Regulatory Obligations and Policy Reviews

Licensing and Product Compliance

State licensing is a foundational requirement for non-bank lenders. Each state imposes its own licensing criteria, renewal deadlines, and compliance obligations. As part of the Q4 review, lenders should:

• Verify that all required state licenses are current and that renewals are submitted on time.

• Confirm that loan products comply with state-specific usury laws, which cap interest rates and fees.

• Review loan agreements and disclosures to ensure they meet TILA requirements, including Annual Percentage Rate (APR) calculations and payment schedules.

• Ensure compliance with the Real Estate Settlement Procedures Act (RESPA) for mortgage products, including good faith estimates and settlement statements.

• Audit fair lending practices to confirm non-discrimination in credit decisions, consistent with the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA).

• Validate that FCRA-compliant procedures are in place for obtaining and using consumer credit reports, including adverse action notices.

Section 1071 and Small-Business Data Collection

The Consumer Financial Protection Bureau's Section 1071 rule requires financial institutions to collect and report demographic data on small-business loan applicants. This rule aims to enhance transparency and promote equitable access to credit for small businesses, including women-owned and minority-owned enterprises. Lenders making small-business loans must:

• Implement systems to collect required data elements, including business demographics, loan terms, and application outcomes.

• Establish processes for securely storing and reporting this data to the CFPB.

• Train staff on data collection protocols to ensure accuracy and compliance.

• Prepare for the rule's compliance deadlines and understand that failure to comply can result in enforcement actions and financial penalties.

Anti-Money Laundering and Beneficial Ownership

Non-bank lenders may be subject to Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements, depending on their business model and regulatory classification. During Q4, lenders should:

• Review and update BSA/AML policies to reflect current risk assessments and regulatory guidance.

• Ensure customer due diligence (CDD) and enhanced due diligence (EDD) procedures are properly documented.

• Incorporate beneficial ownership identification requirements into customer onboarding workflows.

• Conduct ongoing monitoring for suspicious activity and file Suspicious Activity Reports (SARs) as required.

Debt Collection and Servicing Practices

Debt collection activities are governed by the Fair Debt Collection Practices Act (FDCPA) and various state laws. Non-bank lenders must ensure their collection practices are fair, transparent, and lawful. Key compliance actions include:

• Auditing collections communications for compliance with FDCPA prohibitions on harassment, false statements, and unfair practices.

• Reviewing loan modification and forbearance procedures to ensure they align with applicable consumer protection rules.

• Confirming that foreclosure processes comply with state-specific notice requirements and judicial procedures.

• Documenting all servicing activities to support regulatory examinations and consumer dispute resolution.