Compliance Blog

Feb 28, 2022
Categories: Consumer Lending

Special Purpose Credit Programs

On Tuesday, February 22, 2022, NCUA issued Letter to Credit Unions, 22-CU-03 regarding special purpose credit programs. The letter informed credit unions of the release of an interagency statement on special purpose programs. The purpose of the letter and statement was to remind credit unions of their ability to offer special purpose programs that meet the needs of specified classes under the Equal Credit Opportunity Act (ECOA) and Regulation B. So, what are special purpose programs?

The ECOA and Regulation B, section 1002.8 permit creditor to provide “special purpose credit” to specific applicant types (such as the elderly) under the following programs:

1.       Credit assistance programs for an economically disadvantaged class that were expressly authorized by state or federal law;

2.       Credit assistance programs offered by a nonprofit (such as a credit union) for the benefit of its members or an economically disadvantaged class; and

3.       Special purpose credit programs that are offered by for-profit organizations or where the organization “participates to meet special needs.”

Credit unions should note that under section 1002.8(b)(2), programs created by credit unions, not by federal/state law, only qualify as special purpose credit programs if the programs were not established to discriminate on a prohibited basis and are not administered in a way that discriminates on a prohibited basis. However, a special purpose credit program may still require participants to share a common characteristic, such as “race, national origin, or sex,” as long as the program was not created to evade any part of the ECOA or Regulation B. For example, a program that requires the common characteristics of blue eyes, blonde hair, and to be of Aryan descent might not qualify as a special purpose credit program.

If you are familiar with Regulation B, you may be wondering how these special purpose programs work with sections 1002.5 and 1002.6, which prohibit collecting certain information and evaluating certain information from applicants respectively. Fortunately, section 1002.8(c) and (d) provide exceptions. Section 1002.8(c) permits a credit union to collect and evaluate information from an applicant, that would otherwise be prohibited, if the information is required due to the special purpose credit program requiring a common characteristic. The commentary provides the following two examples:

“i. Energy conservation programs to assist the elderly, for which the creditor must consider the applicant's age.

ii. Programs under a Minority Enterprise Small Business Investment Corporation, for which a creditor must consider the applicant's minority status.”

Section 1002.8(d) permits a credit union to collect marital information from an applicant if financial need is a criteria under a special purpose credit program. Section 1002.8(d) permits a credit union to consider: marital status, alimony, child support, separate maintenance income, and spouse’s financial resources when evaluating an applicant’s eligibility for the program. The commentary provides the following two examples:

“i. Subsidized housing programs for low-to moderate-income households, for which a creditor may have to consider the applicant's receipt of alimony or child support, the spouse's or parents' income, etc.

ii. Student loan programs based on the family's financial need, for which a creditor may have to consider the spouse's or parents' financial resources.”

Credit unions should also note that the statement clarifies the Department of Housing and Urban Development’s position that ECOA/Regulation B special purpose credit programs do not generally violate the Fair Housing Act.

While special purpose credit programs have been around for a while, it appears that NCUA and other agencies believe that they are underutilized. The statement and NCUA letter note that while neither NCUA or the other agencies determine whether a program qualifies for special purpose credit status, credit union’s may consult with NCUA with any questions about these programs. Federal credit unions can contact their NCUA Regional Office and state-chartered credit unions can contact their state supervisory authority.

About the Author

Keith Schostag, NCCO, Senior Regulatory Compliance Counsel, NAFCU


Keith Schostag joined NAFCU as regulatory compliance counsel in February 2021. In this role, Keith assists credit unions with a variety of compliance issues.

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