Pub. 6 2018 Issue 1

13 Spring 2018 The Community Banker COMPLIANCE Q&A – WINTER 2018 By Bill Showalter, Senior Consultant, Young & Associates, Inc. Young & Associates provides banks and thrifts with support for their compliance programs, independent reviews, and in-bank training, as well as a full menu of management con- sulting, loan review, IT consulting, and policy systems. MLA. Q: Does the disclosure required by the regulation implementing the Military Lend- ing Act (MLA) also has to be given to a cosigner? A: This disclosure would have to be given to a cosigner only if they met the definition of “covered borrower,” which means they are the military member or a dependent. Otherwise, no, the disclosure would not be required for a cosigner. TILA. Q: Our borrower is purchasing a lot. If we issue a Loan Estimate (LE) today, what is the earliest we can close this loan? A: The lender must make sure the LE is in the customer’s hands (not just placed in the mail) “not later than the seventh business day before consummation of the transaction.” So, the earliest the loan may close is the seventh (7) business day after delivery (in the borrower’s hands) of the LE. If you just put the LE in the mail, then the earliest the loan may be closed would be on the tenth (10) business day after putting it in the mail. This is because you have to wait un- til the third (3) business day after putting the LE in the mail to presume receipt/delivery. Then, consummation may occur on the sev- enth business day after that. The seven-busi- ness-day count begins when the LE is verified to be in the borrower’s hands – through hand delivery or some other means. In addition, do not forget to deliver the Closing Disclosure to the borrower (into their hands) no later than the third business day before closing/consummation. So, if the LE was in the borrower’s hands today, then the CD should be in their hands no later than the fourth business day after today, so the closing can proceed on the seventh business day after today. Advertising. Q: The bank’s marketing person wants to start digital advertising. The bank would purchase key words and if these words showed up in a person’s online search they could click on a link that would bring up a bank advertisement. Is there anything, other than the triggering terms, that I should be aware of that could give us trouble? A: Digital advertising is subject to all the advertising rules – Regulation Z and Regu- lation DD triggering terms, fair lending (no discrimination/discouragement and “Equal Housing Lender”), “Member FDIC” – just like all the bank’s advertising using other media (print, television, radio, website, etc.). EFTA. Q: We have a home equity line that the draw period has ended and is now in repayment. The customer is unable to make the payments so we will do a workout with them. My question is with a workout are we allowed to require automatic payments? I know Regulation E states this is prohibited as a condition of a loan but what about when you do a modification and workout plan? A: No, there is no exception from the com- pulsory use prohibition for a workout loan. You can give the customer a rate incentive for using automatic payment, as long as there is an option (not at a reduced rate) for not using the automatic payment option. ECOA. Q: If we have a loan application that we did not make a credit decision on and the customer decides not to go through with it (withdraws), do we have to send a notice let- ting the customer knowwe are closing the file? A: No, Regulation B does not require any notice be sent to an applicant who withdraws their application, before or after a credit decision is made. Some lenders do so to document the outcome of the application, but it is not required. Just noting “withdrawn (date)” on the application and supporting documents that the bank retains is sufficient from a compliance standpoint. BSA. Q: We had a business customer deposit $4,000.00 in cash on one day. On the same day, they also withdrew $7,500.00 in cash from their account. Should we file a currency transaction report because together the cash in and cash out exceed $10,000.00? A: No, a CTR is not required in this case. The trigger for filing a CTR is over $10,000 in currency going in the same direction – either in or out. You are not required to total cash deposits with cash withdrawals during a par- ticular business day – just total deposits with deposits, and withdrawals with withdrawals, and both with cash/currency exchanges (where you have currency both coming in and going out). EFTA. Q: The bank has an overdraft pro- gram – “Bounce Protection” – that is offered to everyone with a checking account. There are times when the customer does not want a debit card. My question is this. If the customer does not receive a debit card does the consent form for overdraft ser- vices have to be given? The way I’m reading Regulation E is that this form would not be needed if a debit card is not given out. If at a later time the customer wants a debit card, the consent form/disclosure would be given out and completed. Is this correct? A: On the disclosure, you are correct that you do not have to give it automatically when an account is opened – the bank must give it before it charges a fee for an overdraft involv- ing either a one-time debit card transaction or any ATM transaction. So, if debit cards are your only form of ATM cards, then the disclosure would not have to be given if the customer chooses not to have a debit card initially. But, later, if the custom- er chooses to get a debit card, be sure the disclosure is given at that time. EFAA. Q: If we no longer accept deposits at our ATMs and are changing the wording on our funds availability policy disclosure, do we have to send it out to all customers or just use it going forward? A: Since the change does not affect customers’ access to funds after deposit, no change in terms notice seems needed – unless the bank has been giving customers a list of ATMs with the initial funds availability disclosure to indicate which are proprietary (or nonproprietary) ATMs at which deposits are accepted. Customers must be given notice of any changes to such a list (including that it is going away).