Page 2 of 3 1 2 3
Thread Options
#807427 - 08/31/07 06:00 PM Re: New Usury Rates for Servicemembers MarieR
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
We're working on a paper to provide additional guidance on this now. Hopefully it will answer your immediate questions.

Sinatra Fan, I was at it before that, so that we could meet your immediate need for information. If someone felt getting the FR out at o'dark thirty was important, we thought reading it was too. :P Are we dedicated or what!

We figured the FR would have this today and if it applies to you, there is a very short time for implementation. So you may need answers now, and don't want to spend the weekend on this stuff.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
Lending to Servicemembers (SCRA, JWNDAA), War, Terrorism
#807553 - 08/31/07 07:00 PM Re: New Usury Rates for Servicemembers MarieR
Richard Insley Offline
Power Poster
Richard Insley
Joined: Oct 2000
Posts: 9,982
Toano, VA
That's the way I read it. You can't afford to make a mistake, however. The penalties for violating this reg appear to include 100% of principal and interest.
_________________________
...gone fishing.

Return to Top
#807654 - 08/31/07 07:31 PM Re: New Usury Rates for Servicemembers Richard Insley
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
It also allows for criminal penalties.

Messing up on one or two of these wouldn't cause real problems for the bank, but having a big program for these loans and having a procedural error that lasted a year or two could require a resume update for someone.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#807855 - 08/31/07 09:58 PM Re: New Usury Rates for Servicemembers MarieR
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#808628 - 09/04/07 07:24 PM Re: New Usury Rates for Servicemembers Andy_Z
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,296
Cape Cod
Mary Beth Guard and Jack Holzknecht will be presenting a BOL Learning Connect webinar, "New Rules for Consumer Loans to Servicemembers," on September 14 (note the date change). Click HERE for information.
Last edited by John Burnett; 09/04/07 07:49 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#809542 - 09/05/07 07:43 PM Re: New Usury Rates for Servicemembers MarieR
LoisLane Offline
Diamond Poster
LoisLane
Joined: Oct 2001
Posts: 1,570
Wisteria Lane..
If the bank makes a $2,000 or smaller closed-end loan, for 91 days or less and the borrower authorizes payments to be debited from his checking account, does that loan come under the definition of a "payday loan"?

Last edited by LoisLane; 09/05/07 08:52 PM.
_________________________
And where is Superman when I need him?

Return to Top
#809790 - 09/05/07 10:18 PM Re: New Usury Rates for Servicemembers LoisLane
Cowboys Fan Offline
Power Poster
Joined: Dec 2002
Posts: 4,585
SC
I don't think it would be a payday loan. Here's my thought process:
232.3(b)(1)(i)(B) includes the term electronic funds transfer.
232.3(g) uses the same definition of electronic funds transfer as Reg E
205.3(c)(5)appears to exempt this type of transaction from the definition of an EFT.
My comfort level isn't very high on this so hopefully one of our experts will confirm or correct.
_________________________

Return to Top
#810138 - 09/06/07 03:08 PM Re: New Usury Rates for Servicemembers Cowboys Fan
dach Offline
100 Club
Joined: Mar 2006
Posts: 135
Our Bank loan software company has stated that they will not update their software to include this calculation or the disclosures. Can anyone tell me some software companies that would offer this product?

Return to Top
#810304 - 09/06/07 04:53 PM Re: New Usury Rates for Servicemembers dach
MaryRink Offline
Gold Star
Joined: Jul 2003
Posts: 306
Northern MN
Our lending software co.(Harland LaserPro) is NOT updating their software. They do not support these types of lending products! Nice, huh?

Return to Top
#810669 - 09/06/07 08:18 PM Re: New Usury Rates for Servicemembers MaryRink
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,296
Cape Cod
Cowboys Fan -- It would appear that an in-house loan of that type, with an internal electronic debit (bank holding the deposit also makes and keeps the loan) would not meet the strict definition of "payday loan" because of the Reg. E exception you've noted.

The hangup could be the fact that you cannot require the electronic payment authorization as a condition of extending credit. If the service member balks and you accept a post-dated check in order to make the payment, BAM, you're looking at a payday loan.

Also, be aware that nowhere in the material accompanying the regulation does DoD note that little exception. My guess is that you'd have to scrap with an examiner to win an argument over whether the 12 CFR 205.3(c)(5) exception carves some loans out.

Last edited by John Burnett; 09/06/07 08:38 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#810758 - 09/06/07 09:10 PM Re: New Usury Rates for Servicemembers MaryRink
CalifDreamin Offline
Diamond Poster
CalifDreamin
Joined: Mar 2002
Posts: 2,201
Far from Calif
What are your thoughts on simply writing into policy that we don't make these types of loans, especially if our software can't support the "MAPR"? What are the fair lending implications? I'm thinking we'd be okay if the reason is a business decision made in part due to the inability to calculate the "MAPR," but don't feel entirely confident of that if we do have the ability to do the calculation.
_________________________
The opinions expressed are mine and do not necessarily reflect those of my employer
_._._._._._.
A.S.A.P.
Always
Say
A
Prayer
<><

Return to Top
#810795 - 09/06/07 09:45 PM Re: New Usury Rates for Servicemembers John Burnett
Cowboys Fan Offline
Power Poster
Joined: Dec 2002
Posts: 4,585
SC
Thank you for the info John.
_________________________

Return to Top
#811039 - 09/07/07 02:24 PM Re: New Usury Rates for Servicemembers CalifDreamin
LoisLane Offline
Diamond Poster
LoisLane
Joined: Oct 2001
Posts: 1,570
Wisteria Lane..
Originally Posted By: FlamingoGal
What are your thoughts on simply writing into policy that we don't make these types of loans, especially if our software can't support the "MAPR"? What are the fair lending implications?


You could change loan policy to restrict loans under $2500 to an open -end line of credit.
_________________________
And where is Superman when I need him?

Return to Top
#811102 - 09/07/07 02:46 PM Re: New Usury Rates for Servicemembers LoisLane
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,366
Bloomington, IN
You can write whatever you want into your policy. However, your policy does not dictate what a loan is. How the loan is underwritten and the terms of the loan dictates what type of loan it is.

Doing this would be no different than writing in your loan policy you do not take telephone applications, but you have one loan officer that constantly takes loan requests from their customers over the telephone, therefore you do take telephone applications. Your actions dictate what you do, not your written "intentions".
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#811774 - 09/07/07 09:32 PM Re: New Usury Rates for Servicemembers Cowboys Fan
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
Originally Posted By: Cowboys Fan
I don't think it would be a payday loan. Here's my thought process:
232.3(b)(1)(i)(B) includes the term electronic funds transfer.
232.3(g) uses the same definition of electronic funds transfer as Reg E
205.3(c)(5)appears to exempt this type of transaction from the definition of an EFT.
My comfort level isn't very high on this so hopefully one of our experts will confirm or correct.



Lets think this one through. I think Lois' example may well be a payday loan, but I admire your ability to see an exception based on Reg E.

The spirit and intent was to protect servicemembers from abuses. Personally, this is an envelope I wouldn't want to push. Do you have a technical out, yes, possibly. Would I want to stand up and defend this position, no way. It wouldn't be worth it.

Landlords in my area (I am not proud to say) read the lease protections in the SCRA. When a SM needed to get out of a lease because they were deploying or moving, they let the SM out of the lease, but enforced it on the spouse (working or not) who now intended to go home to family during this period. Was it within the parameters allowed by law, yes. Was it withing the spirit and intent, no. Was it a huge black eye for those using this clause to retain tenants, absolutely.

As noted above, internally, I'd make it a policy (and a practice) that loans meeting the criteria here NOT be in the banks list of available products, unless the bankers want to comply with these requirements. Is this a common product, or an odd duck for you. If it is the exception, just don't do them.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#811787 - 09/07/07 09:46 PM Re: New Usury Rates for Servicemembers Dan Persfull
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,296
Cape Cod
I'm going to temper what I wrote above a bit. I think that relying on the apparent exception in Reg. E's definition of EFT is a bit of a risk. Although we have cited 205.3(c)(5)(iii) for years to create an exception to the Reg. E compliance requirements for auto-loan debits, the regulation doesn't come right out and mention loan payments as an exception at all. And there is no cover in the Interpretations to this section, either.

Devil's advocate department:
It's reasonable to interpret this subparagraph as describing loan payments because this is where the regulation reminds us that you can't condition the extension of credit on an agreement to have payments deducted by EFT.

Back to the principal argument:
It's clear to me that using the exception suggested by Cowboys Fan above would be contrary to the spirit of the DoD regulation. It's no less injurious to a service member for her own bank to make such a loan than for a non-bank payday lender to do the same, assuming the same rates and fees.

At any rate, I suggest that anyone considering these loans would be inviting a lot less scrutiny if they would look at the loan terms and adjust them so they are clearly outside the reach of the DoD regulation.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#812876 - 09/11/07 03:44 PM Re: New Usury Rates for Servicemembers John Burnett
ktac MITCH Offline
Diamond Poster
ktac MITCH
Joined: May 2005
Posts: 1,813
Giant side of TX
OK - so payday is still somewhat up in the air. Lets move on to the other 2

2. Title Loan = Say a customer is trading vehicles and wants to sell their old one theirselves, so we make them a loan secured by the old vehic (previously fee and clear) for 120 days to give them $ for a down payment on the new vehic and time to sell their old one.
I think this would fall under the definition.

3. Tax Refund = We are a bank that has a good volume of consumer loans, and we have customers who want to borrow for christmas expenses and we do a 4 - 6 month single pay loan with the identified source of repayment being their tax refund (the anticipate to receive like they have in prior years).
I think this would fall under the definition.

WOW - we apparently fall under this new reg and don't want to !?!?!
_________________________
My opinions are just that, and might be worth what you paid for them.

Return to Top
#813203 - 09/11/07 07:59 PM Re: New Usury Rates for Servicemembers ktac MITCH
Cowboys Fan Offline
Power Poster
Joined: Dec 2002
Posts: 4,585
SC
3. I don't think it would be based on the comments on page 50586 of the Federal Register link from above: "The rule does not cover loans where borrowers merely note that a tax refund may be used to repay the advance."
_________________________

Return to Top
#813213 - 09/11/07 08:07 PM Re: New Usury Rates for Servicemembers Cowboys Fan
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,366
Bloomington, IN
I agree with CF on #3, and also don't lose sight that these rules only apply to a service member or their qualifying dependent. If the applicant is not a covered person you have no worries. We will have the "covered persons" statement provided in the Reg. signed at the time of application so we will know how to proceed with the processing. We are also fortunate in that a very small percentage of our customers will be covered by the regulation.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#813236 - 09/11/07 08:21 PM Re: New Usury Rates for Servicemembers Dan Persfull
jap Offline
Platinum Poster
jap
Joined: Mar 2004
Posts: 600
IN
I would not exactly agree that you have no worries if the applicant is not a covered person. If a bank makes a loan that falls into one of the three categories, they will need to have the covered person statement signed (whether or not they end up being a covered person).

If you are like us (software vendor has stated they will not be upgrading to incorporate the new MAPR requirements), then your only option would be to find a new software company or completely stop making loans that would fall into any of the three categories.
_________________________
Watch out, brother, for that long black train...

Return to Top
#813242 - 09/11/07 08:23 PM Re: New Usury Rates for Servicemembers Dan Persfull
MarieR Offline
Platinum Poster
Joined: Nov 2005
Posts: 614
Dan,
Are you going to give this disclosure to all applicants, or only to those who apply for a loan that would be covered by the reg?
_________________________
CRCM

Return to Top
#813243 - 09/11/07 08:23 PM Re: New Usury Rates for Servicemembers Dan Persfull
Richard Insley Offline
Power Poster
Richard Insley
Joined: Oct 2000
Posts: 9,982
Toano, VA
Originally Posted By: Dan Persfull
a very small percentage of our customers will be covered by the regulation
The problem is, however, you have to spend the same time and money implementing the rule unless you can get the percentage of covered borrowers and covered products down to 0.000%.
_________________________
...gone fishing.

Return to Top
#813295 - 09/11/07 08:48 PM Re: New Usury Rates for Servicemembers Richard Insley
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
Absolutely. "Close enough" only counts in hand grenades and nuclear bombs. Here, one puts you in the game and the requirements need to be addressed.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#813301 - 09/11/07 08:51 PM Re: New Usury Rates for Servicemembers Andy_Z
jap Offline
Platinum Poster
jap
Joined: Mar 2004
Posts: 600
IN
I had always heard that "close enough" counted in horseshoes as well...
_________________________
Watch out, brother, for that long black train...

Return to Top
#813304 - 09/11/07 08:54 PM Re: New Usury Rates for Servicemembers jap
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,325
On the Net
You are correct. But I was "on duty" for that post and horse shoes is an after hours R&R activity.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
Page 2 of 3 1 2 3

Moderator:  Andy_Z