DCU Bulletin on Risk-Based Pricing Notices and Indirect Automobile Lending

The Washington State Department of Financial Institutions Division of Credit Unions (DCU) has released DCU Bulletin B-16-04, which provides guidance for state-chartered credit unions on indirect lending compliance requirements.

While the bulletin is intended for Washington State-chartered credit unions, all credit unions may wish to review the information since it was sent as a response to inconsistent practices the DCU found while reviewing indirect lending compliance.

The focus of the bulletin is on the delivery of the Risk-Based Pricing Notices that are required by the Fair Credit Reporting Act (FCRA).

Timing of Disclosure: For automobile lending, the Risk-Based Pricing Notice must be provided after credit approval is communicated to the consumer, but before consummation. If the creditor relies on the dealership to deliver the notice, the creditor must maintain reasonable policies and procedures to verify that the dealership or other party provides the notice within the required time frame. If the creditor chooses to provide an exception notice in lieu of a risk-based pricing notice, the exception notice must be provided to the consumer as soon as reasonably practicable after requesting the consumer’s credit score but not later than consummation.

Review by Examiners: The Division of Credit Unions (DCU) examiners will review loan file documentation to determine whether required notices are provided to consumers. Credit unions should either retain the notices in the loan files or perform due diligence on automobile dealers to confirm they are providing the notices in a timely manner. Examiners will also review whether credit unions have adequate procedures in place for compliance with the above provisions of the FCRA and Regulation V.

On a side note, the auto dealers’ requirements for providing Risk-Based Pricing Notices are under the Federal Trade Commission’s rules 16 CFR 640. And their model forms in Appendix B to Part 698 reference the FTC instead of the CFPB, but still comply with the underlying requirement out of the FCRA.

Compliance Question of the Week

Does it matter where the “Equal Opportunity Lender” notice is placed in our lobby?

There is no requirement that specifically states where the Equal Opportunity Lender notice must be placed.  However, the rule does state that the sign must be in a “conspicuous” position in a central location within the bank where deposits are received or where such loans are made in a manner clearly visible to the general public entering the area where the poster is displayed.

Resources

12 CFR 701.31

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that it will hold a Twitter Chat on April 27, 2016 at 11 a.m. EST. The Twitter chat is aimed at helping consumers protect their money and personal information from consumer financial fraud.

The NCUA released a report titled Serving the Credit-Invisible. The report details ways that credit unions can help provide credit (safely and soundly) to members of this underserved population.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced new additions to its senior leadership team.

Federal Reserve Board (FRB)

The FRB released its Survey of Terms Business Lending E.2 report.

The FRB announced that it revised its Operating Circular 2 and Cash Services Manual of Procedures.

The FRB released the minutes from its two most recent discount rate meetings.

The FRB announced the release of its April 2016 Beige Book. 

The FRB released the April issue of FedFlash.

The FRB published the minutes from its most recent meeting of the Community Depository Institutions Advisory Council (CDIAC).

Federal Trade Commission (FTC)

The FTC announced that it will hold a forum series on financial technology and its implications on consumers. The first FinTech Forum will be held on June 9, 2016 in Washington D.C.

U.S. Government Accountability Office (GAO)

The GAO issued a report to Congress regarding the regulatory oversight of nonbank mortgage services. The report found that the oversight could be strengthened and made recommendations for how the CFPB can work towards improving the regulatory oversight. 

Federal Housing Finance Agency (FHFA)

The FHFA announced a new program through Fannie Mae and Freddie Mac that will offer principal reductions to certain seriously delinquent, underwater borrowers. The new Principal Reduction Modification program is a one-time offering that will be available to borrowers who are 90 days or more delinquent.

Federal Deposit Insurance Corporation (FDIC)

The FDIC, along with the FRB, announced determinations and specific feedback regarding the 2015 resolution plans received from 8 systemically important domestic banks. The announcement included information on the issues found and required due dates for the actions that the banks must take to fix their plans.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of April 15, 2016. The last update prior to this was April 14, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News.