October 30, 2002
America’s Community Bankers
Comment Letter to Federal Reserve
Regarding Changes to Regulation B
October 30, 2002
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Re: Equal Credit Opportunity Act
64 FR 44582 (August 16, 1999) Docket No. R-1008
Dear Sir or Madam:
America’s Community Bankers (“ACB”) commented on a proposal issued by the Board of Governors of the Federal Reserve System (“Board”) to revise Regulation B, the implementing regulation for the Equal Credit Opportunity Act (“ECOA”). The proposal would, among other things, remove the prohibition in Regulation B on the collection of information about the race, color, religion, national origin and sex of applicants for credit. The creditor would continue to be prohibited from using the information in making the credit decision.
ACB wishes to reiterate its strong opposition to this proposal. We submitted a comment letter in November 1999 outlining our concerns with several aspects of the proposal. Given the passage of time, ACB wanted to restate its opposition to one of the major aspects of the proposal. We understand that the Board will take up this proposal shortly.
We believe that lifting the prohibition on the collection of prohibited basis information in nonmortgage transactions would not further the goals of ECOA or Regulation B. In fact, we suggest that the negative impact of the removal of the prohibition would far outweigh any perceived benefits. This proposal would add significant administrative burdens to those placed on institutions choosing to collect the data. As proposed, the data would not be protected under the self-testing privilege, subjecting the institution to potential litigation. Finally, the quality of the data would be suspect. Each institution collecting data would collect different information and because consumers can refuse to provide information there would be no consistency across a voluntary system.
The collection and notation of the data would not lead to additional applicants obtaining credit. It may perversely lead to a reduction in credit availability as resources are diverted to administering the data collection. An additional issue we raised in our comment letter was the opposition to not qualify this proposed voluntary data collection for the self-testing privilege under ECOA. We continue to hold that view and wish to point out that should the Board decide that the proposed voluntary data collection be included in the self-testing privilege we would continue to oppose the proposal.
While ACB and its member institutions strongly believe in the goals of ECOA and its implementing regulation, we do not agree with the Board that the proposal will help further those goals. Lifting the prohibition against collecting the prohibited basis information may create opportunities for insured institutions to serve unmet needs, but the operational burden of collecting and maintaining the data will direct resources away from the granting of credit. The differences in the data collected from institution-to-institution will enhance the risks of litigation.
A copy of ACB’s November 1999 letter is attached. We appreciate the opportunity to reiterate our comments on the Board’s proposed revisions to Regulation B. Should you have any questions regarding this letter, please contact the undersigned at 202-857-3121 or cbahin@acbankers.org.
Sincerely,
Charlotte M. Bahin
Director of Regulatory Affairs, Senior Regulatory Counsel
Enclosure: ACB’s comment letter dated November 1999.
cc: Dolores Smith, Jane Gell