No, we do not have sample written procedures for determinations regarding a prospective loan originator’s financial responsibility, character, and general fitness. However, we have requested sample written procedures from the IBA’s Compliance Division Advisory Committee and will send you any submissions we receive.

Regulation Z requires banks to determine whether a loan originator employee (who is not required to be licensed) “[h]as demonstrated financial responsibility, character, and general fitness such as to warrant a determination that the individual loan originator will operate honestly, fairly, and efficiently.” To make this determination, banks must obtain a criminal background check, credit report, and information about any administrative, civil, or criminal findings. Banks may also consider any other reasonably available information.

Regulation Z’s Official Interpretations provide that a bank complies with Regulation Z’s requirement to determine a prospective loan originator’s financial responsibility, character, and general fitness if it establishes related written procedures and follows them for each individual it considers. Such procedures are not required to include review of a credit score.

As such, your written procedures should outline how you will review and assess a prospective loan officer’s financial responsibility. When assessing financial responsibility, you should consider “the existence of current outstanding judgments, tax liens, other government liens, nonpayment of child support, or a pattern of bankruptcies, foreclosures, or delinquent accounts.” Additionally, “[a] review and assessment of character and general fitness is sufficient if it considers, as relevant factors, acts of unfairness or dishonesty . . . and any disciplinary actions by regulatory or professional licensing agencies.” However, no single factor is determinative, provided that a bank “considers all relevant factors and reasonably determines that, on balance, the individual meets the standards.”

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.36(f) (“To comply with this paragraph (f), a loan originator organization . . . must: . . . (3) For each of its individual loan originator employees who is not required to be licensed and is not licensed as a loan originator pursuant to § 1008.103 of this chapter or State SAFE Act implementing law:

(i) Obtain . . . before the individual acts as a loan originator in a consumer credit transaction secured by a dwelling: (A) A criminal background check . . . (B) A credit report from a consumer reporting agency . . . ; and (C) Information about any administrative, civil, or criminal findings by any government jurisdiction;

(ii) Determine on the basis of the information obtained pursuant to paragraph (f)(3)(i) of this section and any other information reasonably available to the loan originator organization . . . before the individual acts as a loan originator in a consumer credit transaction secured by a dwelling, that the individual loan originator: . . . (B) Has demonstrated financial responsibility, character, and general fitness such as to warrant a determination that the individual loan originator will operate honestly, fairly, and efficiently.”)

• Regulation Z, Paragraph 36(f)(3)(ii)(B), Comment 1 (“The determination of financial responsibility, character, and general fitness required under § 1026.36(f)(3)(ii)(B) requires an assessment of all information obtained pursuant to paragraph (f)(3)(i) and any other reasonably available information, including information that is known to the loan originator organization or would become known to the loan originator organization as part of a reasonably prudent hiring process. The absence of any significant adverse information is sufficient to support an affirmative determination that the individual meets the standards. A review and assessment of financial responsibility is sufficient if it considers, as relevant factors, the existence of current outstanding judgments, tax liens, other government liens, nonpayment of child support, or a pattern of bankruptcies, foreclosures, or delinquent accounts. A review and assessment of financial responsibility is not required to consider debts arising from medical expenses. A review and assessment of character and general fitness is sufficient if it considers, as relevant factors, acts of unfairness or dishonesty, including dishonesty by the individual in the course of seeking employment or in connection with determinations pursuant to the qualification requirements of § 1026.36(f), and any disciplinary actions by regulatory or professional licensing agencies. No single factor necessarily requires a determination that the individual does not meet the standards for financial responsibility, character, or general fitness, provided that the loan originator organization considers all relevant factors and reasonably determines that, on balance, the individual meets the standards.”)

• Regulation Z, Paragraph 36(f)(3)(ii)(B), Comment 2 (“A loan originator organization that establishes written procedures for determining whether individuals meet the financial responsibility, character, and general fitness standards under § 1026.36(f)(3)(ii)(B) and comment 36(f)(3)(ii)(B)-1 and follows those written procedures for an individual and complies with the requirement for that individual. Such procedures may provide that bankruptcies and foreclosures are considered under the financial responsibility standard only if they occurred within a recent timeframe established in the procedures. Such procedures are not required to include review of a credit score.”)