As you begin to think through your procedures for complying with Section 1071, you will obviously need to address how you will request, collect and record the applicable data. One area to really focus in on is “applicant-provided data”.
The Rule requires you to have procedures that are “reasonably designed to obtain a response.” It states, A covered financial institution shall not discourage an applicant from responding to requests for applicant-provided data…and shall otherwise maintain procedures to collect such data at a time and in a manner that are reasonably designed to obtain a response.
On the surface, that is pretty subjective and while some leeway is provided, the CFPB points out:
- The data must be requested prior to notifying the applicant of the final action taken on the application…Generally, the earlier in the application process the financial institution initially seeks to collect applicant-provided data, the more likely the timing of collection is reasonably designed to obtain a response.
- The request must be “prominently displayed or presented”…a financial institution must ensure an applicant actually sees, hears, or is otherwise presented with the request for applicant-provided data.
- The applicant cannot be discouraged from providing the information. For example, institutions are not to indicate that the demographic information is not important.
- It must be easy for applicants to respond. For example, the information can be provided in the same format as other application information, or another straightforward and seamless method.
While you have some time to figure out the details, it’s not too early to start having conversations with your lenders. They may be able to provide valuable insights on how to best document responses.
Published
2023/07/31
