The loan department just came to me with a question. Their understanding was that for an unsecured loan > $10,000, the documentation must include a reason or purpose for the loan and that "personal reasons" is not an adequate reason.

The guidance I am looking at (FIS Regulatory Advisory Services Compliance Manual) does state that a purpose or reason is necessary but that it need not be overly detailed. In fact, it mentions that "unsecured personal credit line" would be sufficient.

Does anyone know of any other guidance that contradicts this? Any experience with examiners regarding this issue?

BSA requires that a specific purpose be identified for all loans in excess of $10,000 not secured by real estate. In addition, if you report home improvement loans on your HMDA LAR you would need a specific purpose to determine whether the loan is HMDA reportable.

My experience with OCC mirrors Duchess' statements. They've gotten onto us for not having clear purposes for loans (Personal Expenses are not an adequate purpose, according to them).

Can you please provide me with a link/citation?

Please note additionaly to post above, if your Banks BSA Policy states that you need it than you would need it.

Appendix P of the BSA/AML Manual. It's listed under BSA Record Rentention Requirements.

http://www.fdic.gov/news/news/press/2010/pr10092a.pdf

And if you need the regulatory citation:

§ 1010.410 Records to be made and retained by financial institutions.

Each financial institution shall retain either the original or a microfilm or other copy or reproduction of each of the following:

(a) A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property, which record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof, and the date thereof;

The OCC is serious about this. See the following actions for examples.

Edward Farah C&D and CMP Action from OCC
http://www.occ.gov/static/enforcement-actions/ea2007-037.pdf

International Bank of Miami C&D
http://www.occ.gov/static/enforcement-actions/ea2007-011.pdf

Thanks everyone!

For a business loan would either of these be sufficient reasons:

1)Working Capital?

2)General Business purposes?

Read the enforcement orders that Retread posted and you can be your own judge.

I agree that those won't fly as "working capital" was specifically cited as vague. I wonder about "working capital for law office operations" or otherwise where the type of business is specifically included? I assume that would pass muster.

Thanks