Compliance Shorts

FRB Offers Consumer Education Tool
The choice between leasing and financing can be difficult and confusing. The Federal Reserve Board has just released a software program to make this easier for consumers. The software, Keys to Vehicle Leasing: A Consumer Resource is a computer program that runs on PCs.

The program compares leasing to buying, illustrates different costs, and explains how to compare lease offers. The program includes information on Regulation M and the answers to some frequently asked questions.

The program is available at www.federalreserve.gov/pubs/leasing. You can link to the program or download it. You can also print this site on cards or flyers that you give to customers who are shopping for cars and considering how to finance them. It's a service to your customers and it's free from your friendly regulator.

Privacy For Business Customers
The new privacy laws protect consumers but not businesses. You don't have to provide all the notices and protections to your business customers that you will be providing to consumers. However, offering the protections is not a bad idea. In fact, Robin Warren, the privacy guru at Bank of America, recommends doing this. She points out that this can be a valuable service to business customers. Many of the small businesses are really "mom and pop" operations, and, according to Warren, they really have the same concerns that your consumer customers do. She suggests that banks step ahead of the curve and provide the same protections for business accounts as for consumer accounts. Then, if future laws add business customers to the protected list, you'll already be there.

Finding Foxdale


If you are looking for the Foxdale case to support your budget request, you can find it at the Federal Reserve Board's website at http://www.federalreserve.gov/boarddocs/press/enforcement/1999 . Look under enforcement actions for December 6, 1999.

Three Agencies Step Up Fair Housing Ante
Tax breaks for low-income housing should only be available to those who don't discriminate. Three federal departments, HUD, Treasury, and Justice, have issued a joint statement on their agreement to take action to ensure that discrimination has a new price tag. The agencies will maintain a monitoring process to ensure that the low-income tax credit properties comply with the fair housing act. The agencies will forward any findings of fair lending violations to the IRS so that IRS can void any tax benefits to those entities.

The agencies will bolster this effort with training and technical assistance to organizations participating in low-income projects.

Flood's Caution
It seems to be a common misconception among commercial lenders that when taking a security interest in improved real property as an abundance of caution, flood insurance doesn't enter the picture. In fact, flood insurance requirements apply whenever a lender takes a security interest in real property, regardless of the reason.

The purpose of the flood insurance program is to ensure that improvements on properties subject to flood hazard are insured. The loan is the tool for imposing the insurance requirement. The reason for taking the security is not relevant to this. The opportunity is there and the law takes advantage of that. The rule is therefore quite simple: whenever taking a security interest in improved real property, flood insurance applies. No exceptions.

Predatory Lending Reviewed
Congressional interest in predatory lending continues. The Senate Committee on Banking has just released findings of a "study" based on questions sent to the regulatory agencies. The conclusion, according to Senator Gramm, is that there is no consistent definition of predatory lending. Defining the problem is the first step. Gramm also noted that the regulators did not report any lack of authority to penalize predatory lending abuses.

Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 10, 9/00