[Federal Register Volume 61, Number 251 (Monday, December 30, 1996)]
[Proposed Rules]
[Pages 68688-68689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33088]


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FEDERAL RESERVE SYSTEM

12 CFR Part 202

[Regulation B; Docket No. R-0876]


Equal Credit Opportunity

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Withdrawal of proposed rule.

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SUMMARY: The Board is withdrawing a proposed amendment to Regulation B 
(Equal Credit Opportunity) that would have eliminated the general 
prohibition on collecting data relating to an applicant's sex, race, 
color, religion, and national origin.

DATES: This proposed rule is withdrawn December 24, 1996.

FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Sheilah Goodman or 
Natalie Taylor, Staff Attorneys, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667 or 452-2412; for the hearing impaired only, Dorothea Thompson, 
Telecommunications Device for the Deaf, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

    The Equal Credit Opportunity Act (ECOA) makes it unlawful for 
creditors to discriminate in any aspect of a credit transaction on the 
basis of sex, race, color, religion, national origin, marital status, 
age (provided the applicant has the capacity to contract), because all 
or part of an applicant's income derives from any public assistance, or 
because an applicant has in good faith exercised any right under the 
Consumer Credit Protection Act. The ECOA, which is implemented by the 
Board's Regulation B, is generally silent regarding what information a 
creditor may collect from an applicant. Regulation B prohibits 
creditors from asking for or otherwise noting an applicant's sex, race, 
color,

[[Page 68689]]

and national origin, except in connection with home mortgage loans. The 
regulation also prohibits creditors from collecting information 
concerning an applicant's religion.
    On April 26, 1995, the Board published for public comment a 
proposed amendment that would eliminate these prohibitions; the 
proposed amendment would have allowed, but not required, creditors to 
collect these data for any credit products. (60 FR 20436.) Creditors 
that collected these data would not have been required to report or 
disclose them to the public. The Board proposed that if a creditor 
requested this information and the applicant chose not to provide it, 
the creditor would have been prohibited from collecting the information 
through visual observation or other means. The regulation would have 
continued to bar creditors from considering this information in a 
credit decision.

II. Comments Received

    Approximately 250 comment letters were received. Nearly 70 percent 
of them opposed the Board's proposal; the majority of these comments 
were from creditors and their trade associations. These commenters 
generally expressed concern that the amendment would lead to mandatory 
data collection and result in substantially increased costs and burden. 
In addition, these commenters raised concerns about the quality of the 
data that would be obtained, given that supplying the information would 
be voluntary and not all applicants would choose to provide it.
    Of the 30 percent of commenters that supported the Board's 
proposal, approximately half were creditors and half were community 
representatives. Both groups believed that the data would allow 
creditors to better identify underserved groups and design programs 
that would address unmet credit needs. Creditors who supported the 
proposal believed that it would reduce compliance burden (by allowing 
them to streamline training and use one application form for multiple 
credit products, for example). These creditors also stated that having 
the data would give them the ability to evaluate their compliance with 
fair lending laws.

III. Discussion

    In 1977, when the Board chose to prohibit creditors from collecting 
these data, the policy choice was seen as a way to discourage 
discrimination: If creditors did not have these data, they could not 
use them to discriminate. In addition, the prohibition was intended to 
emphasize that factors unrelated to creditworthiness such as sex or 
race should not be part of the credit decision.
    The fundamental question raised by the proposal is whether the rule 
prohibiting data collection furthers the ECOA's goal of preventing 
discrimination in credit transactions. The comments, while helpful, 
tended to focus on practical issues (such as data quality) rather than 
how best to ensure fair lending. Ultimately, there is no easy way to 
measure the extent to which discrimination occurs in credit 
transactions, nor the effect the rule has had on the incidence of 
discrimination. It is impossible to know precisely how, if at all, 
lifting the prohibition and making these data available would affect 
creditors' actions. On the one hand, it is likely that the prohibition 
has helped to prevent discrimination in at least some credit 
transactions. On the other hand, creditors have collected data in 
connection with mortgage loan applications for nearly twenty years, and 
there is no indication from this experience that data collection 
increases the potential for discrimination.
    In the past the Congress has expressed interest in this issue, at 
least with respect to data collection for small business loans. Given 
this history, and the significant policy issues involved in any 
decision to remove the prohibition, the Board believes that this is an 
issue more appropriate for the Congress to consider. Consequently, the 
Board is withdrawing the proposed amendment pending further 
congressional guidance.

IV. Regulatory Flexibility Analysis

    The Board's Office of the Secretary has determined that no analysis 
is needed since the proposal is being withdrawn.

    By order of the Board of Governors of the Federal Reserve 
System, December 23, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-33088 Filed 12-27-96; 8:45 am]
BILLING CODE 6210-01-P