Bureau of Consumer Financial Protection: Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z)
GAO-13-411R, Mar 1, 2013
GAO reviewed the Bureau of Consumer Financial Protection's (Bureau) new rule on loan originator compensation requirements under the Truth in Lending Act (Regulation Z). GAO found that (1) the final rule implements amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The final rule implements requirements and restrictions imposed by the Dodd-Frank Act concerning loan originator compensation; qualifications of, and registration or licensing of loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance. The final rule revises or provides additional commentary on Regulation Z's restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to recordkeeping requirements. The final rule also establishes tests for when loan originators can be compensated through certain profits-based compensation arrangements. This final rule is designed primarily to protect consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified; and (2) the Bureau complied with applicable requirements in promulgating the rule.