Financial Penalties for Advertising Violations

YOUR QUESTION 

We have been using a marketing company for our advertising. We relied on their compliance to make sure the advertisements met the guidelines. Unfortunately, a banking department just cited us for violations in our advertising. So, we fired the marketing company. Meanwhile, we're stuck. The banking department has asked for all our advertising going back three years!   

My partner hired a lawyer to handle our case. The lawyer reviewed the advertisements from the last three years and informed us that there are many violations in them. It is scary how much money we will need to pay in financial penalties. The lawyer says there could also be remuneration to the borrowers. We don't have the money for all of these violations. We just don't. We may have to close down the company. We're going to meet with the department next week to discuss the situation. 

I need some more guidance. I want to be more prepared for the meeting. I need to know what we're facing in penalties. We have been told that your firm conducts advertising reviews before their publication, so I hope you can enlighten me about what to expect. 

What are the financial and other penalties for violations of mortgage advertisements? 

COMPLIANCE SOLUTIONS 

Advertising & Marketing Compliance Reviews 

Advertising Tune-up 

Advertising Manual 

Please contact us to discuss these solutions!

ANSWER TO YOUR QUESTION 

I am sorry to learn of this happening. This situation is avoidable, yet many companies get caught up in the dragnet of defective advertisements. You can't farm out your liability to marketing companies. Many of them claim to have compliance staff, but in reality, their compliance is sparse, if it exists at all. And forget about the testimonials of their awesome success; for goodness sake, they are marketing companies – what kind of testimonials do you expect them to provide? 

Yes, we provide relatively inexpensive advertising and marketing campaign reviews. We've offered advertising compliance for twenty years. The advertising review is expeditious. We hold the final masters in our extranet, so that clients can access them at any time. Our staff works with the client to ensure the advertisements both meet their marketing goals and comply with regulatory mandates. Some clients have even retained us to review the compliance procedures of their marketing companies.

If you want assistance with advertising compliance, please contact me. Get your company into a reliable advertising compliance program. Forget the bells and whistles. Forget the marketing company route! 

If you are not an expert in advertising compliance, you need compliance support. 

A hefty violation could cost you the company! 

Here's what happens when your advertising compliance is not reliable.

 

Recently, a company was shuttered for alleged deceptive advertising. Its home office was located in California. It was licensed in 30 states and Puerto Rico. In that case, specifically, the mortgage lender allegedly used the names and logos of the VA and FHA in its advertisements, described loan products as part of a "distinctive program offered by the U.S. government," and instructed consumers to call the "VA Interest Rate Reduction Department" at a phone number belonging to the mortgage lender, thus implying that government agencies sent the mailings. The result of this matter was a consent order permanently banning the company from engaging in any mortgage lending activities, or from "otherwise participating in or receiving remuneration from mortgage lending, or assisting others in doing so." In addition, the company, while neither admitting nor denying the allegations, was required to pay a $1 million civil money penalty. 

Fortunately, many compliance departments have a very good understanding of the restrictions on advertising, which are meant to protect consumers from misleading practices and ensure fair access to credit. 

Here is a list of a few basic Acts and regulations. 

Some Acts and Regulations 

Truth in Lending Act (TILA) (Regulation Z) 

TILA requires clear and accurate disclosure of loan terms, including the annual percentage rate (APR), loan amount, loan term, and repayment terms, presented clearly and conspicuously. Certain "trigger terms" (for instance, specific interest rates or monthly payment amounts) require additional disclosures.

CFPB’s Repeat Offender Registry – Part Two

QUESTION 

Last week, you published an article about the Repeat Offender rule. The questioner was pretty upset about it. But I am not upset about it. After all, if a company repeats violations, why shouldn’t the public know about it? 

I also run a mortgage lender, just like the other guy. I’m the President and CEO. My company is almost 30 years old. We’ve made it through upturns and downturns, and we’re positioned well for the next upturn. Along the way, we have had violations cited on banking audits. We corrected them and moved on. I can’t think of a single instance when the violation that we corrected got repeated. Not once has that happened. 

So, my view is different. Companies that make the same violations over and over again make it harder for companies like mine to be trusted by the public. I want a level playing field where my loan officers are able to provide our services without having to worry that a competitor is getting away with repeat violations. Repeat offenders are bad for business and mess with the public trust. 

I learned a lot from your article. I printed it out and sent it to my mortgage bankers association as well as all our employees. I want people to know that our company supports the Repeat Offender rule because it is good for business and strengthens the public trust. 

You ended last week’s article by saying that Part Two would further discuss other aspects of the Repeat Offender requirements. I look forward to reading it soon. 

What are other essential aspects of the Repeat Offender requirements? 

COMPLIANCE SOLUTION 

CMS Tune-up®

(Compliance Management System)

ANSWER 

I appreciate your message. The response to Part One was enormous. 

Clearly, this is a controversial subject. But, in a sense, it shouldn’t be. After all, analogously, if you obey the speed limit, it is not unreasonable to want others to follow the speed limit, too. Do you enjoy being tailgated? Are you entertained by cars swerving in and out of fast-moving traffic? Do you feel safe when somebody races past your car at 80 MPH in a 50 MPH zone? About 11% of Americans have had at least one speeding ticket.[i] Repeat driving offenses risk increased insurance fees, loss of a driver’s license (a privilege, not a right), a hazard to safety, destruction of property, and a threat to life.    

Why should some people get bent out of shape by calling a company that continues to violate banking laws a “repeat offender?” What else should it be called? If the term “recidivist” is a proxy, then go for it – use “recidivist.” Both terms infer a tendency to relapse, and "repeat offender," in particular, does seem to be associated with criminal behavior. It is quite a stretch to imply that mortgage companies that repeat offenses of legal and regulatory mandates are criminals. They are certainly not criminals. The problem is the terminology. Perhaps the CFPB can come up with a less objectionable term. 

A quick recap:

On Monday, June 3^rd, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a Final Rule[ii] (“Rule”) requiring nonbank consumer financial services companies to register court orders or government agency orders in a new Nonbank Registry (“Registry”). This Rule is the “Repeat Offender” registration requirement. The effective compliance date is September 16, 2024. 

In Part One, I outlined the following areas: 

·       Repeat Offender Unit; 

·       Risk Profile; 

·       Agency and Court Orders; 

·       Registration; and 

·       Attestation. 

In Part Two, I will discuss[iii] optional alternative registration, timing requirements, the written statement requirement, and when the registration requirement comes to an end. Also, I provide tables for the submission periods and registration protocols. 

Optional Alternative Registration Requirements 

The Rule provides a limited one-time, alternative registration option for covered orders that are published on the Nationwide Multistate Licensing System (NMLS) Consumer Access website.[iv] 

As a covered nonbank, you may alternatively choose to file a special one-time registration for NMLS-published covered orders that were not issued or obtained, at least in part, by the CFPB. By “covered orders,” the CFPB means court orders or government agency orders.[v] 

If the alternative option is chosen, the nonbank must submit certain required information. After such submission, the nonbank has no further obligations to register any changes to or expiration of the order or to file written statements with respect to that order (if applicable). 

The alternative option is not available for any order issued or obtained at least in part by the CFPB, regardless of whether it is published on the NMLS Consumer Access website. 

Timing Requirements 

The timing requirements are a little bit tricky, so stay with me as I elaborate on them. I suggest you work with a compliance professional to ensure the filing and timing requirements are adhered to meticulously. 

Initially, the Rule has a phased-in implementation. During the implementation submission period, nonbanks are categorized into three institutional types, as follows:

 1)    Larger Participant CFPB-Supervised Covered Nonbanks;

 

2)    Other CFPB-Supervised Covered Nonbanks (i.e., CFPB-supervised covered nonbanks that do not meet the definition of a larger participant under the CFPB’s regulations); and

 

3)    All Other Covered Nonbanks (i.e., covered nonbanks that the CFPB does not supervise).

 

For each category, the final rule provides a 90-day window for covered nonbanks to register all covered orders with effective dates from January 1, 2017, until the start of that implementation submission period.

 

The table below identifies registration submission periods based on the Rule’s effective date of September 16, 2024. 

Implementation Submission Periods[vi]

 

Covered Nonbank Type	Registration Submission Period	Registration Deadline
Larger Participant CFPB-Supervised Covered Nonbanks	October 16, 2024 through January 14, 2025	January 14, 2025
Other CFPB-Supervised Covered Nonbanks	January 14, 2025  through April 14, 2025	April 14, 2025
All Other Covered Nonbanks	April 14, 2025 through July 14, 2025	July 14, 2025
* Any dates that fall on a Saturday, Sunday, or Federal holiday should be converted to the next day that is not a Saturday, Sunday, or Federal holiday. Accordingly, the Bureau has adjusted the submission period dates, as listed above.

Two orders are subject to registration: orders that 

1.     Have an effective date from January 1, 2017, through the start of the nonbank’s submission period, and 

2.     For orders issued prior to September 16, 2024, the order remains effective as of September 16, 2024. 

Here’s how this works. I will use the institutional category two (above)—Other CFPB-Supervised Covered Nonbanks—to illustrate the protocol. It reflects the Bureau’s example.[vii] My protocol table shows how to determine the analysis. 

Protocol for Registration of Covered Orders - Example

 

Order Types	Order Timeframe	Registration Disposition
First Order	Order takes effect[viii] on January 1, 2016, and expires on January 1, 2026.	Do not register (effective January 1, 2016) because it takes effect before January 1, 2017.
Second Order	Order takes effect on January 1, 2017, and expires on October 30, 2025.	Register (effective January 1, 2017) because it takes effect on or after January 1, 2017 (and prior to the start of the applicable submission period) and remains in effect as of September 16, 2024.
Third Order	Order that becomes effective on January 1, 2025, and expires on January 1, 2031.	Register (effective January 1, 2025) because it takes effect on or after September 16, 2024, and prior to the start of the applicable submission period.
Note 1: Continue to comply with the ongoing registration requirements for these orders until they expire or are terminated.
Note 2: If a new order is issued and effective on or after the start date of the implementation submission period, follow the ongoing registration timing requirements.

 

Understanding the Ongoing Registration Timing Requirements 

After the start of a nonbank’s implementation submission period, it must begin complying with the Rule’s ongoing registration timing requirements to register new orders and submit changes or updates related to previously registered covered orders. 

The nonbank should access the CFPB’s Nonbank Registry and provide a registration submission within the identified 90-day window for each of the following events: 

1.     Within 90 days after the date of updates or changes to the nonbank’s identifying information or administrative information. 

2.     Within 90 days after the date of any amendments made to previously registered orders, including changes to submitted order information. 

3.     Within 90 days after the effective date of any new order(s) applicable to the nonbank (with effective dates on or after the start of the applicable implementation period). 

4.     Within 90 days after the effective date of termination or expiration, submit a revised filing of a previously registered covered order. 

Written Statement – Attestation 

In Part One, I discussed the annual filing requirement of the written statement. It is, in effect, an attestation.[ix] 

·       For CFPB-Supervised Covered Nonbanks, these written statements must be submitted annually on or before March 31 of each year. 

·       For Larger Participant CFPB-Supervised Covered Nonbanks that register by December 31, 2024, the first written statement submission is required by March 31, 2025. It would cover all applicable orders registered with an effective date from October 16, 2024 to December 31, 2024. 

·       For Other CFPB-Supervised Covered Nonbanks, the first written statement submission is required on March 31, 2026. It will cover all applicable orders registered with an effective date on or after the beginning of their implementation submission period, January 14, 2025 to December 31, 2025. 

As I pointed out in Part One, the written statement is where governance plays a role because the designated executive must provide:

CFPB’s Repeat Offender Registry – Part One

QUESTION 

We just learned from our lawyers about the possibility that our firm will need to file as a Repeat Offender. I am really angry about this, and I am turning to you for feedback. This type of filing could crush our business reputation. I am the President and have built this company for over twenty years. Now, because we had a few violations, we are going to be considered repeat offenders. And the whole world is going to view us as repeat offenders. 

I am outraged. I had a conference call with other company owners, and they wanted me to ask you for your understanding of this nasty situation. I mean, really, repeat offenders are felons, sex perverts, murderers, crooks, and criminals of all sorts and stripes. It is insulting to say we are Repeat Offenders. We are not hardened criminals. We are not crooks. 

We are hardworking business people who do the best we can in a highly regulated industry. If we make mistakes, we try to fix them. Sometimes, we make the same mistake, but not out of malice. We’re licensed, and the last thing we want to do is call regulators down on our company for repeating a mistake. We don’t run from our responsibilities. 

Our lawyers are telling us how to manage the situation legally. But all I’m hearing is there’s nothing we can do but accept that we are going to be called “repeat offenders.” One of our lawyers used a fancy word, saying we are a “recidivist” company. Is that word supposed to make me feel better? Whatever. We are going to be burned on the “repeat offender” stake. 

Thank you for letting me rant. I am just so pissed off. Please give me and others some basic understanding of what this new set of regulatory shackles is all about. 

What is the Repeat Offender requirement? 

How does the Repeat Offender filing work? 

Why is my firm being singled out? 

COMPLIANCE SOLUTION 

CMS Tune-up®

(Compliance Management System)

ANSWER 

For the last few days, we’ve gotten so many calls on this subject that we had to double up the reception team. The emails to us were peaking each day. That’s because, on Monday, June 3^rd, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a Final Rule[i] (“Rule”) requiring nonbank consumer financial services companies to register court orders or government agency orders in its Nonbank Registry (“Registry”). This Rule is the “Repeat Offender” registration requirement that you’re referring to. The effective compliance date is September 16, 2024. 

Given the complexity of the Rule, my answer today constitutes Part One. We’ll publish Part Two next week, which will be a continuation of today’s answer and will also contain a chart and another checklist outline. Furthermore, since we have received so many inquiries on this topic, I may include some of those questions in Part Two. 

I understand your concerns. Before I get into some of the details and answer your questions, please relax. If you have competent counsel, they should be responsive and provide helpful guidance. 

You can contact me personally here if you want us to discuss your compliance needs. We have a range of compliance services that will likely mitigate your risk management challenges. When risk management is not functioning well, repeated violations may happen, and regulations can become a minefield. 

REPEAT OFFENDER UNIT 

You seem surprised by the terminology of “Repeat Offender.” You might like to know that the CFPB has had a Repeat Offender Unit since 2022. It was set up specifically to focus[ii] on these four activities: 

1)    reviewing and monitoring the activities of repeat offenders;

2)    identifying the root cause of recurring violations;

3)    pursuing and recommending solutions and remedies that hold entities accountable for failing to comply with Federal consumer financial law consistently; and

4)    designing a model for order review and monitoring that reduces the occurrences of repeat offenders.

The Repeat Offender Unit is equipped with a national supervision team that is responsible for designing and executing comprehensive oversight of supervised entities subject to CFPB law enforcement orders.[iii] In effect, it is a deterrence strategy that actively ensures a company, its senior management, and its board of directors are not treating any orders as mere suggestions.

Thus, the Bureau is taking several steps to identify specific individuals and entities responsible for repeat offenses. 

And you are correct: the CFPB will make the Registry publicly accessible. The Bureau states in the Rule that a public registry will enable other Federal, state, and local regulators to “realize many of the same market-monitoring benefits that the Bureau anticipates obtaining from this rule.”[iv] The plan here is to facilitate the ability of consumers to identify the entities that are registered with the Bureau, with the goal of enhancing “the ability of investors, research organizations, firms conducting due diligence, and the media to locate, review, and monitor orders enforcing the law.”[v]  

RISK PROFILE 

Your firm is not being singled out, though it may feel that way. Don’t develop a persecution complex when dealing with regulators. I have even admonished lawyers who presumably know how to interact with regulators but come at them with righteous indignation. They should know better. 

You’ve spent decades building your business, but compliance issues are always traceable and never erasable. Like it or not, your firm has established a risk profile with the Bureau and likely with state banking departments. Your goal must be to prevent, reduce, and mitigate legal and regulatory risks. 

If you want to be proactive, do a self-assessment, such as our CMS Tune-up®, which will help you to get a better understanding of the strengths and weaknesses in your Compliance Management System. Get our report. Fix the weaknesses. Conduct an annual review.  

Contact us for more information about the CMS Tune-up®.  

We have a Compliance Tune-up® audit for virtually all areas of mortgage banking. Whatever you do, stay focused on ensuring the resiliency of your overall compliance program. 

As you know, we only work in the mortgage compliance space. If you are a covered nonbank providing consumer financial products or services, such as residential mortgage loans, you are probably covered by the Rule.[vi] 

AGENCY AND COURT ORDERS 

As I said above, the Rule requires the covered nonbank to register court orders or government agency orders into a new Registry. Let me discuss this requirement because it is mandated due to investigations, proceedings, administrative matters and actions, consent orders, agency orders, and court orders. 

Since your lawyers have notified you that you need to register, my guess is that your risk profile contains some of the requirements that mandate registration. Given that you may need to register with the Registry, let’s drill down into the types of orders that can trigger the filing requirement. 

Here’s a helpful outline to help you identify whether you may need to file with the Registry. If any of these orders have happened, you certainly may be subject to registration.[vii]

An order[viii] is covered by the Rule if it:

• Is a final public order issued by an agency or court. 

• Identifies a covered nonbank by name as a party subject to the order;

• Was issued at least in part in any action or proceeding brought by any Federal agency, state agency, or local agency; 

• Contains public provisions that impose obligations on the covered nonbank to take certain actions or to refrain from taking certain actions;

• Imposes obligations on the covered nonbank based on an alleged violation of a covered law, which includes Federal consumer financial laws, other laws enforced by the CFPB, and certain unfair, deceptive, or abusive acts or practices laws at both Federal and state levels identified in the final rule; and

• Has an effective date on or after January 1, 2017. An order is effective on the date specified in the order. If an order does not have an effective date identified, the date of issuance is the effective date. If the issuing agency or a court stays or otherwise suspends an order’s effectiveness, the order’s effective date for purposes of the final rule is delayed until the stay or suspension is lifted.[ix]

The Bureau casts a wide net with respect to the laws covered by the Rule. The Rule covers a federal consumer financial law or any other law the CFPB enforces; Section 5 of the FTC Act (UDAP); state UDAAP laws; and specific state laws identified by the Rule. 

REGISTRATION

Unfortunately, filing is going to add an administrative burden on management and governance. There’s no getting around it; registration will require you to file information and documentation.[x] The Bureau will provide the Registry format and filing instructions. And, the Rule requires you to submit revised filings within 90 days if any information outlined above changes or the covered order is amended, terminated, rescinded, or abrogated. 

So, it’s clear you will need to do the following: 

1) Covered Nonbank Identity Information 

As specified in the CFPB’s filing instructions, a covered nonbank must submit identifying information about itself, such as its legal name and the address of its principal place of business. 

2) Administrative Information 

As specified in the CFPB’s filing instructions, a covered nonbank must submit certain additional administrative information. For example, administrative information may include information regarding a registered entity’s affiliates that are registered with respect to the same order. 

3) Covered Order Information 

To register a covered order, a covered nonbank must submit at least the following to the CFPB:

• A fully executed, accurate, and complete copy of the covered order in a PDF format.[xi]

• The applicable agency(ies) and court(s) that issued or obtained the covered order.[xii]

• The effective date of the covered order.[xiii]

• The date of expiration, if any, of the covered order or a statement that there is none.

Defining “Mortgage Loan Originator”

QUESTION 

The banking department claims that our “mortgage loan officer” category is incorrectly defined. As a result, they think we are not licensing MLOs who should be licensed, leading to us originating unlicensed loans. Now, they are auditing our loans for licensing violations. 

Our attorney believes that our policy clearly states how we define an MLO. However, she is concerned that we do not provide examples of the activities and services offered by Mortgage Loan Originators. 

We are in the process of preparing our defense but need some assistance in coming up with examples of MLO activities that the examiners will accept. They are currently auditing us, so we would appreciate your prioritizing our questions. Thanks for your commitment to us all! 

What is the definition of a Mortgage Loan Originator? 

What are some examples of MLO activities? 

COMPLIANCE SOLUTION 

MLO Tune-up 

Policies and Procedures 

ANSWER 

You have asked questions about the term Mortgage Loan Originator (“MLO”), a term that has been defined and redefined, construed and misconstrued, litigated and relitigated, embedded in and cross-referenced among several foundational regulations, and, to some extent, continues to be elucidated and attenuated ad nauseum. 

If your organization employs one or more mortgage loan originators, you must adopt and follow written policies and procedures designed to assure compliance. These policies and procedures must be appropriate to the nature, size, complexity, and scope of the financial institution's mortgage lending activities and apply only to those employees acting within the scope of their employment. 

If you have not recently done a deep dive into the written policy document, contact us, and we’ll get it done. Better yet, ask us to provide an MLO Tune-up, one of our pioneering Compliance Tune-ups. Banking departments expect you to perform such self-assessment reviews. 

I will give you a brief tour and promptly provide some examples. 

S.A.F.E. ACT AND REGULATION G

Let’s go first to the S.A.F.E. Act, implemented through Regulation G,[i] which defines a mortgage loan originator and which individuals within your organization must be registered (banks) or licensed (non-banks). 

This definition states that an MLO is an individual who: 

·       Takes a residential mortgage loan application and 

·       Offers or negotiates terms of a residential mortgage loan for compensation or gain. 

However, like many things in regulatory compliance, it is often not what a definition includes but what it excludes that counts! I don’t care what title you give a person because what the person does matters most, not what title he happens to hold. 

So, here are activities that are excluded[ii] from the MLO category: 

1.     An individual who performs purely administrative or clerical tasks on behalf of an individual who is an MLO under the broad definition above; 

2.     An individual who only performs real estate brokerage activities[iii] and is licensed or registered as a real estate broker under applicable State law, unless the individual is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator, and meets the definition of mortgage loan originator in the above definition; or 

3.     An individual or entity solely involved in extensions of credit related to timeshare plans, as that term.[iv] 

Now, we are often asked if administrative and clerical tasks are excluded. If you can demonstrate purely “administrative or clerical tasks,”[v] as I’ve outlined above, then, for purposes of exclusion, it is necessary to explicate the “tasks” that would be considered administrative and clerical. 

In that context, “administrative or clerical” generally means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the residential mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan. 

I use the term “residential mortgage loan” to mean[vi] any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling (as defined in the Truth in Lending Act,[vii] or residential real estate upon which is constructed or intended to be constructed a dwelling, and includes: 

·       Refinancings; 

·       Reverse mortgages; 

·       Home equity lines of credit; and 

·       Other first and additional lien loans that meet the qualifications listed in this definition. 

In short, virtually any consumer loan secured by a dwelling falls under this definition, meaning employees who originate these loans must be registered or licensed as MLOs. 

DE MINIMIS EXCEPTION

Another question that usually comes up regards the so-called “de minimis exception.” Some people think that de minimis means “at a minimum.” But that is not the case. The term is Latin for “at least.” Generally, in the context of regulatory compliance, de minimis action is slight, minor, nearly trivial, or even insignificant. What constitutes de minimis is codified in applicable regulations not only in mortgage banking but also in a wide spectrum of regulations. 

From a regulatory point of view, there is a de minimis exception[viii] from registration and licensing requirements for individuals who originate very few mortgage loans during the year. Under this exception, the registration and licensing requirements do not apply to an employee who has never been registered or licensed through the Nationwide Mortgage Licensing System and Registry or Registry[ix] (“Registry”) as a mortgage loan originator if, during the past 12 months, the employee acted as a mortgage loan originator for five or fewer residential mortgage loans. 

However, before engaging in mortgage loan origination activity that exceeds the five-loan exception limit, the employee must register or license via the Registry under the rules. In addition, institutions are prohibited from engaging in any act or practice to evade the limits of the de minimis exception. 

Also, once employees are registered or licensed, they cannot go back and rely on the de minimis exception even if their originations fall below the five-loan threshold. The de minimis exception only applies to employees who have never been registered or licensed. 

You have asked for some examples of MLO activities. Please keep in mind that my answer is not meant to be comprehensive. The examples I offer are suggestive and generally illustrative. If you are unsure about activities performed by your MLOs, you should contact us or consult a competent compliance professional. 

SOME EXAMPLES OF MLO ACTIVITIES 

To help clarify the definition of mortgage loan originator and aid in the understanding of activities that would cause an employee to fall within or outside the definition of mortgage loan originator, the S.A.F.E. Act provides Appendix A,[x] which provides examples illustrating the application of the definition of an MLO. 

As the Appendix makes abundantly clear, these examples are “not all-inclusive and illustrate only the issue described and do not illustrate any other issues that may arise under the rules.”[xi] 

Taking a Loan Application 

The following examples illustrate when an employee takes or does not take a loan application. 

Taking an application includes: 

·       Receiving information provided in connection with a request for a loan to be used to determine whether the consumer qualifies for a loan, even if the employee: 

o   has received the consumer’s information indirectly to make an offer or negotiate a loan;

o   is not responsible for verifying information;

o   is inputting information into an online application or other automated system on behalf of the consumer; or

o   is not engaged in approving the loan, including determining whether the consumer qualifies for the loan. 

Taking an application does not include: 

·       Any of the following activities performed solely or in combination: 

o   contacting a consumer to verify the information in the loan application by obtaining documentation, such as tax returns or payroll receipts;

o   receiving a loan application through the mail and forwarding it, without review, to loan approval personnel;

o   assisting a consumer who is filling out an application by clarifying what type of information is necessary for the application or otherwise explaining the qualifications or criteria necessary to obtain a loan product;

o   describing the steps that a consumer would need to take to provide information to be used to determine whether the consumer qualifies for a loan or otherwise explaining the loan application process;