Topic: Equal Credit Opportunity Act (ECOA)
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We are a HMDA reporter but have not reported open lines of credit in the past, and we are exempt from reporting in 2018 (we do not meet the 500 loan threshold for open-end lines of credit). Under Regulation B, can we collect government monitoring information (GMI) for open-end home purchase loans and refinances?
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Yes, Regulation B permits (and actually requires) lenders to collect an applicant’s GMI — ethnicity, race, sex, age, and marital status — open-end home purchase loans or refinancings, provided that they are to be secured by the applicant’s principal residence. In general, Regulation B prohibits lenders from collecting certain personal information from applicants, including ethnicity,…
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If an individual and his personal trust co-apply for a loan, do we need to require a statement of joint intent?
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Yes, we believe that you should require a statement of joint intent in this situation. The Official Interpretations to Regulation B state that “a person’s intent to be a joint applicant must be evidenced at the time of application.” An “applicant” is any person who has requested an extension of credit. A “person” includes (among…
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Does a request for a modification of an existing loan constitute an “application” under Regulation B, triggering the requirement to send an appraisal notice within three business days? Typically, our modifications involve extending the maturity date or lowering interest rate.
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The answer depends on the specific type of modification and how the request is made. Regulation B’s appraisal notice requirements apply whenever you receive an application for an extension of credit secured by a first lien on a dwelling. Therefore, you must determine whether each modification request involves an “application” for an “extension of credit.”…
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A consumer applied for a loan that is subject to the TILA-RESPA Integrated Disclosure (TRID) rules. The consumer indicated an intent to proceed with the loan, but we did not end up originating the loan. The consumer refuses to pay our appraisal fee. Can we pull the fee amount from the consumer’s checking account at our bank?
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Yes, we believe that your bank may exercise a valid right of setoff for the unpaid appraisal fee against the applicant’s checking account, provided that your bank properly disclosed the appraisal fee and that the applicant would be charged the fee to reimburse your bank for the cost of the appraisal (and the applicant had…
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Most of our branches are located in Illinois, but one branch is located in another state. Can we offer a certificate of deposit (CD) promotion just at the out-of-state branch? We would advertise the promotion on lobby signs only in that branch. Also, the promotional terms of the CD would be included in the rate sheet for just that branch.
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Yes, we believe that your bank may offer a promotional CD only at your out-of-state branch. We should note that, in general, any promotion that singles out a group of customers creates some potential for fair lending concerns. Although a customer base is not a protected class, a promotion offered only to customers of a…
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When we extend our in-house balloon mortgage loans, we reevaluate the property. The evaluations usually consist of driving by the property and concluding either that the property value is consistent with our original appraisal or that it has deteriorated. We document the evaluations and retain the documentation in our loan files. Are we required to provide a copy of these evaluations to the applicants and obtain their signatures of receipt?
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Yes, we believe that your bank should provide copies of these evaluations to applicants requesting renewals of loans secured by a first lien on a dwelling. While the applicants’ signatures are not required, obtaining their signatures would be a prudent step for documenting your compliance with this requirement. Regulation B requires creditors to provide applicants…
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We obtain our credit reports through a vendor, not directly from the credit bureaus. The vendor provides merged credit reports for married co-applicants, but not for unmarried co-applicants (for unmarried co-applicants it requires us to obtain two individual credit reports). We currently charge loan applicants the exact credit report fees that the vendor charges us. The vendor’s charge for an individual report is slightly more than half the cost of a merged report; in other words, married co-applicants receive a slight pricing advantage over unmarried co-applicants. Does this create a fair lending issue?
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Yes, we believe that a pricing disparity between a merged credit report for two married co-applicants (commonly misnomered as a “joint credit report”) and two individual credit reports for unmarried co-applicants would pose a fair lending issue, since the cost of the less expensive merged credit report is made available on the basis of the…
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We would like to target customers of a nearby bank that is closing by offering them a free order of checks when they open a checking account at our bank. We would require proof that the customers are coming from the other bank. Could this be viewed as a discrimination issue? Also, can we mention the closing bank’s name in advertisements?
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It is possible that your contemplated promotion could create fair lending concerns, but a full analysis would require additional facts comparing your bank’s customer base with the closing bank’s customer base. Although a customer base is not a protected class, a promotion offered only to customers of a particular bank conceivably could have a disparate…
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How long should we keep mail returned as undeliverable, such as privacy notices and bank statements?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. We are unaware of any recordkeeping requirements for mail that has been sent to customers…
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We have a referral relationship with a leasing company for agricultural and commercial leases of equipment. The leasing company sends out an application on behalf of the applicant to multiple banks and will not fund a lease unless it has lined up a purchaser. The leasing company takes the application and then provides us with basic financial information about a potential lease to purchase, but we underwrite the lease ourselves as we would with any commercial credit application. We often ask the leasing company to obtain and send us more information from their applicant. We set the terms of the lease that will be acceptable to us, including the duration, the interest rate, and the down payment. When we decline to purchase a lease, do we need to send an adverse action notice to the leasing company, the commercial applicant, both or neither?
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As a creditor subject to Regulation B, your bank may fulfill its adverse action notice responsibilities either by sending the notices directly to the applicants or through the leasing company. Regulation B generally requires “creditors” to provide an adverse action notice to applicants whenever an adverse action is taken with respect to a credit application.…