Pub. 9 2021 Issue 3

18 The Community Banker mibonline.org COMPLIANCE Q&A TILA. Q: I am working on a Loan Estimate (LE) for a purchase transaction on which we have not yet received a purchase agreement. The lender would like to include all of the seller fees on the LE so we would not have to redisclose the LE in the event we get a purchase agreement saying the buyer must pay all seller fees. Is there any harm in doing this? A: The LE intends to inform applicants of costs they are likely to incur as part of their loans. If there is some likelihood that the buyer will agree to pay the seller’s fees (such as if that is happening with some frequency in your market due to real estate market conditions), then it would probably be fine to include those normally seller’s fees on the buyer’s LE, showing to be paid by buyer/borrower. If there is no basis for believing it likely that the buyer will agree to pay the seller’s fees, it may or may not be compliant to disclose those fees on the LE as to be paid by the buyer/borrower. Regulation Z requires that these disclosures be made in “good faith.” The lender may need to probe a bit further to determine who will be paying these fees. Overdisclosing merely to avoid producing a revised LE is probably not a reasonable basis for “good faith” disclosures. EFTA/TISA. Q: We are researching increasing our international wire transfer fee. We are having a debate whether this would require 30-day prior notice to customers. The reason for the debate is that the fee is disclosed in our current Terms & Conditions. My position is that it would not be required because it is not a fee connected to an account but a service we provide, even if the person doesn’t have an account. Can you provide some clarification for us? Do we need to give prior notice to the customer? A: You are correct. If the fee is not charged “in connection with” the account or with making/receiving electronic fund transfers, then Regulation E and Regulation DD do not require that it be disclosed. While neither rule prohibits the bank from disclosing these non-account-related fees (allowing banks and thrifts to have consolidated fee schedules that they give with their regulatory disclosures), the mere inclusion of such fees in consolidated fee schedules does not make future increases subject to the rules’ advance notice requirements. Insider Credit. Q: We have an executive officer (EO) whose stepdaughter is applying for a car loan. The EO’s wife will be co-signing for the car loan. Being that we are in Wisconsin, a community property state, does this loan need board approval? A: Maybe not. If the loan proceeds are not transferred to the EO or used for their direct benefit, and the loan is to be repaid from the separate income of either the stepdaughter and/or the wife, then the loan is not considered an “extension of credit” to the EO. There is a Federal Reserve Staff Opinion on this type of issue (though it deals with the spouse’s business rather than their stepdaughter, the logic and reasoning seem to apply to this scenario). In such a situation, prior approval by the board would not be necessary (under Regulation O) since this would not be an “extension of credit” to the EO. However, if there is some direct benefit, etc., for the EO and other criteria are met, prior approval would be required. By Bill Showalter, Senior Consultant, Young & Associates, Inc. FALL 2021 Compliance Q&A