The CFPB’s ability-to-repay (ATR) rules do not require creditors of any stripe to verify a borrower's employment status over the phone. (Note that these rules differ from the more onerous “qualified mortgage” (QM) requirements.) However, the rules do expressly permit creditors to verbally obtain a verification of employment (VOE) status. And, as we discussed with a CFPB attorney, you may be able to verify a borrower’s employment by using a paystub or other “reasonably reliable third-party record,” with some provisos discussed below.

The ATR rules generally require creditors to verify the information they are relying on when determining a consumer’s ability to repay by using “reasonably reliable third-party records.” 12 CFR 1026.43(c)(3). However, the rules also allow a creditor to verbally obtain a VOE, provided that “the creditor prepares a record of the information obtained orally.” This is an exception from the requirement to use only third-party records for verification. 12 CFR 1026.43(c)(3)(ii).

If your institution does not wish to verbally obtain VOEs, then you will be relying on third-party records. The rule does not specify what types of third-party records should be used for VOEs, except in the case of military employment (for which a military Leave and Earnings Statement or a listing in the Department of Defense’s electronic database suffices). Official Interpretations, 12 CFR 1026, Paragraph 43(c)(3), Comment 8.

A CFPB attorney provided informal guidance on using paystubs and other records to verify employment and told us that a paystub may suffice, particularly when an employer is unwilling to provide verification of employment to your institution. However, the CFPB attorney stated that a paystub may not be conclusive. Any record used to verify employment must include information that indicates an employment relationship with the borrower, rather than an independent contractor relationship. On a paystub, examples of such information would be deductions for social security, health insurance, and other taxes or benefits that would be consistent with an employment relationship rather than an independent contractor relationship.