Dear Boards of Directors and Chief Executive Officers:
Five federal financial institutions regulatory agencies, in conjunction with the Department of Housing and Urban Development (HUD), the Federal Housing Finance Agency, and the Department of Justice (hereafter, the agencies) are issuing the enclosed interagency statement to remind creditors of the ability under the Equal Credit Opportunity Act (ECOA) and Regulation B to establish special purpose credit programs (SPCPs) to meet the credit needs of specified classes of persons.1 SPCPs are credit assistance programs for economically or socially disadvantaged consumers and commercial enterprises.
The statement explains that ECOA and Regulation B permit creditors to extend special purpose credit offered pursuant to:
- Any credit assistance program expressly authorized by federal or state law for the benefit of an economically disadvantaged class of persons;
- Any credit assistance program offered by a not-for-profit organization for the benefit of its members or an economically disadvantaged class of persons; or
- Any special purpose credit program offered by a for-profit organization, or in which such an organization participates to meet special social needs, if it meets certain standards prescribed in regulations by the Consumer Financial Protection Bureau (CFPB).2
Credit unions, as not-for-profit organizations, fall under the second category, although some programs that credit unions participate in may also fall under the first. Credit unions may consider the use of SPCPs across all types of credit covered by ECOA and Regulation B.3 Credit unions can use an SPCP to offer, for example, special underwriting or pricing for designated loan products.4
Many credit unions offer special lending programs that may meet the spirit and intent of a SPCP. Affordable and equitable access to credit is a vital aspect of credit union service to members. Credit unions can use SPCPs to foster greater financial inclusion and ensure that the cooperative nature of the credit union system lives up to its mission of meeting the credit needs of consumers, including underserved populations, communities of color, and those of modest means. I encourage all credit unions to consider using an SPCP to provide credit to economically disadvantaged members and communities within their field of membership.
The statement also clarifies that the agencies do not determine whether a program qualifies for special purpose credit status. Accordingly, credit unions must determine whether their program qualifies for special purpose credit status. However, the statement indicates that creditors with questions about any aspect of ECOA and Regulation B’s special purpose credit program may consult their appropriate regulatory agencies.5 Lastly, the agencies encourage creditors to explore opportunities to develop SPCPs consistent with ECOA and Regulation B requirements and applicable safe and sound lending principles.
Please contact your NCUA Regional Office or state supervisory authority if you have any questions about this important tool.
Todd M. Harper
1 The five federal financial institutions regulatory agencies are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Consumer Financial Protection Bureau; see 15 U.S.C. § 1691(c)(1)-(3) (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) ; 12 C.F.R. § 1002.8(a) (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) .
3 See (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (Dec. 7, 2021) HUD guidance concluding that special purpose credit programs instituted in conformity with ECOA and Regulation B generally do not violate the Fair Housing Act.
4 See e.g., CFPB Supervisory Highlights, Issue 12, Summer 2016, at pp.16-18 (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) (June 2016) A CFPB report highlighting SPCPs, including a “small business lending program providing credit to minority-owned businesses,” and a “mortgage lending program with special rates and terms for individuals with income below certain thresholds or buying property in areas where the median income was below certain thresholds.”
5 See 86 Fed. Reg. at 3762, 3764–65 (Jan. 15, 2021) (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) A CFPB Advisory Opinion addressing regulatory uncertainty regarding certain aspects of special purpose credit programs designed and implemented by for-profit organizations.