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Question & Answer
Question: Our trust department believes that they are not subject to certain consumer compliance regulations including BSA and Truth in Lending. What is your position on this?
Answer: They can't get out of your compliance committee meetings that easily. The fact is that for both of the laws you mentioned, the trust department is clearly covered. For purposes of BSA, all departments in the bank are covered. In the effort to trace criminal activity and inhibit the movement of funds acquired through criminal acts, allowing exemptions for trust departments would provide a superhighway for criminals. If a drug dealer could avoid having CTRs filed simply by being a trust customer, the law would be useless.
Trust departments are also subject to consumer credit protection laws. If a trust makes a loan, such as a mortgage to the purchaser of property owned by the trust, that borrower should get disclosures under the Truth in Lending Act. The coverage test used in the commentary is whether the trust department, not the specific trust has made the number of loans that trigger coverage as a creditor. It may be worth reminding your trust department that because Truth in Lending, and other consumer protection laws, are designed to protect the consumer, they provides only very limited exceptions. The exceptions from the act generally apply to situations where the customer arguably does not need the protection of the information provided in the disclosures or to situations where the entity making the loan truly has no access to the expertise needed to prepare the disclosures.
Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 12, 7/96
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