The loan you described may involve some risk of UDAAP or fair lending violations, but there are no specific federal or Illinois prohibitions of a consumer short-term balloon loan secured by real property that is not the consumer’s dwelling.[1] As you pointed out, Regulation Z’s restrictions on balloon loans would not apply to this loan, which is not secured by the consumer’s principal dwelling. See 12 CFR 1026.32(a)1026.34(a). However, the OCC identified short-term consumer balloon loans as “associated with discriminatory, unfair, deceptive, abusive, and predatory lending practices,” and suggests that you should have policies and procedures governing when such loans are granted to avoid the appearance of unfairness or discrimination. See OCC’s Comptroller Handbook, Retail Lending. If the loan is made in compliance with your own policies and procedures, and if all of your disclosures are in compliance with the regulations, examiners should not object to the loan.