I know I am going to get questions on this so I am trying to prepare. Where can I find definitions for:

*securities credit
*consumer designated credit used for business or agricultural purposes
*purchases of originated covered credit (does that include through merger?)

Thanks.

When the final rule was issued, there was also a table of contents document available on the CFPB website. Securities credit page 203, consumer designated page 196, purchase of covered credit page 199.

I have not done an extensive read but this should get you started. Good luck!

https://files.consumerfinance.gov/f/documents/cfpb_1071-table-of-contents.pdf

Oh my goodness, I am so embarrassed. Thank you for pointing out the obvious to me. It's been a long week.

Oh my, don't be embarrassed! There is so much flying around and we are all trying our best to keep up. It's all good!

I really don't understand the exclusion for Consumer Designated Credit in the commentary or how that adds any additional clarity. To me it makes things even more confusing.

So, business credit is covered. Business credit is well defined in Reg B simply as an extension of credit primarily for business and commercial (including ag) purposes. The reg says then that "consumer designated credit" is excluded. It is consumer designated credit if it is primarily for personal, family, or household purposes. This seems clear simply based on the definition of Business Credit.

As discussed previously, we treat business credit applications under $50,000 as consumer loans. We take a consumer application and run them through the consumer UW/approval and Reg Z documentation processes. Does this commentary indicate that these loans would be excluded from the rule? Initially, I would have said that these loans are covered because their primary purpose is "business", but now I'm not sure.

Given the purpose of the regulation in covering loans to small businesses, it would make no sense to exclude these, but it's certainly not clear. I'm not sure if the CFPB crafters of these provisions were or weren't aware of CU call reporting. I certainly wasn't. I'd send a question to them.

I have not been able to find if the dollar amount for CRA Small Business continues to remain at $1 million, I know the revenues went up to $5 million, but not clear on the loan amount.

Appreciate a response.
Thanks,

OK

First, there are 2 "not covered" applications found in § 1002.103 Covered applications.(b) Circumstances that are not covered applications. A covered application does not include:
(1) Reevaluation, extension, or renewal requests on an existing business credit account,
unless the request seeks additional credit amounts.
(2) Inquiries and prequalification requests.

Second there are 6 specific excluded transactions in § 1002.104 Covered credit transactions and excluded transactions:
(b)
1 Trade Credit
2 HMDA
3 Insurance Premium financing
4 Public Utilities
5 Securities credit
6 Incidental credit
Then there are 4 more excluded transactions that are not explicitly listed in 104 but are included in the Official Commentary regarding 104: (1) factoring, (2) leases, (3) Consumer designated credit and (4) credit transaction purchases, purchases in a pool of credit transactions and partial interest in a credit transaction.

The exclusion of loans purchased and loan participations is in contrast to the way those credits are handled in the existing CRA and may have a big impact because some banks helped their CRA performance by purchasing loans. Those loans will no longer be captured under 1071 and since the Agencies have indicated that the 1071 data will replace small business loan and small business farm data collection, that activity will not be in the A&D data and won't be in the small business loan application register which means institutions won't be able to submit such transactions for CRA consideration.

Finally, loan size has been the determinant of small business and small farm loans since 1995 for CRA purposes. With Section 1071 loan size in irrelevant and unlimited. It is the size of the business as measured by its GAR (<=$5 million) that defines a small business.

Regarding Consumer designated credit in the Official Commentary (page 826)

Section 1002.104 (b) Excluded transactions.

3. Consumer-designated credit. The term “covered credit transaction” does not include
consumer-designated credit that is used for business or agricultural purposes. A transaction
qualifies as consumer-designated credit if the financial institution offers or extends the credit
primarily for personal, family, or household purposes. For example, an open-end credit account
used for both personal and business/agricultural purposes is not business credit for the purpose of
subpart B of this part unless the financial institution designa

Under 1071 there will be no limit to the value of any individual small business loan unlike in CRA where there is a limit of $1 million.

When determining bank originated transactions, would financial standby letters of credit be considered incidental credit?

I've read the definition and am still a bit unsure...

How does a standby letter of credit fall within the definition of incidental credit in 1002.3(c)(1)?

ECOA and Regulation B do not address letters of credit. Regulation Z excludes letters of
credit under its comment 2(a)(14)-1.vi. In finalizing this exclusion, the Board stated that
“[i]ssuance of letters of credit and execution of option contracts are not extensions of credit,
although there may be an extension of credit when the letter of credit is presented for payment or
the option is exercised, if there is a deferral of the payment of a debt at that time.”483 The Bureau
agrees with the Board’s assessment of these products and believes that a letter of credit is not
credit under ECOA. Thus, the Bureau is not covering letters of credit under the final rule.

Thank you Len S for the informative and respectful answer. I appreciate the help.