Complaince Exams

In the compliance exam questionaire, what is the question "Do you have loans that are secured by deposit accounts with interest rates less than 5%" getting at? What are they trying to hook you on, does anyone know?

The only thing I can think of is that if you have a loan secured by a deposit account that is earning less than 5%, the "Required Deposit" box in the Fed Box needs to be checked.

Look at 226.18(r) and footnote 45 in Regulation Z.

A key distinction here - you are required to check the box (or include the statement if not a standardized TIL disclosure form) even if the required deposit account does not actually secure the loan. For example, if you have a consumer loan policy that requires consumer loan customers maintain a checking or savings account with the bank, and that account pays less than 5% interest, you are required to give the "required deposit" disclosure language in the TIL even though the loan is not secured by the deposit account. I think the questionnaire is worded the way it is because typically the only time banks require a deposit account be maintained as a condition of the loan is when the loan will be secured by the deposit account.

Oh boy a complaince exam. We just went through one this summer, what fun. Kinda like when the doctor says bend over, this won't hurt.

As a former examiner, I agree with those that have already responded.

MagicBanker,

Can I clarify this just a bit more to be sure I've got it correct. What if say "If you choose automatic loan payments from one of our accounts (i.e., checking, savings) we will give you a .25% discount on your rate. Would that trigger the required deposit disclosure? (I don't believe it would).

Thanks for your help.........

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A key distinction here - you are required to check the box (or include the statement if not a standardized TIL disclosure form) even if the required deposit account does not actually secure the loan. For example, if you have a consumer loan policy that requires consumer loan customers maintain a checking or savings account with the bank, and that account pays less than 5% interest, you are required to give the "required deposit" disclosure language in the TIL even though the loan is not secured by the deposit account. I think the questionnaire is worded the way it is because typically the only time banks require a deposit account be maintained as a condition of the loan is when the loan will be secured by the deposit account.

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