Compliance Q&A

Questions about the Fair Credit Reporting Act and Regulation B's appraisal rule.

June 1, 2015

Q: When indirect lending is involved, who’s responsible for providing the risk-based pricing notice under the Fair Credit Reporting Act: the auto dealer or the credit union?

A: The original creditor (i.e., the person to whom the obligation is initially payable) is responsible for providing the risk-based pricing notice. This is the case even if the loan is assigned to a third party, or if the original creditor isn’t the funding source for the loan.

In some cases the auto dealer is the original creditor that extends credit contingent on the ability to assign the loan to a third party. In such cases, the auto dealer must provide the risk-based pricing notice.

On the other hand, if the credit union is the original creditor, it will be obligated to either provide the notice or contract with the auto dealer to provide it (and have policies and procedures in place to verify the dealer properly provides the notice).

Q: Can we charge members for photocopies of appraisals under Regulation B’s appraisal rule?

A: No. Regulation B prohibits creditors from charging for copies of appraisals/ valuations (e.g., photocopying charges, postage, etc.), but permits them to charge applicants reasonable fees to reimburse for the cost of the actual appraisal/valuation (unless otherwise prohibited by law). The reimbursement amount can’t be increased to cover the cost of providing documentation to the consumer. Reg B’s appraisal rule covers applications for closed-end or open-end credit secured by a first lien on a dwelling (Section 1002.14).

Q: Is it true that federal flood insurance is no longer required for certain detached structures, e.g. detached garages?

A: Yes. The Homeowner Flood Insurance Affordability Act (HFIAA) of 2014 included an exemption from the Flood Disaster Protection Act's (FDPA) mandatory flood insurance purchase requirements for certain detached structures. HFIM amended the Biggert-Waters Act of 2012. Section 13 of HFIM provides that flood insurance isn't required for any structure that is part of a residential property but is detached from the primary residential structure and doesn't serve as a residence. The interagency flood insurance regulations will incorporate this exemption once finalized; however, this particular provision was effective upon enactment.

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