We do not offer the traditional higher education loans [postsecondary] described in this ANPR's model disclosures. We could, however, make straight personal loans to an applicant if they wanted to borrow for college, Master or PhD tuition expenses.

My question is: "Do our unsecured personal loans fall outside this ANPR as they are not the 'traditional' student loans .... or must we now conform our occasional UNSECURED CLOSED-END POSTSECONDARY EDUCATION LOAN to these Reg Z amendments ???

Here is the website that will pull up the FRB's 03/11 Press Release:
http://www.federalreserve.gov/newsevents/press/bcreg/20090311a.htm

Someone's advice would be greatly appreciated. Thank you.

I'd like to re-kindle this thread - with the recently released Reg Z amendments under HEOA - sounds like some of our standard unsecured consumer type loans might be covered?

I'd like to bump this back up to the top before I approach managment about this as I've seen a lot of "education" loans this week for school clothes, 3 month short term single payment term loans for tuition for son/daughter/granddaughter... this week.

Seems as though no one wants to interpret regular vanilla consumer loans as education loans? (Maybe we already know our answer. And we are hoping for another one?)

I had this same concern and when I posted my question, I believe I only got one response which was yes, these are covered - even though you don't have a traditional student loan program. If you have, for example, an unsecured loan and the applicant indicates the purpose is to pay for college expenses in any way, the loan is subject to these rules. Which tells me that every bank across the country will have to include these application disclosures with their consumer loan applications. I've read through the final and didn't see anything that caused me to believe otherwise, but I keep hoping that I must be wrong!

Ok, so this applies to -
"creditors making private education loans" (from the summary)and there are some exceptions - funded by a credit card, secured by RE, open-ended plans,a multiple purpose loan...

So, I asked myself, "What is a private education loan?"

From the reg:
A private education loan would be a loan that is not made, insured, or guaranteed under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) and is extended expressly, in whole or in part, for postsecondary educational expenses to a consumer, regardless of whether the loan is provided through the educational institution that the student
attends."

So, I asked myself, "What are postsecondary educational expenses?" And wouldn't you know it, they give us some examples, although a proposed comment states that it's not an exhaustive list: "Examples include tuition and fees, books, supplies, miscellaneous personal expenses, room and board, and
an allowance for any loan fee,origination fee, or insurance premium charged to a student or parent for a loan incurred to cover the cost of the student’s attendance."

So, I take it that private school tuition loans for high/middle/elementary school students - excluded from this reg. HOWEVER, as it stands, if the consumer states, "I want to borrow this money to buy a laptop because I need it to pursue my college diploma. This MIGHT be interpreted as an "education loan". My short term tuition loans (bridges the time the consumer gets their actual government loan $, and when tution was due.) are now covered. Any loans that we do that might cover housing expenses for the college bound, would be covered.

At least it is still a "proposal".

No use screaming to management for this back to school season, "The sky is falling! The sky is falling!"

I'll wait till it's finalized, and wait to start screaming in October when we start doing those implemented Reg Z things incorrectly...

It looks like the final rule was published on August 14, 2009 in the Federal Register. I can't find a link on the Federal Reserve page yet, but this was in the top stories section of BOL on Friday. The rule has an effective date of September 14, 2009 with compliance mandatory February 14, 2010. I haven't read the 60+ pages yet to determine how it will apply to our institution.

Here's a link to the final rule in the 8/14/09 issue of the Federal Register.

http://edocket.access.gpo.gov/2009/pdf/E9-18548.pdf

I haven't read it yet. My assistant indicated that the FRB included language in the final rule that would seem to require a creditor, who gets an application for an unsecured personal loan or an account loan that indicates in the "Loan Purpose" section that a purpose of the loan is to pay post-secondary educational expenses, to comply with this new rule.

That's my preliminary understanding as well.

What about refinancing loans that were for post-secondard educational expenses? Would those fall under this new rule?

I thought I had this all figured out.....unsecured personal consumer loans would not fall into this regulation. I don't see how a $1500 personal loan for books would be covered. Take a look at the disclosures. A personal loan doesn't fit into any of the disclosures in the models provided in the FRB press release of July 30.

http://www.federalreserve.gov/newsevents/press/bcreg/20090730a.htm

And, a new Loan Officer position would have to be designed so someone would understand all the ins and outs of the government-regulated special programs. No one in my bank knows any of this 'stuff'.

P.S. I don't think a refi would fall into this category because the proceeds are not going to a secondary school.

The model forms all seem to say that "if you file bankruptcy you may still have to pay the loan back."

I hate to even say "may" since you will not have to pay us back if you file bankruptcy, (unless there is a bar to discharge due to some criminal act).

I've read some of the legislation --- Staff Commentary is the best to start out with, so ------

Yes, that would apply.FDIC Official Staff Commentary 46(b)(5) Private Education Loans, Para 1....."A private education loan is ..... as well as loans extended to consolidate a consumer's pre-existing private education loans."

In fact, the next paragraph "2. Multiple Purpose Loans, i- Definition and ii-Coverage" confirm that a simple personal loan request, even when only part of the proceeds will go towards postsecondary educational expenses, Is Considered Part Of This Regulation.

Now ---- I have no idea HOW I am going to learn about 'self-certification', Perkins, Stafford, Plus Loan Programs so I can train our loan officers. Any Ideas.....? I'm counting heavily on BOL and a webinar to give it all to me !!

Ditto. Really confusing what loans are covered under these new rules specifically. Guidance on this topic would be great.

DATES: Effective Date: September 14,
2009.
Compliance Date: Compliance is
optional until February 14, 2010.

As compliance is optional until Feb 2010, the new requirements will be required for any loan which meets the purpose of post education loan, except for open-ended or secured R/E or dwelling secured loan. Unless you do not extend credit for this purpose, highly unlikely, you will need generate the required disclosures (30 day approval with no changes and 3 day recession to cancel will apply). Loans for this purpose may also be in danger of diappearing due to overly burdensome regulation. Additional training!!!

and here is the student loan issue Reg Z change effective 2-14-2010- which could be stickied as well.

After reading the proposal summary and the final rule it sounds like the new Application disclosures would include the interest rate rather than an APR-
1-Do you agree?

This also states they don't want to see where we have structured a loan as open end credit to avoid all the new disclosures.
2-I wonder if we could give them an option of a real estate secured or an open end loan?

3- If the loan is made to the parent's rather than the student, would this rule still apply?

I like Mind Boggled's #3: can we exclude loans that are made to the parent vs the student?

So is my understanding correct that compliance is effective 2/14/2010 so that is when we need to make sure disclosures are given?

2/14/2010 is the mandatory compliance date, if you choose you can comply before that but at that point you no longer have the choice.

Well, that is and stay in compliance.

I am a little confused looking at the model forms. We do not offer consumer loans with variable rates (except HELOCs) and all the examples state "Your loan has a variable rate". Was there an exclusion for fixed rate loans somewhere I missed on this?

Look at the reg itself. Approval disclosures: 226.47(b)(1)(ii) Whether the interest rate is fixed or variable.

I did, but you only get "safe harbor protection" if you use the model forms and there does not appear to be a form for fixed rate loans. Now, I know we can alter the forms, but I was just wondering if in reading the upteen pages of the reg, I missed something regarding fixed rate loans. I don't want to alter the form and lose the protection. I

Point taken. I was only referring to the question of a possible exclusion for fixed rate loans. I'm sure someone will have an answer concerning the safe harbor aspect.

After reading the background and summary, the way I understand it is that open end loans, or any loan secured by real property or a dwelling are excluded.

Multi purpose, closed end loans would be subject to the reg, but I believe we do NOT have to include the application disclosures required under 226.47(a). (The FR even includes a comment that this requirement would be complicated and burdensome.) So, we wouldn't have to include student loan disclosures with our applications. If indicated for student loan purposes, however, we would have to provide approval disclosures, final disclosures, 30-day acceptance period, and allow the right to cancel.

Flamingo Gal had posted something early on in this thread about including these disclosures with all of our loan apps- IMO, I don't think we do. Anyone agree/disagree?