The Consumer Financial Protection Bureau (CFPB or Bureau) has issued a "Compliance Aid," The Bureau's Equal Credit Opportunity Act and Regulation B FAQs related to the COVID-19 Emergency, to clarify the application of certain Regulation B requirements related to credit decisioning and consumer notices on Paycheck Protection Program (PPP) loans. ECOA and Regulation B requirements apply to business/commercial credit, in addition to consumer credit, so compliance with the rules bears directly on lenders making PPP loans. In three FAQs, the Bureau clarifies how the Regulation B requirements impact PPP applications and loans that are submitted to the Small Business Administration (SBA) for guaranty.
ECOA and Regulation B require creditors to take certain steps during and at the completion of the credit decisioning process. For PPP loans, the nuances of these requirements are muddled by the fact that creditors take an extra step – submitting the loans to the SBA for processing and approval of the guaranty. The Bureau explains how this extra step affects the Regulation B requirements below:
- Credit Decision Notice (Question 1): In general, creditors must notify applicants of a credit decision within 30 days of receiving a completed application under Regulation B. The CFPB's Compliance Aid clarifies that the 30-day timeline to notify the applicant of the action taken on a completed application under Regulation B does not begin until a creditor has received a loan number from the SBA or a response about the availability of funds. Thus, the Regulation B clock will not begin to run on PPP applications until the creditor receives a response from the SBA.
- Adverse Action Notices (Question 2): In general, creditors must provide an adverse action notice to any applicant who is denied credit. The CFPB states that consumers with applications that are denied before being submitted to the SBA must still receive an adverse action notice that contains the specific reasons for the credit denial (or notice of the right to receive the reasons).
- Denials for Incompleteness (Question 3): In general, creditors may deny an application as "incomplete" after notifying the applicant of the issue and providing a period to complete the application. The CFPB explains that creditors may not deny applications for incompleteness solely because the creditor has not received a loan number from the SBA or a response about the availability of funds.
The ECOA Compliance Aid showcases a new tool in the Bureau's regulatory toolbelt. The CFPB under Director Kathleen Kraninger published a policy statement in February 2020 regarding Bureau "Compliance Aids." While they are intended to accurately summarize the regulatory requirements, CFPB Compliance Aids do not bind the Bureau or any other party, and do not represent the CFPB's interpretation of the statutory or regulatory requirements. However, the Policy Statement does provide that "reasonably rely[ing] on Compliance Aids" will receive consideration under the CFPB's enforcement and supervisory discretion.