To Image or Not to Image, That is the Question

There are two primary issues involved in imaging loan documents. One is meeting record retention requirements; the other is meeting evidentiary requirements in a lawsuit.

Document Retention Requirements. Federal regulations generally permit document retention by electronic imaging means. Here is a sampling of two Commentary statements:

Reg. Z sec. 226.25(a)(2) Commentary: "Methods of retaining evidence. Adequate evidence of compliance does not necessarily mean actual paper copies of disclosure statements or other business records. The evidence may be retained on microfilm, microfiche, or by any other method that reproduces records accurately (including computer programs). The creditor need retain only enough information to reconstruct the required disclosures or other records. Thus, for example, the creditor need not retain each open-end periodic statement, so long as the specific information on each statement can be retrieved."

Reg. B sec. 202.12(b)(1) Commentary. "Copies of the original record include carbon copies, photocopies, microfilm or microfiche copies, or copies produced by any other accurate retrieval system, such as documents stored and reproduced by computer. A creditor that uses a computerized or mechanized system need not keep a paper copy of a document (for example, of an adverse action notice) if it can regenerate all pertinent information in a timely manner for examination or other purposes."

State laws may also address this issue. In Oklahoma, for example, the State Banking Department has issued a rule permitting imaged documents for retention purposes. Check your state laws and regulations for similar rules.

When You Need to Sue. State law generally governs evidentiary rules related to documents. In Oklahoma, we have specific statutes that permit imaged documents (e.g., promissory notes and mortgages) to be introduced as evidence in a court proceeding. Other states have similar statutes. You should consult your own state laws about using imaged documents, rather than original paper documents, in litigation matters.

First published on BankersOnline.com 5/23/05