An advisory opinion clarifying the content that a for-profit organization must include in a written plan that establishes and administers a special purpose credit program (SPCP) under Regulation B, which implements the Equal Credit Opportunity Act (ECOA), was issued Monday by the Consumer Financial Protection Bureau (CFPB).
The advisory opinion, which takes effect upon its publication in the Federal Register, also clarifies the type of research and data that may be appropriate to inform a for-profit organization’s determination that an SPCP is needed to benefit a certain class of persons, the bureau said in the notice prepared for Register publication.
The bureau notes that the ECOA prohibits discrimination in credit on the basis of sex, marital status, age, race, color, religion, national origin, receipt of public assistance benefits, and exercise of rights under the Federal Consumer Credit Protection Act. However, Congress has clarified that it does not constitute discrimination under the act for a creditor to “refuse to extend credit offered pursuant to” “any special purpose credit program offered by a profit-making organization to meet special social needs which meets standards prescribed” in CFPB regulations.
The bureau said it had feedback on an ECOA/Reg B request for information that indicated a desire for more clarity on how to administer SPCP in compliance with Reg B. “The Bureau is issuing this AO to address this regulatory uncertainty in the hope that broader creation of special purpose credit programs by creditors will help expand access to credit among disadvantaged groups and will better address special social needs that exist today,” the agency said.
The AO, it said, applies solely to certain aspects of special purpose credit programs designed and implemented by for-profit organizations to meet special social needs under Reg B requirements. These requirements include following a written plan for the program that identifies the class of persons to be served; procedures and standards for issuing credit; provides either the time period during which the program will last or when the program will be reevaluated to determine if there is a continuing need for it; and a description of the analysis the organization conducted to determine the need for the program.
The CFPB noted that an organization does not need bureau approval to initiate an SPCP.