IBA Compliance Connection

Your go to source for compliance!

Can our bank receive a fee for referring commercial loan customers that our bank cannot accommodate to a lending network? We do not pass on the customers’ information to the network. When we know that we cannot accommodate a customer with a commercial loan, we provide the customer with contact information for the lending network. If the customer can find financing through the network, we receive a referral fee.

—

by

admin

Yes, we believe that your bank may accept a fee for referring commercial customers to a lending network.

We are not aware of any Illinois or federal laws that would prohibit such an arrangement, and because these are commercial loans, RESPA’s limitations on referrals do not apply. In addition, because your bank does not disclose your customers’ information to third parties as part of this arrangement, we do not believe that your arrangement violates Illinois or federal privacy laws. We do note that fair lending laws, such as the Equal Credit Opportunity Act and the Illinois Human Rights Act, apply to commercial loans, but the referral arrangement that you have described does not inherently violate these laws.  

For resources related to our guidance, please see:

  • RESPA, 12 USC 2606(a) (“This chapter does not apply to credit transactions involving extensions of credit— (1) primarily for business, commercial, or agricultural purposes; or  (2) to government or governmental agencies or instrumentalities.”)
  • Regulation P, 12 CFR 1016.10 (Limitations on sharing financial information with nonaffiliated third parties.)
  • Illinois Banking Act, 215 ILCS 5/48.1(c) (“Except as otherwise provided by this Act, a bank may not disclose to any person, except to the customer or his duly authorized agent, any financial records or financial information obtained from financial records relating to that customer of that bank unless . . . .”)
  • Equal Credit Opportunity Act, 15 USC 1691 (“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under this chapter.”)
  • Illinois Human Rights Act, 775 ILCS 5/4-102 (“It shall be a civil rights violation for any financial institution, on the grounds of unlawful discrimination, to: . . . Deny any person any of the services normally offered by such an institution.”)
  • Illinois Human Rights Act, 775 ILCS 5/1-103 (“‘Unlawful discrimination’ means discrimination against a person because of his or her race, color, religion, national origin, ancestry, age, sex, marital status, order of protection status, disability, military status, sexual orientation, pregnancy, or unfavorable discharge from military service…”)