ABA Banking Journal - February 2013 - (Page 47)

ABA COMPLIANCE CENTER | inbox Getting “no-cost” loans right under Reg Z Q. I am performing a truth in lending compliance review of our mortgage department. I have come across a “no-cost” loan. I am unsure about Regulation Z and the calculation of the APR for this type of loan. If the bank pays a typical finance charge item (i.e. loan origination fee) should it still be included in the finance charge and the APR calculation? A. No. Items paid for by other than the borrower or otherwise not imposed upon the borrower are typically exempt from the finance charge, especially if the borrower is not obligated to pay for it. For examples, see the Regulation Z Commentary, Section 226.4--Finance Charge, at 4(a)-2 and 4(c)(5)-1 and 2. 1. Comment 4(a)-2, costs of doing business: “Charges absorbed by the creditor as a cost of doing business are not finance charges, even though the creditor may take such costs into consideration in determining the interest rate to be charged or the cash price of the property or service sold.” 2. Comment 4(c)(5) -1, Seller’s points: “The seller’s points mentioned in Section 1026.4(c)(5) include any charges imposed by the creditor upon the noncreditor seller of property for providing credit to the buyer or for providing credit on certain terms. These charges are excluded from the finance charge even if they are passed on to the buyer, for example, in the form of a higher sales price. Seller’s points are frequently involved in real estate transactions guaranteed or insured by governmental agencies. A commitment fee paid by a non-creditor seller (such as a real estate developer) to the creditor should be treated as seller’s points. Buyer’s points (that is, points charged to the buyer by the creditor), however, are finance charges.” 3. Comment 4(c)(5)-2, Other seller-paid amount : “Mortgage insurance premiums and other finance charges are sometimes paid at or before consummation or settlement on the borrower’s behalf by a non-creditor seller. The creditor should treat the payment made by the seller as seller’s points and exclude it from the finance charge if, based on the seller’s payment, the consumer is not legally bound to the creditor for the charge. A creditor who gives disclosures before the payment has been made should base them on the best information reasonably available.” (Response provided December 2012.) When a joint decision isn’t joint... Q. Our overdraft program includes one-time debit and ATM transactions, so we provide for opt-ins in accordance with Regulation E. If we have a joint account and one owner opts in, do we need the other owner’s consent as well? A. For joint accounts, it is not necessary to obtain affirmative consent from all account holders. If one holder opts-in, the bank may honor the request and pay all covered debit card overdrafts and impose a fee. Where one joint account holder opts in and the other opts out, the last (most recent) communication from one of the holders governs. Be sure the person understands, however, that the opt-in authorizes the bank to pay one-time debit and ATM transactions for the entire account, not just transactions using the card of the person who opted in. (Response provided December 2012.) CTRs: When do you check ATM box? Q. We are debating when to check the ATM box on a currency transaction report. Do we only check that box if we are unaware of who conducted the transaction or do we check it regardless of whether or not we know their identity?        A. If you are talking about CTR Form 104, that section is intended to be used if Section B (conductor information) of Part I is left blank or incomplete (if you do not know the identity of the conductor). In the new electronic CTR, the ATM box is included under Part II: amount and type of transactions. Instructions state only that you mark the ATM box if the transaction included an ATM cash transaction. Therefore mark that box whether you knew the conductor’s identity or not. (Response provided December 2012.) Are we free to call this “free”? Q. Can we call a checking account “free” if the customer signs up for an optional overdraft transfer from another linked account and we assess an overdraft transfer fee when the customer overdraws his or her account and we have to transfer funds to cover the overdraft? A. Yes. A fee for optional services such as overdraft transfers does not take the account out of the “free” bucket. This is a fee for an “option” and not a fee for a transaction that a consumer might expect to be included as part of the account. (Response provided January 2013.) 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 dates shown. February 2013 | ABA BANKING JOURNAL | 47 http://www.ababj.com

Table of Contents for the Digital Edition of ABA Banking Journal - February 2013

ABA Banking Journal - February 2013
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
“I’m not just a banker anymore”
Pass the Aspirin
Tech Topics
High-energy banker—a tale of four cities
What’s in it for the customer?
Wealth management goes holistic
Compliance Inbox
ABA At Your Service
Legal Issues
First Person

ABA Banking Journal - February 2013

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