Topic: Student Loans
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A customer came to us with an outstanding federal student loan. Our loan department refinanced his student loan, but structured it as a commercial loan product (with the terms and conditions of a commercial loan). The refinancing was made to him and his wife as co-borrowers, and the proceeds were used to pay off his original federal student loan. Were the Higher Education Opportunity Act (HEOA) disclosures required? What if we had made the refinancing to the customer’s business, with him and his wife as individual guarantors? Would that transaction have been subject to HEOA disclosures?
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We do not believe that the Higher Education Opportunity Act (HEOA) disclosures were required in this case, because the loan did not fit the definition of a “private education loan.” The HEOA disclosures are required only for “private education loans,” which are loans made to a consumer for post-secondary educational expenses (in addition to having…
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We have a commercial customer that has an outstanding student loan with us. The customer would like to refinance this loan, with the new borrowers being a husband and wife, as individuals. The loan proceeds will be paid to the commercial customer to pay off the existing loan. Is this considered a commercial loan, or are the Higher Education Opportunity Act disclosures required? What if we make the new loan to the business with the husband and wife as guarantors?
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We do not believe that the Higher Education Opportunity Act (HEOA) disclosures are required in this case, because this loan does not fit the definition of a “private education loan.” The HEOA disclosures are required only for “private education loans,” which are loans made to a consumer for post-secondary educational expenses (in addition to having…
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We service student loans made by trusts for which our trust department serves as trustee. If the student borrowers meet certain conditions, such as finding employment in their field of study, then the loan is forgiven (it becomes a “scholarship”). If not, the student must pay back the loan to the trust. The loan terms are longer than a year, and they are unsecured. Is our bank considered a servicing agent for these loans? If so, what regulations apply? What disclosures are required?
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Do any of the trusts make more than twenty-five unsecured loans in a calendar year? If not, all of their student loans likely are exempt from Regulation Z. Regulation Z exempts creditors that make fewer than twenty-five unsecured loans annually, and its Official Interpretations treat these trusts as “separate entities” when counting their loans. But…
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Our trust department is planning to offer loans for post-secondary education funded by trust accounts. Is our bank now considered a servicing agent for these loans? If so, what regulations apply? What disclosures are required?
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These loans likely will be considered private education loans governed by Regulation Z. The term “private education loan” includes extensions of credit made for postsecondary education expenses made to consumers — and Regulation Z defines consumer credit to include credit extended to trusts for personal, family or household purposes. There are exclusions from the definition…
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We are thinking about providing a bonus credit of $10 for new student checking accounts. Can we condition the bonus on the customer’s enrollment in internet banking?
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With proper disclosures, you should be able to provide the account bonus on the condition that the customer enrolls in internet banking. Any advertising and account disclosures should clearly state that customers must sign up for internet banking to receive the bonus. If you will not be providing paper statements to the customers that enroll…
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What requirements would apply if we were to allow a high school foreign exchange student to open a checking account?
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Below are some of the issues we would consider before opening an account for a high school foreign exchange student. BSA/AML Requirements We recommend looking at your customer identification program (CIP) policies and considering what information you would like to collect from the student. The CIP regulations require you to collect the following information from…