"Consummation" and Timing of Closed-End Disclosures under Securian's Single-Signature Blended...

“Consummation” and timing of closed-end disclosures under Securian’s single-signature blended multi-featured plan

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Catherine Klimek Senior Counsel Securian Financial Group

July 2012

Consummation – July 2012 Securian.com/financialinstitutions

Executive summary

One of the legal implications to consider when developing

a blended, single-signature multi-featured lending plan is

whether the closed-end Fed Box disclosures can be given

timely under Reg Z and applicable state contract law. The

answer is yes, they can. By providing the disclosures at the

time of advance, prior to or with the disbursement of funds,

credit unions satisfy the timing requirements under Reg Z

and state law.

This paper will explain in greater detail the legal definition

of “consummation”, the state law interpreting it, and how it

applies to blended multi-featured plans.

Consummation – July 2012 Securian.com/financialinstitutions

We carefully read Reg Z’s

definitions of “consummation”

and “credit” and analyzed the

state court cases regarding

when a consumer becomes

contractually obligated

on a credit transaction.

We determined that

consummation occurs under

a blended plan at the time

of the advance, not when

the plan is first established,

and have structured our plan

documents accordingly.

BackgroundWhen Reg Z’s open-end rules were changed in 2009, Securian knew that

a blended approach to multi-featured lending would be permissible. All

that was needed was to provide closed-end disclosures for closed-end

advances. For it to work, however, credit unions would need to be able to

deliver the closed-end disclosures in a timely manner to comply with Reg Z.

So, one of the first steps we took when we created our blended plan

was to complete the legal research necessary to determine when

consummation occurs under a blended plan. We carefully read Reg Z’s

definitions of “consummation” and “credit” and analyzed the state court

cases regarding when a consumer becomes contractually obligated on

a credit transaction. We determined that consummation occurs under

a blended plan at the time of the advance, not when the plan is first

established, and have structured our plan documents accordingly. Our

clients have been able to build the delivery of the closed-end disclosures

seamlessly into their lending procedures.

Consummation – July 2012 Securian.com/financialinstitutions 4

The Consumer Lending PlanUnder Securian’s multi-featured blended plan, the member establishes

the plan by signing the Consumer Lending Plan document. The plan

document reserves the credit union’s right to refuse any advance, and

the member is not obligated on the terms of the plan until he accepts the

advance proceeds. When a member requests a closed-end advance, the

credit union will fully underwrite the advance before approving it. If the

credit union approves the request, the credit union will set the terms of

the loan, and the member may accept the loan or refuse the loan. In other

words, neither party is obligated on any particular advance request until

they agree on the terms of that loan, and the credit union issues, and the

member accepts, the loan proceeds. This is set forth in the language of

the plan documents.

The closed-end Fed Box disclosures are given on our Advance Receipt

document, which is not signed by the member. The Advance Receipt

does not need to be signed in order to “consummate” the closed-end

transaction under a blended plan. We instruct our credit union clients to

provide the closed-end Fed Box disclosures at the time of the advance,

prior to or at the time the funds are disbursed, because that is the point at

which the member becomes obligated on the advance. For example, the

Fed Box can be handed to a member with the proceeds check, or mailed

with the proceeds check, or provided electronically.

The Consumer Lending Plan

document reserves the credit

union’s right to refuse any

advance, and the member is

not obligated on the terms of

the plan unless and until he

takes an advance.


The lawTo determine when consummation occurs, one must look to Reg Z, as

well as state contract law as determined by the pertinent court cases.

Reg Z

Under Reg Z, creditors must make the required disclosures “before

consummation of the transaction.”1 “Consummation” under Reg Z means

“the time that a consumer becomes contractually obligated on a credit

transaction.”2 The term, “credit” under Reg Z is defined as “the right to

defer payment of a debt or to incur debt and defer its payment.”3 So, in

the case of a multi-featured lending plan, consummation occurs at the

time the consumer has the right to incur debt and to defer its payment,

and becomes legally obligated on that debt (i.e., when the consumer

becomes obligated on a loan).

When that obligation occurs is not determined by Reg Z; rather, it’s

determined based on state contract law.4 Reg Z’s Official Commentary states:

1. State law governs. When a contractual obligation on the consumer’s

part is created is a matter to be determined under applicable law;

Regulation Z does not make this determination. A contractual

commitment agreement, for example, that under applicable law

binds the consumer to the credit terms would be consummation.

Consummation, however, does not occur merely because the

consumer has made some financial investment in the transaction

(for example, by paying a nonrefundable fee) unless, of course,

applicable law holds otherwise.5

1 12 CFR 1026.17(b)2 12 CFR 1026.2(a)(13)3 12 CFR 1026.2(a)(14)4 12 CFR 1026.2(a)(13), Comment 1.5 Comment 1026.2(a)(13) -1

Under Reg Z, creditors must

make the required disclosures

“before consummation of the

transaction.” “Consummation”

under Reg Z means “the time

that a consumer becomes

contractually obligated on a

‘credit’ transaction.”


Reg Z does provide some general guidance and contemplates a two-step

approach similar to that used by Securian’s Consumer Lending Plan:

2. Credit v. sale. Consummation does not occur when the consumer

becomes contractually committed to a sale transaction, unless the

consumer also becomes legally obligated to accept a particular credit

arrangement. For example, when a consumer pays a nonrefundable

deposit to purchase an automobile, a purchase contract may be

created, but consummation for purposes of the regulation does not

occur unless the consumer also contracts for financing at that time.6

This Comment 2 addresses a structure similar to the two-step approach

of the Consumer Lending Plan. First is when the member commits to the

contractual arrangement; the second is when he commits to the terms of

the financing. It is the second step at which the Reg Z disclosures must

be given.

Court cases

We must look to court cases to determine when a credit transaction

has been consummated and, therefore, when the closed-end Fed Box

disclosures must be given. There are many cases across the country which

support the fact that our Consumer Lending Plan does conform to the

Reg Z timing requirements. The essential question is: at what point did

the consumer become obligated on the credit transaction? That is, at

what point did the parties agree to the essential terms of the particular

loan at issue, and when did they commit to providing, or accepting, that

loan? Most court cases address confusion or debate that comes when the

transaction is completed in more than one step.

Vehicle financing cases

For example, vehicle purchases often have a two-part contractual

arrangement: a purchase agreement or delivery sheet outlining the basic

parameters of the sale is signed (e.g., purchase price, description of the

vehicle, etc.), and then the dealer searches for a particular financing

arrangement with set loan terms (e.g., $25,000 at 4.99 percent). If the

consumer is approved for, and accepts, that financing on those terms,

6 Comment 1026.2(a)(13) -2


then the closing takes place. Courts have held in such cases that the credit

transaction did not occur until closing (even though the first agreement

may be a legally binding contract to purchase the vehicle) because the

consumer did not accept, or agree to, the particular terms of credit until

later, when the particular financing arrangement was approved. As such,

the Reg Z disclosure requirements are not triggered until that second

step, when the set terms are agreed upon.

Example:

Liabo v. Wayzata Nissan, LLC, 707 N.W.2d 715 (Minn. Ct. App.

2006) held that a delivery sheet alone did not trigger the disclosure

requirements of TILA because no particular financing had been

agreed upon at that time. In that case, Ms. Liabo went to the

dealership and wanted to buy a vehicle at the dealer’s advertised

promotional rate of 2.9 percent. Once Ms. Liabo picked the vehicle she

wanted, a Delivery Sheet was prepared. The Delivery Sheet set forth

the basic parameters of the purchase, including a $1200 deposit, but

did not set forth the terms of the financing. The Delivery Sheet stated

that it was a binding contract. However, both parties understood

that the financing (rather than the purchase) was contingent on Ms.

Liabo qualifying for the 2.9 percent interest rate. After the Delivery

Sheet was signed, and the deposit paid, Ms. Liabo completed a loan

application. It took the dealer some time to find a lender willing to

provide the loan at 2.9 percent. In the meantime, Ms. Liabo decided

she wanted a more expensive car (which would not qualify for the 2.9

percent rate) and tried to cancel the purchase. The dealer refused to

refund the $1200 deposit, and the lawsuit ensued. Ms. Liabo, among

other things, alleged that the dealer violated Reg Z because the

disclosures were not given at the time the Delivery Sheet was signed.

The Court held that the Reg Z disclosures were not required at the time

the Delivery Sheet was signed. Rather, had the sale continued, the Reg

Z disclosures should have (and would have) been disclosed on the retail

installment contract that the borrower would have received. Relying

on the Reg Z Commentary, the court noted that consummation did not

occur merely because Ms. Liabo became obligated on the purchase


transaction, because at that time she had not become contractually

obligated to accept a particular credit arrangement.7

Securian’s Consumer Lending Plan, and others like it, is directly comparable

to the Liabo situation. When consumers sign the plan document, they

are not becoming contractually obligated to accept a particular credit

arrangement. As such, Reg Z disclosures are not required at that time.

It’s not until later, when a particular advance is requested, approved, and

accepted, that a credit transaction occurs and the disclosures must be given.

Unfunded financing arrangements

Unfunded financing arrangements are contracts in which a consumer is

obligated to accept future funds. Blended plans are not unfunded financing

arrangements. But these cases are instructive because they can be

legally contrasted.

Example:

The case of Gibson v. LTD, Inc., 434 F.3d 275 (4th Cir. 2006)8

is instructive as well. In that case, the consumer signed retail

financing agreements in order to purchase two trucks. The purchase

agreements, however, conditioned the loan on the dealer’s ability to

secure third-party financing for the loans. The court held that, even

though this condition precedent was set forth in the documents, the

court would not impose such a requirement on the consumer because

that condition was solely within the dealer’s control. The court held

that the consumer, when he signed the documents, could no longer

alter the terms of credit, and therefore he became contractually

obligated on the credit transaction when he signed the documents.

Since the disclosures were not provided prior to that time, the dealer

violated Reg Z.

In so holding, the Court stated, “consummation occurs when a

consumer has done all he can to be committed to the terms of a credit

transaction”. 434 F.3d at 281 (quoting Nigh v. Koons Buick Pontiac

GMC, Inc., 319 F.3d 119 (4th Cir.2003) (reversed in part on other

grounds). The court went on to state:

7 707 N.W.2d at 723.8 The Fourth Circuit covers Maryland, North Carolina, South Carolina, Virginia and West Virginia.


Applying Nigh, we conclude that when the purchaser of a motor vehicle

signs a retail installment sales contract after which he no longer can alter

the terms of credit and after which the dealer retains the exclusive right

to decide when the financing arrangement takes effect, the transaction is

“consummated” for TILA purposes.

Following this reasoning, under Securian’s Consumer Lending Plan,

consummation occurs at the time of the advance, rather than at the time

the Plan document is signed. Under the terms of the Plan, the consumer

“has done all he can to be committed to the terms of the credit transaction”

and can “no longer alter the terms” at the point in time he accepts the

closed-end advance proceeds. When the member signs the Plan document,

he has not committed to any particular terms of financing or even agreed

to take any particular loan yet. Therefore, disclosures are timely given at the

time of the advance.

A very similar case is Bragg v. Bill Heard Chevrolet, 374 F.3d 1060 (11th

Cir. 2004).9 In that case, the purchase agreement and retail installment

contracts were signed and the vehicle was delivered to the consumer.

However, because of the dealer’s process, financing was not secured

and title did not pass until a later date. The dispute arose as to whether

consummation occurred at the time the documents were signed, or

later at the time the title passed. The court held that it occurred at the

time the documents were signed, because that was the point at which

the consumer became obligated on the transaction. This was because

the conditions of consummating the loan were in the sole control of the

lender. The Court stated:

“We hold that in a financing agreement containing a condition

precedent where the condition of obtaining financing is within the

exclusive control of the seller and third-party lender, consummation

occurs when the consumer signs the contract. 374 F.3d at 1067.”

Cases such as this and Nigh involve “unfunded financing arrangements”,

in which the consumer, when signing the document, gives up the right to

refuse future advances under the contract. Therefore, “consummation”

occurs at the time the document is signed.

9 The 11th Circuit covers Alabama, Georgia and Florida.


Blended plans are not unfunded financing arrangements. Under the terms

of the blended plan contract, the condition consummating the loan is not

“within the exclusive control” of the lender, because the member has not

given up his right to refuse future advances. Therefore a member under

Securian’s Plan does not consummate the closed-end advance until he

accepts the advance proceeds. Up until that point, he has the power to

determine whether he is obligated on that advance.

Mortgage cases

Mortgage cases involving rescission are also instructive because the

cases must determine when consummation occurred for the purpose of

determining whether the rescission notice was timely given.

Example:

Jackson v. Grant, 890 F.2d 118 (C.A. 9 (Cal) 1989)10 was a case in which

the borrower sought to rescind a real estate loan transaction. The

issue became one of consummation in order to determine whether

the rescission notice was timely given. Loan documents were signed

in February giving many of the truth-in-lending disclosures as well as

the contractual terms governing the loan. However, those documents

were executed with a broker, Union Home Loans, and no lender had

been selected yet. The documents clearly stated that Ms. Jackson was

not guaranteed a loan, and the name of the lender was left blank on

the promissory note and the deed of trust. Finally, in April, when no

lender could be found, the broker informed Ms. Jackson that it would

be the lender. The promissory note and deed were then completed

with the broker’s name, and the loan closed in April. A dispute ensued

and Ms. Jackson alleged that the rescission notice should have been

given in February when she signed the documents, rather than April,

when the loan was funded.

The court found that, if an essential element of the contract is

reserved for the future agreement of both parties, there is no legal

obligation created until such an agreement is entered into. The court

stated, “While it is not necessary to decide what, if any, binding

agreement was created by and between Jackson and Union on

10 The 9th Circuit covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington.


February 18, one conclusion is inescapable. No one, including Union,

had agreed to extend credit to Jackson as of that date and no loan

transaction was consummated.” In a footnote, the court also noted

that the regulations at 1026.2(a)(14) define “credit’ as “the right to

defer payment of debt or to incur debt and defer its payment,” and

that Jackson received no such right in February. The court determined

that the broker made an offer in February, which was not accepted

until April. As such, consummation did not occur until April.

The same can be said of the Consumer Lending Plan. At the time the

plan is signed, an offer to make a loan (or series of loans) is extended by

the credit union. That offer is not accepted, however, until later, when

the consumer requests, and accepts, an advance. Consummation, then,

occurs at that later point.

Other cases follow the same tenant. For example, in re: Vickers, 275 B.R.

401 (Bkrtcy.M.D. Fla., 2001), was a similar rescission case resting on the

issue of when consummation occurred. On February 21, the debtors

signed the note, mortgage, and related closing documents. One of

those documents stated that the documents did not constitute a loan

commitment and that the requested loan was “conditioned” on review

and investigation of all facts and representations including the consumer’s

credit history. The lender then conducted the credit review, approved the

loan, and distributed the funds on March 3. Because the lender had no

obligation to lend money on February 21, the court held, the loan was not

consummated until funds were disbursed on March 3. Like Jackson, the

court determined that the February 21 transaction was an offer to accept

a loan by the debtor, which offer was only accepted by lender when

lender funded the loan on March 3.

This is consistent with Reg Z’s Official Commentary, as well as Securian’s

Consumer Lending Plan. The signing of the Plan initially is not enough to

trigger the disclosure requirements, because no particular credit terms

were agreed upon at that time. As such, while a contract may be signed at

that time, no credit transaction has occurred. It is not until the time of the

advance that a credit transaction occurs and the disclosure requirements


are triggered - because that is when the credit union and the member agree

to make, and accept, a loan on specific and essential agreed-upon terms.

Other cases

There are other court cases that can be contrasted.

Example:

In Murphy v. Empire of America, 746 F.2d 931 (2nd Cir. (NY) 1984)11,

the Murphys applied for a second mortgage with Empire. On

November 15, 1982, Empire, after reviewing the application, issued

to them a commitment letter for a $27,000 loan at a 15½ percent

interest rate, to be secured by a second mortgage on the premises.

The letter provided that upon the Murphy’s execution and return of

the letter before November 24, 1982, together with their payment

of a $715 commitment fee, the commitment letter would constitute

a contract, to be interpreted according to New York law, for a loan

to be closed on or before December 31, 1982. In the event that the

loan is not closed, the Murphys would be liable for any damages

suffered by Empire. The Murphys executed the commitment letter

and returned it with their $715 commitment fee to Empire on or about

November 18, 1982. Eight days later, Empire sent the Notice of Right

to Rescind required by Reg Z. Within the three day rescission period,

the Murphys signed and returned the notice electing NOT to rescind.

However, in December, prior to the funding of the loan, the Murphys

had a change of heart and tried cancelling the loan. The Court

held that the loan commitment constituted consummation of the

transaction, stating:

Under New York law the consumer’s acceptance of a lender’s

commitment offer constitutes a binding contract. For such

a commitment contract to exist it is only necessary that the

borrower and lender concur as to the essential terms of the future

mortgage transaction.

Thus, consummation can occur before the loan is funded if the first set of

documents sets forth terms specific enough to constitute a commitment

11 The Second Circuit covers Connecticut, New York and Vermont.


letter. This is not the case with Securian’s Consumer Lending Plan,

because no loan terms are determined or guaranteed at the time the plan

document is signed, nor does the plan document contain the terms of the

particular advance.

This same rule would apply if a purchase agreement sets forth a promise

to make the loan from a particular lender at set terms and the borrower

signed that document, agreeing to those terms.

Example:

In Graves v. Tru-Link Fence Company, 905 F. Supp 515 (N.D. Illinois

1995), Ms. Graves entered into an agreement to purchase, and finance,

a fence to be constructed around her home. The Proposal signed

by both parties contained the agreement to build the fence and the

financing terms of the agreement. It did not state that the contract

or financing terms were “subject to” the fence company’s approval.

As such, the credit transaction was consummated at the time the

proposal was signed, and Reg Z disclosures should have been given at

that time, rather than when the fence company later attempted to sell

the contract to a finance company.

Clark v. Troy & Nichols, Inc., 864 F.2d 1261 (5th Cir. 1989)12 is also

instructive. In that case, the consumer was attempting to purchase a

home and signed a “Rate & Discount Agreement” prior to the lender

approving the loan. The consumer contended that by signing this

agreement, the lender was obligated to lend, and the consumer was

obligated to borrow, the funds. Therefore, the consumer alleged, the

disclosures should have been given at that time, rather than at closing.

The court disagreed. It noted that the Rate & Discount Agreement

stated that if the loan does not occur by a stated date, the loan is

open and can be re-negotiated, “unless the loan is approved on or

before the 25th day of the agreement.” The loan was not approved by

the 25th day, and the court stated that because of this, the consumer

was not obligated on the transaction when he signed the Rate &

Discount Agreement. Therefore, consummation did not occur at that

12 The Fifth Circuit covers Louisiana, Mississippi and Texas.


time, and the disclosures did not need to be given at that time. Rather,

the disclosures were given timely at closing.

This is consistent with Securian’s blended plan. The member is not

obligated on any given transaction until he accepts the proceeds of that

transaction. Therefore, disclosures are required at the time of the advance,

not at the time the plan document was signed.

Merely establishing the plan does not create a credit transaction;

therefore, Reg Z disclosure requirements are not triggered at that time

As we’ve explained already, the plan document signed by the consumer

sets forth no set loan terms such as loan amount, APR, collateral,

or payment schedule. Moreover, it specifically states that the credit

union can refuse any advance request, and that by accepting, using, or

accessing the advance proceeds, the consumer is agreeing to the terms of

the disclosures and the credit contract. As such, the Plan document is not

a loan commitment and does not have sufficient details to obligate either

party to any particular credit transaction at the time the Plan document is

signed. Thus, the Reg Z disclosures do not need to be given at that time.

Rather, it is not until the time of the advance, when the parties accept the

particular (and essential) terms of a particular loan, that the disclosures

must be given.

Not only is this position justified under the law, but it is readily apparent

by using common sense and logic. When the consumer signs the plan

document, no loan is being agreed upon.13 If there is no loan, there can be

no disclosure requirement. Even if the consumer signs a plan document,

there are no obligations unless and until an advance is requested, approved,

and accepted by the consumer. Therefore, the proper time to provide

disclosures is at the time of the advance, prior to or with disbursement of

the funds.

Blank note cases

It’s been suggested that the Consumer Lending Plan can be likened to the

“blank note cases.” Blank note cases are those cases in which a consumer

13 Often the first advance under the plan is requested at the same time the plan is established. In such a case, the Advance Receipt with Fed Box is given at the same time the consumer signs the plan document. However, that occurs because the advance was granted, not because the plan was established.


signs a blank promissory note containing the Fed Box, and the lender fills

in the disclosures later, long after the consumer has accepted the loan

proceeds and began using the collateral. Or, an unscrupulous lender never

fills them in at all.

Example:

In Lacey v. William Chrysler Plymouth, 2004 WL 415972 (N.D. Ill. 2004),

Ms. Lacey went to the dealership on June 8 and was interested in

buying a certain vehicle. The dealership ran her credit report and told

her she did not qualify for that vehicle, but said she could purchase a

less expensive vehicle if she put $750 down. Ms. Lacey did not have the

down payment with her and went home to gather the down payment.

She came back to the dealer that day with a partial down payment.

The dealer at that point had Ms. Lacey sign a blank retail installment

contract and told her they would try to get a monthly payment about

the same as her current payment on her current car. Ms. Lacey left her

current vehicle at the lot as a trade-in and drove the new vehicle home.

About two weeks later, the dealer finally sent Ms. Lacey a completed

retail installment contract, which did not reflect the trade-in. When Ms.

Lacey asked why the trade-in wasn’t a part of the disclosure, a dispute

ensued. Ms. Lacey never made any payments and the dealer eventually

repossessed the vehicle. Ms. Lacy sued for, among other things,

violation of Reg Z for making her sign a blank note and not receiving

the disclosures until after the loan was made.

The court noted that Ms. Lacey clearly did not understand the terms of

the financing agreement because those terms had not been determined,

nor disclosed, at the time of the transaction (in this case, when the

dealer accepted her cash and trade-in, and allowed her to drive the

vehicle home). The Court held that the dealership violated Reg Z.

Such a situation is clearly distinguishable from that of the Consumer

Lending Plan. There is no “blank note” or blank disclosures being signed.

The contract document is signed at the time the plan is established. It

does not contain, and is not meant to contain, any particular terms of

a particular credit transaction. Instead, the contract is signed with the

intention of the parties that if, and when, the consumer requests a loan


advance, the credit union will determine if the consumer qualifies for the

loan. If the consumer qualifies, the terms of the advance (e.g., amount,

APR, etc.) are agreed upon, the disclosures and advance receipt is

provided, and then the funds are disbursed. The credit union is not filling

in or providing the disclosures after disbursement. Nor is the consumer

obligated on the loan unless and until he accepts the proceeds. Such a

situation is clearly distinguishable from a blank note case.

States in which the exact issue of Reg Z timing requirements have not been addressed

It is commonplace in the law to find that not all fifty states have addressed

a particular issue. When this occurs, state courts will first look to other

states in its district, and then other states outside its district. So, in the

states in which this particular issue has not been addressed, the courts

have plenty of law to follow from the other states.

The state courts will also look to the basic tenants of contract law in

its state to confirm when the consumer becomes obligated on the

transaction. While different states will use different terminology, all states

require the three basic elements of a contract: acceptance, offer, and

consideration. A consumer is not obligated on a transaction until those

three elements are present. Under a blended plan, this occurs at the time

of the advance, not when the plan is first established - at the time of the

advance is when the credit union will offer a particular loan on particular

terms, the member accepts that loan, and consideration (i.e., the loan

proceeds) is paid. Therefore, it is valid to conclude that any court in the

country would find consummation to occur at the time of the advance. If

the Fed Box disclosures are provided at that time, then the credit union

complies with Reg Z and state law.

Legal conclusion

Many different cases across all fifty states can be examined, compared,

contrasted, etc. Such is the nature of state contract law. But the general

contract rules are consistent in the above cases: if, under the terms of the

documents and the circumstances of the case, neither the credit union nor

the consumer has agreed to the essential terms of the advance, and the

member has not accepted the loan proceeds, then the credit transaction

Consummation occurs when

the consumer becomes legally

obligated on a loan. A loan

occurs when debt is incurred

with the right to defer it.


has not been “consummated” and the Reg Z disclosures do not need to be

given. As such, the establishment of the plan by the signing of the contract

does not trigger the Reg Z disclosures. It is a two step-process, and the

disclosure requirement is not triggered until the two parties agree on the

essential terms of a particular advance, and the funds are disbursed by the

credit union and accepted by the consumer. Thus, if a consumer opens a

plan but never takes an advance, there is no loan, no obligation, and no Reg

Z requirements. And if a consumer does take an advance, that is when the

obligation is incurred, and that’s when the disclosures must be given.

ConclusionConsummation occurs when the consumer becomes legally obligated on a

loan. A loan occurs when debt is incurred with the right to defer it. Under

the various states’ court cases, this occurs when the credit union and the

member agree on the essential terms of the advance and the member

accepts the loan proceeds. This is because it is not until that time that the

member becomes obligated on the advance.

A single-signature multi-featured blended plan is not a closed-end note, not

a loan commitment, and not an unfunded financing arrangement. In those

cases, the member is obligated to accept all funds under the terms of the

contract. By contrast, under a blended plan, the consumer is not obligated to

accept any advance proceeds when he signs the plan document. Rather, he

becomes obligated on a particular advance when he accepts the proceeds of

that advance. Therefore, consummation occurs at the time of advance, and

delivering the closed-end disclosures at that time complies with Reg Z.

About Securian Financial Group, Inc.Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation’s largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company.

Securian Financial Group, Inc. www.securian.com

400 Robert Street North, St. Paul, MN 55101-2098 ©2012 Securian Financial Group, Inc. All rights reserved.

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"Consummation" and Timing of Closed-End Disclosures under Securian's Single-Signature Blended...

Economy & Finance

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