Why and how do you limit the effective lending territory serviced by your WWW credit application forms?

Why?

• Because we choose not to aggressively lend in areas far removed from our service area. As a Massachusetts bank, we don't need to lend in Ashtabula, Ohio, to customers whom we will never really know. We want most of our loans made to people in our CRA designated area.
  
• Because we don't want to worry about receiving applications that we will have to turn down for being "out of area" and the attendant need for adverse action notices.

How?

We get location information (ZIP code) up front in the process of filling out the WWW application. If the ZIP provided doesn't fall in our lending area, the process is cut off, the inquiring party is told (in the kindest of ways, of course) that we don't lend outside our territory, and we never receive a completed application.

We got this idea from a bank Web-site guru who shall remain nameless, (except to say he started this thread).

We do not accept on-line applications from outside our assessment area, and we state this at the beginning of our on-line app. We are a small rural bank. In the past two years, our % of loans originated inside our AA has declined due to a higher volume from auto dealers who draw applicants from outside our AA, and we don't want to risk adding to this trend.

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Sounds like great answers to the question. Thanks for the response.

Any other reasons why out-of-area lending is discouraged or declined? CRA is a good one, but there must be others, too.

Richard: Unusual state laws like Texas Home Equity should scare anyone unfamiliar with the requirements.

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This is a personal observation that should not be taken as legal advice nor relied upon for any purpose.

Ted, it scares the ones familiar with it too.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Another factor is the increased cost of collecting on the debt if the borrower defaults. If you have to chase down collateral (such as a car or boat, for example) in another state, it can be time-consuming and expensive.