[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49688-49699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23137]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / 
Proposed Rules  

[[Page 49688]]


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FEDERAL RESERVE SYSTEM

12 CFR Part 202

[Regulation B; Docket No. R-1040]


Equal Credit Opportunity

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is requesting comment on proposed revisions to 
Regulation B, which implements the Equal Credit Opportunity Act. The 
Board previously published a proposed rule that permits creditors to 
use electronic communication (for example, communication via personal 
computer and modem) to provide disclosures required by the act and 
regulation, if the applicant agrees to such delivery. (A similar rule 
was also proposed under various other consumer financial services 
regulations administered by the Board.) In response to comments 
received on the proposals, the Board is publishing for comment an 
alternative proposal on the electronic delivery of disclosures, 
together with proposed commentary that would provide further guidance 
on electronic communication issues. The Board is also publishing for 
comment proposed revisions to allow disclosures in other languages.

DATES: Comments must be received by October 29, 1999.

ADDRESSES: Comments, which should refer to Docket No. R-1040, may be 
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW, 
Washington, DC 20551. Comments addressed to Ms. Johnson may also be 
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m. 
weekdays, and to the security control room at all other times. The mail 
room and the security control room, both in the Board's Eccles 
building, are accessible from the courtyard entrance on 20th Street 
between Constitution Avenue and C Street, NW. Comments may be inspected 
in room MP-500 between 9:00 a.m. and 5:00 p.m., pursuant to 
Sec. 261.12, except as provided in Sec. 261.14 of the Board's Rules 
Regarding the Availability of Information, 12 CFR 261.12 and 261.14.

FOR FURTHER INFORMATION CONTACT: Jane E. Ahrens, Senior Counsel, or 
Natalie E. Taylor, Staff Attorney, Division of Consumer and Community 
Affairs, at (202) 452-3667 or (202) 452-2412. Users of 
Telecommunications Device for the Deaf (TDD) only, contact Diane 
Jenkins at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

    The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq., 
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 
public assistance, or because an applicant has in good faith exercised 
any right under the Consumer Credit Protection Act. The Board's 
Regulation B (12 CFR part 202) implements the act.
    The ECOA and Regulation B require a number of disclosures to be 
provided in writing, presuming that creditors provide paper documents. 
Under many laws that call for information to be in writing, information 
in electronic form is considered to be ``written.'' Information 
produced, stored, or communicated by computer is also generally 
considered to be a writing, where visual text is involved.
    In May 1996, the Board revised Regulation E (Electronic Fund 
Transfers) following a comprehensive review. During that process, the 
Board determined that electronic communication for delivery of 
information required by federal laws governing financial services could 
effectively reduce compliance costs without adversely affecting 
consumer protections. Consequently, the Board simultaneously issued a 
proposed rule to permit financial institutions to use electronic 
communication to deliver disclosures that Regulation E requires to be 
given in writing. (61 FR 19696, May 2, 1996.) The 1996 proposal 
required that disclosures be provided in a form the consumer may 
retain, a requirement that institutions could satisfy by providing 
information in a format that may be printed or downloaded. The proposed 
rule also allowed consumers to request a paper copy of a disclosure for 
up to one year after its original delivery.
    Following a review of the comments, on March 25, 1998, the Board 
issued an interim rule under Regulation E (the ``interim rule''), 63 FR 
14528. The Board also published proposals under Regulations DD (Truth 
in Savings), 63 FR 14533, M (Consumer Leasing), 63 FR 14538, Z (Truth 
in Lending), 63 FR 14548, and B (Equal Credit Opportunity), 63 FR 
14552, (collectively, the ``March 1998 proposed rules''). The rules 
would apply to financial institutions, creditors, lessors, and other 
entities that are required to give disclosures to consumers and others. 
(For ease of reference, this background section uses the terms 
``financial institutions,'' ``institutions,'' and ``consumers.'') The 
interim rule and the March 1998 proposed rules were similar to the May 
1996 proposed rule; however, they did not require financial 
institutions to provide paper copies of disclosures to a consumer upon 
request if the consumer previously agreed to receive disclosures 
electronically. The Board believed that most institutions would 
accommodate consumer requests for paper copies when feasible or 
redeliver disclosures electronically; and the Board encouraged 
financial institutions to do so.
    The March 1998 proposed rules and the interim rule permitted 
financial institutions to provide disclosures electronically if the 
consumer agreed, with few other requirements. The rule was intended to 
provide flexibility and did not specify any particular method for 
obtaining a consumer's agreement. Whether the parties had an agreement 
would be determined by state law. The proposals and the interim rule 
did not preclude a financial institution and a consumer from entering 
into an agreement electronically, nor did they prescribe a formal 
mechanism for doing so.
    The Board received approximately 200 written comments on the 
interim rule and the March 1998 proposed rules. The majority of 
comments were submitted by financial institutions and their trade 
associations. Industry commenters generally supported the use of 
electronic communication to deliver

[[Page 49689]]

information required by the ECOA and Regulation B. Nevertheless, many 
sought specific revisions and additional guidance on how to comply with 
the disclosure requirements in particular transactions and 
circumstances.
    Industry commenters were especially concerned about the condition 
that a consumer had to ``agree'' to receive information by electronic 
communication, because the rule did not specify a method for 
establishing that an ``agreement'' was reached. These commenters 
believed that relying on state law created uncertainty about what 
constitutes an agreement and, therefore, potential liability for 
noncompliance. To avoid uncertainty over which state's laws apply, some 
commenters urged the Board to adopt a federal minimum standard for 
agreements or for informed consent to receive disclosures by electronic 
communication. These commenters believed that such a standard would 
avoid the compliance burden associated with tailoring legally binding 
``agreements'' to the contract laws of all jurisdictions where 
electronic communication may be sent.
    Consumer advocates generally opposed the March 1998 interim rule 
and proposed rules. Without additional safeguards, they believed, 
consumers may not be provided with adequate information about 
electronic communication before an ``agreement'' is reached. They also 
believed that promises of lower costs could induce consumers to agree 
to receive disclosures electronically without a full understanding of 
the implications. To avoid such problems, they urged the Board, for 
example, either to require institutions to disclose to consumers that 
their account with the institution will not be adversely affected if 
they do not agree to receive electronic disclosures, or to permit 
institutions to offer electronic disclosures only to consumers who 
initiate contact with the institution through electronic communication. 
They also noted that some consumers will likely consent to electronic 
disclosures believing that they have the technical capability to 
retrieve information electronically, but might later discover that they 
are unable to do so. They questioned consumers' willingness and ability 
to access and retain disclosures posted on Internet websites, and 
expressed their apprehension that the goals of federally mandated 
disclosure laws will be lost.
    Consumer advocates and others were particularly concerned about the 
use of electronic disclosures in connection with home-secured loans and 
certain other transactions that consumers typically consummate in 
person (citing as examples automobile loans and leases, short-term 
``payday'' loans, or home improvement financing contracts resulting 
from door-to-door sales). They asserted that there is little benefit to 
eliminating paper disclosures in such transactions and that allowing 
electronic disclosures in those cases could lead to abusive practices. 
Accordingly, consumer advocates and others believed that paper 
disclosures should always accompany electronic disclosures in mortgage 
loans and certain other transactions, and that consumers should have 
the right to obtain paper copies of disclosures upon request for all 
types of transactions (deposit account, credit card, loan or lease, and 
other transactions).
    A final issue raised by consumer advocates was the integrity of 
disclosures sent electronically. They stated that there may be 
instances when the consumer and the institution disagree on the terms 
or conditions of an agreement and consumers may need to offer 
electronic disclosures as proof of the agreed-upon terms and to enforce 
rights under consumer protection laws. Thus, to assure that electronic 
documents have not been altered and that they accurately reflect the 
disclosures originally sent, consumer advocates recommended that the 
Board require that electronic disclosures be authenticated by an 
independent third party.
    The Board's Consumer Advisory Council considered the electronic 
delivery of disclosures in 1998 and again in 1999. Many Council members 
shared views similar to those expressed in written comment letters on 
the 1998 proposals. For example, some Council members expressed concern 
that the Board was moving too quickly in allowing electronic 
disclosures for certain transactions, and suggested that the Board 
might go forward with electronic disclosures for deposit accounts while 
proceeding more slowly on credit and lease transactions. Others 
expressed concern about consumer access and consumers' ability to 
retain electronic disclosures. They believed that, without specific 
guidance from the Board, institutions would provide electronic 
disclosures without knowing whether consumers could retain or access 
the disclosures, and without establishing procedures to address 
technical malfunctions or nondelivery. The Council also discussed the 
integrity and security of electronic documents.

II. Overview of Proposed Revisions

    Based on a review of the comments and further analysis, the Board 
is requesting comment on a modified proposed rule that is more detailed 
than the interim rule and March 1998 proposed rules. It is intended to 
provide specific guidance for creditors that choose to use electronic 
communication to comply with Regulation B's requirements to provide 
written disclosures, and to ensure effective delivery of disclosures to 
applicants through this medium. Though detailed, the proposal provides 
flexibility for compliance with the electronic communication rules. The 
modified proposal recognizes that some disclosures may warrant 
different treatment under the rule. Where written disclosures are made 
to consumers who are transacting business in person, these disclosures 
generally would have to be made in paper form. The modified proposal 
for Regulation B would not contain this in-person exception as the 
Board does not believe the exception is necessary given the timing and 
delivery provision for providing information, as discussed below under 
4(e)(2).
    The Board is soliciting comment on a modified approach that 
addresses both industry and consumer group concerns. Under the 
proposal, creditors would have to provide specific information about 
how the applicant can receive and retain electronic disclosures--
through a standardized disclosure statement--before obtaining 
applicants' acceptance of such delivery, with some exceptions. If they 
satisfy these requirements and obtain applicants' affirmative consent, 
creditors would be permitted to use electronic communication. As a 
general rule a creditor would be permitted to offer the option of 
receiving electronic disclosures to all applicants, whether they 
initially contact the creditor by electronic communication or 
otherwise.
    Creditors would have the option of delivering disclosures to an e-
mail address designated by the applicant or making disclosures 
available at another location such as the creditor's website, for 
printing or downloading. If the disclosures are posted at a website 
location, creditors generally must notify applicants at an e-mail 
address about the availability of the information. (Creditors may offer 
consumers the option of receiving alert notices at a postal address.) 
The disclosures must remain available at that site for 90 days.
    Disclosures provided electronically would be subject to a ``clear 
and conspicuous'' standard, must be in a form that the applicant can 
retain, and would be subject to the format and timing rules in 
Regulation B. For example, a creditor that provides electronic 
disclosures and denies an applicant's credit request must provide an 
electronic adverse action notice

[[Page 49690]]

within 30 days after receiving a completed application.
    Creditors generally must provide a means for applicants to confirm 
the availability of equipment to receive and retain electronic 
disclosure documents. A creditor would not otherwise have a duty to 
verify applicants' actual ability to receive, print, or download the 
disclosures. Some commenters suggested that creditors should be 
required to verify delivery by return receipt. The Board solicits 
comment on the need for such a requirement and the feasibility of that 
approach.
    As previously mentioned, consumer advocates and others have 
expressed concerns that electronic documents can be altered more easily 
than paper documents. The issue of the integrity and security of 
electronic documents affects electronic commerce in general and is not 
unique to the written disclosures required under the consumer 
protection laws administered by the Board. Applicants' ability to 
enforce rights under the consumer protection laws could be impaired in 
some cases, however, if the authenticity of disclosures that they 
retain cannot be demonstrated. Signatures, notary seals, and other 
established verification procedures are used to detect alterations for 
transactions memorialized in paper form. The development of similar 
devices for electronic communication should reduce uncertainty over 
time about the ability to use electronic documents for resolving 
disputes.
    The Board's rules require creditors to retain evidence of 
compliance with Regulation B. Specific comment is solicited on the 
feasibility of complying with a requirement that creditors provide 
disclosures in a format that cannot be altered without detection, or 
have systems in place capable of detecting whether or not information 
has been altered, as well as the feasibility of requiring use of 
independent certification authorities to verify disclosure documents.
    Elsewhere in today's Federal Register, the Board is publishing 
similar proposals for comment under Regulations E, M, Z, and DD. In a 
separate notice the Board is publishing an interim rule under 
Regulation DD, which implements the Truth in Savings Act, to permit 
depository institutions to use electronic communication to deliver 
disclosures on periodic statements. For ease of reference, the Board 
has assigned new docket numbers to the modified proposals published 
today.

III. Section-by-Section Analysis

    Pursuant to its authority under section 703 of the ECOA, the Board 
proposes to amend Regulation B to permit creditors to use electronic 
communication to provide disclosures and other information required by 
the act and regulation to be in writing. Below is a section-by-section 
analysis of the rules for providing disclosures by electronic 
communication, including references to proposed commentary provisions.

Section 202.4  General Rules

4(e) Electronic Communication
    4(e)(1) Definition. The definition of the term ``electronic 
communication'' in the March 1998 proposed rule remains unchanged. 
Section 202.4(e)(1) limits the term to a message transmitted 
electronically that can be displayed on equipment as visual text, such 
as a message that is displayed on a computer monitor screen. Most 
commenters supported the term as defined in the March 1998 proposed 
rule. Some commenters favored a more expansive definition that would 
encompass communications such as audio and voice response telephone 
systems. Because the proposal is intended to permit electronic 
communication to satisfy the statutory requirement for written 
disclosures, the Board believes visual text is an essential element of 
the definition.
    Commenters asked the Board to clarify the coverage of certain types 
of communications. A few commenters asked about communication by 
facsimile. Facsimiles are initially transmitted electronically; the 
information may be received either in paper form or electronically 
through software that allows a consumer to capture the facsimile, 
display it on a monitor, and store it on a computer diskette or drive. 
Thus, information sent by facsimile may be subject to the provisions 
governing electronic communication. When disclosures are sent by 
facsimile, a creditor should comply with the requirements for 
electronic communication unless it knows that the disclosures will be 
received in paper form. Proposed comment 4(e)(1)-1 contains this 
guidance.
    4(e)(2) Electronic Communication between Creditor and Applicant. 
Section 202.4(e)(2) would permit creditors to provide disclosures using 
electronic communication, if the creditor complies with provisions in 
new Sec. 202.4(e)(3), discussed below.

1. Presenting Disclosures in a Clear and Conspicuous Format

    Currently, Regulation B does not expressly require creditors to 
present required information in a clear and conspicuous format. In 
contrast, Regulations DD (Truth in Savings), E (Electronic Fund 
Transfers), M (Consumer Leasing), and Z (Truth in Lending) all require 
that information be provided in a clear and conspicuous (or conspicuous 
or clear and readily understandable) format. Because clarity 
requirements for written disclosures (whether electronic or not) exist 
for those regulations, the Board requested comment in the March 1998 
proposed rule on whether these requirements should be extended to 
electronic communication under Regulation B. Also, the Board recently 
issued a proposed rule for Regulation B as part of its periodic review 
of regulations. As part of the review, the Board requested comment on 
whether the ``clear and conspicuous'' requirement should apply to all--
paper or electronic--disclosures and information required by Regulation 
B. (64 FR 44581, August 16, 1999).
    Most commenters to the March 1998 proposed rule suggested that the 
Board adopt the clear and conspicuous requirement for electronic 
communication under Regulation B. These commenters noted that the 
requirements for electronic communication should be consistent among 
the regulations, and that extension of this requirement to Regulation B 
would not be burdensome. A few commenters, however, suggested that 
either the Board adopt the clear and conspicuous requirement for all 
disclosures under the regulation--paper or electronic--or that it leave 
the requirement as it is. They argued that imposing a different 
standard for paper and electronic disclosures might result in 
applicants receiving disclosures in different formats based on how they 
apply for credit and for what product they apply.
    The proposal would extend a ``clear and conspicuous'' requirement 
to electronic communication under Regulation B, consistent with the 
proposed changes to Regulation B discussed above. See Sec. 202.4(d) of 
the August 16, 1999 proposed rule for Regulation B (64 FR 44581). The 
Board does not intend to discourage or encourage specific types of 
technologies. Regardless of the technology, however, disclosures 
provided electronically must be presented in a clear and conspicuous 
format.
    When applicants consent to receive disclosures electronically and 
they confirm that they have the equipment to do so, creditors generally 
would have no further duty to determine that applicants are able to 
receive the

[[Page 49691]]

disclosures. Creditors do have the responsibility of ensuring the 
proper equipment is in place in instances where the creditor controls 
the equipment. Proposed comment 4(e)(2)-1 contains this guidance.

2. Providing Disclosures in a Form the Applicant May Keep

    Currently under Regulation B, only one notice 
(Sec. 202.9(a)(3)(i)(B), regarding business credit) must be provided in 
a form the applicant may retain. On the other hand, Regulations DD, E, 
M, and Z all require that information be provided in a retainable form. 
In the March 1998 proposed rule, the Board requested comment on whether 
a retainability requirement should be extended to electronic 
communication under Regulation B generally.
    Most commenters supported a retainability requirement for 
electronic communication under Regulation B. These commenters noted 
that the requirements for electronic communication should be as 
consistent as practicable for all of the regulations, and that 
extension of this requirement would not be burdensome. Some commenters, 
however, supported leaving the requirement as it is. They believe a 
retainability requirement for disclosures sent by electronic 
communication would discourage the use of electronic communication by 
creating different rules for disclosures sent by mail and those sent by 
electronic communication. As part of its August 1999 proposed rule for 
Regulation B, discussed above, the Board requested comment on whether a 
``retainability'' requirement should apply to all--paper or 
electronic--disclosures and information required by Regulation B. See 
Sec. 202.4(d) of the August 16, 1999 Regulation B proposed rule (64 FR 
44581).
    Under the 1998 proposals and interim rule, a creditor would satisfy 
the retainability requirement by providing information that can be 
printed or downloaded. The modified proposal adopts the same approach 
but also provides that the information must be sent to a specified 
location to ensure that applicants have an adequate opportunity to 
retain the information.
    Applicants communicate electronically with creditors through a 
variety of means and from various locations. Depending on the location 
(at home, at work, in a public place such as a library), an applicant 
may not have the ability at a given time to preserve ECOA disclosures 
presented on-screen. Therefore, when a creditor provides disclosures by 
electronic communication, to satisfy the retention requirements, the 
creditor must send the disclosures to an applicant's e-mail address or 
other location where information may be retrieved at a later date. 
Proposed comment 4(e)(2)-2 contains this guidance; see also the 
discussion under Sec. 202.4(e)(4), below. In instances where a creditor 
controls an electronic terminal used to provide electronic disclosures, 
a creditor may provide equipment for the applicant to print a paper 
copy in lieu of sending the information to the applicant's e-mail 
address or posting the information at another location such as the 
creditor's website. See proposed comment 4(e)(2)-1.

3. Timing

    Creditors must ensure that electronic disclosures comply with all 
relevant timing requirements of the regulation. For example, under 
Secs. 202.9(a)(1) and (2), a creditor must send a written notice within 
30 days after receiving a completed application, if the creditor takes 
adverse action.
    To illustrate the timing requirements for electronic communication, 
assume that a consumer is interested in obtaining a loan and uses a 
personal computer at home to access the creditor's website on the 
Internet. The creditor provides disclosures to the consumer about the 
use of electronic communication (the Sec. 202.4(e)(3) disclosures 
discussed below) and the consumer responds affirmatively. If the 
creditor's procedures permit the consumer to apply for a loan at that 
time, and the creditor denies the credit request, the written notice 
required by Sec. 202.9 must be provided. Under the proposal, the 
creditor would satisfy the regulation's timing requirements if, within 
30 days of receiving the completed application, an adverse action 
notice is sent to the applicant's e-mail address, or is posted on the 
creditor's website and the applicant is informed that the notice is 
available.
    If an applicant is transacting business at a creditor's website and 
is at a point in the transaction where in order to go forward the 
applicant must receive disclosures, the disclosures must appear on the 
screen. By displaying the disclosures on the screen, creditors meet the 
timing and delivery requirements of the regulation. For example, if an 
applicant applies over the Internet for a loan to purchase a principal 
dwelling, the request for monitoring information required by 
Sec. 202.13(a) and the disclosure required by Sec. 202.13(c) concerning 
the collection of the information must appear on the screen before the 
application can be sent to the creditor for processing. The timing 
requirements for requesting the information and providing the 
disclosure would not be met if, in this example, the creditor permitted 
the applicant to complete the application and apply for credit and sent 
the request for monitoring information and the applicable disclosure to 
an e-mail address thereafter. Proposed comment 4(e)(2)-3 contains this 
guidance.
    4(e)(3) Disclosure Notice. Section 202.4(e)(3) would identify the 
specific steps required before a creditor could use electronic 
communication to satisfy the regulation's disclosure requirements. 
Proposed Sample Forms C-11, C-12, C-14, and C-15 are published to aid 
compliance with these requirements.
    4(e)(3)(i) Notice by Creditor. Section 202.4(e)(3)(i) outlines the 
information that creditors must provide before electronic disclosures 
can be given. The creditor must: (1) Describe the information to be 
provided electronically and specify whether the information is also 
available in paper form or whether the credit product is offered only 
with electronic disclosures; (2) identify the address or location where 
the information will be provided electronically, and if it will be 
available at a location other than the applicant's electronic address, 
specify for how long and where it can be obtained once that period 
ends; (3) specify any technical requirements for receiving and 
retaining information sent electronically, and provide a means for the 
applicant to confirm the availability of equipment meeting those 
requirements; and (4) provide a toll-free telephone number and, at the 
creditor's option, an electronic or a postal address for questions 
about receiving electronic disclosures or for updating applicants' 
electronic addresses, and for seeking assistance with technical or 
other difficulties (see proposed comments to 4(e)(3)(i)). The Board 
requests comment on whether other information should be disclosed 
regarding the use of electronic communication and on any format changes 
that might improve the usefulness of the notice for applicants.
    Under the proposal, the Sec. 202.4(e)(3)(i) disclosures must be 
provided, as applicable, before the creditor uses electronic 
communication to deliver any information required by the regulation. 
The approach of requiring a standardized disclosure statement 
addresses, in several ways, the concern that applicants may be steered 
into using electronic communication without fully understanding the 
implications. Under this approach, the specific disclosures that would 
be delivered electronically

[[Page 49692]]

must be identified, and applicants must be informed whether there is 
also an option to receive the information in paper form. Applicants 
must provide an e-mail address where one is required. Technical 
requirements must also be stated, and applicants must affirm that their 
equipment meets the requirements, and that they have the capability of 
retaining electronic disclosures by downloading or printing them (see 
proposed comment 4(e)(3)-1). Thus, the Sec. 202.4(e)(3)(i) disclosures 
should allow applicants to make informed judgments about receiving 
electronic disclosures.
    Some commenters requested clarification of whether a creditor may 
use electronic communication to provide some required disclosures while 
using paper for others. The proposed rule would permit creditors to do 
so; the disclosure given under Sec. 202.4(e)(3)(i) must specify which 
ECOA disclosures will be provided electronically.
    Commenters requested further guidance on a creditor's obligation 
under the regulation if the applicant chooses not to receive 
information by electronic communication. A creditor could offer an 
applicant the option of receiving disclosures in paper form, but it 
would not be required to do so. A creditor could establish credit 
products for which disclosures are given only by electronic 
communication. Section 202.4(e)(3)(i)(A) would require creditors to 
tell applicants whether or not they have the option to receive 
disclosures in paper form. Section 202.4(e)(3)(i)(D) would require 
creditors to provide a toll-free number that applicants could use to 
inform creditors if they wish to discontinue receiving electronic 
disclosures. In such cases the creditor must inform the applicant 
whether the credit product is also available with disclosures in paper 
form. Proposed sample notices in which the applicant has an option to 
receive electronic or paper disclosures (Form C-14) or electronic 
disclosures only (Form C-15) are contained in appendix C.
    4(e)(3)(ii) Response by Applicant. Proposed Sec. 202.4(e)(3)(ii) 
would require creditors to provide a means for the applicant to 
affirmatively indicate that information may be provided electronically. 
Examples include a ``check box'' on a computer screen or a signature 
line (for requests made in paper form). The requirement is intended to 
ensure that applicants' consent is established knowingly and 
voluntarily, and that consent to receive electronic disclosures is not 
inferred from the submission of an application for credit. See proposed 
comment 4(e)(3)(ii)-1.
    4(e)(3)(iii) Changes. Creditors would be required to notify 
applicants about changes to the information that is provided in the 
notice required by Sec. 202.4(e)(3)(i)--for example, if upgrades to 
computer software are required. Proposed comment 4(e)(3)(iii)-1 
contains this guidance.
    The notice must include the effective date of the change and be 
provided before that date. Proposed comment 4(e)(3)(iii)-2 would 
provide that the notice must be sent a reasonable period of time before 
the effective date of the change. Although the number of days that 
constitutes reasonable notice may vary, depending on the type of change 
involved, the comment would provide creditors with a safe harbor: 
fifteen days' advance notice would be considered a reasonable time in 
all cases. The same time period is stated in similar proposals under 
Regulations E, Z, and DD published in today's Federal Register. Comment 
is requested on whether a safe harbor of 15 days is an appropriate time 
period, and whether a uniform period for changes involving electronic 
communication is desirable. Proposed comment 4(e)(3)(iii)-3 contains 
guidance on delivery requirements for the notice of change.
    The notice of a change must also include a toll-free telephone 
number or, at the creditor's option, an address for questions about 
receiving electronic disclosures. For example, a consumer may call 
regarding problems related to a change, such as an upgrade to computer 
software that is not provided by the creditor. Applicants may also use 
the toll-free number if they wish to discontinue receiving electronic 
disclosures. In such cases, the creditor must inform applicants whether 
the credit product is also available with disclosures in paper form. 
(See proposed comments 4(e)(3)(iii)-4 through -6).
    If the change involves providing additional disclosures by 
electronic communication, creditors generally would be required to 
provide the notice in Sec. 202.4(e)(3)(i) and obtain the applicant's 
consent. That notice would not be required if the creditor previously 
obtained the applicant's consent to the additional disclosures in its 
initial notice by disclosing the possibility and specifying which 
disclosures might be provided electronically in the future. Comment is 
specifically requested on this approach. A list of additional 
disclosures may be necessary to ensure that applicants' consent is 
informed and knowing (provided it does not cause confusion).
    4(e)(4) Address or Location to Receive Electronic Communication. 
Proposed Sec. 202.4(e)(4) identifies addresses and locations where 
creditors using electronic communication may send information to the 
applicant. Creditors may send information to an applicant's electronic 
address, which is defined in proposed comment 4(e)(4)(i)-1 as an e-mail 
address that the applicant also may use for receiving communications 
from parties other than the creditor. For notices of action taken, for 
example, a creditor's responsibility to provide notice under Sec. 202.9 
will be satisfied when the notice of action taken is sent to the 
applicant's electronic address in accordance with the applicable 
proposed rules concerning delivery of disclosures by electronic 
communication.
    Guidance accompanying the March 1998 proposed rule provided that a 
creditor would not meet delivery requirements by simply posting 
information to an Internet site such as a creditor's ``home page'' 
without appropriate notice on how applicants can access the 
information. Industry commenters wanted to retain the flexibility of 
posting disclosures on an Internet website. They did not object to 
providing a separate notice alerting applicants about the disclosures' 
availability but requested more guidance on the issue. Consumer 
advocates and others expressed concern that the mere posting of 
information inappropriately places the responsibility to obtain 
disclosures on applicants, and undermines the purpose of the delivery 
requirements of the regulation.
    The Board recognizes that currently, because of security and 
privacy concerns associated with data transmissions, a number of 
creditors may choose to provide disclosures at their websites, where 
the applicant may retrieve them under secure conditions. Under 
Sec. 202.4(e)(4), a creditor may make disclosures available to an 
applicant at a location other than the applicant's electronic address. 
The creditor must notify the applicant when the information becomes 
available and identify the credit transaction involved. The notice must 
be sent to the electronic mail address designated by the applicant; the 
creditor may, at its option, permit the applicant to designate a postal 
address. A proposed sample notice (Form C-13) is published below; see 
also proposed comment 4(e)(4)(ii)-1.
    The Board believes it would be inconsistent with the ECOA to 
require an applicant to initiate a search--for example, to search the 
website of each creditor with whom the applicant applied for credit--to 
determine whether a disclosure has been provided.

[[Page 49693]]

The proposed approach ensures that an applicant would not be required 
to check a creditor's website repeatedly, for example, to learn whether 
the creditor posted a notice of adverse action.
    The requirements of the regulation would be met only if the 
required information is posted on the website and the applicant is 
notified of its availability in a timely fashion. For example, 
creditors must provide adverse action notices to applicants within 30 
days after receiving a completed application. For an adverse action 
notice posted on the Internet, a creditor must both post the notice and 
notify the applicant of its availability within 30 days of receiving a 
completed application.
    Commenters sought guidance on how long disclosures posted at a 
particular location must be available to applicants. There is a variety 
of circumstances when an applicant may not be able immediately to 
access the information due to illness, travel, or computer malfunction, 
for example. Under Sec. 202.4(e)(4), creditors must post information 
that is sent to a location other than the applicant's electronic mail 
address for 90 days. Proposed comment 4(e)(4)(ii)-2 contains this 
guidance.
    Under the modified proposal, creditors that post information at a 
location other than the applicant's electronic mail address are 
required--after the 90 day period--to make disclosures available to 
applicants upon request for a period of not less than 25 months, except 
as otherwise provided, from the date disclosures are required to be 
made, consistent with the record retention requirements under 
Sec. 202.12(b). (See Sec. 202.12(b) of the August 16, 1999 proposed 
rule for Regulation B (64 FR 44581). The Board requests comment on this 
approach, including suggestions for alternative means for providing 
consumers continuing access to disclosures.
    4(e)(5) Applicant Use of Electronic Communication. Proposed 
Sec. 202.4(e)(5) would clarify applicants' ability to provide certain 
information to creditors by electronic communication. Regulation B 
provides that an applicant, upon written request, is entitled to 
receive a copy of an appraisal report under Sec. 202.5a and a statement 
of specific reasons for adverse action under Sec. 202.9(a)(3)(ii). 
Under the proposal, applicants generally would have the option to use 
electronic communication for these written notices if the applicant has 
chosen to receive information by electronic communication. Because the 
applicant's electronic communication serves as written notice, the 
creditor could not also require paper notice. Creditors could, however, 
specify a particular electronic address for receiving the notices.
    The issue of the applicant's ability to provide certain information 
to creditors by electronic communication was not raised in the March 
1998 proposed rule for Regulation B. In issuing the March 1998 
Regulation E interim rule, the Board stated that financial institutions 
could require paper confirmation of electronic notices in the two 
instances where the regulation allows written confirmation--stop-
payment notices and notices of error. This approach was consistent with 
guidance provided in the May 1996 proposed rule, where the Board stated 
that (as in the case of an oral communication) if the consumer sends an 
electronic communication to the financial institution, the institution 
could require paper confirmation from the consumer (particularly since 
the consumer was entitled to a paper copy of a disclosure upon request 
under the May 1996 proposal).
    Views were mixed on whether financial institutions should be 
permitted to require paper confirmations of electronic notices. Many 
industry commenters requested that the Board allow financial 
institutions to request paper confirmations; some stated that paper 
confirmations protect both the consumer and the financial institution. 
Consumer advocates and other commenters believed it would be unfair to 
require paper confirmation of an electronic communication from 
consumers who receive electronic communication from a financial 
institution.
    Based upon the comments received and further analysis, and subject 
to certain limitations discussed below, the Board is proposing that 
applicants be permitted to provide electronically any information that 
an applicant is required to provide a creditor to exercise the 
applicant's rights under the regulation, such as the request for a 
written statement of reasons. If a creditor uses electronic 
communication to provide disclosures about appraisal rights under 
Sec. 202.5a and notices under Sec. 202.9, it is appropriate to allow 
applicants to use electronic communication to provide notices to the 
creditor. If, however, a creditor limits its use of electronic 
communication to the delivery of information required at the time the 
application is taken--the disclosure concerning the collection of 
monitoring information for home-secured loans--creditors would not be 
required to accept electronic communication from applicants.
    4(e)(5)(ii) Creditor's Designation of Address. Section 
202.4(e)(5)(ii) would provide that a creditor may designate the 
electronic address that must be used by an applicant for sending 
electronic communication as permitted by Sec. 202.4(e)(5)(i).
    4(f) Foreign Language Disclosures. To provide consistency among the 
regulations, the Board would add guidance permitting disclosures to be 
made in languages other than English (provided they are available in 
English upon request). This guidance would be set forth in proposed 
Sec. 202.4(f).

Appendix C to Part 202--Sample Notification Forms

    The Board solicits comment on two proposed sample disclosure forms 
and three sample notice forms for use by creditors to aid compliance 
with the disclosure requirements of Secs. 202.4(e)(3) and (e)(4). Forms 
C-11 and C-12 would implement Sec. 202.4(e)(3), regarding the notice 
that creditors must give prior to using electronic communication to 
provide required disclosures. Form C-13 would implement 
Sec. 202.4(e)(4), regarding notices to applicants about the 
availability of electronic information at locations such as the 
creditor's website. Use of any modified version of these forms would be 
in compliance as long as the creditor does not delete information 
required by the regulation or rearrange the format in a way that 
affects the substance, clarity, or meaningful sequence of the 
disclosure. For example, where a creditor combines Regulation B and 
Regulation Z disclosures for a credit card account, the creditor may 
provide a single disclosure statement about electronic delivery.
    Sample Form C-14 illustrates the disclosures under 
Sec. 202.4(e)(3). The sample assumes the creditor also offers paper 
disclosures for applicants who choose not to receive electronic 
disclosures. Sample Form C-15 assumes that applicants must accept 
electronic disclosures if they want to apply for the particular credit 
product.

Other issues

Preemption
    A few commenters suggested that any final rule issued by the Board 
permitting electronic disclosures should explicitly preempt any state 
law requiring paper disclosures. Under Sec. 202.11(a) of the 
regulation, state laws are preempted if they are inconsistent with the 
act and regulation and only to the extent of the inconsistency. The 
proposed rule would provide creditors with the option of

[[Page 49694]]

giving required disclosures by electronic communication as an 
alternative to paper. There is no apparent inconsistency with the act 
and regulation if state laws require paper disclosures. The Board will, 
however, review preemption issues that are brought to the Board's 
attention. Section 202.11(b)(2) outlines the Board's procedures for 
determining whether a specific law is preempted, which will guide the 
Board in any determination requested by a creditor, state, or other 
interested party following publication of a final rule regarding 
electronic communication.

IV. Form of Comment Letters

    Comment letters should refer to Docket No. R-1040, and, when 
possible, should use a standard typeface with a type size of 10 or 12 
characters per inch. This will enable the Board to convert the text to 
machine-readable form through electronic scanning, and will facilitate 
automated retrieval of comments for review. Also, if accompanied by an 
original document in paper form, comments may be submitted on 3\1/2\ 
inch computer diskettes in any IBM-compatible DOS- or Windows-based 
format.

V. Initial Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act, 
the Board has reviewed the proposed amendments to Regulation B. 
Although the proposal would add disclosure requirements with respect to 
electronic communication, overall, the proposed amendments are not 
expected to have any significant impact on small entities. A creditor's 
use of electronic communication to provide disclosures required by the 
regulation is optional. The proposed rule would give creditors 
flexibility in providing disclosures. A final regulatory flexibility 
analysis will be conducted after consideration of comments received 
during the public comment period.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The Federal Reserve may not conduct or sponsor, and 
an organization is not required to respond to, this information 
collection unless it displays a currently valid OMB number. The OMB 
control number is 7100-0201.
    The collection of information requirements that are relevant to 
this proposed rulemaking are in 12 CFR part 202. This information is 
mandatory (15 U.S.C. 1691b(a)(1) and Public Law 104-208, Sec. 2302(a)) 
to evidence compliance with the requirements of Regulation B and the 
Equal Credit Opportunity Act. The purpose of the act is to ensure that 
credit is made available to all creditworthy customers without 
discrimination on the basis of race, color, religion, national origin, 
sex, marital status, age (provided the applicant has the capacity to 
contract), receipt of public assistance, or the fact that the applicant 
has in good faith exercised any right under the Consumer Credit 
Protection Act (15 U.S.C. 1600 et. seq.). The respondents/recordkeepers 
are for-profit financial institutions, including small businesses. 
Creditors are also required to retain records for 12 to 25 months. This 
regulation applies to all types of creditors, not just state member 
banks; however, under Paperwork Reduction Act regulations, the Federal 
Reserve accounts for the burden of the paperwork associated with the 
regulation only for state member banks. Other agencies account for the 
paperwork burden on their respective constituencies under this 
regulation.
    The proposed revisions would allow creditors the option of using 
electronic communication (for example, via personal computer and modem) 
to provide disclosures and other information required by the 
regulation. Although the proposal would add disclosure requirements 
with respect to electronic communication, the optional use of 
electronic communication would likely reduce the paperwork burden of 
creditors. With respect to state member banks, it is estimated that 
there are 988 respondents/recordkeepers and an average frequency of 
4,765 responses per respondent each year. Therefore, the current amount 
of annual burden is estimated to be 123,892 hours. There is estimated 
to be no additional annual cost burden and no capital or start-up cost.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality under the Freedom of Information Act arises; however, 
any information obtained by the Federal Reserve may be protected from 
disclosure under exemptions (b)(4), (6), and (8) of the Freedom of 
Information Act (5 U.S.C. 522(b)(4), (6) and (8)). The adverse action 
disclosure is confidential between creditors and the applicants 
involved.
    The Federal Reserve requests comments from creditors, especially 
state member banks, that will help to estimate the number and burden of 
the various disclosures that would be made in the first year this 
proposed regulation would be effective. Comments are invited on: (a) 
The cost of compliance; (b) ways to enhance the quality, utility, and 
clarity of the information to be disclosed; and (c) ways to minimize 
the burden of disclosure on respondents, including through the use of 
automated disclosure techniques or other forms of information 
technology. Comments on the collection of information should be sent to 
the Office of Management and Budget, Paperwork Reduction Project (7100-
0201), Washington, DC 20503, with copies of such comments sent to Mary 
M. West, Federal Reserve Board Clearance Officer, Division of Research 
and Statistics, Mail Stop 97, Board of Governors of the Federal Reserve 
System, Washington, DC 20551.

List of Subjects in 12 CFR Part 202

    Aged, Banks, banking, Civil rights, Credit, Federal Reserve System, 
Marital status discrimination, Penalties, Religious discrimination, 
Reporting and recordkeeping requirements, Sex discrimination.

Text of Proposed Revisions

    Certain conventions have been used to highlight proposed changes to 
Regulation B. New language is shown inside bold-faced arrows.
    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation B, 12 CFR part 202, as set forth below:

PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)

    1. The authority citation for part 202 would continue to read as 
follows:

    Authority: 15 U.S.C. 1691-1691f.

    2. Section 202.4 as proposed to be revised at 64 FR 44595, August 
16, 1999, is further amended by adding new paragraphs (e) and (f) to 
read as follows:


Sec. 202.4  General rules.

* * * * *
    (e) Electronic communication--(1) Definition. Electronic 
communication means a message transmitted electronically between an 
applicant and a creditor in a format that allows visual text to be 
displayed on equipment such as a personal computer monitor.
    (2) Electronic communication between creditor and applicant. A 
creditor that has complied with paragraph (e)(3) of this section may 
provide by electronic communication any information required by this 
regulation to be in writing.

[[Page 49695]]

    (3) Disclosure notice. The disclosure notice required by paragraph 
(e)(3) of this section shall be clear and conspicuous and in a form the 
consumer may keep, and shall be provided in a manner substantially 
similar to the applicable sample notice set forth in Appendix C of this 
part (Sample Forms C-11 and C-12).
    (i) Notice by creditor. A creditor shall:
    (A) Describe the information to be provided electronically and 
specify whether the information is also available in paper form or 
whether the credit product is offered only with electronic disclosures;
    (B) Identify the address or location where the information will be 
provided electronically; and if it is made available at a location 
other than the applicant's electronic address, how long the information 
will be available, and how it can be obtained once that period ends;
    (C) Specify any technical requirements for receiving and retaining 
information sent electronically, and provide a means for the applicant 
to confirm the availability of equipment meeting those requirements; 
and
    (D) Provide a toll-free telephone number and, at the creditor's 
option, an address for questions about receiving electronic 
disclosures, for updating applicants' electronic addresses, and for 
seeking technical or other assistance related to electronic 
communication.
    (ii) Response by applicant. A creditor shall provide a means for 
the applicant to accept or reject electronic disclosures.
    (iii) Changes. (A) A creditor shall notify affected applicants of 
any change to the information provided in the notice required by 
paragraph (e)(3)(i) of this section. The notice shall include the 
effective date of the change and must be provided before that date. The 
notice shall also include a toll-free telephone number, and, at the 
creditor's option, an address for questions about receiving electronic 
disclosures.
    (B) In addition to the notice under paragraph (e)(3)(iii)(A) of 
this section, if the change involves providing additional disclosures 
by electronic communication, a creditor shall provide the notice in 
paragraph (e)(3)(i) of this section and obtain the applicant's consent. 
A notice is not required under paragraph (e)(3)(i) if the creditor's 
initial notice states that additional disclosures may be provided 
electronically in the future and specifies which disclosures could be 
provided.
    (4) Address or location to receive electronic communication. A 
creditor that uses electronic communication to provide information 
required by this regulation shall:
    (i) Send the information to the applicant's electronic address; or
    (ii) Post the information for at least 90 days at a location such 
as a website, and send a notice to the applicant when the information 
becomes available. Thereafter the information shall be available upon 
request for a period of not less than 25 months, except as otherwise 
provided, from the date disclosures are required to be made. The notice 
required by this paragraph (e)(4)(ii) shall identify the credit product 
or application involved, shall be sent to an electronic address 
designated by the applicant (or to a postal address, at the creditor's 
option), and shall be substantially similar to the sample notice set 
forth in Appendix C of this part (Sample Form C-13).
    (5) Applicant use of electronic communication. (i) General. An 
applicant may use electronic communication to exercise any right under 
Sec. 202.5a and Sec. 202.9(a)(3) if the applicant has consented to 
receive information required by these sections by electronic 
communication.
    (ii) Creditor's designation of address. A creditor may designate 
the electronic address or location that applicants must use if they 
send electronic communication under this paragraph.
    (f) Foreign language disclosures. Disclosures may be made in 
languages other than English, provided they are available in English 
upon request.
    3. Appendix C to Part 202 as proposed to be revised at 64 FR 44616, 
August 16, 1999, is further amended by adding new Forms C-11, C-12, C-
13, C-14, and C-15 to read as follows:

Appendix C to Part 202--Sample Notification Forms

* * * * *

Form C-11--Sample Disclosures for Electronic Communication (Disclosures 
Available in Paper or Electronically)

    You can choose to receive important information required by the 
Equal Credit Opportunity Act in paper or electronically.
    Read this notice carefully and keep a copy for your records.
     You can choose to receive the following information in 
paper form or electronically: (description of specific disclosures 
to be provided electronically).
     How would you like to receive this information
      {time}  I want paper disclosures.
      {time}  I want electronic disclosures.
     [We may provide the following additional disclosures 
electronically in the future: (description of specific 
disclosures).]
     [If you choose electronic disclosures, this information 
will be available at: (specify location) for ______ days. After 
that, the information will be available upon request (state how to 
obtain the information). When the information is posted, we will 
send you a message at the electronic mail address you designate 
here: (applicant's electronic mail address).]
    [If you choose electronic disclosures this information will be 
sent to the electronic mail address that you designate here: 
(applicant's electronic mail address).]
     To receive this information you will need: (list 
hardware and software requirements).
    Do you have access to a computer that satisfies these 
requirements?
      {time}  Yes      {time}  No
     Do you have access to a printer, or the ability to 
download information, in order to keep copies for your records?
    {time}  Yes      {time}  No
     To update your electronic address, if you have 
questions about receiving disclosures, or need technical or other 
assistance concerning these disclosures, contact us at (telephone 
number).

Form C-12--Sample Disclosures for Electronic Communication (Disclosures 
Available Only Electronically)

    You will receive important information required by the Equal 
Credit Opportunity Act electronically.
    Read this notice carefully and keep a copy for your records.
     The following information will be provided 
electronically: (description of specific disclosures to be provided 
electronically).
     This credit product is not available unless you accept 
electronic disclosures.
     [We may provide the following additional disclosures 
electronically in the future: (description of specific 
disclosures).]
     [If you choose electronic disclosures, this information 
will be available at: (specify location) for ______ days. After 
that, the information will be available upon request (state how to 
obtain the information). When the information is posted, we will 
send you a message at the electronic mail address you designate 
here: (applicant's electronic mail address).]
    [If you choose electronic disclosures this information will be 
sent to the electronic mail address that you designate here: 
(applicant's electronic mail address).]
     To receive this information you will need: (list 
hardware and software requirements).
    Do you have access to a computer that satisfies these 
requirements?
      {time}  Yes      {time}  No
     Do you have access to a printer, or the ability to 
download information, in order to keep copies for your records?
      {time}  Yes      {time}  No
    Do you want this credit product with electronic disclosures?
      {time}  Yes      {time}  No
     To update your electronic address, if you have 
questions about receiving disclosures, or need technical or other 
assistance concerning these disclosures, contact us at (telephone 
number).

Form C-13--Sample Notice for Delivery of Information Posted at Certain 
Locations

    Information about your (identify loan application or credit 
transaction) is now

[[Page 49696]]

available at [website address or other location]. The information 
discusses (describe the disclosure). It will be available for ______ 
days.

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[[Page 49699]]

    4. Supplement I to Part 202, as proposed to be revised at 64 FR 
44618, August 16, 1999, is further amended under Section 202.4--General 
Rules by adding a new paragraph 4(e) Electronic Communication to read 
as follows:

Supplement I to Part 202--Official Staff Interpretations

* * * * *

Section 202.4--General Rules

* * * * *

 4(e) Electronic Communication

    4(e)(1) Definition.
    1. Coverage. Information transmitted by facsimile may be 
received in paper form or electronically, although the party 
initiating the transmission may not know at the time the disclosures 
are sent which form will be used. A creditor that provides 
disclosures by facsimile should comply with the requirements for 
electronic communication unless the creditor knows that the 
disclosures will be received in paper form.
    4(e)(2) Electronic communication between creditor and applicant.
    1. Disclosures provided on creditor's equipment. Creditors that 
control equipment providing electronic disclosures to applicants 
(for example, computer terminals in a creditor's lobby or kiosks 
located in public places) must ensure that the equipment satisfies 
the regulation's requirements to provide disclosures in a clear and 
conspicuous format and in a form the consumer may keep. A creditor 
that controls the equipment may provide a printer for applicants' 
use in lieu of sending the information to the applicant's electronic 
mail address or posting the information at another location such as 
the creditor's website.
    2. Retainability. Creditors must provide electronic disclosures 
in a retainable format (for example, they can be printed or 
downloaded). Applicants may communicate electronically with 
creditors through a variety of means and from various locations. 
Depending on the location (at home, at work, in a public place such 
as a library), an applicant may not have the ability at a given time 
to preserve ECOA disclosures presented on-screen. To ensure that 
applicants have an adequate opportunity to retain the disclosures, 
the creditor also must send them to the applicant's designated 
electronic mail address or to another location, for example, on the 
creditor's website, where the information may be retrieved at a 
later date.
    3. Timing and delivery. When an applicant applies for credit on 
the Internet, for example, in order to meet the timing and delivery 
requirements, creditors must ensure that disclosures applicable at 
that time appear on the screen and are in a retainable format. The 
delivery requirements would not be met if disclosures do not either 
appear on the screen or if the applicant is allowed to apply for 
credit before receiving the disclosures. For example, a creditor can 
provide a link to electronic disclosures appearing on a separate 
page as long as applicants cannot bypass the link and they are 
required to access the disclosures before completing the 
application.
    4(e)(3) Disclosure notice.
    1. Applicant's affirmative responses. Even though an applicant 
accepts electronic disclosures in accordance with 
Sec. 202.4(e)(3)(ii), a creditor may deliver disclosures by 
electronic communication only if the applicant provides an 
electronic address where one is required, and responds affirmatively 
to questions about technical requirements and the ability to print 
or download information (see sample forms C-14 and C-15 in appendix 
C to this part).

Paragraph 4(e)(3)(i)

    1. Toll-free telephone number. The number must be toll-free for 
nonlocal calls made from an area code other than the one used in the 
creditor's dialing area. Alternatively, a creditor may provide any 
telephone number that allows an applicant to call for information 
and reverse the telephone charges.
    2. Creditor's address. Creditors have the option of providing 
either an electronic or postal address for applicants' use in 
addition to the toll-free telephone number.
    3. Discontinuing electronic disclosures. Applicants may use the 
toll-free number (or optional address) if they wish to discontinue 
receiving electronic disclosures. In such cases, the creditor must 
inform applicants whether the credit product is also available with 
disclosures in paper form.

Paragraph 4(e)(3)(ii)

    1. Nature of consent. Applicants must agree to receive 
disclosures by electronic communication knowingly and voluntarily. 
An agreement to receive electronic disclosures is not implied from 
an applicant's submission of an application for credit.

Paragraph 4(e)(3)(iii)

    1. Examples. Examples of changes include a change in technical 
requirements, such as upgrades to software affecting the creditor's 
disclosures provided on the Internet.
    2. Timing for notices. A notice of a change must be sent a 
reasonable period of time before the effective date of the change. 
The length of a reasonable notice period may vary, depending on the 
type of change involved; however, fifteen days is a reasonable time 
for providing notice in all cases.
    3. Delivery of notices. A creditor meets the delivery 
requirements if the notice of a change is sent to the address 
provided by the applicant for receiving other disclosures. For 
example, if the applicant provides an electronic address to receive 
a notice of action taken, the same electronic address may be used 
for the change notice. The applicant's postal address must be used, 
however, if the applicant consented to additional disclosures by 
electronic communication when receiving the initial notice under 
Sec. 202.4(e)(3)(i), but provided a postal address to receive the 
notice of action taken.
    4. Toll-free number. See comment 4(e)(3)(i)-1.
    5. Creditor's address. See comment 4(e)(3)(i)-2.
    6. Applicant inquiries. Applicants may use the toll-free number 
(or optional address) for questions or assistance with problems 
related to a change, such as an upgrade to computer software, that 
is not provided by the creditor. Applicants may also use the toll-
free number if they wish to discontinue receiving electronic 
disclosures; in such cases, the creditor must inform applicants 
whether the credit product is also available with disclosures in 
paper form.
    4(e)(4) Address or location to receive electronic communication.

Paragraph 4(e)(4)(i)

    1. Electronic address. An applicant's electronic address is an 
electronic mail address that may be used by the applicant for 
receiving communications transmitted by parties other than the 
creditor.

Paragraph 4(e)(4)(ii)

    1. Identifying application or transaction involved. A creditor 
is not required to identify a loan application or credit transaction 
by reference to a number. For example, where the applicant has not 
applied for credit with the creditor before, and no confusion would 
result, the creditor may refer to ``your credit card application,'' 
or ``your home equity line application.''
    2. Availability. Information that is not sent to an applicant's 
electronic mail address must be available for at least 90 days from 
the date the information becomes available or from the date the 
notice required by Sec. 202.4(e)(4)(ii) is sent to the applicant, 
whichever occurs later.
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-23137 Filed 9-13-99; 8:45 am]
BILLING CODE 6210-01-P