The Consumer Financial Protection Bureau announced it is reassessing the Equal Credit Opportunity Act in order to provide lenders with additional flexibility when collecting consumer ethnicity and race information.
The bureau’s proposed amendments are intended to give lenders needed clarity on their obligations under the law, while promoting compliance with rules intended to ensure consumers are treated fairly.
The bureau stated that Regulation B, the CFPB’s rule implementing ECOA, includes restrictions regarding lenders’ ability to ask consumers about their race, color, religion, national origin or sex, except in certain circumstances.
Those circumstances can include required collection of the information for some mortgage applications under Regulation B.
The CFPB stated that, under to the new proposal, mortgage lenders would not be required to maintain different practices depending on their loan volume or other characteristics.
As a result, more lenders would be able to adopt application forms that include expanded requests for information regarding a consumer’s ethnicity and race, including the revised Uniform Residential Loan Application, the standardized form used by borrowers to apply for a mortgage loan.
Toward the end of 2016, both Fannie Mae and Freddie Mac announced the redesigned Uniform Residential Loan Application in order to standardize and enhance the quality of loan information for underwriting single-family mortgages.
The revisions marked the first substantial revisions made to the form in more than 20 years.
Beyond these changes, the CFPB said the proposal “also contains other amendments to Regulation B and its commentary to facilitate compliance with Regulation B’s requirements for the collection and retention of information about the ethnicity, race, and sex of applicants seeking certain types of mortgage loans.”
Lenders have been struggling with how to implement the final HMDA rule, which requires collecting this information, without running afoul of Regulation B requirements.
"As part of the Bureau’s outreach to financial institutions, vendors, and other mortgage industry participants to prepare for the implementation of the 2015 HMDA final rule, the Bureau has received questions about the requirement to permit applicants to self-identify using disaggregated ethnicity and race categories and how that requirement intersects with compliance obligations under Regulation B," the CFPB states in the proposed amendment.
"In light of these inquiries, the Bureau determined that it would be beneficial to establish through rulemaking appropriate standards in Regulation B concerning the collection of an applicant’s ethnicity and race information similar to those in revised Regulation C."
Comments on the proposal must be received on or before the date the proposal is published in the Federal Register.
"This law is a key part of the government's commitment to root out discrimination," said CFPB Director Richard Cordray. "This proposal will help industry comply with the law and help protect consumers against illegal discrimination."