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Reg Z New Rules for Private Education Loans

Recorded on February 10, 2010

Mom, Dad and their 18 year old daughter want to borrow a few thousand dollars for tuition for the daughter's next semester at State University. Do you make loans like this?

The loan is a Private Education Loan (PEL); so, should you:

  • Refuse to make the loan;
  • Make the loan, but deliver the three new disclosures required by Regulation Z for PELs; or
  • Structure the loan so it does not qualify as a Private Education Loan.

Both your options and your time are limited. You must decide how to handle PELs by February 14, 2010.

WHAT?

On July 30th the Federal Reserve Board approved final amendments to Regulation Z (Truth in Lending) that revise the disclosure requirements for private education loans. The new rules implement Title X of the Higher Education Opportunity Act (HEOA).

The rules were effective September 14, 2009, but compliance is not mandatory until February 14, 2010.

The new rules apply to loans made expressly for postsecondary educational expenses but do not apply where educational expenses are funded by credit card advances, or real-estate-secured loans. In addition, the amendments do not apply to education loans made, insured, or guaranteed by the federal government, which are subject to disclosure rules issued by the Department of Education.

WHY?

Upon completion of this program, participants understand:

  • Which transactions are covered by the new Regulation Z rules on private education loans;
  • The series of three new disclosures required for such loans; and
  • The restrictions on using the name, emblem, or mascot of an educational institution in a way that implies that the institution endorses the creditor's loans.

Participants receive a detailed manual that serves as a handbook long after the program is completed

PROGRAM CONTENT

This two-hour webinar focuses on:

  • Revised coverage rules to expressly cover private education loans even if the amount financed exceeds $25,000;
  • The new disclosures:
  • At application - Creditors must provide general information about loan rates, fees, and terms, including an example of the total cost of a loan based on the maximum interest rate the creditor can charge.
  • At approval - the creditor must give the consumer a set of transaction-specific disclosures, including information about the rate, fees and other terms of the loan.
  • At consummation - the creditor must provide updated cost disclosures substantially similar to those provided at approval. The consumer's three-day right to cancel the transaction must also be disclosed.
  • Once a consumer applies for a private education loan, the consumer must complete a "self-certification form" with information about the cost of attendance at the school that the student will attend or is attending. The creditor must obtain the signed and completed form before consummating the private education loan.

WHO?

The program is designed for compliance officers, loans officers, auditors and anyone else with consumer loan compliance responsibilities.

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