We recently change our web site vendor and have a brand new site that apparently allows a borrower to transfer from their HELOC to their deposit account. We did not have this capability in the past.

I am concerned that there are some additional rules or disclosures perhaps that we need to consider with this new capability.

Is there something we are missing?

You have added a new access device for the HELOC and there are some subsequent disclosures reqired....reveiw 226.9(b) and its Commentary.

Okay, I'm confused. Rather than calling the bank and requesting a transfer from HELOC to checking, I can have it added to my on-line banking and make the transfer myself.

I'm not making the connection that this would apply to that scenario? Dan, can you elaborate?

A telephone request, convenience checks, credit card, etc are means (devices) of accessing the HELOC and they should have been disclosed in the agreement. Adding the means to now transfer per their on-line access is another means (device) they can now access the account and IMO the requirements of 226.9 kick in.

If we are going to offer this service online to existing customers, who do not have anything in their disclosures or their note regarding access via online transfers, what would we need to do allow this service? Would we need some kind of "Terms of Service" type of agreement that they can complete online upon their first transfer attempt?

From the cite I quoted above.

. . . the creditor shall disclose, before the consumer uses the feature or device for the first time, that it is for use in obtaining credit under the terms previously disclosed.

If you are going to allow them to sign up for it on-line then the disclosure should be part of the registration process and you should be able to document they received it. If you contemplate sending it to them via email make sure you take e-sign into consideration.

If we allowed some draws already using online banking (because someone jumped the gun prior to having a discussion with the compliance person), what do you recommend we do? For instance, should we try to obtain a list of those borrowers that have used this feature already and send them a separate notice to have them sign and return, or send via certified mail???

By the way, is there model language that we should use for this?

Not anything you can do to cure the violation and quite honestly I'm not sure what the penalty would be.

My advice would be to send the notice to all HELOC customers by mail, that way you have everyone covered and it also could serve as a marketing tool to get them to use your on-line service.

There is no requirement to have them sign and return the disclosure.

Does anyone have any model language for this type of disclosure?

Hi Many Hats

Same issue...have you come up with anything for your disclosure?

Dear Borrower,

We are pleased to inform you that we have added the ability for you to transfer money from your HELOC to other accounts you have with us through our on-line banking service.

If you wish to take advantage of this new service you will need to ..................

The advance will be treated as a cash advance (or whatever) under the loan agreement and the following terms and charges will apply......

The following restrictions apply to the advance ........