We believe it would be advisable to have these customers sign new loan documents. There are at least two areas of concern in the situation you have described: (1) the bank’s right to enforce the loans, and (2) compliance with Regulation Z’s disclosure rules.

The first issue is whether the bank has the right to enforce the loans if it is not listed as the creditor on the loan documents. If the bank brought an action to enforce one of these loans, the borrower could argue that the bank is not the creditor and is not entitled to enforce the loan because it is not listed on the loan agreement.

The second issue is whether the bank may be found to have violated Regulation Z’s disclosure requirements, because the loan documents do not reflect the true creditor for the loans. Regulation Z requires you to disclose the identity of the creditor, which in this case is the bank, not the holding company. This issue may be addressed by providing new disclosures to the customers with the bank’s name listed as the creditor.

Please understand that our guidance does not constitute legal advice, and due to the complexity of this situation and the business decisions it entails, you may wish to consult with your bank counsel on this matter.

For resources related to our guidance, please see:

• Illinois Banking Act, 205 ILCS 5/28 (“A resulting State bank . . . shall be considered the same business and corporate entity as each merging bank . . . .”) 

• Regulation Z, 12 CFR 1026.18(a) (“For each transaction, the creditor shall disclose . . . (a) The identity of the creditor making the disclosures.”)