[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
________________________________________________________________________
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