Q: We do not have an official pre-qualification program in place. Instead, customers will usually contact a lender on a random basis to find out how much they could borrow if they decide to begin searching for a house. The lenders do not obtain credit reports, Social Security numbers, or property addresses. The borrowers give general information about their income and debts. The lenders neither approve nor deny. They only state the amount that, based on the information given, the customers might be granted. Some of these inquiries turn into a full application, whereas others are not continued. For those that are not continued, how long should we retain records of the conversation and the information?
A: A “discussion” is not an application for credit unless the lender declines the request. So, if someone calls, as you describe, and nothing more happens, there are no record retention requirements. However, if, during the discussion, the borrower provides information such as “I have a credit score of 450” or “I declared bankruptcy last year” and the lender tells the individual that the bank does not loan under those circumstances, that is adverse action and a notice must be provided and a record retained for the requisite time Regulation B requires. (Response provided May 2017.)
Q: Currently I am the Community Reinvestment Act officer for my bank and my name is listed in the CRA lobby notice. I am retiring soon and no one has been appointed to replace me. The sample CRA notices all show a name and address for a bank contact person, but could the notice just direct individuals to contact the CRA officer without a named contact?
A: In our experience, regulators and other interested parties have not taken exception to including the title of a person or area instead of listing a specific name. The key is, of course, to ensure that the communication is delivered to the appropriate person or area for handling.
There is no reference or other written documentation on this issue, as this is merely my interpretation based on experience and the actions of other banking institutions. Section § 12 CFR 345.44 states “A bank shall provide in the public lobby of its main office and each of its branches the appropriate public notice set forth in Appendix B of this part.” Appendix B then states, in part: “You may send written comments about our performance in helping to meet community credit needs to (name and address of official at bank) and FDIC Regional Director.”
There is currently a discussion on the ABA Compliance Network asking bankers which one is used at their bank, with some stating they use the title and others using the name of an individual. Both groups state that they have gone through CRA or general compliance examinations, by the FDIC or other agencies, with no issues. I would suggest that you decide what course of action you deem appropriate to take considering your specific scenario and the regulatory requirements. Then contact your examination team and get their view on your recommended action. (Response provided May 2017.)
Q: I’d like to get your interpretation of Regulation II, Section 235.8 regarding Federal Reserve Board of Governors reporting. It seems that the Fed requires issuers to submit documentation regarding interchange fees but I’m not sure about the timing. The Federal Register states that the Fed did not specify the frequency of required reporting in the regulatory text to retain flexibility. Additionally, it states: “Similar to other reporting forms, the Board plans to indicate with publication of the form the frequency with which entities are required to report.” Do you know what “form” is being referenced? And does this mean that the Fed will reach out to the issuer when it wants the issuer to report?
A: The answer is yes. The Fed has a particular form for covered institutions to fill out with regard to debit card costs. The Fed uses the information to determine what the interchange fees should be for debit card interchange fees paid to covered borrowers (those with over $10 billion in assets).
It is our understanding that for each report, the Federal Reserve Board publishes the form (usually revised) and announces the due date for completion. It may also notify covered institutions directly. (Response provided May 2017.)
Q: If a business sends an email to a banker asking if the banker would send it additional product information, can the banker reply to that email with a product information or marketing piece?
A: Yes, but with some caveats. According to the Federal Trade Commission, “If recipients have given their prior affirmative consent to get messages from you, you’re exempt from the requirement of identifying the message as an ad or solicitation—but that’s it. All other CAN-SPAM requirements still apply. Therefore, email to those people still has to include accurate header information and subject lines and a valid physical address. Also, you still must include information on how to opt out of receiving future email and honor opt-out requests promptly.” (Response provided May 2017.)
Q: Our question is regarding the commentary at Section 1002.9 (a)(1)-4 of Regulation B. It states: “When an application is missing information but provides sufficient data for a credit decision, the creditor may evaluate the application, make its credit decision, and notify the applicant accordingly. If credit is denied, the applicant must be given the specific reasons for the credit denial (or notice of the right to receive the reasons); in this instance missing information or “incomplete application” cannot be given as the reason for the denial.” Does this mean if we are denying someone for both an incomplete application and a credit reason, we can only put the credit reason on the notice of denial? Or can we put both?
A: The commentary section you quote is for denial for reasons “other than” incompleteness. If you are denying the application for incompleteness see the commentary at Section 1002.9(a)(1)-3. This is an either/or response. It cannot be both. For example, let’s say that the application is incomplete, but you are denying it due to the credit history and credit score of the applicant; in other words, you have enough information to deny the loan without additional information from the borrower. In that case, you would not use the fact that the application is incomplete as a reason for denial; you made a credit decision with the information you already had available. On the other hand, if you are denying the application because it is incomplete, then that is your reason for denial. (Response provided May 2017.)
Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, CRCM, compliance analyst, ABA Center for Regulatory Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.
