[Vicki Kramer]

Good morning. Can a checking account be required before a loan application is considered or a loan approved? Does it matter whether it’s consumer or business? My answer was no, the bank must act upon all loan applications received and if credit worthy and meets loan policy criteria, the bank must grant the loan. Thanks in advance for clearing up the confusion!

[rcooper]

I don’t know of anything that would prohibit it from being required. A couple of things you need to consider:
1) Reg E, 1005.10(e), states.. (e) Compulsory use—(1) Credit. No financial institution or other person may condition an extension of credit to a consumer on the consumer’s repayment by preauthorized electronic fund transfers, except for credit extended under an overdraft credit plan or extended to maintain a specified minimum balance in the consumer’s account. This exception does not apply to a covered separate credit feature accessible by a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 1026.61.

Also, you should consider if this practice would have a disparate impact on your consumers in your area (i.e. is one demographic likely to be denied because they don’t typically have checking accounts) and could that result in a fair lending issue.

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