This is probably a dumb question, but can a business have a loan for personal reasons? We have a loan to a LLC for a home (non-owner occupied). Doc prep folks reported it on HMDA(correctly), but also put in the APR spread. They did reg Z disclosures also. Our compliance folks are stating that since it is in the businesses name, it can be on the HMDA LAR, but you shouldn't report the APR spread.

I agree with your compliance folks. Loans to non-natural persons are not subject to the provisions of Reg. Z whether the loan's purpose is consumer or business. For HMDA you only report the rate spread for loans subject to the provisions of Reg. Z.

I'm going to go out on a limb and disagree with Dan. Even though the Reg Z disclosures are not required, I would think that if they were provided to the LLC, you have given them the consumer rights under the Reg and should report the APR and rate spread information on the LAR.

(Okay, I'll duck now!)

From page A-9 in the GIR:

b. If the loan is not subject to Regulation Z, or is a home improvement loan that is not dwelling-secured, or is a loan that you purchased, enter “NA.”

I'm not trying to cause trouble, but my argument would be that because they provided the disclosures, they made the loan subject to Reg Z.

No they did not. They simply provided unnecessary disclosures. Would you say because they did not provide the disclosures, then the loan would not be subject to the regulation because they weren't provided?

The regulations dictate what loans are subject to their provisions. And Reg. Z exempts business loans from its provisions.

I have been told time and again that if a Reg. Z disclosure isn't required, and you do it wrong, you can't be penalized under that. The same holds true here. Just because it was done, doesn't make it subject to the reg. The old rule of when in doubt, disclose, is a safeguard, not a liability.

I fully agree with Dan and Andy. Providing disclosures does not convert a non-Reg Z loan into a Reg Z loan.

Now someone needs to explain to some Commercial lenders that NOT providing disclosures, and booking a loan on "the commercial system" does NOT make a personal loan exempt from Reg Z!!!!!!
(A gripe from painful personal experience!)

Thanks to all for your advice. My concern was similar to hmdagirl about providing disclosures and if that would subject us to additional regulation scrutiny. Good evening.

P.S. It's been a long day.