ABA Banking Journal - October 2012 - (Page 60)
ABA COMPLIANCE CENTER | iNbox
Who gets Reg B notice when one co-applicant kills deal?
Q. We are denying an application for credit received from two applicants. The primary applicant had excellent credit. However, the coapplicant had a recent bankruptcy and multiple past-due accounts. As a result, his credit score was below our acceptable limits. Can we send the Regulation B adverse action notice to the secondary applicant since that person’s credit impacted our decision to deny? A. Yes, you can send the co-applicant a copy of the Reg B adverse action notice, but you are not required to do so. Reg B states that although only one Reg B adverse action notice is required, it must be sent to the primary applicant “when one is readily apparent.” In this case, the primary applicant would receive the Reg B notice listing the reasons for denial as the co-applicant’s bankruptcy and poor credit. (Note that, pursuant to the Fair Credit Reporting Act, credit scores may not be shared.) The co-applicant should receive the FCRA credit score notice and disclosures because that person’s credit impacted your decision to deny the application. (Response provided August 2012) Free to call it “free”? Q. We are considering switching from paper statements to online statements. At that time we would begin charging a fee for paper statements. If we do, can we still call this a “free” product? A. Maybe. There is no regulatory requirement of a paper statement. It just has to be made available. The customer still has a free account—as long as they choose an electronic statement. The choice is the consumer’s. However: A recent issue we have heard from banks is that some regulators believe this is a possible UDAAP issue. Another concern is that the customers who may be most negatively impacted by this policy will likely be the poor, minorities, and the elderly, as they are least likely to have online access. A better practice might be: “Sign up for online statements and your account is free,” rather than advertising the account as free and then charging for paper statements. (Response provided August 2012) Does this refi mean one LAR or two? Q. We had a second-lien balloon mature. We planned to refinance the remaining balance (no new funds) and issued a good faith estimate and new truth in lending document based on a full payout in five years. Subsequently, the customer decided she couldn’t afford the high payment, so we re-issued the GFE and TIL based on a ten-year amortization, with a five-year balloon. Would this require two entries on the HMDA LAR, or just one? A. Do not report a refinancing if, under the agreement, you were unconditionally obligated to refinance the obligation or were obligated to refinance subject to conditions under borrower control. However, if otherwise covered under the definition of a refinancing, the process for reporting applications that are changed in the middle of the process is left to the discretion of the reporting institution. For example, it is possible to treat the original five-year term request as withdrawn (one LAR entry) and the subsequent ten-year term request as a new “application” (second LAR entry). Alternatively, it is also possible to treat the transaction as one application and report on one LAR entry. Be as consistent as possible. (Response provided April 2012) Friends, family, and CAN-SPAM Q. Our bank is marketing a new HELOC product. Several of our employees have requested the ability to e-mail the flyer promoting this product to their family, friends, and potential customers using the employee’s bank e-mail address. Would these e-mails fall under CAN-SPAM rules since they are sent independently by bank employees and are not specific marketing department blasts? A. Yes, these fall under the CANSPAM Act. Despite the name, the Act doesn’t apply just to bulk e-mail. It covers all commercial messages, which the law defines as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” That means all e-mail containing promotional content. There is no “established business relationship” exception under this Act: the fact that someone is a current customer, friend, or family member is not an exception. A message to customers, friends and family announcing a new product line must comply with the act. (Response provided July 2012)
Leslie Callaway, CRCM, ABA Compliance Project Manager, and Mark Kruhm, CRCM, ABA Senior Compliance Analyst, and other ABA experts, answer ABA member questions here and in the online edition of Inbox at ababj.com. Member banks may submit questions to: compliance@aba. com. Disclaimer: Our answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of date shown at the end of each item.
ABA BANKING JOURNAL
Table of Contents for the Digital Edition of ABA Banking Journal - October 2012
ABA Banking Journal - October 2012
Ag bank rebrands—literally
Pass the Aspirin
Ready for the leadership ride
Community Bank Survival: Matter of attitude?
Card biz: Playing the hand you’re dealt
ABA At Your Service
100 years of service to farmers
ABA Banking Journal - October 2012