Currently for new commercial loans we require the Bankers System personal financial statement to be signed by guarantors for prospective Commercial entity loans (LLC, corp, etc) so that we will be in compliance with the above letter and have a "permissible purpose". If the commercial entity gains a loan on 1/3/2001 with a signed statement and then requests a new loan on 7/3/2001, do we have to get another personal financial to prove that we have a "permissible purpose" for this new loan. The Bankers System statement does not limit itself for a specific request and states that it is "provided... for the purpose of obtaining credit for the Applicants. " Typically we will get a new financial statement every 12 months according to our Loan policy. Thanks

My own opinion is that it would be cleaner to have one authorization for each loan in which you will be accessing a new credit report.

You could have them reaffirm by initialling and dating the authorization on the current FS, without indicating that the rest of the FS is correct as of the new date.

Otherwise, the risk is that you access the credit file and are later told no such request was made.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Andy is taking the cautious view. I am inclined to think that, while an agreement each time is ideal, the bank could rely on the permission given on the financial statement, especially if the financial statement is renewed each year. It would also be a good idea to modify the language on the financial statement to clearly authorize the bank to obtain the report as needed.

Keep watching this area. The banking agencies may give some new easier-to-live-with guidance later this year.

Without a specific authorization, I would inventory the players to insure the names haven't changed. My fear is that you'd have one point of contact to discuss the deal, you'd access credit reports, and later find out there was a change in people. Did you access a report you shouldn't have, do you not have authorization on one you now need...

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

It seems this issue has caused much confusion in the banking industry especially regarding the letter's reference to sole proprietors. In a bulletin to our bank, one national compliance organization stated that a bank has a permissible purpose for a sole proprietor and therefore does not have to obtain continuing permission signatures. Another organization disagreed. Our counsel advised us to obtain authorization signatures for sole proprietors.

How are others treating this issue? Any comments would be appreciated.

I was discussing Tatelbaum with a regulator this weekend. He indicated that at this point, he is advising banks that the language on the financial statement should specifically authorize the bank to obtain a credit report throughout the life of the loan. He said that he's finding that most language on financial statements authorize a credit report during the application stage, but is not clear about pulling subsequent reports.

For those of you that use LaserPro for your loan documentation, I learned today that version 5.16 has a separate document that will handle this issue on a per loan basis. Supposedly, it will print separately or you can use it integrated with the commercial application.