CFPB Issues Interpretive Rule on Loan Originator Screening, Training Requirements

The Consumer Financial Protection Bureau on Friday issued an interpretive rule clarifying screening and training requirements for financial institutions that employ loan originators with temporary authority.

The rule, effective November 24, clarifies provisions under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 establishing a national system for licensing and registration of loan originators; and Section 106 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which establishes a third category, loan originators with temporary authority to originate loans.

All loan originators must satisfy certain criminal history screening and training requirements. Under the SAFE Act, before issuing a state loan originator license, states must ensure that the individual never has had a loan originator license revoked; has not been convicted of enumerated felonies within specified timeframes; demonstrated financial responsibility, character and fitness; completed 20 hours of pre-licensing education; and passed state specific testing requirements.

Under Regulation Z, which implements the Truth in Lending Act, employers must perform substantially the same screening of certain loan originators before permitting them to originate loans. Employers must also ensure certain training for those loan originators.

The interpretive rule clarifies that the employer is not required to conduct the screening and ensure the training of loan originators with temporary authority. The state will perform the screening and training as part of its review of the individual’s application for a state loan originator license. The rule can be found at