Internet Banking Disclosure Requirements For Mortgage Applications

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Question:

We are considering adding mortgage applications and possibly home equity applications to our internet banking site. If we do this, what are the requirements for diclosing properly? Are there sites containg disclosures that could be downloaded by hyperlink with the applications or some kind of electronic acknowledgements? How do other banks disclose with online applications?

Answer:

Answer by Andy Zavoina:

It can be done, but you need the proper infrastructure. You need to be able to react to the application within time constraints and the disclosures required in a paper based world apply here as well. There are some variations noted below, but depending on how far you go in the process, E-Sign or UETA consent may be required within your procedures.

Reg. Z has an interim/final rule which is excellent guidance although not yet mandatory.

12 CFR Section 226.36 Requirements for Electronic Communication.
(c) When consent is required. Under the E-Sign Act, a creditor is required to obtain a consumer’s affirmative consent when providing disclosures related to a transaction. For purposes of this requirement, the disclosures required under Secs. 226.5a, 226.5b(d) and 226.5b(e), 226.16, 226.17(g)(1) through (5), 226.19(b) and 226.24 are deemed not to be related to a transaction..

This means that depending on the disclosure, (not those above) you may first have to obtain demonstrable consent, disclose any hardware and software requirements, etc.

While you may look at other Web sites to fashion yours, be careful to review the disclosure content to ensure you state yours correctly and do not assume because someone else has done something that it is the best way and in compliance. That isn't always the case.

Answer:

Answer by Richard Insley:

One of the more common mistakes with online applications for housing credit products is failure to provide booklets and program disclosures on or with e-apps for ARMs and HELOCs. If these apps are dispensed online, you must include these Reg Z disclosures on the same page with the application, or link them sequentially so the customer MUST click through the disclosure pages on the way to the app.

First published on BankersOnline.com 7/15/02