REGULATION B

1. REGULATION B Discrimination And Lending

2. REGULATION B • Enacted in 1974 • Requires creditors to base lending decisions on neutral credit factors • Borrower’s ability to repay a debt • Borrower’s willingness to repay a debt

3. REGULATION B • Cannot Discriminate based on: • Sex • Marital Status • Childbearing intentions • Part-time income • Receipt of alimony, child support, or separate maintenance payments

4. REGULATION B • In 1976, new guidelines were added to the Reg. • Discrimination is prohibited based on: • Race • Skin Color • Religion • National origin • Age • Receipt of protected income

5. REGULATION B • Pre-application • Cannot discourage member from applying • Cannot accept applications from non-members (employee should determine eligibility for membership first) • Cannot discourage certain categories of members from applying for credit

6. REGULATION B • Can ask marital status when: • Application is for joint credit • Loan is to be secured • Applicant lives in a community property state or relies on property located in one to secure the loan

7. REGULATION B • Can only ask about a spouse if: • Spouse will use the account or be contractually liable for it • Applicant is relying on spouse’s income to repay the loan • Applicant is relying on alimony, child support, or separate maintenance income to repay the loan • Applicant lives in a community property state or is relying on assets located in one

8. REGULATION B • Age • Can refuse credit to members who are not age 18 or older • If you ask one member whether they expect decreases or interruptions in their income, you must ask them all

9. REGULATION B • Older Applicants • Age 62 and older • Cannot discriminate! • Determine whether the security is adequate to cover the loan • Do they have additional collateral to support repayment?

10. REGULATION B • Income • Cannot refuse to consider any legitimate income such as: • Unemployment compensation • Social Security • Any type of government assistance • Alimony • Child support • Separate maintenance payments • Part-time work

11. REGULATION B • Income note: • Members have the option of choosing whether or note to use Alimony, child support, and separate maintenance payments in establishing their creditworthiness • You must inform them that they are not required to tell you about this type of income if they do not plan to rely on it to repay the loan

12. REGULATION B • Income • Types of income that must be considered • Alimony, child support, separate maintenance payments • Annuity, pension, or other retirement benefits • Social Security or supplemental security income • Unemployment compensation • Aid to families with dependent children • Rent and mortgage supplement • Welfare benefits

13. REGULATION B • Federal government monitoring • If loan is used to purchase or refinance a principal residence, we are required to request the following information: • Race/national origin, using specific, listed terms • Sex • Marital status, using specific, listed terms • Age

14. REGULATION B • Government Monitoring • You may ask the applicant their immigration or residency status and deny credit to an illegal alien • If applicant refuses to answer the required questions: • Note the applicant’s refusal on the form • Note the applicant’s national origin or race and sex based on visual observation

15. REGULATION B • Insurance • Can ask member’s age, sex, and marital status to determine insurance eligibility • Cannot deny credit because the member does not qualify for insurance • Credit life • Credit disability • Health insurance • Accident insurance

16. REGULATION B • Credit Information • Must consider accounts where both spouses are contractually responsible • Must consider information a member presents disputing a negative credit history • Must consider information reported in the name of a spouse or former spouse that accurately reflects the member’s creditworthiness ( member’s income was needed to pay account listed in the name of their spouse)

17. REGULATION B • Decisions • Must be communicated within 30 days • Approvals may be communicated by telephone or in person • Denials must be mailed an Adverse Action Notice

18. REGULATION B • Creditors must give a reason for denying credit • Creditors may not terminate credit on an existing account because of a change in marital status unless the applicant is unable or unwilling to pay

19. REGULATION B • Adverse Action Notices • Denying credit • Reducing member’s credit limit • Refusing to increase amount of credit available when a formal request is made by the member

20. REGULATION B • Adverse Action Notices must include: • Telephone number of consumer reporting agency • Statement-Consumer Reporting Agency did not make decision • Notice to receive a free copy of the credit report • Notice of member’s right to dispute information in the report

21. REGULATION B • Notification of Adverse Action • Must be in writing and mailed to member within 30 days • Must be in writing and mailed to member within 90 days of counteroffer • ECOA Notice • Include list of reasons for denial • Don’t include more than 4 reasons for denial

22. REGULATION B • Guarantor • Does not share in the loan proceeds but agrees to pay the debit if the borrower defaults • Cosigner • Signs, but does not receive the proceeds • Equally responsible for loan, whether in default or not

23. REGULATION B • Secured Credit • Must have signatures from all parties named on the collateral • Security agreement allows FTWCCU to repossess collateral • Allows FTWCCU to sell collateral if borrower defaults • Individual that signs security agreement gives up their rights to property if loan default occurs, but is not responsible for remaining debt