Service Provider Costs on GFE

Question: My consumer loan department never charges the customer for third party costs so they don't think they should disclose the required service providers on the GFE. The regulation says to disclose the costs if the customer is paying all or a portion of the service. However you have indicated that the regulators seem to be taking the stance that there is no such thing as a free loan. So are you of the opinion that we should be providing a list of required service providers?

Answer: This is a topic of constant confusion. The act and regulation do indeed say that the disclosure is triggered by the customer making all or a portion of the costs. The trick that HUD came up with is the presumption that if the lender is not passing on the costs directly, the costs are hidden somewhere else in the cost of the loan. Therefore, the consumer should know that the costs exist. HUD does not work with or enforce Regulation Z which does show the cost of credit. Instead, they are sticking to their position that service provider costs must be disclosed even when the lender does not directly pass the cost on to the customer. Because they have taken this position, the required service providers must also be identified and go with the GFE.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 14, 12/05