Compliance Q&A: Home Equity Line of Credit

Can CUs include mandatory arbitration clauses in HELOCs?

May 1, 2014

Q:Are credit unions permitted to include mandatory arbitration clauses in their home equity line of credit (HELOC) agreements?

A: No. Regulation Z, Section 1026.36(h)(1) prohibits creditors from including terms that require arbitration or any other nonjudicial procedure to resolve any controversy or settle any claims arising out of a contract or other agreement for both closed-end consumer credit transactions secured by a dwelling (except for certain time-share plans) and for HELOCs secured by the consumer’s principal dwelling.

Agreements in connection with dwelling-secured loans also may not limit a consumer from bringing a claim in court, an arbitration procedure, or other nonjudicial procedure for damages or any other relief in connection with an alleged violation of federal law.

Q:Are credit unions required to provide any subsequent notice of a member’s right to opt-in or revoke an opt-in after satisfying Regulation E’s overdraft notice requirements for ATM and one-time debit card transactions?

A: No. Section 1005.17 of Regulation E doesn’t require a subsequent notice.

To comply with the Reg E opt-in requirement for ATM and one-time debit card overdrafts, a credit union must:

The credit union must complete all four steps to charge the member any fees for paying (or declining) ATM and one-time debit card overdrafts.

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