The issue of whether the bank can require that the student be present for a deposit to count toward the needed 18 deposits within 20 weeks is not addressed by the Truth in Savings Act or the other federal consumer rules we cover on the hotline. You should consult with the bank’s attorney regarding what state law may provide in this instance. TILA. Q: If we offer a preferred rate for using an automatic payment on a consumer installment loan, is that information required to be in the Truth in Lending (TIL) Disclosure or is having it listed in the note sufficient? We’re changing to a new LOS, and the preferred rate verbiage that prints on the disclosure is calculating differently than what we typically use. I have the option to add custom verbiage to the note to rectify this; however, there isn’t a way for me to customize the disclosure. A: The general rule is that the TIL disclosures must reflect the terms of the underlying note. So, if there is a preferred rate offered for agreeing to set up automatic repayment, and the customer opts for the auto-pay, then the disclosures (payment schedule, APR, finance charge, etc.) will be based on that preferred rate. In addition, if the note provides that, should the customer cancel the auto-pay or not maintain enough deposit balance to accommodate the auto-pay or whatever, then the interest rate reverts to the full indexed/“un-discounted” rate in the note (presuming that this rate is in the note, otherwise it probably cannot be enforced), then that fact also must be disclosed in the TIL disclosure. TISA/EFTA. Q: If a bank is converting its accounts due to a merger, would it just give the old TISA/EFTA disclosures and the TISA/EFTA disclosures that would go into effect after the conversion at the time a new account is opened during the 30-day period before the merger effective date? Regulation DD requires 30 days’ advance notice for changes in terms, while Regulation E requires at least 21 days’ notice. However, for accounts opened within 30 days of the effective change due to the merger conversion, I would assume giving both the old and the new disclosures at account opening would suffice, as this would then not technically be a change in terms from the forms given at account opening, as they received both. The bank would just need to ensure the customer was informed of when the new disclosures go into effect, correct? A: From your description, these accounts are being opened by the bank being acquired/merged into another before the actual merger effective date. Yes, the bank could give two full sets of TISA and EFTA disclosures: one that will be effective for less than 30 days and one that goes into effect on the merger effective date. It would be prudent to clearly label the second set with an effective date so there will be no question in customers’ minds when they go into effect. An oral disclosure of that effective date may not comply, and would definitely be inferior to having the effective date printed on the disclosures. ECOA. Q: We have recently implemented an online consumer secured loan application. We received an application from someone who lives in Pennsylvania, but we are located in Illinois. We are in the process of putting a hard stop on our online application program to prevent online applications for applicants from beyond our bordering states. We tried to reach this applicant by phone and email to confirm that they intended to apply with our bank, but have not received a response. We 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. None of the standard denial reasons seem to 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 seems perfectly acceptable. You have probably 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 than the “we do not … ” approach, which is the point of the adverse action notice process. 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 consulting, loan review, IT consulting and policy systems. 12 Community Banker
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