Question:
If a consumer is disputing a POS transaction and it is not fraud (i.e. merchandise never received, service canceled and company debited account or any other reason than a fraud transaction), are we required under Reg. E to give provisional credit while we complete our investigation? Answer: As the customer has asserted that an error took place, you are required to conduct an investigation. Subject to certain limitations, if the investigation takes more than 10 days, you have to issue a provisional credit to the customer’s account. If your investigation reveals that the customer authorized the transaction in the amount transferred, then it would not be a Reg. E error. At that point, you need to provide a written explanation of the results of your investigation and debit any provisional credit. The term “error” means: (i) An unauthorized electronic fund transfer; (ii) An incorrect electronic fund transfer to or from the consumer's account; (iii) The omission of an electronic fund transfer from a periodic statement; (iv) A computational or bookkeeping error made by the financial institution relating to an electronic fund transfer; (v) The consumer's receipt of an incorrect amount of money from an electronic terminal; (vi) An electronic fund transfer not identified in accordance with § 1005.9 or § 1005.10(a); or (vii) The consumer's request for documentation required by § 1005.9 or § 1005.10(a) or for additional information or clarification concerning an electronic fund transfer, including a request the consumer makes to determine whether an error exists under paragraphs (a)(1)(i) through (vi) of this section. § 1005.11(a): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/11/#a In addition to following the procedures specified in paragraph (c) of this section, the financial institution shall follow the procedures set forth in this paragraph (d) if it determines that no error occurred or that an error occurred in a manner or amount different from that described by the consumer: (1) Written explanation. The institution's report of the results of its investigation shall include a written explanation of the institution's findings and shall note the consumer's right to request the documents that the institution relied on in making its determination. Upon request, the institution shall promptly provide copies of the documents. (2) Debiting provisional credit. Upon debiting a provisionally credited amount, the financial institution shall: (i) Notify the consumer of the date and amount of the debiting; (ii) Notify the consumer that the institution will honor checks, drafts, or similar instruments payable to third parties and preauthorized transfers from the consumer's account (without charge to the consumer as a result of an overdraft) for five business days after the notification. The institution shall honor items as specified in the notice, but need honor only items that it would have paid if the provisionally credited funds had not been debited. § 1005.11(d): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/11/#d Question:
I’m being told we can opt people in for overdraft protection. Is that true? Answer: Reg. E sets out the requirements for providing customers with overdraft services for paying an ATM or a one-time debit card transaction. Under the Reg. E requirements, before the bank can assess an overdraft fee for paying an ATM or one-time debit card transaction, the customer must affirmatively consent to such coverage. This does not mean that the bank cannot pay the overdraft item, it merely means that without the customer’s affirmative consent, the bank may not assess an overdraft fee for paying those items. (b) Opt-in requirement -- (1) General. Except as provided under paragraph (c) of this section, a financial institution holding a consumer's account shall not assess a fee or charge on a consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service, unless the institution: (iii) Obtains the consumer's affirmative consent, or opt-in, to the institution's payment of ATM or one-time debit card transactions; and § 1005.17(b)(1)(iii): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/17/#b-1-iii (2) Conditioning payment of other overdrafts on consumer's affirmative consent. A financial institution shall not: (i) Condition the payment of any overdrafts for checks, ACH transactions, and other types of transactions on the consumer affirmatively consenting to the institution's payment of ATM and one-time debit card transactions pursuant to the institution's overdraft service…. § 1005.17(b)(2)(i): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/17/#b-2-i Question:
We are moving to a new ChexSystem benefit whereby the credit score will be provided to us. However, we will not use the score in making the determination to deny an account opening. Since we are not using it, do we have to include the additional credit score disclosures? Answer: If you did not use a credit score in your decision, then there is no technical need to add include the additional disclosures. However, the issue comes in the form of showing that the bank did not actually use the score. So, if the bank does choose not to utilize the credit score disclosures, then it needs to thoroughly document that fact. Section 1100F of the Dodd-Frank Act amended the FCRA to include additional disclosure requirements when adverse action is taken because of the consumer’s credit score. ... But if the credit score did not play a role in the decision to take adverse action, these disclosures are not required. Fed. Res., Consumer Compliance Outlook, Adverse Action Notice Requirements Under the ECOA and the FCRA: https://consumercomplianceoutlook.org/2013/second-quarter/adverse-action-notice-requirements-under-ecoa-fcra/ Question:
I have a list of reasons for denial on a loan, but is there a separate list of reasons for denying a deposit that are standard reasons? Answer: Unfortunately, there is not a model list of reasons for deposit accounts. The bank may be able to modify some of the reasons in the model forms for credit accounts though, and you can find those in Regulation B here: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1002/C/ Question:
We are in the process of underwriting a Commercial 10 YR Term loan to a Church for the purpose of purchasing a single family residence (zoned as single family) that will be used as a place of worship. Is this a HMDA covered transaction or is there an exemption that exists that excludes this loan? Answer: If the loan will be replaced by permanent financing later, then it's possible that it might fall into the temporary exception: 1. Temporary financing. Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time. For example:... https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-3/#3-c-3-Interp Otherwise, if not, the bank may be able to document that this is not in fact used as a residence, and thus, does not fall into the definition of a "dwelling": 3. Exclusions. Recreational vehicles, including boats, campers, travel trailers, and park model recreational vehicles, are not considered dwellings for purposes of § 1003.2(f), regardless of whether they are used as residences. Houseboats, floating homes, and mobile homes constructed before June 15, 1976, are also excluded, regardless of whether they are used as residences. Also excluded are transitory residences such as hotels, hospitals, college dormitories, and recreational vehicle parks, and structures originally designed as dwellings but used exclusively for commercial purposes, such as homes converted to daycare facilities or professional offices. https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-2/#2-f-Interp-3 Question:
I was wondering do all checks over a certain dollar amount need to be verified for accurate signatures—can you tell me whether there is a requirement? Answer: There is not a particular threshold amount in the federal laws or regulations, or in the model UCC. So generally speaking, any specific threshold requirement would just be under the bank's internal policy. Question:
I'm not sure how to handle deferred student loan payments. I have a borrower that is working as a teacher and stated that her student loans would be paid for by the state. Does Appendix Q state that I can in essence ignore these debts? Answer: The bank can exclude them if they can show written evidence that they are not due until after 12 months from closing. Otherwise, they would need to be included, unfortunately, as set out here: 1. Projected Obligations a. Debt payments, such as a student loan or balloon-payment note scheduled to begin or come due within 12 months of the mortgage loan closing, must be included by the creditor as anticipated monthly obligations during the underwriting analysis. b. Debt payments do not have to be classified as projected obligations if the consumer provides written evidence that the debt will be deferred to a period outside the 12-month timeframe. https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/Q/#5-1-a Question:
For SCRA purposes, if a customer we know has been called into service comes into the bank to lower their rate, does the bank have to require proof of military service? Answer: No - there is not an actual requirement to collect or file proof of military status as license to reduce the rate under the SCRA. However, the bank may have internal procedures mandating personnel to do so, and this is quite common in the industry. In addition, ensure that if the bank does have a policy related to this, that it is applied consistently for fair lending purposes. Question:
We have a commercial loan transaction where the borrower is purchasing a commercial building and repurposing it into 18 residential condos. Is this loan HMDA reportable? Answer: Unfortunately, the regulation does not specifically address the situation of a non-residential building is being converted to a dwelling after consummation. While there is an argument that this is not a "dwelling" at consummation, in grey areas, we'd generally interpret that it's more conservative to report than not. So the bank may choose to report this to be on the safe side, but whichever way it chooses, it should document its reasoning and apply it consistently to any similar situations that may come up in the future. Question:
If a consumer is disputing a POS transaction and it is not fraud (i.e. merchandise never received, service canceled, and company debited account or any other reason than a fraud transaction), are we required under Reg. E to give provisional credit while we complete our investigation? Answer: As the customer has asserted that an error took place, you are required to conduct an investigation. Subject to certain limitations, if the investigation takes more than 10 days, you have to issue a provisional credit to the customer’s account. If your investigation reveals that the customer authorized the transaction in the amount transferred, then it would not be a Reg. E error. At that point, you need to provide a written explanation of the results of your investigation and debit any provisional credit. The term “error” means: (i) An unauthorized electronic fund transfer; (ii) An incorrect electronic fund transfer to or from the consumer's account; (iii) The omission of an electronic fund transfer from a periodic statement; (iv) A computational or bookkeeping error made by the financial institution relating to an electronic fund transfer; (v) The consumer's receipt of an incorrect amount of money from an electronic terminal; (vi) An electronic fund transfer not identified in accordance with § 1005.9 or § 1005.10(a); or vii) The consumer's request for documentation required by § 1005.9 or § 1005.10(a) or for additional information or clarification concerning an electronic fund transfer, including a request the consumer makes to determine whether an error exists under paragraphs (a)(1)(i) through (vi) of this section. § 1005.11(a): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/11/#a In addition to following the procedures specified in paragraph (c) of this section, the financial institution shall follow the procedures set forth in this paragraph (d) if it determines that no error occurred or that an error occurred in a manner or amount different from that described by the consumer: (1) Written explanation. The institution's report of the results of its investigation shall include a written explanation of the institution's findings and shall note the consumer's right to request the documents that the institution relied on in making its determination. Upon request, the institution shall promptly provide copies of the documents. (2) Debiting provisional credit. Upon debiting a provisionally credited amount, the financial institution shall: (i) Notify the consumer of the date and amount of the debiting; (ii) Notify the consumer that the institution will honor checks, drafts, or similar instruments payable to third parties and preauthorized transfers from the consumer's account (without charge to the consumer as a result of an overdraft) for five business days after the notification. The institution shall honor items as specified in the notice, but need honor only items that it would have paid if the provisionally credited funds had not been debited. § 1005.11(d): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1005/11/#d |
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