I have been asked if there are any federal laws or regulations that specify a loan rate vs. deposit rate spread minimum or maximum when the deposit product will serve as collateral for the loan. I am at a loss for where to even begin. Any suggestions from you more seasoned compliance professionals?

I'm not sure where to begin for you either, but I am guessing that the end result will be dependent simply on the usury laws within the state. I think bank competition itself would settle the issue, as I think you'll find 2% above the CD rate (for a cd collateralized loan) is a good ballpark going rate.

There are currently no federal rate spread requirements. We have had several recent discussions touching on this. The last time federal rules covered this was in the '80s before Reg Q was emasculated.

Richard, doesn't that Reg Z issue still exist when the deposit securing the loan has a real low rate like you'd find today?

Be careful of Reg O. Does the public get a 300 b.p. spread while insiders get 200 b.p.?

If your spread gets too thin on a whole bunch of loans expect a regulator to ask if you know what your costs are to service those loans and keep the lights on. Does it make sense to book loans at a rate that makes the loans losers?

Yes, Section 226.18(r) requires a simple statement if the creditor requires the consumer to maintain a deposit earning less than 5% as a condition of the specific transaction. The statement simply advises the consumer that the annual percentage rate does not reflect the effect of the required deposit. In no way does this rule restrict the rates that may be charged on the loan or paid on the deposit.

Thank you all for your insight. I value these Bankers Online "chats" so much!