ABA Banking Journal - July 2010 - (Page 37)
ABA COMPLIANCE CENTER | inbox
Must bank make good for customer’s privacy goof?
Q. our bank’s customer was scammed by someone who called, claiming to be from the bank. The fraudster asked for the customer’s Pin and card number and then proceeded to withdraw funds from the customer’s account. Are we required to reimburse the customer under a Reg E claim? We feel that this was obviously a scam and the customer should have known better than to reveal private information. Therefore, we believe that the customer “authorized” the transaction. Can we deny the claim? A. The Commentary to Reg E 205.2(m) defines “Unauthorized Electronic Fund Transfer” as an “Access device obtained through robbery or fraud. An unauthorized EFT includes a transfer initiated by a person who obtained the access device from the consumer through fraud or robbery.” The term “access device” includes debit cards; personal identification numbers (PINs), telephone transfer and telephone bill payment codes, and other means that may be used by a consumer to initiate an electronic fund transfer (EFT) to or from a consumer account. Based on this, we think this would be a valid Reg E claim. The bank should reimburse the customer. (3/11/10) CD penalties are not fees Q. is a penalty for early withdrawal of a CD considered a maintenance or activity fee under Regulation DD? A. No, it is considered a penalty, regardless of whether it is a mandatory penalty as required under Regulation D (12 CFR 204.2(c)(1)(i)) or a bank-imposed penalty requiring the forfeiture of a specified number of days of interest for early withdrawals. Although this must be disclosed per Reg DD (12 CFR 230.4(6)(ii)), it is still classified as a penalty and not a fee. (2/5/10) When a home loan isn’t a “home loan” Q. We have a loan that is secured by a CD, but the loan’s purpose was for purchase of the customer’s primary dwelling. When we input the information into our Home Mortgage Disclosure Act Loan Application Register system, we received a message that in order for the loan to not be secured by a dwelling, it must be classified as a home improvement loan. How do we report it correctly? A. The definition of “home purchase” under 203.2(h) of Regulation C is “a loan secured by and made for the purpose of purchasing a dwelling.” Therefore, if the loan to purchase a dwelling is secured solely by a CD or by any items other than a dwelling then it would not be HMDA reportable. (2/5/10) A disagreement with lenders over RESPA Q. We interpret the Real Estate Settlement Procedures Act FAQs of the Department of Housing and Urban Development to mean that we must disclose owner’s title insurance on the good-faith estimate for all purchase transactions, even though we do not require that coverage. our lenders disagree, stating that because “the GFE is a disclosure of charges the borrower is ‘likely to incur in connection with the settlement’,” that we should not be required to disclose owners title insurance because it is unlikely that it will be purchased with the transaction. Do you agree with the lenders’ interpretation? A. We do not agree with your lenders on this issue. The fact that you don’t “require” the coverage is irrelevant—HUD wants borrowers to know this is a cost that could be associated with their loan. According to Question 1 on p. 27 of HUD’s FAQs regarding the GFE and block 5:
“Q. Do loan originators have to provide a price for owner’s title insurance on the GFE?
“A. Loan originators must provide an estimate of the charge for an owner’s title insurance policy in Block 5 ‘Owner’s title insurance’ on the GFE on all purchase transactions. For non-purchase transactions, the loan originator may enter NA (Not Applicable) in this block.” (http://tinyurl.com/ resparules) The instructions in HUD’s Regulation X state, “Block 5, “Owner’s title insurance.”—In this block, for all purchase transactions the loan originator must provide an estimate of the charge for the owner’s title insurance and related endorsements, regardless of whether the providers are selected or paid for by the borrower, seller, or loan originator.” (2/5/10)
Leslie Callaway, CRCM, CAMS, 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 only may submit questions to: email@example.com. Disclaimer: Our answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of date shown for each item.
JuLY 2010 | ABA BANKING JOURNAL | 37
Table of Contents for the Digital Edition of ABA Banking Journal - July 2010
ABA Banking Journal - July 2010
Of Mutual Interest
Pass the Aspirin
What’s PayPal Up To?
Brother, Would You Take a Lease?
Surveys & Trends
ABA Banking Journal - July 2010