Skip to content
BOL Conferences
Thread Options
#2168416 - 03/15/18 05:15 PM MLA - Secured Accounts
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,668
What is your understanding of 32 CFR 232.8(e)(3)?:

(e) The creditor uses a check or other method of access to a deposit, savings, or other financial account maintained by the covered borrower, except that, in connection with a consumer credit transaction with an MAPR consistent with §232.4(b), the creditor may:

(3) If not otherwise prohibited by applicable law, take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction.

This is explained further in Q & A #'s 17 and 18 in the Interpretive Rule; however, there seems to be a disagreement in the Compliance community as to what it means to "take a security interest in funds deposited after the extension of credit in an account established in connection with the consumer credit transaction."

Does this mean that the loan has to be a deposit secured loan where the deposit account is established at the same time the loan is made for the lender to take a security interest in the account funds? Or, is a creditor able to take a security interest in any account that the customer has at the institution? If the ability to take the security interest is restricted to deposit secured loans, then is the security interest restricted again to only funds deposited after the loan was made? Such that for the initial deposited funds that established the account would not be included?

Thank you for your time and assistance.

Return to Top
Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#2168419 - 03/15/18 05:32 PM Re: MLA - Secured Accounts Compliance NABW
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,294
In what situation would a bank place a hold on funds that were securing the loan after the loan was made? The customer could empty the account and then you'd have an unsecured loan... If you are talking about a situaton where you close the loan and then walk the customer to the teller line to place a hold on the funds, I don't see that as an issue.
_________________________
CRCM, CAMS

Return to Top
#2168425 - 03/15/18 05:47 PM Re: MLA - Secured Accounts Compliance NABW
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,668
What do you interpret the part to mean then about taking a security interest in funds deposited after the extension of credit?

Return to Top
#2168427 - 03/15/18 05:48 PM Re: MLA - Secured Accounts Compliance NABW
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,668
This phrase seems directly tied to "in an account established in connection with the consumer credit transaction."

Return to Top
#2168456 - 03/15/18 07:24 PM Re: MLA - Secured Accounts Compliance NABW
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2168457 - 03/15/18 07:24 PM Re: MLA - Secured Accounts Compliance NABW
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,294
In my opinion, putting a hold on funds as collateral on the loan is a simultaneous event. The customer knew this fact going into the loan and the agreements are all signed at closing.

I guess if you closed the loan and then said “now we’re going to need to place a hold on $XX amount” or required additional funds to be held after the fact, that would be prohibited? I’m assuming this is more geared to the payday lenders. Hopefully someone else chimes in.
_________________________
CRCM, CAMS

Return to Top
#2168502 - 03/15/18 08:44 PM Re: MLA - Secured Accounts rlcarey
Compliance NABW Offline
Diamond Poster
Joined: Oct 2015
Posts: 1,668
Thank you, RL. I referenced the #17 in my original post. The Q & A makes it seem like the Bank can take, and the military member can convey a security interest in any deposit account for any loan covered by the MLA.

However, this seems to contradict that literal language of 32 CFR 232.8(e)(3). Usually, the Regulation comes first in understanding a topic and then you rely on interpretation, Q & A, etc. I'm just not understanding how the Regulation statement and the Q & A's reconcile. The language of the Reg. makes it sound like taking a security interest is restricted to a deposit secured loan where funds were placed after the establishment of the account.

Return to Top
#2168516 - 03/15/18 09:27 PM Re: MLA - Secured Accounts Compliance NABW
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
However, this seems to contradict that literal language

As to why the interpretation was issued. This was a hot topic a while ago when they finally addressed it.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2168557 - 03/16/18 01:21 PM Re: MLA - Secured Accounts Compliance NABW
bcompliance Offline
Diamond Poster
Joined: Sep 2014
Posts: 1,294
Exactly what Randy said. The interpretive rule was effective on the date it was issued going forward. That replaced the "literal language" in the regulation that you are referring to.
_________________________
CRCM, CAMS

Return to Top

Moderator:  Andy_Z