TILA. Q: If the borrower shops for a title company, does the title closing/settlement fee still go into the annual percentage rate (APR) and finance charge calculations? The title company has a much higher fee than we normally encounter, which is raising the APR.

A: A fee for conducting the closing/settlement is always a finance charge, no matter who imposes the fee and no matter whether the borrower shopped for the title company that is charging this higher fee. And since the borrower was shopping for a title company, it sounds like the bank requires the use of a title company and the closing/settlement service/event, which satisfies the “third-party test” you mentioned (in 12 CFR 1026.4(a)).

So, put it in the finance charge and take it into account in your APR calculation.

ECOA. Q: The bank has recently implemented an online application for secured consumer loans. We received an application from a borrower who lives in Pennsylvania, but we are located in Illinois. We are in the process of putting a hard stop in place in the online application program to not allow online applications for applicants outside of our bordering states.

We tried to reach the applicant by phone and email to confirm that they intended to apply with our bank, but have not received a response. I do not want to send a notice of incomplete application (no income documentation provided) when we know that we would not approve a loan outside of our lending area, even if additional information is provided. I do not find that any of the standard denial reasons fit this scenario. We have not used “Other” in the past, but would it be acceptable to choose “Other” and enter “Applicant resides outside of lender’s lending area”?

A: Yes, that would be perfectly acceptable. I am sure you have heard the general rule to stay away from the “other” reason — unless nothing else fits. Well, in this case, none of the other reasons fit (though, I believe some lenders will use the “we do not make that type of credit” (outside our area) reason. Your approach seems more informative to the applicant (which is the point of the adverse action notice process) than the “we do not …” approach.

EFTA. Q: I am looking through Regulation E for information on periodic statements. Specifically, I am looking for support from the regulation that the bank must ensure that the customer is able to receive their statement.

Our management suggested that we start charging customers a fee to mail their statements. If the customer does not want to incur the fee, then we would hold their statement for pickup for 30 days. After 30 days, we would destroy their statement. 

Does this violate Regulation E requirements?

A: The general rule in Regulation E is that the bank must “send a periodic statement for each monthly cycle in which an electronic fund transfer has occurred; and shall send a periodic statement at least quarterly if no transfer has occurred.”

Holding statements for pick up is something that the bank may permit — but only at the customer’s request. It may not require that customers come in to pick up their statements. The requirement is to send the statements to customers.

One other exception provides that a financial institution need not send statements to consumers whose accounts are inactive as defined by the institution.

I have only seen fees for printed and mailed statements as an alternative to electronic statements. If the customer does not want e-statements, then they are charged a fee to cover printing and mailing costs for a physical statement. So, in either case, a statement is sent — a free e-statement or a fee-charged hard copy statement.

TISA. Q: Our bank wants to send the following change in the terms message on statements:

Important Notice: Previously, the tiers associated with your checking and savings accounts remained unchanged; however, they are now subject to change. Additionally, for accounts that do not currently have tiers, we reserve the right to introduce tiered structures in the future as part of our ongoing efforts to enhance our banking services. As a result, your Truth in Savings disclosure has been revised to reflect these changes. You can obtain a copy of the updated disclosure by visiting any of our financial centers, emailing us at _____@______.com or calling us at ______. If you have any questions or need further information, we’re happy to assist.

We want to have the option to add tiers to products that are not tiered or adjust tiers to products in the future without any additional disclosure beyond the statement message below. The Truth-in-Savings disclosures would be updated to include language with the bank’s option to add or modify tiers.

A: Whether the changes benefit the customers is not clear from the limited information we have been given here. If a tier(s) being added to an existing tiered product has higher interest rates than the existing tier structure, then that benefits the customer. If the bottom tier of a newly-added tiered structure equals the existing rate on the customer’s deposit product, with the remaining tiers at higher rates, then this again would seem to benefit the customer. But if any rates in any new tiering scheme are lower than the customers’ existing rates, then there is no benefit to the customer.

If a change unequivocally benefits a customer for the remaining term of their account, then advance written notice is not required. Otherwise, notice must be sent at least 30 days before the change is effective.

The bank should also consult with its legal counsel to determine if your state law allows such unilateral changes to deposit contracts, or if you need the customer’s agreement.

Any change-in-terms notice, whether on/with a periodic statement (if all required language can be fitted in) or mailed separately, would need to fully disclose what the change consists of.

The general language the bank proposes does not appear to fulfill the information requirements of Regulation DD for a change-in-terms notice. There are no account-specific details, which are required. This generic message could serve as some sort of early notice of potential upcoming changes, with more specific, TISA-compliant notices to come later when specific changes are made.

ECOA. Q: Do the reasons on the adverse actions notice (AAN) for a loan applicant and the co-applicant need to be the same on the separate notices? May we list just the value or type of collateral not sufficient on the AAN for the co-applicant, or do we have to also show all of the reasons that the primary applicant is being denied? 

We received a loan application with a co-signer. We are denying the loan application for multiple reasons. The primary applicant has poor credit history, too high of a debt-to-income ratio and wants an unsecured loan. His AAN is straightforward. The issue is the AAN for the co-signer. He would be a good co-signer except he also wants the loan to be unsecured. The lack of collateral is the sole reason we are denying him. While we do make unsecured loans, such loans are generally for people we have a long history with and are for small dollar amounts. This loan is to be for $12,000, and the applicants have no history with us.

A: No, the reasons for adverse action do not have to be identical on co-applicants’ AANs. The reasons may be identical since the Federal Reserve Board in the past basically said there should be no expectation of privacy among multiple applicants for credit. However, it is permitted to tailor the reasons disclosed for each applicant and put only the reason(s) that apply to that applicant on their individual AAN.

EFAA. Q: The bank generally makes funds available the day after the deposit is made. 

When placing a large deposit check hold, I know that the first $275 must be available the day after the deposit, and the next $6,450 is subject to a two-day hold. Do we have to give a case-by-case hold notice for the two-day hold? If so, can we show both holds on the same notice? We would give the large deposit hold notice for the balance over $6,725.

A: Yes, a case-by-case hold notice must be given if the bank wants to impose a two-day case-by-case hold on the bulk of the first $6,725 ($6,450). And, yes, the notice can be combined with the large deposit exception hold notice for the amount that exceeds $6,725. In fact, at least some of the forms companies (well, now software providers mostly) have a special combined form for large deposit holds — the case-by-case hold for the first part of the deposit and the exception hold for the excess amount, all on one form/notice.

TILA. Q: We closed a TRID mortgage for a borrower four years ago on a horse farm/boarding/training facility with their personal residence. Now, the borrower would like a second loan to add on two buildings and expand the horse arena. I intend to place a junior lien on the real estate. This is a business-purpose loan, but since the first mortgage was done as a consumer loan under TRID, I am confused about how to do this second loan. Any guidance?

A: The previous loan does not impact this subsequent loan. Lenders need to look at each loan transaction on its own. It sounds like the first mortgage must have been primarily for consumer purposes, so the bank followed TRID rules. But, if this current loan transaction is to be primarily for business/commercial/agricultural purposes, then it is exempt from Regulation Z — no TRID (or other TILA) disclosures or rescission required.

Keep in mind, of course, the flood insurance rules and fair lending (nondiscrimination) requirements do still apply.