Oracle Financial Services Lending and Leasing
Compliance and Regulation in the United States
ORACLE WHITE PAPER
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JANUARY 2016
State and Federal Compliance
Oracle Financial Services Lending and Leasing is being used to finance consumer products in 50
states of the USA as well as in Puerto Rico. Since the financial institution is responsible for being in
compliance, the lender needs to have the ability to configure the system in order to comply with state
and federal regulations, such as Truth-in-Lending, Fair Credit Reporting Act, Usury Rates, Late Fees,
Fair Debt Collection Practices Act and Servicemembers Civil Relief Act (SCRA).
Here is some detail on how each of these sample compliance features are configured within Oracle
Financial Services Lending and Leasing.
Truth-in-Lending
Within Oracle Financial Services Lending and Leasing, the lender is able to configure edits throughout
the underwriting and funding processes to ensure that their credit policies and regulations are met. As
described below, the system allows the validation of tolerances related to finance charges and APR
calculations as per federal guidelines, and mandatory completion and validation of truth-in-lending
details before funding which can be applied across different companies, branches, products, and
states.
Usury Rates
Within Oracle Financial Services Lending and Leasing, the pricing (interest rates) of each account is
defined based on various attributes selected by the lender. The system allows the creation of unlimited
pricing records, with the maximum rate (Rate To) that must not exceed the usury law of the state. As
shown in the example below, the pricing record is for a new consumer loan, in the state of Washington,
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for a maximum rate of 20 percent, which the lender determines is within the state usury rate
regulations.
Late Fees
Oracle Financial Services Lending and Leasing provides a configurable fee rule definition for the
lender to determine the appropriate fees to be assessed to the account, based on different states,
products, companies and branches. When the event is triggered to assess a specific fee, such as late
fees, the system calculates the fee based on the method configured by the lender. Within Oracle
Financial Services Lending and Leasing, each fee definition record has a start and an end date, which
allows the system to assess the correct amount based on the contract date of the account.
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Servicemembers Civil Relief Act (SCRA)
Oracle Financial Services Lending and Leasing supports the federal regulation requirement of SCRA
with the processing of a monetary transaction on the account. Each maintenance transaction
processed on the account is displayed in the transaction history and if needed, the transaction can be
back-dated or reversed, wherein all related transactions will be adjusted automatically.
As shown in the screen shots below, the system enables transactions to place a SCRA flag on the
account and also remove them when appropriate. When the transaction is processed, the interest rate
is adjusted accordingly, based on the effective date of the transaction. The lender has the ability to
default the SCRA interest rate, which could be lower than the federal law requires.
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Equal Credit Opportunity Act (ECOA)
Oracle Financial Services Lending and Leasing supports the federal regulation requirement of ECOA
by allowing the lender to configure and select the applicable ECOA code of the applicant during
application entry stage itself and later generating the standard prospect / customer communication
artifacts like Approval letter, Counter Offer Letter, and Adverse Action Letter with the necessary
contents as per ECOA guidelines. Below screen shot shows the facility to select ECOA code of the
applicant during the application entry stage.
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Right To Financial Privacy Act (Gramm-Leech Bliley Act) /
CFPB - Regulation P: Privacy of Consumer Financial Information
Oracle Financial Services Lending and Leasing supports this federal regulation requirement by
providing facility to mark a particular telephone number of the applicant / customer as ‘Permission to
Call’ and corresponding agreed call timings. In case of customers who do not want to further share
their details with any other third parties, system supports the same by providing facility to mark ‘Privacy
Opt Out’ so that lender can check the same while planning any customer data sharing . In addition,
customer information can be masked for security and privacy reasons. The screen shots below shows
the ‘Permission to Call’ and ‘Privacy Opt Out’ features.
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Fair Credit Reporting Act
Getting the credit bureau reports on the loan applicant / customer and utilizing the report contents for
various decisions making during origination, servicing and collection stages of lending lifecycle are
mandatory for a lender. Oracle Financial Services Lending and Leasing provides out of the box facility
to pull credit bureau reports from Experian, Equifax and TransUnion, either automatically or manually.
While defining the application scoring models, lender can directly use the report contents and system
automatically calculates the application score and grade. Below screen shot shows the facility to
handle the bureau pulls.
Credit Bureau Reporting
Oracle Financial Services Lending and Leasing supports the account performance data reporting to
CDIA (Consumer Data Industry Association) on all accounts under servicing in the industry standard
Metro2 format. While defining a lending product itself lender can select the credit bureau portfolio type
and credit bureau account type and during end of day processing, system batch job will create the
actual electronic files in the prescribed format accordingly for reporting. The screen shot below shows
product definition which contains bureau reporting base configurations.
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Fair Debt Collection Practices Act
Oracle Financial Services Lending and Leasing supports this federal regulation requirement by
providing the ability to manage all collection activities with user-defined work queues and capturing all
customer information, including the various telephone numbers, plus the permission to call, the
start/end and the time zone of each customer, so the lender has the ability to use this information for
various contact and collection activities in order to comply with the federal regulations.
US Bankruptcy Processing Compliance
Oracle Financial Services Lending and Leasing supports this federal regulation requirement by
providing facility to record all the customer bankruptcy related information received from courts and
attorneys in a systematic way as per the bankruptcy processing guidelines. The system provides
predefined bankruptcy tracking templates as per the legal practices followed in US and it helps the
lender to record and view and download the bankruptcy details as required for the court filing
purposes. The screen shots below shows the bankruptcy processing features of the system.
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Electronic Funds Transfer Act
Oracle Financial Services Lending and Leasing provides the capability to support the processing of
direct debits (or ACH) for the repayment of the customer’s obligations. The system captures the direct
debit information on the account and creates the file based on the standard NACHA format, which the
lender would be responsible to process to collect the funds from the customer. The screen shot below
shows how the information is captured within the system.
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Federal Trade Commission Act - Section 5(a) and Dodd-Frank Unfair, Deceptive &
Abusive Acts and Practices
Oracle Financial Services Lending and Leasing provides various configurable product definitions and
business rules to support the processing of consistent business practices, including pricing, credit
decisions and customer service/collection activities. In addition, all comments on the customer
account are captured with a date, time and user, plus the comments can’t be deleted through the user
interface. All entered information within the system is available for audit and compliance reporting.
Stipulation and adverse action reasons are defined by the admin user and access to edit this
information will be access driven.
Telephone Consumer Protection Act and Telemarketing and Consumer Fraud and
Abuse Prevention Act
Oracle Financial Services Lending and Leasing captures the telephone numbers, including the
permission to call, the start/end and the time zone of each customer, so the lender has the ability to
use this information for various contact and collection activities with the customer and abide within the
federal regulations. The screen shot below shows the information collected on each telephone
number.
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Regulation X: Real Estate Settlement Procedures Act (RESPA)
Oracle Financial Services Lending and Leasing provides capability to perform Escrow related disclosures / statements / Refund if balance is greater than $50. Escrow account means any account
that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums
(including flood insurance), or other charges with respect to a federally related mortgage loan,
including charges that the borrower and servicer have voluntarily agreed that the servicer should
collect and pay. An “escrow account” includes any arrangement where the servicer adds a portion of
the borrower's payments to principal and subsequently deducts from principal the disbursements for
escrow account items.
CAN-SPAM Act and Junk Fax Prevention Act
Oracle Financial Services Lending and Leasing captures the email address and fax number of the
customer, plus provides an “opt-out” and stop correspondence indicators that supports the ability of the
lender to comply with the regulation, which the lender is responsible on how this information is used
with any communication with the customer. The screen shot below shows some specific information
captured for each customer.
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Bank Secrecy Act and Anti-Money Laundering Regulations
Oracle Financial Services Lending and Leasing captures and maintains all monetary transactions,
including new account activations and customer payments. The transaction type and amounts are
available real-time for any audit reporting.
USA Patriot Act and Office of Foreign Assets Control Regulations
Oracle Financial Services Lending and Leasing leverages the information received from the credit
bureaus to allow the lender to identify any risk, including OFAC, during the underwriting, customer
service or collection processes.
IRS Regulations - Cancellation of Debt
Oracle Financial Services Lending and Leasing supports the 1099-C processing for the forgiveness of
debt. The system identifies all debt cancellation over $600 and processes a text file of all accounts at
year-end, which would be used by the lender to create the tax form to the customer and to be
submitted to the IRS.
Consumer Leasing - Regulation M
Oracle Financial Services Lending and Leasing provides the ability for the lender to manage
comprehensive financial information during the underwriting and servicing for consumer leases,
including but not limited to, capitalized costs, down payment, rent factor, residual factor and term. In
addition, the system has user-configurable edit checks to ensure the funded lease contract is within
the credit policies of the lender. The screen shot below shows the contract details of a consumer
lease.
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Other Compliance
For other compliant related areas, Oracle Financial Services Lending and Leasing provides the
capability to support other state and federal compliance, such as tax reporting (1098, 1099-A and
1099-C) and Home Mortgage Disclosure Act (HMDA) reporting. The system allows for the generation
of data files in the format(s) prescribed by applicable regulatory agencies (e.g. the FFIEC for Home
Mortgage Disclosure Act (HMDA) reporting) or for Internal Revenue Service (IRS) information
reporting purposes (e.g. forms 1098, 1099-A and 1099-C as specified by the IRS).
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White Paper :Compliance and Regulation in the United States
January 2016