ABA Regulatory Policy and Compliance Inbox: Must banks divulge all co-branding relationships?

And if a bank reports customer bank account to a “specialty” customer reporting company such as ChexSystems, is it needed to follow the direct disagreement arrangements in the Fair Credit Reporting Act?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP: and Rhonda Castaneda, CRCM

Q: My bank has a contract with a 3rd party to offer co-branded charge card for the bank’s clients. The bank makes application offered to its clients, and the charge card bears the bank’s name. However, the bank does not share details or offer client lists and the 3rd party services the card, processes client payments and offers routine declarations. In addition, clients use straight to the 3rd party.

This co-branding relationship has actually existed for several years and has actually never ever been revealed in the bank’s personal privacy notification on the basis that the bank does not have a relationship such as a joint marketing contract that needs disclosure, and clients deal solely with this 3rd party in all elements of this relationship. The bank’s brand-new auditor is questioning this position, arguing that the bank needs to divulge the relationship in its personal privacy notification due to the fact that of the co-branding.

Is the auditor remedy?

A: Yes. Even though clients are offering their details straight to the 3rd party and the 2 entities do not share details, due to the fact that the card is co-branded, the plan satisfies the meaning of joint marketing under §1016.13(c). That area offers that “joint agreement” suggests a composed agreement pursuant to which you and several banks collectively use, back or sponsor a monetary product and services. (Answer supplied November 2022.)

Q: My bank is making a loan protected by a nonresidential structure situated in an unique flood risk location. Flood policies (12 CFR §§ 22, 208.25, and 339) need the bank to offer a notification of unique flood threats and accessibility of federal catastrophe relief help, with a sample notification supplied in Appendix A. The sample notification consists of an area in brackets entitled “Escrow Requirements for Residential Loans.”

Given the structure is nonresidential, might the bank get rid of the bracketed area without losing any safe harbor for its usage?

A: Yes. Per Notice 7 in the 2022 “Interagency Questions and Answers Regarding Flood Insurance,” “[U]se of the sample form . . . provided in appendix A of the Regulation is not mandatory.” It continues, “[T]he sample form includes other information in addition to what is required by the Act and the Regulation. Lenders may personalize, change the format of, and add information to the sample form of notice, if they choose.” (Answer supplied November 2022.)

Q: If a bank reports customer bank account to a “specialty” customer reporting company such as ChexSystems, is it needed to follow the direct disagreement arrangements in the Fair Credit Reporting Act (Regulation V)? Or do those arrangements use just to conflicts including credit details?

A: The direct disagreement arrangements under §1022.43 of Regulation V use to details in all customer reports, not simply credit reports. Section 1022.43(a) lists when furnishers need to perform an examination including a direct disagreement. In addition to those associated to credit details, it notes “[a]ny other information contained in a consumer report regarding an account or other relationship with the furnisher that bears on the consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. . . . ” (Answer supplied December 2022.)

Q: My bank offers different building and construction and irreversible funding loans. One of my bank’s clients has actually gotten the building and construction and the irreversible funding loan on the exact same application. Because it is tough to approximate the irreversible funding costs at the start of the building and construction stage, must the bank problem a Loan Estimate for the irreversible funding when it releases the LE for the building and construction stage?

A: The bank needs to offer an LE for both the building and construction stage and the irreversible stage within 3 company days of invoice of the application.

Comment 5 to Regulation Z (Truth in Lending Act) §1026.19(e)(1)(iii) states:

“For construction-permanent transactions disclosed as a separate construction phase and a separate permanent phase for which an application for both the construction and permanent financing has been received, the creditor complies with §1026.19(e)(1)(iii) by delivering or placing in the mail the separate disclosures required by §1026.19(e)(1)(i) for both the construction financing and the permanent financing not later than the third business day after the creditor receives the application.” (Answer supplied March 2022.)

Q: My bank has a customer who has actually not reacted to the bank’s ask for evidence of upgraded risk insurance coverage for her mortgage as the loan contract needs. The bank is preparing to send out the 45-day notification needed under the Real Estate Settlement Procedures Act (Regulation X) to start the procedure of force-placing insurance coverage. May the bank include other details such as all branch hours to the notification language needed under §1024.37(c)(2)?

A: The just extra details the bank might contribute to the design Regulation X language is the mortgage account number. However, the bank might offer extra details to a customer on “separate pieces of paper” in the exact same transmittal. (See §1024.37(c)(3) and (4)). (Answer supplied November 2022.)

Q: My bank is thought about a big bank under the Community Reinvestment Act (12 CFR §§ 25, 228, and 345) and appropriately need to gather and report information for loans consisting of those fulfilling the meaning of bank loan. The bank bought a variety of bank loan from another bank.

What loan quantity does the bank get in when reporting: the loan quantity at preliminary consummation or the balance at the time the bank purchases the loan?

A: Banks report the quantity of the loan at origination. See Interagency Questions and Answers Regarding Community Reinvestment, particularly §_.42(a)(2)-1. It clarifies that reporting the loan quantity at origination follows the Call Report’s usage in identifying whether a loan is a small company and under which classification it need to be reported. (Answer supplied October 2022.)

Answers are supplied by ABA Regulatory Policy and Compliance staff member Leslie T. Callaway, CRCM, CAFP, senior director, compliance outreach and advancement; Mark Kruhm, CRCM, CAFP, senior compliance expert; and Rhonda Castaneda, CRCM, senior compliance expert. Answers do not offer, nor are they alternatives to, expert legal recommendations.


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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