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Credit Discrimination: § 1002.15 Incentives for self-testing and self-correction.

(a) General rules.

(1) Voluntary self-testing and correction. The report or results of a self-test that a creditor voluntarily conducts (or authorizes) are privileged as provided in this section. Data collection required by law or by any governmental authority is not a voluntary self-test.

(2) Corrective action required. The privilege in this section applies only if the creditor has taken or is taking appropriate corrective action.

Credit Discrimination: Appendix A to Part 1002—Federal Agencies To Be Listed in Adverse Action Notices

The following list indicates the Federal agency or agencies that should be listed in notices provided by creditors pursuant to § 1002.9(b)(1). Any questions concerning a particular creditor may be directed to such agencies. This list is not intended to describe agencies’ enforcement authority for ECOA and Regulation B. Terms that are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in the International Banking Act of 1978 (12 U.S.C. 3101).

Credit Discrimination: Appendix B to Part 1002—Model Application Forms

1. This appendix contains four1 model credit application forms, each designated for use in a particular type of consumer credit transaction as indicated by the bracketed caption on each form. The first sample form is intended for use in open-end, unsecured transactions; the second for closed-end, secured transactions; the third for closed-end transactions, whether unsecured or secured; and the fourth in transactions involving community property or occurring in community property States.

Credit Discrimination: General

1. This Appendix contains ten sample notification forms. Forms C-1 through C-4 are intended for use in notifying an applicant that adverse action has been taken on an application or account under §§ 1002.9(a)(1) and (2)(i) of this part. Form C-5 is a notice of disclosure of the right to request specific reasons for adverse action under §§ 1002.9(a)(1) and (2)(ii). Form C-6 is designed for use in notifying an applicant, under § 1002.9(c)(2), that an application is incomplete. Forms C-7 and C-8 are intended for use in connection with applications for business credit under § 1002.9(a)(3).

Credit Discrimination: Form C-1—Sample Notice of Action Taken and Statement of Reasons

Statement of Credit Denial, Termination or Change

Date: ______________________________

Applicant’s Name: ______________________________

Applicant’s Address: ______________________________

Description of Account, Transaction, or Requested Credit: ______________________________

Description of Action Taken: ______________________________

Part I—Principal Reason(s) for Credit Denial, Termination, or Other Action Taken Concerning Credit

Credit Discrimination: Form C-2—Sample Notice of Action Taken and Statement of Reasons

Date

Dear Applicant: Thank you for your recent application. Your request for [a loan/a credit card/an increase in your credit limit] was carefully considered, and we regret that we are unable to approve your application at this time, for the following reason(s):

Your Income:

_______________is below our minimum requirement.

_______________is insufficient to sustain payments on the amount of credit requested.

_______________could not be verified.

Your Employment:

_______________is not of sufficient length to qualify.

Credit Discrimination: Form C-3—Sample Notice of Action Taken and Statement of Reasons (Credit Scoring)

Date

Dear Applicant: Thank you for your recent application for _______________. We regret that we are unable to approve your request.

[Reasons for Denial of Credit]

Your application was processed by a [credit scoring] system that assigns a numerical value to the various items of information we consider in evaluating an application. These numerical values are based upon the results of analyses of repayment histories of large numbers of customers.

Credit Discrimination: Form C-5—Sample Disclosure of Right To Request Specific Reasons for Credit Denial

Date

Dear Applicant: Thank you for applying to us for _______________.

After carefully reviewing your application, we are sorry to advise you that we cannot [open an account for you/grant a loan to you/increase your credit limit] at this time. If you would like a statement of specific reasons why your application was denied, please contact [our credit service manager] shown below within 60 days of the date of this letter. We will provide you with the statement of reasons within 30 days after receiving your request.

Creditor’s name

Address

Telephone number

Credit Discrimination: Form C-6—Sample Notice of Incomplete Application and Request for Additional Information

Creditor’s name

Address

Telephone number

Date

Dear Applicant: Thank you for your application for credit. The following information is needed to make a decision on your application: _______________.

We need to receive this information by _______________ (date). If we do not receive it by that date, we will regrettably be unable to give further consideration to your credit request.

Sincerely,

Credit Discrimination: Form C-7—Sample Notice of Action Taken and Statement of Reasons (Business Credit)

Creditor’s name

Creditor’s address

Date

Dear Applicant: Thank you for applying to us for credit. We have given your request careful consideration, and regret that we are unable to extend credit to you at this time for the following reasons:

(Insert appropriate reason, such as: Value or type of collateral not sufficient; Lack of established earnings record; Slow or past due in trade or loan payments.)

Sincerely,

Credit Discrimination: Form C-8—Sample Disclosure of Right To Request Specific Reasons for Credit Denial Given at Time of Application (Business Credit)

Creditor’s name

Creditor’s address

If your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please contact [name, address and telephone number of the person or office from which the statement of reasons can be obtained] within 60 days from the date you are notified of our decision. We will send you a written statement of reasons for the denial within 30 days of receiving your request for the statement.

Credit Discrimination: Form C-10—Sample Disclosure About Voluntary Data Notation

We are requesting the following information to monitor our compliance with the Federal Equal Credit Opportunity Act, which prohibits unlawful discrimination. You are not required to provide this information. We will not take this information (or your decision not to provide this information) into account in connection with your application or credit transaction. The law provides that a creditor may not discriminate based on this information, or based on whether or not you choose to provide it.

Credit Discrimination: Appendix D to Part 1002—Issuance of Official Interpretations

1. Official Staff Interpretations. Interpretations of this part issued by officials of the Bureau provide the protection afforded under section 706(e) of the Act. Except in unusual circumstances, such interpretations will not be issued separately but will be incorporated in an official commentary to the regulation, which will be amended periodically.

Credit Discrimination: 5.1.1 The Special ECOA Requirements

As a fundamental principle, the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and other credit discrimination statutes set forth a general rule against discrimination in every aspect of a credit transaction. In addition, the ECOA has specific prohibitions and procedural requirements that creditors must follow in the various stages of a credit transaction. The FHA and federal Civil Rights Acts do not contain equivalent specific prohibitions and requirements but nevertheless apply broadly to all stages of a credit transaction.

Credit Discrimination: 5.2.1 Introduction

Before discussing discrimination specific to each stage of the credit transaction, it is helpful to understand some principles about the general rule against discrimination embodied in the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), the Civil Rights Acts, and other credit discrimination statutes.

Credit Discrimination: 5.2.2 What Is “Discrimination” Under the General Rule?

The term “discriminate” is defined by Regulation B as treating an applicant less favorably than other applicants.2 Consequently, the ECOA prohibits treating an applicant less favorably than other applicants on a prohibited basis at any stage of the credit transaction, ranging from application procedures to terms of the transaction to the subsequent handling of defaults.

Credit Discrimination: 5.3.1 Overview

The first stage of a credit transaction in which discrimination may take place occurs prior to the actual application—i.e., when the creditor takes various actions to encourage or discourage persons from seeking credit from that creditor.13 While most of the Equal Credit Opportunity Act (ECOA) applies only to “applicants,”14 Regulation B does include a pre-application prohibition forbidding creditors from discouraging prospective applicants on a prohibited basis.

Credit Discrimination: 5.3.2.1 The ECOA Standard

Regulation B specifically prohibits any oral or written statement to prospective applicants in advertising or otherwise that would discourage, on a prohibited basis, a reasonable person from pursuing an application.20 Similarly, the ECOA’s general rule against discrimination prohibits advertising and other marketing that discriminates on a prohibited basis as to who is encouraged to apply.21

Credit Discrimination: 5.3.2.2 The FHA Standard

The Fair Housing Act (FHA) explicitly prohibits discrimination in advertising with respect to the sale or rental of a dwelling.35 This prohibition applies to all written and oral notices or statements36 and thus should apply to marketing discrimination.