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#2261965 - 11/02/21 02:11 PM loan officer conflict of interest question
Anonymous
Unregistered

Loan officer advised me that two of his customers were about to partner and purchase shipping containers of trading cards for resale. The customers were looking for ‘a third partner’ and asked loan officer to be the third partner. Loan officer asked if that would be allowed. I advised that if the loan officer participated in the deal as a third partner, he would need to move their existing loan relationship to a different serving officer.

Loan officer closes a loan to the two customers for the purpose of purchasing the cards for resale. There is no reference to his present or future involvement in the loan file.

I overheard the loan officer discussing his participation in the acquisition of cards for resale as a third partner.

I researched and found the closed loan.

Loan officer now advises that he was told by one of the customers that he should make the loan to just the customers and then have his wife buy in 1/3 after the closing. The loan officer asserts there is ‘no paper trail’ tying him to the transaction and, thus, no conflict exists. He likewise asserts that the CEO approved the structure while the two were on the golf course together.

Am I wrong in thinking this is a conflict of interest and the loan officer should not be allowed to continue to be the servicing officer for these customers?

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#2261970 - 11/02/21 02:23 PM Re: loan officer conflict of interest question Anonymous
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 78,948
Galveston, TX
Since this sounds like a venture capital loan unless fully secured by other means, this is the stuff that prohibition orders are made of. Get out your SAR and the LO should get ready to answer questions by the regulators.
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#2261976 - 11/02/21 04:02 PM Re: loan officer conflict of interest question Anonymous
Rocky P Offline
Power Poster
Joined: Jun 2003
Posts: 7,379
Florida
Besides Randy's words, what does the ethics, employment policy say? Would the fidelity insurance cover this transaction or would it be prohibited by policy definition?
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#2261982 - 11/02/21 05:40 PM Re: loan officer conflict of interest question Rocky P
Anonymous
Unregistered

Code of Conduct:

'Officers must not use their position for private gain, to advance personal interests, or to obtain favors or benefits for themselves, members of their families, or any other individuals, corporations or business entities.'

Loan Policy:

'No loan officer may approve a loan to any entity in which he or a member of his family has an interest, other than a company which securities are publicly traded in which family or individual ownership represents less than 10 percent of total ownership. Loans to
entities owned or controlled by employees or officers or their families shall be approved only after a disclosure of ownership has been made to the Directors’ Loan Committee which shall determine whether or not the possibility of a conflict of interest may exist.

No loan officer shall make a loan directly or indirectly to any person related to him by blood or marriage regardless of the degree of the relationship. This rule applies to partnerships, corporations, or other legal entities.'

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#2261988 - 11/02/21 06:05 PM Re: loan officer conflict of interest question Anonymous
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,963
TN
So your lender allowed the customer to tell him how to handle the transaction?

If the 2nd Anonymous is the same as the first - you have code of conduct and loan policy violations. This sounds like a mess.
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#2261989 - 11/02/21 06:08 PM Re: loan officer conflict of interest question Anonymous
Rocky P Offline
Power Poster
Joined: Jun 2003
Posts: 7,379
Florida
Anon, if you are the original poster, there appears to be a violation to both the code of conduct and loan policy. It would be SAR time, and potentially the loan will be classified by regulators. CEO's acknowledgement - take that with a grain of salt. A lot of things are said on the golf course and if actually discussed, all the details of the transaction might not have been stated.
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Integrity. With it, nothing else matters. Without it, nothing else matters.

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#2262540 - 11/16/21 02:32 PM Re: loan officer conflict of interest question Anonymous
Anonymous
Unregistered

This sounds like a $hit $how.

SAR, SAR, SAR.

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