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#20461 - 06/11/02 11:06 PM Reg B
Jodi Offline
Member
Jodi
Joined: Jun 2002
Posts: 87
Should you not collect "monitoring information", marital status specifically, on an individual loan application to purchase a car? If it is not the purchase or refinance of the primary residence is that info not to be noted on the application?

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Lending Compliance
#20462 - 06/12/02 11:06 AM Re: Reg B
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,191
Toano, VA
An inquiry about MS is always permitted for secured credit (so you can determine your rights as a secured creditor.) Unless the loan is somehow covered by HMDA or Section 13 of Reg. B, an inquiry about race is illegal.
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#20463 - 06/12/02 04:12 PM Re: Reg B
Jodi Offline
Member
Jodi
Joined: Jun 2002
Posts: 87
Reg B section 202.9(a)(3)(i)(B) in addressing business loan denials that may be given orally, state disclosure of an applicant's right to a statement of reasons may be given at the time of app. provided the disclosure is in a form the applicant may retain and contains the info required... Please explain, from what I am told we do not do an adverse action on business loans. And please excuse my ignorance! Thank you

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#20464 - 06/12/02 04:25 PM Re: Reg B
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
  • §202.9(a)(1) tells us the time limits on providing AA notices.
  • §202.9(a)(2) tells us what has to be included in the AA notice and provides a couple of ways to do it.
  • §202.9(a)(3) tells us that we can modify somewhat the rules in 202.9(b) for business applicants. One of the modifications is that we can provide all business applicants with an ECOA notice and statement of right to receive reasons for AA up front.


You say you might not be doing AA on business applications. I suggest you go back and interview lenders to determine how they say "No" to commercial applicants, and then review all material provided to applicants at the front end. If you see no evidence of complying with §202.9, you have work to do.

It is not uncommon for commercial lenders to mistakenly assume the Reg. B doesn't apply to them. It's a fatal misconception, and regulators are less than happy to learn of it.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
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#20465 - 06/12/02 04:36 PM Re: Reg B
Martoon Offline
New Poster
Martoon
Joined: Apr 2002
Posts: 23
Sacramento
We use a "universal" application for our consumer loan products (auto, unsecured, HELOC, etc) It is illegal to make the inquiry about the race & sex on auto loans but because we use the universal app, we have a HUGE disclaimer preceeding the race/sex information that states the information should only be completed if the loan is for home purchase or home improvement. We still get customers who complete the entire app without regard to the disclaimer. Legal counsel had opinioned we are OK because of the disclaimer plus we score everything eliminating the race/sex from the decisioning tool. Marital status is OK because you need the information for community property states.

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#20466 - 06/12/02 04:40 PM Re: Reg B
Lestie G Offline

Power Poster
Joined: May 2002
Posts: 3,608
Near the Land of Enchantment
Construction lenders in one of our banks were using the secondary market application for the construction loan. Since monitoring information is not required on construction loans (temporary financing), our regulators cited us with a violation of law because the monitoring information was on the application, and thus in the file. They suggested we do whatever we have to do to get it out of the construction loan file. We chose to mark through it with a black magic marker. The regulators approved of that approach.
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#20467 - 06/13/02 02:21 PM Re: Reg B
Anonymous
Unregistered

Reg B can be somewhat misleading when it comes to commercial loans - however, yes, it does apply to business applicants - in particular if it is an individual applying for a business loan, or if it is a sole proprietorship or a partnership. I am with a large bank and we do a high volume of small business lending - of which I have responsibility for compliance in this area. We have taken a policy stance that we will issue adverse action notices (and FCRA) for small business applicants (requests under $1MM) - particularly because in a high volume situation, it is too difficult to weed out individuals, sole props and partnerships.

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