Compliance Q&A: Ability-to-Repay and Mobile Homes

Does the new ATR rule cover mobile home loans?

July 1, 2013

Q: Does the new ability-to-repay (ATR) rule cover mobile home loans, when the mobile home is used as a dwelling?

A: Yes. The ATR rule will apply to any consumer credit transaction that’s secured by a dwelling as defined in Section 1026.2(a) (19) of Reg Z, including any real property attached to a dwelling, other than home equity lines of credit, a timeshare plan, reverse mortgages, and temporary loans with terms of 12 months or less.

Reg Z defines “dwelling” as a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it’s used as a residence.

The ATR rule goes into effect on Jan. 10, 2014.

Q: What’s the correct way to complete the credit score section on an adverse action notice if the applicant has a limited credit history and no score?

A: The credit union can leave this section blank when there is no available credit score. The Reg B (Equal Credit Opportunity) requirement only applies when a creditor uses a credit score in taking adverse action. The credit union can’t disclose credit score information if an applicant has no credit score. But the credit union may choose to provide the applicant notice that no credit score was available from a consumer reporting agency.

Q: Is the credit union required to pay all ATM or one-time debit card overdrafts for members who participate in the institution’s overdraft program?

A: No. Section 1005.17 of Regulation E (Electronic Fund Transfers) doesn’t require a financial institution to authorize or pay an overdraft on an ATM or one-time debit card transaction, even if the consumer has affirmatively consented to an institution’s overdraft service for such transactions. Further, the model consent for overdraft services (Form A-9) discloses that: “We pay overdrafts at our discretion, which means we do not guarantee that we will always authorize and pay any type of transaction.”

Visit CUNA’s compliance blog— “CompBlog”—for coverage of key issues. Email with questions or ideas, and keep the conversation going with your peers on COBWEB—CUNA’s compliance listserv.

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