These loans likely will be considered private education loans governed by Regulation Z. The term “private education loan” includes extensions of credit made for postsecondary education expenses made to consumers — and Regulation Z defines consumer credit to include credit extended to trusts for personal, family or household purposes. There are exclusions from the definition of “private education loan” for some student loans, such as open-end credit and loans secured by real property, but we do not have enough facts to determine whether one of these exclusions might apply to this program.

The private education loan provisions of Regulation Z impose not only special disclosure requirements, but many other requirements, such as special rescission and cancellation rights, in addition to the other provisions in Regulation Z applicable to consumer credit. Other consumer credit requirements in federal regulations, such as adverse action notices required by Regulation B, also would apply.

Depending on the state where the student is studying, there may be other state statutes and regulations that would apply. (We are not aware of any Illinois laws or regulations specifically governing student loans, but other general credit requirements would apply, such as the anti-discrimination provisions applicable to loans imposed by the Illinois Human Rights Act.)

We recommend that you consult with bank counsel to ensure that you fully meet the documentation and disclosure requirements for this student loan program.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.46(b)(5)Is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the loan is provided by the educational institution that the student attends; (iii) Does not include open-end credit or any loan that is secured by real property or a dwelling; and (iv) Does not include an extension of credit in which the covered educational institution is the creditor if: (A) The term of the extension of credit is 90 days or less; or (B) an interest rate will not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than four installments.”)

• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 3(a), Comment 10(i) (“Credit extended for consumer purposes to certain trusts is considered to be credit extended to a natural person rather than credit extended to an organization. Specifically: (i) In some instances, a creditor may extend credit for consumer purposes to a trust that a consumer has created for tax or estate planning purposes (or both). . . . Regardless of the capacity or capacities in which the loan documents are executed, assuming the transaction is primarily for personal, family, or household purposes, the transaction is subject to the regulation because in substance (if not form) consumer credit is being extended.”)

• Regulation Z, 12 CFR 1026.47

• Regulation Z, 12 CFR 1026.48

• Illinois Human Rights Act, 775 ILCS 5/4-101(C) (“Loan. ‘Loan’ includes, but is not limited to, the providing of funds, for consideration, which are sought for: (1) the purpose of purchasing, constructing, improving, repairing, or maintaining a housing accommodation as that term is defined in paragraph (C) of Section 3-101; or (2) any commercial or industrial purposes.”)