[JGo9]

Typically if you are disclosing the fee at account opening then there is no requirement to give additional notice before charging such a fee. This case is a bit different as the Bank may have created a sense that it doesn’t charge the fee. I don’t believe there is a regulatory requirement that would require you to give the 30 day notice, but by doing so it would be a good customer service move and would give you a pretty good argument about it not being a UDAAP issue.

In the regulatory environment that we are in know, I could see this potentially being spun into a UDAAP issue. I like where you are headed with the 30 day notice, and that does sound like the safest route to go.

[penncm]

We have a fee listed in our deposit disclosure booklet called ACH revocation/stop payment. We have never charged the fee for ACH revocations before but we have always charged for the stop payment. We now would like to start charging the fee for the revocations. The fee would be listed on the statement as “ACH revocation”. Our CSRs are to inform the customer that we will now be charging $30 for the revocation at the time they are filling out the form.

Since the fee has already been disclosed in our disclosure booklet, do we need to notify our customers 30 days prior to charging the fee? Is this merely a customer service issue where it would be nice to tell them ahead of time or is there a regulatory issue as well?
Is this a UDAAP issue?

[kowsley]

We provide our customers with a GFE on construction because we always anticipate getting permanent financing; however, there has been inconsistencies in the way the construction inspection fees are being disclosed on the GFE. We typically anticipate 4-6 inspections will need to be completed during the average construction process.

Some of our loan officers complete the inspections themselves, while others send an appraiser out to complete the inspections. If a loan officer handles the inspection themselves, the initial appraisal and final inspection will be handled by an appraiser and we charge the customer; therefore, we are disclosing these fees to the customer.

However, for those loan officers that engage the appraiser to go out and complete the inspections we are still only disclosing the initial appraisal and final inspection. Each inspection is charged to the customer from the draw off of the construction line that is being requested after the inspection has occurred. Shouldn’t these inspection fees also be included on the GFE?

While it is not a settlement service necessarily and the service is occurring after settlement, it is still a known fee that will be charged to the customer that the bank is aware of. Some lenders feel that it is a cost to build the house, such as the cost of a box of nails…

Also, if some lenders are using appraisers and some are not for inspections then technically the cost of the loan is different based on the loan officer…UDAAP???

UGH! HELP!

[jholzknecht]

I don’t see any UDAAP issues with the pricing on these two products. What do the rest of you think?

[kowsley]

I am looking for some guidance on lending to the Mennonite/Amish community. We are being bombarded with loan requests from this group; however, it has been very difficult to complete a transaction for them given their limitations on having homeowner’s insurance and/or flood insurance. Their religious beliefs restrict them from purchasing any type of insurance. My concern is that “waiving” homeowner’s insurance for this community and not others will be an ECOA violation, as well as, UDAAP. We have had a few loans where we have just been able to take land and have been fine but when their are structures on the property we run into issues. Any thoughts???

[KCapps]

My marketing department is considering a promotion for a HELOC’s with an inroductary (“teaser rate”) (yikes) of 1.80% for the first 7 months; then it would convert to our fixed rate pricing as low as 4.00%, based on our current pricing model which is based on credit score. We will also be offering a lower fixed rate closed end HE as low as 4.55%. I have some others concerns that this may pose but one in particular is that of UDAAP. Am I off base in thinking that on the surface anyone would think that low (teaser rate) is the best way to go especially since the fixed rate portion is potentially less than the closed end HE? Could this be seen as unfair and deceptive?

Any thoughts or feedback would be most appreciated.

[jholzknecht]

If you advertise that you match any rate, then you better match the rate or you are risking a UDAAP problem. If your offer has restrictions, then the restrictions should be disclosed in the advertisements.

[jholzknecht]

You don’t want to have the same person performing a task and reviewing the task. Both the operating and controls functions can occur within the same department, but with different employees performing the tasks.

[kowsley]

Question regarding the UDAAP Procedures: Is it reasonable to think that the Operating function and the Control function can be handled by the same group, i.e. Compliance department. For example, the Repricing and Changes in Terms Checklist appears to be a function that would best fit the Compliance dept. in our bank. Would we be criticized by examiners if the compliance dept. handled both Operating and Control functions and then our internal audit department handled the audit function?

[kowsley]

I have my first UDAAP Alliance meeting on the calendar to occur next Thursday, the 23rd. My Alliance group is made up of the marketing department (3 members), a customer service representative, a loan officer, a collection supervisor, two audit assistants, and an HR representative. The goal is to allow each of those individuals/depts. review the checklists that Jack provided to us and tweek them to fit the needs of our bank. Once the worksheets are reviewed, we will then use those to review our existing products and services. In addition the worksheets will become part of our procedures to ensure new products/services are reviewed as well. The policy and procedures will be reviewed and tweeked as part of the Alliance and taken to Board for approval by end of March. My goal is to have everything in place and complete by end of April! Just wanted to provide some feedback on how my Alliance group is working and who is a part of it. Thanks!

[Anonymous]

After reviewing the materials, I find this is going to be a daunting task for us. The materials are great! I really like Kelly’s “Alliance” in making everyone responsible for compliance. It is going to take all employees working together to conquer UDAAP.

For Control in the procedures, I feel it will more than likely fall under compliance especially in a small community bank.

Thanks!

[jholzknecht]

Thanks to one and all for the input. I have some work to do on this material before our next meeting. Before I chime in on Kelly’s questions I would like to see some input from you all. Let her know how you handle some of these issues in your bank.

I hope all of you are subscribers to my blog; it’s free. I posted an article today that we will discuss on Friday. It appears that the big stuff is about to start flowing out of the CFPB. Check out the article at: https://jholzknecht.wordpress.com/2012/02/07/cfpbs-semi-annual-report-to-the-president-and-congress/

[Anonymous]

I was wondering if a “YES” answer in the Product/Service Readiness Checklist in all situations indicates higher risk. It seems in some of the questions (ex: Are transactons simple and easy to explain? Can easily be understood by customer?) a “YES” would indicate less risk.

[pphillip]

We reviewed the policy and procedures and found the materials great. We did find a couple of ‘grammar’ type corrections needed. We like the format of the Risk Assessment and plan to implement for all policies. Currently, we attach a memo stating the reason why have the policy and any changes/revisions since last approval; however, we like this format and the inclusion of the Risk Assessment.

Procedures:
On page 3 under Control, first sentence. The first sentence has two ‘a’s’. Believe it should be ‘an’. Also, the word ‘sue’ should be ‘due’. [Insert appropriate party] reviews, on an [insert frequency] basis, a sample of new open-end loans to determine the percentage of the total amount of fees due at account opening, fees due …..

Page 3, under Control, last sentence. Place a comma after 25%.

Page 3, under Audit, second bullet. Remove one of the ‘periods’.

Policy: A period is needed at the end of the first paragraph.

Thanks.

[kowsley]

First, just want to say that these materials are great! I finally had the opportunity to review today and feel that this will help me get UDAAP policies and procedures implemented at my bank without having to jump off the roof!

Just wanted to provide a few questions or comments that I had as I progressed through the material:
1. Is there a need to put a UDAAP section in other policies that reference the fact that UDAAP policies and procedures exist, once these are implemented? The act of getting a policy approved in our bank takes quite a few steps and we are beginning a new year of taking policies to board so would like to know if this is something we should build into other policies as a reference.

2. Just as a comment, anytime we have a large change with policies/procedures in our bank, we have begun to setup an “Alliance” for whatever the subject matter is. This allows us to draw people in from other areas of the bank so that those areas affected are aware and take part in the change. I am leaning toward a UDAAP Alliance for this to be able to review all existing products/services! In other words, compliance is everyone’s responsibility, don’t do it alone! 🙂

3. Does anyone currently have a complaint/resolution policy/procedure that they don’t mind sharing? We have minimal procedures but I would like to have something more substantial in order to provide some consistency across all banking centers and management and would like to have this as part of this UDAAP project.

4. In the procedures, do you see the “Control” function as a Compliance function in your bank?

Thanks in advance for help and feedback!

Kelly Owsley