While there are a lot of changes with the Integrated Disclosures Rule, the prohibition on imposing a fee (other than for a credit report) before a consumer has received early disclosures (and indicated their intent to proceed) remains.
The commentary to §1026.19(e)(2)(i)(A) that will be in effect on August 1st gives some examples of actions that are prohibited when looking to collect fees other than a credit report. For example, requiring an applicant to provide payment information, such as a credit card number, prior to the consumer receiving disclosures and indicating their intent to proceed is prohibited. Doing so would be prohibited even if the card will not be charged until after receipt of the disclosures and communication of the intent to proceed. If a creditor has credit card information on file (from the consumer authorizing the credit report fee) a separate authorization must be obtained for any additional fee.
Appraisal costs usually generate the most concern. Lenders understandably want them ordered quickly so closing doesn’t have to be delayed. This is especially true when the borrower needs to have a copy of the appraisal “in hand” three business days before closing. While consumer “shopping” may not be as prevalent as the CFPB tends to believe, creditors don’t want to be left eating appraisal costs if the applicant decides to go with someone else or hold off on the transaction altogether. So, lenders get a little creative. If a card won’t be charged until after disclosures are received and the applicant has indicated they want to proceed, when you actually obtain credit card information seems like a technicality. However, your practices here can result in violations and potentially bigger issues. In fact, although there’s nothing in the regulation that dictates when you can order an appraisal, last year the CFPB entered into a consent order with Amerisave Mortgage Corporation which prohibited it from scheduling an appraisal until providing early disclosures.
Diane joined Banker’s Compliance Consulting with over 10 years of compliance experience and over 15 years of experience within the financial industry. Diane is a Certified Regulatory Compliance Manager (CRCM) and has a Bachelor’s Degree in Sociology with a concentration in Criminal Justice. She is a graduate of the Schools of Banking Compliance School and has participated in various other training opportunities throughout her career. Diane understands firsthand the struggles banks face in building and maintaining successful compliance programs. Her experience and common sense approach to consumer compliance is a great asset to our clients.
Diane and her husband have two kids who keep them busy. She enjoys running and other sports and is a big Bugs Bunny fan! She’s a bit crazy in that she does enjoy reading some of these regulations and she’s a “crazy cat lady!” Her cat tales are hilarious!