[Kristin]

Is there any exemption in Reg Z for an employee who did not qualify as an LO for the first quarter of a year but did qualify for the last three quarters when paying profit sharing bonuses? Can they be paid the bonus for that quarter? Or are we not allowed to pay them any of the bonus at all if they made more than 10 loans during the previous 12 months? Is the requirement the previous 12 months from the date the bonus is paid?

[rcooper]

Please see below. You may pay a bonus over the 10% limit if #2 below applies. If they are a LO then the 10% limit under #1 would apply. You base the 10 or fewer determination on the 12 month period prior to when you make the determination to pay the bonus. The SECG breaks down the examples in an easy to read format: https://files.consumerfinance.gov/f/201503_cfpb_2013-loan-originator-rule-small-entity-compliance-guide.pdf.

SECG:
“You may pay compensation under a non-deferred profits-based compensation plan to an individual loan originator if the compensation is not based on the terms of that individual loan originator’s transactions and either:
1) The compensation paid does not, in the aggregate, exceed 10 percent of the originator’s total compensation corresponding to the time period for which the compensation under the non-deferred profits-based compensation plan is paid (the “10-percent total compensation limit” or “10-percent limit”).
2) The individual was a loan originator for 10 or fewer transactions consummated during the 12-month period preceding the date of the compensation determination.”

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