[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Rules and Regulations]
[Pages 11099-11102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04643]



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 Rules and Regulations
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  Federal Register / Vol. 81, No. 42 / Thursday, March 3, 2016 / Rules 
and Regulations  

[[Page 11099]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

RIN 3170-AA58


Application Process for Designation of Rural Area under Federal 
Consumer Financial Law; Procedural Rule

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
adopting a procedural rule establishing an application process under 
which a person may identify an area that has not been designated by the 
Bureau as a rural area for purposes of a Federal consumer financial law 
and apply for such area to be so designated. Currently the Bureau 
designates rural areas for purposes of certain Federal consumer 
financial laws relating to mortgage lending.

DATES: This final rule is effective March 3, 2016. The Bureau will 
begin accepting applications submitted according to the procedure 
established herein on March 31, 2016.

FOR FURTHER INFORMATION CONTACT: Carl Owens, Terry J. Randall, and 
James Wylie, Counsels, Office of Regulations, Consumer Financial 
Protection Bureau, 1700 G Street NW., Washington, DC 20552, at 202-435-
7700.

SUPPLEMENTARY INFORMATION:

I. Background

A. Rural Area Designations in Federal Consumer Financial Law

    Federal consumer financial law provides special provisions and 
exemptions for certain creditors doing business in rural areas. For 
example, an exemption from the requirement to establish an escrow 
account for a higher-priced mortgage loan (escrow exception) partially 
depends on whether the creditor has extended credit secured by 
properties in rural areas\1\ and a special provision permits certain 
small creditors to originate balloon-payment qualified mortgages if the 
creditor has extended a sufficient amount of credit secured by 
properties in rural areas.\2\
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    \1\ 12 CFR 1026.35(b), 1026.35(b)(2)(iii)(A), and 
1026.35(b)(2)(iv)(A).
    \2\ 12 CFR 1026.43(f)(1).
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    The exemption and special provision listed above were adopted as 
part of the Bureau's mortgage rules implementing title XIV of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act),\3\ pursuant to its authority under the Truth in Lending Act 
(TILA), as amended by the Dodd-Frank Act. The Bureau adopted revisions 
to these provisions that were published in the Federal Register on 
October 2, 2015.\4\ These revisions included raising the loan 
origination limit for determining eligibility for small creditor 
status, including the assets of a creditor's affiliates that regularly 
extended covered transactions in the calculation of the asset limit for 
small-creditor status, expanding the definition of rural and 
underserved areas by adding census blocks that are not in urban areas 
as defined by the U.S. Census Bureau to the existing county-based 
definition, and extending the transition period that allowed certain 
small creditors to make balloon-payment qualified mortgages regardless 
of whether they operated predominantly in rural or underserved areas to 
April 1, 2016. Title LXXXIX of the Fixing America's Surface 
Transportation Act, entitled the HELP Rural Communities Act,\5\ 
contained amendments to TILA and new provisions relating to the 
designation by the Bureau of rural areas under ``a Federal consumer 
financial law (as defined under section 1002 of the [Dodd-Frank 
Act]).''
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    \3\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
    \4\ Amendments Relating to Small Creditors and Rural or 
Underserved Areas Under the Truth in Lending Act (Regulation Z), 80 
FR 59943, 59944 (Oct. 2, 2015).
    \5\ HELP Rural Communities Act, Public Law 114-94 (2015).
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B. HELP Rural Communities Act Application Process

    Section 89002 of the HELP Rural Communities Act requires the Bureau 
to establish an application process under which a person may apply to 
have an area designated by the Bureau as a rural area for purposes of a 
Federal consumer financial law. Section 89002 of the HELP Rural 
Communities Act also provides details on many of the features of the 
process, including evaluation criteria for the Bureau's determinations 
on these applications, a period for public comment on the applications, 
and a sunset date for the application process of two years after the 
date of enactment of the HELP Rural Communities Act. The Bureau is 
issuing this procedural rule to establish the process required by 
section 89002 of the HELP Rural Communities Act.
    Section 89003 of the HELP Rural Communities Act separately made 
amendments to TILA's test with respect to the Bureau's discretionary 
authority to establish the escrow exemption and a special provision 
that permits certain small creditors to originate balloon-payment 
qualified mortgages. This procedural rule relates solely to the 
application process under section 89002 and not to those amendments. 
The Bureau understands that the HELP Rural Communities Act amendments 
to TILA may create some uncertainty for creditors regarding how the 
Bureau will exercise its newly expanded discretionary authority with 
respect to the exemption and special provision in question, 
particularly in light of the April 1, 2016, expiration of the temporary 
period that allows certain small creditors to originate balloon-payment 
qualified mortgages and balloon-payment high cost mortgages, regardless 
of their operations in rural or underserved areas.\6\ The Bureau 
expects to issue another notice in the Federal Register shortly 
concerning the amendments under section 89003. The Bureau also 
anticipates providing an interpretation of the term ``rural area'' in 
section 89002(a) of the HELP Rural Communities Act in that notice that 
would define the type of area for which applicants may submit 
applications pursuant to this rule. The Bureau plans to issue that 
notice before it begins accepting applications pursuant to this rule on 
March 31, 2016.
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    \6\ Amendments Relating to Small Creditors and Rural or 
Underserved Areas Under the Truth in Lending Act (Regulation Z), 80 
FR 59943, 59968 (amending 12 CFR 1026.43(e)(i)(B)(ii)) (Oct. 2, 
2015).

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[[Page 11100]]

II. Procedural Requirements

A. Administrative Procedure Act

    No notice of proposed rulemaking is required under the 
Administrative Procedure Act (APA) because this rule relates solely to 
agency procedure and practice.\7\ Because the rule relates solely to 
agency procedure and practice, it is not substantive, and therefore is 
not subject to the 30-day delayed effective date for substantive rules 
under section 553(d) of the APA.\8\ The Bureau also believes that this 
final rule meets the requirements for the section 553(d)(3) exception 
for good cause. Congress, in section 89002(a) of the HELP Rural 
Communities Act, required the Bureau to establish an application 
process not later than 90 days after the enactment of the HELP Rural 
Communities Act. Because the application process has a required sunset 
period of two years from the enactment of the HELP Rural Communities 
Act under section 89002(g), there is good cause to establish the 
procedure immediately to provide the most time possible for applicants 
to use the application process. Therefore, the Bureau finds that there 
is good cause to make the final rule effective on March 3, 2016. Though 
this final rule establishes the application process immediately, the 
Bureau will not begin accepting applications until March 31, 2016. In 
addition the Bureau currently expects to issue a notice concerning the 
amendments under section 89003 of the HELP Rural Communities Act before 
March 31, 2016, in light of the April 1, 2016, expiration of the 
temporary provisions referenced in part I above, and the Bureau expects 
that some potential applicants may wish to consider the content of that 
notice in determining whether to apply. The delay also will afford some 
time for the Bureau to prepare internal procedures to receive 
applications.
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    \7\ 5 U.S.C. 553(b).
    \8\ 5 U.S.C. 553(d).
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B. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\9\
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    \9\ 5 U.S.C. 603-604.
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III. Legal Authority

    The Bureau is issuing this rule pursuant to its authority under 
section 1022(b)(1) of the Dodd-Frank Act, which authorizes the Bureau 
to prescribe rules as may be necessary or appropriate to enable the 
Bureau to administer and carry out the purposes and objectives of 
Federal consumer financial law.\10\ The Bureau is also issuing this 
rule pursuant to the requirements of section 89002(a) of the HELP Rural 
Communities Act.\11\
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    \10\ 12 U.S.C. 5512(b)(1).
    \11\ Public Law 114-94, Title LXXXIX (2015).
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IV. Effective Date

    The final rule is effective March 3, 2016. The Bureau will begin 
accepting applications submitted according to the procedure established 
herein on March 31, 2016. The HELP Rural Communities Act provides that 
section 89002, which requires the Bureau to establish this process, 
shall cease to have any force or effect on December 4, 2017.

V. Paperwork Reduction Act

    According to the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 
3501 et seq.) the Bureau may not conduct or sponsor a collection of 
information as defined by the PRA and, notwithstanding any other 
provisions of law, persons are not required to respond to a collection 
of information unless it displays a current valid Office of Management 
and Budget (OMB) control number. The collections of information 
contained in this procedural rule, and identified as such, have been 
approved by OMB and assigned the control number 3170-0061. The 
information collection contained in this procedural rule is required to 
obtain a benefit. The information collection under this procedural rule 
is an application to request that the Bureau apply a rural designation 
to a specific geographic area.

VI. Application Process and Instructions

A. Submission

    The application shall be addressed to the CFPB Rural Application 
Coordinator, Bureau of Consumer Financial Protection.
    It may be submitted using one of the following methods:
     Email: [email protected].
     Mail: ATTN: CFPB Rural Application Coordinator, Research, 
Markets, and Regulations Division, Consumer Financial Protection 
Bureau, 1700 G Street NW., Washington, DC 20552.
     Hand Delivery/Courier: ATTN: CFPB Rural Application 
Coordinator, Research, Markets, and Regulations Division, Consumer 
Financial Protection Bureau, 1275 First Street NE., Washington, DC 
20002.
    If the application is submitted by email, it and all attachments 
described below in part VI.C shall be compiled into a single portable 
document format (PDF) file. If the application is submitted by mail, 
hand delivery, or courier, the applicant shall provide three copies of 
the complete application. The application shall not exceed 10 pages.

B. Content

    The application shall contain the following sections:
1. Area Identified
    The application shall specifically identify the area requested to 
be designated as a rural area and the State in which the area is 
located. An application may identify more than one area if the areas 
are contiguous (e.g., counties that share a border). Additional areas 
that are not contiguous (e.g., counties that do not share a border) 
must be identified in separate applications.
    The application shall provide information describing the area 
identified, for example:
    a. The county that comprises the area or in which the area is 
located; or
    b. The Census block that comprises the area, unless the area is 
comprised entirely of whole counties.
2. Justification for Designation as Rural Area
    The applicant shall provide the following information about the 
evaluation criteria in section 89002(b) of the HELP Rural Communities 
Act:
a. Census Bureau
    The application shall state whether the area identified is 
classified as rural or urban by the Director of the Bureau of the 
Census and, if rural, explain the basis for concluding that the area 
identified was so classified, including by attaching any supporting 
documentation as described below in part VI.C.
b. Office of Management and Budget
    The application shall state whether the area identified is 
classified as either a metropolitan area, a micropolitan area, or 
neither by the Director of the Office of Management and Budget and, if 
neither, explain the basis for concluding that the area identified was 
so classified, including by attaching any supporting documentation as 
described below in part VI.C.
c. Department of Agriculture--Rural Development
    The application shall state whether the Secretary of Agriculture 
has determined that properties in the area

[[Page 11101]]

identified are eligible for programs of the United States Department of 
Agriculture Office of Rural Development and, if so, explain the basis 
for concluding that the Secretary has determined as such, including by 
attaching any supporting documentation as described below in part VI.C.
d. Department of Agriculture--Rural-Urban Commuting Codes
    The application shall state the most recent primary and secondary 
rural-urban commuting codes from the Department of Agriculture for the 
area identified or of which the area identified is a part, including by 
attaching any supporting documentation as described below in part VI.C.
e. State Bank Supervisor
    The application shall state whether the State bank supervisor, as 
defined by 12 U.S.C. 1813(r), of the State where the area identified is 
located has issued a written opinion concerning whether the area 
identified should be designated as a rural area. Any such written 
opinion shall be attached as described below in part VI.C.
f. Population Density
    The application shall provide the population density of the area 
identified expressed as the number of persons per square mile using 
data from the Bureau of the Census and explain the data relied on, 
including by attaching supporting documentation as described below in 
part VI.C. The application shall also provide the population density of 
any nearby area with a greater population density that has been 
designated by the Bureau as a rural area.
3. Applicant Information
    The application shall include the following information about the 
applicant:
a. Name
    The application shall include the name of the applicant.
b. Contact Information
    The application shall include information about how to contact the 
applicant if the Bureau needs additional information about the request.
c. Living or Doing Business in the State
    If the applicant is a natural person, the application shall include 
only a statement affirming that the applicant lives or does business in 
the State in which the area identified is located. If the applicant is 
not a natural person, the application shall include a statement 
affirming that the applicant does business in the State in which the 
area identified is located and evidence supporting the statement as an 
attachment as described in part VI.C. Such evidence could include, for 
example, evidence of incorporation in the State, evidence of licensure 
to do business in the State, evidence of licensure to conduct a 
specific type of business in the State, or evidence of an office in the 
State. The applicant may redact such evidence to withhold sensitive 
personal information that is not relevant to establishing that the 
applicant does business in the State where the area identified is 
located. The applicant may also state on a cover page to the attachment 
that it wishes the entire attachment to be withheld from the Federal 
Register publication of the attachment.

C. Attachments

    The application shall include any other documents necessary to 
provide the required information above as attachments.

D. Further Instructions

    Applicants should not include personal information other than 
information identified above in part VI.B.3. The Bureau is required by 
the HELP Rural Communities Act to publish the application in the 
Federal Register. The Bureau may redact the application prior to 
publication in the Federal Register to withhold any unnecessary 
personal information included in the application.

VII. Process for Considering Applications

A. Receipt of Application and Initial Review

    Upon receipt of a request pursuant to this process, the Bureau 
shall review the request for preliminary matters, including:
    1. Completeness of the information set forth above in part VI;
    2. Ensuring that the area identified is not already designated as a 
rural area under the Federal consumer financial laws;
    3. Determining if there is an application already pending for the 
same area identified as described in section 89002(d)(2) of the HELP 
Rural Communities Act; and
    4. Determining if an application for the area identified has been 
denied less than 90 days before the receipt of the application as 
described in section 89002(f) of the HELP Rural Communities Act.
    If the Bureau determines that the applicant has not submitted a 
complete application (e.g., because the Bureau cannot ascertain the 
relevant area from the application), it shall contact the applicant and 
specify the additional information that is needed to complete an 
application.
    If the Bureau determines that the applicant seeks the designation 
of a rural area for an area that is already designated as a rural area 
under the Federal consumer financial laws, for an area for which an 
application is already pending, for an area for which an application 
has been denied less than 90 days before the receipt of the 
application, or if the Bureau determines that the applicant neither 
lives nor does business in the State in which the area is located, the 
Bureau shall notify the applicant that the Bureau will not consider 
whether to designate the area as rural and the reason for not 
considering the application.

B. Publication of Application in the Federal Register

    Not later than 60 days after receipt of a complete application, the 
Bureau shall publish the application in the Federal Register. The 
Bureau may redact the application prior to publication in the Federal 
Register to withhold any unnecessary personal information included in 
the application, as discussed above in part VI.D.

C. Public Comment on Application

    The Bureau shall accept public comments on the application for not 
fewer than 90 days after publication in the Federal Register.

D. Decision on Designation

    The Bureau shall review the information contained in the 
application and the public comments and, not later than 90 days after 
the end of the public comment period described above in part VII.C, the 
Bureau shall grant or deny the application in whole or in part and 
shall publish such grant or denial in the Federal Register along with 
an explanation of what factors the Bureau relied on in making such 
determination. The Bureau shall base its decision on the criteria set 
forth in section 89002(b) of the HELP Rural Communities Act and the 
rule of construction in section 89002(c) of the HELP Rural Communities 
Act. A decision to grant an application in whole or in part shall 
specify the area designated as a rural area, and the time period during 
which the designation is effective by reference to the duration of the 
designations of rural areas under the Federal consumer financial laws.

[[Page 11102]]

E. Sunset Date

    The HELP Rural Communities Act contemplates a process of up to 240 
days for each application, including a minimum of 90 days for public 
comments. The Bureau will consider any application received before 
April 8, 2017. The Bureau may, in its discretion, consider an 
application received on or after April 8, 2017, if it determines that 
it is possible to complete the designation decision process for that 
application by the sunset date, based on the time remaining, the 
complexity of the application, and any other relevant factors. The 
Bureau will notify the applicant if it determines that it cannot 
complete the application process, in which case the Bureau shall not 
consider the application nor publish the application in the Federal 
Register as described above in part VII.B.

    Dated: February 26, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-04643 Filed 3-2-16; 8:45 am]
BILLING CODE 4810-AM-P