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(a) Discrimination. A creditor shall not discriminate against an applicant on a prohibited basis regarding any aspect of a credit transaction.
1. Scope of rule. The general rule stated in §1002.4(a) covers all dealings, without exception, between an applicant and a creditor, whether or not addressed by other provisions of the regulation. Other provisions of the regulation identify specific practices that the Bureau has decided are impermissible because they could result in credit discrimination on a basis prohibited by the Act. The general rule covers, for example, application procedures, criteria used to evaluate creditworthiness, administration of accounts, and treatment of delinquent or slow accounts. Thus, whether or not specifically prohibited elsewhere in the regulation, a credit practice that treats applicants differently on a prohibited basis violates the law because it violates the general rule. Disparate treatment on a prohibited basis is illegal whether or not it results from a conscious intent to discriminate.
i. Disparate treatment would exist, for example, in the following situations:
A. A creditor provides information only on “subprime” and similar products to minority applicants who request information about the creditor's mortgage products, but provides information on a wider variety of mortgage products to similarly situated nonminority applicants.
B. A creditor provides more comprehensive information to men than to similarly situated women.
C. A creditor requires a minority applicant to provide greater documentation to obtain a loan than a similarly situated nonminority applicant.
D. A creditor waives or relaxes credit standards for a nonminority applicant but not for a similarly situated minority applicant.
ii. Treating applicants differently on a prohibited basis is unlawful if the creditor lacks a legitimate nondiscriminatory reason for its action, or if the asserted reason is found to be a pretext for discrimination.
See interpretation of Paragraph 4(a). in Supplement I
(b) Discouragement. A creditor shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application.
1. Prospective applicants. Generally, the regulation's protections apply only to persons who have requested or received an extension of credit. In keeping with the purpose of the Act - to promote the availability of credit on a nondiscriminatory basis - §1002.4(b) covers acts or practices directed at prospective applicants that could discourage a reasonable person, on a prohibited basis, from applying for credit. Practices prohibited by this section include:
i. A statement that the applicant should not bother to apply, after the applicant states that he is retired.
ii. The use of words, symbols, models or other forms of communication in advertising that express, imply, or suggest a discriminatory preference or a policy of exclusion in violation of the Act.
iii. The use of interview scripts that discourage applications on a prohibited basis.
2. Affirmative advertising. A creditor may affirmatively solicit or encourage members of traditionally disadvantaged groups to apply for credit, especially groups that might not normally seek credit from that creditor.
See interpretation of Paragraph 4(b). in Supplement I
(c) Written applications. A creditor shall take written applications for the dwelling-related types of credit covered by §1002.13(a).
1. Requirement for written applications. Model application forms are provided in appendix B to the regulation, although use of a printed form is not required. A creditor will satisfy the requirement by writing down the information that it normally considers in making a credit decision. The creditor may complete an application on behalf of an applicant and need not require the applicant to sign the application.
2. Telephone applications. A creditor that accepts applications by telephone for dwelling-related credit covered by §1002.13 can meet the requirement for written applications by writing down pertinent information that is provided by the applicant.
3. Computerized entry. Information entered directly into and retained by a computerized system qualifies as a written application under this paragraph. (See the commentary to §1002.13(b), Applications through electronic media and Applications through video.)
See interpretation of Paragraph 4(c). in Supplement I
(d) Form of disclosures —
1. Clear and conspicuous. This standard requires that disclosures be presented in a reasonably understandable format in a way that does not obscure the required information. No minimum type size is mandated, but the disclosures must be legible, whether typewritten, handwritten, or printed by computer.
2. Form of disclosures. Whether the disclosures required to be on or with an application must be in electronic form depends upon the following:
i. If an applicant accesses a credit application electronically (other than as described under ii below), such as online at a home computer, the creditor must provide the disclosures in electronic form (such as with the application form on its Web site) in order to meet the requirement to provide disclosures in a timely manner on or with the application. If the creditor instead mailed paper disclosures to the applicant, this requirement would not be met.
ii. In contrast, if an applicant is physically present in the creditor's office, and accesses a credit application electronically, such as via a terminal or kiosk (or if the applicant uses a terminal or kiosk located on the premises of an affiliate or third party that has arranged with the creditor to provide applications to consumers), the creditor may provide disclosures in either electronic or paper form, provided the creditor complies with the timing, delivery, and retainability requirements of the regulation.
See interpretation of Paragraph 4(d). in Supplement I
(1) General rule. A creditor that provides in writing any disclosures or information required by this part must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§1002.5 and 1002.13, in a form the applicant may retain.
(2) Disclosures in electronic form. The disclosures required by this part that are required to be given in writing may be provided to the applicant in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). Where the disclosures under §§1002.5(b)(1), 1002.5(b)(2), 1002.5(d)(1), 1002.5(d)(2), 1002.13, and 1002.14(a)(2) accompany an application accessed by the applicant in electronic form, these disclosures may be provided to the applicant in electronic form on or with the application form, without regard to the consumer consent or other provisions of the E-Sign Act.
(e) Foreign-language disclosures. Disclosures may be made in languages other than English, provided they are available in English upon request.
As a seasoned expert in financial regulations and consumer protection, I have a comprehensive understanding of the legal landscape governing credit transactions. My expertise extends to the Equal Credit Opportunity Act (ECOA), and in particular, I am well-versed in Regulation B, which implements and enforces the anti-discrimination provisions of the ECOA.
Regulation B, as outlined in your provided text, covers various aspects of credit transactions to ensure fair and equal treatment for all applicants. Let me break down the key concepts and provisions highlighted in the text:
1. Discrimination (§1002.4(a))
- General Rule: Creditors are prohibited from discriminating against applicants on a prohibited basis throughout all aspects of a credit transaction.
- Scope of Rule: The general rule covers all interactions between an applicant and a creditor, addressing application procedures, creditworthiness evaluation criteria, account administration, and treatment of delinquent accounts.
- Examples of Disparate Treatment: The text provides scenarios illustrating disparate treatment, emphasizing that it is illegal regardless of intent if it violates the general rule.
2. Discouragement (§1002.4(b))
- Oral or Written Statements: Creditors are prohibited from making statements, whether oral or written, in advertising or otherwise, that would discourage a reasonable person from applying on a prohibited basis.
- Prospective Applicants: Protections extend to prospective applicants, and prohibited practices include statements and advertising that discourage applications on a prohibited basis.
3. Written Applications (§1002.4(c))
- Requirement for Written Applications: Creditors must accept written applications for dwelling-related types of credit. Model application forms are provided, but the use of a printed form is not mandatory.
- Telephone and Computerized Applications: Telephone and computerized entry methods are acceptable for written applications, with specific requirements outlined.
4. Form of Disclosures (§1002.4(d))
- Clear and Conspicuous Disclosures: Disclosures must be presented in a reasonably understandable format without obscuring required information.
- Electronic Form of Disclosures: The form of disclosures depends on whether the applicant accesses the credit application electronically. Compliance with the Electronic Signatures in Global and National Commerce Act (E-Sign Act) is essential.
5. Foreign-Language Disclosures (§1002.4(e))
- Foreign-Language Disclosures: Creditors may provide disclosures in languages other than English, but they must be available in English upon request.
This overview highlights the meticulous attention to detail and the comprehensive framework established by Regulation B to prevent discrimination and ensure fair lending practices in the realm of credit transactions.