IBA Compliance Connection

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Besides the Interagency Statement on Branch Names from May 1, 1998, is there any other guidance regarding how a loan production office (LPO) is identified for advertising purposes? Our marketing department would like to refer to it as a “Loan Center” rather than “Loan Production Office.”

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In addition to the Interagency Statement on Branch Names that you mention, there is a short FDIC Advisory Opinion on the use of trade names in which the FDIC warns a bank to clarify on its website that a particular bank division is part of that same bank. This opinion also refers to the Interagency Statement, which urges banks to ensure that customers understand that all of a bank’s offices, branches and other outlets are part of the same bank.

We also note that regardless of what you call your loan production office, we remind you not to advertise — or engage in — any activities that cannot be performed at a loan production office. Although “loan production office” is not defined in the Illinois Banking Act, the Illinois Department of Financial and Professional Regulation has stated that “[p]ermissible activities for such LPOs include: explaining credit product features and benefits; assisting in credit application preparation; and accepting credit applications for referral to and processing at the bank.”

Other activities, such as approving or denying credit applications, disbursing loan proceeds, accepting loan payments or deposits, or cashing checks, fit the Banking Act’s definition of a “branch” and subject the loan production office to its state branching provisions.

For resources related to our guidance, please see:

  • IDFPR Interpretive Letter 91-21 (September 4, 1991) (“Permissible activities for such LPOs include: explaining credit product features and benefits; assisting in credit application preparation; and accepting credit applications for referral to and processing at the bank. Such an LPO would not fall within the definition of a ‘branch’ and therefore would not be subject to branching restrictions (e.g., home office protection, numeric limitations, geographic limitations, etc.) unless any of the following banking functions were performed at the LPO location: approval or denial of credit applications; disbursement of loan proceeds; acceptance of loan payments; acceptance of deposits; or cashing of checks. Further, this Office does not require the filing of an application, notice, or fee by a state bank establishing an LPO.”)
  • Illinois Banking Act, 205 ILCS 5/2 (defines a “branch” as a place where “deposits are received, checks paid, or loans made, but shall not include any place at which only records thereof are made, posted, or kept.”)
  • Federal Deposit Insurance Act, 12 USC 1813(o) (defines a “branch” as a location at which deposits are received or checks paid or money lent. The term “domestic branch” does not include an automated teller machine or a remote service unit.)