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#49265 - 12/17/02 06:05 PM Violation or not?
Anonymous
Unregistered

Is there any regulation under Truth In Lending, or any other regulation, that says a consumer must sign and date an application for a consumer loan purpose? I have just completed a branch audit and found a few applications where the customer did not sign or date the application. Should I site them with a violation or not?

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#49266 - 12/17/02 06:12 PM Re: Violation or not?
Kara S Offline
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Joined: Oct 2002
Posts: 927
Milwaukee, WI
If the customer didn't sign the application, couldn't they come back and say this contract is null and void, I didn't agree to it?
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#49267 - 12/17/02 06:14 PM Re: Violation or not?
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Look at Reg B 202.5(e) If the loan was not related to a dwelling purchase or refinance, a written application is not required.

If the loan was not related to the purchase or refinance of a dwelling you should not write them up for a reg violation, however it may be an internal loan policy requirement.
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#49268 - 12/17/02 06:24 PM Re: Violation or not?
Don_Narup Offline

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Joined: Jul 2001
Posts: 3,708
Las Vegas Nevada
One reason is :
The application is supposed to present a snapshot of the borrowers financial condition at a specific date in time. The credit desision is based in part on what the application says. The signature confirms the borrower has told the truth.

Without a signature or date you cannot contest a bankruptcy along the lines that the customer presented an untruthful picture of their financial condition on the date indicated on the application, and had they been truthful you would not have made the loan.

Read what your borrower is attesting to by signing the application. In many cases the wording gives the bank an OK to run credit checks.

I have seen judges deny a judgement to the bank because the application was not date or signed
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#49269 - 12/17/02 06:28 PM Re: Violation or not?
LinMarie Offline
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LinMarie
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Is your application the same as a note? As in our institution the application serves to record all information and give permission to run a credit report to make a decision. The note is the actual contract with the customer. It is our internal policy to have the applcation signed.


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#49270 - 12/17/02 06:43 PM Re: Violation or not?
Anonymous
Unregistered

Our policy is to have applications signed and dated.
If they are not, loan review send them back to be signed and dated. By signing the consumer is confirming the information given on the applicationa dn giving permission to run a credit check and review any items therein.


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#49271 - 12/17/02 06:47 PM Re: Violation or not?
Sponge Steve Offline
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Sponge Steve
Joined: Jun 2002
Posts: 299
Midwest
Except as noted for the home mortgage application, no reg requires the application be signed.

However, it's a good practice for this crucial issue: What if the loan is granted and the borrower files bankruptcy shortly thereafter? If you have a signed application from that person you have a stronger case to have the discharge set aside if the application is fraudulent than if the application was not signed.

Good practice to have them signed but no reg violation if they aren't.
Last edited by Steve White; 12/17/02 06:48 PM.
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#49272 - 12/17/02 06:58 PM Re: Violation or not?
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Ladies and Gentlemen, Anon's question was if there was any reg that requires a completed and signed application, and if he should write up the files for reg violations. To the best of my konwledge there is not except for the requirements in 202.5(e) and the requirement of a "purpose statement" of loans >=$10k, under BSA.

Written and signed applications may be required by your internal loan policies for the very good reasons mentioned above (our bank also requires written and signed applications), but unless they are for the purchase or refinancing of a dwelling, they are not required by the regs.

So the answer remains the same, no there is no reg that requires the application except under the reqirements of 202.5(e), and no they should not be written up for a reg violation.

If Anon's loan policy requires written applications, then by all means they should be corrected to adhere to the loan policy and he should write them up for a loan policy violation, but not a reg vioaltion.
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#49273 - 12/17/02 07:20 PM Re: Violation or not?
rlcarey Online
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rlcarey
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Posts: 79,294
Galveston, TX
Dan,

I concur and I find it interesting that there was a common thread in some of the responses that they get a customer signature to "give permission to run a credit report to make a decision". Under the FCRA, you do not need written permission to pull a credit report if you intend to use the information in connection with a credit transaction.
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#49274 - 12/17/02 07:36 PM Re: Violation or not?
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
In reply to:

Under the FCRA, you do not need written permission to pull a credit report if you intend to use the information in connection with a credit transaction.



100% accurate.
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#49275 - 12/17/02 08:08 PM Re: Violation or not?
Ted Dreyer Offline
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Ted Dreyer
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Posts: 2,245
I agree with Dan, although I would add the standard warning to "check state requirements".

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#49276 - 12/17/02 08:20 PM Re: Violation or not?
Pale Rider Offline
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Our state regulator in Texas requires a signed and dated application. Therefore, if you are state chartered you need to check the documentation requirements of the state banking department.
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#49277 - 12/17/02 08:31 PM Re: Violation or not?
rlcarey Online
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rlcarey
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Posts: 79,294
Galveston, TX
Since I'm relatively new to Texas - can you give me a citation for that requirement.

Thanks,
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#49278 - 12/17/02 08:46 PM Re: Violation or not?
Anonymous
Unregistered

I am from VA. Does anyone know if this is a requirement in VA? Or can you tell me where to look?

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#49279 - 12/17/02 08:52 PM Re: Violation or not?
David Dickinson Offline
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David Dickinson
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Central City, NE
Be sure to read the commentary to §202.5(e)#1, which states:

The requirement of written applications for certain types of dwelling-related loans (purchase or refinance of the borrower’s principle dwelling and secured by the dwelling) is intended to assist the federal supervisory agencies in monitoring compliance with the ECOA and the Fair Housing Act. Model application forms are provided in appendix B to the regulation, although use of a printed form of any kind is not required. A creditor will satisfy the requirement by writing down the information that it normally considers in making a credit decision. The creditor may complete the application on behalf of an applicant and need not require the applicant to sign the application.

Notice that the applicant does not need to fill out an application nor sign it. This is the lender's burden.
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#49280 - 12/20/02 01:58 AM Re: Violation or not?
Lucy Griffin Offline

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Lucy Griffin
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Posts: 1,544
The answers here are right on point. The only federal requirement falls in the mortgage area. But there are lots of little tricks under state law, interaction with laws, such as FCRA, and the growing concerns about both BSA CIP and predatory lending. Signatures and dates are a good practice and a smart practice, but not a requirement.

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#49281 - 12/20/02 02:58 PM Re: Violation or not?
redsfan Offline
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redsfan
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The Pennant Race
Virginia has no requirements regarding signed applications.
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