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#2273027 - 07/19/22 01:55 PM Online Loan Apps -Can you Limit States?
Tesla Offline
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We are considering jumping into putting a consumer loan application online. (Ugh!). We are a national bank. Can we exclude certain states or limit applicants to living in states that border our state? What issues do you see with doing that? My concern is we are not experts in states with heavy consumer laws like Texas and California.
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#2273032 - 07/19/22 02:43 PM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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rlcarey
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Why would you even contemplate making consumer loans in States in which you are unfamiliar with the laws, regardless of whether you feel they are "heavy" on consumer laws or not. Also, I know nothing but the bare minimum about the new CRA proposal but establishing lending areas outside of your direct marketplace might be problematic, but I would let Len answer that sort of question.
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#2273050 - 07/19/22 04:32 PM Re: Online Loan Apps -Can you Limit States? Tesla
Len S Offline
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The CRA NPR will require that all loans extended anywhere by a "large bank" (=>$2 billion assets) be evaluated in the proposed retail lending test.

You read that correctly - everyone is focused on the new "Retail Lending Assessment Areas" and ignoring the requirement to be examined in all "Outside Retail Lending Areas".

So you extend a single mortgage 1,000 miles away from your nearest branch and, if that mortgage qualifies as a major product line (15% of the value of retail loans extended outside the facility-based and retail lending areas) it will be compared to the benchmarks for the MSA or statewide non-MSA in which the mortgage is located and included in the Retail Lending Test at the institution level. So there is no minimum of 100 mortgages or 250 small business loans like there is for the Retail Lending Assessment Area.

Not a single bank has yet commented about NPR with 17 days to go till the end of the comment period on August 5.
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#2273062 - 07/19/22 06:46 PM Re: Online Loan Apps -Can you Limit States? Tesla
Inherent_Risk Offline
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You can limit it by state, and I'd go further and say you should unless you understand the laws and licensing you might need by moving into a new state.

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#2273063 - 07/19/22 06:49 PM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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Well, they did say they were a National bank, but they need to be fully versed on what their Federal preemption abilities will allow and what it will not.
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#2273065 - 07/19/22 07:46 PM Re: Online Loan Apps -Can you Limit States? Tesla
Tesla Offline
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Ok - thank you all. Someone said we COULD limit by state. That was my main question. So we can say, for example, "I am sorry we do not make loans in Texas", and that is OK, right?
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#2273066 - 07/19/22 07:52 PM Re: Online Loan Apps -Can you Limit States? Len S
Tesla Offline
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Originally Posted by Len S
The CRA NPR will require that all loans extended anywhere by a "large bank" (=>$2 billion assets) be evaluated in the proposed retail lending test.

You read that correctly - everyone is focused on the new "Retail Lending Assessment Areas" and ignoring the requirement to be examined in all "Outside Retail Lending Areas".

So you extend a single mortgage 1,000 miles away from your nearest branch and, if that mortgage qualifies as a major product line (15% of the value of retail loans extended outside the facility-based and retail lending areas) it will be compared to the benchmarks for the MSA or statewide non-MSA in which the mortgage is located and included in the Retail Lending Test at the institution level. So there is no minimum of 100 mortgages or 250 small business loans like there is for the Retail Lending Assessment Area.

Not a single bank has yet commented about NPR with 17 days to go till the end of the comment period on August 5.

Sorry, Len- I did not see this response. If I understand the proposal correctly, the 15% rule applies for retail loans, right? So if we make 1 car loan in AZ, 4 in MN and 15 in TX - as long as we don't exceed the 15% we don't fall under that test, right? However, if our aggregate of car loans is greater than 15%, then those individual loans in each state would trip that rule and we would be compared to the benchmarks for the MSA or statewide non-MSA for those car loans.
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#2273067 - 07/19/22 07:54 PM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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Now wait a minute - Texans are a protected class under Regulation B I thought.

Just kidding.

Yes - limiting your offerings by geographies is OK as long as it does not represent redlining. If this is an on-line application portal, the first thing you should ask for is the customer's zip code and if they do not enter one in which you are offering loans, then they should not be able to continue the application process, otherwise you are going to be inundated with applications that you are going to have send adverse action notices.
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#2273068 - 07/19/22 07:56 PM Re: Online Loan Apps -Can you Limit States? Tesla
Tesla Offline
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LOL - yes, I shouldn't pick on Texas so much. smile

I will definitely see if the software can do that. That will help a ton with this train I can't stop. I found out about this plan about 1 day ago, so I am scrambling to stop it or at least slow it down until I can think through all of these things!
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#2273085 - 07/20/22 03:31 AM Re: Online Loan Apps -Can you Limit States? Tesla
Len S Offline
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Connecticut
Tesla - yes only loans that qualify as Major product line loans will be measured in the outside retail lending area. The calculation is based on 15% of the dollar value of all retail loans. However, for automobile loans they take the percentage based on a combination of the dollar value and the count of auto loans originated so if auto loans constitute 20% of the number of retail loans and only 5% of the value of retail loan dollars in an area the average of 12.5% would not be enough to qualify as a major product line. However, if the value equaled 10% of retail loan dollars in a given market, the average would be 15% which would qualify auto loans as a major product line in the market and that lending activity would be subject to the Retail lending test.

One other tricky thing is are you talking about a Retail lending area or the "outside retail lending area" (which essentially is the part of the entire country in which you made loans but not enough to qualify as a retail lending assessment area). I suggest you watch the recording of the webinar we broadcast. The link is in the CRA thread.
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#2273086 - 07/20/22 03:44 AM Re: Online Loan Apps -Can you Limit States? Tesla
Tesla Offline
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Wow! Thank you! That is enough to make my head spin! LOL! I attended the ABA Reg Conference and didn't get that detailed of information, so I will look for the link to your webinar.

I think we would be looking at "outside retail lending area" but that is going to have to be determined, I think. This is just a hair brained idea from our Consumer Lending department that has no idea about this CRA stuff coming yet. I have a meeting to discuss it high level with them tomorrow. Wish me luck! smile
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#2273088 - 07/20/22 11:51 AM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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So, let me get this straight. You are going to launch an on-line application portal for direct lending for automobile loans in areas that you have no physical presence?

All I can say is good luck in generating any business, as you would need an unlimited marketing budget or a miracle to get your name in front of enough people that would bother looking outside of the dealer showroom for financing and then you will also need to be able to beat the pricing of available dealer financing or local indirect lenders.

This likely is a project doomed to failure anyway. But I sure would be interested in actually reading this business plan.

There is a written business plan - right?
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#2273089 - 07/20/22 01:14 PM Re: Online Loan Apps -Can you Limit States? Tesla
Tesla Offline
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You made me spit out my coffee laughing! Business plan? LOL! No, the lines of business run the show here. We did less than 100 car loans last year and the new Retail lender wants to go national and no one is stopping him. All I can do is say this is or is not compliant. Believe me, I know this is not the way to run a bank, but I am just the lowly compliance person - not in senior or executive management. Have you ever seen the meme with the dumpster fire? LOL!
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#2273093 - 07/20/22 01:49 PM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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I was hired into a bank and as part of the deal, I told the president that I would only do it if I had a seat on the executive committee. Well, the first time marketing came in with some cockamamie idea, I interjected into the meeting that is sounded like a good idea and that I would need to see the business plan in order to decide. I got a bunch of deer in the headlights looks. Then I just said, I would really like to know the projected costs for the program and then the projected returns, whether financial or name recognition or other intangible expected values. The president looked at me and slowly started nodding his head. From that date forward, business plans for new endeavors were SOP whether marketing or other product development. And progress updates were also required after the fact. But I know everyone is not that lucky to have that opportunity.
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#2273094 - 07/20/22 02:04 PM Re: Online Loan Apps -Can you Limit States? Tesla
Rocky P Online
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Love stories with happy endings Randy - thanks. Too often, a new manager has high dreams and (s)he's selling the dream to the CEO to make millions, without any idea how it works (or if the infrastructure can handle it).
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#2273130 - 07/20/22 05:58 PM Re: Online Loan Apps -Can you Limit States? Tesla
John Burnett Offline
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A little late in this thread now that the idea has been effectively shot down, but part of the business plan for this online loan product would also have to be how the bank would handle and manage repos when the few loans it might garner go south.
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#2273245 - 07/22/22 06:55 AM Re: Online Loan Apps -Can you Limit States? Tesla
deltacrcm Offline
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Related to this thread (sort of), but we have recently begun offering several different types of consumer loan products through our online application portal, and we have run into situations where an applicant, usually one with a very low credit score who definitely would not qualify, applies for all of our loan products. In this situation, should an AAN be issued individually for each product applied for, or would it be possible to consolidate the products on one notice since they are declined for the same reason in every case? We asked the software provider if we could limit the applicant to choosing one product and they have answered with no.

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#2273248 - 07/22/22 12:32 PM Re: Online Loan Apps -Can you Limit States? Tesla
rlcarey Online
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rlcarey
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If you received one application for multiple products, I am not sure why you could not just list the products that were applied for under Description of Account, Transaction, or Requested Credit on one AAN.


Form C–1—Sample Notice of Action Taken and Statement of Reasons
Statement of Credit Denial, Termination or Change

Date:____________________
Applicant's Name:____________________
Applicant's Address:____________________
Description of Account, Transaction, or Requested Credit:____________________
Description of Action Taken:____________________
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#2273268 - 07/22/22 02:22 PM Re: Online Loan Apps -Can you Limit States? Tesla
deltacrcm Offline
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Makes sense, thank you!

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