Regulation B carves out a provision for allowing collection of normally prohibited information to be used in self-testing. The information that is collected must be kept separately from the loan files and must not be used to determine creditworthiness.
In preparing to conduct a self-test that involves the collection of applicants’ personal characteristics, creditors would be expected to develop a written plan that describes, among other things, the specific purpose of the self-test, the methodology to be used, the geographic area covered by the test, the types of credit transactions involved, the identity of the entity that will conduct the test and analyze the data (such as the creditor’s audit department), and the timing of the test, including the expected start date and end date or the expected duration of the test. The creditor is generally required to retain records regarding a self-test, including personal-characteristics data and all other written or recorded information about the self-test for 25 months after a test has been completed.
In addition, the self-test provision requires that creditors take appropriate and timely corrective action when the self-test shows that it is “more likely than not” that a violation of the ECOA or Regulation B has occurred, even though no violation has been formally adjudicated. 12 CFR 202.15(c)(1) (emphasis added). Creditors should ensure that corrective action is taken on a timely basis and is “reasonably likely to remedy the cause and effect of a likely violation.”
Reference: Regulation B 12 CFR 1002.5(b)(1); 1002.15. Regulation B final rule issued 2003, page 14. Note: the Federal Reserve version uses 12 CFR 202.