Compliance Questions & Answers

No. Surplus provisions apply only if the borrower is current at the time of analysis. A borrower is considered current if their payment is less than 30 days past due.

Loan servicers may keep the surplus in the escrow account if the borrower is not current pursuant to the loan terms.

Reference: 12 CFR 1024.17(f)(2)(ii).

No. The exemption process is at the financial institution's discretion. This means, you may choose to forgo exempt designations and continue to report large currency transactions for every customer.

Reference: 31 CFR 1020.315(b).

The interpretive rule states that in general, creditors are to look to the provisions of Regulation Z in determining whether a product or service is considered "consumer credit" (232.3) for the purposes of MLA. While the definition of consumer credit is not exactly the same as in Regulation Z, it is consistent with the definition under Regulation Z.

To determine whether the bank’s overdraft product or service is “consumer credit” under the MLA, depends on whether the product or service meets each element of the definition of “consumer credit” and whether an exception applies.

Reference: Interpretive Rule issued August 26, 2016 Q1.

The Federal Reserve and the CFPB have implemented amendments to Regulation CC to adjust the dollar amounts for inflation. The newest adjustments are effective July 1, 2020. The next round of adjustments will be July 2025, and on every July 1, of every fifth year after 2025, according to the Consumer Price Index for Urban Wage Earners and Clerical Workers. A new section was added to Regulation CC which addresses the indexing of the dollar amount adjustments, the procedures used, and the adjustment amounts.

Regulation CC: 12 CFR 229.11; See also: 12 CFR 229.10(c)(1)(vii), 229.12(d), 229.13(a), (b), (d); and 229.21(a)

Following regulatory compliance regulations including Regulation Z which requires focus on the ability to repay, sets standards for all calculations and disclosure of costs in a uniform manner.

• RESPA which prohibits borrowers from paying fees that aren’t reasonable.
• Regulation B which prohibits discrimination on a prohibited basis.
• Section 5 of FTC Act on UDAAP and safety and soundness policies.

All of these help a lender assess whether the bank’s lending practices are fair, clear, conspicuous, and protect the consumer from unreasonable risk.

Lastly, training of personnel must be ongoing focusing on the requirements with emphasis on fair lending.

Reference: Fair Lending: Regulation B 12 CFR 1002, FHA; Regulation Z 12 CFR 1026; RESPA (Regulation X) 12 CFR 1024; Section 5 of FTC UDAAP.

An effective Compliance Management System has four parts:

1. Board of Directors and management oversight;
2. Compliance program;
3. Consumer Complaint Management Program, and
4. Compliance audit.