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#1920201 - 05/05/14 07:07 PM Mixed Purpose Loan - PEL?
pacar Offline
Gold Star
Joined: Jul 2007
Posts: 320
I just stumbled across a closed-end installment loan with a mixed business / consumer purpose. 60% of the loan proceeds were designated as business purposes (a D.B.A.), with 40% as consumer purpose. While reviewing the lender comments, I discovered that a portion of the consumer portion of the loan was for tuition expense at a qualifying institution.

1026.46 says "in whole or in part" for credit extended to a consumer. The borrower is a consumer, but 60% of the loan was for a business purpose so we booked it as a consumer loan.

Is this exempt from the PEL requirements? I'm tending to lean on the business purpose of this loan and say "yes", but just thought I'd double check because I'm second guessing myself.


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Lending Compliance
#1920210 - 05/05/14 07:33 PM Re: Mixed Purpose Loan - PEL? pacar
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 8,598
If the loan is exempt from Reg. Z (and it sure sounds like it would be), then it's exempt from everything in Reg. Z, including the PEL requirements.
I'm fixin' to fix that.

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#1920379 - 05/06/14 03:50 PM Re: Mixed Purpose Loan - PEL? pacar
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,410
Cape Cod
I agree with raitchjay's response. However, if you suspect there might be other lenders in your organization who might be tempted to roll PEL financing into another credit extension that doesn't meet the business-purpose test, you should think about some reinforcing training.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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