Credit Report & Flood Determination Fees

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Question:

We want to start charging our customers for credit reports and flood determinations. Is it ok to only charge customers that we actually close the loan with or would this be discriminatory? We don't want to charge the credit report fee at application. We would rather wait until the loan is closed before the fee is imposed on the customer, therefore if a denial is made, the denied customers would not have the fee imposed on them.

Answer:

To be considered discriminatory per Reg. B and/or the Fair Housing Act, one or more of the prohibited factors would need to used in the decision to charge or waive. However, if you charge only those customers who have loans that are originated, the credit report charges must be considered a prepaid finance charge. You will find this in the Official Staff Commentary 4(c) Charges excluded from the finance charge. "...if the fee is to be excluded from the finance charge under Section 226.4(c)(1), it must be charged to all applicants, not just to applicants who are approved or who actually receive credit."

First published on BankersOnline.com 9/07/09