We are offering a new service (contract collections) to accept payments, process tax reporting, etc. for consumers and businesses who have private notes. Basically, we are servicing a loan, but we are not the lender.

My question pertains to beneficial ownership. Would this type of service meet the definition of an "account"? Does it make a difference if the parties involved are added to our system? It's somewhat confusing because technically they are not our borrowers.

If you currently are taking advantage of any small service exemptions, this will kill them.

Also, servicing a loan does not appear to meet the definition of an account.


Sec. 1020.100 Definitions.
(a) Account. For purposes of §1020.220:

(1) Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.

UPDATE:

Our BSA Department has determined these are an "account" and the borrower is a "customer"; therefore, we are collecting CIP and BO information.

That being said, they do not meet the definition of a residential mortgage transaction in Reg Z (1026.2(a)(24)), since we did not take a security interest or finance a dwelling. Is that the way we can justify not counting them towards the 5,000 and retain the small servicer exemption?

Bump

The definition of residential mortgage transaction isn't germane to your question. If the bank wants to maintain a small servicer exemption under Reg Z § 1026.41(e)(4), it will not meet Criterion (ii)(A) because it will be servicing one or more loans for which it is neither creditor nor assignee, cannot meet criteria (ii)(B) or (C), and the loans won't be excluded under (e)(4)((iii)(A), (B) or (C).

That leaves one possible out that I can see -- Under 1026.41(e)(4)(iii)(D) you can exclude transactions serviced for a seller financer that meets all of the criteria in §1026.36(a)(5).