I have written several times about doing business remotely. See Electronic Commerce and Doing Business Remotely!, Do you have your electronic signature solution in place? and From Touch to Text, or Conducting Business Electronically. Certainly, the movement toward online transactions zoomed ahead during the height of the Pandemic. Online lenders and sellers saw a business opportunity and even a business necessity. The move toward online consumer transactions does not appear to be letting up.

So, what are the steps involved in making a loan electronically? Here are some identifiable steps. But, at the outset, let me say that an excellent software platform and website are pre-requisites to doing business online.

1. The first hurdle to be crossed is to obtain your customer’s consent to do business electronically. Various federal and state laws spell out the nature of the consent and the requirements associated with electronic contracting including computer or cellphone capacity.
2. Taking a suitable online credit application probably comes next.
3. The lender’s actions in response to the credit application follow. A subset of these actions includes evaluation of the application, determination of military status, OFAC screening, and approval or turn-down of the application.
4. Then there are the various consumer finance disclosures that must be delivered on or before a consumer credit transaction is consummated, such as the Gramm-Leach-Bliley Privacy Notice.
5. The creation of the obligation evidenced by a promissory note and security agreement (if appropriate) comes next. And, we should not forget about perfecting the security interest.
6. Ancillary products may be involved in the transaction—and if so, they need to be properly addressed.
7. A Truth-in-Lending Act Disclosure Statement is required together with other federal or state law disclosures such as the FTC Co-signor notice may be required as well.
8. Finally, funding the loan proceeds via ACH deposit to a consumer’s bank account or to a consumer’s debit card must be addressed.

As the trend toward remote transactions continues, lenders should be prepared to experience more and more of their interactions with consumers to be initiated and concluded electronically.

Please Note: This is the two hundred first blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking Dentons - Consumer Finance Report.