Curious to know what some of the rest of you do. Regulation Z exempts credit over $25,000 not secured by real property or a dwelling. Does anyone out there disregard this exemption and treat ALL consumer transactions the same no matter what the amount? Also, Does this mean per loan or total credit extended to one customer?

We treat all consumer loans the same in regard to Reg Z regardless of whether they fall into a category you described. However, here is something to consider. We just finished an OCC exam and they found a minor violation which was within tolerance on a loan which technically Reg Z did not apply to. But, since we chose to disclose under Reg Z it was a violation. Their comment was that if you choose to apply Reg Z disclosures to all loans, they need to be correct.

It means per loan, not total exposure. We exempt when Reg Z allows exemption.

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

cwilliams, dig deep if it isn't too late. I recall at a seminar being told that if Reg. Z didn't apply and it was done wrong, there was not a violation. I don't necessarily agree with that if it was intentionally misleading or a pattern or practice, like a bait and switch. I remember it distinctly because I would have agreed with your examiners up to that point.

In any case, we use the exemptions when possible. In fact, we designed one product specifically to avoid Reg. Z. We wanted a revolving line for our P&E customers but didn't want to get a system to handle all the requirements of open-end lines. So we set the minimum line over the Z threshold.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

I would have a real argument with the EIC that cited me a for a Reg Z violation on a loan that was exempt from Regulation Z. The transaction is exempt and therefor there cannot be a violation. I would go to the district office for an opionin on this one. The examiners do not have the latitude to make that type of determination. While I would except a notation or a comment, I would make sure that it never made it to the final report.

I'm with you, rlcarey! If the loan's exempt from Reg Z, there can't be a violation and I would not accept one in an exit conference or in an exam report. Examiners can't be allowed to make up the rules as they go. No one should roll over and play dead every time an examiner doesn't like something. Make them cite chapter and verse, and if necessary get the bank's attorney to write a letter to the regional office objecting to false conclusions like this.

There is only one circumstance when a citation of this type would be warranted. Even though the loan in question does not represent a violation, if the software or disclosure procedure is flawed and will similarly affect borrowers who are covered by the regulation, then criticism is warranted. The criticism should be directed at the procedure, however, not the exempt loan.

I'm glad to know I'm not the only one to whom this violation seemed wrong. In this instance the administrative assistant who prepared the loan docs simply made an error so there was no pattern or willful intent. However, because the results of the exam were better than we expected, I don't think I'll pursue it at this time. But I will definitely file this away for future reference! Thanks!

You do have to pick your battles. And if the biggest thing they found wrong, wasn't wrong, "you done good".

There are times exainers need to be challenged. They make mistakes just like we do. But again, decide what is important in the overall scheme of things, choose what is important and manage the exam.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Andy's hit one of the most important elements to the whole C/O job--manage exams--don't let them happen to you. Your regulator expects you to know what the regs require and manage your program effectively. If you don't stand up and defend what you believe, you're signaling a lack of confidence.

Examiners make mistakes and it builds character when they have to admit it. You're actually doing them a favor by presenting well-documented arguments that you are right and they are still learning the regs! :-) They will treat you with more respect when they learn that you do your homework and know your stuff. Next time they'll think twice before trying to blow one by you. Even better - next exam they'll probably send the trainee crew!!

I don't know about that Richard!! The last examination I went through I stood up to an examiner (politely of course) and told her I could not agree with something and she would have to prove it to me. I was told more or less that "if I don't get you on this I will on something else". She was kinda like a bad dog wagging it's tail like it's friendly and then taking a bite out of you!

The days of the big bad examiner are pretty much over. If you experience a situation such as that, I would document the discussion and then I would have a chat with your regional director of examinations. I have found that the regional directors don't have much patience anymore with examiners with that type of attitude.