Credit Discrimination: § 1002.14 Rules on providing appraisals and other valuations.
(a) Providing appraisals and other valuations.
(a) Providing appraisals and other valuations.
(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.
(a) Administrative enforcement.
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).
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.
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).
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
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.
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.
Date
Dear Applicant: Thank you for your application for _______________. We are unable to offer you credit on the terms that you requested for the following reason(s): _______________
We can, however, offer you credit on the following terms: _______________
If this offer is acceptable to you, please notify us within [amount of time] at the following address: _______________.
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
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,
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,
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.
We may order an appraisal to determine the property’s value and charge you for this appraisal. We will promptly give you a copy of any appraisal, even if your loan does not close.
You can pay for an additional appraisal for your own use at your own cost.
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.
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.
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.
The next few chapters of this treatise will follow the five major stages in a credit transaction. Each chapter will discuss both general discriminatory practices and the special ECOA requirements specific to that stage of the credit process.
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.
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.
The general rule against discrimination applies during every stage of the credit transaction. This is true for the ECOA, the FHA, and the federal Civil Rights Acts.
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.
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