loans generally must conform to the requirements of Regulation O within 14 months of the borrower becoming an insider – by the time of the next new “extension of credit.” Also, remember that any overdrafts involving this new director’s deposit accounts must comply with Regulation O limitations from the time they become an insider. TILA. Q: We have a situation with a mortgage loan where the Loan Estimate (LE) was properly completed with the UST1 index, but the final Closing Disclosure (CD) was completed with an incorrect SOFR index. The note and mortgage both correctly indicate the UST1 index. The SOFR index tracks lower than UST1, so the disclosed finance charge and annual percentage rate (APR) are higher than those disclosed on the CD. We are unsure how to correct this since the loan has already been closed and booked. A: The TILA provides a “cure” provision if done timely. The bank would recalculate/verify the APR and FC it disclosed, but using the correct values for the amount financed and payment schedule(s) (if those in the CD were not correct/ in line with the note). If the APR verification program shows a violation, you should compute what (if any) restitution is due. If no monthly payment has yet come due, you should enter “1” in the space for number of payments made. Then, see what the program tells you is due. You will also need to issue a corrected CD since this is part of proper correction under the TRID rules. In addition, you should work with the bank’s legal counsel from the beginning on making this cure. BSA. Q: We have a situation where a customer brought in $10,000 cash on behalf of a business and $3,000 cash for a personal loan payment. The customer deposited it into a personal account on the same business day. Would we be required to file a Currency Transaction Report (CTR) on this customer? A: Yes, a CTR must be filed since you had over $10,000 in currency brought in by or on behalf of any person during any business day. EFTA/TILA. Q: The person who usually works our disputes is no longer here. Would you refresh my memory on the following: Our customer ordered tires online and authorized payment through Square but never received any tires and the phone number of the guy selling the tires is no longer valid. Does the bank incur a loss when our customer authorized this? A: It may depend on whether the customer used a debit or credit card. If a debit card was used, the bank is off the hook – no investigation under Regulation E or customer reimbursement. The EFTA and Regulation E do not have a provision about customers not getting what they ordered, purchased, etc. On the other hand, if it involves a credit card, TILA and Regulation Z have such a provision, and the bank will have to investigate and absorb at least some of the loss. TILA. Q: Our bank’s practice has been to have our lenders either obtain the signatures of persons entitled to rescind a particular loan on the rescission notice for non-cancellation or calling/e-mailing the individuals, then document the noncancellation section themselves after the rescission period has expired and before disbursement. We have talked to other banks who claim not to do this, and their practice is if they have not been contacted by “the date” the transaction is being canceled, then they disburse funds. What is the right way to manage this? We are leaning towards not gathering these signatures or doing the followup we are currently doing, but we would like some guidance. A: Regulation Z and the TILA do not require a signature or follow-up, just being “reasonably satisfied” that the consumer(s) has not canceled. Since almost no one cancels, most lenders go with “the date” business. However, I cannot fault the bank for what it has been doing – making sure the consumer(s) has not canceled before disbursing – which is the route some lenders choose to follow. Of course, you need to ensure your lenders/closers do not do what sometimes happens: getting borrowers (and non-borrowers entitled to rescind) to sign the confirmations at closing (with the correct date). This is hard to catch, as a reviewer, unless you happen to have a loan in your sample that had closed but not reached a disbursement date (rare) – or have this happen at your own closing for a rescindable loan (as happened once when my wife and I were refinancing our home). As they say, such a “confirmation” is not worth the paper it is printed on. 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. The Community Banker 11
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