Equal Credit Opportunity Act

Supplement I to Part 202--Official Staff Interpretations

Introduction
Section 202.1 - Authority, Scope, and Purpose
Section 202.2 - Definitions
   Paragraph 2(c)(1)(i)
   Paragraph 2(c)(1)(ii)
   Paragraph 2(c)(2)(ii)
   Paragraph 2(c)(2)(iii)
   Paragraph 2(c)(2)(v)
Section 202.3 - Limited Exceptions for Certain Classes of Transactions
Section 202.4 - General Rule Prohibiting Discrimination
Section 202.5 - Rules Concerning Taking of Applications
   Paragraph 5(b)(2)
   Paragraph 5(d)(1)
   Paragraph 5(d)(2)
Section 202.5a - Rules on Providing Appraisal Reports
Section 202.6 - Rules Concerning Evaluation of Applications
   Paragraph 6(b)(1)
   Paragraph 6(b)(2)
   Paragraph 6(b)(5)
   Paragraph 6(b)(6)
   Paragraph 6(b)(7)
Section 202.7 - Rules Concerning Extensions of Credit
   Paragraph 7(c)(1)
   Paragraph 7(c)(2)
   Paragraph 7(d)(1)
   Paragraph 7(d)(2)
   Paragraph 7(d)(3)
   Paragraph 7(d)(4)
   Paragraph 7(d)(5)
   Paragraph 7(d)(6)
Section 202.8 - Special Purpose Credit Programs
Section 202.9 - Notifications
   Paragraph 9(a)(1)
   Paragraph 9(a)(3)
   Paragraph 9(b)(1)
   Paragraph 9(b)(2)
   Paragraph 9(c) Incomplete applications.
   Paragraph 9(c)(2)
   Paragraph 9(c)(3)
Section 202.10 - Furnishing of Credit Information
Section 202.11 Relation to State Law
Section 202.12 - Record Retention
   Paragraph 12(b)(3)
   Paragraph 12 (b)(6)
Section 202.13 - Information for Monitoring purposes
Section 202.14 - Enforcement, penalties and liabilities
Section 202.15 - Incentives for Self-testing and Self-correction

[Reg. B; ECO-1]

         Following is an official staff interpretation of Regulation B issued under authority delegated by the Federal Reserve Board to officials in the Division of Consumer and Community Affairs. References are to sections of the regulation or the Equal Credit Opportunity Act (15 U.S.C. 1601 et seq.).


^Introduction

         1. Official status. Section 706(e) of the Equal Credit Opportunity Act protects a creditor from civil liability for any act done or omitted in good faith in conformity with an interpretation issued by a duly authorized official of the Federal Reserve Board. This commentary is the means by which the Division of Consumer and Community Affairs of the Federal Reserve Board issues official staff interpretations of Regulation B. Good-faith compliance with this commentary affords a creditor protection under section 706(e) of the Act.
         2. Issuance of interpretations. Under appendix D to the regulation, any person may request an official staff interpretation. Interpretations will be issued at the discretion of designated officials and incorporated in this commentary following publication for comment in the Federal Register. Except in unusual circumstances, official staff interpretations will be issued only by means of this commentary.
         3. Status of previous interpretations. Interpretations of Regulation B previously issued by the Federal Reserve Board and its staff have been incorporated into this commentary as appropriate. All other previous Board and staff interpretations, official and unofficial, are superseded by this commentary.
         4. Footnotes. Footnotes in the regulation have the same legal effect as the text of the regulation, whether they are explanatory or illustrative in nature.
         5. Comment designations. The comments are designated with as much specificity as possible according to the particular regulatory provision addressed. Each comment in the commentary is identified by a number and the regulatory section or paragraph that it interprets. For example, comments to Sec. 202.2(c) are further divided by subparagraph, such as comment 2(c)(1)(ii)-1 and comment 2(c)(2)(ii)-1.

^{Section 202.1--Authority, Scope, and Purpose}

         1(a) Authority and scope.
         1. Scope. The Equal Credit Opportunity Act and Regulation B apply to all credit--commercial as well as personal--without regard to the nature or type of the credit or the creditor. If a transaction provides for the deferral of the payment of a debt, it is credit covered by Regulation B even though it may not be a credit transaction covered by Regulation Z (Truth in Lending). Further, the definition of creditor is not restricted to the party or person to whom the obligation is initially payable, as is the case under Regulation Z. Moreover, the Act and regulation apply to all methods of credit evaluation, whether performed judgmentally or by use of a credit scoring system.
         2. Foreign applicability. Regulation B generally does not apply to lending activities that occur outside the United States. The regulation does apply to lending activities that take place within the United States (as well as the Commonwealth of Puerto Rico and any territory or possession of the United States), whether or not the applicant is a citizen.
         3. Board. The term Board, as used in this regulation, means the Board of Governors of the Federal Reserve System.

^{Section 202.2 Definitions}

         2(c) Adverse action.

^{Paragraph 2(c)(1)(i)}

         1. Application for credit. A refusal to refinance or extend the term of a business or other loan is adverse action if the applicant applied in accordance with the creditor's procedures.

^{Paragraph 2(c)(1)(ii)}

         1. Move from service area. If a credit card issuer terminates the open-end account of a customer because the customer has moved out of the card issuer's service area, the termination is adverse action for purposes of the regulation unless termination on this ground was explicitly provided for in the credit agreement between the parties. In cases were termination is adverse action, notification is required under Sec. 202.9.
         2. Termination based on credit limit. If a creditor terminates credit accounts that have low credit limits (for example, under $400) but keeps open accounts with higher credit limits, the termination is adverse action and notification is required under Sec. 202.9.

^{Paragraph 2(c)(2)(ii)}

         1. Default--exercise of due-on-sale clause. If a mortgagor sells or transfers mortgaged property without the consent of the mortgagee, and the mortgagee exercises its contractual right to accelerate the mortgage loan, the mortgagee may treat the mortgagor as being in default. An adverse action notice need not be given to the mortgagor or the transferee. (See comment 2(e)-1 for treatment of a purchaser who requests to assume the loan.)
         2. Current delinquency or default. The term adverse action does not include a creditor's termination of an account when the accountholder is currently in default or delinquent on that account. Notification in accordance with Sec. 202.9 of the regulation generally is required, however, if the creditor's action is based on a past delinquency or default on the account.

^{Paragraph (2)(c)(2)(iii)}

         1. Point-of-sale transactions. Denial of credit at point of sale is not adverse action except under those circumstances specified in the regulation. For example, denial, at point of sale is not adverse action in the following situations:        

• ^{A credit cardholder presents an expired card or a card that has been reported to the card issuer as lost or stolen.}
           
• ^{The amount of a transaction exceeds a cash advance or credit limit.}
           
• ^{The circumstances (such as excessive use of a credit card in a short period of time) suggests that fraud is involved.}
           
• ^{The authorization facilities are not functioning.}
           
• ^{Billing statements have been returned to the creditor for lack of a forwarding address.}

• ^{When a consumer calls to asks about loan terms and an employee explains the creditor's basic loan terms, such as interest rates, loan to value ration, and debt to income ratio.}
           
• ^{When a consumer calls to ask about interest rates for car loans, and, in order to quote the appropriate rate, the loan officer asks for the make and sale price of the car and amount of the down- payment, then given the consumer the rate.}
           
• ^{When a consumer asks about terms for a loan to purchase home and tells the loan officer her income and intended down-payment, but the loan officer only explains the creditor's loan to value ratio policy and other basic lending policies, without telling the consumer whether she qualifies for the loan.}
           
• ^{When a consumer calls to ask about terms for a loan to purchase vacant land and states his income, the sale price of the property to be financed, and asks whether he qualifies for a loan, and the employee responds by describing the general lending policies, explaining that he would need to look at all of the applicant's qualifications before making a decision, and offering to send an application form to the consumer.}          

• ^{A statement that the applicant should not bother to apply, after the applicant states that he is retired.}
           
• ^{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.}
           
• ^{Use of interview scripts that discourage applications on a prohibited basis.}

• ^{The applicant's obligation to pay alimony, child support, or separate maintenance.}
           
• ^{The source of income to be used as the basis for repaying the credit requested, which could disclose that it is the income of a spouse.}
           
• ^{Whether any obligation disclosed by the applicant has a co- obligor, which could disclose that the co-obligor is a spouse or former spouse.}
           
• ^{The ownership of assets, which could disclose the interest of a spouse.}

• ^{A creditor may consider the applicant's occupation and length of time to retirement to ascertain whether the applicant's income (including retirement income) will support the extension of credit to its maturity.}
           
• ^{A creditor may consider the adequacy of any security offered when the term of the credit extension exceeds the life expectancy of the applicant and the cost of realizing on the collateral could exceed the applicant's equity. (An elderly applicant might not qualify for a 5 percent down, 30-year mortgage loan but might qualify with a larger downpayment or a shorter loan maturity.)}
           
• ^{A creditor may consider the applicant's age to assess the significance of the length of the applicant's employment (a young applicant may have just entered the job market) or length of time at an address (an elderly applicant may recently have retired and moved from a long-term residence).}

• ^{The length of time an applicant will likely remain eligible to receive such income.}
           
• ^{Whether the applicant will continue to qualify for benefits based on the status of the applicant's dependents (such as Aid to Families with Dependent Children or Social Security payments to a minor).}
           
• ^{Whether the creditor can attach or garnish the income to assure payment of the debt in the event of default.}

• ^{A creditor may score or take into account the total sum of all income stated by the applicant without taking steps to evaluate the income.}
           
• ^{A creditor may evaluate each component of the applicant's income, and then score or take into account reliable income separately from income that is not reliable, or the creditor may disregard that portion of income that is not reliable before aggregating it with reliable income.}
           
• ^{A creditor that does not evaluate all income components for reliability must treat as reliable any component of protected income that is not evaluated.
           In considering the separate components of an applicant's income, the creditor may not automatically discount or exclude from consideration any protected income. Any discounting or exclusion must be based on the applicant's actual circumstances.}          

• ^{Repudiate responsibility for future charges on the joint account.}
           
• ^{Request separate accounts in their own names.}
           
• ^{Request that the joint account be closed.}
  

• ^{Energy conservation programs to assist the elderly, for which the creditor must consider the applicant's age.}
           
• ^{Programs under a Minority Enterprise Small Business Investment Corporation, for which a creditor must consider the applicant's minority status.}
  

• ^{Subsidized housing programs for low- to moderate-income households, for which a creditor may have to consider the applicant's receipt of alimony or child support, the spouse's or parents' income, etc.}
           
• ^{Student loan programs based on the family's financial need, for which a creditor may have to consider to spouse's or parents' financial resources.
           3. Student loans. In a guaranteed student loan program, a creditor may obtain the signature of a parent as a guarantor when required by federal or state law or agency regulation, or when the student does not meet the creditor's standards of creditworthiness. (See Sec. 202.7(d)(1) and (5).) The creditor may not require an additional signature when a student has a work or credit history that satisfies the creditor's standards.}

• ^{Article 15, section 296a(1)(b)--Unlawful discriminatory practices in relation to credit on the basis of race, creed, color, national origin, age, sex, marital status, or disability. This provision is preempted to the extent that it bars taking a prohibited basis into account when establishing eligibility for certain special-purpose credit programs.}
           
• ^{Article 15, section 296a(1)(c)--Unlawful discriminatory practice to make any record or inquiry based on race, creed, color, national origin, age, sex, marital status, or disability. This provision is preempted to the extent that it bars a creditor from requesting and considering information regarding the particular characteristics (for example, race, national origin, or sex) required for eligibility for special-purpose credit programs.}

• ^{Section 4112.021(B)(1)--Unlawful discriminatory practices in credit transactions. This provision is preempted to the extent that it bars asking or favorably considering the age of an elderly applicant; prohibits the consideration of age in a credit scoring system; permits without limitation the consideration of age in real estate transactions; and limits the consideration of age in special-purpose credit programs to certain government-sponsored programs identified in the state law.}

• ^{An application is withdrawn by the applicant.}
           
• ^{An application is submitted to more than one creditor on behalf of the applicant, and the application is approved by one of the other creditors.}

• ^{When a creditor accepts an application by telephone, it does not have to request the monitoring information.}
           
• ^{When a creditor accepts an application by mail, it does not have to make a special request to the applicant if the applicant fails to complete the monitoring information on the application form sent to the creditor.}
           
• ^{If it is not evident on the face of the application that it was received by mail or telephone, the creditor should indicate on the form or other application record how the application was received.}

         <sup>4. Applications through electronic media. If an applicant applies through an electronic medium (for example, the Internet or a facsimile) without video capability that allows the creditor to see the applicant, the creditor may treat the application as if it were received by mail or telephone.
         5. Applications through video. If a creditor takes an application through a medium that allows the creditor to see the applicant, the creditor treats the application as taken in person and must note the monitoring information on the basis of visual observation or surname, if the applicant chooses not to provide the information.
         6. Applications through loan-shopping services. When a creditor receives an application through an unaffiliated loan-shopping service, it does not have to request the monitoring information for purposes of the ECOA or Regulation B. Creditors subject to the Home Mortgage Disclosure Act should be aware, however, that data collection may be called for under Regulation C which generally requires creditors to report, among other things, the sex and race or national origin of an applicant on brokered applications or applications received through a correspondent.
         7. Inadvertent notation. If a creditor inadvertently obtains the monitoring information in a dwelling related transaction not covered by Sec. 202.13, the creditor may process and retain the application without violating the regulation.
         13(c) Disclosure to applicant(s).
         1. Procedures for providing disclosures. The disclosures to an applicant regarding the monitoring information may be provided in writing. Appendix B contains a sample disclosure. A creditor may devise its own disclosure so long as it is substantially similar. The creditor need not orally request the applicant to provide the monitoring information if it is requested in writing.
         13(d) Substitute monitoring program.
         1. Substitute program. An enforcement agency may adopt, under its established rulemaking or enforcement procedures, a program requiring creditors under its jurisdiction to collect information in addition to that required by this section.

Section 202.14--Enforcement, penalties and liabilities

         14(c) Failure of compliance.
         1. Inadvertent errors. Inadvertent errors include, but are not limited to, clerical mistake, calculation error, computer malfunction, and printing error. An error of legal judgment is not an inadvertent error under the regulation.
         2. Correction of error. For inadvertent errors that occur under Secs. 202.12 and 202.13, this section requires that they be corrected prospectively only.

Section 202.15 -- Incentives for Self-testing and Self-correction

15(a) General Rules
15(a)(1) Voluntary Self-Testing and Correction
     1. Activities required by any governmental authority are not voluntary self-tests. A governmental authority includes both administrative and judicial authorities for federal, state, and local governments.
15(a)(2) Corrective Action Required
     1. To qualify for the privilege, appropriate corrective action is required when the results of a self-test show that it is more likely than not that there has been a violation of the ECOA or this regulation. A self-test is also privileged when it identifies no violations.
     2. In some cases, the issue of whether certain information is privileged may arise before the self-test is complete or corrective actions are fully under way. This would not necessarily prevent a creditor from asserting the privilege. In situations where the self-test is not complete, for the privilege to apply the lender must satisfy the regulation's requirements within a reasonable period of time. To assert the privilege where the self-test shows a likely violation, the rule requires, at a minimum, that the creditor establish a plan for corrective action and a method to demonstrate progress in implementing the plan. Creditors must take appropriate corrective action on a timely basis after the results of the self-test are known.
     3. A creditor's determination about the type of corrective action needed, or a finding that no corrective action is required, is not conclusive in determining whether the requirements of this paragraph have been satisfied. If a creditor's claim of privilege is challenged, an assessment of the need for corrective action or the type of corrective action that is appropriate must be based on a review of the self-testing results, which may require an in camera inspection of the privileged documents.
15(a)(3) Other privileges
     1. A creditor may assert the privilege established under this section in addition to asserting any other privilege that may apply, such as the attorney-client privilege or the work product privilege. Self-testing data may still be privileged under this section, whether or not the creditor's assertion of another privilege is upheld.
15(b) Self-test Defined
15(b)(1) Definition
Paragraph 15(b)(1)(i)
     1. To qualify for the privilege, a self-test must be sufficient to constitute a determination of the extent or effectiveness of the creditor's compliance with the act and Regulation B. Accordingly, a self-test is only privileged if it was designed and used for that purpose. A self-test that is designed or used to determine compliance with other laws or regulations or for other purposes is not privileged under this rule. For example, a self-test designed to evaluate employee efficiency or customers' satisfaction with the level of service provided by the creditor is not privileged even if evidence of discrimination is uncovered incidentally. If a self-test is designed for multiple purposes, only the portion designed to determine compliance with the ECOA is eligible for the privilege.
Paragraph 15(b)(1)(ii)
     1. The principal attribute of self-testing is that it constitutes a voluntary undertaking by the creditor to produce new data or factual information that otherwise would not be available and could not be derived from loan or application files or other records related to credit transactions. Self-testing includes, but is not limited to, the practice of using fictitious applicants for credit (testers), either with or without the use of matched pairs. A creditor may elect to test a defined segment of its business, for example, loan applications processed by a specific branch or loan officer, or applications made for a particular type of credit or loan program. A creditor also may use other methods of generating information that is not available in loan and application files, such as surveying mortgage loan applicants. To the extent permitted by law, creditors might also develop new methods that go beyond traditional pre-application testing, such as hiring testers to submit fictitious loan applications for processing.      2. The privilege does not protect a creditor's analysis performed as part of processing or underwriting a credit application. A creditor's evaluation or analysis of its loan files, Home Mortgage Disclosure Act data, or similar types of records (such as broker or loan officer compensation records) does not produce new information about a creditor's compliance and is not a self-test for purposes of this section. Similarly, a statistical analysis of data derived from existing loan files is not privileged.
15(b)(3) Types of Information not Privileged Paragraph 15(b)(3)(i)
     1. The information listed in this paragraph is not privileged and may be used to determine whether the prerequisites for the privilege have been satisfied. Accordingly, a creditor might be asked to identify the self-testing method, for example, whether pre-application testers were used or data were compiled by surveying loan applicants. Information about the scope of the self test (such as the types of credit transactions examined, or the geographic area covered by the test) also is not privileged.
Paragraph 15(b)(3)(ii)
     1. Property appraisal reports, minutes of loan committee meetings or other documents reflecting the basis for a decision to approve or deny an application, loan policies or procedures, underwriting standards, and broker compensation records are examples of the types of records that are not privileged. If a creditor arranges for testers to submit loan applications for processing, the records are not related to actual credit transactions for purposes of this paragraph and may be privileged self-testing records.
15(c) Appropriate Corrective Action
     1. The rule only addresses what corrective actions are required for a creditor to take advantage of the privilege in this section. A creditor may still be required to take other actions or provide additional relief if a formal finding of discrimination is made.
15(c)(1) General Requirement
     1. Appropriate corrective action is required even though no violation has been formally adjudicated or admitted by the creditor. In determining whether it is more likely than not that a violation occurred, a creditor must treat testers as if they are actual applicants for credit. A creditor may not refuse to take appropriate corrective action under this section because the self-test used fictitious loan applicants. The fact that a tester's agreement with the creditor waives the tester's legal right to assert a violation does not eliminate the requirement for the creditor to take corrective action, although no remedial relief for the tester is required under paragraph 15(c)(3).
15(c)(2) Determining the Scope of Appropriate Corrective Action
     1. Whether a creditor has taken or is taking corrective action that is appropriate will be determined on a case-by-case basis. Generally, the scope of the corrective action that is needed to preserve the privilege is governed by the scope of the self-test. For example, a creditor that self-tests mortgage loans and discovers evidence of discrimination may focus its corrective actions on mortgage loans, and is not required to expand its testing to other types of loans.
     2. In identifying the policies or practices that are the likely cause of the violation, a creditor might identify inadequate or improper lending policies, failure to implement established policies, employee conduct, or other causes. The extent and scope of a likely violation may be assessed by determining which areas of operations are likely to be affected by those policies and practices, for example, by determining the types of loans and stages of the application process involved and the branches or offices where the violations may have occurred.
     3. Depending on the method and scope of the self-test and the results of the test, appropriate corrective action may include one or more of the following:
     i. If the self-test identifies individuals whose applications were inappropriately processed, offering to extend credit if the application was improperly denied and compensating such persons for out-of-pocket costs and other compensatory damages;
     ii. Correcting institutional polices or procedures that may have contributed to the likely violation, and adopting new policies as appropriate;
     iii. Identifying and then training and/or disciplining the employees involved;
     iv. Developing outreach programs, marketing strategies, or loan products to serve more effectively segments of the lender's markets that may have been affected by the likely discrimination; and
     v. Improving audit and oversight systems to avoid a recurrence of the likely violations.
15(c)(3) Types of Relief
Paragraph 15(c)(3)(ii)
     1. The use of pre-application testers to identify policies and practices that illegally discriminate does not require creditors to review existing loan files for the purpose of identifying and compensating applicants who might have been adversely affected.
     2. If a self-test identifies a specific applicant that was subject to discrimination on a prohibited basis, in order to qualify for the privilege in this section the creditor must provide appropriate remedial relief to that applicant; the creditor would not be required under this paragraph to identify other applicants who might also have been adversely affected.
Paragraph 15(c)(3)(iii)
     1. A creditor is not required to provide remedial relief to an applicant that would not be available by law. An applicant might also be ineligible from obtaining certain types of relief due to changed circumstances. For example, a creditor is not required to offer credit to a denied applicant if the applicant no longer qualifies for the credit due to a change in financial circumstances, although some other type of relief might be appropriate.
15(d)(1) Scope of Privilege
     1. The privilege applies with respect to any examination, investigation or proceeding by federal, state, or local government agencies relating to compliance with the Act or this regulation. Accordingly, in a case brought under the ECOA, the privilege established under this section preempts any inconsistent laws or court rules to the extent they might require disclosure of privileged self-testing data. The privilege does not apply in other cases, for example, litigation filed solely under a state's fair lending statute. In such cases, if a court orders a creditor to disclose self-test results, the disclosure is not a voluntary disclosure or waiver of the privilege for purposes of paragraph 15(d)(2); creditors may protect the information by seeking a protective order to limit availability and use of the self-testing data and prevent dissemination beyond what is necessary in that case. Paragraph 15(d)(1) precludes a party who has obtained privileged information from using it in a case brought under the ECOA, provided the creditor has not lost the privilege through voluntarily disclosure under paragraph 15(d)(2).
15(d)(2) Loss of Privilege
Paragraph 15(d)(2)(i)
     1. Corrective action taken by a creditor, by itself, is not considered a voluntary disclosure of the self-test report or results. For example, a creditor does not disclose the results of a self-test merely by offering to extend credit to a denied applicant or by inviting the applicant to reapply for credit. Voluntary disclosure could occur under this paragraph, however, if the creditor disclosed the self-test results in connection with a new offer of credit.
     2. Disclosure of self-testing results to an independent contractor acting as an auditor or consultant for the creditor on compliance matters does not result in loss of the privilege.
Paragraph 15(d)(2)(ii)
     1. The privilege is lost if the creditor discloses privileged information, such as the results of the self-test. The privilege is not lost if the creditor merely reveals or refers to the existence of the self-test.
Paragraph 15(d)(2)(iii)
     1. A creditor's claim of privilege may be challenged in a court or administrative law proceeding with appropriate jurisdiction. In resolving the issue, the presiding officer may require the creditor to produce privileged information about the self-test.
Paragraph 15(d)(3) Limited use of Privileged Information
     1. A creditor may be required to produce privileged documents for the purpose of determining a penalty or remedy after a violation of the ECOA or Regulation B has been formally adjudicated or admitted. A creditor's compliance with this requirement does not evidence the creditor's intent to forfeit the privilege.
Appendix B--Model Application Forms

         1. FHLMC/FNMA form--residential loan application. The uniform residential loan application form (FHLMC 65/FNMA 1003), including supplemental form (FHLMC 65A/FNMA 1003A), prepared by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association and dated May 1991 may be used by creditors without violating this regulation even though the form's listing of race or national origin categories in the ``Information for Government Monitoring Purposes'' section differs from the classifications currently specified in Sec. 202.13(a)(1). The classifications used on the FNMA-FHLMC form are those required by the U.S. Office of Management and Budget for notation of race and ethnicity by federal programs in their administrative reporting and statistical activities. Creditors that are governed by the monitoring requirements of Regulation B (which limits collection to applications primarily for the purchase or refinancing of the applicant's principal residence) should delete, strike, or modify the data-collection section on the form when using it for transactions not covered by Sec. 202.13(a) to ensure that they do not collect the information. Creditors that are subject to more extensive collection requirements by a substitute monitoring program under Sec. 202.13(d) or by the Home Mortgage Disclosure Act (HMDA) may use the form as issued, in compliance with the substitute program or HMDA.
         2. FHLMC/FNMA form--home-improvement loan application. The home-improvement and energy loan application form (FHLMC 703/FNMA 1012), prepared by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association and dated October 1986, complies with the requirements of the regulation for some creditors but not others because of the form's section on ``Information for Government Monitoring Purposes.'' Creditors that are governed by Sec. 202.13(a) of the regulation (which limits collection to applications primarily for the purchase or refinancing of the applicant's principal residence) should delete, strike, or modify the data collection section on the form when using it for transactions not covered by Sec. 202.13(a) to assure that they do not collect the information. Creditors that are subject to more extensive collection requirements by a substitute monitoring program under Sec. 202.13(d) may use the form as issued, in compliance with that substitute program.



 <sub>\1 \This paragraph does not limit or abrogate any federal or state law regarding privacy, privileged information, credit reporting limitations, or similar restrictions on obtainable information.

 \2\ The legislative history of the Act indicates that the Congress intended an ``effects test'' concept, as outlined in the employment field by the Supreme Court in the cases of Griggs v. Duke Power Co., 401 U.S. 424 (1971), and Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975), to be applicable to a creditor's determination of creditworthiness.</sub></sup>

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