IBA Compliance Connection

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If a borrower will be purchasing a dwelling for a family member, the family member will be the occupant but not the borrower, and the family member is not paying rent, would that be a consumer purpose loan?

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Yes, this loan would be treated as a consumer purpose loan under Regulation Z. A consumer purpose loan is one offered or extended “primarily for personal, family, or household purposes.” If a borrower is purchasing a home for a family member and will not be collecting rent, we would view the loan as extended for family purposes, making it a consumer purpose loan.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.2(a)(12) (“Consumer credit means credit offered or extended to a consumer primarily for personal, family, or household purposes.”)
  • Regulation Z, 12 CFR 1026.3(a) (“The following transactions are not subject to this part . . . : (a) Business, commercial, agricultural, or organizational credit. An extension of credit primarily for a business, commercial or agricultural purpose.”)