Are there any legal ramifications for giving a consumer the right to rescission when it is not necessary (business purpose loan)?
In the next month, our loan documents for HELOCs in LaserPro include the date for the right of rescission even when we choose that there is no right. In order to get around this, we would have to create new products within the system. Instead of doing this, we were thinking of including the ROR on all documents even when it is for a business purpose. By including it in the business purpose loans, we are hoping to avoid any future confusion as to whether or not it was for a true business purpose. For example, if the first advance is being used to purchase a piece of investment property, this would be for a business purpose. But if the rest of the advances (let’s say 80% of them) are to be used for a consumer purpose, the primary purpose of the loan would be for consumer purposes and subject to the ROR.
If you are wanting to know the legal ramifications, you need to be asking your Bank’s attorney. From a compliance stand-point it is not a violation but I would think you would have to abide by it if you disclose it.
It may appear to Examiners that you really don’t know what you are doing by over disclosing in this case, so be careful.