Topic: Loan Documentation
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We are considering implementing electronic signature pads for new deposit accounts and, eventually, loans. What are the state law implications that we should be considering during this process?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021.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. Illinois law provides that electronic signatures have the same validity as ink signatures, but additional…
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We recently noticed a handful of loan documents that name our holding company, instead of the bank, as the lender. The documents state that payment is due to the holding company, but the payments are actually due to the bank, and the bank provided the initial disclosures. Do we need to ask our customers to sign new loan documents with the bank’s name?
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We believe it would be advisable to have these customers sign new loan documents. There are at least two areas of concern in the situation you have described: (1) the bank’s right to enforce the loans, and (2) compliance with Regulation Z’s disclosure rules. The first issue is whether the bank has the right to…
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We offer customers a zero interest loan to pay back the amount of their deposit account overdrafts. The loans are payable in more than four installments. Is it a UDAAP violation, or would it violate any regulation, to require customers to make the first periodic payment when they sign the loan documents?
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No, we are not aware of any rule that would prohibit you from requiring the first month’s payment at the time of the loan closing. However, this practice could raise the possibility of being viewed by regulators or by customers as abusive. Because the loans are payable in more than four installments, Regulation Z applies,…
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Are we required to use a “same name” affidavit for loans where a customer’s name on the loan documents does not match the name on his or her Illinois driver’s license (e.g., “Bill” versus “William”)? What are the possible consequences of having a customer sign a loan document using a nickname?
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No, we are not aware of any law or rule that would require you to use a same name affidavit for a customer that signed loan documents with a name other than what is on his or her driver’s license, although this practice may be advisable. Loan documents using a nickname very likely are enforceable…
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Does Illinois law require us to inform a borrower that they will receive the following materials in connection with their residential mortgage loan application: the Settlement Cost Booklet, a Good Faith Estimate of Settlement Costs, a “RESPA Servicing Disclosure,” a copy of the loan application or equivalent form, a copy of the bank’s privacy statement, a notice detailing the customer identification procedures, the Consumer Handbook on Adjustable Rate Mortgages, and a separate disclosure and description for the specific type of adjustable rate mortgage.
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No, we do not believe Illinois law requires you to inform a borrower that you will be providing those disclosures. However, we understand it may be a best practice to obtain a borrower’s signature acknowledging receipt of those disclosures, as proof of your compliance with those federal requirements.