Online Loan Applications, Disclosures, and CIP

Answer by Mary Beth Guard:

In terms of the CIP requirements, the regulation does not REQUIRE all account openings to be in person. What it requires is that you obtain certain pieces of information on a customer prior to opening a new account (name, address, identifying number and, in the case of an individual, date of birth) and that within a reasonable time thereafter you verify the customer's identity to the extent reasonable and practicable.

The verification of identity may be made through documentary methods, nondocumentary methods, or a combination. For excellent guidance on using positive, negative, and logical verification, see the FFIEC's publication Authentication in an Electronic Banking Environment.

You will want to put your CIP notice on your Web site where it can be viewed by prospective customers before they enter into a customer relationship with you, and your privacy notice needs to be given before the person enters into a customer relationship with you -- which means sometime before consummation of the loan transaction.

Some disclosures in the lending context need to be given at the time of application (such as the servicing disclosure on first lien-type loans covered by RESPA). If the customer is coming into the branch to turn in the application, disclosures may be given at that time.

If the customer is not coming into the branch, you still have some slack. Reg X (the RESPA reg) says, "At the time an application for a mortgage servicing loan is submitted, or within 3 business days after submission of the application, the lender, mortgage broker who anticipates using table funding, or dealer who anticipates a first lien dealer loan shall provide to each person who applies for such a loan a Servicing Disclosure Statement." (See Section 3500.21 )

If insurance is being offered, solicited or sold by, through, or at the bank, you'll need to also consider how you're going to handle the consumer insurance disclosures. Most of the lending disclosures, however, do not have to be given prior to, or at the time of, application.