Q A consumer contacted the toll-free number at my bank claiming that a transaction on his credit card account was unauthorized. A few weeks later, the same consumer wrote a letter and mailed it to the bank’s post office box asserting the same dispute with no changes in fact pattern or amount. Because the bank already responded to the original dispute, does it have to respond to the second one as well?
A No. Under §1026.13(h) of Regulation Z, “a creditor that has fully complied with the requirements of this section has no further responsibilities under this section . . . if a consumer reasserts substantially the same billing error.” (Answer provided Oct. 2019.)
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Q My bank has revised its privacy notice, so the bank will be required to send it to our customers this year. My question is whether the bank is required to send the annual notice to customers who have asked that the bank not mail anything, to customers in bankruptcy, to customers with foreign addresses or to customers who are deceased?
A The bank is not required to mail annual privacy notices to customers who have requested that the bank not mail notices. Customers who have declared bankruptcy are still customers who must receive the annual notice. Similarly, banks must send annual notices to customers with foreign addresses. For deceased customers, the answer depends. The personal representative of the deceased “stands in the shoes” of the deceased, so should receive the notice. However, no annual notice is required for accounts opened for the deceased’s estate, since the estate is not an individual. (Answer provided Oct. 2019.)
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Q Our bank’s management has proposed a compensation program under which mortgage loan officers will receive a set percentage based on the loan amount. The percentage amount will differ depending on whether the loan is sold on the secondary market or held in our bank’s loan portfolio. Is this compliant with the loan officer compensation provisions of Regulation Z?
A It will depend on the specific factors.
Regulation Z generally prohibits compensation for loans secured by a dwelling based on either a term of a transaction or a proxy for a term of a transaction. Comment 2.ii.A to §1026.36(d)(1) provides an example of a proxy for terms of a transaction. The example assumes that a creditor holds certain types of loans in portfolio and sells all others into the secondary market. The loans sold into the secondary market have a higher interest rate than those held in portfolio. It pays loan originators a higher commission for transactions held in portfolio than those sold into the secondary market. The comment explains:
[W]hether an extension of credit is held in portfolio or sold into the secondary market for this creditor consistently varies with the interest rate [which is a term of the transaction] . . . over a significant number of transactions. . . . Therefore, under these circumstances, whether or not an extension of credit will be held in portfolio is a proxy for a term of a transaction.
Thus, because the interest rates and the compensation vary depending on whether the loan is held in portfolio or sold into the secondary market, the compensation is based on a term of the transaction (in this case a proxy), the compensation system would not be compliant.
That being said, depending on the circumstances, it may be possible to set up a compensation system whereby compensation might vary depending on whether the loans are held in portfolio or sold into the secondary market. (Answer provided Sept. 2019.)
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, senior compliance analyst, ABA Regulatory Policy and 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.
