You are probably very aware that the timing of the covered borrower status check, under the Military Lending Act’s safe harbor, has been widely debated. We are, of course, in the camp that to obatin the safe harbor, the status check should be done at the time of application. One thing you may not have thought about is how that affects your denied and/or withdrawn files? Those don’t need evidence of a status check, right? Not so fast.
There may be instances where you know at the time of application, that you will not make the loan. Thus, there is no reason for you to do a status check on the applicant as they won’t meet the definition of a covered borrower. There will also be instances; however, where you’re not sure at time of application if you will deny the loan request. Similarly, you won’t know if the application will later be withdrawn by the applicant. This means if your procedure is to do a status check at the time of application, we would expect to see evidence of a status check on some, and maybe even the majority of your denied/withdrawn applications. If your denied and withdrawn files never have a documented status check, it could raise questions about your process.
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!