Editor's Note: The following was submitted by Bankers Alliance. LBA, through its subsidiary Louisiana Bankers Service Corporation, has partnered with Bankers Alliance to give banks access to three compliance-related programs. Click here for more information.
Q. Our customer received a phone call from someone telling the customer that the customer’s computer was about to be hacked. The person convinced the customer to allow remote sign into the customer’s computer to “stop the hacking process.” In this process, the customer provided both of his debit card numbers and PINs. The fraudster used these to then purchase gift cards. We feel the customer was clearly negligent in this case, but does that help the bank at all?
A. Unfortunately, when fraudsters gain access to accounts by persuading consumers to provide their access device (e.g., authorization or authentication code), Regulation E generally considers such situations to be unauthorized electronic fund transfers. Regulation E’s commentary specifically states that “[a]n unauthorized EFT includes a transfer initiated by a person who obtained the access device from the consumer through fraud or robbery.” (Click here to view.) Furthermore, according to the commentary, “consumer behavior that may constitute negligence under state law, such as situations where the consumer wrote the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer’s liability for unauthorized transfers. (Click here to view.) Therefore, consumer liability in these instances is generally going to be limited to $50 if the consumer notifies the financial institution of the loss or theft of an access device within two business days of learning of the loss or theft of the access device, or up to a maximum of $500 if the consumer fails to provide notice within that time period.
Q. If the bank agrees to make an interim construction loan but the borrower has a takeout letter from another institution, is the bank required to send a permanent loan disclosure for informational purposes?
A. As set out in the Consumer Financial Protection Bureau guidance below, whether the bank has to provide the loan estimate for the permanent portion depends on whether the bank "receives a consumer’s application (i.e., the six pieces of information identified in § 1026.2(a)(3)) for both the construction financing and the permanent financing":
“Applying all of these concepts together, as stated in Comment 17(c)(6)-3 to the TRID rule, a creditor has the option to disclose a multiple-advance construction-permanent loan with:
- One, combined loan estimate and one, combined closing disclosure; or
- Two or more loan estimates for each phase and two or more closing disclosures for each phase (for example, one set for the construction financing as a whole and one set for the permanent financing).
The ability to separate these transactions into two or more disclosures under § 1026.17(c)(6) is available regardless of whether the consumer initially applies for construction-only or both construction and permanent financing at application. But note that if the creditor receives a consumer’s application (i.e., the six pieces of information identified in § 1026.2(a)(3)) for both the construction financing and the permanent financing, disclosures for both phases must be given within the timing provided in § 1026.19(e) and (f). Comment 19(e)(1)(iii)-5.”
Click here to view TILA-RESPA Integrated Disclosures for Construction Loans on p. 6.
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Did you know that the bank only needs to list the credit score that was relied on when making a credit decision for joint applications?
- According to Regulation C, Section 12 CFR 1003.4(a)(15)(i): Except for purchased covered loans, a financial institution reports the credit score or scores it relied on in making the credit decision and the name and version of the scoring model used to generate each reported score.
- If credit scores are obtained for multiple individuals, but only one score was relied on in making the credit decision, the financial institution reports the scored relied on, and reports the applicant or co-applicants score not relied upon as not applicable.
Did you know that FEMA flood declaration pages are no longer required to list the flood zone?
- FEMA issued the Risk Rating 2.0 NFIP Flood Insurance Manual in October 2021 which changed how flood insurance is priced.
- This update also changed guidance on flood zones and how they drive National Flood Insurance Program ratings.
- Private flood insurance policies will still list a flood zone for the property.
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