Academic journal article ABA Banking Journal

Pass the Aspirin

Academic journal article ABA Banking Journal

Pass the Aspirin

Article excerpt

Headache 1: ID conflict

A midwestern bank CEO asks: Customer identification laws (BSA, OFAC, etc.) require the bank to obtain a driver's license (or other picture ID) at account opening and at the car dealer when a new customer is obtaining an indirect loan that the bank has approved. Unfortunately, our understanding is that Regulation B doesn't allow the driver's license to be kept in the loan file, because that could allow the bank to discriminate against protected groups, because the bank employee can "see" the customer. How are other banks handling this operationally and practically?

Remedy 1

Nancy Derr-Castiglione, contributing editor, and principal, D-C Compliance Services, Highlands Ranch, Colo. nancycastiglione@comcast.net

Some examiners have told banks that they risk violating Regulation B if they get copies of driver's licenses of loan customers, because it captures a picture of the individual and reveals race and sex information. On the other hand, as the banker states, above, banks are expected to identify their customers by obtaining identifying information and verifying the information by means of reviewing a document, such as a driver's license.

Yet there are several ways a bank can satisfy both requirements.

One way is to obtain the copy of the driver's license at loan closing, after the loan decision has been made. That way, the race and sex information from the driver's license is not available during the credit decision phase of the loan process.

Another option is to use a checklist to document that the driver's license was reviewed and the identifying information from the license noted (name, address, birthdate, license number, and expiration date). That will satisfy the Customer Identification Program (CIP) minimum standards and will eliminate the need to make a copy of the driver's license for the loan file. Many banks incorporate these steps into an existing loan documentation checklist, eliminating the need for a separate checklist.

Remedy 2

Lucy Griffin, contributing editor, and president, Compliance

Resources, Inc., and senior associate of Paragon Compliance Group. griffin@earthlink.net.

Identifying customers who are purchasing a car and applying for a loan is a challenging process. …

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