Regulation Z does not apply to commercials, except for rules on issuance and liability for unauthorized use of credit cards. Exempt credit includes loans for business or agricultural purposes, and certain student loans. Credit unions may want to review the agreements and disclosures provided for business credit cards to determine if they meet the requirements. Open credit advertising rules specify that when certain terms are used in advertisements (trigger terms), additional disclosures are required for both non-mortgage loans and open home-guaranteed credit plans.
Additional disclosure requirements apply to television and radio advertisements. Although most federal regulations are geared towards consumer lending, there are regulations that apply to business loans. It is important for banks to ensure that commercial lenders are aware of federal regulations that do apply to them. Regulation Z does not dictate the terms of the loan, what type of loans lenders offer, or who can borrow.
The law is designed to help ensure transparency in the lending and credit process by requiring lenders to provide certain disclosures to consumers, observe appropriate credit card practices, resolve billing disputes in a timely manner, provide account statements monthly to borrowers, notify borrowers when loan conditions change and avoid unfair mortgage lending practices. The clear and visible standard applies to all Regulation Z disclosures, including announcements subject to opening and closing rules. Certain types of loans are not subject to Regulation Z, including federal student loans, loans for business, commercial, agricultural or organizational use, loans over a certain amount, utility loans, and securities or commodities offered by the Securities and Exchange Commission. The purpose of Regulation C is to provide the public with loan data that can be used to help determine if banks are meeting the housing needs of their communities, to help public officials distribute public sector investment to attract private investment to areas where it is needed, and to help identify potential discriminatory lending patterns and enforcing anti-discrimination laws.
When federal and state regulations or private requirements do not require specific treatment of commercial loans, the credit union may establish its own risk-based requirements through its internal policies and loan agreements. Under Regulation Z, closed-term credit advertisements guaranteed by a home are subject not only to the requirements discussed above, but also to several other requirements. The provision of actually available terms prohibits creditors from inciting an applicant to apply for credit with an offer that is not available as advertised. The HMDA applies to any “covered loan” which is defined as “a closed mortgage loan” or a fixed capital line of credit that is not an excluded transaction under §1003.3 (c).
It is essential for commercial lenders to understand the regulations that apply to them in order for them to comply with the law and protect their customers from unfair practices. Understanding whether an individual or legal entity will act as the borrower of the loan, as well as the purpose of the loan, can be important in determining the applicability of a rule, as well as the credit union's ability to grant the loan under its internal policies and field of membership considerations.
