§ 1041.12 Compliance program and record retention.

(a) Compliance program. A lender making a covered loan must develop and follow written policies and procedures that are reasonably designed to ensure compliance with the requirements in this part. These written policies and procedures must be appropriate to the size and complexity of the lender and its affiliates, and the nature and scope of the covered loan lending activities of the lender and its affiliates.

Official Interpretation

Section 1041.12—Compliance Program and Record Retention

12(a) Compliance Program

1. General. Section 1041.12(a) requires a lender making a covered loan to develop and follow written policies and procedures that are reasonably designed to ensure compliance with the applicable requirements in this part. These written policies and procedures must provide guidance to a lender's employees on how to comply with the requirements in this part. In particular, under §1041.12(a), a lender must develop and follow detailed written policies and procedures reasonably designed to achieve compliance, as applicable, with the ability-to-repay requirements in §1041.5, alternative requirements in §1041.6, payments requirements in §§1041.8 and 1041.9, and requirements on furnishing loan information to registered and provisionally registered information systems in §1041.10. The provisions and commentary in each section listed above provide guidance on what specific directions and other information a lender must include in its written policies and procedures.

2. Examples. The written policies and procedures a lender must develop and follow under §1041.12(a) depend on the types of loans that the lender makes. A lender that makes a covered loan under §1041.5 must develop and follow written policies and procedures to ensure compliance with the ability-to-repay requirements, including on projecting a consumer's net income and payments on major financial obligations, and estimating a consumer's basic living expenses. Among other written policies and procedures, a lender that makes a covered loan under §1041.5 or §1041.6 must develop and follow written policies and procedures to furnish loan information to registered and provisionally registered information systems in accordance with §1041.10. A lender that makes a covered loan subject to the requirements in §1041.6 or §1041.9 must develop and follow written policies and procedures to provide the required disclosures to consumers.

(b) Record retention. A lender must retain evidence of compliance with this part for 36 months after the date on which a covered loan ceases to be an outstanding loan.

(1) Retention of loan agreement and documentation obtained in connection with originating a covered short-term or covered longer-term balloon-payment loan. To comply with the requirements in this paragraph (b), a lender must retain or be able to reproduce an image of the loan agreement and documentation obtained in connection with a covered short-term or covered longer-term balloon-payment loan, including the following documentation, as applicable:

(i) Consumer report from an information system that has been registered for 180 days or more pursuant to §1041.11(c)(2) or is registered with the Bureau pursuant to §1041.11(d)(2);

(ii) Verification evidence, as described in §1041.5(c)(2)(ii); and

(iii) Written statement obtained from the consumer, as described in §1041.5(c)(2)(i).

(2) Electronic records in tabular format regarding origination calculations and determinations for a covered short-term or covered longer-term balloon-payment loan under §1041.5. To comply with the requirements in this paragraph (b), a lender must retain electronic records in tabular format that include the following information for a covered loan made under §1041.5:

(i) The projection made by the lender of the amount of a consumer's net income during the relevant monthly period;

(ii) The projections made by the lender of the amounts of a consumer's major financial obligations during the relevant monthly period;

(iii) Calculated residual income or debt-to-income ratio during the relevant monthly period;

(iv) Estimated basic living expenses for the consumer during the relevant monthly period; and

(v) Other consumer-specific information considered in making the ability-to-repay determination.

(3) Electronic records in tabular format regarding type, terms, and performance of covered short-term or covered longer-term balloon-payment loan. To comply with the requirements in this paragraph (b), a lender must retain electronic records in tabular format that include the following information for a covered short-term or covered longer-term balloon-payment loan:

(i) As applicable, the information listed in §1041.10(c)(1)(i) through (viii) and (c)(2);

(ii) Whether the lender obtained vehicle security from the consumer;

(iii) The loan number in a loan sequence of covered short-term loans, covered longer-term balloon-payment loans, or a combination thereof;

(iv) For any full payment on the loan that was not received or transferred by the contractual due date, the number of days such payment was past due, up to a maximum of 180 days;

(v) For a loan with vehicle security: Whether repossession of the vehicle was initiated;

(vi) Date of last or final payment received; and

(vii) The information listed in §1041.10(c)(3).

(4) Retention of records relating to payment practices for covered loans. To comply with the requirements in this paragraph (b), a lender must retain or be able to reproduce an image of the following documentation, as applicable, in connection with a covered loan:

(i) Leveraged payment mechanism(s) obtained by the lender from the consumer;

(ii) Authorization of additional payment transfer, as described in §1041.8(c)(3)(iii); and

(iii) Underlying one-time electronic transfer authorization or underlying signature check, as described in §1041.8(d)(2).

(5) Electronic records in tabular format regarding payment practices for covered loans. To comply with the requirements in this paragraph (b), a lender must retain electronic records in tabular format that include the following information for covered loans:

(i) History of payments received and attempted payment transfers, as defined in §1041.8(a)(1), including:

(A) Date of receipt of payment or attempted payment transfer;

(B) Amount of payment due;

(C) Amount of attempted payment transfer;

(D) Amount of payment received or transferred; and

(E) Payment channel used for attempted payment transfer.

(ii) If an attempt to transfer funds from a consumer's account is subject to the prohibition in §1041.8(b)(1), whether the lender or service provider obtained authorization to initiate a payment transfer from the consumer in accordance with the requirements in §1041.8(c) or (d).

Official Interpretation

12(b) Record Retention

1. General. Section 1041.12(b) requires a lender to retain various categories of documentation and information in connection with the underwriting and performance of covered short-term loans and covered longer-term balloon payment loans, as well as payment practices in connection with covered loans generally. The items listed are non-exhaustive as to the records that may need to be retained as evidence of compliance with this part concerning loan origination and underwriting, terms and performance, and payment practices.

12(b)(1) Retention of Loan Agreement and Documentation Obtained in Connection With Originating a Covered Short-Term or Covered Longer-Term Balloon-Payment Loan

1. Methods of retaining loan agreement and documentation obtained for a covered short-term or covered longer-term balloon-payment loan. Section 1041.12(b)(1) requires a lender either to retain the loan agreement and documentation obtained in connection with a covered short-term or covered longer-term balloon-payment loan in original form or to be able to reproduce an image of the loan agreement and documentation accurately. For example, if the lender uses a consumer's pay stub to verify the consumer's net income, §1041.12(b)(1) requires the lender to either retain a paper copy of the pay stub itself or be able to reproduce an image of the pay stub, and not merely the net income information that was contained in the pay stub. For documentation that the lender receives electronically, such as a consumer report from a registered information system, the lender may retain either the electronic version or a printout of the report.

12(b)(2) Electronic Records in Tabular Format Regarding Origination Calculations and Determinations for a Covered Short-Term or Longer-Term Balloon-Payment Loan Under §1041.5

1. Electronic records in tabular format. Section 1041.12(b)(2) requires a lender to retain records regarding origination calculations and determinations for a covered loan in electronic, tabular format. Tabular format means a format in which the individual data elements comprising the record can be transmitted, analyzed, and processed by a computer program, such as a widely used spreadsheet or database program. Data formats for image reproductions, such as PDF, and document formats used by word processing programs are not tabular formats. A lender does not have to retain the records required in §1041.12(b)(2) in a single, combined spreadsheet or database with the records required in §1041.12(b)(3) and (5). Section 1041.12(b)(2), however, requires a lender to be able to associate the records for a particular covered short-term or covered longer-term balloon payment loan in §1041.12(b)(2) with unique loan and consumer identifiers in §1041.12(b)(3).

12(b)(3) Electronic Records in Tabular Format Regarding Type, Terms, and Performance of Covered Short-Term or Covered Longer-Term Balloon-Payment Loans

1. Electronic records in tabular format. Section 1041.12(b)(3) requires a lender to retain records regarding loan type, terms, and performance of covered short-term or covered longer-term balloon-payment loans for a covered loan in electronic, tabular format. See comment 12(b)(2)-1 for a description of how to retain electronic records in tabular format. A lender does not have to retain the records required in §1041.12(b)(3) in a single, combined spreadsheet or database with the records required in §1041.12(b)(2). Section 1041.12(b)(3), however, requires a lender to be able to associate the records for a particular covered short-term or covered longer-term balloon payment loan in §1041.12(b)(2) and (5) with unique loan and consumer identifiers in §1041.12(b)(3).

Paragraph 12(b)(3)(iv)

1. Maximum number of days, up to 180 days, any full payment was past due. Section 1041.12(b)(3)(iv) requires a lender that makes a covered loan to retain information regarding the number of days any full payment is past due beyond the payment schedule established in the loan agreement, up to 180 days. For this purpose, a full payment is defined as principal, interest, and any charges. If a consumer makes a partial payment on the contractual due date and the remainder of the payment 10 days later, the lender must record the full payment as being 10 days past due. If a consumer fails to make a full payment on a covered loan more than 180 days after the contractual due date, the lender must only record the full payment as being 180 days past due.

12(b)(4) Retention of Records Relating to Payment Practices for Covered Loans

1. Methods of retaining documentation. Section 1041.12(b)(4) requires a lender either to retain certain payment-related information in connection with covered loans in original form or to be able to reproduce an image of such documents accurately. For example, §1041.12(b)(4) requires the lender to either retain a paper copy of the leveraged payment mechanism obtained in connection with a covered longer-term loan or to be able to reproduce an image of the mechanism. For documentation that the lender receives electronically, the lender may retain either the electronic version or a printout.

12(b)(5) Electronic Records in Tabular Format Regarding Payment Practices for Covered Loans

1. Electronic records in tabular format. Section 1041.12(b)(5) requires a lender to retain records regarding payment practices in electronic, tabular format. See comment 12(b)(2)-1 for a description of how to retain electronic records in tabular format. A lender does not have to retain the records required in §1041.12(b)(5) in a single, combined spreadsheet or database with the records required in §1041.12(b)(2) and (3). Section 1041.12(b)(5), however, requires a lender to be able to associate the records for a particular covered short-term or covered longer-term balloon payment loan in §1041.12(b)(5) with unique loan and consumer identifiers in §1041.12(b)(3).

Regulation Subsection Info: 

The compliance date for subsections 12(a), (b) introductory text, (b)(4) and (b)(5) is August 19, 2019.

The compliance date for subsections (b)(1) through (3) is November 19, 2020.


(a) Compliance program
(b) Record retention