Is a Guarantor a Customer to CIP
by Mary Beth Guard, BOL Guru
Question: My question relates to how a guarantor is classified under the new regulation. Is a guarantor a customer or non-customer? Has he or she established a continuing relationship with the institution? If I remember correctly, someone who is purely a guarantor on another person's or entity's note would not have to be taken through the bank's customer ID program.
Answer: It is not possible to give you an absolutely definitive answer because in the final rules and prefatory comments the terms "guarantor" and "guarantee" are never used. The rules simply do not address the issue of whether a guarantor is considered to be a customer. The most conservative approach would be to consider the guarantor a customer until such time as the regulators specify otherwise in a Q&A document they've promised to produce. There are good arguments to be made, however, for the proposition that a guarantor does not fall within the scope of a "customer opening a new account", since the guarantor is not applying for the loan, but is simply adding his financial strength to assure repayment.
The original version appeared in the July/August 2003 edition of the Oklahoma Bankers Association Compliance Informer.
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