Closed-End Pre-Approved Lending User Guide

Transcription

1 Consumer Deposit Consumer Lending Real Estate Lending Business Services Closed-End Pre-Approved Lending User Guide P.O. Box Mineral Point Road Madison, WI MXUG51 (1/14) CUNA Mutual Group 2013 All Rights Reserved

2 Contents Chapter 1: General Information Introduction 1 Process Summary for a Closed-End Pre-Approved Loan 1 Document Listing 2 Chapter 2: Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Document Description 4 Document Sample Document Completion Instructions 6 Chapter 3: Truth in Lending Disclosure (Pre-Approved) Document Description 22 Document Sample Document Completion Instructions 24 Chapter 4: Pre-Approved Express Draft (Site Draft) Document Description 25 Document Sample Document Completion Instructions 27 Chapter 5: Pre-Approved Express Draft (Check) LOANLINER Check Stock Version Document Description 32 Document Sample Document Completion Instructions 34 Chapter 6: Check Stock (Sample of Paper Check) Document Description 36 Document Sample Document Completion Instructions 38 Chapter 7: Pre-Approved Express Draft (Check) Credit Union Check Stock Version Document Description 41 Document Sample Document Completion Instructions 43 Chapter 8: Pre-Approved Express Draft Confirmation Receipt Document Description 46 Document Sample Document Completion Instructions 48 Chapter 9: Frequently Asked Questions 50 Chapter 10: Additional Guidance Sample 1 Vehicle purchase with Credit Insurance, GAP & financed Filing Fee 59 Sample 2 Vehicle purchase with a trade in, financed Extended Warranty, and cash Filing Fee; without Debt Protection and GAP. 79 Sample 3 Boat purchase with a trade in, GAP purchased with cash, and a financed Filing Fee; without Debt Protection or Extended Warranty. 95 Pre-Approved Lending User Guide

3 Chapter 1: General Information Introduction This guide is designed to help you understand how to use the LOANLINER Pre-Approved Lending document suite. This guide describes each document in detail, including instructions for document completion. This guide also includes sample pre-approved loan transactions which may be helpful to you when completing loan documents at your credit union. Service and Support One of the key features of any product you use is the service and support that goes with it. You can rely on LOANLINER to provide you with excellent support and service for the LOANLINER Closed- End Pre-Approved Lending program. You can receive assistance by: Calling our team of operations and compliance experts at: Contacting the LOANLINER Department at: Fax: Mail: LOANLINER Documents PO Box 2991 Madison, WI Accessing the Compliance Resource Center at Lending and Compliance Support The LOANLINER program has been part of credit unions lending success for several decades and LOANLINER products are currently being used by thousands of credit unions. You will have direct access to this support via any of the channels described above or through your CUNA Mutual Group Account Team. Process Summary for a Closed-End Pre-Approved Loan Step 1 Credit union qualifies the member(s) to be pre-approved for a loan; Step 2 Step 3 Step 4 Step 5 Step 6 Credit union offers or promotes Payment Protection, GAP, and MRC (Extended Warranty) product and, if accepted, the member signs the Payment Protection forms. They will sign any GAP or MRC (Extended Warranty) documents in step 8; Credit union provides the member with the Pre-Approved Note, the Truth in Lending Disclosure (Pre-Approved) [as necessary], the Express Draft, and any Payment Protection product documents; Member shops for and negotiates the price of the property; Member and Dealer complete and sign the Express Draft, in accordance with the specified instructions; Dealer sends to credit union (i.e. by fax or other means specified by the credit union) a copy of the completed and signed Express Draft, the Purchase Agreement for the property, and other required documents; Pre-Approved Lending User Guide 1

4 Step 7 Step 8 Step 9 Credit union verifies information meets the loan requirements and pays the Dealer; Credit union contacts the member to discuss MRC (Extended Warranty) and, if accepted by the member, includes the cost in the loan transaction (if applicable) and on the Pre- Approved Express Draft Confirmation Receipt. This is also when the credit union will want to arrange with the member how to collect the signatures on the GAP or MRC (Extended Warranty) documents. Credit union books the loan and sends the Pre-Approved Express Draft Confirmation Receipt and, as a best practice, a copy of the completed Express Draft marked Copy (for the site draft) or Void (for the check) to the member. If the member elected Payment Protection, any documents they have not yet received should be delivered at this time. Document Listing LOANLINER DOCUMENT LISTING VERSION FORMAT TYPE 1 MEDIA TYPE DOCUMENT NUMBER STATES USED IN PRE-APPROVED LOAN AND SECURITY AGREEMENT AND TRUTH IN LENDING DISCLOSURE Standard Fixed/Variable Rate E NXX23* All other states plus federally chartered credit unions lending to borrowers in South Carolina FILING COPY Yes FILING STATES Arkansas, Ohio, South Dakota, Wyoming Right to Cure Fixed/Variable Rate E NRC23* Colorado, DC, Kansas, Maine, Massachusetts, Missouri, Nebraska, West Virginia and state chartered credit unions lending to borrowers in South Carolina Florida Fixed/Variable Rate E NFL23* Florida No Iowa Fixed/Variable Rate E NIA23* Iowa No Louisiana Fixed/Variable Rate E NLA23* Louisiana Yes Louisiana New Hampshire Fixed/Variable Rate E NNH23* New Hampshire No Virginia Fixed/Variable Rate E NVA23* Virginia No Wisconsin Fixed/Variable Rate E NWI23* Wisconsin No TRUTH IN LENDING DISCLOSURE (Pre-Approved) Standard Fixed/Variable Rate E NXX33* All states except for credit unions with Virginia N/A N/A credit insurance Florida Fixed/Variable Rate E NFL33* Florida N/A N/A Virginia Fixed/Variable Rate E NVA33* Credit unions with Virginia credit insurance N/A N/A PRE-APPROVED EXPRESS DRAFT Single Security Check Fixed/Variable Rate E NXX93* All States N/A N/A Multiple Security Check Fixed/Variable Rate E NXX91* All States N/A N/A Single Security Check! Fixed/Variable Rate E NXX97* All States N/A N/A Multiple Security Check! Fixed/Variable Rate E NXX95* All States N/A N/A Florida Single Security Check Fixed/Variable Rate E NFL93* Florida N/A N/A Florida Multiple Security Check Fixed/Variable Rate E NFL91* Florida N/A N/A Florida Single Security Check! Fixed/Variable Rate E NFL97* Florida N/A N/A Florida Multiple Security Check! Fixed/Variable Rate E NFL95* Florida N/A N/A Single Security Site Draft Fixed/Variable Rate E NXX73* All States N/A N/A Multiple Security Site Draft Fixed/Variable Rate E NXX71* All States N/A N/A Florida Single Security Site Draft Fixed/Variable Rate E NFL73* Florida N/A N/A Florida Multiple Security Site Draft Fixed/Variable Rate E NFL71* Florida N/A N/A PRE-APPROVED EXPRESS DRAFT CONFIRMATION RECEIPT Credit Insurance Fixed/Variable Rate E NXX83* All States N/A N/A Debt Protection Fixed/Variable Rate E NXX63* All States N/A N/A Florida Credit Insurance Fixed/Variable Rate E NFL83* Florida N/A N/A Florida Debt Protection Fixed/Variable Rate E NFL63* Florida N/A N/A CHECK STOCK Check Stock N/A P JXX92* All States N/A N/A * Document Version! Requires JXX92* 1 Media Type E = Electronic P = Paper Yes Colorado, DC, Nebraska Pre-Approved Lending User Guide 2

5 Differences between the Standard and State Specific Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures Standard This version is used when a state specific version or right to cure version is not required. Right to Cure This version is used when a state specific version is not required but a notice of the borrower s right to cure in default is required. Florida This version is used exclusively for lending in Florida when the lender does not want the transaction to be subject to the Florida Documentary Stamp Tax under Section (1)(a) of the Florida Statues. Iowa Iowa is a right to cure state and has state specific default language. Louisiana Louisiana has state specific security agreement language. New Hampshire New Hampshire law has state specific requirements for car loans which are included in this version. Virginia This version is for Virginia credit unions due to Credit Insurance requirements. Wisconsin Wisconsin has state specific default provisions and security agreement language. Pre-Approved Lending User Guide 3

6 Chapter 2 Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Document Description Electronic format only When Used: Purpose: Document Numbers: How Distributed: Printed Components: State-Specific Versions: This document is used when a borrower has been approved for a closed-end pre-approved loan. The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure must be used in conjunction with A Pre-Approved Express Draft (Site Draft) or a Pre-Approved Express Draft (Check). The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure provides: The disclosures required by Regulation Z; and The contract terms between the credit union and the borrower(s). Truth in Lending disclosures are given in the Fed Box area and need to be completed based on the maximum amount permitted to be borrowed. NXX23* A copy of this document must be given to a borrower (if joint borrowers, only one needs to receive a copy). Part 1 Credit union copy of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Part 2 Borrower copy of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Part 3 Filing copy, if applicable. NOTE: When recording the Filing Copy, also include a copy of the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) as it contains the Borrower(s) signature(s). Right to Cure, Florida, Iowa, Louisiana, New Hampshire, Virginia, and Wisconsin. *Indicates spaceholder for version number Pre-Approved Lending User Guide 4

7 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 1 sample The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure sets forth the terms and conditions of the loan offered and extended by to the borrower(s) identified herein and is comprised of the following documents: (i) a Truth in Lending Disclosure for each available Loan Type; and (ii) a Loan and Security Agreement. FIXED RATE VARIABLE RATE NAME AND ADDRESS STEP RATE DATE 4 BORROWER 1 Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 10 LOAN TYPE TRUTH IN LENDING DISCLOSURE ( 'e' means an estimate) ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments Prepayment: If you pay off early you will not 15 The cost of your credit as a yearly The dollar amount the The amount of credit The amount you will have have to pay a penalty. rate. credit will cost you. provided to you or on paid after you have made Required Deposit: The Annual Percentage your behalf. all payments as scheduled. Rate does not take into account your 11 % $ 12 $ 13 $ required deposit, if any. 17 Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay $ 18 $ 19 $ 20 Late Charge: 21 Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments $ When Payments Are Due $ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: 24 SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE ITEMIZATION OF THE AMOUNT FINANCED ( 'e' means an estimate) Itemization of Amount Financed of 26 Amount Paid on Your Account 27 Prepaid Finance Charge $ $ $ Amounts Paid to Others on Your Behalf: (If an amount is marked with an asterisk (*) we will be retaining a portion of the amount.) $ To Approved and/or Independent Dealer $ To $ To $ One or more additional Truth In Lending Disclosure(s) for other available Loan Types may be included on a following page and shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. To CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 5

8 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. 1. Credit Union Information This space is used to identify the credit union (creditor) as required by Regulation Z, Section (a). Have your data processor set up your credit union s name, address, telephone number and logo to print. 2. Credit Union Name Enter the name of the credit union. 3. Rate Type Enter an X in the check box next to the type of rate you are offering. If, in addition, you are offering a Step rate, enter an X in that check box. For example, if you are offering a Fixed Step Rate, you would check both the Fixed Rate box and the Step Rate box. 4. Date Enter the date you prepared and delivered the document to the borrower(s). 5. Loan Number Enter the loan identification number as defined by the credit union. There is no regulatory requirement for what date this is, however it is intended to be used as a reference as to when the loan documents were provided to the borrower. 6. Express Draft Number Enter an Express Draft Number assigned to this transaction. The Express Draft Number that appears on the Pre-Approved Express Draft (Site Draft) or Pre- Approved Express Draft (Check) needs to match the Express Draft Number that appears on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Truth in Lending Disclosure (Pre-Approved), if used for this loan. The Express Draft Number will be used to track this and other documents that are part of this transaction in your Pre-Approved Express Draft Log as discussed in the Pre-Approved Lending Planning Guide. If a credit union is using LOANLINER Check Stock (JXX92*) with a compatible Check Version of the Express Draft (NXX95* or NXX97*), the Express Draft number, which is supplied by the credit union at the time of the check stock order, will be printed on the LOANLINER Check Stock and be displayed in this location once the Express Draft (Check) is printed on the Check Stock. If a credit union is using their own check stock with a compatible Check version of the Express Draft (NXX91* or NXX93*), the credit union will need to ensure an Express Draft Number of their choosing appears on the Express Draft. If a credit union is using a Site Draft version of Express Draft (NXX71* or NXX73*) they will create a series of unique numbers to pull from and enter onto the Site Draft to ensure no two Express Drafts ever have the same Express Draft Numbers. 7. Account Number Enter the borrower s account number. 8. Group Policy Number Enter your credit union s CUNA Mutual Group Policy Number, often referred to as your Contract Number. 9. Borrower 1 Name and Address / Borrower 2 Name and Address Enter the name and address of each borrower. 10. Loan Type Enter the Loan Type that is represented by this Truth In Lending Disclosure. A Loan Type is an offer that is specific as to the Annual Percentage Rate (APR), term, collateral requirements and any other characteristics of the offer that may differ from other offers. Please refer to the Sample Loans section for an example of how Loan Type can be used. Pre-Approved Lending User Guide 6

9 Page 1 instructions (continued) Truth in Lending Disclosure Section The Truth in Lending Act requires certain disclosures be segregated from other information on a closed-end lending document per Regulation Z, Section (a). The area labeled Truth in Lending Disclosure is referred to as the Fed Box. Regulation Z (Section (c)) requires disclosures for Closed-End loans be based on the best information reasonably available at the time the disclosures are made. When any information needed to make and accurate disclosure is unknown to the credit union, they must make that disclosure based on the best information reasonably available at the time the disclosure is made. Because of the nature of the Pre-Approved Lending program, the Amount Financed, Finance Charge, Total of Payments, and Payment Schedule disclosures fall into this unknown category. Fed Box disclosures are to be made based upon the maximum approved loan amount and labeled as estimates as indicated. Filing Fees may also be listed as an estimate if it is unclear what the final amount of those fees will be. The Truth in Lending Disclosure contains the following items: 11. Annual Percentage Rate Your credit union must complete the Annual Percentage Rate (APR) for the loan requested, pursuant to Regulation Z, Sections (e) and The APR should not be labeled as an estimate due to Regulation Z thresholds which require re-disclosure if the APR changes by more than 1/8 of 1% in either direction. If you have more than one APR, that will be a separate Loan Type. Note: The APR will be the simple interest rate when the only finance charge is interest. If finance charges other than interest are to be included, the APR will be different than the simple interest rate and must be calculated using a calculation device sufficiently sophisticated to correctly compute the correct APR pursuant to Appendix J to Part Examples of finance charges on consumer loans include among other things: a) credit report fees; b) loan processing fees; and c) mandatory GAP coverage. 12. Finance Charge (Labeled with an e ) Your credit union must complete the total finance charge for the loan as required by Regulation Z, Section (d). See also Regulation Z, Section Note: Any prepaid finance charge should be included in this amount (i.e. loan processing fee). However, given the unique aspects of this program, charging a prepaid finance charge could trigger re-disclosure requirements given the potential impact on APR pursuant to Section (f). Contact the LOANLINER Department if you intend to offer a prepaid finance charge and have questions. 13. Amount Financed (Labeled with an e ) As with other Fed Box disclosures, the actual Amount Financed is unknown at the time of disclosure in Pre-Approved Loans and therefore must be estimated. Regulation Z, Section (b) requires that the amount financed be calculated in the following way: a) The pre-approved principal loan amount. Pre-Approved Lending User Guide 7

10 Page 1 instructions (continued) b) Plus other amounts that are financed by the lender and are not part of the finance charge. Level Rate, Monthly Renewable Credit Insurance, and Monthly Renewable Debt Protection are not financed and should not be added when calculating Amount Financed. Single Premium insurance is financed and will be included in this amount. c) Minus any prepaid finance charge. 14. Total of Payments (Labeled with an e ) Your credit union must include the sum of the payments for the loan, Regulation Z, Section (h). The total of payments must equal the sum of the payments reflected in the payment schedule. For example: If the payment schedule contemplates 36 payments of $110 ($100 for Principal and Interest plus $10 for Monthly Renewable Credit Life insurance), the total of payments would show $3, Prepayment Regulation Z, Section (k) requires disclosure of any prepayment penalty. The language in the LOANLINER documents prohibits a prepayment penalty. Pursuant to federal law, federal credit unions cannot charge pre-payment penalties. 16. Required Deposit Per Regulation Z, Section (r), this language is required when the borrower must maintain a deposit as a condition of the loan. 17. Property Insurance If your credit union sells property insurance, you must enter the amount of the insurance premium. The term of the insurance must also be disclosed if it is less than the term of the loan, Regulation Z, Section (n). 18. Filing Fees (Labeled with an e as applicable) A filing fee is not considered a finance charge if the cost is itemized and disclosed, Regulation Z, Section (e). However, any amount charged by your credit union that is in addition to the actual fee charged by the government agency would be considered a finance charge, per Commentary to Regulation Z, Section (e). These fees must be disclosed whether you pass on the cost of filing fees (for example, a lien filing fee) to borrowers, directly or indirectly. These fees must be disclosed even if the borrower pays the fee in cash to the credit union or a third party, such as when the fee is included on the purchase order from the dealer. If the filing fee may vary, disclose the maximum possible filing fee amount and label it with an e for estimate. 19. Non-Filing Insurance (Labeled with an e as applicable) Enter the dollar amount of the non-filing insurance. This insurance premium is used to perfect the lien in lieu of actually filing the security interest, Regulation Z, Section (o). If the non-filing insurance may vary, disclose the maximum possible amount and label it with an e for estimate. 20. Late Charge The late charge is any dollar or percentage charge that may be imposed before maturity due to a late payment per Regulation Z, Section (l). This language must be provided by the credit union and may be printed on the documents. 21. Payment Schedule Enter the number and amount(s), of the payments per Regulation Z, Section (g). You do not have to label any of these with an e for estimate as the entire section is already labeled as an estimate. You may include amounts other than the amount financed and finance charges, such as Voluntary Payment Protection, in the payment amounts. Keep in mind, any additional amounts included in the payment schedule will also end up in the Total of Payments disclosure as the Total of Payments disclosure must equal the sum of all payments listed in the payment schedule. Pre-Approved Lending User Guide 8

11 Page 1 instructions (continued) The final payment amounts and due dates will be communicated to the borrower on the Pre- Approved Express Draft Confirmation Receipt that you must send out once the Pre-Approved Lending transaction is complete. Please review the Sample Loan Scenarios at the end of this user guide for more information. 22. Security The statement Collateral securing other loans with the credit union may also secure this loan must be disclosed as it supports the cross-collateral clause found in the Loan and Security Agreement. The statement You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union discloses that the member s shares/deposits will also be used to secure the loan. The actual Property being purchased and offered as security is described in the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check). 23. Variable Rate The definition of a variable rate loan for closed-end credit is as follows: any loan in which the rate can increase after consummation in a transaction not secured by the consumer s principal dwelling. Step Rate loans, loans where the change in the interest rate has a predetermined timing and rate associated with it such as in Introductory Rate loans, are not considered variable rate by Regulation Z. Step Rate loans are discussed in the sample loan scenarios at the end of this guide. There are many types of variable rate closed-end transactions and they generally fall into one of the following categories: a) Changes that follow an external index such as the Prime Rate, Treasury Bill Rates, Eleventh District Cost of Funds, Treasury Securities, etc. These are indexes that are set up by an agency or group other than the credit union and are generally published in The Wall Street Journal, the financial pages of local newspapers, the Federal Reserve Statistical Release and Federal Reserve Board Bulletin. b) Changes that follow an external index that are beyond the control of the credit union such as the rate charged by another local financial institution. An example would be the fixed rate charged by XYZ Financial for 30-year fixed rate mortgages. These rates generally are not officially published like the indexes described above, but they are beyond the control of the credit union. c) Changes that follow an internal index of the credit union. An example would be the credit union s rate on 6-month certificates or the dividend rate paid on share accounts. d) Changes in the rate that are based entirely on the discretion of the credit union s board of directors. At any particular time the board of directors can decide that the interest rate will change on existing loans. e) Changes that are tied to some event or occurrence. Common occurrences in credit union loans which trigger an interest rate increase include: 1) when an employee leaves the employment of the credit union, 2) discontinuing payroll deduction or automatic payment, 3) failure to maintain minimum account balances, or 4) failure to maintain certain services. Pre-Approved Lending User Guide 9

12 Page 1 instructions (continued) REQUIRED DISCLOSURES FOR VARIABLE RATE LOANS The following disclosures must appear in this section of the document: The Circumstances Under Which the Rate May Increase SAMPLE LANGUAGE: The APR may increase during the term of this transaction if: [the prime interest rate of (creditor) increases.] [the balance in your deposit account falls below $.] [you terminate your employment with (employer).] Any Limitation on the Increase SAMPLE LANGUAGE: [The interest rate will not increase above %.] [The maximum interest rate increase at one time will be %.] [The rate will not increase more than once every (time period).] The Effect of an Increase SAMPLE LANGUAGE: Any increase will take the form of: [higher payment amounts.] [more payments of the same amount.] [a larger amount due at maturity.] An Example of the Payment Terms that would Result from an Increase The example must be either a standard example that illustrates the terms and conditions of the type of credit offered by the credit union or it may directly reflect the terms and conditions of the particular transaction. Additional Variable Rate Information In addition to the Truth in Lending Disclosures, you must also explain any other terms of the variable rate which are directly related. These include: the margin, interest rate floors, rounding of index values or payments. 24. Contract Reference This is a statement per Regulation Z, Section (p) which explains the consumer should refer to the appropriate contract documents (Loan and Security Agreement) for information about nonpayment, default and prepayment penalties and rebates. Itemization of Amount Financed Section 25. Itemization of Amount Financed This is the amount shown in the Amount Financed disclosure. This is required per Regulation Z, Section (c). This amount must be disclosed in its estimated amount for Truth in Lending disclosure purposes on the Note, however once the loan terms are finalized, the Disbursement Details of the Pre-Approved Express Draft Confirmation Receipt will convey the final amounts to the borrower(s). 26. Amount Paid on Your Account This is the amount your credit union will use to pay off an existing loan balance connected to the Pre-Approved Loan. This amount would include any payment of an existing loan balance (principal and accrued interest) on a prior loan, such as when a member uses property with existing credit union financing as a trade-in. Only amounts paid to loan accounts should be shown here, per Regulation Z, Section (c)(1)(ii). Pre-Approved Lending User Guide 10

13 Page 1 instructions (continued) 27. Prepaid Finance Charge Prepaid finance charges include any portion of the finance charge paid prior to or at closing or settlement. They may be paid in cash or financed and withheld from the proceeds. Some common examples include: service fees, loan fees, loan guarantee insurance, credit report fees, residual value insurance and mandatory GAP coverage. Prepaid finance charges are subtracted from the principal loan amount and added to the finance charge for disclosure purposes. This will result in an APR that is different than the contractual interest rate. 28. Amount Paid to Others on Your Behalf These boxes are provided to disclose amounts paid to other persons by the credit union on the borrower s behalf. These persons must be identified by name with the exception of payments to government agencies, public officials, credit report agencies, appraisers and insurance companies may be generically identified with phrases like credit bureau or state agency. Since the Pre-Approved Lending program is designed with the option to only allow purchase of property from an Approved and/or Independent Dealer, this phrase has been pre-filled into the first line. The To Approved and/or Independent Dealer amount is the portion of the Amount financed which the borrower may spend at the dealer. However any other amount financed that is paid to someone other than the dealer must be listed on one of the other blank spaces with that person properly identified. If the loan transaction will include the payoff of a loan with another financial institution, such as when a member uses property with existing financing as a trade-in, you would list the estimated loan pay-off amount on its own line, if the credit union is sending a the pay-off to the financial institution. If the payoff of the other financial institutions trade-in collateralized loan is being handled by the dealer, you may include the pay-off loan amount with the other amounts being paid to the Dealer on your behalf. NOTE: Voluntary Payment Protection need not be disclosed in this section unless it is financed Single Premium Coverage in which case you should contact LOANLINER for more information. This section includes a sentence which reads as follows: If an amount is marked with an asterisk(*), we will be retaining a portion of the amount. An asterisk should be used whenever the borrower is financing a product for which the credit union imposes an upcharge. Typically, if the credit union sells mechanical repair coverage (MRC) or extended warranties and retains a portion of the amount, then an asterisk will be needed. An example would be if the borrower purchased an extended warranty from the credit union. The warranty may cost the credit union $300, but the credit union charges the borrower $400. The $100 difference is an upcharge on this product. The credit union needs to disclose that it is retaining a portion of the $400 that is being charged to the borrower. 29. Truth in Lending Disclosure This statement refers to a standalone Truth in Lending Disclosure in the event an additional Loan Type is offered to the member. Pre-Approved Lending User Guide 11

14 Page 2 sample Credit Union Loan No. Acct. No. Borrower(s) LOAN AND SECURITY AGREEMENT 30 In this Loan and Security Agreement ("Agreement"), all references to "Credit Union," "we," "our," or "us," mean the Credit Union whose name appears above and anyone to whom the Credit Union assigns or transfers this Agreement. All references to "you," "your," or "borrower" mean each person who signs the Pre-Approved Express Draft ("Express Draft") as a borrower. All references to the "Disclosure Statement" shall refer to the Truth in Lending Disclosure(s) provided as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. All references to "Loan" shall mean, the amount actually borrowed pursuant to this Agreement, including without limitation any fees financed with the proceeds thereof and/or any amounts paid to others on your behalf or paid to us to satisfy a debt on your account. By signing the Express Draft (which is incorporated herein by reference) you acknowledge that you have received and read in full the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Express Draft and agree to the terms, obligations and conditions set forth in this Agreement and the Express Draft SELECTION OF LOAN TYPE - You acknowledge and agree that we have provided a Disclosure Statement setting forth the estimated terms of each Loan Type being offered to you by the Credit Union. The Loan Type is specified on the Disclosure Statement(s) provided in connection herewith. You agree to fill-in the Loan Type you have selected on the Express Draft in accordance with the instructions set forth therein. You further acknowledge and agree that the terms of the Loan will correspond to the terms of the Loan Type you select but that certain terms may vary depending on the actual amount and date of the Loan PROMISE TO PAY - You promise to pay to the Credit Union the principal amount of the Loan plus interest on the unpaid balance until the entire outstanding balance plus interest has been repaid. The interest rate(s) applicable to each available Loan Type are set forth below. Interest will begin to accrue on the date we pay the Express Draft. Loan Type: The interest rate will be % per year Variable Rate: Loan Type: The interest rate will be % per year Variable Rate: COLLECTION COSTS PAYMENTS - You promise to make regular payments of principal and interest in accordance with the payment schedule set forth on the Pre-Approved Express Draft Confirmation Receipt (the "Confirmation") you will receive shortly after your purchase. You acknowledge and agree that the amount of the payments and the due dates of such payments may vary from those disclosed in the Disclosure Statement depending on the amount and date of the Loan. You may prepay any amount without penalty at any time. If you prepay any part of what you owe, you are still required to make the regularly scheduled payments, unless we have agreed to a change in the payment schedule. Because this is a simple interest loan, if you do not make payments when due, your final payment may be more or less than the amount of the final payment disclosed to you. If you elect voluntary payment protection, we will either include the premium or program fees in your payments or extend the term of your Loan. If the term is extended, you will be required to make additional payments of the scheduled amount, until what you owe has been paid. You promise to make all payments in a manner and at a location acceptable to us. Unless otherwise required by law, payments will be applied to amounts owed in the manner we choose LATE CHARGE - If you are late in making a payment, you promise to pay the late charge shown in the Disclosure Statement. If no late charge is disclosed on the Disclosure Statement, none will be charged TRADE IN - If you are trading in a vehicle or other property as part of the purchase transaction associated with this Loan, we have calculated the approved loan amount based on this fact. Thus, if you decide not to trade in your vehicle or other property as originally agreed, this Agreement is void SECURITY AGREEMENT. a. THE SECURITY FOR THE LOAN - You give us a security interest in the property described in the Security Offered section of the Express Draft ("Property"). The security interest you give includes all accessions (things that are attached to or installed in the Property now or in the future). The security interest also includes any replacements for the Property which you buy within 10 days of the Loan and any extensions, renewals or refinancings of the Loan. It also includes any money you receive from selling the Property or from insurance you have on the Property. If the value of the Property declines, you agree to give us more property as security if asked to do so. In addition to the Property, property securing other loans you have with us also secures this Loan, unless the property is a principal dwelling. In addition to your pledge of shares, we may also have what is known as a statutory lien on all individual and joint accounts you have with us. A statutory lien means we have the right under federal law and many state laws to claim an interest in your accounts. We can enforce a statutory lien against your shares and dividends, and if any, interest and deposits, in all individual and joint accounts you have with us to satisfy any outstanding financial obligation that is due and payable to us. We may exercise CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 12

15 Page 2 instructions Loan and Security Agreement Section 30. Definition of Terms This paragraph defines the various terms used throughout the document including Agreement, Credit Union, you, Express Draft, and Disclosure Statement. It also details that by the borrower signing the Express Draft as defined, the borrower acknowledges receipt of this document and the Express Draft document as well as agreeing to the terms of both documents. 31. Selection of Loan Type This paragraph allows you to offer more than one Loan Type (see Pre-Approved Lending Planning Guide for more details on Loan Type). This paragraph clarifies that the borrower is required to properly complete the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) with the name of the Loan Type they have selected. It also captures their acknowledgement to the fact they were provided a Truth in Lending Disclosure for each Loan Type offered to them as part of the pre-approved loan transaction. 32. Promise to Pay This is the contractual promise to repay the principal loan amount plus interest. Your credit union must insert each Loan Type offered and corresponding interest rate as disclosed in the Truth In Lending Disclosure(s). If only offering one Loan Type, place N/A in the second line. If a loan type is fixed rate, enter the interest rate and add a period. to the end of the standard language The interest rate will be % per year. If a loan type is variable rate, variable step rate, or fixed step rate, in addition to listing the appropriate interest rate, additional language must be populated to the right of and below the standard language The interest rate will be % per year. Please see the Sample Loan Scenarios at the end of the user guide for more details. 33. Collection Costs Any collection costs your credit union wants to impose that are permissible under state law must be disclosed here. This language may be imprinted. 34. Payments This is the borrower s promise to make payments as specified in the Pre-Approved Express Draft Confirmation Receipt they will receive shortly after purchase. It also discloses to the borrower that there is no prepayment penalty and if payments are not made as scheduled, the final payment may be more or less than the final payment that was disclosed. Also, if Voluntary Payment Protection is elected, the premium or program fees may be included in the payment otherwise the loan term will be extended. 35. Late Charge This describes that if your borrower is late in making a payment, they promise to pay the late charge shown in the Truth in Lending Disclosure that corresponds to the Loan Type they have selected, if a late charge is disclosed. 36. Trade In This clarifies that the LOANLINER Closed-End Pre-Approved Lending Documents are void if a borrower decides not to a trade-in after telling the credit union they would. This is because when a credit union knows that a trade-in will be involved in a pre-approved loan transaction ahead of time, certain disclosures must be made in the Fed Box on page 1 of the Note and on any associated Truth in Lending disclosures. Pre-Approved Lending User Guide 13

16 Page 2 instructions (continued) 37. Security Agreement a) The Security for the Loan This paragraph grants your credit union a security interest in the property described on the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check). It also permits your credit union a security interest in accessions, proceeds of the collateral, and allows you to obtain additional collateral if the market value of the collateral declines, among other things. This paragraph also discusses specific pledge of collateral, general pledge of shares, and statutory lien. NOTE: For state chartered credit unions located in states where statutory liens are not allowed, however the general pledge of shares and dividends would apply. Pre-Approved Lending User Guide 14

17 Page 3 sample Credit Union Loan No. Acct. No. Borrower(s) LOAN AND SECURITY AGREEMENT (continued) our right to enforce this lien without further notice to you, to the extent permitted by law. You pledge as security for this Loan all shares and dividends and, if any, all deposits and interest in all joint and individual accounts you have with the Credit Union now and in the future. The statutory lien and/or your pledge will allow us to apply the funds in your account(s) to what you owe when you are in default. The statutory lien and your pledge do not apply to any Individual Retirement Account or any other account that would lose special tax treatment under state or federal law if given as security as well as any amounts protected by law. b. WHAT THE SECURITY INTEREST COVERS/CROSS COLLATERAL PROVISIONS - Our security interest described in section 7.a. of this Agreement secures the Loan and any extensions, renewals, modifications or refinancings of the Loan. The security interest also secures any other loans, including any credit card loan, you have now or receive in the future from us and any other amounts you owe us for any reason now or in the future, except any loan secured by your principal dwelling. c. OWNERSHIP OF THE PROPERTY - You promise that you own the Property or, if this Loan is to buy the Property, you promise you will use the Loan proceeds for that purpose. You promise that no one else has any interest in or claim against the Property that you have not already told us about. You promise not to sell or lease the Property or to use it as security for a loan with another creditor until the Loan is repaid. You promise you will allow no other security interest or lien to attach to the Property either by your actions, inactions, or by operation of law. d. PROTECTING THE SECURITY INTEREST - If your state issues a title for the Property, you promise to have our security interest shown on the title. We may have to file what is called a financing statement or some other document or instrument to protect our security interest from the claims of others. You irrevocably authorize us to execute (on your behalf and in a form satisfactory to us), if applicable, and file one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code (UCC) or any other document or instrument pursuant to applicable state law. You promise to do whatever else we think is necessary to protect our security interest in the Property. You also promise to pay all costs, including but not limited to any attorney fees, we incur in protecting our security interest and rights in the Property, to the extent permitted by applicable law. e. USE OF PROPERTY - Until the Loan has been paid off, you promise you will: (1) use the Property carefully and keep it in working order and in good repair; (2) obtain our written permission before making major changes to the Property or changing the address where the Property is kept; (3) inform us in writing before changing your address; (4) allow us to inspect the Property; (5) promptly notify us if the Property is damaged, stolen or abused; (6) not use the Property for any unlawful purpose; and (7) not retitle the Property in another state without telling us. f. PROPERTY INSURANCE, TAXES AND FEES - You promise to pay all taxes and fees (e.g. registration fees) due on the Property. You also promise to keep the Property insured against loss and damage in the amount and with the coverages we reasonably require from an insurance company that is acceptable to us. You may provide the property insurance through a policy you already have, or through a policy you get and pay for. You promise to make the insurance policy payable to us and to deliver the policy or proof of coverage to us if asked to do so. If you cancel your insurance and get a refund, we have a right to the refund. If the Property is lost or damaged, we can use the insurance settlement to repair the Property or apply it towards what you owe in our sole discretion. You authorize us to endorse any draft or check that may be payable to you in order for us to collect any refund or benefits due under your insurance policy. If you do not pay the taxes or fees on the Property when due or keep it insured, we may pay these obligations, but we are not required to do so. Any money we spend for taxes, fees or insurance will be added to the unpaid balance of the Loan and you will pay interest on those amounts at the same rate you agreed to pay on the Loan. We may receive payments in connection with the insurance from a company which provides the insurance. We may monitor our loans for the purpose of determining whether you and other borrowers have complied with the insurance requirements of our loan agreements or may engage others to do so. The insurance charge added to the Loan may include (1) the insurance company's payments to us and (2) the cost of determining compliance with the insurance requirements. If we add amounts for taxes, fees or insurance to the unpaid balance of the Loan, we may increase your payments to pay the amount added within the term of the insurance or term of the Loan. g. INSURANCE NOTICE - If you do not purchase the required property insurance, the insurance we may purchase and charge you for will cover only our interest in the Property. The premium for this insurance may be higher because the insurance company may have given us the right to purchase insurance after uninsured collateral is lost or damaged. The insurance will not include liability insurance coverage and will not satisfy any state financial responsibility or no fault laws DEFAULT - You will be in default under this Agreement if you do not make a payment of the amount required on or before the date it is due. You will be in default if you break any other promise you made under this Agreement. You will be in default if you die, file for bankruptcy, become insolvent (that is, unable to pay your bills and loans as they become due), or if you made any false or misleading statements in your loan application. You will also be in default if something happens that we believe may seriously affect your ability to repay what you owe under this Agreement or if you are in default under any other agreement you have with us. You will be in default if any Property you have given us as security is repossessed by someone else, seized under a forfeiture or similar law, or if anything else happens that significantly affects the value of the Property or our security interest in it ACTIONS AFTER DEFAULT - When you are in default, we may demand immediate payment of the entire unpaid balance of the Loan. You waive any right you have to receive demand for payment, notice of intent to demand immediate payment and notice of demand for immediate payment. If we demand immediate payment, you will continue to pay interest at the rate provided for in this Agreement, until what you owe has been fully repaid. We will also apply against what you owe any shares and/or deposits given as security under this Agreement. We may also exercise any other rights given by law when you are in default. When you are in default, we may also take possession of the Property. You agree the Credit Union has the right to take possession of the Property without judicial process if this can be done without breach of the peace. If we ask, you promise to deliver the Property at a time and place we choose. You agree that we may obtain a key or other device necessary to unlock and operate the Property when you are in default. We will not be responsible for any other property not covered by this Agreement that you leave inside the Property or that is attached to the Property. We will try to return that property to you or make it available for you to claim. After we have possession of the Property, we can sell it and apply the money to any amounts you owe us. We will give you notice of any public disposition or the date after which a private disposition will be held. Our expenses for taking possession of and selling the Property will be deducted from the money received from the sale. Those costs may include the cost of storing the Property, preparing it for sale and attorneys fees to the extent permitted under state law or awarded under the Bankruptcy Code. If you have agreed to pay the Loan, you must pay any amount that remains unpaid after the sale money has been applied to the unpaid balance of the Loan and to what you owe under this Agreement. You agree to pay interest on that amount at the same rate as the Loan until that amount has been paid EACH PERSON RESPONSIBLE - Each person who signs, or otherwise authenticates, the Express Draft as a borrower will be individually and jointly responsible for paying the entire amount owed under this Agreement. This means we can enforce our rights against any one of you individually or against all of you together DELAY IN ENFORCING RIGHTS - We can delay enforcing any of our rights under this Agreement any number of times without losing the ability to exercise our rights later. We can enforce this Agreement against your heirs or legal representatives CONTINUED EFFECTIVENESS - If any term of this Agreement is determined by a court to be unenforceable, the other terms will remain in full force and effect NOTICES - Notices will be sent to you at the most recent address you have given us in writing. Notice to any one of you will be notice to all USE OF LOAN - You promise to use your Loan for consumer (personal, family or household) purposes, unless the Credit Union gives you written permission to use the Loan also for agricultural or commercial purposes. CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 15

18 Page 3 instructions b) What the Security Interest Covers/Cross Collateral Provisions This paragraph states that the security interest in the property described on the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) secures the Loan. It also states that the security for the loan will also be security for certain other debts with the credit union, now and in the future. c) Ownership of the Property This clause details the borrower s promises as they relate to the ownership of the property. The borrower(s) promise that they own or will use the loan proceeds to purchase the collateral shown in the Security Offered Section of the Pre-Approved Express Draft. They further promise that they will not sell or lease the collateral or give anyone else a security interest in it until the debt has been paid, nor will they allow any other security interest or lien to be attached to the Property. d) Protecting the Security Interest This paragraph requires the borrower to promise to assist the credit union in any way to protect the security interest. It also requires the borrower to identify your credit union as lien holder on the title. e) Use of Property This paragraph outlines the responsibilities of the borrower to maintain the collateral. f) Property Insurance, Taxes and Fees This paragraph contains information about taxes, fees and property insurance on the collateral. The borrower is required to pay all taxes and fees plus insure the property and name the credit union as loss payee on an insurance policy. Any amounts spent by your credit union on taxes, fees or property insurance can be added to the loan balance and be subject to interest at the same rate as the original loan. Your credit union has the option of increasing the borrower s payment to the extent necessary to repay the loan in the original scheduled term. g) Insurance Notice This paragraph states that if your borrower does not purchase property insurance, your credit union can purchase and charge your borrower for insurance that covers only your credit union s interest in the property. 38. Default This paragraph describes the events that will result in default. Be sure to read this paragraph to determine whether a loan may be deemed to be in default. The default language will vary by version, due to state law requirements. Be sure to read this paragraph before deciding whether you can call a loan in default. If you have questions, consult your legal counsel. 39. Actions After Default This section includes a statement allowing the credit union to accelerate the unpaid balance of the loan in the event of default. If this paragraph gives the borrower a right to cure the default, be sure you comply with the applicable state law on timing and content of the Right to Cure Notice. When a debt is accelerated, interest will continue to accrue on the unpaid balance at the same rate. Lastly, this section allows your credit union to exercise any other rights given by law when your borrower is in default. 40. Each Person Responsible This paragraph explains that each borrower who signs, or otherwise authenticates, the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) will be held individually and jointly responsible for paying the entire amount owed under the Agreement. Pre-Approved Lending User Guide 16

19 Page 3 instructions (continued) 41. Delay in Enforcing Rights This statement provides that your credit union can delay enforcing any rights under the Agreement without losing the ability to exercise those rights later. It also permits your credit union to enforce the Agreement against a borrower s heirs or legal representatives. 42. Continued Effectiveness This statement provides that if a court finds any part of the Agreement unenforceable, that the remainder of the Agreement will remain in effect. 43. Notices This paragraph states that your credit union will send notices to the most recent address your borrower gave your credit union in writing and that notice to one is notice to all. 44. Use of Loan This paragraph was added to the Agreement due to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) which provides certain protections against court-ordered reduction (cramdown) of a secured balance due on purchase-money secured debt acquired for personal, family or household purposes. This provision will prove that the property was purchased by the borrower for consumer purposes. Pre-Approved Lending User Guide 17

20 Page 4 sample Credit Union Loan No. Acct. No. Borrower(s) LOAN AND SECURITY AGREEMENT (continued) NO ORAL AGREEMENTS - THIS AGREEMENT CONSTITUTES A "WRITTEN LOAN AGREEMENT" PURSUANT TO SECTION OF THE TEXAS BUSINESS AND COMMERCE CODE, IF SUCH SECTION APPLIES. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES NOTICE TO NORTH DAKOTA BORROWERS PURCHASING A MOTOR VEHICLE - THE MOTOR VEHICLE IN THIS TRANSACTION MAY BE SUBJECT TO REPOSSESSION. IF IT IS REPOSSESSED AND SOLD TO SOMEONE ELSE, AND ALL AMOUNTS DUE TO THE SECURED PARTY ARE NOT RECEIVED IN THAT SALE, YOU MAY HAVE TO PAY THE DIFFERENCE NOTICE FOR ARIZONA OWNERS OF PROPERTY - It is unlawful for you to fail to return a motor vehicle that is subject to a security interest, within thirty days after you have received notice of default. The notice will be mailed to the address you gave us. It is your responsibility to notify us if your address changes. The maximum penalty for unlawful failure to return a motor vehicle is one year in prison and/or a fine of $150, NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER OTHER PROVISIONS - CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 18

21 Page 4 instructions 45. No Oral Agreements This paragraph confirms for Texas transactions that the rights and obligations of the borrower and the credit union shall be determined solely from the written Loan Agreement and any prior oral agreements between the credit union and the borrower are superseded by the Loan Agreement. 46. Notice to North Dakota Borrowers Purchasing a Motor Vehicle This paragraph states that a motor vehicle may be subject to repossession for North Dakota borrowers and provides for amounts that may still be due after repossession and sale of the vehicle. 47. Notice for Arizona Owners of Property This paragraph describes responsibilities for Arizona owners of property when in default on a motor vehicle. 48. Consumers Claims and Defenses Notice The Consumers Claims and Defenses Notice is required when the credit union has a business relationship with the seller of goods. Given the nature of the Pre-Approved Loan program, the credit union will have, at the very least, an indirect business relationship with the Dealer. Thus the Consumers Claims and Defenses Notice will apply. 49. Other Provisions This section allows your credit union some flexibility by adding special provisions such as mandatory VSI coverage or default rate language. Pre-Approved Lending User Guide 19

22 Page 5 sample 50 Credit Union 51 Date 52 Loan No. 53 NAME AND ADDRESS BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 54 Year Make Model Type VIN 55 Lien Amount $ Value $ $ $ $ $ LOAN AND SECURITY AGREEMENT In this Loan and Security Agreement ("Agreement"), all references to "Credit Union," "we," "our," or "us," mean the Credit Union whose name appears above and anyone to whom the Credit Union assigns or transfers this Agreement. All references to "you," "your," or "borrower" mean each person who signs the Pre-Approved Express Draft ("Express Draft") as a borrower. All references to the "Disclosure Statement" shall refer to the Truth in Lending Disclosure(s) provided as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. All references to "Loan" shall mean, the amount actually borrowed pursuant to this Agreement, including without limitation any fees financed with the proceeds thereof and/or any amounts paid to others on your behalf or paid to us to satisfy a debt on your account. By signing the Express Draft (which is incorporated herein by reference) you acknowledge that you have received and read in full the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Express Draft and agree to the terms, obligations and conditions set forth in this Agreement and the Express Draft. 1. SELECTION OF LOAN TYPE - You acknowledge and agree that we have provided a Disclosure Statement setting forth the estimated terms of each Loan Type being offered to you by the Credit Union. The Loan Type is specified on the Disclosure Statement(s) provided in connection herewith. You agree to fill-in the Loan Type you have selected on the Express Draft in accordance with the instructions set forth therein. You further acknowledge and agree that the terms of the Loan will correspond to the terms of the Loan Type you select but that certain terms may vary depending on the actual amount and date of the Loan. 2. PROMISE TO PAY - You promise to pay to the Credit Union the principal amount of the Loan plus interest on the unpaid balance until the entire outstanding balance plus interest has been repaid. The interest rate(s) applicable to each available Loan Type are set forth below. Interest will begin to accrue on the date we pay the Express Draft. Loan Type: The interest rate is % per year Variable Rate: Loan Type: The interest rate is % per year Variable Rate: 3. COLLECTION COSTS - 4. PAYMENTS - You promise to make regular payments of principal and interest in accordance with the payment schedule set forth on the Pre-Approved Express Draft Confirmation Receipt (the "Confirmation") you will receive shortly after your purchase. You acknowledge and agree that the amount of the payments and the due dates of such payments may vary from those disclosed in the Disclosure Statement depending on the amount and date of the Loan. You may prepay any amount without penalty at any time. If you prepay any part of what you owe, you are still required to make the regularly scheduled payments, unless we have agreed to a change in the payment schedule. Because this is a simple interest loan, if you do not make payments when due, your final payment may be more or less than the amount of the final payment disclosed to you. If you elect voluntary payment protection, we will either include the premium or program fees in your payments or extend the term of your Loan. If the term is extended, you will be required to make additional payments of the scheduled amount, until what you owe has been paid. You promise to make all payments in a manner and at a location acceptable to us. Unless otherwise required by law, payments will be applied to amounts owed in the manner we choose. 5. LATE CHARGE - If you are late in making a payment, you promise to pay the late charge shown in the Disclosure Statement. If no late charge is disclosed on the Disclosure Statement, none will be charged. 6. TRADE IN - If you are trading in a vehicle or other property as part of the purchase transaction associated with this Loan, we have calculated the approved loan amount based on this fact. Thus, if you decide not to trade in your vehicle or other property as originally agreed, this Agreement is void. 7. SECURITY AGREEMENT. a. THE SECURITY FOR THE LOAN - You give us a security interest in the property described in the Security Offered section of the Express Draft ("Property"). The security interest you give includes all accessions (things that are attached to or installed in the Property now or in the future). The security interest also includes any replacements for the Property which you buy within 10 days of the Loan and any extensions, renewals or refinancings of the Loan. It also includes any money you receive from selling the Property or from insurance you have on the Property. If the value of the Property declines, you agree to give us more property as security if asked to do so. In addition to the Property, property securing other loans you have with us also secures this Loan, unless the property is a principal dwelling. In addition to your pledge of shares, we may also have what is known as a statutory lien on all individual and joint accounts you have with us. A statutory lien means we have the right under federal law and many state laws to claim an interest in your accounts. We can enforce a statutory lien against your shares and dividends, and if any, interest and deposits, in all individual and joint accounts you have with us to satisfy any outstanding financial obligation that is due and payable to us. We may exercise our right to enforce this lien without further notice to you, to the extent permitted by law. You pledge as security for this Loan all shares and dividends and, if any, all deposits and interest in all joint and individual CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Note: Page 2 of the Filing Copy of the Loan and Security Agreement is not shown, please refer to NXX235 pages 3 and 4 for sample language. Pre-Approved Lending User Guide 20

23 Page 5 instructions Filing Copy of Loan and Security Agreement This Filing Copy of the Loan and Security Agreement is provided for credit unions that need to send in a copy of the Loan and Security Agreement when filing their lien. When submitting the Filing Copy to a government agency for lien recording, also include a copy of the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) as it contains the Borrower(s) signature(s) agreeing to the terms of the Security Agreement. Keep in mind the Filing Copy cannot be completed until the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check) which provides the detailed information about the final loan term and property has been completed and returned to the credit union. 50. Credit Union Name and Address Ensure that your credit union s name and address print into this section. 51. Date Enter the date you prepared the filing copy. 52. Loan Number Enter the loan identification number as defined by the credit union. 53. Borrower 1 Name and Address / Borrower 2 Name and Address Enter the name and address of each borrower. 54. Security Offered Enter all property information including Year, Make, Model, Type and VIN or Identification Number. Be certain to verify the accuracy of the VIN or Identification Number. 55. Lien Amount For Colorado Filing Copy ONLY Enter dollar amount of lien. The instructions for the remaining sections of the Filing Copy of the Loan and Security Agreement are identical to the Loan and Security Agreement instructions on the previous pages. Please refer to those pages for additional information. Pre-Approved Lending User Guide 21

24 Chapter 3 Truth in Lending Disclosure (Pre-Approved) Document Description Electronic format only When Used: Purpose: Document Numbers: How Distributed: Printed Components: State-Specific Versions: This document must be used when a second Loan Type is offered to the borrower under the Closed-End Pre-Approved Lending Program. The Truth in Lending Disclosure provides the disclosures required by Regulation Z for a second Loan Type. NXX33* A copy of this document must be given to a borrower (if joint borrowers, only one needs to receive a copy). Part 1 Credit Union copy of the Truth in Lending Disclosure (Pre- Approved) Part 2 Borrower copy of the Truth in Lending Disclosure (Pre- Approved) Florida and Virginia *Indicates spaceholder for version number Pre-Approved Lending User Guide 22

25 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 1 sample FIXED RATE VARIABLE RATE NAME AND ADDRESS STEP RATE DATE 4 BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Truth in Lending Disclosure (Pre-Approved) LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER LOAN TYPE TRUTH IN LENDING DISCLOSURE ( 'e' means an estimate) ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments 15 Prepayment: If you pay off early you will not The cost of your credit as a yearly The dollar amount the The amount of credit The amount you will have have to pay a penalty. rate. credit will cost you. provided to you or on paid after you have made Required Deposit: The Annual Percentage your behalf. all payments as scheduled. 16 Rate does not take into account your 11 % $ 12 $ 13 $ 14 required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance 17 union. If you get the insurance from us, you will pay $ 18 $ 19 $ Late Charge: Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments $ When Payments Are Due $ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: 24 SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. 25 This document shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2011, 13 All Rights Reserved NXX334-e Pre-Approved Lending User Guide 23

26 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. Note: Instructions for the Truth in Lending Disclosure (Pre-Approved) are identical to instructions 1 and 3-24 of the previously described Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. 25. Cross-Reference Statement This statement incorporates this Truth in Lending Disclosure into the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. Pre-Approved Lending User Guide 24

27 Chapter 4 Pre-Approved Express Draft (Site Draft) Document Description Electronic format only When Used: Purpose: Document Numbers: How Distributed: This document is used after a borrower has been approved for a Pre- Approved Loan. A Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and any additional Truth in Lending Disclosure (Pre- Approved) will also need to be completed prior to the Pre-Approved Express Draft (Site Draft). The Pre-Approved Express Draft (Site Draft) must be used in conjunction with other required Pre-Approved Lending documents. This document allows you to pre-approve borrowers who want to shop for/ purchase a property that can be titled such as a car, truck, boat, or ATV. The borrower(s) take the Pre-Approved Express Draft (Site Draft) to the dealership so that once the borrower(s) and Dealer have negotiated the purchase, the borrower(s) and Dealer can complete and sign the Pre- Approved Express Draft (Site Draft), agreeing to the terms of the loan. The Dealer must present the Pre-Approved Express Draft (Site Draft) to you for payment rather than deposit it directly at their financial institution. If you want the Dealer to be able to directly deposit a check, the Pre-Approved Express Draft (Check) option as described in this User Guide may better suit your needs. This is the only document that the member needs to take to the dealer. Once processed by the credit union, it becomes part of the note and provides the security information for the loan. NXX71* 1-3 pieces of property (shown below) NXX73* 1 piece of property only Distribution by Credit Union to Borrower(s) at time of Preapproval: This document must be given to the borrower(s). Distribution by Dealer to Credit Union after document completion: Once the borrower(s) and the Dealer have reviewed, completed and signed the Pre-Approved Express Draft (Site Draft), the Dealer needs to make a copy of the completed original for themselves. The original should be submitted by the Dealer to the credit union along with any information detailed in the Instructions to Dealer section of the Pre- Approved Express Draft (Site Draft) so the Dealer can receive payment. The credit union should put these documents in the member s loan file (scan) with other Pre-Approved Lending documentation. Distribution by Credit Union to Borrower(s) at time of Loan Completion: While a best practice to also send a copy of the completed Pre- Approved Express Draft (Site Draft) with the Pre-Approved Express Draft Confirmation Receipt once the credit union has finalized the loan transaction, it is not necessary. State-Specific Versions: Florida *Indicates spaceholder for version number Pre-Approved Lending User Guide 25

28 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 1 sample 1 2 ACCOUNT NUMBER 3 CREDIT UNION CONTACT CREDIT UNION TELEPHONE CREDIT UNION FAX 4 5 Pre-Approved Express Draft (Site Draft) BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 6 EXPRESS DRAFT NUMBER 7 TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: i) 8 ii) B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: 9 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* 3 Give the completed Express Draft to Dealer. 10 *See page 2 for additional Dealer instructions THIS PRE-APPROVED EXPRESS DRAFT WILL NOT BE PAID UNLESS ALL INFORMATION IS COMPLETE. Loan Type: 12 Approved Limit: $ 13 Date Issued: 14 Void After: will Pay to: Credit Union Dealer $ Amount in Numbers Dollars, subject to final settlement Amount in Words Security Offered: 20 SIGNATURES By signing or otherwise authenticating, all parties agree to the terms and conditions of this Express Draft including those on page 2. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Borrower 1 Signature X Year Make Model Type VIN / ID # (Seal) Date 21 Type or Print Name of Authorized Representativeof Dealer Phone Number Borrower 2 Signature X (Seal) Date Signature of Authorized Representative of Dealer 22 X (Seal) Date CUNA Mutual Group 2011, 13 All Rights Reserved Page 1 of 2 NXX710-e Pre-Approved Lending User Guide 26

29 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. 1. Credit Union Information This space is used to identify the credit union (creditor) as required by Regulation Z, Section (a). If your credit union s name, address, telephone number and logo to print were not imprinted by LOANLINER, enter the applicable information here. 2. Borrower Account Number Enter the borrower s account number. 3. Credit Union Contact Enter the name of the person or department that the Dealer or the borrower(s) should contact at the credit union if they have any questions. 4. Credit Union Telephone Enter the telephone number of the Credit Union Contact. 5. Credit Union Fax Enter the fax number the Dealer may use to send all required documents back to the credit union. 6. Express Draft Number Enter an Express Draft Number assigned to this transaction. If a credit union is using the NXX95* or NXX97*, this Express Draft number has been supplied on the JXX92* check stock. If a credit union is using the NXX71* or NXX73* they can create a series of unique numbers to pull from so that no two Express Draft Numbers are ever the same. If a credit union has purchased the NXX91* or NXX93*, either option may apply depending on the credit union s check stock. The Express Draft Number that appears on the Pre-Approved Express Draft (Site Draft) needs to match the Express Draft Number that appears on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure as well as any additional Truth in Lending Disclosure (Pre-Approved) used as part of this loan. The Express Draft Number will be used to track this and other documents that are part of this transaction in your Pre-Approved Draft Log as discussed in the Pre-Approved Lending Planning Guide. 7. Borrower Information Enter the borrower s name and address. 8. Loan Type Enter the Loan Type(s) available to the borrower. If only offering one Loan Type, place N/A in second line. 9. Loan Requirements and Qualifications Insert in this area any requirements related to the preapproved transaction such as: limitations on the type of property, model year limitations, Loan to Value maximums, or limits on the participating dealerships. Examples include: The amount of the Pre-Approved Express Draft (Site Draft) cannot exceed % of the purchase price for the property or % of NADA retail price on used property. The Pre-Approved Express Draft is valid only with Dealerships in Madison, WI. No Salvage titles. For New Vehicle Loans, model year must be or newer and have mileage of or less; for Used Vehicle Loans, model year must be or newer and have mileage of or less. Valid on current to 4 year old models only. Pre-Approved Lending User Guide 27

30 Page 1 instructions (continued) 10. Lien Recording Enter the lienholder information (i.e. address, Electronic Lien Title (ELT) Code, etc.) 11. Loan Type The borrower or Dealer should enter the Loan Type for the property being purchased. If you are only offering the borrower(s) one Loan Type, it is a best practice to preprint the Loan Type as it appears in A) Loan Types you select before the Pre-Approved Express Draft (Site Draft) is given to the borrower(s). 12. Approved Limit Enter the maximum amount the borrower can use to purchase the property. This amount may be lower than the Amount Financed on the corresponding Truth in Lending Disclosure if the borrower wishes to finance additional amounts (Guaranteed Asset Protection, Mechanical Repair Coverage, or the balance of the outstanding loan on a trade-in). Remind the borrower that this amount needs to include the price of the property, taxes, title fee, and any other charges that may be included in the total purchase and any special requirements as listed in Approved Limit area. 13. Date Issued Enter the date you issue the Pre-Approved Express Draft (Site Draft) to the borrower. 14. Void After Enter the date after which the Pre-Approved Express Draft (Site Draft) can no longer be used. Ensure the borrower knows they will need to contact the credit union for a new set of Pre-Approved Loan documents if they do not use their Express Draft (Site Draft) prior to this date. 15. Credit Union Enter your credit union name in this space. 16. Dealer Borrower or Dealer would enter the name of the Authorized Dealer (the business s name) from which the property is being purchased. If you know the name of the Dealer the property will be purchased from or wish to limit the borrower to purchasing property from a particular Dealer, it is a best practice to preprint the Dealer s name before the Pre-Approved Express Draft is given to the borrower(s). 17. Amount in Numbers Borrower or Dealer would enter the final purchase price of the property being purchased in numbers. This is the amount paid to the Dealer and would include any extra amounts such as tax, title, license, etc. 18. Amount in Words Borrower or Dealer would enter the final purchase price of the property being purchased in words. 19. Security Offered Borrower or Dealer should enter all the property s information including Year, Make, Model, Type and VIN or Identification Number. Be certain to verify the accuracy of the VIN or Identification Number. 20. Borrower(s) Signatures Enter Borrower 1 Name and Borrower 2 Name (if applicable) in the space immediately below the signature boxes before presenting to the member. Upon completion, the borrower will sign, or otherwise authenticate, the Pre-Approved Express Draft (Site Draft). By signing as a borrower, they are agreeing to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Pre-Approved Express Draft (Site Draft). If you are using the Florida specific version (NFL71*), you may notice that the signature language varies from the sample shown. Pre-Approved Lending User Guide 28

31 Page 1 instructions (continued) IMPORTANT: If there are owners of the collateral other than the borrower(s), they should sign a separate Security Agreement by using the LOANLINER Security Agreement (MXX88*). If you are not already using Electronic version MXX888 or newer (e.g. MXX889, MXX88A, etc.) or Paper version MXX88C or newer (e.g. MXX88D, MXX88E, etc.), we have enhanced our agreement to be used for both the Pre-Approved Lending document suite as well as other lending products. Please ensure that you are using an up to date version of the Security Agreement (MXX88*) if owners of collateral other than borrowers are involved in your Pre-Approved Lending loans. Contact the LOANLINER Department if you need to order a supply of the current paper version or to receive an updated electronic image. 21. Authorized Representative of Dealer The dealership representative / employee whom is the primary contact for the transaction needs to list their name and telephone number in this space. 22. Authorized Dealer Signature The dealership representative / employee must sign and date here. By signing, the dealership representative / employee agrees, on behalf of the dealer, that all Instructions To Dealer will be satisfied, all required documents have been executed, and the original signed and completed Pre-Approved Express Draft (Site Draft) as well as all other required documents will be provided to the credit union. Note: Consider putting the Pre-Approved Express Draft in a LOANLINER Document Folder (MXX00*) before giving it to the borrower. The borrower will then have a compact, sturdy folder to protect the Pre-Approved Express Draft, and the Dealer will be able to insert all the required support documents when they present the Pre-Approved Express Draft to you for payment. Pre-Approved Lending User Guide 29

32 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 2 sample TERMS AND CONDITIONS The following terms and conditions govern the use of this Pre-Approved Express Draft ("Express Draft"). All references to "Credit Union," "we" or "us" mean the Credit Union whose name appears on page 1. All references to "you" mean each person who signs the Express Draft as a borrower. All references to "Property" mean the Property purchased with the Express Draft. All references to "Dealer" mean the licensed Dealer from which the Property will be purchased. SIGNATURE OF BORROWER -- By signing or otherwise authenticating Express Draft as a borrower, you agree to be bound by and acknowledge receipt of the terms and conditions of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and this Express Draft, all of which are incorporated herein by reference, and acknowledge you have complied with "Instructions to Borrower". You also grant us a security interest in the Property described on page 1 pursuant to the terms of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. COMPLETION OF EXPRESS DRAFT - You and an authorized representative of Dealer agree to complete and sign Express Draft in accordance with the instructions on page 1 and25 SIGNATURE OF AUTHORIZED REPRESENTATIVE OF page 2. DEALER -- By signing, or otherwise authenticating, Dealer agrees to be bound by the terms and conditions of Express SECURITY QUALIFICATIONS - You and Dealer promise Draft and represents that all instructions to Dealer have been Property purchased with Express Draft meets the satisfied and that all required documents have been or will requirements, if any, detailed on page 1. be properly completed and presented with the Express Draft. Dealer acknowledges and agrees that Express Draft must be presented to Credit Union for payment. ADDITIONAL INSTRUCTIONS TO DEALER DELIVERY OF DOCUMENTATION - To receive payment, LIEN RECORDING - Dealer must ensure that the necessary Dealer will deliver a copy of the following to the Credit documents and fees have been delivered to appropriate Union by fax (or other means acceptable to the Credit Union) parties to perfect the lien of the Credit Union as a valid first within a commercially reasonable time or as described in priority purchase money security interest in the Property, Instructions to Dealer on page 1: and there are no other security interests in Property. a) Copy of executed purchase agreement; b) Copy of executed Express Draft; c) NADA value or MSRP sticker related to Property; and d) Copy of application for title. CUNA Mutual Group 2011, 13 All Rights Reserved Page 2 of 2 NXX710-e Pre-Approved Lending User Guide 30

33 Page 2 instructions 23. Completion of Express Draft This paragraph describes the borrower s and Dealer s agreement to completely execute the Pre-Approved Express Draft (Site Draft). 24. Security Qualifications This paragraph describes the borrower s and Dealer s promise to fulfill any requirements set on the property purchased as listed on page Signature of Authorized Representative of Dealer This paragraph describes the Dealer s agreement to be bound by the terms and conditions of the Pre-Approved Express Draft (Site Draft) and their promise to comply with any and all instructions to Dealer. 26. Additional Instructions to Dealer This paragraph describes the additional instructions, beyond what is detailed on page 1, which the Dealer must comply with to receive payment for the Express Draft. Pre-Approved Lending User Guide 31

34 Chapter 5 Pre-Approved Express Draft (Check) LOANLINER Check Stock Version Document Description Electronic format only When Used: This document is used after a borrower has been approved for a Pre- Approved Loan. A Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and any additional Truth in Lending Disclosure (Pre-Approved) will also need to be completed prior to the Pre-Approved Express Draft (Check). The Pre-Approved Express Draft (Check) must be used in conjunction with other required Pre-Approved Lending documents including sheet of the JXX92* Check Stock for printing checks. Purpose: This document allows you to pre-approve borrowers who want to shop for / purchase property that can be titled such as a car, truck, boat, or ATV. The borrower(s) take the Pre-Approved Express Draft (Check) to the dealership, negotiates the purchase, and then the borrower(s) and Dealer complete and sign the Pre-Approved Express Draft (Check) agreeing to the terms of the loan. Since this Pre-Approved Express Draft (Check) is a check, the Dealer can deposit it for payment directly at their financial institution. It should be safely treated like any other check used to purchase property or issued by the Credit Union. This is the only document the member needs to take to the Dealer. Once processed by the credit union, it becomes part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and provides the security identification information for the loan. Document Numbers: How Distributed: State-Specific Versions: NXX95* 1-3 pieces of property (shown below) NXX97* 1 piece of property only Distribution by Credit Union to Borrower(s) at time of Preapproval: This document must be given to the borrower(s). Distribution by Dealer to Credit Union after document completion: Once the borrower(s) and the Dealer reviewed, completed, and signed the Pre-Approved Express Draft (Check), the Dealer needs to make two copies of the completed original front and back, before the check is detached. The Dealer will keep one of the copies for themselves and needs to send the other copy to the credit union along with any information detailed in the Instructions to Dealer section of the Pre-Approved Express Draft (Check). The Dealer can then detach and use the check as it would any other check. The credit union should put these documents in the member s loan file (scan) with other Pre-Approved Lending documentation. Distribution by Credit Union to Borrower(s) at time of Loan Completion: While a best practice to also send a copy of the completed Pre-Approved Express Draft (Check) including the signed check, marked VOID, with the Pre-Approved Express Draft Confirmation Receipt once the credit union has finalized the loan transaction, it is not necessary. Florida *Indicates spaceholder for version number Pre-Approved Lending User Guide 32

35 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 1 sample 1 Pre-Approved Express Draft (Check) 2 ACCOUNT NUMBER 3 CREDIT UNION CONTACT 4 CREDIT UNION TELEPHONE 5 CREDIT UNION FAX 6 NAME AND ADDRESS BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: i) 7 ii) B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: 8 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 and date the Express Draft. 3 Give the completed Express Draft to Dealer. 6 9 Deliver required documentation and fees to appropriate parties to perfect Credit Union's lien (Information below).* Endorse detachable check. *See page 2 for additional Dealer instructions 10 CUNA Mutual Group 2011, 13 All Rights Reserved Page 1 of 2 Type or Print Name of Authorized Representative of Dealer Phone Number NXX950-e PAY TO THE ORDER OF (Dealer): Amount in Words Security Offered: 11 Date Issued: 12 Void After: 13 Approved Limit: $ 14 Loan Type: $ 16 Amount in Numbers Dollars, subject to final settlement SIGNATURE OF BORROWER -- By signing or otherwise authenticating Express Draft as a borrower, you agree to be bound by and acknowledge receipt of the terms and conditions of the Loan and Security Agreement and this Express Draft, all of which are incorporated herein by reference, and acknowledge you have complied with "Instructions to Borrower". You also grant us a security interest in the Property described above pursuant to the terms of the Loan and Security Agreement. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. X Borrower 1: Type or Print Name Signature Date 20 Borrower 2: Type or Print Name Year Make Model Type X Signature Date VIN/ID# Credit Union Authorized Signature Pre-Approved Lending User Guide 33

36 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. 1. Credit Union Information The credit union s name, address, telephone number, and logo will appear in this area after the NXX95* has been printed over the JXX92* check stock. This information will be preprinted on the JXX92* check stock. 2. Borrower Account Number Enter the Borrower s account number 3. Credit Union Contact Enter the name of the person or department that the Dealer or the borrower(s) should contact at the credit union if they have any questions. 4. Credit Union Telephone Enter the telephone number of the Credit Union Contact. 5. Credit Union Fax Enter the fax number the Dealer may use to send all required documents back to the credit union. 6. Borrower Information Enter the borrower s name and address. 7. Loan Type Enter the Loan Type(s) available to the borrower. If only offering one Loan Type, place N/A in second line. 8. Loan Requirements and Qualifications Insert in this area any requirements related to the pre-approved transaction such as: limitations on the type of property, model year limitations, Loan to Value maximums, or limits on the participating dealerships. Examples include: The amount of the Pre-Approved Express Draft (Check) cannot exceed % of the purchase price for the property or % of NADA retail price on the used property. The Pre-Approved Express Draft (Check) is valid only with Dealerships in Madison, WI. The total of the vehicle purchase price, taxes, fees, and other charges cannot exceed the Approved Limit. No Salvage titles. For New Vehicle Loans, model year must be or newer and have mileage of or less; for Used Vehicle Loans, model year must be or newer and have mileage of or less. Valid on current to 4 year old models only. 9. Lien Recording Enter the lienholder information (i.e. address, Electronic Lien Title (ELT) Code, etc.) 10. Authorized Representative of Dealer The dealership representative / employee whom is the primary contact for the transaction needs to list their name and telephone number in this space. 11. Date Issued Enter the date you issue the Pre-Approved Express Draft (Check) to the borrower. 12. Void After Enter the date after which the Pre-Approved Express Draft (Check) which includes the check, can no longer be used. Ensure the borrower knows they will need to contact the credit union for a new set of Pre-Approved Loan documents if they do not use their Express Draft (Check) prior to this date. Pre-Approved Lending User Guide 34

37 Page 1 instructions (continued) 13. Approved Limit Enter the maximum amount the borrower can use to purchase the property. This amount may be lower than the Amount Financed on the corresponding Truth in Lending Disclosure if the borrower wishes to finance additional amounts (i.e. Guaranteed Asset Protection, Mechanical Repair Coverage, or the balance of the outstanding loan on a trade-in). Remind the borrower this amount needs to include the price of the property, taxes, title fee, and any other charges that may be included in the total purchase and any special requirements as listed in Approved Limit area. 14. Loan Type The borrower or Dealer should enter the Loan Type for the property being purchased. If you are only offering the borrower(s) one Loan Type, it is a best practice to preprint the Loan Type as it appears in A) Loan Types you select before the Pre-Approved Express Draft (Check) is given to the borrower(s). 15. Pay to the Order Of Borrower or Dealer would enter the name of the Authorized Dealer (the business s name) from which the property is being purchased. If you know the name of the Authorized Dealer the property will be purchased from or wish to limit the borrower to purchasing property from a particular Dealer, it is a best practice to fill in the Dealer s name before the Pre- Approved Express Draft (Check) is given to the borrower(s). 16. Amount in Numbers Borrower or Dealer would enter the final purchase price of the property being purchased in numbers. This is the amount paid to the Dealer and would include any extra amounts such as tax, title, license, etc. 17. Amount in Words Borrower or Dealer would enter the final purchase price of the property being purchased in words. 18. Security Offered Borrower or Dealer should enter all property information including Year, Make, Model, Type and VIN or Identification Number. Be certain to verify the accuracy of the VIN or Identification Number. 19. Borrower(s) Signatures Enter Borrower 1 Name and Borrower 2 Name (if applicable) before presenting to the member. Upon completion, the borrower will sign, or otherwise authenticate, the Pre-Approved Express Draft (Check). By signing as a borrower, they are agreeing to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Pre-Approved Express Draft (Check). If you are using the Florida specific versions (NFL95*), you may notice that the signature language varies from the sample shown. IMPORTANT: If there are owners of the collateral other than the borrower(s), they should sign a separate Security Agreement by using the LOANLINER Security Agreement (MXX88*). If you are not already using Electronic version MXX888 or newer (e.g. MXX889, MXX88A, etc.) or Paper version MXX88C or newer (e.g. MXX88D, MXX88E, etc.), we have enhanced our agreement to be used for both the Pre-Approved Lending document suite as well as other lending products. Please ensure that you are using an up to date version of the Security Agreement (MXX88*) if owners of collateral other than borrowers are involved in your Pre- Approved Lending loans. Contact LOANLINER Department if you need to order a supply of the current paper version or to receive an updated electronic image. 20. Credit Union Authorized Signature This is where the credit union representative will sign the check in advance of presenting it to the member. Pre-Approved Lending User Guide 35

38 Chapter 6 Check Stock (Sample of Paper Check) Document Description When Used: Purpose: Document Number: State-Specific Versions: This document is used with the optimized electronic documents NXX95* Multiple Security Pre-Approved Express Draft (Check) and NXX97* Single Security Pre-Approved Express Draft (Check). These electronic images of the NXX95* and NXX97* are then printed onto the LOANLINER JXX92* Check Stock. This will result in a Pre-Approved Express Draft (Check) with a check that can be detached by the dealer after the member and dealer have fully executed the Pre-Approved Express Draft (Check). When using these aforementioned Pre-Approved Express Draft (Check) versions, it is a best practice to print the Pre-Approved Express Draft (Check) onto the Check Stock prior to printing any other Pre-Approved documents for the loan transaction. This way if the Express Draft prints incorrectly and you must use a new copy of the Check Stock with a new Express Draft Number, you will not have to reprint all the other Pre- Approved documents with the new Express Draft Number. Note: This paper check stock includes your credit union name, address, and logo printed in black ink, a choice of color for the background screen of the check, check security features, MICR encoding information across the bottom of the check, sequential numbering, and a perforation above the check for easy separation from the other portion of the Express Draft. The back of the Pre-Approved Express Draft (Check) includes the Terms and Conditions, Security Qualifications, and Additional Instructions to Dealer contract language. Due to the additional language on the reverse side of the check stock, it should not be used with other credit union transactions or to otherwise disburse credit union funds. This check stock is not a replacement for teller or voucher checks the credit union would use in a normal course of business for other transactions. This check stock is designed specifically to support the LOANLINER Closed-End Pre-Approved Lending document suite. To support the use of the Pre-Approved Express Draft (Check) (NXX95* or NXX97*). This base stock, when used with the Pre-Approved Express Draft (Check) electronic image, will produce the proper documentation. JXX92* None *Indicates spaceholder for version number Pre-Approved Lending User Guide 36

39 SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DO To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 1 sample 1 Express Draft No. 2 1 SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENTS SECURE DOCUMENT SECURE DO DOCUMENT SECURE DOCUMENTS SECURE DOCUMENT SECURE DOCUMENTS SECURE DOCUMENT SECURE DOCUMENT SECURED DOCUM THIS CHECK HAS A COLORED BACKGROUND AND A MICROPRINT BORDER 2 Express Draft No. SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECURE DOCUMENT SECU 3 MICR Information Would Go Here Pre-Approved Lending User Guide 37

40 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. 1. Credit Union Contact Your credit union information (name, address, and logo) will be preprinted on the supply of Check Stock in the two referenced areas. 2. Express Draft No. Express Draft Numbers will be preprinted on the supply of Check Stock ordered. The starting check number is chosen by the credit union and sequentially numbered. Ensure you note the last Express Draft Number from the stock you have when ordering new stock to avoid duplication of Express Draft Numbers. 3. MICR Line This information is provided by the credit union and will be preprinted on the supply of Check Stock ordered. The MICR information is used for processing of the checks (clearing through the check processing system). Pre-Approved Lending User Guide 38

41 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Page 2 sample TERMS AND CONDITIONS The following terms and conditions govern the use of this Pre-Approved have already received. Express Draft which includes detachable check ( Express Draft ). All 4 COMPLETION OF EXPRESS DRAFT You and an authorized references to Credit Union, we or us mean the Credit Union whose representative of Dealer agree to complete and sign Express Draft in name appears on page 1. All references to you mean each person who accordance with the instructions on page 1 and page 2. signs the Express Draft as a borrower. All references to Property mean the Property purchased with the Express Draft. All references to Dealer 5 SECURITY QUALIFICATIONS You and Dealer promise Property mean the licensed Dealer from which the Property will be purchased. All purchased with Express Draft meets the requirements, if any, detailed references to Loan and Security Agreement mean the Pre-Approved on page 1. Loan and Security Agreement and Truth in Lending Disclosure that you ADDITIONAL INSTRUCTIONS TO DEALER 6 DELIVERY OF DOCUMENTATION To receive payment, Dealer will deliver a copy of the following to the Credit Union by fax (or other means acceptable to the Credit Union) within a commercially reasonable time or as described in Instructions to Dealer on page 1: a) Copy of executed purchase agreement; b) Copy of executed Express Draft; c) NADA value or MSRP sticker related to Property; and d) Copy of application for title. LIEN RECORDING Dealer must ensure that the necessary documents and fees have been delivered to appropriate parties to perfect the lien of the Credit Union as a valid first priority purchase money security interest in the Property, and there are no other security interests in Property. CUNA Mutual Group 1980, 2011, 12, 13 All Rights Reserved Page 2 of 2 JXX922 Checkshell (10/13) x Signature of Authorized Representative of Dealer 7 SIGNATURE OF AUTHORIZED REPRESENTATIVE OF DEALER By signing, or otherwise authenticating, Dealer agrees to be bound by the terms and conditions of Express Draft and represents that all instructions to Dealer have been satisfied and that all required documents have been or will be properly completed and presented with the Express Draft. Dealer acknowledges and agrees that Express Draft must be presented to Credit Union for Payment. Pre-Approved Lending User Guide 39

42 Page 2 instructions 4. Completion of Express Draft This paragraph describes the borrower and Dealer s agreement to completely execute the Express Draft. 5. Security Qualifications This paragraph describes the borrower and Dealer s promise to fulfill any requirements set on the property purchased as listed on page Additional Instructions to Dealer This paragraph describes the additional instructions, beyond what is detailed on page 1, which the Dealer must comply with to receive payment for the Express Draft. 7. Signature of Authorized Representative of Dealer This paragraph describes the Dealer s agreement to be bound by the terms and conditions of the Pre-Approved Express Draft (Check) and their promise to comply with any and all instructions to Dealer. Pre-Approved Lending User Guide 40

43 Chapter 7 Pre-Approved Express Draft (Check) Credit Union Check Stock Version Document Description Electronic format only When Used: This document is used after a borrower has been approved for a Pre-Approved Loan. A Pre-Approved Loan and Security Agreement, Truth in Lending Disclosure, and any additional Truth in Lending Disclosures (pre-approved) will also need to be completed prior to the Pre-Approved Express Draft (Check). The Pre-Approved Express Draft (Check) must be used in conjunction with other required Pre-Approved Lending documents and a check stock for printing checks. This version of Pre-Approved Express Draft (Check) has been optimized to perform with a credit union s check stock. Note: Check stock used with this document needs to include specific endorsement language. See below or contact the LOANLINER department for appropriate endorsement language. Purpose: This document allows you to pre-approve borrowers who want to shop for / purchase a property that can be titled such as a car, truck, boat, or ATV. The borrower(s) take the Pre-Approved Express Draft (Check) to the dealership, negotiates the purchase, and then the borrower(s) and Dealer can complete and sign the Pre-Approved Express Draft (Check), agreeing to the terms of the loan. Since this Pre-Approved Express Draft (Check) is a check, the Dealer can deposit it for payment directly at their financial institution. It should be safely treated like any other check used to purchase property or issued by the Credit Union. This is the only document the member needs to take to the Dealer. Once processed by the credit union, it becomes part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the security identification information for the loan. Document Numbers: How Distributed: State-Specific Versions: Florida *Indicates spaceholder for version number NXX91* 1-3 pieces of property (shown below) NXX93* 1 piece of property only Distribution by Credit Union to Borrower(s) at time of Preapproval: This document must be given to the borrower(s). Distribution by Dealer to Credit Union after document completion: Once the borrower(s) and the Dealer have reviewed, completed, and signed the Pre-Approved Express Draft (Check), the Dealer needs to make two copies of the completed original front and back, before the check is detached. The Dealer will keep one of the copies for themselves, and needs to send the other copy to the credit union along with any information detailed in the Instructions to Dealer. The Dealer can then detach and use the check as it would any other check. The credit union should put these documents in the member s loan file (scan) with other Pre-Approved Lending documentation. Distribution by Credit Union to Borrower(s) at time of Loan Completion: While a best practice to also send a copy of the completed Pre-Approved Express Draft (Check) including the signed check, marked VOID, with the Pre-Approved Express Draft Confirmation Receipt once the credit union has finalized the loan transaction, it is not necessary. Pre-Approved Lending User Guide 41

44 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Page with circle 1 sample numbers to use as a graphic for the manual. (maz) 1 Pre-Approved Express Draft (Check) 2 ACCOUNT NUMBER 3 CREDIT UNION CONTACT 4 CREDIT UNION TELEPHONE 5 CREDIT UNION FAX 6 NAME AND ADDRESS BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: i) 7 ii) B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: 8 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* 3 Give the completed Express Draft to Dealer. 6 9 Endorse detachable check. *See page 2 for additional Dealer instructions 10 CUNA Mutual Group 2011, 13 All Rights Reserved Page 1 of 2 Type or Print Name of Authorized Representative of Dealer Phone Number NXX950-e PAY TO THE ORDER OF (Dealer): Amount in Words Security Offered: 11 Date Issued: 12 Void After: 13 Approved Limit: $ 14 Loan Type: $ 16 Amount in Numbers Dollars, subject to final settlement SIGNATURE OF BORROWER -- By signing or otherwise authenticating Express Draft as a borrower, you agree to be bound by and acknowledge receipt of the terms and conditions of the Loan and Security Agreement and this Express Draft, all of which are incorporated herein by reference, and acknowledge you have complied with "Instructions to Borrower". You also grant us a security interest in the Property described above pursuant to the terms of the Loan and Security Agreement. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. X Borrower 1: Type or Print Name Signature Date 20 Borrower 2: Type or Print Name Year Make Model Type X Signature Date VIN/ID# Credit Union Authorized Signature Pre-Approved Lending User Guide 42

45 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. 1. Credit Union Information This space is used to identify the credit union (creditor) as required by Regulation Z, Section (a). Have your data processor set up your credit union s name, address, telephone number and logo to print. A credit union may have their logo preprinted on their check stock and may choose not to use this field. 2. Borrower Account Number Enter the borrower s account number. 3. Credit Union Contact Enter the name of the person or department that the Dealer or the borrower(s) should contact at the credit union if they have any questions. 4. Credit Union Telephone Enter the telephone number of the Credit Union Contact. 5. Credit Union Fax Enter the fax number the Dealer may use to send all required documents back to the credit union. 6. Borrower Information Enter the borrower s name and address. 7. Loan Type Enter the Loan Type(s) available to the borrower. If only offering one Loan Type, place N/A in second line. 8. Loan Requirements and Qualifications Insert in this area any requirements related to the preapproved transaction such as: limitations on the type of property, model year limitations, Loan to Value maximums, or limits on the participating dealerships. Examples could include: The amount of the Pre-Approved Express Draft (Check) cannot exceed % of the purchase price for the property or % of NADA retail price on the used property. The Pre-Approved Express Draft (Check) is valid only with Dealerships in Madison, WI. The total of the vehicle purchase price, taxes, fees, and other charges cannot exceed the Approved Limit. No Salvage titles. For New Vehicle Loans, model year must be or newer and have mileage of or less; for Used Vehicle Loans, model year must be or newer and have mileage of or less. Valid on current to 4 year old models only. 9. Lien Recording Enter the lienholder information (i.e. address, Electronic Lien Title (ELT) Code, etc.) 10. Authorized Representative of Dealer The dealership representative / employee whom is the primary contact for the transaction needs to list their name and telephone number in this space. 11. Date Issued Enter the date you issue the Pre-Approved Express Draft (Check) to the borrower. 12. Void After Enter the date after which the Pre-Approved Express Draft (Check) which includes the check, can no longer be used. Ensure the borrower knows they will need to contact the credit union for a new set of Pre-Approved Loan documents if they do not use their Express Draft (Check) prior to this date. Pre-Approved Lending User Guide 43

46 Page 1 instructions (continued) 13. Approved Limit Enter the maximum amount the borrower can use to purchase the property. This amount may be lower than the Amount Financed on the corresponding Truth in Lending Disclosure if the borrower wishes to finance additional amounts (i.e. Guaranteed Asset Protection, Mechanical Repair Coverage, or the balance of the outstanding loan on a trade-in). Remind the borrower this amount needs to include the price of the property, taxes, title fee, and any other charges that may be included in the total purchase and any special requirements as listed in Approved Limit area. 14. Loan Type The borrower or Dealer should enter the Loan Type for the property being purchased. If you are only offering the borrower(s) one Loan Type, it is a best practice to preprint the Loan Type as it appears in A) Loan Types you select before the Pre-Approved Express Draft (Check) is given to the borrower(s). 15. Pay to the Order Of Borrower or Dealer would enter the name of the Authorized Dealer (the business s name) from which the property is being purchased. If you know the name of the Dealer the property will be purchased from or wish to limit the borrower to purchasing property from a particular Dealer, it is a best practice to fill in the Dealer s name before the Pre-Approved Express Draft (Check) is given to the borrower(s). 16. Amount in Numbers Borrower or Dealer would enter the final purchase price of the property being purchased in numbers. This is the amount paid to the Dealer and would include any extra amounts such as tax, title, license, etc. 17. Amount in Words Borrower or Dealer would enter the final purchase price of the property being purchased in words. 18. Security Offered Borrower or Dealer should enter all property information including Year, Make, Model, Type and VIN or Identification number. Be certain to verify the accuracy of the VIN or Identification number. 19. Borrower(s) Signatures Enter Borrower 1 Name and Borrower 2 Name (if applicable) before presenting to the member. Upon completion, the borrower will sign, or otherwise authenticate, the Pre-Approved Express Draft (Check). By signing as a borrower, they are agreeing to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Pre-Approved Express Draft (Check). If you are using the Florida specific versions (NFL95*), you may notice that the signature language varies from the sample shown. IMPORTANT: If there are owners of the collateral other than the borrower(s), they should sign a separate Security Agreement by using the LOANLINER Security Agreement (MXX88*). If you are not already using Electronic version MXX888 or newer (e.g. MXX889, MXX88A, etc.) or Paper version MXX88C or newer (e.g. MXX88D, MXX88E, etc.), we have enhanced our agreement to be used for both the Pre-Approved Lending document suite as well as other lending products. Please ensure that you are using an up to date version of the Security Agreement (MXX88*) if owners of collateral other than borrowers are involved in your Pre-Approved Lending loans. Contact LOANLINER Department if you need to order a supply of the current paper version or to receive an updated electronic image. 20. Credit Union Authorized Signature This is where the credit union representative will sign the check in advance of presenting it to the member. Pre-Approved Lending User Guide 44

47 Page 2 instructions 21. Endorsement Language Required When using this version of the Pre-Approved Express Draft (Check), you will need to create your own check stock onto which this Pre-Approved Express Draft (Check) will be printed. When creating this check stock, you must use the following endorsement language on the back of the check. This is to ensure the Pre-Approved Express Draft (Check), when used in combination with the other LOANLINER Closed-End Pre-Approved Lending Documents, leads to an enforceable loan contract. 21 SIGNATURE OF AUTHORIZED REPRESENTATIVE OF DEALER By signing, or otherwise authenticating, Dealer agrees to be bound by the terms and conditions of Express Draft and represents that all instructions to Dealer have been satisfied and that all required documents have been or will be properly completed and presented with the Express Draft. Dealer acknowledges and agrees that Express Draft must be presented to Credit Union for Payment. x Signature of Authorized Representative of Dealer Page 2 of 2 Pre-Approved Lending User Guide 45

48 Chapter 8 Pre-Approved Express Draft Confirmation Receipt Document Description Electronic format only When Used: Purpose: This document is used after the Pre-Approved Loan has been consummated and the Dealer has been paid. This document is used to communicate the final terms of the Pre-Approved Loan to the borrower(s). This document also details the costs of any Payment Protection, GAP, or Extended Warranty (MRC) purchased. The Pre-Approved Express Draft Confirmation Receipt should be sent out to the borrower(s) as soon as possible once the Pre-Approved Loan transaction is completed as it is a contractual requirement the borrower receive this document. Document Numbers: How Distributed: Printed Components: State-Specific Versions: NXX63* for use with Debt Protection NXX83* for use with Credit Insurance (shown below) Distribution by the Credit Union to the Borrower(s) at time of Loan Completion: Once the credit union has finalized the loan transaction, a Pre-Approved Express Draft Confirmation Receipt must be provided to the borrower(s). While a best practice to also send a copy of the completed Pre- Approved Express Draft (Site Draft), marked Copy, or Pre-Approved Express Draft (Check) including the signed check, marked VOID, with the Pre-Approved Express Draft Confirmation Receipt once the credit union has finalized the loan transaction, it is not necessary. NOTE: This document was designed to fit into a window envelope. There is also an optional marketing message area near the top of the document for the credit union to use as needed. (e.g. Thank you message to member, cross-sell message for other credit union services, special promotion or activity happening at the credit union or within the community, etc.) Part 1 Credit Union copy of the Pre-Approved Express Draft Confirmation Receipt Part 2 Borrower copy of the Pre-Approved Express Draft Confirmation Receipt Florida *Indicates spaceholder for version number Pre-Approved Lending User Guide 46

49 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Page with 1 circle sample numbers to use as a graphic for the manual. (maz) 1 Pre-Approved Express Draft Confirmation Receipt 2 3 LOAN TYPE LOAN DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER 4 NAME AND ADDRESS BORROWER BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 8 9 Paid to Dealer DISBURSEMENT DETAILS 10 $ Paid on Your Loan(s) with Us 11 $ Paid to Others on Your Behalf for 12 for You have elected the following other coverages (if applicable): $ $ Guaranteed Asset Protection Extended Warranty You have elected the following Voluntary Payment Protection Total Loan Amount: $ (if applicable): Credit Insurance Insurance Charge Single Credit Disability $ Joint Credit Disability $ Single Credit Life $ Joint Credit Life $ Your Payment Schedule Will Be: 19 (Payment Schedule Disclosures are Estimates) REPAYMENT TERMS Number of Payments Amount of Payments $ $ When Payments Are Due This Confirmation Receipt confirms the terms of your recent vehicle purchase pursuant to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, Voluntary Payment Protection and/or other coverages elected by you (if applicable) and the Pre-Approved Express Draft executed in connection therewith. Please retain this for your records. CUNA Mutual Group 2011, 13 All Rights Reserved NXX833-e Pre-Approved Lending User Guide 47

50 Page 1 instructions Please refer to the document on the preceding page for the corresponding numbers. NOTE: Since this is not a Truth in Lending disclosure and all information represents the final terms of the loan, use of e for estimate should not be used. 1. Credit Union Information This space is used to identify the credit union. If your credit union s name, address, telephone number and logo were not imprinted by LOANLINER, enter the applicable information here. 2. Borrower Information Enter the borrower s name and address to be used with a window envelope (optional) for ease of mailing. 3. Blank Space This area can be used for instructions particular to your credit union. You may also use this space to promote protection products such as Payment Protection, GAP, or Extended Warranty (MRC), or other credit union products or services the borrower(s) have yet to purchase. The credit union may also use this space for a simple Thank you to the member. 4. Loan Type Enter the Loan Type associated with the terms of the loan and property purchased. 5. Loan Date Enter the date of loan. This date is not established by regulation or contract, it is simply the date your credit union chooses to use to represent the date of the loan. 6. Loan Number Enter the loan identification number as defined by the credit union. 7. Express Draft Number Enter the Express Draft Number that corresponds to the Express Draft Number on the Pre-Approved Express Draft (Site Draft) or Pre-Approved Express Draft (Check). 8. Account Number Enter the borrower s account number. 9. Borrower 1 Name and Address / Borrower 2 Name and Address Enter the name and address of each borrower. Disbursement Details The following section acts as a summary of the different items that create the total loan amount. 10. Paid to Dealer Enter the amount Paid to the Dealer. 11. Paid on Your Loan(s) with Us This indicates if any loan funds were used to pay off the existing loan for a Trade-in property connected to this Pre-Approve Loan transaction. 12. Paid to Others on Your Behalf These blanks are provided to detail the various amounts paid to other persons (excluding amounts paid to the Dealer already listed above) by the credit union on the borrower s behalf. Do not list amounts paid to others for Guaranteed Asset Protection and Mechanical Repair Coverage as those are listed below. Identify the persons the credit union paid on the borrower s behalf by specific name or generic categories such as credit bureau or state agency as needed. The amount the Credit Union paid to another financial institution in order to satisfy any existing loans the borrower had with that institution would be listed here. Pre-Approved Lending User Guide 48

51 Page 1 instructions (continued) Guaranteed Asset Protection 13. Paid for outside of the Loan Enter the amount of the Guaranteed Asset Protection if it was not financed into the loan, but paid for in cash or by some other means outside of the loan. 14. Financed into the Loan Enter the amount of the Guaranteed Asset Protection if it was financed into the loan. Mechanical Repair Coverage (Extended Warranty) 15. Paid for outside of the Loan Enter the amount of any Extended Warranty or Mechanical Repair Coverage if it was not financed into the loan, but paid for in cash or by some other means outside of the loan. 16. Financed into the Loan Enter the amount of the Extended Warranty or Mechanical Repair Coverage if it was financed into the loan. 17. Payment Protection If Payment Protection (i.e. Credit Insurance or Debt Protection) was sold at the time of pre approval, it would have been disclosed as an estimate. Enter the actual cost of the Payment Protection here along with which coverage options were selected. Illustrates version NXX63* for Debt Protection You have elected the following Voluntary Payment Protection (if applicable): Debt Protection $ (option chosen) 18. Total Loan Amount Enter the total amount of the Loan. This amount includes all amounts paid to the dealer or other parties, amounts paid on other loans, and any GAP coverage or MRC that was financed into the transaction. 19. Payment Schedule Enter the number and amount(s) of the payments based on the final loan amount and terms. If Voluntary Payment Protection is elected, the premium or program fee should be included in the payment amount. IMPORTANT: Since the original Payment Schedule disclosures could only be estimated, it is required by contract (not by Reg Z) to provide the final Repayment Terms based on the final loan amount and terms. Pre-Approved Lending User Guide 49

52 Chapter 9 Frequently Asked Questions Question 1: Is the Approved Limit on the Pre-Approved Express Draft always the same as the Amount Financed on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure? Answer: No. The Approved Limit found on the Pre-Approved Express Draft, is the amount you want the member to be able to shop with. This amount needs to include the price of the property being purchased, taxes, title fees and any other charges that may be included in the total purchase or any special requirements as listed in the Approved Limit area of the Pre-Approved Express Draft. The Amount Financed found in the Truth in Lending Disclosure(s) is the total pre-approved amount, that includes not only the cost of the collateral (sales price, tax, fees, etc.), but also any additional payment protection products that are financed into the loan (GAP, MRC, etc.). Basically this is the most you will be willing to lend the member in regard to this loan. Question 2: How are estimates used in this transaction? Answer: Since we are disclosing the maximum amount the member may borrow, the figures in the Fed Box are the best information available when the disclosures are made. Therefore, Amount Financed, Finance Charge, Total of Payments, and Payment Amount must be marked as an estimate. Place an e next to these disclosures. The fielding on the documents includes support for placement of the e. In addition, if Payment Protection is sold at the time of the loan pre-approval, the amount should be marked with an e on the enrollment form / contract. Other amounts may also need to be marked with an e for estimate. If an amount reasonably unknown at the time you create the disclosures or that amount may vary depending on the outcome of the transaction, such as filing fees, then you should mark it with an e and list the maximum fee possible for that transaction. This is supported by Regulation Z, Section (c) Basis of disclosures and use of estimates. APR, however, should never be marked as an estimate, as any change outside of 1/8 of 1% in either direction will require new disclosures be provided. Question 3: Why doesn t the member sign the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure? Answer: Indirectly, they do! The various LOANLINER Pre-Approved Lending documents work together to form one contractual agreement between the member and the credit union. Because of this multi-document contract design, certain pieces of a traditional Closed-End loan contract and Truth in Lending Disclosure appear on some documents but not others. When the member signs the Express Draft they are signing agreeing to all incorporated documents (e.g. the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, any additional Truth in Lending Disclosure (Pre-Approved), the Pre-Approved Express Draft, and, via the Payment section of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, also the Repayment Terms of the Pre-Approved Express Draft Confirmation Receipt. The signature boxes, typically used for the member to agree to the terms of the Loan and Security Agreement, are a prime example. With the Pre-Approved Lending documents consummation does not occur until the property has been selected, a purchase price negotiated, and the Express Draft Pre-Approved Lending User Guide 50

53 completed. This occurs at some time after the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures are delivered. As such, the signature boxes appear on the Express Draft, not the note. Question 4: What if there are non-borrowing owners of collateral involved in the property purchase? Answer: Non-borrowing owners of collateral (i.e. owners of the collateral other than a borrower), will need to sign a separate Security Agreement. We suggest using the LOANLINER Security Agreement (MXX88*). It also important to ensure the borrower(s) and non-borrowing owners know about this requirement to sign additional documents. It is also important to establish a consistent process around when and how you will have a non-borrowing owner of collateral sign the LOANLINER Security Agreement (MXX88*). Ensure you are using Electronic version MXX888 or newer (e.g. MXX889, MXX88A, etc.) or Paper version MXX88C or newer (e.g. MXX88D, MXX88E, etc.) as these newer versions have been enhanced for use with the Pre-Approved Lending document suite. Contact LOANLINER Department if you need to order a supply of the current paper version or to receive an updated electronic image. Question 5: How will the member(s) know the final terms of their loan? Answer: Your Credit Union must send a Pre-Approved Express Draft Confirmation Receipt confirming the final loan amount to the member prior to the due date of the first payment. While not a Reg. Z requirement, because e for estimate was used on the Truth in Lending Disclosures, a borrower will not know the final payment amount or first payment due date, a Confirmation Receipt is necessary. In addition, the Loan Agreement states that the final terms will be reflected on the Confirmation Receipt; consequently, the Confirmation Receipt becomes necessary from a contract standpoint. Question 6: We do risk-based pricing on our loans. When should we provide the Risk-Based Pricing Notice as required under the FACT Act Risk-Based Pricing Rules? Answer: Notice must be provided before consummation of the transaction but not before the terms of credit have been communicated to the member(s). Therefore, once the member(s) have been approved, the notice can be provided followed by giving the borrower the Pre-Approved Express Draft and Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. Question 7: Can I use Pre-Approved Lending Documents for Variable Rate loans? Answer: Yes. The Pre-Approved Lending document suite now supports the use of Variable Rate lending such as when the interest rate is based on the Prime Rate plus a margin. Please see sample Loan Scenario #3 below for more details. Question 8: Can the Pre-Approved Lending documents accommodate Introductory or Promotional Rates (i.e. Step Rates)? Answer: Yes. The Pre-Approved Lending document suite now supports the use of Introductory Rates and other Step Rates such as 0% interest for 90 days. Please see Sample Loan Scenario #2 below for more details. Pre-Approved Lending User Guide 51

54 Question 9: Can I use the Pre-Approved Lending documents for Relationship Pricing? Answer: Yes. Relationship pricing, which involves a discount to the loan rate that may be revoked should the borrower no longer meet certain pre-defined requirements, can be properly disclosed as a variable rate. A typical relationship pricing feature may be a 0.25% rate discount for members with the combination of direct deposit, automatic loan payments, and over $10,000 on deposit. The rate is listed as Variable Rate since the 0.25% rate discount is conditioned on the member s continued participation in direct deposit, automatic loan payments, and over $10,000 on deposit. Should the member discontinue one or all of these services, the 0.25% discount will be revoked and the interest rate will increase. Variable Rate disclosures must be made if the relationship pricing is revocable. Question 10: What happens if an Express Draft is lost or stolen before the member can execute the transaction at the dealer? Answer: This is where the Express Draft log discussed in the Pre-Approved Lending Planning Guide comes into play. If an Express Draft is lost, stolen, or needs to be replaced prior to its void after date, you will need to reprint ALL Pre-Approved Lending documents for that transaction with a new Express Draft Number. This is to prevent fraud or the accidental use of the lost or stolen Express Draft. Since ALL documents in the Pre-Approved Lending transaction contain the same interconnecting Express Draft Number, you should reprint all of them. You must also indicate in your Express Draft Number Log that the original Express Draft Number is VOID and any Express Drafts received with that number on them should NOT be honored. Question 11: What happens if the wrong Loan Type was selected for property purchased? (e.g. the borrower marked the Loan Type as New but the property purchased was used property) Answer: If the member and dealer did not complete the Express Draft with the correct Loan Type for the property purchased, the credit union does not have to honor the Express Draft. However, the credit union should consider the unique nature of each Pre-Approved Loan that falls into this scenario before exercising this option. An Express Draft completed with the incorrect Loan Type may be considered a new offer from the Member to the Credit Union proposing terms other Art 1 than those originally presented to the borrower. As such, the credit union may accept or reject the offer. Art 1 Art Art 2 3? Things to Consider Tip In this scenario it is possible the borrower or dealer simply wrote in the wrong Loan Type and still wish to proceed with the loan under the correct terms. It is also likely the borrower already has possession of the property and believes the loan contract has been properly consummated with the dealer s payment on its way. If the credit union accepts the offer as is, the credit union may send the borrower a Pre-Approved Express? Art 2 Draft Confirmation Receipt with the executed terms. However, if the Credit Union rejects the member s offer of different terms, the member and the Things to Credit Union! will need to come together and agree upon new loan terms. Once the Credit Union and Consider member Caution reach a set of terms they both can agree to, the Credit Union can have the member sign a modification agreement which reflects the agreed to terms and then send out a confirmation receipt to the member with the corrected final terms. Art 3! Caution Keep in mind, these processes are based on the fact that the borrower was sent to the dealership with all possible Loan Types but the borrower or dealer completed the Express Draft with the incorrect Loan Type. The process described above may NOT be used to circumvent the Reg. Z required practice of sending the member to the dealer with all possible Loan Types via multiple Truth in Lending Disclosures. Pre-Approved Lending User Guide 52

55 For example, if the Credit Union knows a member in interested in purchasing a New Vehicle (3.25% for 60 months on a current model year vehicle) or a Used Vehicle (4.00% for 48 months on a vehicle 2-5 model years old), and the Credit Union preapproves the member for either Loan Type, they cannot send the member to the dealer with only a New Vehicle Loan Type and then modify the loan terms after consummation should the member and dealer complete the Express Draft with the Loan Type Used Vehicle based on the members purchase of a 3 year old vehicle. Please contact LOANLINER if you have further questions on this topic. Question 12: What if the property used as collateral does not meet the requirements of the Express Draft? Answer: If the collateral offered by the borrower and dealer does not meet the requirements listed on the Express Draft, the credit union does not have to honor the Express Draft. However, the credit union should consider the unique nature of each Pre-Approved Loan that falls into this scenario before exercising this option. An Express Draft presented with collateral that does not Art 1 meet the requirements may be considered a new offer from the member to the Credit Union. As such the Credit Union may accept or reject the offer. If the credit union accepts the offer as is, the credit union may send the member a Pre-Approved? Express Draft Confirmation Receipt with the executed terms. However, Things to if the credit union rejects the member s offer of different terms, the member and the Credit Union Consider will need to come together and agree upon new loan terms. Once the Credit Union and member reach a set of terms they both can agree to, the Credit Union can have the member sign a modification agreement which reflects the agreed to terms and then send out a confirmation receipt to the member with the corrected final terms. Art 2 Art 3! Caution Tip Keep in mind, these processes are based on the fact the member was sent to the dealership with all possible Loan Types but the member or dealer submitted the Express Draft for purchase of collateral outside of the requirements listed for the Loan Types presented. The process describe above may NOT be used to circumvent the Reg Z required practice of sending the member to the dealer with all possible Loan Types for all collateral approved for the member s purchase via multiple Truth in Lending Disclosures. For example, if the Credit Union knows a member may purchase a new vehicle or a used vehicle, and the Credit Union will approve a member for a Used Vehicle loan (4.00% for 48 months on a vehicle 2-5 model years old) should the collateral not meet the New Vehicle requirements, they cannot send the member to the dealer with only a New Vehicle Loan Type (3.25% for 60 months on a current model year vehicle) and then modify the loan terms after consummation. Please contact LOANLINER if you have further questions on this topic. Question 13: If the member uses very little of the approved limit and wants a shorter term loan than was originally disclosed, what do we have to do? Answer: This may occur when the member was approved for a loan amount significantly higher than the final amount borrowed (e.g. the Approved Limit is $40,000 at 5.99% for 60 months resulting in payment of roughly $773.00, but the final amount borrowed is only $15,000, at 5.99% for 60 months resulting in a payment of roughly $ ) Pre-Approved Lending User Guide 53

56 In a scenario such as this, it is possible the member will wish to pay more than the $ per month in order to pay off the debt more quickly, avoiding additional interest charges and aligning with their original loan payment budget of $ They can do this in one of two basic ways, a) allow the contract to stand, but consciously sent in a payment of $ even though on $ a month is due, or b) amend the loan contract to reflect payments of $ If they choose a) just send in higher payments but do not modify the loan, there is no additional documentation necessary. Art 1 However, if they choose b) Formally amending the loan contract to increase the, a loan modification may be the solution. When the contractual loan payment is increased the term of the loan is decrease. If this reduction in the term of the loan can be achieved without an increase in the APR or any other changes to Things to the loan terms (e.g. changes to the collateral securing the loan, change in the loan balance, etc.) Consider aside from the decrease in the term of the loan, using a modification agreement can occur with the member s signature. This signed modification would be followed up with the delivery of a Pre- Approved Express Draft Confirmation Receipt listing the corrected final loan terms to the member. Art 2 Art 3?! Caution Tip Keep in mind, the loan modification solution described above assumes the member was sent to the dealership with all appropriate Loan Type disclosures given the information reasonably available to the Credit Union prior to consummation. The process describe above may not be used to avoid sending the member to the dealer with multiple Truth in Lending disclosures, one for each Loan Type possible for a given situation. An example of when a Credit Union is given information that would require multiple Loan Type disclosures to be send out with the member would be if a member told the Credit Union they want to have a car payment as close to $ as possible regardless of the purchase price of the vehicle and that they intended on spending anywhere from $10, to the approved limit of $40, for their new vehicle. In this scenario, the Credit Union knows that the member will end up with one of several loan terms and thus, must send the member to the dealer with disclosures for each possibility (e.g. 24 months and 36 months, 36 months and 48 months, or 24 months and 48 months, etc.). Please contact LOANLINER if you have further questions on this topic. Question 14: When can I start charging interest in a Pre-Approved Loan? Answer: The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure (Pre- Approved Note) states in Paragraph 2. Promise to Pay that interest will begin to accrue on the day the credit union pays the Express Draft. This is in line with other forms of remote lending such as loans by mail where the interest begins to accrue on the date the proceeds are mailed to the borrower or deposited in one of the member s accounts. Beginning the accrual of interest before the payment date would be contradicting the contract language and also likely poses system issues associated with backdating interest. If you intend on charging interest on Pre-Approved Loans prior to the payment of the Express Draft, you will need to contact LOANLINER to discuss considerations and options. Pre-Approved Lending User Guide 54

57 Question 15: What happens if the member or the dealer exceeds the Approved Limit listed on the Express Draft? Answer: If the member and dealer exceeded the Approved Limit as listed on the Express Draft, the credit union does not have to honor the Express Draft. However, the credit union should consider the unique nature of each Pre-Approved Loan that falls into this scenario before exercising this option. An Express Draft completed with an amount exceeding the Approved Limit may be considered a new offer from the member to the Credit Union. As such, the Credit Union may accept or reject the offer. Art 1 If the Credit Union accepts the offer as is, the Credit Union may send the member a Pre-Approved Express Draft Confirmation Receipt with the executed terms. However, if the Credit Union rejects the member s offer of different terms, the member and the Things to Credit Union will need to come together and agree upon new loan terms. Once the Credit Union and Consider member reach a set of terms they both can agree to, the Credit Union can have the member sign a modification agreement which reflects the agreed to terms and then send out a confirmation receipt to the member with the corrected final terms. Art 2 Art 3?! Caution Tip Keep in mind, these processes are based on the fact that the borrower was sent to the dealership with an accurate Approved Limit, but the member or dealer completed the Express Draft with a final amount exceeding that Approved Limit. The process described above may NOT be used to circumvent the Reg. Z required practice of sending the borrower to the dealer with all possible Loan Types via multiple Truth in Lending Disclosures. For example, if the Credit Union knows they will approve the member for an Amount Financed of $50,000, they cannot send the member to the dealer with the Truth in Lending disclosure listing Amount Financed $40, Please contact LOANLINER if you have further questions on this topic. Question 16: What happens if a member fails to trade-in the collateral they agreed to trade-in as part of the Pre-Approved Lending transaction? Answer: The LOANLINER Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure does contain a clause voiding the loan agreement if the member agrees to use a trade-in as part of the Pre-Approved Lending transaction but then fails to do so. This clause may come into play should there be an outstanding loan balance on the trade-in property. In such a situation, by not using the trade-in as part of the Pre-Approved Transaction, the member is negatively impacting the assumed debt ratio which was used in the Credit Union s underwriting calculations when approving the member and setting the terms of the Pre-Approved Loan (e.g. Approved Limit, APR, Loan Term, etc.) However, the Credit Union should consider the unique nature of each Pre-Approved Loan that falls into this scenario before perusing this option. In a situation like this, the primary concern for a Credit Union is whether the failure to use the trade-in property, specifically one with an outstanding loan balance connected to it, causes the member to fall outside of acceptable underwriting criteria given the terms of the Pre-Approved Loan. Pre-Approved Lending User Guide 55

58 Art 1 In other words, the Credit Union should be contemplating will we still honor this Pre-Approved Loan,? given that when we established the maximum approved loan amount of $40,000.00, it was based on Art the 1 fact the member would be using $10, of that amount to pay off the existing trade-in Things to property loan by refinancing it into the new Pre-Approved Loan, when in fact, the member did not Consider and instead spent the entire $40, on the new vehicle resulting in a total debt of $50, ($10, from existing trade-in loan already on the books plus $40, from new vehicle? loan)? Art 2 Art 2 Art 3 Things to Consider! Caution! Caution Keep in mind, these processes are based on the fact that the member was sent to the dealership with an accurate Pre-Approved Lending documents but the member failed to adhere to their promise to use the trade-in property as part of the Pre-Approved Lending Transaction. The process describe above may not be used to circumvent the required practice of sending the member to the dealer with accurate Truth in Lending Disclosures. For example, if the dealer knows they will approve the member for an Amount Financed of $50,000, they cannot send them the dealer with Truth in Lending disclosures listing Amount Financed $40, Question Art Tip 3 17: What are some examples of when multiple Loan Types would be offered to a member? Tip The concept of Loan Types is discussed in Chapter 4 of the LOANLINER Closed-End Pre-Approved Lending Planning Guide. Being familiar with this discussion will aid in your understanding of Loan Types. Answer: When more than one Loan Type is offered, Truth in Lending Disclosures for each Loan Type must be provided to the member. The standard Pre-Approved Lending document selection supports up to two Loan Types. The first set of Truth in Lending Disclosures appear on the Pre- Approved Loan and Security Agreement and Truth in Lending Disclosure Pre-Approved Note and the second set appears on a Truth in Lending Disclosure (Pre-Approved) Additional TIL. Both Loan Types, and associated contract language, also appear in the Promise to Pay section on page 2 of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. Examples of when more than one Loan Type would be offered to a member for a given Pre- Approved Lending transaction, thus requiring an Additional TIL, include but are not limited to: 1. Different Interest Rates, but Term of Loan is the same: a) Member is interested in a 48 month loan for a vehicle, but is unsure if they will purchase a new vehicle with the 3.00% New Vehicle rate or a used vehicle with the 3.75% Used Vehicle rate. Solution: Disclosures for the New Vehicle Loan Type (3.00%, 48 month term) will be made on the Pre-Approved Note. Disclosures for the Used Vehicle Loan Type (3.75%, 48 month term) will be made on the Additional TIL. b) Member is interested in a 48 month loan for a vehicle, but is unsure what the Loan to Value ratio (LTV) will be, a factor that impacts the Interest Rate for the loan. If the LTV is under 90%, the interest rate is 3.25%, if the LTV is 90% or greater, the interest rate is 3.75%. Pre-Approved Lending User Guide 56

59 Solution: Disclosures for the <90% LTV Loan Type (3.25%, 48 month term) will be made on the Pre-Approved Note. Disclosures for the >=90% LTV Loan Type (3.75%, 48 month term) will be made on the Additional TIL. 2. Same Interest Rates, but Term of Loan is different: a) Member is interested in a loan for a vehicle, but is unsure if they will purchase a new vehicle or a used vehicle. In either case the interest rate will be 3.50%. However the Term of the Loan for the New Vehicle Loan Type is 60 months, while the Term of the Loan for the Used Vehicle Loan Type is 48 months. Solution: Disclosures for the New Vehicle Loan Type (3.75%, 60 month term) will be made on the Pre-Approved Note. Disclosures for the Used Vehicle Loan Type (3.75%, 48 month term) will be made on the Additional TIL. b) Member is interested in a New Vehicle Loan with an interest rate of 3.00% but wants their payment to be around $ regardless of the purchase price. After some quick calculations, the Credit Union determines this means member may end up with a loan term of 60 months or 72 months. Solution: Disclosures for the 60 Month New Vehicle Loan Type (3.00%, 60 month term) will be made on the Pre-Approved Note. Disclosures for the 72 Month New Vehicle Loan Type (3.00%, 72 month term) will be made on the Additional TIL. 3. Different Rate Types (e.g. Fixed Rate vs. Step Rate vs. Variable Rate) a) Fixed Rate vs. Step Rate (also known as an Intro Rate Loan) Member is interested in a loan for a vehicle, but is unsure if they will purchase a new vehicle or a used vehicle. In either case the interest rate will be 3.50%. However there is currently a 0.00% Interest Rate for 6 months promotion going on for the New Vehicle Loan Type, but not for the Used Vehicle Loan Type. Solution: Disclosures for the New Vehicle Loan Type (a Step Rate of 0.00% for six months, which then increases to 3.50% for remainder of loan, 60 month term) will be made on the Pre-Approved Note. Disclosures for the Used Vehicle Loan Type (Fixed Rate of 3.50% for the entire term of the loan, 60 month term) will be made on the Additional TIL. b) Fixed Rate vs. Variable Rate (Increasing interest rates) Member is interested in a New Vehicle Loan. Due to an environment of increasing interest rates, the Credit Union currently has two rate offers, 4.50% Fixed for 60 months or 3.50% Variable rate for 60 months. The member is unsure which option they are interested in at this time but still wants to go shopping for a new vehicle without having to return to the Credit Union. Solution: Disclosures for the Fixed Rate New Vehicle Loan Type (Fixed Rate of 4.50%, 60 month term) will be made on the Pre-Approved Note. Disclosures for the Variable Rate New Vehicle Loan Type (Variable Rate of 3.50%, 60 month term) will be made on the Additional TIL. Pre-Approved Lending User Guide 57

60 Art 1 Art 2 c) Fixed Rate vs. Variable Rate (Relationship Pricing*)? Things to Consider! Caution Member is interested in a New Vehicle Loan. The current terms for a new vehicle loan are a Fixed Rate of 4.00% for 60 months. However, the Credit Union offers a 0.25% rate discount (interest rate of 3.75%) if the member signs up for AutoPay with the Credit Union. This discount may be revoked during the term of the loan, resulting in the interest rate increasing back to 4.00%, should the member discontinue AutoPay. The member is unsure if they want to sign up for AutoPay at this time but still wants to go shopping for a new vehicle without having to return to the Credit Union. Solution: Disclosures for the Fixed Rate New Vehicle Loan Type (Fixed Rate of 4.00%, 60 month term) will be made on the Pre-Approved Note. Disclosures for the AutoPay New Vehicle Loan Type (Variable Rate* of 3.75%, 60 month term) will be made on the Additional TIL. * Relationship Pricing and Variable Rate Disclosures: Relationship Pricing refers to the practice of discounting an interest rate for a particular reason including, but not limited to: Member participation in a particular program(s) such as AutoPay, Direct Deposit, etc., When a member meets certain qualifications such as having a combination of a checking account, $10,000 on deposit, and at least 3 loans with the Credit Union, or When the member is an employee of the Credit Union If Art this 3 interest rate discount cannot be revoked by the Credit Union during the term of the loan, the discounted interest rate is disclosed as a Fixed Rate on loan documents and disclosures. If this interest rate discount can be revoked by the Credit Union during the term of the loan, the discounted interest rate is disclosed as a Variable Rate on loan documents and disclosures. This is because, Tip as defined in Regulation Z, Variable Rate is defined as an annual percentage rate (which) may increase after consummation and includes all transaction in which the terms of the legal obligation allow the creditor to increase the rate originally disclosed to the consumer. [Reg Z, (f) Variable Rate & Commentary 18(f)-1. Coverage] For Variable Rate Pre-Approved Loans, Variable Rate Promise to Pay language as well as Variable Rate Truth in Lending disclosures must appear on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and, if applicable, Truth in Lending Disclosure (Pre-Approved). Variable Rate language and disclosures for Relationship Pricing must detail: 1. how the interest rate discount can be lost, 2. any limits on the resulting interest rate increase, 3. the effect of the increase, and 4. an example of the payment terms that would result from such an interest rate increase. [Regulation Z, (f)(1)(i) thru (iv) Closed-end Variable Rate disclosure requirements]. Pre-Approved Lending User Guide 58

61 Chapter 10 Additional Guidance Sample 1 Pre-Approved Loan Scenario: Summary of Scenario: Individual pre-approved vehicle purchase Fixed rate of 4.00% # of Loan Types: 2 Pre-Approved Express Draft (Site Draft) used Credit Insurance is elected GAP is purchased and financed into the loan Extended Warranty waived Filing Fee will be financed Trade in: No Downpayment: No Details: John Q. Member is interested in purchasing a car that is less than 5 years old. He has no down payment and has no vehicle to trade-in. He has come to ABC Federal Credit Union to finance the loan for the car. At the Credit Union: On April 1st, John goes into his local branch to apply for a loan. With the help of Henry Collins, a Member Service Representative (MSR), John submits an application and is approved for up to $30,000 to purchase a car from a Dealership. John is not certain what make, model, or year of car he will end up with just that he needs a car to commute back and forth to his new job. Henry advises John he should consider using the Credit Union s Pre-Approved Lending program which will allow him to shop for his car without having to come back into the branch or deal with the hassle of the dealer s F&I department. John agrees and Henry makes certain to prepare the Pre-Approved Lending documents with two Loan Types, New Vehicle and Used Vehicle. Henry advises John to use the New Vehicle loan type if the car he purchases is the current model year & not previously titled or to use the Used Vehicle loan type if the car is the current model year and previously titled or if the car is 1 to 5 model years old. Henry reminds John that regardless of any of this, the car may not list salvage on the title and the Loan to Value ratio (LTV) cannot exceed 110%. The New Vehicle Loan Type has an interest rate of 4.00% with a term of 60 months. The Used Vehicle Loan Type has an interest rate of 4.00% with a term of 48 months. There is a $10.00 filing fee which John will be financing into the loan. John has chosen to elect Single Credit Disability and Single Credit Life Insurance. The cost of Credit Insurance is not financed into the loan but paid on a monthly basis and added onto the loan payments. John also wants to purchase Guaranteed Asset Protection (GAP) which he will finance into the loan. The cost of GAP is $400 regardless of the final loan amount or the value, age, make, etc. of the car John purchases. Pre-Approved Lending User Guide 59

62 ? At this Consider point, Henry will prepare the Pre-Approved Lending documents. Henry will give John the partially completed Pre-Approved Express Draft (Site Draft) (from now on referred to as the Express Draft). The Express Draft is the only document John will take to the dealership while shopping. Art 2 Best Practice Caution John is instructed by Henry not to provide the Dealer with the Express Draft until after he and Dealer have reached an agreed upon purchase price. Henry will also give John the rest of the Pre-Approved Lending documents to take home for safe keeping. These include the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures, an additional Truth in Lending Disclosures (Pre-Approved), Credit Insurance disclosures, Art 3 Things to! and information on Guaranteed Asset Protection (GAP). Tip To help John keep the two sets of documents separate, Henry uses LOANLINER Document Folders. These folders will not only help keep the two sets of documents separate, but also protect them as John travels from dealership to dealership shopping for his new car. Later at a Dealership: On April 30th, 2014, John picked out a 2014 Toyota Prius 4 door from Anytown USA Auto Sales. He negotiated a final sales price of $26, which includes tax, license, and various other fees with Monte Hall Jr. one of friendly dealers at Anytown USA Auto Sales. Once the deal was struck, John pulled out the Express Draft. John and Monte completed and signed it that day. Monte then faxed to Henry at the Credit Union a copy of the completed and signed Express Draft, along with a copy of the purchase order for the Prius, a copy of the application for title to the DMV showing ABC Federal Credit Union as the lien holder, and a copy of the MSRP Sticker from the Prius. Back at the Credit Union: Henry pulled the faxed information up on his computer and verified all the requirements for the loan were met, that the Express Draft was completed and signed by John and Monte per the instructions included, and all copies of other required documents were accounted for. Now that everything was in order, Henry was able to book the loan into the system and fund the loan that same day. Pre-Approved Lending User Guide 60

63 To create Sample these samples, 1 pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure sets forth the terms and conditions of the loan offered and extended by ABC Federal Credit Union 1 to the borrower(s) identified herein and is comprised of the following documents: (i) a Truth in Lending Disclosure for each available Loan Type; and (ii) a Loan and Security Agreement. 2 x FIXED RATE STEP RATE DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER VARIABLE RATE 3 April 1st, BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 8 John Q. Member N/A 123 Any Street Anytown, USA LOAN TYPE New Vehicle 17 TRUTH IN LENDING DISCLOSURE ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments The amount you will have paid after you have made ( 'e' means an estimate) Prepayment: If you pay off early you will not The cost of your credit as a yearly The dollar amount the The amount of credit have to pay a penalty. rate. credit will cost you. provided to you or on Required Deposit: The Annual Percentage your behalf. all payments as scheduled Rate does not take into account your % 11 $ 3, e $ 30, e $ 35, e required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay $ N/A 14 $ $ N/A 16 Late Charge: 20% of interest due if 7 or more days late, minimum of $5.00, maximum of $ Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments When Payments Are Due 59 1 $ $ monthly beginning 05/01/ /01/ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: N/A SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. 20 ITEMIZATION OF THE AMOUNT FINANCED ( 'e' means an estimate) Itemization of Amount Financed of Amount Paid on Your Account Prepaid Finance Charge a $ 30, b $ N/A c $ N/A Amounts Paid to Others on Your Behalf: (If an amount is marked with an asterisk (*) we will be retaining a portion of the amount.) d $ 29, To Approved and/or Independent Dealer $ * To Insurance Company $ To Public Officials $ To One or more additional Truth In Lending Disclosure(s) for other available Loan Types may be included on a following page and shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 61

64 Credit Union ABC Federal Credit Union Loan No Acct. No Borrower(s) John Q. Member N/A LOAN AND SECURITY AGREEMENT In this Loan and Security Agreement ("Agreement"), all references to "Credit Union," "we," "our," or "us," mean the Credit Union whose name appears above and anyone to whom the Credit Union assigns or transfers this Agreement. All references to "you," "your," or "borrower" mean each person who signs the Pre-Approved Express Draft ("Express Draft") as a borrower. All references to the "Disclosure Statement" shall refer to the Truth in Lending Disclosure(s) provided as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. All references to "Loan" shall mean, the amount actually borrowed pursuant to this Agreement, including without limitation any fees financed with the proceeds thereof and/or any amounts paid to others on your behalf or paid to us to satisfy a debt on your account. By signing the Express Draft (which is incorporated herein by reference) you acknowledge that you have received and read in full the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Express Draft and agree to the terms, obligations and conditions set forth in this Agreement and the Express Draft. 1. SELECTION OF LOAN TYPE - You acknowledge and agree that we have provided a Disclosure Statement setting forth the estimated terms of each Loan Type being offered to you by the Credit Union. The Loan Type is specified on the Disclosure Statement(s) provided in connection herewith. You agree to fill-in the Loan Type you have selected on the Express Draft in accordance with the instructions set forth therein. You further acknowledge and agree that the terms of the Loan will correspond to the terms of the Loan Type you select but that certain terms may vary depending on the actual amount and date of the Loan PROMISE TO PAY - You promise to pay to the Credit Union the principal amount of the Loan plus interest on the unpaid balance until the entire outstanding balance plus interest has been repaid. The interest rate(s) applicable to each available Loan Type are set forth below. Interest will begin to accrue on the date we pay the Express Draft. Loan Type: New Vehicle The interest rate will be 4.00 % per year. Variable Rate: N/A Loan Type: Used Vehicle The interest rate will be 4.00 % per year. Variable Rate: N/A COLLECTION COSTS - You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. 4. PAYMENTS - You promise to make regular payments of principal and interest in accordance with the payment schedule set forth on the Pre-Approved Express Draft Confirmation Receipt (the "Confirmation") you will receive shortly after your purchase. You acknowledge and agree that the amount of the payments and the due dates of such payments may vary from those disclosed in the Disclosure Statement depending on the amount and date of the Loan. You may prepay any amount without penalty at any time. If you prepay any part of what you owe, you are still required to make the regularly scheduled payments, unless we have agreed to a change in the payment schedule. Because this is a simple interest loan, if you do not make payments when due, your final payment may be more or less than the amount of the final payment disclosed to you. If you elect voluntary payment protection, we will either include the premium or program fees in your payments or extend the term of your Loan. If the term is extended, you will be required to make additional payments of the scheduled amount, until what you owe has been paid. You promise to make all payments in a manner and at a location acceptable to us. Unless otherwise required by law, payments will be applied to amounts owed in the manner we choose. 5. LATE CHARGE - If you are late in making a payment, you promise to pay the late charge shown in the Disclosure Statement. If no late charge is disclosed on the Disclosure Statement, none will be charged. 6. TRADE IN - If you are trading in a vehicle or other property as part of the purchase transaction associated with this Loan, we have calculated the approved loan amount based on this fact. Thus, if you decide not to trade in your vehicle or other property as originally agreed, this Agreement is void. 7. SECURITY AGREEMENT. a. THE SECURITY FOR THE LOAN - You give us a security interest in the property described in the Security Offered section of the Express Draft ("Property"). The security interest you give includes all accessions (things that are attached to or installed in the Property now or in the future). The security interest also includes any replacements for the Property which you buy within 10 days of the Loan and any extensions, renewals or refinancings of the Loan. It also includes any money you receive from selling the Property or from insurance you have on the Property. If the value of the Property declines, you agree to give us more property as security if asked to do so. In addition to the Property, property securing other loans you have with us also secures this Loan, unless the property is a principal dwelling. In addition to your pledge of shares, we may also have what is known as a statutory lien on all individual and joint accounts you have with us. A statutory lien means we have the right under federal law and many state laws to claim an interest in your accounts. We can enforce a statutory lien against your shares and dividends, and if any, interest and deposits, in all individual and joint accounts you have with us to satisfy any outstanding financial obligation that is due and payable to us. We may exercise CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 62

65 Explanation of Sample: 1. Credit Union Name ABC Federal Credit Union The Credit Union s legal name needs to appear in this location even if it already appears above or as part of the logo at the top of the page. 2. Rate Type Fixed Rate box checked The Fixed Rate box is checked, signifying the rate on this Loan Type, New Vehicle, is not scheduled to change during the loan term. 3. Date 04/01/2014 This is the date the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure was prepared by Henry and delivered to John. 4. Loan Number This is the loan number the Credit Union assigned to John s loan. 5. Express Draft Number This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up their Pre-Approved Lending program. This number will appear on all the various Pre-Approved Lending documents Henry gives to John. It is used for two primary reasons: a) It allows Henry to track John s Pre-Approved Lending documents throughout the preapproved loan process. b) Ensures that John knows all the various Pre-Approved Lending documents he is about to receive are part of one loan transaction. 6. Account Number John s member number. 7. Group Policy Number ABC Federal Credit Union s Group Policy Number from CUNA Mutual Group, also known as their Contract Number. 8. Borrower(s) Name and Address John s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as John is the only borrower. 9. Loan Type New Vehicle This indicates the disclosures presented on this document, the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, are those for the New Vehicle loan type. The disclosures for the other loan type Henry is offering to John, Used Vehicle, will be disclosed on the additional Truth in Lending Disclosures (Pre-Approved). 10. Annual Percentage Rate 4.00% In this example, the Annual Percentage Rate (APR) and the contract interest rate are the same, 4.00%. This is because the interest rate does not change over the period of the loan nor does the loan include any finance charge other than simple interest. Unlike other disclosures on this document, the APR is not estimated. This is because the APR is actually known at the time Henry completed this document. Pre-Approved Lending User Guide 63

66 11. Finance Charge $3, e This is the total finance charge for the New Vehicle loan type based on the loan terms of 4.00% for 60 months on $30, Since John s loan does not involve any prepaid finance charges, this amount is made up entirely of interest charges. Henry used an e for estimate beside this amount as it is based on the maximum approved loan amount of $30,000 rather than the final actual loan amount which is unknown at this point in the transaction. 12. Amount Financed $30,000 e This is the maximum approved loan amount. John may use up to this amount not only to purchase his car, but also to finance the cost of GAP coverage ($400) and the filing fee ($10.00). The cost of Credit Insurance is not included in the amount financed, but instead is paid monthly along with his principle and interest payment. Henry used e for estimate beside this amount because,? at this point in the transaction, he does not know the final actual loan amount. Art Total of Payments $35, e Things to Consider This amount equals the sum of all of the payments listed in the Your Payment Schedule will be: section (referred to as the Payment Schedule ). Since the cost of the Credit Insurance John elected was included in the payment amounts disclosed in the Payment Schedule, the cost of Credit Insurance must also be included in the Total of Payments disclosure. Art 2 Art 3! Caution When the cost of monthly Payment Protection is included in the payment amounts disclosed in the Payment Schedule and thus in the Total of Payments disclosure, the Finance Charge plus Amount Financed will not equal the Total of Payments. While this may seem odd, this disclosure of Finance Charges, Amount Financed and Total of Payments is accurate. Henry used e for estimate beside the Total of Payments disclosure as this amount, like the payment amounts disclosed in the Payment Schedule, are estimates based on the maximum approved loan amount, not the final actual loan amount which is unknown at this point. 14. Property Insurance N/A Tip In this example the Credit Union doesn t sell property insurance, but instead requires John to purchase his own policy from an acceptable insurance company. 15. Filing Fee $10.00 In this example, the filing fee is financed into the loan. Since this is a known amount which will not vary between the time Henry give this document to John and when the fee is actually paid, Henry cannot use an e for estimate. 16. Non-Filing Insurance N/A In this example, the Credit Union does not require non-filing insurance as they are filing a lien with the Department of Motor Vehicles. 17. Late Charge 20% of interest due if 7 or more days late with a minimum of $5.00 and maximum of $ This is simply a statement of the Credit Union s late fee policy. 18. Payment Schedule At this point in the transaction, neither Henry nor John knows the final loan amount or the closing date of the loan. Regardless, (g) still requires Henry to enter in Payment Schedule disclosures. Luckily Henry can enter in estimated payment amounts and payment due dates as (c) allows estimates when this information is reasonably unknown at time Payment Schedule disclosures are made. Pre-Approved Lending User Guide 64

67 Things to Consider Art 1 Art 2 Art 3 Art 2 In regards to the payment due dates, while ABC Federal has a policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed (e.g. if the loan closes! on 04/01/2014 the first payment is due on 05/01/2014) Henry has no idea when John s Caution loan will actually close. To account for this, the Credit Union has a policy of assuming John s loan will close right away on 04/01/2014, the first day possible loan could close. The estimated Payment Schedule due date disclosure is then based around that date. The loan system uses these policies and creates a first payment due date of 05/01/2014. Art 3 Tip? When developing policies regarding estimating the first payment due date, Regulation Z Truth in Lending does not require the use of a particular date such as the first possible day the loan could close. Rather Regulation Z requires estimates be made based on the best information reasonably available at the time disclosures are made. Your Credit Union should already have established policies regarding the use of estimates for the Payment Schedule due date disclosures. In regard to the payment amounts, the Credit Union s loan system will use the maximum approved loan amount of $30,000.00, just as it has with previous Truth in Lending disclosures. Things to Consider Based on these two estimates, the Payment Schedule is completed showing 59 monthly payments of $ beginning on 05/01/2014 and 1 final payment of $ on 04/01/2019.! Caution Tip Henry needs to ensure he discusses with John the difference between the estimated Payment Schedule disclosures which appear on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures for the New Vehicle Loan Type and the final actual Repayment Terms which will appear on the Pre-Approved Express Draft Confirmation Receipt which John will receive shortly after Loan Closing. It is important John understands, regardless of the estimated due dates and estimated payment amounts he is provided at this point in the transaction, his final actual payment due dates and payment amounts may vary based on the amount of the loan and the loan type used. Please consult with your Credit Union s policies when completing the Payment Schedule to determine the appropriate estimated due dates to disclose. 19. Variable Rate N/A This reinforces the interest rate for the Loan Type New Vehicle is a Fixed Rate, not a Variable Rate. This corresponds to the Fixed Rate checkbox above. 20. Itemization of Amount Financed a) Itemization of Amount Financed $30,000 This is the amount shown in the Amount Financed section above as required per Regulation Z, Section (c). This amount does not need to be marked with an e for estimate as Amount Financed above is already marked with and e for estimate. b) Amount Paid on Your Account N/A John s loan does not involve the payoff of a loan at ABC Federal Credit Union, so this section is marked N/A. c) Prepaid Finance Charge N/A There are no Prepaid Finance Charges associated with John s loan. d) Amount Paid to Others on Your Behalf John s loan involves the Credit Union making several payments to third-parties on John s behalf from the loan proceeds. 1) $29, To Approved and/or Independent Dealer The maximum possible amount of the final loan proceeds that may be sent to the Dealer. Pre-Approved Lending User Guide 65

68 2) $400.00* To Insurance Company The cost of the Guaranteed Asset Protection (GAP) coverage John is financing into this loan. The asterisk indicates the Credit Union is retaining a portion of this amount. 3) $10.00 To Public Officials The cost of the filing fee which John is financing and all of which will be sent to the DMV by the Credit Union. Regulation Z allows for use of the general category Public Officials for filing fees rather than the full name Department of Motor Vehicles. 21. Promise to Pay For John s loan, Henry uses both of the two available Loan Type sections of 2. Promise to Pay. The Loan Types of New Vehicle and Used Vehicle and their corresponding interest rates, both of which are 4.00%, were disclosed as shown. A period. was placed in the field immediately to the right of the words per year in both cases. These sentences align with the fact the New Vehicle and Used Vehicle loan types both have a Fixed Rate which will not change over the term of the loan. The fields between this first line and the words Variable Rate: are used for Step Rate loan language. For John s loan, these fields are left blank. Henry also ensured the system generated an N/A in the Variable Rate: field of both Loan Type sections to reinforce these Loan Types do not involve a variable rate. 22. Collection Costs You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. This is the collection cost language Henry s collections officer and legal counsel required to be listed based on the applicable laws they researched. Pre-Approved Lending User Guide 66

69 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Sample with circle 1numbers to use as a graphic for the manual. (maz) Truth in Lending Disclosure (Pre-Approved) x FIXED RATE STEP RATE VARIABLE RATE 2 NAME AND ADDRESS 7 John Q. Member 123 Any Street Anytown, USA Truth in Lending Disclosure (Pre-Approved) DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER April 1st, BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) N/A LOAN TYPE Used Vehicle TRUTH IN LENDING DISCLOSURE ( 'e' means an estimate) ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Prepayment: If you pay off early you will not 11 12Total of Payments The cost of your credit as a yearly The dollar amount the The amount of credit The amount you will have have to pay a penalty. rate. credit will cost you. provided to you or on paid after you have made Required Deposit: The Annual Percentage your behalf. all payments as scheduled. 9 Rate does not take into account your 4.00% 10 $ 2, e $ 30, e $ 34, e required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay $ N/A 14 $ $ N/A Late Charge: 20% of interest due if 7 or more days late, minimum of $5.00, maximum of $ Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments When Payments Are Due 47 1 $ $ monthly beginning 05/01/ /01/ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: N/A SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. This document shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2011, 13 All Rights Reserved NXX334-e Pre-Approved Lending User Guide 67

70 Explanation of Sample: 1. Rate Type Fixed Rate box checked The Fixed Rate box is checked, signifying the rate on this Loan Type, Used Vehicle, is not scheduled to change during the loan term. 2. Date 04/01/2014 This is the date the Truth in Lending Disclosures (Pre-Approved) was prepared by Henry and delivered to John. 3. Loan Number , This is the loan number the Credit Union assigned to John s loan. 4. Express Draft Number , This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up their Pre-Approved Lending program. This number will appear on all the various Pre-Approved Lending documents Henry gives to John. It is used for two primary reasons: a) It allows Henry to track John s Pre-Approved Lending documents throughout the preapproved loan process. b) Ensures that John knows all the various Pre-Approved Lending documents he is about to receive are part of one loan transaction. 5. Account Number John s member number. 6. Group Policy Number ABC Federal Credit Union s Group Policy Number from CUNA Mutual Group, also known as their Contract Number. 7. Borrower(s) Name and Address John s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as John is the only borrower. 8. Loan Type Used Vehicle This indicates the disclosures presented on this document, the Truth in Lending Disclosures (Pre-Approved), are those for the Used Vehicle loan type. The disclosures for the other loan type Henry is offering to John, New Vehicle, were disclosed on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. 9. Annual Percentage Rate 4.00% In this example, the Annual Percentage Rate (APR) and the contract interest rate are the same, 4.00%. This is because the interest rate does not change over the period of the loan nor does the loan include any finance charge other than simple interest. Unlike other disclosures on this document, the APR is not estimated. This is because the APR is actually known at the time Henry completed this document. 10. Finance Charge $2, e This is the total finance charge for the Used Vehicle loan type based on the loan terms of 4.00% on $30,000 for 48 months. Since John s loan does not involve any prepaid finance charges, this amount is made up entirely of interest charges. Henry used an e for estimate beside this amount as it is based on the maximum approved loan amount of $30,000 rather than the final actual loan amount which is unknown at this point in the transaction. Pre-Approved Lending User Guide 68

71 11. Amount Financed $30,000 e This is the maximum approved loan amount. John may use up to this amount not only to purchase his car, but also to finance the cost of GAP coverage ($400) and the filing fee ($10.00). The cost of Credit Insurance is not included in the amount financed, but instead is paid monthly along with his principle and interest payment. Henry used e for estimate beside this amount because, at this point in the transaction, he does not know the final actual loan amount. Art Total of Payments $34, e Things This to amount equals the sum of all of the payments listed in the Your Payment Schedule will be: Consider section (referred to as the Payment Schedule ). Since the cost of the Credit Insurance John elected was included in the payment amounts disclosed in the Payment Schedule, the cost of Credit Insurance must also be included in the Total of Payments disclosure. Art 2 Art 3?! Caution When the cost of monthly Payment Protection is included in the payment amounts disclosed in the Payment Schedule and thus in the Total of Payments disclosure, the Finance Charge plus Amount Financed will not equal the Total of Payments. While this may seem odd, this disclosure of Finance Charges, Amount Financed and Total of Payments is accurate. Henry used e for estimate beside the Total of Payments disclosure as this amount, like the payment amounts disclosed in the Payment Schedule, are estimates based on the maximum approved loan amount, not the final actual loan amount which is unknown at this point. 13. Property Insurance N/A In this example the Credit Union doesn t sell property insurance, but instead requires John to Tip purchase his own policy from an acceptable insurance company. 14. Filing Fee $10.00 In this example, the filing fee is financed in to the loan. Since this is a known amount that will not vary, between the time Henry give this document to John and when the fee is actually paid, Henry cannot use an e for estimate. 15. Non-Filing Insurance N/A In this example, the Credit Union does not require non-filing insurance as they are filing a lien with the Department of Motor Vehicles. 16. Late Charge 20% of interest due if 7 or more days late with a minimum of $5.00 and maximum of $ This is simply a statement of the Credit Union s late fee policy. 17. Payment Schedule At this point in the transaction, neither Henry nor John knows the final loan amount or the closing date of the loan. Regardless, (g) still requires Henry to enter in Payment Schedule disclosures. Luckily Henry can enter in estimated payment amounts and payment due dates as (c) allows estimates when this information is reasonably unknown at time Payment Schedule disclosures are made. In regards to the payment due dates, while ABC Federal has a policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed (e.g. if the loan closes on 04/01/2014 the first payment is due on 05/01/2014) Henry has no idea when John s loan will actually close. To account for this, the Credit Union has a policy of assuming John s loan will close right away on 04/01/2014, the first day possible loan could close. The estimated Payment Schedule due date disclosure is then based around that date. The loan system uses these policies and creates a first payment due date of 05/01/2014. Pre-Approved Lending User Guide 69

72 ! Caution Art 1 Art 2 Art 3 Art 3 Tip? When developing policies regarding estimating the first payment due date, Regulation Z Truth in Lending does not require the use of a particular date such as the first possible day the loan could close. Rather Regulation Z requires estimates be made based on the best information reasonably available at the time disclosures are made. Your Credit Union should already have established policies regarding the use of estimates for the Payment Schedule due date disclosures. In regard to the payment amounts, the Credit Union s loan system will use the maximum approved loan amount of $30,000.00, just as it has with previous Truth in Lending disclosures. Things to Consider Based on these two estimates, the Payment Schedule is completed showing 47 monthly payments of $ beginning on 05/01/2014 and 1 final payment of $ on 04/01/2018.! Caution Tip Henry needs to ensure he discusses with John the difference between the estimated Payment Schedule disclosures which appear on the Truth in Lending Disclosures (Pre- Approved) for the Used Vehicle Loan Type and the final actual Repayment Terms which will appear on the Pre-Approved Express Draft Confirmation Receipt which John will receive shortly after Loan Closing. It is important John understands, regardless of the estimated due dates and estimated payment amounts he is provided at this point in the transaction, his final actual payment due dates and payment amounts may vary based on the amount of the loan and the loan type used. Please consult with your credit union s policies when completing the Payment Schedule to determine the appropriate estimated Due Dates to disclose. 18. Variable Rate N/A This reinforces the interest rate for the Loan Type Used Vehicle is a Fixed Rate, not a Variable Rate. This corresponds to the Fixed Rate checkbox above. Pre-Approved Lending User Guide 70

73 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Sample with circle 1 numbers to use as a graphic for the manual. (maz) Pre-Approved Express Draft (Site Draft) This section explains the areas of the Express Draft to be filled out by the Credit Union. 1 6 Pre-Approved Express Draft (Site Draft) ACCOUNT NUMBER CREDIT UNION CONTACT CREDIT UNION TELEPHONE CREDIT UNION FAX EXPRESS DRAFT NUMBER Henry Collins BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) John Q. Member 7 N/A 123 Any Street Anytown, USA TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: 8 9 i) New Vehicle ii) Used Vehicle B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: No salvage, Max LTV 110% New Vehicle: current model year & not previously titled Used Vehicle: previously titled current model year or vehicle one to five model years old 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* ABC Federal Credit Union Credit Union Avenue 3 Give the completed Express Draft to Dealer. Anytown, USA Electronic Lien Title Code: *See page 2 for additional Dealer instructions THIS PRE-APPROVED EXPRESS DRAFT WILL NOT BE PAID UNLESS ALL INFORMATION IS COMPLETE. Loan Type: 11 Approved Limit: $ 29, Date Issued: 04/01/ Void After: 05/01/2014 ABC Federal Credit Union will Pay to: Credit Union Dealer $ Amount in Numbers Dollars, subject to final settlement Amount in Words Security Offered: 15 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Year Make Model Type VIN / ID # SIGNATURES By signing or otherwise authenticating, all parties agree to the terms and conditions of this Express Draft including those on page 2. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Borrower 1 Signature X John Q. Member Borrower 2 Signature X N/A CUNA Mutual Group 2011, 13 All Rights Reserved (Seal) (Seal) Date Date Type or Print Name of Authorized Representativeof Dealer Signature of Authorized Representative of Dealer X Page 1 of 2 Phone Number (Seal) Date NXX710-e Pre-Approved Lending User Guide 71

74 Explanation of Sample: The following items (1 through 16) were completed by Henry at the Credit Union prior to handing the Pre-Approved Express Draft (Site Draft) Express Draft over to John. The remainder of the items (17 through 24 in the sample below) will be completed by John and Monte at the dealership. 1. Account Number John s member number. 2. Credit Union Contact Henry Collins In this example, Henry Collins is the Member Service Rep (MSR) at the Credit Union whom John the member or Monte the dealer should contact if they have any questions while completing the Express Draft. 3. Credit Union Telephone Number (231) This is Henry Collins direct line at the credit union. 4. Credit Union Fax Number (231) This is the fax number Monte needs to use when faxing back to Henry at the Credit Union a copy of the completed and signed Express Draft, a copy of the Purchase Order, a copy of the Application for Title, a copy of the NADA value, and copies of any other documents required. 5. Express Draft Number This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up the Pre-Approved Lending program. This number will appear on all the Pre-Approved Lending documents Henry gives to John. It is used for two primary reasons: a) It allows Henry to track John s Express Draft throughout the Pre-Approved Loan process. b) Reinforces for John that all the Pre-Approved Lending documents he receives are part of one larger loan transaction. 6. Borrower 1 Name and Address John s full name and address were entered in this section. 7. Borrower 2 Name and Address N/A Indicates John is the only borrower on this loan. 8. Available Loan Types New Vehicle & Used Vehicle Henry lists the two loan types available to John when purchasing his car. John and Monte will use this as a reference when completing 17. Loan Type below. Art 1 9. Requirements No salvage, Max LTV 110%, New Vehicle: current model year & not previously titled,? Used Vehicle: previously titled current model year or vehicle one to five model years old. Art 2 In this example, John may use the Pre-Approved Express Draft (Site Draft) to purchase a New Vehicle which is defined as a current model year vehicle which has not been previously titled or he may purchase a Used Vehicle which is defined as a previously titled current model year vehicle or which is five or fewer model years old. In either case the vehicle may not have Salvage listed on the title, nor can the Loan to Value ratio (LTV) be greater than 110%. Things to Consider! Caution It is important John keep these requirements in mind when shopping for his new car. If John purchases a car from Monte which does not meet these requirements, Henry is not obligated to honor the Express Draft. Art 3 Pre-Approved Lending User Guide 72 Tip

75 10. Lien Recording ABC Federal Credit Union 321 Credit Union Avenue Anytown, USA Electronic Lien Title Code: This is the name, address and Electronic Lien Title Code information the Credit Union wants Monte to use in the lien portion of the title paper work he files for John s car. 11. Approved Limit $29, In this example, Henry lists on John s Pre-Approved Express Draft (Site Draft) $29, as his Approved Limit. Henry arrived at this amount by taking the maximum pre-approved loan amount, $30,000.00, and subtracting out the two additional amounts John told Henry he wanted to finance, a) the $ for GAP and b) the $10.00 filing fee. By listing the lower amount of $29, instead of $30,000, Henry is helping ensure John does not inadvertently exceed the $30,000 maximum pre-approved loan amount when purchasing his car. 12. Date Issued April 1st, 2014 This is the date the Express Draft was prepared by Henry for John. 13. Void After May 1st, 2014 This reflects the fact this Pre-Approved Express Draft (Site Draft) is only valid for 30 days. If John needs more time, he would need to contact Henry for an extension, otherwise the offer will expire. 14. Credit Union ABC Federal Credit Union Henry made certain the Credit Union s name was completed in this space prior to giving the Express Draft to John. 15. Security Offered N/A (in the 2nd and 3rd set of fields) In this example, the ABC Federal Credit Union has purchased from LOANLINER a version of the Pre-Approved Express Draft (Site Draft) with three Security Offered lines as opposed to the version with only one Security Offered line. Since this is a Best Practice single vehicle purchase loan, Henry placed N/A in the 2nd and 3rd set of lines to indicate John may only purchase one vehicle, not two or three vehicles. 16. Borrower(s) Name John Q. Member John s name was preprinted here by Henry. Pre-Approved Lending User Guide 73

76 Sample 1 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Pre-Approved with circle numbers Express to use as a graphic Draft for the (Site manual. Draft) (maz) This section explains the areas of the Express Draft to be filled out by the borrower and dealer. ACCOUNT NUMBER CREDIT UNION CONTACT CREDIT UNION TELEPHONE Pre-Approved Express Draft (Site Draft) CREDIT UNION FAX EXPRESS DRAFT NUMBER Henry Collins BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) John Q. Member N/A 123 Any Street Anytown, USA TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: i) New Vehicle ii) Used Vehicle B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: No salvage, Max LTV 110% New Vehicle: current model year & not previously titled Used Vehicle: previously titled current model year or vehicle one to five model years old 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* ABC Federal Credit Union 321 Credit Union Avenue 3 Give the completed Express Draft to Dealer. Anytown, USA Electronic Lien Title Code: *See page 2 for additional Dealer instructions THIS PRE-APPROVED EXPRESS DRAFT WILL NOT BE PAID UNLESS ALL INFORMATION IS COMPLETE. Loan Type: New Vehicle Approved Limit: $ 29, Date Issued: 04/01/2014 Void After: 05/01/2014 ABC Federal Credit Union 18 will Pay to: Anytown USA Auto Sales Credit Union Dealer $ 26, Amount in Numbers Twenty Six Thousand Nine Hundred Fifty Two and 31/100 Dollars, subject to final settlement Amount in Words Security Offered: 2014 Toyota Prius 4 Door A1B2C3D4 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Year Make Model Type VIN / ID # SIGNATURES By signing or otherwise authenticating, all parties agree to the terms and conditions of this Express Draft including those on page 2. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Borrower 1 Signature Date 22 X 04/30/ John Q. Member (Seal) Monte Hall Jr. John Q. Member Type or Print Name of Authorized Representativeof Dealer Phone Number Borrower 2 Signature Date Signature of Authorized Representative of Dealer Date 24 04/30/2014 X (Seal) X Monte Hall Jr (Seal) N/A CUNA Mutual Group 2011, 13 All Rights Reserved Page 1 of 2 NXX710-e Pre-Approved Lending User Guide 74

77 Explanation of Sample: Items 17 through 24 are completed by John Q. Member (Borrower) or Monte Hall Jr. (Dealer) after negotiating a purchase price. 17. Loan Type New Vehicle Since the Prius which John purchased meets the requirements of the New Vehicle loan type (e.g. a previously untitled, current model year Prius which does not list Salvage on the title nor causes the LTV to exceed 110%), Monte Hall Jr. and John wrote in New Vehicle. 18. Will Pay To: (Dealer) Anytown USA Auto Sales Monte Hall Jr. wrote in the name of his Dealership, Anytown USA Auto Sales, to indicate where John purchased his Prius. This is also to whom Henry at the Credit Union should make the dealer s portion of the loan funds payable. Art Amount in Numbers $26, The final cost of John s new Prius, including all taxes and fees, was written in by Monte Hall Jr. 20. Amount in Words Twenty six thousand, nine hundred and fifty two 31/100 Things Monte to wrote in the final purchase price in words. 21. Security Offered 2014 Toyota Prius 4 Door A1B2C3D4 A full description of John s Prius, including model year, make, model, description, and VIN # is filled in by Monte Hall Jr. Art 2 Art 3? Consider! Caution This step is critical to the collectability of the loan. This is the only place on any of the Pre-Approved Lending Documents were the identification of the collateral securing the loan occurs. Henry will need to ensure this information is accurate before funding the loan. 22. Borrower(s) Signatures John Q. Member This is where John signed and dated the completed Pre-Approved Express Draft (Site Draft), agreeing to the terms of not only this document, but also the terms of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. 23. Name and Phone Number of Authorized Representative of Dealer (printed) Monte Hall Jr. Tip Monte, the Dealer who handled the car purchase for John, printed his name and phone number in this space so Henry, at the Credit Union, would know whom to call at the dealership with any questions regarding the Pre-Approved Loan. 24. Authorized Representative of Dealer Signature and Date Monte Hall Jr. Monte signed and dated the completed Express Draft agreeing it was completed correctly and thoroughly. By signing, Monte is also agreeing to provide all the necessary documents to Henry and process any required title work on the new minivan as well as the trade-in Honda Civic. Pre-Approved Lending User Guide 75

78 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Sample with circle 1numbers to use as a graphic for the manual. (maz) Pre-Approved Express Draft Confirmation Receipt Pre-Approved Express Draft Confirmation Receipt 1 John Q. Member 123 Any Street Anytown, Anystate Congratulations on your recent purchase. Listed below are the final terms of your loan agreement for your records. You will receive a 60-month coupon book within 7-10 business days. Please remember to send verification of insurance coverage for the vehicle listed below within 14 days to ABC Federal Credit Union, 321 Credit Union Avenue, Anytown, USA 12345, or fax to If you have any questions, please feel free to contact us at Thank you for choosing ABC Federal Credit Union for your financing needs. LOAN TYPE LOAN DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER New Vehicle 04/30/ BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) John Q. Member N/A Any Street Anytown, USA Anytown, Anystate DISBURSEMENT DETAILS Paid to Dealer 9 $ 26, Paid on Your Loan(s) with Us 10 $ N/A 11 Paid to Others on Your Behalf for Public Officials for $ $ You have elected the following other coverages (if applicable): 12 Guaranteed Asset Protection a b $ Extended Warranty a You have elected the following Voluntary Payment Protection (if applicable): b Total Loan Amount: $ 14 N/A 27, Credit Insurance 15 Insurance Charge Single Credit Disability $ 1, Joint Credit Disability $ N/A Single Credit Life $ Joint Credit Life $ N/A 16 Your Payment Schedule Will Be: REPAYMENT TERMS Number of Payments Amount of Payments When Payments Are Due 59 $ monthly beginning 05/30/ $ /30/2019 This Confirmation Receipt confirms the terms of your recent purchase pursuant to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, Voluntary Payment Protection and/or other coverages elected by you (if applicable) and the Pre-Approved Express Draft executed in connection therewith. Please retain this for your records. CUNA Mutual Group 2011, 13 All Rights Reserved NXX833-e Pre-Approved Lending User Guide 76

79 Explanation of Sample: NOTE: The Pre-Approved Express Draft Confirmation Receipt ( Confirmation Receipt ) is not a Truth in Lending disclosure but rather a contractual statement of the final terms of the loan to the borrower. As such there is no use of e for estimate. 1. Borrower(s) Name and Address (window envelope) John Q. Member Since ABC Federal Credit Union uses window envelopes, John s name and address, copied from Borrower 1 below, was printed here. 2. Message from Credit Union ABC Federal Credit Union used this space to congratulate John on his vehicle purchase, to notify him, he will be receiving a coupon book, and to request he send in a copy of his verification of insurance coverage to the Credit Union. 3. Loan Type New Vehicle Henry listed New Vehicle indicating which Loan Type was utilized for John s loan. This corresponds to the Loan Type John selected on the Pre-Approved Express Draft (Site Draft). 4. Loan Date 04/30/2014 This is the date the loan was booked in the Credit Union s system. 5. Loan Number , This is the number assigned to John s loan by the Credit Union. 6. Express Draft Number , This Express Draft Number matches those appearing on all the other Pre-Approved Lending documents Henry gave to John. 7. Account Number John s member number. 8. Borrower(s) Name and Address John s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as this is an individual loan. Art 1 9. Paid to Dealer $26, In this example, the Paid to Dealer section lists the amount paid to the Anytown USA Auto Sales. This includes any applicable taxes and fees paid to the Dealer. 10. Paid on Your Loan with Us N/A Things Because to John s loan did not include paying off an existing loan at the Credit Union, Henry Consider marked this line N/A. He could have also marked it with $ Paid to Others on Your Behalf Public Officials This indicates $10.00 was sent to the Department of Motor Vehicles by the Credit Union. Art 2 Art 3?! Caution Had Monte at the Dealership been the one to send the $10.00 to the DMV, this section would list N/A $0.00 as the $10.00 would have been part of the Purchase Order and included in the Paid to Dealer amount. 12. Guaranteed Asset Protection a) In this example, this space is deliberately left blank. b) $ Tip Pre-Approved Lending User Guide 77

80 Things to Consider Art 2 Art 3! Since John financed the cost of GAP into his loan, rather than paying for it outside of the loan, this space immediately to the right of the words Guaranteed Asset Protection, was left blank. Caution Henry listed the $ cost of GAP to the far right. This indicates not only that John selected GAP coverage, but he chose to finance it with the Loan Proceeds. Tip See Pre-Approved Loan Scenario 3 for an example of how the cost of GAP or Extended Warranty is listed if the member pays in cash or otherwise outside of the loan. 13. Extended Warranty / MRC a) In this example, this space is deliberately left blank. b) N/A John did not to purchase Mechanical Repair Coverage, the Credit Union s brand of Extended Warranty protection. To make certain John knows he declined this protection, Henry indicated N/A to the far right of Extended Warranty. 14. Total Loan Amount $27, This is the final amount of John s loan. For John s loan, this amount is made up of the $26, paid to Anytown USA Auto Sales, the $10.00 filing fee paid to the DMV, and the $ for GAP coverage. 15. Voluntary Payment Protection This section is used to remind John of his Credit Insurance elections and provide him with the new estimated costs. 16. Repayment Terms At this point in the transaction, Henry knows the final actual loan amount, the term of the loan, and the loan closing date. This means Henry can finally disclose to John the actual payment amounts and due dates for his loan. While this is not a Regulation Z Truth in Lending disclosure, the Repayment Terms are required for contractual purposes. Henry lists the payment details as shown in accordance with ABC Federal s policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed. Best Practice Since Henry was not able to disclose the final actual due dates to John at the beginning of this Pre-Approved Lending transaction, it is critical Henry deliver this confirmation receipt to him as soon as possible so John can avoid any delinquency or even default. Pre-Approved Lending User Guide 78

81 Sample 2 Pre-Approved Vehicle Loan Scenario: Summary of Scenario: Joint pre-approved vehicle purchase Fixed Step rate of 0.00% for six months then 4.00% for the remainder of the loan term. # of Loan Types: 1 Pre-Approved Express Draft (Check) used along with Credit Union Check Stock Credit Insurance is waived GAP is waived Extended Warranty is purchased and financed into the loan Filing Fee will be paid in cash Trade in: Yes Downpayment: Yes Details: Bob Smith and his wife Sally Smith are interested in purchasing a new minivan. They have a down payment of $10,000 saved up when they decide to apply for a loan from ABC Federal Credit Union. They are planning on trading in their 2008 Honda Civic as part of the deal. The payoff amount for the loan on the Honda Civic with The Other Guys Bank is $4, At the Credit Union: On April 1st, Bob and Sally go into their local ABC Federal branch to apply for a loan. With the help of Henry Collins, a Member Service Representative (MSR), Bob and Sally submit an application and are approved for up to $40,000 to purchase a minivan from a Dealership. Henry clarifies with Bob and Sally, the $40,000 loan approval is based on the fact they are trading in their Honda and should they change their minds about the trade-in, they need to contact him right away as it may affect their maximum approved loan amount. Bob and Sally are not certain which make or model of minivan they want, but are set on buying a brand new minivan to accommodate their growing family of five. Henry advises them they should consider using the Credit Union s Pre-Approved Lending program which will allow them to shop for their mini-van without having to come back into the branch or deal with the hassle of the dealer s F&I department. Henry lets the Smiths know that he will be sending the check to The Other Guys Bank for the payoff of the loan on their trade-in once the loan paperwork comes back from the Dealership. Bob and Sally agree and Henry makes certain to prepare the Pre-Approved Lending documents with only one loan type New Vehicle. Henry advises Bob and Sally the New Vehicle loan type will allow them to purchase a current model year minivan which has not been previously titled. Henry reminds Bob and Sally that minivan may not list salvage on the title and the Loan to Value ratio (LTV) cannot exceed 110%. The New Vehicle Loan Type has an initial interest rate of 0.00% for six months, then a rate of 4.00% for the remainder of the 72 month term. There is a $15.00 filing fee which Bob and Sally will pay for in cash. The Smiths have chosen to waive Credit Disability and Credit Life Insurance. The Smiths do want to purchase ABC Federal s Extended Warranty Coverage called Mechanical Repair Coverage (MRC) which they will finance into the loan. The cost of MRC will be unknown until the Smiths purchases the property as the cost of MRC is based on characteristics of the property such as Make, Model, Year, etc. Pre-Approved Lending User Guide 79

82 Art 1? At this point, Henry prepares the Pre-Approved Lending documents. Henry will give Bob and Sally Consider the partially completed Pre-Approved Express Draft (Check) (from now on referred to as the Express Draft.) The Express Draft is the only document Bob and Sally will take to the dealership while shopping. Art 2 Things to! Best Caution Practice The Smiths are instructed by Henry not to provide the Dealer with the Express Draft until after they and Dealer have reached an agreed upon purchase price. Henry will also give the Smith s the rest of the Pre-Approved Lending documents to take home for safe keeping. These include the Pre-Approved Loan and Security Agreement and Truth in Lending Art 3 Disclosures, and information on the Mechanical Repair Coverage (MRC). Tip To help Bob and Sally keep the two sets of documents separate, Henry uses LOANLINER Document Folders. These folders will not only help keep the two sets of documents separate, but also protect them as Bob and Sally travel from dealership to dealership shopping for their mini-van. Later at a Dealership: On April 5th, 2014, Bob and Sally purchased a 2014 Honda Odyssey Touring Elite from Anytown USA Auto Sales as their new mini-van. They negotiated a final sales price of $46, which includes tax, license, and various other fees with Monte Hall Jr. one of the friendly dealers at Anytown USA Auto Sales. As part of the deal Monte agreed to give the Smith s $4, for their Honda Civic. After subtracting out the $4, for their trade-in and the $10, downpayment, this left the Smith s with a $32, remaining to be financed with their loan from ABC Federal. Once the deal was struck, Sally took out the Express Draft completing and signing the Express Draft with the help of Monte that same day. Monte then faxed to Henry at the credit union a copy of the completed and signed Express Draft (front and back) prior to removing the detachable check portion. When he did this Monte also faxed a copy of the purchase order for the Honda Odessey showing the $4, trade in and the $10, downpayment, a copy of the application for title to the DMV showing ABC Federal Credit Union as the lien holder, and a copy of the MSRP Sticker from the Odessey. Monte contacted Henry and verified Henry would ensure The Other Guys Bank received payment directly from the Credit Union so that Monte could get the lien release and resell the 2008 Honda Civic. A couple days later: On April 7th, 2014, Henry made note in the system all required documentation had been received from the Dealer. Henry sent payment to The Other Guys Bank for the payoff of the loan on the 2008 Honda Civic. Also on April 7th, 2014, Monte took the check portion of the Express Draft to his bank, 1st Savings Bank of Anytown, to deposit it into the dealership s account. On April 9th, 2014, ABC Federal Credit Union was presented the check for payment. Henry verified in the system all required information had been received and proceeded to post the check. The credit union was able to book the loan into their system on April 10th, Pre-Approved Lending User Guide 80

83 Sample 2 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Pre-Approved with circle numbers to Loan use as a and graphic Security for the manual. Agreement (maz) and Truth in Lending Disclosure Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure sets forth the terms and conditions of the loan offered and extended by ABC Federal Credit Union to the borrower(s) identified herein and is comprised of the following documents: (i) a Truth in Lending Disclosure for each available Loan Type; and (ii) a Loan and Security Agreement. x FIXED RATE x STEP RATE DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER VARIABLE RATE 3 April 1st, BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Bob Smith Sally Smith 123 Any Street Anytown, USA LOAN TYPE New Vehicle 17 TRUTH IN LENDING DISCLOSURE ( 'e' means an estimate) ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments Prepayment: If you pay off early you will not The cost of your credit as a yearly The dollar amount the The amount of credit The amount you will have have to pay a penalty. rate. credit will cost you. provided to you or on Required Deposit: The Annual Percentage your 12 paid after you have made behalf. all 13payments as scheduled Rate does not take into account your % 11 $ 4, e $ 40, e $ 44, e required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay $ N/A $ $ N/A Late Charge: 20% of interest due if 7 or more days late, minimum of $5.00, maximum of $ Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments When Payments Are Due 71 1 $ $ monthly beginning 05/01/ /01/ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: N/A SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. ITEMIZATION OF THE AMOUNT FINANCED ( 'e' means an estimate) 20 Itemization of Amount Financed of Amount Paid on Your Account Prepaid Finance Charge a $ 40, e b $ N/A c $ N/A Amounts Paid to Others on Your Behalf: (If an amount is marked with an asterisk (*) we will be retaining a portion of the amount.) d $ 33, To Approved and/or Independent Dealer $ 2,000.00* To Insurance Company $ 4,087.84* To The Other Guys Bank $ To One or more additional Truth In Lending Disclosure(s) for other available Loan Types may be included on a following page and shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 81

84 Credit Union ABC Federal Credit Union Loan No Acct. No Borrower(s) Bob Smith Sally Smith LOAN AND SECURITY AGREEMENT In this Loan and Security Agreement ("Agreement"), all references to "Credit Union," "we," "our," or "us," mean the Credit Union whose name appears above and anyone to whom the Credit Union assigns or transfers this Agreement. All references to "you," "your," or "borrower" mean each person who signs the Pre-Approved Express Draft ("Express Draft") as a borrower. All references to the "Disclosure Statement" shall refer to the Truth in Lending Disclosure(s) provided as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. All references to "Loan" shall mean, the amount actually borrowed pursuant to this Agreement, including without limitation any fees financed with the proceeds thereof and/or any amounts paid to others on your behalf or paid to us to satisfy a debt on your account. By signing the Express Draft (which is incorporated herein by reference) you acknowledge that you have received and read in full the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Express Draft and agree to the terms, obligations and conditions set forth in this Agreement and the Express Draft. 1. SELECTION OF LOAN TYPE - You acknowledge and agree that we have provided a Disclosure Statement setting forth the estimated terms of each Loan Type being offered to you by the Credit Union. The Loan Type is specified on the Disclosure Statement(s) provided in connection herewith. You agree to fill-in the Loan Type you have selected on the Express Draft in accordance with the instructions set forth therein. You further acknowledge and agree that the terms of the Loan will correspond to the terms of the Loan Type you select but that certain terms may vary depending on the actual amount and date of the Loan. 2. PROMISE TO PAY - You promise to pay to the Credit Union the principal amount of the Loan plus interest on the unpaid balance until the entire outstanding balance plus interest has been repaid. The interest rate(s) applicable to each available Loan Type are set forth below. Interest will begin to accrue on the date we pay the Express Draft. 21 Loan Type: New Vehicle The interest rate will be 0.00 % per year initially. Then on 10/01/2014 the interest rate will change to 4.00% until the balance is repaid in full. Variable Rate: N/A Loan Type: N/A The interest rate will be N/A% per year Variable Rate: 3. COLLECTION COSTS - 22 You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. 4. PAYMENTS - You promise to make regular payments of principal and interest in accordance with the payment schedule set forth on the Pre-Approved Express Draft Confirmation Receipt (the "Confirmation") you will receive shortly after your purchase. You acknowledge and agree that the amount of the payments and the due dates of such payments may vary from those disclosed in the Disclosure Statement depending on the amount and date of the Loan. You may prepay any amount without penalty at any time. If you prepay any part of what you owe, you are still required to make the regularly scheduled payments, unless we have agreed to a change in the payment schedule. Because this is a simple interest loan, if you do not make payments when due, your final payment may be more or less than the amount of the final payment disclosed to you. If you elect voluntary payment protection, we will either include the premium or program fees in your payments or extend the term of your Loan. If the term is extended, you will be required to make additional payments of the scheduled amount, until what you owe has been paid. You promise to make all payments in a manner and at a location acceptable to us. Unless otherwise required by law, payments will be applied to amounts owed in the manner we choose. 5. LATE CHARGE - If you are late in making a payment, you promise to pay the late charge shown in the Disclosure Statement. If no late charge is disclosed on the Disclosure Statement, none will be charged. 6. TRADE IN - If you are trading in a vehicle or other property as part of the purchase transaction associated with this Loan, we have calculated the approved loan amount based on this fact. Thus, if you decide not to trade in your vehicle or other property as originally agreed, this Agreement is void. 7. SECURITY AGREEMENT. a. THE SECURITY FOR THE LOAN - You give us a security interest in the property described in the Security Offered section of the Express Draft ("Property"). The security interest you give includes all accessions (things that are attached to or installed in the Property now or in the future). The security interest also includes any replacements for the Property which you buy within 10 days of the Loan and any extensions, renewals or refinancings of the Loan. It also includes any money you receive from selling the Property or from insurance you have on the Property. If the value of the Property declines, you agree to give us more property as security if asked to do so. In addition to the Property, property securing other loans you have with us also secures this Loan, unless the property is a principal dwelling. In addition to your pledge of shares, we may also have what is known as a statutory lien on all individual and joint accounts you have with us. A statutory lien means we have the right under federal law and many state laws to claim an interest in your accounts. We can enforce a statutory lien against your shares and dividends, and if any, interest and deposits, in all individual and joint accounts you have with us to satisfy any outstanding financial obligation that is due and payable to us. We may exercise CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 82

85 Explanation of Sample: 1. Credit Union Name ABC Federal Credit Union The Credit Union s legal name needs to appear in this location even if it already appears above or as part of the logo at the top of the page. 2. Rate Type Fixed Rate and Step Rate boxes (both checked) The Fixed Rate and Step Rate boxes are both checked, signifying the rate on this Loan Type, New Vehicle has a scheduled step from one fixed rate (0.00%) to another (4.00%). Unlike a Variable Rate where the rate can change at various times during the loan, a Fixed Step Rate has predetermined change(s) which are set at loan closing. 3. Date 04/01/2014 This is the date the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure was prepared by Henry and delivered to Bob and Sally. 4. Loan Number This is the number the Credit Union assigned to Bob and Sally s loan. 5. Express Draft Number This is the Express Draft number from the check stock used in printing the Pre-Approved Express Draft (Check). This number will appear on all the various Pre-Approved Lending documents Henry gives to Bob and Sally. It is used for two primary reasons: a) It allows Henry to track the Smiths Pre-Approved Lending documents throughout the preapproved loan process. b) Ensures that the Smiths know all the various Pre-Approved Lending documents they are about to receive are part of one loan transaction. 6. Account Number Bob and Sally s member number. 7. Group Policy Number ABC Federal Credit Union s Group Policy Number from CUNA Mutual Group, also known as their Contract Number. 8. Borrower(s) Name and Address Bob s full name and address is entered in this section. Sally s name but not here address was entered into the BORROWER 2 section since Bob and Sally are married and have the same address. 9. Loan Type New Vehicle This indicates the disclosures presented on this document, the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, are those for the New Vehicle loan type. In this example, Bob and Sally are only being presented with the New Vehicle Loan Type so there is no need for Henry to complete an additional Truth in Lending Disclosure (Pre-Approved). 10. Annual Percentage Rate % In this example, the Annual Percentage Rate (APR) is listed at %. This APR is a blended or composite rate the loan system at ABC Federal calculated for Henry based on the six months of interest at 0.00% and 66 months of interest at 4.00%. This loan does not include any finance charge other than simple interest. Unlike other disclosures on this document, the APR is not estimated. This is because the APR is actual known at the time Henry completed this document. Pre-Approved Lending User Guide 83

86 11. Finance Charge $4, e This is the total finance charge for the New Vehicle loan type based on the loan terms of 0.00% for six months and 4.00% for 66 months on $40, Since Bob and Sally s loan does not involve any prepaid finance charges, this amount is made up entirely of interest charges. Henry used an e for estimate beside this amount as it is based on the maximum approved loan amount of $40,000 rather than the final actual loan amount which is unknown at this point in the transaction. 12. Amount Financed $40, e This is the maximum approved loan amount. Bob and Sally may use up to this amount not only to purchase the mini-van, but also to finance the cost of MRC coverage ($2000) and to pay off the remaining balance of the loan on their trade-in vehicle. Henry used e for estimate beside this amount because, at this point in the transaction, he does not know the final actual loan amount. 13. Total of Payments $44, e This amount equals the sum of all of the payments listed in the Your Payment Schedule will be: section (referred to as the Payment Schedule ). Henry used e for estimate beside this amount as it is an estimate based on the maximum approved loan amount, not the final actual loan amount which is unknown at this point. 14. Property Insurance N/A In this example the Credit Union doesn t sell property insurance, but instead requires Bob and Sally to purchase their own policy from an acceptable insurance company. 15. Filing Fee $15.00 In this example, the filing fee is paid in cash. Since this is a known amount which will not vary between the time Henry give this document to the Smiths and when the fee is actually paid, Henry cannot use an e for estimate. 16. Non-Filing Insurance N/A. In this example, the Credit Union does not require non-filing insurance as they are filing a lien with the Department of Motor Vehicles. 17. Late Charge 20% of interest due if 7 or more days late with a minimum of $5.00 and maximum of $ This is simply a statement of the Credit Union s late fee policy. 18. Payment Schedule At this point in the transaction, neither Henry nor the Smiths know the final loan amount or the closing date of the loan. Regardless, (g) still requires Henry to enter in Payment Schedule disclosures. Luckily Henry can enter in estimated payment amounts and payment due dates as (c) allows estimates when this information is reasonably unknown at time Payment Schedule disclosures are made. In regards to the payment due dates, while ABC Federal has a policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed (e.g. if the loan closes on 04/01/2014 the first payment is due on 05/01/2014) Henry has no idea when the Smith s loan will actually close. To account for this, the Credit Union has a policy of assuming the Smith s loan will close right away on 04/01/2014, the first possible day the loan could close. The estimated Payment Schedule due date disclosure is then based around that date. The loan system uses these two policies and creates a first payment due date of 05/01/2014. Pre-Approved Lending User Guide 84

87 ! Caution Art 1 Art 2 Art 3 Art 3 Tip? When developing policies regarding estimating the first payment due date, Regulation Z Truth in Lending does not require the use of a particular date such as the first possible day the loan could close. Rather Regulation Z requires estimates be made based on the best information reasonably available at the time disclosures are made. Your Credit Union should already have established policies regarding the use of estimates for the Payment Schedule due date disclosures. In regard to the payment amounts, the Credit Union s loan system will use the maximum approved loan amount of $40,000.00, just as it has with previous Truth in Lending disclosures. Things to Consider Based on these two estimates, the Payment Schedule is completed showing 71 monthly payments of $ beginning on 05/01/2014 and 1 final payment of $ on 04/01/2020.! Caution Tip Henry needs to ensure he discusses with Bob and Sally the difference between the estimated Payment Schedule disclosures which appear on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures for the New Vehicle Loan Type and the final actual Repayment Terms which will appear on the Pre-Approved Express Draft Confirmation Receipt which the Smiths will receive shortly after Loan Closing. It is important Bob and Sally understand, regardless of the estimated due dates and estimated payment amounts they are provided at this point in the transaction, their final actual payment due dates and payment amounts may vary based on the amount of the loan and the loan type used. Please consult with your Credit Union s policies when completing the Payment Schedule to determine the appropriate estimated due dates to disclose. 19. Variable Rate N/A This reinforces the interest rate for the Loan Type New Vehicle is a Fixed Step Rate, not a Variable Rate. This corresponds to the Fixed Rate and Step Rate checkboxes above. 20. Itemization of Amount Financed a) Itemization of Amount Financed $40,000 This is the amount shown in the Amount Financed section above as required per Regulation Z, Section (c). This amount does not need to be marked with an e for estimate as Amount Financed above is already marked with and e for estimate. b) Amount Paid on Your Account N/A Art 1 The Smith s loan does not involve the payoff of a loan at ABC Federal Credit Union, so this section is marked N/A. Art 2 Art 3? Things to Consider Caution Please see Loan Scenario #3 for information on properly disclosing the payoff of a trade-in vehicle loan held by the Credit Union. c) Prepaid Finance Charge N/A There are no Prepaid Finance Charges associated with Bob and Sally s loan. d) Amount Paid to Others on Your Behalf Bob! and Sally s loan involves the Credit Union making several payments to third-parties on Bob and Sally s behalf from the loan proceeds. 1) $33, To Approved and/or Independent Dealer The maximum possible amount of the final loan proceeds that may be sent to the Dealer. Tip Pre-Approved Lending User Guide 85

88 Art 1 2) $2,000.00* To Insurance Company The cost of the Extended Warranty/Mechanical Repair coverage the Smiths are financing into this loan. The asterisk indicates the Credit Union is retaining a portion of this amount. 3) $4,087.84*? To The Other Guys Bank The current payoff amount of the loan on Bob and Sally s trade-in, a 2008 Honda Civic. This amount is listed as a separate item as ABC Federal Credit Union is sending the payoff check directly to The Other Guys Bank rather including this amount in the check going to Monte s Dealership. 21. Promise to Pay For the Smith s loan, Henry uses only the first of the two available Loan Type Art sections 2 of 2. Promise to Pay. The first Loan Type section is populated with New Vehicle and its initial interest rate of 0.00% is disclosed! in the interest rate field provided. The word initially and a period. was placed in the Caution field immediately to the right of the words per year to signify the New Vehicle loan type involves a Fixed Step rate that will change. Additional language describing how the interest will Step or increase from 0.00% to 4.00% after the initial six months is entered in immediately below this first line of the New Vehicle Loan Type as shown. Art 3 Things to Consider Please Contact LOANLINER Compliance if you have question regarding the use or drafting of Step Rate language. Tip Henry also ensured the system generated an N/A in the Variable Rate Section of the New Vehicle loan type to reinforce this Loan Type does not involve a variable rate. The second Loan Type section is populated with N/A s as shown, indicating that New Vehicle is the only available Loan Type for Bob and Sally s loan. 22. Collection Costs You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. This is the collection cost language Henry s collections officer and legal counsel required to be listed based on the applicable laws they researched. Pre-Approved Lending User Guide 86

89 Sample 2 Pre-Approved Express Draft (Check) In this example, the Pre-Approved Express Draft (Check) was printed onto a copy of the LOANLINER To Check create these Stock, samples, forming pull the the pdf into final an Express InDesign file Draft and add sent the circles along to a with seperate Bob layer. and Now Sally make on a high their res mini-van pdf of the shopping form with circle trip. numbers to use as a graphic for the manual. (maz) This section explains the areas of the Express Draft to be filled out by the Credit Union. 1 Pre-Approved Express Draft (Check) ACCOUNT NUMBER 4 CREDIT UNION CONTACT 5 CREDIT UNION TELEPHONE 6 CREDIT UNION FAX Henry Collins BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 7 Bob Smith Sally Smith 123 Any Street Anytown, USA The following terms and conditions govern the use of this Pre-Approved Express Draft which includes detachable check ("Express Draft"). All references to "Credit Union," "we" or "us" mean the Credit Union whose name appears above. All references to "you" mean each person who signs the front of the Express Draft as a borrower. All references to "Property" mean the Property purchased with the Express Draft. All references to "Dealer" mean the licensed Dealer from which the Property will be purchased. All references to "Loan and Security Agreement" mean the 1 Fill in the selected Loan Type on the Express Draft. Available Loan Types are: Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure that you have already received. COMPLETION OF EXPRESS DRAFT - You and an authorized representative of Dealer agree to complete and sign Express Draft in accordance with the instructions set forth below. SECURITY QUALIFICATIONS - You and Dealer promise Property purchased with Express Draft meets the requirements, if any, detailed below. INSTRUCTIONS - TO BORROWER: 3 Fill in the Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 8 A) New Vehicle B) N/A 2 Fill in the name of the Dealer and the amount due to Dealer (not 5 Give the completed Express Draft to Dealer. to exceed the "Approved Limit" amount). 4 Each borrower listed must sign, or otherwise authenticate, and date the Express Draft. 1 Express Draft cannot exceed "Approved Limit" 2 The following requirements must be met: No salvage, Max LTV 110% 9 New Vehicle: current model year & not previously titled 3 To receive payment, Dealer will deliver a copy of the following to the Credit Union by fax (or other means acceptable to the Credit Union) within a commercially reasonable time or as described above: a) Copy of executed purchase agreement; b) Copy of executed Express Draft; c) NADA value or MSRP sticker related to the Property; and d) Copy of application for title. CUNA Mutual Group 2011, 13 All Rights Reserved INSTRUCTIONS - TO DEALER: 4 Take all necessary steps to ensure any debt associated with any trade in property is satisfied. 5 Dealer must ensure that the necessary documents and fees have been delivered to appropriate parties to perfect the lien of the Credit Union as a valid first priority purchase money security interest in the Property, and there are no other security interest in Property. The following is the lienholder information to be used by the Dealer: 10 ABC Federal Credit Union 321 Credit Union Avenue Anytown, USA Electronic Lien Title Code: Endorse detachable check. Type or Print Name of Authorized Representative of Dealer Phone Number NXX910-e Date Issued: 04/01/2014 Void After: 05/01/ Approved Limit: $ 33, Loan Type: 16 New Vehicle PAY TO THE ORDER OF (Dealer): $ Amount in Numbers Dollars, subject to final settlement Amount in Words Security Offered: N/A N/A N/A N/A N/A 17 N/A N/A N/A N/A N/A Year Make Model Type VIN/ID# SIGNATURE OF BORROWER -- By signing or otherwise authenticating Express Draft as a borrower, you agree to be bound by and acknowledge receipt of the terms and conditions of the Loan and Security Agreement and this Express Draft, all of which are incorporated herein by reference, and acknowledge you have complied with "Instructions to Borrower". You also grant us a security interest in the Property described above pursuant to the terms of the Loan and Security Agreement. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. 18 Bob Smith X 19 Borrower 1: Type or Print Name Signature Date Henry Collins Sally Smith X Credit Union Authorized Signature Borrower 2: Type or Print Name Signature Date Pre-Approved Lending User Guide 87

90 Explanation of Sample: The following items (1 through 19) were completed by Henry at the Credit Union prior to handing the Express Draft over to Bob and Sally. The remainder of the items (20 through 24 in the sample below) will be completed by the Smiths and Monte at the dealership. 1. Credit Union Information The Credit Union s Logo and contact information was preprinted onto the LOANLINER Check Stock by LOANLINER and now appears in the upper left hand corner of the Express Draft. 2. Express Draft Number In this example the Express Draft Number is This number was preprinted on the LOANLINER Check Stock that was used when Henry printed out the Express Draft. The Express Draft Number is used for two primary reasons: a) It allows Henry to track the Smith s Pre-Approved Lending documents throughout the Pre- Approved Loan process. b) Ensures that the Smiths know all the various Pre-Approved Lending documents they are about to receive are part of one loan transaction. 3. Account Number Bob and Sally s member number. 4. Credit Union Contact Henry Collins In this example, Henry Collins is the Member Service Rep (MSR) at the Credit Union whom Bob and Sally the members or Monte the dealer should contact if they have any questions while completing the Express Draft. 5. Credit Union Telephone (231) This is Henry Collin s direct line at the credit union. 6. Credit Union Fax (231) This is the fax number Monte needs to use when faxing back to Henry at the Credit Union a copy of the completed and signed Express Draft, a copy of the Purchase Order, a copy of the Application for Title, a copy of the MSRP Sticker, and copies of any other documents required. 7. Borrower(s) Name and Address Bob s full name and address is entered in this section. Sally s name but not here address was entered into the BORROWER 2 section since Bob and Sally are married and have the same address. 8. Available Loan Types New Vehicle & N/A Henry lists New Vehicle and N/A in these spaces to indicate there is only one loan type available to Bob and Sally when purchasing their minivan. Henry will also ensure the system printed New Vehicle in 16. Loan Type below. Art 1 9. Requirements No salvage, Max LTV 110%, New Vehicle: current model year & not previously? titled. In this example, Bob and Sally may use the Pre-Approved Express Draft (Check) to purchase a Things to Consider New Vehicle which is defined as a current model year vehicle which has not been previously titled or they may purchase a Used Vehicle which is defined as a previously titled current model year vehicle or which is five or fewer model years old. In either case the vehicle may not have Salvage listed on the title, nor can the Loan to Value ratio (LTV) be greater than 110%. Art 2! Caution It is important Bob and Sally keep these requirements in mind when shopping for their minivan. If the Smiths purchase a minivan from Monte which does not meet these requirements, Henry is not obligated to honor the Express Draft. Art 3 Pre-Approved Lending User Guide 88

91 10. Lien Recording ABC Federal Credit Union 321 Credit Union Avenue Anytown, USA Electronic Lien Title Code: This is the name, address and Electronic Lien Title Code information the Credit Union wants Monte to use in the lien portion of the title paper work he files for the Smith s new minivan. 11. Credit Union Logo/Name/Contact Information - Henry made certain the Credit Union s logo and contact information appeared in this space prior to giving the Pre-Approved Express Draft (Check) to Bob and Sally. 12. Date Issued April 1st, 2014 This is the date the Express Draft was prepared by Henry for the Smiths. 13. Void After May 1st, 2014 This reflects the fact this Pre-Approved Express Draft (Check) is only valid for 30 days. If the Smiths needs more time, they would need to contact Henry for an extension, otherwise the offer will expire. 14. Express Draft Number In this example the Express Draft Number is This number was preprinted on the LOANLINER Check Stock that was used when Henry printed out the Express Draft. 15. Approved Limit $33, In this example, Henry lists on the Smith s Pre-Approved Express Draft (Check) $33, as their Approved Limit. Henry arrived at this amount by taking the maximum pre-approved loan amount, $40,000.00, and subtracting out the two additional amounts the Smiths told Henry they wanted to finance, a) the $2, for MRC and b) the $4, Bob and Sally will need to pay off the outstanding loan on their trade-in. By listing the lower amount of $33, instead of $40,000, Henry is helping ensure the Smiths do not inadvertently exceed the $40,000 maximum pre-approved loan amount when purchasing their minivan. 16. Loan Type New Vehicle Since Bob and Sally stated they were purchasing a new minivan, Henry preprinted New Vehicle in this space reinforcing this Pre-Approved Express Draft (Check) may only be used if the minivan meets the requirements listed. 17. Security Offered N/A (in the 2nd and 3rd set of fields) In this example, the ABC Federal Credit Union has purchased from LOANLINER a version of the Pre-Approved Express Draft (Check) with three Security Offered lines as opposed to the version with only one Security Offered line. Since this is a single Best Practice vehicle purchase loan, Henry placed N/A in the 2nd and 3rd set of lines to indicate the Smiths may only purchase one vehicle, not two or three vehicles. 18. Borrower(s) Name(s) Bob Smith and Sally Smith The Smith s names were printed here by Henry. 19. Credit Union Authorized Signature Henry Collins signed the Express Draft before giving it to Bob and Sally. Pre-Approved Lending User Guide 89

92 Sample 2 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form Pre-Approved with circle numbers to Express use as a graphic Draft for the (Check) manual. (maz) This section explains the areas of the Express Draft to be filled out by the borrower and dealer. NAME AND ADDRESS Bob Smith 123 Any Street Anytown, USA BORROWER 1 BORROWER 2 The following terms and conditions govern the use of this Pre-Approved Express Draft which includes detachable check ("Express Draft"). All references to "Credit Union," "we" or "us" mean the Credit Union whose name appears above. All references to "you" mean each person who signs the front of the Express Draft as a borrower. All references to "Property" mean the Property purchased with the Express Draft. All references to "Dealer" mean the licensed Dealer from which the Property will be purchased. All references to "Loan and Security Agreement" mean the 1 Fill in the selected Loan Type on the Express Draft. Available Loan Types are: detailed below. INSTRUCTIONS - TO BORROWER: Pre-Approved Express Draft (Check) ACCOUNT NUMBER CREDIT UNION CONTACT CREDIT UNION TELEPHONE CREDIT UNION FAX Henry Collins NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Sally Smith Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure that you have already received. COMPLETION OF EXPRESS DRAFT - You and an authorized representative of Dealer agree to complete and sign Express Draft in accordance with the instructions set forth below. SECURITY QUALIFICATIONS - You and Dealer promise Property purchased with Express Draft meets the requirements, if any, 3 Fill in the Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. A) New Vehicle B) N/A 2 Fill in the name of the Dealer and the amount due to Dealer (not 5 Give the completed Express Draft to Dealer. to exceed the "Approved Limit" amount) Each borrower listed must sign, or otherwise authenticate, and date the Express Draft. 1 Express Draft cannot exceed "Approved Limit" 2 The following requirements must be met: No salvage, Max LTV 110% New Vehicle: current model year & not previously titled 3 To receive payment, Dealer will deliver a copy of the following to the Credit Union by fax (or other means acceptable to the Credit Union) within a commercially reasonable time or as described above: a) Copy of executed purchase agreement; b) Copy of executed Express Draft; c) NADA value or MSRP sticker related to the Property; and d) Copy of application for title. CUNA Mutual Group 2011, 13 All Rights Reserved INSTRUCTIONS - TO DEALER: 4 Take all necessary steps to ensure any debt associated with any trade in property is satisfied. 5 Dealer must ensure that the necessary documents and fees have been delivered to appropriate parties to perfect the lien of the Credit Union as a valid first priority purchase money security interest in the Property, and there are no other security interest in Property. The following is the lienholder information to be used by the Dealer: ABC Federal Credit Union 321 Credit Union Avenue Anytown, USA Electronic Lien Title Code: Endorse detachable check. 20 Monte Hall Jr Type or Print Name of Authorized Representative of Dealer Phone Number NXX910-e Date Issued: 04/01/2014 Void After: 05/01/ Approved Limit: $ 33, Loan Type: New Vehicle 21 PAY TO THE ORDER OF (Dealer): Anytown USA Auto Sales 22 $ $32, Amount in Numbers Thirty Two Thousand Four Hundred and Seventy Seven and 13/100 Dollars, subject to final settlement 24 Amount in Words Security Offered: 2014 Honda Odyssey Touring HNDA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Year Make Model Type VIN/ID# SIGNATURE OF BORROWER -- By signing or otherwise authenticating Express Draft as a borrower, you agree to be bound by and acknowledge receipt of the terms and conditions of the Loan and Security Agreement and this Express Draft, all of which are incorporated herein by reference, and acknowledge you have complied with "Instructions to Borrower". You also grant us a security interest in the Property described above pursuant to the terms of the Loan and Security Agreement. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Bob Smith 25 X Bob Smith 04/05/2014 Borrower 1: Type or Print Name Signature Date Sally Smith X Sally Smith 04/05/2014 Henry Collins Credit Union Authorized Signature Borrower 2: Type or Print Name Signature Date Pre-Approved Lending User Guide 90

93 Explanation of Sample Items 20 through 25 are completed by Bob and Sally (Borrower) or Monte Hall Jr. (Dealer) after negotiating a purchase price. 20. Name and Phone Number of Authorized Representative of Dealer (Printed) Monte Hall Jr Monte, the Dealer who handled the minivan purchase for Bob and Sally, printed his name and phone number in this space so Henry, at the credit union, would know whom to call at the dealership with any questions regarding the Pre-Approved Loan. 21. Pay to the Order of (Dealer) Anytown USA Auto Sales Monte Hall Jr. wrote in the name of his Dealership, Anytown USA Auto Sales, to indicate where the Smith s purchased their minivan. This is also to whom the check will be payable. 22. Amount in Numbers $32, The final cost of Bob and Sally s new minivan including all taxes and fees, was written in by Monte? Hall Jr. 23. Amount in Words Thirty Two Thousand Four Hundred and Seventy Seven and 13/100 Things to Monte wrote in the final purchase price in words. Consider 24. Security Offered 2014 Honda Odyssey Touring HNDA A full description of the Smith s minivan, including model year, make, model, description, and VIN # is filled in by Monte Hall Jr. Art 1 Art 2 Art 3! Caution This step is critical to the collectability of the loan. This is the only place on any of the Pre- Approved Lending Documents were the identification of the collateral securing the loan occurs. Henry will need to ensure this information is accurate before funding the loan. 25. Borrower(s) Signatures Bob Smith 04/05/2014 & Sally Smith 04/05/2014 This is where Bob and Sally signed and dated the completed Pre-Approved Express Draft (Check), agreeing to the terms of not only this document, but also the terms of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. Dealer Warranties/Endorsement Tip By signing below the vehicle dealer warrants and promises that: a) the vehicle identified on the Pre-Approved Express Draft ( Express Draft ) meets all of the required qualifications set forth therein; b) the necessary documents and fees have been delivered to the appropriate state agency to perfect the lien of the Credit Union as a valid, first priority purchase money security interest in the vehicle identified herein; c) the borrower(s) shown on this Express Draft is/are the owner(s) of record of the vehicle identified herein; d) the borrower(s) executed the signature(s) on the front hereof; e) the amount completed on the Express Draft does not exceed the Approved Limit indicated on the Express Draft and satisfies any requirements specified in the Dealer Instructions ; and f) a copy of the application for title, the front and back of the completed Express Draft and the NADA value or MSRP sticker will be faxed (or sent by other means acceptable to the Credit Union) to the Credit Union within a commercially reasonable time to receive payment. 26 x Monte Hall, Jr. 3/5/2012 Signature of Authorized Representative of Dealer 26. Authorized Representative of Dealer Signature and Date Monte Hall Jr. Monte signed and dated the back of the completed Pre-Approved Express Draft (Check) endorsing the check so that it may be deposited or cashed. By doing so he also agreed to the terms of the Pre-Approved Express Draft (Check). Pre-Approved Lending User Guide 91

94 To create Sample these samples, 2 pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Pre-Approved Express Draft Confirmation Receipt Pre-Approved Express Draft Confirmation Receipt 1 Bob Smith 123 Any Street Anytown, USA Congratulations on your recent purchase. Listed below are the final terms of your loan agreement for your records. You will receive a 72-month coupon book within 7-10 business days. Please remember to send verification of insurance coverage for the vehicle listed below within 14 days to ABC Federal Credit Union, 321 Credit Union Avenue, Anytown, USA 12345, or fax to If you have any questions, please feel free to contact us at Thank you for choosing ABC Federal Credit Union for your financing needs. LOAN TYPE LOAN DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER New Vehicle 04/10/ BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 8 Bob Smith Sally Smith 123 Any Street Anytown, USA Paid to Dealer DISBURSEMENT DETAILS 9 $ 32, Paid on Your Loan(s) with Us 10 $ N/A a 11 Paid to Others on Your Behalf for The Other Guys Bank for b $ $ 4, You have elected the following other coverages (if applicable): 12 Guaranteed Asset Protection 13 Extended Warranty a You have elected the following Voluntary Payment Protection (if applicable): a 14 Total Loan Amount: $ b b N/A $ 2, , Credit Insurance Insurance Charge 15 Single Credit Disability $ N/A Joint Credit Disability $ N/A Single Credit Life $ N/A Joint Credit Life $ N/A 16 Your Payment Schedule Will Be: REPAYMENT TERMS Number of Payments Amount of Payments When Payments Are Due 71 $ monthly beginning 5/10/ $ /10/2020 This Confirmation Receipt confirms the terms of your recent purchase pursuant to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, Voluntary Payment Protection and/or other coverages elected by you (if applicable) and the Pre-Approved Express Draft executed in connection therewith. Please retain this for your records. CUNA Mutual Group 2011, 13 All Rights Reserved NXX833-e Pre-Approved Lending User Guide 92

95 Explanation of Sample: NOTE: The Pre-Approved Express Draft Confirmation Receipt ( Confirmation Receipt ) is not a Truth in Lending disclosure but rather a contractual statement of the final terms of the loan to the borrower. As such there is no use of e for estimate. 1. Borrower(s) Name and Address (window envelope) Bob Smith Since ABC Federal Credit Union uses window envelopes; Bob Smith s name and address, copied from Borrower 1 below, was printed here. 2. Message from Credit Union ABC Federal Credit Union used this space to congratulate Bob and Sally on their vehicle purchase, to notify them that they will be receiving a coupon book, and to request they send in a copy of their verification of insurance coverage to the credit union. 3. Loan Type New Vehicle Henry listed New Vehicle indicating which Loan Type was utilized for the Smith s loan. This corresponds to the Loan Type printed on the Pre-Approved Express Draft (Check). 4. Loan Date 04/10/2014 This is the date the loan was booked in the Credit Union s system. 5. Loan Number This is the number assigned to Bob and Sally s loan by the Credit Union. 6. Express Draft Number This is the number that was preprinted on the LOANLINER Check Stock used to print out the Express Draft. This Express Draft Number matches those appearing on all the other Pre- Approved Lending documents Henry gave to the Smiths. 7. Account Number Bob and Sally s member number. 8. Borrower(s) Name and Address Bob s full name and address is entered in this section. Sally s name but not here address was entered into the BORROWER 2 section since Bob and Sally are married and have the same address. 9. Paid to Dealer $32, In this example, the Paid to Dealer section lists the amount paid to Anytown USA Auto Sales. This includes any applicable taxes and fees paid to the Dealer. 10. Paid on Your Loan with Us N/A Because the Smith s loan did not include paying off an existing loan at the Credit Union, but rather with a third party financial institution The Other Guys Bank, Henry marked this line N/A. He could have also marked it with $ Paid to Others on Your Behalf a) The Other Guys Bank This indicates that Henry is sending to The Other Guys Bank a check b) 4, This indicates the amount of $4, to cover the payoff of the outstanding loan balance for the trade-in vehicle, the 2008 Honda Odyssey was sent to The Other Guys Bank. Pre-Approved Lending User Guide 93

96 Things to Consider Art Guaranteed Asset Protection Art 1 Art 3! a) In this example this space is left deliberately left blank. Caution b) N/A This section is completed with N/A as shown because the Smiths did not to purchase Guaranteed Asset Protection (GAP). To make certain the Smiths know they declined this protection, Henry indicated N/A to the far right of Guaranteed Asset Protection. Things to Consider Tip See Pre-Approved Loan Scenario 1 for an example of how the cost of GAP is listed if the member Finances it into the loan. 13. Extended Warranty / MRC Art a) 2 In this example, this space is deliberately left blank. b) $ ! Since the Smiths financed the cost of Mechanical Repair Coverage (MRC), the Credit Union s Caution brand of Extended Warranty, rather than paying for it outside of the loan, this space immediately to the right of the words Extended Warranty, was left blank. Art 3? Henry listed the $2, cost of MRC to the far right indicating not only that the Smiths selected MRC, but they chose to finance it with the loan proceeds. Tip See Pre-Approved Loan Scenario 3 for an example of how the cost of GAP or Extended Warranty is listed if the member pays in cash or otherwise outside of the loan. 14. Total Loan Amount $38, This is the final amount of Bob and Sally s loan. For the Smiths loan, this amount is made up of the $32, paid to Anytown USA Auto Sales, the $4, paid to The Other Guys Bank, and the $ for MRC coverage. 15. Voluntary Payment Protection N/A This section is used to remind Bob and Sally they declined any Credit Insurance. 16. Repayment Terms At this point in the transaction, Henry knows the final actual loan amount, the term of the loan, and the loan closing date. This means Henry can finally disclose to the Smith s the actual payment amounts and due dates for their loan. While this is not a Regulation Z Truth in Lending disclosure, the Repayment Terms are required for contractual purposes. Henry lists the payment details as shown in accordance with ABC Federal s policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed. Best Practice Since Henry was not able to disclose the final actual due dates to the Smith s at the beginning of this Pre-Approved Lending transaction, it is critical Henry deliver this confirmation receipt to them as soon as possible so the Smiths can avoid any delinquency or even default. Pre-Approved Lending User Guide 94

97 Sample 3 Pre-Approved Scenario: Summary of Scenario: Individual pre-approved boat / motor / trailer purchase Variable rate of 3.75% and 4.75% # of Loan Types: 2 Pre-Approved Express Draft (Site Draft) used Debt Protection is waived GAP is purchased in cash Extended Warranty is waived Filing Fee will be financed Trade in: Yes Downpayment: No Details: Shirley Jones is interested in purchasing a newer used boat and financing the purchase with a loan from ABC Federal Credit Union. Shirley has no down payment saved up for this purchase. Shirley will be trading in her 2003 Sun Tracker Pontoon Boat as part of the deal. Shirley still has a loan balance of $5, on the 2003 Sun Tracker at ABC Federal Credit Union. At the Credit Union: On April 1st, 2014, Shirley goes into her local ABC Federal branch to apply for a loan. With the help of Henry Collins, a Member Service Representative (MSR), Shirley submits an application and is approved for up to $36,000 to purchase a boat from a Dealership. Henry clarifies with Shirley, the $36,000 loan approval is based on the fact she is trading in her 2003 Sun Tracker and should she change her mind about the trade-in, she needs to contact him right away as it may affect her maximum approved loan amount. Shirley is not certain which boat she will purchase, however she does know that she only wants to look at used boats in an effort to keep her payments lower. Henry advises Shirley she should consider using the Credit Union s Pre-Approved Lending program which will allow her to shop for a boat without having to come back into the branch or deal with the hassle of the dealer s F&I department. Shirley agrees and Henry makes certain to prepare the Pre-Approved Lending documents with two Loan Types, New Boat and Used Boat. Henry advises Shirley to use the New Boat loan type if the boat she purchases is the current model year boat that has not been previously titled or to use the Used Boat loan type if the boat is the current model year and previously titled or if the boat is a 2010 to 2013 model year. Henry reminds Shirley that regardless of any of this, the boat may not be a salvaged boat. Henry also points out that the Loan to Value ratio (LTV) for the New Boat loan type cannot exceed 110% while the LTV for the Used Boat loan type cannot exceed 100%. The New Boat Loan Type has an initial variable interest rate of 3.75% with a term of 60 months. The Used Boat Loan Type has an initial variable interest rate of 4.75% with a term of 48 months. There is a $10.00 filing fee which Shirley will finance into the loan. Pre-Approved Lending User Guide 95

98 Art 1 Shirley chose? to waive Debt Protection. Shirley does want to purchase Guaranteed Asset Protection (GAP) which she will pay for in cash. The cost of GAP is $400 regardless of the final loan amount or the value, Things age, to make, etc. of the boat Shirley purchases. Consider At this point, Henry prepares the Pre-Approved Lending documents. Henry will give Shirley the partially completed Pre-Approved Express Draft (Site Draft) (from now on referred to as the Express Draft.) The Express Draft is the only document Shirley will take to the dealership while shopping. Art 2! Best Caution Practice Shirley is instructed by Henry not to provide the Dealer with the Express Draft until after she and Dealer have reached an agreed upon purchase price. Henry will also give Shirley the rest of the Pre-Approved Lending documents to take home for safe Art 3 keeping. These include the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures, an additional Truth in Lending Disclosures (Pre-Approved), and information on GAP. Tip To help Shirley keep the two sets of documents separate, Henry uses LOANLINER Document Folders. These folders will not only help keep the two sets of documents separate, but also protect them as Shirley travels from dealership to dealership shopping for her boat. Later at a Dealership: On April 16th, 2014, Shirley purchased a 2010 Bayliner 285SB, with a trailer from Anytown USA boats, Boats, BOATS. She negotiated a final sales price of $20, which includes tax, license, and various other fees with Monte Hall Jr., one of the friendly dealers at Anytown USA boats, Boats, BOATS. As part of the deal Monte agreed to give Shirley $6, for her 2003 Sun Tracker. After subtracting out the $6, for her trade-in this left Shirley with a $13, remaining to be financed with her loan from ABC Federal. Once the deal was struck, Shirley took out the Express Draft completing and signing the Express Draft with the help of Monte that same day. Monte then faxed to Henry at the credit union a copy of the completed and signed Express Draft. When he did this Monte also faxed in a copy of the purchase order for the 2010 Bayliner 285SB showing the $6, trade in, a copy of the application for title showing ABC Federal Credit Union as the lien holder, and a copy of the NADA Value print off for the 2010 Bayliner 285SB. Monte contacted Henry and verified Henry would be sending him correspondence once the loan on the trade in was paid off so Monte could get the lien release and resell the 2003 Sun Tracker. Back at the Credit Union: Henry pulled the faxed information up on his computer and verified all the requirements for the loan were met, that the Express Draft was completed and signed by Shirley and Monte per the instructions included, and all copies of other required documents were accounted for. Henry was able to contact Shirley to get the GAP documentation signed that same day. Now that everything was in order, Henry was able to book the loan into the system, pay off the loan on the 2003 Sun Tracker trade in boat, and fund the loan that same day. Pre-Approved Lending User Guide 96

99 Sample 3 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure The Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure sets forth the terms and conditions of the loan offered and extended by ABC Federal Credit Union to the borrower(s) identified herein and is comprised of the following documents: (i) a Truth in Lending Disclosure for each available Loan Type; and (ii) a Loan and Security Agreement. FIXED RATE STEP RATE DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER x VARIABLE RATE 3 April 1st, BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Shirley Jones N/A 987 Any Street Anytown, USA LOAN TYPE New Boat TRUTH IN LENDING DISCLOSURE ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments The amount you will have paid after you have made ( 'e' means an estimate) Prepayment: If you pay off early you will not The cost of your credit as a yearly The dollar amount the The amount of credit have to pay a penalty. rate. credit will cost you. provided to you or on Required Deposit: The Annual Percentage your behalf. all payments as scheduled. Rate does not take into account your % 11 $ 3, e $ 36, e $ 39, e required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay $ N/A 14 $ $ N/A 16 Late Charge: 20% of interest due if 7 or more days late, minimum of $5.00, maximum of $ Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments When Payments Are Due 59 1 $ $ monthly beginning 05/01/ /01/ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: Variable Rate: The annual percentage rate may increase during the term of this transaction if the Prime Rate published in the Wall Street Journal (Index) changes. We will add a margin of 2.5% to the index value. The rate will change monthly on the first day of the month. The rate will never be higher than the maximum rate allowed by law, and it will never be less than 3%. Any interest rate increase will result in more payments of the same amount. If your loan were for $36,000 at 3.75% for 60 months, and the rate increased to 4.495% after 6 months, you will have to make one additional payment. SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. 20 ITEMIZATION OF THE AMOUNT FINANCED ( 'e' means an estimate) Itemization of Amount Financed of Amount Paid on Your Account Prepaid Finance Charge a $ 36, e b $ 5, c $ N/A Amounts Paid to Others on Your Behalf: (If an amount is marked with an asterisk (*) we will be retaining a portion of the amount.) d $ 30, e To Approved and/or Independent Dealer $ To $ To Public Officials $ To One or more additional Truth In Lending Disclosure(s) for other available Loan Types may be included on a following page and shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 97

100 Credit Union ABC Federal Credit Union Loan No Acct. No Borrower(s) Shirley Jones N/A LOAN AND SECURITY AGREEMENT In this Loan and Security Agreement ("Agreement"), all references to "Credit Union," "we," "our," or "us," mean the Credit Union whose name appears above and anyone to whom the Credit Union assigns or transfers this Agreement. All references to "you," "your," or "borrower" mean each person who signs the Pre-Approved Express Draft ("Express Draft") as a borrower. All references to the "Disclosure Statement" shall refer to the Truth in Lending Disclosure(s) provided as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. All references to "Loan" shall mean, the amount actually borrowed pursuant to this Agreement, including without limitation any fees financed with the proceeds thereof and/or any amounts paid to others on your behalf or paid to us to satisfy a debt on your account. By signing the Express Draft (which is incorporated herein by reference) you acknowledge that you have received and read in full the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure and the Express Draft and agree to the terms, obligations and conditions set forth in this Agreement and the Express Draft. 1. SELECTION OF LOAN TYPE - You acknowledge and agree that we have provided a Disclosure Statement setting forth the estimated terms of each Loan Type being offered to you by the Credit Union. The Loan Type is specified on the Disclosure Statement(s) provided in connection herewith. You agree to fill-in the Loan Type you have selected on the Express Draft in accordance with the instructions set forth therein. You further acknowledge and agree that the terms of the Loan will correspond to the terms of the Loan Type you select but that certain terms may vary depending on the actual amount and date of the Loan. 2. PROMISE TO PAY - You promise to pay to the Credit Union the principal amount of the Loan plus interest on the unpaid balance until the entire outstanding balance plus interest has been repaid. The interest rate(s) applicable to each available Loan Type are set forth below. Interest will begin to accrue on the date we pay the Express Draft. 21 Loan Type: New Boat The interest rate will be 3.75 % per year initially and will vary as follows Variable Rate: Variable Rate: The annual percentage rate may increase during the term of this transaction if the Prime Rate published in the Wall Street Journal (Index) changes. We will add a margin of 2.5% to the index value. The rate will change monthly on the first day of the month. The rate will never be higher than the maximum rate allowed by law, and it will never be less than 3%. Any interest rate increase will result in more payments of the same amount. If your loan were for $36,000 at 3.75% for 60 months, and the rate increased to 4.495% after 6 months, you will have to make one additional payment. Loan Type: Used Boat The interest rate will be 4.75% per year initially and will vary as follows Variable Rate: Variable Rate: The annual percentage rate may increase during the term of this transaction if the Prime Rate published in the Wall Street Journal (Index) changes. We will add a margin of 3.5% to the index value. The rate will change monthly on the first day of the month. The rate will never be higher than the maximum rate allowed by law, and it will never be less than 3%. Any interest rate increase will result in more payments of the same amount. If your loan were for $36,000 at 4.75% for 60 months, and the rate increased to 5.97% after 6 months, you will have to make one additional payment COLLECTION COSTS - You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. 4. PAYMENTS - You promise to make regular payments of principal and interest in accordance with the payment schedule set forth on the Pre-Approved Express Draft Confirmation Receipt (the "Confirmation") you will receive shortly after your purchase. You acknowledge and agree that the amount of the payments and the due dates of such payments may vary from those disclosed in the Disclosure Statement depending on the amount and date of the Loan. You may prepay any amount without penalty at any time. If you prepay any part of what you owe, you are still required to make the regularly scheduled payments, unless we have agreed to a change in the payment schedule. Because this is a simple interest loan, if you do not make payments when due, your final payment may be more or less than the amount of the final payment disclosed to you. If you elect voluntary payment protection, we will either include the premium or program fees in your payments or extend the term of your Loan. If the term is extended, you will be required to make additional payments of the scheduled amount, until what you owe has been paid. You promise to make all payments in a manner and at a location acceptable to us. Unless otherwise required by law, payments will be applied to amounts owed in the manner we choose. 5. LATE CHARGE - If you are late in making a payment, you promise to pay the late charge shown in the Disclosure Statement. If no late charge is disclosed on the Disclosure Statement, none will be charged. 6. TRADE IN - If you are trading in a vehicle or other property as part of the purchase transaction associated with this Loan, we have calculated the approved loan amount based on this fact. Thus, if you decide not to trade in your vehicle or other property as originally agreed, this Agreement is void. 7. SECURITY AGREEMENT. a. THE SECURITY FOR THE LOAN - You give us a security interest in the property described in the Security Offered section of the Express Draft ("Property"). The security interest you give includes all accessions (things that are attached to or installed in the Property now or in the future). The security interest also includes any replacements for the Property which you buy within 10 days of the Loan and any extensions, renewals or refinancings of the Loan. It also includes any money you receive from selling the Property or from insurance you have on the Property. If the value of the Property declines, you agree to give us more property as security if asked to do so. In addition to the Property, property securing other loans you have with us also secures this Loan, unless the property is a principal dwelling. In addition to your pledge of shares, we may also have what is known as a statutory lien on all individual and joint accounts you have with us. A statutory lien means we have the right under federal law and many state laws to claim an interest in your accounts. We can enforce a statutory lien against your shares and dividends, and if any, interest and deposits, in all individual and joint accounts you have with us to satisfy any outstanding financial obligation that is due and payable to us. We may exercise CUNA Mutual Group 2012, 13 All Rights Reserved NXX235-e Pre-Approved Lending User Guide 98

101 Explanation of Sample: 1. Credit Union Name ABC Federal Credit Union The Credit Union s legal name needs to appear in this location even if it already appears above or as part of the logo at the top of the page. 2. Rate Type The Variable Rate box is checked The Variable Rate box is checked, signifying the rate on this Loan Type, New Boat is scheduled to change during the loan term according to the Variable Rate language listed below. 3. Date 04/01/2014 This is the date the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure was prepared by Henry and delivered to Shirley. 4. Loan Number This is the loan number the Credit Union assigned to Shirley s loan. 5. Express Draft Number This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up their Pre-Approved Loan program. This number will appear on all the various Pre-Approved Lending documents Henry gives to Shirley. It is used for two primary reasons: a) It allows Henry to track Shirley s Pre-Approved Lending documents throughout the preapproved loan process. b) Ensures that Shirley knows all the various Pre-Approved Lending documents she is about to receive are part of one loan transaction. 6. Account Number Shirley s member number. 7. Group Policy Number ABC Federal Credit Union s Group Policy Number from CUNA Mutual Group, also known as their Contract Number. 8. Borrower(s) Name and Address Shirley s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as Shirley is the only borrower. 9. Loan Type New Boat This indicates the disclosures presented on this document, the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, are those for the New Boat loan type. The disclosures for the other loan type Henry is offering to Shirley, Used Boat, will be disclosed on the additional Truth in Lending Disclosures (Pre-Approved). 10. Annual Percentage Rate 3.75% In this example, the initial Annual Percentage Rate (APR) and the initial contract interest rate are the same, 3.75%. This is because the loan does not include any finance charge other than simple interest. Unlike other disclosures on this document, the APR is not estimated. This is because the initial APR is actually known at the time Henry completed this document. Pre-Approved Lending User Guide 99

102 11. Finance Charge $3, e This is the total finance charge for the New Boat loan type based on the loan terms of 3.75% for 60 months on $36, Since Shirley s loan does not involve any prepaid finance charges, this amount is made up entirely of interest charges. Henry used an e for estimate beside this amount as it is based on the maximum approved loan amount of $36,000 rather than the final actual loan amount which is unknown at this point in the transaction. Per Reg Z Henry is able to use the 3.75% initial APR to calculate Finance Charge even though that rate may change over the term of the loan. 12. Amount Financed $36,000 e This is the maximum approved loan amount. Shirley may use up to this amount not only to purchase her boat, but also to finance the filing fee ($10.00) and to pay off the remaining balance of the loan on her trade-in boat at the ABC Federal. Henry used e for estimate beside this amount because, at this point in the transaction, he does not know the final actual loan amount. 13. Total of Payments $39, e This amount equals the sum of all of the payments listed in the Your Payment Schedule will be: section (referred to as the Payment Schedule ). Henry used e for estimate beside this amount as it is an estimate based on the maximum approved loan amount, not the final actual loan amount which is unknown at this point. 14. Property Insurance N/A In this example the Credit Union doesn t sell property insurance, but instead requires Shirley to purchase her own policy from an acceptable insurance company. 15. Filing Fee $10.00 In this example, the filing fee is financed into the loan. Since this is a known amount which will not vary between the time Henry give this document to Shirley and when the fee is actually paid, Henry cannot use an e for estimate. 16. Non-Filing Insurance N/A In this example, the Credit Union does not require non-filing insurance as they are filing a lien on Shirley s boat. 17. Late Charge 20% of interest due if 7 or more days late with a minimum of $5.00 and maximum of $ This is simply a statement of the Credit Union s late fee policy. 18. Payment Schedule At this point in the transaction, neither Henry nor Shirley knows the final loan amount or the closing date of the loan. Regardless, (g) still requires Henry to enter in Payment Schedule disclosures. Luckily Henry can enter in estimated payment amounts and payment due dates as (c) allows estimates when this information is reasonably unknown at time Payment Schedule disclosures are made. In regards to the payment due dates, while ABC Federal has a policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed (e.g. if the loan closes on 04/01/2014 the first payment is due on 05/01/2014) Henry has no idea when Shirley s loan will actually close. To account for this, the Credit Union has a policy of assuming Shirley s loan will close right away on 04/01/2014, the first possible day the loan could close. The estimated Payment Schedule due date disclosure is then based around that date. The loan system uses these two policies and creates a first payment due date of 05/01/2014. Pre-Approved Lending User Guide 100

103 ! Caution Art 1 Art 2 Art 3 Art 3 Tip? When developing policies regarding estimating the first payment due date, Regulation Z Truth in Lending does not require the use of a particular date such as the first possible day the loan could close. Rather Regulation Z requires estimates be made based on the best information reasonably available at the time disclosures are made. Your Credit Union should already have established policies regarding the use of estimates for the Payment Schedule due date disclosures. In regard to the payment amounts, the Credit Union s loan system will use the maximum approved loan amount of $36,000.00, just as it has with previous Truth in Lending disclosures. Things to Consider Based on these two estimates, the Payment Schedule is completed showing 59 monthly payments of $ beginning on 05/01/2014 and 1 final payment of $ on 04/01/2019.! Caution Tip Henry needs to ensure he discusses with Shirley the difference between the estimated Payment Schedule disclosures which appear on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures for the New Boat Loan Type and the final actual Repayment Terms which will appear on the Pre-Approved Express Draft Confirmation Receipt which Shirley will receive shortly after Loan Closing. It is important Shirley understand, regardless of the estimated due dates and estimated payment amounts she is provided at this point in the transaction, her final actual payment due dates and payment amounts may vary based on the amount of the loan and the loan type used. Please consult with your Credit Union s policies when completing the Payment Schedule to determine the appropriate estimated due dates to disclose. 19. Variable Rate Listed on the sample above is the Variable Rate disclosures required by Regulation Z Truth in Lending (f). This language will also appear on page two under Promise to Pay. This corresponds to the Variable Rate checkbox above. 20. Itemization of Amount Financed a) Itemization of Amount Financed $36,000 This is the amount shown in the Amount Financed section above as required per Regulation Z, Section (c). This amount does not need to be marked with an e for estimate as Amount Financed above is already marked with and e for estimate. b) Amount Paid on Your Account $5, This is the current payoff amount of the loan on Shirley s trade-in, a 2003 Sun Tracker. This amount will be applied to Shirley s loan at ABC Federal Credit Union once the loan is processed after Henry receives the completed Pre-Approved Express Draft (Site Draft) back from the dealer. c) Prepaid Finance Charge N/A There are no Prepaid Finance Charges associated with Shirley s loan. d) Amount Paid to Others on Your Behalf Shirley s loan involves the Credit Union making several payments to third-parties on Shirley s behalf from the loan proceeds. 1) $30, To Approved and/or Independent Dealer The maximum possible amount of the final loan proceeds that may be sent to the Dealer. 2) $10.00 To Public Officials The cost of the filing fee which Shirley is financing and all of which will be sent to Public Officials by the Credit Union. Pre-Approved Lending User Guide 101

104 21. Promise to Pay For Shirley s loan, Henry uses both of the two available Loan Type sections of 2. Promise to Pay. The Loan Types of New Boat and Used Boat and their corresponding interest rates, 3.75% and 4.75% respectively, were disclosed as shown. The phrase, initially and will vary as follows. was placed in the field immediately to the right of the words per year in both cases. These sentences align with the fact the New Boat and Used Boat loan types both have a Variable Rate which will change over the term of the loan according to the Variable Rate language listed below. The fields between this first line and the words Variable Rate: are used for Step Rate loan language. For Shirley s loan, these fields are left blank. Henry also ensured the system populates the Variable Rate language used on page 1 in the Variable Rate: field just below the newly created sentences for both Loan Types. This language is required for contractual purposes. 22. Collection Costs You agree to pay all costs of collecting the amount you owe under this Agreement, including court costs and reasonable attorney fees. This is the collection cost language Henry s collections officer and legal counsel required to be listed based on the applicable laws they researched. Pre-Approved Lending User Guide 102

105 To create Sample these samples, 3 pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Truth in Lending Disclosure (Pre-Approved) Truth in Lending Disclosure (Pre-Approved) 1 x FIXED RATE STEP RATE DATE LOAN NUMBER EXPRESS DRAFT NUMBER ACCOUNT NUMBER GROUP POLICY NUMBER VARIABLE RATE 2 April 1st, BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) 7 Shirley Jones N/A 987 Any Street Anytown, USA LOAN TYPE Used Boat TRUTH IN LENDING DISCLOSURE ( 'e' means an estimate) ANNUAL PERCENTAGE RATE FINANCE CHARGE Amount Financed Total of Payments Prepayment: If you pay off early you will not The cost of your credit as a yearly The dollar amount the The amount of credit The amount you will have have to pay a penalty. rate. credit will cost you. provided to you or on Required Deposit: The Annual Percentage your 11 paid 12after you have made behalf. all payments as scheduled. 9 Rate does not take into account your 4.75% 10 $ 3, e $ 36, e $ 39, e required deposit, if any. Property Insurance: You may obtain property insurance from anyone that is acceptable to the credit Filing Fees Non-Filing Insurance union. If you get the insurance from us, you will pay 13 $ N/A 14 $ $ N/A Late Charge: 20% of interest due if 7 or more days late, minimum of $5.00, maximum of $ Your Payment Schedule Will Be: (Payment Schedule Disclosures are Estimates) Number of Payments Amount of Payments When Payments Are Due 47 1 $ $ monthly beginning 05/01/ /01/ Security: Collateral securing other loans with the credit union may also secure this loan. You are giving a security interest in your shares and dividends and, if any, your deposits and interest in the credit union; and the goods or property purchased with and described in the Pre-Approved Express Draft. Variable Rate: Variable Rate: The annual percentage rate may increase during the term of this transaction if the Prime Rate published in the Wall Street Journal (Index) changes. We will add a margin of 3.5% to the index value. The rate will change monthly on the first day of the month. The rate will never be higher than the maximum rate allowed by law, and it will never be less than 3%. Any interest rate increase will result in more payments of the same amount. If your loan were for $36, at 4.75% for 60 months, and the rate increased to 5.97% after 6 months, you will have to make one additional payment. SEE YOUR LOAN AND SECURITY AGREEMENT FOR ANY ADDITIONAL INFORMATION ABOUT NONPAYMENT, DEFAULT, AND ANY REQUIRED REPAYMENT IN FULL BEFORE THE SCHEDULED DATE. This document shall be incorporated as part of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. CUNA Mutual Group 2011, 13 All Rights Reserved NXX334-e Pre-Approved Lending User Guide 103

106 Explanation of Sample: 1. Rate Type Variable Rate box checked The Variable Rate box is checked, signifying the rate on this Loan Type, Used Boat is scheduled to change during the loan term according to the Variable Rate language listed below. 2. Date 04/01/2014 This is the date the Truth in Lending Disclosure (Pre-Approved) was prepared by Henry and delivered to Shirley. 3. Loan Number This is the loan number the Credit Union assigned to Shirley s loan. 4. Express Draft Number This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up their Pre-Approved Loan program. This number will appear on all the various Pre-Approved Lending documents Henry gives to Shirley. It is used for two primary reasons: a) It allows Henry to track Shirley s Pre-Approved Lending documents throughout the preapproved loan process. b) Ensures that Shirley knows all the various Pre-Approved Lending documents she is about to receive are part of one loan transaction. 5. Account Number Shirley s member number. 6. Group Policy Number ABC Federal Credit Union s Group Policy Number from CUNA Mutual Group, also known as their Contract Number. 7. Borrower(s) Name and Address Shirley s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as Shirley is the only borrower. 8. Loan Type Used Boat This indicates the disclosures presented on this document, the Truth in Lending Disclosures (Pre-Approved), are those for the Used Boat loan type. The disclosures for the other loan type Henry is offering to Shirley, New Boat, were disclosed on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. 9. Annual Percentage Rate 4.75% In this example, the initial Annual Percentage Rate (APR) and the initial contract interest rate are the same, 4.75%. This is because the loan does not include any finance charge other than simple interest. Unlike other disclosures on this document, the APR is not estimated. This is because the initial APR is actually known at the time Henry completed this document. 10. Finance Charge $3, e This is the total finance charge for the Used Boat loan type based on the loan terms of 4.75% for 48 months on $36, Since Shirley s loan does not involve any prepaid finance charges, this amount is made up entirely of interest charges. Henry used an e for estimate beside this amount as it is based on the maximum approved loan amount of $36,000 rather than the final actual loan amount which is unknown at this point in the transaction. Per Regulation Z, Henry is able to use the 4.75% initial APR to calculate Finance Charge even though that rate may change over the term of the loan. Pre-Approved Lending User Guide 104

107 11. Amount Financed $36, e This is the maximum approved loan amount. Shirley may use up to this amount not only to purchase her boat, but also to finance the filing fee ($10.00) and to pay off the remaining balance of the loan on her trade-in boat at the ABC Federal. Henry used e for estimate beside this amount because, at this point in the transaction, he does not know the final actual loan amount. 12. Total of Payments $39, e This amount equals the sum of all of the payments listed in the Your Payment Schedule will be: section (referred to as the Payment Schedule ). Henry used e for estimate beside this amount as it is an estimate based on the maximum approved loan amount, not the final actual loan amount which is unknown at this point. 13. Property Insurance N/A In this example the Credit Union doesn t sell property insurance, but instead requires Shirley to purchase her own policy from an acceptable insurance company. 14. Filing Fee $10.00 In this example, the filing fee is financed in to the loan. Since this is a known amount which will not vary between the time Henry give this document to Shirley and when the fee is actually paid, Henry cannot use an e for estimate. 15. Non-Filing Insurance N/A In this example, the Credit Union does not have non-filing insurance as they are filing a lien on Shirley s boat. 16. Art Late 1 Charge 20% of interest due if 7 or more days late with a minimum of $5.00 and maximum of $ This is simply a statement of the Credit Union s late fee policy. 17. Payment? Schedule At this point in the transaction, neither Henry nor Shirley knows the final loan amount or the closing Things to date of the loan. Regardless, (g) still requires Henry to enter in Payment Schedule Consider disclosures. Luckily Henry can enter in estimated payment amounts and payment due dates as (c) allows estimates when this information is reasonably unknown at time Payment Schedule disclosures are made. Art 2 In regards to the payment due dates, while ABC Federal has a policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed (e.g. if the loan closes! on 04/01/2014 the first payment is due on 05/01/2014) Henry has no idea when Shirley s Caution loan will actually close. To account for this, the Credit Union has a policy of assuming Shirley s loan will close right away on 04/01/2014, the first possible day the loan could close. The estimated Payment Schedule due date disclosure is then based around that date. The loan system uses these two policies and creates a first payment due date of 05/01/2014. Art 3 Tip When developing policies regarding estimating the first payment due date, Regulation Z Truth in Lending does not require the use of a particular date such as the first possible day the loan could close. Rather Regulation Z requires estimates be made based on the best information reasonably available at the time disclosures are made. Your Credit Union should already have established policies regarding the use of estimates for the Payment Schedule due date disclosures. In regard to the payment amounts, the Credit Union s loan system will use the maximum approved loan amount of $36,000.00, just as it has with previous Truth in Lending disclosures. Pre-Approved Lending User Guide 105

108 ? Art 2 Art 3 Things to Consider Based on these two estimates, the Payment Schedule is completed showing 47 monthly payments of $ beginning on 05/01/2014 and 1 final payment of $ on 04/01/2018.! Caution Tip Henry needs to ensure he discusses with Shirley the difference between the estimated Payment Schedule disclosures which appear on the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosures for the New Boat Loan Type and the final actual Repayment Terms which will appear on the Pre-Approved Express Draft Confirmation Receipt which Shirley will receive shortly after Loan Closing. It is important Shirley understand, regardless of the estimated due dates and estimated payment amounts she is provided at this point in the transaction, her final actual payment due dates and payment amounts may vary based on the amount of the loan and the loan types used. Please consult with your Credit Union s policies when completing the Payment Schedule to determine the appropriate estimated due dates to disclose. 18. Variable Rate Listed on the sample above is the Variable Rate disclosures required by Regulation Z Truth in Lending (f). This language will also appear on page two under Promise to Pay. This corresponds to the Variable Rate checkbox above. Pre-Approved Lending User Guide 106

109 Sample 3 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Pre-Approved Express Draft (Check) This section explains the areas of the Express Draft to be filled out by the Credit Union. 1 6 Pre-Approved Express Draft (Site Draft) ACCOUNT NUMBER CREDIT UNION CONTACT CREDIT UNION TELEPHONE CREDIT UNION FAX EXPRESS DRAFT NUMBER Henry Collins BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Shirley Jones 7 N/A 987 Any Street Anytown, USA TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: 8 i) New Boat ii) Used Boat B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 9 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: New Boat: Not to exceed 110% Loan to Value, 2014 model year & not previously titled, no salvage Used Boat: Not to exceed 100% Loan to Value, 2014 model year & previously titled or model years, no salvage 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* ABC Federal Credit Union Credit Union Street Give the completed Express Draft to Dealer. Anytown, USA Electronic Lien Title Code: *See page 2 for additional Dealer instructions 14 THIS PRE-APPROVED EXPRESS DRAFT WILL NOT BE PAID UNLESS ALL INFORMATION IS COMPLETE. Loan Type: 11 Approved Limit: $ 30, Date Issued: 04/01/ Void After: 05/01/2014 ABC Federal Credit Union will Pay to: Credit Union Dealer $ Amount in Numbers Dollars, subject to final settlement Amount in Words Security Offered: 15 SIGNATURES By signing or otherwise authenticating, all parties agree to the terms and conditions of this Express Draft including those on page 2. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Borrower 1 Signature X Shirley Jones Borrower 2 Signature X N/A CUNA Mutual Group 2011, 13 All Rights Reserved Year Make Model Type VIN / ID # (Seal) (Seal) Date Date Type or Print Name of Authorized Representativeof Dealer Signature of Authorized Representative of Dealer X Page 1 of 2 Phone Number (Seal) Date NXX710-e Pre-Approved Lending User Guide 107

110 Explanation of Sample: The following items (1 through 15) were completed by Henry at the Credit Union prior to handing the Pre-Approved Express Draft (Site Draft) Express Draft over to Shirley. The remainder of the items (16 through 23 in the sample below) will be completed by Shirley and Monte at the dealership. 1. Account Number Shirley s member number. 2. Credit Union Contact Henry Collins In this example, Henry Collins is the Member Service Rep (MSR) at the Credit Union whom Shirley the member or Monte the dealer should contact if they have any questions while completing the Express Draft. 3. Credit Union Telephone Number (231) This is Henry Collins direct line at the Credit Union. 4. Credit Union Fax (231) This is the fax number Monte needs to use when faxing back to Henry at the Credit Union a copy of the completed and signed Express Draft, a copy of the Purchase Order, a copy of the Application for Title, a copy of the NADA value, and copies of any other documents required. 5. Express Draft Number This is the next available Express Draft Number from the pool of sequential numbers the Credit Union created when setting up the Pre-Approved Loan program. This number will appear on all the Pre-Approved Lending documents Henry gives to Shirley. It is used for two primary reasons: a) It allows Henry to track Shirley s Express Draft throughout the Pre-Approved Loan process. b) Reinforces for Shirley that all the Pre-Approved Lending documents she receives are part of one larger loan transaction. 6. Borrower 1 Name and Address Shirley s full name and address were entered in this section. 7. Borrower 2 Name and Address N/A Indicates Shirley is the only borrower on this loan. 8. Available Loan Types New Boat & Used Boat Henry lists the two loan types available to Shirley when purchasing her boat. Shirley and Monte will use this as a reference when completing 16. Loan Type below. 9. Requirements New Boat: Not to exceed 110% Loan to Value, 2014 model year & not previously titled, no salvage Art 1 Art 2 Used Boat: Not to exceed 100% Loan to Value, 2014 model year & previously titled or model years, no salvage? In this example, Shirley may use the Pre-Approved Express Draft (Site Draft) to purchase a New Boat which is defined as a 2014 model year boat which has not been previously titled or she may purchase a Used Boat which is defined as a previously titled 2014 model year boat which was previously titled or a 2010 to 2013 model year boat. In either case the boat may not have Salvage listed on the title. For a New Boat the loan to value ratio cannot exceed 110%, and for a Used Boat cannot exceed 100%. Things to Consider! Caution It is important Shirley keep these requirements in mind when shopping for her boat. If Shirley purchases a boat from Monte which does not meet these requirements, Henry is not obligated to honor the Express Draft. Art 3 Pre-Approved Lending User Guide 108

111 10. Lien Recording ABC Federal Credit Union 321 Credit Union Avenue Anytown, USA Electronic Lien Title Code: This is the name, address and Electronic Lien Title Code information the Credit Union wants Monte to use in the lien portion of the title paper work he files for Shirley s boat. 11. Approved Limit $30, In this example, Henry lists on Shirley s Pre-Approved Express Draft (Site Draft) $30, as her Approved Limit. Henry arrived at this amount by taking the maximum pre-approved loan amount, $36,000, and subtracting out the two additional amounts Shirley told Henry she wanted to finance, a) the $10.00 filing fee and b) the $ 5, Shirley will need to pay off the outstanding loan on her trade-in. By listing the lower amount of $30, instead of $36,000, Henry is helping ensure Shirley does not inadvertently exceed the $36,000 maximum pre-approved loan amount when purchasing her boat. 12. Date Issued April 1, 2014 This is the date the Express Draft was prepared by Henry for Shirley. 13. Void After May 1st, 2014 This reflects the fact this Pre-Approved Express Draft (Site Draft) is only valid for 30 days. If Shirley needs more time, she would need to contact Henry for an extension, otherwise the offer will expire. 14. Credit Union ABC Federal Credit Union Henry made certain the Credit Union s name was completed in this space prior to giving the Express Draft to Shirley. 15. Borrower(s) Name Shirley Jones Shirley s name was preprinted here by Henry. Pre-Approved Lending User Guide 109

112 Sample 3 To create these samples, pull the pdf into an InDesign file and add the circles to a seperate layer. Now make a high res pdf of the form with circle numbers to use as a graphic for the manual. (maz) Pre-Approved Express Draft (Check) This section explains the areas of the Express Draft to be filled out by the borrower and dealer. ACCOUNT NUMBER CREDIT UNION CONTACT CREDIT UNION TELEPHONE Pre-Approved Express Draft (Site Draft) CREDIT UNION FAX EXPRESS DRAFT NUMBER Henry Collins BORROWER 1 BORROWER 2 NAME AND ADDRESS NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Shirley Jones N/A 987 Any Street Anytown, USA TO BORROWER: INSTRUCTIONS TO DEALER: 1 Complete the following sections of the Express Draft below. A) Loan Type you select. Available Loan Types are: i) New Boat ii) Used Boat B) Dealer name and the amount due to Dealer (not to exceed "Approved Limit" amount). C) Security Offered section. THE VIN/ID# ON THE EXPRESS DRAFT MUST MATCH THE VIN/ID# OF THE CORRESPONDING PROPERTY PURCHASED. 1 Express Draft cannot exceed "Approved Limit". 2 The following requirements must be met: New Boat: Not to exceed 110% Loan to Value, 2014 model year & not previously titled, no salvage Used Boat: Not to exceed 100% Loan to Value, 2014 model year & previously titled or model years, no salvage 3 Deliver a copy of required documentation to Credit Union.* 4 Take all necessary steps to ensure any debt associated with any trade-in property is satisfied. 2 Each borrower listed must sign or otherwise authenticate, 5 Deliver required documentation and fees to appropriate and date the Express Draft. parties to perfect Credit Union's lien (Information below).* ABC Federal Credit Union 123 Credit Union Street 3 Give the completed Express Draft to Dealer. Anytown, USA Electronic Lien Title Code: *See page 2 for additional Dealer instructions THIS PRE-APPROVED EXPRESS DRAFT WILL NOT BE PAID UNLESS ALL INFORMATION IS COMPLETE. Loan Type: 16 Used Boat Approved Limit: $ 30, Date Issued: 04/01/2014 Void After: 05/01/2014 ABC Federal Credit Union will Pay to: Anytown USA boats Boats BOATS Credit Union 17 Dealer 18 $ 13, Amount in Numbers 19 Thirteen Thousand Six Hundred Twenty Eight and 29/100 Dollars, subject to final settlement Amount in Words Security Offered: 2010 Bayliner 285SB Hull B285SB Bayliner 285SB Engine E285SB Trailer N/A N/A T285SB Year Make Model Type VIN / ID # SIGNATURES By signing or otherwise authenticating, all parties agree to the terms and conditions of this Express Draft including those on page 2. NOTICE TO BORROWER: (a) DO NOT SIGN THIS PAPER BEFORE YOU HAVE READ IT OR IF IT CONTAINS ANY BLANK SPACES. (b) YOU ARE ENTITLED TO AN EXACT COPY OF ANY AGREEMENT YOU SIGN. (c) YOU HAVE THE RIGHT AT ANY TIME TO PAY IN ADVANCE THE UNPAID BALANCE DUE UNDER THE LOAN AND YOU MAY BE ENTITLED TO A PARTIAL REFUND OF THE FINANCE CHARGE. Borrower 1 Signature Date 21 X Shirley Jones 04/16/2014 (Seal) 22 Monte Hall JR Shirley Jones Type or Print Name of Authorized Representativeof Dealer Phone Number Borrower 2 Signature Date Signature of Authorized Representative of Dealer X N/A CUNA Mutual Group 2011, 13 All Rights Reserved (Seal) 23 X Page 1 of 2 Date Monte Hall JR 04/16/2014 (Seal) NXX710-e Pre-Approved Lending User Guide 110

113 Explanation of Sample: Items 16 through 23 are completed by Shirley Jones (Borrower) or Monte Hall Jr. (Dealer) after negotiating a purchase price. 16. Loan Type Used Boat Since Shirley s new 2010 Bayliner 285B does not meet the requirements of the New Boat loan type as it is not a 2014 model year but does meet the requirements of the Used Boat loan type (e.g. a 2010 to 2013 model year boat which does not list Salvage on the title nor causes the LTV to exceed 100%), Monte Hall Jr. and Shirley wrote in Used Boat. 17. Will Pay To: (Dealer) Anytown USA boats Boats BOATS Monte Hall Jr. wrote in the name of his Dealership, Anytown USA boats Boats BOATS, to indicate where Shirley purchased her boat. This is also to whom Henry at the Credit Union should make the dealer s portion of the loan funds payable. 18. Amount in Numbers $13, The final cost of Shirley s new boat, including all taxes and fees, was written in by Monte Hall Jr. 19. Amount in Words Thirteen Thousand Six Hundred Twenty Eight and 29/100 Monte wrote in the final purchase price in words. Art Security Offered Art 2 Art 3? 2010 Bayliner 285SB Hull B285SB Bayliner 285SB Engine E285SB Trailer N/A N/A T285SB Things to Consider A full description of Shirley s boat, including separate identification numbers for the hull and the engine, as well as the identification number of the boat trailer sold as part of the deal is filled in by Monte Hall Jr.! Caution This step is critical to the collectability of the loan. This is the only place on any of the Pre-Approved Lending Documents were the identification of the collateral securing the loan occurs. Henry will need to ensure this information is accurate before funding the loan. 21. Borrower(s) Signatures Shirley Jones This is where Shirley signed and dated the completed Pre-Approved Express Draft (Site Draft), agreeing to the terms of not only this document, but also the terms of the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure. 22. Name and Phone Number of Authorized Representative of Dealer (printed) Tip Monte Hall Jr Monte, the Dealer who handled the boat purchase for Shirley, printed his name and phone number in this space so Henry, at the Credit Union, would know whom to call at the dealership with any questions regarding the Pre-Approved Loan. 23. Authorized Representative of Dealer Signature and Date Monte Hall Jr. Monte signed and dated the completed Express Draft agreeing it was completed correctly and thoroughly. By signing, Monte is also agreeing to provide all the necessary documents to Henry and process any required title work on the Shirley s 2010 Bayliner as well as the 2003 Sun Tracker trade-in boat. Pre-Approved Lending User Guide 111

114 Sample 3 Pre-Approved Express Draft Confirmation Receipt Pre-Approved Express Draft Confirmation Receipt 1 Shirley Jones 987 Any Street Anytown, USA Congratulations on your recent purchase. Listed below are the final terms of your loan agreement for your records. You will receive a 48-month coupon book within 7-10 business days. Please remember to send verification of insurance coverage for the property listed below within 14 days to ABC Federal Credit Union, 123 Credit Union Street, Anytown, State 12345, or fax to If you have any questions, please feel free to contact us at Thank you for choosing ABC Federal Credit Union for your financing needs. 3 LOAN TYPE 4 LOAN DATE 5 LOAN NUMBER 6 EXPRESS DRAFT NUMBER 7 ACCOUNT NUMBER Used Boat 04/17/ NAME AND ADDRESS Shirley Jones 987 Any Street BORROWER 1 BORROWER 2 NAME (AND ADDRESS IF DIFFERENT FROM BORROWER 1) Anytown, USA Paid to Dealer DISBURSEMENT DETAILS 9 $ 13, Paid on Your Loan(s) with Us 10 $ 5, Paid to Others on Your Behalf for for You have elected the following other coverages (if applicable): a Public Officials b $ Guaranteed Asset Protection a $ Paid in Cash b $ 13 Extended Warranty a You have elected the following Voluntary Payment Protection (if applicable): 14 b $ N/A Total Loan Amount: $ 18, Debt Protection N/A N/A $ N/A (option chosen) 16 Your Payment Schedule Will Be: REPAYMENT TERMS Number of Payments Amount of Payments When Payments Are Due 47 $ monthly beginning 05/17/ $ /17/2017 This Confirmation Receipt confirms the terms of your recent purchase pursuant to the Pre-Approved Loan and Security Agreement and Truth in Lending Disclosure, Voluntary Payment Protection and/or other coverages elected by you (if applicable) and the Pre-Approved Express Draft executed in connection therewith. Please retain this for your records. CUNA Mutual Group 2011, 13 All Rights Reserved NXX633-e Pre-Approved Lending User Guide 112

115 Explanation of Sample: NOTE: The Pre-Approved Express Draft Confirmation Receipt ( Confirmation Receipt ) is not a Truth in Lending disclosure but rather a contractual statement of the final terms of the loan to the borrower. As such there is no use of e for estimate. 1. Borrower(s) Name and Address (window envelope) Shirley Jones Since ABC Federal Credit Union uses window envelopes, Shirley s name and address, copied from Borrower 1 below, was printed here. 2. Message from Credit Union ABC Federal Credit Union used this space to congratulate Shirley on her recent purchase, to notify her, she will be receiving a coupon book, and to request she send in a copy of her verification of insurance coverage to the Credit Union. 3. Loan Type Used Boat Henry listed Used Boat indicating which Loan Type was utilized for Shirley s loan. This corresponds to the Loan Type Shirley selected on the Pre-Approved Express Draft (Site Draft). 4. Loan Date 04/17/2014 This is the date the loan was booked in the Credit Union s system. 5. Loan Number This is the number assigned to Shirley s loan by the Credit Union. 6. Express Draft Number This Express Draft Number matches those appearing on all the other Pre-Approved Lending documents Henry gave to Shirley. 7. Account Number Shirley s member number. 8. Borrower(s) Name and Address Shirley s full name and address were entered in this section. N/A was entered into the BORROWER 2 section, as this is an individual loan. 9. Paid to Dealer - $13, In this example, the Paid to Dealer section lists the amount paid to the Anytown USA boats Boats BOATS. This includes any applicable taxes and fees paid to the Dealer. Art Paid? on Your Loan with Us $5, This indicates Henry applied $5, to the outstanding balance of Shirley s loan on the 2003 Things Sun to Tracker which she traded-in as part of her deal with Monte. 11. Paid to Others on Your Behalf Public Officials This indicates $10.00 was sent to public officials by the Credit Union to have a lien placed on Shirley s boat. Art 2 Art 3 Consider! Caution Had Monte at the Dealership been the one to send the $10.00 to the public officials, this section would list N/A $0.00 as the $10.00 would have been part of the Purchase Order and included in the Paid to Dealer amount. 12. Guaranteed Asset Protection a) $ Paid in Cash b) In this example, this space is deliberately left blank. Tip Pre-Approved Lending User Guide 113

116 Things to Consider Art 2 Art 3! Since Shirley paid the cost of GAP in cash, rather than financing it into the loan, this space immediately Caution to the right of the words Guaranteed Asset Protection, is completed with $ Paid in Cash. Henry left the space to the far right blank. This indicates not only that Shirley selected GAP coverage, but she chose to pay for it in cash. Tip See Pre-Approved Loan Scenario 1 for an example of how the cost of GAP or Extended Warranty is listed if the member finances the cost into the loan. 13. Extended Warranty / MRC a) In this example, this space is deliberately left blank. b) N/A Shirley does not have Mechanical Repair Coverage, the Credit Union s brand of Extended Warranty, protection on her boat. To make certain Shirley knows she does not have this protection, Henry indicated N/A to the far right of Extended Warranty. 14. Total Loan Amount $18, This is the final amount of Shirley s loan. For Shirley s loan, this amount is made up of the $13, paid to Anytown USA boats, Boats, BOATS, the $10.00 filing fee, and the $5, loan payoff to ABC Federal for the 2003 Sun Tracker trade-in boat. 15. Voluntary Payment Protection N/A This section is used to remind Shirley they declined any Credit Insurance. 16. Repayment Terms At this point in the transaction, Henry knows the final actual loan amount, the term of the loan, and the loan closing date. This means Henry can finally disclose to Shirley the actual payment amounts and due dates for her loan. While this is not a Regulation Z Truth in Lending disclosure, the Repayment Terms are required for contractual purposes. Henry lists the payment details as shown in accordance with ABC Federal s policy of setting the final actual due date of the first payment as exactly one month after the date the loan is closed. Best Practice Since Henry was not able to disclose the final actual due dates to Shirley at the beginning of this Pre-Approved Lending transaction, it is critical Henry deliver this confirmation receipt to her as soon as possible so Shirley can avoid any delinquency or even default. Pre-Approved Lending User Guide 114