[Federal Register Volume 68, Number 237 (Wednesday, December 10, 2003)]
[Proposed Rules]
[Pages 68786-68788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29942]


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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. 68, No. 237 / Wednesday, December 10, 2003 / 
Proposed Rules  

[[Page 68786]]



FEDERAL RESERVE SYSTEM

12 CFR Part 202

[Regulation B; Docket No. R-1168]


Equal Credit Opportunity

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is proposing to amend Regulation B, which implements 
the Equal Credit Opportunity Act, and the staff commentary to the 
regulation. Regulation B would be revised to define more specifically 
the standard for providing ``clear and conspicuous'' disclosures, and 
to provide a more uniform standard among the Board's regulations. The 
staff commentary would be revised to include examples of how to meet 
this standard. Similar proposed revisions to Regulations E, M, Z and DD 
appear elsewhere in today's Federal Register. These revisions are 
intended to help ensure that consumers receive noticeable and 
understandable information that is required by law in connection with 
obtaining consumer financial products and services. In addition, 
consistency among the regulations should facilitate compliance by 
institutions.

DATES: Comments must be received on or before January 30, 2004.

ADDRESSES: Comments should refer to Docket No. R-1168 and should be 
mailed to Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551. However, because paper mail in the Washington 
area and at the Board of Governors is subject to delay, please consider 
submitting your comments by e-mail to [email protected], 
or faxing them to the Office of the Secretary at (202) 452-3819 or 452-
3102. Members of the public may inspect comments in Room MP-500 of the 
Martin Building between 9 a.m. and 5 p.m. on weekdays pursuant to Sec.  
261.12, except as provided in Sec.  261.14, of the Board's Rules 
Regarding Availability of Information, 12 CFR 261.12 and 261.14.

FOR FURTHER INFORMATION CONTACT: Minh-Duc Le, Senior Attorney, and 
David A. Stein, Counsel, Division of Consumer and Community Affairs, 
Board of Governors of the Federal Reserve System, at (202) 452-3667 or 
452-2412; for users of Telecommunications Device for the Deaf (``TDD'') 
only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691-1691f, 
makes it unlawful for a creditor to discriminate against an applicant 
in any aspect of a credit transaction on the basis of the applicant's 
national origin, marital status, religion, sex, color, race, age 
(provided the applicant has the capacity to contract), receipt of 
public assistance benefits, or the good faith exercise of a right under 
the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.).
    In addition to a general prohibition against discrimination, the 
regulation contains specific rules concerning: the taking and 
evaluation of credit applications, how credit history information is 
reported on accounts used by spouses, procedures and notices for credit 
denials and other adverse action, and limitations on requiring 
signatures of persons other than the applicant on credit documents. The 
act also excepts certain types of credit (such as securities credit) 
from some requirements, and provides model forms for optional use by 
creditors. The ECOA is implemented by the Board's Regulation B (12 CFR 
part 202). An official staff commentary interprets the requirements of 
Regulation B (12 CFR part 202 (Supp. I)).

II. Proposed Revisions

Section 202.2--Definitions

2(bb) Clear and Conspicuous
    The ECOA does not address a standard for the form of disclosures. 
Regulation B, however, requires creditors to disclose information 
provided in writing in a clear and conspicuous manner. See Sec.  
202.4(d). Guidance on how creditors may comply with the clear and 
conspicuous standard is contained in the staff commentary. See comment 
4(d)-1.
    Consumer financial services and fair lending laws and the Board 
regulations that implement them contain similar but not identical 
standards for providing disclosures that consumers will notice and 
understand. Generally, disclosures must be ``clear and conspicuous'' 
under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), 
Regulation P (Privacy of Consumer Financial Information), Z (Truth in 
Lending) and DD (Truth in Savings), and ``clear and readily 
understandable'' under Regulation E (Electronic Fund Transfers). In 
interpreting the ``clear and conspicuous'' standard, the staff 
commentaries to Regulations B, M and Z provide that disclosures must be 
``in a reasonably understandable'' form; similarly, under Regulation DD 
disclosures must be in a format that allows consumers ``to readily 
understand the terms of their account.'' For purposes of the 
disclosures provided with credit card solicitations and applications, 
the commentary to Regulation Z provides more specifically that those 
disclosures must also be ``readily noticeable to the consumer.'' In 
contrast, the Board's Regulation P (Privacy of Consumer Financial 
Information) defines the ``clear and conspicuous'' standard to mean 
that a disclosure is ``reasonably understandable and designed to call 
attention to the nature and significance of the information'' in the 
disclosure. 12 CFR 216.3(b)(1). Regulation P also provides examples of 
how to satisfy the standard. 12 CFR 216.3(b)(2).
    The Board believes that the recently implemented standard in 
Regulation P (65 FR 35162, June 1, 2000), articulates with greater 
precision than the other regulations the concepts underlying the duty 
to provide disclosures that consumers will notice and understand. 
Therefore, to provide consistent guidance on the clear and conspicuous 
standard among its regulations, the Board is proposing to amend 
Regulation B by adding a definition of ``clear and conspicuous'' in 
Sec.  202.2(bb), consistent with the ``clear and conspicuous'' 
definition in Regulation P. The staff commentary to Regulation B also 
would be revised to add comments 2(bb)-1 and -2, consistent with 
Regulation P's examples of how to meet the clear and conspicuous 
standard. Similar proposed

[[Page 68787]]

revisions to Regulations E, M, Z and DD appear elsewhere in today's 
Federal Register. These revisions are intended to help ensure that 
consumers receive noticeable and understandable information that is 
required by law in connection with obtaining consumer financial 
products and services. In addition, consistency among the regulations 
should facilitate compliance by institutions.
    Comment 2(bb)-3 would be added to clarify that the ``clear and 
conspicuous'' standard does not prohibit adding other terms to the 
federally required disclosures (such as contractual provisions or 
state-required disclosures); nor does it prohibit sending promotional 
material with the disclosures. Proposed comment 2(bb)-3 also would 
clarify, however, that the presence of other information may be a 
factor in determining whether the ``clear and conspicuous'' standard is 
met. Generally, segregating federally mandated disclosures from other 
information is more likely to satisfy the clear and conspicuous 
standard.
    The Board also proposes to adopt for Regulations B, E, M, Z and DD, 
guidance concerning type-sizes that are deemed to meet the ``clear and 
conspicuous'' standard and those that would likely be too small (this 
guidance currently applies only to credit card solicitations and 
applications under Regulation Z). See proposed comment 2(bb)-2(ii).
    The proposal does not add special format requirements to the 
regulation where none currently exist. Accordingly, even though the 
revisions clarify that type size can be one factor to consider in 
determining whether a disclosure is conspicuous, the proposal would not 
add a specific type-size requirement.
    To eliminate redundancy with proposed Sec.  202.2(bb) and its 
accompanying commentary, the Board also proposes to revise comment 
4(d)-1. Guidance regarding the ``clear and conspicuous'' standard for 
disclosures transmitted by electronic communication will be considered 
in the context of rulemakings dealing specifically with electronic 
delivery of disclosures.

III. Form of Comment Letters

    Comment letters should refer to Docket No. R-1168 and, when 
possible, should use a standard typeface with a font size of 10 or 12; 
this will enable the Board to convert text submitted in paper form to 
machine-readable form through electronic scanning, and will facilitate 
automated retrieval of comments for review. Comments may be mailed 
electronically to [email protected].

IV. Solicitation of Comments Regarding the Use of ``Plain Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The Board invites comments on whether 
the proposed rules are clearly stated and effectively organized, and 
how the Board might make the proposed text easier to understand.

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. The 
proposed amendments are not expected to have any significant impact on 
small entities. 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 rule under the 
authority delegated to the Board by the Office of Management and 
Budget. 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 control number. The OMB 
control number is 7100-0201.
    The collection of information that is revised by this rulemaking is 
found in 12 CFR part 202. This collection is mandatory to evidence 
compliance with the requirements of 15 U.S.C. 1691b(a)(1) and Pub. L. 
104-208, Sec.  2302(a), and also 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 income, 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.).
    Regulation B applies to all types of creditors, not just state 
member banks. However, under the Paperwork Reduction Act, the Federal 
Reserve accounts for the burden of the paperwork associated with the 
regulation only for entities that are supervised by the Federal 
Reserve. Appendix A of Regulation B defines these creditors as 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 
the Federal Reserve Act. Other agencies account for the paperwork 
burden for the institutions they supervise. Creditors are required to 
retain records for 12 to 25 months as evidence of compliance.
    The proposed revisions would provide creditors with a more uniform 
definition of providing ``clear and conspicuous'' disclosures and 
examples of how to satisfy the clear and conspicuous standard. While 
the proposal would amend Regulation B and the staff commentary, it is 
expected that these revisions would not increase the paperwork burden 
of creditors. The estimated annual burden for entities supervised by 
the Federal Reserve is approximately 175,711 hours for the 1,312 
creditors that are ``respondents'' for purposes of the Paperwork 
Reduction Act.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality arises under the Freedom of Information Act.
    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 
Cynthia Ayouch, Federal Reserve Board Clearance Officer, Division of 
Research and Statistics, Mail Stop 41, Board of Governors of the 
Federal Reserve System, Washington, DC 20551.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
revisions. New language is shown inside bold-faced arrows while 
language that would be deleted is set off with bold-faced brackets.

List of Subjects in 12 CFR Part 202

    Aged, Banks, banking, Civil rights, Consumer protections, Credit, 
Discrimination, Federal Reserve System, Marital status discrimination, 
Penalties, Religious discrimination, Reporting and record keeping 
requirements, Sex discrimination.

    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation B, 12 CFR part 202, as set forth below:

[[Page 68788]]

PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)

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

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

    2. Section 202.2 is amended by adding a new paragraph (bb) to read 
as follows:


Sec.  202.2  Definitions.

    For the purposes of this regulation, unless the context indicates 
otherwise, the following definitions apply.
* * * * *
    (bb) Clear and conspicuous means that a disclosure is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the disclosure.
* * * * *
    3. In Supplement I to Part 202:
    a. Under Section 202.2 Definitions, a new paragraph title 2(bb) 
Clear and conspicuous is added, and new paragraphs (bb) 1. through (bb) 
3. are added.
    b. Under Section 202.4--General Rules, under 4(d) Form of 
Disclosures, paragraph 1. is revised.

Supplement I to Part 202--Official Staff Interpretations

* * * * *


Section 202.2  Definitions

* * * * *

2(bb) Clear and Conspicuous

    1. Reasonably understandable. Examples of disclosures that are 
reasonably understandable include disclosures that:
    i. Present the information in the disclosure in clear, concise 
sentences, paragraphs, and sections;
    ii. Use short explanatory sentences or bullet lists whenever 
possible;
    iii. Use definite, concrete, everyday words and active voice 
whenever possible;
    iv. Avoid multiple negatives;
    v. Avoid legal and highly technical business terminology 
whenever possible; and
    vi. Avoid explanations that are imprecise and readily subject to 
different interpretations.
    2. Designed to call attention. Examples of disclosures that are 
designed to call attention to the nature and significance of the 
information include disclosures that:
    i. Use a plain-language heading to call attention to the 
disclosure;
    ii. Use a typeface and type size that are easy to read. 
Disclosures in 12-point type generally meet this standard. 
Disclosures printed in less than 12-point type do not automatically 
violate the standard; however, disclosures in less than 8-point type 
would likely be too small to satisfy the standard;
    iii. Provide wide margins and ample line spacing;
    iv. Use boldface or italics for key words; and
    v. In a document that combines disclosures with other 
information, use distinctive type size, style, and graphic devices, 
such as shading or sidebars, to call attention to the disclosures.
    3. Other information. Except as otherwise provided, the clear 
and conspicuous standard does not prohibit adding to the required 
disclosures such items as contractual provisions, explanations of 
contract terms, state disclosures, and translations; or sending 
promotional material with the required disclosures. However, the 
presence of this other information may be a factor in determining 
whether the clear and conspicuous standard is met.
* * * * *

Section 202.4--General Rules

* * * * *

4(d) Form of Disclosures

    1. Clear and conspicuous. See Sec.  202.2(bb) and accompanying 
comments.

[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.]
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System.

    Dated: November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03-29942 Filed 12-9-03; 8:45 am]
BILLING CODE 6210-01-P