If you don't already subscribe to this, I highly recommend you get on the e-mail list with the DFI for their monthly bulletins.

Just in case you had not heard of this, the DFI will examine for compliance with Division 1.6 of the Financial Code as part of its regular safety and soundness examinations.

The bulletin has a laundry list of items they will look for. They also strongly suggest the board of directors adopt policies which cover the aforementioned laudry list. You can view the bulletin at:
DFI July Bulletin

Division 1.6 is California's "Predatory Lending" law which mirrors Reg Z Section 32. For more specific information, you can look at Financial Code - Div 1.6 Section 4970
and Div 1.6 Section 4973
and
Div 1.6 Section 4974-4978.8

Thanks for the information. I guess I had better take a closer look at this bulletin. Thanks for the additional sites of information.

Bonnie,

Has your institution completed the P&P as stronly recommend by this Monthly Bulletin? Getting started on one would be difficult due to the various areas of information. Which area of information did you start this process, if completed?

Thanks

I am working on a general policy statement. It is actually pretty easy for us since we are not a mortgage lender. We do Home Equity loans mainly to accomodate personal needs of business customers. However, anyone can apply, we just don't advertise them. Our pricing is nowhere near in danger of triggering coverage, our fees are modest, plus we are conservative in LTV and credit qualification.

So basically, our procedure stays the same, and our policy will reflect that we will observe the indexes and make sure our pricing will not trigger coverage.

I am actually writing the policy to reflect what FC section 4970 and 4973. We do mortgage loans, but like you we go no where near the trigger points. Based on what you say, maybe I am going a bit too far with this one.

My take on the DFI bulletin is that this is the DFI answer to the issue of Predatory Lending. IMHO, they want to make sure those institutions that keep the "wheels a little too close to the edge" are fully aware of the risks, and this also gives the state examiners a basis for conducting examinations on Sub-prime loans for any signs of predatory lending.

I'm not sure how valuable this attention will be with respect to a state financial institution since we already have FDIC/FRB/OTS looking at the same thing.

But it does demonstrate how these "compliance" issues will become more and more important to Safety and Soundness.

I agree completely. I think the reason the DFI implemented this is so they had a basis to conduct an examination. Thanks for the input Bonnie.