Connecticut Banking Dept. takes no-action position on new demographic data reporting requirement for sales finance companies
In August 2018, we reported about significant changes to Connecticut’s licensing laws for consumer financial services providers that were to take effect on October 1, 2018. In our blog post, we highlighted a new requirement (which appeared to be unprecedented), for sales finance companies to acquire and maintain information about the ethnicity, race, and sex of applicants for motor vehicle retail installment contracts. A licensee is required to submit the demographic records collected between October 1, 2018 and June 30, 2019 to the Connecticut Banking Department by July 1, 2019.
We observed that the new requirement presented an apparent conflict with the Regulation B proscription against a non-mortgage creditor inquiring about the race, ethnicity or gender of an applicant. See 12 C.F.R. § 1002.5(b) (“A creditor shall not inquire about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction, except as provided in paragraphs (b)(1) [relating to self-testing that complies with Sections 1002.15 of Regulation B] and (b)(2) of this section [authorizing only an optional request to designate a title on an application form such as Ms., Miss, Mr. or Mrs.])
On September 28, the Connecticut Department of Banking issued a memo stating that it has formally asked the CFPB for an official interpretation as to whether the state’s new requirement is consistent with Regulation B. The Department also indicated that until it receives additional guidance from the CFPB, it “takes a no-action position as the enforcement of the new requirement.” The Department also stated that it considers the no-action position necessary to provide it with “additional time to undertake a review of the appropriate manner and form for which [the records required to be kept by sales finance companies] shall be acquired, maintained and reported to this Department.”