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;
    (G) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free report from each of the nationwide 
consumer reporting agencies once during any 12-month period;
    (H) Contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (I) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Form of the notice. The notice described in paragraph (d)(1)(ii) 
of this section must be:
    (i) Clear and conspicuous;
    (ii) Provided on or with the notice required by section 609(g) of 
the FCRA;
    (iii) Segregated from other information provided to the consumer, 
except for the notice required by section 609(g) of the FCRA; and
    (iv) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (3) Timing. The notice described in paragraph (d)(1)(ii) of this 
section must be provided to the consumer at the time the disclosure 
required by section 609(g) of the FCRA is provided to the consumer, but 
in any event at or before consummation in the case of closed-end credit 
or before the first transaction is made under an open-end credit plan.
    (4) Multiple credit scores--(i) In general. When a person obtains 
two or more credit scores from consumer reporting agencies and uses one 
of those credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by using the 
low, middle, high, or most recent score, the notice described in 
paragraph (d)(1)(ii) of this section must include that credit score and 
the other information required by that paragraph. When a person obtains 
two or more credit scores from consumer reporting agencies and uses 
multiple credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer,

[[Page 611]]

for example, by computing the average of all the credit scores obtained, 
the notice described in paragraph (d)(1)(ii) of this section must 
include one of those credit scores and the other information required by 
that paragraph. The notice may, at the person's option, include more 
than one credit score, along with the additional information specified 
in paragraph (d)(1)(ii) of this section for each credit score disclosed.
    (ii) Examples. (A) A person that uses consumer reports to set the 
material terms of mortgage credit granted, extended, or provided to 
consumers regularly requests credit scores from several consumer 
reporting agencies and uses the low score when determining the material 
terms it will offer to the consumer. That person must disclose the low 
score in the notice described in paragraph (d)(1)(ii) of this section.
    (B) A person that uses consumer reports to set the material terms of 
mortgage credit granted, extended, or provided to consumers regularly 
requests credit scores from several consumer reporting agencies, each of 
which it uses in an underwriting program in order to determine the 
material terms it will offer to the consumer. That person may choose one 
of these scores to include in the notice described in paragraph 
(d)(1)(ii) of this section.
    (5) Model form. A model form of the notice described in paragraph 
(d)(1)(ii) of this section consolidated with the notice required by 
section 609(g) of the FCRA is contained in appendix H-3 of this part. 
Appropriate use of Model Form H-3 is deemed to comply with the 
requirements of Sec.  1022.74(d). Use of the model form is optional.
    (e) Other extensions of credit--credit score disclosure--(1) In 
general. A person is not required to provide a risk-based pricing notice 
to a consumer under Sec.  1022.72(a) or (c) if:
    (i) The consumer requests from the person an extension of credit 
other than credit that is or will be secured by one to four units of 
residential real property; and
    (ii) The person provides to each consumer described in paragraph 
(e)(1)(i) of this section a notice that contains the following:
    (A) A statement that a consumer report (or credit report) is a 
record of the consumer's credit history and includes information about 
whether the consumer pays his or her obligations on time and how much 
the consumer owes to creditors;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time to reflect changes in the consumer's credit history;
    (C) A statement that the consumer's credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;
    (D) The current credit score of the consumer or the most recent 
credit score of the consumer that was previously calculated by the 
consumer reporting agency for a purpose related to the extension of 
credit;
    (E) The range of possible credit scores under the model used to 
generate the credit score;
    (F) The distribution of credit scores among consumers who are scored 
under the same scoring model that is used to generate the consumer's 
credit score using the same scale as that of the credit score that is 
provided to the consumer, presented in the form of a bar graph 
containing a minimum of six bars that illustrates the percentage of 
consumers with credit scores within the range of scores reflected in 
each bar, or by other clear and readily understandable graphical means, 
or a clear and readily understandable statement informing the consumer 
how his or her credit score compares to the scores of other consumers. 
Use of a graph or statement obtained from the person providing the 
credit score that meets the requirements of this paragraph (e)(1)(ii)(F) 
is deemed to comply with this requirement;
    (G) The date on which the credit score was created;
    (H) The name of the consumer reporting agency or other person that 
provided the credit score;
    (I) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the report;

[[Page 612]]

    (J) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free report from each of the nationwide 
consumer reporting agencies once during any 12-month period;
    (K) Contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (L) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Form of the notice. The notice described in paragraph (e)(1)(ii) 
of this section must be:
    (i) Clear and conspicuous;
    (ii) Segregated from other information provided to the consumer; and
    (iii) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (3) Timing. The notice described in paragraph (e)(1)(ii) of this 
section must be provided to the consumer as soon as reasonably 
practicable after the credit score has been obtained, but in any event 
at or before consummation in the case of closed-end credit or before the 
first transaction is made under an open-end credit plan.
    (4) Multiple credit scores. (i) In general. When a person obtains 
two or more credit scores from consumer reporting agencies and uses one 
of those credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by using the 
low, middle, high, or most recent score, the notice described in 
paragraph (e)(1)(ii) of this section must include that credit score and 
the other information required by that paragraph. When a person obtains 
two or more credit scores from consumer reporting agencies and uses 
multiple credit scores in setting the material terms of credit granted, 
extended, or otherwise provided to a consumer, for example, by computing 
the average of all the credit scores obtained, the notice described in 
paragraph (e)(1)(ii) of this section must include one of those credit 
scores and the other information required by that paragraph. The notice 
may, at the person's option, include more than one credit score, along 
with the additional information specified in paragraph (e)(1)(ii) of 
this section for each credit score disclosed.
    (ii) Examples. The manner in which multiple credit scores are to be 
disclosed under this section are substantially identical to the manner 
set forth in the examples contained in paragraph (d)(4)(ii) of this 
section.
    (5) Model form. A model form of the notice described in paragraph 
(e)(1)(ii) of this section is contained in appendix H-4 of this part. 
Appropriate use of Model Form H-4 is deemed to comply with the 
requirements of Sec.  1022.74(e). Use of the model form is optional.
    (f) Credit score not available--(1) In general. A person is not 
required to provide a risk-based pricing notice to a consumer under 
Sec.  1022.72(a) or (c) if the person:
    (i) Regularly obtains credit scores from a consumer reporting agency 
and provides credit score disclosures to consumers in accordance with 
paragraphs (d) or (e) of this section, but a credit score is not 
available from the consumer reporting agency from which the person 
regularly obtains credit scores for a consumer to whom the person 
grants, extends, or provides credit;
    (ii) Does not obtain a credit score from another consumer reporting 
agency in connection with granting, extending, or providing credit to 
the consumer; and
    (iii) Provides to the consumer a notice that contains the following:
    (A) A statement that a consumer report (or credit report) includes 
information about the consumer's credit history and the type of 
information included in that history;
    (B) A statement that a credit score is a number that takes into 
account information in a consumer report and that a credit score can 
change over time in response to changes in the consumer's credit 
history;
    (C) A statement that credit scores are important because consumers 
with higher credit scores generally obtain more favorable credit terms;
    (D) A statement that not having a credit score can affect whether 
the consumer can obtain credit and what the cost of that credit will be;

[[Page 613]]

    (E) A statement that a credit score about the consumer was not 
available from a consumer reporting agency, which must be identified by 
name, generally due to insufficient information regarding the consumer's 
credit history;
    (F) A statement that the consumer is encouraged to verify the 
accuracy of the information contained in the consumer report and has the 
right to dispute any inaccurate information in the consumer report;
    (G) A statement that Federal law gives the consumer the right to 
obtain copies of his or her consumer reports directly from the consumer 
reporting agencies, including a free consumer report from each of the 
nationwide consumer reporting agencies once during any 12-month period;
    (H) The contact information for the centralized source from which 
consumers may obtain their free annual consumer reports; and
    (I) A statement directing consumers to the Web site of the Bureau to 
obtain more information about consumer reports.
    (2) Example. A person that uses consumer reports to set the material 
terms of non-mortgage credit granted, extended, or provided to consumers 
regularly requests credit scores from a particular consumer reporting 
agency and provides those credit scores and additional information to 
consumers to satisfy the requirements of paragraph (e) of this section. 
That consumer reporting agency provides to the person a consumer report 
on a particular consumer that contains one trade line, but does not 
provide the person with a credit score on that consumer. If the person 
does not obtain a credit score from another consumer reporting agency 
and, based in whole or in part on information in a consumer report, 
grants, extends, or provides credit to the consumer, the person may 
provide the notice described in paragraph (f)(1)(iii) of this section. 
If, however, the person obtains a credit score from another consumer 
reporting agency, the person may not rely upon the exception in 
paragraph (f) of this section, but may satisfy the requirements of 
paragraph (e) of this section.
    (3) Form of the notice. The notice described in paragraph 
(f)(1)(iii) of this section must be:
    (i) Clear and conspicuous;
    (ii) Segregated from other information provided to the consumer; and
    (iii) Provided to the consumer in writing and in a form that the 
consumer may keep.
    (4) Timing. The notice described in paragraph (f)(1)(iii) of this 
section must be provided to the consumer as soon as reasonably 
practicable after the person has requested the credit score, but in any 
event not later than consummation of a transaction in the case of 
closed-end credit or when the first transaction is made under an open-
end credit plan.
    (5) Model form. A model form of the notice described in paragraph 
(f)(1)(iii) of this section is contained in appendix H-5 of this part. 
Appropriate use of Model Form H-5 is deemed to comply with the 
requirements of Sec.  1022.74(f). Use of the model form is optional.



Sec.  1022.75  Rules of construction.

    For purposes of this subpart, the following rules of construction 
apply:
    (a) One notice per credit extension. A consumer is entitled to no 
more than one risk-based pricing notice under Sec.  1022.72(a) or (c), 
or one notice under Sec.  1022.74(d), (e), or (f), for each grant, 
extension, or other provision of credit. Notwithstanding the foregoing, 
even if a consumer has previously received a risk-based pricing notice 
in connection with a grant, extension, or other provision of credit, 
another risk-based pricing notice is required if the conditions set 
forth in Sec.  1022.72(d) have been met.
    (b) Multi-party transactions--(1) Initial creditor. The person to 
whom a credit obligation is initially payable must provide the risk-
based pricing notice described in Sec.  1022.72(a) or (c), or satisfy 
the requirements for and provide the notice required under one of the 
exceptions in Sec.  1022.74(d), (e), or (f), even if that person 
immediately assigns the credit agreement to a third party and is not the 
source of funding for the credit.
    (2) Purchasers or assignees. A purchaser or assignee of a credit 
contract with a consumer is not subject to the requirements of this 
subpart and is not

[[Page 614]]

required to provide the risk-based pricing notice described in Sec.  
1022.72(a) or (c), or satisfy the requirements for and provide the 
notice required under one of the exceptions in Sec.  1022.74(d), (e), or 
(f).
    (3) Example. A consumer obtains credit to finance the purchase of an 
automobile. If a bank or finance company is the person to whom the loan 
obligation is initially payable, the bank or finance company must 
provide the risk-based pricing notice to the consumer (or satisfy the 
requirements for and provide the notice required under one of the 
exceptions noted above) based on the terms offered by that bank or 
finance company only. The auto dealer has no duty to provide a risk-
based pricing notice to the consumer. However, the bank or finance 
company may comply with this rule if the auto dealer has agreed to 
provide notices to consumers before consummation pursuant to an 
arrangement with the bank or finance company, as permitted under Sec.  
1022.73(c).
    (c) Multiple consumers--(1) Risk-based pricing notices. In a 
transaction involving two or more consumers who are granted, extended, 
or otherwise provided credit, a person must provide a notice to each 
consumer to satisfy the requirements of Sec.  1022.72(a) or (c). Whether 
the consumers have the same address or not, the person must provide a 
separate notice to each consumer if a notice includes a credit score(s). 
Each separate notice that includes a credit score(s) must contain only 
the credit score(s) of the consumer to whom the notice is provided, and 
not the credit score(s) of the other consumer. If the consumers have the 
same address, and the notice does not include a credit score(s), a 
person may satisfy the requirements by providing a single notice 
addressed to both consumers.
    (2) Credit score disclosure notices. In a transaction involving two 
or more consumers who are granted, extended, or otherwise provided 
credit, a person must provide a separate notice to each consumer to 
satisfy the exceptions in Sec.  1022.74(d), (e), or (f). Whether the 
consumers have the same address or not, the person must provide a 
separate notice to each consumer. Each separate notice must contain only 
the credit score(s) of the consumer to whom the notice is provided, and 
not the credit score(s) of the other consumer.
    (3) Examples. (i) Two consumers jointly apply for credit with a 
creditor. The creditor obtains credit scores on both consumers. Based in 
part on the credit scores, the creditor grants credit to the consumers 
on material terms that are materially less favorable than the most 
favorable terms available to other consumers from the creditor. The 
creditor provides risk-based pricing notices to satisfy its obligations 
under this subpart. The creditor must provide a separate risk-based 
pricing notice to each consumer whether the consumers have the same 
address or not. Each risk-based pricing notice must contain only the 
credit score(s) of the consumer to whom the notice is provided.
    (ii) Two consumers jointly apply for credit with a creditor. The two 
consumers reside at the same address. The creditor obtains credit scores 
on each of the two consumer applicants. The creditor grants credit to 
the consumers. The creditor provides credit score disclosure notices to 
satisfy its obligations under this subpart. Even though the two 
consumers reside at the same address, the creditor must provide a 
separate credit score disclosure notice to each of the consumers. Each 
notice must contain only the credit score of the consumer to whom the 
notice is provided.



 Subpart I_Duties of Users of Consumer Reports Regarding Identity Theft



Sec. Sec.  1022.80-1022.81  [Reserved]



Sec.  1022.82  Duties of users regarding address discrepancies.

    (a) Scope. This section applies to a user of consumer reports (user) 
that receives a notice of address discrepancy from a consumer reporting 
agency described in 15 U.S.C. 1681a(p), except for a person excluded 
from coverage of this part by section 1029 of the Consumer Financial 
Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Law 111-203, 124 Stat. 137.
    (b) Definition. For purposes of this section, a notice of address 
discrepancy

[[Page 615]]

means a notice sent to a user by a consumer reporting agency described 
in 15 U.S.C. 1681a(p) pursuant to 15 U.S.C. 1681c(h)(1), that informs 
the user of a substantial difference between the address for the 
consumer that the user provided to request the consumer report and the 
address(es) in the agency's file for the consumer.
    (c) Reasonable belief--(1) Requirement to form a reasonable belief. 
A user must develop and implement reasonable policies and procedures 
designed to enable the user to form a reasonable belief that a consumer 
report relates to the consumer about whom it has requested the report, 
when the user receives a notice of address discrepancy.
    (2) Examples of reasonable policies and procedures. (i) Comparing 
the information in the consumer report provided by the consumer 
reporting agency with information the user:
    (A) Obtains and uses to verify the consumer's identity in accordance 
with the requirements of the Customer Identification Program (CIP) rules 
implementing 31 U.S.C. 5318(l) (31 CFR 1020.220);
    (B) Maintains in its own records, such as applications, change of 
address notifications, other customer account records, or retained CIP 
documentation; or
    (C) Obtains from third-party sources; or
    (ii) Verifying the information in the consumer report provided by 
the consumer reporting agency with the consumer.
    (d) Consumer's address--(1) Requirement to furnish consumer's 
address to a consumer reporting agency. A user must develop and 
implement reasonable policies and procedures for furnishing an address 
for the consumer that the user has reasonably confirmed is accurate to 
the consumer reporting agency described in 15 U.S.C. 1681a(p) from whom 
it received the notice of address discrepancy when the user:
    (i) Can form a reasonable belief that the consumer report relates to 
the consumer about whom the user requested the report;
    (ii) Establishes a continuing relationship with the consumer; and
    (iii) Regularly and in the ordinary course of business furnishes 
information to the consumer reporting agency from which the notice of 
address discrepancy relating to the consumer was obtained.
    (2) Examples of confirmation methods. The user may reasonably 
confirm an address is accurate by:
    (i) Verifying the address with the consumer about whom it has 
requested the report;
    (ii) Reviewing its own records to verify the address of the 
consumer;
    (iii) Verifying the address through third-party sources; or
    (iv) Using other reasonable means.
    (3) Timing. The policies and procedures developed in accordance with 
paragraph (d)(1) of this section must provide that the user will furnish 
the consumer's address that the user has reasonably confirmed is 
accurate to the consumer reporting agency described in 15 U.S.C. 
1681a(p) as part of the information it regularly furnishes for the 
reporting period in which it establishes a relationship with the 
consumer.

Subparts J-L [Reserved]



Subpart M_Duties of Consumer Reporting Agencies Regarding Identity Theft



Sec.  1022.120  [Reserved]



Sec.  1022.121  Active duty alerts.

    (a) Duration. The duration of an active duty alert shall be twelve 
months.



Sec.  1022.122  [Reserved]



Sec.  1022.123  Appropriate proof of identity.

    (a) Consumer reporting agencies shall develop and implement 
reasonable requirements for what information consumers shall provide to 
constitute proof of identity for purposes of sections 605A, 605B, and 
609(a)(1) of the FCRA. In developing these requirements, the consumer 
reporting agencies must:
    (1) Ensure that the information is sufficient to enable the consumer 
reporting agency to match consumers with their files; and
    (2) Adjust the information to be commensurate with an identifiable 
risk of

[[Page 616]]

harm arising from misidentifying the consumer.
    (b) Examples of information that might constitute reasonable 
information requirements for proof of identity are provided for 
illustrative purposes only, as follows:
    (1) Consumer file match. The identification information of the 
consumer including his or her full name (first, middle initial, last, 
suffix), any other or previously used names, current and/or recent full 
address (street number and name, apt. no., city, state, and zip code), 
full nine digits of Social Security number, and/or date of birth.
    (2) Additional proof of identity. Copies of government issued 
identification documents, utility bills, and/or other methods of 
authentication of a person's identity which may include, but would not 
be limited to, answering questions to which only the consumer might be 
expected to know the answer.



Sec. Sec.  1022.124-1022.129  [Reserved]



Subpart N_Duties of Consumer Reporting Agencies Regarding Disclosures to 
                                Consumers



Sec.  1022.130  Definitions.

    For purposes of this subpart, the following definitions apply:
    (a) Annual file disclosure means a file disclosure that is provided 
to a consumer, upon consumer request and without charge, once in any 
twelve month period, in compliance with section 612(a) of the FCRA, 15 
U.S.C. 1681j(a).
    (b) Associated consumer reporting agency means a consumer reporting 
agency that owns or maintains consumer files housed within systems 
operated by one or more nationwide consumer reporting agencies.
    (c) Consumer report has the meaning provided in section 603(d) of 
the FCRA, 15 U.S.C. 1681a(d).
    (d) Consumer reporting agency has the meaning provided in section 
603(f) of the FCRA, 15 U.S.C. 1681a(f).
    (e) Extraordinary request volume occurs when the number of consumers 
requesting or attempting to request file disclosures during any twenty-
four hour period is more than 175 percent of the rolling ninety-day 
daily average of consumers requesting or attempting to request file 
disclosures. For example, if over the previous ninety days an average of 
one hundred consumers per day requested or attempted to request file 
disclosures, then extraordinary request volume would be any volume 
greater than 175 percent of one hundred, i.e., 176 or more requests in a 
single twenty-four hour period.
    (f) File disclosure means a disclosure by a consumer reporting 
agency pursuant to section 609 of the FCRA, 15 U.S.C. 1681g.
    (g) High request volume occurs when the number of consumers 
requesting or attempting to request file disclosures during any twenty-
four hour period is more than 125 percent of the rolling ninety-day 
daily average of consumers requesting or attempting to request file 
disclosures. For example, if over the previous ninety days an average of 
one hundred consumers per day requested or attempted to request file 
disclosures, then high request volume would be any volume greater than 
125 percent of one hundred, i.e., 126 or more requests in a single 
twenty-four hour period.
    (h) Nationwide consumer reporting agency means a consumer reporting 
agency that compiles and maintains files on consumers on a nationwide 
basis as defined in section 603(p) of the FCRA, 15 U.S.C. 1681a(p).
    (i) Nationwide specialty consumer reporting agency has the meaning 
provided in section 603(w) of the FCRA, 15 U.S.C. 1681a(w).
    (j) Request method means the method by which a consumer chooses to 
communicate a request for an annual file disclosure.



Sec. Sec.  1022.131-1022.135  [Reserved]



Sec.  1022.136  Centralized source for requesting annual file disclosures 
from nationwide consumer reporting agencies.

    (a) Purpose. The purpose of the centralized source is to enable 
consumers to make a single request to obtain annual file disclosures 
from all nationwide consumer reporting agencies, as required under 
section 612(a) of the FCRA, 15 U.S.C. 1681j(a).

[[Page 617]]

    (b) Establishment and operation. All nationwide consumer reporting 
agencies shall jointly design, fund, implement, maintain, and operate a 
centralized source for the purpose described in Paragraph (a) of this 
section. The centralized source required by this part shall:
    (1) Enable consumers to request annual file disclosures by any of 
the following request methods, at the consumers' option:
    (i) A single, dedicated Web site,
    (ii) A single, dedicated toll-free telephone number; and
    (iii) Mail directed to a single address;
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the centralized source 
through each request method, as determined in accordance with Paragraph 
(c) of this section;
    (ii) Collects only as much personally identifiable information as is 
reasonably necessary to properly identify the consumer as required under 
the FCRA, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other applicable 
laws and regulations, and to process the transaction(s) requested by the 
consumer;
    (iii) Provides information through the centralized source Web site 
and telephone number regarding how to make a request by all request 
methods required under paragraph (b)(1) of this section; and
    (iv) Provides clear and easily understandable information and 
instructions to consumers, including, but not necessarily limited to:
    (A) Providing information on the progress of the consumer's request 
while the consumer is engaged in the process of requesting a file 
disclosure;
    (B) For a Web site request method, providing access to a ``help'' or 
``frequently asked questions'' screen, which includes specific 
information that consumers might reasonably need to request file 
disclosures, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
centralized source and with the Bureau;
    (C) In the event that a consumer requesting a file disclosure 
through the centralized source cannot be properly identified in 
accordance with the FCRA, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and 
other applicable laws and regulations, providing a statement that the 
consumers' identity cannot be verified; and directions on how to 
complete the request, including what additional information or 
documentation will be required to complete the request, and how to 
submit such information; and
    (D) A statement indicating that the consumer has reached the Web 
site or telephone number for ordering free annual credit reports as 
required by Federal law; and
    (3) Make available to consumers a standardized form established 
jointly by the nationwide consumer reporting agencies, which consumers 
may use to make a request for an annual file disclosure, either by mail 
or on the Web site required under paragraph (b)(1) of this section, from 
the centralized source required by this part. The form provided at 
appendix L to part 1022, may be used to comply with this section.
    (c) Requirement to anticipate. The nationwide consumer reporting 
agencies shall implement reasonable procedures to anticipate, and to 
respond to, the volume of consumers who will contact the centralized 
source through each request method, to request, or attempt to request, a 
file disclosure, including developing and implementing contingency plans 
to address circumstances that are reasonably likely to occur and that 
may materially and adversely impact the operation of the nationwide 
consumer reporting agency, a centralized source request method, or the 
centralized source.
    (1) The contingency plans required by this section shall include 
reasonable measures to minimize the impact of such circumstances on the 
operation of the centralized source and on consumers contacting, or 
attempting to contact, the centralized source.
    (i) Such reasonable measures to minimize impact shall include, but 
are not necessarily limited to:

[[Page 618]]

    (A) The extent reasonably practicable under the circumstances, 
providing information to consumers on how to use another available 
request method;
    (B) The extent reasonably practicable under the circumstances, 
communicating, to a consumer who attempts but is unable to make a 
request, the fact that a condition exists that has precluded the 
centralized source from accepting all requests, and the period of time 
after which the centralized source is reasonably anticipated to be able 
to accept the consumers' request for an annual file disclosure; and
    (C) Taking all reasonable steps to restore the centralized source to 
normal operating status as quickly as reasonably practicable under the 
circumstances.
    (ii) Reasonable measures to minimize impact may also include, as 
appropriate, collecting request information but declining to accept the 
request for processing until a reasonable later time, provided that the 
consumer is clearly and prominently informed, to the extent reasonably 
practicable under the circumstances, of when the request will be 
accepted for processing.
    (2) A nationwide consumer reporting agency shall not be deemed in 
violation of paragraph (b)(2)(i) of this section if a centralized source 
request method is unavailable to accept requests for a reasonable period 
of time for purposes of conducting maintenance on the request method, 
provided that the other required request methods remain available during 
such time.
    (d) Disclosures required. If a nationwide consumer reporting agency 
has the ability to provide a consumer report to a third party relating 
to a consumer, regardless of whether the consumer report is owned by 
that nationwide consumer reporting agency or by an associated consumer 
reporting agency, that nationwide consumer reporting agency shall, upon 
proper identification in compliance with section 610(a)(1) of the FCRA, 
15 U.S.C. 1681h(a)(1), provide an annual file disclosure to such 
consumer if the consumer makes a request through the centralized source.
    (e) High request volume and extraordinary request volume--(1) High 
request volume. Provided that a nationwide consumer reporting agency has 
implemented reasonable procedures developed in accordance with Paragraph 
(c) of this section, entitled ``requirement to anticipate,'' the 
nationwide consumer reporting agency shall not be deemed in violation of 
Paragraph (b)(2)(i) of this section for any period of time in which a 
centralized source request method, the centralized source, or the 
nationwide consumer reporting agency experiences high request volume, if 
the nationwide consumer reporting agency:
    (i) Collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (ii) Clearly and prominently informs the consumer of when the 
request will be accepted for processing.
    (2) Extraordinary request volume. Provided that the nationwide 
consumer reporting agency has implemented reasonable procedures 
developed in compliance with Paragraph (c) of this section, entitled 
``requirement to anticipate,'' the nationwide consumer reporting agency 
shall not be deemed in violation of Paragraph (b)(2)(i) of this section 
for any period of time during which a particular centralized source 
request method, the centralized source, or the nationwide consumer 
reporting agency experiences extraordinary request volume.
    (f) Information use and disclosure. Any personally identifiable 
information collected from consumers as a result of a request for annual 
file disclosure, or other disclosure required by the FCRA, made through 
the centralized source, may be used or disclosed by the centralized 
source or a nationwide consumer reporting agency only:
    (1) To provide the annual file disclosure or other disclosure 
required under the FCRA requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for annual file disclosure or other disclosure;
    (3) To comply with applicable legal requirements, including those 
imposed by the FCRA and this part; and

[[Page 619]]

    (4) To update personally identifiable information already maintained 
by the nationwide consumer reporting agency for the purpose of providing 
consumer reports, provided that the nationwide consumer reporting agency 
uses and discloses the updated personally identifiable information 
subject to the same restrictions that would apply, under any applicable 
provision of law or regulation, to the information updated or replaced.
    (g) Communications provided through centralized source. (1) Any 
advertising or marketing for products or services, any communications or 
instructions that advertise or market any products or services, or any 
request to establish an account through the centralized source must be 
delayed until after the consumer has obtained his or her annual file 
disclosure.
    (i) In the case of requests made by mail or telephone, the consumer 
``has obtained his or her annual file disclosure'' when the file 
disclosure is mailed, and the nationwide consumer reporting agency may 
include advertising for other products or services with the file 
disclosure.
    (ii) In the case of requests made through the centralized source Web 
site, the consumer ``has obtained his or her annual file disclosure'' 
when the file disclosure is delivered to the consumer through the 
Internet, and the nationwide consumer reporting agency may include 
advertising for other products or services with the file disclosure.
    (2) Any communications, instructions, or permitted advertising or 
marketing shall not interfere with, detract from, contradict, or 
otherwise undermine the purpose of the centralized source stated in 
Paragraph (a) of this section.
    (3) Examples of interfering, detracting, inconsistent, and/or 
undermining communications include:
    (i) Centralized source materials that represent, expressly or by 
implication, that a consumer must purchase a paid product or service in 
order to receive or to understand the annual file disclosure;
    (ii) Centralized source materials that represent, expressly or by 
implication, that annual file disclosures are not free, or that 
obtaining an annual file disclosure will have a negative impact on the 
consumers' credit standing; and
    (iii) Centralized source materials that falsely represent, expressly 
or by implication, that a product or service offered ancillary to 
receipt of a file disclosure, such as a credit score or credit 
monitoring service, is free, or fail to clearly and prominently disclose 
that consumers must cancel a service, advertised as free for an initial 
period of time, to avoid being charged, if such is the case.
    (h) Other practices prohibited through the centralized source. The 
centralized source shall not:
    (1) Contain hyperlinks to commercial or proprietary Web sites until 
after the consumer has obtained his or her annual file disclosure, 
except for technical transfers to a Web page on which consumers can 
request their free annual file disclosure; provided, however, that no 
hyperlinks to commercial Web sites shall appear on the initial page of 
the centralized source.
    (2) Require consumers to set up an account in connection with 
obtaining an annual file disclosure; or
    (3) Ask or require consumers to agree to terms or conditions in 
connection with obtaining an annual file disclosure.



Sec.  1022.137  Streamlined process for requesting annual file disclosures 
from nationwide specialty consumer reporting agencies.

    (a) Streamlined process requirements. Any nationwide specialty 
consumer reporting agency shall have a streamlined process for accepting 
and processing consumer requests for annual file disclosures. The 
streamlined process required by this part shall:
    (1) Enable consumers to request annual file disclosures by a toll-
free telephone number that:
    (i) Provides clear and prominent instructions for requesting 
disclosures by any additional available request methods, that do not 
interfere with, detract from, contradict, or otherwise undermine the 
ability of consumers to obtain annual file disclosures through the 
streamlined process required by this part;

[[Page 620]]

    (ii) Is published, in conjunction with all other published numbers 
for the nationwide specialty consumer reporting agency, in any telephone 
directory in which any telephone number for the nationwide specialty 
consumer reporting agency is published; and(iii) Is clearly and 
prominently posted on any Web site owned or maintained by the nationwide 
specialty consumer reporting agency that is related to consumer 
reporting, along with instructions for requesting disclosures by any 
additional available request methods; and
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the nationwide specialty 
consumer reporting agency through the streamlined process, as determined 
in compliance with Paragraph (b) of this section;
    (ii) Collects only as much personal information as is reasonably 
necessary to properly identify the consumer as required under the FCRA, 
section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other applicable laws and 
regulations; and
    (iii) Provides clear and easily understandable information and 
instructions to consumers, including but not necessarily limited to:
    (A) Providing information on the status of the consumers request 
while the consumer is in the process of making a request;
    (B) For a Web site request method, providing access to a ``help'' or 
``frequently asked questions'' screen, which includes more specific 
information that consumers might reasonably need to order their file 
disclosure, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
nationwide specialty consumer reporting agency and with the Bureau; and
    (C) In the event that a consumer requesting a file disclosure cannot 
be properly identified in accordance with the FCRA, section 610(a)(1), 
15 U.S.C. 1681h(a)(1), and other applicable laws and regulations, 
providing a statement that the consumers identity cannot be verified; 
and directions on how to complete the request, including what additional 
information or documentation will be required to complete the request, 
and how to submit such information.
    (b) Requirement to anticipate. A nationwide specialty consumer 
reporting agency shall implement reasonable procedures to anticipate, 
and respond to, the volume of consumers who will contact the nationwide 
specialty consumer reporting agency through the streamlined process to 
request, or attempt to request, file disclosures, including developing 
and implementing contingency plans to address circumstances that are 
reasonably likely to occur and that may materially and adversely impact 
the operation of the nationwide specialty consumer reporting agency, a 
request method, or the streamlined process.
    (1) The contingency plans required by this section shall include 
reasonable measures to minimize the impact of such circumstances on the 
operation of the streamlined process and on consumers contacting, or 
attempting to contact, the nationwide specialty consumer reporting 
agency through the streamlined process.
    (i) Such reasonable measures to minimize impact shall include, but 
are not necessarily limited to:
    (A) To the extent reasonably practicable under the circumstances, 
providing information to consumers on how to use another available 
request method;
    (B) To the extent reasonably practicable under the circumstances, 
communicating, to a consumer who attempts but is unable to make a 
request, the fact that a condition exists that has precluded the 
nationwide specialty consumer reporting agency from accepting all 
requests, and the period of time after which the agency is reasonably 
anticipated to be able to accept the consumers request for an annual 
file disclosure; and
    (C) Taking all reasonable steps to restore the streamlined process 
to normal operating status as quickly as reasonably practicable under 
the circumstances.
    (ii) Measures to minimize impact may also include, as appropriate, 
collecting request information but declining to accept the request for 
processing

[[Page 621]]

until a reasonable later time, provided that the consumer is clearly and 
prominently informed, to the extent reasonably practicable under the 
circumstances, of when the request will be accepted for processing.
    (2) A nationwide specialty consumer reporting agency shall not be 
deemed in violation of paragraph (a)(2)(i) of this section if the toll-
free telephone number required by this part is unavailable to accept 
requests for a reasonable period of time for purposes of conducting 
maintenance on the request method, provided that the nationwide 
specialty consumer reporting agency makes other request methods 
available to consumers during such time.
    (c) High request volume and extraordinary request volume--(1) High 
request volume. Provided that the nationwide specialty consumer 
reporting agency has implemented reasonable procedures developed in 
accordance with Paragraph (b) of this section, entitled ``requirement to 
anticipate,'' a nationwide specialty consumer reporting agency shall not 
be deemed in violation of Paragraph (a)(2)(i) of this section for any 
period of time during which a streamlined process request method or the 
nationwide specialty consumer reporting agency experiences high request 
volume, if the nationwide specialty consumer reporting agency:
    (i) Collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (ii) Clearly and prominently informs the consumer of when the 
request will be accepted for processing.
    (2) Extraordinary request volume. Provided that the nationwide 
specialty consumer reporting agency has implemented reasonable 
procedures developed in accordance with Paragraph (b) of this section, 
entitled ``requirement to anticipate,'' a nationwide specialty consumer 
reporting agency shall not be deemed in violation of Paragraph (a)(2)(i) 
of this section for any period of time during which a streamlined 
process request method or the nationwide specialty consumer reporting 
agency experiences extraordinary request volume.
    (d) Information use and disclosure. Any personally identifiable 
information collected from consumers as a result of a request for annual 
file disclosure, or other disclosure required by the FCRA, made through 
the streamlined process, may be used or disclosed by the nationwide 
specialty consumer reporting agency only:
    (1) To provide the annual file disclosure or other disclosure 
required under the FCRA requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for annual file disclosure or other disclosure;
    (3) To comply with applicable legal requirements, including those 
imposed by the FCRA and this part; and
    (4) To update personally identifiable information already maintained 
by the nationwide specialty consumer reporting agency for the purpose of 
providing consumer reports, provided that the nationwide specialty 
consumer reporting agency uses and discloses the updated personally 
identifiable information subject to the same restrictions that would 
apply, under any applicable provision of law or regulation, to the 
information updated or replaced.
    (e) Requirement to accept or redirect requests. If a consumer 
requests an annual file disclosure through a method other than the 
streamlined process established by the nationwide specialty consumer 
reporting agency in compliance with this part, a nationwide specialty 
consumer reporting agency shall:
    (1) Accept the consumers request; or
    (2) Instruct the consumer how to make the request using the 
streamlined process required by this part.



Sec.  1022.138  Prevention of deceptive marketing of free credit reports.

    (a) For purposes of this section:
    (1) AnnualCreditReport.com and (877) 322-8228 means the Uniform 
Resource Locator address ``AnnualCreditReport.com'' and toll-free 
telephone number, (877) 322-8228. These are the locator address and 
toll-free telephone number currently used by the centralized source. If 
the locator address or toll-free telephone number changes in the future, 
the new address or telephone number shall be substituted within a 
reasonable time.

[[Page 622]]

    (2) Free credit report means a file disclosure prepared by or 
obtained from, directly or indirectly, a nationwide consumer reporting 
agency (as defined in section 603(p) of the FCRA), that is represented, 
either expressly or impliedly, to be available to the consumer at no 
cost if the consumer purchases a product or service, or agrees to 
purchase a product or service subject to cancellation.
    (3) General requirements for disclosures. The disclosures covered by 
Paragraph (b) of this section shall contain only the prescribed content 
and comply with the following requirements:
    (i) All disclosures shall be prominent;
    (ii) All disclosures shall be made in the same language as that 
principally used in the advertisement;
    (iii) Visual disclosures shall be easily readable; in a high degree 
of contrast from the immediate background on which it appears; in a 
format so that the disclosure is distinct from other text, such as 
inside a border; in a distinct type style, such as bold; and parallel to 
the base of the advertisement or screen;
    (iv) Audio disclosures shall be delivered in a slow and deliberate 
manner and in a reasonably understandable volume and pitch;
    (v) Program-length television, radio, or Internet-hosted multimedia 
advertisement disclosures shall be made at the beginning, near the 
middle, and at the end of the advertisement; and
    (vi) Nothing contrary to, inconsistent with, or that undermines the 
required disclosures shall be used in any advertisement in any medium, 
nor shall any audio, visual, or print technique be used that is likely 
to detract significantly from the communication of any disclosure.
    (b) Medium-specific disclosures. All offers of free credit reports 
shall prominently include the disclosures required by this section.
    (1) Television advertisements. (i) All advertisements for free 
credit reports broadcast on television shall include the following 
disclosure in close proximity to the first mention of a free credit 
report: ``This is not the free credit report provided for by Federal 
law.''
    (ii) The disclosure shall appear at the same time in the audio and 
visual part of the advertisement. The visual disclosure shall be at 
least four percent of the vertical picture height and appear for a 
minimum of four seconds.
    (2) Radio advertisements. All advertisements for free credit reports 
broadcast on radio shall include the following disclosure in close 
proximity to the first mention of a free credit report: ``This is not 
the free credit report provided for by Federal law.''
    (3) Print advertisements. All advertisements for free credit reports 
in print shall include the following disclosure in the form specified 
below and in close proximity to the first mention of a free credit 
report. The first line of the disclosure shall be centered and contain 
only the following language: ``THIS NOTICE IS REQUIRED BY LAW.'' 
Immediately below the first line of the disclosure the following 
language shall appear: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' Each letter of the disclosure text shall be, at 
minimum, one-half the size of the largest character used in the 
advertisement.
    (4) Web sites. Any Web site offering free credit reports must 
display the disclosure set forth in paragraphs (b)(4)(i), (ii), and (v) 
of this section on each page that mentions a free credit report and on 
each page of the ordering process. This disclosure shall be visible 
across the top of each page where the disclosure is required to appear; 
shall appear inside a box; and shall appear in the form specified below:
    (i) The first element of the disclosure shall be a header that is 
centered and shall consist of the following text: ``THIS NOTICE IS 
REQUIRED BY LAW. Read more at consumerfinance.gov/learnmore.'' Each 
letter of the header shall be one-half the size of the largest character 
of the disclosure text required by paragraph (b)(4)(ii) of this section. 
The reference to consumerfinance.gov/learnmore shall be an operational 
hyperlink, underlined, and in a color that is a high degree of contrast 
from the color of the other disclosure text and background color of the 
box. Until January 1, 2013,

[[Page 623]]

www.ftc.gov and the corresponding hyperlink may be substituted for 
``consumerfinance.gov/learmore'' and the corresponding hyperlink;
    (ii) The second element of the disclosure shall appear below the 
header required by paragraph (b)(4)(i) and shall consist of the 
following text: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' The reference to AnnualCreditReport.com shall be an 
operational hyperlink to the centralized source, underlined, and in the 
same color as the hyperlink to consumerfinance.gov/learnmore required in 
Sec.  1022.138(b)(4)(i);
    (iii) The color of the text required by Sec.  1022.138(b)(4)(i) and 
(ii) shall be in a high degree of contrast with the background color of 
the box;
    (iv) The background of the box shall be a solid color in a high 
degree of contrast from the background of the page and the color shall 
not appear elsewhere on the page;
    (v) The third element of the disclosure shall appear below the text 
required by paragraph (b)(4)(ii) and shall be an operational hyperlink 
to AnnualCreditReport.com that appears as a centered button containing 
the following language: ``Take me to the authorized source.'' The 
background of this button shall be the same color as the hyperlinks 
required by Sec.  1022.138(b)(4)(i) and (ii) and the text shall be in a 
high degree of contrast to the background of the button;
    (vi) Each character of the text required in paragraph (b)(4)(ii) and 
(v) of this section shall be, at minimum, the same size as the largest 
character on the page, including characters in an image or graphic 
banner;
    (vii) Each character of the disclosure shall be displayed as plain 
text and in a sans serif font, such as Arial; and
    (viii) The space between each element of the disclosure required in 
paragraph (b)(i), (ii), and (v) of this section shall be, at minimum, 
the same size as the largest character on the page, including characters 
in an image or graphic banner. The space between the boundaries of the 
box and the text or button required in Sec.  1022.138(b)(i), (ii), and 
(v) shall be, at minimum, twice the size of the vertical height of the 
largest character on the page, including characters in an image or 
graphic banner.
    (5) Internet-hosted multimedia advertising. All advertisements for 
free credit reports disseminated through Internet-hosted multimedia in 
both audio and visual formats shall include the following disclosure in 
the form specified below and in close proximity to the first mention of 
a free credit report. The first line of the disclosure shall be centered 
and contain only the following language: ``THIS NOTICE IS REQUIRED BY 
LAW.'' Immediately below the first line of the disclosure the following 
language shall appear: ``You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the ONLY authorized source 
under Federal law.'' The disclosure shall appear at the same time in the 
audio and visual part of the advertisement. If the advertisement 
contains characters, the visual disclosure shall be, at minimum, the 
same size as the largest character on the advertisement.
    (6) Telephone requests. When consumers call any telephone number, 
other than the number of the centralized source, appearing in an 
advertisement that represents free credit reports are available at the 
number, consumers must receive the following audio disclosure at the 
first mention of a free credit report: ``The following notice is 
required by law. You have the right to a free credit report from 
AnnualCreditReport.com or (877) 322-8228, the only authorized source 
under Federal law.''
    (7) Telemarketing solicitations. When telemarketing sales calls are 
made that include offers of free credit reports, the call must include 
at the first mention of a free credit report the following disclosure: 
``The following notice is required by law. You have the right to a free 
credit report from AnnualCreditReport.com or (877) 322-8228, the only 
authorized source under Federal law.''

[[Page 624]]



Sec.  1022.139  [Reserved]



      Subpart O_Miscellaneous Duties of Consumer Reporting Agencies



Sec.  1022.140  Prohibition against circumventing or evading treatment 
as a consumer reporting agency.

    (a) A consumer reporting agency shall not circumvent or evade 
treatment as a ``consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis,'' as defined under section 
603(p) of the FCRA, 15 U.S.C. 1681a(p), by any means, including, but not 
limited to:
    (1) Corporate organization, reorganization, structure, or 
restructuring, including merger, acquisition, dissolution, divestiture, 
or asset sale of a consumer reporting agency; or
    (2) Maintaining or merging public record and credit account 
information in a manner that is substantially equivalent to that 
described in Paragraphs (1) and (2) of section 603(p) of the FCRA, 15 
U.S.C. 1681a(p).
    (b) Examples:
    (1) Circumvention through reorganization by data type. XYZ Inc. is a 
consumer reporting agency that compiles and maintains files on consumers 
on a nationwide basis. It restructures its operations so that public 
record information is assembled and maintained only by its corporate 
affiliate, ABC Inc. XYZ continues operating as a consumer reporting 
agency but ceases to comply with the FCRA obligations of a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis, asserting that it no longer meets the definition found 
in FCRA section 603(p), because it no longer maintains public record 
information. XYZ's conduct is a circumvention or evasion of treatment as 
a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis, and thus violates this section.
    (2) Circumvention through reorganization by regional operations. PDQ 
Inc. is a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis. It restructures its operations so that 
corporate affiliates separately assemble and maintain all information on 
consumers residing in each state. PDQ continues to operate as a consumer 
reporting agency but ceases to comply with the FCRA obligations of a 
consumer reporting agency that compiles and maintains files on consumers 
on a nationwide basis, asserting that it no longer meets the definition 
found in FCRA section 603(p), because it no longer operates on a 
nationwide basis. PDQ's conduct is a circumvention or evasion of 
treatment as a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis, and thus violates this 
section.
    (3) Circumvention by a newly formed entity. Smith Co. is a new 
entrant in the marketplace for consumer reports that bear on a 
consumer's credit worthiness, standing and capacity. Smith Co. organizes 
itself into two affiliated companies: Smith Credit Co. and Smith Public 
Records Co. Smith Credit Co. assembles and maintains credit account 
information from persons who furnish that information regularly and in 
the ordinary course of business on consumers residing nationwide. Smith 
Public Records Co. assembles and maintains public record information on 
consumers nationwide. Neither Smith Co. nor its affiliated organizations 
comply with FCRA obligations of consumer reporting agencies that compile 
and maintain files on consumers on a nationwide basis. Smith Co.'s 
conduct is a circumvention or evasion of treatment as a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis, and thus violates this section.
    (4) Bona fide, arm's length transaction with unaffiliated party. 
Foster Ltd. is a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis. Foster Ltd. sells its public 
record information business to an unaffiliated company in a bona fide, 
arm's length transaction. Foster Ltd. ceases to assemble, evaluate and 
maintain public record information on consumers residing nationwide, and 
ceases to offer reports containing public record information. Foster 
Ltd.'s conduct is not a circumvention or evasion of treatment as a 
consumer reporting agency that compiles and

[[Page 625]]

maintains files on consumers on a nationwide basis. Foster Ltd.'s 
conduct does not violate this part.
    (c) Limitation on applicability. Any person who is otherwise in 
violation of paragraph (a) of this section shall be deemed to be in 
compliance with this part if such person is in compliance with all 
obligations imposed upon consumer reporting agencies that compile and 
maintain files on consumers on a nationwide basis under the FCRA, 15 
U.S.C. 1681 et seq.



Sec.  1022.141  Reasonable charges for certain disclosures.

    Pursuant to section 612(f) of the FCRA, 15 U.S.C. 1681j(f), the 
charge imposed by a consumer reporting agency for a disclosure to the 
consumer pursuant to section 609 of the FCRA, 15 U.S.C. 1681g, shall not 
exceed the maximum allowable charge set by the Bureau.

[84 FR 517, Jan. 31, 2019]



Sec.  1022.142  Prohibition on inclusion of adverse information in consumer 
reporting in cases of human trafficking.

    (a) Scope. This section applies to any consumer reporting agency as 
defined in section 603(f) of the FCRA, 15 U.S.C. 1681a(f).
    (b) Definitions. For purposes of this section:
    (1) Appropriate proof of identity means proof of identity that meets 
the requirements in Sec.  1022.123, for purposes of section 605C of the 
FCRA.
    (2) Consumer report has the meaning provided in section 603(d) of 
the FCRA, 15 U.S.C. 1681a(d).
    (3) Consumer reporting agency has the meaning provided in section 
603(f) of the FCRA, 15 U.S.C. 1681a(f).
    (4) Severe forms of trafficking in persons has the meaning provided 
in section 103 of the Trafficking Victims Protection Act of 2000, 22 
U.S.C. 7102(11).
    (5) Sex trafficking has the meaning provided in section 103 of the 
Trafficking Victims Protection Act of 2000, as amended by section 108 of 
the Justice for Victims of Trafficking Act of 2015, 22 U.S.C. 7102(12).
    (6) Trafficking documentation means one or more documents that 
satisfy paragraphs (b)(6)(i) and (ii) of this section:
    (i) Victim determination. Documentation that:
    (A) Is of a determination that a consumer is a victim of trafficking 
made by a:
    (1) Federal, State, or Tribal governmental entity; or
    (2) Non-governmental organization or members of a human trafficking 
task force, including victim service providers affiliated with the 
organization or task force, authorized by a Federal, State, or Tribal 
governmental entity to make such a determination;
    (B) Is of a determination that a consumer is a victim of trafficking 
made by a court of competent jurisdiction or determination consisting of 
documents filed in a court of competent jurisdiction where a central 
issue in the case is whether the consumer is a victim of trafficking and 
the court has, at a minimum, affirmed the consumer's claim either by 
accepting certain pieces of evidence which are assumed to be true or 
finding that the there is no genuine dispute as to any material fact 
supporting a judgment in favor of the victim as a matter of law; or
    (C) Is of a signed statement by the consumer attesting that the 
consumer is a victim of trafficking if such statement or an accompanying 
document is signed or certified by a representative of an entity 
described in paragraph (b)(6)(i)(A) or (B) of this section.
    (ii) Identified adverse items of information. Documentation, which 
may consist of a statement prepared by the consumer or by any designated 
representative on behalf of a consumer (except for a credit repair 
organization as defined in section 403(3) of the Credit Repair 
Organizations Act, 15 U.S.C. 1679a(3), or an entity that would be a 
credit repair organization, but for section 403(3)(B)(i) of the Credit 
Repair Organizations Act, 15 U.S.C. 1679a(3)(B)(i)), that:
    (A) Identifies any items of adverse information that should not be 
furnished by a consumer reporting agency because the items resulted from 
a severe form of trafficking in persons or sex trafficking of which the 
consumer is a victim; and

[[Page 626]]

    (B) Must contain a preferred method for a consumer reporting agency 
to contact the consumer electronically or in writing such as an email 
address or physical address where mail can be received. A consumer 
reporting agency shall use only the consumer's preferred method of 
contact for communications under paragraphs (d), (e), and (f) of this 
section about the consumer's submission and shall not use the consumer's 
preferred contact information for any other purpose.
    (7) Victim of trafficking means a person who is a victim of a severe 
form of trafficking in persons or sex trafficking.
    (c) Prohibition on inclusion of adverse information of trafficking 
victims. A consumer reporting agency may not furnish a consumer report 
containing any adverse item of information about a consumer that 
resulted from a severe form of trafficking in persons or sex trafficking 
if the consumer has provided trafficking documentation as defined under 
paragraph (b)(6) of this section to the consumer reporting agency.
    (d) Method of submission to consumer reporting agencies--(1) Mailing 
and website address. A consumer reporting agency must provide two 
mailing addresses for a consumer or consumer representative, as 
described in paragraph (b)(6)(ii) of this section, to send a submission 
consisting of an appropriate proof of identification under paragraph 
(b)(1) of this section and trafficking documentation under paragraph 
(b)(6) of this section. A consumer reporting agency may also establish a 
secure online website portal for a consumer to upload a submission. A 
consumer reporting agency must accept a submission sent to the mailing 
and, if applicable, website address used for disputes under section 611 
of the FCRA, and must accept a submission sent to a mailing and, if 
applicable, website address dedicated to blocking adverse items of 
information resulting from a severe form of trafficking in persons or 
sex trafficking under this section.
    (2) Disclosing methods for submission. A consumer reporting agency 
must add information on its publicly available website stating how 
submissions for the blocking of adverse items of information resulting 
from a severe form of trafficking in persons or sex trafficking should 
be provided to a consumer reporting agency.
    (3) Toll-free telephone number. A consumer reporting agency that 
compiles and maintains files on consumers on a nationwide basis, as 
defined in section 603(p) of the FCRA, 15 U.S.C. 1681a(p), must:
    (i) Allocate a reasonable amount of personnel to respond to consumer 
inquiries about the process for and status of a consumer's submission at 
the toll-free telephone number used for disputes under section 611 of 
the FCRA; and
    (ii) Establish a toll-free telephone number dedicated to addressing 
submissions from consumers seeking to block adverse items of information 
resulting from a severe form of trafficking in persons or sex 
trafficking under this section.
    (e) Block of adverse information resulting from trafficking--(1) 
Block upon receipt of the submission. Except as otherwise provided in 
this section, within four business days of receipt of the consumer's 
submission under paragraph (d)(1) of this section, a consumer reporting 
agency must block the reporting of any adverse item of information 
identified by the consumer (or their representative) as resulting from a 
severe form of trafficking in persons or sex trafficking.
    (2) Requirement to notify the consumer and attempt to resolve 
deficiencies--(i) In general. Within five business days of receipt of 
the consumer's submission under paragraph (d) of this section, a 
consumer reporting agency must notify a consumer if additional 
information is necessary for the purpose of completing the submission 
and attempt to resolve any deficiency in the consumer's submission. A 
consumer reporting agency may only request additional information where 
the consumer reporting agency cannot reasonably confirm the appropriate 
proof of identity under paragraph (b)(1) of this section for the 
consumer or, if applicable, the consumer's representative, the consumer 
did not provide victim determination documentation under paragraph 
(b)(6)(i) of this section, or the consumer reporting agency cannot 
properly identify the adverse items of

[[Page 627]]

information under paragraph (b)(6)(ii) of this section. A consumer 
reporting agency may not, however, ask for information on the validity 
of the facts or circumstances detailed in the contents of the submitted 
trafficking documentation establishing the consumer is a victim of 
trafficking or whether the identified adverse information resulted from 
a severe form of trafficking in persons or sex trafficking under 
paragraph (b)(6) of this section.
    (ii) Timing of final determination. A consumer reporting agency must 
make a final determination on the consumer's submission no later than 25 
business days after receiving the submission provided in paragraph 
(d)(1) of this section.
    (3) Final determination of the block. Upon confirming completion of 
the submission from the consumer under paragraph (d)(1) of this section 
and in accordance with the requirements under paragraph (e)(2) of this 
section, the consumer reporting agency must initiate or maintain the 
action described in paragraph (e)(1) of this section by blocking the 
reporting of the items of adverse information on the consumer.
    (4) Authority to decline or rescind a block. A consumer reporting 
agency may decline to block, or may rescind any block of, adverse items 
of information resulting from a severe form of trafficking in persons or 
sex trafficking, in accordance with the timing requirements under 
paragraph (e)(2)(ii) of this section, only where the consumer reporting 
agency cannot reasonably confirm the appropriate proof of identity under 
paragraph (b)(1) of this section for the consumer, and, if applicable, 
the consumer's representative, the consumer cannot provide documentation 
consisting of a victim determination under paragraph (b)(6)(i) of this 
section, or the consumer reporting agency cannot properly identify the 
adverse items of information under paragraph (b)(6)(ii) of this section. 
A consumer reporting agency may not, however, decline to block or 
rescind any block of adverse information identified by the consumer or 
if applicable, the consumer's representative, based on the validity of 
the facts or circumstances detailed in the contents of the submitted 
trafficking documentation as defined in paragraph (b)(6) of this 
section. A consumer reporting agency may decline or rescind a block only 
after notifying the consumer using the method of contact specified by 
the consumer in paragraph (b)(6)(ii)(B) of this section and attempting 
to resolve any deficiency in the consumer's submission as required in 
paragraph (e)(2) of this section.
    (f) Notification to consumer of actions taken in response to the 
consumer's submission--(1) In general. A consumer reporting agency must 
provide written or electronic notice to a consumer of actions performed 
in response to a consumer's submission no later than five business days 
after a final determination on a consumer's submission under paragraph 
(e)(3) of this section (or, if rescinding a previously applied block, 
five business days after rescinding under paragraph (e)(4) of this 
section). The consumer reporting agency must use the method of contact 
specified by the consumer in paragraph (b)(6)(ii)(B) of this section.
    (2) Contents. The notice must include the following:
    (i) A statement that the review of the submission is completed;
    (ii) A statement of the outcome of the submission, including the 
reason(s) if the consumer reporting agency declined to block the adverse 
information identified by the consumer, or rescinded such a block, under 
paragraph (e)(4) of this section;
    (iii) A consumer report, provided at no cost to the consumer, that 
is based upon the consumer's revised file (if applicable) as a result of 
the consumer's submission;
    (iv) A description of the procedure used to determine the outcome;
    (v) A method for contacting the consumer reporting agency to appeal 
the determination or revise the submission to cure any of the noted 
reasons for declining to block the adverse information identified by the 
consumer; and
    (vi) The web page consumers can use to submit complaints to the 
Consumer Financial Protection Bureau.
    (g) Record retention. For a period of seven years after the 
consumer's submission is received at the mailing or website address made 
available under

[[Page 628]]

paragraph (d)(1) of this section, a consumer reporting agency must 
retain evidence of all such submissions and compliance with this 
section, including the actions taken by the consumer reporting agency 
under paragraphs (e)(1) through (e)(3), and (f) of this section and the 
reasons provided under paragraph (e)(4) of this section for declining to 
block or rescinding any block of items of adverse information identified 
by the consumer.
    (h) Policies and procedures to ensure and maintain compliance. A 
consumer reporting agency must establish and maintain written policies 
and procedures reasonably designed to ensure and monitor the compliance 
of the consumer reporting agency and its employees with the requirements 
of the paragraphs in this section. These written policies and procedures 
must be appropriate to the nature, size, complexity, and scope of the 
activities of the consumer reporting agency and its employees.

[87 FR 37723, June 24, 2022]





                 Sec. Appendix A to Part 1022 [Reserved]



   Sec. Appendix B to Part 1022--Model Notices of Furnishing Negative 
                               Information

    a. Although use of the model notices is not required, a financial 
institution that is subject to section 623(a)(7) of the FCRA shall be 
deemed to be in compliance with the notice requirement in section 
623(a)(7) of the FCRA if the institution properly uses the model notices 
in this appendix (as applicable).
    b. A financial institution may use Model Notice B-1 if the 
institution provides the notice prior to furnishing negative information 
to a nationwide consumer reporting agency.
    c. A financial institution may use Model Notice B-2 if the 
institution provides the notice after furnishing negative information to 
a nationwide consumer reporting agency.
    d. Financial institutions may make certain changes to the language 
or format of the model notices without losing the safe harbor from 
liability provided by the model notices. The changes to the model 
notices may not be so extensive as to affect the substance, clarity, or 
meaningful sequence of the language in the model notices. Financial 
institutions making such extensive revisions will lose the safe harbor 
from liability that this appendix provides. Acceptable changes include, 
for example,
    1. Rearranging the order of the references to ``late payment(s),'' 
or ``missed payment(s).''
    2. Pluralizing the terms ``credit bureau,'' ``credit report,'' and 
``account.''
    3. Specifying the particular type of account on which information 
may be furnished, such as ``credit card account.''
    4. Rearranging in Model Notice B-1 the phrases ``information about 
your account'' and ``to credit bureaus'' such that it would read ``We 
may report to credit bureaus information about your account.''

                            Model Notice B-1

    We may report information about your account to credit bureaus. Late 
payments, missed payments, or other defaults on your account may be 
reflected in your credit report.

                            Model Notice B-2

    We have told a credit bureau about a late payment, missed payment or 
other default on your account. This information may be reflected in your 
credit report.



      Sec. Appendix C to Part 1022--Model Forms for Opt-Out Notices

    a. Although use of the model forms is not required, use of the model 
forms in this appendix (as applicable) complies with the requirement in 
section 624 of the Act for clear, conspicuous, and concise notices.
    b. Certain changes may be made to the language or format of the 
model forms without losing the protection from liability afforded by use 
of the model forms. These changes may not be so extensive as to affect 
the substance, clarity, or meaningful sequence of the language in the 
model forms. Persons making such extensive revisions will lose the safe 
harbor that this appendix provides. Acceptable changes include, for 
example:
    1. Rearranging the order of the references to ``your income,'' 
``your account history,'' and ``your credit score.''
    2. Substituting other types of information for ``income,'' ``account 
history,'' or ``credit score'' for accuracy, such as ``payment 
history,'' ``credit history,'' ``payoff status,'' or ``claims history.''
    3. Substituting a clearer and more accurate description of the 
affiliates providing or covered by the notice for phrases such as ``the 
[ABC] group of companies,'' including without limitation a statement 
that the entity providing the notice recently purchased the consumer's 
account.
    4. Substituting other types of affiliates covered by the notice for 
``credit card,'' ``insurance,'' or ``securities'' affiliates.

[[Page 629]]

    5. Omitting items that are not accurate or applicable. For example, 
if a person does not limit the duration of the opt-out period, the 
notice may omit information about the renewal notice.
    6. Adding a statement informing consumers how much time they have to 
opt out before shared eligibility information may be used to make 
solicitations to them.
    7. Adding a statement that the consumer may exercise the right to 
opt out at any time.
    8. Adding the following statement, if accurate: ``If you previously 
opted out, you do not need to do so again.''
    9. Providing a place on the form for the consumer to fill in 
identifying information, such as his or her name and address.
    10. Adding disclosures regarding the treatment of opt-outs by joint 
consumers to comply with Sec.  1022.23(a)(2) of this part.

C-1 Model Form for Initial Opt-out Notice (Single-Affiliate Notice)
C-2 Model Form for Initial Opt-out Notice (Joint Notice)
C-3 Model Form for Renewal Notice (Single-Affiliate Notice)
C-4 Model Form for Renewal Notice (Joint Notice)
C-5 Model Form for Voluntary ``No Marketing'' Notice

 C-1--Model Form for Initial Opt-Out Notice (Single-Affiliate Notice)--
          [Your Choice To Limit Marketing]/[Marketing Opt-Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You may limit our affiliates in the [ABC] group 
of companies, such as our [credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that we collect and share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice to limit marketing offers from our 
affiliates will apply [until you tell us to change your choice]/[for x 
years from when you tell us your choice]/[for at least 5 years from when 
you tell us your choice]. [Include if the opt-out period expires.] Once 
that period expires, you will receive a renewal notice that will allow 
you to continue to limit marketing offers from our affiliates for 
[another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
our affiliates, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:

 By telephone: 1-(877) -
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Do not allow your affiliates to use my personal information to 
market to me.

C-2--Model Form for Initial Opt-Out Notice (Joint Notice)--[Your Choice 
                 To Limit Marketing]/[Marketing Opt-Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You may limit the [ABC] companies, such as the 
[ABC credit card, insurance, and securities] affiliates, from marketing 
their products or services to you based on your personal information 
that they receive from other [ABC] companies. This information includes 
your [income], your [account history], and your [credit score].
     Your choice to limit marketing offers from the 
[ABC] companies will apply [until you tell us to change your choice]/
[for x years from when you tell us your choice]/[for at least 5 years 
from when you tell us your choice]. [Include if the opt-out period 
expires.] Once that period expires, you will receive a renewal notice 
that will allow you to continue to limit marketing offers from the [ABC] 
companies for [another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
the [ABC] companies, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:

 By telephone: 1-(877) -
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Do not allow any company [in the ABC group of companies] to use my 
personal information to market to me.

[[Page 630]]

C-3--Model Form for Renewal Notice (Single-Affiliate Notice)--[Renewing 
    Your Choice To Limit Marketing]/[Renewing Your Marketing Opt-Out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You previously chose to limit our affiliates in 
the [ABC] group of companies, such as our [credit card, insurance, and 
securities] affiliates, from marketing their products or services to you 
based on your personal information that we share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:

 By telephone: 1-(877) -
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

    --Renew my choice to limit marketing for [x] more years.

C-4--Model Form for Renewal Notice (Joint Notice)--[Renewing Your Choice 
          To Limit Marketing]/[Renewing Your Marketing Opt-Out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You previously chose to limit the [ABC] 
companies, such as the [ABC credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that they receive from other ABC companies. 
This information includes your [income], your [account history], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:

 By telephone: 1-(877) -
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

--Renew my choice to limit marketing for [x] more years.

 C-5--Model Form for Voluntary ``No Marketing'' Notice--[Your Choice To 
                             Stop Marketing]

     [Name of Affiliate] is providing this notice.
     You may choose to stop all marketing from us and 
our affiliates.
     [Your choice to stop marketing from us and our 
affiliates will apply until you tell us to change your choice.]
    To stop all marketing, contact us [include all that apply]:

 By telephone: 1 (877) -
 On the Web: www.--.com
 By mail: Check the box and complete the form below, 
          and send the form to:
    [Company name]
    [Company address]

--Do not market to me.



 Sec. Appendix D to Part 1022--Model Forms for Firm Offers of Credit or 
                                Insurance

    In order to comply with Sec.  1022.54, the following model notices 
may be used:
    (a) English language model notice--(1) Short notice.

[[Page 631]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.000

    (2) Long notice.

[[Page 632]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.001

    (b) Spanish language model notice--(1) Short notice.

[[Page 633]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.002

    (2) Long notice.

[[Page 634]]

[GRAPHIC] [TIFF OMITTED] TR21DE11.003



  Sec. Appendix E to Part 1022--Interagency Guidelines Concerning the 
 Accuracy and Integrity of Information Furnished to Consumer Reporting 
                                Agencies

    The Bureau encourages voluntary furnishing of information to 
consumer reporting agencies. Section 1022.42 of this part requires each 
furnisher to establish and implement reasonable written policies and 
procedures concerning the accuracy and integrity of the information it 
furnishes to consumer reporting agencies. Under Sec.  1022.42(b) of this

[[Page 635]]

part, a furnisher must consider the guidelines set forth below in 
developing its policies and procedures. In establishing these policies 
and procedures, a furnisher may include any of its existing policies and 
procedures that are relevant and appropriate. Section 1022.42(c) 
requires each furnisher to review its policies and procedures 
periodically and update them as necessary to ensure their continued 
effectiveness.

       I. Nature, Scope, and Objectives of Policies and Procedures

    (a) Nature and Scope. Section 1022.42(a) of this part requires that 
a furnisher's policies and procedures be appropriate to the nature, 
size, complexity, and scope of the furnisher's activities. In developing 
its policies and procedures, a furnisher should consider, for example:
    (1) The types of business activities in which the furnisher engages;
    (2) The nature and frequency of the information the furnisher 
provides to consumer reporting agencies; and
    (3) The technology used by the furnisher to furnish information to 
consumer reporting agencies.
    (b) Objectives. A furnisher's policies and procedures should be 
reasonably designed to promote the following objectives:
    (1) To furnish information about accounts or other relationships 
with a consumer that is accurate, such that the furnished information:
    (i) Identifies the appropriate consumer;
    (ii) Reflects the terms of and liability for those accounts or other 
relationships; and
    (iii) Reflects the consumer's performance and other conduct with 
respect to the account or other relationship;
    (2) To furnish information about accounts or other relationships 
with a consumer that has integrity, such that the furnished information:
    (i) Is substantiated by the furnisher's records at the time it is 
furnished;
    (ii) Is furnished in a form and manner that is designed to minimize 
the likelihood that the information may be incorrectly reflected in a 
consumer report; thus, the furnished information should:
    (A) Include appropriate identifying information about the consumer 
to whom it pertains; and
    (B) Be furnished in a standardized and clearly understandable form 
and manner and with a date specifying the time period to which the 
information pertains; and
    (iii) Includes the credit limit, if applicable and in the 
furnisher's possession;
    (3) To conduct reasonable investigations of consumer disputes and 
take appropriate actions based on the outcome of such investigations; 
and
    (4) To update the information it furnishes as necessary to reflect 
the current status of the consumer's account or other relationship, 
including, for example:
    (i) Any transfer of an account (e.g., by sale or assignment for 
collection) to a third party; and
    (ii) Any cure of the consumer's failure to abide by the terms of the 
account or other relationship.

        II. Establishing and Implementing Policies and Procedures

    In establishing and implementing its policies and procedures, a 
furnisher should:
    (a) Identify practices or activities of the furnisher that can 
compromise the accuracy or integrity of information furnished to 
consumer reporting agencies, such as by:
    (1) Reviewing its existing practices and activities, including the 
technological means and other methods it uses to furnish information to 
consumer reporting agencies and the frequency and timing of its 
furnishing of information;
    (2) Reviewing its historical records relating to accuracy or 
integrity or to disputes; reviewing other information relating to the 
accuracy or integrity of information provided by the furnisher to 
consumer reporting agencies; and considering the types of errors, 
omissions, or other problems that may have affected the accuracy or 
integrity of information it has furnished about consumers to consumer 
reporting agencies;
    (3) Considering any feedback received from consumer reporting 
agencies, consumers, or other appropriate parties;
    (4) Obtaining feedback from the furnisher's staff; and
    (5) Considering the potential impact of the furnisher's policies and 
procedures on consumers.
    (b) Evaluate the effectiveness of existing policies and procedures 
of the furnisher regarding the accuracy and integrity of information 
furnished to consumer reporting agencies; consider whether new, 
additional, or different policies and procedures are necessary; and 
consider whether implementation of existing policies and procedures 
should be modified to enhance the accuracy and integrity of information 
about consumers furnished to consumer reporting agencies.
    (c) Evaluate the effectiveness of specific methods (including 
technological means) the furnisher uses to provide information to 
consumer reporting agencies; how those methods may affect the accuracy 
and integrity of the information it provides to consumer reporting 
agencies; and whether new, additional, or different methods (including 
technological means) should be used to provide information to consumer 
reporting agencies to enhance the accuracy and integrity of that 
information.

[[Page 636]]

           III. Specific Components of Policies and Procedures

    In developing its policies and procedures, a furnisher should 
address the following, as appropriate:
    (a) Establishing and implementing a system for furnishing 
information about consumers to consumer reporting agencies that is 
appropriate to the nature, size, complexity, and scope of the 
furnisher's business operations.
    (b) Using standard data reporting formats and standard procedures 
for compiling and furnishing data, where feasible, such as the 
electronic transmission of information about consumers to consumer 
reporting agencies.
    (c) Maintaining records for a reasonable period of time, not less 
than any applicable recordkeeping requirement, in order to substantiate 
the accuracy of any information about consumers it furnishes that is 
subject to a direct dispute.
    (d) Establishing and implementing appropriate internal controls 
regarding the accuracy and integrity of information about consumers 
furnished to consumer reporting agencies, such as by implementing 
standard procedures and verifying random samples of information provided 
to consumer reporting agencies.
    (e) Training staff that participates in activities related to the 
furnishing of information about consumers to consumer reporting agencies 
to implement the policies and procedures.
    (f) Providing for appropriate and effective oversight of relevant 
service providers whose activities may affect the accuracy or integrity 
of information about consumers furnished to consumer reporting agencies 
to ensure compliance with the policies and procedures.
    (g) Furnishing information about consumers to consumer reporting 
agencies following mergers, portfolio acquisitions or sales, or other 
acquisitions or transfers of accounts or other obligations in a manner 
that prevents re-aging of information, duplicative reporting, or other 
problems that may similarly affect the accuracy or integrity of the 
information furnished.
    (h) Deleting, updating, and correcting information in the 
furnisher's records, as appropriate, to avoid furnishing inaccurate 
information.
    (i) Conducting reasonable investigations of disputes.
    (j) Designing technological and other means of communication with 
consumer reporting agencies to prevent duplicative reporting of 
accounts, erroneous association of information with the wrong 
consumer(s), and other occurrences that may compromise the accuracy or 
integrity of information provided to consumer reporting agencies.
    (k) Providing consumer reporting agencies with sufficient 
identifying information in the furnisher's possession about each 
consumer about whom information is furnished to enable the consumer 
reporting agency properly to identify the consumer.
    (l) Conducting a periodic evaluation of its own practices, consumer 
reporting agency practices of which the furnisher is aware, 
investigations of disputed information, corrections of inaccurate 
information, means of communication, and other factors that may affect 
the accuracy or integrity of information furnished to consumer reporting 
agencies.
    (m) Complying with applicable requirements under the FCRA and its 
implementing regulations.



               Sec. Appendixes F-G to Part 1022 [Reserved]



  Sec. Appendix H to Part 1022--Model Forms for Risk-Based Pricing and 
                Credit Score Disclosure Exception Notices

    1. This appendix contains four model forms for risk-based pricing 
notices and three model forms for use in connection with the credit 
score disclosure exceptions. Each of the model forms is designated for 
use in a particular set of circumstances as indicated by the title of 
that model form.
    2. Model form H-1 is for use in complying with the general risk-
based pricing notice requirements in Sec. 1022.72 if a credit score is 
not used in setting the material terms of credit. Model form H-2 is for 
risk-based pricing notices given in connection with account review if a 
credit score is not used in increasing the annual percentage rate. Model 
form H-3 is for use in connection with the credit score disclosure 
exception for loans secured by residential real property. Model form H-4 
is for use in connection with the credit score disclosure exception for 
loans that are not secured by residential real property. Model form H-5 
is for use in connection with the credit score disclosure exception when 
no credit score is available for a consumer. Model form H-6 is for use 
in complying with the general risk-based pricing notice requirements in 
Sec. 1022.72 if a credit score is used in setting the material terms of 
credit. Model form H-7 is for risk-based pricing notices given in 
connection with account review if a credit score is used in increasing 
the annual percentage rate. All forms contained in this appendix are 
models; their use is optional.
    3. A person may change the forms by rearranging the format or by 
making technical modifications to the language of the forms, in each 
case without modifying the substance of the disclosures. Any such 
rearrangement or modification of the language

[[Page 637]]

of the model forms may not be so extensive as to materially affect the 
substance, clarity, comprehensibility, or meaningful sequence of the 
forms. Persons making revisions with that effect will lose the benefit 
of the safe harbor for appropriate use of appendix H model forms. A 
person is not required to conduct consumer testing when rearranging the 
format of the model forms.
    a. Acceptable changes include, for example:
    i. Corrections or updates to telephone numbers, mailing addresses, 
or Web site addresses that may change over time.
    ii. The addition of graphics or icons, such as the person's 
corporate logo.
    iii. Alteration of the shading or color contained in the model 
forms.
    iv. Use of a different form of graphical presentation to depict the 
distribution of credit scores.
    v. Substitution of the words ``credit'' and ``creditor'' or 
``finance'' and ``finance company'' for the terms ``loan'' and 
``lender.''
    vi. Including pre-printed lists of the sources of consumer reports 
or consumer reporting agencies in a ``check-the-box'' format.
    vii. Including the name of the consumer, transaction identification 
numbers, a date, and other information that will assist in identifying 
the transaction to which the form pertains.
    viii. Including the name of an agent, such as an auto dealer or 
other party, when providing the ``Name of the Entity Providing the 
Notice.''
    ix. Until January 1, 2013, substituting ``For more information about 
credit reports and your rights under Federal law, visit the Federal 
Reserve Board's Web site at www.federalreserve.gov, or the Federal Trade 
Commission's Web site at www.ftc.gov.'' for ``For more information about 
credit reports and your rights under Federal law, visit the Consumer 
Financial Protection Bureau's Web site at www.consumerfinance.gov/
learnmore.''
    b. Unacceptable changes include, for example:
    i. Providing model forms on register receipts or interspersed with 
other disclosures.
    ii. Eliminating empty lines and extra spaces between sentences 
within the same section.
    4. If a person uses an appropriate appendix H model form, or 
modifies a form in accordance with the above instructions, that person 
shall be deemed to be acting in compliance with the provisions of Sec.  
1022.73 or Sec.  1022.74, as applicable, of this part. It is intended 
that appropriate use of Model Form H-3 also will comply with the 
disclosure that may be required under section 609(g) of the FCRA. 
Optional language in model forms H-6 and H-7 may be used to direct the 
consumer to the entity (which may be a consumer reporting agency or the 
creditor itself, for a proprietary score that meets the definition of a 
credit score) that provided the credit score for any questions about the 
credit score, along with the entity's contact information. Creditors may 
use or not use the additional language without losing the safe harbor, 
since the language is optional.
    H-1 Model form for risk-based pricing notice.
    H-2 Model form for account review risk-based pricing notice.
    H-3 Model form for credit score disclosure exception for credit 
secured by one to four units of residential real property.
    H-4 Model form for credit score disclosure exception for loans not 
secured by residential real property.
    H-5 Model form for credit score disclosure exception for loans where 
credit score is not available.
    H-6 Model form for risk-based pricing notice with credit score 
information.
    H-7 Model form for account review risk-based pricing notice with 
credit score information.

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 Sec. Appendix I to Part 1022--Summary of Consumer Identity Theft Rights

    The prescribed form for this summary is a disclosure that is 
substantially similar to the Bureau's model summary with all information 
clearly and prominently displayed. A summary should accurately reflect 
changes to those items that may change over time (such as telephone 
numbers) to remain in compliance. Translations of this summary will be 
in compliance with the Bureau's prescribed model, provided that the 
translation is accurate and that it is provided in a language used by 
the recipient consumer.

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[83 FR 47033, Sept. 18, 2018]



                 Sec. Appendix J to Part 1022 [Reserved]



        Sec. Appendix K to Part 1022--Summary of Consumer Rights

    The prescribed form for this summary is a disclosure that is 
substantially similar to the Bureau's model summary with all information 
clearly and prominently displayed. The list of Federal regulators that 
is included in the Bureau's prescribed summary may be provided 
separately so long as this is done in a clear and conspicuous way. A 
summary should accurately reflect changes to those items that may change 
over time (e.g., dollar amounts, or telephone numbers and addresses of 
Federal agencies) to remain in compliance. Translations of this summary 
will be in compliance with the Bureau's prescribed model, provided that 
the translation is accurate and that it is provided in a language used 
by the recipient consumer.

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[88 FR 58066, Aug. 25, 2023]



 Sec. Appendix L to Part 1022--Standardized Form for Requesting Annual 
                            File Disclosures

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   Sec. Appendix M to Part 1022--Notice of Furnisher Responsibilities

    The prescribed form for this disclosure is a separate document that 
is substantially similar to the Bureau's model notice with all 
information clearly and prominently displayed. Consumer reporting 
agencies may limit the disclosure to only those items that they know are 
relevant to the furnisher that will receive the notice.

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[77 FR 67750, Nov. 14, 2012]



      Sec. Appendix N to Part 1022--Notice of User Responsibilities

    The prescribed form for this disclosure is a separate document that 
is substantially similar to the Bureau's notice with all information 
clearly and prominently displayed. Consumer reporting agencies may limit 
the disclosure to only those items that they know are relevant to the 
user that will receive the notice.

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[77 FR 67754, Nov. 14, 2012]



Sec. Appendix O to Part 1022--Reasonable Charges for Certain Disclosures

    Section 612(f) of the FCRA, 15 U.S.C. 1681j(f), directs the Bureau 
to increase the maximum allowable charge a consumer reporting agency may 
impose for making a disclosure to the consumer pursuant to section 609 
of the FCRA, 15 U.S.C. 1681g, on January 1 of each year, based 
proportionally on changes in the Consumer Price Index, with fractional 
changes rounded to the nearest fifty cents. The Bureau will publish 
notice of the maximum allowable charge each year by amending this 
appendix. For calendar year 2024, the maximum allowable charge is 
$15.50. For historical purposes:
    1. For calendar year 2012, the maximum allowable disclosure charge 
was $11.50.
    2. For calendar year 2013, the maximum allowable disclosure charge 
was $11.50.
    3. For calendar year 2014, the maximum allowable disclosure charge 
was $11.50.
    4. For calendar year 2015, the maximum allowable disclosure charge 
was $12.00.
    5. For calendar year 2016, the maximum allowable disclosure charge 
was $12.00.
    6. For calendar year 2017, the maximum allowable disclosure charge 
was $12.00.
    7. For calendar year 2018, the maximum allowable disclosure charge 
was $12.00.
    8. For calendar year 2019, the maximum allowable disclosure charge 
was $12.50.
    9. For calendar year 2020, the maximum allowable disclosure charge 
was $12.50.
    10. For calendar year 2021, the maximum allowable disclosure charge 
was $13.00.
    11. For calendar year 2022, the maximum allowable disclosure charge 
was $13.50.
    12. For calendar year 2023, the maximum allowable disclosure charge 
was $14.50.
    13. For calendar year 2024, the maximum allowable disclosure charge 
is $15.50.

[88 FR 78231, Nov. 15, 2023]



PART 1024_REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)--Table 
of Contents



                      Subpart A_General Provisions

Sec.
1024.1 Designation.
1024.2 Definitions.
1024.3 E-Sign applicability.
1024.4 Reliance upon rule, regulation, or interpretation by the Bureau.
1024.5 Coverage of RESPA.

            Subpart B_Mortgage Settlement and Escrow Accounts

1024.6 Special information booklet at time of loan application.
1024.7 Good faith estimate.
1024.8 Use of HUD-1 or HUD-1A settlement statements.
1024.9 Reproduction of settlement statements.
1024.10 One-day advance inspection of HUD-1 or HUD-1A settlement 
          statement; delivery; recordkeeping.
1024.11 Mailing.
1024.12 No fee.
1024.13 [Reserved]

[[Page 674]]

1024.14 Prohibition against kickbacks and unearned fees.
1024.15 Affiliated business arrangements.
1024.16 Title companies.
1024.17 Escrow accounts.
1024.18-1024.19 [Reserved]
1024.20 List of homeownership counseling organizations.

                      Subpart C_Mortgage Servicing

1024.30 Scope.
1024.31 Definitions.
1024.32 General disclosure requirements.
1024.33 Mortgage servicing transfers.
1024.34 Timely escrow payments and treatment of escrow account balances.
1024.35 Error resolution procedures.
1024.36 Requests for information.
1024.37 Force-placed insurance.
1024.38 General servicing policies, procedures, and requirements.
1024.39 Early intervention requirements for certain borrowers.
1024.40 Continuity of contact.
1024.41 Loss mitigation procedures.

Appendix A to Part 1024--Instructions for Completing HUD-1 and HUD-1A 
          Settlement Statements; Sample HUD-1 and HUD-1A Statements
Appendix B to Part 1024--Illustrations of Requirements of RESPA
Appendix C to Part 1024--Instructions for Completing Good Faith Estimate 
          (GFE) Form
Appendix D to Part 1024--Affiliated Business Arrangement Disclosure 
          Statement Format
Appendix E to Part 1024--Arithmetic Steps
Appendix MS to Part 1024--Mortgage Servicing
Appendix MS-1 to Part 1024--Servicing Disclosure Statement
Appendix MS-2 to Part 1024--Notice of Servicing Transfer
Appendix MS-3 to Part 1024--Model Force-Placed Insurance Notice Forms
Appendix MS-4 to Part 1024--Model Clauses for the Written Early 
          Intervention Notice
Supplement I to Part 1024--Official Bureau Interpretations

    Authority: 12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 5581.

    Source: 76 FR 78981, Dec. 20, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  1024.1  Designation.

    This part, known as Regulation X, is issued by the Bureau of 
Consumer Financial Protection to implement the Real Estate Settlement 
Procedures Act of 1974, as amended, 12 U.S.C. 2601 et. seq.



Sec.  1024.2  Definitions.

    (a) Statutory terms. All terms defined in RESPA (12 U.S.C. 2602) are 
used in accordance with their statutory meaning unless otherwise defined 
in paragraph (b) of this section or elsewhere in this part.
    (b) Other terms. As used in this part:
    Application means the submission of a borrower's financial 
information in anticipation of a credit decision relating to a federally 
related mortgage loan, which shall include the borrower's name, the 
borrower's monthly income, the borrower's social security number to 
obtain a credit report, the property address, an estimate of the value 
of the property, the mortgage loan amount sought, and any other 
information deemed necessary by the loan originator. An application may 
either be in writing or electronically submitted, including a written 
record of an oral application.
    Balloon payment has the same meaning as ``balloon payment'' under 
Regulation Z (12 CFR part 1026).
    Bureau means the Bureau of Consumer Financial Protection.
    Business day means a day on which the offices of the business entity 
are open to the public for carrying on substantially all of the entity's 
business functions.
    Changed circumstances means:
    (1)(i) Acts of God, war, disaster, or other emergency;
    (ii) Information particular to the borrower or transaction that was 
relied on in providing the GFE and that changes or is found to be 
inaccurate after the GFE has been provided. This may include information 
about the credit quality of the borrower, the amount of the loan, the 
estimated value of the property, or any other information that was used 
in providing the GFE;
    (iii) New information particular to the borrower or transaction that 
was not relied on in providing the GFE; or
    (iv) Other circumstances that are particular to the borrower or 
transaction, including boundary disputes, the need for flood insurance, 
or environmental problems.

[[Page 675]]

    (2) Changed circumstances do not include:
    (i) The borrower's name, the borrower's monthly income, the property 
address, an estimate of the value of the property, the mortgage loan 
amount sought, and any information contained in any credit report 
obtained by the loan originator prior to providing the GFE, unless the 
information changes or is found to be inaccurate after the GFE has been 
provided; or
    (ii) Market price fluctuations by themselves.
    Dealer means, in the case of property improvement loans, a seller, 
contractor, or supplier of goods or services. In the case of 
manufactured home loans, ``dealer'' means one who engages in the 
business of manufactured home retail sales.
    Dealer loan or dealer consumer credit contract means, generally, any 
arrangement in which a dealer assists the borrower in obtaining a 
federally related mortgage loan from the funding lender and then assigns 
the dealer's legal interests to the funding lender and receives the net 
proceeds of the loan. The funding lender is the lender for the purposes 
of the disclosure requirements of this part. If a dealer is a 
``creditor'' as defined under the definition of ``federally related 
mortgage loan'' in this part, the dealer is the lender for purposes of 
this part.
    Effective date of transfer is defined in section 6(i)(1) of RESPA 
(12 U.S.C. 2605(i)(1)). In the case of a home equity conversion mortgage 
or reverse mortgage as referenced in this section, the effective date of 
transfer is the transfer date agreed upon by the transferee servicer and 
the transferor servicer.
    Federally related mortgage loan means:
    (1) Any loan (other than temporary financing, such as a construction 
loan):
    (i) That is secured by a first or subordinate lien on residential 
real property, including a refinancing of any secured loan on 
residential real property, upon which there is either:
    (A) Located or, following settlement, will be constructed using 
proceeds of the loan, a structure or structures designed principally for 
occupancy of from one to four families (including individual units of 
condominiums and cooperatives and including any related interests, such 
as a share in the cooperative or right to occupancy of the unit); or
    (B) Located or, following settlement, will be placed using proceeds 
of the loan, a manufactured home; and
    (ii) For which one of the following paragraphs applies. The loan:
    (A) Is made in whole or in part by any lender that is either 
regulated by or whose deposits or accounts are insured by any agency of 
the Federal Government;
    (B) Is made in whole or in part, or is insured, guaranteed, 
supplemented, or assisted in any way:
    (1) By the Secretary of the Department of Housing and Urban 
Development (HUD) or any other officer or agency of the Federal 
Government; or
    (2) Under or in connection with a housing or urban development 
program administered by the Secretary of HUD or a housing or related 
program administered by any other officer or agency of the Federal 
Government;
    (C) Is intended to be sold by the originating lender to the Federal 
National Mortgage Association, the Government National Mortgage 
Association, the Federal Home Loan Mortgage Corporation (or its 
successors), or a financial institution from which the loan is to be 
purchased by the Federal Home Loan Mortgage Corporation (or its 
successors);
    (D) Is made in whole or in part by a ``creditor,'' as defined in 
section 103(g) of the Consumer Credit Protection Act (15 U.S.C. 
1602(g)), that makes or invests in residential real estate loans 
aggregating more than $1,000,000 per year. For purposes of this 
definition, the term ``creditor'' does not include any agency or 
instrumentality of any State, and the term ``residential real estate 
loan'' means any loan secured by residential real property, including 
single-family and multifamily residential property;
    (E) Is originated either by a dealer or, if the obligation is to be 
assigned to any maker of mortgage loans specified in paragraphs 
(1)(ii)(A) through (D) of this definition, by a mortgage broker; or
    (F) Is the subject of a home equity conversion mortgage, also 
frequently called a ``reverse mortgage,'' issued by

[[Page 676]]

any maker of mortgage loans specified in paragraphs (1)(ii)(A) through 
(D) of this definition.
    (2) Any installment sales contract, land contract, or contract for 
deed on otherwise qualifying residential property is a federally related 
mortgage loan if the contract is funded in whole or in part by proceeds 
of a loan made by any maker of mortgage loans specified in paragraphs 
(1)(ii) (A) through (D) of this definition.
    (3) If the residential real property securing a mortgage loan is not 
located in a State, the loan is not a federally related mortgage loan.
    Good faith estimate or GFE means an estimate of settlement charges a 
borrower is likely to incur, as a dollar amount, and related loan 
information, based upon common practice and experience in the locality 
of the mortgaged property, as provided on the form prescribed in Sec.  
1024.7 and prepared in accordance with the Instructions in appendix C to 
this part.
    HUD means the Department of Housing and Urban Development.
    HUD-1 or HUD-1A settlement statement (also HUD-1 or HUD-1A) means 
the statement that is prescribed in this part for setting forth 
settlement charges in connection with either the purchase or the 
refinancing (or other subordinate lien transaction) of 1- to 4-family 
residential property.
    Lender means, generally, the secured creditor or creditors named in 
the debt obligation and document creating the lien. For loans originated 
by a mortgage broker that closes a federally related mortgage loan in 
its own name in a table funding transaction, the lender is the person to 
whom the obligation is initially assigned at or after settlement. A 
lender, in connection with dealer loans, is the lender to whom the loan 
is assigned, unless the dealer meets the definition of creditor as 
defined under ``federally related mortgage loan'' in this section. See 
also Sec.  1024.5(b)(7), secondary market transactions.
    Loan originator means a lender or mortgage broker.
    Manufactured home is defined in HUD regulation 24 CFR 3280.2.
    Mortgage broker means a person (other than an employee of a lender) 
that renders origination services and serves as an intermediary between 
a borrower and a lender in a transaction involving a federally related 
mortgage loan, including such a person that closes the loan in its own 
name in a table-funded transaction.
    Mortgaged property means the real property that is security for the 
federally related mortgage loan.
    Origination service means any service involved in the creation of a 
federally related mortgage loan, including but not limited to the taking 
of the loan application, loan processing, the underwriting and funding 
of the loan, and the processing and administrative services required to 
perform these functions.
    Person is defined in section 3(5) of RESPA (12 U.S.C. 2602(5)).
    Prepayment penalty has the same meaning as ``prepayment penalty'' 
under Regulation Z (12 CFR part 1026).
    Public Guidance Documents means Federal Register documents adopted 
or published, that the Bureau may amend from time-to-time by publication 
in the Federal Register. These documents are also available from the 
Bureau. Requests for copies of Public Guidance Documents should be 
directed to the Assistant Director, Office of Regulations, Division of 
Research, Monitoring, and Regulations, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20552.
    Refinancing means a transaction in which an existing obligation that 
was subject to a secured lien on residential real property is satisfied 
and replaced by a new obligation undertaken by the same borrower and 
with the same or a new lender. The following shall not be treated as a 
refinancing, even when the existing obligation is satisfied and replaced 
by a new obligation with the same lender (this definition of 
``refinancing'' as to transactions with the same lender is similar to 
Regulation Z, 12 CFR 1026.20(a)):
    (1) A renewal of a single payment obligation with no change in the 
original terms;
    (2) A reduction in the annual percentage rate as computed under the 
Truth in Lending Act with a corresponding change in the payment 
schedule;

[[Page 677]]

    (3) An agreement involving a court proceeding;
    (4) A workout agreement, in which a change in the payment schedule 
or change in collateral requirements is agreed to as a result of the 
consumer's default or delinquency, unless the rate is increased or the 
new amount financed exceeds the unpaid balance plus earned finance 
charges and premiums for continuation of allowable insurance; and
    (5) The renewal of optional insurance purchased by the consumer that 
is added to an existing transaction, if disclosures relating to the 
initial purchase were provided.
    Regulation Z means the regulations issued by the Bureau (12 CFR part 
1026) to implement the Federal Truth in Lending Act (15 U.S.C. 1601 et 
seq.), and includes the Commentary on Regulation Z.
    Required use means a situation in which a person must use a 
particular provider of a settlement service in order to have access to 
some distinct service or property, and the person will pay for the 
settlement service of the particular provider or will pay a charge 
attributable, in whole or in part, to the settlement service. However, 
the offering of a package (or combination of settlement services) or the 
offering of discounts or rebates to consumers for the purchase of 
multiple settlement services does not constitute a required use. Any 
package or discount must be optional to the purchaser. The discount must 
be a true discount below the prices that are otherwise generally 
available, and must not be made up by higher costs elsewhere in the 
settlement process.
    RESPA means the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2601 et seq.).
    Servicer means a person responsible for the servicing of a federally 
related mortgage loan (including the person who makes or holds such loan 
if such person also services the loan). The term does not include:
    (1) The Federal Deposit Insurance Corporation (FDIC), in connection 
with assets acquired, assigned, sold, or transferred pursuant to section 
13(c) of the Federal Deposit Insurance Act or as receiver or conservator 
of an insured depository institution;
    (2) The National Credit Union Administration (NCUA), in connection 
with assets acquired, assigned, sold, or transferred pursuant to section 
208 of the Federal Credit Union Act or as conservator or liquidating 
agent of an insured credit union; and
    (3) The Federal National Mortgage Corporation (FNMA); the Federal 
Home Loan Mortgage Corporation (Freddie Mac); the FDIC; HUD, including 
the Government National Mortgage Association (GNMA) and the Federal 
Housing Administration (FHA) (including cases in which a mortgage 
insured under the National Housing Act (12 U.S.C. 1701 et seq.) is 
assigned to HUD); the NCUA; the Farm Service Agency; and the Department 
of Veterans Affairs (VA), in any case in which the assignment, sale, or 
transfer of the servicing of the federally related mortgage loan is 
preceded by termination of the contract for servicing the loan for 
cause, commencement of proceedings for bankruptcy of the servicer, 
commencement of proceedings by the FDIC for conservatorship or 
receivership of the servicer (or an entity by which the servicer is 
owned or controlled), or commencement of proceedings by the NCUA for 
appointment of a conservator or liquidating agent of the servicer (or an 
entity by which the servicer is owned or controlled).
    Servicing means receiving any scheduled periodic payments from a 
borrower pursuant to the terms of any federally related mortgage loan, 
including amounts for escrow accounts under section 10 of RESPA (12 
U.S.C. 2609), and making the payments to the owner of the loan or other 
third parties of principal and interest and such other payments with 
respect to the amounts received from the borrower as may be required 
pursuant to the terms of the mortgage servicing loan documents or 
servicing contract. In the case of a home equity conversion mortgage or 
reverse mortgage as referenced in this section, servicing includes 
making payments to the borrower.
    Settlement means the process of executing legally binding documents 
regarding a lien on property that is subject to a federally related 
mortgage

[[Page 678]]

loan. This process may also be called ``closing'' or ``escrow'' in 
different jurisdictions.
    Settlement service means any service provided in connection with a 
prospective or actual settlement, including, but not limited to, any one 
or more of the following:
    (1) Origination of a federally related mortgage loan (including, but 
not limited to, the taking of loan applications, loan processing, and 
the underwriting and funding of such loans);
    (2) Rendering of services by a mortgage broker (including 
counseling, taking of applications, obtaining verifications and 
appraisals, and other loan processing and origination services, and 
communicating with the borrower and lender);
    (3) Provision of any services related to the origination, processing 
or funding of a federally related mortgage loan;
    (4) Provision of title services, including title searches, title 
examinations, abstract preparation, insurability determinations, and the 
issuance of title commitments and title insurance policies;
    (5) Rendering of services by an attorney;
    (6) Preparation of documents, including notarization, delivery, and 
recordation;
    (7) Rendering of credit reports and appraisals;
    (8) Rendering of inspections, including inspections required by 
applicable law or any inspections required by the sales contract or 
mortgage documents prior to transfer of title;
    (9) Conducting of settlement by a settlement agent and any related 
services;
    (10) Provision of services involving mortgage insurance;
    (11) Provision of services involving hazard, flood, or other 
casualty insurance or homeowner's warranties;
    (12) Provision of services involving mortgage life, disability, or 
similar insurance designed to pay a mortgage loan upon disability or 
death of a borrower, but only if such insurance is required by the 
lender as a condition of the loan;
    (13) Provision of services involving real property taxes or any 
other assessments or charges on the real property;
    (14) Rendering of services by a real estate agent or real estate 
broker; and
    (15) Provision of any other services for which a settlement service 
provider requires a borrower or seller to pay.
    Special information booklet means the booklet adopted pursuant to 
section 5 of RESPA (12 U.S.C. 2604) to help persons understand the 
nature and costs of settlement services. The Bureau publishes the form 
of the special information booklet in the Federal Register or by other 
public notice. The Bureau may issue or approve additional booklets or 
alternative booklets by publication of a Notice in the Federal Register.
    State means any state of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, and any territory or 
possession of the United States.
    Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds. A table-funded transaction is not a 
secondary market transaction (see Sec.  1024.5(b)(7)).
    Third party means a settlement service provider other than a loan 
originator.
    Title company means any institution, or its duly authorized agent, 
that is qualified to issue title insurance.
    Title service means any service involved in the provision of title 
insurance (lender's or owner's policy), including but not limited to: 
Title examination and evaluation; preparation and issuance of title 
commitment; clearance of underwriting objections; preparation and 
issuance of a title insurance policy or policies; and the processing and 
administrative services required to perform these functions. The term 
also includes the service of conducting a settlement.
    Tolerance means the maximum amount by which the charge for a 
category or categories of settlement costs may exceed the amount of the 
estimate for such category or categories on a GFE.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10873, Feb. 14, 2013; 
88 FR 16542, Mar. 20, 2023]

[[Page 679]]



Sec.  1024.3  E-Sign applicability.

    The disclosures required by this part may be provided in electronic 
form, subject to compliance with the consumer consent and other 
applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).

[78 FR 10873, Feb. 14, 2013]



Sec.  1024.4  Reliance upon rule, regulation, or interpretation by the 
Bureau.

    (a) Rule, regulation or interpretation. (1) For purposes of sections 
19(a) and (b) of RESPA (12 U.S.C. 2617(a) and (b)), only the following 
constitute a rule, regulation or interpretation of the Bureau:
    (i) All provisions, including appendices and supplements, of this 
part. Any other document referred to in this part is not incorporated in 
this part unless it is specifically set out in this part;
    (ii) Any other document that is published in the Federal Register by 
the Bureau and states that it is an ``interpretation,'' ``interpretive 
rule,'' ``commentary,'' or a ``statement of policy'' for purposes of 
section 19(a) of RESPA. Except in unusual circumstances, interpretations 
will not be issued separately but will be incorporated in an official 
interpretation to this part, which will be amended periodically.
    (2) A ``rule, regulation, or interpretation thereof by the Bureau'' 
for purposes of section 19(b) of RESPA (12 U.S.C. 2617(b)) shall not 
include the special information booklet prescribed by the Bureau or any 
other statement or issuance, whether oral or written, by an officer or 
representative of the Bureau, letter or memorandum by the Director, 
General Counsel, or other officer or employee of the Bureau, preamble to 
a regulation or other issuance of the Bureau, Public Guidance Document, 
report to Congress, pleading, affidavit or other document in litigation, 
pamphlet, handbook, guide, telegraphic communication, explanation, 
instructions to forms, speech or other material of any nature which is 
not specifically included in paragraph (a)(1) of this section.
    (b) All informal counsel's opinions and staff interpretations issued 
by HUD before November 2, 1992, were withdrawn as of that date. Courts 
and administrative agencies, however, may use previous opinions to 
determine the validity of conduct under the previous Regulation X.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10874, Feb. 14, 2013]



Sec.  1024.5  Coverage of RESPA.

    (a) Applicability. RESPA and this part apply to federally related 
mortgage loans, except as provided in paragraphs (b) and (d) of this 
section.
    (b) Exemptions. (1) [Reserved]
    (2) Business purpose loans. An extension of credit primarily for a 
business, commercial, or agricultural purpose, as defined by 12 CFR 
1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in 
determining whether the exemption applies.
    (3) Temporary financing. Temporary financing, such as a construction 
loan. The exemption for temporary financing does not apply to a loan 
made to finance construction of 1- to 4-family residential property if 
the loan is used as, or may be converted to, permanent financing by the 
same lender or is used to finance transfer of title to the first user. 
If a lender issues a commitment for permanent financing, with or without 
conditions, the loan is covered by this part. Any construction loan for 
new or rehabilitated 1- to 4-family residential property, other than a 
loan to a bona fide builder (a person who regularly constructs 1- to 4-
family residential structures for sale or lease), is subject to this 
part if its term is for two years or more. A ``bridge loan'' or ``swing 
loan'' in which a lender takes a security interest in otherwise covered 
1- to 4-family residential property is not covered by RESPA and this 
part.
    (4) Vacant land. Any loan secured by vacant or unimproved property, 
unless within two years from the date of the settlement of the loan, a 
structure or a manufactured home will be constructed or placed on the 
real property using the loan proceeds. If a loan for a structure or 
manufactured home to be placed on vacant or unimproved property will be 
secured by a lien on that

[[Page 680]]

property, the transaction is covered by this part.
    (5) Assumption without lender approval. Any assumption in which the 
lender does not have the right expressly to approve a subsequent person 
as the borrower on an existing federally related mortgage loan. Any 
assumption in which the lender's permission is both required and 
obtained is covered by RESPA and this part, whether or not the lender 
charges a fee for the assumption.
    (6) Loan conversions. Any conversion of a federally related mortgage 
loan to different terms that are consistent with provisions of the 
original mortgage instrument, as long as a new note is not required, 
even if the lender charges an additional fee for the conversion.
    (7) Secondary market transactions. A bona fide transfer of a loan 
obligation in the secondary market is not covered by RESPA and this 
part, except with respect to RESPA (12 U.S.C. 2605) and subpart C of 
this part (Sec. Sec.  1024.30-1024.41). In determining what constitutes 
a bona fide transfer, the Bureau will consider the real source of 
funding and the real interest of the funding lender. Mortgage broker 
transactions that are table-funded are not secondary market 
transactions. Neither the creation of a dealer loan or dealer consumer 
credit contract, nor the first assignment of such loan or contract to a 
lender, is a secondary market transaction (see Sec.  1024.2).
    (c) Relation to State laws. (1) State laws that are inconsistent 
with RESPA or this part are preempted to the extent of the 
inconsistency. However, RESPA and these regulations do not annul, alter, 
affect, or exempt any person subject to their provisions from complying 
with the laws of any State with respect to settlement practices, except 
to the extent of the inconsistency.
    (2) Upon request by any person, the Bureau is authorized to 
determine if inconsistencies with State law exist; in doing so, the 
Bureau shall consult with appropriate Federal agencies.
    (i) The Bureau may not determine that a State law or regulation is 
inconsistent with any provision of RESPA or this part, if the Bureau 
determines that such law or regulation gives greater protection to the 
consumer.
    (ii) In determining whether provisions of State law or regulations 
concerning affiliated business arrangements are inconsistent with RESPA 
or this part, the Bureau may not construe those provisions that impose 
more stringent limitations on affiliated business arrangements as 
inconsistent with RESPA so long as they give more protection to 
consumers and/or competition.
    (3) Any person may request the Bureau to determine whether an 
inconsistency exists by submitting to the address established by the 
Bureau to request an official interpretation, a copy of the State law in 
question, any other law or judicial or administrative opinion that 
implements, interprets or applies the relevant provision, and an 
explanation of the possible inconsistency. A determination by the Bureau 
that an inconsistency with State law exists will be made by publication 
of a notice in the Federal Register. ``Law'' as used in this section 
includes regulations and any enactment which has the force and effect of 
law and is issued by a State or any political subdivision of a State.
    (4) A specific preemption of conflicting State laws regarding 
notices and disclosures of mortgage servicing transfers is set forth in 
Sec.  1024.33(d).
    (d) Partial exemptions for certain mortgage loans. Sections 1024.6, 
1024.7, 1024.8, 1024.10, and 1024.33(a) do not apply to a federally 
related mortgage loan:
    (1) That is subject to the special disclosure requirements for 
certain consumer credit transactions secured by real property set forth 
in Regulation Z, 12 CFR 1026.19(e), (f), and (g); or
    (2) That satisfies the criteria in Regulation Z, 12 CFR 1026.3(h).

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10874, Feb. 14, 2013; 
78 FR 44717, July 24, 2013; 78 FR 80104, Dec. 31, 2013; 80 FR 8775, Feb. 
19, 2015]



            Subpart B_Mortgage Settlement and Escrow Accounts



Sec.  1024.6  Special information booklet at time of loan application.

    (a) Lender to provide special information booklet. Subject to the 
exceptions

[[Page 681]]

set forth in this paragraph, the lender shall provide a copy of the 
special information booklet to a person from whom the lender receives, 
or for whom the lender prepares, a written application for a federally 
related mortgage loan. When two or more persons apply together for a 
loan, the lender is in compliance if the lender provides a copy of the 
booklet to one of the persons applying.
    (1) The lender shall provide the special information booklet by 
delivering it or placing it in the mail to the applicant not later than 
three business days (as that term is defined in Sec.  1024.2) after the 
application is received or prepared. However, if the lender denies the 
borrower's application for credit before the end of the three-business-
day period, then the lender need not provide the booklet to the 
borrower. If a borrower uses a mortgage broker, the mortgage broker 
shall distribute the special information booklet and the lender need not 
do so. The intent of this provision is that the applicant receive the 
special information booklet at the earliest possible date.
    (2) In the case of a federally related mortgage loan involving an 
open-ended credit plan, as defined in Regulation Z, 12 CFR 
1026.2(a)(20), a lender or mortgage broker that provides the borrower 
with a copy of the brochure entitled ``When Your Home is On the Line: 
What You Should Know About Home Equity Lines of Credit'', or any 
successor brochure issued by the Bureau, is deemed to be in compliance 
with this section.
    (3) In the categories of transactions set forth at the end of this 
paragraph, the lender or mortgage broker does not have to provide the 
booklet to the borrower. Under the authority of section 19(a) of RESPA 
(12 U.S.C. 2617(a)), the Bureau may issue a revised or separate special 
information booklet that deals with these transactions, or the Bureau 
may choose to endorse the forms or booklets of other Federal agencies. 
In such an event, the requirements for delivery by lenders and the 
availability of the booklet or alternate materials for these 
transactions will be set forth in a Notice in the Federal Register. This 
paragraph shall apply to the following transactions:
    (i) Refinancing transactions;
    (ii) Closed-end loans, as defined in 12 CFR 1026.2(a)(10) of 
Regulation Z, when the lender takes a subordinate lien;
    (iii) Reverse mortgages; and
    (iv) Any other federally related mortgage loan whose purpose is not 
the purchase of a 1- to 4-family residential property.
    (b) Revision. The Bureau may from time to time revise the special 
information booklet, publishing a notice in the Federal Register.
    (c) Reproduction. The special information booklet may be reproduced 
in any form, provided that no change is made other than as provided 
under paragraph (d) of this section. The special information booklet may 
not be made a part of a larger document for purposes of distribution 
under RESPA and this section. Any color, size and quality of paper, type 
of print, and method of reproduction may be used so long as the booklet 
is clearly legible.
    (d) Permissible changes. (1) No changes to, deletions from, or 
additions to the special information booklet currently prescribed by the 
Bureau shall be made other than the permissible changes specified in 
paragraphs (d)(2) and (3) of this section or changes as otherwise 
approved in writing by the Bureau in accordance with the procedures 
described in this paragraph (d). A request to the Bureau for approval of 
any changes other than the permissible changes specified in paragraphs 
(d)(2) and (3) of this section shall be submitted in writing to the 
address indicated in the definition of Public Guidance Documents in 
Sec.  1024.2, stating the reasons why the applicant believes such 
changes, deletions, or additions are necessary.
    (2) The cover of the booklet may be in any form and may contain any 
drawings, pictures, or artwork, provided that the words ``settlement 
costs'' are used in the title. Names, addresses and telephone numbers of 
the lender or others and similar information may appear on the cover, 
but no discussion of the matters covered in the booklet shall appear on 
the cover.

[[Page 682]]

    (3) The special information booklet may be translated into languages 
other than English.

[76 FR 78981, Dec. 20, 2011, as amended at 81 FR 72370, Oct. 19, 2016]



Sec.  1024.7  Good faith estimate.

    (a) Lender to provide. (1) Except as otherwise provided in 
paragraphs (a), (b), or (h) of this section, not later than 3 business 
days after a lender receives an application, or information sufficient 
to complete an application, the lender must provide the applicant with a 
GFE. In the case of dealer loans, the lender must either provide the GFE 
or ensure that the dealer provides the GFE.
    (2) The lender must provide the GFE to the loan applicant by hand 
delivery, by placing it in the mail, or, if the applicant agrees, by 
fax, email, or other electronic means.
    (3) The lender is not required to provide the applicant with a GFE 
if, before the end of the 3-business-day period:
    (i) The lender denies the application; or
    (ii) The applicant withdraws the application.
    (4) The lender is not permitted to charge, as a condition for 
providing a GFE, any fee for an appraisal, inspection, or other similar 
settlement service. The lender may, at its option, charge a fee limited 
to the cost of a credit report. The lender may not charge additional 
fees until after the applicant has received the GFE and indicated an 
intention to proceed with the loan covered by that GFE. If the GFE is 
mailed to the applicant, the applicant is considered to have received 
the GFE 3 calendar days after it is mailed, not including Sundays and 
the legal public holidays specified in 5 U.S.C. 6103(a).
    (5) The lender may at any time collect from the loan applicant any 
information that it requires in addition to the required application 
information. However, the lender is not permitted to require, as a 
condition for providing a GFE, that an applicant submit supplemental 
documentation to verify the information provided on the application.
    (b) Mortgage broker to provide. (1) Except as otherwise provided in 
paragraphs (a), (b), or (h) of this section, either the lender or the 
mortgage broker must provide a GFE not later than 3 business days after 
a mortgage broker receives either an application or information 
sufficient to complete an application. The lender is responsible for 
ascertaining whether the GFE has been provided. If the mortgage broker 
has provided a GFE, the lender is not required to provide an additional 
GFE.
    (2) The mortgage broker must provide the GFE by hand delivery, by 
placing it in the mail, or, if the applicant agrees, by fax, email, or 
other electronic means.
    (3) The mortgage broker is not required to provide the applicant 
with a GFE if, before the end of the 3-business-day period:
    (i) The mortgage broker or lender denies the application; or
    (ii) The applicant withdraws the application.
    (4) The mortgage broker is not permitted to charge, as a condition 
for providing a GFE, any fee for an appraisal, inspection, or other 
similar settlement service. The mortgage broker may, at its option, 
charge a fee limited to the cost of a credit report. The mortgage broker 
may not charge additional fees until after the applicant has received 
the GFE and indicated an intention to proceed with the loan covered by 
that GFE. If the GFE is mailed to the applicant, the applicant is 
considered to have received the GFE 3 calendar days after it is mailed, 
not including Sundays and the legal public holidays specified in 5 
U.S.C. 6103(a).
    (5) The mortgage broker may at any time collect from the loan 
applicant any information that it requires in addition to the required 
application information. However, the mortgage broker is not permitted 
to require, as a condition for providing a GFE, that an applicant submit 
supplemental documentation to verify the information provided on the 
application.
    (c) Availability of GFE terms. Except as provided in this paragraph, 
the estimate of the charges and terms for all settlement services must 
be available for at least 10 business days from when the GFE is 
provided, but it may remain available longer, if the loan originator 
extends the period of availability. The

[[Page 683]]

estimate for the following charges are excepted from this requirement: 
the interest rate, charges and terms dependent upon the interest rate, 
which includes the charge or credit for the interest rate chosen, the 
adjusted origination charges, and per diem interest.
    (d) Content and form of GFE. The GFE form is set out in appendix C 
to this part. The loan originator must prepare the GFE in accordance 
with the requirements of this section and the Instructions in appendix C 
to this part. The instructions in appendix C to this part allow for 
flexibility in the preparation and distribution of the GFE in hard copy 
and electronic format.
    (e) Tolerances for amounts included on GFE. (1) Except as provided 
in paragraph (f) of this section, the actual charges at settlement may 
not exceed the amounts included on the GFE for:
    (i) The origination charge;
    (ii) While the borrower's interest rate is locked, the credit or 
charge for the interest rate chosen;
    (iii) While the borrower's interest rate is locked, the adjusted 
origination charge; and
    (iv) Transfer taxes.
    (2) Except as provided in paragraph (f) of this section, the sum of 
the charges at settlement for the following services may not be greater 
than 10 percent above the sum of the amounts included on the GFE:
    (i) Lender-required settlement services, where the lender selects 
the third party settlement service provider;
    (ii) Lender-required services, title services and required title 
insurance, and owner's title insurance, when the borrower uses a 
settlement service provider identified by the loan originator; and
    (iii) Government recording charges.
    (3) The amounts charged for all other settlement services included 
on the GFE may change at settlement.
    (f) Binding GFE. The loan originator is bound, within the tolerances 
provided in paragraph (e) of this section, to the settlement charges and 
terms listed on the GFE provided to the borrower, unless a revised GFE 
is provided prior to settlement consistent with this paragraph (f) or 
the GFE expires in accordance with paragraph (f)(4) of this section. If 
a loan originator provides a revised GFE consistent with this paragraph, 
the loan originator must document the reason that a revised GFE was 
provided. Loan originators must retain documentation of any reason for 
providing a revised GFE for no less than 3 years after settlement.
    (1) Changed circumstances affecting settlement costs. If changed 
circumstances result in increased costs for any settlement services such 
that the charges at settlement would exceed the tolerances for those 
charges, the loan originator may provide a revised GFE to the borrower. 
If a revised GFE is to be provided, the loan originator must do so 
within 3 business days of receiving information sufficient to establish 
changed circumstances. The revised GFE may increase charges for services 
listed on the GFE only to the extent that the changed circumstances 
actually resulted in higher charges.
    (2) Changed circumstances affecting loan. If changed circumstances 
result in a change in the borrower's eligibility for the specific loan 
terms identified in the GFE, the loan originator may provide a revised 
GFE to the borrower. If a revised GFE is to be provided, the loan 
originator must do so within 3 business days of receiving information 
sufficient to establish changed circumstances. The revised GFE may 
increase charges for services listed on the GFE only to the extent that 
the changed circumstances affecting the loan actually resulted in higher 
charges.
    (3) Borrower-requested changes. If a borrower requests changes to 
the federally related mortgage loan identified in the GFE that change 
the settlement charges or the terms of the loan, the loan originator may 
provide a revised GFE to the borrower. If a revised GFE is to be 
provided, the loan originator must do so within three business days of 
the borrower's request. The revised GFE may increase charges for 
services listed on the GFE only to the extent that the borrower-
requested changes to the mortgage loan identified on the GFE actually 
resulted in higher charges.
    (4) Expiration of GFE. If a borrower does not express an intent to 
continue with an application within 10 business days after the GFE is 
provided, or such

[[Page 684]]

longer time specified by the loan originator pursuant to paragraph (c) 
of this section, the loan originator is no longer bound by the GFE.
    (5) Interest rate-dependent charges and terms. If the interest rate 
has not been locked, or a locked interest rate has expired, the charge 
or credit for the interest rate chosen, the adjusted origination 
charges, per diem interest, and loan terms related to the interest rate 
may change. When the interest rate is later locked, a revised GFE must 
be provided showing the revised interest rate-dependent charges and 
terms. The loan originator must provide the revised GFE within 3 
business days of the interest rate being locked or, for an expired 
interest rate, re-locked. All other charges and terms must remain the 
same as on the original GFE, except as otherwise provided in paragraph 
(f) of this section.
    (6) New construction home purchases. In transactions involving new 
construction home purchases, where settlement is anticipated to occur 
more than 60 calendar days from the time a GFE is provided, the loan 
originator may provide the GFE to the borrower with a clear and 
conspicuous disclosure stating that at any time up until 60 calendar 
days prior to closing, the loan originator may issue a revised GFE. If 
no such separate disclosure is provided, the loan originator cannot 
issue a revised GFE, except as otherwise provided in paragraph (f) of 
this section.
    (g) GFE is not a loan commitment. Nothing in this section shall be 
interpreted to require a loan originator to make a loan to a particular 
borrower. The loan originator is not required to provide a GFE if the 
loan originator does not have available a loan for which the borrower is 
eligible.
    (h) Open-end lines of credit (home-equity plans) under Truth in 
Lending Act. In the case of a federally related mortgage loan involving 
an open-end line of credit (home-equity plan) covered under the Truth in 
Lending Act and Regulation Z, a lender or mortgage broker that provides 
the borrower with the disclosures required by 12 CFR 1026.40 of 
Regulation Z at the time the borrower applies for such loan shall be 
deemed to satisfy the requirements of this section.
    (i) Violations of section 5 of RESPA (12 U.S.C. 2604). A loan 
originator that violates the requirements of this section shall be 
deemed to have violated section 5 of RESPA. If any charges at settlement 
exceed the charges listed on the GFE by more than the permitted 
tolerances, the loan originator may cure the tolerance violation by 
reimbursing to the borrower the amount by which the tolerance was 
exceeded, at settlement or within 30 calendar days after settlement. A 
borrower will be deemed to have received timely reimbursement if the 
loan originator delivers or places the payment in the mail within 30 
calendar days after settlement.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10875, Feb. 14, 2013]



Sec.  1024.8  Use of HUD-1 or HUD-1A settlement statements.

    (a) Use by settlement agent. The settlement agent shall use the HUD-
1 settlement statement in every settlement involving a federally related 
mortgage loan in which there is a borrower and a seller. For 
transactions in which there is a borrower and no seller, such as 
refinancing loans or subordinate lien loans, the HUD-1 may be utilized 
by using the borrower's side of the HUD-1 statement. Alternatively, the 
form HUD-1A may be used for these transactions. The HUD-1 or HUD-1A may 
be modified as permitted under this part. Either the HUD-1 or the HUD-
1A, as appropriate, shall be used for every RESPA-covered transaction, 
unless its use is specifically exempted. The use of the HUD-1 or HUD-1A 
is exempted for open-end lines of credit (home-equity plans) covered by 
the Truth in Lending Act and Regulation Z.
    (b) Charges to be stated. The settlement agent shall complete the 
HUD-1 or HUD-1A, in accordance with the instructions set forth in 
appendix A to this part. The loan originator must transmit to the 
settlement agent all information necessary to complete the HUD-1 or HUD-
1A.
    (1) In general. The settlement agent shall state the actual charges 
paid by the borrower and seller on the HUD-1, or by the borrower on the 
HUD-1A. The settlement agent must separately itemize each third party 
charge paid by

[[Page 685]]

the borrower and seller. All origination services performed by or on 
behalf of the loan originator must be included in the loan originator's 
own charge. Administrative and processing services related to title 
services must be included in the title underwriter's or title agent's 
own charge. The amount stated on the HUD-1 or HUD-1A for any itemized 
service cannot exceed the amount actually received by the settlement 
service provider for that itemized service, unless the charge is an 
average charge in accordance with paragraph (b)(2) of this section.
    (2) Use of average charge. (i) The average charge for a settlement 
service shall be no more than the average amount paid for a settlement 
service by one settlement service provider to another settlement service 
provider on behalf of borrowers and sellers for a particular class of 
transactions involving federally related mortgage loans. The total 
amounts paid by borrowers and sellers for a settlement service based on 
the use of an average charge may not exceed the total amounts paid to 
the providers of that service for the particular class of transactions.
    (ii) The settlement service provider shall define the particular 
class of transactions for purposes of calculating the average charge as 
all transactions involving federally related mortgage loans for:
    (A) A period of time as determined by the settlement service 
provider, but not less than 30 calendar days and not more than 6 months;
    (B) A geographic area as determined by the settlement service 
provider; and
    (C) A type of loan as determined by the settlement service provider.
    (iii) A settlement service provider may use an average charge in the 
same class of transactions for which the charge was calculated. If the 
settlement service provider uses the average charge for any transaction 
in the class, the settlement service provider must use the same average 
charge in every transaction within that class for which a GFE was 
provided.
    (iv) The use of an average charge is not permitted for any 
settlement service if the charge for the service is based on the loan 
amount or property value. For example, an average charge may not be used 
for transfer taxes, interest charges, reserves or escrow, or any type of 
insurance, including mortgage insurance, title insurance, or hazard 
insurance.
    (v) The settlement service provider must retain all documentation 
used to calculate the average charge for a particular class of 
transactions for at least 3 years after any settlement for which that 
average charge was used.
    (c) Violations of section 4 of RESPA (12 U.S.C. 2603). A violation 
of any of the requirements of this section will be deemed to be a 
violation of section 4 of RESPA. An inadvertent or technical error in 
completing the HUD-1 or HUD-1A shall not be deemed a violation of 
section 4 of RESPA if a revised HUD-1 or HUD-1A is provided in 
accordance with the requirements of this section within 30 calendar days 
after settlement.



Sec.  1024.9  Reproduction of settlement statements.

    (a) Permissible changes--HUD-1. The following changes and insertions 
are permitted when the HUD-1 settlement statement is reproduced:
    (1) The person reproducing the HUD-1 may insert its business name 
and logo in section A and may rearrange, but not delete, the other 
information that appears in section A.
    (2) The name, address, and other information regarding the lender 
and settlement agent may be printed in sections F and H, respectively.
    (3) Reproduction of the HUD-1 must conform to the terminology, 
sequence, and numbering of line items as presented in lines 100-1400. 
However, blank lines or items listed in lines 100-1400 that are not used 
locally or in connection with mortgages by the lender may be deleted, 
except for the following: Lines 100, 120, 200, 220, 300, 301, 302, 303, 
400, 420, 500, 520, 600, 601, 602, 603, 700, 800, 900, 1000, 1100, 1200, 
1300, and 1400. The form may be shortened correspondingly. The number of 
a deleted item shall not be used for a substitute or new item, but the 
number of a blank space on the HUD-1 may be used for a substitute or new 
item.
    (4) Charges not listed on the HUD-1, but that are customary locally 
or pursuant to the lender's practice, may be

[[Page 686]]

inserted in blank spaces. Where existing blank spaces on the HUD-1 are 
insufficient, additional lines and spaces may be added and numbered in 
sequence with spaces on the HUD-1.
    (5) The following variations in layout and format are within the 
discretion of persons reproducing the HUD-1 and do not require prior 
Bureau approval: Size of pages; tint or color of pages; size and style 
of type or print; vertical spacing between lines or provision for 
additional horizontal space on lines (for example, to provide sufficient 
space for recording time periods used in prorations); printing of the 
HUD-1 contents on separate pages, on the front and back of a single 
page, or on one continuous page; use of multicopy tear-out sets; 
printing on rolls for computer purposes; reorganization of sections B 
through I, when necessary to accommodate computer printing; and manner 
of placement of the HUD number, but not the OMB approval number, neither 
of which may be deleted. The expiration date associated with the OMB 
number listed on the form may be deleted. Any changes in the HUD number 
or OMB approval number may be announced by notice in the Federal 
Register, rather than by amendment of this part.
    (6) The borrower's information and the seller's information may be 
provided on separate pages.
    (7) Signature lines may be added.
    (8) The HUD-1 may be translated into languages other than English.
    (9) An additional page may be attached to the HUD-1 for the purpose 
of including customary recitals and information used locally in real 
estate settlements; for example, breakdown of payoff figures, a 
breakdown of the borrower's total monthly mortgage payments, check 
disbursements, a statement indicating receipt of funds, applicable 
special stipulations between buyer and seller, and the date funds are 
transferred. If space permits, such information may be added at the end 
of the HUD-1.
    (10) As required by HUD/FHA in FHA-insured loans.
    (11) As allowed by Sec.  1024.17, relating to an initial escrow 
account statement.
    (b) Permissible changes--HUD-1A. The changes and insertions on the 
HUD-1 permitted under paragraph (a) of this section are also permitted 
when the HUD-1A settlement statement is reproduced, except the changes 
described in paragraphs (a)(3) and (6) of this section.
    (c) Written approval. Any other deviation in the HUD-1 or HUD-1A 
forms is permissible only upon receipt of written approval of the 
Bureau; provided, however, that notwithstanding contrary instructions in 
this section or appendix A of this part, reproducing the HUD-1 or HUD-1A 
forms with the Bureau's OMB approval number displayed in place of HUD's 
OMB approval number does not require the written approval of the Bureau. 
A request to the Bureau for approval shall be submitted in writing to 
the address indicated in the definition of Public Guidance Documents in 
Sec.  1024.2 and shall state the reasons why the applicant believes such 
deviation is needed. The prescribed form(s) must be used until approval 
is received.

[76 FR 78981, Dec. 20, 2011, as amended at 81 FR 72370, Oct. 19, 2016]



Sec.  1024.10  One-day advance inspection of HUD-1 or HUD-1A settlement 
statement; delivery; recordkeeping.

    (a) Inspection one day prior to settlement upon request by the 
borrower. The settlement agent shall permit the borrower to inspect the 
HUD-1 or HUD-1A settlement statement, completed to set forth those items 
that are known to the settlement agent at the time of inspection, during 
the business day immediately preceding settlement. Items related only to 
the seller's transaction may be omitted from the HUD-1.
    (b) Delivery. The settlement agent shall provide a completed HUD-1 
or HUD-1A to the borrower, the seller (if there is one), the lender (if 
the lender is not the settlement agent), and/or their agents. When the 
borrower's and seller's copies of the HUD-1 or HUD-1A differ as 
permitted by the instructions in appendix A to this part, both copies 
shall be provided to the lender (if the lender is not the settlement 
agent). The settlement agent shall deliver the completed HUD-1 or HUD-1A 
at or before the settlement, except as provided in paragraphs (c) and 
(d) of this section.

[[Page 687]]

    (c) Waiver. The borrower may waive the right to delivery of the 
completed HUD-1 or HUD-1A no later than at settlement by executing a 
written waiver at or before settlement. In such case, the completed HUD-
1 or HUD-1A shall be mailed or delivered to the borrower, seller, and 
lender (if the lender is not the settlement agent) as soon as 
practicable after settlement.
    (d) Exempt transactions. When the borrower or the borrower's agent 
does not attend the settlement, or when the settlement agent does not 
conduct a meeting of the parties for that purpose, the transaction shall 
be exempt from the requirements of paragraphs (a) and (b) of this 
section, except that the HUD-1 or HUD-1A shall be mailed or delivered as 
soon as practicable after settlement.
    (e) Recordkeeping. The lender shall retain each completed HUD-1 or 
HUD-1A and related documents for five years after settlement, unless the 
lender disposes of its interest in the mortgage and does not service the 
mortgage. In that case, the lender shall provide its copy of the HUD-1 
or HUD-1A to the owner or servicer of the mortgage as a part of the 
transfer of the loan file. Such owner or servicer shall retain the HUD-1 
or HUD-1A for the remainder of the five-year period. The Bureau shall 
have the right to inspect or require copies of records covered by this 
paragraph (e).



Sec.  1024.11  Mailing.

    The provisions of this part requiring or permitting mailing of 
documents shall be deemed to be satisfied by placing the document in the 
mail (whether or not received by the addressee) addressed to the 
addresses stated in the loan application or in other information 
submitted to or obtained by the lender at the time of loan application 
or submitted or obtained by the lender or settlement agent, except that 
a revised address shall be used where the lender or settlement agent has 
been expressly informed in writing of a change in address.



Sec.  1024.12  No fee.

    No fee shall be imposed or charge made upon any other person, as a 
part of settlement costs or otherwise, by a lender in connection with a 
federally related mortgage loan made by it (or a loan for the purchase 
of a manufactured home), or by a servicer (as that term is defined under 
12 U.S.C. 2605(i)(2)) for or on account of the preparation and 
distribution of the HUD-1 or HUD-1A settlement statement, escrow account 
statements required pursuant to section 10 of RESPA (12 U.S.C. 2609), or 
statements required by the Truth in Lending Act (15 U.S.C. 1601 et 
seq.).



Sec.  1024.13  [Reserved]



Sec.  1024.14  Prohibition against kickbacks and unearned fees.

    (a) Section 8 violation. Any violation of this section is a 
violation of section 8 of RESPA (12 U.S.C. 2607).
    (b) No referral fees. No person shall give and no person shall 
accept any fee, kickback or other thing of value pursuant to any 
agreement or understanding, oral or otherwise, that business incident to 
or part of a settlement service involving a federally related mortgage 
loan shall be referred to any person. Any referral of a settlement 
service is not a compensable service, except as set forth in Sec.  
1024.14(g)(1). A company may not pay any other company or the employees 
of any other company for the referral of settlement service business.
    (c) No split of charges except for actual services performed. No 
person shall give and no person shall accept any portion, split, or 
percentage of any charge made or received for the rendering of a 
settlement service in connection with a transaction involving a 
federally related mortgage loan other than for services actually 
performed. A charge by a person for which no or nominal services are 
performed or for which duplicative fees are charged is an unearned fee 
and violates this section. The source of the payment does not determine 
whether or not a service is compensable. Nor may the prohibitions of 
this part be avoided by creating an arrangement wherein the purchaser of 
services splits the fee.
    (d) Thing of value. This term is broadly defined in section 3(2) of 
RESPA (12

[[Page 688]]

U.S.C. 2602(2)). It includes, without limitation, monies, things, 
discounts, salaries, commissions, fees, duplicate payments of a charge, 
stock, dividends, distributions of partnership profits, franchise 
royalties, credits representing monies that may be paid at a future 
date, the opportunity to participate in a money-making program, retained 
or increased earnings, increased equity in a parent or subsidiary 
entity, special bank deposits or accounts, special or unusual banking 
terms, services of all types at special or free rates, sales or rentals 
at special prices or rates, lease or rental payments based in whole or 
in part on the amount of business referred, trips and payment of another 
person's expenses, or reduction in credit against an existing 
obligation. The term ``payment'' is used throughout Sec. Sec.  1024.14 
and 1024.15 as synonymous with the giving or receiving of any ``thing of 
value'' and does not require transfer of money.
    (e) Agreement or understanding. An agreement or understanding for 
the referral of business incident to or part of a settlement service 
need not be written or verbalized but may be established by a practice, 
pattern or course of conduct. When a thing of value is received 
repeatedly and is connected in any way with the volume or value of the 
business referred, the receipt of the thing of value is evidence that it 
is made pursuant to an agreement or understanding for the referral of 
business.
    (f) Referral. (1) A referral includes any oral or written action 
directed to a person which has the effect of affirmatively influencing 
the selection by any person of a provider of a settlement service or 
business incident to or part of a settlement service when such person 
will pay for such settlement service or business incident thereto or pay 
a charge attributable in whole or in part to such settlement service or 
business.
    (2) A referral also occurs whenever a person paying for a settlement 
service or business incident thereto is required to use (see Sec.  
1024.2, ``required use'') a particular provider of a settlement service 
or business incident thereto.
    (g) Fees, salaries, compensation, or other payments. (1) Section 8 
of RESPA permits:
    (i) A payment to an attorney at law for services actually rendered;
    (ii) A payment by a title company to its duly appointed agent for 
services actually performed in the issuance of a policy of title 
insurance;
    (iii) A payment by a lender to its duly appointed agent or 
contractor for services actually performed in the origination, 
processing, or funding of a loan;
    (iv) A payment to any person of a bona fide salary or compensation 
or other payment for goods or facilities actually furnished or for 
services actually performed;
    (v) A payment pursuant to cooperative brokerage and referral 
arrangements or agreements between real estate agents and real estate 
brokers. (The statutory exemption restated in this paragraph refers only 
to fee divisions within real estate brokerage arrangements when all 
parties are acting in a real estate brokerage capacity, and has no 
applicability to any fee arrangements between real estate brokers and 
mortgage brokers or between mortgage brokers.);
    (vi) Normal promotional and educational activities that are not 
conditioned on the referral of business and that do not involve the 
defraying of expenses that otherwise would be incurred by persons in a 
position to refer settlement services or business incident thereto; or
    (vii) An employer's payment to its own employees for any referral 
activities.
    (2) The Bureau may investigate high prices to see if they are the 
result of a referral fee or a split of a fee. If the payment of a thing 
of value bears no reasonable relationship to the market value of the 
goods or services provided, then the excess is not for services or goods 
actually performed or provided. These facts may be used as evidence of a 
violation of section 8 and may serve as a basis for a RESPA 
investigation. High prices standing alone are not proof of a RESPA 
violation. The value of a referral (i.e., the value of any additional 
business obtained thereby) is not to be taken into account in 
determining whether the payment exceeds the reasonable value of such 
goods, facilities or services. The fact that the

[[Page 689]]

transfer of the thing of value does not result in an increase in any 
charge made by the person giving the thing of value is irrelevant in 
determining whether the act is prohibited.
    (3) Multiple services. When a person in a position to refer 
settlement service business, such as an attorney, mortgage lender, real 
estate broker or agent, or developer or builder, receives a payment for 
providing additional settlement services as part of a real estate 
transaction, such payment must be for services that are actual, 
necessary and distinct from the primary services provided by such 
person. For example, for an attorney of the buyer or seller to receive 
compensation as a title agent, the attorney must perform core title 
agent services (for which liability arises) separate from attorney 
services, including the evaluation of the title search to determine the 
insurability of the title, the clearance of underwriting objections, the 
actual issuance of the policy or policies on behalf of the title 
insurance company, and, where customary, issuance of the title 
commitment, and the conducting of the title search and closing.
    (h) Recordkeeping. Any documents provided pursuant to this section 
shall be retained for five (5) years from the date of execution.
    (i) Appendix B of this part. Illustrations in appendix B of this 
part demonstrate some of the requirements of this section.



Sec.  1024.15  Affiliated business arrangements.

    (a) General. An affiliated business arrangement is defined in 
section 3(7) of RESPA (12 U.S.C. 2602(7)).
    (b) Violation and exemption. An affiliated business arrangement is 
not a violation of section 8 of RESPA (12 U.S.C. 2607) and of Sec.  
1024.14 if the conditions set forth in this section are satisfied. 
Paragraph (b)(1) of this section shall not apply to the extent it is 
inconsistent with section 8(c)(4)(A) of RESPA (12 U.S.C. 2607(c)(4)(A)).
    (1) The person making each referral has provided to each person 
whose business is referred a written disclosure, in the format of the 
Affiliated Business Arrangement Disclosure Statement set forth in 
appendix D of this part, of the nature of the relationship (explaining 
the ownership and financial interest) between the provider of settlement 
services (or business incident thereto) and the person making the 
referral and of an estimated charge or range of charges generally made 
by such provider (which describes the charge using the same terminology, 
as far as practical, as section L of the HUD-1 settlement statement). 
The disclosures must be provided on a separate piece of paper no later 
than the time of each referral or, if the lender requires use of a 
particular provider, the time of loan application, except that:
    (i) Where a lender makes the referral to a borrower, the condition 
contained in paragraph (b)(1) of this section may be satisfied at the 
time that the good faith estimate or a statement under Sec.  1024.7(d) 
is provided; and
    (ii) Whenever an attorney or law firm requires a client to use a 
particular title insurance agent, the attorney or law firm shall provide 
the disclosures no later than the time the attorney or law firm is 
engaged by the client.
    (iii) Failure to comply with the disclosure requirements of this 
section may be overcome if the person making a referral can prove by a 
preponderance of the evidence that procedures reasonably adopted to 
result in compliance with these conditions have been maintained and that 
any failure to comply with these conditions was unintentional and the 
result of a bona fide error. An error of legal judgment with respect to 
a person's obligations under RESPA is not a bona fide error. 
Administrative and judicial interpretations of section 130(c) of the 
Truth in Lending Act shall not be binding interpretations of the 
preceding sentence or section 8(d)(3) of RESPA (12 U.S.C. 2607(d)(3)).
    (2) No person making a referral has required (as defined in Sec.  
1024.2, ``required use'') any person to use any particular provider of 
settlement services or business incident thereto, except if such person 
is a lender, for requiring a buyer, borrower or seller to pay for the 
services of an attorney, credit reporting agency, or real estate 
appraiser chosen by the lender to represent the

[[Page 690]]

lender's interest in a real estate transaction, or except if such person 
is an attorney or law firm for arranging for issuance of a title 
insurance policy for a client, directly as agent or through a separate 
corporate title insurance agency that may be operated as an adjunct to 
the law practice of the attorney or law firm, as part of representation 
of that client in a real estate transaction.
    (3) The only thing of value that is received from the arrangement 
other than payments listed in Sec.  1024.14(g) is a return on an 
ownership interest or franchise relationship.
    (i) In an affiliated business arrangement:
    (A) Bona fide dividends, and capital or equity distributions, 
related to ownership interest or franchise relationship, between 
entities in an affiliate relationship, are permissible; and
    (B) Bona fide business loans, advances, and capital or equity 
contributions between entities in an affiliate relationship (in any 
direction), are not prohibited--so long as they are for ordinary 
business purposes and are not fees for the referral of settlement 
service business or unearned fees.
    (ii) A return on an ownership interest does not include:
    (A) Any payment which has as a basis of calculation no apparent 
business motive other than distinguishing among recipients of payments 
on the basis of the amount of their actual, estimated or anticipated 
referrals;
    (B) Any payment which varies according to the relative amount of 
referrals by the different recipients of similar payments; or
    (C) A payment based on an ownership, partnership or joint venture 
share which has been adjusted on the basis of previous relative 
referrals by recipients of similar payments.
    (iii) Neither the mere labeling of a thing of value, nor the fact 
that it may be calculated pursuant to a corporate or partnership 
organizational document or a franchise agreement, will determine whether 
it is a bona fide return on an ownership interest or franchise 
relationship. Whether a thing of value is such a return will be 
determined by analyzing facts and circumstances on a case by case basis.
    (iv) A return on franchise relationship may be a payment to or from 
a franchisee but it does not include any payment which is not based on 
the franchise agreement, nor any payment which varies according to the 
number or amount of referrals by the franchisor or franchisee or which 
is based on a franchise agreement which has been adjusted on the basis 
of a previous number or amount of referrals by the franchiser or 
franchisees. A franchise agreement may not be constructed to insulate 
against kickbacks or referral fees.
    (c) Definitions. As used in this section:
    Associate is defined in section 3(8) of RESPA (12 U.S.C. 2602(8)).
    Affiliate relationship means the relationship among business 
entities where one entity has effective control over the other by virtue 
of a partnership or other agreement or is under common control with the 
other by a third entity or where an entity is a corporation related to 
another corporation as parent to subsidiary by an identity of stock 
ownership.
    Beneficial ownership means the effective ownership of an interest in 
a provider of settlement services or the right to use and control the 
ownership interest involved even though legal ownership or title may be 
held in another person's name.
    Control, as used in the definitions of ``associate'' and ``affiliate 
relationship,'' means that a person:
    (i) Is a general partner, officer, director, or employer of another 
person;
    (ii) Directly or indirectly or acting in concert with others, or 
through one or more subsidiaries, owns, holds with power to vote, or 
holds proxies representing, more than 20 percent of the voting interests 
of another person;
    (iii) Affirmatively influences in any manner the election of a 
majority of the directors of another person; or
    (iv) Has contributed more than 20 percent of the capital of the 
other person.
    Direct ownership means the holding of legal title to an interest in 
a provider of settlement service except where title is being held for 
the beneficial owner.

[[Page 691]]

    Franchise is defined in FTC regulation 16 CFR 436.1(h).
    Franchisor is defined in FTC regulation 16 CFR 436.1(k).
    Franchisee is defined in FTC regulation 16 CFR 436.1(i).
    FTC means the Federal Trade Commission.
    Person who is in a position to refer settlement service business 
means any real estate broker or agent, lender, mortgage broker, builder 
or developer, attorney, title company, title agent, or other person 
deriving a significant portion of his or her gross income from providing 
settlement services.
    (d) Recordkeeping. Any documents provided pursuant to this section 
shall be retained for 5 years after the date of execution.
    (e) Appendix B of this part. Illustrations in appendix B of this 
part demonstrate some of the requirements of this section.



Sec.  1024.16  Title companies.

    No seller of property that will be purchased with the assistance of 
a federally related mortgage loan shall violate section 9 of RESPA (12 
U.S.C. 2608). Section 1024.2 defines ``required use'' of a provider of a 
settlement service.



Sec.  1024.17  Escrow accounts.

    (a) General. This section sets out the requirements for an escrow 
account that a lender establishes in connection with a federally related 
mortgage loan. It sets limits for escrow accounts using calculations 
based on monthly payments and disbursements within a calendar year. If 
an escrow account involves biweekly or any other payment period, the 
requirements in this section shall be modified accordingly. A Public 
Guidance Document entitled ``Biweekly Payments--Example'' provides 
examples of biweekly accounting and a Public Guidance Document entitled 
``Annual Escrow Account Disclosure Statement--Example'' provides 
examples of a 3-year accounting cycle that may be used in accordance 
with paragraph (c)(9) of this section. A Public Guidance Document 
entitled ``Consumer Disclosure for Voluntary Escrow Account Payments'' 
provides a model disclosure format that originators and servicers are 
encouraged, but not required, to provide to consumers when the 
originator or servicer anticipates a substantial increase in 
disbursements from the escrow account after the first year of the loan. 
The disclosures in that model format may be combined with or included in 
the Initial Escrow Account Statement required in Sec.  1024.17(g).
    (b) Definitions. As used in this section:
    Aggregate (or) composite analysis, hereafter called aggregate 
analysis, means an accounting method a servicer uses in conducting an 
escrow account analysis by computing the sufficiency of escrow account 
funds by analyzing the account as a whole. Appendix E to this part sets 
forth examples of aggregate escrow account analyses.
    Annual escrow account statement means a statement containing all of 
the information set forth in Sec.  1024.17(i). As noted in Sec.  
1024.17(i), a servicer shall submit an annual escrow account statement 
to the borrower within 30 calendar days of the end of the escrow account 
computation year, after conducting an escrow account analysis.
    Cushion or reserve (hereafter cushion) means funds that a servicer 
may require a borrower to pay into an escrow account to cover 
unanticipated disbursements or disbursements made before the borrower's 
payments are available in the account, as limited by Sec.  1024.17(c).
    Deficiency is the amount of a negative balance in an escrow account. 
As noted in Sec.  1024.17(f), if a servicer advances funds for a 
borrower, then the servicer must perform an escrow account analysis 
before seeking repayment of the deficiency.
    Delivery means the placing of a document in the United States mail, 
first-class postage paid, addressed to the last known address of the 
recipient. Hand delivery also constitutes delivery.
    Disbursement date means the date on which the servicer actually pays 
an escrow item from the escrow account.
    Escrow account means any account that a servicer establishes or 
controls on behalf of a borrower to pay taxes, insurance premiums 
(including flood

[[Page 692]]

insurance), or other charges with respect to a federally related 
mortgage loan, including charges that the borrower and servicer have 
voluntarily agreed that the servicer should collect and pay. The 
definition encompasses any account established for this purpose, 
including a ``trust account'', ``reserve account'', ``impound account'', 
or other term in different localities. An ``escrow account'' includes 
any arrangement where the servicer adds a portion of the borrower's 
payments to principal and subsequently deducts from principal the 
disbursements for escrow account items. For purposes of this section, 
the term ``escrow account'' excludes any account that is under the 
borrower's total control.
    Escrow account analysis means the accounting that a servicer 
conducts in the form of a trial running balance for an escrow account 
to:
    (1) Determine the appropriate target balances;
    (2) Compute the borrower's monthly payments for the next escrow 
account computation year and any deposits needed to establish or 
maintain the account; and
    (3) Determine whether shortages, surpluses or deficiencies exist.
    Escrow account computation year is a 12-month period that a servicer 
establishes for the escrow account beginning with the borrower's initial 
payment date. The term includes each 12-month period thereafter, unless 
a servicer chooses to issue a short year statement under the conditions 
stated in Sec.  1024.17(i)(4).
    Escrow account item or separate item means any separate expenditure 
category, such as ``taxes'' or ``insurance'', for which funds are 
collected in the escrow account for disbursement. An escrow account item 
with installment payments, such as local property taxes, remains one 
escrow account item regardless of multiple disbursement dates to the tax 
authority.
    Initial escrow account statement means the first disclosure 
statement that the servicer delivers to the borrower concerning the 
borrower's escrow account. The initial escrow account statement shall 
meet the requirements of Sec.  1024.17(g) and be in substantially the 
format set forth in Sec.  1024.17(h).
    Installment payment means one of two or more payments payable on an 
escrow account item during an escrow account computation year. An 
example of an installment payment is where a jurisdiction bills 
quarterly for taxes.
    Payment due date means the date each month when the borrower's 
monthly payment to an escrow account is due to the servicer. The initial 
payment date is the borrower's first payment due date to an escrow 
account.
    Penalty means a late charge imposed by the payee for paying after 
the disbursement is due. It does not include any additional charge or 
fee imposed by the payee associated with choosing installment payments 
as opposed to annual payments or for choosing one installment plan over 
another.
    Pre-accrual is a practice some servicers use to require borrowers to 
deposit funds, needed for disbursement and maintenance of a cushion, in 
the escrow account some period before the disbursement date. Pre-accrual 
is subject to the limitations of Sec.  1024.17(c).
    Shortage means an amount by which a current escrow account balance 
falls short of the target balance at the time of escrow analysis.
    Single-item analysis means an accounting method servicers use in 
conducting an escrow account analysis by computing the sufficiency of 
escrow account funds by considering each escrow item separately. 
Appendix E to this part sets forth examples of single-item analysis.
    Submission (of an escrow account statement) means the delivery of 
the statement.
    Surplus means an amount by which the current escrow account balance 
exceeds the target balance for the account.
    System of recordkeeping means the servicer's method of keeping 
information that reflects the facts relating to that servicer's handling 
of the borrower's escrow account, including, but not limited to, the 
payment of amounts from the escrow account and the submission of initial 
and annual escrow account statements to borrowers.
    Target balance means the estimated month end balance in an escrow 
account that is just sufficient to cover the remaining disbursements 
from the

[[Page 693]]

escrow account in the escrow account computation year, taking into 
account the remaining scheduled periodic payments, and a cushion, if 
any.
    Trial running balance means the accounting process that derives the 
target balances over the course of an escrow account computation year. 
Section 1024.17(d) provides a description of the steps involved in 
performing a trial running balance.
    (c) Limits on payments to escrow accounts. (1) A lender or servicer 
(hereafter servicer) shall not require a borrower to deposit into any 
escrow account, created in connection with a federally related mortgage 
loan, more than the following amounts:
    (i) Charges at settlement or upon creation of an escrow account. At 
the time a servicer creates an escrow account for a borrower, the 
servicer may charge the borrower an amount sufficient to pay the charges 
respecting the mortgaged property, such as taxes and insurance, which 
are attributable to the period from the date such payment(s) were last 
paid until the initial payment date. The ``amount sufficient to pay'' is 
computed so that the lowest month end target balance projected for the 
escrow account computation year is zero (-0-) (see Step 2 in appendix E 
to this part). In addition, the servicer may charge the borrower a 
cushion that shall be no greater than one-sixth (\1/6\) of the estimated 
total annual payments from the escrow account.
    (ii) Charges during the life of the escrow account. Throughout the 
life of an escrow account, the servicer may charge the borrower a 
monthly sum equal to one-twelfth (\1/12\) of the total annual escrow 
payments which the servicer reasonably anticipates paying from the 
account. In addition, the servicer may add an amount to maintain a 
cushion no greater than one-sixth (\1/6\) of the estimated total annual 
payments from the account. However, if a servicer determines through an 
escrow account analysis that there is a shortage or deficiency, the 
servicer may require the borrower to pay additional deposits to make up 
the shortage or eliminate the deficiency, subject to the limitations set 
forth in Sec.  1024.17(f).
    (2) Escrow analysis at creation of escrow account. Before 
establishing an escrow account, the servicer must conduct an escrow 
account analysis to determine the amount the borrower must deposit into 
the escrow account (subject to the limitations of paragraph (c)(1)(i) of 
this section), and the amount of the borrower's periodic payments into 
the escrow account (subject to the limitations of paragraph (c)(1)(ii) 
of this section). In conducting the escrow account analysis, the 
servicer must estimate the disbursement amounts according to paragraph 
(c)(7) of this section. Pursuant to paragraph (k) of this section, the 
servicer must use a date on or before the deadline to avoid a penalty as 
the disbursement date for the escrow item and comply with any other 
requirements of paragraph (k) of this section. Upon completing the 
initial escrow account analysis, the servicer must prepare and deliver 
an initial escrow account statement to the borrower, as set forth in 
paragraph (g) of this section. The servicer must use the escrow account 
analysis to determine whether a surplus, shortage, or deficiency exists 
and must make any adjustments to the account pursuant to paragraph (f) 
of this section.
    (3) Subsequent escrow account analyses. For each escrow account, the 
servicer must conduct an escrow account analysis at the completion of 
the escrow account computation year to determine the borrower's monthly 
escrow account payments for the next computation year, subject to the 
limitations of paragraph (c)(1)(ii) of this section. In conducting the 
escrow account analysis, the servicer must estimate the disbursement 
amounts according to paragraph (c)(7) of this section. Pursuant to 
paragraph (k) of this section, the servicer must use a date on or before 
the deadline to avoid a penalty as the disbursement date for the escrow 
item and comply with any other requirements of paragraph (k) of this 
section. The servicer must use the escrow account analysis to determine 
whether a surplus, shortage, or deficiency exists, and must make any 
adjustments to the account pursuant to paragraph (f) of this section. 
Upon completing an escrow account analysis, the servicer

[[Page 694]]

must prepare and submit an annual escrow account statement to the 
borrower, as set forth in paragraph (i) of this section.
    (4) Aggregate accounting required. All servicers must use the 
aggregate accounting method in conducting escrow account analyses.
    (5) Cushion. The cushion must be no greater than one-sixth (\1/6\) 
of the estimated total annual disbursements from the escrow account.
    (6) Restrictions on pre-accrual. A servicer must not practice pre-
accrual.
    (7) Servicer estimates of disbursement amounts. To conduct an escrow 
account analysis, the servicer shall estimate the amount of escrow 
account items to be disbursed. If the servicer knows the charge for an 
escrow item in the next computation year, then the servicer shall use 
that amount in estimating disbursement amounts. If the charge is unknown 
to the servicer, the servicer may base the estimate on the preceding 
year's charge, or the preceding year's charge as modified by an amount 
not exceeding the most recent year's change in the national Consumer 
Price Index for all urban consumers (CPI, all items). In cases of 
unassessed new construction, the servicer may base an estimate on the 
assessment of comparable residential property in the market area.
    (8) Provisions in federally related mortgage documents. The servicer 
must examine the federally related mortgage loan documents to determine 
the applicable cushion for each escrow account. If any such documents 
provide for lower cushion limits, then the terms of the loan documents 
apply. Where the terms of any such documents allow greater payments to 
an escrow account than allowed by this section, then this section 
controls the applicable limits. Where such documents do not specifically 
establish an escrow account, whether a servicer may establish an escrow 
account for the loan is a matter for determination by other Federal or 
State law. If such documents are silent on the escrow account limits and 
a servicer establishes an escrow account under other Federal or State 
law, then the limitations of this section apply unless applicable 
Federal or State law provides for a lower amount. If such documents 
provide for escrow accounts up to the RESPA limits, then the servicer 
may require the maximum amounts consistent with this section, unless an 
applicable Federal or State law sets a lesser amount.
    (9) Assessments for periods longer than one year. Some escrow 
account items may be billed for periods longer than one year. For 
example, servicers may need to collect flood insurance or water 
purification escrow funds for payment every three years. In such cases, 
the servicer shall estimate the borrower's payments for a full cycle of 
disbursements. For a flood insurance premium payable every 3 years, the 
servicer shall collect the payments reflecting 36 equal monthly amounts. 
For two out of the three years, however, the account balance may not 
reach its low monthly balance because the low point will be on a three-
year cycle, as compared to an annual one. The annual escrow account 
statement shall explain this situation (see example in the Public 
Guidance Document entitled ``Annual Escrow Account Disclosure 
Statement--Example'', available in accordance with Sec.  1024.3).
    (d) Methods of escrow account analysis. (1) The following sets forth 
the steps servicers must use to determine whether their use of aggregate 
analysis conforms with the limitations in Sec.  1024.17(c)(1). The steps 
set forth in this section result in maximum limits. Servicers may use 
accounting procedures that result in lower target balances. In 
particular, servicers may use a cushion less than the permissible 
cushion or no cushion at all. This section does not require the use of a 
cushion.
    (2) Aggregate analysis. (i) In conducting the escrow account 
analysis using aggregate analysis, the target balances may not exceed 
the balances computed according to the following arithmetic operations:
    (A) The servicer first projects a trial balance for the account as a 
whole over the next computation year (a trial running balance). In doing 
so the servicer assumes that it will make estimated disbursements on or 
before the earlier of the deadline to take advantage of discounts, if 
available, or the deadline to avoid a penalty. The servicer does

[[Page 695]]

not use pre-accrual on these disbursement dates. The servicer also 
assumes that the borrower will make monthly payments equal to one-
twelfth of the estimated total annual escrow account disbursements.
    (B) The servicer then examines the monthly trial balances and adds 
to the first monthly balance an amount just sufficient to bring the 
lowest monthly trial balance to zero, and adjusts all other monthly 
balances accordingly.
    (C) The servicer then adds to the monthly balances the permissible 
cushion. The cushion is two months of the borrower's escrow payments to 
the servicer or a lesser amount specified by state law or the mortgage 
document (net of any increases or decreases because of prior year 
shortages or surpluses, respectively).
    (ii) Lowest monthly balance. Under aggregate analysis, the lowest 
monthly target balance for the account shall be less than or equal to 
one-sixth of the estimated total annual escrow account disbursements or 
a lesser amount specified by state law or the mortgage document. The 
target balances that the servicer derives using these steps yield the 
maximum limit for the escrow account. Appendix E to this part 
illustrates these steps.
    (e) Transfer of servicing. (1) If the new servicer changes either 
the monthly payment amount or the accounting method used by the 
transferor (old) servicer, then the new servicer shall provide the 
borrower with an initial escrow account statement within 60 days of the 
date of servicing transfer.
    (i) Where a new servicer provides an initial escrow account 
statement upon the transfer of servicing, the new servicer shall use the 
effective date of the transfer of servicing to establish the new escrow 
account computation year.
    (ii) Where the new servicer retains the monthly payments and 
accounting method used by the transferor servicer, then the new servicer 
may continue to use the escrow account computation year established by 
the transferor servicer or may choose to establish a different 
computation year using a short-year statement. At the completion of the 
escrow account computation year or any short year, the new servicer 
shall perform an escrow analysis and provide the borrower with an annual 
escrow account statement.
    (2) The new servicer shall treat shortages, surpluses and 
deficiencies in the transferred escrow account according to the 
procedures set forth in Sec.  1024.17(f).
    (f) Shortages, surpluses, and deficiencies requirements--(1) Escrow 
account analysis. For each escrow account, the servicer shall conduct an 
escrow account analysis to determine whether a surplus, shortage or 
deficiency exists.
    (i) As noted in Sec.  1024.17(c)(2) and (3), the servicer shall 
conduct an escrow account analysis upon establishing an escrow account 
and at completion of the escrow account computation year.
    (ii) The servicer may conduct an escrow account analysis at other 
times during the escrow computation year. If a servicer advances funds 
in paying a disbursement, which is not the result of a borrower's 
payment default under the underlying mortgage document, then the 
servicer shall conduct an escrow account analysis to determine the 
extent of the deficiency before seeking repayment of the funds from the 
borrower under this paragraph (f).
    (2) Surpluses. (i) If an escrow account analysis discloses a 
surplus, the servicer shall, within 30 days from the date of the 
analysis, refund the surplus to the borrower if the surplus is greater 
than or equal to 50 dollars ($50). If the surplus is less than 50 
dollars ($50), the servicer may refund such amount to the borrower, or 
credit such amount against the next year's escrow payments.
    (ii) These provisions regarding surpluses apply if the borrower is 
current at the time of the escrow account analysis. A borrower is 
current if the servicer receives the borrower's payments within 30 days 
of the payment due date. If the servicer does not receive the borrower's 
payment within 30 days of the payment due date, then the servicer may 
retain the surplus in the escrow account pursuant to the terms of the 
federally related mortgage loan documents.
    (iii) After an initial or annual escrow analysis has been performed, 
the servicer and the borrower may enter into a voluntary agreement for 
the

[[Page 696]]

forthcoming escrow accounting year for the borrower to deposit funds 
into the escrow account for that year greater than the limits 
established under paragraph (c) of this section. Such an agreement shall 
cover only one escrow accounting year, but a new voluntary agreement may 
be entered into after the next escrow analysis is performed. The 
voluntary agreement may not alter how surpluses are to be treated when 
the next escrow analysis is performed at the end of the escrow 
accounting year covered by the voluntary agreement.
    (3) Shortages. (i) If an escrow account analysis discloses a 
shortage of less than one month's escrow account payment, then the 
servicer has three possible courses of action:
    (A) The servicer may allow a shortage to exist and do nothing to 
change it;
    (B) The servicer may require the borrower to repay the shortage 
amount within 30 days; or
    (C) The servicer may require the borrower to repay the shortage 
amount in equal monthly payments over at least a 12-month period.
    (ii) If an escrow account analysis discloses a shortage that is 
greater than or equal to one month's escrow account payment, then the 
servicer has two possible courses of action:
    (A) The servicer may allow a shortage to exist and do nothing to 
change it; or
    (B) The servicer may require the borrower to repay the shortage in 
equal monthly payments over at least a 12-month period.
    (4) Deficiency. If the escrow account analysis confirms a 
deficiency, then the servicer may require the borrower to pay additional 
monthly deposits to the account to eliminate the deficiency.
    (i) If the deficiency is less than one month's escrow account 
payment, then the servicer:
    (A) May allow the deficiency to exist and do nothing to change it;
    (B) May require the borrower to repay the deficiency within 30 days; 
or
    (C) May require the borrower to repay the deficiency in 2 or more 
equal monthly payments.
    (ii) If the deficiency is greater than or equal to 1 month's escrow 
payment, the servicer may allow the deficiency to exist and do nothing 
to change it or may require the borrower to repay the deficiency in two 
or more equal monthly payments.
    (iii) These provisions regarding deficiencies apply if the borrower 
is current at the time of the escrow account analysis. A borrower is 
current if the servicer receives the borrower's payments within 30 days 
of the payment due date. If the servicer does not receive the borrower's 
payment within 30 days of the payment due date, then the servicer may 
recover the deficiency pursuant to the terms of the federally related 
mortgage loan documents.
    (5) Notice of shortage or deficiency in escrow account. The servicer 
shall notify the borrower at least once during the escrow account 
computation year if there is a shortage or deficiency in the escrow 
account. The notice may be part of the annual escrow account statement 
or it may be a separate document.
    (g) Initial escrow account statement--(1) Submission at settlement, 
or within 45 calendar days of settlement. As noted in Sec.  
1024.17(c)(2), the servicer shall conduct an escrow account analysis 
before establishing an escrow account to determine the amount the 
borrower shall deposit into the escrow account, subject to the 
limitations of Sec.  1024.17(c)(1)(i). After conducting the escrow 
account analysis for each escrow account, the servicer shall submit an 
initial escrow account statement to the borrower at settlement or within 
45 calendar days of settlement for escrow accounts that are established 
as a condition of the loan.
    (i) The initial escrow account statement shall include the amount of 
the borrower's monthly mortgage payment and the portion of the monthly 
payment going into the escrow account and shall itemize the estimated 
taxes, insurance premiums, and other charges that the servicer 
reasonably anticipates to be paid from the escrow account during the 
escrow account computation year and the anticipated disbursement dates 
of those charges. The initial escrow account statement shall indicate 
the amount that the servicer

[[Page 697]]

selects as a cushion. The statement shall include a trial running 
balance for the account.
    (ii) Pursuant to Sec.  1024.17(h)(2), the servicer may incorporate 
the initial escrow account statement into the HUD-1 or HUD-1A settlement 
statement. If the servicer does not incorporate the initial escrow 
account statement into the HUD-1 or HUD-1A settlement statement, then 
the servicer shall submit the initial escrow account statement to the 
borrower as a separate document.
    (2) Time of submission of initial escrow account statement for an 
escrow account established after settlement. For escrow accounts 
established after settlement (and which are not a condition of the 
loan), a servicer shall submit an initial escrow account statement to a 
borrower within 45 calendar days of the date of establishment of the 
escrow account.
    (h) Format for initial escrow account statement. (1) The format and 
a completed example for an initial escrow account statement are set out 
in Public Guidance Documents entitled ``Initial Escrow Account 
Disclosure Statement--Format'' and ``Initial Escrow Account Disclosure 
Statement--Example,'' available in accordance with the direction in the 
definition of Public Guidance Documents in Sec.  1024.2.
    (2) Incorporation of initial escrow account statement into HUD-1 or 
HUD-1A settlement statement. Pursuant to Sec.  1024.9(a)(11), a servicer 
may add the initial escrow account statement to the HUD-1 or HUD-1A 
settlement statement. The servicer may include the initial escrow 
account statement in the basic text or may attach the initial escrow 
account statement as an additional page to the HUD-1 or HUD-1A 
settlement statement.
    (3) Identification of payees. The initial escrow account statement 
need not identify a specific payee by name if it provides sufficient 
information to identify the use of the funds. For example, appropriate 
entries include: county taxes, hazard insurance, condominium dues, etc. 
If a particular payee, such as a taxing body, receives more than one 
payment during the escrow account computation year, the statement shall 
indicate each payment and disbursement date. If there are several taxing 
authorities or insurers, the statement shall identify each taxing body 
or insurer (e.g., ``City Taxes'', ``School Taxes'', ``Hazard 
Insurance'', or ``Flood Insurance,'' etc.).
    (i) Annual escrow account statements. For each escrow account, a 
servicer shall submit an annual escrow account statement to the borrower 
within 30 days of the completion of the escrow account computation year. 
The servicer shall also submit to the borrower the previous year's 
projection or initial escrow account statement. The servicer shall 
conduct an escrow account analysis before submitting an annual escrow 
account statement to the borrower.
    (1) Contents of annual escrow account statement. The annual escrow 
account statement shall provide an account history, reflecting the 
activity in the escrow account during the escrow account computation 
year, and a projection of the activity in the account for the next year. 
In preparing the statement, the servicer may assume scheduled payments 
and disbursements will be made for the final 2 months of the escrow 
account computation year. The annual escrow account statement must 
include, at a minimum, the following (the items in paragraphs (i)(1)(i) 
through (i)(1)(iv) must be clearly itemized):
    (i) The amount of the borrower's current monthly mortgage payment 
and the portion of the monthly payment going into the escrow account;
    (ii) The amount of the past year's monthly mortgage payment and the 
portion of the monthly payment that went into the escrow account;
    (iii) The total amount paid into the escrow account during the past 
computation year;
    (iv) The total amount paid out of the escrow account during the same 
period for taxes, insurance premiums, and other charges (as separately 
identified);
    (v) The balance in the escrow account at the end of the period;
    (vi) An explanation of how any surplus is being handled by the 
servicer;
    (vii) An explanation of how any shortage or deficiency is to be paid 
by the borrower; and

[[Page 698]]

    (viii) If applicable, the reason(s) why the estimated low monthly 
balance was not reached, as indicated by noting differences between the 
most recent account history and last year's projection. Public Guidance 
Documents entitled ``Annual Escrow Account Disclosure Statement--
Format'' and ``Annual Escrow Account Disclosure Statement--Example'' set 
forth an acceptable format and methodology for conveying this 
information.
    (2) No annual statements in the case of default, foreclosure, or 
bankruptcy. This paragraph (i)(2) contains an exemption from the 
provisions of Sec.  1024.17(i)(1). If at the time the servicer conducts 
the escrow account analysis the borrower is more than 30 days overdue, 
then the servicer is exempt from the requirements of submitting an 
annual escrow account statement to the borrower under Sec.  1024.17(i). 
This exemption also applies in situations where the servicer has brought 
an action for foreclosure under the underlying federally related 
mortgage loan, or where the borrower is in bankruptcy proceedings. If 
the servicer does not issue an annual statement pursuant to this 
exemption and the loan subsequently is reinstated or otherwise becomes 
current, the servicer shall provide a history of the account since the 
last annual statement (which may be longer than 1 year) within 90 days 
of the date the account became current.
    (3) Delivery with other material. The servicer may deliver the 
annual escrow account statement to the borrower with other statements or 
materials, including the Substitute 1098, which is provided for Federal 
income tax purposes.
    (4) Short year statements. A servicer may issue a short year annual 
escrow account statement (``short year statement'') to change one escrow 
account computation year to another. By using a short year statement a 
servicer may adjust its production schedule or alter the escrow account 
computation year for the escrow account.
    (i) Effect of short year statement. The short year statement shall 
end the ``escrow account computation year'' for the escrow account and 
establish the beginning date of the new escrow account computation year. 
The servicer shall deliver the short year statement to the borrower 
within 60 days from the end of the short year.
    (ii) Short year statement upon servicing transfer. Upon the transfer 
of servicing, the transferor (old) servicer shall submit a short year 
statement to the borrower within 60 days of the effective date of 
transfer.
    (iii) Short year statement upon loan payoff. If a borrower pays off 
a federally related mortgage loan during the escrow account computation 
year, the servicer shall submit a short year statement to the borrower 
within 60 days after receiving the payoff funds.
    (j) Formats for annual escrow account statement. The formats and 
completed examples for annual escrow account statements using single-
item analysis (pre-rule accounts) and aggregate analysis are set out in 
Public Guidance Documents entitled ``Annual Escrow Account Disclosure 
Statement--Format'' and ``Annual Escrow Account Disclosure Statement--
Example''.
    (k) Timely payments. (1) If the terms of any federally related 
mortgage loan require the borrower to make payments to an escrow 
account, the servicer must pay the disbursements in a timely manner, 
that is, on or before the deadline to avoid a penalty, as long as the 
borrower's payment is not more than 30 days overdue.
    (2) The servicer must advance funds to make disbursements in a 
timely manner as long as the borrower's payment is not more than 30 days 
overdue. Upon advancing funds to pay a disbursement, the servicer may 
seek repayment from the borrower for the deficiency pursuant to 
paragraph (f) of this section.
    (3) For the payment of property taxes from the escrow account, if a 
taxing jurisdiction offers a servicer a choice between annual and 
installment disbursements, the servicer must also comply with this 
paragraph (k)(3). If the taxing jurisdiction neither offers a discount 
for disbursements on a lump sum annual basis nor imposes any additional 
charge or fee for installment disbursements, the servicer must make 
disbursements on an installment basis. If, however, the taxing 
jurisdiction offers a discount for disbursements on a lump

[[Page 699]]

sum annual basis or imposes any additional charge or fee for installment 
disbursements, the servicer may, at the servicer's discretion (but is 
not required by RESPA to), make lump sum annual disbursements in order 
to take advantage of the discount for the borrower or avoid the 
additional charge or fee for installments, as long as such method of 
disbursement complies with paragraphs (k)(1) and (k)(2) of this section. 
The Bureau encourages, but does not require, the servicer to follow the 
preference of the borrower, if such preference is known to the servicer.
    (4) Notwithstanding paragraph (k)(3) of this section, a servicer and 
borrower may mutually agree, on an individual case basis, to a different 
disbursement basis (installment or annual) or disbursement date for 
property taxes from that required under paragraph (k)(3) of this 
section, so long as the agreement meets the requirements of paragraphs 
(k)(1) and (k)(2) of this section. The borrower must voluntarily agree; 
neither loan approval nor any term of the loan may be conditioned on the 
borrower's agreeing to a different disbursement basis or disbursement 
date.
    (5) Timely payment of hazard insurance--(i) In general. Except as 
provided in paragraph (k)(5)(iii) of this section, with respect to a 
borrower whose mortgage payment is more than 30 days overdue, but who 
has established an escrow account for the payment for hazard insurance, 
as defined in Sec.  1024.31, a servicer may not purchase force-placed 
insurance, as that term is defined in Sec.  1024.37(a), unless a 
servicer is unable to disburse funds from the borrower's escrow account 
to ensure that the borrower's hazard insurance premium charges are paid 
in a timely manner.
    (ii) Inability to disburse funds--(A) When inability exists. A 
servicer is considered unable to disburse funds from a borrower's escrow 
account to ensure that the borrower's hazard insurance premiums are paid 
in a timely manner only if the servicer has a reasonable basis to 
believe either that the borrower's hazard insurance has been canceled 
(or was not renewed) for reasons other than nonpayment of premium 
charges or that the borrower's property is vacant.
    (B) When inability does not exist. A servicer shall not be 
considered unable to disburse funds from the borrower's escrow account 
because the escrow account contains insufficient funds for paying hazard 
insurance premium charges.
    (C) Recoupment of advances. If a servicer advances funds to an 
escrow account to ensure that the borrower's hazard insurance premium 
charges are paid in a timely manner, a servicer may seek repayment from 
the borrower for the funds the servicer advanced, unless otherwise 
prohibited by applicable law.
    (iii) Small servicers. Notwithstanding paragraphs (k)(5)(i) and 
(k)(5)(ii)(B) of this section and subject to the requirements in Sec.  
1024.37, a servicer that qualifies as a small servicer pursuant to 12 
CFR 1026.41(e)(4) may purchase force-placed insurance and charge the 
cost of that insurance to the borrower if the cost to the borrower of 
the force-placed insurance is less than the amount the small servicer 
would need to disburse from the borrower's escrow account to ensure that 
the borrower's hazard insurance premium charges were paid in a timely 
manner.
    (l) Discretionary payments. Any borrower's discretionary payment 
(such as credit life or disability insurance) made as part of a monthly 
mortgage payment is to be noted on the initial and annual statements. If 
a discretionary payment is established or terminated during the escrow 
account computation year, this change should be noted on the next annual 
statement. A discretionary payment is not part of the escrow account 
unless the payment is required by the lender, in accordance with the 
definition of ``settlement service'' in Sec.  1024.2, or the servicer 
chooses to place the discretionary payment in the escrow account. If a 
servicer has not established an escrow account for a federally related 
mortgage loan and only receives payments for discretionary items, this 
section is not applicable.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 10875, Feb. 14, 2013; 
81 FR 72370, Oct. 19, 2016]

[[Page 700]]



Sec. Sec.  1024.18-1024.19  [Reserved]



Sec.  1024.20  List of homeownership counseling organizations.

    (a) Provision of list. (1) Except as otherwise provided in this 
section, not later than three business days after a lender, mortgage 
broker, or dealer receives an application, or information sufficient to 
complete an application, the lender must provide the loan applicant with 
a clear and conspicuous written list of homeownership counseling 
organizations that provide relevant counseling services in the loan 
applicant's location. The list of homeownership counseling organizations 
distributed to each loan applicant under this section shall be obtained 
no earlier than 30 days prior to the time when the list is provided to 
the loan applicant from either:
    (i) The Web site maintained by the Bureau for lenders to use in 
complying with the requirements of this section; or
    (ii) Data made available by the Bureau or HUD for lenders to use in 
complying with the requirements of this section, provided that the data 
is used in accordance with instructions provided with the data.
    (2) The list of homeownership counseling organizations provided 
under this section may be combined and provided with other mortgage loan 
disclosures required pursuant to Regulation Z, 12 CFR part 1026, or this 
part unless prohibited by Regulation Z or this part.
    (3) A mortgage broker or dealer may provide the list of 
homeownership counseling organizations required under this section to 
any loan applicant from whom it receives or for whom it prepares an 
application. If the mortgage broker or dealer has provided the required 
list of homeownership counseling organizations, the lender is not 
required to provide an additional list. The lender is responsible for 
ensuring that the list of homeownership counseling organizations is 
provided to a loan applicant in accordance with this section.
    (4) If the lender, mortgage broker, or dealer does not provide the 
list of homeownership counseling organizations required under this 
section to the loan applicant in person, the lender must mail or deliver 
the list to the loan applicant by other means. The list may be provided 
in electronic form, subject to compliance with the consumer consent and 
other applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act), 15 U.S.C. 7001 et seq.
    (5) The lender is not required to provide the list of homeownership 
counseling organizations required under this section if, before the end 
of the three-business-day period provided in paragraph (a)(1) of this 
section, the lender denies the application or the loan applicant 
withdraws the application.
    (6) If a mortgage loan transaction involves more than one lender, 
only one list of homeownership counseling organizations required under 
this section shall be given to the loan applicant and the lenders shall 
agree among themselves which lender will comply with the requirements 
that this section imposes on any or all of them. If there is more than 
one loan applicant, the required list of homeownership counseling 
organizations may be provided to any loan applicant with primary 
liability on the mortgage loan obligation.
    (b) Open-end lines of credit (home-equity plans) under Regulation Z. 
For a federally related mortgage loan that is a home-equity line of 
credit subject to Regulation Z, 12 CFR 1026.40, a lender or mortgage 
broker that provides the loan applicant with the list of homeownership 
organizations required under this section may comply with the timing and 
delivery requirements set out in either paragraph (a) of this section or 
12 CFR 1026.40(b).
    (c) Exemptions--(1) Reverse mortgage transactions. A lender is not 
required to provide an applicant for a reverse mortgage transaction 
subject to 12 CFR 1026.33(a) the list of homeownership counseling 
organizations required under this section.
    (2) Timeshare plans. A lender is not required to provide an 
applicant for a mortgage loan secured by a timeshare, as described under 
11 U.S.C. 101(53D), the list of homeownership counseling

[[Page 701]]

organizations required under this section.

[78 FR 6961, Jan. 31, 2013]



                      Subpart C_Mortgage Servicing

    Source: 78 FR 10876, Feb. 14, 2013, unless otherwise noted.



Sec.  1024.30  Scope.

    (a) In general. Except as provided in paragraphs (b) and (c) of this 
section, this subpart applies to any mortgage loan, as that term is 
defined in Sec.  1024.31.
    (b) Exemptions. Except as otherwise provided in Sec.  1024.41(j), 
Sec. Sec.  1024.38 through 1024.41 of this subpart shall not apply to 
the following:
    (1) A servicer that qualifies as a small servicer pursuant to 12 CFR 
1026.41(e)(4);
    (2) A servicer with respect to any reverse mortgage transaction as 
that term is defined in Sec.  1024.31; and
    (3) A servicer with respect to any mortgage loan for which the 
servicer is a qualified lender as that term is defined in 12 CFR 
617.7000.
    (c) Scope of certain sections. (1) Section 1024.33(a) only applies 
to reverse mortgage transactions.
    (2) The procedures set forth in Sec. Sec.  1024.39 through 1024.41 
of this subpart only apply to a mortgage loan that is secured by a 
property that is a borrower's principal residence.
    (d) Successors in interest. A confirmed successor in interest shall 
be considered a borrower for purposes of Sec.  1024.17 and this subpart.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 78 
FR 80104, Dec. 31, 2013; 81 FR 72370, Oct. 19, 2016]



Sec.  1024.31  Definitions.

    For purposes of this subpart:
    Confirmed successor in interest means a successor in interest once a 
servicer has confirmed the successor in interest's identity and 
ownership interest in a property that secures a mortgage loan subject to 
this subpart.
    Consumer reporting agency has the meaning set forth in section 603 
of the Fair Credit Reporting Act, 15 U.S.C. 1681a.
    COVID-19-related hardship means a financial hardship due, directly 
or indirectly, to the national emergency for the COVID-19 pandemic 
declared in Proclamation 9994 on March 13, 2020 (beginning on March 1, 
2020) and continued on February 24, 2021, in accordance with section 
202(d) of the National Emergencies Act (50 U.S.C.1622(d)).
    Day means calendar day.
    Delinquency means a period of time during which a borrower and a 
borrower's mortgage loan obligation are delinquent. A borrower and a 
borrower's mortgage loan obligation are delinquent beginning on the date 
a periodic payment sufficient to cover principal, interest, and, if 
applicable, escrow becomes due and unpaid, until such time as no 
periodic payment is due and unpaid.
    Hazard insurance means insurance on the property securing a mortgage 
loan that protects the property against loss caused by fire, wind, 
flood, earthquake, theft, falling objects, freezing, and other similar 
hazards for which the owner or assignee of such loan requires insurance.
    Loss mitigation application means an oral or written request for a 
loss mitigation option that is accompanied by any information required 
by a servicer for evaluation for a loss mitigation option.
    Loss mitigation option means an alternative to foreclosure offered 
by the owner or assignee of a mortgage loan that is made available 
through the servicer to the borrower.
    Master servicer means the owner of the right to perform servicing. A 
master servicer may perform the servicing itself or do so through a 
subservicer.
    Mortgage loan means any federally related mortgage loan, as that 
term is defined in Sec.  1024.2 subject to the exemptions in Sec.  
1024.5(b), but does not include open-end lines of credit (home equity 
plans).
    Qualified written request means a written correspondence from the 
borrower to the servicer that includes, or otherwise enables the 
servicer to identify, the name and account of the borrower, and either:
    (1) States the reasons the borrower believes the account is in 
error; or
    (2) Provides sufficient detail to the servicer regarding information 
relating

[[Page 702]]

to the servicing of the mortgage loan sought by the borrower.
    Reverse mortgage transaction has the meaning set forth in 12 CFR 
1026.33(a).
    Service provider means any party retained by a servicer that 
interacts with a borrower or provides a service to the servicer for 
which a borrower may incur a fee.
    Subservicer means a servicer that does not own the right to perform 
servicing, but that performs servicing on behalf of the master servicer.
    Successor in interest means a person to whom an ownership interest 
in a property securing a mortgage loan subject to this subpart is 
transferred from a borrower, provided that the transfer is:
    (1) A transfer by devise, descent, or operation of law on the death 
of a joint tenant or tenant by the entirety;
    (2) A transfer to a relative resulting from the death of a borrower;
    (3) A transfer where the spouse or children of the borrower become 
an owner of the property;
    (4) A transfer resulting from a decree of a dissolution of marriage, 
legal separation agreement, or from an incidental property settlement 
agreement, by which the spouse of the borrower becomes an owner of the 
property; or
    (5) A transfer into an inter vivos trust in which the borrower is 
and remains a beneficiary and which does not relate to a transfer of 
rights of occupancy in the property.
    Transferee servicer means a servicer that obtains or will obtain the 
right to perform servicing pursuant to an agreement or understanding.
    Transferor servicer means a servicer, including a table-funding 
mortgage broker or dealer on a first- lien dealer loan, that transfers 
or will transfer the right to perform servicing pursuant to an agreement 
or understanding.

[78 FR 10876, Feb. 14, 2013, as amended at 81 FR 72370, Oct. 19, 2016; 
86 FR 34899, June 30, 2021]



Sec.  1024.32  General disclosure requirements.

    (a) Disclosure requirements--(1) Form of disclosures. Except as 
otherwise provided in this subpart, disclosures required under this 
subpart must be clear and conspicuous, in writing, and in a form that a 
recipient may keep. The disclosures required by this subpart may be 
provided in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act, as set forth 
in Sec.  1024.3. A servicer may use commonly accepted or readily 
understandable abbreviations in complying with the disclosure 
requirements of this subpart.
    (2) Foreign language disclosures. Disclosures required under this 
subpart may be made in a language other than English, provided that the 
disclosures are made available in English upon a recipient's request.
    (b) Additional information; disclosures required by other laws. 
Unless expressly prohibited in this subpart, by other applicable law, 
such as the Truth in Lending Act (15 U.S.C. 1601 et seq.) or the Truth 
in Savings Act (12 U.S.C. 4301 et seq.), or by the terms of an agreement 
with a Federal or State regulatory agency, a servicer may include 
additional information in a disclosure required under this subpart or 
combine any disclosure required under this subpart with any disclosure 
required by such other law.
    (c) Successors in interest--(1) Optional notice with acknowledgment 
form. Upon confirmation, a servicer may provide a confirmed successor in 
interest who is not liable on the mortgage loan obligation with a 
written notice together with a separate acknowledgment form that meets 
the requirements of paragraph (c)(1)(iv) of this section and that does 
not require acknowledgment of any items other than those identified in 
paragraph (c)(1)(iv) of this section. The written notice must clearly 
and conspicuously explain that:
    (i) The servicer has confirmed the successor in interest's identity 
and ownership interest in the property;
    (ii) Unless the successor in interest assumes the mortgage loan 
obligation under State law, the successor in interest is not liable for 
the mortgage debt and cannot be required to use the successor in 
interest's assets to pay the mortgage debt, except that the lender has a 
security interest in the property and a right to foreclose on the 
property, when permitted by law and authorized under the mortgage loan 
contract;

[[Page 703]]

    (iii) The successor in interest may be entitled to receive certain 
notices and communications about the mortgage loan if the servicer is 
not providing them to another confirmed successor in interest or 
borrower on the account;
    (iv) In order to receive such notices and communications, the 
successor in interest must execute and provide to the servicer an 
acknowledgment form that:
    (A) Requests receipt of such notices and communications if the 
servicer is not providing them to another confirmed successor in 
interest or borrower on the account; and
    (B) Indicates that the successor in interest understands that such 
notices do not make the successor in interest liable for the mortgage 
debt and that the successor in interest is only liable for the mortgage 
debt if the successor in interest assumes the mortgage loan obligation 
under State law; and
    (C) Informs the successor in interest that there is no time limit to 
return the acknowledgment but that the servicer will not begin sending 
such notices and communications to the confirmed successor in interest 
until the acknowledgment is returned; and
    (v) Whether or not the successor in interest executes the 
acknowledgment described in paragraph (c)(1)(iv) of this section, the 
successor in interest is entitled to submit notices of error under Sec.  
1024.35, requests for information under Sec.  1024.36, and requests for 
a payoff statement under Sec.  1026.36 with respect to the mortgage loan 
account, with a brief explanation of those rights and how to exercise 
them, including appropriate address information.
    (2) Effect of failure to execute acknowledgment. If, upon 
confirmation, a servicer provides a confirmed successor in interest who 
is not liable on the mortgage loan obligation with a written notice and 
acknowledgment form in accordance with paragraph (c)(1) of this section, 
the servicer is not required to provide to the confirmed successor in 
interest any written disclosure required by Sec.  1024.17, Sec.  
1024.33, Sec.  1024.34, Sec.  1024.37, or Sec.  1024.39 or to comply 
with the live contact requirements in Sec.  1024.39(a) with respect to 
the confirmed successor in interest until the confirmed successor in 
interest either assumes the mortgage loan obligation under State law or 
executes an acknowledgment that complies with paragraph (c)(1)(iv) of 
this section and provides it to the servicer.
    (3) Additional copies of acknowledgment form. If a servicer provides 
a confirmed successor in interest with a written notice and 
acknowledgment form in accordance with paragraph (c)(1) of this section, 
the servicer must make additional copies of the written notice and 
acknowledgment form available to the confirmed successor in interest 
upon written or oral request.
    (4) Multiple notices unnecessary. Except as required by Sec.  
1024.36, a servicer is not required to provide to a confirmed successor 
in interest any written disclosure required by Sec.  1024.17, Sec.  
1024.33, Sec.  1024.34, Sec.  1024.37, or Sec.  1024.39(b) if the 
servicer is providing the same specific disclosure to another borrower 
on the account. A servicer is also not required to comply with the live 
contact requirements set forth in Sec.  1024.39(a) with respect to a 
confirmed successor in interest if the servicer is complying with those 
requirements with respect to another borrower on the account.

[78 FR 10876, Feb. 14, 2013, as amended at 81 FR 72371, Oct. 19, 2016]



Sec.  1024.33  Mortgage servicing transfers.

    (a) Servicing disclosure statement. Within three days (excluding 
legal public holidays, Saturdays, and Sundays) after a person applies 
for a reverse mortgage transaction, the lender, mortgage broker who 
anticipates using table funding, or dealer in a first-lien dealer loan 
shall provide to the person a servicing disclosure statement that states 
whether the servicing of the mortgage loan may be assigned, sold, or 
transferred to any other person at any time. Appendix MS-1 of this part 
contains a model form for the disclosures required under this paragraph 
(a). If a person who applies for a reverse mortgage transaction is 
denied credit within the three-day period, a servicing disclosure 
statement is not required to be delivered.
    (b) Notices of transfer of loan servicing--(1) Requirement for 
notice. Except as provided in paragraph (b)(2) of this section, each 
transferor servicer and

[[Page 704]]

transferee servicer of any mortgage loan shall provide to the borrower a 
notice of transfer for any assignment, sale, or transfer of the 
servicing of the mortgage loan. The notice must contain the information 
described in paragraph (b)(4) of this section. Appendix MS-2 of this 
part contains a model form for the disclosures required under this 
paragraph (b).
    (2) Certain transfers excluded. (i) The following transfers are not 
assignments, sales, or transfers of mortgage loan servicing for purposes 
of this section if there is no change in the payee, address to which 
payment must be delivered, account number, or amount of payment due:
    (A) A transfer between affiliates;
    (B) A transfer that results from mergers or acquisitions of 
servicers or subservicers;
    (C) A transfer that occurs between master servicers without changing 
the subservicer;
    (ii) The Federal Housing Administration (FHA) is not required to 
provide to the borrower a notice of transfer where a mortgage insured 
under the National Housing Act is assigned to the FHA.
    (3) Time of notice--(i) In general. Except as provided in paragraphs 
(b)(3)(ii) and (iii) of this section, the transferor servicer shall 
provide the notice of transfer to the borrower not less than 15 days 
before the effective date of the transfer of the servicing of the 
mortgage loan. The transferee servicer shall provide the notice of 
transfer to the borrower not more than 15 days after the effective date 
of the transfer. The transferor and transferee servicers may provide a 
single notice, in which case the notice shall be provided not less than 
15 days before the effective date of the transfer of the servicing of 
the mortgage loan.
    (ii) Extended time. The notice of transfer shall be provided to the 
borrower by the transferor servicer or the transferee servicer not more 
than 30 days after the effective date of the transfer of the servicing 
of the mortgage loan in any case in which the transfer of servicing is 
preceded by:
    (A) Termination of the contract for servicing the loan for cause;
    (B) Commencement of proceedings for bankruptcy of the servicer;
    (C) Commencement of proceedings by the FDIC for conservatorship or 
receivership of the servicer or an entity that owns or controls the 
servicer; or
    (D) Commencement of proceedings by the NCUA for appointment of a 
conservator or liquidating agent of the servicer or an entity that owns 
or controls the servicer.
    (iii) Notice provided at settlement. Notices of transfer provided at 
settlement by the transferor servicer and transferee servicer, whether 
as separate notices or as a combined notice, satisfy the timing 
requirements of paragraph (b)(3) of this section.
    (4) Contents of notice. The notices of transfer shall include the 
following information:
    (i) The effective date of the transfer of servicing;
    (ii) The name, address, and a collect call or toll-free telephone 
number for an employee or department of the transferee servicer that can 
be contacted by the borrower to obtain answers to servicing transfer 
inquiries;
    (iii) The name, address, and a collect call or toll-free telephone 
number for an employee or department of the transferor servicer that can 
be contacted by the borrower to obtain answers to servicing transfer 
inquiries;
    (iv) The date on which the transferor servicer will cease to accept 
payments relating to the loan and the date on which the transferee 
servicer will begin to accept such payments. These dates shall either be 
the same or consecutive days;
    (v) Whether the transfer will affect the terms or the continued 
availability of mortgage life or disability insurance, or any other type 
of optional insurance, and any action the borrower must take to maintain 
such coverage; and
    (vi) A statement that the transfer of servicing does not affect any 
term or condition of the mortgage loan other than terms directly related 
to the servicing of the loan.
    (c) Borrower payments during transfer of servicing--(1) Payments not 
considered late. During the 60-day period beginning on the effective 
date of transfer of the servicing of any mortgage loan, if the 
transferor servicer (rather than the

[[Page 705]]

transferee servicer that should properly receive payment on the loan) 
receives payment on or before the applicable due date (including any 
grace period allowed under the mortgage loan instruments), a payment may 
not be treated as late for any purpose.
    (2) Treatment of payments. Beginning on the effective date of 
transfer of the servicing of any mortgage loan, with respect to payments 
received incorrectly by the transferor servicer (rather than the 
transferee servicer that should properly receive the payment on the 
loan), the transferor servicer shall promptly either:
    (i) Transfer the payment to the transferee servicer for application 
to a borrower's mortgage loan account, or
    (ii) Return the payment to the person that made the payment and 
notify such person of the proper recipient of the payment.
    (d) Preemption of State laws. A lender who makes a mortgage loan or 
a servicer shall be considered to have complied with the provisions of 
any State law or regulation requiring notice to a borrower at the time 
of application for a loan or transfer of servicing of a loan if the 
lender or servicer complies with the requirements of this section. Any 
State law requiring notice to the borrower at the time of application or 
at the time of transfer of servicing of the loan is preempted, and there 
shall be no additional borrower disclosure requirements. Provisions of 
State law, such as those requiring additional notices to insurance 
companies or taxing authorities, are not preempted by section 6 of RESPA 
or this section, and this additional information may be added to a 
notice provided under this section, if permitted under State law.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 80104, Dec. 31, 2013]



Sec.  1024.34  Timely escrow payments and treatment of escrow account 
balances.

    (a) Timely escrow disbursements required. If the terms of a mortgage 
loan require the borrower to make payments to the servicer of the 
mortgage loan for deposit into an escrow account to pay taxes, insurance 
premiums, and other charges for the mortgaged property, the servicer 
shall make payments from the escrow account in a timely manner, that is, 
on or before the deadline to avoid a penalty, as governed by the 
requirements in Sec.  1024.17(k).
    (b) Refund of escrow balance--(1) In general. Except as provided in 
paragraph (b)(2) of this section, within 20 days (excluding legal public 
holidays, Saturdays, and Sundays) of a borrower's payment of a mortgage 
loan in full, a servicer shall return to the borrower any amounts 
remaining in an escrow account that is within the servicer's control.
    (2) Servicer may credit funds to a new escrow account. 
Notwithstanding paragraph (b)(1) of this section, if the borrower 
agrees, a servicer may credit any amounts remaining in an escrow account 
that is within the servicer's control to an escrow account for a new 
mortgage loan as of the date of the settlement of the new mortgage loan 
if the new mortgage loan is provided to the borrower by a lender that:
    (i) Was also the lender to whom the prior mortgage loan was 
initially payable;
    (ii) Is the owner or assignee of the prior mortgage loan; or
    (iii) Uses the same servicer that serviced the prior mortgage loan 
to service the new mortgage loan.



Sec.  1024.35  Error resolution procedures.

    (a) Notice of error. A servicer shall comply with the requirements 
of this section for any written notice from the borrower that asserts an 
error and that includes the name of the borrower, information that 
enables the servicer to identify the borrower's mortgage loan account, 
and the error the borrower believes has occurred. A notice on a payment 
coupon or other payment form supplied by the servicer need not be 
treated by the servicer as a notice of error. A qualified written 
request that asserts an error relating to the servicing of a mortgage 
loan is a notice of error for purposes of this section, and a servicer 
must comply with all requirements applicable to a notice of error with 
respect to such qualified written request.
    (b) Scope of error resolution. For purposes of this section, the 
term ``error''

[[Page 706]]

refers to the following categories of covered errors:
    (1) Failure to accept a payment that conforms to the servicer's 
written requirements for the borrower to follow in making payments.
    (2) Failure to apply an accepted payment to principal, interest, 
escrow, or other charges under the terms of the mortgage loan and 
applicable law.
    (3) Failure to credit a payment to a borrower's mortgage loan 
account as of the date of receipt in violation of 12 CFR 1026.36(c)(1).
    (4) Failure to pay taxes, insurance premiums, or other charges, 
including charges that the borrower and servicer have voluntarily agreed 
that the servicer should collect and pay, in a timely manner as required 
by Sec.  1024.34(a), or to refund an escrow account balance as required 
by Sec.  1024.34(b).
    (5) Imposition of a fee or charge that the servicer lacks a 
reasonable basis to impose upon the borrower.
    (6) Failure to provide an accurate payoff balance amount upon a 
borrower's request in violation of section 12 CFR 1026.36(c)(3).
    (7) Failure to provide accurate information to a borrower regarding 
loss mitigation options and foreclosure, as required by Sec.  1024.39.
    (8) Failure to transfer accurately and timely information relating 
to the servicing of a borrower's mortgage loan account to a transferee 
servicer.
    (9) Making the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process in violation of Sec.  
1024.41(f) or (j).
    (10) Moving for foreclosure judgment or order of sale, or conducting 
a foreclosure sale in violation of Sec.  1024.41(g) or (j).
    (11) Any other error relating to the servicing of a borrower's 
mortgage loan.
    (c) Contact information for borrowers to assert errors. A servicer 
may, by written notice provided to a borrower, establish an address that 
a borrower must use to submit a notice of error in accordance with the 
procedures in this section. The notice shall include a statement that 
the borrower must use the established address to assert an error. If a 
servicer designates a specific address for receiving notices of error, 
the servicer shall designate the same address for receiving information 
requests pursuant to Sec.  1024.36(b). A servicer shall provide a 
written notice to a borrower before any change in the address used for 
receiving a notice of error. A servicer that designates an address for 
receipt of notices of error must post the designated address on any Web 
site maintained by the servicer if the Web site lists any contact 
address for the servicer.
    (d) Acknowledgment of receipt. Within five days (excluding legal 
public holidays, Saturdays, and Sundays) of a servicer receiving a 
notice of error from a borrower, the servicer shall provide to the 
borrower a written response acknowledging receipt of the notice of 
error.
    (e) Response to notice of error--(1) Investigation and response 
requirements--(i) In general. Except as provided in paragraphs (f) and 
(g) of this section, a servicer must respond to a notice of error by 
either:
    (A) Correcting the error or errors identified by the borrower and 
providing the borrower with a written notification of the correction, 
the effective date of the correction, and contact information, including 
a telephone number, for further assistance; or
    (B) Conducting a reasonable investigation and providing the borrower 
with a written notification that includes a statement that the servicer 
has determined that no error occurred, a statement of the reason or 
reasons for this determination, a statement of the borrower's right to 
request documents relied upon by the servicer in reaching its 
determination, information regarding how the borrower can request such 
documents, and contact information, including a telephone number, for 
further assistance.
    (ii) Different or additional error. If during a reasonable 
investigation of a notice of error, a servicer concludes that errors 
occurred other than, or in addition to, the error or errors alleged by 
the borrower, the servicer shall correct all such additional errors and 
provide the borrower with a written notification that describes the 
errors the servicer identified, the action taken to correct the errors, 
the effective date of

[[Page 707]]

the correction, and contact information, including a telephone number, 
for further assistance.
    (2) Requesting information from borrower. A servicer may request 
supporting documentation from a borrower in connection with the 
investigation of an asserted error, but may not:
    (i) Require a borrower to provide such information as a condition of 
investigating an asserted error; or
    (ii) Determine that no error occurred because the borrower failed to 
provide any requested information without conducting a reasonable 
investigation pursuant to paragraph (e)(1)(i)(B) of this section.
    (3) Time limits--(i) In general. A servicer must comply with the 
requirements of paragraph (e)(1) of this section:
    (A) Not later than seven days (excluding legal public holidays, 
Saturdays, and Sundays) after the servicer receives the notice of error 
for errors asserted under paragraph (b)(6) of this section.
    (B) Prior to the date of a foreclosure sale or within 30 days 
(excluding legal public holidays, Saturdays, and Sundays) after the 
servicer receives the notice of error, whichever is earlier, for errors 
asserted under paragraphs (b)(9) and (10) of this section.
    (C) For all other asserted errors, not later than 30 days (excluding 
legal public holidays, Saturdays, and Sundays) after the servicer 
receives the applicable notice of error.
    (ii) Extension of time limit. For asserted errors governed by the 
time limit set forth in paragraph (e)(3)(i)(C) of this section, a 
servicer may extend the time period for responding by an additional 15 
days (excluding legal public holidays, Saturdays, and Sundays) if, 
before the end of the 30-day period, the servicer notifies the borrower 
of the extension and the reasons for the extension in writing. A 
servicer may not extend the time period for responding to errors 
asserted under paragraph (b)(6), (9), or (10) of this section.
    (4) Copies of documentation. A servicer shall provide to the 
borrower, at no charge, copies of documents and information relied upon 
by the servicer in making its determination that no error occurred 
within 15 days (excluding legal public holidays, Saturdays, and Sundays) 
of receiving the borrower's request for such documents. A servicer is 
not required to provide documents relied upon that constitute 
confidential, proprietary or privileged information. If a servicer 
withholds documents relied upon because it has determined that such 
documents constitute confidential, proprietary or privileged 
information, the servicer must notify the borrower of its determination 
in writing within 15 days (excluding legal public holidays, Saturdays, 
and Sundays) of receipt of the borrower's request for such documents.
    (5) Omissions in responses to requests for documentation. In its 
response to a request for documentation under paragraph (e)(4) of this 
section, a servicer may omit location and contact information and 
personal financial information (other than information about the terms, 
status, and payment history of the mortgage loan) if:
    (i) The information pertains to a potential or confirmed successor 
in interest who is not the requester; or
    (ii) The requester is a confirmed successor in interest and the 
information pertains to any borrower who is not the requester.
    (f) Alternative compliance--(1) Early correction. A servicer is not 
required to comply with paragraphs (d) and (e) of this section if the 
servicer corrects the error or errors asserted by the borrower and 
notifies the borrower of that correction in writing within five days 
(excluding legal public holidays, Saturdays, and Sundays) of receiving 
the notice of error.
    (2) Error asserted before foreclosure sale. A servicer is not 
required to comply with the requirements of paragraphs (d) and (e) of 
this section for errors asserted under paragraph (b)(9) or (10) of this 
section if the servicer receives the applicable notice of an error seven 
or fewer days before a foreclosure sale. For any such notice of error, a 
servicer shall make a good faith attempt to respond to the borrower, 
orally or in writing, and either correct the error or state the reason 
the servicer has determined that no error has occurred.
    (g) Requirements not applicable--(1) In general. A servicer is not 
required to

[[Page 708]]

comply with the requirements of paragraphs (d), (e), and (i) of this 
section if the servicer reasonably determines that any of the following 
apply:
    (i) Duplicative notice of error. The asserted error is substantially 
the same as an error previously asserted by the borrower for which the 
servicer has previously complied with its obligation to respond pursuant 
to paragraphs (d) and (e) of this section, unless the borrower provides 
new and material information to support the asserted error. New and 
material information means information that was not reviewed by the 
servicer in connection with investigating a prior notice of the same 
error and is reasonably likely to change the servicer's prior 
determination about the error.
    (ii) Overbroad notice of error. The notice of error is overbroad. A 
notice of error is overbroad if the servicer cannot reasonably determine 
from the notice of error the specific error that the borrower asserts 
has occurred on a borrower's account. To the extent a servicer can 
reasonably identify a valid assertion of an error in a notice of error 
that is otherwise overbroad, the servicer shall comply with the 
requirements of paragraphs (d), (e) and (i) of this section with respect 
to that asserted error.
    (iii) Untimely notice of error. A notice of error is delivered to 
the servicer more than one year after:
    (A) Servicing for the mortgage loan that is the subject of the 
asserted error was transferred from the servicer receiving the notice of 
error to a transferee servicer; or
    (B) The mortgage loan is discharged.
    (2) Notice to borrower. If a servicer determines that, pursuant to 
this paragraph (g), the servicer is not required to comply with the 
requirements of paragraphs (d), (e), and (i) of this section, the 
servicer shall notify the borrower of its determination in writing not 
later than five days (excluding legal public holidays, Saturdays, and 
Sundays) after making such determination. The notice to the borrower 
shall set forth the basis under paragraph (g)(1) of this section upon 
which the servicer has made such determination.
    (h) Payment requirements prohibited. A servicer shall not charge a 
fee, or require a borrower to make any payment that may be owed on a 
borrower's account, as a condition of responding to a notice of error.
    (i) Effect on servicer remedies--(1) Adverse information. After 
receipt of a notice of error, a servicer may not, for 60 days, furnish 
adverse information to any consumer reporting agency regarding any 
payment that is the subject of the notice of error.
    (2) Remedies permitted. Except as set forth in this section with 
respect to an assertion of error under paragraph (b)(9) or (10) of this 
section, nothing in this section shall limit or restrict a lender or 
servicer from pursuing any remedy it has under applicable law, including 
initiating foreclosure or proceeding with a foreclosure sale.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 81 
FR 72371, Oct. 19, 2016]



Sec.  1024.36  Requests for information.

    (a) Information request. A servicer shall comply with the 
requirements of this section for any written request for information 
from a borrower that includes the name of the borrower, information that 
enables the servicer to identify the borrower's mortgage loan account, 
and states the information the borrower is requesting with respect to 
the borrower's mortgage loan. A request on a payment coupon or other 
payment form supplied by the servicer need not be treated by the 
servicer as a request for information. A request for a payoff balance 
need not be treated by the servicer as a request for information. A 
qualified written request that requests information relating to the 
servicing of the mortgage loan is a request for information for purposes 
of this section, and a servicer must comply with all requirements 
applicable to a request for information with respect to such qualified 
written request.
    (b) Contact information for borrowers to request information. A 
servicer may, by written notice provided to a borrower, establish an 
address that a borrower must use to request information in accordance 
with the procedures in this section. The notice shall include a 
statement that the borrower must use the established address to request 
information. If a servicer designates a

[[Page 709]]

specific address for receiving information requests, a servicer shall 
designate the same address for receiving notices of error pursuant to 
Sec.  1024.35(c). A servicer shall provide a written notice to a 
borrower before any change in the address used for receiving an 
information request. A servicer that designates an address for receipt 
of information requests must post the designated address on any Web site 
maintained by the servicer if the Web site lists any contact address for 
the servicer.
    (c) Acknowledgment of receipt. Within five days (excluding legal 
public holidays, Saturdays, and Sundays) of a servicer receiving an 
information request from a borrower, the servicer shall provide to the 
borrower a written response acknowledging receipt of the information 
request.
    (d) Response to information request--(1) Investigation and response 
requirements. Except as provided in paragraphs (e) and (f) of this 
section, a servicer must respond to an information request by either:
    (i) Providing the borrower with the requested information and 
contact information, including a telephone number, for further 
assistance in writing; or
    (ii) Conducting a reasonable search for the requested information 
and providing the borrower with a written notification that states that 
the servicer has determined that the requested information is not 
available to the servicer, provides the basis for the servicer's 
determination, and provides contact information, including a telephone 
number, for further assistance.
    (2) Time limits--(i) In general. A servicer must comply with the 
requirements of paragraph (d)(1) of this section:
    (A) Not later than 10 days (excluding legal public holidays, 
Saturdays, and Sundays) after the servicer receives an information 
request for the identity of, and address or other relevant contact 
information for, the owner or assignee of a mortgage loan; and
    (B) For all other requests for information, not later than 30 days 
(excluding legal public holidays, Saturdays, and Sundays) after the 
servicer receives the information request.
    (ii) Extension of time limit. For requests for information governed 
by the time limit set forth in paragraph (d)(2)(i)(B) of this section, a 
servicer may extend the time period for responding by an additional 15 
days (excluding legal public holidays, Saturdays, and Sundays) if, 
before the end of the 30-day period, the servicer notifies the borrower 
of the extension and the reasons for the extension in writing. A 
servicer may not extend the time period for requests for information 
governed by paragraph (d)(2)(i)(A) of this section.
    (3) Omissions in responses to requests. In its response to a request 
for information, a servicer may omit location and contact information 
and personal financial information (other than information about the 
terms, status, and payment history of the mortgage loan) if:
    (i) The information pertains to a potential or confirmed successor 
in interest who is not the requester; or
    (ii) The requester is a confirmed successor and the information 
pertains to any borrower who is not the requester.
    (e) Alternative compliance. A servicer is not required to comply 
with paragraphs (c) and (d) of this section if the servicer provides the 
borrower with the information requested and contact information, 
including a telephone number, for further assistance in writing within 
five days (excluding legal public holidays, Saturdays, and Sundays) of 
receiving an information request.
    (f) Requirements not applicable--(1) In general. A servicer is not 
required to comply with the requirements of paragraphs (c) and (d) of 
this section if the servicer reasonably determines that any of the 
following apply:
    (i) Duplicative information. The information requested is 
substantially the same as information previously requested by the 
borrower for which the servicer has previously complied with its 
obligation to respond pursuant to paragraphs (c) and (d) of this 
section.
    (ii) Confidential, proprietary or privileged information. The 
information requested is confidential, proprietary or privileged.

[[Page 710]]

    (iii) Irrelevant information. The information requested is not 
directly related to the borrower's mortgage loan account.
    (iv) Overbroad or unduly burdensome information request. The 
information request is overbroad or unduly burdensome. An information 
request is overbroad if a borrower requests that the servicer provide an 
unreasonable volume of documents or information to a borrower. An 
information request is unduly burdensome if a diligent servicer could 
not respond to the information request without either exceeding the 
maximum time limit permitted by paragraph (d)(2) of this section or 
incurring costs (or dedicating resources) that would be unreasonable in 
light of the circumstances. To the extent a servicer can reasonably 
identify a valid information request in a submission that is otherwise 
overbroad or unduly burdensome, the servicer shall comply with the 
requirements of paragraphs (c) and (d) of this section with respect to 
that requested information.
    (v) Untimely information request. The information request is 
delivered to a servicer more than one year after:
    (A) Servicing for the mortgage loan that is the subject of the 
information request was transferred from the servicer receiving the 
request for information to a transferee servicer; or
    (B) The mortgage loan is discharged.
    (2) Notice to borrower. If a servicer determines that, pursuant to 
this paragraph (f), the servicer is not required to comply with the 
requirements of paragraphs (c) and (d) of this section, the servicer 
shall notify the borrower of its determination in writing not later than 
five days (excluding legal public holidays, Saturdays, and Sundays) 
after making such determination. The notice to the borrower shall set 
forth the basis under paragraph (f)(1) of this section upon which the 
servicer has made such determination.
    (g) Payment requirement limitations--(1) Fees prohibited. Except as 
set forth in paragraph (g)(2) of this section, a servicer shall not 
charge a fee, or require a borrower to make any payment that may be owed 
on a borrower's account, as a condition of responding to an information 
request.
    (2) Fee permitted. Nothing in this section shall prohibit a servicer 
from charging a fee for providing a beneficiary notice under applicable 
State law, if such a fee is not otherwise prohibited by applicable law.
    (h) Servicer remedies. Nothing in this section shall prohibit a 
servicer from furnishing adverse information to any consumer reporting 
agency or pursuing any of its remedies, including initiating foreclosure 
or proceeding with a foreclosure sale, allowed by the underlying 
mortgage loan instruments, during the time period that response to an 
information request notice is outstanding.
    (i) Potential successors in interest. (1) With respect to any 
written request from a person that indicates that the person may be a 
successor in interest and that includes the name of the transferor 
borrower from whom the person received an ownership interest and 
information that enables the servicer to identify the mortgage loan 
account, a servicer shall respond by providing the potential successor 
in interest with a written description of the documents the servicer 
reasonably requires to confirm the person's identity and ownership 
interest in the property and contact information, including a telephone 
number, for further assistance. With respect to the written request, a 
servicer shall treat the potential successor in interest as a borrower 
for purposes of the requirements of paragraphs (c) through (g) of this 
section.
    (2) If a written request under paragraph (i)(1) of this section does 
not provide sufficient information to enable the servicer to identify 
the documents the servicer reasonably requires to confirm the person's 
identity and ownership interest in the property, the servicer may 
provide a response that includes examples of documents typically 
accepted to establish identity and ownership interest in a property; 
indicates that the person may obtain a more individualized description 
of required documents by providing additional information; specifies 
what additional information is required to enable the servicer to 
identify the required documents; and provides contact information, 
including a telephone

[[Page 711]]

number, for further assistance. A servicer's response under this 
paragraph (i)(2) must otherwise comply with the requirements of 
paragraph (i)(1). Notwithstanding paragraph (f)(1)(i) of this section, 
if a potential successor in interest subsequently provides orally or in 
writing the required information specified by the servicer pursuant to 
this paragraph (i)(2), the servicer must treat the new information, 
together with the original request, as a new, non-duplicative request 
under paragraph (i)(1), received as of the date the required information 
was received, and must respond accordingly.
    (3) In responding to a request under paragraph (i)(1) of this 
section prior to confirmation, the servicer is not required to provide 
any information other than the information specified in paragraphs 
(i)(1) and (2) of this section. In responding to a written request under 
paragraph (i)(1) that requests other information, the servicer must 
indicate that the potential successor in interest may resubmit any 
request for information once confirmed as a successor in interest.
    (4) If a servicer has established an address that a borrower must 
use to request information pursuant to paragraph (b) of this section, a 
servicer must comply with the requirements of paragraph (i)(1) of this 
section only for requests received at the established address.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 81 
FR 72371, Oct. 19, 2016]



Sec.  1024.37  Force-placed insurance.

    (a) Definition of force-placed insurance--(1) In general. For the 
purposes of this section, the term ``force-placed insurance'' means 
hazard insurance obtained by a servicer on behalf of the owner or 
assignee of a mortgage loan that insures the property securing such 
loan.
    (2) Types of insurance not considered force-placed insurance. The 
following insurance does not constitute ``force-placed insurance'' under 
this section:
    (i) Hazard insurance required by the Flood Disaster Protection Act 
of 1973.
    (ii) Hazard insurance obtained by a borrower but renewed by the 
borrower's servicer as described in Sec.  1024.17(k)(1), (2), or (5).
    (iii) Hazard insurance obtained by a borrower but renewed by the 
borrower's servicer at its discretion, if the borrower agrees.
    (b) Basis for charging borrower for force-placed insurance. A 
servicer may not assess on a borrower a premium charge or fee related to 
force-placed insurance unless the servicer has a reasonable basis to 
believe that the borrower has failed to comply with the mortgage loan 
contract's requirement to maintain hazard insurance.
    (c) Requirements before charging borrower for force-placed 
insurance--(1) In general. Before a servicer assesses on a borrower any 
premium charge or fee related to force-placed insurance, the servicer 
must:
    (i) Deliver to a borrower or place in the mail a written notice 
containing the information required by paragraph (c)(2) of this section 
at least 45 days before a servicer assesses on a borrower such charge or 
fee;
    (ii) Deliver to the borrower or place in the mail a written notice 
in accordance with paragraph (d)(1) of this section; and
    (iii) By the end of the 15-day period beginning on the date the 
written notice described in paragraph (c)(1)(ii) of this section was 
delivered to the borrower or placed in the mail, not have received, from 
the borrower or otherwise, evidence demonstrating that the borrower has 
had in place, continuously, hazard insurance coverage that complies with 
the loan contract's requirements to maintain hazard insurance.
    (2) Content of notice. The notice required by paragraph (c)(1)(i) of 
this section shall set forth the following information:
    (i) The date of the notice;
    (ii) The servicer's name and mailing address;
    (iii) The borrower's name and mailing address;
    (iv) A statement that requests the borrower to provide hazard 
insurance information for the borrower's property and identifies the 
property by its physical address;
    (v) A statement that:

[[Page 712]]

    (A) The borrower's hazard insurance is expiring, has expired, or 
provides insufficient coverage, as applicable;
    (B) The servicer does not have evidence that the borrower has hazard 
insurance coverage past the expiration date or evidence that the 
borrower has hazard insurance that provides sufficient coverage, as 
applicable; and
    (C) If applicable, identifies the type of hazard insurance for which 
the servicer lacks evidence of coverage;
    (vi) A statement that hazard insurance is required on the borrower's 
property, and that the servicer has purchased or will purchase, as 
applicable, such insurance at the borrower's expense;
    (vii) A statement requesting the borrower to promptly provide the 
servicer with insurance information;
    (viii) A description of the requested insurance information and how 
the borrower may provide such information, and if applicable, a 
statement that the requested information must be in writing;
    (ix) A statement that insurance the servicer has purchased or 
purchases:
    (A) May cost significantly more than hazard insurance purchased by 
the borrower;
    (B) Not provide as much coverage as hazard insurance purchased by 
the borrower;
    (x) The servicer's telephone number for borrower inquiries; and
    (xi) If applicable, a statement advising the borrower to review 
additional information provided in the same transmittal.
    (3) Format. A servicer must set the information required by 
paragraphs (c)(2)(iv), (vi), and (ix)(A) and (B) in bold text, except 
that the information about the physical address of the borrower's 
property required by paragraph (c)(2)(iv) of this section may be set in 
regular text. A servicer may use form MS-3A in appendix MS-3 of this 
part to comply with the requirements of paragraphs (c)(1)(i) and (2) of 
this section.
    (4) Additional information. Except for the mortgage loan account 
number, a servicer may not include any information other than 
information required by paragraph (c)(2) of this section in the written 
notice required by paragraph (c)(1)(i) of this section. However, a 
servicer may provide such additional information to a borrower on 
separate pieces of paper in the same transmittal.
    (d) Reminder notice--(1) In general. The notice required by 
paragraph (c)(1)(ii) of this section shall be delivered to the borrower 
or placed in the mail at least 15 days before a servicer assesses on a 
borrower a premium charge or fee related to force-placed insurance. A 
servicer may not deliver to a borrower or place in the mail the notice 
required by paragraph (c)(1)(ii) of this section until at least 30 days 
after delivering to the borrower or placing in the mail the written 
notice required by paragraph (c)(1)(i) of this section.
    (2) Content of the reminder notice--(i) Servicer receiving no 
insurance information. A servicer that receives no hazard insurance 
information after delivering to the borrower or placing in the mail the 
notice required by paragraph (c)(1)(i) of this section must set forth in 
the notice required by paragraph (c)(1)(ii) of this section:
    (A) The date of the notice;
    (B) A statement that the notice is the second and final notice;
    (C) The information required by paragraphs (c)(2)(ii) through (xi) 
of this section; and
    (D) The cost of the force-placed insurance, stated as an annual 
premium, except if a servicer does not know the cost of force-placed 
insurance, a reasonable estimate shall be disclosed and identified as 
such.
    (ii) Servicer lacking evidence of continuous coverage. A servicer 
that has received hazard insurance information after delivering to a 
borrower or placing in the mail the notice required by paragraph 
(c)(1)(i) of this section, but has not received, from the borrower or 
otherwise, evidence demonstrating that the borrower has had sufficient 
hazard insurance coverage in place continuously, must set forth in the 
notice required by paragraph (c)(1)(ii) of this section the following 
information:
    (A) The date of the notice;
    (B) The information required by paragraphs (c)(2)(ii) through (iv) 
and (ix) through (xi) and (d)(2)(i)(B) and (D) of this section;

[[Page 713]]

    (C) A statement that the servicer has received the hazard insurance 
information that the borrower provided;
    (D) A statement that requests the borrower to provide the 
information that is missing;
    (E) A statement that the borrower will be charged for insurance the 
servicer has purchased or purchases for the period of time during which 
the servicer is unable to verify coverage;
    (3) Format. A servicer must set the information required by 
paragraphs (d)(2)(i)(B) and (D) of this section in bold text. The 
requirements of paragraph (c)(3) of this section apply to the 
information required by paragraph (d)(2)(i)(C) of this section. A 
servicer may use form MS-3B in appendix MS-3 of this part to comply with 
the requirements of paragraphs (d)(1) and (d)(2)(i) of this section. A 
servicer may use form MS-3C in appendix MS-3 of this part to comply with 
the requirements of paragraphs (d)(1) and (d)(2)(ii) of this section.
    (4) Additional information. Except for the borrower's mortgage loan 
account number, a servicer may not include any information other than 
information required by paragraph (d)(2)(i) or (ii) of this section, as 
applicable, in the written notice required by paragraph (c)(1)(ii) of 
this section. However, a servicer may provide such additional 
information to a borrower on separate pieces of paper in the same 
transmittal.
    (5) Updating notice with borrower information. If a servicer 
receives new information about a borrower's hazard insurance after a 
written notice required by paragraph (c)(1)(ii) of this section has been 
put into production, the servicer is not required to update such notice 
based on the new information so long as the notice was put into 
production a reasonable time prior to the servicer delivering the notice 
to the borrower or placing the notice in the mail.
    (e) Renewing or replacing force-placed insurance--(1) In general. 
Before a servicer assesses on a borrower a premium charge or fee related 
to renewing or replacing existing force-placed insurance, a servicer 
must:
    (i) Deliver to the borrower or place in the mail a written notice 
containing the information set forth in paragraph (e)(2) of this section 
at least 45 days before assessing on a borrower such charge or fee; and
    (ii) By the end of the 45-day period beginning on the date the 
written notice required by paragraph (e)(1)(i) of this section was 
delivered to the borrower or placed in the mail, not have received, from 
the borrower or otherwise, evidence demonstrating that the borrower has 
purchased hazard insurance coverage that complies with the loan 
contract's requirements to maintain hazard insurance.
    (iii) Charging a borrower before end of notice period. 
Notwithstanding paragraphs (e)(1)(i) and (ii) of this section, if not 
prohibited by State or other applicable law, if a servicer has renewed 
or replaced existing force-placed insurance and receives evidence 
demonstrating that the borrower lacked insurance coverage for some 
period of time following the expiration of the existing force-placed 
insurance (including during the notice period prescribed by paragraph 
(e)(1) of this section), the servicer may, promptly upon receiving such 
evidence, assess on the borrower a premium charge or fee related to 
renewing or replacing existing force-placed insurance for that period of 
time.
    (2) Content of renewal notice. The notice required by paragraph 
(e)(1)(i) of this section shall set forth the following information:
    (i) The date of the notice;
    (ii) The servicer's name and mailing address;
    (iii) The borrower's name and mailing address;
    (iv) A statement that requests the borrower to update the hazard 
insurance information for the borrower's property and identifies the 
borrower's property by its physical address;
    (v) A statement that the servicer previously purchased insurance on 
the borrower's property and assessed the cost of the insurance to the 
borrower because the servicer did not have evidence that the borrower 
had hazard insurance coverage for the property;
    (vi) A statement that:
    (A) The insurance the servicer purchased previously has expired or 
is expiring, as applicable; and

[[Page 714]]

    (B) Because hazard insurance is required on the borrower's property, 
the servicer intends to maintain insurance on the property by renewing 
or replacing the insurance it previously purchased;
    (vii) A statement informing the borrower:
    (A) That insurance the servicer purchases may cost significantly 
more than hazard insurance purchased by the borrower;
    (B) That such insurance may not provide as much coverage as hazard 
insurance purchased by the borrower; and
    (C) The cost of the force-placed insurance, stated as an annual 
premium, except if a servicer does not know the cost of force-placed 
insurance, a reasonable estimate shall be disclosed and identified as 
such.
    (viii) A statement that if the borrower purchases hazard insurance, 
the borrower should promptly provide the servicer with insurance 
information.
    (ix) A description of the requested insurance information and how 
the borrower may provide such information, and if applicable, a 
statement that the requested information must be in writing;
    (x) The servicer's telephone number for borrower inquiries; and
    (xi) If applicable, a statement advising a borrower to review 
additional information provided in the same transmittal.
    (3) Format. A servicer must set the information required by 
paragraphs (e)(2)(iv), (vi)(B), and (vii)(A) through (C) of this section 
in bold text, except that the information about the physical address of 
the borrower's property required by paragraph (e)(2)(iv) may be set in 
regular text. A servicer may use form MS-3D in appendix MS-3 of this 
part to comply with the requirements of paragraphs (e)(1)(i) and (2) of 
this section.
    (4) Additional information. Except for the borrower's mortgage loan 
account number, a servicer may not include any information other than 
information required by paragraph (e)(2) of this section in the written 
notice required by paragraph (e)(1) of this section. However, a servicer 
may provide such additional information to a borrower on separate pieces 
of paper in the same transmittal.
    (5) Frequency of renewal notices. Before each anniversary of a 
servicer purchasing force-placed insurance on a borrower's property, the 
servicer shall deliver to the borrower or place in the mail the written 
notice required by paragraph (e)(1) of this section. A servicer is not 
required to provide the written notice required by paragraph (e)(1) of 
this section more than once a year.
    (f) Mailing the notices. If a servicer mails a written notice 
required by paragraphs (c)(1)(i), (c)(1)(ii), or (e)(1) of this section, 
the servicer must use a class of mail not less than first-class mail.
    (g) Cancellation of force-placed insurance. Within 15 days of 
receiving, from the borrower or otherwise, evidence demonstrating that 
the borrower has had in place hazard insurance coverage that complies 
with the loan contract's requirements to maintain hazard insurance, a 
servicer must:
    (1) Cancel the force-placed insurance the servicer purchased to 
insure the borrower's property; and
    (2) Refund to such borrower all force-placed insurance premium 
charges and related fees paid by such borrower for any period of 
overlapping insurance coverage and remove from the borrower's account 
all force-placed insurance charges and related fees for such period that 
the servicer has assessed to the borrower.
    (h) Limitations on force-placed insurance charges--(1) In general. 
Except for charges subject to State regulation as the business of 
insurance and charges authorized by the Flood Disaster Protection Act of 
1973, all charges related to force-placed insurance assessed to a 
borrower by or through the servicer must be bona fide and reasonable.
    (2) Bona fide and reasonable charge. A bona fide and reasonable 
charge is a charge for a service actually performed that bears a 
reasonable relationship to the servicer's cost of providing the service, 
and is not otherwise prohibited by applicable law.
    (i) Relationship to Flood Disaster Protection Act of 1973. If 
permitted by regulation under section 102(e) of the Flood Disaster 
Protection Act of 1973, a

[[Page 715]]

servicer subject to the requirements of this section may deliver to the 
borrower or place in the mail any notice required by this section and 
the notice required by section 102(e) of the Flood Disaster Protection 
Act of 1973 on separate pieces of paper in the same transmittal.

[78 FR 10876, Feb. 14, 2013, as amended at 81 FR 72372, Oct. 19, 2016]



Sec.  1024.38  General servicing policies, procedures, and requirements.

    (a) Reasonable policies and procedures. A servicer shall maintain 
policies and procedures that are reasonably designed to achieve the 
objectives set forth in paragraph (b) of this section.
    (b) Objectives--(1) Accessing and providing timely and accurate 
information. The policies and procedures required by paragraph (a) of 
this section shall be reasonably designed to ensure that the servicer 
can:
    (i) Provide accurate and timely disclosures to a borrower as 
required by this subpart or other applicable law;
    (ii) Investigate, respond to, and, as appropriate, make corrections 
in response to complaints asserted by a borrower;
    (iii) Provide a borrower with accurate and timely information and 
documents in response to the borrower's requests for information with 
respect to the borrower's mortgage loan;
    (iv) Provide owners or assignees of mortgage loans with accurate and 
current information and documents about all mortgage loans they own;
    (v) Submit documents or filings required for a foreclosure process, 
including documents or filings required by a court of competent 
jurisdiction, that reflect accurate and current information and that 
comply with applicable law; and
    (vi)(A) Upon receiving notice of the death of a borrower or of any 
transfer of the property securing a mortgage loan, promptly facilitate 
communication with any potential or confirmed successors in interest 
regarding the property;
    (B) Upon receiving notice of the existence of a potential successor 
in interest, promptly determine the documents the servicer reasonably 
requires to confirm that person's identity and ownership interest in the 
property and promptly provide to the potential successor in interest a 
description of those documents and how the person may submit a written 
request under Sec.  1024.36(i) (including the appropriate address); and
    (C) Upon the receipt of such documents, promptly make a confirmation 
determination and promptly notify the person, as applicable, that the 
servicer has confirmed the person's status, has determined that 
additional documents are required (and what those documents are), or has 
determined that the person is not a successor in interest.
    (2) Properly evaluating loss mitigation applications. The policies 
and procedures required by paragraph (a) of this section shall be 
reasonably designed to ensure that the servicer can:
    (i) Provide accurate information regarding loss mitigation options 
available to a borrower from the owner or assignee of the borrower's 
mortgage loan;
    (ii) Identify with specificity all loss mitigation options for which 
borrowers may be eligible pursuant to any requirements established by an 
owner or assignee of the borrower's mortgage loan;
    (iii) Provide prompt access to all documents and information 
submitted by a borrower in connection with a loss mitigation option to 
servicer personnel that are assigned to assist the borrower pursuant to 
Sec.  1024.40;
    (iv) Identify documents and information that a borrower is required 
to submit to complete a loss mitigation application and facilitate 
compliance with the notice required pursuant to Sec.  
1024.41(b)(2)(i)(B); and
    (v) Properly evaluate a borrower who submits an application for a 
loss mitigation option for all loss mitigation options for which the 
borrower may be eligible pursuant to any requirements established by the 
owner or assignee of the borrower's mortgage loan and, where applicable, 
in accordance with the requirements of Sec.  1024.41.
    (vi) Promptly identify and obtain documents or information not in 
the

[[Page 716]]

borrower's control that the servicer requires to determine which loss 
mitigation options, if any, to offer the borrower in accordance with the 
requirements of Sec.  1024.41(c)(4).
    (3) Facilitating oversight of, and compliance by, service providers. 
The policies and procedures required by paragraph (a) of this section 
shall be reasonably designed to ensure that the servicer can:
    (i) Provide appropriate servicer personnel with access to accurate 
and current documents and information reflecting actions performed by 
service providers;
    (ii) Facilitate periodic reviews of service providers, including by 
providing appropriate servicer personnel with documents and information 
necessary to audit compliance by service providers with the servicer's 
contractual obligations and applicable law; and
    (iii) Facilitate the sharing of accurate and current information 
regarding the status of any evaluation of a borrower's loss mitigation 
application and the status of any foreclosure proceeding among 
appropriate servicer personnel, including any personnel assigned to a 
borrower's mortgage loan account as described in Sec.  1024.40, and 
appropriate service provider personnel, including service provider 
personnel responsible for handling foreclosure proceedings.
    (4) Facilitating transfer of information during servicing transfers. 
The policies and procedures required by paragraph (a) of this section 
shall be reasonably designed to ensure that the servicer can:
    (i) As a transferor servicer, timely transfer all information and 
documents in the possession or control of the servicer relating to a 
transferred mortgage loan to a transferee servicer in a form and manner 
that ensures the accuracy of the information and documents transferred 
and that enables a transferee servicer to comply with the terms of the 
transferee servicer's obligations to the owner or assignee of the 
mortgage loan and applicable law; and
    (ii) As a transferee servicer, identify necessary documents or 
information that may not have been transferred by a transferor servicer 
and obtain such documents from the transferor servicer.
    (iii) For the purposes of this paragraph (b)(4), transferee servicer 
means a servicer, including a master servicer or a subservicer, that 
performs or will perform servicing of a mortgage loan and transferor 
servicer means a servicer, including a master servicer or a subservicer, 
that transfers or will transfer the servicing of a mortgage loan.
    (5) Informing borrowers of the written error resolution and 
information request procedures. The policies and procedures required by 
paragraph (a) of this section shall be reasonably designed to ensure 
that the servicer informs borrowers of the procedures for submitting 
written notices of error set forth in Sec.  1024.35 and written 
information requests set forth in Sec.  1024.36.
    (c) Standard requirements--(1) Record retention. A servicer shall 
retain records that document actions taken with respect to a borrower's 
mortgage loan account until one year after the date a mortgage loan is 
discharged or servicing of a mortgage loan is transferred by the 
servicer to a transferee servicer.
    (2) Servicing file. A servicer shall maintain the following 
documents and data on each mortgage loan account serviced by the 
servicer in a manner that facilitates compiling such documents and data 
into a servicing file within five days:
    (i) A schedule of all transactions credited or debited to the 
mortgage loan account, including any escrow account as defined in Sec.  
1024.17(b) and any suspense account;
    (ii) A copy of the security instrument that establishes the lien 
securing the mortgage loan;
    (iii) Any notes created by servicer personnel reflecting 
communications with the borrower about the mortgage loan account;
    (iv) To the extent applicable, a report of the data fields relating 
to the borrower's mortgage loan account created by the servicer's 
electronic systems in connection with servicing practices; and
    (v) Copies of any information or documents provided by the borrower 
to the servicer in accordance with the

[[Page 717]]

procedures set forth in Sec.  1024.35 or Sec.  1024.41.

[78 FR 10876, Feb. 14, 2013, as amended at 81 FR 72372, Oct. 19, 2016]



Sec.  1024.39  Early intervention requirements for certain borrowers.

    (a) Live contact. Except as otherwise provided in this section, a 
servicer shall establish or make good faith efforts to establish live 
contact with a delinquent borrower no later than the 36th day of a 
borrower's delinquency and again no later than 36 days after each 
payment due date so long as the borrower remains delinquent. Promptly 
after establishing live contact with a borrower, the servicer shall 
inform the borrower about the availability of loss mitigation options, 
if appropriate, and take the actions described in paragraph (e) of this 
section, if applicable.
    (b) Written notice--(1) Notice required. Except as otherwise 
provided in this section, a servicer shall provide to a delinquent 
borrower a written notice with the information set forth in paragraph 
(b)(2) of this section no later than the 45th day of the borrower's 
delinquency and again no later than 45 days after each payment due date 
so long as the borrower remains delinquent. A servicer is not required 
to provide the written notice, however, more than once during any 180-
day period. If a borrower is 45 days or more delinquent at the end of 
any 180-day period after the servicer has provided the written notice, a 
servicer must provide the written notice again no later than 180 days 
after the provision of the prior written notice. If a borrower is less 
than 45 days delinquent at the end of any 180-day period after the 
servicer has provided the written notice, a servicer must provide the 
written notice again no later than 45 days after the payment due date 
for which the borrower remains delinquent.
    (2) Content of the written notice. The notice required by paragraph 
(b)(1) of this section shall include:
    (i) A statement encouraging the borrower to contact the servicer;
    (ii) The telephone number to access servicer personnel assigned 
pursuant to Sec.  1024.40(a) and the servicer's mailing address;
    (iii) If applicable, a statement providing a brief description of 
examples of loss mitigation options that may be available from the 
servicer;
    (iv) If applicable, either application instructions or a statement 
informing the borrower how to obtain more information about loss 
mitigation options from the servicer; and
    (v) The Web site to access either the Bureau list or the HUD list of 
homeownership counselors or counseling organizations, and the HUD toll-
free telephone number to access homeownership counselors or counseling 
organizations.
    (3) Model clauses. Model clauses MS-4(A), MS-4(B), and MS-4(C), in 
appendix MS-4 to this part may be used to comply with the requirements 
of this paragraph (b).
    (c) Borrowers in bankruptcy--(1) Partial exemption. While any 
borrower on a mortgage loan is a debtor in bankruptcy under title 11 of 
the United States Code, a servicer, with regard to that mortgage loan:
    (i) Is exempt from the requirements of paragraph (a) of this 
section;
    (ii) Is exempt from the requirements of paragraph (b) of this 
section if no loss mitigation option is available, or if any borrower on 
the mortgage loan has provided a notification pursuant to the Fair Debt 
Collection Practices Act (FDCPA) section 805(c) (15 U.S.C. 1692c(c)) 
with respect to that mortgage loan as referenced in paragraph (d) of 
this section; and
    (iii) If the conditions of paragraph (c)(1)(ii) of this section are 
not met, must comply with the requirements of paragraph (b) of this 
section, as modified by this paragraph (c)(1)(iii):
    (A) If a borrower is delinquent when the borrower becomes a debtor 
in bankruptcy, a servicer must provide the written notice required by 
paragraph (b) of this section not later than the 45th day after the 
borrower files a bankruptcy petition under title 11 of the United States 
Code. If the borrower is not delinquent when the borrower files a 
bankruptcy petition, but subsequently becomes delinquent while a debtor 
in bankruptcy, the servicer must provide the written notice not later 
than the 45th day of the borrower's delinquency. A servicer must

[[Page 718]]

comply with these timing requirements regardless of whether the servicer 
provided the written notice in the preceding 180-day period.
    (B) The written notice required by paragraph (b) of this section may 
not contain a request for payment.
    (C) A servicer is not required to provide the written notice 
required by paragraph (b) of this section more than once during a single 
bankruptcy case.
    (2) Resuming compliance. (i) Except as provided in paragraph 
(c)(2)(ii) of this section, a servicer that was exempt from paragraphs 
(a) and (b) of this section pursuant to paragraph (c)(1) of this section 
must resume compliance with paragraphs (a) and (b) of this section after 
the next payment due date that follows the earliest of the following 
events:
    (A) The bankruptcy case is dismissed;
    (B) The bankruptcy case is closed; and
    (C) The borrower reaffirms personal liability for the mortgage loan.
    (ii) With respect to a mortgage loan for which the borrower has 
discharged personal liability pursuant to 11 U.S.C. 727, 1141, 1228, or 
1328, a servicer:
    (A) Is not required to resume compliance with paragraph (a) of this 
section; and
    (B) Must resume compliance with paragraph (b) of this section if the 
borrower has made any partial or periodic payment on the mortgage loan 
after the commencement of the borrower's bankruptcy case.
    (d) Fair Debt Collection Practices Act--partial exemption. With 
regard to a mortgage loan for which any borrower has provided a 
notification pursuant to the Fair Debt Collection Practices Act (FDCPA) 
section 805(c) (15 U.S.C. 1692c(c)), a servicer subject to the FDCPA 
with respect to that borrower's loan:
    (1) Is exempt from the requirements of paragraph (a) of this 
section;
    (2) Is exempt from the requirements of paragraph (b) of this section 
if no loss mitigation option is available, or while any borrower on that 
mortgage loan is a debtor in bankruptcy under title 11 of the United 
States Code as referenced in paragraph (c) of this section; and
    (3) If the conditions of paragraph (d)(2) of this section are not 
met, must comply with the requirements of paragraph (b) of this section, 
as modified by this paragraph (d)(3):
    (i) In addition to the information required pursuant to paragraph 
(b)(2) of this section, the written notice must include a statement that 
the servicer may or intends to invoke its specified remedy of 
foreclosure. Model clause MS-4(D) in appendix MS-4 to this part may be 
used to comply with this requirement.
    (ii) The written notice may not contain a request for payment.
    (iii) A servicer is prohibited from providing the written notice 
more than once during any 180-day period. If a borrower is 45 days or 
more delinquent at the end of any 180-day period after the servicer has 
provided the written notice, a servicer must provide the written notice 
again no later than 190 days after the provision of the prior written 
notice. If a borrower is less than 45 days delinquent at the end of any 
180-day period after the servicer has provided the written notice, a 
servicer must provide the written notice again no later than 45 days 
after the payment due date for which the borrower remains delinquent or 
190 days after the provision of the prior written notice, whichever is 
later.
    (e) Temporary COVID-19-related live contact. Until October 1, 2022, 
in complying with the requirements described in paragraph (a) of this 
section, promptly after establishing live contact with a borrower the 
servicer shall take the following actions:
    (1) Borrowers not in forbearance programs at the time of live 
contact. At the time the servicer establishes live contact pursuant to 
paragraph (a) of this section, if the borrower is not in a forbearance 
program and the owner or assignee of the borrower's mortgage loan makes 
a forbearance program available to borrowers experiencing a COVID-19-
related hardship, the servicer shall inform the borrower of the 
following information:
    (i) That forbearance programs are available for borrowers 
experiencing a COVID-19-related hardship and, unless the borrower states 
that they are not interested in receiving information

[[Page 719]]

about such programs, the servicer shall list and briefly describe to the 
borrower any such forbearance programs made available at that time and 
the actions the borrower must take to be evaluated for such forbearance 
programs.
    (ii) At least one way that the borrower can find contact information 
for homeownership counseling services, such as referencing the 
borrower's periodic statement.
    (2) Borrowers in forbearance programs at the time of live contact. 
If the borrower is in a forbearance program made available to borrowers 
experiencing a COVID-19-related hardship, during the live contact 
established pursuant to paragraph (a) of this section that occurs at 
least 10 days and no more than 45 days before the scheduled end of the 
forbearance program or, if the scheduled end date of the forbearance 
program occurs between August 31, 2021 and September 10, 2021, during 
the first live contact made pursuant paragraph (a) of this section after 
August 31, 2021, the servicer shall inform the borrower of the following 
information:
    (i) The date the borrower's current forbearance program is scheduled 
to end;
    (ii) A list and brief description of each of the types of 
forbearance extension, repayment options, and other loss mitigation 
options made available to the borrower by the owner or assignee of the 
borrower's mortgage loan at the time of the live contact, and the 
actions the borrower must take to be evaluated for such loss mitigation 
options; and
    (iii) At least one way that the borrower can find contact 
information for homeownership counseling services, such as referencing 
the borrower's periodic statement.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 78 
FR 63004, Oct. 23, 2013; 81 FR 72373, Oct. 19, 2016; 82 FR 47957, Oct. 
16, 2017; 86 FR 34899, June 30, 2021]



Sec.  1024.40  Continuity of contact.

    (a) In general. A servicer shall maintain policies and procedures 
that are reasonably designed to achieve the following objectives:
    (1) Assign personnel to a delinquent borrower by the time the 
servicer provides the borrower with the written notice required by Sec.  
1024.39(b), but in any event, not later than the 45th day of the 
borrower's delinquency.
    (2) Make available to a delinquent borrower, via telephone, 
personnel assigned to the borrower as described in paragraph (a)(1) of 
this section to respond to the borrower's inquiries, and as applicable, 
assist the borrower with available loss mitigation options until the 
borrower has made, without incurring a late charge, two consecutive 
mortgage payments in accordance with the terms of a permanent loss 
mitigation agreement.
    (3) If a borrower contacts the personnel assigned to the borrower as 
described in paragraph (a)(1) of this section and does not immediately 
receive a live response from such personnel, ensure that the servicer 
can provide a live response in a timely manner.
    (b) Functions of servicer personnel. A servicer shall maintain 
policies and procedures reasonably designed to ensure that servicer 
personnel assigned to a delinquent borrower as described in paragraph 
(a) of this section perform the following functions:
    (1) Provide the borrower with accurate information about:
    (i) Loss mitigation options available to the borrower from the owner 
or assignee of the borrower's mortgage loan;
    (ii) Actions the borrower must take to be evaluated for such loss 
mitigation options, including actions the borrower must take to submit a 
complete loss mitigation application, as defined in Sec.  1024.41, and, 
if applicable, actions the borrower must take to appeal the servicer's 
determination to deny a borrower's loss mitigation application for any 
trial or permanent loan modification program offered by the servicer;
    (iii) The status of any loss mitigation application that the 
borrower has submitted to the servicer;
    (iv) The circumstances under which the servicer may make a referral 
to foreclosure; and
    (v) Applicable loss mitigation deadlines established by an owner or 
assignee of the borrower's mortgage loan or Sec.  1024.41.
    (2) Retrieve, in a timely manner:

[[Page 720]]

    (i) A complete record of the borrower's payment history; and
    (ii) All written information the borrower has provided to the 
servicer, and if applicable, to prior servicers, in connection with a 
loss mitigation application;
    (3) Provide the documents and information identified in paragraph 
(b)(2) of this section to other persons required to evaluate a borrower 
for loss mitigation options made available by the servicer, if 
applicable; and
    (4) Provide a delinquent borrower with information about the 
procedures for submitting a notice of error pursuant to Sec.  1024.35 or 
an information request pursuant to Sec.  1024.36.



Sec.  1024.41  Loss mitigation procedures.

    (a) Enforcement and limitations. A borrower may enforce the 
provisions of this section pursuant to section 6(f) of RESPA (12 U.S.C. 
2605(f)). Nothing in Sec.  1024.41 imposes a duty on a servicer to 
provide any borrower with any specific loss mitigation option. Nothing 
in Sec.  1024.41 should be construed to create a right for a borrower to 
enforce the terms of any agreement between a servicer and the owner or 
assignee of a mortgage loan, including with respect to the evaluation 
for, or offer of, any loss mitigation option or to eliminate any such 
right that may exist pursuant to applicable law.
    (b) Receipt of a loss mitigation application--(1) Complete loss 
mitigation application. A complete loss mitigation application means an 
application in connection with which a servicer has received all the 
information that the servicer requires from a borrower in evaluating 
applications for the loss mitigation options available to the borrower. 
A servicer shall exercise reasonable diligence in obtaining documents 
and information to complete a loss mitigation application.
    (2) Review of loss mitigation application submission--(i) 
Requirements. If a servicer receives a loss mitigation application 45 
days or more before a foreclosure sale, a servicer shall:
    (A) Promptly upon receipt of a loss mitigation application, review 
the loss mitigation application to determine if the loss mitigation 
application is complete; and
    (B) Notify the borrower in writing within 5 days (excluding legal 
public holidays, Saturdays, and Sundays) after receiving the loss 
mitigation application that the servicer acknowledges receipt of the 
loss mitigation application and that the servicer has determined that 
the loss mitigation application is either complete or incomplete. If a 
loss mitigation application is incomplete, the notice shall state the 
additional documents and information the borrower must submit to make 
the loss mitigation application complete and the applicable date 
pursuant to paragraph (b)(2)(ii) of this section. The notice to the 
borrower shall include a statement that the borrower should consider 
contacting servicers of any other mortgage loans secured by the same 
property to discuss available loss mitigation options.
    (ii) Time period disclosure. The notice required pursuant to 
paragraph (b)(2)(i)(B) of this section must include a reasonable date by 
which the borrower should submit the documents and information necessary 
to make the loss mitigation application complete.
    (3) Determining protections. To the extent a determination of 
whether protections under this section apply to a borrower is made on 
the basis of the number of days between when a complete loss mitigation 
application is received and when a foreclosure sale occurs, such 
determination shall be made as of the date a complete loss mitigation 
application is received.
    (c) Evaluation of loss mitigation applications--(1) Complete loss 
mitigation application. Except as provided in paragraph (c)(4)(ii) of 
this section, if a servicer receives a complete loss mitigation 
application more than 37 days before a foreclosure sale, then, within 30 
days of receiving the complete loss mitigation application, a servicer 
shall:
    (i) Evaluate the borrower for all loss mitigation options available 
to the borrower; and
    (ii) Provide the borrower with a notice in writing stating the 
servicer's determination of which loss mitigation options, if any, it 
will offer to the borrower on behalf of the owner or assignee of the 
mortgage. The servicer shall include in this notice the amount

[[Page 721]]

of time the borrower has to accept or reject an offer of a loss 
mitigation program as provided for in paragraph (e) of this section, if 
applicable, and a notification, if applicable, that the borrower has the 
right to appeal the denial of any loan modification option as well as 
the amount of time the borrower has to file such an appeal and any 
requirements for making an appeal, as provided for in paragraph (h) of 
this section.
    (2) Incomplete loss mitigation application evaluation--(i) In 
general. Except as set forth in paragraphs (c)(2)(ii), (iii), (v), and 
(vi) of this section, a servicer shall not evade the requirement to 
evaluate a complete loss mitigation application for all loss mitigation 
options available to the borrower by offering a loss mitigation option 
based upon an evaluation of any information provided by a borrower in 
connection with an incomplete loss mitigation application.
    (ii) Reasonable time. Notwithstanding paragraph (c)(2)(i) of this 
section, if a servicer has exercised reasonable diligence in obtaining 
documents and information to complete a loss mitigation application, but 
a loss mitigation application remains incomplete for a significant 
period of time under the circumstances without further progress by a 
borrower to make the loss mitigation application complete, a servicer 
may, in its discretion, evaluate an incomplete loss mitigation 
application and offer a borrower a loss mitigation option. Any such 
evaluation and offer is not subject to the requirements of this section 
and shall not constitute an evaluation of a single complete loss 
mitigation application for purposes of paragraph (i) of this section.
    (iii) Short-term loss mitigation options. Notwithstanding paragraph 
(c)(2)(i) of this section, a servicer may offer a short-term payment 
forbearance program or a short-term repayment plan to a borrower based 
upon an evaluation of an incomplete loss mitigation application. 
Promptly after offering a payment forbearance program or a repayment 
plan under this paragraph (c)(2)(iii), unless the borrower has rejected 
the offer, the servicer must provide the borrower a written notice 
stating the specific payment terms and duration of the program or plan, 
that the servicer offered the program or plan based on an evaluation of 
an incomplete application, that other loss mitigation options may be 
available, and that the borrower has the option to submit a complete 
loss mitigation application to receive an evaluation for all loss 
mitigation options available to the borrower regardless of whether the 
borrower accepts the program or plan. A servicer shall not make the 
first notice or filing required by applicable law for any judicial or 
non-judicial foreclosure process, and shall not move for foreclosure 
judgment or order of sale or conduct a foreclosure sale, if a borrower 
is performing pursuant to the terms of a payment forbearance program or 
repayment plan offered pursuant to this paragraph (c)(2)(iii). A 
servicer may offer a short-term payment forbearance program in 
conjunction with a short-term repayment plan pursuant to this paragraph 
(c)(2)(iii).
    (iv) Facially complete application. A loss mitigation application 
shall be considered facially complete when a borrower submits all the 
missing documents and information as stated in the notice required under 
paragraph (b)(2)(i)(B) of this section, when no additional information 
is requested in such notice, or once the servicer is required to provide 
the borrower a written notice pursuant to paragraph (c)(3)(i) of this 
section. If the servicer later discovers that additional information or 
corrections to a previously submitted document are required to complete 
the application, the servicer must promptly request the missing 
information or corrected documents and treat the application as complete 
for the purposes of paragraphs (f)(2) and (g) of this section until the 
borrower is given a reasonable opportunity to complete the application. 
If the borrower completes the application within this period, the 
application shall be considered complete as of the date it first became 
facially complete, for the purposes of paragraphs (d), (e), (f)(2), (g), 
and (h) of this section, and as of the date the application was actually 
complete for the purposes of this paragraph (c). A servicer that 
complies with this paragraph (c)(2)(iv) will be deemed to have fulfilled 
its obligation to provide

[[Page 722]]

an accurate notice under paragraph (b)(2)(i)(B) of this section.
    (v) Certain COVID-19-related loss mitigation options. (A) 
Notwithstanding paragraph (c)(2)(i) of this section, a servicer may 
offer a borrower a loss mitigation option based upon evaluation of an 
incomplete application, provided that all of the following criteria are 
met:
    (1) The loss mitigation option permits the borrower to delay paying 
covered amounts until the mortgage loan is refinanced, the mortgaged 
property is sold, the term of the mortgage loan ends, or, for a mortgage 
loan insured by the Federal Housing Administration, the mortgage 
insurance terminates. For purposes of this paragraph (c)(2)(v)(A)(1), 
``covered amounts'' includes, without limitation, all principal and 
interest payments forborne under a payment forbearance program made 
available to borrowers experiencing a COVID-19-related hardship, 
including a payment forbearance program made pursuant to the Coronavirus 
Economic Stabilization Act, section 4022 (15 U.S.C. 9056); it also 
includes, without limitation, all other principal and interest payments 
that are due and unpaid by a borrower experiencing a COVID-19-related 
hardship. For purposes of this paragraph (c)(2)(v)(A)(1), ``the term of 
the mortgage loan'' means the term of the mortgage loan according to the 
obligation between the parties in effect when the borrower is offered 
the loss mitigation option.
    (2) Any amounts that the borrower may delay paying as described in 
paragraph (c)(2)(v)(A)(1) of this section do not accrue interest; the 
servicer does not charge any fee in connection with the loss mitigation 
option; and the servicer waives all existing late charges, penalties, 
stop payment fees, or similar charges promptly upon the borrower's 
acceptance of the loss mitigation option.
    (3) The borrower's acceptance of an offer made pursuant to paragraph 
(c)(2)(v)(A) of this section ends any pre-existing delinquency on the 
mortgage loan.
    (B) Once the borrower accepts an offer made pursuant to paragraph 
(c)(2)(v)(A) of this section, the servicer is not required to comply 
with paragraph (b)(1) or (2) of this section with regard to any loss 
mitigation application the borrower submitted prior to the servicer's 
offer of the loss mitigation option described in paragraph (c)(2)(v)(A) 
of this section.
    (vi) Certain COVID-19-related loan modification options. (A) 
Notwithstanding paragraph (c)(2)(i) of this section, a servicer may 
offer a borrower a loan modification based upon evaluation of an 
incomplete application, provided that all of the following criteria are 
met:
    (1) The loan modification extends the term of the loan by no more 
than 480 months from the date the loan modification is effective and, 
for the entire modified term, does not cause the borrower's monthly 
required principal and interest payment to increase beyond the monthly 
principal and interest payment required prior to the loan modification.
    (2) If the loan modification permits the borrower to delay paying 
certain amounts until the mortgage loan is refinanced, the mortgaged 
property is sold, the loan modification matures, or, for a mortgage loan 
insured by the Federal Housing Administration, the mortgage insurance 
terminates, those amounts do not accrue interest.
    (3) The loan modification is made available to borrowers 
experiencing a COVID-19-related hardship.
    (4) Either the borrower's acceptance of an offer pursuant to this 
paragraph (c)(2)(vi)(A) ends any preexisting delinquency on the mortgage 
loan or the loan modification offered pursuant to this paragraph 
(c)(2)(vi)(A) is designed to end any preexisting delinquency on the 
mortgage loan upon the borrower satisfying the servicer's requirements 
for completing a trial loan modification plan and accepting a permanent 
loan modification.
    (5) The servicer does not charge any fee in connection with the loan 
modification, and the servicer waives all existing late charges, 
penalties, stop payment fees, or similar charges that were incurred on 
or after March 1, 2020, promptly upon the borrower's acceptance of the 
loan modification.
    (B) Once the borrower accepts an offer made pursuant to paragraph

[[Page 723]]

(c)(2)(vi)(A) of this section, the servicer is not required to comply 
with paragraph (b)(1) or (2) of this section with regard to any loss 
mitigation application the borrower submitted prior to the servicer's 
offer of the loan modification described in paragraph (c)(2)(vi)(A) of 
this section. However, if the borrower fails to perform under a trial 
loan modification plan offered pursuant to paragraph (c)(2)(vi)(A) of 
this section or requests further assistance, the servicer must 
immediately resume reasonable diligence efforts as required under 
paragraph (b)(1) of this section with regard to any loss mitigation 
application the borrower submitted prior to the servicer's offer of the 
trial loan modification plan and must provide the borrower with the 
notice required by paragraph (b)(2)(i)(B) of this section with regard to 
the most recent loss mitigation application the borrower submitted prior 
to the servicer's offer of the loan modification described in paragraph 
(c)(2)(vi)(A) of this section, unless the servicer has already provided 
such notice to the borrower.
    (3) Notice of complete application. (i) Except as provided in 
paragraph (c)(3)(ii) of this section, within 5 days (excluding legal 
public holidays, Saturdays, and Sundays) after receiving a borrower's 
complete loss mitigation application, a servicer shall provide the 
borrower a written notice that sets forth the following information:
    (A) That the loss mitigation application is complete;
    (B) The date the servicer received the complete application;
    (C) That the servicer expects to complete its evaluation within 30 
days of the date it received the complete application;
    (D) That the borrower is entitled to certain foreclosure protections 
because the servicer has received the complete application, and, as 
applicable, either:
    (1) If the servicer has not made the first notice or filing required 
by applicable law for any judicial or non-judicial foreclosure process, 
that the servicer cannot make the first notice or filing required to 
commence or initiate the foreclosure process under applicable law before 
evaluating the borrower's complete application; or
    (2) If the servicer has made the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process, 
that the servicer has begun the foreclosure process, and that the 
servicer cannot conduct a foreclosure sale before evaluating the 
borrower's complete application;
    (E) That the servicer may need additional information at a later 
date to evaluate the application, in which case the servicer will 
request that information from the borrower and give the borrower a 
reasonable opportunity to submit it, the evaluation process may take 
longer, and the foreclosure protections could end if the servicer does 
not receive the information as requested; and
    (F) That the borrower may be entitled to additional protections 
under State or Federal law.
    (ii) A servicer is not required to provide a notice pursuant to 
paragraph (c)(3)(i) of this section if:
    (A) The servicer has already provided the borrower a notice under 
paragraph (b)(2)(i)(B) of this section informing the borrower that the 
application is complete and the servicer has not subsequently requested 
additional information or a corrected version of a previously submitted 
document from the borrower pursuant to paragraph (c)(2)(iv) of this 
section;
    (B) The application was not complete or facially complete more than 
37 days before a foreclosure sale; or
    (C) The servicer has already provided the borrower a notice 
regarding the application under paragraph (c)(1)(ii) of this section.
    (4) Information not in the borrower's control--(i) Reasonable 
diligence. If a servicer requires documents or information not in the 
borrower's control to determine which loss mitigation options, if any, 
it will offer to the borrower, the servicer must exercise reasonable 
diligence in obtaining such documents or information.
    (ii) Effect in case of delay. (A)(1) Except as provided in paragraph 
(c)(4)(ii)(A)(2) of this section, a servicer must not deny a complete 
loss mitigation application solely because the servicer lacks required 
documents or information not in the borrower's control.

[[Page 724]]

    (2) If a servicer has exercised reasonable diligence to obtain 
required documents or information from a party other than the borrower 
or the servicer, but the servicer has been unable to obtain such 
documents or information for a significant period of time following the 
30-day period identified in paragraph (c)(1) of this section, and the 
servicer, in accordance with applicable requirements established by the 
owner or assignee of the borrower's mortgage loan, is unable to 
determine which loss mitigation options, if any, it will offer the 
borrower without such documents or information, the servicer may deny 
the application and provide the borrower with a written notice in 
accordance with paragraph (c)(1)(ii) of this section. When providing the 
written notice in accordance with paragraph (c)(1)(ii) of this section, 
the servicer must also provide the borrower with a copy of the written 
notice required by paragraph (c)(4)(ii)(B) of this section.
    (B) If a servicer is unable to make a determination within the 30-
day period identified in paragraph (c)(1) of this section as to which 
loss mitigation options, if any, it will offer to the borrower because 
the servicer lacks required documents or information from a party other 
than the borrower or the servicer, the servicer must, within such 30-day 
period or promptly thereafter, provide the borrower a written notice, 
informing the borrower:
    (1) That the servicer has not received documents or information not 
in the borrower's control that the servicer requires to determine which 
loss mitigation options, if any, it will offer to the borrower on behalf 
of the owner or assignee of the mortgage;
    (2) Of the specific documents or information that the servicer 
lacks;
    (3) That the servicer has requested such documents or information; 
and
    (4) That the servicer will complete its evaluation of the borrower 
for all available loss mitigation options promptly upon receiving the 
documents or information.
    (C) If a servicer must provide a notice required by paragraph 
(c)(4)(ii)(B) of this section, the servicer must not provide the 
borrower a written notice pursuant to paragraph (c)(1)(ii) of this 
section until the servicer receives the required documents or 
information referenced in paragraph (c)(4)(ii)(B)(2) of this section, 
except as provided in paragraph (c)(4)(ii)(A)(2) of this section. Upon 
receiving such required documents or information, the servicer must 
promptly provide the borrower with the written notice pursuant to 
paragraph (c)(1)(ii) of this section.
    (d) Denial of loan modification options. If a borrower's complete 
loss mitigation application is denied for any trial or permanent loan 
modification option available to the borrower pursuant to paragraph (c) 
of this section, a servicer shall state in the notice sent to the 
borrower pursuant to paragraph (c)(1)(ii) of this section the specific 
reason or reasons for the servicer's determination for each such trial 
or permanent loan modification option and, if applicable, that the 
borrower was not evaluated on other criteria.
    (e) Borrower response--(1) In general. Subject to paragraphs 
(e)(2)(ii) and (iii) of this section, if a complete loss mitigation 
application is received 90 days or more before a foreclosure sale, a 
servicer may require that a borrower accept or reject an offer of a loss 
mitigation option no earlier than 14 days after the servicer provides 
the offer of a loss mitigation option to the borrower. If a complete 
loss mitigation application is received less than 90 days before a 
foreclosure sale, but more than 37 days before a foreclosure sale, a 
servicer may require that a borrower accept or reject an offer of a loss 
mitigation option no earlier than 7 days after the servicer provides the 
offer of a loss mitigation option to the borrower.
    (2) Rejection--(i) In general. Except as set forth in paragraphs 
(e)(2)(ii) and (iii) of this section, a servicer may deem a borrower 
that has not accepted an offer of a loss mitigation option within the 
deadline established pursuant to paragraph (e)(1) of this section to 
have rejected the offer of a loss mitigation option.
    (ii) Trial Loan Modification Plan. A borrower who does not satisfy 
the servicer's requirements for accepting a trial loan modification 
plan, but submits the payments that would be owed pursuant to any such 
plan within the

[[Page 725]]

deadline established pursuant to paragraph (e)(1) of this section, shall 
be provided a reasonable period of time to fulfill any remaining 
requirements of the servicer for acceptance of the trial loan 
modification plan beyond the deadline established pursuant to paragraph 
(e)(1) of this section.
    (iii) Interaction with appeal process. If a borrower makes an appeal 
pursuant to paragraph (h) of this section, the borrower's deadline for 
accepting a loss mitigation option offered pursuant to paragraph 
(c)(1)(ii) of this section shall be extended until 14 days after the 
servicer provides the notice required pursuant to paragraph (h)(4) of 
this section.
    (f) Prohibition on foreclosure referral--(1) Pre-foreclosure review 
period. A servicer shall not make the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process 
unless:
    (i) A borrower's mortgage loan obligation is more than 120 days 
delinquent;
    (ii) The foreclosure is based on a borrower's violation of a due-on-
sale clause; or
    (iii) The servicer is joining the foreclosure action of a superior 
or subordinate lienholder.
    (2) Application received before foreclosure referral. If a borrower 
submits a complete loss mitigation application during the pre-
foreclosure review period set forth in paragraph (f)(1) of this section 
or before a servicer has made the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process, a 
servicer shall not make the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process 
unless:
    (i) The servicer has sent the borrower a notice pursuant to 
paragraph (c)(1)(ii) of this section that the borrower is not eligible 
for any loss mitigation option and the appeal process in paragraph (h) 
of this section is not applicable, the borrower has not requested an 
appeal within the applicable time period for requesting an appeal, or 
the borrower's appeal has been denied;
    (ii) The borrower rejects all loss mitigation options offered by the 
servicer; or
    (iii) The borrower fails to perform under an agreement on a loss 
mitigation option.
    (3) Temporary Special COVID-19 Loss Mitigation Procedural 
Safeguards--(i) In general. To give a borrower a meaningful opportunity 
to pursue loss mitigation options, a servicer must ensure that one of 
the procedural safeguards described in paragraph (f)(3)(ii) of this 
section has been met before making the first notice or filing required 
by applicable law for any judicial or non-judicial foreclosure process 
because of a delinquency under paragraph (f)(1)(i) if:
    (A) The borrower's mortgage loan obligation became more than 120 
days delinquent on or after March 1, 2020; and
    (B) The statute of limitations applicable to the foreclosure action 
being taken in the laws of the State where the property securing the 
mortgage loan is located expires on or after January 1, 2022.
    (ii) Procedural safeguards. A procedural safeguard is met if:
    (A) Complete loss mitigation application evaluated. The borrower 
submitted a complete loss mitigation application, remained delinquent at 
all times since submitting the application, and paragraph (f)(2) of this 
section permitted the servicer to make the first notice or filing 
required for foreclosure;
    (B) Abandoned property. The property securing the mortgage loan is 
abandoned according to the laws of the State or municipality where the 
property is located when the servicer makes the first notice or filing 
required by applicable law for any judicial or non-judicial foreclosure 
process; or
    (C) Unresponsive borrower. The servicer did not receive any 
communications from the borrower for at least 90 days before the 
servicer makes the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process and all of the 
following conditions are met:
    (1) The servicer made good faith efforts to establish live contact 
with the borrower after each payment due date, as required by Sec.  
1024.39(a), during the 90-day period before the servicer makes the first 
notice or filing required by applicable law for any judicial or non-
judicial foreclosure process;

[[Page 726]]

    (2) The servicer sent the written notice required by Sec.  
1024.39(b) at least 10 days and no more than 45 days before the servicer 
makes the first notice or filing required by applicable law for any 
judicial or non-judicial foreclosure process;
    (3) The servicer sent all notices required by this section, as 
applicable, during the 90-day period before the servicer makes the first 
notice or filing required by applicable law for any judicial or non-
judicial foreclosure process; and
    (4) The borrower's forbearance program, if applicable, ended at 
least 30 days before the servicer makes the first notice or filing 
required by applicable law for any judicial or non-judicial foreclosure 
process.
    (iii) Sunset date. This paragraph (f)(3) does not apply if a 
servicer makes the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process on or after January 1, 
2022.
    (g) Prohibition on foreclosure sale. If a borrower submits a 
complete loss mitigation application after a servicer has made the first 
notice or filing required by applicable law for any judicial or non-
judicial foreclosure process but more than 37 days before a foreclosure 
sale, a servicer shall not move for foreclosure judgment or order of 
sale, or conduct a foreclosure sale, unless:
    (1) The servicer has sent the borrower a notice pursuant to 
paragraph (c)(1)(ii) of this section that the borrower is not eligible 
for any loss mitigation option and the appeal process in paragraph (h) 
of this section is not applicable, the borrower has not requested an 
appeal within the applicable time period for requesting an appeal, or 
the borrower's appeal has been denied;
    (2) The borrower rejects all loss mitigation options offered by the 
servicer; or
    (3) The borrower fails to perform under an agreement on a loss 
mitigation option.
    (h) Appeal process--(1) Appeal process required for loan 
modification denials. If a servicer receives a complete loss mitigation 
application 90 days or more before a foreclosure sale or during the 
period set forth in paragraph (f) of this section, a servicer shall 
permit a borrower to appeal the servicer's determination to deny a 
borrower's loss mitigation application for any trial or permanent loan 
modification program available to the borrower.
    (2) Deadlines. A servicer shall permit a borrower to make an appeal 
within 14 days after the servicer provides the offer of a loss 
mitigation option to the borrower pursuant to paragraph (c)(1)(ii) of 
this section.
    (3) Independent evaluation. An appeal shall be reviewed by different 
personnel than those responsible for evaluating the borrower's complete 
loss mitigation application.
    (4) Appeal determination. Within 30 days of a borrower making an 
appeal, the servicer shall provide a notice to the borrower stating the 
servicer's determination of whether the servicer will offer the borrower 
a loss mitigation option based upon the appeal and, if applicable, how 
long the borrower has to accept or reject such an offer or a prior offer 
of a loss mitigation option. A servicer may require that a borrower 
accept or reject an offer of a loss mitigation option after an appeal no 
earlier than 14 days after the servicer provides the notice to a 
borrower. A servicer's determination under this paragraph is not subject 
to any further appeal.
    (i) Duplicative requests. A servicer must comply with the 
requirements of this section for a borrower's loss mitigation 
application, unless the servicer has previously complied with the 
requirements of this section for a complete loss mitigation application 
submitted by the borrower and the borrower has been delinquent at all 
times since submitting the prior complete application.
    (j) Small servicer requirements. A small servicer shall be subject 
to the prohibition on foreclosure referral in paragraph (f)(1) of this 
section. A small servicer shall not make the first notice or filing 
required by applicable law for any judicial or non-judicial foreclosure 
process and shall not move for foreclosure judgment or order of sale, or 
conduct a foreclosure sale, if a borrower is performing pursuant to the 
terms of an agreement on a loss mitigation option.

[[Page 727]]

    (k) Servicing transfers--(1) In general--(i) Timing of compliance. 
Except as provided in paragraphs (k)(2) through (4) of this section, if 
a transferee servicer acquires the servicing of a mortgage loan for 
which a loss mitigation application is pending as of the transfer date, 
the transferee servicer must comply with the requirements of this 
section for that loss mitigation application within the timeframes that 
were applicable to the transferor servicer based on the date the 
transferor servicer received the loss mitigation application. All rights 
and protections under paragraphs (c) through (h) of this section to 
which a borrower was entitled before a transfer continue to apply 
notwithstanding the transfer.
    (ii) Transfer date defined. For purposes of this paragraph (k), the 
transfer date is the date on which the transferee servicer will begin 
accepting payments relating to the mortgage loan, as disclosed on the 
notice of transfer of loan servicing pursuant to Sec.  
1024.33(b)(4)(iv).
    (2) Acknowledgment notices--(i) Transferee servicer timeframes. If a 
transferee servicer acquires the servicing of a mortgage loan for which 
the period to provide the notice required by paragraph (b)(2)(i)(B) of 
this section has not expired as of the transfer date and the transferor 
servicer has not provided such notice, the transferee servicer must 
provide the notice within 10 days (excluding legal public holidays, 
Saturdays, and Sundays) of the transfer date.
    (ii) Prohibitions. A transferee servicer that must provide the 
notice required by paragraph (b)(2)(i)(B) of this section under this 
paragraph (k)(2):
    (A) Shall not make the first notice or filing required by applicable 
law for any judicial or non-judicial foreclosure process until a date 
that is after the reasonable date disclosed to the borrower pursuant to 
paragraph (b)(2)(ii) of this section, notwithstanding paragraph (f)(1) 
of this section. For purposes of paragraph (f)(2) of this section, a 
borrower who submits a complete loss mitigation application on or before 
the reasonable date disclosed to the borrower pursuant to paragraph 
(b)(2)(ii) of this section shall be treated as having done so during the 
pre-foreclosure review period set forth in paragraph (f)(1) of this 
section.
    (B) Shall comply with paragraphs (c), (d), and (g) of this section 
if the borrower submits a complete loss mitigation application to the 
transferee or transferor servicer 37 or fewer days before the 
foreclosure sale but on or before the reasonable date disclosed to the 
borrower pursuant to paragraph (b)(2)(ii) of this section.
    (3) Complete loss mitigation applications pending at transfer. If a 
transferee servicer acquires the servicing of a mortgage loan for which 
a complete loss mitigation application is pending as of the transfer 
date, the transferee servicer must comply with the applicable 
requirements of paragraphs (c)(1) and (4) of this section within 30 days 
of the transfer date.
    (4) Applications subject to appeal process. If a transferee servicer 
acquires the servicing of a mortgage loan for which an appeal of a 
transferor servicer's determination pursuant to paragraph (h) of this 
section has not been resolved by the transferor servicer as of the 
transfer date or is timely filed after the transfer date, the transferee 
servicer must make a determination on the appeal if it is able to do so 
or, if it is unable to do so, must treat the appeal as a pending 
complete loss mitigation application.
    (i) Determining appeal. If a transferee servicer is required under 
this paragraph (k)(4) to make a determination on an appeal, the 
transferee servicer must complete the determination and provide the 
notice required by paragraph (h)(4) of this section within 30 days of 
the transfer date or 30 days of the date the borrower made the appeal, 
whichever is later.
    (ii) Servicer unable to determine appeal. A transferee servicer that 
is required to treat a borrower's appeal as a pending complete loss 
mitigation application under this paragraph (k)(4) must comply with the 
requirements of this section for such application, including evaluating 
the borrower for all loss mitigation options available to the borrower 
from the transferee servicer. For purposes of paragraph (c) or (k)(3) of 
this section, as applicable, such a pending complete loss mitigation 
application shall be considered complete

[[Page 728]]

as of the date the appeal was received by the transferor servicer or the 
transferee servicer, whichever occurs first. For purposes of paragraphs 
(e) through (h) of this section, the transferee servicer must treat such 
a pending complete loss mitigation application as facially complete 
under paragraph (c)(2)(iv) as of the date it was first facially complete 
or complete, as applicable, with respect to the transferor servicer.
    (5) Pending loss mitigation offers. A transfer does not affect a 
borrower's ability to accept or reject a loss mitigation option offered 
under paragraph (c) or (h) of this section. If a transferee servicer 
acquires the servicing of a mortgage loan for which the borrower's time 
period under paragraph (e) or (h) of this section for accepting or 
rejecting a loss mitigation option offered by the transferor servicer 
has not expired as of the transfer date, the transferee servicer must 
allow the borrower to accept or reject the offer during the unexpired 
balance of the applicable time period.

[78 FR 10876, Feb. 14, 2013, as amended at 78 FR 60437, Oct. 1, 2013; 81 
FR 72373, Oct. 19, 2016; 85 FR 39065, June 30, 2020; 86 FR 34899, June 
30, 2021]





Sec. Appendix A to Part 1024--Instructions for Completing HUD-1 and HUD-
      1a Settlement Statements; Sample HUD-1 and HUD-1a Statements

    The following are instructions for completing the HUD-1 settlement 
statement, required under section 4 of RESPA and 12 CFR part 1024 
(Regulation X) of the Bureau of Consumer Financial Protection (Bureau) 
regulations. This form is to be used as a statement of actual charges 
and adjustments paid by the borrower and the seller, to be given to the 
parties in connection with the settlement. The instructions for 
completion of the HUD-1 are primarily for the benefit of the settlement 
agents who prepare the statements and need not be transmitted to the 
parties as an integral part of the HUD-1. There is no objection to the 
use of the HUD-1 in transactions in which its use is not legally 
required. Refer to the definitions section of the regulations (12 CFR 
1024.2) for specific definitions of many of the terms that are used in 
these instructions.

                          General Instructions

    Information and amounts may be filled in by typewriter, hand 
printing, computer printing, or any other method producing clear and 
legible results. Refer to the Bureau's regulations (Regulation X) 
regarding rules applicable to reproduction of the HUD-1 for the purpose 
of including customary recitals and information used locally in 
settlements; for example, a breakdown of payoff figures, a breakdown of 
the Borrower's total monthly mortgage payments, check disbursements, a 
statement indicating receipt of funds, applicable special stipulations 
between Borrower and Seller, and the date funds are transferred.
    The settlement agent shall complete the HUD-1 to itemize all charges 
imposed upon the Borrower and the Seller by the loan originator and all 
sales commissions, whether to be paid at settlement or outside of 
settlement, and any other charges which either the Borrower or the 
Seller will pay at settlement. Charges for loan origination and title 
services should not be itemized except as provided in these 
instructions. For each separately identified settlement service in 
connection with the transaction, the name of the person ultimately 
receiving the payment must be shown together with the total amount paid 
to such person. Items paid to and retained by a loan originator are 
disclosed as required in the instructions for lines in the 800-series of 
the HUD-1 (and for per diem interest, in the 900-series of the HUD-1).
    As a general rule, charges that are paid for by the seller must be 
shown in the seller's column on page 2 of the HUD-1 (unless paid outside 
closing), and charges that are paid for by the borrower must be shown in 
the borrower's column (unless paid outside closing). However, in order 
to promote comparability between the charges on the GFE and the charges 
on the HUD-1, if a seller pays for a charge that was included on the 
GFE, the charge should be listed in the borrower's column on page 2 of 
the HUD-1. That charge should also be offset by listing a credit in that 
amount to the borrower on lines 204-209 on page 1 of the HUD-1, and by a 
charge to the seller in lines 506-509 on page 1 of the HUD-1. If a loan 
originator (other than for no-cost loans), real estate agent, other 
settlement service provider, or other person pays for a charge that was 
included on the GFE, the charge should be listed in the borrower's 
column on page 2 of the HUD-1, with an offsetting credit reported on 
page 1 of the HUD-1, identifying the party paying the charge.
    Charges paid outside of settlement by the borrower, seller, loan 
originator, real estate agent, or any other person, must be included on 
the HUD-1 but marked ``P.O.C.'' for ``Paid Outside of Closing'' 
(settlement) and must

[[Page 729]]

not be included in computing totals. However, indirect payments from a 
lender to a mortgage broker may not be disclosed as P.O.C., and must be 
included as a credit on Line 802. P.O.C. items must not be placed in the 
Borrower or Seller columns, but rather on the appropriate line outside 
the columns. The settlement agent must indicate whether P.O.C. items are 
paid for by the Borrower, Seller, or some other party by marking the 
items paid for by whoever made the payment as ``P.O.C.'' with the party 
making the payment identified in parentheses, such as ``P.O.C. 
(borrower)'' or ``P.O.C. (seller)''.
    In the case of ``no cost'' loans where ``no cost'' encompasses third 
party fees as well as the upfront payment to the loan originator, the 
third party services covered by the ``no cost'' provisions must be 
itemized and listed in the borrower's column on the HUD-1/1A with the 
charge for the third party service. These itemized charges must be 
offset with a negative adjusted origination charge on Line 803 and 
recorded in the columns.
    Blank lines are provided in section L for any additional settlement 
charges. Blank lines are also provided for additional insertions in 
sections J and K. The names of the recipients of the settlement charges 
in section L and the names of the recipients of adjustments described in 
section J or K should be included on the blank lines.
    Lines and columns in section J which relate to the Borrower's 
transaction may be left blank on the copy of the HUD-1 which will be 
furnished to the Seller. Lines and columns in section K which relate to 
the Seller's transaction may be left blank on the copy of the HUD-1 
which will be furnished to the Borrower.

                         Line Item Instructions

    Instructions for completing the individual items on the HUD-1 
follow.
    Section A. This section requires no entry of information.
    Section B. Check appropriate loan type and complete the remaining 
items as applicable.
    Section C. This section provides a notice regarding settlement costs 
and requires no additional entry of information.
    Sections D and E. Fill in the names and current mailing addresses 
and zip codes of the Borrower and the Seller. Where there is more than 
one Borrower or Seller, the name and address of each one is required. 
Use a supplementary page if needed to list multiple Borrowers or 
Sellers.
    Section F. Fill in the name, current mailing address and zip code of 
the Lender.
    Section G. The street address of the property being sold should be 
listed. If there is no street address, a brief legal description or 
other location of the property should be inserted. In all cases give the 
zip code of the property.
    Section H. Fill in name, address, zip code and telephone number of 
settlement agent, and address and zip code of ``place of settlement.''
    Section I. Fill in date of settlement.
    Section J. Summary of Borrower's Transaction. Line 101 is for the 
contract sales price of the property being sold, excluding the price of 
any items of tangible personal property if Borrower and Seller have 
agreed to a separate price for such items.
    Line 102 is for the sales price of any items of tangible personal 
property excluded from Line 101. Personal property could include such 
items as carpets, drapes, stoves, refrigerators, etc. What constitutes 
personal property varies from State to State. Manufactured homes are not 
considered personal property for this purpose.
    Line 103 is used to record the total charges to Borrower detailed in 
section L and totaled on Line 1400.
    Lines 104 and 105 are for additional amounts owed by the Borrower, 
such as charges that were not listed on the GFE or items paid by the 
Seller prior to settlement but reimbursed by the Borrower at settlement. 
For example, the balance in the Seller's reserve account held in 
connection with an existing loan, if assigned to the Borrower in a loan 
assumption case, will be entered here. These lines will also be used 
when a tenant in the property being sold has not yet paid the rent, 
which the Borrower will collect, for a period of time prior to the 
settlement. The lines will also be used to indicate the treatment for 
any tenant security deposit. The Seller will be credited on Lines 404-
405.
    Lines 106 through 112 are for items which the Seller had paid in 
advance, and for which the Borrower must therefore reimburse the Seller. 
Examples of items for which adjustments will be made may include taxes 
and assessments paid in advance for an entire year or other period, when 
settlement occurs prior to the expiration of the year or other period 
for which they were paid. Additional examples include flood and hazard 
insurance premiums, if the Borrower is being substituted as an insured 
under the same policy; mortgage insurance in loan assumption cases; 
planned unit development or condominium association assessments paid in 
advance; fuel or other supplies on hand, purchased by the Seller, which 
the Borrower will use when Borrower takes possession of the property; 
and ground rent paid in advance.
    Line 120 is for the total of Lines 101 through 112.
    Line 201 is for any amount paid against the sales price prior to 
settlement.
    Line 202 is for the amount of the new loan made by the Lender when a 
loan to finance construction of a new structure constructed for sale is 
used as or converted to a loan to

[[Page 730]]

finance purchase. Line 202 should also be used for the amount of the 
first user loan, when a loan to purchase a manufactured home for resale 
is converted to a loan to finance purchase by the first user. For other 
loans covered by 12 CFR part 1024 (Regulation X) which finance 
construction of a new structure or purchase of a manufactured home, list 
the sales price of the land on Line 104, the construction cost or 
purchase price of manufactured home on Line 105 (Line 101 would be left 
blank in this instance) and amount of the loan on Line 202. The 
remainder of the form should be completed taking into account 
adjustments and charges related to the temporary financing and permanent 
financing and which are known at the date of settlement. For reverse 
mortgage transactions, the amount disclosed on Line 202 is the initial 
principal limit.
    Line 203 is used for cases in which the Borrower is assuming or 
taking title subject to an existing loan or lien on the property.
    Lines 204-209 are used for other items paid by or on behalf of the 
Borrower. Lines 204-209 should be used to indicate any financing 
arrangements or other new loan not listed in Line 202. For example, if 
the Borrower is using a second mortgage or note to finance part of the 
purchase price, whether from the same lender, another lender or the 
Seller, insert the principal amount of the loan with a brief explanation 
on Lines 204-209. Lines 204-209 should also be used where the Borrower 
receives a credit from the Seller for closing costs, including seller-
paid GFE charges. They may also be used in cases in which a Seller 
(typically a builder) is making an ``allowance'' to the Borrower for 
items that the Borrower is to purchase separately. For reverse 
mortgages, the amount of any initial draw at settlement is disclosed on 
Line 204.
    Lines 210 through 219 are for items which have not yet been paid, 
and which the Borrower is expected to pay, but which are attributable in 
part to a period of time prior to the settlement. In jurisdictions in 
which taxes are paid late in the tax year, most cases will show the 
proration of taxes in these lines. Other examples include utilities used 
but not paid for by the Seller, rent collected in advance by the Seller 
from a tenant for a period extending beyond the settlement date, and 
interest on loan assumptions.
    Line 220 is for the total of Lines 201 through 219.
    Lines 301 and 302 are summary lines for the Borrower. Enter total in 
Line 120 on Line 301. Enter total in Line 220 on Line 302.
    Line 303 must indicate either the cash required from the Borrower at 
settlement (the usual case in a purchase transaction), or cash payable 
to the Borrower at settlement (if, for example, the Borrower's earnest 
money exceeds the Borrower's cash obligations in the transaction or 
there is a cash-out refinance). Subtract Line 302 from Line 301 and 
enter the amount of cash due to or from the Borrower at settlement on 
Line 303. The appropriate box should be checked. If the Borrower's 
earnest money is applied toward the charge for a settlement service, the 
amount so applied should not be included on Line 303 but instead should 
be shown on the appropriate line for the settlement service, marked 
``P.O.C. (Borrower)'', and must not be included in computing totals.
    Section K. Summary of Seller's Transaction. Instructions for the use 
of Lines 101 and 102 and 104-112 above, apply also to Lines 401-412. 
Line 420 is for the total of Lines 401 through 412.
    Line 501 is used if the Seller's real estate broker or other party 
who is not the settlement agent has received and holds a deposit against 
the sales price (earnest money) which exceeds the fee or commission owed 
to that party. If that party will render the excess deposit directly to 
the Seller, rather than through the settlement agent, the amount of 
excess deposit should be entered on Line 501 and the amount of the total 
deposit (including commissions) should be entered on Line 201.
    Line 502 is used to record the total charges to the Seller detailed 
in section L and totaled on Line 1400.
    Line 503 is used if the Borrower is assuming or taking title subject 
to existing liens which are to be deducted from sales price.
    Lines 504 and 505 are used for the amounts (including any accrued 
interest) of any first and/or second loans which will be paid as part of 
the settlement.
    Line 506 is used for deposits paid by the Borrower to the Seller or 
other party who is not the settlement agent. Enter the amount of the 
deposit in Line 201 on Line 506 unless Line 501 is used or the party who 
is not the settlement agent transfers all or part of the deposit to the 
settlement agent, in which case the settlement agent will note in 
parentheses on Line 507 the amount of the deposit that is being 
disbursed as proceeds and enter in the column for Line 506 the amount 
retained by the above-described party for settlement services. If the 
settlement agent holds the deposit, insert a note in Line 507 which 
indicates that the deposit is being disbursed as proceeds.
    Lines 506 through 509 may be used to list additional liens which 
must be paid off through the settlement to clear title to the property. 
Other Seller obligations should be shown on Lines 506-509, including 
charges that were disclosed on the GFE but that are actually being paid 
for by the Seller. These Lines may also be used to indicate funds to be 
held by the settlement agent for the payment of either repairs, or 
water, fuel, or other utility bills that cannot be prorated between the 
parties at settlement because

[[Page 731]]

the amounts used by the Seller prior to settlement are not yet known. 
Subsequent disclosure of the actual amount of these post-settlement 
items to be paid from settlement funds is optional. Any amounts entered 
on Lines 204-209 including Seller financing arrangements should also be 
entered on Lines 506-509.
    Instructions for the use of Lines 510 through 519 are the same as 
those for Lines 210 to 219 above.
    Line 520 is for the total of Lines 501 through 519.
    Lines 601 and 602 are summary lines for the Seller. Enter the total 
in Line 420 on Line 601. Enter the total in Line 520 on Line 602.
    Line 603 must indicate either the cash required to be paid to the 
Seller at settlement (the usual case in a purchase transaction), or the 
cash payable by the Seller at settlement. Subtract Line 602 from Line 
601 and enter the amount of cash due to or from the Seller at settlement 
on Line 603. The appropriate box should be checked.

                     Section L. Settlement Charges.

    Line 700 is used to enter the sales commission charged by the sales 
agent or real estate broker.
    Lines 701-702 are to be used to state the split of the commission 
where the settlement agent disburses portions of the commission to two 
or more sales agents or real estate brokers.
    Line 703 is used to enter the amount of sales commission disbursed 
at settlement. If the sales agent or real estate broker is retaining a 
part of the deposit against the sales price (earnest money) to apply 
towards the sales agent's or real estate broker's commission, include in 
Line 703 only that part of the commission being disbursed at settlement 
and insert a note on Line 704 indicating the amount the sales agent or 
real estate broker is retaining as a ``P.O.C.'' item.
    Line 704 may be used for additional charges made by the sales agent 
or real estate broker, or for a sales commission charged to the 
Borrower, which will be disbursed by the settlement agent.
    Line 801 is used to record ``Our origination charge,'' which 
includes all charges received by the loan originator, except any charge 
for the specific interest rate chosen (points). This number must not be 
listed in either the buyer's or seller's column. The amount shown in 
Line 801 must include any amounts received for origination services, 
including administrative and processing services, performed by or on 
behalf of the loan originator.
    Line 802 is used to record ``Your credit or charge (points) for the 
specific interest rate chosen,'' which states the charge or credit 
adjustment as applied to ``Our origination charge,'' if applicable. This 
number must not be listed in either column or shown on page one of the 
HUD-1.
    For a mortgage broker originating a loan in its own name, the amount 
shown on Line 802 will be the difference between the initial loan amount 
and the total payment to the mortgage broker from the lender. The total 
payment to the mortgage broker will be the sum of the price paid for the 
loan by the lender and any other payments to the mortgage broker from 
the lender, including any payments based on the loan amount or loan 
terms, and any flat rate payments. For a mortgage broker originating a 
loan in another entity's name, the amount shown on Line 802 will be the 
sum of all payments to the mortgage broker from the lender, including 
any payments based on the loan amount or loan terms, and any flat rate 
payments.
    In either case, when the amount paid to the mortgage broker exceeds 
the initial loan amount, there is a credit to the borrower and it is 
entered as a negative amount. When the initial loan amount exceeds the 
amount paid to the mortgage broker, there is a charge to the borrower 
and it is entered as a positive amount. For a lender, the amount shown 
on Line 802 may include any credit or charge (points) to the Borrower.
    Line 803 is used to record ``Your adjusted origination charges,'' 
which states the net amount of the loan origination charges, the sum of 
the amounts shown in Lines 801 and 802. This amount must be listed in 
the columns as either a positive number (for example, where the 
origination charge shown in Line 801 exceeds any credit for the interest 
rate shown in Line 802 or where there is an origination charge in Line 
801 and a charge for the interest rate (points) is shown on Line 802) or 
as a negative number (for example, where the credit for the interest 
rate shown in Line 802 exceeds the origination charges shown in Line 
801).
    In the case of ``no cost'' loans, where ``no cost'' refers only to 
the loan originator's fees, the amounts shown in Lines 801 and 802 
should offset, so that the charge shown on Line 803 is zero. Where ``no 
cost'' includes third party settlement services, the credit shown in 
Line 802 will more than offset the amount shown in Line 801. The amount 
shown in Line 803 will be a negative number to offset the settlement 
charges paid indirectly through the loan originator.
    Lines 804-808 may be used to record each of the ``Required services 
that we select.'' Each settlement service provider must be identified by 
name and the amount paid recorded either inside the columns or as paid 
to the provider outside closing (``P.O.C.''), as described in the 
General Instructions.
    Line 804 is used to record the appraisal fee.
    Line 805 is used to record the fee for all credit reports.
    Line 806 is used to record the fee for any tax service.

[[Page 732]]

    Line 807 is used to record any flood certification fee.
    Lines 808 and additional sequentially numbered lines, as needed, are 
used to record other third party services required by the loan 
originator. These Lines may also be used to record other required 
disclosures from the loan originator. Any such disclosures must be 
listed outside the columns.
    Lines 901-904. This series is used to record the items which the 
Lender requires to be paid at the time of settlement, but which are not 
necessarily paid to the lender (e.g., FHA mortgage insurance premium), 
other than reserves collected by the Lender and recorded in the 1000-
series.
    Line 901 is used if interest is collected at settlement for a part 
of a month or other period between settlement and the date from which 
interest will be collected with the first regular monthly payment. Enter 
that amount here and include the per diem charges. If such interest is 
not collected until the first regular monthly payment, no entry should 
be made on Line 901.
    Line 902 is used for mortgage insurance premiums due and payable at 
settlement, including any monthly amounts due at settlement and any 
upfront mortgage insurance premium, but not including any reserves 
collected by the Lender and recorded in the 1000-series. If a lump sum 
mortgage insurance premium paid at settlement is included on Line 902, a 
note should indicate that the premium is for the life of the loan.
    Line 903 is used for homeowner's insurance premiums that the Lender 
requires to be paid at the time of settlement, except reserves collected 
by the Lender and recorded in the 1000-series.
    Lines 904 and additional sequentially numbered lines are used to 
list additional items required by the Lender (except for reserves 
collected by the Lender and recorded in the 1000-series), including 
premiums for flood or other insurance. These lines are also used to list 
amounts paid at settlement for insurance not required by the Lender.
    Lines 1000-1007. This series is used for amounts collected by the 
Lender from the Borrower and held in an account for the future payment 
of the obligations listed as they fall due. Include the time period 
(number of months) and the monthly assessment. In many jurisdictions 
this is referred to as an ``escrow'', ``impound'', or ``trust'' account. 
In addition to the property taxes and insurance listed, some Lenders may 
require reserves for flood insurance, condominium owners' association 
assessments, etc. The amount in line 1001 must be listed in the columns, 
and the itemizations in lines 1002 through 1007 must be listed outside 
the columns.
    After itemizing individual deposits in the 1000 series, the servicer 
shall make an adjustment based on aggregate accounting. This adjustment 
equals the difference between the deposit required under aggregate 
accounting and the sum of the itemized deposits. The computation steps 
for aggregate accounting are set out in 12 CFR 1024.17(d). The 
adjustment will always be a negative number or zero (-0-), except for 
amounts due to rounding. The settlement agent shall enter the aggregate 
adjustment amount outside the columns on a final line of the 1000 series 
of the HUD-1 or HUD-1A statement. Appendix E to this part sets out an 
example of aggregate analysis.
    Lines 1100-1108. This series covers title charges and charges by 
attorneys and closing or settlement agents. The title charges include a 
variety of services performed by title companies or others, and include 
fees directly related to the transfer of title (title examination, title 
search, document preparation), fees for title insurance, and fees for 
conducting the closing. The legal charges include fees for attorneys 
representing the lender, seller, or borrower, and any attorney preparing 
title work. The series also includes any settlement, notary, and 
delivery fees related to the services covered in this series. 
Disbursements to third parties must be broken out in the appropriate 
lines or in blank lines in the series, and amounts paid to these third 
parties must be shown outside of the columns if included in Line 1101. 
Charges not included in Line 1101 must be listed in the columns.
    Line 1101 is used to record the total for the category of ``Title 
services and lender's title insurance.'' This amount must be listed in 
the columns.
    Line 1102 is used to record the settlement or closing fee.
    Line 1103 is used to record the charges for the owner's title 
insurance and related endorsements. This amount must be listed in the 
columns.
    Line 1104 is used to record the lender's title insurance premium and 
related endorsements.
    Line 1105 is used to record the amount of the lender's title policy 
limit. This amount is recorded outside of the columns.
    Line 1106 is used to record the amount of the owner's title policy 
limit. This amount is recorded outside of the columns.
    Line 1107 is used to record the amount of the total title insurance 
premium, including endorsements, that is retained by the title agent. 
This amount is recorded outside of the columns.
    Line 1108 used to record the amount of the total title insurance 
premium, including endorsements, that is retained by the title 
underwriter. This amount is recorded outside of the columns.
    Additional sequentially numbered lines in the 1100-series may be 
used to itemize title charges paid to other third parties, as identified 
by name and type of service provided.

[[Page 733]]

    Lines 1200-1206. This series covers government recording and 
transfer charges. Charges paid by the borrower must be listed in the 
columns as described for lines 1201 and 1203, with itemizations shown 
outside the columns. Any amounts that are charged to the seller and that 
were not included on the Good Faith Estimate must be listed in the 
columns.
    Line 1201 is used to record the total ``Government recording 
charges,'' and the amount must be listed in the columns.
    Line 1202 is used to record, outside of the columns, the itemized 
recording charges.
    Line 1203 is used to record the transfer taxes, and the amount must 
be listed in the columns.
    Line 1204 is used to record, outside of the columns, the amounts for 
local transfer taxes and stamps.
    Line 1205 is used to record, outside of the columns, the amounts for 
state transfer taxes and stamps.
    Line 1206 and additional sequentially numbered lines may be used to 
record specific itemized third party charges for government recording 
and transfer services, but the amounts must be listed outside the 
columns.
    Line 1301 and additional sequentially numbered lines must be used to 
record required services that the borrower can shop for, such as fees 
for survey, pest inspection, or other similar inspections. These lines 
may also be used to record additional itemized settlement charges that 
are not included in a specific category, such as fees for structural and 
environmental inspections; pre-sale inspections of heating, plumbing or 
electrical equipment; or insurance or warranty coverage. The amounts 
must be listed in either the borrower's or seller's column.
    Line 1400 must state the total settlement charges as calculated by 
adding the amounts within each column.

                                 Page 3

      Comparison of Good Faith Estimate (GFE) and HUD-1/1A Charges

    The HUD-1/1-A is a statement of actual charges and adjustments. The 
comparison chart on page 3 of the HUD-1 must be prepared using the exact 
information and amounts for the services that were purchased or provided 
as part of the transaction, as that information and those amounts are 
shown on the GFE and in the HUD-1. If a service that was listed on the 
GFE was not obtained in connection with the transaction, pages 1 and 2 
of the HUD-1 should not include any amount for that service, and the 
estimate on the GFE of the charge for the service should not be included 
in any amounts shown on the comparison chart on Page 3 of the HUD-1. The 
comparison chart is comprised of three sections: ``Charges That Cannot 
Increase,'' ``Charges That Cannot Increase More Than 10%,'' and 
``Charges That Can Change''.
    ``Charges That Cannot Increase.'' The amounts shown in Blocks 1 and 
2, in Line A, and in Block 8 on the borrower's GFE must be entered in 
the appropriate line in the Good Faith Estimate column. The amounts 
shown on Lines 801, 802, 803 and 1203 of the HUD-1/1A must be entered in 
the corresponding line in the HUD-1/1A column. The HUD-1/1A column must 
include any amounts shown on page 2 of the HUD-1 in the column as paid 
for by the borrower, plus any amounts that are shown as P.O.C. by or on 
behalf of the borrower. If there is a credit in Block 2 of the GFE or 
Line 802 of the HUD-1/1A, the credit should be entered as a negative 
number.
    ``Charges That Cannot Increase More Than 10%.'' A description of 
each charge included in Blocks 3 and 7 on the borrower's GFE must be 
entered on separate lines in this section, with the amount shown on the 
borrower's GFE for each charge entered in the corresponding line in the 
Good Faith Estimate column. For each charge included in Blocks 4, 5 and 
6 on the borrower's GFE for which the loan originator selected the 
provider or for which the borrower selected a provider identified by the 
loan originator, a description must be entered on a separate line in 
this section, with the amount shown on the borrower's GFE for each 
charge entered in the corresponding line in the Good Faith Estimate 
column. The loan originator must identify any third party settlement 
services for which the borrower selected a provider other than one 
identified by the loan originator so that the settlement agent can 
include those charges in the appropriate category. Additional lines may 
be added if necessary. The amounts shown on the HUD-1/1A for each line 
must be entered in the HUD-1/1A column next to the corresponding charge 
from the GFE, along with the appropriate HUD-1/1A line number. The HUD-
1/1A column must include any amounts shown on page 2 of the HUD-1 in the 
column as paid for by the borrower, plus any amounts that are shown as 
P.O.C. by or on behalf of the borrower.
    The amounts shown in the Good Faith Estimate and HUD-1/1A columns 
for this section must be separately totaled and entered in the 
designated line. If the total for the HUD-1/1A column is greater than 
the total for the Good Faith Estimate column, then the amount of the 
increase must be entered both as a dollar amount and as a percentage 
increase in the appropriate line.
    ``Charges That Can Change.'' The amounts shown in Blocks 9, 10 and 
11 on the borrower's GFE must be entered in the appropriate lines in the 
Good Faith Estimate column. Any third party settlement services for 
which the borrower selected a provider other than one identified by the 
loan originator

[[Page 734]]

must also be included in this section. The amounts shown on the HUD-1/1A 
for each charge in this section must be entered in the corresponding 
line in the HUD-1/1A column, along with the appropriate HUD-1/1A line 
number. The HUD-1/1A column must include any amounts shown on page 2 of 
the HUD-1 in the column as paid for by the borrower, plus any amounts 
that are shown as P.O.C. by or on behalf of the borrower. Additional 
lines may be added if necessary.

                               Loan Terms

    This section must be completed in accordance with the information 
and instructions provided by the lender. The lender must provide this 
information in a format that permits the settlement agent to simply 
enter the necessary information in the appropriate spaces, without the 
settlement agent having to refer to the loan documents themselves. For 
reverse mortgages, the initial monthly amount owed for principal, 
interest, and any mortgage insurance must read ``N/A'' and the loan term 
is disclosed as ``N/A'' when the loan term is conditioned upon the 
occurrence of a specified event, such as the death of the borrower or 
the borrower no longer occupying the property for a certain period of 
time. Additionally, for reverse mortgages the question ``Even if you 
make payments on time, can your loan balance rise?'' must be answered as 
``Yes'' and the maximum amount disclosed as ``Unknown.''
    For reverse mortgages that establish an arrangement for the payment 
of property taxes, homeowner's insurance, or other recurring charges 
through draws from the principal limit, the second box in the ``Total 
monthly amount owed including escrow payments'' section must be checked. 
The blank following the first $ must be completed with ``0'' and an 
asterisk, and all items that will be paid using draws from the principal 
limit, such as for property taxes, must also be indicated. An asterisk 
must also be placed in this section with the following statement: ``Paid 
by or through draws from the principal limit.'' Reverse mortgage 
transactions are not considered to be balloon transactions for the 
purposes of the loan terms disclosed on page 3 of the HUD-1.

                   Instructions for Completing HUD-1A

    Note: The HUD-1A is an optional form that may be used for 
refinancing and subordinate-lien federally related mortgage loans, as 
well as for any other one-party transaction that does not involve the 
transfer of title to residential real property. The HUD-1 form may also 
be used for such transactions, by utilizing the borrower's side of the 
HUD-1 and following the relevant parts of the instructions as set forth 
above. The use of either the HUD-1 or HUD-1A is not mandatory for open-
end lines of credit (home-equity plans), as long as the provisions of 
Regulation Z are followed.

                               Background

    The HUD-1A settlement statement is to be used as a statement of 
actual charges and adjustments to be given to the borrower at 
settlement, as defined in this part. The instructions for completion of 
the HUD-1A are for the benefit of the settlement agent who prepares the 
statement; the instructions are not a part of the statement and need not 
be transmitted to the borrower. There is no objection to using the HUD-
1A in transactions in which it is not required, and its use in open-end 
lines of credit transactions (home-equity plans) is encouraged. It may 
not be used as a substitute for a HUD-1 in any transaction that has a 
seller.
    Refer to the ``definitions'' section (Sec.  1024.2) of 12 CFR part 
1024 (Regulation X) for specific definitions of terms used in these 
instructions.

                          General Instructions

    Information and amounts may be filled in by typewriter, hand 
printing, computer printing, or any other method producing clear and 
legible results. Refer to 12 CFR 1024.9 regarding rules for reproduction 
of the HUD-1A. Additional pages may be attached to the HUD-1A for the 
inclusion of customary recitals and information used locally for 
settlements or if there are insufficient lines on the HUD-1A. The 
settlement agent shall complete the HUD-1A in accordance with the 
instructions for the HUD-1 to the extent possible, including the 
instructions for disclosing items paid outside closing and for no cost 
loans.
    Blank lines are provided in section L for any additional settlement 
charges. Blank lines are also provided in section M for recipients of 
all or portions of the loan proceeds. The names of the recipients of the 
settlement charges in section L and the names of the recipients of the 
loan proceeds in section M should be set forth on the blank lines.

                         Line-Item Instructions

                                 Page 1

    The identification information at the top of the HUD-1A should be 
completed as follows: The borrower's name and address is entered in the 
space provided. If the property securing the loan is different from the 
borrower's address, the address or other location information on the 
property should be entered in the space provided. The loan number is the 
lender's identification number for the loan. The settlement date is the 
date of settlement in accordance with 12 CFR 1024.2, not the end of any 
applicable rescission period. The name and address of the lender should 
be entered in the space provided.

[[Page 735]]

    Section L. Settlement Charges. This section of the HUD-1A is similar 
to section L of the HUD-1, with minor changes or omissions, including 
deletion of lines 700 through 704, relating to real estate broker 
commissions. The instructions for section L in the HUD-1 should be 
followed insofar as possible. Inapplicable charges should be ignored, as 
should any instructions regarding seller items.
    Line 1400 in the HUD-1A is for the total settlement charges charged 
to the borrower. Enter this total on line 1601. This total should 
include section L amounts from additional pages, if any are attached to 
this HUD-1A.
    Section M. Disbursement to Others. This section is used to list 
payees, other than the borrower, of all or portions of the loan proceeds 
(including the lender, if the loan is paying off a prior loan made by 
the same lender), when the payee will be paid directly out of the 
settlement proceeds. It is not used to list payees of settlement 
charges, nor to list funds disbursed directly to the borrower, even if 
the lender knows the borrower's intended use of the funds.
    For example, in a refinancing transaction, the loan proceeds are 
used to pay off an existing loan. The name of the lender for the loan 
being paid off and the pay-off balance would be entered in section M. In 
a home improvement transaction when the proceeds are to be paid to the 
home improvement contractor, the name of the contractor and the amount 
paid to the contractor would be entered in section M. In a consolidation 
loan, or when part of the loan proceeds is used to pay off other 
creditors, the name of each creditor and the amount paid to that 
creditor would be entered in section M. If the proceeds are to be given 
directly to the borrower and the borrower will use the proceeds to pay 
off existing obligations, this would not be reflected in section M.
    Section N. Net Settlement. Line 1600 normally sets forth the 
principal amount of the loan as it appears on the related note for this 
loan. In the event this form is used for an open-ended home equity line 
whose approved amount is greater than the initial amount advanced at 
settlement, the amount shown on Line 1600 will be the loan amount 
advanced at settlement. Line 1601 is used for all settlement charges 
that both are included in the totals for lines 1400 and 1602, and are 
not financed as part of the principal amount of the loan. This is the 
amount normally received by the lender from the borrower at settlement, 
which would occur when some or all of the settlement charges were paid 
in cash by the borrower at settlement, instead of being financed as part 
of the principal amount of the loan. Failure to include any such amount 
in line 1601 will result in an error in the amount calculated on line 
1604. Items paid outside of closing (P.O.C.) should not be included in 
Line 1601.
    Line 1602 is the total amount from line 1400.
    Line 1603 is the total amount from line 1520.
    Line 1604 is the amount disbursed to the borrower. This is 
determined by adding together the amounts for lines 1600 and 1601, and 
then subtracting any amounts listed on lines 1602 and 1603.

                                 Page 2

    This section of the HUD-1A is similar to page 3 of the HUD-1. The 
instructions for page 3 of the HUD-1 should be followed insofar as 
possible. The HUD-1/1A Column should include any amounts shown on page 1 
of the HUD-1A in the column as paid for by the borrower, plus any 
amounts that are shown as P.O.C. by the borrower. Inapplicable charges 
should be ignored.

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[[Page 741]]



[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 80104, Dec. 31, 2013]



  Sec. Appendix B to Part 1024--Illustrations of Requirements of RESPA

    The following illustrations provide additional guidance on the 
meaning and coverage of the provisions of RESPA. Other provisions of 
Federal or state law may also be applicable to the practices and 
payments discussed in the following illustrations.
    1. Facts: A, a provider of settlement services, provides settlement 
services at abnormally low rates or at no charge at all to B, a builder, 
in connection with a subdivision being developed by B. B agrees to refer 
purchasers of the completed homes in the subdivision to A for the 
purchase of settlement services in connection with the sale of 
individual lots by B.
    Comments: The rendering of services by A to B at little or no charge 
constitutes a thing of value given by A to B in return for the referral 
of settlement services business, and both A and B are in violation of 
section 8 of RESPA.
    2. Facts: B, a lender, encourages persons who receive federally 
related mortgage loans from it to employ A, an attorney, to perform 
title searches and related settlement services in connection with their 
transaction. B and A have an understanding that in return for the 
referral of this business A provides legal services to B or B's officers 
or employees at abnormally low rates or for no charge.
    Comments: Both A and B are in violation of section 8 of RESPA. 
Similarly, if an attorney gives a portion of his or her fees to another 
attorney, a lender, a real estate broker or any other provider of 
settlement services, who had referred prospective clients to the 
attorney, section 8 would be violated by both persons.
    3. Facts: A, a real estate broker, obtains all necessary licenses 
under state law to act as a title insurance agent. A refers individuals 
who are purchasing homes in transactions in which A participates as a 
broker to B, an unaffiliated title company, for the purchase of title 
insurance services. A performs minimal, if any, title services in 
connection with the issuance of the title insurance policy (such as 
placing an application with the title company). B pays A a commission 
(or A retains a portion of the title insurance premium) for the 
transactions or alternatively B receives a portion of the premium paid 
directly from the purchaser.
    Comments: The payment of a commission or portion of the title 
insurance premium by B to A, or receipt of a portion of the payment for 
title insurance under circumstances where no substantial services are 
being performed by A, is a violation of section 8 of RESPA. It makes no 
difference whether the payment comes from B or the purchaser. The amount 
of the payment must bear a reasonable relationship to the services 
rendered. Here A really is being compensated for a referral of business 
to B.
    4. Facts: A is an attorney who, as a part of his legal 
representation of clients in residential real estate transactions, 
orders and reviews title insurance policies for his clients. A enters 
into a contract with B, a title company, to be an agent of B under a 
program set up by B. Under the agreement, A agrees to prepare and 
forward title insurance applications to B, to re-examine the preliminary 
title commitment for accuracy and if he chooses to attempt to clear 
exceptions to the title policy before closing. A agrees to assume 
liability for waiving certain exceptions to title, but never exercises 
this authority. B performs the necessary title search and examination 
work, determines insurability of title, prepares documents containing 
substantive information in title commitments, handles closings for A's 
clients and issues title policies. A receives a fee from his client for 
legal services and an additional fee for his title agent ``services'' 
from the client's title insurance premium to B.
    Comments: A and B are violating section 8 of RESPA. Here, A's 
clients are being double billed because the work A performs as a ``title 
agent'' is that which he already performs for his client in his capacity 
as an attorney. For A to receive a separate payment as a title agent, A 
must perform necessary core title work and may not contract out the 
work. To receive additional compensation as a title agent for this 
transaction, A must provide his client with core title agent services 
for which he assumes liability, and which includes at a minimum, the 
evaluation of the title search to determine insurability of the title, 
and the issuance of a title commitment where customary, the clearance of 
underwriting objections, and the actual issuance of the policy or 
policies on behalf of the title company. A may not be compensated for 
the mere re-examination of work performed by B. Here, A is not 
performing these services and may not be compensated as a title agent 
under section 8(c)(1)(B). Referral fees or splits of fees may not be 
disguised as title agent commissions when the core title agent work is 
not performed. Further, because B created the program and gave A the 
opportunity to collect fees (a thing of value) in exchange for the 
referral of settlement service business, it has violated section 8 of 
RESPA.
    5. Facts: A, a ``mortgage originator,'' receives loan applications, 
funds the loans with its own money or with a wholesale line of credit 
for which A is liable, and closes the loans in A's own name. 
Subsequently, B, a mortgage lender, purchases the loans and compensates 
A for the value of the loans, as well as for any mortgage servicing 
rights.

[[Page 742]]

    Comments: Compensation for the sale of a mortgage loan and servicing 
rights constitutes a secondary market transaction, rather than a 
referral fee, and is beyond the scope of section 8 of RESPA. For 
purposes of section 8, in determining whether a bona fide transfer of 
the loan obligation has taken place, the Bureau examines the real source 
of funding, and the real interest of the named settlement lender.
    6. Facts. A, a credit reporting company, places a facsimile 
transmission machine (FAX) in the office of B, a mortgage lender, so 
that B can easily transmit requests for credit reports and A can 
respond. A supplies the FAX machine at no cost or at a reduced rental 
rate based on the number of credit reports ordered.
    Comments: Either situation violates section 8 of RESPA. The FAX 
machine is a thing of value that A provides in exchange for the referral 
of business from B. Copying machines, computer terminals, printers, or 
other like items which have general use to the recipient and which are 
given in exchange for referrals of business also violate RESPA.
    7. Facts: A, a real estate broker, refers title business to B, a 
company that is a licensed title agent for C, a title insurance company. 
A owns more than 1% of B. B performs the title search and examination, 
makes determinations of insurability, issues the commitment, clears 
underwriting objections, and issues a policy of title insurance on 
behalf of C, for which C pays B a commission. B pays annual dividends to 
its owners, including A, based on the relative amount of business each 
of its owners refers to B.
    Comments: The facts involve an affiliated business arrangement. The 
payment of a commission by C to B is not a violation of section 8 of 
RESPA if the amount of the commission constitutes reasonable 
compensation for the services performed by B for C. The payment of a 
dividend or the giving of any other thing of value by B to A that is 
based on the amount of business referred to B by A does not meet the 
affiliated business agreement exemption provisions and such actions 
violate section 8. Similarly, if the amount of stock held by A in B (or, 
if B were a partnership, the distribution of partnership profits by B to 
A) varies based on the amount of business referred or expected to be 
referred, or if B retained any funds for subsequent distribution to A 
where such funds were generally in proportion to the amount of business 
A referred to B relative to the amount referred by other owners, such 
arrangements would violate section 8. The exemption for controlled 
business arrangements would not be available because the payments here 
would not be considered returns on ownership interests. Further, the 
required disclosure of the affiliated business arrangement and estimated 
charges have not been provided.
    8. Facts: Same as illustration 7, but B pays annual dividends in 
proportion to the amount of stock held by its owners, including A, and 
the distribution of annual dividends is not based on the amount of 
business referred or expected to be referred.
    Comments: If A and B meet the requirements of the affiliated 
business arrangement exemption there is not a violation of RESPA. Since 
the payment is a return on ownership interests, A and B will be exempt 
from section 8 if (1) A also did not require anyone to use the services 
of B, and (2) A disclosed its ownership interest in B on a separate 
disclosure form and provided an estimate of B's charges to each person 
referred by A to B (see appendix D of this part), and (3) B makes no 
payment (nor is there any other thing of value exchanged) to A other 
than dividends.
    9. Facts: A, a franchisor for franchised real estate brokers, owns 
B, a provider of settlement services. C, a franchisee of A, refers 
business to B.
    Comments: This is an affiliated business arrangement. A, B and C 
will all be exempt from section 8 if C discloses its franchise 
relationship with the owner of B on a separate disclosure form and 
provides an estimate of B's charges to each person referred to B (see 
appendix D of this part) and C does not require anyone to use B's 
services and A gives no thing a value to C under the franchise agreement 
(such as an adjusted level of franchise payment based on the referrals), 
and B makes no payments to A other than dividends representing a return 
on ownership interest (rather than, e.g., an adjusted level of payment 
being based on the referrals). Nor may B pay C anything of value for the 
referral.
    10. Facts: A is a real estate broker who refers business to its 
affiliate title company B. A makes all required written disclosures to 
the homebuyer of the arrangement and estimated charges and the homebuyer 
is not required to use B. B refers or contracts out business to C who 
does all the title work and splits the fee with B. B passes its fee to A 
in the form of dividends, a return on ownership interest.
    Comments: The relationship between A and B is an affiliated business 
arrangement. However, the affiliated business arrangement exemption does 
not provide exemption between an affiliated entity, B, and a third 
party, C. Here, B is a mere ``shell'' and provides no substantive 
services for its portion of the fee. The arrangement between B and C 
would be in violation of section 8(a) and (b). Even if B had an 
affiliate relationship with C, the required exemption criteria have not 
been met and the relationship would be subject to section 8.
    11. Facts: A, a mortgage lender is affiliated with B, a title 
company, and C, an escrow company and offers consumers a package of

[[Page 743]]

mortgage title and escrow services at a discount from the prices at 
which such services would be sold if purchased separately. Neither A, B, 
nor C requires consumers to purchase the services of their sister 
companies and each company sells such services separately and as part of 
the package. A also pays its employees (e.g., loan officers, 
secretaries, etc.) a bonus for each loan, title insurance or closing 
that A's employees generate for A, B, or C respectively. A pays such 
employee bonuses out of its own funds and receives no payments or 
reimbursements for such bonuses from B or C. At or before the time that 
customers are told by A or its employees about the services offered by B 
and C and/or the package of services that is available, the customers 
are provided with an affiliated business disclosure form.
    Comments: A's selling of a package of settlement services at a 
discount to a settlement service purchaser does not violate section 8 of 
RESPA. A's employees are making appropriate affiliated business 
disclosures and since the services are available separately and as part 
of a package, there is not ``required use'' of the additional services. 
A's payments of bonuses to its employees for the referral of business to 
A or A's affiliates, B and C, are exempt from section 8 under Sec.  
1024.14(g)(1). However, if B or C reimbursed A for any bonuses that A 
paid to its employees for referring business to B or C, such 
reimbursements would violate section 8. Similarly, if B or C paid 
bonuses to A's employees directly for generating business for them, such 
payments would violate section 8.
    12. Facts. A is a mortgage broker who provides origination services 
to submit a loan to a lender for approval. The mortgage broker charges 
the borrower a uniform fee for the total origination services, as well 
as a direct up-front charge for reimbursement of credit reporting, 
appraisal services, or similar charges.
    Comment. The mortgage broker's fee must be reflected in the Good 
Faith Estimate and on the HUD-1 Settlement Statement. Other charges 
which are paid for by the borrower and paid in advance are listed as 
P.O.C. on the HUD-1 Settlement Statement, and reflect the actual 
provider charge for such services.
    13. Facts. A is a dealer in home improvements who has established 
funding arrangements with several lenders. Customers for home 
improvements receive a proposed contract from A. The proposal requires 
that customers both execute forms authorizing a credit check and 
employment verification, and frequently, execute a dealer consumer 
credit contract secured by a lien on the customer's (borrower's) 1- to 
4-family residential property. Simultaneously with the completion and 
certification of the home improvement work, the note is assigned by the 
dealer to a funding lender.
    Comments. The loan that is assigned to the funding lender is a loan 
covered by RESPA, when a lien is placed on the borrower's 1- to 4-family 
residential structure. The dealer loan or consumer credit contract 
originated by a dealer is also a RESPA-covered transaction, except when 
the dealer is not a ``creditor'' under the definition of ``federally 
related mortgage loan'' in Sec.  1024.2. The lender to whom the loan 
will be assigned is responsible for assuring that the lender or the 
dealer delivers to the borrower a Good Faith Estimate of closing costs 
consistent with Regulation X, and that the HUD-1 or HUD-1A Settlement 
Statement is used in conjunction with the settlement of the loan to be 
assigned. A dealer who, under Sec.  1024.2, is covered by RESPA as a 
creditor is responsible for the Good Faith Estimate of Closing Costs and 
the use of the appropriate settlement statement in connection with the 
loan.

[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 80105, Dec. 31, 2013]



  Sec. Appendix C to Part 1024--Instructions for Completing Good Faith 
                           Estimate (GFE) Form

    The following are instructions for completing the GFE required under 
section 5 of RESPA and 12 CFR 1024.7 of the Bureau regulations. The 
standardized form set forth in this Appendix is the required GFE form 
and must be provided exactly as specified; provided, however, preparers 
may replace HUD's OMB approval number listed on the form with the 
Bureau's OMB approval number when they reproduce the GFE form. The 
instructions for completion of the GFE are primarily for the benefit of 
the loan originator who prepares the form and need not be transmitted to 
the borrower(s) as an integral part of the GFE. The required 
standardized GFE form must be prepared completely and accurately. A 
separate GFE must be provided for each loan where a transaction will 
involve more than one mortgage loan.

                          General Instructions

    The loan originator preparing the GFE may fill in information and 
amounts on the form by typewriter, hand printing, computer printing, or 
any other method producing clear and legible results. Under these 
instructions, the ``form'' refers to the required standardized GFE form. 
Although the standardized GFE is a prescribed form, Blocks 3, 6, and 11 
on page 2 may be adapted for use in particular loan situations, so that 
additional lines may be inserted there, and unused lines may be deleted.
    All fees for categories of charges shall be disclosed in U.S. dollar 
and cent amounts.

[[Page 744]]

                          Specific Instructions

                                 Page 1

    Top of the Form--The loan originator must enter its name, business 
address, telephone number, and email address, if any, on the top of the 
form, along with the applicant's name, the address or location of the 
property for which financing is sought, and the date of the GFE.
    ``Purpose.''--This section describes the general purpose of the GFE 
as well as additional information available to the applicant.
    ``Shopping for your loan.''--This section requires no loan 
originator action.
    ``Important dates.''--This section briefly states important 
deadlines after which the loan terms that are the subject of the GFE may 
not be available to the applicant. In Line 1, the loan originator must 
state the date and, if necessary, time until which the interest rate for 
the GFE will be available. In Line 2, the loan originator must state the 
date until which the estimate of all other settlement charges for the 
GFE will be available. This date must be at least 10 business days from 
the date of the GFE. In Line 3, the loan originator must state how many 
calendar days within which the applicant must go to settlement once the 
interest rate is locked. In Line 4, the loan originator must state how 
many calendar days prior to settlement the interest rate would have to 
be locked, if applicable.
    ``Summary of your loan.''--In this section, for all loans the loan 
originator must fill in, where indicated:
    (i) The initial loan amount;
    (ii) The loan term; and
    (iii) The initial interest rate.
    For reverse mortgage transactions:
    (i) The initial loan amount disclosed on the GFE is the amount of 
the initial principal limit of the loan;
    (ii) The loan term is disclosed as ``N/A'' when the loan term is 
conditioned upon the occurrence of a specified event, such as the death 
of the borrower or the borrower no longer occupying the property for a 
certain period of time; and
    (iii) The initial interest rate is the interest rate indicated on 
the legal obligation.
    The loan originator must fill in the initial monthly amount owed for 
principal, interest, and any mortgage insurance. The amount shown must 
be the greater of: (1) The required monthly payment for principal and 
interest for the first regularly scheduled payment, plus any monthly 
mortgage insurance payment; or (2) the accrued interest for the first 
regularly scheduled payment, plus any monthly mortgage insurance 
payment. For reverse mortgage transactions where there are no regular 
payment periods, the loan originator must disclose ``Not Applicable'' or 
``N/A'' for the initial monthly amount owed for principal, interest, and 
any mortgage insurance.
    The loan originator must indicate whether the interest rate can 
rise, and, if it can, must insert the maximum rate to which it can rise 
over the life of the loan. The loan originator must also indicate the 
period of time after which the interest rate can first change.
    The loan originator must indicate whether the loan balance can rise 
even if the borrower makes payments on time, for example in the case of 
a loan with negative amortization. If it can, the loan originator must 
insert the maximum amount to which the loan balance can rise over the 
life of the loan. For Federal, State, local, or tribal housing programs 
that provide payment assistance, any repayment of such program 
assistance should be excluded from consideration in completing this 
item. If the loan balance will increase only because escrow items are 
being paid through the loan balance, the loan originator is not required 
to check the box indicating that the loan balance can rise. For reverse 
mortgage transactions, the loan originator must indicate that the loan 
balance can rise even if the borrower makes payments on time and the 
maximum amount to which the loan balance can rise must be disclosed as 
``Unknown.''
    The loan originator must indicate whether the monthly amount owed 
for principal, interest, and any mortgage insurance can rise even if the 
borrower makes payments on time. If the monthly amount owed can rise 
even if the borrower makes payments on time, the loan originator must 
indicate the period of time after which the monthly amount owed can 
first change, the maximum amount to which the monthly amount owed can 
rise at the time of the first change, and the maximum amount to which 
the monthly amount owed can rise over the life of the loan. The amount 
used for the monthly amount owed must be the greater of: (1) The 
required monthly payment for principal and interest for that month, plus 
any monthly mortgage insurance payment; or (2) the accrued interest for 
that month, plus any monthly mortgage insurance payment. For reverse 
mortgage transactions, the loan originator must disclose that the 
monthly amount owed for principal, interest, and any mortgage insurance 
cannot rise.
    The loan originator must indicate whether the loan includes a 
prepayment penalty, and, if so, the maximum amount that it could be.
    The loan originator must indicate whether the loan requires a 
balloon payment and, if so, the amount of the payment and in how many 
years it will be due. Reverse mortgage transactions are not considered 
to be balloon transactions for the purposes of this disclosure on the 
GFE.
    ``Escrow account information.''--The loan originator must indicate 
whether the loan includes an escrow account for property

[[Page 745]]

taxes and other financial obligations. The amount shown in the ``Summary 
of your loan'' section for ``Your initial monthly amount owed for 
principal, interest, and any mortgage insurance'' must be entered in the 
space for the monthly amount owed in this section. For reverse mortgage 
transactions where the lender will establish an arrangement to pay for 
such items as property taxes and homeowner's insurance through draws 
from the principal limit, the loan originator must indicate that an 
escrow account is included and the amount shown in this section must be 
disclosed as 'N/A.'
    ``Summary of your settlement charges.''--On this line, the loan 
originator must state the Adjusted Origination Charges from subtotal A 
of page 2, the Charges for All Other Settlement Services from subtotal B 
of page 2, and the Total Estimated Settlement Charges from the bottom of 
page 2.

                                 Page 2

    ``Understanding your estimated settlement charges.''--This section 
details 11 settlement cost categories and amounts associated with the 
mortgage loan. For purposes of determining whether a tolerance has been 
met, the amount on the GFE should be compared with the total of any 
amounts shown on the HUD-1 in the borrower's column and any amounts paid 
outside closing by or on behalf of the borrower.

                  ``Your Adjusted Origination Charges''

    Block 1, ``Our origination charge.''--The loan originator must state 
here all charges that all loan originators involved in this transaction 
will receive, except for any charge for the specific interest rate 
chosen (points). A loan originator may not separately charge any 
additional fees for getting this loan, including for application, 
processing, or underwriting. The amount stated in Block 1 is subject to 
zero tolerance, i.e., the amount may not increase at settlement.
    Block 2, ``Your credit or charge (points) for the specific interest 
rate chosen.''--For transactions involving mortgage brokers, the 
mortgage broker must indicate through check boxes whether there is a 
credit to the borrower for the interest rate chosen on the loan, the 
interest rate, and the amount of the credit, or whether there is an 
additional charge (points) to the borrower for the interest rate chosen 
on the loan, the interest rate, and the amount of that charge. Only one 
of the boxes may be checked; a credit and charge cannot occur together 
in the same transaction.
    For transactions without a mortgage broker, the lender may choose 
not to separately disclose in this block any credit or charge for the 
interest rate chosen on the loan; however, if this block does not 
include any positive or negative figure, the lender must check the first 
box to indicate that ``The credit or charge for the interest rate you 
have chosen'' is included in ``Our origination charge'' above (see Block 
1 instructions above), must insert the interest rate, and must also 
insert ``0'' in Block 2. Only one of the boxes may be checked; a credit 
and charge cannot occur together in the same transaction.
    For a mortgage broker, the credit or charge for the specific 
interest rate chosen is the net payment to the mortgage broker from the 
lender (i.e., the sum of all payments to the mortgage broker from the 
lender, including payments based on the loan amount, a flat rate, or any 
other computation, and in a table funded transaction, the loan amount 
less the price paid for the loan by the lender). When the net payment to 
the mortgage broker from the lender is positive, there is a credit to 
the borrower and it is entered as a negative amount in Block 2 of the 
GFE. When the net payment to the mortgage broker from the lender is 
negative, there is a charge to the borrower and it is entered as a 
positive amount in Block 2 of the GFE. If there is no net payment (i.e., 
the credit or charge for the specific interest rate chosen is zero), the 
mortgage broker must insert '0' in Block 2 and may check either the box 
indicating there is a credit of '0' or the box indicating there is a 
charge of '0.'
    The amount stated in Block 2 is subject to zero tolerance while the 
interest rate is locked, i.e., any credit for the interest rate chosen 
cannot decrease in absolute value terms and any charge for the interest 
rate chosen cannot increase. (Note: An increase in the credit is allowed 
since this increase is a reduction in cost to the borrower. A decrease 
in the credit is not allowed since it is an increase in cost to the 
borrower.)
    Line A, ``Your Adjusted Origination Charges.''--The loan originator 
must add the numbers in Blocks 1 and 2 and enter this subtotal at 
highlighted Line A. The subtotal at Line A will be a negative number if 
there is a credit in Block 2 that exceeds the charge in Block 1. The 
amount stated in Line A is subject to zero tolerance while the interest 
rate is locked.
    In the case of ``no cost'' loans, where ``no cost'' refers only to 
the loan originator's fees, Line A must show a zero charge as the 
adjusted origination charge. In the case of ``no cost'' loans where ``no 
cost'' encompasses third party fees as well as the upfront payment to 
the loan originator, all of the third party fees listed in Block 3 
through Block 11 to be paid for by the loan originator (or borrower, if 
any) must be itemized and listed on the GFE. The credit for the interest 
rate chosen must be large enough that the total for Line A will result 
in a negative number to cover the third party fees.

[[Page 746]]

           ``Your Charges for All Other Settlement Services''

    There is a 10 percent tolerance applied to the sum of the prices of 
each service listed in Block 3, Block 4, Block 5, Block 6, and Block 7, 
where the loan originator requires the use of a particular provider or 
the borrower uses a provider selected or identified by the loan 
originator. Any services in Block 4, Block 5, or Block 6 for which the 
borrower selects a provider other than one identified by the loan 
originator are not subject to any tolerance and, at settlement, would 
not be included in the sum of the charges on which the 10 percent 
tolerance is based. Where a loan originator permits a borrower to shop 
for third party settlement services, the loan originator must provide 
the borrower with a written list of settlement services providers at the 
time of the GFE, on a separate sheet of paper.
    Block 3, ``Required services that we select.''--In this block, the 
loan originator must identify each third party settlement service 
required and selected by the loan originator (excluding title services), 
along with the estimated price to be paid to the provider of each 
service. Examples of such third party settlement services might include 
provision of credit reports, appraisals, flood checks, tax services, and 
any upfront mortgage insurance premium. The loan originator must 
identify the specific required services and provide an estimate of the 
price of each service. Loan originators are also required to add the 
individual charges disclosed in this block and place that total in the 
column of this block. The charge shown in this block is subject to an 
overall 10 percent tolerance as described above.
    Block 4, ``Title services and lender's title insurance.''--In this 
block, the loan originator must state the estimated total charge for 
third party settlement service providers for all closing services, 
regardless of whether the providers are selected or paid for by the 
borrower, seller, or loan originator. The loan originator must also 
include any lender's title insurance premiums, when required, regardless 
of whether the provider is selected or paid for by the borrower, seller, 
or loan originator. All fees for title searches, examinations, and 
endorsements, for example, would be included in this total. The charge 
shown in this block is subject to an overall 10 percent tolerance as 
described above.
    Block 5, ``Owner's title insurance.''--In this block, for all 
purchase transactions the loan originator must provide an estimate of 
the charge for the owner's title insurance and related endorsements, 
regardless of whether the providers are selected or paid for by the 
borrower, seller, or loan originator. For non-purchase transactions, the 
loan originator may enter ``NA'' or ``Not Applicable'' in this Block. 
The charge shown in this block is subject to an overall 10 percent 
tolerance as described above.
    Block 6, ``Required services that you can shop for.''--In this 
block, the loan originator must identify each third party settlement 
service required by the loan originator where the borrower is permitted 
to shop for and select the settlement service provider (excluding title 
services), along with the estimated charge to be paid to the provider of 
each service. The loan originator must identify the specific required 
services (e.g., survey, pest inspection) and provide an estimate of the 
charge of each service. The loan originator must also add the individual 
charges disclosed in this block and place the total in the column of 
this block. The charge shown in this block is subject to an overall 10 
percent tolerance as described above.
    Block 7, ``Government recording charge.''--In this block, the loan 
originator must estimate the State and local government fees for 
recording the loan and title documents that can be expected to be 
charged at settlement. The charge shown in this block is subject to an 
overall 10 percent tolerance as described above.
    Block 8, ``Transfer taxes.''--In this block, the loan originator 
must estimate the sum of all State and local government fees on 
mortgages and home sales that can be expected to be charged at 
settlement, based upon the proposed loan amount or sales price and on 
the property address. A zero tolerance applies to the sum of these 
estimated fees.
    Block 9, ``Initial deposit for your escrow account.''--In this 
block, the loan originator must estimate the amount that it will require 
the borrower to place into a reserve or escrow account at settlement to 
be applied to recurring charges for property taxes, homeowner's and 
other similar insurance, mortgage insurance, and other periodic charges. 
The loan originator must indicate through check boxes if the reserve or 
escrow account will cover future payments for all tax, all hazard 
insurance, and other obligations that the loan originator requires to be 
paid as they fall due. If the reserve or escrow account includes some, 
but not all, property taxes or hazard insurance, or if it includes 
mortgage insurance, the loan originator should check ``other'' and then 
list the items included.
    Block 10, ``Daily interest charges.''--In this block, the loan 
originator must estimate the total amount that will be due at settlement 
for the daily interest on the loan from the date of settlement until the 
first day of the first period covered by scheduled mortgage payments. 
The loan originator must also indicate how this total amount is 
calculated by providing the amount of the interest charges per day and 
the number of days used in the calculation, based on a stated projected 
closing date.

[[Page 747]]

    Block 11, ``Homeowner's insurance.''--The loan originator must 
estimate in this block the total amount of the premiums for any hazard 
insurance policy and other similar insurance, such as fire or flood 
insurance that must be purchased at or before settlement to meet the 
loan originator's requirements. The loan originator must also separately 
indicate the nature of each type of insurance required along with the 
charges. To the extent a loan originator requires that such insurance be 
part of an escrow account, the amount of the initial escrow deposit must 
be included in Block 9.
    Line B, ``Your Charges for All Other Settlement Services.''--The 
loan originator must add the numbers in Blocks 3 through 11 and enter 
this subtotal in the column at highlighted Line B.
    Line A + B, ``Total Estimated Settlement Charges.''--The loan 
originator must add the subtotals in the right-hand column at 
highlighted Lines A and B and enter this total in the column at 
highlighted Line A + B.

                                 Page 3

                            ``Instructions''

    ``Understanding which charges can change at settlement.''--This 
section informs the applicant about which categories of settlement 
charges can increase at closing, and by how much, and which categories 
of settlement charges cannot increase at closing. This section requires 
no loan originator action.
    ``Using the tradeoff table.''--This section is designed to make 
borrowers aware of the relationship between their total estimated 
settlement charges on one hand, and the interest rate and resulting 
monthly payment on the other hand. The loan originator must complete the 
left hand column using the loan amount, interest rate, monthly payment 
figure, and the total estimated settlement charges from page 1 of the 
GFE. The loan originator, at its option, may provide the borrower with 
the same information for two alternative loans, one with a higher 
interest rate, if available, and one with a lower interest rate, if 
available, from the loan originator. The loan originator should list in 
the tradeoff table only alternative loans for which it would presently 
issue a GFE based on the same information the loan originator considered 
in issuing this GFE. The alternative loans must use the same loan amount 
and be otherwise identical to the loan in the GFE. The alternative loans 
must have, for example, the identical number of payment periods; the 
same margin, index, and adjustment schedule if the loans are adjustable 
rate mortgages; and the same requirements for prepayment penalty and 
balloon payments. If the loan originator fills in the tradeoff table, 
the loan originator must show the borrower the loan amount, alternative 
interest rate, alternative monthly payment, the change in the monthly 
payment from the loan in this GFE to the alternative loan, the change in 
the total settlement charges from the loan in this GFE to the 
alternative loan, and the total settlement charges for the alternative 
loan. If these options are available, an applicant may request a new 
GFE, and a new GFE must be provided by the loan originator.
    ``Using the shopping chart.''--This chart is a shopping tool to be 
provided by the loan originator for the borrower to complete, in order 
to compare GFEs.
    ``If your loan is sold in the future.''--This section requires no 
loan originator action.

[[Page 748]]

[GRAPHIC] [TIFF OMITTED] TR20DE11.006


[[Page 749]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.007


[[Page 750]]


[GRAPHIC] [TIFF OMITTED] TR20DE11.008


[[Page 751]]



[76 FR 78981, Dec. 20, 2011, as amended at 78 FR 80105, Dec. 31, 2013]



Sec. Appendix D to Part 1024--Affiliated Business Arrangement Disclosure 
                         Statement Format Notice

To:_____________________________________________________________________
From:___________________________________________________________________
 (Entity Making Statement)
Property:_______________________________________________________________
Date:___________________________________________________________________

    This is to give you notice that [referring party] has a business 
relationship with [settlement services provider(s)]. [Describe the 
nature of the relationship between the referring party and the 
provider(s), including percentage of ownership interest, if applicable.] 
Because of this relationship, this referral may provide [referring 
party] a financial or other benefit.
    [A.] Set forth below is the estimated charge or range of charges for 
the settlement services listed. You are NOT required to use the listed 
provider(s) as a condition for [settlement of your loan on] [or] 
[purchase, sale, or refinance of] the subject property. THERE ARE 
FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR 
SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE 
RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.

[provider and settlement service]_______________________________________
________________________________________________________________________
________________________________________________________________________
[charge or range of charges]____________________________________________
________________________________________________________________________
________________________________________________________________________

    [B.] Set forth below is the estimated charge or range of charges for 
the settlement services of an attorney, credit reporting agency, or real 
estate appraiser that we, as your lender, will require you to use, as a 
condition of your loan on this property, to represent our interests in 
the transaction.

[provider and settlement service]_______________________________________
________________________________________________________________________
________________________________________________________________________
[charge or range of charges]____________________________________________
________________________________________________________________________
________________________________________________________________________

                             ACKNOWLEDGMENT

    I/we have read this disclosure form, and understand that referring 
party is referring me/us to purchase the above-described settlement 
service(s) and may receive a financial or other benefit as the result of 
this referral.
________________________________________________________________________
Signature

[INSTRUCTIONS TO PREPARER:] [Use paragraph A for referrals other than 
those by a lender to an attorney, a credit reporting agency, or a real 
estate appraiser that a lender is requiring a borrower to use to 
represent the lender's interests in the transaction. Use paragraph B for 
those referrals to an attorney, credit reporting agency, or real estate 
appraiser that a lender is requiring a borrower to use to represent the 
lender's interests in the transaction. When applicable, use both 
paragraphs. Specific timing rules for delivery of the affiliated 
business disclosure statement are set forth in 12 CFR 1024.15(b)(1) of 
Regulation X). These INSTRUCTIONS TO PREPARER should not appear on the 
statement.]



             Sec. Appendix E to Part 1024--Arithmetic Steps

               I. Example Illustrating Aggregate Analysis

                               Assumptions

                             Disbursements:

$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10

          Cushion: One-sixth of estimated annual disbursements

                           Settlement: May 15

                          First Payment: July 1

                      Step 1--Initial Trial Balance
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0        0
Jul..........................................      130      500     -370
Aug..........................................      130        0     -240
Sep..........................................      130      360     -470
Oct..........................................      130        0     -340
Nov..........................................      130        0     -210
Dec..........................................      130      700     -780
Jan..........................................      130        0     -650
Feb..........................................      130        0     -520
Mar..........................................      130        0     -390
Apr..........................................      130        0     -260
May..........................................      130        0     -130
Jun..........................................      130        0        0
------------------------------------------------------------------------


                     Step 2--Adjusted Trial Balance
       [Increase monthly balances to eliminate negative balances]
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0      780
Jul..........................................      130      500      410
Aug..........................................      130        0      540
Sep..........................................      130      360      310
Oct..........................................      130        0      440
Nov..........................................      130        0      570
Dec..........................................      130      700        0

[[Page 752]]

 
Jan..........................................      130        0      130
Feb..........................................      130        0      260
Mar..........................................      130        0      390
Apr..........................................      130        0      520
May..........................................      130        0      650
Jun..........................................      130        0      780
------------------------------------------------------------------------


                   Step 3--Trial Balance With Cushion
------------------------------------------------------------------------
                                                       Aggregate
                                              --------------------------
                                                 pmt      disb     bal
------------------------------------------------------------------------
Jun..........................................        0        0     1040
Jul..........................................      130      500      670
Aug..........................................      130        0      800
Sep..........................................      130      360      570
Oct..........................................      130        0      700
Nov..........................................      130        0      830
Dec..........................................      130      700      260
Jan..........................................      130        0      390
Feb..........................................      130        0      520
Mar..........................................      130        0      650
Apr..........................................      130        0      780
May..........................................      130        0      910
Jun..........................................      130        0     1040
------------------------------------------------------------------------

              II. Example Illustrating Single-Item Analysis

                               Assumptions

                             Disbursements:

$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10

          Cushion: One-sixth of estimated annual disbursements

                           Settlement: May 15

                          First Payment: July 1

                                          Step 1--Initial Trial Balance
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
June..............................            0            0            0            0            0            0
July..............................          100          500         -400           30            0           30
August............................          100            0         -300           30            0           60
September.........................          100            0         -200           30          360         -270
October...........................          100            0         -100           30            0         -240
November..........................          100            0            0           30            0         -210
December..........................          100          700         -600           30            0         -180
January...........................          100            0         -500           30            0         -150
February..........................          100            0         -400           30            0         -120
March.............................          100            0         -300           30            0          -90
April.............................          100            0         -200           30            0          -60
May...............................          100            0         -100           30            0          -30
June..............................          100            0            0           30            0            0
----------------------------------------------------------------------------------------------------------------


                                         Step 2--Adjusted Trial Balance
                           [Increase monthly balances to eliminate negative balances]
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
Jun...............................            0            0          600            0            0          270
Jul...............................          100          500          200           30            0          300
Aug...............................          100            0          300           30            0          330
Sep...............................          100            0          400           30          360            0
Oct...............................          100            0          500           30            0           30
Nov...............................          100            0          600           30            0           60
Dec...............................          100          700            0           30            0           90
Jan...............................          100            0          100           30            0          120
Feb...............................          100            0          200           30            0          150
Mar...............................          100            0          300           30            0          180
Apr...............................          100            0          400           30            0          210
May...............................          100            0          500           30            0          240

[[Page 753]]

 
Jun...............................          100            0          600           30            0          270
----------------------------------------------------------------------------------------------------------------


                                       Step 3--Trial Balance With Cushion
----------------------------------------------------------------------------------------------------------------
                                                                     Single-item
                                   -----------------------------------------------------------------------------
                                                    Taxes                               School taxes
                                   -----------------------------------------------------------------------------
                                        pmt          disb         bal          pmt          disb         bal
----------------------------------------------------------------------------------------------------------------
Jun...............................            0            0          800            0            0          330
Jul...............................          100          500          400           30            0          360
Aug...............................          100            0          500           30            0          390
Sep...............................          100            0          600           30          360           60
Oct...............................          100            0          700           30            0           90
Nov...............................          100            0          800           30            0          120
Dec...............................          100          700          200           30            0          150
Jan...............................          100            0          300           30            0          180
Feb...............................          100            0          400           30            0          210
Mar...............................          100            0          500           30            0          240
Apr...............................          100            0          600           30            0          270
May...............................          100            0          700           30            0          300
Jun...............................          100            0          800           30            0          330
----------------------------------------------------------------------------------------------------------------



            Sec. Appendix MS to Part 1024--Mortgage Servicing





                     Sec. Appendix MS-1 to Part 1024

    [Sample language; use business stationery or similar heading]
    [Date]

   SERVICING DISCLOSURE STATEMENT NOTICE TO FIRST LIEN MORTGAGE LOAN 
  APPLICANTS: THE RIGHT TO COLLECT YOUR MORTGAGE LOAN PAYMENTS MAY BE 
                               TRANSFERRED

    You are applying for a mortgage loan covered by the Real Estate 
Settlement Procedures Act (RESPA) (12 U.S.C. 2601 et seq.). RESPA gives 
you certain rights under Federal law. This statement describes whether 
the servicing for this loan may be transferred to a different loan 
servicer. ``Servicing'' refers to collecting your principal, interest, 
and escrow payments, if any, as well as sending any monthly or annual 
statements, tracking account balances, and handling other aspects of 
your loan. You will be given advance notice before a transfer occurs.

                     Servicing Transfer Information

    [We may assign, sell, or transfer the servicing of your loan while 
the loan is outstanding.]
    [or]
    [We do not service mortgage loans of the type for which you applied. 
We intend to assign, sell, or transfer the servicing of your mortgage 
loan before the first payment is due.]
    [or]
    [The loan for which you have applied will be serviced at this 
financial institution and we do not intend to sell, transfer, or assign 
the servicing of the loan.]
    [INSTRUCTIONS TO PREPARER: Insert the date and select the 
appropriate language under ``Servicing Transfer Information.'' The model 
format may be annotated with further information that clarifies or 
enhances the model language.]



                     Sec. Appendix MS-2 to Part 1024

                      Notice of Servicing Transfer

    The servicing of your mortgage loan is being transferred, effective 
[Date]. This means that after this date, a new servicer will be 
collecting your mortgage loan payments from you. Nothing else about your 
mortgage loan will change.
    [Name of present servicer] is now collecting your payments. [Name of 
present servicer] will stop accepting payments received from you after 
[Date].
    [Name of new servicer] will collect your payments going forward. 
Your new servicer will start accepting payments received from you on 
[Date].

[[Page 754]]

    Send all payments due on or after [Date] to [Name of new servicer] 
at this address: [New servicer address].
    If you have any questions for either your present servicer, [Name of 
present servicer] or your new servicer [Name of new servicer], about 
your mortgage loan or this transfer, please contact them using the 
information below:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Current Servicer:                    New Servicer:
[Name of present servicer]           [Name of new servicer]
[Individual or Department]           [Individual or Department]
[Telephone Number]                   [Telephone Number]
[Address]                            [Address]
------------------------------------------------------------------------

    [Use this paragraph if appropriate; otherwise omit.] Important note 
about insurance: If you have mortgage life or disability insurance or 
any other type of optional insurance, the transfer of servicing rights 
may affect your insurance in the following way:

________________________________________________________________________

    You should do the following to maintain coverage:

________________________________________________________________________

    Under Federal law, during the 60-day period following the effective 
date of the transfer of the loan servicing, a loan payment received by 
your old servicer on or before its due date may not be treated by the 
new servicer as late, and a late fee may not be imposed on you.
________________________________________________________________________
[NAME OF PRESENT SERVICER]

________________________________________________________________________
Date

[and] [or]

________________________________________________________________________
[NAME OF NEW SERVICER]

________________________________________________________________________
Date

[78 FR 10886, Feb. 14, 2013]



                     Sec. Appendix MS-3 to Part 1024

                Model Force-Placed Insurance Notice Forms

                            Table of Contents

MS-3(A)--Model Form for Force-Placed Insurance Notice Containing 
          Information Required by Sec.  1024.37(c)(2)
MS-3(B)--Model Form for Force-Placed Insurance Notice Containing 
          Information Required by Sec.  1024.37(d)(2)(i)
MS-3(C)--Model Form for Force-Placed Insurance Notice Containing 
          Information Required by Sec.  1024.37(d)(2)(ii)
MS-3(D)--Model Form for Force-Placed Insurance Notice Containing 
          Information Required by Sec.  1024.37(e)(2)

    MS-3(A)--Model Form for Force-Placed Insurance Notice Containing 
               Information Required by Sec.  1024.37(c)(2)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Please provide insurance information for [Property Address]
Dear [Borrower's Name]:

    Our records show that your [hazard] [Insurance Type] insurance [is 
expiring] [expired] [provides insufficient coverage], and we do not have 
evidence that you have obtained new coverage. Because [hazard] 
[Insurance Type] insurance is required on your property, [we bought 
insurance for your property] [we plan to buy insurance for your 
property]. You must pay us for any period during which the insurance we 
buy is in effect but you do not have insurance.
    You should immediately provide us with your insurance information. 
[Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    The insurance we [bought] [buy]:
     May be significantly more expensive than the 
insurance you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

    MS-3(B)--Model Form for Force-Placed Insurance Notice Containing 
             Information Required by Sec.  1024.37(d)(2)(i)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Second and final notice--please provide insurance information 
for [Property Address]
Dear [Borrower's Name]:

    This is your second and final notice that our records show that your 
[hazard] [Insurance Type] insurance [is expiring] [expired] [provides 
insufficient coverage], and we do not have evidence that you have 
obtained new coverage. Because [hazard] [Insurance Type] insurance is 
required on your property, [we bought insurance for your property] [we 
plan to buy insurance for your property]. You must pay us for any period 
during which the insurance we buy is in effect but you do not have 
insurance.
    You should immediately provide us with your insurance information. 
[Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    The insurance we [bought] [buy]:

[[Page 755]]

     [Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be significantly more expensive 
than insurance you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

    MS-3(C)--Model Form for Force-Placed Insurance Notice Containing 
             Information Required by Sec.  1024.37(d)(2)(ii)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Second and final notice--please provide insurance information 
for [Property Address]
Dear [Borrower's Name]:

    We received the insurance information you provided, but we are 
unable to verify coverage from [Date Range].
    Please provide us with insurance information for [Date Range] 
immediately.
    We will charge you for insurance we [bought] [plan to buy] for [Date 
Range] unless we can verify that you have insurance coverage for [Date 
Range].
    The insurance we [bought] [buy]:
     [Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be significantly more expensive 
than insurance you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

    MS-3(D)--Model Form for Force-Placed Insurance Notice Containing 
               Information Required by Sec.  1024.37(e)(2)

[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower's Name]
[Borrower's Mailing Address]
Subject: Please update insurance information for [Property Address]
Dear [Borrower's Name]:

    Because we did not have evidence that you had [hazard] [Insurance 
Type] insurance on the property listed above, we bought insurance on 
your property and added the cost to your mortgage loan account.
    The policy that we bought [expired] [is scheduled to expire]. 
Because [hazard][Insurance Type] insurance] is required on your 
property, we intend to maintain insurance on your property by renewing 
or replacing the insurance we bought.
    The insurance we buy:
     [Costs $[premium charge]] [Will cost an estimated 
$[premium charge]] annually, which may be significantly more expensive 
than insurance you can buy yourself.
     May not provide as much coverage as an insurance 
policy you buy yourself.
    If you buy [hazard] [Insurance Type] insurance, you should 
immediately provide us with your insurance information.
    [Describe the insurance information the borrower must provide]. [The 
information must be provided in writing.]
    If you have any questions, please contact us at [telephone number].
    [If applicable, provide a statement advising a borrower to review 
additional information provided in the same transmittal.]

[81 FR 72376, Oct. 19, 2016]



  Sec. Appendix MS-4 to Part 1024--Model Clauses for the Written Early 
                           Intervention Notice

MS-4(A)--Statement Encouraging the Borrower To Contact the Servicer and 
      Additional Information About Loss Mitigation Options (Sec.  
                    1024.39(b)(2)(i), (ii) and (iv))

    Call us today to learn more about your options and instructions for 
how to apply. [The longer you wait, or the further you fall behind on 
your payments, the harder it will be to find a solution.]
[Servicer Name]
[Servicer Address]
[Servicer Telephone Number]
[For more information, visit [Servicer Web site] [and][or] [Email 
Address]].

  MS-4(B)--Available Loss Mitigation Options (Sec.  1024.39(b)(2)(iii))

    [If you need help, the following options may be possible (most are 
subject to lender approval):]
     [Refinance your loan with us or another lender;]
     [Modify your loan terms with us;]
     [Payment forbearance temporarily gives you more 
time to pay your monthly payment;] [or]
     [If you are not able to continue paying your 
mortgage, your best option may be to find more affordable housing. As an 
alternative to foreclosure, you may be able to sell your home and use 
the proceeds to pay off your current loan.]

          MS-4(C)--Housing Counselors (Sec.  1024.39(b)(2)(v))

    For help exploring your options, the Federal government provides 
contact information for housing counselors, which you can

[[Page 756]]

access by contacting [the Consumer Financial Protection Bureau at 
[Bureau Housing Counselor List Web site]] [the Department of Housing and 
Urban Development at [HUD Housing Counselor List Web site]] or by 
calling [HUD Housing Counselor List Telephone Number].

  MS-4(D)--Written Early Intervention Notice for Servicers Subject to 
                    FDCPA (Sec.  1024.39(d)(2)(iii))

    This is a legally required notice. We are sending this notice to you 
because you are behind on your mortgage payment. We want to notify you 
of possible ways to avoid losing your home. We have a right to invoke 
foreclosure based on the terms of your mortgage contract. Please read 
this letter carefully.

[78 FR 10887, Feb. 14, 2013, as amended at 81 FR 72376, Oct. 19, 2016; 
82 FR 30948, July 5, 2017]



     Sec. Supplement I to Part 1024--Official Bureau Interpretations

                              Introduction

    1. Official status. This commentary is the primary vehicle by which 
the Bureau of Consumer Financial Protection issues official 
interpretations of Regulation X. Good faith compliance with this 
commentary affords protection from liability under section 19(b) of the 
Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2617(b).
    2. Requests for official interpretations. A request for an official 
interpretation shall be in writing and addressed to the Assistant 
Director, Office of Regulations, Division of Research, Monitoring, and 
Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW, 
Washington, DC 20552. A request shall contain a complete statement of 
all relevant facts concerning the issue, including copies of all 
pertinent documents. Except in unusual circumstances, such official 
interpretations will not be issued separately but will be incorporated 
in the official commentary to this part, which will be amended 
periodically. No official interpretations will be issued approving 
financial institutions' forms or statements. This restriction does not 
apply to forms or statements whose use is required or sanctioned by a 
government agency.
    3. Unofficial oral interpretations. Unofficial oral interpretations 
may be provided at the discretion of Bureau staff. Written requests for 
such interpretations should be sent to the address set forth for 
official interpretations. Unofficial oral interpretations provide no 
protection under section 19(b) of RESPA. Ordinarily, staff will not 
issue unofficial oral interpretations on matters adequately covered by 
this part or the official Bureau interpretations.
    4. Rules of construction. (a) Lists that appear in the commentary 
may be exhaustive or illustrative; the appropriate construction should 
be clear from the context. In most cases, illustrative lists are 
introduced by phrases such as ``including, but not limited to,'' ``among 
other things,'' ``for example,'' or ``such as.''
    (b) Throughout the commentary, reference to ``this section'' or 
``this paragraph'' means the section or paragraph in the regulation that 
is the subject of the comment.
    5. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that the 
comment interprets. The comments are designated with as much specificity 
as possible according to the particular regulatory provision addressed. 
For example, some of the comments to Sec.  1024.37(c)(1) are further 
divided by subparagraph, such as comment 37(c)(1)(i)-1. In other cases, 
comments have more general application and are designated, for example, 
as comment 40(a)-1. This introduction may be cited as comments I-1 
through I-5.

                      Subpart A--General Provisions

                    Section 1024.5 Coverage of RESPA

                      5(c) Relation to State laws.

                           Paragraph 5(c)(1).

    1. State laws that are inconsistent with the requirements of RESPA 
or Regulation X may be preempted by RESPA or Regulation X. State laws 
that give greater protection to consumers are not inconsistent with and 
are not preempted by RESPA or Regulation X. In addition, nothing in 
RESPA or Regulation X should be construed to preempt the entire field of 
regulation of the practices covered by RESPA or Regulation X, including 
the regulations in Subpart C with respect to mortgage servicers or 
mortgage servicing.

      Subpart B--Mortgage Settlement and Escrow Accounts [Reserved]

                     Section 1024.17 Escrow Accounts

                         17(k) Timely payments.

              17(k)(5) Timely payment of hazard insurance.

                17(k)(5)(ii) Inability to disburse funds.

                  17(k)(5)(ii)(A)When inability exists.

    1. Examples of reasonable basis to believe that a policy has been 
cancelled or not renewed. The following are examples of where a servicer 
has a reasonable basis to believe that a borrower's hazard insurance 
policy has been canceled or not renewed for reasons other than the 
nonpayment of premium charges:
    i. A borrower notifies a servicer that the borrower has cancelled 
the hazard insurance

[[Page 757]]

coverage, and the servicer has not received notification of other hazard 
insurance coverage.
    ii. A servicer receives a notification of cancellation or non-
renewal from the borrower's insurance company before payment is due on 
the borrower's hazard insurance.
    iii. A servicer does not receive a payment notice by the expiration 
date of the borrower's hazard insurance policy.
    17(k)(5)(ii)(C) Recoupment for advances.
    1. Month-to-month advances. A servicer that advances the premium 
payment to be disbursed from an escrow account may advance the payment 
on a month-to-month basis, if permitted by State or other applicable law 
and accepted by the borrower's hazard insurance company.

                      Subpart C--Mortgage Servicing

                          Sec.  1024.30--Scope

    30(b) Exemptions.
    1. Exemption for Farm Credit System institutions. Pursuant to 12 CFR 
617.7000, certain servicers may be considered ``qualified lenders'' only 
with respect to loans discounted or pledged pursuant to 12 U.S.C. 
2015(b)(1). To the extent a servicer, as defined in RESPA, services a 
mortgage loan that has not been discounted or pledged pursuant to 12 
U.S.C. 2015(b)(1), and is not subject to the requirements set forth in 
12 CFR 617, the servicer may be required to comply with the requirements 
of Sec. Sec.  1024.38 through 41 with respect to that mortgage loan.
    Paragraph 30(c)(2).
    1. Principal residence. If a property ceases to be a borrower's 
principal residence, the procedures set forth in Sec. Sec.  1024.39 
through 1024.41 do not apply to a mortgage loan secured by that 
property. Determination of principal residence status will depend on the 
specific facts and circumstances regarding the property and applicable 
State law. For example, a vacant property may still be a borrower's 
principal residence.
    30(d) Successors in interest.
    1. Treatment of confirmed successors in interest. Under Sec.  
1024.30(d), a confirmed successor in interest must be considered a 
borrower for purposes of this subpart and Sec.  1024.17, regardless of 
whether the successor in interest assumes the mortgage loan obligation 
under State law. For example, if a servicer receives a loss mitigation 
application from a confirmed successor in interest, the servicer must 
review and evaluate the application and notify the confirmed successor 
in interest in accordance with the procedures set forth in Sec.  1024.41 
if the property is the confirmed successor in interest's principal 
residence and the procedures set forth in Sec.  1024.41 are otherwise 
applicable. Treatment of a confirmed successor in interest as a borrower 
for purposes of this subpart and Sec.  1024.17 does not affect whether 
the confirmed successor in interest is subject to the contractual 
obligations of the mortgage loan agreement, which is determined by 
applicable State law. 2Communications in compliance with this part to a 
confirmed successor in interest as defined in Sec.  1024.31 do not 
violate section 805(b) of the Fair Debt Collection Practices Act (FDCPA) 
because consumer for purposes of FDCPA section 805 includes any person 
who meets the definition in this part of confirmed successor in 
interest.
    2. Assumption of the mortgage loan obligation. A servicer may not 
require a confirmed successor in interest to assume the mortgage loan 
obligation under State law to be considered a borrower for purposes of 
Sec.  1024.17 and this subpart. If a successor in interest assumes a 
mortgage loan obligation under State law or is otherwise liable on the 
mortgage loan obligation, the protections that the successor in interest 
enjoys under this part are not limited to the protections that apply 
under Sec.  1024.30(d) to a confirmed successor in interest.
    3. Treatment of transferor borrowers. Even after a servicer's 
confirmation of a successor in interest, the servicer is still required 
to comply with all applicable requirements of this subpart with respect 
to the transferor borrower.

                       Sec.  1024.31--Definitions

    Delinquency.
    1. Length of delinquency. A borrower's delinquency begins on the 
date an amount sufficient to cover a periodic payment of principal, 
interest, and, if applicable, escrow becomes due and unpaid, and lasts 
until such time as no periodic payment is due and unpaid, even if the 
borrower is afforded a period after the due date to pay before the 
servicer assesses a late fee.
    2. Application of funds. If a servicer applies payments to the 
oldest outstanding periodic payment, a payment by a delinquent borrower 
advances the date the borrower's delinquency began. For example, assume 
a borrower's mortgage loan obligation provides that a periodic payment 
sufficient to cover principal, interest, and escrow is due on the first 
of each month. The borrower fails to make a payment on January 1 or on 
any day in January, and on January 31 the borrower is 30 days 
delinquent. On February 3, the borrower makes a periodic payment. The 
servicer applies the payment it received on February 3 to the 
outstanding January payment. On February 4, the borrower is three days 
delinquent.
    3. Payment tolerance. For any given billing cycle for which a 
borrower's payment is less than the periodic payment due, if a servicer 
chooses not to treat a borrower as delinquent for purposes of any 
section of this subpart, that borrower is not delinquent as defined in 
Sec.  1024.31.

[[Page 758]]

    4. Creditor's contract rights. This subpart does not prevent a 
creditor from exercising a right provided by a mortgage loan contract to 
accelerate payment for a breach of that contract. Failure to pay the 
amount due after the creditor accelerates the mortgage loan obligation 
in accordance with the mortgage loan contract would begin or continue 
delinquency.
    Loss mitigation application.
    1. Borrower's representative. A loss mitigation application is 
deemed to be submitted by a borrower if the loss mitigation application 
is submitted by an agent of the borrower. Servicers may undertake 
reasonable procedures to determine if a person that claims to be an 
agent of a borrower has authority from the borrower to act on the 
borrower's behalf.
    Loss mitigation option.
    1. Types of loss mitigation options. Loss mitigation options include 
temporary and long-term relief, including options that allow borrowers 
who are behind on their mortgage payments to remain in their homes or to 
leave their homes without a foreclosure, such as, without limitation, 
refinancing, trial or permanent modification, repayment of the amount 
owed over an extended period of time, forbearance of future payments, 
short-sale, deed-in-lieu of foreclosure, and loss mitigation programs 
sponsored by a locality, a State, or the Federal government.
    2. Available through the servicer. A loss mitigation option 
available through the servicer refers to an option for which a borrower 
may apply, even if the borrower ultimately does not qualify for such 
option.
    Qualified written request.
    1. A qualified written request is a written notice a borrower 
provides to request a servicer either correct an error relating to the 
servicing of a mortgage loan or to request information relating to the 
servicing of the mortgage loan. A qualified written request is not 
required to include both types of requests. For example, a qualified 
written request may request information relating to the servicing of a 
mortgage loan but not assert that an error relating to the servicing of 
a loan has occurred.
    2. A qualified written request is just one form that a written 
notice of error or information request may take. Thus, the error 
resolution and information request requirements in Sec. Sec.  1024.35 
and 1024.36 apply as set forth in those sections irrespective of whether 
the servicer receives a qualified written request.
    Service provider.
    1. Service providers may include attorneys retained to represent a 
servicer or an owner or assignee of a mortgage loan in a foreclosure 
proceeding, as well as other professionals retained to provide 
appraisals or inspections of properties.
    Successor in interest.
    1. Joint tenants and tenants by the entirety. If a borrower who has 
an ownership interest as a joint tenant or tenant by the entirety in a 
property securing a mortgage loan subject to this subpart dies, a 
surviving joint tenant or tenant by the entirety with a right of 
survivorship in the property is a successor in interest as defined in 
Sec.  1024.31.
    2. Beneficiaries of inter vivos trusts. In the event of a transfer 
into an inter vivos trust in which the borrower is and remains a 
beneficiary and which does not relate to a transfer of rights of 
occupancy in the property, the beneficiaries of the inter vivos trust 
rather than the inter vivos trust itself are considered to be the 
successors in interest for purposes of Sec.  1024.31. For example, 
assume Borrower A transfers her home into such an inter vivos trust for 
the benefit of her spouse and herself. As of the transfer date, Borrower 
A and her spouse would be considered successors in interest and, upon 
confirmation, would be borrowers for purposes of certain provisions of 
Regulation X. If the lender has not released Borrower A from the loan 
obligation, Borrower A would also remain a borrower more generally for 
purposes of Regulation X.

             Sec.  1024.32--General Disclosure Requirements.

    32(c) Confirmed successors in interest.
    32(c)(1) Optional notice with acknowledgment form.
    1. A servicer may identify in the acknowledgment form examples of 
the types of notices and communications identified in Sec.  
1024.32(c)(1)(iii), such as periodic statements and mortgage servicing 
transfer notices. Any examples provided should be the types of notices 
or communications that would be available to a confirmed successor in 
interest if the confirmed successor in interest executed the 
acknowledgment and returned it to the servicer.
    32(c)(2) Effect of failure to execute acknowledgment.
    1. No time limit to return acknowledgment. A confirmed successor in 
interest may provide an executed acknowledgment that complies with Sec.  
1024.32(c)(1)(iv) to the servicer at any time after confirmation.
    2. Effect of revocation of acknowledgment. If a confirmed successor 
in interest who is not liable on the mortgage loan obligation executes 
and then later revokes an acknowledgment pursuant to Sec.  
1024.32(c)(1)(iv), the servicer is not required to provide to the 
confirmed successor in interest any written disclosure required by Sec.  
1024.17, Sec.  1024.33, Sec.  1024.34, Sec.  1024.37, or Sec.  1024.39 
or to comply with the live contact requirements in Sec.  1024.39(a) with 
respect to the confirmed successor in interest from the date the 
revocation is received until the confirmed successor in interest either 
assumes the mortgage loan obligation under State law or executes a new 
acknowledgment that complies

[[Page 759]]

with Sec.  1024.32(c)(1)(iv) and provides it to the servicer.
    32(c)(4) Multiple notices unnecessary.
    1. Specific written disclosure. A servicer may rely on Sec.  
1024.32(c)(4) if the servicer provides a specific written disclosure 
required by Sec.  1024.17, Sec.  1024.33, Sec.  1024.34, Sec.  1024.37, 
or Sec.  1024.39(b) to another borrower. For example, a servicer is not 
required to provide a force-placed insurance notice required under Sec.  
1024.37 to a confirmed successor in interest if the servicer is 
providing the same force-placed insurance notice to a transferor 
borrower or to another confirmed successor in interest.

               Sec.  1024.33--Mortgage Servicing Transfers

    33(a) Servicing disclosure statement.
    1. Terminology. Although the servicing disclosure statement must be 
clear and conspicuous pursuant to Sec.  1024.32(a), Sec.  1024.33(a) 
does not set forth any specific rules for the format of the statement, 
and the specific language of the servicing disclosure statement in 
appendix MS-1 is not required to be used. The model format may be 
supplemented with additional information that clarifies or enhances the 
model language.
    2. Delivery to co-applicants. If co-applicants indicate the same 
address on their application, one copy delivered to that address is 
sufficient. If different addresses are shown by co-applicants on the 
application, a copy must be delivered to each of the co-applicants.
    3. Lender servicing. If the lender, mortgage broker who anticipates 
using table funding, or dealer in a first lien dealer loan knows at the 
time of making the disclosure whether it will service the mortgage loan 
for which the applicant has applied, the disclosure must, as applicable, 
state that such entity will service such loan and does not intend to 
sell, transfer, or assign the servicing of the loan, or that such entity 
intends to assign, sell, or transfer servicing of such mortgage loan 
before the first payment is due. In all other instances, a disclosure 
that states that the servicing of the loan may be assigned, sold, or 
transferred while the loan is outstanding complies with Sec.  
1024.33(a).
    33(b) Notices of transfer of loan servicing.
    Paragraph 33(b)(3).
    1. Delivery. A servicer mailing the notice of transfer must deliver 
the notice to the mailing address (or addresses) listed by the borrower 
in the mortgage loan documents, unless the borrower has notified the 
servicer of a new address (or addresses) pursuant to the servicer's 
requirements for receiving a notice of a change of address.
    33(c) Borrower payments during transfer of servicing.
    33(c)(1) Payments not considered late.
    1. Late fees prohibited. The prohibition in Sec.  1024.33(c)(1) on 
treating a payment as late for any purpose would prohibit a late fee 
from being imposed on the borrower with respect to any payment on the 
mortgage loan. See RESPA section 6(d) (12 U.S.C. 2605(d)).
    2. Compliance with Sec.  1024.39. A transferee servicer's compliance 
with Sec.  1024.39 during the 60-day period beginning on the effective 
date of a servicing transfer does not constitute treating a payment as 
late for purposes of Sec.  1024.33(c)(1).

 Sec.  1024.34--Timely Escrow Payments and Treatment of Escrow Balances

    Paragraph 34(b)(1).
    1. Netting of funds. Section 1024.34(b)(1) does not prohibit a 
servicer from netting any remaining funds in an escrow account against 
the outstanding balance of the borrower's mortgage loan.
    Paragraph 34(b)(2).
    1. Refund always permissible. A servicer is not required to credit 
funds in an escrow account to an escrow account for a new mortgage loan 
and may, in all circumstances, comply with the requirements of Sec.  
1024.34(b) by refunding the funds in the escrow account to the borrower 
pursuant to Sec.  1024.34(b)(1).
    2. Borrower agreement. A borrower may agree either orally or in 
writing to a servicer's crediting of any remaining balance in an escrow 
account to a new escrow account for a new mortgage loan pursuant to 
Sec.  1024.34(b)(2).

               Sec.  1024.35--Error Resolution Procedures

    35(a) Notice of error.
    1. Borrower's representative. A notice of error is submitted by a 
borrower if the notice of error is submitted by an agent of the 
borrower. A servicer may undertake reasonable procedures to determine if 
a person that claims to be an agent of a borrower has authority from the 
borrower to act on the borrower's behalf, for example, by requiring that 
a person that claims to be an agent of the borrower provide 
documentation from the borrower stating that the purported agent is 
acting on the borrower's behalf. Upon receipt of such documentation, the 
servicer shall treat the notice of error as having been submitted by the 
borrower.
    2. Information request. A servicer should not rely solely on the 
borrower's description of a submission to determine whether the 
submission constitutes a notice of error under Sec.  1024.35(a), an 
information request under Sec.  1024.36(a), or both. For example, a 
borrower may submit a letter that claims to be a ``Notice of Error'' 
that indicates that the borrower wants to receive the information set 
forth in an annual escrow account statement and asserts an error for the 
servicer's failure to provide the borrower an annual escrow statement. 
Such a letter may constitute an information request under Sec.  
1024.36(a) that triggers an obligation by the

[[Page 760]]

servicer to provide an annual escrow statement. A servicer should not 
rely on the borrower's characterization of the letter as a ``Notice of 
Error,'' but must evaluate whether the letter fulfills the substantive 
requirements of a notice of error, information request, or both.
    35(b) Scope of error resolution.
    1. Noncovered errors. A servicer is not required to comply with 
Sec.  1024.35(d), (e) and (i) with respect to a borrower's assertion of 
an error that is not defined as an error in Sec.  1024.35(b). For 
example, the following are not errors for purposes of Sec.  1024.35:
    i. An error relating to the origination of a mortgage loan;
    ii. An error relating to the underwriting of a mortgage loan;
    iii. An error relating to a subsequent sale or securitization of a 
mortgage loan;
    iv. An error relating to a determination to sell, assign, or 
transfer the servicing of a mortgage loan. However, an error relating to 
the failure to transfer accurately and timely information relating to 
the servicing of a borrower's mortgage loan account to a transferee 
servicer is an error for purposes of Sec.  1024.35.
    2. Unreasonable basis. For purposes of Sec.  1024.35(b)(5), a 
servicer lacks a reasonable basis to impose fees that are not bona fide, 
such as:
    i. A late fee for a payment that was not late;
    ii. A charge imposed by a service provider for a service that was 
not actually rendered;
    iii. A default property management fee for borrowers that are not in 
a delinquency status that would justify the charge; or
    iv. A charge for force-placed insurance in a circumstance not 
permitted by Sec.  1024.37.
    35(c) Contact information for borrowers to assert errors.
    1. Exclusive address not required. A servicer is not required to 
designate a specific address that a borrower must use to assert an 
error. If a servicer does not designate a specific address that a 
borrower must use to assert an error, a servicer must respond to a 
notice of error received by any office of the servicer.
    2. Notice of an exclusive address. A notice establishing an address 
that a borrower must use to assert an error may be included with a 
different disclosure, such as a notice of transfer. The notice is 
subject to the clear and conspicuous requirement in Sec.  1024.32(a)(1). 
If a servicer establishes an address that a borrower must use to assert 
an error, a servicer must provide that address to the borrower in the 
following contexts:
    i. The written notice designating the specific address, required 
pursuant to Sec.  1024.35(c) and Sec.  1024.36(b).
    ii. Any periodic statement or coupon book required pursuant to 12 
CFR 1026.41.
    iii. Any Web site the servicer maintains in connection with the 
servicing of the loan.
    iv. Any notice required pursuant to Sec. Sec.  1024.39 or .41 that 
includes contact information for assistance.
    3. Multiple offices. A servicer may designate multiple office 
addresses for receiving notices of errors. However, a servicer is 
required to comply with the requirements of Sec.  1024.35 with respect 
to a notice of error received at any such designated address regardless 
of whether that specific address was provided to a specific borrower 
asserting an error. For example, a servicer may designate an address to 
receive notices of error for borrowers located in California and a 
separate address to receive notices of errors for borrowers located in 
Texas. If a borrower located in California asserts an error through the 
address used by the servicer for borrowers located in Texas, the 
servicer is still considered to have received a notice of error and must 
comply with the requirements of Sec.  1024.35.
    4. Internet intake of notices of error. A servicer may, but need 
not, establish a process for receiving notices of error through email, 
Web site form, or other online intake methods. Any such online intake 
process shall be in addition to, and not in lieu of, any process for 
receiving notices of error by mail. The process or processes established 
by the servicer for receiving notices of error through an online intake 
method shall be the exclusive online intake process or processes for 
receiving notices of error. A servicer is not required to provide a 
separate notice to a borrower to establish a specific online intake 
process as an exclusive online process for receiving such notices of 
error.
    35(e) Response to notice of error.
    35(e)(1) Investigation and response requirements.
    Paragraph 35(e)(1)(i).
    1. Notices alleging multiple errors; separate responses permitted. A 
servicer may respond to a notice of error that alleges multiple errors 
through either a single response or separate responses that address each 
asserted error.
    Paragraph 35(e)(1)(ii).
    1. Different or additional errors; separate responses permitted. A 
servicer may provide the response required by Sec.  1024.35(e)(1)(ii) 
for different or additional errors identified by the servicer in the 
same notice that responds to errors asserted by the borrower pursuant to 
Sec.  1024.35(e)(1)(i) or in a separate response that addresses the 
different or additional errors identified by the servicer.
    35(e)(3) Time limits.
    35(e)(3)(i) In general.
    Paragraph 35(e)(3)(i)(B).
    1. Foreclosure sale timing. If a servicer cannot comply with its 
obligations pursuant to Sec.  1024.35(e) by the earlier of a foreclosure 
sale or 30 days after receipt of the notice of error,

[[Page 761]]

a servicer may cancel or postpone a foreclosure sale, in which case the 
servicer would meet the time limit in Sec.  1024.35(e)(3)(i)(B) by 
complying with the requirements of Sec.  1024.35(e) before the earlier 
of 30 days after receipt of the notice of error (excluding legal public 
holidays, Saturdays, and Sundays) or the date of the rescheduled 
foreclosure sale.
    35(e)(3)(ii) Extension of time limit.
    1. Notices alleging multiple errors; extension of time. A servicer 
may treat a notice of error that alleges multiple errors as separate 
notices of error and may extend the time period for responding to each 
asserted error for which an extension is permissible under Sec.  
1024.35(e)(3)(ii).
    35(e)(4) Copies of documentation.
    1. Types of documents to be provided. A servicer is required to 
provide only those documents actually relied upon by the servicer to 
determine that no error occurred. Such documents may include documents 
reflecting information entered in a servicer's collection system. For 
example, in response to an asserted error regarding payment allocation, 
a servicer may provide a printed screen-capture showing amounts credited 
to principal, interest, escrow, or other charges in the servicer's 
system for the borrower's mortgage loan account.
    35(g) Requirements not applicable.
    35(g)(1) In general.
    Paragraph 35(g)(1)(i).
    1. New and material information. A dispute between a borrower and a 
servicer with respect to whether information was previously reviewed by 
a servicer or with respect to whether a servicer properly determined 
that information reviewed was not material to its determination of the 
existence of an error, does not itself constitute new and material 
information.
    Paragraph 35(g)(1)(ii).
    1. Examples of overbroad notices of error. The following are 
examples of notices of error that are overbroad:
    i. Assertions of errors regarding substantially all aspects of a 
mortgage loan, including errors relating to all aspects of mortgage 
origination, mortgage servicing, and foreclosure, as well as errors 
relating to the crediting of substantially every borrower payment and 
escrow account transaction;
    ii. Assertions of errors in the form of a judicial action complaint, 
subpoena, or discovery request that purports to require servicers to 
respond to each numbered paragraph; and
    iii. Assertions of errors in a form that is not reasonably 
understandable or is included with voluminous tangential discussion or 
requests for information, such that a servicer cannot reasonably 
identify from the notice of error any error for which Sec.  1024.35 
requires a response.
    35(h) Payment requirements prohibited.
    1. Borrower obligation to make payments. Section 1024.35(h) 
prohibits a servicer from requiring a borrower to make a payment that 
may be owed on a borrower's account as a prerequisite to investigating 
or responding to a notice of error submitted by a borrower, but does not 
alter or otherwise affect a borrower's obligation to make payments owed 
pursuant to the terms of a mortgage loan. For example, if a borrower 
makes a monthly payment in February for a mortgage loan, but asserts an 
error relating to the servicer's acceptance of the February payment, 
Sec.  1024.35(h) does not alter a borrower's obligation to make a 
monthly payment that the borrower owes for March. A servicer, however, 
may not require that a borrower make the March payment as a condition 
for complying with its obligations under Sec.  1024.35 with respect to 
the notice of error on the February payment.

                 Sec.  1024.36--Requests for Information

    36(a) Information request.
    1. Borrower's representative. An information request is submitted by 
a borrower if the information request is submitted by an agent of the 
borrower. A servicer may undertake reasonable procedures to determine if 
a person that claims to be an agent of a borrower has authority from the 
borrower to act on the borrower's behalf, for example, by requiring that 
a person that claims to be an agent of the borrower provide 
documentation from the borrower stating that the purported agent is 
acting on the borrower's behalf. Upon receipt of such documentation, the 
servicer shall treat the request for information as having been 
submitted by the borrower.
    2. Owner or assignee of a mortgage loan. i. When a loan is not held 
in a trust for which an appointed trustee receives payments on behalf of 
the trust, a servicer complies with Sec.  1024.36(d) by responding to a 
request for information regarding the owner or assignee of a mortgage 
loan by identifying the person on whose behalf the servicer receives 
payments from the borrower. A servicer is not the owner or assignee for 
purposes of Sec.  1024.36(d) if the servicer holds title to the loan, or 
title is assigned to the servicer, solely for the administrative 
convenience of the servicer in servicing the mortgage loan obligation. 
The Government National Mortgage Association is not the owner or 
assignee for purposes of such requests for information solely as a 
result of its role as the guarantor of the security in which the loan 
serves as the collateral.
    ii. When the loan is held in a trust for which an appointed trustee 
receives payments on behalf of the trust, a servicer complies with Sec.  
1024.36(d) by responding to a borrower's request for information 
regarding the owner, assignee, or trust of the mortgage

[[Page 762]]

loan with the following information, as applicable:
    A. For any request for information where the Federal National 
Mortgage Association or the Federal Home Loan Mortgage Corporation is 
not the owner of the loan or the trustee of the securitization trust in 
which the loan is held: The name of the trust, and the name, address, 
and appropriate contact information for the trustee. Assume, for 
example, a mortgage loan is owned by Mortgage Loan Trust, Series ABC-1, 
for which XYZ Trust Company is the trustee. The servicer complies with 
Sec.  1024.36(d) by identifying the owner as Mortgage Loan Trust, Series 
ABC-1, and providing the name, address, and appropriate contact 
information for XYZ Trust Company as the trustee.
    B. If the request for information did not expressly request the name 
or number of the trust or pool and the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation is the owner 
of the loan or the trustee of the securitization trust in which the loan 
is held: The name and contact information for the Federal National 
Mortgage Association or the Federal Home Loan Mortgage Corporation, as 
applicable, without also providing the name of the trust.
    C. If the request for information did expressly request the name or 
number of the trust or pool and the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation is the owner 
of the loan or the trustee of the securitization trust in which the loan 
is held: The name of the trust, and the name, address, and appropriate 
contact information for the trustee, as in comment 36(a)-2.ii.A above.
    36(b) Contact information for borrowers to request information.
    1. Exclusive address not required. A servicer is not required to 
designate a specific address that a borrower must use to request 
information. If a servicer does not designate a specific address that a 
borrower must use to request information, a servicer must respond to an 
information request received by any office of the servicer.
    2. Notice of an exclusive address. A notice establishing an address 
that a borrower must use to request information may be included with a 
different disclosure, such as a notice of transfer. The notice is 
subject to the clear and conspicuous requirement in Sec.  1024.32(a)(1). 
If a servicer establishes an address that a borrower must use to request 
information, a servicer must provide that address to the borrower in the 
following contexts:
    i. The written notice designating the specific address, required 
pursuant to Sec.  1024.35(c) and Sec.  1024.36(b).
    ii. Any periodic statement or coupon book required pursuant to 12 
CFR 1026.41.
    iii. Any Web site the servicer maintains in connection with the 
servicing of the loan.
    iv. Any notice required pursuant to Sec. Sec.  1024.39 or .41 that 
includes contact information for assistance.
    3. Multiple offices. A servicer may designate multiple office 
addresses for receiving information requests. However, a servicer is 
required to comply with the requirements of Sec.  1024.36 with respect 
to an information request received at any such address regardless of 
whether that specific address was provided to a specific borrower 
requesting information. For example, a servicer may designate an address 
to receive information requests for borrowers located in California and 
a separate address to receive information requests for borrowers located 
in Texas. If a borrower located in California requests information 
through the address used by the servicer for borrowers located in Texas, 
the servicer is still considered to have received an information request 
and must comply with the requirements of Sec.  1024.36.
    4. Internet intake of information requests. A servicer may, but need 
not, establish a process for receiving information requests through 
email, Web site form, or other online intake methods. Any such online 
intake process shall be in addition to, and not in lieu of, any process 
for receiving information requests by mail. The process or processes 
established by the servicer for receiving information requests through 
an online intake method shall be the exclusive online intake process or 
processes for receiving information requests. A servicer is not required 
to provide a separate notice to a borrower to establish a specific 
online intake process as an exclusive online process for receiving 
information requests.
    36(d) Response to information request.
    36(d)(1) Investigation and response requirements.
    Paragraph 36(d)(1)(ii).
    1. Information not available. Information is not available if:
    i. The information is not in the servicer's control or possession, 
or
    ii. The information cannot be retrieved in the ordinary course of 
business through reasonable efforts.
    2. Examples. The following examples illustrate when information is 
available (or not available) to a servicer under Sec.  
1024.36(d)(1)(ii):
    i. A borrower requests a copy of a telephonic communication with a 
servicer. The servicer's personnel have access in the ordinary course of 
business to audio recording files with organized recordings or 
transcripts of borrower telephone calls and can identify the 
communication referred to by the borrower through reasonable business 
efforts. The information requested by the borrower is available to the 
servicer.

[[Page 763]]

    ii. A borrower requests information stored on electronic back-up 
media. Information on electronic back-up media is not accessible by the 
servicer's personnel in the ordinary course of business without 
undertaking extraordinary efforts to identify and restore the 
information from the electronic back-up media. The information requested 
by the borrower is not available to the servicer.
    iii. A borrower requests information stored at an offsite document 
storage facility. A servicer has a right to access documents at the 
offsite document storage facility and servicer personnel can access 
those documents through reasonable efforts in the ordinary course of 
business. The information requested by the borrower is available to the 
servicer assuming that the information can be found within the offsite 
documents with reasonable efforts.
    36(f) Requirements not applicable.
    36(f)(1) In general.
    Paragraph 36(f)(1)(i).
    1. A borrower's request for a type of information that can change 
over time is not substantially the same as a previous information 
request for the same type of information if the subsequent request 
covers a different time period than the prior request.
    Paragraph 36(f)(1)(ii).
    1. Confidential, proprietary or privileged information. A request 
for confidential, proprietary or privileged information of a servicer is 
not an information request for which the servicer is required to comply 
with the requirements of Sec.  1024.36(c) and (d). Confidential, 
proprietary or privileged information may include information requests 
relating to, for example:
    i. Information regarding management or profitability of a servicer, 
including information provided to investors in the servicer.
    ii. Compensation, bonuses, or personnel actions relating to servicer 
personnel, including personnel responsible for servicing a borrower's 
mortgage loan account;
    iii. Records of examination reports, compliance audits, borrower 
complaints, and internal investigations or external investigations; or
    iv. Information protected by the attorney-client privilege.
    Paragraph 36(f)(1)(iii).
    1. Examples of irrelevant information. The following are examples of 
irrelevant information:
    i. Information that relates to the servicing of mortgage loans other 
than a borrower's mortgage loan, including information reported to the 
owner of a mortgage loan regarding individual or aggregate collections 
for mortgage loans owned by that entity;
    ii. The servicer's training program for servicing personnel;
    iii. The servicer's servicing program guide; or
    iv. Investor instructions or requirements for servicers regarding 
criteria for negotiating or approving any program with a borrower, 
including any loss mitigation option.
    Paragraph 36(f)(1)(iv).
    1. Examples of overbroad or unduly burdensome requests for 
information. The following are examples of requests for information that 
are overbroad or unduly burdensome:
    i. Requests for information that seek documents relating to 
substantially all aspects of mortgage origination, mortgage servicing, 
mortgage sale or securitization, and foreclosure, including, for 
example, requests for all mortgage loan file documents, recorded 
mortgage instruments, servicing information and documents, and sale or 
securitization information and documents;
    ii. Requests for information that are not reasonably understandable 
or are included with voluminous tangential discussion or assertions of 
errors;
    iii. Requests for information that purport to require servicers to 
provide information in specific formats, such as in a transcript, letter 
form in a columnar format, or spreadsheet, when such information is not 
ordinarily stored in such format; and
    iv. Requests for information that are not reasonably likely to 
assist a borrower with the borrower's account, including, for example, a 
request for copies of the front and back of all physical payment 
instruments (such as checks, drafts, or wire transfer confirmations) 
that show payments made by the borrower to the servicer and payments 
made by a servicer to an owner or assignee of a mortgage loan.
    36(i) Potential successors in interest.
    1. Requests that indicate that the person may be a successor in 
interest. Section 1024.36(i) requires a servicer to respond to certain 
written requests received from a person that indicate the person may be 
a successor in interest. Examples of written requests that indicate that 
the person may be a successor in interest include, without limitation, a 
written statement from a person other than a borrower indicating that 
there has been a transfer of ownership or of an ownership interest in 
the property to the person or that a borrower has been divorced, legally 
separated, or died, or a written loss mitigation application received 
from a person other than a borrower.
    2. Time limits. A servicer must respond to a request under Sec.  
1024.36(i) not later than the time limits set forth in Sec.  
1024.36(d)(2). Servicers subject to Sec.  1024.38(b)(1)(vi)(B) must also 
maintain policies and procedures reasonably designed to ensure that, 
upon receiving notice of the existence of a potential successor in 
interest, the servicer can promptly determine the documents the servicer 
reasonably requires to confirm that person's identity and ownership 
interest in the property and promptly provide to the potential

[[Page 764]]

successor in interest a description of those documents and how the 
person may submit a written request under Sec.  1024.36(i) (including 
the appropriate address). Depending on the facts and circumstances of 
the request, responding promptly may require a servicer to respond more 
quickly than the time limits established in Sec.  1024.36(d)(2).
    3. Potential successor in interest's representative. An information 
request pursuant to Sec.  1024.36(i) is submitted by a potential 
successor in interest if the information request is submitted by an 
agent of the potential successor in interest. A servicer may undertake 
reasonable procedures to determine if a person that claims to be an 
agent of a potential successor in interest has authority from the 
potential successor in interest to act on the potential successor in 
interest's behalf, for example, by requiring that a person that claims 
to be an agent of the potential successor in interest provide 
documentation from the potential successor in interest stating that the 
purported agent is acting on the potential successor in interest's 
behalf. Upon receipt of such documentation, the servicer shall treat the 
request for information as having been submitted by the potential 
successor in interest.

                  Sec.  1024.37--Force-Placed Insurance

    37(a) Definition of force-placed insurance.
    37(a)(2) Types of insurance not considered force-placed insurance.
    Paragraph 37(a)(2)(iii).
    1. Servicer's discretion. Hazard insurance paid by a servicer at its 
discretion refers to circumstances in which a servicer pays a borrower's 
hazard insurance even though the servicer is not required by Sec.  
1024.17(k)(1), (2), or (5) to do so.
    37(b) Basis for charging force-placed insurance.
    1. Reasonable basis to believe. Section Sec.  1024.37(b) prohibits a 
servicer from assessing on a borrower a premium charge or fee related to 
force-placed insurance unless the servicer has a reasonable basis to 
believe that the borrower has failed to comply with the loan contract's 
requirement to maintain hazard insurance. Information about a borrower's 
hazard insurance received by a servicer from the borrower, the 
borrower's insurance provider, or the borrower's insurance agent, may 
provide a servicer with a reasonable basis to believe that the borrower 
has either complied with or failed to comply with the loan contract's 
requirement to maintain hazard insurance. If a servicer receives no such 
information, the servicer may satisfy the reasonable basis to believe 
standard if the servicer acts with reasonable diligence to ascertain a 
borrower's hazard insurance status and does not receive from the 
borrower, or otherwise have evidence of insurance coverage as provided 
in Sec.  1024.37(c)(1)(iii). A servicer that complies with the 
notification requirements set forth in Sec.  1024.37(c)(1)(i) and (ii) 
has acted with reasonable diligence.
    37(c) Requirements before charging borrower for force-placed 
insurance.
    37(c)(1) In general.
    Paragraph 37(c)(1)(i).
    1. Assessing premium charge or fee. Subject to the requirements of 
Sec.  1024.37(c)(1)(i) through (iii), if not prohibited by State or 
other applicable law, a servicer may charge a borrower for force-placed 
insurance the servicer purchased, retroactive to the first day of any 
period of time in which the borrower did not have hazard insurance in 
place.
    Paragraph 37(c)(1)(iii).
    1. Extension of time. Applicable law, such as State law or the terms 
and conditions of a borrower's insurance policy, may provide for an 
extension of time to pay the premium on a borrower's hazard insurance 
after the due date. If a premium payment is made within such time, and 
the insurance company accepts the payment with no lapse in insurance 
coverage, then the borrower's hazard insurance is deemed to have had 
hazard insurance coverage continuously for purposes of Sec.  
1024.37(c)(1)(iii).
    2. Evidence demonstrating insurance. As evidence of continuous 
hazard insurance coverage that complies with the loan contract's 
requirements, a servicer may require a copy of the borrower's hazard 
insurance policy declaration page, the borrower's insurance certificate, 
the borrower's insurance policy, or other similar forms of written 
confirmation. A servicer may reject evidence of hazard insurance 
coverage submitted by the borrower if neither the borrower's insurance 
provider nor insurance agent provides confirmation of the insurance 
information submitted by the borrower, or if the terms and conditions of 
the borrower's hazard insurance policy do not comply with the borrower's 
loan contract requirements.
    Paragraph 37(c)(2)(v).
    1. Identifying type of hazard insurance. If the terms of a mortgage 
loan contract requires a borrower to purchase both a homeowners' 
insurance policy and a separate hazard insurance policy to insure 
against loss resulting from hazards not covered under the borrower's 
homeowners' insurance policy, a servicer must disclose whether it is the 
borrower's homeowners' insurance policy or the separate hazard insurance 
policy for which it lacks evidence of coverage to comply with Sec.  
1024.37(c)(2)(v).
    37(d) Reminder notice.
    37(d)(1) In general.
    1. When a servicer is required to deliver or place in the mail the 
written notice pursuant to Sec.  1024.37(d)(1), the content of the 
reminder notice will be different depending on the insurance information 
the servicer has received from the borrower. For example:

[[Page 765]]

    i. Assume that, on June 1, the servicer places in the mail the 
written notice required by Sec.  1024.37(c)(1)(i) to Borrower A. The 
servicer does not receive any insurance information from Borrower A. The 
servicer must deliver to Borrower A or place in the mail a reminder 
notice, with the information required by Sec.  1024.37(d)(2)(i), at 
least 30 days after June 1 and at least 15 days before the servicer 
charges Borrower A for force-placed insurance.
    ii. Assume the same example, except that Borrower A provides the 
servicer with insurance information on June 18, but the servicer cannot 
verify that Borrower A has hazard insurance in place continuously based 
on the information Borrower A provided (e.g., the servicer cannot verify 
that Borrower A had coverage between June 10 and June 15). The servicer 
must either deliver to Borrower A or place in the mail a reminder 
notice, with the information required by in Sec.  1024.37(d)(2)(ii), at 
least 30 days after June 1 and at least 15 days before charging Borrower 
A for force-placed insurance it obtains for the period between June 10 
and June 15.
    37(d)(2) Content of reminder notice.
    37(d)(2)(i) Servicer receiving no insurance information.
    Paragraph 37(d)(2)(i)(D).
    1. Reasonable estimate of the cost of force-placed insurance. 
Differences between the amount of the estimated cost disclosed under 
Sec.  1024.37(d)(2)(i)(D) and the actual cost later assessed to the 
borrower are permissible, so long as the estimated cost is based on the 
information reasonably available to the servicer at the time the 
disclosure is provided. For example, a mortgage investor's requirements 
may provide that the amount of coverage for force-placed insurance 
depends on the borrower's delinquency status (the number of days the 
borrower's mortgage payment is past due). The amount of coverage affects 
the cost of force-placed insurance. A servicer that provides an estimate 
of the cost of force-placed insurance based on the borrower's 
delinquency status at the time the disclosure is made complies with 
Sec.  1024.37(d)(2)(i)(D).
    37(d)(5) Updating notice with borrower information.
    1. Reasonable time. If the written notice required by Sec.  
1024.37(c)(1)(ii) was put into production a reasonable time prior to the 
servicer delivering or placing the notice in the mail, the servicer is 
not required to update the notice with new insurance information 
received. For purposes of Sec.  1024.37(d)(5), a reasonable time is no 
more than five days (excluding legal holidays, Saturdays, and Sundays).
    37(e) Renewal or replacing force-placed insurance.
    37(e)(1) In general.
    1. For purposes of Sec.  1024.37(e)(1), as evidence that the 
borrower has purchased hazard insurance coverage that complies with the 
loan contract's requirements, a servicer may require a borrower to 
provide a form of written confirmation as described in comment 
37(c)(1)(iii)-2, and may reject evidence of coverage submitted by the 
borrower for the reasons described in comment 37(c)(1)(iii)-2.
    37(e)(1)(iii) Charging before end of notice period.
    1. Example. Section 1024.37(e)(1)(iii) permits a servicer to assess 
on a borrower a premium charge or fee related to renewing or replacing 
existing force-placed insurance promptly after the servicer receives 
evidence demonstrating that the borrower lacked hazard insurance 
coverage in compliance with the loan contract's requirements to maintain 
hazard insurance for any period of time following the expiration of the 
existing force-placed insurance. To illustrate, assume that on January 
2, the servicer sends the notice required by Sec.  1024.37(e)(1)(i). At 
12:01 a.m. on January 12, the existing force-placed insurance the 
servicer had purchased on the borrower's property expires and the 
servicer replaces the expired force-placed insurance policy with a new 
policy. On February 5, the servicer receives evidence demonstrating the 
borrower has hazard insurance effective since 12:01 a.m. on January 31. 
The servicer may charge the borrower for force-placed insurance covering 
the period from 12:01 a.m. January 12 to 12:01 a.m. January 31, as early 
as February 5.
    Paragraph 37(e)(2)(vii).
    1. Reasonable estimate of the cost of force-placed insurance. The 
reasonable estimate requirement set forth in Sec.  1024.37(e)(2)(vii) is 
the same reasonable estimate requirement set forth in Sec.  
1024.37(d)(2)(i)(D). See comment 37(d)(2)(i)(D)-1 regarding the 
reasonable estimate.
    37(g) Cancellation of force-placed insurance.
    Paragraph 37(g)(2).
    1. Period of overlapping insurance coverage. Section 1024.37(g)(2) 
requires a servicer to refund to a borrower all force-placed insurance 
premium charges and related fees paid by the borrower for any period of 
overlapping insurance coverage and remove from the borrower's account 
all force-placed insurance charges and related fees for such period. A 
period of overlapping insurance coverage means the period of time during 
which the force-placed insurance purchased by a servicer and the hazard 
insurance purchased by a borrower were in effect at the same time.

      Section 1024.38--General servicing policies, procedures, and 
                              requirements.

    38(a) Reasonable policies and procedures.
    1. Policies and procedures. A servicer may determine the specific 
policies and procedures it will adopt and the methods by which

[[Page 766]]

it will implement those policies and procedures so long as they are 
reasonably designed to achieve the objectives set forth in Sec.  
1024.38(b). A servicer has flexibility to determine such policies and 
procedures and methods in light of the size, nature, and scope of the 
servicer's operations, including, for example, the volume and aggregate 
unpaid principal balance of mortgage loans serviced, the credit quality, 
including the default risk, of the mortgage loans serviced, and the 
servicer's history of consumer complaints.
    2. Procedures used. The term ``procedures'' refers to the actual 
practices followed by a servicer for achieving the objectives set forth 
in Sec.  1024.38(b).
    38(b) Objectives.
    38(b)(1) Accessing and providing timely and accurate information.
    Paragraph 38(b)(1)(ii).
    1. Errors committed by service providers. A servicer's policies and 
procedures must be reasonably designed to provide for promptly obtaining 
information from service providers to facilitate achieving the objective 
of correcting errors resulting from actions of service providers, 
including obligations arising pursuant to Sec.  1024.35.
    Paragraph 38(b)(1)(iv).
    1. Accurate and current information for owners or assignees of 
mortgage loans relating to loan modifications. The relevant current 
information to owners or assignees of mortgage loans includes, among 
other things, information about a servicer's evaluation of borrowers for 
loss mitigation options and a servicer's agreements with borrowers on 
loss mitigation options, including loan modifications. Such information 
includes, for example, information regarding the date, terms, and 
features of loan modifications, the components of any capitalized 
arrears, the amount of any servicer advances, and any assumptions 
regarding the value of a property used in evaluating any loss mitigation 
options.
    Paragraph 38(b)(1)(vi).
    1. Identification of potential successors in interest. A servicer 
may be notified of the existence of a potential successor in interest in 
a variety of ways. For example, a person could indicate that there has 
been a transfer of ownership or of an ownership interest in the property 
or that a borrower has been divorced, legally separated, or died, or a 
person other than a borrower could submit a loss mitigation application. 
A servicer must maintain policies and procedures reasonably designed to 
ensure that the servicer can retain this information and promptly 
facilitate communication with potential successors in interest when a 
servicer is notified of their existence. A servicer is not required to 
conduct a search for potential successors in interest if the servicer 
has not received actual notice of their existence.
    2. Documents reasonably required. The documents a servicer requires 
to confirm a potential successor in interest's identity and ownership 
interest in the property must be reasonable in light of the laws of the 
relevant jurisdiction, the specific situation of the potential successor 
in interest, and the documents already in the servicer's possession. The 
required documents may, where appropriate, include, for example, a death 
certificate, an executed will, or a court order. The required documents 
may also include documents that the servicer reasonably believes are 
necessary to prevent fraud or other criminal activity (for example, if a 
servicer has reason to believe that documents presented are forged).
    3. Examples of reasonable requirements. Because the relevant law 
governing each situation may vary from State to State, the following 
examples are illustrative only. The examples illustrate what documents 
it would generally be reasonable for a servicer to require to confirm a 
potential successor in interest's identity and ownership interest in the 
property under the specific circumstances described.
    i. Tenancy by the entirety or joint tenancy. Assume that a servicer 
knows that the potential successor in interest and the transferor 
borrower owned the property as tenants by the entirety or joint tenants 
and that the transferor borrower has died. Assume further that, upon the 
death of the transferor borrower, the applicable law of the relevant 
jurisdiction does not require a probate proceeding to establish that the 
potential successor in interest has sole interest in the property but 
requires only that there be a prior recorded deed listing both the 
potential successor in interest and the transferor borrower as tenants 
by the entirety (e.g., married grantees) or joint tenants. Under these 
circumstances, it would be reasonable for the servicer to require the 
potential successor in interest to provide documentation of the recorded 
instrument, if the servicer does not already have it, and the death 
certificate of the transferor borrower. Because in this situation a 
probate proceeding is not required under the applicable law of the 
relevant jurisdiction, it generally would not be reasonable for the 
servicer to require documentation of a probate proceeding.
    ii. Affidavits of heirship. Assume that a potential successor in 
interest indicates that an ownership interest in the property 
transferred to the potential successor in interest upon the death of the 
transferor borrower through intestate succession and offers an affidavit 
of heirship as confirmation. Assume further that, upon the death of the 
transferor borrower, the applicable law of the relevant jurisdiction 
does not require a probate proceeding to establish that the potential 
successor in interest has an interest in the

[[Page 767]]

property but requires only an appropriate affidavit of heirship. Under 
these circumstances, it would be reasonable for the servicer to require 
the potential successor in interest to provide the affidavit of heirship 
and the death certificate of the transferor borrower. Because a probate 
proceeding is not required under the applicable law of the relevant 
jurisdiction to recognize the transfer of title, it generally would not 
be reasonable for the servicer to require documentation of a probate 
proceeding.
    iii. Divorce or legal separation. Assume that a potential successor 
in interest indicates that an ownership interest in the property 
transferred to the potential successor in interest from a spouse who is 
a borrower as a result of a property agreement incident to a divorce 
proceeding. Assume further that the applicable law of the relevant 
jurisdiction does not require a deed conveying the interest in the 
property but accepts a final divorce decree and accompanying separation 
agreement executed by both spouses to evidence transfer of title. Under 
these circumstances, it would be reasonable for the servicer to require 
the potential successor in interest to provide documentation of the 
final divorce decree and an executed separation agreement. Because the 
applicable law of the relevant jurisdiction does not require a deed, it 
generally would not be reasonable for the servicer to require a deed.
    iv. Living spouses or parents. Assume that a potential successor in 
interest indicates that an ownership interest in the property 
transferred to the potential successor in interest from a living spouse 
or parent who is a borrower by quitclaim deed or act of donation. Under 
these circumstances, it would be reasonable for the servicer to require 
the potential successor in interest to provide the quitclaim deed or act 
of donation. It generally would not be reasonable, however, for the 
servicer to require additional documents.
    4. Additional documentation required for confirmation determination. 
Section 1024.38(b)(1)(vi)(C) requires a servicer to maintain policies 
and procedures reasonably designed to ensure that, upon receipt of the 
documents identified by the servicer, the servicer promptly notifies a 
potential successor in interest that, as applicable, the servicer has 
confirmed the potential successor in interest's status, has determined 
that additional documents are required, or has determined that the 
potential successor in interest is not a successor in interest. If a 
servicer reasonably determines that it cannot make a determination of 
the potential successor in interest's status based on the documentation 
provided, it must specify what additional documentation is required. For 
example, if there is pending litigation involving the potential 
successor in interest and other claimants regarding who has title to the 
property at issue, a servicer may specify that documentation of a court 
determination or other resolution of the litigation is required.
    5. Prompt confirmation and loss mitigation. A servicer's policies 
and procedures must be reasonably designed to ensure that the servicer 
can promptly notify the potential successor in interest that the 
servicer has confirmed the potential successor in interest's status. 
Notification is not prompt for purposes of this requirement if it 
unreasonably interferes with a successor in interest's ability to apply 
for loss mitigation options according to the procedures provided in 
Sec.  1024.41.
    38(b)(2) Properly evaluating loss mitigation applications.
    Paragraph 38(b)(2)(ii).
    1. Means of identifying all available loss mitigation options. 
Servicers must develop policies and procedures that are reasonably 
designed to enable servicer personnel to identify all loss mitigation 
options available for mortgage loans currently serviced by the mortgage 
servicer. For example, a servicer's policies and procedures must be 
reasonably designed to address how a servicer specifically identifies, 
with respect to each owner or assignee, all of the loss mitigation 
options that the servicer may consider when evaluating any borrower for 
a loss mitigation option and the criteria that should be applied by a 
servicer when evaluating a borrower for such options. In addition, a 
servicer's policies and procedures must be reasonably designed to 
address how the servicer will apply any specific thresholds for 
eligibility for a particular loss mitigation option established by an 
owner or assignee of a mortgage loan (e.g., if the owner or assignee 
requires that a servicer only make a particular loss mitigation option 
available to a certain percentage of the loans that the servicer 
services for that owner or assignee, then the servicer's policies and 
procedures must be reasonably designed to determine in advance how the 
servicer will apply that threshold to those mortgage loans). A 
servicer's policies and procedures must also be reasonably designed to 
ensure that such information is readily accessible to the servicer 
personnel involved with loss mitigation, including personnel made 
available to the borrower as described in Sec.  1024.40.
    Paragraph 38(b)(2)(v).
    1. Owner or assignee requirements. A servicer must have policies and 
procedures reasonably designed to evaluate a borrower for a loss 
mitigation option consistent with any owner or assignee requirements, 
even where the requirements of Sec.  1024.41 may be inapplicable. For 
example, an owner or assignee may require that a servicer implement 
certain procedures to review a loss mitigation application submitted by 
a borrower less than 37 days before a foreclosure sale. Further, an 
owner or assignee may require that

[[Page 768]]

a servicer implement certain procedures to re-evaluate a borrower who 
has demonstrated a material change in the borrower's financial 
circumstances for a loss mitigation option after the servicer's initial 
evaluation. A servicer must have policies and procedures reasonably 
designed to implement these requirements even if such loss mitigation 
evaluations may not be required pursuant to Sec.  1024.41.
    38(b)(3) Facilitating oversight of, and compliance by, service 
providers.
    Paragraph 38(b)(3)(iii).
    1. Sharing information with service provider personnel handling 
foreclosure proceedings. A servicer's policies and procedures must be 
reasonably designed to ensure that servicer personnel promptly inform 
service provider personnel handling foreclosure proceedings that the 
servicer has received a complete loss mitigation application and 
promptly instruct foreclosure counsel to take any step required by Sec.  
1024.41(g) sufficiently timely to avoid violating the prohibition 
against moving for judgment or order of sale, or conducting a 
foreclosure sale.
    38(b)(4) Facilitating transfer of information during servicing 
transfers.
    Paragraph 38(b)(4)(i).
    1. Electronic document transfers. A transferor servicer's policies 
and procedures may provide for transferring documents and information 
electronically, provided that the transfer is conducted in a manner that 
is reasonably designed to ensure the accuracy of the information and 
documents transferred and that enables a transferee servicer to comply 
with its obligations to the owner or assignee of the loan and with 
applicable law. For example, a transferor servicer must have policies 
and procedures reasonably designed to ensure that data can be properly 
and promptly boarded by a transferee servicer's electronic systems and 
that all necessary documents and information are available to, and can 
be appropriately identified by, a transferee servicer.
    2. Loss mitigation documents. A transferor servicer's policies and 
procedures must be reasonably designed to ensure that the transfer 
includes any information reflecting the current status of discussions 
with a borrower regarding loss mitigation options, any agreements 
entered into with a borrower on a loss mitigation option, and any 
analysis by a servicer with respect to potential recovery from a non-
performing mortgage loan, as appropriate.
    Paragraph 38(b)(4)(ii).
    1. Missing loss mitigation documents and information. A transferee 
servicer must have policies and procedures reasonably designed to 
ensure, in connection with a servicing transfer, that the transferee 
servicer receives information regarding any loss mitigation discussions 
with a borrower, including any copies of loss mitigation agreements. 
Further, the transferee servicer's policies and procedures must address 
obtaining any such missing information or documents from a transferor 
servicer before attempting to obtain such information from a borrower. 
For example, assume a servicer receives documents or information from a 
transferor servicer indicating that a borrower has made payments 
consistent with a trial or permanent loan modification but has not 
received information about the existence of a trial or permanent loan 
modification agreement. The servicer must have policies and procedures 
reasonably designed to identify whether any such loan modification 
agreement exists with the transferor servicer and to obtain any such 
agreement from the transferor servicer.
    38(b)(5) Informing borrowers of written error resolution and 
information request procedures.
    1. Manner of informing borrowers. A servicer may comply with the 
requirement to maintain policies and procedures reasonably designed to 
inform borrowers of the procedures for submitting written notices of 
error set forth in Sec.  1024.35 and written information requests set 
forth in Sec.  1024.36 by informing borrowers, through a notice (mailed 
or delivered electronically) or a Web site. For example, a servicer may 
comply with Sec.  1024.38(b)(5) by including in the periodic statement 
required pursuant to Sec.  1026.41 a brief statement informing borrowers 
that borrowers have certain rights under Federal law related to 
resolving errors and requesting information about their account, and 
that they may learn more about their rights by contacting the servicer, 
and a statement directing borrowers to a Web site that provides a 
description of the procedures set forth in Sec. Sec.  1024.35 and 
1024.36. Alternatively, a servicer may also comply with Sec.  
1024.38(b)(5) by including a description of the procedures set forth in 
Sec. Sec.  1024.35 and 1024.36 in the written notice required by Sec.  
1024.35(c) and Sec.  1024.36(b).
    2. Oral complaints and requests. A servicer's policies and 
procedures must be reasonably designed to provide information to 
borrowers who are not satisfied with the resolution of a complaint or 
request for information submitted orally about the procedures for 
submitting written notices of error set forth in Sec.  1024.35 and for 
submitting written requests for information set forth in Sec.  1024.36.
    3. Notices of error incorrectly sent to addresses associated with 
submission of loss mitigation applications or the continuity of contact. 
A servicer's policies and procedures must be reasonably designed to 
ensure that if a borrower incorrectly submits an assertion of an error 
to any address given to the borrower in connection with submission of a 
loss mitigation application or the continuity of contact pursuant to 
Sec.  1024.40, the servicer will inform the borrower of the procedures 
for submitting written notices of error set forth in

[[Page 769]]

Sec.  1024.35, including the correct address. Alternatively, the 
servicer could redirect such notices to the correct address.
    38(c) Standard requirements.
    38(c)(1)Record retention.
    1. Methods of retaining records. Retaining records that document 
actions taken with respect to a borrower's mortgage loan account does 
not necessarily mean actual paper copies of documents. The records may 
be retained by any method that reproduces the records accurately 
(including computer programs) and that ensures that the servicer can 
easily access the records (including a contractual right to access 
records possessed by another entity).
    38(c)(2) Servicing file.
    1. Timing. A servicer complies with Sec.  1024.38(c)(2) if it 
maintains information in a manner that facilitates compliance with Sec.  
1024.38(c)(2) beginning on or after January 10, 2014. A servicer is not 
required to comply with Sec.  1024.38(c)(2) with respect to information 
created prior to January 10, 2014. For example, if a mortgage loan was 
originated on January 1, 2013, a servicer is not required by Sec.  
1024.38(c)(2) to maintain information regarding transactions credited or 
debited to that mortgage loan account in any particular manner for 
payments made prior to January 10, 2014. However, for payments made on 
or after January 10, 2014, a servicer must maintain such information in 
a manner that facilitates compiling such information into a servicing 
file within five days.
    2. Borrower requests for servicing file. Section 1024.38(c)(2) does 
not confer upon any borrower an independent right to access information 
contained in the servicing file. Upon receipt of a borrower's request 
for a servicing file, a servicer shall provide the borrower with a copy 
of the information contained in the servicing file for the borrower's 
mortgage loan, subject to the procedures and limitations set forth in 
Sec.  1024.36.
    Paragraph 38(c)(2)(iv).
    1. Report of data fields. A report of the data fields relating to a 
borrower's mortgage loan account created by the servicer's electronic 
systems in connection with servicing practices means a report listing 
the relevant data fields by name, populated with any specific data 
relating to the borrower's mortgage loan account. Examples of data 
fields relating to a borrower's mortgage loan account created by the 
servicer's electronic systems in connection with servicing practices 
include fields used to identify the terms of the borrower's mortgage 
loan, fields used to identify the occurrence of automated or manual 
collection calls, fields reflecting the evaluation of a borrower for a 
loss mitigation option, fields used to identify the owner or assignee of 
a mortgage loan, and any credit reporting history.

  Sec.  1024.39--Early Intervention Requirements for Certain Borrowers

    39(a) Live Contact
    1. Delinquency. Section 1024.39 requires a servicer to establish or 
attempt to establish live contact no later than the 36th day of a 
borrower's delinquency. This provision is illustrated as follows:
    i. Assume a mortgage loan obligation with a monthly billing cycle 
and monthly payments of $2,000 representing principal, interest, and 
escrow due on the first of each month.
    A. The borrower fails to make a payment of $2,000 on, and makes no 
payment during the 36-day period after, January 1. The servicer must 
establish or make good faith efforts to establish live contact not later 
than 36 days after January 1--i.e., on or before February 6.
    B. The borrower makes no payments during the period January 1 
through April 1, although payments of $2,000 each on January 1, February 
1, and March 1 are due. Assuming it is not a leap year; the borrower is 
90 days delinquent as of April 1. The servicer may time its attempts to 
establish live contact such that a single attempt will meet the 
requirements of Sec.  1024.39(a) for two missed payments. To illustrate, 
the servicer complies with Sec.  1024.39(a) if the servicer makes a good 
faith effort to establish live contact with the borrower, for example, 
on February 5 and again on March 25. The February 5 attempt meets the 
requirements of Sec.  1024.39(a) for both the January 1 and February 1 
missed payments. The March 25 attempt meets the requirements of Sec.  
1024.39(a) for the March 1 missed payment.
    ii. A borrower who is performing as agreed under a loss mitigation 
option designed to bring the borrower current on a previously missed 
payment is not delinquent for purposes of Sec.  1024.39.
    iii. During the 60-day period beginning on the effective date of 
transfer of the servicing of any mortgage loan, a borrower is not 
delinquent for purposes of Sec.  1024.39 if the transferee servicer 
learns that the borrower has made a timely payment that has been 
misdirected to the transferor servicer and the transferee servicer 
documents its files accordingly. See Sec.  1024.33(c)(1) and comment 
33(c)(1)-2.
    iv. A servicer need not establish live contact with a borrower 
unless the borrower is delinquent during the 36 days after a payment due 
date. If the borrower satisfies a payment in full before the end of the 
36-day period, the servicer need not establish live contact with the 
borrower. For example, if a borrower misses a January 1 due date but 
makes that payment on February 1, a servicer need not establish or make 
good faith efforts to establish live contact by February 6.

[[Page 770]]

    2. Establishing live contact. Live contact provides servicers an 
opportunity to discuss the circumstances of a borrower's delinquency. 
Live contact with a borrower includes speaking on the telephone or 
conducting an in-person meeting with the borrower but not leaving a 
recorded phone message. A servicer may rely on live contact established 
at the borrower's initiative to satisfy the live contact requirement in 
Sec.  1024.39(a). Servicers may also combine contacts made pursuant to 
Sec.  1024.39(a) with contacts made with borrowers for other reasons, 
for instance, by telling borrowers on collection calls that loss 
mitigation options may be available.
    3. Good faith efforts. Good faith efforts to establish live contact 
consist of reasonable steps, under the circumstances, to reach a 
borrower and may include telephoning the borrower on more than one 
occasion or sending written or electronic communication encouraging the 
borrower to establish live contact with the servicer. The length of a 
borrower's delinquency, as well as a borrower's failure to respond to a 
servicer's repeated attempts at communication pursuant to Sec.  
1024.39(a), are relevant circumstances to consider. For example, whereas 
``good faith efforts'' to establish live contact with regard to a 
borrower with two consecutive missed payments might require a telephone 
call, ``good faith efforts'' to establish live contact with regard to an 
unresponsive borrower with six or more consecutive missed payments might 
require no more than including a sentence requesting that the borrower 
contact the servicer with regard to the delinquencies in the periodic 
statement or in an electronic communication. However, if a borrower is 
in a situation such that the additional live contact information is 
required under Sec.  1024.39(e) or if a servicer relies on the temporary 
special COVID-19 loss mitigation procedural safeguards provision in 
Sec.  1024.41(f)(3)(ii)(C)(1), providing no more than a sentence 
requesting that the borrower contact the servicer with regard to the 
delinquencies in the periodic statement or in an electronic 
communication would not be a reasonable step, under the circumstances, 
to make good faith efforts to establish live contact. Comment 39(a)-6 
discusses the relationship between live contact and the loss mitigation 
procedures set forth in Sec.  1024.41.
    4. Promptly inform if appropriate.
    i. Servicer's determination. Except as provided in Sec.  1024.39(e), 
it is within a servicer's reasonable discretion to determine whether 
informing a borrower about the availability of loss mitigation options 
is appropriate under the circumstances. The following examples 
demonstrate when a servicer has made a reasonable determination 
regarding the appropriateness of providing information about loss 
mitigation options.
    A. A servicer provides information about the availability of loss 
mitigation options to a borrower who notifies a servicer during live 
contact of a material adverse change in the borrower's financial 
circumstances that is likely to cause the borrower to experience a long-
term delinquency for which loss mitigation options may be available.
    B. A servicer does not provide information about the availability of 
loss mitigation options to a borrower who has missed a January 1 payment 
and notified the servicer that full late payment will be transmitted to 
the servicer by February 15.
    ii. Promptly inform. If appropriate, a servicer may inform borrowers 
about the availability of loss mitigation options orally, in writing, or 
through electronic communication, but the servicer must provide such 
information promptly after the servicer establishes live contact. Except 
as provided in Sec.  1024.39(e), a servicer need not notify a borrower 
about any particular loss mitigation options at this time; if 
appropriate, a servicer need only inform borrowers generally that loss 
mitigation options may be available. If appropriate, a servicer may 
satisfy the requirement in Sec.  1024.39(a) to inform a borrower about 
loss mitigation options by providing the written notice required by 
Sec.  1024.39(b)(1), but the servicer must provide such notice promptly 
after the servicer establishes live contact.
    5. Borrower's representative. Section 1024.39 does not prohibit a 
servicer from satisfying its requirements by establishing live contact 
with and, if applicable, providing information about loss mitigation 
options to a person authorized by the borrower to communicate with the 
servicer on the borrower's behalf. A servicer may undertake reasonable 
procedures to determine if a person that claims to be an agent of a 
borrower has authority from the borrower to act on the borrower's 
behalf, for example, by requiring a person that claims to be an agent of 
the borrower to provide documentation from the borrower stating that the 
purported agent is acting on the borrower's behalf.
    6. Relationship between live contact and loss mitigation procedures. 
If the servicer has established and is maintaining ongoing contact with 
the borrower under the loss mitigation procedures under Sec.  1024.41, 
including during the borrower's completion of a loss mitigation 
application or the servicer's evaluation of the borrower's complete loss 
mitigation application, or if the servicer has sent the borrower a 
notice pursuant to Sec.  1024.41(c)(1)(ii) that the borrower is not 
eligible for any loss mitigation options, the servicer complies with 
Sec.  1024.39(a) and need not otherwise establish or make good faith 
efforts to establish live contact. When the borrower is in a forbearance 
program made available to borrowers experiencing a

[[Page 771]]

COVID-19-related hardship such that the additional live contact 
information is required under Sec.  1024.39(e)(2) or if a servicer 
relies on the temporary special COVID-19 loss mitigation procedural 
safeguards provision in Sec.  1024.41(f)(3)(ii)(C)(1), the servicer is 
not maintaining ongoing contact with the borrower under the loss 
mitigation procedures under Sec.  1024.41 in a way that would comply 
with Sec.  1024.39(a) if the servicer has only sent the notices required 
by Sec.  1024.41(b)(2)(i)(B) and (c)(2)(iii) and has had no further 
ongoing contact with the borrower concerning the borrower's loss 
mitigation application. A servicer must resume compliance with the 
requirements of Sec.  1024.39(a) for a borrower who becomes delinquent 
again after curing a prior delinquency.
    39(b) Written notice.
    39(b)(1) Notice required.
    1. Delinquency. For guidance on the circumstances under which a 
borrower is delinquent for purposes of Sec.  1024.39, see comment 39(a)-
1. For example, if a payment due date is January 1 and the payment 
remains unpaid during the 45-day period after January 1, the servicer 
must provide the written notice within 45 days after January 1--i.e., by 
February 15. However, if a borrower satisfies a late payment in full 
before the end of the 45-day period, the servicer need not provide the 
written notice. For example, if a borrower misses a January 1 due date 
but makes that payment on February 1, a servicer need not provide the 
written notice by February 15.
    2. Frequency of the written notice. A servicer need not provide the 
written notice under Sec.  1024.39(b) more than once during a 180-day 
period beginning on the date on which the written notice is provided. A 
servicer must provide the written notice under Sec.  1024.39(b) at least 
once every 180 days to a borrower who is 45 days or more delinquent. 
This provision is illustrated as follows: Assume a borrower becomes 
delinquent on March 1, the amount due is not fully paid during the 45 
days after March 1, and the servicer provides the written notice on the 
45th day after March 1, which is April 15. Assume the borrower also 
fails to make the payment due on April 1 and the amount due is not fully 
paid during the 45 days after April 1. The servicer need not provide the 
written notice again until after the 180-day period beginning on April 
15--i.e., no sooner than on October 12--and then only if the borrower is 
at that time 45 days or more delinquent.
    i. If the borrower is 45 days or more delinquent on October 12, the 
date that is 180 days after the prior provision of the written notice, 
the servicer is required to provide the written notice again on October 
12.
    ii. If the borrower is less than 45 days delinquent on October 12, 
the servicer must again provide the written notice 45 days after the 
payment due date for which the borrower remains delinquent. For example, 
if the borrower becomes delinquent on October 1, and the amount due is 
not fully paid during the 45 days after October 1, the servicer will 
need to provide the written notice again no later than 45 days after 
October 1--i.e., by November 15.
    3. Borrower's representative. Comment 39(a)-5 explains how a 
servicer may satisfy the requirements under Sec.  1024.39 with a person 
authorized by the borrower to communicate with the servicer on the 
borrower's behalf.
    4. Relationship to Sec.  1024.39(a). The written notice required 
under Sec.  1024.39(b)(1) must be provided even if the servicer provided 
information about loss mitigation and foreclosure previously during an 
oral communication with the borrower under Sec.  1024.39(a).
    5. Servicing transfers. A transferee servicer is required to comply 
with the requirements of Sec.  1024.39(b) regardless of whether the 
transferor servicer provided a written notice to the borrower in the 
preceding 180-day period. However, a transferee servicer is not required 
to provide a written notice under Sec.  1024.39(b) if the transferor 
servicer provided the written notice under Sec.  1024.39(b) within 45 
days of the transfer date. For example, assume a borrower has monthly 
payments, with a payment due on March 1. The transferor servicer 
provides the notice required by Sec.  1024.39(b) on April 10. The loan 
is transferred on April 12. Assuming the borrower remains delinquent, 
the transferee servicer is not required to provide another written 
notice until 45 days after May 1, the first post-transfer payment due 
date--i.e., by June 15.
    39(b)(2) Content of the written notice.
    1. Minimum requirements. Section 1024.39(b)(2) contains minimum 
content requirements for the written notice. A servicer may provide 
additional information that the servicer determines would be helpful or 
which may be required by applicable law or the owner or assignee of the 
mortgage loan.
    2. Format. Any color, number of pages, size and quality of paper, 
size and type of print, and method of reproduction may be used, provided 
each of the statements required by Sec.  1024.39(b)(2) satisfies the 
clear and conspicuous standard in Sec.  1024.32(a)(1).
    3. Delivery. A servicer may satisfy the requirement to provide the 
written notice by combining other notices that satisfy the content 
requirements of Sec.  1024.39(b)(2) into a single mailing, provided each 
of the statements required by Sec.  1024.39(b)(2) satisfies the clear 
and conspicuous standard in Sec.  1024.32(a)(1).
    Paragraph 39(b)(2)(iii).
    1. Number of examples. Section 1024.39(b)(2)(iii) does not require 
that a specific number of examples be disclosed, but borrowers are 
likely to benefit from examples of options that would permit them to 
retain ownership of their home and examples of options that may require 
borrowers to end their ownership to avoid foreclosure. The

[[Page 772]]

servicer may include a generic list of loss mitigation options that it 
offers to borrowers. The servicer may include a statement that not all 
borrowers will qualify for the listed options.
    2. Brief description. An example of a loss mitigation option may be 
described in one or more sentences. If a servicer offers a loss 
mitigation option comprising several loss mitigation programs, the 
servicer may provide a generic description of the option without 
providing detailed descriptions of each program. For example, if the 
servicer offers several loan modification programs, the servicer may 
provide a generic description of ``loan modification.''
    Paragraph 39(b)(2)(iv).
    1. Explanation of how the borrower may obtain more information about 
loss mitigation options. A servicer may comply with Sec.  
1024.39(b)(2)(iv) by directing the borrower to contact the servicer for 
more detailed information on how to apply for loss mitigation options. 
For example, a general statement such as, ``contact us for instructions 
on how to apply'' would satisfy the requirement to inform the borrower 
how to obtain more information about loss mitigation options. However, 
to expedite the borrower's timely application for any loss mitigation 
options, servicers may provide more detailed instructions, such as by 
listing representative documents the borrower should make available to 
the servicer (such as tax filings or income statements), and an estimate 
of how quickly the servicer expects to evaluate a completed application 
and make a decision on loss mitigation options. Servicers may also 
supplement the written notice required by Sec.  1024.39(b)(1) with a 
loss mitigation application form.
    39(c) Borrowers in bankruptcy.
    1. Borrower's representative. If the borrower is represented by a 
person authorized by the borrower to communicate with the servicer on 
the borrower's behalf, the servicer may provide the written notice 
required by Sec.  1024.39(b), as modified by Sec.  1024.39(c)(1)(iii), 
to the borrower's representative. See comment 39(a)-5. In general, 
bankruptcy counsel is the borrower's representative. A servicer's 
procedures for determining whether counsel is the borrower's 
representative are generally considered reasonable if they are limited 
to, for example, confirming that the attorney's name is listed on the 
borrower's bankruptcy petition or other court filing.
    2. Adapting requirements in bankruptcy. Section 1024.39(c) does not 
require a servicer to communicate with a borrower in a manner that would 
be inconsistent with applicable bankruptcy law or a court order in a 
bankruptcy case. If necessary to comply with such law or court order, a 
servicer may adapt the requirements of Sec.  1024.39 as appropriate.
    39(c)(1) Borrowers in bankruptcy--Partial exemption.
    1. Commencing a case. Section 1024.39(c)(1) applies once a petition 
is filed under title 11 of the United States Code, commencing a case in 
which the borrower is a debtor in bankruptcy.
    Paragraph 39(c)(1)(ii).
    1. Availability of loss mitigation options. In part, Sec.  
1024.39(c)(1)(ii) exempts a servicer from the requirements of Sec.  
1024.39(b) if no loss mitigation option is available. A loss mitigation 
option is available if the owner or assignee of a mortgage loan offers 
an alternative to foreclosure that is made available through the 
servicer and for which a borrower may apply, even if the borrower 
ultimately does not qualify for such option.
    2. Fair Debt Collections Practices Act. i. Exemption. To the extent 
the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) 
applies to a servicer's communications with a borrower in bankruptcy and 
any borrower on the mortgage loan has provided a notification pursuant 
to FDCPA section 805(c) notifying the servicer that the borrower refuses 
to pay a debt or that the borrower wishes the servicer to cease further 
communications, with regard to that mortgage loan, Sec.  
1024.39(c)(1)(ii) exempts a servicer from providing the written notice 
required by Sec.  1024.39(b).
    ii. Example. For example, assume that two spouses jointly own a home 
and are both primarily liable on the mortgage loan. Further assume that 
the servicer is subject to the FDCPA with respect to that mortgage loan. 
One spouse is a debtor in bankruptcy under title 11 of the United States 
Code subject to Sec.  1024.39(c). The other spouse provided the servicer 
a notification pursuant to FDCPA section 805(c). Section 
1024.39(c)(1)(ii) exempts the servicer from providing the written notice 
required by Sec.  1024.39(b) with respect to that mortgage loan.
    Paragraph 39(c)(1)(iii).
    1. Joint obligors. When two or more borrowers are joint obligors 
with primary liability on a mortgage loan subject to Sec.  1024.39, if 
any of the borrowers is a debtor in bankruptcy, a servicer may provide 
the written notice required by Sec.  1024.39(b), as modified by Sec.  
1024.39(c)(1)(iii), to any borrower.
    39(c)(2) Resuming compliance.
    1. Bankruptcy case revived. If the borrower's bankruptcy case is 
revived, for example if the court reinstates a previously dismissed case 
or reopens the case, Sec.  1024.39(c)(1) once again applies. However, 
Sec.  1024.39(c)(1)(iii)(C) provides that a servicer is not required to 
provide the written notice more than once during a single bankruptcy 
case. For example, assume a borrower's bankruptcy case commences on June 
1, the servicer provides the written notice on July 10 in compliance 
with Sec.  1024.39(b) as modified by Sec.  1024.39(c)(1)(iii), and the 
bankruptcy case is

[[Page 773]]

dismissed on August 1. If the court subsequently reopens or reinstates 
the borrower's bankruptcy case and the servicer does not provide a 
second written notice for that bankruptcy case, the servicer has 
complied with Sec.  1024.39(b) and (c)(1)(iii).
    39(d) Fair Debt Collection Practices Act--partial exemption.
    1. Availability of loss mitigation options. In part, Sec.  
1024.39(d)(2) exempts a servicer from providing the written notice 
required by Sec.  1024.39(b) if no loss mitigation option is available. 
A loss mitigation option is available if the owner or assignee of a 
mortgage loan offers an alternative to foreclosure that is made 
available through the servicer and for which a borrower may apply, even 
if the borrower ultimately does not qualify for such option.
    2. Early intervention communications under the FDCPA. To the extent 
the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) 
applies to a servicer's communications with a borrower, a servicer does 
not violate FDCPA section 805(c) by providing the written notice 
required by Sec.  1024.39(b) as modified by Sec.  1024.39(d)(3) after a 
borrower has provided a notification pursuant to FDCPA section 805(c) 
with respect to that borrower's loan. Nor does a servicer violate FDCPA 
section 805(c) by providing loss mitigation information or assistance in 
response to a borrower-initiated communication after the borrower has 
invoked the cease communication right under FDCPA section 805(c). A 
servicer subject to the FDCPA must continue to comply with all other 
applicable provisions of the FDCPA, including restrictions on 
communications and prohibitions on harassment or abuse, false or 
misleading representations, and unfair practices as contained in FDCPA 
sections 805 through 808 (15 U.S.C. 1692c through 1692f).
    Paragraph 39(d)(2).
    1. Borrowers in bankruptcy. To the extent the Fair Debt Collection 
Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) applies to a servicer's 
communications with a borrower and the borrower has provided a 
notification pursuant to FDCPA section 805(c) notifying the servicer 
that the borrower refuses to pay a debt or that the borrower wishes the 
servicer to cease communications, with regard to that mortgage loan, 
Sec.  1024.39(d)(2) exempts a servicer from providing the written notice 
required by Sec.  1024.39(d) while any borrower on the mortgage loan is 
also a debtor in bankruptcy under title 11 of the United States Code. 
For an example, see comment 39(c)(1)(ii)-2.ii.

                  Sec.  1024.40--Continuity of Contact

    40(a) In general.
    1. Delinquent borrower. A borrower is not considered delinquent if 
the borrower has refinanced the mortgage loan, paid off the mortgage 
loan, brought the mortgage loan current by paying all amounts owed in 
arrears, or if title to the borrower's property has been transferred to 
a new owner through, for example, a deed-in-lieu of foreclosure, a sale 
of the borrower's property, including, as applicable, a short sale, or a 
foreclosure sale. For purposes of responding to a borrower's inquiries 
and assisting a borrower with loss mitigation options, the term 
``borrower'' includes a person authorized by the borrower to act on the 
borrower's behalf. A servicer may undertake reasonable procedures to 
determine if a person that claims to be an agent of a borrower has 
authority from the borrower to act on the borrower's behalf, for example 
by requiring that a person who claims to be an agent of the borrower 
provide documentation from the borrower stating that the purported agent 
is acting on the borrower's behalf.
    2. Assignment of personnel. A servicer has discretion to determine 
whether to assign a single person or a team of personnel to respond to a 
delinquent borrower. The personnel a servicer assigns to the borrower as 
described in Sec.  1024.40(a)(1) may be single-purpose or multi-purpose 
personnel. Single-purpose personnel are personnel whose primary 
responsibility is to respond to a delinquent borrower's inquiries, and 
as applicable, assist the borrower with available loss mitigation 
options. Multi-purpose personnel can be personnel that do not have a 
primary responsibility at all, or personnel for whom responding to a 
delinquent borrower's inquiries, and as applicable, assisting the 
borrower with available loss mitigation options is not the personnel's 
primary responsibility. If the delinquent borrower files for bankruptcy, 
a servicer may assign personnel with specialized knowledge in bankruptcy 
law to assist the borrower.
    3. Delinquency. See Sec.  1024.31 for the definition of delinquency 
applicable to subpart C of Regulation X.

                Sec.  1024.41--Loss Mitigation Procedures

    41(b) Receipt of a loss mitigation application.
    1. Successors in interest. i. If a servicer receives a loss 
mitigation application from a potential successor in interest before 
confirming that person's identity and ownership interest in the 
property, the servicer may, but need not, review and evaluate the loss 
mitigation application in accordance with the procedures set forth in 
Sec.  1024.41. If a servicer complies with the requirements of Sec.  
1024.41 for a complete loss mitigation application submitted by a 
potential successor in interest before confirming that person's identity 
and ownership interest in the property, Sec.  1024.41(i)'s limitation on 
duplicative requests applies to that person, provided the servicer's 
evaluation of loss mitigation options available to the person would not 
have resulted in a different determination due to the person's 
confirmation as a successor in

[[Page 774]]

interest if it had been conducted after the servicer confirmed the 
person's status as a successor in interest.
    ii. If a servicer receives a loss mitigation application from a 
potential successor in interest and elects not to review and evaluate 
the loss mitigation application before confirming that person's identity 
and ownership interest in the property, the servicer must preserve the 
loss mitigation application and all documents submitted in connection 
with the application, and, upon such confirmation, the servicer must 
review and evaluate the loss mitigation application in accordance with 
the procedures set forth in Sec.  1024.41 if the property is the 
confirmed successor in interest's principal residence and the procedures 
set forth in Sec.  1024.41 are otherwise applicable. For purposes of 
Sec.  1024.41, the servicer must treat the loss mitigation application 
as if it had been received on the date that the servicer confirmed the 
successor in interest's status. If the loss mitigation application is 
incomplete at the time of confirmation because documents submitted by 
the successor in interest became stale or invalid after they were 
submitted and confirmation is 45 days or more before a foreclosure sale, 
the servicer must identify the stale or invalid documents that need to 
be updated in a notice pursuant to Sec.  1024.41(b)(2).
    41(b)(1) Complete Loss Mitigation Application
    1. In general. A servicer has flexibility to establish its own 
application requirements and to decide the type and amount of 
information it will require from borrowers applying for loss mitigation 
options. In the course of gathering documents and information from a 
borrower to complete a loss mitigation application, a servicer may stop 
collecting documents and information for a particular loss mitigation 
option after receiving information confirming that, pursuant to any 
requirements established by the owner or assignee of the borrower's 
mortgage loan, the borrower is ineligible for that option. A servicer 
may not stop collecting documents and information for any loss 
mitigation option based solely upon the borrower's stated preference but 
may stop collecting documents and information for any loss mitigation 
option based on the borrower's stated preference in conjunction with 
other information, as prescribed by any requirements established by the 
owner or assignee. A servicer must continue to exercise reasonable 
diligence to obtain documents and information from the borrower that the 
servicer requires to evaluate the borrower as to all other loss 
mitigation options available to the borrower. For example:
    i. Assume a particular loss mitigation option is only available for 
borrowers whose mortgage loans were originated before a specific date. 
Once a servicer receives documents or information confirming that a 
mortgage loan was originated after that date, the servicer may stop 
collecting documents or information from the borrower that the servicer 
would use to evaluate the borrower for that loss mitigation option, but 
the servicer must continue its efforts to obtain documents and 
information from the borrower that the servicer requires to evaluate the 
borrower for all other available loss mitigation options.
    ii. Assume applicable requirements established by the owner or 
assignee of the mortgage loan provide that a borrower is ineligible for 
home retention loss mitigation options if the borrower states a 
preference for a short sale and provides evidence of another applicable 
hardship, such as military Permanent Change of Station orders or an 
employment transfer more than 50 miles away. If the borrower indicates a 
preference for a short sale or, more generally, not to retain the 
property, the servicer may not stop collecting documents and information 
from the borrower pertaining to available home retention options solely 
because the borrower has indicated such a preference, but the servicer 
may stop collecting such documents and information once the servicer 
receives information confirming that the borrower has an applicable 
hardship under requirements established by the owner or assignee, such 
as military Permanent Change of Station orders or employment transfer.
    2. When an inquiry or prequalification request becomes an 
application. A servicer is encouraged to provide borrowers with 
information about loss mitigation programs. If in giving information to 
the borrower, the borrower expresses an interest in applying for a loss 
mitigation option and provides information the servicer would evaluate 
in connection with a loss mitigation application, the borrower's inquiry 
or prequalification request has become a loss mitigation application. A 
loss mitigation application is considered expansively and includes any 
``prequalification'' for a loss mitigation option. For example, if a 
borrower requests that a servicer determine if the borrower is 
``prequalified'' for a loss mitigation program by evaluating the 
borrower against preliminary criteria to determine eligibility for a 
loss mitigation option, the request constitutes a loss mitigation 
application.
    3. Examples of inquiries that are not applications. The following 
examples illustrate situations in which only an inquiry has taken place 
and no loss mitigation application has been submitted:
    i. A borrower calls to ask about loss mitigation options and 
servicer personnel explain the loss mitigation options available to the 
borrower and the criteria for determining the borrower's eligibility for 
any such loss mitigation option. The borrower does not, however, provide 
any information that a servicer would consider for evaluating a loss 
mitigation application.

[[Page 775]]

    ii. A borrower calls to ask about the process for applying for a 
loss mitigation option but the borrower does not provide any information 
that a servicer would consider for evaluating a loss mitigation 
application.
    4. Although a servicer has flexibility to establish its own 
requirements regarding the documents and information necessary for a 
loss mitigation application, the servicer must act with reasonable 
diligence to collect information needed to complete the application. A 
servicer must request information necessary to make a loss mitigation 
application complete promptly after receiving the loss mitigation 
application. Reasonable diligence for purposes of Sec.  1024.41(b)(1) 
includes, without limitation, the following actions:
    i. A servicer requires additional information from the applicant, 
such as an address or a telephone number to verify employment; the 
servicer contacts the applicant promptly to obtain such information 
after receiving a loss mitigation application;
    ii. Servicing for a mortgage loan is transferred to a servicer and 
the borrower makes an incomplete loss mitigation application to the 
transferee servicer after the transfer; the transferee servicer reviews 
documents provided by the transferor servicer to determine if 
information required to make the loss mitigation application complete is 
contained within documents transferred by the transferor servicer to the 
servicer; and
    iii. A servicer offers a borrower a short-term payment forbearance 
program or a short-term repayment plan based on an evaluation of an 
incomplete loss mitigation application and provides the borrower the 
written notice pursuant to Sec.  1024.41(c)(2)(iii). If the borrower 
remains in compliance with the short-term payment forbearance program or 
short-term repayment plan, and the borrower does not request further 
assistance, the servicer may suspend reasonable diligence efforts until 
near the end of the payment forbearance program or repayment plan. 
However, if the borrower fails to comply with the program or plan or 
requests further assistance, the servicer must immediately resume 
reasonable diligence efforts. Near the end of a short-term payment 
forbearance program offered based on an evaluation of an incomplete loss 
mitigation application pursuant to Sec.  1024.41(c)(2)(iii), and prior 
to the end of the forbearance period, if the borrower remains 
delinquent, a servicer must contact the borrower to determine if the 
borrower wishes to complete the loss mitigation application and proceed 
with a full loss mitigation evaluation.
    iv. If the borrower is in a short-term payment forbearance program 
made available to borrowers experiencing a COVID-19-related hardship, 
including a payment forbearance program made pursuant to the Coronavirus 
Economic Stability Act, section 4022 (15 U.S.C. 9056), that was offered 
to the borrower based on evaluation of an incomplete application, and 
the borrower remains delinquent, a servicer must contact the borrower no 
later than 30 days before the scheduled end of the forbearance period to 
determine if the borrower wishes to complete the loss mitigation 
application and proceed with a full loss mitigation evaluation. If the 
borrower requests further assistance, the servicer must exercise 
reasonable diligence to complete the application before the end of the 
forbearance period.
    5. Information not in the borrower's control. A loss mitigation 
application is complete when a borrower provides all information 
required from the borrower notwithstanding that additional information 
may be required by a servicer that is not in the control of a borrower. 
For example, if a servicer requires a consumer report for a loss 
mitigation evaluation, a loss mitigation application is considered 
complete if a borrower has submitted all information required from the 
borrower without regard to whether a servicer has obtained a consumer 
report that a servicer has requested from a consumer reporting agency.
    41(b)(2)Review of loss mitigation application submission.
    41(b)(2)(i) Requirements.
    1. Foreclosure sale not scheduled. For purposes of Sec.  
1024.41(b)(2)(i), if no foreclosure sale has been scheduled as of the 
date a servicer receives a loss mitigation application, the servicer 
must treat the application as having been received 45 days or more 
before any foreclosure sale.
    Paragraph 41(b)(2)(i)(B).
    1. Later discovery of additional information required to evaluate 
application. Even if a servicer has informed a borrower that an 
application is complete (or notified the borrower of specific 
information necessary to complete an incomplete application), if the 
servicer determines, in the course of evaluating the loss mitigation 
application submitted by the borrower, that additional information or a 
corrected version of a previously submitted document is required, the 
servicer must promptly request the additional information or corrected 
document from the borrower pursuant to the reasonable diligence 
obligation in Sec.  1024.41(b)(1). See Sec.  1024.41(c)(2)(iv) 
addressing facially complete applications.
    41(b)(2)(ii) Time period disclosure.
    1. Thirty days is generally reasonable. In general and subject to 
the restrictions described in comments 41(b)(2)(ii)-2 and -3, a servicer 
complies with the requirement to include a reasonable date in the 
written notice required under Sec.  1024.41(b)(2)(i)(B) by including a 
date that is 30 days after the date the servicer provides the written 
notice.
    2. No later than the next milestone. For purposes of Sec.  
1024.41(b)(2)(ii), subject to the restriction described in comment 
41(b)(2)(ii)-3,

[[Page 776]]

the reasonable date must be no later than the earliest of:
    i. The date by which any document or information submitted by a 
borrower will be considered stale or invalid pursuant to any 
requirements applicable to any loss mitigation option available to the 
borrower;
    ii. The date that is the 120th day of the borrower's delinquency;
    iii. The date that is 90 days before a foreclosure sale;
    iv. The date that is 38 days before a foreclosure sale.
    3. Seven-day minimum. A reasonable date for purposes of Sec.  
1024.41(b)(2)(ii) must never be less than seven days from the date on 
which the servicer provides the written notice pursuant to Sec.  
1024.41(b)(2)(i)(B).
    41(b)(3) Determining Protections.
    1. Foreclosure sale not scheduled. If no foreclosure sale has been 
scheduled as of the date that a complete loss mitigation application is 
received, the application is considered to have been received more than 
90 days before any foreclosure sale.
    2. Foreclosure sale re-scheduled. The protections under Sec.  
1024.41 that have been determined to apply to a borrower pursuant to 
Sec.  1024.41(b)(3) remain in effect thereafter, even if a foreclosure 
sale is later scheduled or rescheduled.
    41(c) Evaluation of loss mitigation applications.
    41(c)(1) Complete loss mitigation application.
    1. Definition of ``evaluation.'' The conduct of a servicer's 
evaluation with respect to any loss mitigation option is in the sole 
discretion of a servicer. A servicer meets the requirements of Sec.  
1024.41(c)(1)(i) if the servicer makes a determination regarding the 
borrower's eligibility for a loss mitigation program. Consistent with 
Sec.  1024.41(a), because nothing in section 1024.41 should be construed 
to permit a borrower to enforce the terms of any agreement between a 
servicer and the owner or assignee of a mortgage loan, including with 
respect to the evaluation for, or provision of, any loss mitigation 
option, Sec.  1024.41(c)(1) does not require that an evaluation meet any 
standard other than the discretion of the servicer.
    2. Loss mitigation options available to a borrower. The loss 
mitigation options available to a borrower are those options offered by 
an owner or assignee of the borrower's mortgage loan. Loss mitigation 
options administered by a servicer for an owner or assignee of a 
mortgage loan other than the owner or assignee of the borrower's 
mortgage loan are not available to the borrower solely because such 
options are administered by the servicer. For example:
    i. A servicer services mortgage loans for two different owners or 
assignees of mortgage loans. Those entities each have different loss 
mitigation programs. loss mitigation options not offered by the owner or 
assignee of the borrower's mortgage loan are not available to the 
borrower; or
    ii. The owner or assignee of a borrower's mortgage loan has 
established pilot programs, temporary programs, or programs that are 
limited by the number of participating borrowers. Such loss mitigation 
options are available to a borrower. However, a servicer evaluates 
whether a borrower is eligible for any such program consistent with 
criteria established by an owner or assignee of a mortgage loan. For 
example, if an owner or assignee has limited a pilot program to a 
certain geographic area or to a limited number of participants, and the 
servicer determines that a borrower is not eligible based on any such 
requirement, the servicer shall inform the borrower that the investor 
requirement for the program is the basis for the denial.
    3. Offer of a non-home retention option. A servicer's offer of a 
non-home retention option may be conditional upon receipt of further 
information not in the borrower's possession and necessary to establish 
the parameters of a servicer's offer. For example, a servicer complies 
with the requirement for evaluating the borrower for a short sale option 
if the servicer offers the borrower the opportunity to enter into a 
listing or marketing period agreement but indicates that specifics of an 
acceptable short sale transaction may be subject to further information 
obtained from an appraisal or title search.
    4. Other notices. A servicer may combine other notices required by 
applicable law, including, without limitation, a notice with respect to 
an adverse action required by Regulation B, 12 CFR part 1002, or a 
notice required pursuant to the Fair Credit Reporting Act, with the 
notice required pursuant to Sec.  1024.41(c)(1), unless otherwise 
prohibited by applicable law.
    41(c)(2) Incomplete loss mitigation application evaluation.
    41(c)(2)(i) In general.
    1. Offer of a loss mitigation option without an evaluation of a loss 
mitigation application. Nothing in Sec.  1024.41(c)(2)(i) prohibits a 
servicer from offering loss mitigation options to a borrower who has not 
submitted a loss mitigation application. Further, nothing in Sec.  
1024.41(c)(2)(i) prohibits a servicer from offering a loss mitigation 
option to a borrower who has submitted an incomplete loss mitigation 
application where the offer of the loss mitigation option is not based 
on any evaluation of information submitted by the borrower in connection 
with such loss mitigation application. For example, if a servicer offers 
trial loan modification programs to all borrowers who become 150 days 
delinquent without an application or consideration of any information 
provided by a borrower in connection with a loss mitigation application, 
the servicer's offer of any such program does not violate Sec.  
1024.41(c)(2)(i), and a

[[Page 777]]

servicer is not required to comply with Sec.  1024.41 with respect to 
any such program, because the offer of the loss mitigation option is not 
based on an evaluation of a loss mitigation application.
    2. Servicer discretion. Although a review of a borrower's incomplete 
loss mitigation application is within a servicer's discretion, and is 
not required by Sec.  1024.41, a servicer may be required separately, in 
accordance with policies and procedures maintained pursuant to Sec.  
1024.38(b)(2)(v), to properly evaluate a borrower who submits an 
application for a loss mitigation option for all loss mitigation options 
available to the borrower pursuant to any requirements established by 
the owner or assignee of the borrower's mortgage loan. Such evaluation 
may be subject to requirements applicable to loss mitigation 
applications otherwise considered incomplete pursuant to Sec.  1024.41.
    41(c)(2)(ii) Reasonable time.
    1. Significant period of time. A significant period of time under 
the circumstances may include consideration of the timing of the 
foreclosure process. For example, if a borrower is less than 50 days 
before a foreclosure sale, an application remaining incomplete for 15 
days may be a more significant period of time under the circumstances 
than if the borrower is still less than 120 days delinquent on a 
mortgage loan obligation.
    41(c)(2)(iii) Short-term loss mitigation options.
    1. Short-term payment forbearance program. The exemption in Sec.  
1024.41(c)(2)(iii) applies to, among other things, short-term payment 
forbearance programs. For purposes of Sec.  1024.41(c)(2)(iii), a 
payment forbearance program is a loss mitigation option pursuant to 
which a servicer allows a borrower to forgo making certain payments or 
portions of payments for a period of time. A short-term payment 
forbearance program for purposes of Sec.  1024.41(c)(2)(iii) allows the 
forbearance of payments due over periods of no more than six months. 
Such a program would be short-term regardless of the amount of time a 
servicer allows the borrower to make up the missing payments.
    2. Short-term loss mitigation options and incomplete applications. 
Section 1024.41(c)(2)(iii) allows a servicer to offer a borrower a 
short-term payment forbearance program or a short-term repayment plan 
based on an evaluation of an incomplete loss mitigation application. The 
servicer must still comply with the other requirements of Sec.  1024.41 
with respect to the incomplete loss mitigation application, including 
the requirement in Sec.  1024.41(b)(2) to review the application to 
determine if it is complete, the requirement in Sec.  1024.41(b)(1) to 
exercise reasonable diligence in obtaining documents and information to 
complete a loss mitigation application (see comment 41(b)(1)-4.iii), and 
the requirement in Sec.  1024.41(b)(2)(i)(B) to provide the borrower 
with written notice that the servicer acknowledges the receipt of the 
application and has determined that the application is incomplete.
    3. Short-term loss mitigation options and complete applications. 
Even if a servicer offers a borrower a short-term payment forbearance 
program or a short-term repayment plan based on an evaluation of an 
incomplete loss mitigation application, the servicer must still comply 
with all applicable requirements in Sec.  1024.41 if the borrower 
completes a loss mitigation application.
    4. Short-term repayment plan. The exemption in Sec.  
1024.41(c)(2)(iii) applies to, among other things, short-term repayment 
plans. For purposes of Sec.  1024.41(c)(2)(iii), a repayment plan is a 
loss mitigation option with terms under which a borrower would repay all 
past due payments over a specified period of time to bring the mortgage 
loan account current. A short-term repayment plan for purposes of Sec.  
1024.41(c)(2)(iii) allows for the repayment of no more than three months 
of past due payments and allows a borrower to repay the arrearage over a 
period lasting no more than six months.
    5. Specific payment terms and duration. i. General requirement. 
Section 1024.41(c)(2)(iii) requires a servicer to provide the borrower a 
written notice stating, among other things, the specific payment terms 
and duration of a short-term payment forbearance program or a short-term 
repayment plan offered based on an evaluation of an incomplete 
application. Generally, a servicer complies with these requirements if 
the written notice states the amount of each payment due during the 
program or plan, the date by which the borrower must make each payment, 
and whether the mortgage loan will be current at the end of the program 
or plan if the borrower complies with the program or plan.
    ii. Disclosure of payment amounts that may change. At the time a 
servicer provides the written notice pursuant to Sec.  
1024.41(c)(2)(iii), if the servicer lacks information necessary to 
determine the amount of a specific payment due during the program or 
plan (for example, because the borrower's interest rate will change to 
an unknown rate based on an index or because an escrow account 
computation year as defined in Sec.  1024.17(b) will end and the 
borrower's escrow payment might change), the servicer complies with the 
requirement to disclose the specific payment terms and duration of a 
short-term payment forbearance program or short-term repayment plan if 
the disclosures are based on the best information reasonably available 
to the servicer at the time the notice is provided and the written 
notice identifies which payment amounts may change, states that such 
payment amounts are estimates, and states the general reason that such 
payment amounts might change. For example, if an escrow account 
computation year as defined

[[Page 778]]

in Sec.  1024.17(b) will end during a borrower's short-term repayment 
plan, the written notice complies with Sec.  1024.41(c)(2)(iii) if it 
identifies the payment amounts that may change, states that those 
payment amounts are estimates, and states that the affected payments 
might change because the borrower's escrow payment might change.
    6. Timing of notice. Generally, a servicer acts promptly to provide 
the written notice required by Sec.  1024.41(c)(2)(iii) if the servicer 
provides such written notice no later than five days (excluding legal 
public holidays, Saturdays, and Sundays) after offering the borrower a 
short-term payment forbearance program or short-term repayment plan. A 
servicer may provide the written notice at the same time the servicer 
offers the borrower the program or plan. A written offer that contains 
all the required elements of the written notice also satisfies Sec.  
1024.41(c)(2)(iii).
    41(c)(2)(iv) Facially complete application.
    1. Reasonable opportunity. Section 1024.41(c)(2)(iv) requires a 
servicer to treat a facially complete application as complete for the 
purposes of paragraphs (f)(2) and (g) until the borrower has been given 
a reasonable opportunity to complete the application. A reasonable 
opportunity requires the servicer to notify the borrower of what 
additional information or corrected documents are required, and to 
afford the borrower sufficient time to gather the information and 
documentation necessary to complete the application and submit it to the 
servicer. The amount of time that is sufficient for this purpose will 
depend on the facts and circumstances.
    2. Borrower fails to complete the application. If the borrower fails 
to complete the application within the timeframe provided under Sec.  
1024.41(c)(2)(iv), the application shall be considered incomplete.
    41(c)(3) Notice of complete application.
    Paragraph 41(c)(3)(i).
    1. Completion date. A servicer complies with Sec.  
1024.41(c)(3)(i)(B) by disclosing on the notice the most recent date the 
servicer received the complete loss mitigation application. For example, 
assume that a borrower first submits a complete loss mitigation 
application on March 1. The servicer must disclose March 1 as the date 
the servicer received the application under Sec.  1024.41(c)(3)(i)(B). 
Assume the servicer discovers on March 10 that it requires additional 
information or corrected documents to complete the application and 
promptly requests such additional information or documents from the 
borrower pursuant to Sec.  1024.41(c)(2)(iv). If the borrower 
subsequently completes the application on March 21, the servicer must 
provide another notice in accordance with Sec.  1024.41(c)(3)(i) and 
disclose March 21 as the date the servicer received the complete 
application. See comment 41(c)(3)(i)-3.
    2. First notice or filing. Section 1024.41(c)(3)(i)(D)(1) and (2) 
sets forth different requirements depending on whether the servicer has 
made the first notice or filing under applicable law for any judicial or 
non-judicial foreclosure process at the time the borrower submits a 
complete loss mitigation application. See comment 41(f)-1 for a 
description of whether a document is considered the first notice or 
filing under applicable law.
    3. Additional notices. Except as provided in Sec.  
1024.41(c)(3)(ii), Sec.  1024.41(c)(3)(i) requires a servicer to provide 
a written notice every time a loss mitigation application becomes 
complete. For example, assume that a borrower first submits a complete 
loss mitigation application on March 1, and the servicer provides the 
notice under Sec.  1024.41(c)(3)(i). Assume the servicer discovers on 
March 10 that it requires additional information or corrected documents 
regarding a source of income that the borrower previously identified. 
The servicer must promptly request such additional information or 
documents from the borrower pursuant to Sec.  1024.41(c)(2)(iv). If the 
borrower subsequently completes the application on March 21, the 
servicer must provide another notice in accordance with Sec.  
1024.41(c)(3)(i), unless an exception applies under Sec.  
1024.41(c)(3)(ii). See comment 41(c)(3)(i)-1.
    41(c)(4) Information not in the borrower's control.
    41(c)(4)(i) Diligence requirements.
    1. During the first 30 days following receipt of a complete loss 
mitigation application. Section 1024.41(c)(4)(i) requires a servicer to 
act with reasonable diligence to obtain documents or information not in 
the borrower's control, which includes information in the servicer's 
control, that the servicer requires to determine which loss mitigation 
options, if any, it will offer to the borrower. At a minimum and without 
limitation, a servicer must request such documents or information from 
the appropriate party:
    i. Promptly upon determining that the servicer requires the 
documents or information to determine which loss mitigation options, if 
any, the servicer will offer the borrower; and
    ii. By a date that will enable the servicer to complete the 
evaluation within 30 days of receiving the complete loss mitigation 
application, as set forth in Sec.  1024.41(c)(1), to the extent 
practicable.
    2. More than 30 days following receipt of a complete loss mitigation 
application. If a servicer has not, within 30 days of receiving a 
complete loss mitigation application, received the required documents or 
information from a party other than the borrower or the servicer, the 
servicer acts with reasonable diligence pursuant to Sec.  
1024.41(c)(4)(i) by heightening efforts to obtain the documents or 
information promptly, to minimize delay

[[Page 779]]

in making a determination of which loss mitigation options, if any, it 
will offer to the borrower. Such heightened efforts include, for 
example, promptly verifying that it has contacted the appropriate party 
and determining whether it should obtain the required documents or 
information from a different party.
    41(c)(4)(ii) Effect in case of delay.
    1. Third-party delay. Notwithstanding delay in receiving required 
documents or information from any party other than the borrower or the 
servicer, Sec.  1024.41(c)(1)(i) requires a servicer to complete all 
possible steps in the process of evaluating a complete loss mitigation 
application within 30 days of receiving the complete loss mitigation 
application. Such steps may include requirements imposed on the servicer 
by third parties, such as mortgage insurance companies, guarantors, 
owners, or assignees. For example, if a servicer can determine a 
borrower's eligibility for all available loss mitigation options based 
on an evaluation of the borrower's complete loss mitigation application 
subject only to approval from the mortgage insurance company, Sec.  
1024.41(c)(1)(i) requires the servicer to do so within 30 days of 
receiving the complete loss mitigation application notwithstanding the 
need to obtain such approval before offering the borrower any loss 
mitigation options.
    2. Offers not prohibited. Section 1024.41(c)(4)(ii)(A)(2) permits a 
servicer to deny a complete loss mitigation application (in accordance 
with applicable investor requirements) if, after exercising reasonable 
diligence to obtain the required documents or information from a party 
other than the borrower or the servicer, the servicer has been unable to 
obtain such documents or information for a significant period of time 
and the servicer cannot complete its determination without the required 
documents or information. Section 1024.41(c)(4)(ii)(A)(2) does not 
require a servicer to deny a complete loss mitigation application and 
permits a servicer to offer a borrower a loss mitigation option, even if 
the servicer does not obtain the requested documents or information.
    41(d) Denial of loan modification options.
    1. Investor requirements. If a trial or permanent loan modification 
option is denied because of a requirement of an owner or assignee of a 
mortgage loan, the specific reasons in the notice provided to the 
borrower must identify the owner or assignee of the mortgage loan and 
the requirement that is the basis of the denial. A statement that the 
denial of a loan modification option is based on an investor 
requirement, without additional information specifically identifying the 
relevant investor or guarantor and the specific applicable requirement, 
is insufficient. However, where an owner or assignee has established an 
evaluation criteria that sets an order ranking for evaluation of loan 
modification options (commonly known as a waterfall) and a borrower has 
qualified for a particular loan modification option in the ranking 
established by the owner or assignee, it is sufficient for the servicer 
to inform the borrower, with respect to other loan modification options 
ranked below any such option offered to a borrower, that the investor's 
requirements include the use of such a ranking and that an offer of a 
loan modification option necessarily results in a denial for any other 
loan modification options below the option for which the borrower is 
eligible in the ranking.
    2. Net present value calculation. If a trial or permanent loan 
modification is denied because of a net present value calculation, the 
specific reasons in the notice provided to the borrower must include the 
inputs used in the net present value calculation.
    3. Determination not to offer a loan modification option constitutes 
a denial. A servicer's determination not to offer a borrower a loan 
modification available to the borrower constitutes a denial of the 
borrower for that loan modification option, notwithstanding whether a 
servicer offers a borrower a different loan modification option or other 
loss mitigation option.
    4. Reasons listed. A servicer is required to disclose the actual 
reason or reasons for the denial. If a servicer's systems establish a 
hierarchy of eligibility criteria and reach the first criterion that 
causes a denial but do not evaluate the borrower based on additional 
criteria, a servicer complies with the rule by providing only the reason 
or reasons with respect to which the borrower was actually evaluated and 
rejected as well as notification that the borrower was not evaluated on 
other criteria. A servicer is not required to determine or disclose 
whether a borrower would have been denied on the basis of additional 
criteria if such criteria were not actually considered.
    41(f) Prohibition on foreclosure referral.
    1. Prohibited activities. Section 1024.41(f) prohibits a servicer 
from making the first notice or filing required by applicable law for 
any judicial or non-judicial foreclosure process under certain 
circumstances. Whether a document is considered the first notice or 
filing is determined on the basis of foreclosure procedure under the 
applicable State law.
    i. Where foreclosure procedure requires a court action or 
proceeding, a document is considered the first notice or filing if it is 
the earliest document required to be filed with a court or other 
judicial body to commence the action or proceeding (e.g., a complaint, 
petition, order to docket, or notice of hearing).
    ii. Where foreclosure procedure does not require an action or court 
proceeding, such

[[Page 780]]

as under a power of sale, a document is considered the first notice or 
filing if it is the earliest document required to be recorded or 
published to initiate the foreclosure process.
    iii. Where foreclosure procedure does not require any court filing 
or proceeding, and also does not require any document to be recorded or 
published, a document is considered the first notice or filing if it is 
the earliest document that establishes, sets, or schedules a date for 
the foreclosure sale.
    iv. A document provided to the borrower but not initially required 
to be filed, recorded, or published is not considered the first notice 
or filing on the sole basis that the document must later be included as 
an attachment accompanying another document that is required to be 
filed, recorded, or published to carry out a foreclosure.
    41(f)(3) Temporary Special COVID-19 Loss Mitigation Procedural 
Safeguards
    1. Record retention. As required by Sec.  1024.38(c)(1), a servicer 
shall maintain records that document actions taken with respect to a 
borrower's mortgage loan account until one year after the date a 
mortgage loan is discharged or servicing of a mortgage loan is 
transferred by the servicer to a transferee servicer. If the servicer 
makes the first notice or filing required by applicable law for any 
judicial or non-judicial foreclosure process before January 1, 2022, 
these records must include evidence demonstrating compliance with Sec.  
1024.41(f)(3), including, if applicable, evidence that the servicer 
satisfied one of the procedural safeguards described in Sec.  
1024.41(3)(ii). For example, if the procedural safeguards are met due to 
an unresponsive borrower determination as described in Sec.  
1024.41(f)(3)(ii)(C), the servicer must maintain records demonstrating 
that the servicer did not receive communications from the borrower 
during the relevant time period and that all four elements of Sec.  
1024.41(f)(3)(ii)(C) were met. For example, records demonstrating that 
the servicer did not receive any communications from the borrower during 
any relevant time period may include, for example: (1) Call logs, 
servicing notes, and other systems of record cataloguing communications 
showing the absence of written or oral communication from the borrower 
during the relevant period; and (2) a schedule of all transactions 
credited or debited to the mortgage loan account, including any escrow 
account as defined in Sec.  1024.17(b) and any suspense account, as 
required by Sec.  1024.38(c)(2)(i). The method of retaining these 
records must comply with comment 31(c)(1)-1.
    41(f)(3)(ii)(C) Unresponsive Borrower
    1. Communication. For purposes of Sec.  1024.41(f)(3)(ii)(C), a 
servicer has not received a communication from the borrower if the 
servicer has not received any written or electronic communication from 
the borrower about the mortgage loan obligation, has not received a 
telephone call from the borrower about the mortgage loan obligation, has 
not successfully established live contact with the borrower about the 
mortgage loan obligation, and has not received a payment on the mortgage 
loan obligation. A servicer has received a communication from the 
borrower if, for example, the borrower discusses loss mitigation options 
with the servicer, even if the borrower does not submit a loss 
mitigation application or agree to a loss mitigation option offered by 
the servicer.
    2. Borrower's representative. A servicer has received a 
communication from the borrower if the communication is from an agent of 
the borrower. A servicer may undertake reasonable procedures to 
determine if a person that claims to be an agent of a borrower has 
authority from the borrower to act on the borrower's behalf, for 
example, by requiring that a person that claims to be an agent of the 
borrower provide documentation from the borrower stating that the 
purported agent is acting on the borrower's behalf. Upon receipt of such 
documentation, the servicer shall treat the communication as having been 
submitted by the borrower.
    41(g) Prohibition on foreclosure sale.
    1. Dispositive motion. The prohibition on a servicer moving for 
judgment or order of sale includes making a dispositive motion for 
foreclosure judgment, such as a motion for default judgment, judgment on 
the pleadings, or summary judgment, which may directly result in a 
judgment of foreclosure or order of sale. A servicer that has made any 
such motion before receiving a complete loss mitigation application has 
not moved for a foreclosure judgment or order of sale if the servicer 
takes reasonable steps to avoid a ruling on such motion or issuance of 
such order prior to completing the procedures required by Sec.  1024.41, 
notwithstanding whether any such action successfully avoids a ruling on 
a dispositive motion or issuance of an order of sale.
    2. Proceeding with the foreclosure process. Nothing in Sec.  
1024.41(g) prevents a servicer from proceeding with the foreclosure 
process, including any publication, arbitration, or mediation 
requirements established by applicable law, when the first notice or 
filing for a foreclosure proceeding occurred before a servicer receives 
a complete loss mitigation application so long as any such steps in the 
foreclosure process do not cause or directly result in the issuance of a 
foreclosure judgment or order of sale, or the conduct of a foreclosure 
sale, in violation of Sec.  1024.41.
    3. Interaction with foreclosure counsel. The prohibitions in Sec.  
1024.41(g) against moving for judgment or order of sale or conducting a 
sale may require a servicer to act through foreclosure counsel retained 
by the servicer in a foreclosure proceeding. If a servicer has received 
a complete loss mitigation application, the servicer must instruct 
counsel

[[Page 781]]

promptly not to make a dispositive motion for foreclosure judgment or 
order of sale; where such a dispositive motion is pending, to avoid a 
ruling on the motion or issuance of an order of sale; and, where a sale 
is scheduled, to prevent conduct of a foreclosure sale, unless one of 
the conditions in Sec.  1024.41(g)(1) through (3) is met. A servicer is 
not relieved of its obligations because foreclosure counsel's actions or 
inaction caused a violation.
    4. Loss mitigation applications submitted 37 days or less before 
foreclosure sale. Although a servicer is not required to comply with the 
requirements in Sec.  1024.41 with respect to a loss mitigation 
application submitted 37 days or less before a foreclosure sale, a 
servicer is required separately, in accordance with policies and 
procedures maintained pursuant to Sec.  1024.38(b)(2)(v) to properly 
evaluate a borrower who submits an application for a loss mitigation 
option for all loss mitigation options available to the borrower 
pursuant to any requirements established by the owner or assignee of the 
borrower's mortgage loan. Such evaluation may be subject to requirements 
applicable to a review of a loss mitigation application submitted by a 
borrower 37 days or less before a foreclosure sale.
    5. Conducting a sale prohibited. Section 1024.41(g) prohibits a 
servicer from conducting a foreclosure sale, even if a person other than 
the servicer administers or conducts the foreclosure sale proceedings. 
Where a foreclosure sale is scheduled, and none of the conditions under 
Sec.  1024.41(g)(1) through (3) are applicable, conduct of the sale 
violates Sec.  1024.41(g).
    Paragraph 41(g)(3).
    1. Short sale listing period. An agreement for a short sale 
transaction, or other similar loss mitigation option, typically includes 
marketing or listing periods during which a servicer will allow a 
borrower to market a short sale transaction. A borrower is deemed to be 
performing under an agreement on a short sale, or other similar loss 
mitigation option, during the term of a marketing or listing period.
    2. Short sale agreement. If a borrower has not obtained an approved 
short sale transaction at the end of any marketing or listing period, a 
servicer may determine that a borrower has failed to perform under an 
agreement on a loss mitigation option. An approved short sale 
transaction is a short sale transaction that has been approved by all 
relevant parties, including the servicer, other affected lienholders, or 
insurers, if applicable, and the servicer has received proof of funds or 
financing, unless circumstances otherwise indicate that an approved 
short sale transaction is not likely to occur.
    41(h) Appeal process.
    Paragraph 41(h)(3).
    1. Supervisory personnel. The appeal may be evaluated by supervisory 
personnel that are responsible for oversight of the personnel that 
conducted the initial evaluation, as long as the supervisory personnel 
were not directly involved in the initial evaluation of the borrower's 
complete loss mitigation application.
    41(i) Duplicative requests.
    1. Applicability of loss mitigation protections. Under Sec.  
1024.41(i), a servicer must comply with Sec.  1024.41 with respect to a 
loss mitigation application unless the servicer has previously done so 
for a complete loss mitigation application submitted by the borrower and 
the borrower has been delinquent at all times since submitting the prior 
complete application. Thus, for example, if the borrower has previously 
submitted a complete loss mitigation application and the servicer 
complied fully with Sec.  1024.41 for that application, but the borrower 
then ceased to be delinquent and later became delinquent again, the 
servicer again must comply with Sec.  1024.41 for any subsequent loss 
mitigation application submitted by the borrower. When a servicer is 
required to comply with the requirements of Sec.  1024.41 for such a 
subsequent loss mitigation application, the servicer must comply with 
all applicable requirements of Sec.  1024.41. For example, in such a 
case, the servicer's provision of the notice of determination of which 
loss mitigation options, if any, it will offer to the borrower under 
Sec.  1024.41(c)(1)(ii) regarding the borrower's prior complete loss 
mitigation application does not affect the servicer's obligations to 
provide a new notice of complete application under Sec.  
1024.41(c)(3)(i) regarding the borrower's subsequent complete loss 
mitigation application.
    2. Servicing transfers. Section 1024.41(i) provides that a servicer 
need not comply with Sec.  1024.41 for a subsequent loss mitigation 
application from a borrower where certain conditions are met. A 
transferee servicer and a transferor servicer, however, are not the same 
servicer. Accordingly, a transferee servicer is required to comply with 
the applicable requirements of Sec.  1024.41 upon receipt of a loss 
mitigation application from a borrower whose servicing the transferee 
servicer has obtained through a servicing transfer, even if the borrower 
previously received an evaluation of a complete loss mitigation 
application from the transferor servicer.
    41(k) Servicing transfers.
    1. Pending loss mitigation application. For purposes of Sec.  
1024.41(k), a loss mitigation application is pending if it was subject 
to Sec.  1024.41 and had not been fully resolved before the transfer 
date. For example, a loss mitigation application would not be considered 
pending if a transferor servicer had denied a borrower for all options 
and the borrower's time for making an appeal, if any, had expired prior 
to the transfer date, such

[[Page 782]]

that the transferor servicer had no continuing obligations under Sec.  
1024.41 with respect to the application. A pending application is 
considered a pending complete application if it was complete as of the 
transfer date under the transferor servicer's criteria for evaluating 
loss mitigation applications.
    41(k)(1) In general.
    41(k)(1)(i) Timing of compliance.
    1. Obtaining loss mitigation documents and information. i. In 
connection with a transfer, a transferor servicer must timely transfer, 
and a transferee servicer must obtain from the transferor servicer, 
documents and information submitted by a borrower in connection with a 
loss mitigation application, consistent with policies and procedures 
adopted pursuant to Sec.  1024.38(b)(4). A transferee servicer must 
comply with the applicable requirements of Sec.  1024.41 with respect to 
a loss mitigation application received as a result of a transfer, even 
if the transferor servicer was not required to comply with Sec.  1024.41 
with respect to that application (for example, because Sec.  1024.41(i) 
precluded applicability of Sec.  1024.41 with respect to the transferor 
servicer). If an application was not subject to Sec.  1024.41 prior to a 
transfer, then for purposes of Sec.  1024.41(b) and (c), a transferee 
servicer is considered to have received the loss mitigation application 
on the transfer date. Any such application is subject to the timeframes 
for compliance set forth in Sec.  1024.41(k).
    ii. A transferee servicer must, in accordance with Sec.  
1024.41(b)(1), exercise reasonable diligence to complete a loss 
mitigation application, including a facially complete application, 
received as a result of a transfer. In the transfer context, reasonable 
diligence includes ensuring that a borrower is informed of any changes 
to the application process, such as a change in the address to which the 
borrower should submit documents and information to complete the 
application, as well as ensuring that the borrower is informed about 
which documents and information are necessary to complete the 
application.
    iii. A borrower may provide documents and information necessary to 
complete an application to a transferor servicer after the transfer 
date. Consistent with policies and procedures maintained pursuant to 
Sec.  1024.38(b)(4), the transferor servicer must timely transfer, and 
the transferee servicer must obtain, such documents and information.
    2. Determination of rights and protections. For purposes of Sec.  
1024.41(c) through (h), a transferee servicer must consider documents 
and information that constitute a complete loss mitigation application 
for the transferee servicer to have been received as of the date such 
documents and information were received by the transferor servicer, even 
if such documents and information were received by the transferor 
servicer after the transfer date. See comment 41(k)(1)(i)-1.iii. An 
application that was facially complete under Sec.  1024.41(c)(2)(iv) 
with respect to the transferor servicer remains facially complete under 
Sec.  1024.41(c)(2)(iv) with respect to the transferee servicer as of 
the date it was facially complete with respect to the transferor 
servicer. If an application was complete with respect to the transferor 
servicer, but is not complete with respect to the transferee servicer, 
the transferee servicer must treat the application as facially complete 
under Sec.  1024.41(c)(2)(iv) as of the date the application was 
complete with respect to the transferor servicer.
    3. Duplicative notices not required. A transferee servicer is not 
required to provide notices under Sec.  1024.41 with respect to a 
particular loss mitigation application that the transferor servicer 
provided prior to the transfer. For example, if the transferor servicer 
provided the notice required by Sec.  1024.41(b)(2)(i)(B) prior to the 
transfer, the transferee servicer is not required to provide the notice 
again for that application.
    41(k)(1)(ii) Transfer date defined.
    1. Transfer date. Section 1024.41(k)(1)(ii) provides that the 
transfer date is the date on which the transferee servicer will begin 
accepting payments relating to the mortgage loan, as disclosed on the 
notice of transfer of loan servicing pursuant to Sec.  
1024.33(b)(4)(iv). The transfer date is the same date as that on which 
the transfer of the servicing responsibilities from the transferor 
servicer to the transferee servicer occurs. The transfer date is not 
necessarily the same date as either the effective date of the transfer 
of servicing as disclosed on the notice of transfer of loan servicing 
pursuant to Sec.  1024.33(b)(4)(i) or the sale date identified in a 
servicing transfer agreement.
    41(k)(2) Acknowledgment notices.
    41(k)(2)(ii) Prohibitions.
    1. Examples of prohibitions. Section 1024.41(k)(2)(ii)(A) and (B) 
adjusts the timeframes for certain borrower rights and foreclosure 
protections where Sec.  1024.41(k)(2)(i) applies. These provisions are 
illustrated as follows: Assume a transferor servicer receives a 
borrower's initial loss mitigation application on October 1, and the 
loan is transferred five days (excluding legal public holidays, 
Saturdays, or Sundays) later, on October 8. Assume that Columbus Day, a 
legal public holiday, occurs on October 14, and the transferee servicer 
provides the notice required by Sec.  1024.41(b)(2)(i)(B) 10 days 
(excluding legal public holidays, Saturdays, or Sundays) after the 
transfer date, on October 23. Assume the transferee servicer discloses a 
30-day reasonable date, November 22, under Sec.  1024.41(b)(2)(ii).
    i. If the transferor servicer receives the borrower's initial loss 
mitigation application when the borrower's mortgage loan is 101 days 
delinquent, the borrower's mortgage

[[Page 783]]

loan would be 123 days delinquent on October 23, the date the transferee 
servicer provides the notice required by Sec.  1024.41(b)(2)(i)(B). 
Pursuant to Sec.  1024.41(k)(2)(ii)(A), the transferee servicer cannot 
make the first notice or filing required by applicable law for any 
judicial or non-judicial foreclosure process until after November 22, 
the reasonable date disclosed under Sec.  1024.41(b)(2)(ii), and then 
only if the borrower has not submitted a complete application by that 
date.
    ii. If the transferor servicer receives the borrower's initial loss 
mitigation application 55 days before the foreclosure sale, the date 
that the transferee servicer provides the notice required by Sec.  
1024.41(b)(2)(i)(B), October 23, is 33 days before the foreclosure sale. 
Pursuant to Sec.  1024.41(k)(2)(ii)(B), the transferee servicer must 
comply with Sec.  1024.41(c), (d), and (g) if the borrower submits a 
complete loss mitigation application on or before November 22, the 
reasonable date disclosed under Sec.  1024.41(b)(2)(ii).
    2. Applicability of loss mitigation provisions. Section 
1024.41(k)(2)(ii)(A) prohibits a servicer from making the first notice 
or filing required by applicable law for any judicial or non-judicial 
foreclosure process until a date that is after the reasonable date 
disclosed to the borrower pursuant to Sec.  1024.41(b)(2)(ii), 
notwithstanding Sec.  1024.41(f)(1). Section 1024.41(k)(2)(ii)(B) 
requires a servicer to comply with Sec.  1024.41(c), (d), and (g) if a 
borrower submits a complete loss mitigation application on or before the 
reasonable date disclosed in the notice required by Sec.  
1024.41(b)(2)(i)(B), even if the servicer would otherwise not be 
required to comply with Sec.  1024.41(c), (d), and (g) because the 
application is submitted 37 days or fewer before a foreclosure sale. 
Section 1024.41(k)(2)(ii) provides additional protections for borrowers 
but does not remove any protections. Servicers remain subject to the 
requirements of Sec.  1024.41 as applicable and so, for example, must 
comply with Sec.  1024.41(h) if the servicer receives a complete loss 
mitigation application 90 days or more before a foreclosure sale. 
Similarly, a servicer is prohibited from making the first notice or 
filing before the borrower's mortgage loan obligation is more than 120 
days delinquent, even if that is after the reasonable date disclosed to 
the borrower pursuant to Sec.  1024.41(b)(2)(ii).
    3. Reasonable date when no milestones remain. Generally, a servicer 
does not provide the notice required under Sec.  1024.41(b)(2)(i)(B) 
after the date that is 38 days before a foreclosure sale, so at least 
one milestone specified in comment 41(b)(ii)-1 always remains 
applicable. When Sec.  1024.41(k)(2)(i) applies, however, the transferee 
servicer may sometimes provide the notice after the date that is 38 days 
before a foreclosure sale. When this occurs, the transferee servicer 
must determine the reasonable date when none of the four specified 
milestones remain. The other requirements of Sec.  1024.41(b)(2)(ii) 
continue to apply. In this circumstance, a reasonable date may occur 
less than 30 days, but not less than seven days, after the date the 
transferee servicer provides the written notice pursuant to Sec.  
1024.41(b)(2)(i)(B).
    41(k)(3) Complete loss mitigation applications pending at transfer.
    1. Additional information or corrections to a previously submitted 
document. If a transferee servicer acquires the servicing of a mortgage 
loan for which a complete loss mitigation application is pending as of 
the transfer date and the transferee servicer determines that additional 
information or a correction to a previously submitted document is 
required based upon its criteria for evaluating loss mitigation 
applications, the application is considered facially complete under 
Sec.  1024.41(c)(2)(iv) as of the date it was first facially complete or 
complete, as applicable, with respect to the transferor servicer. Once 
the transferee servicer receives the information or corrections 
necessary to complete the application, Sec.  1024.41(c)(3) requires the 
transferee servicer to provide a notice of complete application.
    2. Applications first complete upon transfer. If the borrower's loss 
mitigation application was incomplete based on the transferor servicer's 
criteria prior to transfer but is complete based upon the transferee 
servicer's criteria, the application is considered a pending loss 
mitigation application complete as of the transfer date for purposes of 
Sec.  1024.41(k)(3). Consequently, the transferee servicer must comply 
with the applicable requirements of Sec.  1024.41(c)(1) and (4) within 
30 days of the transfer date. For purposes of Sec.  1024.41(c) through 
(h), the application is complete as of the date the transferor servicer 
received the documents and information constituting the complete 
application. See comment 41(k)(1)(i)-2. In such circumstances, Sec.  
1024.41(c)(3) requires the transferee servicer to provide a notice of 
complete application that discloses the date the transferor servicer 
received the documents and information constituting the complete 
application.
    41(k)(4) Applications subject to appeal process.
    1. Obtaining appeal. A borrower may submit an appeal of a transferor 
servicer's determination pursuant to Sec.  1024.41(h) to the transferor 
servicer after the transfer date. Consistent with policies and 
procedures maintained pursuant to Sec.  1024.38(b)(4), the transferor 
servicer must timely transfer, and the transferee servicer must obtain, 
documents and information regarding such appeals.
    2. Servicer unable to determine appeal. A transferee servicer may be 
unable to make a determination on an appeal when, for example, the 
transferor servicer denied a borrower for a loan modification option 
that the

[[Page 784]]

transferee servicer does not offer or when the transferee servicer 
receives the mortgage loan through an involuntary transfer and the 
transferor servicer failed to maintain proper records such that the 
transferee servicer lacks sufficient information to review the appeal. 
In that circumstance, the transferee servicer is required to treat the 
appeal as a pending complete application, and it must permit the 
borrower to accept or reject any loss mitigation options offered by the 
transferor servicer, even if it does not offer the loss mitigation 
options offered by the transferor servicer, in addition to the loss 
mitigation options, if any, that the transferee servicer determines to 
offer the borrower based on its own evaluation of the borrower's 
complete loss mitigation application. For example, assume a transferor 
servicer denied a borrower for all loan modification options but offered 
the borrower a short sale option, and assume that the borrower's appeal 
of the loan modification denial was pending as of the transfer date. If 
the transferee servicer is unable to determine the borrower's appeal, 
the transferee servicer must evaluate the borrower for all available 
loss mitigation options in accordance with Sec.  1024.41(c) and (k)(3). 
At the conclusion of such evaluation, the transferee servicer must 
permit the borrower to accept the short sale option offered by the 
transferor servicer, even if the transferee servicer does not offer the 
short sale option, in addition to any loss mitigation options the 
transferee servicer determines to offer the borrower based upon its own 
evaluation.
    41(k)(5) Pending loss mitigation offers.
    1. Obtaining evidence of borrower acceptance. A borrower may provide 
an acceptance or rejection of a pending loss mitigation offer to a 
transferor servicer after the transfer date. Consistent with policies 
and procedures maintained pursuant to Sec.  1024.38(b)(4), the 
transferor servicer must timely transfer, and the transferee servicer 
must obtain, documents and information regarding such acceptances and 
rejections, and the transferee servicer must provide the borrower with 
any timely accepted loss mitigation option, even if the borrower 
submitted the acceptance to the transferor servicer.

  Appendix MS to Part 1024--Mortgage Servicing Model Forms and Clauses

    1. In general. This appendix contains model forms and clauses for 
mortgage servicing disclosures required by Sec. Sec.  1024.33, 37, and 
39. Each of the model forms is designated for uses in a particular set 
of circumstances as indicated by the title of that model form or clause. 
Although use of the model forms and clauses is not required, servicers 
using them appropriately will be in compliance with disclosure 
requirements of Sec. Sec.  1024.33, 37, and 39. To use the forms 
appropriately, information required by regulation must be set forth in 
the disclosures.
    2. Permissible changes. Servicers may make certain changes to the 
format or content of the forms and clauses and may delete any 
disclosures that are inapplicable without losing the protection from 
liability so long as those changes do not affect the substance, clarity, 
or meaningful sequence of the forms and clauses. Servicers making 
revisions to that effect will lose their protection from civil 
liability. Except as otherwise specifically required, acceptable changes 
include, for example:
    i. Use of ``borrower'' and ``servicer'' instead of pronouns.
    ii. Substitution of the words ``lender'' and ``servicer'' for each 
other.
    iii. Addition of graphics or icons, such as the servicer's corporate 
logo.
    iv. Modifications to remove language that could suggest liability 
under the mortgage loan agreement if such language is not applicable. 
For example, in the case of a confirmed successor in interest who has 
not assumed the mortgage loan obligation under State law and is not 
otherwise liable on the mortgage loan obligation, this could include:
    A. Use of ``the mortgage loan'' or ``this mortgage loan'' instead of 
``your mortgage loan'' and ``the monthly payments'' instead of ``your 
monthly payments.''
    B. Use of ``Payments due on or after [Date] may be sent to'' instead 
of ``Send all payments due on or after [Date] to'' in notices of 
transfer.
    C. Use of ``We will charge the loan account'' instead of ``You must 
pay us'' in notices relating to force-placed insurance.

        Appendix MS-3--Model Force-Placed Insurance Notice Forms

    1. Where the model forms MS-3(A), MS-3(B), MS-3(C), and MS-3(D) use 
the term ``hazard insurance,'' the servicer may substitute ``hazard 
insurance'' with ``homeowners' insurance'' or ``property insurance.''

 Appendix MS-4--Model Clauses for the Written Early Intervention Notice

    1. Model MS-4(A). These model clauses illustrate how a servicer may 
provide its contact information, how a servicer may request that the 
borrower contact the servicer, and how the servicer may inform the 
borrower how to obtain additional information about loss mitigation 
options, as required by Sec.  1024.39(b)(2)(i), (ii), and (iv).
    2. Model MS-4(B). These model clauses illustrate how the servicer 
may inform the borrower of loss mitigation options that may be 
available, as required by Sec.  1024.39(b)(2)(iii), if applicable. A 
servicer may include clauses describing particular loss mitigation 
options to the extent such options are available. Model MS-4(B) does not 
contain sample

[[Page 785]]

clauses for all loss mitigation options that may be available. The 
language in the model clauses contained in square brackets is optional; 
a servicer may comply with the disclosure requirements of Sec.  
1024.39(b)(2)(iii) by using language substantially similar to the 
language in the model clauses, providing additional detail about the 
options, or by adding or substituting applicable loss mitigation options 
for options not represented in these model clauses, provided the 
information disclosed is accurate and clear and conspicuous.
    3. Model MS-4(C). These model clauses illustrate how a servicer may 
provide contact information for housing counselors, as required by Sec.  
1024.39(b)(2)(v). A servicer may, at its option, provide the Web site 
and telephone number for either the Bureau's or the Department of 
Housing and Urban Development's housing counselors list, as provided by 
paragraphs Sec.  1024.39(b)(2)(v).

[78 FR 10887, Feb. 14, 2013, as amended at 78 FR 44717, July 24, 2013; 
78 FR 60438, Oct. 1, 2013; 78 FR 63004, 63005, Oct. 23, 2013; 81 FR 
72376, Oct. 19, 2016; 82 FR 30948, July 5, 2017; 86 FR 34900, June 30, 
2021; 88 FR 16542, Mar. 20, 2023]

                          PART 1025 [RESERVED]

[[Page 787]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 789]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2024)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--599)
        VI  National Capital Planning Commission (Parts 600--699)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
         X  Department of the Treasury (Parts 1000--1099)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Department of Housing and Urban Development (Parts 
                2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)

[[Page 790]]

     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)
        LX  Federal Communications Commission (Parts 6000--6099)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Office of Personnel Management and Office of the 
                Director of National Intelligence (Parts 1400--
                1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)

[[Page 791]]

      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  U.S. International Development Finance Corporation 
                (Parts 4300--4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
     XXXVI  Department of Homeland Security (Parts 4600--4699)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)

[[Page 792]]

    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
    XCVIII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)
         C  National Council on Disability (Parts 10000--10049)
        CI  National Mediation Board (Parts 10100--10199)
       CII  U.S. Office of Special Counsel (Parts 10200--10299)
       CII  U.S. Office of Special Counsel (Parts 10300--10399)
       CIV  Office of the Intellectual Property Enforcement 
                Coordinator (Part 10400--10499)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)

[[Page 793]]

      VIII  Agricultural Marketing Service (Federal Grain 
                Inspection Service, Fair Trade Practices Program), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  [Reserved]
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  [Reserved]
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]

[[Page 794]]

      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)
         L  Rural Business-Cooperative Service, and Rural 
                Utilities Service, Department of Agriculture 
                (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Agricultural Marketing Service (Fair Trade Practices 
                Program), Department of Agriculture (Parts 200--
                299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  [Reserved]
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  (Parts 900--999)[Reserved]

[[Page 795]]

         X  Consumer Financial Protection Bureau (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research, Department of the 
                Treasury (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)

[[Page 796]]

      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  National Technical Information Service, Department of 
                Commerce (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
        XV  Office of the Under-Secretary for Economic Affairs, 
                Department of Commerce (Parts 1500--1599)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399) [Reserved]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599) [Reserved]

[[Page 797]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Agency for Global Media (Parts 500--599)
       VII  U.S. International Development Finance Corporation 
                (Parts 700--799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 798]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799) 
                [Reserved]
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]

[[Page 799]]

        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--899)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900--999)
        VI  Office of the Assistant Secretary, Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--799)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)

[[Page 800]]

        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance

[[Page 801]]

         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of Investment Security, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Department of Defense, Defense Logistics Agency (Parts 
                1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army, Department 
                of Defense (Parts 200--399)
        IV  Great Lakes St. Lawrence Seaway Development 
                Corporation, Department of Transportation (Parts 
                400--499)

[[Page 802]]

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599) 
                [Reserved]
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799) 
                [Reserved]
            Subtitle C--Regulations Relating to Education
        XI  [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)

[[Page 803]]

       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  National Institute of Standards and Technology, 
                Department of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)
        IX  Federal Permitting Improvement Steering Council (Part 
                1900)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
 Chapters 
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
 Chapters 
  103--104  (Parts 103-001--104-099) [Reserved]

[[Page 804]]

       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
 Chapters 
  129--200  [Reserved]
            Subtitle D--Federal Acquisition Supply Chain Security
       201  Federal Acquisition Security Council (Parts 201-1--
                201-99).
            Subtitle E [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
 Chapters 
   II--III  [Reserved]
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--699)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1099)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)

[[Page 805]]

        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
        IX  Denali Commission (Parts 900--999)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Administration for Children and Families, Department 
                of Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission of Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Parts 2300--2399)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)

[[Page 806]]

       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)
         V  The First Responder Network Authority (Parts 500--599)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)

[[Page 807]]

        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199) [Reserved]
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

[[Page 808]]

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 809]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2024)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     5, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, VIII, IX, X, XI; 9, 
                                                  II
Agricultural Research Service                     7, V
Agriculture, Department of                        2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, VIII, IX, X, XI; 9, 
                                                  II
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force, Department of                          32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 810]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI; 38, II
Army, Department of                               32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
  Federal Acquisition Regulation                  48, 19
Career, Technical, and Adult Education, Office    34, IV
     of
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazard Investigation Board    40, VI
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X, XIII
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce, Department of                           2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Affairs, Office of the Under-          15, XV
       Secretary for
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II; 37, IV
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Technical Information Service          15, XI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Secretary of Commerce, Office of                15, Subtitle A
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I
Defense, Department of                            2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III; 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I

[[Page 811]]

  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy, Department of                             32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Denali Commission                                 45, IX
Disability, National Council on                   5, C; 34, XII
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Office of the Under-Secretary   15, XV
     for
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Career, Technical, and Adult Education, Office  34, IV
       of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Policy, National Commission for        1, IV
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         2, XXXVI; 21, III
  National Security Council                       32, XXI; 47, II
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
     States
[[Page 812]]

Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Acquisition Security Council              41, 201
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 2, LX; 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        5, CIII; 29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Permitting Improvement Steering Council   40, IX
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission of                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5

[[Page 813]]

  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Great Lakes St. Lawrence Seaway Development       33, IV
     Corporation
Gulf Coast Ecosystem Restoration Council          2, LIX; 40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X, XIII
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 5, XXXVI; 6, I; 8, 
                                                  I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Independent Counsel, Offices of                   28, VI
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II

[[Page 814]]

Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Intellectual Property Enforcement Coordinator,    5, CIV
     Office of
Inter-American Foundation                         5, LXIII; 22, X
Interior, Department of                           2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Safety and Environmental Enforcement, Bureau    30, II
       of
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Development Finance Corporation,    5, XXXIII; 22, VII
     U.S.
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice, Department of                            2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Independent Counsel, Offices of                 28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor, Department of                              2, XXIX; 5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Federal Acquisition Regulation                  48, 29

[[Page 815]]

  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I, VI
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Libraries and Information Science, National       45, XVII
     Commission on
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV, VI
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           2, XXXVI; 21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Geospatial-Intelligence Agency           32, I
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II; 37, IV
National Intelligence, Office of Director of      5, IV; 32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          5, CI; 29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI; 47, II

[[Page 816]]

National Technical Information Service            15, XI
National Telecommunications and Information       15, XXIII; 47, III, IV, V
     Administration
National Transportation Safety Board              49, VIII
Natural Resource Revenue, Office of               30, XII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy, Department of                               32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, IV, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Contracts, Department of Labor             41, 50
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Safety and Environmental Enforcement, Bureau of   30, II
Science and Technology Policy, Office of          32, XXIV; 47, II
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State, Department of                              2, VI; 22, I; 28, XI

[[Page 817]]

  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Tennessee Valley Authority                        5, LXIX; 18, XIII
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Great Lakes St. Lawrence Seaway Development     33, IV
       Corporation
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury, Department of the                       2, X; 5, XXI; 12, XV; 17, 
                                                  IV; 31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
Truman, Harry S. Scholarship Foundation           45, XVIII
United States Agency for Global Media             22, V
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
U.S. Office of Special Counsel                    5, CII
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs, Department of                   2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I, VII
World Agricultural Outlook Board                  7, XXXVIII

[[Page 819]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2019 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.govinfo.gov. For changes to this volume of the 
CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 
1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. 
The ``List of CFR Sections Affected 1986-2000'' is available at 
www.govinfo.gov.

                                  2019

12 CFR
                                                                   84 FR
                                                                    Page
Chapter IX
930--932 (Subchapter E) Removed.....................................5325
Chapter X
Chapter X Policy statement...........................48229, 48246, 48260
1003.2 (g)(1)(v)(B) and (2)(ii)(B) revised.........................57980
1003.2 (g)(1)(v)(B) and (2)(ii)(B) revised; eff. 1-1-22............58003
1003.3 Heading and (c)(12) revised; (d) added......................57980
1003.3 (c)(12) revised; eff. 1-1-22................................58003
1003.4 (a) introductory text, (1)(i) introductory text, and (e) 
        revised....................................................57981
1003 Supplement I amended..............................514, 57981, 69994
1003 Supplement I amended; eff. 1-1-22.............................58003
1005 Notification...................................................7979
1013 Supplement I amended..........................................58019
1022.141 Added.......................................................517
1022 Appendix O added................................................517
1022 Appendix O revised............................................65281

                                  2020

12 CFR
                                                                   85 FR
                                                                    Page
Chapter X
Chapter X Policy statement.......4579, 6733, 15917, 37331, 41330, 69482, 
                                                                   77987
1003 Technical correction..........................................69119
1003.2 (g)(1)(v)(A) and (2)(ii)(A) revised.........................28404
1003.2 (g)(1)(v)(B) and (2)(ii)(B) revised; eff. 1-1-22............28406
1003.3 (c)(11) revised.............................................28404
1003.3 (c)(11) and (12); eff. 1-1-22...............................28406
1003 Supplement I amended...................................28404, 83410
1003 Supplement I amended; eff. 1-1-22.............................28406
1005 Policy statement..............................................23217
1005.30 (f)(2)(i)(A), (B), and (ii) revised; (f)(2)(iii) added.....34904
1005.32 (b)(4) and (5) added; (c) and (4) heading amended..........34904
1005.33 (a)(1)(iii)(A) amended.....................................34904
1005.36 (b)(3) amended.............................................34904
1005 Supplement I amended..........................................34905
1006 Revised; eff. 11-30-21........................................76887
1013 Supplement I amended..........................................79393
1022 Appendix O revised............................................83750
1024 Policy statement..............................................25281
1024.41 (c)(2)(i) revised; (c)(2)(v) added; interim................39065

[[Page 820]]

                                  2021

12 CFR
                                                                   86 FR
                                                                    Page
Chapter X
Chapter X Policy statement...........................14808, 17699, 32723
1002 Policy statement...............................................3762
1002 Interpretation................................................14363
1003 Policy statement..............................................17692
1003 Supplement I amended..........................................72819
1005 Policy statement..............................................17693
1006 Authority citation revised....................................21180
1006.1 (c)(2) added.................................................5853
1006.2 (e) revised; (f) added.......................................5853
1006.9 (Subpart B) Added; interim..................................21180
1006.26 Added.......................................................5854
1006.30 (a) added...................................................5854
1006.34 Added.......................................................5854
1006.38 (a)(2), (b), and (c) revised................................5856
1006.42 (a)(2) and (b) revised......................................5856
1006 Appendix B added...............................................5856
1006 Supplement No. 1 amended.......................................5857
1006 Supplement I added; interim...................................21180
1010 Policy statement..............................................17694
1013 Supplement I amended..........................................67850
1022 Policy statement................................17695, 35595, 62468
1022 Appendix O revised............................................67650
1024 Policy statement..............................................17897
1024.31 Amended....................................................34899
1024.39 (a) revised; (e) added.....................................34899
1024.41 (c)(2)(i) and (v)(A)(1) revised; (c)(2)(vi) and (f)(3) 
        added......................................................34899
1024 Supplement I amended..........................................34900

                                  2022

12 CFR
                                                                   87 FR
                                                                    Page
Chapter X
Chapter X Policy statement.....11286, 11950, 17143, 31940, 35866, 35868, 
                         50556, 54346, 57375, 58439, 66935, 66940, 71507
1002 Policy statement.......................................30097, 35864
1003 Technical correction...........................................8733
1003.2 (g)(1)(v)(A) and (2)(ii)(A) revised.........................77981
1003.3 (c)(11) revised.............................................77981
1003 Supplement I amended...................................77981, 80434
1005 Policy statement..............................................10297
1006 Policy statement........................................3025, 39733
1006 Supplement No. 1 amended......................................65669
1013 Supplement I amended..........................................63669
1022 Policy statement..........................3025, 41042, 41243, 64689
1022 Authority citation revised....................................37723
1022 Technical correction..........................................60265
1022.142 Added.....................................................37723
1022 Appendix O revised............................................72365

                                  2023

12 CFR
                                                                   88 FR
                                                                    Page
Chapter X
Chapter X Policy statement..............5727, 17366, 21883, 33545, 71279
Chapter X Heading revised..........................................16537
1002 Technical correction..........................................16537
1002 Authority citation revised....................................35527
1002.1--1002.16 Designated as Subpart A............................35527
1002.1 (a) amended.................................................35527
1002.2 Introductory text revised...................................35527
1002.5 (a)(4) introductory text revised; (a)(4)(vii) through (x) 
        added......................................................35527
1002.9 (b)(1) amended..............................................16537
1002.12 (b)(1) introductory text, (2) introductory text, (3) 
        through (5), and (7) introductory text revised.............35528
1002.101--1002.114 (Subpart B) Added...............................35528
1002 Appendix A revised............................................16537
1002 Correction: Appendix A revised................................58065
1002 Appendix D revised............................................16538
1002 Appendix E and Appendix F added...............................35534
1002 Supplement I amended..........................................35536
1003 Supplement I amended..........................................88222
1005 Technical correction..........................................16535
1005 Appendix C revised............................................16538
1006 Technical correction..........................................16538
1006 Policy statement..............................................26475
1006 Appendix A amended............................................16538
1006 Supplement I amended..........................................16538
1010 Technical correction..........................................16538
1010 Appendix A amended............................................16538
1013 Supplement I amended..........................................83321
1022 Technical correction..........................................16538
1022 Appendix K revised............................................16538

[[Page 821]]

1022 Correction: Appendix K revised................................58066
1022 Appendix O revised............................................78231
1024 Notification...................................................9162
1024 Technical correction..........................................16542
1024.2 (b) amended.................................................16542
1024 Supplement I amended..........................................16542


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