Topic: Equal Credit Opportunity Act (ECOA)
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For which type of “dwelling” must we provide the appraisal notice required under ECOA? We use the definition of “dwelling” in Regulation B, but were recently told that the notice requirement also applies to apartment complexes and vacant land where a 1 – 4 family “might be built.”
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We believe you should use Regulation B’s definition of “dwelling” with regard to the ECOA’s appraisal notice requirements. Although the ECOA does not define “dwelling,” its implementing rule, Regulation B, defines the term to mean “a residential structure that contains one to four units whether or not that structure is attached to real property. The…
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Are Community Integrated Living Arrangement (CILA) homes used to secure commercial loans subject to ECOA appraisal rules?
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Whether ECOA’s requirements regarding appraisals apply depends on whether the CILA mortgage is a first lien and whether the property is a 1 – 4 unit dwelling. The Official Interpretations to Regulation B make clear that its appraisal requirement “covers applications for credit to be secured by a first lien on a dwelling . .…
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We are looking for guidance on how long we should retain closed files. This would include paid off loans, closed DDA accounts, denials, etc. Is there a general timeframe that can be used conservatively to cover all regulatory requirements (5 years, 7 years, etc.)? We would like to implement something across the board.
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We do not recommend using a one general timeframe for all types of closed files. Record retention requirements vary widely depending on many factors, including the type of document, when the document was created, why the document was created or collected, and any number of other criteria. Some documents, such as certain trust or custodial…
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Have there been any substantive changes to the Fair Credit Reporting Act (FCRA) or the Equal Credit Opportunity Act (ECOA) regarding adverse action notices that would affect using Regulation B’s model notices?
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No, there have not been any substantive changes to the FCRA or the ECOA regarding adverse action notices that would affect your use of the model forms in Regulation B. For resources related to our guidance, please see: Appendix C to Regulation B — Sample Notification Forms
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We are aware that the Illinois appellate court recently ruled that when spouses hold the title to their home in tenancy by the entirety, their real estate is subject to foreclosure if they both signed a mortgage, even if only one spouse signed the promissory note. Currently, we require both spouses to sign notes and all other mortgage documents. Does our current policy raise any Regulation B concerns? In light of this recent court case, should we change our policy to require both spouses to sign the mortgage, but only the borrowing spouse to sign the note? Or will that raise lien perfection concerns?
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In our view, requiring only the borrowing spouse to sign the promissory note and requiring both spouses to sign a mortgage, including a homestead waiver, does not raise any Regulation B or lien perfection concerns. Regulation B prohibits lenders from requiring a spouse to sign credit documents unless the spouses expressly apply for joint credit.…
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If a business loan applicant has under $1 million in revenues, is it proper to provide an adverse action notice verbally? Also, do you have any sample adverse action forms for commercial applicants?
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Yes, you may provide verbal notification of an adverse action to a business loan applicant. Regulation B permits creditors to provide businesses with adverse action notices “orally or in writing.” This rule applies to all business applicants, whether their annual gross revenues were less than or greater than $1 million. For a business with annual…
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When I am reviewing denied, withdrawn and incomplete loan files for compliance with Regulation B, Regulation C, and Regulation Z, the Uniform Residential Loan Application often is missing the application date. This makes it very difficult to review a loan file for compliance with these regulations. Would it be acceptable to use the Loan Estimate date as the application date in these files?
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We believe that it is possible, but very unlikely, that the Loan Estimate date is an appropriate substitute for the application date under Regulation B, Regulation C, or Regulation Z. Each of the three regulations has its own definition of application, the receipt of which triggers separate, unique obligations. In order to ensure compliance with…
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If we do not identify the date on which a loan application is “completed” under Regulation B, what date should we use as the application date on an adverse action notice? Would it be acceptable to use the application date under either HMDA or the TRID rule?
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We believe that either the HMDA or the TRID application date may serve as an acceptable substitute for the purpose of sending adverse action notices under Regulation B, depending on what your internal policies require for an application to be considered “complete.” Regulation B requires you to send out adverse action notices within 30 days…
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Certain geographic areas have more instances of debit card fraud than others. Can we change our rules to require customers living in those areas to use a PIN when using a debit card as a credit card? If so, do we need to disclose the change?
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Requiring the use of debit cards PINs only for customers residing in particular geographic areas (here, areas with higher crime rates) could raise concerns under the fair lending laws. Although residents located in specific geographic areas are not per se protected classes based on their locations, a practice singling out particular geographic areas could result…
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Our marketing department is working on a promotion for deposit accounts opened by teachers. We would like to provide an account opening bonus of $100, as well as a $100 gift card donated to the teacher’s classroom. Would the $100 gift card be treated as a donation? Should we donate it to the teacher or to the school? How would we disclose the bonuses to the customers and the schools?
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Whether the gift card is donated to the school or to the individual teacher is up to the bank. If donating to the school, it may be possible to designate that the gift card must be used in a particular teacher’s classroom, but that will depend on the school district’s policies. We recommend contacting the…