Topic: Equal Credit Opportunity Act (ECOA)
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One of our loan officers wants to reject a loan applicant on the basis of age. The borrower is an elderly person. Isn’t that illegal?
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Yes, both federal and Illinois laws prohibit discrimination in lending activities on the basis of age. As to federal law, the Equal Credit Opportunity Act states that “it shall be unlawful for any creditor to discriminate against any applicant . . . on the basis of . . . age (provided the applicant has the…
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Do you see any problems with making a mortgage loan secured by an Illinois home to a non-U.S. citizen who lives in Illinois? How would we collect if the borrower defaults on the loan? Would we have to litigate in a foreign country?
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Lending to a non-U.S. citizen is a business decision that depends on the amount of risk your institution is willing to accept. Should the borrower default on the loan, you may have to litigate in U.S. federal court, where rules and procedures will differ from Illinois state courts. The choice between initiating a collection action…
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Based on the recent CFPB guidance on fair lending and indirect automobile lending, what steps should a smaller regional bank take to lessen our fair lending risks? Do we need to switch to a flat rate of compensation for dealers, or are there other options?
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While the CFPB’s Indirect Auto Lending Bulletin does not directly apply to your institution, since you are not supervised by the CFPB, we agree that all financial institutions should be taking the CFPB’s guidance seriously. While the other federal banking regulators have released some helpful materials on discrimination and auto lending, which we discuss below,…
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If we have a loan closing on Friday, April 4, the new ECOA appraisal rules require us to provide a copy of the appraisal by Tuesday, April 1 (per the example in the CFPB’s Small Entity Compliance Guide). If we are mailing the appraisal, does that mean we have to mail the appraisal by March 28 so that it arrives by April 1?
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We agree with your analysis, but with the proviso that for higher-priced mortgage loans, a different definition of “business day” will apply which may require a different mailing date. Based on the ECOA appraisal regulation and staff commentary, if you are mailing an appraisal to a borrower, it must be placed in the mail six…
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Are there any prohibitions on charging fees for our in-house valuations under Illinois law? The CFPB’s new ECOA rules state that we can charge mortgage loan borrowers for appraisals or valuations, if not otherwise prohibited by law.
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We are not aware of any Illinois law that would prohibit or limit your ability to charge customers a fee for the cost of a property appraisal or valuation, which is permitted by Regulation B (12 CFR 1002.14(a)(3)). Section 5e of the Illinois Banking Act states that “[n]otwithstanding the provisions of any other law in…
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We are thinking about offering “second chance” checking accounts in addition to our regular checking account products. The second chance accounts would have lower daily limits for ATM withdrawals and point of sale (POS) purchases, among other changes to our account terms. If we offer a customer a “second chance” checking account, do we need to send an adverse action notice?
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We believe that the Fair Credit Reporting Act (FCRA) would require your institution to provide adverse action notices to customers who apply for a checking account and are rejected, even if your institution offers the customer a “second chance” checking account with reduced limits and other features that differ from your normal checking accounts. The…
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After we rejected a loan application, the applicant came to us with additional cash flow information. Should we treat this additional information as a new application, and how should we report this in our HMDA register?
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Your bank has the flexibility to determine whether it will categorize the applicant’s furnishing of additional cash flow information as a new application or as a continuation of a prior application. Both the Home Mortgage Disclosure Act (HMDA) regulations and the adverse action notice regulations under the Equal Credit Opportunity Act (ECOA) define an “application”…
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Should we ask for documentation of a couple’s marriage if we only do so for same sex couples? Or if only for same sex couples with out of state marriages?
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We believe that requiring greater documentation for same sex couples than is required for heterosexual couples could be considered discriminatory, just as requiring different documentation or charging different fees for unmarried couples than for married couples would be considered discriminatory. The Regulation B Official Staff Commentary uses differing documentation standards as evidence of disparate treatment:…