Under today’s rules, credit extended to anything other than a natural person is exempt from Regulation Z requirements. However, on August 1, 2015, a key change will go into effect. This change, found in the Commentary to 1026.3(a), will make credit extended to certain types of trusts subject to Regulation Z. Specifically, Regulation Z will apply to any consumer-purpose credit extended to a trust that was created for tax or estate planning purposes. The exemption for “organizational credit” still applies and continues to exempt credit extended to corporations, partnerships, and other associations or entities.
Although this change might not affect a large volume of your loans, you need to ensure compliance when extending a loan to an applicable trust. The good thing is that if want to take a conservative approach, you can over-disclose.
Again, this coverage change applies to any application received on or after August 1, 2015.