[Federal Register Volume 76, Number 121 (Thursday, June 23, 2011)]
[Proposed Rules]
[Pages 36885-36887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15654]


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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. 76, No. 121 / Thursday, June 23, 2011 / 
Proposed Rules  

[[Page 36885]]



FEDERAL RESERVE SYSTEM

12 CFR Part 202

[Regulation B; Docket No. R-1426]
RIN No. 7100-AD-78


Regulation B; Equal Credit Opportunity

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Board is publishing for public comment a proposed rule 
amending Regulation B (Equal Credit Opportunity). Section 704B of the 
Equal Credit Opportunity Act (ECOA), as added by Section 1071 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act or Act), requires that financial institutions collect and report 
information concerning credit applications made by women- or minority-
owned businesses and by small businesses. ECOA Section 704B becomes 
effective on the date that rulemaking authority for ECOA is transferred 
to the Consumer Financial Protection Bureau (CFPB), which is July 21, 
2011. Although the CFPB will have the authority to issue rules to 
implement ECOA Section 704B for most entities, the Board retains 
authority to issue rules for certain motor vehicle dealers. This 
proposed rule excepts motor vehicle dealers that are subject to the 
Board's jurisdiction from the requirements of ECOA Section 704B 
temporarily, until the effective date of final rules that will be 
issued by the Board to implement that provision.

DATES: Comments on this proposed rule must be received on or before 
July 29, 2011.

ADDRESSES: You may submit comments, identified by Docket No. R-1426 and 
RIN No. 7100-AD-78, by any of the following methods:
     Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Address to Jennifer J. Johnson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue, NW., Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets, NW.) between 
9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Lorna Neill or Nikita Pastor, Senior 
Attorneys, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, at (202) 
452-2412 or (202) 452-3667. For users of Telecommunications Device for 
the Deaf (TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 704B of the Equal Credit Opportunity Act (ECOA), as added 
by Section 1071 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act \1\ (Dodd-Frank Act or Act), requires that financial 
institutions collect and report information concerning credit 
applications made by women- or minority-owned businesses and by small 
businesses. 15 U.S.C. 1691c-2. The statute directs financial 
institutions to compile and maintain the data ``in accordance with 
regulations of the Bureau.'' ECOA Section 704B(e)(1), 15 U.S.C. 1691c-
2(e)(1). The purpose of Section 704B is ``to facilitate enforcement of 
fair lending laws and enable communities, governmental entities, and 
creditors to identify business and community development needs and 
opportunities of women-owned, minority-owned, and small businesses.'' 
ECOA Section 704B becomes effective on the date that rulemaking 
authority for ECOA is generally transferred to the Consumer Financial 
Protection Bureau (CFPB), which is July 21, 2011.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
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    On April 11, 2011, the CFPB issued a letter concluding that 
financial institutions have no obligations under Section 704B until the 
CFPB issues regulations to implement the requirements. The CFPB letter 
notes that Congress intended Section 704B to produce reliable and 
consistent data that can be analyzed by the CFPB, other government 
agencies, and members of the public to facilitate enforcement of fair 
lending laws and to identify business and community development needs. 
Based on the statutory text, purpose, and legislative history, the CFPB 
letter concluded that implementing regulations are necessary to ensure 
that data are collected and reported in a consistent, standardized 
fashion that allows for sound analysis by the CFPB and other users of 
data.
    Although the CFPB will have authority to issue rules to implement 
ECOA Section 704B for most entities, the Board retains authority to 
issue rules for motor vehicle dealers covered by Section 1029(a) of the 
Act.\2\ 12 U.S.C. 5519. Thus, the Board is responsible for issuing 
regulations to implement the amendments made by Section 704B for motor 
vehicle dealers covered by Section 1029(a) of the Dodd-Frank Act. 
Consequently, the Board has received inquiries as to whether motor 
vehicle

[[Page 36886]]

dealers will need to comply with the requirements of ECOA Section 704B 
before implementing regulations are issued.
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    \2\ Section 1029(a) of the Dodd-Frank Act states: ``Except as 
permitted in subsection (b), the Bureau may not exercise any 
rulemaking * * * authority * * * over a motor vehicle dealer that is 
predominantly engaged in the sale and servicing of motor vehicles, 
the leasing and servicing of motor vehicles, or both.'' 12 U.S.C. 
5519(a). Section 1029(b) of the Dodd-Frank Act states: ``Subsection 
(a) shall not apply to any person, to the extent such person (1) 
provides consumers with any services related to residential or 
commercial mortgages or self-financing transaction involving real 
property; (2) operates a line of business (A) that involves the 
extension of retail credit or retail leases involving motor 
vehicles; and (B) in which (i) the extension of retail credit or 
retail leases are provided directly to consumers and (ii) the 
contract governing such extension of retail credit or retail leases 
is not routinely assigned to an unaffiliated third party finance or 
leasing source; or (3) offers or provides a consumer financial 
product or service not involving or related to the sale, financing, 
leasing, rental, repair, refurbishment, maintenance, or other 
servicing of motor vehicles, motor vehicle parts, or any related or 
ancillary product or service.'' 12 U.S.C. 5519(b).
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    The Board believes that detailed rules to implement ECOA Section 
704B are necessary to ensure that data collected and reported under 
that provision are useful. The purposes of the statute are to 
facilitate fair lending enforcement and to identify business and 
community development needs and opportunities of women-owned, minority-
owned, and small businesses. To support sound analysis by users of the 
data, it should be collected and reported in a consistent and 
standardized way. To achieve this, implementing rules can provide motor 
vehicle dealers with uniform definitions and standards that they can 
follow in collecting and reporting data.
    Accordingly, this proposed rule excepts motor vehicle dealers 
covered by Section 1029(a) of the Dodd-Frank Act from any obligation to 
comply with ECOA Section 704B until the Board issues final regulations 
to implement that provision and those regulations become effective. 
This proposed rule is consistent with the views expressed by the CFPB, 
and is supported by the text and purpose of Section 1071 of the Dodd-
Frank Act. The applicability of this proposed rule is limited to 
Section 1071 and does not affect the implementation date of any other 
provision of the Dodd-Frank Act.

II. Legal Authority

    ECOA Section 703, as amended by Section 1085 of the Dodd-Frank Act, 
directs the Board to prescribe regulations to carry out ECOA's purposes 
for motor vehicle dealers covered by Section 1029(a) of the Dodd-Frank 
Act. 15 U.S.C. 1691b(f). In addition, ECOA Section 703 authorizes the 
Board to issue regulations that contain such classifications, 
differentiation, or other provisions, or that provide for such 
adjustments and exceptions for any class of transactions, as in the 
judgment of the Board are necessary or proper to effectuate the 
purposes of ECOA, to prevent circumvention or evasion of ECOA, or to 
facilitate or substantiate compliance with ECOA. Id. Finally, ECOA 
Section 704B(g)(2) contains authority for exceptions or exemptions for 
any class of financial institutions as deemed necessary or appropriate 
to carry out the purposes of this section. 15 U.S.C. 1691c-2(g)(2).
    Pursuant to this authority, the proposed rule excepts motor vehicle 
dealers covered by Section 1029(a) of the Dodd-Frank Act temporarily 
from the requirement to comply with ECOA Section 704B, until the 
effective date of final rules that will be issued by the Board to 
implement Section 704B. The Board believes that this exception is 
necessary to effectuate the purposes of ECOA and facilitate compliance. 
First, ECOA Section 704B states that the purpose is ``to facilitate 
enforcement of fair lending laws and enable communities, governmental 
entities, and creditors to identify business and community development 
needs and opportunities of women-owned, minority-owned, and small 
businesses.'' 15 U.S.C. 1691c-2(a). The Board believes that this 
purpose is better served if there are detailed rules that prescribe the 
method for collecting and reporting of data under Section 704B. The 
collection of data in a uniform manner under such rules will enhance 
data analysis and enforcement capabilities. In addition, the text of 
ECOA Section 704B contemplates that regulations are necessary to 
implement this provision by directing that financial institutions 
compile and maintain the data ``in accordance with regulations of the 
Bureau.'' \3\ Finally, implementing regulations will facilitate 
compliance by providing guidance on how motor vehicle dealers can 
comply with the statutory requirements in a manner that effectuates the 
legislative purposes.
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    \3\ See ECOA Section 704B(e)(1), 15 U.S.C. 1691c-2(e)(1) (``Each 
financial institution shall compile and maintain, in accordance with 
regulations of the Bureau, a record of the information provided by 
any loan applicant * * *''); ECOA Section 704B(b), 15 U.S.C. 1691c-
2(b) (``Subject to the requirements of this section * * * the 
financial institution shall * * * maintain a record of the responses 
* * *'').
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III. Section-by-Section Analysis

Section 202.17 Data Collection for Credit Applications by Women-Owned, 
Minority-Owned, or Small Businesses

17(a) Effective Date for Motor Vehicle Dealers
    Section 704B of ECOA, as added by Section 1071 of the Dodd-Frank 
Act, requires that financial institutions collect and report 
information concerning credit applications made by women- or minority-
owned businesses and by small businesses. 15 U.S.C. 1691c-2. The term 
``financial institution'' includes any entity that engages in any 
financial activity. 15 U.S.C. 1691c-2(h)(1). Although the term 
``financial activity'' is not defined in ECOA or the Dodd-Frank Act, 
motor vehicle dealers covered by Section 1029(a) of the Dodd-Frank Act 
may be financial institutions subject to the requirements of ECOA 
Section 704B. This section of ECOA becomes effective on the designated 
transfer date, which is July 21, 2011.
    The proposed rule provides that no motor vehicle dealer covered by 
Section 1029(a) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, 12 U.S.C. 5519(a), shall be required to comply with the 
requirements of Section 704B of the Equal Credit Opportunity Act, 15 
U.S.C. 1691c-2, until the effective date of final rules issued by the 
Board to implement Section 704B of the Equal Credit Opportunity Act, 15 
U.S.C. 1691c-2. Section 202.17(a). Moreover, the proposed rule provides 
that the rule shall not be construed to affect the effective date of 
Section 704B ECOA for any person other than a motor vehicle dealer 
covered by Section 1029(a) of the Dodd-Frank Act.

IV. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the 
proposed rule under the authority delegated to the Board by the Office 
of Management and Budget. The rule contains no collections of 
information under the PRA. See 44 U.S.C. 3502(3). Accordingly, there is 
no paperwork burden associated with the rule.

V. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires an 
agency to perform an initial and final regulatory flexibility analysis 
on the impact a rule is expected to have on small entities. The Small 
Business Administration (SBA) establishes size standards that define 
which entities are small businesses for purposes of the RFA.\4\ The 
size standard to be considered a small business is: $175 million or 
less in assets for banks and other depository institutions; and $7 
million or less in annual revenues for the majority of non-bank 
entities that are likely to be subject to the final rules.
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    \4\ U.S. Small Business Administration, Table of Small Business 
Size Standards Matched to North American Industry Classification 
System Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
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    Under Section 605(b) of the RFA, 5 U.S.C. 605(b), the initial 
regulatory flexibility analysis otherwise required under Section 603 of 
the RFA is not required if an agency certifies, along with a statement 
providing the factual basis for such certification, that the rule will 
not have a significant economic impact on a substantial number of small 
entities. Based on its initial analysis and for the reasons stated 
below, the Board believes that this proposed rule would

[[Page 36887]]

not have a significant economic impact on a substantial number of small 
entities.

A. Statement of Reasons, Objectives, and Legal Basis for the Proposed 
Rule

    Section 704B of the Equal Credit Opportunity Act (ECOA), as added 
by Section 1071 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act or Act), requires that financial 
institutions collect and report information concerning credit 
applications made by women- or minority-owned businesses and by small 
businesses. ECOA Section 704B becomes effective on the date that 
rulemaking authority for ECOA is transferred to the Consumer Financial 
Protection Bureau (CFPB), which is July 21, 2011. Although the CFPB 
will have the authority to issue rules to implement ECOA Section 704B 
for most entities, the Board retains authority to issue rules for 
certain motor vehicle dealers. This proposed rule excepts motor vehicle 
dealers that are subject to the Board's jurisdiction from the 
requirements of ECOA Section 704B temporarily, until the effective date 
of final rules that will be issued by the Board to implement that 
provision. The SUPPLEMENTARY INFORMATION above contains information on 
the reasons, objectives and legal basis for the proposed rule.

B. Small Entities Affected by the Proposed Rule

    The proposed rule applies to motor vehicle dealers covered by 
Section 1029(a) of the Dodd-Frank Act.\5\ The total number of small 
entities covered by the final rules is unknown, because the Board does 
not have data on the number of small entities that are motor vehicle 
dealers covered by Section 1029(a). Furthermore, it is not clear how 
many motor vehicle dealers covered by Section 1029(a) receive credit 
applications from women- or minority-owned business or small 
businesses. Nevertheless, there are likely to be no small entities 
affected by the final rule because the rule merely preserves the status 
quo by granting a temporary exemption from the requirement to comply 
with the statute when it takes effect on July 21, 2011.
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    \5\ Section 1029(a) of the Dodd-Frank Act states: ``Except as 
permitted in subsection (b), the Bureau may not exercise any 
rulemaking * * * authority * * * over a motor vehicle dealer that is 
predominantly engaged in the sale and servicing of motor vehicles, 
the leasing and servicing of motor vehicles, or both.'' 12 U.S.C. 
5519(a). Section 1029(b) of the Dodd-Frank Act states: ``Subsection 
(a) shall not apply to any person, to the extent such person (1) 
provides consumers with any services related to residential or 
commercial mortgages or self-financing transaction involving real 
property; (2) operates a line of business (A) that involves the 
extension of retail credit or retail leases involving motor 
vehicles; and (B) in which (i) the extension of retail credit or 
retail leases are provided directly to consumers and (ii) the 
contract governing such extension of retail credit or retail leases 
is not routinely assigned to an unaffiliated third party finance or 
leasing source; or (3) offers or provides a consumer financial 
product or service not involving or related to the sale, financing, 
leasing, rental, repair, refurbishment, maintenance, or other 
servicing of motor vehicles, motor vehicle parts, or any related or 
ancillary product or service.'' 12 U.S.C. 5519(b).
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C. Recordkeeping, Reporting, and Compliance Requirements

    The proposed rule would not impose any new recordkeeping, 
reporting, or compliance requirements. Instead, the proposed rule 
temporarily would delay such requirements until the Board issues final 
implementing regulations and the regulations become effective.

D. Identification of Duplicative, Overlapping, or Conflicting Federal 
Regulations

    The Board has not identified any Federal statutes or regulations 
that would duplicate, overlap, or conflict with the proposed rule.

E. Significant Alternatives to the Proposed Revisions

    The Board is not aware of any significant alternatives that would 
further minimize any significant economic impact of the proposed rule 
on small entities, but solicits comment on this approach.

List of Subjects in 12 CFR Part 202

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

Authority and Issuance

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

PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)

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

    Authority:  15 U.S.C. 1691-1691f; Pub. L. 111-203, 124 Stat. 
1376.

    2. Add Sec.  202.17 to read as follows:


Sec.  202.17  Data collection for credit applications by women-owned, 
minority-owned, or small businesses.

    (a) Effective date for motor vehicle dealers. No motor vehicle 
dealer covered by section 1029(a) of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, 12 U.S.C. 5519(a), shall be required to 
comply with the requirements of section 704B of the Equal Credit 
Opportunity Act, 15 U.S.C. 1691c-2, until the effective date of final 
rules issued by the Board to implement section 704B of the Act, 15 
U.S.C. 1691c-2. This paragraph shall not be construed to affect the 
effective date of section 704B of the Act for any person other than a 
motor vehicle dealer covered by section 1029(a) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.

    By order of the Board of Governors of the Federal Reserve 
System, June 17, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-15654 Filed 6-22-11; 8:45 am]
BILLING CODE 6210-01-P