For the purposes of this part,
unless the context indicates otherwise or as otherwise defined in
subpart B, the following definitions apply:
(a) Account means an extension of credit. When
employed in relation to an account, the word use refers only to open-end
credit.
(b) Act means the Equal Credit
Opportunity Act (Title VII of the Consumer Credit Protection Act).
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(c) Adverse action.
(1) The term means:
(i) A refusal
to grant credit in substantially the amount or on substantially the
terms requested in an application unless the creditor makes a counteroffer
(to grant credit in a different amount or on other terms) and the
applicant uses or expressly accepts the credit offered;
(ii) A termination of an
account or an unfavorable change in the terms of an account that does
not affect all or substantially all of a class of the creditor’s
accounts; or
(iii)
A refusal to increase the amount of credit available to an applicant
who has made an application for an increase.
(2) The term does not include:
(i) A change in the terms of an account expressly agreed to by an
applicant;
(ii) Any
action or forbearance relating to an account taken in connection with
inactivity, default, or delinquency as to that account;
(iii) A refusal or failure
to authorize an account transaction at point of sale or loan, except
when the refusal is a termination or an unfavorable change in the
terms of an account that does not affect all or substantially all
of a class of the creditor’s accounts, or when the refusal is
a denial of an application for an increase in the amount of credit
available under the account;
(iv) A refusal to extend credit because
applicable law prohibits the creditor from extending the credit requested;
or
(v) A refusal
to extend credit because the creditor does not offer the type of credit
or credit plan requested.
(3) An action that falls within the definition
of both paragraphs (c)(1) and (c)(2) of this section is governed by
paragraph (c)(2) of this section.
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(d) Age refers only to the age of natural persons and means the number of
fully elapsed years from the date of an applicant’s birth.
(e) Applicant means any person who requests
or who has received an extension of credit from a creditor, and includes
any person who is or may become contractually liable regarding an
extension of credit. For purposes of section 1002.7(d), the term includes
guarantors, sureties, endorsers, and similar parties.
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(f) Application means an oral or written request for an extension
of credit that is made in accordance with procedures used by a creditor
for the type of credit requested. The term application does not include
the use of an account or line of credit to obtain an amount of credit
that is within a previously established credit limit. A completed
application means an application in connection with which a creditor
has received all the information that the creditor regularly obtains
and considers in evaluating applications for the amount and type of
credit requested (including, but not limited to, credit reports, any
additional information requested from the applicant, and any approvals
or reports by governmental agencies or other persons that are necessary
to guarantee, insure, or provide security for the credit or collateral).
The creditor shall exercise reasonable diligence in obtaining such
information.
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(g) Business credit refers to extensions of
credit primarily for business or commercial (including agricultural)
purposes, but excluding extensions of credit of the types described
in sections 1002.3(a)-(d).
(h) Consumer credit means credit extended to a natural person primarily for personal,
family, or household purposes.
(i) Contractually liable means expressly obligated to repay all debts arising on an account
by reason of an agreement to that effect.
(j) Credit means the right granted by a creditor to an applicant
to defer payment of a debt, incur debt and defer its payment, or purchase
property or services and defer payment therefor.
(k) Credit card means any card, plate, coupon book, or other
single credit device that may be used from time to time to obtain
money, property, or services on credit.
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(l) Creditor means a person who, in the ordinary course of business,
regularly participates in a credit decision, including setting the
terms of the credit. The term creditor includes a creditor’s
assignee, transferee, or subrogee who so participates. For purposes
of sections 1002.4(a) and (b), the term creditor also includes a person
who, in the ordinary course of business, regularly refers applicants
or prospective applicants to creditors, or selects or offers to select
creditors to whom requests for credit may be made. A person is not
a creditor regarding any violation of the Act or this part committed
by another creditor unless the person knew or had reasonable notice
of the act, policy, or practice that constituted the violation before
becoming involved in the credit transaction. The term does not include
a person whose only participation in a credit transaction involves
honoring a credit card.
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(m) Credit
transaction means every aspect of an applicant’s dealings
with a creditor regarding an application for credit or an existing
extension of credit (including, but not limited to, information requirements;
investigation procedures; standards of creditworthiness; terms of
credit; furnishing of credit information; revocation, alteration,
or termination of credit; and collection procedures).
(n) Discriminate against an applicant means to
treat an applicant less favorably than other applicants.
(o) Elderly means age 62 or older.
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(p) Empirically derived and other credit
scoring systems.
(1) A credit scoring system is a
system that evaluates an applicant’s creditworthiness mechanically,
based on key attributes of the applicant and aspects of the transaction,
and that determines, alone or in conjunction with an evaluation of
additional information about the applicant, whether an applicant is
deemed creditworthy. To qualify as an empirically derived, demonstrably
and statistically sound, credit scoring system, the system must
be:
(i) Based on data that are derived from
an empirical comparison of sample groups or the population of creditworthy
and non-creditworthy applicants who applied for credit within a reasonable
preceding period of time;
(ii) Developed for the purpose of evaluating
the creditworthiness of applicants with respect to the legitimate
business interests of the creditor utilizing the system (including,
but not limited to, minimizing bad debt losses and operating expenses
in accordance with the creditor’s business judgment);
(iii) Developed and validated
using accepted statistical principles and methodology; and
(iv) Periodically revalidated
by the use of appropriate statistical principles and methodology and
adjusted as necessary to maintain predictive ability.
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(2) A creditor may use an
empirically derived, demonstrably and statistically sound, credit
scoring system obtained from another person or may obtain credit experience
from which to develop satisfy the criteria set forth in paragraph
(p)(1)(i) through (iv) of this section; if the creditor is unable
during the development process to validate the system based on its
own credit experience in accordance with paragraph (p)(1) of this
section, the system must be validated when sufficient credit experience
becomes available. A system that fails this validity test is no longer
an empirically derived, demonstrably and statistically sound, credit
scoring system for that creditor.
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(q) Extend
credit and extension of credit mean the granting of credit in
any form (including, but not limited to, credit granted in addition
to any existing credit or credit limit; credit granted pursuant to
an open-end credit plan; the refinancing or other renewal of credit,
including the issuance of a new credit card in place of an expiring
credit card or in substitution for an existing credit card; the consolidation
of two or more obligations; or the continuance of existing credit
without any special effort to collect at or after maturity).
(r) Good faith means honesty in fact in the conduct
or transaction.
(s) Inadvertent error means
a mechanical, electronic, or clerical error that a creditor demonstrates
was not intentional and occurred notwithstanding the maintenance of
procedures reasonably adapted to avoid such errors.
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(t) Judgmental system of evaluating applicants means any system
for evaluating the creditworthiness of an applicant other than an
empirically derived, demonstrably and statistically sound, credit
scoring system.
(u) Marital status means
the state of being unmarried, married, or separated, as defined by
applicable state law. The term “unmarried” includes persons
who are single, divorced, or widowed.
(v) Negative
factor or value, in relation to the age of elderly applicants,
means utilizing a factor, value, or weight that is less favorable
regarding elderly applicants than the creditor’s experience
warrants or is less favorable than the factor, value, or weight assigned
to the class of applicants that are not classified as elderly and
are most favored by a creditor on the basis of age.
(w) Open-end credit means credit extended under a plan in
which a creditor may permit an applicant to make purchases or obtain
loans from time to time directly from the creditor or indirectly by
use of a credit card, check, or other device.
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(x) Person means a natural person, corporation, government
or governmental subdivision or agency, trust, estate, partnership,
cooperative, or association.
(y) Pertinent
element of creditworthiness, in relation to a judgmental system
of evaluating applicants, means any information about applicants that
a creditor obtains and considers and that has a demonstrable relationship
to a determination of creditworthiness.
(z) Prohibited basis means race, color, religion, national origin,
sex, marital status, or age (provided that the applicant has the capacity
to enter into a binding contract); the fact that all or part of the
applicant’s income derives from any public assistance program;
or the fact that the applicant has in good faith exercised any right
under the Consumer Credit Protection Act or any state law upon which
an exemption has been granted by the Bureau.
(aa) State means any state, the District of Columbia, the Commonwealth
of Puerto Rico, or any territory or possession of the United States.
