Good morning!

I am researching requirements for debt consolidation loans. Can a bank require a credit card account be closed as a condition of a loan? I know it is not permitted for home equity loans, but how about for non home equity loans?

I have thus far been unable to find anything in Reg Z and am wondering if it may be a state law requirement. I am in Texas.

Any insight that anybody can share?

thank you in advance!

It would be state law if it were.

But in reality, what stops the borrower from re-establishing credit the following week? If you feel that the customer continuing to ring up their existing card balances exists, hence the thought to force them to close them, then I think that is a good indication you do not trust your borrower, and may not want to make the loan to start with.

Closing cards can also affect credit score-

I've seen it that as a condition for the loan that the borrower goes to a credit counseling course so it does not happen again. If not, the situation as JJ mentioned will occur over and over again. And with no credit card debts, they look so much better on paper, and will easily get a few more. In many cases, it's more of a mind issue rather than anything else. (I had a friend that thought she could keep writing checks because there were some unused ones still in the checkbook.)