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#1265688 - 10/13/09 06:49 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans M&M
Jan94 Offline
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Quote:
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.


So are you stating that if any portion is used for student expenses (if it is stated in the loan request), the muti-purpose loan would require the additional disclosures, etc? Just wanting to be sure I'm understanding. Thank you.

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#1266284 - 10/14/09 04:21 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Jan94
Jan94 Offline
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Just checking back - the rules provide that it must be "expressly" indicated. So for a multi-purpose loan if the request specifically provides that any of the funds will go to postsecondary expenses, then disclosures would be required? That's what I'm reading from above, but again just want to be sure I'm not misinterpreting this. Thanks!

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#1267645 - 10/15/09 09:35 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Jan94
Chance Offline
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Jan94 - I believe that M&M is correct and that these requirements are applicable if any portion of the loan proceeds are used for post-secondary educational expenses. In addition to M&M's referenced section, see also page 41250 of the Federal Register (Staff Commentary), Subpart F, 46(A)- Coverage, which reads in part - "However, if any part of such loan is used for postsecondary educational expenses as defined in 226.46(b)(3), then compliance with Subpart F is mandatory no optional".

Hope this helps.

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#1267718 - 10/16/09 11:00 AM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Chance
rlcarey Offline
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I agree - the definition is very very broad and this piece of Reg Z is going to catch a lot of banks by surprise come Valentine's Day.
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#1268598 - 10/16/09 10:23 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans M&M
bankchick Offline
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I visited with our state banking association and their answer was: if the funds are used for anything pertaining to education costs for higher education (if those words were ANYWHERE in the loan papers), it falls into this category. Increasing Mom's car loan by $200.00 for books falls into the category. We'll have an increase in personal expense loans...wink, wink...after 2/14/10.
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#1268991 - 10/19/09 05:45 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans bankchick
DD Regs Offline
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SO, the only loans that could potentially fall subject to these provisions would be:

1. An unsecured closed end loan (personal loan)
2. Closed End Secured by other than real estate (auto, boat,)

Excluded would be HELOCs, 2nd mortgages, opened end unsecure (personal lines of credit, CC's)

Do I have this right?
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#1275389 - 10/27/09 07:56 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans DD Regs
goingtoexperts Offline
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That appears to be correct. I would be interested to know how other financial institutions are proposing to meet this requirement for multi-purpose loans. Thanks!

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#1275413 - 10/27/09 08:15 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans goingtoexperts
Burgess Offline
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Unless you have developed all the disclosures for a honest-to-goodness private student loan program, you just can't do a loan where a partial purpose is for college. I don't think the software companies are going to step up on this - it will be like the "Military APR" when JWANDA Pay Day loan law came in - no software company supported that calculation (or at least our software company was a no-show).

Seriously, look at the disclosures needed - how can you do them without a software program?
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#1275433 - 10/27/09 08:31 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Burgess
goingtoexperts Offline
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I agree. The challenge is identifying and handling multi-purpose loans. Do you specifically ask if any part of the proceeds will be used for postsecondary educational expenses? Customer wants $8,000 - $6,000 for home improvements and $2,000 for books/computer for child's college. If you specifically ask, determine part will be used for postsecondary educational purposes and cannot provide the required disclosures, then how do you proceed with the loan request?

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#1275518 - 10/27/09 09:44 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans goingtoexperts
Burgess Offline
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I am telling our loan officers that the real enemy here is the borrower. You can tell the borrower the situation and he can phrase the request in such a way that leaves our the post secondary purpose portion BUT the day the loan goes bad, that same borrower(or his attorney) will be saying "I told the loan officer i was using part of the proceeds for education, but he/she told me i needed to leave that out of my application because of the disclosures being too hard to give"
In other words, i think once the borrower has stated he is going to use part of the loan proceeds to help with college, your done. Either you know how to give the disclosures or you have to decline the loan.
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#1276269 - 10/28/09 06:37 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Burgess
DD Regs Offline
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Are we going to get in trouble if a customer comes in and says, "I need money for (Buying books, tuition, education expense, student debt consolidation, you pick it)" and we reply "The only loans we can offer to finance that need is HELOCs, 2nd mortgages, opened end unsecure (personal lines of credit, CC's)."
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#1280794 - 11/04/09 08:09 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans DD Regs
Burgess Offline
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The department of ed on 10.28.09 published these rules that appear to be the same law that is the subject of this thread and the Reg Z amendments effective 2.14.2010. The only diffence is the Dept of Ed posting says the rules are effective in July 2010.
http://edocket.access.gpo.gov/2009/pdf/E9-25073.pdf
What am i missing?
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#1283272 - 11/09/09 03:03 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Burgess
Always In Training Offline
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As a lender, I'm not subject to those (Department of Ed) rules. I'm subject to Reg Z. So, the 2/14 date is what we are attempting to be in compliance or to stop making these types of loans by.

I've read the Fed Register, but anybody see a loophole for educational "bridge" loans ? The only educational loans we make currently, are for our customers that have to pay their tution/fees/books NOW or be dropped from the class roles while they wait for their Federal student loans to fund. Our customers are going to have a cow next summer when we won't cover the 30-60 days it takes now for them to get their school money.
Last edited by Always In Training; 11/09/09 03:07 PM. Reason: added second paragraph
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#1283318 - 11/09/09 03:28 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Always In Training
DD Regs Offline
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Somewhere in the middle
Offer a Credit Card to them for these "Short Term" needs.
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#1284019 - 11/10/09 01:26 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans DD Regs
M&M Offline
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I didn't see anyone respond to DD Regs question above- are we going to get in trouble if we only offer open-end lines for this purpose? Is that an option?

We have a purpose line today, so we're asking the purpose. As of 2/14, can we steer customers to open-end lines and tell them our closed-end loan is not available for this purpose? I know there were some comments in the FR regarding circumventing certain requirements, but I did not see anything that would prohibit us from directing a customer to an open-end line in these instances.

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#1285312 - 11/12/09 03:39 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans DD Regs
Always In Training Offline
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Originally Posted By: DD Regs
Offer a Credit Card to them for these "Short Term" needs.


We don't do open-ended consumer credit - and with all changes coming in 2010 to Reg Z for open-ended, we are NOT going to get into that product. That was at least one area that I could tell our board that we didn't have to worry about.

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#1285530 - 11/12/09 07:12 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Always In Training
Princess Romeo Offline

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What about doing an automatic decline if the applicant indicates that some or all of the proceeds will be used for education? Last time I checked, "education" was not a protected class under Regulation B. The decline would state "We do not offer credit under the terms you have requested."
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#1285562 - 11/12/09 07:41 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Princess Romeo
rlcarey Offline
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That is not a term - it is loan purpose.
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#1285792 - 11/12/09 10:28 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans rlcarey
Princess Romeo Offline

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But it IS a term for a particular purpose - i.e. we can do a loan for the purpose of financing education but only under a real estate secured loan or a revolving line of credit.
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Regulations are a poor substitute for ethics.
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#1287464 - 11/16/09 09:42 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans BLPage
Burgess Offline
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we just received an application from a low income borrower (good cra type loan) - needed some money for college expenses - tuition ate up his student loans and now we need some living expenses.

We are happy to make the loan, but come February 2010 we can no longer make loans with college anywhere on the application. Go figure.
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#1289528 - 11/19/09 03:26 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans DD Regs
Brad B Offline
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KS
Originally Posted By: DD Regs
Are we going to get in trouble if a customer comes in and says, "I need money for (Buying books, tuition, education expense, student debt consolidation, you pick it)" and we reply "The only loans we can offer to finance that need is HELOCs, 2nd mortgages, opened end unsecure (personal lines of credit, CC's)."



That is the scenario I have. Our software provider told us that they "will not support private education loans" so I don't believe we will be able to provide the required disclosures unless we develop a form manually (not likely to happen). We don't offer personal lines of credit so to make a private education loan we would have to route our borrower to a HELOC or credit card product. That may give the appearance of steering a customer to a product to avoid the disclosures but I don't really have the reasonable ability to provide the disclosures. I don't want "trouble" but I also wonder if this somehow would be perceived as a "disparate impact" on our consumers. I can still make the loan but it just has to be open-end or real estate secured.

It seems this amendment will just push consumers into Federal education loans, which might have been the purpose of the amendment anyway. Beats me.
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#1292200 - 11/24/09 03:42 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Brad B
Game On Offline
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Marietta, GA
Brad, we are running into the same problem and the decision was made not to make the loan unless the consumer wanted to go the real estate or credit card route.

The cost of creating all these forms for a few applicants just can't fit into an already squeezed budget.It will be costly enough making all the other form changes that are coming up.

They take away our ability to collect fees- add on expenses to comply with all the new regulations "so the consumer will be well informed", and the end result is the responsible consumers will now pay more!

Maybe the consumers can show their appreciation come election day!

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#1293103 - 11/25/09 12:02 AM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Game On
Princess Romeo Offline

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In all likelihood, the type of folks that will be affected will probably not constitute an effective voting block.
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Regulations are a poor substitute for ethics.
Just sayin'

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#1295803 - 11/30/09 09:34 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Princess Romeo
Dolly Nugent Offline
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Southern California
Has anyone heard if Harland Financial Solutions (LaserPro) will be supporting these types of loans?
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#1296699 - 12/01/09 10:34 PM Re: FRB 3/11 ANPR Reg Z Amend on College Student Loans Dolly Nugent
ForceFull1 Offline
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Dolly, I spoke with a Harland rep last week who stated that they were "seriously reviewing" adding these disclosures to Laser Pro after initially not planning to offer them. I have my doubts that they will have them in place in just over two months if they are still "reviewing" whether or not they want to offer them.

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