FDIC Proposed Rule: Transferred Office of Thrift Supervision Regulations Regarding Nondiscrimination Requirements
The proposed rule was issued by
DATES: Comments must be received on or before
ADDRESSES:
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In this notice of proposed rulemaking, the
The
The remaining provisions in part 390, subpart G without a direct counterpart are largely duplicative of federal laws (Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), Equal Employment Opportunity Act (EEOA) and other laws concerning nondiscrimination in lending, employment, and services) and implementing regulations.
After careful review of part 390, subpart G, the
The
If the proposal is adopted in final form, insured State nonmember banks and State savings associations will be subject to the same anti-discrimination requirements.
Upon removal of part 390, subpart G, nondiscrimination regulations related to lending applicable for all insured depository institutions for which the
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Act
Title III of the Dodd-Frank Act[1] provided for a substantial reorganization of the regulation of State and Federal savings associations and their holding companies. Beginning
Section 316(c) of the Dodd-Frank Act[4] further directed the
Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act[6] granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the
As noted, on
One of the OTS rules transferred to the
The Fair Housing Act of 1968 prohibits discrimination concerning the sale, rental and financing of housing based on race, religion, national origin or sex. Section 808 of the FHA directed all executive departments and agencies to administer their programs relating to housing and urban development (including any Federal agency having regulatory or supervisory authority over financial institutions, e.g., the
Following this initial issuance of part 528 in 1972, in 1978 the FHLBB finalized major amendments to the regulation to update and strengthen its nondiscrimination in lending regulations to reflect provisions of the FHA, ECOA, and the Community Reinvestment Act (CRA) and to "strengthen the Bank Board's ability to enforce member institutions' compliance with these and other Federal laws which prohibit discriminatory lending practices."[10] Specifically, these amendments to the FHLBB's fair lending regulation: "(1) [p]rohibit member institutions from automatically refusing to lend because of the age or location of a dwelling; (2) prohibit loan decisions based on discriminatory appraisals; (3) emphasize that there is a right to file a written loan application; (4) require member institutions to have written loan underwriting standards which are available to the public upon request; (5) revise the Equal Housing Lender poster which member institutions display in their lobbies; and (6) establish a new monitoring system for fair lending enforcement and analysis."[11]
In 1993, following the President's order for federal agencies to review all Federal regulations and policies to eliminate over-burdensome regulations that discourage economic growth,[12] the OTS (as successor to the FHLBB)[13] updated part 528 to eliminate certain definitions that were deemed unnecessary and amended Section 528.6, regarding compliance with Home Mortgage Disclosure Act (HMDA) loan/application registers (LARs). Commenters favored elimination of the nondiscrimination disclosure requirements of Section 528.6, arguing it was duplicative of the requirements set forth in 12 CFR part 203, which made HMDA requirements applicable to savings associations. In its proposed rule, the OTS stated that its own "loan application register" was "more comprehensive than required by Regulation C" and that "the additional register information is useful to examiners" but also stated that the additional information was available to examiners through other means.[14] In its final rule, the OTS agreed that part 528.6 was substantially duplicative of HMDA part 203 but disagreed that the
Part 528 was among the regulations that were transferred to the
Specifically, the
In addition,
With respect to the presence of non-binding guidance, Section 390.146 recommends, but does not require, that State savings associations "post a Spanish language version of the [Equal Housing Lender] poster in offices serving areas with a substantial Spanish-speaking population." The
Although several former OTS nondiscrimination rules codified in part 390, subpart G do not have direct
In addition, to the extent that any such provision of part 390, subpart G can be interpreted as applying in a case where ECOA, FHA, EEOA and other laws and regulations concerning nondiscrimination in lending, employment or services would not apply, the
The
1. Require each State savings association to have clearly written, nondiscriminatory loan underwriting standards, available to the public upon request, at each of its offices. Require each association to review its standards, and business practices that implement them, at least annually to ensure equal opportunity in lending.[25]
2. Require each State savings association notify each "inquirer" of a right to obtain a copy of its loan underwriting standards.[26]
3. Provide supplementary guidelines to aid savings associations in developing and implementing nondiscriminatory lending policies and provide that each State savings association "should reexamine its underwriting standards at least annually in order to ensure equal opportunity."[27]
4. Treat the age or location of a dwelling as a per se prohibited basis for discrimination.[28]
5. Provide certain guidelines relating to nondiscrimination in marketing practices.[29]
In summary, after careful review of part 390, subpart G (formerly part 528), and the former OTS's stated rationale for the rule, the
II. The Proposal
Regarding the functions of the former OTS that were transferred to the
Part 390, Subpart G
A. Section 390.140--Definitions
Section 390.140 defines the terms "application," "dwelling," and "State savings association." In light of the proposal to rescind subpart G of part 390 in its entirety, these definitions need not be retained. Therefore, the
B. Section 390.141--Supplementary Guidelines
Section 390.141 cross-references a policy statement transferred from OTS regulations to Section 390.151, HUD's fair housing regulations at 24 CFR part
C. Section 390.142--Nondiscrimination in Lending and Other Services
Section 390.142 prohibits discrimination on a prohibited basis by State savings associations in lending and other services. The prohibited bases specified are location and age of a dwelling and race, color, religion, sex, handicap, familial status, marital status, or age of an applicant or a joint applicant, among other parties.[32] In general, Section 390.142(a) prohibits denying a loan or other service, discriminating in the purchase of loans or securities, or discriminating in fixing the amount, interest rate, duration, application procedures, collection or enforcement procedures, or other terms or conditions of such loan or service, on a prohibited basis. Section 390.142(b) provides that "[a] State savings association shall consider without prejudice the combined income of joint applicants for a loan or other service." Section 390.142(c) prohibits a State savings association from discriminating against an applicant for a loan or other service on any prohibited basis, as defined in Regulation B or HUD's FHA regulation in 24 CFR part 100.
There is significant overlap between the requirements of Section 390.142 and of the requirements of ECOA and Regulation B and the FHA and HUD's FHA regulations (the general federal fair lending laws). For example, under ECOA, it is "unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction" on a prohibited basis.[33] Similarly, the FHA provides that it is "unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction" because of a prohibited basis.[34] Moreover, the following are prohibited bases under both subpart G of part 390 and the general federal fair lending laws: Race, color, religion, national origin, and sex.[35]
However, there are differences between Section 390.142 and the general federal fair lending laws. For example, under Section 390.142(a), prohibited bases for discrimination explicitly include the location and age of a dwelling, whereas prohibited bases for discrimination under ECOA, FHA, and their implementing regulations do not include such factors.
As discussed earlier, to the extent that a provision of Section 390.142 can be interpreted as applying in a case where ECOA, FHA, EEOA and other laws and regulations concerning nondiscrimination in lending, employment or services would not apply, the
Similarly, Section 390.142(b) addresses acts and practices addressed by the general federal fair lending laws but differs in ways that make
As mentioned, Section 390.142(c) prohibits a State savings association from discriminating against an applicant for a loan or other service on any prohibited basis, as defined in Regulation B or HUD's FHA regulation in 24 CFR part 100. The
D. Section 390.143--Nondiscriminatory Appraisal and Underwriting
Section 390.143(a) prohibits using or relying upon a dwelling appraisal that a State savings association knows or reasonably should know is "discriminatory on the basis of the age or location of the dwelling" or is "discriminatory per se or in effect" under the FHA or ECOA. The general federal fair lending laws prohibit appraisal-related discrimination on a prohibited basis.[37] Although the location of a dwelling is not a per se prohibited basis for discrimination under those statutes, ECOA prohibits discrimination because of the race, color, religion, national origin, etc. of residents in the neighborhood where the property offered as collateral.[38] To the extent that Section 390.143(a) prohibits considering the age of a dwelling in a way that would not be prohibited under the general federal fair lending laws, the authority of the
As stated, Section 390.143(a) also prohibits using or relying upon a dwelling appraisal that is discriminatory per se or in effect under the FHA or ECOA. The
Section 390.143(b) requires each State savings association to have clearly written, nondiscriminatory loan underwriting standards available to the public upon request at each of its offices. In addition, Section 390.143(b) requires each association to review its standards, and business practices that implement them, at least annually to ensure equal opportunity in lending. No such requirements apply to insured State nonmember banks. The provision is not required by ECOA or the FHA, and the authority of the
E. Section 390.144--Nondiscrimination in Applications
Section 390.144(a) prohibits discouraging or refusing to allow, receive, or consider any applicant, request or inquiry about a loan or other service on a prohibited basis. Section 390.144(b) requires a State savings association to "inform each inquirer of his or her right to file a written loan application, and to receive a copy of the association's underwriting standards."
Section 390.144(a) is substantially similar to, and duplicative of, prohibitions under the general federal fair lending laws.[39] To the extent that Section 390.144(a) relies on HOLA authority to prohibit discrimination with respect to a service, or with respect to the age or the location of a dwelling, in cases where the general federal fair lending laws would not apply, the
As discussed earlier, the
F. Section 390.145--
Section 390.145 prohibits directly or indirectly engaging in any form of advertising that implies or suggests a policy of discrimination or exclusion in violation of ECOA, the FHA, or subpart G of part 390. The provision also provides that advertisements for any loan for purchasing, constructing, improving, repairing, or maintaining a dwelling or any loan secured by a dwelling must include the Equal Housing Lender symbol.
The requirement in Section 390.145 to include the Equal Housing Lender symbol in dwelling-related advertising is substantially similar to the requirement in Section 338.4(a) that an insured State nonmember bank prominently indicate in advertisements for dwelling-related loans "that the bank makes such loans without regard to race, color, religion, national origin, sex, handicap, or familial status." Section 338.4(a)(1) permits, but does not require, an insured State nonmember bank to comply "by including in the advertisement a copy of the logotype with the Equal Housing Lender legend contained in the Equal Housing Lender poster prescribed in Section 338.4(b) of the
G. Section 390.146--Equal Housing Lender Poster
Section 390.146(a) requires each State savings association to post and maintain at least one Equal Housing Lender poster prominently in the lobby of each of its offices, requires the use of specified text, establishes a minimum poster size, and requires that the text be legible. Also, Section 390.146(a) states that "[i]t is recommended that savings associations post a Spanish language version of the poster in offices serving areas with a substantial Spanish-speaking population." Section 390.146(b) sets forth the required poster text and the Equal Housing Lender logotype.
The requirements of Section 390.146 are substantially similar to the requirements applicable to insured State nonmember banks under Section 338.4. As discussed later, although the
H. Section 390.147--
Section 390.147 requires that State savings associations and other lenders required to file HMDA LARs with the
I. Section 390.148--Nondiscrimination in Employment
Section 390.148 prohibits discrimination on a prohibited basis by State savings associations in employment. The specified prohibited bases are race, color, religion, sex, and national origin. Section 390.148(a) prohibits discrimination in the hiring, firing, promoting, compensating, or training of an individual or similar discriminatory treatment during employment or with regard to training. Section 390.148(b) prohibits segregation or classification of employees in a way that would adversely affect their status as an employee on a prohibited basis. Section 390.148(c) prohibits State savings associations from retaliating against an employee for opposing an unlawful employment practice. Section 390.148(d) prohibits discrimination by State savings associations in advertisements for employment. Section 390.148(e) states the regulation does not apply in any case in which certain exemptions and exceptions under the EEOA apply. Section 390.148(f) states that any violation of specified laws or regulations, such as the EEOA and the Age Discrimination in Employment Act, shall be deemed a violation of this regulation.
There is significant overlap between the requirements of Section 390.148(a) through (d) and the EEOA. Under the EEOA, it is unlawful for an employer to discriminate in hiring, firing, compensating or providing training because of the same prohibited bases as under Section 390.148(a).[42] Similarly, the EEOA prohibits employers from segregating or classifying employees that would adversely affect their status as an employee on a prohibited basis.[43] The EEOA also makes it unlawful for an employer to retaliate against an employee for opposing a practice made unlawful under a subchapter of the EEOA.[44] The EEOA makes it generally unlawful for an employer to discriminate in advertisements for employment.[45] The
Section 390.148(e) cross-references the EEOA. The cross-reference to the statute would be obsolete if Section 390.148 is rescinded as proposed. Section 390.148(f) cross-references multiple employment laws, including the EEOA. The
J. Section 390.149--Complaints
Section 390.149 provides that complaints about discrimination in lending by a State savings association "shall be referred" to the Secretary of HUD for processing under the FHA and the Director of the
However, there appears to be no equivalent requirement to the provisions in Section 390.149 regarding referring complaints to EEOC regarding employment discrimination by
K. Section 390.150--Guidelines Relating to Nondiscrimination in Lending
Section 390.150 "provides supplementary guidelines to aid savings associations in developing and implementing nondiscriminatory lending policies." In general, Section 390.150 states actions that State savings associations "should" take or actions that "can" or "may" constitute illegal discrimination.[47] The requirements in the guidelines generally have analogous requirements in the general federal fair lending laws; for example, with respect to discrimination on the basis of marital status,[48] discounting or excluding spousal income or supplementary income,[49] and inquiring about child bearing or childrearing.[50] Therefore, the
Part 338--
The
By order of the Board of Directors.
Dated at
Acting Assistant Executive Secretary.
[FR Doc. 2020-18813 Filed 9-24-20;
BILLING CODE 6714-01-P
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