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Question & Answer
Question: We purchase automobile loans from several dealers. Several of the dealers sell automobiles covering a wide price range and some of the loans are for $30,000 or more. One of the dealers is not providing Truth in Lending disclosures for the high-amount loans. Can we purchase these loans without compliance problems?
Answer: This dealer has read Regulation Z! The coverage of the regulation applies to all consumer credit up to $25,000.01. Consumer credit over $25,000 that is not secured by real estate or a dwelling is exempt. When Truth in Lending first took effect this limit covered almost all car loans. In today's market, however, many vehicle purchases are exempt. Technically, loans for amounts greater than $25,000 that are secured by an automobile purchase are exempt. For compliance purposes, you have two choices. You may treat the exempt loans as exempt and safely purchase car loans of more than $25,000 without Truth in Lending disclosures. However, many compliance managers believe that permitting these purchases has some risk. Implementation of this policy requires the loan purchasers to be alert to the $25,000 rule. These compliance managers prefer to have disclosures even when not needed rather than risk missing some when required. The choice is yours.
Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 13, 8/96
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