Just when we all thought we could breathe a sigh of relief from the barrage of regulatory changes, Regulation V hits us square between the eyes. Regulation V places disclosure requirements upon institutions using risk based pricing models when determining the interest rates on member loans. The verbiage of Regulation V is confusing to the point that it took a conference call with compliance attorney Tom Leduc, to pinpoint the exact requirements. Tom’s recommendations and opinions are the basis on which we completed this project and it can be sent to you upon your request. In the event you would like to have a formal opinion identified with your credit union name, Tom has agreed to send you one for $50 per credit union.
In a nutshell the regulation requires a disclosure to members stating that their loan rate might not be the best rate offered by the credit union. The body of the regulation describes two distinct methodologies that can be used to determine which member receives the additional disclosure. The first methodology incorporates a 60/40 rule which must be extrapolated from your approved loan data and recalculated every 24 months. The second is a disclosure which is simply handed out to all members to whom you have extended credit. In accordance with attorney Tom Leduc’s recommendation, CU*Answers will program the forms that correlate to the second methodology.
As the January 1, 2011 deadline looms, our loan forms department has been deluged with requests for custom loan forms. After four weeks, the requests sent from their forms provider continue to pour in. Regulation V provided form samples in the appendix which allowed our Lender VP and AuditLink teams to carefully review the ramifications and the process of producing these new forms for our clients. The prospect of creating forms on an individual basis would be costly and we needed a more economical solution. We consulted with Tom Leduc to advise in the process. His recommendations and opinions will become part of the documentation we supply to our credit unions with the new forms.
So what are we going to do? This project will launch the first week of November. Expect to receive the proper disclosure from CU*Answers, similar to the way we provide you with an adverse action notice. The form itself will be uploaded to your CU*BASE library so it’s available to print during the loan application process or as a standalone document. To minimize the costs of this obligatory form, we are building this process cooperatively for all clients. The shared cost per credit union will be $200 up front with a maintenance fee of $50/yr. This form is subject to data population and must be monitored on a regular basis, therefore the requisite annual maintenance charge.
We encourage you to contact your forms provider to assure your complete set of forms complements each other and meets compliance standards. This could be a concern primarily if you offer multi-feature open-end lending. If you consider adopting this form and want it programmed for your credit union, please fill out the accompanying request form and fax it to the number listed.