After shocking the industry by telling lenders that anyone affirmatively offering to refer potential borrowers to a loan officer would be an “originator” the Consumer Financial Protection Bureau did an about face earlier this month. Now, the Consumer Financial Protection Bureau proposes to change the final rules and narrow the definition of an “originator” under the new rules as it pertains to initial solicitations.
Whereas the Final Rule previously excluded only referrals based upon communications that did not discuss credit terms and were only in response to borrower requests, the Consumer Financial Protection Bureau proposes to exclude all referral communications from “originating” unless the communication involves a discussion of credit terms particular to the borrower. It will not matter whether it is a communication initiated by the borrower or the individual. Indeed, only those communications that involve an assessment of the borrower’s qualifications in regard to discussing credit terms or referring them to a loan officer will be considered originating activities.
The impact of this is that lenders must be careful to literally script what telemarketers and tellers say to potential borrowers. In addition, no assessment whatsoever should be made as to the borrowers’ qualifications or circumstances. Hence, if a communication is initiated, the contact information/referral should be offered regardless of the borrowers’ circumstances.
For instance, a teller advising a bank customer that the bank is offering refinances as low as 3% and providing contact information would now be perfectly acceptable. On the other hand, a telemarketer gathering information about a borrower’s equity in a property and based upon that answer either discontinuing the conversation or referring the potential borrower to a loan officer, would likely exceed the permissible unlicensed communication.
Lenders wishing to utilize the services of telemarketers, tellers, and similar lead generators should therefore be at ease (presuming the proposal is approved) that these business origination methods will continue, but lenders must take care to ensure that the extent of the communication remains within permissible limits.